Fundamental Investors 497 Filing

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FUNDAMENTAL INVESTORS, INC.

Part B
Statement of Additional Information

March 1, 2006

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

Fundamental Investors, Inc.
Attention: Secretary
One Market
Steuart Tower, Suite 1800
San Francisco, California 94105
415/421-9360

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

TABLE OF CONTENTS

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

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fundamental policies and investment restrictions. . . . . . . . . . 6
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 8
Execution of portfolio transactions . . . . . . . . . . . . . . . . 26
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 26
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 29
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 34
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 39
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Shareholder account services and privileges . . . . . . . . . . . . 44
General information . . . . . . . . . . . . . . . . . . . . . . . . 46
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Financial statements

Fundamental Investors -- Page 1
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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

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

DEBT SECURITIES

.. The fund may invest up to 5% of its assets in straight debt securities
(i.e, not convertible into equity) rated Ba or below by Moody's Investors
Service ("Moody's") and BB or below by Standard & Poor's Corporation
("S&P") or unrated but determined to be of equivalent quality.

NON-U.S. SECURITIES

.. The fund may invest up to 30% of its assets in securities of issuers that
are domiciled outside the United States and Canada and not included in the
S&P 500 Composite Index.

* * * * * *

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

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

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

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

There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity securities.

The growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss.

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

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Lower rated debt securities, rated Ba or below by Moody's and/or BB or below by
S&P or unrated but determined to be of equivalent quality, are described by the
rating agencies as speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than higher rated debt
securities, or they may already be in default. The market prices of these
securities may fluctuate more than higher quality securities and may decline
significantly in periods of general economic difficulty. It may be more
difficult to dispose of, and to determine the value of, lower rated debt
securities.

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

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

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

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

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.

Fundamental Investors -- Page 3
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Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

CURRENCY TRANSACTIONS -- The fund may purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain that may result from an increase in the
value of the currency. The fund will not generally attempt to protect against
all potential changes in exchange rates. The fund will segregate liquid assets
that will be marked to market daily to meet its forward contract commitments to
the extent required by the Securities and Exchange Commission.

Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions also may affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

INVESTING IN SMALLER CAPITALIZATION STOCKS -- The fund may invest in the stocks
of smaller capitalization companies (typically companies with market
capitalizations of less than $2.0 billion at the time of purchase). The
investment adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in stocks of larger, more established companies. For example,
smaller companies often have limited product lines, limited markets or financial
resources, may be dependent for management on one or a few key persons and can
be more susceptible to losses. Also, their securities may be thinly traded (and
therefore have to be sold at a discount from current prices or sold in small
lots over an extended period of time), may be followed by fewer investment
research analysts and may be subject to wider price swings, thus creating a
greater chance of loss than securities of larger capitalization companies.

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

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

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Adminis-

Fundamental Investors -- Page 4
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tration (FHA), the Export-Import Bank (Exim Bank), the Overseas Private
Investment Corporation (OPIC), the Commodity Credit Corporation (CCC) and
the Small Business Administration (SBA).

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

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

REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the investment adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the investment adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization of the collateral by the fund
may be delayed or limited.

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933 (the "1933 Act"), or in a registered public offering.
Where registration is required, the holder of a registered security may be
obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
it may be permitted to sell a security under an effective registration
statement. Difficulty in selling such securities may result in a loss or be
costly to the fund.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of directors, taking into account
factors such as the frequency and volume of trading, the

Fundamental Investors -- Page 5
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commitment of dealers to make markets and the availability of qualified
investors, all of which can change from time to time. The fund may incur certain
additional costs in disposing of illiquid securities.

* * * * * *

PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the fund's objective, and changes in its investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

A fund's portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. The fund's portfolio turnover rates for
the fiscal years ended December 31, 2005 and 2004 were 24% and 30%,
respectively. See "Financial highlights" in the prospectus for the fund's annual
portfolio turnover rate for each of the last five fiscal years.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

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

The fund may not:

1. borrow money or securities;

2. buy securities "on margin";

3. effect "short sales" of securities;

4. mortgage, pledge or hypothecate securities;

5. lend money or securities (but the purchase of a portion of an issue of
publicly distributed debt securities is not considered the making of a loan);

6. invest in the securities of any issuer which, including predecessors, has
a record of less than three years continuous operation;

7. invest in the securities of any issuer if any officer or director of the
fund owns more than 1/2 of 1% of the securities of that issuer or if the fund's
officers and directors together own more than 5% of the securities of that
issuer;

Fundamental Investors -- Page 6
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8. invest any of its assets in the securities of any managed investment trust
or of any other managed investment company;

9. invest more than 5% of its total assets at the market value at the time of
investment in securities of any one issuer, or hold more than 10% of such
securities of any one issuer, but these limitations do not apply to obligations
of or guaranteed by the U.S.;

10. purchase or sell real estate;

11. purchase or sell commodities or commodity contracts;

12. act as underwriter of securities issued by other persons;

13. make investments in other companies for the purpose of exercising control
or management;

14. concentrate its investments in any one industry or group of industries,
but may invest up to 25% of its assets in any one industry.

Notwithstanding investment restriction number 8, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.

For purposes of investment restriction number 14, the fund will not invest 25%
or more (rather than more than 25%) of its total assets in the securities of
issuers in the same industry.

NONFUNDAMENTAL POLICIES -- The following policies may be changed without
shareholder approval.

1. The fund will not invest in puts or calls; or invest more than 10% of the
value of its total assets in securities which are not readily marketable
(including repurchase agreements maturing in more than seven days or securities
for which there is no active and substantial market).

2. No officer or director of the fund may sell portfolio securities to the
fund or buy portfolio securities from it.

3. The fund may not issue senior securities, except as permitted by the 1940
Act.

Fundamental Investors -- Page 7
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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"NON-INTERESTED" DIRECTORS/1/

- --------------------------------------------------------------------------------------------------------------- NUMBER OF
NAME, AGE AND PORTFOLIOS/3/
POSITION WITH FUND PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
(YEAR FIRST ELECTED/2/) DURING PAST FIVE YEARS BY DIRECTOR BY DIRECTOR
- ---------------------------------------------------------------------------------------------------------------

Joseph C. Berenato, 59 Chairman of the Board and 6 Ducommun Incorporated
Director (2003) CEO, Ducommun Incorporated
(aerospace components
manufacturer)
- ---------------------------------------------------------------------------------------------------------------
Robert J. Denison/5/, 64 Chair, First Security 6 None
Director (2005) Management (private
investments)
- ---------------------------------------------------------------------------------------------------------------
Robert A. Fox, 68 Managing General Partner, Fox 7 Chemtura Corporation
Director (1998) Investments LP; corporate
director; retired President
and CEO, Foster Farms
(poultry producer)
- ---------------------------------------------------------------------------------------------------------------
Leonade D. Jones, 58 Co-founder, VentureThink LLC 6 None
Director (1998) (developed and managed
e-commerce businesses) and
Versura Inc. (education loan
exchange); former Treasurer,
The Washington Post Company
- ---------------------------------------------------------------------------------------------------------------
John G. McDonald, 68 Professor of Finance, 8 iStar Financial, Inc.; Plum
Director (1998) Graduate School of Business, Creek Timber Co.; Scholastic
Stanford University Corporation; Varian, Inc.
- ---------------------------------------------------------------------------------------------------------------
Gail L. Neale, 71 President, The Lovejoy 6 None
Director (1985) Consulting Group, Inc. (a pro
bono consulting group
advising nonprofit
organizations)
- ---------------------------------------------------------------------------------------------------------------
Henry E. Riggs, 71 President Emeritus, Keck 4 None
Chairman of the Board Graduate Institute of Applied
(Independent and Life Sciences
Non-Executive) (1989)
- ---------------------------------------------------------------------------------------------------------------
Patricia K. Woolf, Ph.D., 71 Private investor; corporate 6 First Energy Corporation
Director (1998) director; former Lecturer,
Department of Molecular
Biology, Princeton University
- ---------------------------------------------------------------------------------------------------------------

Fundamental Investors -- Page 8
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"INTERESTED" DIRECTORS/6,7/

- ------------------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
AND POSITIONS NUMBER OF
NAME, AGE AND HELD WITH AFFILIATED ENTITIES PORTFOLIOS/3/
POSITION WITH FUND OR THE PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
(YEAR FIRST ELECTED/2/) OF THE FUND BY DIRECTOR BY DIRECTOR
- ------------------------------------------------------------------------------------------------------------

James F. Rothenberg, 59 President and Director, 2 None
Vice Chairman of the Board Capital Research and
(1998) Management Company; Director,
American Funds Distributors,
Inc.*; Director, The Capital
Group Companies, Inc.*;
Director, Capital Group
Research, Inc.*
- ------------------------------------------------------------------------------------------------------------
Dina N. Perry, 60 Senior Vice President, Capital 1 None
President (1994) Research and Management Company
- ------------------------------------------------------------------------------------------------------------

Other officers/7/

- -------------------------------------------------------------------------------
NAME, AGE AND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
POSITION WITH FUND AND POSITIONS HELD WITH AFFILIATED ENTITIES
(YEAR FIRST OR THE PRINCIPAL UNDERWRITER OF THE FUND
ELECTED/2/)
- -------------------------------------------------------------------------------

Gordon Crawford, 59 Senior Vice President and Director, Capital Research
Senior Vice and Management Company
President (1994)
- -------------------------------------------------------------------------------
Paul G. Haaga, Jr., 57 Executive Vice President and Director, Capital
Senior Vice Research and Management Company; Director, The Capital
President (1994) Group Companies, Inc.*
- -------------------------------------------------------------------------------
Michael T. Kerr, 46 Vice President, Capital Research and Management
Senior Vice Company; Senior Vice President, Capital Research
President (1995) Company*
- -------------------------------------------------------------------------------
Martin Romo, 38 Executive Vice President and Director, Capital
Senior Vice Research Company*
President (1999)
- -------------------------------------------------------------------------------
Ronald B. Morrow, 60 Senior Vice President, Capital Research Company*
Vice President
(2004)
- -------------------------------------------------------------------------------
Patrick F. Quan, 47 Vice President - Fund Business Management Group,
Secretary Capital Research and Management Company
(1989-1998; 2000)
- -------------------------------------------------------------------------------
Sheryl F. Johnson, 37 Vice President - Fund Business Management Group,
Treasurer (1998) Capital Research and Management Company
- -------------------------------------------------------------------------------
David A. Pritchett, 39 Vice President - Fund Business Management Group,
Assistant Treasurer Capital Research and Management Company
(1999)
- -------------------------------------------------------------------------------

Fundamental Investors -- Page 9
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/*/ Company affiliated with Capital Research and Management Company.

/1/ A "non-interested" director refers to a director who is not an "interested
person" within the meaning of the 1940 Act.

/2/ Directors and officers of the fund serve until their resignation, removal or
retirement.

/3/ Fund managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.

/4/ This includes all directorships (other than those of the American Funds) that
are held by each director as a director of a public company or a registered
investment company.

/5/ Elected effective February 17, 2005.

/6/ "Interested persons," within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).

/7/ All of the officers listed, except Ronald B. Morrow and Martin Romo, are
officers and/or directors/trustees of one or more of the other funds for which
Capital Research and Management Company serves as investment adviser.

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

FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2005

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

"NON-INTERESTED" DIRECTORS
- -------------------------------------------------------------------------------
Joseph C. Berenato $1 - $10,000 Over $100,000
- -------------------------------------------------------------------------------
Robert J. Denison $10,001 - $50,000 Over $100,000
- -------------------------------------------------------------------------------
Robert A. Fox Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
Leonade D. Jones $50,001 - $100,000 Over $100,000
- -------------------------------------------------------------------------------
John G. McDonald $50,001 - $100,000 Over $100,000
- -------------------------------------------------------------------------------
Gail L. Neale $50,001 - $100,000 Over $100,000
- -------------------------------------------------------------------------------
Henry E. Riggs Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
Patricia K. Woolf $50,001 - $100,000 Over $100,000
- -------------------------------------------------------------------------------
"INTERESTED" DIRECTORS
- -------------------------------------------------------------------------------
Dina N. Perry Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
James F. Rothenberg Over $100,000 Over $100,000
- -------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.

DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
director who is a director, officer or employee of the investment adviser or its
affiliates. The fund typically pays each non-interested director an annual fee
of $16,000. If the aggregate annual fees paid to a non-interested director by
all funds advised by the investment adviser is less than $50,000, that
non-interested director would be eligible for a $50,000 alternative fee. This
alternative fee is paid by those funds for which the non-interested director
serves as a director on a pro-rata basis

Fundamental Investors -- Page 10
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according to each fund's relative share of the annual fees that it would
typically pay. The alternative fee reflects the significant time and labor
commitment required for a director to oversee even one fund. A non-interested
director who is chairman of the board also receives an additional annual fee of
$25,000, paid in equal portions by the fund and the funds whose boards and
committees typically meet jointly with those of the fund.

In addition, the fund generally pays to non-interested directors fees of (a)
$2,500 for each board of directors meeting attended and (b) $1,500 for each
meeting attended as a member of a committee of the board of directors.

Non-interested directors also receive attendance fees of (a) $2,500 for each
director seminar or information session organized by the investment adviser, (b)
$1,500 for each joint audit committee meeting with all other American Funds
audit committees and (c) $500 for each meeting of the board or committee chairs
of other American Funds. The fund and the other funds served by each
non-interested director each pay an equal portion of these attendance fees.

The nominating committee of the board of directors, a committee comprised
exclusively of non-interested directors, reviews director compensation
periodically, and typically recommends adjustments every other year. In making
its recommendations, the nominating committee considers a number of factors,
including operational, regulatory and other developments affecting the
complexity of the board's oversight obligations, as well as comparative industry
data. In lieu of meeting attendance fees, members of the proxy committee receive
an annual retainer fee of $4,500 from the fund if they serve as a member of four
proxy committees, or $6,250 if they serve as a member of two proxy committees,
meeting jointly.

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

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

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

Joseph C. Berenato/3/ $32,417 $168,834
- ----------------------------------------------------------------------------------------------------
Robert J. Denison/3/ 32,259 117,837
- ----------------------------------------------------------------------------------------------------
Robert A. Fox/3/ 38,429 262,500
- ----------------------------------------------------------------------------------------------------
Leonade D. Jones 38,583 234,500
- ----------------------------------------------------------------------------------------------------
John G. McDonald/3/ 38,062 332,500
- ----------------------------------------------------------------------------------------------------
Gail L. Neale/3/ 32,150 145,000
- ----------------------------------------------------------------------------------------------------
Henry E. Riggs/3/ 33,000 144,000
- ----------------------------------------------------------------------------------------------------
Patricia K. Woolf/3/ 36,250 211,000
- ----------------------------------------------------------------------------------------------------

Fundamental Investors -- Page 11
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/1/ Amounts may be deferred by eligible directors under a nonqualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more American Funds
as designated by the directors. Compensation shown in this table for the fiscal
year ended December 31, 2005 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.

/2/ Fund managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which serves as the
underlying investment vehicle for certain variable insurance contracts, and
Endowments, whose shareholders are limited to certain nonprofit organizations.

/3/ Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2005
fiscal year for participating directors is as follows: Joseph C. Berenato
($68,937), Robert J. Denison ($37,159), Robert A. Fox ($266,973), John G.
McDonald ($263,457), Gail L. Neale ($27,033), Henry E. Riggs ($409,352) and
Patricia K. Woolf ($157,633). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the directors.

As of February 1, 2006, the officers and directors of the fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Delaware
corporation on October 17, 1932 and reincorporated in Maryland on February 1,
1990. Although the board of directors has delegated day-to-day oversight to the
investment adviser, all fund operations are supervised by the fund's board,
which meets periodically and performs duties required by applicable state and
federal laws.

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

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

The fund has several different classes of shares, including Class A, B, C, F,
529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. Shares of
each class represent an interest in the same investment portfolio. Each class
has pro rata rights as to voting, redemption, dividends and liquidation, except
that each class bears different distribution expenses and may bear different
transfer agent fees and other expenses properly attributable to the particular
class as approved by the board of directors and set forth in the fund's rule
18f-3 Plan. Each class' shareholders have exclusive voting rights with respect
to the respective class' rule 12b-1 plans adopted in connection with the
distribution of shares and on other matters in which the interests of one class
are different from interests in another class. Shares of all classes of the fund
vote together on matters that affect all classes in substantially the same
manner. Each class votes as a class on matters that affect that class alone.
Note that CollegeAmerica/(R)/ account owners invested in Class 529 shares are
not shareholders of the fund and, accordingly, do not have the rights of a
shareholder, such as the right to vote proxies relating to fund shares. As the
legal owner of the fund's Class 529 shares, the Virginia College Savings
Plan/SM/ will vote any proxies relating to such fund shares.

The fund does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of board
members or a change in a

Fundamental Investors -- Page 12
<PAGE>

fundamental investment policy, will be presented to shareholders at a meeting
called for such purpose. Shareholders have one vote per share owned. At the
request of the holders of at least 10% of the shares, the fund will hold a
meeting at which any member of the board could be removed by a majority vote.

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

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an audit committee
comprised of Joseph C. Berenato, Robert J. Denison, Robert A. Fox and Leonade D.
Jones, none of whom is an "interested person" of the fund within the meaning of
the 1940 Act. The committee provides oversight regarding the fund's accounting
and financial reporting policies and practices, its internal controls and the
internal controls of the fund's principal service providers. The committee acts
as a liaison between the fund's independent registered public accounting firm
and the full board of directors. Four audit committee meetings were held during
the 2005 fiscal year.

The fund has a governance and contracts committee comprised of Joseph C.
Berenato, Robert J. Denison, Robert A. Fox, Leonade D. Jones, John G. McDonald,
Gail L. Neale, Henry E. Riggs and Patricia K. Woolf, none of whom is an
"interested person" of the fund within the meaning of the 1940 Act. The
committee's principal function is to request, review and consider the
information deemed necessary to evaluate the terms of certain agreements between
the fund and its investment adviser or the investment adviser's affiliates, such
as the Investment Advisory and Service Agreement, Principal Underwriting
Agreement, Administrative Services Agreement and Plans of Distribution adopted
pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew
or continue, and to make its recommendations to the full board of directors on
these matters. Two governance and contracts committee meetings were held during
the 2005 fiscal year.

The fund has a nominating committee comprised of Joseph C. Berenato, John G.
McDonald, Gail L. Neale and Patricia K. Woolf, none of whom is an "interested
person" of the fund within the meaning of the 1940 Act. The committee
periodically reviews such issues as the board's composition, responsibilities,
committees, compensation and other relevant issues, and recommends any
appropriate changes to the full board of directors. The committee also
evaluates, selects and nominates non-interested director candidates to the full
board of directors. While the committee normally is able to identify from its
own and other resources an ample number of qualified candidates, it will
consider shareholder suggestions of persons to be considered as nominees to fill
future vacancies on the board. Such suggestions must be sent in writing to the
nominating committee of the fund, addressed to the fund's secretary, and must be
accompanied by complete biographical and occupational data on the prospective
nominee, along with a written consent of the prospective nominee for
consideration of his or her name by the committee. Four nominating committee
meetings were held during the 2005 fiscal year.

The fund has a proxy committee comprised of Robert A. Fox, Leonade D. Jones,
John G. McDonald and Patricia K. Woolf, none of whom is an "interested person"
of the fund within the meaning of the 1940 Act. The committee's functions
include establishing and reviewing procedures and policies for voting proxies of
companies held in the fund's portfolio, making

Fundamental Investors -- Page 13
<PAGE>

determinations with regard to certain contested proxy voting issues, and
discussing related current issues. Four proxy committee meetings were held
during the 2005 fiscal year.

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

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

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

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

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

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

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is

Fundamental Investors -- Page 14
<PAGE>

determined to be in the best interest of shareholders. Separation of the
chairman and CEO positions may also be supported. Typically, proposals to
declassify the board (elect all directors annually) are supported based on
the belief that this increases the directors' sense of accountability to
shareholders.

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

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

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

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on February 1, 2006. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

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

Edward D. Jones & Co. Class A 20.40%
201 Progress Parkway Class B 11.66
Maryland Heights, MO 63043-3009
- ----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 15.04
333 W. 34th Street Class F 8.88
New York, NY 10001-2402
- ----------------------------------------------------------------------------
MLPF&S Class C 11.53
4800 Deer Lake Drive, East, Floor 2
Jacksonville, FL 32246-6484
- ----------------------------------------------------------------------------
Charles Schwab & Co., Inc. Class F 7.66
101 Montgomery Street Class R-4 17.50
San Francisco, CA 94104-4122
- ----------------------------------------------------------------------------
NFS LLC Class R-1 6.81
320 N. Jensen Road
Vestal, NY 13850-2111
- ----------------------------------------------------------------------------
Raymond James & Associates, Inc. Class R-1 6.38
880 Carillon Parkway
St. Petersburg, FL 33716-1100
- ----------------------------------------------------------------------------
Wilmington Trust Company Class R-1 5.16
P.O. Box 8971
Wilmington, DE 19899-8971
- ----------------------------------------------------------------------------
Transamerica Life Insurance & Annuity Class R-3 9.31
P.O. Box 30368
Los Angeles, CA 90030-0368
- ----------------------------------------------------------------------------
Delaware Charter Guarantee & Trust Class R-3 6.89
711 High Street
Des Moines, IA 50392-0001
- ----------------------------------------------------------------------------
Nationwide Trust Company FSB Class R-3 5.93
P.O. Box 182029
Columbus, OH 43218-2029
- ----------------------------------------------------------------------------
New York Life Trust Company Class R-4 9.63
169 Lackawanna Avenue
Parsippany, NJ 07054-1007
- ----------------------------------------------------------------------------
BB&T Class R-4 5.75
434 Fayetteville Street Mall, Floor 4
Raleigh, NC 27601-1701
- ----------------------------------------------------------------------------
BB&T Class R-4 5.57
P.O. Box 14967
Greensboro, NC 27415-4967
- ----------------------------------------------------------------------------
Emjayco Class R-4 5.47
P.O. Box 170190
Milwaukee, WI 53217-8016
- ----------------------------------------------------------------------------
State Street Bank & Trust Co. Class R-5 25.35
105 Rosemont Road
Westwood, MA 02090-2318
- ----------------------------------------------------------------------------
CGTC Class R-5 23.03
333 S. Hope Street, Floor 49
Los Angeles, CA 90071
- ----------------------------------------------------------------------------
The Northern Trust Company Class R-5 15.85
P.O. Box 92994
Chicago, IL 60675-2994
- ----------------------------------------------------------------------------
Fidelity Investments Institutional Class R-5 5.63
100 Magellan Way KWIC
Covington, KY 41015
- ----------------------------------------------------------------------------

Fundamental Investors -- Page 15
<PAGE>

INVESTMENT ADVISER -- The investment adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the United States and
abroad (Los Angeles; San Francisco; New York; Washington, DC; London; Geneva;
Hong Kong; Singapore; and Tokyo) with a staff of professionals, many of whom
have significant investment experience. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 135 South State

Fundamental Investors -- Page 16
<PAGE>

College Boulevard, Brea, CA 92821. The investment adviser's research
professionals travel several million miles a year, making more than 5,000
research visits in more than 50 countries around the world. The investment
adviser believes that it is able to attract and retain quality personnel. The
investment adviser is a wholly owned subsidiary of The Capital Group Companies,
Inc.

The investment adviser is responsible for managing more than $750 billion of
stocks, bonds and money market instruments and serves over 35 million
shareholder accounts of all types throughout the world. These investors include
individuals, privately owned businesses and large corporations, as well as
schools, colleges, foundations and other nonprofit and tax-exempt organizations.

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

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

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors. In order to encourage a long-term focus, bonuses based on investment
results are calculated by comparing pretax total returns to relevant benchmarks
over both the most recent year and a four-year rolling average, with the greater
weight placed on the four-year rolling average. For portfolio counselors,
benchmarks may include measures of the marketplaces in which the relevant fund
invests and measures of the results of comparable mutual funds. For investment
analysts, benchmarks may include relevant market measures and appropriate
industry or sector indexes reflecting their areas of expertise. Capital Research
and Management Company also separately compensates analysts for the quality of
their research efforts. The benchmarks against which Fundamental Investors
portfolio counselors are measured include: S&P 500 and Lipper Growth and Income
Funds Index.

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

Fundamental Investors -- Page 17
<PAGE>

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

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

Dina N. Perry Over 3 $158.7 1 $0.30 None
$1,000,000
- -------------------------------------------------------------------------------------------
Michael T. Kerr $500,001 -- 2 $198.7 None None
$1,000,000
- -------------------------------------------------------------------------------------------
James E. Drasdo Over 2 $207.7 None None
$1,000,000
- -------------------------------------------------------------------------------------------
Brady L. $100,001 -- 1 $ 15.6 None None
Enright $500,000
- -------------------------------------------------------------------------------------------
Ronald B. $50,001 -- 1 $ 70.4 None None
Morrow $100,000
- -------------------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.

/2/ Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount.

/3/ Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States and/ or fixed-income assets in
institutional accounts managed by investment adviser subsidiaries of Capital
Group International, Inc., an affiliate of Capital Research and Management
Company. Assets noted are the total net assets of the fund or account and are
not indicative of the total assets managed by the individual, which is a
substantially lower amount.

/4/ Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until August 31, 2006, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (a) the board of directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (b) the vote of a majority of directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the investment adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).

Fundamental Investors -- Page 18
<PAGE>

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

As compensation for its services, the investment adviser receives a monthly fee
that is based on average daily net assets and is calculated at an annual rate of
0.39% on the first $1 billion of the fund's net assets, plus 0.336% on net
assets over $1 billion to $2 billion, plus 0.30% on net assets over $2 billion
to $3 billion, plus 0.276% on net assets over $3 billion to $5 billion, plus
0.27% on net assets over $5 billion to $8 billion, plus 0.258% on net assets
over $8 billion to $13 billion, plus 0.252% on net assets over $13 billion to
$17 billion, plus 0.250% on net assets over $17 billion to $21 billion, plus
0.245% on net assets over $21 billion to $27 billion, plus 0.240% on net assets
over $27 billion.

The investment adviser has agreed to waive any fees to the extent they would
exceed those payable under the rate structure contained in its previous
agreement that was in effect from December 1, 1991 through May 31, 1998. The fee
structure referenced above is lower than that in the previous agreement except
in the event that the fund's net assets were to fall below $8 billion when fees
are equal to, or higher than, that in the previous agreement.

The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed 1% of the
average net assets in excess thereof. Expenses which are not subject to these
limitations are interest, taxes and extraordinary expenses. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses. To the extent the fund's management fee must
be waived due to Class A share expense ratios exceeding the expense limitations
described above, management fees will be reduced similarly for all classes of
shares of the fund, or other Class A fees will be waived in lieu of management
fees.

For the fiscal years ended December 31, 2005 and 2004, the investment adviser
was entitled to receive from the fund management fees of $67,323,000 and
$59,209,000, respectively. After giving effect to the management fee
waivers/expense reimbursements described below, the fund paid the investment
adviser management fees of $61,385,000 (a reduction of $5,938,000) and
$58,189,000 (a reduction of $1,020,000) for the fiscal years ended December 31,
2005 and 2004, respectively. For the fiscal year ended December 31, 2003, the
fund paid the investment adviser management fees of $48,382,000.

Fundamental Investors -- Page 19
<PAGE>

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

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until August
31, 2006, unless sooner terminated, and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by the vote of a majority of directors who are not parties to the
Administrative Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The fund may terminate the Administrative Agreement at any time
by vote of a majority of non-interested directors. The investment adviser has
the right to terminate the Administrative Agreement upon 60 days' written notice
to the fund. The Administrative Agreement automatically terminates in the event
of its assignment (as defined in the 1940 Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser contracts
with third parties, including American Funds Service Company, the fund's
Transfer Agent, to provide these services. Services include, but are not limited
to, shareholder account maintenance, transaction processing, tax information
reporting and shareholder and fund communications. In addition, the investment
adviser monitors, coordinates and oversees the activities performed by third
parties providing such services. For Class R-1 and R-2 shares, the investment
adviser has agreed to pay a portion of the fees payable under the Administrative
Agreement that would otherwise have been paid by the fund. For the year ended
December 31, 2005, the total fees paid by the investment adviser were $231,000.

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

Fundamental Investors -- Page 20
<PAGE>

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

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

CLASS C $1,058,000
- ------------------------------------------------------------------------------
CLASS F 634,000
- ------------------------------------------------------------------------------
CLASS 529-A 227,000
- ------------------------------------------------------------------------------
CLASS 529-B 52,000
- ------------------------------------------------------------------------------
CLASS 529-C 81,000
- ------------------------------------------------------------------------------
CLASS 529-E 11,000
- ------------------------------------------------------------------------------
CLASS 529-F 3,000
- ------------------------------------------------------------------------------
CLASS R-1 18,000
- ------------------------------------------------------------------------------
CLASS R-2 739,000
- ------------------------------------------------------------------------------
CLASS R-3 375,000
- ------------------------------------------------------------------------------
CLASS R-4 222,000
- ------------------------------------------------------------------------------
CLASS R-5 215,000
- ------------------------------------------------------------------------------

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

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

Fundamental Investors -- Page 21
<PAGE>

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

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

CLASS A 2005 $10,046,000 $44,270,000
2004 7,010,000 31,352,000
2003 5,197,000 24,084,000
- -----------------------------------------------------------------------------------------------------
CLASS B 2005 408,000 2,993,000
2004 529,000 3,819,000
2003 596,000 3,754,000
- -----------------------------------------------------------------------------------------------------
CLASS C 2005 0 1,833,000
2004 2,000 1,352,000
2003 72,000 937,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-A 2005 382,000 1,771,000
2004 258,000 1,226,000
2003 181,000 871,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-B 2005 37,000 313,000
2004 56,000 527,000
2003 51,000 277,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-C 2005 0 199,000
2004 2,000 148,000
2003 4,000 108,000
- -----------------------------------------------------------------------------------------------------

The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full board of directors and separately by a majority of the non-interested
directors of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. Potential
benefits of the Plans to the fund include quality shareholder services; savings
to the fund in transfer agency costs; and

Fundamental Investors -- Page 22
<PAGE>

benefits to the investment process from growth or stability of assets. The
selection and nomination of non-interested directors are committed to the
discretion of the non-interested directors during the existence of the Plans.
The Plans may not be amended to increase materially the amount spent for
distribution without shareholder approval. Plan expenses are reviewed quarterly
and the Plans must be renewed annually by the board of directors.

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

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to the amount allowable under the fund's Class
A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying
distribution-related expenses, including for Class A and 529-A shares dealer
commissions and wholesaler compensation paid on sales of shares of $1 million or
more purchased without a sales charge (including purchases by employer-sponsored
defined contribution-type retirement plans investing $1 million or more or with
100 or more eligible employees, and retirement plans, endowments and foundations
with $50 million or more in assets -- "no load purchases"). Commissions on no
load purchases of Class A and 529-A shares in excess of the Class A and 529-A
plan limitations not reimbursed to the Principal Underwriter during the most
recent fiscal quarter are recoverable for five quarters, provided that such
commissions do not exceed the annual expense limit. After five quarters, these
commissions are not recoverable.

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

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

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

Fundamental Investors -- Page 23
<PAGE>

is paid to the Principal Underwriter for paying distribution-related expenses,
including commissions paid to qualified dealers.

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

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

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

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

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

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

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

CLASS A $53,469,000 $4,656,000
- --------------------------------------------------------------------------------------------
CLASS B 9,984,000 926,000
- --------------------------------------------------------------------------------------------
CLASS C 6,408,000 652,000
- --------------------------------------------------------------------------------------------
CLASS F 1,302,000 138,000
- --------------------------------------------------------------------------------------------
CLASS 529-A 326,000 33,000
- --------------------------------------------------------------------------------------------
CLASS 529-B 334,000 33,000
- --------------------------------------------------------------------------------------------
CLASS 529-C 557,000 59,000
- --------------------------------------------------------------------------------------------
CLASS 529-E 45,000 5,000
- --------------------------------------------------------------------------------------------
CLASS 529-F 2,000 0
- --------------------------------------------------------------------------------------------
CLASS R-1 85,000 9,000
- --------------------------------------------------------------------------------------------
CLASS R-2 916,000 98,000
- --------------------------------------------------------------------------------------------
CLASS R-3 841,000 92,000
- --------------------------------------------------------------------------------------------
CLASS R-4 359,000 44,000
- --------------------------------------------------------------------------------------------

Fundamental Investors -- Page 24
<PAGE>

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

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

Fundamental Investors -- Page 25
<PAGE>

Stifel, Nicolaus & Company, Inc.
The O.N. Equity Sales Company
UBS Financial Services Inc.
US Bancorp Investments, Inc.
Wachovia Securities

EXECUTION OF PORTFOLIO TRANSACTIONS

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

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
December 31, 2005, 2004 and 2003 amounted to $15,535,000, $15,147,000 and
$16,389,000. With respect to fixed-income securities, brokerage commissions
include explicit investment dealer concessions and may exclude other transaction
costs which may be reflected in the spread between the bid and asked price.

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

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Banc of America Securities, LLC, Citigroup Global
Markets, Inc., J.P. Morgan Securities and State Street Bank and Trust Company.
As of the fund's most recent fiscal year-end, the fund held equity securities of
Bank of America Corporation in the amount of $34,926,000, Citigroup, Inc. in the
amount of $346,019,000, J.P. Morgan Chase & Company in the amount of $61,519,000
and State Street Corporation in the amount of $38,808,000.

DISCLOSURE OF PORTFOLIO HOLDINGS

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

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the

Fundamental Investors -- Page 26
<PAGE>

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

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the fund receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons may be bound by agreements (including confidentiality agreements)
that restrict and limit their use of the information to legitimate business uses
only. Neither the fund nor its investment adviser or any affiliate thereof
receives compensation or other consideration in connection with the disclosure
of information about portfolio securities.

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

PRICE OF SHARES

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

Fundamental Investors -- Page 27
<PAGE>

dealer MUST be indicated. The dealer is responsible for promptly transmitting
purchase and sell orders to the Principal Underwriter.

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

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

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

1. Equity securities, including depositary receipts, are valued at the
official closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the last available
bid price. Prices for each security are taken from the principal exchange or
market in which the security trades. Fixed-income securities are valued at
prices obtained from an independent pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices (or bid prices, if asked prices are not available) or at prices for
securities of comparable maturity, quality and type.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

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

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

Fundamental Investors -- Page 28
<PAGE>

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

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable, are valued in good faith by the valuation
committee based upon what the fund might reasonably expect to receive upon their
current sale. The valuation committee considers all indications of value
available to it in determining the fair value to be assigned to a particular
security, including, without limitation, the type and cost of the security,
contractual or legal restrictions on resale of the security, relevant financial
or business developments of the issuer, actively traded similar or related
securities, conversion or exchange rights on the security, related corporate
actions, significant events occurring after the close of trading in the security
and changes in overall market conditions.

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

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

TAXES AND DISTRIBUTIONS

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

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not

Fundamental Investors -- Page 29
<PAGE>

limited to, gains from options, futures or forward contracts) derived with
respect to the business of investing in such securities or currencies, and (b)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the fund's assets is represented by cash, U.S.
government securities and securities of other regulated investment companies,
and other securities (for purposes of this calculation, generally limited in
respect of any one issuer, to an amount not greater than 5% of the market value
of the fund's assets and 10% of the outstanding voting securities of such
issuer) and (ii) not more than 25% of the value of its assets is invested in the
securities of (other than U.S. government securities or the securities of other
regulated investment companies) any one issuer; two or more issuers which the
fund controls and which are determined to be engaged in the same or similar
trades or businesses; or the securities of certain publicly traded partnerships.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year) and
(c) the sum of any untaxed, undistributed net investment income and net capital
gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (a) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (b) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is in the interest of shareholders to distribute a lesser
amount.

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

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

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

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income, which includes
any excess of net realized short-term gains over net realized long-term
capital losses. Investment company taxable income generally includes
dividends, interest, net short-term capital gains in excess of net
long-term capital losses, and certain foreign currency gains, if any, less
expenses and certain foreign currency losses. To the extent the fund
invests in stock of domestic and

Fundamental Investors -- Page 30
<PAGE>

certain foreign corporations and meets the applicable holding period
requirement, it may receive "qualified dividends". The fund will designate
the amount of "qualified dividends" to its shareholders in a notice sent
within 60 days of the close of its fiscal year and will report "qualified
dividends" to shareholders on Form 1099-DIV.

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

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

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

Dividends from domestic corporations are expected to comprise some portion
of the fund's gross income. To the extent that such dividends constitute
any of the fund's gross income, a portion of the income distributions of
the fund may be eligible for the deduction for dividends received by
corporations. Corporate shareholders will be informed of the portion of
dividends that so qualifies. The dividends-received deduction is reduced to
the extent that either the fund shares, or the underlying shares of stock
held by the fund, with respect to which dividends are received, are treated
as debt-financed under federal income tax law, and is eliminated if the
shares are deemed to have been held by the shareholder or the fund, as the
case may be, for less than 46 days during the 90-day period beginning on
the date that is 45 days before the date on which the shares become

Fundamental Investors -- Page 31
<PAGE>

ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

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

In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax
purposes. The gain realized on the disposition of any bond having a market
discount may be treated as taxable ordinary income to the extent it does
not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is
attributable. Generally, accrued market discount may be figured under
either the ratable accrual method or constant interest method. If the fund
has paid a premium over the face amount of a bond, the fund has the option
of either amortizing the premium until bond maturity and reducing the
fund's basis in the bond by the amortized amount, or not amortizing and
treating the premium as part of the bond's basis. In the case of any debt
security having a fixed maturity date of not more than one year from its
date of issue, the gain realized on disposition generally will be treated
as a short-term capital gain. In general, any gain realized on disposition
of a security held less than one year is treated as a short-term capital
gain.

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

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

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

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions.

Fundamental Investors -- Page 32
<PAGE>

Shareholders of the fund also may be subject to state and local taxes on
distributions received from the fund.

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

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

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

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

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

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

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of a regulated investment company

Fundamental Investors -- Page 33
<PAGE>

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

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

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

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

PURCHASE AND EXCHANGE OF SHARES

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

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

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

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

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

Fundamental Investors -- Page 34
<PAGE>

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

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

Your bank should include the following information when
wiring funds:

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

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

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

The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 3.0% of the outstanding
shares of the fund without the consent of a majority of the fund's board.

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

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases. The initial
purchase minimum of $25 may be waived for the following account types:

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

. Employer-sponsored CollegeAmerica accounts.

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

. Retirement accounts that are funded with employer contributions; and

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

Fundamental Investors -- Page 35
<PAGE>

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

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

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

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds money market funds are
subject to applicable sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange from a fund having a sales
charge, or by reinvestment or cross-reinvestment of dividends or capital gain
distributions. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

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

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

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

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

Fundamental Investors -- Page 36
<PAGE>

MOVING BETWEEN SHARE CLASSES

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

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

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

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

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

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

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

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her

Fundamental Investors -- Page 37
<PAGE>

designee, Class A shares of the American Funds stock, stock/bond and bond
funds may be sold at net asset value to:

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

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

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

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

(5) insurance company separate accounts;

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

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

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

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

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

Fundamental Investors -- Page 38
<PAGE>

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

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

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

SALES CHARGE REDUCTIONS AND WAIVERS

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

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

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

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchase must be made will remain
unchanged. Accordingly, upon your

Fundamental Investors -- Page 39
<PAGE>

request, the sales charge paid on investments made 90 days prior to the
Statement revision will be adjusted to reflect the revised Statement.

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

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

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the Statement
period will be handled as follows: the total monthly investment will be
multiplied by 13 and then multiplied by 1.5. The market value of existing
American Funds investments (other than shares representing direct purchases
of money market funds) as of the day immediately before the start of the
Statement period, and any rollovers or transfers reasonably anticipated to
be invested in non-money market American Funds during the Statement period,
are added to the figure determined above. The sum is the Statement amount
and applicable breakpoint level. On the first investment and all other
investments made pursuant to the Statement, a sales charge will be assessed
according to the sales charge breakpoint thus determined. There will be no
retroactive adjustments in sales charges on investments made during the
Statement period.

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

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

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

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

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

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

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

Fundamental Investors -- Page 40
<PAGE>

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

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

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

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

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

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

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

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

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

Fundamental Investors -- Page 41
<PAGE>

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

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

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

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

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

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

Fundamental Investors -- Page 42
<PAGE>

For purposes of this paragraph, "account" means:

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

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

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

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

SELLING SHARES

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

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

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

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

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

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

Fundamental Investors -- Page 43
<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

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

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

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

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

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

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

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

Fundamental Investors -- Page 44
<PAGE>

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

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

Withdrawal payments are not to be considered as dividends, yield or income.
Automatic investments may not be made into a shareholder account from which
there are automatic withdrawals. Withdrawals of amounts exceeding reinvested
dividends and distributions and increases in share value would reduce the
aggregate value of the shareholder's account. The Transfer Agent arranges for
the redemption by the fund of sufficient shares, deposited by the shareholder
with the Transfer Agent, to provide the withdrawal payment specified.

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

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

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

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) that may be incurred in connection
with the exercise of these privileges.

Fundamental Investors -- Page 45
<PAGE>

Generally, all shareholders are automatically eligible to use these services.
However, you may elect to opt out of these services by writing the Transfer
Agent (you may also reinstate them at any time by writing the Transfer Agent).
If the Transfer Agent does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, it and/or the fund may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders are unable to reach the
fund by telephone because of technical difficulties, market conditions or a
natural disaster, redemption and exchange requests may be made in writing only.

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

REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the board of directors of the fund may from time to time
adopt.

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

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

GENERAL INFORMATION

CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to subcustodial arrangements in non-U.S. banks or
non-U.S. branches of U.S. banks.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, processes
purchases and redemptions of the fund's shares, acts as dividend and capital
gain distribution disbursing agent, and performs other related shareholder
service functions. The principal office of American Funds Service Company is
located at 135 South State College Boulevard, Brea, CA 92821-5823. American
Funds Service Company was paid a fee of $19,717,000 for Class A shares and
$954,000 for Class B shares for the 2005 fiscal year.

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds

Fundamental Investors -- Page 46
<PAGE>

Service Company. These services are rendered under agreements with American
Funds Service Company or its affiliates and the third parties receive
compensation according to such agreements. Compensation for transfer agency and
shareholder services, whether paid to American Funds Service Company or such
third parties, is ultimately paid from fund assets and is reflected in the
expenses of the fund as disclosed in the prospectus.

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

INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 515 South
Flower Street, Los Angeles, CA 90071, serves as counsel for the fund and for
non-interested directors in their capacities as such. Certain legal matters in
connection with the capital shares offered by the prospectus have been passed
upon for the fund by Paul, Hastings, Janofsky & Walker LLP. Counsel does not
provide legal services to the fund's investment adviser or any of its affiliated
companies. A determination with respect to the independence of the fund's
"independent legal counsel" will be made at least annually by the non-interested
directors of the fund, as prescribed by the 1940 Act and related rules.

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

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

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

Fundamental Investors -- Page 47
<PAGE>

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

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. The SEC is conducting a related investigation
as of the date of this statement of additional information. The investment
adviser and Principal Underwriter are cooperating fully. In addition, a class
action lawsuit has been filed in the U.S. District Court, Central District of
California, raising issues related to so-called "directed brokerage" and
"revenue sharing" practices. Further updates on these issues will be available
on the American Funds website (americanfunds.com) under "American Funds
regulatory matters."

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

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

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $35.40

Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $37.56

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

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

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

Fundamental Investors -- Page 48
<PAGE>

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

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

Fundamental Investors -- Page 49
<PAGE>

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

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

Fundamental Investors -- Page 50
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

Fundamental Investors -- Page 51
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

Fundamental Investors -- Page 52
<PAGE>

C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

Fundamental Investors -- Page 53

[Logo - American Funds ®]

Fundamental Investors^SM

Investment portfolio

December 31, 2005

Common stocks — 95.97%		Shares			Market value (000	)

ENERGY — 17.76%
Suncor Energy Inc.		18,550,712		$	1,169,911
Royal Dutch Shell PLC, Class A (ADR)		7,440,000			457,486
Halliburton Co.		6,000,000			371,760
Norsk Hydro ASA		2,168,000			222,542
Norsk Hydro ASA (ADR)		700,000			72,226
Baker Hughes Inc.		4,828,000			293,446
AOA LUKOIL (ADR)		4,700,000			277,300
CONSOL Energy Inc.¹		3,700,000			241,166
Burlington Resources Inc.		2,781,000			239,722
Chevron Corp.		4,185,674			237,621
Murphy Oil Corp.		4,063,000			219,361
Exxon Mobil Corp.		3,000,000			168,510
ConocoPhillips		2,390,000			139,050
Imperial Oil Ltd.		1,198,054			119,326
Schlumberger Ltd.		1,000,000			97,150
Reliance Industries Ltd.		4,900,000			96,900
Marathon Oil Corp.		1,525,000			92,979
Shell Canada Ltd.		2,538,600			91,818
Occidental Petroleum Corp.		1,000,000			79,880
Smith International, Inc.		2,100,000			77,931
Massey Energy Co.		2,011,700			76,183
Oil & Natural Gas Corp. Ltd.		2,425,000			63,321
Vintage Petroleum, Inc.		874,100			46,616
Cameco Corp.		500,000			31,735
CNX Gas Corp.^1,2,3		575,000			12,075
					4,996,015

INDUSTRIALS — 12.68%
Deere & Co.		5,500,000			374,605
Union Pacific Corp.		4,200,000			338,142
Caterpillar Inc.		5,400,000			311,958
General Electric Co.		7,400,000			259,370
Deutsche Post AG		8,945,000			216,663
Mitsubishi Corp.		9,490,000			209,924
Boeing Co.		2,900,000			203,696
General Dynamics Corp.		1,772,900			202,199
Tyco International Ltd.		6,830,000			197,114
Parker Hannifin Corp.		2,800,000			184,688
Raytheon Co.		4,461,372			179,124
Emerson Electric Co.		2,200,000			164,340
Northrop Grumman Corp.		2,114,483			127,102
Mitsui & Co., Ltd.		8,000,000			102,720
American Standard Inc.		2,332,300			93,175
United Technologies Corp.		1,500,000			83,865
Illinois Tool Works Inc.		838,000			73,736
United Parcel Service, Inc., Class B		800,000			60,120
Avery Dennison Corp.		966,400			53,413
Waste Management, Inc.		1,700,000			51,595
Southwest Airlines Co.		1,500,000			24,645
Allied Waste Industries, Inc.²		2,500,000			21,850
Bombardier Inc., Class B		7,500,000			17,805
Lockheed Martin Corp.		248,200			15,793
					3,567,642

FINANCIALS — 12.36%
Washington Mutual, Inc.		8,580,000			373,230
Citigroup Inc.		7,130,000			346,019
Freddie Mac		3,225,000			210,754
Fannie Mae		4,317,800			210,752
Allied Irish Banks, PLC		9,600,000			204,938
Bank of Ireland		10,165,000			160,015
Irish Life & Permanent PLC		7,000,000			142,894
Berkshire Hathaway Inc., Class A²		1,600			141,792
AMP Ltd.		25,000,202			141,036
Equity Residential		3,000,000			117,360
Willis Group Holdings Ltd.		3,100,000			114,514
Cullen/Frost Bankers, Inc.		2,000,000			107,360
Mitsubishi Estate Co., Ltd.		3,750,000			77,867
Bank Hapoalim Ltd.		16,255,900			75,522
American International Group, Inc.		1,100,000			75,053
Genworth Financial, Inc., Class A		2,000,000			69,160
Bank of New York Co., Inc.		2,085,000			66,407
Marshall & Ilsley Corp.		1,490,000			64,130
Aon Corp.		1,767,400			63,538
CapitalSource Inc.		2,765,200			61,940
J.P. Morgan Chase & Co.		1,550,000			61,519
U.S. Bancorp		2,000,000			59,780
KBC Groupe SA		620,000			57,672
Marsh & McLennan Companies, Inc.		1,770,000			56,215
Commerce Bancorp, Inc.		1,593,800			54,843
Wells Fargo & Co.		870,000			54,662
St. George Bank Ltd.		2,450,279			53,315
Zions Bancorporation		575,000			43,447
Banco Popolare di Verona e Novara Scrl		2,000,000			40,425
State Street Corp.		700,000			38,808
Bank of America Corp.		756,800			34,926
Mellon Financial Corp.		902,700			30,917
City National Corp.		265,000			19,197
MI Developments Inc., Class A		500,000			17,190
National Bank of Canada		230,000			11,933
Fidelity National Financial, Inc.		313,600			11,537
Arthur J. Gallagher & Co.		240,000			7,411
					3,478,078


INFORMATION TECHNOLOGY — 10.42%
Microsoft Corp.		21,725,000		$	568,109
Texas Instruments Inc.		11,713,024			375,637
International Business Machines Corp.		3,050,000			250,710
Automatic Data Processing, Inc.		4,600,000			211,094
Intersil Corp., Class A		7,475,000			185,978
Linear Technology Corp.		5,000,000			180,350
Google Inc., Class A²		400,000			165,944
Motorola, Inc.		7,156,080			161,656
Hitachi, Ltd.		20,000,000			134,757
Agilent Technologies, Inc.²		3,061,761			101,926
Sun Microsystems, Inc.²		24,000,000			100,560
Sabre Holdings Corp., Class A		2,645,304			63,778
Maxim Integrated Products, Inc.		1,750,000			63,420
ASML Holding NV²		2,500,000			49,969
Ceridian Corp.²		1,900,000			47,215
Microchip Technology Inc.		1,297,222			41,706
Hewlett-Packard Co.		1,343,700			38,470
Electronic Data Systems Corp.		1,400,000			33,656
CDW Corp.		545,000			31,375
Advanced Micro Devices, Inc.²		1,000,000			30,600
Corning Inc.²		1,520,000			29,883
Lam Research Corp.²		800,000			28,544
Murata Manufacturing Co., Ltd.		300,000			19,222
Rohm Co., Ltd.		150,000			16,311
					2,930,870

MATERIALS — 9.00%
BHP Billiton Ltd.		17,995,030			300,326
Dow Chemical Co.		6,836,700			299,584
Alcoa Inc.		8,773,800			259,441
Rio Tinto PLC		5,066,709			231,188
Weyerhaeuser Co.		3,183,000			211,160
Freeport-McMoRan Copper & Gold Inc., Class B		3,500,000			188,300
E.I. du Pont de Nemours and Co.		3,500,000			148,750
Mosaic Co.²		9,357,400			136,899
Sealed Air Corp.²		1,878,500			105,515
Falconbridge Ltd.		3,500,000			103,862
International Paper Co.		3,000,000			100,830
Potash Corp. of Saskatchewan Inc.		1,068,400			85,707
Inco Ltd.		1,632,300			71,119
Temple-Inland Inc.		1,500,000			67,275
CRH PLC		1,918,931			56,398
Placer Dome Inc.		1,550,000			35,542
L’Air Liquide		184,000			35,363
Lyondell Chemical Co.		1,450,000			34,539
USX-U.S. Steel Group		650,000			31,246
Phelps Dodge Corp.		200,000			28,774
					2,531,818

HEALTH CARE — 8.62%
Roche Holding AG		2,965,000			444,761
Merck & Co., Inc.		8,800,000			279,928
Abbott Laboratories		6,710,000			264,575
Eli Lilly and Co.		4,070,000			230,321
Sanofi-Aventis		2,192,600			191,896
Schering-Plough Corp.		7,500,000			156,375
Bristol-Myers Squibb Co.		5,350,000			122,943
WellPoint, Inc.²		1,490,000			118,887
Medco Health Solutions, Inc.²		1,663,000			92,795
CIGNA Corp.		725,000			80,983
McKesson Corp.		1,300,000			67,067
Guidant Corp.		1,000,000			64,750
Aetna Inc.		560,000			52,814
Medtronic, Inc.		850,000			48,935
Omnicare, Inc.		800,000			45,776
Amgen Inc.²		500,000			39,430
AstraZeneca PLC (Sweden)		500,000			24,436
AstraZeneca PLC (ADR)		190,600			9,263
Forest Laboratories, Inc.²		700,000			28,476
Wyeth		500,000			23,035
Martek Biosciences Corp.²		850,000			20,919
Cardinal Health, Inc.		250,000			17,187
					2,425,552

CONSUMER DISCRETIONARY — 8.46%
Lowe’s Companies, Inc.		6,015,000			400,960
Target Corp.		5,790,000			318,276
Time Warner Inc.		15,925,000			277,732
Limited Brands, Inc.		10,815,980			241,737
Toyota Motor Corp.		3,000,000			155,606
Best Buy Co., Inc.		2,883,000			125,353
Sony Corp.		2,700,000			110,297
Federated Department Stores, Inc.		1,500,000			99,495
Walt Disney Co.		4,000,000			95,880
Magna International Inc., Class A		1,199,300			86,326
Clear Channel Communications, Inc.		2,500,000			78,625
Comcast Corp., Class A²		2,500,000			64,900
Comcast Corp., Class A, special nonvoting stock²		500,000			12,845
Bridgestone Corp.		3,475,000			72,304
Starbucks Corp.²		2,090,000			62,721
General Motors Corp.		2,100,000			40,782
News Corp. Inc.		2,400,000			37,320
Applebee’s International, Inc.		1,500,000			33,885
Accor SA		605,000			33,244
Expedia, Inc.²		978,000			23,433
Discovery Holding Co., Class A²		595,000			9,014
					2,380,735

CONSUMER STAPLES — 5.26%
Altria Group, Inc.		8,274,800			618,293
PepsiCo, Inc.		2,800,000			165,424
Walgreen Co.		2,585,700			114,443
Procter & Gamble Co.		1,800,000			104,184
ConAgra Foods, Inc.		5,100,000			103,428
Bunge Ltd.		1,302,000			73,706
General Mills, Inc.		1,404,200			69,255
C&C Group PLC		8,357,900			53,379
Coca-Cola Co.		1,300,000			52,403
Avon Products, Inc.		1,740,000			49,677
Anheuser-Busch Companies, Inc.		800,000			34,368
Diageo PLC		1,539,200			22,286
Diageo PLC (ADR)		15,200			886
SYSCO Corp.		600,000			18,630
					1,480,362

UTILITIES — 4.35%
Dominion Resources, Inc.		3,390,000			261,708
Questar Corp.		3,000,000			227,100
Exelon Corp.		2,965,000			157,560
Veolia Environnement		3,059,100			138,352
FirstEnergy Corp.		1,618,000			79,266
DTE Energy Co.		1,606,900			69,402
Public Service Enterprise Group Inc.		1,000,000			64,970
Sempra Energy		1,000,000			44,840
FPL Group, Inc.		1,050,000			43,638
Pinnacle West Capital Corp.		997,300			41,238
E.ON AG		300,000			31,007
Cinergy Corp.		650,000			27,599
Tokyo Gas Co., Ltd.		6,025,000			26,757
Entergy Corp.		150,000			10,298
					1,223,735

TELECOMMUNICATION SERVICES — 4.12%
AT&T Inc.		17,545,622			429,692
BellSouth Corp.		7,100,000			192,410
Verizon Communications Inc.		4,700,000			141,564
Qwest Communications International Inc.²		24,000,000			135,600
Sprint Nextel Corp., Series 1		5,400,000			126,144
KDDI Corp.		15,000			86,448
Telefónica, SA		3,068,000			46,119
					1,157,977

MISCELLANEOUS — 2.94%
Other common stocks in initial period of acquisition					825,633


Total common stocks (cost: $20,024,817,000)					26,998,417



Convertible securities — 0.41%		Shares or principal amount

INFORMATION TECHNOLOGY — 0.15%
Advanced Micro Devices, Inc. 4.75% convertible debentures 2022⁴	$	24,050,000			31,776
ASML Holding NV 5.50% convertible notes 2010		€6,000,000			9,534
					41,310

Convertible securities		Shares or principal amount			Market value (000	)

FINANCIALS — 0.13%
Genworth Financial, Inc. 6.00% convertible preferred 2007		1,010,000 units		$	38,441


MATERIALS — 0.13%
Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred¹		31,000			36,566


Total convertible securities (cost: $89,301,000)					116,317


Bonds & notes — 0.05%		Principal amount (000	)

INDUSTRIALS — 0.05%
Southwest Airlines Co. 5.25% 2014	$	15,000			14,571


Total bonds & notes (cost: $14,967,000)					14,571


Short-term securities — 3.27%

Variable Funding Capital Corp. 4.14%-4.365% due 1/11-2/28/2006¹		115,000			114,576
Concentrate Manufacturing Co. of Ireland 4.14%-4.27% due 1/9-2/6/2006¹		101,700			101,434
Park Avenue Receivables Co., LLC 4.25%-4.33% due 1/10-2/10/2006¹		61,376			61,261
Preferred Receivables Funding Corp. 4.30%-4.34% due 1/27-2/2/06¹		32,385			32,271
Federal Home Loan Bank 3.90%-4.25% due 1/6-3/8/2006		90,800			90,446
Pfizer Investment Capital PLC 4.105%-4.225% due 1/4-1/19/2006¹		82,800			82,682
International Lease Finance Corp. 4.125% due 1/11/2006		50,000			49,940
Tennessee Valley Authority 4.06%-4.125% due 1/19-1/26/2006		45,000			44,886
HSBC Finance Corp. 4.23% due 1/17/2006		40,500			40,419
Wells Fargo Bank, N.A. 4.40% due 3/6/2006		40,000			39,997
General Electric Capital Corp. 4.20% due 1/3/2006		34,000			33,984
Ranger Funding Co. LLC 4.32% due 1/24/2006¹		31,300			31,210
Atlantic Industries 4.28% due 2/8-2/10/2006¹		31,100			30,955
BellSouth Corp. 4.09% due 1/23/2006¹		25,000			24,934
CAFCO, LLC 4.36% due 2/23/2006¹		25,000			24,836
Clipper Receivables Co., LLC 4.23% due 1/20/2006¹		22,800			22,746
NetJets Inc.4.12% due 1/13/2006¹		21,600			21,569
Cloverleaf International Holdings, SA 4.22% due 1/30/2006¹		17,200			17,140
Federal Farm Credit Banks 4.03% due 1/25/2006		14,700			14,657
Hershey Co. 4.21% due 1/25/2006¹		13,700			13,660
Scripps (E.W.) Co. 4.17% due 1/11/2006¹		8,224			8,214
FCAR Owner Trust I 4.30% due 1/25/2006		6,600			6,580
Wal-Mart Stores Inc. 4.08% due 1/19/2006¹		5,400			5,389
Avon Capital Corp. 4.27% due 1/4/2006¹		4,800			4,798

Total short-term securities (cost: $918,573,000)				$	918,584

Total investment securities (cost: $21,047,658,000)					28,047,889
Other assets less liabilities					84,753

Net assets				$	28,132,642

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

¹Purchased 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 $887,482,000, which represented 3.15% of the net assets of the fund.

²Security did not produce income during the last 12 months.

³Valued under fair value procedures adopted by authority of the board of directors.

⁴Coupon rate may change periodically.

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

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

Assets:
Investment securities at market (cost: $21,047,658)			$	28,047,889
Cash				104
Receivables for:
Sales of investments	$	4,499
Sales of fund's shares		86,400
Dividends and interest		42,562		133,461
				28,181,454
Liabilities:
Payables for:
Purchases of investments		1,880
Repurchases of fund's shares		26,180
Investment advisory services		5,667
Services provided by affiliates		8,750
Deferred directors' compensation		1,577
Other fees and expenses		4,758		48,812
Net assets at December 31, 2005			$	28,132,642

Net assets consist of:
Capital paid in on shares of capital stock			$	21,278,567
Undistributed net investment income				85,236
Accumulated net realized loss				(226,915	)
Net unrealized appreciation				6,995,754
Net assets at December 31, 2005			$	28,132,642

Total authorized capital stock - 1,000,000 shares, $1.00 par value (794,857 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share (1	)

Class A	$	24,390,549	688,980	$	35.40
Class B		1,090,118	30,855		35.33
Class C		775,834	21,981		35.30
Class F		661,951	18,707		35.39
Class 529-A		231,217	6,535		35.38
Class 529-B		39,552	1,118		35.37
Class 529-C		71,113	2,011		35.37
Class 529-E		11,571	327		35.36
Class 529-F		4,862	137		35.36
Class R-1		10,688	303		35.31
Class R-2		154,959	4,391		35.29
Class R-3		219,614	6,213		35.35
Class R-4		205,239	5,805		35.36
Class R-5		265,375	7,494		35.41
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $37.56 and $37.54, respectively.

See Notes to Financial Statements

Statement of operations
for the year ended December 31, 2005		(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding tax of $14,109)	$	533,209
Interest		60,165		$	593,374

Fees and expenses:(1)
Investment advisory services		67,323
Distribution services		74,628
Transfer agent services		20,671
Administrative services		3,917
Reports to shareholders		779
Registration statement and prospectus		615
Postage, stationery and supplies		2,252
Directors' compensation		450
Auditing and legal		155
Custodian		1,868
State and local taxes		1
Other		275
Total fees and expenses before reimbursements/waivers		172,934
Less reimbursement/waiver of fees and expenses:
Investment advisory services		5,938
Administrative services		231
Total fees and expenses after reimbursements/waivers					166,765
Net investment income					426,609

Net realized gain and change in unrealized
appreciation on investments
and non-U.S. currency:
Net realized gain (loss) on:
Investments		592,418
Non-U.S. currency transactions		(1,912	)		590,506
Net change in unrealized appreciation on:
Investments		1,849,893
Non-U.S. currency translations		(132	)		1,849,761
Net realized gain and
change in unrealized appreciation
on investments and non-U.S. currency					2,440,267
Net increase in net assets resulting
from operations				$	2,866,876

(1) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements



Statements of changes in net assets		(dollars in thousands)


		Year ended December 31
		2005			2004
Operations:
Net investment income	$	426,609		$	438,828
Net realized gain on investments and
non-U.S. currency transactions		590,506			611,565
Net change in unrealized appreciation
on investments and non-U.S. currency translations		1,849,761			1,889,494
Net increase in net assets
resulting from operations		2,866,876			2,939,887

Dividends paid to shareholders from net
investment income and non-U.S. currency gains		(440,865	)		(404,177	)

Capital share transactions		1,489,209			497,675

Total increase in net assets		3,915,220			3,033,385

Net assets:
Beginning of year		24,217,422			21,184,037
End of year (including undistributed
net investment income: $85,236 and $100,738, respectively)	$	28,132,642		$	24,217,422


See Notes to Financial Statements

Notes to financial statements

1.	Organization and significant accounting policies

Organization -Fundamental Investors, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks long-term growth of capital and income primarily through investments in common stocks.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica^Ò 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) 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 charge upon redemption	Conversion feature
Class A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities are valued at the official closing price of, or the last reported sale price on, the exchange or market on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, 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. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. 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 on the valuation date. 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 change in unrealized appreciation or depreciation on investments. The realized gain or loss and change in 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 December 31, 2005, non-U.S. taxes provided on unrealized gains were $4,432,000.

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 December 31, 2005, the cost of investment securities for federal income tax purposes was $21,058,110,000.

During the year ended December 31, 2005, the fund reclassified $1,189,000 from undistributed net investment income to undistributed net realized gains; and reclassified $57,000 from undistributed net investment income to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of December 31, 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	$86,813
Short-term capital loss deferrals	(216,463)
Gross unrealized appreciation on investment securities	7,698,696
Gross unrealized depreciation on investment securities	(708,917)
Net unrealized appreciation on investment securities	6,989,779

Short-term capital loss deferrals above include a capital loss carryforward of $216,463,000 expiring in 2011. During the year ended December 31, 2005, the fund realized, on a tax basis, a net capital gain of $590,978,000, which was offset by the utilization of capital loss carryforwards. The remaining capital loss carryforward will be used to offset any capital gains realized by the fund in future years through the expiration date. The fund will not make distributions from capital gains while a capital loss carryforward remains.

	Year ended December 31
Share class		2005		2004
Class A	$	398,335	$	372,550
Class B		10,375		9,991
Class C		6,729		5,262
Class F		9,749		7,307
Class 529-A		3,286		2,122
Class 529-B		312		234
Class 529-C		553		363
Class 529-E		137		89
Class 529-F		68		30
Class R-1		90		51
Class R-2		1,327		831
Class R-3		2,603		1,486
Class R-4		2,838		1,232
Class R-5		4,463		2,629
Total	$	440,865	$	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 investment advisory services fees. At the beginning of the period, CRMC waived 5% of these fees and increased the waiver to 10% on April 1, 2005. During the year ended December 31, 2005, total investment advisory services fees waived by CRMC were $5,938,000. As a result, the fee shown on the accompanying financial statements of $67,323,000, which was equivalent to an annualized rate of 0.266%, was reduced to $61,385,000, or 0.243% 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 and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.25% to 1.00% as noted below. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. 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. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class 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. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.25% is not exceeded. As of December 31, 2005, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.25%	0.25%
Class 529-A	0.25	0.50
Class B and 529-B	1.00	1.00
Class C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Class 529-E and R-3	0.50	0.75
Class F, 529-F and R-4	0.25	0.50

Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share 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. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended December 31, 2005, the total administrative services fees paid by CRMC were $2,000 and $229,000 for Class 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 on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described on the previous page for the year ended December 31, 2005, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$53,469	$19,717	Not applicable	Not applicable	Not applicable
Class B	9,984	954	Not applicable	Not applicable	Not applicable
Class C	6,408	Included in administrative services	$912	$146	Not applicable
Class F	1,302		568	66	Not applicable
Class 529-A	326		201	26	$ 180
Class 529-B	334		38	14	34
Class 529-C	557		62	19	56
Class 529-E	45		10	1	3
Class 529-F	2		3	-*	9
Class R-1	85		12	6	Not applicable
Class R-2	916		183	556	Not applicable
Class R-3	841		245	130	Not applicable
Class R-4	359		215	7	Not applicable
Class R-5	Not applicable		211	4	Not applicable
Total	$74,628	$20,671	$2,660	$975	$282

* 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 $450,000, shown on the accompanying financial statements, includes $292,000 in current fees (either paid in cash or deferred) and a net increase of $158,000 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			Repurchases(1)					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Year ended December 31, 2005
Class A	$	3,005,984	90,443	$	375,768	11,039	$	(2,648,000	)	(80,442	)	$	733,752	21,040
Class B		109,936	3,324		9,966	289		(95,999	)	(2,920	)		23,903	693
Class C		218,924	6,608		6,422	186		(79,167	)	(2,409	)		146,179	4,385
Class F		244,749	7,340		8,448	247		(106,338	)	(3,245	)		146,859	4,342
Class 529-A		72,664	2,186		3,286	96		(9,106	)	(273	)		66,844	2,009
Class 529-B		7,547	228		312	9		(942	)	(28	)		6,917	209
Class 529-C		23,294	702		553	16		(3,668	)	(111	)		20,179	607
Class 529-E		3,417	103		137	4		(312	)	(10	)		3,242	97
Class 529-F		2,261	68		68	2		(214	)	(7	)		2,115	63
Class R-1		5,776	176		89	3		(2,202	)	(66	)		3,663	113
Class R-2		71,936	2,187		1,327	38		(24,346	)	(735	)		48,917	1,490
Class R-3		110,345	3,339		2,595	76		(35,242	)	(1,065	)		77,698	2,350
Class R-4		130,964	4,035		2,837	83		(26,250	)	(795	)		107,551	3,323
Class R-5		152,129	4,640		4,015	117		(54,754	)	(1,618	)		101,390	3,139
Total net increase
(decrease)	$	4,159,926	125,379	$	415,823	12,205	$	(3,086,540	)	(93,724	)	$	1,489,209	43,860

Year ended December 31, 2004
Class A	$	2,128,875	71,901	$	351,340	11,834	$	(2,413,347	)	(81,685	)	$	66,868	2,050
Class B		110,433	3,739		9,629	320		(86,500	)	(2,936	)		33,562	1,123
Class C		147,896	5,005		5,035	167		(57,179	)	(1,947	)		95,752	3,225
Class F		187,702	6,362		6,418	216		(88,450	)	(2,984	)		105,670	3,594
Class 529-A		46,582	1,571		2,122	71		(5,035	)	(170	)		43,669	1,472
Class 529-B		8,121	274		234	8		(586	)	(20	)		7,769	262
Class 529-C		15,730	531		363	12		(2,040	)	(68	)		14,053	475
Class 529-E		2,339	79		89	3		(190	)	(6	)		2,238	76
Class 529-F		1,251	42		31	1		(222	)	(8	)		1,060	35
Class R-1		4,263	146		51	1		(915	)	(31	)		3,399	116
Class R-2		52,680	1,793		831	28		(14,324	)	(486	)		39,187	1,335
Class R-3		68,710	2,325		1,481	49		(23,310	)	(791	)		46,881	1,583
Class R-4		44,674	1,514		1,233	42		(22,061	)	(723	)		23,846	833
Class R-5		27,580	928		2,298	78		(16,157	)	(550	)		13,721	456
Total net increase
(decrease)	$	2,846,836	96,210	$	381,155	12,830	$	(2,730,316	)	(92,405	)	$	497,675	16,635

6. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $7,625,604,000 and $5,699,726,000, respectively, during the year ended December 31, 2005.

Financial highlights(1)

				Income (loss) from investment operations(2)								Dividends and distributions
		Net asset value, beginning of period		Net investment income		Net gains (losses) on securities (both realized and unrealized	)		Total from investment operations			Dividends (from net investment income	)		Distributions (from capital gains	)		Total dividends and distributions			Net asset value, end of period	Total return(3	)		Net assets, end of period (in millions	)			Ratio of expenses to average net assets before reimbursements / waivers				Ratio of expenses to average net assets after reimbursements / waivers		(4	)	Ratio of net income to average net assets
Class A:
Year ended 12/31/2005	$	32.25	$	.58	$	3.16		$	3.74		$	(.59	)	$	-		$	(.59	)	$	35.40	11.68	%	$	24,390				.62	%			.60	%			1.75	%
Year ended 12/31/2004		28.85		.61		3.35			3.96			(.56	)		-			(.56	)		32.25	13.91			21,543				.63				.63				2.05
Year ended 12/31/2003		22.23		.50		6.52			7.02			(.40	)		-			(.40	)		28.85	31.96			19,212				.66				.66				2.08
Year ended 12/31/2002		27.45		.42		(5.14	)		(4.72	)		(.50	)		-			(.50	)		22.23	(17.34	)		15,201				.67				.67				1.68
Year ended 12/31/2001		31.16		.40		(3.34	)		(2.94	)		(.40	)		(.37	)		(.77	)		27.45	(9.55	)		19,331				.65				.65				1.41
Class B:
Year ended 12/31/2005		32.19		.33		3.15			3.48			(.34	)		-			(.34	)		35.33	10.84			1,090				1.39				1.36				.99
Year ended 12/31/2004		28.80		.38		3.35			3.73			(.34	)		-			(.34	)		32.19	13.03			971				1.40				1.39				1.29
Year ended 12/31/2003		22.19		.31		6.51			6.82			(.21	)		-			(.21	)		28.80	30.97			836				1.44				1.44				1.30
Year ended 12/31/2002		27.40		.23		(5.14	)		(4.91	)		(.30	)		-			(.30	)		22.19	(17.97	)		618				1.45				1.45				.91
Year ended 12/31/2001		31.12		.18		(3.34	)		(3.16	)		(.19	)		(.37	)		(.56	)		27.40	(10.24	)		653				1.42				1.42				.64
Class C:
Year ended 12/31/2005		32.17		.30		3.15			3.45			(.32	)		-			(.32	)		35.30	10.76			776				1.45				1.43				.91
Year ended 12/31/2004		28.78		.37		3.34			3.71			(.32	)		-			(.32	)		32.17	12.96			566				1.47				1.46				1.24
Year ended 12/31/2003		22.17		.30		6.51			6.81			(.20	)		-			(.20	)		28.78	30.93			413				1.50				1.50				1.23
Year ended 12/31/2002		27.39		.21		(5.14	)		(4.93	)		(.29	)		-			(.29	)		22.17	(18.06	)		266				1.50				1.50				.86
Period from 3/15/2001 to 12/31/2001		28.52		.11		(1.13	)		(1.02	)		(.11	)		-			(.11	)		27.39	(3.60	)		203				1.55		(5	)	1.55		(5	)	.49		(5	)
Class F:
Year ended 12/31/2005		32.24		.57		3.16			3.73			(.58	)		-			(.58	)		35.39	11.64			662				.66				.63				1.71
Year ended 12/31/2004		28.84		.59		3.35			3.94			(.54	)		-			(.54	)		32.24	13.84			463				.70				.70				2.02
Year ended 12/31/2003		22.22		.49		6.52			7.01			(.39	)		-			(.39	)		28.84	31.92			311				.71				.71				2.02
Year ended 12/31/2002		27.44		.40		(5.14	)		(4.74	)		(.48	)		-			(.48	)		22.22	(17.38	)		203				.72				.72				1.65
Period from 3/15/2001 to 12/31/2001		28.56		.28		(1.12	)		(.84	)		(.28	)		-			(.28	)		27.44	(2.97	)		153				.74		(5	)	.74		(5	)	1.31		(5	)
Class 529-A:
Year ended 12/31/2005		32.24		.55		3.15			3.70			(.56	)		-			(.56	)		35.38	11.60			231				.70				.67				1.66
Year ended 12/31/2004		28.84		.59		3.34			3.93			(.53	)		-			(.53	)		32.24	13.77			146				.73				.72				2.00
Year ended 12/31/2003		22.22		.50		6.52			7.02			(.40	)		-			(.40	)		28.84	31.99			88				.68				.68				2.03
Period from 2/15/2002 to 12/31/2002		26.71		.33		(4.34	)		(4.01	)		(.48	)		-			(.48	)		22.22	(15.16	)		39				.76		(5	)	.76		(5	)	1.64		(5	)
Class 529-B:
Year ended 12/31/2005		32.23		.27		3.16			3.43			(.29	)		-			(.29	)		35.37	10.66			40				1.54				1.52				.82
Year ended 12/31/2004		28.83		.33		3.35			3.68			(.28	)		-			(.28	)		32.23	12.83			29				1.59				1.59				1.13
Year ended 12/31/2003		22.22		.27		6.52			6.79			(.18	)		-			(.18	)		28.83	30.74			19				1.61				1.61				1.10
Period from 2/19/2002 to 12/31/2002		26.27		.16		(3.91	)		(3.75	)		(.30	)		-			(.30	)		22.22	(14.35	)		8				1.62		(5	)	1.62		(5	)	.77		(5	)
Class 529-C:
Year ended 12/31/2005		32.23		.27		3.16			3.43			(.29	)		-			(.29	)		35.37	10.68			71				1.53				1.51				.83
Year ended 12/31/2004		28.83		.34		3.34			3.68			(.28	)		-			(.28	)		32.23	12.84			45				1.58				1.58				1.14
Year ended 12/31/2003		22.22		.27		6.52			6.79			(.18	)		-			(.18	)		28.83	30.75			27				1.60				1.60				1.11
Period from 2/15/2002 to 12/31/2002		26.71		.16		(4.34	)		(4.18	)		(.31	)		-			(.31	)		22.22	(15.74	)		11				1.60		(5	)	1.60		(5	)	.79		(5	)
Class 529-E:
Year ended 12/31/2005		32.23		.44		3.15			3.59			(.46	)		-			(.46	)		35.36	11.24			12				1.02				.99				1.34
Year ended 12/31/2004		28.83		.49		3.35			3.84			(.44	)		-			(.44	)		32.23	13.40			7				1.06				1.05				1.66
Year ended 12/31/2003		22.21		.40		6.52			6.92			(.30	)		-			(.30	)		28.83	31.42			4				1.08				1.08				1.61
Period from 3/7/2002 to 12/31/2002		28.13		.26		(5.85	)		(5.59	)		(.33	)		-			(.33	)		22.21	(19.92	)		2				1.07		(5	)	1.07		(5	)	1.35		(5	)
Class 529-F:
Year ended 12/31/2005		32.22		.59		3.15			3.74			(.60	)		-			(.60	)		35.36	11.68			5				.58				.56				1.76
Year ended 12/31/2004		28.82		.58		3.33			3.91			(.51	)		-			(.51	)		32.22	13.73			2				.81				.80				1.95
Year ended 12/31/2003		22.22		.45		6.52			6.97			(.37	)		-			(.37	)		28.82	31.72			1				.82				.82				1.81
Period from 9/23/2002 to 12/31/2002		21.22		.12		1.08			1.20			(.20	)		-			(.20	)		22.22	5.65			-		(6	)	.22				.22				.51


Class R-1:
Year ended 12/31/2005	$	32.18	$	.29	$	3.16		$	3.45		$	(.32	)	$	-		$	(.32	)	$	35.31	10.74	%	$	11				1.50	%			1.46	%			.88	%
Year ended 12/31/2004		28.79		.37		3.33			3.70			(.31	)		-			(.31	)		32.18	12.92			6				1.53				1.49				1.26
Year ended 12/31/2003		22.19		.27		6.54			6.81			(.21	)		-			(.21	)		28.79	30.90			2				1.70				1.50				1.08
Period from 6/19/2002 to 12/31/2002		26.04		.13		(3.75	)		(3.62	)		(.23	)		-			(.23	)		22.19	(13.91	)		-		(6	)	4.20		(5	)	1.50		(5	)	1.11		(5	)
Class R-2:
Year ended 12/31/2005		32.17		.30		3.14			3.44			(.32	)		-			(.32	)		35.29	10.73			155				1.64				1.43				.91
Year ended 12/31/2004		28.77		.38		3.34			3.72			(.32	)		-			(.32	)		32.17	13.02			93				1.76				1.45				1.29
Year ended 12/31/2003		22.18		.30		6.51			6.81			(.22	)		-			(.22	)		28.77	30.93			45				1.94				1.46				1.19
Period from 5/21/2002 to 12/31/2002		27.39		.14		(5.13	)		(4.99	)		(.22	)		-			(.22	)		22.18	(18.22	)		7				1.64		(5	)	1.46		(5	)	1.05		(5	)
Class R-3:
Year ended 12/31/2005		32.21		.45		3.16			3.61			(.47	)		-			(.47	)		35.35	11.26			220				1.01				.98				1.35
Year ended 12/31/2004		28.82		.50		3.33			3.83			(.44	)		-			(.44	)		32.21	13.41			125				1.05				1.04				1.69
Year ended 12/31/2003		22.21		.40		6.52			6.92			(.31	)		-			(.31	)		28.82	31.45			66				1.10				1.08				1.60
Period from 6/4/2002 to 12/31/2002		26.66		.18		(4.38	)		(4.20	)		(.25	)		-			(.25	)		22.21	(15.75	)		11				1.13		(5	)	1.08		(5	)	1.41		(5	)
Class R-4:
Year ended 12/31/2005		32.22		.55		3.16			3.71			(.57	)		-			(.57	)		35.36	11.61			205				.69				.66				1.66
Year ended 12/31/2004		28.83		.60		3.33			3.93			(.54	)		-			(.54	)		32.22	13.85			80				.69				.69				2.04
Year ended 12/31/2003		22.21		.48		6.53			7.01			(.39	)		-			(.39	)		28.83	31.91			48				.71				.71				1.94
Period from 7/25/2002 to 12/31/2002		21.75		.22		.55			.77			(.31	)		-			(.31	)		22.21	3.51			7				.34				.32				.96
Class R-5:
Year ended 12/31/2005		32.26		.65		3.17			3.82			(.67	)		-			(.67	)		35.41	11.94			265				.39				.36				1.96
Year ended 12/31/2004		28.86		.68		3.35			4.03			(.63	)		-			(.63	)		32.26	14.19			141				.39				.39				2.31
Year ended 12/31/2003		22.23		.56		6.53			7.09			(.46	)		-			(.46	)		28.86	32.34			112				.39				.39				2.30
Period from 5/15/2002 to 12/31/2002		27.62		.28		(5.34	)		(5.06	)		(.33	)		-			(.33	)		22.23	(18.34	)		53				.40		(5	)	.40		(5	)	1.91		(5	)

	Year ended December 31
	2005		2004		2003		2002		2001
Portfolio turnover rate for all classes of shares	24	%	30	%	31	%	38	%	29	%

(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) Total returns exclude all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC.

During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes.

In addition, during the start-up period for the retirement plan share classes (except Class R-5),

CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Annualized.

(6) Amount less than $1 million.

See Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Fundamental Investors, Inc.:

We have audited the accompanying statement of assets and liabilities of Fundamental Investors, Inc. (the “Fund”), including the investment portfolio, as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2005, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fundamental Investors, Inc. as of December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Costa Mesa, California

February 14, 2006

Tax information unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The information below is provided for the fund’s fiscal year ended December 31, 2005.

Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates 100% of the dividends paid by the fund as qualified dividend income.

Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $381,709,000 of dividends received as qualified dividend income.

For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $2,029,000 as interest derived on direct U.S. government obligations.

Individual shareholders should refer to their Form 1099-DIV or other tax information, which was mailed in January 2006, to determine the calendar year amounts to be included on their 2005 tax returns. Shareholders should consult their tax advisers.