As filed with the Securities and Exchange Commission on April 9, 1999
SEC File Nos.
811-9105
333-67455
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 2 (X)
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 (X)
NEW WORLD FUND, INC.
(Exact name of registrant as specified in charter)
333 South Hope Street, Los Angeles, California 90071
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (213) 486-9200
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Eric A.S. Richards, Esq.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
Approximate date of proposed public offering:
April 19, 1999
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Title of Securities Being Registered
Amount Being Registered
Proposed Maximum Offering Price Per Unit
Proposed Maximum Aggregate Offering Price
Amount of Registration Fee
Shares of Common Stock $0.01 par value per share)
Indefinite
N/A
Indefinite*
$500**
* An indefinite number of shares of common stock of the Registrant is being
registered by this Registration Statement pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
** The $500 fee was paid upon the initial filing of the registration statement
on November 17, 1998.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter be effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
The
American
Funds
Group(R)
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New World
Fund
Prospectus
New World Fund seeks to make your investment grow over time by investing
primarily in stocks of companies with significant exposure to countries with
developing economies and/or markets.
American Funds Distributors, as principal underwriter, has entered into
agreements with a selected group of securities dealers to solicit subscriptions
for shares of the fund during an initial offering period that will terminate on
the settlement date, June 17, 1999. Purchases may not be made by exchanging
shares from other funds in The American Funds Group.
The fund will reopen on September 15, 1999, and shares of the fund will be
continuously offered thereafter.
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.
APRIL 19, 1999
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New World Fund, Inc.
333 South Hope Street
Los Angeles, California 90071
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TABLE OF CONTENTS
Risk/Return Summary 2
.............................................................................
Fees and Expenses of the Fund 3
.............................................................................
Investment Objective, Strategies and Risks 4
.............................................................................
Year 2000 6
.............................................................................
Management and Organization 6
.............................................................................
Shareholder Information 8
.............................................................................
Purchase and Exchange of Shares 9
.............................................................................
How to Sell Shares 13
.............................................................................
Distribution Arrangements 14
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New World Fund / Prospectus 1
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RISK/RETURN SUMMARY
The fund seeks to make your investment grow over time by investing primarily in
stocks of companies with significant exposure to countries with developing
economies and/or markets. The fund may also invest in debt securities of
issuers, including issuers of high-yield, high-risk bonds, in these countries.
The fund is designed for investors seeking capital appreciation. Investors in
the fund should have a long-term perspective and be able to tolerate
potentially wide price fluctuations. An investment in the fund is subject to
risks, including the possibility that the fund may decline in value in response
to economic, political and social events in the U.S. or abroad. In addition,
the prices of equity securities will be affected by events specifically
involving the companies whose securities are owned by the fund. The value of
debt securities held by the fund may be affected by changing interest rates and
credit ratings. High-yield, high-risk and longer maturity bonds will be subject
to greater credit risk and price fluctuations than higher quality and shorter
maturity bonds.
Although all securities in the fund's portfolio, including U.S. securities, may
be adversely affected by currency fluctuations or world political, social and
economic instability, investments outside the U.S., particularly in countries
with developing economies or markets, may be affected to a greater extent.
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.
You may lose money by investing in the fund. The likelihood of loss is greater
if you invest for a shorter period of time.
2 New World Fund / Prospectus
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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.
Shareholders Fees
(fees paid directly from your investment)
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Maximum sales charge imposed on purchases
(as a percentage of offering price) 5.75%/1/
................................................................................
Maximum sales charge imposed on reinvested dividends 0%
................................................................................
Maximum deferred sales charge 0%/2/
................................................................................
Redemption or exchange fees 0%
/1/ Sales charges are reduced or eliminated for larger purchases.
/2/ A contingent deferred sales charge of 1% applies to certain redemptions
made within 12 months following any purchases you made without a sales
charge.
Annual Fund Operating Expenses/1/
(expenses deducted from fund assets)
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Management Fees .85%
................................................................................
Service (12b-1) Fees .10%/2/
................................................................................
Other Expenses .29%
................................................................................
Total Annual Fund Operating Expenses 1.24%
/1/ Based on estimated amounts for the current fiscal year.
/2/ 12b-1 expenses may not exceed 0.30% 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:
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One year $595
................................................................................
Three years $850
................................................................................
New World Fund / Prospectus 3
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INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is long-term capital appreciation. The fund may
invest in equity securities of any company, regardless of where it is based, if
the fund's investment adviser determines that a significant portion of a
company's assets or revenues (generally 20% or more) are attributable to
developing countries. Under normal market conditions, the fund will invest at
least 35% of its assets in equity and debt securities of issuers primarily based
in "qualified" countries that have developing economies and/or markets. In
addition, the fund may invest up to 25% of its assets in debt securities of
issuers, including issuers of high-yield, high-risk and government bonds,
primarily based in qualified countries or that have a significant portion of
their assets or revenues attributable to developing countries.
In determining whether a country is qualified, the fund will consider such
factors as the country's per capita gross domestic product, the percentage of
the country's economy that is industrialized, market capital as a percentage of
gross domestic product, the overall regulatory environment, the presence of
government regulation limiting or banning foreign ownership, and restrictions on
repatriation of initial capital, dividends, interest, and/or capital gains. The
fund's investment adviser, Capital Research and Management Company, will
maintain an eligible list of qualified countries and securities in which the
fund may invest. Developing countries in which the fund may invest currently
include, but are not limited to Argentina, Brazil, Chile, Hungary, India,
Indonesia, Israel, Korea, Mexico, Philippines, Poland, Russia, South Africa, and
Turkey.
The prices of equity securities will decline in response to certain events,
including those directly involving the companies whose securities are owned in
the fund, adverse conditions affecting the general economy, overall market
declines, world political, social and economic instability, and currency
fluctuations. Investments outside the U.S. may be affected by these events to a
greater extent and may also be affected by differing securities regulations,
higher transaction costs, and administrative difficulties such as delays in
clearing and settling portfolio transactions.
Investing in countries with developing economies and/or markets generally
involves risks in addition to and greater than those generally associated with
investing in developed countries. For instance, developing countries may have
less developed legal and accounting systems. The governments of these countries
may be more unstable and likely to impose capital controls, nationalize a
company or industry, place restrictions on foreign ownership and on withdrawing
sale proceeds of securities from the country, and/or impose punitive taxes that
4 New World Fund / Prospectus
could adversely affect security prices. In addition, the economies of these
countries may be dependent on relatively few industries that are more
susceptible to local and global changes. Securities markets in these countries
are also relatively small and have substantially lower trading volumes. As a
result, securities issued in these countries may be more volatile and
potentially less liquid than securities issued in countries with more developed
economies or markets.
The value of debt securities held by the fund may be affected by factors such
as changing interest rates, credit ratings, and effective maturities. For
example, the value of bonds in the fund's portfolio generally will decline when
in terest rates rise and vice versa. In addition, the values of high-yield,
high-risk and longer maturity bonds will be subject to greater credit risk and
price fluctuations than higher quality and shorter maturity bonds.
The fund may also hold cash or money market instruments of any issuer to any
extent deemed appropriate. The size of the fund's cash position will vary and
will depend on various factors, including market conditions and purchases and
redemptions of fund shares. A larger cash position could detract from the
achievement of the fund's objective, but it also provides greater liquidity to
meet redemptions or to make additional investments, and it would reduce the
fund's exposure in the event of a market downturn.
The fund relies on the professional judgment of 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.
Securities may be sold when they are judged to no longer represent good long-
term value.
New World Fund / Prospectus 5
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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. These risks may be particularly acute
in certain developing countries in which the fund may invest and may adversely
affect the fund's net asset value and total return. The fund and its investment
adviser will continue to monitor developments relating to this issue.
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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 estimated total management fee to be paid by the fund,
as a percentage of average net assets, is discussed earlier under "Fees and
Expenses of the Fund."
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.
6 New World Fund / Prospectus
Multiple Portfolio Counselor System
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments 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 New World Fund are listed below.
<TABLE>
Approximate
Years of Experience as an
Investment Professional
(including the last five years)
................................
With Capital
Portfolio Years of Experience Research and
Counselors as Portfolio Counselor Management
for New World for New World Fund Company or
Fund Primary Title(s) (approximate) affiliates Total Years
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert W. President of the Less than one year 14 years 14 years
Lovelace fund. Executive (since the fund began
Vice President operations)
and Director,
Capital Research
Company*
------------------------------------------------------------------------------------------------
Mark E. Denning Senior Vice Less than one year 17 years 17 years
President of the (since the fund began
fund. Director, operations)
Capital Research
and Management
Company
------------------------------------------------------------------------------------------------
David C. Barclay Vice President of Less than one year 11 years 18 years
the fund. Vice (since the fund began
President, Capital operations)
Research and
Management Company.
------------------------------------------------------------------------------------------------
Alwyn Heong Vice President of Less than one year 7 years 11 years
the fund. Vice (since the fund began
President, Capital operations)
Research Company*
------------------------------------------------------------------------------------------------
Carl M. Kawaja Vice President of Less than one year 8 years 12 years
the fund. Vice (since the fund began
President, Capital operations)
Research Company*
------------------------------------------------------------------------------------------------
</TABLE>
The fund began operations June 17, 1999.
* Company affiliated with Capital Research and Management Company.
New World Fund / Prospectus 7
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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.
[MAPS APPEARS HERE]
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Call toll-free from anywhere anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
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A complete description of the services we offer is 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 re-
tirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan
administration/trustee or dealer.
8 New World Fund / Prospectus
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PURCHASE AND EXCHANGE OF SHARES
Initial Offering
American Funds Distributors will serve as the principal underwriter for the
fund's shares and will enter into agreements with a selected group of
securities dealers who will use their best efforts to solicit orders to purchase
shares of the fund. Dealers may obtain non-binding indications of interest
prior to actually confirming any orders. The termination date of the offering
is June 17, 1999, the settlement date for subscriptions accepted during the
offering. Any payments received by a dealer or by American Funds Distributors
prior to the settlement date will be held in a non-interest bearing bank
account. Shares of the fund may be purchased only through those dealers that are
registered, if required, in the state where the purchase is made.
A minimum purchase of 200 shares ($5,000 at the maximum offering price) is
required to invest in the fund during the offering, except that for retirement
plans, such as IRAs, this minimum is reduced to 60 shares ($1,500 at the
maximum offering price). For Education IRAs the minimum is further reduced to 25
shares ($500 at the maximum offering price). The shares are offered at a
maximum offering price of $25.00 per share, which is equal to the net asset
value per share plus a sales charge. The sales charge will be reduced for large
purchases in the amount indicated below, but in all cases, the fund will receive
the net asset value of $23.56 per share.
The table below shows the offering price, total per share sales charges
(underwriting discounts) and dealer concessions connected with sales of various
quantities of the fund's shares during the initial offering. Dealer concessions
represent the amounts allowed to securities dealers.
<TABLE>
Underwriting Discount Dealer Concession
--------------------------------- ---------------------
Approx. % Approx. % Approx. %
Amount of Purchase Offering Dollar of Offering of Net Dollar of Offering
at the Offering Price Price Amount Price Asset Value Amount Price
- ------------------------ --------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Less than $50,000....... $25.00 $1.44 5.75% 6.10% $1.44 5.75%
$50,000 but less than
$100,000............... $24.61 $1.11 4.50% 4.71% $1.11 4.50%
$100,000 but less than
$250,000............... $24.35 $0.85 3.50% 3.63% $0.85 3.50%
$250,000 but less than
$500,000............... $24.10 $0.60 2.50% 2.56% $0.60 2.50%
$500,000 but less than
$1 million............. $23.98 $0.48 2.00% 2.04% $0.48 2.00%
$1 million or more...... see below see below see below see below see below see below
</TABLE>
New World Fund / Prospectus 9
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 im-
posed 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. Up to 1% may be paid by the fund under its Plan of Dis-
tribution and/or by American Funds Distributors to dealers on investments made
with no initial sales charge.
The fund currently intends to pay a continuing service fee (not to exceed 0.25%
annually) to dealers in order to promote selling efforts and to compensate them
for providing certain services for their clients. Participating dealers may re-
ceive up to the entire underwriting discount.
You may be entitled to a reduced sales charge and offering price on purchases
in the offering as described below under "Reducing Your Sales Charge."
Additional Sales and Future Offerings
Following the completion of the offering, the fund does not intend to make
additional sales of its shares (except as described below) until September 15,
1999. During the period prior to September 15, 1999, the fund intends to sell
additional shares pursuant to its registration statement (including this
prospectus) or amendments thereto, as follows: (i) additional purchases ($50
minimum) by shareholders that purchased fund shares in the initial offering;
(ii) for reinvestment of dividends and capital gain distributions paid by the
fund (including reinvestment within 30 days of dividends or capital gain
distributions that were paid in cash); (iii) in connection with the exercise of
the reinstatement privilege by shareholders who redeemed fund shares; and (iv)
in connection with retirement plans offered to employees of the investment
adviser and its affiliates. Investments in such retirement plans, as well as
reinvestment and reinstatement, will be at the next determined net asset value.
The other sales will be at the net asset value next determined after receipt of
the order plus a sales charge in accordance with the schedule set forth above.
Exchange
Shareholders of other funds in The American Funds Group may not exchange their
shares for shares of the fund during the initial offering or in connection with
the additional sales described above. Once the fund begins its continuous
offering on September 15, 1999, you may exchange your shares into the fund or
other funds in The American Funds Group, subject to the terms of the
prospectuses of the funds involved, without a sales charge. Exchanges 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.
10 New World Fund / Prospectus
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.
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
When the fund begins its continuous offering of shares on September 15, 1999,
it likely will adopt the sales charge schedule applicable to the other equity
funds in The American Funds Group as set forth below.
<TABLE>
Sales Charge as a Percentage of
.................
Net Dealer Concession
Offering Amount as % of
Investment Price Invested Offering Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
................................................................................................
$50,000 but less than $100,000 4.50% 4.71% 3.75%
................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
................................................................................................
$500,000 but less $1 million 2.00% 2.04% 1.60%
................................................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
New World Fund / Prospectus 11
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. Up to 1% may be paid by the fund under its Plan of
Distribution and/or by American Funds Distributors to dealers 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 estimated 12b-
1 fee, as a percentage of average net assets, to be paid by the fund 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.
12 New World Fund / Prospectus
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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 and
American FundsLine OnLine) 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, or American FundsLine
OnLine
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
New World Fund / Prospectus 13
- --------------------------------------------------------------------------------
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) that may be
incurred in connection with the exercise of these privileges, provided American
Funds Service Company employs reasonable procedures to confirm that the in-
structions 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 distribute dividends to you once each year, usually in
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 generally 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% of the applicable tax treaty rate from
dividends paid to certain non-resident 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.
14 New World Fund / Prospectus
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NOTES
New World Fund / Prospectus 15
- --------------------------------------------------------------------------------
NOTES
16 New World Fund / Prospectus
- --------------------------------------------------------------------------------
NOTES
New World Fund / Prospectus 17
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
FundsLine(R) FundsLine OnLine(R)
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
inconsistency 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,
investment results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent accountants' 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 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
Securities and Exchange Commission's Public Reference Room (1-800-SEC-0330) in
Washington, D.C. or on its 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 333 South Hope Street
800/421-0180 ext. 1 Los Angeles, CA 90071
[LOGO]
Investment Company File No. 811-9105 Printed on recycled paper
NEW WORLD FUND, INC.
Part B
Statement of Additional Information
APRIL 19, 1999
This document is not a prospectus but should be read in conjunction with the
current prospectus of New World Fund, Inc. (the fund or NWF) dated April 19,
1999. The prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:
New World Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
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
Item Page No.
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES 2
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES 2
INVESTMENT RESTRICTIONS 7
FUND ORGANIZATION 9
FUND DIRECTORS AND OFFICERS 10
MANAGEMENT 11
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 13
PURCHASE OF SHARES 17
SELLING SHARES 23
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 25
EXECUTION OF PORTFOLIO TRANSACTIONS 27
GENERAL INFORMATION 28
DESCRIPTION OF BOND RATINGS 29
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.
GENERAL
- - The fund will invest at least 35% of its assets in equity and debt securities
of companies based primarily in qualified countries with developing economies
and/or markets.
EQUITY SECURITIES
- - The fund may invest the balance of its assets in equity securities of any
company, regardless of where it is based, if the fund's investment adviser
determines that a significant portion of its assets or revenues (generally 20%
or more) are attributable to developing countries.
DEBT SECURITIES
- - The fund may invest up to 25% of its assets in debt securities of issuers,
including government issuers, primarily based in qualified countries with
developing economies and/or markets, or issuers that the fund's investment
adviser determines have a significant portion of their assets or revenues
(generally 20% or more) attributable to developing countries. The fund will
generally purchase debt securities considered consistent with its objective of
long-term capital appreciation.
- - The fund may invest up to 25% of its assets in debt securities rated Ba and
BB or below by Moody's Investors Services, Inc. or Standard & Poor's
Corporation or unrated but determined to be of equivalent quality.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under the "Risk/Return Summary" and "Investment Objective,
Strategies and Risks."
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, particularly in the case of
smaller capitalization stocks. (See "Certain Risk Factors Related to
Developing Countries" below.)
INVESTING IN VARIOUS COUNTRIES -- Investing outside the U.S. involves special
risks, caused by, among other things: currency controls; fluctuating currency
values; different accounting, auditing and financial reporting regulations and
practices in some countries; changing local and regional economic, political
and social conditions; 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.
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 in the
initial stages of its industrialization cycle with a low per capita gross
national product. 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.
In determining where an issuer of a security is domiciled, the Investment
Adviser may consider such factors as where the country is legally organized,
maintains its principal corporate offices, and/or conducts its principal
operations.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. The fund may purchase and sell currencies to
facilitate transactions in securities denominated in currencies other than the
US. dollar. 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.
CERTAIN RISK FACTORS RELATED TO DEVELOPING COUNTRIES
CURRENCY FLUCTUATIONS -- The fund's investments may be valued in currencies
other than the U.S. dollar. Certain developing countries' currencies have
experienced and may in the future experience significant declines against the
U.S. dollar. For example, if the U.S. dollar appreciates against foreign
currencies, the value of the fund's securities holdings would generally
depreciate and vice versa. Consistent with its investment objective, the fund
can engage in certain currency transactions to hedge against currency
fluctuations. SEE "Currency Transactions" below.
GOVERNMENT REGULATION -- The political, economic and social structures of
certain developing countries may be more volatile and less developed than those
in the U.S. Certain developing countries lack uniform accounting, auditing and
financial reporting standards, have less governmental supervision of financial
markets than in the U.S., and do not honor legal rights enjoyed in the U.S.
Certain governments may be more unstable and present greater risks of
nationalization or restrictions on foreign ownership of local companies.
Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some
developing market countries. While the fund will only invest in markets where
these restrictions are considered acceptable, a country could impose new or
additional repatriation restrictions after the fund's investment. If this
happened, the fund's response might include, among other things, applying to
the appropriate authorities for a waiver of the restrictions or engaging in
transactions in other markets designed to offset the risks of decline in that
country. Such restrictions will be considered in relation to the fund's
liquidity needs and all other positive and negative factors. Further, some
attractive equity securities may not be available to the fund because foreign
shareholders hold the maximum amount legally permissible.
While government involvement in the private sector varies in degree among
developing countries, such involvement may in some cases include government
ownership of companies in certain sectors, wage and price controls or
imposition of trade barriers and other protectionist measures. With respect to
any developing country, there is no guarantee that some future economic or
political crisis will not lead to price controls, forced mergers of companies,
expropriation, or creation of government monopolies to the possible detriment
of the fund's investments.
LESS DEVELOPED SECURITIES MARKETS -- Developing countries may have less
well-developed securities markets and exchanges. They have lower trading
volumes than the securities markets of more developed countries. These markets
may be unable to respond effectively to increases in trading volume.
Consequently, these markets may be substantially less liquid than those of more
developed countries, and the securities of issuers located in these markets may
have limited marketability. These factors may make prompt liquidation of
substantial portfolio holdings difficult or impossible at times.
SETTLEMENT RISKS -- Settlement systems in developing countries are generally
less well organized in developed markets. Supervisory authorities may also be
unable to apply standards comparable with those in developed markets. Thus,
there may be risks that settlement may be delayed and that cash or securities
belonging to the fund may be in jeopardy because of failures of or defects in
the systems. In particular, market practice may require that payment be made
before receipt of the security being purchased or that delivery of a security
be made before payment is received. In such cases, default by a broker or bank
(the "counterparty") through whom the transaction is effected might cause the
fund to suffer a loss. The fund will seek, where possible, to use
counterparties whose financial status is such that this risk is reduced.
However, there can be no certainty that the fund will be successful in
eliminating this risk, particularly as counterparties operating in developing
countries frequently lack the substance or financial resources of those in
developed countries. There may also be a danger that, because of uncertainties
in the operation of settlement systems in individual markets, competing claims
may arise with respect to securities held by or to be transferred to the fund.
INVESTOR INFORMATION -- The fund may encounter problems assessing investment
opportunities in certain developing securities markets in light of limitations
on available information and different accounting, auditing and financial
reporting standards. In such circumstances, the fund's investment adviser will
seek alternative sources of information, and to the extent the investment
adviser may not be satisfied with the sufficiency of the information obtained
with respect to a particular market or security, the fund will not invest in
such market or security.
TAXATION -- Taxation of dividends and capital gains received by non-residents
varies among developing countries and, in some cases, is comparatively high.
In addition, developing countries typically have less well-defined tax laws and
procedures and such laws may permit retroactive taxation so that the fund could
in the future become subject to local tax liability that it had not reasonably
anticipated in conducting its investment activities or valuing its assets.
LITIGATION -- The fund and its shareholders may encounter substantial
difficulties in obtaining and enforcing judgments against non-U.S. resident
individuals and companies.
FRAUDULENT SECURITIES -- Securities purchased by the fund may subsequently be
found to be fraudulent or counterfeit resulting in a loss to the fund.
LOAN PARTICIPATIONS -- The fund may invest, subject to its overall limitation
on debt securities, in loan participations, typically made by a syndicate of
banks to governmental or corporate borrowers for a variety of purposes. The
underlying loans to developing market governmental borrowers may be in default
and may be subject to restructuring under the Brady Plan. The underlying loans
may be secured or unsecured, and will vary in term and legal structure. When
purchasing such instruments, the fund may assume the credit risks associated
with the original bank lender as well as the credit risks associated with the
borrower. Investment in loan participations presents the possibility that in
the U.S., the fund could be held liable as a co-lender under emerging legal
theories of lender liability. In addition, if the loan is foreclosed, the fund
could be part owner of any collateral, and could bear the costs and liabilities
of owning and disposing of the collateral. Loan participations are generally
not rated by major rating agencies, may not be protected by securities laws and
are often considered to be illiquid.
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.
INVESTMENTS IN LOWER RATED BONDS -- The fund may invest up to 25% of it's
assets in lower rated straight debt securities (securities rated Ba or below by
Moody's and BB or below by S&P and commonly referred to as "high-yield,
high-risk bonds" or "junk bonds") or in unrated securities that are determined
to be of equivalent quality. High-yield, high-risk bonds carry a higher degree
of investment risk and are considered speculative.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and corporate
developments and may be less sensitive to interest rate changes. 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. In addition,
periods of economic uncertainty and changes can be expected to result in
increased volatility of market prices and yields of high-yield, high-risk
bonds.
PAYMENT EXPECTATIONS -- High-yield, high-risk 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. In addition,
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.
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.
Capital Research and Management Company attempts to reduce the risks described
above through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
OTHER SECURITIES -- The fund may also invest in securities that have equity and
debt characteristics. 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
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 issuer's credit
quality.
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. In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
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 U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to, Federal Land Banks, Farmers Home Administration, Central
Bank Cooperatives, and Federal Intermediate Credit Banks.
CASH AND CASH EQUIVALENTS -- These securities include (i) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (ii) commercial bank obligations (E.G., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity), (iii) savings
association and saving bank obligations (E.G., certificates of deposit issued
by savings banks or savings associations), (iv) securities of the U.S.
Government, its agencies or instrumentalities that mature, or may be redeemed,
in one year or less, and (v) corporate bonds and notes that mature, or that may
be redeemed, in one year or less.
INVESTMENT COMPANIES -- The fund has the ability to invest up to 5% of its
total assets in shares of closed-end investment companies, but would not
acquire more than 3% of the outstanding voting securities of any one closed-end
investment company. (If the fund invests in another investment company, it
would pay an investment advisory fee in addition to the fee paid to the
Investment Adviser.)
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 on the date of the
contract. Forward currency contracts entered into by the fund will involve the
purchase or sale of a currency against the U.S. dollar. 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 that may be adopted by the fund's Board of
Directors, taking into account factors such as the 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.
INVESTMENT RESTRICTIONS
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by the Investment Company Act of
1940 (the 1940 Act) as the vote of the lesser of (i) 67% or more of the
outstanding voting securities present at a meeting, 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. Investment
limitations expressed in the following restrictions are considered at the time
securities are purchased and are based on the fund's net assets unless
otherwise indicated. These restrictions provide that:
1. The fund may not borrow money or securities, except for temporary or
emergency purposes in an amount not exceeding 33$% of its total assets.
2. The fund may not make loans, if, as a result, more than 33$% of its total
assets would be lent to other parties (this limitation does not apply to
purchases of debt securities, repurchase agreements or loans of portfolio
securities).
3. The fund may not invest 25% or more of its assets in securities of issuers
in any one industry (other than securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities).
4. The fund may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (this shall not prevent the fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business, such as real
estate investment trusts).
5. The fund may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (this shall not prevent
the fund from purchasing or selling options and futures contracts or from
investing in securities or other instruments backed by physical commodities).
6. The fund may not engage in the business of underwriting securities of other
issuers, except to the extent that the purchase or disposal of an investment
position may technically constitute the fund as an underwriter as that term is
defined under the Securities Act of 1933.
7. The fund may not issue senior securities, except as permitted under the
Investment Company Act of 1940.
In addition, the fund will not change its subclassification from a
diversified to non-diversified company except as permitted under the Investment
Company Act of 1940.
The fund has also adopted the following investment restrictions which may be
changed without shareholder approval:
1. The fund may not with respect to 75% of its total assets, invest more than
5% of its assets in securities of any one issuer or acquire more than 10% of
the voting securities of any one issuer. These limitations do not apply to
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
2. The fund may not invest more than 15% of its total assets in securities
which are not readily marketable.
3. The fund may not purchase securities on margin, except for such short-term
credits as are necessary for the clearance of transactions, and provided that
the fund may make margin payments in connection with purchases or sales of
futures contracts or of options on futures contracts.
4. The fund may not engage in short sales except to the extent it owns or has
the right to obtain securities equivalent in kind and amount to those sold
short.
5. The fund may not invest in other companies for the purpose of exercising
control or management.
6. The fund may not more than 5% of its total assets in the securities of
other managed investment companies; such investments shall be limited to 3% of
the voting stock of any investment company, provided, however, that investment
in the open market of a closed-end investment company where no more than
customary brokers' commissions are involved and investment in connection with a
merger, consolidation, acquisition or reorganization shall not be prohibited by
this restriction.
FUND ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Maryland Corporation on November 13, 1998.
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 "Directors and Director Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
FUND DIRECTORS AND OFFICERS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL TOTAL TOTAL NUMBER OF
AND AGE REGISTRANT OCCUPATION(S) COMPENSATION FUND BOARDS
DURING PAST 5 (INCLUDING ON WHICH TRUSTEE
YEARS VOLUNTARILY SERVES/3/
DEFERRED
COMPENSATION/1/)
FROM ALL FUNDS
MANAGED BY
CAPITAL RESEARCH
AND MANAGEMENT
COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED __/__/__
<S> <C> <C> <C> <C>
$
</TABLE>
+ Directors who are considered "interested persons" of the fund as defined in
the 1940 Act on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company.
++ Directors who may be deemed "interested persons" of the fund as defined in
the 1940 Act due to membership on the board of directors of the parent company
of a registered broker-dealer.
1 Amounts may be deferred by eligible Directors under a non-qualified deferred
compensation plan adopted by the fund in 1999. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more of the funds in
The American Funds Group as designated by the director.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, 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., New World 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 serve as the underlying investment vehicles 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.
3 Includes funds managed by Capital Research and Management Company and
affiliates.
4 Gina H. Despres and William R. Grimsley are affiliated with the Investment
Adviser and, accordingly, receive no compensation from the fund.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) PRINCIPAL OCCUPATION(S)
HELD WITH DURING PAST 5 YEARS
REGISTRANT
<S> <C> <C> <C>
</TABLE>
All of the officers listed are officers or employees of the Investment Adviser
or affiliated companies. No compensation is paid by the fund to any director
or officer who is a director, officer or employee of the Investment Adviser or
affiliated companies. The fund pays fees of $_____ per annum to Directors who
are not affiliated with the Investment Adviser, plus $_____ for each Board of
Directors meeting attended ($_____ for each meeting attended in conjunction
with meetings with the Advisory Board), plus $_____ for each meeting attended
as a member of a committee of the Board of Directors. 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.
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, Hong Kong, Singapore 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 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 managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types. These investors include individuals, various
retirement benefit plans, 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 Agreement) between the fund and the Investment Adviser
is dated _____. The Agreement will continue in effect until ____, 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 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. The
Agreement provides that the Investment Adviser has no liability to the fund for
its acts or omissions in the performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The 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 Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
who perform the executive, administrative, clerical and bookkeeping functions
of the fund, provides suitable office space and utilities, necessary office
equipment and general purpose forms and supplies used at the office of the
fund, and will pay the travel expenses of Directors incurred in connection with
attendance at meetings of those Boards. The fund will pay all expenses not
expressly assumed by the Investment Adviser, including, but not limited to,
fees and expenses of the transfer agent, dividend disbursing agent, legal
counsel and independent public accountants and custodian, including charges of
such custodian for the preparation and maintenance of the books of account and
records of the fund, cost of designing, printing and mailing reports,
prospectuses, proxy statements and notices to shareholders; fees and expenses
of registration, qualification and issuance of fund shares; expenses pursuant
to the fund's Plan of Distribution (described below); association dues;
interest; taxes; and compensation of Directors who are not affiliated persons
of the Investment Adviser.
The Investment Adviser has agreed that in the event the expenses of the fund
(with the exclusion of interest, taxes, brokerage costs, distribution expenses
pursuant to a plan under Rule 12b-1 and extraordinary expenses such as
litigation and acquisitions) for any fiscal year ending on a date on which the
Agreement is in effect, exceed the expense limitations, if any, applicable to
the fund pursuant to state securities laws or any regulations thereunder, it
will reduce its fee by the extent of such excess and, if required pursuant to
any such laws or regulations, will reimburse the fund in the amount of such
excess.
As compensation for its services, the Investment Adviser receives a monthly fee
which is accrued daily, calculated at the annual rate of
_________________________.
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 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 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 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers.
As required by rule 12b-1 and the 1940 Act, 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 be considered to have a direct or indirect financial interest
in the operation of the Plan due to present or past affiliations with the
Investment Adviser and related companies. 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 0.30% of its average net assets
annually to finance any activity 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, any defined contribution plan qualified under Section 401(a) of
the Internal Revenue 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.
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
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
Internal Revenue Code of 1986, as amended (the "Code"). Under Subchapter M, if
the fund distributes within specified times at least 90% of the sum of its
investment company taxable income (net investment income and the excess of net
short-term capital gains over net long-term capital losses) and its tax-exempt
interest, if any, it generally will be taxed only on that portion of the
investment company taxable income which 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; and (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 total assets and to not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total 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.
Distributions of investment company taxable income, including short-term
capital gains, generally are taxable to the shareholder as ordinary income,
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the fund. A capital gain distribution, whether paid in
cash or reinvested in shares, is taxable to shareholders as long-term capital
gains, regardless of the length of time a shareholder has held the shares or
whether such gain was realized by the fund before the shareholder acquired such
shares and was reflected in the price paid for the shares.
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 to that extent 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.
Except for transactions the fund has identified as hedging transactions, the
fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on forward currency
contracts as of the end of the year as well as those actually realized during
the year.
Sales of forward currency contracts which are intended to hedge against a
change in the value of securities or currencies held by the fund may affect the
holding period of such securities or currencies and, consequently, the nature
of the gain or loss on such securities or currencies upon disposition. It is
anticipated that any net gain realized from the closing out of forward currency
contracts will be considered gain from the sale of securities or currencies and
therefore be qualifying income for purposes of the 90% of gross income from
qualified sources requirement, as discussed above.
The amount of any realized gain or loss on closing out forward currency
contracts such as a forward commitment for the purchase or sale of foreign
currency will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by the fund
at the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Code Section 988 may also apply to forward currency contracts. Under Section
988, each foreign currency gain or loss is generally computed separately and
treated as ordinary income or loss. In the case of overlap between Sections
1256 and 988, special provisions determine the character and timing of any
income, gain or loss. The fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
The fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the fund's fiscal year) on forward currency
contract transactions. Such distributions will be combined with distributions
of capital gains realized on the fund's other investments.
Under the Code, the fund's taxable income for each year will be computed
without regard to any net foreign currency loss attributable to transactions
after October 31, and any such net foreign currency loss will be treated as
arising on the first day of the following taxable year.
The fund's dividends will be based on its income for federal tax purposes.
Because some gains and losses from currency fluctuation are deemed to be income
or loss for federal tax purposes, the fund's dividends may be more or less than
interest and dividends earned by the fund.
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 therefore
taxable in the current calendar year even if the fund pays the dividend after
December 31 but during 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 in The American Funds Group, the
sales charge previously incurred in acquiring the fund's shares shall 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.
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, foreign
trust or estate, non-U.S. corporation or non-U.S. partnership (a non-U.S.
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 net long-term capital gains are
not subject to tax withholding, but in the case of a non-U.S. shareholder who
is a nonresident alien individual, such distributions ordinarily will be
subject to U.S. income tax at a rate of 30% if the individual is physically
present in the U.S. for more than 182 days during the taxable year.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate 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 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 taxable income in excess of $100,000 for a taxable year
will be required to pay an additional amount of tax liability of up to $11,750
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 a shareholder with respect
to either distributions from the fund or disposition of fund shares 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 that year) whereby
earnings on investments are tax-deferred. The maximum amount that an
individual may contribute to all IRA's (deductible, nondeductible and Roth
IRA's) per year is the lesser of $2,000 or the individual's compensation for
the year. 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. Shareholders should consult their own tax advisers for
additional details as to their particular tax status.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers" for initial "Investment Minimums and Fund
investment minimums. Numbers").
By Visit any investment Mail directly to your
contacting dealer who is investment dealer's address
your registered in the printed on your account
investment state where the statement.
dealer purchase is made and
who has a sales
agreement with
American Funds
Distributors.
By mail Make your check Fill out the account
payable to the fund additions form at the bottom
and mail to the of a recent account
address indicated on statement, make your check
the account payable to the fund, write
application. Please your account number on your
indicate an check, and mail the check and
investment dealer on form in the envelope provided
the account with your account statement.
application.
By Please contact your Complete the "Investments by
telephone investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. 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 "Telephone Purchases,
Redemptions and Exchanges"
below).
By Please contact your Complete the American
computer investment dealer to FundsLink Authorization Form.
open account, then Once you establish the
follow the procedures privilege, you, your
for additional financial advisor or any
investments. person with your account
information may access
American FundsLine OnLine(r) on
the Internet and make
investments by computer
(subject to conditions noted
in "Telephone and Computer
Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described
necessary. Please under "Initial Investment."
indicate an
investment dealer on
the account.
Instruct 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>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income 33
Fund(sm) 1,000
New World Fund(sm) 36
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
New World Fund(sm) 36
1,000
SMALLCAP World Fund(r) 35
1,000
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 individual retirement accounts
(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>
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
<S> <C> <C> <C>
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 purchases. 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 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 Capital Research and Management Company, 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
American Funds Distributors (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 of organizations with retirement plan 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 Internal Revenue 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 $50 million or more: _______________________.
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 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally 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 the following statement of intention (the
"Statement"). The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize 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. 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 remit 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 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 (i) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (ii) 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 (iii) 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 American Funds
Service Company; 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 the case of orders sent directly to the fund or American Funds
Service Company, 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, American Funds Service
Company, 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 indicated 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 shares, the 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 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. Debt 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 representative quoted bid and asked prices.
Assets or liabilities 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.
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; and
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 of the fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 4.5% 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(r) and American
FundsLine OnLine(R)) 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 1940 Act), 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.
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 from funds other than the money market funds
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; and for redemptions through certain automatic
withdrawals not exceeding 10% of the amount that would otherwise be subject to
the charge.
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, American Funds Service Company will automatically charge the bank
account for the amount specified ($50 minimum), which will be automatically
invested in shares at the 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 the 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 American Funds
Service Company.
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, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- A shareholder in one fund
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 the shareholder's 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 shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, to automatically redeem the account and send the
proceeds to the shareholder. 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(r) or American FundsLine OnLine(r) (see "American FundsLine(r) and
American FundsLine OnLine(r)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, 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. American
Funds Service Company arranges for the redemption by the fund of sufficient
shares, deposited by the shareholder with American Funds Service Company, 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 and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(r) -- 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(r) or American
FundsLine OnLine(r). To use this service, 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(r) and American FundsLine OnLine(r) are subject to the conditions
noted above and in "Shareholder Account Services and Privileges -- Telephone
and Computer Purchases, 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 REDEMPTIONS AND EXCHANGES -- By using the telephone or
computer (including American FundsLine(r) or American FundsLine OnLine(r)),
fax or telegraph redemption and/or exchange options, 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
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 American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company 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.
REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit the fund to
direct American Funds Service Company to redeem your shares for their then
current net asset value per share if at such time you own of record, shares
having an aggregate net asset value of less than the minimum initial investment
amount required of new shareholders as set forth in the fund's current
registration statement under the 1940 Act, and subject to such further terms
and conditions as the Board of Directors of the fund may from time to time
adopt. 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.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. Fixed-income securities are generally traded on a
"net" basis with a dealer acting as principal for its own account without a
stated commission, although the price of the security usually includes a profit
to the dealer. In underwritten offerings, securities are usually purchased at a
fixed price which includes an amount of compensation to the dealer, generally
referred to as a concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no commissions or discounts
are paid. In the over-the-counter market, purchases and sales are transacted
directly with principal market-makers except in those circumstances where it
appears better prices and executions are available elsewhere.
When circumstances relating to a proposed transaction indicate that a
particular broker (either directly or through their correspondent clearing
agents) 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 funds or other funds served by the Investment
Adviser. The fund does not consider that they have an obligation to obtain the
lowest available commission rate to the exclusion of price, service and
qualitative considerations.
Subject to the above policy, when two or more brokers (either directly or
through their correspondent clearing agents) are in a position to offer
comparable prices and executions, preference may be given to brokers who have
sold shares of the funds or have provided investment research, statistical, and
other related services for the funds and or other funds served by the
Investment Adviser.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts 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. The fund will not pay a mark-up for
research in principal transactions.
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 The Chase Manhattan Bank, One Chase Manhattan Plaza,
New York, NY 10081, 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 records 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.
INDEPENDENT ACCOUNTANTS -- Deloitte & Touche LLP, 1000 Wilshire Boulevard,
15th floor, Los Angeles, California 90017, has served as the fund's
independent accountants since the fund's inception, 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 report of the independent auditors given on the
authority of that firm as experts in auditing and accounting.
SHAREHOLDER VOTING RIGHTS -- The fund does not hold annual meetings of
shareholders. However, significant matters that require shareholder approval,
such as certain elections of board members or a change in a fundamental
investment policy, will be presented to shareholders at a meeting called for
such purpose. 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. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any director when requested in writing
to do so by the record holders of at least 10% of the outstanding shares.
Shareholders have one vote per share owned.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on October 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
Deloitte & Touche, whose selection is determined annually by the Board of
Directors. In an effort to reduce the volume of mail shareholders receive from
the fund when a household owns more than one account, American Funds Service
Company has taken steps to eliminate duplicate mailings of shareholder reports.
To receive additional copies of a report, shareholders should contact American
Funds Service Company.
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; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; 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.
The financial statements including the investment portfolio and the report of
independent accountants contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
The fund may refer to results and surveys compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services,
Morningstar, Inc. and Wiesenberger Investment Companies Services and by the
U.S. Department of Commerce. Additionally, the fund may 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.
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, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes in 128 of 138 periods.
Note that past results are not an indication of future investment results and
that the fund has different investment policies from other funds managed by
Capital Research and Management Company. Reference to the other common stock
funds is made solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.
DESCRIPTION OF BOND RATINGS
Corporate Debt Securities
MOODY'S INVESTORS SERVICE, INC. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C" according to quality.
"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 bonds
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
and differs from the higher rated issues only in 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."
"C-1 -- 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."
OTHER INFORMATION
Item 23. Exhibits.
a. Articles of Incorporation of Registrant
b. By-Laws of Registrant
c. Share Certificate -- to be provided by amendment
d. Form of Investment Advisory and Service Agreement between the Registrant
and Capital Research and Management Company -- to be provided by amendment
e. Form of Principal Underwriting Agreement -- to be provided by amendment
f. None
g. Form of Custodian Agreement -- to be provided by amendment
h. None
i. Legal Opinion -- to be provided by amendment
j. None
k. None
l. None
m. Form of Plan of Distribution adopted by the Registrant pursuant to rule
12b-1 under the 1940 Act -- to be provided by amendment
n. None
o. None
Item 24. Persons Controlled by or under Common Control with the Fund
None.
Item 25. Indemnification.
Registrant, upon the effective date of this Registration Statement, will
become 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
will insure 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.
Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually incurred by him in connection
with such action, suit or proceeding unless it is established that: (I) the
act or omission of the person was material to the matter giving rise to the
proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the person actually received an improper personal
benefit of money, property or services; or (iii) with respect to any criminal
action or proceeding, the person had reasonable cause to believe his act or
omission was unlawful.
Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (I) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (I), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which any director who is a party may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).
Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any rights to which the indemnified
party may be entitled; that the scope of indemnification extends to directors,
officers, employees or agents of a constituent corporation absorbed in a
consolidation or merger and persons serving in that capacity at the request of
the constituent corporation for another; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in any such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify such person
against such liabilities under Section 2-418.
Article VIII (h) of the Articles of Incorporation of New World Fund, Inc.
(the "Fund" or the "Corporation") provides that "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."
The Fund will comply with the indemnification requirements contained in the
Investment Company Act of 1940 (the "1940 Act") Releases No. 7221 (June 9,
1972) and No. 11330 (September 4, 1980). In addition, indemnification by the
Corporation shall be consistent with the requirements of rule 484 under the
Securities Act of 1933. Furthermore, the Fund undertakes to the staff of the
Securities and Exchange Commission that the Fund's indemnification provisions
quoted above prohibit indemnification for liabilities arising under the
Securities Act of 1933 and the 1940 Act.
Item 26. Business and Other Connections of the 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., 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, Capital World Bond Fund, Capital World Growth and
Income Fund, Inc., New World Fund, Inc., The Cash Management Trust of America,
EuroPacific Growth Fund, Fundamental Investors, Inc., The Growth 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
BUSINESS ADDRESS WITH UNDERWRITER OFFICES 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 Co- None
hief 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
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 None
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
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 - Institutional None
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 - Institutional None
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 None
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 Executive
Pittsburgh, PA 15238 Officer
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Vice President - Institutional None
Investment Services Division
L Mary E. Smith Vice President - Institutional None
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
John David Viale Regional Vice President None
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Sr. Vice President, Treasurer None
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
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
2887 Player Lane
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 its
investment adviser, Capital Research and Management Company, 333 South Hope
Street, Los Angeles, California 90071, and/or 135 South State College
Boulevard, Brea, California 92821, and/or the offices of the Registrant, One
Market, Steuart Tower, Suite 1800, San Francisco, CA 94105.
Registrant's records covering shareholder accounts are maintained and kept by
the fund's transfer agent, American Funds Service Company, 135 South State
College Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and
5300 Robin Hood Road, Norfolk, VA 23513.
Registrant's records covering portfolio transactions are maintained and kept
by the fund's custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza,
New York, New York 10081.
Item 29. Management Services.
None.
Item 30. Undertakings.
None.
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 and County of Los Angeles, and State of California on the 9th day of
April, 1999.
NEW WORLD FUND, INC.
ATTEST:
/s/ Michael J. Downer /s/ Michele Y. Yang
Michael J. Downer, Director Michele Y. Yang, Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on April 9, 1999 by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
/s/ Michael J. Downer
Michael J. Downer Director
/s/ Kristine M. Nishiyama
Kristine M. Nishiyama Director
/s/ Patrick F. Quan
Patrick F. Quan Director
/s/ Michele Y. Yang
Michele Y. Yang Director
</TABLE>
