SEC. File Nos. 33-32785
811-5888
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 12
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 15
SMALLCAP WORLD FUND, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
Chad L. Norton
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
MICHAEL J. FAIRCLOUGH, ESQ.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
On November 25, 1996, it filed its 24f-2 notice for fiscal 1996.
Approximate date of proposed public offering:
It is proposed that this filing become effective on February 1, 1997, pursuant
to paragraph (a) of rule 485.
<PAGE>
SMALLCAP WORLD FUND, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number of Captions in Prospectus (Part "A")
Part "A" of Form N-1A
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Financial Highlights; Investment Results
4. General Description of Registrant Investment Policies and Risks; Securities and
Investment Techniques; Fund Organization and
Management
5. Management of the Fund Financial Highlights; Fund Organization and Management;
Expenses; Securities and Investment Techniques;
Multiple Portfolio Counselor System
6. Capital Stock and Other Securities Investment Policies and Risks; Securities and
Investment Techniques; Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares; Fund Organization and Management;
Shareholder Services
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
Item Number of Captions in Statement of
Part "B" of Form N-1A Additional Information (Part "B")
<S> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History Fund Organization and Management (Part "A")
13. Investment Objectives and Policies Securities and Investment Techniques (Part "A");
Investment Policies; Investment Restrictions
14. Management of the Registrant Fund Directors and Officers; Management
15. Control Persons and Principal Holders Fund Directors and Officers
of Securities
16. Investment Advisory and Other Services Management; Fund Organization and Management (Part "A");
General Information
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Securities N/A
19. Purchase, Redemption and Pricing of Purchase of Shares; Purchasing Shares (Part "A"); Shareholder
Securities Being Offered Account Services and Privileges; Redeeming Shares
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Item in Part "C"
<S> <C>
24. Financial Statements and Exhibits
25. Persons Controlled by or under
Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of
Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
<PAGE>
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
- --------------------------------------------------------------------------------
SMALLCAP
World Fund(R)
Prospectus
FEBRUARY 1, 1997
<PAGE>
SMALLCAP WORLD FUND, INC.
333 South Hope Street
Los Angeles, CA 90071
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Expenses 3
Financial Highlights 4
Investment Policies and Risks 5
Securities and Investment Techniques 6
Multiple Portfolio Counselor System 7
Investment Results 9
Dividends Distributions and Taxes 10
Fund Organization and Management 11
Shareholder Services 14
- --------------------------------------------------------------------------------
The fund's objective is long-term growth of capital. The fund strives to
accomplish this objective by investing primarily in equity securities of
issuers with relatively small market capitalizations located in various
countries. Investing in smaller capitalization stocks and securities of issuers
in various countries involves certain opportunities and risks that are
different from those associated with investing solely in larger capitalization
stocks and securities of issuers based in the United States.
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT
A DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
35-010-0297
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
EXPENSES
The effect of the expenses described below is reflected in the fund's share
price or return.
You may pay certain shareholder transaction expenses when you buy or sell
shares of the fund. Fund operating expenses are paid out of the fund's earned
income.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge on purchases
(as a percentage of offering price) 5.75%
................................................................................
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
FUND OPERATING EXPENSES
(as a percentage of average net assets for the fiscal year ended September 30,
1996)
Management fees 0.69%
12b-1 expenses 0.23%/1/
Other expenses 0.17%
Total fund operating expenses 1.09%
/1/ 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually. Due to these distribution expenses, long-term shareholders may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc.
EXAMPLES
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
- --------------------------------------------------------------------------------
One year $ 68
Three years $ 90
Five years $114
Ten years $183
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
3
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information has been audited by Deloitte & Touche llp,
independent auditors. This table should be read together with the financial
statements which are included in the statement of additional information and
annual report.
SELECTED PER-SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
------------------------
1996 1995 1994 1993 1992 1991 1990/1/
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year $26.11 $23.61 $22.72 $18.01 $17.60 $13.26 $15.08
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .17 .22 .09 .06 .14 .18 .26
Net realized and
unrealized gain (loss)
on investments 3.32 3.79 1.83 5.56 .38 4.56 (2.08)
Total income (loss)
from investment
operations 3.49 4.01 1.92 5.62 .52 4.74 (1.82)
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.23) (.16) (.06) (.08) (.11) (.40) --
Distributions from
net realized gains (2.45) (1.35) (.97) (.83) -- -- --
Total distributions (2.68) (1.51) (1.03) (.91) (.11) (.40) --
Net asset value,
end of year $26.92 $26.11 $23.61 $22.72 $18.01 $17.60 $13.26
- -------------------------------------------------------------------------------------
Total return/2/ 15.21% 18.59% 8.60% 32.46% 2.95% 36.43% (12.07%)/3/
- -------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
year (in millions) $6,607 $4,625 $3,497 $2,247 $1,255 $ 798 $ 571
Ratio of expenses to
average net assets 1.09% 1.13% 1.12% 1.15% 1.21% 1.31% .49%/3/
Ratio of net income
to average net assets .68% .97% .38% .33% .85% 1.11% 1.70%/3/
Average commissions
paid/4/ 1.41c 1.00c 1.25c 1.55c 2.36c 1.83c 2.24c
Portfolio turnover
rate 42.88% 45.63% 29.43% 25.00% 23.10% 19.26% 1.91%/3/
- -------------------------------------------------------------------------------------
</TABLE>
/1/ The period ended September 30, 1990 represents the initial period of
operations from April 30, 1990 to September 30, 1990.
/2/ Excludes maximum sales charge of 5.75%.
/3/ These figures are based on operations for the period shown and, accordingly,
are not representative of a full years' operations.
/4/ Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold, and are not
reflected in the fund's statement of operations. Shares traded on a
principal basis (without commissions), such as most over-the-counter and
fixed-income transactions, are excluded. Generally, non-U.S. commissions are
lower than U.S. commissions when expressed as cents per share but higher
when expressed as a percentage of transactions because of the lower per-
share prices of many non-U.S. securities.
4
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
INVESTMENT POLICIES AND RISKS
The fund aims to provide you with growth of capital.
The fund seeks to achieve its objective by investing primarily in equity
securities of companies with relatively small market capitalizations (share
price times the number of equity securities outstanding). In selecting
investments, the fund emphasizes companies that are believed by Capital
Research and Management Company to have the potential for growth. Current
income is not a consideration.
The fund's investments typically have individual market capitalizations of
approximately $50 million to $1.2 billion; however, the fund will not
necessarily sell stocks because they fall outside this range due to market
conditions.
The fund's assets may also be held in cash or high-quality cash equivalents,
government or corporate debt securities denominated in U.S. dollars or other
currencies for liquidity purposes or when, in the opinion of Capital Research
and Management Company, prevailing market conditions indicate that it is
desirable to do so. Under normal market conditions the fund will invest no more
than 35% of its total assets in such securities.
When prevailing market, economic, political or currency conditions warrant,
assets may also be invested in securities convertible into common stocks,
straight debt securities (generally rated in the top three quality categories
by any national rating service or determined to be of equivalent quality by
Capital Research and Management Company), government securities or
nonconvertible preferred stocks. These securities may also be issued by
entities domiciled outside the U.S. MORE INFORMATION ON THE FUND'S INVESTMENT
POLICIES IS CONTAINED IN ITS STATEMENT OF ADDITIONAL INFORMATION.
The fund's fundamental investment restrictions (described in the statement of
additional information) and objective may not be changed without shareholder
approval. All other investment practices may be changed by the fund's board of
directors.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT, OF COURSE, BE ASSURED
DUE TO THE RISK OF CAPITAL LOSS FROM FLUCTUATING PRICES INHERENT IN ANY
INVESTMENT IN SECURITIES.
5
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
SECURITIES AND INVESTMENT TECHNIQUES
INVESTING IN SMALLER CAPITALIZATION STOCKS
Investing in smaller capitalization stocks can involve greater risk than is
customarily associated with investing in stocks of larger, more established
companies. Transaction costs in stocks of smaller capitalization companies may
be higher than those of larger capitalization companies. Because the fund
emphasizes the stocks of issuers with smaller market capitalizations (by U.S.
standards), it can be expected to have more difficulty obtaining information
about the issuers or valuing or disposing of its securities than it would if it
were to concentrate on more widely held stocks.
EQUITY SECURITIES
Equity securities represent an ownership position in a company. These
securities may include common stocks and securities with equity conversion or
purchase rights. 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.
DEBT SECURITIES
Bonds and other debt securities are used by issuers to borrow money. Issuers
pay investors interest and generally must repay the amount borrowed at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality and maturity. In general their prices decline when
interest rates rise and vice versa.
The fund may invest up to 10% of its total assets in debt securities rate Baa
or BBB or below by Moody's Investors Service, Inc. or Standard & Poor's
Corporation or in unrated securities that are determined to be of equivalent
quality. Securities rate Ba and BB or below or unrated securities determined to
be of equivalent quality are commonly known as "high-yield, high-risk" or
"junk" bonds and are described by the ratings agencies as speculative. These
securities are subject to greater risk of default and can significantly decline
in price particularly in periods of general economic difficulty. It may be more
difficult to dispose of, or to determine the value of, high-yield, high-risk
bonds. The fund's high-yield, high risk securities may be rated as low as Ca or
CC. Bonds rated Ca or CC are described by the ratings agencies as "speculative
in a high degree; often in default or [having] other marked shortcomings." See
the statement of additional information for a complete description of the
ratings.
6
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
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.
INVESTING IN VARIOUS COUNTRIES
The fund has the ability to invest outside the U.S. Investing outside the U.S.
involves special risks, particularly in certain developing countries, caused
by, among other things: fluctuating currency values; different accounting,
auditing, and financial reporting regulations and practices in some countries;
changing local and regional economic, political, and social conditions; greater
market volatility; differing securities market structures; and various
administrative difficulties such as delays in clearing and settling portfolio
transactions or in receiving payment of dividends. However, in the opinion of
Capital Research and Management Company, investing outside the U.S. also can
reduce certain portfolio risks due to greater diversification opportunities.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
In making its investments in companies outside the U.S., the fund does not
intend to emphasize any particular country or region. Under normal market
conditions the fund will invest at least 65% of its total assets in equity
securities of small capitalization issuers as discussed earlier, and such
issuers will be located in at least three countries.
CURRENCY TRANSACTIONS
The fund can purchase and sell currencies to facilitate securities transactions
and enter into forward currency contracts to hedge against changes in currency
exchange rates. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain which might result from an increase in
the value of the currency. The fund will not generally attempt to protect
against all potential changes in exchange rates.
- --------------------------------------------------------------------------------
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The basic investment philosophy of Capital Research and Management Company is
to seek fundamental values at reasonable prices, using a system of multiple
7
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
portfolio counselors in managing mutual fund assets. Under this system the
portfolio of the fund is divided into segments which are managed by individual
counselors. Counselors decide how their respective segments will be invested
(within the limits provided by the fund's objective and policies and by Capital
Research and Management Company's investment committee). In addition, Capital
Research and Management Company's research professionals make investment
decisions with respect to a portion of the fund's portfolio. The primary
individual portfolio counselors for the fund are listed on the following page.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
------------------------------
YEARS OF EXPERIENCE
AS PORTFOLIO COUNSELOR WITH CAPITAL
(AND RESEARCH PROFESSIONAL, RESEARCH AND
PORTFOLIO COUNSELORS IF APPLICABLE) FOR MANAGEMENT
FOR SMALLCAP (SMALLCAP WORLD FUND, INC. COMPANY OR
WORLD FUND, INC. PRIMARY TITLE(S) (APPROXIMATEL) ITS AFFILIATES TOTAL YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
WILLIAM R. Director and 7 years (since 27 years 34 years
GRIMSLEY Vice Chairman the fund began
of the Board of operations)
the fund;
Senior Vice
President and
Director,
Capital
Research and
Management
Company
- ---------------------------------------------------------------------------------------------------------
GORDON President and 7 years (since 26 years 26 years
CRAWFORD Principal the fund began
Executive operations)
Officer of the
fund; Senior
Vice President
and Director,
Capital
Research
Company*
- ---------------------------------------------------------------------------------------------------------
ROBERT W. Vice President 2 years (in 12 years 12 years
LOVELACE of the fund; addition to 4
Executive Vice years as a
President and research
Director, professional
Capital prior to
Research becoming a
Company* portfolio
counselor for
the fund)
- ---------------------------------------------------------------------------------------------------------
MARK E. Senior Vice 5 years (in 15 years 15 years
DENNING President and addition to 1
Director, year as a
Capital research
Research professional
Company* prior to
becoming a
portfolio
counselor for
the fund)
- ---------------------------------------------------------------------------------------------------------
CLAUDIA Senior Vice 1 year (in 19 years 21 years
HUNTINGTON President, addition to 4
Capital years as a
Research research
Company* professional
prior to
becoming a
portfolio
counselor for
the fund)
- ---------------------------------------------------------------------------------------------------------
JAMES F. President and 2 years 27 years 27 years
ROTHENBERG Director,
Capital
Research and
Management
Company
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The fund began operations in April 1990.
* Company affiliated with Capital Research and Management Company.
................................................................................
8
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
The fund may from time to time compare investment results to various indices or
other mutual funds. Fund results may be calculated on a total return, yield
and/or distribution rate basis. Currently, the fund calculates investment
results only on a total return basis. Results calculated without a sales charge
will be higher.
- - TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gain
distributions.
- - YIELD is computed by dividing the net investment income per share earned by
the fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula
may be different than the income actually paid to shareholders.
- - DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by dividing the dividends paid over the last
12 months by the sum of the month-end price and the capital gain
distributions paid over the last 12 months.
INVESTMENT RESULTS
(FOR PERIODS ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
AVERAGE
ANNUAL THE FUND MEDIUM-
TOTAL AT NET THE FUND AT MAXIMUM SMALL CAP
RETURNS: ASSET VALUE/1/ SALES CHARGE/1/,/2/ WORLD INDEX/3/
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
One year 19.75% 12.88% 11.46%
................................................................................
Five years 14.64% 13.29% 10.59%
................................................................................
Lifetime/4/ 14.95% 13.93% 9.59%
- --------------------------------------------------------------------------------
</TABLE>
/1/ These fund results were calculated according to a standard formula that is
required for all stock and bond funds.
/2/ The maximum sales charge has been deducted.
/3/ The FT/S&P-Actuaries Medium-Small Cap World Index tracks the stocks of
smaller companies in 28 world markets. This index is unmanaged and does not
reflect sales charges, commissions or expenses.
/4/ The fund began investment operations on April 30, 1990.
9
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
[GRAPH APPEARS HERE]
Past results are not an indication of future results.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund usually pays dividends, which may fluctuate, in December. Capital
gains, if any, are also usually distributed in December. When a dividend or
capital gain is distributed, the net asset value per share is reduced by the
amount of the payment.
FEDERAL TAXES
In any fiscal year in which the fund qualifies as a regulated investment
company and distributes to shareholders all of its net investment income and
net capital gains, the fund itself is relieved of federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the
amount and federal tax status of all income distributions paid during the prior
year. Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
10
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE
FUND TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law
also requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement of additional information and your tax
adviser for further information.
- --------------------------------------------------------------------------------
FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Maryland corporation in 1989. All fund operations are supervised by the
fund's board of directors who meet periodically and perform 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 the statement of additional
information. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund. The fund does not hold
annual meetings of shareholders. However, significant corporate matters which
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. Shareholders have one vote per share owned.
At the request of the holders of at least 10% of the shares, the fund will hold
a meeting at which any member of the board could be removed by a majority vote.
THE INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the 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
11
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
Company manages the investment portfolio and business affairs of the fund. The
management fee paid by the fund to Capital Research and Management Company may
not exceed 0.50% of the fund's average net assets annually and declines at
certain asset levels. The total management fee paid by the fund, as a
percentage of average net assets, for the previous fiscal year is discussed
earlier under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's "code of ethics."
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 board and the expenses paid under the
Plan were incurred within the preceding 12 months and accrued while the Plan is
in effect. The 12b-1 fee paid by the fund, as a percentage of average net
assets, for the previous fiscal year is discussed earlier under "Expenses."
PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality 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.
Subject to the above policy, when two or more brokers are in a position to
offer comparable prices and executions, preference may be given to brokers who
have sold shares of the fund or have provided investment research, statistical,
and other related services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
12
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
[MAP APPEARS HERE]
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
WESTERN SERVICE CENTER
American Funds Service Company
P.O. Box 2205
Brea, California
92822-2205
Fax: 714/671-7080
WESTERN CENTRAL SERVICE CENTER
American Funds Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
Fax: 210/530-4050
EASTERN CENTRAL SERVICE CENTER
American Funds Service Company
P.O. Box 6007
Indianapolis, Indiana
46206-6007
Fax: 317/735-6620
EASTERN SERVICE CENTER
American Funds Service Company
P.O. Box 2280
Norfolk, Virginia
23501-2280
Fax: 804/670-4773
13
<PAGE>
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SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services,
which are summarized below, 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. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT
POLICIES IS CONTAINED 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.
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS. IF
YOU ARE INVESTING THROUGH A RETIREMENT PLAN, YOU SHOULD CONTACT YOUR PLAN
ADMINISTRATOR/TRUSTEE ABOUT WHAT SERVICES ARE AVAILABLE AND WITH QUESTIONS
ABOUT YOUR ACCOUNT.
- --------------------------------------------------------------------------------
PURCHASING SHARES
HOW TO PURCHASE SHARES
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, wire, or
bank debit. You may also establish or add to your account by exchanging shares
from any of your other accounts in The American Funds Group. The fund and
American Funds Distributors reserve the right to reject any purchase order.
Various purchase options are available as described below subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
- - Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
- - Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the
fund (with no sales charge). This will be done automatically unless you
elect to have the dividends and/or capital gain distributions paid to you
in cash.
14
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- - Cross-Reinvestment
You may invest your dividend and capital gain distributions into any other
fund in The American Funds Group.
- - Exchange Privilege
You may exchange your shares into other funds in The American Funds Group
generally with no sales charge. Exchanges of shares from the money market
funds that were initially purchased with no sales charge will generally be
subject to the appropriate sales charge. You may also elect to
automatically exchange shares among any of the funds in The American Funds
Group. Exchange requests may be made in writing, by telephone including
American FundsLine(R) (see below) or by fax. EXCHANGES HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
- - Retirement Plans
You may invest in the fund through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE
The fund's share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York
Stock Exchange is open. The fund calculates its net asset value per share,
generally using market prices, by dividing the total value of its assets after
subtracting liabilities by the number of its shares outstanding. Shares are
purchased at the offering price next determined after your investment is
received and accepted by American Funds Service Company. The offering price is
the net asset value plus a sales charge, if applicable.
SHARE CERTIFICATES
Shares are credited to your account and certificates are not issued unless you
request them by writing to American Funds Service Company.
INVESTMENT MINIMUMS
<TABLE>
- ----------------------------------------------------------------
<S> <C>
To establish an account $1,000
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account $ 25
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
SALES CHARGES
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
-----------------------
DEALER
NET CONCESSION AS
OFFERING AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED 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 than $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>
PURCHASES NOT SUBJECT TO SALES CHARGES
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 200 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS MADE WITHIN ONE YEAR OF PURCHASE BY THESE
ACCOUNTS. A dealer concession of up to 1% may be paid by the fund from its Plan
of Distribution on these investments. Investments by retirement plans with $100
million or more in assets may be made with no sales charge and are not subject
to a contingent deferred sales charge. A dealer concession of up to 1% may be
paid by American Funds Distributors on these investments. Investments by
certain individuals and entities including employees and other associated
persons of dealers authorized to sell shares of the fund and Capital Research
and Management Company and its affiliated companies are not subject to a sales
charge.
16
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
ADDITIONAL DEALER COMPENSATION
In addition to the concessions listed, 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. During 1997, American Funds Distributors will
also provide additional compensation to the top one hundred dealers who have
sold shares of funds in The American Funds Group based on the pro rata share of
a qualifying dealer's sales.
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.
- - Aggregation
Investments that may be aggregated include those made by you, your spouse
and your children under the age of 21, if all parties are purchasing shares
for their own account(s), including any business account solely "controlled
by," as well as any retirement plan or trust account solely for the benefit
of, these individuals. Investments made for multiple employee benefit plans
of a single employer or "affiliated" employers may be aggregated provided
they are not also aggregated with individual accounts. Finally, investments
made by a common trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating fund shares may be
aggregated.
Purchases made for nominee or street name accounts will generally not be
aggregated with those made for other accounts unless qualified as described
above.
- - Concurrent Purchases
You may combine concurrent purchases of two or more funds in The American
Funds Group, except direct purchases of the money market funds. Shares of
the 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 to determine your sales charge. Direct purchases
of the money market funds are excluded.
17
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
- - Statement of Intention
You may enter into a non-binding commitment to invest a certain amount
(which, at your request, may include purchases made during the previous 90
days) in non-money market fund shares over a 13-month period. A portion of
your account may be held in escrow to cover additional sales charges which
may be due if your total investments over the statement period are
insufficient to qualify for the applicable sales charge reduction.
- --------------------------------------------------------------------------------
SELLING SHARES
HOW TO SELL SHARES
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American
FundsLine(R) (see below). In addition, you may sell shares in amounts of $50 or
more automatically. If you sell shares through your investment dealer you may
be charged for this service. Shares held for you in your dealer's street name
must be sold through the dealer.
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R) (see below), or
by fax. Sales by telephone or fax are limited to $10,000 in accounts registered
to individual(s) (including non-retirement trust accounts). In addition, checks
must be made payable to the registered shareholder(s) and mailed to an address
of record that has been used with the account for at least 15 days. 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 10 calendar days from the
purchase date). Except for delays relating to clearance of checks for share
purchases or in extraordinary circumstances (and as permissible under the
Investment Company Act of 1940), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. The fund may, with 60
days' written notice, close your account if due to a sale of shares the account
has a value of less than the minimum required initial investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your
signature must be guaranteed by a bank, savings association, credit union, or
member firm of a domestic stock exchange or the National Association of
Securities Dealers, Inc., that is an eligible guarantor institution. A
signature guarantee is not currently required for any sale of $50,000 or less
provided the check is made
18
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
payable to the registered shareholder(s) and is mailed to the address of record
on the account, and provided the address has been used with the account for at
least 10 days. Additional documentation may be required for sales of shares
held in corporate, partnership or fiduciary accounts.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge in any fund in The American Fund Group
within 90 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt and acceptance by
American Funds Service Company.
- --------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE(R)
You may check your share balance, the price of your shares, or your most recent
account transactions, sell shares (up to $10,000 per fund, per account each
day), or exchange shares around the clock with American FundsLine(R). To use
this service, call 800/325-3590 from a TouchTone(TM) telephone.
TELEPHONE PURCHASES, SALES AND EXCHANGES
Unless you opt out of the telephone (including American FundsLine(R)) or fax
purchase, sale and/or exchange options (see below), 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 provided American Funds Service Company employs reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine. If reasonable procedures are not
employed, the fund may be liable for losses due to unauthorized or fraudulent
instructions.
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 to
American Funds Service Company.)
ACCOUNT STATEMENTS
You will receive regular confirmation statements reflecting transactions in
your account. Purchases through automatic investment plans and certain
retirement plans will be confirmed at least quarterly.
19
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
NOTES
20
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
NOTES
21
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
NOTES
22
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
NOTES
23
<PAGE>
- --------------------------------------------------------------------------------
SMALLCAP WORLD FUND / PROSPECTUS
- --------------------------------------------------------------------------------
FOR SHAREHOLDER FOR DEALER FOR 24-HOUR
SERVICES SERVICES INFORMATION
American Funds American Funds American
Service Company Distributors FundsLine(R)
800/421-0180 ext. 1 800/421-9900 ext. 11 800/325-3590
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
- ---------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL STATEMENT OF ADDITIONAL
REPORT TO SHAREHOLDERS INFORMATION (SAI)
Includes financial Contains more detailed
statements, detailed information on all aspects of
performance information, the fund, including the
portfolio holdings, a fund's financial statements.
statement from portfolio
management and the auditor's
report.
A current SAI has been filed
with the Securities and
Exchange Commission and is
incorporated by reference (is
legally part of the
prospectus).
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
[RECYCLE LOGO]
This prospectus has been printed on recycled paper.
24
<PAGE>
Prospectus
for Eligible Retirement Plans
SMALLCAP
WORLD FUND(R)
AN OPPORTUNITY FOR LONG-TERM GROWTH OF
CAPITAL PRIMARILY THROUGH THE STOCKS OF
SMALLER COMPANIES IN THE UNITED STATES --
AND AROUND THE WORLD
February 1, 1997
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
SMALLCAP WORLD FUND, INC.
333 South Hope Street
Los Angeles, California 90071
The fund's investment objective is to achieve long-term growth of capital. It
seeks to achieve this objective by investing primarily in equity securities of
issuers with relatively small market capitalizations located in various
countries. Investing in smaller capitalization stocks and securities of
issuers in various countries involves certain opportunities and risks that are
different from those associated with investing solely in larger capitalization
stocks and securities of issuers based in the United States.
This prospectus relates only to shares of the fund offered without a sales
charge to eligible retirement plans. For a prospectus regarding shares of the
fund to be acquired otherwise, contact the Secretary of the fund at the
address indicated above.
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference.
More detailed information about the fund, including the fund's financial
statements is contained in the statement of additional information dated
February 1, 1997, which has been filed with the Securities and Exchange
Commission and is available to you without charge, by writing to the
Secretary of the fund at the above address or calling American Funds Service
Company.
SHARES OF THE FUND 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. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
RP 35-010-0297
<PAGE>
- -------------------------------------------------------------------------------
SUMMARY OF
EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $13 per
year, assuming a $1,000
investment and a 5%
annual return with no
sales charge.
TABLE OF
CONTENTS
<TABLE>
<S> <C>
Summary of Expenses.............................. 2
Financial Highlights............................. 3
Investment Objective and Policies................ 3
Certain Securities and Investment Techniques..... 4
Investment Results............................... 7
Dividends, Distributions and Taxes............... 7
Fund Organization and Management................. 8
Purchasing Shares................................ 9
Shareholder Services............................. 11
Redeeming Shares................................. 11
</TABLE>
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
Certain retirement plans may purchase shares of the fund with no sales
charge./1/ The fund also has no sales charge on reinvested dividends, deferred
sales charge, redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C>
Management fees...................................................... 0.69%
12b-1 expenses....................................................... 0.23%/2/
Other expenses (including audit, legal, shareholder services,
transfer agent and custodian expenses).............................. 0.17%
Total fund operating expenses........................................ 1.09%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following cumulative
expenses on a $1,000 investment,
assuming a 5% annual return./3/ $11 $35 $60 $133
</TABLE>
/1/ Retirement plans of organizations with $100 million or more in collective
retirement plan assets may purchase shares of the fund with no sales charge.
In addition, any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or any other plan that
invests at least $1 million in shares of the fund (or in combination with
shares of other funds in The American Funds Group other than the money
market funds) may purchase shares at net asset value; however, a contingent
deferred sales charge of 1% applies on certain redemptions within 12 months
following such purchases. (See "Redeeming Shares--Contingent Deferred Sales
Charge.")
/2/ These expenses may not exceed 0.30% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/3/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL The following information relating to the past six pe-
HIGHLIGHTS riods has been audited by Deloitte & Touche LLP, inde-
pendent accountants, whose unqualified report is in-
(For a share cluded in the statement of additional information. This
outstanding information should be read in conjunction with the fi-
throughout the nancial statements and accompanying notes which are
fiscal year) also included in the statement of additional
information.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
-----------------------------------------------
1996 1995 1994 1993 1992 1991 1990/1/
------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Begin-
ning of Period........... $26.11 $23.61 $22.72 $18.01 $17.60 $13.26 $15.08
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income... .17 .22 .09 .06 .14 .18 .26
Net realized and
unrealized gain (loss)
on investments......... 3.32 3.79 1.83 5.56 .38 4.56 (2.08)
------ ------ ------ ------ ------ ------ ------
Total income from in-
vestment operations... 3.49 4.01 1.92 5.62 .52 4.74 (1.82)
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net in-
vestment income........ (.23) (.16) (.06) (.08) (.11) (.40) --
Distributions from net
realized gains......... (2.45) (1.35) (.97) (.83) -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions.... (2.68) (1.51) (1.03) (.91) (.11) (.40) --
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period................... $26.92 $26.11 $23.61 $22.72 $18.01 $17.60 $13.26
====== ====== ====== ====== ====== ====== ======
Total Return/2/........... 15.21% 18.59% 8.60% 32.46% 2.95% 36.43% (12.07)%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of pe-
riod (in millions)..... $6,607 $4,625 $3,497 $2,247 $1,255 $ 798 $ 571
Ratio of expenses to av-
erage net assets....... 1.09% 1.13% 1.12% 1.15% 1.21% 1.31% .49%/3/
Ratio of net income to
average net assets..... .68% .97% .38% .33% .85% 1.11% 1.70%/3/
Average commissions
paid/4/............1.41cents 1.00cents 1.25cents 1.55cents 2.36cents 1.83cents 2.24cents
Portfolio turnover rate. 42.88% 45.63% 29.43% 25.00% 23.10% 19.26% 1.91%/3/
</TABLE>
- -----------------
/1/ Period from 4/30/90-9/30/90 (initial period of operations).
/2/ Calculated with no sales charge.
/3/ These amounts are based on operations for the period shown and,
accordingly, not representative of a full year's operations.
/4/ Brokerage commissions paid on portfolio transactions increase the
cost of securities purchased or reduce the proceeds of securities
sold, and are not reflected in the fund's statement of operations.
Shares traded on a principal basis (without commissions), such as
most over-the-counter and fixed-income transactions, are excluded.
INVESTMENT The fund's investment objective is to provide long-term
OBJECTIVE growth of capital. It seeks to achieve its objective by
AND POLICIES investing primarily in equity securities of companies
with relatively small market capitalizations (share
The fund's goal is price times number of equity securities outstanding).
to provide you In selecting investments, the fund emphasizes companies
with long-term that are believed by the fund's investment adviser,
growth of capital. Capital Research and Management Company, to have the
potential for growth (based on strength of management,
new products or new services, etc.). Current income is
not a consideration.
The fund's investments typically have individual market
capitalizations of approximately $50 million to
$1.2 billion. The fund will not normally purchase
shares of any company, or add to any existing holding,
with a market capitalization of more than $1.2 billion.
However, the fund will not necessarily sell stocks be-
cause they fall outside this range due to market
conditions.
The fund's assets may also be held in cash or high-
quality cash equivalents (including certificates of de-
posit, bankers acceptances, commercial paper, short-
term notes or repurchase agreements), government or
corporate debt securities denominated in U.S. dollars
or other currencies for liquidity purposes or when, in
the opinion of Capital Research and Management Company,
prevailing market and economic conditions in-
3
<PAGE>
- -------------------------------------------------------------------------------
dicate that it is desirable to do so (for example, for
temporary defensive purposes). Under normal market con-
ditions the fund will invest no more than 35% of its
total assets in such securities.
The fund's investment restrictions (which are described
in the statement of additional information) and objec-
tive cannot be changed without shareholder approval.
All other investment practices may be changed by the
board of directors.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES AND THE SPECIAL RISKS ASSOCIATED WITH IN-
VESTING OUTSIDE THE U.S. DESCRIBED HEREIN.
CERTAIN INVESTING IN SMALLER CAPITALIZATION STOCKS Capital
SECURITIES AND Research and Management Company believes that the
INVESTMENT issuers of smaller capitalization stocks often have
TECHNIQUES sales and earnings growth rates which exceed those of
larger companies and that such growth rates may in turn
Investing in be reflected in more rapid share price appreciation.
smaller However, investing in smaller capitalization stocks can
capitalization involve greater risk than is customarily associated
stocks involves with investing in stocks of larger, more established
greater risks than companies. For example, smaller capitalization
investing in the companies often have limited product lines, markets, or
stocks of larger, financial resources, may be dependent for management on
more established one or a few key persons, and can be more susceptible
companies. to losses. Also, their securities may be thinly traded
(and therefore have to be sold at a discount from
current prices or sold in small lots over an extended
period of time), may be followed by fewer investment
research analysts, and may be subject to wider price
swings thus creating a greater chance of loss than
securities of larger capitalization companies.
Transaction costs in stocks of smaller capitalization
companies may be higher than those of larger
capitalization companies. Because the fund emphasizes
the stocks of issuers with smaller market
capitalizations (by U.S. standards), it can be expected
to have more difficulty obtaining information about the
issuers or valuing or disposing of its securities than
it would if it were to concentrate on more widely held
stocks.
INVESTING AROUND THE WORLD The fund's assets are
invested globally which, in the opinion of Capital
Research and Management Company, enhances the fund's
ability to meet its objective--long-term growth of
capital.
Of course, investing globally involves special risks,
particularly in certain developing countries, caused
by, among other things: fluctuating currency values;
less stringent accounting, auditing, and financial
reporting regulations and practices in some countries;
changing local and regional economic, political, and
social conditions; differing securities market
structures; and various administrative difficulties
such as delays in clearing and settling portfolio
transactions or in receiving payment of dividends.
4
<PAGE>
- -------------------------------------------------------------------------------
However, in the opinion of Capital Research and Manage-
ment Company, global investing also can reduce certain
portfolio market risks due to greater diversification
opportunities.
Additional costs could be incurred in connection with
the fund's investment activities outside the U.S. Bro-
kerage commissions are generally higher outside the
U.S., and the fund will bear certain expenses in con-
nection with its currency transactions. Furthermore,
increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
In making its investments in companies outside the
U.S., the fund does not intend to emphasize any partic-
ular country or region. Under normal market conditions
the fund will invest at least 65% of its total assets
in equity securities of smaller capitalization issuers
as described above, and such issuers will be located in
at least three countries.
INVESTING IN FIXED-INCOME SECURITIES When prevailing
market, economic, political or currency conditions
warrant, assets may also be invested in securities
convertible into common stocks, straight debt
securities (generally rated in the top three quality
categories by any national rating service or determined
to be of equivalent quality by Capital Research and
Management Company), government securities, or
nonconvertible preferred stocks. If market interest
rates increase, such fixed-income securities generally
decline in value and vice versa. These securities may
also be issued by entities domiciled outside the U.S.
The fund's investments in debt securities may be denom-
inated in currencies other than the U.S. dollar. If the
currency in which the security is denominated declines
against the U.S. dollar, the dollar value of the secu-
rity will decline and vice versa. The fund may hold a
portion of its assets in U.S. dollars and other curren-
cies and in cash equivalents of either U.S. issuers or
issuers domiciled outside the U.S. (See the statement
of additional information for a description of cash
equivalents.)
CURRENCY TRANSACTIONS The fund has the ability to hold
currencies and enter into forward currency contracts to
protect against changes in currency exchange rates.
However, there is no assurance that such strategies
will be successful. Moreover, due to the expenses in-
volved, the fund will not generally attempt to protect
against all potential changes in exchange rates.
5
<PAGE>
- -------------------------------------------------------------------------------
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic invest-
ment philosophy of Capital Research and Management Com-
pany is to seek fundamental values at reasonable pric-
es, using a system of multiple portfolio counselors in
managing mutual fund assets. Under this system the
portfolio of the fund is divided into segments, which
are managed by individual counselors. Each counselor
decides how their segment will be invested (within the
limits provided by the fund's objective and policies
and by Capital Research and Management Company's in-
vestment committee). In addition, Capital Research and
Management Company's research professionals make in-
vestment decisions with respect to a portion of the
fund's portfolio. The primary individual portfolio
counselors for the fund are listed below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
YEARS OF EXPERIENCE AS (APPROXIMATE)
PORTFOLIO COUNSELOR (AND
PORTFOLIO COUNSELORS RESEARCH PROFESSIONAL, WITH CAPITAL
FOR IF APPLICABLE) FOR RESEARCH AND
SMALLCAP PRIMARY TITLE(S) SMALLCAP MANAGEMENT
WORLD FUND WORLD FUND COMPANY OR TOTAL
(APPROXIMATE) ITS AFFILIATES YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William R. Grimsley Director and Vice Since the fund began 27 years 34 years
Chairman of the Board operations
of the fund. Senior
Vice President and
Director,
Capital Research and
Management Company
- ------------------------------------------------------------------------------------------------------------
Gordon Crawford President and Principal Since the fund began 26 years 26 years
Executive Officer of operations
the fund. Senior Vice
President and Director,
Capital Research and
Management Company
- ------------------------------------------------------------------------------------------------------------
Robert W. Lovelace Vice President of the 3 years (in addition to 12 years 12 years
fund. Executive Vice 4 years as a research
President and Director, professional prior to
Capital Research Company* becoming a portfolio
counselor for the fund)
------------------------------------------------------------------------------------------------------------
Mark E. Denning Senior Vice President 5 years (in addition to 15 years 15 years
and Director, Capital 1 year as a research
Research Company* professional prior to
becoming a portfolio
counselor for the fund)
- ------------------------------------------------------------------------------------------------------------
Claudia Huntington Senior Vice President, 1 year (in addition to ___ 19 years 21 years
Capital Research Company* years as a research
professional prior to
becoming a portfolio
counselor for the fund)
- ------------------------------------------------------------------------------------------------------------
James F. Rothenberg President and Direc- 2 years 27 years 27 years
tor, Capital Research
and Management Company
- ------------------------------------------------------------------------------------------------------------
THE FUND BEGAN OPERATIONS ON APRIL 30, 1990
*COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
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INVESTMENT The fund may from time to time compare its investment
RESULTS results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a to-
averaged a total tal return, yield and/or distribution rate basis for
return (at no various periods, with or without sales charges. Results
sales charge) of calculated without a sales charge will be higher. Total
14.95% a year returns assume the reinvestment of all dividends and
under Capital capital gain distributions. The fund's distribution
Research and rate is calculated by dividing the dividends paid by
Management the fund over the last 12 months by the sum of the
Company's month-end price and the capital gains paid over the
management last 12 months. The SEC yield reflects income the fund
(April 30, 1990 expects to earn based on its current portfolio of
through December securities, while the distribution rate is based on the
31, 1996). fund's past dividends. Accordingly, the fund's SEC yield
and distribution rate may differ. Among the elements
used to calculate the SEC yield are the dividend and
interest income earned and expenses paid by the fund,
whereas the income paid to shareholders is used to
calculate the distribution rate.
The fund's total return over the past 12 months, aver-
age annual return over the past five years and average
lifetime return, as of December 31, 1996, were 19.75%,
14.64% and 14.95%, respectively. These results were
calculated with no sales charge in accordance with Se-
curities and Exchange Commission requirements. Of
course, past results are not an indication of future
results. Further information regarding the fund's in-
vestment results is contained in the fund's annual re-
port which may be obtained without charge by writing to
the Secretary of the fund at the address indicated on
the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS Dividends are usually paid
DISTRIBUTIONS in June and December. Capital gains, if any, are usu-
AND TAXES ally distributed in December. When a dividend or capi-
tal gain is distributed, the net asset value per share
Income is reduced by the amount of the payment.
distributions are
usually made in The terms of your plan will govern how your plan may
June and December. receive distributions from the fund. Generally, peri-
odic distributions from the fund to your plan are rein-
vested in additional fund shares, although your plan
may permit fund distributions from net investment in-
come to be received by you in cash while reinvesting
capital gain distributions in additional shares or may
permit all fund distributions to be received in cash.
Unless you select another option, all distributions
will be reinvested in additional fund shares.
FEDERAL TAXES The fund intends to operate as a "regu-
lated investment company" under the Internal Revenue
Code. In any fiscal year in which the fund so qualifies
and distributes to shareholders all of its net invest-
ment income and net capital gains, the fund itself is
relieved of federal income tax. The tax treatment of
redemptions from a retirement plan may differ from re-
demptions from an ordinary shareholder account.
The fund may be required to pay withholding and other
taxes imposed by various countries in connection with
its investments outside the U.S., generally at rates
from 10% to 40%, which would reduce the fund's invest-
ment income.
PLEASE SEE THE STATEMENT OF ADDITIONAL INFORMATION AND
YOUR TAX ADVISER FOR FURTHER INFORMATION.
7
<PAGE>
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FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end, diversified management investment company, was or-
AND ganized as a Maryland corporation in 1989. The fund's
MANAGEMENT board supervises fund operations and performs duties
required by applicable state and federal law. Members
The fund is a of the board who are not employed by Capital Research
member of The and Management Company or its affiliates are paid for
American Funds services rendered to the fund as described in the
Group, which is statement of additional information. They may elect to
managed by one of defer all or a portion of these fees through a deferred
the largest and compensation plan in effect for the fund. Shareholders
most experienced have one vote per share owned and, at the request of
investment the holders of at least 10% of the shares, the fund
advisers. will hold a meeting at which any member of the board
could be removed by a majority vote. There will not
usually be a shareholder meeting in any year except,
for example, when the election of the board is required
to be acted upon by shareholders under the Investment
Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los Ange-
les, CA 90071, and at 135 South State College Boule-
vard, Brea, CA 92821. Capital Research and Management
Company manages the investment portfolio and business
affairs of the fund and receives a fee at the annual
rates of 0.80% on the first $1 billion of the fund's
assets, 0.70% on net assets in excess of $1 billion but
not exceeding $2 billion, 0.67% on net assets in excess
of $2 billion but not exceeding $3 billion, 0.65% on
net assets in excess of $3 billion but not exceeding $5
billion, 0.635% on net assets in excess of $5 billion
but not exceeding $8 billion, and 0.625% on net assets
in excess of $8 billion.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its affili-
ated companies have adopted a personal investing policy
that is consistent with the recommendations contained
in the report dated May 9, 1994 issued by the Invest-
ment Company Institute's Advisory Group on Personal In-
vesting. (See the statement of additional information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. In the over-the-counter mar-
ket, purchases and sales are transacted directly with
principal market-makers
8
<PAGE>
- -------------------------------------------------------------------------------
except in those circumstances where it appears better
prices and executions are available elsewhere.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors, Inc. is lo-
cated at 333 South Hope Street, Los Angeles, CA 90071,
135 South State College Boulevard, Brea, CA 92821, 8000
IH-10 West, San Antonio, TX 78230, 8332 Woodfield
Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. Telephone conversa-
tions with American Funds Distributors may be recorded
or monitored for verification, recordkeeping and qual-
ity assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of distribu-
tion or "12b-1 Plan" under which it may finance activi-
ties primarily intended to sell shares, provided the
categories of expenses are approved in advance by the
board and the expenses paid under the plan were in-
curred within the last 12 months and accrued while the
plan is in effect. Expenditures by the fund under the
plan may not exceed 0.30% of its average net assets an-
nually (0.25% of which may be for service fees.)
TRANSFER AGENT American Funds Service Company, 800/421-
0180, a wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. American Funds Service
Company is located at 333 South Hope Street, Los Ange-
les, CA 90071, 135 South State College Boulevard, Brea,
CA 92821, 8000 IH-10 West, San Antonio, TX 78230, 5300
Robin Hood Road, Norfolk, VA 23513 and 8332 Woodfield
Crossing Boulevard, Indianapolis, IN 46240. It was paid
a fee of $5,701,000 for the fiscal year ended September
30, 1996. Telephone conversations with American Funds
Service Company may be recorded or monitored for veri-
fication, recordkeeping and quality assurance purposes.
PURCHASING SHARES ALL ORDERS TO PURCHASE SHARES MUST BE MADE THROUGH YOUR
RETIREMENT PLAN. FOR MORE INFORMATION ABOUT HOW TO
PURCHASE SHARES OF THE FUND THROUGH YOUR PLAN OR
LIMITATIONS ON THE AMOUNT THAT MAY BE PURCHASED, PLEASE
CONSULT WITH YOUR EMPLOYER. Shares are sold to eligible
retirement plans at the net asset value per share next
determined after receipt of an order by the fund or
American Funds Service Company. Orders must be received
before the close of regular trading on the New York
Stock Exchange in order to receive that day's net asset
value. Plans of organizations with collective
retirement plan assets of $100 million or more may
purchase shares at net asset value. In
9
<PAGE>
- -------------------------------------------------------------------------------
addition, any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees or any other plan that
invests at least $1 million in shares of the fund (or
in combination with shares of other funds in The
American Funds Group other than the money market funds)
may purchase shares at net asset value; however, a
contingent deferred sales charge of 1% is imposed on
certain redemptions made within one year of such
purchase. (See "Redeeming Shares--Contingent Deferred
Sales Charge.") Plans may also qualify to purchase
shares at net asset value by completing a statement of
intention to purchase $1 million in fund shares subject
to a commission over a maximum of 13 consecutive
months. Certain redemptions of such shares may also be
subject to a contingent deferred sales charge as
described above. (See the statement of additional
information.)
The minimum initial investment 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.
During 1997, American Funds Distributors will provide
additional compensation to the top one hundred dealers
who have sold shares of the fund or other funds in
The American Funds Group, based on a pro rata share
of a qualifying dealer's sales. American Funds
Distributors will, on an annual basis, determine the
advisability of continuing these promotional incentives.
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. (See "Fund
Organization and Management--Plan of Distribution.")
These services include processing purchase and
redemption transactions, establishing shareholder
accounts and providing certain information and
assistance with respect to the fund.
Shares of the fund are offered to other shareholders
pursuant to another prospectus at public offering
prices that may include an initial sales charge.
SHARE PRICE Shares are offered to eligible retirement
plans at the net asset value next determined after the
order is received by the fund or American Funds Service
Company. In the case of orders sent directly to the
fund or American Funds Service Company, an investment
dealer must be indicated. Dealers are responsible for
promptly transmitting orders. (See the
10
<PAGE>
- -------------------------------------------------------------------------------
statement of additional information under "Purchase of
Shares--Price of Shares.")
The fund's net asset value per share is determined as
of the close of trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share.
SHAREHOLDER Subject to any restrictions contained in your plan, you
SERVICES can exchange your shares for shares of other funds in
The American Funds Group which are offered through the
plan at net asset value. In addition, again depending
on your plan, you may be able to exchange shares auto-
matically or cross-reinvest dividends in shares of
other funds. Contact your plan administrator/trustee
regarding how to use these services. Also, see the
fund's statement of additional information for a de-
scription of these and other services that may be
available through your plan. These services are avail-
able only in states where the fund to be purchased may
be legally offered and may be terminated or modified at
any time upon 60 days' written notice.
REDEEMING SHARES Subject to any restrictions imposed by your plan, you
can sell your shares through the plan any day the New
York Stock Exchange is open. For more information about
how to sell shares of the fund through your retirement
plan, including any charges that may be imposed by the
plan, please consult with your employer.
--------------------------------------------------------
By contacting Your plan administrator/trustee must
your plan send a letter of instruction
administrator/ specifying the name of the fund, the
trustee number of shares or dollar amount to
be sold, and, if applicable, your
name and account number. For your
protection, if you redeem more than
$50,000, the signatures of the
registered owners or their legal
representatives must be guaranteed by
a bank, savings association, credit
union, or member firm of a domestic
stock exchange or the National
Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. Your plan administrator/
trustee should verify with the
institution that it is an eligible
guarantor prior to signing.
Additional documentation may be
required to redeem shares from
certain accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
--------------------------------------------------------
By contacting Shares may also be redeemed through
an investment an investment dealer; however, you or
dealer your plan may be charged for this
service. SHARES HELD FOR YOU IN AN
INVESTMENT DEALER'S STREET NAME MUST
BE REDEEMED THROUGH THE DEALER.
--------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND ALL
REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
11
<PAGE>
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CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions made
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees. 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 qualified
retirement plans and other employee benefit plans; for
redemptions resulting from participant-directed
switches among investment options within a participant-
directed employer-sponsored retirement plan; and for
redemptions in connection with loans made by qualified
retirement plans.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because the fund's
net asset value fluctuates, reflecting the market value
of the portfolio, the amount you receive for shares
redeemed may be more or less than the amount paid for
them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
THIS PROSPECTUS RELATES ONLY TO SHARES OF THE FUND
OFFERED WITHOUT A SALES CHARGE TO ELIGIBLE RETIREMENT
PLANS. FOR A PROSPECTUS REGARDING SHARES OF THE FUND
TO BE ACQUIRED OTHERWISE, CONTACT THE SECRETARY OF
THE FUND AT THE ADDRESS INDICATED ON THE FRONT.
12
<PAGE>
SMALLCAP WORLD FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1997
This document is not a prospectus but should be read in conjunction with the
current prospectus of SMALLCAP World Fund, Inc. (the fund or SCWF) dated
February 1, 1997. The prospectus may be obtained from your investment dealer
or financial planner or by writing to the fund at the following address:
SMALLCAP 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
<TABLE>
<CAPTION>
ITEM PAGE NO.
<S> <C>
INVESTMENT POLICIES 1
DESCRIPTION OF CERTAIN SECURITIES 3
INVESTMENT RESTRICTIONS 4
FUND DIRECTORS AND OFFICERS 6
MANAGEMENT 10
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 12
PURCHASE OF SHARES 15
REDEEMING SHARES 22
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 23
EXECUTION OF PORTFOLIO TRANSACTIONS 25
GENERAL INFORMATION 25
INVESTMENT RESULTS 27
APPENDIX - DESCRIPTION OF BOND RATINGS 32
FINANCIAL STATEMENTS ATTACHED
</TABLE>
INVESTMENT POLICIES
INVESTING IN SMALLER CAPITALIZATION STOCKS Capital Research and Management
Company believes that the issuers of smaller capitalization stocks often have
sales and earnings growth rates which exceed those of larger companies and that
such growth rates may in turn be reflected in more rapid share price
appreciation. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with investing in stocks of larger,
more established companies. For example, smaller companies often have limited
product lines, markets, or financial resources, may be dependent for management
on one or a few key persons, and can be more susceptible to losses. Also, their
securities may be thinly traded (and therefore have to be sold at a discount
from current prices or sold in small lots over an extended period of time), may
be followed by fewer investment research analysts, and may be subject to wider
price swings thus creating a greater chance of loss than securities of larger
capitalization companies.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the repurchase price, including
accrued interest, as monitored daily by Capital Research and Management Company
(the Investment Adviser). See "Management" below. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
fund may be delayed or limited.
CURRENCY TRANSACTIONS -- The fund has the ability to enter into forward
currency contracts to protect against changes in currency exchange rates. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. 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 the extent
required by the Securities and Exchange Commission.
Certain provisions of the Internal Revenue Code may limit 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.
INVESTMENT COMPANIES -- Although the fund has no current intention of investing
in such securities (at least for the next 12 months), it has the ability to
invest up to 5% of its total assets in shares of closed-end investment
companies. Additionally, the fund would not acquire more than 3% of the
outstanding voting securities of any one closed-end investment company. (To
the extent that the fund invests in another investment company, it would pay an
investment advisory fee in addition to the fee paid to the Investment Adviser.)
LOWER RATED DEBT SECURITIES - The fund may invest up to 10% of its assets in
debt securities which are rated below the top three quality categories by
Standard & Poor's Corporation (S&P) or Moody's Investors Service, Inc.
(Moody's) or securities that are determined equivalent by the fund's investment
adviser, Capital Research and Management Company (the Investment Adviser).
(See "Appendix - Description of Bond Ratings" below for a more complete
description of bond ratings.)
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high risk bonds
are very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercised these provisions
in a declining interest rate market, the fund would have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. Conversely, a high-yield, high-risk bond's value will decrease in a
rising interest rate market, as it will with all bonds.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
DESCRIPTION OF CERTAIN SECURITIES
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (i) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (ii) 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.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the Treasury.
However, they generally involve federal sponsorship in one way or another; some
are backed by specific types of collateral; some are supported by the issuer's
right to borrow from the Treasury; some are supported by the discretionary
authority of the Treasury to purchase certain obligations of the issuer; 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 EQUIVALENTS -- These securities include (1) commercial paper (short-term
notes up to 9 months in maturity issued by corporations or governmental
bodies), (2) commercial bank obligations (certificates of deposit
(interest-bearing time deposits) and banker's acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity), (3) savings association obligations (certificates of deposit issued
by mutual savings banks or savings and loan associations), (4) securities of
the U.S. Government, its agencies or instrumentalities that mature, or may be
redeemed, in one year or less, and (5) corporate bonds and notes (corporate
obligations that mature, or that may be redeemed, in one year or less).
PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders. 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. See Financial Highlights in the
prospectus for the fund's portfolio turnover for each of the last seven fiscal
periods.
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 law 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. All percentage limitations expressed in the following investment
restrictions are measured immediately after and giving effect to the relevant
transaction. The fund may not:
1. Invest in securities of an issuer (other than the U.S. or its agencies or
instrumentalities), if immediately after and as a result of such investment
more than 5% of the value of its total assets would be invested in the
securities of such other issuer (except with respect to 25% of the value of its
total assets, the fund may exceed the 5% limitation with regard to investments
in the securities of any one foreign government);
2. Invest in companies for the purpose of exercising control or management;
3. Invest 25% or more of the value of its total assets in the securities of
companies primarily engaged in any one industry;
4. Invest 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;
5. Buy or sell real estate (including real estate limited partnerships) in the
ordinary course of its business; however, the fund may invest in securities
secured by real estate or interests therein or issued by companies, including
real estate investment trusts and funds, which invest in real estate or
interests therein;
6. Buy or sell commodities or commodity contracts in the ordinary course of
its business, provided, however, that entering into a currency forward or
futures contract shall not be prohibited by this restriction;
7. Invest more than 10% of the value of its total assets in securities which
are not readily marketable (including repurchase agreements maturing in more
than seven days or non-U.S. securities for which there is no recognized
exchange or active and substantial over-the-counter market) or engage in the
business of underwriting securities of other issuers, except to the extent that
the disposal of an investment position may technically constitute the fund an
underwriter as that term is defined under the Securities Act of 1933;
8. Lend money; provided that entering into repurchase agreements, investment
in debt securities or in cash equivalents and lending of portfolio securities
shall not be prohibited by this restriction;
9. Sell securities short except to the extent that the fund contemporaneously
owns or has the right to acquire, at no additional cost, securities identical
to those sold short;
10. Purchase securities on margin or mortgage, pledge or hypothecate its
assets to any extent;
11. Borrow amounts in excess of 5% of the value of its total assets or issue
senior securities. In any event, the fund may borrow only as a temporary
measure for extraordinary or emergency purposes and not for investment in
securities;
12. Purchase or retain the securities of any issuer if those individual
officers and Directors of the fund, its Investment Adviser or principal
underwriter, each owning beneficially more than 1/2 of 1% of the securities of
such issuer, together own more than 5% of the securities of such issuer;
13. Invest more than 5% of the value of its total assets in securities of
companies having, together with their predecessors, a record of less than three
years of continuous operation;
14. Purchase or sell puts, calls, straddles or spreads, or combinations
thereof; nor
15. Purchase partnership interests or invest in leases to develop, or explore
for, oil, gas, or minerals.
For purposes of investment restriction number 3, the fund will not invest 25%
or more of total assets in the securities of issuers in the same industry.
Further investment policies of the fund, which may be changed by action of the
Board of Directors without shareholder approval, are as follows: the fund will
not invest in securities of an issuer if the investment would cause the fund to
own more than 10% of any class of securities of any one issuer; and the fund
will not invest more than 5% of its net assets in warrants valued at the lower
of cost or market, with no more than 2% being unlisted on either the New York
or the American Stock Exchanges (warrants acquired or attached to securities
may be deemed to be without value for the purpose of this restriction).
All percentages relating to the policies and restrictions of the fund are
measured at the time the investment is made.
FUND DIRECTORS AND OFFICERS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATION(S) DURING AGGREGATE TOTAL COMPENSATION TOTAL NUMBER
WITH PAST 5 YEARS (POSITIONS WITHIN THE COMPENSATION (INCLUDING VOLUNTARILY OF FUND BOARDS
REGISTRANT ORGANIZATIONS LISTED MAY HAVE (INCLUDING DEFERRED ON WHICH
CHANGED DURING THIS PERIOD) VOLUNTARILY COMPENSATION) DIRECTOR
DEFERRED FROM ALL FUNDS SERVES/2/
COMPENSATION/1/) MANAGED BY CAPITAL
FROM THE FUND RESEARCH AND
DURING FISCAL YEAR MANAGEMENT
ENDED 9/30/96 COMPANY
<S> <C> <C> <C> <C> <C>
Richard G. Capen, Jr. Director Corporate Director and author; $13,900 $27,650 2
Box 2494 former United States Ambassador to
Rancho Santa Fe, CA 92067 Spain; former Vice Chairman of the
Age: 62 Board; Knight Ridder, Inc.; former
Chairman and Publisher, The Miami
Herald.
+H. Frederick Christie Director Private Investor; former President $14,300/3/ $145,750/3/ 18
P.O. Box 144 and Chief Executive Officer, The
Palos Verdes Estates, CA Mission Group (non-utility holding
90274 company, subsidiary of Southern
Age: 63 California Edison Company); former
President, Southern California
Edison Company
Alan E. Clements Director Private investor; former Executive $13,300 $26,350 2
16 Great Peter Street Director - Finance, Imperial Chemical
London SW1P3JF Industries PLC
England
Age: 68
++Robert B. Egelston Chairman Senior Partner, Capital Group None/4/ None/4/ 5
333 South Hope Street of the Partners, Limited Partnership
Los Angeles, CA 90071 Board
Age: 66
Alan Greenway Director President, Greenway Associates, $13,900 $67,450 4
7413 Fairway Road Inc.
La Jolla, CA 92037 (management consulting services)
Age: 69
++William R. Grimsley Director Senior Vice President and Director, None/4/ None/4/ 3
One Market Plaza Capital Research and Management
Steuart Towers, Suite 1800 Company
San Francisco, CA 94105
Age: 58
++Graham Holloway Director Former Chairman of the Board, None/4/ None/4/ 2
17309 Club Hill Drive American Funds Distributors, Inc.
Dallas, TX 75248
Age: 66
Leonade D. Jones Director Former Treasurer, The Washington $13,900/3/ $72,500/3/ 5
1536 Los Montes Drive Post Company
Burlingame, CA 94010
Age: 49
William H. Kling Director President, Minnesota Public Radio; $13,300/3/ $70,050/3/ 4
45 East Seventh Street President, Greenspring Co.; former
St. Paul, MN 55101 President, American Public Radio
Age: 54 (now Public Radio International)
Norman R. Weldon Director Managing Director, Partisan $13,300 $33,850 2
8210 N.W. 27th Street Management Group, Inc.; Chairman
Miami, FL 33122 of the Board, Novoste Corporation;
Age: 62 Director, Enable Medical; former
President and Director, Corvita
Corporation
Patricia K. Woolf Director Private investor; Lecturer, $13,300 $77,950 5
506 Quaker Road Department
Princeton, NJ 08540 of Molecular Biology, Princeton
Age: 62 University
</TABLE>
+ May be deemed an "interested person" within the meaning of the Investment
Company Act of 1940 (the 1940 Act) due to membership on the board of directors
of the parent company of a registered broker-dealer.
++ Directors who are "interested persons" within the meaning of the 1940 Act on
the basis of their affiliation with the Investment Adviser.
/1/ Amounts may be deferred by eligible Directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more 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 28 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., 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; amd Bond Portfolio for Endowments, Inc. and
Endowments, Inc whose shares may be owned only by tax-exempt organizations.
/3/ Since the plan's adoption, the total amounts of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors are as
follows: H. Frederick Christie ($24,098) William H. Kling ($42,302); and
Leonade D. Jones ($22,958). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the Director.
/4/ Robert B. Egelston, William R. Grimsley and Graham Holloway are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
(with their principal occupations during the past five years)#
ROBERT B. EGELSTON, Chairman of the Board (see above).
WILLIAM R. GRIMSLEY, Vice Chairman of the Board (see above).
* GORDON CRAWFORD, President. Senior Vice President and Director, Capital
Research and Management Company
GREGORY W. WENDT, Senior Vice President. One Market Plaza, Steuart Towers,
Suite 1800, San Francisco, CA 94105. Vice President, Capital Research
Company.
* VINCENT P. CORTI, Vice President. Vice President - Fund Business Management
Group, Capital Research and Management Company.
** STEVEN N. KEARSLEY, Vice President and Treasurer. Vice President and
Treasurer, Capital Research and Management Company.
ROBERT W. LOVELACE, Vice President. 11100 Santa Monica Boulevard, 15th Floor,
Los Angeles, CA 90025. Vice President, Capital International, Inc.
* CHAD L. NORTON, Secretary. Vice President - Fund Business Management Group,
Capital Research and Management Company.
** MARY C. HALL, Assistant Treasurer. Vice President - Fund Business
Management Group, Capital Research and Management Company.
ROBERT P. SIMMER, Assistant Treasurer. 5300 Robin Hood Road, Norfolk, VA
23513. Vice President - Fund Business Management Group, Capital Research and
Management Company.
__________________________________
# Positions within the organizations listed may have changed during this
period.
* Address is 333 South Hope Street, Los Angeles, CA 90071
** Address is 135 South State College Boulevard, Brea, CA 92821
All of the Directors and officers also are officers or employees of the
Investment Adviser or affiliated companies. No compensation is paid by the
fund to any officer or Director who is a director, officer or employee of the
Investment Adviser or affiliated companies. The fund pays fees of $11,500 per
annum to Directors who are not affiliated with the Investment Adviser, plus
$800 for each Board of Directors meeting attended, plus $400 for each meeting
attended as a member of a committee of the Board of Directors. The Directors
may elect, on a voluntary basis, to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund. The fund also
reimburses certain expenses of the Directors who are not affiliated with the
Investment Adviser. As of January 1, 1997 the officers and Directors of the
fund and their families as a group owned beneficially or of record less than 1%
of the outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, 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 Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types. These investors include privately owned businesses and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the Agreement) between the fund and the Investment Adviser
will continue in effect until November 30, 1997, 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
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 the services and paying the
compensation and travel expenses of qualified persons to perform executive,
administrative, clerical and bookkeeping functions of the fund, provides
suitable office space and utilities, and provides necessary small office
equipment and general purpose accounting forms, supplies, and postage used at
the office of the fund.
Under the Agreement, the Investment Adviser's fee is calculated at the annual
rates of 0.80% on the first $1 billion of the fund's average net assets, 0.70%
on average net assets in excess of $1 billion but not exceeding $2 billion,
0.67% on average net assets in excess of $2 billion but not exceeding $3
billion, 0.65% on average net assets in excess of $3 billion but not exceeding
$5 billion, 0.635% on average net assets in excess of $5 billion but not
exceeding $8 billion, and 0.625% on average net assets in excess of $8
billion.
The Investment Adviser has agreed that in the event the expenses of the fund
(with the exclusion of interest, taxes, brokerage costs, extraordinary expenses
such as litigation and acquisitions or other expenses excludable under
applicable state securities laws or regulations) 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 any regulations thereunder, will
reimburse the fund in the amount of such excess.
During the fiscal years ended September 30, 1996, 1995 and 1994, the
Investment Adviser received advisory fees of $37,904,000, $26,933,000 and
$21,425,000, respectively.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the Principal
Underwriter) is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240 and 5300 Robin
Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of Distribution (the
Plan), pursuant to rule 12b-1 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. Commissions retained by the Principal
Underwriter on sales of fund shares for the fiscal year ended September 30,
1996 amounted to $6,297,000 after allowance of $32,208,000 to dealers. During
the fiscal years ended September 30, 1995 and 1994, the Principal Underwriter
retained $3,278,000 and $5,343,000, respectively.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by a majority of the entire 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 shall be 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 which is primarily intended to result in the
sale of fund shares provided the fund's Board of Directors has approved the
category of expenses for which payment is made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue code including a 401(k) plan with 200 or
more eligible employees). Only expenses incurred during the preceeding 12
months and accrued while the Plan is in effect may be paid by the fund. During
the fiscal year ended September 30, 1996, the fund paid or accrued $12,769,000
under the Plan as compensation to dealers.
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 (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of its investment company
taxable income, it will be taxed only on that portion of such investment
company taxable income that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
gains or sale or other disposition of stock or securities held less than three
months; and (c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies and other securities, but such other
securities must be limited, in respect of any one issuer, to an amount not
greater than 5% of the fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies), or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends, to the extent practicable, to meet these
distribution requirements to minimize or avoid the excise tax liability.
The amount of any realized gain or loss on closing out a forward currency
contract 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 also intends to continue distributing 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. Except for transactions in forward currency contracts which
are classified as part of a "mixed straddle," any gain or loss recognized with
respect to forward currency contracts is considered to be 60% long-term capital
gain or loss and 40% short-term capital gain or loss, without regard to the
holding period of the contract. In the case of a transaction classified as a
"mixed straddle," the recognition of losses may be deferred to a later taxable
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. In order to
avoid realizing excessive gains on securities or currencies held less than
three months, the fund may be required to defer the closing out of a forward
currency contract beyond the time when it would otherwise be advantageous to do
so. It is anticipated that unrealized gains on forward currency contracts,
which have been open for less than three months as of the end of the fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test, as discussed above.
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.
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, 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, nonresident
alien fiduciary of a 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 if the
non-U.S. shareholder was an individual who was physically present in the U.S.
during the tax year for more than 182 days and such shareholder is nonetheless
treated as a nonresident alien, the distributions would be subject to a 30%
tax.
The fund may be required to pay withholding and other taxes imposed by foreign
countries, generally at rates from 10% to 40%, which would reduce the fund's
investment income. While the fund expects to invest less than 50% of its
assets outside the U.S. under current market conditions, if more than 50% in
value of the fund's total assets at the close of its taxable year consists of
securities of foreign issuers, the fund will be eligible to file elections with
the Internal Revenue Service pursuant to which shareholders of the fund will be
required to include their respective pro rata portions of such withholding
taxes in their federal income tax returns as gross income, treat such amounts
as foreign taxes paid by them, and deduct such amounts in computing their
taxable incomes or, alternatively, use them as foreign tax credits against
their federal income taxes. In any year the fund makes such an election,
shareholders will be notified as to the amount of foreign withholding and other
taxes paid by the fund.
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 gain is 28%; and the maximum corporate tax applicable
to ordinary income and net capital gain is 35%. However, to eliminate the
benefit of lower marginal corporate income tax rates, corporations which have
income in excess of $100,000 for a taxable year will be required to pay an
additional income tax liability 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 taxpayer 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
IRA each year (prior to the tax return filing deadline for that year) whereby
earnings on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Investors should consult their own tax advisers for
additional details as to their particular tax status.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums $50 minimum (except where a lower
and Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer Mail directly to your investment dealer's
your investment who is registered in the state address printed on your account
dealer where the purchase is made statement.
and who has a sales
agreement with American
Funds Distributors.
By mail Make your check payable to Fill out the account additions form at
the fund and mail to the the bottom of a recent account
address indicated on the statement, make your check payable to
account application. Please the fund, write your account number on
indicate an investment dealer your check, and mail the check and
on the account application. form in the envelope provided with your
account statement.
By telephone Please contact your Complete the "Investments by Phone"
investment dealer to open section on the account application or
account, then follow the American FundsLink Authorization
procedures for additional Form. Once you establish the privilege,
investments. you, your financial advisor or any
person with your account information
can call American FundsLine(R) and
make investments by telephone
(subject to conditions noted in
"Shareholder Account Services and
Privileges - Telephone Redemptions
and Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your additional
your account number(s), if investments in the same manner as
necessary. Please indicate described under "Initial Investment."
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>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
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 Fund(SM) 33
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
SMALLCAP World Fund(R) 35
1,000
Washington Mutual Investors Fund(SM) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(R) 40
1,000
American High-Income Trust(SM) 21
1,000
The Bond Fund of America(SM) 08
1,000
Capital World Bond Fund(R) 31
1,000
Intermediate Bond Fund of America(SM) 23
1,000
Limited Term Tax-Exempt Bond Fund of 43
America(SM) 1,000
The Tax-Exempt Bond Fund of America(R) 19
1,000
The Tax-Exempt Fund of California(R)* 20
1,000
The Tax-Exempt Fund of Maryland(R)* 24
1,000
The Tax-Exempt Fund of Virginia(R)* 25
1,000
U.S. Government Securities Fund(SM) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(R) 09
2,500
The Tax-Exempt Money Fund of America(SM) 39
2,500
The U.S. Treasury Money Fund of America(SM) 49
2,500
___________
*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).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000
6.10% 5.75% 5.00%
$50,000 but less than $100,000
4.71 4.50 3.75
BOND FUNDS
Less than $25,000
4.99 4.75 4.00
$25,000 but less than $50,000
4.71 4.50 3.75
$50,000 but less than $100,000
4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than $250,000
3.63 3.50 2.75
$250,000 but less than $500,000
2.56 2.50 2.00
$500,000 but less than $1,000,000
2.04 2.00 1.60
$1,000,000 or more (see below)
none none
</TABLE>
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 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1997, provide additional compensation
to dealers. Currently these payments are limited to the top one hundred dealers
who have sold shares of the fund or other funds in The American Funds Group.
These payments will be based on a pro rata share of a qualifying dealer's
sales. American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees or any other purchaser investing at least $1 million
in shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares at
net asset value; however, a contingent deferred sales charge of 1% is imposed
on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.")
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.
NET ASSET VALUE PURCHASES - 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 $100
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.
STATEMENT OF INTENTION - 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") terms. 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 the
Transfer Agent. All dividends and any capital gain distributions on shares
held in escrow will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will 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 prospectus and
account application) may be credited toward satisfying the Statement. During
the Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service; 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, the Transfer Agent, or the fund after the
time of the determination of the net asset value will be entered at the next
calculated offering price. The prices which appear in the newspaper are not
always indicative of 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 close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open as set forth below. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day. The net asset value per share is determined as follows:
1. Portfolio securities, including American Depositary Receipt's and European
Depositary Receipt's, which are traded on stock exchanges, are valued at the
last sale price on the exchange 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 securities are traded
on more than one exchange, the securities are valued on the exchange designated
by or under the authority of the Board of Directors as the primary market.
Securities traded in the over-the-counter market are valued at the last
reported sale price prior to the time of valuation or, lacking any sales, at
the last available bid price in the over-the-counter market prior to the time
of valuation. Securities and assets for which market quotations are not
readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Board of Directors. U.S. Treasury
bills, and other short-term obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, with original or remaining
maturities in excess of 60 days are valued at the mean of representative quoted
bid and asked prices for such securities or, if such prices are not available,
are valued at the mean of representative quoted bid and asked prices for
securities of comparable maturity, quality and type. Short-term securities
with 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. Trading in securities on
European and Far Eastern securities exchanges and over-the-counter markets is
normally completed well before the close of business day in New York. In
addition, European or Far Eastern securities trading may not take place on all
business days in New York. Furthermore, trading takes place in various
non-U.S. markets on days which are not business days in New York and on which
the Fund's net asset value is not calculated. The calculation of net asset
value may not take place contemporaneously with the determination of the prices
of portfolio securities used in such calculation. Events affecting the values
of non-U.S. portfolio securities that occur between the time their prices are
determined and the close of the New York Stock Exchange will not be reflected
in the fund's calculation of net asset value unless the Board of Directors
deems that the particular event would materially affect net asset value, in
which case an adjustment will be made. Assets or liabilities initially
expressed in terms of foreign currencies are translated prior to the next
determination of the net asset value of the fund's shares, into U.S. dollars at
the prevailing market rates. The fair value of all other assets is added to
the value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including accruals of taxes and other expense items; and
3. The value of the net assets so obtained is then divided by the total number
of shares outstanding (excluding treasury shares) 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 fund will not knowingly sell shares (other than for the reinvestment of
dividends or capital gain distributions) directly or indirectly, or through a
unit investment trust to any other investment company, person or entity, where,
after the sale, such investment company, person, or entity would own
beneficially directly, indirectly, or through a unit investment trust more than
4.5% of the outstanding shares of the fund without the consent of a majority of
the Board of Directors.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Send a letter of instruction specifying the name of the
Funds Service fund, the number of shares or dollar amount to be sold,
Company (at the your name and account number. You should also enclose
appropriate address any share certificates you wish to redeem. For
indicated under redemptions over $50,000 and for certain redemptions of
"Principal Underwriter $50,000 or less (see below), your signature must be
and Transfer Agent" in guaranteed by a bank, savings association, credit union,
the prospectus) or member firm of a domestic stock exchange or the
National Association of Securities Dealers, Inc. that is an
eligible guarantor institution. You should verify with the
institution that it is an eligible guarantor prior to signing.
Additional documentation may be required for redemption
of shares held in corporate, partnership or fiduciary
accounts. Notarization by a Notary Public is not an
acceptable signature guarantee.
By contacting your If you redeem shares through your investment dealer, you
investment dealer may be charged for this service. SHARES HELD FOR YOU IN
YOUR INVESTMENT DEALER'S STREET NAME MUST BE
REDEEMED THROUGH THE DEALER.
You may have a You may use this option, provided the account is
redemption check sent registered in the name of an individual(s), a UGMA/UTMA
to you by using custodian, or a non-retirement plan trust. These
American FundsLine(R) redemptions may not exceed $10,000 per day, per fund
or by telephoning, account and the check must be made payable to the
faxing, or telegraphing shareholder(s) of record and be sent to the address of
American Funds record provided the address has been used with the
Service Company account for at least 10 days. See "Principal Underwriter
(subject to the and Transfer Agent" in the Prospectus and "Exchange
conditions noted in this Privilege" below for the appropriate telephone or fax
section and in "Other number.
Important Things to
Remember -
Telephone Purchases,
Sales and Exchanges"
in the prospectus)
In the case of the Upon request (use the account application for the money
money market funds, market funds) you may establish telephone redemption
you may have privileges (which will enable you to have a redemption
redemptions wired to sent to your bank account) and/or check writing privileges.
your bank by If you request check writing privileges, you will be provided
telephoning American with checks that you may use to draw against your
Funds Service account. These checks may be made payable to anyone
Company ($1,000 or you designate and must be signed by the authorized
more) or by writing a number of registered shareholders exactly as indicated on
check ($250 or more) your checking account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. 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 qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or closing of the
account, the plan may be terminated and the related investment reversed. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, 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, automatically to 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) (see "American FundsLine(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 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, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments 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) - You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $10,000
per fund, per account each day), or exchange shares around the clock with
American FundsLine(R). To use this service, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American
FundsLine(R) are subject to the conditions noted above and in "Telephone
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 REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLine(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.
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. When circumstances relating to a proposed
transaction indicate that a particular broker is in a position to obtain the
best price and execution, the order is placed with that broker. This may or
may not be a broker who has provided investment research, statistical, or other
related services to the Investment Adviser or has sold shares of the fund or
other funds served by the Investment Adviser. The fund does not consider that
it has an obligation to obtain the lowest available commission rate to the
exclusion of price, service and qualitative considerations.
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.
Brokerage commissions paid on portfolio transactions for the fiscal years
ended September 30, 1996, 1995 and 1994 amounted to $7,988,000, $5,355,000 and
$3,551,000 respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, N.A., One Chase Manhattan
Plaza, New York, NY 10081, as Custodian. Non-U.S. securities may be held by
the Custodian pursuant to sub-custodial 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. American Funds Service Company was paid a fee
of $5,701,000 for the fiscal year ended September 30, 1996.
INDEPENDENT AUDITORS -- Deloitte & Touche LLP, 1000 Wilshire Boulevard, Suite
1500, Los Angeles, CA 90017, has served as the fund's independent auditors
since its 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 Deloitte & Touche LLP given on the authority of said firm as experts
in accounting and auditing.
REMOVAL OF DIRECTORS BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors as
though the fund were a common-law trust. Accordingly, the directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on September 30.
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 auditors,
Deloitte & Touche LLP, whose selection is determined annually by the Board of
Directors.
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:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE - SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $26.92
Maximum offering price per share (100/94.25 of
per share net asset value, which takes into
account the fund's current maximum sales load) $28.56
</TABLE>
INVESTMENT RESULTS
The fund's yield is 0.51% based on a 30-day (or one month) period ended
September 30, 1996, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The fund's one-year total return, five-year average annual compound return and
lifetime average annual compound return for the periods ended September 30,
1996 were 8.60%, 13.78% and 13.76%, respectively. The average annual compound
return ("T") is computed by using the value at the end of the period ("ERV") of
a hypothetical initial investment of $1,000 ("P") over a period of years ("n")
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors. The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value. The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return. The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period. Total return may be calculated for one year, five years,
ten years and for other periods of years. The average annual total return over
periods greater than one year also may be computed by utilizing ending values
as determined above.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated.
The fund may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by dividing the dividends
paid by the fund over the last 12 months by the sum of the month-end net asset
value or maximum offering price and the capital gains paid over the last 12
months. The distribution rate may differ from the yield.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard and Poor's 500 Stock Composite
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may refer to results compiled by organizations such as CDA Investment
Technologies, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc. and Weisenberger Investment Companies Services and by the U.S. Department
of Commerce. Additionally, the fund may, from time to time, refer to results
published in various newspapers or periodicals, including BARRONS, FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may, from time to time, compare its investment results with the
following:
(1) Average of Savings Institutions deposits, which is a measure of all kinds
of savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions and the Federal Reserve
Board). Savings deposits offer a guaranteed rate of return on principal, but
no opportunity for capital growth. The period shown may include periods during
which the maximum rates paid on some savings deposits were fixed by law.
(2) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (e.g. food,
clothing, shelter, and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
The fund may from time to time illustrate the benefits of tax-deferral by
comparing taxable investment to investments made through tax-deferred
retirement plans.
EXPERIENCE OF THE INVESTMENT ADVISER -- Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In all of the
10-year periods since January 1, 1967 (127 in all), those funds have had better
total returns than the Standard and Poor's 500 Stock Composite Index in 91 of
the 127 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
SMALL CAPITALIZATION STOCKS VERSUS LARGE CAPITALIZATION STOCKS -- According to
Ibbottson Associates, an investment in small company stocks has grown an
average of 15.5% a year from September 30, 1971 through September 30, 1996
compared with an average of 12.4% a year for an investment in large company
stocks. Small company stocks are represented by the lowest 20% of market
capitalization of New York Stock Exchange, American Stock Exchange and
Over-the-Counter stocks, while large company stocks are represented by the
Standard & Poor's 500 Stock Composite Index.
The investment results set forth below were calculated as described in the
fund's prospectus. The fund's results will vary from time to time depending
upon market conditions, the composition of the fund's portfolio and operating
expenses of the fund, so that any investment results reported by the fund
should not be considered representative of what an investment in the fund may
earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative
to the risks associated with the fund's investment objective and policies.
The investment results set forth below were calculated as described in the
fund's prospectus.
SMALLCAP VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
Capital Appreciation
Russell/3/ NASDAQ/4/
Period SMALLCAP S&P 500/1/ MSCIW/2/ 2000 SMALLCAP OTC
<S> <C> <C> <C> <C> <C> <C>
4/30/90*
to 9/30/96 +128.8% + 150.4% + 92.3% + 144.4% + 116.3% + 192.1%
</TABLE>
*Commencement of operations
/1/ The Standard and Poor's 500 Stock Composite Index, which consists of
industrial, transportation, public utilities and financial stocks and
represents a large portion of the value of issues traded on the New York Stock
Exchange. Selected issues traded on the American Stock Exchange are also
included.
/2/ The Morgan Stanley Capital International World Index, which is an
arithmetical average, weighted by market value, of the performance of more than
1,400 securities listed on the stock exchanges of Europe, Australia, the Far
East, Canada, New Zealand and the U.S.
/3/ The Russell 2000 Index, which contains 2000 smaller capitalized companies
in the Russell 3000 Index (these smaller companies have market capitalizations
of approximately $20 million to $300 million).
/4/ The National Association of Securities Dealers Automated Quotation
Composite Index of Over-the-Counter Stocks represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, covers some 3,500 stocks, is market value weighed and
reflects only capital appreciation.
IF YOU ARE CONSIDERING THE FUND FOR RETIREMENT...
<TABLE>
<CAPTION>
Here's how much you would have if you invested $2,000 a year in the fund:
<S> <C> <C>
1 Year 3 Years Lifetime
(10/1/95 - 9/30/96) (10/1/94 - 9/30/96) (4/30/90 - 9/30/96)
$2,172 $7,544 $22,523
</TABLE>
Illustration of a $10,000 investment in the fund with
dividends reinvested and capital gain distributions taken in shares
(For the lifetime of the fund, April 30, 1990 through September 30, 1996)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF
SHARES
Fiscal Annual Total Investment From From Dividends Total
Year End Dividends Dividends Cost Initial Capital Reinvested Value
9/30 (cumulative) Investment Gains
Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1990# $ -- $ -- $ 10,000 $ 8,288 $ -- $ -- $ 8,288
1991 251 251 10,251 11,000 -- 307 11,307
1992 71 322 10,322 11,256 -- 384 11,640
1993 52 374 10,374 14,200 670 548 15,418
1994 41 415 10,415 14,756 1,376 612 16,744
1995 116 531 10,531 16,319 2,719 818 19,856
1996 179 710 10,710 16,825 5,005 1,047 22,877
</TABLE>
The dollar amount of capital gain distributions during the period was $4,014
# from April 30, 1990, the date the fund commenced operations
APPENDIX
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."
<PAGE>
<TABLE>
American High-Income Trust
Investment Portfolio
September 30, 1996
[CHART]
- -------------------------------------------------- --------- ----------- --------
<S> <C> <C> <C>
U.S. Corporate Bonds 67%
Non-U.S. Corporate Bonds 12%
U.S. Treasuries 6%
Stocks 4%
Non-U.S. Government Bonds 2%
Cash Equivalents 9%
[END CHART]
TEN LARGEST HOLDINGS
MFS Communications 3.36%
California Energy 1.95
Container Corp. of America 1.83
Videotron Holdings 1.76
USAir 1.60
Bell Cablemedia 1.54
Integrated Health Services 1.46
Fort Howard Paper 1.36
CellNet Data Systems 1.35
NEXTEL Communications 1.27
- -------------------------------------------------- --------- ----------- --------
Principal Market Percent
Amount Value of Net
Bonds & Notes - 87.17% (000) (000) Assets
Banking & Financial Services - 0.50%
First Nationwide Holdings Inc.:
10.625% 2003 /1/ $4,000 $4,175
12.50% 2003 2,000 2,165 .41%
Ocwen Financial Corp. 11.875% 2003 1,375 1,444 .09
----------- --------
7,784 .50
----------- --------
Beverages - 1.28%
Canandaigua Wine Co., Inc. 8.75% 2003 12,000 11,580 .75
Dr Pepper Bottling Co. of Texas 10.25% 2000 8,000 8,280 .53
----------- --------
19,860 1.28
----------- --------
Broadcasting & Publishing - 4.09%
American Media Operations, Inc. 11.625% 2004 16,400 17,261 1.12
American Radio Systems Corp. 9.00% 2006 8,750 8,487 .55
Chancellor Broadcasting Co.:
9.375% 2004 10,000 9,900
12.50% 2004 1,185 1,332 .73
EZ Communications, Inc. 9.75% 2005 4,750 4,821 .31
Grupo Televisa, S.A.
Series A, 11.375% 2003 /1/ 1,250 1,309
0%/13.25% 2008 /1/ /2/ 3,750 2,325 .23
Infinity Broadcasting Corp. 10.375% 2002 6,000 6,330 .41
Newsquest Capital PLC 11.00% 2006 /1/ 3,250 3,347 .22
Univision Television Group, Inc. 11.75% 2001 4,350 4,611 .30
Young Broadcasting Inc. 10.125% 2005 3,500 3,482 .22
----------- --------
63,205 4.09
----------- --------
Cable & Telephone in the United
Kingdom - 6.42%
Bell Cablemedia PLC 0%/11.95% 2004 /2/ 31,000 23,870 1.54
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 /2/ 25,750 16,319 1.06
International CableTel Inc.:
0%/10.875% 2003 /2/ 21,175 15,987
0%/12.75% 2005 /2/ 1,000 675 1.08
Ionica, PLC Units 13.50% 2006 /1/ 6,000 6,015 .39
TeleWest PLC:
9.625% 2006 8,000 7,920
0%/11.00% 2007 /2/ 2,000 1,270 .59
Videotron Holdings PLC:
0%/11.125% 2004 /2/ 31,000 23,250
0%/11.00% 2005 /2/ 6,000 3,975 1.76
----------- --------
99,281 6.42
----------- --------
Cellular, Paging & Wireless
Communications - 14.45%
CAI Wireless Systems, Inc. 12.25% 2002 5,200 5,421 .35
CellNet Data Systems, Inc. 0%/13.00% 2005 /1/ /2/ /3/ 32,000 20,960 1.35
Cellular, Inc. 0%/11.75% 2003 /2/ 8,500 7,183 .46
Cellular Communications International, Inc.
Units, 0.00% 2000 17,250 11,299 .73
Centennial Cellular Corp.:
8.875% 2001 17,000 15,980
10.125% 2005 2,500 2,431 1.19
Comunicacion Celular S.A. 0%/13.125% 2003 /2/ 15,000 9,150 .59
Geotek Communications, Inc. 0%/15.00% 2005 /2/ 2,000 1,295 .08
Heartland Wireless Communications, Inc.
13.00% 2003 3,800 4,076 .26
Horizon Cellular Telephone Co., LP
0%/11.375% 2000 /2/ 17,065 16,428 1.06
InterCel, Inc. 0%/12.50% 2006 /2/ 12,500 7,156 .46
Mobile Telecomm 13.50% 2002 5,750 5,980 .39
MobileMedia Communications, Inc.:
0%/10.50% 2003 /2/ 21,150 13,959
9.375% 2007 5,000 3,950 1.16
NEXTEL Communications, Inc.:
0%/11.50% 2003 /2/ 7,250 5,365
0%/9.75% 2004 /2/ 3,000 1,935
0%/10.125% 2004 (formerly CenCall) /2/ 18,750 12,375 1.27
Omnipoint Corp.:
6.00%/12.00% 2000 /2/ /3/ 12,500 12,250
11.625% 2006 6,000 6,240 1.20
Paging Network, Inc. 11.75% 2002 14,750 15,782 1.02
PanAmSat, LP:
9.75% 2000 6,500 6,857
0%/11.375% 2003 /2/ 7,000 6,370 .86
PriCellular Wireless Corp.:
0%/14.00% 2001 /2/ 4,000 3,780
0%/12.25% 2003 /2/ 16,210 13,049 1.09
Rogers Cantel Mobile Communications Inc.:
11.125% 2002 2,500 2,625
9.375% 2008 3,000 2,963 .36
Sprint Spectrum LP, Sprint Spectrum Finance Corp.:
0%/12.50% 2006 /2/ 1,000 585
11.00% 2006 3,000 3,090 .24
Vanguard Cellular Systems, Inc. 9.375% 2006 2,000 1,980 .13
Western Wireless Corp. 10.50% 2006 /1/ 3,000 3,045 .20
----------- --------
223,559 14.45
----------- --------
Construction & Housing - 1.45%
Del Webb Corp. 9.75% 2003 2,250 2,250 .15
M.D.C. Holdings, Inc. 11.125% 2003 5,000 4,975 .32
The Ryland Group, Inc. 10.50% 2006 2,500 2,494 .16
Toll Corp. 9.50% 2003 4,000 4,090 .26
Triangle Pacific Corp. 10.50% 2003 8,250 8,580 .56
----------- --------
22,389 1.45
----------- --------
Diversified Media, Cable Television &
Telecommunications - 8.15%
Brooks Fiber Properties, Inc. 0%/10.875% 2006 /2/ 11,750 7,226 .47
Cablevision Systems Corp. 9.875% 2013 4,000 3,850 .25
Comcast Corp. 10.25% 2001 3,200 3,328 .22
Comtel Brasileira Ltda. 10.75% 2004 /1/ 4,000 4,095 .26
Insight Communications Co., LP 11.25% 2000 3,000 3,075 .20
IntelCom Group Inc.:
0%/13.50% 2005 /2/ 12,000 8,055
0%/12.50% 2006 /2/ 6,000 3,780 .76
Jones Intercable, Inc. 9.625% 2002 4,500 4,680 .30
MFS Communications Co., Inc.:
0%/9.375% 2004 /2/ 59,350 49,854
0%/8.875% 2006 /2/ 3,000 2,100 3.36
Multicanal Participacoes SA 12.625% 2004 /1/ 10,000 10,738 .69
Muzak, LP Muzak Capital Corp. 10.00% 2003 2,750 2,771 .18
Storer Communications, Inc. 10.00% 2003 3,034 3,072 .20
Telecom Argentina STET - France Telecom SA
12.00% 2002 3,000 3,225 .21
Teleport Communications Group Inc. 9.875% 2006 5,000 5,125 .33
Viacom International Inc.:
9.125% 1999 4,859 4,968
10.25% 2001 4,000 4,270
7.75% 2005 2,000 1,932 .72
----------- --------
126,144 8.15
----------- --------
Electric & Gas Utilities - 0.19%
Columbia Gas System, Inc., Series A, 6.39% 2000 3,000 2,946 .19
----------- --------
Energy & Related Companies - 5.98%
Benton Oil and Gas Co. 11.625% 2003 7,000 7,578 .49
Chesapeake Energy Corp.:
10.50% 2002 4,700 4,959
9.125% 2006 6,260 6,182 .72
Cliffs Drilling Co. 10.25% 2003 5,500 5,720 .37
Dual Drilling Co. 9.875% 2004 9,450 10,017 .65
Falcon Drilling Co., Inc.:
9.75% 2001 2,500 2,531
8.875% 2003 5,000 4,900 .48
Flores & Rucks, Inc. 13.50% 2004 10,150 11,926 .77
Global Marine, Inc. 12.75% 1999 5,900 6,372 .41
Kelley Oil & Gas Corp. 13.50% 1999 6,570 7,424 .48
Mariner Energy, Inc. 10.50% 2006 /1/ 6,750 6,986 .45
Mesa Operating Co.:
0%/11.625% 2006 /2/ 2,000 1,280
10.625% 2006 1,000 1,050 .15
Triton Energy Corp. 0%/9.75% 2000 /2/ 8,000 8,080 .53
Tuboscope Vetco International Inc. 10.75% 2003 7,000 7,438 .48
----------- --------
92,443 5.98
----------- --------
Food Retailing - 3.44%
Bruno's, Inc. 10.50% 2005 12,500 12,813 .83
Carr-Gottstein Foods Co. 12.00% 2005 4,000 4,230 .27
The Penn Traffic Co. 9.625% 2005 2,000 1,350 .09
Rykoff-Sexton, Inc. 8.875% 2003 10,000 9,125 .59
Safeway Inc. 10.00% 2002 1,700 1,910 .12
Star Markets Co., Inc. 13.00% 2004 11,000 11,577 .75
Stater Brothers Holdings Inc. 11.00% 2001 11,500 12,190 .79
----------- --------
53,195 3.44
----------- --------
Forest Products & Paper - 5.66%
Container Corp. of America:
10.75% 2002 6,000 6,300
9.75% 2003 18,000 18,270
11.25% 2004 3,500 3,718 1.83
Fort Howard Paper Co.:
9.25% 2001 13,500 13,770
8.25% 2002 2,000 1,960
11.00% 2002 2,058 2,140
9.00% 2006 3,250 3,201 1.36
Four M Corp., Series A, 12.00% 2006 13,250 14,045 .91
Grupo Industrial Durango, SA de CV 12.625% 2003 1,000 1,068 .07
MAXXAM Group Inc. 11.25% 2003 3,000 3,075 .20
Pacific Lumber Co. 10.50% 2003 7,000 6,895 .44
PT Indah Kiat Pulp & Paper Corp., 11.875% 2002 1,000 1,077 .07
PT Pabrik Kertas Tjiwi Kimia 13.25% 2001 8,500 9,478 .61
Repap Wisconsin, Inc.:
First Priority 9.25% 2002 1,140 1,154
Second Priority 9.875% 2006 1,500 1,470 .17
----------- --------
87,621 5.66
----------- --------
Health & Personal Care - 4.57%
Integrated Health Services, Inc.:
9.625% 2002 4,485 4,597
10.75% 2004 6,000 6,323
10.25% 2006 /1/ 11,250 11,616 1.46
Mariner Health Group, Inc. 9.50% 2006 8,000 8,100 .52
Merit Behavioral Care Corp. 11.50% 2005 4,750 5,011 .32
Paracelsus Healthcare Corp. 10.00% 2006 8,250 8,539 .55
Regency Health Services, Inc.:
9.875% 2002 13,050 13,115
12.25% 2003 /1/ 3,000 3,188 1.06
Universal Health Services, Inc. 8.75% 2005 10,200 10,251 .66
----------- --------
70,740 4.57
----------- --------
Independent Power Producers - 2.34%
California Energy Co., Inc.
0%/10.25% 2004 /2/ 29,750 30,196 1.95
CE Casecnan Water and Energy Co., Inc.:
Series A, 11.45% 2005 2,000 2,145
Series B, 11.95% 2010 3,500 3,780 .39
----------- --------
36,121 2.34
----------- --------
Leisure, Tourism & Restaurants - 4.53%
AMF Group Inc.:
10.875% 2006 6,000 6,150
0%/12.25% 2006 /2/ 10,500 6,261 .80
California Hotel Finance Corp. 11.00% 2002 7,000 7,350 .47
Casino America, Inc. 12.50% 2003 3,500 3,662 .24
Foodmaker, Inc.:
9.25% 1999 8,950 8,950
9.75% 2002 6,000 5,850 .96
Four Seasons Hotels Inc. 9.125% 2000 /1/ 7,000 7,070 .46
Plitt Theatres, Inc. 10.875% 2004 1,025 1,038 .07
Rio Hotel & Casino, Inc. 10.625% 2005 5,400 5,670 .36
Station Casinos, Inc. 9.625% 2003 8,750 8,466 .55
Trump Atlantic City Associates, Trump Atlantic
City Funding, Inc. 11.25% 2006 5,000 4,925 .32
Wyndham Hotel Corp. 10.50% 2006 4,500 4,618 .30
----------- --------
70,010 4.53
----------- --------
Manufacturing & Materials - 7.64%
Acme Metals Inc.:
12.50% 2002 7,000 7,420
0%/13.50% 2004 /2/ 5,750 5,577 .84
Advanced Micro Devices, Inc. 11.00% 2003 9,000 9,292 .60
AGCO Corp. 8.50% 2006 6,000 6,000 .39
AK Steel Corp. 10.75% 2004 1,250 1,363 .09
Coltec Industries Inc.:
9.75% 1999 2,500 2,588
9.75% 2000 16,000 16,560 1.24
Kaiser Aluminum & Chemical Corp.:
9.875% 2002 4,750 4,833
12.75% 2003 7,500 8,138 .84
Knoll Group, Inc. 10.875% 2006 5,000 5,225 .34
Lifestyle Furnishings International Ltd.
10.875% 2006 5,500 5,693 .37
MagneTek, Inc. 10.75% 1998 5,700 5,786 .37
Oregon Steel Mills 11.00% 2003 4,750 4,993 .32
Owens-Illinois, Inc. 11.00% 2003 4,750 5,195 .34
Printpack Inc. 10.625% 2006 2,500 2,562 .16
Sterling Chemicals, Inc.:
11.75% 2006 2,500 2,612
Unit, 0%/13.50% 2008 /2/ 3,000 1,845 .29
Texas Petrochemicals Corp. 11.125% 2006 /1/ 7,500 7,912 .51
UCAR Global Enterprises Inc. 12.00% 2005 6,430 7,338 .47
Westinghouse Air Brake Co. 9.375% 2005 7,250 7,196 .47
----------- --------
118,128 7.64
----------- --------
Merchandising - 1.88%
Ann Taylor 8.75% 2000 3,500 3,395 .22
Barnes & Noble, Inc. 11.875% 2003 10,450 11,390 .73
Loehmann's 11.875% 2003 2,500 2,650 .17
Thrifty PayLess, Inc. 12.25% 2004 10,549 11,762 .76
----------- --------
29,197 1.88
----------- --------
Miscellaneous Services - 0.39%
Neodata Services, Inc. 12.00% 2003 6,000 6,060 .39
----------- --------
Protection Services - 0.68%
ADT Operations 9.25% 2003 2,000 2,070 .13
Protection One Alarm Monitoring, Inc.
0%/13.625% 2005 /2/ 9,500 8,455 .55
----------- --------
10,525 .68
----------- --------
Real Estate - 0.28%
B.F. Saul Real Estate Investment Trust ----------- --------
11.625% 2002 4,000 4,260 .28
----------- --------
Textiles & Apparel - 0.17%
Tultex Corp. 10.625% 2005 1,000 1,050 .07
WestPoint Stevens Inc. 8.75% 2001 1,500 1,519 .10
----------- --------
2,569 .17
----------- --------
Transportation - 3.51%
Airplanes Pass Through Trust, pass-through
certificates, Class D, 10.875% 2019 /4/ 13,375 14,412 .93
Teekay Shipping Corp. 8.32% 2008 13,500 12,859 .83
TNT Transport (Europe) PLC/TNT (USA)
Inc. 11.50% 2004 500 521 .03
USAir, Inc.:
9.625% 2001 8,000 7,600
9.625% 2003 1,490 1,460
10.00% 2003 8,000 7,600
Pass-through trust, Series 1993-A3,
10.375% 2013 /4/ 8,150 8,109 1.60
ValuJet, Inc. 10.25% 2001 /1/ 2,000 1,810 .12
----------- --------
54,371 3.51
----------- --------
Private Issue Collateralized Mortgage/Asset-Backed
Obligations 4 - 0.75%
Fifth Avenue Capital Trust, Class C, 12.36% 2002 /1/ 10,000 10,975 .71
Resolution Trust Corp.:
Series 1993-C1, Class E, 9.50% 2024 274 272
Series 1993-C2, Class E, 8.50% 2025 363 358 .04
----------- --------
11,605 .75
----------- --------
Non-U.S. Governments and Governmental
Authorities - 2.38%
Argentina (Republic of):
8.375% 2003 1,500 1,348
6.312% 2005 /5/ 3,960 3,317
Bocon PIK 4.717% 2007 /5/ /6/ ARP 6,000 2,858 .48
Brazil (Federal Republic of):
Eligible Interest Bond 6.50% 2006 /5/ $1,000 872
Debt Conversion Bond 6.563% 2012 /5/ 500 378
Capitalization Bond PIK 8.00% 2014 /6/ 271 191 .09
Ecuador (Republic of) Past Due Interest Bond
6.50% 2015 /5/ 8,459 4,335 .28
New Zealand Index Linked
4.59% 2016 /7/ NZ$ 3,000 1,827 .12
Panama (Republic of) Interest Reduction Bond
3.50% 2014 /1/ /5/ $11,500 7,245 .47
Peru (Republic of) Front Loaded Interest
Reduction Bond 0.00% 2049 /1/ 500 261 .02
Poland (Republic of):
Past Due Interest Bonds:
Bearer 3.75% 2014 /5/ 1,375 1,090
Registered 3.75% 2014 /5/ 375 297
Treasury Bill 1997 PLZ 8,000 2,472 .25
Russia Interest Arrears Notes:
Euro 2015 /5/ $2,000 1,287
SF 2015 /5/ 4,250 2,736 .26
United Mexican States:
Collateralized Eurobond:
Series A, 6.398% 2019 500 422
Series B, 6.25% 2019 3,000 2,081 .34
Government 9.75% 2001 1,000 1,020
Government 11.50% 2026 1,784 1,773
Venezuela (Republic of):
Front Loaded Interest Reduction Bond 6.375% 2007 500 422
6.625% 2007 750 622 .07
----------- --------
36,854 2.38
----------- --------
U.S. Treasury Obligations - 6.44%
6.00% 1998 3,000 2,997
7.25% 1998 5,000 5,081
6.875% 1999 39,000 39,579
6.625% 2001 7,000 7,042
7.50% 2001 16,000 16,692
8.00% 2001 4,000 4,244
5.75% 2003 13,000 12,401
7.875% 2004 1,000 1,075
11.625% 2004 8,000 10,445
----------- --------
99,556 6.44
----------- --------
Total Bonds & Notes (cost: $1,308,727,000) 1,348,423 87.17
----------- --------
Number of
Stocks (Common & Preferred) - 3.40% Shares
AnnTaylor, Inc. /8/ 40,000 675 .04
California Energy Co., Inc. /8/ 65,000 2,072 .13
CellNet Data Systems, Inc.,
warrants, expire 6/15/05 /3/ /8/ 128,000 2,816 .18
Columbia Gas System, Inc. 14,700 823 .05
Comcast Corp., Class A 10,000 154
Comcast Corp., Class A, special stock 20,000 308 .03
Comunicacion Celular SA
warrants, expire 11/15/03 /8/ 15,000 90 .01
El Paso Electric Co., Series A, preferred
11.40% 2008 /6/ 6,000 690 .05
Earthwatch Inc., preferred 12.00% /3/ 675,000 7,092 .46
Falcon Drilling Co., Inc. /8/ 35,000 910 .06
Foodmaker, Inc. /8/ 30,000 300 .02
Heartland Wireless Communications, Inc.,
warrants, expire 4/26/00 /8/ 22,800 137 .01
Host Marriott Corp. /8/ 13,896 201 .01
IntelCom Group Inc., warrants, expire 8/8/05 /2/ /8/ 42,900 691 .05
Kelley Oil & Gas Corp. convertible preferred 70,000 1,733 .11
Kmart Corp. 7.75% convertible preferred 60,000 2,933 .19
MFS Communications Co., Inc. /8/ 10,000 436 .03
Marriott International, Inc. 13,896 766 .05
MESA Inc. /8/ 275,000 1,134
MESA Inc. 8.00% convertible preferred, Series A 276,945 1,454 .17
Nacional Financiera SNC PRIDES 11.25% 1998 20,000 640 .04
NEXTEL Communications, Inc. warrants /3/ /8/ 21,250 0 .00
Nortel Inversora SA, Class A, preferred
(American Depositary Receipts) /1/ /3/ 1,174,607 13,978 .90
Omnipoint Corp./3/ /8/ 278,001 6,477 .42
Protection One Alarm Monitoring, Inc.,
warrants, expire 6/30/05 /8/ 30,400 274 .02
Station Casinos, Inc. 7.00% convertible preferred 30,000 1,582 .10
Thrifty PayLess Inc., Class B /8/ 11,400 212 .01
Time Warner Inc. exchangeable preferred, Series K 2,811 2,937 .19
Viacom International Inc., Class B /8/ 30,000 1,065 .07
----------- --------
Total Stocks (cost: $39,470,000) 52,580 3.40
----------- --------
Principal
Amount
(000)
Convertible Debentures - 0.54%
Banco Nacional de Mexico, SA 11.00% 2003 $500 512 .03
Euro Disney S.C.A. 6.75% 2001 7,700 1,505 .10
Integrated Health Services, Inc. 6.00% 2003 6,500 6,403 .41
----------- --------
Total Convertible Debentures (cost:
$7,993,000) 8,420 .54
----------- --------
Short-Term Securities
Corporate Short-Term Notes - 9.51%
American Express Credit Corp.:
5.37% due 10/11/96 10,000 9,984
5.41% due 10/25/96 4,290 4,274 .92
Ciesco LP:
5.32% due 10/9/96 10,000 9,987
5.46% due 12/2/96 9,300 9,212 1.24
Hewlett-Packard Co.:
5.45% due 10/1/96 6,050 6,049
5.34% due 12/20/96 10,000 9,880 1.03
International Lease Finance Corp.:
5.39% due 10/23/96 15,000 14,948
5.42% due 12/11/96 4,500 4,452 1.26
J.C. Penney Funding Corp.:
5.29% due 10/2/96 11,200 11,197
5.39% due 11/20/96 12,300 12,206 1.51
Raytheon Co. 5.34% due 10/18/96 12,700 12,666 .82
SAFECO Credit Co. Inc. 5.47% due 11/6/96 10,000 9,944 .64
UBS Finance (Delaware) Inc. 5.85% due 10/1/96 32,300 32,295 2.09
----------- --------
Total Short-Term Securities (cost:
$147,096,000) 147,094 9.51
----------- --------
Total Investment Securities (cost:
$1,503,286,000) 1,556,517 100.62
Excess of payables over cash and
receivables 9,621 .62
----------- --------
Net Assets $1,546,896 100.00%
=========== ========
/1/ Purchased in a private placement transaction;
resale to the public may require registration.
/2/ Step bond; coupon rate will increase at a later date.
/3/ Valued under procedures established by the Board of Trustees.
/4/ Pass-through security backed by a pool of mortgages
or other loans on which principal payments are
periodically made. Therefore, the effective maturity
is shorter than the stated maturity.
/5/ Coupon rate may change periodically.
/6/ Payment in kind. The issuer has the option of
paying additional securities in lieu of cash.
/7/ Index-linked bond, which is a floating rate
bond whose principal amount
moves with a government retail price index.
/8/ Non-income-producing security.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
American High-Income Trust
Financial Statements
Statement of Assets and Liabilities
at September 30, 1996 (dollars in thousands)
<S> <C> <C>
Assets:
Investment securities
(cost: $1,503,286) $ 1,556,517
Cash 80
Receivables for--
Sales of investments $ 5,519
Sales of fund's shares 7,557
Accrued dividends and interest 28,538 41,614
-------- ---------
1,598,211
Liabilities:
Payables for--
Purchases of investments 43,105
Repurchases of fund's shares 2,210
Forward currency contracts 4
Dividends on fund's shares 5,137
Management services 597
Accrued expenses 262 51,315
-------- ---------
Net Assets at September 30, 1996 --
Equivalent to $14.86 per share on
104,126,659 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $ 1,546,896
========
Statement of Operations
for the year ended September 30, 1996
(dollars in thousands)
Investment Income:
Income:
Dividends $ 2,300
Interest 127,327 $ 129,627
--------
Expenses:
Management services fee 6,481
Distribution expenses 3,079
Transfer agent fee 976
Reports to shareholders 164
Registration statement and prospectus 289
Postage, stationery and supplies 343
Trustees' fees 21
Auditing and legal fees 45
Custodian fee 64
Taxes other than federal income tax 20
Other expenses 18 11,500
-------- ---------
Net investment income 118,127
---------
Realized Gain and Increase in Unrealized
Appreciation on Investments:
Net realized gain 4,164
Net unrealized appreciation
on investments:
Beginning of year 5,775
End of year 53,227
---------
Net increase in unrealized
appreciation on investments 47,452
---------
Net realized gain and unrealized
appreciation on investments 51,616
---------
Net Increase in Net Assets
Resulting from Operations $ 169,743
========
Statement of Changes in Net Assets
(dollars in thousands)
Year ended September 30
1996 1995
Operations: -------- ---------
Net investment income $ 118,127 $ 89,824
Net realized gain (loss) on investments 4,164 (7,154)
Net increase in unrealized appreciation
on investments 47,452 36,963
-------- ---------
Net increase in net assets
resulting from operations 169,743 119,633
-------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (118,864) (87,231)
Distributions from net realized
gain on investments - (4,494)
-------- ---------
Total dividends and distributions (118,864) (91,725)
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
43,729,904 and 30,002,672
shares, respectively 636,739 414,416
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on
investments: 5,021,604 and
4,145,269 shares, respectively 73,124 56,782
Cost of shares repurchased:
22,319,120 and 16,228,009
shares, respectively (324,832) (223,033)
-------- ---------
Net increase in net assets
resulting from capital share
transactions 385,031 248,165
-------- ---------
Total Increase in Net Assets 435,910 276,073
Net Assets:
Beginning of year 1,110,986 834,913
-------- ---------
End of year (including undistributed
net investment income: $7,102
and $7,839, respectively) $ 1,546,896 $ 1,110,986
======== ========
See Notes to Financial Statements
</TABLE>
<PAGE>
Notes to Financial Statements
1. American High-Income Trust (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund seeks a high level of current income and, secondarily, capital
appreciation through a diversified, carefully supervised portfolio consisting
primarily of lower rated, higher risk corporate bonds. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Stocks and convertible debentures traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted bid price.
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, when such prices are available; however,
in circumstances where the investment adviser deems it appropriate to do so,
such securities will be valued at the mean of their representative quoted bid
and asked prices or, if such prices are not available, at prices for securities
of comparable maturity, quality and type. Securities denominated in non-U.S.
currencies are generally valued on the basis of bid quotations. The value of
each security denominated in a currency other than U.S. dollars will be
translated into U.S. dollars at the prevailing market rate provided by a
pricing service in accordance with procedures established by the fund's
officers. Securities for which market quotations are not readily available are
valued at fair value by the Board of Trustees or a committee thereof.
Short-term securities with original or remaining maturities in excess of 60
days, including forward currency contracts, 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.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. 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 and premiums on
securities purchased are amortized over the life of the respective securities.
Dividends to shareholders are declared daily after determination of the fund's
net investment income and paid to shareholders monthly.
Investment securities and other assets and liabilities, including forward
currency contracts, 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 effects of changes in foreign currency exchange
rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $64,000 includes $62,000 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, 1996, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $53,231,000, of which $65,293,000 related to appreciated securities
and $12,062,000 related to depreciated securities. During the year ended
September 30, 1996, the fund realized, on a tax basis, a net capital gain of
$4,435,000 on securities transactions. Net gains related to non US currency
transactions of $271,000 are reported as ordinary income for federal tax
purposes. The fund has available at September 30, 1996 a net capital loss
carryforward totaling $2,672,000 which may be used to offset capital gains
realized during subsequent years through 2002 and thereby relieve the fund and
its shareholders of any federal income tax liability with respect to the
capital gains that are so offset. It is the intention of the fund not to make
distributions from capital gains while there is a capital loss carryforward.
The cost of portfolio securities, excluding forward currency contracts, for
book and federal income tax purposes was $1,503,286,000 at September 30, 1996.
3. The fee of $6,481,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion; and
0.18% of such assets in excess of $1 billion; plus 3.00% on the first $100
million of the fund's annual gross investment income; and 2.50% of such income
in excess of $100 million.
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 Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended September 30, 1996,
distribution expenses under the Plan were $3,079,000. As of September 30, 1996,
accrued and unpaid distribution expenses were $221,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $976,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $1,943,000 (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.
Trustees 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,
1996, aggregate amounts deferred and earnings thereon were $30,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly
owned subsidiaries of CRMC. Certain Trustees 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, 1996, accumulated net realized loss on investments was
$2,943,000 and paid-in capital was $1,489,510,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $771,970,000 and $483,596,000, respectively, during
the year ended September 30, 1996.
The fund purchases and sells forward currency contracts in anticipation of, or
to protect itself against, fluctuations in exchange rates. The contracts are
recorded in the statement of assets and liabilities at their net unrealized
value; the fund's maximum potential liability in these contracts is equal to
the full contract amounts. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from the possible movements in foreign exchange rates and securities values
underlying these instruments. At September 30, 1996, the fund had outstanding
forward currency contracts to purchase and sell non-U.S. currencies as follows:
<TABLE>
Contract Amount U.S. Valuation at 9/30/96
------------------------------------------------------
Unrealized
Non-U.S. Currency Sales Contract Non-U.S. U.S. Amount Depreciation
- --------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
French Francs expiring 11/24/96 FF5,100,000 $986,000 $990,000 $(4,000)
</TABLE>
<PAGE>
<TABLE>
Per-Share
Data and Ratios Year ended September 30
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $14.30 $13.97 $15.18 $14.58 $13.56
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 1.29 1.33 1.25 1.28 1.35
Net realized and
unrealized gain
(loss) on investments .59 .39 (.99) .74 .99
-------- -------- -------- -------- --------
Total income from
investment operations 1.88 1.72 .26 2.02 2.34
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income (1.32) (1.32) (1.21) (1.29) (1.32)
Distributions from net
realized gains - (.07) (.26) (.13) -
-------- -------- -------- -------- --------
Total distributions (1.32) (1.39) (1.47) (1.42) (1.32)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $14.86 $14.30 $13.97 $15.18 $14.58
======== ======== ======== ======== ========
Total Return* 13.68% 13.34% 1.60% 14.59% 18.08%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $1,547 $1,111 $835 $707 $438
Ratio of expenses to average
net assets .87% .89% .86% .87% .94%
Ratio of net income to
average net assets 8.90% 9.72% 8.63% 8.60% 9.58%
Portfolio turnover rate 39.74% 29.56% 42.03% 44.37% 58.04%
*Calculated without deducting a sales charge.
The maximum sales charge is 4.75% of the
fund's offering price.
</TABLE>
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
American High-Income Trust:
We have audited the accompanying statement of assets and liabilities of
American High-Income Trust (the "Fund"), including the schedule of portfolio
investments, as of September 30, 1996, 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
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 as of
September 30, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other 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 American High-Income Trust as of September 30, 1996, 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 29, 1996
1996 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.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 2% of the dividends
paid by the fund from net investment income represents qualifying dividends.
Certain states may exempt from income taxation a portion of the dividends paid
from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 4% of the dividends paid
by the fund from net investment income was derived from interest on direct U.S.
Treasury obligations.
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 FISCAL YEAR AND NOT THE CALENDAR
YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE MAILED IN
JANUARY 1997 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR
1996 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
<PAGE> PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
As of September 30, 1996:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Per Share Data and Ratios
Independent Auditors' Report
(b) Exhibits:
1. On file (see SEC file nos. 811-5888 and 33-32785).
2. On file (see SEC file nos. 811-5888 and 33-32785).
3. None.
4. On file (see SEC file nos. 811-5888 and 33-32785).
5. On file (see SEC file nos. 811-5888 and 33-32785).
6. On file (see SEC file nos. 811-5888 and 33-32785).
7. None.
8. On file (see SEC file nos. 811-5888 and 33-32785).
9. On file (see SEC file nos. 811-5888 and 33-32785).
10. Not applicable to this filing.
11. Consent of Independent Accountants.
12. None.
13. None.
14. On file (see SEC file nos. 811-5888 and 33-32785).
15. On file (see SEC file nos. 811-5888 and 33-32785).
16. On file (see SEC file nos. 811-5888 and 33-32785).
17. EX-27 Financial data schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of December 31, 1996:
<TABLE>
<CAPTION>
<S> <C>
Title of Class Number of Record-Holders
Capital Stock 463,699
($0.01 par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors and
Omissions Policy written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.
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 matters 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 under 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 the fund 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."
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., The 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., 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.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David A. Abzug Regional Vice President None
5657 Lemona Avenue
Van Nuys, CA 91411
John A. Agar Regional Vice President None
1501 N. University Drive
Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Brynwood Drive
Madison, WI 53711
% Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
8000 Town Line Avenue So.
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron 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 Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
3100 West End Avenue
Suite 870
Nashville, TN 37215
Mick L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Senior Vice President None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
609 W. Littleton Blvd. - Suite 310
Littleton, CO 80121
Christopher J. Cassin Senior Vice President None
111 West Chicago Avenue
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Regional Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
* Larry P. Clemmensen Director None
* Kevin G. Clifford Director, Senior Vice None
President
Ruth M. Collier Vice President None
145 W. 67th Street #12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Blvd.
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
4116 Woodbine Street
Chevy Chase, MD 20815
* Carl D. Cutting Vice President None
Dan 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 East Main Street
Jenks, OK 74037
Kirk D. Dodge Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
& Lloyd G. Edwards Vice President None
* Paul H. Fieberg Senior Vice President None
John R. Fodor Regional Vice President None
15 Latisquana Road
Southborough, MA 01772
* Mark P. Freeman, Jr. President, Director None
Clyde E. Gardner Senior Vice President None
Rt. 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
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 33483
* Robert L. Johansen Vice President, Controller None
Michael J. Johnston Chairman of the Board None
630 Fifth Avenue, 36th Floor
New York, NY 10111
V. John Kriss, Jr. Senior Vice President None
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E
East Tennessee Circle
Aurora, CO 80012
* Lorin E. Liesy Assistant Vice President None
* Susan G. Lindgren Vice President - Institutional None
Investment Services Division
% Stella Lopez Vice President None
+ Robert W. Lovelace Director Vice President
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Director, Senior Vice None
President
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
3500 West Camino de Urania
Tucson, AZ 85741
% John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Rd.
St. Louis, MO 63131
* R. William Melinat Vice President, Institutional None
Investment Services Division
David R. Murray Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
32 Ridge Avenue
Newton Centre, MA 02161
# Candance D. Pilgram Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, SE
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
* James F. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
31465 St. Andrews
Westlake, OH 44145
* Daniel B. Seivert Assistant Vice President None
* R. Michael Shanahan Director None
David W. Short Director, Senior Vice None
1000 RIDC Plaza, Ste. 212 President
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President, None
Institutional Investment
Services Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President, None
Institutional Investment
Services Division
* Mary E. Smith Assistant Vice President, None
Institutional Investment
Services Division
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
4 West 4th Avenue, Suite 406
San Mateo, CA 94402
Thomas A. Stout Regional Vice President None
12913 Kendale Lane
Bowie, MD 20715
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
* Drew Taylor Assistant Vice President None
% James P. Toomey Assistant Vice President None
& Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
* David M. Ward Assistant Vice President, None
Institutional Investment
Services Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
* J. Kelly Webb Senior Vice President, None
Treasurer
Gregory J. Weimer Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
** N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
# Laura L. Wimberly Assistant Vice President None
* Marshall D. Wingo Director, Senior Vice None
President
* Robert L. Winston Director, Senior Vice None
President
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
209 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
___________________
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
** Business Address, One Market Plaza, Steuart Tower, Suite 1800, San
Francisco, CA 94111
+ Business Address, 11100 Santa Monica Blvd., Los Angeles, CA 90025
# Business Address, 135 South State College Blvd., Brea, CA 92821
% Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
& Business Address, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240
(c) None.
ITEM 30. 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 kept in the offices of the
fund and its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, CA 90071. Certain accounting records are
maintained and kept in the offices of the Fund's accounting department, 135
South State College Blvd., Brea, CA 92621 and 5300 Robin Hood Road, Norfolk,
VA 23513.
Records covering shareholder accounts are maintained and kept by the fund's
transfer agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92621, 8000 IH-10, Suite 1400, San Antonio, TX 78230, 8332 Woodfield
Crossing Blvd., Indianapolis, IN 46240 and 5300 Robin Hood Road, Norfolk, VA
23513.
Records covering portfolio transactions are also maintained and kept by the
Custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, New
York, 10081.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(c) As reflected in the prospectus, the fund undertakes to provide each
person to whom a prospectus is delivered with a copy of the fund's latest
annual report to shareholders, upon request and without charge.
<PAGE>
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, and State of California, on the 23rd day of January,
1996.
SMALLCAP World Fund, Inc.
By: /s/ Cordon Crawford
Gordon Crawford, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on January 23, 1996, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ Gordon Crawford President
Gordon Crawford
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Steven N. Kearsley Vice President and Treasurer
Steven N. Kearsley
(3) Directors:
Richard G. Capen, Jr. Director
H. Frederick Christie* Director
Alan W. Clements* Director
Robert B. Egelston* Chairman of the Board
Alan Greenway* Director
William R. Grimsley* Vice Chairman and Director
E. Graham Holloway* Director
Leonade D. Jones* Director
William H. Kling* Director
Norman R. Weldon* Director
Patricia K. Woolf* Director
</TABLE>
*By /s/ Chad L. Norton
Chad L. Norton
(Attorney-in-Fact)
C-13
SMALLCAP WORLD FUND, INC.:
We consent to (a) the use in this Post-Effective Amendment No. 12 to
Registration Statement No. 33-32785 on Form N-1A of our report dated OCTOBER
29, 1996 appearing in the Financial Statements, which are included in Part B,
the Statement of Additional Information of such Registration Statement, (b) the
references to us under the heading "General Information" in such Statement of
Additional Information and (c) the reference to us under the heading "Financial
Highlights" in the Prospectus, which is a part of such Registration Statement.
Deloitte & Touche LLP
January 22, 1997
Los Angeles, California
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 5,763,402
<INVESTMENTS-AT-VALUE> 6,599,386
<RECEIVABLES> 65,494
<ASSETS-OTHER> 11,271
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,676,151
<PAYABLE-FOR-SECURITIES> 60,642
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,412
<TOTAL-LIABILITIES> 69,054
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,195,428
<SHARES-COMMON-STOCK> 245,391,124
<SHARES-COMMON-PRIOR> 177,117,618
<ACCUMULATED-NII-CURRENT> 16,689
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 556,532
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 835,994
<NET-ASSETS> 6,607,097
<DIVIDEND-INCOME> 46,605
<INTEREST-INCOME> 51,069
<OTHER-INCOME> 0
<EXPENSES-NET> 60,380
<NET-INVESTMENT-INCOME> 37,294
<REALIZED-GAINS-CURRENT> 595,514
<APPREC-INCREASE-CURRENT> 132,107
<NET-CHANGE-FROM-OPS> 764,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 43,854
<DISTRIBUTIONS-OF-GAINS> 441,715
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86,216,034
<NUMBER-OF-SHARES-REDEEMED> 38,162,440
<SHARES-REINVESTED> 20,219,912
<NET-CHANGE-IN-ASSETS> 1,702,353
<ACCUMULATED-NII-PRIOR> 23,552
<ACCUMULATED-GAINS-PRIOR> 402,430
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 37,904
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 60,380
<AVERAGE-NET-ASSETS> 5,522,006
<PER-SHARE-NAV-BEGIN> 26.11
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> 3.32
<PER-SHARE-DIVIDEND> .23
<PER-SHARE-DISTRIBUTIONS> 2.45
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.92
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
