fi497.htm

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FUNDAMENTAL INVESTORS, INC.

Part B
Statement of Additional Information

July 30, 2008

This document is not a prospectus but should be read in conjunction with the
current prospectus of Fundamental Investors, Inc. (the "fund" or "FI") dated
July 30, 2008 or retirement plan prospectus of the fund dated March 1, 2008.
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

Certain privileges and/or services described below may not be available to all
shareholders (including shareholders who purchase shares at net asset value
through eligible retirement plans) depending on the shareholder's investment
dealer or retirement plan recordkeeper. Please see your financial adviser,
investment dealer, plan recordkeeper or employer for more information.

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 . . . . . . . . . . . . . . . . . . . . . . 9
Execution of portfolio transactions . . . . . . . . . . . . . . . . 27
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 30
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 33
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 38
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 45
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Shareholder account services and privileges . . . . . . . . . . . . 50
General information . . . . . . . . . . . . . . . . . . . . . . . . 52
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
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.

INVESTING OUTSIDE THE U.S.

.. 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. In determining the domicile of an issuer, the
fund's investment adviser will consider the domicile determination of a
leading provider of global indexes, such as Morgan Stanley Capital
International, and may also take into account such factors as where the
company is legally organized and/or maintains principal corporate offices
and/or conducts its principal operations.

* * * * * *

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. For
example, prices of these securities can be affected by financial contracts held
by the issuer or third parties (such as derivatives) relating to the security or
other assets or indices.

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

Fundamental Investors -- Page 2
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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 their values accrete over time to face value at maturity. The market prices
of debt securities fluctuate depending on such factors as interest rates, credit
quality and maturity. In general, market prices of debt securities decline when
interest rates rise and increase when interest rates fall. For example, prices
of these securities can be affected by financial contracts held by the issuer or
third parties (such as derivatives) relating to the security or other assets or
indices.

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.

Credit ratings for debt securities provided by rating agencies reflect an
evaluation of the safety of principal and interest payments, not market value
risk. The rating of an issuer is a rating agency's view of past and future
potential developments related to the issuer and may not necessarily reflect
actual outcomes. There can be a lag between the time of developments relating to
an issuer and the time a rating is assigned and updated.

Bond rating agencies may assign modifiers (such as +/-) to ratings categories to
signify the relative position of a credit within the rating category. Investment
policies that are based on ratings categories should be read to include any
security within that category, without giving consideration to the modifier. See
the Appendix for more information about credit ratings.

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 or vice versa. Some
types of convertible bonds, preferred stocks or other preferred securities
automatically convert into common stocks or other securities at a stated
conversion ratio and some may be subject to redemption at the option of the
issuer at a predetermined price. 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 values vary in response to many factors,
including the values of the securities into which they are convertible, 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.

The prices and yields of nonconvertible preferred securities or preferred stocks
generally move with changes in interest rates and the issuer's credit quality,
similar to the factors affecting debt securities. Nonconvertible preferred
securities will be treated as debt for fund investment limit purposes.

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, tax laws 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

Fundamental Investors -- Page 3
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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.

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 $3.5 billion at the time of purchase). The
investment adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in stocks of larger, more established companies. For example,
smaller companies often have limited product lines, limited operating histories,
limited markets or financial resources, may be dependent on one or a few key
persons for management and can be more susceptible to losses.

Fundamental Investors -- Page 4
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Also, their securities may be thinly traded (and therefore have to be sold at a
discount from current prices or sold in small lots over an extended period of
time), may be followed by fewer investment research analysts and may be subject
to wider price swings, thus creating a greater chance of loss than securities of
larger capitalization companies.

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

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

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
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 -- The fund may hold cash or invest in cash
equivalents. Cash equivalents 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

Fundamental Investors -- Page 5
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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 may only be sold 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 to the fund or cause it to incur additional administrative
costs.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of directors, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
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.

The fund's portfolio turnover rates for the fiscal years ended December 31, 2007
and 2006 were 27% and 21%, respectively. The portfolio turnover rate would equal
100% if each security in a fund's portfolio were replaced once per year. 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.

Fundamental Investors -- Page 6
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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;

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 (this shall not prevent the fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);

11. purchase or sell commodities or commodity contracts;

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

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

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

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

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

Fundamental Investors -- Page 7
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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.

4. The fund may not acquire securities of open-end investment companies or
unit investment trusts registered under the 1940 Act in reliance on Sections
12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.

Fundamental Investors -- Page 8
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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"INDEPENDENT" DIRECTORS/1/

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

Joseph C. Berenato, 62 Chairman and CEO, Ducommun 6 Ducommun Incorporated
Director (2003) Incorporated (aerospace
components manufacturer)
- ------------------------------------------------------------------------------------------------------------
Robert J. Denison, 67 Chair, First Security 5 None
Director (2005) Management (private
investment)
- ------------------------------------------------------------------------------------------------------------
Robert A. Fox, 71 Managing General Partner, Fox 7 Chemtura Corporation
Director (1998) Investments LP; corporate
director; retired President
and CEO, Foster Farms
(poultry producer)
- ------------------------------------------------------------------------------------------------------------
Leonade D. Jones, 60 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, 71 Stanford Investors Professor, 8 iStar Financial, Inc.;
Director (1998) Graduate School of Business, Plum Creek Timber Co.;
Stanford University Scholastic Corporation;
Varian, Inc.
- ------------------------------------------------------------------------------------------------------------
Gail L. Neale, 73 President, The Lovejoy 4 None
Director (1985) Consulting Group, Inc. (a
pro-bono consulting group
advising nonprofit
organizations)
- ------------------------------------------------------------------------------------------------------------
Henry E. Riggs, 73 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., Private investor; corporate 6 None
73 director; former Lecturer,
Director (1998) Department of Molecular
Biology, Princeton University
- ------------------------------------------------------------------------------------------------------------

Fundamental Investors -- Page 9
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"INTERESTED" DIRECTORS/5,6/

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

James F. Rothenberg, 62 Chairman of the Board, Capital 2 None
Research and Management
Company; Director, American
Vice Chairman of the Board Funds Distributors, Inc.*;
(1998) Director, The Capital Group
Companies, Inc.*
- -------------------------------------------------------------------------------------------------------------
Dina N. Perry, 62 Senior Vice President - Capital 1 None
World Investors, Capital
Research and Management Company;
President (1994) Director, Capital Research and
Management Company
- -------------------------------------------------------------------------------------------------------------

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

Paul G. Haaga, Jr., Vice Chairman of the Board, Capital Research and
59 Management Company; Senior Vice President - Fixed
Income, Capital Research and Management Company;
Executive Vice Director, The Capital Group Companies, Inc.*
President (1994)
- -------------------------------------------------------------------------------
Michael T. Kerr, 48 Senior Vice President - Capital World Investors,
Capital Research and Management Company; Director,
Senior Vice President Capital Research and Management Company
(1995)
- -------------------------------------------------------------------------------
Martin Romo,/6/ 40 Senior Vice President - Capital World Investors,
Capital Research Company*; Director, Capital Research
Senior Vice President Company*; Director, The Capital Group Companies,
(1999) Inc.*
- -------------------------------------------------------------------------------
Mark L. Casey,/6 /37 Vice President - Capital World Investors, Capital
Research Company
Vice President (2008)
- -------------------------------------------------------------------------------
Ronald B. Morrow, 62 Senior Vice President - Capital World Investors,
Capital Research and Management Company
Vice President (2004)
- -------------------------------------------------------------------------------
Donald H. Rolfe, 36 Associate Counsel - Fund Business Management Group,
Capital Research and Management Company
Vice President (2007)
- -------------------------------------------------------------------------------
Patrick F. Quan, 50 Vice President - Fund Business Management Group,
Capital Research and Management Company
Secretary (1989-1998;
2000)
- -------------------------------------------------------------------------------
Jeffrey P. Regal, 36 Vice President - Fund Business Management Group,
Capital Research and Management Company
Treasurer (2006)
- -------------------------------------------------------------------------------
David A. Pritchett, Vice President - Fund Business Management Group,
41 Capital Research and Management Company

Assistant Treasurer
(1999)
- -------------------------------------------------------------------------------

Other officers/6/

Fundamental Investors -- Page 10
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* Company affiliated with Capital Research and Management Company.

1 The term "independent" director refers to a director who is not an "interested
person" of the fund within the meaning of the 1940 Act.

2 Directors and officers of the fund serve until their resignation, removal or
retirement.
3 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 15
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R)/ /Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available to certain nonprofit organizations.
4 This includes all directorships (other than those in the American Funds or
other funds managed by Capital Research and Management Company) that are held
by each director as a director of a public company or a registered investment
company.
5 "Interested persons" of the fund within the meaning of the 1940 Act, on the
basis of their affiliation with the fund's investment adviser, Capital Research
and Management Company, or affiliated entities (including the fund's principal
underwriter).
6 All of the officers listed, except Mark L. Casey 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: SECRETARY.

Fundamental Investors -- Page 11
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FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2007

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED/2/ BY DIRECTOR
- -------------------------------------------------------------------------------

"INDEPENDENT" DIRECTORS
- -------------------------------------------------------------------------------
Joseph C. Berenato $10,001 - $50,000 Over $100,000
- -------------------------------------------------------------------------------
Robert J. Denison $10,001 - $50,000 $50,001 - $100,000
- -------------------------------------------------------------------------------
Robert A. Fox Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
Leonade D. Jones Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
John G. McDonald Over $100,000 Over $100,000
- -------------------------------------------------------------------------------
Gail L. Neale $10,001 - $50,000 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.

2 An independent director may have exposure to the fund through an allocation of
some or all of his or her nonqualified deferred compensation account.

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 boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent director an annual
fee, which ranges from $16,500 to $35,000, based primarily on the total number
of board clusters on which that independent director serves.

In addition, the fund generally pays independent directors attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.

Independent directors also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent director each pay an equal portion of these attendance fees.

Fundamental Investors -- Page 12
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No pension or retirement benefits are accrued as part of fund expenses.
Independent 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 independent directors.

DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED DECEMBER 31, 2007

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

Joseph C. Berenato/3/ $50,584 $303,375
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. Denison/3/ 45,375 212,771
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A. Fox/3/ 45,844 278,041
- ------------------------------------------------------------------------------------------------------------------------------------
Leonade D. Jones/3/ 45,917 342,375
- ------------------------------------------------------------------------------------------------------------------------------------
John G. McDonald/3/ 39,687 368,500
- ------------------------------------------------------------------------------------------------------------------------------------
Gail L. Neale 51,646 205,230
- ------------------------------------------------------------------------------------------------------------------------------------
Henry E. Riggs/3/ 70,750 248,771
- ------------------------------------------------------------------------------------------------------------------------------------
Patricia K. Woolf/3/ 48,334 306,125
- ------------------------------------------------------------------------------------------------------------------------------------

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, 2007 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
2 Funds managed by Capital Research and Management Company, including the
American Funds; American Funds Insurance Series,(R) which is composed of 15
funds and serves as the underlying investment vehicle for certain variable
insurance contracts; American Funds Target Date Retirement Series,(R)/ /Inc.,
which is composed of nine funds and is available through tax-deferred
retirement plans and IRAs; and Endowments, which is composed of two portfolios
and is available 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 2007
fiscal year for participating directors is as follows: Joseph C. Berenato
($93,340), Robert J. Denison ($175,855), Robert A. Fox ($456,883), Leonade D.
Jones ($95,717), John G. McDonald ($383,314), Henry E. Riggs ($554,257) and
Patricia K. Woolf ($311,820). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the directors.

As of June 1, 2008, 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

Fundamental Investors -- Page 13
<PAGE>

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.

Independent board members 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. 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 529 college savings
plan 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 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 independent
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 2007 fiscal year.

The fund has a 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

Fundamental Investors -- Page 14
<PAGE>

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.
One contracts committee meeting was held during the 2007 fiscal year.

The fund has a nominating and governance 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 independent director candidates to the
full board of directors. While the committee normally is able to identify from
its own and other resources an ample number of qualified candidates, it will
consider shareholder suggestions of persons to be considered as nominees to fill
future vacancies on the board. Such suggestions must be sent in writing to the
nominating and governance 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 2007 fiscal year.

The fund has a proxy committee comprised of Robert A. Fox, Leonade D. Jones,
John G. McDonald, Gail L. Neale and Patricia K. Woolf, none of whom is an
"interested person" of the fund within the meaning of the 1940 Act. The
committee's functions include establishing and reviewing procedures and policies
for voting proxies of companies held in the fund's portfolio, making
determinations with regard to certain contested proxy voting issues, and
discussing related current issues. Four proxy committee meetings were held
during the 2007 fiscal year.

PROXY VOTING PROCEDURES AND PRINCIPLES -- The fund and its investment adviser
have adopted Proxy Voting Procedures and Principles (the "Principles") with
respect to voting proxies of securities held by the fund, other American Funds,
Endowments and American Funds Insurance Series. The complete text of these
principles is available on the American Funds website at americanfunds.com.
Certain American Funds, including the fund, have established separate proxy
voting 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 appropriate equity investment division 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. Proxies for companies outside the U.S. also are
voted, provided there is sufficient time and information available. After a
proxy statement is received, the investment adviser prepares a summary of the
proposals contained in the proxy statement. A discussion of any potential
conflicts of interest also is included in the summary. For proxies of securities
managed by a particular investment division of the investment adviser, the
initial voting recommendation is made by one or more of the division's
investment analysts familiar with the company and industry. A second
recommendation is made by a proxy coordinator (an investment analyst with
experience in corporate governance and proxy voting matters) within the
appropriate investment division, based on knowledge of these Principles and
familiarity with proxy-related

Fundamental Investors -- Page 15
<PAGE>

issues. The proxy summary and voting recommendations are made available to the
appropriate proxy voting committee for a 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 voting committee members
are alerted to the potential conflict. The proxy voting 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 Principles, 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 Principles 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 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 Principles is available upon request, free
of charge, by calling American Funds Service Company or visiting the American
Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director generally is supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions also may be
supported.

GOVERNANCE PROVISIONS -- Typically, proposals to declassify a board (elect
all directors annually) are supported based on the belief that this
increases the directors' sense of accountability to shareholders. Proposals
for cumulative voting generally are supported in order to promote
management and board accountability and an opportunity for leadership
change. Proposals designed to make director elections more meaningful,
either by requiring a majority vote or by requiring any director receiving
more withhold votes to tender his or her resignation, generally are
supported.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill generally
are supported. (There may be certain circumstances, however, when a proxy
voting committee of a fund or an investment division of the investment
adviser believes that a company needs to maintain anti-takeover
protection.) 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 typically are not 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 share-

Fundamental Investors -- Page 16
<PAGE>

holder 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 generally are 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 June 1, 2008. 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 24.70%
Maryland Heights, MO Class B 14.38
- ----------------------------------------------------------------------------
First Clearing LLC Class B 5.20
Glen Allen, VA Class C 5.41
- ----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 17.45
New York, NY Class F-1 23.15
- ----------------------------------------------------------------------------
Merrill Lynch Class C 11.15
Jacksonville, FL
- ----------------------------------------------------------------------------
A G Edwards & Sons Inc. Class C 5.46
Saint Louis, MO
- ----------------------------------------------------------------------------
Charles Schwab & Co., Inc. Class F-1 6.86
San Francisco, CA Class R-4 7.86
- ----------------------------------------------------------------------------
Hartford Life Insurance Co. Class R-1 18.80
Harford, CT
- ----------------------------------------------------------------------------
Transamerica Life Insurance Class R-3 8.34
Los Angeles, CA
- ----------------------------------------------------------------------------
Fidelity Investments Institutional Operations Co. Class R-4 9.49
Covington, KY Class R-5 12.17
- ----------------------------------------------------------------------------
Principal Financial Group Class R-4 7.87
Des Moines, IA
- ----------------------------------------------------------------------------
Capital Group Companies Class R-5 6.62
Los Angeles, CA
- ----------------------------------------------------------------------------
Reed Elsevier Class R-5 6.56
Westwood, MA
- ----------------------------------------------------------------------------
The Gates Corporation Class R-5 5.80
Chicago, IL
- ----------------------------------------------------------------------------

Fundamental Investors -- Page 17
<PAGE>

UNLESS OTHERWISE NOTED, REFERENCES IN THIS STATEMENT OF ADDITIONAL INFORMATION
TO CLASS F SHARES, CLASS R SHARES OR CLASS 529 SHARES REFER TO BOTH F SHARE
CLASSES, ALL R SHARE CLASSES OR ALL 529 SHARE CLASSES, RESPECTIVELY.

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, 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). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine,
CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc.,
a holding company for several investment management subsidiaries. Capital
Research and Management Company manages equity assets through two investment
divisions, Capital World Investors and Capital Research Global Investors, and
manages fixed-income assets through its Fixed Income division. Capital World
Investors and Capital Research Global Investors make investment decisions on an
independent basis.

The investment adviser has adopted policies and procedures that address issues
that may arise as a result of an investment professional's management of the
fund and other funds and accounts. Potential issues could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, investment professional compensation and
voting relating to portfolio securities. The investment adviser believes that
its policies and procedures are reasonably designed to address these issues.

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 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 plans will vary depending on
the individual's portfolio results, contributions to the organization and other
factors.

To encourage a long-term focus, bonuses based on investment results are
calculated by comparing pretax total investment returns to relevant benchmarks
over the most recent year, a four-year rolling average and an eight-year rolling
average with much greater weight placed on the four-year and eight-year rolling
averages. For portfolio counselors, benchmarks may include measures of the
marketplaces in which the 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 makes periodic subjective
assessments of analysts' contributions to the investment process and this is an
element of their overall compensation. The investment results of the fund's
portfolio counselors may be measured against one or more of the following
benchmarks, depending on his or her investment focus: S&P 500, MSCI World Index
and Lipper Growth & 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

Fundamental Investors -- Page 18
<PAGE>

manage portions of other mutual funds or accounts advised by Capital Research
and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF DECEMBER 31, 2007:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) IN WHICH
IN WHICH IN WHICH PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR IS A MANAGER
OF FUND IS A MANAGER IS A MANAGER (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 $209.5 1 $1.09 None
$1,000,000
- ----------------------------------------------------------------------------------------
Michael T. Kerr Over 2 $301.7 None None
$1,000,000
- ----------------------------------------------------------------------------------------
Ronald B. $100,001 - 2 $301.7 None None
Morrow $500,000
- ----------------------------------------------------------------------------------------
James E. Drasdo Over None None None
$1,000,000
- ----------------------------------------------------------------------------------------
Brady L. $100,001 - 2 $ 86.8 None None
Enright $500,000
- ----------------------------------------------------------------------------------------

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. No fund has an advisory fee that is based on the
performance of the fund.
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 funds or accounts and are
not indicative of the total assets managed by the individual, which is a
substantially lower amount. No fund or account has an advisory fee that is
based on the performance of the fund or account.
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, 2008, 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

Fundamental Investors -- Page 19
<PAGE>

performance of its obligations to the fund not involving willful misconduct, bad
faith, gross negligence or reckless disregard of its obligations under the
Agreement. The Agreement also provides that either party has the right to
terminate it, without penalty, upon 60 days' written notice to the other party,
and that the Agreement automatically terminates in the event of its assignment
(as defined in the 1940 Act).

In 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 independent 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
management 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 to $34 billion, plus 0.237% on net assets over
$34 billion to $44 billion, plus 0.234% on net assets over $44 billion to $55
billion, plus 0.232% on net assets over $55 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, 2007, 2006 and 2005, the investment
adviser was entitled to receive from the fund management fees of $115,799,000,
$87,469,000 and

Fundamental Investors -- Page 20
<PAGE>

$67,323,000, respectively. After giving effect to the management fee waivers
described below, the fund paid the investment adviser management fees of
$104,219,000 (a reduction of $11,580,000), $78,722,000 (a reduction of
$8,747,000) and $61,385,000 (a reduction of $5,938,000) for the fiscal years
ended December 31, 2007, 2006 and 2005, respectively.

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 this waiver is expected to continue at this level until further
review. As a result of this waiver, management fees are 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, 2008, 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 independent 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 Class R and 529 shares. The investment adviser may contract
with third parties, including American Funds Service Company/(R)/, the fund's
Transfer Agent, to provide some of 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, oversees and assists with 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, 2007, the total fees paid by the
investment adviser were $116,000.

The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 shares) and 529 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 does 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. The administrative services fee includes compensation for
transfer agent and shareholder services provided to the fund's Class C, F, R and
529 shares. In addition to making administrative service fee payments to
unaffiliated third parties, the investment adviser also makes payments from the
administrative services fee to American Funds Service Company according to a fee
schedule, based principally on the number of accounts serviced, contained in a
Shareholder Services Agreement between the fund and American Funds Service
Company.

Fundamental Investors -- Page 21
<PAGE>

During the 2007 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

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

CLASS C $2,386,000
- --------------------------------------------------------------------------------
CLASS F-1 2,205,000
- --------------------------------------------------------------------------------
CLASS 529-A 530,000
- --------------------------------------------------------------------------------
CLASS 529-B 77,000
- --------------------------------------------------------------------------------
CLASS 529-C 174,000
- --------------------------------------------------------------------------------
CLASS 529-E 25,000
- --------------------------------------------------------------------------------
CLASS 529-F-1 16,000
- --------------------------------------------------------------------------------
CLASS R-1 67,000
- --------------------------------------------------------------------------------
CLASS R-2 1,728,000
- --------------------------------------------------------------------------------
CLASS R-3 1,712,000
- --------------------------------------------------------------------------------
CLASS R-4 959,000
- --------------------------------------------------------------------------------
CLASS R-5 717,000
- --------------------------------------------------------------------------------

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds
Distributors/(R)/, 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; 6455 Irvine Center Drive, Irvine, CA
92618; 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 relating to sales of the fund's
shares, as follows:

. For Class A and 529-A shares, the Principal Underwriter receives
commission revenue consisting of the balance 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 its
rights to the 0.75% distribution-related portion of the 12b-1 fees
paid by the fund, as well as any contingent deferred sales charges, to
a third party. The Principal Underwriter compensates investment
dealers for sales of Class B and 529-B shares out of the proceeds of
this sale and keeps any amounts remaining after this compensation is
paid.

. For Class C and 529-C shares, the Principal Underwriter receives any
contingent deferred sales charges that apply during the first year
after purchase.

In addition, the fund reimburses the Principal Underwriter for advancing
immediate service fees to qualified dealers and advisers upon the sale of Class
B, 529-B, C and 529-C shares. The fund also reimburses the Principal Underwriter
for service fees (and, in the case of Class 529-E shares, commissions) paid on a
quarterly basis to qualified dealers and advisers in connection with investments
in Class F-1, 529-F-1, 529-E, R-1, R-2, R-3 and R-4 shares.

Fundamental Investors -- Page 22
<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 2007 $23,001,000 $100,028,000
2006 20,462,000 89,708,000
2005 10,046,000 44,270,000
- -----------------------------------------------------------------------------------------------------
CLASS B 2007 1,020,000 6,693,000
2006 788,000 5,960,000
2005 408,000 2,993,000
- -----------------------------------------------------------------------------------------------------
CLASS C 2007 -- 6,137,000
2006 -- 4,452,000
2005 -- 1,833,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-A 2007 947,000 4,327,000
2006 696,000 3,180,000
2005 382,000 1,771,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-B 2007 58,000 407,000
2006 46,000 328,000
2005 37,000 313,000
- -----------------------------------------------------------------------------------------------------
CLASS 529-C 2007 -- 543,000
2006 -- 363,000
2005 -- 199,000
- -----------------------------------------------------------------------------------------------------

Plans of distribution -- The fund has adopted plans of distribution (the
"Plans") pursuant to rule 12b-1 under the 1940 Act. The Plans permit the fund to
expend 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.

Fundamental Investors -- Page 23
<PAGE>

Each Plan is specific to a particular share class of the fund. As the fund has
not adopted a Plan for Class F-2 or Class R-5, no 12b-1 fees are paid from Class
F-2 or Class R-5 share assets and the following disclosure is not applicable to
these share classes.

Payments under the Plans may be made for service-related and/or
distribution-related expenses. Service-related expenses include paying service
fees to qualified dealers. Distribution-related expenses include commissions
paid to qualified dealers. The amounts actually paid under the Plans for the
past fiscal year, expressed as a percentage of the fund's average daily net
assets attributable to the applicable share class, are disclosed in the
prospectus under "Fees and expenses of the fund." Further information regarding
the amounts available under each Plan is in the "Plans of Distribution" section
of the prospectus.

Following is a brief description of the Plans:

CLASS A AND 529-A -- For Class A and 529-A shares, up to 0.25% of the
fund's average daily net assets attributable to such shares is reimbursed
to the Principal Underwriter for paying service-related expenses, and the
balance available under the applicable Plan may be paid to the Principal
Underwriter for distribution-related expenses. The fund may annually expend
up to 0.25% for Class A shares and up to 0.50% for Class 529-A shares under
the applicable Plan.

Distribution-related expenses for Class A and 529-A shares include dealer
commissions and wholesaler compensation paid on sales of shares of $1
million or more purchased without a sales charge. Commissions on these "no
load" purchases (which are described in further detail under the "Sales
Charges" section of this statement of additional information) in excess of
the Class A and 529-A Plan limitations and not reimbursed to the Principal
Underwriter during the most recent fiscal quarter are recoverable for five
quarters, provided that the reimbursement of such commissions does not
cause the fund to exceed the annual expense limit. After five quarters,
these commissions are not recoverable.

CLASS B AND 529-B -- The Plans for Class B and 529-B shares provide for
payments to the Principal Underwriter of up to 0.25% of the fund's average
daily net assets attributable to such shares for paying service-related
expenses and 0.75% for distribution-related expenses, which include the
financing of commissions paid to qualified dealers.

OTHER SHARE CLASSES (CLASS C, 529-C, F-1, 529-F-1, 529-E, R-1, R-2, R-3 AND
R-4) -- The Plans for each of the other share classes that have adopted
Plans provide for payments to the Principal Underwriter for paying
service-related and distribution-related expenses of up to the following
amounts of the fund's average daily net assets attributable to such shares:

Fundamental Investors -- Page 24
<PAGE>

TOTAL
SERVICE DISTRIBUTION ALLOWABLE
RELATED RELATED UNDER
SHARE CLASS PAYMENTS/1/ PAYMENTS/1/ THE PLANS/2/
- ----------------------------------------------------------------------------------

Class C 0.25% 0.75% 1.00%
- ----------------------------------------------------------------------------------
Class 529-C 0.25 0.75 1.00
- ----------------------------------------------------------------------------------
Class F-1 0.25 -- 0.50
- ----------------------------------------------------------------------------------
Class 529-F-1 0.25 -- 0.50
- ----------------------------------------------------------------------------------
Class 529-E 0.25 0.25 0.75
- ----------------------------------------------------------------------------------
Class R-1 0.25 0.75 1.00
- ----------------------------------------------------------------------------------
Class R-2 0.25 0.50 1.00
- ----------------------------------------------------------------------------------
Class R-3 0.25 0.25 0.75
- ----------------------------------------------------------------------------------
Class R-4 0.25 -- 0.50
- ----------------------------------------------------------------------------------

1 Amounts in these columns represent the amounts approved by the board of
directors under the applicable Plan.
2 The fund may annually expend the amounts set forth in this column under
the current Plans with the approval of the board of directors.

During the 2007 fiscal year, 12b-1 expenses accrued and paid, and if applicable,
unpaid, were:

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

CLASS A $86,166,000 $7,263,000
- ------------------------------------------------------------------------------
CLASS B 15,767,000 1,434,000
- ------------------------------------------------------------------------------
CLASS C 17,479,000 1,752,000
- ------------------------------------------------------------------------------
CLASS F-1 6,255,000 1,209,000
- ------------------------------------------------------------------------------
CLASS 529-A 1,018,000 96,000
- ------------------------------------------------------------------------------
CLASS 529-B 716,000 70,000
- ------------------------------------------------------------------------------
CLASS 529-C 1,636,000 171,000
- ------------------------------------------------------------------------------
CLASS 529-E 126,000 13,000
- ------------------------------------------------------------------------------
CLASS 529-F-1 -- --
- ------------------------------------------------------------------------------
CLASS R-1 385,000 53,000
- ------------------------------------------------------------------------------
CLASS R-2 2,942,000 297,000
- ------------------------------------------------------------------------------
CLASS R-3 4,268,000 486,000
- ------------------------------------------------------------------------------
CLASS R-4 1,674,000 188,000
- ------------------------------------------------------------------------------

Fundamental Investors -- Page 25
<PAGE>

Approval of the Plans -- 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 independent
directors of the fund who have no direct or indirect financial interest in the
operation of the Plans or the Principal Underwriting Agreement. In addition, the
selection and nomination of independent directors of the fund are committed to
the discretion of the independent directors during the existence of the Plans.

Potential benefits of the Plans to the fund include quality shareholder
services, savings to the fund in transfer agency costs, and benefits to the
investment process from growth or stability of assets. The Plans may not be
amended to materially increase the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly by the board of
directors and the Plans must be renewed annually by the board of directors.

OTHER COMPENSATION TO DEALERS -- As of July 2008, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

AIG Advisors Group
Advantage Capital Corporation
AIG Financial Advisors, Inc.
American General Securities Incorporated
FSC Securities Corporation
Royal Alliance Associates, Inc.
AXA Advisors, LLC

Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones
Genworth Financial Securities Corporation
Hefren-Tillotson, Inc.
HTK / Janney Montgomery Group
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Advisors Network Inc.
Bancnorth Investment Group, Inc.
Financial Network Investment Corporation
Guaranty Brokerage Services, Inc.
ING Financial Partners, Inc.
Multi-Financial Securities Corporation
Primevest Financial Services, Inc.
Intersecurities / Transamerica
InterSecurities, Inc.
Transamerica Financial Advisors, Inc.
JJB Hilliard/PNC Bank
J.J.B. Hilliard, W.L. Lyons, Inc.
PNC Bank, National Association
PNC Investments LLC
Lincoln Financial Advisors Corporation

Fundamental Investors -- Page 26
<PAGE>

LPL Group
Associated Securities Corp.
LPL Financial Corporation
Mutual Service Corporation
Uvest Investment Services
Waterstone Financial Group, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Metlife Enterprises
Metlife Securities Inc.
New England Securities
Walnut Street Securities, Inc.
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley & Co., Incorporated
National Planning Holdings Inc.
Invest Financial Corporation
Investment Centers of America, Inc.
National Planning Corporation
SII Investments, Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC
Park Avenue Securities LLC
Princor Financial Services Corporation
Raymond James Group
Raymond James & Associates, Inc.
Raymond James Financial Services Inc.
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Incorporated
Securian / C.R.I.
CRI Securities, LLC
Securian Financial Services, Inc.
Smith Barney
Legg Mason
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
Wachovia Group
A. G. Edwards, a Division of Wachovia Securities, LLC
First Clearing LLC
Wachovia Securities Financial Network, LLC
Wachovia Securities Investment Services Group
Wachovia Securities Latin American Channel
Wachovia Securities Private Client Group
Wells Fargo Investments, LLC

EXECUTION OF PORTFOLIO TRANSACTIONS

The investment adviser places orders with broker-dealers for the fund's
portfolio transactions. Purchases and sales of equity securities on a securities
exchange or an over-the-counter market are effected through broker-dealers who
receive commissions for their services. Generally, commissions relating to
securities traded on foreign exchanges will be higher than commissions

Fundamental Investors -- Page 27
<PAGE>

relating to securities traded on U.S. exchanges and may not be subject to
negotiation. Equity securities may also be purchased from underwriters at prices
that include underwriting fees. Purchases and sales of fixed-income securities
are generally made with an issuer or a primary market-maker acting as principal
with no stated brokerage commission. The price paid to an underwriter for
fixed-income securities includes underwriting fees. Prices for fixed-income
securities in secondary trades usually include undisclosed compensation to the
market-maker reflecting the spread between the bid and ask prices for the
securities.

In selecting broker-dealers, the investment adviser strives to obtain "best
execution" (the most favorable total price reasonably attainable under the
circumstances) for the fund's portfolio transactions, taking into account a
variety of factors. These factors include the size and type of transaction, the
nature and character of the markets for the security to be purchased or sold,
the cost, quality and reliability of the executions and the broker-dealer's
ability to offer liquidity and anonymity. The investment adviser considers these
factors, which involve qualitative judgments, when selecting broker-dealers and
execution venues for fund portfolio transactions. The investment adviser views
best execution as a process that should be evaluated over time as part of an
overall relationship with particular broker-dealer firms rather than on a
trade-by-trade basis. The fund does not consider the investment adviser as
having an obligation to obtain the lowest commission rate available for a
portfolio transaction to the exclusion of price, service and qualitative
considerations.

The investment adviser may execute portfolio transactions with broker-dealers
who provide certain brokerage and/or investment research services to it, but
only when in the investment adviser's judgment the broker-dealer is capable of
providing best execution for that transaction. The receipt of these services
permits the investment adviser to supplement its own research and analysis and
makes available the views of, and information from, individuals and the research
staffs of other firms. Such views and information may be provided in the form of
written reports, telephone contacts and meetings with securities analysts. These
services may include, among other things, reports and other communications with
respect to individual companies, industries, countries and regions, economic,
political and legal developments, as well as scheduling meetings with corporate
executives and seminars and conferences related to relevant subject matters. The
investment adviser considers these services to be supplemental to its own
internal research efforts and therefore the receipt of investment research from
broker-dealers does not tend to reduce the expenses involved in the investment
adviser's research efforts. If broker-dealers were to discontinue providing such
services it is unlikely the investment adviser would attempt to replicate them
on its own, in part because they would then no longer provide an independent,
supplemental viewpoint. Nonetheless, if it were to attempt to do so, the
investment adviser would incur substantial additional costs. Research services
that the investment adviser receives from broker-dealers may be used by the
investment adviser in servicing the fund and other funds and accounts that it
advises; however, not all such services will necessarily benefit the fund.

The investment adviser may pay commissions in excess of what other
broker-dealers might have charged - including on an execution-only basis - for
certain portfolio transactions in recognition of brokerage and/or investment
research services provided by a broker-dealer. In this regard, the investment
adviser has adopted a brokerage allocation procedure consistent with the
requirements of Section 28(e) of the U.S. Securities Exchange Act of 1934.
Section 28(e) permits an investment adviser to cause an account to pay a higher
commission to a broker-dealer that provides certain brokerage and/or investment
research services to the investment adviser, if the investment adviser makes a
good faith determination that such commissions are reasonable in

Fundamental Investors -- Page 28
<PAGE>

relation to the value of the services provided by such broker-dealer to the
investment adviser in terms of that particular transaction or the investment
adviser's overall responsibility to the fund and other accounts that it advises.
Certain brokerage and/or investment research services may not necessarily
benefit all accounts paying commissions to each such broker-dealer; therefore,
the investment adviser assesses the reasonableness of commissions in light of
the total brokerage and investment research services provided by each particular
broker-dealer.

In accordance with its internal brokerage allocation procedure, each equity
investment division of the investment adviser periodically assesses the
brokerage and investment research services provided by each broker-dealer from
which it receives such services. Using its judgment, each equity investment
division of the investment adviser then creates lists with suggested levels of
commissions for particular broker-dealers and provides those lists to its
trading desks. Neither the investment adviser nor the fund incurs any obligation
to any broker-dealer to pay for research by generating trading commissions. The
actual level of business received by any broker-dealer may be less than the
suggested level of commissions and can, and often does, exceed the suggested
level in the normal course of business. As part of its ongoing relationships
with broker-dealers, the investment adviser routinely meets with firms,
typically at the firm's request, to discuss the level and quality of the
brokerage and research services provided, as well as the perceived value and
cost of such services. In valuing the brokerage and investment research services
the investment adviser receives from broker-dealers for its good faith
determination of reasonableness, the investment adviser does not attribute a
dollar value to such services, but rather takes various factors into
consideration, including the quantity, quality and usefulness of the services to
the investment adviser.

The investment adviser seeks, on an ongoing basis, to determine what the
reasonable levels of commission rates are in the marketplace. The investment
adviser takes various considerations into account when evaluating such
reasonableness, including, (a) rates quoted by broker-dealers, (b) the size of a
particular transaction in terms of the number of shares and dollar amount, (c)
the complexity of a particular transaction, (d) the nature and character of the
markets on which a particular trade takes place, (e) the ability of a
broker-dealer to provide anonymity while executing trades, (f) the ability of a
broker-dealer to execute large trades while minimizing market impact, (g) the
extent to which a broker-dealer has put its own capital at risk, (h) the level
and type of business done with a particular broker-dealer over a period of time,
(i) historical commission rates, and (j) commission rates that other
institutional investors are paying.

When executing portfolio transactions in the same equity security for the funds
and accounts, or portions of funds and accounts, over which the investment
adviser, through its equity investment divisions, has investment discretion,
each of the investment divisions will normally aggregate its respective
purchases or sales and execute them as part of the same transaction or series of
transactions. When executing portfolio transactions in the same fixed-income
security for the fund and the other funds or accounts over which it or one of
its affiliated companies has investment discretion, the investment adviser will
normally aggregate such purchases or sales and execute them as part of the same
transaction or series of transactions. The objective of aggregating purchases
and sales of a security is to allocate executions in an equitable manner among
the funds and other accounts that have concurrently authorized a transaction in
such security.

The investment adviser may place orders for the fund's portfolio transactions
with broker-dealers who have sold shares in the funds managed by the investment
adviser or its affiliated companies; however, it does not consider whether a
broker-dealer has sold shares of the funds managed by

Fundamental Investors -- Page 29
<PAGE>

the investment adviser or its affiliated companies when placing any such orders
for the fund's portfolio transactions.

Brokerage commissions paid on portfolio transactions for the fiscal years ended
December 31, 2007, 2006 and 2005 amounted to $18,379,000, $17,751,000 and
$12,254,000, respectively. The increase in commissions paid between 2005 and
2006 was largely due to increases in brokerage transactions and in the number of
shares transacted.

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 Citigroup Global Markets Inc., J.P. Morgan Securities
Inc. and Wachovia Securities Private Client Group. As of the fund's most recent
fiscal year-end, the fund held equity securities of Citigroup Inc. in the amount
of $373,299,000 and Wachovia Corporation in the amount of $93,934,000. As of
that date the fund held debt securities of JPMorgan Chase & Co. in the amount of
$99,726,000 and Wachovia Corporation in the amount of $49,992,000.

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 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.
The fund's custodian, outside counsel and auditor, each of which requires
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.

Fundamental Investors -- Page 30
<PAGE>

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 appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine 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 dealer should 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 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 p.m., the fund's share price would still be determined
as of 4 p.m. New York time. The New York Stock Exchange is currently closed on
weekends and on the following

Fundamental Investors -- Page 31
<PAGE>

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 indicated below. The fund follows
standard industry practice by typically reflecting changes in its holdings of
portfolio securities on the first business day following a portfolio trade.

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. The pricing services base
bond prices on, among other things, an evaluation of the yield curve as of
approximately 3 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

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 currencies other than U.S.
dollars are translated prior to the next determination of the net asset value of
the fund's shares into U.S. dollars at the prevailing market rates.

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

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable by the investment adviser, are valued in good
faith by the valuation committee based upon what the fund might reasonably

Fundamental Investors -- Page 32
<PAGE>

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. The
valuation committee employs additional fair value procedures to address issues
related to equity holdings of applicable fund portfolios outside the United
States. Securities owned by these funds trade in markets that open and close at
different times, reflecting time zone differences. If significant events occur
after the close of a market (and before these fund's net asset values are next
determined) which affect the value of portfolio securities, appropriate
adjustments from closing market prices may be made to reflect these events.
Events of this type could include, for example, earthquakes and other natural
disasters or significant price changes in other markets (e.g., U.S. stock
markets).

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
nearest 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 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

Fundamental Investors -- Page 33
<PAGE>

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 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. Investment
company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and
certain foreign currency gains, if any, less expenses and certain foreign
currency losses. To the extent the fund invests in stock of domestic and
certain foreign corporations 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.

Fundamental Investors -- Page 34
<PAGE>

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 91-day period beginning on
the date that is 45 days before the date on which the shares become
ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

A portion of the difference between the issue price of zero coupon
securities and their face value (original issue discount) is considered to
be income to the fund each year, even though the fund will not receive cash
interest payments from these securities. This

Fundamental Investors -- Page 35
<PAGE>

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.

The price of a bond purchased after its original issuance may reflect
market discount which, depending on the particular circumstances, may
affect the tax character and amount of income required to be recognized by
a fund holding the bond. In determining whether a bond is purchased with
market discount, certain de minimis rules apply.

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. Some
foreign countries 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 carryforward of
the fund.

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

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
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 other than a corporation 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

Fundamental Investors -- Page 36
<PAGE>

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.

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 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.

Fundamental Investors -- Page 37
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F-1 SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR
529-F-1 SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE
PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY
RELATING TO THESE 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.

The amount of time it takes for us to receive regular U.S. postal mail may
vary and there is no assurance that we will receive such mail on the day
you expect. Mailing addresses for regular U.S. postal mail can be found in
the prospectus. To send investments or correspondence to us via overnight
mail or courier service, use any of the following addresses:

American Funds
8332 Woodfield Crossing Blvd.
Indianapolis, IN 46240-2482

American Funds
3500 Wiseman Blvd.
San Antonio, TX 78251-4321

American Funds
5300 Robin Hood Rd.
Norfolk, VA 23513-2407

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

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

Fundamental Investors -- Page 38
<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.

OTHER PURCHASE INFORMATION -- 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. 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.

In the case of American Funds non-tax-exempt funds, 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 39
<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.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and this statement of additional information.

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. Exchanges are not permitted from Class A shares
of The Cash Management Trust of America to Class B or C shares of Intermediate
Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America and
Short-Term Bond Fund of America. 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" in this statement of additional
information. 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" in this
statement of additional information).

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.

Fundamental Investors -- Page 40
<PAGE>

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.

MOVING BETWEEN SHARE CLASSES

If you wish to "move" your investment between share classes (within the
same fund or between different funds), we generally will process your
request as an exchange of the shares you currently hold for shares in the
new class or fund. Below is more information about how sales charges are
handled for various scenarios.

EXCHANGING CLASS B SHARES FOR CLASS A SHARES -- If you exchange Class B
shares for Class A shares during the contingent deferred sales charge
period you are responsible for paying any applicable deferred sales charges
attributable to those Class B shares, but you will not be required to pay a
Class A sales charge. If, however, you exchange your Class B shares for
Class A shares after the contingent deferred sales charge period, you are
responsible for paying any applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS A SHARES -- If you exchange Class C
shares for Class A shares, you are still responsible for paying any Class C
contingent deferred sales charges and applicable Class A sales charges.

EXCHANGING CLASS C SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class C shares
for Class F shares to be held in the program, you are still responsible for
paying any applicable Class C contingent deferred sales charges.

EXCHANGING CLASS F SHARES FOR CLASS A SHARES -- You can exchange Class F
shares held in a qualified fee-based program for Class A shares without
paying an initial Class A sales charge if all of the following requirements
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 of your request. If you have
already redeemed your Class F shares, the foregoing requirements apply and
you must purchase Class A shares within 90 days after redeeming your Class
F shares to receive the Class A shares without paying an initial Class A
sales charge.

In addition, you may redeem Class F-1 shares held in a fee-based brokerage
account/ program for less than one year and with the redemption proceeds
purchase Class A shares without a sales charge if the redemption is
necessary to comply with the repeal of SEC Rule 202 under the Investment
Advisers Act of 1940 and the transaction occurs prior to October 1, 2007,
or such other date as determined by rule, regulation or court order.

EXCHANGING CLASS A SHARES FOR CLASS F SHARES -- If you are part of a
qualified fee-based program and you wish to exchange your Class A shares
for Class F shares to be held in 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.

Fundamental Investors -- Page 41
<PAGE>

EXCHANGING CLASS A SHARES FOR CLASS R SHARES -- Provided it is eligible to
invest in Class R shares, a retirement plan currently invested in Class A
shares may exchange its shares for Class R shares. Any Class A sales
charges that the retirement plan previously paid will not be credited back
to the plan's account.

EXCHANGING CLASS F-1 SHARES FOR CLASS F-2 SHARES -- If you are part of a
qualified fee-based program that offers Class F-2 shares, you may exchange
your Class F-1 shares for Class F-2 shares to be held in the program.

MOVING BETWEEN OTHER SHARE CLASSES -- If you desire to move your investment
between share classes and the particular scenario is not described in this
statement of additional information, please contact American Funds Service
Company at 800/421-0180 for more information.

NON-REPORTABLE TRANSACTIONS -- Automatic conversions described in the
prospectus will be non-reportable for tax purposes. In addition, except in
the case of a movement between a 529 share class and a non-529 share class,
an exchange of shares from one share class of a fund to another share class
of the same fund will be treated as a non-reportable exchange for tax
purposes, provided that the exchange request is received in writing by
American Funds Service Company and processed as a single transaction.

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.

PURCHASES BY SEP PLANS AND SIMPLE IRA PLANS

Participant accounts in a Simplified Employee Pension (SEP) plan or a
Savings Incentive Match Plan for Employees of Small Employers IRA (SIMPLE
IRA) plan will be aggregated together for Class A sales charge purposes if
the SEP plan or SIMPLE IRA plan was established after November 15, 2004 by
an employer adopting a prototype plan produced by American Funds
Distributors, Inc. In the case where the employer adopts any other plan
(including, but not limited to, an IRS model agreement), each participant's
account in the plan will be aggregated with the participant's own personal
investments that qualify under the aggregation policy. A SEP plan or SIMPLE
IRA plan with a certain method of aggregating participant accounts as of
November 15, 2004 may continue with that method so long as the employer has
not modified the plan document since that date.

Fundamental Investors -- Page 42
<PAGE>

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

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

Fundamental Investors -- Page 43
<PAGE>

investments are managed by any affiliate of The Capital Group
Companies, Inc.; and

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

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

TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:

. redemption proceeds from a non-retirement account (for example, a
joint tenant account) used to purchase fund shares in an IRA or other
individual-type retirement account;

. required minimum distributions from an IRA or other individual-type
retirement account used to purchase fund shares in a non-retirement
account; and

. death distributions paid to a beneficiary's account that are used by
the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.

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 initial 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 of less than $4
million, 0.50% on amounts of at least $4 million but less than $10 million and
0.25% on amounts of at least $10 million. Commissions are based on cumulative
investments over the life of the account with no adjustment for redemptions,
transfers, or market declines. For example, if a shareholder has accumulated
investments in excess of $4 million (but less than $10 million) and subsequently
redeems all or a portion of the account(s), purchases following the redemption
will generate a dealer commission of 0.50%.

Fundamental Investors -- Page 44
<PAGE>

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
the American Funds (excluding money market funds) over a 13-month period
and receive the same sales charge (expressed as a percentage of your
purchases) as if all shares had been purchased at once.

The Statement period starts on the date on which your first purchase made
toward satisfying the Statement is processed. 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 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 purchases must be made will remain
unchanged. Purchases made from the date of revision will receive the
reduced sales charge, if any, resulting from the revised Statement.

The Statement will be considered completed if the shareholder dies within
the 13-month Statement period. Commissions to dealers will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement may 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 may be required to 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. Any dealers assigned to the shareholder's account at the
time a purchase was made during the Statement period will receive a
corresponding commission adjustment if appropriate. 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 may be liable
to the Principal Underwriter for the balance still outstanding.

Certain payroll deduction retirement plans purchasing Class A shares under
a Statement on or before November 12, 2006, may continue to purchase Class
A shares at the sales charge determined by that particular Statement until
the plans' values reach the amounts

Fundamental Investors -- Page 45
<PAGE>

specified in their Statements. Upon reaching such amounts, the Statements
for these plans will be deemed completed and will terminate. After such
termination, these plans are eligible for additional sales charge
reductions by meeting the criteria under the fund's rights of accumulation
policy.

In addition, if you currently have individual holdings in American Legacy
variable annuity contracts or variable life insurance policies that were
established on or before March 31, 2007, you may continue to apply
purchases under such contracts and policies to a Statement.

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;

. SEP plans and SIMPLE IRA plans established after November 15, 2004 by
an employer adopting any plan document other than a prototype plan
produced by American Funds Distributors, Inc.;

. 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

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

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

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

.
made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, 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;

Fundamental Investors -- Page 46
<PAGE>

. 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;

. 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; or

. for a SEP or SIMPLE IRA plan established after November 15, 2004 by an
employer adopting a prototype plan produced by American Funds
Distributors, Inc.

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 holdings in Endowments and applicable holdings
in the American Funds Target Date Retirement Series. 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. If you currently have
individual holdings in American Legacy variable annuity contracts or
variable life insurance policies that were established on or before March
31, 2007, you may continue to combine purchases made under such contracts
and policies to reduce your Class A sales charge.

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 and applicable holdings in the American Funds Target Date
Retirement Series, to determine your sales charge on investments in
accounts eligible to be aggregated. Direct purchases of American Funds
money market funds are excluded. 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, accounts held in
nominee or street name may not be eligible for calculation at cost value
and instead may be calculated at market value for purposes of rights of
accumulation.

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

Fundamental Investors -- Page 47
<PAGE>

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 your
investment is not in an employer-sponsored retirement plan, you may also
continue to take into account the market value (as of the day prior to your
American Funds investment) of your individual holdings in various American
Legacy variable annuity contracts and variable life insurance policies that
were established on or before March 31, 2007. An employer-sponsored
retirement plan may also continue to take into account the market value of
its investments in American Legacy Retirement Investment Plans that were
established on or before March 31, 2007.

You may not purchase Class B or 529-B shares if your combined American
Funds and applicable American Legacy holdings cause you to be eligible to
purchase Class A or 529-A shares at the $100,000 or higher sales charge
discount rate. In addition, you may not purchase Class C or 529-C shares if
such combined holdings cause you to be eligible to purchase Class A or
529-A shares at the $1 million or more sales charge discount rate (i.e. at
net asset value).

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 applicable 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 an automatic withdrawal plan ("AWP") (see
"Automatic withdrawals" under "Shareholder account services and
privileges" in this statement of additional information). For each AWP
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 AWP 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

Fundamental Investors -- Page 48
<PAGE>

payments through an AWP will also count toward the 12% limit. In the
case of an AWP, the 12% limit is calculated at the time an automatic
redemption is first made, and is recalculated at the time each
additional automatic redemption is made. Shareholders who establish an
AWP should be aware that the amount of a payment not subject to a CDSC
may vary over time depending on fluctuations in the value of their
accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

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

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

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

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or 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. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."

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 Financial
Industry Regulatory Authority, 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 10
business days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as

Fundamental Investors -- Page 49
<PAGE>

permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

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

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

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

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account
application and specify the amount that you would like to invest 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);

Fundamental Investors -- Page 50
<PAGE>

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

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

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

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more. 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.
Generally, 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.

Redemption proceeds from an automatic withdrawal plan are not eligible for
reinvestment without a sales charge.

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.

Fundamental Investors -- Page 51
<PAGE>

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

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds upon meeting
the fund's initial purchase minimum of $1,000. 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 if, in
the opinion of the fund's board of directors, 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, One Lincoln Street, Boston, MA
02111, as Custodian. If the fund holds

Fundamental Investors -- Page 52
<PAGE>

securities of issuers outside the U.S., the Custodian may hold these securities
pursuant to subcustodial arrangements in banks outside the U.S. or branches of
U.S. banks outside the U.S.

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 6455 Irvine Center Drive, Irvine, CA 92618. American Funds Service
Company was paid a fee of $31,392,000 for Class A shares and $1,335,000 for
Class B shares for the 2007 fiscal year. American Funds Service Company is also
compensated for certain transfer agency services provided to all other share
classes from the administrative services fees paid to Capital Research and
Management Company, as described under "Administrative services agreement."

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 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 audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
report appearing herein. Such financial statements have been so included in
reliance upon the report of such firm given upon their authority 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 independent legal counsel
("counsel") for the fund and for independent directors in their capacities as
such. Certain legal matters in connection with certain capital shares offered by
the prospectus have been passed upon for the fund by Paul, Hastings, Janofsky &
Walker LLP and DLA Piper US LLP, Baltimore, Maryland. A determination with
respect to the independence of the fund's counsel will be made at least annually
by the independent directors of the fund, as prescribed by the 1940 Act and
related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on December 31. Shareholders are provided updated prospectuses
annually and at least semiannually with reports showing the 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,

Fundamental Investors -- Page 53
<PAGE>

shareholder reports and proxy statements. To receive additional copies of a
prospectus, report or proxy statement, shareholders should contact the Transfer
Agent.

Shareholders may also elect to receive updated prospectuses, annual reports and
semi-annual reports electronically by signing up for electronic delivery on our
website, americanfunds.com. Upon opting in to the electronic delivery of updated
prospectuses and other reports, a shareholder will no longer automatically
receive such documents in paper form by mail. A shareholder who elects
electronic delivery is able to cancel this service at any time and return to
receiving updated prospectuses and other reports in paper form by mail.

Prospectuses, annual reports and semi-annual reports that are mailed to
shareholders by the American Funds organization are printed with ink containing
soy and/or vegetable oil on paper containing recycled fibers.

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 (now the Financial Industry
Regulatory Authority, or FINRA) 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. On August 30, 2006, a
FINRA Hearing Panel ruled against the Principal Underwriter and imposed a $5
million fine. On April 30, 2008, FINRA's National Adjudicatory Council affirmed
the decision by FINRA's Hearing Panel. The Principal Underwriter has appealed
this decision to the Securities and Exchange Commission.

The investment adviser and Principal Underwriter believe that the likelihood
that this matter 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. In addition, class action lawsuits have been
filed in the U.S. District Court, Central District of California, relating to
this and other matters. The investment adviser believes that these suits are
without merit and will defend itself vigorously.

Fundamental Investors -- Page 54
<PAGE>

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- DECEMBER 31, 2007

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $42.45
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). . . . . . . . . . . . . . . . $45.04

OTHER INFORMATION -- The fund reserves the right to modify the privileges
described in this statement of additional information at any time.

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 on fund numbers is not included in the annual report:

Fundamental Investors -- Page 55
<PAGE>

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-1 CLASS F-2
- -------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . 002 202 302 402 602
American Balanced Fund/(R)/ 011 211 311 411 611
American Mutual Fund/(R)/ . 003 203 303 403 603
Capital Income Builder/(R)/ 012 212 312 412 612
Capital World Growth and
Income Fund/SM/ . . . . . . 033 233 333 433 633
EuroPacific Growth Fund/(R)/ 016 216 316 416 616
Fundamental Investors/SM/ . 010 210 310 410 610
The Growth Fund of
America/(R)/. . . . . . . . 005 205 305 405 605
The Income Fund of
America/(R)/. . . . . . . . 006 206 306 406 606
The Investment Company of
America/(R)/. . . . . . . . 004 204 304 404 604
The New Economy Fund/(R)/ . 014 214 314 414 614
New Perspective Fund/(R)/ . 007 207 307 407 607
New World Fund/SM/ . . . . 036 236 336 436 636
SMALLCAP World Fund/(R)/ . 035 235 335 435 635
Washington Mutual Investors
Fund/SM/ . . . . . . . . . 001 201 301 401 601
BOND FUNDS
American High-Income
Municipal Bond Fund/(R)/ . 040 240 340 440 640
American High-Income
Trust/SM/ . . . . . . . . . 021 221 321 421 621
The Bond Fund of America/SM/ 008 208 308 408 608
Capital World Bond Fund/(R)/ 031 231 331 431 631
Intermediate Bond Fund of
America/SM/ . . . . . . . . 023 223 323 423 623
Limited Term Tax-Exempt Bond
Fund of America/SM/ . . . . 043 243 343 443 643
Short-Term Bond Fund of
America/SM/ . . . . . . . . 048 248 348 448 648
The Tax-Exempt Bond Fund of
America/(R)/. . . . . . . . 019 219 319 419 619
The Tax-Exempt Fund of
California/(R)/*. . . . . . 020 220 320 420 620
The Tax-Exempt Fund of
Maryland/(R)/*. . . . . . . 024 224 324 424 624
The Tax-Exempt Fund of
Virginia/(R)/*. . . . . . . 025 225 325 425 625
U.S. Government Securities
Fund/SM/. . . . . . . . . . 022 222 322 422 622
MONEY MARKET FUNDS
The Cash Management Trust of
America/(R)/. . . . . . . . 009 209 309 409 609
The Tax-Exempt Money Fund of
America/SM/ . . . . . . . . 039 N/A N/A N/A N/A
The U.S. Treasury Money Fund
of America/SM/ . . . . . . 049 N/A N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

Fundamental Investors -- Page 56
<PAGE>

FUND NUMBERS
----------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F-1
- -------------------------------------------------------------------------------

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
Short-Term Bond Fund of America 1048 1248 1348 1548 1448
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America. . . . . . . . . . . . 1009 1209 1309 1509 1409

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
Short-Term Bond Fund of America. . . 2148 2248 2348 2448 2548
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 57
<PAGE>

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

AMERICAN FUNDS TARGET DATE RETIREMENT SERIES/(R)/
American Funds 2050 Target Date
Retirement Fund/(R)/ . . . . . . 069 2169 2269 2369 2469 2569
American Funds 2045 Target Date
Retirement Fund/(R)/ . . . . . . 068 2168 2268 2368 2468 2568
American Funds 2040 Target Date
Retirement Fund/(R)/ . . . . . . 067 2167 2267 2367 2467 2567
American Funds 2035 Target Date
Retirement Fund/(R)/ . . . . . . 066 2166 2266 2366 2466 2566
American Funds 2030 Target Date
Retirement Fund/(R)/ . . . . . . 065 2165 2265 2365 2465 2565
American Funds 2025 Target Date
Retirement Fund/(R)/ . . . . . . 064 2164 2264 2364 2464 2564
American Funds 2020 Target Date
Retirement Fund/(R)/ . . . . . . 063 2163 2263 2363 2463 2563
American Funds 2015 Target Date
Retirement Fund/(R)/ . . . . . . 062 2162 2262 2362 2462 2562
American Funds 2010 Target Date
Retirement Fund/(R)/ . . . . . . 061 2161 2261 2361 2461 2561

Fundamental Investors -- Page 58
<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 59
<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 60
<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 61

...

[Logo – American Funds®]

Fundamental InvestorsSM

Investment portfolio

December 31, 2007

		Market value
Common stocks — 91.42%	Shares	(000)

ENERGY — 14.81%
Suncor Energy Inc.	18,626,627	$2,024,984
CONSOL Energy Inc.1	7,400,000	529,248
Occidental Petroleum Corp.	6,404,244	493,063
Tenaris SA (ADR)	10,135,000	453,339
Murphy Oil Corp.	4,343,636	368,514
Chevron Corp.	3,185,674	297,319
StatoilHydro ASA2	6,621,848	204,729
StatoilHydro ASA (ADR)	3,017,700	92,100
Royal Dutch Shell PLC, Class A (ADR)	3,500,000	294,700
EnCana Corp.	4,000,000	272,013
Petro-Canada	4,890,000	262,334
Schlumberger Ltd.	2,650,000	260,680
Exxon Mobil Corp.	2,525,000	236,567
Marathon Oil Corp.	3,470,000	211,184
Imperial Oil Ltd.	3,608,739	198,579
Baker Hughes Inc.	2,285,500	185,354
Smith International, Inc.	2,485,000	183,517
Devon Energy Corp.	2,000,000	177,820
Petróleo Brasileiro SA – Petrobras, ordinary nominative (ADR)	1,510,000	174,012
OAO LUKOIL (ADR)2	2,000,000	171,708
Oil & Natural Gas Corp. Ltd.2	3,637,500	113,549
Quicksilver Resources Inc.3	1,296,100	77,235
Massey Energy Co.	2,011,700	71,918
Saipem SpA, Class S2	1,000,000	39,700
Cameco Corp.	846,300	33,738
TOTAL SA2	325,000	26,932
CNX Gas Corp.3,4	287,500	9,186
		7,464,022

INDUSTRIALS — 14.08%
Deere & Co.	10,320,000	960,998
Caterpillar Inc.	7,950,000	576,852
General Electric Co.	15,250,000	565,317
Union Pacific Corp.	3,200,000	401,984
Emerson Electric Co.	6,800,000	385,288
Northrop Grumman Corp.	4,166,243	327,633
Parker Hannifin Corp.	4,200,000	316,302
General Dynamics Corp.	3,545,800	315,541
Deutsche Post AG2	8,945,000	305,274
Schneider Electric SA2	2,071,575	276,587
European Aeronautic Defence and Space Co. EADS NV2	7,000,000	221,895
Joy Global Inc.	3,350,000	220,497
Boeing Co.	2,500,000	218,650
Mitsubishi Corp.2	7,245,800	197,395
Finmeccanica SpA2	6,000,000	189,898
Raytheon Co.	2,832,732	171,947
KBR, Inc.3	3,950,000	153,260
Corporate Executive Board Co.5	2,304,200	138,482
Lockheed Martin Corp.	1,248,200	131,386
Waste Management, Inc.	3,800,000	124,146
Siemens AG2	703,000	110,201
Fastenal Co.	2,400,000	97,008
United Technologies Corp.	1,250,000	95,675
Illinois Tool Works Inc.	1,636,000	87,592
AMR Corp.3	6,120,000	85,864
United Parcel Service, Inc., Class B	1,200,000	84,864
Grafton Group PLC, units2,3	9,500,000	74,549
Mitsubishi Heavy Industries, Ltd.2	14,446,000	61,830
Kingspan Group PLC2	3,500,000	52,671
Roper Industries, Inc.	770,000	48,156
Tyco International Ltd.	1,125,000	44,606
Allied Waste Industries, Inc.3	2,500,000	27,550
Robert Half International Inc.	800,000	21,632
		7,091,530

INFORMATION TECHNOLOGY — 12.91%
Nokia Corp.2	18,900,000	726,664
Nokia Corp. (ADR)	10,987,000	421,791
Oracle Corp.3	35,790,500	808,150
Microsoft Corp.	21,165,000	753,474
Texas Instruments Inc.	10,025,000	334,835
International Business Machines Corp.	3,000,000	324,300
Google Inc., Class A3	455,000	314,623
Fidelity National Information Services, Inc.	6,615,000	275,118
Agilent Technologies, Inc.3	6,981,300	256,493
Corning Inc.	10,520,000	252,375
Yahoo! Inc.3	9,100,000	211,666
Apple Inc.3	1,000,000	198,080
Cisco Systems, Inc.3	5,960,000	161,337
Kyocera Corp.2	1,725,000	150,954
Motorola, Inc.	9,256,080	148,467
Microchip Technology Inc.	4,618,000	145,098
Comverse Technology, Inc.3	7,684,470	132,557
Paychex, Inc.	3,300,000	119,526
Red Hat, Inc.3	5,650,000	117,746
Autodesk, Inc.3	1,900,000	94,544
Linear Technology Corp.	2,700,000	85,941
ASML Holding NV2,3	2,609,568	81,885
Trimble Navigation Ltd.3	2,475,000	74,844
STMicroelectronics NV2	5,100,000	72,496
Hewlett-Packard Co.	1,000,000	50,480
EMC Corp.3	2,500,000	46,325
Nortel Networks Corp.3	2,800,000	42,257
Tyco Electronics Ltd.	1,125,000	41,771
Advanced Micro Devices, Inc.3	4,000,000	30,000
Murata Manufacturing Co., Ltd.2	300,000	17,450
Metavante Technologies, Inc.3	496,666	11,582
		6,502,829


MATERIALS — 9.88%
Mosaic Co.3	6,000,000	$ 566,040
Syngenta AG2	2,117,750	536,640
Rohm and Haas Co.	8,607,300	456,789
Bayer AG, non-registered shares2	3,688,000	335,757
Alcoa Inc.	7,650,000	279,608
Weyerhaeuser Co.	3,583,000	264,210
Potash Corp. of Saskatchewan Inc.	1,709,100	246,042
Freeport-McMoRan Copper & Gold Inc.	2,000,000	204,880
Norsk Hydro ASA2	10,840,000	153,240
Norsk Hydro ASA (ADR)2	3,500,000	49,478
USX Corp.	1,650,000	199,501
E.I. du Pont de Nemours and Co.	4,500,000	198,405
International Paper Co.	5,500,000	178,090
PPG Industries, Inc.	2,500,000	175,575
BHP Billiton Ltd.2	4,675,000	163,748
Sigma-Aldrich Corp.	2,900,000	158,340
CRH PLC2	3,997,950	138,607
Rio Tinto PLC2	1,266,709	132,263
Barrick Gold Corp.	3,049,395	128,227
Newmont Mining Corp.	2,500,000	122,075
Vulcan Materials Co.	1,350,000	106,772
RPM International, Inc.	3,440,000	69,832
Monsanto Co.	350,000	39,092
Temple-Inland Inc.	1,500,000	31,275
UPM-Kymmene Corp. (ADR)2	1,400,000	28,009
Sealed Air Corp.	684,100	15,830
		4,978,325

CONSUMER DISCRETIONARY — 8.93%
Lowe’s Companies, Inc.	19,610,000	443,578
Target Corp.	7,840,000	392,000
TomTom NV2,3	3,665,000	273,507
Best Buy Co., Inc.	5,175,000	272,464
Johnson Controls, Inc.	7,500,000	270,300
McDonald’s Corp.	3,875,000	228,276
Fortune Brands Inc.	3,000,000	217,080
Garmin Ltd.	2,000,000	194,000
Time Warner Inc.	11,000,000	181,610
Liberty Media Holding Corp., Liberty Interactive, Series A3	8,950,000	170,766
Sony Corp.2	3,000,000	162,826
Toyota Motor Corp.2	3,000,000	161,497
Macy’s, Inc.	6,000,000	155,220
General Motors Corp.	5,500,000	136,895
Nikon Corp.2	3,977,000	135,683
CBS Corp., Class B	4,900,000	133,525
Starbucks Corp.3	6,500,000	133,055
Magna International Inc., Class A	1,474,300	118,578
Harman International Industries, Inc.	1,300,000	95,823
Penn National Gaming, Inc.3	1,500,000	89,325
Amazon.com, Inc.3	900,000	83,376
Yue Yuen Industrial (Holdings) Ltd.2	20,690,000	74,010
News Corp., Class A	3,400,000	69,666
Kohl’s Corp.3	1,500,000	68,700
Limited Brands, Inc.	3,315,980	62,772
Chipotle Mexican Grill, Inc., Class A3	238,832	35,125
Chipotle Mexican Grill, Inc., Class B3	208,000	25,594
Virgin Media Inc.3	3,000,000	51,420
WABCO Holdings Inc.	944,100	47,290
Saks Inc.3	650,000	13,494
		4,497,455

FINANCIALS — 8.40%
Fannie Mae	15,040,100	601,303
U.S. Bancorp	12,975,000	411,826
Citigroup Inc.	12,680,000	373,299
Bank of America Corp.	6,000,000	247,560
Bank of Ireland2	15,863,513	234,833
Freddie Mac	6,690,000	227,928
Allied Irish Banks, PLC2	9,700,000	222,570
AMP Ltd.2	25,000,412	217,293
AFLAC Inc.	2,700,000	169,101
Marsh & McLennan Companies, Inc.	5,371,000	142,170
Berkshire Hathaway Inc., Class A3	1,000	141,600
Irish Life & Permanent PLC2	7,000,000	120,282
Washington Mutual, Inc.	8,580,000	116,774
XL Capital Ltd., Class A	2,180,000	109,676
Wells Fargo & Co.	3,475,000	104,910
CapitalSource Inc.	5,500,954	96,762
Wachovia Corp.	2,470,000	93,934
AXA SA2	2,345,500	93,252
Equity Residential, shares of beneficial interest	2,500,000	91,175
T. Rowe Price Group, Inc.	1,200,000	73,056
St. George Bank Ltd.2	2,450,279	67,470
Bank of New York Mellon Corp.	1,000,000	48,760
Anglo Irish Bank Corp. PLC2	3,011,907	47,671
Marshall & Ilsley Corp.	1,489,998	39,455
MGIC Investment Corp.	1,707,000	38,288
Zions Bancorporation	550,000	25,679
City National Corp.	400,000	23,820
PMI Group, Inc.	1,174,600	15,599
Old Republic International Corp.	914,000	14,085
Forestar Real Estate Group LLC3	500,000	11,795
Guranty Financial Group Inc.3	500,000	8,000
		4,229,926

HEALTH CARE — 7.93%
Merck & Co., Inc.	13,600,000	790,296
Roche Holding AG2	4,575,000	787,042
Eli Lilly and Co.	7,670,000	409,501
Abbott Laboratories	4,450,000	249,868
Bristol-Myers Squibb Co.	9,350,000	247,962
Shire PLC (ADR)	3,500,000	241,325
Wyeth	5,000,000	220,950
Medtronic, Inc.	3,625,200	182,239
Schering-Plough Corp.	5,158,600	137,425
Aetna Inc.	2,310,000	133,356
CIGNA Corp.	2,175,000	116,863
Stryker Corp.	1,550,000	115,816
Patterson Companies, Inc.3	3,137,521	106,519
Novo Nordisk A/S, Class B2	1,280,000	83,475
Amgen Inc.3	1,350,000	62,694
WellPoint, Inc.3	599,953	52,634
Medco Health Solutions, Inc.3	463,000	46,948
C. R. Bard, Inc.	91,900	8,712
		3,993,625

CONSUMER STAPLES — 5.67%
Altria Group, Inc.	9,624,800	727,442
Coca-Cola Co.	9,400,000	576,878
PepsiCo, Inc.	4,400,000	333,960
Wal-Mart Stores, Inc.	5,800,000	275,674
Bunge Ltd.	1,801,024	209,657
Diageo PLC2	6,700,000	142,934
Avon Products, Inc.	2,680,000	105,940
Tesco PLC2	10,951,206	103,061
C&C Group PLC2,5	16,055,047	95,802
Unilever NV, depository receipts2	2,440,000	89,204
Wm. Wrigley Jr. Co.	1,400,000	81,970
SYSCO Corp.	2,000,000	62,420
Goodman Fielder Ltd.2	31,711,000	52,550
		2,857,492

TELECOMMUNICATION SERVICES — 4.04%
AT&T Inc.	15,912,500	661,324
Verizon Communications Inc.	7,950,000	347,335
KDDI Corp.2	41,000	304,477
Vodafone Group PLC2	75,283,000	279,636
Vodafone Group PLC (ADR)	221,700	8,274
Sprint Nextel Corp., Series 1	13,700,000	179,881
Qwest Communications International Inc.3	21,500,000	150,715
Inmarsat PLC2	9,685,000	103,443
		2,035,085

UTILITIES — 2.85%
Exelon Corp.	3,545,000	289,414
Questar Corp.	5,000,000	270,500
Veolia Environnement2	2,250,000	204,042
SUEZ SA2	2,915,400	197,330
E.ON AG2	800,000	169,611
Electricité de France SA2	1,334,000	157,852
FPL Group, Inc.	1,050,000	71,169
Duke Energy Corp.	3,000,000	60,510
Entergy Corp.	150,000	17,929
		1,438,357

MISCELLANEOUS — 1.92%
Other common stocks in initial period of acquisition		965,749


Total common stocks (cost: $33,657,009,000)		46,054,395



	Principal amount	Market value
Short-term securities — 8.33%	(000)	(000)

Federal Home Loan Bank 4.16%–4.35% due 1/18–6/18/2008	$734,710	$ 730,128
Procter & Gamble International 4.23%–4.75% due 1/4–3/14/20084	379,431	377,629
Freddie Mac 4.175%–4.335% due 1/22–4/25/2008	368,300	366,212
United Parcel Service Inc. 4.17%–4.50% due 2/12-3/31/20084	255,700	253,436
Fannie Mae 4.13%–4.28% due 1/17–3/12/2008	234,600	233,453
Bank of America Corp. 4.595%–5.015% due 1/14–3/28/2008	190,000	188,613
JPMorgan Chase & Co. 5.04%–5.05% due 1/7–2/1/2008	100,000	99,726
Jupiter Securitization Co., LLC 4.70% due 3/19/20084	41,281	40,798
Park Avenue Receivables Co., LLC 4.73% due 1/10/20084	27,300	27,261
Wal-Mart Stores Inc. 4.45%–4.73% due 1/8–2/13/20084	164,100	163,433
General Electric Capital Corp. 4.15%–4.52 due 1/2–2/13/2008	88,000	87,690
Edison Asset Securitization LLC 4.49% due 3/13/20084	75,000	74,190
IBM Capital Inc. 4.20%–4.22% due 1/29–3/18/20084	79,500	78,791
IBM Corp. 4.21% due 1/29/20084	35,000	34,881
IBM International Group Capital LLC 4.47% due 2/14/20084	21,000	20,870
Hewlett-Packard Co. 4.24%–4.52% due 1/2–1/18/20084	118,400	118,218
CAFCO, LLC 5.05%–5.25% due 1/3–1/24/20084	100,000	99,804
Private Export Funding Corp. 4.37%–4.74% due 1/9–3/11/20084	93,000	92,362
Federal Farm Credit Banks 4.18%–4.29% due 1/23–1/31/2008	85,000	84,768
Wachovia Bank NA 5.08% due 2/5/2008	50,000	49,992
Variable Funding Capital Corp. 5.10% due 1/9/20084	30,000	29,962
E.I. duPont de Nemours and Co. 4.18%–4.22% due 1/11–1/30/20084	80,000	79,787
Paccar Financial Corp. 4.15%–4.73% due 1/9–3/19/2008	64,600	64,229
State Street Corp. 4.50% due 1/16/2008	64,300	64,162
Honeywell International Inc. 4.35%–4.46% due 1/28–2/28/20084	62,509	62,165
Eaton Corp. 4.25%–4.73% due 1/11–2/27/20084	54,750	54,487
Harley-Davidson Funding Corp. 4.25%–4.50% due 1/11–3/5/20084	50,300	50,057
International Bank for Reconstruction and Development 4.30% due 1/28/2008	50,000	49,832
International Lease Finance Corp. 4.33% due 2/7/2008	50,000	49,771
HSBC Finance Corp. 4.70% due 2/7/2008	50,000	49,752
FCAR Owner Trust I 6.00% due 1/31/2008	50,000	49,741
Coca-Cola Co. 4.46%–4.63% due 1/18–2/29/20084	45,100	44,813
NetJets Inc. 4.30%–4.48% due 1/16–2/20/20084	45,000	44,808
Wells Fargo & Co. 4.30% due 1/18/2008	44,100	44,005
U.S. Treasury Bills 3.251% due 6/12/2008	44,300	43,649
Chevron Funding Corp. 4.41% due 1/10/2008	25,000	24,969
AT&T Inc. 4.50% due 1/17/20084	25,000	24,947
Estée Lauder Companies Inc. 4.46%–4.47% due 1/14–1/29/20084	25,000	24,913
Anheuser-Busch Cos. Inc. 4.35% due 2/11/20084	25,000	24,852
Kimberly-Clark Worldwide Inc. 4.20%–4.46% due 1/11–1/29/20084	24,630	24,582
Medtronic Inc. 4.22% due 1/17/20084	20,000	19,960
Caterpillar Financial Services Corp. 4.20% due 2/19/2008	15,100	15,012
John Deere Capital Corp. 4.50% due 2/19/20084	13,900	13,805
Becton, Dickinson and Co. 4.50% due 1/11/2008	11,700	11,684
Brown-Forman Corp. 4.25% due 1/18/20084	10,505	10,483


Total short-term securities (cost: $4,198,727,000)		4,198,682

Total investment securities (cost: $37,855,736,000)		50,253,077
Other assets less liabilities		123,984

Net assets		$50,377,061

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

1Purchased in a transaction exempt from registration under the Securities Act of 1933. This security (acquired 10/2/2003 at a cost of $67,784,000) may be subject to legal or contractual restrictions on resale.

2Valued under fair value procedures adopted by authority of the board of directors. The total value of all such securities, including those in "Miscellaneous," was $9,448,855,000.

3Security did not produce income during the last 12 months.

4Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $1,900,480,000, which represented 3.77% of the net assets of the fund.

5Represents an affiliated company as defined under the Investment Company Act of 1940.

ADR = American Depositary Receipts

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information

is contained in each fund’s prospectus, which can be obtained from your financial professional and should be read carefully before investing.

MFGEFP-910-0208O-S10887

Industry sector diversification (percent of net assets)

Energy	14.81	%
Industrials	14.08
Information technology	12.91
Materials	9.88
Consumer discretionary	8.93
Other industries	30.81
Short-term securities & other assets less liabilities	8.58

Country diversification	(percent of net assets)
United States		62.6	%
Euro zone *		9.9
Canada		6.7
Japan		2.8
Switzerland		2.6
United Kingdom		2.6
Other countries		4.2
Short-term securities & other assets less liabilities		8.6

* Countries using the euro as a common currency; those represented in the fund's
portfolio are Finland, France, Germany, Ireland, Italy and the Netherlands.

	Beginning shares		Additions		Reductions		Ending shares		Dividend income (000)		Market value of affiliates at 12/31/07 (000)

Corporate Executive Board Co.		-		2,304,200		-		2,304,200	$	1,512	$	138,482
C&C Group PLC (2)		8,552,418		7,502,629		-		16,055,047		5,023		95,802
Comverse Technology, Inc. (3) (5) (6)		8,003,677		5,126,323		5,445,530		7,684,470		-		-
									$	6,535	$	234,284

Statement of assets and liabilities
at December 31, 2007	(dollars and shares in thousands, except per-share amounts)

Assets:
Investment securities at market:
Unaffiliated issuers (cost: $37,568,261)	$	50,018,793
Affiliated issuers (cost: $287,475)		234,284	$	50,253,077
Cash denominated in currencies other than U.S. dollars
(cost: $680)				694
Cash				162
Receivables for:
Sales of investments		28,897
Sales of fund's shares		209,669
Dividends and interest		59,105		297,671
				50,551,604
Liabilities:
Payables for:
Purchases of investments		63,481
Repurchases of fund's shares		81,009
Investment advisory services		9,674
Services provided by affiliates		17,462
Directors' deferred compensation		2,562
Other		355		174,543
Net assets at December 31, 2007			$	50,377,061

Net assets consist of:
Capital paid in on shares of capital stock			$	37,492,519
Undistributed net investment income				179,577
Undistributed net realized gain				307,650
Net unrealized appreciation				12,397,315
Net assets at December 31, 2007			$	50,377,061

Total authorized capital stock - 1,500,000 shares, $1.00 par value ( 1,187,157 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share (*)

Class A	$	38,877,046		915,826	$	42.45
Class B		1,666,590		39,352		42.35
Class C		2,052,584		48,516		42.31
Class F		3,234,681		76,232		42.43
Class 529-A		642,753		15,152		42.42
Class 529-B		80,239		1,892		42.41
Class 529-C		195,311		4,607		42.40
Class 529-E		29,007		684		42.40
Class 529-F		20,338		480		42.39
Class R-1		57,315		1,355		42.31
Class R-2		470,915		11,133		42.30
Class R-3		1,156,864		27,300		42.38
Class R-4		879,581		20,751		42.39
Class R-5		1,013,837		23,877		42.46
(*) 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 $45.04 and $45.01, respectively.


See Notes to Financial Statements

	Shares		Market value (000)		Percent of net assets

Common stocks - 91.42%

Energy - 14.81%
Suncor Energy Inc.		18,626,627	$	2,024,984		4.02	%
CONSOL Energy Inc. (1)		7,400,000		529,248		1.05
Occidental Petroleum Corp.		6,404,244		493,063		.98
Tenaris SA (ADR)		10,135,000		453,339		.90
Murphy Oil Corp.		4,343,636		368,514		.73
Chevron Corp.		3,185,674		297,319		.59
StatoilHydro ASA (2)		6,621,848		204,729
StatoilHydro ASA (ADR)		3,017,700		92,100		.59
Royal Dutch Shell PLC, Class A (ADR)		3,500,000		294,700		.58
Other securities				2,706,026		5.37
				7,464,022		14.81

Industrials - 14.08%
Deere & Co.		10,320,000		960,998		1.91
Caterpillar Inc.		7,950,000		576,852		1.14
General Electric Co.		15,250,000		565,317		1.12
Union Pacific Corp.		3,200,000		401,984		.80
Emerson Electric Co.		6,800,000		385,288		.76
Northrop Grumman Corp.		4,166,243		327,633		.65
Parker Hannifin Corp.		4,200,000		316,302		.63
General Dynamics Corp.		3,545,800		315,541		.63
Deutsche Post AG (2)		8,945,000		305,274		.61
Schneider Electric SA (2)		2,071,575		276,587		.55
Other securities				2,659,754		5.28
				7,091,530		14.08

Information technology - 12.91%
Nokia Corp. (2)		18,900,000		726,664
Nokia Corp. (ADR)		10,987,000		421,791		2.28
Oracle Corp. (3)		35,790,500		808,150		1.60
Microsoft Corp.		21,165,000		753,474		1.50
Texas Instruments Inc.		10,025,000		334,835		.67
International Business Machines Corp.		3,000,000		324,300		.64
Google Inc., Class A (3)		455,000		314,623		.62
Other securities				2,818,992		5.60
				6,502,829		12.91

Materials - 9.88%
Mosaic Co. (3)		6,000,000		566,040		1.12
Syngenta AG (2)		2,117,750		536,640		1.07
Rohm and Haas Co.		8,607,300		456,789		.91
Bayer AG, non-registered shares (2)		3,688,000		335,757		.67
Alcoa Inc.		7,650,000		279,608		.55
Other securities				2,803,491		5.56
				4,978,325		9.88

Consumer discretionary - 8.93%
Lowe's Companies, Inc.		19,610,000		443,578		.88
Target Corp.		7,840,000		392,000		.78
Other securities				3,661,877		7.27
				4,497,455		8.93

Financials - 8.40%
Fannie Mae		15,040,100		601,303		1.20
U.S. Bancorp		12,975,000		411,826		.82
Citigroup Inc.		12,680,000		373,299		.74
Freddie Mac		6,690,000		227,928		.45
Other securities				2,615,570		5.19
				4,229,926		8.40

Health care - 7.93%
Merck & Co., Inc.		13,600,000		790,296		1.57
Roche Holding AG (2)		4,575,000		787,042		1.56
Eli Lilly and Co.		7,670,000		409,501		.81
Other securities				2,006,786		3.99
				3,993,625		7.93

Consumer staples - 5.67%
Altria Group, Inc.		9,624,800		727,442		1.44
Coca-Cola Co.		9,400,000		576,878		1.15
PepsiCo, Inc.		4,400,000		333,960		.66
Other securities				1,219,212		2.42
				2,857,492		5.67

Telecommunication services - 4.04%
AT&T Inc.		15,912,500		661,324		1.31
Verizon Communications Inc.		7,950,000		347,335		.69
KDDI Corp. (2)		41,000		304,477		.61
Vodafone Group PLC (2)		75,283,000		279,636
Vodafone Group PLC (ADR)		221,700		8,274		.57
Other securities				434,039		.86
				2,035,085		4.04

Utilities - 2.85%
Exelon Corp.		3,545,000		289,414		.57
Other securities				1,148,943		2.28
				1,438,357		2.85

MISCELLANEOUS - 1.92%
Other common stocks in initial period of acquisition				965,749		1.92


Total common stocks (cost: $33,657,009,000)				46,054,395		91.42



	Principal amount (000)		Market value (000)		Percent of net assets
Short-term securities - 8.33%


Federal Home Loan Bank 4.16%-4.35% due 1/18-6/18/2008	$	734,710	$	730,128		1.45	%
Procter & Gamble International 4.23%-4.75% due 1/4-3/14/2008 (4)		379,431		377,629		.75
Freddie Mac 4.175%-4.335% due 1/22-4/25/2008		368,300		366,212		.72
Fannie Mae 4.13%-4.28% due 1/17-3/12/2008		234,600		233,453		.46
General Electric Capital Corp. 4.15%-4.52% due 1/2-2/13/2008		88,000		87,690
Edison Asset Securitization LLC 4.49% due 3/13/2008 (4)		75,000		74,190		.32
Coca-Cola Co. 4.46%-4.63% due 1/18-2/29/2008 (4)		45,100		44,813		.09
AT&T Inc. 4.50% due 1/17/2008 (4)		25,000		24,947		.05
Caterpillar Financial Services Corp. 4.20% due 2/19/2008		15,100		15,012		.03
John Deere Capital Corp. 4.50% due 2/19/2008 (4)		13,900		13,805		.03
Other securities				2,230,803		4.43


Total short-term securities (cost: $4,198,727,000)				4,198,682		8.33


Total investment securities (cost: $37,855,736,000)				50,253,077		99.75
Other assets less liabilities				123,984		.25

Net assets			$	50,377,061		100.00	%


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

"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Statement of operations	(dollars in thousands)
for the year ended December 31, 2007
Investment income:
Income:
Dividends (net of non-U.S. taxes of $20,913;
also includes $6,535 from affiliates)	$	1,232,429
Interest		125,436		$	1,357,865

Fees and expenses(*):
Investment advisory services		115,799
Distribution services		138,432
Transfer agent services		32,727
Administrative services		11,408
Reports to shareholders		1,258
Registration statement and prospectus		1,525
Postage, stationery and supplies		2,985
Directors' compensation		728		rd
Auditing and legal		128		rd
Custodian		1,237
State and local taxes		1
Other		140
Total fees and expenses before reimbursements/waivers		306,368
Less reimbursements/waivers of fees and expenses:
Investment advisory services		11,580
Administrative services		116
Total fees and expenses after reimbursements/waivers					294,672
Net investment income					1,063,193


Net realized gain and unrealized appreciation on
investments and currency:
Net realized gain (loss) on:
Investments (including $7,118 net gain from affiliates)		2,688,176
Currency transactions		(1,787	)		2,686,389
Net unrealized appreciation (depreciation) on:
Investments		1,808,549
Currency translations		(159	)		1,808,390
Net realized gain and unrealized appreciation
on investments and currency					4,494,779
Net increase in net assets resulting
from operations				$	5,557,972

(*) 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
	2007			2006
Operations:
Net investment income	$	1,063,193		$	515,580
Net realized gain on investments and
currency transactions		2,686,389			1,740,056
Net unrealized appreciation
on investments and currency translations		1,808,390			3,593,171
Net increase in net assets
resulting from operations		5,557,972			5,848,807


Dividends and distributions paid to shareholders:
Dividends from net investment income and currency gain		(998,744	)		(473,267	)

Distributions from net realized gain on investments		(2,310,752	)		(1,471,900	)

Total dividends and distributions paid to shareholders		(3,309,496	)		(1,945,167	)

Net capital share transactions		8,940,644			7,151,659

Total increase in net assets		11,189,120			11,055,299

Net assets:
Beginning of year		39,187,941			28,132,642
End of year (including undistributed net investment
income: $179,577 and $117,249, respectively)	$	50,377,061		$	39,187,941



See Notes to Financial Statements

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

(dollars in thousands)
Undistributed ordinary income	$	183,197
Post-October currency loss deferrals (realized during the period November 1, 2007, through December 31, 2007)*	<1,058>
Undistributed long-term capital gain		316,213
Gross unrealized appreciation on investment securities		14,715,466
Gross unrealized depreciation on investment securities	<2,326,688>
Net unrealized appreciation on investment securities		12,388,778
Cost of investment securities		37,864,299

*These deferrals are considered incurred in the subsequent year.

	Year ended December 31, 2007						Year ended December 31, 2006
Share class	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid

Class A	$	809,465	$	1,788,460	$	2,597,925	$	415,933	$	1,209,190	$	1,625,123
Class B		23,044		76,989		100,033		8,802		53,464		62,266
Class C		26,701		93,931		120,632		7,248		51,882		59,130
Class F		61,524		146,701		208,225		18,703		68,161		86,864
Class 529-A		12,265		29,043		41,308		4,668		15,407		20,075
Class 529-B		998		3,671		4,669		294		2,243		2,537
Class 529-C		2,393		8,837		11,230		603		4,713		5,316
Class 529-E		487		1,322		1,809		180		752		932
Class 529-F		404		908		1,312		130		417		547
Class R-1		710		2,590		3,300		113		882		995
Class R-2		6,021		21,466		27,487		1,503		10,912		12,415
Class R-3		18,381		52,112		70,493		4,196		19,585		23,781
Class R-4		16,207		39,566		55,773		4,339		16,233		20,572
Class R-5		20,144		45,156		65,300		6,555		18,059		24,614
Total	$	998,744	$	2,310,752	$	3,309,496	$	473,267	$	1,471,900	$	1,945,167

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

	Sales(*)				Reinvestments of dividends and distributions				Repurchases(*)						Net increase
Share class	Amount		Shares		Amount		Shares		Amount			Shares			Amount		Shares

Year ended December 31, 2007
Class A	$	6,456,455		150,249	$	2,483,027		58,072	$	(4,147,003	)		(96,202	)	$	4,792,479		112,119
Class B		235,580		5,496		96,689		2,265		(166,258	)		(3,864	)		166,011		3,897
Class C		687,356		16,009		116,095		2,721		(205,156	)		(4,780	)		598,295		13,950
Class F		1,620,221		37,361		185,210		4,331		(467,079	)		(10,793	)		1,338,352		30,899
Class 529-A		195,316		4,545		41,303		966		(30,624	)		(708	)		205,995		4,803
Class 529-B		15,494		361		4,669		109		(3,171	)		(73	)		16,992		397
Class 529-C		63,670		1,483		11,229		263		(12,819	)		(297	)		62,080		1,449
Class 529-E		7,666		179		1,809		42		(1,862	)		(43	)		7,613		178
Class 529-F		9,733		225		1,312		31		(2,366	)		(55	)		8,679		201
Class R-1		40,043		927		3,279		77		(10,137	)		(236	)		33,185		768
Class R-2		238,540		5,572		27,471		644		(101,887	)		(2,364	)		164,124		3,852
Class R-3		733,841		17,019		70,429		1,648		(193,827	)		(4,485	)		610,443		14,182
Class R-4		506,361		11,794		55,763		1,306		(143,084	)		(3,308	)		419,040		9,792
Class R-5		547,603		12,544		63,750		1,490		(93,997	)		(2,173	)		517,356		11,861
Total net increase
(decrease)	$	11,357,879		263,764	$	3,162,035		73,965	$	(5,579,270	)		(129,381	)	$	8,940,644		208,348

Year ended December 31, 2006
Class A	$	5,807,510		150,813	$	1,556,073		39,076	$	(2,898,417	)		(75,162	)	$	4,465,166		114,727
Class B		242,131		6,302		60,167		1,507		(123,484	)		(3,209	)		178,814		4,600
Class C		551,355		14,335		57,032		1,428		(122,224	)		(3,178	)		486,163		12,585
Class F		1,130,387		29,210		74,949		1,878		(172,348	)		(4,462	)		1,032,988		26,626
Class 529-A		144,288		3,732		20,072		504		(16,375	)		(422	)		147,985		3,814
Class 529-B		13,817		359		2,537		63		(1,745	)		(45	)		14,609		377
Class 529-C		46,215		1,198		5,315		132		(7,072	)		(183	)		44,458		1,147
Class 529-E		6,630		172		932		24		(651	)		(17	)		6,911		179
Class 529-F		5,683		146		547		14		(708	)		(18	)		5,522		142
Class R-1		14,244		369		983		24		(4,185	)		(109	)		11,042		284
Class R-2		147,153		3,832		12,407		310		(48,232	)		(1,252	)		111,328		2,890
Class R-3		325,070		8,397		23,740		595		(80,993	)		(2,087	)		267,817		6,905
Class R-4		234,425		5,947		20,545		515		(50,824	)		(1,308	)		204,146		5,154
Class R-5		187,718		4,875		23,765		597		(36,773	)		(950	)		174,710		4,522
Total net increase
(decrease)	$	8,856,626		229,687	$	1,859,064		46,667	$	(3,564,031	)		(92,402	)	$	7,151,659		183,952

(*) Includes exchanges between share classes of the fund.

			Income from investment operations(1)						Dividends and distributions
	Net asset value, beginning of year		Net investment income (2)		Net gains 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 year		Total return (3) (4)			Net assets, end of year (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 (2)(4)
Class A:
Year ended 12/31/2007	$	40.05	$	1.03	$	4.39	$	5.42	$	(.95	)	$	(2.07	)	$	(3.02	)	$	42.45		13.55	%	$	38,877		.60	%		.57	%		2.40	%
Year ended 12/31/2006		35.40		.62		6.16		6.78		(.56	)		(1.57	)		(2.13	)		40.05		19.24			32,187		.61			.58			1.60
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
Class B:
Year ended 12/31/2007		39.96		.70		4.38		5.08		(.62	)		(2.07	)		(2.69	)		42.35		12.70			1,667		1.36			1.33			1.63
Year ended 12/31/2006		35.33		.32		6.14		6.46		(.26	)		(1.57	)		(1.83	)		39.96		18.33			1,417		1.38			1.35			.83
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
Class C:
Year ended 12/31/2007		39.92		.70		4.36		5.06		(.60	)		(2.07	)		(2.67	)		42.31		12.65			2,053		1.41			1.38			1.62
Year ended 12/31/2006		35.30		.30		6.13		6.43		(.24	)		(1.57	)		(1.81	)		39.92		18.23			1,380		1.43			1.41			.77
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
Class F:
Year ended 12/31/2007		40.03		1.06		4.36		5.42		(.95	)		(2.07	)		(3.02	)		42.43		13.55			3,235		.61			.58			2.45
Year ended 12/31/2006		35.39		.62		6.15		6.77		(.56	)		(1.57	)		(2.13	)		40.03		19.21			1,815		.61			.58			1.58
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
Class 529-A:
Year ended 12/31/2007		40.02		1.03		4.36		5.39		(.92	)		(2.07	)		(2.99	)		42.42		13.49			643		.66			.64			2.37
Year ended 12/31/2006		35.38		.60		6.15		6.75		(.54	)		(1.57	)		(2.11	)		40.02		19.16			414		.66			.63			1.55
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
Class 529-B:
Year ended 12/31/2007		40.01		.66		4.38		5.04		(.57	)		(2.07	)		(2.64	)		42.41		12.57			80		1.48			1.46			1.53
Year ended 12/31/2006		35.37		.27		6.16		6.43		(.22	)		(1.57	)		(1.79	)		40.01		18.18			60		1.50			1.47			.71
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
Class 529-C:
Year ended 12/31/2007		40.00		.67		4.37		5.04		(.57	)		(2.07	)		(2.64	)		42.40		12.58			195		1.48			1.45			1.56
Year ended 12/31/2006		35.37		.28		6.14		6.42		(.22	)		(1.57	)		(1.79	)		40.00		18.16			126		1.49			1.47			.71
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
Class 529-E:
Year ended 12/31/2007		40.00		.88		4.38		5.26		(.79	)		(2.07	)		(2.86	)		42.40		13.14			29		.97			.95			2.05
Year ended 12/31/2006		35.36		.48		6.15		6.63		(.42	)		(1.57	)		(1.99	)		40.00		18.80			20		.97			.95			1.23
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

Class 529-F:
Year ended 12/31/2007	$	40.00	$	1.13	$	4.33	$	5.46	$	(1.00	)	$	(2.07	)	$	(3.07	)	$	42.39		13.69	%	$	20		.47	%		.45	%		2.62	%
Year ended 12/31/2006		35.36		.67		6.15		6.82		(.61	)		(1.57	)		(2.18	)		40.00		19.40			11		.47			.45			1.73
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
Class R-1:
Year ended 12/31/2007		39.93		.72		4.33		5.05		(.60	)		(2.07	)		(2.67	)		42.31		12.62			57		1.44			1.42			1.67
Year ended 12/31/2006		35.31		.29		6.13		6.42		(.23	)		(1.57	)		(1.80	)		39.93		18.19			23		1.47			1.43			.74
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
Class R-2:
Year ended 12/31/2007		39.92		.70		4.34		5.04		(.59	)		(2.07	)		(2.66	)		42.30		12.61			471		1.46			1.40			1.62
Year ended 12/31/2006		35.29		.30		6.14		6.44		(.24	)		(1.57	)		(1.81	)		39.92		18.26			291		1.54			1.41			.77
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
Class R-3:
Year ended 12/31/2007		39.98		.92		4.34		5.26		(.79	)		(2.07	)		(2.86	)		42.38		13.17			1,157		.97			.94			2.12
Year ended 12/31/2006		35.35		.47		6.14		6.61		(.41	)		(1.57	)		(1.98	)		39.98		18.75			525		.99			.96			1.21
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
Class R-4:
Year ended 12/31/2007		39.99		1.05		4.34		5.39		(.92	)		(2.07	)		(2.99	)		42.39		13.51			879		.66			.64			2.42
Year ended 12/31/2006		35.36		.59		6.14		6.73		(.53	)		(1.57	)		(2.10	)		39.99		19.12			438		.67			.65			1.52
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
Class R-5:
Year ended 12/31/2007		40.06		1.18		4.34		5.52		(1.05	)		(2.07	)		(3.12	)		42.46		13.81			1,014		.37			.34			2.73
Year ended 12/31/2006		35.41		.71		6.16		6.87		(.65	)		(1.57	)		(2.22	)		40.06		19.50			481		.38			.35			1.83
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

Long-term capital gains	$	2,426,624,000
Qualified dividend income		100	%
Corporate dividends received deduction	$	548,280,000
U.S. government income that may be exempt from state taxation		10,314,000