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. 16
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 19
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, 1999, pursuant
to paragraph (b) of rule 485.
<PAGE>
SMALLCAPWorld Fund/(R)/
Prospectus
DECEMBER 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
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SMALLCAP WORLD FUND, INC.
333 South Hope Street
Los Angeles, CA 90071
<TABLE>
<CAPTION>
<S> <C> <C>
TICKER SYMBOL: SMCWX NEWSPAPER ABBREV: SmCp FUND NO: 35
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C>
Risk/Return Summary 2
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Fees and Expenses of the Fund 5
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Investment Objective, Strategies and Risks 6
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Year 2000 8
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Management and Organization 9
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Shareholder Information 11
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Purchase and Exchange of Shares 12
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Distribution Arrangements 17
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Financial Highlights 18
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</TABLE>
1
35-010-1299/MC
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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RISK/RETURN SUMMARY
The fund seeks to make your investment grow over time by investing in stocks of
smaller companies located around the world that typically have market
capitalizations of $50 million to $1.5 billion.
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 economic, political or social events in the U.S. or abroad. The
prices of equity securities owned by the fund may be affected by events
specifically involving the companies issuing those 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.
Although all securities in the fund's portfolio may be adversely affected by
currency fluctuations or world political, social and economic instability,
investments outside the U.S. may be affected to a greater extent.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
You may lose money by investing in the fund. The likelihood of loss is greater
if you invest for a shorter period of time.
2
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
INVESTMENT RESULTS
The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.
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]
1991 32.89%
1992 6.69%
1993 30.04%
1994 -2.85%
1995 22.70%
1996 19.75%
1997 11.83%
1998 0.38%
[end bar chart]
The fund's year-to-date return for the nine months ended September 30, 1999
was 20.06%.
------------------------------------------------------------------------------
The fund's highest/lowest quarterly results during this time period were:
<TABLE>
<CAPTION>
<S> <C> <C>
Highest 17.79% (quarter ended December 31, 1998)
Lowest -19.90% (quarter ended September 30, 1998)
</TABLE>
3
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
For periods ended December 31, 1998:
<TABLE>
<CAPTION>
THE FUND WITH
AVERAGE ANNUAL MAXIMUM SALES SALOMON SMITH BARNEY
TOTAL RETURN CHARGE DEDUCTED/1/ WORLD SMALLCAP INDEX/2/ CPI/3/
<S> <C> <C> <C>
One Year -5.37% 0.61% 1.61%
--------------------------------------------------------------------------
Five Years 8.59% 6.39% 2.37%
--------------------------------------------------------------------------
Lifetime/4/ 12.04% 8.15% 2.81%
--------------------------------------------------------------------------
</TABLE>
1 These fund results were calculated according to a formula which requires that
the maximum sales charge of 5.75% be deducted and include the reinvestment of
dividend and capital gain distributions. Results would be higher if they were
calculated at net asset value.
2 The Salomon Smith Barney World Smallcap Index tracks over 5,100 small-company
stocks traded around the world with market capitalizations between $100
million and $1.2 billion. This index is unmanaged and does not reflect sales
charges, commissions or expenses.
3 The Consumer Price Index is a measure of inflation and is computed from data
supplied by the U.S. Department of Labor, Bureau of Labor Statistics.
4 The fund began investment operations on April 30, 1990.
4
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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FEES AND EXPENSES OF THE FUND
The following describes the fees and expenses that you may pay if you buy and
hold shares of the fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment)
----------------------------------------------------------------
<S> <C>
Maximum sales charge imposed on purchases 5.75%/1/
(as a percentage of offering price)
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Maximum sales charge imposed on reinvested dividends 0%
----------------------------------------------------------------
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 purchases of $1 million or more made without a
sales charge.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
----------------------------------------------------------
<S> <C>
Management Fees 0.67%
Service (12b-1) Fees 0.25%*
Other Expenses 0.17%
Total Annual Fund Operating Expenses 1.09%
</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 cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your cumulative expenses would
be:
<TABLE>
<CAPTION>
<S> <C>
One year $ 680
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Three years $ 902
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Five years $1,141
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Ten years $1,827
</TABLE>
5
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide you with long-term growth of
capital. It invests primarily in equity securities of companies with
relatively small market capitalizations located around the world. These
companies will typically have market capitalizations of $50 million to $1.5
billion.
The prices of equity securities held by the fund will decline in response to
certain events, including those directly involving the companies whose
securities are owned in the fund, adverse conditions affecting the general
economy, overall market declines, world political, social and economic
instability, and currency fluctuations. 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.
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. Investments outside the U.S. may be
affected by these events to a greater extent and may also be affected by
differing securities regulations, higher transaction costs, and administrative
difficulties such as delays in clearing and settling portfolio transactions.
The fund may also hold cash or money market instruments. The size of the fund's
cash position will vary and will depend on various factors, including market
conditions and purchases and redemptions of fund shares. A larger cash position
could detract from the achievement of the fund's objective, but it also
provides greater liquidity to meet redemptions or to make additional
investments, and it would reduce the fund's exposure in the event of a market
downturn.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.
6
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
The following chart illustrates the industry mix of the fund's investment
portfolio as of the end of the fund's fiscal year, September 30, 1999.
Largest Industry Holdings
[pie chart]
Business Services 12.96%
Electronic Components 12.01%
Broadcasting & Publishing 8.96%
Merchandising 6.66%
Health & Personal Care 5.28%
Other Industries 48.96%
Cash & Cash Equivalents 5.17%
[end pie chart]
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
Percent Invested by Country NET ASSETS Ten Largest Individual Holdings NET ASSETS
----------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C>
The Americas 54.2% PMC- Sierra 3.37%
---------------------------------------------
United States 48.2 United GlobalCom 1.30
---------------------------------------------
Canada 4.1 Micrel 1.17
---------------------------------------------
Brazil .9 Disco .98
---------------------------------------------
Mexico .7 Venture Marketing .94
---------------------------------------------
Other Latin America .3 Scient .87
----------------------------------------- ---------------------------------------------
Asia Pacific 19.6% Westwood One .85
---------------------------------------------
Japan 7.0 Andrx .82
---------------------------------------------
Australia 2.8 Newfield Exploration .81
---------------------------------------------
Singapore 2.5 Flextech .77
---------------------------------------------
Hong Kong 2.4
Taiwan 1.3
New Zealand .9
Indonesia .7
South Korea .5
India .5
Other Asia 1.0
-----------------------------------------
Europe 17.9%
United Kingdom 6.5
Germany 1.9
Sweden 1.6
France 1.3
Denmark 1.1
Finland .8
Spain .8
Ireland .7
Netherlands .5
Luxembourg .5
Other Europe 2.2
-----------------------------------------
Other Countries 3.1%
-----------------------------------------
</TABLE>
Because the fund is actively managed, its holdings will change from time to
time.
7
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service providers -
including the investment adviser and its affiliates - have updated all of their
computer systems to process date-related information properly following the
turn of the century. In addition, the Year 2000 problem may adversely affect
the issuers in which the fund invests. For example, issuers may incur
substantial costs to address the problem. They may also suffer losses caused by
corporate and governmental data processing errors. These risks may be
particularly acute in certain countries outside the U.S. in which the fund may
invest and may adversely affect the fund's net asset value and total return.
The fund and its investment adviser will continue to monitor developments
relating to this issue.
8
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the fund. The total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is discussed earlier under
"Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments 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.
9
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
AS AN INVESTMENT PROFESSIONAL
YEARS OF EXPERIENCE (INCLUDNG THE LAST FIVE YEARS)
AS PORTFOLIO COUNSELOR -----------------------------------
PORTFOLIO (AND RESEARCH PROFESSIONAL, WITH CAPITAL
COUNSELORS FOR IF APPLICABLE) FOR RESEARCH AND
SMALLCAP WORLD SMALLCAP WORLD FUND MANAGEMENT
FUND PRIMARY TITLE(S) (APPROXIMATE) COMPANY
------------------------------------------------------------------------- OR AFFILIATES TOTAL YEARS
-----------------------------------
<S> <C> <C> <C> <C>
GORDON CRAWFORD Chairman and Principal 10 years (since the fund 28 years 28 years
Executive Officer of the began operations)
fund. Senior Vice
President and Director,
Capital Research and
Management Company
------------------------------------------------------------------------------------------------------------
GREGORY W. President of the fund. 2 years (plus 8 years as a 12 years 12 years
WENDT Senior Vice President and research professional prior
Director, Capital to becoming a portfolio
Research Company* counselor for the fund)
-----------------------------------
-------------------------------------------------------------------------
J. BLAIR Vice President of the 1 year (plus 4 years as a 6 years 6 years
FRANK fund. Vice President, research professional prior
Capital Research Company to becoming a portfolio
counselor for the fund)
-----------------------------------
-------------------------------------------------------------------------
MARTIAL G. Senior Vice President and 2 years (plus 8 years as a 27 years 27 years
CHAILLET Director, Capital research professional prior
Research Company* to becoming a portfolio
counselor for the fund)
-----------------------------------
-------------------------------------------------------------------------
MARK E. DENNING Director, Capital 8 years (plus 2 years as a 17 years 17 years
Research and Management research professional prior
Company to becoming a portfolio
counselor for the fund)
------------------------------------------------------------------------------------------------------------
CLAUDIA P. Senior Vice President, 4 years (plus 5 years as a 25 years 27 years
HUNTINGTON Capital Research and research professional prior
Management Company to becoming a portfolio
counselor for the fund)
The fund began investment operations on April 30, 1990.
* Company affiliated with Capital Research and Management Company.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days' written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
[map]
Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
[map of the United States]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED 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.
11
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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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.
<TABLE>
<CAPTION>
INVESTMENT MINIMUMS
<S> <C>
To establish an account $1,000
For a retirement plan account $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account 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.
12
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
------------------------------------------------------------------------------
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than $1
million 2.00% 2.04% 1.60%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined
contribution-type plans investing $1 million or more, or with 100 or more
eligible employees, may invest with no sales charge and are not subject to
a contingent deferred sales charge. Investments made by retirement plans,
endowments or foundations with $50 million or more in assets may also be made
with no sales charge and are not subject to a contingent deferred sales charge.
The fund may pay a dealer concession of up to 1% under its Plan of Distribution
on investments made with no initial sales charge.
13
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
REDUCING YOUR SALES CHARGE
You and your "immediate family" (your spouse and your children under the age of
21) 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 below and in the statement of additional information and "Welcome to
the Family."
AGGREGATING ACCOUNTS
To receive a reduced sales charge, investments made by you and your immediate
family (see above) may be aggregated if made for their own account(s) and/or:
- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.
- solely controlled business accounts.
- single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of two or more American Funds, as well
as individual holdings in various American Legacy variable annuities or
variable life insurance policies, to qualify for a reduced sales charge. Direct
purchases of money market funds are excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value of your existing holdings in The
American Funds Group, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your sales
charge. Direct purchases of money market funds are excluded.
STATEMENT OF INTENTION
You may establish a Statement of Intention (SOI) that allows you to combine the
purchases you intend to make over a 13-month period in any non-money market
fund or individual American Legacy variable annuity or variable life insurance
policy. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and
14
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
capital gains do not apply toward these combined purchases. An SOI allows you
to take immediate advantage of the maximum quantity discount available. A
portion of your account may be held in escrow to cover additional sales charges
which may be due if your total investments over the 13-month period do not
qualify for the applicable sales charge reduction.
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. Up to 0.25%
of average net assets is paid annually to qualified dealers for providing
certain shareholder services. The 12b-1 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." Since these fees are paid out of the fund's
assets or income on an ongoing basis, over time they will increase the cost and
reduce the return 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.
15
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:
- Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- Checks must be made payable to the registered shareholder.
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE, OR AMERICAN FUNDSLINE
ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any 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.
16
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund intends to distribute dividends to you, usually in December. Capital
gains, if any, are usually distributed in December. When a 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. Most shareholders do not elect
to take capital gain distributions in cash because these distributions reduce
principal value.
TAXES ON DISTRIBUTIONS
Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.</r
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
17
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
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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, is included in the statement of additional information, which is
available upon request.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30
----------------------------
1999 1998 1997 1996 1995
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, $22.14 $30.72 $26.92 $26.11 $23.61
Beginning of Year
------------------------------------------------------------------------------
Income (Loss) From Investment
Operations:
Net investment income .03 .07 .10 .17 .22
Net gains or losses on
securities (both 8.78 (6.10) 6.17 3.32 3.79
realized and unrealized)
------------------------------------------------------------------------------
Total from investment 8.81 (6.03) 6.27 3.49 4.01
operations
------------------------------------------------------------------------------
Less Distributions:
Dividends (from net
investment income) (.09) (.05) (.12) (.23) (.16)
Distributions (from capital (1.29) (2.50) (2.35) (2.45) (1.35)
gains)
------------------------------------------------------------------------------
Total distributions (1.38) (2.55) (2.47) (2.68) (1.51)
------------------------------------------------------------------------------
Net Asset Value, $29.57 $22.14 $30.72 $26.92 $26.11
End of Year
------------------------------------------------------------------------------
Total return* 41.42% (20.70)% 25.41% 15.21% 18.59%
------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year (in $8,983 $7,102 $9,256 $6,607 $4,625
millions)
------------------------------------------------------------------------------
Ratio of expenses to 1.09% 1.06% 1.07% 1.09% 1.13%
average net assets
------------------------------------------------------------------------------
Ratio of net income .12% .27% .40% .68% .97%
to average net assets
------------------------------------------------------------------------------
Portfolio Turnover Rate 50.06% 44.31% 42.21% 42.88% 45.63%
* Excludes maximum sales charge of 5.75%.
</TABLE>
18
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
19
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
20
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
21
SMALLCAP WORLD FUND / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext. 11
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
800/325-3590 http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
---------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. If there is any
inconsistency or ambiguity as to the meaning of any word or phrase in a
translation, the English text will prevail.
---------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Contains additional information about the fund including financial statements,
investment results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent auditors' 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.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
The fund's code of ethics and current SAI has been filed with the Securities
and Exchange Commission ("SEC"). The SAI is incorporated by reference into
this prospectus. These and other related materials about the fund are available
for review or to be copied at the SEC's Public Reference Room in Washington,
D.C. (1-800-SEC-0330) or on the SEC's Internet Web site at http://www.sec.gov.
To request a free copy of any of the documents above:
<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or 333 South Hope StreetLos Angeles, CA
800/421-0180 ext. 1 90071
</TABLE>
Investment Company File No. 811-5888
Printed on recycled paper
<PAGE>
SMALLCAP WORLD FUND, INC.
Part B
Statement of Additional Information
December 1, 1999
This document is not a prospectus but should be read in conjunction with the
current prospectus of SMALLCAP World Fund (the "fund" or "SCWF") dated December
1, 1999. 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 and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 7
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 9
Fund Directors and Officers . . . . . . . . . . . . . . . . . . . . 10
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Shareholder Account Services and Privileges . . . . . . . . . . . . 29
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 32
General Information . . . . . . . . . . . . . . . . . . . . . . . . 32
Investment Results and Related Statistics . . . . . . . . . . . . . 33
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Financial Statements
</TABLE>
SMALLCAP World Fund -- Page 1
<PAGE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.
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 $1.5 billion.
DEBT SECURITIES
- - The fund may invest up to 10% of its assets in straight debt securities
rated Baa or BBB or below by Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or unrated but determined to be of equivalent quality.
NON-U.S. SECURITIES
- - The fund's investments outside the U.S. will be in at least three
countries.
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.
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
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. These securities may include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The fund's results will be related to the overall markets
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
SMALLCAP World Fund -- Page 2
<PAGE>
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. 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.
High-yield, high-risk bonds rated Ba or below by Standard & Poor's Corporation
and BB or below by Moody's Investors Services, Inc. (or unrated but considered
to be of equivalent quality) 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. Certain risk factors relating to "high-yield,
high-risk bonds" are discussed below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and
corporate developments and may be less sensitive to interest rate changes.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would
adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain
additional financing. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices
and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds, like other bonds, may
contain redemption or call provisions. If an issuer exercises 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. If the issuer of a bond defaults on its
obligations to pay interest or principal or enters into bankruptcy
proceedings, the fund may incur losses or expenses in seeking recovery of
amounts owed to it.
SMALLCAP World Fund -- Page 3
<PAGE>
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 Investment Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.
SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in
securities that have a combination of 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. The risks of
convertible preferred stocks are similar to those of equity securities and they
often automatically convert into common stock. Non-convertible preferred stocks
with stated redemption rates are similar to debt in that they have a stated
dividend rate akin to the coupon of a bond or note even though they are often
classified as equity securities. The prices and yields of non-convertible
preferred stocks generally move with changes in interest rates and the issuer's
credit quality, similar to the factors affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
common stock or other securities at a stated conversion 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 -- Investing outside the U.S. involves special
risks, caused by, among other things: currency controls, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; 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 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.
SMALLCAP World Fund -- Page 4
<PAGE>
CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one 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 affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures which have been 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 it 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. 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.
INVESTMENT COMPANIES -- The fund has the ability to invest up to 5% of its total
assets in shares of closed-end investment companies, but will 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. For 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
SMALLCAP World Fund -- Page 5
<PAGE>
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
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.
CASH AND CASH EQUIVALENTS - These securities include (i) commercial paper
(short-term notes up to 9 months in maturity issued by corporations or
governmental bodies), (ii) commercial bank obligations (e.g., certificates of
deposit, bankers' acceptances (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity)), (iii) savings
association and saving bank obligations (e.g., certificates of deposit issued by
savings banks or savings associations), (iv) securities of the U.S. Government,
its agencies or instrumentalities that mature, or may be redeemed, in one year
or less, and (v) corporate bonds and notes that mature, or that may be redeemed,
in one year or less. Cash and cash equivalents may be denominated in U.S.
dollars, non-U.S. currencies or multinational currency units.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities it does not
participate in further gains or losses with respect to the 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 increases. 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 may 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.
The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement is the sale of a security by a fund
and its agreement to repurchase the security at a specified time and price. A
"roll" transaction is the sale of mortgage-backed or other securities together
with a commitment to purchase similar, but not identical securities at a later
date. The fund assumes the rights and risks of ownership, including the risk of
price and yield fluctuations as of the time of the agreement. The fund intends
to treat roll transactions as two
SMALLCAP World Fund -- Page 6
<PAGE>
separate transactions: one involving the purchase of a security and a separate
transaction involving the sale of a security. Since the fund does not intend to
enter into roll transactions for financing purposes, it may treat these
transactions as not falling within the definition of "borrowing" set forth in
Section 2(a)(23) of the Investment Company Act of 1940. The fund will segregate
liquid assets which will be marked to market daily in an amount sufficient to
meet its payment obligations under "roll" transactions and reverse repurchase
agreements with broker-dealers (no collateral is required for reverse repurchase
agreements with banks).
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) 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.
The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.
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
SMALLCAP World Fund -- Page 7
<PAGE>
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.
SMALLCAP World Fund -- Page 8
<PAGE>
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 AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Maryland corporation on December 18, 1989.
All fund operations are supervised by the fund's board of directors which 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.
The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.
SMALLCAP World Fund -- Page 9
<PAGE>
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS SEPTEMBER 30, 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard G. Capen, Jr. Director Corporate Director and author; former $ 21,000
Box 2494 United States Ambassador to Spain;
Rancho Santa Fe, CA former Vice Chairman of the Board;
92067 Knight Ridder, Inc., former Chairman
Age: 65 and Publisher, The Miami Herald
----------------
- ------------------------------------------------------------------------------------------------------------
H. Frederick Christie Director Private Investor. Former President $21,250/4/
P.O. Box 144 and Chief Executive Officer, The
Palos Verdes Estates, CA Mission Group (non-utility holding
90274 company, subsidiary of Southern
Age: 66 California Edison Company)
- ------------------------------------------------------------------------------------------------------------
Alan W. Clements Director Private Investor; former Executive $ 17,000
16 Great Peter Street Director - Finance, Imperial Chemical
London SW1P3JF Industries PLC
England
Age: 71
- ------------------------------------------------------------------------------------------------------------
+ Gordon Crawford Chairman of Senior Vice President and Director, None/5/
333 South Hope Street the Board Capital Research and Management
Los Angeles, CA 90071 Company
Age: 52
- ------------------------------------------------------------------------------------------------------------
Alan Greenway Director President, Greenway Associates, Inc. $ 21,000
7413 Fairway Road (management consulting services)
La Jolla, CA 92037
Age: 72
- ------------------------------------------------------------------------------------------------------------
+ Graham Holloway Director Former Chairman of the Board, None/5/
17309 Club Hill Drive American Funds Distributors, Inc.
Dallas, TX 75248
Age: 69
- ------------------------------------------------------------------------------------------------------------
Leonade D. Jones Director Management consultant; former $21,000/4/
1536 Los Montes Drive Treasurer, The Washington Post
Burlingame, CA 94010 Company
Age: 52
- ------------------------------------------------------------------------------------------------------------
William H. Kling Director President, Minnesota Public Radio; $19,500/4/
2619 Lake of the Isles President, Greenspring Co.; former
Parkway East President, American Public Radio (now
Minneapolis, MN 55408 Public Radio International)
Age: 57
- ------------------------------------------------------------------------------------------------------------
Norman R. Weldon Director Managing Director, Partisan $ 19,500
7026 Timbers Drive Management Group, Inc.; former
Evergreen, CO 80439 Chairman of the Board, Novoste
Age: 65 Corporation; Director, Enable
Medical; former President and
Director, Corvita Corporation
- ------------------------------------------------------------------------------------------------------------
Patricia K. Woolf Director Private investor; Corporate Director; $ 19,500
506 Quaker Road Lecturer, Department of Molecular
Princeton, NJ 08540 Biology, Princeton University
Age: 65
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE DIRECTOR
NAME, ADDRESS AND AGE YEAR ENDED SEPTEMBER 30, 1999 SERVES/2/
- -------------------------------------------------------------------------
<S> <C> <C>
Richard G. Capen, Jr. $ 45,250 14
Box 2494
Rancho Santa Fe, CA
92067
Age: 65
- -------------------------------------------------------------------------
H. Frederick Christie $211,600/4/ 18
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 66
- -------------------------------------------------------------------------
Alan W. Clements $ 29,000 2
16 Great Peter Street
London SW1P3JF
England
Age: 71
- -------------------------------------------------------------------------
+ Gordon Crawford None/5/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 52
- -------------------------------------------------------------------------
Alan Greenway $ 94,500 4
7413 Fairway Road
La Jolla, CA 92037
Age: 72
- -------------------------------------------------------------------------
+ Graham Holloway None/5/ 2
17309 Club Hill Drive
Dallas, TX 75248
Age: 69
- -------------------------------------------------------------------------
Leonade D. Jones 138,500/4/ 5
1536 Los Montes Drive
Burlingame, CA 94010
Age: 52
- -------------------------------------------------------------------------
William H. Kling $95,250/4/ 6
2619 Lake of the Isles
Parkway East
Minneapolis, MN 55408
Age: 57
- -------------------------------------------------------------------------
Norman R. Weldon $ 41,750 3
7026 Timbers Drive
Evergreen, CO 80439
Age: 65
- -------------------------------------------------------------------------
Patricia K. Woolf $ 103,250 6
506 Quaker Road
Princeton, NJ 08540
Age: 65
- -------------------------------------------------------------------------
</TABLE>
SMALLCAP World Fund -- Page 10
<PAGE>
SMALLCAP World Fund -- Page 11
<PAGE>
+ "Interested persons" within the meaning of 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 funds in The
American Funds Group as designated by the Directors.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.
3 Includes funds managed by Capital Research and Management Company and
affiliates.
4 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of fiscal year
ended September 30, 1999 for participating Directors is as follows: H.
Frederick Christie ($84,765), Leonade D. Jones ($66,948), and William H. Kling
($113,847). Amounts deferred and accumulated earnings thereon are not funded
and are general unsecured liabilities of the fund until paid to the Directors.
5 Gordon Crawford and E. Graham Holloway are affiliated with the Investment
Adviser and, accordingly, receive no compensation from the fund.
SMALLCAP World Fund -- Page 12
<PAGE>
OFFICERS
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH REGISTRANT DURING
- -------------------------------------------------- PAST 5 YEARS
-----------------------------
<S> <C> <C> <C>
Gordon Crawford
(see above)
- -------------------------------------------------------------------------------
Gregory W. Wendt 37 Senior Vice Senior Vice President and
P.O. Box 7650 President Director, Capital Research
San Francisco, CA Company*
94120
- -------------------------------------------------------------------------------
Vincent P. Corti 43 Vice President Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and
Management Company
- -------------------------------------------------------------------------------
J. Blair Frank 33 Vice President Vice President, Capital
333 South Hope Street Research Company
Los Angeles, CA 90071
- -------------------------------------------------------------------------------
Chad L. Norton 39 Secretary Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and
Management Company
- -------------------------------------------------------------------------------
Robert P. Simmer 38 Treasurer Vice President - Fund
5300 Robin Hood Road Business Management Group,
Norfolk, VA 23513 Capital Research and
Management Company
- -------------------------------------------------------------------------------
Sheryl F. Johnson 31 Assistant 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 are officers, and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.
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 annual fees of $14,000 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 their 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, 1999 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
SMALLCAP World Fund -- Page 13
<PAGE>
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 research professionals
travel several million miles a year, making more than 5,000 research visits in
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and retain quality personnel. The Investment Adviser is a
wholly owned subsidiary of The Capital Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital International
Perspective, providing financial and market information about more than 2,400
companies around the world.
The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors of all types throughout the world. 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, 2000, 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, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plan of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.
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%
SMALLCAP World Fund -- Page 14
<PAGE>
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 ona
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.
For the fiscal years ended September 30, 1999, 1998, 1997, the Investment
Adviser received advisory fees of $54,205,000, $59,135,000, and $50,724,000,
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 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal year ended
September 30, 1999 amounted to $3,295,000 after allowance of $15,881,000 to
dealers. During the fiscal years ended 1998 and 1997 the Principal Underwriter
retained $4,795,000 and $6,589,000, respectively after an allowance of
$23,709,000 and $33,103,000 to dealers, respectively.
As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has been approved by the full Board of
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plan or the Principal Underwriting Agreement, and the Plan
has been approved by the vote of a majority of the outstanding voting securities
of the fund. The officers and directors who are "interested persons" of the fund
may be considered to have a direct or indirect financial interest in the
operation of the Plan due to present or past affiliations with the Investment
Adviser and related companies. Potential benefits of the Plan to the fund
include improved shareholder services, savings to the fund in transfer agency
costs, savings to the fund in advisory fees and other expenses, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
directors who are not "interested persons" of the fund are committed to the
discretion of the directors who are not "interested persons" during the
existence of the Plan. The Plan is reviewed quarterly and must be renewed
annually by the Board of Directors.
Under the Plan the fund may expend up to 0.30% of its 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 being made. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales of
shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan, any defined contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees or a community foundation).
SMALLCAP World Fund -- Page 15
<PAGE>
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, 1999, the fund paid or accrued $20,592,000 for
compensation to dealers under the Plan. Accrued and unpaid distribution expenses
were $1,566,000.
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 or 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 TAXES
DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However,
the fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances, the fund may determine that it is in the interest of
shareholders to distribute less than the required amount. In this case, the fund
will pay any income or excise taxes due.
Dividends will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.
TAXES - The fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Code. A regulated investment company
qualifying under Subchapter M of the Code is required to distribute to its
shareholders at least 90% of its investment company taxable income (including
the excess of net short-term capital gain over net long-term capital
SMALLCAP World Fund -- Page 16
<PAGE>
losses) and generally is not subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code. The fund intends to
distribute annually all of its investment company taxable income and net
realized capital gains and therefore does not expect to pay federal income tax,
although in certain circumstances the fund may determine that it is in the
interest of shareholders to distribute less than that amount.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. The fund intends to distribute net investment income and net
capital gains so as to minimize or avoid the excise tax liability.
Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.
If any net long-term capital gains in excess of net short-term capital losses
are retained by a fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.
Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable as described above, whether
received in shares or in cash. Shareholders electing to receive distributions in
the form of additional shares will have a cost
SMALLCAP World Fund -- Page 17
<PAGE>
basis for federal income tax purposes in each share so received equal to the net
asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.
Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days.
Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.
A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund. Shareholders will be subject to income tax on such original
issue discount, whether or not they elect to receive their distributions in
cash.
The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the
SMALLCAP World Fund -- Page 18
<PAGE>
shareholder has previously failed to report interest or dividend income. If the
withholding provisions are applicable, any such distributions and proceeds,
whether taken in cash or reinvested in additional shares, will be reduced by the
amounts required to be withheld.
Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year fund shareholders will
receive a statement of the federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.
Dividend and interest income received by the fund from sources outside the U.S.
may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however. Most foreign countries do not impose
taxes on capital gains in respect of investments by foreign investors.
The fund may make the election permitted under Section 853 of the Code so that
shareholders may (subject to limitations) be able to claim a credit or deduction
on their federal income tax returns for, and will be required to treat as part
of the amounts distributed to them, their pro rata portion of qualified taxes
paid by the Fund to foreign countries (which taxes relate primarily to
investment income). The fund may make an election under Section 853 of the Code,
provided that more than 50% of the value of the total assets of the fund at the
close of the taxable year consists of securities in foreign corporations. The
foreign tax credit available to shareholders is subject to certain limitations
imposed by the Code.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the fund accrues receivables or liabilities
denominated in a foreign currency and the time the fund actually collects such
receivables, or pays such liabilities, generally are treated as ordinary income
or ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of the fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
If the fund invests in stock of certain passive foreign investment companies,
the fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the fund at
the highest ordinary income rate in effect
SMALLCAP World Fund -- Page 19
<PAGE>
for such year, and the tax would be further increased by an interest charge to
reflect the value of the tax deferral deemed to have resulted from the ownership
of the foreign company's stock. Any amount of distribution or gain allocated to
the taxable year of the distribution or disposition would be included in the
fund's investment company taxable income and, accordingly, would not be taxable
to the fund to the extent distributed by the fund as a dividend to its
shareholders.
To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any gains
for tax purposes at that time. Under this election, deductions for losses are
allowable only to the extent of any prior recognized gains, and both gains and
losses will be treated as ordinary income or loss. The fund will be required to
distribute any resulting income, even though it has not sold the security and
received cash to pay such distributions.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
SMALLCAP World Fund -- Page 20
<PAGE>
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
- -------------------------------------------------------------------------------
<S> <C> <C>
See "Investment $50 minimum (except where a
Minimums and Fund lower minimum is noted under
Numbers "for initial "Investment Minimums and Fund
investment minimums. Numbers").
- -------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
- -------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
- -------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
- -------------------------------------------------------------------------------
By wire Call800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)
For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
- -------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
- -------------------------------------------------------------------------------
</TABLE>
SMALLCAP World Fund -- Page 21
<PAGE>
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>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
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
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 36
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
SMALLCAP World Fund -- Page 22
<PAGE>
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>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE 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 $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $25,000 . . . . . . . . 4.99 4.75 4.00
$25,000 but less than $50,000 . . 4.71 4.50 3.75
$50,000 but less than $100,000 . . 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 . 3.63 3.50 2.75
$250,000 but less than $500,000 . 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.60
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$1,000,000 or more . . . . . . . . . . none none (see below)
- -----------------------------------------------------------------------------
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES - Investment of $1 million or more are
sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED SALES
CHARGE MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE.
Employer-sponsored defined contribution-type plans investing $1 million or more,
or with 100 or more eligible employees, may invest with no sales charge and are
not subject to a contingent deferred sales charge. Investments made by
retirement plans, endowments or foundations with $50 million or more in assets
may also be made with no sales charge and are not subject to a contingent
deferred sales charge. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial 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 Man-
SMALLCAP World Fund -- Page 23
<PAGE>
agement 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 the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS - Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 million or more: 1.00% on amounts of $1 million to
$4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on
amounts over $10 million.
OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter 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" (your spouse and
your children under age 21) may combine investments to reduce your costs. You
must let your investment dealer or American Funds Service Company (the "Transfer
Agent") know if you qualify for a reduction in your sales charge using one or
any combination of the methods described below.
SMALLCAP World Fund -- Page 24
<PAGE>
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a over a 13-month period and receive the
same sales charge as if all shares had been purchased at once. This
includes purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $50,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to utilize a Statement in order to qualify for a reduced sales
charge, shares equal to 5% of the dollar amount specified in the Statement
will be held in escrow in the shareholder's account out of the initial
purchase (or subsequent purchases, if necessary) by 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 by the close of
the period, 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. Existing holdings eligible for rights
of accumulation (see the account application) and any individual
investments in American Legacy variable annuities or variable life
insurance policies (American Legacy, American Legacy II, American Legacy
III, and American Legacy Shareholder's Advantage variable annuities,
American Legacy Life, American Legacy Variable Life, and American Legacy
Estate Builder) 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, and
any individual investments in American Legacy variable annuities or
variable life insurance policies 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.
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 accounts and/or:
SMALLCAP World Fund -- Page 25
<PAGE>
- employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;
- business accounts solely controlled by these individuals (for example,
the individuals own the entire business);
- trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:
- for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;
- made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or
- 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, as well as individual holdings in various
American Legacy variable annuities and variable life insurance policies.
Direct purchases of the money market funds are excluded. Shares of money
market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHTS 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. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy variable annuities and variable
life insurance policies. 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 the Transfer
Agent; 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 the Transfer Agent, 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
SMALLCAP World Fund -- Page 26
<PAGE>
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. For example, if the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m. New
York time on both days. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. 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.
Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.
Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share
Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.
SMALLCAP World Fund -- Page 27
<PAGE>
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. You may sell (redeem) shares in
your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- Shares held for you in your dealer's street name must be sold
through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s)
- A signature guarantee is required if the redemption is:
- Over $50,000;
- Made payable to someone other than the registered
shareholder(s); or
- Sent to an address other than the address of record, or an
address of record which has been changed within the last
10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- Additional documentation may be required for sales of shares held
in corporate, partnership or fiduciary accounts.
- You must include any shares you wish to sell that are in
certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/
- Redemptions by telephone or fax (including American FundsLine/(R)/
and American FundsLine OnLine/(R)/) are limited to $50,000 per
shareholder each day.
- Checks must be made payable to the registered shareholder(s).
- Checks must be mailed to an address of record that has been used
with the account for at least 10 days.
MONEY MARKET FUNDS
- You may have redemptions of $1,000 or more wired to your bank by
writing American Funds Service Company.
- You may establish check writing privileges (use the money market
funds application).
SMALLCAP World Fund -- Page 28
<PAGE>
- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. Redemption proceeds of
shares representing direct purchases in the money market funds are excluded.
Proceeds will be reinvested at the next calculated net asset value after your
request is received and accepted by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds made
within twelve months of purchase on investments of $1 million or more (other
than redemptions by employer-sponsored retirement plans). The charge is 1% of
the lesser of the value of the shares redeemed (exclusive of reinvested
dividends and capital gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be redeemed first for purposes
of calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from 403(b) plans or IRAs due to death, disability
or attainment of age 591/2; for tax-free returns of excess contributions to
IRAs; and for redemptions through certain automatic withdrawals not exceeding
10% of the amount that would otherwise be subject to the charge.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - 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. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If your
bank 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 the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares at no sales charge unless you indicate otherwise on the
account application. You also
SMALLCAP World Fund -- Page 29
<PAGE>
may elect to have dividends and/or capital gain distributions paid in cash by
informing the fund, the Transfer Agent or your investment dealer.
If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.
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 $5,000 (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 distributions 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 the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine and
American FundsLine OnLine (see "American FundsLine and American FundsLine
OnLine" 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 the Transfer Agent. (See "Telephone and Computer
Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type
retirement plans for which Capital Guardian Trust Company serves as trustee may
not be exchanged by telephone, computer, fax or telegraph. Exchange redemptions
and purchases are processed simultaneously at the share prices next determined
after the exchange order is received. (See "Purchase of Shares--Price of
Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares in amounts of $50 or
more among any of the funds in The American Funds Group on any day (or preceding
business day if the day falls on a non-business day of each month you designate.
You must either (a) meet the minimum initial investment requirement for the
receiving fund OR (b) the originating fund's balance must be at least $5,000 and
the receiving fund's minimum must be met within one year.
SMALLCAP World Fund -- Page 30
<PAGE>
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 the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine 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 (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, 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 the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent 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.
REDEMPTION OF SHARES - The fund's articles of incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Directors of the fund may from time to time
adopt.
SMALLCAP World Fund -- Page 31
<PAGE>
SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.
There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.
Dealer concessions paid on underwriting transactions for the fiscal years ended
September 30, 1999, 1998 and 1997, amounted to $12,434,000, $8,662,000 and
$8,965,000, 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 State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, as Custodian. If the fund holds non-U.S. securities, the
Custodian may hold these securities 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
$9,047,000 for the fiscal year ended September 30, 1999.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, serves as the funds' independent auditors
providing audit services, preparation of tax returns and review of certain
documents to be filed with the Securities and Exchange Commission. The financial
statements included in this Statement of Additional Information from the Annual
Report have been so included in reliance on the report Deloitte & Touche LLP,
independent auditors, given on the authority of said firm as experts in
accounting and auditing. The selection of the funds' independent accountants is
reviewed and determined annually by the Board of Directors.
SMALLCAP World Fund -- Page 32
<PAGE>
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on September 30.
Shareholders are provided at least semiannually 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. In an effort to reduce the volume of mail shareholders
receive from the fund when a household owns more than one account, the Transfer
Agent has taken steps to eliminate duplicate mailings of shareholder reports. To
receive additional copies of a report, shareholders should contact the Transfer
Agent.
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. The fund understands that these service providers
have updated all of their computer systems to process date-related information
properly following the turn of the century. However, there can be no assurance
that these steps are 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 - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments. The personal
investing policy is 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.
OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Auditors 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, 1999
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $29.57
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $31.37
</TABLE>
INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield is -0.03% based on a 30-day (or one month) period ended
September 30, 1999, 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:
SMALLCAP World Fund -- Page 33
<PAGE>
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 average total return ("T") is computed by equating the value at the end of
the period ("ERV") with 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 fund's one-year total return, five-year average annual total return, and
lifetime average annual total return for periods ended September 30, 1999 were
33.29%, 12.61%, and 13.21% respectively. The fund's one-year total return,
five-year average annual total return, and lifetime average annual total return
at net asset value for the periods ended September 30, 1999 were 41.42%, 13.95%,
and 13.92% respectively.
In calculating average annual total return, the fund assumes: (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. In addition, the fund will provide lifetime
average total return figures.
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 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 Composite Stock
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/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
SMALLCAP World Fund -- Page 34
<PAGE>
The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.
The fund may 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, and fuels, transportation, and other
goods and services that people buy for day-to-day living).
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.
SMALL CAPITALIZATION STOCKS VERSUS LARGE CAPITALIZATION STOCKS -- According to
Ibbottson Associates, an investment in small company stocks has grown an average
of 18.9% a year from September 30, 1974 through September 30, 1999, compared
with an average of 17.0% 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 for the fund 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.
SCWF VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
CAPITAL APPRECIATION/5/
----------------------------
RUSSELL/4/ NASDAQ/6/
PERIOD SMALLCAP S&P 500/2/ MSCIW/3/ 2000 SMALLCAP OTC
------ -------- ---------- -------- ----- -------- ----
<S> <C> <C> <C> <C> <C> <C>
4/30/90/1/
to 9/30/99 +221.7% +389.7% +213.0% +213.9% +201.1% +553.7%
</TABLE>
1 Commencement of operations
2 The Standard and Poor's 500 Stock Composite Index is a broad-based measurement
of changes in stock market conditions based on the average performance of 500
widely held common stocks.
3 The Morgan Stanley Capital International World Index is an arithmetical
average, weighted by market value, or 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.
4 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).
5 Reflects the change in value of the fund and index without the effect of
reinvested dividends.
6 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.
SMALLCAP World Fund -- Page 35
<PAGE>
IF YOU ARE CONSIDERING SCWF FOR AN
INDIVIDUAL RETIREMENT ACCOUNT HERE ARE THE BENEFITS OF SYSTEMATIC INVESTING:
<TABLE>
<CAPTION>
HERE'S HOW MUCH YOU WOULD HAVE IF YOU INVESTED $2,000 A YEAR IN SCWF:
1 YEAR 3 YEARS LIFETIME
(10/1/98 - 9/30/99) (10/1/96 - 9/30/99) (4/30/90 - 9/30/99)
- ------------------------------------------------------------------------------
<S> <C> <C>
$2,666 $7,431 $35,129
- ------------------------------------------------------------------------------
</TABLE>
SMALLCAP World Fund -- Page 36
<PAGE>
Illustration of a $10,000 investment in SCWF with
dividends reinvested and capital gain distributions taken in shares
(For the lifetime of the fund, April 30, 1990 through September 30, 1999)
<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES**
----------------- --------------------
FISCAL ANNUAL DIVIDENDS TOTAL FROM FROM FROM TOTAL
YEAR END DIVIDENDS (CUMULATIVE) INVESTMENT INITIAL CAPITALGAINS DIVIDENDS VALUE
9/30 --------- ------------ COST INVESTMENT REINVESTED 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 47 863 10,863 13,838 7,919 992 22,749
1999 92 955 10,955 18,481 12,247 1,444 32,172
</TABLE>
The dollar amount of capital gain distributions during the period was $9,672
# From April 30, 1990, the date the fund commenced operations.
SMALLCAP World Fund -- Page 37
<PAGE>
EXPERIENCE OF INVESTMENT ADVISER - The Investment Adviser manages nine growth
and growth-income funds that are at least 10 years old. In the rolling 10-year
periods since January 1, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes in 128 of 138 periods.
Note that past results are not an indication of future investment results. 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.
SMALLCAP World Fund -- Page 38
<PAGE>
APPENDIX
Description of Bond Ratings
BOND RATINGS -- The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.
Moody's rates the long-term debt securities issued by various entities from
- -------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:
"Bonds which are rated Aaa are judged to be of the best quality. They 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."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. 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."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. 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."
"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often 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. Uncertainty of position characterizes
bonds in this class."
"Bonds which are rated 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."
"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."
SMALLCAP World Fund -- Page 39
<PAGE>
"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
S & P rates the long-term securities debt of various entities in categories
- -----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:
"Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."
"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.
"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."
"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."
"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."
SMALLCAP World Fund -- Page 40
<TABLE>
Smallcap World Fund, Inc.
Investment Portfolio September 30, 1999
<S> <C> <C> <C>
Industry Diversification
Business Services 12.96%
Electronic Components 12.01
Broadcasting & Publishing 8.96
Merchandising 6.66
Health & Personal Care 5.28
Other Industries 48.96
Cash & Equivalents 5.17
Percent
of
Net
Largest Equity Holdings Assets
PMC-Sierra 3.37%
UnitedGlobalCom 1.30
Micrel 1.17
Disco .98
Venture Manufacturing .94
Scient .87
Westwood One .85
Andrx .82
Newfield Exploration .81
Flextech .77
Shares or Market Percent
Equity Securitites Principal Value Of Net
(common and preferred stocks and convertible debentures) Amount (000) Assets
Business Services -- 12.96%
Scient Corp. (USA) (1,2,3) 1,432,123 77,907 .87
ISS-International Service System A/S, Class B (Denmark) (1) 1,116,950 62,673 .70
Black Box Corp. (USA) (1) 878,000 46,095 .51
Flextronics International Ltd. (USA -- Incorporated in Singapore) 790,000 45,968 .51
Medicis Pharmaceutical Corp., Class A (USA) (1) 1,459,000 41,581 .46
NCO Group, Inc. (USA) (1) 825,000 38,775 .43
Baltimore Technologies PLC (United Kingdom) (1,4) 1,910,000 36,788 .41
Bally Total Fitness Holding Corp. (USA) (1) 1,160,500 35,468 .39
CBT Group PLC (ADR) (Ireland) (1) 1,350,000 33,244 .37
Falck A/S (Denmark) 295,000 27,602 .31
Corporate Services Group PLC (United Kingdom) (2) 7,528,427 13,447
Corporate Services Group PLC, 7.50% convertible debentures 2005 $6,000,000 7,507 .27
Corporate Services Group PLC 2,000,000 3,572
ChoicePoint Inc. (USA) (1) 357,400 24,080 .27
Rhon-Klinikum AG (Germany) 187,100 22,540 .25
Stewart Enterprises, Inc., Class A (USA) 3,000,000 18,188 .20
Intershop Communications AG (Germany) (1) 159,300 16,558 .18
Photobition Group PLC (United Kingdom) 2,278,400 8,627
Photobition Group PLC (2) 1,999,670 7,571 .18
Lason, Inc. (USA) (1) 350,000 15,586 .17
Trigon Healthcare, Inc. (USA) (1) 525,700 15,180 .17
Exact Holding NV (Netherlands) (1) 427,000 15,113 .17
Regis Corp. (USA) 775,500 14,928 .17
Midas, Inc. (USA) 700,000 14,438 .16
I-D Media AG (Germany) (1) 346,420 14,292 .16
Mosaic Group Inc. (Canada) (1) 2,873,300 14,194 .16
Sapient Corp. (USA) (1) 138,400 13,044 .15
Whittman-Hart, Inc. (USA) (1) 316,200 12,263 .14
Uproar Ltd. (formerly E-Pub (Holdings) Ltd.) (Austria) (1) 574,320 11,633 .13
MSC Industrial Direct Co., Inc., Class A (USA) (1) 1,250,000 11,484 .13
DII Group, Inc. (USA) (1) 325,000 11,436 .13
Sapiens International Corp. NV (Israel) (1,4) 1,015,000 11,292 .13
Focal Communications Corp. (USA) (1) 440,000 11,275 .13
MEDION AG (Germany) (1) 46,800 11,126 .12
Profit Recovery Group International, Inc. (USA) (1) 238,350 10,636 .12
AHL Services, Inc. (USA) (1) 399,900 10,422 .12
Fujitsu Support and Service Inc. (Japan) 36,000 10,254 .11
InaCom Corp. (USA) (1) 1,104,000 10,143 .11
MDC Communications Corp., Class A (Canada) (1) 970,933 10,089 .11
Bellsystem24 Inc. (Japan) 15,000 10,082 .11
Bertrandt AG (Germany) 145,000 9,893 .11
Iron Mountain Inc. (USA) (1) 291,000 9,858 .11
Kroll-O'Gara Co. (USA) (1) 590,000 9,846 .11
Brunel International NV (Netherlands) 595,104 9,707 .11
Ci Technologies Group Ltd. (Australia) 2,425,784 9,495 .11
Zhejiang Expressway Co. Ltd. (China) 60,000,000 9,424 .11
ProBusiness Services, Inc. (USA) (1) 350,000 9,406 .10
InfoCure Corp. (USA) (1) 490,000 9,249 .10
Corporate Executive Board Co. (The) (USA) (1) 225,000 9,169 .10
APCOA Parking AG (Germany) (4) 120,800 9,015 .10
Kanamoto Co., Ltd. (Japan) 1,086,000 8,984 .10
eXchange Holdings PLC (The) (United Kingdom) (1) 3,346,200 8,979 .10
Digex, Inc., Class A (USA) (1) 377,500 8,942 .10
Bright Horizons Family Solutions, Inc. (USA) (1) 555,000 8,672 .10
Innotrac Corp. (USA) (1) 475,000 8,491 .09
Icon Medialab International AB (Sweden) (1) 150,000 8,477 .09
LibertyOne Ltd. (Australia) (1) 9,000,000 8,455 .09
Casella Waste Systems, Inc., Class A (USA) (1) 502,500 8,385 .09
PSD Group PLC (United Kingdom) 978,000 8,163 .09
e4L, Inc (USA) (1) 2,100,000 8,006 .09
Talentum Oyj (Finland) (1) 550,000 7,740 .09
BPP Holdings PLC (United Kingdom) 800,000 7,335 .08
Parsytec AG (Germany) (1) 128,943 6,915 .08
CoSine Communications, Inc., Series D, convertible 1,925,820 6,750 .08
preferred (USA) (1,2,3)
Catena Corp (Japan) 600,000 6,458 .07
Source Information Management Co. (The) (USA) (1) 425,000 6,030 .07
International Container Terminal Services, Inc., $5,905,000 5,728 .06
1.75% convertible debentures 2004 (Philippines)
American Dental Partners, Inc. (USA) (1,4) 443,000 5,371 .06
GTS Duratek, Inc. (USA) (1) 891,100 5,319 .06
London Bridge Software Holdings PLC (United Kingdom) 103,400 4,029
London Bridge Software Holdings PLC New (1) 34,400 1,241 .06
Trafficmaster PLC (United Kingdom) (1) 550,000 4,762 .05
Triad Hospitals, Inc. (USA) (1) 468,347 4,742 .05
REMARQ Communities, Series B, convertible 548,000 4,658 .05
preferred (USA) (1,2,3)
FortuneCity.com Inc. (USA) (1) 475,000 4,634 .05
Scoot.com PLC (United Kingdom) (1) 7,000,000 4,462 .05
Stericycle, Inc. (USA) (1) 300,000 4,406 .05
Sylvan Learning Systems, Inc. (USA) (1) 219,850 4,260 .05
LifePoint Hospitals, Inc. (USA) (1) 468,347 4,069 .05
Pre-Paid Legal Services, Inc. (USA) (1) 100,000 3,937 .04
Formula Systems (1985) Ltd. (ADR) (Israel) (1) 154,400 3,821 .04
WatchGuard Technologies, Inc. (USA) (1) 250,000 3,750 .04
Engage Technologies, Inc. (USA) (1) 99,300 3,742 .04
AmSurg Corp., Class B (USA) (1) 309,972 1,937
AmSurg Corp., Class A (1) 250,000 1,594 .04
Extreme Networks, Inc. (USA) (1) 52,000 3,292 .04
ICON PLC (ADR) (Ireland) (1) 209,000 3,292 .04
American Healthcorp, Inc. (USA) (1,4) 522,000 3,197 .04
Private Business, Inc. (USA) (1) 650,000 3,087 .03
Franklin Covey Co. (USA) (1) 375,000 2,883 .03
Primark Corp. (USA) (1) 89,102 2,534 .03
UroCor, Inc. (USA) (1,4) 600,000 2,456 .03
IXLA Ltd. (Australia) (1) 2,000,000 2,427 .03
Snyder Communications, Inc. (USA) (1) 130,000 1,974 .02
Artnet.com AG (Germany) (1) 150,000 1,919 .02
Sterile Recoveries, Inc. (USA) (1) 241,000 1,868 .02
China.com Corp., Class A (Hong Kong) (1) 25,800 1,677 .02
Luminant Worldwide Corp. (USA) (1) 49,200 1,513 .02
Framtidsfabriken AB (Sweden) (1) 40,000 1,396 .02
Fantastic Corp., co-ownership shares (Switzerland) (1) 25,000 1,386 .02
Sifo Group AB, Class B (Sweden) 200,000 1,253 .01
Lorien PLC (United Kingdom) 819,663 1,201 .01
M-Web Holdings Ltd. (South Africa) (1) 1,727,700 908 .01
Ventiv Health, Inc. (USA) (1) 43,333 428 .00
InterQ Inc. (Japan) (1) 1,000 296 .00
Metropolis Transactive Holdings Ltd. (South Africa) (1) 302,426 50 .00
Electronic Components -- 12.01%
PMC-Sierra, Inc. (USA) (1,4) 3,270,000 302,475 3.37
Micrel, Inc. (USA) (1,4) 2,422,000 105,054 1.17
Venture Manufacturing (Singapore) Ltd (Singapore) 6,976,000 60,775
Venture Manufacturing (Singapore) Ltd (2) 2,710,000 23,610 .94
NatSteel Electronics Ltd (Singapore) 17,700,000 66,161 .74
Power Integrations, Inc. (USA) (1,4) 833,900 57,748 .64
Cymer, Inc. (USA) (1) 1,182,700 41,025 .46
Acer Display Technology (Taiwan) (1,2,3) 36,000,000 34,123 .38
Sanmina Corp. (USA) (1) 417,000 32,265 .36
Wus Printed Circuit Co., Ltd. (Taiwan) (1,4) 22,083,750 31,120 .35
Dainippon Screen Mfg. Co., Ltd. (Japan) (1) 4,150,000 25,318 .28
Semtech Corp. (USA) (1) 660,000 24,172 .27
Varian Semiconductor Equipment Associates, Inc. (USA) (1) 1,139,800 24,007 .27
Applied Micro Circuits Corp. (USA) (1) 418,000 23,826 .27
Littelfuse, Inc. (USA) (1,4) 1,000,000 22,250 .25
DuPont Photomasks, Inc. (USA) (1) 450,000 20,728 .23
Photronics, Inc. (USA) (1) 850,000 19,072 .21
Dallas Semiconductor Corp. (USA) 312,800 16,715 .19
SIPEX Corp. (USA) (1,4) 1,160,000 16,603 .18
Kinpo Electronics, Inc. (Taiwan) (1) 9,375,000 15,699 .17
Malaysian Pacific Industries Bhd. (Malaysia) 4,420,000 15,354 .17
JIT Holdings Ltd. (Singapore) 7,418,000 13,711 .15
Unicap Electronics Industrial Corp. (Taiwan) (1,4) 18,037,505 12,880 .14
Anam Semiconductor, Inc. (South Korea)(1) 800,000 12,500 .14
Perlos Oyj (Finland) (1) 918,800 12,391 .14
Varitronix International Ltd. (Hong Kong --- 5,672,000 12,377 .14
Incorporated in Bermuda)
Elec & Eltek International Holdings Ltd. (Hong Kong-- 52,905,000 9,603 .11
Incorporated in Bermuda) (4)
Aavid Thermal Technologies, Inc. (USA) (1) 337,900 7,624 .08
Elec & Eltek International Co. Ltd. (Singapore) 1,840,000 7,139 .08
MegaChips Corp. (Japan) 60,000 4,569 .05
Shinsung ENG (South Korea) (1) 510,000 4,047 .04
Tower Semiconductor Ltd. (Israel) (1) 420,000 3,833 .04
Broadcasting & Publishing -- 8.96%
UnitedGlobalCom Inc., Class A (formerly United 1,625,000 116,391 1.30
International Holdings, Inc.) (USA) (1)
Westwood One, Inc. (USA) (1) 1,691,300 76,320 .85
Flextech PLC (United Kingdom) (1) 4,442,100 69,433 .77
Scottish Media Group PLC (United Kingdom) 3,182,500 46,182 .51
SBS Broadcasting SA (Luxembourg) (1) 1,021,550 39,585 .44
United Television, Inc. (USA) 350,000 39,463 .44
Antena 3 de Television, SA (GDR) (Spain) (1,2,3,4) 1,500 39,207 .44
Shaw Communications Inc., Class B (Canada) 1,050,000 28,904 .32
MIH Ltd., Class A (South Africa) (1) 850,000 24,544 .27
Jones Intercable, Inc., Class A (USA) (1) 427,400 23,106 .26
CanWest Global Communications Corp. (Canada) 1,554,946 19,071 .21
Nasionale Pers Beperk (South Africa) 4,000,000 19,024 .21
Chrysalis Group PLC (United Kingdom) 1,474,000 18,927 .21
Class Editori SpA, Class A (Italy) 2,082,000 17,872 .20
Radio One, Inc., Class A (USA) (1) 400,000 16,600 .18
Highlight Communications AG, co-ownership shares 200,200 16,007 .18
(Switzerland) (1)
HIT Entertainment PLC (United Kingdom) (2,4) 913,420 13,684
HIT Entertainment PLC (4) 140,000 2,097 .18
Rural Press Ltd. (Australia) 3,726,466 12,034 .13
Australian Provincial Newspapers Holdings Ltd. (Australia) 5,639,774 11,406 .13
Zee Telefilms Ltd. (India) 110,000 11,389 .13
NRJ SA (France) 40,284 10,951 .12
Modern Times Group MTG AB, Class B (ADR) (Sweden) (1) 69,200 10,795 .12
Primedia Ltd., units (South Africa) 7,718,508 9,016 .10
Ten Network Holdings Ltd. (Australia) 6,500,000 8,778 .10
Antenna TV SA (ADR) (Greece) (1) 900,000 8,325 .09
Future Network PLC (The) (United Kingdom) (1) 750,000 7,803 .09
ENDEMOL Entertainment Holding NV (Netherlands) (1) 195,520 6,087
ENDEMOL Entertainment Holding NV 50,000 1,557 .08
GWR Group PLC (United Kingdom) 1,093,000 7,359 .08
Media General, Inc., Class A (USA) 139,500 7,149 .08
Sky Network Television Ltd. (ADR) (New Zealand) (1) 376,000 5,922
Sky Network Television Ltd. (1) 106,500 173 .07
Senator Film AG (Germany) (1) 79,450 5,760 .06
MIH Holdings Ltd. (South Africa) (1) 1,727,700 5,507 .06
Agora SA (GDR) (Poland) (1) 625,000 5,391 .06
Sondagsavisen A/S (Denmark) 80,000 5,051 .06
RTV Family Entertainment AG (Germany) (1) 110,000 4,363 .05
Teletypos SA (Greece) 168,190 4,308 .05
CHUM Ltd., nonvoting, Class B (Canada) 158,200 4,150 .05
P4 Radio Hele Norge ASA (Norway) 816,000 3,804 .04
SuperSport International Holdings Ltd. (South Africa) 5,347,900 3,704 .04
United Broadcasting Corp. (Thailand) (1) 5,800,000 3,224 .04
TVA Group Inc., Class B (Canada) 243,600 3,220 .04
Roularta Media Group NV (Belgium) 60,000 3,198 .04
Alma Media Oyj (Finland) 107,400 2,656 .03
CTV Inc. (Canada) (1) 160,400 2,202 .02
Southern Star Group Ltd. (Australia) 3,290,000 1,803 .02
StoryFirst Communications Inc., convertible 4,022 1,207 .01
preferred, Class B (Russia) (1,2,3)
Merchandising -- 6.66%
Lands' End, Inc. (USA) (1) 706,700 46,642 .52
Komori Corp. (Japan) 1,105,000 41,965 .47
Michaels Stores, Inc. (USA) (1) 1,400,000 41,300 .46
Giordano International Ltd. (Hong Kong) (4) 42,954,000 34,008 .38
Sunglass Hut International, Inc. (USA) (1,4) 3,200,000 33,800 .38
Too, Inc. (USA) (1,4) 1,775,000 31,839 .35
Homac Corp. (Japan) 1,314,200 31,502 .35
Zale Corp. (USA) (1) 798,700 30,600 .34
Cost Plus, Inc. (USA) (1) 630,000 30,555 .33
DFS Furniture Co. PLC (United Kingdom) 4,852,700 23,087 .26
Tsuruha Co., Ltd. (Japan) 198,000 18,613 .21
Williams-Sonoma, Inc. (USA) (1) 234,099 11,369
Williams-Sonoma, Inc. (1,2) 134,099 6,512 .20
Migros Turk TAS (Turkey) 40,904,025 17,754 .20
Whitehall Jewellers, Inc. (USA) (1,4) 510,000 14,663 .16
Rent-Way, Inc. (USA) (1) 700,000 13,300 .15
Jo-Ann Stores, Inc., Class A (USA) (1,4) 525,000 6,530
Jo-Ann Stores, Inc., Class B (1,4) 525,000 5,906 .14
PETsMART, Inc. (USA) (1) 3,150,000 11,714 .13
Webvan Group, Inc., convertible preferred, Class C 1,434,700 10,000 .11
(formerly Intelligent Systems Corp.) (USA) (1,2,3)
O'Reilly Automotive, Inc. (USA) (1) 200,000 9,531 .11
Controladora Comercial Mexicana, SA de CV, units (Mexico) 10,737,000 9,324 .10
Sharper Image Corp. (USA) (1,4) 775,000 8,525 .09
School Specialty, Inc. (USA) (1) 500,000 8,438 .09
GrandVision SA (France) 321,704 8,262 .09
Claire's Stores, Inc. (USA) 450,000 7,453 .08
Haverty Furniture Companies, Inc. (USA) 470,000 6,815 .08
Jean Coutu Group (PJC) Inc., Class A (Canada) 333,400 6,724 .07
Piercing Pagoda, Inc. (USA) (1,4) 502,500 6,533 .07
Bombay Co., Inc. (USA) (1) 1,222,200 6,187 .07
Hornbach Holding AG, preferred (Germany) 142,650 6,174 .07
AnnTaylor, Inc. (USA) (1) 150,000 6,131 .07
Chapters Inc. (Canada) (1) 324,200 5,467 .06
Shop At Home, Inc. (USA) (1) 580,000 5,220 .06
Sixt AG (Germany) 101,136 4,097
Sixt AG, nonvoting preferred 36,768 992 .06
PlanetRx.com, Inc., preferred, Series B (USA) (1,2,3) 1,000,000 5,000 .06
Athlon Groep NV (Netherlands) 225,000 4,846 .05
EUROBIKE AG (Germany) (4) 364,000 4,191 .05
Miadora Inc., preferred, Series B (USA) (1,2,3) 602,410 4,000 .04
Dickson Concepts (International) Ltd. (Hong Kong --- 4,575,699 3,564 .04
Incorporated in Bermuda)
Chapters Online Inc. (Canada) (1) 330,000 3,339 .04
Mobel Walther AG, nonvoting preferred (Germany) 212,851 2,700
Mobel Walther AG 38,000 496 .04
Liquidation World Inc. (Canada) (1,4) 450,000 2,453 .03
Homeplace of America Inc. (formerly Homeplace 22,536 362
Holdings Inc.) (USA) (1,3)
Homeplace of America Inc., Series A, warrants, 112,679 .00
expire 2004 (1,3)
Health & Personal Care -- 5.28%
Andrx Corp. (USA) (1) 1,260,000 73,749 .82
Inhale Therapeutic Systems, Inc. (USA) (1,2,4) 1,101,646 33,462 .37
Pharmacyclics, Inc. (USA) (1,2,4) 580,000 23,707
Pharmacyclics, Inc. (1,4) 215,000 8,788 .36
Mentor Corp. (USA) 1,080,000 30,780 .34
SuperGen Inc. (USA) (1,2,3) 561,000 10,938
SuperGen Inc. (1) 463,600 10,634
SuperGen Inc., warrants, expire 2002 (1,2,3) 336,600 3,964
SuperGen Inc., warrants, expire 2002 (1,3) 231,800 2,862 .32
Nobel Biocare AB (Sweden) (4) 1,591,900 23,665 .26
Vertex Pharmaceuticals Inc. (USA) (1) 730,000 22,676 .25
ImClone Systems Inc. (USA) (1) 650,000 21,612 .24
Protein Design Labs, Inc. (USA) (1) 500,000 18,063 .20
ViroPharma Inc. (USA) (1,4) 740,000 16,488 .18
Aviron (USA) (1) 605,000 14,671 .16
IDEXX Laboratories, Inc. (USA) (1) 825,000 14,205 .16
Gilead Sciences, Inc. (USA) (1) 200,000 12,838 .14
COR Therapeutics, Inc. (USA) (1) 557,300 10,589 .12
Thermedics Inc. (USA) (1) 1,390,000 10,338 .12
Nadro, SA de CV, L Shares (Mexico) 9,500,000 7,823
Nadro, SA de CV, B Shares 2,788,000 2,439 .11
Digene Corp. (USA) (1,4) 800,000 9,900 .11
Vical Inc. (USA) (1) 700,000 9,669 .11
Scotia Holdings PLC (United Kingdom) (1) 3,476,900 9,387 .10
Hollis-Eden Pharmaceuticals, Inc. (USA) (1,2,4) 555,556 7,396 .08
Anesta Corp. (USA) (1,4) 740,000 6,799 .08
Ocular Sciences, Inc. (USA) (1) 341,100 6,609 .07
Neose Technologies, Inc. (USA) (1) 400,000 6,000 .07
NeoPath, Inc. (USA) (1,4) 621,400 2,990
NeoPath, Inc. (1,2,4) 500,000 2,406 .06
Genetronics Biomedical Ltd., warrants, expire 1999 1,650,000 5,065 .06
(Canada) (1,3,4)
OrthoLogic Corp. (USA) (1,4) 1,620,000 4,860 .05
Computer Motion, Inc. (USA) (1,4) 434,900 4,349 .05
CIMA LABS INC. (USA) (1,4) 617,200 4,320 .05
Dura Pharmaceuticals, Inc. (USA) (1) 300,000 4,181 .05
GelTex Pharmaceuticals, Inc. (USA) (1) 329,900 3,670 .04
AVANT Immunotherapeutics, Inc. (USA) (1,2) 1,000,000 2,125
AVANT Immunotherapeutics, Inc. (1) 500,000 1,063 .04
Women First HealthCare, Inc. (USA) (1) 400,000 2,825 .03
Scios Inc. (USA) (1) 656,500 2,421 .03
Grupo Casa Autrey, SA de CV (ADR) (Mexico) (1) 498,500 1,994 .02
Vision-Sciences, Inc. (USA) (1,4) 984,500 1,477 .02
drugstore.com, inc. (USA) (1) 19,800 718 .01
Data Processing & Reproduction -- 5.13%
HNC Software Inc. (USA) (1,4) 1,675,198 66,484 .74
Visio Corp. (USA) (1) 1,360,000 53,380 .59
Datacraft Asia Ltd (Singapore) 8,991,058 39,560 .44
Great Plains Software, Inc. (USA) (1) 700,000 36,050 .40
Remedy Corp. (USA) (1) 1,200,000 34,050 .38
Electronics for Imaging, Inc. (USA) (1) 500,000 25,703 .29
Documentum, Inc. (USA) (1,4) 1,095,000 23,679 .26
Inet Technologies, Inc. (USA) (1) 501,100 19,997 .22
RadiSys Corp. (USA) (1,4) 500,000 19,625 .22
Apex Inc. (USA) (1) 875,000 16,352 .18
Nice Systems Ltd. (ADR) (Israel) (1,4) 625,000 16,094 .18
Saville Systems Ireland PLC (ADR) (Ireland) (1) 890,000 13,072 .15
Macromedia, Inc. (USA) (1) 315,300 12,888 .14
Great Wall Technology Co. Ltd., Class H (China) (1) 20,000,000 12,874 .14
i2 Technologies, Inc. (USA) (1) 300,000 11,644 .13
Primax Electronics Ltd. (Taiwan) (1) 13,239,285 10,667 .12
Integral Systems, Inc. (USA) (1,2) 277,778 7,986 .09
Aspen Technology, Inc. (USA) (1) 776,700 7,573 .08
National Computer Systems, Inc. (USA) 193,000 7,400 .08
Commerce One, Inc. (USA) (1) 70,000 6,840 .08
Aspect Development, Inc. (USA) (1) 265,000 6,708 .07
VA Linux Systems, Inc., convertible preferred, 777,202 6,000 .07
Series B (USA) (1,2,3)
Efficient Networks, Inc. (USA) (1) 87,100 3,168 .04
Momentum Business Applications, Inc., Class A (USA) (1,4) 302,000 2,718 .03
Kana Communications, Inc. (USA) (1) 9,800 489 .01
Leisure & Tourism -- 4.90%
Vail Resorts, Inc. (USA) (1) 1,571,300 36,435 .41
Extended Stay America, Inc. (USA) (1) 4,000,000 36,000 .40
Cheesecake Factory Inc. (USA) (1,4) 1,205,500 33,453 .37
Village Roadshow Ltd. (Australia) 10,032,395 19,963
Village Roadshow Ltd., Class A, 5.50% preferred 6,849,896 12,884 .37
J D Wetherspoon PLC (United Kingdom) 5,704,935 31,461 .35
Imax Corp. (Canada) (1,4) 1,558,000 31,160 .35
Station Casinos, Inc. (USA) (1) 1,233,200 28,672 .32
CINAR Films Inc., Class B (Canada) (1) 705,600 21,344 .24
Boca Resorts, Inc., Class A (formerly Florida 1,175,000 12,338
Panthers Holdings, Inc.) (USA) (1)
Boca Resorts, Inc., Class A, 1997 Series (1,2) 500,000 5,250
Boca Resorts, Inc., Class A, 1999 Series (1,2) 231,730 2,433 .22
Corporacion Interamericana de Entretenimiento, 8,153,679 19,750 .22
SA de CV, Class B (Mexico) (1)
Four Seasons Hotels Inc. (Canada) 529,707 19,310 .22
Ruby Tuesday, Inc. (USA) 841,800 16,415 .18
Consolidated Products, Inc. (USA) (1,4) 1,562,500 15,234 .17
American Classic Voyages Co. (USA) (1) 600,000 13,763 .15
Kinowelt Medien AG (Germany) (1) 240,000 13,305 .15
Alliance Atlantis Communications Inc., nonvoting, 969,450 9,776 .11
Class B (Canada) (1)
Mandarin Oriental International Ltd. (Singapore) 12,210,529 8,669 .10
Scandic Hotels AB (Sweden) 822,600 8,287 .09
Kinepolis Group NV (Belgium) 89,485 7,489 .08
Morton's Restaurant Group, Inc. (USA) (1,4) 415,000 7,288 .08
Gaumont SA (France) 81,370 5,335 .06
Round One Corp. (Japan) 383 4,894 .05
Lions Gate Entertainment Corp. (Canada) (1,4) 998,300 1,939
Lions Gate Entertainment Corp. (1,2,4) 885,834 1,720 .04
I T International Theatres Ltd. (Israel) (1) 375,000 3,600 .04
Norsk Lotteridrift ASA (Norway) 965,000 2,624 .03
Johnnies Industrial Corp. Ltd. (South Africa) 374,797 2,471 .03
Filmes Lusomundo, SA, preferred (Portugal) 248,500 2,223 .02
Silverleaf Resorts, Inc. (USA) (1) 355,100 2,197 .02
DAS WERK AG (Germany) (1) 45,000 1,463 .02
CineMedia Film AG (Germany) (1) 28,671 1,024 .01
Energy Sources -- 4.08%
Newfield Exploration Co. (USA) (1,4) 2,200,000 72,463 .81
Louis Dreyfus Natural Gas Corp. (USA) (1) 2,000,000 42,875 .48
Fletcher Challenge Energy (New Zealand) 16,900,000 42,280 .47
Mitchell Energy & Development Corp., nonvoting, 1,200,000 28,200 .31
Class B (USA)
Oil Search Ltd. (Australia) 14,385,000 18,582
Oil Search Ltd., 9.50% convertible preferred 50,000 3,575
Oil Search Ltd. (2) 2,300,000 2,971 .28
Cairn Energy PLC (United Kingdom) (1,4) 11,000,000 24,627 .27
Encal Energy Ltd. (Canada) (1) 4,000,000 21,532 .24
Vintage Petroleum, Inc. (USA) 1,500,000 20,250 .23
Chieftain International, Inc. (Canada) (1,4) 860,000 16,340 .18
Premier Oil PLC (United Kingdom) (1) 45,675,000 14,286 .16
QCT Resources Ltd. (Australia) 19,747,983 12,497 .14
Cabre Exploration Ltd. (Canada) (1,4) 1,099,000 11,120 .12
Novus Petroleum Ltd. (Australia) (1,4) 7,200,757 7,089
Novus Petroleum Ltd. (1,2,3,4) 1,850,000 1,548 .10
Ramco Energy PLC (United Kingdom) (1,4) 1,297,000 7,260 .08
Northrock Resources Ltd. (Canada) (1) 603,000 6,471 .07
Paladin Resources NL (Australia) (1,4) 11,270,998 4,453 .05
HS Resources, Inc. (USA) (1) 200,000 3,275 .04
Arcon International Resources PLC (Ireland) (1) 11,798,000 3,108 .03
Aminex PLC (Ireland) (1,2) 3,250,000 1,391
Aminex PLC (1) 750,000 321 .02
Anzoil NL (Australia) (1) 2,730,000 258 .00
Electronic Instruments -- 4.05%
Disco Corp. (Japan) 709,000 87,975 .98
TranSwitch Corp. (USA) (1) 900,000 51,300 .57
Etec Systems, Inc. (USA) (1,4) 1,210,000 45,526 .51
ANTEC Corp. (USA) (1) 570,000 30,281 .34
Orbotech Ltd. (Israel) (1) 450,000 27,844 .31
Plantronics, Inc. (USA) (1) 425,000 21,144 .23
L-3 Communications Corp. (USA) (1) 550,000 20,762 .23
ASM Pacific Technology Ltd. (Hong Kong) 16,487,000 19,633 .22
Mercury Computer Systems, Inc. (USA) (1) 490,000 16,660 .19
Trimble Navigation Ltd. (USA) (1,4) 1,450,000 15,497 .17
Picvue Electronics, Ltd. (Taiwan) 17,990,000 15,063 .17
ThermoQuest Corp. (USA) (1) 510,000 5,164 .06
Lumonics Inc. (Canada) (1) 710,000 4,209 .05
Micronic Laser Systems AB (Sweden) (1,2,3) 466,666 2,179 .02
Chemicals -- 2.28%
OM Group, Inc. (USA) 1,050,000 40,294 .45
Cambrex Corp. (USA) (4) 1,400,000 37,012 .41
Valspar Corp. (USA) 991,100 32,397 .35
Ionics, Inc. (USA) (1) 750,000 24,281 .27
Airgas, Inc. (USA) (1) 1,459,300 16,964 .19
Bush Boake Allen Inc. (USA) (1) 533,600 14,074 .16
Omni Industries Ltd. (Singapore) 12,600,000 13,351 .15
CK Witco Corp. (formerly Crompton & Knowles 671,200 9,774 .11
Corp.) (USA)
Georgia Gulf Corp. (USA) 495,000 8,724 .10
Gurit-Heberlein AG (Switzerland) 15,000 8,059 .09
Beverages & Tobacco -- 2.19%
BRL Hardy Ltd. (Australia) (4) 7,216,826 32,026 .36
Beringer Wine Estates Holdings, Inc., Class B (USA) (1) 708,000 29,072 .32
Coca-Cola West Japan Co., Ltd. (formerly Kita 536,220 24,699 .27
Kyushu Coca-Cola Bottling Co., Ltd.) (Japan)
Robert Mondavi Corp., Class A (USA) (1) 500,000 18,781 .21
Chukyo Coca-Cola Bottling Co. Ltd. (Japan) 1,125,000 15,810 .18
Montana Group Ltd. (formerly Corporate Investments 13,950,000 14,998 .17
Ltd.) (New Zealand) (4)
Simeon Wines Ltd. (Australia) (4) 3,900,000 9,032 .10
Vitasoy International Holdings Ltd. (Hong Kong) 27,250,000 8,332 .09
Oy Hartwall AB, Class A (Finland) 505,150 7,055 .08
Mikasa Coca-Cola Bottling Co., Ltd. (Japan) 725,000 7,020 .08
Quilmes Industrial SA, nonvoting preferred (ADR) (Argentina) 700,000 6,694 .07
Ege Biracilik ve Malt Sanayii AS (Turkey) 183,310,800 5,967 .07
Brau und Brunnen AG (Germany) (1) 79,804 5,275 .06
Guinness Anchor Bhd. (Malaysia) 4,271,000 4,226 .05
AL-Ahram Beverages Co. (GDR) (Egypt) (1) 120,000 3,564 .04
Petaluma Ltd. (Australia) 689,950 2,323 .03
Vina Concha y Toro SA (ADR) (Chile) 27,200 1,027 .01
Electrical & Electronics -- 2.05%
Kokusai Electric Co., Ltd. (Japan) (4) 4,675,000 61,657 .69
ERG Ltd. (Australia) 8,014,840 32,942 .37
Johnson Electric Holdings Ltd. (Hong Kong --- 5,088,000 24,694 .27
Incorporated in Bermuda)
Gilat Satellite Networks Ltd. (Israel) (1) 420,000 22,522 .25
DSP Communications, Inc. (USA) (1) 1,065,000 20,235 .22
InterCept Group, Inc. (USA) (1) 427,500 7,909 .09
Maker Communications, Inc. (USA) (1) 307,200 7,219 .08
Tandberg Television AS (Norway) (1) 324,000 3,608 .04
Advanced Systems Automation Ltd. (Singapore) 2,250,000 2,291 .03
Telinfo NV (Belgium) 6,333 608 .01
Banking -- 1.83%
Industrial Finance Corp. of Thailand (Thailand) 74,000,000 23,052 .26
FirstMerit Corp. (USA) 680,000 17,255 .19
UST Corp. (USA) 550,000 16,912 .19
Imperial Bancorp (USA) (1) 777,600 16,524 .18
Banco de Galicia y Buenos Aires SA, Class B 711,750 14,813 .16
(ADR) (Argentina)
Yapi ve Kredi Bankasi AS (Turkey) 1,040,000,000 14,219 .16
Fulton Financial Corp. (USA) 752,867 14,116 .16
Laurentian Bank of Canada (Canada) 896,800 13,505 .15
Commerce Bancorp, Inc. (USA) 320,971 13,320 .15
Provident Bankshares Corp. (USA) 625,117 13,303 .15
Pacific Bank, N.A. (USA) 98,100 2,453 .03
Banco Rio de la Plata SA, Class B (ADR) (Argentina) 221,000 2,376 .03
Grupo Financiero BBV Probursa, SA de CV, 16,785,500 1,723 .02
Class B (Mexico) (1)
Real Estate -- 1.62%
Unibail (France) 234,000 33,204 .37
Newhall Land and Farming Co. (USA) 950,600 23,408 .26
Cadiz Inc. (USA) (1,4) 2,232,000 21,343 .24
Castellum AB (Sweden) 2,359,200 20,434 .23
Wiggins Group PLC (United Kingdom) (1) 37,815,866 14,785 .16
TBI PLC (United Kingdom) 9,718,400 13,119 .15
Sponda Oyj (Finland) 1,330,000 6,168 .07
Diligentia AB (Sweden) 800,000 6,045 .07
Mandamus AB (Sweden) 727,575 3,844 .04
Pillar Property PLC (United Kingdom) 400,000 2,145 .02
CCA Prison Realty Trust (USA) 113,600 1,221 .01
Financial Services -- 1.53%
Metris Companies Inc. (USA) 1,520,000 44,745 .50
OM Gruppen AB (Sweden) 2,706,400 30,590 .34
Nissin Co., Ltd. (Japan) 250,000 17,014 .19
CB Richard Ellis Services, Inc. (USA) (1) 721,800 10,917 .12
Challenger International Ltd. (Australia) 3,700,000 10,018 .11
JCG Holdings Ltd. (Hong Kong --- Incorporated in Bermuda) 13,000,000 7,615 .08
American Capital Strategies, Ltd. (USA) 400,000 7,400 .08
Medallion Financial Corp. (USA) 275,000 5,569 .06
Mycal Card Inc. (Japan) 87,200 4,672 .05
Recreation & Other Consumer Products -- 1.51%
AVEX Inc. (Japan) 282,750 52,627 .59
Infogrames Entertainment (France) (1) 324,500 26,880
Infogrames Entertainment, 2.00% convertible debentures 2002 $7,872 3,155
Infogrames Entertainment, warrants, expire 2001 (1) 25,500 220 .34
VTech Holdings Ltd. (Hong Kong) 10,500,000 27,035 .30
Movado Group, Inc. (USA) 440,000 10,120 .11
ACTIVISION, Inc. (USA) (1,2) 570,000 10,046 .11
Metromedia International Group, Inc. (USA) (1) 757,000 3,123 .03
edel music AG (Germany) (1) 70,000 2,798 .03
Insurance -- 1.28%
Independent Insurance Group PLC (United Kingdom) (4) 13,940,000 63,107 .70
HCC Insurance Holdings, Inc. (USA) 1,555,600 26,154 .29
Mutual Risk Management Ltd. (USA --- Incorporated in Bermuda) 1,165,000 14,271 .16
Clark/Bardes Holdings, Inc. (USA) (1) 451,300 9,308 .10
Lindsey Morden Group Inc. (Canada) 230,000 2,821 .03
Food & Household Products -- 1.13%
PT Indofood Sukses Makmur Tbk (Indonesia) (1) 47,822,300 45,607 .51
Geest PLC (United Kingdom) 2,250,000 18,316 .20
Grupo Industrial Maseca, SA de CV, Class B (ADR) (Mexico) 1,220,000 11,056 .12
Royal Canin SA (France) 147,300 10,694 .12
Celestial Seasonings, Inc. (USA) (1,4) 530,000 10,203 .11
Fyffes PLC (Ireland) 3,350,000 6,143 .07
Industrial Components -- 1.11%
Tower Automotive, Inc. (USA) (1) 805,400 15,957 .18
Senior Engineering Group PLC (United Kingdom) 9,100,000 14,980 .17
Kiekert AG (Germany) 500,000 14,899 .17
Exedy Corp. (Japan) 1,172,500 14,053 .16
Toyoda Machine Works, Ltd. (Japan) 1,680,000 13,660 .15
Koito Manufacturing Co., Ltd. (Japan) 1,670,000 9,121 .10
Hayes Lemmerz International, Inc. (USA) (1) 300,000 6,975 .08
Roper Industries, Inc. (USA) 150,000 5,738 .06
Superior TeleCom Inc. (USA) 200,000 2,787 .03
THK Co., Ltd. (Japan) 27,000 797 .01
Wireless Telecommunication Services -- 1.09%
SkyTel Communications, Inc. (USA) (1) 1,395,000 25,546 .28
Tele Celular Sul Participacoes SA, preferred 1,284,900 24,333 .27
nominative (ADR) (Brazil)
Tele Nordeste Celular Participacoes SA, preferred 678,600 15,438 .17
nominative (ADR) (Brazil)
Tele Centro Oeste Celular Participacoes SA, 4,550,000 15,072 .17
preferred nominative (ADR) (Brazil)
Hutchison Telecommunications Ltd. (Australia) Ltd. 5,500,000 8,252 .09
(Australia) (1)
CESKE RADIOKOMUNIKACE AS (GDR) (Czech Republic) (1) 113,300 4,107 .05
PageMart Wireless, Inc., Class A (USA) (1) 500,000 3,000 .03
M-Cell Ltd. (South Africa) 1,484,000 2,452 .03
Transportation: Shipping -- 0.89%
Stolt-Nielsen SA, Class B (ADR) (Multinational) 1,040,000 17,550 .20
MIF Ltd. (Greece) (1,4) 682,903 12,028 .13
Odfjell ASA, Class B (Norway) 445,000 5,993
Odfjell ASA, Class A 214,320 2,914 .10
Ugland International Holdings PLC (United Kingdom) (4) 7,342,000 8,702 .10
Great Eastern Shipping Co. Ltd. (India) (4) 14,402,500 7,660
Great Eastern Shipping Co. Ltd. (GDR) (4) 325,500 895 .10
N & T Argonaut AB, Class B (Sweden) (1) 7,703,790 5,726 .06
Teekay Shipping Corp. (Bahamas) 350,000 5,469 .06
Benor Tankers Ltd. (Norway) (4) 740,000 2,386
Benor Tankers Ltd. (1,4) 500,000 1,612 .04
Shipping Corp. of India Ltd. (India) (1) 5,391,600 2,942 .03
Knightsbridge Tankers Ltd. (Bermuda) 150,000 2,400 .03
Frontline Ltd. (Bermuda) (1) 483,300 1,432 .02
Mosvold Shipping Ltd (Norway) (1) 2,580,000 1,002 .01
Waterfront Shipping ASA (Norway) (1) 34,110 539 .01
Textiles & Apparel -- 0.86%
Esprit Holdings Ltd. (formerly Esprit Asia Holdings 39,649,605 36,496 .41
Ltd.) (Hong Kong)
JJB Sports PLC (United Kingdom) 4,625,000 24,478 .27
Wolford Group (Austria) (4) 324,000 16,442 .18
Miscellaneous Materials & Commodities -- 0.73%
Intertape Polymer Group Inc. (Canada) (4) 1,500,000 42,375 .47
Arisawa Mfg. Co., Ltd (Japan) 380,000 9,823 .11
Kafus Industries Ltd. (Canada) (1) 1,000,000 9,125 .10
Park-Ohio Holdings Corp. (USA) (1) 300,000 3,750 .04
Sinocan Holdings Ltd. (Hong Kong --- Incorporated 36,608,000 585 .01
in Bermuda) (1)
Appliances & Household Durables -- 0.66%
Pittway Corp., Class A (USA) 1,055,700 33,255 .37
Fisher & Paykel Industries Ltd. (New Zealand) (4) 6,550,000 20,653 .23
Stanley Furniture Co., Inc. (USA) (1) 250,000 5,281 .06
Diversified Telecommunication Services -- 0.63%
Intermedia Communications Inc. (USA) (1) 1,365,000 29,689 .33
Global Light Telecommunications Inc. (Canada) (1) 800,000 8,150
GST Global Telecommunications Inc., 10.00% $3,000,000 4,650 .14
convertible debentures 2002
Highpoint Telecommunications Inc. (Canada) (1,4) 1,000,000 5,451
Highpoint Telecommunications Inc., convertible 322,000 1,492 .08
preferred (1,2,3,4)
Corus Entertainment Inc., Class B (Canada) (1) 350,000 5,664 .07
Societe Europeenne de Communication SA, 62,280 996
Class B (ADR) (Luxembourg) (1)
Societe Europeenne de Communication SA, 6,920 103 .01
Class A (ADR) (1)
Building Materials & Components -- 0.61%
Elcor Corp. (USA) 650,000 16,250 .18
Geberit AG (Switzerland) (1) 45,000 12,613 .14
Puerto Rican Cement Co., Inc. (USA) 250,000 9,016 .10
Apasco, SA de CV (Mexico) 1,322,620 7,383 .08
RHI AG (formerly Radex-Heraklith Industriebeteiligungs 225,000 6,633
AG) (Austria)
RHI AG, rights, expire 1999 (1) 225,000 0 .08
Cia. Cimento Portland Itau, preferred nominative (Brazil) 23,200,000 2,187 .02
Futuris Corp. Ltd. (Australia) (1) 725,000 927 .01
Machinery & Engineering -- 0.59%
KCI Konecranes International Corp. (Finland) 701,700 19,076 .21
JOT Automation Group Oyj (Finland) 402,560 16,944 .19
Miura Co., Ltd. (Japan) 500,000 7,520 .08
Thermo Fibertek Inc. (USA) (1) 1,200,000 7,350 .08
Chen Hsong Holdings Ltd. (Hong Kong --- 12,000,000 2,472 .03
Incorporated in Bermuda)
Utilities: Electric & Gas -- 0.50%
Australian Gas Light Co. (Australia) 3,972,668 23,481 .26
International Energy Group Ltd. (United Kingdom) (4) 4,640,000 14,589 .16
Centrais Eletricas de Santa Catarina SA - 135,000 3,578 .04
CELESC, preferred nominative (ADR) (Brazil)
Cia. de Electricidade do Estado do Rio de Janeiro - 11,835,646,000 2,281 .03
CERJ, ordinary nominative (Brazil) (1)
Espirito Santo Centrais Electricas SA - ESCELSA, 17,335 550 .01
ordinary nominative (Brazil)
Transportation: Airlines -- 0.49%
Atlantic Coast Airlines Holdings, Inc. (USA) (1,4) 1,268,000 22,507 .25
Alaska Air Group, Inc. (USA) (1) 500,000 20,344 .23
British Airways Inc. (France) 29,500 1,305 .01
Multi-Industry -- 0.49%
Corporacion Financiera Alba, SA (Spain) 1,070,694 29,564 .33
Discount Investment Corp. Ltd (Israel) 292,200 10,293 .11
Cahya Mata Sarawak Bhd. (Malaysia) 5,556,000 4,255 .05
Wholesale & International Trade -- 0.42%
Li & Fung Ltd. (Hong Kong--Incorporated in Bermuda) 7,800,000 23,597 .26
Performance Food Group Co. (USA) (1) 550,000 14,094 .16
Daewoo Corp., 0.50% convertible debentures $2,500,000 500 .00
2007 (South Korea)
Metals: Nonferrous -- 0.34%
Kaiser Aluminum Corp. (USA) (1) 3,100,000 25,769 .29
Minmet PLC (Ireland) (1,2,4) 25,235,027 5,089 .05
Energy Equipment -- 0.28%
Rowan Companies, Inc. (USA) (1) 691,500 11,237 .13
Shaw Industries Ltd., Class A (Canada) 750,000 7,972 .09
Newpark Resources, Inc. (USA) (1) 700,000 5,425 .06
Equity Common Trusts -- 0.27%
Atle AB, Class A (Sweden) 1,590,000 24,418 .27
Automobiles -- 0.25%
Mahindra & Mahindra Ltd. (GDR) (India) 1,795,948 16,119
Mahindra & Mahindra Ltd. 804,052 6,317 .25
Construction & Housing -- 0.16%
Palm Harbor Homes, Inc. (USA) (1) 648,906 8,922 .10
Societe Generale d'Entreprises (France) 100,000 5,043 .06
Gold Mines -- 0.06%
Ashanti Goldfields Co. Ltd. (Ghana) 400,000 3,310 .04
Avocet Mining PLC (United Kingdom) (1,2,4) 2,750,000 1,041
Avocet Mining PLC (1,4) 1,100,000 417 .02
Philippine Gold PLC (United Kingdom) (1,4) 4,953,700 387 .00
Metals: Steel -- 0.05%
Tubos de Acero de Mexico, SA (ADR) (Mexico) 335,547 4,110 .05
Transportation: Rail & Road -- 0.04%
C.H. Robinson Worldwide, Inc. (USA) 100,000 3,369 .04
Forest Products & Paper -- 0.03%
PT Indah Kiat Pulp & Paper Corp. Tbk (Indonesia) (1) 8,707,000 3,117 .03
Aerospace & Military Technology -- 0.01%
Orbital Sciences Corp., 5.00% convertible debentures $1,500,000 1,335 .01
2002 (USA) (2)
Miscellaneous -- 4.82%
Other equity securities in initial period of acquisition 432,671 4.82
------------------
TOTAL EQUITY SECURITIES (cost: $6,510,020,000) 8,518,38 94.83
------------------
Principal
Amount
SHORT-TERM SECURITIES (000)
Corporate Short-Term Notes -- 5.48%
BMW US Capital Corp. 5.12% due 10/12-10/18/1999 61,580 61,442 .68
Abbey National North America 5.14%-5.15% due 50,000 49,872 .56
10/13-10/22/1999
France Telecom SA 5.15% due 10/7-10/15/1999 45,000 44,925 .50
KfW International Finance Inc. 5.22%-5.50% due 41,000 40,918 .46
10/1-10/20/1999
Toyota Motor Credit Corp. 5.22%-5.27% due 35,500 35,386 .39
10/18-10/27/1999
Reed Elsevier Inc. 5.15% due 10/25/1999 (2) 35,000 34,872 .39
Westpac Banking Corp. 4.83%-5.32% due 11/5/1999 31,000 30,835 .34
Halifax PLC 5.29%-5.31% due 11/9/1999 30,000 29,823 .33
American Honda Finance Corp. 5.25%-5.30% 29,600 29,544 .33
due 10/13/1999
Arco British Ltd. 5.27%-5.32% due 10/15-11/9/1999 (2) 26,500 26,386 .29
Internationale Nederlanden U.S. Fund 5.26% due 25,000 24,934 .28
10/18/1999
Telstra Corp. Ltd. 5.30% due 11/19/1999 24,800 24,618 .27
Rio Tinto America, Inc. 5.15% due 10/4/1999 (2) 22,208 22,195 .25
Diageo Capital PLC 5.34% due 1/24/2000 (2) 22,500 22,080 .24
DaimlerChrysler AG 5.31% due 10/19/1999 15,000 14,958 .17
Non-U.S. Currency -- 0.08%
New Taiwanese Dollar NT$108,6 3,431 .04
Malaysian Ringgit MYR$12,80 3,370 .04
TOTAL SHORT-TERM SECURITIES (cost: $499,625,000) 499,589 5.56
TOTAL INVESTMENT SECURITIES (cost: $7,009,645,000) 9,017,97 100.39
Excess of payables over cash and receivables 35,434 0.39
NET ASSETS $8,982,5 100.00
1 Non-income-producing security.
2 Purchased in a private placement transaction;
resale to the public may require registration or
sale only to qualified institutional buyers.
3 Valued under procedures established by the
Board of Directors.
4 Represents an affiliated company as defined under the
Investment Company Act of 1940.
ADR = American Depositary Receipts
GDR = Global Depositary Receipts
The descriptions of the companies shown in the portfolio,
which were obtained from published reports and other
sources believed to be reliable, are supplemental and are not
covered by the Independent Auditors' Report.
See Notes to Financial Statements
EQUITY-TYPE SECURITIES APPEARING IN THE
PORTFOLIO SINCE MARCH 31, 1999
Aavid Thermal Technologies
Alaska Air Group
American Classic Voyages
Anam Semiconductor
Apex
Artnet.com
Aspen Technology
AVEX
Baltimore Technologies
Bertrandt
Bombay Co.
British Airways
BRL Hardy
Catena
Challenger International
Chapters Online
Chieftain International
China.com
Chukyo Coca-Cola Bottling Co.
Ci Technologies Group
Commerce One
Corporacion Interamericana de Entretenimiento
Corporate Executive Board
Corus Entertainment
Cosine Communications
CTV
Dainippon Screen Mfg. Co.
Dallas Semiconductor
DAS WERK
Digex
DII Group
Discount Investment Corp.
Documentum
drugstore.com
DSP Communications
e4L
Efficient Networks
Elcor
Elec & Eltek International Holdings
Elec & Eltek International Co.
Engage Technologies
Exact Holding NV
eXchange Holdings
Exedy
Extreme Networks
Fantastic
Fisher & Paykel Industries
Focal Communications
FortuneCity.com
Framtidsfabriken
Future Network
Geberit
Genetronics Biomedical
Giordano International
Global Light Telecommunications
Great Wall Technology Co.
Highlight Communications AG
HS Resources
Hutchison Telecommunications
ICON
Icon Medialab International
I-D Media
IDEXX Laboratories
Industrial Financial Corp. of Thailand
Inet Technologies
InfoCure
Innotrac
Integral Systems
International Energy Group
InterQ
IXLA
JIT Holdings
Kafus Industries
Kana Communications
Kinepolis Group
Kokusai Electric Co.
LibertyOne
LifePoint Hospitals
London Bridge Software Holdings
Louis Dreyfus Natural Gas
Luminant Worldwide
Maker Communications
Miadora
MIH
MIH Holdings
Mikasa Coca-Cola Bottling
Minmet
Mitchell Energy & Development
M-Web Holdings
Mycal Card
Nadro
Nasionale Pers Beperk
Newpark Resources
Nissin Co.
Northrock Resources
Omni Industries
O'Reilly Automotive
PageMart Wireless
Park-Ohio Holdings
Parsytec
Performance Food Group
Perlos
Picvue Electronics
Power Integrations
Pre-Paid Legal Services
Private Business
Profit Recovery Group International
Radio One
RadiSys
Roularta Media Group
Round One
Rowan Companies
RTV Family Entertainment
Scandic Hotels
Scoot.com
Semtech
Senator Film
Sharper Image
Shinsung
Shop At Home
Sifo Group
SIPEX
Source Information Management
Stanley Furniture Co.
Stericycle
Sterile Recoveries
Stewart Enterprises
SuperGen
SuperSport International Holdings
Talentum
Tele Celular Sul Participacoes
Tele Centro Oeste Celular Participacoes
Tele Nordeste Celular Participacoes
THK
Too
Tower Semiconductor
Toyoda Machine Works
Trafficmaster
Triad Hospitals
Tsuruha
VA Linux Systems
Varian Semiconductor Equipment Associates
Ventiv Health
Vina Concha y Toro
Vintage Petroleum
ViroPharma
Visio
WatchGuard Technologies
Whittman-Hart
Women First HealthCare
Zee Telefilms
Zhejiang Expressway Co.
EQUITY-TYPE SECURITIES ELIMINATED FROM
THE PORTFOLIO SINCE MARCH 31, 1999
@Entertainment
Aboitiz Equity Ventures
ABR Information Services
Acer Computer International
Adelphia Communications
Alvis
AMCORE Financial
Ascent Entertainment Group
Ashton Mining
Asia Satellite Telecommunications Holdings
Automatic Data Processing
Autoweb.com
Bank Handlowy w Warszawie
Bona Shipholding
Brightpoint
BTI Capital Trust
Buckeye Technologies
Budget Group
Capital
Caraustar Industries
Carbide/Graphite Group
CD Radio
Central European Media Enterprises
Century Communications
CinemaxX
Citizens Banking
Coinmach Laundry
Concord EFS
Culp
Cyberonics
Det Sondenfjelds-Norske Dampskibsselskab
Devro
Edify
EM.TV & Merchandising
Enator
Esat Telecom Group
EXPAND
Fidelity National Financial
First Consulting Group
Four Media
Genelabs Technologies
Gensia Sicor
Global TeleSystems Group
Gretag Imaging Holding
Grupo Radio Centro
Gymboree
Hanover Direct
Harleysville Group
Hartmarx
HealthCare Financial Partners
Hoyts Cinemas
ICB Shipping
iMALL
IMC Holdings
Insignia/ESG Holdings
Intercardia
Investec - Consultoria Internacional
Ispat Industries
ITT Educational Services
Kalon Group
KeraVision
Keystone Financial
Kudelski
L.D.C.
Lazare Kaplan International
Lernout & Hauspie Speech Products
Level One Communications
LoJack
London Sumatra Indonesia
Mac-Gray
Market Facts
Matav-Cable Systems Media
Material Sciences
McWhorter Technologies
Metro-Richelieu
Milltronics
Nature's Sunshine Products
NEON Systems
OneMain.com
Option International
Peapod
Pfeiffer Vacuum Technology
Philippine Airlines
PictureTel
Pittston Brink's Group
Platinum Software
Powerscreen International
PR Holdings
Protection One
PRT Group
PubliGroupe
Ranger Oil
Renaissance Worldwide
Rental Service
Rogers
ROMAC International
Spelling Entertainment Group
Sports Authority
Superior Consultant Holdings
Taylor Nelson Sofres
TelDaFax
TeleTech Holdings
Transportes Azkar
Tranz Rail Holdings
TV Guide
UMW Holdings Bhd.
United Natural Foods
USWeb/CKS
Wah Kwong Shipping Holdings
Werner Enterprises
Zonagen
</TABLE>
<TABLE>
SMALLCAP World Fund
FINANCIAL STATEMENTS
<S> <C> <C>
- ---------------------------------------- ------------ ------------
Statement of Assets and Liabilities
at September 30, 1999 (dollars in thousands)
- ---------------------------------------- ------------ ------------
Assets:
Investment securities at market:
Unaffiliated issuers (cost: $ 5,690,570) $7,194,591
Affiliated issuers (cost: $1,319,075) 1,823,381
$9,017,972
Cash 11,783
Receivables for -
Sales of investments 35,579
Sales of fund's shares 12,183
Dividends and interest 7,800 55,562
------------ ------------
9,085,317
Liabilities:
Payables for -
Purchases of investments 83,704
Repurchases of fund's shares 11,929
Management services 4,998
Other expenses 2,148 102,779
------------ ------------
Net Assets at September 30, 1999 -
Equivalent to $29.57 per share on
303,754,234 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 400,000,000 shares) $8,982,538
============
Statement of Operations
for the year ended September 30, 1999 (dollars in thousands)
- ---------------------------------------- ------------ ------------
Investment Income:
Income:
Dividends (includes $11,458 from affiliates) $ 60,224
Interest 37,848 $ 98,072
------------
Expenses:
Management services fee 54,205
Distribution expenses 20,592
Transfer agent fee 9,047
Reports to shareholders 579
Registration statement and
prospectus 375
Postage, stationery and supplies 1,480
Directors' fees 160
Auditing and legal fees 83
Custodian fee 1,515
Taxes other than federal income tax 189
Other expenses 192 88,417
------------ ------------
Net investment income 9,655
------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain (including $90,920 net loss 157,055
from affiliates)
Change from unrealized depreciation to
unrealized appreciation on investments:
Beginning of year (558,923)
End of year 2,008,296
Net unrealized appreciation on investments ------------ 2,567,219
------------
Net realized gain and unrealized appreciation
on investments 2,724,274
------------
Net Increase in Net Assets Resulting
from Operations $2,733,929
============
Statement of Changes in Net
Assets (dollars in thousands)
- ---------------------------------------- --------------------------
Year ended September 30
1999 1998
------------ ------------
Operations:
Net investment income $ 9,655 $ 23,809
Net realized gain on investments 157,055 493,492
Net unrealized appreciation (depreciation)
on investments 2,567,219 (2,424,139)
------------ ------------
Net increase (decrease) in net assets
resulting from operations 2,733,929 (1,906,838)
------------ ------------
Dividends and Distributions Paid
to Shareholders:
Dividends from net
investment income (28,122) (15,213)
Distributions from net realized
gain on investments (403,091) (760,633)
------------ ------------
Total dividends and
distributions (431,213) (775,846)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
50,434,688 and 54,562,618
shares, respectively 1,309,044 1,498,043
Proceeds from shares issued in
reinvestment of net investment
income dividends and
distributions of net realized
gain on investments:
17,698,049 and 29,239,348
shares, respectively 415,013 743,523
Cost of shares repurchased:
85,119,727 and 64,322,473
shares, respectively (2,145,795)(1,713,474)
------------ ------------
Net (decrease) increase in net assets
resulting from capital share
transactions (421,738) 528,092
------------ ------------
Total Increase (Decrease) in Net Assets 1,880,978 (2,154,592)
Net Assets:
Beginning of year 7,101,560 9,256,152
------------ ------------
End of year (including undistributed
net investment income: $2,359 and
$21,487, respectively) $8,982,538 $7,101,560
============ ============
See Notes to Financial Statements
</TABLE>
SMALLCAP WORLD FUND
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - SMALLCAP World Fund, Inc. (the "fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks long-term growth of capital through
investments in smaller companies in the U.S. and around the world.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assuptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - 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. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value. Forward currency contracts are valued at the mean of their
representative quoted bid and asked prices. Securities and assets for which
representative market quotations are not readily available are valued at fair
value as determined in good faith by a committee appointed by the Board of
Directors.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed
in terms of non-U.S. currencies are translated into U.S. dollars at the
prevailing market rates at the end of the reporting period. Purchases and sales
of securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -Security transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost. In
the event securities are purchased on a delayed delivery or "when-issued"
basis, the fund will instruct the custodian to segregate liquid assets
sufficient to meet its payment obligations in these transactions. Dividend
income is recognized on the ex-dividend date, and interest income is recognized
on an accrual basis. Market discounts, premiums, and original issue discounts
on securities purchased are amortized daily over the expected life of the
security.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
paid to shareholders are recorded on the ex-dividend date.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange currencies of different
countries at specified future dates at specified rates. The fund enters into
these contracts to reduce its exposure to fluctuations in foreign exchange
rates arising from investments denominated in non-U.S. currencies.
The fund's use of forward currency contracts involves market risk in
excess of the amount recognized in the statement of assets and liabilities.
The contracts are recorded in the statement of assets and liabilities at their
net unrealized value. The fund records realized gains or losses at the time
the forward contract is closed or offset by a matching contract. The face or
contract amount in U.S. dollars reflects the total exposure the fund has in
that particular contract. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from possible movements in non-U.S. exchange rates and securities values
underlying these instruments. Purchases and sales of forward currency exchange
contracts having the same settlement date and broker are offset and presented
net in the statement of assets and liabilities.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes
paid. For the year ended September 30, 1999, such non-U.S. taxes were
$4,702,000. Net realized gain and net unrealized gain of the fund derived in
India are subject to certain non-U.S. taxes at a rate of 10%. The fund
provides for such non-U.S. taxes on investment income, net realized gain and
net unrealized gain.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, sales of non-U.S. bonds and notes, and other receivables and
payables, on a book basis, were $4,000 for the year ended September 30, 1999.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of September 30, 1999, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $2,008,327,000, of which
$2,755,338,000 related to appreciated securities and $747,011,000 related to
depreciated securities. During the year ended September 30, 1999, the fund
realized, on a tax basis, a net capital gain of $157,717,000 on securities
transactions. In addition, the fund has deferred, for tax purposes, to fiscal
year ending September 30, 2000, the recognition of losses relating to non-U.S.
currency transactions totaling $622,000 which were realized during the period
November 1, 1998 through September 30, 1999.
Net losses related to non-U.S. currency transations of $1,053,000 were
treated as an adjustment to ordinary income for federal income tax purposes.
The cost of portfolio securities for book and federal income tax purposes was
$7,009,645,000 at September 30, 1999.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $54,205,000 for management services
was incurred pursuant to an agreement with Capital Research and Management
Company (CRMC), with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement provides for monthly
fees, accrued daily, based on an annual rate of 0.80% of the first $1 billion
of average net assets; 0.70% of such assets in excess of $1 billion but not
exceeding $2 billion; 0.67% of such assets in excess of $2 billion but not
exceeding $3 billion; 0.65% of such assets in excess of $3 billion but not
exceeding $5 billion; 0.635% of such assets in excess of $5 billion but not
exceeding $8 billion; and 0.625% of such assets in excess of $8.0 billion but
not exceeding $13.0 billion; and 0.615% of such assets in excess of $13.0
billion.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may
expend up to 0.30% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
September 30, 1999, distribution expenses under the Plan were $20,592,000. As
of September 30, 1999, accrued and unpaid distribution expenses were
$1,566,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $3,295,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's shares. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying statement of operations.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $9,047,000.
DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may
elect to defer part or all of the fees earned for services as members of the
Board. Amounts deferred are not funded and are general unsecured liabilities
of the fund. As of September 30, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993), net of any
payments to Directors, were $266,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $3,691,038,000 and $4,064,493,000, respectively,
during the year ended September 30, 1999.
As of September 30, 1999, accumulated undistributed net realized gain on
investments was $157,168,000 and additional paid-in capital was $6,811,677,000.
The fund reclassified $53,923,000 from undistributed net realized gains to
additional paid-in capital during the year ended September 30, 1999, as a
result of permanent differences between book and tax. Additionally, the fund
reclassified $661,000 of currency losses from undistributed net realized gains
to undistributed net investment income for the year ended September 30, 1999.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $1,515,000 includes $104,000 that was paid by these
credits rather than in cash.
6. TRANSACTIONS WITH AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
are those in which the fund's holdings of an issuer represent 5% or more of the
outstanding voting securities of the issuer. A summary of the fund's
transactions in the securities of these issuers during the year ended September
30, 1999 is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Market Value
Beginning Ending Dividenof Affiliates
Company Shares Purchases Sales Shares Income at 9/30/99
(000) (000)
ABR Information Services(1) 1,865,000 - 1,865,000 - - -
ACTIVISION(1) 1,215,000 - 645,000 570,000 - -
Alarmguard Holdings(1) 360,000 - 360,000 - - -
Alliance Atlantis Communications(1,069,675 388,35 488,575 969,450 - -
Alvis(1) 4,831,250 - 4,831,250 - $6 -
American Dental Partners 443,000 - - 443,00 - $5,371
American Healthcorp 522,000 - - 522,00 - 3,197
Aminex(1) 3,250,000 1,000,00 250,00 4,000,00 - -
Anesta 550,000 190,00 - 740,00 - 6,799
Antena 3 de Television 1,500 - - 1,50 - 39,207
APCOA Parking 120,800 - - 120,80 200 9,015
Ascent Entertainment Group(1) 1,930,000 - 1,930,00 - - -
Atlantic Coast Airlines Holdings - 1,268,00 - 1,268,00 - 22,507
Avocet Mining 3,850,00 - - 3,850,00 - 1,458
Baltimore Technologies - 1,910,00 - 1,910,00 - 36,788
Benor Tankers 1,240,00 - - 1,240,00 - 3,998
Brightpoint(1) 2,732,50 - 2,732,50 - - -
BRL Hardy - 7,216,82 - 7,216,82 565 32,026
Cabre Exploration 1,033,40 65,60 - 1,099,00 - 11,120
Cadiz 2,122,00 110,00 - 2,232,00 - 21,343
Cairn Energy - 11,000,00 - 11,000,00 - 24,627
Cambrex 1,400,00 - - 1,400,00 168 37,012
Carbide/Graphite Group(1) 511,80 - 511,80 - - -
Castellum(1) 2,515,00 50,00 205,80 2,359,20 851 -
CB Richard Ellis Services(1) 1,042,80 - 321,00 721,80 - -
Celestial Seasonings 520,00 10,00 - 530,00 - 10,203
Cheesecake Factory 1,295,50 - 90,00 1,205,50 - 33,453
Chieftain International - 860,00 - 860,00 - 16,340
Chrysalis Group(1) 1,824,00 - 350,00 1,474,00 65 -
CIMA LABS 617,20 - - 617,20 - 4,320
Computer Motion 434,90 - - 434,90 - 4,349
Consolidated Products 1,250,00 312,50 - 1,562,50 - 15,234
Corporate Services Group(1) 13,092,09 - 3,563,67 9,528,42 - -
Cost Plus(1) 500,00 355,00 225,00 630,00 - -
Cymer(1) 1,500,00 182,70 500,00 1,182,70 - -
Cytyc(1) 933,70 - 933,70 - - -
Data Broadcasting(1) 2,130,00 - 2,130,00 - - -
Digene 800,00 - - 800,00 - 9,900
Documentum - 1,095,00 - 1,095,00 - 23,679
Edify(1) 1,055,00 - 1,055,00 - - -
Elec & Eltek International Holdin 11,500,00 41,405,00 - 52,905,00 178 9,603
Epicor Software(1) 1,625,00 195,00 1,820,00 - - -
Etec Systems 460,00 750,00 - 1,210,00 - 45,526
EUROBIKE 364,00 - - 364,00 203 4,191
Filofax Group(1) 1,956,00 - 1,956,00 - - -
Fisher & Paykel Industries - 6,550,00 - 6,550,00 171 20,653
Four Media(1) 610,00 30,00 640,00 - - -
Franklin Covey(1) 1,350,00 - 975,00 375,00 - -
Genetronics Biomedical - 1,650,00 - 1,650,00 - 5,065
Giordano International - 42,954,00 - 42,954,00 360 34,008
Great Eastern Shipping 14,728,00 - - 14,728,00 736 8,555
Gymboree(1) 1,435,60 - 1,435,60 - - -
Hardy Oil & Gas(1) 9,058,01 - 9,058,01 - - -
Hartmarx(1) 1,787,90 - 1,787,90 - - -
Highpoint Telecommunications - 1,322,00 - 1,322,00 - 6,943
HIT Entertainment 840,00 213,42 - 1,053,42 19 15,781
HNC Software 1,595,00 80,19 - 1,675,19 - 66,484
Hollis-Eden Pharmaceuticals - 555,55 - 555,55 - 7,396
Imax 1,558,00 - - 1,558,00 - 31,160
Independent Insurance Group 8,150,00 5,790,00 - 13,940,00 967 63,107
Inhale Therapeutic Systems - 1,101,64 - 1,101,64 - 33,462
InterCept Group(1) 500,00 50,00 122,50 427,50 - -
International Energy Group - 4,640,00 - 4,640,00 - 14,589
Intertape Polymer Group 1,500,00 - - 1,500,00 133 42,375
Jo-Ann Stores 1,050,00 - - 1,050,00 - 12,436
KCI Konecranes International(1) 911,70 - 210,00 701,70 605 -
KeraVision(1) 795,00 - 795,00 - - -
Kokusai Electric - 4,675,00 - 4,675,00 150 61,657
Landec(1) 690,00 - 690,00 - - -
Laurentian Bank of Canada(1) 987,10 34,70 125,00 896,80 516 -
Lazare Kaplan International(1) 550,00 - 550,00 - - -
Lions Gate Entertainment 2,766,66 540,00 1,422,53 1,884,13 - 3,659
Liquidation World 450,00 - - 450,00 - 2,453
Littelfuse 800,00 200,00 - 1,000,00 - 22,250
LoJack(1) 1,347,00 - 1,347,00 - - -
Material Sciences(1) 1,000,00 - 1,000,00 - - -
McWhorter Technologies(1) 706,00 - 706,00 - - -
MDC Communications(1) 433,33 537,60 - 970,93 - -
MemberWorks(1) 961,70 - 961,70 - - -
Micrel 1,275,00 1,332,00 185,00 2,422,00 - 105,054
MIF 682,90 - 682,90 - 12,028
Milltronics(1) 900,00 - 900,00 - - -
Minmet - 25,235,02 - 25,235,02 - 5,089
Momentum Business Applications - 302,00 - 302,00 - 2,718
Montana Group 27,900,00 - 13,950,00 13,950,00 445 14,998
Morton's Restaurant Group 415,00 - - 415,00 - 7,288
NCO Group(1) 995,30 136,00 306,30 825,00 - -
NeoPath 621,40 500,00 - 1,121,40 - 5,396
Newfield Exploration 1,350,00 850,00 - 2,200,00 - 72,463
Nice Systems 60,00 565,00 - 625,00 - 16,094
Nobel Biocare 940,00 651,90 - 1,591,90 239 23,665
Nordic American Tanker Shipping(1 733,50 - 733,50 - 370 -
Norsk Lotteridrift(1) 965,00 - - 965,00 78 -
Novus Petroleum 4,895,60 4,155,15 - 9,050,75 - 8,637
OM Gruppen(1) 4,329,30 - 1,622,90 2,706,40 2,024 -
OrthoLogic 1,620,00 - - 1,620,00 - 4,860
Paladin Resources 11,270,99 - - 11,270,99 - 4,453
Pharmacyclics 795,00 - - 795,00 - 32,495
Philippine Gold 4,953,70 - - 4,953,70 - 387
Piercing Pagoda 502,50 - - 502,50 - 6,533
PMC-Sierra 1,900,00 2,005,00 635,00 3,270,00 - 302,475
Power Integrations - 841,40 7,50 833,90 - 57,748
Puerto Rican Cement(1) 371,00 - 121,00 250,00 269 -
RadiSys - 500,00 - 500,00 - 19,625
Ramco Energy 1,597,00 - 300,00 1,297,00 - 7,260
Ranger Oil(1) 7,018,91 - 7,018,91 - - -
Rent-Way(1) 600,00 100,00 - 700,00 - -
Safety 1st(1) 460,00 - 460,00 - - -
Sapiens International - 1,015,00 - 1,015,00 - 11,292
Saville Systems(1) - 2,200,00 1,310,00 890,00 - -
SBS Broadcasting(1) 887,90 133,65 - 1,021,55 - -
Scottish Media Group(1) 3,280,00 - 97,50 3,182,50 1,310 -
SEQUUS Pharmaceuticals(1) 1,709,58 - 1,709,58 - - -
Sharper Image - 775,00 - 775,00 - 8,525
Simeon Wines - 3,900,00 - 3,900,00 - 9,032
SIPEX - 1,160,00 - 1,160,00 - 16,603
SkyTel Communications(1) 3,725,00 170,00 2,500,00 1,395,00 - -
Strategic Distribution(1) 1,890,00 - 1,890,00 - - -
Sunglass Hut International 1,200,00 2,000,00 - 3,200,00 - 33,800
Technical Chemicals and Products( 600,00 - 600,00 - - -
Too - 1,775,00 - 1,775,00 - 31,839
Trimble Navigation 1,250,00 200,00 - 1,450,00 - 15,497
Ugland International Holdings 7,342,00 - - 7,342,00 615 8,702
Unicap Electronics Industrial 3,388,54 14,648,96 - 18,037,50 - 12,880
UroCor 600,00 - - 600,00 - 2,456
Vanstar(1) 2,700,00 - 2,700,00 - - -
Vincam Group(1) 1,017,75 - 1,017,75 - - -
ViroPharma - 740,00 - 740,00 - 16,488
Vision-Sciences 484,50 500,00 - 984,50 - 1,477
Warrantech(1) 860,00 - 860,00 - - -
Whitehall Jewellers 510,00 - - 510,00 - 14,663
Wolford Group 324,00 - - 324,00 215 16,442
Wus Printed Circuit 4,056,00 18,027,75 - 22,083,75 - 31,120
Zonagen(1) 640,00 - 640,00 - - -
$11,458$1,823,381
1 Unaffiliated issuer at 9/30/1999
</TABLE>
<TABLE>
PER-SHARE DATA AND
RATIOS
<S> <C> <C> <C> <C> <C>
Year ended September 30
---------------- -------- -------- --------
1999 1998 1997 1996 1995
- ----------------------- ----------------------------------- ---------
Net Asset Value,
Beginning of Year $22.14 $30.72 $26.92 $26.11 $23.61
----------------------------------- ---------
Income (Loss) from Investment
Operations:
Net investment income .03 .07 .10 .17 .22
Net gains (losses) on securities
(both realized and unrealiz 8.78 (6.10) 6.17 3.32 3.79
----------------------------------- ---------
Total from investment
operations 8.81 (6.03) 6.27 3.49 4.01
----------------------------------- ---------
Less Distributions:
Dividends (from
net investment
income) (.09) (.05) (.12) (.23) (.16)
Distributions
(from capital
gains) (1.29) (2.50) (2.35) (2.45) (1.35)
----------------------------------- ---------
Total distributions (1.38) (2.55) (2.47) (2.68) (1.51)
----------------------------------- ---------
Net Asset Value, End
of Year $29.57 $22.14 $30.72 $26.92 $26.11
=================================== =========
Total Return(1) 41.42%(20.70)% 25.41% 15.21% 18.59%
Ratios/Supplemental
Data:
Net assets, end
of year (in
millions) $8,983 $7,102 $9,256 $6,607 $4,625
Ratio of expenses
to average net
assets 1.09% 1.06% 1.07% 1.09% 1.13%
Ratio of net income
to average net
assets .12% .27% .40% .68% .97%
Portfolio turnover
rate 50.06% 44.31% 42.21% 42.88% 45.63%
(1) Excludes maximum sales
charge of 5.75%.
</TABLE>
Independent Auditors' Report
To the Board of Directors and Shareholders of
SMALLCAP World Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of
SMALLCAP World Fund, Inc. (the "fund"), including the investment portfolio as
of September 30, 1999, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years in
the period then ended, and the per-share data and ratios for each of the five
years in the period then ended. These financial statements and per-share data
and ratios are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and per-share data and
ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
per-share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at September 30, 1999 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of SMALLCAP World Fund, Inc. at September 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the per-share data and ratios for
each of the five years in the period then ended, in conformity with generally
accepted accounting principles.
/s/Deloitte & Touche LLP
Los Angeles, California
October 29, 1999
1999 Tax Information (Unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Dividends and Distributions per Share
To Shareholders Payment Date From Net From Net Realized
Short-term Gains From Net Realized
Long-term Gains
of Record Investment Income
December 22, 1998 December 23, 1998 $.09 $0 $1.29
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 100% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2000 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
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) Foreign Custody Manager Agreement
(h) None
(i) Not applicable to this filing
(j) Consent of Independent Auditors
(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) None
(o) None
(p) Code of Ethics
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.
ITEM 25. INDEMNIFICATION (CONTINUED)
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
ITEM 25. INDEMNIFICATION (CONTINUED)
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, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt 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>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
#61 Point West Circle
Little Rock, AR 72211
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
Suite 1
Boulder, CO 80301-3508
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
J. Walter Best, Jr. Regional Vice President None
9013 Brentmeade Blvd.
Brentwood, TN 37027
Joseph T. Blair Senior Vice President None
148 E. Shore Ave.
Groton Long Point, CT 06340
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
Mick L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
B J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd.,
Suite 310
Greenwood Village, CO 80120
Christopher J. Cassin Senior Vice President None
19 North Grant Street
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
29 Landsdowne Drive
Larchmont, NY 10538
H Carlo Cordasco Assistant Vice President None
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 Director, Senior Vice None
President
Suite 216W
100 Merrick Road
Rockville Centre, NY 11570
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
Daniel B. Frick Regional Vice President None
845 Western Avenue
Glen Ellyn, IL 60137
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
150 Old Franklin School
Road
Pittstown, NJ 08867
H Mary Pat Harris Assistant Vice President None
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
Michael J. Johnston Director None
630 Fifth Avenue, 36th
Floor
New York, NY 10111
B Damien M. Jordan Vice President None
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
Mark J. Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - Institutional None
Investment Services
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - Institutional None
Investment Services
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
Gary Peace Regional Vice President None
291 Caanapali Drive
Napa, CA 94558
Samuel W. Perry Regional Vice President None
6133 Calle del Paisano
Scottsdale, AZ 85251
Fredric Phillips Senior 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
7455 80th Place, S.E.
Mercer Island, WA 98040
L John O. Post Senior Vice President None
S Richard P. Prior 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
414 Logan Ranch Road
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 Chairman of the Board and None
1000 RIDC Plaza, Co-Chief Executive Officer
Suite 212
Pittsburgh, PA 15238
William P. Simon Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
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
S Sherrie Snyder-Senft Assistant Vice President None
Anthony L. Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
Theresa Souiller Assistant Vice President None
2652 Excaliber Court
Virginia Beach, VA 23454
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
LW Eric H. Stern Director None
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
1004 Ditchley Road
Virginia Beach, VA 23451
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
31641 Saddletree Drive
Westlake Village, CA
91361
L 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
J. David Viale Regional Vice President None
7 Gladstone Lane
Laguna Niguel, CA 92677
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer and Controller
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George Wenzel Regional Vice President None
3406 Shakespeare Drive
Troy, MI 48084
H J. D. Wiedmaier Assistant Vice President None
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
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
2887 Player Lane
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 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 held in the
offices of its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92821.
Registrant's records covering shareholder accounts are maintained and kept by
its transfer agent, American Funds Service Company, 135 South State College
Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and
5300 Robin Hood Road, Norfolk, VA 23513.
Registrant's records covering portfolio transactions are maintained and kept
by its custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 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 certifies that it meets all of the
requirements for effectiveness of this
Registration Statement pursuant to rule 485(b) under the Securities Act of 1933
and 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 26th day of November, 1999.
SMALLCAP World Fund, Inc.
By: /s/ Gregory W. Wendt
Gregory W. Wendt, Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on November 26, 1999, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ Gordon Crawford Chairman of the Board
Gordon Grawford
(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
/s/ Gordon Crawford Chairman of the Board
Alan Greenway* 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)
Counsel reports that the amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of rule
485(b).
/s/ Michael J. Downer
Michael J. Downer, Esq.
January 15, 1999
Capital Research and Management Company
333 South Hope Street, 55/th/ Floor
Los Angeles, CA 90071
RE: DELEGATION OF RESPONSIBILITIES UNDER RULE 17F-5
Dear Mesdames/Sirs:
This Agreement confirms, and sets forth the responsibilities of the parties in
connection with, the appointment of Capital Research and Management Company
("CRMC") as the Foreign Custody Manager of SMALLCAP World Fund, Inc. (the
"Corporation"), in accordance with rule 17f-5, as amended, under the Investment
Company Act of 1940 (the "1940 Act"). CRMC hereby accepts such appointment as
of the date first written above. All capitalized terms used herein and not
otherwise defined have the meanings assigned in rule 17f-5.
The Corporation may, from time to time and in accordance with this Agreement,
place or maintain in the care of an Eligible Foreign Custodian, any of the
Corporation's investments (including non-U.S. currencies) for which the primary
market is outside the United States, and such cash and cash equivalents as are
reasonably necessary to effect the Corporation's transactions in such
investments, PROVIDED THAT:
(a) CRMC, as Foreign Custody Manager, determines that the Corporation's assets
will be subject to reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with the custodian, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation:
(1) the custodian's practices, procedures, and internal controls, including,
but not limited to, the physical protections available for certificated
securities (if applicable), the method of keeping custodial records, and the
security and data protection practices;
(2) whether the custodian has the requisite financial strength to provide
reasonable care for the Corporation's assets;
(3) the custodian's general reputation and standing and, in the case of a
securities depository, the depository's operating history and number of
participants; and
(4) whether the Corporation will have jurisdiction over and be able to
enforce judgments against the custodian, such as by virtue of the existence of
any offices of the custodian in the U.S. or the custodian's consent to service
of process in the U.S.
(b) Each of the Corporation's non-U.S. custody arrangements are governed by a
written contract (or, in the case of a Securities Depository, by such a
contract, by the rules or established practices or procedures of the
depository, or by any combination of the foregoing) that CRMC, as Foreign
Custody Manager, has determined will provide reasonable care for the
Corporation's assets based on the standards set forth in paragraph (a) above.
(1) Such contract shall include provisions that provide:
(i) for indemnification or insurance arrangements (or any combination of the
foregoing) such that the Corporation will be adequately protected against the
risk of loss of assets held in accordance with such contract;
(ii) that the Corporation's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the custodian or its
creditors except a claim of payment for their safe custody or administration
or, in the case of cash deposits, liens or rights in favor of creditors of the
custodian arising under bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership for the Corporation's assets will be freely
transferable without the payment of money or value other than for safe custody
or administration;
(iv) that adequate records will be maintained identifying the assets as
belonging to the Corporation or as being held by a third party for the benefit
of the Corporation;
(v) that the Corporation's independent public accountants will be given access
to those records or confirmation of the contents of those records; and
(vi) that the Corporation will receive periodic reports with respect to
the safekeeping of the Corporation's assets, including, but not limited to,
notification of any transfer to or from the Corporation's account or a third
party account containing assets held for the benefit of the Corporation.
(2) Such contract may contain, in lieu of any or all of the provisions
specified in subparagraph (1) above, such other provisions that CRMC, as
Foreign Custody Manager, determines will provide, in their entirety, the same
or a greater level of care and protection for Corporation assets as the
specified provisions, in their entirety.
(c) (1) CRMC, as Foreign Custody Manager, will have established a system to
monitor the appropriateness of maintaining the Corporation's assets with a
particular custodian under paragraph (a) above, and the contract governing the
Corporation's arrangements under paragraph (b) above.
(2) If an arrangement no longer meets the requirements of paragraph (c), the
Corporation must withdraw its assets from the custodian as soon as reasonably
practicable.
CRMC, as Foreign Custody Manager, will provide written reports notifying the
Corporation's Board of Directors of the placement of the Corporation's assets
with a particular custodian and of any material change in the Corporation's
arrangements, with the reports to be provided to the Board at such times as the
Board deems reasonable and appropriate based on the circumstances of the
Corporation's non-U.S. custody arrangements.
CRMC, in performing the responsibilities delegated to it as the Corporation's
Foreign Custody Manager, will exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of the Corporation's
assets would exercise.
This Agreement (and the appointment of CRMC as the Corporation's Foreign
Custody Manager) may be terminated at any time, without payment or any penalty,
by the Board of Directors of the Corporation or by vote of a majority (within
the meaning of the 1940 Act) of the outstanding voting securities of the
Corporation, on sixty (60) days' written notice to CRMC, or by CRMC on like
notice to the Corporation.
The obligations of the Corporation under this Agreement are not binding upon
any of the directors, officers, employees, agents or shareholders of the
Corporation individually, but bind only the Corporation's estate. CRMC agrees
to look solely to the assets of the Corporation for the satisfaction of any
liability in respect of the Corporation under this Agreement and will not seek
recourse against such directors, officers, employees, agents or shareholders,
or any of them, or any of their personal assets for such satisfaction.
Very truly yours,
SMALLCAP WORLD FUND, INC.
By: /s/ Chad L. Norton
Chad L. Norton, Secretary
ACCEPTED AND AGREED as of the date first written above:
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
By: /s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Executive Vice President
INDEPENDENT AUDITORS' CONSENT
SMALLCAP World Fund, Inc.:
We consent to (a) the use in this Post-Effective Amendment No. 16 to
Registration Statement No. 33-32785 on Form N-1A of our report dated October
29, 1999 appearing in the Financial Statements, which are included in Part B,
the Statement of Additional Information of such Registration Statement, (b) the
references to us under the heading "General Information" in such Statement of
Additional Information and (c) the reference to us under the heading "Financial
Highlights" in the Prospectus, which is a part of such Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
November 22, 1999
<PAGE>
THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of October 1, 1999)
All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.
Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.
REPORTING VIOLATIONS
If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.
You can report confidentially to:
- - Your manager or department head
- - CGC Audit Committee:
Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
John McLaughlin
Bob O'Donnell
Tom Rowland
John Smet
Mark Smith
Wally Stern
Antonio Vegezzi
Shaw Wagener
Kelly Webb
- - Mike Downer or any other lawyer in the CGC Legal Group
- - Don Wolfe of Deloitte & Touche LLP (CGC's auditors)
CONFLICTS OF INTEREST
A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.
REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.
GIFTS POLICY COMMITTEE
The Gifts Policy Committee oversees administration of and compliance with the
Policy.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.
While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties. All associates must read the Insider Trading Policy in the
Appendix of the CGC Handbook for Associates.
PERSONAL INVESTING POLICY
As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.
You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
ALL ASSOCIATES
Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.
Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception.
COVERED PERSONS
Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. You should take the time to review this memo as ongoing interpretations
of the policy will be explained therein.
Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of interest.
This involves checking with the CGC Legal Group based in LAO by calling [phone
number]. (You will generally receive a response within one business day.)
Unless a shorter period is specified, clearance is good for two trading days
(including the day you check). If you have not executed your transaction
within this period, you must again pre-clear your transaction.
Covered persons must promptly submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: gifts
or bequests of securities (although pre-clearance and reporting are required if
these securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options or futures on broad-based
indices. Covered persons must also report transactions made by family members
in their household and by those for which they are a trustee or custodian.
Reporting forms will be supplied at the appropriate times.
In addition, the following transactions must be reported but need not have been
pre-cleared: transactions in debt instruments rated "A" or above by at least
one national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).
BROKERAGE ACCOUNTS
Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc., [P.O. Box address]. ALL
DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT STRICTLY CONFIDENTIAL.
[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]
ANNUAL RECERTIFICATION
All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any associate who is in a
position to recommend the purchase or sale of securities by the fund or client
accounts must not recommend securities that s/he personally owns without FIRST
disclosing ownership. Typically, a complete disclosure of holdings (such as in
the annual disclosure of personal securities) satisfies this requirement.
BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND OR CLIENT ACCOUNT THAT HIS OR HER COMPANY MANAGES transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.
BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.
ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS - Investment personnel will
be required to disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. Reporting forms will be supplied
for this purpose.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company BEFORE
SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY TRADED COMPANIES.
PERSONAL INVESTING POLICY COMMITTEE
Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee.
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THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of January 1, 1998)
All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.
Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.
If you have trouble interpreting laws or regulations, ask CGC's Legal Group for
advice.
REPORTING VIOLATIONS
If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.
You can report confidentially to:
- - Your manager or department head
- - CGC Audit Committee:
Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
Bob O'Donnell
John Smet
Mark Smith
Wally Stern
Kelly Webb
Shaw Wagener
- - Mike Downer or any other lawyer in the CGC Legal Group
- - Don Wolfe of Deloitte & Touche LLP (CGC's auditors)
CONFLICTS OF INTEREST
A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.
REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.
GIFTS POLICY COMMITTEE
The Gifts Policy Committee oversees administration of and compliance with the
Policy. If you have any questions about the Policy, you should contact Ken
Gorvetzian, Kristine Nishiyama, or Michele Yang.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.
While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties. All associates must read the Insider Trading Policy in the
Appendix of the CGC Handbook for Associates.
PERSONAL INVESTING POLICY
As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.
You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
ALL ASSOCIATES
Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.
Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception by
contacting Cheryl Ruff or Michele Yang.
COVERED PERSONS
Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. A MEMO CONTAINING MORE IN-DEPTH DETAILS OF THE PERSONAL INVESTING
POLICY IS ATTACHED TO EACH QUARTERLY REPORTING FORM. You should take the time
to review this memo as ongoing interpretations of the policy will be explained
therein.
Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of interest.
This involves checking with the CGC Legal Group based in LAO by calling [phone
number]. (You will generally receive a response within one business day.)
Unless a shorter period is specified, clearance is good for two trading days
(including the day you check). If you have not executed your transaction
within this period, you must again pre-clear your transaction.
Covered persons must promptly submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: gifts
or bequests of securities (although pre-clearance and reporting are required if
these securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options or futures on broad-based
indices. Covered persons must also report transactions made by family members
in their household and by those for which they are a trustee or custodian.
Reporting forms will be supplied at the appropriate times.
In addition, the following transactions must be reported but need not have been
pre-cleared: transactions in debt instruments rated "A" or above by at least
one national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).
BROKERAGE ACCOUNTS
Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc., [P.O. Box address]. ALL
DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT STRICTLY CONFIDENTIAL.
[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]
ANNUAL RECERTIFICATION
All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any associate who is in a
position to recommend the purchase or sale of securities by the fund or client
accounts must not recommend securities that s/he personally owns without FIRST
disclosing ownership. Typically, a complete disclosure of holdings (such as in
the annual disclosure of personal securities) satisfies this requirement. If
you have questions, you should contact Michele Yang, Mike Downer, or Cheryl
Ruff.
BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND OR CLIENT ACCOUNT THAT HIS OR HER COMPANY MANAGES transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.
BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.
ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS - Investment personnel will
be required to disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. Reporting forms will be supplied
for this purpose.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company BEFORE
SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY TRADED COMPANIES.
PERSONAL INVESTING POLICY COMMITTEE
Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee (by
calling Cheryl Ruff or Michele Yang).