-----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, Cf4s4DFDZaUtWdLfENqR+zNG1C2cEfktSOWt9P8LqwGb18aBIj4dexdYurCVVW8s d08rarrFHkz33iDMxoan5Q== 0000039473-05-000018.txt : 20050907 0000039473-05-000018.hdr.sgml : 20050907 20050907142154 ACCESSION NUMBER: 0000039473-05-000018 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050907 DATE AS OF CHANGE: 20050907 EFFECTIVENESS DATE: 20050907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUNDAMENTAL INVESTORS INC CENTRAL INDEX KEY: 0000039473 IRS NUMBER: 221557722 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00032 FILM NUMBER: 051072476 BUSINESS ADDRESS: STREET 1: ONE MARKET - STEUART TOWER STREET 2: SUITE 1800 CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 415-421-9360 MAIL ADDRESS: STREET 1: P.O. BOX 7650 CITY: SAN FRANCISCO STATE: CA ZIP: 94120 N-CSRS 1 fincsr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR Certified Shareholder Report of Registered Management Investment Companies Investment Company Act File Number: 811-32 Fundamental Investors, Inc. (Exact Name of Registrant as specified in charter) P.O. Box 7650, One Market, Steuart Tower San Francisco, California 94120 (Address of principal executive offices) Registrant's telephone number, including area code: (415) 421-9360 Date of fiscal year end: December 31, 2005 Date of reporting period: June 30, 2005 Patrick F. Quan Secretary Fundamental Investors, Inc. P.O. Box 7650, One Market, Steuart Tower San Francisco, California 94120 (name and address of agent for service) Copies to: Michael Glazer Paul, Hastings, Janofsky & Walker LLP 515 South Flower Street Los Angeles, California 90071 (Counsel for the Registrant) ITEM 1 - Reports to Stockholders [logo - American Funds(R)] The right choice for the long term(R) FUNDAMENTAL INVESTORS [abstract illustration of building blocks with pictures of various items on each block: house, hard hat, screwdriver, crane, corn cob, leaf, factory. Building blocks are being analyzed, pushed and measured by individuals.] Semi-annual report for the six months ended June 30, 2005 FUNDAMENTAL INVESTORS(SM) seeks long-term growth of capital and income primarily through investments in common stocks. This fund is one of the 29 American Funds. The organization ranks among the nation's three largest mutual fund families. For more than seven decades, Capital Research and Management Company,(SM) the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk. FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS WOULD HAVE BEEN LOWER. Here are the average annual total returns on a $1,000 investment with all distributions reinvested for periods ended June 30, 2005: Class A shares 1 year 5 years 10 years Reflecting 5.75% maximum sales charge +5.28% +1.01% +10.76%
The fund's investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on page 22 for details. The fund's 30-day yield for Class A shares as of July 31, 2005, calculated in accordance with the Securities and Exchange Commission formula, was 1.52%, which reflects a fee waiver (1.50% without the fee waiver). The fund's distribution rate for Class A shares as of that date was 1.56%. Both reflect the 5.75% maximum sales charge. The SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities while the distribution rate reflects the fund's past dividends paid to shareholders. Accordingly, the fund's SEC yield and distribution rate may differ. Results for other share classes can be found on page 5. Please see the inside back cover for important information about other share classes. Investing outside the United States is subject to additional risks, such as currency fluctuations and political instability, which are detailed in the fund's prospectus. FELLOW SHAREHOLDERS: [abstract illustration of a man holding a ruler larger than himself] Despite an investment environment characterized by inflation worries, rising oil prices and concerns about the durability of the global economic recovery, Fundamental Investors finished in positive territory for the six months ended June 30, 2005. Shares of the fund rose 0.8% for those who reinvested dividends. This total return was slightly higher than those of the fund's primary benchmarks, the Lipper Large-Cap Value Funds Index, which recorded a gain of 0.5%, and the unmanaged Standard & Poor's 500 Composite Index (-0.8%), a broad measure of U.S. stocks. Extending the time period to include the past 12 months, Fundamental Investors' 11.7% total return was significantly ahead of those posted by both the Lipper Value index (+8.8%) and the S&P 500 (+6.3%). We believe in maintaining a long-term perspective when it comes to your investments. So while we recognize the importance of short-term results, we are more gratified by the advantage Fundamental Investors has maintained over its benchmarks for longer, more meaningful periods, as shown in the table below. [Begin Sidebar] Results at a glance Returns for periods ended June 30, 2005, with all distributions reinvested. Total returns Average annual total returns 6 months 12 months 5 years 10 years Lifetime(1) Fundamental Investors +0.8% +11.7% +2.2% +11.4% +13.9% Lipper Large-Cap Value Funds Index +0.5 +8.8 +1.9 +9.5 +12.8 Lipper Large-Cap Core Funds Index -1.0 +4.8 -3.5 +8.5 --(2) Standard & Poor's 500 Composite Index(3) -0.8 +6.3 -2.4 +9.9 +13.1 (1) Since Capital Research and Management Company began managing the fund on August 1, 1978. (2) Index began on December 29, 1978. (3) Unmanaged.
[End Sidebar] Relatively flat markets highlight the value of the income component of the fund's objective. During the six months, Fundamental Investors paid dividends totaling 20 cents a share, which accounted for a considerable portion of the fund's positive return. With growing numbers of investors rediscovering the benefits of income, and rising corporate profits leading to increased payouts, the dividend culture seems to be strengthening -- a development that could benefit the fund going forward. RUNNING IN PLACE A stock market that had surged in the fall of 2004 began to languish in the new year as investors questioned whether the recent earnings recovery would taper off, and disappointing economic indicators sparked doubts about the global economy's strength. Additionally, rising oil prices and inflation fears -- and the Federal Reserve Board's methodical ratcheting up of the federal funds rate in response to those fears -- weighed on investors' minds. Despite these concerns, the period concluded on a brighter note, with U.S. markets on the rise as June saw consumer and corporate spending figures take a turn for the better. The effect of currency translation had benefited the fund for more than two years, but detracted from results during the period, due to the dollar's considerable strengthening against the pound, euro and yen. In spite of the currency effect, the fund's non-U.S. holdings, which represent 25.9% of the portfolio, strongly supported results and we continue to believe that our ability to seek opportunities in non-U.S. markets is of long-term benefit to shareholders. PORTFOLIO STRENGTH FROM FAMILIAR QUARTERS Results for the fund's top 10 holdings exemplify conditions in the overall market: Five gained in value and five finished in negative territory. Among industry sectors, energy was the greatest positive contributor, just as it had been for the last few reporting periods. Over the past year, the price of oil has continued to rise in response to strong global demand. And despite having steadily appreciated during the prior year, we believed that stocks of oil companies remained attractively valued at the outset of the reporting period, since most did not appear to fully reflect the significantly higher price of crude. For the six months, all the fund's holdings in the sector gained; most went up sharply. One of the leaders was Suncor Energy (+33.6%), the Canadian oil sands company we highlighted in the most recent annual report. In addition to being the fund's biggest holding, it was one of its largest gainers. Other notable movers included ConocoPhillips (+32.4%) and Royal Dutch Petroleum (+13.1%). Stocks of metals and mining companies benefited from the continuing appetite for commodities in the developing world. Substantial price gains in a number of our positions, like BHP Billiton (+15.3%) and Potash Corp. (+15.1%), helped offset the negative figures turned in by a handful of others, including Alcoa (-16.8%) and Freeport-McMoRan Copper & Gold (-2.8%). We have maintained a significant concentration in the sector, and took advantage of elevated prices to sell some of our holdings -- realizing substantial gains after a long climb. Utilities and retail stocks also showed relative strength. On the other side of the ledger, industrials, which generally prosper during periods of economic expansion, suffered from the widespread perception that global growth had hit a soft patch. A number of the fund's larger holdings felt the impact: Parker Hannifin (-18.1%), Deere (-12.0%) and General Electric (-5.1%) all fell. In addition, telecommunication services stocks were down almost across the board. Despite generally healthy profitability, improved balance sheets and strong cash flows, negative investor sentiment regarding the industry's future competitive environment hampered results. SBC Communications, the fund's ninth-largest holding, lost 7.8%; shares of France Telecom fell 11.5% and Verizon Communications (-14.7%) finished well into negative territory. LOOKING AHEAD Whether markets are rising, falling or seem to be standing still, our approach remains the same. We conduct intense, fundamental research in order to uncover reasonably priced companies with solid long-term prospects. Based on that research, we are relatively optimistic about the current investment climate. Stock valuations are reasonable, dividends are reasserting their prominence, and the economy appears strong. With these conditions in mind and our focus on the long term, we will continue to seek out the best opportunities for Fundamental Investors and its shareholders. We thank you for your continuing support. Sincerely, /s/ James F. Rothenberg /s/ Dina N. Perry James F. Rothenberg Dina N. Perry Vice Chairman and President Principal Executive Officer August 11, 2005 Henry E. Riggs, an independent Director of the fund since 1989, has been elected non-executive chairman of the Board. James F. Rothenberg, the previous chairman, has been elected vice chairman and will remain principal executive officer. As independent Board chair pursuant to recently adopted Securities and Exchange Commission regulations, Mr. Riggs will chair Board meetings, including executive sessions of the independent Directors, and will be responsible for Board agendas, but will not have other executive or management responsibilities with the fund. He will remain unaffiliated with Capital Research and Management Company, the fund's investment adviser, and any of its affiliates. For current information about the fund, visit americanfunds.com. OTHER SHARE CLASS RESULTS unaudited Class B, Class C, Class F and Class 529 Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For the most current information and month-end results, visit americanfunds.com. Average annual total returns for periods ended June 30, 2005: 1 year 5 years Life of class Class B shares Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%, payable only if shares are sold within six years of purchase +5.86% +1.07% +2.26%(1) Not reflecting CDSC +10.86% +1.43% +2.43%(1) Class C shares Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +9.80% -- +3.78%(2) Not reflecting CDSC +10.80% -- +3.78%(2) Class F shares(3) Not reflecting annual asset-based fee charged by sponsoring firm +11.61% -- +4.60%(2) Class 529-A shares(4) Reflecting 5.75% maximum sales charge +5.14% -- +5.82%(5) Not reflecting maximum sales charge +11.57% -- +7.69%(5) Class 529-B shares(4) Reflecting applicable CDSC, maximum of 5%, payable only if shares are sold within six years of purchase +5.67% -- +6.56%(6) Not reflecting CDSC +10.67% -- +7.32%(6) Class 529-C shares(4) Reflecting CDSC, maximum of 1%, payable only if shares are sold within one year of purchase +9.65% -- +6.78%(5) Not reflecting CDSC +10.65% -- +6.78%(5) Class 529-E shares(3,4) +11.22% -- +5.67%(7) Class 529-F shares(3,4) Not reflecting annual asset-based fee charged by sponsoring firm +11.54% -- +18.36%(8)
The fund's investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. In addition, the fund's principal underwriter also waived fees related to distribution services for Class 529-F. Fund results shown reflect these waivers, without which they would have been lower. Please see the Financial Highlights table on page 22 for details. (1) From March 15, 2000, when Class B shares were first sold. (2) From March 15, 2001, when Class C and Class F shares were first sold. (3) These shares are sold without any initial or contingent deferred sales charge. (4) Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee. (5) From February 15, 2002, when Class 529-A and Class 529-C shares were first sold. (6) From February 19, 2002, when Class 529-B shares were first sold. (7) From March 7, 2002, when Class 529-E shares were first sold. (8) From September 23, 2002, when Class 529-F shares were first sold. SUMMARY INVESTMENT PORTFOLIO, June 30, 2005 unaudited The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund's principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover. [begin pie chart] Percent of Industry sector diversification net assets Energy 17.77 % Industrials 12.68 % Financials 11.74 % Information technology 9.90 % Consumer discretionary 9.44 % Other industries 32.94 % Convertible securities .65 % Bonds & notes .36 % Cash & equivalents 4.52 % [end pie chart] Market Percent value of net Common stocks - 94.47% Shares (000) assets Energy - 17.77% Suncor Energy Inc. 18,546,307 $ 875,399 3.56% Royal Dutch Petroleum Co. (New York registered) 8,925,000 579,233 2.35 Exxon Mobil Corp. 5,000,000 287,350 1.17 Halliburton Co. 5,500,000 263,010 1.07 Norsk Hydro ASA 2,168,000 198,863 Norsk Hydro ASA (ADR) 700,000 63,504 1.07 LUKoil Holding (ADR) 7,000,000 257,670 1.05 Murphy Oil Corp. 3,940,000 205,786 .84 Baker Hughes Inc. 3,968,000 203,003 .82 ConocoPhillips 3,450,000 198,341 .81 CONSOL Energy Inc. (1) 3,700,000 198,246 .80 Unocal Corp. 2,928,664 190,510 .77 Other securities 852,331 3.46 4,373,246 17.77 Industrials - 12.68% Deere & Co. 5,500,000 360,195 1.46 Union Pacific Corp. 4,200,000 272,160 1.11 Caterpillar Inc. 2,700,000 257,337 1.05 General Electric Co. 7,100,000 246,015 1.00 General Dynamics Corp. 1,772,900 194,203 .79 Deutsche Post AG 8,275,000 193,238 .78 Raytheon Co. 4,461,372 174,529 .71 Parker Hannifin Corp. 2,800,000 173,628 .70 Tyco International Ltd. 5,750,000 167,900 .68 Other securities 1,082,936 4.40 3,122,141 12.68 Financials - 11.74% Washington Mutual, Inc. 8,450,000 343,831 1.40 Fannie Mae 5,567,800 325,160 1.32 Citigroup Inc. 5,150,000 238,085 .97 Allied Irish Banks, PLC 9,600,000 205,382 .83 Bank of Ireland 10,165,000 164,884 .67 Freddie Mac 2,025,000 132,091 .53 Other securities 1,481,701 6.02 2,891,134 11.74 Information technology - 9.90% Microsoft Corp. 21,225,000 527,229 2.14 Texas Instruments Inc. 11,963,024 335,802 1.36 Automatic Data Processing, Inc. 4,600,000 193,062 .79 International Business Machines Corp. 2,200,000 163,240 .66 Other securities 1,217,618 4.95 2,436,951 9.90 Consumer discretionary - 9.44% Lowe's Companies, Inc. 6,015,000 350,193 1.42 Time Warner Inc. (2) 17,425,000 291,172 1.18 Target Corp. 4,890,000 266,065 1.08 Limited Brands, Inc. 10,815,980 231,678 .94 News Corp. Inc. 12,290,000 198,852 .81 Other securities 985,607 4.01 2,323,567 9.44 Materials - 8.36% Dow Chemical Co. 8,836,700 393,498 1.60 BHP Billiton Ltd. 17,995,030 248,517 1.01 Alcoa Inc. 7,973,800 208,355 .85 Rio Tinto PLC 6,000,000 183,583 .75 Weyerhaeuser Co. 2,883,000 183,503 .74 E.I. du Pont de Nemours and Co. 3,850,000 165,589 .67 Other securities 675,245 2.74 2,058,290 8.36 Telecommunication services - 7.67% SBC Communications Inc. 14,250,000 338,438 1.38 Verizon Communications Inc. 5,000,000 172,750 .70 France Telecom, SA 5,800,000 169,373 .69 Other securities 1,206,577 4.90 1,887,138 7.67 Health care - 5.82% Merck & Co., Inc. 8,200,000 252,560 1.03 Roche Holding AG 1,949,316 246,437 1.00 Sanofi-Aventis 2,192,600 179,948 .73 Other securities 753,980 3.06 1,432,925 5.82 Consumer staples - 5.11% Altria Group, Inc. 8,114,800 524,703 2.13 Other securities 733,025 2.98 1,257,728 5.11 Utilities - 4.97% Dominion Resources, Inc. 3,390,000 248,792 1.01 Questar Corp. 3,000,000 197,700 .80 Other securities 776,968 3.16 1,223,460 4.97 Miscellaneous - 1.01% Other common stocks in initial period of acquisition 247,741 1.01 Total common stocks (cost: $18,475,737,000) 23,254,321 94.47 Convertible securities - 0.65% Total convertible securities (cost: $143,177,000) 159,140 .65 Bonds & notes - 0.36% Total bonds & notes (cost: $106,822,000) 88,404 .36 Principal amount Short-term securities - 4.53% (000) Freddie Mac 3.04%-3.08% due 7/26-8/2/2005 $ 169,755 169,325 .69 CAFCO, LLC 3.04%-3.07% due 7/6-7/20/2005 (1) 49,800 49,746 Ciesco LLC 3.125% due 8/3/2005 15,600 15,555 .31 Citicorp 3.11% due 7/25/2005 10,800 10,777 Edison Asset Securitization LLC 3.15% due 8/5/2005(1) 22,300 22,230 .09 Other securities 846,264 3.44 Total short-term securities (cost: $1,113,872,000) 1,113,897 4.53 Total investment securities (cost: $19,839,608,000) 24,615,762 100.01 Other assets less liabilities (997) (0.01) Net assets $24,614,765 100.00%
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. "Other securities" includes all issues that are not disclosed separately in the summary investment portfolio. (1) 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, including those in "Other securities" in the summary investment portfolio, was $1,069,415,000, which represented 4.34% of the net assets of the fund. (2) Security did not produce income during the last 12 months. ADR = American Depositary Receipts See Notes to Financial Statements FINANCIAL STATEMENTS Statement of assets and liabilities unaudited at June 30, 2005 (dollars and shares in thousands, except per-share amounts) Assets: Investment securities at market (cost: $19,839,608) $24,615,762 Cash 2,374 Receivables for: Sales of investments $31,806 Sales of fund's shares 26,431 Dividends and interest 43,967 102,204 24,720,340 Liabilities: Payables for: Purchases of investments 72,306 Repurchases of fund's shares 18,708 Investment advisory services 4,852 Services provided by affiliates 7,603 Deferred Directors' compensation 1,348 Other fees and expenses 758 105,575 Net assets at June 30, 2005 $24,614,765 Net assets consist of: Capital paid in on shares of capital stock $20,140,439 Undistributed net investment income 190,019 Accumulated net realized loss (491,347) Net unrealized appreciation 4,775,654 Net assets at June 30, 2005 $24,614,765
Total authorized capital stock - 1,000,000 shares, $1.00 par value (762,019 total shares outstanding) Net assets Shares outstanding Net asset value per share (1) Class A $21,600,914 668,591 $32.31 Class B 976,236 30,274 32.25 Class C 623,520 19,353 32.22 Class F 499,145 15,456 32.29 Class 529-A 174,696 5,410 32.29 Class 529-B 32,657 1,012 32.29 Class 529-C 54,755 1,696 32.28 Class 529-E 8,817 273 32.28 Class 529-F 3,082 95 32.27 Class R-1 8,543 265 32.23 Class R-2 118,551 3,680 32.22 Class R-3 163,581 5,070 32.27 Class R-4 136,197 4,220 32.27 Class R-5 214,071 6,624 32.32
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $34.28 and $34.26, respectively. See Notes to Financial Statements STATEMENT OF OPERATIONS unaudited for the six months ended June 30, 2005 (dollars in thousands) Investment income: Income: Dividends (net of non-U.S. withholding tax of $10,979) $283,799 Interest 30,048 $313,847 Fees and expenses: Investment advisory services 31,946 Distribution services 35,436 Transfer agent services 10,319 Administrative services 1,911 Reports to shareholders 230 Registration statement and prospectus 469 Postage, stationery and supplies 1,392 Directors' compensation 173 Auditing and legal 56 Custodian 853 State and local taxes 1 Other 109 Total expenses before reimbursements/waivers 82,895 Less reimbursement/waiver of expenses: Investment advisory services 2,400 Distribution services 1 Administrative services 115 Total expenses after reimbursement/waiver of expenses 80,379 Net investment income 233,468 Net realized gain and unrealized depreciation on investments and non-U.S. currency: Net realized gain (loss) on: Investments 328,970 Non-U.S. currency transactions (1,707) 327,263 Net unrealized depreciation on: Investments (370,315) Non-U.S. currency translations (24) (370,339) Net realized gain and unrealized depreciation on investments and non-U.S. currency (43,076) Net increase in net assets resulting from operations $190,392 See Notes to Financial Statements Statements of changes in net assets (dollars in thousands) Six months Year ended ended June 30, December 31, 2005* 2004 Operations: Net investment income $233,468 $438,828 Net realized gain on investments and non-U.S. currency transactions 327,263 611,565 Net unrealized (depreciation) appreciation on investments and non-U.S. currency translations (370,339) 1,889,494 Net increase in net assets resulting from operations 190,392 2,939,887 Dividends paid to shareholders from net investment income and non-U.S. currency gains (144,187) (404,177) Capital share transactions 351,138 497,675 Total increase in net assets 397,343 3,033,385 Net assets: Beginning of period 24,217,422 21,184,037 End of period (including undistributed net investment income: $190,019 and $100,738, respectively) $24,614,765 $24,217,422 *Unaudited See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS unaudited 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - Fundamental Investors, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth of capital and income primarily through investments in common stocks. The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica(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 0% 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. CollegeAmerica is a registered trademark of the Virginia College Savings Plan.(sm) 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, including short-term securities purchased with more than 60 days left to maturity, 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. Short-term securities originally purchased with maturities greater than 60 days but that now have 60 days or less remaining to maturity, are valued based on the amortized difference between the par value and 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. 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. withholding taxes paid. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. As of June 30, 2005, non-U.S. taxes provided on unrealized gains were $549,000. 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 for financial reporting purposes. As of June 30, 2005, the cost of investment securities for federal income tax purposes was $19,850,947,000. As of June 30, 2005, the components of distributable earnings on a tax basis were as follows (dollars in thousands): Undistributed net investment income and non-U.S. currency gains $190,445 Accumulated short-term capital losses (807,546) Undistributed long-term capital gains 328,461 Gross unrealized appreciation on investment securities 5,799,432 Gross unrealized depreciation on investment securities (1,034,617) Net unrealized appreciation on investment securities 4,764,815
Accumulated short-term capital losses above include capital loss carryforwards of $66,479,000 and $740,962,000 expiring in 2010 and 2011, respectively. The capital loss carryforwards will be used to offset any capital gains realized by the fund in the current year or in future years through the expiration dates. The fund will not make distributions from capital gains while capital loss carryforwards remain. During the six months ended June 30, 2005, the fund realized, on a tax basis, a net capital gain of $328,356,000. Ordinary income distributions paid to shareholders from net investment income and non-U.S. currency gains were as follows (dollars in thousands): Share class Six months ended June 30, 2005 Year ended December 31, 2004 Class A $ 133,530 $ 372,550 Class B 2,474 9,991 Class C 1,329 5,262 Class F 2,819 7,307 Class 529-A 921 2,122 Class 529-B 51 234 Class 529-C 85 363 Class 529-E 34 89 Class 529-F 16 30 Class R-1 18 51 Class R-2 253 831 Class R-3 645 1,486 Class R-4 692 1,232 Class R-5 1,320 2,629 Total $ 144,187 $ 404,177
4. FEES AND TRANSACTIONS WITH RELATED PARTIES Capital Research and Management Company ("CRMC"), the fund's investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund's transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund's shares. INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.390% on the first $1 billion of daily net assets and decreasing to 0.240% on such assets in excess of $27 billion. CRMC is currently waiving a portion of these fees. At the beginning of the period, CRMC was waiving 5% of these fees and increased the waiver to 10% on April 1, 2005. During the six months ended June 30, 2005, the total investment advisory services fees waived by CRMC were $2,400,000. As a result, the fee shown on the accompanying financial statements of $31,946,000, which was equivalent to an annualized rate of 0.267%, was reduced to $29,546,000, or 0.247% 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. AFD is currently waiving a portion of these fees to the extent the amounts paid to qualified dealers or advisers was less than the approved limit. During the six months ended June 30, 2005, the total distribution services fees waived by AFD were $1,000, which related to Class 529-F. For classes A and 529-A, the Board of Directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. Each class reimburses AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of June 30, 2005, 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/on the next page. 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 six months ended June 30, 2005, CRMC agreed to pay AFS a portion of these fees for classes R-1 and R-2. For the six months ended June 30, 2005, the total administrative services fees paid by CRMC were $1,000 and $114,000 for classes R-1 and 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 six months ended June 30, 2005, 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 $25,667 $9,838 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class B 4,766 481 Not applicable Not applicable Not applicable -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class C 2,926 Included $439 $70 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class F 587 Included 352 32 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-A 145 Included 118 12 $79 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-B 152 Included 23 7 15 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-C 246 Included 37 9 25 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-E 20 Included 6 -* 4 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class 529-F 3 Included 2 -* 1 in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-1 37 Included 5 3 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-2 396 Included 79 255 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-3 358 Included 108 58 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-4 133 Included 80 3 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Class R-5 Not applicable Included 87 2 Not applicable in administrative services -------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------- Total $35,436 $10,319 $1,336 $451 $124 -------------------------------------------------------------------------------------------------------------- * 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 $173,000, shown on the accompanying financial statements, includes $148,000 in current fees (either paid in cash or deferred) and a net increase of $25,000 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 Six months ended June 30, 2005 Class A $ 1,271,562 39,980 $ 125,912 3,928 Class B 50,398 1,589 2,383 74 Class C 94,134 2,970 1,270 40 Class F 92,968 2,922 2,461 77 Class 529-A 30,863 971 921 29 Class 529-B 3,596 113 51 2 Class 529-C 10,733 337 85 3 Class 529-E 1,460 46 34 1 Class 529-F 743 23 16 1 Class R-1 2,954 93 18 1 Class R-2 35,383 1,116 253 8 Class R-3 52,424 1,648 643 20 Class R-4 66,194 2,118 692 22 Class R-5 85,035 2,666 1,165 36 Total net increase (decrease) $ 1,798,447 56,592 $ 135,904 4,242 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 Share class Repurchases(1) Net increase Amount Shares Amount Shares Six months ended June 30, 2005 Class A $ (1,375,119) (43,257) $ 22,355 651 Class B (49,215) (1,551) 3,566 112 Class C (39,713) (1,253) 55,691 1,757 Class F (60,600) (1,908) 34,829 1,091 Class 529-A (3,705) (116) 28,079 884 Class 529-B (398) (12) 3,249 103 Class 529-C (1,503) (48) 9,315 292 Class 529-E (114) (4) 1,380 43 Class 529-F (86) (3) 673 21 Class R-1 (604) (19) 2,368 75 Class R-2 (10,967) (345) 24,669 779 Class R-3 (14,626) (461) 38,441 1,207 Class R-4 (12,773) (402) 54,113 1,738 Class R-5 (13,790) (433) 72,410 2,269 Total net increase (decrease) $ (1,583,213) (49,812) $ 351,138 11,022 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 (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 $3,369,540,000 and $2,715,856,000, respectively, during the six months ended June 30, 2005. The fund receives a reduction in its custodian fee equal to the amount of interest calculated on certain cash balances held at the custodian bank. For the six months ended June 30, 2005, the custodian fee of $853,000, shown on the accompanying financial statements, includes $11,000 that was offset by this reduction, rather than paid in cash. Financial highlights (1) Income (loss) from investment operations(2) Net Net asset (losses) gains value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class A: Six months ended 6/30/2005 (5) $32.25 $.32 $(.06) $.26 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: Six months ended 6/30/2005 (5) 32.19 .20 (.06) .14 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: Six months ended 6/30/2005 (5) 32.17 .19 (.07) .12 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: Six months ended 6/30/2005 (5) 32.24 .31 (.07) .24 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: Six months ended 6/30/2005 (5) 32.24 .30 (.07) .23 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: Six months ended 6/30/2005 (5) 32.23 .17 (.06) .11 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: Six months ended 6/30/2005 (5) 32.23 .17 (.07) .10 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: Six months ended 6/30/2005 (5) 32.23 .25 (.07) .18 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: Six months ended 6/30/2005 (5) 32.22 .31 (.07) .24 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 (losses) gains value, Net on securities Total from beginning investment (both realized investment of period income and unrealized) operations Class R-1: Six months ended 6/30/2005 (5) $32.18 $.19 $(.07) $.12 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: Six months ended 6/30/2005 (5) 32.17 .19 (.07) .12 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: Six months ended 6/30/2005 (5) 32.21 .26 (.06) .20 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: Six months ended 6/30/2005 (5) 32.22 .31 (.07) .24 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: Six months ended 6/30/2005 (5) 32.26 .36 (.06) .30 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: Six months ended 6/30/2005 (5) $(.20) $- $(.20) $32.31 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: Six months ended 6/30/2005 (5) (.08) - (.08) 32.25 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: Six months ended 6/30/2005 (5) (.07) - (.07) 32.22 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: Six months ended 6/30/2005 (5) (.19) - (.19) 32.29 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: Six months ended 6/30/2005 (5) (.18) - (.18) 32.29 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: Six months ended 6/30/2005 (5) (.05) - (.05) 32.29 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: Six months ended 6/30/2005 (5) (.05) - (.05) 32.28 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: Six months ended 6/30/2005 (5) (.13) - (.13) 32.28 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: Six months ended 6/30/2005 (5) (.19) - (.19) 32.27 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: Six months ended 6/30/2005 (5) $(.07) $- $(.07) $32.23 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: Six months ended 6/30/2005 (5) (.07) - (.07) 32.22 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: Six months ended 6/30/2005 (5) (.14) - (.14) 32.27 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: Six months ended 6/30/2005 (5) (.19) - (.19) 32.27 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: Six months ended 6/30/2005 (5) (.24) - (.24) 32.32 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 reimbursements/ reimbursements/ to average return (3) (in millions) waivers waivers (4) net assets Six months ended 6/30/2005 (5) .81% $21,601 .63% (6) .61% (6) 2.01% (6) 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: Six months ended 6/30/2005 (5) .45 976 1.40 (6) 1.38 (6) 1.25 (6) 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 (6) 1.39 (6) .53 (6) Class C: Six months ended 6/30/2005 (5) .38 623 1.47 (6) 1.45 (6) 1.19 (6) 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 (6) 1.55 (6) .49 (6) Class F: Six months ended 6/30/2005 (5) .75 499 .70 (6) .68 (6) 1.95 (6) 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 (6) .74 (6) 1.31 (6) Class 529-A: Six months ended 6/30/2005 (5) .76 175 .74 (6) .72 (6) 1.92 (6) 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 (6) .76 (6) 1.64 (6) Class 529-B: Six months ended 6/30/2005 (5) .35 33 1.59 (6) 1.57 (6) 1.07 (6) 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 (6) 1.62 (6) .77 (6) Class 529-C: Six months ended 6/30/2005 (5) .33 55 1.58 (6) 1.56 (6) 1.08 (6) 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 (6) 1.60 (6) .79 (6) Class 529-E: Six months ended 6/30/2005 (5) .61 9 1.06 (6) 1.04 (6) 1.60 (6) 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 (6) 1.07 (6) 1.35 (6) Class 529-F: Six months ended 6/30/2005 (5) .74 3 .81 (6) .63 (6) 2.02 (6) 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 - (7) .22 .22 .51 Financial highlights (1) (continued) Ratio of expense Ratio of expenses to average net to average net Ratio of Net assets, assets before assets after net income Total end of period reimbursements/ reimbursements/ to average return (in millions) waivers waivers (4) net assets Class R-1: Six months ended 6/30/2005 (5) .38% $8 1.52% (6) 1.47% (6) 1.18% (6) 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) - (7) 4.20 (6) 1.50 (6) 1.11 (6) Class R-2: Six months ended 6/30/2005 (5) .39 119 1.67 (6) 1.43 (6) 1.21 (6) 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 (6) 1.46 (6) 1.05 (6) Class R-3: Six months ended 6/30/2005 (5) .63 164 1.02 (6) 1.00 (6) 1.65 (6) 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 (6) 1.08 (6) 1.41 (6) Class R-4: Six months ended 6/30/2005 (5) .76 136 .69 (6) .67 (6) 2.00 (6) 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: Six months ended 6/30/2005 (5) .93 214 .39 (6) .37 (6) 2.29 (6) 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 (6) .40 (6) 1.91 (6)
Six months ended June 30, Year ended December 31 2005(5) 2004 2003 2002 2001 2000 Portfolio turnover rate for all classes of shares 12% 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. During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. 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. In addition, during the six months ended 6/30/2005, AFD agreed to waive a portion of the fees related to distribution services for Class 529-F. (5) Unaudited. (6) Annualized. (7) Amount less than $1 million. See Notes to Financial Statements EXPENSE EXAMPLE unaudited As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2005 through June 30, 2005). ACTUAL EXPENSES: The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period. There are some account fees that are charged to certain types of accounts, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES: The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds. There are some account fees that are charged to certain shareholders, such as Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F and Class 529-F shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Beginning account Ending account Expenses paid Annualized value 1/1/2005 value 6/30/2005 during period(1) expense ratio Class A -- actual return $1,000.00 $1,008.14 $3.04 .61% Class A -- assumed 5% return 1,000.00 1,021.77 3.06 .61 Class B -- actual return 1,000.00 1,004.46 6.86 1.38 Class B -- assumed 5% return 1,000.00 1,017.95 6.90 1.38 Class C -- actual return 1,000.00 1,003.78 7.20 1.45 Class C -- assumed 5% return 1,000.00 1,017.60 7.25 1.45 Class F -- actual return 1,000.00 1,007.48 3.38 .68 Class F -- assumed 5% return 1,000.00 1,021.42 3.41 .68 Class 529-A -- actual return 1,000.00 1,007.61 3.58 .72 Class 529-A -- assumed 5% return 1,000.00 1,021.22 3.61 .72 Class 529-B -- actual return 1,000.00 1,003.51 7.80 1.57 Class 529-B -- assumed 5% return 1,000.00 1,017.01 7.85 1.57 Class 529-C -- actual return 1,000.00 1,003.26 7.75 1.56 Class 529-C -- assumed 5% return 1,000.00 1,017.06 7.80 1.56 Class 529-E -- actual return 1,000.00 1,006.10 5.17 1.04 Class 529-E -- assumed 5% return 1,000.00 1,019.64 5.21 1.04 Class 529-F -- actual return 1,000.00 1,007.40 3.14 .63 Class 529-F -- assumed 5% return 1,000.00 1,021.67 3.16 .63 Class R-1 -- actual return 1,000.00 1,003.80 7.30 1.47 Class R-1 -- assumed 5% return 1,000.00 1,017.50 7.35 1.47 Class R-2 -- actual return 1,000.00 1,003.88 7.10 1.43 Class R-2 -- assumed 5% return 1,000.00 1,017.70 7.15 1.43 Class R-3 -- actual return 1,000.00 1,006.28 4.97 1.00 Class R-3 -- assumed 5% return 1,000.00 1,019.84 5.01 1.00 Class R-4 -- actual return 1,000.00 1,007.63 3.34 .67 Class R-4 -- assumed 5% return 1,000.00 1,021.47 3.36 .67 Class R-5 -- actual return 1,000.00 1,009.32 1.84 .37 Class R-5 -- assumed 5% return 1,000.00 1,022.96 1.86 .37
(1) Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the period (181), and divided by 365 (to reflect the one-half year period). OFFICE OF THE FUND One Market Steuart Tower, Suite 1800 Mailing address: P.O. Box 7650 San Francisco, CA 94120-7650 INVESTMENT ADVISER Capital Research and Management Company 333 South Hope Street Los Angeles, CA 90071-1406 135 South State College Boulevard Brea, CA 92821-5823 TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS American Funds Service Company (Please write to the address nearest you.) P.O. Box 25065 Santa Ana, CA 92799-5065 P.O. Box 659522 San Antonio, TX 78265-9522 P.O. Box 6007 Indianapolis, IN 46206-6007 P.O. Box 2280 Norfolk, VA 23501-2280 CUSTODIAN OF ASSETS State Street Bank and Trust Company 225 Franklin Street Boston, MA 02105-1713 COUNSEL Paul, Hastings, Janofsky & Walker LLP 515 South Flower Street Los Angeles, CA 90071-2228 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Two California Plaza 350 South Grand Avenue Los Angeles, CA 90071-3462 PRINCIPAL UNDERWRITER American Funds Distributors, Inc. 333 South Hope Street Los Angeles, CA 90071-1406 There are several ways to invest in Fundamental Investors. Class A shares are subject to a 5.75% maximum up-front sales charge that declines for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. Other share classes, which are generally not available for certain employer-sponsored retirement plans, have no up-front sales charges but are subject to additional annual expenses and fees. Annualized expenses for Class B shares were 0.77 percentage points higher than for Class A shares; Class B shares convert to Class A shares after eight years of ownership. If redeemed within six years, Class B shares may also be subject to a contingent deferred sales charge ("CDSC") of up to 5% that declines over time. Class C shares were subject to annualized expenses 0.84 percentage points higher than those for Class A shares and a 1% CDSC if redeemed within the first year after purchase. Class C shares convert to Class F shares after 10 years. Class F shares, which are available only through certain fee-based programs offered by broker-dealer firms and registered investment advisers, had higher annualized expenses (by 0.07 percentage points) than did Class A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses are deducted from income earned by the fund. As a result, dividends and investment results will differ for each share class. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT AMERICANFUNDS.COM. If you reside in a state other than Virginia, there may be an in-state plan that offers additional tax benefits not available in CollegeAmerica. Talk to your tax adviser. Interests in CollegeAmerica are sold through unaffiliated intermediaries. "American Funds Proxy Voting Guidelines" -- which describes how we vote proxies relating to portfolio securities -- is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at www.sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites. A complete June 30, 2005, portfolio of Fundamental Investors' investments is available free of charge on the SEC website or upon request by calling AFS. Fundamental Investors files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This form is available free of charge on the SEC website or upon request by calling AFS. You may also review or, for a fee, copy the form at the SEC's Public Reference Room in Washington, D.C. (800/SEC-0330). This report is for the information of shareholders of Fundamental Investors, but it may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after September 30, 2005, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter. [logo - American Funds(R)] CollegeAmerica is sponsored by Virginia College Savings Plan(SM) WHAT MAKES AMERICAN FUNDS DIFFERENT? For more than 70 years, we have followed a consistent philosophy that we firmly believe is in our investors' best interests. The range of opportunities offered by our family of just 29 carefully conceived, broadly diversified funds has attracted over 30 million shareholder accounts. OUR UNIQUE COMBINATION OF STRENGTHS INCLUDES THESE FIVE FACTORS: o A LONG-TERM, VALUE-ORIENTED APPROACH Rather than follow fads, we pursue a consistent strategy, focusing on each investment's long-term potential. o AN UNPARALLELED GLOBAL RESEARCH EFFORT American Funds draws on one of the industry's most globally integrated research networks. o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM Every American Fund is divided among a number of portfolio counselors. Each takes responsibility for a portion independently, within each fund's objectives; in most cases, research analysts manage a portion as well. Over time this method has contributed to a consistency of results and continuity of management. o EXPERIENCED INVESTMENT PROFESSIONALS The recent market decline was not the first for most of the portfolio counselors who serve the American Funds. More than half of them were in the investment business before the sharp market decline of 1987. o A COMMITMENT TO LOW OPERATING EXPENSES American Funds' operating expenses are among the lowest in the mutual fund industry. Our portfolio turnover rates are low as well, keeping transaction costs and tax consequences contained. 29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS o GROWTH FUNDS AMCAP Fund(R) EuroPacific Growth Fund(R) The Growth Fund of America(R) The New Economy Fund(R) New Perspective Fund(R) New World Fund(SM) SMALLCAP World Fund(R) o GROWTH-AND-INCOME FUNDS American Mutual Fund(R) Capital World Growth and Income Fund(SM) > Fundamental Investors(SM) The Investment Company of America(R) Washington Mutual Investors Fund(SM) o EQUITY-INCOME FUNDS Capital Income Builder(R) The Income Fund of America(R) o BALANCED FUND American Balanced Fund(R) o BOND FUNDS American High-Income Trust(SM) The Bond Fund of America(SM) Capital World Bond Fund(R) Intermediate Bond Fund of America(R) U.S. Government Securities Fund(SM) o TAX-EXEMPT BOND FUNDS American High-Income Municipal Bond Fund(R) Limited Term Tax-Exempt Bond Fund of America(SM) The Tax-Exempt Bond Fund of America(R) STATE-SPECIFIC TAX-EXEMPT FUNDS The Tax-Exempt Fund of California(R) The Tax-Exempt Fund of Maryland(R) The Tax-Exempt Fund of Virginia(R) o MONEY MARKET FUNDS The Cash Management Trust of America(R) The Tax-Exempt Money Fund of America(SM) The U.S. Treasury Money Fund of America(SM) THE CAPITAL GROUP COMPANIES American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust Lit. No. MFGESR-910-0805P Litho in USA KBD/L/8083-S4697 Printed on recycled paper ITEM 2 - Code of Ethics Not applicable for filing of Semiannual Reports to Shareholders. ITEM 3 - Audit Committee Financial Expert Not applicable for filing of Semiannual Reports to Shareholders. ITEM 4 - Principal Accountant Fees and Services Not applicable for filing of Semiannual Reports to Shareholders. ITEM 5 - Audit Committee of Listed Registrants Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934. ITEM 6 - Schedule of Investments [logo - American Funds (r)] FUNDAMENTAL INVESTORS(SM) Investment portfolio June 30, 2005 unaudited Market value Common stocks -- 94.47% Shares (000) ENERGY -- 17.77% Suncor Energy Inc. 18,546,307 $ 875,399 Royal Dutch Petroleum Co. (New York registered) 8,925,000 579,233 Exxon Mobil Corp. 5,000,000 287,350 Halliburton Co. 5,500,000 263,010 Norsk Hydro ASA 2,168,000 198,863 Norsk Hydro ASA (ADR) 700,000 63,504 LUKoil Holding (ADR) 7,000,000 257,670 Murphy Oil Corp. 3,940,000 205,786 Baker Hughes Inc. 3,968,000 203,003 ConocoPhillips 3,450,000 198,341 CONSOL Energy Inc.(1) 3,700,000 198,246 Unocal Corp. 2,928,664 190,510 Burlington Resources Inc. 2,781,000 153,622 Chevron Corp. 2,470,000 138,122 Imperial Oil Ltd. 1,195,880 99,629 Marathon Oil Corp. 1,525,000 81,389 Occidental Petroleum Corp. 1,000,000 76,930 Massey Energy Co. 2,011,700 75,881 Shell Canada Ltd. 2,538,600 68,042 Reliance Industries Ltd. 4,485,846 66,338 Oil & Natural Gas Corp. Ltd. 2,425,000 57,343 Smith International, Inc. 550,000 35,035 4,373,246 INDUSTRIALS -- 12.68% Deere & Co. 5,500,000 360,195 Union Pacific Corp. 4,200,000 272,160 Caterpillar Inc. 2,700,000 257,337 General Electric Co. 7,100,000 246,015 General Dynamics Corp. 1,772,900 194,203 Deutsche Post AG 8,275,000 193,238 Raytheon Co. 4,461,372 174,529 Parker Hannifin Corp. 2,800,000 173,628 Tyco International Ltd. 5,750,000 167,900 Boeing Co. 2,400,000 158,400 Emerson Electric Co. 2,200,000 137,786 United Parcel Service, Inc., Class B 1,750,000 121,030 Northrop Grumman Corp. 2,114,483 116,825 3M Co. 1,600,000 115,680 United Technologies Corp. 1,500,000 77,025 American Standard Inc. 1,432,300 60,042 Illinois Tool Works Inc. 657,200 52,366 Avery Dennison Corp. 966,400 51,181 Mitsui & Co., Ltd. 4,759,000 45,075 Mitsubishi Corp. 3,250,000 44,209 Continental Airlines, Inc., Class B(2) 2,300,000 30,544 Southwest Airlines Co. 1,500,000 20,895 Allied Waste Industries, Inc.(2) 2,500,000 19,825 Lockheed Martin Corp. 248,200 16,101 Bombardier Inc., Class B 7,500,000 15,952 3,122,141 FINANCIALS -- 11.74% Washington Mutual, Inc. 8,450,000 343,831 Fannie Mae 5,567,800 325,160 Citigroup Inc. 5,150,000 238,085 Allied Irish Banks, PLC 9,600,000 205,382 Bank of Ireland 10,165,000 164,884 Freddie Mac 2,025,000 132,091 AMP Ltd. 25,000,202 123,077 Irish Life & Permanent PLC 7,000,000 122,429 Willis Group Holdings Ltd. 3,400,000 111,248 Equity Residential 3,000,000 110,460 Cullen/Frost Bankers, Inc. 2,000,000 95,300 American International Group, Inc. 1,100,000 63,910 Genworth Financial, Inc., Class A 2,000,000 60,460 Bank of New York Co., Inc. 2,085,000 60,006 U.S. Bancorp 2,000,000 58,400 J.P. Morgan Chase & Co. 1,550,000 54,746 Wells Fargo & Co. 870,000 53,575 Bank Hapoalim Ltd. 16,255,900 51,098 Independence Community Bank Corp. 1,366,000 50,446 KBC Groupe SA 620,000 48,935 St. George Bank Ltd. 2,450,279 48,848 Aon Corp. 1,767,400 44,256 Mitsubishi Estate Co., Ltd. 3,750,000 41,302 Raiffeisen International Bank Holding AG(2) 609,100 38,879 Bank of America Corp. 756,800 34,518 Banco Popolare di Verona e Novara Scrl 2,000,000 34,037 Marsh & McLennan Companies, Inc. 1,120,000 31,024 Zions Bancorporation 350,000 25,736 Chubb Corp. 300,000 25,683 Fidelity National Financial, Inc. 676,000 24,126 Arthur J. Gallagher & Co. 600,000 16,278 MI Developments Inc., Class A 500,000 15,775 National Bank of Canada 230,000 10,198 State Street Corp. 200,000 9,650 Marshall & Ilsley Corp. 205,400 9,130 XL Capital Ltd., Class A 109,800 8,171 2,891,134 INFORMATION TECHNOLOGY -- 9.90% Microsoft Corp. 21,225,000 527,229 Texas Instruments Inc. 11,963,024 335,802 Automatic Data Processing, Inc. 4,600,000 193,062 International Business Machines Corp. 2,200,000 163,240 Linear Technology Corp. 4,000,000 146,760 Intersil Corp., Class A 7,475,000 $ 140,306 Motorola, Inc. 7,156,080 130,670 Hitachi, Ltd. 20,000,000 121,595 Agilent Technologies, Inc.(2) 4,000,000 92,080 Sun Microsystems, Inc.(2) 24,000,000 89,520 Hewlett-Packard Co. 3,500,000 82,285 Google Inc., Class A(2) 200,000 58,830 Sabre Holdings Corp., Class A 2,645,304 52,774 Maxim Integrated Products, Inc. 1,250,000 47,762 ASML Holding NV(2) 2,500,000 39,343 Ceridian Corp.(2) 1,900,000 37,012 CDW Corp. 545,000 31,114 Electronic Data Systems Corp. 1,582,700 30,467 Advanced Micro Devices, Inc.(2) 1,500,000 26,010 Corning Inc.(2) 1,520,000 25,262 Murata Manufacturing Co., Ltd. 300,000 15,290 Cisco Systems, Inc.(2) 800,000 15,288 Rohm Co., Ltd. 150,000 14,478 Affiliated Computer Services, Inc., Class A(2) 250,000 12,775 Microchip Technology Inc. 270,000 7,997 2,436,951 CONSUMER DISCRETIONARY -- 9.44% Lowe's Companies, Inc. 6,015,000 350,193 Time Warner Inc.(2) 17,425,000 291,172 Target Corp. 4,890,000 266,065 Limited Brands, Inc. 10,815,980 231,678 News Corp. Inc. 12,290,000 198,852 May Department Stores Co. 3,500,000 140,560 Best Buy Co., Inc. 1,922,000 131,753 Comcast Corp., Class A(2) 3,600,000 110,520 Comcast Corp., Class A, special nonvoting stock(2) 500,000 14,975 Toyota Motor Corp. 3,000,000 107,433 Magna International Inc., Class A 1,199,300 84,359 Sony Corp. 2,200,000 75,807 Walt Disney Co. 3,000,000 75,540 General Motors Corp. 2,100,000 71,400 Starbucks Corp.(2) 1,045,000 53,985 Accor SA 605,000 28,351 Warner Music Group Corp.(2) 1,500,000 24,300 IAC/InterActiveCorp(2) 956,000 22,992 Mattel, Inc. 750,000 13,725 Liberty Media Corp., Class A(2) 1,200,000 12,228 Clear Channel Communications, Inc. 300,000 9,279 Dollar Tree Stores, Inc.(2) 350,000 8,400 2,323,567 MATERIALS -- 8.36% Dow Chemical Co. 8,836,700 393,498 BHP Billiton Ltd. 17,995,030 248,517 Alcoa Inc. 7,973,800 208,355 Rio Tinto PLC 6,000,000 183,583 Weyerhaeuser Co. 2,883,000 183,503 E.I. du Pont de Nemours and Co. 3,850,000 165,589 Freeport-McMoRan Copper & Gold Inc., Class B 3,500,000 131,040 Potash Corp. of Saskatchewan Inc. 1,238,400 118,366 International Paper Co. 3,000,000 90,630 Inco Ltd. 1,632,300 61,619 Noranda Inc. 3,500,000 59,955 Temple-Inland Inc. 1,500,000 55,725 CRH PLC 1,918,931 50,911 Lyondell Chemical Co. 1,450,000 38,309 USX Corp. 650,000 22,341 Phelps Dodge Corp. 200,000 18,500 Air Products and Chemicals, Inc. 300,000 18,090 Georgia-Pacific Corp., Georgia-Pacific Group 198,640 6,317 Nitto Denko Corp. 60,000 3,442 2,058,290 TELECOMMUNICATION SERVICES -- 7.67% SBC Communications Inc. 14,250,000 338,438 Verizon Communications Inc. 5,000,000 172,750 France Telecom, SA 5,800,000 169,373 BellSouth Corp. 6,100,000 162,077 Telefonica, SA (ADR) 2,054,000 100,441 Telefonica, SA 3,068,000 50,210 China Telecom Corp. Ltd., Class H 400,000,000 144,127 Sprint Corp. 5,400,000 135,486 Qwest Communications International Inc.(2) 33,000,000 122,430 Vodafone Group PLC (ADR) 4,325,000 105,184 Vodafone Group PLC 5,850,000 14,252 KDDI Corp. 20,000 92,549 AT&T Corp. 4,620,000 87,965 O2 PLC(2) 33,750,000 82,376 Deutsche Telekom AG 2,300,000 42,534 Telecom Italia SpA, nonvoting 15,076,900 39,180 China Netcom Group Corp. Ltd. 13,000,000 18,904 KT Corp. 218,170 8,862 1,887,138 HEALTH CARE -- 5.82% Merck & Co., Inc. 8,200,000 252,560 Roche Holding AG 1,949,316 246,437 Sanofi-Aventis 2,192,600 179,948 Bristol-Myers Squibb Co. 4,850,000 121,153 Schering-Plough Corp. 5,950,000 113,407 Eli Lilly and Co. 1,950,000 108,635 CIGNA Corp. 725,000 77,597 WellPoint, Inc.(2) 840,000 58,498 Aetna Inc. 560,000 46,379 Abbott Laboratories 800,000 39,208 Amgen Inc.(2) 500,000 30,230 AstraZeneca PLC (Sweden) 500,000 20,779 AstraZeneca PLC (ADR) 190,600 7,864 Forest Laboratories, Inc.(2) 700,000 27,195 Medco Health Solutions, Inc.(2) 463,000 24,706 Wyeth 500,000 22,250 Elan Corp., PLC (ADR)(2) 2,500,000 17,050 Medtronic, Inc. 300,000 15,537 Guidant Corp. 195,500 13,157 Biogen Idec Inc.(2) 300,000 10,335 1,432,925 CONSUMER STAPLES -- 5.11% Altria Group, Inc. 8,114,800 524,703 ConAgra Foods, Inc. 5,100,000 118,116 Anheuser-Busch Companies, Inc. 2,300,000 105,225 PepsiCo, Inc. 1,800,000 97,074 Procter & Gamble Co. 1,800,000 94,950 Walgreen Co. 1,585,700 72,926 General Mills, Inc. 1,404,200 65,703 Coca-Cola Co. 1,300,000 54,275 Avon Products, Inc. 1,340,000 50,719 C&C Group PLC 8,357,900 37,580 SYSCO Corp. 600,000 21,714 Diageo PLC 1,000,000 14,743 1,257,728 UTILITIES -- 4.97% Dominion Resources, Inc. 3,390,000 248,792 Questar Corp. 3,000,000 197,700 Exelon Corp. 2,965,000 152,193 Veolia Environnement 3,059,100 114,882 Duke Energy Corp. 3,000,000 89,190 DTE Energy Co. 1,606,900 75,155 KeySpan Corp. 1,584,000 64,469 Public Service Enterprise Group Inc. 1,000,000 60,820 Pinnacle West Capital Corp. 1,000,000 44,450 FPL Group, Inc. 1,050,000 44,163 Sempra Energy 1,000,000 41,310 FirstEnergy Corp. 618,000 29,732 E.ON AG 300,000 26,717 Tokyo Gas Co., Ltd. 6,025,000 22,554 Entergy Corp. 150,000 11,333 1,223,460 MISCELLANEOUS -- 1.01% Other common stocks in initial period of acquisition 247,741 Total common stocks (cost: $18,475,737,000) 23,254,321 Shares or principal Convertible securities -- 0.65% amount FINANCIALS -- 0.29% Chubb Corp. 7.00% convertible preferred 2005 1,200,000 units 38,076 Genworth Financial, Inc. 6.00% convertible preferred 2007 1,010,000 units 34,693 72,769 INFORMATION TECHNOLOGY -- 0.24% Agilent Technologies, Inc. 3.00% convertible debentures 2021(1,3) $10,370,000 10,279 Agilent Technologies, Inc. 3.00% convertible debentures 2021(3) $15,074,000 14,942 Advanced Micro Devices, Inc. 4.75% convertible debentures 2022(3) $24,050,000 23,960 ASML Holding NV 5.50% convertible notes 2010 Euro 6,000,000 8,685 57,866 Shares or principal Market value amount (000) MATERIALS -- 0.12% Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred(1) 31,000 $ 28,505 Total convertible securities (cost: $143,177,000) 159,140 Principal amount Bonds & notes -- 0.36% (000) INDUSTRIALS -- 0.32% Northwest Airlines, Inc. 8.875% 2006 $ 29,570 18,925 Northwest Airlines, Inc. 9.875% 2007 15,335 7,744 Northwest Airlines, Inc. 7.875% 2008 16,566 6,958 Continental Airlines, Inc. 8.00% 2005 28,600 28,743 Southwest Airlines Co. 5.25% 2014 15,000 15,113 77,483 CONSUMER DISCRETIONARY -- 0.04% Delphi Automotive Systems Corp. 7.125% 2029 11,200 7,784 General Motors Corp. 7.125% 2013 2,540 2,286 General Motors Corp. 7.20% 2011 915 851 10,921 Total bonds & notes (cost: $106,822,000) 88,404 Short-term securities -- 4.53% Freddie Mac 3.04%-3.08% due 7/26-8/2/2005 169,755 169,325 Wal-Mart Stores Inc. 3.05%-3.31% due 7/12-9/7/2005(1) 95,300 94,992 Hewlett-Packard Co. 3.10%-3.20% due 7/25-7/27/2005(1) 87,800 87,610 Triple-A One Funding Corp. 3.07%-3.26% due 7/6-8/23/2005(1) 87,086 86,935 CAFCO, LLC 3.04%-3.07% due 7/6-7/20/2005(1) 49,800 49,746 Ciesco LLC 3.125% due 8/3/2005 15,600 15,555 Citicorp 3.11% due 7/25/2005 10,800 10,777 Procter & Gamble Co. 3.15%-3.19% due 8/23-8/25/2005(1) 72,401 72,049 Three Pillars Funding, LLC 3.09%-3.40% due 7/1-7/5/2005(1) 70,900 70,885 Variable Funding Capital Corp. 3.04%-3.27% due 7/5-8/23/2005(1) 57,471 57,392 Clipper Receivables Co., LLC 3.05%-3.32% due 7/8-8/17/2005(1) 54,400 54,263 DuPont (E.I.) de Nemours & Co. 3.08%-3.21% due 7/28-8/16/2005 50,000 49,835 BellSouth Corp. 3.08%-3.09% due 7/6-7/7/2005(1) 45,500 45,474 Gannett Co. 3.02%-3.19% due 7/29-8/12/2005(1) 45,000 44,867 Park Avenue Receivables Co., LLC 3.07% due 7/8/2005(1) 31,800 31,778 Preferred Receivables Funding Corp. 3.07% due 7/13/2005(1) 4,249 4,244 PepsiCo Inc. 3.12% due 7/20/2005(1) 29,475 29,424 Hershey Foods Corp. 3.05%-3.12% due 7/21-8/12/2005(1) 27,600 27,527 Edison Asset Securitization LLC 3.15% due 8/5/2005(1) 22,300 22,230 Coca-Cola Co. 3.07% due 7/26/2005 20,700 20,654 Scripps (E.W.) Co. 3.24% due 8/10/2005(1) 17,100 17,037 Colgate-Palmolive Co. 3.17% due 7/14/2005(1) 17,000 16,979 NetJets Inc. 3.19% due 8/19/2005(1) 10,000 9,957 Abbott Laboratories Inc. 3.00% due 7/6/2005(1) 9,000 8,996 International Bank for Reconstruction and Development 3.03% due 8/5/2005 8,900 8,873 International Business Machines Corp. 3.00% due 7/12/2005 6,500 6,493 Total short-term securities (cost: $1,113,872,000) 1,113,897 Total investment securities (cost: $19,839,608,000) 24,615,762 Other assets less liabilities (997) Net assets $24,614,765
"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed. (1) 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 $1,069,415,000, which represented 4.34% of the net assets of the fund. (2) Security did not produce income during the last 12 months. (3) Coupon rate may change periodically. ADR = American Depositary Receipts ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company. ITEM 10 - Submission of Matters to a Vote of Security Holders There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Directors since the Registrant last submitted a proxy statement to its shareholders. The procedures are as follows. The Registrant has a Nominating Committee comprised solely of persons who are not considered ``interested persons'' of the Registrant within the meaning of the Investment Company Act of 1940, as amended. 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. While the committee normally is able to identify from its own 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 Nominating Committee of the Registrant, c/o the Registrant'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 Nominating Committee. ITEM 11 - Controls and Procedures (a) The Registrant's Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant's disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule. (b) There were no changes in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12 - Exhibits (a) (1) The Code of Ethics - not applicable for filing of Semiannual Reports to Shareholders. (a) (2) The certifications required by Rule 30a-2 of the Investment Company Act of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FUNDAMENTAL INVESTORS, INC. By /s/ James F. Rothenberg - ------------------------------------------ James F. Rothenberg, Vice Chairman and PEO Date: September 7, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ James F. Rothenberg - ------------------------------------------ James F. Rothenberg, Vice Chairman and PEO Date: September 7, 2005 By /s/ Sheryl F. Johnson - ------------------------------------ Sheryl F. Johnson, Treasurer and PFO Date: September 7, 2005 EX-99.CERT 2 cert302.txt [logo - American Funds(r)] Fundamental Investors, Inc. One Market, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION I, James F. Rothenberg, certify that: 1. I have reviewed this report on Form N-CSR of Fundamental Investors, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 /s/ James F. Rothenberg - -------------------------------------- James F. Rothenberg, Vice Chairman and Principal Executive Officer Fundamental Investors, Inc. [logo - American Funds(r)] Fundamental Investors, Inc. One Market, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION I, Sheryl F. Johnson, certify that: 1. I have reviewed this report on Form N-CSR of Fundamental Investors, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 /s/ Sheryl F. Johnson - -------------------------------- Sheryl F. Johnson, Treasurer and Principal Financial Officer Fundamental Investors, Inc. EX-99.906CERT 3 cert906.txt [logo - American Funds(r)] Fundamental Investors, Inc. One Market, Steuart Tower Suite 1800 San Francisco, California 94105 Phone (415) 421-9360 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 JAMES F. ROTHENBERG, Vice Chairman and PEO, and SHERYL F. JOHNSON, Treasurer of Fundamental Investors, Inc., (the "Registrant"), each certify to the best of his or her knowledge that: 1) The Registrant's periodic report on Form N-CSR for the period ended June 30, 2005 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Principal Executive Officer Principal Financial Officer FUNDAMENTAL INVESTORS, INC. FUNDAMENTAL INVESTORS, INC. /s/ James F. Rothenberg /s/ Sheryl F. Johnson - ---------------------------------- ---------------------------- James F. Rothenberg, Vice Chairman Sheryl F. Johnson, Treasurer Date: September 7, 2005 Date: September 7, 2005 A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to FUNDAMENTAL INVESTORS, INC. and will be retained by FUNDAMENTAL INVESTORS, INC. and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Form N-CSR filed with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----