-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AUpQcbQvbFbjGMIyMznOtZLMGnLSkjtiqGknxNscZXs9BY69W6jA4NEVJhsptN9A NmIuUT/pZmWWfft49jPOaQ== 0000039473-01-000003.txt : 20010312 0000039473-01-000003.hdr.sgml : 20010312 ACCESSION NUMBER: 0000039473-01-000003 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20010308 EFFECTIVENESS DATE: 20010315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUNDAMENTAL INVESTORS INC CENTRAL INDEX KEY: 0000039473 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 221557722 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 002-10760 FILM NUMBER: 1563984 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-00032 FILM NUMBER: 1563985 BUSINESS ADDRESS: STREET 1: FOUR EMBARCADERO CTR CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4154219360 MAIL ADDRESS: STREET 1: PO BOX 7650 CITY: SAN FRANCISCO STATE: CA ZIP: 94120 485BPOS 1 0001.txt SEC File Nos. 811-32 2-10760 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Post-Effective Amendment No. 86 (X) and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 29 (X) FUNDAMENTAL INVESTORS, INC. (Exact name of registrant as specified in charter) P.O. Box 7650, One Market, Steuart Tower, San Francisco, California 94120 (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (415) 421-9360 Patrick F. Quan Secretary Fundamental Investors, Inc. P.O. Box 7650, One Market, Steuart Tower San Francisco, California 94120 (Name and address of agent for service) Copy to: Robert E. Carlson, Esq. Paul, Hastings, Janofsky & Walker, LLP 555 South Flower Street Los Angeles, California 90071 Approximate date of proposed public offering: [X] It is proposed that this filing will become effective on March 15, 2001 pursuant to paragraph (b) of Rule 485. Fundamental Investors/(R)/ Prospectus
TABLE OF CONTENTS - ----------------------------------------------------- 1 Risk/Return Summary - ----------------------------------------------------- 4 Fees and Expenses of the Fund - ----------------------------------------------------- 5 Investment Objective, Strategies and Risks - ----------------------------------------------------- 8 Management and Organization - ----------------------------------------------------- 9 Shareholder Information - ----------------------------------------------------- 10 Choosing a Share Class - ----------------------------------------------------- 12 Purchase and Exchange of Shares - ----------------------------------------------------- 13 Sales Charges - ----------------------------------------------------- 15 Sales Charge Reductions and Waivers - ----------------------------------------------------- 16 Plans of Distribution - ----------------------------------------------------- 17 How to Sell Shares - ----------------------------------------------------- 18 Distributions and Taxes - ----------------------------------------------------- 19 Financial Highlights - -----------------------------------------------------
MARCH 15, 2001 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. RISK/RETURN SUMMARY The fund seeks to make your investment grow and provide you with income over time by investing primarily in common stocks of large, established companies that offer growth potential at reasonable prices. The fund may also invest significantly in non-U.S. securities. The fund is designed for investors seeking both capital appreciation and income. An investment in the fund is subject to risks, including the possibility that the fund's income and the value of its investments may fluctuate in response to economic, political or social events in the U.S. or abroad. The values of equity securities owned by the fund may be affected by events specifically involving the companies issuing those securities. Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or world political, social and economic instability, investments outside the U.S. may be affected to a greater extent. Your investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, entity or person. YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER IF YOU INVEST FOR A SHORTER PERIOD OF TIME. 1 FUNDAMENTAL INVESTORS / PROSPECTUS HISTORICAL INVESTMENT RESULTS The following information provides some indication of the risks of investing in the fund by showing changes in the fund's investment results from year to year and by showing how the fund's average annual returns for various periods compare with those of a broad measure of market performance. Past results are not an indication of future results. CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES (Results do not include a sales charge; if one were included, results would be lower.) [bar chart] 1991 30.34% 1992 10.19% 1993 18.16% 1994 1.33% 1995 34.21% 1996 19.99% 1997 26.67% 1998 16.72% 1999 24.58% 2000 4.27% [end bar chart] The fund's highest/lowest quarterly results during this time period were:
HIGHEST 15.46% (quarter ended December 31, 1998) LOWEST -10.41% (quarter ended September 30, 1998)
2 FUNDAMENTAL INVESTORS / PROSPECTUS Unlike the bar chart on the previous page, the table below reflects the fund's results with the maximum initial or deferred sales charge imposed, as required by Securities and Exchange Commission rules. Class A share results reflect the maximum initial sales charge of 5.75%. Sales charges are reduced for purchases of $25,000 or more. Results would be higher if calculated without a sales charge. All fund results reflect the reinvestment of dividend and capital gain distributions. Since the fund's Class B shares began investment operations on March 15, 2000 and Class C and F shares began investment operations on March 15, 2001, comparable results for those classes are not available for the 2000 calendar year.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 2000: ------------------------------------------------------------------------------ ONE YEAR FIVE YEARS TEN YEARS LIFETIME Class A - began 8/1/78/1/ (with the maximum sales -1.73% 16.78% 17.49% 15.97% charge imposed) ------------------------------------------------------------------------------ S&P 500/2/ -9.11% 18.29% 17.41% 16.04% ------------------------------------------------------------------------------ Lipper Multi-Cap Value Fund 9.64% 13.69% 14.87% 14.52% Index/3/ ------------------------------------------------------------------------------ Class A 30-day yield: 1.51% (For current yield information, please call American FundsLine at 1-800-325-3590.) ------------------------------------------------------------------------------
1 The lifetime figure is from August 1, 1978 when Capital Research and Management Company became investment adviser for the fund. 2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted measurement of changes in stock market conditions based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions or expenses. 3 The Lipper Multi-Cap Value Fund Index is an equally weighted index of 30 funds which invest in a variety of market capitalization ranges. These funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings or other factors. The results of the underlying funds in the index include the reinvestment of dividend and capital gain distributions and brokerage commissions paid by the fund for portfolio transactions, but do not reflect sales charges 3 FUNDAMENTAL INVESTORS / PROSPECTUS FEES AND EXPENSES OF THE FUND SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C CLASS F ------------------------------------------------------------------------------------------------ Maximum sales charge imposed on purchases (as a 5.75%/1/ none none none percentage of offering price) ------------------------------------------------------------------------------------------------ Maximum sales charge imposed on reinvested dividends none none none none ------------------------------------------------------------------------------------------------ Maximum deferred sales charge none/2/ 5.00%/3/ 1.00%/4/ none ------------------------------------------------------------------------------------------------ Redemption or exchange fees none none none none ------------------------------------------------------------------------------------------------
1 Sales charges are reduced or eliminated for purchases of $25,000 or more. 2 A contingent deferred sales charge of 1% applies on certain redemptions made within 12 months following purchases of $1 million or more made without a sales charge. 3 Deferred sales charges are reduced after 12 months and eliminated after six years. 4 Deferred sales charge is eliminated after 12 months. ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B/1/ CLASS C/2/ CLASS F/2/ ----------------------------------------------------------------------------------------------------------- Management Fees 0.27% 0.27% 0.27% 0.27% ----------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees/3/ 0.25% 1.00% 1.00% 0.25% ----------------------------------------------------------------------------------------------------------- Other Expenses 0.12% 0.12% 0.20% 0.19% ----------------------------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.64% 1.39% 1.47% 0.71% -----------------------------------------------------------------------------------------------------------
1 Annualized. 2 Based on estimated amounts for the current fiscal year. 3 Class A and F 12b-1 fees may not exceed 0.25% and 0.50%, respectively, of the class' average net assets annually. EXAMPLE The examples below are intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The examples assume that you invest $10,000 in the fund for the time periods indicated, that your investment has a 5% return each year and that the fund's operating expenses remain the same as shown above. The "Class A" example reflects the maximum initial sales charge in the first year. The "Class B- and Class C-assuming redemption" examples reflect applicable contingent deferred sales charges through six years and one year, respectively (after which times they are eliminated). The examples do not include fees charged by financial intermediaries, typically applicable mainly to Class F shares. Both Class B examples reflect Class A expenses for years 9 and 10 since Class B shares automatically convert to Class A after eight years. Although your actual costs may be higher or lower, based on these assumptions, your cumulative expenses would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS Class A $637 $768 $911 $1,327 ---------------------------------------------------------------------------------------------------------------------------------- Class B - assuming redemption $642 $840 $961 $1,463 ------------------------------------------------------------------------------------------------------------------- Class B - assuming no redemption $142 $440 $761 $1,463 ------------------------------------------------------------------------------------------------------------------- Class C - assuming redemption $250 $465 $803 $1,757 ------------------------------------------------------------------------------------------------------------------- Class C - assuming no redemption $150 $465 $803 $1,757 ------------------------------------------------------------------------------------------------------------------- Class F - excludes intermediary fees/*/ $ 73 $227 $395 $ 883 ------------------------------------------------------------------------------------------------------------------- *Fees charged by financial intermediaries are independent of fund expenses and will increase the overall cost of your investment. Intermediary fees typically range from 0.50% to 3.00% of assets annually depending on services offered.
4 FUNDAMENTAL INVESTORS / PROSPECTUS INVESTMENT OBJECTIVE, STRATEGIES AND RISKS The fund's investment objective is to achieve long-term growth of capital and income. The fund invests primarily in common stocks or securities convertible into common stocks and may invest significantly in securities of issuers domiciled outside the U.S. and not included in the Standard & Poor's 500 Composite Index. The values of equity securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned in the fund, adverse conditions affecting the general economy, overall market declines, world political, social and economic instability, and currency and interest rate fluctuations. Investments outside the U.S. may be affected by these events to a greater extent and may also be affected by differing securities regulations, higher transaction costs, and administrative difficulties such as delays in clearing and settling portfolio transactions. The fund may also hold cash or money market instruments. The size of the fund's cash position will vary and will depend on various factors, including market conditions and purchases and redemptions of fund shares. A larger cash position could detract from the achievement of the fund's objective, but it also would reduce the fund's exposure in the event of a market downturn and provide liquidity to make additional investments or to meet redemptions. The fund relies on the professional judgment of its investment adviser, Capital Research and Management Company, to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek undervalued securities that represent good long-term investment opportunities. Securities may be sold when the investment adviser believes they no longer represent good long-term value. OTHER IMPORTANT INVESTMENT PRACTICES In addition to the principal investment strategies described above, the fund has other investment practices that are described here and in the statement of additional information. The fund may invest to a limited extent in lower quality straight debt securities rated Ba and BB or below or unrated but determined to be of equivalent quality. The prices of debt securities fluctuate depending on such factors as changing interest rates, effective maturities and credit ratings. For example, their prices generally decline when interest rates rise and vice versa. The values of lower quality and longer maturity bonds will be subject to greater price fluctuations than higher quality and shorter maturity bonds. 5 FUNDAMENTAL INVESTORS / PROSPECTUS ADDITIONAL INVESTMENT RESULTS Unlike the investment results table shown on an earlier page, the table below reflects the fund's results calculated without a sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000: ONE YEAR FIVE YEARS TEN YEARS LIFETIME Class A - began 8/1/78/1/ (with no sales charge 4.27% 18.17% 18.19% 16.28% imposed) ----------------------------------------------------------------------------------- S&P 500/2/ -9.11% 18.29% 17.41% 16.04% ----------------------------------------------------------------------------------- Lipper Multi-Cap Value 9.64% 13.69% 14.87% 14.52% Fund Index/3/ ----------------------------------------------------------------------------------- Class A distribution rate/4/: 1.19% (For current distribution rate information, please call American FundsLine at 1-800-325-3590.) -----------------------------------------------------------------------------------
1 The lifetime figure is from August 1, 1978 when Capital Research and Management Company became investment adviser for the fund. 2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted measurement of changes in stock market conditions based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions or expenses. 3 The Lipper Multi-Cap Value Fund Index is an equally weighted index of 30 funds which invest in a variety of market capitalization ranges. These funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings or other factors. The results of the underlying funds in the index include the reinvestment of dividend and capital gain distributions and brokerage commissions paid by the fund for portfolio transactions, but do not reflect sales charges. 4 The distribution rate is based on actual distributions paid to shareholders over a 12-month interval. Capital gain distributions are added back to the net asset value to determine the rate. 6 FUNDAMENTAL INVESTORS / PROSPECTUS HOLDINGS BY TYPE OF INVESTMENT AS OF DECEMBER 31, 2000 [pie chart] U.S. Equities 72.7% Non-U.S. Equities 15.0% Bonds 1.1% Cash and Equivalents 11.2% [end pie chart]
FIVE LARGEST INDUSTRIES IN EQUITY HOLDINGS AS OF PERCENT OF DECEMBER 31, 2000 NET ASSETS ------------------------------------------------------------------ Pharmaceuticals 9.84% ------------------------------------------------------------------ Media 9.03 ------------------------------------------------------------------ Insurance 6.99 ------------------------------------------------------------------ Oil & Gas 4.83 ------------------------------------------------------------------ Diversified Telecommunication Services 3.92 TEN LARGEST EQUITY HOLDINGS AS OF DECEMBER 31, 2000 ------------------------------------------------------------------ AstraZeneca 2.51% ------------------------------------------------------------------ Dow Chemical 2.17 ------------------------------------------------------------------ Viacom 2.09 ------------------------------------------------------------------ Pfizer 2.05 ------------------------------------------------------------------ Texas Instruments 1.98 ------------------------------------------------------------------ Pharmacia 1.88 ------------------------------------------------------------------ Allstate 1.84 ------------------------------------------------------------------ Time Warner 1.82 ------------------------------------------------------------------ Bank of America 1.80 ------------------------------------------------------------------ AT&T 1.60
Because the fund is actively managed, its holdings will change from time to time. 7 FUNDAMENTAL INVESTORS / PROSPECTUS MANAGEMENT AND ORGANIZATION INVESTMENT ADVISER Capital Research and Management Company, an experienced investment management organization founded in 1931, serves as investment adviser to the fund and other funds, including those in The American Funds Group. Capital Research and Management Company, a wholly owned subsidiary of The Capital Group Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital Research and Management Company manages the investment portfolio and business affairs of the fund. The total management fee paid by the fund, as a percentage of average net assets, for the previous fiscal year appears earlier under "Fees and Expenses of the Fund." MULTIPLE PORTFOLIO COUNSELOR SYSTEM Capital Research and Management Company uses a system of multiple portfolio counselors in managing mutual fund assets. Under this approach the portfolio of a fund is divided into segments managed by individual counselors. Counselors decide how their respective segments will be invested, within the limits provided by a fund's objective(s) and policies and by Capital Research and Management Company's investment committee. In addition, Capital Research and Management Company's research professionals may make investment decisions with respect to a portion of a fund's portfolio. The primary individual portfolio counselors for Fundamental Investors are:
PORTFOLIO COUNSELOR/ FUND PRIMARY TITLE WITH INVESTMENT ADVISER TITLE (IF APPLICABLE) COUNSELOR SINCE (OR AFFILIATE) AND INVESTMENT EXPERIENCE ------------------------------------------------------------------------------------------------------ JAMES E. DRASDO 1984 (6 years as a Senior Vice President, Capital Research and President, Principal research professional Management Company Executive Officer and for the fund) Investment professional since 1972 and with Director Capital Research and Management Company or affiliate since 1977 ------------------------------------------------------------------------------------------------------ GORDON CRAWFORD 1991 (23 years as a Senior Vice President and Director, Capital Senior Vice President research professional Research and Management Company for the fund) Investment professional with Capital Research and Management Company or affiliate since 1971 ------------------------------------------------------------------------------------------------------ MICHAEL T. KERR 1999 (4 years as a Senior Vice President, Capital Research Company Senior Vice President research professional Investment professional since 1983 and with for the fund) Capital Research and Management Company or affiliate since 1985 ------------------------------------------------------------------------------------------------------ DINA N. PERRY 1993 (9 years as a Senior Vice President, Capital Research and Senior Vice President research professional Management Company for the fund) Investment professional since 1978 and with Capital Research and Management Company or affiliate since 1991 ------------------------------------------------------------------------------------------------------
8 FUNDAMENTAL INVESTORS / PROSPECTUS SHAREHOLDER INFORMATION SHAREHOLDER SERVICES American Funds Service Company, the fund's transfer agent, offers you a wide range of services you can use to alter your investment program should your needs and circumstances change. These services may be terminated or modified at any time upon 60 days written notice. For your convenience, American Funds Service Company has four service centers across the country. AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS Call toll-Free from anywhere in the U.S. (8 a.m. to 8 p.m. ET): 800/421-0180 [map of the United States]
Western Western Central Eastern Central Eastern Service Center Service Center Service Center Service Center American Funds American Funds American Funds American Funds Service Company Service Company Service Company Service Company P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280 Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia 92822-2205 78265-9522 46206-6007 23501-2280 Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
A MORE DETAILED DESCRIPTION OF POLICIES AND SERVICES IS INCLUDED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION AND THE OWNER'S GUIDE SENT TO NEW AMERICAN FUNDS SHAREHOLDERS TITLED "WELCOME TO THE FAMILY." Both are available by writing or calling American Funds Service Company. 9 FUNDAMENTAL INVESTORS / PROSPECTUS CHOOSING A SHARE CLASS The fund offers four different classes of shares. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, allowing you to choose the class that best meets your situation. WHEN YOU PURCHASE SHARES OF THE FUND, YOU MUST CHOOSE A SHARE CLASS. IF NONE IS CHOSEN, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES. Shares of the fund may be purchased through various investment programs or accounts, including many types of retirement plans. The services or share classes available to you may vary depending upon how you wish to purchase shares of the fund. Factors you should consider in choosing a class of shares include: . How long you expect to own the shares . How much you intend to invest . Total expenses associated with owning shares of each class . Whether you qualify for any reduction or waiver of sales charges (for example, Class A shares may be a less expensive option over time if you qualify for a sales charge reduction or waiver) . Class B and C shares generally are not available to certain retirement plans, including employer-sponsored retirement plans such as 401(k) plans, employer-sponsored 403(b) plans, and money purchase pension and profit sharing plans . Class F shares are generally only available to fee-based programs of investment firms and registered investment advisers that have special agreements with the fund's distributor EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU. 10 FUNDAMENTAL INVESTORS / PROSPECTUS SUMMARY OF THE PRIMARY DIFFERENCES AMONG SHARE CLASSES
CLASS A SHARES ------------------------------------------------------------------------------ Initial sales charge up to 5.75% (reduced or eliminated for purchases of $25,000 or more) Contingent deferred sales none (except on certain redemptions on purchases charge of $1 million or more bought without an initial sales charge) 12b-1 fees up to 0.25% annually Dividends higher than other classes due to lower annual expenses Purchase maximum none Conversion none CLASS B SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales starts at 5.00% and declines each year until it charge reaches 0% after six years 12b-1 fees 1.00% annually Dividends lower than Class A and F shares due to higher distribution fees and other expenses Purchase maximum $100,000 Conversion automatic conversion to Class A shares after eight years, reducing future annual expenses CLASS C SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales 1.00% if shares are sold within one year after charge being purchased 12b-1 fees 1.00% annually Dividends lower than Class A and F shares due to higher distribution fees and other expenses Purchase maximum $500,000 Conversion automatic conversion to Class F shares after ten years, reducing future annual expenses CLASS F SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales none charge 12b-1 fees currently 0.25% annually (may not exceed 0.50% annually) Dividends higher than Class B and C shares due to lower distribution fees, but typically lower than Class A shares due to higher other expenses Purchase maximum none Conversion none ------------------------------------------------------------------------------
11 FUNDAMENTAL INVESTORS / PROSPECTUS PURCHASE AND EXCHANGE OF SHARES PURCHASE OF CLASS A, B AND C SHARES Generally, you may open an account and purchase Class A, B and C shares by contacting any investment dealer (who may impose transaction charges in addition to those described in this prospectus) authorized to sell the fund's shares. You may purchase additional shares in various ways, including through your investment dealer and by mail, telephone, the Internet and bank wire. PURCHASE OF CLASS F SHARES Generally, you may only open an account and purchase Class F shares through fee-based programs of investment firms and registered investment advisers with special agreements with the fund's distributor. These firms and advisers typically charge ongoing fees for services they provide. EXCHANGE Generally, you may exchange your shares into shares of the same class of other funds in The American Funds Group without a sales charge. For purposes of computing the contingent deferred sales charge on Class B and C shares, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any exchange. Exchanges of shares from the money market funds initially purchased without a sales charge generally will be subject to the appropriate sales charge. Exchanges have the same tax consequences as ordinary sales and purchases. See "Transactions by Telephone..." for information regarding electronic exchanges. THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON, INCLUDING PURCHASES WHICH ARE PART OF EXCHANGE ACTIVITY THAT COULD INVOLVE ACTUAL OR POTENTIAL HARM TO THE FUND.
PURCHASE MINIMUMS FOR ALL CLASSES OF SHARES To establish an account (including retirement plan accounts) $ 250 For a retirement plan account through payroll deduction $ 25 To add to an account $ 50 For a retirement plan account through payroll deduction $ 25 ------------------------------------------------------------------------ PURCHASE MAXIMUM FOR CLASS B SHARES $100,000 ------------------------------------------------------------------------ PURCHASE MAXIMUM FOR CLASS C SHARES $500,000 ------------------------------------------------------------------------
12 FUNDAMENTAL INVESTORS / PROSPECTUS SHARE PRICE The fund calculates its share price, also called net asset value, as of approximately 4:00 p.m. New York time, which is the normal close of trading on the New York Stock Exchange, every day the Exchange is open. In calculating net asset value, market prices are used when available. The fund has adopted procedures to make "fair value" determinations when reliable market prices for particular securities are not available. Your shares will be purchased at the net asset value (plus any applicable sales charge in the case of Class A shares), or sold at the net asset value next determined after American Funds Service Company receives and accepts your request. A contingent deferred sales charge may apply at the time you sell certain Class A, B and C shares. SALES CHARGES CLASS A The initial sales charge you pay when you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases as indicated below.
SALES CHARGE AS A PERCENTAGE OF ---------------------------------- DEALER NET COMMISSION OFFERING AMOUNT AS % OF INVESTMENT PRICE INVESTED OFFERING PRICE ------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 5.00% ------------------------------------------------------------------------------ $25,000 but less than 5.00% 5.26% 4.25% $50,000 ------------------------------------------------------------------------------ $50,000 but less than 4.50% 4.71% 3.75% $100,000 ------------------------------------------------------------------------------ $100,000 but less than 3.50% 3.63% 2.75% $250,000 ------------------------------------------------------------------------------ $250,000 but less than 2.50% 2.56% 2.00% $500,000 ------------------------------------------------------------------------------ $500,000 but less than 2.00% 2.04% 1.60% $750,000 ------------------------------------------------------------------------------ $750,000 but less than $1 1.50% 1.52% 1.20% million ------------------------------------------------------------------------------ $1 million or more and certain other investments none none none described below ------------------------------------------------------------------------------
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE INVESTMENTS OF $1 MILLION OR MORE MAY BE SUBJECT TO A 1% CONTINGENT DEFERRED SALES CHARGE IF SHARES ARE SOLD WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type plans investing $1 million or more, or with 100 or more eligible employees, and Individual Retirement Account rollovers involving retirement plan assets invested in the American Funds, may invest with no sales charge and are not subject to a contingent deferred sales charge. Also exempt are investments made through retirement plans, endowments or 13 FUNDAMENTAL INVESTORS / PROSPECTUS foundations with $50 million or more in assets, and investments made through accounts that purchased fund shares before March 15, 2001 and are part of certain qualified fee-based programs. The distributor may pay dealers up to 1% on investments made in Class A shares with no initial sales charge. The fund may reimburse the distributor for these payments through its Plan of Distribution (see below). CLASS B AND C Class B and C shares are sold without any initial sales charge. American Funds Distributors pays 4% of the amount invested to dealers who sell Class B shares and 1% to dealers who sell Class C shares. For Class C shares, a contingent deferred sales charge of 1% applies if shares are sold within one year of purchase. For Class B shares, a contingent deferred sales charge may be applied to shares you sell within six years of purchase, as shown in the table below.
CLASS B SHARES SOLD WITHIN YEAR 1 2 3 4 5 6 ------------------------------------------------------------------------ CONTINGENT DEFERRED SALES CHARGE 5% 4% 4% 3% 2% 1%
Shares acquired through reinvestment of dividends or capital gain distributions are not subject to a contingent deferred sales charge. In addition, the contingent deferred sales charge may be waived in certain circumstances. See "Contingent Deferred Sales Charge Waivers for Class B and C Shares" below. The contingent deferred sales charge is based on the original purchase cost or the current market value of the shares being sold, whichever is less. For purposes of determining the contingent deferred sales charge, if you sell only some of your shares, shares that are not subject to any contingent deferred sales charge will be sold first and then shares that you have owned the longest. See "Plans of Distribution" below for ongoing compensation paid to your dealer or financial adviser for all share classes. CONVERSION OF CLASS B AND C SHARES Class B shares automatically convert to Class A shares in the month of the eight-year anniversary of the purchase date. Class C shares automatically convert to Class F shares in the month of the ten-year anniversary of the purchase date. The Internal Revenue Service currently takes the position that these automatic conversions are not taxable. Should their position change, shareholders would still have the option of converting but may face certain tax consequences. 14 FUNDAMENTAL INVESTORS / PROSPECTUS SALES CHARGE REDUCTIONS AND WAIVERS You must let your investment dealer or American Funds Service Company know if you qualify for a reduction in your Class A sales charge or waiver of your Class B or C contingent deferred sales charge. REDUCING YOUR CLASS A SALES CHARGE You and your "immediate family" (your spouse and your children under the age of 21) may combine investments to reduce your Class A sales charge. AGGREGATING ACCOUNTS To receive a reduced Class A sales charge, investments made by you and your immediate family (see above) may be aggregated if made for your own account(s) and/or, for instance: . trust accounts established by the above individuals. However, if the person(s) who established the trust is deceased, the trust account may be aggregated with accounts of the person who is the primary beneficiary of the trust. . solely controlled business accounts. . single-participant retirement plans. CONCURRENT PURCHASES You may combine simultaneous purchases of any class of shares of two or more American Funds, as well as individual holdings in various American Legacy variable annuities or variable life insurance policies, to qualify for a reduced Class A sales charge. Direct purchases of money market funds are excluded. RIGHTS OF ACCUMULATION You may take into account the current value (or if greater, the amount you invested less any withdrawals) of your existing holdings in any class of shares of the American Funds, as well as individual holdings in various American Legacy variable annuities or variable life insurance policies, to determine your Class A sales charge. Direct purchases of money market funds are excluded. STATEMENT OF INTENTION You can reduce the sales charge you pay on your Class A share purchases by establishing a Statement of Intention. A Statement of Intention allows you to combine all non-money market fund purchases of all share classes, as well as individual American Legacy variable annuity and life insurance policies you intend to make over a 13-month period, to determine the applicable sales charge. At your request, purchases made during the previous 90 days may be included; however, capital appreciation and reinvested dividends and capital gains do not apply toward these combined purchases. A portion of your account may be held in escrow to cover additional Class A sales charges which may be due if your total investments over the 13-month period do not qualify for the applicable sales charge reduction. 15 FUNDAMENTAL INVESTORS / PROSPECTUS CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B AND C SHARES The contingent deferred sales charge on Class B and C shares may be waived in the following cases: . when receiving payments through systematic withdrawal plans (up to 12% of the value of each fund account); . when receiving required minimum distributions from retirement accounts upon reaching age 70 1/2; or . for redemptions due to death or post-purchase disability of the shareholder. PLANS OF DISTRIBUTION The fund has Plans of Distribution or "12b-1 Plans" under which it may finance activities primarily intended to sell shares, provided the categories of expenses are approved in advance by the fund's board of directors. The plans provide for annual expenses of up to 0.25% for Class A shares, 1.00% for Class B and C shares, and up to 0.50% for Class F shares. For all share classes, up to 0.25% of these expenses may be used to pay service fees to qualified dealers for providing certain shareholder services. The remaining expense for each share class may be used for distribution expenses. The 12b-1 fees paid by the fund, as a percentage of average net assets, for the previous fiscal year are indicated earlier under "Fees and Expenses of the Fund." Since these fees are paid out of the fund's assets or income on an ongoing basis, over time they will increase the cost and reduce the return of an investment. The higher fees for Class B and C shares may cost you more over time than paying the initial sales charge for Class A shares. OTHER COMPENSATION TO DEALERS American Funds Distributors may pay, or sponsor informational meetings for, dealers as described in the statement of additional information. 16 FUNDAMENTAL INVESTORS / PROSPECTUS HOW TO SELL SHARES Once a sufficient period of time has passed to reasonably assure that checks or drafts (including certified or cashiers' checks) for shares purchased have cleared (normally 15 calendar days), you may sell (redeem) those shares in any of the following ways: THROUGH YOUR DEALER OR FINANCIAL ADVISER (CERTAIN CHARGES MAY APPLY) . Shares held for you in your dealer's name must be sold through the dealer. . Class F shares must be sold through your dealer or financial adviser. WRITING TO AMERICAN FUNDS SERVICE COMPANY . Requests must be signed by the registered shareholder(s). . A signature guarantee is required if the redemption is: -- Over $50,000; -- Made payable to someone other than the registered shareholder(s); or -- Sent to an address other than the address of record, or an address of record which has been changed within the last 10 days. . American Funds Service Company reserves the right to require signature guarantee(s) on any redemptions. . Additional documentation may be required for sales of shares held in corporate, partnership or fiduciary accounts. TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/: . Redemptions by telephone, fax, or computer (including American FundsLine and American FundsLine OnLine) are limited to $50,000 per shareholder each day. . Checks must be made payable to the registered shareholder. . Checks must be mailed to an address of record that has been used with the account for at least 10 days. TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE Generally, you are automatically eligible to use these services for redemptions and exchanges unless you notify us in writing that you do not want any or all of these services. You may reinstate these services at any time. Unless you decide not to have telephone, fax, or computer services on your account(s), you agree to hold the fund, American Funds Service Company, 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 liabilities (including attorney fees) which may be incurred in connection with the exercise of these privileges, provided American Funds Service Company employs reasonable procedures to confirm that the instructions received from any person with appropriate account information are genuine. If reasonable procedures are not employed, it and/or the fund may be liable for losses due to unauthorized or fraudulent instructions. 17 FUNDAMENTAL INVESTORS / PROSPECTUS DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS The fund intends to distribute dividends to you, usually in February, May, August and December. Capital gains, if any, are usually distributed in December and February. When a dividend or capital gain is distributed, the net asset value per share is reduced by the amount of the payment. You may elect to reinvest dividends and/or capital gain distributions to purchase additional shares of this fund or any other American Fund, or you may elect to receive them in cash. Most shareholders do not elect to take capital gain distributions in cash because these distributions reduce principal value. TAXES ON DISTRIBUTIONS Distributions you receive from the fund may be subject to income tax and may also be subject to state or local taxes - unless you are exempt from taxation. For federal tax purposes, any taxable dividends and distributions of short-term capital gains are treated as ordinary income. The fund's distributions of net long-term capital gains are taxable to you as long-term capital gains. Any taxable distributions you receive from the fund will normally be taxable to you when made, regardless of whether you reinvest distributions or receive them in cash. TAXES ON TRANSACTIONS Your redemptions, including exchanges, may result in a capital gain or loss for federal tax purposes. A capital gain or loss on your investment is the difference between the cost of your shares, including any sales charges, and the price you receive when you sell them. Please see your tax adviser for further information. 18 FUNDAMENTAL INVESTORS / PROSPECTUS FINANCIAL HIGHLIGHTS/1/ The financial highlights table is intended to help you understand the fund's results for the past five years and is currently only shown for Class A and B shares. A similar table will be shown for Class C and F shares beginning with the fund's 2001 fiscal year end. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, whose report, along with the fund's financial statements, is included in the statement of additional information, which is available upon request.
Net gains/(losses) on Net asset securities Dividends value, Net (both realized Total from (from net Distributions Year ended beginning of investment and investment investment (from capital Total December 31 year income unrealized) operations income) gains) distributions - --------------------------------------------------------------------------------------------------------------------- CLASS A: 2000 $32.59 $.42/2/ $.90/2/ $1.32 $(.40) $(2.35) $(2.75) 1999 28.92 .41 6.45 6.86 (.40) (2.79) (3.19) 1998 27.40 .42 4.09 4.51 (.40) (2.59) (2.99) 1997 24.54 .41 6.00 6.41 (.42) (3.13) (3.55) 1996 22.29 .41 4.00 4.41 (.40) (1.76) (2.16) CLASS B: 2000 31.93 .15/2/ 1.02/2/ 1.17 (.13) (1.85) (1.98) Ratio of Ratio of Net asset Net assets, expenses to net income Year ended value, end of end of year average net to average Portfolio December 31 year Total return (in millions) assets net assets turnover rate - --------------------------------------------------------------------------------------------------- CLASS A: 2000 $31.16 4.27% $19,872 .64% 1.28% 43.43%/4/ 1999 32.59 24.58 16,603 .63 1.33 45.50 1998 28.92 16.72 12,713 .63 1.47 52.57 1997 27.40 26.67 10,465 .63 1.54 45.09 1996 24.54 19.99 7,165 .66 1.78 39.07 CLASS B: 2000 31.12 3.73 299 1.39/3/ .53/3/ 43.43/4/
1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended December 31. The period ended 2000 represents, for Class B shares, the 291-day period ended December 31, 2000. Class B shares were not offered before March 15, 2000. Total return for Class B is based on activity during the period and thus is not representative of a full year. Total returns exclude all sales charges, including contingent deferred sales charges. 2 Based on average shares outstanding. 3 Annualized. 4 Represents portfolio turnover rate (equivalent for all share classes) for the year ended December 31, 2000. 19 FUNDAMENTAL INVESTORS / PROSPECTUS --------------------------------------------------------- NOTES 20 FUNDAMENTAL INVESTORS / PROSPECTUS --------------------------------------------------------- NOTES 21 FUNDAMENTAL INVESTORS / PROSPECTUS
FOR SHAREHOLDER SERVICES American Funds Service Company 800/421-0180 FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator FOR DEALER SERVICES American Funds Distributors 800/421-9900 Ext. 11 FOR 24-HOUR INFORMATION American FundsLine(R) 800/325-3590 American FundsLine OnLine(R) http://www.americanfunds.com
Telephone conversations may be recorded or monitored for verification, recordkeeping and quality assurance purposes. * * * * * MULTIPLE TRANSLATIONS This prospectus may be translated into other languages. If there is any inconsistency or ambiguity as to the meaning of any word or phrase in a translation, the English text will prevail. ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information about the fund including financial statements, investment results, portfolio holdings, a statement from portfolio management discussing market conditions and the fund's investment strategies, and the independent accountants' report (in the annual report). STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains more detailed information on all aspects of the fund, including the fund's financial statements and is incorporated by reference into this prospectus. The Codes of Ethics describe the personal investing policies adopted by the The Codes of Ethics and current SAI have been filed with the Securities and Exchange Commission ("SEC"). These and other related materials about the fund are available for review or to be copied at the SEC's Public Reference Room in Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet Web site at http://www.sec.gov, or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing the SEC's Public Reference HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus, annual and semi-annual report for the fund. You may also occasionally receive proxy statements for the fund. In order to reduce the volume of mail you receive, when possible, only one copy of these documents will be sent to shareholders that are part of the same family and share the same residential address. If you would like to receive individual copies of these documents, or a free copy of the SAI or Codes of Ethics, please call American Funds Service Company at 800/421-0180 or write to the Secretary of the fund at P.O. Box 7650, San Francisco, California 94120. Investment Company File No. 811-32 Printed on recycled paper FI-010-0301/RRD THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND. /s/ Patrick F. Quan Patrick F. Quan Secretary Fundamental Investors/(R)/ Prospectus
TABLE OF CONTENTS - ----------------------------------------------------- 1 Risk/Return Summary - ----------------------------------------------------- 4 Fees and Expenses of the Fund - ----------------------------------------------------- 5 Investment Objective, Strategies and Risks - ----------------------------------------------------- 8 Management and Organization - ----------------------------------------------------- 9 Shareholder Information - ----------------------------------------------------- 10 Choosing a Share Class - ----------------------------------------------------- 12 Purchase and Exchange of Shares - ----------------------------------------------------- 13 Sales Charges - ----------------------------------------------------- 15 Sales Charge Reductions and Waivers - ----------------------------------------------------- 16 Plans of Distribution - ----------------------------------------------------- 17 How to Sell Shares - ----------------------------------------------------- 18 Distributions and Taxes - ----------------------------------------------------- 19 Financial Highlights - -----------------------------------------------------
MARCH 15, 2001 THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. RISK/RETURN SUMMARY The fund seeks to make your investment grow and provide you with income over time by investing primarily in common stocks of large, established companies that offer growth potential at reasonable prices. The fund may also invest significantly in non-U.S. securities. The fund is designed for investors seeking both capital appreciation and income. An investment in the fund is subject to risks, including the possibility that the fund's income and the value of its investments may fluctuate in response to economic, political or social events in the U.S. or abroad. The values of equity securities owned by the fund may be affected by events specifically involving the companies issuing those securities. Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or world political, social and economic instability, investments outside the U.S. may be affected to a greater extent. Your investment in the fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, entity or person. YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER IF YOU INVEST FOR A SHORTER PERIOD OF TIME. 1 FUNDAMENTAL INVESTORS / PROSPECTUS HISTORICAL INVESTMENT RESULTS The following information provides some indication of the risks of investing in the fund by showing changes in the fund's investment results from year to year and by showing how the fund's average annual returns for various periods compare with those of a broad measure of market performance. Past results are not an indication of future results. CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES (Results do not include a sales charge; if one were included, results would be lower.) [bar chart] 1991 30.34% 1992 10.19% 1993 18.16% 1994 1.33% 1995 34.21% 1996 19.99% 1997 26.67% 1998 16.72% 1999 24.58% 2000 4.27% [end bar chart] The fund's highest/lowest quarterly results during this time period were:
HIGHEST 15.46% (quarter ended December 31, 1998) LOWEST -10.41% (quarter ended September 30, 1998)
2 FUNDAMENTAL INVESTORS / PROSPECTUS Unlike the bar chart on the previous page, the table below reflects the fund's results with the maximum initial or deferred sales charge imposed, as required by Securities and Exchange Commission rules. Class A share results reflect the maximum initial sales charge of 5.75%. Sales charges are reduced for purchases of $25,000 or more. Results would be higher if calculated without a sales charge. All fund results reflect the reinvestment of dividend and capital gain distributions. Since the fund's Class B shares began investment operations on March 15, 2000 and Class C and F shares began investment operations on March 15, 2001, comparable results for those classes are not available for the 2000 calendar year.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING DECEMBER 31, 2000: ------------------------------------------------------------------------------ ONE YEAR FIVE YEARS TEN YEARS LIFETIME Class A - began 8/1/78/1/ (with the maximum sales -1.73% 16.78% 17.49% 15.97% charge imposed) ------------------------------------------------------------------------------ S&P 500/2/ -9.11% 18.29% 17.41% 16.04% ------------------------------------------------------------------------------ Lipper Multi-Cap Value Fund 9.64% 13.69% 14.87% 14.52% Index/3/ ------------------------------------------------------------------------------ Class A 30-day yield: 1.51% (For current yield information, please call American FundsLine at 1-800-325-3590.) ------------------------------------------------------------------------------
1 The lifetime figure is from August 1, 1978 when Capital Research and Management Company became investment adviser for the fund. 2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted measurement of changes in stock market conditions based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions or expenses. 3 The Lipper Multi-Cap Value Fund Index is an equally weighted index of 30 funds which invest in a variety of market capitalization ranges. These funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings or other factors. The results of the underlying funds in the index include the reinvestment of dividend and capital gain distributions and brokerage commissions paid by the fund for portfolio transactions, but do not reflect sales charges 3 FUNDAMENTAL INVESTORS / PROSPECTUS FEES AND EXPENSES OF THE FUND SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C CLASS F -------------------------------------------------------------------------------------------- Maximum sales charge imposed on purchases (as a 5.75%/1/ none none none percentage of offering price) -------------------------------------------------------------------------------------------- Maximum sales charge imposed on reinvested none none none none dividends -------------------------------------------------------------------------------------------- Maximum deferred sales charge none/2/ 5.00%/3/ 1.00%/4/ none -------------------------------------------------------------------------------------------- Redemption or exchange fees none none none none --------------------------------------------------------------------------------------------
1 Sales charges are reduced or eliminated for purchases of $25,000 or more. 2 A contingent deferred sales charge of 1% applies on certain redemptions made within 12 months following purchases of $1 million or more made without a sales charge. 3 Deferred sales charges are reduced after 12 months and eliminated after six years. 4 Deferred sales charge is eliminated after 12 months. ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS)
CLASS A CLASS B/1/ CLASS C/2/ CLASS F/2/ ------------------------------------------------------------------------------------------------------- Management Fees 0.27% 0.27% 0.27% 0.27% ------------------------------------------------------------------------------------------------------- Distribution and/or Service (12b-1) Fees/3/ 0.25% 1.00% 1.00% 0.25% ------------------------------------------------------------------------------------------------------- Other Expenses 0.12% 0.12% 0.20% 0.19% ------------------------------------------------------------------------------------------------------- Total Annual Fund Operating Expenses 0.64% 1.39% 1.47% 0.71% -------------------------------------------------------------------------------------------------------
1 Annualized. 2 Based on estimated amounts for the current fiscal year. 3 Class A and F 12b-1 fees may not exceed 0.25% and 0.50%, respectively, of the class' average net assets annually. EXAMPLE The examples below are intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The examples assume that you invest $10,000 in the fund for the time periods indicated, that your investment has a 5% return each year and that the fund's operating expenses remain the same as shown above. The "Class A" example reflects the maximum initial sales charge in the first year. The "Class B- and Class C-assuming redemption" examples reflect applicable contingent deferred sales charges through six years and one year, respectively (after which times they are eliminated). The examples do not include fees charged by financial intermediaries, typically applicable mainly to Class F shares. Both Class B examples reflect Class A expenses for years 9 and 10 since Class B shares automatically convert to Class A after eight years. Although your actual costs may be higher or lower, based on these assumptions, your cumulative expenses would be:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS Class A $637 $768 $911 $1,327 ---------------------------------------------------------------------------------------------------------------------------------- Class B - assuming redemption $642 $840 $961 $1,463 ------------------------------------------------------------------------------------------------------------------- Class B - assuming no redemption $142 $440 $761 $1,463 ------------------------------------------------------------------------------------------------------------------- Class C - assuming redemption $250 $465 $803 $1,757 ------------------------------------------------------------------------------------------------------------------- Class C - assuming no redemption $150 $465 $803 $1,757 ------------------------------------------------------------------------------------------------------------------- Class F - excludes intermediary fees/*/ $ 73 $227 $395 $ 883 ------------------------------------------------------------------------------------------------------------------- *Fees charged by financial intermediaries are independent of fund expenses and will increase the overall cost of your investment. Intermediary fees typically range from 0.50% to 3.00% of assets annually depending on services offered.
4 FUNDAMENTAL INVESTORS / PROSPECTUS INVESTMENT OBJECTIVE, STRATEGIES AND RISKS The fund's investment objective is to achieve long-term growth of capital and income. The fund invests primarily in common stocks or securities convertible into common stocks and may invest significantly in securities of issuers domiciled outside the U.S. and not included in the Standard & Poor's 500 Composite Index. The values of equity securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned in the fund, adverse conditions affecting the general economy, overall market declines, world political, social and economic instability, and currency and interest rate fluctuations. Investments outside the U.S. may be affected by these events to a greater extent and may also be affected by differing securities regulations, higher transaction costs, and administrative difficulties such as delays in clearing and settling portfolio transactions. The fund may also hold cash or money market instruments. The size of the fund's cash position will vary and will depend on various factors, including market conditions and purchases and redemptions of fund shares. A larger cash position could detract from the achievement of the fund's objective, but it also would reduce the fund's exposure in the event of a market downturn and provide liquidity to make additional investments or to meet redemptions. The fund relies on the professional judgment of its investment adviser, Capital Research and Management Company, to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek undervalued securities that represent good long-term investment opportunities. Securities may be sold when the investment adviser believes they no longer represent good long-term value. OTHER IMPORTANT INVESTMENT PRACTICES In addition to the principal investment strategies described above, the fund has other investment practices that are described here and in the statement of additional information. The fund may invest to a limited extent in lower quality straight debt securities rated Ba and BB or below or unrated but determined to be of equivalent quality. The prices of debt securities fluctuate depending on such factors as changing interest rates, effective maturities and credit ratings. For example, their prices generally decline when interest rates rise and vice versa. The values of lower quality and longer maturity bonds will be subject to greater price fluctuations than higher quality and shorter maturity bonds. 5 FUNDAMENTAL INVESTORS / PROSPECTUS ADDITIONAL INVESTMENT RESULTS Unlike the investment results table shown on an earlier page, the table below reflects the fund's results calculated without a sales charge.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2000: ONE YEAR FIVE YEARS TEN YEARS LIFETIME Class A - began 8/1/78/1/ (with no sales charge 4.27% 18.17% 18.19% 16.28% imposed) ----------------------------------------------------------------------------------- S&P 500/2/ -9.11% 18.29% 17.41% 16.04% ----------------------------------------------------------------------------------- Lipper Multi-Cap Value 9.64% 13.69% 14.87% 14.52% Fund Index/3/ ----------------------------------------------------------------------------------- Class A distribution rate/4/: 1.19% (For current distribution rate information, please call American FundsLine at 1-800-325-3590.) -----------------------------------------------------------------------------------
1 The lifetime figure is from August 1, 1978 when Capital Research and Management Company became investment adviser for the fund. 2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted measurement of changes in stock market conditions based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions or expenses. 3 The Lipper Multi-Cap Value Fund Index is an equally weighted index of 30 funds which invest in a variety of market capitalization ranges. These funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings or other factors. The results of the underlying funds in the index include the reinvestment of dividend and capital gain distributions and brokerage commissions paid by the fund for portfolio transactions, but do not reflect sales charges. 4 The distribution rate is based on actual distributions paid to shareholders over a 12-month interval. Capital gain distributions are added back to the net asset value to determine the rate. 6 FUNDAMENTAL INVESTORS / PROSPECTUS HOLDINGS BY TYPE OF INVESTMENT AS OF DECEMBER 31, 2000 [pie chart] U.S. Equities 72.7% Non-U.S. Equities 15.0% Bonds 1.1% Cash and Equivalents 11.2% [end pie chart]
FIVE LARGEST INDUSTRIES IN EQUITY HOLDINGS AS OF PERCENT OF DECEMBER 31, 2000 NET ASSETS ------------------------------------------------------------------ Pharmaceuticals 9.84% ------------------------------------------------------------------ Media 9.03 ------------------------------------------------------------------ Insurance 6.99 ------------------------------------------------------------------ Oil & Gas 4.83 ------------------------------------------------------------------ Diversified Telecommunication Services 3.92 TEN LARGEST EQUITY HOLDINGS AS OF DECEMBER 31, 2000 ------------------------------------------------------------------ AstraZeneca 2.51% ------------------------------------------------------------------ Dow Chemical 2.17 ------------------------------------------------------------------ Viacom 2.09 ------------------------------------------------------------------ Pfizer 2.05 ------------------------------------------------------------------ Texas Instruments 1.98 ------------------------------------------------------------------ Pharmacia 1.88 ------------------------------------------------------------------ Allstate 1.84 ------------------------------------------------------------------ Time Warner 1.82 ------------------------------------------------------------------ Bank of America 1.80 ------------------------------------------------------------------ AT&T 1.60
Because the fund is actively managed, its holdings will change from time to time. 7 FUNDAMENTAL INVESTORS / PROSPECTUS MANAGEMENT AND ORGANIZATION INVESTMENT ADVISER Capital Research and Management Company, an experienced investment management organization founded in 1931, serves as investment adviser to the fund and other funds, including those in The American Funds Group. Capital Research and Management Company, a wholly owned subsidiary of The Capital Group Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital Research and Management Company manages the investment portfolio and business affairs of the fund. The total management fee paid by the fund, as a percentage of average net assets, for the previous fiscal year appears earlier under "Fees and Expenses of the Fund." MULTIPLE PORTFOLIO COUNSELOR SYSTEM Capital Research and Management Company uses a system of multiple portfolio counselors in managing mutual fund assets. Under this approach the portfolio of a fund is divided into segments managed by individual counselors. Counselors decide how their respective segments will be invested, within the limits provided by a fund's objective(s) and policies and by Capital Research and Management Company's investment committee. In addition, Capital Research and Management Company's research professionals may make investment decisions with respect to a portion of a fund's portfolio. The primary individual portfolio counselors for Fundamental Investors are:
PORTFOLIO COUNSELOR/ FUND PRIMARY TITLE WITH INVESTMENT ADVISER TITLE (IF APPLICABLE) COUNSELOR SINCE (OR AFFILIATE) AND INVESTMENT EXPERIENCE ------------------------------------------------------------------------------------------------------ JAMES E. DRASDO 1984 (6 years as a Senior Vice President, Capital Research and President, Principal research professional Management Company Executive Officer and for the fund) Investment professional since 1972 and with Director Capital Research and Management Company or affiliate since 1977 ------------------------------------------------------------------------------------------------------ GORDON CRAWFORD 1991 (23 years as a Senior Vice President and Director, Capital Senior Vice President research professional Research and Management Company for the fund) Investment professional with Capital Research and Management Company or affiliate since 1971 ------------------------------------------------------------------------------------------------------ MICHAEL T. KERR 1999 (4 years as a Senior Vice President, Capital Research Company Senior Vice President research professional Investment professional since 1983 and with for the fund) Capital Research and Management Company or affiliate since 1985 ------------------------------------------------------------------------------------------------------ DINA N. PERRY 1993 (9 years as a Senior Vice President, Capital Research and Senior Vice President research professional Management Company for the fund) Investment professional since 1978 and with Capital Research and Management Company or affiliate since 1991 ------------------------------------------------------------------------------------------------------
8 FUNDAMENTAL INVESTORS / PROSPECTUS SHAREHOLDER INFORMATION SHAREHOLDER SERVICES American Funds Service Company, the fund's transfer agent, offers you a wide range of services you can use to alter your investment program should your needs and circumstances change. These services may be terminated or modified at any time upon 60 days written notice. For your convenience, American Funds Service Company has four service centers across the country. AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS Call toll-Free from anywhere in the U.S. (8 a.m. to 8 p.m. ET): 800/421-0180 [map of the United States]
Western Western Central Eastern Central Eastern Service Center Service Center Service Center Service Center American Funds American Funds American Funds American Funds Service Company Service Company Service Company Service Company P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280 Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia 92822-2205 78265-9522 46206-6007 23501-2280 Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
A MORE DETAILED DESCRIPTION OF POLICIES AND SERVICES IS INCLUDED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION AND THE OWNER'S GUIDE SENT TO NEW AMERICAN FUNDS SHAREHOLDERS TITLED "WELCOME TO THE FAMILY." Both are available by writing or calling American Funds Service Company. 9 FUNDAMENTAL INVESTORS / PROSPECTUS CHOOSING A SHARE CLASS The fund offers four different classes of shares. Each share class represents investments in the same portfolio of securities, but each class has its own sales charge and expense structure, allowing you to choose the class that best meets your situation. WHEN YOU PURCHASE SHARES OF THE FUND, YOU MUST CHOOSE A SHARE CLASS. IF NONE IS CHOSEN, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES. Shares of the fund may be purchased through various investment programs or accounts, including many types of retirement plans. The services or share classes available to you may vary depending upon how you wish to purchase shares of the fund. Factors you should consider in choosing a class of shares include: . How long you expect to own the shares . How much you intend to invest . Total expenses associated with owning shares of each class . Whether you qualify for any reduction or waiver of sales charges (for example, Class A shares may be a less expensive option over time if you qualify for a sales charge reduction or waiver) . Class B and C shares generally are not available to certain retirement plans, including employer-sponsored retirement plans such as 401(k) plans, employer-sponsored 403(b) plans, and money purchase pension and profit sharing plans . Class F shares are generally only available to fee-based programs of investment firms and registered investment advisers that have special agreements with the fund's distributor EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU. 10 FUNDAMENTAL INVESTORS / PROSPECTUS SUMMARY OF THE PRIMARY DIFFERENCES AMONG SHARE CLASSES
CLASS A SHARES ------------------------------------------------------------------------------ Initial sales charge up to 5.75% (reduced or eliminated for purchases of $25,000 or more) Contingent deferred sales none (except on certain redemptions on purchases charge of $1 million or more bought without an initial sales charge) 12b-1 fees up to 0.25% annually Dividends higher than other classes due to lower annual expenses Purchase maximum none Conversion none CLASS B SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales starts at 5.00% and declines each year until it charge reaches 0% after six years 12b-1 fees 1.00% annually Dividends lower than Class A and F shares due to higher distribution fees and other expenses Purchase maximum $100,000 Conversion automatic conversion to Class A shares after eight years, reducing future annual expenses CLASS C SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales 1.00% if shares are sold within one year after charge being purchased 12b-1 fees 1.00% annually Dividends lower than Class A and F shares due to higher distribution fees and other expenses Purchase maximum $500,000 Conversion automatic conversion to Class F shares after ten years, reducing future annual expenses CLASS F SHARES ------------------------------------------------------------------------------ Initial sales charge none Contingent deferred sales none charge 12b-1 fees currently 0.25% annually (may not exceed 0.50% annually) Dividends higher than Class B and C shares due to lower distribution fees, but typically lower than Class A shares due to higher other expenses Purchase maximum none Conversion none ------------------------------------------------------------------------------
11 FUNDAMENTAL INVESTORS / PROSPECTUS PURCHASE AND EXCHANGE OF SHARES PURCHASE OF CLASS A, B AND C SHARES Generally, you may open an account and purchase Class A, B and C shares by contacting any investment dealer (who may impose transaction charges in addition to those described in this prospectus) authorized to sell the fund's shares. You may purchase additional shares in various ways, including through your investment dealer and by mail, telephone, the Internet and bank wire. PURCHASE OF CLASS F SHARES Generally, you may only open an account and purchase Class F shares through fee-based programs of investment firms and registered investment advisers with special agreements with the fund's distributor. These firms and advisers typically charge ongoing fees for services they provide. EXCHANGE Generally, you may exchange your shares into shares of the same class of other funds in The American Funds Group without a sales charge. For purposes of computing the contingent deferred sales charge on Class B and C shares, the length of time you have owned your shares will be measured from the date of original purchase and will not be affected by any exchange. Exchanges of shares from the money market funds initially purchased without a sales charge generally will be subject to the appropriate sales charge. Exchanges have the same tax consequences as ordinary sales and purchases. See "Transactions by Telephone..." for information regarding electronic exchanges. THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON, INCLUDING PURCHASES WHICH ARE PART OF EXCHANGE ACTIVITY THAT COULD INVOLVE ACTUAL OR POTENTIAL HARM TO THE FUND.
PURCHASE MINIMUMS FOR ALL CLASSES OF SHARES To establish an account (including retirement plan accounts) $ 250 For a retirement plan account through payroll deduction $ 25 To add to an account $ 50 For a retirement plan account through payroll deduction $ 25 ------------------------------------------------------------------------ PURCHASE MAXIMUM FOR CLASS B SHARES $100,000 ------------------------------------------------------------------------ PURCHASE MAXIMUM FOR CLASS C SHARES $500,000 ------------------------------------------------------------------------
12 FUNDAMENTAL INVESTORS / PROSPECTUS SHARE PRICE The fund calculates its share price, also called net asset value, as of approximately 4:00 p.m. New York time, which is the normal close of trading on the New York Stock Exchange, every day the Exchange is open. In calculating net asset value, market prices are used when available. The fund has adopted procedures to make "fair value" determinations when reliable market prices for particular securities are not available. Your shares will be purchased at the net asset value (plus any applicable sales charge in the case of Class A shares), or sold at the net asset value next determined after American Funds Service Company receives and accepts your request. A contingent deferred sales charge may apply at the time you sell certain Class A, B and C shares. SALES CHARGES CLASS A The initial sales charge you pay when you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases as indicated below.
SALES CHARGE AS A PERCENTAGE OF ---------------------------------- DEALER NET COMMISSION OFFERING AMOUNT AS % OF INVESTMENT PRICE INVESTED OFFERING PRICE ------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 5.00% ------------------------------------------------------------------------------ $25,000 but less than 5.00% 5.26% 4.25% $50,000 ------------------------------------------------------------------------------ $50,000 but less than 4.50% 4.71% 3.75% $100,000 ------------------------------------------------------------------------------ $100,000 but less than 3.50% 3.63% 2.75% $250,000 ------------------------------------------------------------------------------ $250,000 but less than 2.50% 2.56% 2.00% $500,000 ------------------------------------------------------------------------------ $500,000 but less than 2.00% 2.04% 1.60% $750,000 ------------------------------------------------------------------------------ $750,000 but less than $1 1.50% 1.52% 1.20% million ------------------------------------------------------------------------------ $1 million or more and certain other investments none none none described below ------------------------------------------------------------------------------
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE INVESTMENTS OF $1 MILLION OR MORE MAY BE SUBJECT TO A 1% CONTINGENT DEFERRED SALES CHARGE IF SHARES ARE SOLD WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type plans investing $1 million or more, or with 100 or more eligible employees, and Individual Retirement Account rollovers involving retirement plan assets invested in the American Funds, may invest with no sales charge and are not subject to a contingent deferred sales charge. Also exempt are investments made through retirement plans, endowments or 13 FUNDAMENTAL INVESTORS / PROSPECTUS foundations with $50 million or more in assets, and investments made through accounts that purchased fund shares before March 15, 2001 and are part of certain qualified fee-based programs. The distributor may pay dealers up to 1% on investments made in Class A shares with no initial sales charge. The fund may reimburse the distributor for these payments through its Plan of Distribution (see below). CLASS B AND C Class B and C shares are sold without any initial sales charge. American Funds Distributors pays 4% of the amount invested to dealers who sell Class B shares and 1% to dealers who sell Class C shares. For Class C shares, a contingent deferred sales charge of 1% applies if shares are sold within one year of purchase. For Class B shares, a contingent deferred sales charge may be applied to shares you sell within six years of purchase, as shown in the table below.
CLASS B SHARES SOLD WITHIN YEAR 1 2 3 4 5 6 -------------------------------------------------------------------- CONTINGENT DEFERRED SALES CHARGE 5% 4% 4% 3% 2% 1%
Shares acquired through reinvestment of dividends or capital gain distributions are not subject to a contingent deferred sales charge. In addition, the contingent deferred sales charge may be waived in certain circumstances. See "Contingent Deferred Sales Charge Waivers for Class B and C Shares" below. The contingent deferred sales charge is based on the original purchase cost or the current market value of the shares being sold, whichever is less. For purposes of determining the contingent deferred sales charge, if you sell only some of your shares, shares that are not subject to any contingent deferred sales charge will be sold first and then shares that you have owned the longest. See "Plans of Distribution" below for ongoing compensation paid to your dealer or financial adviser for all share classes. CONVERSION OF CLASS B AND C SHARES Class B shares automatically convert to Class A shares in the month of the eight-year anniversary of the purchase date. Class C shares automatically convert to Class F shares in the month of the ten-year anniversary of the purchase date. The Internal Revenue Service currently takes the position that these automatic conversions are not taxable. Should their position change, shareholders would still have the option of converting but may face certain tax consequences. 14 FUNDAMENTAL INVESTORS / PROSPECTUS SALES CHARGE REDUCTIONS AND WAIVERS You must let your investment dealer or American Funds Service Company know if you qualify for a reduction in your Class A sales charge or waiver of your Class B or C contingent deferred sales charge. REDUCING YOUR CLASS A SALES CHARGE You and your "immediate family" (your spouse and your children under the age of 21) may combine investments to reduce your Class A sales charge. AGGREGATING ACCOUNTS To receive a reduced Class A sales charge, investments made by you and your immediate family (see above) may be aggregated if made for your own account(s) and/or, for instance: . trust accounts established by the above individuals. However, if the person(s) who established the trust is deceased, the trust account may be aggregated with accounts of the person who is the primary beneficiary of the trust. . solely controlled business accounts. . single-participant retirement plans. CONCURRENT PURCHASES You may combine simultaneous purchases of any class of shares of two or more American Funds, as well as individual holdings in various American Legacy variable annuities or variable life insurance policies, to qualify for a reduced Class A sales charge. Direct purchases of money market funds are excluded. RIGHTS OF ACCUMULATION You may take into account the current value (or if greater, the amount you invested less any withdrawals) of your existing holdings in any class of shares of the American Funds, as well as individual holdings in various American Legacy variable annuities or variable life insurance policies, to determine your Class A sales charge. Direct purchases of money market funds are excluded. STATEMENT OF INTENTION You can reduce the sales charge you pay on your Class A share purchases by establishing a Statement of Intention. A Statement of Intention allows you to combine all non-money market fund purchases of all share classes, as well as individual American Legacy variable annuity and life insurance policies you intend to make over a 13-month period, to determine the applicable sales charge. At your request, purchases made during the previous 90 days may be included; however, capital appreciation and reinvested dividends and capital gains do not apply toward these combined purchases. A portion of your account may be held in escrow to cover additional Class A sales charges which may be due if your total investments over the 13-month period do not qualify for the applicable sales charge reduction. 15 FUNDAMENTAL INVESTORS / PROSPECTUS CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B AND C SHARES The contingent deferred sales charge on Class B and C shares may be waived in the following cases: . when receiving payments through systematic withdrawal plans (up to 12% of the value of each fund account); . when receiving required minimum distributions from retirement accounts upon reaching age 70 1/2; or . for redemptions due to death or post-purchase disability of the shareholder. PLANS OF DISTRIBUTION The fund has Plans of Distribution or "12b-1 Plans" under which it may finance activities primarily intended to sell shares, provided the categories of expenses are approved in advance by the fund's board of directors. The plans provide for annual expenses of up to 0.25% for Class A shares, 1.00% for Class B and C shares, and up to 0.50% for Class F shares. For all share classes, up to 0.25% of these expenses may be used to pay service fees to qualified dealers for providing certain shareholder services. The remaining expense for each share class may be used for distribution expenses. The 12b-1 fees paid by the fund, as a percentage of average net assets, for the previous fiscal year are indicated earlier under "Fees and Expenses of the Fund." Since these fees are paid out of the fund's assets or income on an ongoing basis, over time they will increase the cost and reduce the return of an investment. The higher fees for Class B and C shares may cost you more over time than paying the initial sales charge for Class A shares. OTHER COMPENSATION TO DEALERS American Funds Distributors may pay, or sponsor informational meetings for, dealers as described in the statement of additional information. 16 FUNDAMENTAL INVESTORS / PROSPECTUS HOW TO SELL SHARES Once a sufficient period of time has passed to reasonably assure that checks or drafts (including certified or cashiers' checks) for shares purchased have cleared (normally 15 calendar days), you may sell (redeem) those shares in any of the following ways: THROUGH YOUR DEALER OR FINANCIAL ADVISER (CERTAIN CHARGES MAY APPLY) . Shares held for you in your dealer's name must be sold through the dealer. . Class F shares must be sold through your dealer or financial adviser. WRITING TO AMERICAN FUNDS SERVICE COMPANY . Requests must be signed by the registered shareholder(s). . A signature guarantee is required if the redemption is: -- Over $50,000; -- Made payable to someone other than the registered shareholder(s); or -- Sent to an address other than the address of record, or an address of record which has been changed within the last 10 days. . American Funds Service Company reserves the right to require signature guarantee(s) on any redemptions. . Additional documentation may be required for sales of shares held in corporate, partnership or fiduciary accounts. TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/: . Redemptions by telephone, fax, or computer (including American FundsLine and American FundsLine OnLine) are limited to $50,000 per shareholder each day. . Checks must be made payable to the registered shareholder. . Checks must be mailed to an address of record that has been used with the account for at least 10 days. TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE Generally, you are automatically eligible to use these services for redemptions and exchanges unless you notify us in writing that you do not want any or all of these services. You may reinstate these services at any time. Unless you decide not to have telephone, fax, or computer services on your account(s), you agree to hold the fund, American Funds Service Company, 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 liabilities (including attorney fees) which may be incurred in connection with the exercise of these privileges, provided American Funds Service Company employs reasonable procedures to confirm that the instructions received from any person with appropriate account information are genuine. If reasonable procedures are not employed, it and/or the fund may be liable for losses due to unauthorized or fraudulent instructions. 17 FUNDAMENTAL INVESTORS / PROSPECTUS DISTRIBUTIONS AND TAXES DIVIDENDS AND DISTRIBUTIONS The fund intends to distribute dividends to you, usually in February, May, August and December. Capital gains, if any, are usually distributed in December and February. When a dividend or capital gain is distributed, the net asset value per share is reduced by the amount of the payment. You may elect to reinvest dividends and/or capital gain distributions to purchase additional shares of this fund or any other American Fund, or you may elect to receive them in cash. Most shareholders do not elect to take capital gain distributions in cash because these distributions reduce principal value. TAXES ON DISTRIBUTIONS Distributions you receive from the fund may be subject to income tax and may also be subject to state or local taxes - unless you are exempt from taxation. For federal tax purposes, any taxable dividends and distributions of short-term capital gains are treated as ordinary income. The fund's distributions of net long-term capital gains are taxable to you as long-term capital gains. Any taxable distributions you receive from the fund will normally be taxable to you when made, regardless of whether you reinvest distributions or receive them in cash. TAXES ON TRANSACTIONS Your redemptions, including exchanges, may result in a capital gain or loss for federal tax purposes. A capital gain or loss on your investment is the difference between the cost of your shares, including any sales charges, and the price you receive when you sell them. Please see your tax adviser for further information. 18 FUNDAMENTAL INVESTORS / PROSPECTUS FINANCIAL HIGHLIGHTS/1/ The financial highlights table is intended to help you understand the fund's results for the past five years and is currently only shown for Class A and B shares. A similar table will be shown for Class C and F shares beginning with the fund's 2001 fiscal year end. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the fund (assuming reinvestment of all dividends and distributions). This information has been audited by Deloitte & Touche LLP, whose report, along with the fund's financial statements, is included in the statement of additional information, which is available upon request.
Net gains/(losses) on Net asset securities Dividends value, Net (both realized Total from (from net Distributions Year ended beginning of investment and investment investment (from capital Total December 31 year income unrealized) operations income) gains) distributions - --------------------------------------------------------------------------------------------------------------------- CLASS A: 2000 $32.59 $.42/2/ $.90/2/ $1.32 $(.40) $(2.35) $(2.75) 1999 28.92 .41 6.45 6.86 (.40) (2.79) (3.19) 1998 27.40 .42 4.09 4.51 (.40) (2.59) (2.99) 1997 24.54 .41 6.00 6.41 (.42) (3.13) (3.55) 1996 22.29 .41 4.00 4.41 (.40) (1.76) (2.16) CLASS B: 2000 31.93 .15/2/ 1.02/2/ 1.17 (.13) (1.85) (1.98) Ratio of Ratio of Net asset Net assets, expenses to net income Year ended value, end of end of year average net to average Portfolio December 31 year Total return (in millions) assets net assets turnover rate - --------------------------------------------------------------------------------------------------- CLASS A: 2000 $31.16 4.27% $19,872 .64% 1.28% 43.43%/4/ 1999 32.59 24.58 16,603 .63 1.33 45.50 1998 28.92 16.72 12,713 .63 1.47 52.57 1997 27.40 26.67 10,465 .63 1.54 45.09 1996 24.54 19.99 7,165 .66 1.78 39.07 CLASS B: 2000 31.12 3.73 299 1.39/3/ .53/3/ 43.43/4/
1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended December 31. The period ended 2000 represents, for Class B shares, the 291-day period ended December 31, 2000. Class B shares were not offered before March 15, 2000. Total return for Class B is based on activity during the period and thus is not representative of a full year. Total returns exclude all sales charges, including contingent deferred sales charges. 2 Based on average shares outstanding. 3 Annualized. 4 Represents portfolio turnover rate (equivalent for all share classes) for the year ended December 31, 2000. 19 FUNDAMENTAL INVESTORS / PROSPECTUS --------------------------------------------------------- NOTES 20 FUNDAMENTAL INVESTORS / PROSPECTUS --------------------------------------------------------- NOTES 21 FUNDAMENTAL INVESTORS / PROSPECTUS FUNDAMENTAL INVESTORS / PROSPECTUS
FOR SHAREHOLDER SERVICES American Funds Service Company 800/421-0180 FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator FOR DEALER SERVICES American Funds Distributors 800/421-9900 Ext. 11 FOR 24-HOUR INFORMATION American FundsLine(R) 800/325-3590 American FundsLine OnLine(R) http://www.americanfunds.com
Telephone conversations may be recorded or monitored for verification, recordkeeping and quality assurance purposes. * * * * * MULTIPLE TRANSLATIONS This prospectus may be translated into other languages. If there is any inconsistency or ambiguity as to the meaning of any word or phrase in a translation, the English text will prevail. ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information about the fund including financial statements, investment results, portfolio holdings, a statement from portfolio management discussing market conditions and the fund's investment strategies, and the independent accountants' report (in the annual report). STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains more detailed information on all aspects of the fund, including the fund's financial statements and is incorporated by reference into this prospectus. The Codes of Ethics describe the personal investing policies adopted by the fund and the fund's investment adviser and its affiliated companies. The Codes of Ethics and current SAI have been filed with the Securities and Exchange Commission ("SEC"). These and other related materials about the fund are available for review or to be copied at the SEC's Public Reference Room in Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet Web site at http://www.sec.gov, or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus, annual and semi-annual report for the fund. You may also occasionally receive proxy statements for the fund. In order to reduce the volume of mail you receive, when possible, only one copy of these documents will be sent to shareholders that are part of the same family and share the same residential address. If you would like to receive individual copies of these documents, or a free copy of the SAI or Codes of Ethics, please call American Funds Service Company at 800/421-0180 or write to the Secretary of the fund at P.O. Box 7650, San Francisco, California 94120. Investment Company File No. 811-32 Printed on recycled paper FI-010-0301/RRD FUNDAMENTAL INVESTORS, INC. Part B Statement of Additional Information March 15, 2001 This document is not a prospectus but should be read in conjunction with the current prospectus of Fundamental Investors (the "fund" or "FI") dated March 15, 2001. The prospectus may be obtained from your investment dealer or financial planner or by writing to the fund at the following address: Fundamental Investors, Inc. Attention: Secretary One Market Steuart Tower, Suite 1800 San Francisco, California 94105 (415) 421-9360 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, and they should contact their employer 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 Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 7 Fund Directors and Other Officers . . . . . . . . . . . . . . . . . 8 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Taxes and Distributions . . . . . . . . . . . . . . . . . . . . . . 16 Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21 Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 26 Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 29 Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Shareholder Account Services and Privileges . . . . . . . . . . . . 32 Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 35 General Information . . . . . . . . . . . . . . . . . . . . . . . . 36 Class A Share Investment Results and Related Statistics . . . . . . 37 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Financial Statements
Fundamental Investors - Page 1 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES The following limitations and guidelines are considered at the time of purchase, under normal market conditions, 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. DEBT SECURITIES . The fund may invest up to 5% of its assets in straight debt securities rated Ba and BB or below by Moody's Investors Services, Inc. (Moody's) or Standard & Poor's Corporation (S&P) or in unrated securities that are determined to be of equivalent quality. NON-U.S. SECURITIES . The fund may invest up to 30% of its assets in securities of issuers that are domiciled outside the U.S. and not included in the Standard & Poor's 500 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. These securities may include common stocks and securities with equity conversion or purchase rights. The prices of equity securities fluctuate based on changes in the financial condition of their issuers and on market and economic conditions. The fund's results will be related to the overall markets for these securities. The growth-oriented, equity-type securities generally purchased by the fund may involve large price swings and potential for loss. DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow money. Issuers pay investors interest and generally must repay the amount borrowed 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. The prices of debt securities fluctuate depending on such factors as interest rates, credit quality, and maturity. In general, their prices decline when interest rates rise and vice versa. Lower rated bonds, rated Ba or below by S&P and BB or below by Moody's or unrated but considered to be of equivalent quality, are described by the rating agencies as speculative and involve greater risk of default or price changes due to changes in the issuer's creditworthiness than higher rated bonds, or they may already be in default. The market prices of these securities may fluctuate more than higher quality securities and may decline significantly in periods of general economic difficulty. It may be more difficult to dispose of, or to determine the value of, lower rated bonds. Certain risk factors relating to lower rated bonds are discussed below. Fundamental Investors - Page 2 SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower rated bonds, like other bonds, may be sensitive to adverse economic changes and political and corporate developments and may be sensitive to interest rate changes. During an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience increased financial stress that would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals, and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices and yields of lower rated bonds. PAYMENT EXPECTATIONS - Lower rated bonds, like other bonds, may contain redemption or call provisions. If an issuer exercises these provisions in a declining interest rate market, the fund would have to replace the security with a lower yielding security, resulting in a decreased return for investors. If the issuer of a bond defaults on its obligations to pay interest or principal or enters into bankruptcy proceedings, the fund may incur losses or expenses in seeking recovery of amounts owed to it. LIQUIDITY AND VALUATION - There may be little trading in the secondary market for particular bonds, which may affect adversely the fund's ability to value accurately or dispose of such bonds. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of lower rated bonds. The Investment Adviser attempts to reduce the risks described above through diversification of the portfolio and by credit analysis of each issuer, as well as by monitoring broad economic trends and corporate and legislative developments, but there can be no assurance that it will be successful in doing so. 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 stock automatically convert into common stock. The prices and yields of non-convertible preferred stock generally move with changes in interest rates and the issuer's credit quality, similar to the factors affecting debt securities. Convertible bonds, convertible preferred stock, and other securities may sometimes be converted into common stock or other securities at a stated conversion ratio. These securities, prior to conversion, 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 equity, general market and economic conditions, 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 U.S. involves special risks, caused by, among other things: currency controls and fluctuating currency values; different accounting, auditing, and financial reporting regulations and practices in some countries; changing local and regional economic, political, and social conditions; expropriation or confiscatory taxation; greater market volatility; differing securities market structures; and various administrative difficulties such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. However, in the opinion of Capital Research and Management Company, investing outside the U.S. also can reduce certain portfolio risks due to greater diversification opportunities. Fundamental Investors - Page 3 The risks described above are potentially heightened in connection with investments in developing countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of its industrialization cycle with a low per capita gross national product. For example, political and/or economic structures in these countries may be in their infancy and developing rapidly. Historically, the markets of developing countries have been more volatile than the markets of developed countries. The fund may only invest in securities of issuers in developing countries to a limited extent. Additional costs could be incurred in connection with the fund's investment activities outside the U.S. Brokerage commissions may be higher outside the U.S., and the fund will bear certain expenses in connection with its currency transactions. Furthermore, increased custodian costs may be associated with the maintenance of assets in certain jurisdictions. CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate securities transactions and enter into forward currency contracts to protect against changes in currency exchange rates. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward currency contracts entered into by the fund will involve the purchase or sale of one currency against the U.S. dollar. While entering into forward currency transactions could minimize the risk of loss due to a decline in the value of the hedged currency, it could also limit any potential gain which might result from an increase in the value of the currency. The fund will not generally attempt to protect against all potential changes in exchange rates. The fund will segregate liquid assets which will be marked to market daily to meet its forward contract commitments to the extent required by the Securities and Exchange Commission. Certain provisions of the Internal Revenue Code may affect the extent to which the fund may enter into forward contracts. Such transactions may also affect the character and timing of income, gain or loss recognized by the fund for U.S. federal income tax purposes. CASH AND CASH EQUIVALENTS - These securities include: (i) commercial paper (e.g., short-term notes up to 9 months in maturity issued by corporations, governmental bodies or bank/ corporation sponsored conduits (asset-backed commercial paper)), (ii) commercial bank obligations (e.g., certificates of deposit, bankers' acceptances (time drafts on a commercial bank where the bank accepts an irrevocable obligation to pay at maturity)), (iii) savings association and savings bank obligations (e.g., bank notes and certificates of deposit issued by savings banks or savings associations), (iv) securities of the U.S. Government, its agencies or instrumentalities that mature, or may be redeemed, in one year or less, and (v) corporate bonds and notes that mature, or that may be redeemed, in one year or less. INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest in the stocks of smaller capitalization companies (typically companies with market capitalizations of less than $1.5 billion at the time of purchase). The Investment Adviser believes that the issuers of smaller capitalization stocks often provide attractive investment opportunities. However, investing in smaller capitalization stocks can involve greater risk than is customarily associated with investing in stocks of larger, more established companies. For example, smaller companies often have limited product lines, markets, or financial resources, may be dependent for management on one or a few key persons, and can be more susceptible to losses. Also, their securities may be thinly traded (and therefore have to be sold at a discount from current prices or sold in small lots over an extended period of time), may be followed by fewer investment research analysts, and may Fundamental Investors - Page 4 be subject to wider price swings, thus creating a greater chance of loss than securities of larger capitalization companies. U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government 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. Certain securities issued by U.S. Government instrumentalities and certain federal agencies are neither direct obligations of, nor guaranteed by, the Treasury. However, they generally involve federal sponsorship in one way or another; some are backed by specific types of collateral; some are supported by the issuer's right to borrow from the Treasury; some are supported by the discretionary authority of the Treasury to purchase certain obligations of the issuer; and others are supported only by the credit of the issuing government agency or instrumentality. These agencies and instrumentalities include, but are not limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee Valley Authority, and Federal Farm Credit Bank System. REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under which the fund buys a security and obtains a simultaneous commitment from the seller to repurchase the security at a specified time and price. Repurchase agreements permit the fund to maintain liquidity and earn income over periods of time as short as overnight. The seller must maintain with the fund's custodian collateral equal to at least 100% of the repurchase price, including accrued interest, as monitored daily by the Investment Adviser. The fund will only enter into repurchase agreements involving securities in which it could otherwise invest and with selected banks and securities dealers whose financial condition is monitored by the Investment Adviser. If the seller under the repurchase agreement defaults, the fund may incur a loss if the value of the collateral securing the repurchase agreement has declined and may incur disposition costs in connection with liquidating the collateral. If bankruptcy proceedings are commenced with respect to the seller, realization of the collateral by the fund may be delayed or limited. RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject to restrictions on resale. Securities not actively traded will be considered illiquid unless they have been specifically determined to be liquid under procedures which have been adopted by the fund's board of directors, taking into account factors such as the frequency and volume of trading, the commitment of dealers to make markets and the availability of qualified investors, all of which can change from time to time. The fund may incur certain additional costs in disposing of illiquid securities. 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 ("1940 Act") as the vote of the lesser of (i) 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 (ii) 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 Fundamental Investors - Page 5 maximum percentage of assets will be considered violated unless the excess occurs immediately after, and is caused by, an acquisition by the fund. The fund may not: 1. borrow money or securities; 2. buy securities "on margin"; 3. effect "short sales" of securities; 4. mortgage, pledge or hypothecate securities; 5. lend money or securities (but the purchase of a portion of an issue of publicly distributed debt securities is not considered the making of a loan); 6. invest in the securities of any issuer which, including predecessors, has a record of less than three years continuous operation; 7. invest in the securities of any issuer if any officer or director of the fund owns more than ^ of 1% of the securities of that issuer or if the fund's officers and directors together own more than 5% of the securities of that issuer; 8. invest any of its assets in the securities of any managed investment trust or of any other managed investment company; 9. invest more than 5% of its total assets at the market value at the time of investment in securities of any one issuer, or hold more than 10% of such securities of any one issuer, but these limitations do not apply to obligations of or guaranteed by the U.S.; 10. purchase or sell real estate; 11. purchase or sell commodities or commodity contracts; 12. act as underwriter of securities issued by other persons; 13. make investments in other companies for the purpose of exercising control or management; 14. concentrate its investments in any one industry or group of industries, but may invest up to 25% of its assets in any one industry. Notwithstanding investment restriction number 8, the fund may invest in securities of other investment companies if deemed advisable by its officers in connection with the administration of a deferred compensation plan adopted by Directors pursuant to an exemptive order granted by the Securities and Exchange Commission. For purposes of investment restriction number 14, the fund will not invest 25% or more (rather than more than 25%) of its total assets in the securities of issuers in the same industry. Fundamental Investors - Page 6 Although not fundamental policies, the fund has further agreed that it will not invest in puts or calls; or invest more than 10% 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). No officer or director of the fund may sell portfolio securities to the fund or buy portfolio securities from it. FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-end, diversified management investment company, was organized as a Delaware corporation on October 17, 1932 and reincorporated in Maryland on February 1, 1990. All fund operations are supervised by the fund's Board of Directors which meets periodically and performs duties required by applicable state and federal laws. Members of the board who are not employed by Capital Research and Management Company or its affiliates are paid certain fees for services rendered to the fund as described in "Directors and Director Compensation" below. 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 four classes of shares - Class A, B, C and F. The shares of each class represent an interest in the same investment portfolio. Each class has equal 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. Class A, B, C and F 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. The fund does not hold annual meetings of shareholders. However, significant matters which 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. Fundamental Investors - Page 7 FUND DIRECTORS AND OFFICERS Directors and Director Compensation
AGGREGATE COMPENSATION (INCLUDING VOLUNTARILY DEFERRED COMPENSATION/1/) FROM THE FUND POSITION DURING FISCAL YEAR WITH PRINCIPAL OCCUPATION(S) DURING ENDED NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS DECEMBER 31, 2000 - -------------------------------------------------------------------------------------------------------------- Guilford C. Babcock Director Associate Professor of Finance, $16,500/3/ 1500 Park Place School of Business Administration, San Marino, CA 91108 University of Southern California Age: 69 - -------------------------------------------------------------------------------------------------------------- + James E. Drasdo President, Senior Vice President, Capital none/4/ 333 South Hope Street PEO and Research and Management Company Los Angeles, CA 90071 Director Age: 55 - -------------------------------------------------------------------------------------------------------------- Robert A. Fox Director Managing General Partner, Fox $19,928/3/ 2110 Waverley Street Investments LP; Professor and Palo Alto, CA 94301 Executive in Residence, University of Age: 63 California, Davis; former President and Chief Executive Officer, Foster Farms - -------------------------------------------------------------------------------------------------------------- Roberta L. Hazard Director Consultant; Rear Admiral, United $ 19,750 1419 Audmar Drive States Navy (Retired) McLean, VA 22101 Age: 66 - -------------------------------------------------------------------------------------------------------------- Leonade D. Jones Director Co-Founder and Adviser, VentureThink $ 19,500 1536 Los Montes Drive LLC and Versura Inc.; former Burlingame, CA 94010 Treasurer, The Washington Post Age: 53 Company - -------------------------------------------------------------------------------------------------------------- John G. McDonald Director The IBJ Professor of Finance, $23,375/3/ Graduate School of Graduate School of Business, Stanford Business University Stanford University Stanford, CA 94305 Age: 63 - -------------------------------------------------------------------------------------------------------------- Gail L. Neale Director President, The Lovejoy Consulting $ 25,250 The Lovejoy Consulting Group, Inc.; former Executive Vice Group, Inc. President, Salzburg Seminar 154 Prospect Parkway Burlington, VT 05401 Age: 66 - -------------------------------------------------------------------------------------------------------------- Henry E. Riggs Director President, Keck Graduate Institute of $23,750/3/ Keck Graduate Institute of Applied Life Sciences; former Applied Life Sciences President and Professor of 535 Watson Drive Engineering, Harvey Mudd College Claremont, CA 91711 Age: 66 - -------------------------------------------------------------------------------------------------------------- + James F. Rothenberg Chairman of President and Director, Capital none/4/ 333 South Hope Street the Board Research and Management Company Los Angeles, CA 90071 Age: 54 - -------------------------------------------------------------------------------------------------------------- Patricia K. Woolf Director Private investor; Lecturer, $ 23,000 506 Quaker Road Department of Molecular Biology, Princeton, NJ 08540 Princeton University; Corporate Age: 66 Director - -------------------------------------------------------------------------------------------------------------- TOTAL COMPENSATION (INCLUDING VOLUNTARILY DEFERRED COMPENSATION/1/) FROM TOTAL NUMBER ALL FUNDS MANAGED BY OF FUND CAPITAL RESEARCH AND BOARDS MANAGEMENT COMPANY ON WHICH OR ITS AFFILIATES/2/ FOR THE DIRECTOR NAME, ADDRESS AND AGE YEAR ENDED DECEMBER 31, 2000 SERVES/2/ - -------------------------------------------------------------------------- Guilford C. Babcock $35,500/3/ 2 1500 Park Place San Marino, CA 91108 Age: 69 - -------------------------------------------------------------------------- + James E. Drasdo none/4/ 2 333 South Hope Street Los Angeles, CA 90071 Age: 55 - -------------------------------------------------------------------------- Robert A. Fox $149,000/3/ 7 2110 Waverley Street Palo Alto, CA 94301 Age: 63 - -------------------------------------------------------------------------- Roberta L. Hazard $ 86,000 4 1419 Audmar Drive McLean, VA 22101 Age: 66 - -------------------------------------------------------------------------- Leonade D. Jones $ 141,500 6 1536 Los Montes Drive Burlingame, CA 94010 Age: 53 - -------------------------------------------------------------------------- John G. McDonald $241,500/3/ 8 Graduate School of Business Stanford University Stanford, CA 94305 Age: 63 - -------------------------------------------------------------------------- Gail L. Neale $ 90,500 5 The Lovejoy Consulting Group, Inc. 154 Prospect Parkway Burlington, VT 05401 Age: 66 - -------------------------------------------------------------------------- Henry E. Riggs $98,000/3/ 4 Keck Graduate Institute of Applied Life Sciences 535 Watson Drive Claremont, CA 91711 Age: 66 - -------------------------------------------------------------------------- + James F. Rothenberg none/4/ 4 333 South Hope Street Los Angeles, CA 90071 Age: 54 - -------------------------------------------------------------------------- Patricia K. Woolf $ 139,000 6 506 Quaker Road Princeton, NJ 08540 Age: 66 - --------------------------------------------------------------------------
Fundamental Investors - Page 8 Fundamental Investors - Page 9 + "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 the parent company of the Investment Adviser, The Capital Group Companies, Inc. 1 Amounts may be deferred by eligible Directors under a non-qualified 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 funds in The American Funds Group as designated by the Directors. 2 Capital Research and Management Company manages The American Funds Group consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc., American High-Income Municipal Bond Fund, Inc., American High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of America, Capital Income Builder, Inc., Capital World Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc., Intermediate Bond Fund of America, The Investment Company of America, Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury Money Fund of America, U.S. Government Securities Fund and Washington Mutual Investors Fund, Inc. Capital Research and Management Company also manages American Variable Insurance Series and Anchor Pathway Fund, which serve as the underlying investment vehicle for certain variable insurance contracts; and Endowments, whose shareholders are limited to (i) any entity exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii) any trust, the present or future beneficiary of which is a 501(c)(3) organization, and (iii) any other entity formed for the primary purpose of benefiting a 501(c)(3) organization. An affiliate of Capital Research and Management Company, Capital International, Inc., manages Emerging Markets Growth Fund, Inc. 3 Since the deferred compensation plan's adoption, the total amount of deferred compensation accrued by the fund (plus earnings thereon) through the 2000 fiscal year for participating Directors is as follows: Guilford C. Babcock ($178,267), Robert A. Fox ($62,111), John G. McDonald ($67,679) and Henry E. Riggs ($210,156). Amounts deferred and accumulated earnings thereon are not funded and are general unsecured liabilities of the fund until paid to the Directors. 4 James E. Drasdo and James F. Rothenberg are affiliated with the Investment Adviser and, accordingly, receive no compensation from the fund. Fundamental Investors - Page 10 OTHER OFFICERS
POSITION(S) PRINCIPAL OCCUPATION(S) DURING NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS - ------------------------------------------------------------------------------- Gordon Crawford 54 Senior Vice Senior Vice President and 333 South Hope Street President Director, Capital Research and Los Angeles, CA 90071 Management Company - ------------------------------------------------------------------------------- Paul G. Haaga, Jr. 52 Senior Vice Executive Vice President and 333 South Hope Street President Director, Capital Research and Los Angeles, CA 90071 Management Company - ------------------------------------------------------------------------------- Michael T. Kerr 41 Senior Vice Senior Vice President, Capital 333 South Hope Street President Research Company* Los Angeles, CA 90071 - ------------------------------------------------------------------------------- Dina N. Perry 55 Senior Vice Senior Vice President, Capital 3000 K Street, N.W., President Research and Management Company Suite 230 Washington, D.C. 20007-5124 - ------------------------------------------------------------------------------- Martin Romo 33 Vice President Vice President, Capital Research P.O. Box 7650 Company* San Francisco, CA 94120 - ------------------------------------------------------------------------------- Patrick Quan 42 Secretary Vice President - Fund Business P.O. Box 7650 Management Group, Capital San Francisco, CA Research and Management Company 94120 - ------------------------------------------------------------------------------- Sheryl F. Johnson 32 Treasurer Vice President - Fund Business 5300 Robin Hood Road Management Group, Capital Norfolk, VA 23513 Research and Management Company - ------------------------------------------------------------------------------- David A. Pritchett 34 Assistant Vice President - Fund Business 5300 Robin Hood Road Treasurer Management Group, Capital Norfolk, VA 23513 Research and Management Company - -------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company. All of the officers listed, except Martin Romo, 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. No compensation is paid by the fund to any officer or Director who is a director, officer or employee of the Investment Adviser or affiliated companies. The fund pays annual fees of $15,000 to Directors who are not affiliated with the Investment Adviser, plus $1,000 for each Board of Directors meeting attended, plus $500 for each meeting attended as a member of a committee of the Board of Directors. In lieu of meeting attendance fees, members of the Proxy Committee receive an annual retainer fee of $4,500 per annum from the fund if they serve as a member of four proxy committees, or $6,250 if they serve as a member of two proxy committees, meeting jointly. No pension or retirement benefits are accrued as part of fund expenses. The Directors may elect, on a voluntary basis, to defer all or a portion of their fees through a deferred Fundamental Investors - Page 11 compensation plan in effect for the fund. The fund also reimburses certain expenses of the Directors who are not affiliated with the Investment Adviser. As of February 15, 2001 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. MANAGEMENT INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management Company, founded in 1931, maintains research facilities in the U.S. and abroad (Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a staff of professionals, many of whom have a number of years of investment experience. The Investment Adviser is located at 333 South Hope Street, Los Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821. The Investment Adviser's research professionals travel several million miles a year, making more than 5,000 research visits in more than 50 countries around the world. The Investment Adviser believes that it is able to attract and retain quality personnel. The Investment Adviser is a wholly owned subsidiary of The Capital Group Companies, Inc. The Investment Adviser is responsible for managing more than $300 billion of stocks, bonds and money market instruments and serves over 11 million shareholder accounts of all types throughout the world. These investors include privately owned businesses and large corporations as well as schools, colleges, foundations and other non-profit and tax-exempt organizations. 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 August 31, 2001, 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 (i) 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 (ii) 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). The Investment Adviser, in addition to providing investment advisory services, furnishes the services and pays the compensation and travel expenses of persons to perform the executive, administrative, clerical and bookkeeping functions of the fund, and provides suitable office space, necessary small office equipment and utilities, general purpose accounting forms, supplies, and postage used at the offices of the fund. 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 services; 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 shares of the fund (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, Fundamental Investors - Page 12 and expenses paid to directors unaffiliated with the Investment Adviser; 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 which is based on average daily net assets and is calculated at an annual rate of 0.39% on the first $1 billion of the fund's net assets, plus 0.336% on net assets over $1 billion to $2 billion, plus 0.30% on net assets over $2 billion to $3 billion, plus 0.276% on net assets over $3 billion to $5 billion, plus 0.27% on net assets over $5 billion to $8 billion, plus 0.258% on net assets over $8 billion to $13 billion, plus 0.252% on net assets over $13 billion to $17 billion, plus 0.250% on net assets over $17 billion to $21 billion, plus 0.248% on net assets over $21 to $27 billion, plus 0.246% on net assets over $27 billion. In connection with the approval of the Agreement by the fund's Board of Directors, the Investment Adviser has agreed to waive any fees to the extent they would exceed those payable under the rate structure contained in its previous agreement. The fee structure referenced above is lower than that in the previous agreement except in the event that the fund's net assets were to fall below $8 billion when fees are equal to, or higher than, that in the previous agreement. The Agreement provides for a management fee reduction to the extent that the annual ordinary operating expenses of the fund's Class A shares exceed 1% of the average net assets in excess thereof. 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 this limit, 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 2000, 1999, and 1998, the Investment Adviser received advisory fees of $51,298,000, $40,589,000, and $33,742,000, respectively. ADMINISTRATIVE SERVICES AGREEMENT - The Administrative Services Agreement (the "Administrative Agreement") between the fund and the Investment Adviser, relating to the fund's Class C and F shares, will continue in effect until August 31, 2002, 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 Administrative Agreement provides that the fund may terminate the agreement at any time by vote of a majority of Directors who are not interested persons of the fund. 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. 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 Fundamental Investors - Page 13 fund communications. In addition, the Investment Adviser monitors, coordinates and oversees the activities performed by third parties. As compensation for its services, the Investment Adviser receives transfer agent fees for transfer agent services provided to the fund's Class C and F 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 fund's Class C and F shares pay only those transfer agent fees that are attributed to accounts and activities generated by their respective share class. The Investment Adviser also receives an administrative services fee for administrative services provided to the fund's Class C and F shares. Administrative services fees are paid monthly, accrued daily and calculated at the annual rate of 0.15% of the average net assets of the fund's Class C and F shares. 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. 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). In addition, the Principal Underwriter receives revenues from sales of the fund's shares. For Class A shares, the Principal Underwriter receives commission revenue consisting of that portion of the Class A sales charge remaining after the allowances by the Principal Underwriter to investment dealers. For Class B shares, the Principal Underwriter sells the rights to Class B 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 shares. The fund also pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers of Class B shares. For Class C shares, the Principal Underwriter receives any contingent deferred sales charges that apply to Class C shares 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 shares. For Class F shares, the fund pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers and advisers of Class F shares. Commissions retained by the Principal Underwriter on sales of Class A shares during the 2000 fiscal year amounted to $12,094,000 after an allowance of $55,890,000 to dealers. During the fiscal years ended 1999 and 1998, the Principal Underwriter retained $7,987,000 and $7,753,000, respectively, on sales of Class A shares after an allowance of $40,289,000 and $38,376,000 to dealers, respectively. Revenue retained and service fees received by the Principal Underwriter on sales of Class B shares during the 2000 fiscal year amounted to $1,967,000 after compensation of $12,116,000 to dealers. 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 shareholder services, savings to the fund in transfer agency costs, savings to the fund in advisory fees and other expenses, benefits to the investment process from growth or stability of assets and maintenance of a financially healthy Fundamental Investors - Page 14 management organization. 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 (i) for Class A shares, up to 0.25% of its net assets attributable to Class A shares, (ii) for Class B shares, 1.00% of its net assets attributable to Class B shares, (iii) for Class C shares, 1.00% of its net assets attributable to Class C shares, and (iv) for Class F shares, up to 0.50% of its net assets attributable to Class F shares, to finance any activity which is 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. For Class A shares, (i) up to 0.25% is reimbursed to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) up to the amount allowable under the fund's Class A 12b-1 limit is reimbursed to the Principal Underwriter for paying distribution-related expenses, including 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 shares in excess of the Class A Plan limitation 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 shares, (i) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) 0.75% is paid to the Principal Underwrtier for distribution-related expenses, including the financing of commissions paid to qualified dealers. For Class C shares, (i) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) 0.75% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualfied dealers. For Class F shares, 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers or advisers. Currently, no compensation is paid under the fund's Class F Plan for distribution-related expenses. During the 2000 fiscal year, the fund paid or accrued $46,569,000 for compensation to dealers or the Principal Underwriter under the Plan for Class A shares and $1,121,000 under the Plan for Class B shares. As of December 31, 2000, accrued and unpaid distribution expenses for Class A and Class B shares were $4,066,000 and $237,000 respectively. OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from a designated percentage of its income), currently provides additional compensation to dealers. Currently these payments are limited to the top 100 dealers who have sold shares of the fund or other funds in The American Funds Group. These payments will be based principally on a pro rata share of a Fundamental Investors - Page 15 qualifying dealer's sales. The Principal Underwriter will, on an annual basis, determine the advisability of continuing these payments. TAXES AND DISTRIBUTIONS FUND TAXATION - The fund has elected to be treated as a regulated investment company under Subchapter M of 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 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 any one issuer (other than U.S. Government securities or the securities of other regulated investment companies), or two or more issuers which the fund controls and which are determined to be engaged in the same or similar trades or businesses. 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 (i) 98% of ordinary income (generally net investment income) for the calendar year, (ii) 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 (iii) the sum of any untaxed, 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 (i) amounts actually distributed by the fund from its current year's ordinary income and capital gain net income and (ii) 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 the interest of shareholders to distribute a lesser amount. 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. Fundamental Investors - Page 16 Distributions of investment company taxable income and net realized capital gains to individual shareholders will be taxable whether received in shares or in cash. 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 - 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. Under the Code, gains or losses attributable to fluctuations in exchange rates which 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 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 will be eligible for the deduction Fundamental Investors - Page 17 for dividends received by corporations. Shareholders will be informed of the portion of dividends which so qualify. 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 which 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 which 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 a 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 market discount generally will be treated as taxable ordinary income to the extent it does not exceed the accrued market discount on such bond (unless a fund elects to include market discount in income in tax years to which it is attributable). Generally, market discount accrues on a daily basis for each day the bond is held by a fund on a straight-line basis over the time remaining to the bond's maturity. 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 short-term capital gain. In general, any gain realized on disposition of a security held less than one year is treated as short-term capital gain. Dividend and interest income received by the fund from sources outside the U.S. may be subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventions between certain countries and the U.S. may reduce or eliminate these foreign taxes, however. Most foreign countries do not impose taxes on capital gains in respect of 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 20% 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 their related tax credit. Fundamental Investors - Page 18 SHAREHOLDER TAXATION - In January of each year individual shareholders of the fund 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. Distributions of the excess of net long-term capital gains over net short-term capital losses which the fund properly designates as "capital gain dividends" generally will be taxable to individual shareholders at a maximum 20% capital gains rate, regardless of the length of time the shares of the fund have been held by such shareholders. 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 treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain during such six-month period. Distributions by the fund result in a reduction in the net asset value of the fund's shares. Should a distribution reduce the net asset value below a shareholder's cost basis, such distribution would nevertheless be taxable to the shareholder as ordinary income or capital gain as described above, even though, from an investment standpoint, it may constitute a partial return of investment capital. For this reason, 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 then receive a partial return of investment capital upon the distribution, which will nevertheless be taxable to them. Redemptions of shares, including exchanges for shares of another American Fund, 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 funds. Also, 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. 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 withholding of federal income tax at the rate of 31% 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. Fundamental Investors - Page 19 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. Fundamental Investors - Page 20 PURCHASE OF SHARES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS - ------------------------------------------------------------------------------- See "Purchase $50 minimum (except where a Minimums" for initial lower minimum is noted under investment minimums. "Purchase Minimums"). - ------------------------------------------------------------------------------- By contacting Visit any investment Mail directly to your your investment dealer dealer who is investment dealer's address registered in the printed on your account state where the statement. purchase is made and who has a sales agreement with American Funds Distributors. - ------------------------------------------------------------------------------- By mail Make your check Fill out the account additions payable to the fund form at the bottom of a recent and mail to the account statement, make your address indicated on check payable to the fund, the account write your account number on application. Please your check, and mail the check indicate an investment and form in the envelope dealer on the account provided with your account application. statement. - ------------------------------------------------------------------------------- By telephone Please contact your Complete the "Investments by investment dealer to Phone" section on the account open account, then application or American follow the procedures FundsLink Authorization Form. for additional Once you establish the investments. privilege, you, your financial advisor or any person with your account information can call American FundsLine(R) and make investments by telephone (subject to conditions noted in "Shareholder Account Services and Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below). - ------------------------------------------------------------------------------- By computer Please contact your Complete the American FundsLink investment dealer to Authorization Form. Once you open account, then established the privilege, you, follow the procedures your financial advisor or any for additional person with your account investments. information may access American FundsLine OnLine(R) on the Internet and make investments by computer (subject to conditions noted in "Shareholder Account Services and Privileges - Telephone and Computer Purchases, Redemptions and Exchanges" below). - ------------------------------------------------------------------------------- By wire Call 800/421-0180 to Your bank should wire your obtain your account additional investments in the number(s), if same manner as described under necessary. Please "Initial Investment." indicate an investment dealer on the account. Instruct your bank to wire funds to: Wells Fargo Bank 155 Fifth Street, Sixth Floor San Francisco, CA 94106 (ABA#121000248) For credit to the account of: American Funds Service Company a/c# 4600-076178 (fund name) (your fund acct. no.) - -------------------------------------------------------------------------------
The funds and the Principal Underwriter reserve the right to reject any purchase order. Generally, Class F shares may only be purchased through fee-based programs of investment firms and registered investment advisers who have special agreements with the fund's distributor. Class B and C shares are generally not available to certain employer-sponsored retirement plans, such as 401(k) plans, employer-sponsored 403(b) plans, and money purchase Fundamental Investors - Page 21 pension and profit sharing plans. In addition, the state tax-exempt funds are only offered in certain states and tax-exempt funds in general should not serve as retirement plan investments. PURCHASE MINIMUMS - The minimum initial investment for all funds in The American Funds Group, except the money market funds and the state tax-exempt funds, is $250. The minimum initial investment for the money market funds (The Cash Management Trust of America, The Tax-Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase minimums are reduced to $50 for purchases through "Automatic Investment Plans" (except for the money market funds) or to $25 for purchases by retirement plans through payroll deductions and may be reduced or waived for shareholders of other funds in The American Funds Group. The minimum is $50 for additional investments (except for retirement plan payroll deductions as noted above). PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B shares for all American Funds is $100,000. For investments above $100,000, Class A shares are generally a less expensive option over time due to sales charge reductions or waivers. PURCHASE MAXIMUM FOR CLASS C SHARES - The maximum purchase order for Class C shares for all American Funds is $500,000. FUND NUMBERS - Here are the fund numbers for use with our automated phone line, American FundsLine/(R)/ (see description below):
FUND FUND FUND FUND NUMBER NUMBER NUMBER NUMBER FUND CLASS A CLASS B CLASS C CLASS F - ---------------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund/(R)/ . . . . . . . . . . . . . . . 02 202 302 402 American Balanced Fund/(R)/ . . . . . . . . . 11 211 311 411 American Mutual Fund/(R)/ . . . . . . . . . . 03 203 303 403 Capital Income Builder/(R)/ . . . . . . . . . 12 212 312 412 Capital World Growth and Income Fund/SM/ . . 33 233 333 433 EuroPacific Growth Fund/(R)/ . . . . . . . . 16 216 316 416 Fundamental Investors/SM/ . . . . . . . . . . 10 210 310 410 The Growth Fund of America/(R)/ . . . . . . . 05 205 305 405 The Income Fund of America/(R)/ . . . . . . . 06 206 306 406 The Investment Company of America/(R)/ . . . 04 204 304 404 The New Economy Fund/(R)/ . . . . . . . . . . 14 214 314 414 New Perspective Fund/(R)/ . . . . . . . . . . 07 207 307 407 New World Fund/SM/ . . . . . . . . . . . . . 36 236 336 436 SMALLCAP World Fund/(R)/ . . . . . . . . . . 35 235 335 435 Washington Mutual Investors Fund/SM/ . . . . 01 201 301 401 BOND FUNDS American High-Income Municipal Bond Fund/(R)/ 40 240 340 440 American High-Income Trust/SM/ . . . . . . . 21 221 321 421 The Bond Fund of America/SM/ . . . . . . . . 08 208 308 408 Capital World Bond Fund/(R)/ . . . . . . . . 31 231 331 431 Intermediate Bond Fund of America/SM/ . . . . 23 223 323 423 Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 43 243 343 443 The Tax-Exempt Bond Fund of America/(R)/ . . 19 219 319 419 The Tax-Exempt Fund of California/(R)/* . . . 20 220 320 420 The Tax-Exempt Fund of Maryland/(R)/* . . . . 24 224 324 424 The Tax-Exempt Fund of Virginia/(R)/* . . . . 25 225 325 425 U.S. Government Securities Fund/SM/ . . . . . 22 222 322 422 MONEY MARKET FUNDS The Cash Management Trust of America/(R)/ . . 09 209 309 409 The Tax-Exempt Money Fund of America/SM/ . . 39 N/A N/A N/A The U.S. Treasury Money Fund of America/SM/ . 49 N/A N/A N/A ___________ *Available only in certain states.
Fundamental Investors - Page 22 SALES CHARGES CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares of stock, stock/bond, and bond funds of The American Funds Group are set forth below. The money market funds of The American Funds Group are offered at net asset value. (See "Fund Numbers" for a listing of the funds.)
DEALER SALES CHARGE AS CONCESSION PERCENTAGE OF THE: AS PERCENTAGE ------------------ OF THE AMOUNT OF PURCHASE AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING -INVESTED- PRICE PRICE - ----------------------------------------------------------------- -------- ----- ----- STOCK AND STOCK/BOND FUNDS Less than $25,000 . . . . . . . . . 6.10% 5.75% 5.00% $25,000 but less than $50,000 . . . 5.26 5.00 4.25 $50,000 but less than $100,000. . 4.71 4.50 3.75 BOND FUNDS Less than $100,000 . . . . . . . . 3.90 3.75 3.00 STOCK, STOCK/BOND, AND BOND FUNDS $100,000 but less than $250,000 . 3.63 3.50 2.75 $250,000 but less than $500,000 . 2.56 2.50 2.00 $500,000 but less than $750,000 . 2.04 2.00 1.60 $750,000 but less than $1 million 1.52 1.50 1.20 $1 million or more . . . . . . . . . . none none (see below) - -----------------------------------------------------------------------------
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE (CDSC) MAY BE Fundamental Investors - Page 23 IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type plans investing $1 million or more, or with 100 or more eligible employees, and Individual Retirement Account rollovers from retirement plans with assets invested in the American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may invest with no sales charge and are not subject to a CDSC. 403(b) plans may be treated as employer-sponsored plans for sales charge purposes if: (i) the American Funds are principal investment options; (ii) the employer facilitates the enrollment process by, for example, allowing for onsite group enrollment meetings held during working hours; and (iii) there is only one dealer firm assigned to the plans. 403(b) plans meeting these criteria may invest with no sales charge and are not subject to a CDSC if investing $1 million or more or having 100 or more eligible employees. Investments made through accounts that purchased Class A shares of the fund before March 15, 2001 and are part of certain qualified fee-based programs, and retirement plans, endowments or foundations with $50 million or more in assets, may also be made with no sales charge and are not subject to a CDSC. A dealer concession of up to 1% may be paid by the fund under its Class A Plan of Distribution on investments made with no initial sales charge. In addition, Class A shares of the 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) current registered representatives, retired registered representatives with respect to accounts established while active, or full-time employees (and their spouses, parents, and children) of dealers who have sales agreements with the Principal Underwriter (or who clear transactions through such dealers) and plans for such persons or the dealers; (3) companies exchanging securities with the fund through a merger, acquisition or exchange offer; (4) insurance company separate accounts; (5) accounts managed by subsidiaries of The Capital Group Companies, Inc.; (6) The Capital Group Companies, Inc., its affiliated companies and Washington Management Corporation; and (7) wholesalers and full-time employees of insurance companies involved in the distribution of insurance company separate accounts whose underlying investments are managed by any affiliate of The Capital Group Companies, Inc. Shares are offered at net asset value to these persons and organizations due to anticipated economies in sales effort and expense. Fundamental Investors - Page 24 CONTINGENT DEFERRED SALES CHARGE ON CLASS A AND C SHARES - Except as described above, a CDSC of 1% applies to redemptions of Class A shares of the American Funds, other than the money market funds, made within 12 months following the purchase of Class A shares of $1 million or more made without an initial sales charge. A CDSC of 1% also applies to redemptions of Class C shares of the American Funds made within 12 months following the purchase of the Class C shares. The charge is 1% of the lesser of the value of the shares redeemed (exclusive of reinvested dividends and capital gain distributions) or the total cost of such shares. Shares held the longest are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC may be waived in certain circumstances. See "CDSC Waivers for Class A and C Shares" below. CLASS B SALES CHARGES - Class B shares are sold without any initial sales charge. However, a CDSC may be applied to shares you sell within six years of purchase, as shown in the table below:
CONTINGENT DEFERRED SALES CHARGE ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD ------------------------------------------------------------------------------ 1 5.00% 2 4.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00%
There is no CDSC on appreciation in share value above the initial purchase price or on shares acquired through reinvestment of dividends or capital gain distributions. In addition, the CDSC may be waived in certain circumstances. See "CDSC Waivers for Class B shares" below. The CDSC is based on the original purchase cost or the current market value of the shares being sold, whichever is less. In processing redemptions of Class B shares, shares that are not subject to any CDSC will be redeemed first followed by shares that you have owned the longest during the six-year period. CLASS F SALES CHARGE - Class F shares are sold with no initial or contingent deferred sales charge. DEALER COMMISSIONS AND COMPENSATION - For Class A shares, commissions (up to 1%) are paid to dealers who initiate and are responsible for purchases of $1 million or more, for purchases by any employer-sponsored defined contribution-type plan investing $1 million or more or with 100 or more eligible employees, IRA rollover accounts (as described in "Individual Retirement Account (IRA) Rollovers" below), and for purchases made at net asset value by certain retirement plans, endowments and foundations with assets of $50 million or more. Commissions on investments in Class A shares are paid at the following rates: 1.00% on amounts of $1 million 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. For Class B shares, compensation equal to 4.00% of the amount invested is paid by the Principal Underwriter to dealers who sell Class B shares. Fundamental Investors - Page 25 For Class C shares, compensation equal to 1.00% of the amount invested is paid by the Principal Underwriter to dealers who sell Class C shares. CONVERSION OF CLASS B AND C SHARES - Class B shares automatically convert to Class A shares in the month of the eight-year anniversary of the purchase date. Class C shares automatically convert to Class F shares in the month of the ten-year anniversary of the purchase date. The conversion of shares is subject to the Internal Revenue Service's continued position that the conversions are not subject to federal income tax. In the event the Internal Revenue Service no longer takes this position, the automatic conversion feature may be suspended, in which event no further conversions of Class B or C shares would occur while such suspension remained in effect. In that event, at your option, Class B shares could be exchanged for Class A shares and Class C shares for Class F shares on the basis of the relative net asset values of the two classes, without the imposition of a sales charge or fee; however, such an exchange could constitute a taxable event for you. Absent such an exchange, Class B and C shares would continue to be subject to higher expenses for longer than eight years and ten years, respectively. SALES CHARGE REDUCTIONS AND WAIVERS REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your spouse and your children under age 21) may combine investments to reduce your costs. You must let your investment dealer or American Funds Service Company (the "Transfer Agent") know if you qualify for a reduction in your sales charge using one or any combination of the methods described below. STATEMENT OF INTENTION - You may enter into a non-binding commitment to purchase shares of a fund(s) over a 13-month period and receive the same sales charge as if all shares had been purchased at once. This includes purchases made during the previous 90 days, but does not include future appreciation of your investment or reinvested distributions. The reduced sales charges and offering prices set forth in the Prospectus apply to purchases of $25,000 or more for equity funds and $100,000 or more for bond funds made within a 13-month period subject to the following statement of intention (the "Statement"). The Statement is not a binding obligation to purchase the indicated amount. When a shareholder elects to use a Statement in order to qualify for a reduced sales charge, 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 13-month 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. 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 13-month period, and such a revision will be treated as a new Statement, except that the 13-month period during which the purchase must be made will remain unchanged. Accordingly, upon your Fundamental Investors - Page 26 request, the sales charge paid on investments made 90 days prior to the Statement revision will be adjusted to reflect the revised Statement. Existing holdings eligible for rights of accumulation (see below), including Class A shares held in a fee-based arrangement, other classes of shares of the American Funds, and any individual investments in American Legacy variable annuities and variable life insurance policies (American Legacy, American Legacy II and American Legacy III variable annuities, American Legacy Life, American Legacy Variable Life, and American Legacy Estate Builder) may be credited toward satisfying the Statement. During the Statement period reinvested dividends and capital gain distributions, investments in money market funds, and investments made under a right of reinstatement will not be credited toward satisfying the Statement. The Statement will be considered completed if the shareholder dies within the 13-month Statement period. Commissions 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 13-month period will be handled as follows: the regular monthly payroll deduction investment will be multiplied by 13 and then multiplied by 1.5. The current value of existing American Funds investments (other than money market fund investments) and any rollovers or transfers reasonably anticipated to be invested in non-money market American Funds during the 13-month period, and any individual investments in American Legacy variable annuities and variable life insurance policies 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 13-month period. Shareholders purchasing shares at a reduced sales charge under a Statement indicate their acceptance of these terms with their first purchase. AGGREGATION - Sales charge discounts are available for certain aggregated investments. Qualifying investments include those made by you and your immediate family (your spouse and your children under the age of 21), if all parties are purchasing shares for their own accounts and/or: . individual-type employee benefit plan(s), such as an IRA, 403(b) plan (see exception below), 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. However, if the person(s) who established the trust is deceased, the trust account may be aggregated with accounts of the person who is the primary beneficiary of the trust; or . endowments or foundations established and controlled by you or your immediate family. Fundamental Investors - Page 27 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, excluding 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, again excluding 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 non-profit, charitable or educational organizations (or any employer-sponsored retirement plan for such an endowment or foundation) or any endowments or foundations established and controlled by the organization; or . for participant accounts of a 403(b) plan that is treated as an employer-sponsored plan (see "Class A Purchases Not Subject to Sales Charges" above), or made for two or more 403(b) plans that are treated as employer-sponsored plans 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 - You may combine purchases of all classes of shares of two or more funds in The American Funds Group, as well as individual holdings in American Legacy variable annuities 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 the money market funds are excluded. RIGHTS OF ACCUMULATION - You may take into account the current value (or if greater, the amount you invested less any withdrawals) of your existing holdings in all share classes of The American Funds Group, as well as your holdings in Endowments (shares of which may be owned only by tax-exempt organizations), to determine your sales charge on investments in accounts eligible to be aggregated, or when making a gift to an individual or charity. When determining your sales charge, you may also take into account the value of your individual holdings, as of the end of the week prior to your investment, in various American Legacy variable annuities and variable life insurance policies. Direct purchases of the money market funds are excluded. CDSC WAIVERS FOR CLASS A AND C SHARES - Any CDSC on Class A and C shares may be waived in the following cases: (1) Exchanges (except if shares acquired by exchange are then redeemed within 12 months of the initial purchase). Fundamental Investors - Page 28 (2) Distributions from 403(b) plans or IRAs due to death, post-purchase disability or attainment of age 59-1/2. (3) Tax-free returns of excess contributions to IRAs. (4) Redemptions through systematic withdrawal plans (see "Automatic Withdrawals" below), not exceeding 12% each year of the lesser of the original purchase cost or the current market value of the shares being sold that would otherwise be subject to a CDSC. CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in the following cases: (1) Redemptions through systematic withdrawal plans ("SWPs") (see "Automatic Withdrawals" below) not exceeding 12% each year of the lesser of the original purchase cost or the current market value of the shares being sold that would otherwise be subject to a CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. The 12% fee from CDSC limit is calculated on a pro rata basis at the time the first payment is made and is recalculated thereafter on a pro rata basis at the time of each SWP payment. Shareholders who establish a SWP should be aware that the amount of that payment not subject to a CDSC may vary over time depending on fluctuations in net asset value of their account. This privilege may be revised or terminated at any time. (2) Required minimum distributions taken from retirement accounts upon the attainment of age 70-1/2. (3) Distributions due to death or post-purchase disability of a shareholder. In the case of joint tenant accounts, if one joint tenant dies, the surviving joint tenant(s), at the time they notify the Transfer Agent of the decedent's death and remove his/her name from the account, may redeem shares from the account without incurring a CDSC. Redemptions subsequent to the notification to the Transfer Agent of the death of one of the joint owners will be subject to a CDSC. INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS Assets from a retirement plan (plan assets) may be invested in any class of shares of the American Funds (except as described below) through an IRA rollover plan. All such rollover investments will be subject to the terms and conditions for Class A, B, C and F shares contained in the fund's current prospectus and statement of additional information. In the case of an IRA rollover involving plan assets that offered an investment option managed by any affiliate of The Capital Group Companies, Inc., including any of the American Funds, the assets may only be invested in Class A shares of the American Funds. Such investments will be at net asset value and will not be subject to a contingent deferred sales charge. Dealers who initiate and are responsible for such investments will be compensated pursuant to the schedule applicable to Class A share investments of $1 million or more (see "Dealers Commissions and Compensation" above). Fundamental Investors - Page 29 PRICE OF SHARES Shares are purchased at the offering price next determined after the purchase order is received and accepted by the fund or the Transfer Agent; this offering 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, accepted by the Principal Underwriter prior to its close of business. 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 orders to the Principal Underwriter. Orders received by the investment dealer, 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. Prices which 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 whereas 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. All portfolio securities of funds managed by Capital Research and Management Company (other than money market funds) are valued, and the net asset value per share is determined as follows: 1. Equity securities, including depositary receipts, are valued at the last reported sale price on the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange or market determined by the Investment Adviser to be the broadest and most representative market, which may be either a securities exchange or the over-the-counter market. Fixed-income securities are valued at prices obtained from a pricing service, when such prices are available; however, in circumstances where the Investment Adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. Short-term securities maturing within 60 days are valued at amortized cost which approximates market value. 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 representative market quotations are not readily available are valued at fair value as determined in good faith under policies approved by the fund's Board. The fair value of all other assets is added to the value of securities to arrive at the total assets; 2. Liabilities, including accruals of taxes and other expense items, are deducted from total assets; and Fundamental Investors - Page 30 3. Net assets so obtained are then divided by the total number of shares outstanding, and the result, rounded to the nearer cent, is the net asset value per share. Any purchase order may be rejected by the Principal Underwriter or by the fund. 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 indirectly more than 3.0% of the outstanding shares of the fund without the consent of a majority of the fund's Board of Directors. SELLING SHARES Shares are sold at the net asset value next determined after your request is received in good order by the Transfer Agent. Sales of certain Class A, B and C shares may be subject to a CDSC. Generally, Class F shares may only be sold through fee-based programs of investment firms and registered investment advisers with special agreements with the fund's distributor. You may sell (redeem) other classes of shares in your account in any of the following ways: THROUGH YOUR DEALER (certain charges may apply) - Shares held for you in your dealer's street name must be sold through the dealer. WRITING TO AMERICAN FUNDS SERVICE COMPANY - Requests must be signed by the registered shareholder(s). - A signature guarantee is required if the redemption is: - Over $50,000; - Made payable to someone other than the registered shareholder(s); or - Sent to an address other than the address of record, or an address of record which has been changed within the last 10 days. 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 any shares you wish to sell that are in certificate form. TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/ - Redemptions by telephone or fax (including American FundsLine/(R)/ and American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each day. Fundamental Investors - Page 31 - Checks must be made payable to the registered shareholder(s). - Checks must be mailed to an address of record that has been used with the account for at least 10 days. MONEY MARKET FUNDS - You may have redemptions of $1,000 or more wired to your bank by writing American Funds Service Company. - You may establish check writing privileges (use the money market funds 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 checking account signature card. - Check writing is not available for Class B, C or F shares of The Cash Management Trust. 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 reinvest proceeds from a redemption or a dividend or capital gain distribution of Class A, B, C or F shares without a sales charge in the Class A shares of any fund in The American Funds Group within 90 days after the date of the redemption or distribution (any CDSC on Class A or C shares will be credited to your account). In addition, proceeds from a redemption or a dividend or capital gain distribution of Class C shares may be reinvested in Class C shares. Redemption proceeds of shares representing direct purchases in the money market funds that are reinvested in non-money market funds will be subject to a sales charge. Proceeds will be reinvested at the next calculated net asset value after your request is received and accepted by the Transfer Agent. 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 if your account is held with an investment dealer. Fundamental Investors - Page 32 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 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. For example, if the date you specified falls on a weekend or holiday, your money will be invested on the next business day. 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 investment reversed. You may change the amount of the investment or discontinue the plan at any time by writing to 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. 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 - You may cross-reinvest dividends and capital gains ("distributions") of the same share class into any other fund in The American Funds Group at net asset value, subject to the following conditions: (a) 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), (b) If the value of the account of the fund receiving distributions is below the minimum initial investment requirement, distributions must be automatically reinvested, (c) 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. EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The American Funds Group within the same class. However, exchanges from Class A shares of The Cash Management Trust of America may be made to Class B or C shares of any other American Fund 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 the 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, or by reinvestment or cross-reinvestment of dividends or capital gain distributions. Fundamental Investors - Page 33 Exchanges of Class F shares generally may only be done through fee-based programs of investment firms and registered investment advisers with special agreements with the fund's distributor. You may exchange shares of other classes by writing to the Transfer Agent (see "Selling Shares"), by contacting your investment dealer, by using American FundsLine and American FundsLine OnLine (see "American FundsLine and American FundsLine OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see "American Funds Service Company Service Areas" -- "Principal Underwriter and Transfer Agent" in the prospectus for the appropriate fax numbers) or telegraphing the Transfer Agent. (See "Telephone and Computer Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type retirement plans for which Capital Bank and Trust Company serves as trustee may not be exchanged by telephone, computer, fax or telegraph. Exchange redemptions and purchases are processed simultaneously at the share prices next determined after the exchange order is received. (See "Purchase of Shares"--"Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES. AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in amounts of $50 or more among any of the funds in The American Funds Group on any day (or preceding business day if the day falls on a non-business day) of each month you designate. AUTOMATIC WITHDRAWALS - 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 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 AMERICAN FUNDSLINE ONLINE - You may check your share balance, the price of your shares, or your most recent account transaction, redeem shares (up to $50,000 per shareholder each day) from non-retirement plan accounts, or exchange shares around the clock with American FundsLine and American FundsLine OnLine. To use these services, call 800/325-3590 from a TouchTone(TM) telephone or access the American Funds Web site on the Internet at www.americanfunds.com. Redemptions and exchanges through American FundsLine and American FundsLine OnLine are subject to the conditions noted above and in "Telephone and Computer Purchases, Redemptions and Exchanges" below. You will need your fund number (see the list of funds in The American Funds Group under "Purchase of Shares - Purchase Minimums" and "Purchase of Shares - 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. TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the telephone (including American FundsLine) or computer (including American FundsLine OnLine), fax or telegraph 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 Fundamental Investors - Page 34 respective directors, trustees, officers, employees and agents harmless from any losses, expenses, costs or liability (including attorney fees) which may be incurred in connection with the exercise of these privileges. Generally, all shareholders are automatically eligible to use these options. However, you may elect to opt out of these options 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. REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund to direct the Transfer Agent to redeem the shares of any shareholder for their then current net asset value per 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 permits 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 writing to the Transfer Agent. EXECUTION OF PORTFOLIO TRANSACTIONS The Investment Adviser places orders for the fund's portfolio securities transactions. The Investment Adviser strives to obtain the best available prices in its portfolio transactions taking into account the costs and quality of executions. When, in the opinion of the Investment Adviser, two or more brokers (either directly or through their correspondent clearing agents) are in a position to obtain the best price and execution, preference may be given to brokers who have sold shares of the fund or who have provided investment research, statistical, or other related services to the Investment Adviser. The fund does not consider that it has an obligation to obtain the lowest available commission rate to the exclusion of price, service and qualitative considerations. There are occasions on which 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. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the fund, they are effected only when the Investment Adviser believes that to do so is in the interest of the fund. When such concurrent authorizations occur, the objective is to allocate the executions in an equitable manner. The fund will not pay a mark-up for research in principal transactions. Brokerage commissions paid on portfolio transactions for the fiscal years ended 2000, 1999 and 1998, amounted to $17,261,564, $12,898,000 and $9,944,000. Fundamental Investors - Page 35 The fund is required to disclose information regarding investments in the securities of broker-dealers (or parents of broker-dealers that derive more than 15% of their revenue from broker-dealer activities) which have certain relationships with the fund. During the last fiscal year, Bank of America was among the top 10 dealers that received the largest amount of brokerage commissions and that acted as principals in portfolio transactions. The fund held equity and debt securities of Bank of America Corp. in the amounts of $362,413,000 and $31,282,000, respectively, as of the close of its most recent fiscal year. 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 State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02101, as Custodian. If the fund holds non-U.S. securities, the Custodian may hold these securities pursuant to sub-custodial 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 each shareholder's account, 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. American Funds Service Company was paid a fee of $16,605,000 for Class A shares and $112,000 for Class B shares for the 2000 fiscal year. INDEPENDENT AUDITORS - Deloitte & Touche LLP, Two California Plaza, 350 South Grand Avenue, Los Angeles, CA 90071, serves as the fund's independent auditors 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 auditors, given on the authority of said firm as experts in accounting and auditing. The selection of the fund's independent auditors is reviewed and determined annually by the Board of Directors. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS - The fund's fiscal year ends on December 31. Shareholders are provided updated prospectuses annually and at least semiannually with reports showing the investment portfolio, financial statements and other information. The fund's annual financial statements are audited by the fund's independent auditors, 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. Fundamental Investors - Page 36 PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company and its affiliated companies, including the fund's principal underwriter, have adopted codes of ethics which allow for personal investments, including securities in which the fund may invest from time to time. This policy includes: a ban on acquisitions of securities pursuant to an initial public offering; restrictions on acquisitions of private placement securities; pre-clearance 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. OTHER INFORMATION - The financial statements including the investment portfolio and the report of Independent Auditors 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 -- DECEMBER 31, 2000
Net asset value and redemption price per share (Net assets divided by shares outstanding) . . . . . . . . . $31.16 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). . . . . . . . . . . . . . . . . . . . . . . . $33.06
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS The fund's yield was 1.51% based on a 30-day (or one month) period ended December 31, 2000, computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period, according to the following formula: YIELD = 2[( a-b/cd + 1)/6/ -1] Where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursements). c =the average daily number of shares outstanding during the period that were entitled to receive dividends. d =the maximum offering price per share on the last day of the period. The fund may also calculate a distribution rate on a taxable and tax equivalent basis. The distribution rate is computed by dividing the dividends paid by the fund over the last 12 months by the sum of the month-end net asset value or maximum offering price and the capital gains paid over the last 12 months. The distribution rate may differ from the yield. Fundamental Investors - Page 37 The fund's one year total return and average annual total returns at the maximum offering price for the five- and ten-year periods ended December 31, 2000 were - -1.73%, 16.78% and 17.49%, respectively. The fund's one year total return and average annual total returns at net asset value for the five- and ten-year periods ended on December 31, 2000 were 4.27%, 18.17% and 18.19%, respectively. The average total return ("T") is computed by equating the value at the end of the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a period of years ("n") according to the following formula as required by the Securities and Exchange Commission: P(1+T)/n/ = ERV. In calculating average annual total return at the maximum offering price, the fund assumes: (1) deduction of the maximum sales load of 5.75% from the $1,000 initial investment; (2) reinvestment of dividends and distributions at net asset value on the reinvestment date determined by the Board; and (3) a complete redemption at the end of any period illustrated. In addition, the fund will provide lifetime average total return figures. From time to time, the fund may calculate investment results for Class B, C and F shares. The fund may also, at times, calculate total return based on net asset value per share (rather than the offering price), in which case the figure would not reflect the effect of any sales charges which would have been paid if shares were purchased during the period reflected in the computation. Consequently, total return calculated in this manner will be higher. These total returns may be calculated over periods in addition to those described above. Total return for the unmanaged indices will be calculated assuming reinvestment of dividends and interest, but will not reflect any deductions for advisory fees, brokerage costs or administrative expenses. The fund may include information on its investment results and/or comparisons of its investment results to various unmanaged indices (such as the Dow Jones Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock Index) or results of other mutual funds or investment or savings vehicles in advertisements or in reports furnished to present or prospective shareholders. The fund may also, from time to time, combine its results with those of other funds in The American Funds Group for purposes of illustrating investment strategies involving multiple funds. The fund may refer to results and surveys compiled by organizations such as CDA/ Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar, Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer to results published in various newspapers and periodicals, including Barron's, Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The Wall Street Journal. The fund may illustrate the benefits of tax-deferral by comparing taxable investments to investments made through tax-deferred retirement plans. The fund may compare its investment results with the Consumer Price Index, which is a measure of the average change in prices over time in a fixed market basket of goods and services (e.g. food, clothing, and fuels, transportation, and other goods and services that people buy for day-to-day living). Fundamental Investors - Page 38 APPENDIX Description of Bond Ratings BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and Standard & Poor's Corporation (S&P) represent their opinions as to the quality of the municipal bonds which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon and rating may have different yields, while municipal bonds of the same maturity and coupon with different ratings may have the same yield. Moody's rates the long-term debt securities issued by various entities from - ------- "Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Ratings are described as follows: "Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as 'gilt edge.' Interest payments are protected by a large or by an exceptionally stable margin, and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues." "Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities, or fluctuation of protective elements may be of greater amplitude, or there may be other elements present which make the long-term risks appear somewhat larger than the Aaa securities." "Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future." "Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and, in fact, have speculative characteristics as well." "Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class." "Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small." Fundamental Investors - Page 39 "Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest." "Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings." "Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing." S & P rates the long-term securities debt of various entities in categories - ----- ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Ratings are described as follows: "Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay interest and repay principal is extremely strong." "Debt rated 'AA' has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree." "Debt rated 'A' has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories." "Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories." "Debt rated 'BB' has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The 'BB' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied 'BBB-' rating. "Debt rated 'B' has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The 'B' rating category is also used for debt subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-' rating." "The rating 'CC' is typically applied to debt subordinated to senior debt that is assigned an actual or implied 'CCC' rating." "The rating 'C' is typically applied to debt subordinated to senior debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued." "The rating 'C1' is reserved for income bonds on which no interest is being paid." Fundamental Investors - Page 40 "Debt rated 'D' is in payment default. The 'D' rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized." Fundamental Investors - Page 41 Fundamental Investors Investment Portfolio, December 31, 2000 [Begin table] PERCENT OF PERCENT Largest Equity Holdings NET ASSETS CHANGE /1/ AstraZeneca 2.51% 21.41% Dow Chemical 2.17 -17.77 Viacom 2.09 -21.77 /2/ Pfizer 2.05 44.38 /2/ Texas Instruments 1.98 -2.19 Pharmacia 1.88 72.17 /2/ Allstate 1.84 81.51 Time Warner 1.82 -27.88 Bank of America 1.80 -8.59 AT&T 1.60 -65.89 /1/ Reflects change in market price for the year ended 12/31/00. (Excludes dividends). /2/ Adjusted for mergers. [end table] [begin table] PERCENT OF Largest Industry Holdings NET ASSETS Pharmaceuticals 9.84% Media 9.03 Insurance 6.99 Oil & Gas 4.83 Diversified Telecommunication Services 3.92 [end table] SHARES OR MARKET PERCENT Equity Securities PRINCIPAL VALUE OF NET (COMMON AND PREFERRED STOCKS AND CONVERTIBLE AMOUNT (000) ASSETS DEBENTURES) PHARMACEUTICALS - 9.84% AstraZeneca PLC (United Kingdom) 6,715,500 $335,750 AstraZeneca PLC (ADR) 3,300,766 169,989 2.51% Pfizer Inc 9,000,000 414,000 2.05 Pharmacia Corp. 6,139,500 374,509 Pharmacia Corp. 6.50% ACES convertible 100,000 5,181 1.88 preferred 2001, units American Home Products Corp. 4,500,000 285,975 1.42 Bristol-Myers Squibb Co. 2,500,000 184,844 .92 Elan Corp., PLC (ADR) (Ireland) (1) 2,100,000 98,306 .49 Eli Lilly and Co. 950,000 88,409 .44 Forest Laboratories, Inc. (1) 150,000 19,931 .10 IVAX Corp. 5.50% convertible debentures 2007(2) $5,000,000 6,150 .03 MEDIA - 9.03% Viacom Inc., Class B (1) 6,673,500 311,986 Viacom Inc., Class A (1) 2,351,200 110,506 2.09 Time Warner Inc. 7,044,000 367,979 1.82 Walt Disney Co. 10,375,000 300,227 1.49 News Corp. Ltd., preferred (ADR) (Australia) 6,200,000 180,187 News Corp. Ltd. (ADR) 3,150,000 101,587 1.40 United Pan-Europe Communications NV, 1,120 92,022 convertible preferred (Netherlands)(1),(2),(3) United Pan-Europe Communications NV, warrants, 543,825 45 .46 expire 2007 (1),(3) Dow Jones & Co., Inc. 1,183,300 67,004 .33 Fox Entertainment Group, Inc., Class A (1) 3,650,000 65,244 .32 Interpublic Group of Companies, Inc. 860,000 36,604 Interpublic Group of Companies, Inc. 1.87% $8,168,000 7,627 .22 convertible debentures 2006 (2) E.W. Scripps Co., Class A 700,000 44,012 .22 Comcast Corp., Class A, special stock (1) 1,000,000 41,750 .21 Gannett Co., Inc. 500,000 31,531 .16 Tribune Co. 718,400 30,352 .15 Knight-Ridder, Inc. 441,200 25,093 .12 A. H. Belo Corp., Class A 443,400 7,094 .04 INSURANCE - 6.99% Allstate Corp. 8,500,000 370,281 1.84 Marsh & McLennan Companies, Inc. 2,140,600 250,450 1.24 Chubb Corp. 2,725,000 235,712 1.17 Berkshire Hathaway Inc., Class A (1) 1,750 124,250 .62 Aon Corp. 3,000,000 102,750 .51 St. Paul Companies, Inc. 1,500,000 81,469 .40 Cincinnati Financial Corp. 1,700,000 67,256 .33 American International Group, Inc. 600,000 59,137 .29 21st Century Insurance Group 3,000,000 42,750 .21 XL Capital Ltd., Class A 472,000 41,241 .20 AMP Ltd. (Australia) 3,300,000 37,148 .18 OIL & GAS - 4.83% Suncor Energy Inc. (Canada) 8,822,239 225,442 1.12 Texaco Inc. 2,500,000 155,312 .77 Murphy Oil Corp. 2,194,900 132,654 .66 Unocal Corp. 2,000,000 77,375 Unocal Capital Trust $3.125 450,000 22,781 .50 convertible preferred Shell Canada Ltd., Class A (Canada) 3,254,700 84,907 .42 ENI SpA (Italy) 10,240,000 65,548 .32 Phillips Petroleum Co. 1,138,400 64,746 .32 Imperial Oil Ltd. (Canada) 2,261,900 59,488 .29 Royal Dutch Petroleum Co. (New York registered) 500,000 30,281 (Netherlands) "Shell" Transport and Trading Co., PLC 450,000 22,219 .26 (New York registered) (United Kingdom) Sunoco, Inc. 1,000,000 33,687 .17 DIVERSIFIED TELECOMMUNICATION SERVICES - 3.92% AT&T Corp. 18,600,000 322,012 1.60 SBC Communications Inc. 5,800,000 276,950 1.37 Qwest Communications International Inc. 2,161,650 88,628 .44 (merged with U S WEST, Inc.) (1) Sprint FON Group 2,643,700 53,700 .27 Verizon Communications (formerly GTE Corp.) 875,000 43,859 Bell Atlantic Financial Services, Inc. 4.25% $5,000,000 5,350 .24 convertible debentures 2005 (2) BANKS - 3.82% Bank of America Corp. 7,900,000 362,413 1.80 BANK ONE CORP. 2,717,300 99,521 .49 Wells Fargo & Co. 1,400,000 77,962 .39 Mizuho Holdings, Inc. (formerly Fuji Bank, Ltd.) 10,000 61,726 .31 (Japan) (1) First Union Corp. 1,700,000 47,281 .23 Sumitomo Bank, Ltd. (Japan) 4,600,000 47,043 .23 FleetBoston Financial Corp. 1,250,000 46,953 .23 Royal Bank of Canada (Canada) 850,000 28,838 .14 CHEMICALS - 3.33% Dow Chemical Co. 11,975,000 438,584 2.17 Imperial Chemical Industries PLC (ADR) 3,500,000 117,906 .58 (United Kingdom) Bayer AG (Germany) 1,130,000 59,526 .30 Air Products and Chemicals, Inc. 1,400,000 57,400 .28 INDUSTRIAL CONGLOMERATES - 2.91% Minnesota Mining and Manufacturing Co. 1,900,000 228,950 1.14 Norsk Hydro AS (Norway) 2,701,000 114,558 Norsk Hydro AS (ADR) 2,009,000 84,504 .99 Siemens AG (Germany) 1,200,000 156,907 .78 COMMUNICATIONS EQUIPMENT - 2.81% Corning Inc. 4,320,000 228,150 1.13 Telefonaktiebolaget LM Ericsson, Class B (ADR) 13,600,000 152,150 .75 (Sweden) Motorola, Inc. 5,761,100 116,662 .58 Lucent Technologies Inc. 3,000,000 40,500 .20 Avaya Inc. (1) 1,700,000 17,531 .09 Nortel Networks Corp. (Canada) 400,000 12,825 .06 SEMICONDUCTOR EQUIPMENT & PRODUCTS - 2.65% Texas Instruments Inc. 8,413,024 398,567 1.98 Intel Corp. 2,060,000 61,929 .31 LSI Logic Corp. (1) 2,000,000 34,180 .17 ON Semiconductor Corp. (1) 5,390,200 28,299 .14 Semtech Corp. 4.50% convertible debentures $8,000,000 5,930 2007 (2) Semtech Corp. 4.50% convertible debentures 2007 $2,000,000 1,482 .04 Infineon Technologies AG (Germany) (1) 75,500 2,807 .01 FOOD PRODUCTS - 2.51% Unilever NV (New York Registered) (Netherlands) 1,600,000 100,700 .50 Sara Lee Corp. 3,900,000 95,794 .47 H.J. Heinz Co. 1,800,000 85,387 .42 Wm. Wrigley Jr. Co. 845,400 81,000 .40 General Mills, Inc. 1,404,200 62,575 .31 Kellogg Co. 2,200,000 57,750 .29 Dole Food Co., Inc. 1,527,500 25,013 .12 DIVERSIFIED FINANCIALS - 2.38% Fannie Mae 2,950,000 255,912 1.27 Household International, Inc. 1,700,000 93,500 .46 Investor AB, Class B (Sweden) 5,000,000 74,730 .37 Capital One Financial Corp. 450,000 29,616 .15 USA Education Inc. (formerly SLM Holding Corp.) 400,000 27,200 .13 BEVERAGES - 1.87% Coca-Cola Co. 4,500,000 274,219 1.36 Adolph Coors Co., Class B 780,200 62,660 .31 PepsiCo, Inc. 800,000 39,650 .20 COMPUTERS & PERIPHERALS - 1.84% International Business Machines Corp. 1,600,000 136,000 .67 Lexmark International, Inc., Class A (1) 3,000,000 132,937 .66 Compaq Computer Corp. 3,500,000 52,675 .26 Hewlett-Packard Co. 1,600,000 50,500 .25 AEROSPACE & DEFENSE - 1.78% Boeing Co. 1,750,000 115,500 .57 Lockheed Martin Corp. 2,911,900 98,859 .49 Northrop Grumman Corp. 800,000 66,400 .33 Raytheon Co., Class B 662,500 20,579 Raytheon Co., Class A 670,232 19,437 .20 Honeywell International Inc. 800,000 37,850 .19 ELECTRIC UTILITIES - 1.64% CMS Energy Corp. 1,800,000 57,038 .28 DTE Energy Co. 1,300,000 50,619 .25 Dominion Resources, Inc. 750,000 50,250 .25 Constellation Energy Group, Inc. 1,090,800 49,154 .24 Xcel Energy Inc. 1,200,000 34,875 .17 American Electric Power Co., Inc. 652,100 30,323 .15 FPL Group, Inc. 297,500 21,346 .11 Southern Co. 400,000 13,300 .07 Duke Energy Corp. 150,000 12,787 .06 Entergy Corp. 150,000 6,347 .03 TXU Corp. 120,800 5,353 .03 Progress Energy, Inc. 850,000 349 .00 (formerly Florida Progress Corp.) (1),(3) METALS & MINING - 1.54% Alcoa Inc. 5,500,000 184,250 .91 Phelps Dodge Corp. 1,205,620 67,289 .33 BHP Ltd. (Australia) 3,200,400 33,773 .17 Massey Energy Co. 2,011,700 25,649 .13 MACHINERY - 1.49% Deere & Co. 2,800,000 128,275 .64 Parker Hannifin Corp. 2,300,000 101,488 .50 Caterpillar Inc. 1,000,000 47,313 .23 Illinois Tool Works, Inc. 400,000 23,825 .12 ROAD & RAIL - 1.42% Canadian Pacific Ltd. (Canada) 3,943,400 112,633 .56 Union Pacific Corp. 1,700,000 86,275 Union Pacific Capital Trust 6.25% TIDES 260,000 11,960 .49 convertible preferred 2028 (2) Burlington Northern Santa Fe Corp. 2,547,600 72,129 .36 Budget Group, Inc. 6.25% TIDES 257,000 1,542 .01 convertible preferred 2005 PAPER & FOREST PRODUCTS - 1.39% Weyerhaeuser Co. 1,725,000 87,544 .43 International Paper Co. 2,000,000 81,625 .40 Bowater Inc. 700,000 39,463 .20 Willamette Industries, Inc. 800,000 37,550 .19 Georgia-Pacific Corp., Georgia-Pacific Group 958,640 29,838 Georgia-Pacific Corp., Timber Group 150,000 4,491 .17 SOFTWARE - 1.37% Microsoft Corp. (1) 3,977,300 172,515 .86 Computer Associates International, Inc. 2,750,000 53,625 .27 Intuit Inc. (1) 1,235,700 48,733 .24 AIRLINES - 1.36% Delta Air Lines, Inc. 3,206,600 160,931 .80 AMR Corp. (1) 2,000,000 78,375 .39 Southwest Airlines Co. 1,000,000 33,530 .17 INTERNET SOFTWARE & SERVICES - 1.24% Yahoo Inc. (1) 7,000,000 210,438 1.04 America Online, Inc. (1) 1,000,000 34,800 .17 CNET Networks, Inc. 5.00% convertible $8,000,000 5,320 .03 debentures 2006 SPECIALTY RETAIL - 1.20% Limited Inc. 8,768,578 149,614 .74 Lowe's Companies, Inc. 2,100,000 93,450 .46 HEALTH CARE EQUIPMENT & SUPPLIES - 1.03% Applera Corp. - Applied Biosystems Group 1,330,200 125,122 .62 (formerly PE Biosystems Group) Becton, Dickinson and Co. 2,400,000 83,100 .41 HOUSEHOLD PRODUCTS - 0.96% Colgate-Palmolive Co. 3,000,000 193,650 .96 PERSONAL PRODUCTS - 0.94% Gillette Co. 5,250,000 189,656 .94 AIR FREIGHT & COURIERS - 0.79% FedEx Corp. (1) 2,600,000 103,896 .52 United Parcel Service, Inc., Class B 934,600 54,966 .27 COMMERCIAL SERVICES & SUPPLIES - 0.74% Sabre Holdings Corp. (formerly Sabre Group 2,045,304 88,204 .44 Holdings, Inc.), Class A (1) Cendant Corp. (1) 1,800,000 17,325 Cendant Corp.7.50% PRIDES convertible preferred 1,242,100 16,924 Cendant Corp. 3.00% convertible $7,900,000 7,327 .21 debentures 2002 (2) Waste Management, Inc. 4.00% convertible $11,000,000 10,533 .05 debentures 2002 Equifax Inc. 300,000 8,606 .04 ENERGY EQUIPMENT & SERVICES - 0.70% Baker Hughes Inc. 2,900,000 120,531 .60 Schlumberger Ltd. (Netherlands Antilles) 150,000 11,991 .06 Diamond Offshore Drilling, Inc. 3.75% $6,500,000 7,102 .04 convertible debentures 2007 AUTOMOBILES - 0.66% Honda Motor Co., Ltd. (Japan) 1,954,000 72,572 .36 General Motors Corp. 1,200,000 61,125 .30 IT CONSULTING & SERVICES - 0.66% Electronic Data Systems Corp. 2,300,000 132,825 .66 ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.65% Agilent Technologies, Inc. (1) 1,300,000 71,175 .35 SCI Systems, Inc. (1) 2,000,000 52,750 SCI Systems, Inc. 3.00% convertible $10,000,000 7,962 .30 debentures 2007 MULTI-UTILITIES - 0.65% Questar Corp. 3,000,000 90,188 .45 Williams Companies, Inc. 1,000,000 39,938 .20 BUILDING PRODUCTS - 0.54% Nippon Sheet Glass Co., Ltd. (Japan) 9,000,000 109,381 .54 WIRELESS TELECOMMUNICATION SERVICES - 0.50% AT&T Broadband (formerly MediaOne Group, Inc.) 750,000 60,938 .30 6.25% PIES convertible preferred 2001 Crown Castle International Corp. (1) 1,500,000 40,594 .20 MULTILINE RETAIL - 0.45% Federated Department Stores, Inc. (1) 2,600,000 91,000 .45 GAS UTILITIES - 0.33% KeySpan Corp. 1,584,000 67,122 .33 CONSTRUCTION & ENGINEERING - 0.33% Fluor Corp. (1) 2,011,700 66,512 .33 HEALTH CARE PROVIDERS & SERVICES - 0.25% Cardinal Health, Inc. 500,000 49,813 .25 OTHER INDUSTRIES - 0.77% Newell Rubbermaid Inc. 1,200,000 27,300 Newell Financial Trust I 5.25% QUIPS 254,000 8,271 .18 convertible preferred 2027 Delphi Automotive Systems Corp. 2,814,518 31,663 .16 Albertson's, Inc. 998,550 26,462 .13 Applera Corp. - Celera Genomics Group 528,800 19,004 .09 (formerly Celera Genomics) (1) Chesapeake Corp. (4) 859,100 17,665 .09 Tupperware Corp. 500,000 10,219 .05 Dana Corp. 550,000 8,422 .04 Walgreen Co. 149,900 6,268 .03 MISCELLANEOUS - 3.66% Other equity securities in initial period 736,553 3.66 of acquisition Total Equity Securities 17,703,443 87.77 (cost: $14,321,307,000) PRINCIPAL MARKET PERCENT AMOUNT VALUE OF NET Bonds & Notes (000) (000) ASSETS MEDIA - 0.62% Charter Communications Holdings, LLC 8.25% 2007 $50,000 $45,500 .23% United Pan-Europe Communications NV: 10.875% 2009 42,950 28,025 11.50% 2010 17,050 11,253 .19 FrontierVision 11.00% 2006 15,000 14,400 Century Communications Corp. 8.375% 2007 9,570 8,087 .11 Cablevision Industries Corp. 9.875% 2013 10,000 10,400 .05 Time Warner Inc. 10.15% 2012 6,000 7,347 .04 DIVERSIFIED TELECOMMUNICATION SERVICES - 0.37% NTL Communications Corp.: 11.50% 2008 31,500 27,720 11.875% 2010 (2) 16,125 14,271 NTL Inc. 0%/12.75% 2005 (5) 19,500 18,720 Comcast UK Cable Partners Ltd. 16,070 13,820 .37 0%/11.20% 2007 (5) AIRLINES - 0.06% Delta Air Lines, Inc., Series 1993-A2, 11,500 12,953 .06 10.50% 2016 (6) Total Bonds & Notes (cost: $206,403,000) 212,496 1.05 PRINCIPAL MARKET PERCENT AMOUNT VALUE OF NET Short Term Securities (000) (000) ASSETS Corporate Short-Term Notes - 7.75% SBC Communications Inc. 6.46%-6.55% $104,000 $103,500 .51% due 1/19-2/2/2001 (2) Alcoa Inc. 6.50%-6.52% due 1/11-1/25/2001 80,000 79,737 .40 General Motors Acceptance Corp. 6.53% 80,000 79,727 .39 due 1/10-1/24/2001 USAA Capital Corp. 6.48%-6.50% due 75,000 74,656 .37 1/4-2/15/2001 Verizon Global Funding Inc. 6.40%-6.52% 75,000 74,574 .37 due 1/22-2/15/2001 Park Avenue Receivables Corp. 6.53%-6.68% 65,000 64,884 .32 due 1/5-1/22/2001 (2) American Express Credit Corp. 6.50%-6.51% 65,000 64,793 .32 due 1/12-1/30/2001 Preferred Receivables Funding Corp. 6.52%-6.60% 65,000 64,747 .32 due 1/10-2/2/2001 (2) Corporate Asset Funding Co. Inc. 6.50%-6.61% 60,000 59,788 .30 due 1/8-2/22/2001 (2) A.I. Credit Corp. 6.50%-6.54% due 1/10-2/2/2001 60,000 59,770 .30 International Lease Finance Corp. 6.50% 50,000 49,973 .25 due 1/3/2001 E.I. Du Pont de Nemours and Co. 6.50% 50,000 49,900 .25 due 1/11/2001 IBM Credit Corp. 6.50%-6.54% due 1/9-1/30/2001 50,000 49,823 .25 BellSouth Capital Funding Corp. 6.40%-6.51% 50,000 49,772 .25 due 1/12-2/9/2001 (2) Gannett Co. Inc. 6.43%-6.54% 50,000 49,763 .24 due 1/18-2/8/2001 (2) General Electric Capital Corp. 6.40% 48,000 47,659 .24 due 2/9/2001 Gillette Co. 6.50% due 1/8-1/12/2001 (2) 47,600 47,512 .24 Anheuser-Busch Companies, Inc. 6.45%-6.50% 45,000 44,923 .22 due 1/4-1/11/2001 Motiva Enterprises LLC 6.45%-6.54% 45,000 44,868 .22 due 1/2-1/18/2001 Merck & Co. Inc. 6.48%-6.54% due 1/16-1/17/2001 44,000 43,867 .22 Ciesco L.P. 6.40%-6.53% due 1/16-2/22/2001 45,000 44,735 .22 BellSouth Telecommunications, Inc. 6.52%-6.54% 40,000 39,968 .20 due 1/4-1/5/2001 Equilon Enterprises, LLC 6.51%-6.53% 36,000 35,876 .18 due 1/5-1/25/2001 Duke Energy Corp. 6.49% 1/9-1/11/2001 34,300 34,240 .17 Bank of America Corp. 6.51%-6.62% 31,350 31,282 .15 due 1/8-1/16/2001 Knight-Ridder, Inc. 6.35%-6.52% 29,300 29,179 .14 due 1/9-2/14/2001 Household Finance Corp. 6.55% due 1/9/2001 25,000 24,959 .12 Golden Peanut Co., LLC 6.50%-6.52% 21,000 20,904 .10 due 1/16-2/7/2001 AT&T Corp. 6.51% due 1/5/2001 20,000 19,982 .10 Estee Lauder Companies Inc. 6.48%-6.55% 20,000 19,945 .10 due 1/10-1/22/2001 (2) Tribune Co. 6.51% due 2/12/2001 (2) 20,000 19,846 .10 Monsanto Co. 6.35% due 3/16/2001 (2) 20,000 19,728 .10 Wells Fargo & Co. 6.49% due 1/17/2001 18,700 18,642 .09 Federal Agency Discount Notes - 2.98% Federal Home Loan Banks 6.155%-6.42% 215,000 213,429 1.06 due 1/8-3/14/2001 Fannie Mae 6.11%-6.435% due 1/4-3/29/2001 200,000 198,501 .98 Freddie Mac 6.19%-6.465% due 1/2-3/1/2001 190,000 188,912 .94 TOTAL SHORT-TERM SECURITIES 2,164,364 10.73 (cost: $2,164,377,000) TOTAL INVESTMENT SECURITIES 20,080,303 99.55 (cost: $16,692,087,000) Excess of cash and receivables over payables 90,380 .45 NET ASSETS $20,170,683 100.00 (1) Non-income-producing security. (2) Purchased in a private placement transaction; resale to the public may require registration or sale only to qualified institutional buyers. (3) Valued under procedures established by the Board of Directors. (4) The fund owns 5.69% of the outstanding voting securities of Chesapeake Corp. and thus is considered an affiliate as defined under the Investment Company Act of 1940. (5) Step bond; coupon rate will increase at a later date. (6) Pass-through security backed by a pool of mortgages or other loans on which principal payments are made. Therefore, the effective maturity of these securities is shorter than the stated maturity. ADR = American Depositary Receipts See Notes to Financial Statements
Equity securities added since June 30, 2000 Adolph Coors Agilent Technologies America Online American Electric Power AMP Avaya Berkshire Hathaway BHP Burlington Northern Santa Fe CMS Energy CNET Networks ENI SpA Federated Department Stores Fluor Intuit Investor AB Lexmark International Eli Lilly Lockheed Martin LSI Logic Massey Energy Minnesota Mining and Manufacturing ON Semiconductor Royal Bank of Canada United Pan-Europe Communications Walgreen Co. Wm. Wrigley Jr. Co. Xcel Energy Yahoo Equity securities eliminated since June 30, 2000 Advanced Micro Devices American Greetings Archer Daniels Midland Avon Products Cisco Systems Dai-Ichi Kangyo Bank Dell Computer Dillard's Eastman Kodak EMI Group Ford Motor Fort James Fujitsu Gateway Hasbro HCA - The Healthcare Co. Kimberly-Clark May Department Stores MBNA McDonald's MDU Resources Group Micron Technology Nabisco Group Holdings NEC New York Times Oracle Owens-Illinois Pogo Trust I PSINet Research in Motion Sanofi-Synthelabo Seagram Co. Toshiba USX-Marathon Western Resources Fundamental Investors Financial Statements Statement of Assets and Liabilities at December 31, 2000 (dollars in thousands) Assets: Investment securities at market (cost: $16,692,087) $20,080,303 Cash 87 Receivables for-- Sales of investments $106,853 Sales of fund's shares 63,172 Dividends and interest 25,931 Other 58 196,014 20,276,404 Liabilities: Payables for-- Purchases of investments 55,263 Repurchases of fund's shares 39,249 Management services 4,589 Other expenses 6,620 105,721 Net Assets at December 31, 2000 - $20,170,683 Total authorized capital stock - 1,000,000,000 shares Class A shares, $1.00 par value Net assets $19,871,724 Shares outstanding 637,798,430 Net asset value per share $31.16 Class B shares, $1.00 par value Net assets $298,959 Shares outstanding 9,606,045 Net asset value per share $31.12 See Notes to Financial Statements STATEMENT OF OPERATIONS for the year ended December 31, 2000 (dollars in thousands) Investment Income: Income: Dividends $258,832 Interest 100,285 $ 359,117 Expenses: Management services fee 51,298 Distribution expenses - Class A 46,569 Distribution expenses - Class B 1,121 Transfer agent fee - Class A 16,605 Transfer agent fee - Class B 112 Reports to shareholders 397 Registration statement and prospectus 1,363 Postage, stationery and supplies 2,089 Directors' fees 163 Auditing and legal fees 71 Custodian fee 836 Taxes other than federal income tax 1 Other expenses 151 120,776 Net investment income 238,341 Realized Gain and Unrealized Depreciation on Investments: Net realized gain 1,436,000 Net unrealized depreciation on investments (981,026) Net realized gain and unrealized depreciation on investments 454,974 Net Increase in Net Assets Resulting from Operations $ 693,315 See Notes to Financial Statements Statement of Changes in Net Assets (dollars in thousands) Year ended December 31 2000 1999 Operations: Net investment income $ 238,341 $ 192,612 Net realized gain on investments 1,436,000 1,393,331 Net unrealized (depreciation) appreciation on investments (981,026) 1,590,469 Net increase in net assets resulting from operations 693,315 3,176,412 Dividends and Distributions Paid to Shareholders: Dividends from net investment income: Class A (223,880) (182,671) Class B (587) - Distributions from net realized gains on investments: Class A (1,367,983) (1,298,803) Class B (15,496) - Total dividends and distributions (1,607,946) (1,481,474) Capital Share Transactions: Proceeds from shares sold 5,434,428 2,627,090 Proceeds from shares issued in reinvestment of net investment income dividends and distributions of net realized gain on investments 1,527,294 1,404,953 Cost of shares repurchased (2,479,505) (1,836,795) Net increase in net assets resulting from 4,482,217 2,195,248 capital share transactions Total Increase in Net Assets 3,567,586 3,890,186 Net Assets: Beginning of year 16,603,097 12,712,911 End of year (including undistributed net investment income: $40,847 and $31,348, respectively) $20,170,683 $16,603,097 See Notes to Financial Statements
FUNDAMENTAL INVESTORS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Fundamental Investors, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth of capital and income primarily through investments in common stocks. The fund offers Class A and Class B shares. Class A shares are sold with an initial sales charge of up to 5.75%. Class B shares are sold without an initial sales charge but are subject to a contingent deferred sales charge paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares have higher distribution expenses and transfer agent fees than Class A shares. Class B shares are automatically converted to Class A shares after eight years. Holders of both classes of shares have equal pro rata rights to assets and identical voting, dividend, liquidation and other rights, except that each class bears different distribution and transfer agent expenses, and each class shall have exclusive rights to vote on matters affecting only their class. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the fund in the preparation of its financial statements: SECURITY VALUATION - Equity securities, including depositary receipts, are valued at the last reported sale price on the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. In cases where equity securities are traded on more than one exchange, the securities are valued on the exchange or market determined by the investment adviser to be the broadest and most representative market, which may be either a securities exchange or the over-the-counter market. Fixed-income securities are valued at prices obtained from a pricing service, when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. The ability of the issuers of the fixed-income securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. Securities and assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by the Board of Directors. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in terms of non-U.S. currencies are translated into U.S. dollars at the prevailing market rates at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are included with the net realized and unrealized gain or loss on investment securities. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are accounted for as of the trade date. Realized gains and losses from securities transactions are determined based on specific identified cost. Dividend income is recognized on the ex-dividend date, and interest income is recognized on an accrual basis. Market discounts and original issue discounts on fixed-income securities are amortized daily over the expected life of the security. The fund did not amortize premiums on fixed-income securities. On January 1, 2001, the fund will begin amortizing premiums on fixed-income securities to conform with a recent change in generally accepted accounting principles for mutual funds. Adopting this change will not impact the fund's net asset value and will result in immaterial changes to the classification of certain amounts between interest income, realized gain/loss and unrealized appreciation/depreciation in the Statement of Operations. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. ALLOCATIONS - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily between Class A and Class B based on their relative net asset values. Distribution expenses, certain transfer agent fees and any other applicable class-specific expenses are accrued daily and charged to the respective share class. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain countries involve special investment risks. These risks may include, but are not limited to, investment and repatriation restrictions, revaluation of currencies, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations and limited regulation of the securities markets. TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid. For the year ended December 31, 2000, such non-U.S. taxes were $5,253,000. Net realized gain of the fund derived in certain countries is subject to certain non-U.S. taxes. The fund provides for such non-U.S. taxes on investment income, net realized gain and net unrealized gain. CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest, and other receivables and payables, on a book basis, were $4,321,000 for the year ended December 31, 2000. 3. FEDERAL INCOME TAXATION The fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and intends to distribute all of its net taxable income and net capital gains for the fiscal year. As a regulated investment company, the fund is not subject to income taxes if such distributions are made. Required distributions are determined on a tax basis and may differ from net investment income and net realized gains for financial reporting purposes. In addition, the fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund. As of December 31, 2000, net unrealized appreciation on investments, for federal income tax purposes aggregated $3,383,957,000; $4,378,584,000 related to appreciated securities and $994,627,000 related to depreciated securities. During the year ended December 31, 2000, the fund realized, on a tax basis, a net capital gain of $1,443,901,000 on securities transactions. In addition, the fund has deferred, for tax purposes, to fiscal year ending December 31, 2001, the recognition of losses relating to non-U.S. currency transactions totaling $4,398,000 which were realized during the period November 1, 2000 through December 31, 2000. Net losses related to non-U.S. currency transactions of $4,321,000 were treated as an adjustment to ordinary income for federal income tax purposes. The cost of portfolio securities for federal income tax purposes was $16,696,346,000 at December 31, 2000. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE The fee of $51,298,000 for management services was incurred pursuant to an agreement with Capital Research and Management Company (CRMC), with which certain officers and Directors of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees accrued daily, based on the following rates and net asset levels:
Net Asset Level (in billions) Rate In Excess of Up to 0.390% $0 $1 0.336 1 2 0.300 2 3 0.276 3 5 0.270 5 8 0.258 8 13 0.252 13 17 0.250 17 21 0.248 21 27 0.246 27
DISTRIBUTION EXPENSES American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares, received $12,094,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares during the year ended December 31, 2000. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expense are approved in advance by the fund's Board of Directors. The plans provide for aggregate annual expense limits of 0.25% of net assets for Class A shares, and 1.00% of net assets for Class B shares. For Class A shares, approved categories of expense include dealer service fees of up to 0.25% of net assets. Also included are reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. These reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the fund's overall 0.25% annual expense limit is not exceeded. For the year ended December 31, 2000, aggregate distribution expenses were limited to $46,569,000, or 0.25% of net assets attributable to Class A shares. As of December 31, 2000, unreimbursed expenses which remain subject to reimbursement totaled $2,355,000. For Class B shares, approved categories of expense include fees of 0.75% per annum payable to AFD. AFD sells the rights to receive such payments (as well as any contingent deferred sales charges payable in respect of shares sold during the period) in order to finance the payment of dealer commissions. Also included are service fees of 0.25% per annum. These fees are paid to AFD to compensate AFD for paying service fees to qualified dealers. For the year ended December 31, 2000, aggregate distribution expenses were $1,121,000, or 1.00% of net assets attributable to Class B shares. As of December 31, 2000, accrued and unpaid distribution expenses payable to AFD for Class A and Class B shares were $4,066,000 and $237,000, respectively. TRANSFER AGENT FEE A fee of $16,717,000 was incurred during the year ended December 31, 2000 pursuant to an agreement with American Funds Service Company (AFS), the transfer agent for the fund. DEFERRED DIRECTORS' FEES Directors who are unaffiliated with CRMC may elect to defer part or all of the fees earned for services as members of the Board. Amounts deferred are not funded and are general unsecured liabilities of the fund. As of December 31, 2000, aggregate deferred amounts and earnings thereon since the deferred compensation plan's adoption (1993), net of any payments to Directors, were $803,000. AFFILIATED DIRECTORS' AND OFFICERS CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Officers of the fund and certain Directors are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $9,435,704,000 and $7,541,731,000, respectively, during the year ended December 31, 2000. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. During the year ended December 31, 2000, the custodian fee of $836,000 includes $65,000 that was paid by these credits rather than in cash. The fund reclassified $4,375,000 from undistributed net investment income and $73,914,000 from undistributed net realized gains to additional paid-in capital for the year ended December 31, 2000, as a result of permanent differences between book and tax. As of December 31, 2000, net assets consisted of the following: (dollars in thousands) Capital paid in on shares of capital stock $16,497,751 Undistributed net investment income 40,847 Accumulated net realized gain 243,844 Net unrealized appreciation 3,388,241 Net assets $20,170,683
Capital share transactions in the fund were as follows: Year ended December 31, 2000 Amount (000) Shares Class A Shares: Sold $5,121,869 154,249,355 Reinvestment of dividends and distributions 1,511,665 48,749,136 Repurchased (2,471,417) (74,675,780) Net increase in Class A 4,162,117 128,322,711 Class B Shares:* Sold 312,559 9,345,451 Reinvestment of dividends and distributions 15,629 507,965 Repurchased (8,088) (247,371) Net increase in Class B 320,100 9,606,045 Total net increase in fund $4,482,217 137,928,756 Year ended December 31, 1999 Amount (000) Shares Class A Shares: Sold $2,627,090 82,752,634 Reinvestment of dividends and distributions 1,404,953 45,448,355 Repurchased (1,836,795) (58,299,290) Net increase in Class A 2,195,248 69,901,699 Class B Shares:* Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class B - - Total net increase in fund $2,195,248 69,901,699 * Class B shares were not offered before March 15, 2000.
[begin chart] PER-SHARE DATA AND RATIOS (1) Net asset Net gains/(losses) value, Net on securities beginning investment (both realized Year ended of year income and unrealized) Class A: 2000 $32.59 0.42 (2) 0.90 (2) 1999 28.92 .41 6.45 1998 27.40 .42 4.09 1997 24.54 .41 6.00 22.29 .41 4.00 Class B: 2000 31.93 0.15 (2) 1.02 (2) Dividends Total from (from net Distributions investment investment (from capital Year ended operations income) gains) Class A: 2000 $1.32 $(.40) $(2.35) 1999 6.86 (.40) (2.79) 1998 4.51 (.40) (2.59) 1997 6.41 (.42) (3.13) 4.41 (.40) (1.76) Class B: 2000 1.17 (.13) (1.85) Net asset Total value, end Total Year ended distributions of year return Class A: 2000 $(2.75) $31.16 4.27% 1999 (3.19) 32.59 24.58 1998 (2.99) 28.92 16.72 1997 (3.55) 27.40 26.67 (2.16) 24.54 19.99 Class B: 2000 (1.98) 31.12 3.73 Ratio of Ratio of Net assets, expenses net income Portfolio end of year to average to average turnover Year ended (in millions) net assets net assets rate Class A: 2000 $19,872 .64% 1.28% 43.43% (4) 1999 16,603 .63 1.33 45.50 1998 12,713 .63 1.47 52.57 1997 10,465 .63 1.54 45.09 7,165 .66 1.78 39.07 Class B: 2000 299 1.39 (3) 0.53 (3) 43.43 (4)
(1) The periods 1996 through 2000 represent fiscal years ended December 31. The period ended 2000 represents, for Class B shares, the 291-day period ended December 31, 2000. Class B shares were not offered before March 15, 2000. Total return for Class B is based on activity during the period and thus is not representative of a full year. Total returns exclude all sales charges, including contingent deferred sales charges. (2) Based on average shares outstanding. (3) Annualized. (4) Represents portfolio turnover rate (equivalent for all share classes) for the year ended December 31, 2000. [end chart] INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Fundamental Investors, Inc.: We have audited the accompanying statement of assets and liabilities of Fundamental Investors, Inc.(the "fund"), including the investment portfolio, as of December 31, 2000, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per-share data and ratios for each of the five years in the period then ended for Class A shares and the period March 15, 2000 through December 31, 2000 for Class B shares. These financial statements and per-share data and ratios are the responsibility of the fund's management. Our responsibility is to express an opinion on these financial statements and per-share data and ratios based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per-share data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 2000, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per-share data and ratios referred to above present fairly, in all material respects, the financial position of Fundamental Investors, Inc. at December 31, 2000, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the per-share data and ratios for each of the five years in the period then ended for Class A shares and the period March 15, 2000 through December 31, 2000, for Class B shares, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Los Angeles, California January 26, 2001 TAX INFORMATION (UNAUDITED) We are required to advise you within 60 days of the fund's fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. During the fiscal year ended December 31, 2000, the fund paid a long-term capital gain distribution of $1,383,479,000. The fund also designated as a capital gain distribution a portion of earnings and profits paid to shareholders in redemption of their shares. Corporate shareholders may exclude up to 70% of qualifying dividends received during the year. For purposes of computing this exclusion, 93% of the dividends paid by the fund from net investment income represent qualifying dividends. Dividends and distributions received by retirement plans such as IRAs, Keogh-type plans and 403(b) plans need not be reported as taxable income. However, many retirement plan trusts may need this information for their annual information reporting. SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH WAS MAILED IN JANUARY 2001 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR 2000 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS. PART C OTHER INFORMATION FUNDAMENTAL INVESTORS, INC. ITEM 23. EXHIBITS (a) Articles Supplementary as filed with the State of Maryland on 1/2/00 (b) By-Laws, as amended (c) Share Certificate (d) Previously filed (see Post-Effective Amendment No. 85 filed 3/13/00) (e) Form of Amended and Restated Principal Underwriting Agreement (f) None (g) Previously filed (see Post-Effective Amendment No. 85 filed 3/13/00) (h) Form of Administrative Services Agreement (i) Legal Opinion for Class C and Class F Shares (j) Consent of Independent Auditors (k) None (l) None (m) Form of Plans of Distribution relating to Class C and Class F Shares (n) Amended Form of Multiple Class Plan (o) None (p) Code of Ethics ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT None ITEM 25. INDEMNIFICATION The registrant is a joint-insured under Investment Adviser/Mutual fund Errors and Omissions Policies written by American International Surplus Lines Insurance Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which insures its officers and directors against certain liabilities. However, in no event will Registrant maintain insurance to indemnify any such person for any act for which Registrant itself is not permitted to indemnify the individual. ITEM 25. INDEMNIFICATION (CONTINUED) The fund's Articles of Incorporation state: The Corporation shall indemnify (1) its directors and officers, whether serving the Corporation or at its request any other entity, to the full extent required or permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by law, and (2) its other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation's By-Laws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such by-laws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of this Charter of the Corporation shall limit or eliminate the right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal. Nothing contained herein shall be construed to authorize the Corporation to indemnify any director or officer of the Corporation against any liability to the Corporation or to any holders of securities of the Corporation to which he is subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. Any indemnification by the Corporation shall be consistent with the requirements of law, including the Investment Company Act of 1940. To the fullest extent permitted by Maryland statutory and decisional law and the 1940 Act, as amended or interpreted, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages; provided, however, that nothing herein shall be construed to protect any director or officer of the Corporation against any liability to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. No amendment, modification or repeal of this Article VIII shall adversely affect any right or protection of a director or officer that exists at the time of such amendment, modification or repeal. Section 2-418 (b) of The Annotated Code of Maryland states: Permitted indemnification of director: 1. A corporation may indemnify any director made a party to any proceeding by reason of service in that capacity unless it is established that: (i) The act or omission of the director was material to the matter giving rise to the proceeding; and 1. Was committed in bad faith; or 2. Was the result of active and deliberate dishonesty; or (ii) The director actually received an improper personal benefit in money, property, or services; or ITEM 25. INDEMNIFICATION (CONTINUED) (iii) In the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. 2. (i) Indemnification may be against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the director in connection with the proceeding. (ii) However, if the proceeding was one by or in the right of the corporation, indemnification may not be made in respect of any proceeding in which the director shall have been adjudged to be liable to the corporation. ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER None ITEM 27. PRINCIPAL UNDERWRITERS (a) American Funds Distributors, Inc. is also the Principal Underwriter of shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds Income Series, The American Funds Tax-Exempt Series I, The American Funds Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc., Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific Growth Fund, The Growth Fund of America, Inc., The Income Fund of America, Inc., The Investment Company of America, Intermediate Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America, U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.
(B) (1) (2) (3) NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND BUSINESS ADDRESS WITH UNDERWRITER OFFICES WITH REGISTRANT David L. Abzug Vice President None 27304 Park Vista Road Agoura Hills, CA 91301 John A. Agar Vice President None 1501 N. University, Suite 227A Little Rock, AR 72207 Robert B. Aprison Vice President None 2983 Bryn Wood Drive Madison, WI 53711 L William W. Bagnard Vice President None Steven L. Barnes Senior Vice President None 5400 Mount Meeker Road Suite 1 Boulder, CO 80301-3508 B Carl R. Bauer Vice President None Michelle A. Bergeron Senior Vice President None 4160 Gateswalk Drive Smyrna, GA 30080 J. Walter Best, Jr. Regional Vice President None 9013 Brentmeade Blvd. Brentwood, TN 37027 Joseph T. Blair Senior Vice President None 148 E. Shore Ave. Groton Long Point, CT 06340 John A. Blanchard Vice President None 6421 Aberdeen Road Mission Hills, KS 66208 Ian B. Bodell Senior Vice President None P.O. Box 1665 Brentwood, TN 37024-1665 Mick L. Brethower Senior Vice President None 2320 North Austin Avenue Georgetown, TX 78626 Alan Brown Vice President None 4129 Laclede Avenue St. Louis, MO 63108 B J. Peter Burns Vice President None Brian C. Casey Vice President None 8002 Greentree Road Bethesda, MD 20817 Victor C. Cassato Senior Vice President None 609 W. Littleton Blvd., Suite 310 Greenwood Village, CO 80120 Christopher J. Cassin Senior Vice President None 19 North Grant Street Hinsdale, IL 60521 Denise M. Cassin Vice President None 1301 Stoney Creek Drive San Ramon, CA 94538 L Larry P. Clemmensen Director None L Kevin G. Clifford Director, President and None Co-Chief Executive Officer Ruth M. Collier Senior Vice President None 29 Landsdowne Drive Larchmont, NY 10538 S David Coolbaugh Assistant Vice President None H Carlo O. Cordasco Assistant Vice President None Thomas E. Cournoyer Vice President None 2333 Granada Boulevard Coral Gables, FL 33134 Douglas A. Critchell Senior Vice President None 3521 Rittenhouse Street, N.W. Washington, D.C. 20015 L Carl D. Cutting Vice President None William F. Daugherty Regional Vice President None 1216 Highlander Way Mechanicsburg, PA 17055 Guy E. Decker Regional Vice President None 345 Trowbridge Lane Lawrenceville, GA 300436 Daniel J. Delianedis Vice President None 8689 Braxton Drive Eden Prairie, MN 55347 James A. DePerno, Jr. Regional Vice President None 91 Church Street East Aurora, NY 14052 L Bruce De Priester Vice President None Michael A. DiLella Vice President None P. O. Box 661 Ramsey, NJ 07446 G. Michael Dill Senior Vice President None 505 E. Main Street Jenks, OK 74037 Kirk D. Dodge Senior Vice President None 2627 Mission Street San Marino, CA 91108 Peter J. Doran Director, Executive Vice None President 100 Merrick Road, Suite 216W Rockville Centre, NY 11570 L Michael J. Downer Secretary None Michael J. Dullaghan Regional Vice President None 1307 Sage Court Chesapeake, VA 23320 Robert W. Durbin Vice President None 74 Sunny Lane Tiffin, OH 44883 I Lloyd G. Edwards Senior Vice President None Timothy L. Ellis Regional Vice President None 1441 Canton Mart Road, Suite 9 Jackson, MS 39211 John R. Fodor Senior Vice President None 15 Latisquama Road Southborough, MA 01772 Daniel B. Frick Regional Vice President None 845 Western Avenue Glen Ellyn, IL 60137 Clyde E. Gardner Senior Vice President None Route 2, Box 3162 Osage Beach, MO 65065 B Evelyn K. Glassford Vice President None Jeffrey J. Greiner Vice President None 12210 Taylor Road Plain City, OH 43064 L Paul G. Haaga, Jr. Director Senior Vice President B Mariellen Hamann Assistant Vice President None Derek S. Hansen Regional Vice President None 13033 Ridgedale Drive, PMB 147 Minnetonka, MN 55305 David E. Harper Senior Vice President None 150 Old Franklin School Road Pittstown, NJ 08867 H Mary Pat Harris Assistant Vice President None Ronald R. Hulsey Senior Vice President None 6744 Avalon Dallas, TX 75214 Robert S. Irish Vice President None 1225 Vista Del Mar Drive Delray Beach, FL 33483 Michael J. Johnston Director None 630 Fifth Avenue, 36th Floor New York, NY 10111 B Damien M. Jordan Vice President None John P. Keating Regional Vice President None 2285 Eagle Harbor Parkway Orange Park, FL 32073 Dorothy Klock Vice President None 555 Madison Avenue, 29th Floor New York, NY 10022 H Dianne L. Koske Assistant Vice President Andrew R. LeBlanc Regional Vice President None 78 Eton Road Garden City, NY 11530 Arthur J. Levine Senior Vice President None 12558 Highlands Place Fishers, IN 46038 B Karl A. Lewis Assistant Vice President None T. Blake Liberty Vice President None 5506 East Mineral Lane Littleton, CO 80122 Mark J. Lien Regional Vice President None 5570 Beechwood Terrace West Des Moines, IA 50266 L Lorin E. Liesy Vice President None Louis K. Linquata Regional Vice President None 170 South Battin Wichita, KS 67218 LW Robert W. Lovelace Director None Stephen A. Malbasa Senior Vice President None 13405 Lake Shore Blvd. Cleveland, OH 44110 Steven M. Markel Senior Vice President None 5241 South Race Street Littleton, CO 80121 L J. Clifton Massar Director, Senior Vice None President L E. Lee McClennahan Senior Vice President None James R. McCrary Regional Vice President None 963 1st Street, #1 Hermosa Beach, CA 90254 S John V. McLaughlin Senior Vice President None Terry W. McNabb Vice President None 2002 Barrett Station Road St. Louis, MO 63131 William E. Noe Vice President None 304 River Oaks Road Brentwood, TN 37027 Peter A. Nyhus Vice President None 3084 Wilds Ridge Court Prior Lake, MN 55372 Eric P. Olson Vice President None 62 Park Drive Glenview, IL 60025 Jeffrey A. Olson Regional Vice President None 930 S. Cowley Street, #305 Spokane, WA 99202 Gary A. Peace Regional Vice President None 291 Kaanapali Drive Napa, CA 94558 Samuel W. Perry Regional Vice President None 4730 East Indian School Road Suite 120 Phoenix, AZ 85018 David K. Petzke Regional Vice President None 4016 Saint Lucia Street Boulder, CO 80301 Fredric Phillips Senior Vice President None 175 Highland Avenue, 4th Floor Needham, MA 02494 B Candance D. Pilgrim Assistant Vice President None Carl S. Platou Vice President None 7455 80th Place, S.E. Mercer Island, WA 98040 L John O. Post Senior Vice President None S Richard P. Prior Vice President None Steven J. Reitman Senior Vice President None 212 The Lane Hinsdale, IL 60521 Brian A. Roberts Vice President None P.O. Box 388 Glenville, NC 28736 George S. Ross Senior Vice President None P.O. Box 376 Southport, ME 04576 L Julie D. Roth Vice President None L James F. Rothenberg Director Chairman of the Board Douglas F. Rowe Vice President None 414 Logan Ranch Road Georgetown, TX 78628 Christopher S. Rowey Vice President None 10538 Cheviot Drive Los Angeles, CA 90064 Dean B. Rydquist Senior Vice President None 1080 Bay Pointe Crossing Alpharetta, GA 30005 Richard R. Samson Senior Vice President None 4604 Glencoe Avenue, #4 Marina del Rey, CA 90292 Joseph D. Scarpitti Vice President None 31465 St. Andrews Westlake, OH 44145 Shannon D. Schofield Regional Vice President None 3078 Peachtree Drive, NE Atlanta, GA 30305 L R. Michael Shanahan Director None Brad W. Short Regional Vice President None 1601 Seal Way Seal Beach, CA 90740 David W. Short Chairman of the Board and None 1000 RIDC Plaza, Suite Co-Chief Executive Officer 212 Pittsburgh, PA 15238 William P. Simon Senior Vice President None 912 Castlehill Lane Devon, PA 19333 Jerry L. Slater Regional Vice President None 4152 42nd Avenue, NE Seattle, WA 98105 Rodney G. Smith Senior Vice President None 100 N. Central Expressway Suite 1214 Richardson, TX 75080 S Sherrie L. Snyder-Senft Assistant Vice President None Anthony L. Soave Regional Vice President None 8831 Morning Mist Drive Clarkston, MI 48348 L Therese L. Souiller Assistant Vice President None Nicholas D. Spadaccini Vice President None 855 Markley Woods Way Cincinnati, OH 45230 L Kristen J. Spazafumo Assistant Vice President None Daniel S. Spradling Senior Vice President None 181 Second Avenue Suite 228 San Mateo, CA 94401 LW Eric H. Stern Director None B Max D. Stites Vice President None Thomas A. Stout Vice President None 1004 Ditchley Road Virginia Beach, VA 23451 Craig R. Strauser Vice President None 3 Dover Way Lake Oswego, OR 97034 Francis N. Strazzeri Senior Vice President None 3021 Kensington Trace Tarpon Springs, FL 34689 L Drew W. Taylor Assistant Vice President None Gary J. Thoma Regional Vice President None 604 Thelosen Drive Kimberly, WI 54136 L James P. Toomey Vice President None I Christopher E. Trede Vice President None George F. Truesdail Senior Vice President None 400 Abbotsford Court Charlotte, NC 28270 Scott W. Ursin-Smith Vice President None 60 Reedland Woods Way Tiburon, CA 94920 J. David Viale Regional Vice President None 39 Old Course Drive Newport Beach, CA 92660 Thomas E. Warren Vice President None 119 Faubel Street Sarasota, FL 34242 L J. Kelly Webb Senior Vice President, None Treasurer and Controller Gregory J. Weimer Vice President None 206 Hardwood Drive Venetia, PA 15367 B Timothy W. Weiss Director None George J. Wenzel Regional Vice President None 251 Barden Road Bloomfield, MI 48304 H J. D. Wiedmaier Assistant Vice President None SF N. Dexter Williams Senior Vice President None Timothy J. Wilson Vice President None 113 Farmview Place Venetia, PA 15367 B Laura L. Wimberly Vice President None H Marshall D. Wingo Director, Senior Vice None President L Robert L. Winston Director, Senior Vice None President William R. Yost Senior Vice President None 9320 Overlook Trail Eden Prairie, MN 55347 Janet M. Young Regional Vice President None 1616 Vermont Houston, TX 77006 Jonathan A. Young Regional Vice President None 329 Downing Drive Chesapeake, VA 23322 Scott D. Zambon Regional Vice President None 2887 Player Lane Tustin Ranch, CA 92782
__________ L Business Address, 333 South Hope Street, Los Angeles, CA 90071 LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA 90025 B Business Address, 135 South State College Boulevard, Brea, CA 92821 S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251 SF Business Address, One Market, Steuart Tower, Suite 1800, San Francisco, CA 94105-1016 H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513 I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240 (c) None ITEM 28. LOCATION OF ACCOUNTS AND RECORDS Accounts, books and other records required by Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as amended, are maintained and held in the offices of its investment adviser, Capital Research and Management Company, 333 South Hope Street, Los Angeles, California 90071, and/or 135 South State College Boulevard, Brea, California 92821. Registrant's records covering shareholder accounts are maintained and kept by its transfer agent, American Funds Service Company, 135 South State College Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and 5300 Robin Hood Road, Norfolk, VA 23513. Registrant's records covering portfolio transactions are maintained and kept by its custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02101. ITEM 29. MANAGEMENT SERVICES None ITEM 30. UNDERTAKINGS n/a SIGNATURE OF REGISTRANT Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940 the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and County of San Francisco, and State of California on the 8th day of March, 2001. FUNDAMENTAL INVESTORS, INC. By /s/ Patrick F. Quan Patrick F. Quan, Secretary ATTEST: /s/ Melem Eday Melem Eday Pursuant to the requirements of the Securities Act of 1933, this amendment to its registration statement has been signed below on March 8, 2001 by the following persons in the capacities indicated.
Signature Title (1) Principal Executive Officer: /s/ James E. Drasdo President and (James E. Drasdo) Director (2) Principal Financial Officer and Principal Accounting Officer: /s/ Sheryl F. Johnson Treasurer (Sheryl F. Johnson) (3) Directors: Guilford C. Babcock* Director Robert A. Fox* Director Roberta L. Hazard* Director Leonade D. Jones* Director John G. McDonald* Director Gail L. Neale* Director Henry E. Riggs* Director /s/ James F. Rothenberg Chairman of the (James F. Rothenberg) Board Patricia K. Woolf* Director
*By /s/ Paul G. Haaga, Jr. Paul G. Haaga, Jr., Attorney-in-Fact Counsel reports that the amendment does not contain disclosures that would make the amendment ineligible for effectiveness under the provisions of Rule 485(b). /s/ Kristine M. Nishiyama Kristine M. Nishiyama, Counsel EX-99.ACHARTER 2 0002.txt FUNDAMENTAL INVESTORS, INC. ARTICLES SUPPLEMENTARY Fundamental Investors, Inc., a Maryland corporation having its principal office in Baltimore, Maryland (the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: (a) The Board of Directors of the Corporation has divided and further classified the unissued shares of the authorized common stock of the Corporation into two additional classes, designated "Class C" and "Class F". The remaining shares of common stock, including the shares currently issued and outstanding, shall consist of the previously designated Class A shares and Class B shares. The authorized shares of each such class of common stock shall consist of the sum of (x) the outstanding shares of that class and (y) one-fourth (1/4) of the authorized but unissued shares of all classes of common stock; PROVIDED HOWEVER, that in the event application of the above formula would result, at the time, in fractional shares of one or more classes, the number of authorized shares of each such class shall be rounded down to the nearest wh ole number of shares; and PROVIDED, FURTHER, that at all times the aggregate number of authorized Class A shares, Class B shares, Class C shares and Class F shares of common stock shall not exceed the authorized number of shares of common stock (I.E., 1,000,000,000 shares until changed by action of the Board of Directors in accordance with Section 2-208.1 of the Maryland General Corporation Law). (b) The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the Class A shares and Class B shares of the Corporation are set forth in the Charter of the Corporation. The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption of the Class C shares and Class F shares of the Corporation are set forth below. SECOND: Except to the extent provided otherwise by the Charter of the Corporation, all classes of shares of the Corporation (including Class C shares and Class F shares) shall represent an equal proportionate interest in the assets of the Corporation (subject to the liabilities of the Corporation) and each share shall have identical voting, dividend, liquidation and other rights; PROVIDED, HOWEVER, that notwithstanding anything in the Charter of the Corporation to the contrary: (i) Each class of shares of the Corporation (including Class C shares and Class F shares) may be issued and sold subject to different sales loads or charges, whether initial, deferred or contingent, or any combination thereof, as may be established from time to time by the Board of Directors in accordance with the Investment Company Act of 1940 and applicable rules and regulations of self-regulatory organizations and as shall be set forth in the applicable prospectus for the shares; (ii) Expenses, costs and charges which are determined by or under the supervision of the Board of Directors to be attributable to the shares of a particular class may be charged to that class and appropriately reflected in the net asset value of, or dividends payable on, the shares of that class; (iii) Except as otherwise provided hereinafter, on a business day no later than the fifteenth day of the first calendar month following the expiration of a 120-month period commencing on the first day of the calendar month during which Class C shares were purchased by a holder thereof, such shares (as well as a pro rata portion of any Class C shares purchased through the reinvestment of dividends or other distributions paid on all Class C shares held by such holder) shall automatically convert to Class F shares on the basis of the respective net asset values of the Class C shares and the Class F shares on the conversion date; PROVIDED, HOWEVER, that the Board of Directors, in its sole discretion, may suspend the conversion of Class C shares if any conversion of such shares would constitute a taxable event under federal income tax law (in which case the holder of such Class C shares shall have the right to exchange from time to time any or all of such Class C shares held by such holder for Class F shares on the basis of the respective net asset values of the Class C shares and Class F shares on the applicable exchange date and without the imposition of a sales charge or fee); and PROVIDED, FURTHER, that conversion (or exchange) of Class C shares represented by stock certificates shall be subject to tender of such certificates; and (iv) Subject to the foregoing paragraph, each class of shares of the Corporation (including Class C and Class F shares) may have such different exchange rights as the Board of Directors shall provide in compliance with the Investment Company Act of 1940. THIRD: The foregoing amendment to the Charter of the Corporation does not increase the authorized capital stock of the Corporation. FOURTH: The aforesaid shares have been duly classified by the Board of Directors pursuant to authority and power contained in the Charter of the Corporation. IN WITNESS WHEREOF, the Corporation has caused these presents to be signed in its name and on its behalf by its Chairman of the Board and attested by its Secretary on this 2nd day of January, 2001. FUNDAMENTAL INVESTORS, INC. By: /s/ James F. Rothenberg James F. Rothenberg Chairman of the Board ATTEST: By: /s/ Patrick F. Quan Patrick F. Quan Secretary The undersigned, Chairman of the Board of Fundamental Investors, Inc., who executed on behalf of said Corporation the foregoing Articles Supplementary of which this certificate is made a part, hereby acknowledges in the name and on behalf of the Corporation the foregoing Articles Supplementary to be the corporate act of the Corporation and hereby certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the authorization and approval thereof are true in all material respects under the penalties of perjury. /s/ James F. Rothenberg James F. Rothenberg Chairman of the Board EX-99.BBYLAWS 3 0003.txt BY-LAWS OF FUNDAMENTAL INVESTORS, INC. ARTICLE I. SHAREHOLDERS Section 1.01. Annual Meetings. The Corporation is not required to hold an annual meeting in any year in which the election of directors is not required to be acted upon under the Investment Company Act of 1940, as amended (the "1940 Act"). If the election of directors is required to be acted upon under the 1940 Act then such meeting (or the first such meeting in any year) shall be designated as the annual meeting of stockholders for that year. If the 1940 Act requires the Corporation to hold a meeting of stockholders to elect directors, the meeting shall, unless otherwise required by the 1940 Act, be held no later than 120 days after the occurrence of the event requiring the meeting. Except as the Charter or statute provides otherwise, any business may be considered at an annual meeting without the purpose of the meeting having been specified in the notice. Failure to hold an annual meeting does not invalidate the Corporation's existence or affect any otherwise valid corporate acts. Section 1.02. Special Meetings. At any time in the interval between annual meetings, special meetings of the shareholders may be called by the Chairman of the Board or the President or by a majority of the Board or by shareholders entitled to cast 10% in number of votes by vote at a meeting or in writing with or without a meeting. Section 1.03. Place of Meetings. Meetings of the shareholders for the election of Directors shall be held at such place either within or without the State of Maryland or elsewhere in the United States as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of shareholders for any other purpose may be held at such time and place, within the State of Maryland or elsewhere in the United States, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 1.04. Notice of Meetings. Not less than ten days nor more than ninety days before the date of every shareholders' meeting, the Secretary shall give to each shareholder entitled to vote at such meeting, written or printed notice stating the time and place of the meeting and, if the meeting is a special meeting or notice of the purpose is required by statute, the purpose or purposes for which the meeting is called, either by mail or by presenting it to the shareholder personally or by leaving it at the shareholder's residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post office address as it appears on the records of the Corporation, with postage thereon prepaid. Notwithstanding the foregoing provision, a waiver of notice in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting in person or by proxy, shall be deemed equivalent to the giving of such notice to such persons. Any meeting of shareholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement at the meeting. Section 1.05. Quorum. At any meeting of shareholders the presence in person or by proxy of shareholders entitled to cast one third of the votes thereat shall constitute a quorum; but this Section shall not affect any requirement under statute or under the Articles for the vote necessary for the adoption of any measure. In the absence of a quorum the shareholders present in person or by proxy, by majority vote and without notice, may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. Section 1.06. Votes Required. A majority of the votes cast at a meeting of shareholders, duly called and at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless more than a majority of votes cast is required by statute or by the Articles. Each outstanding share of stock shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders and fractional shares shall be entitled to corresponding fractions of one vote on such matters, except that a plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a director. Section 1.07. Proxies. A shareholder may vote the shares owned of record by him either in person or by proxy executed in writing by the shareholder or by the shareholder's duly authorized attorney-in-fact. No proxy shall be valid after eleven months from its date, unless otherwise provided in the proxy. Every proxy shall be in writing, subscribed by the shareholder or the shareholder's duly authorized attorney, and dated, but need not be sealed, witnessed or acknowledged. Section 1.08. List of Shareholders. At each meeting of shareholders, a full, true and complete list in alphabetical order of all shareholders entitled to vote at such meeting, certifying the number and class or series of shares held by each, shall be made available by the Secretary. Section 1.09. Voting. In all elections for Directors every shareholder shall have the right to vote, in person or by proxy, the shares owned of record by the shareholder, for as many persons as there are Directors to be elected and for whose election the shareholder has a right to vote. At all meetings of shareholders, unless the voting is conducted by inspectors, the proxies and ballots shall be received, and all questions regarding the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided by the chairman of the meeting. If demanded by shareholders, present in person or by proxy, entitled to cast 10% in number of votes, or if ordered by the chairman, the vote upon any election or question shall be taken by ballot. Upon like demand or order, the voting shall be conducted by two inspectors in which event the proxies and ballots shall be received, and all questions regarding the qualification of voters and the validity of proxies and the acceptance or rejection of votes shall be decided, by such inspectors. Unless so demanded or ordered, no vote need be by ballot, and voting need not be conducted by inspectors. Inspectors may be elected by the shareholders at their annual meeting, to serve until the close of the next annual meeting and their election may be held at the same time as the election of Directors. In case of a failure to elect inspectors, or in case an inspector shall fail to attend, or refuse or be unable to serve, the shareholders at any meeting may choose an inspector or inspectors to act at such meeting, and in default of such election the chairman of the meeting may appoint an inspector or inspectors. Section 1.10. Action by Shareholders Other than at a Meeting. Any action required or permitted to be taken at any meeting of shareholders may be taken without a meeting, if a consent in writing, setting forth such action, is signed by all the shareholders entitled to vote on the subject matter thereof and any other shareholders entitled to notice of a meeting of shareholders (but not to vote thereat) have waived in writing any rights which they may have to dissent from such action, and such consent and waiver are filed with the records of the Corporation. ARTICLE II BOARD OF DIRECTORS Section 2.01. Powers. The Board may exercise all the powers of the Corporation, except such as are by statute or the charter or these By-Laws conferred upon or reserved to the shareholders. The Board shall keep full and fair accounts of its transactions. Section 2.02. Number of Directors. The number of Directors shall be such number as shall be fixed from time to time by vote of a majority of the Directors; provided, however, that the number of Directors shall in no event exceed fifteen nor be reduced to fewer than three. The tenure of office of a Director shall not be affected by any decrease in the number of Directors made by the Board. Section 2.03. Election of Directors. Until the first annual meeting of shareholders and until successors or additional Directors are duly elected and qualify, the Board shall consist of the persons named as such in the charter. At the first annual meeting of shareholders and at each annual meeting thereafter, the shareholders shall elect Directors to hold office until the next succeeding annual meeting and until their successors are elected and qualify. At any meeting of shareholders, duly called and at which a quorum is present, the shareholders may, by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon, remove any Director or Directors from office and may elect a successor or successors to fill any resulting vacancies for the unexpired terms of removed Directors. Section 2.04. Regular Meetings. After each meeting of shareholders at which a Board of Directors shall have been elected, the Board so elected shall meet for the purpose of organization and the transaction of other business. No notice of such first meeting shall be necessary if held immediately after the adjournment, and at the site, of such meeting of shareholders. Other regular meetings of the Board shall be held without notice on such dates and at such places within or without the State of Maryland as may be designated from time to time by the Board. Section 2.05. Special Meetings. Special meetings of the Board may be called at any time by the Chairman of the Board, the President or the Secretary of the Corporation, or by a majority of the Board by vote at a meeting, or in writing with or without a meeting. Such special meetings shall be held at such place or places within or without the State of Maryland as may be designated from time to time by the Board. In the absence of such designation such meetings shall be held at such places as may be designated in the calls. Section 2.06. Notice of Meetings. Except as provided in Section 2.04, notice of the place, day and hour of all meetings shall be given to each Director two days (or more) before the meeting, by delivering the same personally, or by sending the same by telegraph, or by leaving the same at the Director's residence or usual place of business, or, in the alternative, by mailing such notice three days (or more) before the meeting, postage prepaid, and addressed to the Director at the Director's last known business or residence post office address, according to the records of the Corporation. Unless required by these By-Laws or by resolution of the Board, no notice of any meeting of the Board need state the business to be transacted thereat. No notice of any meeting of the Board need be given to any Director who attends or, to any Director who in writing executed and filed with the records of the meeting either before or after the holding thereof, waives such notice. Any meeting of the Board, regular or special, may adjourn from time to time to reconvene at the same or some other place, and no notice need be given of any such adjourned meeting other than by announcement at the adjourned meeting. Section 2.07. Quorum. At all meetings of the Board, one-third of the Directors (but in no event fewer than two Directors) shall constitute a quorum for the transaction of business. Except in cases in which it is by statute, by the charter or by these By-Laws otherwise provided, the vote of a majority of such quorum at a duly constituted meeting shall be sufficient to elect and pass any measure. In the absence of a quorum, the Directors present by majority vote and without notice other than by announcement at the meeting may adjourn the meeting from time to time until a quorum shall attend. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 2.08. Vacancies. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of Directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of Directors may be filled by action of a majority of the entire Board of Directors; provided, in either case, that immediately after filling such vacancy at least two-thirds of the Directors then holding office shall have been elected to such office by the shareholders at an annual or special meeting thereof. If at any time after the first annual meeting of shareholders of the Corporation a majority of the Directors in office shall consist of Directors elected by the Board of Directors, a meeting of the shareholders shall be called forthwith for the purpose of electing the entire Board of Directors, and the terms of office of the Directors then in office shall terminate upon the election and qualification of such Board of Directors. A Director elected by the Board of Directors or the shareholders to fill a vacancy shall be elected to hold office until the next annual meeting of shareholders and until his successor is elected and qualifies. Section 2.09. Compensation and Expenses. Directors may, pursuant to resolution of the Board, be paid fees for their services, which fees may consist of an annual fee or retainer and/or a fixed fee for attendance at meetings. In addition, Directors may in the same manner be reimbursed for expenses incurred in connection with their attendance at meetings or otherwise in performing their duties as Directors. Members of committees may be allowed like compensation and reimbursement. Nothing herein contained shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Section 2.10. Action by Directors Other than at a Meeting. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting, if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. Section 2.11. Committees. The Board may, by resolution passed by a majority of the entire Board, designate one or more committees, each committee to consist of two or more of the Directors. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution and by law, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, provided, however, that in the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. Section 2.12. Holding of Meetings by Conference Telephone Call. At any regular or special meeting of the Board or any committee thereof, members thereof may participate in such meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at such meeting. ARTICLE III OFFICERS Section 3.01. Executive Officers. The Board of Directors may choose a Chairman of the Board and a Vice Chairman of the Board from among the Directors, and shall choose a President, a Secretary and a Treasurer who need not be Directors. The Board of Directors shall designate as principal executive officer of the Corporation either the Chairman of the Board, the Vice Chairman of the Board, or the President. The Board of Directors may choose an Executive Vice President, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers, none of whom need be a Director. Any two or more of the above-mentioned offices, except those of President and a Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument be required by law, by the charter, by the By-Laws or by resolution of the Board of Directors to be executed by any two or more officers. Each such officer shall hold office until his successor shall have been duly chosen and qualified, or until he shall have resigned or shall have been removed. Any vacancy in any of the above offices may be filled for the unexpired portion of the term of the Board of Directors at any regular or special meeting. Section 3.02. Chairman and Vice Chairman of the Board. The Chairman of the Board, if one be elected, shall preside at all meetings of the Board of Directors and of the shareholders at which he is present. He shall have and may exercise such powers as are, from time to time, assigned to him by the Board of Directors. The Vice Chairman of the Board, if one be elected, shall, when present and in the absence of the Chairman of the Board, preside at all meetings of the shareholders and Directors, and he shall perform such other duties as may from time to time be assigned to him by the Board of Directors or as may be required by law. Section 3.03. President. In the absence of the Chairman or Vice Chairman of the Board, the President shall preside at all meetings of the shareholders and of the Board at which the President is present; and in general, shall perform all duties incident to the office of a president of a Maryland Corporation, and such other duties, as from time to time, may be assigned to him by the Board. Section 3.04. Vice Presidents. The Vice President or Vice Presidents, including any Executive or Senior Vice President(s), at the request of the President or in the President's absence or during the President's inability or refusal to act, shall perform the duties and exercise the functions of the President, and when so acting shall have the powers of the President. If there be more than one Vice President, the Board may determine which one or more of the Vice Presidents shall perform any of such duties or exercise any of such functions, or if such determination is not made by the Board, the President may make such determination. The Vice President or Vice Presidents shall have such other powers and perform such other duties as may be assigned by the Board, the Chairman of the Board, or the President. Section 3.05. Secretary and Assistant Secretaries. The Secretary shall keep the minutes of the meetings of the shareholders, of the Board and of any committees, in books provided for the purpose; shall see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; be custodian of the records of the Corporation; see that the corporate seal is affixed to all documents the execution of which, on behalf of the Corporation, under its seal, is duly authorized, and when so affixed may attest the same; and in general perform all duties incident to the office of a secretary of a Maryland Corporation, and such other duties as, from time to time, may be assigned to him by the Board, the Chairman of the Board, or the President. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board, the President or the Chairman of the Board, shall, in the absence of the Secretary or in the event of the Secretary's inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe. Section 3.06. Treasurer and Assistant Treasurers. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Corporation, and shall deposit, or cause to be deposited in the name of the Corporation, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board in accordance with Section 5.04 of these By-Laws; render to the President, the Chairman of the Board and to the Board, whenever requested, an account of the financial condition of the Corporation; and in general, perform all the duties incident to the office of a treasurer of a corporation, such other duties as may be assigned to him by the Board, the President or the Chairman of the Board. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board, the President or the Chairman of the Board shall, in the absence of the Treasurer or in the event of the Treasurer's inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform other duties and have such other powers as the Board may from time to time prescribe. Section 3.07. Subordinate Officers. The Board may from time to time appoint such subordinate officers as it may deem desirable. Each such officer shall hold office for such period and perform such duties as the Board, the President or the Chairman of the Board may prescribe. The Board may, from time to time, authorize any committee or officer to appoint and remove subordinate officers and prescribe the duties thereof. Section 3.08. Removal. Any officer or agent of the Corporation may be removed by the Board whenever, in its judgment, the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. ARTICLE IV STOCK Section 4.01. Certificates. Each shareholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of stock owned by him in the Corporation. Such certificate shall be signed by the President, the Chairman of the Board or a Vice President and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. The signatures may be either manual or facsimile signatures. No certificates shall be issued for fractional shares. Such certificates shall be in such form, not inconsistent with law or with the charter, as shall be approved by the Board. In case any officer of the Corporation who has signed any certificate ceases to be an officer of the Corporation, whether because of death, resignation or otherwise, before such certificate is issued, the certificate may nevertheless be issued and delivered by the Corporation as if the officer had not ceased to be such officer as of the date of its issue. Certificates need not be issued except to shareholders who request such issuance in writing. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Section 4.02. Transfers. The Board of Directors shall have power and authority to make such rules and regulations as it may deem necessary or expedient concerning the issue, transfer and registration of certificates of stock; and may appoint transfer agents and registrars thereof. The duties of transfer agent and registrar, if any, may be combined. Section 4.03. Stock Ledgers. A stock ledger, containing the names and addresses of the shareholders of the Corporation and the number of shares of each class held by them, respectively, shall be kept by the Transfer Agent of the Corporation. The stock ledger may be in written form or in any other form which can be converted within a reasonable time into written form for visual inspection. Section 4.04. Record Dates. The Board is hereby empowered to fix, in advance, a date as the record date for the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders, or shareholders entitled to receive payment of any dividend, capital gains distribution or the allotment of any rights, or in order to make a determination of shareholders for any other proper purpose. Such date in any case shall be not more than ninety days, and in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. Section 4.05. Replacement Certificates. The Board of Directors may direct a new stock certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon such conditions as the Board shall determine. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in it discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the Certificate alleged to have been lost, stolen or destroyed. ARTICLE V GENERAL PROVISIONS Section 5.01. Dividends. Dividends or distributions upon the capital stock of the Corporation, subject to provisions of the charter, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends or distributions may be paid only in cash or in shares of the capital stock, subject to the provisions of the Articles of Incorporation. Before payment of any dividend or distribution there may be set aside out of any funds of the Corporation available for dividends or distributions such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends or distributions or for maintaining any property of the Corporation, or for such other purpose as the Directors shall think conducive to the interest of the Corporation, and the Directors may modify or abolish any such reserve in the manner in which it was created. Section 5.02. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board may from time to time designate. Section 5.03. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 5.04. Custodian. All securities and cash of the Corporation shall be placed in the custody of a bank or trust company ("Custodian") having (according to its last published report) not less than $2,000,000 aggregate capital, surplus and undivided profits, provided such a Custodian can be found ready and willing to act (or maintained in such other manner as is consistent with Section 17(f) of the Investment Company Act of 1940 and the rules and regulations promulgated thereunder.) The Corporation shall enter into a written contract with the Custodian regarding the powers, duties and compensation of the Custodian with respect to the cash and securities of the Corporation held by the Board of Directors of the Corporation. The Corporation shall upon the resignation or inability to serve of the Custodian use its best efforts to obtain a successor custodian; require that the cash and securities owned by the Corporation be delivered directly to the successor custodian; and in the event that no successor custodian can be found, submit to the shareholders, before permitting delivery of the cash and securities owned by the Corporation to other than a successor custodian, the question whether or not the Corporation shall be liquidated or shall function without a custodian. Section 5.05. Seal. The Board of Directors may provide a suitable seal, bearing the name of the Corporation, which shall be in the custody of the Secretary. The Board of Directors may authorize one or more duplicate seals and provide for the custody thereof. Section 5.06. Representation of Shares. Any officer of the Corporation is authorized to vote, represent and exercise for the Corporation any and all rights incident to any shares of any corporation or other business enterprise owned by the Corporation. Section 5.07. Prohibited Transactions. No officer or director of the Corporation or of its investment adviser shall deal for or on behalf of the Corporation with himself, as principal or agent, or with any corporation or partnership in which he has a financial interest. This prohibition shall not prevent: (a) officers or directors of the Corporation from having a financial interest in the Corporation, its principal underwriter or its investment adviser; (b) the purchase of securities for the portfolio of the Corporation or the sale of securities owned by the Corporation through a securities dealer, one or more of whose partners, officers or directors is an officer or director of the Corporation, provided such transactions are handled in the capacity of broker only and provided commissions charged do not exceed customary brokerage charges for such service; or (c) the employment of legal counsel, registrar, transfer agent, dividend disbursing agent, or custodian having a partner, officer or director who is an officer or director of the Corporation, provided only customary fees are charged for services rendered to or for the benefit of the Corporation. Section 5.08. Bonds. The Board of Directors may require any officer, agent or employee of the Corporation to give a bond to the Corporation, conditioned upon the faithful discharge of his duties, with one or more sureties and in such amount as may be satisfactory to the Board of Directors. The Board of Directors shall, in any event, require the Corporation to provide and maintain a bond issued by a reputable fidelity insurance company, against larceny and embezzlement, covering each officer and employee of the Corporation who may singly, or jointly with others, have access to securities or funds of the Corporation, either directly or through authority to draw upon such funds, or to direct generally the disposition of such securities, such bond or bonds to be in such reasonable amount as a majority of the Board of Directors who are not such officers or employees of the Corporation shall determine with due consideration to the value of the aggregate assets of the Corporation to which any such officer or employee may have access, or in any amount or upon such terms as the Securities and Exchange Commission may prescribe by order, Rule or Regulations. Section 5.09. Annual Statement of Affairs. The President or the Controller shall prepare annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be placed on file at the Corporation's principal office within 120 days after the end of the fiscal year. ARTICLE VI AMENDMENT OF BY-LAWS These By-Laws of the Corporation may be altered, amended, added to or repealed by majority vote of the shareholders or by majority vote of the entire Board. EX-99.CHOLDERSRTS 4 0004.txt FORM OF SHARE CERTIFICATE NUMBER SHARES CUSIP CLASS AMERICAN FUNDS [Name of Fund] This certifies that is the owner of Fully paid and non-assessable [Common Shares of Capital Stock][Shares of Beneficial Interest], of the Class and number indicated above, of [Name of Fund], [each of the par value of One Tenth of One Cent][without par value], transferable on the books of the [Corporation][Trust] by the holder thereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned by the Transfer Agent. (See reverse for certain abbreviations.) Witness, the facsimile signatures of duly authorized officers of the [Corporation][Trust]. Dated: [signature] [signature] Secretary President COUNTERSIGNED AMERICAN FUNDS SERVICE COMPANY TRANSFER AGENT BY: ____________________________________________________ AUTHORIZED SIGNATURE THE ISSUER OF THE SHARES REPRESENTED BY THIS CERTIFICATE WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, THE VARIATIONS IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH CLASS AND SERIES INSOFAR AS THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS OR TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF CLASSES AND SERIES OF SHARES OF THE ISSUER. IF YOU WOULD LIKE A COPY OF THE FULL STATEMENT, PLEASE WRITE TO THE SECRETARY OF THE ISSUER OR ITS TRANSFER AGENT. CLASS B AND SERIES B SHARES REDEEMED WITHIN SIX YEARS OF THEIR PURCHASE ARE SUBJECT TO A DEFERRED SALES CHARGE OF UP TO 5%. CLASS C AND SERIES C SHARES REDEEMED WITHIN ONE YEAR OF THEIR PURCHASE ARE SUBJECT TO A DEFERRED SALES CHARGE OF 1%. IN ADDITION, DURING THE MONTH FOLLOWING THE 96-MONTH PERIOD THAT BEGINS ON THE FIRST DAY OF THE MONTH IN WHICH CLASS B AND SERIES B SHARES ARE PURCHASED, SUCH SHARES (ALONG WITH SHARES OF THE SAME CLASS AND SERIES PURCHASED THROUGH REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS ON SUCH SHARES) WILL AUTOMATICALLY CONVERT TO CLASS A SHARES (OR COMMON SHARES) ON THE BASIS OF THEN CURRENT RELATIVE NET ASSET VALUES PER SHARE. SIMILARLY, DURING THE MONTH FOLLOWING THE 120-MONTH PERIOD THAT BEGINS ON THE FIRST DAY OF THE MONTH IN WHICH CLASS C AND SERIES C SHARES ARE PURCHASED, SUCH SHARES (ALONG WITH SHARES OF THE SAME CLASS AND SERIES PURCHASED THROUGH REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS ON SUCH SHARES) WILL AUTOMATICALLY CONVERT TO CLASS F SHARES (OR ALTERNATIVE COMMON SHARES, SERIES F) ON THE BASIS OF THEN CURRENT RELATIVE NET ASSET VALUES PER SHARE. THE ISSUER MAY SUSPEND SUCH CONVERSION IN CERTAIN LIMITED CIRCUMSTANCES, IN WHICH CASE AN EXCHANGE PRIVILEGE WILL APPLY. THE ISSUER MAY REQUIRE TENDER OF THIS CERTIFICATE PRIOR TO ANY CONVERSION OR EXCHANGE. IF SUCH TENDER IS NOT REQUIRED, THE NUMBER OF SHARES REPRESENTED BY THIS CERTIFICATE AFTER SUCH CONVERSION OR EXCHANGE WILL BE DIFFERENT THAN THE NUMBER INDICATED ON THE FACE OF THIS CERTIFICATE. SHAREHOLDERS MAY RETURN THIS CERTIFICATE AFTER ANY CONVERSION OR EXCHANGE AND OBTAIN A NEW CERTIFICATE (OR CERTIFICATES) REPRESENTING THE ACTUAL NUMBER AND TYPE OF SHARES OWNED. NOTE: SHARES REPRESENTED BY THIS CERTIFICATE MAY BE REDEEMED WITHOUT THE CONSENT OR APPROVAL OF THE SHAREHOLDER FOR THE THEN CURRENT NET ASSET VALUE PER SHARE IF AT SUCH TIME THE SHAREHOLDER OWNS OF RECORD SHARES HAVING AN AGGREGATE NET ASSET VALUE OF LESS THAN THE MINIMUM INITIAL INVESTMENT AMOUNT.
EXPLANATION OF ABBREVIATIONS THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE REGISTRATION ON THE FACE OF THIS CERTIFICATE, SHALL HAVE THE MEANINGS ASSIGNED BELOW: ADM - ADMINISTRATRIX FBO - FOR THE BENEFIT OF TTEE - TRUSTEE ADMINISTRATOR GDN - GUARDIAN U/A - UNDER AGREEMENT COM - COMMUNITY JT TEN - JOINT TENANTS WITH UDT - UNDERDECLARATION PROP PROPERTY RIGHT OF SURVIVORSHIP OF TRUST CONS - CONSERVATOR JTWROS UGMA/ - UNIFORM GIFTS TO CUST - CUSTODIAN LIFE TEN - LIFE TENANT (STATE) MINORS ACT IN EFFECT DTD - DATED (STATE)/TOD - UNIFORM TRANSFER UTMA/ IN THE STATE ON DEATH (STATE) INDICATED - UNIFORM TRANSFERS TO MINORS ACT IN EST - ESTATE OF THE TR ACT IN EFFECT IN THE U/W EFFECT IN THE STATE ET AL ESTATE OF TEN COM STATE INDICATED INDICATED EXEC - AND OTHERS - TRUST - LAST WILL AND - EXECUTOR - TENANTS IN COMMON TESTAMENT UNDER LAST WILL AND TESTAMENT OF UNDER THE WILL OF - EXECUTRIX - TENANTS BY THE ENTIRETIES OF THE WILL OF TEN ENT NOTE: ABBREVIATIONS REFER WHERE APPROPRIATE TO THE SINGULAR OR PLURAL, MALE OR FEMALE. OTHER ABBREVIATIONS MAY ALSO BE USED, INCLUDING U.S. POSTAL SERVICE TWO-LETTER STATE ABBREVIATIONS.
REQUIREMENTS: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND EXACTLY WITH THE NAME(S) WRITTEN ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR. SIGNATURE(S) MUST BE GUARANTEED BY AN "ELIGIBLE GUARANTOR," SUCH AS A BANK, SAVINGS ASSOCIATION OR CREDIT UNION THAT IS FEDERALLY INSURED OR A MEMBER FIRM OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. A NOTARY PUBLIC IS NOT AN ACCEPTABLE GUARANTOR. FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELL, ASSIGN, AND TRANSFER SHARES OF THE ISSUER REPRESENTED BY THIS CERTIFICATE TO: (PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE)AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ___________________________________________________ ATTORNEY TO TRANSFER THESE SHARES ON THE BOOKS OF THE ISSUER WITH FULL POWER OF SUBSTITUTION. SIGNATURE OF OWNER DATE SIGNATURE OF CO-OWNER, IF ANY DATE IMPORTANT: BEFORE SIGNING, PLEASE READ AND COMPLY WITH THE REQUIREMENTS PRINTED ABOVE. SIGNATURE(S) GUARANTEED BY: ______________________________________________________________________ EX-99.EUNDRCONTR 5 0005.txt EXHIBIT E FORM OF [NAME OF FUND] AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT THIS PRINCIPAL UNDERWRITING AGREEMENT, between ______________ _______________________, a __________________ corporation/trust (the "Fund"), and AMERICAN FUNDS DISTRIBUTORS, INC., a California corporation (the "Distributor"). W I T N E S S E T H: WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end diversified investment company which offers four classes of shares of common stock/beneficial interest, designated as Class A shares, Class B shares, Class C shares, and Class F shares, and it is a part of the business of the Fund, and affirmatively in the interest of the Fund, to offer shares of the Fund either from time to time or continuously as determined by the Fund's officers subject to authorization by its Board of Directors/Trustees; and WHEREAS, the Distributor is engaged in the business of promoting the distribution of shares of investment companies through securities broker-dealers; and WHEREAS, the Fund and the Distributor wish to enter into an agreement with each other to promote the distribution of the shares of the Fund and of all series or classes of the Fund which may be established in the future; NOW, THEREFORE, the parties agree as follows: 1. (a) The Distributor shall be the exclusive principal underwriter for the sale of the shares of the Fund and of each series or class of the Fund which may be established in the future, except as otherwise provided pursuant to the following subsection (b). The terms "shares of Fund" or "shares" as used herein shall mean shares of common stock/beneficial interest of the Fund and each series or class which may be established in the future and become covered by this Agreement in accordance with Section 24 of this Agreement. (b) The Fund may, upon 60 days' written notice to the Distributor, from time to time designate other principal underwriters of its shares with respect to areas other than the North American continent, Hawaii, Puerto Rico, and such countries or other jurisdictions as to which the Fund may have expressly waived in writing its right to make such designation. In the event of such designation, the right of the Distributor under this Agreement to sell shares in the areas so designated shall terminate, but this Agreement shall remain otherwise in full force and effect until terminated in accordance with the other provisions hereof. 2. In the sale of shares of the Fund, the Distributor shall act as agent of the Fund except in any transaction in which the Distributor sells such shares as a dealer to the public, in which event the Distributor shall act as principal for its own account. 3. The Fund shall sell shares only through the Distributor, except that the Fund may, to the extent permitted by the 1940 Act and the rules and regulations promulgated thereunder or pursuant thereto, at any time: (a) issue shares to any corporation, association, trust, partnership or other organization, or its, or their, security holders, beneficiaries or members, in connection with a merger, consolidation or reorganization to which the Fund is a party, or in connection with the acquisition of all or substantially all the property and assets of such corporation, association, trust, partnership or other organization; (b) issue shares at net asset value to the holders of shares of capital stock or beneficial interest of other investment companies served as investment adviser by any affiliated company or companies of The Capital Group Companies, Inc., to the extent of all or any portion of amounts received by such shareholders upon redemption or repurchase of their shares by the other investment companies; (c) issue shares at net asset value to its shareholders in connection with the reinvestment of dividends paid and other distributions made by the Fund; (d) issue shares at net asset value to persons entitled to purchase shares at net asset value without sales charge or contingent deferred sales charge as described in the Fund's current Registration Statement in effect under the Securities Act of 1933, as amended, for each series issued by the Fund at the time of such offer or sale. 4. The Distributor shall devote its best efforts to the sale of shares of the Fund and shares of any other mutual funds served as investment adviser by affiliated companies of The Capital Group Companies, Inc., and insurance contracts funded by shares of such mutual funds, for which the Distributor has been authorized to act as a principal underwriter for the sale of shares. The Distributor shall maintain a sales organization suited to the sale of shares of the Fund and shall use its best efforts to effect such sales in jurisdictions as to which the Fund shall have expressly waived in writing its right to designate another principal underwriter pursuant to subsection 1(b) hereof, and shall effect and maintain appropriate qualification to do so in all those jurisdictions in which it sells or offers shares for sale and in which qualification is required. 5. Within the United States of America, all dealers to whom the Distributor shall offer and sell shares must be duly licensed and qualified to sell shares of the Fund. Shares sold to dealers shall be for resale by such dealers only at the public offering price set forth in the current Prospectus of the Fund's Registration Statement in effect under the Securities Act of 1933, as amended ("Prospectus"). The Distributor shall not, without the consent of the Fund, sell or offer for sale any shares of a series or class issued by the Fund other than as principal underwriter pursuant to this Agreement. 6. In its sales to dealers, it shall be the responsibility of the Distributor to insure that such dealers are appropriately qualified to transact business in the shares under applicable laws, rules and regulations promulgated by such national, state, local or other governmental or quasi-governmental authorities as may in a particular instance have jurisdiction. 7. The applicable public offering price of shares shall be the price which is equal to the net asset value per share, as shall be determined by the Fund in the manner and at the time or times set forth in and subject to the provisions of the Prospectus of the Fund. 8. All orders for shares received by the Distributor shall, unless rejected by the Distributor or the Fund, be accepted by the Distributor immediately upon receipt and confirmed at an offering price determined in accordance with the provisions of the Prospectus and the 1940 Act, and applicable rules in effect thereunder. The Distributor shall not hold orders subject to acceptance nor otherwise delay their execution. The provisions of this Section shall not be construed to restrict the right of the Fund to withhold shares from sale under Section 19 hereof. 9. The Fund or its transfer agent shall be promptly advised of all orders received, and shall cause shares to be issued upon payment therefor in New York or Los Angeles Clearing House Funds. 10. The Distributor shall adopt and follow procedures as approved by the officers of the Fund for the confirmation of sales to dealers, the collection of amounts payable by dealers on such sales, and the cancellation of unsettled transactions, as may be necessary to comply with the requirements of the Securities and Exchange Commission or the National Association of Securities Dealers, Inc. ("NASD"), as such requirements may from time to time exist. 11. The Distributor, as a principal underwriter under this Agreement for Class A shares, shall receive (i) that part of the sales charge which is retained by the Distributor after allowance of discounts to dealers, unless waived by the Distributor for certain qualified fee-based programs, as set forth in the Prospectus of the Fund, and (ii) amounts payable to the Distributor pursuant to the Fund's Plan of Distribution under Rule 12b-1 under the 1940 Act relating to its Class A shares. 12. The Distributor, as principal underwriter under this agreement for Class B shares shall receive (i) distribution fees as commissions for the sale of Class B shares and contingent deferred sales charges ("CDSC") (as defined below), as set forth in the Fund's Prospectus, and (ii) shareholder service fees at the rate of 0.25% per annum of the average net asset value of Class B shares pursuant to the Fund's Plan of Distribution under Rule 12b-1 under the 1940 Act relating to its Class B shares (the " Class B Plan"). (a) In accordance with the Class B Plan, and subject to the limit on asset-based sales charges set forth in NASD Conduct Rule 2830 (and any successor provision thereto), the Fund shall pay to the Distributor or, at the Distributor's direction, to a third-party, monthly in arrears on or prior to the 10th business day of the following calendar month, the Distributor's Allocable Portion (as defined below) of a fee (the "Distribution Fee") which shall accrue daily in an amount equal to the product of (A) the daily equivalent of 0.75% per annum multiplied by (B) the net asset value of the Class B shares of the Fund outstanding on such day. The Fund agrees to withhold from redemption proceeds of the Class B shares, the Distributor's Allocable Portion of any CDSCs payable with respect to the Class B shares, as provided in the Fund's Prospectus, and to pay the same over to the Distributor or, at the Distributor's direction to a third-party, at the time the redemption proceeds are payable to the holder of such shares redeemed. Payment of these CDSC amounts to the Distributor is not contingent upon the adoption or continuation of any Class B Plan. (b) For purposes of this Agreement, the term "Allocable Portion" of Distribution Fees and CDSCs payable with respect to Class B shares shall mean the portion of such Distribution Fees and CDSC allocated to the Distributor in accordance with the Allocation Schedule attached hereto as Schedule A. (c) The Distributor shall be considered to have completely earned the right to the payment of its Allocable Portion of the Distribution Fees and the right to payment of its Allocable Portion of the CDSCs with respect to each "Commission Share" (as defined in the Allocation Schedule attached hereto as Schedule A) upon the settlement date of such Commission Share taken into account in determining the Distributor's Allocable Portion of Distribution Fees. (d) The provisions set forth in Section 1 of the Class B Plan (in effect on the date hereof) relating to Class B shares, together with the related definitions are hereby incorporated into this Section 12 by reference with the same force and effect as if set forth herein in their entirety. 13. The Distributor, as principal underwriter under this agreement for Class C shares shall receive (i) distribution fees as commissions for the sale of Class C shares and CDSCs, as set forth in the Fund's Prospectus, and (ii) shareholder service fees at the rate of 0.25% per annum of the average net asset value of Class C shares pursuant to the Fund's Plan of Distribution under Rule 12b-1 under the 1940 Act relating to its Class C shares (the "Class C Plan"). (a) In accordance with the Class C Plan, and subject to the limit on asset-based sales charges set forth in NASD Conduct Rule 2830 (and any successor provision thereto), the Fund shall pay to the Distributor, no more frequently than monthly in arrears within 30 days of receipt of an invoice for payment, the Distributor's Allocable Portion (as defined below) of a fee (the "Distribution Fee") which shall accrue daily in an amount equal to the daily equivalent of 0.75% per annum of the net asset value of the Class C shares outstanding on such day. The Fund agrees to withhold from redemption proceeds of the Class C shares, the Distributor's Allocable Portion of any CDSCs payable with respect to the Class C shares, as provided in the Fund's Prospectus and to pay the same over to the Distributor, or, at the Distributor's direction to a third party, at the time the redemption proceeds are payable to the holder of such shares redeemed. Payment of these CDSC amounts to the Distributor is not contingent upon the adoption or continuation of any Class C Plan. (b) For purposes of this Agreement, the term "Allocable Portion" of Distribution Fees and CDSCs payable with respect to Class C shares shall mean the portion of such Distribution Fees and CDSC allocated to the Distributor in accordance with the Allocation Schedule attached hereto as Schedule B. (c) The Distributor shall be considered to have completely earned the right to the payment of its Allocable Portion of the Distribution Fees and the right to payment of its Allocable Portion of the CDSCs with respect to each "Commission Share" (as defined in the Allocation Schedule attached hereto as Schedule B) upon the settlement date of such Commission Share taken into account in determining the Distributor's Allocable Portion of Distribution Fees. (d) The provisions set forth in Section 1 of the Class C Plan (in effect on the date thereof) relating to Class C shares, together with the related definitions are hereby incorporated into this Section 13 by reference with the same force and effect as if set forth herein in their entirety. 14. The Distributor, as principal underwriter under this agreement for Class F shares, shall receive shareholder service fees at the rate of 0.25% per annum of the average net asset value of Class F shares pursuant to the Fund's Plan of Distribution under Rule 12b-1 under the 1940 Act relating to its Class F shares (the "Class F Plan"). 15. The Fund agrees to use its best efforts to maintain its registration as a diversified open-end management investment company under the 1940 Act. 16. The Fund agrees to use its best efforts to maintain an effective Prospectus under the Securities Act of 1933, as amended, and warrants that such Prospectus will contain all statements required by and will conform with the requirements of such Securities Act of 1933 and the rules and regulations thereunder, and that no part of any such Prospectus, at the time the Registration Statement of which it is a part becomes effective, will contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein not misleading (excluding any information provided by the Distributor in writing for inclusion in the Prospectus). The Distributor agrees and warrants that it will not in the sale of shares use any Prospectus, advertising or sales literature not approved by the Fund or its officers nor make any untrue statement of a material fact nor omit the stating of a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading. The Distributor agrees to indemnify and hold the Fund harmless from any and all loss, expense, damage and liability resulting from a breach of the agreements and warranties contained in this Section, or from the use of any sales literature, information, statistics or other aid or device employed in connection with the sale of shares. 17. The expense of each printing of each Prospectus and each revision thereof or addition thereto deemed necessary by the Fund's officers to meet the requirements of applicable laws shall be divided between the Fund, the Distributor and any other principal underwriter of the shares of the Fund as follows: (a) the Fund shall pay the typesetting and make-ready charges; (b) the printing charges shall be prorated between the Fund, the Distributor, and any other principal underwriter(s) in accordance with the number of copies each receives; and (c) expenses incurred in connection with the foregoing, other than to meet the requirements of the Securities Act of 1933, as amended, or other applicable laws, shall be borne by the Distributor, except in the event such incremental expenses are incurred at the request of any other principal underwriter(s), in which case such incremental expenses shall be borne by the principal underwriter(s) making the request. 18. The Fund agrees to use its best efforts to qualify and maintain the qualification of an appropriate number of the shares of each series or class it offers for sale under the securities laws of such states as the Distributor and the Fund may approve. Any such qualification for any series or class may be withheld, terminated or withdrawn by the Fund at any time in its discretion. The expense of qualification and maintenance of qualification shall be borne by the Fund, but the Distributor shall furnish such information and other material relating to its affairs and activities as may be required by the Fund or its counsel in connection with such qualifications. 19. The Fund may withhold shares of any series or class from sale to any person or persons or in any jurisdiction temporarily or permanently if, in the opinion of its counsel, such offer or sale would be contrary to law or if theDirectors/Trustees or the President or any Vice President of the Fund determines that such offer or sale is not in the best interest of the Fund. The Fund will give prompt notice to the Distributor of any withholding and will indemnify it against any loss suffered by the Distributor as a result of such withholding by reason of nondelivery of shares of any series or class after a good faith confirmation by the Distributor of sales thereof prior to receipt of notice of such withholding. 20. (a) This Agreement may be terminated at any time, without payment of any penalty, as to the Fund or any series on sixty (60) days' written notice by the Distributor to the Fund. (b) This Agreement may be terminated as to the Fund or any series or class by either party upon five (5) days' written notice to the other party in the event that the Securities and Exchange Commission has issued an order or obtained an injunction or other court order suspending effectiveness of the Registration Statement covering the shares of the Fund or such series or class. (c) This Agreement may be terminated as to the Fund or any series or class by the Fund upon five (5) days' written notice to the Distributor provided either of the following events has occurred: (i) The NASD has expelled the Distributor or suspended its membership in that organization; or (ii) the qualification, registration, license or right of the Distributor to sell shares of any series in a particular state has been suspended or canceled by the State of California or any other state in which sales of the shares of the Fund or such series during the most recent 12-month period exceeded 10% of all shares of such series sold by the Distributor during such period. (d) This Agreement may be terminated as to the Fund or any series or class at any time on sixty (60) days' written notice to the Distributor without the payment of any penalty, by vote of a majority of the Independent Directors/Trustees or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the Fund or such series or class. 21. This Agreement shall not be assignable by either party hereto and in the event of assignment shall automatically terminate forthwith. The term "assignment" shall have the meaning set forth in the 1940 Act. Notwithstanding this Section, this Agreement, with respect to the Fund's Class B shares, has been approved in accordance with Section 24 in anticipation of the Distributor's transfer of its Allocable Portion of Distribution Fees and CDSCs (but not its obligations under this Agreement) to a third-party pursuant to a "Purchase and Sale Agreement" in order to raise funds to cover distribution expenditures, and such transfer will not cause a termination of this Agreement. If Distributor determines to transfer its Allocable Portion of Distribution Fees and CDSCs in respect of Class C shares to a third party, such transfer shall not cause a termination of this Agreement. 22. No provision of this Agreement shall protect or purport to protect the Distributor against any liability to the Fund or holders of its shares for which the Distributor would otherwise be liable by reason of willful misfeasance, bad faith, or gross negligence. 23. This Agreement shall become effective on March 15, 2001. Unless sooner terminated in accordance with the other provisions hereof, this Agreement shall continue in effect until March 31, 2001, and shall continue in effect from year to year thereafter but only so long as such continuance is specifically approved at least annually by (i) the vote of a majority of the Independent Directors/Trustees of the Fund cast in person at a meeting called for the purpose of voting on such approval, and (ii) the vote of either a majority of the entire Board of Directors/Trustees of the Fund or a majority (within the meaning of the 1940 Act) of the outstanding voting securities of the Fund. 24. If the Fund shall at any time issue shares in more than one series or class, this Agreement shall take effect with respect to such series or class of the Fund which may be established in the future at such time as it has been approved as to such series or class by vote of the Board of Directors/Trustees and the Independent Directors/Trustees in accordance with Section 23. The Agreement as approved with respect to any series or class shall specify the compensation payable to the Distributor pursuant to Sections 11, 12, 13 and 14, as well as any provisions which may differ from those herein with respect to such series, subject to approval in writing by the Distributor. This Agreement may be approved, amended, continued or renewed with respect to a series or class as provided herein notwithstanding such approval, amendment, continuance or renewal has not been effected with respect to any one or more other series or class of the Fund. This Agreement shall be construed under and shall be governed by the laws of the State of California, and the parties hereto agree that proper venue of any action with respect hereto shall be Los Angeles County, California. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed in duplicate original by their officers thereunto duly authorized, as of _________, 2001. AMERICAN FUNDS DISTRIBUTORS, INC. [Name of Fund] By: By: Kevin G. Clifford President Chairman of the Board By: By: Michael J. Downer Secretary Secretary SCHEDULE A TO THE AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT ALLOCATION SCHEDULE The following relates solely to Class B shares. The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect of Class B shares shall be 100% until such time as the Distributor shall cease to serve as exclusive distributor of Class B shares; thereafter, collections that constitute CDSCs and Distribution Fees relating to Class B shares shall be allocated among the Distributor and any successor distributor ("Successor Distributor") in accordance with this Schedule. Defined terms used in this Schedule and not otherwise defined herein shall have the meanings assigned to them in the Amended and Restated Principal Underwriting Agreement (the "Distribution Agreement"), of which this Schedule is a part. As used herein the following terms shall have the meanings indicated: "Commission Share" means each B share issued under circumstances which would normally give rise to an obligation of the holder of such share to pay a CDSC upon redemption of such share (including, without limitation, any B share issued in connection with a permitted free exchange), and any such share shall continue to be a Commission Share of the applicable Fund prior to the redemption (including a redemption in connection with a permitted free exchange) or conversion of such share, even though the obligation to pay the CDSC may have expired or conditions for waivers thereof may exist. "Date of Original Issuance" means in respect of any Commission Share, the date with reference to which the amount of the CDSC payable on redemption thereof, if any, is computed. "Free Share" means, in respect of a Fund, each B share of the Fund, other than a Commission Share (including, without limitation, any B share issued in connection with the reinvestment of dividends or capital gains). "Inception Date" means in respect of a Fund, the first date on which the Fund issued shares. "Net Asset Value" means the net asset value determined as set forth in the Prospectus of each Fund. "Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share sold by one of the selling agents maintaining shares in an omnibus account. If, subsequent to the Successor Distributor becoming exclusive distributor of the Class B shares, the Distributor reasonably determines that the transfer agent is able to track all Commission Shares and Free Shares sold by any selling agents in the same manner as Commission Shares and Free Shares are currently tracked in respect of selling agents not listed on Exhibit I, then Exhibit I shall be amended to delete such selling agent from Exhibit I so that Commission Shares and Free Shares sold by such selling agent will no longer be treated as Omnibus Shares. PART I: ATTRIBUTION OF CLASS B SHARES Class B shares that are outstanding from time to time, shall be attributed to the Distributor and each Successor Distributor in accordance with the following rules; (1) Commission Shares other than Omnibus Shares: (a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission Shares") attributed to the Distributor shall be those Non-Omnibus Commission Shares the date of Original Issuance of which occurred on or after the Inception Date of the applicable Fund and on or prior to the date the Distributor ceased to be exclusive distributor of Class B shares of the Fund. (b) Non-Omnibus Commission Shares attributable to each Successor Distributor shall be those Non-Omnibus Commission Shares the Date of Original Issuance of which occurs after the date such Successor Distributor became the exclusive distributor of Class B shares of the Fund and on or prior to the date such Successor Distributor ceased to be the exclusive distributor of Class B shares of the Fund. (c) A Non-Omnibus Commission Share of a Fund issued in consideration of the investment of proceeds of the redemption of a Non-Omnibus Commission Share of another Fund (the "Redeeming Fund") in connection with a permitted free exchange, is deemed to have a Date of Original Issuance identical to the Date of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund, and any such Commission Share will be attributed to the Distributor or Successor Distributor based upon such Date of Original Issuance in accordance with rules (a) and (b) above. (2) Free Shares: Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of a Fund outstanding on such date are attributed to each on such date; provided that if the Distributor and its transferees reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for such Non-Omnibus Free Shares, then such Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. (3) Omnibus Shares: Omnibus Shares of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of the applicable Fund outstanding on such date are attributed to it on such date; provided that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for the Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. PART II: ALLOCATION OF CDSCs (1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares: CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be allocated to the Distributor or a Successor Distributor depending upon whether the related redeemed Commission Share is attributable to the Distributor or such Successor Distributor, as the case may be, in accordance with Part I above. (2) CDSCs Related to the Redemption of Omnibus Shares: CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the Distributor or a Successor Distributor in the same proportion that CDSCs related to the redemption of Non-Omnibus Commission Shares are allocated to each thereof; provided, that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports which track the Date of Original Issuance for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus Shares shall be allocated among the Distributor and any Successor Distributor depending on whether the related redeemed Omnibus Share is attributable to the Distributor or a Successor Distributor, as the case may be, in accordance with Part I above. PART III: ALLOCATION OF DISTRIBUTION FEE Assuming that the Distribution Fee remains constant over time so that Part IV hereof does not become operative: (1) The portion of the aggregate Distribution Fee accrued in respect of all Class B shares of a Fund during any calendar month allocable to the Distributor or a Successor Distributor is determined by multiplying the total of such Distribution Fee by the following fraction: (A + C)/2 (B + D)/2 where: A= The aggregate Net Asset Value of all Class B shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the beginning of such calendar month B= The aggregate Net Asset Value of all Class B shares of a Fund at the beginning of such calendar month C= The aggregate Net Asset Value of all Class B shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the end of such calendar month D= The aggregate Net Asset Value of all Class B shares of a Fund at the end of such calendar month (2) If the Distributor reasonably determines that the transfer agent is able to produce automated monthly reports that allocate the average Net Asset Value of the Commission Shares (or all Class B shares if available) of a Fund among the Distributor and any Successor Distributor in a manner consistent with the methodology detailed in Part I and Part III(1) above, the portion of the Distribution Fee accrued in respect of all such Class B shares of a Fund during a particular calendar month will be allocated to the Distributor or a Successor Distributor by multiplying the total of such Distribution Fee by the following fraction: (A)/(B) where: A= Average Net Asset Value of all such Class B shares of a Fund for such calendar month attributed to the Distributor or a Successor Distributor, as the case may be B= Total average Net Asset Value of all such Class B shares of a Fund for such calendar month PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR DISTRIBUTOR'S ALLOCABLE PORTION The parties to the Distribution Agreement recognize that, if the terms of any distributor's contract, any distribution plan, any prospectus, the Conduct Rules or any other applicable law change so as to disproportionately reduce, in a manner inconsistent with the intent of this Distribution Agreement, the amount of the Distributor's Allocable Portion or any Successor Distributor's Allocable Portion had no such change occurred, the definitions of the Distributor's Allocable Portion and/or the Successor Distributor's Allocable Portion in respect of the Class B shares relating to a Fund shall be adjusted by agreement among the relevant parties; provided, however, if the Distributor, the Successor Distributor and the Fund cannot agree within thirty (30) days after the date of any such change in applicable laws or in any distributor's contract, distribution plan, prospectus or the Conduct Rules, they shall submit the question to arbitration in accordance with the commercial arbitration rules of the American Arbitration Association and the decision reached by the arbitrator shall be final and binding on each of them. SCHEDULE B TO THE AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT ALLOCATION SCHEDULE The following relates solely to Class C shares. The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect of Class C shares shall be 100% until such time as the Distributor shall cease to serve as exclusive distributor of Class C shares; thereafter, collections that constitute CDSCs and Distribution Fees relating to Class C shares shall be allocated among the Distributor and any successor distributor ("Successor Distributor") in accordance with this Schedule. At such time as the Distributor's Allocable Portion of the Distribution Fees equals zero, the Successor Distributor shall become the Distributor for purposes of this Allocation Schedule. Defined terms used in this Schedule and not otherwise defined herein shall have the meanings assigned to them in the Amended and Restated Principal Underwriting Agreement (the "Distribution Agreement"), of which this Schedule is a part. As used herein the following terms shall have the meanings indicated: "Commission Share" means each C share issued under circumstances which would normally give rise to an obligation of the holder of such share to pay a CDSC upon redemption of such share (including, without limitation, any C share issued in connection with a permitted free exchange), and any such share shall continue to be a Commission Share of the applicable Fund prior to the redemption (including a redemption in connection with a permitted free exchange) or conversion of such share, even though the obligation to pay the CDSC may have expired or conditions for waivers thereof may exist. "Date of Original Issuance" means in respect of any Commission Share, the date with reference to which the amount of the CDSC payable on redemption thereof, if any, is computed. "Free Share" means, in respect of a Fund, each C share of the Fund, other than a Commission Share (including, without limitation, any C share issued in connection with the reinvestment of dividends or capital gains). "Inception Date" means in respect of a Fund, the first date on which the Fund issued shares. "Net Asset Value" means the net asset value determined as set forth in the Prospectus of each Fund. "Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share sold by one of the selling agents maintaining shares in an omnibus account ("Omnibus Selling Agents"). If, subsequent to the Successor Distributor becoming exclusive distributor of the Class C shares, the Distributor reasonably determines that the transfer agent is able to track all Commission Shares and Free Shares sold by any of the Omnibus Selling Agents in the same manner that Non-Omnibus Commission Shares and Free Shares (defined below) are currently tracked, then Omnibus Shares of such Omnibus Selling Agent shall be treated as Commission Shares and Free Shares. PART I: ATTRIBUTION OF CLASS C SHARES Class C shares that are outstanding from time to time, shall be attributed to the Distributor and each Successor Distributor in accordance with the following rules; (1) Commission Shares other than Omnibus Shares: (a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission Shares") attributed to the Distributor shall be those Non-Omnibus Commission Shares (i) the date of Original Issuance of which occurred on or after the Inception Date of the applicable Fund and on or prior to the date the Distributor ceased to be exclusive distributor of Class C shares of the Fund and (ii) that are subject to a CDSC (without regard to any conditions for waivers thereof). (b) Non-Omnibus Commission Shares attributable to each Successor Distributor shall be those Non-Omnibus Commission Shares (i) the Date of Original Issuance of which occurs after the date such Successor Distributor became the exclusive distributor of Class C shares of the Fund and on or prior to the date such Successor Distributor ceased to be the exclusive distributor of Class C shares of the Fund and (ii) that are subject to a CDSC (without regard to any conditions for waivers thereof). (c) A Non-Omnibus Commission Share of a Fund issued in consideration of the investment of proceeds of the redemption of a Non-Omnibus Commission Share of another Fund (the "Redeeming Fund") in connection with a permitted free exchange, is deemed to have a Date of Original Issuance identical to the Date of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund, and any such Commission Share will be attributed to the Distributor or Successor Distributor based upon such Date of Original Issuance in accordance with rules (a) and (b) above. (2) Free Shares: Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of a Fund outstanding on such date are attributed to each on such date; provided that if the Distributor and its transferees reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for such Non-Omnibus Free Shares, then such Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. (3) Omnibus Shares: Omnibus Shares of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of the applicable Fund outstanding on such date are attributed to it on such date; provided that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for the Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. PART II: ALLOCATION OF CDSCs (1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares: CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be allocated to the Distributor or a Successor Distributor depending upon whether the related redeemed Commission Share is attributable to the Distributor or such Successor Distributor, as the case may be, in accordance with Part I above. (2) CDSCs Related to the Redemption of Omnibus Shares: CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the Distributor or a Successor Distributor in the same proportion that CDSCs related to the redemption of Non-Omnibus Commission Shares are allocated to each thereof; provided, that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports which track the Date of Original Issuance for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus Shares shall be allocated among the Distributor and any Successor Distributor depending on whether the related redeemed Omnibus Share is attributable to the Distributor or a Successor Distributor, as the case may be, in accordance with Part I above. PART III: ALLOCATION OF DISTRIBUTION FEE Assuming that the Distribution Fee remains constant over time so that Part IV hereof does not become operative: (1) The portion of the aggregate Distribution Fee accrued in respect of all Class C shares of a Fund during any calendar month allocable to the Distributor or a Successor Distributor is determined by multiplying the total of such Distribution Fee by the following fraction: (A + C)/2 (B + D)/2 where: A= The aggregate Net Asset Value of all Class C shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the beginning of such calendar month B= The aggregate Net Asset Value of all Class C shares of a Fund at the beginning of such calendar month C= The aggregate Net Asset Value of all Class C shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the end of such calendar month D= The aggregate Net Asset Value of all Class C shares of a Fund at the end of such calendar month (2) If the Distributor reasonably determines that the transfer agent is able to produce automated monthly reports that allocate the average Net Asset Value of the Commission Shares (or all Class C shares if available) of a Fund among the Distributor and any Successor Distributor in a manner consistent with the methodology detailed in Part I and Part III(1) above, the portion of the Distribution Fee accrued in respect of all such Class C shares of a Fund during a particular calendar month will be allocated to the Distributor or a Successor Distributor by multiplying the total of such Distribution Fee by the following fraction: (A)/(B) where: A= Average Net Asset Value of all such Class C shares of a Fund for such calendar month attributed to the Distributor or a Successor Distributor, as the case may be B= Total average Net Asset Value of all such Class C shares of a Fund for such calendar month PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR DISTRIBUTOR'S ALLOCABLE PORTION The parties to the Distribution Agreement recognize that, if the terms of any distributor's contract, any distribution plan, any prospectus, the Conduct Rules or any other applicable law change so as to disproportionately reduce, in a manner inconsistent with the intent of this Distribution Agreement, the amount of the Distributor's Allocable Portion or any Successor Distributor's Allocable Portion had no such change occurred, the definitions of the Distributor's Allocable Portion and/or the Successor Distributor's Allocable Portion in respect of the Class C shares relating to a Fund shall be adjusted by agreement among the relevant parties; provided, however, if the Distributor, the Successor Distributor and the Fund cannot agree within thirty (30) days after the date of any such change in applicable laws or in any distributor's contract, distribution plan, prospectus or the Conduct Rules, they shall submit the question to arbitration in accordance with the commercial arbitration rules of the American Arbitration Association and the decision reached by the arbitrator shall be final and binding on each of them. EX-99.HOTHMATCONT 6 0006.txt FORM OF [FUND NAME] ADMINISTRATIVE SERVICES AGREEMENT WHEREAS, _______________ (the "Fund"), is a [Maryland corporation/Massachusetts Business Trust] registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end diversified investment company that offers Class C shares and Class F shares; and WHEREAS, Capital Research and Management Company (the "Investment Adviser"), is a Delaware corporation registered under the Investment Advisers Act of 1940, as amended, and is engaged in the business of providing investment advisory and related services to the Fund and to other investment companies; and WHEREAS, the Fund wishes to have the Investment Adviser arrange for and coordinate and monitor the provision of transfer agent and shareholder services ("transfer agent services") and certain other administrative services (other than those provided pursuant to any other agreement with the Fund), including but not limited to recordkeeping, transactional services, tax information returns and reports, fund communication and shareholder communication (collectively "administrative services") for the Fund's Class C and Class F shares; and WHEREAS, the Investment Adviser is willing to perform or to cause to be performed such transfer agent services and administrative services for the Fund's Class C and Class F shares on the terms and conditions set forth herein; and WHEREAS, the Fund and the Investment Adviser wish to enter into an Administrative Services Agreement ("Agreement") whereby the Investment Adviser would perform or cause to be performed such transfer agent services and administrative services for the Fund's Class C and Class F shares; NOW, THEREFORE, the parties agree as follows: 1. Services. During the term of this Agreement, the Investment Adviser shall perform or cause to be performed the transfer agent services and administrative services set forth in Exhibit A hereto, as such exhibit may be amended from time to time by mutual consent of the parties. The Fund and Investment Adviser acknowledge that the Investment Adviser will contract with third parties, including American Funds Service Company ("AFS") to perform such transfer agent services and administrative services. In selecting third parties to perform transfer agent and administrative services, the Investment Adviser shall select only those third parties that the Investment Adviser reasonably believes has adequate facilities and personnel to diligently perform such services. The Investment Adviser shall monitor, coordinate and oversee the activities of the third parties with which it or AFS contracts to ensure shareholders receive high-quality service. In doing so the Investment Adviser shall establish procedures to monitor the activities of such third parties. These procedures may, but need not, include monitoring (i) telephone queue wait times, (ii) telephone abandon rates, (iii) website and voice response unit downtimes, (iv) downtime of the third party's shareholder account record keeping system, (v) the accuracy and timeliness of financial and non-financial transactions, and (vi) to ensure compliance with the Fund prospectus. 2. Fees. (a) TRANSFER AGENT FEES. In consideration of transfer agent services performed or caused to be performed by the Investment Adviser for the Fund's Class C and Class F shares, the Fund shall pay the Investment Adviser transfer agent fees according to the fee schedule contained in the Shareholder Services Agreement between the Fund and AFS (a copy of which is attached hereto). All fund-specific charges from third parties -- including DST charges, postage, NSCC transaction charges and similar out-of-pocket expenses -- will be passed through directly to the Fund. The Fund's Class C shares and Class F shares shall pay only those transfer agent fees that are attributed to accounts and activities generated by their respective classes. Such transfer agent fees shall be paid on or before the 10th day of each month for transfer agent services performed the preceding month. (b) ADMINISTRATIVE SERVICES FEES. In consideration of administrative services performed or caused to be performed by the Investment Adviser for the Fund's Class C and Class F shares, the Fund shall pay the Investment Adviser an administrative services fee ("administrative fee"). Such administrative fee shall accrue daily and shall be calculated at the annual rate of 0.15% of the average net assets of the Fund's Class C shares and Class F shares. The administrative fee shall be paid on or before the 10th day of each month for administrative services performed in the preceding month. 3. Effective Date and Termination of Agreement. This Agreement shall become effective on March 15, 2001, and unless terminated sooner it shall continue in effect until _______________. It may thereafter be continued from year to year only with the approval of a majority of those Directors/Trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Agreement or any agreement related to it (the "Independent Directors/Trustees"). This Agreement may be terminated as to the Fund's Class C and Class F shares at any time by vote of a majority of the Independent Directors/Trustees. The Investment Adviser may terminate this agreement upon sixty (60) days' prior written notice to the Fund. 4. Amendment. This Agreement may not be amended to increase materially the fees payable under this Agreement unless such amendment is approved by the vote of a majority of the Independent Directors/Trustees. 5. Assignment. This Agreement shall not be assignable by either party hereto and in the event of assignment shall automatically terminate forthwith. The term "assignment" shall have the meaning set forth in the 1940 Act. Notwithstanding the foregoing, the Investment Adviser is specifically authorized to contract with third parties for the provision of transfer agency, shareholder services, and administrative services on behalf of the Fund. 6. Issuance of Series of Shares. If the Fund shall at any time issue shares in more than one series, this Agreement may be adopted, amended, continued or renewed with respect to a series as provided herein, notwithstanding that such adoption, amendment, continuance or renewal has not been effected with respect to any one or more other series of the Fund. 7. Choice of Law. This Agreement shall be construed under and shall be governed by the laws of the State of California, and the parties hereto agree that proper venue of any action with respect hereto shall be Los Angeles County, California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate original by its officers thereunto duly authorized, as of _____________, 2000. CAPITAL RESEARCH AND MANAGEMENT COMPANY [FUND] EXHIBIT A TO THE ADMINISTRATIVE SERVICES AGREEMENT TRANSFER AGENT SERVICES The Investment Adviser or any third-party with whom it may contract, including American Funds Service Company (the Investment Adviser and any such third-party are collectively referred to as "Service Provider") shall act, as necessary, as stock transfer agent, dividend disbursing agent and redemption agent for the Fund's Class C and Class F shares, and shall provide such additional related services as the Fund's Class C and Class F shares may from time to time require, all of which services are sometimes referred to herein as "shareholder services." ADMINISTRATIVE SERVICES 2. Record Maintenance The Service Provider shall maintain, and require any third parties with which it contracts to maintain with respect to each Fund shareholder holding the Fund's Class C and/or Class F shares in a Service Provider account ("Customers") the following records: 0. Number of Shares; a. Date, price and amount of purchases and redemptions (including dividend reinvestments) and dates and amounts of dividends paid for at least the current year to date; b. Name and address of the Customer, including zip codes and social security numbers or taxpayer identification numbers; c. Records of distributions and dividend payments; d. Any transfers of shares; and e. Overall control records. 2. Shareholder Communications Service Provider shall: 0. Provide to a shareholder mailing agent for the purpose of delivering certain Fund-related materials the names and addresses of all Customers. The Fund-related materials shall consist of updated prospectuses and any supplements and amendments thereto, annual and other periodic reports, proxy or information statements and other appropriate shareholder communications. In the alternative, the Service Provider may distribute the Fund-related materials to its Customers. a. Deliver current Fund prospectuses and statements of additional information and annual and other periodic reports upon Customer request, and, as applicable, with confirmation statements; b. Deliver statements to Customers on no less frequently than a quarterly basis showing, among other things, the number of Class C and/or Class F shares of the Fund owned by such Customer and the net asset value of the Class C and/or Class F shares of the Fund as of a recent date; c. Produce and deliver to Customers confirmation statements reflecting purchases and redemptions of Class C and/or Class F shares of the Fund; d. Respond to Customer inquiries regarding, among other things, share prices, account balances, dividend amounts and dividend payment dates; and e. With respect to Class C and/or Class F shares of the Fund purchased by Customers after the effective date of this Agreement, provide average cost basis reporting to Customers to assist them in preparation of their income tax returns. f. If the Service Provider clears transactions in Fund's Class C and/or Class F shares for any correspondent brokers or banks in an omnibus relationship, it will require each such correspondent broker or bank to provide such shareholder communications as set forth in 2(a) through 2(f) to its own Customers. 3. Transactional Services The Service Provider shall communicate to its Customers, as to Class C and Class F shares of the Fund, purchase, redemption and exchange orders reflecting the orders it receives from its Customers or from any correspondent brokers and banks for their Customers. The Service Provider shall also communicate to beneficial owners holding through it, and to any correspondent brokers or banks for beneficial owners holding through them, as to shares of Class C and Class F share of the Fund, mergers, splits and other reorganization activities, and require any correspondent broker or bank to communicate such information to its Customers. 4. Tax Information Returns and Reports The Service Provider shall prepare and file, and require to be prepared and filed by any correspondent brokers or banks as to their Customers, with the appropriate governmental agencies, such information, returns and reports as are required to be so filed for reporting (i) dividends and other distributions made, (ii) amounts withheld on dividends and other distributions and payments under applicable federal and state laws, rules and regulations, and (iii) gross proceeds of sales transactions as required. 5. Fund Communications The Service Provider shall, upon request by the Fund, on each business day, report the number of Class C shares and the number of Class F shares on which the administrative fee is to be paid pursuant to this Agreement. The Service Provider shall also provide the Fund with a monthly invoice. 6. Monitoring of Service Providers The Investment Adviser shall coordinate and monitor the activities of the Service Providers with which it contracts to ensure that Fund's Class C and Class F shareholders receive high-quality service. The Investment Adviser shall also ensure that Service Providers deliver to Customers account statements and all Fund-related materials, including prospectuses, shareholder reports, and proxies. ATTACHMENT TO ADMINISTRATIVE SERVICES AGREEMENT AMENDMENT OF SHAREHOLDER SERVICES AGREEMENT This Amendment to the Shareholder Services Agreement (the "Agreement") by and between American Funds Service Company (hereinafter "AFS") and AMCAP Fund, Inc. (hereinafter called the "Fund") is dated as of the first day of January 1998. WHEREAS, AFS and the Fund entered into the Agreement with regard to certain shareholder services to be performed by AFS; and WHEREAS, AFS and the Fund desire to amend said Agreement in the manner hereinafter set forth; NOW THEREFORE, pursuant to Section 9 of the Agreement, AFS and the Fund hereby amend the Agreement in the following form: 1. Section 6 is amended to read as follows: AFS will provide to the participating investment companies the shareholder services referred to herein in return for the following fees: ANNUAL ACCOUNT MAINTENANCE FEE (PAID MONTHLY): $0.45 per month for each open account on AFS books or in Level 2 or 4 Networking ($5.40 per year). $0.06 per month for each open account maintained in Street Name or Level 1 or 3 Networking ($0.72 per year). No annual fee will be charged for a participant account underlying a 401(k) or other defined contribution plan where the plan maintains a single account on AFS books and responds to all participant inquiries. TRANSACTION FEES: $2.70 per non-automated transaction $0.20 per automated transaction For this purpose, "transactions" shall include all types of transactions included in an "activity index" as reported to the Review and Advisory Committee at least annually. AFS will bill the Fund monthly, on or shortly after the first of each calendar month, and the Fund will pay AFS within five business days of such billing. Any revision of the schedule of charges set forth herein shall require the affirmative vote of a majority of the members of the board of directors/trustees of the Fund. IN WITNESS THEREOF, AFS and the Fund have caused this Amendment to be executed by their duly authorized officers effective as of the date first written above. FUND AMERICAN FUNDS SERVICE COMPANY BY: BY: Name: Name: Title: Title: Date: Date: EX-99.ILEGALOPININ 7 0007.txt PAUL, HASTINGS, JANOFSKY & WALKER LLP 555 South Flower Street Los Angeles, California 90071 (213) 683-6000 March 8, 2001 Fundamental Investors, Inc. 333 South Hope Street Los Angeles, CA 90071 Ladies and Gentlemen: We have acted as counsel to Fundamental Investors, Inc. (the "Fund") in connection with Post-Effective Amendment No. 86 to the Fund's Registration Statement on Form N-1A (Registration No. 2-10760) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Registration Statement"), relating to the issuance by the Fund of an indefinite number of Class C and Class F shares of common stock of the Fund (the "Shares"). In our capacity as counsel for the Fund, we have examined the Articles of Incorporation of the Fund filed with the State of Maryland Department of Assessments and Taxation on February 1, 1990, as amended, the bylaws of the Fund, as amended, and originals or copies of actions of the Board of Directors of the Fund, as furnished to us by the Fund, certificates of public officials, and such other documents, records and certificates as we have deemed necessary for the purposes of this opinion. Our opinion below is limited to the federal law of the United States of America and the Maryland General Corporation Law. We are not licensed to practice law in the State of Maryland, and we have based our opinion solely on our review of the Maryland General Corporation Law and the case law interpreting such Law as reported in 4 Corporation Statutes (Aspen Law & Business 1997, 2000 Supp.). We have not undertaken a review of other Maryland law or of any administrative or court decisions in connection with rendering this opinion. We disclaim any opinion as to any law other than as described above, and we disclaim any opinion as to any statute, rule, regulation, ordinance, order or other promulgation of any regional or local governmental authority. Based on the foregoing and our examination of such questions of law as we have deemed necessary and appropriate for the purpose of this opinion, we are of the opinion that the Shares of the Fund are duly authorized and, when purchased and paid for as described in the Registration Statement, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion of counsel as an exhibit to the Registration Statement. Very truly yours, s/ PAUL, HASTINGS, JANOFSKY & WALKER LLP EX-99.JOTHEROPININ 8 0008.txt INDEPENDENT AUDITORS' CONSENT Fundamental Investors, Inc.: We consent to (a) the use in this Post-Effective Amendment No. 86 to Registration Statement No. 2-10760 on Form N-1A of our report dated January 26, 2001 appearing in the Financial Statements which are included in Part B, the Statement of Additional Information of such Registration Statement, (b) the references to us under the heading "General Information" in such Statement of Additional Information and (c) the reference to us under the heading "Financial Highlights" in the Prospectus, which is a part of such Registration Statement. DELOITTE & TOUCHE LLP Los Angeles, California March 8, 2001 EX-99.M12B-1PLAN 9 0009.txt FORM OF PLAN OF DISTRIBUTION OF __________________________ RELATING TO ITS CLASS C SHARES WHEREAS, __________________________ (the "Fund") is a Corporation/Trust that offers four classes of shares of common stock, designated as Class A shares, Class B shares, Class C shares and Class F shares; WHEREAS, American Funds Distributors, Inc. ("AFD") or any successor entity designated by the Fund (AFD and any such successor collectively are referred to as "Distributor") will serve as distributor of the shares of common stock of the Fund, and the Fund and Distributor are parties to a principal underwriting agreement (the "Agreement"); WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to authorize the Fund to bear expenses of distribution of its Class C shares; and WHEREAS, the Board of Directors/Trustees of the Fund has determined that there is a reasonable likelihood that this Plan will benefit the Fund and its shareholders; NOW, THEREFORE, the Fund adopts this Plan as follows: 1. PAYMENTS TO DISTRIBUTOR. The Fund may expend pursuant to this Plan and as set forth below an aggregate amount not to exceed 1.00% per annum of the average net assets of the Fund's Class C shares. The categories of expenses are as follows: A. SERVICE FEES. The Fund shall pay to the Distributor no more frequently than monthly in arrears a service fee (the "Service Fee"), which shall accrue daily in an amount equal to the daily equivalent of 0.25% per annum of the net asset value of the Fund's Class C shares outstanding on each day. The Service Fee compensates the Distributor for paying service-related expenses, including Service Fees to others in respect of Class C shares of the Fund. B. DISTRIBUTION FEES. The Fund shall pay to the Distributor no more frequently than monthly in arrears its "Allocable Portion" (as described in Schedule A to this Plan "Allocation Schedule", and until such time as the Fund designates a successor to AFD as distributor, the Allocable Portion shall equal 100%) of a fee (the "Distribution Fee"), which shall accrue daily in an amount equal to the daily equivalent of 0.75% per annum of the net asset value of the Fund's Class C shares outstanding on each day. The Distribution Fee compensates the Distributor for providing distribution and sales-related services in respect of Class C shares of the Fund. The Distributor may sell and assign its right to its Allocable Portion (but not its obligations to the Fund under the Agreement) of the Distribution Fee to a third party, and such transfer shall be free and clear of offsets or claims the Fund may have against the Distributor, it being understood that the Fund is not releasing the Distributor from any of its obligations to the Fund under the Agreement or any of the assets the Distributor continues to own. The Fund may agree, at the request of the Distributor, to pay the Allocable Portion of the Distribution Fee directly to the third party transferee. Any Agreement between the Fund and the Distributor relating to the Fund's Class C shares shall provide that: (i) the Distributor will be deemed to have performed all services required to be performed in order to be entitled to receive its Allocable Portion of the Distribution Fee payable in respect of each "Commission Share" (as defined in the Allocation Schedule) upon the settlement date of each sale of such Commission Share taken into account in determining such Distributor's Allocable Portion of the Distribution Fee; (ii) notwithstanding anything to the contrary in this Plan or the Agreement, the Fund's obligation to pay the Distributor its Allocable Portion of the Distribution Fee shall not be terminated or modified (including without limitation, by change in the rules applicable to the conversion of the Class C shares into shares of another class) for any reason (including a termination of this Plan or the Agreement between such Distributor and the Fund) except: (a) to the extent required by a change in the Investment Company Act of 1940 (the "1940 Act"), the rules and regulations under the 1940 Act, the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"), or any judicial decisions or interpretive pronouncements by the Securities and Exchange Commission, which is either binding upon the Distributor or generally complied with by similarly situated distributors of mutual fund shares, in each case enacted, promulgated, or made after March 15, 2001, (b) on a basis which does not alter the Distributor's Allocable Portion of the Distribution Fee computed with reference to Commission Shares of the Fund, the Date of Original Issuance (as defined in the Allocation Schedule) of which occurs on or prior to the adoption of such termination or modification and with respect to Free Shares (as defined in the Allocation Schedule) which would be attributed to the Distributor under the Allocation Schedule with reference to such Commission Shares, or (c) in connection with a Complete Termination (as defined below) of this Plan by the Fund; (iii) the Fund will not take any action to waive or change any contingent deferred sales charge ("CDSC") in respect of the Class C shares, the Date of Original Issuance of which occurs on or prior to the taking of such action except as provided in the Fund's prospectus or statement of additional information on the date such Commission Share was issued, without the consent of the Distributor or its assigns; (iv) notwithstanding anything to the contrary in this Plan or the Agreement, none of the termination of the Distributor's role as principal underwriter of the Class C shares of the Fund, the termination of the Agreement or the termination of this Plan will terminate the Distributor's right to its Allocable Portion of the CDSCs in respect of Class C shares of the Fund; (v) except as provided in (ii) above and notwithstanding anything to the contrary in this Plan or the Agreement, the Fund's obligation to pay the Distributor's Allocable Portion of the Distribution Fees and CDSCs payable in respect of the Class C shares of the Fund shall be absolute and unconditional and shall not be subject to dispute, offset, counterclaim or any defense whatsoever, at law or equity, including, without limitation, any of the foregoing based on the insolvency or bankruptcy of the Distributor; and (vi) until the Distributor has been paid its Allocable Portion of the Distribution Fees in respect of the Class C shares of the Fund, the Fund will not adopt a plan of liquidation in respect of the Class C shares without the consent of the Distributor and its assigns. For purposes of this Plan, the term Allocable Portion of the Distribution Fees or CDSCs payable in respect of the Class C shares as applied to any Distributor shall mean the portion of such Distribution Fees or CDSCs payable in respect of such Class C shares of the Fund allocated to the Distributor in accordance with the Allocation Schedule as it relates to the Class C shares of the Fund, and until such time as the Fund designates a successor to AFD as distributor, the Allocable Portion shall equal 100% of the Distribution Fees and CDSCs. For purposes of this Plan, the term "Complete Termination" in respect of this Plan as it relates to the Class C shares means a termination of this Plan involving the complete cessation of the payment of Distribution Fees in respect of all Class C shares, the termination of the distribution plans and principal underwriting agreements, and the complete cessation of the payment of any asset based sales charge (within the meaning of the Conduct Rules of the NASD) or similar fees in respect of the Fund and any successor mutual fund or any mutual fund acquiring a substantial portion of the assets of the Fund (the Fund and such other mutual funds hereinafter referred to as the "Affected Funds") and in respect of the Class C shares and every future class of shares (other than future classes of shares established more than one year after the date of such termination) which has substantially similar characteristics to the Class C shares (all such classes of shares the "Affected Classes of Shares") of such Affected Funds taking into account the manner of payment and amount of asset based sales charge, CDSC or other similar charges borne directly or indirectly by the holders of such shares; provided that (a) the Board of Directors/Trustees of such Affected Funds, including the Independent Directors/Trustees (as defined below) of the Affected Funds, shall have determined that such termination is in the best interest of such Affected Funds and the shareholders of such Affected Funds, and (b) such termination does not alter the CDSC as in effect at the time of such termination applicable to Commission Shares of the Fund, the Date of Original Issuance of which occurs on or prior to such termination. 2. APPROVAL BY THE BOARD. This Plan shall not take effect until it has been approved, together with any related agreement, by votes of the majority of both (i) the Board of Directors/Trustees of the Fund and (ii) those Directors/Trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) and have no direct or indirect financial interest in the operation of this Plan or any agreement related to it (the "Independent Directors/Trustees"), cast in person at a meeting called for the purpose of voting on this Plan and/or such agreement. 3. REVIEW OF EXPENDITURES. At least quarterly, the Board of Directors/Trustees shall be provided by any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement, and the Board shall review, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. 4. TERMINATION OF PLAN. This Plan may be terminated as to the Fund's Class C shares at any time by vote of a majority of the Independent Directors/Trustees, or by vote of a majority of the outstanding Class C shares of the Fund. Unless sooner terminated in accordance with this provision, this Plan shall continue in effect until _________________. It may thereafter be continued from year to year in the manner provided for in paragraph 2 hereof. Notwithstanding the foregoing or paragraph 6, below, any amendment or termination of this Plan shall not affect the rights of the Distributor to receive its Allocable Portion of the Distribution Fee, unless the termination constitutes a Complete Termination of this Plan as described in paragraph 1 above. 5. REQUIREMENTS OF AGREEMENT. Any Agreement related to this Plan shall be in writing, and shall provide: a. that such agreement may be terminated as to the Fund at any time, without payment of any penalty by the vote of a majority of the Independent Directors/Trustees or by a vote of a majority of the outstanding Class C shares of the Fund, on not more than sixty (60) days' written notice to any other party to the agreement; and b. that such agreement shall terminate automatically in the event of its assignment. 6. AMENDMENT. This Plan may not be amended to increase materially the maximum amount of fees or other distribution expenses provided for in paragraph 1 hereof with respect to the Class C shares of the Fund unless such amendment is approved by vote of a majority of the outstanding voting securities of the Class C shares of the Fund and as provided in paragraph 2 hereof, and no other material amendment to this Plan shall be made unless approved in the manner provided for in paragraph 2 hereof. 7. NOMINATION OF DIRECTORS/TRUSTEES. While this Plan is in effect, the selection and nomination of Independent Directors/Trustees shall be committed to the discretion of the Independent Directors/Trustees of the Fund. 8. ISSUANCE OF SERIES OF SHARES. If the Fund shall at any time issue shares in more than one series, this Plan may be adopted, amended, continued or renewed with respect to a series as provided herein, notwithstanding that such adoption, amendment, continuance or renewal has not been effected with respect to any one or more other series of the Fund. 9. RECORD RETENTION. The Fund shall preserve copies of this Plan and any related agreement and all reports made pursuant to paragraph 3 hereof for not less than six (6) years from the date of this Plan, or such agreement or reports, as the case may be, the first two (2) years of which such records shall be stored in an easily accessible place. IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its officers thereunto duly authorized, as of ________________. By ______________________________ Chairman of the Board By ______________________________ Secretary SCHEDULE A TO THE PLAN OF DISTRIBUTION OF __________________________ RELATING TO ITS CLASS C SHARES ALLOCATION SCHEDULE The following relates solely to Class C shares. The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect of Class C shares shall be 100% until such time as the Distributor shall cease to serve as exclusive distributor of Class C shares; thereafter, collections that constitute CDSCs and Distribution Fees relating to Class C shares shall be allocated among the Distributor and any successor distributor ("Successor Distributor") in accordance with this Schedule. At such time as the Distributor's Allocable Portion of the Distribution Fees equals zero, the Successor Distributor shall become the Distributor for purposes of this Allocation Schedule. Defined terms used in this Schedule and not otherwise defined herein shall have the meanings assigned to them in the Amended and Restated Principal Underwriting Agreement (the "Distribution Agreement"), of which this Schedule is a part. As used herein the following terms shall have the meanings indicated: "Commission Share" means each C share issued under circumstances which would normally give rise to an obligation of the holder of such share to pay a CDSC upon redemption of such share (including, without limitation, any C share issued in connection with a permitted free exchange), and any such share shall continue to be a Commission Share of the applicable Fund prior to the redemption (including a redemption in connection with a permitted free exchange) or conversion of such share, even though the obligation to pay the CDSC may have expired or conditions for waivers thereof may exist. "Date of Original Issuance" means in respect of any Commission Share, the date with reference to which the amount of the CDSC payable on redemption thereof, if any, is computed. "Free Share" means, in respect of a Fund, each C share of the Fund, other than a Commission Share (including, without limitation, any C share issued in connection with the reinvestment of dividends or capital gains). "Inception Date" means in respect of a Fund, the first date on which the Fund issued shares. "Net Asset Value" means the net asset value determined as set forth in the Prospectus of each Fund. "Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share sold by one of the selling agents maintaining shares in an omnibus account ("Omnibus Selling Agents"). If, subsequent to the Successor Distributor becoming exclusive distributor of the Class C shares, the Distributor reasonably determines that the transfer agent is able to track all Commission Shares and Free Shares sold by any of the Omnibus Selling Agents in the same manner that Non-Omnibus Commission Shares and Free Shares (defined below) are currently tracked, then Omnibus Shares of such Omnibus Selling Agent shall be treated as Commission Shares and Free Shares. PART I: ATTRIBUTION OF CLASS C SHARES Class C shares that are outstanding from time to time, shall be attributed to the Distributor and each Successor Distributor in accordance with the following rules; (1) Commission Shares other than Omnibus Shares: (a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission Shares") attributed to the Distributor shall be those Non-Omnibus Commission Shares (i) the date of Original Issuance of which occurred on or after the Inception Date of the applicable Fund and on or prior to the date the Distributor ceased to be exclusive distributor of Class C shares of the Fund and (ii) that are subject to a CDSC (without regard to any conditions for waivers thereof). (b) Non-Omnibus Commission Shares attributable to each Successor Distributor shall be those Non-Omnibus Commission Shares (i) the Date of Original Issuance of which occurs after the date such Successor Distributor became the exclusive distributor of Class C shares of the Fund and on or prior to the date such Successor Distributor ceased to be the exclusive distributor of Class C shares of the Fund and (ii) that are subject to a CDSC (without regard to any conditions for waivers thereof). (c) A Non-Omnibus Commission Share of a Fund issued in consideration of the investment of proceeds of the redemption of a Non-Omnibus Commission Share of another Fund (the "Redeeming Fund") in connection with a permitted free exchange, is deemed to have a Date of Original Issuance identical to the Date of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund, and any such Commission Share will be attributed to the Distributor or Successor Distributor based upon such Date of Original Issuance in accordance with rules (a) and (b) above. (2) Free Shares: Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of a Fund outstanding on such date are attributed to each on such date; provided that if the Distributor and its transferees reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for such Non-Omnibus Free Shares, then such Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. (3) Omnibus Shares: Omnibus Shares of a Fund outstanding on any date shall be attributed to the Distributor or a Successor Distributor, as the case may be, in the same proportion that the Non-Omnibus Commission Shares of the applicable Fund outstanding on such date are attributed to it on such date; provided that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports that track the Date of Original Issuance for the Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause 1(a), (b) and (c) above. PART II: ALLOCATION OF CDSCs (1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares: CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be allocated to the Distributor or a Successor Distributor depending upon whether the related redeemed Commission Share is attributable to the Distributor or such Successor Distributor, as the case may be, in accordance with Part I above. (2) CDSCs Related to the Redemption of Omnibus Shares: CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the Distributor or a Successor Distributor in the same proportion that CDSCs related to the redemption of Non-Omnibus Commission Shares are allocated to each thereof; provided, that if the Distributor reasonably determines that the transfer agent is able to produce monthly reports which track the Date of Original Issuance for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus Shares shall be allocated among the Distributor and any Successor Distributor depending on whether the related redeemed Omnibus Share is attributable to the Distributor or a Successor Distributor, as the case may be, in accordance with Part I above. PART III: ALLOCATION OF DISTRIBUTION FEE Assuming that the Distribution Fee remains constant over time so that Part IV hereof does not become operative: (1) The portion of the aggregate Distribution Fee accrued in respect of all Class C shares of a Fund during any calendar month allocable to the Distributor or a Successor Distributor is determined by multiplying the total of such Distribution Fee by the following fraction: (A + C)/2 (B + D)/2 where: A= The aggregate Net Asset Value of all Class C shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the beginning of such calendar month B= The aggregate Net Asset Value of all Class C shares of a Fund at the beginning of such calendar month C= The aggregate Net Asset Value of all Class C shares of a Fund attributed to the Distributor or such Successor Distributor, as the case may be, and outstanding at the end of such calendar month D= The aggregate Net Asset Value of all Class C shares of a Fund at the end of such calendar month (2) If the Distributor reasonably determines that the transfer agent is able to produce automated monthly reports that allocate the average Net Asset Value of the Commission Shares (or all Class C shares if available) of a Fund among the Distributor and any Successor Distributor in a manner consistent with the methodology detailed in Part I and Part III(1) above, the portion of the Distribution Fee accrued in respect of all such Class C shares of a Fund during a particular calendar month will be allocated to the Distributor or a Successor Distributor by multiplying the total of such Distribution Fee by the following fraction: (A)/(B) where: A= Average Net Asset Value of all such Class C shares of a Fund for such calendar month attributed to the Distributor or a Successor Distributor, as the case may be B= Total average Net Asset Value of all such Class C shares of a Fund for such calendar month PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR DISTRIBUTOR'S ALLOCABLE PORTION The parties to the Distribution Agreement recognize that, if the terms of any distributor's contract, any distribution plan, any prospectus, the Conduct Rules or any other applicable law change so as to disproportionately reduce, in a manner inconsistent with the intent of this Distribution Agreement, the amount of the Distributor's Allocable Portion or any Successor Distributor's Allocable Portion had no such change occurred, the definitions of the Distributor's Allocable Portion and/or the Successor Distributor's Allocable Portion in respect of the Class C shares relating to a Fund shall be adjusted by agreement among the relevant parties; provided, however, if the Distributor, the Successor Distributor and the Fund cannot agree within thirty (30) days after the date of any such change in applicable laws or in any distributor's contract, distribution plan, prospectus or the Conduct Rules, they shall submit the question to arbitration in accordance with the commercial arbitration rules of the American Arbitration Association and the decision reached by the arbitrator shall be final and binding on each of them. FORM OF PLAN OF DISTRIBUTION OF __________________________ RELATING TO ITS CLASS F SHARES WHEREAS, __________________________ (the "Fund") is a Corporation/Trust that offers four classes of shares of common stock, designated as Class A shares, Class B shares, Class C shares and Class F shares; WHEREAS, American Funds Distributors, Inc. ("AFD") or any successor entity designated by the Fund (AFD and any such successor collectively are referred to as "Distributor") will serve as distributor of the shares of common stock of the Fund, and the Fund and Distributor are parties to a principal underwriting agreement (the "Agreement"); WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to authorize the Fund to bear expenses of distribution of its Class F shares; and WHEREAS, the Board of Directors/Trustees of the Fund has determined that there is a reasonable likelihood that this Plan will benefit the Fund and its shareholders; NOW, THEREFORE, the Fund adopts this Plan as follows: 1. PAYMENTS TO DISTRIBUTOR. The Fund may expend pursuant to this Plan and as set forth below an aggregate amount not to exceed 0.50% per annum of the average net assets of the Fund's Class F shares. The categories of expenses permitted under this Plan include service fees ("Service Fees") and distribution fees ("Distribution Fees"), each in an amount not to exceed 0.25% per annum of the average net assets of the Fund's Class F shares. The actual amounts paid shall be determined by the Board of Directors/Trustees. The Service Fee compensates the Distributor for service-related expenses, including paying Service Fees to others in respect of Class F shares of the Fund. The Distribution Fee compensates the Distributor for providing distribution services in respect of Class F shares of the Fund. 2. APPROVAL BY THE BOARD. This Plan shall not take effect until it has been approved, together with any related agreement, by votes of the majority of both (i) the Board of Directors/Trustees of the Fund and (ii) those Directors/Trustees of the Fund who are not "interested persons" of the Fund (as defined in the Investment Company Act of 1940) and have no direct or indirect financial interest in the operation of this Plan or any agreement related to it (the "Independent Directors/Trustees"), cast in person at a meeting called for the purpose of voting on this Plan and/or such agreement. 3. REVIEW OF EXPENDITURES. At least quarterly, the Board of Directors/Trustees shall be provided by any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to this Plan or any related agreement, and the Board shall review, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made. 4. TERMINATION OF PLAN. This Plan may be terminated as to the Fund's Class F shares at any time by vote of a majority of the Independent Directors/Trustees, or by vote of a majority of the outstanding Class F shares of the Fund. Unless sooner terminated in accordance with this provision, this Plan shall continue in effect until _________________. It may thereafter be continued from year to year in the manner provided for in paragraph 2 hereof. 5. REQUIREMENTS OF AGREEMENT. Any Agreement related to this Plan shall be in writing, and shall provide: a. that such agreement may be terminated as to the Fund at any time, without payment of any penalty by the vote of a majority of the Independent Directors/Trustees or by a vote of a majority of the outstanding Class F shares of the Fund, on not more than sixty (60) days' written notice to any other party to the agreement; and b. that such agreement shall terminate automatically in the event of its assignment. 6. AMENDMENT. This Plan may not be amended to increase materially the maximum amount of fees or other distribution expenses provided for in paragraph 1 hereof with respect to the Class F shares of the Fund unless such amendment is approved by vote of a majority of the outstanding voting securities of the Class F shares of the Fund and as provided in paragraph 2 hereof, and no other material amendment to this Plan shall be made unless approved in the manner provided for in paragraph 2 hereof. 7. NOMINATION OF DIRECTORS/TRUSTEES. While this Plan is in effect, the selection and nomination of Independent Directors/Trustees shall be committed to the discretion of the Independent Directors/Trustees of the Fund. 8. ISSUANCE OF SERIES OF SHARES. If the Fund shall at any time issue shares in more than one series, this Plan may be adopted, amended, continued or renewed with respect to a series as provided herein, notwithstanding that such adoption, amendment, continuance or renewal has not been effected with respect to any one or more other series of the Fund. 9. RECORD RETENTION. The Fund shall preserve copies of this Plan and any related agreement and all reports made pursuant to paragraph 3 hereof for not less than six (6) years from the date of this Plan, or such agreement or reports, as the case may be, the first two (2) years of which such records shall be stored in an easily accessible place. IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its officers thereunto duly authorized, as of ________________. __________________________ By ______________________________ Chairman of the Board By ______________________________ Secretary FORM OF [NAME OF FUND] AMENDED AND RESTATED MULTIPLE CLASS PLAN WHEREAS, _______________________ (the "Fund"), a _____________ corporation/trust, is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company that offers shares of common stock/beneficial interest; WHEREAS, American Funds Distributors, Inc. (the "Distributor") serves as the principal underwriter for the Fund; WHEREAS, the Fund has adopted Plans of Distribution (each a "12b-1 Plan") under which the Fund may bear expenses of distribution of its shares, including payment and/or reimbursement to the Distributor for certain of its expenses incurred in connection with the Fund; WHEREAS, the Fund is authorized to issue four classes of shares of common stock/beneficial interest, designated as Class A shares, Class B shares, Class C shares and Class F shares; WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management investment companies to issue multiple classes of voting stock representing interests in the same portfolio if, among other things, an investment company adopts a written Multiple Class Plan (the "Plan") setting forth the separate arrangement and expense allocation of each class and any related conversion features or exchange privileges; WHEREAS, the Board of Directors/Trustees of the Fund adopted a Multiple Class Plan on ______________; and WHEREAS, the Board of Directors/Trustees of the Fund has determined, that it is in the best interest of each class of shares of the Fund individually, and the Fund as a whole, to amend and restate its Multiple Class Plan in recognition of it issuing additional classes of shares; NOW THEREFORE, the Fund adopts this Plan as follows: 1. Each class of shares will represent interests in the same portfolio of investments of the Fund, and be identical in all respects to each other class, except as set forth below. The differences among the various classes of shares of the Fund will relate to: (i) distribution, service and other charges and expenses as provided for in paragraph 3 of this Plan; (ii) the exclusive right of each class of shares to vote on matters submitted to shareholders that relate solely to that class or the separate voting right of each class on matters for which the interests of one class differ from the interests of another class; (iii) such differences relating to eligible investors as may be set forth in the Fund's prospectus and statement of additional information ("SAI"), as the same may be amended or supplemented from time to time; (iv) the designation of each class of shares; (v) conversion features; and (vi) exchange privileges. 2. (a) Certain expenses may be attributable to the Fund, but not a particular class of shares thereof. All such expenses will be borne by each class on the basis of the relative aggregate net assets of the classes. Notwithstanding the foregoing, the Distributor, the investment adviser or other provider of services to the Fund may waive or reimburse the expenses of a specific class or classes to the extent permitted by Rule 18f-3 under the 1940 Act and any other applicable law. (b) A class of shares may be permitted to bear expenses that are directly attributable to that class, including: (i) any distribution service fees associated with any rule 12b-1 Plan for a particular class and any other costs relating to implementing or amending such rule 12b-1 Plan; (ii) any administrative service fees attributable to such class; and (iii) any transfer agency and shareholder servicing fees attributable to such class. (c) Any additional incremental expenses not specifically identified above that are subsequently identified and determined to be applied properly to one class of shares of the Fund shall be so applied upon approval by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) those Directors/Trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) ("Independent Directors/Trustees"). 3. Consistent with the general provisions of section 2(b), above, each class of shares of the Fund shall differ in the amount of, and the manner in which costs are borne by shareholders as follows: (a) Class A shares (i) Class A shares shall be sold at net asset value plus a front-end sales charge, at net asset value without a front-end sales charge but subject to a contingent deferred sales charge ("CDSC"), and at net asset value without any sales charge, as set forth in the Fund's prospectus and SAI. (ii) Class A shares shall be subject to an annual distribution expense under the Fund's Class A Plan of Distribution of up to 0.25% [or 0.30% or 0.15%] of average net assets, as set forth in the Fund's prospectus, SAI, and Plan of Distribution. This expense consists of a service fee of up to 0.25% plus certain other distribution costs. (b) Class B shares (i) Class B shares shall be sold at net asset value without a front-end sales charge, but are subject to a CDSC and maximum purchase limits as set forth in the Fund's prospectus and SAI. (ii) Class B shares shall be subject to an annual 12b-1 expense under the Fund's Class B Plan of Distribution of 1.00% [or 0.90%] of average net assets, as set forth in the Fund's prospectus, SAI, and Class B Plan of Distribution. This expense shall consist of a distribution fee of 0.75% and a service fee of 0.25% of such net assets. (iii) Class B shares will automatically convert to Class A shares of the Fund approximately eight years after purchase, subject to the limitations described in the Fund's prospectus and SAI. All conversions shall be effected on the basis of the relative net asset values of the two classes of shares without the imposition of any sales load or other charge. (iv) Class B shares shall be subject to a fee (included within the transfer agency expense) for additional costs associated with tracking the age of each Class B share. (c) Class C shares (i) Class C shares shall be sold at net asset value without a front-end sales charge, but are subject to a CDSC and maximum purchase limits as set forth in the Fund's prospectus and SAI. f. Class C shares shall be subject to an annual 12b-1 expense under the Fund's Class C Plan of Distribution of 1.00% of average net assets, as set forth in the Fund's prospectus, SAI, and Class C Plan of Distribution. This expense shall consist of a distribution fee of 0.75% and a service fee of 0.25% of such net assets. (iii) Class C shares shall be subject to an Administrative Services fee comprising transfer agent fees (according to the fee schedule contained in the Shareholder Services Agreement between the Fund and its transfer agent for its Class A and Class B shares) plus 0.15% of average net assets, as set forth in the Fund's prospectus, SAI, and Class C Administrative Services Agreement. Class C shares will pay only those transfer agent fees that are attributed to accounts of and activities generated by the Class C shares. (iv) Class C shares will automatically convert to Class F shares of the Fund approximately ten years after purchase, subject to the limitations described in the Fund's prospectus and SAI. All conversions shall be effected on the basis of the relative net asset values of the two classes of shares without the imposition of any sales load or other charge. (v) Class C shares shall be subject to a fee (included within the transfer agency expense) for additional costs associated with tracking the age of each Class C share. (d) Class F shares (i) Class F shares shall be sold at net asset value without a front-end or back-end sales charge. (ii) Class F shares shall be subject to an annual 12b-1 expense under the Fund's Class F Plan of Distribution of up to 0.50% of average net assets, as set forth in the Fund's prospectus, SAI, and Class F Plan of Distribution. This expense shall consist of a distribution fee of 0.25% and a service fee of 0.25% of such net assets. (iii) Class F shares shall be subject to an Administrative Services fee comprising transfer agent fees (according to the fee schedule contained in the Shareholder Services Agreement between the Fund and its transfer agent for its Class A and Class B shares) plus 0.15% of average net assets, as set forth in the Fund's prospectus, SAI, and Class F Administrative Services Agreement. Class F shares will pay only those transfer agent fees that are attributed to accounts of and activities generated by the Class F shares. All other rights and privileges of Fund shareholders are identical regardless of which class of shares are held. 4. This Plan shall not take effect until it has been approved by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) the Independent Directors/Trustees. 5. This Plan shall become effective with respect to any class of shares of the Fund, other than Class A, Class B, Class C or Class F shares, upon the commencement of the initial public offering thereof (provided that the Plan has previously been approved with respect to such additional class by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees prior to the offering of such additional class of shares), and shall continue in effect with respect to such additional class or classes until terminated in accordance with paragraph 7. An addendum setting forth such specific and different terms of such additional class or classes shall be attached to and made part of this Plan. 6. No material amendment to the Plan shall be effective unless it is approved by the votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees. 7. This Plan may be terminated at any time with respect to the Fund as a whole or any class of shares individually, by the votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees. This Plan may remain in effect with respect to a particular class or classes of shares of the Fund even if it has been terminated in accordance with this paragraph with respect to any other class of shares. IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its officers thereunto duly authorized, as of ____________________. By By EX-99.N18F-3PLAN 10 0010.txt FORM OF [NAME OF FUND] AMENDED AND RESTATED MULTIPLE CLASS PLAN WHEREAS, _______________________ (the "Fund"), a _____________ corporation/trust, is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company that offers shares of common stock/beneficial interest; WHEREAS, American Funds Distributors, Inc. (the "Distributor") serves as the principal underwriter for the Fund; WHEREAS, the Fund has adopted Plans of Distribution (each a "12b-1 Plan") under which the Fund may bear expenses of distribution of its shares, including payment and/or reimbursement to the Distributor for certain of its expenses incurred in connection with the Fund; WHEREAS, the Fund is authorized to issue four classes of shares of common stock/beneficial interest, designated as Class A shares, Class B shares, Class C shares and Class F shares; WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management investment companies to issue multiple classes of voting stock representing interests in the same portfolio if, among other things, an investment company adopts a written Multiple Class Plan (the "Plan") setting forth the separate arrangement and expense allocation of each class and any related conversion features or exchange privileges; WHEREAS, the Board of Directors/Trustees of the Fund adopted a Multiple Class Plan on ______________; and WHEREAS, the Board of Directors/Trustees of the Fund has determined, that it is in the best interest of each class of shares of the Fund individually, and the Fund as a whole, to amend and restate its Multiple Class Plan in recognition of it issuing additional classes of shares; NOW THEREFORE, the Fund adopts this Plan as follows: 1. Each class of shares will represent interests in the same portfolio of investments of the Fund, and be identical in all respects to each other class, except as set forth below. The differences among the various classes of shares of the Fund will relate to: (i) distribution, service and other charges and expenses as provided for in paragraph 3 of this Plan; (ii) the exclusive right of each class of shares to vote on matters submitted to shareholders that relate solely to that class or the separate voting right of each class on matters for which the interests of one class differ from the interests of another class; (iii) such differences relating to eligible investors as may be set forth in the Fund's prospectus and statement of additional information ("SAI"), as the same may be amended or supplemented from time to time; (iv) the designation of each class of shares; (v) conversion features; and (vi) exchange privileges. 2. (a) Certain expenses may be attributable to the Fund, but not a particular class of shares thereof. All such expenses will be borne by each class on the basis of the relative aggregate net assets of the classes. Notwithstanding the foregoing, the Distributor, the investment adviser or other provider of services to the Fund may waive or reimburse the expenses of a specific class or classes to the extent permitted by Rule 18f-3 under the 1940 Act and any other applicable law. (b) A class of shares may be permitted to bear expenses that are directly attributable to that class, including: (i) any distribution service fees associated with any rule 12b-1 Plan for a particular class and any other costs relating to implementing or amending such rule 12b-1 Plan; (ii) any administrative service fees attributable to such class; and (iii) any transfer agency and shareholder servicing fees attributable to such class. (c) Any additional incremental expenses not specifically identified above that are subsequently identified and determined to be applied properly to one class of shares of the Fund shall be so applied upon approval by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) those Directors/Trustees of the Fund who are not "interested persons" of the Fund (as defined in the 1940 Act) ("Independent Directors/Trustees"). 3. Consistent with the general provisions of section 2(b), above, each class of shares of the Fund shall differ in the amount of, and the manner in which costs are borne by shareholders as follows: (a) Class A shares (i) Class A shares shall be sold at net asset value plus a front-end sales charge, at net asset value without a front-end sales charge but subject to a contingent deferred sales charge ("CDSC"), and at net asset value without any sales charge, as set forth in the Fund's prospectus and SAI. (ii) Class A shares shall be subject to an annual distribution expense under the Fund's Class A Plan of Distribution of up to 0.25% [or 0.30% or 0.15%] of average net assets, as set forth in the Fund's prospectus, SAI, and Plan of Distribution. This expense consists of a service fee of up to 0.25% plus certain other distribution costs. (b) Class B shares (i) Class B shares shall be sold at net asset value without a front-end sales charge, but are subject to a CDSC and maximum purchase limits as set forth in the Fund's prospectus and SAI. (ii) Class B shares shall be subject to an annual 12b-1 expense under the Fund's Class B Plan of Distribution of 1.00% [or 0.90%] of average net assets, as set forth in the Fund's prospectus, SAI, and Class B Plan of Distribution. This expense shall consist of a distribution fee of 0.75% and a service fee of 0.25% of such net assets. (iii) Class B shares will automatically convert to Class A shares of the Fund approximately eight years after purchase, subject to the limitations described in the Fund's prospectus and SAI. All conversions shall be effected on the basis of the relative net asset values of the two classes of shares without the imposition of any sales load or other charge. (iv) Class B shares shall be subject to a fee (included within the transfer agency expense) for additional costs associated with tracking the age of each Class B share. (c) Class C shares (i) Class C shares shall be sold at net asset value without a front-end sales charge, but are subject to a CDSC and maximum purchase limits as set forth in the Fund's prospectus and SAI. (ii) Class C shares shall be subject to an annual 12b-1 expense under the Fund's Class C Plan of Distribution of 1.00% of average net assets, as set forth in the Fund's prospectus, SAI, and Class C Plan of Distribution. This expense shall consist of a distribution fee of 0.75% and a service fee of 0.25% of such net assets. (iii) Class C shares shall be subject to an Administrative Services fee comprising transfer agent fees (according to the fee schedule contained in the Shareholder Services Agreement between the Fund and its transfer agent for its Class A and Class B shares) plus 0.15% of average net assets, as set forth in the Fund's prospectus, SAI, and Class C Administrative Services Agreement. Class C shares will pay only those transfer agent fees that are attributed to accounts of and activities generated by the Class C shares. (iv) Class C shares will automatically convert to Class F shares of the Fund approximately ten years after purchase, subject to the limitations described in the Fund's prospectus and SAI. All conversions shall be effected on the basis of the relative net asset values of the two classes of shares without the imposition of any sales load or other charge. (v) Class C shares shall be subject to a fee (included within the transfer agency expense) for additional costs associated with tracking the age of each Class C share. (d) Class F shares (i) Class F shares shall be sold at net asset value without a front-end or back-end sales charge. (ii) Class F shares shall be subject to an annual 12b-1 expense under the Fund's Class F Plan of Distribution of up to 0.50% of average net assets, as set forth in the Fund's prospectus, SAI, and Class F Plan of Distribution. This expense shall consist of a distribution fee of 0.25% and a service fee of 0.25% of such net assets. (iii) Class F shares shall be subject to an Administrative Services fee comprising transfer agent fees (according to the fee schedule contained in the Shareholder Services Agreement between the Fund and its transfer agent for its Class A and Class B shares) plus 0.15% of average net assets, as set forth in the Fund's prospectus, SAI, and Class F Administrative Services Agreement. Class F shares will pay only those transfer agent fees that are attributed to accounts of and activities generated by the Class F shares. All other rights and privileges of Fund shareholders are identical regardless of which class of shares are held. 4. This Plan shall not take effect until it has been approved by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) the Independent Directors/Trustees. 5. This Plan shall become effective with respect to any class of shares of the Fund, other than Class A, Class B, Class C or Class F shares, upon the commencement of the initial public offering thereof (provided that the Plan has previously been approved with respect to such additional class by votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees prior to the offering of such additional class of shares), and shall continue in effect with respect to such additional class or classes until terminated in accordance with paragraph 7. An addendum setting forth such specific and different terms of such additional class or classes shall be attached to and made part of this Plan. 6. No material amendment to the Plan shall be effective unless it is approved by the votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees. 7. This Plan may be terminated at any time with respect to the Fund as a whole or any class of shares individually, by the votes of the majority of both (i) the Board of Directors/Trustees of the Fund; and (ii) Independent Directors/Trustees. This Plan may remain in effect with respect to a particular class or classes of shares of the Fund even if it has been terminated in accordance with this paragraph with respect to any other class of shares. IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its officers thereunto duly authorized, as of ____________________. By By EX-99.PCODEETH 11 0011.txt FORM OF CODE OF CONDUCT All of us within the Capital organization are responsible for maintaining the very highest ethical standards when conducting business. In keeping with these standards, we must never allow our own interests to be placed ahead of our shareholders' and clients' interests. Over the years we have earned a reputation for the highest integrity. Regardless of lesser standards that may be followed through business or community custom, we must observe exemplary standards of honesty and integrity. REPORTING VIOLATIONS If you know of any violation of our Code of Conduct, you have a responsibility to report it. Deviations from controls or procedures that safeguard the company, including the assets of shareholders and clients, should also be reported. You can report confidentially to: - - Your manager or department head - - CGC Audit Committee: Wally Stern - Chairman Donnalisa Barnum David Beevers Jim Brown Larry P. Clemmensen Roberta Conroy Bill Hurt - (emeritus) Sonny Kamm Mike Kerr Victor Kohn John McLaughlin Don O'Neal Tom Rowland John Smet Antonio Vegezzi Shaw Wagener Kelly Webb - - Mike Downer or any other lawyer in the CGC Legal Group - - Don Wolfe of Deloitte & Touche LLP (CGC's auditors). CGC GIFTS POLICY - CONFLICTS OF INTEREST A conflict of interest occurs when the private interests of associates interfere or could potentially interfere with their responsibilities at work. Associates must not place themselves or the company in a position of actual or potential conflict. Associates may not accept gifts worth more than $100, excessive business entertainment, loans, or anything else involving personal gain from those who conduct business with the company. In addition, a business entertainment event exceeding $200 in value should not be accepted unless the associate receives permission from the Gifts Policy Committee. REPORTING Although the limitations on accepting gifts applies to ALL associates as described above, some associates will be asked to fill out quarterly reports. If you receive a reporting form, you must report any gift exceeding $50 (although it is recommended that you report ALL gifts received) and business entertainment in which an event exceeds $75. GIFTS POLICY COMMITTEE The Gifts Policy Committee oversees administration of and compliance with the Policy. INSIDER TRADING Antifraud provisions of the federal securities laws generally prohibit persons while in possession of material nonpublic information from trading on or communicating the information to others. Sanctions for violations can include civil injunctions, permanent bars from the securities industry, civil penalties up to three times the profits made or losses avoided, criminal fines and jail sentences. While investment research analysts are most likely to come in contact with material nonpublic information, the rules (and sanctions) in this area apply to all CGC associates and extend to activities both within and outside each associate's duties. Although different standards may apply outside the U.S., CGC applies the same standard to all associates across all offices. Associates meeting with companies outside the U.S. should be aware that these companies may not be as sensitive to issues relating to material non-public information. PERSONAL INVESTING POLICY As an associate of the Capital Group companies, you may have access to confidential information. This places you in a position of special trust. You are associated with a group of companies that is responsible for the management of many billions of dollars belonging to mutual fund shareholders and other clients. The law, ethics and our own policy place a heavy burden on all of us to ensure that the highest standards of honesty and integrity are maintained at all times. There are several rules that must be followed to avoid possible conflicts of interest in personal securities transactions. ALL ASSOCIATES Information regarding proposed or partially completed plans by CGC companies to buy or sell specific securities must not be divulged to outsiders. Favors or preferential treatment from stockbrokers may not be accepted. Associates may not subscribe to ANY initial public offering (IPO). Generally, this prohibition applies to spouses of associates and any family member residing in the same household. However, an associate may request that the Personal Investing Committee consider granting an exception under special circumstances. COVERED PERSONS Associates who have access to investment information in connection with their regular duties are generally considered "covered persons." If you receive a quarterly personal securities transactions report form, you are a covered person. You will be provided a summary of CGC's Personal Investing Policy on a quarterly basis and a copy of the full policy annually. In addition, a copy of the Policy is always available on the CGC web home page. Covered persons must conduct their personal securities transactions in such a way that they do not conflict with the interests of the funds and client accounts. This policy also includes securities transactions of family members living in the covered person's household and any trust or custodianship for which the associate is trustee or custodian. A conflict may occur if you, a family member in the same household, a trust or custodianship for which you are trustee or custodian have a transaction in a security when the funds or client accounts are considering or concluding a transaction in the same security. Additional rules apply to "investment associates" including portfolio counselors/managers, research analysts, traders, portfolio control associates, and investment administration associates (see below). PRE-CLEARANCE OF SECURITIES TRANSACTIONS Before buying or selling securities, covered persons must check with the staff of the Personal Investing Committee. (You will generally receive a response within one business day.) If you are granted permission to trade, you will generally be given until the close of the New York Stock Exchange to complete your transaction, although some transactions may be granted up to two trading days (including the day you call) to complete. If you have not executed your transaction within this period, you must again pre-clear your transaction. Covered associates must PROMPTLY submit quarterly reports of certain transactions. Transactions of securities (including fixed-income securities) or options (see below) must be precleared as described above and reported EXCEPT that the following types of transactions ONLY NEED TO BE REPORTED BUT NOT PRE-CLEARED: g. options or futures on broad-based indices or currencies h. gifts or bequests (either receiving or giving) of securities (note that sales of securities received as a gift MUST be both precleared and reported); i. debt instruments rated "A" or above by at least one national rating service; j. sales pursuant to tender offers; and k. dividend reinvestment plan purchases (provided the purchase pursuant to such plan is made with dividend proceeds only). In addition, THE FOLLOWING TRANSACTIONS NEITHER REQUIRE PRE-CLEARANCE NOR REPORTING: g. open-end investment companies (mutual funds); h. money market instruments with maturities of one year or less; i. direct obligations of the U.S. Government; j. bankers' acceptances, CDs or other commercial paper; and k. commodities. NOTE THAT INVESTMENTS IN PRIVATE PLACEMENTS AND VENTURE CAPITAL PARTNERSHIPS MUST BE PRE-CLEARED AND REPORTED AND ARE SUBJECT TO SPECIAL REVIEW. YOU WILL RECEIVE REPORTING FORMS EACH QUARTER WHICH ARE DUE NO LATER THAN 10 DAYS AFTER THE END OF THE QUARTER. PERSONAL INVESTING SHOULD BE VIEWED AS A PRIVILEGE, NOT A RIGHT. AS SUCH, LIMITATIONS MAY BE PLACED ON THE NUMBER OF PRE-CLEARANCES AND/OR TRANSACTIONS AS DEEMED APPROPRIATE BY THE PERSONAL INVESTING COMMITTEE. BROKERAGE ACCOUNTS Covered persons should inform their stockbrokers that they are employed by an investment adviser, trust company or affiliate of either. U.S. brokers are subject to certain rules designed to prevent favoritism toward such accounts. Associates may not accept negotiated commission rates which they believe may be more favorable than the broker grants to accounts with similar characteristics. In addition, covered persons must direct their brokers to send duplicate confirmations and copies of all periodic statements on a timely basis to The Legal Group of The Capital Group Companies, Inc., ALL DOCUMENTS RECEIVED ARE CONSIDERED TO BE CONFIDENTIAL./1/ DISCLOSURE OF ACCOUNTS THAT COULD HOLD SECURITIES SUBJECT TO PRE-CLEARANCE OR REPORTING - Associates are not required to provide duplicate statements for accounts that only hold securities that are not subject to pre-clearance or reporting (E.G., mutual funds, U.S. Government securities, money market instruments, etc.). However, if the accounts could hold securities subject to the policy, the existence of these accounts (including the name of the brokerage firm or bank and the date the accounts were established) must be disclosed. If extraneous sensitive information is included on an associate's statements (E.G., checking account information), the associate might want to establish a separate account solely for cash holdings and cash-related transactions. The existence of this type of account would not need to be disclosed. DISCRETIONARY ACCOUNTS - Transactions and holdings in accounts over which an associate has turned over complete investment discretion to a third party (I.E. broker, money manager, or financial advisor) are not subject to pre-clearance or reporting requirements. You must disclose the existence of this account to the staff of the Personal Investing Committee (and you MUST have a signed exemption memo on file with the staff of the Personal Investing Committee regarding this account). In addition, investment associates should note that to the extent that securities are held personally in discretionary accounts and held professionally or are within an analyst's research responsibility, holdings SHOULD BE INCLUDED on the appropriate form (see "Disclosure of Ownership of Certain Securities" below). ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS Covered persons will be required to disclose all personal securities holdings upon commencement of employment (or upon becoming a covered person) and thereafter on an annual basis. Reporting forms will be supplied for this purpose. /1/ Information about particular transactions may be provided to an associate's supervisor or appropriate human resources manager by Personal Investing Committee staff where the transactions are in violation of the Policy, may impact the associate's job performance, or raise other conflict of interest-related issues. ANNUAL RECERTIFICATION All access persons will be required to certify annually that they have read and understood the Personal Investing Policy and recognize that they are subject thereto. ADDITIONAL RULES FOR INVESTMENT ASSOCIATES DISCLOSURE OF OWNERSHIP OF CERTAIN SECURITIES Ownership of securities that are held professionally as well as personally will be reviewed on a periodic basis by the staff of the Personal Investing Committee and may also be reviewed by the applicable Management Committee and/or Investment Committee or Subcommittee. In addition, to the extent that disclosure has not already been made to the staff of the Personal Investing Committee, any associate who is in a position to recommend the purchase or sale of securities by the fund or client accounts that s/he personally owns should FIRST disclose such ownership either in writing (in a company write-up) or verbally (when discussing the company at investment meetings) prior to making a recommendation./2/ BLACKOUT PERIOD Investment associates may not buy or sell a security during a period beginning seven calendar days before and ending seven calendar days after a fund or client account that is managed by the company(ies) with which the individual has investment responsibility transacts in that security. If a fund or client account transaction takes place in the seven calendar days following a precleared purchase by an investment associate, the transaction will be reviewed by the Personal Investing Committee to determine the appropriate action, if any. For example, the Committee may recommend that the associate be subject to a price adjustment to ensure that he or she has not received a better price than the fund or client account. BAN ON SHORT-TERM TRADING PROFITS Investment associates are prohibited from profiting from the purchase and sale or sale and purchase of the same (or equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS. SERVICE AS A DIRECTOR All investment associates must obtain prior authorization of the Investment Committee or Investment Sub-Committee of the appropriate management company or CGC committee before serving on the boards of directors of publicly traded companies. Also, prior to serving on the board of a private company investment personnel must notify the LAO Legal Group; in certain circumstances these matters may be referred to the appropriate management or investment committee for approval. /2/ Note that this disclosure requirement is consistent with both AIMR standards as well as the ICI Advisory Group Guidelines. In addition, other CGC associates should notify the LAO Legal Group, prior to serving on the board of a public or private company. PERSONAL INVESTING COMMITTEE Any questions or hardships that result from these policies or requests for exceptions should be referred to CGC's Personal Investing Committee by calling the Personal Investing Committee staff. -----END PRIVACY-ENHANCED MESSAGE-----