-----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, FUlaQC/7EZ3wvUR9jAR+SV5jq+e4bXw/mzuoRcWHPvqQPglRdr6ETy5rP3gpDfFP I/Sei7xykW1svkL3chSJ+A== 0000039473-03-000006.txt : 20030908 0000039473-03-000006.hdr.sgml : 20030908 20030908145326 ACCESSION NUMBER: 0000039473-03-000006 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030908 EFFECTIVENESS DATE: 20030908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUNDAMENTAL INVESTORS INC CENTRAL INDEX KEY: 0000039473 IRS NUMBER: 221557722 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-00032 FILM NUMBER: 03885871 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 N-CSR 1 fincsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR Certified Shareholder Report of Registered Management Investment Companies Investment Company Act File Number: 811-32 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) Registrant's telephone number, including area code: (415) 421-9360 Date of fiscal year end: December 31, 2003 Date of reporting period: June 30, 2003 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) Copies to: Robert E. Carlson, Esq. Paul, Hastings, Janofsky &Walker LLP 515 South Flower Street Los Angeles, California 90071 (Counsel for the Registrant) ITEM 1 - Reports to Stockholders [logo] American Funds(R) The right choice for the long term(R) FUNDAMENTAL INVESTORS [abstract painting that shows a giant-sized man holding up the roof of a building] Semi-annual report for the six months ended June 30, 2003 Fundamental Investors(SM) seeks long-term growth of capital and income primarily through investments in common stocks. This fund is one of the 29 American Funds, the nation's third-largest mutual fund family. For more than seven decades, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. Fund results in this report were calculated for Class A shares at net asset value (without a sales charge) unless otherwise indicated. Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2003: CLASS A SHARES 1 YEAR 5 YEARS 10 YEARS Reflecting 5.75% maximum sales charge -8.98% +0.71% +10.12% The fund's 30-day yield for Class A shares as of July 31, 2003, calculated in accordance with the Securities and Exchange Commission formula, was 1.85%. The fund's distribution rate for Class A shares as of that date was 1.90%. Both reflect the 5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund's past dividends paid to shareholders. Accordingly, the fund's SEC yield and distribution rate may differ. Results for other share classes can be found on page 28. For the most current investment results, please refer to americanfunds.com. Please see the inside back cover for important information about other share classes. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. INVESTING OUTSIDE THE UNITED STATES INVOLVES ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS, POLITICAL INSTABILITY, DIFFERING SECURITIES REGULATIONS AND PERIODS OF ILLIQUIDITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS. FELLOW SHAREHOLDERS: [abstract painting that shows a giant-sized man holding up the roof of a building] The stock market experienced an upswing in the first half of 2003, helped by low interest rates and stimulative fiscal policies. In this environment, Fundamental Investors posted a 9.4% gain, with dividends reinvested, for the six months ended June 30, 2003. By comparison, the Lipper Large-Cap Core Index, which tracks funds that allow a wide latitude of companies in their portfolios, returned 10.2% for the period. The Lipper Large-Cap Value Index, which measures funds that invest in companies that are undervalued within their industries, gained 10.7%. The unmanaged Standard & Poor's 500 Composite Index, which tracks relatively large companies listed on U.S. exchanges, increased by 11.8%. Despite an environment where interest rates dropped to their lowest level in decades, we are pleased to report that the fund continued to pay two 10-cent quarterly dividends in February and May. The fund's 12-month distribution rate at net asset value was 2.05%, which surpasses the rates for all three of its benchmarks: 0.66% for the Lipper Large-Cap Core Index, 0.92% for the Lipper Large-Cap Value Index, and 1.66% for the S&P 500. [Begin Sidebar] RESULTS AT A GLANCE Returns for periods ended June 30, 2003, with all distributions reinvested. 6 months 1 year 5 years (1) 10 years (1) Lifetime (1), (2) Fundamental Investors 9.44% -3.42% 1.92% 10.78% 13.62% Lipper Large-Cap Core Index 10.15 -1.00 -2.10 8.51 --3 Lipper Large-Cap Value Index 10.75 -2.13 -0.75 9.15 12.72 Standard & Poor's 500 Composite Index 11.75 0.25 -1.61 10.04 13.13
(1) Average annual total return. (2) Since Capital Research and Management Company began managing the fund on August 1, 1978. (3) Index began on December 29, 1978. The market indexes are unmanaged. [End Sidebar] THE SIX MONTHS IN REVIEW Fundamental Investors' portfolio was helped by a favorable stock and bond market environment. Some of the strongest stocks during the period were among those that were hardest hit during the bear market of the past three years. These include J.P. Morgan Chase, the global financial services firm, up 42.4%; AOL Time Warner, the media giant, up 22.8%; and Texas Instruments, a global semiconductor maker, up 17.3%. All are among our 20 largest holdings. Pharmaceutical companies, which constitute about 8% of the fund's overall portfolio, also experienced a rebound. AstraZeneca (+14.5%) and Eli Lilly (+8.6%), both among our top five holdings, saw some recovery in their stock prices during this period as each made progress in getting new products to market. AstraZeneca's new cancer drug, IRESSA,(R) and its new cholesterol-lowering drug, Crestor,(R) were approved by the Food and Drug Administration, while an application for the approval of Exanta,TM a drug formulated to prevent blood clots, is expected to be submitted to the FDA by the end of 2003. Eli Lilly, our largest holding, has had FDA approval for several new products delayed until it completes upgrades of the manufacturing control systems at two of its plants. That has hindered several promising new medications, including an injectable version of Zyprexa,(R) the top-selling oral drug for the treatment of schizophrenia, and Cymbalta,TM a new anti-depressant to replace Prozac, which is now off patent. Despite these issues, we believe long-term growth prospects for the company are favorable. The fund has held some cyclical stocks, including Caterpillar (+21.7%), a manufacturer of construction and mining machinery, and Alcoa (+11.9%), an aluminum producer, in anticipation of an economic recovery. The U.S. dollar has declined 8.7% on a trade-weighted basis over the past year (1), helping U.S. cyclical companies to gain market share on a global basis. With signs of a continuing global economic recovery, we hope this part of the portfolio will continue to do well. (1) As measured by the J.P. Morgan Trade-Weighted Real Broad Effective U.S. Dollar Index. The weakness in the U.S. dollar also benefited many of the fund's non-U.S. holdings, which currently make up 18.5% of the portfolio. A CUT IN TAXES Perhaps one of the biggest boosts to the stock market during the period was the passage of President Bush's tax bill, which included substantial cuts in taxes on both dividends and capital gains. Dividends had previously been taxed as ordinary income at federal tax rates as high as 38.6%, while capital gains on investments held longer than one year were taxed up to 20%; in each case, maximum rates were reduced to 15%. Non-qualified dividends will still be taxed at ordinary income tax rates. Over the long term, we believe that these tax law changes will help to encourage buy-and-hold investing and provide an incentive for company managements to pay more dividends. This change in focus is very significant to a fund like Fundamental Investors, whose objective is to provide capital appreciation as well as income. LOOKING AHEAD We believe the fund's portfolio is well-positioned to take advantage of a global economic recovery. Our long-term focus has helped the fund to hold its value relatively well during periods of declining stock prices and to produce competitive returns during periods of economic prosperity. Over the past 10-year period, Fundamental Investors has produced an average annual return of 10.8%, surpassing the 8.5% gain of the Lipper Large-Cap Core Index, the 9.2% return of the Lipper Large-Cap Value Index, and the 10.0% advance of the S&P 500. A NEW PRESIDENT Finally, we are pleased to announce that Dina N. Perry, who has served as a portfolio counselor for Fundamental Investors for the past decade, has been named president of the fund. She succeeds James E. Drasdo, who remains on the board of directors as vice chairman and will continue to serve as a portfolio counselor for the fund. We thank Jim for his nine years as president. As always, we appreciate your continued support. Sincerely, /s/ James F. Rothenberg /s/ Dina N. Perry James F. Rothenberg Dina N. Perry Chairman President August 14, 2003 INVESTMENT PORTFOLIO June 30, 2003 unaudited LARGEST EQUITY HOLDINGS Percent of Net Assets Eli Lilly 2.39 % Dow Chemical 2.27 AOL Time Warner 2.18 FleetBoston Financial 2.17 AstraZeneca 2.14 Altria Group 2.02 General Electric 1.98 Suncor Energy 1.90 Norsk Hydro 1.81 Raytheon 1.80 LARGEST INDUSTRY HOLDINGS Percent of Net Assets Oil & Gas 9.03 % Pharmaceuticals 7.98 Media 6.33 Aerospace & Defense 5.14 Insurance 4.61 Market EQUITY SECURITIES Shares or principal value (common and preferred stocks and convertible debentures) amount (000) OIL & GAS - 9.03% Suncor Energy Inc. (Canada) 17,838,485 $ 333,920 Norsk Hydro AS (ADR) (Norway) 3,559,000 174,925 Norsk Hydro AS 2,934,600 144,014 LUKoil Holding (ADR) (Russia) 2,250,000 177,975 Murphy Oil Corp. 2,639,200 138,822 Shell Canada Ltd. (Canada) 3,273,200 127,258 Exxon Mobil Corp. 3,500,000 125,685 Unocal Corp. 3,000,000 86,070 Unocal Capital Trust 6.25% 450,000 21,600 convertible preferred 2026 ConocoPhillips 1,700,000 93,160 ChevronTexaco Corp. 1,000,000 72,200 Burlington Resources Inc. 1,000,000 54,070 Imperial Oil Ltd. (Canada) 1,180,018 41,206 PHARMACEUTICALS - 7.98% Eli Lilly and Co. 6,115,000 421,752 AstraZeneca PLC (United Kingdom) 5,525,000 223,996 AstraZeneca PLC 2,000,000 80,302 AstraZeneca PLC (ADR) 1,776,266 $ 72,418 Sanofi-Synthelabo (France) 2,350,000 137,588 Bristol-Myers Squibb Co. 4,350,000 118,102 Johnson & Johnson 2,000,000 103,400 Merck & Co., Inc. 1,250,000 75,687 Schering-Plough Corp. 3,900,000 72,540 Pfizer Inc (formed by the merger of Pfizer Inc 1,900,000 64,885 and Pharmacia Corp.) Forest Laboratories, Inc. (1) 650,000 35,587 MEDIA - 6.33% AOL Time Warner Inc. (1) 23,815,000 383,183 Viacom Inc., Class B, nonvoting (1) 4,900,000 213,934 News Corp. Ltd., preferred (ADR) (Australia) 7,050,000 176,602 News Corp. Ltd. (ADR) 700,000 21,189 Comcast Corp., Class A (1) 3,712,162 112,033 Comcast Corp., Class A, special stock, nonvoting (1) 1,000,000 28,830 Liberty Media Corp., Class A (1) 6,800,000 78,608 Dow Jones & Co., Inc. 1,800,000 77,454 Adelphia Communications Corp. 6.00% convertible $ 86,000,000 14,620 subordinated notes 2006 (2) Interpublic Group of Companies, Inc. 1.87% convertible $ 8,168,000 7,157 subordinated notes 2006 (3) UnitedGlobalCom, Inc., Class A 225,035 1,047 (formerly United Pan-Europe Communications NV) (1)(3)(4) AEROSPACE & DEFENSE - 5.14% Raytheon Co. 7,592,732 249,345 Raytheon Co. - RC Trust I 8.25% convertible preferred 2006 1,180,000 units 67,543 Boeing Co. 6,850,000 235,092 Northrop Grumman Corp. 1,150,000 99,233 Northrop Grumman Corp. 7.25% convertible preferred 2004 369,690 units 37,616 General Dynamics Corp. 1,500,000 108,750 Honeywell International Inc. 1,500,000 40,275 United Technologies Corp. 425,000 30,103 Bombardier Inc., Class B (Canada) 7,500,000 25,319 Lockheed Martin Corp. 248,200 11,807 INSURANCE - 4.61% American International Group, Inc. 3,800,000 209,684 Allstate Corp. 4,800,000 171,120 XL Capital Ltd., Class A 1,825,000 151,475 Berkshire Hathaway Inc., Class A (1) 1,000 72,500 Chubb Corp. 7.00% convertible preferred 2005 1,200,000 units 31,260 Chubb Corp. 300,000 18,000 Irish Life & Permanent PLC (Ireland) 4,425,000 $ 47,751 21st Century Insurance Group 3,000,000 42,900 Aon Corp. 1,767,400 42,559 St. Paul Companies, Inc. 700,000 25,557 COMMERCIAL BANKS - 4.46% FleetBoston Financial Corp. 12,880,000 382,665 Allied Irish Banks, PLC (Ireland) 8,871,485 133,315 Cullen/Frost Bankers, Inc. 2,550,000 81,855 KeyCorp 3,100,000 78,337 National Bank of Canada (Canada) 1,405,000 38,236 Comerica Inc. 800,000 37,200 St. George Bank Ltd. (Australia) 2,400,000 34,769 ELECTRIC UTILITIES - 4.01% Dominion Resources, Inc. 4,590,000 294,999 Exelon Corp. 3,000,000 179,430 Constellation Energy Group, Inc. 2,296,100 78,756 DTE Energy Co. 1,606,900 62,091 American Electric Power Co., Inc. 1,902,100 56,740 TXU Corp. 1,167,200 26,204 Entergy Corp. 150,000 7,917 METALS & MINING - 3.81% Alcoa Inc. 7,108,700 181,272 BHP Billiton Ltd. (Australia) 23,945,030 138,758 Freeport-McMoRan Copper & Gold Inc., Class B 4,973,100 121,841 Rio Tinto PLC (United Kingdom) 6,000,000 113,017 Phelps Dodge Corp. (1) 965,620 37,022 Inco Ltd. (Canada) (1) 1,632,300 34,507 Massey Energy Co. 2,011,700 26,454 Arch Coal, Inc. 5.00% convertible preferred (undated) 200,000 13,337 BHP Steel Ltd. (Australia) 2,113,020 5,272 CHEMICALS - 3.40% Dow Chemical Co. 12,925,000 400,158 E.I. du Pont de Nemours and Co. 3,000,000 124,920 Air Products and Chemicals, Inc. 1,200,000 49,920 Lyondell Chemical Co. 1,450,000 19,618 Potash Corp. of Saskatchewan Inc. (Canada) 69,200 4,429 DIVERSIFIED TELECOMMUNICATION SERVICES - 3.17% SBC Communications Inc. 11,750,000 $ 300,212 AT&T Corp. 5,455,000 105,009 Verizon Communications Inc. 2,000,000 78,900 Swisscom AG (Switzerland) 167,510 47,651 Deutsche Telekom International Finance BV Euro 12,000,000 15,233 6050% convertible notes 2006 (Germany) Sprint Corp. - FON Group 847,300 12,201 INDUSTRIAL CONGLOMERATES - 3.04% General Electric Co. 12,175,000 349,179 Tyco International Ltd. 5,125,000 97,272 3M Co. 500,000 64,490 Siemens AG (Germany) 503,200 24,638 MACHINERY - 3.01% Deere & Co. 6,217,000 284,117 Caterpillar Inc. 2,600,000 144,716 Parker Hannifin Corp. 2,400,000 100,776 FOOD PRODUCTS - 2.91% Unilever NV, New York registered (Netherlands) 4,100,000 221,400 Nestle SA (Switzerland) 475,000 98,096 General Mills, Inc. 1,404,200 66,573 Sara Lee Corp. 3,375,000 63,484 H.J. Heinz Co. 1,700,000 56,066 Kraft Foods Inc., Class A 200,000 6,510 PAPER & FOREST PRODUCTS - 2.63% International Paper Co. 4,775,000 170,611 Weyerhaeuser Co. 2,883,000 155,682 Norske Skogindustrier ASA, Class A (Norway) 6,566,900 98,042 Bowater Inc. 700,000 26,215 Georgia-Pacific Corp., Georgia-Pacific Group 698,640 13,239 SPECIALTY RETAIL - 2.54% Lowe's Companies, Inc. 5,650,000 242,667 Limited Brands, Inc. 13,200,000 204,600 MULTI-UTILITIES & UNREGULATED POWER - 2.26% Duke Energy Corp. 10,275,000 $ 204,986 Questar Corp. 3,000,000 100,410 El Paso Corp. 11,550,000 93,324 TOBACCO - 2.02% Altria Group, Inc. (formerly Philip Morris Companies Inc.) 7,825,000 355,568 SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.98% Texas Instruments Inc. 11,863,024 208,789 National Semiconductor Corp. (1) 1,750,000 34,510 Maxim Integrated Products, Inc. 1,000,000 34,190 Linear Technology Corp. 1,000,000 32,210 Semtech Corp. 4.50% convertible subordinated notes 2007 $ 20,000,000 20,625 Semtech Corp. (1) 750,000 10,680 ASML Holding NV 5.25% convertible notes 2010 (Netherlands) Euro 6,000,000 7,026 IT SERVICES - 1.58% Automatic Data Processing, Inc. 5,075,000 171,840 Sabre Holdings Corp., Class A 2,045,304 50,417 Electronic Data Systems Corp. 1,400,000 30,030 Electronic Data Systems Corp. 7.625% Feline Prides 2004 279,600 units 6,165 Ceridian Corp. (1) 1,200,000 20,364 CAPITAL MARKETS - 1.54% J.P. Morgan Chase & Co. 7,950,000 271,731 MULTILINE RETAIL - 1.51% Target Corp. 4,890,000 185,038 May Department Stores Co. 3,600,000 80,136 ENERGY EQUIPMENT & SERVICES - 1.48% Halliburton Co. 6,700,000 154,100 Baker Hughes Inc. 3,200,000 107,424 COMMUNICATIONS EQUIPMENT - 1.47% Cisco Systems, Inc. (1) 9,300,000 $ 155,217 Motorola, Inc. 7,000,000 66,010 Motorola, Inc. 7.00% convertible preferred 2004 800,000 units 26,080 Corning Inc. (1) 1,520,000 11,233 COMPUTERS & PERIPHERALS - 1.41% International Business Machines Corp. 2,225,000 183,563 Hewlett-Packard Co. 3,000,000 63,900 ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.36% Sanmina Corp. 0% convertible $ 166,000,000 80,510 subordinated debentures 2020 SCI Systems, Inc. 3.00% convertible $ 54,500,000 48,096 subordinated debentures 2007 Agilent Technologies, Inc. (1) 3,700,000 72,335 Agilent Technologies, Inc. 3.00% $ 15,074,000 14,735 convertible debentures 2021 (5) Agilent Technologies, Inc. 3.00% $ 10,370,000 10,137 convertible debentures 2021 (3),(5) Solectron Corp. 7.25% Aces 1,200,000 units 14,088 convertible preferred 2004 DDi Corp. 5.25% convertible $ 10,000,000 500 subordinated notes 2008 (2) BEVERAGES - 1.34% Anheuser-Busch Companies, Inc. 1,700,000 86,785 PepsiCo, Inc. 1,800,000 80,100 Coca-Cola Co. 1,500,000 69,615 ROAD & RAIL - 1.26% Union Pacific Corp. 1,500,000 87,030 Canadian Pacific Railway Ltd. (Canada) 3,300,000 74,580 Burlington Northern Santa Fe Corp. 2,110,000 60,008 ELECTRICAL EQUIPMENT - 0.93% Emerson Electric Co. 3,200,000 163,520 SOFTWARE - 0.91% Microsoft Corp. 6,240,000 159,806 HOUSEHOLD PRODUCTS - 0.79% Colgate-Palmolive Co. 2,409,400 139,625 THRIFTS & MORTGAGE FINANCE - 0.77% Fannie Mae 2,017,800 136,080 FOOD & STAPLES RETAILING - 0.68% Walgreen Co. 3,750,000 112,875 SYSCO Corp. 200,000 6,008 CONTAINERS & PACKAGING - 0.67% Temple-Inland Inc. (6) 2,750,000 118,003 GAS UTILITIES - 0.62% KeySpan Corp. 1,584,000 56,153 NiSource Inc. 2,800,000 53,200 AUTOMOBILES - 0.47% General Motors Corp. 2,300,000 82,800 REAL ESTATE - 0.45% Equity Residential 2,850,000 73,958 Plum Creek Timber Co., Inc. 205,500 5,333 AUTO COMPONENTS - 0.38% Magna International Inc., Class A (Canada) 1,000,000 67,270 HEALTH CARE PROVIDERS & SERVICES - 0.38% CIGNA Corp. 725,000 34,032 HCA Inc. 1,000,000 32,040 AIRLINES - 0.37% Continental Airlines, Inc., Class B (1) 2,675,000 40,045 Southwest Airlines Co. 1,500,000 25,800 OTHER - 0.44% Amgen Inc. (1) 500,000 33,220 Allied Waste Industries, Inc., Series C, 360,000 21,132 6.25% convertible preferred 2006 Sprint Corp. 7.125% convertible preferred 2004 1,525,000 units 12,124 Avon Products, Inc. 170,000 10,574 Miscellaneous - 1.58% Other equity securities in initial period of acquisition $ 278,576 TOTAL EQUITY SECURITIES (cost: $16,724,291,000) 16,686,585 Bonds & notes Principal amount (000) AIRLINES - 0.87% Northwest Airlines, Inc.: 8.875% 2006 $ 49,185 39,102 7.625% 2005 37,860 32,181 8.52% 2004 24,540 23,068 7.875% 2008 16,566 12,673 9.875% 2007 15,335 12,191 Continental Airlines, Inc. 8.00% 2005 28,600 25,740 Delta Air Lines, Inc., Series 1993-A2, 10.50% 2016 (7) 11,500 8,822 MEDIA - 0.54% United Pan-Europe Communications NV: (2) 10.875% 2009 119,615 26,315 11.50% 2010 30,575 6,727 Series B, 11.25% 2010 30,175 6,639 0%/13.75% 2010 (8) 33,950 4,838 Series B, 11.25% 2009 15,250 3,279 Charter Communications Holdings, LLC 8.25% 2007 50,000 38,750 Time Warner Inc. 10.15% 2012 6,000 8,224 DIVERSIFIED TELECOMMUNICATION SERVICES - 0.17% Comcast UK Cable Partners Ltd. 11.20% 2007 19,570 19,203 AT&T Corp. 6.50% 2006 (3) Euro 8,950 10,942 TOTAL BONDS & notes (cost: $381,100,000) 278,694 Short-term securities Principal Market amount value (000) (000) CORPORATE SHORT-TERM NOTES - 2.02% Triple-A One Funding Corp. 1.05%-1.35% $ 88,000 $ 87,973 due 7/1-7/25/2003 (3) Verizon Network Funding Corp. 0.98%-1.21% 71,000 70,912 due 7/14-8/26/2003 Pfizer Inc 0.91%-0.96% due 8/4-8/12/2003 (3) 61,000 60,941 E.I. DuPont de Nemours & Co. 1.00%-1.10% 52,000 51,950 due 7/18-8/14/2003 Edison Asset Securitization LLC 1.22% 35,000 34,974 due 7/22/2003 (3) Corporate Asset Funding Co. Inc. 1.22% 25,000 24,997 due 7/3/2003 (3) Merck & Co. Inc. 1.02%-1.21% due 7/10-7/11/2003 24,697 24,689 FEDERAL AGENCY DISCOUNT NOTES - 1.45% Fannie Mae 0.94%-1.20% due 7/7-9/19/2003 183,973 183,748 Freddie Mac 1.13%-1.155% due 9/3-9/15/2003 39,300 39,223 Federal Home Loan Bank 1.15%-1.19% 31,387 31,377 due 7/2-7/25/2003 TOTAL SHORT-TERM SECURITIES (cost: $610,766,000) 610,784 TOTAL INVESTMENT SECURITIES (cost: $17,716,157,000) 17,576,063 OTHER ASSETS LESS LIABILITIES 40,458 NET ASSETS $17,616,521
(1) Security did not produce income during the last 12 months. (2) Company not making scheduled interest payments; bankruptcy proceedings pending. (3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. (4) Valued under fair value procedures adopted by authority of the Board of Directors. (5) Coupon rate may change periodically. (6) The fund owns 5.09% of the outstanding voting securities of Temple-Inland Inc., and thus is considered an affiliate of this company under the Investment Company Act of 1940. (7) Pass-through security backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturity is shorter than the stated maturity. (8) Step bond; coupon rate will increase at a later date. ADR = American Depositary Receipts See Notes to Financial Statements EQUITY SECURITIES APPEARING IN THE PORTFOLIO SINCE DECEMBER 31, 2002: Allied Waste Industries HCA Amgen Inco Arch Coal Irish Life & Permanent ASML Holding Kraft Foods Avon Products Linear Technology Burlington Resources Lyondell Chemical ChevronTexaco Magna International CIGNA National Bank of Canada Comerica NiSource Deutsche Telekom Potash Corp. of Saskatchewan Emerson Electric St. George Bank Freeport-McMoRan Copper & Gold St. Paul Companies General Dynamics SYSCO EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE DECEMBER 31, 2002: Albertson's Jabil Circuit AMP Kellogg Applera Marsh & McLennan Companies Archer Daniels Midland Monsanto BANK ONE National City Cypress Semiconductor NTL Dell Computer PNC Financial Services Group Delta Air Lines Qwest Trends Trust EnCana Statoil ENI SpA Sumitomo Mitsui Financial Group FedEx Sun Microsystems Ford Motor Telefonos de Mexico FPL Group Unibail Genentech Williams Companies Gillette Wyeth Household International Xcel Energy FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES UNAUDITED at June 30, 2003 (dollars and shares in thousands, except per-share amounts) ASSETS: Investment securities at market: Unaffiliated issuers (cost: $17,595,792) $17,458,060 Affiliated issuers (cost: $120,365) 118,003 $17,576,063 Cash 69 Receivables for: Sales of investments 82,638 Sales of fund's shares 19,851 Dividends and interest 46,000 148,489 17,724,621 LIABILITIES: Payables for: Purchases of investments 75,611 Repurchases of fund's shares 21,954 Investment advisory services 4,021 Services provided by affiliates 5,459 Deferred Directors' compensation 956 Other fees and expenses 99 108,100 NET ASSETS AT JUNE 30, 2003 $17,616,521 NET ASSETS CONSIST OF: Capital paid in on shares of capital stock $19,192,809 Undistributed net investment income 33,521 Accumulated net realized loss (1,470,006) Net unrealized depreciation (139,803) NET ASSETS AT JUNE 30, 2003 $17,616,521 TOTAL AUTHORIZED CAPITAL STOCK - 1,000,000 SHARES, $1.00 PAR VALUE NET ASSETS SHARES NET ASSET OUTSTANDING VALUE PER SHARE (1) Class A $16,146,187 669,739 $24.11 Class B 681,161 28,303 24.07 Class C 310,102 12,894 24.05 Class F 240,746 9,989 24.10 Class 529-A 57,308 2,378 24.10 Class 529-B 12,020 499 24.10 Class 529-C 17,095 709 24.10 Class 529-E 2,811 117 24.09 Class 529-F 465 19 24.09 Class R-1 721 30 24.06 Class R-2 23,172 963 24.05 Class R-3 38,716 1,607 24.09 Class R-4 25,237 1,048 24.09 Class R-5 60,780 2,520 24.12 (1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $25.58 and $25.57, respectively. See Notes to Financial Statements STATEMENT OF OPERATIONS UNAUDITED for the six months ended June 30, 2003 (dollars in thousands) INVESTMENT INCOME: Income: Dividends (net of non-U.S. withholding tax of $6,991, also includes $1,615 from affiliates) $213,296 Interest 40,391 $253,687 Fees and expenses: Investment advisory services 22,372 Distribution services 22,853 Transfer agent services 10,199 Administrative services 722 Reports to shareholders 263 Registration statement and prospectus 219 Postage, stationery and supplies 1,304 Directors' compensation 138 Auditing and legal 58 Custodian 457 State and local taxes 1 Other 104 Total expenses before reimbursement 58,690 Reimbursement of expenses 54 58,636 Net investment income 195,051 NET REALIZED LOSS AND UNREALIZED APPRECIATION ON INVESTMENTS AND NON-U.S. CURRENCY: Net realized (loss) gain on: Investments (654,613) Non-U.S. currency transactions 510 (654,103) Net unrealized appreciation on: Investments 1,960,329 Non-U.S. currency translations 52 1,960,381 Net realized loss and unrealized appreciation on investments and non-U.S. currency 1,306,278 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,501,329 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Six months Year ended ended June 30, December 31, 2003* 2002 OPERATIONS: Net investment income $195,051 $306,427 Net realized loss on investments and non-U.S. currency transactions (654,103) (425,234) Net unrealized appreciation (depreciation) on investments and non-U.S. currency translations 1,960,381 (3,522,999) Net increase (decrease) in net assets resulting from operations 1,501,329 (3,641,806) DIVIDENDS PAID TO SHAREHOLDERS FROM NET INVESTMENT INCOME (142,354) (362,738) CAPITAL SHARE TRANSACTIONS (168,466) 90,287 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,190,509 (3,914,257) NET ASSETS: Beginning of period 16,426,012 20,340,269 End of period (including undistributed (distributions in excess of) net investment income: $33,521 and $(19,176), respectively) $17,616,521 $16,426,012 *Unaudited See Notes to Financial Statements NOTES TO FINANCIAL STATEMENTS unaudited 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 14 share classes consisting of four retail share classes, five CollegeAmerica savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund's share classes are described below: - --------------------------------------------------------------------------------------------------------- Share class Initial sales Contingent deferred sales charge charge upon redemption Conversion feature - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes A and 529-A Up to 5.75% None (except 1% for certain None redemptions within one year of purchase without an initial sales charge) - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes B and 529-B None Declines from 5% to zero for Classes B and 529-B redemptions within six years convert to classes A of purchase and 529-A respectively, after eight years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class C None 1% for redemptions within Class C converts to one year of purchase Class F after 10 years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-C None 1% for redemptions within None one year of purchase - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-E None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes F and 529-F None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes R-1, R-2, R-3, None None None R-4 and R-5 - ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund: SECURITY VALUATION - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities are valued at prices obtained from an independent pricing service, when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices or at prices for securities of comparable maturity, quality and type. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by authority of the fund's Board of Directors. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security. CLASS ALLOCATIONS - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid to shareholders are recorded on the ex-dividend date. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect at the end of the reporting period. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers 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. 3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. DISTRIBUTIONS - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of securities within 30 days of purchase; scheduled interest payments not received; expenses deferred for tax purposes; cost of investments sold; and net capital losses. 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 June 30, 2003, the cost of investment securities for federal income tax purposes was $17,731,119,000. As of June 30, 2003, the components of distributable earnings on a tax basis were as follows: (dollars in thousands) Undistributed net investment income and currency gains $ 45,549 Accumulated short-term capital losses (850,190) Accumulated long-term capital losses (605,365) Gross unrealized appreciation on investment securities 1,725,754 Gross unrealized depreciation on investment securities (1,880,810) Accumulated short-term capital losses above include capital loss carryforwards of $95,779,000 and $577,387,000 expiring in 2009 and 2010, respectively. The capital loss carryforwards will be used to offset any capital gains realized by the fund in the current year or in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain. The tax character of distributions paid to shareholders was as follows (dollars in thousands): DISTRIBUTIONS FROM ORDINARY INCOME DISTRIBUTIONS TOTAL NET INVESTMENT INCOME SHORT-TERM FROM LONG-TERM DISTRIBUTIONS SHARE CLASS(1) AND CURRENCY GAINS CAPITAL GAINS CAPITAL GAINS PAID SIX MONTHS ENDED JUNE 30, 2003 Class A $ 134,380 - - $ 134,380 Class B 3,212 - - 3,212 Class C 1,364 - - 1,364 Class F 1,865 - - 1,865 Class 529-A 427 - - 427 Class 529-B 44 - - 44 Class 529-C 63 - - 63 Class 529-E 15 - - 15 Class 529-F 2 - - 2 Class R-1 2 - - 2 Class R-2 84 - - 84 Class R-3 190 - - 190 Class R-4 137 - - 137 Class R-5 569 - - 569 Total $ 142,354 - - $ 142,354 YEAR ENDED DECEMBER 31, 2002 Class A $ 345,886 - - $ 345,886 Class B 8,215 - - 8,215 Class C 3,168 - - 3,168 Class F 3,838 - - 3,838 Class 529-A 482 - - 482 Class 529-B 64 - - 64 Class 529-C 90 - - 90 Class 529-E 15 - - 15 Class 529-F 2 - - 2 Class R-1 1 - - 1 Class R-2 49 - - 49 Class R-3 78 - - 78 Class R-4 43 - - 43 Class R-5 807 - - 807 Total $ 362,738 - - $ 362,738
(1) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered beginning May 15, 2002. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES Capital Research and Management Company ("CRMC"), the fund's investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund's transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares. INVESTMENT ADVISORY SERVICES -The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of daily net assets and decreasing to 0.246% on such assets in excess of $27 billion. For the six months ended June 30, 2003, the investment advisory services fee was equivalent to an annualized rate of 0.277% of average daily net assets. CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below: DISTRIBUTION SERVICES - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the Board of Directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares. The plans provide for annual expenses, based on a percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the Board of Directors has approved expense amounts lower than plan limits. ----------------------------------------------------------------------- SHARE CLASS CURRENTLY APPROVED LIMITS PLAN LIMITS ----------------------------------------------------------------------- ----------------------------------------------------------------------- Class A 0.25% 0.25% ----------------------------------------------------------------------- ----------------------------------------------------------------------- Class 529-A 0.25 0.50 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Classes B and 529-B 1.00 1.00 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Classes C, 529-C and R-1 1.00 1.00 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Class R-2 0.75 1.00 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Classes 529-E and R-3 0.50 0.75 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Classes F, 529-F and R-4 0.25 0.50 ----------------------------------------------------------------------- All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD for providing certain shareholder services. Expenses in excess of these amounts, up to approved limits, may be used to compensate dealers and wholesalers for shares sold. For classes A and 529-A, the Board of Directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. Each class reimburses AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of June 30, 2003, there were no unreimbursed expenses subject to reimbursement for classes A or 529-A. TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with AFS for classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below. ADMINISTRATIVE SERVICES - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all classes of shares other than classes A and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. During the start-up period for classes R-1, R-2 and R-3, CRMC has voluntarily agreed to pay a portion of these fees. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees in the accompanying financial statements, the Commonwealth of Virginia is not considered a related party. Administrative services fees are presented gross of any payments made by CRMC. Expenses under the agreements described above for the six months ended June 30, 2003, were as follows (dollars in thousands): - --------------------------------------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES ------------------------------------------------------------- COMMONWEALTH OF DISTRIBUTION TRANSFER AGENT CRMC TRANSFER AGENT VIRGINIA SHARE SERVICES SERVICES ADMINISTRATIVE SERVICES ADMINISTRATIVE CLASS SERVICES SERVICES - --------------------------------------------------------------------------------------------------------------- Class A $17,861 $9,716 Not applicable Not applicable Not applicable - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class B 3,089 483 Not applicable Not applicable Not applicable - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class C 1,364 Included $205 $ 76 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class F 263 Included 158 20 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class 529-A 17 Included 35 5 $23 in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class 529-B 48 Included 7 3 5 in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class 529-C 68 Included 10 4 7 in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class 529-E 5 Included 2 -* 1 in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class 529-F -* Included -* -* -* in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class R-1 2 Included -* 1 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class R-2 55 Included 11 65 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class R-3 63 Included 19 24 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class R-4 18 Included 11 2 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 27 1 Not applicable in administrative services - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Total $22,853 $10,199 $485 $201 $36 - ----------------=============================================================================================== * Amount less than one thousand
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors' fees in the accompanying financial statements include the current fees (either paid in cash or deferred) and the net increase or decrease in the value of the deferred amounts. AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or Directors received any compensation directly from the fund. 5. CAPITAL SHARE TRANSACTIONS Capital share transactions in the fund were as follows (dollars and shares in thousands): REINVESTMENTS OF DIVIDENDS NET (DECREASE) SALES(2) AND DISTRIBUTIONS REPURCHASES(2) INCREASE SHARE CLASS (1) AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES SIX MONTHS ENDED JUNE 30, 2003 Class A $ 827,114 37,105 $ 126,632 5,733 $ (1,255,306) (57,057) $ (301,560) (14,219) Class B 53,082 2,389 3,102 141 (45,294) (2,070) 10,890 460 Class C 43,943 1,973 1,311 59 (24,234) (1,115) 21,020 917 Class F 48,999 2,194 1,630 74 (30,868) (1,399) 19,761 869 Class 529-A 14,182 637 427 19 (827) (37) 13,782 619 Class 529-B 3,168 142 43 2 (143) (6) 3,068 138 Class 529-C 4,876 219 63 3 (310) (14) 4,629 208 Class 529-E 971 43 15 1 (10) -* 976 44 Class 529-F 226 10 3 -* (25) (1) 204 9 Class R-1 555 25 2 -* (62) (3) 495 22 Class R-2 18,511 836 84 4 (4,314) (195) 14,281 645 Class R-3 33,290 1,506 190 9 (8,788) (403) 24,692 1,112 Class R-4 17,996 798 137 6 (1,656) (75) 16,477 729 Class R-5 3,740 164 456 21 (1,377) (61) 2,819 124 Total net increase (decrease) $ 1,070,653 48,041 $ 134,095 6,072 $ (1,373,214) (62,436) $ (168,466) (8,323) YEAR ENDED DECEMBER 31, 2002 Class A $ 2,510,082 99,589 $ 325,159 13,445 $ (3,217,263) (133,389) $ (382,022) (20,355) Class B 196,132 7,724 7,923 335 (96,136) (4,053) 107,919 4,006 Class C 161,418 6,407 3,050 130 (46,109) (1,969) 118,359 4,568 Class F 135,377 5,446 3,355 141 (48,639) (2,052) 90,093 3,535 Class 529-A 44,610 1,774 482 21 (818) (36) 44,274 1,759 Class 529-B 9,031 362 64 3 (81) (4) 9,014 361 Class 529-C 12,734 508 90 4 (247) (11) 12,577 501 Class 529-E 1,753 72 15 1 (5) -* 1,763 73 Class 529-F 227 10 2 -* -* -* 229 10 Class R-1 179 8 1 -* (2) -* 178 8 Class R-2 8,884 402 49 2 (1,911) (86) 7,022 318 Class R-3 14,900 674 78 3 (4,035) (182) 10,943 495 Class R-4 7,251 326 43 2 (188) (9) 7,106 319 Class R-5 69,699 2,695 607 27 (7,474) (326) 62,832 2,396 Total net increase (decrease) $ 3,172,277 125,997 $ 340,918 14,114 $ (3,422,908) (142,117) $ 90,287 (2,006) * Amount less than one thousand. (1) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered beginning May 15, 2002. (2) Includes exchanges between share classes of the fund.
6. RESTRICTED SECURITIES The fund has invested in certain securities for which resale may be limited to qualified buyers or which are otherwise restricted. These securities are identified in the investment portfolio. As of June 30, 2003, the total value of restricted securities was $238,168,000, which represents 1.35% of the net assets of the fund. 7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $2,771,544,000 and $2,935,807,000, respectively, during the six months ended June 30, 2003. The fund receives a reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the six months ended June 30, 2003, the custodian fee of $457,000 includes $6,000 that was offset by this reduction, rather than paid in cash. FINANCIAL HIGHLIGHTS (1) INCOME (LOSS) FROM INVESTMENT OPERATIONS (3) NET NET ASSET GAINS(LOSSES) VALUE, NET ON SECURITIES TOTAL FROM BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT OF PERIOD INCOME AND UNREALIZED) OPERATIONS CLASS A: Six months ended 6/30/2003 (2) $22.23 $.27 $1.81 $2.08 Year ended 12/31/2002 27.45 .42 (5.14) (4.72) Year ended 12/31/2001 31.16 .40 (3.34) (2.94) Year ended 12/31/2000 32.59 .42 .90 1.32 Year ended 12/31/1999 28.92 .41 6.45 6.86 Year ended 12/31/1998 27.40 .42 4.09 4.51 CLASS B: Six months ended 6/30/2003 (2) 22.19 .19 1.80 1.99 Year ended 12/31/2002 27.40 .23 (5.14) (4.91) Year ended 12/31/2001 31.12 .18 (3.34) (3.16) Period from 3/15/2000 to 12/31/2000 31.93 .15 1.02 1.17 CLASS C: Six months ended 6/30/2003 (2) 22.17 .18 1.81 1.99 Year ended 12/31/2002 27.39 .21 (5.14) (4.93) Period from 3/15/2001 to 12/31/2001 28.52 .11 (1.13) (1.02) CLASS F: Six months ended 6/30/2003 (2) 22.22 .27 1.81 2.08 Year ended 12/31/2002 27.44 .40 (5.14) (4.74) Period from 3/15/2001 to 12/31/2001 28.56 .28 (1.12) (.84) CLASS 529-A: Six months ended 6/30/2003 (2) 22.22 .28 1.80 2.08 Period from 2/15/2002 to 12/31/2002 26.71 .33 (4.34) (4.01) CLASS 529-B: Six months ended 6/30/2003 (2) 22.22 .17 1.81 1.98 Period from 2/19/2002 to 12/31/2002 26.27 .16 (3.91) (3.75) CLASS 529-C: Six months ended 6/30/2003 (2) 22.22 .17 1.81 1.98 Period from 2/15/2002 to 12/31/2002 26.71 .16 (4.34) (4.18) CLASS 529-E: Six months ended 6/30/2003 (2) 22.21 .23 1.80 2.03 Period from 3/7/2002 to 12/31/2002 28.13 .26 (5.85) (5.59) CLASS 529-F: Six months ended 6/30/2003 (2) 22.22 .26 1.80 2.06 Period from 9/23/2002 to 12/31/2002 21.22 .12 1.08 1.20 CLASS R-1: Six months ended 6/30/2003 (2) 22.19 .19 1.80 1.99 Period from 6/19/2002 to 12/31/2002 26.04 .13 (3.75) (3.62) CLASS R-2: Six months ended 6/30/2003 (2) 22.18 .19 1.80 1.99 Period from 5/21/2002 to 12/31/2002 27.39 .14 (5.13) (4.99) CLASS R-3: Six months ended 6/30/2003 (2) 22.21 .24 1.80 2.04 Period from 6/4/2002 to 12/31/2002 26.66 .18 (4.38) (4.20) CLASS R-4: Six months ended 6/30/2003 (2) 22.21 .28 1.80 2.08 Period from 7/25/2002 to 12/31/2002 21.75 .22 .55 .77 CLASS R-5: Six months ended 6/30/2003 (2) 22.23 .30 1.82 2.12 Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06)
DIVIDENDS AND DISTRIBUTIONS DIVIDENDS DISTRIBUTIONS TOTAL (FROM NET (FROM DIVIDENDS INVESTMENT CAPITAL AND INCOME) GAINS) DISTRIBUTIONS CLASS A: Six months ended 6/30/2003 (2) $(.20) $- $(.20) Year ended 12/31/2002 (.50) - (.50) Year ended 12/31/2001 (.40) (.37) (.77) Year ended 12/31/2000 (.40) (2.35) (2.75) Year ended 12/31/1999 (.40) (2.79) (3.19) Year ended 12/31/1998 (.40) (2.59) (2.99) CLASS B: Six months ended 6/30/2003 (2) (.11) - (.11) Year ended 12/31/2002 (.30) - (.30) Year ended 12/31/2001 (.19) (.37) (.56) Period from 3/15/2000 to 12/31/2000 (.13) (1.85) (1.98) CLASS C: Six months ended 6/30/2003 (2) (.11) - (.11) Year ended 12/31/2002 (.29) - (.29) Period from 3/15/2001 to 12/31/2001 (.11) - (.11) CLASS F: Six months ended 6/30/2003 (2) (.20) - (.20) Year ended 12/31/2002 (.48) - (.48) Period from 3/15/2001 to 12/31/2001 (.28) - (.28) CLASS 529-A: Six months ended 6/30/2003 (2) (.20) - (.20) Period from 2/15/2002 to 12/31/2002 (.48) - (.48) CLASS 529-B: Six months ended 6/30/2003 (2) (.10) - (.10) Period from 2/19/2002 to 12/31/2002 (.30) - (.30) CLASS 529-C: Six months ended 6/30/2003 (2) (.10) - (.10) Period from 2/15/2002 to 12/31/2002 (.31) - (.31) CLASS 529-E: Six months ended 6/30/2003 (2) (.15) - (.15) Period from 3/7/2002 to 12/31/2002 (.33) - (.33) CLASS 529-F: Six months ended 6/30/2003 (2) (.19) - (.19) Period from 9/23/2002 to 12/31/2002 (.20) - (.20) CLASS R-1: Six months ended 6/30/2003 (2) (.12) - (.12) Period from 6/19/2002 to 12/31/2002 (.23) - (.23) CLASS R-2: Six months ended 6/30/2003 (2) (.12) - (.12) Period from 5/21/2002 to 12/31/2002 (.22) - (.22) CLASS R-3: Six months ended 6/30/2003 (2) (.16) - (.16) Period from 6/4/2002 to 12/31/2002 (.25) - (.25) CLASS R-4: Six months ended 6/30/2003 (2) (.20) - (.20) Period from 7/25/2002 to 12/31/2002 (.31) - (.31) CLASS R-5: Six months ended 6/30/2003 (2) (.23) - (.23) Period from 5/15/2002 to 12/31/2002 (.33) - (.33) RATIO OF RATIO OF NET ASSET NET ASSETS, EXPENSES NET INCOME VALUE, END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE OF PERIOD RETURN(4) (IN MILLIONS) NET ASSETS NET ASSETS CLASS A: Six months ended 6/30/2003 (2) $24.11 9.44% $16,146 .68% (6) 2.46% (6) Year ended 12/31/2002 22.23 (17.34) 15,201 .67 1.68 Year ended 12/31/2001 27.45 (9.55) 19,331 .65 1.41 Year ended 12/31/2000 31.16 4.27 19,872 .64 1.28 Year ended 12/31/1999 32.59 24.58 16,603 .63 1.33 Year ended 12/31/1998 28.92 16.72 12,713 .63 1.47 CLASS B: Six months ended 6/30/2003 (2) 24.07 9.04 681 1.46 (6) 1.67 (6) Year ended 12/31/2002 22.19 (17.97) 618 1.45 .91 Year ended 12/31/2001 27.40 (10.24) 653 1.42 .64 Period from 3/15/2000 to 12/31/2000 31.12 3.73 299 1.39 (6) .53 (6) CLASS C: Six months ended 6/30/2003 (2) 24.05 9.03 310 1.51 (6) 1.63 (6) Year ended 12/31/2002 22.17 (18.06) 266 1.50 .86 Period from 3/15/2001 to 12/31/2001 27.39 (3.60) 203 1.55 (6) .49 (6) CLASS F: Six months ended 6/30/2003 (2) 24.10 9.43 241 .72 (6) 2.43 (6) Year ended 12/31/2002 22.22 (17.38) 203 .72 1.65 Period from 3/15/2001 to 12/31/2001 27.44 (2.97) 153 .74 (6) 1.31 (6) CLASS 529-A: Six months ended 6/30/2003 (2) 24.10 9.46 57 .65 (6) 2.51 (6) Period from 2/15/2002 to 12/31/2002 22.22 (15.16) 39 .76 (6) 1.64 (6) CLASS 529-B: Six months ended 6/30/2003 (2) 24.10 8.96 12 1.63 (6) 1.53 (6) Period from 2/19/2002 to 12/31/2002 22.22 (14.35) 8 1.62 (6) .77 (6) CLASS 529-C: Six months ended 6/30/2003 (2) 24.10 8.96 17 1.61 (6) 1.55 (6) Period from 2/15/2002 to 12/31/2002 22.22 (15.74) 11 1.60 (6) .79 (6) CLASS 529-E: Six months ended 6/30/2003 (2) 24.09 9.20 3 1.11 (6) 2.06 (6) Period from 3/7/2002 to 12/31/2002 22.21 (19.92) 2 1.07 (6) 1.35 (6) CLASS 529-F: Six months ended 6/30/2003 (2) 24.09 9.34 - (5) .83 (6) 2.34 (6) Period from 9/23/2002 to 12/31/2002 22.22 5.65 - (5) .22 .51 CLASS R-1: Six months ended 6/30/2003 (2) 24.06 8.99 1 1.50 (6,7) 1.66 (6) Period from 6/19/2002 to 12/31/2002 22.19 (13.91) - (5) 1.50 (6,7) 1.11 (6) CLASS R-2: Six months ended 6/30/2003 (2) 24.05 9.04 23 1.46 (6,7) 1.74 (6) Period from 5/21/2002 to 12/31/2002 22.18 (18.22) 7 1.46 (6,7) 1.05 (6) CLASS R-3: Six months ended 6/30/2003 (2) 24.09 9.26 39 1.08 (6,7) 2.14 (6) Period from 6/4/2002 to 12/31/2002 22.21 (15.75) 11 1.08 (6,7) 1.41 (6) CLASS R-4: Six months ended 6/30/2003 (2) 24.09 9.45 25 .72 (6) 2.52 (6) Period from 7/25/2002 to 12/31/2002 22.21 3.51 7 .32 (7) .96 CLASS R-5: Six months ended 6/30/2003 (2) 24.12 9.63 61 .40 (6) 2.75 (6) Period from 5/15/2002 to 12/31/2002 22.23 (18.34) 53 .40 (6) 1.91 (6)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31 JUNE 30, 2003 (2) 2002 2001 2000 1999 1998 Portfolio turnover rate for all classes of shares 18% 38% 29% 43% 46% 53%
(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. (2) Unaudited. (3) Years ended 1999 and 1998 are based on shares outstanding on the last day of the year; all other periods are based on average shares outstanding. (4) Total returns exclude all sales charges, including contingent deferred sales charges. (5) Amount less than 1 million. (6) Annualized. (7) During the start-up period for this class, CRMC voluntarily agreed to pay a portion of the fees relating to transfer agent services. Had CRMC not paid such fees, expense ratios would have been 2.05%, 2.08% and 1.14% for classes R-1, R-2, and R-3, respectively, during the six months ended June 30, 2003, and 4.20%, 1.64%, 1.13% and .34% for classes R-1, R-2, R-3 and R-4, respectively, during the period ended December 31, 2002. OTHER SHARE CLASS RESULTS unaudited CLASS B, CLASS C, CLASS F AND CLASS 529 Returns for periods ended June 30, 2003: 1 YEAR LIFE OF CLASS CLASS B SHARES Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold within six years of purchase -8.89% -6.19% (1) Not reflecting CDSC -4.16% -5.41% (1) CLASS C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase -5.18% -6.31% (2) Not reflecting CDSC -4.24% -6.31% (2) CLASS F SHARES (3) Not reflecting annual asset-based fee charged by sponsoring firm -3.48% -5.55% (2) CLASS 529-A SHARES Reflecting 5.75% maximum sales charge -9.04% -9.27% (4) Not reflecting maximum sales charge -3.49% -5.26% (4) CLASS 529-B SHARES Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase -9.03% -7.73% (5) Not reflecting CDSC -4.31% -4.96% (5) CLASS 529-C SHARES Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase -5.24% -6.05% (4) Not reflecting CDSC -4.30% -6.05% (4) CLASS 529-E SHARES (3) -3.86% -9.70% (6) CLASS 529-F SHARES (3) Not reflecting annual asset-based fee charged by sponsoring firm -- +15.51% (7) (1) Average annual total return from March 15, 2000, when Class B shares were first sold (2) Average annual total return from March 15, 2001, when Class C and Class F shares were first sold. (3) These shares are sold without any initial or contingent deferred sales charge. (4) Average annual total return from February 15, 2002, when Class 529-A and Class 529-C shares were first sold. (5) Average annual total return from February 19, 2002, when Class 529-B shares were first sold. (6) Average annual total return from March 7, 2002, when Class 529-E shares were first sold. (7) Cumulative total return from September 23, 2002, when Class 529-F shares were first sold. OFFICE OF THE FUND One Market Steuart Tower, Suite 1800 Mailing address: P.O. Box 7650 San Francisco, CA 94120-7650 INVESTMENT ADVISER Capital Research and Management Company 333 South Hope Street Los Angeles, CA 90071-1406 135 South State College Boulevard Brea, CA 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 25065 Santa Ana, CA 92799-5065 P.O. Box 659522 San Antonio, TX 78265-9522 P.O. Box 6007 Indianapolis, IN 46206-6007 P.O. Box 2280 Norfolk, VA 23501-2280 CUSTODIAN OF ASSETS State Street Bank and Trust Company 225 Franklin Street Boston, MA 02105-1713 COUNSEL Paul, Hastings, Janofsky & Walker LLP 515 South Flower Street Los Angeles, CA 90071-2371 INDEPENDENT AUDITORS Deloitte & Touche LLP Two California Plaza 350 South Grand Avenue Los Angeles, CA 90071-3462 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, CA 90071-1406 There are several ways to invest in Fundamental Investors. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts of $25,000 or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annualized expenses for Class B shares were 0.78 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge ("CDSC") of up to 5% that declines over time. Class C shares were subject to annualized expenses 0.83 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annualized expenses (by 0.04 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class. FOR MORE INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, OR FOR A PROSPECTUS FOR ANY OF THE AMERICAN FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180 OR VISIT US AT AMERICANFUNDS.COM. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. This report is for the information of shareholders of Fundamental Investors, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2003, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter. [logo] American Funds(R) The right choice for the long term(R) WHAT MAKES AMERICAN FUNDS DIFFERENT? For more than 70 years, we have followed a consistent philosophy that we firmly believe is in our investors' best interests. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 20 million shareholder accounts. OUR UNIQUE COMBINATION OF STRENGTHS INCLUDES THESE FIVE FACTORS: o A LONG-TERM, VALUE-ORIENTED APPROACH Rather than follow fads, we pursue a consistent strategy, focusing on each investment's long-term potential. o AN UNPARALLELED GLOBAL RESEARCH EFFORT American Funds draws on one of the industry's most globally integrated research networks. o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM Every American Fund is divided among a number of portfolio counselors. Each takes responsibility for a portion independently, within each fund's objectives; in most cases, research analysts manage a portion as well. Over time this method has contributed to a consistency of results and continuity of management. o EXPERIENCED INVESTMENT PROFESSIONALS The recent market decline was not the first for most of the portfolio counselors who serve the American Funds. Nearly 70% of them were in the investment business before the sharp market decline of 1987. o A COMMITMENT TO LOW OPERATING EXPENSES American Funds' operating expenses are among the lowest in the mutual fund industry. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. 29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS GROWTH FUNDS AMCAP Fund(R) EuroPacific Growth Fund(R) The Growth Fund of America(R) The New Economy Fund(R) New Perspective Fund(R) New World FundSM SMALLCAP World Fund(R) GROWTH-AND-INCOME FUNDS American Mutual Fund(R) Capital World Growth and Income FundSM FUNDAMENTAL INVESTORSSM The Investment Company of America(R) Washington Mutual Investors FundSM EQUITY-INCOME FUNDS Capital Income Builder(R) The Income Fund of America(R) BALANCED FUND American Balanced Fund(R) BOND FUNDS American High-Income TrustSM The Bond Fund of AmericaSM Capital World Bond Fund(R) Intermediate Bond Fund of America(R) U.S. Government Securities FundSM TAX-EXEMPT BOND FUNDS American High-Income Municipal Bond Fund(R) Limited Term Tax-Exempt Bond Fund of AmericaSM The Tax-Exempt Bond Fund of America(R) STATE-SPECIFIC TAX-EXEMPT FUNDS The Tax-Exempt Fund of California(R) The Tax-Exempt Fund of Maryland(R) The Tax-Exempt Fund of Virginia(R) MONEY MARKET FUNDS The Cash Management Trust of America(R) The Tax-Exempt Money Fund of AmericaSM The U.S. Treasury Money Fund of AmericaSM THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. FI-013-0803 Litho in USA KBD/CG/8083 Printed on recycled paper ITEM 2 - Code of Ethics Not applicable for filing of Semiannual Reports to Shareholders. ITEM 3 - Audit Committee Financial Expert Not applicable for filing of Semiannual Reports to Shareholders. ITEM 4 - Principal Accountant Fees and Services Form N-CSR disclosure requirement not yet effective with respect to Registrant. ITEM 5 - Audit Committee of Listed Registrants Not applicable. ITEM 6 - Reserved ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 8 - Reserved ITEM 9 - Controls and Procedures (a) The officers providing the certifications in this report in accordance with rule 30a-2 under the Investment Company Act of 1940 have concluded, based on their evaluation of the Registrant's disclosure controls and procedures (as such term is defined in such rule), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. (b) There were no changes in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant s last fiscal half-year (the Registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 10 - Exhibits (a) Code of Ethics - not applicable for filing of Semiannual Reports to Shareholders. (b) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FUNDAMENTAL INVESTORS, INC. By /s/ James F. Rothenberg James F. Rothenberg, Chairman and PEO Date: September 5, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James F. Rothenberg, James F. Rothenberg, Chairman and PEO Date: September 5, 2003 By /s/ Sheryl F. Johnson Sheryl F. Johnson, Treasurer Date: September 5, 2003 EX-99.CERT 3 fi302.txt Fundamental Investors, Inc. One Mrket, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION I, James F. Rothenberg, certify that: 1. I have reviewed this report on Form N-CSR of Fundamental Investors, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 5, 2003 /s/ James F. Rothenberg James F. Rothenberg, Chairman and Principal Executive Officer Fundamental Investors, Inc. One Mrket, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION I, Sheryl F. Johnson, certify that: 1. I have reviewed this report on Form N-CSR of Fundamental Investors, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 5, 2003 /s/ Sheryl F. Johnson Sheryl F. Johnson, Treasurer Fundamental Investors, Inc. EX-99.906 4 fi906.txt Fundamental Investors, Inc. One Mrket, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 JAMES F. ROTHENBERG, Chairman and PEO, and SHERYL F. JOHNSON, Treasurer of Fundamental Investors, Inc. (the "Registrant"), each certify to the best of his or her knowledge that: 1) The Registrant's periodic report on Form N-CSR for the period ended June 30, 2003 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Chief Executive Officer Chief Financial Officer FUNDAMENTAL INVESTORS, INC. FUNDAMENTAL INVESTORS, INC. /s/ James F. Rothenberg /s/ Sheryl F. Johnson James F. Rothenberg, Chairman Sheryl F. Johnson, Treasurer Date: September 5, 2003 Date: September 5, 2003 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to FUNDAMENTAL INVESTORS, INC. and will be retained by FUNDAMENTAL INVESTORS, INC. and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----