[The American Funds Group(r)]
Fundamental Investors
Semi-Annual Report
For the six months
ended June 30, 2000
[cover: various photographs of Dr. Tony Alonso and Sumi Iwasaki]
Fundamental Investors(SM) seeks long-term growth of capital and income
primarily through investments in common stocks.
Fundamental Investors is one of the 29 American Funds, the nation's
third-largest mutual fund family. For nearly seven decades, Capital Research
and Management Company, the American Funds adviser, has invested with a
long-term focus based on thorough research and attention to risk.
Results at a Glance
<TABLE>
<CAPTION>
Total Return Through 6/30/00 Six One Five 10
with all distributions Months Year Years Years
reinvested
<S> <C> <C> <C> <C>
Fundamental Investors +5.88% +12.80% +164.14% +383.36%
Lipper Multi-Cap Value Funds <UNDEF>0.77 -6.66 +92.61 +237.09
Index
</TABLE>
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are the average
annual compound returns on a $1,000 investment for periods ended June 30, 2000,
with all distributions reinvested:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Shares One Year Five Years 10 Years
Reflecting 5.75% maximum sales +6.31% +20.01% +16.37%
charge
</TABLE>
Results for Class B shares are not shown because of the brief time between
their introduction on March 15 and the end of the fund's fiscal period.
Please see back cover for important information about Class A and Class B
shares.
The fund's 30-day yield as of July 31, 2000, calculated in accordance with the
Securities and Exchange Commission formula, was 1.27%.
Figures shown are past results and are not predictive of future results. Share
price and return will vary, so you may lose money. Investing for short periods
makes losses more likely. Investments are not FDIC-insured, nor are they
deposits of or guaranteed by a bank or any other entity. Investing outside the
United States involves additional risks, such as currency fluctuations,
political instability, differing securities regulations and periods of
illiquidity, which are detailed in the fund's prospectus.
On the cover: The images are a reprise from our 1999 annual report in which we
featured Dr. Tony Alonso and Sumi Iwasaki. These shareholders' fundamental
values guided them in keeping their long-term commitment to the fund.
Fellow shareholders
The markets gave investors a wake-up call this spring. By the end of June, the
Dow Jones Industrial Average was down 8.4% year to date, and the broader
Standard & Poor's 500 Composite Index, which tracks large-company U.S. stocks,
declined 0.4%. During this period, shares of Fundamental Investors increased
5.9% (with reinvestment of dividends and capital gains). We produced these
results by continuing our tradition of focusing on undervalued, profitable and
well-run companies with good long-term prospects.
As we have in the past few years, we paid two 10-cent quarterly dividends,
which resulted in an income return of 0.6% for the period (1.2% annualized). A
long-term capital gain distribution of 51 cents was paid in February.
It was a challenging time to invest, as can be seen by the 0.8% average loss
turned in by our peers in the Lipper Multi-Cap Value Funds Index, which tracks
30 of the largest U.S. multi-cap value funds. (These are funds that seek to
invest in undervalued companies in all market capitalization ranges.) The
Federal Reserve Board, concerned about inflation, raised short-term interest
rates and thus increased the possibility of tougher times for economically
dependent companies some of which we own in the fund. During this same period,
many "dot-coms" got some of the speculative stuffing knocked out of them. And
though these types of companies are not prevalent in multi-cap value funds,
their sudden reversal of fortunes was sobering to all investors.
High Concentration of Quality Companies
Fundamental Investors' success during the period was primarily related to a
high concentration of rapidly growing companies and an investment objective
that guided us to many companies with stabilizing dividends.
Those of you who know American Funds' long-term buy-and-hold philosophy won't
be surprised that many of the fund's largest holdings are names we've talked
about for years. But given the raised eyebrows about Internet stocks, it may
surprise you to hear that many of our stars during this period were technology
companies. Yes, many "dot-coms" got their come-uppance as investors realized
that, in many cases, the emperors had no clothes. But the solid citizens of the
technology kingdom the ones that provide the necessary infrastructure to a now
technology-dependent society got their due rewards.
Corning (+109.3%), Texas Instruments (+41.8%) and Ericsson (+21.8%) are three
such examples. The fund's largest holding, Corning, narrowed its focus to
emphasize products that are key to the new economy such as optical fibers that
create pipelines for digital information and lightweight liquid-crystal
displays for laptops, cell phones and other handheld devices. Representing 3.4%
of the portfolio, Corning's outstanding return had an important impact on the
fund.
Texas Instruments is another company that refocused its business on the
products in demand by the new economy. We bought shares of Texas Instruments
even before the company trimmed away its less profitable computer-memory
businesses to concentrate on digital signal processors. DSPs power many
consumer goods such as cell phones, modems and digital cameras. The stock has
been a major contributor to the fund's success for a number of years.
As surely as the world is going digital, it's also going wireless.
Swedish-based Ericsson is the world leader in creating the standard for base
stations that process and convey the digital and the wireless information that
make it possible for us to be "connected" while mobile.
Companies with Promising Futures
Extensive and beneficial merger activity dominated the fund's largest media and
entertainment holdings. Viacom (+14.0%) finally completed its merger with CBS,
offering the promise of huge advertising revenues. The Time Warner (+4.9%) and
America Online merger will create the first media and communications company
powered by the Internet. Paris-based Vivendi plans to purchase Seagram (+29.1%)
to gain access to its Universal Studios assets. After having sold all Disney
(+32.7%) holdings last year, we bought back the stock at substantially lower
prices; it now represents the fund's 12th largest holding.
Pharmaceutical companies were also important to the fund in this period. In
spite of political machinations, we believe it is unlikely that price controls
will be placed on these companies' products. Strong research abilities and
effective remedies for common medical ailments among our aging population
created a favorable environment for three of our largest holdings: Pfizer
(+50.7%), Pharmacia (+46.0%) and AstraZeneca (+11.4%). The fund held shares of
Pfizer and Warner-Lambert when they merged during the period as well as shares
of Pharmacia and Monsanto when they merged.
What Helped, What Hurt
Fundamental Investors was also helped by a concentration of oil- and
gas-related companies. Last year it became apparent to us that the market for
natural gas was tightening, given increasing demand and short supply. We also
believed that a more unified OPEC would be better able to manage prices and,
therefore, improve prospects for earnings in the companies we own. Companies
like Phillips Petroleum (+7.8%), Suncor Energy (+10.6%) and Murphy Oil (+3.6%)
helped stabilize the fund with returns modestly ahead of the overall stock
market.
As we mentioned earlier, the fund was hurt by its economically sensitive
holdings. Rising interest rates, an uncertain market and anticipation of an
economic slowdown affected interest-sensitive companies such as Alcoa (-30.1%),
Dow Chemical (-32.2%) and Weyerhaeuser (-40.1%). We attribute the falling stock
prices of such companies to recessionary concerns. Since we don't anticipate
such a harsh slowdown, we expect to hold on to the best managed of these
cyclical companies.
As can be seen by the market and the returns of our peers, this was a difficult
period to invest successfully. It was a reminder that markets can go down, too.
We are pleased that over the past 10 years Fundamental Investors has achieved
an average annual compound return of 17.1% compared with 12.9% for the Lipper
Multi-Cap Value Funds Index. We appreciate your trust, and we will continue our
efforts to help you meet your long-term financial goals.
Sincerely,
/s/ James F. Rothenberg
James F. Rothenberg
Chairman
/s/ James E. Drasdo
James E. Drasdo
President
August 14, 2000
<TABLE>
Fundamental Investors, Inc.
June 30, 2000
<S> <C> <C> <C>
PERCENT OF PERCENT
Largest Equity Holdings NET ASSETS CHANGE (1)
Corning 3.42% +109.31%
Pharmacia 3.21 +46.0 (2)
Viacom 3.09 +14.0 (2)
Texas Instruments 2.97 +41.8
Pfizer 2.81 +50.7 (2)
AstraZeneca 2.47 +11.4
News Corp. 2.46 +42.2
Time Warner 2.09 +4.9
Seagram 1.75 +29.1
IBM 1.62 +1.5
1 Reflects change in market price for the
six months ended June 30, 2000 (excludes dividends).
2 Adjusted for mergers.
PERCENT OF
Largest Industry Holdings NET ASSETS
Health & Personal Care 13.60
Broadcasting & Publishing 10.39
Electronic Components 8.37
Energy Sources 7.50
Data Processing & Reproduction 5.45
</TABLE>
<TABLE>
Fundamental Investors, Inc.
Investment Portfolio, June 30, 2000
Unaudited
Shares or Market Percent
Principal Value of Net
Equity Securities (common and preferred stocks Amount (000) Assets
and convertible debentures)
<S> <C> <C> <C>
HEALTH & PERSONAL CARE - 13.60%
Pharmacia Corp. (merger of Monsanto Co. and 11,580,800 $598,582
Pharmacia & Upjohn, Inc.)
Monsanto Co. 6.50% ACES convertible 200,000 9,050 3.21%
preferred 2001, units
Pfizer Inc (merged with Warner-Lambert) 11,100,000 532,800 2.81
AstraZeneca PLC (United Kingdom) 6,715,500 313,125
AstraZeneca Group PLC (ADR) 3,300,766 153,486 2.47
American Home Products Corp. 5,000,000 293,750 1.55
Gillette Co. 4,100,000 143,244 .76
Bristol-Myers Squibb Co. 2,200,000 128,150 .68
Cardinal Health, Inc. 1,004,650 74,344 .39
Becton, Dickinson and Co. 2,400,000 68,850 .36
Elan Corp., PLC (ADR) (Ireland) (1) 1,400,000 67,812 .36
Celera Genomics (1) 528,800 49,443 .26
Kimberly-Clark Corp. 800,000 45,900 .24
Avon Products, Inc. 854,400 38,021 .20
Sanofi-Synthelabo SA (France) 475,000 22,636 .12
IVAX Corp. 5.50% convertible debentures 2007 (2) $15,000,000 19,856 .11
Forest Laboratories, Inc. (1) 150,000 15,150 .08
BROADCASTING & PUBLISHING - 10.39%
Viacom Inc., Class B (1) (merged with CBS) 6,223,500 424,365
Viacom Inc., Class A (1) 2,351,200 160,763 3.09
News Corp. Ltd., preferred (ADR) (Australia) 6,200,000 294,500
News Corp. Ltd. (ADR) 3,150,000 171,675 2.46
Time Warner Inc. 5,214,300 396,287 2.09
Dow Jones & Co., Inc. 2,098,500 153,715 .81
Fox Entertainment Group, Inc., Class A (1) 3,650,000 110,869 .59
A.H. Belo Corp., Class A 3,000,000 51,938 .28
Comcast Corp., Class A, special stock (1) 1,000,000 40,500 .21
New York Times Co., Class A 1,000,000 39,500 .21
E.W. Scripps Co., Class A 700,000 34,475 .18
Knight-Ridder, Inc. 625,000 33,242 .18
Gannett Co., Inc. 500,000 29,906 .16
Tribune Co. 718,400 25,144 .13
ELECTRONIC COMPONENTS - 8.37%
Corning Inc. 2,400,000 647,700 3.42
Texas Instruments Inc. 8,193,024 562,758 2.97
Advanced Micro Devices, Inc. (1) 1,200,000 92,700 .49
Motorola, Inc. 3,161,100 91,869 .49
SCI Systems, Inc.(1) 2,000,000 78,375
SCI Systems, Inc. 3.00% convertible debentures 2007 $10,000,000 9,875 .47
Intel Corp. 380,000 50,801 .27
Infineon Technologies AG (Germany) (1) 315,500 25,008 .13
Micron Technology, Inc. (1) 200,000 17,613 .09
Semtch Corp. 4.50% convertible debentures 2007 (2) $8,000,000 8,240 .04
ENERGY SOURCES - 7.50%
Texaco Inc. 4,300,000 228,975 1.21
Phillips Petroleum Co. 4,354,300 220,709 1.17
Suncor Energy Inc. (Canada) 8,780,000 202,848 1.07
Unocal Corp. 5,000,000 165,625
Unocal Capital Trust $3.125 convertible preferred 450,000 20,700 .98
Norsk Hydro AS (Norway) 2,701,000 113,434
Norsk Hydro AS (ADR) 1,609,000 67,679 .96
Murphy Oil Corp. 2,194,900 130,459 .69
USX-Marathon Group 3,000,000 75,188 .40
Shell Canada Ltd. (Canada) 3,254,700 73,106 .39
Royal Dutch Petroleum Co. (New York Registered) 500,000 30,781
(Netherlands)
"Shell" Transport and Trading Co., PLC 450,000 22,472 .28
(New York Registered) (United Kingdom)
Imperial Oil Ltd. (Canada) 1,461,900 35,634 .19
Sunoco, Inc. 1,000,000 29,437 .15
Pogo Trust I, Series A, 6.50% convertible preferred 2029 38,600 2,084 .01
DATA PROCESSING & REPRODUCTION - 5.45%
International Business Machines Corp. 2,800,000 306,775 1.62
Computer Associates International, Inc. 2,750,000 140,766 .74
Microsoft Corp. (1) 1,600,000 128,000 .68
Hewlett-Packard Co. 966,700 120,717 .64
Fujitsu Ltd. (Japan) 3,000,000 103,682 .55
Compaq Computer Corp. 3,500,000 89,469 .47
Oracle Corp. (1) 1,000,000 84,063 .44
Dell Computer Corp. (1) 600,000 29,587 .16
Gateway, Inc. (1) 486,700 27,620 .15
ELECTRICAL & ELECTRONICS - 4.09%
Telefonaktiebolaget LM Ericsson, Class B (ADR) (Sweden) 14,000,000 280,000 1.48
Nortel Networks Corp. (Canada) 2,133,760 145,629 .77
Siemens AG (Germany) 900,000 135,371 .71
Lucent Technologies Inc. 1,200,000 71,100 .37
Toshiba Corp. (Japan) 5,000,000 56,361 .30
NEC Corp. (Japan) 1,547,000 48,512 .26
Cisco Systems, Inc. (1) 600,000 38,138 .20
FOOD & HOUSEHOLD PRODUCTS - 3.89%
Colgate-Palmolive Co. 3,400,000 203,575 1.08
Nabisco Group Holdings Corp. 7,300,000 189,344 1.00
H.J. Heinz Co. 1,800,000 78,750 .42
Kellogg Co. 2,200,000 65,450 .34
Unilever NV (New York Registered) (Netherlands) 1,400,000 60,200 .32
Sara Lee Corp. 2,900,000 56,006 .30
Archer Daniels Midland Co. 3,570,000 35,031 .18
Dole Food Co., Inc. 1,527,500 21,385 .11
General Mills, Inc. 404,200 15,460 .08
Tupperware Corp. 500,000 11,000 .06
INSURANCE - 3.79%
Chubb Corp. 3,034,000 186,591 .99
Marsh & Mclennan Companies, Inc. 1,600,000 167,100 .88
Aon Corp. 3,000,000 93,187 .49
Allstate Corp. 3,100,000 68,975 .37
Cincinnati Financial Corp. 1,650,000 51,872 .27
St. Paul Companies, Inc. 1,500,000 51,188 .27
21st Century Insurance Group 3,000,000 47,250 .25
(formerly 20th Century Industries)
XL Capital Ltd., Class A 472,000 25,547 .14
American International Group, Inc. 212,500 24,969 .13
LEISURE & TOURISM - 3.59%
Seagram Co. Ltd. (Canada) 5,704,900 330,884 1.75
Walt Disney Co. 7,775,000 301,767 1.60
McDonald's Corp. 1,400,000 46,113 .24
BANKING - 3.17%
Bank of America Corp. 3,200,000 137,600 .73
FleetBoston Corp. (formerly Fleet Boston Corp.) 3,750,000 127,500 .67
First Union Corp. 2,854,700 70,832 .37
BANK ONE CORP. 2,500,000 66,406 .35
Fuji Bank, Ltd. (Japan) 8,550,000 64,896 .34
Sumitomo Bank, Ltd. (Japan) 4,600,000 56,314 .30
Wells Fargo & Co. 1,400,000 54,250 .29
Dai-Ichi Kangyo Bank, Ltd. (Japan) 3,000,000 22,743 .12
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.67%
AT&T Corp. 4,800,000 151,800 .80
Sprint FON Group 2,643,700 134,829 .71
U S WEST, Inc. 1,250,000 107,187 .57
SBC Communications Inc. 2,000,000 86,500 .46
GTE Corp. 300,000 18,675 .10
Bell Atlantic Financial Services, Inc., $5,000,000 6,075 .03
Senior Exchangeable Notes, 4.25% 2005 (2)
CHEMICALS - 2.64%
Dow Chemical Co. 10,125,000 305,648 1.61
Imperial Chemical Industries PLC (ADR) (United Kingdom) 3,500,000 107,844 .57
Bayer AG (Germany) 1,130,000 44,029 .23
Air Products and Chemicals, Inc. 1,400,000 43,138 .23
MERCHANDISING - 2.09%
Limited Inc. 8,768,578 189,620 1.00
Albertson's, Inc. 2,332,550 77,557 .41
Lowe's Companies, Inc. 1,500,000 61,594 .33
May Department Stores Co. 2,200,000 52,800 .28
Dillard's Inc., Class A 1,155,000 14,149 .07
UTILITIES: ELECTRIC & GAS - 2.07%
Constellation Energy Group, Inc. 2,000,000 65,125 .34
Questar Corp. 3,000,000 58,125 .31
KeySpan Corp. 1,584,000 48,708 .26
Williams Companies, Inc. 1,000,000 41,687 .22
Florida Progress Corp. 850,000 39,844 .21
DTE Energy Co. 1,050,000 32,091 .17
Dominion Resources, Inc. 675,000 28,941 .15
(formerly Consolidated Natural Gas Co.)
Western Resources, Inc. 1,300,000 20,150 .10
FPL Group, Inc. 297,500 14,726 .08
MDU Resources Group, Inc. 600,000 12,975 .07
Duke Energy Corp. 205,200 11,568 .06
Southern Co. 482,400 11,246 .06
Entergy Corp. 150,000 4,078 .02
TXU Corp. (formerly Texas Utilities Co.) 120,800 3,564 .02
BEVERAGES & TOBACCO - 2.06%
Coca-Cola Co. 4,000,000 229,750 1.21
PepsiCo, Inc. 3,600,000 159,975 .85
BUSINESS SERVICES - 1.94%
FedEx Corp. (formerly FDX Corp.) (1) 2,600,000 98,800 .52
Cendant Corp. (1) 2,700,000 37,800
Cendant Corp. 7.50% PRIDES convertible preferred 1,242,100 27,016
Cendant Corp. 3.00% convertible debentures 2002 (2) $7,900,000 7,150 .38
Sabre Group Holdings, Inc., Class A (1) 2,045,304 58,291 .31
Interpublic Group of Companies, Inc. 860,000 36,980
Interpublic Group of Companies, Inc. $8,168,000 7,903 .24
1.87% convertible debentures 2006 (2)
United Parcel Service, Inc., Class B 734,600 43,341 .23
PSINet Inc., Series D, 7.00% convertible 575,000 19,478 .10
preferred 2049 (2)
Equifax Inc. 600,000 15,750 .08
Waste Management, Inc. 4.00% converible debentures 2002 $11,000,000 10,202 .05
Budget Group, Inc. 6.25% TIDES convertible 292,000 5,548 .03
preferred 2005
TRANSPORTATION: AIRLINES - 1.24%
Delta Air Lines, Inc. 3,206,600 162,134 .86
AMR Corp. (1) 2,000,000 52,875 .28
Southwest Airlines Co. 1,000,000 18,937 .10
FOREST PRODUCTS & PAPER - 1.12%
Weyerhaeuser Co. 1,525,000 65,575 .35
Willamette Industries, Inc. 1,173,500 31,978 .17
Bowater Inc. 700,000 30,887 .16
Chesapeake Corp. 859,100 25,451 .14
Georgia-Pacific Corp., Georgia-Pacific Group 800,000 21,000
Georgia-Pacific Corp., Timber Group 150,000 3,244 .13
International Paper Co. 653,100 19,471 .10
Fort James Corp. 600,000 13,875 .07
MACHINERY & ENGINEERING - 0.99%
Deere & Co. 2,400,000 88,800 .47
Parker Hannifin Corp. 1,900,000 65,075 .34
Caterpillar Inc. 1,000,000 33,875 .18
METALS: NONFERROUS - 0.95%
Alcoa Inc. 5,000,000 145,000 .76
Phelps Dodge Corp. 965,620 35,909 .19
AEROSPACE & MILITARY TECHNOLOGY - 0.93%
Boeing Co. 2,000,000 83,625 .44
Northrop Grumman Corp. 1,000,000 66,250 .35
Raytheon Co., Class A 670,232 13,028
Raytheon Co., Class B 662,500 12,753 .14
FINANCIAL SERVICES - 0.77%
Household International, Inc. 1,700,000 70,656 .37
MBNA Corp. 810,000 21,971 .11
Capital One Financial Corp. 450,000 20,081 .11
Fannie Mae 350,000 18,266 .10
SLM Holding Corp. 400,000 14,975 .08
RECREATION, OTHER CONSUMER PRODUCTS - 0.75%
Eastman Kodak Co. 1,200,000 71,400 .38
EMI Group PLC (United Kingdom) 4,769,900 43,370 .23
American Greetings Corp., Class A 1,000,000 19,000 .10
Hasbro, Inc. 525,000 7,908 .04
MULTI-INDUSTRY - 0.75%
Honeywell International Inc. 2,200,000 74,113 .39
Canadian Pacific Ltd. (Canada) 2,560,000 67,040 .36
AUTOMOBILES - 0.74%
Honda Motor Co., Ltd. (Japan) 1,954,000 66,428 .35
Ford Motor Co. 883,900 38,008 .20
General Motors Corp. 600,000 34,837 .19
WIRELESS TELECOMMUNICATION SERVICES - 0.70%
MediaOne Group, Inc. 6.25% PIES convertible 750,000 67,453
preferred 2001
MediaOne Group, Inc. 7.00% PIES convertible 240,000 9,720 .41
preferred 2002
Crown Castle International Corp. (1) 1,500,000 54,750 .29
ELECTRONIC INSTRUMENTS - 0.70
PE Biosystems Group 1,815,200 119,576 .63
Research In Motion Ltd. (Canada) (1) 270,000 12,166 .07
MISCELLANEOUS MATERIALS & COMMODITIES - 0.69%
Nippon Sheet Glass Co., Ltd. (Japan) 9,000,000 124,927 .66
Owens-Illinois, Inc. 4.75% convertible preferred 2049 220,000 4,895 .03
IT CONSULTING & SERVICES - 0.39%
Electronic Data Systems Corp. 1,800,000 74,250 .39
INDUSTRIAL COMPONENTS - 0.33%
Dana Corp. 1,100,000 23,306 .12
Illinois Tool Works, Inc. 400,000 22,800 .12
Delphi Automotive Systems Corp. 1,165,518 16,973 .09
ENERGY EQUIPMENT - 0.30%
Baker Hughes Inc. 1,200,000 38,400 .20
Schlumberger Ltd. (Netherlands Antilles) 150,000 11,194 .06
Diamond Offshore Drilling, Inc. 3.75% $6,500,000 6,812 .04
convertible debentures 2007
HEALTH CARE PROVIDERS & SERVICES - 0.19%
HCA - The Healthcare Co. (formerly 1,178,700 35,803 .19
Columbia/HCA Healthcare Corp.)
TRANSPORTATION: RAIL & ROAD - 0.05%
Union Pacific Capital Trust 6.25% TIDES 260,000 10,270 .05
convertible preferred 2028 (2)
APPLIANCES & HOUSEHOLD DURABLES - 0.05%
Newell Financial Trust I 5.25% QUIPS 254,000 9,747 .05
convertible preferred 2027
MISCELLANEOUS - 3.09%
Other equity securities in initial period of acquisition 585,690 3.09
TOTAL EQUITY SECURITIES (cost: $12,976,618,000) 17,421,907 92.04
Principal
Amount
(000)
Bonds and Notes
INDUSTRIALS - 0.32%
Charter Communications Holdings, LLC 8.25% 2007 $50,000 44,250 .23
CSC Holdings, Inc. 9.875% 2013 10,000 10,262 .05
Time Warner Inc. 10.15% 2012 6,000 6,886 .04
TRANSPORTATION: AIRLINES - 0.07%
Delta Air Lines, Inc., Series 1993-A2, 10.50% 2016 (3) 11,500 12,525 .07
TOTAL BONDS AND NOTES (cost: $77,814,000) 73,923 .39
Short-Term Securities
CORPORATE SHORT-TERM NOTES - 7.30%
Associates First Capital Corp. 6.35%-6.85% 113,900 113,718 .60
due 7/3-8/3/2000
Eastman Kodak Co. 6.08%-6.62% due 7/13-8/25/2000 85,000 84,670 .45
International Lease Finance Corp. 6.53%-6.56% 76,000 75,587 .40
due 7/19-8/14/2000
Bell Atlantic Financial Services, Inc. 70,000 69,636 .37
6.52%-6.60% due 7/7-8/23/2000
AT&T Corp. 6.51%-6.60% due 7/10-8/4/2000 61,900 61,616 .33
Minnesota Mining and Manufacturing Co. 6.50%-6.53% 61,500 61,369 .32
due 7/5-7/19/2000
Corporate Access Funding Co. Inc. 6.54%-6.60% 60,100 59,946 .32
due 7/12-7/17/2000 (2)
General Motors Acceptance Corp. 6.54%-6.57% 53,100 52,783 .28
due 7/13-8/15/2000
USAA Capital Corp. 6.51%-6.59% due 7/24-8/2/2000 52,000 51,717 .27
SBC Communications Inc. 6.08%-6.56% 50,375 50,253 .27
due 7/3-8/22/2000 (2)
Wal-Mart Stores, Inc. 6.50%-6.51% due 7/11-7/18/2000 (2) 50,000 49,882 .26
Coca-Cola Co. 6.07%-6.51% due 7/5-8/1/2000 50,000 49,853 .26
Alcoa Inc. 6.50%-6.55% due 7/12-7/28/2000 50,000 49,843 .26
Procter & Gamble Co. 6.49%-6.55% due 7/10-7/31/2000 50,000 49,774 .26
Lucent Technologies Inc. 6.50%-6.53% due 7/7-8/14/2000 50,000 49,769 .26
IBM Credit Corp. 6.56%-6.57% due 7/31-8/31/2000 50,000 49,575 .26
H.J. Heinz Co. 6.51%-6.55% due 7/5-7/21/2000 49,500 49,405 .26
Archer Daniels Midland Co. 6.10%-6.55% due 7/11-8/7/2000 43,130 42,941 .23
Preferred Receivables Funding 6.53%-6.54% 40,000 39,860 .21
due 7/7-7/24/2000 (2)
Ciesco LP 6.52%-6.60% due 7/5-7/25/2000 40,000 39,858 .21
E.W. Scripps Co. 6.55%-6.63% due 7/26-8/9/2000 (2) 40,000 39,765 .21
Household Finance Corp. 6.54%-6.55% due 7/6-8/3/2000 35,000 34,859 .18
Chevron USA Inc. 6.52%-6.55% due 7/7-7/21/2000 30,000 29,925 .16
E.I. du Pont de Nemours and Co. 6.53%-6.55% 30,000 29,846 .16
due 7/11-9/11/2000
Motiva Enterprises LLC 6.55% due 8/11/2000 30,000 29,771 .16
Hershey Foods Corp. 6.52% due 7/24/2000 25,000 24,891 .13
Fortune Brands Inc. 6.08%-6.55% due 7/6-7/26/2000 (2) 20,000 19,942 .11
Estee Lauder Companies Inc. 6.35%-6.58% 20,000 19,934 .11
due 7/12-9/5/2000 (2)
FEDERAL AGENCY DISCOUNT NOTES - 0.21%
Freddie Mac 6.44-6.52% due 7/11-9/7/2000 40,342 39,900 .21
TOTAL SHORT-TERM SECURITIES (cost: $1,420,902,000) 1,420,888 7.51
TOTAL INVESTMENT SECURITIES (cost:$14,475,334,000) 18,916,718 99.94
Excess of cash and receivables over payables 10,777 .06
NET ASSETS $18,927,495 100.00
(1) Non-income-producing security.
(2) Purchased in a private placement transaction;
resale to the public may require registration or sale
only to qualified institutional buyers.
(3) Pass-through security backed by a pool of mortgages
or other loans on which principal payments are
periodically made. Therefore, the effective maturity
of these securities is shorter than the
stated maturity.
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
Fundamental Investors
Equity Securities added since December 31, 1999
Advanced Micro Devices
American Home Products
Aon
Bristol-Myers Squibb
Cincinnati Financial
Coca-Cola
Crown Castle
Dell Computer
Equifax
Fannie Mae
Forest Laboratories
FPL Group
Infineon Technologies
IVAX
Lucent Technologies
Micron Technology
Nippon Sheet Glass
Norsk Hydro
PSINet
Research In Motion
Sabre Group
Sanofi-Synthelabo
Schlumberger
Semtech
Southwest Airlines
St. Paul Companies
Walt Disney
Equity Securities eliminated since December 31, 1999
AT&T Corp. Liberty Media
CK Witco
Coastal Corp.
Conoco
Federal-Mogul
Galileo International
International Flavors & Fragrances
Ito-Yokado
J.C. Penney
National City
NIKE
Nissan Motor
Royal & Sun Alliance Insurance
Schering-Plough
Telefonos de Mexico
Textron
TransCanada PipeLines
Washington Mutual
<TABLE>
Fundamental Investors
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES UNAUDITED
at June 30, 2000 (dollars in thousands)
<S> <C> <C>
Assets:
Investment securities at market
(cost: $14,475,334) $18,916,718
Cash 119
Receivables for--
Sales of investments $ 1,931
Sales of fund's shares 46,092
Forward currency contracts - net 0
Dividends and accrued interest 23,537 71,560
18,988,397
Liabilities:
Payables for--
Purchases of investments 18,629
Repurchases of fund's shares 32,512
Forward currency contracts - net 0
Dividends on fund's shares 0
Management services 4,273
Chase Manhattan Bank 0
Other expenses 5,488 60,902
Net Assets at June 30, 2000-- $18,927,495
Total authorized capital stock--1,000,000,000 shares
Class A shares, $1.00 par value
Net Assets $18,832,688
Shares outstanding 558,185,517
Net asset value per share $33.74
Class B shares, $1.00 par value
Net Assets $94,807
Shares outstanding 2,812,225
Net asset value per share $33.71
See Notes to Financial Statements
STATEMENT OF OPERATIONS UNAUDITED
for the six months ended June 30, 2000 (dollars in thousands)
Investment Income:
Income:
Dividends $ 129,549
Interest 34,677 $ 164,226
Expenses:
Management services fee 24,267
Distribution expenses - Class A 22,091
Distribution expenses - Class B 129
Transfer agent fee - Class A 8,461
Transfer agent fee - Class B 12
Reports to shareholders 44
Registration statement and prospectus 1,143
Postage, stationery and supplies 1,194
Directors' fees 84
Auditing and legal fees 55
Custodian fee 415
Taxes other than federal income tax 1
Other expenses 138 58,034
Net investment income 106,192
Realized Gain and Unrealized
Apreciation on Investments:
Net realized gain 832,892
Net increase in unrealized
appreciation on investments:
Beginning of period 4,369,267
Open forward currency contracts 0
End of period 4,441,397
Net unrealized apreciation on investments 72,130
Net realized gain and
unrealized apreciation
on investments 905,022
Net Increase in Net Assets Resulting
from Operations $1,011,214
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Six Months Year
ended ended
06/30/2000 * 12/31/99
Operations:
Net investment income $ 106,192 $ 192,612
Net realized gain on investments 832,892 1,393,331
Net unrealized apreciation
on investments 72,130 1,590,469
Net increase in net assets
resulting from operations 1,011,214 3,176,412
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (107,093) (182,671)
Class B (86) -
Distributions from net realized gains on investments
Class A (266,116) (1,298,803)
Class B - -
Total Dividends and Distributions (373,295) (1,481,474)
Capital Share Transactions:
Proceeds from shares sold 2,639,318 2,627,090
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on investments 353,631 1,404,953
Cost of shares repurchased (1,306,470) (1,836,795)
Net increase in net assets resulting from
capital share transactions 1,686,479 2,195,248
Total Increase in Net Assets 2,324,398 3,890,186
Net Assets:
Beginning of period 16,603,097 12,712,911
End of period (including
undistributed net investment
income: $30,361 and $31,348,
respectively) $18,927,495 $16,603,097
* Unaudited
See Notes to Financial Statements
</TABLE>
FUNDAMENTAL INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Fundamental Investors, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital and income
primarily through investments in common stocks.
The fund offers Class A and Class B shares. Class A shares are sold with an
initial sales charge of up to 5.75%. Class B shares are sold without an
initial sales charge but subject to a contingent deferred sales charge paid
upon redemption. This charge declines from 5% to zero over a period of six
years. Class B shares have higher distribution expenses and transfer agent fees
than Class A shares. Class B shares are automatically converted to Class A
shares eight years after the date of purchase. Holders of both classes of
shares have equal pro rata rights to assets and identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution and transfer agent expenses, and each class shall have exclusive
rights to vote on matters affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
SECURITY VALUATION - 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. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
the Board of Directors.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost.
Dividend income is recognized on the ex-dividend date, and interest income is
recognized on an accrual basis. Market discounts and original issue discounts
on securities purchased are amortized daily over the expected life of the
security. The fund does not amortize premiums on securities purchased.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions paid
to shareholders are recorded on the ex-dividend date.
ALLOCATIONS - Income, expenses other than class-specific expenses and realized
and unrealized gains and losses are allocated daily between the classes based
on their relative net asset values. Distribution expenses, transfer agent fees
and any other class-specific expenses, are accrued daily and charged to the
applicable share class.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - Investment in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluations of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the security markets.
TAXATION - Dividend and Interest income is recorded net of non-U.S. taxes
paid. For the six months ended June 30, 2000, such non-U.S. taxes were
$3,549,000.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, and other receivables and payables, on a book basis, were $97,000 for
the six months ended June 30, 2000.
3. FEDERAL INCOME TAXATION - The fund complies with the requirements of the
Internal Revenue Code applicable to regulated investment companies and intends
to distribute all of its net taxable income and net capital gains for the
fiscal year. As a regulated investment company, the fund is not subject to
income taxes if such distributions are made. Required distributions are
determined on a tax basis and may differ from net investment income and net
realized gains for financial reporting purposes. In addition, the fiscal year
in which amounts are distributed may differ from the year in which the net
investment income and net realized gains are recorded by the fund.
As of June 30, 2000, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $4,441,384,000; $5,301,132,000 related
to appreciated securities and $859,748,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended June 30, 2000. Net losses related to
non-U.S. currency transactions of $97,000 were treated as an adjustment to
ordinary income for federal income tax purposes. The cost of portfolio
securities for book and federal income tax purposes was $14,475,334,000 at June
30, 2000.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $24,267,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Directors of the fund are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees,
accrued daily, based on the following rates and net asset levels:
<TABLE>
<CAPTION>
Average Net Asset Level (in billions)
<S> <C> <C>
Rate In Excess of Up to
.39% $0 $1
.336% $1 $2
.30% $2 $3
.276% $3 $5
.27% $5 $8
.258% $8 $13
.252% $13
</TABLE>
The Board of Directors has approved an amended agreement effective September 1,
2000. Beginning June 1, 2000, CRMC has voluntarily agreed to waive its
management fees in excess of those provided by the amended agreement. As a
result, the amount waived was $3,000. The amended agreement provides for fees
at the following rates and net asset levels:
<TABLE>
<CAPTION>
Average Net Asset Level (in billions)
Rate In Excess of Up to
<S> <C> <C>
.252% $13 $17
.25% $17 $21
.248% $21 $27
.246% $27
</TABLE>
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.25% of Class A daily net assets annually for any
activities primarily intended to result in sales of fund shares, provided the
categories of expenses for which reimbursement is made are approved by the
fund's Board of Directors. Pursuant to a Plan of Distribution for Class B
shares, the fund may expend up to 1.00% of Class B daily net assets annually to
compensate dealers for their selling and servicing efforts. During the six
months ended June 30, 2000, distribution expenses under the Plan of
Distribution for Class A shares were limited to $22,091,000. Had no limitation
been in effect, the fund would have paid $23,276,000 in distribution expensese
for Class A shares under the plan. Some or all of the amounts not paid by the
fund may be recovered by the distibutor in the future. During the six months
ended June 30, 2000 distribution expenss under the Plan of Distribution for
Class B shares were $ 129,000. As of June 30, 2000, accrued and unpaid
distribution expenses for Class A and Class B shares were $3,193,000 and
$65,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $7,042,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's Class A shares. Such
sales charges are not an expense of the fund and, hence, are not reflected in
the accompanying statement of operations.
TRANSFER AGENT FEES - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $8,473,000.
DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may elect
to defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of June 30, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Directors, were $793,000.
AFFILIATED DIRECTORS' AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Certain Directors and officers of the fund are or may be considered to be
affiliated with CRMC, AFS and AFD. No such persons received any remuneration
directly from the fund.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,931,067,000 and $2,902,827,000, respectively,
during the six months ended June 30, 2000.
As of June 30, 2000, net assets consisted of the following:
<TABLE>
<S> <C>
Capital paid in on shares of beneficial interest $13,623,724
Undistributed net investment income 30,361
Accumulated net realized gain 832,013
Net unrealized appreciation 4,441,397
Net assets $18,927,495
</TABLE>
Capital share transations in the fund were as follows:
<TABLE>
<S> <C> <C>
Six monthe
ended June 30,
2000
Amount (000) Shares
Class A Shares:
Sold $ 2,544,242 77,106,713
Reinvestment of dividends and distributions 353,548 11,265,929
Repurchased (1,305,910) (39,662,844)
Net increase in Class A 1,591,880 48,709,798
Class B Shares*:
Sold 95,076 2,826,396
Reinvestment of dividends and distributions 83 2,483
Repurchased (560) (16,654)
Net increase in Class B 94,599 2,812,225
Total Net Increase in fund $ 1,686,479 51,522,023
Year ended
December 31,
1999
Amount (000) Shares
Class A Shares:
Sold $ 2,627,090 82,752,634
Reinvestment of dividends and distributions 1,404,953 45,448,355
Repurchased (1,836,795) (58,299,290)
Net increase in Class A 2,195,248 69,901,699
Class B Shares*:
Sold - -
Reinvestment of dividends and distributions - -
Repurchased - -
Net increase in Class B - -
Total Net Increase in fund $ 2,195,248 69,901,699
* Class B shares were not offered
before March 15, 2000.
</TABLE>
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $415,000 includes $47,000 that was paid by these credits
rather than in cash.
<TABLE>
Fundamental Investors
PER-SHARE DATA AND RATIO
<S> <C> <C> <C>
Net asset Net gains
value, Net on securities
Period beginning investment (both realized
Ended(1) of period income and unrealized)
Class A:
2000 $32.59 $.20(2) $1.66(2)
1999 28.92 .41 6.45
1998 27.40 .42 4.09
1997 24.54 .41 6.00
1996 22.29 .41 4.00
1995 17.50 .41 5.46
Class B:
2000 31.93 .06(2) 1.78(2)
Dividends
Total from (from net Distributions
Period investment investment (from capital
Ended(1) operations income) gains)
Class A:
2000 $1.86 $(.20) $ (.51)
1999 6.86 (.40) (2.79)
1998 4.51 (.40) (2.59)
1997 6.41 (.42) (3.13)
1996 4.41 (.40) (1.76)
1995 5.87 (.40) (.68)
Class B:
2000 1.84 (.06) -
Net asset
Period Total value, end Total
Ended(1) distributions of period return
Class A:
2000 $ (.71) $33.74 5.88%
1999 (3.19) 32.59 24.58
1998 (2.99) 28.92 16.72
1997 (3.55) 27.40 26.67
1996 (2.16) 24.54 19.99
1995 (1.08) 22.29 34.21
Class B:
2000 (.06) 33.71 5.75
Ratio of Ratio of
Net assets, expenses net income
Period end of period to average to average
Ended(1) (in millions) net assets net assets
Class A:
2000 $18,832 0.65%(3) 1.20%(3)
1999 16,603 0.63 1.33
1998 12,713 0.63 1.47
1997 10,465 0.63 1.54
1996 7,165 0.66 1.78
1995 4,754 0.70 2.08
Class B:
2000 95 1.39(3) .55(3)
Portfolio
Period turnover
Ended(1) rate
Class A:
2000 17.36%(4)
1999 45.50
1998 52.57
1997 45.09
1996 39.07
1995 25.47
Class B:
2000 17.36(4)
(1) The periods 1995 through 1999 represent
fiscal years ended December 31. The periods
ended 2000 (unaudited)
represent for Class A shares, the six-month
period ended June 30, 2000, and for
Class B shares, the 107-day
period ended June 30, 2000. Class B
shares were not offered before March 15, 2000.
Totals returns for such periods are
based on activity during the period
and thus are not representative of a full year.
Total returns exclude all sales charges,
including contingent deferred sales charges.
(2) Based on average shares outstanding.
(3) Annualized.
(4) Represents portfolio turnover rate
(equivalent for all share classes)
for the six months ended June 30, 2000.
</TABLE>
Directors and other officers
Directors
Guilford C. Babcock
San Marino, California
Associate Professor of Finance,
Marshall School of Business,
University of Southern California
James E. Drasdo
Los Angeles, California
President of the fund
Senior Vice President,
Capital Research and Management Company
Robert A. Fox
Livingston, California
President and Chief Executive Officer,
Foster Farms Inc.
Roberta L. Hazard
McLean, Virginia
Consultant; Rear Admiral,
U.S. Navy (retired)
Leonade D. Jones
Burlingame, California
Management consultant; former Treasurer,
The Washington Post Company
John G. McDonald
Stanford, California
The IBJ Professor of Finance,
Graduate School of Business,
Stanford University
Gail L. Neale
Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of
the Salzburg Seminar
Henry E. Riggs
Claremont, California
President, Keck Graduate Institute
of Applied Life Sciences
James F. Rothenberg
Los Angeles, California
Chairman of the Board of the fund
President and Director,
Capital Research and Management Company
Patricia K. Woolf, Ph.D.
Princeton, New Jersey
Private investor; corporate director;
lecturer, Department of Molecular Biology,
Princeton University
Other Officers
Gordon Crawford
Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
Paul G. Haaga, Jr.
Los Angeles, California
Senior Vice President of the fund
Executive Vice President and Director,
Capital Research and Management Company
Michael T. Kerr
Los Angeles, California
Senior Vice President of the fund
Senior Vice President,
Capital Research Company
Dina N. Perry
Washington, D.C.
Senior Vice President of the fund
Senior Vice President,
Capital Research and Management Company
Martin Romo
San Francisco, California
Vice President of the fund
Vice President and Director,
Capital Research Company
Julie F. Williams
Los Angeles, California
Secretary of the fund
Vice President Fund Business
Management Group, Capital Research
and Management Company
Sheryl F. Johnson
Norfolk, Virginia
Treasurer of the fund
Vice President Fund Business
Management Group, Capital Research
and Management Company
David A. Pritchett
Norfolk, Virginia
Assistant Treasurer of the fund
Vice President Fund Business
Management Group, Capital Research
and Management Company
[The American Funds Group(r)]
Offices of the fund
One Market, Steuart Tower
Suite 1800
San Francisco, California 94105-1409
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
Transfer agent for
shareholder accounts
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
Custodian of assets
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02105-1713
Counsel
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
For information about your account or any of the fund's services, or for a
prospectus for any of the American Funds, please contact your financial
adviser. You may also call American Funds Service Company, toll-free, at
800/421-0180 or visit www.americanfunds.com on the World Wide Web. Please read
the prospectus carefully before you invest or send money.
This report is for the information of shareholders of Fundamental Investors,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
September 30, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
There are two ways to invest in Fundamental Investors. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts of
$25,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front sales charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time. Because expenses are first deducted from income, dividends for Class B
share accounts will be lower.
Printed on recycled paper
Litho in USA KBD/CG/4627
Lit. No. FI-013-0800
