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. 14
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 17
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)
Approximate date of proposed public offering:
It is proposed that this filing become effective on December 1, 1998, pursuant
to paragraph (a)(1) of rule 485.
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. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks and Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary
4. Investment Objectives, Principal Investment Objectives, Principal Investment
Investment Strategies, and Related Strategies and Related Risks
Risks
5. Management's Discussion of Fund N/A
Performance
6. Management, Organization, and Capital Management and Organization
Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Distribution Arrangements
9. Financial Highlights Information Financial Highlights
</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 and Table of Contents Cover Page and Table of Contents
11. Fund History Fund Organization
12. Description of the Fund and its Fund Organization; Investment Restrictions;
Investments and Risks Certain Investment Limitations; Description of
Securities and Investment Techniques
13. Management of the Fund Management; Fund Directors and Officers
14. Control Persons and Principal Holders N/A
of Securities
15. Investment Advisory and Other Services Management; General Information; Fund
Directors and Officers
16. Brokerage Allocation and Other Management; Execution of Portfolio
Practices Transactions
17. Capital Stock and Other Securities None
18. Purchase, Redemption and Pricing of Purchase of Shares; Selling Shares;
Shares Shareholder Account Services and Privileges;
General Information
19. Taxation of the Fund Dividends, Distributions and Federal Taxes
20. Underwriters Management
21. Calculation of Performance Data Investment Results and Related Statistics
22. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
<S> <C>
23. Exhibits
24. Persons Controlled by or under Common
Control with the Fund
25. Indemnification
26. Business and Other Connections of
the Investment Adviser
27. Principal Underwriters
28. Location of Accounts and Records
29. Management Services
30. Undertakings
Signature Page
</TABLE>
SMALLCAP World Fund
PROSPECTUS
DECEMBER 1, 1998
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SMALLCAP WORLD FUND, INC.
333 South Hope Street
Los Angeles, CA 90071
TICKER SYMBOL: SMCWX NEWSPAPER ABBREV.: SmCp FUND NO.: 35
TABLE OF CONTENTS
Risk/Return Summary
Fees and Expenses of the Fund
Investment Objective, Strategies and Risks
Important Recent Developments
Management and Organization
Shareholder Information
Purchase and Exchange of Shares
Distribution Arrangements
Financial Highlights
RISK/RETURN SUMMARY
The fund seeks to make your investment grow over time by investing in stocks of
smaller companies located around the world.
The fund is designed for investors seeking capital appreciation through stocks.
Investors in the fund should have a long-term perspective and be able to
tolerate potentially wide price fluctuations. An investment in the fund is
subject to risks, including the possibility that the fund may decline in value
in response to certain events, such as changes in the market or general
economy. In addition, the prices of equity securities held by the fund may be
affected by events specifically involving the issuers of these securities.
Investing in smaller companies may pose additional risks as it is often more
difficult to obtain information about smaller companies and the prices of their
stocks may be more volatile than stocks of larger, more established companies.
Investing outside the U.S. can also involve additional risks. For example, the
prices of non-U.S. securities can decline in response to currency fluctuations
or political, social and economic instability. Accordingly, 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 bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other entity or
person.
INVESTMENT RESULTS
The following information illustrates how fund results may vary:
For periods ended December 31, 1997:
<TABLE>
<CAPTION>
Average Annual The fund including World Smallcap Index/2/
Total Return/1/ maximum sales charge/1/
<S> <C> <C>
One Year xx.xx% xx.xx%
Five Years xx.xx% xx.xx%
Lifetime/3/ xx.xx% xx.xx%
</TABLE>
/1/ THESE FUND RESULTS WERE CALCULATED ACCORDING TO A STANDARD FORMULA WHICH
REQUIRES THAT THE MAXIMUM SALES CHARGE BE DEDUCTED. RESULTS WOULD BE HIGHER IF
THEY WERE CALCULATED AT NET ASSET VALUE.
/2/ THE SALOMON BROTHERS WORLD SMALLCAP INDEX TRACKS OVER 5,100 SMALL-COMPANY
STOCKS TRADED AROUND THE WORLD WITH A MARKET CAPITALIZATION BETWEEN $100
MILLION AND $1.2 BILLION. THIS INDEX IS UNMANAGED AND DOES NOT REFLECT SALES
CHARGES, COMMISSIONS OR EXPENSES.
/3/ THE FUND BEGAN INVESTMENT OPERATIONS ON APRIL 30, 1990.
Here are the fund's results calculated without a sales charge on a calendar
year basis. (If a sales charge were included, results would be lower.)
[bar chart]
1990 -3.76%
1991 32.89%
1992 6.69%
1993 30.04%
1994 -2.85%
1995 22.70%
1996 19.75%
1997
THE FUND'S YEAR-TO-DATE RETURN FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 WAS
__%.
The fund's highest/lowest quarterly results during this time period were:
- - Highest xx.xx% (quarter ended xx, 19xx)
- - Lowest xx.xx% (quarter ended xx, 19xx)
Past results are not an indication of future results.
FEES AND EXPENSES OF THE FUND
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
<S> <C>
Maximum sales charge imposed on purchases 5.75%/1/
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum sales charge imposed on reinvested 0%
dividends
Maximum deferred sales charge 0%/2/
Redemption or exchange fees 0%
</TABLE>
/1/ SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES.
/2/ A CONTINGENT DEFERRED SALES CHARGE OF 1% APPLIES ON CERTAIN REDEMPTIONS
MADE WITHIN 12 MONTHS FOLLOWING ANY PURCHASES YOU MADE WITHOUT A SALES CHARGE.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
<S> <C>
Management Fees xx.xx%
Service (12b-1) Fees xx.xx%*
Other Expenses xx.xx%
Total Annual Fund Operating Expenses xx.xx%
</TABLE>
*12B-1 EXPENSES MAY NOT EXCEED 0.30% OF THE FUND'S AVERAGE NET ASSETS ANNUALLY.
EXAMPLE
This Example is intended to help you compare the costs of investing in various
funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
One year $xx
Three years $xx
Five years $xx
Ten years $xx
</TABLE>
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide you with long-term growth of
capital. It invests primarily in companies with relatively small market
capitalizations located around the world. These companies will typically have
market capitalizations of $50 million to $1.2 billion. The fund may, however,
invest a substantial portion of its portfolio in cash, cash equivalents, or
securities of any type in response to abnormal market conditions (which may
prevent the fund from pursuing its objective over the short-term).
The prices of equity securities held by the fund may decline in response to
certain events including those directly involving issuers of these securities,
adverse conditions affecting the general economy, or overall market declines.
The growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss. In addition, smaller
capitalization stocks are often more difficult to value or dispose of, more
difficult to obtain information about, and more volatile than stocks of larger,
more established companies. Furthermore, the value of non-U.S. securities can
decline in response to various factors, including currency fluctuations,
political, social and economic instability, differing securities regulations,
and administrative difficulties such as delays in clearing and settling
portfolio transactions.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities that represent good long-term
investment opportunities.
The following chart illustrates the asset mix of the fund's investment
portfolio as of the end of the fund's fiscal year.
ASSET MIX (PIE CHART)
LARGEST INDUSTRY HOLDINGS
LARGEST INDIVIDUAL EQUITY HOLDINGS
LARGEST HOLDINGS BY COUNTRY
Because the fund is actively managed, its holdings will change from time to
time.
IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service
providers--including the investment adviser and its affiliates--are taking
steps to address the issue. In addition, the Year 2000 problem may adversely
affect the issuers in which the fund invests. For example, issuers may incur
substantial costs to address the problem. They may also suffer losses caused
by corporate and governmental data processing errors. The fund and its
investment adviser will continue to monitor developments relating to this
issue.
EURO INTRODUCTION
On January 1, 1999, the European Union will introduce a single European
currency, the Euro. The first group of countries that will begin to convert
their currencies to the Euro include Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The
expected introduction of the Euro present unique uncertainties, including:
whether the payment and operational systems of banks and other financial
institutions will be ready by the scheduled launch date; the legal treatment of
certain outstanding financial contracts after January 1, 1999 that refer to
existing currencies rather than the Euro; and the creation of suitable clearing
and settlement payment systems for the new currency. These or other factors,
including political and economic risks, could cause market disruptions before
or after the introduction of the Euro. The fund understands that the
investment adviser and other key service providers are taking steps to address
Euro-related issues.
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071.
Capital Research and Management Company manages the investment portfolio and
business affairs of the fund. The total management fee paid by the fund, as a
percentage of average net assets, for the previous fiscal year is indicated
earlier under "Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
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 a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee). In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for SMALLCAP World Fund are listed on the following page.
<TABLE>
<CAPTION>
Portfolio Primary Title(s) Years of Approximate Years of Experience
Counselors for Experience as as an Investment Professional
SMALLCAP World Fund Portfolio (including the last five years)
Counselor for
SMALLCAP World
Fund (approximate)
With Capital Research Total
and Management Years
Company or affiliates
<S> <C> <C> <C> <C>
William R. Grimsley Director and Vice 9 years (since the 29 years 36 years
Chairman of the fund began
Board of the fund; operations)
Senior Vice
President and
Director, Capital
Research and
Management Company
Gordon Crawford President and 9 years (since the 27 years 27 years
Principal Executive fund began
Officer of the operations)
fund; Senior Vice
President and
Director, Capital
Research and
Management Company
Gregory W. Wendt Senior Vice 1 year (in 11 years 11 years
President of the addition to 8
fund; Senior Vice years as a
President and research
Director, Capital professional prior
Research Company* to becoming a
portfolio
counselor for the
fund)
Robert W. Lovelace Vice President of 5 years (in 13 years 13 years
the fund; Executive addition to 4
Vice President and years as a
Director, Capital research
Research Company* professional prior
to becoming a
portfolio
counselor for the
fund)
Mark E. Denning Director, Capital 7 years (in 16 years 16 years
Research and addition to 1
Management Company years as a
research
professional prior
to becoming a
portfolio
counselor for the
fund)
Claudia Huntington Senior Vice 3 years (in 21 years 23 years
President, Capital addition to 4
Research and years as a
Management Company research
professional prior
to becoming a
portfolio
counselor for the
fund)
THE FUND BEGAN OPERATIONS IN APRIL 1990.
*COMPANY AFFILIATED WITH CAPITAL RESEARCH AND MANAGEMENT COMPANY.
</TABLE>
SHAREHOLDER INFORMATION
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
[Map of the United States of America]
<TABLE>
<CAPTION>
WESTERN SERVICE WESTERN CENTRAL EASTERN CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
<S> <C> <C> <C>
AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS AMERICAN FUNDS
SERVICE COMPANY SERVICE COMPANY SERVICE COMPANY SERVICE COMPANY
P.O. BOX 2205 P.O. BOX 659522 P.O. BOX 6007 P.O. BOX 2280
BREA, CALIFORNIA SAN ANTONIO, INDIANAPOLIS, NORFOLK,
TEXAS INDIANA VIRGINIA
92822-2205 78265-9522 46206-6007 23501-2280
FAX: 714/671-7080 FAX: 210/474-4050 FAX: 317/735-6620 FAX: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, some
retirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan
administrator/trustee or dealer.
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group
generally without a sales charge. Exchanges of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases. See "Transactions by Telephone . . ." for
information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
<TABLE>
<CAPTION>
INVESTMENT MINIMUMS
<S> <C>
To establish an account $250
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 through payroll deduction $ 25
</TABLE>
SHARE PRICE
The fund calculates its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value,
market prices are used when available. If a market price for a particular
security is not available, the fund will determine the appropriate price for
the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts your request. The offering price is the net asset value plus a sales
charge, if applicable.
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced
for larger purchases as indicated below.
<TABLE>
<CAPTION>
Sales Charge as a
Percentage of
Investment Offering Net Dealer
Price Amount Concession
Invested as % of
Offering
Price
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.50% 4.71% 3.75%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less $1 million 2.00% 2.04% 1.60%
$1 million or more and certain see see below see below
other investments described below below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. A dealer concession of up to 1% may be paid by the fund under its
Plan of Distribution and/or by American Funds Distributors on investments made
with no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any
combination of the methods described in the statement of additional information
and "Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. Up to 0.30%
of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. The 12b-1 fee,
as a percentage of average net assets, paid by the fund for the previous fiscal
year is indicated earlier under "Fees and Expenses of the Fund." Since these
fees are paid out of the fund's assets on an ongoing basis, over time they will
increase the cost of an investment and may cost you more than paying higher
initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- - Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- -- Over $50,000;
- -- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address other than the address of record, or an address of record
which has been changed within the last 10 days.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(SM):
- - Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(sm)) are limited to $50,000 per shareholder each day
- - Checks must be made payable to the registered shareholder
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE(R), OR AMERICAN FUNDSLINE
ONLINE(sm)
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) 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.
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund usually pays dividends, which may fluctuate, in June and 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.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in the American Funds
Group or you may elect to receive them in cash.
TAX CONSEQUENCES
Dividends and capital gains are generally taxable whether they are reinvested
or received in cash--unless you are exempt from taxation or entitled to tax
deferral. Capital gains may be taxed at different rates depending on the
length of time the fund holds its assets.
You must provide the fund with a certified correct taxpayer identification
number (generally your Social Security Number) and certify that you are not
subject to backup withholding. If you fail to do so, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions. Federal
law also requires the fund to withhold 30% of the applicable tax treaty rate
from dividends paid to certain non-resident alien, non-US partnership and
non-U.S. corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial
results for a single fund share. The total returns in the table represent the
rate that an investor would have earned or lost on an investment in the fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Deloitte & Touche LLP, whose report, along with the fund's
financial statements, are included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
Years ended September 30
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period xxx $26.92 $26.11 $23.61 $22.72
INCOME FROM INVESTMENT OPERATIONS xxx .10 .17 .22 .09
Net Investment Income
Net Gains or Losses On Securities (both xxx 6.17 3.32 3.79 1.83
realized and unrealized)
Total Income (from Investment Operations xxx 6.27 3.49 4.01 1.92
LESS DISTRIBUTIONS: xxx (.12) (.16) (.06)
Dividends (from net investment income) (.23)
Distributions from Net Realized Gains (2.35) (2.45) (1.35) (.97)
Total Distributions (2.47) (2.68) (1.51) (1.03)
Net Asset Value, End of Period xxx $30.72 $26.92 $26.11 $23.61
TOTAL RETURN/1/ xxx 25.41% 15.21% 18.59% 8.60%
RATIOS/SUPPLEMENTAL DATA: xxx $9,256 $6,607 $4,625 $3,497
Net Assets, End of Period
Ratio of Expenses to Average Net Assets xxx 1.07% 1.09% 1.13% 1.12%
Ratio of Net Income to Average Net Assets xxx .40% .68% .97% .38%
Portfolio Turnover Rate xxx 42.21% 42.88% 45.63% 29.43%
</TABLE>
/1/ Excludes maximum sales charge of 5.75%.
<TABLE>
<CAPTION>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER SERVICES
SERVICES SERVICES
<S> <C> <C>
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext.11
</TABLE>
FOR 24-HOUR INFORMATION
<TABLE>
<CAPTION>
<S> <C>
American FundsLine(r) American Funds
800/325-3590 Internet Web site
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
MULTIPLE TRANSALATIONS
This prospectus may be translated into other languages. In the event of any
inconsistencies or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial statements,
investment results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent accountants' report (in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund, including the
fund's financial statements.
A current SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The SAI and
other related materials about the fund are available for review or to be copied
at the SEC's Public Reference Room (1-800-SEC-0330) or on the SEC's Internet
Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
<TABLE>
<CAPTION>
<S> <C>
Call American Funds or Write to the Secretary of the fund
Service Company P.O. Box 7650
800/421-0180 ext.1 San Francisco, CA 94120
</TABLE>
Investment Company File No. 811-588
SMALLCAP WORLD FUND, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 1998
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
December 1, 1998. 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>
CERTAIN INVESTMENT LIMITATIONS 1
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES 2
INVESTMENT RESTRICTIONS 7
FUND DIRECTORS AND OFFICERS 9
MANAGEMENT 12
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES 15
PURCHASE OF SHARES 19
SELLING SHARES 28
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES 29
EXECUTION OF PORTFOLIO TRANSACTIONS 32
GENERAL INFORMATION 32
INVESTMENT RESULTS AND RELATED STATISTICS 34
DESCRIPTION OF BOND RATINGS 39
FINANCIAL STATEMENTS ATTACHED
</TABLE>
CERTAIN INVESTMENT LIMITATIONS
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
EQUITY SECURITIES - SMALL CAPITALIZATION ISSUERS
- - At least 65% of the fund's assets will be invested in equity securities of
small capitalization issuers, typically having individual market
capitalizations of approximately $50 million to $1.2 billion.
DEBT SECURITIES
- - The fund may invest up to 35% of its assets in debt securities rated Baa or
BBB or unrated but determined to be of equivalent quality.
INVESTMENT COMPANIES
- - The fund may invest up to 5% of its assets in closed-end investment
companies.
- - The fund may acquire up to 3% of the outstanding voting stock of any one
closed-end investment company.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions. The
descriptions below are intended to supplement the material in the prospectus
under "Investment Objective, Strategies and Risks."
EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. The prices of equity securities fluctuate based on changes in the
financial condition of their issuers and on market and economic conditions. The
fund's results will be related to the overall market for these securities. The
growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss, particularly in the case of
smaller capitalization stocks.
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. The fund determines relative market capitalizations
using U.S. standards (as described earlier). Accordingly, the fund's non-U.S.
investments may have large capitalizations relative to market capitalizations
of companies based outside the U.S.
Capital Research and Management Company (the Investment Adviser) 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.
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.
LOWER RATED DEBT SECURITIES -- Although the fund has no current intention of
investing in such securities (at least for the next 12 months), it may invest
up to 10% of its assets in debt securities rated Baa or BBB or below by Moody's
Investors Services, Inc. or Standard & Poor's Corporation 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 may have
characteristics similar to the equity securities eligible for purchase by the
fund. High-yield, high-risk bonds are described by the rating agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already
be in default. The market prices of these securities may fluctuate more than
higher quality securities and may decline significantly 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 by Moody's or CC by S&P which are
described by the rating agencies as "speculative in a high degree; often in
default or [having] other marked shortcomings" or "predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
terms of the obligation."
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 or issuers whose revenue is very
sensitive to economic conditions 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 obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. 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.
The fund's investment adviser attempts to reduce these risks through
diversification of the portfolio, by credit analysis of each issuer as well as
by monitoring broad economic trends and corporate developments, but there can
be no assurance that it will be successful in doing so. The fund's investment
policy with respect to investing in high-yield, high-risk securities is a
"non-fundamental" policy and thus may be changed by the board of directors at
any time.
OTHER SECURITIES -- The fund may also invest in securities that have equity
and debt characteristics such as non-convertible preferred stocks and
convertible securities. These securities may at times resemble equity more than
debt, and vice versa. Non-convertible preferred stocks are similar to debt in
that they have a stated dividend rate akin to the coupon of a bond or note even
though they are often classified as equity securities. The prices and yields of
non- convertible preferred stocks generally move with changes in interest rates
and the issuer's credit quality, similar to the factors affecting debt
securities.
Bonds, preferred stocks, and other securities may sometimes be converted
into shares of common stock or other securities at a stated exchange ratio.
These securities prior to conversion pay a fixed rate of interest or a
dividend. Because convertible securities have both debt and equity
characteristics, their value varies in response to many factors, including the
value of the underlying equity, general market and economic conditions,
convertible market valuations, as well as changes in interest rates, credit
spreads, and the credit quality of the issuer.
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; expropriation or
confiscatory taxation; 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.
The risks described above are potentially heightened in connection with
investments in less developed and developing countries. Although there is no
universally accepted definition, a developing country is generally considered
to be a country which is in the initial stages of its industrialization cycle
with a low per capita gross national product. For example, political and/or
economic structures in these countries may be in their infancy and developing
rapidly. Historically, the markets of developing countries have been more
volatile than the markets of developed countries. The fund may only invest in
securities of issuers in developing countries to a limited extent.
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. These investments will be
located in at least three countries.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities
subject to restrictions on resale. All such securities not actively traded
outside the U.S. will be considered illiquid unless they have been specifically
determined to be liquid under procedures adopted by the fund's board of
directors, taking into account factors such as the frequency and volume of
trading, the commitment of dealers to make markets and the availability of
qualified investors, all of which can change from time to time. The fund may
incur certain additional costs in disposing of illiquid securities.
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 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 can purchase and sell currencies to
facilitate securities transactions and enter into forward currency contracts to
hedge 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. 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.
The fund will segregate liquid assets, which will be marked to market daily, to
meet its forward contract commitments to the extent required by the Securities
and Exchange Commission.
Certain provisions of the Internal Revenue Code may 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 -- The fund has the ability to invest up to 5% of its
total assets in shares of closed-end investment companies, but would not
acquire more than 3% of the outstanding voting securities of any one closed-end
investment company. (If the fund invests in another investment company, it
would pay an investment advisory fee in addition to the fee paid to the
Investment Adviser.)
U.S. GOVERNMENT SECURITIES -- Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. In these securities, the payment of
principal and interest is unconditionally guaranteed by the U.S. Government,
and thus they are of the highest possible credit quality. Such securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations of
the issuer; others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but
are not limited to, Federal Land Banks, Farmers Home Administration, Central
Bank Cooperatives, and Federal Intermediate Credit Banks.
CASH AND CASH EQUIVALENTS -- These securities include (1) commercial paper
(short-term notes issued by corporations or governmental bodies), (2)
commercial bank obligations (E.G. 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 and savings bank obligations (certificates of deposit issued by
savings banks or savings 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 that mature, or that may be
redeemed, in one year or less).
FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When a fund purchases such securities, it assumes
the risk of any decline in value of the security beginning on the date of the
agreement. When a fund sells such securities, it does not participate in
further gains or losses with respect to such securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver
or pay for the securities, the fund could miss a favorable price or yield
opportunity or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly may increase. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its
payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it will have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets would likely occur than were
it not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
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 (1) 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 (2) more than 50% of the outstanding voting
securities. Investment limitations expressed in the following restrictions as
a percentage of assets are considered at the time securities are purchased.
The fund may not:
1. Invest in securities of an issuer (other than the U.S. Government 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.
The following investment policy of the fund may be changed by action of the
Board of Directors without shareholder approval: 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.
FUND ORGANIZATION
The fund is an open-end, diversified management investment company. It was
organized as a Maryland corporation on December 18, 1989.
All fund operations are supervised by the fund's board of directors. The board
meets periodically and performs duties required by applicable state and federal
laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Directors and Director Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
FUND DIRECTORS AND OFFICERS
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AND AGE REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS
(POSITIONS DEFERRED DEFERRED ON WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) DIRECTOR
ORGANIZATIONS FROM THE FUND FROM ALL FUNDS SERVES/3/
LISTED MAY DURING FISCAL MANAGED BY
HAVE YEAR ENDED CAPITAL RESEARCH
CHANGED 9/30/98 AND
DURING THIS MANAGEMENT
PERIOD) COMPANY OR ITS
AFFILIATES/2/
FOR THE YEAR
ENDED 9/30/98
<S> <C> <C> <C> <C> <C>
Richard G. Director Corporate $XX,XXX $XX,XXX 2
Capen, Jr. Director and
Box 2494 author;
Rancho former United
Santa Fe, States
CA 92067 Ambassador to
Age: 64 Spain; former
Vice Chairman
of the Board,
Knight
Ridder, Inc.;
former
Chairman and
Publisher,
The Miami
Herald.
H. Director Private $XX,XXX/3/ $XXX,XXX/3/ 18
Frederick Investor;
Christie former
P.O. Box President and
144 Chief
Palos Executive
Verdes Officer, The
Estates, Mission Group
CA (non-utility
90274 holding
Age: 65 company,
subsidiary of
Southern
California
Edison
Company);
former
President,
Southern
California
Edison
Company
Alan W. Director Private $XX,XXX $XX,XXX 2
Clements investor;
16 Great former
Peter Executive
Street Director -
London Finance,
SW1P3JF Imperial
England Chemical
Age: 70 Industries
PLC
+Gordon President Senior Vice None/4/ None/4/ 1
Crawford and President and
333 South Director Director,
Hope Capital
Street Research and
Los Management
Angeles, Company
CA 90071
Age: 51
Alan Director President, $XX,XXX $XX,XXX 4
Greenway Greenway
7413 Associates,
Fairway Inc.
Road (management
La Jolla, consulting
CA 92037 services)
Age: 70
+William Chairman Senior Vice None/4/ None/4/ 3
R. of the President and
Grimsley Board Director,
P.O. 7650 Capital
San Research and
Francisco, Management
CA 94120 Company
Age: 60
+Graham Director Former None/4/ None/4/ 2
Holloway Chairman of
17309 Club the Board,
Hill Drive American
Dallas, TX Funds
75248 Distributors,
Age: 68 Inc.
Leonade D. Director Former $XX,XXX/3/ $XX,XXX/3/ 5
Jones Treasurer,
1536 Los The
Montes Washington
Drive Post Company
Burlingame, CA
94010
Age: 51
William H. Director President, $XX,XXX/3/ $XX,XXX/3/ 4
Kling Minnesota
2619 Lake Public Radio;
of the President,
Isles Greenspring
Parkway Co.; former
East President,
Minneapolis, MN American
55408 Public Radio
Age: 56 (now Public
Radio
International)
Norman R. Director Managing $XX,XXX $XX,XXX 2
Weldon Director,
15600 N.W. Partisan
67th Management
Avenue, Group, Inc.;
Suite 310 Chairman of
Miami the Board,
Lakes, FL Novoste
33014 Corporation;
Age: 64 Director,
Enable
Medical;
former
President and
Director,
Corvita
Corporation
Patricia Director Private $XX,XXX $XX,XXX 6
K. Woolf investor;
506 Quaker Lecturer,
Road Department
Princeton, of Molecular
NJ 08540 Biology,
Age: 64 Princeton
University
</TABLE>
+ "Interested persons" of the fund within the meaning of the Investment Company
Act of 1940 (the 1940 Act) on the basis of their affiliation with the fund's
Investment Adviser, Capital Research and Management Company or the parent
company of the Investment Adviser, The Capital Group Companies, Inc.
/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; and Endowments, shareholders are limited to (I)
any entity exempt from taxation under Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended ("501(c)(3) organization"); (ii) any trust, the
present or future bneficiary of which is a 501(c)(3) organization; and (iii)
any other entity formed for the primary purpose of benefiting a 501(c)(3)
organization.
/3/ Includes funds managed by Capital Research and Management Company.
/4/ 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 ($XX,XXX), Leonade D. Jones ($XX,XXX) and
William H. Kling ($XX,XXX). Amounts deferred and accumulated earnings thereon
are not funded and are general unsecured liabilities of the fund until paid to
the Director.
/5/ Gordon Crawford, William R. Grimsley and Graham Holloway are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S)
WITH REGISTRANT DURING PAST 5 YEARS
<S> <C> <C> <C>
Gordon Crawford
(see above)
William R. Grimsley
(see above)
Gregory W. Wendt 36 Senior Senior Vice President and
P.O. Box 7650 Vice President Director, Capital Research
San Francisco, CA 94120 Company
Vincent P. Corti 42 Vice President Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and
Management Company
Robert W. Lovelace 36 Vice President Executive Vice President and
1110 Santa Monica Blvd. Director, Capital Research
Los Angeles, CA 90025 Company
Chad L. Norton 38 Secretary Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and
Management Company
Robert P. Simmer 37 Treasurer Vice President - Fund
5300 Robin Hood Road Business Management Group,
Norfolk, VA 23513 Capital Research and
Management Company
</TABLE>
All of the officers listed 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 $ $14,000 per annum to
Directors who are not affiliated with the Investment Adviser, plus $ $1,000 for
each Board of Directors meeting attended, plus $ $500 for each meeting attended
as a member of a committee of the Board of Directors. No pension or retirement
benefits are accrued as part of fund expenses. The Directors may elect, on a
voluntary basis, to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund. The fund also reimburses certain
expenses of the Directors who are not affiliated with the Investment Adviser.
As of September 30, 1998, 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.
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 $175 billion of stocks,
bonds and money market instruments and serves over eight 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, 1999, 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, 0.625% on average net assets in excess of $8 billion
but not exceeding $13 billion, and 0.615% on overage net assets in excess of
$13 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, 1998, 1997 and 1996, the Investment
Adviser received advisory fees of $XX,XXX,000, $50,724,000 and $37,904,000,
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, 3500 Wiseman Boulevard, 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, 1998 amounted to $X,XXX,000 after allowance of $31,103,000 to
dealers. During the fiscal years ended September 30, 1997 and 1996, the
Principal Underwriter retained $6,589,000 and $6,297,000, 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 are committed to the discretion of the
Directors who are not interested persons during the existence of the Plan. The
Plan is reviewed quarterly and must be renewed annually by the Board of
Directors.
Under the Plan, the fund may expend up to 0.30% of its average net assets
annually to finance any activity 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 100 or
more eligible employees).
Commissions on sales of shares exceeding $1 million (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the fiscal year ended September 30, 1998, the fund paid or accrued $XX,XXX,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) 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 which 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 (1) 98% of ordinary income for the calendar year, (2) 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 (3) 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 (1) amounts actually distributed by the fund from its current
year's ordinary income and capital gain net income and (2) 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
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 thereby
taxable as of December 31, provided that the fund pays the dividend no later
than the end of January of the following year.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
Corporate shareholders of the fund may be eligible for the
dividends-received deduction on the dividends (excluding the net capital gain
distributions) paid by the fund to the extent the fund's income is derived from
dividends (which if received directly would qualify for such deduction)
received from domestic corporations. In order to qualify for the
dividends-received deduction, a corporate shareholder must hold the fund shares
paying the dividends upon which the deduction is based for at least 46
days.
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 gains on assets held more than 18 months is 20%, and on assets held
more than one year and not more than 18 months 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>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and Fund $50 minimum (except where a lower
Numbers" for initial investment minimum is noted under "Investment
minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer who is Mail directly to your investment
your registered in the state where the dealer's address printed on your
investment purchase is made and who has a account statement.
dealer sales agreement with American Funds
Distributors.
By mail Make your check payable to the fund Fill out the account additions form
and mail to the address indicated at the bottom of a recent account
on the account application. Please statement, make your check payable
indicate an investment dealer on to the fund, write your account
the account application. number on your check, and mail the
check and form in the envelope
provided with your account
statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then follow section on the account application
the procedures for additional or American FundsLink Authorization
investments. Form. Once you establish the
privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(r) and make
investments by telephone (subject
to conditions noted in "Telephone
and Computer Purchases, Redemptions
and Exchanges" below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then follow Authorization Form. Once you
the procedures for additional establish the privilege, you, your
investments. financial advisor or any person
with your account information may
access American FundsLine
OnLine(sm) on the Internet and make
investments by computer (subject to
conditions noted in "Telephone and
Computer Purchases, Redemptions and
Exchanges" below).
By wire Call 800/421-0180 to obtain your Your bank should wire your
account number(s), if necessary. additional investments in the same
Please indicate an investment manner as described under "Initial
dealer on the account. Instruct Investment."
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) $1,000 02
American Balanced Fund(r) 500 11
American Mutual Fund(r) 250 03
Capital Income Builder(r) 1,000 12
Capital World Growth and Income Fund(sm) 1,000 33
EuroPacific Growth Fund(r) 250 16
Fundamental Investors(sm) 250 10
The Growth Fund of America(r) 1,000 05
The Income Fund of America(r) 1,000 06
The Investment Company of America(r) 250 04
The New Economy Fund(r) 1,000 14
New Perspective Fund(r) 250 07
SMALLCAP World Fund(r) 1,000 35
Washington Mutual Investors Fund(sm) 250 01
BOND FUNDS
American High-Income Municipal Bond Fund(r) 1,000 40
American High-Income Trust(sm) 1,000 21
The Bond Fund of America(sm) 1,000 08
Capital World Bond Fund(r) 1,000 31
Intermediate Bond Fund of America(sm) 1,000 23
Limited Term Tax-Exempt Bond Fund of America(sm) 1,000 43
The Tax-Exempt Bond Fund of America(r) 1,000 19
The Tax-Exempt Fund of California(r)* 1,000 20
The Tax-Exempt Fund of Maryland(r)* 1,000 24
The Tax-Exempt Fund of Virginia(r)* 1,000 25
U.S. Government Securities Fund(sm) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 2,500 09
The Tax-Exempt Money Fund of America(sm) 2,500 39
The U.S. Treasury Money Fund of America(sm) 2,500 49
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES -- The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
<S> <C> <C> <C>
STOCK AND STOCK/BOND
FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than 4.71 4.50 3.75
$100,000
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than 4.71 4.50 3.75
$50,000
$50,000 but less than 4.17 4.00 3.25
$100,000
STOCK, STOCK/BOND, AND
BOND FUNDS
$100,000 but less than 3.63 3.50 2.75
$250,000
$250,000 but less than 2.56 2.50 2.00
$500,000
$500,000 but less than 2.04 2.00 1.60
$1,000,000
$1,000,000 or more none none (see below)
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or more
and investments made by employer-sponsored defined contribution-type plans with
100 or more eligible employees are sold with no initial sales charge. A
contingent deferred sales charge may be imposed on certain redemptions by these
accounts made within one year of purchase. Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net
asset value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.;
and
(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation. Shares are offered at net asset value to
these persons and organizations due to anticipated economies in sales effort
and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 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.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the Prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to the following statement of intention (the
Statement) 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.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (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.
CONCURRENT PURCHASES - You may combine purchases of two or more funds in The
American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION - You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments (shares of which may be owned only by tax-exempt organizations), to
determine your sales charge on investments in accounts eligible to be
aggregated, or when making a gift to an individual or charity. Direct
purchases of the money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next
determined after the purchase order is received and accepted by the fund or
American Funds Service; 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. 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, Martin Luther King Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined, as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of 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.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly trust to any person or entity, where, after the sale, such
person or entity would own beneficially directly or indirectly more than 4.5%
of the outstanding shares of the fund without the consent of a majority of the
fund's directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
S Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- -- Over $50,000;
- -- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address that has not been used with the account for at least 10
days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(SM)
- - Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(sm)) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application)
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
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.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service
Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds
made within twelve months of purchase on investments of $1 million or more 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 100 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 -- An automatic investment plan enables you to
make monthly or quarterly investments into the American Funds through automatic
debits from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is
made, depending on the bank's capabilities. American Funds Service Company will
then invest your money into the fund you specified on or around the date you
specified. If your account cannot be debited due to insufficient funds, a
stop-payment, or the closing of the account, the plan may be terminated and the
related investment reversed. You may change the amount of the investment or
discontinue the plan at any time by writing to American Funds Service
Company.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:
a) The aggregate value of your account(s) in the fund(s) paying
distributions equals or exceeds $5000 (this is waived if the value of the
account in the fund receiving the distributions equals or exceeds that fund's
minimum initial investment requirement),
b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distribution must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) or American FundsLine OnLine (sm) (see "American FundsLine(r)" and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, 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, will be reflected on regular confirmation statements from American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per fund, per account each day), or
exchange shares around the clock with American FundsLine(r) or American
FundsLine OnLine(sm). To use this service, call 800/325-3590 from a TouchTonet
telephone or access the American Funds Web site on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(r)
and American FundsLine OnLine(sm) are subject to the conditions noted above and
in "Shareholder Account Services and Privileges -- Telephone and Computer
Purchases, Redemptions and Exchanges" below. You will need your fund number
(see the list of funds in The American Funds Group under "Purchase of Shares --
Investment Minimums and Fund Numbers"), personal identification number (the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone or computer (including American FundsLine(r) or American FundsLine
OnLine(sm)), fax or telegraph purchase, redemption and/or exchange options, you
agree to hold the fund, American Funds Service Company, any of its affiliates
or mutual funds managed by such affiliates, and each of their respective
directors, trustees, officers, employees and agents harmless from any losses,
expenses, costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate account
information are genuine, the fund may be liable for losses due to unauthorized
or fraudulent instructions. In the event that shareholders are unable to reach
the fund by telephone because of technical difficulties, market conditions, or
a natural disaster, redemption and exchange requests may be made in writing
only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates
are not issued unless you request them by writing to American Funds Service
Company.
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 (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the 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.
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, 1998, 1997 and 1996 amounted to $X,XXX,000, $8,965,000 and
$9,988,000 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, 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 $X,XXX,000 for the fiscal year ended September 30, 1998.
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 incorporated in this Statement of
Additional Information 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 holding 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 16E 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.
YEAR 2000 - The fund and its shareholders depend on the proper functioning
of computer systems maintained by the Investment Adviser and its affiliates and
other key service providers. Many computer systems in use today will require
reprogramming or replacement prior to the year 2000 because of the way they
store dates and make date-related calculations. The fund understands that
these service providers are taking steps to address the "Year 2000 problem".
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the fund. In addition, the fund's investments could be
adversely affected by the Year 2000 problem. For example, the markets for
securities in which the fund invests could experience settlement problems and
liquidity issues. Corporate and governmental data processing errors may cause
losses for individual companies and overall economic uncertainties. Earnings of
individual issuers are likely to be affected by the costs of addressing the
problem, which may be substantial and may be reported inconsistently.
PERSONAL INVESTING POLICY -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; 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, 1998
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $XX.XX
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) $XX.XX
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is X.XX% based on a 30-day (or one month) period ended
September 30, 1998, 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,
1998 were XX.XX%, XX.XX% and XX.XX%, 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.
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.
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 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 also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.
The fund may refer to results and surveys 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 illustrate the benefits of tax-deferral by
comparing taxable investment to investments made through tax-deferred
retirement plans.
The fund may, from time to time, compare its investment results with 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,
fuels, transportation, and other goods and services that people buy for
day-to-day living).
SMALL CAPITALIZATION STOCKS VERSUS LARGE CAPITALIZATION STOCKS -- According to
Ibbottson Associates, an investment in small company stocks has grown an
average of xx.x% a year from September 30, 1973 through September 30, 1998,
compared with an average of xx.x% 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.
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 9/30/98 xxx.x% xxx.x% xxx.x% xxx.x% xxx.x% xxx.x%
</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
(10/1/97 - 9/30/98) (10/1/95 - 9/30/98) (4/30/90 - 9/30/98)
$xxxx $xxxxxx $xxxx
</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, 1998)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
Fiscal Annual Total Investment From From Dividends Total
Year End Dividends Dividends Cost Initial Capital Gains Reinvested Value
9/30 (cumulative) Investment 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
1997 106 816 10,816 19,200 8,167 1,322 28,689
1998 XXX XXX XX,XXX XX,XXX X,XXX X,XXX XX,XXX
</TABLE>
The dollar amount of capital gain distributions during the period was $6,011
# from April 30, 1990, the date the fund commenced operations
EXPERIENCE OF THE INVESTMENT ADVISER -- Capital Research and Management
Company manages nine growth and growth-income funds that are at least 10 years
old. In the 10-year periods since January 1, 1968 (133 in all), those funds
have had better total returns than the Standard and Poor's 500 Stock Composite
Index in 124 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.
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."
PART C
OTHER INFORMATION
SMALLCAP WORLD FUND, INC.
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(b) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(c) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(d) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(e) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(f) None.
(g) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(h) None.
(i) Not applicable to this filing.
(j) Consent of Independent Auditors - to be filed by amendment.
(k) None.
(l) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(m) Previously filed (see Post-Effective Amendment No. 13 filed November 26,
1997).
(n) EX-27 Financial data schedule (EDGAR).
(o) None.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policies written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company and ICI Mutual Insurance
Company which insures its officers and Trustees 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., 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., 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, U.S. Treasury Money Fund of America
and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
1501 N. University, Suite
227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Boulder, CO 80301
B Carl R. Bauer Assistant Vice President None
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 Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd.
Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and None
Co-Chief Executive
Officer
Ruth M. Collier Senior Vice President None
145 West 67th St., #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director None
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President None
Michael J. Johnston Director None
630 Fifth Avenue, 36th
Floor
New York, NY 10111
B Damien M. Jordan Vice President None
V. John Kriss Senior Vice President None
P. O. Box 247
Surfside, CA 90743
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - None
Institutional
Investment Services
LW Robert W. Lovelace Director Vice President
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
L Jamie R. McCrary Assistant Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - None
Institutional
Investment Services
David R. Murray Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Vice President None
175 Highland Avenue
4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07962
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, Chairman of None
1000 RIDC Plaza, Suite 212 the Board and Co-Chief
Pittsburgh, PA 15238 Executive Officer
William P. Simon, Jr. Senior Vice President None
912 Castlehill Lane
Devon, PA 91333
L John C. Smith Assistant Vice President None
- Institutional
Investment Services
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
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue
Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
L David M. Ward Vice President - None
Institutional Investment
Services
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice None
President
L Robert L. Winston Director, Senior Vice None
President
Laurie B. Wood Regional Vice President None
3500 W. Camino de Urania
Tucson, AZ 85741
William R. Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, 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 92821 and 5300 Robin Hood
Road, Norfolk, VA 23513.
Records covering shareholder accounts are maintained and kept by the
transfer agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92821,3500 Wiseman Boulevard, San Antonio, TX 78251, 8332 Woodfield
Crossing Boulevard, Indianapolis, IN 42640 and 5300 Robin Hood Road, Norfolk,
VA 23514.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
n/a
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 29th day of September,
1998.
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 September 29, 1998, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Gordon Crawford President
Gordon Crawford
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Robert P. Simmer Treasurer
Robert P. Simmer
(3) Directors:
Richard G. Capen, Jr.* Director
H. Frederick Christie* Director
Alan W. Clements* Director
Gordon Crawford* President and Director
Alan Greenway* Director
William R. Grimsley* 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)
SMALLCAP World Fund, Inc. -- Pg C-13
