UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-32
Fundamental Investors, Inc.
(Exact Name of Registrant as specified in charter)
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 421-9360
Date of fiscal year end: December 31, 2005
Date of reporting period: June 30, 2005
Patrick F. Quan
Secretary
Fundamental Investors, Inc.
P.O. Box 7650, One Market, Steuart Tower
San Francisco, California 94120
(name and address of agent for service)
Copies to:
Michael Glazer
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, California 90071
(Counsel for the Registrant)
<Page>
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
FUNDAMENTAL INVESTORS
[abstract illustration of building blocks with pictures of various items on
each block: house, hard hat, screwdriver, crane, corn cob, leaf, factory.
Building blocks are being analyzed, pushed and measured by individuals.]
Semi-annual report for the six months ended June 30, 2005
FUNDAMENTAL INVESTORS(SM) seeks long-term growth of capital and income primarily
through investments in common stocks.
This fund is one of the 29 American Funds. The organization ranks among the
nation's three largest mutual fund families. For more than seven decades,
Capital Research and Management Company,(SM) the American Funds adviser, has
invested with a long-term focus based on thorough research and attention to
risk.
FIGURES SHOWN ARE PAST RESULTS FOR CLASS A SHARES AND ARE NOT PREDICTIVE OF
RESULTS IN FUTURE PERIODS. CURRENT AND FUTURE RESULTS MAY BE LOWER OR HIGHER
THAN THOSE SHOWN. SHARE PRICES AND RETURNS WILL VARY, SO INVESTORS MAY LOSE
MONEY. INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY. FOR THE MOST CURRENT INFORMATION AND MONTH-END RESULTS, VISIT
AMERICANFUNDS.COM. FUND RESULTS SHOWN, UNLESS OTHERWISE INDICATED, ARE AT NET
ASSET VALUE. IF A SALES CHARGE (MAXIMUM 5.75%) HAD BEEN DEDUCTED, THE RESULTS
WOULD HAVE BEEN LOWER.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended June 30, 2005:
Class A shares 1 year 5 years 10 years
Reflecting 5.75% maximum sales charge +5.28% +1.01% +10.76%
The fund's investment adviser waived 5% of its management fees from September 1,
2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005.
Fund results shown reflect the waiver, without which they would have been lower.
Please see the Financial Highlights table on page 22 for details.
The fund's 30-day yield for Class A shares as of July 31, 2005, calculated in
accordance with the Securities and Exchange Commission formula, was 1.52%, which
reflects a fee waiver (1.50% without the fee waiver). The fund's distribution
rate for Class A shares as of that date was 1.56%. Both reflect the 5.75%
maximum sales charge. The SEC yield reflects the rate at which the fund is
earning income on its current portfolio of securities while the distribution
rate reflects the fund's past dividends paid to shareholders. Accordingly, the
fund's SEC yield and distribution rate may differ.
Results for other share classes can be found on page 5. Please see the inside
back cover for important information about other share classes.
Investing outside the United States is subject to additional risks, such as
currency fluctuations and political instability, which are detailed in the
fund's prospectus.
FELLOW SHAREHOLDERS:
[abstract illustration of a man holding a ruler larger than himself]
Despite an investment environment characterized by inflation worries, rising oil
prices and concerns about the durability of the global economic recovery,
Fundamental Investors finished in positive territory for the six months ended
June 30, 2005. Shares of the fund rose 0.8% for those who reinvested dividends.
This total return was slightly higher than those of the fund's primary
benchmarks, the Lipper Large-Cap Value Funds Index, which recorded a gain of
0.5%, and the unmanaged Standard & Poor's 500 Composite Index (-0.8%), a broad
measure of U.S. stocks.
Extending the time period to include the past 12 months, Fundamental Investors'
11.7% total return was significantly ahead of those posted by both the Lipper
Value index (+8.8%) and the S&P 500 (+6.3%).
We believe in maintaining a long-term perspective when it comes to your
investments. So while we recognize the importance of short-term results, we are
more gratified by the advantage Fundamental Investors has maintained over its
benchmarks for longer, more meaningful periods, as shown in the table below.
[Begin Sidebar]
Results at a glance
Returns for periods ended June 30, 2005, with all distributions reinvested.
Total returns Average annual total returns
6 months 12 months 5 years 10 years Lifetime(1)
Fundamental Investors +0.8% +11.7% +2.2% +11.4% +13.9%
Lipper Large-Cap Value Funds Index +0.5 +8.8 +1.9 +9.5 +12.8
Lipper Large-Cap Core Funds Index -1.0 +4.8 -3.5 +8.5 --(2)
Standard & Poor's 500
Composite Index(3) -0.8 +6.3 -2.4 +9.9 +13.1
(1) Since Capital Research and Management Company began managing the fund on August 1, 1978.
(2) Index began on December 29, 1978.
(3) Unmanaged.
[End Sidebar]
Relatively flat markets highlight the value of the income component of the
fund's objective. During the six months, Fundamental Investors paid dividends
totaling 20 cents a share, which accounted for a considerable portion of the
fund's positive return.
With growing numbers of investors rediscovering the benefits of income, and
rising corporate profits leading to increased payouts, the dividend culture
seems to be strengthening -- a development that could benefit the fund going
forward.
RUNNING IN PLACE
A stock market that had surged in the fall of 2004 began to languish in the new
year as investors questioned whether the recent earnings recovery would taper
off, and disappointing economic indicators sparked doubts about the global
economy's strength. Additionally, rising oil prices and inflation fears -- and
the Federal Reserve Board's methodical ratcheting up of the federal funds rate
in response to those fears -- weighed on investors' minds. Despite these
concerns, the period concluded on a brighter note, with U.S. markets on the rise
as June saw consumer and corporate spending figures take a turn for the better.
The effect of currency translation had benefited the fund for more than two
years, but detracted from results during the period, due to the dollar's
considerable strengthening against the pound, euro and yen. In spite of the
currency effect, the fund's non-U.S. holdings, which represent 25.9% of the
portfolio, strongly supported results and we continue to believe that our
ability to seek opportunities in non-U.S. markets is of long-term benefit to
shareholders.
PORTFOLIO STRENGTH FROM FAMILIAR QUARTERS
Results for the fund's top 10 holdings exemplify conditions in the overall
market: Five gained in value and five finished in negative territory.
Among industry sectors, energy was the greatest positive contributor, just as it
had been for the last few reporting periods. Over the past year, the price of
oil has continued to rise in response to strong global demand. And despite
having steadily appreciated during the prior year, we believed that stocks of
oil companies remained attractively valued at the outset of the reporting
period, since most did not appear to fully reflect the significantly higher
price of crude. For the six months, all the fund's holdings in the sector
gained; most went up sharply. One of the leaders was Suncor Energy (+33.6%), the
Canadian oil sands company we highlighted in the most recent annual report. In
addition to being the fund's biggest holding, it was one of its largest gainers.
Other notable movers included ConocoPhillips (+32.4%) and Royal Dutch Petroleum
(+13.1%).
Stocks of metals and mining companies benefited from the continuing appetite for
commodities in the developing world. Substantial price gains in a number of our
positions, like BHP Billiton (+15.3%) and Potash Corp. (+15.1%), helped offset
the negative figures turned in by a handful of others, including Alcoa (-16.8%)
and Freeport-McMoRan Copper & Gold (-2.8%). We have maintained a significant
concentration in the sector, and took advantage of elevated prices to sell some
of our holdings -- realizing substantial gains after a long climb.
Utilities and retail stocks also showed relative strength.
On the other side of the ledger, industrials, which generally prosper during
periods of economic expansion, suffered from the widespread perception that
global growth had hit a soft patch. A number of the fund's larger holdings felt
the impact: Parker Hannifin (-18.1%), Deere (-12.0%) and General Electric
(-5.1%) all fell.
In addition, telecommunication services stocks were down almost across the
board. Despite generally healthy profitability, improved balance sheets and
strong cash flows, negative investor sentiment regarding the industry's future
competitive environment hampered results. SBC Communications, the fund's
ninth-largest holding, lost 7.8%; shares of France Telecom fell 11.5% and
Verizon Communications (-14.7%) finished well into negative territory.
LOOKING AHEAD
Whether markets are rising, falling or seem to be standing still, our approach
remains the same. We conduct intense, fundamental research in order to uncover
reasonably priced companies with solid long-term prospects.
Based on that research, we are relatively optimistic about the current
investment climate. Stock valuations are reasonable, dividends are reasserting
their prominence, and the economy appears strong. With these conditions in mind
and our focus on the long term, we will continue to seek out the best
opportunities for Fundamental Investors and its shareholders.
We thank you for your continuing support.
Sincerely,
/s/ James F. Rothenberg /s/ Dina N. Perry
James F. Rothenberg Dina N. Perry
Vice Chairman and President
Principal Executive Officer
August 11, 2005
Henry E. Riggs, an independent Director of the fund since 1989, has been elected
non-executive chairman of the Board. James F. Rothenberg, the previous chairman,
has been elected vice chairman and will remain principal executive officer. As
independent Board chair pursuant to recently adopted Securities and Exchange
Commission regulations, Mr. Riggs will chair Board meetings, including executive
sessions of the independent Directors, and will be responsible for Board
agendas, but will not have other executive or management responsibilities with
the fund. He will remain unaffiliated with Capital Research and Management
Company, the fund's investment adviser, and any of its affiliates.
For current information about the fund, visit americanfunds.com.
OTHER SHARE CLASS RESULTS unaudited
Class B, Class C, Class F and Class 529
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Average annual total returns for periods ended June 30, 2005:
1 year 5 years Life of class
Class B shares
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only
if shares are sold within six years of purchase +5.86% +1.07% +2.26%(1)
Not reflecting CDSC +10.86% +1.43% +2.43%(1)
Class C shares
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase +9.80% -- +3.78%(2)
Not reflecting CDSC +10.80% -- +3.78%(2)
Class F shares(3)
Not reflecting annual asset-based fee charged
by sponsoring firm +11.61% -- +4.60%(2)
Class 529-A shares(4)
Reflecting 5.75% maximum sales charge +5.14% -- +5.82%(5)
Not reflecting maximum sales charge +11.57% -- +7.69%(5)
Class 529-B shares(4)
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +5.67% -- +6.56%(6)
Not reflecting CDSC +10.67% -- +7.32%(6)
Class 529-C shares(4)
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase +9.65% -- +6.78%(5)
Not reflecting CDSC +10.65% -- +6.78%(5)
Class 529-E shares(3,4) +11.22% -- +5.67%(7)
Class 529-F shares(3,4)
Not reflecting annual asset-based fee charged
by sponsoring firm +11.54% -- +18.36%(8)
The fund's investment adviser waived 5% of its management fees from September 1,
2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005.
In addition, the fund's principal underwriter also waived fees related to
distribution services for Class 529-F. Fund results shown reflect these waivers,
without which they would have been lower. Please see the Financial Highlights
table on page 22 for details.
(1) From March 15, 2000, when Class B shares were first sold.
(2) From March 15, 2001, when Class C and Class F shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Results shown do not reflect the $10 initial account setup fee and an
annual $10 account maintenance fee.
(5) From February 15, 2002, when Class 529-A and Class 529-C shares were first
sold.
(6) From February 19, 2002, when Class 529-B shares were first sold.
(7) From March 7, 2002, when Class 529-E shares were first sold.
(8) From September 23, 2002, when Class 529-F shares were first sold.
SUMMARY INVESTMENT PORTFOLIO, June 30, 2005 unaudited
The following summary investment portfolio is designed to streamline the report
and help investors better focus on a fund's principal holdings. For details on
how to obtain a complete schedule of portfolio holdings, please see the inside
back cover.
[begin pie chart]
Percent of
Industry sector diversification net assets
Energy 17.77 %
Industrials 12.68 %
Financials 11.74 %
Information technology 9.90 %
Consumer discretionary 9.44 %
Other industries 32.94 %
Convertible securities .65 %
Bonds & notes .36 %
Cash & equivalents 4.52 %
[end pie chart]
Market Percent
value of net
Common stocks - 94.47% Shares (000) assets
Energy - 17.77%
Suncor Energy Inc. 18,546,307 $ 875,399 3.56%
Royal Dutch Petroleum Co. (New York registered) 8,925,000 579,233 2.35
Exxon Mobil Corp. 5,000,000 287,350 1.17
Halliburton Co. 5,500,000 263,010 1.07
Norsk Hydro ASA 2,168,000 198,863
Norsk Hydro ASA (ADR) 700,000 63,504 1.07
LUKoil Holding (ADR) 7,000,000 257,670 1.05
Murphy Oil Corp. 3,940,000 205,786 .84
Baker Hughes Inc. 3,968,000 203,003 .82
ConocoPhillips 3,450,000 198,341 .81
CONSOL Energy Inc. (1) 3,700,000 198,246 .80
Unocal Corp. 2,928,664 190,510 .77
Other securities 852,331 3.46
4,373,246 17.77
Industrials - 12.68%
Deere & Co. 5,500,000 360,195 1.46
Union Pacific Corp. 4,200,000 272,160 1.11
Caterpillar Inc. 2,700,000 257,337 1.05
General Electric Co. 7,100,000 246,015 1.00
General Dynamics Corp. 1,772,900 194,203 .79
Deutsche Post AG 8,275,000 193,238 .78
Raytheon Co. 4,461,372 174,529 .71
Parker Hannifin Corp. 2,800,000 173,628 .70
Tyco International Ltd. 5,750,000 167,900 .68
Other securities 1,082,936 4.40
3,122,141 12.68
Financials - 11.74%
Washington Mutual, Inc. 8,450,000 343,831 1.40
Fannie Mae 5,567,800 325,160 1.32
Citigroup Inc. 5,150,000 238,085 .97
Allied Irish Banks, PLC 9,600,000 205,382 .83
Bank of Ireland 10,165,000 164,884 .67
Freddie Mac 2,025,000 132,091 .53
Other securities 1,481,701 6.02
2,891,134 11.74
Information technology - 9.90%
Microsoft Corp. 21,225,000 527,229 2.14
Texas Instruments Inc. 11,963,024 335,802 1.36
Automatic Data Processing, Inc. 4,600,000 193,062 .79
International Business Machines Corp. 2,200,000 163,240 .66
Other securities 1,217,618 4.95
2,436,951 9.90
Consumer discretionary - 9.44%
Lowe's Companies, Inc. 6,015,000 350,193 1.42
Time Warner Inc. (2) 17,425,000 291,172 1.18
Target Corp. 4,890,000 266,065 1.08
Limited Brands, Inc. 10,815,980 231,678 .94
News Corp. Inc. 12,290,000 198,852 .81
Other securities 985,607 4.01
2,323,567 9.44
Materials - 8.36%
Dow Chemical Co. 8,836,700 393,498 1.60
BHP Billiton Ltd. 17,995,030 248,517 1.01
Alcoa Inc. 7,973,800 208,355 .85
Rio Tinto PLC 6,000,000 183,583 .75
Weyerhaeuser Co. 2,883,000 183,503 .74
E.I. du Pont de Nemours and Co. 3,850,000 165,589 .67
Other securities 675,245 2.74
2,058,290 8.36
Telecommunication services - 7.67%
SBC Communications Inc. 14,250,000 338,438 1.38
Verizon Communications Inc. 5,000,000 172,750 .70
France Telecom, SA 5,800,000 169,373 .69
Other securities 1,206,577 4.90
1,887,138 7.67
Health care - 5.82%
Merck & Co., Inc. 8,200,000 252,560 1.03
Roche Holding AG 1,949,316 246,437 1.00
Sanofi-Aventis 2,192,600 179,948 .73
Other securities 753,980 3.06
1,432,925 5.82
Consumer staples - 5.11%
Altria Group, Inc. 8,114,800 524,703 2.13
Other securities 733,025 2.98
1,257,728 5.11
Utilities - 4.97%
Dominion Resources, Inc. 3,390,000 248,792 1.01
Questar Corp. 3,000,000 197,700 .80
Other securities 776,968 3.16
1,223,460 4.97
Miscellaneous - 1.01%
Other common stocks in initial period of acquisition 247,741 1.01
Total common stocks (cost: $18,475,737,000) 23,254,321 94.47
Convertible securities - 0.65%
Total convertible securities (cost: $143,177,000) 159,140 .65
Bonds & notes - 0.36%
Total bonds & notes (cost: $106,822,000) 88,404 .36
Principal amount
Short-term securities - 4.53% (000)
Freddie Mac 3.04%-3.08% due 7/26-8/2/2005 $ 169,755 169,325 .69
CAFCO, LLC 3.04%-3.07% due 7/6-7/20/2005 (1) 49,800 49,746
Ciesco LLC 3.125% due 8/3/2005 15,600 15,555 .31
Citicorp 3.11% due 7/25/2005 10,800 10,777
Edison Asset Securitization LLC 3.15% due 8/5/2005(1) 22,300 22,230 .09
Other securities 846,264 3.44
Total short-term securities (cost: $1,113,872,000) 1,113,897 4.53
Total investment securities (cost: $19,839,608,000) 24,615,762 100.01
Other assets less liabilities (997) (0.01)
Net assets $24,614,765 100.00%
"Miscellaneous" securities include holdings in their initial period of
acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the
summary investment portfolio.
(1) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities, including
those in "Other securities" in the summary investment portfolio,
was $1,069,415,000, which represented 4.34% of the net assets of the fund.
(2) Security did not produce income during the last 12 months.
ADR = American Depositary Receipts
See Notes to Financial Statements
FINANCIAL STATEMENTS
Statement of assets and liabilities unaudited
at June 30, 2005 (dollars and shares in thousands,
except per-share amounts)
Assets:
Investment securities at market (cost: $19,839,608) $24,615,762
Cash 2,374
Receivables for:
Sales of investments $31,806
Sales of fund's shares 26,431
Dividends and interest 43,967 102,204
24,720,340
Liabilities:
Payables for:
Purchases of investments 72,306
Repurchases of fund's shares 18,708
Investment advisory services 4,852
Services provided by affiliates 7,603
Deferred Directors' compensation 1,348
Other fees and expenses 758 105,575
Net assets at June 30, 2005 $24,614,765
Net assets consist of:
Capital paid in on shares of capital stock $20,140,439
Undistributed net investment income 190,019
Accumulated net realized loss (491,347)
Net unrealized appreciation 4,775,654
Net assets at June 30, 2005 $24,614,765
Total authorized capital stock - 1,000,000 shares, $1.00 par value (762,019
total shares outstanding)
Net assets Shares outstanding Net asset value per share
(1)
Class A $21,600,914 668,591 $32.31
Class B 976,236 30,274 32.25
Class C 623,520 19,353 32.22
Class F 499,145 15,456 32.29
Class 529-A 174,696 5,410 32.29
Class 529-B 32,657 1,012 32.29
Class 529-C 54,755 1,696 32.28
Class 529-E 8,817 273 32.28
Class 529-F 3,082 95 32.27
Class R-1 8,543 265 32.23
Class R-2 118,551 3,680 32.22
Class R-3 163,581 5,070 32.27
Class R-4 136,197 4,220 32.27
Class R-5 214,071 6,624 32.32
(1) Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for classes A and
529-A, for which the maximum offering prices per share were $34.28 and
$34.26, respectively.
See Notes to Financial Statements
STATEMENT OF OPERATIONS unaudited
for the six months ended June 30, 2005 (dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding
tax of $10,979) $283,799
Interest 30,048 $313,847
Fees and expenses:
Investment advisory services 31,946
Distribution services 35,436
Transfer agent services 10,319
Administrative services 1,911
Reports to shareholders 230
Registration statement and prospectus 469
Postage, stationery and supplies 1,392
Directors' compensation 173
Auditing and legal 56
Custodian 853
State and local taxes 1
Other 109
Total expenses before reimbursements/waivers 82,895
Less reimbursement/waiver of expenses:
Investment advisory services 2,400
Distribution services 1
Administrative services 115
Total expenses after reimbursement/waiver of expenses 80,379
Net investment income 233,468
Net realized gain and unrealized
depreciation on investments
and non-U.S. currency:
Net realized gain (loss) on:
Investments 328,970
Non-U.S. currency transactions (1,707) 327,263
Net unrealized depreciation on:
Investments (370,315)
Non-U.S. currency translations (24) (370,339)
Net realized gain and
unrealized depreciation
on investments and non-U.S. currency (43,076)
Net increase in net assets resulting
from operations $190,392
See Notes to Financial Statements
Statements of changes in net assets (dollars in thousands)
Six months Year ended
ended June 30, December 31,
2005* 2004
Operations:
Net investment income $233,468 $438,828
Net realized gain on investments and
non-U.S. currency transactions 327,263 611,565
Net unrealized (depreciation) appreciation
on investments and non-U.S. currency translations (370,339) 1,889,494
Net increase in net assets
resulting from operations 190,392 2,939,887
Dividends paid to shareholders from net investment income and non-U.S. currency gains (144,187) (404,177)
Capital share transactions 351,138 497,675
Total increase in net assets 397,343 3,033,385
Net assets:
Beginning of period 24,217,422 21,184,037
End of period (including undistributed
net investment income: $190,019 and $100,738, respectively) $24,614,765 $24,217,422
*Unaudited
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS unaudited
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Fundamental Investors, Inc. (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The fund seeks long-term growth of capital and income primarily through
investments in common stocks.
The fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica(R) savings plan share classes and five retirement plan share
classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C,
529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be
utilized to save for college education. The five retirement plan share classes
(R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry
any conversion rights. The fund's share classes are described below:
- ---------------------------------------------------------------------------------------------------------
Share class Initial sales charge Contingent deferred sales Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to 0% Classes B and 529-B convert to
for redemptions within classes A and 529-A,
six years of purchase respectively, after eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation proceeds. Each share class has identical voting rights, except for
the exclusive right to vote on matters affecting only its class. Share classes
have different fees and expenses ("class-specific fees and expenses"), primarily
due to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
CollegeAmerica is a registered trademark of the Virginia College Savings
Plan.(sm)
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official
closing price of, or the last reported sale price on, the exchange or
market on which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Prices for each security are
taken from the principal exchange or market in which the security
trades. Fixed-income securities, including short-term securities
purchased with more than 60 days left to maturity, are valued at
prices obtained from an independent pricing service when such prices
are available. However, where the investment adviser deems it
appropriate, such securities will be valued at the mean quoted bid and
asked prices (or bid prices, if asked prices are not available) or at
prices for securities of comparable maturity, quality and type.
Securities with both fixed-income and equity characteristics, or
equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by
the investment adviser. Short-term securities purchased within 60 days
to maturity are valued at amortized cost, which approximates market
value. Short-term securities originally purchased with maturities
greater than 60 days but that now have 60 days or less remaining to
maturity, are valued based on the amortized difference between the par
value and the market value on the 61st day. The ability of the issuers
of the debt securities held by the fund to meet their obligations may
be affected by economic developments in a specific industry, state or
region. Securities and other assets for which representative market
quotations are not readily available are fair valued as determined in
good faith under procedures adopted by authority of the fund's Board
of Directors. Various factors may be reviewed in order to make a good
faith determination of a security's fair value. These factors include,
but are not limited to, the type and cost of the security; contractual
or legal restrictions on resale of the security; relevant financial or
business developments of the issuer; actively traded similar or
related securities; conversion or exchange rights on the security;
related corporate actions; significant events occurring after the
close of trading in the security; and changes in overall market
conditions.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. Market
discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) and realized and unrealized gains
and losses are allocated daily among the various share classes based
on their relative net assets. Class-specific fees and expenses, such
as distribution, administrative and shareholder services, are charged
directly to the respective share class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions paid to shareholders are recorded on the ex-dividend
date.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including
investment securities, denominated in non-U.S. currencies are
translated into U.S. dollars at the exchange rates in effect at the
end of the reporting period. Purchases and sales of investment
securities and income and expenses are translated into U.S. dollars at
the exchange rates on the dates of such transactions. In the
accompanying financial statements, the effects of changes in non-U.S.
exchange rates on investment securities are included with the net
realized gain or loss and net unrealized appreciation or depreciation
on investments. The realized gain or loss and unrealized appreciation
or depreciation resulting from all other transactions denominated in
non-U.S. currencies are disclosed separately.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. withholding
taxes paid. Gains realized by the fund on the sale of securities in certain
countries are subject to non-U.S. taxes. The fund records a liability based on
unrealized gains to provide for potential non-U.S. taxes payable upon the sale
of these securities. As of June 30, 2005, non-U.S. taxes provided on unrealized
gains were $549,000.
3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
DISTRIBUTIONS - Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
non-U.S. currency gains and losses; short-term capital gains and losses; capital
losses related to sales of certain securities within 30 days of purchase;
unrealized appreciation of certain investments in non-U.S. securities; deferred
expenses; cost of investments sold; and net capital losses. The fiscal year in
which amounts are distributed may differ from the year in which the net
investment income and net realized gains are recorded by the fund for financial
reporting purposes. As of June 30, 2005, the cost of investment securities for
federal income tax purposes was $19,850,947,000.
As of June 30, 2005, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Undistributed net investment income and non-U.S. currency gains $190,445
Accumulated short-term capital losses (807,546)
Undistributed long-term capital gains 328,461
Gross unrealized appreciation on investment securities 5,799,432
Gross unrealized depreciation on investment securities (1,034,617)
Net unrealized appreciation on investment securities 4,764,815
Accumulated short-term capital losses above include capital loss carryforwards
of $66,479,000 and $740,962,000 expiring in 2010 and 2011, respectively. The
capital loss carryforwards will be used to offset any capital gains realized by
the fund in the current year or in future years through the expiration dates.
The fund will not make distributions from capital gains while capital loss
carryforwards remain. During the six months ended June 30, 2005, the fund
realized, on a tax basis, a net capital gain of $328,356,000.
Ordinary income distributions paid to shareholders from net investment income
and non-U.S. currency gains were as follows (dollars in thousands):
Share class Six months ended June 30, 2005 Year ended December 31, 2004
Class A $ 133,530 $ 372,550
Class B 2,474 9,991
Class C 1,329 5,262
Class F 2,819 7,307
Class 529-A 921 2,122
Class 529-B 51 234
Class 529-C 85 363
Class 529-E 34 89
Class 529-F 16 30
Class R-1 18 51
Class R-2 253 831
Class R-3 645 1,486
Class R-4 692 1,232
Class R-5 1,320 2,629
Total $ 144,187 $ 404,177
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
Capital Research and Management Company ("CRMC"), the fund's investment adviser,
is the parent company of American Funds Service Company ("AFS"), the fund's
transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal
underwriter of the fund's shares.
INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement
with CRMC provides for monthly fees accrued daily. These fees are based on a
declining series of annual rates beginning with 0.390% on the first $1 billion
of daily net assets and decreasing to 0.240% on such assets in excess of $27
billion. CRMC is currently waiving a portion of these fees. At the beginning of
the period, CRMC was waiving 5% of these fees and increased the waiver to 10% on
April 1, 2005. During the six months ended June 30, 2005, the total investment
advisory services fees waived by CRMC were $2,400,000. As a result, the fee
shown on the accompanying financial statements of $31,946,000, which was
equivalent to an annualized rate of 0.267%, was reduced to $29,546,000, or
0.247% of average daily net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily
net assets, ranging from 0.25% to 1.00% as noted below. In some cases,
the Board of Directors has approved expense amounts lower than plan
limits. All share classes may use up to 0.25% of average daily net
assets to pay service fees, or to compensate AFD for paying service
fees, to firms that have entered into agreements with AFD for
providing certain shareholder services. Expenses in excess of these
amounts, up to approved limits, may be used to compensate dealers and
wholesalers for shares sold. AFD is currently waiving a portion of
these fees to the extent the amounts paid to qualified dealers or
advisers was less than the approved limit. During the six months ended
June 30, 2005, the total distribution services fees waived by AFD were
$1,000, which related to Class 529-F.
For classes A and 529-A, the Board of Directors has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses AFD
for amounts billed within the prior 15 months but only to the extent
that the overall annual expense limit of 0.25% is not exceeded. As of
June 30, 2005, there were no unreimbursed expenses subject to
reimbursement for classes A and 529-A.
------------------------------------------------ ----------------------------- -----------------------------
Share class Currently approved limits Plan limits
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.25% 0.25%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes A and B. Under this agreement, these share classes
compensate AFS for transfer agent services including shareholder
recordkeeping, communications and transaction processing. AFS is also
compensated for certain transfer agent services provided to all other
share classes from the administrative services fees paid to CRMC
described below/on the next page.
ADMINISTRATIVE SERVICES - The fund has an administrative services
agreement with CRMC to provide transfer agent and other related
shareholder services for all classes of shares other than classes A
and B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for
Class R-5) based on its respective average daily net assets. Each
relevant class also pays AFS additional amounts for certain transfer
agent services. CRMC and AFS may use these fees to compensate third
parties for performing these services. During the six months ended
June 30, 2005, CRMC agreed to pay AFS a portion of these fees for
classes R-1 and R-2. For the six months ended June 30, 2005, the total
administrative services fees paid by CRMC were $1,000 and $114,000 for
classes R-1 and R-2, respectively. Administrative services fees are
presented gross of any payments made by CRMC. Each 529 share class is
subject to an additional annual administrative services fee of 0.10%
of its respective average daily net assets; this fee is payable to the
Commonwealth of Virginia for the maintenance of the CollegeAmerica
plan. Although these amounts are included with administrative services
fees in the accompanying financial statements, the Commonwealth of
Virginia is not considered a related party.
Expenses under the agreements described above for the six months ended
June 30, 2005, were as follows (dollars in thousands):
--------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent Administrative services
services services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
CRMC Transfer agent Commonwealth of
administrative services Virginia
services administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class A $25,667 $9,838 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class B 4,766 481 Not applicable Not applicable Not applicable
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class C 2,926 Included $439 $70 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class F 587 Included 352 32 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-A 145 Included 118 12 $79
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-B 152 Included 23 7 15
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-C 246 Included 37 9 25
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-E 20 Included 6 -* 4
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class 529-F 3 Included 2 -* 1
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-1 37 Included 5 3 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-2 396 Included 79 255 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-3 358 Included 108 58 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-4 133 Included 80 3 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 87 2 Not applicable
in
administrative
services
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Total $35,436 $10,319 $1,336 $451 $124
--------------------------------------------------------------------------------------------------------------
* Amount less than one thousand.
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to
defer the cash payment of part or all of their compensation. These deferred
amounts, which remain as liabilities of the fund, are treated as if invested in
shares of the fund or other American Funds. These amounts represent general,
unsecured liabilities of the fund and vary according to the total returns of the
selected funds. Directors' compensation of $173,000, shown on the accompanying
financial statements, includes $148,000 in current fees (either paid in cash or
deferred) and a net increase of $25,000 in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Share class Sales(1) Reinvestments of dividends
Amount Shares Amount Shares
Six months ended June 30, 2005
Class A $ 1,271,562 39,980 $ 125,912 3,928
Class B 50,398 1,589 2,383 74
Class C 94,134 2,970 1,270 40
Class F 92,968 2,922 2,461 77
Class 529-A 30,863 971 921 29
Class 529-B 3,596 113 51 2
Class 529-C 10,733 337 85 3
Class 529-E 1,460 46 34 1
Class 529-F 743 23 16 1
Class R-1 2,954 93 18 1
Class R-2 35,383 1,116 253 8
Class R-3 52,424 1,648 643 20
Class R-4 66,194 2,118 692 22
Class R-5 85,035 2,666 1,165 36
Total net increase
(decrease) $ 1,798,447 56,592 $ 135,904 4,242
Year ended December 31, 2004
Class A $ 2,128,875 71,901 $ 351,340 11,834
Class B 110,433 3,739 9,629 320
Class C 147,896 5,005 5,035 167
Class F 187,702 6,362 6,418 216
Class 529-A 46,582 1,571 2,122 71
Class 529-B 8,121 274 234 8
Class 529-C 15,730 531 363 12
Class 529-E 2,339 79 89 3
Class 529-F 1,251 42 31 1
Class R-1 4,263 146 51 1
Class R-2 52,680 1,793 831 28
Class R-3 68,710 2,325 1,481 49
Class R-4 44,674 1,514 1,233 42
Class R-5 27,580 928 2,298 78
Total net increase
(decrease) $ 2,846,836 96,210 $ 381,155 12,830
Share class Repurchases(1) Net increase
Amount Shares Amount Shares
Six months ended June 30, 2005
Class A $ (1,375,119) (43,257) $ 22,355 651
Class B (49,215) (1,551) 3,566 112
Class C (39,713) (1,253) 55,691 1,757
Class F (60,600) (1,908) 34,829 1,091
Class 529-A (3,705) (116) 28,079 884
Class 529-B (398) (12) 3,249 103
Class 529-C (1,503) (48) 9,315 292
Class 529-E (114) (4) 1,380 43
Class 529-F (86) (3) 673 21
Class R-1 (604) (19) 2,368 75
Class R-2 (10,967) (345) 24,669 779
Class R-3 (14,626) (461) 38,441 1,207
Class R-4 (12,773) (402) 54,113 1,738
Class R-5 (13,790) (433) 72,410 2,269
Total net increase
(decrease) $ (1,583,213) (49,812) $ 351,138 11,022
Year ended December 31, 2004
Class A $ (2,413,347) (81,685) $ 66,868 2,050
Class B (86,500) (2,936) 33,562 1,123
Class C (57,179) (1,947) 95,752 3,225
Class F (88,450) (2,984) 105,670 3,594
Class 529-A (5,035) (170) 43,669 1,472
Class 529-B (586) (20) 7,769 262
Class 529-C (2,040) (68) 14,053 475
Class 529-E (190) (6) 2,238 76
Class 529-F (222) (8) 1,060 35
Class R-1 (915) (31) 3,399 116
Class R-2 (14,324) (486) 39,187 1,335
Class R-3 (23,310) (791) 46,881 1,583
Class R-4 (22,061) (723) 23,846 833
Class R-5 (16,157) (550) 13,721 456
Total net increase
(decrease) $ (2,730,316) (92,405) $ 497,675 16,635
(1) Includes exchanges between share classes of the fund.
6. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $3,369,540,000 and $2,715,856,000, respectively, during the six
months ended June 30, 2005.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
six months ended June 30, 2005, the custodian fee of $853,000, shown on the
accompanying financial statements, includes $11,000 that was offset by this
reduction, rather than paid in cash.
Financial highlights (1)
Income (loss) from investment operations(2)
Net
Net asset (losses) gains
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Six months ended 6/30/2005 (5) $32.25 $.32 $(.06) $.26
Year ended 12/31/2004 28.85 .61 3.35 3.96
Year ended 12/31/2003 22.23 .50 6.52 7.02
Year ended 12/31/2002 27.45 .42 (5.14) (4.72)
Year ended 12/31/2001 31.16 .40 (3.34) (2.94)
Year ended 12/31/2000 32.59 .42 .90 1.32
Class B:
Six months ended 6/30/2005 (5) 32.19 .20 (.06) .14
Year ended 12/31/2004 28.80 .38 3.35 3.73
Year ended 12/31/2003 22.19 .31 6.51 6.82
Year ended 12/31/2002 27.40 .23 (5.14) (4.91)
Year ended 12/31/2001 31.12 .18 (3.34) (3.16)
Period from 3/15/2000 to 12/31/2000 31.93 .15 1.02 1.17
Class C:
Six months ended 6/30/2005 (5) 32.17 .19 (.07) .12
Year ended 12/31/2004 28.78 .37 3.34 3.71
Year ended 12/31/2003 22.17 .30 6.51 6.81
Year ended 12/31/2002 27.39 .21 (5.14) (4.93)
Period from 3/15/2001 to 12/31/2001 28.52 .11 (1.13) (1.02)
Class F:
Six months ended 6/30/2005 (5) 32.24 .31 (.07) .24
Year ended 12/31/2004 28.84 .59 3.35 3.94
Year ended 12/31/2003 22.22 .49 6.52 7.01
Year ended 12/31/2002 27.44 .40 (5.14) (4.74)
Period from 3/15/2001 to 12/31/2001 28.56 .28 (1.12) (.84)
Class 529-A:
Six months ended 6/30/2005 (5) 32.24 .30 (.07) .23
Year ended 12/31/2004 28.84 .59 3.34 3.93
Year ended 12/31/2003 22.22 .50 6.52 7.02
Period from 2/15/2002 to 12/31/2002 26.71 .33 (4.34) (4.01)
Class 529-B:
Six months ended 6/30/2005 (5) 32.23 .17 (.06) .11
Year ended 12/31/2004 28.83 .33 3.35 3.68
Year ended 12/31/2003 22.22 .27 6.52 6.79
Period from 2/19/2002 to 12/31/2002 26.27 .16 (3.91) (3.75)
Class 529-C:
Six months ended 6/30/2005 (5) 32.23 .17 (.07) .10
Year ended 12/31/2004 28.83 .34 3.34 3.68
Year ended 12/31/2003 22.22 .27 6.52 6.79
Period from 2/15/2002 to 12/31/2002 26.71 .16 (4.34) (4.18)
Class 529-E:
Six months ended 6/30/2005 (5) 32.23 .25 (.07) .18
Year ended 12/31/2004 28.83 .49 3.35 3.84
Year ended 12/31/2003 22.21 .40 6.52 6.92
Period from 3/7/2002 to 12/31/2002 28.13 .26 (5.85) (5.59)
Class 529-F:
Six months ended 6/30/2005 (5) 32.22 .31 (.07) .24
Year ended 12/31/2004 28.82 .58 3.33 3.91
Year ended 12/31/2003 22.22 .45 6.52 6.97
Period from 9/23/2002 to 12/31/2002 21.22 .12 1.08 1.20
Financial highlights (1) (continued)
Income (loss) from investment operations(2)
Net
Net asset (losses) gains
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class R-1:
Six months ended 6/30/2005 (5) $32.18 $.19 $(.07) $.12
Year ended 12/31/2004 28.79 .37 3.33 3.70
Year ended 12/31/2003 22.19 .27 6.54 6.81
Period from 6/19/2002 to 12/31/2002 26.04 .13 (3.75) (3.62)
Class R-2:
Six months ended 6/30/2005 (5) 32.17 .19 (.07) .12
Year ended 12/31/2004 28.77 .38 3.34 3.72
Year ended 12/31/2003 22.18 .30 6.51 6.81
Period from 5/21/2002 to 12/31/2002 27.39 .14 (5.13) (4.99)
Class R-3:
Six months ended 6/30/2005 (5) 32.21 .26 (.06) .20
Year ended 12/31/2004 28.82 .50 3.33 3.83
Year ended 12/31/2003 22.21 .40 6.52 6.92
Period from 6/4/2002 to 12/31/2002 26.66 .18 (4.38) (4.20)
Class R-4:
Six months ended 6/30/2005 (5) 32.22 .31 (.07) .24
Year ended 12/31/2004 28.83 .60 3.33 3.93
Year ended 12/31/2003 22.21 .48 6.53 7.01
Period from 7/25/2002 to 12/31/2002 21.75 .22 .55 .77
Class R-5:
Six months ended 6/30/2005 (5) 32.26 .36 (.06) .30
Year ended 12/31/2004 28.86 .68 3.35 4.03
Year ended 12/31/2003 22.23 .56 6.53 7.09
Period from 5/15/2002 to 12/31/2002 27.62 .28 (5.34) (5.06)
Financial highlights (1)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class A:
Six months ended 6/30/2005 (5) $(.20) $- $(.20) $32.31
Year ended 12/31/2004 (.56) - (.56) 32.25
Year ended 12/31/2003 (.40) - (.40) 28.85
Year ended 12/31/2002 (.50) - (.50) 22.23
Year ended 12/31/2001 (.40) (.37) (.77) 27.45
Year ended 12/31/2000 (.40) (2.35) (2.75) 31.16
Class B:
Six months ended 6/30/2005 (5) (.08) - (.08) 32.25
Year ended 12/31/2004 (.34) - (.34) 32.19
Year ended 12/31/2003 (.21) - (.21) 28.80
Year ended 12/31/2002 (.30) - (.30) 22.19
Year ended 12/31/2001 (.19) (.37) (.56) 27.40
Period from 3/15/2000 to 12/31/2000 (.13) (1.85) (1.98) 31.12
Class C:
Six months ended 6/30/2005 (5) (.07) - (.07) 32.22
Year ended 12/31/2004 (.32) - (.32) 32.17
Year ended 12/31/2003 (.20) - (.20) 28.78
Year ended 12/31/2002 (.29) - (.29) 22.17
Period from 3/15/2001 to 12/31/2001 (.11) - (.11) 27.39
Class F:
Six months ended 6/30/2005 (5) (.19) - (.19) 32.29
Year ended 12/31/2004 (.54) - (.54) 32.24
Year ended 12/31/2003 (.39) - (.39) 28.84
Year ended 12/31/2002 (.48) - (.48) 22.22
Period from 3/15/2001 to 12/31/2001 (.28) - (.28) 27.44
Class 529-A:
Six months ended 6/30/2005 (5) (.18) - (.18) 32.29
Year ended 12/31/2004 (.53) - (.53) 32.24
Year ended 12/31/2003 (.40) - (.40) 28.84
Period from 2/15/2002 to 12/31/2002 (.48) - (.48) 22.22
Class 529-B:
Six months ended 6/30/2005 (5) (.05) - (.05) 32.29
Year ended 12/31/2004 (.28) - (.28) 32.23
Year ended 12/31/2003 (.18) - (.18) 28.83
Period from 2/19/2002 to 12/31/2002 (.30) - (.30) 22.22
Class 529-C:
Six months ended 6/30/2005 (5) (.05) - (.05) 32.28
Year ended 12/31/2004 (.28) - (.28) 32.23
Year ended 12/31/2003 (.18) - (.18) 28.83
Period from 2/15/2002 to 12/31/2002 (.31) - (.31) 22.22
Class 529-E:
Six months ended 6/30/2005 (5) (.13) - (.13) 32.28
Year ended 12/31/2004 (.44) - (.44) 32.23
Year ended 12/31/2003 (.30) - (.30) 28.83
Period from 3/7/2002 to 12/31/2002 (.33) - (.33) 22.21
Class 529-F:
Six months ended 6/30/2005 (5) (.19) - (.19) 32.27
Year ended 12/31/2004 (.51) - (.51) 32.22
Year ended 12/31/2003 (.37) - (.37) 28.82
Period from 9/23/2002 to 12/31/2002 (.20) - (.20) 22.22
Financial highlights (1) (continued)
Dividends and distributions
Dividends
(from net Distributions Total Net asset
investment (from capital dividends and value, end
income) gains) distributions of period
Class R-1:
Six months ended 6/30/2005 (5) $(.07) $- $(.07) $32.23
Year ended 12/31/2004 (.31) - (.31) 32.18
Year ended 12/31/2003 (.21) - (.21) 28.79
Period from 6/19/2002 to 12/31/2002 (.23) - (.23) 22.19
Class R-2:
Six months ended 6/30/2005 (5) (.07) - (.07) 32.22
Year ended 12/31/2004 (.32) - (.32) 32.17
Year ended 12/31/2003 (.22) - (.22) 28.77
Period from 5/21/2002 to 12/31/2002 (.22) - (.22) 22.18
Class R-3:
Six months ended 6/30/2005 (5) (.14) - (.14) 32.27
Year ended 12/31/2004 (.44) - (.44) 32.21
Year ended 12/31/2003 (.31) - (.31) 28.82
Period from 6/4/2002 to 12/31/2002 (.25) - (.25) 22.21
Class R-4:
Six months ended 6/30/2005 (5) (.19) - (.19) 32.27
Year ended 12/31/2004 (.54) - (.54) 32.22
Year ended 12/31/2003 (.39) - (.39) 28.83
Period from 7/25/2002 to 12/31/2002 (.31) - (.31) 22.21
Class R-5:
Six months ended 6/30/2005 (5) (.24) - (.24) 32.32
Year ended 12/31/2004 (.63) - (.63) 32.26
Year ended 12/31/2003 (.46) - (.46) 28.86
Period from 5/15/2002 to 12/31/2002 (.33) - (.33) 22.23
Financial highlights (1)
Ratio of expenses Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (3) (in millions) waivers waivers (4) net assets
Six months ended 6/30/2005 (5) .81% $21,601 .63% (6) .61% (6) 2.01% (6)
Year ended 12/31/2004 13.91 21,543 .63 .63 2.05
Year ended 12/31/2003 31.96 19,212 .66 .66 2.08
Year ended 12/31/2002 (17.34) 15,201 .67 .67 1.68
Year ended 12/31/2001 (9.55) 19,331 .65 .65 1.41
Year ended 12/31/2000 4.27 19,872 .64 .64 1.28
Class B:
Six months ended 6/30/2005 (5) .45 976 1.40 (6) 1.38 (6) 1.25 (6)
Year ended 12/31/2004 13.03 971 1.40 1.39 1.29
Year ended 12/31/2003 30.97 836 1.44 1.44 1.30
Year ended 12/31/2002 (17.97) 618 1.45 1.45 .91
Year ended 12/31/2001 (10.24) 653 1.42 1.42 .64
Period from 3/15/2000 to 12/31/2000 3.73 299 1.39 (6) 1.39 (6) .53 (6)
Class C:
Six months ended 6/30/2005 (5) .38 623 1.47 (6) 1.45 (6) 1.19 (6)
Year ended 12/31/2004 12.96 566 1.47 1.46 1.24
Year ended 12/31/2003 30.93 413 1.50 1.50 1.23
Year ended 12/31/2002 (18.06) 266 1.50 1.50 .86
Period from 3/15/2001 to 12/31/2001 (3.60) 203 1.55 (6) 1.55 (6) .49 (6)
Class F:
Six months ended 6/30/2005 (5) .75 499 .70 (6) .68 (6) 1.95 (6)
Year ended 12/31/2004 13.84 463 .70 .70 2.02
Year ended 12/31/2003 31.92 311 .71 .71 2.02
Year ended 12/31/2002 (17.38) 203 .72 .72 1.65
Period from 3/15/2001 to 12/31/2001 (2.97) 153 .74 (6) .74 (6) 1.31 (6)
Class 529-A:
Six months ended 6/30/2005 (5) .76 175 .74 (6) .72 (6) 1.92 (6)
Year ended 12/31/2004 13.77 146 .73 .72 2.00
Year ended 12/31/2003 31.99 88 .68 .68 2.03
Period from 2/15/2002 to 12/31/2002 (15.16) 39 .76 (6) .76 (6) 1.64 (6)
Class 529-B:
Six months ended 6/30/2005 (5) .35 33 1.59 (6) 1.57 (6) 1.07 (6)
Year ended 12/31/2004 12.83 29 1.59 1.59 1.13
Year ended 12/31/2003 30.74 19 1.61 1.61 1.10
Period from 2/19/2002 to 12/31/2002 (14.35) 8 1.62 (6) 1.62 (6) .77 (6)
Class 529-C:
Six months ended 6/30/2005 (5) .33 55 1.58 (6) 1.56 (6) 1.08 (6)
Year ended 12/31/2004 12.84 45 1.58 1.58 1.14
Year ended 12/31/2003 30.75 27 1.60 1.60 1.11
Period from 2/15/2002 to 12/31/2002 (15.74) 11 1.60 (6) 1.60 (6) .79 (6)
Class 529-E:
Six months ended 6/30/2005 (5) .61 9 1.06 (6) 1.04 (6) 1.60 (6)
Year ended 12/31/2004 13.40 7 1.06 1.05 1.66
Year ended 12/31/2003 31.42 4 1.08 1.08 1.61
Period from 3/7/2002 to 12/31/2002 (19.92) 2 1.07 (6) 1.07 (6) 1.35 (6)
Class 529-F:
Six months ended 6/30/2005 (5) .74 3 .81 (6) .63 (6) 2.02 (6)
Year ended 12/31/2004 13.73 2 .81 .80 1.95
Year ended 12/31/2003 31.72 1 .82 .82 1.81
Period from 9/23/2002 to 12/31/2002 5.65 - (7) .22 .22 .51
Financial highlights (1) (continued)
Ratio of expense Ratio of expenses
to average net to average net Ratio of
Net assets, assets before assets after net income
Total end of period reimbursements/ reimbursements/ to average
return (in millions) waivers waivers (4) net assets
Class R-1:
Six months ended 6/30/2005 (5) .38% $8 1.52% (6) 1.47% (6) 1.18% (6)
Year ended 12/31/2004 12.92 6 1.53 1.49 1.26
Year ended 12/31/2003 30.90 2 1.70 1.50 1.08
Period from 6/19/2002 to 12/31/2002 (13.91) - (7) 4.20 (6) 1.50 (6) 1.11 (6)
Class R-2:
Six months ended 6/30/2005 (5) .39 119 1.67 (6) 1.43 (6) 1.21 (6)
Year ended 12/31/2004 13.02 93 1.76 1.45 1.29
Year ended 12/31/2003 30.93 45 1.94 1.46 1.19
Period from 5/21/2002 to 12/31/2002 (18.22) 7 1.64 (6) 1.46 (6) 1.05 (6)
Class R-3:
Six months ended 6/30/2005 (5) .63 164 1.02 (6) 1.00 (6) 1.65 (6)
Year ended 12/31/2004 13.41 125 1.05 1.04 1.69
Year ended 12/31/2003 31.45 66 1.10 1.08 1.60
Period from 6/4/2002 to 12/31/2002 (15.75) 11 1.13 (6) 1.08 (6) 1.41 (6)
Class R-4:
Six months ended 6/30/2005 (5) .76 136 .69 (6) .67 (6) 2.00 (6)
Year ended 12/31/2004 13.85 80 .69 .69 2.04
Year ended 12/31/2003 31.91 48 .71 .71 1.94
Period from 7/25/2002 to 12/31/2002 3.51 7 .34 .32 .96
Class R-5:
Six months ended 6/30/2005 (5) .93 214 .39 (6) .37 (6) 2.29 (6)
Year ended 12/31/2004 14.19 141 .39 .39 2.31
Year ended 12/31/2003 32.34 112 .39 .39 2.30
Period from 5/15/2002 to 12/31/2002 (18.34) 53 .40 (6) .40 (6) 1.91 (6)
Six months ended
June 30, Year ended December 31
2005(5) 2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 12% 30% 31% 38% 29% 43%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent deferred sales
charges.
(4) The ratios in this column reflect the impact, if any, of certain
reimbursements/waivers. During some of the periods shown, CRMC reduced fees
for investment advisory services for all share classes. During the start-up
period for the retirement plan share classes (except Class R-5), CRMC
agreed to pay a portion of the fees related to transfer agent services. In
addition, during the six months ended 6/30/2005, AFD agreed to waive a
portion of the fees related to distribution services for Class 529-F.
(5) Unaudited.
(6) Annualized.
(7) Amount less than $1 million.
See Notes to Financial Statements
EXPENSE EXAMPLE unaudited
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the fund so you can compare these costs with the ongoing costs of
investing in other mutual funds. The example is based on an investment of $1,000
invested at the beginning of the period and held for the entire period (January
1, 2005 through June 30, 2005).
ACTUAL EXPENSES:
The first line of each share class in the table on the next page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses paid during period" to estimate the expenses you paid on your account
during this period. There are some account fees that are charged to certain
types of accounts, such as Individual Retirement Accounts and CollegeAmerica
accounts (generally, a $10 fee is charged to set up the account and an
additional $10 fee is charged to the account annually) that would increase the
amount of expenses paid on your account. In addition, retirement plan
participants may be subject to certain fees charged by the plan sponsor, and
Class F and Class 529-F shareholders may be subject to fees charged by financial
intermediaries, typically ranging from 0.75% to 1.50% of assets annually
depending on services offered. You can estimate the impact of these fees by
adding the amount of the fees to the total estimated expenses you paid on your
account during the period as calculated above. In addition, your ending account
value would also be lower by the amount of these fees.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of each share class in the table on the next page provides
information about hypothetical account values and hypothetical expenses based on
the actual expense ratio for the share class and an assumed rate of return of
5.00% per year before expenses, which is not the actual return of the share
class. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts and CollegeAmerica accounts (generally, a $10 fee
is charged to set up the account and an additional $10 fee is charged to the
account annually) that would increase the amount of expenses paid on your
account. In addition, retirement plan participants may be subject to certain
fees charged by the plan sponsor, and Class F and Class 529-F shareholders may
be subject to fees charged by financial intermediaries, typically ranging from
0.75% to 1.50% of assets annually depending on services offered. You can
estimate the impact of these fees by adding the amount of the fees to the total
estimated expenses you paid on your account during the period as calculated
above. In addition, your ending account value would also be lower by the amount
of these fees.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
Beginning account Ending account Expenses paid Annualized
value 1/1/2005 value 6/30/2005 during period(1) expense ratio
Class A -- actual return $1,000.00 $1,008.14 $3.04 .61%
Class A -- assumed 5% return 1,000.00 1,021.77 3.06 .61
Class B -- actual return 1,000.00 1,004.46 6.86 1.38
Class B -- assumed 5% return 1,000.00 1,017.95 6.90 1.38
Class C -- actual return 1,000.00 1,003.78 7.20 1.45
Class C -- assumed 5% return 1,000.00 1,017.60 7.25 1.45
Class F -- actual return 1,000.00 1,007.48 3.38 .68
Class F -- assumed 5% return 1,000.00 1,021.42 3.41 .68
Class 529-A -- actual return 1,000.00 1,007.61 3.58 .72
Class 529-A -- assumed 5% return 1,000.00 1,021.22 3.61 .72
Class 529-B -- actual return 1,000.00 1,003.51 7.80 1.57
Class 529-B -- assumed 5% return 1,000.00 1,017.01 7.85 1.57
Class 529-C -- actual return 1,000.00 1,003.26 7.75 1.56
Class 529-C -- assumed 5% return 1,000.00 1,017.06 7.80 1.56
Class 529-E -- actual return 1,000.00 1,006.10 5.17 1.04
Class 529-E -- assumed 5% return 1,000.00 1,019.64 5.21 1.04
Class 529-F -- actual return 1,000.00 1,007.40 3.14 .63
Class 529-F -- assumed 5% return 1,000.00 1,021.67 3.16 .63
Class R-1 -- actual return 1,000.00 1,003.80 7.30 1.47
Class R-1 -- assumed 5% return 1,000.00 1,017.50 7.35 1.47
Class R-2 -- actual return 1,000.00 1,003.88 7.10 1.43
Class R-2 -- assumed 5% return 1,000.00 1,017.70 7.15 1.43
Class R-3 -- actual return 1,000.00 1,006.28 4.97 1.00
Class R-3 -- assumed 5% return 1,000.00 1,019.84 5.01 1.00
Class R-4 -- actual return 1,000.00 1,007.63 3.34 .67
Class R-4 -- assumed 5% return 1,000.00 1,021.47 3.36 .67
Class R-5 -- actual return 1,000.00 1,009.32 1.84 .37
Class R-5 -- assumed 5% return 1,000.00 1,022.96 1.86 .37
(1) Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in
the period (181), and divided by 365 (to reflect the one-half year period).
OFFICE OF THE FUND
One Market
Steuart Tower, Suite 1800
Mailing address: P.O. Box 7650
San Francisco, CA 94120-7650
INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02105-1713
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street
Los Angeles, CA 90071-2228
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two California Plaza
350 South Grand Avenue
Los Angeles, CA 90071-3462
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
There are several ways to invest in Fundamental Investors. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts (and
aggregated investments) of $25,000 or more and is eliminated for purchases of $1
million or more. Other share classes, which are generally not available for
certain employer-sponsored retirement plans, have no up-front sales charges but
are subject to additional annual expenses and fees. Annualized expenses for
Class B shares were 0.77 percentage points higher than for Class A shares; Class
B shares convert to Class A shares after eight years of ownership. If redeemed
within six years, Class B shares may also be subject to a contingent deferred
sales charge ("CDSC") of up to 5% that declines over time. Class C shares were
subject to annualized expenses 0.84 percentage points higher than those for
Class A shares and a 1% CDSC if redeemed within the first year after purchase.
Class C shares convert to Class F shares after 10 years. Class F shares, which
are available only through certain fee-based programs offered by broker-dealer
firms and registered investment advisers, had higher annualized expenses (by
0.07 percentage points) than did Class A shares, and an annual asset-based fee
charged by the sponsoring firm. Expenses are deducted from income earned by the
fund. As a result, dividends and investment results will differ for each share
class.
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES
AND EXPENSES OF THE AMERICAN FUNDS AND COLLEGEAMERICA. THIS AND OTHER IMPORTANT
INFORMATION IS CONTAINED IN THE FUND'S PROSPECTUS AND THE COLLEGEAMERICA PROGRAM
DESCRIPTION, WHICH CAN BE OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE
READ CAREFULLY BEFORE INVESTING. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY (AFS) AT 800/421-0180 OR VISIT THE AMERICAN FUNDS WEBSITE AT
AMERICANFUNDS.COM.
If you reside in a state other than Virginia, there may be an in-state plan that
offers additional tax benefits not available in CollegeAmerica. Talk to your tax
adviser. Interests in CollegeAmerica are sold through unaffiliated
intermediaries.
"American Funds Proxy Voting Guidelines" -- which describes how we vote proxies
relating to portfolio securities -- is available free of charge on the U.S.
Securities and Exchange Commission (SEC) website at www.sec.gov, on the American
Funds website or upon request by calling AFS. The fund files its proxy voting
record with the SEC for the 12 months ended June 30 by August 31. The report
also is available on the SEC and American Funds websites.
A complete June 30, 2005, portfolio of Fundamental Investors' investments is
available free of charge on the SEC website or upon request by calling AFS.
Fundamental Investors files a complete list of its portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q. This form
is available free of charge on the SEC website or upon request by calling AFS.
You may also review or, for a fee, copy the form at the SEC's Public Reference
Room in Washington, D.C. (800/SEC-0330).
This report is for the information of shareholders of Fundamental Investors, but
it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
September 30, 2005, this report must be accompanied by an American Funds
statistical update for the most recently completed calendar quarter.
[logo - American Funds(R)]
CollegeAmerica is sponsored by
Virginia College Savings Plan(SM)
WHAT MAKES AMERICAN FUNDS DIFFERENT?
For more than 70 years, we have followed a consistent philosophy that we firmly
believe is in our investors' best interests. The range of opportunities offered
by our family of just 29 carefully conceived, broadly diversified funds has
attracted over 30 million shareholder accounts.
OUR UNIQUE COMBINATION OF STRENGTHS INCLUDES THESE FIVE FACTORS:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is divided among a number of portfolio counselors. Each
takes responsibility for a portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time this method has contributed to a consistency of results and continuity
of management.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. More than half of them were in the
investment business before the sharp market decline of 1987.
o A COMMITMENT TO LOW OPERATING EXPENSES
American Funds' operating expenses are among the lowest in the mutual fund
industry. Our portfolio turnover rates are low as well, keeping transaction
costs and tax consequences contained.
29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS
o GROWTH FUNDS
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
American Mutual Fund(R)
Capital World Growth and Income Fund(SM)
> Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
o EQUITY-INCOME FUNDS
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
American Balanced Fund(R)
o BOND FUNDS
American High-Income Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
o TAX-EXEMPT BOND FUNDS
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of America(SM)
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGESR-910-0805P
Litho in USA KBD/L/8083-S4697
Printed on recycled paper
ITEM 2 - Code of Ethics
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3 - Audit Committee Financial Expert
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4 - Principal Accountant Fees and Services
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable to this Registrant, insofar as the Registrant is not a listed
issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.
ITEM 6 - Schedule of Investments
[logo - American Funds (r)]
FUNDAMENTAL INVESTORS(SM)
Investment portfolio
June 30, 2005 unaudited
Market value
Common stocks -- 94.47% Shares (000)
ENERGY -- 17.77%
Suncor Energy Inc. 18,546,307 $ 875,399
Royal Dutch Petroleum Co. (New York registered) 8,925,000 579,233
Exxon Mobil Corp. 5,000,000 287,350
Halliburton Co. 5,500,000 263,010
Norsk Hydro ASA 2,168,000 198,863
Norsk Hydro ASA (ADR) 700,000 63,504
LUKoil Holding (ADR) 7,000,000 257,670
Murphy Oil Corp. 3,940,000 205,786
Baker Hughes Inc. 3,968,000 203,003
ConocoPhillips 3,450,000 198,341
CONSOL Energy Inc.(1) 3,700,000 198,246
Unocal Corp. 2,928,664 190,510
Burlington Resources Inc. 2,781,000 153,622
Chevron Corp. 2,470,000 138,122
Imperial Oil Ltd. 1,195,880 99,629
Marathon Oil Corp. 1,525,000 81,389
Occidental Petroleum Corp. 1,000,000 76,930
Massey Energy Co. 2,011,700 75,881
Shell Canada Ltd. 2,538,600 68,042
Reliance Industries Ltd. 4,485,846 66,338
Oil & Natural Gas Corp. Ltd. 2,425,000 57,343
Smith International, Inc. 550,000 35,035
4,373,246
INDUSTRIALS -- 12.68%
Deere & Co. 5,500,000 360,195
Union Pacific Corp. 4,200,000 272,160
Caterpillar Inc. 2,700,000 257,337
General Electric Co. 7,100,000 246,015
General Dynamics Corp. 1,772,900 194,203
Deutsche Post AG 8,275,000 193,238
Raytheon Co. 4,461,372 174,529
Parker Hannifin Corp. 2,800,000 173,628
Tyco International Ltd. 5,750,000 167,900
Boeing Co. 2,400,000 158,400
Emerson Electric Co. 2,200,000 137,786
United Parcel Service, Inc., Class B 1,750,000 121,030
Northrop Grumman Corp. 2,114,483 116,825
3M Co. 1,600,000 115,680
United Technologies Corp. 1,500,000 77,025
American Standard Inc. 1,432,300 60,042
Illinois Tool Works Inc. 657,200 52,366
Avery Dennison Corp. 966,400 51,181
Mitsui & Co., Ltd. 4,759,000 45,075
Mitsubishi Corp. 3,250,000 44,209
Continental Airlines, Inc., Class B(2) 2,300,000 30,544
Southwest Airlines Co. 1,500,000 20,895
Allied Waste Industries, Inc.(2) 2,500,000 19,825
Lockheed Martin Corp. 248,200 16,101
Bombardier Inc., Class B 7,500,000 15,952
3,122,141
FINANCIALS -- 11.74%
Washington Mutual, Inc. 8,450,000 343,831
Fannie Mae 5,567,800 325,160
Citigroup Inc. 5,150,000 238,085
Allied Irish Banks, PLC 9,600,000 205,382
Bank of Ireland 10,165,000 164,884
Freddie Mac 2,025,000 132,091
AMP Ltd. 25,000,202 123,077
Irish Life & Permanent PLC 7,000,000 122,429
Willis Group Holdings Ltd. 3,400,000 111,248
Equity Residential 3,000,000 110,460
Cullen/Frost Bankers, Inc. 2,000,000 95,300
American International Group, Inc. 1,100,000 63,910
Genworth Financial, Inc., Class A 2,000,000 60,460
Bank of New York Co., Inc. 2,085,000 60,006
U.S. Bancorp 2,000,000 58,400
J.P. Morgan Chase & Co. 1,550,000 54,746
Wells Fargo & Co. 870,000 53,575
Bank Hapoalim Ltd. 16,255,900 51,098
Independence Community Bank Corp. 1,366,000 50,446
KBC Groupe SA 620,000 48,935
St. George Bank Ltd. 2,450,279 48,848
Aon Corp. 1,767,400 44,256
Mitsubishi Estate Co., Ltd. 3,750,000 41,302
Raiffeisen International Bank Holding AG(2) 609,100 38,879
Bank of America Corp. 756,800 34,518
Banco Popolare di Verona e Novara Scrl 2,000,000 34,037
Marsh & McLennan Companies, Inc. 1,120,000 31,024
Zions Bancorporation 350,000 25,736
Chubb Corp. 300,000 25,683
Fidelity National Financial, Inc. 676,000 24,126
Arthur J. Gallagher & Co. 600,000 16,278
MI Developments Inc., Class A 500,000 15,775
National Bank of Canada 230,000 10,198
State Street Corp. 200,000 9,650
Marshall & Ilsley Corp. 205,400 9,130
XL Capital Ltd., Class A 109,800 8,171
2,891,134
INFORMATION TECHNOLOGY -- 9.90%
Microsoft Corp. 21,225,000 527,229
Texas Instruments Inc. 11,963,024 335,802
Automatic Data Processing, Inc. 4,600,000 193,062
International Business Machines Corp. 2,200,000 163,240
Linear Technology Corp. 4,000,000 146,760
Intersil Corp., Class A 7,475,000 $ 140,306
Motorola, Inc. 7,156,080 130,670
Hitachi, Ltd. 20,000,000 121,595
Agilent Technologies, Inc.(2) 4,000,000 92,080
Sun Microsystems, Inc.(2) 24,000,000 89,520
Hewlett-Packard Co. 3,500,000 82,285
Google Inc., Class A(2) 200,000 58,830
Sabre Holdings Corp., Class A 2,645,304 52,774
Maxim Integrated Products, Inc. 1,250,000 47,762
ASML Holding NV(2) 2,500,000 39,343
Ceridian Corp.(2) 1,900,000 37,012
CDW Corp. 545,000 31,114
Electronic Data Systems Corp. 1,582,700 30,467
Advanced Micro Devices, Inc.(2) 1,500,000 26,010
Corning Inc.(2) 1,520,000 25,262
Murata Manufacturing Co., Ltd. 300,000 15,290
Cisco Systems, Inc.(2) 800,000 15,288
Rohm Co., Ltd. 150,000 14,478
Affiliated Computer Services, Inc., Class A(2) 250,000 12,775
Microchip Technology Inc. 270,000 7,997
2,436,951
CONSUMER DISCRETIONARY -- 9.44%
Lowe's Companies, Inc. 6,015,000 350,193
Time Warner Inc.(2) 17,425,000 291,172
Target Corp. 4,890,000 266,065
Limited Brands, Inc. 10,815,980 231,678
News Corp. Inc. 12,290,000 198,852
May Department Stores Co. 3,500,000 140,560
Best Buy Co., Inc. 1,922,000 131,753
Comcast Corp., Class A(2) 3,600,000 110,520
Comcast Corp., Class A, special nonvoting stock(2) 500,000 14,975
Toyota Motor Corp. 3,000,000 107,433
Magna International Inc., Class A 1,199,300 84,359
Sony Corp. 2,200,000 75,807
Walt Disney Co. 3,000,000 75,540
General Motors Corp. 2,100,000 71,400
Starbucks Corp.(2) 1,045,000 53,985
Accor SA 605,000 28,351
Warner Music Group Corp.(2) 1,500,000 24,300
IAC/InterActiveCorp(2) 956,000 22,992
Mattel, Inc. 750,000 13,725
Liberty Media Corp., Class A(2) 1,200,000 12,228
Clear Channel Communications, Inc. 300,000 9,279
Dollar Tree Stores, Inc.(2) 350,000 8,400
2,323,567
MATERIALS -- 8.36%
Dow Chemical Co. 8,836,700 393,498
BHP Billiton Ltd. 17,995,030 248,517
Alcoa Inc. 7,973,800 208,355
Rio Tinto PLC 6,000,000 183,583
Weyerhaeuser Co. 2,883,000 183,503
E.I. du Pont de Nemours and Co. 3,850,000 165,589
Freeport-McMoRan Copper & Gold Inc., Class B 3,500,000 131,040
Potash Corp. of Saskatchewan Inc. 1,238,400 118,366
International Paper Co. 3,000,000 90,630
Inco Ltd. 1,632,300 61,619
Noranda Inc. 3,500,000 59,955
Temple-Inland Inc. 1,500,000 55,725
CRH PLC 1,918,931 50,911
Lyondell Chemical Co. 1,450,000 38,309
USX Corp. 650,000 22,341
Phelps Dodge Corp. 200,000 18,500
Air Products and Chemicals, Inc. 300,000 18,090
Georgia-Pacific Corp., Georgia-Pacific Group 198,640 6,317
Nitto Denko Corp. 60,000 3,442
2,058,290
TELECOMMUNICATION SERVICES -- 7.67%
SBC Communications Inc. 14,250,000 338,438
Verizon Communications Inc. 5,000,000 172,750
France Telecom, SA 5,800,000 169,373
BellSouth Corp. 6,100,000 162,077
Telefonica, SA (ADR) 2,054,000 100,441
Telefonica, SA 3,068,000 50,210
China Telecom Corp. Ltd., Class H 400,000,000 144,127
Sprint Corp. 5,400,000 135,486
Qwest Communications International Inc.(2) 33,000,000 122,430
Vodafone Group PLC (ADR) 4,325,000 105,184
Vodafone Group PLC 5,850,000 14,252
KDDI Corp. 20,000 92,549
AT&T Corp. 4,620,000 87,965
O2 PLC(2) 33,750,000 82,376
Deutsche Telekom AG 2,300,000 42,534
Telecom Italia SpA, nonvoting 15,076,900 39,180
China Netcom Group Corp. Ltd. 13,000,000 18,904
KT Corp. 218,170 8,862
1,887,138
HEALTH CARE -- 5.82%
Merck & Co., Inc. 8,200,000 252,560
Roche Holding AG 1,949,316 246,437
Sanofi-Aventis 2,192,600 179,948
Bristol-Myers Squibb Co. 4,850,000 121,153
Schering-Plough Corp. 5,950,000 113,407
Eli Lilly and Co. 1,950,000 108,635
CIGNA Corp. 725,000 77,597
WellPoint, Inc.(2) 840,000 58,498
Aetna Inc. 560,000 46,379
Abbott Laboratories 800,000 39,208
Amgen Inc.(2) 500,000 30,230
AstraZeneca PLC (Sweden) 500,000 20,779
AstraZeneca PLC (ADR) 190,600 7,864
Forest Laboratories, Inc.(2) 700,000 27,195
Medco Health Solutions, Inc.(2) 463,000 24,706
Wyeth 500,000 22,250
Elan Corp., PLC (ADR)(2) 2,500,000 17,050
Medtronic, Inc. 300,000 15,537
Guidant Corp. 195,500 13,157
Biogen Idec Inc.(2) 300,000 10,335
1,432,925
CONSUMER STAPLES -- 5.11%
Altria Group, Inc. 8,114,800 524,703
ConAgra Foods, Inc. 5,100,000 118,116
Anheuser-Busch Companies, Inc. 2,300,000 105,225
PepsiCo, Inc. 1,800,000 97,074
Procter & Gamble Co. 1,800,000 94,950
Walgreen Co. 1,585,700 72,926
General Mills, Inc. 1,404,200 65,703
Coca-Cola Co. 1,300,000 54,275
Avon Products, Inc. 1,340,000 50,719
C&C Group PLC 8,357,900 37,580
SYSCO Corp. 600,000 21,714
Diageo PLC 1,000,000 14,743
1,257,728
UTILITIES -- 4.97%
Dominion Resources, Inc. 3,390,000 248,792
Questar Corp. 3,000,000 197,700
Exelon Corp. 2,965,000 152,193
Veolia Environnement 3,059,100 114,882
Duke Energy Corp. 3,000,000 89,190
DTE Energy Co. 1,606,900 75,155
KeySpan Corp. 1,584,000 64,469
Public Service Enterprise Group Inc. 1,000,000 60,820
Pinnacle West Capital Corp. 1,000,000 44,450
FPL Group, Inc. 1,050,000 44,163
Sempra Energy 1,000,000 41,310
FirstEnergy Corp. 618,000 29,732
E.ON AG 300,000 26,717
Tokyo Gas Co., Ltd. 6,025,000 22,554
Entergy Corp. 150,000 11,333
1,223,460
MISCELLANEOUS -- 1.01%
Other common stocks in initial period of acquisition 247,741
Total common stocks (cost: $18,475,737,000) 23,254,321
Shares or principal
Convertible securities -- 0.65% amount
FINANCIALS -- 0.29%
Chubb Corp. 7.00% convertible preferred 2005 1,200,000 units 38,076
Genworth Financial, Inc. 6.00% convertible preferred 2007 1,010,000 units 34,693
72,769
INFORMATION TECHNOLOGY -- 0.24%
Agilent Technologies, Inc. 3.00% convertible debentures 2021(1,3) $10,370,000 10,279
Agilent Technologies, Inc. 3.00% convertible debentures 2021(3) $15,074,000 14,942
Advanced Micro Devices, Inc. 4.75% convertible debentures 2022(3) $24,050,000 23,960
ASML Holding NV 5.50% convertible notes 2010 Euro 6,000,000 8,685
57,866
Shares or principal Market value
amount (000)
MATERIALS -- 0.12%
Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred(1) 31,000 $ 28,505
Total convertible securities (cost: $143,177,000) 159,140
Principal amount
Bonds & notes -- 0.36% (000)
INDUSTRIALS -- 0.32%
Northwest Airlines, Inc. 8.875% 2006 $ 29,570 18,925
Northwest Airlines, Inc. 9.875% 2007 15,335 7,744
Northwest Airlines, Inc. 7.875% 2008 16,566 6,958
Continental Airlines, Inc. 8.00% 2005 28,600 28,743
Southwest Airlines Co. 5.25% 2014 15,000 15,113
77,483
CONSUMER DISCRETIONARY -- 0.04%
Delphi Automotive Systems Corp. 7.125% 2029 11,200 7,784
General Motors Corp. 7.125% 2013 2,540 2,286
General Motors Corp. 7.20% 2011 915 851
10,921
Total bonds & notes (cost: $106,822,000) 88,404
Short-term securities -- 4.53%
Freddie Mac 3.04%-3.08% due 7/26-8/2/2005 169,755 169,325
Wal-Mart Stores Inc. 3.05%-3.31% due 7/12-9/7/2005(1) 95,300 94,992
Hewlett-Packard Co. 3.10%-3.20% due 7/25-7/27/2005(1) 87,800 87,610
Triple-A One Funding Corp. 3.07%-3.26% due 7/6-8/23/2005(1) 87,086 86,935
CAFCO, LLC 3.04%-3.07% due 7/6-7/20/2005(1) 49,800 49,746
Ciesco LLC 3.125% due 8/3/2005 15,600 15,555
Citicorp 3.11% due 7/25/2005 10,800 10,777
Procter & Gamble Co. 3.15%-3.19% due 8/23-8/25/2005(1) 72,401 72,049
Three Pillars Funding, LLC 3.09%-3.40% due 7/1-7/5/2005(1) 70,900 70,885
Variable Funding Capital Corp. 3.04%-3.27% due 7/5-8/23/2005(1) 57,471 57,392
Clipper Receivables Co., LLC 3.05%-3.32% due 7/8-8/17/2005(1) 54,400 54,263
DuPont (E.I.) de Nemours & Co. 3.08%-3.21% due 7/28-8/16/2005 50,000 49,835
BellSouth Corp. 3.08%-3.09% due 7/6-7/7/2005(1) 45,500 45,474
Gannett Co. 3.02%-3.19% due 7/29-8/12/2005(1) 45,000 44,867
Park Avenue Receivables Co., LLC 3.07% due 7/8/2005(1) 31,800 31,778
Preferred Receivables Funding Corp. 3.07% due 7/13/2005(1) 4,249 4,244
PepsiCo Inc. 3.12% due 7/20/2005(1) 29,475 29,424
Hershey Foods Corp. 3.05%-3.12% due 7/21-8/12/2005(1) 27,600 27,527
Edison Asset Securitization LLC 3.15% due 8/5/2005(1) 22,300 22,230
Coca-Cola Co. 3.07% due 7/26/2005 20,700 20,654
Scripps (E.W.) Co. 3.24% due 8/10/2005(1) 17,100 17,037
Colgate-Palmolive Co. 3.17% due 7/14/2005(1) 17,000 16,979
NetJets Inc. 3.19% due 8/19/2005(1) 10,000 9,957
Abbott Laboratories Inc. 3.00% due 7/6/2005(1) 9,000 8,996
International Bank for Reconstruction and Development 3.03% due 8/5/2005 8,900 8,873
International Business Machines Corp. 3.00% due 7/12/2005 6,500 6,493
Total short-term securities (cost: $1,113,872,000) 1,113,897
Total investment securities (cost: $19,839,608,000) 24,615,762
Other assets less liabilities (997)
Net assets $24,614,765
"Miscellaneous" securities include holdings in their initial period of
acquisition that have not previously been publicly disclosed.
(1) Purchased in a private placement transaction; resale may be limited to
qualified institutional buyers; resale to the public may require
registration. The total value of all such restricted securities was
$1,069,415,000, which represented 4.34% of the net assets of the fund.
(2) Security did not produce income during the last 12 months.
(3) Coupon rate may change periodically.
ADR = American Depositary Receipts
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 10 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Directors since the Registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a Nominating Committee comprised solely of persons
who are not considered ``interested persons'' of the Registrant within the
meaning of the Investment Company Act of 1940, as amended. The committee
periodically reviews such issues as the Board's composition, responsibilities,
committees, compensation and other relevant issues, and recommends any
appropriate changes to the full Board of Directors. While the committee normally
is able to identify from its own resources an ample number of qualified
candidates, it will consider shareholder suggestions of persons to be considered
as nominees to fill future vacancies on the Nominating Committee of the
Registrant, c/o the Registrant's Secretary, and must be accompanied by complete
biographical and occupational data on the prospective nominee, along with a
written consent of the prospective nominee for consideration of his or her name
by the Nominating Committee.
ITEM 11 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer have concluded, based on their evaluation of the Registrant's
disclosure controls and procedures (as such term is defined in Rule 30a-3
under the Investment Company Act of 1940), that such controls and
procedures are adequate and reasonably designed to achieve the purposes
described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 12 - Exhibits
(a) (1) The Code of Ethics - not applicable for filing of Semiannual Reports to
Shareholders.
(a) (2) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 are attached as exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FUNDAMENTAL INVESTORS, INC.
By /s/ James F. Rothenberg
- ------------------------------------------
James F. Rothenberg, Vice Chairman and PEO
Date: September 7, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ James F. Rothenberg
- ------------------------------------------
James F. Rothenberg, Vice Chairman and PEO
Date: September 7, 2005
By /s/ Sheryl F. Johnson
- ------------------------------------
Sheryl F. Johnson, Treasurer and PFO
Date: September 7, 2005