SMALLCAP WORLD FUND
HOW DO SMALL COMPANIES COMPETE?
1995 ANNUAL REPORT
For the year ended September 30
[The American Funds Group(R)]
SMALLCAP WORLD FUND(R) SEEKS LONG-TERM GROWTH OF CAPITAL THROUGH INVESTMENTS IN
SMALLER COMPANIES IN THE U.S. AND AROUND THE WORLD.
SMALLCAP'S INVESTMENT RESULTS
For fiscal years ended September 30
1995 +18.6%
1994 + 8.6
1993 +32.5
1992 + 3.0
1991 +36.4
1990 (from inception on 4/30/90) -12.1
Total return since inception +110.7%
Average annual compound return since inception +14.7%
OUR TOP 10 HOLDINGS
For holdings owned throughout the fiscal year ended 9/30/95
M.A.I.D. (business & public services) +346.9%
Structural Dynamics Research (data processing & reproduction)
+312.5
America Online (business & public services) +302.9
AutoImmune (health & personal care) +220.5
Activision (leisure & tourism) +202.4
Cephalon (health & personal care) +168.3
Amalgamated Holdings (multi-industry) +161.3
Isis Pharmaceuticals (health & personal care) +144.7
LoJack (electronic instruments) +144.4
Pilipino Telephone (telecommunications) +130.4
OUR BOTTOM 10 HOLDINGS
For holdings owned throughout the fiscal year ended 9/30/95
Yip's Hang Cheung (chemicals) -40.7%
Savoy Pictures Entertainment (leisure & tourism) -42.4
CONVEX Computer (data processing & reproduction) -43.8
Pacific Media (broadcasting & publishing) -44.3
Au Bon Pain (leisure & tourism) -53.0
Hanover Direct (merchandising) -53.7
Tolmex (building materials & components) -66.7
First Pacific Networks (electronic components) -70.4
Silja (transportation: shipping) -70.6
Z Groupe Zannier (textiles & apparel) -78.1
All market indexes cited in this report are unmanaged and include reinvestment
of all distributions. Fund results were computed with dividends reinvested and
without a sales charge unless otherwise indicated.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
The stocks of large U.S. companies set a blistering pace during SMALLCAP World
Fund's 1995 fiscal year. Small-company U.S. stocks didn't quite keep up, and
outside the United States most markets posted only modest gains.
In this environment, with small-company and international stocks lagging,
SMALLCAP generated a total return of 18.6% during the 12 months ended September
30, 1995. This assumes you reinvested the two dividends totaling 16 cents a
share which were paid in December and May as well as the $1.35 capital gain
distribution also paid last December.
By comparison:
- - SMALLCAP's primary benchmark, the FT/S&P-Actuaries Medium-Small Cap World
Index, increased 7.8% during the year. This index tracks small-company stocks
in 26 world markets.
- - Standard & Poor's 500 Composite Index, which tracks the stocks of large U.S.
companies, rose 29.7% during SMALLCAP's fiscal year.
- - The Morgan Stanley Capital International EAFE(R) (Europe, Australasia, Far
East) Index, which tracks large-capitalization stocks in all major non-U.S.
markets, gained 6.1%.
Of the 259 stocks SMALLCAP owned throughout its fiscal year, 155 rose in price;
13 more than doubled and 121 registered double-digit gains. On the opposite
side of the ledger, 34 stocks lost more than 25% of their value - reminding us,
once again, that even during periods of market strength not all stocks will do
well.
Virtually all of the fund's gains came in the second half of the year. We used
this strength to trim a number of holdings. As a result, the fund realized
significant capital gains
which it will pay in December. You can expect a distribution in excess of $2.40
a share.
WHAT HELPED, WHAT HURT
Broad strength in technology and entertainment stocks - SMALLCAP's two largest
industry concentrations - helped the fund. It's now clear that the computer
revolution is accelerating, with advances in office productivity, automation
and miniaturization driving worldwide demand. Computer software and
semiconductor companies are among the primary beneficiaries. Entertainment
companies, broadly defined to include broadcasting, publishing and leisure
activities, are in a global battle for control of both content and
distribution. A number of highly publicized mergers occurred during the period,
which contributed to gains throughout the industry.
Other areas of strength included financial services and metals. The banking
industry in the U.S. is consolidating rapidly, leading to fewer - though
stronger - competitors. Metals producers are seeing higher demand resulting
from economic growth in the U.S. If economies in Europe and Japan rebound, we
would expect continued strength.
Two areas that have made solid contributions to the fund's results in the past
hit potholes on the information superhighway recently. Both cable television
and telecommunications stocks were weak because of regulatory and competitive
pressures. These are temporary setbacks, in our view, for otherwise strong
industries.
By far the greatest drag on the fund's results was the lackluster performance
of international stocks. Only two markets outpaced the U.S. in dollar terms -
Sweden (+45%), where the fund had significant holdings, and Finland (+54%),
where it had a small position. Most other markets posted small gains or modest
losses, which translated into stronger returns when coupled with a weak U.S.
dollar.
The one area of substantial weakness was in developing markets, notably in
Latin America. The devaluation of the Mexican peso in December shook investor
confidence in these volatile markets and drove stock prices and currency values
sharply lower.
WHAT WE DID
As mentioned above, we used exceptional strength in the U.S. market to begin
selling stocks that seemed overvalued, including major holdings like America
Online, Electronic Arts and Viking Office Products. These have been great
stocks for the fund, but they have appreciated to the point where they are no
longer appropriate for our small company focus. More significantly, their
stocks don't appear to offer the same potential they did when we first spotted
them.
We also think many technology stocks have gotten ahead of themselves. This is
primarily a story of exceptional businesses suffering from unrealistic
expectations. Investors have taken recent earnings reports and extrapolated
them far into the future. We believe this may be too optimistic an outlook.
We have been using proceeds from these sales to add substantially to our
non-U.S. holdings. Among developed markets, we are finding particularly good
value in Scandinavia and Australia. We have also begun to nibble again at
stocks in a number of developing markets, where prices have come down to more
reasonable levels.
THE VALUE OF RESEARCH
The relative weakness of small-company stocks compared with larger stocks - and
of international stocks compared with the U.S. - suggests to us that good value
remains in SMALLCAP's investment universe. That thought is echoed by our
research analysts, who continue to find an array of intriguing smaller
companies, often in unusual places - small oil companies, process automation,
new retailing concepts, a microbrewery, an Internet provider in the U.K.
A NOTE OF CAUTION
Nonetheless, it's difficult to forget that it's been five years since the last
substantial U.S. stock market decline. The gravity-defying rise of U.S.
technology stocks and the overheated market for initial public offerings are
the most obvious evidence that prudence should be the order of the day.
We will do whatever we can to mitigate the effects of any stock market decline.
We would also urge you to recall the reason you invested in the fund, which
most likely parallels the reason we originally introduced it: Much of the true
creativity in the business world today continues to come from smaller
companies.
Because we are not simply trading stocks but are attempting to participate in a
company's long-term growth, that entrepreneurial creativity continues to give
us confidence. Investing in small companies may require a long time frame and a
willingness to shoulder occasional volatility, but the rewards are likely to be
superior over time.
LOOKING BACK, AND AHEAD
This is our fifth annual report to shareholders, sufficient time to draw some
conclusions about our experiences. Since the fund's inception in April 1990,
small-company stocks have traded leadership several times with their larger
brethren, with no clear winner. Over longer periods, the record shows that the
higher growth rates of small companies have translated into better returns.
What our experience suggests is that even during a period when the market
indexes don't show such correlations, we have been able to add value through
superior research.
In addition, over the fund's lifetime non-U.S. stocks have lagged far behind
results here at home. Part of SMALLCAP's original mission was to provide
exposure to markets around the world. To date, that has not been a particularly
profitable exercise. We are confident, however, that global diversification has
diffused our risk and will add to long-term results.
Over its 5 1/2-year lifetime, SMALLCAP has generated a compound return of
+14.7% a year - modestly better than the stocks of large U.S. companies (+14.5%
as measured by the S&P 500) and well ahead of both non-U.S. stocks (+7.4% as
measured by the EAFE Index) and our global small-company universe (+9.2% as
measured by the FT/S&P-Actuaries Medium-Small Cap World Index). Market
conditions for small-company investing have not been ideal during your fund's
lifetime, but it's been said that you can't quarrel with results. We tend to
agree.
Cordially,
Robert B. Egelston
Chairman of the Board
William R. Grimsley
President
November 16, 1995
WHERE ARE SMALLCAP'S PORTFOLIO COMPANIES LOCATED?
Geographical distribution of equity assets on September 30, 1995, excluding
cash equivalents
THE AMERICAS 68.2%
United States 61.7%
Canada 5.8
Mexico .6
Other Latin America .1
Europe 20.5%
United Kingdom 5.6%
Sweden 5.0
France 1.9
Germany 1.5
Austria 1.3
Norway 1.2
Luxembourg 1.0
Spain .8
Belgium .7
Ireland .5
Other Europe 1.0
Pacific Basin 10.4%
Australia 4.9%
Hong Kong 2.9
Philippines 1.2
Japan .9
Other Asia .5
Other 0.9%
HOW BIG ARE SMALLCAP'S COMPANIES?
<TABLE>
<CAPTION>
Ranked by market Number of Percent of
capitalization Holdings Equity Assets
<S> <C> <C>
$1 BILLION+ 55 18.7%
Example: America Online
$800 MILLION+ 30 10.3%
Example: Australian Gas Light
$600 MILLION+ 40 11.7%
Example: Thiokol
$400 MILLION+ 68 19.8%
Example: Williams-Sonoma
$200 MILLION+ 113 24.4%
Example: Maybelline
LESS THAN $200 MILLION 134 15.1%
Example: Puerto Rican Cement
AVERAGE MARKET CAPITALIZATION: $494 million
</TABLE>
Market capitalization is calculated by multiplying the price of a company's
stock by the number of its shares outstanding. It is often used as a rough
gauge of a company's size.
CHARTING THE COURSE OF A $10,000 INVESTMENT
This chart shows how a $10,000 investment in SMALLCAP World Fund grew from
April 30, 1990 - the date of the fund's inception -- through September 30,
1995, the end of the fund's latest fiscal year.
As you can see, that $10,000 would have nearly doubled to $19,856, even after
deducting the maximum 5.75% sales charge. (Sales charges are lower for accounts
of $50,000 or more.) This is significantly better than the $16,098 generated by
an investment in the unmanaged FT/S&P-Actuaries Medium- Small Cap World Index,
which tracks small-company stocks in 26 world markets - a universe quite
similar to SMALLCAP's. Of course, past results are not predictive of future
results.
AVERAGE ANNUAL COMPOUND RETURNS
for periods ended September 30, 1995
LIFETIME (since inception on April 30, 1990) +13.49%
FIVE YEARS +17.69%
ONE YEAR +11.77%
Assumes reinvestment of all distributions and payment of the maximum 5.75%
sales charge.
SMALLCAP World Fund $19,856
FT/S&P-Actuaries medium-small cap World Index* $16,098
Consumer Price Index $11,885
*This index, which tracks the smallest stocks (the bottom 25%) in 26 world
markets, is calculated by The Financial Times Ltd. and Goldman, Sachs & Co. and
is jointly compiled by The Financial Times Ltd.; Goldman, Sachs & Co.; and
Standard & Poor's Corp. in conjunction with the Institute of Actuaries and the
Faculty of Actuaries.
HOW CAN SMALL COMPANIES COMPETE IN A LAND OF GIANTS?
THE CORPORATE WORLD IS RUSHING TOWARD BIGNESS - THE BIGGER THE BETTER AND AS
FAST AS POSSIBLE.
[Side Bar]
TAKING A CLOSER LOOK AT THE ENTERTAINMENT INDUSTRY, AS A PROXY FOR THE WORLD
ECONOMY, MIGHT YIELD SOME CLUES.
[End Side Bar]
In the first nine months of this year, $270 billion in takeovers and mergers
were announced, according to Securities Data Co. Whether the company is a bank,
insurer, utility, railroad or pharmaceutical manufacturer - or is based in the
U.S., Europe or Asia - managers now believe the only way to survive, let alone
succeed, is to have the critical mass and breadth of product line that will
allow economies of scale in manufacturing, financing and distribution.
The entertainment industry is one area where the "urge to merge" has been
particularly strong. First, Viacom won a bidding war for Paramount. Then
Seagram bought MCA, Westinghouse bid for CBS, and Disney bought ABC. In the
latest coup de grace, Time Warner - itself a result of the marriage of Time
Inc. with Warner Brothers in 1989 - offered to buy Turner Broadcasting, home of
CNN and the old MGM film library.
The Holy Grail in business today is "vertical integration" - owning every step
in the process of making and selling a product. For an oil company, this means
searching for new deposits, pumping the oil, refining it and selling it in
company-owned gas stations. In the entertainment industry, it means owning both
the content - the music, films and books - and the distribution channels,
including television networks and stations, cable TV systems, publishers, movie
theaters and satellites.
The advantages of size are relatively easy to see. You guarantee your access to
markets, provide the resources to invest in new technology and products, and
allow an opportunity for synergy - that is, for the combined businesses to work
together to leverage their strengths.
Also whetting the appetites of companies like Disney and News Corp. (the
Australian parent of Fox Broadcasting) are the opportunities available in
global markets. Everyone likes to be entertained, but few people have had the
choices we've had here in the U.S. Lots of money will be made bringing movies,
music and video games to the far reaches of the globe.
How can small companies possibly compete against such obvious strengths?
Small entertainment companies have some natural advantages in this regard,
since the industry relies so heavily on the creativity of individuals.
Nonetheless, the strategies for success are the same no matter what the
business:
SPECIALIZE. A small company can't possibly compete with Time Warner, News Corp.
or Disney on every front. But it may be able to pick one or two limited areas
and, by focusing intently, be the best at what it does. BET Holdings, for
example, operates the only cable television network designed specifically for
African Americans - Black Entertainment Television.
DO SOMETHING NEW. In business, being first often confers great advantages, and
no one innovates as well as entrepreneurs. Indeed, many small companies are
founded when executives at larger firms can't get anyone to listen to their
ideas. America Online took an embryonic idea - on-line computer services - and
repackaged it for public consumption.
SERVE SMALL MARKETS. Some markets simply don't offer enough potential to make a
meaningful contribution to a large company's results. But for a smaller
company, a large slice of a small pie can feed the company's coffers for years
to come. Infinity Broadcasting and Westwood One, for example, together control
almost half of U.S. radio programming - a much smaller market than television -
leaving little room for new competitors.
DOMINATE A LOCAL MARKET. Wherever you live, you can probably name a local
institution - a retail store, a restaurant, a theater - that has kept the
Wal-Marts and chain stores at bay by serving local tastes. Owners of local
television stations, such as Renaissance Communications and Young Broadcasting,
play a similar role. They're valuable to the networks because they not only
control access to viewers in the local area, but have established relationships
with local advertisers.
ADAPT AN IDEA TO ANOTHER CULTURE. Different cultures and different languages
present many obstacles for larger companies. Divergent regulations and social
norms preclude a cookie-cutter approach. That need for local knowledge opens
the door for many small companies, such as Village Roadshow - which took a
uniquely American concept, the multiplex cinema, and adapted it for Australian
and Southeast Asian markets.
PARTNER WITH A LARGER COMPETITOR. Subcontractors are common in many industries.
In the entertainment field, one might provide programming for networks and
cable systems like International Family Entertainment does. Anything that
makes you invaluable to a competitor increases your chances of survival.
Not all small companies will succeed, of course, and the consequences of a
product failure are greater than for larger firms with more diversified product
lines. But just because large companies are doing well, small companies needn't
get trampled. In fact, quite the opposite is true: When large companies in an
industry are prospering, opportunities are created for resourceful smaller
firms.
SMALLCAP's approach is to identify smaller companies that have demonstrated an
ability to compete effectively. Rather than focus on short-term gains, we seek
to invest in companies that can grow and prosper for many years. Most often,
that ability is apparent in the quality of management - which is why we believe
in-depth research is so important.
On the next few pages, we profile a few companies in one field - the
entertainment field - and discuss how they are handling the unique challenges
of being small. Then, beginning on page 12, you'll find descriptions of all the
fund's holdings.
[Pull Quote]
"IT'S NOT EXACTLY DAVID VERSUS GOLIATH, BECAUSE IT'S RARE WHEN A SMALL COMPANY
CAN DELIVER A KNOCKOUT BLOW TO A LARGER COMPETITOR." [End Pull Quote]
GAYLORD ENTERTAINMENT
COUNTRY COOKIN'
In the entertainment world, there's nothing more American than country music.
And, as everybody knows, the mecca of country music is Nashville, Tennessee.
Gaylord Entertainment has been synonymous with country music since 1925, when
it first broadcast from the Grand Ole Opry. Today, country music is heard on
more radio stations than any other format, including news and sports. It's
squarely in the American mainstream, and Gaylord has been "instrumental" in
putting it there.
It not only owns and operates the Grand Ole Opry, the Opryland theme park and
hotel, and other Nashville attractions, but its twin cable TV channels - The
Nashville Network and Country Music Television - reach more than 60 million
U.S. homes. That doesn't include nearly 10 million homes in Europe and Asia,
where country music is now as hot as a barbecue on a summer day.
Gaylord is now expanding into "country lifestyles" programming and products.
It's the largest producer of TV shows for outdoor and motor sports, operates a
chain of country and western dance clubs, and has become partners with Bass Pro
Shops, the L.L. Bean of the South.
SMALLCAP has been a Gaylord shareholder since the company first sold stock to
the public in 1991. We may not have that privilege much longer, however. With
country music so popular, we suspect one of the media giants will get a
hankering to buy the company.
WESTWOOD ONE
HAILING ALL FREQUENCIES
Government regulations prohibit any one company from owning more than 40 radio
stations. These rules - and the fact that until recently the radio market
hadn't generated enough revenue to attract the interest of most global media
giants - have kept the industry highly fragmented.
Westwood One has created a lucrative niche in this vacuum. It owns no stations
itself. Instead, the company packages news, sports and music programming with
pre-sold advertising, which it then sells to independent radio stations across
the country. Both sides benefit: Radio stations get a fully developed product,
while national advertisers get better exposure.
This "network" concept, patterned after independent television, has been
enormously popular. Westwood is now the nation's second-largest producer and
distributor of radio programming (after Infinity Broadcasting, another SMALLCAP
holding). Most of the company's four radio networks - Mutual Broadcasting,
Westwood One, NBC Radio and The Source - and eight additional programming
formats are heard in every major U.S. market.
VILLAGE ROADSHOW
GIVE THE PEOPLE WHAT THEY WANT
Most media companies focus on entertaining people in the home. Village Roadshow
decided to get them out of it.
The company's attractively designed multiplex cinemas - often built with
adjacent restaurants and arcades - have revitalized the Australian art of
entertaining people away from home. Village Roadshow also teamed with Warner
Brothers to build an enormously popular movie theme park on Australia's Gold
Coast, patterned after Universal Studios Hollywood.
Capitalizing on these experiences, the company targeted markets throughout the
Pacific Basin. On its march through Australia, New Zealand, Singapore, Taiwan
and Thailand, the company has constantly refined and adapted its approach to
local tastes. Lately, it has been combining its multiplexes with
air-conditioned indoor theme parks. These are especially popular in Asia, where
the weather is either hot - or hotter.
The experience with Warner Brothers helped the company understand the value of
partnerships. Now, it seeks local expertise - or provides it for others - in
almost all of its operations. Golden Harvest, a producer of Chinese movies, and
others have helped finance the expansion of multiplexes across Asia. Other
partners will help expand multiplexes into Italy, China, and India, and
potentially help develop theme parks in Japan and Sydney.
[Pull Quote]
"IT'S MORE LIKE FEEDING ON THE CRUMBS, ALTHOUGH IN THIS CASE THEY ARE
MILLION-DOLLAR CRUMBS." [End Pull Quote]
SCANDINAVIAN BROADCASTING SYSTEM
ON A NORDIC TRACK
"Think globally, act locally" has become a mantra for community activists
across the U.S. For the founders of Scandinavian Broadcasting System, it also
proved to be a sound business strategy.
In 1989, a group of experienced U.S. television executives teamed with European
entrepreneurs to adapt proven American television techniques to markets in
Scandinavia. There, for the first time, governments were ceding control of the
airwaves and allowing commercial television broadcasts.
It was a unique opportunity. With high personal income levels, well-developed
consumer markets and a strong advertising industry - but virtually no
television advertising - the region offered a blank slate for growth.
Starting with television and radio stations in Denmark, followed by Norway and
Sweden, SBS has built a solid, low-cost operation with clear growth prospects.
It has further solidified its position by taking on both local and
international partners, including Capital Cities/ABC, which bought nearly 25%
of the company in 1993 in exchange for access to global news, sports and
entertainment programming. The company recently added Viacom as a partner to
gain more programming rights.
With rapid growth and rising ad revenues in its home markets, the company is
eyeing similar underdeveloped opportunities in Belgium, the Netherlands and
Finland.
[Pull Quote]
"SUCCESSFUL SMALL COMPANIES DON'T STAY SMALL FOR LONG."
[End Pull Quote]
AMERICA ONLINE
CHIP CHAT
America Online wasn't the first to introduce an on-line computer service for
consumers. Several large companies, including IBM, Sears and CompuServe, were
there before them.
But the founders of America Online understood something the others didn't:
Their main competition would be Seinfeld, not the local library. To be
successful, their service would have to do more than move information. It would
have to bring people together.
That's probably why well over half of the time spent on America Online is
person-to-person communications. About half of that is electronic mail and half
is in "chat rooms," where people exchange messages in real-time electronic
conversations on topics ranging from favorite movies to hobbies and self-help
groups.
Of course, America Online is much more than an electronic equivalent of a
telephone party line. You can, in fact, access just about any information you
might require - stock quotes, electronic shopping malls, up-to-the-minute news,
public-interest forums and multimedia encyclopedias.
AOL, as it's known, is no longer a small company, at least by SMALLCAP World
Fund's definition. Its stock quadrupled in the past year, prompting us to sell
a substantial part of our holdings.
ACCLAIM ENTERTAINMENT
NO LONGER CHILD'S PLAY
These days, video games are serious business. More and more, the competitive
landscape resembles a scene from one of the industry's biggest hits - Mortal
Kombat.
Industry heavyweights Nintendo and Sega continue to battle for kids' attention,
dueling to be the first to introduce the latest advanced machine. And now,
consumer electronics giant Sony has entered the fray.
Fortunately, there's a way to outflank these giants: create and market the
games themselves, rather than the machines on which they're played. In this
arena, Acclaim Entertainment has perfected the one-two punch - applying
strategic marketing savvy to a business dominated by technologists and
establishing a global distribution system that maximizes each game's exposure.
Today, Acclaim is the leading publisher of action-oriented games for homes.
Until recently, the company was primarily considered a marketing machine, based
on its success selling the WMS Industries properties NBA/Jam and Mortal Kombat.
Now, it's using its growing strength to establish an in-house development
capability, explore real-time interactive games broadcast over cable TV and
develop a broader product library.
[Pull Quote]
"THEY BECOME BIG, OR THEY GET BOUGHT." [End Pull Quote]
CANWEST GLOBAL COMMUNICATIONS
MOVING FAST WITH SMALL STEPS
Small companies often start with little else but vision and determination. For
CanWest Global Communications, the dream was to develop Canada's third national
broadcasting company.
It started with a very small step. In 1973, the company bought a TV station in
North Dakota and moved it - literally - across the Canadian border to serve
Winnipeg. Slowly but steadily, the company acquired or created new stations
across Canada. It now owns seven independent stations that - lo and behold -
together form one of Canada's three largest television broadcasters.
The company's next step was across an ocean. In 1991, it agreed to manage and
eventually purchase New Zealand's only private television network. Success
there led it to purchase a controlling interest in Australia's 10 Network, a
money-losing operation which CanWest has turned into that country's most
profitable station. The company also has an operation in Chile and is bidding
on a new channel license in the United Kingdom.
CanWest's strength is its ability to attract an audience while keeping a tight
rein on costs. It targets underdeveloped markets with solid growth potential
and then provides the highest quality programming, picking and choosing hits
from ABC, CBS, NBC, the Fox network and local producers, with costs spread
across its network.
FLEXTECH
SEEKING GREENER PASTURES
It's been said that imitation is the sincerest form of flattery. In business,
it can also be quite profitable.
FLEXTECH was once a sleepy oil-field equipment supplier with a small ownership
stake in a children's satellite television channel. Astutely, the company's
managers recognized a brighter future in TV than in oil. They sold their oil
business and leveraged that initial grubstake to purchase the remainder of the
children's network. At that point, the company's managers turned to
Tele-Communications, Inc. - the U.S. cable giant - for expertise and financing
for expansion. Additional channels were purchased including Bravo, Discovery
Europe, The Family Channel, U.K. Living and European Business News. Noticing
this success, two other U.S. companies - U S WEST Communications and Hallmark -
have since bought stakes in FLEXTECH.
Like small companies around the world, FLEXTECH brings to the table in-depth
knowledge of the local market; its partners provide expertise and access to
financing. It's a relationship that works for all concerned.
SMALLCAP World Fund
INVESTMENT PORTFOLIO September 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INDUSTRY DIVERSIFICATION
Broadcasting & Publishing 8.69%
Leisure & Tourism 5.74%
Business & Public Services 4.88%
Data Processing & Reproduction 4.43%
Banking 4.14%
Other Industries 51.80%
Cash & Equivalents 20.32%
PERCENT
OF
NET
ASSETS
LARGEST INDIVIDUAL HOLDINGS
Wisconsin Central Transportation 1.13%
Village Roadshow .93
Hoganas Eldfast .90
Acclaim Entertainment .86
Mentor Graphics .79
Gaylord Entertainment .79
Westwood One .73
Cablevision Systems .72
Consolidated Stores .71
CIDCO .70
Percent
Shares or Market of
EQUITY-TYPE SECURITIES Principal Value Net
(common and preferred stocks and convertible Amount (000) Assets
debentures)
BROADCASTING & PUBLISHING - 8.69%
Gaylord Entertainment Co., Class A (USA) 1,344,000 $36,456 .79%
Westwood One, Inc. (USA)/1/ /2/ 1,875,000 33,750 .73
Cablevision Systems Corp., Class A (USA)/1/ 560,000 33,390 .72
International Family Entertainment, Inc., Class B 1,415,000 26,885 .58
(USA)/1/
Scandinavian Broadcasting System SA (Denmark - 655,000 18,504 .40
Incorporated in Luxembourg) /1/
CanWest Global Communications Corp. (Canada) /2/ 918,300 16,938 .37
FLEXTECH PLC (United Kingdom)/1/ 2,329,600 16,570 .36
Renaissance Communications Corp. (USA)/1/ 461,300 16,145 .35
TCA Cable TV, Inc. (USA) 540,000 15,525 .33
WIC Western International Communications Ltd., 1,025,000 15,469 .33
Class B (Canada)
United International Holdings, Inc., Class A (USA)/1/ 810,000 14,985 .32
United Television, Inc. (USA) 150,000 13,387 .29
BET Holdings, Inc., Class A (USA)/1/ /2/ 662,100 13,242 .29
Comcast UK Cable Partners Ltd., Class A (United 700,000 10,938 .24
Kingdom)/1/
Westcott Communications, Inc. (USA) /1/ 700,000 10,587 .23
Young Broadcasting Inc., Class A (USA)/1/ /2/ 310,000 9,688 .21
Central European Media Enterprises Ltd., Class A
(USA - Incorporated in Bermuda) /1/ /2/ 349,500 8,825 .19
Jones Intercable, Inc., Class A (USA)/1/ 610,000 8,311 .18
Data Broadcasting Corp. (USA) /1/ 1,000,000 7,688 .17
Chrysalis Group PLC (United Kingdom)/1/ /2/ 1,600,000 7,637 .16
Century Communications Corp., Class A (USA)/1/ 724,064 7,331 .16
Scottish Television PLC (United Kingdom) 900,000 7,184 .15
Metropole Television (France) 68,900 6,059 .13
ValueVision International, Inc., Class A (USA) /1/ 1,000,000 5,875 .13
DMX Inc. (formerly International Cablecasting 2,180,000 5,723 .12
Technologies, Inc.) (USA) /1/
American Publishing Co., Class A (USA) 400,000 5,000 .11
Adelphia Communications Corp., Class A (USA)/1/ 525,000 4,725 .10
Infinity Broadcasting Corp., Class A (USA)/1/ 138,562 4,538 .10
AUSTEREO (Australia) 3,339,984 4,164 .09
Western Publishing Group, Inc. (USA) /1/ 300,000 3,825 .08
NRJ SA (France) 39,284 3,120 .07
SelecTV PLC (United Kingdom)/1/ 7,150,000 2,486 .05
Grammy Entertainment (Thailand) 240,000 2,182 .05
Multimedia, Inc. (USA)/1/ 37,700 1,640 .04
AUDIOFINA (Luxembourg) 2,085 1,252 .03
Pacific Media PLC (United Kingdom)/1/ 52,249,124 1,032 .02
M-Net (South Africa) 1,330,000 929 .02
LEISURE & TOURISM - 5.74%
Village Roadshow Ltd. (Australia) 8,147,437 28,623
Village Roadshow Ltd., preferred shares 5,185,001 14,494 .93
Spelling Entertainment Group Inc. (USA)/1/ 2,118,500 28,070 .61
Rio Hotel & Casino, Inc. (USA)/1/ /2/ 1,382,700 17,975 .39
Showboat, Inc. (USA) /2/ 785,000 16,976 .37
AAPC Ltd. (Australia) /2/ 28,028,854 16,941 .37
Aztar Corp. (USA) /1/ 1,740,000 14,573 .31
Savoy Pictures Entertainment, Inc. (USA)/1/ /2/ 1,870,000 12,389 .27
Sydney Harbour Casino Holdings Ltd., convertible 9,073,100 12,201 .26
preferred (Australia) /1/ /3/
Four Seasons Hotels Inc. (Canada) 823,649 10,435 .22
ACTIVISION, Inc. (USA)/1/ /3/ 720,000 11,430 .25
Bally Entertainment Corp. (USA) /1/ 850,000 9,244 .20
London Clubs International PLC (United Kingdom) 1,415,000 9,013 .19
J D Wetherspoon PLC (United Kingdom) 800,000 7,802 .17
Station Casinos, Inc. (USA) /1/ 475,000 7,303 .16
Trump Hotels & Casino Resorts, Inc. (USA) /1/ 410,000 6,970 .15
UGC Droit Audiovisuels, SA (France) 146,869 6,473 .14
ALLIANCE COMM, Class A (Canada)/1/ /2/ 316,000 3,297
ALLIANCE COMM, Class B (Canada)/1/ 316,000 3,032 .14
CINAR Films Inc., Class B (Canada) /1/ 375,000 4,641 .10
Quantum Restaurant Group, Inc. (USA)/1/ 315,000 4,213 .09
Mandarin Oriental International Ltd. (Hong Kong - 3,916,319 4,073 .09
Incorporated in Bermuda)
Gaumont SA (France) 69,159 4,003 .09
Ameristar Casinos, Inc. (USA)/1/ 440,000 2,860 .06
Filmes Lusomundo, SA, preferred shares (Portugal) 292,500 2,759 .06
Samuel Goldwyn Co. (USA)/1/ /2/ 428,400 2,570 .05
MovieFone, Inc., Class A (USA)/1/ /2/ 360,000 1,755 .04
Au Bon Pain Co., Inc. (USA)/1/ 200,000 1,550 .03
BUSINESS & PUBLIC SERVICES - 4.88%
Banta Corp. (USA) 679,900 28,896 .62
Flughafen Wien AG (Austria) 350,600 22,163 .48
Bell & Howell Holdings Co. (USA) /1/ 855,000 21,802 .47
Oxford Health Plans, Inc. (USA)/1/ 200,000 14,550 .31
Vivra Inc. (USA)/1/ 400,000 12,700 .27
DOVatron International, Inc. (USA) /1/ /2/ 350,000 12,119 .26
America Online, Inc.(USA)/1/ 175,000 12,031 .26
Katz Media Group, Inc. (USA) /1/ 575,500 11,726 .25
Quebecor Printing Inc. (Canada) 705,000 11,296 .24
Blenheim Group PLC (United Kingdom) 2,261,460 8,364
Blenheim Group PLC, 6.40% convertible preferred 409,090 427 .19
Western Waste Industries (USA)/1/ 417,000 8,340 .18
Filofax Group PLC (United Kingdom) 1,459,000 5,881 .13
Thomas Group, Inc. (USA)/1/ /2/ 388,500 5,633 .12
US Order, Inc. (USA) /1/ 300,000 5,550 .12
Continental Waste Industries, Inc. (USA)/1/ 300,000 5,175 .11
International Container Terminal Services, Inc.,
5.00% convertible debentures 2001 (Philippines) $5,500,000 4,647 .10
Goldsborough Healthcare PLC (United Kingdom) 2,194,000 4,424 .10
United Waste Systems, Inc. (USA)/1/ 100,000 4,175 .09
APCOA PARKING (Germany) 61,000 3,993 .09
Air & Water Technologies Corp., Class A (USA)/1/ 658,500 3,539 .08
MDC Corp., Class A (Canada)/1/ 2,600,000 3,488 .08
M.A.I.D. PLC (United Kingdom)/1/ 841,600 3,259 .07
CBT Group PLC (American Depositary Receipts) 60,000 2,865 .06
(Ireland) /1/
Kanamoto Co. Ltd. (Japan) 156,000 2,294 .05
Energy BioSystems Corp. (USA)/1/ 240,000 2,220 .05
UNC Inc. (USA)/1/ 350,000 2,187 .05
GNI Group, Inc. (USA)/1/ 290,000 2,103 .05
DATA PROCESSING & REPRODUCTION - 4.43%
Acclaim Entertainment, Inc. (USA)/1/ 1,550,000 39,912 .86
Mentor Graphics Corp. (USA)/1/ 1,750,000 36,531 .79
Corel Corp. (Canada)/1/ 1,522,500 24,931 .54
Diamond Multimedia Systems, Inc. (USA) /1/ 700,000 22,575 .49
Structural Dynamics Research Corp. (USA)/1/ 530,000 9,838 .21
Transaction Systems Architects, Inc., Class A (USA) /1/ 350,000 9,362 .20
Scribona AB, Class B (Sweden) 982,000 8,640 .19
Aspen Technology, Inc. (USA)/1/ 270,000 8,100 .17
CONVEX Computer Corp. (USA)/1/ /2/ 1,515,000 6,818 .15
Avid Technology, Inc. (USA)/1/ 150,000 6,450 .14
Radius Inc. (USA)/1/ /2/ 900,000 6,413 .14
Symantec Corp. (USA)/1/ 200,000 6,000 .13
Electronic Arts (USA)/1/ 125,000 4,594 .10
Walker Interactive Systems, Inc. (USA)/1/ 511,800 4,446 .10
Crystal Dynamics, Inc., convertible preferred, 533,334 4,000 .09
Series D (USA) /1/ /2/ /3/
Innovus Corp. (USA) /1/ /2/ /3/ 300,625 2,593 .05
Hummingbird Communications Ltd. (Canada)/1/ 57,500 2,142 .05
Information International, Inc. (USA)/1/ /2/ 150,000 1,425 .03
BANKING - 4.14%
Washington Mutual Savings Bank (USA) 918,750 24,347 .53
First Financial Corp. (USA) 900,000 19,125 .41
Mercantile Bancorporation Inc. (USA) 375,000 16,781 .36
West One Bancorp (USA) 350,000 14,044 .30
Dah Sing Financial Holdings Ltd. (Hong Kong) 6,200,000 13,955 .30
City National Corp. (USA) 1,025,000 13,581 .29
Provident Bancorp, Inc. (USA) 305,000 12,657 .27
Central Fidelity Banks, Inc. (USA) 367,500 11,944 .26
Hibernia Corp., Class A (USA) 1,100,000 11,137 .24
Keystone Financial, Inc. (USA) 300,000 9,600 .21
Safra Republic Holdings SA (Luxembourg) 112,000 9,520 .21
FirstMerit Corp. (formerly First Bancorporation of 340,000 8,500 .18
Ohio) (USA)
Washington Federal Savings and Loan Assn. (USA) 353,925 8,406 .18
Standard Federal Bank (USA) 150,000 5,850 .13
Collective Bancorp, Inc. (USA) 221,800 5,739 .13
TriCo Bancshares (USA) 149,880 3,073 .07
Yapi ve Kredi Bankasi AS (Turkey) 58,000,000 3,063 .07
HEALTH & PERSONAL CARE - 3.95%
Genetics Institute, Inc. (USA)/1/ 333,000 12,654 .27
Cephalon, Inc. (USA)/1/ 455,000 12,512 .27
AutoImmune Inc. (USA)/1/ /3/ 794,000 12,406 .27
Athena Neurosciences, Inc. (USA)/1/ 992,500 11,848 .26
Sequus Pharmaceuticals, Inc. (formerly Liposome 585,000 6,801
Technology, Inc.) (USA) /1/
Sequus Pharmaceuticals, Inc., warrants, expire 1998 /1/ 48,000 1,848
Sequus Pharmaceuticals, Inc., convertible preferred /1/ /3/ 80,832 323 .19
Vical Inc. (USA) /1/ 700,000 8,225 .18
Ranbaxy Laboratories Ltd. (Global Depositary 250,000 7,062 .15
Receipts)(India)
Omnicare, Inc. (USA) 180,000 7,020 .15
Genelabs Technologies, Inc., units (each unit
consists of one ordinary share and one warrant
to purchase one ordinary share) (USA) /1/ /2/ /3/ 1,390,000 6,776 .15
NeoPath, Inc. (USA) /1/ 253,000 6,704 .14
Paragon Trade Brands, Inc. (USA)/1/ 420,000 6,510 .14
PerSeptive Biosystems, Inc. (USA)/1/ 600,000 6,450 .14
Hologic, Inc. (USA) /1/ /2/ 265,000 6,095 .13
Ethical Holdings PLC (American Depositary Receipts) 675,000 6,075 .13
(United Kingdom) /1/ /2/
Neurogen Corp. (USA) /1/ 250,000 5,563 .12
SciClone Pharmaceuticals, Inc. (USA)/1/ 600,000 5,100 .11
Anesta Corp. (USA)/1/ /2/ 460,000 5,002 .11
Benson Eyecare Corp. (USA) /1/ 500,000 4,938 .11
Alpha-Beta Technology, Inc. (USA)/1/ 545,000 4,428 .09
VIVUS, Inc. (USA) /1/ 200,000 4,125 .09
InStent Inc. (USA) /1/ 250,000 4,063 .09
Thermedics Inc. (USA) /1/ 200,000 3,975 .08
Isis Pharmaceuticals, Inc. (USA)/1/ 325,000 3,778 .08
HemaSure (USA) /1/ 240,000 3,720 .08
Biomatrix, Inc. (USA)/1/ 410,000 3,588 .08
Maybelline, Inc. (USA) 150,000 3,563 .08
Body Shop International PLC (United Kingdom) 1,360,000 3,063 .07
Ventritex, Inc. (USA) /1/ 100,000 2,150 .05
Cyberonics, Inc. (USA)/1/ 370,800 1,854 .04
InSite Vision Inc. (USA)/1/ 350,000 1,641 .04
Vision-Sciences, Inc. (USA)/1/ 484,500 1,635 .04
Gensia Pharmaceuticals, Inc. (USA)/1/ 180,000 990 .02
TELECOMMUNICATIONS - 3.42%
International CableTel Inc. (USA)/1/ 1,009,466 28,265 .61
Vanguard Cellular Systems, Inc. (USA)/1/ 937,500 24,023 .52
Pilipino Telephone Corp. (Philippines)/1/ /3/ 25,225,000 23,976 .52
Octel Communications Corp. (USA)/1/ 650,000 22,669 .49
Telephone and Data Systems, Inc. (USA) 270,000 11,340 .25
Associated Communications Corp., Class A (USA)/1/ 319,075 6,621
Associated Communications Corp., Class B /1/ 319,075 6,621 .29
Centennial Cellular Corp. (USA)/1/ 490,000 9,555 .21
Brooks Fiber Properties, Inc., convertible 49,000 8,085 .17
preferred (USA) /1/ /2/ /3/
Atlantic Tele-Network, Inc. (USA)/1/ 610,000 7,472 .16
MULTICHOICE (South Africa) 1,330,000 4,007 .09
MIDCOM Communications Inc. (USA) /1/ 250,000 3,813 .08
M-CELL (South Africa) 2,500,400 1,575 .03
MERCHANDISING - 3.21%
Consolidated Stores Corp. (USA)/1/ 1,430,000 33,069 .71
Sports Authority, Inc. (USA) /1/ 699,000 19,310 .42
Fabri-Centers of America, Inc., Class A (USA)/1/ 525,000 8,072
Fabri-Centers of America, Inc., Class B /1/ 525,000 6,431 .31
Williams-Sonoma, Inc. (USA)/1/ 548,750 11,387 .25
Duty Free International, Inc. (USA) 856,500 10,920 .24
AnnTaylor, Inc. (USA) /1/ 600,000 10,575 .23
Arbor Drugs, Inc. (USA) 500,000 9,375 .20
Viking Office Products, Inc. (USA)/1/ 200,000 8,350 .18
Hanover Direct, Inc. (USA)/1/ 3,944,000 7,641 .16
Lands' End, Inc. (USA)/1/ 360,000 5,670 .12
HOMAC CORP (Japan) 284,000 5,577 .12
Daiki, 1.50% convertible debentures 2004 (Japan) Y450,000,000 4,378 .09
Colruyt NV (Belgium) 12,000 3,022 .07
Tandy Brands Accessories, Inc. (USA)/1/ 221,625 1,787 .04
Crown Books Corp. (USA)/1/ 160,000 1,680 .04
Groupe Andre (France) 18,494 1,521 .03
TRANSPORTATION: RAIL & ROAD - 2.97%
Wisconsin Central Transportation Corp. (USA)/1/ 783,100 52,272 1.13
TNT Freightways Corp. (USA) /2/ 1,350,000 25,481 .55
Werner Enterprises, Inc. (USA) 850,000 17,637 .38
Swift Transportation Co., Inc. (USA)/1/ 950,000 16,388 .36
M.S. Carriers, Inc. (USA)/1/ /2/ 837,000 13,392 .29
TNT Ltd. (Australia)/1/ 4,076,379 6,252
TNT Ltd., 8.00% convertible preferred 1,316,100 2,118 .18
Nippon Konpo Unyu Soko (Japan) 460,000 3,701 .08
ELECTRONIC COMPONENTS - 2.73%
Flextronics International Ltd. (Singapore)/1/ /2/ 746,500 19,222 .41
SCI Systems, Inc. (USA)/1/ 525,236 18,121 .39
ANTEC Corp. (USA)/1/ /2/ 1,305,000 17,454 .38
VLSI Technology, Inc. (USA)/1/ 500,000 17,125 .37
Quantum Corp. (USA)/1/ 618,100 13,521 .29
Actel Corp. (USA)/1/ 650,000 11,456 .25
Park Electrochemical Corp. (USA) 240,000 7,770 .17
Linear Technology Corp. (USA) 120,000 4,980 .11
Micro Linear Corp. (USA)/1/ 300,000 4,688 .10
Raychem Corp. (USA) 88,000 3,960 .09
Rogers Corp. (USA)/1/ 140,000 3,360 .07
Western Digital Corp. (USA)/1/ 200,000 3,175 .07
First Pacific Networks, Inc. (USA)/1/ 850,000 1,541 .03
MACHINERY & ENGINEERING - 2.49%
Svedala Industri AB (Sweden) 500,000 15,073 .33
Thermo Fibertek Inc. (USA)/1/ 825,000 13,509 .29
Greenfield Industries, Inc. (USA) 414,100 12,734 .28
Valmont Industries, Inc. (USA) 470,000 11,398 .25
Kalmar Industries AB (American Depositary Receipts) 638,000 11,006 .24
(Sweden) /3/
Allied Products Corp. (USA) 371,900 7,949 .17
AGCO Corp. (USA) 150,000 6,825 .15
Thermo Power Corp. (USA)/1/ 410,000 6,509 .14
Crompton & Knowles Corp. (USA) 400,000 5,950 .13
Cincinnati Milacron Inc. (USA) 138,900 4,375 .09
Jungheinrich AG (Germany) 20,500 4,176 .09
Miura Co., Ltd. (Japan) 250,000 3,928 .08
UMW Holdings Bhd. (Malaysia) 1,337,000 3,617 .08
Varity Corp. (USA)/1/ 71,914 3,200 .07
Siu-Fung Ceramics Holdings Ltd. (Hong Kong - 10,655,737 2,398 .05
Incorporated in Bermuda)
Memtec Ltd. (American Depositary Receipts)(Australia) 114,236 1,999 .04
EMCON (USA)/1/ 117,700 574 .01
ENERGY SOURCES - 2.40%
Transocean Drilling AS (Norway) 1,508,500 24,145 .52
California Energy Co., Inc. (USA)/1/ 750,000 15,375 .33
ELAN Energy Inc. (Canada)/1/ 1,635,000 14,013 .30
Ashland Coal, Inc. (USA)/3/ 429,000 12,924 .28
ABACAN RES CORP C$ (Canada)/1/ /2/ 4,524,000 11,463 .25
Cabre Exploration Ltd. (Canada)/1/ /2/ 933,400 9,043 .19
Ampolex Ltd., 8.00% convertible preferred (Australia) 908,000 3,300
Ampolex Ltd. 1,000,000 2,161 .12
Paramount Resources Ltd. (Canada) 488,300 5,459 .12
Blue Range Resource Corp. (Canada)/1/ 500,000 3,633 .08
NOVUS PETROLEUM (Australia) 2,700,000 3,468 .08
Czar Resources Ltd. (Canada)/1/ 2,858,000 2,939 .06
Zhenhai Refining & Chemical Co. Ltd., Class H 10,798,500 2,570 .06
(People's Republic of China)
Elf Gabon SA (Gabon) 3,325 472 .01
MISCELLANEOUS MATERIAL & COMMODITIES -2.31%
Hoganas Eldfast AB, Class B (Sweden) /2/ 1,405,000 41,748 .90
SGL Carbon AG (Germany) 250,000 16,188 .35
Intertape Polymer Group Inc. (Canada) 400,000 11,700 .25
Sealed Air Corp. (USA)/1/ 200,000 11,025 .24
Forsheda AB, Class B (Sweden) /2/ 450,000 10,580 .23
Ashton Mining Ltd. (Australia) 6,100,000 8,203 .18
Carbide/Graphite Group, Inc. (USA)/1/ /2/ 511,800 7,229 .16
CHEMICALS - 2.03%
Kalon Group PLC (United Kingdom) 7,030,000 16,334 .35
Holliday Chemical Holdings PLC (United Kingdom) 4,912,500 14,986 .32
Valspar Corp. (USA) 343,900 13,154 .28
McWhorter, Inc. (USA)/1/ /2/ 706,000 10,855 .24
Airgas, Inc. (USA)/1/ 359,000 9,558 .21
Ferro Corp. (USA) 350,000 8,706 .19
Tessenderlo Chemie SA (Belgium) 19,954 7,259 .16
RPM, Inc. (USA) 330,000 6,559 .14
Armor All Products Corp. (USA) 222,100 3,803 .08
Yip's Hang Cheung (Holdings) Ltd. (Hong Kong) 13,100,000 2,813 .06
MULTI-INDUSTRY - 1.96%
First Pacific Co. Ltd.(Hong Kong) 26,783,048 28,583 .62
Industriforvaltnings AB Kinnevik, Class B (Sweden) 360,000 10,983
Industriforvaltnings AB Kinnevik, Class A 203,440 6,162 .37
D'Ieteren Holdings BV (Belgium) 203,883 16,886 .37
Amalgamated Holdings Ltd. (Australia) 789,320 10,078
Amalgamated Holdings Ltd., 5.00% convertible preferred 265,000 4,004 .30
Corporacion Financiera Alba, SA (Spain) 178,449 9,470 .20
ABOITIZ EQUITY VENTR (Philippines) 25,083,800 4,720 .10
INDUSTRIAL COMPONENTS - 1.96%
Cardo AB (Sweden) 1,114,150 18,722 .41
Kolbenschmidt AG (Germany)/1/ 114,000 16,599 .36
Autoliv AB (American Depositary Receipts)(Sweden)/3/ 203,300 12,390 .27
Lear Seating Corp. (USA)/1/ 352,300 10,349 .22
Bearings, Inc. (USA) 273,300 9,258 .20
Standard Products Co. (USA) 507,600 8,883 .19
Innovative International (Holdings) Ltd. (Hong Kong) 18,156,000 4,873 .11
Federal-Mogul Corp. (USA) 250,000 4,781 .10
Watts Industries, Inc., Class A (USA) 100,000 2,488 .05
Timken Co. (USA) 50,000 2,131 .05
Gold Peak Industries (Holdings) Ltd., warrants, 1,140,000 13 .00
expire 1995 (Hong Kong) /1/
METALS: NONFERROUS - 1.85%
ERAMET (France)/3/ 284,119 21,582 .47
Capral Aluminium Ltd. (formerly Alcan Australia 8,680,000 20,395 .44
Ltd.) (Australia)
QNI Ltd. (Australia) 8,211,900 17,061 .37
Asturiana de Zinc, SA (Spain)/1/ 1,440,000 14,818 .32
Magma Copper Co., convertible preferred, 90,000 6,232
Series E (USA)
Magma Copper Co., convertible preferred, Series D 70,000 4,638 .23
Alumax Inc. (USA)/1/ 25,300 854 .02
ENERGY EQUIPMENT - 1.79%
Camco International, Inc. (USA) 1,011,100 24,772 .54
Landmark Graphics Corp. (USA) /1/ 800,000 22,550 .49
Babcock International Group PLC (United Kingdom) 6,222,285 16,916 .36
Reading & Bates Corp. (USA)/1/ 700,000 8,400 .18
COFLEXIP SA (American Depositary Receipts)(France) 437,800 6,731 .14
Enterra Corp. (USA)/1/ 160,000 3,520 .08
INSURANCE - 1.77%
Fairfax Financial Holdings Ltd. (Canada)/1/ /3/ 272,700 16,462 .36
Transatlantic Holdings, Inc. (USA) 225,000 15,131 .33
Liberty Corp. (USA) 350,000 11,375 .25
Harleysville Group Inc. (USA) 375,000 11,156 .24
Irish Life PLC (Ireland) 2,097,968 7,478 .16
Selective Insurance Group, Inc. (USA) 195,000 7,118 .15
NYMAGIC, Inc. (USA) 254,000 4,318 .09
Nelson Hurst PLC (United Kingdom) 1,435,000 3,697 .08
NAC Re Corp. (USA) 87,200 3,161 .07
ACMAT Corp., Class A (USA)/1/ 150,000 1,800 .04
ELECTRONIC INSTRUMENTS - 1.50%
CIDCO Inc. (USA)/1/ /2/ 913,000 32,183 .70
Plantronics, Inc. (USA)/1/ 350,000 12,731 .28
LoJack Corp. (USA)/1/ 575,000 9,488 .20
Fluke Corp. (USA) 160,000 6,080 .13
C-COR Electronics, Inc. (USA)/1/ 200,000 4,700 .10
Lumonics Inc. (Canada)/1/ 372,000 4,020 .09
TRANSPORTATION: SHIPPING - 1.47%
ICB Shipping AB, Class B (Sweden) 1,150,000 10,782 .23
Bona Shipholding (Norway) 880,200 8,972 .19
Wah Kwong Shipping Holdings Ltd. (Hong Kong) 5,258,500 8,843 .19
Nordstrom & Thulin AB, Class B (Sweden) 3,118,300 8,546 .19
Irish Continental Group PLC (Ireland) 1,025,000 8,277 .18
SMEDVIG AS (American Depositary Receipts)(Norway)/1/ /2/ 463,000 5,556
SMEDVIG AS /1/ 200,000 1,306 .15
IMC Holdings Ltd. (Hong Kong) 8,198,000 5,302 .11
WILLIAMS LINES (Philippines) 14,100,000 4,494 .10
Benor Tankers Ltd. (Norway)/1/ 763,800 4,128 .09
Silja Oy AB, Class A (formerly EffJohn Oy AB) (Finland)/1/ 362,000 1,865 .04
RECREATION & OTHER CONSUMER PRODUCTS - 1.42%
WMS Industries Inc. (USA)/1/ 750,000 15,844 .34
Coleman Co., Inc. (USA)/1/ 304,100 11,404 .25
Scotts Co., Class A (USA)/1/ 500,000 11,062 .24
Fossil, Inc. (USA)/1/ 550,000 7,219 .16
Pacific Concord Holding Ltd., 4.75% convertible $5,000,000 4,069
debentures 1998 (Hong Kong)
Pacific Concord Holding Ltd. 19,862,000 3,057 .15
Bulgari SpA (American Depositary Receipts)(Italy)/1/ /3/ 850,000 6,443 .14
World Houseware (Holdings) Ltd. (Hong Kong) 17,295,809 3,311 .07
Rawlings Sporting Goods Co., Inc. (USA)/1/ 380,000 3,183 .07
BEVERAGES - 1.24%
Taunton Cider PLC (United Kingdom) 5,482,400 19,584 .42
Brau-Union Goss-Reininghaus-Osterreichische Brau AG 271,800 15,234 .33
(Austria)
Osterreichische Brau-Beteiligungs AG (Austria) 176,770 9,098 .20
Canandaigua Wine Co., Inc., Class A (USA)/1/ 141,000 6,856 .15
San Miguel Brewery Hong Kong Ltd. (Hong Kong) 11,200,000 6,701 .14
BUILDING MATERIALS & COMPONENTS - 0.93%
Puerto Rican Cement Co., Inc. (USA) /2/ 371,000 12,846 .28
Tolmex, SA de CV, Class B2 (Mexico) 1,500,000 7,576 .16
Lafarge Corp. (USA) 396,600 7,288 .16
Futuris Corp. Ltd. (Australia) 6,790,200 6,515 .14
Giant Cement Holding, Inc. (USA)/1/ 458,000 5,553 .12
Falcon Building Products, Inc. (USA)/1/ /2/ 390,000 3,413 .07
UTILITIES: ELECTRIC & GAS - 0.81%
Hub Power Co. (Global Depositary Receipts)(Pakistan)/1/ 831,409 14,550 .32
Australian Gas Light Co. (Australia) 3,190,769 11,089 .24
Capex SA, Class A (Global Depositary Receipts) 384,200 5,187 .11
(Argentina)
Espoon Sahko Oy (Finland) 258,000 3,322 .07
South Wales Electricity PLC (United Kingdom) 220,000 3,189 .07
WHOLESALE & INTERNATIONAL TRADE - 0.71%
Finning Ltd. (Canada) 803,500 12,725 .28
Tech Data Corp. (USA)/1/ 900,000 12,713 .27
Kamei Corp. (Japan) 483,000 5,496 .12
Tokyo Sangyo (Japan) 192,500 1,822 .04
METALS: STEEL - 0.70%
Avesta Sheffield AB (Sweden) 1,218,542 13,270 .29
ARBED SA (Luxembourg)/1/ 35,500 4,718
ARBED SA, 2.50% convertible Eurobonds 2003 BFR6,000,000 3,680 .18
Tubos de Acero de Mexico, SA (American Depositary 1,245,000 7,470 .16
Receipts)(Mexico)/1/
Nippon Denro Ispat Ltd., 3.00% convertible $4,700,000 2,949 .07
debentures 2001 (India)
Tung Ho Steel Enterprise Corp. (Global Depositary 5,955 63 .00
Receipts)(Taiwan)/1/
CONSTRUCTION & HOUSING - 0.63%
plettac AG (Germany) 49,332 13,088 .28
Ryland Group, Inc. (USA) 660,000 10,230 .22
Corporacion Geo, SA, Class B (Mexico) /3/ 1,751,568 5,770 .13
ELECTRICAL & ELECTRONICS - 0.53%
Spectra-Physics AB, Class A (Sweden) 425,720 7,461 .16
Steinbrecher Corp., convertible preferred, Series D 910,000 7,280 .16
(USA)/1/ /3/
MagneTek, Inc. (USA)/1/ 400,000 4,950 .11
Johnson Electric Holdings Ltd. (Hong Kong - 2,420,000 4,821 .10
Incorporated in Bermuda)
AEROSPACE & MILITARY TECHNOLOGY - 0.49%
CAE Industries Ltd. (Canada) 1,750,000 12,064 .26
Thiokol Corp. (USA) 300,000 10,725 .23
Food & Household Products - 0.46%
Hazelwood Foods PLC (United Kingdom) 7,500,000 14,462 .31
J.M. Smucker Co., Class B (USA) 300,000 5,625 .12
Nestle (Malaysia) Sdn. Bhd. (Malaysia) 200,000 1,416 .03
TEXTILES & APPAREL - 0.33%
Phillips-Van Heusen Corp. (USA) 450,000 5,175 .11
Marzotto Ord (Italy) 675,000 4,457 .10
Z Groupe Zannier (France) 247,000 2,910 .06
Delta Woodside Industries, Inc. (USA) 350,000 2,669 .06
APPLIANCES & HOUSEHOLD DURABLES - 0.32%
O'Sullivan Industries Holdings, Inc. (USA)/1/ 840,000 6,510 .14
Moulinex SA (France)/1/ 255,000 5,226 .11
SEB SA (France) 25,862 3,152 .07
FOREST PRODUCTS & PAPER - 0.21%
Caraustar Industries, Inc. (USA) 495,000 9,900 .21
TRANSPORTATION: AIRLINES - 0.16%
PR Holdings, Inc., subscription rights (Philippines)/1/ /3/ 1,730,000 7,347 .16
REAL ESTATE - 0.10%
Cadiz Land Co., Inc. (USA)/1/ /2/ 935,000 4,792 .10
MISCELLANEOUS - 4.95%
Other equity-type securities in initial period of 229,032 4.95
acquisition
-------- -----
TOTAL EQUITY -TYPE SECURITIES (cost: $2,981,798,000) 3,685,732 79.68
-------- -----
Principal
Amount
SHORT-TERM SECURITIES (000)
CORPORATE SHORT-TERM NOTES - 16.21%
General Electric Capital Corp. 5.70%-5.71% due 72,300 71,867 1.55
11/2-11/9/95
Halifax Building Society 5.56%-5.70% due 55,400 54,863 1.19
10/25-12/20/95
GLAXO WELLCOME 5.67%-5.70% due 10/17-12/12/95 49,700 49,408 1.07
Bayerische Landesbank Girozentrale 5.67%-5.72% 47,400 47,307 1.02
due 10/5-11/1/95
Chevron Oil Finance Co. 5.69%-5.74% due 10/12-11/7/95 44,900 44,711 .97
Commonwealth Bank of Australia 5.62%-5.65% 45,000 44,705 .97
due 10/11-11/21/95
Ford Credit Europe PLC 5.67%-5.69% due 10/2-10/16/95 41,000 40,946 .88
Ford Motor Credit Co. 5.70%-6.10% due 10/4-10/19/95 35,300 35,241 .76
National Australia Funding (Delaware) Inc. 31,500 31,276 .68
5.66%-5.725% due 10/18-11/29/95
ABN-AMRO North America Finance Inc. 5.63%-5.72% 31,300 31,248 .68
due 10/4-10/11/95
Toyota Motor Credit Corp. 5.67%-5.75% due 30,000 29,919 .65
10/6-11/8/95
PepsiCo, Inc. 5.68%-5.69% due 11/2-11/6/95 28,500 28,347 .61
Canadian Wheat Board 5.69%-5.72% due 10/10-11/2/95 27,000 26,884 .58
Shell Oil Co. 5.72% due 10/12/95 25,000 24,953 .54
Exxon Imperial U.S. Inc. 5.63% due 10/19/95 25,000 24,924 .54
British Gas Capital Inc. 5.68% due 11/20/95 25,000 24,799 .54
Commerzbank U.S. Finance Inc. 5.69% due 10/20/95 22,200 22,130 .48
Daimler-Benz North America Corp. 5.70%-5.73% 19,800 19,742 .43
due 10/13-10/20/95
Sony Capital Corp. 5.70% due 10/6/95 17,900 17,883 .39
Telstra Corp. Ltd. 5.75% due 10/4/95 15,000 14,991 .32
Bank of Montreal 5.71% due 10/16/95 15,000 14,962 .32
BAYER 4 (2) 5.69% due 10/31/95 15,000 14,926 .32
Coca-Cola Co. 5.68% due 10/18/95 14,000 13,960 .30
Panasonic Finance Inc. 5.65% due 10/31/95 10,000 9,951 .21
BNP CANADA 5.73% due 11/17/95 10,000 9,925 .21
CERTIFICATES OF DEPOSIT - 3.09%
Societe Generale 5.71%-5.80% due 10/13-11/21/95 51,000 50,999 1.10
CANADIAN IMPERIAL BANK 5.73%-5.74% due 10/24-11/27/95 42,000 41,998 .91
National Westminster Bank PLC 5.74%-5.76% 25,000 25,000 .54
due 10/2-11/27/95
Abbey National Treasury Services PLC Eurocertificate 15,000 15,000 .32
5.77% due 11/15/95
BANK OF MONTREAL YK CD 5.79% due 11/27/95 10,000 10,000 .22
FEDERAL AGENCY DISCOUNT NOTES - 1.17%
Federal Home Loan Mortgage Corp. 5.62% due 11/10/95 54,200 53,853 1.17
-------- -----
TOTAL SHORT-TERM SECURITIES (cost: $946,765,000) 946,718 20.47
-------- -----
TOTAL INVESTMENT SECURITIES (cost: $3,928,563,000) 4,632,450 100.15
Excess of payables over cash and receivables 7,052 .15
-------- -----
NET ASSETS $4,625,39 100.00%
8
======== =====
</TABLE>
/1/ Non-income-producing securities.
/2/ The fund owns the following percentages (over 5%) of the outstanding
voting securities of the following companies and thus is considered an
affiliate as defined in the Investment Company Act of 1940: Steinbrecher-7.32,
Puerto Rican Cement-6.85, Thomas Group-6.75, Carbide/Graphite Group-6.50, M.S.
Carriers-6.50, CIDCO-6.48, Hologic-6.48, Abacan Resource-6.47, Rio Hotel &
Casino-6.47, Alliance Communications-6.46, Innovus-6.45, McWhorter-6.44,
Anesta-6.40, Brooks Fiber Properties-6.37, Information International-6.23,
Savoy Pictures Entertainment-6.22, TNT Freightways-6.18, SMEDVIG-6.08,
Chrysalis Group-5.99, AAPC-5.90, Flextronics International-5.90, ANTEC-5.86,
Cabre Exploration-5.67, CONVEX Computer-5.66, Cadiz Land-5.33, Radius-5.28,
Ethical Holdings-5.25, Showboat-5.10, Samuel Goldwyn-5.05, and DMX Inc.-5.00.
/3/ Purchased in a private placement transaction; resale to the public may
require registration or may extend only to qualified institutional buyers.
See Notes to Financial Statements
EQUITY-TYPE SECURITIES APPEARING IN THE
PORTFOLIO SINCE MARCH 31, 1995
Abacan Resources
Aboitiz Equity Venture
Alliance Comm
Allied Products
Alumax
AnnTaylor
APCOA Parking
Arbor Drugs
Ashton Mining
Austereo
Aztar
Bally Entertainment
Bell & Howell Holdings
Benson Eyecare
Blue Range Resource
Brooks Fiber Properties
Bulgari
Cadiz Land
CAE Industries
Carbide/Graphite Group
Cardo
CBT Group
C-COR Electronics
CINAR Films
COFLEXIP
Corporacion Geo
Crystal Dynamics
Data Broadcasting
Delta Woodside Industries
Diamond Multimedia Systems
DOVatron International
Espoon Sahko Oy
Falcon Building Products
Filmes Lusomundo
Filofax Group
Flextronics International
Forsheda
Fossil
Genelabs Technologies
Hemasure
Hologic
HOMAC
ICB Shipping
Innovus
InStent
Intertape Polymer Group
Katz Media Group
Kolbenschmidt
London Clubs International
Lumonics
M-Cell
MIDCOM Communications
Multichoice
Neopath
Neurogen
Novus Petroleum
Ranbaxy Laboratories
Raychem
Reading & Bates
San Miguel Brewery
Scotts
Sports Authority
SGL Carbon
Station Casinos
Swift Transportation
Tech Data
Thermedics
Thiokol
Transaction Systems Architects
Transocean Drilling
Trump Hotels & Casino Resorts
UMW Holdings
US Order
United Television
ValueVision International
Ventritex
Vical
VIVUS
Westcott Communications
Western Publishing Group
Williams Lines
Yapi ve Kredi Bankasi
EQUITY-TYPE SECURITIES ELIMINATED FROM
THE PORTFOLIO SINCE MARCH 31, 1995
APV
Australis Media Group
Bay View Capital
BayBanks
BCE Mobile Communications
Bell Cablemedia
Bernard Chaus
Boddington Group
Burgenland Holding
Celsius Industries
Cirrus Logic
COR Therapeutics
Coram Healthcare
Cordiant
Courtaulds Textiles
CRSS
Cypress Semiconductor
Deceuninck Plastics Industries
Del Webb
El Aguila
EnSys Environmental Products
Fila Holding
Fourth Financial
Goody's Family Clothing
Goulds Pumps
H & M Hennes & Mauritz
Harding Associates
Hayes Wheels International
Higashi Nihon House
Hitachi Kiden Kogyo
Ishiguro Homa
Jardine International Motor Holdings
Jostens
KSB
Kwik-Fit Holdings
LCI International
Le Groupe Videotron Ltee
Maanshan Iron & Steel
Matrix Service
Maxtor
McClatchy Newspapers
Microchip Technology
Mississippi Chemical
Moorco International
NGC
Nihon Dempa Kogyo
Nine West Group
Nordictel Holdings
Oil-Dri Corp. of America
OPTi
Orbital Engine
Philippine National Bank
PictureTel
Playboy Enterprises
Pohjola Insurance
PT Indah Kiat Pulp & Paper
Pulitzer Publishing
Raychem
Shaw Brothers
Shaw Communications
ShopKo Stores
Sterling Chemicals
Super Food Services
Svenskt Stal AB
Taisei Fire and Marine Insurance
TJX Companies
Tower Air
TV4
United States Cellular
Vital Forsikring
Worthington Industries
Yorkshire Chemical
SMALLCAP World Fund
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
at September 30, 1995 (dollars in thousands)
- ---------------------------------------- ------------ ------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $3,928,563) $4,632,450
Cash 133
Receivables for -
Sales of investments $42,267
Sales of fund's shares 10,542
Dividends and accrued interest 5,618 58,427
------------ ------------
4,691,010
LIABILITIES:
Payables for -
Purchases of investments 49,549
Repurchases of fund's shares 12,262
Management services 2,637
Accrued expenses 1,164 65,612
------------ ------------
NET ASSETS AT SEPTEMBER 30, 1995 -
Equivalent to $26.11 per share on
177,117,618 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 400,000,000 shares) $4,625,398
============
STATEMENT OF OPERATIONS
for the year ended September 30, 1995 (dollars in thousands)
- ---------------------------------------- ------------ ------------
INVESTMENT INCOME:
Income:
Dividends $ 37,814
Interest 42,505 $ 80,319
------------
Expenses:
Management services fee 26,933
Distribution expenses 8,551
Transfer agent fee 4,265
Reports to shareholders 403
Registration statement and
prospectus 525
Postage, stationery and supplies 1,279
Directors' fees 96
Auditing and legal fees 60
Custodian fee 1,018
Taxes other than federal income tax 90
Other expenses 143 43,363
------------ ------------
Net investment income 36,956
------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 429,536
Net increase in unrealized appreciation
on investments:
Beginning of year 465,051
End of Year 703,887
------------
Net unrealized appreciation on investments 238,836
------------
Net realized gain and unrealized appreciation
on investments 668,372
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $705,328
============
STATEMENT OF CHANGES IN NET
ASSETS (dollars in thousands)
- ---------------------------------------- ------------- -------------
Year ended September 30
1995 1994
------------ ------------
OPERATIONS:
Net investment income $36,956 $11,146
Net realized gain on investments 429,536 212,165
Net unrealized appreciation
(depreciation) on investments 238,836 (12,601)
------------ ------------
Net increase in net assets
resulting from operations 705,328 210,710
------------ ------------
DIVIDENDS AND DISTRIBUTIONS PAID
TO SHAREHOLDERS:
Dividends from net
investment income (24,819) (6,434)
Distributions from net realized
gain on investments (204,948) (104,133)
------------ ------------
Total dividends and
distributions (229,767) (110,567)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
43,202,952 and 57,399,291
shares, respectively 1,002,339 1,341,144
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
10,403,045 and 4,360,143,
respectively 217,741 99,705
Cost of shares repurchased:
24,592,934 and 12,557,650
shares, respectively (566,957) (290,901)
------------ ------------
Net increase in net assets
resulting from capital share
transactions 653,123 1,149,948
------------ ------------
TOTAL INCREASE IN NET ASSETS 1,128,684 1,250,091
NET ASSETS:
Beginning of period 3,496,714 2,246,623
------------ ------------
End of period (including undistributed
net investment income: $23,552 and
$11,415, respectively) $4,625,398 $3,496,714
============ ============
</TABLE>
See Notes to Financial Statements
SMALLCAP WORLD FUND
NOTES TO FINANCIAL STATEMENTS
1. SMALLCAP World Fund, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Equity-type securities traded on a national securities exchange (or reported
on the NASDAQ national market) and securities traded in the over-the-counter
market are stated at the last reported sales price on the day of valuation;
other securities, and securities for which no sale was reported on that date,
are stated at the last quoted bid price. Short-term securities with original
or remaining maturities in excess of 60 days are valued at the mean of their
quoted bid and asked prices. Short-term securities with 60 days or less to
maturity are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Valuation Committee of the Board
of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in
non-U.S. currencies are recorded in the financial statements after translation
into U.S. dollars utilizing rates of exchange on the last business day of the
year. Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's statement of operations
under the caption "Realized Gain and Unrealized Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $1,018,000 includes $80,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of September 30, 1995, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $703,887,000, of which $940,889,000
related to appreciated securities and $237,002,000 related to depreciated
securities. During the year ended September 30, 1995, the fund realized, on a
tax basis, a net capital gain of $429,739,000 on securities transactions. Net
losses related to non-U.S. currency transactions of $203,000 were treated as an
adjustment to ordinary income for federal income tax purposes. The cost of
portfolio securities for book and federal income tax purposes was
$3,928,563,000 at September 30, 1995.
3. The fee of $26,933,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.80% of the first $1 billion of average net assets; 0.70%
of such assets in excess of $1 billion but not exceeding $2 billion; 0.67% of
such assets in excess of $2 billion but not exceeding $3 billion; 0.65% of such
assets in excess of $3 billion but not exceeding $5 billion; 0.635% of such
assets in excess of $5 billion but not exceeding $8 billion; and 0.625% of such
assets in excess of $8 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended September 30, 1995,
distribution expenses under the Plan were $8,551,000. As of September 30,
1995, accrued and unpaid distribution expenses were $966,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,265,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $3,278,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors of the fund who are unaffiliated with CRMC may elect to defer part
or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the fund. As
of September 30, 1995, aggregate amounts deferred were $32,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. As of September 30, 1995, accumulated undistributed net realized gain on
investments was $402,430,000 and additional paid-in capital was $3,493,758,000.
The fund reclassified $32,000 from undistributed net investment income to
undistributed net realized gains for the year ended September 30, 1995.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,618,024,000 and $1,420,450,000, respectively,
during the year ended September 30, 1995.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended September 30, 1995, such non-U.S. taxes were $1,832,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $171,000 for the year ended
September 30, 1995.
PER-SHARE DATA AND
RATIOS
<TABLE>
<CAPTION>
Year ended September 30
-------- -------- -------- ------- -------
1995 1994 1993 1992 1991
- ----------------------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Year $23.61 $22.72 $18.01 $17.60 $13.26
--------- --------- --------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .22 .09 .06 .14 .18
Net realized and
unrealized gain
on investments 3.79 1.83 5.56 .38 4.56
--------- --------- --------- ------- -------
Total income from
investment
operations 4.01 1.92 5.62 .52 4.74
--------- --------- --------- ------- -------
LESS DISTRIBUTIONS:
Dividends from
net investment
income (.16) (.06) (.08) (.11) (.40)
Distributions
from net
realized gains (1.35) (.97) (.83) - -
--------- --------- --------- ------- -------
Total distributions (1.51) (1.03) (.91) (.11) (.40)
--------- --------- --------- ------- -------
Net Asset Value, End
of Year $26.11 $23.61 $22.72 $18.01 $17.60
========= ========= ========= ======= =======
Total Return /1/ 18.59% 8.60% 32.46% 2.95% 36.43%
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end
of year (in
millions) $4,625 $3,497 $2,247 $1,255 $798
Ratio of expenses
to average net
assets 1.13% 1.12% 1.15% 1.21% 1.31%
Ratio of net income
to average net
assets .97% .38% .33% .85% 1.11%
Portfolio turnover
rate 45.63% 29.43% 25.00% 23.10% 19.26%
</TABLE>
/1/ This was calculated without decuting a sales charge. The maximum sales
charge is 5.75% of the fund's offering price.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
SMALLCAP World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
SMALLCAP World Fund, Inc., including the schedule of portfolio investments as
of September 30, 1995, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and the per-share
data and ratios are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and the
per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at September 30, 1995 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of SMALLCAP World Fund, Inc. at September 30, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the per-share data and ratios for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Los Angeles, California
October 23, 1995
1995 TAX INFORMATION (UNAUDITED)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 9% of the dividends
paid by the fund from net investment income represents qualifying dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099 DIV WHICH WILL BE
MAILED IN JANUARY 1996 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON
THEIR 1995 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS.
BOARD OF DIRECTORS
AMBASSADOR RICHARD G. CAPEN, JR.
Rancho Santa Fe, California
Corporate director and author;
former United States Ambassador
to Spain; former Vice Chairman
of the Board, Knight-Ridder, Inc.;
former Chairman and Publisher,
The Miami Herald
H. FREDERICK CHRISTIE
Palos Verdes Estates, California
Private investor; former President
and Chief Executive Officer, The Mission
Group;former President, Southern
California Edison Company
ALAN W. CLEMENTS
London, England
Private investor; former Executive
Director-Finance, Imperial Chemical
Industries PLC
ROBERT B. EGELSTON
Los Angeles, California
Chairman of the Board of the fund
Former Chairman of the Board,
The Capital Group Companies, Inc.
ALAN GREENWAY
La Jolla, California
President, Greenway Associates, Inc.
(management consulting services);
former Chairman, Australian
Tourist Commission
WILLIAM R. GRIMSLEY
San Francisco, California
President of the fund
Senior Vice President and Director,
Capital Research and
Management Company
GRAHAM HOLLOWAY
Dallas, Texas
Former Chairman of the Board,
American Funds Distributors, Inc.
LEONADE D. JONES*
Washington, D.C.
Treasurer, The Washington
Post Company
WILLIAM H. KLING
St. Paul, Minnesota
President, Minnesota Public Radio;
President, Greenspring Co.; former
President, American Public Radio
(now Public Radio International)
NORMAN R. WELDON, PH.D.
Miami, Florida
President and Director, Corvita
Corporation; Chairman of the Board,
Novoste Corporation
PATRICIA K. WOOLF
Princeton, New Jersey
Private investor; lecturer,
Department of Molecular Biology,
Princeton University
OTHER OFFICERS
GORDON CRAWFORD
Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Vice President of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
STEVEN N. KEARSLEY
Brea, California
Vice President and Treasurer of the fund
Vice President and Treasurer, Capital
Research and Management Company
GREGORY W. WENDT
San Francisco, California
Vice President of the fund
Vice President,
Capital Research Company
CHAD L. NORTON
Los Angeles, California
Secretary of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
MARY C. CREMIN
Brea, California
Assistant Treasurer of the fund
Senior Vice President - Fund Business
Management Group, Capital Research
and Management Company
ROBERT P. SIMMER
Norfolk, Virginia
Assistant Treasurer of the fund
Vice President - Fund Business
Management Group, Capital Research
and Management Company
OFFICES OF THE FUND AND
OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
*Leonade Jones was elected by shareholders to the Board of Directors in April
1995.
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
This report is for the information of shareholders of SMALLCAP World Fund, but
it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
December 31, 1995, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA BDA/GRS/2789
Lit. No. SCWF-011-1195
Printed on recycled paper
[The American Funds Group(R)]
