SMALLCAP WORLD FUND, INC.
Part B
Statement of Additional Information
March 15, 2000
(as amended September 26, 2000)
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 March 15,
2000. 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 StreetLos Angeles, California 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.
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<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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 25
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 28
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shareholder Account Services and Privileges . . . . . . . . . . . . 31
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 34
General Information . . . . . . . . . . . . . . . . . . . . . . . . 34
Class A Share Investment Results and Related Statistics . . . . . . 35
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Statements
</TABLE>
SMALLCAP World Fund - Page 1
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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.
Lower quality, lower rated 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, lower quality, lower rated bonds.
Certain risk factors relating to "lower quality, lower rated bonds" are
discussed below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower quality, lower
rated 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 lower quality, lower rated bonds.
PAYMENT EXPECTATIONS - Lower quality, lower rated 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
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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 lower quality, lower rated 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 stock may be similar to those of equity securities. Some
types of convertible preferred stock automatically convert into common stock.
Non-convertible preferred stock 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 stock generally move with changes in
interest rates and the issuer's credit quality, similar to the factors affecting
debt securities.
Bonds, convertible preferred stock, 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
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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 direct obligations of the U.S. Treasury (such as Treasury bills, notes
and bonds). 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 to variations in
market value due to fluctuations in interest rates, but, if held to maturity,
will be paid in full.
SMALLCAP World Fund - Page 5
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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 (e.g.,
short-term notes up to 9 months in maturity issued by corporations, governmental
bodies or bank/ corporation sponsored conduits (asset backed commercial paper)),
(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
savings bank obligations (e.g., bank notes and 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.
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 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
SMALLCAP World Fund - Page 6
<PAGE>
"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;
SMALLCAP World Fund - Page 7
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4. 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;
5. 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;
6. Lend any security or make any other loan if, as a result, more than 15%
of its total assets would be lent to third parties, but this limitation does
not apply to purchases of debt securities or to repurchase agreements;
7. 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;
8. Purchase securities on margin;
9. 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;
10. Purchase or sell puts, calls, straddles or spreads, or combinations
thereof; nor
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.
For purposes of investment restriction number 6, the fund does not currently
intend to lend portfolio securities.
The following investment policies of the fund may be changed by action of the
Board of Directors without shareholder approval: (i) 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; (ii) the fund may not
invest in securities of other investment companies, except as permitted by
the 1940 Act, as amended; and (iii) the fund may not invest more than 15% of
the value of its net assets in illiquid securities.
SMALLCAP World Fund - Page 8
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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 has two classes of shares - Class A and Class B. The shares of each
class represent an interest in the same investment portfolio. Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to the particular class as
approved by the Board of Directors. Class A and Class B shareholders have
exclusive voting rights with respect to the rule 12b-1 Plans adopted in
connection with the distribution of shares and on other matters in which the
interests of one class are different from interests in another class. Shares of
all classes of the fund vote together on matters that affect all classes in
substantially the same manner. Each class votes as a class on matters that
affect that class alone.
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
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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 92067 former Vice Chairman of the Board;
Age: 65 Knight Ridder, Inc., former Chairman
and Publisher, The Miami Herald
----------------
------------------------------------------------------------------------------------------------------------------------
H. Frederick Christie Director Private Investor. Former President and $21,250/3/
P.O. Box 144 Chief Executive Officer, The Mission
Palos Verdes Estates, CA Group (non-utility holding company,
90274 subsidiary of Southern California
Age: 66 Edison Company)
------------------------------------------------------------------------------------------------------------------------
+ Gordon Crawford Chairman of the Senior Vice President and Director, None/4/
333 South Hope Street Board Capital Research and Management Company
Los Angeles, CA 90071
Age: 53
------------------------------------------------------------------------------------------------------------------------
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, American None/4/
17309 Club Hill Drive Funds Distributors, Inc.
Dallas, TX 75248
Age: 69
------------------------------------------------------------------------------------------------------------------------
Leonade D. Jones Director Chief Financial Officer and Secretary, $21,000/3/
1536 Los Montes Drive VentureThink LLC; former Treasurer, The
Burlingame, CA 94010 Washington Post Company
Age: 52
------------------------------------------------------------------------------------------------------------------------
William H. Kling Director President, Minnesota Public Radio; $19,500/3/
2619 Lake of the Isles Parkway President, Greenspring Co.; former
East President, American Public Radio (now
Minneapolis, MN 55408 Public Radio International)
Age: 57
------------------------------------------------------------------------------------------------------------------------
Norman R. Weldon Director Managing Director, Partisan Management $ 19,500
7026 Timbers Drive Group, Inc.; former Chairman of the
Evergreen, CO 80439 Board, Novoste Corporation; Director,
Age: 65 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
ALL FUNDS MANAGED BY TOTAL NUMBER
CAPITAL RESEARCH AND OF FUND
MANAGEMENT COMPANY BOARDS
OR ITS AFFILIATES/2/ FOR THE ON WHICH
YEAR ENDED DIRECTOR
NAME, ADDRESS AND AGE 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 $211,600/3/ 18
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 66
------------------------------------------------------------------------------
+ Gordon Crawford None/4/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 53
------------------------------------------------------------------------------
Alan Greenway $ 94,500 4
7413 Fairway Road
La Jolla, CA 92037
Age: 72
------------------------------------------------------------------------------
+ Graham Holloway None/4/ 2
17309 Club Hill Drive
Dallas, TX 75248
Age: 69
------------------------------------------------------------------------------
Leonade D. Jones 138,500/3/ 5
1536 Los Montes Drive
Burlingame, CA 94010
Age: 52
------------------------------------------------------------------------------
William H. Kling $95,250/3/ 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 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) during the 1999
fiscal year 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.
4 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 53 Chairman of the Senior Vice President and
(see above) Board Director, Capital Research
and Management Company
-------------------------------------------------------------------------------
Gregory W. Wendt 37 President Senior Vice President,
P.O. Box 7650 Capital Research Company*
San Francisco, CA
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
-------------------------------------------------------------------------------
David A. Pritchett 33 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>
* Company affiliated with Capital Research and Management Company.
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 February 15, 2000 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.
SMALLCAP World Fund - Page 13
<PAGE>
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains research
facilities in the U.S. and abroad (Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo), with a staff
of professionals, many of whom have a number of years of investment experience.
The Investment Adviser is located at 333 South Hope Street, Los Angeles, CA
90071, and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's 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.
The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts 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 Plans 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
SMALLCAP World Fund - Page 14
<PAGE>
exceeding $3 billion, 0.65% on average net assets in excess of $3 billion but
not exceeding $5 billion, 0.635% on average net assets in excess of $5 billion
but not exceeding $8 billion, 0.625% on average net assets in excess of $8
billion but not exceeding $13 billion, and 0.615% on overage net assets in
excess of $13 billion.
The Investment Adviser has agreed that in the event the expenses of Class A
shares of the fund (with the exclusion of interest, taxes, brokerage costs,
extraordinary expenses such as litigation and acquisitions or other expenses
excludable under applicable state securities laws or regulations) for any fiscal
year ending on a date on which the Agreement is in effect, exceed the expense
limitations, if any, applicable to the fund pursuant to state securities laws or
any regulations thereunder, it will reduce its fee by the extent of such excess
and, if required pursuant to any such laws or any regulations thereunder, will
reimburse the fund in the amount of such excess. To the extent the fund's
management fee must be waived due to Class A share expense ratios exceeding the
above limit, management fees will be reduced similarly for all classes of shares
of the fund or other Class A fees will be waived in lieu of management fees.
For the fiscal years ended September 30, 1999, 1998, and 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 Plans of
Distribution (the Plans), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plans (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 Class A shares during the 1999 fiscal year
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 on sales of Class A shares 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 Plans (together with the
Principal Underwriting Agreement) have 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 Plans or the Principal Underwriting Agreement. 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 Plans due to
present or past affiliations with the Investment Adviser and related companies.
Potential benefits of the Plans to the fund include 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 Plans. Plan expenses are
reviewed quarterly and the Plans must be renewed annually by the Board of
Directors.
SMALLCAP World Fund - Page 15
<PAGE>
Under the Plans the fund may expend up to 0.30% of its net assets annually for
Class A shares and up to 1.00% of its net assets annually for Class B shares 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. For Class A shares these include up to
0.25% in service fees for qualified dealers and dealer commissions and
wholesaler compensation on sales of shares exceeding $1 million purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, rollover IRA accounts as described in "Individual
Retirement Account (IRA) Rollovers" below, and retirement plans, endowments or
foundations with $50 million or more in assets). For Class B shares these
include 0.25% in service fees for qualified dealers and 0.75% in payments to the
Principal Underwriter for financing commissions paid to qualified dealers
selling Class B shares.
Commissions on sales of Class A 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 Class A 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, these commissions are not recoverable.
During the 1999 fiscal year, the fund paid or accrued $20,592,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares. Accrued and unpaid distribution expenses were $1,566,000.
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.
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 has elected to be treated as a regulated investment company
under Subchapter M of the Code. A regulated investment company qualifying under
Subchapter M of
SMALLCAP World Fund - Page 16
<PAGE>
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 losses) and generally is not subject to
federal income tax to the extent that it distributes annually 100% of 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 the 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.
SMALLCAP World Fund - Page 17
<PAGE>
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 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
SMALLCAP World Fund - Page 18
<PAGE>
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 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.
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 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
SMALLCAP World Fund - Page 19
<PAGE>
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.
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.
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 "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase Minimums").
-------------------------------------------------------------------------------
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 Call 800/421-0180 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>
PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--
SMALLCAP World Fund - Page 21
<PAGE>
Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase
minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived for shareholders of
other funds in The American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for additional investments
(except as noted above).
PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.
FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):
<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . 40 240
American High-Income Trust/SM/ . . . . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . . . . . 22 222
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . 49 N/A
___________
*Available only in certain states.
</TABLE>
SMALLCAP World Fund - Page 22
<PAGE>
SALES CHARGES
CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of 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 "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 $25,000 . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
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 $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
-----------------------------------------------------------------------------
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) 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, and Individual
Retirement Account rollovers from retirement plan assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by
SMALLCAP World Fund - Page 23
<PAGE>
investors in certain qualified fee-based programs, and 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 CDSC. 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, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:
(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees 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.
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. 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 the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.
DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (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 defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective 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.
SMALLCAP World Fund - Page 24
<PAGE>
CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.
Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.
CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the event
the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; HOWEVER, SUCH AN EXCHANGE COULD CONSTITUTE A TAXABLE EVENT FOR
YOU, AND ABSENT SUCH AN EXCHANGE, CLASS B SHARES WOULD CONTINUE TO BE SUBJECT TO
HIGHER EXPENSES FOR LONGER THAN EIGHT YEARS.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A 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 25
<PAGE>
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 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 use 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 below), as well as purchases of Class B shares, and
any individual investments in American Legacy variable annuities and
variable life insurance policies (American Legacy, American Legacy II and
American Legacy III 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 and
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. There will be no retroactive adjustments in sales charges
on investments made during the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:
SMALLCAP World Fund - Page 26
<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 Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in 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 Class A and B 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.
CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:
(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).
SMALLCAP World Fund - Page 27
<PAGE>
(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.
(3) Tax-free returns of excess contributions to IRAs.
(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.
CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:
(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic Withdrawals" below) may withdraw up to 12% of the net asset value of
their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.
The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. This privilege may be revised
or terminated at any time.
(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.
(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS
Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets from a plan that offered the American Funds, the
assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule applicable to
investments of $1 million or more (see "Dealer Commissions on Class A Shares"
above).
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
SMALLCAP World Fund - Page 28
<PAGE>
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 time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper do not always indicate 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 as of approximately 4:00 p.m. New
York time, which is the normal close of trading on the New York Stock Exchange
each day the Exchange is open. If, for example, the Exchange closes at 1:00
p.m., the fund's share price would still be determined as of 4:00 p.m. New York
time. 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
SMALLCAP World Fund - Page 29
<PAGE>
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.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. 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.
SMALLCAP World Fund - Page 30
<PAGE>
MONEY MARKET FUNDS
- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- You may establish check writing privileges (use the money market funds
application).
- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.
- Check writing is not available for Class B shares of The Cash
Management Trust.
If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.
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 of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). 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.
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. For
example, if the date you specified falls on a weekend or holiday, your money
will be invested on the next business day. If your bank account cannot be
debited due to insufficient funds, a stop-payment or the closing of the account,
the
SMALLCAP World Fund - Page 31
<PAGE>
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 of the same class at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, 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") of the same share class 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 only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. 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
SMALLCAP World Fund - Page 32
<PAGE>
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 of the same class 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.
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 - Purchase Minimums" and "Purchase of Shares -
Fund Numbers"), personal identification number (generally 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.
SMALLCAP World Fund - Page 33
<PAGE>
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.
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 non-U.S. 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 1999 fiscal year.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, serves as the fund's independent auditors
providing audit services,
SMALLCAP World Fund - Page 34
<PAGE>
preparation of tax returns and review of certain documents to be filed with the
Securities and Exchange Commission. The financial statements included in this
Statement of Additional Information from the Annual Report have been so included
in reliance on the report of Deloitte & Touche LLP, independent auditors, given
on the authority of said firm as experts in accounting and auditing. The
selection of the fund's independent auditors is reviewed and determined annually
by the Board of Directors.
PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on
September 30. Shareholders are provided updated prospectuses annually. In
addition, 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 prospectuses and
shareholder reports. To receive additional copies of a prospectus or report,
shareholders should contact the Transfer Agent.
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 FOR CLASS A SHARES -- 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>
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was -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 35
<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 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.
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.
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. From time to time, the fund may calculate
investment results for Class B shares.
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 36
<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).
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.
SMALLCAP World Fund - Page 37
<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."
SMALLCAP World Fund - Page 38
<PAGE>
"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."
"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."
SMALLCAP World Fund - Page 39
<PAGE>
"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.
