<Page>
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: 811-852
FPA PARAMOUNT FUND, INC.
(Exact name of registrant as specified in charter)
11400 WEST OLYMPIC BLVD., SUITE 1200, LOS ANGELES, CALIFORNIA 90064
(Address of principal executive offices)
J. RICHARD ATWOOD,
11400 WEST OLYMPIC BLVD., SUITE 1200, LOS ANGELES, CALIFORNIA 90064
(Name and address of agent for service)
Registrant's telephone number, including area code: 310-473-0225
Date of fiscal year end: SEPTEMBER 30
Date of reporting period: MARCH 31, 2005
Item 1. Report to Stockholders.
<Page>
FPA PARAMOUNT FUND, INC.
SEMI-ANNUAL REPORT
[FP DISTRIBUTOR: LOGO]
FPA FUND DISTRIBUTORS, INC.
11400 WEST OLYMPIC BOULEVARD, SUITE 1200
LOS ANGELES, CALIFORNIA 90064
MARCH 31, 2005
43795
<Page>
LETTER TO SHAREHOLDERS
It has now been five years since Steve Geist and I assumed the management
of FPA Paramount Fund. This period began with three years of substantial market
decline, followed by two years of strong advance. Unfortunately for many
investors, however, the up years were not sufficient to offset the down years.
In contrast, the Paramount shareholder was able to conserve and increase
his capital during this difficult time. Over the whole five year period, $1.00
worth of Paramount shares has grown to $1.81, more than twice the value of $1.00
invested in the S&P 500 (85 cents) and four times a similar investment in the
Nasdaq (44 cents).
<Table>
<Caption>
PERIODS ENDED MARCH 31, 2005
--------------------------------------------------------------------
FIVE
ONE THREE FIVE YEARS
QUARTER YEAR YEARS* YEARS* CUMULATIVE
---------- ---------- ---------- ---------- ----------
Paramount 1.1% 12.0% 10.7% 12.6% 81.3%
Russell 2500 (3.1)% 8.2% 9.7% 5.6% 31.4%
S&P 500 (2.2)% 6.7% 2.8% (3.2)% (14.8)%
Nasdaq (8.1)% 0.3% 2.7% (15.3)% (56.3)%
</Table>
* Annualized Returns
COGNEX has been in the Paramount portfolio for several years, having been
first purchased in 2001. Cognex makes machine vision systems, a business in
which it is by far the worldwide market leader.
A machine vision system consists of a digital camera, a small computer and
custom software. Its purpose is to capture and interpret information about
production processes and alert management to any problems. Examples include
determining the exact location or orientation of an object, identifying it by
shape or serial number, inspecting it for defects, and determining its
dimensions.
Cognex earns the very high margins characteristic of successful software
companies, with operating margins of 23% in 2004. Despite a good deal of
cyclicality in its historic customer base, Cognex has grown its earnings by 9%
annually over the past ten years.
The key element of Cognex's success is its proprietary software, which
permits extremely rapid and accurate decisions about the items being inspected.
Conceptually, the software compares an idealized picture with the actual one
and, in a fraction of a second, decides whether or not there is a problem. This
might involve an assembly line operating at 30-40 miles per hour, with hundreds
of items moving past every minute.
In recent years Cognex's business has been undergoing some very significant
changes. These include its customer base, products, and how it goes to market,
as well as some evolution in senior management responsibilities. We believe
these changes are wise, and are optimistic that they are being successfully
executed. Nevertheless, it is a time of more than usual uncertainty for Cognex,
and shareholders are watching its progress closely.
The change that is most important, as well as most obviously beneficial, is
the effort to broaden its customer base. Cognex's business has historically been
dominated by two groups of customers. First are makers of semi-conductor capital
equipment, who use machine vision to check on the precise position and alignment
of silicon wafers being converted into semiconductor chips, among many
applications. The second are producers of circuit-board assembly machines, which
very rapidly and precisely place components and integrated circuits on circuit
boards, the heart of all modern electronics.
While these are excellent customers, where Cognex enjoys a very strong
market position, they are producers of capital goods for industries which are
themselves quite cyclical, so that Cognex's sales to both groups of customers
vary widely from good times to bad.
For the past few years Cognex has been pursuing customers outside of this
historic core. Some of these are manufacturers of high-value goods like medical
devices or pharmaceuticals, where machine vision is called upon to answer
questions like, is the cap on properly? is the bottle filled-up? is it properly
labeled? Others include manufacturers of low-value consumer products, made in
vast quantities and impossible to check for quality manually. Machine vision
permits inspection of every item produced, and
1
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is thus far better than random checks or statistical sampling. In addition, it
can alert management much faster if things start to go awry.
In most cases these uses of machine vision are totally new. Cognex is
helping the manufacturer to improve the quality of its product as well as
reducing costs. Applications such as these are growing at 20-30% annually and,
as a result, sales to Cognex's traditional electronics OEM's are becoming a less
significant share of total revenues. In the peak year of 2004, sales to these
traditional customers were 40% of Cognex's total, while in past peaks they were
over two thirds.
A second major change in Cognex's business is in its product portfolio,
which has been significantly broadened in recent years. The traditional machine
vision product, sold mostly to the semiconductor and electronics OEM's described
earlier, is a product of great flexibility and sophistication, requiring
extensive programming by highly skilled engineers, and incorporated into the
capital goods sold by the manufacturers.
In contrast, Cognex's newer products are much cheaper and less flexible,
being designed for a single, specific purpose. They do not need to be
elaborately programmed, and can be easily installed by an electrician or
engineer. Because they are inexpensive enough to be purchased by local factory
management, a company often orders a few to try out, and returns to buy many
more, finding numerous applications for machine vision in the production
process.
Some examples of these newer products are In-Sight, first introduced in
2000, and now selling about $60 million annually, or 30% of Cognex's total
revenue. Another is CPS 1000 People Sensor, introduced in 2003, which counts
people passing through automated doors. A third is Checker 101, recently
introduced at about $1500 each, which checks on the presence or absence of
products or product features during the manufacturing process. For example, does
the six-pack have five or six cans? is the container full or empty?
A third significant change in the business is on the marketing side. Until
very recently, Cognex sold its products only through its own direct sales force.
These are highly trained people, comfortable in dealing with sophisticated
purchasers in a lengthy sales process. Though ideally suited for Cognex's
traditional customer, such a sales force is not well suited to Cognex's new
products, which are much lower in price, easier to use, and have potential
customers in hundreds of thousands of factories worldwide. To sell these
products, Cognex has added distributors for the first time. These are
organizations which already sell diverse lines of manufacturing-related
products, and can readily add Cognex's new, less expensive machine vision
products to their existing lines.
Finally, Cognex has made a potentially important management change.
Cognex's founder and long-time CEO, Dr. Bob Shillman, has stepped back a bit
from active management, and named Jim Hoffmaster as Chief Operating Officer. Jim
joined Cognex in 2001. Dr. Bob says that this change will permit him to spend
more time on product development and strategic issues, areas in which he is
clearly most comfortable.
Having owned Cognex for several years, we continue to be impressed by its
strong market position, its profitability, and its financial strength. We are
confident that the business changes we have discussed will make Cognex an even
more successful and less cyclical business, and expect to continue to own it for
many more years.
Respectfully submitted,
/s/ Eric S. Ende
Eric S. Ende
President & Portfolio Manager
April 20, 2005
2
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HISTORICAL PERFORMANCE
<Table>
<Caption>
AVERAGE ANNUAL TOTAL RETURN
PERIODS ENDED MARCH 31, 2005
----------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------- ---------- ---------- ----------
FPA Paramount Fund, Inc.
(NAV) 12.01% 10.73% 12.64% 5.17%
FPA Paramount Fund, Inc.
(Net of Sales Charge) 6.13% 8.76% 11.43% 4.61%
Lipper Mid-Cap Core Average 9.50% 7.36% 4.16% 12.77%
Russell 2500 Index 8.21% 9.73% 5.61% 12.59%
</Table>
The table presented above shows the average annual total return, which includes
reinvestment of all distributions, for several different periods ended March 31,
2005 for the Fund and comparative indices of securities prices. The Russell 2500
Index consists of the 2,500 smallest companies in the Russell 3000 total
capitalization universe. This index is a measure of small to medium
capitalization stock performance. The Lipper Mid-Cap Core Average provides an
additional comparison of how your Fund performed in relation to other mutual
funds with similar objectives. The data quoted represents past performance, and
an investment in the Fund may fluctuate so that an investor's shares when
redeemed may be worth more or less than their original cost. Since investors
purchase shares of the Fund with varying sales charges depending primarily on
volume purchased, the returns for the Fund are presented at net asset value
(NAV) and also net of the current maximum sales charge of 5.25% of the offering
price.
3
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PORTFOLIO SUMMARY
March 31, 2005
<Table>
COMMON STOCKS 76.6%
Business Services & Supplies 11.5%
Producer Durables 11.5%
Health Care 10.4%
Technology 9.9%
Energy 9.7%
Financial 7.8%
Retailing 7.4%
Materials 2.7%
Consumer Durables 2.1%
Transportation 1.9%
Entertainment 1.7%
SHORT-TERM CORPORATE NOTES 25.0%
OTHER ASSETS AND LIABILITIES, NET -1.6%
-----
TOTAL NET ASSETS 100.0%
=====
</Table>
MAJOR PORTFOLIO CHANGES
Six Months Ended March 31, 2005
<Table>
<Caption>
SHARES
------------
NET PURCHASES
COMMON STOCKS
Briggs & Stratton Corporation (1) 162,500
CDW Corporation (1) 102,500
Charles River Laboratories International, Inc. 136,400
Cognex Corporation 77,500
Diebold, Inc. (1) 35,000
Engelhard Corporation 60,000
First American Corporation (1) 80,000
Arthur J. Gallagher & Co. 105,200
Health Management Associates 47,500
Heartland Express, Inc. 189,100
Plantronics, Inc. 127,300
SanDisk Corporation 110,000
NET SALES
COMMON STOCKS
Advanced Fibre Communications, Inc. (2) 225,000
Black Box Corporation (2) 60,000
Inveresk Research Group, Inc. (2) 40,500
KEMET Corporation (2) 52,500
Ocular Sciences, Inc. (2) 65,000
Office Depot, Inc. (2) 240,000
Tellabs, Inc. (2) 75,600
TriQuint Semiconductor, Inc. (2) 248,746
</Table>
(1) Indicates new commitment to portfolio
(2) Indicates elimination from portfolio
4
<Page>
PORTFOLIO OF INVESTMENTS
March 31, 2005
<Table>
<Caption>
SHARES VALUE
-------------- --------------
COMMON STOCKS
BUSINESS SERVICES & SUPPLIES -- 11.5%
CDW Corporation 102,500 $ 5,809,700
Charles River Laboratories International, Inc.* 187,500 8,820,000
Invitrogen Corporation* 82,500 5,709,000
Landauer, Inc. 4,500 213,930
Manpower Inc. 85,000 3,699,200
ScanSource Inc.* 152,300 7,893,709
--------------
$ 32,145,539
--------------
PRODUCER DURABLES -- 11.5%
Crane Co. 192,500 $ 5,542,075
Diebold, Inc. 35,000 1,919,750
Graco Inc. 121,500 4,903,740
HNI Corporation 96,900 4,355,655
IDEX Corporation 110,750 4,468,763
Oshkosh Truck Corporation 87,500 7,174,125
Zebra Technologies Corporation (Class A)* 78,000 3,704,220
--------------
$ 32,068,328
--------------
HEALTH CARE -- 10.4%
Bio-Rad Laboratories, inc.* 95,400 $ 4,646,934
Health Management Associates, Inc. 252,500 6,610,450
Lincare Holdings, Inc.* 215,000 9,509,450
Renal Care Group, Inc. 215,000 8,157,100
--------------
$ 28,923,934
--------------
TECHNOLOGY -- 9.9%
Cognex Corporation 322,500 $ 8,023,800
Plantronics, Inc. 245,000 9,329,600
SanDisk Corporation* 370,000 10,286,000
--------------
$ 27,639,400
--------------
ENERGY -- 9.7%
Cal Dive International Inc.* 232,500 $ 10,532,250
Noble Corporation 195,000 10,960,950
Tidewater Inc. 142,500 5,537,550
--------------
$ 27,030,750
--------------
FINANCIAL -- 7.8%
Brown & Brown, INC. 95,000 $ 4,378,550
First American Corporation 80,000 2,635,200
Gallagher & Co., Arthur J 225,000 6,480,000
North Fork Bancorporation 295,000 8,183,300
--------------
$ 21,677,050
--------------
</Table>
5
<Page>
<Table>
<Caption>
SHARES OR
PRINCIPAL
AMOUNT VALUE
-------------- --------------
COMMON STOCKS -- CONTINUED
RETAILING -- 7.4%
CEC Entertainment, Inc.* 85,000 $ 3,111,000
CarMax, Inc.* 277,496 8,741,124
O'Reilly Automotive, Inc.* 180,000 8,915,400
--------------
$ 20,767,524
--------------
MATERIALS -- 2.7%
Engelhard Corporation 252,500 $ 7,582,575
--------------
CONSUMER DURABLES -- 2.1%
Briggs & Stratton Corporation 162,500 $ 5,916,625
--------------
TRANSPORATION -- 1.9%
Heartland Express, Inc. 251,600 $ 4,818,140
Knight Transporation, Inc. 15,750 388,552
--------------
$ 5,206,692
--------------
ENTERTAINMENT -- 1.7%
Carnival Corporation 90,000 $ 4,662,900
--------------
TOTAL COMMON STOCKS -- 76.6% (Cost $156,849,068) $ 213,621,317
--------------
SHORT-TERM INVESTMENTS -- 25.0%
Short-term Corporate Notes:
General Electric Company -- 2.58% 04/01/05 $ 7,659,000 $ 7,659,000
General Electric Company -- 2.70% 04/01/05 6,000,000 6,000,000
Shell Finance (U.K.) Ltd. -- 2.65% 04/08/05 9,323,000 9,318,196
Dupont (E.I.) De Nemours &Co. -- 2.62% 04/11/05 10,605,000 10,597,282
General Electric Capital Services, Inc. -- 2.72% 04/15/05 10,522,000 10,510,870
Federal Home Loan Mortgage Corporation
Discount Note -- 2.70% 04/20/05 9,759,000 9,745,094
Illinois Tool Works, Inc. -- 2.75% 04/26/05 9,000,000 8,982,812
Toyota Motor Credit Corporation -- 2.74% 04/29/05 6,798,000 6,783,513
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost $69,596,767) $ 69,596,767
--------------
TOTAL INVESTMENTS -- 101.6% (Cost $226,445,835) $ 283,218,084
Other assets and liabilities, net -- (1.6)% (4,427,394)
--------------
TOTAL NET ASSETS -- 100.0% $ 278,790,690
==============
</Table>
* Non-income producing security
See notes to financial statements.
6
<Page>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2005
<Table>
ASSETS
Investments at value:
Investment securities -- at market value
(identified cost $156,849,068) $ 213,621,317
Short-term investments -- at amortized cost
(maturities 60 days or less) 69,596,767 $ 283,218,084
--------------
Cash 747
Receivable for:
Capital stock sold $ 643,872
Dividends and accrued interest 94,802 738,674
-------------- --------------
$ 283,957,505
LIABILITIES
Payable for:
Investment securities purchased $ 4,856,888
Advisory fees and financial services 177,537
Capital stock repurchased 95,390
Accrued expenses 37,000 5,166,815
-------------- --------------
NET ASSETS $ 278,790,690
==============
SUMMARY OF SHAREHOLDERS' EQUITY
Capital Stock -- par value $0.25 per share: authorized
100,000,000 shares; outstanding 19,794,034 shares $ 4,948,509
Additional Paid-in Capital 379,373,936
Accumulated net realized loss on investments (162,544,179)
Undistributed net investment income 240,175
Unrealized appreciation of investments 56,772,249
--------------
NET ASSETS $ 278,790,690
==============
NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE
Net asset value and redemption price per share
(net assets divided by shares outstanding) $ 14.08
==============
Maximum offering price per share
(100/94.75 of per share net asset value) $ 14.86
==============
</Table>
See notes to financial statements.
7
<Page>
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 2005
<Table>
INVESTMENT INCOME
Interest $ 754,848
Dividends 652,720
--------------
$ 1,407,568
EXPENSES -- Note 3:
Advisory Fees $ 836,866
Financial services 124,902
Transfer agent fees and expenses 82,663
Reports to shareholders 34,228
Audit fees 23,000
Custodian fees and expenses 19,322
Director's fees and expenses 18,454
Registration fees 15,447
Legal fees 7,879
Insurance 3,832
Other expenses 800 1,167,393
-------------- --------------
Net investment income $ 240,175
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments:
Proceeds from sale of investment securities $ 16,205,968
Cost of investment securities sold 16,190,887
--------------
Net realized gain on investments $ 15,081
Unrealized appreciation of investments:
Unrealized appreciation at beginning of period $ 37,715,833
Unrealized appreciation at end of period 56,772,249
--------------
Increase in unrealized appreciation of investments 19,056,416
--------------
Net realized and unrealized gain on investments $ 19,071,497
--------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 19,311,672
==============
</Table>
See notes to financial statements.
8
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
---------------------------------- ----------------------------------
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $ 240,175 $ (226,400)
Net realized gain on investments 15,081 6,987,390
Net unrealized appreciation of investments 19,056,416 18,513,513
--------------- ---------------
Increase in net assets resulting from operations $ 19,311,672 $ 25,274,503
Capital Stock transactions:
Proceeds from Capital Stock sold $ 61,955,624 $ 90,278,196
Cost of Capital Stock repurchased* (10,383,410) 51,572,214 (17,284,393) 72,993,803
--------------- --------------- --------------- ---------------
Total increase in net assets $ 70,883,886 $ 98,268,306
NET ASSETS
Beginning of period 207,906,804 109,638,498
--------------- ---------------
End of period $ 278,790,690 $ 207,906,804
=============== ===============
CHANGE IN CAPITAL STOCK
OUTSTANDING
Shares of Capital Stock sold 4,571,646 7,240,277
Shares of Capital Stock repurchased (753,830) (1,422,239)
--------------- ---------------
Increase in Capital Stock outstanding 3,817,816 5,818,038
=============== ===============
</Table>
* Net of redemption fees of $3,072 and $97,375 collected in the periods ended
March 31, 2005 and September 30, 2004, respectively.
See notes to financial statements.
9
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FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<Table>
<Caption>
SIX
MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, -------------------------------------------------------------
2005 2004 2003 2002 2001 2000
--------- --------- --------- --------- --------- ---------
Per share operating performance:
Net asset value at beginning of period $ 13.01 $ 10.79 $ 8.12 $ 8.00 $ 7.33 $ 9.46
--------- --------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) $ 0.01 $ (0.01) $ (0.04) $ (0.03) $ 0.08 $ 0.13
Net realized and unrealized gain (loss) on
investment securities 1.06 2.23 2.71 0.16 0.72 (2.17)
--------- --------- --------- --------- --------- ---------
Total from investment operations $ 1.07 $ 2.22 $ 2.67 $ 0.13 $ 0.80 $ (2.04)
--------- --------- --------- --------- --------- ---------
Less dividends from net investment income -- -- -- $ (0.01) $ (0.13) $ (0.09)
--------- --------- --------- --------- --------- ---------
Net asset value at end of period $ 14.08 $ 13.01 $ 10.79 $ 8.12 $ 8.00 $ 7.33
========= ========= ========= ========= ========= =========
Total investment return* 8.22% 20.57% 32.88% 1.63% 11.11% (21.73)%
Ratios/supplemental data:
Net assets at end of period (in 000's) $ 278,791 $ 207,907 $ 109,638 $ 74,192 $ 67,078 $ 73,235
Ratio of expenses to average net assets:
Before reimbursement from Investment
Adviser 0.92%+ 0.99% 1.15% 1.18% 1.28% 1.22%
After reimbursement from Investment
Adviser 0.92%+ 0.99% 1.15% 1.17% 1.20% 1.17%
Ratio of net investment income (loss) to
average net assets:
Before reimbursement from Investment
Adviser 0.19%+ (0.16)% (0.47)% (0.34)% 0.84% 1.18%
After reimbursement from Investment
Adviser 0.19%+ (0.16)% (0.47)% (0.34)% 0.92% 1.22%
Portfolio turnover rate 18%+ 16% 17% 14% 16% 76%
</Table>
* Return is based on net asset value per share, adjusted for reinvestment of
distributions, and does not reflect deduction of the sales charge. The return
for the period ended March 31, 2005 is not annualized.
+ Annualized.
See notes to financial statements.
10
<Page>
NOTES TO FINANCIAL STATEMENTS
March 31, 2005
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company. The Fund's objective is a
high total investment return, including capital appreciation and income, from a
diversified portfolio of securities. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements.
A. Security Valuation
Securities listed or traded on a national securities exchange are
valued at the last sale price on the last business day of the period, or if
there was not a sale that day, at the last bid price. Securities traded in
the NASDAQ National Market System are valued at the NASDAQ Official Closing
Price on the last business day of the period, or if there was not a sale
that day, at the last bid price. Unlisted securities are valued at the most
recent bid price. Short-term investments with maturities of 60 days or less
are valued at amortized cost, which approximates market value.
B. Federal Income Tax
No provision for federal income tax is required because the Fund has
elected to be taxed as a "regulated investment company" under the Internal
Revenue Code and intends to maintain this qualification and to distribute
each year to its shareholders, in accordance with the minimum distribution
requirements of the Code, all of its taxable net investment income and
taxable net realized gains on investments.
C. Securities Transactions and Related Investment Income
Securities transactions are accounted for on the date the securities
are purchased or sold. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income and expenses are
recorded on an accrual basis.
D. Use of Estimates
The preparation of the financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts
reported. Actual results could differ from those estimates.
NOTE 2 -- PURCHASES OF INVESTMENT SECURITIES
Cost of purchases of investment securities (excluding short-term
investments with maturities of 60 days or less) aggregated $56,510,997 for the
six months ended March 31, 2005. Realized gains or losses are based on the
specific identification method. There were no material differences between the
amounts reported in the financial statements at March 31, 2005 for federal
income tax and financial reporting purposes. Gross unrealized appreciation and
depreciation for all securities at March 31, 2005 for federal income tax
purposes was $57,904,181 and $1,131,932, respectively. For federal income tax
purposes, the Fund currently has accumulated net realized losses in the amount
of $162,538,210 which can be carried forward to offset future gains. The ability
to carry these losses forward expires as follows: $90,082,631 in 2007;
$1,128,157 in 2008; and $71,327,422 in 2009.
NOTE 3 -- ADVISORY FEES AND OTHER AFFILIATED TRANSACTIONS
Pursuant to an Investment Advisory Agreement, advisory fees were paid by
the Fund to First Pacific Advisors, Inc. (the "Adviser"). Under the terms of
this Agreement, the Fund pays the Adviser a monthly fee calculated at the annual
rate of 0.75% of the first $50 million of the Fund's average daily net assets
and 0.65% of the average daily net assets in excess of $50 million. In addition,
the Fund reimburses the Adviser monthly for the costs incurred by the Adviser in
providing financial services to the Fund, providing, however, that this
reimbursement shall not exceed 0.1% of the average daily net assets for any
fiscal year. The Agreement obligates the Adviser to reduce its fee to the extent
necessary to reimburse the Fund for any annual expenses (exclusive of interest,
taxes, the cost of any supplemental statistical and research information, and
extraordinary expenses such as litigation) in excess of 1 1/2% of the first
$30 million and 1% of the remaining average net assets of the Fund for the year.
11
<Page>
For the six months ended March 31, 2005, the Fund paid aggregate fees,
excluding expenses, of $17,000 to all Directors who are not affiliated persons
of the Adviser. Certain officers of the Fund are also officers of the Adviser
and FPA Fund Distributors, Inc.
NOTE 4 -- REDEMPTION FEES
A redemption fee of 2% applies to redemptions within 90 days of purchase
for certain purchases made by persons eligible to purchase shares without an
initial sales charge. For the six months ended March 31, 2005, the Fund
collected $3,072 in redemption fees, which amounted to less than $0.01 per
share.
NOTE 5 -- DISTRIBUTOR
For the six months ended March 31, 2005, FPA Fund Distributors, Inc.
("Distributors"), a wholly owned subsidiary of the Adviser, received $9,988 in
net Fund share sales commissions after reallowance to other dealers. The
Distributor pays its own overhead and general administrative expenses, the cost
of supplemental sales literature, promotion and advertising.
12
<Page>
SHAREHOLDER EXPENSE EXAMPLE
March 31, 2005
FUND EXPENSES
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
shareholder service fees; and other Fund expenses. The Example is intended to
help you understand your ongoing costs (in dollars) of investing in the Fund and
to 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 year and held for the entire year.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance"
provides information about actual account values and actual expenses. You may
use the information in this column, 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 column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance
(5% return before expenses)" provides information about hypothetical account
values and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. 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% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs. Therefore,
the information under the heading "Hypothetical Performance (5% return before
expenses)" 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
(5% RETURN
ACTUAL BEFORE
PERFORMANCE EXPENSES)
------------- -------------
Beginning Account Value
September 30, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
March 31, 2005 $ 1,082.20 $ 1,020.36
Expenses Paid During
Period* $ 4.78 $ 4.64
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.92%,
multiplied by the average account value over the period and prorated for the
six-months ended March 31, 2005 (182/365 days).
13
<Page>
DIRECTOR AND OFFICER INFORMATION
<Table>
<Caption>
POSITIONS(S) PORTFOLIOS IN
WITH FUND/ PRINCIPAL OCCUPATION(S) FUND COMPLEX
NAME, AGE & ADDRESS YEARS SERVED DURING THE PAST 5 YEARS OVERSEEN OTHER DIRECTORSHIPS
- ------------------------------ -------------------- ------------------------------------ ------------- -------------------------
Williard H. Altman, Jr. - (69)+ Director* Retired, Formerly, until 1995, 6
11400 W. Olympic Blvd., #1200 Years Served: 3 Partner of Ernst & Young LLP, a
Los Angeles, CA 90064 public accounting firm.
Leonard Mautner - (87)+ Director* President, Leonard Mautner 2
11400 W. Olympic Blvd., #1200 Years Served: 24 Associates; and General Partner,
Los Angeles, CA 90064 Goodman & Mautner Ltd.
John H. Rubel - (85)+ Director* President, John H. Rubel and 1
11400 W. Olympic Blvd., #1200 Years Served: 27 Associates, Inc.
Los Angeles, CA 90064
John P. Shelton (84)+ Director* Professor Emeritus at UCLA Graduate 1 Genisco Systems, Inc.
11400 W. Olympic Blvd., #1200 Years Served: 28 School of Management.
Los Angeles, CA 90064
Eric S. Ende - (60) Director* Senior Vice President of the 3
11400 W. Olympic Blvd., #1200 President & Adviser.
Los Angeles, CA 90064 Portfolio Manager
Years Served: 5
Steven R. Geist (51) Executive Vice Vice President of the Adviser.
11400 W. Olympic Blvd., #1200 President &
Los Angeles, CA 90064 Portfolio Manager
Year Served: 5
J. Richard Atwood - (44) Treasurer Principal and Chief Operating First Pacific Advisors
11400 W. Olympic Blvd., #1200 Years Served: 8 Officer of the Adviser. President Inc. and FPA Fund
Los Angeles, CA 90064 and Chief Executive Officer of FPA Distributors, Inc.
Fund Distributors, Inc.
Christopher H. Thomas - (48) Chief Compliance Vice President and Controller of the FPA Fund Distributors,
11400 W. Olympic Blvd., #1200 Officer Adviser and of FPA Fund Inc.
Los Angeles, CA 90064 Years Served: 10 Distributors, Inc.
Sherry Sasaki - (50) Secretary Assistant Vice President and
11400 W. Olympic Blvd., #1200 Years Served: 22 Secretary of the Adviser and of FPA
Los Angeles, CA 90064 Fund Distributors, Inc.
</Table>
* Directors serve until their resignation, removal or retirement.
+ Audit Committee member
14
<Page>
FPA PARAMOUNT FUND, INC.
INVESTMENT ADVISER
First Pacific Advisors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, CA 90064
DISTRIBUTOR
FPA Fund Distributors, Inc.
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064
COUNSEL
O'Melveny & Myers LLP
Los Angeles, California
TICKER SYMBOL: FPRAX
CUSIP: 302546106
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Los Angeles, California
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts
SHAREHOLDER SERVICE AGENT
Boston Financial Data Services, Inc.
P.O. Box 8115
Boston, Massachusetts 02266-8500
(800) 638-3060
(617) 483-5000
This report has been prepared for the information of shareholders of FPA
Paramount, Inc., and is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective prospectus.
The Fund's complete proxy voting record for the 12 months ended June 30, 2004 is
available without charge, upon request by calling (800) 982-4372 and on the
SEC's website at www.sec.gov.
The Fund's schedule of portfolio holdings, filed the second and fourth quarter
of Form N-Q with the SEC, is available on the SEC's website at www.sec.gov.
Form N-Q is available at the SEC's Public Reference Room in Washington, D.C.,
and information on the operations of the Public Reference Room may be obtained
by calling 1-202-942-8090. To obtain information on Form N-Q from the Fund,
shareholders can call 1-800-982-4372.
<Page>
Item 2. Code of Ethics. Not Applicable.
Item 3. Audit Committee Financial Expert. Not Applicable.
Item 4. Principal Accountant Fees and Services. Not Applicable.
Item 5. Audit Committee of Listed Registrants. Not Applicable.
Item 6. Schedule of Investments. Not Applicable. The schedule of investments
is included as part of the report to stockholders filed under Item 1
of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies. Not Applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not
Applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Issuers. Not Applicable.
Item 10. Submission of Matters to a Vote of Security Holders. There has
been no material change to the procedures by which shareholders may
recommend nominees to the registrant's board of directors.
Item 11. Controls and Procedures.
(a) The Principal Executive Officer and Principal Financial Officer of the
registrant have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment
Company Act of 1940) are effective based on their evaluation of the
disclosure controls and procedures as of a date within 90 days of the
filing date of this report.
(b) There have been no significant 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 last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the registrant's officers and directors,
as required to be disclosed under Item 2 of Form N-CSR. Not
Applicable.
(a)(2) Separate certification for the registrant's principal executive
officer and principal financial officer, as required by Rule 30a-2(a)
under the Investment Company Act of 1940. Attached hereto.
<Page>
(a)(3) Not Applicable
(b) Separate certification for the registrant's principal executive
officer and principal financial officer, as required by Rule 30a-2(b)
under the Investment Company Act of 1940. Attached hereto.
SIGNATURES
Pursuant to 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.
FPA PARAMOUNT FUND, INC.
By: /s/ ERIC S. ENDE
---------------------------------
Eric S. Ende, President
Date: May 20, 2005
Pursuant to 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.
FPA PARAMOUNT FUND, INC.
By: /s/ J. RICHARD ATWOOD
---------------------------------
J. Richard Atwood, Treasurer
Date: May 20, 2005