SEC. File Nos. 2-10760
811-32
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 83
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 26
FUNDAMENTAL INVESTORS, INC.
(Exact Name of Registrant as specified in charter)
One Market, Steuart Tower, Suite 1800
San Francisco, California 94105
(Address of principal executive offices)
Registrant's telephone number, including area code:
(415) 421-9360
JULIE F. WILLIAMS, Secretary
Fundamental Investors, Inc.
One Market, Steuart Tower, Suite 1800
San Francisco, California 94105
(name and address of agent for service)
Copies to:
Robert E. Carlson, Esq.
Michael Glazer, Esq.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. Flower Street
Los Angeles, California 90071-2371
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing become effective on March 1, 1999, pursuant to
paragraph (a) of rule 485.
<PAGE>
FUNDAMENTAL INVESTORS
PROSPECTUS
MARCH 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FUNDAMENTAL INVESTORS, INC.
One Market
Steuart Tower, Suite 1800
San Francisco, CA 94105
TICKER SYMBOL: ANCFX NEWSPAPER ABBREV.: FdInv FUND NO.: 10
TABLE OF CONTENTS
Risk/Return Summary
Fees and Expenses of the Fund
Investment Objectives, Strategies and Risks
Year 2000
Management and Organization
Shareholder information
Purchase and Exchange of Shares
Distribution Arrangements
Financial Highlights
RISK/RETURN SUMMARY
The fund seeks to make your investment grow and provide you with income over
time by investing primarily in common stocks of large, established companies
that offer solid growth potential at reasonable prices.
The fund is designed for investors seeking both capital appreciation and
income. In pursuing its objective, the fund tends to invest in stocks that are
more resilient to market declines. An investment in the fund is subject to
risks, including the possibility that the fund may decline in value in response
to certain events, such as changes in the market or general economy. The
prices of equity securities held by the fund may be affected by events
involving the issuers of these securities.
You may lose money by investing in the fund. The likelihood of loss is greater
if you invest for a shorter period of time.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
INVESTMENT RESULTS
The following information illustrates how the fund's results may vary:
Here are the fund's results calculated without a sales charge on a CALENDAR
YEAR basis. (If a sales charge were included, results would be lower.)
[begin bar chart]
1989 28.56
1990 -6.24
1991 30.34
1992 10.19
1993 18.16
1994 1.33
1995 34.21
1996 19.99
1997 26.67
1998
[end bar chart]
The fund's highest/lowest quarterly results during this time period were:
- - HIGHEST xx.xx% (quarter ended xx, 19xx)
- - LOWEST xx.xx% (quarter ended xx, 19xx)
For periods ended December 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AVERAGE THE FUND WITH S & P'S 500 2 LIPPER
ANNUAL MAXIMUM SALES INDEX 3
TOTAL RETURN CHARGE DEDUCTED 1
One Year xx.xx% xxx.xx% xx.xx%
Five Years xx.xx% xxx.xx% xx.xx%
Ten Years xx.xx% xxx.xx% xx.xx%
Lifetime 4 xx.xx% xxx.xx% xx.xx%
</TABLE>
Yield 1: x.xx%
(For current yield information call American FundsLine(r) at 1-800-325-3590)
1 These fund results were calculated according to a formula that which requires
that the maximum sales charge of 5.75% be deducted. Results would be higher if
they were calculated at net asset value.
2 The Standard & Poor's 500 Index represents stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Lipper Growth & Income Funds Index is an equally weighted performance
index, adjusted for capital gain distributions and income dividends, of the 30
largest qualifying funds. The qualifying funds combine a growth of earnings
orientation and an income requirement for level and/or rising dividends. This
index is unmanaged and does not reflect sales charges, commissions or expenses.
4 For the period beginning August 1, 1978 (when Capital Research and Management
Company became the fund's investment adviser).
These results illustrate the potential fluctuations on the fund's results over
shorter periods of time. Past results are not an indication of future results.
FEES AND EXPENSES OF THE FUND
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
<TABLE>
<CAPTION>
<S> <C>
(fees paid directly from your investment) 5.75% 1
Maximum sales charge imposed on purchases
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum sales charge imposed on reinvested 0%
dividends
Maximum deferred sales charge 0%2
Redemption or exchange fees 0%
</TABLE>
1 Sales charges are reduced or eliminated for larger purchases.
2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following any purchases you made without a sales charge.
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE FUND ASSETS)
<TABLE>
<CAPTION>
<S> <C>
Management Fees 0.00%
Service (12b-1) Fees 0.00%*
Other Expenses 0.00%
</TABLE>
Total Annual Fund Operating Expenses 0.00%
*12B-1 EXPENSES MAY NOT EXCEED 0.25% OF THE FUND'S AVERAGE NET ASSETS ANNUALLY.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
One Year $xx
Three Years $xx
Five Years $xx
Ten Years $xx
</TABLE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund's investment objectives are to achieve long-term growth of capital and
income. It invests investing primarily in common stocks or securities
convertible into common stocks.
The prices of equity securities held by the fund may decline in response to
certain events including those directly involving issuers of securities held in
the fund's portfolio, adverse conditions affecting the general economy, or
overall market declines. The fund may also hold a substantial portion of its
portfolio in cash or cash equivalents, for example, in response to abnormal
market conditions. The extent of the fund's cash position will be dependent on
market conditions, fund purchases and redemptions, and other factors. This may
detract from the achievement of the fund's objective over the short term, or
may protect the fund during a market downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities that represent good long-term
investment opportunities.
OTHER IMPORTANT INVESTMENT PRACTICES
In addition to the principal investment strategies described above, the fund
has other practices that are described here and in the Statement of Additional
Information.
The fund may invest up to 15% of its assets in securities of issuers domiciled
outside the U.S. and not included in the Standard & Poor's 500 Composite Index.
Investing outside the U.S. may be subject to certain risks, such as currency
fluctuations or political, social and economic instability.
The fund may invest in debt securities, including up to 5% of its assets in
lower quality debt securities (rated Ba and BB or below or unrated but
determined to be of equivalent quality). The prices of debt securities
fluctuate depending on such factors as changing, interest rates, effective
maturities and credit ratings. For example, their prices generally decline
when interest rates rise and vice versa.
The following chart illustrates the asset mix of the fund's investment
portfolio as of the end of the fund's fiscal year, December 31, 1998.
Asset Mix [pie chart]
Largest Industry Holdings [table]
Largest Individual Equity Holdings [table]
BECAUSE THE FUND IS ACTIVELY MANAGED, ITS HOLDINGS WILL CHANGE FROM TIME TO
TIME.
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service
providers--including the investment adviser and its affiliates--are taking
steps to address the issue. In addition, the Year 2000 problem may adversely
affect the issuers in which the fund invests. For example, issuers may incur
substantial costs to address the problem. They may also suffer losses caused
by corporate and governmental data processing errors. The fund and its
investment adviser will continue to monitor developments relating to this
issue.
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071.
Capital Research and Management Company manages the investment portfolio and
business affairs of the fund. The total management fee paid by the fund, as a
percentage of average net assets, for the previous fiscal year is discussed
earlier under "Fees and Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested (within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee). In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for Fundamental Investors are listed on the following
page.
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF
EXPERIENCE AS AN
INVESTMENT PROFESSIONAL
(INCLUDING THE LAST FIVE
YEARS)
PORTFOLIO PRIMARY YEARS OF WITH CAPITAL TOTAL
COUNSELORS TITLE(S) EXPERIENCE AS RESEARCH YEARS
FOR PORTFOLIO AND MANAGEMENT
FUNDAMENTAL COUNSELOR COMPANY
INVESTORS (AND RESEARCH OR AFFILIATES
PROFESSIONAL, IF
APPLICABLE) FOR
FUNDAMENTAL
INVESTORS
(APPROXIMATE)
<S> <C> <C> <C> <C>
James E. President 15 years (plus 22 years 27 years
Drasdo and to 5
Director of years as a
the fund. research
Senior Vice professional
President prior to
and becoming a
Director, portfolio
Capital counselor for
Research the fund)
and
Management
Company
Gordon Senior Vice 8 years (plus to 28 years 28 years
Crawford President 13
of the years as a
fund. research
Senior Vice professional
President prior to
and becoming a
Director, portfolio
Capital counselor for
Research the fund)
and
Management
Company
Dina N. Senior Vice 6 years (in 7 years 32 years
Perry President addition to
of the 1 year as a
fund. research
Senior Vice professional
President, prior to
Capital becoming a
Research portfolio
and counselor for
Management the fund)
Company
</TABLE>
SHAREHOLDER INFORMATION
Shareholder Services
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days' written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
(Insert Service Center Map)
<TABLE>
<CAPTION>
<S> <C>
WESTERN SERVICE CENTER EASTERN CENTRAL SERVICE CENTER
American Funds Service Company American Funds Service Company
P.O. Box 2205 P.O. Box 6007
Brea, California Indianapolis, Indiana
92822-2205 46206-6007
Fax: 714/671-7080 Fax: 317/735-6620
WESTERN CENTRAL SERVICE CENTER EASTERN SERVICE CENTER
American Funds Service Company American Funds Service Company
P.O. Box 659522 P.O. Box 2280
San Antonio, Texas Norfolk, Virginia
78265-9522 23501-2280
Fax: 210/474-4050 Fax: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER ARE DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, some
retirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan
administrator/trustee or dealer.
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group
generally without a sales charge. Exchange of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases. See "Transactions by Telephone..." for
information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
To establish an account $ 250
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
SHARE PRICE
The fund calculates its share price, also called net asset value, as of 4:00
p.m. New York time which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value,
market prices are used when available. If a market price for a particular
security is not available, the fund will determine the appropriate price for
the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts your request. The offering price is the net asset value plus a sales
charge, if applicable.
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced
for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
INVESTMENT OFFERING NET DEALER
PRICE AMOUNT CONCESSION
INVESTED AS % OF OFFERING
PRICE
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
$100,000 but less 3.50% 3.63% 2.75%
than $250,000
$250,000 but less 2.50% 2.56% 2.00%
than $500,000
$500,000 but less $1 2.00% 2.04% 1.60%
million
$1 million or more see below see below see below
and certain other
investments described
below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% contingent deferred sales charge may be
imposed on certain redemptions by accounts that invest with no initial sales
charge (other than employer-sponsored plans), if redemptions are made within
one year of purchase. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution and/or by American funds Distributors on
investments made with no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any
combination of the methods described in the statement of additional information
and "Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. Up to 0.25%
of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. The 12b-1 fee
paid by the fund, as a percentage of average net assets, fund for the previous
fiscal year is indicated earlier under "Fees and Expenses of the Fund." Since
these fees are paid out of the fund's assets on an ongoing basis, over time
they will increase the cost of an investment and may cost you more than paying
higher initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
Through Your Dealer (certain charges may apply)
- - Shares held for you in your dealer's name must be sold through the dealer.
Writing to American Funds Service Company
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
--- Over $50,000;
--- Made payable to someone other than the registered shareholder(s); or
--- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
Telephoning or Faxing American Funds Service Company, or by using American
FundsLine(r) or American FundsLine OnLine(r):
- - Redemptions by telephone or fax (including American FundsLine(r) and
American FundsLine OnLine(r)) are limited to $50,000 per shareholder each day
- - Checks must be made payable to the registered shareholder
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE(R), OR AMERICAN FUNDSLINE
ONLINE(R)
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American Funds Service Company employs reasonable procedures to confirm that
the instructions received from any person with appropriate account information
are genuine. If reasonable procedures are not employed, the fund may be liable
for losses due to unauthorized or fraudulent instructions.
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund intends to pay dividends to you, usually in February, May, August and
December. Capital gains, if any, are usually distributed in December.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.
TAX CONSEQUENCES
Dividends and capital gains are taxable whether they are reinvested or received
in cash -- unless you are exempt from taxation or entitled to tax deferral.
Capital gains may be taxed at different rates depending on the length of time
the fund holds its assets.
The tax treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
You must provide the fund with a certified correct taxpayer identification
number (generally your Social Security Number) and certify that you are not
subject to backup withholding. If you fail to do so, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions. Federal
law also requires the fund to withhold 30% or the applicable tax treaty rate
from dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial
results for a single fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Deloitte & Touche LLP, whose report, along with the fund's
financial statements, are included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----- ----- ----- ----- -----
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $24.54 $22.29 $17.50 $18.15
----- ----- ----- ----- -----
Income from Investment Operations:
Net Investment Income .41 .41 .41 .42
Net Gains or Losses on Securities
(both realized and unrealized) 6.00 4.00 5.46 (.18)
----- ----- ----- ----- -----
Total From
Investment Operations 6.41 4.41 5.87 .24
----- ----- ----- ----- -----
Less Distributions:
Dividends (from net investment income) (.42) (.40) (.40) (.44)
Dividends (from capital gains) (3.13) (1.76) (.68) (.45)
----- ----- ----- ----- -----
Total Distributions (3.55) (2.16) (1.08) (.89)
----- ----- ----- ----- -----
Net Asset Value, End of Period $27.40 $24.54 $22.29 $17.50
===== ===== ===== ===== =====
Total Return (1) 26.67% 19.99% 34.21% 1.33%
Ratios/Supplemental Data:
Net Assets, End of Period
(in millions) $10,465 $7,165 $4,754 $2,611
Ratio of Expenses to Average
Net Assets .63% .66% .70% .68%
Ratio of Net Income to Average
Net Assets 1.54% 1.78% 2.08% 2.45%
Portfolio Turnover Rate 45.09% 39.07% 25.47% 23.02%
</TABLE>
/1/ Excludes maximum sales charge of 5.75%
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext.11
FOR 24-HOUR INFORMATION
American American Funds
FundsLine(r) Internet Web site
800/325-3590 http://www.americanfunds.com
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. In the event of any
inconsistencies or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial statements,
investments results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent auditors' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund, including the
fund's financial statements.
A current SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The SAI and
other related materials about the fund are available for review or to be copied
at the SEC's Public Reference Room (1-800-SEC-0330) or on the SEC's Internet
Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary of the fund
Service Company P.O. Box 7650
800/421-0180 ext.1 San Francisco, CA 94120
Investment Company File No. 811-32
<PAGE>
FUNDAMENTAL INVESTORS, INC.
Part B
Statement of Additional Information
MARCH 1, 1999
This document is not a prospectus but should be read in conjunction with the
current prospectus of Fundamental Investors, Inc. (the "fund" or "FI") dated
March 1, 1999. The prospectus may be obtained from your investment dealer or
financial planner or by writing to the fund at the following address:
Fundamental Investors, Inc.
Attention: Secretary
One Market
Steuart Tower, Suite 1800
San Francisco, CA 94105
Telephone: (415) 421-9360
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
Table of Contents
<TABLE>
<CAPTION>
Item Page No.
<S> <C>
Certain Investment Limitations and Guidelines 2
Description of Certain Securities and Investment Techniques 2
Fundamental Policies and Investment Restrictions 5
Fund Organization 6
Fund Officers and Directors 7
Management 11
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 16
Selling Shares 22
Shareholder Account Services and Privileges 24
Execution of Portfolio Transactions 25
General Information 26
Investment Results and Related Statistics 27
Description of Bond Ratings 33
Financial Statements Attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
DEBT SECURITIES
- - The fund may invest up to 5% of its total assets in debt securities rated
Ba/BB or below by Moody's or S&P or in unrated securities that are determined
to be of equivalent quality.
NON-U.S. SECURITIES
- - The fund may invest up to 15% of its assets in securities of issuers that
are domiciled outside the U.S. and not included in the Standard & Poor's 500
Composite Index.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES -- The fund will invest in equity securities. Equity
securities represent an ownership position in a company. The prices of equity
securities fluctuate based on changes in the financial condition of their
issuers and on market and economic conditions. The fund's results will be
related to the overall market for these securities. The growth-oriented,
equity-type securities generally purchased by the fund may involve large price
swings and potential for loss.
DEBT SECURITIES -- The fund will invest in debt securities. Bonds and other
debt securities are used by issuers to borrow money. Issuers pay investors
interest and generally must repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. The prices of debt securities
fluctuate depending on such factors as interest rates, credit quality and
maturity. In general their prices decline when interest rates rise and vice
versa.
The fund may invest up to 5% of its total assets in debt securities rated Ba
and BB or below by Moody's Investors Service, Inc. or Standard & Poor's
Corporation or in unrated securities that are determined to be of equivalent
quality. These securities are commonly known as "high-yield, high-risk" or
"junk" bonds. The market prices of these securities may fluctuate more than
higher quality securities and may decline significantly in periods of general
difficulty.
Certain risk factors relating to investing in below investment grade securities
("high-yield, high-risk bonds") are described below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk bonds
can be sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercised these provisions
in a declining interest rate market, the fund would have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. Conversely, a high-yield, high-risk bond's value will decrease in a
rising interest rate market, as it will with all bonds.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
The fund's investment adviser, Capital Research and Management Company (the
"Investment Adviser"), attempts to reduce the fund's risks through
diversification of the portfolio by credit analysis of each issuer as well as
by monitoring broad economic trends and corporate developments, but there can
be no assurance that it will be successful in doing so. The fund's investment
policy with respect to investing in high-yield, high-risk securities is a
"non-fundamental" policy and thus, may be changed by the board of directors at
any time. It is contemplated that most of the fund's common stock investments
will be made in securities that are listed on a stock exchange.
OTHER SECURITIES -- The fund may also invest in securities that have a
combination of equity and debt characteristics such as non-convertible
preferred stocks and convertible securities. These securities may at times
resemble equity more than debt and vice versa. Non-convertible preferred stocks
are similar to debt in that they have a stated dividend rate akin to the coupon
of a bond or note even though they are often classified as equity securities.
The prices and yields of non- convertible preferred stocks generally move with
changes in interest rates and the issuer's credit quality, similar to the
factors affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
shares of common stock or other securities at a stated exchange ratio. These
securities prior to conversion pay a fixed rate of interest or a dividend.
Because convertible securities have both debt and equity characteristics their
value varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the credit quality of
the issuer.
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality.
INVESTING IN VARIOUS COUNTRIES -- The fund may invest up to 15% of its assets
in securities of issuers domiciled outside the U.S. and not included in the
Standard & Poor's 500 Composite Index. Investing outside the U.S. involves
special risks, particularly in certain developing countries, caused by, among
other things: fluctuating currency values; different accounting, auditing, and
financial reporting regulations and practices in some countries; changing local
and regional economic, political, and social conditions; expropriation or
confiscatory taxation; greater market volatility; differing securities market
structures; and various administrative difficulties such as delays in clearing
and settling portfolio transactions or in receiving payment of dividends.
However, in the opinion of Capital Research and Management Company, investing
outside the U.S. also can reduce certain portfolio risks due to greater
diversification opportunities.
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CASH EQUIVALENTS - The fund invests in various high-quality money market
instruments that mature, or may be redeemed or resold, in 13 months or less (25
months in the case of U.S. government securities). These include (1)
commercial paper (notes issued by corporations or governmental bodies), (2)
commercial bank obligations (for example, certificates of deposit and banker's
acceptances (time drafts on a commercial bank where the bank accepts an
irrevocable obligation to pay at maturity), (3) savings association and savings
bank obligations (for example, certificates of deposit issued by savings banks
or savings and loan associations), (4) securities of the U.S. government, its
agencies or instrumentalities that at purchase mature, or may be redeemed, in
one year or less, and (5) corporate bonds and notes. that at purchase mature,
or that may be redeemed, in one year or less.
CURRENCY TRANSACTIONS -- The fund has the ability to enter into forward
currency contracts to protect against changes in currency exchange rates. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. The fund intends to enter into forward currency contracts solely to
hedge into the U.S. dollar its exposure to other currencies. The fund will
segregate liquid assets which will be marked to market daily to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded outside the
U.S. will be considered illiquid unless they have been specifically determined
to be liquid under procedures adopted by the fund's board of directors taking
into account factors such as frequency and volume of trading, the commitment of
dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements, under
which it buys a security and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and price. The seller must
maintain with the fund's custodian collateral equal to at least 100% of the
repurchase price, including accrued interest, as monitored daily by Capital
Research and Management Company. If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the collateral securing the
repurchase agreement has declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy proceedings are commenced with
respect to the seller, liquidation of the collateral by the fund may be
delayed or limited. For purposes of Investment Restriction number five, under
"Investment Restrictions" below, repurchase agreements maturing in excess of
seven days are considered not readily marketable. The fund does not currently
intend (at least for the next 12 months) to invest in repurchase agreements.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
The fund has adopted certain fundamental policies and investment restrictions
for the protection of the fund's shareholders that may not be changed without
approval of the holders of a majority of its outstanding shares. Such majority
is defined by the Investment Company Act of 1940 ("1940 Act") as the vote of
the lesser of (i) 67% or more of the voting securities present at a meeting of
shareholders, if the holders of more than 50% of the outstanding voting
securities are present in person or by proxy, or (ii) more than 50% of the
outstanding voting securities.)
The fund may not:
1. borrow money or securities;
2. buy securities "on margin";
3. effect "short sales" of securities;
4. mortgage, pledge or hypothecate securities;
5. lend money or securities (but the purchase of a portion of an issue of
publicly distributed debt securities is not considered the making of a loan);
6. invest in the securities of any issuer which, including predecessors, has
a record of less than three years continuous operation;
7. invest in the securities of any issuer if any officer or director of the
fund owns more than 1/2 of 1% of the securities of that issuer or if the fund's
officers and directors together own more than 5% of the securities of that
issuer;
8. invest any of its assets in the securities of any managed investment trust
or of any other managed investment company;
9. invest more than 5% of its total assets at the market value at the time of
investment in securities of any one issuer, or hold more than 10% of such
securities of any one issuer, but these limitations do not apply to obligations
of or guaranteed by the U.S.;
10. purchase or sell real estate;
11. purchase or sell commodities or commodity contracts;
12. act as underwriter of securities issued by other persons;
13. make investments in other companies for the purpose of exercising control
or management;
14. concentrate its investments in any one industry or group of industries,
but may invest up to 25% of its assets in any one industry.
Notwithstanding investment restriction number 8, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For purposes of investment restriction number 14, the fund will not invest 25%
or more (rather than more than 25%) of its total assets in the securities of
issuers in the same industry.
Although not fundamental policies, the fund has further agreed that it will not
invest more than 5% of the value of the fund's assets in warrants, valued at
the lower of cost or market, with no more than 2% being unlisted on the New
York or American Stock Exchanges (warrants acquired by the fund in units or
attached to securities may be deemed to be without value); or invest in puts or
calls, or in oil, gas or other mineral exploration programs; or invest more
than 10% of the value of its total assets in securities which are not readily
marketable (including repurchase agreements maturing in more than seven days or
securities for which there is no active and substantial market). In addition,
in connection with investment restriction number 10 above, the fund has
undertaken to the State of Texas that it will not, as a matter of
non-fundamental policy, purchase or sell limited partnerships in real estate
(excluding securities of companies, such as real estate investment trusts,
which deal in real estate or interests therein).
No officer or director of the fund may sell portfolio securities to the fund or
buy portfolio securities from it.
FUND ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Delaware corporation on October 17, 1932, and reincorporated in
Maryland on February 1, 1990. All fund operations are supervised by the fund's
board of directors. The board meets periodically and performs duties required
by applicable state and federal laws. Members of the board who are not
employed by Capital Research and Management Company or its affiliates are paid
certain fees for services rendered to the fund as described in "Fund Directors
and Officers" below. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AND AGE REGISTRANT DURING (INCLUDING (INCLUDING OF FUND
PAST 5 YEARS VOLUNTARILY VOLUNTARILY BOARDS
DEFERRED DEFERRED ON WHICH
COMPENSATION COMPENSATION DIRECTOR
/1/) FROM /1/) FROM ALL SERVES
FUND DURING FUNDS MANAGED /2/
FISCAL YEAR BY CAPITAL
ENDED RESEARCH AND
12/31/98 MANAGEMENT
COMPANY OR ITS
AFFILIATES /2/
FOR THE YEAR
ENDED 12/31/98
<S> <C> <C> <C> <C> <C>
Guilford C. Babcock Director Associate $ /3/ $ 2
1575 Circle Drive Professor of
San Marino, CA 91108 Finance,
Age: 67 School of Business
Administration,
University of
Southern
California
Charles H. Black Director Private investor $ $ 4
525 Alma Real Drive and consultant;
Pacific Palisades, former Executive
CA 90272 Vice President
Age: 72 and Director,
KaiserSteel
Corporation
+James E. Drasdo President, Senior Vice none /5/ none /5/ 1
333 South Hope PEO and President and
Street Director Director, Capital
Los Angeles, CA Research and
90071 Management Company
Age: 53
Robert A. Fox Director President and $ $ 6
P. O. Box 457 Chief Executive
Livingston, CA 95334 Officer, Foster
Age: 61 Farms
Roberta L. Hazard Director Consultant, Rear $ $ 4
1419 Audmar Drive Admiral, United
McLean, VA 22101 States Navy
Age: 64 (Retired)
Leonade D. Jones Director Former Treasurer; $ $ 6
1536 Los Montes The Washington
Drive Post Company
Burlingame, CA 94010
Age: 51
John G. McDonald Director The IBJ Professor $ $ 7
Graduate School of of Finance,
Business Graduate School of
Stanford University Business, Stanford
Stanford, CA 94305 University
Age: 61
Gail L. Neale Director President, The $ /3/ $ 5
The Lovejoy Lovejoy Consulting
Consulting Group, Group, Inc.;
Inc. former Executive
154 Prospect Parkway Vice President,
Burlington, VT 05401 Salzburg Seminar
Age: 63
+ James W. Ratzlaff Director Senior Partner, none /4/ none /4/ 8
333 South Hope The Capital Group
Street Partners, L.P.
Los Angeles, CA
90071
Age: 62
Henry E. Riggs Director President, Keck $ /3/ $ 4
Keck Graduate Graduate Institute
Institute of Applied of Applied Life
Life Sciences Sciences; former
1263 Dartmouth President and
Claremont, CA 91711 Professor of
Age: 63 Engineering,
Harvey Mudd
College
+James F. Rothenberg Director President and none /4/ none /4/ 3
333 South Hope Director, Capital
Street Research and
Los Angeles, CA Management Company
90071
Age: 52
Patricia K. Woolf Director Private investor; $ $ 6
506 Quaker Road Lecturer,
Princeton, NJ 08540 Department of
Age: 64 Molecular Biology,
Princeton
University;
Corporation
Director
</TABLE>
+ Directors who are considered "interested persons as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and Management
Company.
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the Fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serves as the underlying investment vehicle for certain
variable insurance contracts; and Endowments, whose shareholders are limited to
(i) any entity exempt from taxation under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended ("501(c)(3) organization"); (ii) any trust,
the present or future beneficiary of which is a 501(c)(3) organization, and
(iii) any other entity formed for the primary purpose of benefiting a 501(c)(3)
organization. An affiliate of Capital Research and Management Company, Capital
International, Inc., manages Emerging Markets Growth Fund, Inc.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors is as
follows: Guilford C. Babcock ($ ), Gail L. Neale ($ ), and
Henry E. Riggs ($ ). Amounts deferred and accumulated earnings
thereon are not funded and are general unsecured liabilities of the fund until
paid to the Director.
/4/ James E. Drasdo, James W. Ratzlaff, and James F. Rothenberg are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
Officers
(with their principal occupations during the past five years)
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL
HELD WITH OCCUPATION(S)
REGISTRANT DURING PAST 5
YEARS
<S> <C> <C> <C>
Gordon Crawford 51 Senior Vice Capital Research
333 South Hope Street President and Management
Los Angeles, CA 90071 Company, Senior
Vice President
and Director
Paul G. Haaga, Jr. 50 Senior Vice Capital Research
333 South Hope Street President and Management
Los Angeles, CA 90071 Company,
Executive Vice
President and
Director
Dina N. Perry 53 Senior Vice Capital Research
3000 K Street, N.W., President and Management
Suite 230 Company, Senior
Washington, D.C. 20007- Vice President
5124
Michael T. Kerr 31 Vice Capital Research
333 South Hope Street President Company,
Los Angeles, CA 90071 Executive Vice
President and
Research Director
Julie F. Williams 50 Secretary Capital Research
333 South Hope Street and Management
Los Angeles, CA 90071 Company, Vice
President - Fund
Business
Management Group
Patrick F. Quan 40 Assistant Capital Research
One Market, Steuart Secretary and Management
Tower, Company, Vice
Suite 1800 President - Fund
San Francisco, CA 94105 Business
Management Group
Sheryl F. Johnson 30 Treasurer Capital Research
5300 Robin Hood Road and Management
Norfolk, VA 23513 Company, Senior
Vice President -
Fund Business
Management Group
Robert P. Simmer 36 Assistant Capital Research
5300 Robin Hood Road Treasurer and Management
Norfolk, VA 23513 Company, Vice
President - Fund
Business
Management Group
</TABLE>
No compensation is paid by the fund to any officer or director who is a
director, officer or employee of the Investment Adviser or affiliated
companies. The compensation paid by the fund to directors who are not
affiliated with the Investment Adviser is $11,000 per annum, plus $800 for each
Board of Directors meeting attended, plus $400 for each meeting attended as a
member of a committee of the Board of Directors. In addition, members of the
Proxy Committee receive an annual retainer fee of $11,000. No pension or
retirement benefits are accrued as part of fund expenses. The Directors may
elect, on a voluntary basis, to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. The fund also reimburses
certain expenses of the Directors who are not affiliated with the Investment
Adviser. As of December 1, 1998 the officers and directors of the fund and
their families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
The Investment Adviser's research professionals travel several million miles a
year, making more than 5,000 research visits in more than 50 countries around
the world. The Investment Adviser believes that it is able to attract and
retain quality personnel. The Investment Adviser is a wholly owned subsidiary
of The Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations as well as schools, colleges, foundations and
other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the Advisory Agreement) between the fund and the Investment
Adviser,will continue until the close of business on August 31, 1999, unless
sooner terminated, and may be renewed from year to year thereafter, provided
that any such renewal has been specifically approved at least annually by (i)
the Board of Directors of the fund, or by the vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the fund, and (ii) the
vote of a majority of directors who are not parties to the Advisory Agreement
or interested persons (as defined in said Act) of any such party, cast in
person, at a meeting called for the purpose of voting on such approval. The
Advisory Agreement also provides that either party has the right to terminate
it without penalty, upon 60 days' written notice to the other party, and that
the Advisory Agreement automatically terminates in the event of its assignment
(as defined in said Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, provides suitable office space, necessary small office equipment and
utilities, and provides general purpose accounting forms, supplies, and postage
used at the offices of the fund relating to the services furnished by the
Investment Adviser. The fund pays all expenses not specifically assumed by the
Investment Adviser as provided herein. Such expenses shall include, but shall
not be limited to, custodian, stock transfer and dividend disbursing fees and
expenses; costs of the designing, printing and mailing of reports,
prospectuses, proxy statements, and notices to its shareholders; taxes;
expenses of the issuance and redemption of shares of the fund (including stock
certificates, registration and qualification fees and expenses); expenses
pursuant to the fund's Plan of Distribution (described below); legal and
auditing expenses; compensation, fees, and expenses paid to directors;
association dues; costs of stationery and forms prepared exclusively for the
fund; and costs of assembling and storing shareholder account data.
The Advisory Agreement provides for an advisory fee reduction to the extent
that the fund's annual ordinary operating expenses exceed 1% of the average net
assets of the fund. Expenses which are not subject to this limitation are
interest, taxes, and extraordinary expenses. Expenditures, including costs
incurred in connection with the purchase or sale of portfolio securities, which
are capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses.
The management fee is based on an annual rate of 0.39% on the first $800
million of the fund's net assets, plus 0.336% on net assets over $800 million
to $1.8 billion, plus 0.30% on net assets over $1.8 billion to $3 billion, plus
0.276% on net assets over $3 billion. During the fiscal years ended December
31, 1998, 1997, and 1996, the Investment Adviser received from the fund
advisory fees of $ , $26,675,000, and $18,267,000,
respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the Principal Underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 902821, 3500 Wiseman Boulevard, San
Antonio, TX 78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1. The Principal Underwriter
receives amounts payable pursuant to the Plan (described below) and commissions
consisting of that portion of the sales charge remaining after the discounts
which it allows to investment dealers. Commissions retained by the Principal
Underwriter on sales of fund shares during the fiscal year ended December 31,
1998, amounted to $ after allowance of $ to dealers.
During the fiscal years ended December 31, 1997 and 1996, the Principal
Underwriter retained $8,356,000 and $7,993,000 after allowance of $
and $ to dealers, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors, and separately by
a majority of the directors who are not "interested" persons of the fund and
who have no direct or indirect financial interest in the operation of the Plan
or the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and directors who are "interested" persons of the fund may, due to
present or past affiliations with the Investment Adviser and related companies,
be considered to have a direct or indirect financial interest in the operation
of the Plan. Potential benefits of the plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of directors who
are not "interested persons" of the fund are committed to the discretion of the
directors who are not interested persons during the existence of the Plan. The
Plan is reviewed quarterly and must be renewed annually by the Board of
Directors.
Under the Plan the fund may expend up to 0.25% of its net assets annually to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Directors has approved the category of
expenses for which payment is being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code (the "Code") including a "401(k)
plan with 100 or more eligible employees or a community foundation).
Commissions on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the year ended December 31, 1998, the fund paid or accrued $ under
the Plan as compensation to dealers. As of December 31, 1998, distribution
expenses accrued and unpaid distribution expenses were $ .
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries of affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
with adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Code . Under Subchapter M, if the fund distributes within specified times at
least 90% of its investment company taxable income, it will be taxed only on
that portion of such investment company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) diversify its holdings so that, at the end of
each fiscal quarter, (I) at least 50% of the market value of the fund's assets
is represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities (but such other
securities must be limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's assets and 10% of the outstanding voting
securities of such issuer), and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (I) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (I) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
The fund also intends to distribute to shareholders all of the excess of net
long-term capital gain over net short-term capital loss on sales of securities.
If the net asset value of shares of the fund should, by reason of a
distribution of realized capital gains, be reduced below a shareholder's cost,
such distribution would in effect be a return of capital to that shareholder
even though taxable to the shareholder, and a sale of shares by a shareholder
at net asset value at that time would establish a capital loss for federal tax
purposes. In particular, investors should consider the tax implications of
purchasing shares just prior to a dividend or distribution record date. Those
investors purchasing shares just prior to such a date will then receive a
partial return of capital upon the dividend or distribution, which will
nevertheless be taxable to them as an ordinary or capital gains dividend.
Corporate shareholders of the fund may be eligible for the dividends-received
deduction on the dividends (excluding the net capital gains dividends) paid by
the fund to the extent that the fund's income is derived from dividends (which,
if received directly, would qualify for such deduction) received from domestic
corporations. In order to quality for the dividends-received deduction, a
corporate shareholder must hold the fund shares paying the dividends upon which
the deduction is based for at least 46 days.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are thereby
taxable as of December 31, provided that the fund pays the dividend no later
than the end of January of the following year.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares will not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
The fund may be required to pay withholding and other taxes imposed by foreign
countries generally at rates from 10% to 40% which would reduce the fund's
investment income. Tax conventions between certain countries and the United
States may reduce or eliminate such taxes. It is not anticipated that
shareholders will be entitled to take a foreign tax credit or deduction for
such foreign taxes. Corporate shareholders of the fund will be eligible for
the dividends-received deduction on the dividends (excluding the net capital
gain dividends) paid by the fund to the extent the fund's income is derived
from dividends received from domestic corporations. In order to qualify for
the dividends-received deduction, a corporate shareholder must hold the fund
shares on which the dividends are paid for at least 46 days.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. However, if the distribution is effectively connected
with the conduct of the non-U.S. shareholder's trade or business within the
U.S., the distribution would be included in the net income of the shareholder
and subject to U.S. income tax at the applicable marginal rate. Distributions
of capital gains not effectively connected with a U.S. trade or business are
not subject to the withholding, but if the non-U.S. shareholder was an
individual who was physically present in the U.S. during the tax year for more
than 182 days and such shareholder is nonetheless treated as a nonresident
alien, the distributions would be subject to a 30% tax.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate generally applicable to ordinary income is 39.6%
(effective tax rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
generally applicable to net capital gains on assets held more than one year is
20%, and the maximum corporate tax applicable to ordinary income and net
capital gain is 35%. However, to eliminate the benefit of lower marginal
corporate income tax rates, corporations which have income in excess of
$100,000 for a taxable year will be required to pay an additional income tax
liability of up to $11,700 and corporations which have taxable income in excess
of $15,000,000 for a taxable year will be required to pay an additional amount
of tax of up to $100,000. Naturally, the amount of tax payable by an
individual will be affected by a combination of tax law rules covering, e.g.,
deductions, credits, deferrals, exemptions, sources of income and other
matters. Under the Code, an individual is entitled to establish an Individual
Retirement Account ("IRA") each year (prior to the tax return filing deadline
for the year) whereby earnings on investments are tax-deferred. In addition,
in some cases, the IRA contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Investors are urged to consult their tax advisers with
specific reference to their own tax situations.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and Fund $50 minimum (except where a
Numbers" for initial investment lower minimum is noted under
minimums. "Investment Minimums and Fund
Numbers").
By contacting Visit any investment dealer who is Mail directly to your
your investment registered in the state where the investment dealer's address
dealer purchase is made and who has a printed on your account
sales agreement with American Funds statement.
Distributors.
By mail Make your check payable to the fund Fill out the account additions
and mail to the address indicated form at the bottom of a
on the account application. Please recent account statement, make
indicate an investment dealer on your check payable to
the account application. the fund, write your account
number on your check, and mail
the check and form in the
envelope provided with
your account statement.
By telephone Please contact your investment Complete the "Investments by
dealer to open account, then follow Phone" section on the account
the procedures for additional application or American
investments. FundsLink Authorization Form.
Once you establish the
privilege, you, your financial
advisor or any person with
your account information can
call American FundsLine(R) and
make investments by telephone
(subject to conditions noted
in "Shareholder Account
Services and Privileges -
Telephone and Computer
Redemptions and Exchanges"
below).
By computer Please contact your investment Complete the American
dealer to open account, then follow FundsLink Authorization Form.
the procedures for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with
your account information may
access American FundsLine
OnLine(SM) on the Internet
and make investments by
computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases,
Redemptions and Exchanges"
below).
By wire Call 800/421-0180 to obtain your Your bank should wire your
account number(s), if necessary. additional investments in the
Please indicate an investment same manner as described under
dealer on the account. Instruct "Initial Investment."
your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service
Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE
ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine(R) (see description
below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) $1,000 02
American Balanced Fund(R) 500 11
American Mutual Fund(R) 250 03
Capital Income Builder(R) 1,000 12
Capital World Growth and Income 1,000 33
Fund(SM)
EuroPacific Growth Fund(R) 250 16
Fundamental Investors(SM) 250 10
The Growth Fund of America(R) 1,000 05
The Income Fund of America(R) 1,000 06
The Investment Company of America(R) 250 04
The New Economy Fund(R) 1,000 14
New Perspective Fund(R) 250 07
SMALLCAP World Fund(R) 1,000 35
Washington Mutual Investors Fund(SM) 250 01
BOND FUNDS
American High-Income Municipal Bond 1,000 40
Fund(R)
American High-Income Trust(SM) 1,000 21
The Bond Fund of America(SM) 1,000 08
Capital World Bond Fund(R) 1,000 31
Intermediate Bond Fund of 1,000 23
America(SM)
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(SM)
The Tax-Exempt Bond Fund of 1,000 19
America(R)
The Tax-Exempt Fund of 1,000 20
California(R)*
The Tax-Exempt Fund of Maryland(R)* 1,000 24
The Tax-Exempt Fund of Virginia(R)* 1,000 25
U.S. Government Securities Fund(SM) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of 2,500 09
America(R)
The Tax-Exempt Money Fund of 2,500 39
America(SM)
The U.S. Treasury Money Fund of 2,500 49
America(SM)
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
SALES CHARGES - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investments of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 100
or more eligible employees are sold with no initial sales charge. A contingent
deferred sales charge may be imposed on certain redemptions by these accounts
made within one year of purchase. Investments by retirement plans, foundations
or endowments with $50 million or more in assets, and employer-sponsored
defined contribution-type plans with 100 or more eligible employees may be made
with no sales charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net asset
value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by the Investment Adviser, employees of Washington
Management Corporation, employees and partners of The Capital Group Companies,
Inc. and its affiliated companies, certain family members of the above persons,
and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
the Principal Underwriter (or who clear transactions through such dealers) and
plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans foundations and endowments with assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Code including a "401(k)" plan with
100 or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $100 million or more: 1.00% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the Prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to a statement of intention (the "Statement").
The Statement is not a binding obligation to purchase the indicated amount.
When a shareholder elects to use a Statement in order to qualify for a reduced
sales charge, shares equal to 5% of the dollar amount specified in the
Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by American Funds
Service Company (the "Transfer Agent"). All dividends and any capital gain
distributions on shares held in escrow will be credited to the shareholder's
account in shares (or paid in cash, if requested). If the intended investment
is not completed within the specified 13-month period, the purchaser will pay
to the Principal Underwriter the difference between the sales charge actually
paid and the sales charge which would have been paid if the total of such
purchases had been made at a single time. If the difference is not paid within
45 days after written request by the Principal Underwriter or the securities
dealer, the appropriate number of shares held in escrow will be redeemed to pay
such difference. If the proceeds from this redemption are inadequate, the
purchaser will be liable to the Principal Underwriter for the balance still
outstanding. The Statement may be revised upward at any time during the
13-month period, and such a revision will be treated as a new Statement, except
that the 13-month period during which the purchase must be made will remain
unchanged and there will be no retroactive reduction of the sales charges paid
on prior purchases. Existing holdings eligible for rights of accumulation (see
the prospectus and account application) may be credited toward satisfying the
Statement. During the Statement period reinvested dividends and capital gain
distributions, investments in money market funds, and investments made under a
right of reinstatement will not be credited toward satisfying the
Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments)
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the Statement, a sales charge will be assessed according to the
sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the 1940 Act, again excluding employee benefit plans described
above, or (3) for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. Direct
purchases of the money market funds are excluded.
PRICE OF SHARES - Shares are purchased at the offering price next determined
after the purchase order is received and accepted by the fund or the Transfer
Agent; this offering price is effective for orders received prior to the time
of determination of the net asset value and, in the case of orders placed with
dealers, accepted by the Principal Underwriter prior to its close of business.
In case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. The dealer is responsible for promptly
transmitting purchase orders to the Principal Underwriter. Orders received by
the investment dealer, the Transfer Agent, or the fund after the time of the
determination of the net asset value will be entered at the next calculated
offering price. Prices which appear in the newspaper do not always indicate
the prices at which you will be purchasing and redeeming shares of the fund,
since such prices generally reflect the previous day's closing price whereas
purchases and redemptions are made at the next calculated price.
The price you pay for fund shares, the public offering price, is based on the
net asset value per share which is calculated once daily at the normal close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. For example, if the Exchange closes at 1:00 p.m. on one day
and at 4:00 p.m. on the next, the fund's share price would be determined as of
4:00 p.m. New York time on both days. The New York Stock Exchange is currently
closed on weekends and on the following holidays: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company, other than the money market funds, are valued, and the net asset value
per share is determined as follows:
1. Equity securities, including depositary receipts, are valued at 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. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of their representative quoted bid and asked prices.
Assets or liabilities and income ore expenses initially expressed in terms of
non-U.S. currencies are translated prior to the next determination of the net
asset value of the fund's shares into U.S. dollars at the prevailing market
rates. The effects of changes in foreign currency exchange rates on investment
securities are included with the net realized and unrealized gain or loss on
investment securities.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets.
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets.
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
The Principal Underwriter will not knowingly sell shares directly or
indirectly, or through a unit investment trust to any other investment company,
person or entity, where, after the sale, such investment company, person, or
entity would own beneficially directly, indirectly, or though an investment
trust more than 3% of the outstanding shares of the fund without the consent of
a majority of the fund's Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate
form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(R)
- - Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application)
-- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
The fund may, with 60 days' written notice, close your account if due to a sale
of shares the account has a value of less than the minimum required initial
investment.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service
Company.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more(other than redemptions by employer-sponsored
retirement plans). The charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gain distributions) or
the total cost of such shares. Shares held for the longest period are assumed
to be redeemed first for purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by exchange were then redeemed
within 12 months of the initial purchase); for distributions from 403(b) plans
or IRAs due to death, disability or attainment of age 591/2; for tax-free
returns of excess contributions to IRAs; for redemptions through certain
automatic withdrawals not exceeding 10% of the amount that would otherwise be
subject to the charge.
REDEMPTION OF SHARES - The Transfer Agent may redeem the shares of any
shareholder if the shares owned by such shareholder through redemptions, market
decline or otherwise, have a value of less than the minimum initial investment
amount required of new shareholders, (determined, for this purpose only as the
greater of the shareholder's cost or current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gains distributions). Prior notice of at least 60 days will be given
to a shareholder before the involuntary redemption provision is made effective
with respect to the shareholder's account. The shareholder will have not less
than 30 days from the date of such notice within which to bring the account up
to the minimum determined as set forth above.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the public offering price on or about the dates you select. Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement at least quarterly. Participation in the plan will
begin within 30 days after receipt of the account application. If the
shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or closing of the account, the plan may be terminated and
the related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may elect to
cross-reinvest dividends or dividends and capital gain distributions paid by
that fund (the "paying fund") into any other fund in The American Funds Group
(the "receiving fund") subject to the following conditions: (I) the aggregate
value of your account(s) in the paying fund(s) must equal or exceed $5,000
(this condition is waived if the value of the account in the receiving fund
equals or exceeds that fund's minimum initial investment requirement), (ii) as
long as the value of the account in the receiving fund is below that fund's
minimum initial investment requirement, dividends and capital gain
distributions paid by the receiving fund must be automatically reinvested in
the receiving fund, and (iii) if this privilege is discontinued with respect to
a particular receiving fund, the value of the account in that fund must equal
or exceed the fund's minimum initial investment requirement or the fund will
have the right, if you fail to increase the value of the account to such
minimum within 90 days after being notified of the deficiency, automatically to
redeem the account and send the proceeds to you. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine and American FundsLine OnLine (SM) (see "American FundsLine(R) and
American FundsLine OnLine" below), or by telephoning 800/421-0180 toll-free,
faxing (see "Shareholder Information - American Funds Service Company Service
Areas" in the prospectus for the appropriate fax numbers) or telegraphing
American Funds Service Company. (See "Telephone and Computer Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, computer, fax or telegraph. Exchange redemptions and purchases are
processed simultaneously at the share prices next determined after the exchange
order is received. (See "Purchase of Shares--Price of Shares.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND
PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from the
Transfer Agent. Dividend and capital gain reinvestments and purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine or American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Telephone and Computer
Redemptions and Exchanges" below. You will need your fund number (see the list
of funds in The American Funds Group under "Purchase of Shares--Investment
Minimums and Fund Numbers"), personal identification number (the last four
digits of your Social Security number or other tax identification number
associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) and computer (including American
FundsLine OnLine), fax or telegraph redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by writing to American Funds Service
Company.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through its
correspondent clearing agent) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not have an obligation
to obtain the lowest available commission rate to the exclusion of price,
service and qualitative considerations.
Portfolio transactions for the fund may be executed as part of concurrent
authorizations to purchase or sell the same security for other of the funds
served by the Investment Adviser, or for trust or other accounts served by
affiliated companies of the Investment Adviser. Although such concurrent
authorizations potentially could be either advantageous or disadvantageous to
the fund, they are effected only when the Investment Adviser believes that to
do so is in the interest of the fund. When such concurrent authorizations
occur, the objective is to allocate the executions in an equitable manner.
Brokerage commissions paid on portfolio transactions during the years ended
December 31, 1998, 1997, and 1996, amounted to $ , $7,913,000, and
$6,066,000, respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by State Street Bank and Trust Company, 225 Franklin Street, Boston,
MA 02101, as Custodian. Non-U.S. securities may be held by the Custodian
pursuant to subcustodial arrangements in non-U.S. banks or foreign branches of
U.S. banks.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $ for the fiscal year ended December 31, 1998.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services, preparation of tax returns and review of certain
documents to be filed with the Securities and Exchange Commission. The
financial statements included in this Statement of Additional Information from
the Annual Report, have been so included in reliance on the independent
auditors' report given on the authority of said firm as experts in auditing and
accounting. The selection of the fund's independent auditor is reviewed and
determined annually by the Board of Directors.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on December 31. It
provides shareholders at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The annual
financial statements are audited by the fund's independent auditors, Deloitte
& Touche LLP. In an effort to reduce the volume of mail shareholders receive
from the fund when a household owns more than one account, the Transfer Agent
has taken steps to eliminate duplicate mailings of shareholder reports. To
receive additional copies of a report, shareholders should contact the Transfer
Agent.
YEAR 2000 - The fund and its shareholders depend on the proper functioning of
computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on
personal investing for certain investment personnel; ban on short-term trading
profits for investment personnel; limitations on service as a director of
publicly traded companies; and disclosure of personal securities transactions.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16c of the 1940 Act with respect to the removal of directors as though
the fund were a common-law trust. Accordingly, the directors of the fund shall
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any director when requested in writing to do so by the
record holders of not less than 10% of the outstanding shares.
The financial statements including the investment portfolio and the report of
Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE--DECEMBER 31, 1998
<S> <C>
Net asset value and redemption price per share $
(Net assets divided by shares outstanding)
Maximum offering price per share $
(100/94.25 of net asset value per share which
takes into account the fund's current maximum
sales charge)
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was % for the 30-day (or one month) period ended December
31, 1998, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
As of December 31, 1998, the fund's total return over the past twelve months
and average annual total returns over the past five and ten-year periods were
%, % and %, respectively. The fund's total return at net asset
value over the past 12 months and average annual total return for the five- and
ten-year periods ending on December 31, 1998 was %, %, and %,
respectively. The average annual total return (T) is computed by using the
value at the end of the period (ERV) of a hypothetical initial investment of
$1,000 (P) over a period of years (n) according to the following formula as
required by the Securities and Exchange Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. Total return may be calculated for one year, five years,
ten years and for other periods of years. The average annual total return over
periods greater than one year also may be computed by utilizing ending values
as determined above.
In calculating average annual total return, the fund assumes: (1) deduction of
the maximum sales load of 5.75% from the $1,000 initial investment; (2)
reinvestment of dividends and distributions at net asset value on the
reinvestment date determined by the Board; and (3) a complete redemption at the
end of any period illustrated.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above.
The fund may also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months.
The distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard and Poor's 500 Stock Composite
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
Total return for the unmanaged indices will be calculated assuming reinvestment
of dividends and interest, but will not reflect any deductions for advisory
fees, brokerage costs or administrative expenses.
The fund may refer to results compiled by organizations such as CDA Investment
Technologies, Ibbotson Associates, Lipper Analytical Services ("Lipper"),
Morningstar, Inc., Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the fund may, from time to time, refer
to results published in various newspapers or periodicals, including Barrons,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.
The fund may compare its investment results with the Consumer Price Index,
which is a measure of the average change in prices over time in a fixed market
basket of goods and services (e.g. food, clothing, and fuels, transportation,
and other goods and services that people buy for day-to-day living).
The investment results for the fund set forth below were calculated as
described in the fund's prospectus. The fund's results will vary from time to
time depending upon market conditions, the composition of the fund's portfolio
and operating expenses of the fund, so that any investment results reported by
the fund should not be considered representative of what an investment in the
fund may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
THE FUND VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
Period FI DJIA /1/ S&P 500 /2/ Average
1/1 - 12/31 Savings
Account
/3/
<S> <C> <C> <C> <C>
1989 - 1998 + % + % + % + %
1988 - 1997 +362% +452% +424% +55%
1987 - 1996 +278 +366 +314 +57
1986 - 1995 +285 +360 +299 +62
1985 - 1994 +273 +349 +282 +69
1984 - 1993 +290 +333 +301 +81
1983 - 1992 +316 +367 +346 +92
1982 - 1991 +406 +452 +404 +105
1981 - 1990 +284 +328 +267 +116
1980 - 1989 +396 +426 +402 +121
1979 - 1988 +345 +340 +352 +122
1978/#/ - 1987 +273 +265 +280 +117
</TABLE>
_____________
# From 7/31/78, the date Capital Research and Management Company became the
fund's Investment Adviser.
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30
industrial companies such as General Motors and General Electric.
/2/ The Standard and Poor's 500 Stock Composite Index is comprised of
industrial, transportation, public utilities and financial stocks and
represents a large portion of the value of issues traded on the New York Stock
Exchange. Selected issues traded on the American Stock Exchange are also
included.
/3/ 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. Savings accounts offer a guaranteed return
of principal, but no opportunity for capital growth. During a portion of the
period, the maximum rates paid on some savings deposits were fixed by law.
If you are considering the fund for an Individual Retirement Account...
<TABLE>
<CAPTION>
Here's how much you would have if you invested $2,000
a year in the fund over the past 5 and 10 years and
the period under CRMC management
<S> <C> <C>
5 Years 10 Years Lifetime
(1/1/94 - 12/31/98) (1/1/89 - 12/31/98) (7/31/78 - 12/31/98)
$ $ $
</TABLE>
See the difference time can make in an investment program
<TABLE>
<CAPTION>
If you had invested ...and taken all
$10,000 in the fund distributions in shares, your investment would
this many years ago... have been worth this much at December 31, 1997
| |
Number of Years Periods Value**
1/1-12/31
<S> <C> <C>
1 1998 $
2 1997 - 1998 11,938
3 1996 - 1998 14,325
4 1995 - 1998 19,223
5 1994 - 1998 19,478
6 1993 - 1998 13,027
7 1992 - 1998 25,358
8 1991 - 1998 33,068
9 1990 - 1998 31,003
10 1989 - 1998 39,854
11 1988 - 1998 46,211
12 1987 - 1998 47,942
13 1986 - 1998 58,508
14 1985 - 1998 76,178
15 1984 - 1998 80,589
16 1983 - 1998 101,646
17 1982 - 1998 136,250
18 1981 - 1998 134,644
19 1980 - 1998 163,211
20 1979 - 1998 188,359
Lifetime* 1978 - 1998 182,855
</TABLE>
* From July 31, 1978, the date Capital Research and Management Company became
the fund's Investment Adviser.
** Results assume deduction of the maximum sales charge of 5.75% from the
initial purchase payment.
Illustration of a $10,000 investment in the fund
WITH DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(For the period under CRMC management: July 31, 1979 - December 31, 1998)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES**
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Gains Dividends Value
December Cost Investment Reinvested Reinvested
31
<S> <C> <C> <C> <C> <C> <C> <C>
1978* $ 217 $ 217 $10,217 $ 8,947 -- $ 208 $ 9,155
1979 421 638 10,638 9,892 -- 664 10,556
1980 603 1,241 11,241 11,390 -- 1,417 12,807
1981 665 1,906 11,906 10,688 -- 1,966 12,654
1982 769 2,675 12,675 13,522 -- 3,435 16,957
1983 755 3,430 13,430 16,424 -- 4,965 21,389
1984 734 4,164 14,164 16,113 $ 841 5,667 22,621
1985 795 4,959 14,959 19,379 2,351 7,718 29,448
1986 894 5,853 15,853 19,177 8,262 8,502 35,941
1987 1,034 6,887 16,887 18,151 10,221 8,923 37,295
1988 1,328 8,215 18,215 19,703 12,464 11,079 43,246
1989 1,877 10,092 20,092 22,173 19,099 14,325 55,597
1990 1,678 11,770 21,770 19,325 18,712 14,093 52,130
1991 1,477 13,247 23,247 23,576 25,593 18,778 67,947
1992 1,655 14,902 24,902 23,644 30,728 20,499 74,871
1993 1,857 16,759 26,759 24,494 40,880 23,092 88,466
1994 2,171 18,930 28,930 23,617 41,632 24,392 89,641
1995 2,082 21,012 31,012 30,081 56,840 33,385 120,306
1996 2,188 23,200 33,200 33,117 72,223 39,011 144,351
1997 2,511 25,711 35,711 36,977 99,784 46,094 182,855
1998
</TABLE>
The dollar amount of capital gain distributions during the period was $69,225.
* From July 31, 1978, the date Capital Research and Management Company became
the fund's Investment Adviser.
** Results assume deduction of the maximum sales charge of 5.75% from the
initial purchase payment.
EXPERIENCE OF INVESTMENT ADVISER
The Investment Adviser manages nine growth and growth-income funds that are at
least 10 years old. In the rolling 10-year periods since January 1, 1968 (133
in all), those funds have had better total returns than their comparable Lipper
Indexes in 124 of the 133 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may include, in advertisements or in reports furnished to present or
prospective shareholders, information on its investment results and/or
comparisons of its investment results to various unmanaged indices or results
of other mutual funds or investment or savings vehicles. The fund may also
combine its results with those of other funds in The American Funds Group for
purposes of illustrating investment strategies involving multiple funds.
DESCRIPTION OF BOND RATINGS
CORPORATE DEBT SECURITIES
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities from "Aaa" to "C".
"Aaa -- Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
"Aa -- High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"Baa -- Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
"Ba -- Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B -- Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small."
"Caa -- Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"Ca -- Speculative in a high degree; often in default or have other marked
shortcomings."
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
"AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA -- High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A -- Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"C1 -- Reserved for income bonds on which no interest is being paid."
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
<PAGE>
PART C
FUNDAMENTAL INVESTORS, INC.
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(b) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(c) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(d) Copy of Investment Advisory and Service Agreement dated September 1, 1998.
(e) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(f) None
(g) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(h) None
(i) Not applicable to this filing
(j) Consent of Independent Accountants - to be provided by amendment.
(k) None
(l) None
(m) Previously filed (see Post-Effective Amendment No. 81 filed 2/28/97).
(n) EX-27 Financial data schedule
(o) None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
The registrant is a joint-insured under Investment Adviser/Mutual fund Errors
and Omissions Policies written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company, and ICI Mutual Insurance
Company which insures its officers and directors against certain liabilities.
However, in no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself is not permitted to indemnify
the individual.
The fund's Articles of Incorporation state:
The Corporation shall indemnify (1) its directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law, and (2) its other employees and agents to
such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of this
Charter of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. Nothing contained herein shall be construed
to authorize the Corporation to indemnify any director or officer of the
Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Any indemnification by the Corporation
shall be consistent with the requirements of law, including the Investment
Company Act of 1940.
To the fullest extent permitted by Maryland statutory and decisional law and
the 1940 Act, as amended or interpreted, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that nothing herein shall be construed to
protect any director or officer of the Corporation against any liability to
which such director or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. No amendment, modification or repeal of
this Article VIII shall adversely affect any right or protection of a director
or officer that exists at the time of such amendment, modification or repeal.
Section 2-418 (b) of The Annotated Code of Maryland states:
Permitted indemnification of director:
1. A corporation may indemnify any director made a party to any proceeding
by reason of service in that capacity unless it is established that:
(i) The act or omission of the director was material to the matter giving
rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate dishonesty; or
(ii) The director actually received an improper personal benefit in money,
property, or services; or
(iii) In the case of any criminal proceeding, the director had reasonable
cause to believe that the act or omission was unlawful.
2. (i) Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding.
(ii) However, if the proceeding was one by or in the right of the
corporation, indemnification may not be made in respect of any proceeding in
which the director shall have been adjudged to be liable to the corporation.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific
Growth Fund, The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money
Fund of America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
1501 N. University Drive, Suite 227A
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Vice President None
5400 Mt. Meeker Road, Suite 1
Minneapolis, MN 55438
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
B J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue, Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and None
Co-Chief Executive
Officer
Ruth M. Collier Senior Vice President None
145 West 67th St. Ste. 12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
4116 Woodbine St.
Chevy Chase, MD 20815
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director Senior Vice President
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33843
L Robert L. Johansen Vice President, None
Controller
Michael J. Johnston Director None
630 Fifth Ave., 36th Floor
New York, NY 10111-0121
B Damien M. Jordan Vice President None
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
Mark J. Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - None
Institutional Investment
Services Division
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 90121
L John C. Massar Senior Vice President None
L E. Lee McClennahan Senior Vice President None
L Jamie R. McCrary Assistant Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - None
Institutional
Investment Services
Division
David R. Murray Regional Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Senior Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02194
B Candance Pilgram Assistant Vice President None
Carl S. Platou Vice President None
4021 96th Avenue, SE
Mercer Island, WA 98040
L John O. Post, Jr. Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
11404 Foxhaven Drive
Charlotte, NC 28277
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James F. Rothenberg Director Chairman of the Board
Douglas F. Rowe Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, No. 4
Marina del Rey, CA 90292
Joe D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, Chairman of the None
1000 RIDC Plaza, Ste 212 Board and Co-Chief
Pittsburgh, PA 15238 Executive Officer
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Vice President - None
Institutional Investment
Services Division
L Mary E. Smith Vice President - None
Institutional Investment
Services Division
Rodney G. Smith Vice President None
100 N. Central Expressway, Suite 1214
Richardson, TX 75080
Anthony L. Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
1400 Southdown Road
Hillsborough, CA 94010
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drey W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Sr. Vice President, None
Treasurer
Gregory J. Weimer Regional Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George J. Wenzel Regional Vice President None
3406 Shakespeare Drive
Troy, MI 48084
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Senior Vice President None
L Robert L. Winston Director, Senior Vice None
President
William Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 928621
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78230
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, are maintained and held in the offices of the
registrant's investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92621, and/or the offices of the
Registrant, One Market, Steuart Tower, San Francisco, California 94105
The registrant's records covering shareholder accounts are maintained and kept
by the registrant's transfer agent, American Funds Service Company, 135 South
State College Boulevard, Brea, California 92821, 3500 Wiseman Boulevard, San
Antonio, Texas 78230, 8332 Woodfield Crossing Boulevard, Indianapolis, Indiana
46240, and 5300 Robin Hood Road, Norfolk, VA 23513.
The registrant's records covering portfolio transactions are maintained and
kept by the registrant's custodian, State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02101.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS
n/a
<PAGE>
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, and State of California, on the 29th day of December,
1998.
FUNDAMENTAL INVESTORS, INC.
By: /s/James F. Rothenberg
(James F. Rothenberg), Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on December 29, 1998, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ James E. Drasdo President and Director
(James E. Drasdo)
(2) Principal Financial Officer and Principal Accounting
Officer:
/s/ Sheryl F. Johnson Treasurer
(Sheryl F. Johnson)
(3) Directors:
Guilford C. Babcock* Director
Charles H. Black* Director
/s/ James E. Drasdo President and Director
(James E. Drasdo)
Robert A. Fox* /1/ Director
Roberta L. Hazard* /1/ Director
Leonade D. Jones* /1/ Director
John G. McDonald* /1/ Director
Gail L. Neale* Director
James W. Ratzlaff* Director
Henry E. Riggs* Director
/s/ James F. Rothenberg Chairman and Director
(James F. Rothenberg)
Patricia K. Woolf* /1/ Director
</TABLE>
/1/ Power of Attorney attached hereto.
*By /s/ Julie F. Williams
(Julie F. Williams), Attorney-in-Fact
<PAGE>
POWER OF ATTORNEY
I, Robert A. Fox, the undersigned Director of Fundamental Investors, Inc., a
Maryland corporation, revoking all prior powers of attorney given as a director
of Fundamental Investors, Inc. do hereby constitute and appoint Michael T.
Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, and Julie F. Williams, or any of
them, to act as attorneys-in-fact for and in my name, place and stead (1) to
sign my name as Director of said Corporation to any and all Registration
Statements of Fundamental Investors, Inc., File No. 2-10760, under the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Corporation is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 21st day of December, 1998.
/s/ Robert A. Fox
Robert A. Fox: Director
POWER OF ATTORNEY
I, Roberta L. Hazard, the undersigned Director of Fundamental Investors, Inc.,
a Maryland corporation, revoking all prior powers of attorney given as a
director of Fundamental Investors, Inc. do hereby constitute and appoint
Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, and Julie F. Williams,
or any of them, to act as attorneys-in-fact for and in my name, place and stead
(1) to sign my name as Director of said Corporation to any and all Registration
Statements of Fundamental Investors, Inc., File No. 2-10760, under the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Corporation is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 21st day of December, 1998.
/s/ Roberta L. Hazard
Roberta L. Hazard: Director
POWER OF ATTORNEY
I, Leonade D. Jones, the undersigned Director of Fundamental Investors, Inc.,
a Maryland corporation, revoking all prior powers of attorney given as a
director of Fundamental Investors, Inc. do hereby constitute and appoint
Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, and Julie F. Williams,
or any of them, to act as attorneys-in-fact for and in my name, place and stead
(1) to sign my name as Director of said Corporation to any and all Registration
Statements of Fundamental Investors, Inc., File No. 2-10760, under the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Corporation is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 21st day of December, 1998.
/s/ Leonade D. Jones
Leonade D. Jones: Director
POWER OF ATTORNEY
I, John G. McDonald, the undersigned Director of Fundamental Investors, Inc.,
a Maryland corporation, revoking all prior powers of attorney given as a
director of Fundamental Investors, Inc. do hereby constitute and appoint
Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, and Julie F. Williams,
or any of them, to act as attorneys-in-fact for and in my name, place and stead
(1) to sign my name as Director of said Corporation to any and all Registration
Statements of Fundamental Investors, Inc., File No. 2-10760, under the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Corporation is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 21st day of December, 1998.
/s/ John G. McDonald
John G. McDonald: Director
POWER OF ATTORNEY
I, Patricia K. Woolf, the undersigned Director of Fundamental Investors, Inc.,
a Maryland corporation, revoking all prior powers of attorney given as a
director of Fundamental Investors, Inc. do hereby constitute and appoint
Michael T. Kerr, Paul G. Haaga, Jr., Sheryl F. Johnson, and Julie F. Williams,
or any of them, to act as attorneys-in-fact for and in my name, place and stead
(1) to sign my name as Director of said Corporation to any and all Registration
Statements of Fundamental Investors, Inc., File No. 2-10760, under the
Securities Act of 1933 as amended and/or the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Corporation is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 21st day of December, 1998.
/s/ Patricia K. Woolf
Patricia K. Woolf: Director
Exhibit D
INVESTMENT ADVISORY AND SERVICE AGREEMENT
AGREEMENT, made as of this 1st day of September, 1998, by and between
FUNDAMENTAL INVESTORS, INC., a Maryland corporation (the "Fund"), and CAPITAL
RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation (the "Adviser").
1. The Fund hereby employs the Adviser to furnish advice to the Fund with
respect to the investment and reinvestment of the assets of the Fund. The
Adviser hereby accepts such employment and agrees to render the services and to
assume the obligations to the extent herein set forth, for the compensation
herein provided. The Adviser shall, for all purposes herein, be deemed an
independent contractor and not an agent of the Fund.
2. The Adviser agrees to provide supervision of the portfolio of the Fund
and to determine what securities or other property shall be purchased or sold
by the Fund, giving due consideration to the policies of the Fund as expressed
in the Fund's Articles of Incorporation, By-Laws, Registration Statement under
the Investment Company Act of 1940 (the "1940 Act"), Registration Statement
under the Securities Act of 1933, and prospectus as in use from time to time,
as well as to the factors affecting the Fund's status as a regulated investment
company under the Internal Revenue Code.
The Adviser shall provide adequate facilities and qualified personnel for the
placement of orders for the purchase, or other acquisition, and sale, or other
disposition, of portfolio securities for the Fund. With respect to such
transactions, the Adviser, subject to such directions as may be furnished from
time to time by the Board of Directors of the Fund, shall endeavor as the
primary objective to obtain the most favorable prices and executions of orders.
Subject to such primary objective, the Adviser may place orders with brokerage
firms which have sold shares of the Fund or which furnish statistical and other
information to the Adviser, taking into account the value and quality of the
brokerage services of such broker-dealers, including the availability and
quality of such statistical and other information. Receipt by the Adviser of
any such statistical and other information and services shall not be deemed to
give rise to any requirement for abatement of the advisory fee payable pursuant
to Section 5.
3. The Adviser shall furnish the services of persons to perform the
executive, administrative, clerical, and bookkeeping functions of the Fund,
including the daily determination of net asset value and offering price per
share. The Adviser shall pay the compensation and travel expenses of all such
persons, and they shall serve without additional compensation from the Fund.
The Adviser shall also, at its expense, provide the Fund with suitable office
space (which may be in the offices of the Adviser); all necessary small office
equipment and utilities; and general purpose accounting forms, supplies, and
postage used at the offices of the Fund.
4. The Fund shall pay all its expenses not assumed by the Adviser as
provided herein. Such expenses shall include, but shall not be limited to,
custodian, registrar, stock transfer and dividend disbursing fees and expenses;
costs of the designing, printing and mailing of reports, prospectuses, proxy
statements, and notices to its shareholders; taxes; expenses of the issuance
and redemption of shares of the Fund (including stock certificates,
registration and qualification fees and expenses); legal and auditing expenses;
compensation, fees, and expenses paid to directors; association dues; costs of
stationery and forms prepared exclusively for the Fund; and costs of assembling
and storing shareholder account data.
5. The Fund shall pay to the Investment Adviser on or before the tenth day
of each month, as compensation for the services rendered by the Investment
Adviser during the preceding month, a fee ("Investment Advisory fee")
calculated at the lower of the annual rates of:
.39% on the first $800 million of net assets
.336% on net assets from $800 million to $1.8 billion
.30% on net assets from $1.8 billion to $3.0 billion
.276% on net assets exceeding $3.0 billion
OR
.39% on the first $1 billion of net assets
.336% on net assets from $1.0 billion to $2.0 billion
.30% on net assets from $2.0 billion to $3.0 billion
.276% on net assets from $3.0 billion to $5.0 billion
.27% on net assets from $5.0 billion to $8.0 billion
.258% on net assets from $8.0 billion to $13.0 billion
.252 on net assets over $13.0 billion
The Investment Advisory fee shall be accrued daily on the basis of the number
of calendar days in each year, by computing the net asset value of the Fund, in
the manner provided by its Articles of Incorporation, as at the close of the
New York Stock Exchange on each day on which said Exchange is open, and in the
case of days on which said Exchange shall not be open, as at the close of the
last preceding day on which said Exchange shall have been open.
Upon any termination of this Agreement on a day other than the last day of the
month in which termination occurs, the fee for such month of termination shall
be the amount accrued up to the time of termination.
6. The Adviser agrees to reduce the fee payable to it under this Agreement
by the amount by which the ordinary operating expenses of the Fund for any
fiscal year of the Fund, excluding interest, taxes and extraordinary expenses,
shall exceed one percent of the average net assets of the Fund determined
pursuant to Section 5. Costs incurred in connection with the purchase or sale
of portfolio securities, including brokerage fees and commissions, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, shall be accounted for as capital items and
not as expenses. Proper accruals shall be made by the Fund for any projected
reduction hereunder and corresponding amounts shall be withheld from the fees
paid by the Fund to the Adviser. Any additional reduction computed at the end
of the fiscal year shall be deducted from the fee for the last month of such
fiscal year, and any excess shall be paid to the Fund immediately after the
fiscal year end, and in any event prior to the publication of the Fund's annual
report, as a reduction of the fees previously paid during the fiscal year.
7. Nothing contained in this Agreement shall be construed to prohibit the
Adviser from performing investment advisory, management, or distribution
services for other investment companies and other persons or companies, or to
prohibit affiliates of the Adviser from engaging in such businesses or in other
related or unrelated businesses.
8. The Adviser agrees that neither it nor any of its officers or directors
will take any long or short position in the capital stock of the Fund, except
that it or they may purchase shares of such capital stock for investment at the
price at which such shares are available to the public at the moment of
purchase.
9. The Adviser shall have no liability to the Fund, or its shareholders, for
any error of judgment, mistake of law, or for any loss arising out of any
investment, or for any other act or omission in the performance of its
obligations to the Fund not involving willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties hereunder.
10. This Agreement shall continue in effect until the close of business on
August 31, 1999. It may thereafter be renewed from year to year by mutual
consent, provided that such renewal shall be specifically approved at least
annually by (i) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding shares of the Fund, and (ii) a majority of those
directors who are not parties to this Agreement or interested persons (as
defined in the 1940 Act) of any such party cast in person at a meeting called
for the purpose of voting on such approval. Such mutual consent to renewal
shall not be deemed to have been given unless evidenced by a writing signed by
both parties hereto.
11. This Agreement may be terminated at any time, without payment of any
penalty, by the Board of Directors of the Fund or by the vote of a majority of
the outstanding shares of the Fund, on sixty days' written notice to the
Adviser, or by the Adviser on like notice to the Fund. This Agreement may not
be amended, transferred, assigned, sold, or in any manner hypothecated or
pledged, without the affirmative vote or written consent of the holders of a
majority of the outstanding shares of the Fund, and it shall automatically
terminate in the event of its assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the day and year first above written.
FUNDAMENTAL INVESTORS, INC. CAPITAL RESEARCH AND MANAGEMENT COMPANY
By: By:
James F. Rothenberg Paul G. Haaga, Jr.,
Chairman of the Board Executive Vice President
By: By:
Julie F. Williams Michael J. Downer
Secretary Secretary
