-----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, LZea7jl6A3hrbv2tQBjHW5PATDtYZ8z/OYaR2m0d3vhjQAHGkbYEEwy3X2oexTGA WjHpoYVTOWZQFD7kxT+vDg== 0000039473-05-000003.txt : 20050228 0000039473-05-000003.hdr.sgml : 20050228 20050228152108 ACCESSION NUMBER: 0000039473-05-000003 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20050228 DATE AS OF CHANGE: 20050228 EFFECTIVENESS DATE: 20050301 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: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-10760 FILM NUMBER: 05645257 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 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: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00032 FILM NUMBER: 05645258 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 fi485bpos.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. 91 and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 34 (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: Michael Glazer Paul, Hastings, Janofsky & Walker, LLP 515 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 1, 2005 pursuant to paragraph (b) of Rule 485. [logo - American Funds/(R)/] The right choice for the long term/(R)/ Fundamental Investors/SM/ PROSPECTUS March 1, 2005
TABLE OF CONTENTS 1 Risk/Return summary 5 Fees and expenses of the fund 7 Investment objective, strategies and risks 11 Management and organization 14 Shareholder information 15 Choosing a share class 17 Purchase and exchange of shares 21 Sales charges 25 Sales charge reductions and waivers 28 Rollovers from retirement plans to IRAs 29 Plans of distribution 30 Other compensation to dealers 31 How to sell shares 33 Distributions and taxes 34 Financial highlights
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. [This page left intentionally blank.] 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. Your investment in the fund is subject to risks, including the possibility that the fund's income and the value of its portfolio holdings may fluctuate in response to events specific to the companies in which the fund invests, as well as economic, political or social events in the United States or abroad. Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or global economic, political or social instability, securities issued by entities based outside the United States 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 bar chart below shows how the fund's investment results have varied from year to year, and the Investment Results table on page 4 shows how the fund's average annual total returns for various periods compare with different broad measures of market performance. This information provides some indication of the risks of investing in the fund. All fund results reflect the reinvestment of dividends and capital gain distributions, if any. Past results (before and after taxes) are not predictive of future results. CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES (Results do not include a sales charge; if a sales charge were included, results would be lower.) [begin bar chart] 1995 34.21% 1996 19.99 1997 26.68 1998 16.72 1999 24.58 2000 4.27 2001 -9.55 2002 -17.34 2003 31.96 2004 13.91 [end bar chart] Highest/Lowest quarterly results during this time period were:
HIGHEST 16.28% (quarter ended December 31, 2003) LOWEST -17.59% (quarter ended September 30, 2002)
2 Fundamental Investors / Prospectus Unlike the bar chart above, the Investment Results table below reflects, as required by Securities and Exchange Commission rules, the fund's investment results with the following maximum initial or contingent deferred sales charges imposed: - Class A share results reflect the maximum initial sales charge of 5.75%. This charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more. - Class B share results reflect the applicable contingent deferred sales charge. For example, results for the one-year period shown reflect a contingent deferred sales charge of 5%. These charges begin to decline one year after purchase and are eliminated after six years. - Class C share results for the one-year period shown reflect a contingent deferred sales charge of 1%, which only applies if shares are sold within one year of purchase. - Class 529-E and Class F shares are sold without any initial or contingent deferred sales charge. Results would be higher if calculated without sales charges. The references above to Class A, B, C or F sales charges also refer to the corresponding Class 529-A, 529-B, 529-C or 529-F sales charges. The Investment Results table shows the fund's results on both a pretax and after-tax basis, as required by Securities and Exchange Commission rules. After-tax returns are shown only for Class A shares; after-tax returns for other share classes will vary. Total returns shown "after taxes on distributions" reflect the effect of taxes on distributions (for example, dividends or capital gain distributions) by the fund. Total returns shown "after taxes on distributions and sale of fund shares" assume that you sold your fund shares at the end of the particular time period and, as a result, reflect the effect of both taxes on distributions by the fund and taxes on any gain or loss realized upon the sale of the shares. After-tax returns are calculated using the highest individual federal income tax rates in effect during each year of the periods shown and do not reflect the impact of state and local taxes. YOUR ACTUAL AFTER-TAX RETURNS DEPEND ON YOUR INDIVIDUAL TAX SITUATION AND LIKELY WILL DIFFER FROM THE RESULTS SHOWN BELOW. IN ADDITION, AFTER-TAX RETURNS MAY NOT BE RELEVANT IF YOU HOLD YOUR FUND SHARES THROUGH A TAX-DEFERRED ARRANGEMENT, SUCH AS A 401(K) PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR COLLEGEAMERICA/(R)/ ACCOUNT. Unlike the Investment Results table on page 4, the Additional Investment Results table on page 9 reflects the fund's results calculated without sales charges. 3 Fundamental Investors / Prospectus
INVESTMENT RESULTS (WITH MAXIMUM SALES CHARGES) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- CLASS A -- FROM 8/1/78 Before taxes 7.36% 2.01% 12.60% 13.90% After taxes on distributions 7.06 1.18 10.77 N/A After taxes on distributions and 5.13 1.34 10.23 N/A sale of fund shares - -------------------------------------------------------------------------------
1 YEAR LIFETIME/1/ - --------------------------------------------------------- CLASS B -- FIRST SOLD 3/15/00 Before taxes 8.03% 2.21% - --------------------------------------------------------- CLASS C -- FIRST SOLD 3/15/01 Before taxes 11.96 4.18 - --------------------------------------------------------- CLASS F -- FIRST SOLD 3/15/01 Before taxes 13.84 5.01 - --------------------------------------------------------- CLASS 529-A -- FIRST SOLD 2/15/02 Before taxes 7.23 6.57 CLASS 529-B -- FIRST SOLD 2/19/02 Before taxes 7.83 7.30 CLASS 529-C -- FIRST SOLD 2/15/02 Before taxes 11.84 7.87 CLASS 529-E -- FIRST SOLD 3/7/02 Before taxes 13.40 6.47 CLASS 529-F -- FIRST SOLD 9/23/02 Before taxes 13.73 22.40
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES (BEFORE TAXES) S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value Funds 12.00 1.42 11.29 13.06 Index/3/ Lipper Growth and Income Funds 11.72 1.65 10.72 12.57 Index/4/ Class A 30-day yield at December 31, 2004: 1.44%/5/ (For current yield information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 Reflects a fee waiver (1.42% without the waiver) as described in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." 4 Fundamental Investors / Prospectus Fees and expenses of the fund These tables describe the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A/1/ CLASS B/1/ CLASS C/1/ CLASS 529-E/2/ CLASS F/1,3/ - -------------------------------------------------------------------------------------------- Maximum initial sales charge on purchases 5.75%/4/ none none none none (as a percentage of offering price) - -------------------------------------------------------------------------------------------- Maximum sales charge none none none none none on reinvested dividends - -------------------------------------------------------------------------------------------- Maximum contingent none/5/ 5.00%/6/ 1.00%/7/ none none deferred sales charge - -------------------------------------------------------------------------------------------- Redemption or none none none none none exchange fees
1 Includes a version of this class offered through CollegeAmerica, a 529 college savings plan sponsored by the Virginia College Savings Plan,/SM/ an agency of the Commonwealth of Virginia. CollegeAmerica accounts are subject to a $10 account set-up fee and an annual $10 account maintenance fee, which are not reflected in this table. 2 Class 529-E shares are available only through CollegeAmerica to employer-sponsored plans. CollegeAmerica accounts are subject to a $10 account set-up fee and an annual $10 account maintenance fee, which are not reflected in this table. 3 Class F and 529-F shares are generally available only to fee-based programs of investment dealers that have special agreements with the fund's distributor and to certain registered investment advisers. 4 The initial sales charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more. 5 A contingent deferred sales charge of 1.00% applies on certain redemptions made within one year following purchases of $1 million or more made without an initial sales charge. 6 The contingent deferred sales charge is reduced one year after purchase and eliminated after six years. 7 The contingent deferred sales charge is eliminated one year after purchase.
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS) CLASS A CLASS B CLASS C CLASS F - ------------------------------------------------------------------------------- Management fees 0.27% 0.27% 0.27% 0.27% - ------------------------------------------------------------------------------- Distribution and/or service 0.24 1.00 1.00 0.25 (12b-1) fees/8/ - ------------------------------------------------------------------------------- Other expenses/9/ 0.12 0.13 0.20 0.18 - ------------------------------------------------------------------------------- Total annual fund operating 0.63 1.40 1.47 0.70 expenses/10/ CLASS CLASS CLASS CLASS CLASS 529-A 529-B 529-C 529-E 529-F - ------------------------------------------------------------------------------- Management fees 0.27% 0.27% 0.27% 0.27% 0.27% - ------------------------------------------------------------------------------- Distribution and/or service 0.17 1.00 1.00 0.50 0.25 (12b-1) fees/11/ - ------------------------------------------------------------------------------- Other expenses/9,12/ 0.29 0.32 0.31 0.29 0.29 - ------------------------------------------------------------------------------- Total annual fund operating 0.73 1.59 1.58 1.06 0.81 expenses/10/
8 Class A and F 12b-1 fees may not exceed .25% and .50%, respectively, of each class' average net assets annually. Class B and C 12b-1 fees are 1.00% of each class' average net assets annually. 9 Includes custodial, legal, transfer agent and subtransfer agent/recordkeeping payments. Subtransfer agent/recordkeeping payments may be made to third parties (including affiliates of the fund's investment adviser) that provide subtransfer agent, recordkeeping and/or shareholder services with respect to certain shareholder accounts in lieu of the transfer agent providing such services. The amount paid for subtransfer agent/recordkeeping services will vary depending on the share class and services provided, and typically ranges from $3 per account to $19 per account. 10 The fund's investment adviser began waiving 5.00% of its management fees on September 1, 2004. The waiver will continue until August 31, 2005. As of the fund's last fiscal year-end, the reduction in management fees as a result of the waiver was less than .01% (though the impact may appear greater due to rounding). Total annual fund operating expenses do not reflect the waiver. Information regarding the effect of the waiver on total annual fund operating expenses can be found in the Financial Highlights table and the audited financial statements in the fund's annual report. 11 Class 529-A and 529-F 12b-1 fees may not exceed .50% of each class' average net assets annually. Class 529-B and 529-C 12b-1 fees are 1.00% of each class' average net assets annually. Class 529-E 12b-1 fees may not exceed .75% of the class' average net assets annually. 12 Includes .10% paid to the Virginia College Savings Plan for administrative services it provides in overseeing CollegeAmerica. 5 Fundamental Investors / Prospectus EXAMPLES 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, that all dividends and capital gain distributions are reinvested, and that the fund's operating expenses remain the same as shown above. The examples do not reflect the impact of any fee waivers or expense reimbursements. The examples assuming redemption do not reflect the effect of any taxable gain or loss at the time of the redemption. Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------------------------- Class A/1/ $636 $765 $ 906 $1,316 - ------------------------------------------------------------------------------- Class B -- assuming redemption/2/ 643 843 966 1,469 - ------------------------------------------------------------------------------- Class B -- assuming no redemption/3/ 143 443 766 1,469 - ------------------------------------------------------------------------------- Class C -- assuming redemption/4/ 250 465 803 1,757 - ------------------------------------------------------------------------------- Class C -- assuming no redemption 150 465 803 1,757 - ------------------------------------------------------------------------------- Class F -- excludes intermediary fees/5/ 72 224 390 871 - ------------------------------------------------------------------------------- Class 529-A/1,6/ 665 834 1,016 1,534 - ------------------------------------------------------------------------------- Class 529-B -- assuming 681 941 1,123 1,760 redemption/2,6/ - ------------------------------------------------------------------------------- Class 529-B -- assuming no 181 541 923 1,760 redemption/3,6/ - ------------------------------------------------------------------------------- Class 529-C -- assuming 280 538 917 1,978 redemption/4,6/ - ------------------------------------------------------------------------------- Class 529-C -- assuming no redemption/6/ 180 538 917 1,978 - ------------------------------------------------------------------------------- Class 529-E/6/ 128 376 643 1,397 - ------------------------------------------------------------------------------- Class 529-F -- excludes intermediary 103 298 508 1,106 fees/5,6/
1 Reflects the maximum initial sales charge in the first year. 2 Reflects applicable contingent deferred sales charges through year six and Class A or 529-A expenses for years nine and 10 because Class B and 529-B shares automatically convert to Class A and 529-A shares, respectively, after eight years. 3 Reflects Class A or 529-A expenses for years nine and 10 because Class B and 529-B shares automatically convert to Class A and 529-A shares, respectively, after eight years. 4 Reflects a contingent deferred sales charge in the first year. 5 Does not include fees charged by financial intermediaries, which are independent of fund expenses and will increase the overall cost of your investment. Intermediary fees typically range from .75% to 1.50% of assets annually depending on the services offered. 6 Reflects an initial $10 account set-up fee and an annual $10 CollegeAmerica account maintenance fee. 6 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 United States and not included in the Standard & Poor's 500 Composite Index. The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate fluctuations. Investments in securities issued by entities based outside the United States may be subject to the risks described above to a greater extent and may also be affected by currency fluctuations and controls; different accounting, auditing, financial reporting and legal standards and practices in some countries; expropriation; changes in tax policy; greater market volatility; differing securities market structures; higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. These risks may be heightened in connection with investments in developing countries. The fund may also hold cash or money market instruments, the amount of which will vary and will depend on various factors, including market conditions and purchases and redemptions of fund shares. A larger amount of such holdings could negatively affect the fund's investment results in a period of rising market prices; conversely, it could reduce the fund's magnitude of loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. The fund relies on the professional judgment of its investment adviser to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek to invest in attractively valued companies that, in its opinion, represent above-average long-term investment opportunities. The investment adviser believes that an important way to accomplish this is through fundamental analysis, which may include meeting with company executives and employees, suppliers, customers and competitors. Securities may be sold when the investment adviser believes that they no longer represent relatively attractive investment opportunities. 7 Fundamental Investors / Prospectus OTHER IMPORTANT INVESTMENT PRACTICES In addition to the principal investment strategies described above, the fund has other investment practices that are described in this prospectus and in the statement of additional information. The fund may invest to a limited extent in lower quality 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. Lower quality or longer maturity debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality or shorter maturity debt securities. ADDITIONAL INVESTMENT RESULTS Unlike the Investment Results table on page 4, the table on page 9 reflects the fund's results calculated without sales charges. 8 Fundamental Investors / Prospectus
ADDITIONAL INVESTMENT RESULTS (WITHOUT SALES CHARGES) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- CLASS A -- FROM 8/1/78 Before taxes 13.91% 3.22% 13.27% 14.16% After taxes on distributions 13.59 2.39 11.43 N/A After taxes on distributions and 9.41 2.38 10.85 N/A sale of fund shares - -------------------------------------------------------------------------------
1 YEAR LIFETIME/1/ - --------------------------------------------------------- CLASS B -- FIRST SOLD 3/15/00 Before taxes 13.03% 2.59% - --------------------------------------------------------- CLASS C -- FIRST SOLD 3/15/01 Before taxes 12.96 4.18 - --------------------------------------------------------- CLASS F -- FIRST SOLD 3/15/01 Before taxes 13.84 5.01 - --------------------------------------------------------- CLASS 529-A -- FIRST SOLD 2/15/02 Before taxes 13.77 8.79 - --------------------------------------------------------- CLASS 529-B -- FIRST SOLD 2/19/02 Before taxes 12.83 8.51 - --------------------------------------------------------- CLASS 529-C -- FIRST SOLD 2/15/02 Before taxes 12.84 7.87 - --------------------------------------------------------- CLASS 529-E -- FIRST SOLD 3/7/02 Before taxes 13.40 6.47 - --------------------------------------------------------- CLASS 529-F -- FIRST SOLD 9/23/02 Before taxes 13.73 22.40 - ---------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES (BEFORE TAXES) S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value 12.00 1.42 11.29 13.06 Funds Index/3/ Lipper Growth and Income 11.72 1.65 10.72 12.57 Funds Index/4/ Class A distribution rate at December 31, 2004: 1.74%/5/ (For current distribution rate information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 The distribution rate is based on actual distributions paid to shareholders over a 12-month period. Capital gain distributions, if any, are added back to the net asset value to determine the rate. 9 Fundamental Investors / Prospectus [Begin pie chart] INDUSTRY SECTOR DIVERSIFICATION AS OF DECEMBER 31, 2004, (PERCENT OF NET ASSETS) Energy 13.08% Industrials 12.38 Materials 12.09 Financials 11.66 Consumer discretionary 9.65 Convertible securities 1.29 Bonds & notes 0.72 Other industries 33.65 Cash & equivalents 5.48 [End pie chart]
PERCENT INVESTED BY COUNTRY PERCENT OF NET ASSETS - ------------------------------------------------------------------- The Americas 69.8% - ------------------------------------------------------------------- United States 69.8 - ------------------------------------------------------------------- Europe 14.0 - ------------------------------------------------------------------- Ireland 3.0 - ------------------------------------------------------------------- France 2.7 - ------------------------------------------------------------------- Netherlands 2.2 - ------------------------------------------------------------------- United Kingdom 1.8 - ------------------------------------------------------------------- Norway 1.0 - ------------------------------------------------------------------- Russian Federation 0.9 - ------------------------------------------------------------------- Spain 0.9 - ------------------------------------------------------------------- Italy 0.6 - ------------------------------------------------------------------- Germany 0.3 - ------------------------------------------------------------------- Switzerland 0.3 - ------------------------------------------------------------------- Belgium 0.2 - ------------------------------------------------------------------- Austria 0.1 - ------------------------------------------------------------------- Asia/Pacific 4.3 - ------------------------------------------------------------------- Japan 1.9 - ------------------------------------------------------------------- Australia 1.7 - ------------------------------------------------------------------- China 0.7 - ------------------------------------------------------------------- Other 6.4 - ------------------------------------------------------------------- Canada 5.9 - ------------------------------------------------------------------- Polynational 0.5 - ------------------------------------------------------------------- Cash & equivalents 5.5 - -------------------------------------------------------------------
Because the fund is actively managed, its holdings will change over time. For updated information on the fund's portfolio holdings, please visit us at americanfunds.com. 10 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 the American Funds. Capital Research and Management Company is a wholly owned subsidiary of The Capital Group Companies, Inc. and is located at 333 South Hope Street, Los Angeles, California 90071, and 135 South State College Boulevard, Brea, California 92821. 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 in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." EXECUTION OF PORTFOLIO TRANSACTIONS The investment adviser places orders with broker-dealers for the fund's portfolio transactions. The investment adviser strives to obtain best execution on the fund's equity and/or fixed-income portfolio transactions, taking into account a variety of factors to produce the most favorable total price reasonably attainable under the circumstances. These factors include the size and type of transaction, the cost and quality of executions, and the broker-dealer's ability to offer liquidity and anonymity. For example, with respect to equity transactions, the fund does not consider the investment adviser as having an obligation to obtain the lowest available commission rate to the exclusion of price, service and qualitative considerations. Subject to the considerations outlined above, the investment adviser may place orders for the fund's portfolio transactions with broker-dealers who have sold shares of funds managed by the investment adviser, or who have provided investment research, statistical or other related services to the investment adviser. In placing orders for the fund's portfolio transactions, the investment adviser does not commit to any specific amount of business with any particular broker-dealer. Subject to best execution, the investment adviser may consider investment research, statistical or other related services provided to the adviser in placing orders for the fund's portfolio transactions. However, when the investment adviser places orders for the fund's portfolio transactions, it does not give any consideration to whether a broker-dealer has sold shares of the funds managed by the investment adviser. 11 Fundamental Investors / Prospectus PORTFOLIO HOLDINGS Portfolio holdings information for the fund is available on the American Funds website at americanfunds.com. To reach this information, access the fund's details page on the website. A list of the fund's top 10 equity holdings (updated as of each month-end) and a link to the fund's complete list of publicly disclosed portfolio holdings (updated as of each calendar quarter-end) are located in the lower portion of this website page. These lists are posted to the website generally within 30 days from the end of the applicable month or quarter. Both lists remain available on the website until new information for the next month or quarter is posted. A description of the fund's policies and procedures regarding disclosure of information about its portfolio securities is available in the statement of additional information. 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, under the oversight of Capital Research and Management Company's investment committee. In addition, Capital Research and Management Company's investment analysts may make investment decisions with respect to a portion of a fund's portfolio. The primary individual portfolio counselors for Fundamental Investors are:
PRIMARY TITLE WITH PORTFOLIO PORTFOLIO INVESTMENT ADVISER COUNSELOR'S PORTFOLIO COUNSELOR/ COUNSELOR (OR AFFILIATE) ROLE IN FUND TITLE EXPERIENCE AND INVESTMENT MANAGEMENT (IF APPLICABLE) IN THIS FUND EXPERIENCE OF THE FUND - ------------------------------------------------------------------------------------------------ DINA N. PERRY 12 years Senior Vice President, Serves as an equity President and Director (plus 1 year Capital Research and portfolio counselor prior experience Management Company as an investment analyst Investment professional for the fund) for 27 years in total; 13 years with Capital Research and Management Company or affiliate GORDON CRAWFORD 14 years Senior Vice President and Serves as an equity Senior Vice President (plus 13 years Director, Capital Research portfolio counselor prior experience and Management Company as an investment analyst Investment professional for the fund) for 34 years, all with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ MICHAEL T. KERR 6 years Senior Vice President, Senior Vice President (plus 5 years Capital Research Company Serves as an equity prior experience portfolio counselor as an Investment professional investment analyst for 22 years in total; 20 for the fund) years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ JAMES E. DRASDO 21 years Senior Vice President and (plus 6 years Director, Capital Research prior experience and Management Company Serves as an equity as an portfolio counselor investment analyst Investment professional for the fund) for 33 years in total; 28 years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------
12 Fundamental Investors / Prospectus Additional information regarding the portfolio counselors' compensation, holdings in other accounts and ownership of securities in the fund can be found in the statement of additional information. 13 Fundamental Investors / Prospectus Shareholder information SHAREHOLDER SERVICES American Funds Service Company, the fund's transfer agent, offers a wide range of services that 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 United States (8 a.m. to 8 p.m. ET): 800/421-0180 Access the American Funds website :americanfunds.com [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 25065 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280 Santa Ana, San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia California 78265-9522 46206-6007 23501-2280 92799-5065 Fax: 210/474-4352 Fax: 317/735-6636 Fax: 757/670-4761 Fax: 714/671-7133
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 ENTITLED WELCOME. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO THEIR COLLEGEAMERICA ACCOUNT(S). These documents are available by writing or calling American Funds Service Company. 14 Fundamental Investors / Prospectus Choosing a share class The fund offers different classes of shares through this prospectus. Class A, B, C and F shares may be purchased through various investment programs or accounts, including certain types of retirement plans (see limitations below). The services or share classes available to you may vary depending upon how you wish to purchase shares of the fund. Investors residing in any state may purchase Class 529-A, 529-B, 529-C, 529-E and 529-F shares through an account established with CollegeAmerica. Class 529-A, 529-B, 529-C and 529-F shares are structured similarly to the corresponding Class A, B, C and F shares. For example, the same initial sales charges apply to Class 529-A shares as to Class A shares. Class 529-E shares are available only to investors participating in CollegeAmerica through an eligible employer plan. 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 fits 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 OR, IN THE CASE OF A COLLEGEAMERICA INVESTMENT, CLASS 529-A SHARES. 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 or 529-A shares may be a less expensive option over time, particularly if you qualify for a sales charge reduction or waiver); - - whether you plan to take any distributions in the near future (for example, the contingent deferred sales charge will not be waived if you sell your Class 529-B or 529-C shares to cover higher education expenses); - - availability of share classes: -- Class B and C shares are not available to retirement plans that are eligible to invest in Class R shares, including employer-sponsored retirement plans such as defined benefit plans, 401(k) plans, 457 plans, employer-sponsored 403(b) plans, and money purchase pension and profit-sharing plans; and -- Class F and 529-F shares are generally available only to fee-based programs of investment dealers that have special agreements with the fund's distributor and to certain registered investment advisers. 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. UNLESS OTHERWISE NOTED, REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F SHARES. 15 Fundamental Investors / Prospectus
SUMMARY OF THE PRIMARY DIFFERENCES AMONG SHARE CLASSES CLASS A SHARES Initial sales charge up to 5.75% (reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more) Contingent deferred none (except that a charge of 1.00% applies on certain sales charge redemptions made within one year following purchases of $1 million or more without an initial sales charge) 12b-1 fees up to .25% annually (for 529-A shares, may not exceed .50% annually) Dividends generally higher than other classes due to lower annual expenses Purchase maximum none Conversion none CLASS B SHARES Initial sales charge none Contingent deferred starts at 5.00% and declines until it reaches 0% after sales charge six years 12b-1 fees 1.00% annually Dividends generally lower than A and F shares due to higher 12b-1 fees and other expenses, but higher than C shares due to lower other expenses Purchase maximum $50,000 per transaction Conversion automatic conversion to A or 529-A shares after eight years, reducing future annual expenses CLASS C SHARES Initial sales charge none Contingent deferred 1.00% if shares are sold within one year after sales charge purchase 12b-1 fees 1.00% annually Dividends generally lower than other classes due to higher 12b-1 fees and other expenses Purchase maximum $500,000 per transaction Conversion automatic conversion to F shares after 10 years, reducing future annual expenses (529-C shares will not convert to 529-F shares) CLASS 529-E SHARES Initial sales charge none Contingent deferred none sales charge 12b-1 fees currently .50% annually (may not exceed .75% annually) Dividends generally higher than 529-B and 529-C shares due to lower 12b-1 fees, but lower than 529-A and 529-F shares due to higher 12b-1 fees Purchase maximum none Conversion none CLASS F SHARES Initial sales charge none Contingent deferred none sales charge 12b-1 fees currently .25% annually (may not exceed .50% annually) Dividends generally higher than B and C shares due to lower 12b-1 fees, but lower than A shares due to higher other expenses Purchase maximum none Conversion none
16 Fundamental Investors / Prospectus Purchase and exchange of shares THE FUND'S TRANSFER AGENT, ON BEHALF OF THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, IS REQUIRED BY LAW TO OBTAIN CERTAIN PERSONAL INFORMATION FROM YOU OR ANY PERSON(S) ACTING ON YOUR BEHALF IN ORDER TO VERIFY YOUR OR SUCH PERSON'S IDENTITY. IF YOU DO NOT PROVIDE THE INFORMATION, THE TRANSFER AGENT MAY NOT BE ABLE TO OPEN YOUR ACCOUNT. IF THE TRANSFER AGENT IS UNABLE TO VERIFY YOUR IDENTITY OR THAT OF ANOTHER PERSON(S) AUTHORIZED TO ACT ON YOUR BEHALF, OR BELIEVES IT HAS IDENTIFIED POTENTIALLY CRIMINAL ACTIVITY, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO CLOSE YOUR ACCOUNT OR TAKE SUCH OTHER ACTION THEY DEEM REASONABLE OR REQUIRED BY LAW. PURCHASE OF CLASS A, B AND C SHARES You may generally open an account and purchase Class A, B and C shares by contacting any financial adviser (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 financial adviser and by mail, telephone, the Internet and bank wire. PURCHASE OF CLASS F SHARES You may generally open an account and purchase Class F shares only through fee-based programs of investment dealers that have special agreements with the fund's distributor and through certain registered investment advisers. These dealers and advisers typically charge ongoing fees for services they provide. PURCHASE OF CLASS 529 SHARES Class 529 shares may be purchased only through a CollegeAmerica account. You may open a CollegeAmerica account and purchase 529 shares by contacting any financial adviser (who may impose transaction charges in addition to those described in this prospectus) authorized to sell a CollegeAmerica account. You may purchase additional shares in various ways, including through your financial adviser and by mail, telephone, the Internet and bank wire. Class 529-E shares may be purchased only by employees participating in CollegeAmerica through an eligible employer plan. CollegeAmerica is sponsored by and is a registered trademark of the Virginia College Savings Plan, an agency of the Commonwealth of Virginia. EXCHANGE Generally, you may exchange your shares into shares of the same class of other American Funds without a sales charge. Class A, C or F shares may generally be exchanged into the corresponding 529 share class without a sales charge. Class B shares may not be 17 Fundamental Investors / Prospectus exchanged into Class 529-B shares. EXCHANGES FROM CLASS A, C OR F SHARES TO THE CORRESPONDING 529 SHARE CLASS, PARTICULARLY IN THE CASE OF UNIFORM GIFTS TO MINORS ACT OR UNIFORM TRANSFER TO MINORS ACT CUSTODIAL ACCOUNTS, MAY RESULT IN SIGNIFICANT LEGAL AND TAX CONSEQUENCES AS DESCRIBED IN THE COLLEGEAMERICA PROGRAM DESCRIPTION. PLEASE CONSULT YOUR FINANCIAL ADVISER BEFORE MAKING SUCH AN EXCHANGE. Exchanges of shares from American Funds money market funds initially purchased without a sales charge generally will be subject to the appropriate 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 permitted exchange. Exchanges have the same tax consequences as ordinary sales and purchases. For example, to the extent you exchange shares held in a taxable account that are worth more now than what you paid for them, the gain will be subject to taxation. See "Transactions by telephone, fax or the Internet" for information regarding electronic exchanges. FREQUENT TRADING OF FUND SHARES The fund and American Funds Distributors reserve the right to reject any purchase order for any reason. The fund is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the securities markets. Accordingly, purchases, including those that are part of exchange activity, that the fund or American Funds Distributors has determined could involve actual or potential harm to the fund may be rejected. Frequent trading of fund shares may lead to increased costs to the fund and less efficient management of the fund's portfolio, resulting in dilution of the value of the shares held by long-term shareholders. The fund's Board of Directors has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares. Under the fund's "purchase blocking policy," any American Funds shareholder redeeming shares (including redemptions that are part of an exchange transaction) having a value of $5,000 or more from an American Fund (other than an American Funds money market fund) will be precluded from investing in that fund (including investments that are part of an exchange transaction) for 30 calendar days after the redemption transaction. This prohibition will not apply to redemptions by shareholders whose shares are held on the books of third-party intermediaries that have not adopted procedures to implement this policy. American Funds Service Company will work with intermediaries to develop such procedures, at which time shareholders whose accounts are on the books of intermediaries that have adopted such procedures will be subject to this general purchase blocking policy. Certain purchases will not be prevented and certain redemptions will not trigger a purchase block, such as: systematic redemptions and purchases where the entity maintaining the shareholder account is able to identify the transaction as a systematic redemption or purchase; purchases and redemptions of shares having a value of less than $5,000; retirement plan contributions, loans and distributions (including hardship withdrawals) identified as such on the retirement plan recordkeeper's 18 Fundamental Investors / Prospectus system; and purchase transactions involving transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations, where the entity maintaining the shareholder account is able to identify the transaction as one of these types of transactions. The statement of additional information contains more information about how American Funds Service Company may address other potentially abusive trading activity in the American Funds. PURCHASE MINIMUMS AND MAXIMUMS
PURCHASE MINIMUMS FOR ALL CLASSES OF SHARES - ------------------------------------------------------------------------------- To establish an account (including retirement plan and $ 250 CollegeAmerica accounts) With an automatic investment plan 50 For a retirement plan account through payroll deduction 25 or an employer-sponsored CollegeAmerica account To add to an account 50 For a retirement plan account through payroll deduction 25 or an employer-sponsored CollegeAmerica account - ------------------------------------------------------------------------------- PURCHASE MAXIMUM PER TRANSACTION FOR CLASS B SHARES 50,000 - ------------------------------------------------------------------------------- PURCHASE MAXIMUM PER TRANSACTION FOR CLASS C SHARES 500,000
Due to the current maximum contribution limit for a CollegeAmerica account, the effective purchase maximums for Class 529-A, 529-C, 529-E and 529-F shares are each $250,000. See the CollegeAmerica Program Description for more information. If you have significant American Funds or American Legacy holdings, you may not be eligible to invest in Class B or C shares (or their corresponding 529 share classes). Specifically, you may not purchase Class B or 529-B shares if you are eligible to purchase Class A or 529-A shares at the $100,000 or higher sales charge discount rate, and you may not purchase Class C or 529-C shares if you are eligible to purchase Class A or 529-A shares at the $1 million sales charge discount rate (i.e., at net asset value). See "Sales charge reductions and waivers" below and the statement of additional information for more information regarding sales charge discounts. VALUING SHARES The net asset value of each share class of the fund is the value of a single share. The fund calculates the net asset value each day the New York Stock Exchange is open as of approximately 4:00 p.m. New York time, the normal close of regular trading. Assets are valued primarily on the basis of market quotations. However, the fund has adopted procedures for making "fair value" determinations if market quotations are not readily available or are not considered reliable. Use of these procedures is intended to result in more appropriate net asset values. Because the fund may hold securities that are primarily listed on foreign exchanges that trade on weekends or days when the fund does not price its shares, the value of securities held in the fund may change on days when you will not be able to purchase or redeem fund shares. 19 Fundamental Investors / Prospectus 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. 20 Fundamental Investors / Prospectus Sales charges CLASS A SHARES The initial sales charge you pay each time you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases as indicated below. The "offering price," the price you pay to buy shares, includes any applicable sales charge, which will be deducted directly from your investment. Shares acquired through reinvestment of dividends or capital gain distributions are not subject to an initial sales charge.
SALES CHARGE AS A PERCENTAGE OF: DEALER NET COMMISSION OFFERING AMOUNT AS A PERCENTAGE INVESTMENT PRICE INVESTED OF OFFERING PRICE - ------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 5.00% - ------------------------------------------------------------------------------ $25,000 but less than $50,000 5.00 5.26 4.25 - ------------------------------------------------------------------------------ $50,000 but less than $100,000 4.50 4.71 3.75 - ------------------------------------------------------------------------------ $100,000 but less than $250,000 3.50 3.63 2.75 - ------------------------------------------------------------------------------ $250,000 but less than $500,000 2.50 2.56 2.00 - ------------------------------------------------------------------------------ $500,000 but less than $750,000 2.00 2.04 1.60 - ------------------------------------------------------------------------------ $750,000 but less than $1 million 1.50 1.52 1.20 - ------------------------------------------------------------------------------ $1 million or more and certain other none none see below investments described below - ------------------------------------------------------------------------------
The sales charge, expressed as a percentage of the offering price or the net amount invested, may be higher or lower than the percentages described in the table above due to rounding. This is because the dollar amount of the sales charge is determined by subtracting the net asset value of the shares purchased from the offering price, which is calculated to two decimal places using standard rounding criteria. The impact of rounding will vary with the size of the investment and the net asset value of the shares. Similarly, any contingent deferred sales charge paid by you on investments in Class A shares may be higher or lower than the 1% charge described below due to rounding. EXCEPT AS PROVIDED BELOW, INVESTMENTS IN CLASS A SHARES OF $1 MILLION OR MORE MAY BE SUBJECT TO A 1% CONTINGENT DEFERRED SALES CHARGE IF THE SHARES ARE SOLD WITHIN ONE YEAR OF PURCHASE. 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. 21 Fundamental Investors / Prospectus CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES The following investments are not subject to any initial or contingent deferred sales charge if American Funds Service Company is properly notified of the nature of the investment: - - investments in Class A shares made by endowments or foundations with $50 million or more in assets; and - - investments made by accounts that are part of certain qualified fee-based programs and that purchased Class A shares before March 15, 2001. 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 plans of distribution (see "Plans of distribution" below). A transfer from the Virginia Prepaid Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a CollegeAmerica account will be made with no sales charge. No commission will be paid to the dealer on such a transfer. Certain other investors may qualify to purchase shares without a sales charge, such as employees of investment dealers and registered investment advisers authorized to sell American Funds, and employees of The Capital Group Companies. Please see the statement of additional information for more information. EMPLOYER-SPONSORED RETIREMENT PLANS Employer-sponsored retirement plans not currently invested in Class A shares and wishing to invest without a sales charge are not eligible to purchase Class A shares. Such plans may invest only in Class R shares, which are described in more detail in the fund's retirement plan prospectus. Provided that the plan's recordkeeper can properly apply a sales charge on the plan's investments, an employer-sponsored retirement plan not currently invested in Class A shares and wishing to invest less than $1 million may invest in Class A shares, but the purchase of these shares will be subject to the applicable sales charge. An employer-sponsored retirement plan that purchases Class A shares with a sales charge will be eligible to purchase additional Class A shares in accordance with the sales charge table above. If the recordkeeper cannot properly apply a sales charge on the plan's investments, then the plan may invest only in Class R shares. Employer-sponsored retirement plans not currently invested in Class A shares are not eligible to establish a statement of intention to purchase $1 million or more of American Funds shares in order to qualify to purchase without a sales charge. More information about statements of intention can be found under "Sales charge reductions and waivers." Employer-sponsored retirement plans that invested in Class A shares without any sales charge on or before March 31, 2004, may continue to purchase Class A shares without any initial or contingent deferred sales charge. 22 Fundamental Investors / Prospectus CLASS B AND C SHARES 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 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.
CONTINGENT DEFERRED SALES CHARGE ON CLASS B SHARES YEAR OF REDEMPTION: 1 2 3 4 5 6 7+ - ---------------------------------------------------------------------- CONTINGENT DEFERRED SALES CHARGE: 5% 4% 4% 3% 2% 1% 0%
For Class C shares, a contingent deferred sales charge of 1% applies if shares are sold within one year of purchase. Any contingent deferred sales charge paid by you on investments in Class B or C shares, expressed as a percentage of the applicable redemption amount, may be higher or lower than the percentages described above due to rounding. 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" 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, followed by 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 10-year anniversary of the purchase date; however, Class 529-C shares will not convert to Class 529-F shares. The Internal Revenue Service currently takes the position that these automatic conversions are not taxable. Should its position change, the automatic conversion feature may be suspended. If this happens, you would have the option of converting your Class B, 529-B or C shares to the respective share classes at the anniversary dates described above. This exchange would be based on the relative net asset values of the two classes in question, without the imposition of a sales charge or fee, but you might face certain tax consequences as a result. 23 Fundamental Investors / Prospectus CLASS 529-E AND CLASS F SHARES Class 529-E and Class F shares are sold without any initial or contingent deferred sales charge. 24 Fundamental Investors / Prospectus Sales charge reductions and waivers TO RECEIVE A REDUCTION IN YOUR CLASS A INITIAL SALES CHARGE, YOU MUST LET YOUR FINANCIAL ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW AT THE TIME YOU PURCHASE SHARES THAT YOU QUALIFY FOR SUCH A REDUCTION. IF YOU DO NOT LET YOUR ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW THAT YOU ARE ELIGIBLE FOR A REDUCTION, YOU MAY NOT RECEIVE A SALES CHARGE DISCOUNT TO WHICH YOU ARE OTHERWISE ENTITLED. In order to determine your eligibility to receive a sales charge discount, it may be necessary for you to provide your adviser or American Funds Service Company with information and records (including account statements) of all relevant accounts invested in the American Funds. To have your Class A, B or C contingent deferred sales charge waived, you must let your adviser or American Funds Service Company know at the time you redeem shares that you qualify for such a waiver. REDUCING YOUR CLASS A INITIAL SALES CHARGE Consistent with the policies described in this prospectus, you and your "immediate family" (your spouse -- or equivalent if recognized under local law - -- and your children under the age of 21) may combine all of your American Funds and American Legacy/(R)/ investments to reduce your Class A sales charge. However, for this purpose, investments representing direct purchases of American Funds money market funds are excluded. 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 certain other accounts, such as: - - 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 primary beneficiary of the trust); - - solely controlled business accounts; and - - single-participant retirement plans. CONCURRENT PURCHASES You may combine simultaneous purchases (including, upon your request, purchases for gifts) of any class of shares of two or more American Funds, as well as individual holdings in various American Legacy variable annuity contracts and variable life insurance policies, to qualify for a reduced Class A sales charge. RIGHTS OF ACCUMULATION You may take into account the current value of your existing holdings in any class of shares of the American Funds to determine your Class A sales charge. Alternatively, upon your request, you may take into account the amount you invested less any with- 25 Fundamental Investors / Prospectus drawals (however, for this purpose, the amount invested does not include capital appreciation or reinvested dividends and capital gains). You should retain any records necessary to substantiate the historical amounts you have invested. In addition, you may also take into account the current value of your individual holdings in various American Legacy variable annuity contracts and variable life insurance policies to determine your Class A sales charge. If you make a gift of shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds and American Legacy accounts. STATEMENT OF INTENTION You may reduce your Class A sales charge by establishing a statement of intention. A statement of intention allows you to combine all American Funds non-money market fund purchases of all share classes you intend to make over a 13-month period, as well as individual holdings in various American Legacy variable annuity contracts and variable life insurance policies, to determine the applicable sales charge; however, investments made under a right of reinvestment, appreciation of your investment, and reinvested dividends and capital gains do not apply toward these combined purchases. At your request, purchases made during the previous 90 days may be included. A portion of your account may be held in escrow to cover additional Class A sales charges that may be due if your total investments over the 13-month period do not qualify for the applicable sales charge reduction. RIGHT OF REINVESTMENT Please see "How to sell shares" below for information on how to reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge. CONTINGENT DEFERRED SALES CHARGE WAIVERS The contingent deferred sales charge on Class A, B and C shares may be waived in the following cases: - - permitted exchanges of shares, except if shares acquired by exchange are then redeemed within the period during which a contingent deferred sales charge would apply to the initial shares purchased; - - tax-free returns of excess contributions to IRAs; - - redemptions due to death or postpurchase disability of the shareholder (this generally excludes accounts registered in the names of trusts and other entities); - - for 529 share classes only, redemptions due to a beneficiary's death, postpurchase disability or receipt of a scholarship (to the extent of the scholarship award); - - redemptions due to the complete termination of a trust upon the death of the trustor/ grantor or beneficiary, but only if such termination is specifically provided for in the trust document; 26 Fundamental Investors / Prospectus - - the following types of transactions, if together they do not exceed 12% of the value of an account annually (see the statement of additional information for more information about waivers regarding these types of transactions): -- redemptions due to receiving required minimum distributions from retirement accounts upon reaching age 70 1/2 (required minimum distributions that continue to be taken by the beneficiary(ies) after the account owner is deceased also qualify for a waiver); and -- if you have established a systematic withdrawal plan, redemptions through such a plan (including any dividends and/or capital gain distributions taken in cash). YOU MAY OBTAIN MORE INFORMATION ABOUT SALES CHARGE REDUCTIONS AND WAIVERS THROUGH A LINK ON THE HOME PAGE OF THE AMERICAN FUNDS WEBSITE AT AMERICANFUNDS.COM, FROM THE STATEMENT OF ADDITIONAL INFORMATION OR FROM YOUR FINANCIAL ADVISER. 27 Fundamental Investors / Prospectus Rollovers from retirement plans to IRAs Assets from a retirement plan may be invested in Class A, B, C or F shares of the American Funds through an IRA rollover. Rollover investments to Class A shares from retirement plans will be subject to applicable sales charges. Transfers to IRAs that are attributable to American Funds investments held in SIMPLE IRAs, SEPs or SARSEPs, as well as rollovers to IRAs from individual 403(b) plans custodied at Capital Bank and Trust Company, will not be subject to a sales charge if invested in Class A shares. Rollover investments to Class B, C or F shares will be subject to the terms and conditions generally applicable to investments in these share classes as described in the prospectus and statement of additional information. 28 Fundamental Investors / Prospectus 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 .25% for Class A shares; up to .50% for Class 529-A shares; 1.00% for Class B, 529-B, C and 529-C shares; up to .75% for Class 529-E shares; and up to .50% for Class F and 529-F shares. For all share classes, up to .25% of these expenses may be used to pay service fees to qualified dealers for providing certain shareholder services. The amount remaining 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 in the Annual Fund Operating Expenses table 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 your 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. 29 Fundamental Investors / Prospectus Other compensation to dealers American Funds Distributors, at its expense, currently provides additional compensation to investment dealers. These payments may be made, at the discretion of American Funds Distributors, to the top 75 dealers who have sold shares of the American Funds. The level of payments made to a qualifying dealer in any given year will vary and in no case would exceed the sum of (a) .10% of the previous year's American Funds sales by that dealer and (b) .02% of American Funds assets attributable to that dealer. For 2004, aggregate payments made by American Funds Distributors to dealers were less than .02% of the assets of the American Funds. Aggregate payments may also change from year to year. A number of factors will be considered in determining payments, including the qualifying dealer's sales, assets and redemption rates, and the quality of the dealer's relationship with American Funds Distributors. American Funds Distributors makes these payments to help defray the costs incurred by qualifying dealers in connection with efforts to educate financial advisers about the American Funds so that they can make recommendations and provide services that are suitable and meet shareholder needs. American Funds Distributors will, on an annual basis, determine the advisability of continuing these payments. American Funds Distributors may also pay expenses associated with meetings conducted by dealers outside the top 75 firms to facilitate educating financial advisers and shareholders about the American Funds. 30 Fundamental Investors / Prospectus How to sell shares You may sell (redeem) 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 $75,000; -- 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 that 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 USING THE INTERNET - - Redemptions by telephone, fax or the Internet (including American FundsLine/(R)/ and americanfunds.com) are limited to $75,000 per American Funds 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. If you recently purchased shares and subsequently request a redemption of those shares, you will receive proceeds from the redemption once a sufficient period of time has passed to reasonably assure that checks or drafts (including certified or cashier's checks) for the shares purchased have cleared (normally 15 calendar days). If you notify American Funds Service Company, you may reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge in other American Funds within 90 days after the date of the redemption or distribution. Proceeds from a Class B share redemption where a contingent deferred sales charge was charged will be reinvested in Class A shares. Proceeds from any other type of redemption and all dividend payments and capital gain distributions will be reinvested in the same share class from which the original redemption or distribution was made. Any contingent deferred sales charge on Class A or C shares will be credited to your account. Redemption proceeds of Class A shares representing direct purchases in American Funds money market funds that are reinvested in non-money market American Funds will be subject to a sales charge. Proceeds will be reinvested at the next calculated net asset value after your 31 Fundamental Investors / Prospectus request is received and accepted by American Funds Service Company. You may not reinvest proceeds in the American Funds as described in this paragraph if the reinvestment otherwise triggers a purchase block as described under "Frequent trading of fund shares." This paragraph does not apply to rollover investments as described under "Rollovers from retirement plans to IRAs." TRANSACTIONS BY TELEPHONE, FAX OR THE INTERNET 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 Internet 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) that 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, American Funds Service Company and/or the fund may be liable for losses due to unauthorized or fraudulent instructions. 32 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 other American Funds, 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. Dividends and capital gain distributions for 529 share classes will be automatically reinvested. TAXES ON DIVIDENDS AND DISTRIBUTIONS Dividends and capital gain distributions you receive from the fund will be subject to federal income tax and may also be subject to state or local taxes -- unless you are exempt from taxation. For federal tax purposes, taxable dividends and distributions of short-term capital gains are taxable as ordinary income. Some or all of your dividends may be eligible for a reduced tax rate, if you meet a holding period requirement. The fund's distributions of net long-term capital gains are taxable as long-term capital gains. Any dividends or capital gain distributions you receive from the fund will normally be taxable to you when made, regardless of whether you reinvest dividends or capital gain 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 amount you receive when you sell them. PLEASE SEE YOUR TAX ADVISER FOR MORE INFORMATION. HOLDERS OF 529 SHARES SHOULD REFER TO THE COLLEGEAMERICA PROGRAM DESCRIPTION FOR MORE INFORMATION REGARDING THE TAX CONSEQUENCES OF SELLING 529 SHARES. 33 Fundamental Investors / Prospectus Financial highlights/1/ The Financial Highlights table is intended to help you understand the fund's results for the past five fiscal years. Certain information reflects financial results for a single share of a particular class. 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 capital gain 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.
INCOME (LOSS) FROM INVESTMENT OPERATIONS/2/ Net gains (losses) Net on securities asset (both value, Net realized Total from beginning investment and investment of period income unrealized) operations - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $28.85 $.61 $ 3.35 $ 3.96 Year ended 12/31/2003 22.23 .50 6.52 7.02 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 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B: Year ended 12/31/2004 28.80 .38 3.35 3.73 Year ended 12/31/2003 22.19 .31 6.51 6.82 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: Year ended 12/31/2004 28.78 .37 3.34 3.71 Year ended 12/31/2003 22.17 .30 6.51 6.81 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: Year ended 12/31/2004 28.84 .59 3.35 3.94 Year ended 12/31/2003 22.22 .49 6.52 7.01 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: Year ended 12/31/2004 $28.84 $.59 $ 3.34 $ 3.93 Year ended 12/31/2003 22.22 .50 6.52 7.02 Period from 2/15/2002 to 12/31/2002 26.71 .33 (4.34) (4.01) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS 529-B: Year ended 12/31/2004 28.83 .33 3.35 3.68 Year ended 12/31/2003 22.22 .27 6.52 6.79 Period from 2/19/2002 to 12/31/2002 26.27 .16 (3.91) (3.75) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS 529-C: Year ended 12/31/2004 28.83 .34 3.34 3.68 Year ended 12/31/2003 22.22 .27 6.52 6.79 Period from 2/15/2002 to 12/31/2002 26.71 .16 (4.34) (4.18) CLASS 529-E: Year ended 12/31/2004 28.83 .49 3.35 3.84 Year ended 12/31/2003 22.21 .40 6.52 6.92 Period from 3/7/2002 to 12/31/2002 28.13 .26 (5.85) (5.59) CLASS 529-F: Year ended 12/31/2004 28.82 .58 3.33 3.91 Year ended 12/31/2003 22.22 .45 6.52 6.97 Period from 9/23/2002 to 12/31/2002 21.22 .12 1.08 1.20 DIVIDENDS AND DISTRIBUTIONS Net Dividends Distributions Total asset (from net (from dividends value, investment capital and end of Total income) gains) distributions period return/3/ - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $(.56) $ -- $ (.56) $32.25 13.91% Year ended 12/31/2003 (.40) -- (.40) 28.85 31.96 Year ended 12/31/2002 (.50) -- (.50) 22.23 (17.34) Year ended 12/31/2001 (.40) (.37) (.77) 27.45 (9.55) Year ended 12/31/2000 (.40) (2.35) (2.75) 31.16 4.27 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS B: Year ended 12/31/2004 (.34) -- (.34) 32.19 13.03 Year ended 12/31/2003 (.21) -- (.21) 28.80 30.97 Year ended 12/31/2002 (.30) -- (.30) 22.19 (17.97) Year ended 12/31/2001 (.19) (.37) (.56) 27.40 (10.24) Period from 3/15/2000 to 12/31/2000 (.13) (1.85) (1.98) 31.12 3.73 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS C: Year ended 12/31/2004 (.32) -- (.32) 32.17 12.96 Year ended 12/31/2003 (.20) -- (.20) 28.78 30.93 Year ended 12/31/2002 (.29) -- (.29) 22.17 (18.06) Period from 3/15/2001 to 12/31/2001 (.11) -- (.11) 27.39 (3.60) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS F: Year ended 12/31/2004 (.54) -- (.54) 32.24 13.84 Year ended 12/31/2003 (.39) -- (.39) 28.84 31.92 Year ended 12/31/2002 (.48) -- (.48) 22.22 (17.38) Period from 3/15/2001 to 12/31/2001 (.28) -- (.28) 27.44 (2.97) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS 529-A: Year ended 12/31/2004 $(.53) -- $ (.53) $32.24 13.77% Year ended 12/31/2003 (.40) -- (.40) 28.84 31.99 Period from 2/15/2002 to 12/31/2002 (.48) -- (.48) 22.22 (15.16) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS 529-B: Year ended 12/31/2004 (.28) -- (.28) 32.23 12.83 Year ended 12/31/2003 (.18) -- (.18) 28.83 30.74 Period from 2/19/2002 to 12/31/2002 (.30) -- (.30) 22.22 (14.35) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS 529-C: Year ended 12/31/2004 (.28) -- (.28) 32.23 12.84 Year ended 12/31/2003 (.18) -- (.18) 28.83 30.75 Period from 2/15/2002 to 12/31/2002 (.31) -- (.31) 22.22 (15.74) CLASS 529-E: Year ended 12/31/2004 (.44) -- (.44) 32.23 13.40 Year ended 12/31/2003 (.30) -- (.30) 28.83 31.42 Period from 3/7/2002 to 12/31/2002 (.33) -- (.33) 22.21 (19.92) CLASS 529-F: Year ended 12/31/2004 (.51) -- (.51) 32.22 13.73 Year ended 12/31/2003 (.37) -- (.37) 28.82 31.72 Period from 9/23/2002 to 12/31/2002 (.20) -- (.20) 22.22 5.65 Ratio of Ratio of expenses expenses to average to average Ratio Net net net of net assets, assets assets income end of before after to period reim- reim- average (in bursements/ bursements/ net millions) waivers waivers/4/ assets - ----------------------------------------------------------------------------------------------------------------------- CLASS A: Year ended 12/31/2004 $21,543 .63 % .63 % 2.05 % Year ended 12/31/2003 19,212 .66 .66 2.08 Year ended 12/31/2002 15,201 .67 .67 1.68 Year ended 12/31/2001 19,331 .65 .65 1.41 Year ended 12/31/2000 19,872 .64 .64 1.28 - ----------------------------------------------------------------------------------------------------------------------- CLASS B: Year ended 12/31/2004 971 1.40 1.39 1.29 Year ended 12/31/2003 836 1.44 1.44 1.30 Year ended 12/31/2002 618 1.45 1.45 .91 Year ended 12/31/2001 653 1.42 1.42 .64 Period from 3/15/2000 to 12/31/2000 299 1.39/5/ 1.39/5/ .53/5/ - ----------------------------------------------------------------------------------------------------------------------- CLASS C: Year ended 12/31/2004 566 1.47 1.46 1.24 Year ended 12/31/2003 413 1.50 1.50 1.23 Year ended 12/31/2002 266 1.50 1.50 .86 Period from 3/15/2001 to 12/31/2001 203 1.55/5/ 1.55/5/ .49/5/ - ----------------------------------------------------------------------------------------------------------------------- CLASS F: Year ended 12/31/2004 463 .70 .70 2.02 Year ended 12/31/2003 311 .71 .71 2.02 Year ended 12/31/2002 203 .72 .72 1.65 Period from 3/15/2001 to 12/31/2001 153 .74/5/ .74/5/ 1.31/5/ - ----------------------------------------------------------------------------------------------------------------------- CLASS 529-A: Year ended 12/31/2004 $ 146 .73 % .72 % 2.00 % Year ended 12/31/2003 88 .68 .68 2.03 Period from 2/15/2002 to 12/31/2002 39 .76/5/ .76/5/ 1.64/5/ - ----------------------------------------------------------------------------------------------------------------------- CLASS 529-B: Year ended 12/31/2004 29 1.59 1.59 1.13 Year ended 12/31/2003 19 1.61 1.61 1.10 Period from 2/19/2002 to 12/31/2002 8 1.62/5/ 1.62/5/ .77/5/ - ----------------------------------------------------------------------------------------------------------------------- CLASS 529-C: Year ended 12/31/2004 45 1.58 1.58 1.14 Year ended 12/31/2003 27 1.60 1.60 1.11 Period from 2/15/2002 to 12/31/2002 11 1.60/5/ 1.60/5/ .79/5/ CLASS 529-E: Year ended 12/31/2004 7 1.06 1.05 1.66 Year ended 12/31/2003 4 1.08 1.08 1.61 Period from 3/7/2002 to 12/31/2002 2 1.07/5/ 1.07/5/ 1.35/5/ CLASS 529-F: Year ended 12/31/2004 2 .81 .80 1.95 Year ended 12/31/2003 1 .82 .82 1.81 Period from 9/23/2002 to 12/31/2002 --/6/ .22 .22 .51
34 Fundamental Investors / Prospectus
YEAR ENDED DECEMBER 31 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE FOR ALL CLASSES 30% 31% 38% 29% 43% OF SHARES
1 Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. 2 Based on average shares outstanding. 3 Total returns exclude all sales charges, including contingent deferred sales charges. 4 The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from Capital Research and Management Company. See the Annual Fund Operating Expenses table under "Fees and expenses of the fund" and the audited financial statements in the fund's annual report for more information. 5 Annualized. 6 Amount less than $1 million. Fundamental Investors / Prospectus 35 [logo - American Funds/(R)/] The right choice for the long term/(R)/
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 FOR COLLEGEAMERICA/(R)/ American Funds Service Company 800/421-0180, ext. 529 FOR 24-HOUR INFORMATION American FundsLine/(R)/ 800/325-3590 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 The shareholder reports contain additional information about the fund, including financial statements, investment results, portfolio holdings, a discussion of market conditions and the fund's investment strategies, and the independent registered public accounting firm's report (in the annual report). COLLEGEAMERICA PROGRAM DESCRIPTION The CollegeAmerica Program Description contains additional information about the policies and services related to CollegeAmerica accounts. 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, DC (202/942-8090) or on the EDGAR database on the SEC's website at www.sec.gov or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. The SAI is also available on americanfunds.com. HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus and annual and semi-annual reports 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 who are part of the same family and share the same residential address. If you would like to receive a free copy of the SAI, codes of ethics, annual/semi-annual report to shareholders or CollegeAmerica Program Description, 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. [logo-recycle bug]
Printed on recycled paper MFGEPR-910-0305P Litho in USA Investment Company File No. 811-32 CGD/RRD/8008 - ------------------------------------------------------------------------------- THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
[logo-American Funds/(R)/] The right choice for the long term/(R)/ Fundamental Investors/SM/ PROSPECTUS ADDENDUM March 1, 2005 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. Class R-5 shares of Fundamental Investors are available to certain clients of the Personal Investment Management group of Capital Guardian Trust Company./SM// /Accordingly, for these shareholders, the following information should be read in conjunction with the prospectus for this fund. Fees and expenses of the fund -- pages 5-6 These tables describe the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) CLASS R-5 - ------------------------------------------------------------------------------- Maximum initial sales charge on purchases (as a percentage of none offering price) - ------------------------------------------------------------------------------- Maximum sales charge on reinvested dividends none - ------------------------------------------------------------------------------- Maximum contingent deferred sales charge none - ------------------------------------------------------------------------------- Redemption or exchange fees none
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS) CLASS R-5 - -------------------------------------------------------------- Management fees 0.27% - -------------------------------------------------------------- Distribution and/or service (12b-1) fees none - -------------------------------------------------------------- Other expenses/1/ 0.12 - -------------------------------------------------------------- Total annual fund operating expenses/2/ 0.39
1 A portion of the fund's expenses may be used to pay third parties (including affiliates of the fund's investment adviser) that provide recordkeeping services to retirement plans invested in the fund. 2 The fund's investment adviser began waiving 5.00% of its management fees on September 1, 2004. The waiver will continue until August 31, 2005. As of the fund's last fiscal year-end, the reduction in management fees as a result of the waiver was less than .01% (though the impact may appear greater due to rounding). Total annual fund operating expenses do not reflect this waiver. Information regarding the effect of the waiver on total annual fund operating expenses can be found in the Financial Highlights table and the audited financial statements in the fund's annual report. EXAMPLE The example below is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the fund for the time periods indicated, that your investment has a 5% return each year, that all dividends and capital gain distributions are reinvested, and that the fund's operating expenses remain the same as shown above. The examples do not reflect the impact of any fee waivers or expense reimbursements. Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - ------------------------------------------------------------- Class R-5 $40 $125 $219 $493 - -------------------------------------------------------------
Purchase and exchange of shares -- pages 17-20 PURCHASE OF CLASS R-5 SHARES Class R-5 shares of the fund are available to certain clients of the Personal Investment Management group of Capital Guardian Trust Company. Please contact Capital Guardian Trust Company if you wish to purchase Class R-5 shares of the fund. Sales charges -- pages 21-24 CLASS R-5 SHARES Class R-5 shares are sold without any initial or contingent deferred sales charge. In addition, no compensation is paid to investment dealers on sales of Class R-5 shares. Financial highlights/1/ -- pages 34-35 The Financial Highlights table is intended to help you understand the fund's results. Certain information reflects financial results for a single 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 capital gain 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.
Income (loss) from investment operations/2/ Net gains (losses) Net on securities asset (both value, Net realized Total from beginning investment and investment of period income unrealized) operations - ------------------------------------------------------------------------------------------------- CLASS R-5: Year ended 12/31/2004 $28.86 $.68 $ 3.35 $ 4.03 Year ended 12/31/2003 22.23 .56 6.53 7.09 Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06) Dividends and distributions Net Dividends Distributions Total asset (from net (from dividends value, investment capital and end of Total income) gains) distributions period return - ------------------------------------------------------------------------------------------------- CLASS R-5: Year ended 12/31/2004 $(.63) -- $(.63) $32.26 14.19% Year ended 12/31/2003 (.46) -- (.46) 28.86 32.34 Period from 5/15/2002 to 12/31/2002 (.33) -- (.33) 22.23 (18.34) Ratio of Ratio of expenses expenses to to average average Ratio Net net net of net assets, assets assets income end of before after to period reim- reim- average (in bursements/ bursements/ net millions) waivers waivers/3/ assets - ------------------------------------------------------------------------------------ CLASS R-5: Year ended 12/31/2004 $141 .39 % .39 % 2.31 % Year ended 12/31/2003 112 .39 .39 2.30 Period from 5/15/2002 to 12/31/2002 53 .40/4/ .40/4/ 1.91/4/
Year ended December 31 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE FOR ALL CLASSES 30% 31% 38% 29% 43% OF SHARES
1 Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. 2 Based on average shares outstanding. 3 The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from Capital Research and Management Company. See the Annual Fund Operating Expenses table under "Fees and expenses of the fund" and the audited financial statements in the fund's annual report for more information. 4 Annualized. FUNDAMENTAL INVESTORS, INC. Part B Statement of Additional Information March 1, 2005 This document is not a prospectus but should be read in conjunction with the current prospectus or retirement plan prospectus of Fundamental Investors, Inc. (the "fund" or "FI") dated March 1, 2005. You may obtain a prospectus from your financial adviser 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. They should contact their employers for details. TABLE OF CONTENTS
Item Page no. - ---- -------- Certain investment limitations and guidelines . . . . . . . . . . . 2 Description of certain securities and investment techniques . . . . 2 Fundamental policies and investment restrictions. . . . . . . . . . 6 Management of the fund . . . . . . . . . . . . . . . . . . . . . . 8 Execution of portfolio transactions . . . . . . . . . . . . . . . . 27 Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 27 Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 30 Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 35 Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Sales charge reductions and waivers . . . . . . . . . . . . . . . . 39 Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Shareholder account services and privileges . . . . . . . . . . . . 43 General information . . . . . . . . . . . . . . . . . . . . . . . . 46 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 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 circumstances, and are based on a percentage of the fund's net assets unless otherwise noted. This summary is not intended to reflect all of the fund's investment limitations. DEBT SECURITIES - - The fund may invest up to 5% of its assets in straight debt securities (i.e, not convertible into equity) rated Ba or below by Moody's Investors Service ("Moody's") and BB or below by Standard & Poor's Corporation ("S&P") or unrated but determined to be of equivalent quality. NON-U.S. SECURITIES - - The fund may invest up to 30% of its assets in securities of issuers that are domiciled outside the United States and not included in the S&P 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. Equity securities held by the fund typically consist of common stocks. The prices of equity securities fluctuate based on, among other things, events specific to their issuers and market, economic and other conditions. There may be little trading in the secondary market for particular equity securities, which may adversely affect the fund's ability to value accurately or dispose of such equity securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the value and/or liquidity of equity securities. The growth-oriented, equity-type securities generally purchased by the fund may involve large price swings and potential for loss. DEBT SECURITIES -- Debt securities are used by issuers to borrow money. Generally, issuers pay investors interest and may repay the amount borrowed periodically during the life of the security or at maturity. Some debt securities, such as zero coupon bonds, do not pay current interest, but are purchased at a discount from their face values and increase in value until maturity. The market prices of debt securities fluctuate depending on such factors as interest rates, credit quality and maturity. In general, market prices of debt securities decline when interest rates rise and increase when interest rates fall. Fundamental Investors -- Page 2 Lower rated debt securities, rated Ba or below by Moody's and/or BB or below by S&P or unrated but determined 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 debt securities, 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, and to determine the value of, lower rated debt securities. SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in securities that have a combination of equity and debt characteristics. These securities may at times behave more like equity than debt and vice versa. Some types of convertible bonds or preferred stocks automatically convert into common stocks. The prices and yields of nonconvertible preferred stocks generally move with changes in interest rates and the issuer's credit quality, similar to the factors affecting debt securities. Certain of these securities will be treated as debt for fund investment limit purposes. Convertible bonds, convertible preferred stocks and other securities may sometimes be converted, or may automatically convert, into common stocks or other securities at a stated conversion ratio. These securities, prior to conversion, may pay a fixed rate of interest or a dividend. Because convertible securities have both debt and equity characteristics, their value varies in response to many factors, including the value of the underlying assets, general market and economic conditions, and convertible market valuations, as well as changes in interest rates, credit spreads and the credit quality of the issuer. REAL ESTATE INVESTMENT TRUSTS -- The fund may invest in securities issued by real estate investment trusts (REITs), which primarily invest in real estate or real estate-related loans. REITs are not taxed on income distributed to shareholders provided they meet requirements imposed by the Internal Revenue Code. The risks associated with REIT debt investments are similar to the risks of investing in corporate-issued debt. In addition, the return on REITs is dependent on such factors as the skill of management and the real estate environment in general. INVESTING IN VARIOUS COUNTRIES -- Investing outside the United States may involve additional risks caused by, among other things, currency controls and fluctuating currency values; different accounting, auditing, financial reporting and legal standards and practices in some countries; changing local, regional and global economic, political and social conditions; expropriation; changes in tax policy; greater market volatility; differing securities market structures; higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. The risks described above may be heightened in connection with investments in developing countries. Although there is no universally accepted definition, the investment adviser generally considers a developing country as a country that is in the earlier stages of its industrialization cycle with a low per capita gross domestic product and a low market capitalization relative to those in the United States and western Europe. Historically, the markets of developing countries have been more volatile than the markets of developed countries. The fund may invest in securities of issuers in developing countries only to a limited extent. Additional costs could be incurred in connection with the fund's investment activities outside the United States. Brokerage commissions may be higher outside the United States, and the fund Fundamental Investors -- Page 3 will bear certain expenses in connection with its currency transactions. Furthermore, increased custodian costs may be associated with maintaining assets in certain jurisdictions. CURRENCY TRANSACTIONS -- The fund may 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 that may 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 that 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 also may affect the character and timing of income, gain or loss recognized by the fund for U.S. federal income tax purposes. INVESTING IN SMALLER CAPITALIZATION STOCKS -- The fund may invest in the stocks of smaller capitalization companies (typically companies with market capitalizations of less than $2.0 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 be subject to wider price swings, thus creating a greater chance of loss than securities of larger capitalization companies. U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed by the full faith and credit of the U.S. government. U.S. government obligations include the following types of securities: U.S. TREASURY SECURITIES -- U.S. Treasury securities include direct obligations of the U.S. Treasury, such as Treasury bills, notes and bonds. For these securities, the payment of principal and interest is unconditionally guaranteed by the U.S. government, and thus they are of the highest possible credit quality. Such securities are subject to variations in market value due to fluctuations in interest rates, but, if held to maturity, will be paid in full. FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The securities of certain U.S. government agencies and government-sponsored entities are guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. Such agencies and entities include the Government National Mortgage Association (Ginnie Mae), the Veterans Administration (VA), the Federal Housing Administration (FHA), the Export-Import Bank (Exim Bank), the Overseas Private Investment Fundamental Investors -- Page 4 Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small Business Administration (SBA). OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are neither direct obligations of, nor guaranteed by, the U.S. government. These obligations include securities issued by certain U.S. government agencies and government-sponsored entities. However, they generally involve some form of federal sponsorship: some operate under a government charter, some are backed by specific types of collateral; some are supported by the issuer's right to borrow from the Treasury; and others are supported only by the credit of the issuing government agency or entity. These agencies and entities include, but are not limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee Valley Authority and Federal Farm Credit Bank System. CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example, short-term notes with maturities typically up to nine months in length issued by corporations, governmental bodies or bank/corporation sponsored conduits (asset-backed commercial paper)) (b) commercial bank obligations (for example, certificates of deposit, bankers' acceptances (time drafts on a commercial bank where the bank accepts an irrevocable obligation to pay at maturity)), (c) savings association and savings bank obligations (for example, bank notes and certificates of deposit issued by savings banks or savings associations), (d) securities of the U.S. government, its agencies or instrumentalities that mature, or may be redeemed, in one year or less, and (e) corporate bonds and notes that mature, or that may be redeemed, in one year or less. 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. Difficulty in selling such securities may result in a loss or be costly to a fund. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933 (the "1933 Act"), or in a registered public offering. Where registration is required, the holder of a registered security may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time it may be permitted to sell a security under an effective registration statement. Securities (including restricted securities) not actively traded will be considered illiquid unless they have been specifically determined to be liquid under procedures 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 Fundamental Investors -- Page 5 change from time to time. The fund may incur certain additional costs in disposing of illiquid securities. * * * * * * PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the length of time particular investments may have been held. Short-term trading profits are not the fund's objective, and changes in its investments are generally accomplished gradually, though short-term transactions may occasionally be made. High portfolio turnover involves correspondingly greater transaction costs in the form of dealer spreads or brokerage commissions, and may result in the realization of net capital gains, which are taxable when distributed to shareholders. A fund's portfolio turnover rate would equal 100% if each security in the fund's portfolio were replaced once per year. The fund's portfolio turnover rates for the fiscal years ended December 31, 2004 and 2003 were 30% and 31%, respectively. See "Financial highlights" in the prospectus for the fund's annual portfolio turnover rate for each of the last five fiscal years. FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies and investment restrictions, which may not be changed without approval by holders of a majority of its outstanding shares. Such majority is defined in the Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of the lesser of (a) 67% or more of the outstanding voting securities present at a meeting, if the holders of more than 50% of the outstanding voting securities are present in person or by proxy, or (b) more than 50% of the outstanding voting securities. All percentage limitations are considered at the time securities are purchased and are based on the fund's net assets unless otherwise indicated. None of the following investment restrictions involving a maximum percentage of assets will be considered violated unless the excess occurs immediately after, and is caused by, an acquisition by the fund. 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 1/2 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; Fundamental Investors -- Page 6 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. NONFUNDAMENTAL POLICIES -- The following policies may be changed without shareholder approval. 1. The fund 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). 2. No officer or director of the fund may sell portfolio securities to the fund or buy portfolio securities from it. 3. The fund may not issue senior securities, except as permitted by the 1940 Act. Fundamental Investors -- Page 7 MANAGEMENT OF THE FUND BOARD OF DIRECTORS AND OFFICERS
YEAR FIRST NUMBER OF PORTFOLIOS POSITION ELECTED WITHIN THE FUND OTHER DIRECTORSHIPS/3/ WITH THE A DIRECTOR PRINCIPAL OCCUPATION(S) DURING COMPLEX/2/ OVERSEEN HELD NAME AND AGE FUND OF THE FUND/1/ PAST FIVE YEARS BY DIRECTOR BY DIRECTOR - ----------------------------------------------------------------------------------------------------------------------------------- "NON-INTERESTED" DIRECTORS - ----------------------------------------------------------------------------------------------------------------------------------- Joseph C. Berenato Director 2003 Chairman of the Board and 4 Ducommun Incorporated Age: 58 CEO, Ducommun Incorporated (aerospace components manufacturer) - ----------------------------------------------------------------------------------------------------------------------------------- Robert J. Denison/4/ Director 2005 Chair, First Security 4 None Age: 63 Management (private investments) - ----------------------------------------------------------------------------------------------------------------------------------- Robert A. Fox Director 1998 Managing General Partner, 7 Crompton Corporation Age: 67 Fox Investments LP; former Professor, University of California; retired President and CEO, Foster Farms (poultry producer) - ----------------------------------------------------------------------------------------------------------------------------------- Leonade D. Jones Director 1998 Co-founder, VentureThink LLC 6 None Age: 57 (developed and managed e-commerce businesses) and Versura, Inc. (education loan exchange); former Treasurer, The Washington Post Company - ----------------------------------------------------------------------------------------------------------------------------------- John G. McDonald Director 1998 The Stanford Investors 8 iStar Financial, Inc.; Age: 67 Professor, Graduate School Plum Creek Timber Co.; of Business, Stanford Scholastic Corporation; University Varian, Inc. - ----------------------------------------------------------------------------------------------------------------------------------- Gail L. Neale Director 1985 President, The Lovejoy 6 None Age: 70 Consulting Group, Inc. (a pro bono consulting group advising nonprofit organizations) - ----------------------------------------------------------------------------------------------------------------------------------- Henry E. Riggs Director 1989 President Emeritus, Keck 4 None Age: 70 Graduate Institute of Applied Life Sciences - ----------------------------------------------------------------------------------------------------------------------------------- Patricia K. Woolf, Director 1998 Private investor; corporate 6 Crompton Corporation; Ph.D. director; former Lecturer, First Energy Corporation Age: 70 Department of Molecular Biology, Princeton University - -----------------------------------------------------------------------------------------------------------------------------------
Fundamental Investors -- Page 8
PRINCIPAL OCCUPATION(S) DURING YEAR FIRST PAST FIVE YEARS AND ELECTED POSITIONS HELD NUMBER OF PORTFOLIOS POSITION A DIRECTOR WITH AFFILIATED ENTITIES WITHIN THE FUND WITH THE AND/OR OFFICER OR THE PRINCIPAL UNDERWRITER COMPLEX/2/ OVERSEEN NAME AND AGE FUND OF THE FUND/1/ OF THE FUND BY DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ "INTERESTED" DIRECTORS/5,6/ - ------------------------------------------------------------------------------------------------------------------------------------ James F. Chairman of 1998 President and Director, Capital 3 Rothenberg the Board Research and Management Company; Director, American Funds Distributors, Inc.*; Director, The Age: 58 Capital Group Companies, Inc.*; Director, Capital Group Research, Inc.* - ------------------------------------------------------------------------------------------------------------------- Dina N. Perry President 1994 Senior Vice President, Capital 1 Research and Management Company; Director, Capital Research Company* Age: 59 - ------------------------------------------------------------------------------------------------------------------- OTHER DIRECTORSHIPS/3/ HELD NAME AND AGE BY DIRECTOR - --------------------------------------------------- "INTERESTED" DIRECTORS/5,6/ - ------------------------------------------------------------------------------------------------------------------------------------ James F. None Rothenberg Age: 58 - --------------------------------------------------- Dina N. Perry None Age: 59 - ---------------------------------------------------
Fundamental Investors -- Page 9
PRINCIPAL OCCUPATION(S) DURING POSITION YEAR FIRST ELECTED PAST FIVE YEARS AND POSITIONS HELD WITH THE AN OFFICER WITH AFFILIATED ENTITIES NAME AND AGE FUND OF THE FUND/1/ OR THE PRINCIPAL UNDERWRITER OF THE FUND - ---------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS/6/ - ---------------------------------------------------------------------------------------------------------------------------------- Gordon Crawford Senior Vice 1994 Senior Vice President and Director, Capital Research and President Management Company Age: 58 - ---------------------------------------------------------------------------------------------------------------------------------- Paul G. Haaga, Jr. Senior Vice 1994 Executive Vice President and Director, Capital Research and President Management Company; Director, The Capital Group Companies, Age: 56 Inc.* - ---------------------------------------------------------------------------------------------------------------------------------- Michael T. Kerr Senior Vice 1995 Vice President, Capital Research and Management Company; President Senior Vice President, Capital Research Company* Age: 45 - ---------------------------------------------------------------------------------------------------------------------------------- Martin Romo Senior Vice President 1999 Executive Vice President and Director, Capital Research Company* Age: 37 - ---------------------------------------------------------------------------------------------------------------------------------- Ronald B. Morrow Vice President 2004 Senior Vice President, Capital Research Company* Age: 59 - ---------------------------------------------------------------------------------------------------------------------------------- Patrick F. Quan Secretary 1989-1998 Vice President - Fund Business Management Group, Capital 2000 Research and Management Company Age: 46 - ---------------------------------------------------------------------------------------------------------------------------------- Sheryl F. Johnson Treasurer 1998 Vice President - Fund Business Management Group, Capital Research and Management Company Age: 36 - ---------------------------------------------------------------------------------------------------------------------------------- David A. Pritchett Assistant Treasurer 1999 Vice President - Fund Business Management Group, Capital Research and Management Company Age: 38 - ----------------------------------------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company. 1 Directors and officers of the fund serve until their resignation, removal or retirement. 2 Capital Research and Management Company manages the American Funds, consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series,(R) which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations. 3 This includes all directorships (other than those of the American Funds) that are held by each Director as a director of a public company or a registered investment company. 4 Elected effective February 17, 2005. 5 "Interested persons," within the meaning of the 1940 Act, on the basis of their affiliation with the fund's investment adviser, Capital Research and Management Company, or affiliated entities (including the fund's principal underwriter). 6 All of the officers listed, except Ronald B. Morrow and 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. THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET, 55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY. Fundamental Investors -- Page 10 FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2004
AGGREGATE DOLLAR RANGE/1/ OF SHARES OWNED IN ALL FUNDS IN THE AMERICAN FUNDS DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN NAME SHARES OWNED BY DIRECTOR - ------------------------------------------------------------------------------- "NON-INTERESTED" DIRECTORS - ------------------------------------------------------------------------------- Joseph C. Berenato $1 - $10,000 $50,001 - $100,000 - ------------------------------------------------------------------------------- Robert J. Denison/2/ Over $100,000 Over $100,000 - ------------------------------------------------------------------------------- Robert A. Fox Over $100,000 Over $100,000 - ------------------------------------------------------------------------------- Leonade D. Jones $50,001 - $100,000 Over $100,000 - ------------------------------------------------------------------------------- John G. McDonald $50,001 - $100,000 Over $100,000 - ------------------------------------------------------------------------------- Gail L. Neale $50,001 - $100,000 Over $100,000 - ------------------------------------------------------------------------------- Henry E. Riggs Over $100,000 Over $100,000 - ------------------------------------------------------------------------------- Patricia K. Woolf $50,001 - $100,000 Over $100,000 - ------------------------------------------------------------------------------- "INTERESTED" DIRECTORS/3/ - ------------------------------------------------------------------------------- Dina N. Perry Over $100,000 Over $100,000 - ------------------------------------------------------------------------------- James F. Rothenberg Over $100,000 Over $100,000 - -------------------------------------------------------------------------------
1 Ownership disclosure is made using the following ranges: None; $1 - $10,000; $10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed for "interested" Directors include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan. 2 Shares owned as of February 25, 2005. 3 "Interested persons," within the meaning of the 1940 Act, on the basis of their affiliation with the fund's investment adviser, Capital Research and Management Company, or affiliated entities (including the fund's principal underwriter). DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or Director who is a director, officer or employee of the investment adviser or its affiliates. The fund pays to Directors who are not affiliated with the investment adviser: (a) fees of $2,000 for each Board of Directors meeting attended, (b) $1,000 for each meeting attended as a member of a committee of the Board of Directors and (c) annual fees of either $16,000 (if the Director also receives compensation as a member of the Board of another fund advised by the investment adviser and the other Board typically meets separately from the fund's Board of Directors), or $50,000 (for all other unaffiliated Directors), a pro rata portion of which is paid by the fund and another fund whose Board meets jointly with the fund's Board of Directors. The payment by the fund to certain unaffiliated Directors of a larger per fund annual fee reflects the significant time and labor commitment required of any mutual fund Board member overseeing even one fund. The Nominating Committee of the Board of Directors, a Committee comprised exclusively of Directors not affiliated with the investment adviser, reviews Director compensation periodically, and typically recommends adjustments every other year. In making its recommendations, the Fundamental Investors -- Page 11 Nominating Committee considers a number of factors, including operational, regulatory and other developments affecting the complexity of the Board's oversight obligations, as well as comparative industry data. In lieu of meeting attendance fees, members of the Proxy Committee receive an annual retainer fee of $4,500 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 compensation plan in effect for the fund. The fund also reimburses certain expenses of the Directors who are not affiliated with the investment adviser. DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED DECEMBER 31, 2004
TOTAL COMPENSATION AGGREGATE COMPENSATION (INCLUDING (INCLUDING VOLUNTARILY VOLUNTARILY DEFERRED DEFERRED COMPENSATION/1/) COMPENSATION/1/) NAME FROM THE FUND FROM ALL FUNDS MANAGED BY CAPITAL RESEARCH AND MANAGEMENT COMPANY OR ITS AFFILIATES/2/ - ------------------------------------------------------------------------------------------------------------------------------------ Joseph C. Berenato/3/ $ 27,500 $126,500 - ------------------------------------------------------------------------------------------------------------------------------------ Robert J. Denison/4/ None 6,500 - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Fox/3/ 32,215 239,249 - ------------------------------------------------------------------------------------------------------------------------------------ Leonade D. Jones 35,000 214,500 - ------------------------------------------------------------------------------------------------------------------------------------ John G. McDonald/3/ 32,125 306,749 - ------------------------------------------------------------------------------------------------------------------------------------ Gail L. Neale/3/ 26,550 119,500 - ------------------------------------------------------------------------------------------------------------------------------------ Henry E. Riggs/3/ 30,250 130,000 - ------------------------------------------------------------------------------------------------------------------------------------ Patricia K. Woolf/3/ 30,333 188,000 - ------------------------------------------------------------------------------------------------------------------------------------
1 Amounts may be deferred by eligible Directors under a nonqualified deferred compensation plan adopted by the fund in 1993. Deferred amounts accumulate at an earnings rate determined by the total return of one or more American Funds as designated by the Directors. Compensation for the fiscal year ended December 31, 2004, includes earnings on amounts deferred in previous fiscal years. 2 Capital Research and Management Company manages the American Funds, consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series,(R) which serves as the underlying investment vehicle for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain nonprofit organizations. 3 Since the deferred compensation plan's adoption, the total amount of deferred compensation accrued by the fund (plus earnings thereon) through the 2004 fiscal year for participating Directors is as follows: Joseph C. Berenato ($33,499), Robert A. Fox ($201,187), John G. McDonald ($218,349), Gail L. Neale ($22,352), Henry E. Riggs ($366,532) and Patricia K. Woolf ($105,503). Amounts deferred and accumulated earnings thereon are not funded and are general unsecured liabilities of the fund until paid to the Directors. 4 Robert J. Denison was elected a Director effective February 17, 2005, and, therefore, received no compensation from the fund during the fiscal year ended December 31, 2004. As of February 1, 2005, the officers and Directors of the fund and their families, as a group, owned beneficially or of record less than 1% of the outstanding shares of the fund. FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end, diversified management investment company, was organized as a Delaware corporation on October 17, 1932 and reincorporated in Maryland on February 1, 1990. Although the Board of Directors has delegated day-to-day oversight to the investment adviser, all fund operations are supervised by Fundamental Investors -- Page 12 the fund's Board, which meets periodically and performs duties required by applicable state and federal laws. Under Maryland law, the business affairs of a fund are managed under the direction of the Board of Directors, and all powers of the fund are exercised by or under the authority of the Board except as reserved to the shareholders by law or the fund's charter or by-laws. Maryland law requires each Director to perform his/her duties as a Director, including his/her duties as a member of any Board committee on which he/she serves, in good faith, in a manner he/she reasonably believes to be in the best interest of the fund, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Members of the Board who are not employed by the investment adviser or its affiliates are paid certain fees for services rendered to the fund as described above. They may elect to defer all or a portion of these fees through a deferred compensation plan in effect for the fund. The fund has several different classes of shares, including Class A, B, C, F, 529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. The 529 share classes are available only through CollegeAmerica/(R)/ to investors establishing qualified higher education savings accounts. The R share classes are generally available only to employer-sponsored retirement plans. Class R-5 shares are also available to clients of the Personal Investment Management group of Capital Guardian Trust Company who do not have an intermediary associated with their accounts and without regard to the $1 million purchase minimum. Shares of each class represent an interest in the same investment portfolio. Each class has pro rata rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution expenses and may bear different transfer agent fees and other expenses properly attributable to the particular class as approved by the Board of Directors and set forth in the fund's rule 18f-3 Plan. Each class' shareholders have exclusive voting rights with respect to the respective class' rule 12b-1 plans adopted in connection with the distribution of shares and on other matters in which the interests of one class are different from interests in another class. Shares of all classes of the fund vote together on matters that affect all classes in substantially the same manner. Each class votes as a class on matters that affect that class alone. Note that CollegeAmerica account owners are not shareholders of the fund and, accordingly, do not have the rights of a shareholder, such as the right to vote proxies relating to fund shares. As the legal owner of the fund's shares, the Virginia College Savings Plan/SM/ will vote any proxies relating to fund shares. The fund does not hold annual meetings of shareholders. However, significant matters that require shareholder approval, such as certain elections of Board members or a change in a fundamental investment policy, will be presented to shareholders at a meeting called for such purpose. Shareholders have one vote per share owned. At the request of the holders of at least 10% of the shares, the fund will hold a meeting at which any member of the Board could be removed by a majority vote. The fund's Articles of Incorporation and by-laws as well as separate indemnification agreements that the fund has entered into with Directors who are not "interested persons" of the fund, provide in effect that, subject to certain conditions, the fund will indemnify its officers and Directors against liabilities or expenses actually and reasonably incurred by them relating to their service to the fund. However, Directors are not protected from liability by reason of their willful misfeasance, Fundamental Investors -- Page 13 bad faith, gross negligence or reckless disregard of the duties involved in the conduct of their office. COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an Audit Committee comprised of Joseph C. Berenato, Robert J. Denison, Robert A. Fox, Leonade D. Jones and John G. McDonald, none of whom is an "interested person" of the fund within the meaning of the 1940 Act. The Committee provides oversight regarding the fund's accounting and financial reporting policies and practices, its internal controls and the internal controls of the fund's principal service providers. The Committee acts as a liaison between the fund's independent registered public accounting firm and the full Board of Directors. Three Audit Committee meetings were held during the 2004 fiscal year. The fund has a Governance and Contracts Committee comprised of Joseph C. Berenato, Robert J. Denison, Robert A. Fox, Leonade D. Jones, John G. McDonald, Gail L. Neale, Henry E. Riggs and Patricia K. Woolf, none of whom is an "interested person" of the fund within the meaning of the 1940 Act. The Committee's function is to request, review and consider the information deemed necessary to evaluate the terms of certain agreements between the fund and its investment adviser or the investment adviser's affiliates, such as the Investment Advisory and Service Agreement, Principal Underwriting Agreement, Administrative Services Agreement and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew or continue, and to make its recommendations to the full Board of Directors on these matters. Two Governance and Contracts Committee meetings were held during the 2004 fiscal year. The fund has a Nominating Committee comprised of Robert A. Fox, Leonade D. Jones, John G. McDonald, Gail L. Neale and Patricia K. Woolf, none of whom is an "interested person" of the fund within the meaning of the 1940 Act. The Committee periodically reviews such issues as the Board's composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Directors. The Committee also evaluates, selects and nominates independent Director candidates to the full Board of Directors. While the Committee normally is able to identify from its own and other resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the Nominating Committee of the fund, addressed to the fund's Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the Committee. Two Nominating Committee meetings were held during the 2004 fiscal year. The fund has a Proxy Committee comprised of Robert A. Fox, Leonade D. Jones, John G. McDonald, Henry E. Riggs and Patricia K. Woolf, none of whom is an "interested person" of the fund within the meaning of the 1940 Act. The Committee's functions include establishing and reviewing procedures and policies for voting proxies of companies held in the fund's portfolio, making determinations with regard to certain contested proxy voting issues, and discussing related current issues. Four Proxy Committee meetings were held during the 2004 fiscal year. PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting proxies of securities held by the fund, other American Funds, Endowments and American Funds Insurance Series. Certain American Funds, including the fund, have established separate proxy committees that vote proxies or delegate to a voting officer the authority to vote on behalf of those funds. Proxies for all Fundamental Investors -- Page 14 other funds are voted by a committee of the investment adviser under authority delegated by those funds' Boards. Therefore, if more than one fund invests in the same company, they may vote differently on the same proposal. All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is sufficient time and information available. After a proxy is received, the investment adviser prepares a summary of the proposals in the proxy. A discussion of any potential conflicts of interest is also included in the summary. After reviewing the summary, one or more research analysts familiar with the company and industry make a voting recommendation on the proxy proposals. A second recommendation is made by a proxy coordinator (a senior investment professional) based on the individual's knowledge of the Guidelines and familiarity with proxy-related issues. The proxy summary and voting recommendations are then sent to the appropriate proxy voting committee for the final voting decision. The analyst and proxy coordinator making voting recommendations are responsible for noting any potential material conflicts of interest. One example might be where a director of one or more American Funds is also a director of a company whose proxy is being voted. In such instances, proxy committee members are alerted to the potential conflict. The proxy committee may then elect to vote the proxy or seek a third-party recommendation or vote of an ad hoc group of committee members. The Guidelines, which have been in effect in substantially their current form for many years, provide an important framework for analysis and decision-making by all funds. However, they are not exhaustive and do not address all potential issues. The Guidelines provide a certain amount of flexibility so that all relevant facts and circumstances can be considered in connection with every vote. As a result, each proxy received is voted on a case-by-case basis considering the specific circumstances of each proposal. The voting process reflects the funds' understanding of the company's business, its management and its relationship with shareholders over time. On August 31 of each year, each fund is required to file Form N-PX containing its complete voting record for the 12 months ended the preceding June 30. The fund's voting record for the 12 months ended June 30, 2004 is available on the American Funds website at americanfunds.com and on the SEC's website at www.sec.gov. The following summary sets forth the general positions of the American Funds, Endowments, American Funds Insurance Series and the investment adviser on various proposals. A copy of the full Guidelines is available upon request, free of charge, by calling American Funds Service Company at 800/421-0180 or visiting the American Funds website. DIRECTOR MATTERS -- The election of a company's slate of nominees for director is generally supported. Votes may be withheld for some or all of the nominees if this is determined to be in the best interest of shareholders. Separation of the chairman and CEO positions may also be supported. Typically, proposals to declassify the board (elect all directors annually) are supported based on the belief that this increases the directors' sense of accountability to shareholders. SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to provide for confidential voting and to provide for cumulative voting are usually supported. Proposals to eliminate the right of shareholders to act by written consent or to take away a shareholder's right to call a special meeting are not typically supported. Fundamental Investors -- Page 15 COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many factors are considered in evaluating a plan. Each plan is evaluated based on protecting shareholder interests and a knowledge of the company and its management. Considerations include the pricing (or repricing) of options awarded under the plan and the impact of dilution on existing shareholders from past and future equity awards. Compensation packages should be structured to attract, motivate and retain existing employees and qualified directors; however, they should not be excessive. ROUTINE MATTERS -- The ratification of auditors, procedural matters relating to the annual meeting and changes to company name are examples of items considered routine. Such items are generally voted in favor of management's recommendations unless circumstances indicate otherwise. PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors who own of record or are known by the fund to own beneficially 5% or more of any class of its shares as of the opening of business on February 1, 2005. Unless otherwise indicated, the ownership percentages below represent ownership of record rather than beneficial ownership.
NAME AND ADDRESS OWNERSHIP PERCENTAGE - ---------------------------------------------------------------------------- Edward D. Jones & Co. Class A 17.86% 201 Progress Parkway Class B 11.02 Maryland Heights, MO 63043-3009 - ---------------------------------------------------------------------------- Citigroup Global Market, Inc. Class C 13.42 333 W. 34th Street New York, NY 10001 - ---------------------------------------------------------------------------- MLPF&S For The Sole Benefit Of Its Customers Class B 5.16 4800 Deer Lake Drive East, Floor 2 Class C 13.29 Jacksonville, FL 32246 Class R-3 6.33 - ---------------------------------------------------------------------------- The Matco Group, Inc. 401K Plan Class R-1 12.06 Reliance Trust Company TTEE 320 North Jensen Road Vestal, NY 13850 - ---------------------------------------------------------------------------- Wilmington Trust Company TTEE FBO Class R-1 7.73 J&R Music World PSRP Retirement Plan P.O. Box 8971 Wilmington, DE 19899 - ---------------------------------------------------------------------------- Nationwide Trust Company FSB Class R-3 6.44 P.O. Box 182029 Columbus, OH 43218 - ---------------------------------------------------------------------------- Delaware Charter Guarantee & Trust Class R-3 5.88 711 High Street Des Moines, IA 50392 - ---------------------------------------------------------------------------- BT&T Trust Class R-4 15.33 W E Stanley & Co. Omnibus Account P.O. Box 14967 Greensboro, NC 27415 - ---------------------------------------------------------------------------- Emjayco TTEE Class R-4 12.65 FBO Cornerstone Health Care PA P.O. Box 170190 Milwaukee, WI 53217 - ---------------------------------------------------------------------------- Reliance Trust Company TTEE Class R-4 8.18 Whiteman, Osterman & Hanna LLP PSRP 1 Commerce Plaza, Floor 19 Albany, NY 12260 - ---------------------------------------------------------------------------- CB&T TTEE FBO Class R-4 5.83 Olsson Associates Inc. Cash or Defined PSP & Trust c/o Fascorp Inv/Mutual Fund Trading 8515 East Orchard Road #2T2 Greenwood Village, CO 80111 - ---------------------------------------------------------------------------- CB&T TTEE FBO Class R-4 5.82 EMS 401K Profit Sharing Plan c/o Fascorp Inv/Mutual Fund Trading 8515 East Orchard Road #2T2 Greenwood Village, CO 80111 - ---------------------------------------------------------------------------- CB&T TTEE FBO Class R-4 5.40 Smithgroup Inc. c/o Fascorp Inv/Mutual Fund Trading 8515 East Orchard Road #2T2 Greenwood Village, CO 80111 - ---------------------------------------------------------------------------- Capital Group Master Retirement Plan Class R-5 34.28 c/o Capital Guardian Trust Company 333 South Hope Street, Floor 49 Los Angeles, CA 90071 - ---------------------------------------------------------------------------- The Northern Trust Company Class R-5 21.74 FBO The Gates Corporation P.O. Box 92994 Chicago, IL 60675 - ---------------------------------------------------------------------------- Capital Group 401(K) Plan Class R-5 5.18 c/o Capital Guardian Trust Company 333 South Hope Street, Floor 49 Los Angeles, CA 90071 - ----------------------------------------------------------------------------
Fundamental Investors -- Page 16 INVESTMENT ADVISER -- The investment adviser, Capital Research and Management Company, founded in 1931, maintains research facilities in the United States and abroad (Los Angeles; San Francisco; New York; Washington, DC; London; Geneva; Hong Kong; Singapore; and Tokyo) with a staff of professionals, many of whom have significant 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. Fundamental Investors -- Page 17 The investment adviser is responsible for managing more than $500 billion of stocks, bonds and money market instruments and serves over 20 million shareholder accounts of all types throughout the world. These investors include individuals, privately owned businesses and large corporations, as well as schools, colleges, foundations and other nonprofit and tax-exempt organizations. COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the investment adviser uses a system of multiple portfolio counselors in managing mutual fund assets. In addition, Capital Research and Management Company's investment analysts may make investment decisions with respect to a portion of a fund's portfolio within their research coverage. Portfolio counselors and investment analysts may manage assets in other mutual funds advised by Capital Research and Management Company. Portfolio counselors and investment analysts are paid competitive salaries by Capital Research and Management Company. In addition, they receive bonuses based on their individual portfolio results. Investment professionals also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit-sharing will vary depending on the individual's portfolio results, contributions to the organization and other factors. In order to encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total returns over a four-year period to relevant benchmarks. For portfolio counselors, benchmarks may include measures of the marketplaces in which the relevant fund invests and measures of the results of comparable mutual funds. For investment analysts, benchmarks include both relevant market measures and appropriate industry or sector indexes reflecting their areas of expertise. Capital Research and Management Company also separately compensates analysts for the quality of their research efforts. The benchmarks against which Fundamental Investors portfolio counselors are measured include: S&P 500 and Lipper Growth and Income Funds Index (adjusted). PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described below, portfolio counselors may personally own shares of the fund. In addition, portfolio counselors may manage a portion of other mutual funds or accounts advised by Capital Research and Management Company or its affiliates. THE FOLLOWING TABLE REFLECTS INFORMATION AS OF DECEMBER 31, 2004:
NUMBER NUMBER OF OTHER OF OTHER NUMBER REGISTERED POOLED OF OTHER INVESTMENT INVESTMENT ACCOUNTS COMPANIES (RICS) VEHICLES (PIVS) THAT THAT THAT PORTFOLIO PORTFOLIO PORTFOLIO COUNSELOR DOLLAR RANGE COUNSELOR COUNSELOR MANAGES OF FUND MANAGES MANAGES (ASSETS OF PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS COUNSELOR OWNED/1/ IN BILLIONS) IN BILLIONS) IN BILLIONS)/2/ - ----------------------------------------------------------------------------------------- James E. Over 2 $171.2/3/ None None Drasdo $1,000,000 - ------------------------------------------------------------------------------------------ Gordon Over 4 $169.0/3/ None None Crawford $1,000,000 - ------------------------------------------------------------------------------------------ Michael T. $500,001 -- 1 $95.3/3/ None None Kerr $1,000,000 - ------------------------------------------------------------------------------------------ Dina N. Perry Over 3 $169.3/3/ 1 $0.119/4/ None $1,000,000 - ------------------------------------------------------------------------------------------
Fundamental Investors -- Page 18 1 Ownership disclosure is made using the following ranges: None; $1 - $10,000; $10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 - $1,000,000; and Over $1,000,000. The amounts listed include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan. 2 Reflects other professionally managed accounts held at companies affiliated with Capital Research and Management Company. Personal brokerage accounts of portfolio counselors and their families are not reflected. 3 Assets noted are the total net assets of the registered investment companies and are not indicative of the total assets managed by the individual, which is a substantially lower amount. 4 Represents a fund advised by Capital Research and Management Company and sold in Europe. Assets noted represent the total net assets of the fund and are not indicative of the total assets managed by the individual, which will be a substantially lower amount. 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, 2005, unless sooner terminated, and may be renewed from year to year thereafter, provided that any such renewal has been specifically approved at least annually by (a) the Board of Directors, or by the vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the fund, and (b) the vote of a majority of Directors who are not parties to the Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Agreement provides that the investment adviser has no liability to the fund for its acts or omissions in the performance of its obligations to the fund not involving willful misconduct, bad faith, gross negligence or reckless disregard of its obligations under the Agreement. The Agreement also provides that either party has the right to terminate it, without penalty, upon 60 days' written notice to the other party, and that the Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act). In considering the renewal of the Agreement each year, the Contracts Committee of the Board of Directors evaluates information provided by the investment adviser in accordance with Section 15(c) of the 1940 Act, and presents its recommendations to the full Board of Directors. In approving the renewal of the Agreement, the Committee considered a wide variety of factors, including, among others, the high quality of services provided by the investment adviser, the financial position of the investment adviser including its profitability, the fact that economies of scale were considered in determining the investment advisory fee rates at different net asset levels, the generally excellent relative investment results of the fund, the overall reasonableness of the management fees and comparative expense ratios of the fund, the depth, quality and Fundamental Investors -- Page 19 integrity of the investment adviser and its personnel, and its long standing commitment to excellence. Based on their review, the Committee and the Board concluded that the advisory fees and expenses of the fund are fair, both absolutely and in comparison with those of other funds in the industry, and that shareholders have received reasonable value in return for paying fees and expenses. In addition to providing investment advisory services, the investment adviser furnishes the services and pays the compensation and travel expenses of persons to perform the fund's executive, administrative, clerical and bookkeeping functions, and provides suitable office space, necessary small office equipment and utilities, general purpose accounting forms, supplies and postage used at the fund's offices. The fund pays all expenses not assumed by the investment adviser, including, but not limited to, custodian, stock transfer and dividend disbursing fees and expenses; shareholder recordkeeping and administrative expenses; costs of the designing, printing and mailing of reports, prospectuses, proxy statements and notices to its shareholders; taxes; expenses of the issuance and redemption of fund shares (including stock certificates, registration and qualification fees and expenses); expenses pursuant to the fund's plans of distribution (described below); legal and auditing expenses; compensation, fees and expenses paid to 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 that 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 0.245% on net assets over $21 billion to $27 billion, plus 0.240% 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 the expense limitations described above, management fees will be reduced similarly for all classes of shares of the fund, or other Class A fees will be waived in lieu of management fees. Fundamental Investors -- Page 20 For the fiscal year ended December 31, 2004, the investment adviser was entitled to receive from the fund management fees of $59,209,000. As a result of the management fee waiver described below, for the year ended December 31, 2004, the fee shown on the accompanying financial statements of $59,209,000 was reduced by $1,020,000 to $58,189,000. For the fiscal years ended December 31, 2003 and 2002, management fees paid by the fund amounted to $48,382,000, and $51,014,000, respectively. Effective for the period from September 1, 2004 until August 31, 2005, the investment adviser has agreed to waive 5% of the management fees that it is otherwise entitled to receive under the Agreement. As a result of this waiver, management fees will be reduced similarly for all classes of shares of the fund. ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the "Administrative Agreement") between the fund and the investment adviser relating to the fund's Class C, F, R and 529 shares will continue in effect until August 31, 2005, unless sooner terminated, and may be renewed from year to year thereafter, provided that any such renewal has been specifically approved at least annually by the vote of a majority of Directors who are not parties to the Administrative Agreement or interested persons (as defined in the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. The fund may terminate the Administrative Agreement at any time by vote of a majority of 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, and all Class R and 529 shares. The investment adviser contracts with third parties, including American Funds Service Company, the fund's Transfer Agent, to provide these services. Services include, but are not limited to, shareholder account maintenance, transaction processing, tax information reporting and shareholder and fund communications. In addition, the investment adviser monitors, coordinates and oversees the activities performed by third parties providing such services. For Class R-1 and R-2 shares, the investment adviser has agreed to pay a portion of these fees. For the year ended December 31, 2004, the total fees paid by the investment adviser were $213,000. As compensation for its services, the investment adviser receives transfer agent fees for transfer agent services provided to the fund's applicable share classes. Transfer agent fees are paid monthly according to a fee schedule contained in a Shareholder Services Agreement between the fund and American Funds Service Company. The investment adviser also receives an administrative services fee for administrative services provided to the fund's applicable share classes. Administrative services fees are paid monthly, accrued daily and calculated at the annual rate of 0.15% of the average daily net assets for each applicable share class, except Class R-5 shares. For Class R-5 shares, the administrative services fee is paid monthly, accrued daily and calculated at the annual rate of 0.10% of the average net assets of Class R-5 shares. Fundamental Investors -- Page 21 During the 2004 fiscal year, administrative services fees, gross of any payments made by the investment adviser, were:
ADMINISTRATIVE SERVICES FEE - -------------------------------------------------------------------------------- CLASS C $828,000 - -------------------------------------------------------------------------------- CLASS F 634,000 - -------------------------------------------------------------------------------- CLASS 529-A 186,000 - -------------------------------------------------------------------------------- CLASS 529-B 46,000 - -------------------------------------------------------------------------------- CLASS 529-C 66,000 - -------------------------------------------------------------------------------- CLASS 529-E 9,000 - -------------------------------------------------------------------------------- CLASS 529-F 2,000 - -------------------------------------------------------------------------------- CLASS R-1 10,000 - -------------------------------------------------------------------------------- CLASS R-2 499,000 - -------------------------------------------------------------------------------- CLASS R-3 241,000 - -------------------------------------------------------------------------------- CLASS R-4 102,000 - -------------------------------------------------------------------------------- CLASS R-5 124,000 - --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds Distributors, Inc. (the "Principal Underwriter") is the principal underwriter of the fund's shares. The Principal Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071; 135 South State College Boulevard, Brea, CA 92821; 3500 Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513. The Principal Underwriter receives revenues from sales of the fund's shares. For Class A and 529-A shares, the Principal Underwriter receives commission revenue consisting of that portion of the Class A and 529-A sales charge remaining after the allowances by the Principal Underwriter to investment dealers. For Class B and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees paid by the fund for distribution expenses to a third party and receives the revenue remaining after compensating investment dealers for sales of Class B and 529-B shares. The fund also pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers of Class B and 529-B shares. For Class C and 529-C shares, the Principal Underwriter receives any contingent deferred sales charges that apply during the first year after purchase. The fund pays the Principal Underwriter for advancing the immediate service fees and commissions paid to qualified dealers of Class C and 529-C shares. For Class 529-E shares, the fund pays the Principal Underwriter for advancing the immediate service fees and commissions paid to qualified dealers. For Class F and 529-F shares, the fund pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers and advisers who sell Class F and 529-F shares. For Class R-1, R-2, R-3 and R-4 shares, the fund pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers and advisers who sell Class R-1, R-2, R-3 and R-4 shares. Fundamental Investors -- Page 22 Commissions, revenue or service fees retained by the Principal Underwriter after allowances or compensation to dealers were:
COMMISSIONS, ALLOWANCE OR REVENUE COMPENSATION FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS - ----------------------------------------------------------------------------------------------------- CLASS A 2004 $7,010,000 $31,352,000 2003 5,197,000 24,084,000 2002 7,494,000 35,357,000 CLASS B 2004 529,000 3,819,000 2003 596,000 3,754,000 2002 1,823,000 7,373,000 - ----------------------------------------------------------------------------------------------------- CLASS 529-A 2004 258,000 1,226,000 2003 181,000 871,000 2002 226,000 1,076,000 - ----------------------------------------------------------------------------------------------------- CLASS 529-B 2004 56,000 527,000 2003 51,000 277,000 2002 50,000 359,000 - -----------------------------------------------------------------------------------------------------
The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1 under the 1940 Act. The Principal Underwriter receives amounts payable pursuant to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans (together with the Principal Underwriting Agreement) have been approved by the full Board of Directors and separately by a majority of the Directors who are not "interested persons" of the fund and who have no direct or indirect financial interest in the operation of the Plans or the Principal Underwriting Agreement. Potential benefits of the Plans to the fund include quality shareholder services; savings to the fund in transfer agency costs; benefits to the investment process from growth or stability of assets; and maintenance of a financially healthy 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 the following amounts to finance any activity primarily intended to result in the sale of fund shares, provided the fund's Board of Directors has approved the category of expenses for which payment is being made: (a) for Class A shares, up to 0.25% of the average daily net assets attributable to Class A shares; (b) for Class 529-A Fundamental Investors -- Page 23 shares, up to 0.50% of the average daily net assets attributable to Class 529-A shares; (c) for Class B and 529-B shares, 1.00% of the average daily net assets attributable to Class B and 529-B shares, respectively; (d) for Class C and 529-C shares, 1.00% of the average daily net assets attributable to Class C and 529-C shares, respectively; (e) for Class 529-E shares, up to 0.75% of the average daily net assets attributable to Class 529-E shares; (f) for Class F and 529-F shares, up to 0.50% of the average daily net assets attributable to Class F and 529-F shares; (g) for Class R-1 shares, 1.00% of the average daily net assets attributable to Class R-1 shares; (h) for Class R-2 shares, up to 1.00% of the average daily net assets attributable to Class R-2 shares; (i) for Class R-3 shares, up to 0.75% of the average daily net assets attributable to Class R-3 shares; and (j) for Class R-4 shares, up to 0.50% of its average daily net assets attributable to Class R-4 shares. The fund has not adopted a Plan for Class R-5 shares; accordingly, no 12b-1 fees are paid from Class R-5 share assets. For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) up to the amount allowable under the fund's Class A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying distribution-related expenses, including for Class A and 529-A shares dealer commissions and wholesaler compensation paid on sales of shares of $1 million or more purchased without a sales charge (including purchases by employer-sponsored defined contribution-type retirement plans investing $1 million or more or with 100 or more eligible employees, and retirement plans, endowments and foundations with $50 million or more in assets -- "no load purchases"). Commissions on no load purchases of Class A and 529-A shares, in excess of the Class A and 529-A plan limitations not reimbursed to the Principal Underwriter during the most recent fiscal quarter are recoverable for five quarters, provided that such commissions do not exceed the annual expense limit. After five quarters, these commissions are not recoverable. For Class B and 529-B shares: (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for distribution-related expenses, including the financing of commissions paid to qualified dealers. For Class C and 529-C shares: (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class 529-E shares: currently (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.25% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class F and 529-F shares: currently 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers or advisers. For Class R-1 shares: (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for distribution-related expenses, including commissions paid to qualified dealers. Fundamental Investors -- Page 24 For Class R-2 shares: currently (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.50% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class R-3 shares: currently (a) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers, and (b) 0.25% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class R-4 shares: currently 0.25% is paid to the Principal Underwriter for paying service-related expenses, including paying service fees to qualified dealers or advisers. During the 2004 fiscal year, 12b-1 expenses accrued and paid, and if applicable, unpaid, were:
12B-1 LIABILITY 12B-1 EXPENSES OUTSTANDING - ------------------------------------------------------------------------------ CLASS A $47,779,000 $4,185,000 - ------------------------------------------------------------------------------ CLASS B 8,743,000 808,000 - ------------------------------------------------------------------------------ CLASS C 4,719,000 466,000 - ------------------------------------------------------------------------------ CLASS F 971,000 96,000 - ------------------------------------------------------------------------------ CLASS 529-A 191,000 20,000 - ------------------------------------------------------------------------------ CLASS 529-B 231,000 24,000 - ------------------------------------------------------------------------------ CLASS 529-C 350,000 37,000 - ------------------------------------------------------------------------------ CLASS 529-E 28,000 3,000 - ------------------------------------------------------------------------------ CLASS 529-F 4,000 472 - ------------------------------------------------------------------------------ CLASS R-1 43,000 5,000 - ------------------------------------------------------------------------------ CLASS R-2 518,000 57,000 - ------------------------------------------------------------------------------ CLASS R-3 460,000 51,000 - ------------------------------------------------------------------------------ CLASS R-4 167,000 16,000 - ------------------------------------------------------------------------------
OTHER COMPENSATION TO DEALERS -- As of January 2005, the top dealers that American Funds Distributors anticipates will receive additional compensation (as described in the prospectus) include: 1717 Capital Management Company A. G. Edwards & Sons, Inc. AIG Advisors Group American General Securities Inc. Ameritas Investment Corp. AXA Advisors, LLC Cadaret, Grant & Co., Inc. Fundamental Investors -- Page 25 Cambridge Investment Research, Inc. Capital Analysts, Inc. Commonwealth Financial Network Cuna Brokerage Services, Inc. Deutsche Bank Securities Inc. Edward Jones Ferris, Baker Watts, Inc. Hefren-Tillotson, Inc. Hornor, Townsend & Kent, Inc. ING Advisors Network Inc. InterSecurities, Inc./Transamerica Financial Advisors, Inc. Investacorp, Inc. Janney Montgomery Scott LLC Jefferson Pilot Securities Corporation JJB Hilliard, WL Lyons, Inc./PNC Bank Legg Mason Wood Walker, Inc. Lincoln Financial Advisors Corporation Linsco/Private Ledger Corp. McDonald Investments Inc./Society National Bank Merrill Lynch, Pierce, Fenner & Smith Inc. Metlife Enterprises MML Investors Services, Inc. Morgan Keegan & Company, Inc. NatCity Investment, Inc. National Planning Holdings Inc. NFP Securities, Inc. Northwestern Mutual Investment Services, LLC. Pacific Select Distributors Inc. Park Avenue Securities LLC Piper Jaffray & Co. Princor Financial Services/PPI Employee Benefits ProEquities, Inc. Raymond James Financial Services/Raymond James & Associates RBC Dain Rauscher Inc. Robert W. Baird & Co. Inc. Securian Financial Services/C.R.I. Securities Inc. Securities Service Network Inc. Signator Investors, Inc. Smith Barney Stifel, Nicolaus & Company, Inc. Terra Securities Corporation The O.N. Equity Sales Company UBS Financial Services Inc. US Bancorp Investments, Inc. Wachovia Securities WS Griffith Securities, Inc. Fundamental Investors -- Page 26 EXECUTION OF PORTFOLIO TRANSACTIONS As described in the prospectus, the investment adviser places orders with broker-dealers for the fund's portfolio transactions. Portfolio transactions for the fund may be executed as part of concurrent authorizations to purchase or sell the same security for other funds served by the investment adviser, or for trusts or other accounts served by affiliated companies of the investment adviser. When such concurrent authorizations occur, the objective is to allocate the executions in an equitable manner. Brokerage commissions paid on portfolio transactions, including investment dealer concessions on underwritings, if applicable, for the fiscal years ended December 31, 2004, 2003 and 2002 amounted to $15,147,000, $16,389,000 and $22,067,000. With respect to fixed income securities, brokerage commissions include only explicit investment dealer concessions and exclude other transaction costs which may be reflected in the spread between the bid and asked price. The volume of trading activity decreased during this period, resulting in a decrease in brokerage commissions paid on portfolio transactions. The fund is required to disclose information regarding investments in the securities of its "regular" broker-dealers (or parent companies of its regular broker-dealers) that derive more than 15% of their revenue from broker-dealer, underwriter or investment adviser activities. A regular broker-dealer is (a) one of the 10 broker-dealers that received from the fund the largest amount of brokerage commissions by participating, directly or indirectly, in the fund's portfolio transactions during the fund's most recent fiscal year; (b) one of the 10 broker-dealers that engaged as principal in the largest dollar amount of portfolio transactions of the fund during the fund's most recent fiscal year; or (c) one of the 10 broker-dealers that sold the largest amount of securities of the fund during the fund's most recent fiscal year. At the end of the fund's most recent fiscal year, the fund's regular broker-dealers included J.P. Morgan Securities Inc., Banc of America Securities LLC and Citigroup Global Markets Inc. As of the fund's fiscal year-end, the fund held debt securities in J.P. Morgan Chase & Co. in the amount of $29,955,000 and equity securities of J.P. Morgan Chase & Co. in the amount of $60,465,000, Bank of America Corp. in the amount of $192,509,000 and Citigroup Inc. in the amount of $28,908,000. DISCLOSURE OF PORTFOLIO HOLDINGS The fund's investment adviser, on behalf of the fund, has adopted policies and procedures with respect to the disclosure of information about fund portfolio securities. These policies and procedures have been reviewed by the fund's Board of Directors and compliance will be periodically assessed by the Board in connection with reporting from the fund's Chief Compliance Officer. Under these policies and procedures, the fund's complete list of portfolio holdings available for public disclosure, dated as of the end of each calendar quarter, is permitted to be posted on the American Funds website no earlier than the tenth day after such calendar quarter. In addition, the fund's list of top 10 equity portfolio holdings measured by percentage of net assets invested, dated as of the end of each calendar month, is permitted to be posted on the American Funds website no earlier than the tenth day after such month. Such portfolio holdings information may then be disclosed to any person pursuant to an ongoing arrangement to disclose portfolio holdings information to such person no earlier than one day after the day on which the information is posted on the American Funds website. Affiliates of the fund (including the fund's Board members and officers, and certain personnel of the fund's investment adviser and its Fundamental Investors -- Page 27 affiliates) and certain service providers (such as the fund's custodian and outside counsel) who require such information for legitimate business and fund oversight purposes may receive such information earlier. Affiliated persons of the fund as described above who receive portfolio holdings information are subject to restrictions and limitations on the use and handling of such information pursuant to a Code of Ethics, including requirements to maintain the confidentiality of such information, preclear securities trades and report securities transactions activity, as applicable. Third party service providers of the fund receiving such information are subject to confidentiality obligations. When portfolio holdings information is disclosed other than through the American Funds website to persons not affiliated with the fund (which, as described above, would typically occur no earlier than one day after the day on which the information is posted on the American Funds website), such persons may be bound by agreements (including confidentiality agreements) that restrict and limit their use of the information to legitimate business uses only. Neither the fund nor its investment adviser or any affiliate thereof receives compensation or other consideration in connection with the disclosure of information about portfolio securities. The authority to disclose a fund's portfolio holdings, and to establish policies with respect to such disclosure, resides with the Investment Committee of the fund's investment adviser. In exercising its authority, the Investment Committee determines whether disclosure of information about the fund's portfolio securities is appropriate and in the best interest of fund shareholders. The investment adviser has implemented policies and procedures to address conflicts of interest that may arise from the disclosure of fund holdings. For example, the Code of Ethics specifically requires, among other things, the safeguarding of information about fund holdings and contains prohibitions designed to prevent the personal use of confidential, proprietary investment information in a way that would conflict with fund transactions. In addition, the investment adviser believes that its current policy of not selling portfolio holdings information and not disclosing such information to unaffiliated third parties (other than to fund service providers for legitimate business and fund oversight purposes) until such holdings have been made public on the American Funds website, helps reduce potential conflicts of interest between fund shareholders and the investment adviser and its affiliates. PRICE OF SHARES Shares are purchased at the offering price or sold at the net asset value price next determined after the purchase or sell order is received and accepted by the fund or the Transfer Agent; the offering or net asset value price is effective for orders received prior to the time of determination of the net asset value and, in the case of orders placed with dealers or their authorized designees, accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of their designees. In the case of orders sent directly to the fund or the Transfer Agent, an investment dealer MUST be indicated. The dealer is responsible for promptly transmitting purchase and sell orders to the Principal Underwriter. Orders received by the investment dealer or authorized designee, the Transfer Agent or the fund after the time of the determination of the net asset value will be entered at the next calculated offering price. Note that investment dealers or other intermediaries may have their own rules about share transactions and may have earlier cut-off times than those of the fund. For more information about how to purchase through your intermediary, contact your intermediary directly. Fundamental Investors -- Page 28 Prices that appear in the newspaper do not always indicate prices at which you will be purchasing and redeeming shares of the fund, since such prices generally reflect the previous day's closing price, while purchases and redemptions are made at the next calculated price. The price you pay for shares, the offering price, is based on the net asset value per share, which is calculated once daily as of approximately 4:00 p.m. New York time, which is the normal close of trading on the New York Stock Exchange, each day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the fund's share price would still be determined as of 4:00 p.m. New York time. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year's Day; Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving; and Christmas Day. Each share class of the fund has a separately calculated net asset value (and share price). All portfolio securities of funds managed by Capital Research and Management Company (other than money market funds) are valued, and the net asset values per share for each share class are determined, as follows: 1. Equity securities, including depositary receipts, are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities are valued at prices obtained from an independent pricing service, when such prices are available; however, in circumstances where the investment adviser deems it appropriate to do so, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics (e.g., convertible bonds, preferred stocks, units comprised of more than one type of security, etc.), or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Securities with original maturities of one year or less having 60 days or less to maturity are amortized to maturity based on their cost if acquired within 60 days of maturity, or if already held on the 60th day, based on the value determined on the 61st day. Forward currency contracts are valued at the mean of representative quoted bid and asked prices. Assets or liabilities initially expressed in terms of non-U.S. currencies are translated prior to the next determination of the net asset value of the fund's shares into U.S. dollars at the prevailing market rates. Securities and assets for which market quotations are not readily available or are considered unreliable are valued at fair value as determined in good faith under policies approved by the fund's Board. Subject to Board oversight, the fund's Board has delegated the obligation to make fair valuation determinations to a Valuation Committee established by the fund's investment adviser. The Board receives regular reports describing fair-valued securities and the valuation methods used. The Valuation Committee has adopted guidelines and procedures (consistent with SEC rules and guidance) to ensure that certain basic principles and factors are considered when making all fair Fundamental Investors -- Page 29 value determinations. As a general principle, securities lacking readily available market quotations, or that have quotations that are considered unreliable, are valued in good faith by the Valuation Committee based upon what the fund might reasonably expect to receive upon their current sale. The Valuation Committee considers all indications of value available to it in determining the fair value to be assigned to a particular security, including, without limitation, the type and cost of the security, contractual or legal restrictions on resale of the security, relevant financial or business developments of the issuer, actively traded similar or related securities, conversion or exchange rights on the security, related corporate actions, significant events occurring after the close of trading in the security and changes in overall market conditions. 2. Each class of shares represents interests in the same portfolio of investments and is otherwise identical in all respects to each other class, except for differences relating to distribution, service and other charges and expenses, certain voting rights, differences relating to eligible investors, the designation of each class of shares, conversion features and exchange privileges. Expenses attributable to the fund, but not to a particular class of shares, are borne by each class on the basis of the relative aggregate net assets of the classes. Expenses directly attributable to a class of shares are borne by that class of shares. Liabilities, including accruals of taxes and other expense items attributable to particular share classes, are deducted from total assets attributable to the respective share classes. 3. Net assets so obtained for each share class are then divided by the total number of shares outstanding of that share class, and the result, rounded to the nearer cent, is the net asset value per share for that share class. TAXES AND DISTRIBUTIONS FUND TAXATION -- The fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code (the "Code"). A regulated investment company qualifying under Subchapter M of the Code is required to distribute to its shareholders at least 90% of its investment company taxable income (including the excess of net short-term capital gain over net long-term capital losses) and generally is not subject to federal income tax to the extent that it distributes annually 100% of its investment company taxable income and net realized capital gains in the manner required under the Code. The fund intends to distribute annually all of its investment company taxable income and net realized capital gains and therefore does not expect to pay federal income tax, although in certain circumstances, the fund may determine that it is in the interest of shareholders to distribute less than that amount. To be treated as a regulated investment company under Subchapter M of the Code, the fund must also (a) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans and gains from the sale or other disposition of securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to the business of investing in such securities or currencies, and (b) diversify its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the market value of the fund's assets is represented by cash, U.S. government securities and securities of other regulated investment companies, and other securities (for purposes of this calculation, generally limited in respect of any one issuer, to an amount not greater than 5% of the market value of the fund's assets and 10% of the outstanding voting securities of such issuer) and (ii) not more than 25% of the value of its assets is invested in the securities of (other than U.S. government securities or the securities of other regulated investment companies) any one issuer Fundamental Investors -- Page 30 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 (a) 98% of ordinary income (generally net investment income) for the calendar year, (b) 98% of capital gain (both long-term and short-term) for the one-year period ending on October 31 (as though the one-year period ending on October 31 were the regulated investment company's taxable year) and (c) the sum of any untaxed, undistributed net investment income and net capital gains of the regulated investment company for prior periods. The term "distributed amount" generally means the sum of (a) amounts actually distributed by the fund from its current year's ordinary income and capital gain net income and (b) any amount on which the fund pays income tax during the periods described above. Although the fund intends to distribute its net investment income and net capital gains so as to avoid excise tax liability, the fund may determine that it is in the interest of shareholders to distribute a lesser amount. The following information may not apply to you if you hold fund shares in a tax-deferred account, such as a retirement plan or education savings account. Please see your tax adviser for more information. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain distributions on fund shares will be reinvested in shares of the fund of the same class, unless shareholders indicate in writing that they wish to receive them in cash or in shares of the same class of other American Funds, as provided in the prospectus. Dividends and capital gain distributions by 529 share classes will be automatically reinvested. Distributions of investment company taxable income and net realized capital gains to individual shareholders will be taxable whether received in shares or in cash, unless such shareholders are exempt from taxation. Shareholders electing to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the net asset value of that share on the reinvestment date. Dividends and capital gain distributions by the fund to a tax-deferred retirement plan account are not taxable currently. DIVIDENDS -- The fund intends to follow the practice of distributing substantially all of its investment company taxable income, which includes any excess of net realized short-term gains over net realized long-term capital losses. Investment company taxable income generally includes dividends, interest, net short-term capital gains in excess of net long-term capital losses, and certain foreign currency gains, if any, less expenses and certain foreign currency losses. To the extent the fund invests in stock of domestic and certain foreign corporations, it may receive "qualified dividends". The fund will designate the amount of "qualified dividends" to its shareholders in a notice sent within 60 days of the close of its fiscal year and will report "qualified dividends" to shareholders on Form 1099-DIV. Under the Code, gains or losses attributable to fluctuations in exchange rates that occur between the time the fund accrues receivables or liabilities denominated in a foreign currency and the time the fund actually collects such receivables, or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt Fundamental Investors -- Page 31 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 may be eligible for the deduction for dividends received by corporations. Corporate shareholders will be informed of the portion of dividends that so qualifies. The dividends-received deduction is reduced to the extent that either the fund shares, or the underlying shares of stock held by the fund, with respect to which dividends are received, are treated as debt-financed under federal income tax law, and is eliminated if the shares are deemed to have been held by the shareholder or the fund, as the case may be, for less than 46 days during the 90-day period beginning on the date that is 45 days before the date on which the shares become ex-dividend. Capital gain distributions are not eligible for the dividends-received deduction. A portion of the difference between the issue price of zero coupon securities and their face value (original issue discount) is considered to be income to the fund each year, even though the fund will not receive cash interest payments from these securities. This original issue discount (imputed income) will comprise a part of the investment company taxable income of the fund that must be distributed to shareholders in order to maintain the qualification of the fund as a regulated investment company and to avoid federal income taxation at the level of the fund. Fundamental Investors -- Page 32 In addition, some of the bonds may be purchased by the fund at a discount that exceeds the original issue discount on such bonds, if any. This additional discount represents market discount for federal income tax purposes. The gain realized on the disposition of any bond having a market discount may be treated as taxable ordinary income to the extent it does not exceed the accrued market discount on such bond or a fund may elect to include the market discount in income in tax years to which it is attributable. Generally, accrued market discount may be figured under either the ratable accrual method or constant interest method. If the fund has paid a premium over the face amount of a bond, the fund has the option of either amortizing the premium until bond maturity and reducing the fund's basis in the bond by the amortized amount, or not amortizing and treating the premium as part of the bond's basis. In the case of any debt security having a fixed maturity date of not more than one year from its date of issue, the gain realized on disposition generally will be treated as a short-term capital gain. In general, any gain realized on disposition of a security held less than one year is treated as a short-term capital gain. Dividend and interest income received by the fund from sources outside the United States may be subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventions between certain countries and the United States, however, may reduce or eliminate these foreign taxes. Most foreign countries do not impose taxes on capital gains with respect to investments by foreign investors. CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to follow the practice of distributing the entire excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carry-forward of the fund. If any net long-term capital gains in excess of net short-term capital losses are retained by the fund for reinvestment, requiring federal income taxes to be paid thereon by the fund, the fund intends to elect to treat such capital gains as having been distributed to shareholders. As a result, each shareholder will report such capital gains as long-term capital gains taxable to individual shareholders at a maximum 15% capital gains rate, will be able to claim a pro rata share of federal income taxes paid by the fund on such gains as a credit against personal federal income tax liability, and will be entitled to increase the adjusted tax basis on fund shares by the difference between a pro rata share of the retained gains and such shareholder's related tax credit. SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding fund shares in taxable accounts will receive a statement of the federal income tax status of all distributions. Shareholders of the fund also may be subject to state and local taxes on distributions received from the fund. DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income. Under the 2003 Tax Act, all or a portion of a fund's dividend distribution may be a "qualified dividend." Only fund dividends derived from qualified corporation dividends paid to the fund after December 31, 2002, and held by the fund for the appropriate holding period, will be distributed to shareholders as qualified dividends. Interest income from bonds and money market instruments and nonqualified foreign dividends will be distributed to shareholders as nonqualified fund dividends. The fund will report on Form 1099-DIV the amount of each shareholder's dividend that may be treated as a qualified dividend. If a Fundamental Investors -- Page 33 shareholder meets the requisite holding period requirement, qualified dividends are taxable at a maximum tax rate of 15%. CAPITAL GAINS -- Distributions of the excess of net long-term capital gains over net short-term capital losses that the fund properly designates as "capital gain dividends" generally will be taxable as long-term capital gain. Regardless of the length of time the shares of the fund have been held by a shareholder, a capital gain distribution by the fund is subject to a maximum tax rate of 15%. Any loss realized upon the redemption of shares held at the time of redemption for six months or less from the date of their purchase will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gains during such six-month period. Distributions by the fund result in a reduction in the net asset value of the fund's shares. Investors should consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will subsequently receive a partial return of their investment capital upon payment of the distribution, which will be taxable to them. Redemptions of shares, including exchanges for shares of other American Funds, may result in federal, state and local tax consequences (gain or loss) to the shareholder. However, conversion from one class to another class in the same fund should not be a taxable event. If a shareholder exchanges or otherwise disposes of shares of the fund within 90 days of having acquired such shares, and if, as a result of having acquired those shares, the shareholder subsequently pays a reduced sales charge for shares of the fund, or of a different fund, the sales charge previously incurred in acquiring the fund's shares will not be taken into account (to the extent such previous sales charges do not exceed the reduction in sales charges) for the purposes of determining the amount of gain or loss on the exchange, but will be treated as having been incurred in the acquisition of such other 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 backup withholding of federal income tax in the case of non-exempt U.S. shareholders who fail to furnish the investment company with their taxpayer identification numbers and with required certifications regarding their status under the federal income tax law. Withholding may also be required if the fund is notified by the IRS or a broker that the taxpayer identification number furnished by the shareholder is incorrect or that the shareholder has previously failed to report interest or dividend income. If the withholding provisions are applicable, any such distributions and proceeds, whether taken in cash or reinvested in additional shares, will be reduced by the amounts required to be withheld. The foregoing discussion of U.S. federal income tax law relates solely to the application of that law to U.S. persons (i.e., U.S. citizens and residents and U.S. corporations, partnerships, trusts and estates). Each shareholder who is not a U.S. person should consider the U.S. and foreign tax Fundamental Investors -- Page 34 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. UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO COLLEGEAMERICA ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES. PURCHASE AND EXCHANGE OF SHARES PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally open an account and purchase fund shares by contacting a financial adviser or investment dealer authorized to sell the fund's shares. You may make investments by any of the following means: CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your financial adviser. BY MAIL -- for initial investments, you may mail a check, made payable to the fund, directly to the address indicated on the account application. Please indicate an investment dealer on the account application. You may make additional investments by filling out the "Account Additions" form at the bottom of a recent account statement and mailing the form, along with a check made payable to the fund, using the envelope provided with your account statement. BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder account services and privileges" section of this document for more information regarding this service. BY INTERNET -- using americanfunds.com. Please see the "Shareholder account services and privileges" section of this document for more information regarding this service. Fundamental Investors -- Page 35 BY WIRE -- If you are making a wire transfer, instruct your bank to wire funds to: Wells Fargo Bank ABA Routing No. 121000248 Account No. 4600-076178 Your bank should include the following information when wiring funds: For credit to the account of: American Funds Service Company (fund's name) For further credit to: (shareholder's fund account number) (shareholder's name) You may contact American Funds Service Company at 800/421-0180 if you have questions about making wire transfers. All investments are subject to the purchase minimums and maximums described in the prospectus. The fund and the Principal Underwriter reserve the right to reject any purchase order. 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. Class 529 shares may be purchased by investors only through CollegeAmerica accounts. Class 529-E shares may be purchased only by investors participating in CollegeAmerica through an eligible employer plan. In addition, the American Funds state tax-exempt funds are qualified for sale only in certain jurisdictions, and tax-exempt funds in general should not serve as retirement plan investments. EXCHANGES -- You may only exchange shares into other American Funds within the same share class. However, exchanges from Class A shares of The Cash Management Trust of America may be made to Class B or C shares of other American Funds for dollar cost averaging purposes. Exchange purchases are subject to the minimum investment requirements of the fund purchased and no sales charge generally applies. However, exchanges of shares from American Funds money market funds are subject to applicable sales charges on the fund being purchased, unless the money market fund shares were acquired by an exchange from a fund having a sales charge, or by reinvestment or cross-reinvestment of dividends or capital gain distributions. Exchanges of Class F shares generally may only be made through fee-based programs of investment firms that have special agreements with the fund's distributor and certain registered investment advisers. You may exchange shares of other classes by contacting the Transfer Agent, by contacting your investment dealer or financial adviser, by using American FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or faxing (see "American Funds Service Company service areas" in the prospectus for the appropriate fax numbers) the Transfer Agent. For more information, see "Shareholder account services and privileges" below. THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES. Fundamental Investors -- Page 36 Shares held in employer-sponsored retirement plans may be exchanged into other American Funds by contacting your plan administrator or recordkeeper. Exchange redemptions and purchases are processed simultaneously at the share prices next determined after the exchange order is received (see "Price of shares" above). FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain redemptions may trigger a purchase block lasting 30 calendar days under the fund's "purchase blocking policy." For purposes of this policy, systematic redemptions include, for example, regular periodic automatic redemptions and statement of intention escrow share redemptions. Systematic purchases include, for example, regular periodic automatic purchases and automatic reinvestments of dividends and capital gain distributions. OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase blocks, American Funds Service Company will monitor for other types of activity that could potentially be harmful to the American Funds - for example, short-term trading activity in multiple funds. When identified, American Funds Service Company will request that the shareholder discontinue the activity. If the activity continues, American Funds Service Company will freeze the shareholder account to prevent all activity other than redemptions of fund shares. SALES CHARGES CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES -- As described in the prospectus, certain purchases of Class A shares are not subject to a sales charge. Additional information regarding certain of such purchases is described below. EMPLOYER-SPONSORED RETIREMENT PLANS As noted in the prospectus, employer-sponsored retirement plans are not eligible to purchase Class A shares without a sales charge, or establish a statement of intention to do so, unless they are currently invested in Class A shares. 403(b) plans may be treated as employer-sponsored plans for sales charge purposes if: (a) the American Funds are principal investment options; (b) the employer facilitates the enrollment process by, for example, allowing for onsite group enrollment meetings held during working hours; and (c) there is only one dealer firm assigned to the plans. OTHER PURCHASES Pursuant to a determination of eligibility by a vice president or more senior officer of the Capital Research and Management Company Fund Administration Unit, or by his or her designee, Class A shares of the American Funds stock, stock/bond and bond funds may be sold at net asset value to: (1) current or retired directors, trustees, officers and advisory board members of, and certain lawyers who provide services to, the funds managed by Capital Research and Management Company, current or retired employees of Washington Management Corporation, current or retired employees and partners of The Capital Group Companies, Inc. and its affiliated companies, certain family members and employees of the above persons, and trusts or plans primarily for such persons; Fundamental Investors -- Page 37 (2) current registered representatives and assistants directly employed by such representatives, retired registered representatives with respect to accounts established while active, or full-time employees (collectively, "Eligible Persons") (and their (a) spouses or equivalents if recognized under local law, (b) parents and children, including parents and children in step and adoptive relationships, sons-in-law and daughters-in-law, and (c) parents-in-law, if the Eligible Persons or the spouses, children or parents of the Eligible Persons are listed in the account registration with the parents-in-law) of dealers who have sales agreements with the Principal Underwriter (or who clear transactions through such dealers), plans for the dealers, and plans that include as participants only the Eligible Persons, their spouses, parents and/or children; (3) current registered investment advisers ("RIAs") and assistants directly employed by such RIAs, retired RIAs with respect to accounts established while active, or full-time employees (collectively, "Eligible Persons") (and their (a) spouses or equivalents if recognized under local law, (b) parents and children, including parents and children in step and adoptive relationships, sons-in-law and daughters-in-law and (c) parents-in-law, if the Eligible Persons or the spouses, children or parents of the Eligible Persons are listed in the account registration with the parents-in-law) of RIA firms that are authorized to sell shares of the funds, plans for the RIA firms, and plans that include as participants only the Eligible Persons, their spouses, parents and/or children; (4) companies exchanging securities with the fund through a merger, acquisition or exchange offer; (5) insurance company separate accounts; (6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; (7) The Capital Group Companies, Inc., its affiliated companies and Washington Management Corporation; (8) an individual or entity with a substantial business relationship with The Capital Group Companies, Inc. or its affiliates, or an individual or entity related or relating to such individual or entity; (9) wholesalers and full-time employees directly supporting wholesalers involved in the distribution of insurance company separate accounts whose underlying investments are managed by any affiliate of The Capital Group Companies, Inc.; and (10) full-time employees of banks that have sales agreements with the Principal Underwriter, who are solely dedicated to directly supporting the sale of mutual funds. Shares are offered at net asset value to these persons and organizations due to anticipated economies in sales effort and expense. Once an account is established under this net asset value privilege, additional investments can be made at net asset value for the life of the account. DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to dealers who initiate and are responsible for certain Class A share purchases not subject to sales charges. These purchases consist of purchases of $1 million or more, purchases by employer-- Fundamental Investors -- Page 38 sponsored defined contribution-type retirement plans investing $1 million or more or with 100 or more eligible employees, IRA rollover accounts of $1 million or more and purchases made at net asset value by certain retirement plans, endowments and foundations with assets of $50 million or more. Commissions on such investments are paid to dealers at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4 million to $10 million and 0.25% on amounts over $10 million. Commissions are based on cumulative investments and are not annually reset. A dealer concession of up to 1% may be paid by the fund under its Class A plan of distribution to reimburse the Principal Underwriter in connection with dealer and wholesaler compensation paid by it with respect to investments made with no initial sales charge. SALES CHARGE REDUCTIONS AND WAIVERS REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are various ways to reduce your sales charge when purchasing Class A shares. Additional information about Class A sales charge reductions is provided below. STATEMENT OF INTENTION -- By establishing a statement of intention (the "Statement"), you enter into a nonbinding commitment to purchase shares of American Funds non-money market funds over a 13-month period and receive the same sales charge as if all shares had been purchased at once. When a shareholder elects to use a Statement, shares equal to 5% of the dollar amount specified in the Statement will be held in escrow in the shareholder's account out of the initial purchase (or subsequent purchases, if necessary) by the Transfer Agent. All dividends and any capital gain distributions on shares held in escrow will be credited to the shareholder's account in shares (or paid in cash, if requested). If the intended investment is not completed within the specified 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. The dealer assigned to the account at the end of the period will receive an appropriate commission adjustment. If the difference is not paid by the close of the Statement period, the appropriate number of shares held in escrow will be redeemed to pay such difference. If the proceeds from this redemption are inadequate, the purchaser will be liable to the Principal Underwriter for the balance still outstanding. The Statement may be revised upward at any time during the 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 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) may be credited toward satisfying the Statement. The Statement will be considered completed if the shareholder dies within the 13-month Statement period. Commissions to dealers will not be adjusted or paid on the difference between the Statement amount and the amount actually invested before the shareholder's death. Fundamental Investors -- Page 39 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 total monthly investment will be multiplied by 13 and then multiplied by 1.5. The current value of existing American Funds investments (other than shares representing direct purchases of money market funds) and any rollovers or transfers reasonably anticipated to be invested in non-money market American Funds during the 13-month period are added to the figure determined above. The sum is the Statement amount and applicable breakpoint level. On the first investment and all other investments made pursuant to the Statement, a sales charge will be assessed according to the sales charge breakpoint thus determined. There will be no retroactive adjustments in sales charges on investments made during the 13-month period. Shareholders purchasing shares at a reduced sales charge under a Statement indicate their acceptance of these terms and those in the prospectus with their first purchase. AGGREGATION -- Qualifying investments for aggregation include those made by you and your "immediate family" as defined in the prospectus, if all parties are purchasing shares for their own accounts and/or: - individual-type employee benefit plan(s), such as an IRA, 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); - endowments or foundations established and controlled by you or your immediate family; or - CollegeAmerica accounts, which will be aggregated at the account owner level (Class 529-E accounts may only be aggregated with an eligible employer plan). Individual purchases by a trustee(s) or other fiduciary(ies) may also be aggregated if the investments are: - for a single trust estate or fiduciary account, including employee benefit plans other than the individual-type employee benefit plans described above; - made for two or more employee benefit plans of a single employer or of affiliated employers as defined in the 1940 Act, 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 nonprofit, 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 Fundamental Investors -- Page 40 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 -- As described in the prospectus, you may reduce your Class A sales charge by combining purchases of all classes of shares in the American Funds, as well as individual holdings in Endowments, American Legacy variable annuity contracts and variable life insurance policies. Shares of money market funds purchased through an exchange, reinvestment or cross-reinvestment from a fund having a sales charge also qualify. However, direct purchases of American Funds money market funds are excluded. RIGHTS OF ACCUMULATION -- Subject to the limitations described in the aggregation policy, you may take into account the current value of your existing holdings in all share classes of the American Funds, as well as your holdings in Endowments, to determine your sales charge on investments in accounts eligible to be aggregated. Alternatively, if your investment is not in an employer-sponsored retirement plan, upon your request, you may take into account the amount you invested less any withdrawals (however, for this purpose, the amount invested does not include capital appreciation or reinvested dividends and capital gains). 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 annuity contracts and variable life insurance policies. An employer-sponsored retirement plan may also take into account the current value of its investments in American Legacy Retirement Investment Plans. Direct purchases of American Funds money market funds are excluded. If you make a gift of shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds and American Legacy accounts. CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a contingent deferred sales charge ("CDSC") may be waived for redemptions due to death or postpurchase disability of a shareholder (this generally excludes accounts registered in the names of trusts and other entities). In the case of joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at the time he or she notifies the Transfer Agent of the other joint tenant's death and removes the decedent's name from the account, may redeem shares from the account without incurring a CDSC. Redemptions made after the Transfer Agent is notified of the death of a joint tenant will be subject to a CDSC. In addition, a CDSC may be waived for the following types of transactions, if together they do not exceed 12% of the value of an "account" (defined below) annually (the "12% limit"): - Required minimum distributions taken from retirement accounts upon the shareholder's attainment of age 70-1/2 (required minimum distributions that continue to be taken by the beneficiary(ies) after the account owner is deceased also qualify for a waiver). Fundamental Investors -- Page 41 - Redemptions through a systematic withdrawal plan (SWP) (see "Automatic withdrawals" under "Shareholder account services and privileges" below). For each SWP payment, assets that are not subject to a CDSC, such as appreciation on shares and shares acquired through reinvestment of dividends and/or capital gain distributions, will be redeemed first and will count toward the 12% limit. If there is an insufficient amount of assets not subject to a CDSC to cover a particular SWP payment, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. Any dividends and/or capital gain distributions taken in cash by a shareholder who receives payments through a SWP will also count toward the 12% limit. In the case of a SWP, the 12% limit is calculated at the time a systematic redemption is first made, and is recalculated at the time each additional systematic redemption is made. Shareholders who establish a SWP should be aware that the amount of a payment not subject to a CDSC may vary over time depending on fluctuations in the value of their accounts. This privilege may be revised or terminated at any time. For purposes of this paragraph, "account" means: - in the case of Class A shares, your investment in Class A shares of all American Funds (investments representing direct purchases of American Funds money market funds are excluded); - in the case of Class B shares, your investment in Class B shares of the particular fund from which you are making the redemption; and - in the case of Class C shares, your investment in Class C shares of the particular fund from which you are making the redemption. CDSC waivers are allowed only in the cases listed here and in the prospectus. For example, CDSC waivers will not be allowed on redemptions of Class 529-B and 529-C shares due to termination of CollegeAmerica; a determination by the Internal Revenue Service that CollegeAmerica does not qualify as a qualified tuition program under the Code; proposal or enactment of law that eliminates or limits the tax-favored status of CollegeAmerica; or the Virginia College Savings Plan eliminating the fund as an option for additional investment within CollegeAmerica. SELLING SHARES The methods for selling (redeeming) shares are described more fully in the prospectus. If you wish to sell your shares by contacting American Funds Service Company directly, any such request must be signed by the registered shareholders. A signature guarantee may be required for certain redemptions. In such an event, your signature may be guaranteed by a domestic stock exchange or the National Association of Securities Dealers, Inc., bank, savings association or credit union that is an eligible guarantor institution. The Transfer Agent reserves the right to require a signature guarantee on any redemptions. Additional documentation may be required for sales of shares held in corporate, partnership or fiduciary accounts. You must include with your written request any shares you wish to sell that are in certificate form. Fundamental Investors -- Page 42 If you sell Class A, B or C shares and request a specific dollar amount to be sold, we will sell sufficient shares so that the sale proceeds, after deducting any applicable CDSC, equals the dollar amount requested. Redemption proceeds will not be mailed until sufficient time has passed to provide reasonable assurance that checks or drafts (including certified or cashier's checks) for shares purchased have cleared (which may take up to 15 calendar days from the purchase date). Except for delays relating to clearance of checks for share purchases or in extraordinary circumstances (and as permissible under the 1940 Act), sale proceeds will be paid on or before the seventh day following receipt and acceptance of an order. Interest will not accrue or be paid on amounts that represent uncashed distribution or redemption checks. You may request that redemption proceeds of $1,000 or more from money market funds be wired to your bank by writing American Funds Service Company. A signature guarantee is required on all requests to wire funds. SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES The following services and privileges are generally available to all shareholders. However, certain services and privileges may not be available for Class 529 shareholders or if your account is held with an investment dealer or through an employer-sponsored retirement plan. AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make monthly or quarterly investments in the American Funds through automatic debits from your bank account. To set up a plan, you must fill out an account application and specify the amount that you would like to invest ($50 minimum) and the date on which you would like your investments to occur. The plan will begin within 30 days after your account application is received. Your bank account will be debited on the day or a few days before your investment is made, depending on the bank's capabilities. The Transfer Agent will then invest your money into the fund you specified on or around the date you specified. If the date you specified falls on a weekend or holiday, your money will be invested on the following business day. However, if the following business day falls in the next month, your money will be invested on the business day immediately preceding the weekend or holiday. If your bank account cannot be debited due to insufficient funds, a stop-payment or the closing of the account, the plan may be terminated and the related investment reversed. You may change the amount of the investment or discontinue the plan at any time by contacting the Transfer Agent. AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are reinvested in additional shares of the same class and fund at net asset value unless you indicate otherwise on the account application. You also may elect to have dividends and/or capital gain distributions paid in cash by informing the fund, the Transfer Agent or your investment dealer. Dividends and capital gain distributions paid to retirement plan shareholders or shareholders of the 529 share classes will be automatically reinvested. If you have elected to receive dividends and/or capital gain distributions in cash, and the postal or other delivery service is unable to deliver checks to your address of record, or you do not respond to mailings from American Funds Service Company with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and other distributions reinvested in additional shares. Fundamental Investors -- Page 43 CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes, except the 529 classes of shares, you may cross-reinvest dividends and capital gains (distributions) into other American Funds in the same share class at net asset value, subject to the following conditions: (1) the aggregate value of your account(s) in the fund(s) paying distributions equals or exceeds $5,000 (this is waived if the value of the account in the fund receiving the distributions equals or exceeds that fund's minimum initial investment requirement); (2) if the value of the account of the fund receiving distributions is below the minimum initial investment requirement, distributions must be automatically reinvested; and (3) if you discontinue the cross-reinvestment of distributions, the value of the account of the fund receiving distributions must equal or exceed the minimum initial investment requirement. If you do not meet this requirement within 90 days of notification, the fund has the right to automatically redeem the account. AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange shares of the same class in amounts of $50 or more among any of the American Funds on any day (or preceding business day if the day falls on a nonbusiness day) of each month you designate. AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of shares, you may automatically withdraw shares from any of the American Funds. You can make automatic withdrawals of $50 or more as often as you wish if your account is worth at least $10,000, or up to four times a year for an account worth at least $5,000. You can designate the day of each period for withdrawals and request that checks be sent to you or someone else. Withdrawals may also be electronically deposited to your bank account. The Transfer Agent will withdraw your money from the fund you specify on or around the date you specify. If the date you specified falls on a weekend or holiday, the redemption will take place on the previous business day. However, if the previous business day falls in the preceding month, the redemption will take place on the following business day after the weekend or holiday. Withdrawal payments are not to be considered as dividends, yield or income. Automatic investments may not be made into a shareholder account from which there are automatic withdrawals. Withdrawals of amounts exceeding reinvested dividends and distributions and increases in share value would reduce the aggregate value of the shareholder's account. The Transfer Agent arranges for the redemption by the fund of sufficient shares, deposited by the shareholder with the Transfer Agent, to provide the withdrawal payment specified. ACCOUNT STATEMENTS -- Your account is opened in accordance with your registration instructions. Transactions in the account, such as additional investments, will be reflected on regular confirmation statements from the Transfer Agent. Dividend and capital gain reinvestments, purchases through automatic investment plans and certain retirement plans, as well as automatic exchanges and withdrawals will be confirmed at least quarterly. AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance, the price of your shares or your most recent account transaction; redeem shares (up to $75,000 per American Funds shareholder each day) from nonretirement plan accounts; or exchange shares around the clock with American FundsLine or using americanfunds.com. To use American FundsLine, call 800/325-3590 from a TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine and americanfunds.com are subject to the conditions noted above Fundamental Investors -- Page 44 and in "Telephone and Internet purchases, redemptions and exchanges" below. You will need your fund number (see the list of the American Funds under "General information -- fund numbers"), personal identification number (generally the last four digits of your Social Security number or other tax identification number associated with your account) and account number. Generally, all shareholders are automatically eligible to use these services. However, if you are not currently authorized to do so, you may complete an American FundsLink Authorization Form. Once you establish this privilege, you, your financial adviser or any person with your account information may use these services. TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the telephone (including American FundsLine) or the Internet (including americanfunds.com), or fax purchase, redemption and/or exchange options, you agree to hold the fund, the Transfer Agent, any of its affiliates or mutual funds managed by such affiliates, and each of their respective directors, trustees, officers, employees and agents harmless from any losses, expenses, costs or liability (including attorney fees) that may be incurred in connection with the exercise of these privileges. Generally, all shareholders are automatically eligible to use these services. However, you may elect to opt out of these services by writing the Transfer Agent (you may also reinstate them at any time by writing the Transfer Agent). If the Transfer Agent does not employ reasonable procedures to confirm that the instructions received from any person with appropriate account information are genuine, it and/or the fund may be liable for losses due to unauthorized or fraudulent instructions. In the event that shareholders are unable to reach the fund by telephone because of technical difficulties, market conditions or a natural disaster, redemption and exchange requests may be made in writing only. CHECKWRITING -- You may establish check writing privileges for Class A shares (but not Class 529-A shares) of American Funds money market funds. This can be done by using an account application. If you request check writing privileges, you will be provided with checks that you may use to draw against your account. These checks may be made payable to anyone you designate and must be signed by the authorized number of registered shareholders exactly as indicated on your checking account signature card. REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund to direct the Transfer Agent to redeem the shares of any shareholder for their then current net asset value per share if at such time the shareholder of record owns shares having an aggregate net asset value of less than the minimum initial investment amount required of new shareholders as set forth in the fund's current registration statement under the 1940 Act, and subject to such further terms and conditions as the Board of Directors of the fund may from time to time adopt. While payment of redemptions normally will be in cash, the fund's Articles of Incorporation permit payment of the redemption price wholly or partly in securities or other property included in the assets belonging to the fund when in the opinion of the fund's Board of Directors, which shall be conclusive, conditions exist which make payment wholly in cash unwise or undesirable. SHARE CERTIFICATES -- Shares are credited to your account and certificates are not issued unless you request them by contacting the Transfer Agent. Certificates are not available for the 529 or R share classes. Fundamental Investors -- Page 45 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 02110, as Custodian. If the fund holds non-U.S. securities, the Custodian may hold these securities pursuant to subcustodial arrangements in non-U.S. banks or non-U.S. branches of U.S. banks. TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of the investment adviser, maintains the records of shareholder accounts, processes purchases and redemptions of the fund's shares, acts as dividend and capital gain distribution disbursing agent, and performs other related shareholder service functions. The principal office of American Funds Service Company is located at 135 South State College Boulevard, Brea, CA 92821-5823. American Funds Service Company was paid a fee of $18,904,000 for Class A shares and $892,000 for Class B shares for the 2004 fiscal year. In the case of certain shareholder accounts, third parties who may be unaffiliated with the investment adviser provide transfer agency and shareholder services in place of American Funds Service Company. These services are rendered under agreements with American Funds Service Company or its affiliates and the third parties receive compensation according to such agreements. Compensation for transfer agency and shareholder services, whether paid to American Funds Service Company or such third parties, is ultimately paid from fund assets and is reflected in the expenses of the fund as disclosed in the prospectus. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, Two California Plaza, 350 South Grand Avenue, Suite 200, Los Angeles, CA 90071, serves as the fund's independent registered public accounting firm, providing audit services, preparation of tax returns and review of certain documents to be filed with the Securities and Exchange Commission. The financial statements included in this statement of additional information from the annual report have been so included in reliance on the report of Deloitte & Touche LLP, independent registered public accounting firm, given on the authority of said firm as experts in accounting and auditing. The selection of the fund's independent registered public accounting firm is reviewed and determined annually by the Board of Directors. INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 515 South Flower Street, Los Angeles, CA 90071, serves as counsel for the fund and for Directors who are not "interested persons" (as defined by the 1940 Act) of the fund in their capacities as such. Certain legal matters in connection with the capital shares offered by the prospectus have been passed upon for the fund by Paul, Hastings, Janofsky & Walker LLP. Counsel does not provide legal services to the fund's investment adviser or any of its affiliated companies. A determination with respect to the independence of the fund's "independent legal counsel" will be made at least annually by the independent Directors of the fund, as prescribed by the 1940 Act and related rules. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal year ends on 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 registered public accounting firm, Deloitte & Touche LLP. In addition, shareholders may also receive proxy statements for the fund. In an effort to reduce the volume of mail shareholders receive from the fund when a household owns more than one account, the Transfer Agent has Fundamental Investors -- Page 46 taken steps to eliminate duplicate mailings of prospectuses, shareholder reports and proxy statements. To receive additional copies of a prospectus, report or proxy statement, shareholders should contact the Transfer Agent. CODES OF ETHICS -- The fund and Capital Research and Management Company and its affiliated companies, including the fund's Principal Underwriter, have adopted codes of ethics that allow for personal investments, including securities in which the fund may invest from time to time. These codes include a ban on acquisitions of securities pursuant to an initial public offering; restrictions on acquisitions of private placement securities; preclearance and reporting requirements; review of duplicate confirmation statements; annual recertification of compliance with codes of ethics; blackout periods on personal investing for certain investment personnel; ban on short-term trading profits for investment personnel; limitations on service as a director of publicly traded companies; and disclosure of personal securities transactions. OTHER INFORMATION -- The financial statements including the investment portfolio and the report of the fund's independent registered public accounting firm contained in the annual report are included in this statement of additional information. The following information is not included in the annual report: DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 2004
Net asset value and redemption price per share (Net assets divided by shares outstanding). . $32.25 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). . . . . . . . . . . . . . . . $34.22
FUND NUMBERS -- Here are the fund numbers for use with our automated telephone line, American FundsLine/(R)/, or when making share transactions:
FUND NUMBERS ------------------------------------ FUND CLASS A CLASS B CLASS C CLASS F - ----------------------------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402 American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411 American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403 Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412 Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433 EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416 Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410 The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405 The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406 The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404 The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414 New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407 New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436 SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435 Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401 BOND FUNDS American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440 American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421 The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408 Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431 Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423 Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443 The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419 The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420 The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424 The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425 U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422 MONEY MARKET FUNDS The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409 The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A ___________ *Qualified for sale only in certain jurisdictions.
Fundamental Investors -- Page 47
FUND NUMBERS --------------------------------------------- CLASS CLASS CLASS CLASS CLASS FUND 529-A 529-B 529-C 529-E 529-F - ------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402 American Balanced Fund . . . . 1011 1211 1311 1511 1411 American Mutual Fund . . . . . 1003 1203 1303 1503 1403 Capital Income Builder . . . . 1012 1212 1312 1512 1412 Capital World Growth and Income Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433 EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416 Fundamental Investors . . . . . 1010 1210 1310 1510 1410 The Growth Fund of America . . 1005 1205 1305 1505 1405 The Income Fund of America . . 1006 1206 1306 1506 1406 The Investment Company of America . . . . . . . . . . . . 1004 1204 1304 1504 1404 The New Economy Fund . . . . . 1014 1214 1314 1514 1414 New Perspective Fund . . . . . 1007 1207 1307 1507 1407 New World Fund . . . . . . . . 1036 1236 1336 1536 1436 SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435 Washington Mutual Investors Fund . . . . . . . . . . . . . . . 1001 1201 1301 1501 1401 BOND FUNDS American High-Income Trust . . 1021 1221 1321 1521 1421 The Bond Fund of America . . . 1008 1208 1308 1508 1408 Capital World Bond Fund . . . . 1031 1231 1331 1531 1431 Intermediate Bond Fund of America . . . . . . . . . . . . 1023 1223 1323 1523 1423 U.S. Government Securities Fund 1022 1222 1322 1522 1422 MONEY MARKET FUND The Cash Management Trust of America . . . . . . . . . . . . 1009 1209 1309 1509 1409
Fundamental Investors -- Page 48
FUND NUMBERS ---------------------------------------- CLASS CLASS CLASS CLASS CLASS FUND R-1 R-2 R-3 R-4 R-5 - ------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502 American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511 American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503 Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512 Capital World Growth and Income Fund 2133 2233 2333 2433 2533 EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516 Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510 The Growth Fund of America . . . . . 2105 2205 2305 2405 2505 The Income Fund of America . . . . . 2106 2206 2306 2406 2506 The Investment Company of America . 2104 2204 2304 2404 2504 The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514 New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507 New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536 SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535 Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501 BOND FUNDS American High-Income Municipal Bond Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540 American High-Income Trust . . . . . 2121 2221 2321 2421 2521 The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508 Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531 Intermediate Bond Fund of America . 2123 2223 2323 2423 2523 Limited Term Tax-Exempt Bond Fund of America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543 The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519 The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520 The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524 The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525 U.S. Government Securities Fund . . 2122 2222 2322 2422 2522 MONEY MARKET FUNDS The Cash Management Trust of America 2109 2209 2309 2409 2509 The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539 The U.S. Treasury Money Fund of America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549 ___________ *Qualified for sale only in certain jurisdictions.
Fundamental Investors -- Page 49 APPENDIX The following descriptions of debt security ratings are based on information provided by Moody's Investors Service (Moody's) and Standard & Poor's Corporation (Standard & Poor's). DESCRIPTION OF BOND RATINGS MOODY'S LONG-TERM RATING DEFINITIONS Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. A Obligations rated A are considered upper-medium grade and are subject to low credit risk. Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. Ba Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. B Obligations rated B are considered speculative and are subject to high credit risk. Caa Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk. Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest. C Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest. NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Fundamental Investors -- Page 50 STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS AAA An obligation rated AAA has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong. AA An obligation rated AA differs from the highest-rated obligations only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A An obligation rated A is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong. BBB An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. BB, B, CCC, CC, AND C Obligations rated BB, B, CCC, CC, and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. BB An obligation rated BB is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation. B An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation. CCC An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation. CC An obligation rated CC is currently highly vulnerable to nonpayment. Fundamental Investors -- Page 51 C The C rating may be used to cover a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued. D An obligation rated D is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's 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 or the taking of a similar action if payments on an obligation are jeopardized. PLUS (+) OR MINUS (-) 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. Fundamental Investors -- Page 52 [logo - American Funds (r)] FUNDAMENTAL INVESTORS Investment portfolio December 31, 2004 Market value COMMON STOCKS -- 92.51% Shares (000) ENERGY -- 13.08% Suncor Energy Inc. 18,490,501 $ 653,331 Royal Dutch Petroleum Co. (New York registered) 8,425,000 483,427 Exxon Mobil Corp. 5,000,000 256,300 Norsk Hydro ASA 2,168,000 170,127 Norsk Hydro ASA (ADR) 700,000 55,104 Shell Canada Ltd. 3,273,200 218,186 LUKoil Holding (ADR) 1,750,000 214,375 Halliburton Co. 4,600,000 180,504 Baker Hughes Inc. 3,800,000 162,146 Murphy Oil Corp. 1,970,000 158,487 ConocoPhillips 1,650,000 143,269 ChevronTexaco Corp. 2,000,000 105,020 Unocal Corp. 2,164,332 93,586 Burlington Resources Inc. 2,000,000 87,000 Imperial Oil Ltd. 1,189,266 70,642 Occidental Petroleum Corp. 1,000,000 58,360 Marathon Oil Corp. 1,525,000 57,355 3,167,219 INDUSTRIALS -- 12.38% Deere & Co. 5,500,000 409,200 Caterpillar Inc. 3,600,000 351,036 General Electric Co. 9,500,000 346,750 Northrop Grumman Corp. 4,316,333 234,636 Parker Hannifin Corp. 2,800,000 212,072 General Dynamics Corp. 1,772,900 185,445 Tyco International Ltd. 5,125,000 183,168 Raytheon Co. 4,461,372 173,235 Emerson Electric Co. 2,200,000 154,220 Union Pacific Corp. 2,200,000 147,950 3M Co. 1,600,000 131,312 Boeing Co. 2,400,000 124,248 United Technologies Corp. 750,000 77,513 Burlington Northern Santa Fe Corp. 1,500,000 70,965 Avery Dennison Corp. 950,000 56,971 Illinois Tool Works Inc. 357,200 33,105 Continental Airlines, Inc., Class B(1) 2,300,000 31,142 Southwest Airlines Co. 1,500,000 24,420 Allied Waste Industries, Inc.(1) 2,500,000 23,200 Bombardier Inc., Class B 7,500,000 14,875 Lockheed Martin Corp. 248,200 13,788 2,999,251 MATERIALS -- 12.09% Dow Chemical Co. 9,752,700 482,856 Alcoa Inc. 7,973,800 250,537 International Paper Co. 5,500,000 231,000 BHP Billiton Ltd. 17,995,030 215,535 Phelps Dodge Corp. 2,000,000 197,840 Weyerhaeuser Co. 2,883,000 193,795 E.I. du Pont de Nemours and Co. 3,850,000 188,842 Temple-Inland Inc. 2,750,000 188,100 Rio Tinto PLC 6,000,000 176,261 CONSOL Energy Inc.(2) 3,700,000 151,885 Potash Corp. of Saskatchewan Inc. 1,638,400 136,086 Freeport-McMoRan Copper & Gold Inc., Class B 3,500,000 133,805 Noranda Inc. 5,174,100 90,805 Massey Energy Co. 2,011,700 70,309 Inco Ltd.(1) 1,632,300 60,036 Lyondell Chemical Co.(1) 1,450,000 41,934 Oji Paper Co., Ltd. 6,500,000 37,201 Georgia-Pacific Corp., Georgia-Pacific Group 698,640 26,185 CRH PLC 900,000 24,014 Air Products and Chemicals, Inc. 300,000 17,391 BlueScope Steel Ltd. 2,113,020 13,611 2,928,028 FINANCIALS -- 11.66% Fannie Mae 5,117,800 364,439 Allied Irish Banks, PLC 12,724,382 264,540 Washington Mutual, Inc. 5,200,000 219,856 Bank of America Corp. 4,096,800 192,509 Bank of Ireland 10,165,000 168,652 Freddie Mac 2,025,000 149,243 AMP Ltd. 25,000,000 141,715 XL Capital Ltd., Class A 1,825,000 141,711 Irish Life & Permanent PLC 7,000,000 130,835 Willis Group Holdings Ltd. 3,150,000 129,686 Equity Residential 3,000,000 108,540 Cullen/Frost Bankers, Inc. 2,000,000 97,200 American International Group, Inc. 1,000,000 65,670 U.S. Bancorp 2,000,000 62,640 J.P. Morgan Chase & Co. 1,550,000 60,465 Independence Community Bank Corp. 1,366,000 58,164 National Bank of Canada 1,405,000 58,026 Wells Fargo & Co. 870,000 54,070 Allstate Corp. 1,000,000 51,720 St. George Bank Ltd. 2,450,279 48,308 KBC Bank and Insurance Holding Company NV 620,000 47,445 Aon Corp. 1,767,400 42,170 Banco Popolare di Verona e Novara Scr(l) 2,000,000 40,524 Bank Austria Creditanstalt 343,000 30,893 Citigroup Inc. 600,000 28,908 Genworth Financial, Inc., Class A 1,000,000 27,000 Chubb Corp. 300,000 23,070 MI Developments Inc., Class A 500,000 15,085 2,823,084 CONSUMER DISCRETIONARY -- 9.65% Time Warner Inc.(1) 20,425,000 $ 397,062 News Corp. Inc. 17,220,000 321,325 Lowe's Companies, Inc. 5,524,900 318,179 Target Corp. 4,890,000 253,938 Limited Brands, Inc. 10,815,980 248,984 Comcast Corp., Class A(1) 3,600,000 119,808 Comcast Corp., Class A, special nonvoting stock(1) 500,000 16,420 Toyota Motor Corp. 3,000,000 121,764 May Department Stores Co. 3,000,000 88,200 Walt Disney Co. 3,000,000 83,400 Magna International Inc., Class A 1,000,000 82,550 General Motors Corp. 1,800,000 72,108 Best Buy Co., Inc. 1,100,000 65,362 Dana Corp. 2,215,300 38,391 Starbucks Corp.(1) 545,000 33,986 Fairmont Hotels & Resorts Inc. 750,000 25,980 Mattel, Inc. 750,000 14,617 IAC/InterActiveCorp(1) 456,000 12,595 Liberty Media Corp., Class A(1) 915,000 10,047 Dow Jones & Co., Inc. 210,857 9,080 Liberty Media International, Inc., Class A(1) 55,113 2,548 Antena 3 Television, SA(1) 9,979 718 2,337,062 INFORMATION TECHNOLOGY -- 9.54% Microsoft Corp. 19,625,000 524,184 Texas Instruments Inc. 11,963,024 294,530 Automatic Data Processing, Inc. 4,400,000 195,140 International Business Machines Corp. 1,900,000 187,302 Hitachi, Ltd. 20,000,000 138,213 Sun Microsystems, Inc.(1) 24,000,000 129,120 Intersil Corp., Class A 7,475,000 125,131 Motorola, Inc. 7,156,080 123,085 Agilent Technologies, Inc.(1) 4,000,000 96,400 Alcatel Alsthom1 4,150,000 64,358 Hewlett-Packard Co. 3,000,000 62,910 Sabre Holdings Corp., Class A 2,645,304 58,620 Maxim Integrated Products, Inc. 1,250,000 52,987 ASML Holding NV(1) 2,500,000 39,989 Electronic Data Systems Corp. 1,700,000 39,270 Linear Technology Corp. 1,000,000 38,760 Advanced Micro Devices, Inc.(1) 1,500,000 33,030 Solectron Corp.(1) 5,029,040 26,805 Ceridian Corp.(1) 1,400,000 25,592 Cisco Systems, Inc.(1) 1,000,000 19,300 Corning Inc.(1) 1,520,000 17,890 Murata Manufacturing Co., Ltd. 300,000 16,731 2,309,347 TELECOMMUNICATION SERVICES -- 7.42% SBC Communications Inc. 17,250,000 444,532 Telefonica, SA (ADR) 2,750,000 155,375 Telefonica, SA 2,950,000 55,377 Verizon Communications Inc. 4,815,000 195,056 France Telecom, SA 5,800,000 191,361 China Telecom Corp. Ltd., Class H 400,000,000 146,667 Vodafone Group PLC (ADR) 4,325,000 118,418 Vodafone Group PLC 5,850,000 15,835 Sprint Corp. - FON Group 5,400,000 134,190 Telecom Italia SpA, nonvoting 34,200,000 110,567 KDDI Corp. 20,000 107,456 BellSouth Corp. 2,000,000 55,580 Deutsche Telekom AG(1) 2,300,000 51,867 AT&T Corp. 800,000 15,248 1,797,529 CONSUMER STAPLES -- 4.82% Altria Group, Inc. 8,114,800 495,814 Procter & Gamble Co. 1,800,000 99,144 Anheuser-Busch Companies, Inc. 1,900,000 96,387 PepsiCo, Inc. 1,800,000 93,960 Walgreen Co. 2,400,000 92,088 ConAgra Foods, Inc. 3,100,000 91,295 General Mills, Inc. 1,404,200 69,803 Coca-Cola Co. 1,300,000 54,119 Avon Products, Inc. 1,340,000 51,858 SYSCO Corp. 600,000 22,902 1,167,370 UTILITIES -- 3.81% Dominion Resources, Inc. 3,390,000 229,639 Questar Corp. 3,000,000 152,880 Duke Energy Corp. 4,775,000 120,951 DTE Energy Co. 1,606,900 69,305 American Electric Power Co., Inc. 1,902,100 65,318 KeySpan Corp. 1,584,000 62,489 Public Service Enterprise Group Inc. 1,000,000 51,770 Pinnacle West Capital Corp. 1,000,000 44,410 FPL Group, Inc. 525,000 39,244 E.ON AG 300,000 27,248 Tokyo Gas Co., Ltd. 6,025,000 24,630 FirstEnergy Corp. 618,000 24,417 Entergy Corp. 150,000 10,138 922,439 HEALTH CARE -- 3.76% Sanofi-Aventis 3,350,000 266,790 Eli Lilly and Co. 3,100,000 175,925 Bristol-Myers Squibb Co. 4,350,000 111,447 Schering-Plough Corp. 4,200,000 87,696 CIGNA Corp. 725,000 59,138 AstraZeneca PLC (Sweden) 836,800 30,363 AstraZeneca PLC (United Kingdom) 470,300 17,024 AstraZeneca PLC (ADR) 190,600 6,936 Aetna Inc. 430,000 53,642 Abbott Laboratories 800,000 37,320 Amgen Inc.(1) 500,000 32,075 Forest Laboratories, Inc.(1) 700,000 31,402 909,758 MISCELLANEOUS -- 4.30% Other common stocks in initial period of acquisition $ 1,041,913 TOTAL COMMON STOCKS (cost: $17,291,539,000) 22,403,000 RIGHTS & WARRANTS -- 0.00% INFORMATION TECHNOLOGY -- 0.00% Lucent Technologies Inc., warrants, expire 20071 388,614 614 TOTAL RIGHTS & WARRANTS (cost: $572,000) 614 Shares or principal CONVERTIBLE SECURITIES -- 1.29% amount INFORMATION TECHNOLOGY -- 0.62% Sanmina Corp. 0% convertible subordinated debentures 2020 $166,000,000 87,565 Advanced Micro Devices, Inc. 4.75% convertible debentures 2022(3) 24,050,000 27,748 Agilent Technologies, Inc. 3.00% convertible debentures 2021(2),(3) 10,370,000 10,513 Agilent Technologies, Inc. 3.00% convertible debentures 2021(3) 15,074,000 15,281 ASML Holding NV 5.50% convertible notes 2010 *6,000,000 9,976 151,083 FINANCIALS -- 0.47% Genworth Financial, Inc. 6.00% convertible preferred 2007 2,400,000 units 77,784 Chubb Corp. 7.00% convertible preferred 2005 1,200,000 units 35,508 113,292 MATERIALS -- 0.13% Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred(2) 31,000 30,341 ENERGY -- 0.05% Unocal Capital Trust 6.25% convertible preferred 2026 225,000 11,560 CONSUMER DISCRETIONARY -- 0.02% Interpublic Group of Companies, Inc., Series A, 5.375% convertible preferred 2006 115,300 5,650 TOTAL CONVERTIBLE SECURITIES (cost: $283,272,000) 311,926 Principal amount Market value BONDS & NOTES -- 0.72% (000) (000) INDUSTRIALS -- 0.61% Northwest Airlines, Inc. 7.625% 2005 $19,980 $ 20,105 Northwest Airlines, Inc. 8.875% 2006 50,670 48,897 Northwest Airlines, Inc. 9.875% 2007 15,335 13,916 Northwest Airlines, Inc. 7.875% 2008 16,566 13,584 Continental Airlines, Inc. 8.00% 2005 28,600 28,028 Southwest Airlines Co. 5.25% 2014 15,000 15,084 Delta Air Lines, Inc., Series 1993-A2, 10.50% 2016(4) 11,500 7,360 146,974 CONSUMER DISCRETIONARY -- 0.11% Charter Communications, Inc. 8.25% 2007 20,000 19,525 Time Warner Inc. 10.15% 2012 6,000 7,882 27,407 TOTAL BONDS & NOTES (cost: $168,604,000) 174,381 SHORT-TERM SECURITIES -- 5.48% CAFCO, LLC 2.08%-2.35% due 1/12-2/23/2005(2) 71,000 70,870 Citicorp 2.05% due 1/5/2005 30,000 29,991 Ciesco LLC 2.03% due 1/07/2005(2) 23,100 23,091 Preferred Receivables Funding Corp. 2.30% due 1/20/2005(2) 40,000 39,949 J.P. Morgan Chase & Co. 2.12% due 1/24/2005 30,000 29,955 Park Avenue Receivables Co., LLC 2.28% due 1/12/2005(2) 18,200 18,186 Procter & Gamble Co. 2.01%-2.15% due 1/10-2/4/2005(2) 80,000 79,855 Freddie Mac 2.04%-2.32% due 1/11-2/23/2005 75,800 75,645 Eli Lilly and Co. 2.03%-2.26% due 1/12-2/1/2005(2) 75,000 74,915 Three Pillars Funding, LLC 2.24%-2.34% due 1/7-1/14/2005(2) 68,300 68,243 Pfizer Inc 2.12%-2.31% due 2/2-2/8/2005(2) 62,600 62,459 Triple-A One Funding Corp. 2.33%-2.34% due 1/14-1/19/2005(2) 60,702 60,642 SBC Communications Inc. 2.26%-2.35% due 2/2-2/23/2005(2) 59,800 59,630 Federal Farm Credit Banks 2.18%-2.36% due 1/14-3/23/2005 59,100 58,929 Gannett Co. 2.05%-2.06% due 1/12-1/13/2005(2) 56,200 56,159 BellSouth Corp. 2.16%-2.28% due 1/18-1/25/2005(2) 52,400 52,333 Wal-Mart Stores Inc. 2.20% due 1/19/2005(2) 50,000 49,942 Federal Home Loan Bank 2.195%-2.21% due 1/28-2/4/2005 49,664 49,565 General Electric Capital Services, Inc. 2.27% due 1/18/2005 32,000 31,964 General Electric Capital Corp. 2.20% due 1/3/2005 16,800 16,797 Abbott Laboratories Inc. 2.07%-2.25% due 1/11-1/25/2005(2) 47,400 47,339 Coca-Cola Co. 2.09%-2.21% due 1/10-2/11/2005 44,600 44,500 FCAR Owner Trust I 2.17% due 1/26/2005 31,000 30,950 Variable Funding Capital Corp. 2.32% due 1/6-1/7/2005(2) 29,800 29,788 Anheuser-Busch Cos. Inc. 2.24% due 1/7/2005(2) 25,300 25,289 PepsiCo Inc. 2.20% due 1/10/2005(2) 25,100 25,085 Ranger Funding Co. LLC 2.27% due 1/6/2005(2) 25,000 24,991 IBM Credit Corp. 2.21% due 1/26/2005 23,100 23,063 Clipper Receivables Co., LLC 2.33% due 2/23/2005(2) 21,900 21,820 Hershey Foods Corp. 2.27% due 2/11/2005(2) 18,000 17,952 NetJets Inc. 2.15% due 1/27/2005(2) 10,000 9,983 Harley-Davidson Funding Corp. 2.20% due 2/7/20052 10,000 9,976 Tenessee Valley Authority 2.32% due 3/17/2005 6,000 5,973 Harvard University 2.10% due 1/3/2005 2,000 2,000 U.S. Treasury Bills 2.1225% due 3/17/2005 300 299 TOTAL SHORT-TERM SECURITIES (cost: $1,328,142,000) 1,328,128 TOTAL INVESTMENT SECURITIES (cost: $19,072,129,000) 24,218,049 Other assets less liabilities (627) NET ASSETS $24,217,422
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. (1) Security did not produce income during the last 12 months. (2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $1,121,236,000, which represented 4.63% of the net assets of the fund. (3) Coupon rate may change periodically. (4) 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. ADR = American Depositary Receipts See Notes to Financial Statements STATEMENT OF OPERATIONS for the year ended December 31, 2004 (dollars in thousands) INVESTMENT INCOME: Income: Dividends (net of non-U.S. withholding tax of $11,199; $519,509 also includes $6,710 from affiliate) Interest (net of non-U.S. withholding tax of $5) 69,422 $588,931 Fees and expenses: Investment advisory services 59,209 Distribution services 64,204 Transfer agent services 19,796 Administrative services 2,925 Reports to shareholders 802 Registration statement and prospectus 462 Postage, stationery and supplies 1,952 Directors' compensation 392 Auditing and legal 142 Custodian 1,343 State and local taxes 1 Other 108 Total expenses before reimbursement/waiver 151,336 Reimbursement/waiver of expenses 1,233 150,103 Net investment income 438,828 NET REALIZED GAIN AND UNREALIZED APPRECIATION ON INVESTMENTS AND NON-U.S. CURRENCY: Net realized gain (loss) on: Investments 613,354 Non-U.S. currency transactions (1,789) 611,565 Net unrealized appreciation (depreciation) on: Investments 1,889,711 Non-U.S. currency translations (217) 1,889,494 Net realized gain and unrealized appreciation on investments and non-U.S. currency 2,501,059 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,939,887 See Notes to Financial Statements STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands) Year ended December 31 2004 2003 OPERATIONS: Net investment income $438,828 $358,360 Net realized gain (loss) on investments and non-U.S. currency transactions 611,565 (603,496) Net unrealized appreciation on investments and non-U.S. currency translations 1,889,494 5,356,683 Net increase in net assets resulting from operations 2,939,887 5,111,547 DIVIDENDS PAID TO SHAREHOLDERS FROM NET INVESTMENT INCOME AND CURRENCY GAINS (404,177) (283,809) CAPITAL SHARE TRANSACTIONS 497,675 (69,713) TOTAL INCREASE IN NET ASSETS 3,033,385 4,758,025 NET ASSETS: Beginning of year 21,184,037 16,426,012 End of year (including undistributed net investment income: $100,738 and $65,000, respectively) $24,217,422 $21,184,037 See Notes to Financial Statements
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 14 share classes consisting of four retail share classes, five CollegeAmerica(R) savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund's share classes are described below: - --------------------------------------------------------------------------------------------------------- Share class Initial sales charge Contingent deferred sales Conversion feature charge upon redemption - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes A and 529-A Up to 5.75% None (except 1% for None certain redemptions within one year of purchase without an initial sales charge) - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes B and 529-B None Declines from 5% to zero Classes B and 529-B convert to for redemptions within classes A and 529-A, six years of purchase respectively, after eight years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class C None 1% for redemptions within Class C converts to Class F one year of purchase after 10 years - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-C None 1% for redemptions within None one year of purchase - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Class 529-E None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes F and 529-F None None None - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Classes R-1, R-2, R-3, None None None R-4 and R-5 - ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund: SECURITY VALUATION - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities are valued at prices obtained from an independent pricing service, when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities purchased with greater than 60 days to maturity with 60 days or less remaining to maturity is determined based on the market value on the 61st day. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's Board of Directors. Various factors may be reviewed in order to make a good faith determination of a security's fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. CollegeAmerica is a registered trademark of the Virginia College Savings Plan./SM/ 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 certain securities within 30 days of purchase; unrealized appreciation of certain investments in non-U.S. securities; deferred expenses; 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 December 31, 2004, the cost of investment securities for federal income tax purposes was $19,084,083,000. During the year ended December 31, 2004, the fund reclassified $64,000 from undistributed net investment income to additional paid-in capital and $1,151,000 from undistributed net realized gains to undistributed net investment income to align financial reporting with tax reporting. As of December 31, 2004, the components of distributable earnings on a tax basis were as follows (dollars in thousands): Undistributed net investment income and currency gains $102,750 Short-term capital loss deferrals (807,441) Gross unrealized appreciation on investment securities 5,908,019 Gross unrealized depreciation on investment securities (774,053) Net unrealized appreciation on investment securities 5,133,966
Undistributed net investment income and currency gains above include currency losses of $93,000 that were realized during the period November 1, 2003 through December 31, 2003. Short-term capital loss deferrals above include capital loss carryforwards of $66,479,000 and $606,687,000 expiring in 2010 and 2011, respectively. These numbers reflect the utilization of a capital loss carryforward of $594,776,000. The remaining capital loss carryforwards will be used to offset any capital gains realized by the fund in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain. Ordinary income distributions paid to shareholders from net investment income and currency gains were as follows (dollars in thousands): Year ended December 31 Share class 2004 2003 Class A $ 372,550 $ 267,613 Class B 9,991 6,070 Class C 5,262 2,626 Class F 7,307 3,841 Class 529-A 2,122 962 Class 529-B 234 89 Class 529-C 363 127 Class 529-E 89 35 Class 529-F 30 8 Class R-1 51 7 Class R-2 831 213 Class R-3 1,486 477 Class R-4 1,232 415 Class R-5 2,629 1,326 Total $ 404,177 $ 283,809
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. At the beginning of the period, these fees were 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. The Board of Directors approved an amended agreement effective June 1, 2004, reducing the existing annual rates to 0.245% from 0.248% on daily net assets in excess of $21 billion but not exceeding $27 billion and 0.240% from 0.246% on such assets in excess of $27 billion. During the year ended December 31, 2004, CRMC reduced investment advisory services fees by $1,020,000. As a result, the fee shown on the accompanying financial statements of $59,209,000, which was equivalent to an annualized rate of 0.270%, was reduced to $58,189,000, or 0.265% 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. 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 December 31, 2004, there were no unreimbursed expenses subject to reimbursement for classes A and 529-A. ------------------------------------------------ ----------------------------- ----------------------------- Share class Currently approved limits Plan limits ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class A 0.25% 0.25% ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class 529-A 0.25 0.50 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes B and 529-B 1.00 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes C, 529-C and R-1 1.00 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Class R-2 0.75 1.00 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes 529-E and R-3 0.50 0.75 ------------------------------------------------ ----------------------------- ----------------------------- ------------------------------------------------ ----------------------------- ----------------------------- Classes F, 529-F and R-4 0.25 0.50 ------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with AFS for classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below. ADMINISTRATIVE SERVICES - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all classes of shares other than classes A and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. During the year ended December 31, 2004, CRMC agreed to pay a portion of these fees for classes R-1 and R-2. For the year ended December 31, 2004, the total fees paid by CRMC were $2,000 and $211,000 for Class R-1 and Class R-2, respectively. Administrative services fees are presented gross of any payments made by CRMC. 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. Expenses under the agreements described above for the year ended December 31, 2004, were as follows (dollars in thousands): -------------------------------------------------------------------------------------------------------------- Share class Distribution Transfer agent Administrative services services services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- CRMC Transfer agent Commonwealth of administrative services Virginia services administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class A $47,779 $18,904 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class B 8,743 892 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class C 4,719 Included $708 $120 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class F 971 Included 582 52 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-A 191 Included 169 17 $ 112 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-B 231 Included 35 11 23 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-C 350 Included 53 13 35 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-E 28 Included 8 1 6 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-F 4 Included 2 -* 2 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-1 43 Included 6 4 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-2 518 Included 104 395 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-3 460 Included 138 103 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-4 167 Included 100 2 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 121 3 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Total $64,204 $19,796 $2,026 $721 $178 -------------------------------------------------------------------------------------------------------------- * Amount less than one thousand.
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors' compensation of $392,000, shown on the accompanying financial statements, includes $203,000 in current fees (either paid in cash or deferred) and a net increase of $189,000 in the value of the deferred amounts. AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or Directors received any compensation directly from the fund. 5. CAPITAL SHARE TRANSACTIONS Capital share transactions in the fund were as follows (dollars and shares in thousands): Share class Sales(1) Reinvestments of dividends Amount Shares Amount Shares Year ended December 31, 2004 Class A $ 2,128,875 71,901 $ 351,340 11,834 Class B 110,433 3,739 9,629 320 Class C 147,896 5,005 5,035 167 Class F 187,702 6,362 6,418 216 Class 529-A 46,582 1,571 2,122 71 Class 529-B 8,121 274 234 8 Class 529-C 15,730 531 363 12 Class 529-E 2,339 79 89 3 Class 529-F 1,251 42 31 1 Class R-1 4,263 146 51 1 Class R-2 52,680 1,793 831 28 Class R-3 68,710 2,325 1,481 49 Class R-4 44,674 1,514 1,233 42 Class R-5 27,580 928 2,298 78 Total net increase (decrease) $ 2,846,836 96,210 $ 381,155 12,830 Year ended December 31, 2003 Class A $ 1,760,807 73,050 $ 252,281 10,556 Class B 106,466 4,450 5,861 248 Class C 103,912 4,277 2,524 106 Class F 105,565 4,359 3,347 139 Class 529-A 32,444 1,333 962 40 Class 529-B 7,209 297 89 4 Class 529-C 11,156 458 127 5 Class 529-E 2,001 83 35 1 Class 529-F 730 30 8 -* Class R-1 2,361 97 7 -* Class R-2 37,622 1,581 213 9 Class R-3 57,216 2,436 461 19 Class R-4 35,621 1,487 415 17 Class R-5 42,345 1,675 1,097 45 Total net increase (decrease) $ 2,305,455 95,613 $ 267,427 11,189 Share class Repurchases(1) Net increase (decrease) Amount Shares Amount Shares Year ended December 31, 2004 Class A $ (2,413,347) (81,685) $ 66,868 2,050 Class B (86,500) (2,936) 33,562 1,123 Class C (57,179) (1,947) 95,752 3,225 Class F (88,450) (2,984) 105,670 3,594 Class 529-A (5,035) (170) 43,669 1,472 Class 529-B (586) (20) 7,769 262 Class 529-C (2,040) (68) 14,053 475 Class 529-E (190) (6) 2,238 76 Class 529-F (222) (8) 1,060 35 Class R-1 (915) (31) 3,399 116 Class R-2 (14,324) (486) 39,187 1,335 Class R-3 (23,310) (791) 46,881 1,583 Class R-4 (22,061) (723) 23,846 833 Class R-5 (16,157) (550) 13,721 456 Total net increase (decrease) $ (2,730,316) (92,405) $ 497,675 16,635 Year ended December 31, 2003 Class A $ (2,408,135) (101,674) $ (395,047) (18,068) Class B (82,223) (3,502) 30,104 1,196 Class C (46,686) (1,989) 59,750 2,394 Class F (68,012) (2,847) 40,900 1,651 Class 529-A (1,893) (78) 31,513 1,295 Class 529-B (373) (15) 6,925 286 Class 529-C (881) (35) 10,402 428 Class 529-E (81) (3) 1,955 81 Class 529-F (29) (1) 709 29 Class R-1 (760) (31) 1,608 66 Class R-2 (8,100) (342) 29,735 1,248 Class R-3 (15,665) (670) 42,012 1,785 Class R-4 (4,201) (174) 31,835 1,330 Class R-5 (5,556) (217) 37,886 1,503 Total net increase (decrease) $ (2,642,595) (111,578) $ (69,713) (4,776) * Amount less than one thousand. (1) Includes exchanges between share classes of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities, of $6,226,467,000 and $6,216,912,000, respectively, during the year ended December 31, 2004. The fund receives a reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the year ended December 31, 2004, the custodian fee of $1,343,000, shown on the accompanying financial statements, included $9,000 that was offset by this reduction, rather than paid in cash. FINANCIAL HIGHLIGHTS (1) Income (loss) from investment operations(2) Net Net asset gains (losses) value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class A: Year ended 12/31/2004 $28.85 $.61 $3.35 $3.96 Year ended 12/31/2003 22.23 .50 6.52 7.02 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 Class B: Year ended 12/31/2004 28.80 .38 3.35 3.73 Year ended 12/31/2003 22.19 .31 6.51 6.82 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: Year ended 12/31/2004 28.78 .37 3.34 3.71 Year ended 12/31/2003 22.17 .30 6.51 6.81 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: Year ended 12/31/2004 28.84 .59 3.35 3.94 Year ended 12/31/2003 22.22 .49 6.52 7.01 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: Year ended 12/31/2004 28.84 .59 3.34 3.93 Year ended 12/31/2003 22.22 .50 6.52 7.02 Period from 2/15/2002 to 12/31/2002 26.71 .33 (4.34) (4.01) Class 529-B: Year ended 12/31/2004 28.83 .33 3.35 3.68 Year ended 12/31/2003 22.22 .27 6.52 6.79 Period from 2/19/2002 to 12/31/2002 26.27 .16 (3.91) (3.75) Class 529-C: Year ended 12/31/2004 28.83 .34 3.34 3.68 Year ended 12/31/2003 22.22 .27 6.52 6.79 Period from 2/15/2002 to 12/31/2002 26.71 .16 (4.34) (4.18) Class 529-E: Year ended 12/31/2004 28.83 .49 3.35 3.84 Year ended 12/31/2003 22.21 .40 6.52 6.92 Period from 3/7/2002 to 12/31/2002 28.13 .26 (5.85) (5.59) Class 529-F: Year ended 12/31/2004 28.82 .58 3.33 3.91 Year ended 12/31/2003 22.22 .45 6.52 6.97 Period from 9/23/2002 to 12/31/2002 21.22 .12 1.08 1.20 FINANCIAL HIGHLIGHTS (1) (continued) Income (loss) from investment operations(2) Net Net asset gains(losses) value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class R-1: Year ended 12/31/2004 $28.79 $.37 $3.33 $3.70 Year ended 12/31/2003 22.19 .27 6.54 6.81 Period from 6/19/2002 to 12/31/2002 26.04 .13 (3.75) (3.62) Class R-2: Year ended 12/31/2004 28.77 .38 3.34 3.72 Year ended 12/31/2003 22.18 .30 6.51 6.81 Period from 5/21/2002 to 12/31/2002 27.39 .14 (5.13) (4.99) Class R-3: Year ended 12/31/2004 28.82 .50 3.33 3.83 Year ended 12/31/2003 22.21 .40 6.52 6.92 Period from 6/4/2002 to 12/31/2002 26.66 .18 (4.38) (4.20) Class R-4: Year ended 12/31/2004 28.83 .60 3.33 3.93 Year ended 12/31/2003 22.21 .48 6.53 7.01 Period from 7/25/2002 to 12/31/2002 21.75 .22 .55 .77 Class R-5: Year ended 12/31/2004 28.86 .68 3.35 4.03 Year ended 12/31/2003 22.23 .56 6.53 7.09 Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06) FINANCIAL HIGHLIGHTS (1) Dividends and distributions Dividends (from net Distributions Total Net asset investment (from capital dividends and value, end income) gains) distributions of period Class A: Year ended 12/31/2004 $(.56) $ - $(.56) $32.25 Year ended 12/31/2003 (.40) - (.40) 28.85 Year ended 12/31/2002 (.50) - (.50) 22.23 Year ended 12/31/2001 (.40) (.37) (.77) 27.45 Year ended 12/31/2000 (.40) (2.35) (2.75) 31.16 Class B: Year ended 12/31/2004 (.34) - (.34) 32.19 Year ended 12/31/2003 (.21) - (.21) 28.80 Year ended 12/31/2002 (.30) - (.30) 22.19 Year ended 12/31/2001 (.19) (.37) (.56) 27.40 Period from 3/15/2000 to 12/31/2000 (.13) (1.85) (1.98) 31.12 Class C: Year ended 12/31/2004 (.32) - (.32) 32.17 Year ended 12/31/2003 (.20) - (.20) 28.78 Year ended 12/31/2002 (.29) - (.29) 22.17 Period from 3/15/2001 to 12/31/2001 (.11) - (.11) 27.39 Class F: Year ended 12/31/2004 (.54) - (.54) 32.24 Year ended 12/31/2003 (.39) - (.39) 28.84 Year ended 12/31/2002 (.48) - (.48) 22.22 Period from 3/15/2001 to 12/31/2001 (.28) - (.28) 27.44 Class 529-A: Year ended 12/31/2004 (.53) - (.53) 32.24 Year ended 12/31/2003 (.40) - (.40) 28.84 Period from 2/15/2002 to 12/31/2002 (.48) - (.48) 22.22 Class 529-B: Year ended 12/31/2004 (.28) - (.28) 32.23 Year ended 12/31/2003 (.18) - (.18) 28.83 Period from 2/19/2002 to 12/31/2002 (.30) - (.30) 22.22 Class 529-C: Year ended 12/31/2004 (.28) - (.28) 32.23 Year ended 12/31/2003 (.18) - (.18) 28.83 Period from 2/15/2002 to 12/31/2002 (.31) - (.31) 22.22 Class 529-E: Year ended 12/31/2004 (.44) - (.44) 32.23 Year ended 12/31/2003 (.30) - (.30) 28.83 Period from 3/7/2002 to 12/31/2002 (.33) - (.33) 22.21 Class 529-F: Year ended 12/31/2004 (.51) - (.51) 32.22 Year ended 12/31/2003 (.37) - (.37) 28.82 Period from 9/23/2002 to 12/31/2002 (.20) - (.20) 22.22 FINANCIAL HIGHLIGHTS (1) (continued) Dividends and distributions Dividends (from net Distributions Total Net asset investment (from capital dividends and value, end income) gains) distributions of period Class R-1: Year ended 12/31/2004 $(.31) $ - $(.31) $32.18 Year ended 12/31/2003 (.21) - (.21) 28.79 Period from 6/19/2002 to 12/31/2002 (.23) - (.23) 22.19 Class R-2: Year ended 12/31/2004 (.32) - (.32) 32.17 Year ended 12/31/2003 (.22) - (.22) 28.77 Period from 5/21/2002 to 12/31/2002 (.22) - (.22) 22.18 Class R-3: Year ended 12/31/2004 (.44) - (.44) 32.21 Year ended 12/31/2003 (.31) - (.31) 28.82 Period from 6/4/2002 to 12/31/2002 (.25) - (.25) 22.21 Class R-4: Year ended 12/31/2004 (.54) - (.54) 32.22 Year ended 12/31/2003 (.39) - (.39) 28.83 Period from 7/25/2002 to 12/31/2002 (.31) - (.31) 22.21 Class R-5: Year ended 12/31/2004 (.63) - (.63) 32.26 Year ended 12/31/2003 (.46) - (.46) 28.86 Period from 5/15/2002 to 12/31/2002 (.33) - (.33) 22.23
FINANCIAL HIGHLIGHTS (1) Ratio of expenses Ratio of expenses to average net to average net Ratio of Net assets, assets before assets after net income Total end of period reimbursement/ reimbursement/ to average return (3) (in millions) waiver waiver (4) net assets Class A: Year ended 12/31/2004 13.91% $21,543 .63% .63% 2.05% Year ended 12/31/2003 31.96 19,212 .66 .66 2.08 Year ended 12/31/2002 (17.34) 15,201 .67 .67 1.68 Year ended 12/31/2001 (9.55) 19,331 .65 .65 1.41 Year ended 12/31/2000 4.27 19,872 .64 .64 1.28 Class B: Year ended 12/31/2004 13.03 971 1.40 1.39 1.29 Year ended 12/31/2003 30.97 836 1.44 1.44 1.30 Year ended 12/31/2002 (17.97) 618 1.45 1.45 .91 Year ended 12/31/2001 (10.24) 653 1.42 1.42 .64 Period from 3/15/2000 to 12/31/2000 3.73 299 1.39 (5) 1.39 (5) .53 (5) Class C: Year ended 12/31/2004 12.96 566 1.47 1.46 1.24 Year ended 12/31/2003 30.93 413 1.50 1.50 1.23 Year ended 12/31/2002 (18.06) 266 1.50 1.50 .86 Period from 3/15/2001 to 12/31/2001 (3.60) 203 1.55 (5) 1.55 (5) .49 (5) Class F: Year ended 12/31/2004 13.84 463 .70 .70 2.02 Year ended 12/31/2003 31.92 311 .71 .71 2.02 Year ended 12/31/2002 (17.38) 203 .72 .72 1.65 Period from 3/15/2001 to 12/31/2001 (2.97) 153 .74 (5) .74 (5) 1.31 (5) Class 529-A: Year ended 12/31/2004 13.77 146 .73 .72 2.00 Year ended 12/31/2003 31.99 88 .68 .68 2.03 Period from 2/15/2002 to 12/31/2002 (15.16) 39 .76 (5) .76 (5) 1.64 (5) Class 529-B: Year ended 12/31/2004 12.83 29 1.59 1.59 1.13 Year ended 12/31/2003 30.74 19 1.61 1.61 1.10 Period from 2/19/2002 to 12/31/2002 (14.35) 8 1.62 (5) 1.62 (5) .77 (5) Class 529-C: Year ended 12/31/2004 12.84 45 1.58 1.58 1.14 Year ended 12/31/2003 30.75 27 1.60 1.60 1.11 Period from 2/15/2002 to 12/31/2002 (15.74) 11 1.60 (5) 1.60 (5) .79 (5) Class 529-E: Year ended 12/31/2004 13.40 7 1.06 1.05 1.66 Year ended 12/31/2003 31.42 4 1.08 1.08 1.61 Period from 3/7/2002 to 12/31/2002 (19.92) 2 1.07 (5) 1.07 (5) 1.35 (5) Class 529-F: Year ended 12/31/2004 13.73 2 .81 .80 1.95 Year ended 12/31/2003 31.72 1 .82 .82 1.81 Period from 9/23/2002 to 12/31/2002 5.65 - (6) .22 .22 .51 FINANCIAL HIGHLIGHTS (1) (continued) Ratio of expenses Ratio of expenses to average net to average net Ratio of Net assets, assets before assets after net income Total end of period reimbursement/ reimbursement/ to average return (in millions) waiver waiver (4) net assets Class R-1: Year ended 12/31/2004 12.92% $6 1.53% 1.49% 1.26% Year ended 12/31/2003 30.90 2 1.70 1.50 1.08 Period from 6/19/2002 to 12/31/2002 (13.91) - (6) 4.20 (5) 1.50 (5) 1.11 (5) Class R-2: Year ended 12/31/2004 13.02 93 1.76 1.45 1.29 Year ended 12/31/2003 30.93 45 1.94 1.46 1.19 Period from 5/21/2002 to 12/31/2002 (18.22) 7 1.64 (5) 1.46 (5) 1.05 (5) Class R-3: Year ended 12/31/2004 13.41 125 1.05 1.04 1.69 Year ended 12/31/2003 31.45 66 1.10 1.08 1.60 Period from 6/4/2002 to 12/31/2002 (15.75) 11 1.13 (5) 1.08 (5) 1.41 (5) Class R-4: Year ended 12/31/2004 13.85 80 .69 .69 2.04 Year ended 12/31/2003 31.91 48 .71 .71 1.94 Period from 7/25/2002 to 12/31/2002 3.51 7 .34 .32 .96 Class R-5: Year ended 12/31/2004 14.19 141 .39 .39 2.31 Year ended 12/31/2003 32.34 112 .39 .39 2.30 Period from 5/15/2002 to 12/31/2002 (18.34) 53 .40 (5) .40 (5) 1.91 (5)
Year ended December 31 2004 2003 2002 2001 2000 Portfolio turnover rate for all classes of shares 30% 31% 38% 29% 43%
(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. (2) Based on average shares outstanding. (3) Total returns exclude all sales charges, including contingent deferred sales charges. (4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During the year ended 12/31/2004, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services. (5) Annualized. (6) Amount less than $1 million. See Notes to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors 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, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fundamental Investors, Inc. as of December 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP February 11, 2005 Los Angeles, CA TAX INFORMATION (unaudited) We are required to advise you within 60 days of the fund's fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The information below is provided for the fund's fiscal year ending December 31, 2004. Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates 100% of the dividends paid by the fund earned during the fiscal year as qualified dividend income. Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $382,186,000 of dividends received as qualified dividend income. For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $1,333,000 as interest derived on direct U.S. government obligations. INDIVIDUAL SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH WAS MAILED IN JANUARY 2005 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR 2004 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS. [logo - American Funds/(R)/] The right choice for the long term/(R)/ Fundamental Investors/SM/ RETIREMENT PLAN PROSPECTUS March 1, 2005
TABLE OF CONTENTS 1 Risk/Return summary 4 Fees and expenses of the fund 6 Investment objective, strategies and risks 10 Management and organization 13 Purchase, exchange and sale of shares 16 Sales charges 18 Sales charge reductions 20 Rollovers from retirement plans to IRAs 21 Plans of distribution 22 Other compensation to dealers 23 Distributions and taxes 24 Financial highlights
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. [This page left intentionally blank.] 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. Your investment in the fund is subject to risks, including the possibility that the fund's income and the value of its portfolio holdings may fluctuate in response to events specific to the companies in which the fund invests, as well as economic, political or social events in the United States or abroad. Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or global economic, political or social instability, securities issued by entities based outside the United States 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 bar chart below shows how the fund's investment results have varied from year to year, and the Investment Results table on page 3 shows how the fund's average annual total returns for various periods compare with different broad measures of market performance. This information provides some indication of the risks of investing in the fund. All fund results reflect the reinvestment of dividends and capital gain distributions, if any. Past results are not predictive of future results. CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES (Results do not include a sales charge; if a sales charge were included, results would be lower.) [begin bar chart] 1995 34.21% 1996 19.99 1997 26.68 1998 16.72 1999 24.58 2000 4.27 2001 -9.55 2002 -17.34 2003 31.96 2004 13.91 [end bar chart] Highest/Lowest quarterly results during this time period were:
HIGHEST 16.28% (quarter ended December 31, 2003) LOWEST -17.59% (quarter ended September 30, 2002)
2 Fundamental Investors / Prospectus Unlike the bar chart above, the Investment Results table below reflects, as required by Securities and Exchange Commission rules, the fund's investment results with the following maximum initial sales charge imposed: - - Class A share results reflect the maximum initial sales charge of 5.75%. This charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more. - - Class R shares are sold without any initial sales charge. Results would be higher if calculated without a sales charge. Unlike the Investment Results table below, the Additional Investment Results table on page 8 reflects the fund's results calculated without a sales charge.
INVESTMENT RESULTS (WITH A MAXIMUM SALES CHARGE) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - -------------------------------------------------------------------------- CLASS A -- FROM 8/1/78 7.36% 2.01% 12.60% 13.90%
1 YEAR LIFETIME/1/ - ------------------------------------------------------- CLASS R-1 -- FIRST SOLD 6/19/02 12.92% 9.98% CLASS R-2 -- FIRST SOLD 5/21/02 13.02 7.57 CLASS R-3 -- FIRST SOLD 6/4/02 13.41 9.25 CLASS R-4 -- FIRST SOLD 7/25/02 13.85 19.86 CLASS R-5 -- FIRST SOLD 5/15/02 14.19 8.32
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value Funds 12.00 1.42 11.29 13.06 Index/3/ Lipper Growth and Income Funds 11.72 1.65 10.72 12.57 Index/4/ Class A 30-day yield at December 31, 2004: 1.44%/5/ (For current yield information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 Reflects a fee waiver (1.42% without the waiver) as described in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." 3 Fundamental Investors / Prospectus Fees and expenses of the fund These tables describe the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A ALL R SHARE CLASSES - ------------------------------------------------------------------------------ Maximum initial sales charge on purchases 5.75%/*/ none (as a percentage of offering price) - ------------------------------------------------------------------------------ Maximum sales charge on reinvested dividends none none - ------------------------------------------------------------------------------ Maximum contingent deferred sales charge none none - ------------------------------------------------------------------------------ Redemption or exchange fees none none
* The initial sales charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more.
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS) CLASS CLASS CLASS CLASS CLASS CLASS A R-1 R-2 R-3 R-4 R-5 - ------------------------------------------------------------------------------- Management fees 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% - ------------------------------------------------------------------------------- Distribution and/or service 0.24 1.00 0.75 0.50 0.25 none (12b-1) fees/1/ - ------------------------------------------------------------------------------- Other expenses 0.12 0.26 0.74 0.28 0.17 0.12 - ------------------------------------------------------------------------------- Total annual fund operating 0.63 1.53 1.76 1.05 0.69 0.39 expenses/2/ - -------------------------------------------------------------------------------
1 Class A, R-2, R-3 and R-4 12b-1 fees may not exceed .25%, 1.00%, .75% and .50%, respectively, of the class' average net assets annually. Class R-1 12b-1 fees are 1.00% of the class' average net assets annually. 2 The fund's investment adviser began waiving 5.00% of its management fees on September 1, 2004. The waiver will continue until August 31, 2005. As of the fund's last fiscal year-end, the reduction in management fees as a result of the waiver was less than .01% (though the impact may appear greater due to rounding). In addition, the investment adviser paid a portion of the fund's transfer agent fees for certain R share classes. Total annual fund operating expenses do not reflect any waiver or reimbursement. Information regarding the effect of the waiver/reimbursement on total annual fund operating expenses can be found in the Financial Highlights table and the audited financial statements in the fund's annual report. 4 Fundamental Investors / Prospectus OTHER EXPENSES The "Other expenses" items in the table above include custodial, legal, transfer agent and subtransfer agent/recordkeeping payments. Subtransfer agent/recordkeeping payments may be made to third parties (including affiliates of the fund's investment adviser) that provide recordkeeping and other administrative services to retirement plans invested in the fund in lieu of the transfer agent providing such services. The amount paid for subtransfer agent/recordkeeping services will vary depending on the share class selected and the entity receiving the payments. The table below shows the maximum payments to affiliated and unaffiliated entities of the fund's investment adviser providing services to retirement plans.
PAYMENTS TO AFFILIATED PAYMENTS TO UNAFFILIATED ENTITIES ENTITIES - ------------------------------------------------------------------------------- Class A .05% of assets or .05% of assets or $12 per participant position* $12 per participant position* - ------------------------------------------------------------------------------- Class R-1 .10% of assets .10% of assets - ------------------------------------------------------------------------------- Class R-2 $27 per participant position .25% of assets plus .15% of assets - ------------------------------------------------------------------------------- Class R-3 $12 per participant position .15% of assets plus .10% of assets Class R-4 .10% of assets .10% of assets - ------------------------------------------------------------------------------- Class R-5 .05% of assets .05% of assets - -------------------------------------------------------------------------------
* Payment amount depends on the date upon which services commenced. EXAMPLES 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, that all dividends and capital gain distributions are reinvested, and that the fund's operating expenses remain the same as shown above. The examples do not reflect the impact of any fee waivers or expense reimbursements. Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - -------------------------------------------------------------------- Class A* $636 $765 $906 $1,316 - -------------------------------------------------------------------- Class R-1 156 483 834 1,824 - -------------------------------------------------------------------- Class R-2 179 554 954 2,073 - -------------------------------------------------------------------- Class R-3 107 334 579 1,283 - -------------------------------------------------------------------- Class R-4 70 221 384 859 - -------------------------------------------------------------------- Class R-5 40 125 219 493 - --------------------------------------------------------------------
* Reflects the maximum initial sales charge in the first year. 5 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 United States and not included in the Standard & Poor's 500 Composite Index. The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate fluctuations. Investments in securities issued by entities based outside the United States may be subject to the risks described above to a greater extent and may also be affected by currency fluctuations and controls; different accounting, auditing, financial reporting and legal standards and practices in some countries; expropriation; changes in tax policy; greater market volatility; differing securities market structures; higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. These risks may be heightened in connection with investments in developing countries. The fund may also hold cash or money market instruments, the amount of which will vary and will depend on various factors, including market conditions and purchases and redemptions of fund shares. A larger amount of such holdings could negatively affect the fund's investment results in a period of rising market prices; conversely, it could reduce the fund's magnitude of loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. The fund relies on the professional judgment of its investment adviser to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek to invest in attractively valued companies that, in its opinion, represent above-average long-term investment opportunities. The investment adviser believes that an important way to accomplish this is through fundamental analysis, which may include meeting with company executives and employees, suppliers, customers and competitors. Securities may be sold when the investment adviser believes that they no longer represent relatively attractive investment opportunities. 6 Fundamental Investors / Prospectus OTHER IMPORTANT INVESTMENT PRACTICES In addition to the principal investment strategies described above, the fund has other investment practices that are described in this prospectus and in the statement of additional information. The fund may invest to a limited extent in lower quality 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. Lower quality or longer maturity debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality or shorter maturity debt securities. 7 Fundamental Investors / Prospectus ADDITIONAL INVESTMENT RESULTS Unlike the Investment Results table on page 3, the table below reflects the fund's results calculated without a sales charge.
ADDITIONAL INVESTMENT RESULTS (WITHOUT A SALES CHARGE) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------ CLASS A -- FROM 8/1/78 13.91% 3.22% 13.27% 14.16%
1 YEAR LIFETIME/1/ - ------------------------------------------------------- CLASS R-1 -- FIRST SOLD 6/19/02 12.92% 9.98% CLASS R-2 -- FIRST SOLD 5/21/02 13.02 7.57 CLASS R-3 -- FIRST SOLD 6/4/02 13.41 9.25 CLASS R-4 -- FIRST SOLD 7/25/02 13.85 19.86 CLASS R-5 -- FIRST SOLD 5/15/02 14.19 8.32
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value 12.00 1.42 11.29 13.06 Funds Index/3/ Lipper Growth and Income 11.72 1.65 10.72 12.57 Funds Index/4/ Class A distribution rate at December 31, 2004: 1.74%/5/ (For current distribution rate information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 The distribution rate is based on actual distributions paid to shareholders over a 12-month period. Capital gain distributions, if any, are added back to the net asset value to determine the rate. 8 Fundamental Investors / Prospectus [Begin pie chart] INDUSTRY SECTOR DIVERSIFICATION AS OF DECEMBER 31, 2004, (PERCENT OF NET ASSETS) Energy 13.08% Industrials 12.38 Materials 12.09 Financials 11.66 Consumer discretionary 9.65 Convertible securities 1.29 Bonds & notes 0.72 Other industries 33.65 Cash & equivalents 5.48 [End pie chart]
PERCENT INVESTED BY COUNTRY PERCENT OF NET ASSETS - ------------------------------------------------------------------- The Americas 69.8% - ------------------------------------------------------------------- United States 69.8 - ------------------------------------------------------------------- Europe 14.0 - ------------------------------------------------------------------- Ireland 3.0 - ------------------------------------------------------------------- France 2.7 - ------------------------------------------------------------------- Netherlands 2.2 - ------------------------------------------------------------------- United Kingdom 1.8 - ------------------------------------------------------------------- Norway 1.0 - ------------------------------------------------------------------- Russian Federation 0.9 - ------------------------------------------------------------------- Spain 0.9 - ------------------------------------------------------------------- Italy 0.6 - ------------------------------------------------------------------- Germany 0.3 - ------------------------------------------------------------------- Switzerland 0.3 - ------------------------------------------------------------------- Belgium 0.2 - ------------------------------------------------------------------- Austria 0.1 - ------------------------------------------------------------------- Asia/Pacific 4.3 - ------------------------------------------------------------------- Japan 1.9 - ------------------------------------------------------------------- Australia 1.7 - ------------------------------------------------------------------- China 0.7 - ------------------------------------------------------------------- Other 6.4 - ------------------------------------------------------------------- Canada 5.9 - ------------------------------------------------------------------- Polynational 0.5 - ------------------------------------------------------------------- Cash & equivalents 5.5 - -------------------------------------------------------------------
Because the fund is actively managed, its holdings will change over time. For updated information on the fund's portfolio holdings, please visit us at americanfunds.com. 9 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 the American Funds. Capital Research and Management Company is a wholly owned subsidiary of The Capital Group Companies, Inc. and is located at 333 South Hope Street, Los Angeles, California 90071, and 135 South State College Boulevard, Brea, California 92821. 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 in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." EXECUTION OF PORTFOLIO TRANSACTIONS The investment adviser places orders with broker-dealers for the fund's portfolio transactions. The investment adviser strives to obtain best execution on the fund's equity and/or fixed-income portfolio transactions, taking into account a variety of factors to produce the most favorable total price reasonably attainable under the circumstances. These factors include the size and type of transaction, the cost and quality of executions, and the broker-dealer's ability to offer liquidity and anonymity. For example, with respect to equity transactions, the fund does not consider the investment adviser as having an obligation to obtain the lowest available commission rate to the exclusion of price, service and qualitative considerations. Subject to the considerations outlined above, the investment adviser may place orders for the fund's portfolio transactions with broker-dealers who have sold shares of funds managed by the investment adviser, or who have provided investment research, statistical or other related services to the investment adviser. In placing orders for the fund's portfolio transactions, the investment adviser does not commit to any specific amount of business with any particular broker-dealer. Subject to best execution, the investment adviser may consider investment research, statistical or other related services provided to the adviser in placing orders for the fund's portfolio transactions. However, when the investment adviser places orders for the fund's portfolio transactions, it does not give any consideration to whether a broker-dealer has sold shares of the funds managed by the investment adviser. 10 Fundamental Investors / Prospectus PORTFOLIO HOLDINGS Portfolio holdings information for the fund is available on the American Funds website at americanfunds.com. To reach this information, access the fund's details page on the website. A list of the fund's top 10 equity holdings (updated as of each month-end) and a link to the fund's complete list of publicly disclosed portfolio holdings (updated as of each calendar quarter-end) are located in the lower portion of this website page. These lists are posted to the website generally within 30 days from the end of the applicable month or quarter. Both lists remain available on the website until new information for the next month or quarter is posted. A description of the fund's policies and procedures regarding disclosure of information about its portfolio securities is available in the statement of additional information. 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, under the oversight of Capital Research and Management Company's investment committee. In addition, Capital Research and Management Company's investment analysts may make investment decisions with respect to a portion of a fund's portfolio. The primary individual portfolio counselors for Fundamental Investors are:
PRIMARY TITLE WITH PORTFOLIO PORTFOLIO INVESTMENT ADVISER COUNSELOR'S PORTFOLIO COUNSELOR/ COUNSELOR (OR AFFILIATE) ROLE IN FUND TITLE EXPERIENCE AND INVESTMENT MANAGEMENT (IF APPLICABLE) IN THIS FUND EXPERIENCE OF THE FUND - ------------------------------------------------------------------------------------------------ DINA N. PERRY 12 years Senior Vice President, Serves as an equity President and Director (plus 1 year Capital Research and portfolio counselor prior experience Management Company as an investment analyst Investment professional for the fund) for 27 years in total; 13 years with Capital Research and Management Company or affiliate GORDON CRAWFORD 14 years Senior Vice President and Serves as an equity Senior Vice President (plus 13 years Director, Capital Research portfolio counselor prior experience and Management Company as an investment analyst Investment professional for the fund) for 34 years, all with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ MICHAEL T. KERR 6 years Senior Vice President, Senior Vice President (plus 5 years Capital Research Company Serves as an equity prior experience portfolio counselor as an Investment professional investment analyst for 22 years in total; 20 for the fund) years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ JAMES E. DRASDO 21 years Senior Vice President and (plus 6 years Director, Capital Research prior experience and Management Company Serves as an equity as an portfolio counselor investment analyst Investment professional for the fund) for 33 years in total; 28 years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------
11 Fundamental Investors / Prospectus Additional information regarding the portfolio counselors' compensation, holdings in other accounts and ownership of securities in the fund can be found in the statement of additional information. 12 Fundamental Investors / Prospectus Purchase, exchange and sale of shares AMERICAN FUNDS SERVICE COMPANY, THE FUND'S TRANSFER AGENT, ON BEHALF OF THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, IS REQUIRED BY LAW TO OBTAIN CERTAIN PERSONAL INFORMATION FROM YOU OR ANY PERSON(S) ACTING ON YOUR BEHALF IN ORDER TO VERIFY YOUR OR SUCH PERSON'S IDENTITY. IF YOU DO NOT PROVIDE THE INFORMATION, THE TRANSFER AGENT MAY NOT BE ABLE TO OPEN YOUR ACCOUNT. IF THE TRANSFER AGENT IS UNABLE TO VERIFY YOUR IDENTITY OR THAT OF ANOTHER PERSON(S) AUTHORIZED TO ACT ON YOUR BEHALF, OR BELIEVES IT HAS IDENTIFIED POTENTIALLY CRIMINAL ACTIVITY, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO CLOSE YOUR ACCOUNT OR TAKE SUCH OTHER ACTION THEY DEEM REASONABLE OR REQUIRED BY LAW. PURCHASES AND EXCHANGES Eligible retirement plans generally may open an account and purchase Class A or R 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. Some or all R share classes may not be available through certain investment dealers. Additional shares may be purchased through a plan's administrator or recordkeeper. Class A shares are generally not available for retirement plans using the PlanPremier/(R)/ or Recordkeeper Direct/(R)/ recordkeeping programs. Class R shares generally are available only to 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans and nonqualified deferred compensation plans. Class R shares also are generally available only to retirement plans where plan level or omnibus accounts are held on the books of the fund. In addition, Class R-5 shares generally are available only to retirement plans with $1 million or more in plan assets. Class R shares generally are not available to retail nonretirement accounts, Traditional and Roth IRAs, Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs, individual 403(b) plans and CollegeAmerica/(R)/ accounts. CollegeAmerica is sponsored by and is a registered trademark of the Virginia College Savings Plan,/SM /an agency of the Commonwealth of Virginia. Shares of the fund offered through this prospectus generally may be exchanged into shares of the same class of other American Funds. Exchanges of Class A shares from American Funds money market funds purchased without a sales charge generally will be subject to the appropriate sales charge. 13 Fundamental Investors / Prospectus FREQUENT TRADING OF FUND SHARES The fund and American Funds Distributors reserve the right to reject any purchase order for any reason. The fund is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the securities markets. Accordingly, purchases, including those that are part of exchange activity, that the fund or American Funds Distributors has determined could involve actual or potential harm to the fund may be rejected. Frequent trading of fund shares may lead to increased costs to the fund and less efficient management of the fund's portfolio, resulting in dilution of the value of the shares held by long-term shareholders. The fund's Board of Directors has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares. Under the fund's "purchase blocking policy," any American Funds shareholder redeeming shares (including redemptions that are part of an exchange transaction) having a value of $5,000 or more from an American Fund (other than an American Funds money market fund) will be precluded from investing in that fund (including investments that are part of an exchange transaction) for 30 calendar days after the redemption transaction. This prohibition will not apply to redemptions by shareholders whose shares are held on the books of third-party intermediaries that have not adopted procedures to implement this policy. American Funds Service Company will work with intermediaries to develop such procedures, at which time shareholders whose accounts are on the books of intermediaries that have adopted such procedures will be subject to this general purchase blocking policy. Certain purchases will not be prevented and certain redemptions will not trigger a purchase block, such as: systematic redemptions and purchases where the entity maintaining the shareholder account is able to identify the transaction as a systematic redemption or purchase; purchases and redemptions of shares having a value of less than $5,000; retirement plan contributions, loans and distributions (including hardship withdrawals) identified as such on the retirement plan recordkeeper's system; and purchase transactions involving transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations, where the entity maintaining the shareholder account is able to identify the transaction as one of these types of transactions. The statement of additional information contains more information about how American Funds Service Company may address other potentially abusive trading activity in the American Funds. 14 Fundamental Investors / Prospectus SALES Please contact your plan administrator or recordkeeper in order to sell shares from your retirement plan. If you notify American Funds Service Company, you may reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge in other American Funds within 90 days after the date of the redemption or distribution. Proceeds will be reinvested in the same share class from which the original redemption or distribution was made. Redemption proceeds of Class A shares representing direct purchases in American Funds money market funds that are reinvested in non-money market American 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 American Funds Service Company. You may not reinvest proceeds in the American Funds as described in this paragraph if the reinvestment otherwise triggers a purchase block as described under "Frequent trading of fund shares." This paragraph does not apply to rollover investments as described under "Rollovers from retirement plans to IRAs." VALUING SHARES The net asset value of each share class of the fund is the value of a single share. The fund calculates the net asset value each day the New York Stock Exchange is open as of approximately 4:00 p.m. New York time, the normal close of regular trading. Assets are valued primarily on the basis of market quotations. However, the fund has adopted procedures for making "fair value" determinations if market quotations are not readily available or are not considered reliable. Use of these procedures is intended to result in more appropriate net asset values. Because the fund may hold securities that are primarily listed on foreign exchanges that trade on weekends or days when the fund does not price its shares, the value of securities held in the fund may change on days when you will not be able to purchase or redeem fund shares. 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. 15 Fundamental Investors / Prospectus Sales charges CLASS A SHARES The initial sales charge you pay each time you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases as indicated below. The "offering price," the price you pay to buy shares, includes any applicable sales charge, which will be deducted directly from your investment. Shares acquired through reinvestment of dividends or capital gain distributions are not subject to an initial sales charge.
SALES CHARGE AS A PERCENTAGE OF: DEALER NET COMMISSION OFFERING AMOUNT AS A PERCENTAGE INVESTMENT PRICE INVESTED OF OFFERING PRICE - ------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 5.00% - ------------------------------------------------------------------------------ $25,000 but less than $50,000 5.00 5.26 4.25 - ------------------------------------------------------------------------------ $50,000 but less than $100,000 4.50 4.71 3.75 - ------------------------------------------------------------------------------ $100,000 but less than $250,000 3.50 3.63 2.75 - ------------------------------------------------------------------------------ $250,000 but less than $500,000 2.50 2.56 2.00 - ------------------------------------------------------------------------------ $500,000 but less than $750,000 2.00 2.04 1.60 - ------------------------------------------------------------------------------ $750,000 but less than $1 million 1.50 1.52 1.20 - ------------------------------------------------------------------------------ $1 million or more and certain other none none see below investments described below - ------------------------------------------------------------------------------
The sales charge, expressed as a percentage of the offering price or the net amount invested, may be higher or lower than the percentages described in the table above due to rounding. This is because the dollar amount of the sales charge is determined by subtracting the net asset value of the shares purchased from the offering price, which is calculated to two decimal places using standard rounding criteria. The impact of rounding will vary with the size of the investment and the net asset value of the shares. CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES Investments made by accounts that are part of certain qualified fee-based programs and that purchased Class A shares before March 15, 2001, are not subject to any initial or contingent deferred sales charge if American Funds Service Company is properly notified of the nature of the investment. 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 plans of distribution (see "Plans of distribution" below). 16 Fundamental Investors / Prospectus Certain other investors may qualify to purchase shares without a sales charge, such as employees of investment dealers and registered investment advisers authorized to sell American Funds, and employees of The Capital Group Companies. Please see the statement of additional information for more information. EMPLOYER-SPONSORED RETIREMENT PLANS Employer-sponsored retirement plans not currently invested in Class A shares and wishing to invest without a sales charge are not eligible to purchase Class A shares. Such plans may invest only in Class R shares. Provided that the plan's recordkeeper can properly apply a sales charge on the plan's investments, an employer-sponsored retirement plan not currently invested in Class A shares and wishing to invest less than $1 million may invest in Class A shares, but the purchase of these shares will be subject to the applicable sales charge. An employer-sponsored retirement plan that purchases Class A shares with a sales charge will be eligible to purchase additional Class A shares in accordance with the sales charge table above. If the recordkeeper cannot properly apply a sales charge on the plan's investments, then the plan may invest only in Class R shares. Employer-sponsored retirement plans not currently invested in Class A shares are not eligible to establish a statement of intention to purchase $1 million or more of American Funds shares in order to qualify to purchase without a sales charge. More information about statements of intention can be found under "Sales charge reductions." Employer-sponsored retirement plans that invested in Class A shares without any sales charge on or before March 31, 2004, may continue to purchase Class A shares without any initial or contingent deferred sales charge. CLASS R SHARES Class R shares are sold without any initial or contingent deferred sales charge. The distributor will pay dealers annually an asset-based compensation of 1.00% for sales of Class R-1 shares, .75% for Class R-2 shares, .50% for Class R-3 shares and .25% for Class R-4 shares. No dealer compensation is paid on sales of Class R-5 shares. The fund may reimburse the distributor for these payments through its plans of distribution (see "Plans of distribution" below). 17 Fundamental Investors / Prospectus Sales charge reductions TO RECEIVE A REDUCTION IN YOUR CLASS A INITIAL SALES CHARGE, YOU MUST LET YOUR FINANCIAL ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW AT THE TIME YOU PURCHASE SHARES THAT YOU QUALIFY FOR SUCH A REDUCTION. IF YOU DO NOT LET YOUR ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW THAT YOU ARE ELIGIBLE FOR A REDUCTION, YOU MAY NOT RECEIVE A SALES CHARGE DISCOUNT TO WHICH YOU ARE OTHERWISE ENTITLED. In order to determine your eligibility to receive a sales charge discount, it may be necessary for you to provide your adviser or American Funds Service Company with information and records (including account statements) of all relevant accounts invested in the American Funds. REDUCING YOUR CLASS A INITIAL SALES CHARGE Consistent with the policies described in this prospectus, two or more retirement plans of an employer or employer's affiliates may combine all of their American Funds investments to reduce their Class A sales charge. However, for this purpose, investments representing direct purchases of American Funds money market funds are excluded. CONCURRENT PURCHASES Simultaneous purchases of any class of shares of two or more American Funds may be combined to qualify for a reduced Class A sales charge. RIGHTS OF ACCUMULATION The current value of existing holdings in any class of shares of the American Funds may be taken into account to determine your Class A sales charge. The current value of existing investments in an American Legacy/(R)/ Retirement Investment Plan may also be taken into account to determine your Class A sales charge. STATEMENT OF INTENTION You may reduce your Class A sales charge by establishing a statement of intention. A statement of intention allows all American Funds non-money market fund purchases of all share classes intended to be made over a 13-month period to be combined in order to determine the applicable sales charge; however, investments made under a right of reinvestment, appreciation of your investment, and reinvested dividends and capital gains do not apply toward these combined purchases. At the request of a plan, purchases made during the previous 90 days may be included. A portion of the account may be held in escrow to cover additional Class A sales charges that may be due if total investments over the 13-month period do not qualify for the applicable sales charge reduction. 18 Fundamental Investors / Prospectus RIGHT OF REINVESTMENT Please see the "Sales" section of "Purchase, exchange and sale of shares" above for information on how to reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge. YOU MAY OBTAIN MORE INFORMATION ABOUT SALES CHARGE REDUCTIONS THROUGH A LINK ON THE HOME PAGE OF THE AMERICAN FUNDS WEBSITE AT AMERICANFUNDS.COM, FROM THE STATEMENT OF ADDITIONAL INFORMATION OR FROM YOUR FINANCIAL ADVISER. 19 Fundamental Investors / Prospectus Rollovers from retirement plans to IRAs Assets from a retirement plan may be invested in Class A, B, C or F shares of the American Funds through an IRA rollover. Rollover investments to Class A shares from retirement plans will be subject to applicable sales charges. Transfers to IRAs that are attributable to American Funds investments held in SIMPLE IRAs, SEPs or SARSEPs, as well as rollovers to IRAs from individual 403(b) plans custodied at Capital Bank and Trust Company, will not be subject to a sales charge if invested in Class A shares. Rollover investments to Class B, C or F shares will be subject to the terms and conditions generally applicable to investments in these share classes as described in the prospectus and statement of additional information. 20 Fundamental Investors / Prospectus 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 .25% for Class A shares, 1.00% for Class R-1 shares and up to 1.00%, .75% and .50% for Class R-2, R-3 and R-4 shares, respectively. For all share classes, up to .25% of these expenses may be used to pay service fees to qualified dealers for providing certain shareholder services. The amount remaining 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 in the Annual Fund Operating Expenses table 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 your investment. 21 Fundamental Investors / Prospectus Other compensation to dealers American Funds Distributors, at its expense, currently provides additional compensation to investment dealers. These payments may be made, at the discretion of American Funds Distributors, to the top 75 dealers who have sold shares of the American Funds. The level of payments made to a qualifying dealer in any given year will vary and in no case would exceed the sum of (a) .10% of the previous year's American Funds sales by that dealer and (b) .02% of American Funds assets attributable to that dealer. For 2004, aggregate payments made by American Funds Distributors to dealers were less than .02% of the assets of the American Funds. Aggregate payments may also change from year to year. A number of factors will be considered in determining payments, including the qualifying dealer's sales, assets and redemption rates, and the quality of the dealer's relationship with American Funds Distributors. American Funds Distributors makes these payments to help defray the costs incurred by qualifying dealers in connection with efforts to educate financial advisers about the American Funds so that they can make recommendations and provide services that are suitable and meet shareholder needs. American Funds Distributors will, on an annual basis, determine the advisability of continuing these payments. American Funds Distributors may also pay expenses associated with meetings conducted by dealers outside the top 75 firms to facilitate educating financial advisers and shareholders about the American Funds. 22 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. All dividends and capital gain distributions paid to retirement plan shareholders will be automatically reinvested. TAXES ON DIVIDENDS AND DISTRIBUTIONS Dividends and capital gains distributed by the fund to tax-deferred retirement plan accounts are not taxable currently. TAXES ON TRANSACTIONS Generally, exchanges within a tax-deferred retirement plan account will not result in a capital gain or loss for federal or state income tax purposes. Distributions taken from a retirement plan account, however, generally are taxable as ordinary income. PLEASE SEE YOUR TAX ADVISER FOR MORE INFORMATION. 23 Fundamental Investors / Prospectus 24 Financial highlights/1/ The Financial Highlights table is intended to help you understand the fund's results for the past five fiscal years. Certain information reflects financial results for a single share of a particular class. 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 capital gain 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.
INCOME (LOSS) FROM INVESTMENT OPERATIONS/2/ Net gains (losses) Net on securities asset (both value, Net realized Total from beginning investment and investment of period income unrealized) operations - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $28.85 $.61 $ 3.35 $ 3.96 Year ended 12/31/2003 22.23 .50 6.52 7.02 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 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-1: Year ended 12/31/2004 28.79 .37 3.33 3.70 Year ended 12/31/2003 22.19 .27 6.54 6.81 Period from 6/19/2002 to 12/31/2002 26.04 .13 (3.75) (3.62) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-2: Year ended 12/31/2004 28.77 .38 3.34 3.72 Year ended 12/31/2003 22.18 .30 6.51 6.81 Period from 5/21/2002 to 12/31/2002 27.39 .14 (5.13) (4.99) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-3: Year ended 12/31/2004 28.82 .50 3.33 3.83 Year ended 12/31/2003 22.21 .40 6.52 6.92 Period from 6/4/2002 to 12/31/2002 26.66 .18 (4.38) (4.20) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-4: Year ended 12/31/2004 $28.83 $.60 $ 3.33 $ 3.93 Year ended 12/31/2003 22.21 .48 6.53 7.01 Period from 7/25/2002 to 12/31/2002 21.75 .22 .55 .77 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-5: Year ended 12/31/2004 28.86 .68 3.35 4.03 Year ended 12/31/2003 22.23 .56 6.53 7.09 Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06) DIVIDENDS AND DISTRIBUTIONS Net Dividends Distributions Total asset (from net (from dividends value, investment capital and end of Total income) gains) distributions period return/3/ - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $(.56) $ -- $ (.56) $32.25 13.91% Year ended 12/31/2003 (.40) -- (.40) 28.85 31.96 Year ended 12/31/2002 (.50) -- (.50) 22.23 (17.34) Year ended 12/31/2001 (.40) (.37) (.77) 27.45 (9.55) Year ended 12/31/2000 (.40) (2.35) (2.75) 31.16 4.27 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-1: Year ended 12/31/2004 (.31) -- (.31) 32.18 12.92 Year ended 12/31/2003 (.21) -- (.21) 28.79 30.90 Period from 6/19/2002 to 12/31/2002 (.23) -- (.23) 22.19 (13.91) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-2: Year ended 12/31/2004 (.32) -- (.32) 32.17 13.02 Year ended 12/31/2003 (.22) -- (.22) 28.77 30.93 Period from 5/21/2002 to 12/31/2002 (.22) -- (.22) 22.18 (18.22) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-3: Year ended 12/31/2004 (.44) -- (.44) 32.21 13.41 Year ended 12/31/2003 (.31) -- (.31) 28.82 31.45 Period from 6/4/2002 to 12/31/2002 (.25) -- (.25) 22.21 (15.75) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-4: Year ended 12/31/2004 $(.54) -- $ (.54) $32.22 13.85% Year ended 12/31/2003 (.39) -- (.39) 28.83 31.91 Period from 7/25/2002 to 12/31/2002 (.31) -- (.31) 22.21 3.51 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-5: Year ended 12/31/2004 (.63) -- (.63) 32.26 14.19 Year ended 12/31/2003 (.46) -- (.46) 28.86 32.34 Period from 5/15/2002 to 12/31/2002 (.33) -- (.33) 22.23 (18.34) Ratio of Ratio of expenses expenses to to average average Ratio Net net net of net assets, assets assets income end of before after to period reim- reim- average (in bursements/ bursements/ net millions) waivers waivers/4/ assets - ----------------------------------------------------------------------------------------------------------------------- CLASS A: Year ended 12/31/2004 $21,543 .63 % .63 % 2.05 % Year ended 12/31/2003 19,212 .66 .66 2.08 Year ended 12/31/2002 15,201 .67 .67 1.68 Year ended 12/31/2001 19,331 .65 .65 1.41 Year ended 12/31/2000 19,872 .64 .64 1.28 - ----------------------------------------------------------------------------------------------------------------------- CLASS R-1: Year ended 12/31/2004 6 1.53 1.49 1.26 Year ended 12/31/2003 2 1.70 1.50 1.08 Period from 6/19/2002 to 12/31/2002 --/5/ 4.20/6/ 1.50/6/ 1.11/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-2: Year ended 12/31/2004 93 1.76 1.45 1.29 Year ended 12/31/2003 45 1.94 1.46 1.19 Period from 5/21/2002 to 12/31/2002 7 1.64/6/ 1.46/6/ 1.05/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-3: Year ended 12/31/2004 125 1.05 1.04 1.69 Year ended 12/31/2003 66 1.10 1.08 1.60 Period from 6/4/2002 to 12/31/2002 11 1.13/6/ 1.08/6/ 1.41/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-4: Year ended 12/31/2004 $ 80 .69 % .69 % 2.04 % Year ended 12/31/2003 48 .71 .71 1.94 Period from 7/25/2002 to 12/31/2002 7 .34 .32 .96 - ----------------------------------------------------------------------------------------------------------------------- CLASS R-5: Year ended 12/31/2004 141 .39 .39 2.31 Year ended 12/31/2003 112 .39 .39 2.30 Period from 5/15/2002 to 12/31/2002 53 .40/6/ .40/6/ 1.91/6/
Fundamental Investors / Prospectus
YEAR ENDED DECEMBER 31 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE FOR ALL CLASSES 30% 31% 38% 29% 43% OF SHARES
1 Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. 2 Based on average shares outstanding. 3 Total returns exclude all sales charges. 4 The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from Capital Research and Management Company. See the Annual Fund Operating Expenses table under "Fees and expenses of the fund" and the audited financial statements in the fund's annual report for more information. 5 Amount less than $1 million. 6 Annualized. Fundamental Investors / Prospectus 25 [logo-American Funds/(R)/] The right choice for the long term/(R)/
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 americanfunds.com FOR 24-HOUR INFORMATION For Class R share information, visit AmericanFundsRetirement.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 The shareholder reports contain additional information about the fund, including financial statements, investment results, portfolio holdings, a discussion of market conditions and the fund's investment strategies, and the independent registered public accounting firm's 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, DC (202/942-8090) or on the EDGAR database on the SEC's website at www.sec.gov or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. The SAI is also available on americanfunds.com. HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus and annual and semi-annual reports 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 who are part of the same family and share the same residential address. If you would like to receive a free copy of the SAI, codes of ethics or annual/semi-annual report to shareholders, 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. [logo - recycle bug]
Printed on recycled paper RPGEPR-910-0305P Litho in USA Investment Company File No. 811-32 CGD/RRD/8032 - ------------------------------------------------------------------------------- THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
THE FUND PROVIDES SPANISH TRANSLATION 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 [logo - American Funds/(R)/] The right choice for the long term/(R)/ Fundamental Investors/SM/ RETIREMENT PLAN PROSPECTUS March 1, 2005
TABLE OF CONTENTS 1 Risk/Return summary 4 Fees and expenses of the fund 6 Investment objective, strategies and risks 10 Management and organization 13 Purchase, exchange and sale of shares 16 Sales charges 18 Sales charge reductions 20 Rollovers from retirement plans to IRAs 21 Plans of distribution 22 Other compensation to dealers 23 Distributions and taxes 24 Financial highlights
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. [This page left intentionally blank.] 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. Your investment in the fund is subject to risks, including the possibility that the fund's income and the value of its portfolio holdings may fluctuate in response to events specific to the companies in which the fund invests, as well as economic, political or social events in the United States or abroad. Although all securities in the fund's portfolio may be adversely affected by currency fluctuations or global economic, political or social instability, securities issued by entities based outside the United States 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 bar chart below shows how the fund's investment results have varied from year to year, and the Investment Results table on page 3 shows how the fund's average annual total returns for various periods compare with different broad measures of market performance. This information provides some indication of the risks of investing in the fund. All fund results reflect the reinvestment of dividends and capital gain distributions, if any. Past results are not predictive of future results. CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES (Results do not include a sales charge; if a sales charge were included, results would be lower.) [begin bar chart] 1995 34.21% 1996 19.99 1997 26.68 1998 16.72 1999 24.58 2000 4.27 2001 -9.55 2002 -17.34 2003 31.96 2004 13.91 [end bar chart] Highest/Lowest quarterly results during this time period were:
HIGHEST 16.28% (quarter ended December 31, 2003) LOWEST -17.59% (quarter ended September 30, 2002)
2 Fundamental Investors / Prospectus Unlike the bar chart above, the Investment Results table below reflects, as required by Securities and Exchange Commission rules, the fund's investment results with the following maximum initial sales charge imposed: - - Class A share results reflect the maximum initial sales charge of 5.75%. This charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more. - - Class R shares are sold without any initial sales charge. Results would be higher if calculated without a sales charge. Unlike the Investment Results table below, the Additional Investment Results table on page 8 reflects the fund's results calculated without a sales charge.
INVESTMENT RESULTS (WITH A MAXIMUM SALES CHARGE) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - -------------------------------------------------------------------------- CLASS A -- FROM 8/1/78 7.36% 2.01% 12.60% 13.90%
1 YEAR LIFETIME/1/ - ------------------------------------------------------- CLASS R-1 -- FIRST SOLD 6/19/02 12.92% 9.98% CLASS R-2 -- FIRST SOLD 5/21/02 13.02 7.57 CLASS R-3 -- FIRST SOLD 6/4/02 13.41 9.25 CLASS R-4 -- FIRST SOLD 7/25/02 13.85 19.86 CLASS R-5 -- FIRST SOLD 5/15/02 14.19 8.32
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value Funds 12.00 1.42 11.29 13.06 Index/3/ Lipper Growth and Income Funds 11.72 1.65 10.72 12.57 Index/4/ Class A 30-day yield at December 31, 2004: 1.44%/5/ (For current yield information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 Reflects a fee waiver (1.42% without the waiver) as described in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." 3 Fundamental Investors / Prospectus Fees and expenses of the fund These tables describe the fees and expenses that you may pay if you buy and hold shares of the fund.
SHAREHOLDER FEES (PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A ALL R SHARE CLASSES - ------------------------------------------------------------------------------ Maximum initial sales charge on purchases 5.75%/*/ none (as a percentage of offering price) - ------------------------------------------------------------------------------ Maximum sales charge on reinvested dividends none none - ------------------------------------------------------------------------------ Maximum contingent deferred sales charge none none - ------------------------------------------------------------------------------ Redemption or exchange fees none none
* The initial sales charge is reduced for purchases of $25,000 or more and eliminated for purchases of $1 million or more.
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM FUND ASSETS) CLASS CLASS CLASS CLASS CLASS CLASS A R-1 R-2 R-3 R-4 R-5 - ------------------------------------------------------------------------------- Management fees 0.27% 0.27% 0.27% 0.27% 0.27% 0.27% - ------------------------------------------------------------------------------- Distribution and/or service 0.24 1.00 0.75 0.50 0.25 none (12b-1) fees/1/ - ------------------------------------------------------------------------------- Other expenses 0.12 0.26 0.74 0.28 0.17 0.12 - ------------------------------------------------------------------------------- Total annual fund operating 0.63 1.53 1.76 1.05 0.69 0.39 expenses/2/ - -------------------------------------------------------------------------------
1 Class A, R-2, R-3 and R-4 12b-1 fees may not exceed .25%, 1.00%, .75% and .50%, respectively, of the class' average net assets annually. Class R-1 12b-1 fees are 1.00% of the class' average net assets annually. 2 The fund's investment adviser began waiving 5.00% of its management fees on September 1, 2004. The waiver will continue until August 31, 2005. As of the fund's last fiscal year-end, the reduction in management fees as a result of the waiver was less than .01% (though the impact may appear greater due to rounding). In addition, the investment adviser paid a portion of the fund's transfer agent fees for certain R share classes. Total annual fund operating expenses do not reflect any waiver or reimbursement. Information regarding the effect of the waiver/reimbursement on total annual fund operating expenses can be found in the Financial Highlights table and the audited financial statements in the fund's annual report. 4 Fundamental Investors / Prospectus OTHER EXPENSES The "Other expenses" items in the table above include custodial, legal, transfer agent and subtransfer agent/recordkeeping payments. Subtransfer agent/recordkeeping payments may be made to third parties (including affiliates of the fund's investment adviser) that provide recordkeeping and other administrative services to retirement plans invested in the fund in lieu of the transfer agent providing such services. The amount paid for subtransfer agent/recordkeeping services will vary depending on the share class selected and the entity receiving the payments. The table below shows the maximum payments to affiliated and unaffiliated entities of the fund's investment adviser providing services to retirement plans.
PAYMENTS TO AFFILIATED PAYMENTS TO UNAFFILIATED ENTITIES ENTITIES - ------------------------------------------------------------------------------- Class A .05% of assets or .05% of assets or $12 per participant position* $12 per participant position* - ------------------------------------------------------------------------------- Class R-1 .10% of assets .10% of assets - ------------------------------------------------------------------------------- Class R-2 $27 per participant position .25% of assets plus .15% of assets - ------------------------------------------------------------------------------- Class R-3 $12 per participant position .15% of assets plus .10% of assets Class R-4 .10% of assets .10% of assets - ------------------------------------------------------------------------------- Class R-5 .05% of assets .05% of assets - -------------------------------------------------------------------------------
* Payment amount depends on the date upon which services commenced. EXAMPLES 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, that all dividends and capital gain distributions are reinvested, and that the fund's operating expenses remain the same as shown above. The examples do not reflect the impact of any fee waivers or expense reimbursements. Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS - -------------------------------------------------------------------- Class A* $636 $765 $906 $1,316 - -------------------------------------------------------------------- Class R-1 156 483 834 1,824 - -------------------------------------------------------------------- Class R-2 179 554 954 2,073 - -------------------------------------------------------------------- Class R-3 107 334 579 1,283 - -------------------------------------------------------------------- Class R-4 70 221 384 859 - -------------------------------------------------------------------- Class R-5 40 125 219 493 - --------------------------------------------------------------------
* Reflects the maximum initial sales charge in the first year. 5 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 United States and not included in the Standard & Poor's 500 Composite Index. The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate fluctuations. Investments in securities issued by entities based outside the United States may be subject to the risks described above to a greater extent and may also be affected by currency fluctuations and controls; different accounting, auditing, financial reporting and legal standards and practices in some countries; expropriation; changes in tax policy; greater market volatility; differing securities market structures; higher transaction costs; and various administrative difficulties, such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. These risks may be heightened in connection with investments in developing countries. The fund may also hold cash or money market instruments, the amount of which will vary and will depend on various factors, including market conditions and purchases and redemptions of fund shares. A larger amount of such holdings could negatively affect the fund's investment results in a period of rising market prices; conversely, it could reduce the fund's magnitude of loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. The fund relies on the professional judgment of its investment adviser to make decisions about the fund's portfolio investments. The basic investment philosophy of the investment adviser is to seek to invest in attractively valued companies that, in its opinion, represent above-average long-term investment opportunities. The investment adviser believes that an important way to accomplish this is through fundamental analysis, which may include meeting with company executives and employees, suppliers, customers and competitors. Securities may be sold when the investment adviser believes that they no longer represent relatively attractive investment opportunities. 6 Fundamental Investors / Prospectus OTHER IMPORTANT INVESTMENT PRACTICES In addition to the principal investment strategies described above, the fund has other investment practices that are described in this prospectus and in the statement of additional information. The fund may invest to a limited extent in lower quality 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. Lower quality or longer maturity debt securities generally have higher rates of interest and may be subject to greater price fluctuations than higher quality or shorter maturity debt securities. 7 Fundamental Investors / Prospectus ADDITIONAL INVESTMENT RESULTS Unlike the Investment Results table on page 3, the table below reflects the fund's results calculated without a sales charge.
ADDITIONAL INVESTMENT RESULTS (WITHOUT A SALES CHARGE) AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2004: 1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------ CLASS A -- FROM 8/1/78 13.91% 3.22% 13.27% 14.16%
1 YEAR LIFETIME/1/ - ------------------------------------------------------- CLASS R-1 -- FIRST SOLD 6/19/02 12.92% 9.98% CLASS R-2 -- FIRST SOLD 5/21/02 13.02 7.57 CLASS R-3 -- FIRST SOLD 6/4/02 13.41 9.25 CLASS R-4 -- FIRST SOLD 7/25/02 13.85 19.86 CLASS R-5 -- FIRST SOLD 5/15/02 14.19 8.32
1 YEAR 5 YEARS 10 YEARS LIFETIME/1/ - ------------------------------------------------------------------------------- INDEXES S&P 500/2/ 10.87% -2.30% 12.07% 13.38% Lipper Large-Cap Value 12.00 1.42 11.29 13.06 Funds Index/3/ Lipper Growth and Income 11.72 1.65 10.72 12.57 Funds Index/4/ Class A distribution rate at December 31, 2004: 1.74%/5/ (For current distribution rate information, please call American FundsLine at 800/325-3590.)
1 Lifetime results for Class A shares are measured from August 1, 1978, when Capital Research and Management Company became the fund's investment adviser. Lifetime results for other share classes are measured from the date the share class was first sold. Lifetime results for the index(es) are measured from the date Capital Research and Management Company became the fund's investment adviser. 2 Standard & Poor's 500 Composite Index is a market capitalization-weighted index based on the average weighted performance of 500 widely held common stocks. This index is unmanaged and does not reflect sales charges, commissions, expenses or taxes. Results reflect the reinvestment of dividends on securities in the index. 3 Lipper Large-Cap Value Funds Index is an equally weighted index of funds that invest at least 75% of their equity assets in companies having relatively large market capitalizations. These funds typically have a below-average price-to-earnings ratio, price-to-book ratio and three-year sales-per-share growth value, comparable to the S&P 500. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 4 Lipper Growth and Income Funds Index is an equally weighted index of funds that combine a growth-of-earnings orientation and an income requirement for level and/or rising dividends. The results of the underlying funds in the index include the reinvestment of dividends, capital gain distributions and brokerage commissions paid by the funds for portfolio transactions, but do not reflect sales charges or taxes. 5 The distribution rate is based on actual distributions paid to shareholders over a 12-month period. Capital gain distributions, if any, are added back to the net asset value to determine the rate. 8 Fundamental Investors / Prospectus [Begin pie chart] INDUSTRY SECTOR DIVERSIFICATION AS OF DECEMBER 31, 2004, (PERCENT OF NET ASSETS) Energy 13.08% Industrials 12.38 Materials 12.09 Financials 11.66 Consumer discretionary 9.65 Convertible securities 1.29 Bonds & notes 0.72 Other industries 33.65 Cash & equivalents 5.48 [End pie chart]
PERCENT INVESTED BY COUNTRY PERCENT OF NET ASSETS - ------------------------------------------------------------------- The Americas 69.8% - ------------------------------------------------------------------- United States 69.8 - ------------------------------------------------------------------- Europe 14.0 - ------------------------------------------------------------------- Ireland 3.0 - ------------------------------------------------------------------- France 2.7 - ------------------------------------------------------------------- Netherlands 2.2 - ------------------------------------------------------------------- United Kingdom 1.8 - ------------------------------------------------------------------- Norway 1.0 - ------------------------------------------------------------------- Russian Federation 0.9 - ------------------------------------------------------------------- Spain 0.9 - ------------------------------------------------------------------- Italy 0.6 - ------------------------------------------------------------------- Germany 0.3 - ------------------------------------------------------------------- Switzerland 0.3 - ------------------------------------------------------------------- Belgium 0.2 - ------------------------------------------------------------------- Austria 0.1 - ------------------------------------------------------------------- Asia/Pacific 4.3 - ------------------------------------------------------------------- Japan 1.9 - ------------------------------------------------------------------- Australia 1.7 - ------------------------------------------------------------------- China 0.7 - ------------------------------------------------------------------- Other 6.4 - ------------------------------------------------------------------- Canada 5.9 - ------------------------------------------------------------------- Polynational 0.5 - ------------------------------------------------------------------- Cash & equivalents 5.5 - -------------------------------------------------------------------
Because the fund is actively managed, its holdings will change over time. For updated information on the fund's portfolio holdings, please visit us at americanfunds.com. 9 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 the American Funds. Capital Research and Management Company is a wholly owned subsidiary of The Capital Group Companies, Inc. and is located at 333 South Hope Street, Los Angeles, California 90071, and 135 South State College Boulevard, Brea, California 92821. 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 in the Annual Fund Operating Expenses table under "Fees and expenses of the fund." EXECUTION OF PORTFOLIO TRANSACTIONS The investment adviser places orders with broker-dealers for the fund's portfolio transactions. The investment adviser strives to obtain best execution on the fund's equity and/or fixed-income portfolio transactions, taking into account a variety of factors to produce the most favorable total price reasonably attainable under the circumstances. These factors include the size and type of transaction, the cost and quality of executions, and the broker-dealer's ability to offer liquidity and anonymity. For example, with respect to equity transactions, the fund does not consider the investment adviser as having an obligation to obtain the lowest available commission rate to the exclusion of price, service and qualitative considerations. Subject to the considerations outlined above, the investment adviser may place orders for the fund's portfolio transactions with broker-dealers who have sold shares of funds managed by the investment adviser, or who have provided investment research, statistical or other related services to the investment adviser. In placing orders for the fund's portfolio transactions, the investment adviser does not commit to any specific amount of business with any particular broker-dealer. Subject to best execution, the investment adviser may consider investment research, statistical or other related services provided to the adviser in placing orders for the fund's portfolio transactions. However, when the investment adviser places orders for the fund's portfolio transactions, it does not give any consideration to whether a broker-dealer has sold shares of the funds managed by the investment adviser. 10 Fundamental Investors / Prospectus PORTFOLIO HOLDINGS Portfolio holdings information for the fund is available on the American Funds website at americanfunds.com. To reach this information, access the fund's details page on the website. A list of the fund's top 10 equity holdings (updated as of each month-end) and a link to the fund's complete list of publicly disclosed portfolio holdings (updated as of each calendar quarter-end) are located in the lower portion of this website page. These lists are posted to the website generally within 30 days from the end of the applicable month or quarter. Both lists remain available on the website until new information for the next month or quarter is posted. A description of the fund's policies and procedures regarding disclosure of information about its portfolio securities is available in the statement of additional information. 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, under the oversight of Capital Research and Management Company's investment committee. In addition, Capital Research and Management Company's investment analysts may make investment decisions with respect to a portion of a fund's portfolio. The primary individual portfolio counselors for Fundamental Investors are:
PRIMARY TITLE WITH PORTFOLIO PORTFOLIO INVESTMENT ADVISER COUNSELOR'S PORTFOLIO COUNSELOR/ COUNSELOR (OR AFFILIATE) ROLE IN FUND TITLE EXPERIENCE AND INVESTMENT MANAGEMENT (IF APPLICABLE) IN THIS FUND EXPERIENCE OF THE FUND - ------------------------------------------------------------------------------------------------ DINA N. PERRY 12 years Senior Vice President, Serves as an equity President and Director (plus 1 year Capital Research and portfolio counselor prior experience Management Company as an investment analyst Investment professional for the fund) for 27 years in total; 13 years with Capital Research and Management Company or affiliate GORDON CRAWFORD 14 years Senior Vice President and Serves as an equity Senior Vice President (plus 13 years Director, Capital Research portfolio counselor prior experience and Management Company as an investment analyst Investment professional for the fund) for 34 years, all with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ MICHAEL T. KERR 6 years Senior Vice President, Senior Vice President (plus 5 years Capital Research Company Serves as an equity prior experience portfolio counselor as an Investment professional investment analyst for 22 years in total; 20 for the fund) years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------ JAMES E. DRASDO 21 years Senior Vice President and (plus 6 years Director, Capital Research prior experience and Management Company Serves as an equity as an portfolio counselor investment analyst Investment professional for the fund) for 33 years in total; 28 years with Capital Research and Management Company or affiliate - ------------------------------------------------------------------------------------------------
11 Fundamental Investors / Prospectus Additional information regarding the portfolio counselors' compensation, holdings in other accounts and ownership of securities in the fund can be found in the statement of additional information. 12 Fundamental Investors / Prospectus Purchase, exchange and sale of shares AMERICAN FUNDS SERVICE COMPANY, THE FUND'S TRANSFER AGENT, ON BEHALF OF THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S DISTRIBUTOR, IS REQUIRED BY LAW TO OBTAIN CERTAIN PERSONAL INFORMATION FROM YOU OR ANY PERSON(S) ACTING ON YOUR BEHALF IN ORDER TO VERIFY YOUR OR SUCH PERSON'S IDENTITY. IF YOU DO NOT PROVIDE THE INFORMATION, THE TRANSFER AGENT MAY NOT BE ABLE TO OPEN YOUR ACCOUNT. IF THE TRANSFER AGENT IS UNABLE TO VERIFY YOUR IDENTITY OR THAT OF ANOTHER PERSON(S) AUTHORIZED TO ACT ON YOUR BEHALF, OR BELIEVES IT HAS IDENTIFIED POTENTIALLY CRIMINAL ACTIVITY, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO CLOSE YOUR ACCOUNT OR TAKE SUCH OTHER ACTION THEY DEEM REASONABLE OR REQUIRED BY LAW. PURCHASES AND EXCHANGES Eligible retirement plans generally may open an account and purchase Class A or R 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. Some or all R share classes may not be available through certain investment dealers. Additional shares may be purchased through a plan's administrator or recordkeeper. Class A shares are generally not available for retirement plans using the PlanPremier/(R)/ or Recordkeeper Direct/(R)/ recordkeeping programs. Class R shares generally are available only to 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing and money purchase pension plans, defined benefit plans and nonqualified deferred compensation plans. Class R shares also are generally available only to retirement plans where plan level or omnibus accounts are held on the books of the fund. In addition, Class R-5 shares generally are available only to retirement plans with $1 million or more in plan assets. Class R shares generally are not available to retail nonretirement accounts, Traditional and Roth IRAs, Coverdell Education Savings Accounts, SEPs, SARSEPs, SIMPLE IRAs, individual 403(b) plans and CollegeAmerica/(R)/ accounts. CollegeAmerica is sponsored by and is a registered trademark of the Virginia College Savings Plan,/SM /an agency of the Commonwealth of Virginia. Shares of the fund offered through this prospectus generally may be exchanged into shares of the same class of other American Funds. Exchanges of Class A shares from American Funds money market funds purchased without a sales charge generally will be subject to the appropriate sales charge. 13 Fundamental Investors / Prospectus FREQUENT TRADING OF FUND SHARES The fund and American Funds Distributors reserve the right to reject any purchase order for any reason. The fund is not designed to serve as a vehicle for frequent trading in response to short-term fluctuations in the securities markets. Accordingly, purchases, including those that are part of exchange activity, that the fund or American Funds Distributors has determined could involve actual or potential harm to the fund may be rejected. Frequent trading of fund shares may lead to increased costs to the fund and less efficient management of the fund's portfolio, resulting in dilution of the value of the shares held by long-term shareholders. The fund's Board of Directors has adopted policies and procedures with respect to frequent purchases and redemptions of fund shares. Under the fund's "purchase blocking policy," any American Funds shareholder redeeming shares (including redemptions that are part of an exchange transaction) having a value of $5,000 or more from an American Fund (other than an American Funds money market fund) will be precluded from investing in that fund (including investments that are part of an exchange transaction) for 30 calendar days after the redemption transaction. This prohibition will not apply to redemptions by shareholders whose shares are held on the books of third-party intermediaries that have not adopted procedures to implement this policy. American Funds Service Company will work with intermediaries to develop such procedures, at which time shareholders whose accounts are on the books of intermediaries that have adopted such procedures will be subject to this general purchase blocking policy. Certain purchases will not be prevented and certain redemptions will not trigger a purchase block, such as: systematic redemptions and purchases where the entity maintaining the shareholder account is able to identify the transaction as a systematic redemption or purchase; purchases and redemptions of shares having a value of less than $5,000; retirement plan contributions, loans and distributions (including hardship withdrawals) identified as such on the retirement plan recordkeeper's system; and purchase transactions involving transfers of assets, rollovers, Roth IRA conversions and IRA re-characterizations, where the entity maintaining the shareholder account is able to identify the transaction as one of these types of transactions. The statement of additional information contains more information about how American Funds Service Company may address other potentially abusive trading activity in the American Funds. 14 Fundamental Investors / Prospectus SALES Please contact your plan administrator or recordkeeper in order to sell shares from your retirement plan. If you notify American Funds Service Company, you may reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge in other American Funds within 90 days after the date of the redemption or distribution. Proceeds will be reinvested in the same share class from which the original redemption or distribution was made. Redemption proceeds of Class A shares representing direct purchases in American Funds money market funds that are reinvested in non-money market American 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 American Funds Service Company. You may not reinvest proceeds in the American Funds as described in this paragraph if the reinvestment otherwise triggers a purchase block as described under "Frequent trading of fund shares." This paragraph does not apply to rollover investments as described under "Rollovers from retirement plans to IRAs." VALUING SHARES The net asset value of each share class of the fund is the value of a single share. The fund calculates the net asset value each day the New York Stock Exchange is open as of approximately 4:00 p.m. New York time, the normal close of regular trading. Assets are valued primarily on the basis of market quotations. However, the fund has adopted procedures for making "fair value" determinations if market quotations are not readily available or are not considered reliable. Use of these procedures is intended to result in more appropriate net asset values. Because the fund may hold securities that are primarily listed on foreign exchanges that trade on weekends or days when the fund does not price its shares, the value of securities held in the fund may change on days when you will not be able to purchase or redeem fund shares. 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. 15 Fundamental Investors / Prospectus Sales charges CLASS A SHARES The initial sales charge you pay each time you buy Class A shares differs depending upon the amount you invest and may be reduced or eliminated for larger purchases as indicated below. The "offering price," the price you pay to buy shares, includes any applicable sales charge, which will be deducted directly from your investment. Shares acquired through reinvestment of dividends or capital gain distributions are not subject to an initial sales charge.
SALES CHARGE AS A PERCENTAGE OF: DEALER NET COMMISSION OFFERING AMOUNT AS A PERCENTAGE INVESTMENT PRICE INVESTED OF OFFERING PRICE - ------------------------------------------------------------------------------ Less than $25,000 5.75% 6.10% 5.00% - ------------------------------------------------------------------------------ $25,000 but less than $50,000 5.00 5.26 4.25 - ------------------------------------------------------------------------------ $50,000 but less than $100,000 4.50 4.71 3.75 - ------------------------------------------------------------------------------ $100,000 but less than $250,000 3.50 3.63 2.75 - ------------------------------------------------------------------------------ $250,000 but less than $500,000 2.50 2.56 2.00 - ------------------------------------------------------------------------------ $500,000 but less than $750,000 2.00 2.04 1.60 - ------------------------------------------------------------------------------ $750,000 but less than $1 million 1.50 1.52 1.20 - ------------------------------------------------------------------------------ $1 million or more and certain other none none see below investments described below - ------------------------------------------------------------------------------
The sales charge, expressed as a percentage of the offering price or the net amount invested, may be higher or lower than the percentages described in the table above due to rounding. This is because the dollar amount of the sales charge is determined by subtracting the net asset value of the shares purchased from the offering price, which is calculated to two decimal places using standard rounding criteria. The impact of rounding will vary with the size of the investment and the net asset value of the shares. CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES Investments made by accounts that are part of certain qualified fee-based programs and that purchased Class A shares before March 15, 2001, are not subject to any initial or contingent deferred sales charge if American Funds Service Company is properly notified of the nature of the investment. 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 plans of distribution (see "Plans of distribution" below). 16 Fundamental Investors / Prospectus Certain other investors may qualify to purchase shares without a sales charge, such as employees of investment dealers and registered investment advisers authorized to sell American Funds, and employees of The Capital Group Companies. Please see the statement of additional information for more information. EMPLOYER-SPONSORED RETIREMENT PLANS Employer-sponsored retirement plans not currently invested in Class A shares and wishing to invest without a sales charge are not eligible to purchase Class A shares. Such plans may invest only in Class R shares. Provided that the plan's recordkeeper can properly apply a sales charge on the plan's investments, an employer-sponsored retirement plan not currently invested in Class A shares and wishing to invest less than $1 million may invest in Class A shares, but the purchase of these shares will be subject to the applicable sales charge. An employer-sponsored retirement plan that purchases Class A shares with a sales charge will be eligible to purchase additional Class A shares in accordance with the sales charge table above. If the recordkeeper cannot properly apply a sales charge on the plan's investments, then the plan may invest only in Class R shares. Employer-sponsored retirement plans not currently invested in Class A shares are not eligible to establish a statement of intention to purchase $1 million or more of American Funds shares in order to qualify to purchase without a sales charge. More information about statements of intention can be found under "Sales charge reductions." Employer-sponsored retirement plans that invested in Class A shares without any sales charge on or before March 31, 2004, may continue to purchase Class A shares without any initial or contingent deferred sales charge. CLASS R SHARES Class R shares are sold without any initial or contingent deferred sales charge. The distributor will pay dealers annually an asset-based compensation of 1.00% for sales of Class R-1 shares, .75% for Class R-2 shares, .50% for Class R-3 shares and .25% for Class R-4 shares. No dealer compensation is paid on sales of Class R-5 shares. The fund may reimburse the distributor for these payments through its plans of distribution (see "Plans of distribution" below). 17 Fundamental Investors / Prospectus Sales charge reductions TO RECEIVE A REDUCTION IN YOUR CLASS A INITIAL SALES CHARGE, YOU MUST LET YOUR FINANCIAL ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW AT THE TIME YOU PURCHASE SHARES THAT YOU QUALIFY FOR SUCH A REDUCTION. IF YOU DO NOT LET YOUR ADVISER OR AMERICAN FUNDS SERVICE COMPANY KNOW THAT YOU ARE ELIGIBLE FOR A REDUCTION, YOU MAY NOT RECEIVE A SALES CHARGE DISCOUNT TO WHICH YOU ARE OTHERWISE ENTITLED. In order to determine your eligibility to receive a sales charge discount, it may be necessary for you to provide your adviser or American Funds Service Company with information and records (including account statements) of all relevant accounts invested in the American Funds. REDUCING YOUR CLASS A INITIAL SALES CHARGE Consistent with the policies described in this prospectus, two or more retirement plans of an employer or employer's affiliates may combine all of their American Funds investments to reduce their Class A sales charge. However, for this purpose, investments representing direct purchases of American Funds money market funds are excluded. CONCURRENT PURCHASES Simultaneous purchases of any class of shares of two or more American Funds may be combined to qualify for a reduced Class A sales charge. RIGHTS OF ACCUMULATION The current value of existing holdings in any class of shares of the American Funds may be taken into account to determine your Class A sales charge. The current value of existing investments in an American Legacy/(R)/ Retirement Investment Plan may also be taken into account to determine your Class A sales charge. STATEMENT OF INTENTION You may reduce your Class A sales charge by establishing a statement of intention. A statement of intention allows all American Funds non-money market fund purchases of all share classes intended to be made over a 13-month period to be combined in order to determine the applicable sales charge; however, investments made under a right of reinvestment, appreciation of your investment, and reinvested dividends and capital gains do not apply toward these combined purchases. At the request of a plan, purchases made during the previous 90 days may be included. A portion of the account may be held in escrow to cover additional Class A sales charges that may be due if total investments over the 13-month period do not qualify for the applicable sales charge reduction. 18 Fundamental Investors / Prospectus RIGHT OF REINVESTMENT Please see the "Sales" section of "Purchase, exchange and sale of shares" above for information on how to reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge. YOU MAY OBTAIN MORE INFORMATION ABOUT SALES CHARGE REDUCTIONS THROUGH A LINK ON THE HOME PAGE OF THE AMERICAN FUNDS WEBSITE AT AMERICANFUNDS.COM, FROM THE STATEMENT OF ADDITIONAL INFORMATION OR FROM YOUR FINANCIAL ADVISER. 19 Fundamental Investors / Prospectus Rollovers from retirement plans to IRAs Assets from a retirement plan may be invested in Class A, B, C or F shares of the American Funds through an IRA rollover. Rollover investments to Class A shares from retirement plans will be subject to applicable sales charges. Transfers to IRAs that are attributable to American Funds investments held in SIMPLE IRAs, SEPs or SARSEPs, as well as rollovers to IRAs from individual 403(b) plans custodied at Capital Bank and Trust Company, will not be subject to a sales charge if invested in Class A shares. Rollover investments to Class B, C or F shares will be subject to the terms and conditions generally applicable to investments in these share classes as described in the prospectus and statement of additional information. 20 Fundamental Investors / Prospectus 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 .25% for Class A shares, 1.00% for Class R-1 shares and up to 1.00%, .75% and .50% for Class R-2, R-3 and R-4 shares, respectively. For all share classes, up to .25% of these expenses may be used to pay service fees to qualified dealers for providing certain shareholder services. The amount remaining 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 in the Annual Fund Operating Expenses table 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 your investment. 21 Fundamental Investors / Prospectus Other compensation to dealers American Funds Distributors, at its expense, currently provides additional compensation to investment dealers. These payments may be made, at the discretion of American Funds Distributors, to the top 75 dealers who have sold shares of the American Funds. The level of payments made to a qualifying dealer in any given year will vary and in no case would exceed the sum of (a) .10% of the previous year's American Funds sales by that dealer and (b) .02% of American Funds assets attributable to that dealer. For 2004, aggregate payments made by American Funds Distributors to dealers were less than .02% of the assets of the American Funds. Aggregate payments may also change from year to year. A number of factors will be considered in determining payments, including the qualifying dealer's sales, assets and redemption rates, and the quality of the dealer's relationship with American Funds Distributors. American Funds Distributors makes these payments to help defray the costs incurred by qualifying dealers in connection with efforts to educate financial advisers about the American Funds so that they can make recommendations and provide services that are suitable and meet shareholder needs. American Funds Distributors will, on an annual basis, determine the advisability of continuing these payments. American Funds Distributors may also pay expenses associated with meetings conducted by dealers outside the top 75 firms to facilitate educating financial advisers and shareholders about the American Funds. 22 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. All dividends and capital gain distributions paid to retirement plan shareholders will be automatically reinvested. TAXES ON DIVIDENDS AND DISTRIBUTIONS Dividends and capital gains distributed by the fund to tax-deferred retirement plan accounts are not taxable currently. TAXES ON TRANSACTIONS Generally, exchanges within a tax-deferred retirement plan account will not result in a capital gain or loss for federal or state income tax purposes. Distributions taken from a retirement plan account, however, generally are taxable as ordinary income. PLEASE SEE YOUR TAX ADVISER FOR MORE INFORMATION. 23 Fundamental Investors / Prospectus 24 Financial highlights/1/ The Financial Highlights table is intended to help you understand the fund's results for the past five fiscal years. Certain information reflects financial results for a single share of a particular class. 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 capital gain 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.
INCOME (LOSS) FROM INVESTMENT OPERATIONS/2/ Net gains (losses) Net on securities asset (both value, Net realized Total from beginning investment and investment of period income unrealized) operations - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $28.85 $.61 $ 3.35 $ 3.96 Year ended 12/31/2003 22.23 .50 6.52 7.02 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 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-1: Year ended 12/31/2004 28.79 .37 3.33 3.70 Year ended 12/31/2003 22.19 .27 6.54 6.81 Period from 6/19/2002 to 12/31/2002 26.04 .13 (3.75) (3.62) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-2: Year ended 12/31/2004 28.77 .38 3.34 3.72 Year ended 12/31/2003 22.18 .30 6.51 6.81 Period from 5/21/2002 to 12/31/2002 27.39 .14 (5.13) (4.99) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-3: Year ended 12/31/2004 28.82 .50 3.33 3.83 Year ended 12/31/2003 22.21 .40 6.52 6.92 Period from 6/4/2002 to 12/31/2002 26.66 .18 (4.38) (4.20) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-4: Year ended 12/31/2004 $28.83 $.60 $ 3.33 $ 3.93 Year ended 12/31/2003 22.21 .48 6.53 7.01 Period from 7/25/2002 to 12/31/2002 21.75 .22 .55 .77 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-5: Year ended 12/31/2004 28.86 .68 3.35 4.03 Year ended 12/31/2003 22.23 .56 6.53 7.09 Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06) DIVIDENDS AND DISTRIBUTIONS Net Dividends Distributions Total asset (from net (from dividends value, investment capital and end of Total income) gains) distributions period return/3/ - ------------------------------------------------------------------------------------------------------------------------------------ CLASS A: Year ended 12/31/2004 $(.56) $ -- $ (.56) $32.25 13.91% Year ended 12/31/2003 (.40) -- (.40) 28.85 31.96 Year ended 12/31/2002 (.50) -- (.50) 22.23 (17.34) Year ended 12/31/2001 (.40) (.37) (.77) 27.45 (9.55) Year ended 12/31/2000 (.40) (2.35) (2.75) 31.16 4.27 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-1: Year ended 12/31/2004 (.31) -- (.31) 32.18 12.92 Year ended 12/31/2003 (.21) -- (.21) 28.79 30.90 Period from 6/19/2002 to 12/31/2002 (.23) -- (.23) 22.19 (13.91) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-2: Year ended 12/31/2004 (.32) -- (.32) 32.17 13.02 Year ended 12/31/2003 (.22) -- (.22) 28.77 30.93 Period from 5/21/2002 to 12/31/2002 (.22) -- (.22) 22.18 (18.22) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-3: Year ended 12/31/2004 (.44) -- (.44) 32.21 13.41 Year ended 12/31/2003 (.31) -- (.31) 28.82 31.45 Period from 6/4/2002 to 12/31/2002 (.25) -- (.25) 22.21 (15.75) - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-4: Year ended 12/31/2004 $(.54) -- $ (.54) $32.22 13.85% Year ended 12/31/2003 (.39) -- (.39) 28.83 31.91 Period from 7/25/2002 to 12/31/2002 (.31) -- (.31) 22.21 3.51 - ------------------------------------------------------------------------------------------------------------------------------------ CLASS R-5: Year ended 12/31/2004 (.63) -- (.63) 32.26 14.19 Year ended 12/31/2003 (.46) -- (.46) 28.86 32.34 Period from 5/15/2002 to 12/31/2002 (.33) -- (.33) 22.23 (18.34) Ratio of Ratio of expenses expenses to to average average Ratio Net net net of net assets, assets assets income end of before after to period reim- reim- average (in bursements/ bursements/ net millions) waivers waivers/4/ assets - ----------------------------------------------------------------------------------------------------------------------- CLASS A: Year ended 12/31/2004 $21,543 .63 % .63 % 2.05 % Year ended 12/31/2003 19,212 .66 .66 2.08 Year ended 12/31/2002 15,201 .67 .67 1.68 Year ended 12/31/2001 19,331 .65 .65 1.41 Year ended 12/31/2000 19,872 .64 .64 1.28 - ----------------------------------------------------------------------------------------------------------------------- CLASS R-1: Year ended 12/31/2004 6 1.53 1.49 1.26 Year ended 12/31/2003 2 1.70 1.50 1.08 Period from 6/19/2002 to 12/31/2002 --/5/ 4.20/6/ 1.50/6/ 1.11/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-2: Year ended 12/31/2004 93 1.76 1.45 1.29 Year ended 12/31/2003 45 1.94 1.46 1.19 Period from 5/21/2002 to 12/31/2002 7 1.64/6/ 1.46/6/ 1.05/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-3: Year ended 12/31/2004 125 1.05 1.04 1.69 Year ended 12/31/2003 66 1.10 1.08 1.60 Period from 6/4/2002 to 12/31/2002 11 1.13/6/ 1.08/6/ 1.41/6/ - ----------------------------------------------------------------------------------------------------------------------- CLASS R-4: Year ended 12/31/2004 $ 80 .69 % .69 % 2.04 % Year ended 12/31/2003 48 .71 .71 1.94 Period from 7/25/2002 to 12/31/2002 7 .34 .32 .96 - ----------------------------------------------------------------------------------------------------------------------- CLASS R-5: Year ended 12/31/2004 141 .39 .39 2.31 Year ended 12/31/2003 112 .39 .39 2.30 Period from 5/15/2002 to 12/31/2002 53 .40/6/ .40/6/ 1.91/6/
Fundamental Investors / Prospectus
YEAR ENDED DECEMBER 31 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------ PORTFOLIO TURNOVER RATE FOR ALL CLASSES 30% 31% 38% 29% 43% OF SHARES
1 Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year. 2 Based on average shares outstanding. 3 Total returns exclude all sales charges. 4 The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from Capital Research and Management Company. See the Annual Fund Operating Expenses table under "Fees and expenses of the fund" and the audited financial statements in the fund's annual report for more information. 5 Amount less than $1 million. 6 Annualized. Fundamental Investors / Prospectus 25 [logo-American Funds/(R)/] The right choice for the long term/(R)/
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 americanfunds.com FOR 24-HOUR INFORMATION For Class R share information, visit AmericanFundsRetirement.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 The shareholder reports contain additional information about the fund, including financial statements, investment results, portfolio holdings, a discussion of market conditions and the fund's investment strategies, and the independent registered public accounting firm's 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, DC (202/942-8090) or on the EDGAR database on the SEC's website at www.sec.gov or, after payment of a duplicating fee, via e-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. The SAI is also available on americanfunds.com. HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus and annual and semi-annual reports 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 who are part of the same family and share the same residential address. If you would like to receive a free copy of the SAI, codes of ethics or annual/semi-annual report to shareholders, 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. [logo - recycle bug]
Printed on recycled paper RPGEPR-910-0305P Litho in USA Investment Company File No. 811-32 CGD/RRD/8032 - ------------------------------------------------------------------------------- THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust
Fundamental Investors, Inc. Part C Other Information Item 23. Exhibits for Registration Statement (1940 Act No. 2-10760 and 1933 Act No. 811-32) (a) Articles of Incorporation - previously filed (see P/E Amendment No. 81 filed 2/28/97, No. 85 filed 3/13/00, No. 86 filed 3/8/01, and No. 87 filed 2/15/02) (b) By-laws as amended 5/18/04 (c) Form of Share Certificate - previously filed (see P/E Amendment No. 86 filed 3/8/01) (d) Amended Investment Advisory and Service Agreement as amended 6/1/04 (e-1)Form of Amended and Restated Principal Underwriting Agreement - previously filed (see P/E Amendment No. 87 filed 2/15/02); form of Selling Group Agreement; form of Banking Selling Group Agreement; form of Omnibus addendum to the Selling Group Agreement (for retirement plan share classes (R shares only); and form of Institutional Selling Group Agreement (see P/E Amendment No. 88 filed 5/13/02) (e-2) Form of Institutional Selling Group Agreement (f) Bonus or Profit Sharing Contracts - Deferred Compensation Plan amended 1/1/04 - previously filed (see P/E Amendment No. 90 filed on 2/26/04) (g-1)Form of Global Custody Agreement - previously filed (see P/E Amendment No. 87 filed 2/15/02) (g-2) Form of State Street Bank and Trust Company Supplementary Agreement (h-1)Form of Amended and Restated Administrative Service Agreement - previously filed (see P/E Amendment No. 87 filed 2/15/02) (h-2) Amended Shareholder Services Agreement as of 4/1/03 - previously filed (see P/E Amendment No. 90 filed 2/26/04) (h-3) Form of Indemnification Agreement dated 7/1/04 (i) Legal Opinion - previously filed (see P/E Amendment No. 88 filed 5/13/02) (j) Consent of Independent Registered Public Accounting Firm (k) Omitted Financial Statements - none (l) Initial capital agreements - not applicable to this filing (m) Forms of Plans of Distribution - previously filed (No. 81 filed 2/28/97, No. 85 filed 3/13/00, No. 86 filed 3/8/01, No. 87 filed 2/15/02 and No. 88 filed 5/13/02) (n) Form of Amended and Restated Multiple Class Plan - previously filed (see P/E Amendment No. 87 filed 2/15/02) Fundamental Investors, Inc. -- C-1 (o) Reserved (p) Codes of Ethics of The Capital Group Companies dated November 2004 and Code of Ethics for Registrant dated December 2004 Item 24. Persons Controlled by or under Common Control with the Fund None Item 25. Indemnification The Registrant is a joint-insured under Investment Adviser/Mutual Fund Errors and Omissions Policies, which insure 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. 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 (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. Article VIII of the Registrant's Articles of Incorporation and Article V of the Registrant's By-Laws (attached as an exhibit hereto) as well as the indemnification agreements (a form of which is attached as an exhibit hereto) that the Registrant has entered into with each of its directors who is not an "interested person" of the Registrant (as defined under the Investment Fundamental Investors, Inc. -- C-2 Company Act of 1940), provide in effect that the Registrant will indemnify its officers and directors against any liability or expenses actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Registrant, to the fullest extent permitted by applicable law, subject to certain conditions. In accordance with Section 17(h) and 17(i) of the Investment Company Act of 1940 and their respective terms, these provisions do not protect any person against any liability to the Registrant or its shareholders to which such person 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 or her office. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Registrant will comply with the indemnification requirements contained in the Investment Company Act of 1940, as amended, and Release Nos. 7221 (June 9, 1972) and 11330 (September 4, 1980). Item 26. Business and Other Connections of the 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. Fundamental Investors, Inc. -- C-3
(b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant David L. Abzug Vice President None P.O. Box 2248 Agoura Hills, CA 91376 John A. Agar Vice President None 3901 Cedar Hill Road, #9 Little Rock, AR 72202 William C. Anderson Regional Vice President None 5817 Eastview Drive Edina, MN 55436 Robert B. Aprison Senior Vice President None 2983 Bryn Wood Drive Madison, WI 53711 Shakeel A. Barkat Regional Vice President None 1249 Pine Hill Drive Annapolis, MD 21401 Steven L. Barnes Senior Vice President None 7490 Clubhouse Road Suite 100 Boulder, CO 80301 Thomas M. Bartow Vice President None 20 Cerchio Alto Henderson, NV 89011 B Carl R. Bauer Vice President None Michelle A. Bergeron Senior Vice President None 4160 Gateswalk Drive Smyrna, GA 30080 J. Walter Best, Jr. Vice President None 7003 Chadwick Drive, Suite 355 Brentwood, TN 37027 John A. Blanchard Senior Vice President None 576 Somerset Lane Northfield, IL 60093 Fundamental Investors, Inc. -- C-4 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Ian B. Bodell Senior Vice President None 7003 Chadwick Drive, Suite 355 Brentwood, TN 37027 Bill Brady Regional Vice President None 646 Somerset Drive Indianapolis, IN 46260 Mick L. Brethower Senior Vice President None 601 E. Whitestone Blvd. Building 6, Suite 115 Cedar Park, TX 78613 C. Alan Brown Vice President None 7424 Somerset Avenue St. Louis, MO 63105 L Sheryl M. Burford Assistant Vice President None B J. Peter Burns Vice President None Steven Calabria Regional Vice President None 161 Bay Avenue Huntington Bay, NY 11743 Cody Callaway Regional Vice President None 9942 South 78th East Avenue Tulsa, OK 74133 S Kathleen D. Campbell Assistant Vice President None Matthew C. Carlisle Regional Vice President None 4500 Fairvista Drive Charlotte, NC 28269 Damian F. Carroll Regional Vice President None 40 Ten Acre Road New Britain, CT 06052 James D. Carter Regional Vice President None 401 Bridle Court Chesapeake, VA 23323 Fundamental Investors, Inc. -- C-5 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Brian C. Casey Senior Vice President None 8002 Greentree Road Bethesda, MD 20817 Victor C. Cassato Senior Vice President None 609 W. Littleton Blvd., Suite 310 Littleton, CO 80120 Christopher J. Cassin Senior Vice President None 19 North Grant Street Hinsdale, IL 60521 L Denise M. Cassin Director, Vice President None L David D. Charlton Senior Vice President None Thomas M. Charon Regional Vice President None N27 W23960 Paul Road Suite 204 Pewaukee, WI 53072 Paul A. Cieslik Regional Vice President None 90 Northington Drive Avon, CT 06001 L Larry P. Clemmensen Director None L Kevin G. Clifford Director, President and Co-Chief None Executive Officer H Cheri Coleman Vice President None Ruth M. Collier Senior Vice President None 106 Central Park South, #10K New York, NY 10019 S David Coolbaugh Vice President None Carlo O. Cordasco Regional Vice President None 101 Five Forks Lane Hampton, VA 23669 B Josie Cortez Assistant Vice President None Fundamental Investors, Inc. -- C-6 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Thomas E. Cournoyer Vice President None 2333 Granada Blvd. Coral Gables, FL 33134 L Michael D. Cravotta Assistant Vice President None Joseph G. Cronin Vice President None 1281 Fiore Drive Lake Forest, IL 60045 William F. Daugherty Vice President None 1213 Redwood Hills Circle Carlisle, PA 17013 Guy E. Decker Regional Vice President None 2990 Topaz Lane Carmel, IN 46032 Daniel J. Delianedis Vice President None Edina Executive Plaza 5200 Willson Road, Suite 150 Edina, MN 55424 L James W. DeLouise Assistant Vice President None James A. DePerno, Jr. Vice President None 1 Nehercrest Ln. Orchard Park, NY 14127 L Bruce L. DePriester Director, Senior Vice President, None Treasurer and Controller Lori A. Deuberry Regional Vice President None 4165 Sudbrook Square East New Albany, OH 43054 L Dianne M. Dexter Assistant Vice President None Thomas J. Dickson Vice President None 108 Wilmington Court Southlake, TX 76092 Michael A. DiLella Senior Vice President None 22 Turner's Lake Drive Mahwah, NJ 07430 Fundamental Investors, Inc. -- C-7 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant G. Michael Dill Director, Senior Vice President None 505 E. Main Street Jenks, OK 74037 N Dean M. Dolan Vice President None L Hedy B. Donahue Assistant Vice President None L Michael J. Downer Director, Secretary None Michael J. Dullaghan Regional Vice President None 5040 Plantation Grove Lane Roanoke, VA 24012 I Lloyd G. Edwards Senior Vice President None Timothy L. Ellis Senior Vice President None 1441 Canton Mart Road, Suite 9 Jackson, MS 39211 William F. Flannery Regional Vice President None 29 Overlook Road Hopkinton, MA 01748 John R. Fodor Senior Vice President None 15 Latisquama Road Southborough, MA 01772 L Charles L. Freadhoff Vice President None Daniel B. Frick 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 L Linda S. Gardner Vice President None L J. Christopher Gies Senior Vice President None B Lori A. Giacomini Assistant Vice President None B Evelyn K. Glassford Vice President None Fundamental Investors, Inc. -- C-8 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Jack E. Goldin Regional Vice President None 3424 Belmont Terrace Davie, FL 33328 L Earl C. Gottschalk Vice President None Jeffrey J. Greiner Senior Vice President None 8250-A Estates Parkway Plain City, OH 43064 Eric M. Grey Regional Vice President None 601 Fisher Road N. Dartmouth, MA 02747 B Mariellen Hamann Vice President None Derek S. Hansen Regional Vice President None 13033 Ridgedale Drive, #147 Minnetonka, MN 55305 David E. Harper Senior Vice President None 5400 Russell Cave Road Lexington, KY 40511 Calvin L. Harrelson, III Regional Vice President None 2048 Kings Manor Weddington, NC 28104 H Mary Pat Harris Vice President None Robert J. Hartig, Jr. Vice President None 13563 Marjac Way McCordsville, IN 46055 L Linda M. Hines Vice President None Steven J. Hipsley Regional Vice President None 44 Tyler Drive Saratoga Springs, NY 12866 L Russell K. Holliday Vice President None L Kevin B. Hughes Vice President None Fundamental Investors, Inc. -- C-9 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Ronald R. Hulsey Senior Vice President None 6202 Llano Dallas, TX 75214 Marc Ialeggio Regional Vice President None 48 Tyrrel Court Danville, CA 94526 Robert S. Irish Senior Vice President None 1225 Vista Del Mar Drive Delray Beach, FL 33483 B Damien M. Jordan Senior Vice President None John P. Keating Vice President None 1576 Sandy Springs Dr. Orange Park, FL 32003 Brian G. Kelly Regional Vice President None 76 Daybreak Road Southport, CT 06890 Andrew J. Kilbride Regional Vice President None 3080 Tuscany Court Ann Arbor, MI 48103 Dorothy Klock Vice President None 555 Madison Avenue, 29th Floor New York, NY 10022 Dianne L. Koske Assistant Vice President None 122 Clydesdale Court Hampton, VA 23666 B Elizabeth K. Koster Vice President None R. Andrew LeBlanc Regional Vice President None 78 Eton Road Garden City, NY 11530 B Karl A. Lewis Vice President None T. Blake Liberty Vice President None 5506 East Mineral Lane Littleton, CO 80122 Fundamental Investors, Inc. -- C-10 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Mark J. Lien Vice President None 1103 Tulip Tree Lane West Des Moines, IA 50266 L Lorin E. Liesy Vice President None I Kelle Lindenberg Assistant Vice President None Louis K. Linquata Regional Vice President None 5214 Cass Street Omaha, NE 68132 Brendan T. Mahoney Vice President None 1 Union Avenue, 2nd Floor Sudbury, MA 01776 Stephen A. Malbasa Director, Senior Vice President None 13405 Lake Shore Blvd. Cleveland, OH 44110 Steven M. Markel Senior Vice President None 5241 South Race Street Greenwood Village, CO 80121 L Paul R. Mayeda Assistant Vice President None L Eleanor P. Maynard Vice President None L Christopher McCarthy Vice President None James R. McCrary Vice President None 28812 Crestridge Rancho Palos Verdes, CA 90275 S John V. McLaughlin Senior Vice President None L Dan R. McMaster Assistant Vice President None Terry W. McNabb Senior Vice President None 2002 Barrett Station Road St. Louis, MO 63131 Scott M. Meade Vice President None 370 Central Road Rye Beach, NH 03870 Fundamental Investors, Inc. -- C-11 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Monty L. Moncrief Regional Vice President None 55 Chandler Creek Court The Woodlands, TX 77381 David H. Morrison Regional Vice President None 153 Wildflower Way Streamwood, IL 60107 Andrew J. Moscardini Regional Vice President None 1393 Sunset Beach Drive Niceville, FL 32578 William E. Noe Senior Vice President None 3600 Knollwood Road Nashville, TN 37215 L Heidi J. Novaes Vice President None Peter A. Nyhus Senior Vice President None 15345 Wilderness Ridge Road, NW Prior Lake, MN 55372 G1 Luis Freitas de Oliveira Director None Eric P. Olson Senior Vice President None 42 Topsfield Road Boxford, MA 01921 Jeffrey A. Olson Regional Vice President None 2708 88th St. Court, NW Gig Harbor, WA 98332 Thomas A. O'Neil Regional Vice President None 400 N. Woodlawn, Suite 202 Woodlawn Central Office Building Wichita, KS 67208 W. Burke Patterson, Jr. Regional Vice President None 1643 Richland Avenue Baton Rouge, LA 70808 Gary A. Peace Vice President None 291 Kaanapali Drive Napa, CA 94558 Fundamental Investors, Inc. -- C-12 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Samuel W. Perry Regional Vice President None 4340 East Indian School Road Suite 21 Phoenix, AZ 85018 Raleigh G. Peters Regional Vice President None 5425 Gateswood lane Cumming GA 30040 David K. Petzke 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. Pilgram Assistant Vice President None Carl S. Platou Senior Vice President None 7455 80th Place, S.E. Mercer Island, WA 98040 N Gregory S. Porter Assistant Vice President None S Richard P. Prior Vice President None Mike Quinn Regional Vice President None 1035 Vintage Club Drive Duluth, GA 30097 S John W. Rankin Regional Vice President None Jennifer D. Rasner Regional Vice President None 11940 Baypoint Drive Burnsville, MN 55337 Mark S. Reischmann Regional Vice President None 5485 East Mineral Lane Centennial, CO 80122 Steven J. Reitman Senior Vice President None 212 The Lane Hinsdale, IL 60521 Fundamental Investors, Inc. -- C-13 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Brian A. Roberts Vice President None 209-A 60th Street Virginia Beach, VA 23451 L James F. Rothenberg Director Chairman and Director Romolo D. Rottura Regional Vice President None 233 Glenhaven Court Swedesboro, NJ 08085 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 L Dean B. Rydquist Director, Senior Vice President None Richard A. Sabec, Jr. Regional Vice President None 6019 Craughwell Lane Dublin, OH 43017 Richard R. Samson Senior Vice President None 4604 Glencoe Avenue, #4 Marina del Rey, CA 90292 Paul V. Santoro Vice President None 62 Mt. Vernon Street Boston, MA 02108 Joseph D. Scarpitti Senior Vice President None 31465 St. Andrews Westlake, OH 44145 Shane D. Schofield Regional Vice President None 201 McIver Street Greenville, SC 29601 S Sherrie L. Senft Vice President None James J. Sewell III Regional Vice President None 415 East Holyoke Place Claremont, CA 91711 Fundamental Investors, Inc. -- C-14 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Arthur M. Sgroi Regional Vice President None 76 Fields End Drive Glenmont, NY 12077 L R. Michael Shanahan Director None L Michael J. Sheldon Vice President None Frederic J. Shipp Regional Vice President None 1352 Sanjo Farms Drive Chesapeake, VA 23320 L Katharine J. Shoemaker Assistant Vice President None Daniel S. Shore Regional Vice President None 3734 North Greenview Avenue Chicago, IL 60613 Brad Short Vice President None 1601 Seal Way Seal Beach, CA 90740 David W. Short Chairman of the Board and None 1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer Pittsburgh, PA 15238 William P. Simon, Jr. Senior Vice President None 912 Castlehill Lane Devon, PA 19333 L Connie F. Sjursen Vice President None Jerry L. Slater Senior Vice President None 4227 E. Madison, #2D Seattle, WA 98112 LW John H. Smet Director None Rodney G. Smith Senior Vice President None 15851 Dallas Parkway, Suite 500 Addison, TX 75001-6016 J. Eric Snively Regional Vice President None 9188 Oak Knoll Lane Fishers, IN 46038 Fundamental Investors, Inc. -- C-15 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Anthony L. Soave Vice President None 3780 Foxglove Court NE Grand Rapids, MI 49525 L Therese L. Soullier Vice President None Nicholas D. Spadaccini Senior Vice President None 855 Markley Woods Way Cincinnati, OH 45230 L Kristen J. Spazafumo Assistant Vice President None Mark D. Steburg Regional Vice President None 12508 160th Avenue Southeast Renton, WA 98059 B Raymond Stein Assistant Vice President None Brad Stillwagon Vice President None 2438 Broadmeade Road Louisville, KY 40205 L David K. Stone Assistant Vice President None Thomas A. Stout Vice President None 1004 Ditchley Road Virginia Beach, VA 23451 Craig R. Strauser Vice President None 13160 Princeton Court Lake Oswego, OR 97035 L Lisa F. Swaiman Senior Vice President None L Libby J. Syth Vice President None L Drew W. Taylor Assistant Vice President None L Larry I. Thatt Assistant Vice President None Gary J. Thoma Regional Vice President None 401 Desnoyer Kaukauna, WI 54130 Fundamental Investors, Inc. -- C-16 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Cynthia M. Thompson Regional Vice President None 4 Franklin Way Ladera Ranch, CA 92694 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 Senior Vice President None 60 Reedland Woods Way Tiburon, CA 94920 S Cindy Vaquiax Assistant Vice President None J. David Viale Vice President None 39 Old Course Drive Newport Beach, CA 92660 D Bradley J. Vogt Director None Gerald J. Voss Regional Vice President None 1009 Ridge Road Sioux Falls, SD 57105 L Wendy A. Wainwright Assistant Vice President None L A. Jordan Wallens Regional Vice President None 2016 Dracena Drive, #10 Los Angeles, CA 90027 Thomas E. Warren Vice President None 119 Faubel St. Sarasota, FL 34242 L J. Kelly Webb Senior Vice President None Gregory J. Weimer Director, Senior Vice President None 206 Hardwood Drive Venetia, PA 15367 Fundamental Investors, Inc. -- C-17 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant B Timothy W. Weiss Director None Dana L. Wells Regional Vice President None Emerald Plaza Ctr. 402 W. Broadway, Suite 400 San Diego, CA 92101 SF Gregory W. Wendt Director None George J. Wenzel Vice President None 251 Barden Road Bloomfield Hills, MI 48304 Brian E. Whalen Regional Vice President None 4072 Yellow Ginger Glen Norcross, GA 30092 L N. Dexter Williams, Jr. Senior Vice President None L Alan J. Wilson Director None Andrew L. Wilson Regional Vice President None 11163 Rich Meadow Drive Great Falls, VA 22066 Steven C. Wilson Regional Vice President None 83 Kaydeross Park Road Saratoga Springs, NY 12866 Timothy J. Wilson Vice President None 460 Valleybrook Road McMurray, PA 15317 B Laura L. Wimberly Vice President None H Marshall D. Wingo Director, Senior Vice President None Kurt A. Wuestenberg Regional Vice President None 975 Arboretum Drive Saline, MI 48176 William R. Yost Senior Vice President None 9463 Olympia Drive Eden Prairie, MN 55347 Fundamental Investors, Inc. -- C-18 (b) (1) (2) (3) Name and Principal Positions and Offices Positions and Offices Business Address with Underwriter with Registrant Jason P. Young Regional Vice President None 11141 Whitetail Lane Olathe, KS 66061 Jonathan A. Young Regional Vice President None 2145 Hickory Forrest Chesapeake, VA 23322 Scott D. Zambon Regional Vice President None 2178 Pieper Lane Tustin, CA 92782 - ---------- L Business Address, 333 South Hope Street, Los Angeles, CA 90071 LW Business Address, 11100 Santa Monica Blvd., 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 N Business Address, 630 Fifth Avenue, 36th Floor, New York, NY10111 D Business Address, 3000 K Street N.W., Suite 230, Washington, DC 20007-5140 G1 Business Address, 3 Place des Bergues, 1201 Geneva, Switzerland (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 the Registrant's 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; 10001 North 92nd Street, Suite 100; Scottsdale, Arizona 85258; 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. Fundamental Investors, Inc. -- C-19 Item 29. Management Services None Item 30. Undertakings n/a Fundamental Investors, Inc. -- C-20 SIGNATURES 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 under 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, duly authorized, in the City and County of San Francisco, and State of California on the 25th day of February, 2005. FUNDAMENTAL INVESTORS, INC. By /s/Patrick F. Quan ------------------------------------ Patrick F. Quan, Secretary Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below on February 25, 2005 by the following persons in the capacities indicated. Signature Title (1) Principal Executive Officer: Chairman of the Board /s/James F. Rothenberg (James F. Rothenberg) (2) Principal Financial Officer and Principal Accounting Officer: Treasurer /s/Sheryl F. Johnson (Sheryl F. Johnson) (3) Directors: Joseph C. Berenato* Director Robert J. Denison* Director Robert A. Fox* Director Leonade D. Jones* Director John G. McDonald* Director Gail L. Neale* Director (Dina N. Perry) President and Director Henry E. Riggs* Director Patricia K. Woolf* Director *By Patrick F. Quan, Attorney-in-Fact, Powers of Attorney enclosed Counsel represents that the amendment does not contain disclosures that would make the amendment ineligible for effectiveness under the provisions of Rule 485(b). /s/Walter R. Burkley Walter R. Burkley Counsel Fundamental Investors, Inc. -- C-21 POWER OF ATTORNEY I, Joseph C. Berenato, the undersigned director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint PAUL G. HAAGA, JR. and PATRICK F. QUAN, any of them, to act as attorney-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all amendments to the Registration Statement of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended, said amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments to such Registration Statement, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Long Beach, California, this 5th day of January, 2004. FUNDAMENTAL INVESTORS, INC. /s/ Joseph C. Berenato Joseph C. Berenato Director State of California) County of Los Angeles)ss. On January 5, 2004, before me, Anna Klubnicken, personally appeared Joseph C. Berenato, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (Notary Seal) /s/ Anna Klubnicken Anna Klubnicken Notary Public POWER OF ATTORNEY I, Robert J. Denison, the undersigned director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint MICHAEL T. KERR, PAUL G. HAAGA, JR., SHERYL F. JOHNSON, PATRICK F. QUAN, and JAMES F. ROTHENBERG, or any of them, to act as attorney-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment CompanyAct of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such Registration Statements and amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Cmpany Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys- in-fact. EXECUTED at Los Angeles, California, this 17th day of February, 2005. FUNDAMENTAL INVESTORS, INC. /s/ Robert J. Denison Robert J. Denison Director POWER OF ATTORNEY I, Robert A. Fox, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Long Beach, California, this 31st day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ Robert A. Fox Robert A. Fox Director POWER OF ATTORNEY I, Leonade D. Jones, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Burlingame, California, this 31st day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ Leonade D. Jones Leonade D. Jones Director POWER OF ATTORNEY I, John G. McDonald, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Palo Alto, California, this 31st day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ John G. McDonald John G. McDonald Director POWER OF ATTORNEY I, Gail L. Neale, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Burlington, Vermont, this 28th day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ Gail L. Neale Gail L. Neale Director POWER OF ATTORNEY I, Henry E. Riggs, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Claremont, California, this 29th day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ Henry E. Riggs Henry E. Riggs Director POWER OF ATTORNEY I, Patricia K. Woolf, the undersigned Director of FUNDAMENTAL INVESTORS, INC., a Maryland corporation, revoking all prior powers of attorney given as a director of FUNDAMENTAL INVESTORS, INC., do hereby constitute and appoint Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, Patrick F. Quan and James F. Rothenberg, or any of them, to act as attorneys-in-fact for and in my name, place and stead (1) to sign my name as a director of said Corporation to any and all Registration Statements of FUNDAMENTAL INVESTORS, INC., File No. 2-10760, under the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, and any and all amendments thereto, said Registration Statements and amendments to be filed with the Securities and Exchange Commission, and to any and all reports, applications or renewal of applications required by any State in the United States of America in which this Corporation is registered to sell shares, and (2) to deliver any and all such amendments, so signed, for filing with the Securities and Exchange Commission under the provisions of the Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as amended, granting to said attorneys-in-fact, and each of them, full power and authority to do and perform every act and thing whatsoever requisite and necessary to be done in and about the premises as fully to all intents and purposes as the undersigned might or could do if personally present, hereby ratifying and approving the acts of said attorneys-in-fact. EXECUTED at Princeton, New Jersey, this 31st day of January, 2001. FUNDAMENTAL INVESTORS, INC. /s/ Patricia K. Woolf Patricia K. Woolf Director EX-99.B 3 bylaws.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 1 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 2 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. 3 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 4 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. 5 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. 6 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 6.04 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. 7 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 8 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 INDEMNIFICATION AND INSURANCE Section 5.01. Indemnification. The Corporation shall promptly indemnify and hold harmless each of its directors and officers, and may indemnify and hold harmless any of its employees and agents, against any liabilities or expenses (collectively, "Liability") actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Corporation, to the fullest extent permitted by the Articles of Incorporation and the laws of the State of Maryland, the Securities Act of 1933, and the Investment Company Act of 1940, as now or hereafter in effect, subject to the provisions of paragraphs (a) and (b) of this Section 5.01. (a) Special Condition. With respect to Liability to the Corporation or its stockholders, a director or officer shall be indemnified and held harmless pursuant to this Section 5.01 against any Liability to the Corporation or its stockholders unless such Liability arises by reason of his or her willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office as defined in Section 17(h) of the Investment Company Act of 1940 ("disabling conduct"). (b) Special Process Condition. With respect to Liability to the Corporation or its stockholders, no indemnification shall be made unless a determination has been made by reasonable and fair means that the director or officer has not engaged in disabling conduct. In making such a determination, a director who is not an "interested person" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, shall be entitled to a rebuttable presumption that such director did not engage in disabling conduct while acting in his or her capacity as a director. Section 5.02. Advancement of Expenses. The Corporation shall promptly advance funds to its directors and officers, and may advance funds to its employees and agents, to cover expenses they incur with respect to any proceeding arising out of or in connection with their service to the Corporation, to the fullest extent permitted by the Articles of Incorporation and the laws of the State of Maryland, the Securities Act of 1933, and the Investment Company Act of 1940, as now or hereafter in effect. (a) Special Condition. With respect to Liability to the Corporation or its stockholders, a director or officer shall be entitled to advancements of expenses pursuant to 9 this Section 5.02 against any Liability to the Corporation or its stockholders if the Corporation has (1) obtained assurances, such as by obtaining insurance or receiving collateral provided by the director or officer, that the advance will be repaid if the director or officer is found to have engaged in disabling conduct, or (2) has a reasonable belief that the director or officer has not engaged in disabling conduct and ultimately will be entitled to indemnification. In forming such a reasonable belief, a director who is not an "interested person" of the Corporation as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, shall be entitled to a rebuttable presumption that such director did not engage in disabling conduct while acting in his or her capacity as a director. Section 5.03. Insurance. The Corporation shall purchase and maintain in effect one or more policies of insurance on behalf of its directors and officers in such amounts and with such coverage as shall be determined from time to time by the board of directors, and may purchase and maintain such insurance for any of its employees and agents, issued by a reputable insurer or insurers, against any expenses actually and reasonably incurred by such person in any proceeding arising out of or in connection with his or her service to the Corporation, with customary limitations and exceptions, whether or not the Corporation would have the power to indemnify such person against such expenses pursuant to this Article V. Section 5.04. General Provisions. (a) Non-Exclusive Rights. The provisions for indemnification of, and advancement of expenses to, directors and officers of the Corporation set forth in this Article V shall not be deemed exclusive of any other rights to which a director or officer may otherwise be entitled. (b) Continuation of Provisions. The provisions of this Article V shall continue as to a person who has ceased to provide service to the Corporation and shall inure to the benefit of his or her spouses, heirs, assigns, devisees, executors, administrators and legal representatives. No amendment of the Articles of Incorporation or By-Laws of the Corporation shall limit or eliminate the right of a person to indemnification, advancement of expenses and insurance set forth in this Article V with respect to his or her acts, omissions or service to the Corporation occurring prior to such amendment. Section 5.05. Definitions. For purposes of this Article V, the following terms shall have the following meanings: (1) "Disabling conduct" shall be as defined in Section 5.01(a). (2) "Expenses" shall include without limitation all judgments, penalties, fines, amounts paid or to be paid in settlement, ERISA excise taxes, liabilities, losses, interest, expenses of investigation, attorneys' fees, retainers, court costs, transcript costs, fees of experts and witnesses, expenses of preparing for and attending depositions and other 10 proceedings, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other costs, disbursements or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or acting as a witness in a proceeding. (3) "Liability" shall be as defined in Section 5.01. (4) The term "proceeding" shall include without limitation any threatened, pending or completed claim, demand, threat, discovery request, request for testimony or information, action, suit, arbitration, alternative dispute mechanism, investigation, hearing, or other proceeding, including any appeal from any of the foregoing, whether civil, criminal, administrative or investigative. (5) A person's "service to the Corporation" shall include without limitation his or her service as a director, officer, employee, agent or representative of the Corporation, and his or her service at the request of the Corporation as a director, officer, employee, agent or representative of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. ARTICLE VI GENERAL PROVISIONS Section 6.01. 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 6.02. 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 6.03. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 11 Section 6.04. 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 6.05. 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 6.06. 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 6.07. 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 6.08. 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 12 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 6.09. 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 VII 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. 13 EX-99.D 4 iasa.txt AMENDED INVESTMENT ADVISORY AND SERVICE AGREEMENT AGREEMENT, made as of this 1st day of June, 2004, by and between FUNDAMENTAL INVESTORS, INC., a Maryland corporation (the "Fund"), and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation (the "Adviser"). 1. The Fund hereby employs the Adviser to furnish advice to the Fund with respect to the investment and reinvestment of the assets of the Fund. The Adviser hereby accepts such employment and agrees to render the services and to assume the obligations to the extent herein set forth, for the compensation herein provided. The Adviser shall, for all purposes herein, be deemed an independent contractor and not an agent of the Fund. 2. The Adviser agrees to provide supervision of the portfolio of the Fund and to determine what securities or other property shall be purchased or sold by the Fund, giving due consideration to the policies of the Fund as expressed in the Fund's Articles of Incorporation, By-Laws, Registration Statement under the Investment Company Act of 1940 (the "1940 Act"), Registration Statement under the Securities Act of 1933, and prospectus as in use from time to time, as well as to the factors affecting the Fund's status as a regulated investment company under the Internal Revenue Code. The Adviser shall provide adequate facilities and qualified personnel for the placement of orders for the purchase, or other acquisition, and sale, or other disposition, of portfolio securities for the Fund. With respect to such transactions, the Adviser, subject to such directions as may be furnished from time to time by the Board of Directors of the Fund, shall endeavor as the primary objective to obtain the most favorable prices and executions of orders. Subject to such primary objective, the Adviser may place orders with brokerage firms which have sold shares of the Fund or which furnish statistical and other information to the Adviser, taking into account the value and quality of the brokerage services of such broker-dealers, including the availability and quality of such statistical and other information. Receipt by the Adviser of any such statistical and other information and services shall not be deemed to give rise to any requirement for abatement of the advisory fee payable pursuant to Section 5. 3. The Adviser shall furnish the services of persons to perform the executive, administrative, clerical, and bookkeeping functions of the Fund, including the daily determination of net asset value and offering price per share. The Adviser shall pay the compensation and travel expenses of all such persons, and they shall serve without additional compensation from the Fund. The Adviser shall also, at its expense, provide the Fund with suitable office space (which may be in the offices of the Adviser); all necessary small office equipment and utilities; and general purpose accounting forms, supplies, and postage used at the offices of the Fund. 4. The Fund shall pay all its expenses not assumed by the Adviser as provided herein. Such expenses shall include, but shall not be limited to, custodian, registrar, stock transfer and dividend disbursing fees and expenses; costs of the designing, printing and mailing of reports, prospectuses, proxy statements, and notices to its shareholders; taxes; expenses of the issuance and redemption of shares of the Fund (including stock certificates, registration and qualification fees and expenses); legal and auditing expenses; compensation, fees, and expenses paid to directors; association dues; costs of stationery and forms prepared exclusively for the Fund; and costs of assembling and storing shareholder account data. 5. The Fund shall pay to the Investment Adviser on or before the tenth day of each month, as compensation for the services rendered by the Investment Adviser during the preceding month, a fee ("Investment Advisory fee") calculated at the lower of the annual rates of: .39% on the first $800 million of net assets .336% on net assets from $800 million to $1.8 billion .30% on net assets from $1.8 billion to $3.0 billion .276% on net assets exceeding $3.0 billion or .39% on the first $1 billion of net assets .336% on net assets from $1.0 billion to $2.0 billion .30% on net assets from $2.0 billion to $3.0 billion .276% on net assets from $3.0 billion to $5.0 billion .27% on net assets from $5.0 billion to $8.0 billion .258% on net assets from $8.0 billion to $13.0 billion .252% on net assets from $13.0 billion to $17.0 billion .250% on net assets from $17.0 billion to $21.0 billion .245% on net assets from $21.0 billion to $27.0 billion .240% on net assets over $27.0 billion The Investment Advisory fee shall be computed and accrued daily based on the actual number of days per year. The net assets of the Fund shall be determined in the manner set forth in the Articles of Incorporation and prospectus of the Fund. Upon any termination of this Agreement on a day other than the last day of the month in which termination occurs, the fee for such month of termination shall be the amount accrued up to the time of termination. 6. The Adviser agrees to reduce the fee payable to it under this Agreement by the amount by which the ordinary operating expenses of the Fund for any fiscal year of the Fund, excluding interest, taxes and extraordinary expenses, shall exceed one percent of the average net assets of the Fund determined pursuant to Section 5. Costs incurred in connection with the purchase or sale of portfolio securities, including brokerage fees and commissions, which are capitalized in accordance with generally accepted accounting principles applicable to investment companies, shall be accounted for as capital items and not as expenses. Proper accruals shall be made by the Fund for any projected reduction hereunder and corresponding amounts shall be withheld from the fees paid by the Fund to the Adviser. Any additional reduction computed at the end of the fiscal year shall be deducted from the fee for the last month of such fiscal year, and any excess shall be paid to the Fund immediately after the fiscal year end, and in any event prior to the publication of the Fund's annual report, as a reduction of the fees previously paid during the fiscal year. 7. The expense limitation described in Section 6 shall apply only to Class A shares issued by the Fund and shall not apply to any other class(es) of shares the Fund may issue in the future. Any new class(es) of shares issued by the Fund will not be subject to an expense limitation. However, notwithstanding the foregoing, to the extent the Investment Adviser is required to reduce its management fee pursuant to provisions contained in Section 6 due to the expenses of the Class A shares exceeding the stated limit, the Investment Adviser will either (i) reduce its management fee similarly for other classes of shares, or (ii) reimburse the Fund for other expenses to the extent necessary to result in an expense reduction only for Class A shares of the Fund. 8. Nothing contained in this Agreement shall be construed to prohibit the Adviser from performing investment advisory, management, or distribution services for other investment companies and 2 other persons or companies, or to prohibit affiliates of the Adviser from engaging in such businesses or in other related or unrelated businesses. 9. The Adviser agrees that neither it nor any of its officers or directors will take any long or short position in the capital stock of the Fund, except that it or they may purchase shares of such capital stock for investment at the price at which such shares are available to the public at the moment of purchase. 10. The Adviser shall have no liability to the Fund, or its shareholders, for any error of judgment, mistake of law, or for any loss arising out of any investment, or for any other act or omission in the performance of its obligations to the Fund not involving willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties hereunder. 11. This Agreement shall continue in effect until the close of business on August 31, 2004. It may thereafter be renewed from year to year by mutual consent, provided that such renewal shall be specifically approved at least annually by (i) the Board of Directors of the Fund, or by the vote of a majority of the outstanding shares of the Fund, and (ii) a majority of those directors who are not parties to this 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. Such mutual consent to renewal shall not be deemed to have been given unless evidenced by a writing signed by both parties hereto. 12. This Agreement may be terminated at any time, without payment of any penalty, by the Board of Directors of the Fund or by the vote of a majority of the outstanding shares of the Fund, on sixty days' written notice to the Adviser, or by the Adviser on like notice to the Fund. This Agreement may not be amended, transferred, assigned, sold, or in any manner hypothecated or pledged, without the affirmative vote or written consent of the holders of a majority of the outstanding shares of the Fund, and it shall automatically terminate in the event of its assignment (as defined in the 1940 Act). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate originals by their officers thereunto duly authorized as of the day and year first above written. FUNDAMENTAL INVESTORS, INC. CAPITAL RESEARCH AND MANAGEMENT COMPANY By:/s/ Dina N. Perry By: /s/ James F. Rothenberg ----------------------------------- ----------------------------------- Dina N. Perry James F. Rothenberg President Chairman of the Board By:/s/ Patrick F. Quan By: /s/ Michael J. Downer ----------------------------------- ----------------------------------- Patrick F. Quan Michael J. Downer Secretary Vice President and Secretary 3 EX-99.E 5 exhibite2.txt [logo - American Funds (r)] American Funds Distributors, Inc. 333 South Hope Street Los Angeles, California 90071 Telephone 800/421-5475, ext. 59 Institutional selling group agreement Ladies and Gentlemen: We have entered into a principal underwriting agreement with each Fund in The American Funds Group (Funds) under which we are appointed exclusive agent for the sale of shares. You have indicated that you wish to act as agent for your customers in connection with the purchase, sale and redemption of shares of the Funds as are qualified for sale in your state. We agree to honor your request, subject to the terms of this Selling Group Agreement (Agreement) set forth below. 1. Authorization a. As a member of a group of firms authorized to make shares of the Funds available to institutional customers (Selling Group), you will make available to retirement plans (each a Plan, and collectively, Plans) shares of the Funds only as described in this Section 1. In placing orders for the purchase and sale of shares of the Funds, you will be acting as agent for your customers. We shall execute transactions for each of your customers only upon your authorization, at the regular public price currently determined by the respective Funds in the manner described in their offering prospectuses (Prospectuses). This Agreement on your part runs to us and to the respective Funds and is for the benefit of and enforceable by each. The offering Prospectuses and this Agreement set forth the terms applicable to sales of shares of the Funds through you and all other representations or documents are subordinate. b. Except as provided for in paragraphs c and d of this Section: (1) if approved by us in writing prior to bidding, you will make Class A shares of the Funds available only to a Plan of an entity whose retirement plan assets are already invested in Class A shares and which total at least $50 million, and (2) you will make Class R shares of the Funds available only to a Plan of an entity whose retirement plan assets total at least $50 million. c. For a Plan of an entity whose retirement plan assets total less than $50 million, we may, at our discretion, approve in writing your making Class A shares available to the Plan if the entity's retirement plan assets are already invested in Class A shares and if the Plan uses the services of an independent financial intermediary (e.g., broker, financial advisor, consultant, or RIA). The financial intermediary must provide us with the following information in writing prior to any approval we might give: (1) the name of the financial intermediary and the firm with whom the financial intermediary is affiliated, (2) the name of the proposed Plan, (3) the name of the Fund(s) and share class (i.e., Class A or R) in which the Plan intends to invest, (4) a statement that identifies you or another entity as the one providing recordkeeping services to the Plan, and (5) a statement from the financial intermediary that acknowledges you as the broker-dealer of record and that no compensation under this Agreement will be paid to the financial intermediary from American Funds. d. For a Plan of an entity whose retirement plan assets total less than $50 million, we may, at our discretion, approve in writing your making Class R shares available to the Plan if it uses the services of an independent financial intermediary (e.g., broker, financial advisor, consultant, or RIA). The financial intermediary must provide us in writing with the same information listed in paragraph c prior to any approval we might give. 2. Compensation on Class A Shares In consideration of your acting as agent for your customers in connection with the purchase and redemption of Fund shares and to compensate you for providing certain services to your customers, we will pay you compensation as described below, subject to your compliance with the following terms. Your eligibility to continue receiving this compensation will be evaluated periodically, and your failure to comply with the terms below may result in our discontinuing ongoing payments to you. Initial qualification does not assure continued participation, and the payment of this compensation is subject to the limitations contained in each Fund's Plan of Distribution and may be varied or discontinued by us at any time. a. You agree to cooperate as requested with programs that we provide to enhance shareholder service. You also agree to assume an active role in providing shareholder services such as processing purchase and redemption transactions, establishing shareholder accounts, and providing certain information and assistance with respect to the Funds. b. You agree to support our marketing efforts by granting reasonable requests for visits to your offices by our wholesalers. c. You agree to assign an individual to each Plan account on your books and to reassign the account should that individual no longer be assigned to the account. You agree to instruct each such individual to regularly contact shareholders having accounts so assigned. d. You agree to pass through either directly or indirectly to the individual(s) assigned to such accounts a share of the compensation paid to you pursuant to this Agreement. You recognize that payments under this Agreement are intended to compensate the individual for providing, and encourage the individual to continue to provide, service to the account holder. e. You acknowledge that (i) all compensation is subject to the limitations contained in each Fund's Plan of Distribution and may be varied or discontinued at any time, (ii) in order to receive a payment for a particular month, the payment must amount to at least $100, and (iii) no compensation will be paid on shares purchased under the net asset value purchase privilege as described in the Funds' statements of additional information. f. You will be paid a monthly fee in respect of Class A shares of Funds held in accounts that are assigned to you. The fee shall be the product of the average daily net asset value of Class A shares of Funds in Category 1 and Category 2 on the attached Schedule A held in such accounts for the applicable month multiplied by one-twelfth of 0.25%. The rate for Class A shares of Funds in Category 3 on the attached Schedule A shall be one-twelfth of 0.15%. 3. Retirement Plan Share Classes (R shares) and Account Options (for retirement plans only) a. We will pay you ongoing compensation on a quarterly basis, at the applicable annual rate set forth below, of the average daily net asset value of R shares of Funds listed in Category 1, Category 2 and Category 3 on the attached Schedule A that are held in a Plan account assigned to you at the end of the quarter for which payment is made. The payment of this ongoing compensation is subject to the limitations contained in each Fund's Plan of Distribution and may be varied or discontinued at any time. We expect that you will maintain one account for each of your Plan customers on the books of the Funds. R Share Class Annual Compensation Rate Class R-1 1.00% Class R-2 0.75% Class R-3 0.50% Class R-4 0.25% Class R-5 No compensation paid b. If you hold Plan accounts in an omnibus account (i.e., multiple Plans in one account on the books of the Funds), Plans that are added to the omnibus account after May 15, 2002 may invest only in R shares, and you must execute an Omnibus Addendum to the Selling Group Agreement, which you can obtain by calling our Home Office Service Team at 800/421-5475, extension 59. 4. Order Processing Any order by you for the purchase of shares of the respective Funds through us shall be accepted at the time when it is received by us (or any clearinghouse agency that we may designate from time to time), and at the offering and sale price next determined, unless rejected by us or the respective Funds. In addition to the right to reject any order, the Funds have reserved the right to withhold shares from sale temporarily or permanently. We will not accept any order from you that is placed on a conditional basis or subject to any delay or contingency prior to execution. The procedure relating to the handling of orders shall be subject to instructions that we shall forward from time to time to all members of the Selling Group. The shares purchased will be issued by the respective Funds only against receipt of the purchase price, in collected New York or Los Angeles Clearing House funds. If payment for the shares purchased is not received within three days after the date of confirmation the sale may be cancelled forthwith, by us or by the respective Funds, without any responsibility or liability on our part or on the part of the Funds, and we and/or the respective Funds may hold you responsible for any loss, expense, liability or damage, including loss of profit suffered by us and/or the respective Funds, resulting from your delay or failure to make payment as aforesaid. If this section conflicts with provisions of any operational agreement you have with any of our affiliates, such operational agreement shall control. 5. Timeliness of Submitting Orders You are obliged to date and indicate the time of receipt of all orders you receive from your customers and to transmit promptly all orders to us in time to provide for processing at the price next determined after receipt by you, in accordance with the Prospectuses. You are not to withhold placing with us orders received from any customers for the purchase of shares. You shall not purchase shares through us except for the purpose of covering purchase orders already received by you, or for your bona fide investment. 6. Repurchase of Shares If any share is repurchased by any of the Funds or is tendered thereto for redemption within seven business days after confirmation by us of the original purchase order from you for such security, you shall forthwith refund to us the full compensation paid to you on the original sale. 7. Processing Redemption Requests You shall not purchase any share of any of the Funds from a record holder at a price lower than the net asset value next determined by or for the Funds' shares. You shall, however, be permitted to sell any shares for the account of a shareholder of the Funds at the net asset value currently quoted by or for the Funds' shares, and may charge a fair service fee for handling the transaction provided you disclose the fee to the record owner. 8. Prospectuses and Marketing Materials We shall furnish you without charge reasonable quantities of offering Prospectuses (including any supplements currently in effect), current shareholder reports of the Funds, and sales materials issued by us from time to time. In the purchase of shares through us, you are entitled to rely only on the information contained in the offering Prospectus(es). You may not publish any advertisement or distribute sales literature or other written material to the public that makes reference to us or any of the Funds (except material that we furnished to you) without our prior written approval. 9. Effect of Prospectus This Agreement is in all respects subject to statements regarding the sale and repurchase or redemption of shares made in offering Prospectuses of the Funds, which shall control and override any provision to the contrary in this Agreement. 10. Relationship of Parties You shall make available shares of the Funds only through us. In no transaction (whether of purchase or sale) shall you have any authority to act as agent for, partner of, or participant in a joint venture with us or with the Funds or any other entity having either a Selling Group Agreement or other agreement with us. 11. State Securities Qualification We act solely as agent for the Funds and are not responsible for qualifying the Funds or their shares for sale in any jurisdiction. Upon written request we will provide you with a list of the jurisdictions in which the Funds or their shares are qualified for sale. We also are not responsible for the issuance, form, validity, enforceability or value of Fund shares. 12. Representations a. You represent that you are (a) a properly registered or licensed broker or dealer under applicable federal and state securities laws and regulations and are complying with and will continue to comply with all applicable federal and state laws, rules and regulations; a member of the National Association of Securities Dealers, Inc. (NASD); and your membership with the NASD is not currently suspended or terminated; or (b) a "bank" as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 (or other financial institution) and not otherwise required to register as a broker or dealer under such Act or any state laws. You agree to notify us immediately in writing if any of the foregoing representations ceases to be true to a material extent. You also agree that, if you are a bank or other financial institution as set forth above, you will comply with the applicable rules of the NASD, that you will maintain adequate records with respect to your customers and their transactions, and that such transactions will be without recourse against you by your customers. We recognize that, in addition to applicable provisions of state and federal securities laws, you may be subject to the provisions of other laws governing, among other things, the conduct of activities by federal- and state-chartered and supervised financial institutions and their affiliated organizations. Because you will be the only entity having a direct relationship with the customer in connection with securities purchases hereunder, you will be responsible in that relationship for ensuring compliance with all applicable federal and state laws, rules and regulations relating to securities purchases hereunder. b. We represent that (a) we are acting as an underwriter within the meaning of the applicable rules of the NASD and are complying with and will continue to comply with all applicable federal and state laws, rules and regulations, (b) we are a member of the NASD and (c) our membership with the NASD is not currently suspended or terminated. We agree to notify you immediately in writing if any of the foregoing representations ceases to be true to a material extent. 13. Confidentiality Each party to this Agreement agrees to maintain all information received from the other party pursuant to this Agreement in confidence, and each party agrees not to use any such information for any purpose, or disclose any such information to any person, except as permitted by applicable laws, rules and regulations. This provision shall survive the termination of this Agreement. 14. Termination Either of us may cancel this Agreement at any time by written notice to the other. 15. Notices All communications to us should be sent to the above address. Any notice to you shall be duly given if mailed or sent by overnight courier to you at the address specified by you below. * * * * * Execute this Agreement in duplicate and return one of the duplicate originals to us for our file. This Agreement (i) may be amended by notification from us and orders received following such notification shall be deemed to be an acceptance of any such amendment and (ii) shall be construed in accordance with the laws of the State of California. Very truly yours, American Funds Distributors, Inc. By___________________________________________________________ Kevin G. Clifford President Accepted - -------------------------------------------------------------- Firm By___________________________________________________________ Officer or Partner - -------------------------------------------------------------- Print Name - -------------------------------------------------------------- Title Address: - -------------------------------------------------------------- - -------------------------------------------------------------- Date: - -------------------------------------------------------------- Schedule A January 15, 2001 (supersedes Schedule A dated May 3, 1999) Category 1 Category 2 AMCAP Fund American High-Income Trust American Balanced Fund Bond Fund of America American Mutual Fund Capital World Bond Fund Capital Income Builder Intermediate Bond Fund of America Capital World Growth and Income Fund U.S. Government Securities Fund EuroPacific Growth Fund Fundamental Investors Growth Fund of America Income Fund of America Investment Company of America New Economy Fund New Perspective Fund New World Fund SMALLCAP World Fund Washington Mutual Investors Fund Category 3 Cash Management Trust of America U.S. Treasury Money Fund of America EX-99.G 6 exhibitg2.txt AMENDMENT TO CUSTODIAN AGREEMENT This Amendment to the Custodian Agreement is made as of October 1, 2004, by and between State Street Bank and Trust Company (the "Custodian") and each of the investment companies and other pooled investment vehicles (which may be organized as corporations, business or other trusts, limited liability companies, partnerships or other entities) managed by Capital Research and Management Company and listed on Appendix A of the Custodian Agreement (each a "Fund"); WHEREAS, each Fund entered into a Custodian Agreement dated as of June 29, 2001, (as amended and in effect from time to time, the "Agreement"); and WHEREAS, each Fund and the Custodian desire to amend certain provisions of the Agreement to reflect revisions to Rule 17f-4 ("Rule 17f-4"), promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Agreement, pursuant to the terms thereof, as follows: I. Section 3.3 of the Agreement is hereby deleted and replaced by a new Section 3.3, as of the effective date of this Amendment, as set forth below: SECTION 3.3 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The Custodian may deposit and/or maintain securities owned by the Fund in a U.S. Securities System; in any such case, the Custodian shall comply fully with the conditions of Rule 17f-4 of the 1940 Act, as amended from time to time. II. Except as specifically superseded or modified herein, the terms and provisions of the Agreement shall continue to apply with full force and effect. In the event of any conflict between the terms of the Agreement prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the 1st day of October, 2004. EACH OF THE FUNDS LISTED ON APPENDIX A ATTACHED TO THE CUSTODIAN AGREEMENT, ON BEHALF OF ITSELF OR ITS LISTED PORTFOLIOS BY: CAPITAL RESEARCH AND MANAGEMENT COMPANY* By:____________________________ Name: _________________________ Title: __________________________ STATE STREET BANK AND TRUST COMPANY By: _____________________________ Joseph L. Hooley Executive Vice President - -------------- * Pursuant to delegated authority EX-99.H 7 exhibith3.txt Form of INDEMNIFICATION AGREEMENT This Indemnification Agreement (the "Agreement") is made as of the date set forth on the signature page by and between ______________, a [Maryland corporation][Massachusetts business trust] (the "Fund"), and the [director][trustee] of the Fund whose name is set forth on the signature page (the "Board Member"). WHEREAS, the Board Member is a [director][trustee] of the Fund, and the Fund wishes the Board Member to continue to serve in that capacity; and WHEREAS, the [Articles of Incorporation and By-Laws] [Declaration of Trust and By-Laws] of the Fund and applicable laws permit the Fund to contractually obligate itself to indemnify and hold the Board Member harmless to the fullest extent permitted by law; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements set forth herein, the parties hereby agree as set forth below. Certain capitalized terms used herein are defined in Section 5. 1. Indemnification. The Fund shall indemnify and hold harmless the Board Member against any liabilities or Expenses (collectively, "Liability") actually and reasonably incurred by the Board Member in any Proceeding arising out of or in connection with the Board Member's service to the Fund, to the fullest extent permitted by the [Articles of Incorporation and By-Laws] [Declaration of Trust and By-Laws] of the Fund and the laws of the [State of Maryland][Commonwealth of Massachusetts], the Securities Act of 1933, and the Investment Company Act of 1940, as now or hereafter in force, subject to the provisions of paragraphs (a), (b) and (c) of this Section 1. The Fund's Board of [Directors][Trustees] shall take such actions as may be necessary to carry out the intent of these indemnification provisions and shall not amend the Fund's By-laws to limit or eliminate the right to indemnification provided herein with respect to acts or omissions occurring prior to such amendment or repeal. (a) Special Condition. With respect to Liability to the Fund or its shareholders, and subject to applicable state and federal law, the Board Member shall be indemnified pursuant to this Section 1 against any Liability unless such Liability arises by reason of the Board Member's willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office as defined in such Section 17(h) of the Investment Company Act of 1940, as amended ("Disabling Conduct"). (b) Special Process Condition. With respect to Liability to the Fund or its shareholders, no indemnification shall be made unless a determination has been made by reasonable and fair means that the Board Member has not engaged in disabling conduct. Such reasonable and fair means shall be established in conformity with then applicable law and administrative interpretations. In any determination with respect to disabling conduct, a [director] requesting indemnification who is not an "interested person" of the [Corporation], as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, shall be afforded a rebuttable presumption that such [director] [trustee]did not engage in such conduct while acting in his or her capacity as a [director] [trustee]. (c) State Law Restrictions. In accordance with the [General Corporation Law of the State of Maryland][General Laws of the Commonwealth of Massachusetts], the Board Member shall not be indemnified and held harmless pursuant to this Section 1 if the substantive and procedural standards for indemnification under such law have not been met. 2. Advancement of Expenses. The Fund shall promptly advance funds to the Board Member to cover any and all Expenses the Board Member incurs with respect to any Proceeding arising out of or in connection with the Board Member's service to the Fund, to the fullest extent permitted by the laws of the [State of Maryland] [Commonwealth of Massachusetts], the Securities Act of 1933, and the Investment Company Act of 1940, as such statutes are now or hereafter in force, subject to the provisions of paragraphs (a) and (b) of this Section 2. (a) Affirmation of Conduct. A request by the Board Member for advancement of funds pursuant to this Section 2 shall be accompanied by the Board Member's written affirmation of his or her good faith belief that he or she met the standard of conduct necessary for indemnification, and such other statements, documents or undertakings as may be required under applicable law. (b) Special Conditions to Advancement. With respect to Liability to the Fund or its shareholders, and subject to applicable state and federal law, the Board Member shall be entitled to advancements of Expenses pursuant to this Section 2 against any Liability to the Fund or its shareholders if (1) the Fund has obtained assurances to the extent required by applicable law, such as by obtaining insurance or receiving collateral provided by the Board Member, to the reasonable satisfaction of the Board, that the advance will be repaid if the Board Member is found to have engaged in Disabling Conduct, or (2) the Board has a reasonable belief that the Board Member has not engaged in disabling conduct and ultimately will be entitled to indemnification. In forming such a reasonable belief, the Board of [Directors] [Trustees] shall act in conformity with then applicable law and administrative interpretations, and shall afford a [director] [trustee] requesting an advance who is not an "interested person" of the [Corporation][Trust], as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, a rebuttable presumption that such [director][trustee] did not engage in disabling conduct while acting in his or her capacity as a [director][trustee]. 3. Procedure for Determination of Entitlement to Indemnification and Advancements. A request by the Board Member for indemnification or advancement of Expenses shall be made in writing, and shall be accompanied by such relevant documentation and information as is reasonably available to the Board Member. The Secretary of the Fund shall promptly advise the Board of such request. (a) Methods of Determination. Upon the Board Member's request for indemnification or advancement of Expenses, a determination with respect to the Board Member's entitlement thereto shall be made by the Board or Independent Counsel in accordance with applicable law. The Board Member shall have the right, in his or her sole discretion, to have Independent Counsel make such a determination. The Board Member shall cooperate with the person or persons making such determination, including without limitation providing to such persons upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and is reasonably available to the Board Member and reasonably necessary to such determination. Any Expenses incurred by the Board Member in so cooperating shall be borne by the Fund, irrespective of the determination as to the Board Member's entitlement to indemnification or advancement of Expenses. (b) Independent Counsel. If the determination of entitlement to indemnification or advancement of Expenses is to be made by Independent Counsel, the Board of [Directors][Trustees] shall select the Independent Counsel, and the Secretary of the Fund shall give written notice to the Board Member advising the Board Member of the identity of the Independent Counsel selected. The Board Member may, within five days after receipt of such written notice, deliver to the Secretary of the Fund a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirement of independence set forth in Section 4, and shall set forth with particularity the factual basis of such assertion. Upon such objection, the Board of [Directors][Trustees], acting in conformity with applicable law, shall select another Independent Counsel. If within fourteen days after submission by the Board Member of a written request for indemnification or advancement of Expenses no such Independent Counsel shall have been selected without objection, then either the Board or the Board Member may petition the Superior Court of the State of California or any other court of competent jurisdiction for resolution of any objection that shall have been made to the selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is favorably resolved or the person so appointed shall act as Independent Counsel. The Fund shall pay all reasonable fees and Expenses charged or incurred by Independent Counsel in connection with his or her determinations pursuant to this Agreement, and shall pay all reasonable fees and Expenses incident to the procedures described in this paragraph, regardless of the manner in which such Independent Counsel was selected or appointed. (c) Failure to Make Timely Determination. If the person or persons empowered or selected to determine whether the Board Member is entitled to indemnification or advancement of Expenses shall not have made such determination within thirty days after receipt by the Secretary of the Fund of the request therefor, the requisite determination of entitlement to indemnification or advancement of Expenses shall be deemed to have been made, and the Board Member shall be entitled to such indemnification or advancement, absent (i) an intentional misstatement by the Board Member of a material fact, or an intentional omission of a material fact necessary to make the Board Member's statement not materially misleading, in connection with the request for indemnification or advancement of Expenses, or (ii) a prohibition of such indemnification or advancements under applicable law; provided, however, that such period may be extended for a reasonable period of time, not to exceed an additional thirty days, if the person or persons making the determination in good faith require such additional time to obtain or evaluate documentation or information relating thereto. (d) Payment Upon Determination of Entitlement. If a determination is made pursuant to Section 1 or Section 2 (or is deemed to be made pursuant to paragraph (c) of this Section 3) that the Board Member is entitled to indemnification or advancement of Expenses, payment of any indemnification amounts or advancements owing to the Board Member shall be made within ten days after such determination (and, in the case of advancements of further Expenses, within ten days after submission of supporting information). If such payment is not made when due, the Board Member shall be entitled to an adjudication in a court of competent jurisdiction, of the Board Member's entitlement to such indemnification or advancements. The Board Member shall commence such proceeding seeking an adjudication within one year following the date on which he or she first has the right to commence such proceeding pursuant to this paragraph (d). In any such proceeding, the Fund shall be bound by the determination that the Board Member is entitled to indemnification or advancements, absent (i) an intentional misstatement by the Board Member of a material fact, or an intentional omission of a material fact necessary to make his or her statement not materially misleading, in connection with the request for indemnification or advancements, or (ii) a prohibition of such indemnification or advancements under applicable law. (e) Appeal of Adverse Determination. If a determination is made that the Board Member is not entitled to indemnification or advancements, the Board Member shall be entitled to an adjudication of such matter in any court of competent jurisdiction. Alternatively, the Board Member, at his or her option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the rules of the American Arbitration Association. The Board Member shall commence such proceeding or arbitration within one year following the date on which the adverse determination is made. Any such judicial proceeding or arbitration shall be conducted in all respect as a de novo trial or arbitration on the merits, and the Board Member shall not be prejudiced by reason of such adverse determination. (f) Expenses of Appeal. If the Board Member seeks a judicial adjudication of or an award in arbitration to enforce his or her rights under, or to recover damages for breach of, the indemnification or Expense advancement provisions of this Agreement, the Board Member shall be entitled to recover from the Fund, and shall be indemnified by the Fund against, any and all Expenses actually and reasonably incurred by the Board Member in such judicial adjudication or arbitration, but only if the Board Member prevails therein. If it shall be determined in such judicial adjudication or arbitration that the Board Member is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the Expenses incurred by the Board Member in connection with such judicial adjudication or arbitration shall be prorated as the court or arbitrator determines to be appropriate. (g) Validity of Agreement. In any judicial proceeding or arbitration commenced pursuant to this Section 3, the Fund shall be precluded from asserting that the procedures and presumptions set forth in this Agreement are not valid, binding and enforceable against the Fund, and shall stipulate in any such court or before any such arbitrator that the Fund is bound by all the provisions of this Agreement. 4. General Provisions. (a) Non-Exclusive Rights. The provisions for indemnification of, and advancement of Expenses to, the Board Member set forth in this Agreement shall not be deemed exclusive of any other rights to which the Board Member may otherwise be entitled. The Fund shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Board Member has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. (b) Continuation of Provisions. This Agreement shall be binding upon all successors of the Fund, including without limitation any transferee of all or substantially all assets of the Fund and any successor by merger, consolidation, or operation of law, and shall inure to the benefit of the Board Member's spouse, heirs, assigns, devisees, executors, administrators and legal representatives. The provisions of this Agreement shall continue until the later of (1) ten years after the Board Member has ceased to provide any service to the Fund, and (2) the final termination of all Proceedings in respect of which the Board Member has asserted, is entitled to assert, or has been granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by the Board Member pursuant to Section 3 relating thereto. Unless required by applicable law, no amendment of the [Articles of Incorporation][Declaration of Trust] or By-Laws of the Fund shall limit or eliminate the right of the Board Member to indemnification and advancement of Expenses set forth in this Agreement. In the event the Fund or any successor shall discontinue its operations within the term of this Agreement, adequate provision shall be made to honor the Fund's obligations under this Agreement. (c) Selection of Counsel. Counsel selected by the Board shall be entitled to assume the defense of any Proceeding for which the Board Member seeks indemnification or advancement of Expenses under this Agreement. However, counsel selected by the Board Member shall conduct the defense of the Board Member to the extent reasonably determined by such counsel to be necessary to protect the interests of the Board Member, and the Fund shall indemnify the Board Member therefore to the extent otherwise permitted under this Agreement, if (1) the Board Member reasonably determines that there may be a conflict in the Proceeding between the positions of the Board Member and the positions of the Fund or the other parties to the Proceeding that are indemnified by the Fund and not represented by separate counsel, or the Board Member otherwise reasonably concludes that representation of both the Board Member, the Fund and such other parties by the same counsel would not be appropriate, or (2) the Proceeding involves the Board Member but neither the Fund nor any such other party and the Board Member reasonably withholds consent to being represented by counsel selected by the Fund. If the Board has not selected counsel to assume the defense of any such Proceeding for the Board Member within thirty days after receiving written notice thereof from the Board Member, the Fund shall be deemed to have waived any right it might otherwise have to assume such defense. (d) D&O Insurance. For a period of at least six years after the Board Member has ceased to provide services to the Fund, the Fund shall purchase and maintain in effect, through "tail" or other appropriate coverage, one or more policies of insurance on behalf of the Board Member to the maximum extent of the coverage provided to the active members of the Board of [Directors] [Trustees] of the Fund. (e) Subrogation. In the event of any payment by the Fund pursuant to this Agreement, the Fund shall be subrogated to the extent of such payment to all of the rights of recovery of the Board Member, who shall, upon reasonable written request by the Fund and at the Fund's expense, execute all such documents and take all such reasonable actions as are necessary to enable the Fund to enforce such rights. Nothing in this Agreement shall be deemed to diminish or otherwise restrict the right of the Fund or the Board Member to proceed or collect against any insurers and to give such insurers any rights against the Fund under or with respect to this Agreement, including without limitation any right to be subrogated to the Board Member's rights hereunder, unless otherwise expressly agreed to by the Fund in writing, and the obligation of such insurers to the Fund and the Board Member shall not be deemed to be reduced or impaired in any respect by virtue of the provisions of this Agreement. (f) Notice of Proceedings. The Board Member shall promptly notify the Secretary of the Fund in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding which may be subject to indemnification or advancement of expense pursuant to this Agreement, but no delay in providing such notice shall in any way limit or affect the Board Member's rights or the Fund's obligations under this Agreement. (g) Notices. All notices, requests, demands and other communications to a party pursuant to this Agreement shall be in writing, addressed to such party at the address specified on the signature page of this Agreement (or such other address as may have been furnished by such party by notice in accordance with this paragraph), and shall be deemed to have been duly given when delivered personally (with a written receipt by the addressee) or two days after being sent (1) by certified or registered mail, postage prepaid, return receipt requested, or (2) by nationally recognized overnight courier service. (h) Severability. If any provision of this Agreement shall be held to be invalid, illegal, or unenforceable, in whole or in part, for any reason whatsoever, (1) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any provision that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (2) to the fullest extent possible, the remaining provisions of this Agreement shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. (i) Modification and Waiver. This Agreement supersedes any existing or prior agreement between the Fund and the Board Member pertaining to the subject matter of indemnification, advancement of Expenses and insurance. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both parties or their respective successors or legal representatives. Any waiver by either party of any breach by the other party of any provision contained in this Agreement to be performed by the other party must be in writing and signed by the waiving party or such party's successor or legal representative, and no such waiver shall be deemed a waiver of similar or other provisions at the same or any prior or subsequent time. (j) Headings. The headings of the Sections of this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. (k) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be an original, and all of which when taken together shall constitute one document. (l) Applicable Law. This Agreement shall be governed by and construed and enforce in accordance with the laws of the state of organization of the Fund without reference to principles of conflict of laws. 5. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Board" means the board of [directors] [trustees] of the Fund, excluding those members of the board of [directosr] {trustees] who are not eligible under applicable federal or state law to participate in making a particular determination pursuant to Section 3 of this Agreement; provided, however, that if no two members of the Board of [directors] [trustees] are eligible to participate, Board shall mean Independent Counsel. (b) "Disabling Conduct" shall be as defined in Section 1. (c) "Expenses" shall include without limitation all judgments, penalties, fines, amounts paid or to be paid in settlement, ERISA excise taxes, liabilities, losses, interest, expenses of investigation, attorneys' fees, retainers, court costs, transcript costs, fees of experts and witnesses, expenses of preparing for and attending depositions and other proceedings, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other costs, disbursements or expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or acting as a witness in a Proceeding. (d) "Final termination of a Proceeding" shall mean a final adjudication by court order or judgment of the court or other body before which a matter is pending, from which no further right of appeal or review exists. (e) "Independent Counsel" shall mean a law firm, or a member of a law firm, that is experienced in matters of investment company law and neither at the time of designation is, nor in the five years immediately preceding such designation was, retained to represent (A) the Fund or the Board Member in any matter material to either, or (B) any other party to the Proceeding giving rise to a claim for indemnification or advancements hereunder. Notwithstanding the foregoing, however, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Fund or the Board Member in an action to determine the Board Member's rights pursuant to this Agreement, regardless of when the Board Member's act or failure to act occurred. (f) "Independent Board Member" shall mean a [director] [trustee] of the Fund who is neither an "interested person" of the Fund as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, nor a party to the Proceeding with respect to which indemnification or advances are sought. (g) "Liability shall be as defined in Section 1. (h) "Proceeding" shall include without limitation any threatened, pending or completed claim, demand, threat, discovery request, request for testimony or information, action, suit, arbitration, alternative dispute mechanism, investigation, hearing, or other proceeding, including any appeal from any of the foregoing, whether civil, criminal, administrative or investigative, and shall also include any proceeding brought by the Board Member against the Fund. (i) The Board Member's "service to the Fund" shall include without limitation the Board Member's service as a [director] [trustee], officer, employee, agent or representative of the Fund, and his or her service at the request of the Fund as a [director] [trustee], officer, employee, agent or representative of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below. Dated: __________________ a [Maryland corporation] [Massachusetts business trust] By: ________________________ Name: ___________________ Title: ____________________ Address for notices: [DIRECTOR] [TRUSTEE]: Print Name: ____________________ Address for notices: EX-99.J 8 aud-cnst.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Fundamental Investors, Inc.: We consent to (a) the use in this Post-Effective Amendment No. 91 to Registration Statement No. 811-32 on Form N-1A of our report dated February 11, 2005 appearing in the Financial Statements which are included in Part B, the Statements 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 Prospectuses, which are part of such Registration Statement. DELOITTE & TOUCHE LLP February 23, 2005 Los Angeles, California EX-99.P 9 exhibitp1.txt The following is representative of the Code of Ethics in effect for each Fund: Code of Ethics With respect to non-affiliated Board members and all other access persons to the extent that they are not covered by The Capital Group Companies, Inc. policies: * No Board member shall so use his or her position or knowledge gained therefrom as to create a conflict between his or her personal interest and that of the Fund. * No Board member shall engage in excessive trading of shares of the fund or any other affiliated fund to take advantage of short-term market movements. * Each non-affiliated Board member shall report to the Secretary of the Fund not later than thirty (30) days after the end of each calendar quarter any transaction in securities which such Board member has effected during the quarter which the Board member then knows to have been effected within fifteen (15) days before or after a date on which the Fund purchased or sold, or considered the purchase or sale of, the same security. * For purposes of this Code of Ethics, transactions involving United States Government securities as defined in the Investment Company Act of 1940, bankers' acceptances, bank certificates of deposit, commercial paper, or shares of registered open-end investment companies are exempt from reporting as are non-volitional transactions such as dividend reinvestment programs and transactions over which the Board member exercises no control. * * * * In addition, the Fund has adopted the following standards in accordance with the requirements of Form N-CSR adopted by the Securities and Exchange Commission pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 for the purpose of deterring wrongdoing and promoting: 1) honest and ethical conduct, including handling of actual or apparent conflicts of interest between personal and professional relationships; 2) full, fair, accurate, timely and understandable disclosure in reports and documents that a fund files with or submits to the Commission and in other public communications made by the fund; 3) compliance with applicable governmental laws, rules and regulations; 4) the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and 5) accountability for adherence to the Code. These provisions shall apply to the principal executive officer or chief executive officer and treasurer ("Covered Officers") of the Fund. 1. It is the responsibility of Covered Officers to foster, by their words and actions, a corporate culture that encourages honest and ethical conduct, including the ethical resolution of, and appropriate disclosure of conflicts of interest. Covered Officers should work to assure a working environment that is characterized by respect for law and compliance with applicable rules and regulations. 2. Each Covered Officer must act in an honest and ethical manner while conducting the affairs of the Fund, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. Duties of Covered Officers include: * Acting with integrity; * Adhering to a high standard of business ethics; * Not using personal influence or personal relationships to improperly influence investment decisions or financial reporting whereby the Covered Officer would benefit personally to the detriment of the Fund; 3. Each Covered Officer should act to promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with or submits to, the Securities and Exchange Commission and in other public communications made by the Fund. Each Covered Officer should act to promote full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with or submits to, the Securities and Exchange Commission and in other public communications made by the Fund. * Covered Officers should familiarize themselves with disclosure requirements applicable to the Fund and disclosure controls and procedures in place to meet these requirements. * Covered Officers must not knowingly misrepresent, or cause others to misrepresent facts about the Fund to others, including the Fund's auditors, independent directors, governmental regulators and self-regulatory organizations. 4. Any existing or potential violations of this Code should be reported to The Capital Group Companies' Personal Investing Committee. The Personal Investing Committee is authorized to investigate any such violations and report their findings to the Chairman of the Audit Committee of the Fund. The Chairman of the Audit Committee may report violations of the Code to the Fund's Board or other appropriate entity including the Audit Committee, if he or she believes such a reporting is appropriate. The Personal Investing Committee may also determine the appropriate sanction for any violations of this Code, including removal from office, provided that removal from office shall only be carried out with the approval of the Fund's Board. 5. Application of this Code is the responsibility of the Personal Investing Committee, which shall report periodically to the Chairman of the Audit Committee of the Fund. 6. Material amendments to these provisions must be ratified by a majority vote of the Fund's Board. As required by applicable rules, substantive amendments to the Code must be filed or appropriately disclosed. EX-99.P 10 exhibitp2.txt Code of Ethics November 2004 Following is the Code of Ethics for The Capital Group Companies Inc. (Capital), which includes Capital Research and Management Company, the investment adviser to the American Funds and those involved in the distribution of the funds, client support and services; and Capital Group International Inc. (CGII), which includes Capital Guardian Trust Company and Capital International Inc. The Code of Ethics applies to all associates. The Capital Group Companies CODE OF ETHICS 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 always place the interests of clients and fund shareholders ahead of our own. Moreover, we should adhere to the spirit as well as the letter of the law and be vigilant in guarding against anything that could color our judgment. 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 openness, integrity, honesty and trust. Accordingly, we have adopted certain standards as described below for the purpose of deterring wrongdoing and promoting: 1) honest and ethical conduct; 2) full, fair, accurate, timely and understandable disclosure in reports and documents; 3) compliance with applicable laws (including federal securities laws), rules, and regulations; 4) the prompt internal reporting of violations of our Code of Ethics; and 5) accountability for adherence to our Code of Ethics. General Guidelines Although specific policies are discussed in more detail below, these are general guidelines that all Capital associates should be aware of: o It is a crime in the U.S. and many other countries to transact in a company's securities while in possession of material nonpublic information about the company. If there is any question as to whether you've received material information (typically from a company "insider") you should contact any member of the legal staff to discuss. o You should not knowingly misrepresent, or cause others to misrepresent, facts about Capital to clients, fund shareholders, regulators, or any other member of the public. Disclosure in reports and documents should be fair and accurate. o You should not accept extravagant gifts or entertainment from persons or companies who are trying to solicit business from any of the Capital companies. Capital's Gifts and Entertainment Policy is summarized below. o Safeguarding nonpublic information - - All associates are responsible for safeguarding nonpublic information about securities recommendations and fund and client holdings (for example, analyst research reports, investment meeting discussions or notes, current fund/client transaction information). If you have regular access to such information, you will likely be subject to additional personal investing limitations under Capital's Personal Investing Policy. Even if you are not a "covered person" under the Personal Investing Policy, certain general principles apply to you, and you should not trade based on any Capital company's confidential, proprietary investment information where fund or client trades are likely to be pending or imminent. o Other types of information (for example, marketing plans, employment issues, shareholder identities, etc.) may also be confidential and should not be shared with individuals outside the company (except those retained to provide services for the Capital companies). Excessive trading of Capital-managed Funds - - You should not engage in excessive trading of the American Funds or any other Capital-managed investment vehicles worldwide to take advantage of short-term market movements. Excessive activity, such as a frequent pattern of exchanges, could involve actual or potential harm to shareholders or clients. Note that this applies to your spouse and any other immediate family members. Ban on Participation in IPOs - - Capital associates and their immediate family members residing in their household may not participate in Initial Public Offerings (IPOs). Although exceptions are rarely granted, they will be considered on a case-by-case basis, for example, where a family member is employed by the IPO Company and IPO shares are considered part of that family member's compensation. Limitation on Service on Boards - - Associates are discouraged from serving on the board of directors or advisory board of any public or private company (this does not apply to boards of Capital companies or funds). You must receive approval prior to serving on a board, except for boards of charitable organizations or other nonprofit organizations. In addition, certain associates will be sent a form annually and asked to disclose their board positions. Failure to adhere to our Code of Ethics may result in disciplinary action being taken, including termination. Annual Certification of Code of Ethics Each associate will receive a copy of the Code of Ethics annually and is responsible for certifying in writing that they have read and understood the Code. Reporting Violations You have a responsibility to report any violations of our Code of Ethics, including: (i) fraud or illegal acts involving any aspect of our business; (ii) noncompliance with applicable laws, rules and regulations; (iii) intentional or material misstatements in our regulatory filings, internal books and records or client records or reports; or (iv) activity that is harmful to our clients or fund shareholders. Deviations from controls or procedures that safeguard the company, including the assets of shareholders and clients, should also be reported. Reported violations of the Code of Ethics will be investigated and appropriate actions will be taken. You can report confidentially to: o Your manager or department head o Capital's Audit Committee o any lawyer employed by the Capital organization Capital's Gifts and Entertainment 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 and Entertainment Policy Committee. Gifts or entertainment that are reimbursed by Capital do not need to be reported (or pre-cleared). The expenses, however, are subject to the approval of the associate's manager. When giving a gift or extending entertainment on behalf of Capital, it is important to keep in mind that giving an extravagant gift or entertaining excessively or lavishly may create the appearance of conflict. Associates should also be aware that certain laws or rules may prohibit or limit gifts or entertainment extended to public officials -- especially those responsible for investing public funds. Political and Charitable Contributions In soliciting political or charitable donations from various people in the business community, associates must never allow the present or anticipated business relationships of Capital or any of its affiliates to be a factor in soliciting such contributions. In addition, certain associates are subject to additional restrictions due to their involvement with "College America(R)," the American Funds 529 College Savings Plan. 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 in value (although it is recommended that you report all gifts received) and business entertainment in which an event exceeds $75. Gifts and Entertainment Policy Committee The Gifts and Entertainment Policy Committee oversees administration of and compliance with the Policy. Insider Trading Antifraud provisions of U.S. securities laws as well as the laws of other countries generally prohibit persons 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 Capital associates and extend to activities both within and outside each associate's duties. Any associate who believes that he or she may have material non-public information should contact a Capital lawyer. 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 investments. Keep in mind, however, that placing the interests of clients and fund shareholders first is the core principle of our policies and applies even if the matter is not covered by a specific provision. The following is only a summary of Capital's Personal Investing Policy. The following provisions apply only to associates covered under the Personal Investing Policy. Covered Persons You are a "covered person" if you have access to non-public investment information relating to current or imminent fund/client transactions. If you receive a quarterly personal investing disclosure form, you are considered a covered person. 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, or a family member in the same household, or 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. For purposes of this Policy, "covered persons" include immediate family members living in the same household. Additional rules apply to "investment associates" including portfolio counselors/managers, investment analysts and research associates, trading associates including trading assistants, and investment administration, portfolio control and fixed income control associates including assistants (see below). Prohibited Transactions for Covered Persons o IPO investments o Writing puts and calls on securities that are subject to pre-clearance o Short sales of securities that are subject to pre-clearance Initial and Annual Holdings Reports Any associate that becomes a covered person must submit a list of portfolio holdings and securities accounts within 10 calendar days of becoming covered. In addition, all covered associates will be required to review and update their holdings and securities account information annually. Pre-clearance of Securities Transactions Covered persons must receive approval before buying or selling securities including (but not limited to): o stocks of companies (public or private, including purchases through private placements) o bonds (except U.S. government bonds or other sovereign government bonds rated AAA or Aaa or equivalent) o venture capital partnerships o options on securities subject to pre-clearance (the exercise of options must also be pre-cleared) o closed-end funds including investment trust companies o index funds or exchange-traded funds that are not on the pre-approved list of index funds/ETFs o transactions in the above securities in PEP and ISA accounts (available in the U.K. only) over which you have discretion Before buying or selling securities, covered persons must check with the staff of the Personal Investing Committee. Pre-clear requests will be handled during the hours the New York Stock Exchange ("NYSE") is open (generally 6:30am to 1:00pm Pacific Time). You will generally receive a response within one business day. Unless a different period is specified, clearance is good until the close of the New York Stock Exchange ("NYSE") on the day that you check. Associates from offices outside the U.S. and/or associates trading on non-U.S. exchanges are usually granted enough time to complete their transaction during the next available trading day. If you have not executed your transaction within this period, you must again pre-clear your transaction. Note that investments in private placements and venture capital partnerships must be pre-cleared and reported and are subject to special review. In addition, opportunities to acquire a stock that is "limited" (i.e., a broker-dealer is only given a certain number of shares to sell and is offering the opportunity to buy) may be subject to the Gifts and Entertainment Policy. Exception for De Minimis Transactions The de minimis exception is NOT available to associates based in Tokyo or associates considered investment associates: portfolio counselors/managers, investment analysts and research associates, trading associates including trading assistants, and investment administration, portfolio control and fixed income control associates including assistants. All other covered associates may execute one transaction (either a buy or a sell) of 100 shares or less per issuer per calendar month without pre-clearance. You must, however, still report these trades on your quarterly form. Larger or more frequent share transactions must be pre-cleared. If an associate pre-clears a transaction and is denied permission, s/he may not execute a de minimis transaction in that issuer without pre-clearance for a period of seven calendar days. Reporting Transactions Covered persons must submit quarterly disclosure of certain transactions. You will receive reporting forms each quarter that are due no later than 15 calendar days after the end of the quarter. Reports will be reviewed by the staff of the Personal Investing Committee. Transactions of securities (including fixed-income securities) or options must be pre-cleared as described above and reported except as outlined below: Report Only (no need to pre-clear): o purchases or sales of any fund advised or sub-advised by a Capital company (for example, American Funds, Endowments, Capital International Funds, etc). Note that transactions in American Funds in Capital's 401(k) or MRP accounts or in accounts held with American Funds Service Company (where the account number has been disclosed) need not be reported on the quarterly form o purchases or sales of any other fund (except funds that are advised or sub-advised by a Capital company) that is not a U.S. registered open-end investment company (including closed end funds and funds registered outside the U.S. such as OEICs and Luxembourg or French SICAVs or FCPs) o purchases or sales of index funds or exchange traded funds that are on the pre-approved list of funds o participation in any CGII private equity fund/partnership o de minimis transactions (see above) o distributions of stock from venture capital partnerships o gifts or bequests (either receiving or giving) of securities (note that sales of securities received as a gift must be both pre-cleared and reported) o sales pursuant to tender offers o options or futures of index funds or exchange traded funds that are on the pre-approved list of funds Do Not Pre-clear or Report: o U.S. registered open-end investment companies (mutual funds) except funds advised or sub-advised by any Capital company o money market instruments or other short-term debt instruments with maturities (at issuance) of one year or less that are rated in one of the highest two rating categories by a Nationally Recognized Statistical Rating Organization or unrated but of equivalent quality o direct obligations of the U.S. Government or bonds issued by sovereign governments outside the U.S. that are rated AAA or Aaa or equivalent o bankers' acceptances, CDs or other commercial paper o currencies (including options and futures) o commodities o transactions in accounts for which you have completely turned over investment decision-making authority to a professional money manager (see "Professionally Managed Accounts" below) Personal investing should be viewed as a privilege, not a right. As such, the Personal Investing Committee may place limitations on the number of pre-clearances and/or transactions. Securities Accounts 1. Disclosure of Securities Accounts You must disclose the following types of accounts: o accounts currently holding securities that are subject to pre-clearance or reporting (including any accounts that hold funds advised or sub-advised by a Capital company) o accounts that have the ability to hold securities that are subject to pre-clearance or reporting o PEP and ISA accounts that hold securities subject to pre-clearance or reporting o accounts where you (or immediate family members residing with you) have completely turned over investment decision-making authority to a professional money manager You do not need to disclose accounts that can only hold cash or cash equivalents. 2. Duplicate Account Statements and Trade Confirmations You must submit duplicate statements and trade confirmations (or other equivalent documentation) for accounts currently holding securities that are subject to pre-clearance and/or reporting (other than American Funds accounts where records are held at American Funds Service Company). Covered persons should inform their investment broker-dealers that they are employed by an investment organization. In addition, covered persons must direct their broker-dealers to send duplicate trade confirmations and account statements (or other equivalent documentation) for all new or existing accounts on a timely basis. If they are not able to send duplicates directly, you must submit copies of all trade confirmations and account statements as soon as they become available. All documents received are kept strictly confidential and are maintained by LAO Legal in accordance with applicable Federal Securities laws.1 If your broker requires a letter requesting duplicate trade confirmations and monthly statements, please contact the Staff of the Personal Investing Committee. If your broker will be sending confirmation statements for an immediate family member with a different last name than you, you should inform the staff of the Personal Investing Committee with the name of the family member and that person's relationship to you. 3. Professionally Managed Accounts If you have an account where you have completely turned over decision-making authority to a professional money manager (who is not covered by our policy), you should have a signed "Professionally Managed Account Exception Memo" on file with the staff of the Personal Investing Committee. (This memo is not required for PIM accounts.) You must disclose the existence of these accounts and provide the account numbers on your personal investing disclosure forms. You do not need to pre-clear or report securities transactions in these accounts. Additional Policies for "Investment Associates" 1. Investment Associates Unless otherwise specified, the term "investment associates" includes: portfolio counselors/managers, investment analysts and research associates, trading associates including trading assistants, and investment administration, portfolio control and fixed income control including assistants. 2. Disclosure of Personal Ownership of Recommended Securities Portfolio counselors/managers and analysts will be asked on a regular basis to disclose securities that they own both personally and professionally and, for analysts, securities that they hold personally that are within their research coverage. This disclosure will be reviewed on a periodic basis by the staff of the Personal Investing Committee or other appropriate Capital Committees. In addition, to the extent that disclosure has not already been made to the Personal Investing Committee (by including information on the quarterly form), 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 If you have any questions, you should contact the staff of the Personal Investing Committee. 3. Blackout Periods 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 transacts in that issuer. The blackout period applies to trades in the same management company with which the associate is affiliated. If a fund or client account transaction takes place in the seven calendar days following a pre-cleared transaction by an investment associate, the personal transaction may 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. 4. Ban on short-term trading profits Investment associates are generally 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. Other Considerations Associates may not accept negotiated commission rates or any other terms that they believe may be more favorable than the broker-dealer grants to accounts with similar characteristics. U.S. broker-dealers are subject to certain rules designed to prevent favoritism toward such accounts. In addition, material outside business interests may give rise to potential conflicts of interest. Associates are asked to report if they are a senior officer of or own more than 5% of any private or public company that is or potentially may be doing business with any Capital company or with the American Funds. This reporting requirement also applies to any immediate family member residing within the associate's household. Personal Investing Committee Any questions or hardships that result from these policies or requests for exceptions should be referred to Capital's Personal Investing Committee. - -------- 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 conflict of interest-related issues. 2 Note that this disclosure requirement is consistent with both AIMR standards as well as the ICI Advisory Group Guidelines. -----END PRIVACY-ENHANCED MESSAGE-----