THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC
OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE
ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
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
(as amended February 20, 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.
Under normal market conditions, the fund will invest
at least 65% of its total assets in equity securities
of small capitalization issuers, typically having
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 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 (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 fundamental investment restrictions (which
are described in the statement of additional
information) and objective 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.
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 condi-
tion of their issuers and on market and economic
conditions. The fund's results will be related to
the overall market for these securities.
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. The fund determines relative market
capitalizations using U.S. standards (as described
earlier). Accordingly, the fund's non-U.S. invest-
ments may have larger capitalizations relative to
market capitalizations of stocks of companies based
outside the U.S.
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. These investments 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 may invest up to 10% of its total assets in
debt securities rated Baa or BBB or below by Moody's
Investors Service, Inc. or Standard & Poor's Corpora-
tion or in unrated securities that are determined to
be of equivalent quality. Securities rated 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 signifi-
cantly 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.
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.
U.S. PRIVATE PLACEMENTS
Private Placements may be either purchased from another
institutional investor that originally acquired the
securities in a private placement or directly from the
issuers of the securities. Generally, securities
acquired in such private placements are subject to
contractual restrictions on resale and may not be
resold except pursuant to a registration statement
under the Securities Act of 1933 or in reliance upon
an exemption from the registration requirements under
the Act (for example, private placements sold pursuant
to Rule 144A). Accordingly, all such private place-
ments will be considered illiquid unless they have
been specifically determined to be liquid taking into
account factors such as the frequency and volume of
trading and the commitment of dealers to make markets
under procedures adopted by the funds board of
directors. Additionally, investing in private place-
ment securities could have the effect of increasing
the level of illiquidity of the fund's portfolio to
the extent that "qualified" institutional investors
become, for a period of time, uninterested in
purchasing these securities. The fund will not
invest more than 10% of its total assets in illiquid
securities.
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>
- -------------------------------------------------------------------------------
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. Yield is computed by dividing the
(April 10, 1990 net investment income per share earned by the fund
through December over a given period of time by the net asset value
31, 1996). 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.
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>
- -------------------------------------------------------------------------------
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
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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.
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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.
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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.
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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.")
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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.
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