SEMI-ANNUAL REPORT
for the six months ended June 30, 1996
FUNDAMENTAL INVESTORS
KEEPING A LONG-TERM PERSPECTIVE
[The American Funds Group(R)]
Fundamental Investors(SM) seeks long-term growth of capital and income through
investments in common stocks.
RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Total Return Through 6/30/96 Six Twelve Ten
With All Distributions Reinvested Months Months Years
<S> <C> <C> <C>
Fundamental Investors +7.2% +21.0% +260.2%
Standard & Poor's
500 Composite Index +10.1 +26.0 +263.6
Average Savings Institution* +1.6 +3.1 +66.1
</TABLE>
*With interest compounded. Based on figures supplied by the U.S. League of
Savings Institutions and the Federal Reserve Board, which reflect all kinds of
savings deposits, including longer term certificates. Unlike investments in the
fund, such deposits are insured, and, if held to maturity, offer a guaranteed
return of principal and a fixed rate of interest, but no opportunity for
capital growth.
Fund results in this report were computed without a sales charge. Here are the
total returns and average annual compound returns with all distributions
reinvested for periods ended June 30, 1996, assuming payment of the 5.75%
maximum sales charge at the beginning of the stated periods:
<TABLE>
<CAPTION>
Average Annual
Total Return Compound Return
<S> <C> <C>
10 years +239.52% +13.00%
Five years +102.73 +15.18
One year +14.09 -
</TABLE>
Sales charges are lower for accounts of $50,000 or more. The fund's 30-day
yield as of July 31, 1996, calculated in accordance with the Securities and
Exchange Commission formula, was 1.84%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
The stock market zigged and zagged to new heights during the first six months
of 1996. The economy remained strong with more Americans working, earning
higher wages and spending more money. Higher interest rates hurt bonds, but the
stock market continued its ascent.
An investment in Fundamental Investors rose 7.2% during these six months
for those who reinvested dividends and capital gains. For shareholders who took
their dividends in cash, results were up 6.3%.
Those dividends included payments of ten cents per share in February and
May, representing an income return of 0.9% (or 1.8% on an annualized basis). In
addition, a capital gain distribution of 21 cents a share was paid in February.
As stock prices continued to hit all-time highs in the first half of the
year, Fundamental Investors' portfolio counselors became more cautious. The
fund's return lagged its benchmark Standard & Poor's 500 Composite Index, which
gained 10.1% with dividends reinvested and 8.9% with dividends in cash.
Our more conservative posture was evidenced by increased ownership in
energy-oriented companies, at 8.6% of assets the largest industry represented
in the portfolio.
Oil companies have traditionally offered defensive havens in volatile
environments. This particular period offered a bonus as oil prices averaged
about $20 a barrel, surpassing most analysts' predictions.
Oil company stocks that benefited the fund included Texaco (our largest
holding, representing 2% of assets), Royal Dutch Petroleum, Exxon, Murphy Oil
and Phillips Petroleum. Improved exploration methods and lower costs led us to
add two prominent players in this area as well: Baker Hughes, a manufacturer
of oil well equipment, and Halliburton, an oil-field services provider.
As you know, the fund has the flexibility to diversify its portfolio
globally. This gives us the ability to invest in companies that appear to offer
value, wherever they are, while maintaining Fundamental Investors' basic
character as a primarily U.S. fund. During the first half of the year, the
fund's Board of Directors increased the limit on the fund's holdings in
non-U.S. companies to 15% of assets from 10%. On June 30, 11.8% of the fund's
assets were invested in non-U.S. companies.
Two non-U.S. companies can be found on our list of ten largest holdings
for the period - Australian-based News Corp., the owners of the Fox film and
television enterprise, and Canadian-based Seagram, the well-known beverage
company and new owner of MCA Studios. These, along with two other strong media
and entertainment competitors on the list, Time Warner and Walt Disney, are
familiar names to the fund. The heavy weighting in these companies - more than
5% of the portfolio - illustrates our continued confidence in the prospects for
globally focused companies in the fast-moving entertainment field.
Also of note from the fund's top ten list:
- - Deere, the second-largest holding in the fund, was up 13.5% for the period.
The world's leading farm equipment company, Deere is benefiting from strong
farm income associated with currently high grain prices.
- - Pfizer, another strong holding on the list, was up 13.3%, reflecting
explosive growth in its pharmaceutical business.
- - U S WEST, purchased in February primarily for its relatively high yield, had
a poor showing during the period due to increasing competitive pressure.
- - Though Weyerhaeuser was down slightly for the period, we are optimistic about
this company and others in the forest products field. We have added to our
positions in these companies, taking advantage of lower stock prices.
Obviously, our report covers the period ended June 30. Since then we have
seen a substantial increase in market volatility, including some sizable
declines. Though declining markets can be painful in the short run, those of us
who are long-term investors can benefit when previously high-priced stocks of
well-run companies are finally "on sale."
Keeping a long-term perspective opens up possibilities. We will continue
to hunt for opportunities to satisfy the fund's search for long-term growth of
capital and income for its shareholders.
Sincerely,
Walter P. Stern
Chairman
James E. Drasdo
President
August 14, 1996
<TABLE>
<CAPTION>
Largest For the period 1/1/96-6/30/96
Individual Percent of Percent
Holdings Net Assets Change
<S> <C> <C>
Texaco 2.0% +06.9%
Deere 1.6 +13.5
Texas Instruments 1.6 -3.6
Pfizer 1.4 +13.3
Walt Disney 1.4 +6.6
U S WEST Communications 1.3 -11.8 *
Group
Weyerhaeuser 1.3 -1.7
Time Warner 1.3 +3.6
News Corp. 1.2 +8.3
Seagram 1.2 -2.9
</TABLE>
*This security was not held for the entire period. The percentage change
reflects the period from 2/3/96-6/30/96.
<TABLE>
FUNDAMENTAL INVESTORS, INC.
INVESTMENT PORTFOLIO - June 30, 1996
Unaudited
Percent
Of net
LARGEST INDIVIDUAL HOLDINGS Assets
<S> <C> <C> <C>
Texaco 2.00%
Deere 1.59
Texas Instruments 1.55
Pfizer 1.44
Walt Disney 1.36
U S WEST Communications Group 1.31
Weyerhaeuser 1.27
Time Warner 1.25
News Corp. 1.24
Seagram 1.18
LARGEST INVESTMENT CATEGORIES Percent of
Net Assets
Capital Equipment 20.63%
Services 19.60
Consumer Goods 16.27
Energy 10.61
Materials 9.78
LARGEST INDUSTRY HOLDINGS Percent of
Net Assets
Energy Sources 8.58%
Health & Personal Care 7.39
Banking 5.63
Machinery & Engineering 4.49
Telecommunications 4.32
Shares Market Percent
EQUITY-TYPE SECURITIES Princip Value Of
(Common and Preferred Stocks and Amount (000) Net Assets
Convertible Debentures)
- -------------------------------------------------------------- ---------- ----------
ENERGY
Energy Sources- 8.58%
Atlantic Richfield Co. 350000 $41,475 .69%
British Petroleum Co. PLC (American Depositary
Receipts) (United Kingdom) 190000 20306 .34
Chevron Corp. 600000 35400 .59
Cyprus Amax Minerals Co., convertible preferred,
Series A 200000 11000 .18
Exxon Corp. 795000 69066 1.16
Murphy Oil Corp. 1113700 50534 .85
Phillips Petroleum Co. 1123500 47046 .79
Royal Dutch Petroleum Co. (New York Registered
Shares) (Netherlands) 455000 69956 1.17
"Shell" Transport and Trading Co.,
PLC (New York Registered Shares)
(United Kingdom) 50000 4400 .07
Sun Co., Inc. 48186 1464
Sun Co., Inc., Series A 146314 4316 .09
Texaco Inc. 1425000 119522 2.00
TOTAL, Class B (American Depositary Receipts)
(France) 202463 7516 .13
Unocal Corp. 900000 30375 .52
Utilities: Electric & Gas- 2.03%
DTE Energy Co. 800000 24700 .41
Eastern Utilities Associates 640000 12560 .21
Edison International (formerly SCEcorp.) 450000 7931 .13
Entergy Corp. 150000 4256 .07
Florida Progress Corp. 300000 10425 .17
General Public Utilities Corp. 290000 10223 .17
Houston Industries Inc. 1350000 33244 .56
Long Island Lighting Co. 350000 5863 .10
Pacific Gas and Electric Co. 300000 6975 .12
Texas Utilities Co. 120800 5164 .09
----------------------
633717 10.61
----------------------
MATERIALS
Building Materials & Components- 0.08%
Cemex, SA de CV, Class B 4.25% convertible debentures 1997
(Mexico) /1/ $4,974,000 4564 .08
Chemicals- 4.22%
Air Products and Chemicals, Inc. 621200 35874 .60
Betz Laboratories, Inc. 200000 8775 .15
E.I. du Pont de Nemours and Co. 500000 39562 .66
Eastman Chemical Co. 500000 30438 .51
Georgia Gulf Corp. 1100000 32175 .54
Hoechst AG (Germany) 400000 13578 .23
IMC Global Inc. 300000 11288 .19
Imperial Chemical Industries PLC (American Depositary
Receipts) (United Kingdom) 500000 24563 .41
Mallinckrodt Group Inc. 1423000 55319 .93
Forest Products & Paper- 2.93%
Georgia-Pacific Corp. 400000 28400 .48
James River Corp. of Virginia 400000 10550 .18
Rayonier Inc. 675000 25650 .43
Union Camp Corp. 695000 33881 .57
Weyerhaeuser Co. 1800000 76500 1.27
Metals: Nonferrous- 1.24%
Alumax Inc. /2/ 250000 7594 .13
Aluminum Co. of America 1100000 63112 1.06
Inco Ltd. (Canada) 100000 3225 .05
Metals: Steel- 0.17%
Armco Inc. /2/ 600000 3000
Armco Inc., cumulative convertible preferred 150000 7106 .17
Miscellaneous Materials & Commodities- 1.14%
Potash Corp. of Saskatchewan Inc. (Canada) 775000 51344 .86
TRINOVA Corp. 500000 16687 .28
----------------------
583185 9.78
----------------------
CAPITAL EQUIPMENT
Aerospace & Military Technology- 1.23%
Boeing Co. 385000 33543 .56
Litton Industries, Inc. /2/ 500000 21750 .36
Sundstrand Corp. 500000 18313 .31
Data Processing & Reproduction- 3.98%
Adobe Systems Inc. 625000 22422 .38
Dell Computer Corp. /1/ /2/ 232418 11824 .20
Digital Equipment Corp. /2/ 984000 44280 .74
Hewlett-Packard Co. 450000 44831 .75
International Business Machines Corp. 167700 16602 .28
Oracle Corp. /2/ 1500000 59156 .99
Tandem Computers Inc. /2/ 850000 10519 .18
Xerox Corp. 525000 28088 .46
Electrical & Electronics- 1.78%
Lucent Technologies Inc. 1460000 55298 .93
Nokia Corp., Class A (American Depositary Receipts)
(Finland) 1000000 37000 .62
Siemens AG 1.00% convertible debentures 2001 (Germany)$25000000 14083 .23
Electronic Components- 3.50%
Intel Corp. 900000 66094 1.11
Motorola, Inc. 800000 50300 .84
Texas Instruments Inc. 1859128 92724 1.55
Electronic Instruments- 0.62%
Tektronix, Inc. 825000 36919 .62
Energy Equipment- 3.54%
Baker Hughes Inc. 1950000 64106 1.07
Dresser Industries, Inc. 1400000 41300 .69
Halliburton Co. 575000 31912 .53
Schlumberger Ltd. (Netherlands Antilles) 466700 39319 .66
Western Atlas Inc. /2/ 600000 34950 .59
Industrial Components- 1.49%
Dana Corp. 600000 18600 .31
Goodyear Tire & Rubber Co. 700000 33775 .57
Rockwell International Corp. 635000 36354 .61
Machinery & Engineering- 4.49%
Case Corp. 750000 36000 .60
Caterpillar Inc. 1000000 67750 1.13
Cummins Engine Co., Inc. /1/ 500000 20188 .34
Deere & Co. 2375000 95000 1.59
Parker Hannifin Corp. 1150000 48731 .83
----------------------
1231731 20.63
----------------------
CONSUMER GOODS
Appliances & Household Durables- 0.93%
Philips Electronics NV (Netherlands) 1700000 55463 .93
Automobiles- 1.27%
Ford Motor Co., Class A 812663 26310 .44
General Motors Corp. 950000 49756 .83
Beverages & Tobacco- 1.50%
Anheuser-Busch Companies, Inc. 100000 7500 .13
PepsiCo, Inc. 320000 11320 .19
Seagram Co. Ltd. (Canada) 2100000 70613 1.18
Food & Household Products- 3.31%
Archer Daniels Midland Co. 1500000 28688 .48
Colgate-Palmolive Co. 725000 61444 1.03
CPC International Inc. 381100 27439 .46
General Mills, Inc. 125000 6813 .11
H.J. Heinz Co. 800000 24300 .41
Unilever NV (New York Registered Shares) (Netherland 334900 48602 .82
Health & Personal Care- 7.39%
American Home Products Corp. 1000000 60125 1.01
AB Astra, Class A (American Depositary Receipts)
(Sweden) 800000 35000 .59
Bristol-Myers Squibb Co. 300000 27000 .45
Gillette Co. 500000 31187 .52
Johnson & Johnson 1340000 66330 1.11
Kimberly-Clark Corp. 95000 7339 .12
Eli Lilly and Co. 300000 19500 .33
McKesson Corp. 125000 5953 .10
Merck & Co., Inc. 992500 64140 1.07
Pfizer Inc 1200000 85650 1.44
Pharmacia & Upjohn, Inc. 880000 39050 .65
Recreation & Other Consumer Products- 1.82%
Duracell International Inc. 900000 38812 .65
Eastman Kodak Co. 900000 69975 1.17
Textiles & Apparel- 0.05%
Fruit of the Loom, Inc. /2/ 105000 2677 .05
----------------------
970986 16.27
----------------------
SERVICES
Broadcasting & Publishing- 4.04%
LIN Television Corp. /2/ 520200 18727 .31
News Corp. Ltd. (American Depositary Receipts)
(Australia) 2200000 51700
News Corp. Ltd., preferred shares (American Depositary 1.24
Receipts) 1100000 22138
E.W. Scripps Co., Class A 700000 32638 .55
Tele-Communications, Inc., Series A, Liberty Media G 251003 6652 .11
Tele-Communications, Inc., Series A, TCI Group /2/ 636115 11530 .19
Time Warner Inc. 1824000 71592
Time Warner Inc., 10.25% cumulative exchangeable 1.25
preferred, Series K /1/ 3000 2910
Tribune Co. 155200 11271 .19
Viacom Inc., Class B /2/ 305000 11857 .20
Business & Public Services- 3.62%
Avery Dennison Corp. 500000 27437 .46
Ecolab Inc. 300000 9900 .17
Federal Express Corp. /2/ 650000 53300 .89
Humana Inc. /2/ 1500000 26812 .45
Interpublic Group of Companies, Inc. 725000 33984 .57
Omnicom Group Inc. 947700 44068 .74
United HealthCare Corp. 300000 15150 .25
WMX Technologies, Inc. 175000 5731 .09
Leisure & Tourism- 1.36%
Walt Disney Co. 1290085 81114 1.36
Merchandising- 3.88%
Limited Inc. 2943800 63292 1.06
May Department Stores Co. 700000 30625 .51
Mercantile Stores Co., Inc. 401000 23509 .39
Sears, Roebuck and Co. 600000 29175 .49
Tandy Corp. 500 24 .00
Toys "R" Us, Inc. /2/ 1100000 31350 .53
Wal-Mart Stores, Inc. 850000 21568 .36
Walgreen Co. 950000 31825 .54
Telecommunications- 4.32%
AirTouch Communications /2/ 250000 7062 .12
ALLTEL Corp. 300000 9225 .15
Ameritech Corp. 200000 11875 .20
AT&T Corp. 800000 49600 .83
Bell Atlantic Corp. 425000 27094 .45
MCI Communications Corp. 600000 15375 .26
NYNEX Corp. 400000 19000 .32
Pacific Telesis Group 1205298 40679 .68
U S WEST Communications Group 2450000 78094 1.31
Transportation: Airlines- 1.20%
AMR Corp. /2/ 325000 29575 .50
Delta Air Lines, Inc. 510000 42330 .70
Transportation: Rail & Road- 1.18%
Conrail, Inc. 320000 21240 .36
Southern Pacific Rail Corp. /2/ 562293 14057 .24
Union Pacific Corp. 496800 34714 .58
----------------------
1169799 19.60
----------------------
FINANCE
Banking- 5.63%
Chase Manhattan Corp. 252000 17797 .30
Citicorp 150000 12394 .21
CoreStates Financial Corp 830000 31955 .54
Deutsche Bank AG (Germany) 1220000 57786 .97
First Chicago NBD Corp. 200000 7825 .13
First Union Corp. 1087500 66202 1.11
Fleet Financial Group, Inc. 585000 25448 .43
KeyCorp 400000 15500 .26
Norwest Corp. 900000 31387 .53
PNC Bank Corp. 1000000 29750 .50
Wells Fargo & Co. (formerly First Interstate Bancorp 166666 39812 .65
Financial Services- 1.01%
Associates First Capital Corp., Class A /2/ 40000 1505 .03
Federal Home Loan Mortgage Corp. 350000 29925 .50
Federal National Mortgage Assn. 860000 28810 .48
Insurance- 2.39%
Aetna Life and Casualty Co. 350000 25025 .42
Allstate Corp. 120000 5475 .09
American International Group, Inc. 108750 10725 .18
CNA Financial Corp. /2/ 320000 32960 .55
General Re Corp. 295000 44914 .75
SAFECO Corp. 600000 21225 .36
TIG Holdings, Inc. 100000 2900 .04
----------------------
539320 9.03
----------------------
MULTI-INDUSTRY
Multi-Industry- 3.37%
AlliedSignal Inc. 900000 51413 .86
CITIC Pacific Ltd. (Hong Kong) 8500000 34372 .58
Harsco Corp. 75000 5044 .09
Tenneco Inc. 675000 34509 .58
Textron Inc. 525000 41934 .70
U.S. Industries, Inc. /2/ 1000000 24125 .40
Whitman Corp. 400000 9650 .16
----------------------
201047 3.37
----------------------
MISCELLANEOUS
Other equity-type securities in initial period
of acquisition 200543 3.36
----------------------
TOTAL EQUITY-TYPE SECURITIES (cost: $4,394,226,000) 5530328 92.65
----------------------
Principal
Amount
(000)
Bonds & Notes
- -------------------------------------------------------------- ---------- -----------
Industrials - 0.62%
ADT Operations, Inc. 9.25% 2003 $ 2,000 2065 .03
Bell Cablemedia PLC 0%/11.95% 2004 /3/ 4000 2810 .05
Cablevision Systems Corp. 9.875% 2013 10000 9275
Cablevision Systems Corp. 9.875% 2023 4000 3620 .22
Cliffs Drilling Co. 10.25% 2003 /1/ 1500 1485 .02
Falcon Drilling Co., Inc., Series B, 9.75% 2001 1500 1530
Falcon Drilling Co., Inc., Series B, 8.875% 2003 2500 2413 .07
MFS Communications Co., Inc. 0%/9.375% 2004 /3/ 4000 3000 .05
PriCellular Wireless Corp. 0%/12.25% 2003 /3/ 5000 3925 .07
Time Warner Inc. 10.15% 2012 6000 6911 .11
---------- ----------
37034 .62
---------- ----------
Transportation- 0.23%
Delta Air Lines, Inc., Series 1993-A2, 10.50% 2016 / 11500 13663 .23
---------- ----------
U.S. Treasury Obligations- 0.93%
7.00% 1996 20000 20081 .34
6.375% 1997 15000 15082 .25
6.875% 1997 20000 20172 .34
---------- ----------
55335 .93
---------- ----------
TOTAL BONDS & NOTES (cost: $106,522,000) 106032 1.78
---------- ----------
Short-Term Securities
- ----------------------------------------------------
CORPORATE SHORT-TERM NOTES-4.61%
Abbott Laboratories 5.29%-5.33% due 7/8-7/25/96 $ 20,500 20450 .35%
Beneficial Corp. 5.35%-5.38% due 8/2-8/15/96 32000 31803 .53
Walt Disney Co. 5.26%-5.33% due 8/12-8/19/96 21100 20953 .35
Ford Motor Credit Co. 5.28%-5.38% due 7/1-8/5/96 35700 35590 .60
H.J. Heinz Co. 5.30% due 7/8/96 20400 20376 .34
International Lease Finance Corp. 5.30%-5.31% 35200 35070 .58
due 7/9-8/6/96
Lucent Technologies Inc. 5.37%-5.38% due 7/23-8/22/9 48500 48207 .80
J.C. Penney Funding Corp. 5.32% due 7/12-7/29/96 23200 23151 .38
Xerox Corp. 5.30%-5.38% due 7/18-8/16/96 39500 39292 .68
---------- ----------
274892 4.61
---------- ----------
FEDERAL AGENCY DISCOUNT NOTES-0.91%
Federal Home Loan Bank 5.205% due 7/22/96 22700 22628 .38
Federal Home Loan Mortgage Corp. 5.25%-5.26% 32300 32204 .53
due 7/15-8/6/96
---------- ----------
54832 .91
---------- ----------
TOTAL SHORT-TERM SECURITIES (cost: $329,728,000) 329724 5.52
---------- ----------
TOTAL INVESTMENT SECURITIES (cost: $4,830,476,000) 5966084 99.95
Excess of cash and receivables over payables 3182 .05
---------- ----------
NET ASSETS $5,969,266 100.00%
========== ==========
/1/ Purchased in a private placement transaction;
resale to the public may require registration or sale
only to qualified institutional buyers.
/2/ Non-income-producing securities.
/3/Represents a step bond; coupon rate will increase
at a later date.
/4/ Pass-through securities backed by a pool of mortgages
or other loans on which principal payments are
periodically made. Therefore, the effective maturity of
these securities is shorter than the stated maturity.
See Notes to Financial Statements
</TABLE>
EQUITY-TYPE SECURITIES APPEARING IN
THE PORTFOLIO SINCE DECEMBER 31, 1995
Air Products and Chemicals
AlliedSignal
Associates First Capital
Atlantic Richfield
Baker Hughes
Chase Manhattan
Cummins Engine
Deutsche Bank
Dresser Industries
Ecolab
First Chicago NBD
Georgia-Pacific
Gillette
Halliburton
Hewlett-Packard
Hoechst
Humana
James River Corp. of Virginia
KeyCorp
Kimberly-Clark
Limited
LIN Television
Lucent Technologies
Mallinckrodt Group
Mercantile Stores
Nokia
Oracle
Schlumberger
Siemens
Tektronix
Unilever
U S WEST Communications Group
Whitman
Xerox
EQUITY-TYPE SECURITIES ELIMINATED FROM THE
PORTFOLIO SINCE DECEMBER 31, 1995
Apple Computer
Banc One
Capital Cities/ABC
Chemical Banking
CIGNA
Cooper Cameron
Dun & Bradstreet
First Fidelity Bancorporation
Freeport-McMoRan
Freeport-McMoRan Copper & Gold
Hanson
McDonald's
Norsk Hydro
Phelps Dodge
Procter & Gamble
Ralston Purina
Repsol
Seagate Technology
Sony
Sprint
True North Communications
U.S. Healthcare
<TABLE>
Fundamental Investors, Inc.
Financial Statements Unaudited
Statement of Assets and Liabilities (dollars in thousands)
at June 30, 1996
- ---------------------------------------------------- ------------
<S> <C> <C>
Assets:
Investment securities at market
(cost: $4,830,476) $5,966,084
Cash 198
Receivables for-
Sales of investments $ 32,126
Sales of fund's shares 20,024
Dividends and accrued interest 11,294 63,444
------------ ------------
6,029,726
Liabilities:
Payables for-
Purchases of investments 55,734
Repurchases of fund's shares 2,287
Management services 1,486
Accrued expenses 953 60,460
------------ ------------
Net Assets at June 30, 1996-
Equivalent to $23.49 per share on
254,139,088 shares of $1 par value
capital stock outstanding (authorized
capital stock-300,000,000 shares) $5,969,266
=============
Statement of Operations Unaudited
for the six months ended June 30, 1996 (dollars in thousands)
------------ ------------
Investment Income:
Income:
Dividends $ 56,463
Interest 12,405 $ 68,868
------------
Expenses:
Management services fee 8,390
Distribution expenses 6,158
Transfer agent fee 2,575
Reports to shareholders 167
Registration statement and prospectus 682
Postage, stationery and supplies 692
Directors' fees 60
Auditing and legal fees 45
Custodian fee 141
Taxes other than federal income tax 1
Other expenses 78 18,989
------------ ------------
Net investment income 49,879
------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 279,723
Net increase in unrealized
appreciation on investments:
Beginning of period 1,104,466
End of period 1,135,628
Net unrealized appreciation ------------
on investments 31,162
Net realized gain and unrealized ------------
appreciation on investments 310,885
Net Increase in Net Assets Resulting ------------
from Operations $360,764
============
Statement of Changes in Net Assets (dollars in thousands)
- ------------------------------------------------------------------
Six Months Year
ended ended
6/30/96* 12/31/95
Operations: --------------------------
Net investment income $ 49,879 $ 75,570
Net realized gain on investments 279,723 145,011
Net unrealized appreciation
on investments 31,162 815,253
--------------------------
Net increase in net assets
resulting from operations 360,764 1,035,834
--------------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (47,051) (71,173)
Distributions from net realized
gain on investments (47,297) (128,122)
--------------------------
Total dividends and distributions (94,348) (199,295)
--------------------------
Capital Share Transactions:
Proceeds from shares sold:
51,120,569 and 76,628,416
shares, respectively 1,185,222 1,553,921
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments:
3,672,706 and 8,766,797 shares,
respectively 86,506 181,420
Cost of shares repurchased:
13,949,418 and 21,343,594
shares, respectively (323,372) (428,456)
Net increase in net assets resulting --------------------------
from capital share transactions 948,356 1,306,885
--------------------------
Total Increase in Net Assets 1,214,772 2,143,424
Net Assets:
Beginning of period 4,754,494 2,611,070
End of period (including undistributed --------------------------
net investment income: $12,451 and
$9,623, respectively) $5,969,266 $4,754,494
==========================
*Unaudited
See Notes to Financial Statements
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FUNDAMENTAL INVESTORS, INC.
1. 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
through investments in common stocks. The following paragraphs summarize the
significant accounting policies consistently followed by the fund in the
preparation of its financial statements:
Equity-type securities traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted bid price. Bonds and notes are
valued at prices obtained from a bond-pricing service provided by a major
dealer in bonds, when such prices are available; however, in circumstances
where the investment adviser deems it appropriate to do so, such securities
will be valued at the mean of their representative quoted bid and asked prices
or, if such prices are not available, at prices for securities of comparable
maturity, quality, and type. Short-term securities with original or remaining
maturities in excess of 60 days are valued at the mean of their quoted bid and
asked prices. Short-term securities with 60 days or less to maturity are valued
at amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Valuation Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in
non-U.S. currencies are recorded in the financial statements after translation
into U.S. dollars utilizing rates of exchange on the last business day of the
period. Purchases and sales of investment securities, income and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's statement of operations
under the caption "Realized Gain and Unrealized Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credits against
its custodian fee for imputed interest on certain balances with the custodian
bank. The custodian fee of $141,000 includes $15,000 that was paid by these
credits rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of June 30, 1996, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $1,135,608,000, of which
$1,214,328,000 related to appreciated securities and $78,720,000 related to
depreciated securities. There was no difference between book and tax realized
gains on securities transactions for the six months ended June 30, 1996. The
cost of portfolio securities for book and federal income tax purposes was
$4,830,476,000 at June 30, 1996.
3. The fee of $8,390,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.39% of the first $800 million of average net assets;
0.336% of such assets in excess of $800 million but not exceeding $1.8 billion;
0.30% of such assets in excess of $1.8 billion but not exceeding $3.0 billion;
and 0.276% of such assets in excess of $3.0 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.25% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended June 30,
1996, distribution expenses under the Plan were $6,158,000. As of June 30,
1996, accrued and unpaid distribution expenses were $726,000.
.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $2,575,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $4,591,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of June 30, 1996,
aggregate amounts deferred and earnings thereon were $187,000.
.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. As of June 30, 1996, accumulated undistributed net realized gain on
investments was $279,193,000 and additional paid-in capital was $4,287,855,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,959,741,000 and $1,064,731,000, respectively,
during the six months ended June 30, 1996.
<TABLE>
PER-SHARE DATA AND RATIOS
Six Months Year ended December 31
Ended ----------------- -------- -------- --------
6/30/96 /1 1995 1994 1993 1992 1991
-------- ----------------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period 22.29 17.5 18.15 17.52 17.47 14.32
--------- --------- --------- -------- -------- --------
Income from Investment
Operations:
Net investment income .20 .41 .42 .44 .44 .41
Net realized and unrealized
gain (loss) on investments 1.41 5.46 (.18) 2.65 1.27 3.82
Total income from --------- --------- --------- -------- -------- --------
investment operations 1.61 5.87 .24 3.09 1.71 4.23
--------- --------- --------- -------- -------- --------
Less Distributions:
Dividends from net investment
income (.20) (.40) (.44) (.43) (.42) (.40)
Distributions from net realized
gains (.21) (.68) (.45) (2.03) (1.24) (.68)
--------- --------- --------- -------- -------- --------
Total distributions (.41) (1.08) (.89) (2.46) (1.66) (1.08)
--------- --------- --------- -------- -------- --------
Net Asset Value, End of Period 23.49 22.29 17.5 18.15 17.52 17.47
========= ========= ========= ======== ======== ========
Total Return /2/ 7.22 /3/ 34.21 1.33 18.16% 10.19% 30.34%
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $5,969 $4,754 $2,611 $1,979 $1,440 $1,156
Ratio of expenses to average
net assets .35% /3/ .70% .68% .65% .65% .69%
Ratio of net income to
average net assets .92% /3/ 2.08% 2.45% 2.43% 2.56% 2.50%
Average commissions paid
per share /1/ /4/ 5.85 cents5.95 cents6.02 cents6.14 cent7.53 cent7.50 cents
Portfolio turnover rate 20.56% /3/ 25.47% 23.02% 29.22% 23.98% 17.07%
/1/ Unaudited
/2/ Calculated without deducting a sales charge.
The maximum sales charge is 5.75% of the fund's
offering price.
/3/ Based on operations for the period shown and,
accordingly, not representative of a full
year's operations.
/4/ Brokerage commissions paid on portfolio
transactions increase the cost of securities
and are not reflected in the fund's
and are not reflected in the fund's
statement of operations. Shares traded on a
principal basis, such as most
over-the-counter and fixed-income transactions,
are excluded.
</TABLE>
OFFICE OF THE FUND
Four Embarcadero Center, Suite 1800
Mailing Address: P.O. Box 7650
San Francisco, California 94120-7650
INVESTMENT ADVISER
Capital Research and Management
Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address
closest to you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02105-1713
COUNSEL
Morrison & Foerster LLP
345 California Street
San Francisco, California 94104-2675
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER OR CALL AMERICAN FUNDS SERVICE COMPANY,
TOLL-FREE, AT 800/421-0180.
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, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA SG/FS/3011
Lit No. FI-013-0896
[The American Funds Group(R)]
