SMALLCAP World Fund, Inc.

[logo - American Funds®]

Prospectus Supplement

April 1, 2007

For the following funds with prospectuses dated

May 1, 2006 - March 1, 2007

AMCAP Fund,^® Inc.

American Balanced Fund,^® Inc.

American High-Income Municipal Bond Fund,^® Inc.

American High-Income Trust^SM

American Mutual Fund,^®Inc.

The Bond Fund of America,^SM Inc.

Capital Income Builder,^® Inc.

Capital World Bond Fund,^® Inc.

Capital World Growth and Income Fund,^SM Inc.

The Cash Management Trust of America^®

EuroPacific Growth Fund^®

Fundamental Investors,^SM 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^SM

The New Economy Fund^®

New Perspective Fund,^® Inc.

New World Fund,^SM Inc.

Short-Term Bond Fund of America,^SM 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^SM

U.S. Government Securities Fund^SM

The U.S. Treasury Money Fund of America^SM

Washington Mutual Investors Fund,^SM Inc.

Keep this Supplement with your Prospectus and/or Retirement Plan Prospectus.

The following changes are effective beginning April 1, 2007:

1. The second paragraph after the "Purchase minimums and maximums" table in the "Purchase and exchange of shares" section of the Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds or tax-exempt funds):

If you have significant American Funds holdings, you may not be eligible to invest in Class B or C shares (or their corresponding 529 share classes). Specifically, you may not purchase Class B or 529-B shares if you are eligible to purchase Class A or 529-A shares at the $100,000 or higher sales charge discount rate, and you may not purchase Class C or 529-C shares if you are eligible to purchase Class A or 529-A shares at the $1 million or more sales charge discount rate (i.e., at net asset value). See "Sales charge reductions and waivers" below and the statement of additional information for more information regarding sales charge discounts.

2. The paragraph immediately after the "Purchase minimums and maximums" table in the "Purchase and exchange of shares" section of the Prospectus for The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia is amended in its entirety to read as follows:

If you have significant American Funds holdings, you may not be eligible to invest in Class B or C shares. Specifically, you may not purchase Class B shares if you are eligible to purchase Class A shares at the $100,000 or higher sales charge discount rate, and you may not purchase Class C shares if you are eligible to purchase Class A shares at the $1 million or more sales charge discount rate (i.e., at net asset value). See "Sales charge reductions and waivers" below and the statement of additional information for more information regarding sales charge discounts.

3. The paragraph immediately after the "Purchase minimums and maximums" table in the "Purchase and exchange of shares" section of the Prospectus for The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund, Limited Term Tax-Exempt Bond Fund of America and The Tax-Exempt Fund of California is amended in its entirety to read as follows:

If you have significant American Funds holdings, you may not be eligible to invest in Class B or C shares of The Tax-Exempt Bond Fund of America, American High-Income Municipal Bond Fund and The Tax-Exempt Fund of California. Specifically, you may not purchase Class B shares if you are eligible to purchase Class A shares at the $100,000 or higher sales charge discount rate, and you may not purchase Class C shares if you are eligible to purchase Class A shares at the $1 million or more sales charge discount rate (i.e., at net asset value). See "Sales charge reductions and waivers" below and the statement of additional information for more information regarding sales charge discounts.

4. The subsection entitled "Moving between share classes" in the "Purchase and exchange of shares" section of the Prospectus is amended in its entirety to read as follows:

Moving between share classes and accounts

Please see the statement of additional information for details and limitations on moving investments in certain share classes to different share classes, and on moving investments held in certain accounts to different accounts.

In addition, this amended subsection is added to (1) the "Purchase, exchange and sale of shares" section of the Retirement Plan Prospectus and (2) the "Purchase and exchange of shares" section of the Prospectus for American Funds money market funds.

5. The paragraph immediately under the heading "Reducing your Class A initial sales charge" in the "Sales charge reductions and waivers" section of the Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds):

Consistent with the policies described in this prospectus, you and your "immediate family" (your spouse -- or equivalent if recognized under local law -- and your children under the age of 21) may combine all of your American Funds investments to reduce your Class A sales charge. However, for this purpose, investments representing direct purchases of American Funds money market funds are excluded. Following are different ways that you may qualify for a reduced Class A sales charge:

6. The paragraph immediately under the heading "Concurrent purchases" in the "Sales charge reductions and waivers" section of the Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds):

You may combine simultaneous purchases (including, upon your request, purchases for gifts) of any class of shares of two or more American Funds to qualify for a reduced Class A sales charge.

7. The second paragraph after the heading "Rights of accumulation" in the "Sales charge reductions and waivers" section of the Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds):

If you make a gift of shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds accounts.

8. The paragraph immediately under the heading "Rights of accumulation" in the "Sales charge reductions" section of the Retirement Plan Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds):

You may take into account your accumulated holdings in all share classes of the American Funds to determine the initial sales charge you pay on each purchase of Class A shares. Subject to your investment dealer’s or recordkeeper’s capabilities, your accumulated holdings will be calculated as the higher of (a) the current value of your existing holdings or (b) the amount you invested (excluding capital appreciation) less any withdrawals. Please see the statement of additional information for details. You should retain any records necessary to substantiate the historical amounts you have invested.

9. The paragraph immediately under the heading "Statement of intention" in the "Sales charge reductions and waivers" section of the Prospectus is amended in its entirety to read as follows (not applicable to American Funds money market funds):

You may reduce your Class A sales charge by establishing a statement of intention. A statement of intention allows you to combine all purchases of all share classes of American Funds non-money market funds you intend to make over a 13-month period to determine the applicable sales charge; however, purchases made under a right of reinvestment, appreciation of your holdings, and reinvested dividends and capital gains do not count as purchases made during the statement period. The market value of your existing holdings eligible to be aggregated as of the day immediately before the start of the statement period may be credited toward satisfying the statement. A portion of your account may be held in escrow to cover additional Class A sales charges that may be due if your total purchases over the statement period do not qualify you for the applicable sales charge reduction. [Prospectus for American Funds non-tax-exempt funds adds: Employer-sponsored retirement plans may be restricted from establishing statements of intention. See "Sales charges" above for more information.]

10. The paragraph immediately above the heading "Transactions by telephone, fax or the Internet" in the "How to sell shares" section of the Prospectus, as well as the paragraph immediately above the heading "Valuing shares" in the "Purchase, exchange and sale of shares" section of the Retirement Plan Prospectus, are amended in their entirety to read as follows:

If you notify American Funds Service Company, you may reinvest proceeds from a redemption, dividend payment or capital gain distribution without a sales charge in the same fund or other American Funds provided the reinvestment occurs within 90 days after the date of the redemption or distribution and is made into the same account from which you redeemed the shares or received the distribution. If the account has been closed, reinvestment can be made without a sales charge if the new receiving account has the same registration as the closed account. [Prospectus includes the following: Proceeds from a Class B share redemption made during the contingent deferred sales charge period will be reinvested in Class A shares. Proceeds from any other type of redemption and all dividend payments and capital gain distributions will be reinvested in the same share class from which the original redemption or distribution was made. Any contingent deferred sales charge on Class A or C shares will be credited to your account.] [Retirement Plan Prospectus includes the following: Proceeds will be reinvested in the same share class from which the original redemption or distribution was made.] Redemption proceeds of Class A shares representing direct purchases in American Funds money market funds that are reinvested in non-money market American Funds will be subject to a sales charge. Proceeds will be reinvested at the next calculated net asset value after your request is received and accepted by American Funds Service Company. Redemption proceeds from a systematic withdrawal plan are not eligible for reinvestment without a sales charge. You may not reinvest proceeds in the American Funds as described in this paragraph if such proceeds are subject to a purchase block as described under "Frequent trading of fund shares. " This paragraph does not apply to rollover investments as described under "Rollovers from retirement plans to IRAs. "

MFGEBS-007-0307 Litho in USA CGD/MW/9767-S9100

THE FUND PROVIDES SPANISH TRANSLATION IN CONNECTION WITH THE
PUBLIC OFFERING AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR
AND ACCURATE ENGLISH TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS
FOR THE FUND.

/s/ CHAD L. NORTON
    CHAD L. NORTON
    SECRETARY

[logo - American Funds®]

Prospectus Supplement

April 1, 2007

For the following funds with prospectuses dated

May 1, 2006 - March 1, 2007

AMCAP Fund,^® Inc.

American Balanced Fund,^® Inc.

American High-Income Municipal Bond Fund,^® Inc.

American High-Income Trust^SM

American Mutual Fund,^®Inc.

The Bond Fund of America,^SM Inc.

Capital Income Builder,^® Inc.

Capital World Bond Fund,^® Inc.

Capital World Growth and Income Fund,^SM Inc.

The Cash Management Trust of America^®

EuroPacific Growth Fund^®

Fundamental Investors,^SM 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^SM

The New Economy Fund^®

New Perspective Fund,^® Inc.

New World Fund,^SM Inc.

Short-Term Bond Fund of America,^SM 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^SM

U.S. Government Securities Fund^SM

The U.S. Treasury Money Fund of America^SM

Washington Mutual Investors Fund,^SM Inc.

Keep this Supplement with your Prospectus and/or Retirement Plan Prospectus.

The following changes are effective beginning April 1, 2007:

4. The subsection entitled "Moving between share classes" in the "Purchase and exchange of shares" section of the Prospectus is amended in its entirety to read as follows:

Moving between share classes and accounts

You may combine simultaneous purchases (including, upon your request, purchases for gifts) of any class of shares of two or more American Funds to qualify for a reduced Class A sales charge.

If you make a gift of shares, upon your request, you may purchase the shares at the sales charge discount allowed under rights of accumulation of all of your American Funds accounts.

MFGEBS-007-0307 Litho in USA CGD/MW/9767-S9100

<PAGE>

SMALLCAP WORLD FUND, INC.

Part B
Statement of Additional Information

December 1, 2006
(as supplemented April 1, 2007)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of SMALLCAP World Fund (the
"fund" or "SCWF") dated December 1, 2006. You may obtain a prospectus from your
financial adviser or by writing to the fund at the following address:

SMALLCAP World Fund, Inc.
Attention: Secretary
333 South Hope Street
Los 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. They should contact their employers for details.

TABLE OF CONTENTS

Item Page no.
---- --------

Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fundamental policies and investment restrictions. . . . . . . . . . 8
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 10
Execution of portfolio transactions . . . . . . . . . . . . . . . . 28
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 28
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 31
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 37
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 42
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Shareholder account services and privileges . . . . . . . . . . . . 47
General information . . . . . . . . . . . . . . . . . . . . . . . . 49
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Financial statements

SMALLCAP World Fund -- Page 1
<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, 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

. Normally, the fund invests at least 80% of its assets in equity securities
of companies with small market capitalizations. The investment adviser
currently defines "small market capitalization" companies to be companies
with market capitalizations of $3.5 billion or less. The investment adviser
has periodically reevaluated and adjusted this definition and may continue
to do so in the future.

INVESTING OUTSIDE THE UNITED STATES

. The fund may invest a significant portion of its assets in companies
located outside the United States, including companies located in
developing countries. (See "Investing in various countries" below for more
information.)

DEBT SECURITIES

. The fund may invest up to 10% of its assets in straight debt securities
rated Baa or below by Moody's Investors Service ("Moody's") and BBB or
below by Standard & Poor's Corporation ("S&P"), or unrated but determined
to be of equivalent quality.

* * * * * *

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. Equity securities held by the fund typically consist of common stocks.
The prices of equity securities fluctuate based on, among other things, events
specific to their issuers and market, economic and other conditions. The prices
of these securities can also be adversely affected by the outcome of financial
contracts (such as derivatives) held by third parties relating to various assets
or indices.

There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity securities.

SMALLCAP World Fund -- Page 2
<PAGE>

The growth-oriented, equity-type securities generally purchased by the fund may
involve large price swings and potential for loss, particularly in the case of
smaller capitalization stocks.

INVESTING IN SMALLER CAPITALIZATION STOCKS -- Investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in stocks of larger, more established companies. Transaction
costs in stocks of smaller capitalization companies may be higher than those of
larger capitalization companies. Because the fund emphasizes the stocks of
issuers with smaller market capitalizations (by U.S. standards), it can be
expected to have more difficulty obtaining information about the issuers or
valuing or disposing of its securities than it would if it were to concentrate
on more widely held stocks. The fund determines relative market capitalizations
using U.S. standards. 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 that 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,
limited markets, and/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.

INVESTING IN PRIVATE COMPANIES -- The fund may invest in companies that have not
publicly offered their securities. Investing in private companies can involve
greater risks than those associated with investing in publicly traded companies.
For example, the securities of a private company may be subject to the risk that
market conditions, developments within the company, investor perception, or
regulatory decisions may delay or prevent the company from ultimately offering
its securities to the public. Furthermore, these investments are generally
considered to be illiquid until a company's public offering and are often
subject to additional contractual restrictions on resale that would prevent the
fund from selling its company shares for a period of time following the public
offering.

Investments in private companies can offer the fund significant growth
opportunities at attractive prices. However these investments can pose greater
risk, and, consequently, there is no guarantee that positive results can be
achieved in the future.

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or 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 and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall.

Lower rated debt securities, rated Ba or below by Moody's and/or BB or below by
S&P or unrated but determined to be of equivalent quality, are described by the
rating agencies as speculative

SMALLCAP World Fund -- Page 3
<PAGE>

and involve greater risk of default or price changes due to changes in the
issuer's creditworthiness than higher rated debt securities, 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, and to determine
the value of, lower rated debt securities.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or
substantial period of rising interest rates, issuers that are highly
leveraged may experience increased financial stress that would adversely
affect their ability to meet projected business goals, to obtain additional
financing and to service their principal and interest payment obligations.
Periods of economic change and uncertainty also can be expected to result
in increased volatility of market prices and yields of certain debt
securities. The prices of these securities can be adversely affected by the
outcome of financial contracts (such as derivatives) held by third parties
relating to various assets or indices.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of bankruptcy proceedings, the fund may incur
losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION -- There may be little trading in the secondary
market for particular debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

The investment adviser attempts to reduce the risks described above through
diversification of the fund's 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. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stocks automatically convert into common
stocks and some may be subject to redemption at the option of the issuer at a
predetermined price. The prices and yields of nonconvertible preferred stocks
general move with changes in interest rates and the issuer's credit quality,
similar to the factors affecting debt securities. These securities may be
treated as debt for fund investment limit purposes.

Convertible bonds, convertible preferred stocks and other securities may
sometimes be converted, or may automatically convert, into common stocks or
other securities at a stated conversion ratio. These securities, prior to
conversion, may pay a fixed rate of interest or a dividend. Because convertible
securities have both debt and equity characteristics, their value

SMALLCAP World Fund -- Page 4
<PAGE>

varies in response to many factors, including the value of the underlying
assets, general market and economic conditions, and 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 United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends.

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries, reflecting the greater uncertainties of investing in less established
markets and economies. In particular, developing countries may have less stable
governments; may present the risks of nationalization of businesses,
restrictions on foreign ownership and prohibitions on the repatriation of
assets; and may have less protection of property rights than more developed
countries. The economies of developing countries may be reliant on only a few
industries, may be highly vulnerable to changes in local or global trade
conditions and may suffer from high and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may
be unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of holdings difficult or impossible at times.

Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities may only be sold pursuant to an
exemption from registration under the Securities Act of 1933 (the "1933 Act"),
or in a registered public offering. Where registration is required, the holder
of a registered security may be obligated to pay all or part of the registration
expense and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. Difficulty in selling such securities may
result in a loss to the fund or cause it to incur additional administrative
costs.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures adopted by the fund's board of directors, taking into account
factors such as the frequency and volume of trading, the commitment of dealers
to make markets and the availability of qualified investors, all of which can
change from time to time. The fund may incur certain additional costs in
disposing of illiquid securities.

SMALLCAP World Fund -- Page 5
<PAGE>

CURRENCY TRANSACTIONS -- The fund may 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 that may 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
that 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 also may affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the investment adviser. 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 of the collateral by the fund
may be delayed or limited.

INVESTMENT COMPANIES -- The fund may invest up to 5% of its total assets in
shares of any one investment company, but may not acquire more than 3% of the
outstanding voting stock of any one investment company. In the aggregate, the
fund may invest up to 10% of its total assets in securities issued by investment
companies. In addition, all funds managed by the investment adviser may not, in
the aggregate, acquire more than 10% of the total outstanding voting stock of
any one registered 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 OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:

U.S. TREASURY SECURITIES -- U.S. Treasury securities 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 6
<PAGE>

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter; some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

FORWARD COMMITMENT, WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS -- 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 from 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.

The fund will not use these transactions for the purpose of leveraging and will
segregate liquid assets that 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 in connection with 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 if it were 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. After a transaction is entered into,
the fund may still dispose of or renegotiate the transaction. Additionally,
prior to receiving delivery of securities as part of a transaction, the fund may
sell such securities.

SMALLCAP World Fund -- Page 7
<PAGE>

The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement involves the sale of a security by
a fund and its agreement to repurchase the security at a specified time and
price. A "roll" transaction involves 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 risk of price and yield
fluctuations during the time of the commitment. The fund will segregate liquid
assets that 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 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.

A fund's portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. The fund's portfolio turnover rates for
the fiscal years ended September 30, 2006 and 2005 were 45% and 45%,
respectively. See "Financial highlights" in the prospectus for the fund's annual
portfolio turnover rate for each of the last five fiscal years.

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, as amended (the "1940 Act"), as the vote of the
lesser of (a) 67% or more of the outstanding voting securities present at a
shareholder meeting, if the holders of more than 50% of the outstanding voting
securities are present in person or by proxy, or (b) 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 8
<PAGE>

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;
nor

10. Purchase or sell puts, calls, straddles or spreads, or combinations
thereof.

For purposes of investment restriction number 6, the fund does not currently
intend to lend portfolio securities.

NONFUNDAMENTAL POLICIES -- The following policies may be changed without
shareholder approval:

1. The fund may 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;

2. The fund may not invest in securities of other investment companies, except
as permitted by the 1940 Act;

3. The fund may not invest more than 15% of the value of its net assets in
illiquid securities.

4. The fund may not acquire securities of open-end investment companies or
unit investment trusts registered under the Investment Company Act of 1940 in
reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the Investment Company Act of
1940.

SMALLCAP World Fund -- Page 9
<PAGE>

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

"INDEPENDENT" DIRECTORS/1/

NAME, AGE AND NUMBER OF
POSITION WITH FUND PORTFOLIOS/3/
(YEAR FIRST ELECTED AS A PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
DIRECTOR/2/) DURING PAST FIVE YEARS BY DIRECTOR BY DIRECTOR
-------------------------------------------------------------------------------------------------------------

Joseph C. Berenato, 60 Chairman of the Board and 6 Ducommun Incorporated
Director (2000) CEO, Ducommun Incorporated
(aerospace components
manufacturer)
-------------------------------------------------------------------------------------------------------------
Richard G. Capen, Jr., 72 Corporate director and 15 Carnival Corporation
Director (1993) author; former U.S.
Ambassador to Spain; former
Vice Chairman,
Knight-Ridder, Inc.
(communications company);
former Chairman and
Publisher, The Miami Herald
----------------
-------------------------------------------------------------------------------------------------------------
H. Frederick Christie, 73 Private investor; former 21 Ducommun Incorporated;
Director (1990) President and CEO, The IHOP Corporation;
Mission Group (non-utility Southwest Water Company
holding company, subsidiary
of Southern California
Edison Company)
-------------------------------------------------------------------------------------------------------------
John G. Freund, 53 Founder and Managing 2 XenoPort, Inc.
Director (2000) Director, Skyline Ventures
(venture capital investor in
health care companies);
former Managing Director -
Alternative Asset Management
Group, Chancellor Capital
Management
-------------------------------------------------------------------------------------------------------------
R. Clark Hooper, 60 Private investor; former 18 JPMorgan Value Opportunities
Director (2006) President, Dumbarton Group Fund
LLC (consulting); former
Executive Vice President -
Policy and Oversight, NASD
-------------------------------------------------------------------------------------------------------------
Leonade D. Jones, 59 Co-founder, VentureThink LLC 6 None
Director (1995) (developed and managed
e-commerce businesses) and
Versura Inc. (education loan
exchange); former Treasurer,
The Washington Post Company
-------------------------------------------------------------------------------------------------------------
William H. Kling,/5/ 64 President, American Public 8 Irwin Financial Corporation
Chairman of the Board Media Group
(Independent and
Non-Executive) (1990)
-------------------------------------------------------------------------------------------------------------
Patricia K. Woolf, 72 Private investor; corporate 6 None
Director (1990) director; former Lecturer,
Department of Molecular
Biology, Princeton
University
-------------------------------------------------------------------------------------------------------------

SMALLCAP World Fund -- Page 10
<PAGE>

"INTERESTED" DIRECTORS/6,7/

PRINCIPAL OCCUPATION(S)
DURING PAST FIVE YEARS
NAME, AGE AND AND POSITIONS NUMBER OF
POSITION WITH FUND HELD WITH AFFILIATED ENTITIES PORTFOLIOS/3/
(YEAR FIRST ELECTED AS A OR THE PRINCIPAL UNDERWRITER OVERSEEN OTHER DIRECTORSHIPS/4/ HELD
DIRECTOR/2/) OF THE FUND BY DIRECTOR BY DIRECTOR
-------------------------------------------------------------------------------------------------------------

Gordon Crawford, 59 Senior Vice President, Capital 2 None
Vice Chairman of the Board Research and Management
(1992) Company
-------------------------------------------------------------------------------------------------------------
Gregory W. Wendt, 45 Senior Vice President, Capital 1 None
President (1992) Research Company*; Director,
American Funds Distributors,
Inc.*; Director, Capital
Management Services, Inc.*

-------------------------------------------------------------------------------------------------------------

SMALLCAP World Fund -- Page 11
<PAGE>

OTHER OFFICERS/7/

NAME, AGE AND
POSITION WITH FUND PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
(YEAR FIRST ELECTED AS AND POSITIONS HELD WITH AFFILIATED ENTITIES
AN OFFICER/2/) OR THE PRINCIPAL UNDERWRITER OF THE FUND
-------------------------------------------------------------------------------

J. Blair Frank, 40 Vice President, Capital Research Company*
Senior Vice President
(1999)
-------------------------------------------------------------------------------
Jonathan Knowles, 45 Senior Vice President, Capital Research Company*
Senior Vice President
(2000)
-------------------------------------------------------------------------------
Grant L. Cambridge, Vice President and Director, Capital Research
44 Company*
Vice President (2001)
-------------------------------------------------------------------------------
Noriko H. Chen, 39 Vice President and Director, Capital Research
Vice President (2006) Company*
-------------------------------------------------------------------------------
Brady L. Enright, 39 Senior Vice President, Capital Research Company*
Vice President (2004)
-------------------------------------------------------------------------------
Winnie Kwan, 34 Vice President, Capital Research Company*
Vice President (2006)
-------------------------------------------------------------------------------
Chad L. Norton, 46 Vice President - Fund Business Management Group,
Secretary (1990) Capital Research and Management Company
-------------------------------------------------------------------------------
David A. Pritchett, Vice President - Fund Business Management Group,
40 Capital Research and Management Company
Treasurer (1999)
-------------------------------------------------------------------------------
Steven I. Koszalka, Assistant Vice President - Fund Business Management
42 Group, Capital Research and Management Company
Assistant Secretary
(2005)
-------------------------------------------------------------------------------
Sheryl F. Johnson, 38 Vice President - Fund Business Management Group,
Assistant Treasurer Capital Research and Management Company
(1998)
-------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.

/1/ An "independent" director refers to a director who is not an "interested
person" within the meaning of the 1940 Act.
/2/ Directors and officers of the fund serve until their resignation, removal or
retirement.
/3/ Funds managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which is comprised of 15
funds and serves as the underlying investment vehicle for certain variable
insurance contracts, and Endowments, which is comprised of two portfolios and
whose shareholders are limited to certain nonprofit organizations.
/4/ This includes all directorships (other than those in the American Funds) that
are held by each director as a director of a public company or a registered
investment company.

/5/ During the past two years, Karin Larson (President and Chairman of Capital
International Research, Inc., an affiliate of the investment adviser) has been
a trustee of Minnesota Public Radio, of which Mr. Kling is President and CEO.
During the past two years, Gordon Crawford (Senior Vice President and Director
of the investment adviser) has been a trustee of Southern California Public
Radio, where Mr. Kling serves as a trustee and as Second Vice Chair. Neither
Ms. Larson nor Mr. Crawford participates in decisions directly related to Mr.
Kling's status or compensation.

/6/ "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 affiliated entities (including the fund's principal
underwriter).
/7/ 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.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: SECRETARY.

SMALLCAP World Fund -- Page 12
<PAGE>

FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2005

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR
-------------------------------------------------------------------------------

"INDEPENDENT" DIRECTORS
-------------------------------------------------------------------------------
Joseph C. Berenato $1 - $10,000 Over $100,000
-------------------------------------------------------------------------------
Richard G. Capen, Jr. $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
H. Frederick Christie $50,001 - $100,000 Over $100,000
-------------------------------------------------------------------------------
R. Clark Hooper None/2/ $50,001 - $100,000
-------------------------------------------------------------------------------
John G. Freund Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Leonade D. Jones $10,001 - $50,000 Over $100,000
-------------------------------------------------------------------------------
William H. Kling Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Patricia K. Woolf Over $100,000 Over $100,000
-------------------------------------------------------------------------------
"INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
Gordon Crawford Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Gregory W. Wendt Over $100,000 Over $100,000
-------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.

/2/ Ms. Hooper was elected on September 20, 2006. On that day, the dollar range of
fund shares owned was $10,001 - $50,000.

DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
director who is a director, officer or employee of the investment adviser or its
affiliates. The boards of funds advised by the investment adviser typically meet
either individually or jointly with the boards of one or more other such funds
with substantially overlapping board membership (in each case referred to as a
"board cluster"). The fund typically pays each independent director an annual
fee, which ranges from $16,000 to $34,000, based primarily on the total number of
board clusters on which that independent director serves.

In addition, the fund generally pays independent directors attendance and other
fees for meetings of the board and its committees. Board and committee chairs
receive additional fees for their services.

Independent directors also receive attendance fees for certain special joint
meetings and information sessions with directors and trustees of other groupings
of funds advised by the investment adviser. The fund and the other funds served
by each independent director each pay an equal portion of these attendance fees.

SMALLCAP World Fund -- Page 13
<PAGE>

No pension or retirement benefits are accrued as part of fund expenses.
Independent 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 independent directors.

DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 2006

TOTAL COMPENSATION
(INCLUDING
VOLUNTARILY DEFERRED
COMPENSATION/1/)
FROM ALL FUNDS MANAGED BY
AGGREGATE COMPENSATION CAPITAL RESEARCH AND
(INCLUDING VOLUNTARILY MANAGEMENT
DEFERRED COMPENSATION/1/) COMPANY OR ITS
NAME FROM THE FUND AFFILIATES/2/
------------------------------------------------------------------------------------------------------------------------------------

Joseph C. Berenato/3/ $39,709 $218,334
------------------------------------------------------------------------------------------------------------------------------------
Richard G. Capen, Jr. 36,866 147,750
------------------------------------------------------------------------------------------------------------------------------------
H. Frederick Christie/3/ 38,561 381,250
------------------------------------------------------------------------------------------------------------------------------------
John G. Freund/3/ 40,250 77,500
------------------------------------------------------------------------------------------------------------------------------------
R. Clark Hooper 5,333 190,583
------------------------------------------------------------------------------------------------------------------------------------
Leonade D. Jones/3/ 39,416 255,500
------------------------------------------------------------------------------------------------------------------------------------
William H. Kling 48,000 223,833
------------------------------------------------------------------------------------------------------------------------------------
Patricia K. Woolf/3/ 33,457 215,500
------------------------------------------------------------------------------------------------------------------------------------

/1/ Amounts may be deferred by eligible directors under a nonqualified 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 American Funds
as designated by the directors. Compensation shown in this table for the fiscal
year ended September 30, 2006 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
/2/ Funds managed by Capital Research and Management Company, including the
American Funds, American Funds Insurance Series,(R) which is comprised of 15
funds and serves as the underlying investment vehicle for certain variable
insurance contracts, and Endowments, which is comprised of two portfolios and
whose shareholders are limited to certain nonprofit organizations.
/3/ Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2006
fiscal year for participating directors is as follows: Joseph C. Berenato
($241,718), H. Frederick Christie ($239,750), John G. Freund ($258,379),
Leonade D. Jones ($323,062) and Patricia K. Woolf ($187,250). Amounts deferred
and accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the directors.

As of November 1, 2006, 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 14
<PAGE>

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Maryland
corporation on December 18, 1989. Although the board of directors has delegated
day-to-day oversight to the investment adviser, all fund operations are
supervised by the fund's board, which meets periodically and performs duties
required by applicable state and federal laws.

Under Maryland law, the business affairs of a fund are managed under the
direction of the board of directors, and all powers of the fund are exercised by
or under the authority of the board except as reserved to the shareholders by
law or the fund's charter or by-laws. Maryland law requires each director to
perform his/her duties as a director, including his/her duties as a member of
any board committee on which he/she serves, in good faith, in a manner he/she
reasonably believes to be in the best interest of the fund, and with the care
that an ordinarily prudent person in a like position would use under similar
circumstances.

Members of the board who are not employed by the investment adviser or its
affiliates are paid certain fees for services rendered to the fund as described
above. 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 several different classes of shares. Shares of each class represent
an interest in the same investment portfolio. Each class has pro rata 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 and set forth in the fund's rule 18f-3 Plan. Each class'
shareholders have exclusive voting rights with respect to the respective class'
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. Note that CollegeAmerica/(R)/
account owners invested in Class 529 shares are not shareholders of the fund
and, accordingly, do not have the rights of a shareholder, such as the right to
vote proxies relating to fund shares. As the legal owner of the fund's Class 529
shares, the Virginia College Savings Plan/SM/ will vote any proxies relating to
such fund shares.

The fund does not hold annual meetings of shareholders. However, significant
matters that require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.

The fund's articles of incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with independent
directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an audit committee
comprised of Joseph C. Berenato; Richard G. Capen, Jr.; H. Frederick Christie;
R. Clark Hooper; and Leonade D. Jones, none of whom is an "interested person" of
the fund within the meaning of the 1940 Act. The committee provides oversight
regarding the fund's accounting and financial

SMALLCAP World Fund -- Page 15
<PAGE>

reporting policies and practices, its internal controls and the internal
controls of the fund's principal service providers. The committee acts as a
liaison between the fund's independent registered public accounting firm and the
full board of directors. Six audit committee meetings were held during the 2006
fiscal year.

The fund has a contracts committee comprised of Joseph C. Berenato; Richard G.
Capen, Jr.; H. Frederick Christie; John G. Freund; R. Clark Hooper; Leonade D.
Jones; William H. Kling; Norman R. Weldon; and Patricia K. Woolf, none of whom
is an "interested person" of the fund within the meaning of the 1940 Act. The
committee's principal function is to request, review and consider the
information deemed necessary to evaluate the terms of certain agreements between
the fund and its investment adviser or the investment adviser's affiliates, such
as the Investment Advisory and Service Agreement, Principal Underwriting
Agreement, Administrative Services Agreement and Plans of Distribution adopted
pursuant to rule 12b-1 under the 1940 Act, that the fund may enter into, renew
or continue, and to make its recommendations to the full board of directors on
these matters. Two contracts committee meetings were held during the 2006 fiscal
year.

The fund has a committee on governance comprised of Joseph C. Berenato; Richard
G. Capen, Jr.; H. Frederick Christie; John G. Freund; R. Clark Hooper; Leonade
D. Jones; William H. Kling; Norman R. Weldon; and Patricia K. Woolf, none of
whom is considered an "interested person" of the fund within the meaning of the
1940 Act. The committee periodically reviews such issues as the board's
composition, responsibilities, committees and compensation and other relevant
issues, and recommends any appropriate changes to the full board of directors.
The committee also evaluates, selects and nominates independent director
candidates to the full board of directors. While the committee normally is able
to identify from its own resources an ample number of qualified candidates, it
will consider shareholder suggestions of persons to be considered as nominees to
fill future vacancies on the board. Such suggestions must be sent in writing to
the committee on governance, c/o the fund's secretary, and must be accompanied
by complete biographical and occupational data on the prospective nominee, along
with a written consent of the prospective nominee for consideration of his or
her name by the committee. Three committee on governance meetings were held
during the 2006 fiscal year.

PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser
have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting
proxies of securities held by the fund, other American Funds, Endowments and
American Funds Insurance Series. Certain American Funds have established
separate proxy voting committees that vote proxies or delegate to a voting
officer the authority to vote on behalf of those funds. Proxies for all other
funds are voted by a committee of the investment adviser under authority
delegated by those funds' boards. Therefore, if more than one fund invests in
the same company, they may vote differently on the same proposal.

All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is
sufficient time and information available. After a proxy is received, the
investment adviser prepares a summary of the proposals in the proxy. A
discussion of any potential conflicts of interest is also included in the
summary. After reviewing the summary, one or more research analysts familiar
with the company and industry make a voting recommendation on the proxy
proposals. A second recommendation is made by a proxy coordinator (a senior
investment professional) based on the individual's knowledge of the Guidelines
and familiarity with proxy-related issues. The proxy summary and voting
recommendations are then sent to the appropriate proxy voting committee for the
final voting decision.

SMALLCAP World Fund -- Page 16
<PAGE>

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy voting committee members
are alerted to the potential conflict. The proxy voting committee may then elect
to vote the proxy or seek a third-party recommendation or vote of an ad hoc
group of committee members.

The Guidelines, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Guidelines provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180, (b) on the American
Funds website at americanfunds.com and (c) on the SEC's website at sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Guidelines is available upon request, free
of charge, by calling American Funds Service Company at 800/421-0180 or visiting
the American Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions may also be
supported. Typically, proposals to declassify the board (elect all
directors annually) are supported based on the belief that this increases
the directors' sense of accountability to shareholders.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to
provide for confidential voting and to provide for cumulative voting are
usually supported. Proposals to eliminate the right of shareholders to act
by written consent or to take away a shareholder's right to call a special
meeting are not typically supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items are generally voted in favor of
management's recommendations unless circumstances indicate otherwise.

SMALLCAP World Fund -- Page 17
<PAGE>

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on November 1, 2006. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------

Edward D. Jones & Co. Class A 11.34%
201 Progress Parkway Class B 5.13
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class C 12.63
333 W. 34th Street
New York, NY 10001-2402
----------------------------------------------------------------------------
MLPF&S Class C 8.50
4800 Deer Lake Drive East, Floor 2
Jacksonville, FL 32246-6484
----------------------------------------------------------------------------
CGTC Class R-5 38.29
400 S. Hope Street, Floor 22
Los Angeles, CA 90071-2801
----------------------------------------------------------------------------
UBS Financial Services, Inc. Class R-5 7.37
P.O. Box 92994
Chicago, IL 60675-2994
----------------------------------------------------------------------------

INVESTMENT ADVISER -- Capital Research and Management Company, the fund's
investment adviser, founded in 1931, maintains research facilities in the United
States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London,
Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with
experienced investment professionals. The investment adviser is located at 333
South Hope Street, Los Angeles, CA 90071 and 135 South State College Boulevard,
Brea, CA 92821. It is a wholly owned subsidiary of The Capital Group Companies,
Inc., a holding company for several investment management subsidiaries. The
investment adviser manages equity assets for the American Funds through two
divisions. These divisions generally function separately from each other with
respect to investment research activities and they make investment decisions for
the funds on a separate basis.

POTENTIAL CONFLICTS OF INTEREST -- The investment adviser has adopted policies
and procedures that address conflicts of interest that may arise between a
portfolio counselor's management of the fund and his or her management of other
funds and accounts. Potential areas of conflict could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, personal investing activities, portfolio
counselor compensation and voting relating to portfolio securities. The
investment adviser has adopted policies and procedures that it believes are
reasonably designed to address these conflicts. However, there is no guarantee
that such policies and procedures will be effective or that the investment
adviser will anticipate all potential conflicts of interest.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage. Portfolio counselors and investment
analysts may also make investment decisions for other mutual funds advised by
Capital Research and Management Company.

SMALLCAP World Fund -- Page 18
<PAGE>

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors. In order to encourage a long-term focus, bonuses based on investment
results are calculated by comparing pretax total returns to relevant benchmarks
over both the most recent year and a four-year rolling average, with the greater
weight placed on the four-year rolling average. For portfolio counselors,
benchmarks may include measures of the marketplaces in which the relevant fund
invests and measures of the results of comparable mutual funds. For investment
analysts, benchmarks may include relevant market measures and appropriate
industry or sector indexes reflecting their areas of expertise. Capital Research
and Management Company also separately compensates analysts for the quality of
their research efforts. The benchmarks against which SMALLCAP World Fund
portfolio counselors are measured include: S&P/Citigroup World Smallcap Index;
S&P/Citigroup World ex U.S. Smallcap Index; S&P/Citigroup U.S. Smallcap Index;
Lipper Small Cap Growth Funds Index; Lipper International Small Cap Funds Index.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage portions of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF SEPTEMBER 30, 2006:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) THAT
THAT THAT PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR MANAGES
OF FUND MANAGES MANAGES (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS)/3/ IN BILLIONS)/4/
------------------------------------------------------------------------------------------------

Gordon Crawford Over 3 $239.5 1 $0.01 None
$1,000,000
-------------------------------------------------------------------------------------------------
J. Blair Frank $100,001 - 1 $ 82.2 None None
$500,000
-------------------------------------------------------------------------------------------------
Brady L. Enright $100,001 - 2 $ 85.0 None None
$500,000
-------------------------------------------------------------------------------------------------
Jonathan Knowles $100,001 - None None None
$500,000
-------------------------------------------------------------------------------------------------
Mark E. Denning $1 - $10,000 6 $311.3 2 $0.07 None
-------------------------------------------------------------------------------------------------
J. Dale Harvey $50,001 - 4 $266.4 None None
$100,000
-------------------------------------------------------------------------------------------------
Claudia P. Over 3 $114.2 1 $0.01 None
Huntington $1,000,000
-------------------------------------------------------------------------------------------------

SMALLCAP World Fund -- Page 19
<PAGE>

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
/2/ Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount. No fund has an advisory fee that is based on the
performance of the fund.
/3/ Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States and/ or fixed-income assets in
institutional accounts managed by investment adviser subsidiaries of Capital
Group International, Inc., an affiliate of Capital Research and Management
Company. Assets noted are the total net assets of the funds or accounts and are
not indicative of the total assets managed by the individual, which is a
substantially lower amount. No fund or account has an advisory fee that is
based on the performance of the fund or account.
/4/ Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.

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, 2007, 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 (a) 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 (b) 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).

In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of persons
to perform the fund's executive, administrative, clerical and bookkeeping
functions, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies and postage used at
the fund's offices. 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; shareholder recordkeeping and administrative
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 fund shares (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 independent directors; association dues;
costs of stationery and forms prepared exclusively for the fund; and costs of
assembling and storing shareholder account data.

As compensation for its services, the investment adviser received a monthly fee
that is accrued daily, calculated at the annual rates of:

SMALLCAP World Fund -- Page 20
<PAGE>

Net asset level

RATE IN EXCESS OF UP TO
------------------------------------------------------------------------------

0.800% $ 0 $ 1,000,000,000
------------------------------------------------------------------------------
0.700 1,000,000,000 2,000,000,000
------------------------------------------------------------------------------
0.670 2,000,000,000 3,000,000,000
------------------------------------------------------------------------------
0.650 3,000,000,000 5,000,000,000
------------------------------------------------------------------------------
0.635 5,000,000,000 8,000,000,000
------------------------------------------------------------------------------
0.625 8,000,000,000 13,000,000,000
------------------------------------------------------------------------------
0.615 13,000,000,000 17,000,000,000
------------------------------------------------------------------------------
0.605 17,000,000,000 21,000,000,000
------------------------------------------------------------------------------
0.600 21,000,000,000 27,000,000,000
------------------------------------------------------------------------------
0.595 27,000,000,000
------------------------------------------------------------------------------

The investment adviser has agreed that in the event the Class A expenses of the
fund (with the exclusion of interest, taxes, brokerage costs, distribution
expenses pursuant to a plan under rule 12b-1 and 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 related regulations, 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, 2006, 2005 and 2004, the investment
adviser was entitled to receive from the fund management fees of $109,780,000,
84,038,000 and $68,772,000, respectively. After giving effect to the management
fee waivers described below, the fund paid the investment adviser management
fees of $98,802,000 (a reduction of $10,978,000), $77,637,000 (a reduction of
$6,401,000) and $68,480,000 (a reduction of $292,000) for the fiscal years ended
September 30, 2006, 2005 and 2004, respectively.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that the investment adviser is otherwise entitled
to receive. As a result of this waiver, management fees are reduced similarly
for all classes of shares of the fund.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until
November 30, 2007, 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 the vote of a majority of directors who are not

SMALLCAP World Fund -- Page 21
<PAGE>

parties to the Administrative 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 fund may terminate the Administrative Agreement
at any time by vote of a majority of independent directors. The investment
adviser has the right to terminate the Administrative Agreement upon 60 days'
written notice to the fund. The Administrative Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser may
contract with third parties, including American Funds Service Company,
the fund's Transfer Agent, to provide these services. Services include, but are
not limited to, shareholder account maintenance, transaction processing, tax
information reporting and shareholder and fund communications. In addition,
the investment adviser monitors, coordinates and oversees the activities
performed by third parties providing such services. For Class R-1, R-2 and R-3
shares, the investment adviser has agreed to pay a portion of the fees payable
under the Administrative Agreement that would otherwise have been paid by the
fund. For the year ended September 30, 2006, the total fees paid by the
investment adviser were $690,000.

The investment adviser receives an administrative services fee at the annual
rate of up to 0.15% of the average daily net assets for Class C, F, R (excluding
Class R-5 shares) and 529 shares for administrative services provided to these
share classes. Administrative services fees are paid monthly and accrued daily.
The investment adviser uses a portion of this fee to compensate third parties
for administrative services provided to the fund. Of the remainder, the
investment adviser does not retain more than 0.05% of the average daily net
assets for each applicable share class. For Class R-5 shares, the administrative
services fee is calculated at the annual rate of up to 0.10% of the average
daily net assets. The administrative services fee includes compensation for
transfer agent and shareholder services provided to the fund's Class C, F, R and
529 shares. In addition to making administrative service fee payments to
unaffiliated third parties, the investment adviser also makes payments from the
administrative services fee to American Funds Service Company according
to a fee schedule contained in a Shareholder Services Agreement between the fund
and American Funds Service Company.

During the 2006 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
--------------------------------------------------------------------------------

CLASS C $1,106,000
--------------------------------------------------------------------------------
CLASS F 451,000
--------------------------------------------------------------------------------
CLASS 529-A 300,000
--------------------------------------------------------------------------------
CLASS 529-B 66,000
--------------------------------------------------------------------------------
CLASS 529-C 149,000
--------------------------------------------------------------------------------
CLASS 529-E 19,000
--------------------------------------------------------------------------------
CLASS 529-F 20,000
--------------------------------------------------------------------------------
CLASS R-1 38,000
--------------------------------------------------------------------------------
CLASS R-2 2,109,000
--------------------------------------------------------------------------------
CLASS R-3 743,000
--------------------------------------------------------------------------------
CLASS R-4 154,000
--------------------------------------------------------------------------------
CLASS R-5 193,000
--------------------------------------------------------------------------------

SMALLCAP World Fund -- Page 22
<PAGE>

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- 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; 15370
Barranca Parkway, Irvine, CA 92618; 3500 Wiseman Boulevard, San Antonio, TX
78251; 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240; and 5300 Robin
Hood Road, Norfolk, VA 23513.

The Principal Underwriter receives revenues from sales of the fund's shares. For
Class A and 529-A shares, the Principal Underwriter receives commission revenue
consisting of that portion of the Class A and 529-A sales charge remaining after
the allowances by the Principal Underwriter to investment dealers. For Class B
and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees
paid by the fund for distribution expenses to a third party and receives the
revenue remaining after compensating investment dealers for sales of Class B and
529-B shares. The fund also pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers of Class B and 529-B shares.
For Class C and 529-C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply during the first year after purchase. The fund
pays the Principal Underwriter for advancing the immediate service fees and
commissions paid to qualified dealers of Class C and 529-C shares. For Class
529-E shares, the fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers. For Class F
and 529-F shares, the fund pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers and advisers who sell Class F
and 529-F shares. For Class R-1, R-2, R-3 and R-4 shares, the fund pays the
Principal Underwriter for advancing the immediate service fees paid to qualified
dealers and advisers who sell Class R-1, R-2, R-3 and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------------

CLASS A 2006 $8,300,000 $36,571,000
2005 5,658,000 25,057,000
2004 5,366,000 23,960,000
-----------------------------------------------------------------------------------------------------
CLASS B 2006 409,000 2,978,000
2005 354,000 2,397,000
2004 464,000 3,731,000
-----------------------------------------------------------------------------------------------------
CLASS C 2006 -- 2,219,000
2005 7,000 1,374,000
2004 0 1,368,000
-----------------------------------------------------------------------------------------------------
CLASS 529-A 2006 446,000 2,025,000
2005 313,000 1,440,000
2004 267,000 1,247,000
-----------------------------------------------------------------------------------------------------
CLASS 529-B 2006 37,000 233,000
2005 43,000 238,000
2004 60,000 350,000
-----------------------------------------------------------------------------------------------------
CLASS 529-C 2006 -- 280,000
2005 358 211,000
2004 0 202,000
-----------------------------------------------------------------------------------------------------

SMALLCAP World Fund -- Page 23
<PAGE>

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). 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 independent
directors of the fund who have no direct or indirect financial interest in the
operation of the Plans or the Principal Underwriting Agreement. Potential
benefits of the Plans to the fund include quality shareholder services; savings
to the fund in transfer agency costs; and benefits to the investment process
from growth or stability of assets. The selection and nomination of independent
directors are committed to the discretion of the independent directors during
the existence of the Plans. The Plans may not be amended to increase materially
the amount spent for distribution without shareholder approval. Plan expenses
are reviewed quarterly and the Plans must be renewed annually by the board of
directors.

Under the Plans, the fund may annually expend the following amounts to finance
any activity 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: (a) for Class A shares, up

SMALLCAP World Fund -- Page 24
<PAGE>

to 0.30% of the average daily net assets attributable to Class A shares; (b) for
Class 529-A shares, up to 0.50% of the average daily net assets attributable to
Class 529-A shares; (c) for Class B and 529-B shares, up to 1.00% of the average
daily net assets attributable to Class B and 529-B shares, respectively; (d) for
Class C and 529-C shares, up to 1.00% of the average daily net assets
attributable to Class C and 529-C shares, respectively; (e) for Class 529-E
shares, up to 0.75% of the average daily net assets attributable to Class 529-E
shares; (f) for Class F and 529-F shares, up to 0.50% of the average daily net
assets attributable to Class F and 529-F shares, respectively; (g) for Class R-1
shares, up to 1.00% of the average daily net assets attributable to Class R-1
shares; (h) for Class R-2 shares, up to 1.00% of the average daily net assets
attributable to Class R-2 shares; (i) for Class R-3 shares, up to 0.75% of the
average daily net assets attributable to Class R-3 shares; and (j) for Class R-4
shares, up to 0.50% of the average daily net assets attributable to Class R-4
shares. The fund has not adopted a Plan for Class R-5 shares; accordingly, no
12b-1 fees are paid from Class R-5 share assets.

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to the amount allowable under the fund's Class
A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying
distribution-related expenses, including for Class A and 529-A shares dealer
commissions and wholesaler compensation paid on sales of shares of $1 million or
more 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, and retirement plans, endowments and foundations
with $50 million or more in assets -- "no load purchases"). Commissions on no
load purchases of Class A and 529-A shares in excess of the Class A and 529-A
plan limitations not reimbursed to the Principal Underwriter 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.

For Class B and 529-B shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including the financing of commissions paid to
qualified dealers.

For Class C and 529-C shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.75% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class 529-E shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class F and 529-F shares: currently up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers or advisers.

For Class R-1 shares: (a) up to 0.25% is paid to the Principal Underwriter for
paying service-related expenses, including paying service fees to qualified
dealers, and (b) up to 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including commissions paid to qualified dealers.

SMALLCAP World Fund -- Page 25
<PAGE>

For Class R-2 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.50% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-3 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-4 shares: currently up to 0.25% is paid to the Principal Underwriter
for paying service-related expenses, including paying service fees to qualified
dealers or advisers.

As of the end of the 2006 fiscal year, total 12b-1 expenses, and the portion of
the expenses that remained unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
------------------------------------------------------------------------------------------------

CLASS A $34,860,000 $2,599,000
------------------------------------------------------------------------------------------------
CLASS B 5,342,000 477,000
------------------------------------------------------------------------------------------------
CLASS C 5,942,000 572,000
------------------------------------------------------------------------------------------------
CLASS F 883,000 90,000
------------------------------------------------------------------------------------------------
CLASS 529-A 421,000 34,000
------------------------------------------------------------------------------------------------
CLASS 529-B 417,000 39,000
------------------------------------------------------------------------------------------------
CLASS 529-C 982,000 95,000
------------------------------------------------------------------------------------------------
CLASS 529-E 76,000 7,000
------------------------------------------------------------------------------------------------
CLASS 529-F 0 0
------------------------------------------------------------------------------------------------
CLASS R-1 174,000 17,000
------------------------------------------------------------------------------------------------
CLASS R-2 2,588,000 252,000
------------------------------------------------------------------------------------------------
CLASS R-3 1,303,000 129,000
------------------------------------------------------------------------------------------------
CLASS R-4 248,000 26,000
------------------------------------------------------------------------------------------------

OTHER COMPENSATION TO DEALERS -- As of January 2007, the top dealers (or their
affiliates) that American Funds Distributors anticipates will receive additional
compensation (as described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group:
Advantage Capital Corporation
AIG Financial Advisors, Inc.
American General Securities Incorporated
FSC Securities Corporation
Royal Alliance Associates, Inc.

SMALLCAP World Fund -- Page 26
<PAGE>

AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones
Genworth Financial Securities Corporation
Hefren-Tillotson, Inc.
HTK/Janney Montgomery Group:
Hornor, Townsend & Kent, Inc.
Janney Montgomery Scott LLC
ING Advisors Network Inc.:
Bancnorth Investment Group, Inc.
Financial Network Investment Corporation
Guaranty Brokerage Services, Inc.
ING Financial Partners, Inc.
Multi-Financial Securities Corporation
Primevest Financial Services, Inc.
InterSecurities/Transamerica:
InterSecurities, Inc.
Transamerica Financial Advisors, Inc.
J.J.B. Hilliard/PNC Bank:
J.J.B. Hilliard, W.L. Lyons, Inc.
PNC Bank, National Association
PNC Brokerage Corp.
PNC Investments LLC
Lincoln Financial Advisors Corporation:
Lincoln Financial Advisors Corporation
Jefferson Pilot Securities Corporation
LPL Financial Services:
Linsco/Private Ledger Corp.
Uvest Investment Services
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Metlife Enterprises:
Metlife Securities Inc.
Tower Square Securities
New England Securities
Walnut Street Securities, Inc.
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW Inc.
National Planning Holdings Inc.:
Invest Financial Corporation
Investment Centers of America, Inc.
National Planning Corporation
SII Investments, Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC
Pacific Select Distributors Inc.:
Associated Securities Corp.
Contemporary Financial Solutions, Inc.
M.L. Stern & Co., LLC
Mutual Service Corporation
Sorrento Pacific Financial, LLC
United Planners' Financial Services of America
Waterstone Financial Group, Inc.
Park Avenue Securities LLC
Princor Financial Services Corporation
Raymond James Group:
Raymond James & Associates, Inc.
Raymond James Financial Services Inc.
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Incorporated
Securian/C.R.I.:
CRI Securities, LLC
Securian Financial Services, Inc.
Smith Barney
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
First Clearing LLC
Wells Fargo Investments, L.L.C.

SMALLCAP World Fund -- Page 27
<PAGE>

EXECUTION OF PORTFOLIO TRANSACTIONS

As described in the prospectus, the investment adviser places orders with
broker-dealers for the fund's portfolio transactions. 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. When such concurrent authorizations occur, the objective is to allocate
the executions in an equitable manner.

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
September 30, 2006, 2005 and 2004 amounted to $49,172,000, $33,001,000 and
$35,718,000. With respect to fixed-income securities, brokerage commissions
include explicit investment dealer concessions and may exclude other transaction
costs which may be reflected in the spread between the bid and asked price. The
volume of trading activity increased during the year, resulting in an increase
in broker commissions/concessions paid on portfolio transactions.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year. At the end of the fund's
most recent fiscal year, the fund had no investments in securities of its
regular broker-dealers.

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's board
of directors and compliance will be periodically assessed by the board in
connection with reporting from the fund's Chief Compliance Officer.

SMALLCAP World Fund -- Page 28
<PAGE>

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. In addition, the fund's list of top 10 equity portfolio
holdings measured by percentage of net assets invested, dated as of the end of
each calendar month, is permitted to be posted on the American Funds website no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is posted on the American Funds website.
The fund's custodian, outside counsel and auditor, each of which require
portfolio holdings information for legitimate business and fund oversight
purposes, may receive the information earlier.

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the fund receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons may be bound by agreements (including confidentiality agreements)
that restrict and limit their use of the information to legitimate business uses
only. Neither the fund nor its investment adviser or any affiliate thereof
receives compensation or other consideration in connection with the disclosure
of information about portfolio securities.

Subject to board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the appropriate investment-related committees of the fund's investment
adviser. In exercising their authority, the committees determine whether
disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated third
parties until such holdings have been made public on the American Funds website
(other than to certain fund service providers for legitimate business and fund
oversight purposes) helps reduce potential conflicts of interest between fund
shareholders and the investment adviser and its affiliates.

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value price is effective
for orders received prior to the time of determination of the net asset value
and, in the case of orders placed with dealers or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment

SMALLCAP World Fund -- Page 29
<PAGE>

dealer should be indicated. The dealer is responsible for promptly transmitting
purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, 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. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that 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, while 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. Each share class
of the fund has a separately calculated net asset value (and share price).

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as indicated below. The fund follows
standard industry practice by typically reflecting changes in its holdings of
portfolio securities on the first business day following a portfolio trade.

1. Equity securities, including depositary receipts, are valued at the
official closing price of, or 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. Prices for each security are taken from the principal exchange or
market in which the security trades. Fixed-income securities are valued at
prices obtained from an independent 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 bid prices, if asked prices are not available) or at prices for
securities of comparable maturity, quality and type. The pricing services base
bond prices on, among other things, an evaluation of the yield curve as of
approximately 3:00 p.m. New York time. The fund's investment adviser performs
certain checks on these prices prior to calculation of the fund's net asset
value.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity, or if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean of
representative quoted bid and asked prices.

SMALLCAP World Fund -- Page 30
<PAGE>

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 market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's board. Subject to board oversight, the
fund's board has delegated the obligation to make fair valuation determinations
to a valuation committee established by the fund's investment adviser. The board
receives regular reports describing fair-valued securities and the valuation
methods used.

The valuation committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable by the investment adviser, are valued in good
faith by the valuation committee based upon what the fund might reasonably
expect to receive upon their current sale. The valuation committee considers all
indications of value available to it in determining the fair value to be
assigned to a particular security, including, without limitation, the type and
cost of the security, contractual or legal restrictions on resale of the
security, relevant financial or business developments of the issuer, actively
traded similar or related securities, conversion or exchange rights on the
security, related corporate actions, significant events occurring after the
close of trading in the security and changes in overall market conditions. The
valuation committee employs additional fair value procedures to address issues
related to investing substantial portions of applicable fund portfolios outside
the United States. Securities owned by these funds trade in markets that open
and close at different times, reflecting time zone differences. If significant
events occur after the close of a market (and before these fund's net asset
values are next determined) which affect the value of portfolio securities,
appropriate adjustments from closing market prices may be made to reflect these
events. Events of this type could include, for example, earthquakes and other
natural disasters or significant price changes in other markets (e.g., U.S.
stock markets).

2. Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other expense
items attributable to particular share classes, are deducted from total assets
attributable to such share classes.

3. Net assets so obtained for each share class are then divided by the total
number of shares outstanding of that share class, and the result, rounded to the
nearer cent, is the net asset value per share for that share class.

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least

SMALLCAP World Fund -- Page 31
<PAGE>

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.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation, generally limited in respect of
any one issuer, to an amount not greater than 5% of the market value of the
fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the securities
of (other than U.S. government securities or the securities of other regulated
investment companies) any one issuer; two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses; or the securities of certain publicly traded partnerships.

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 (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 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
(c) 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 (a) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (b) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is in the interest of shareholders to distribute a lesser
amount.

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

SMALLCAP World Fund -- Page 32
<PAGE>

Distributions of investment company taxable income and net realized capital
gains to shareholders will be taxable whether received in shares or in cash,
unless such shareholders are exempt from taxation. 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 that share on the reinvestment date. Dividends and capital gain
distributions by the fund to a tax-deferred retirement plan account are not
taxable currently.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income. 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. To the extent the fund invests in stock of domestic and
certain foreign corporations and meets the applicable holding period
requirement, it may receive "qualified dividends". The fund will designate
the amount of "qualified dividends" to its shareholders in a notice sent
within 60 days of the close of its fiscal year and will report "qualified
dividends" to shareholders on Form 1099-DIV.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that 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 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. Upon
disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.

SMALLCAP World Fund -- Page 33
<PAGE>

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 may be eligible for the deduction for dividends received by
corporations. Corporate shareholders will be informed of the portion of
dividends that so qualifies. 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 during the 90-day period beginning on
the date that is 45 days before the date on which the shares become
ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

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 that must be distributed to shareholders in order to
maintain the qualification of the fund as a regulated investment company
and to avoid federal income taxation at the level of the fund.

The price of a bond purchased after its original issuance may reflect
market discount which, depending on the particular circumstances, may
affect the tax character and amount of income required to be recognized by
a fund holding the bond. In determining whether a bond is purchased with
market discount, certain de minimis rules apply.

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Some
foreign countries impose taxes on capital gains with respect to investments
by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- 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. 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 15% 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
such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions.

SMALLCAP World Fund -- Page 34
<PAGE>

Shareholders of the fund also may be subject to state and local taxes on
distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
All or a portion of a fund's dividend distribution may be a "qualified
dividend." If the fund meets the applicable holding period requirement, it
will distribute dividends derived from qualified corporation dividends to
shareholders as qualified dividends. Interest income from bonds and money
market instruments and nonqualified foreign dividends will be distributed
to shareholders as nonqualified fund dividends. The fund will report on
Form 1099-DIV the amount of each shareholder's dividend that may be treated
as a qualified dividend. If a shareholder meets the requisite holding
period requirement, qualified dividends are taxable at a maximum rate of
15%.

CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
over net short-term capital losses that the fund properly designates as
"capital gain dividends" generally will be taxable as long-term capital
gain. Regardless of the length of time the shares of the fund have been
held by a shareholder, a capital gain distribution by the fund is subject
to a maximum tax rate of 15%. 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 gains during
such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. 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 subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

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 (such 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 of foreign corporations. The foreign tax
credit available to shareholders is subject to certain limitations imposed by
the Code.

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

SMALLCAP World Fund -- Page 35
<PAGE>

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

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 a regulated investment company may
be subject to backup withholding of federal income tax in the case of non-exempt
U.S. shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if the fund
is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the 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.

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 a
lower rate under an applicable income tax treaty) on dividend income received by
the shareholder.

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

SMALLCAP World Fund -- Page 36
<PAGE>

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F
SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE APPLICABLE PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
THESE ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE RETIREMENT PLAN
SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR INFORMATION
REGARDING PURCHASES, SALES AND EXCHANGES.

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- for initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent account statement and mailing the form, along with a
check made payable to the fund, using the envelope provided with your
account statement.

The amount of time it takes for us to receive regular U.S. postal mail may
vary and there is no assurance that we will receive such mail on the day
you expect. Mailing addresses for regular U.S. postal mail can be found in
the prospectus. To send investments or correspondence to us via overnight
mail or courier service, use any of the following addresses:

American Funds
8332 Woodfield Crossing Blvd.
Indianapolis, IN 46240-2482

American Funds
3500 Wiseman Blvd.
San Antonio, TX 78251-4321

American Funds
5300 Robin Hood Rd.
Norfolk, VA 23513-2407

BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this document for more
information regarding this service.

BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this document for more information
regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

SMALLCAP World Fund -- Page 37
<PAGE>

Your bank should include the following information when wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

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.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. Class R-5 shares are also available to clients of the
Personal Investment Management group of Capital Guardian Trust Company who do
not have an intermediary associated with their accounts and without regard to
the $1 million purchase minimum. In addition, the American Funds state
tax-exempt funds are qualified for sale only in certain jurisdictions, and
tax-exempt funds in general should not serve as retirement plan investments. The
fund and the Principal Underwriter reserve the right to reject any purchase
order.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. As noted in the prospectus,
purchase minimums may be waived or reduced in certain cases.

In the case of American Funds non-tax-exempt funds, the initial purchase minimum
of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

SMALLCAP World Fund -- Page 38
<PAGE>

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

Certain accounts held on the fund's books, known as omnibus accounts, contain
multiple underlying accounts that are invested in shares of the fund. These
underlying accounts are maintained by entities such as financial intermediaries
and are subject to the applicable initial purchase minimums as described in the
prospectus and statement of additional information. However, in the case where
the entity maintaining these accounts aggregates the accounts' purchase orders
for fund shares, such accounts are not required to meet the minimum amount for
subsequent purchases.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchanges from Class A shares of The Cash
Management Trust of America to Class B or C shares of Intermediate Bond Fund of
America, Limited Term Tax-Exempt Bond Fund of America and Short-Term Bond Fund
of America are not permitted. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds 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. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service areas" in the prospectus for
the appropriate fax numbers) the Transfer Agent. For more information, see
"Shareholder account services and privileges" below. THESE TRANSACTIONS HAVE THE
SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" above).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

The fund, through its transfer agent, American Funds Service Company,
maintains surveillance procedures to detect frequent trading in fund
shares. Under these procedures, various analytics are used to evaluate
factors that may be indicative of frequent trading. For example,
transactions in fund shares that exceed certain monetary thresholds may be
scrutinized. American Funds Service Company also may review transactions
that occur close in time to other transactions in the same account or in
multiple accounts under common ownership or influence. Trading activity
that is identified through these procedures or as a result of any other
information available to the fund will be evaluated to determine whether
such activity might constitute frequent trading. These procedures may be
modified from time to time as appropriate to improve the detection of
frequent trading, to facilitate monitoring for frequent trading in
particular retirement plans or other accounts, and to comply with
applicable laws.

In addition to the fund's broad ability to restrict potentially harmful
trading, the fund's board of directors has adopted a "purchase blocking
policy," under which any shareholder redeeming shares (including
redemptions that are part of an exchange transaction) having a value of
$5,000 or more from the fund will be precluded from investing in the
fund (including investments that are part of an exchange transaction)
for 30 calendar days after the redemption transaction. Under the fund's
purchase blocking policy, certain purchases will not be prevented and
certain redemptions will not trigger a purchase block, such as: systematic
redemptions and purchases where the entity maintaining the shareholder
account is able to identify the transaction as a systematic redemption or
purchase; purchases and redemptions of shares having a value of less than
$5,000; transactions in Class 529 shares; purchases and redemptions
resulting from reallocations by American Funds Target Date Retirement
Series; retirement plan contributions, loans and distributions (including
hardship withdrawals) identified as such on the retirement plan
recordkeeper's system; and purchase transactions involving transfers of
assets, rollovers, Roth IRA conversions and IRA recharacterizations, where
the entity maintaining the shareholder account is able to identify the
transaction as one of these types of transactions.

The fund reserves the right to waive the purchase blocking policy in those
instances where American Funds Service Company determines that its
surveillance procedures are adequate to detect frequent trading in fund
shares.

American Funds Service Company will work with certain intermediaries (such
as investment dealers holding shareholder accounts in street name,
retirement plan recordkeepers, insurance company separate accounts and bank
trust companies) to apply their procedures which American Funds Service
Company believes are reasonably designed to enforce the frequent trading
policies of the fund. You should refer to disclosures provided by the
intermediaries with which you have an account to determine the specific
trading restrictions that apply to you.

If American Funds Service Company identifies any activity that may
constitute frequent trading, it reserves the right to contact the
intermediary and request that the intermediary either provide information
regarding an account owner's transactions or restrict the account owner's
trading. If American Funds Service Company is not satisfied that the
intermediary has taken appropriate action, American Funds Service Company
may terminate the intermediary's ability to transact in fund shares.

There is no guarantee that all instances of frequent trading in fund shares
will be prevented.

Notwithstanding the fund's surveillance procedures and purchase blocking
policy, all transactions in fund shares remain subject to the fund's and
American Funds Distributors' right to restrict potentially abusive trading
generally (including the types of transactions described above that will
not be prevented or trigger a block under the purchase blocking policy).

SMALLCAP World Fund -- Page 39
<PAGE>

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

AUTOMATIC CONVERSIONS -- As described more fully in the prospectus, Class
B, 529-B and C shares automatically convert to Class A, 529-A and F shares,
respectively, after a certain period from the purchase date.

MOVING FROM CLASS B TO CLASS A SHARES -- Under the right of reinvestment
policy as described in the prospectus, if you redeem Class B shares during
the contingent deferred sales charge period, you may reinvest the proceeds
in Class A shares without paying a Class A sales charge if you notify
American Funds Service Company and the reinvestment occurs within 90 days
after the date of redemption and is made into the same account from which
you redeemed the shares. If you redeem your Class B shares after the
contingent deferred sales charge period, you may either reinvest the
proceeds in Class B shares or purchase Class A shares. If you purchase
Class A shares, you are responsible for paying any applicable Class A sales
charges.

MOVING FROM CLASS C TO CLASS A SHARES -- If you redeem Class C shares and
with the redemption proceeds purchase Class A shares, you are still
responsible for paying any Class C contingent deferred sales charges and
applicable Class A sales charges.

MOVING FROM CLASS F TO CLASS A SHARES -- You can redeem Class F shares held
in a qualified fee-based program and with the redemption proceeds purchase
Class A shares without paying an initial Class A sales charge if all of the
following are met: (a) you are leaving or have left the fee-based program,
(b) you have held the Class F shares in the program for at least one year,
and (c) you notify American Funds Service Company and purchase the Class A
shares within 90 days after redeeming the Class F shares.

MOVING FROM CLASS A TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class A shares and with the
redemption proceeds purchase Class F shares for the program, any Class A
sales charges (including contingent deferred sales charges) that you paid
or are payable will not be credited back to your account.

MOVING FROM CLASS A TO CLASS R SHARES -- Provided it is eligible to invest
in Class R shares, a retirement plan currently invested in Class A shares
may redeem its shares and purchase Class R shares with the redemption
proceeds. Any Class A sales charges that the retirement plan previously
paid will not be credited back to the plan's account.

NON-REPORTABLE TRANSACTIONS -- As described above, automatic conversions
will be non-reportable for tax purposes. In addition, except in the case of
a movement between a 529 share class and a non-529 share class or vice
versa, an exchange of shares from one share class of a fund to another
share class of the same fund will be treated as a non-reportable exchange
for tax purposes, provided that the exchange request is received in writing
by American Funds Service Company and processed as a single transaction.

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

Individual 403(b) plans may be treated similarly to employer-sponsored
plans for Class A sales charge purposes (i.e., individual participant
accounts are eligible to be aggregated together) if: (a) the American Funds
are principal investment options; (b) the employer facilitates the
enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (c) there is only one dealer firm
assigned to the plans.

SMALLCAP World Fund -- Page 40
<PAGE>

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds 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) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the spouses, children or parents of the Eligible
Persons are listed in the account registration with the
parents-in-law) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such
dealers), plans for the dealers, and plans that include as
participants only the Eligible Persons, their spouses, parents and/or
children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and daughters-in-law and (c) parents-in-law, if the Eligible Persons
or the spouses, children or parents of the Eligible Persons are listed
in the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

(4) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.;

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

SMALLCAP World Fund -- Page 41
<PAGE>

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

TRANSFERS TO COLLEGEAMERICA -- A transfer from the Virginia Prepaid
Education Program/SM/ or the Virginia Education Savings Trust/SM/ to a
CollegeAmerica account will be made with no sales charge. No commission
will be paid to the dealer on such a transfer.

MOVING BETWEEN ACCOUNTS -- Investments in certain account types may be moved to
other account types without incurring additional Class A sales charges. These
transactions include, for example:

. redemption proceeds from a non-retirement account (for example, a
joint tenant account) used to purchase fund shares in an IRA or other
individual-type retirement account;

. required minimum distributions from an IRA or other individual-type
retirement account used to purchase fund shares in a non-retirement
account; and

. death distributions paid to a beneficiary's account that are used by
the beneficiary to purchase fund shares in a different account.

LOAN REPAYMENTS -- Repayments on loans taken from a retirement plan or an
individual-type retirement account are not subject to sales charges if American
Funds Service Company is notified of the repayment.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to sales charges. These purchases consist of purchases of $1 million or
more, purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
purchases made at net asset value by certain retirement plans, endowments and
foundations with assets of $50 million or more. Commissions on such investments
(other than IRA rollover assets that roll over at no sales charge under the
fund's IRA rollover policy as described in the prospectus) are paid to dealers
at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4
million to $10 million and 0.25% on amounts over $10 million. Commissions are
based on cumulative investments and are not annually reset.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
American Funds non-money market funds over a 13-month period and receive
the same sales charge (expressed as a percentage of your purchases) as if
all shares had been purchased at once.

The market value of your existing holdings eligible to be aggregated (see
below) as of the day immediately before the start of the Statement period
may be credited toward satisfying the Statement.

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchases must be made will remain
unchanged. Purchases made from the date of revision will receive the
reduced sales charge, if any, resulting from the revised Statement.

SMALLCAP World Fund -- Page 42
<PAGE>

The Statement will be considered completed if the shareholder dies within
the 13-month Statement period. Commissions to dealers will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When a shareholder elects to use a Statement, shares equal to 5% of the
dollar amount specified in the Statement may 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 Statement period,
the purchaser may be required to 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. Any dealers assigned to the shareholder's account at the
time a purchase was made during the Statement period will receive a
corresponding commission adjustment if appropriate. If the difference is
not paid by the close of the Statement 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 may be liable
to the Principal Underwriter for the balance still outstanding.

Certain payroll deduction retirement plans purchasing Class A shares under
a Statement on or before November 12, 2006, may continue to purchase Class
A shares at the sales charge determined by that particular Statement until
the plans' values reach the amounts specified in their Statements. Upon
reaching such amounts, the Statements for these plans will be deemed
completed and will terminate at that time. After such termination, these
plans are eligible for additional sales charge reductions by meeting the
criteria under the fund's rights of accumulation policy.

If you make an American Funds purchase under a statement of intention
prior to April 1, 2007, purchases of American Legacy variable annuity
contracts and variable life insurance policies may also be credited toward
completion of that statement of intention.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms and those in the prospectus with
their first purchase.

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plans, such as an IRA, individual
403(b) plan (see exception in "Purchases by certain 403(b) plans"
under "Sales charges") or single-participant Keogh-type plan;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);

. trust accounts established by you or your immediate family (for trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family; or

SMALLCAP World Fund -- Page 43
<PAGE>

. 529 accounts, which will be aggregated at the account owner level
(Class 529-E accounts may only be aggregated with an eligible employer
plan).

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 employee
benefit plans other than the individual-type employee benefit plans
described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, excluding the
individual-type employee benefit plans described above;

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares;

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations; or

. for individually established participant accounts of a 403(b) plan
that is treated similarly to an employer-sponsored plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" above), or made for two or more such 403(b) plans that are
treated similarly to employer-sponsored plans for sales charge
purposes, in each case of a single employer or affiliated employers as
defined in the 1940 Act.

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 -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as individual holdings in Endowments. Shares of
money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge also qualify. However,
direct purchases of American Funds money market funds are excluded.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments, to determine your sales charge on investments in accounts
eligible to be aggregated. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") or (b) the amount you invested (including reinvested
dividends and capital gains, but excluding capital appreciation) less any
withdrawals (the "cost value"). Depending on the entity on whose books your
account is held, the value of your holdings in that account may not be
eligible for calculation at cost value. For example, accounts held in
nominee or street name are not

SMALLCAP World Fund -- Page 44
<PAGE>

eligible for calculation at cost value and instead will be calculated at
market value for purposes of rights of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

If you make a gift of American Funds Class A shares, upon your request, you
may purchase the shares at the sales charge discount allowed under rights
of accumulation of all of your American Funds accounts.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions made after the Transfer Agent is
notified of the death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through a systematic withdrawal plan (SWP) (see "Automatic
withdrawals" under "Shareholder account services and privileges"
below). For each SWP payment, assets that are not subject to a CDSC,
such as appreciation on shares and shares acquired through
reinvestment of dividends and/or capital gain distributions, will be
redeemed first and will count toward the 12% limit. If there is an
insufficient amount of assets not subject to a CDSC to cover a
particular SWP payment, shares subject to the lowest CDSC will be
redeemed next until the 12% limit is reached. Any dividends and/or
capital gain distributions taken in cash by a shareholder who receives
payments through a SWP will also count toward the 12% limit. In the
case of a SWP, the 12% limit is calculated at the time a systematic
redemption is first made, and is recalculated at the time each
additional systematic redemption is made. Shareholders who establish a
SWP

SMALLCAP World Fund -- Page 45
<PAGE>

should be aware that the amount of a payment not subject to a CDSC may
vary over time depending on fluctuations in the value of their
accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds money market funds are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or elimination of the fund by
the Virginia College Savings Plan as an option for additional investment within
CollegeAmerica.

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders. To contact American Funds Service Company via overnight mail or
courier service, see "Purchase and exchange of shares."

A signature guarantee may be required for certain redemptions. In such an event,
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. The Transfer Agent reserves the
right to require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, 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 10
business 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.

SMALLCAP World Fund -- Page 46
<PAGE>

You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in 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 that you would like to invest ($50 minimum
per fund; $25 minimum per fund in the case of employer-sponsored 529 accounts)
and the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If the
date you specified falls on a weekend or holiday, your money will be invested on
the following business day. However, if the following business day falls in the
next month, your money will be invested on the business day immediately
preceding the weekend or holiday. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related investment reversed. You may change the amount of
the investment or discontinue the plan at any time by contacting the Transfer
Agent.

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
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. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

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 -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

(1) 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);

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

SMALLCAP World Fund -- Page 47
<PAGE>

(3) 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.

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more as often as you wish if your
account is worth at least $10,000, or up to four times a year for an account
worth at least $5,000. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be
electronically deposited to your bank account. The Transfer Agent will withdraw
your money from the fund you specify on or around the date you specify. If the
date you specified falls on a weekend or holiday, the redemption will take place
on the previous business day. However, if the previous business day falls in the
preceding month, the redemption will take place on the following business day
after the weekend or holiday.

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, purchases through
automatic investment plans and certain retirement plans, as well as automatic
exchanges and withdrawals will be confirmed at least quarterly.

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- 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.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

SMALLCAP World Fund -- Page 48
<PAGE>

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax 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) that may be incurred in connection
with the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these services. However, you may elect to opt out
of these services 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, it and/or 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.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds. This can be
done by using an account 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 of registered shareholders exactly as indicated on your
account application.

REDEMPTION OF SHARES -- The fund's Articles of Incorporation permit 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 of record owns
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.

While payment of redemptions normally will be in cash, the fund's Articles of
Incorporation permit payment of the redemption price wholly or partly in
securities or other property included in the assets belonging to the fund when
in the opinion of the fund's board of directors, which shall be conclusive,
conditions exist which make payment wholly in cash unwise or undesirable.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

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, MA
02110, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to subcustodial 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 shareholder accounts, 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. The principal office of American Funds

SMALLCAP World Fund -- Page 49
<PAGE>

Service Company is located at 135 South State College Boulevard, Brea, CA
92821-5823. American Funds Service Company was paid a fee of $17,370,000 for
Class A shares and $733,000 for Class B shares for the 2006 fiscal year.
American Funds Service Company is also compensated for certain transfer agency
services provided to all other share classes from the administrative services
fees paid to Capital Research and Management Company, as described under
"Administrative services agreement."

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- Deloitte & Touche LLP, 695 Town
Center Drive, Costa Mesa, California 92626, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been so included in reliance
on the report of Deloitte & Touche LLP, independent registered public accounting
firm, given on the authority of said firm as experts in accounting and auditing.
The selection of the fund's independent registered public accounting firm is
reviewed and determined annually by the board of directors.

INDEPENDENT LEGAL COUNSEL -- Paul, Hastings, Janofsky & Walker LLP, 55 Second
Street, 24th Floor, San Francisco, CA 94105, serves as counsel for the fund and
for independent directors in their capacities as such. Certain legal matters in
connection with certain capital shares offered by the prospectus have been
passed upon for the fund by Paul, Hastings, Janofsky & Walker LLP. Counsel does
not provide legal services to the fund's investment adviser or any of its
affiliated companies or control persons. A determination with respect to the
independence of the fund's "independent legal counsel" will be made at least
annually by the independent directors of the fund, as prescribed by the 1940 Act
and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on September 30. Shareholders are provided updated prospectuses
annually and at least semiannually with reports showing the fund's investment
portfolio or summary investment portfolio, financial statements and other
information. The fund's annual financial statements are audited by the fund's
independent registered public accounting firm, Deloitte & Touche LLP. In
addition, shareholders may also receive proxy statements for the fund. 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, shareholder reports and proxy
statements. To receive additional copies of a prospectus, report or proxy
statement, shareholders should contact the Transfer Agent.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics;

SMALLCAP World Fund -- Page 50
<PAGE>

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.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD filed an administrative
complaint against the Principal Underwriter. The complaint alleges violations of
certain NASD rules by the Principal Underwriter with respect to the selection of
broker-dealer firms that buy and sell securities for mutual fund investment
portfolios. The complaint seeks sanctions, restitution and disgorgement. On
August 30, 2006, the NASD Hearing Panel ruled against the Principal Underwriter
and imposed a $5 million fine. The Principal Underwriter has appealed this
decision to the NASD's National Adjudicatory Council.

On March 24, 2005, the investment adviser and Principal Underwriter filed a
complaint against the Attorney General of the State of California in Los Angeles
County Superior Court. The complaint alleged that the Attorney General
threatened to take enforcement actions against the investment adviser and
Principal Underwriter that are without merit and preempted by federal law. On
the same day, following the filing of the investment adviser's and Principal
Underwriter's complaint, the Attorney General of the State of California filed a
complaint against the Principal Underwriter and investment adviser. Filed in Los
Angeles County Superior Court, the Attorney General's complaint alleged
violations of certain sections of the California Corporations Code with respect
to so-called "revenue sharing" disclosures in mutual fund prospectuses and
statements of additional information. On November 22, 2005, the Los Angeles
Superior Court dismissed the Attorney General's complaint. The Attorney General
subsequently appealed the Superior Court's decision to California's Court of
Appeal for the Second Appellate District. On January 26, 2007, the Court of
Appeal issued a ruling allowing the California Attorney General to proceed with
his civil action.

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. The SEC is conducting a related investigation
as of the date of this statement of additional information. The investment
adviser and Principal Underwriter are cooperating fully. In addition, class
action lawsuits have been filed in the U.S. District Court, Central District of
California, relating to these matters. The investment adviser believes that
these suits are without merit and will defend itself vigorously. Further updates
on these issues will be available on the American Funds website
(americanfunds.com) under "American Funds regulatory matters."

OTHER INFORMATION -- The financial statements including the investment portfolio
and the report of the fund's independent registered public accounting firm
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, 2006

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $38.88
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). . . . . . . . . . . . . . . . $41.25

SMALLCAP World Fund -- Page 51
<PAGE>

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F
-----------------------------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406
The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443
Short-Term Bond Fund of America/SM/ . . . . . . . . . . . . . 048 248 348 448
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

FUND NUMBERS
---------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
The Investment Company of
America . . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors Fund
. . . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America . . . . . . . . . . . . 1023 1223 1323 1523 1423
Short-Term Bond Fund of America 1048 1248 1348 1548 1448
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America . . . . . . . . . . . . 1009 1209 1309 1509 1409

SMALLCAP World Fund -- Page 52
<PAGE>

FUND NUMBERS
----------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502
American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511
American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503
Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512
Capital World Growth and Income Fund 2133 2233 2333 2433 2533
EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516
Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510
The Growth Fund of America . . . . . 2105 2205 2305 2405 2505
The Income Fund of America . . . . . 2106 2206 2306 2406 2506
The Investment Company of America . 2104 2204 2304 2404 2504
The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514
New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507
New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536
SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535
Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540
American High-Income Trust . . . . . 2121 2221 2321 2421 2521
The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508
Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531
Intermediate Bond Fund of America . 2123 2223 2323 2423 2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543
Short-Term Bond Fund of America. . . 2148 2248 2348 2448 2548
The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519
The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520
The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524
The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525
U.S. Government Securities Fund . . 2122 2222 2322 2422 2522
MONEY MARKET FUNDS
The Cash Management Trust of America 2109 2209 2309 2409 2509
The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539
The U.S. Treasury Money Fund of
America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549
___________
*Qualified for sale only in certain
jurisdictions.

SMALLCAP World Fund -- Page 53
<PAGE>

[This page intentionally left blank for this filing.]

SMALLCAP World Fund -- Page 54
<PAGE>

APPENDIX

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

SMALLCAP World Fund -- Page 55
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, and C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

SMALLCAP World Fund -- Page 56
<PAGE>

C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's 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 or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
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.

SMALLCAP World Fund -- Page 57

[logo - American Funds®]

SMALLCAP World Fund^®

Investment portfolio

September 30, 2006

Common stocks — 90.27%	Shares			Market value (000)

CONSUMER DISCRETIONARY — 19.31%
Michaels Stores, Inc.		3,000,000		$	130,620
Schibsted ASA¹		3,138,000			94,207
CarMax, Inc.²		2,250,000			93,848
Central European Media Enterprises Ltd., Class A²		1,270,500			85,187
Big Lots, Inc.²		4,271,400			84,616
Cheil Industries Inc.¹		1,798,940			78,270
Lions Gate Entertainment Corp.^2,3		7,728,500			77,362
Lojas Renner SA³		1,330,000			77,142
Cyrela Brazil Realty SA, ordinary nominative		4,335,500			73,823
Jumbo SA^1,3		4,164,956			63,182
Aristocrat Leisure Ltd.¹		6,000,000			63,066
Fourlis^1,3		3,310,000			58,607
Praktiker Bau- und Heimwerkermärkte Holding AG¹		1,733,383			57,453
Ameristar Casinos, Inc.		2,600,000			56,446
Restaurant Group PLC^1,3		12,499,555			56,057
Arbitron Inc.³		1,496,760			55,395
Korea Kumho Petrochemical Co., Ltd.^1,3		1,810,940			55,179
Kuoni Reisen Holding AG, Class B^1,2		106,500			54,806
Pantaloon Retail (India) Ltd.¹		1,300,000			53,558
Debenhams PLC^1,2		15,165,000			51,520
Tupperware Brands Corp.		2,500,000			48,650
American Axle & Manufacturing Holdings, Inc.³		2,850,000			47,567
Toyoda Gosei Co., Ltd.¹		2,110,000			46,373
Ekornes AS^1,3		2,237,598			46,167
Life Time Fitness, Inc.²		940,000			43,513
GOME Electrical Appliances Holding Ltd.¹		53,163,000			43,003
Getty Images, Inc.²		850,000			42,228
Hürriyet Gazetecilik ve Matbaacilik AS¹		16,735,985			41,897
Fossil, Inc.²		1,835,000			39,526
Café de Coral Holdings Ltd.¹		23,750,000			37,800
Bob Evans Farms, Inc.		1,245,031			37,700
Unibet Group PLC (SDR)^1,3		1,778,470			37,389
Citi Trends, Inc.^2,3		1,073,916			37,061
Cheng Shin Rubber (Xiamen) Ind., Ltd.¹		34,323,477			33,667
Blyth, Inc.		1,370,000			33,332
Applebee’s International, Inc.		1,525,000			32,803
Select Comfort Corp.²		1,487,500			32,547
Triarc Companies, Inc., Class B, Series 1		1,080,400			16,336
Triarc Companies, Inc., Class A		950,000			15,760
Bloomsbury Publishing PLC^1,3		5,405,000			31,613
Blue Nile, Inc.^2,3		860,375			31,275
Fisher & Paykel Appliances Holdings Ltd.¹		13,080,000			30,827
Cedar Fair, L.P.		1,150,000			30,257
Bijou Brigitte modische Accessoires AG¹		114,700			29,663
Rightmove PLC^1,2		4,559,450			29,637
IBT Education Ltd.^1,3		21,727,690			29,500
Furniture Brands International, Inc.		1,500,000			28,560
Pinnacle Entertainment, Inc.²		1,000,000			28,120
Shuffle Master, Inc.²		1,030,000			27,820
ValueVision Media, Inc., Class A^2,3		2,400,000			27,816
P.F. Chang’s China Bistro, Inc.²		800,000			27,768
Valassis Communications, Inc.²		1,500,000			26,475
Halfords Group PLC¹		4,200,000			26,340
Modern Times Group MTG AB, Class B^1,2		500,000			25,919
ServiceMaster Co.		2,300,000			25,783
Children’s Place Retail Stores, Inc.²		400,000			25,612
CTC Media, Inc.²		1,132,600			25,257
Lifestyle International Holdings Ltd.¹		12,640,000			24,981
GEOX SpA¹		1,981,750			24,683
Trigano SA¹		544,250			24,526
GMARKET INC. (ADR)²		1,662,000			24,182
Stockmann OYJ ABP, Class B¹		565,000			23,750
OSIM International Ltd.¹		19,980,000			23,682
XM Satellite Radio Holdings Inc., Class A²		1,800,000			23,202
CKE Restaurants, Inc.		1,384,179			23,143
Alma Media Corp.¹		2,368,478			22,810
Submarino SA, ordinary nominative		1,151,700			22,532
Valentino Fashion Group SpA¹		635,000			21,787
Nien Made Enterprise Co., Ltd.^1,3		26,156,000			21,428
Progressive Gaming International Corp.^2,3		2,600,000			21,320
Nobia AB¹		627,000			20,987
PETsMART, Inc.		750,000			20,813
Nishimatsuya Chain Co., Ltd.¹		1,092,000			20,579
RNB Retail and Brands AB¹		2,655,000			20,484
Williams-Sonoma, Inc.		626,400			20,289
Handsome Co. Ltd.¹		1,290,000			20,272
Photo-Me International PLC¹		10,000,000			19,821
Rossi Residencial SA, ordinary nominative		1,755,500			18,950
La-Z-Boy Inc.		1,300,000			18,148
Banyan Tree Holdings Ltd.^1,2		33,769,000			18,076
Bright Horizons Family Solutions, Inc.²		425,000			17,735
Nitori Co., Ltd.¹		351,000			15,959
Hemtex AB¹		1,175,000			15,778
Zumiez Inc.²		570,000			15,390
JJB Sports PLC¹		4,390,500			15,351
Denny’s Corp.²		4,500,000			15,345
Crocs, Inc.²		450,000			15,278
YBM Sisa.com Inc.^1,3		624,449			15,215
Carpetright PLC¹		692,213			14,945
BEC World PCL¹		31,500,000			14,258
Impact 21 Co., Ltd.¹		797,400			14,170
SA D’Ieteren NV¹		40,681			13,560
Pumpkin Patch Ltd.¹		4,970,107			13,157
O’Charley’s Inc.²		650,000			12,331
Next Media Ltd.¹		22,100,000			12,046
Urban Outfitters, Inc.²		675,000			11,941
Levitt Corp., Class A³		1,000,000			11,760
TAKKT AG¹		801,778			11,599
Prime Success International Group Ltd.¹		15,200,000			10,651
Bilia AB, Class A¹		785,000			10,459
Restoration Hardware, Inc.²		1,200,000			10,404
Largan Precision Co., Ltd.¹		498,750			10,247
Monro Muffler Brake, Inc.		290,000			9,863
Sharper Image Corp.^2,3		950,000			9,785
Haseko Corp.^1,2		2,830,000			9,728
Tractor Supply Co.²		197,962			9,554
Chipotle Mexican Grill, Inc., Class A²		175,000			8,692
Orient-Express Hotels Ltd., Class A		199,500			7,457
Formosa International Hotels Corp.¹		2,716,000			7,366
ElringKlinger AG¹		135,000			6,939
Nokian Renkaat Oyj¹		370,000			6,652
Rinnai Corp.¹		230,000			6,602
Fontainebleau Resorts, LLC, Class A, units^1,2,4		650,000			6,500
Gafisa SA, ordinary nominative²		500,000			6,456
NutriSystem, Inc.²		100,000			6,229
Palm Harbor Homes, Inc.²		374,906			5,609
Gaming VC Holdings SA^1,3		2,023,800			5,339
Sanctuary Group PLC^1,2,3		14,412,733			5,048
Parkson Retail Group Ltd.¹		1,240,000			4,581
Zhejiang Glass Co. Ltd., Class H^1,2		11,499,400			2,450
Nien Hsing Textile Co., Ltd.¹		3,000,000			1,532
Premier Image Technology Corp.¹		88,650			156
Hi-Lex Corp.¹		3,200			44
					3,566,511

INDUSTRIALS — 13.63%
Samsung Engineering Co., Ltd.^1,3		2,587,640			124,070
Corrections Corporation of America²		2,825,000			122,181
Container Corp. of India Ltd.¹		2,891,794			106,223
Downer EDI Ltd.^1,3		18,641,198			83,246
ALL - América Latina Logística, units		10,015,650			77,918
GS Engineering & Construction Co. Ltd.¹		1,072,127			75,297
Buhrmann NV¹		4,953,600			74,520
LS Industrial Systems Co., Ltd.^1,3		1,950,000			71,614
JetBlue Airways Corp.²		7,654,023			70,953
Silitech Technology Corp.^1,3		10,515,798			56,596
SEEK Ltd.^1,3		14,768,997			55,711
MSC Industrial Direct Co., Inc., Class A		1,350,000			54,999
Hyundai Mipo Dockyard Co., Ltd.¹		409,370			50,985
Murray & Roberts Holdings Ltd.¹		12,115,000			50,038
Actuant Corp., Class A		975,000			48,847
Michael Page International PLC¹		6,416,190			46,156
Acuity Brands, Inc.		969,500			44,015
United Stationers Inc.²		912,200			42,426
ChoicePoint Inc.²		1,150,000			41,170
Minebea Co., Ltd.¹		7,470,000			41,017
Daelim Industrial Co., Ltd.¹		588,640			40,051
Grupo Aeroportuario del Pacífico, SA de CV, Class B (ADR)		1,034,300			35,166
K&F Industries Holdings, Inc.²		1,800,000			33,804
Copa Holdings, SA, Class A		950,000			32,613
Mine Safety Appliances Co.		875,500			31,203
Hong Kong Aircraft Engineering Co. Ltd.¹		2,052,000			29,155
Seco Tools AB, Class B¹		2,225,000			26,592
Sydney Roads Group, units^1,2		31,894,374			26,368
Uponor Oyj¹		960,100			26,004
Wilh. Wilhelmsen ASA, Class A¹		799,600			25,271
Tetra Tech, Inc.²		1,440,500			25,094
Ballast Nedam NV^1,3		628,753			24,464
Federal Signal Corp.		1,596,100			24,341
G&K Services, Inc., Class A		650,000			23,679
Hyundai Engineering & Construction Co., Ltd.^1,2		420,000			22,528
Österreichische Post AG^1,2		587,014			22,363
Kelly Services, Inc., Class A		800,000			21,928
STX Shipbuilding Co., Ltd.¹		1,632,630			21,822
Lupatech SA, ordinary nominative²		2,054,900			21,615
Aditya Birla Nuvo¹		1,059,100			20,066
Oslo Børs Holding ASA¹		228,778			20,006
Chart Industries, Inc.^2,3		1,613,500			19,862
Bradken Ltd.¹		4,389,221			19,629
Kyeryong Construction Industrial Co., Ltd.^1,3		493,190			19,518
EnerSys²		1,200,000			19,248
Emeco Holdings Ltd.^1,2		14,010,000			19,096
Nexans SA¹		215,000			18,657
Trakya Cam Sanayii AS¹		6,873,293			17,571
Max India Ltd.^1,2		999,986			17,506
Spirax-Sarco Engineering PLC¹		930,000			16,012
Singapore Post Private Ltd.¹		24,975,000			15,902
Northgate PLC¹		830,000			15,754
Michaniki SA^1,3		3,935,000			15,120
Fu Sheng Industrial Co., Ltd.¹		16,025,920			14,995
Halla Engineering & Construction Corp.^1,3		626,000			14,618
Aboitiz Equity Ventures¹		134,250,000			13,947
Pentair, Inc.		500,000			13,095
Geberit AG¹		10,550			12,872
Taiwan Secom Co., Ltd.¹		7,766,900			12,854
TransDigm Group Inc.²		525,000			12,821
OSG CORP.¹		891,000			12,721
Herman Miller, Inc.		370,000			12,658
CoStar Group, Inc.²		300,000			12,396
Chen Hsong Holdings Ltd.¹		22,396,000			12,274
Toll Holdings Ltd.¹		1,032,183			11,833
Dongfang Electrical Machinery Co. Ltd., Class H¹		6,800,000			11,801
Goodpack Ltd.^1,2		10,448,000			11,310
Shenzhen Expressway Co., Ltd., Class H¹		19,422,000			10,811
Latécoère SA¹		323,626			10,789
Permasteelisa SpA¹		615,000			10,596
Rollins, Inc.		500,000			10,555
SembCorp Marine Ltd.¹		4,959,000			10,441
Intertek Group PLC¹		700,000			10,206
104 Corp.¹		1,518,000			9,888
Stork NV¹		184,800			9,344
Samsung Techwin Co., Ltd.¹		220,710			9,024
Hi-P International Ltd.¹		16,886,000			8,850
Hyunjin Materials Co., Ltd.^1,2		500,500			8,731
Italian-Thai Development PCL¹		57,220,000			8,574
Harbin Power Equipment Co. Ltd., Class H¹		10,500,000			8,489
Prosegur Compañía de Seguridad, SA¹		282,000			8,464
Anhui Expressway Co. Ltd., Class H¹		12,000,000			8,458
Curtiss-Wright Corp.		268,600			8,152
ElkCorp		300,000			8,145
Royal Boskalis Westminster NV¹		124,600			8,093
Aker American Shipping ASA^1,2		544,600			8,006
Krones AG¹		55,000			7,264
Techem AG¹		145,600			7,055
NEPES Corp.^1,2		701,634			6,772
Steelcase Inc., Class A		419,000			6,574
Korea Electric Terminal Co., Ltd.¹		350,000			5,570
Nissei Industries, Ltd.¹		462,500			4,972
Ansaldo STS SpA^1,2		390,000			4,130
Lincoln Electric Holdings, Inc.		75,500			4,111
Sino-Thai Engineering and Construction PCL¹		30,400,000			3,922
Noritz Corp.¹		130,000			2,266
LTG Technologies PLC^1,2,3		17,785,714			1,997
Moatech Co., Ltd.¹		292,600			1,400
ZOOTS^1,2,3,4		25,173			234
					2,518,068

HEALTH CARE — 12.51%
Beckman Coulter, Inc.		2,300,000			132,388
Medicis Pharmaceutical Corp., Class A³		3,695,000			119,533
Kyphon Inc.^2,3		3,145,600			117,708
Advanced Medical Optics, Inc.²		2,735,000			108,169
Integra LifeSciences Holdings Corp.^2,3		2,189,500			82,062
Myogen, Inc.^2,3		2,315,000			81,210
FoxHollow Technologies, Inc.^2,3		1,994,900			68,206
ArthroCare Corp.^2,3		1,431,700			67,089
Wright Medical Group, Inc.^2,3		2,742,800			66,513
Alfresa Holdings Corp.¹		929,300			59,029
Sirona Dental Systems, Inc.²		1,550,000			51,042
IDEXX Laboratories, Inc.²		520,000			47,393
STERIS Corp.		1,750,000			42,105
Viasys Healthcare Inc.²		1,494,000			40,697
Valeant Pharmaceuticals International		2,050,000			40,549
Greatbatch, Inc.^2,3		1,744,400			39,458
Hikma Pharmaceuticals PLC¹		5,069,153			39,232
Nobel Biocare Holding AG¹		156,000			38,429
Apria Healthcare Group Inc.²		1,875,000			37,013
NuVasive, Inc.^2,3		1,709,000			34,368
Grifols, SA^1,2		3,387,600			34,368
Fisher & Paykel Healthcare Corp. Ltd.¹		12,600,000			34,159
Apollo Hospitals Enterprise Ltd.^1,3		3,275,000			33,987
Vital Signs, Inc.		580,000			32,834
Rhön-Klinikum AG¹		705,200			31,644
Hologic, Inc.²		708,034			30,814
Sigma Pharmaceuticals Ltd.¹		15,680,000			30,478
Volcano Corp.^2,3		2,303,900			26,472
Nuvelo, Inc.²		1,424,915			25,990
Nakanishi Inc.¹		196,500			25,905
PSS World Medical, Inc.²		1,275,000			25,487
Haemonetics Corp.²		539,600			25,253
Cochlear Ltd.¹		637,000			25,152
DCA Group Ltd.¹		9,800,000			25,041
BioMarin Pharmaceutical Inc.²		1,725,901			24,560
ResMed Inc²		452,000			18,193
ResMed Inc (Australia)^1,2		1,500,000			6,034
LifePoint Hospitals, Inc.²		550,000			19,426
ICOS Corp.²		750,000			18,795
United Therapeutics Corp.²		350,000			18,389
Diagnósticos da América SA²		950,000			17,930
Nabi Biopharmaceuticals^2,3		3,050,000			17,629
Hythiam, Inc.^2,3		2,425,000			17,509
Varian, Inc.²		375,000			17,201
Toho Pharmaceutical Co., Ltd.¹		962,000			17,162
Alexion Pharmaceuticals, Inc.²		500,000			16,990
Genmab A/S^1,2		400,000			16,639
Vertex Pharmaceuticals Inc.²		471,300			15,859
Senomyx, Inc.²		1,024,400			15,745
Par Pharmaceutical Companies, Inc.²		850,000			15,504
Invacare Corp.		635,000			14,935
Adams Respiratory Therapeutics, Inc.²		397,600			14,548
Nektar Therapeutics²		1,000,000			14,410
Selcuk Ecza Deposu Ticaret ve Sanayi AS, Class B^1,2		4,454,500			14,247
Theravance, Inc.²		500,000			13,520
I-Flow Corp.²		1,100,000			13,222
Eclipsys Corp.²		725,000			12,985
American Medical Systems Holdings, Inc.²		700,000			12,901
Psychiatric Solutions, Inc.²		333,500			11,369
Labopharm Inc.²		2,000,000			11,340
Triad Hospitals, Inc.²		250,000			11,008
Cubist Pharmaceuticals, Inc.²		500,000			10,870
Tecan Group Ltd., Männedorf¹		215,586			10,770
Keryx Biopharmaceuticals, Inc.²		900,000			10,647
Vical Inc.^2,3		2,075,279			10,480
MGI PHARMA, Inc.²		600,000			10,326
Tong Ren Tang Technologies Co., Ltd., Class H¹		5,824,000			10,056
Idenix Pharmaceuticals, Inc.²		1,000,000			9,700
QIAGEN NV^1,2		611,558			9,588
Recordati SpA¹		1,300,000			9,094
Amplifon SpA¹		1,075,980			8,489
ZymoGenetics, Inc.²		500,000			8,435
Penwest Pharmaceuticals Co.²		500,000			8,325
Adeza Biomedical Corp.²		481,000			7,893
American Healthways, Inc.²		175,000			7,805
Noven Pharmaceuticals, Inc.²		305,657			7,372
Immucor, Inc.²		300,000			6,723
Gentium SpA (ADR)^2,4		450,000			6,368
Human Genome Sciences, Inc.²		500,000			5,770
Cytokinetics, Inc.²		676,500			4,350
BioCryst Pharmaceuticals, Inc.²		209,554			2,613
KRKA, d.d., Novo mesto¹		2,782			2,572
Discovery Laboratories, Inc.²		1,200,000			2,556
Vision-Sciences, Inc.^2,3		1,884,500			2,431
Allied Medical Ltd.^1,2		147,030			12
					2,311,072

INFORMATION TECHNOLOGY — 12.22%
Kingboard Chemical Holdings Ltd.^1,3		45,946,000		$	165,405
CNET Networks, Inc.^2,3		10,655,000			102,075
NHN Corp.^1,2		735,330			77,505
Semtech Corp.^2,3		5,900,000			75,284
ValueClick, Inc.²		3,800,000			70,452
PMC-Sierra, Inc.^2,3		11,500,000			68,310
Tripod Technology Corp.^1,3		21,391,920			65,432
MKS Instruments, Inc.^2,3		2,849,944			57,882
TIBCO Software Inc.²		5,862,500			52,645
Fairchild Semiconductor International, Inc.²		2,665,000			49,836
Venture Corp. Ltd.¹		5,969,600			47,254
Mentor Graphics Corp.²		3,000,000			42,240
Knot, Inc.^2,3		1,200,000			26,556
Knot, Inc.^2,3,4		670,000			14,827
Rogers Corp.²		600,000			37,050
Varian Semiconductor Equipment Associates, Inc.²		1,000,000			36,700
National Instruments Corp.		1,337,500			36,567
Cypress Semiconductor Corp.²		2,000,000			35,540
NCsoft Corp.^1,2		577,000			35,482
Gartner, Inc.²		1,925,000			33,861
GES International^1,3		42,700,000			33,112
Novell, Inc.²		5,394,100			33,012
Vishay Intertechnology, Inc.²		2,350,000			32,994
Littelfuse, Inc.²		950,000			32,965
Marchex, Inc., Class B^2,3		2,125,000			32,598
Veeco Instruments, Inc.^2,3		1,598,523			32,210
Diebold, Inc.		725,700			31,590
Baycorp Advantage Ltd.^1,3		13,885,000			31,442
ProMOS Technologies Inc.^1,2		80,006,000			31,365
Spansion Inc., Class A²		1,870,400			31,180
Unimicron Technology Corp.¹		25,250,450			31,136
Hana Microelectronics PCL¹		40,425,000			29,795
Intersil Corp., Class A		1,107,105			27,179
Manhattan Associates, Inc.²		1,125,000			27,158
MacDonald, Dettwiler and Associates Ltd.²		700,000			23,615
Chicony Electronics Co., Ltd.¹		19,498,185			22,651
O₂Micro International Ltd. (ADR)^2,3		3,055,000			21,110
Orbotech Ltd.²		887,000			21,022
Sanken Electric Co., Ltd.¹		1,625,000			20,959
Power Integrations, Inc.²		1,050,000			20,580
Cymer, Inc.²		460,000			20,199
ASM Pacific Technology Ltd.¹		3,840,000			20,156
Internet Capital Group, Inc.^2,3		2,100,000			19,845
Ichia Technologies, Inc.^1,2,3		16,995,177			18,693
SFA Engineering Corp.^1,3		553,700			17,979
Integrated Device Technology, Inc.²		1,042,000			16,735
Echelon Corp.^2,3		2,000,000			16,440
NAVTEQ Corp.²		619,500			16,175
Chartered Semiconductor Manufacturing Ltd^1,2		20,000,000			14,987
Vaisala Oyj, Class A¹		423,295			14,769
Verifone Holdings, Inc.²		500,000			14,275
Spark Networks PLC (GDR)^1,2,3		1,300,000			7,419
Spark Networks PLC (ADR)^2,3		1,103,000			6,618
Winbond Electronics Corp.^1,2		45,000,000			13,505
Career Technology (MFG.) Co., Ltd.^1,3		14,957,559			13,109
Wintek Corp.¹		13,917,273			12,589
Unisteel Technology Ltd.¹		9,655,000			12,458
Techwell, Inc.²		825,000			12,359
McAfee, Inc.²		500,000			12,230
Simmtech Co., Ltd.¹		1,020,000			11,472
Rotork PLC¹		797,581			11,472
SupportSoft, Inc.^2,3		2,554,400			11,163
PDF Solutions, Inc.²		994,400			10,899
SkillSoft PLC (ADR)²		1,696,800			10,843
Plantynet Co., Ltd.^1,3		537,600			10,777
Toshiba Ceramics Co., Ltd.¹		2,181,000			10,773
Reunert Ltd.¹		1,215,000			10,676
Moser Baer India Ltd.¹		2,350,000			10,664
Net 1 UEPS Technologies, Inc.²		425,000			9,716
Cogent, Inc.²		700,000			9,611
Brooks Automation, Inc.²		725,000			9,461
Symyx Technologies, Inc.²		445,000			9,430
TTM Technologies, Inc.²		800,000			9,360
Plantronics, Inc.		515,000			9,028
Kakaku.com, Inc.¹		2,740			8,885
Phoenix PDE Co., Ltd.^1,3		1,500,000			8,641
InfoSpace.com, Inc.²		450,000			8,298
Himax Technologies, Inc. (ADR)²		1,452,200			8,292
AAC Acoustic Technologies Holdings Inc.^1,2		6,920,000			7,992
Mtekvision Co., Ltd.¹		319,710			7,787
Billing Services Group PLC^1,2,3		16,548,800			7,533
i2 Technologies, Inc.²		402,100			7,531
Siliconware Precision Industries Co., Ltd.¹		6,083,759			7,246
Intevac, Inc.²		400,000			6,720
Kontron AG¹		500,000			6,199
KEC Corp.^1,3		3,926,550			5,749
Taiflex Scientific Co., Ltd.^1,2		4,267,750			5,679
Interflex Co., Ltd.^1,3		799,000			4,966
DK UIL Co., Ltd.¹		564,600			4,064
Sunplus Technology Co., Ltd.¹		4,105,861			3,925
Radiant Op-to Electronics Corp.¹		2,448,250			3,474
Jahwa Electronics Co., Ltd.¹		419,130			3,164
Min Aik Technology Co., Ltd.¹		2,360,000			2,623
KEC Holdings Co. Ltd.^1,3		1,308,849			1,916
Avid Technology, Inc.²		33,400			1,216
Infoteria Corp.^1,2,3,4		2,577			873
Pixelfusion PLC^1,2,4		2,300,000			176
Orbiscom Ltd.^1,2,4		3,905,874			59
MMC AS^1,2,4		4,150,000			6
					2,257,475

FINANCIALS — 9.96%
Daegu Bank, Ltd.^1,3		10,399,890			173,750
Pusan Bank^1,3		11,477,500			142,406
MCB Bank Ltd.¹		19,560,080			82,443
Greek Postal Savings Bank SA^1,2		3,672,400			73,796
HDFC Bank Ltd.¹		3,656,500			73,607
Indiabulls Financial Services Ltd.¹		8,069,292			72,452
Housing Development Finance Corp. Ltd.¹		2,059,346			68,958
Sumitomo Real Estate Sales Co., Ltd.¹		700,000			59,761
IndyMac Bancorp, Inc.		1,299,200			53,475
National Bank of Pakistan¹		11,684,400			48,910
ORCO PROPERTY GROUP SA¹		346,107			43,077
VastNed Retail NV¹		512,000			42,034
Centennial Bank Holdings, Inc.^2,3,4		2,700,000			26,136
Centennial Bank Holdings, Inc.^2,3		1,515,000			14,665
Kotak Mahindra Bank Ltd.¹		5,493,262			40,000
Ascendas Real Estate Investment Trust¹		28,187,550			38,205
Thanachart Capital PCL^1,3		86,650,000			34,263
Topdanmark A/S^1,2		235,700			32,514
Cathay Real Estate Development Co. Ltd.^1,2		51,250,000			31,995
Central Pattana PCL¹		56,461,000			28,797
Saxon Capital, Inc.		2,000,000			28,080
Interhyp AG^1,2		298,903			27,068
Umpqua Holdings Corp.		924,700			26,446
Northwest Bancorp, Inc.		955,000			24,352
China Banking Corp.¹		1,713,750			23,453
Globe Trade Center SA^1,2		2,350,000			22,453
Banco de Oro Universal Bank^1,2		28,000,000			22,425
Wintrust Financial Corp.		440,000			22,066
Crescent Real Estate Equities Co.		1,000,000			21,810
Mizrahi Tefahot Bank Ltd.¹		3,150,000			19,335
Kiatnakin Finance PCL¹		24,270,900			19,063
Sparebanken Rogaland¹		658,145			18,660
Fulton Financial Corp.		1,115,686			18,063
Banco Nossa Caixa SA, ordinary nominative		874,000			17,433
Hung Poo Real Estate Development Corp.^1,3		16,367,000			17,430
Allgreen Properties Ltd.¹		17,145,000			17,130
Wing Tai Holdings Ltd.¹		14,000,000			16,678
Federal Agricultural Mortgage Corp., Class C		630,000			16,676
Alabama National BanCorporation		240,000			16,380
Montpelier Re Holdings Ltd.		844,200			16,369
Banner Corp.		398,110			16,338
Kensington Group PLC¹		994,000			15,382
Dah Sing Financial Holdings Ltd.¹		1,700,000			15,306
Hong Kong Exchanges and Clearing Ltd.¹		1,857,000			13,546
Banco Macro Bansud SA, Class B (ADR)		588,800			12,600
South Financial Group, Inc.		465,000			12,104
City National Corp.		180,000			12,071
Siam City Bank PCL¹		22,335,822			11,807
Vineyard National Bancorp		450,000			11,682
Capital Lease Funding, Inc.		1,041,700			11,552
First Regional Bancorp^2,4		315,000			10,732
UTI Bank Ltd.¹		1,188,383			9,843
CapitaCommercial Trust Management Ltd.¹		6,634,000			9,229
Amata Corp. PCL¹		26,800,000			9,027
AmericanWest Bancorporation		410,000			8,713
SinoPac Financial Holdings Co. Ltd.¹		17,671,000			8,433
Sterling Bancshares, Inc.		400,000			8,100
Eurobancshares, Inc.²		853,000			8,078
First Niagara Financial Group, Inc.		550,000			8,019
Sparebanken Midt-Norge¹		650,000			7,753
TICON Property Fund^1,3		24,700,000			6,249
Public Financial Holdings Ltd.¹		7,937,000			6,112
Catena AB^1,2		392,500			5,065
Nasdaq Stock Market, Inc²		142,300			4,303
Desert Community Bank		200,500			3,627
Echo Investment SA^1,2		60,000			1,313
					1,839,598

MATERIALS — 5.97%
Yamana Gold Inc.		8,915,000			82,170
Taiwan Fertilizer Co., Ltd.¹		45,041,000			73,159
Dongkuk Steel Mill Co., Ltd.¹		3,355,000			63,516
Fortescue Metals Group Ltd.^1,2		9,479,902			58,905
Cleveland-Cliffs Inc.		1,500,000			57,165
Peter Hambro Mining PLC^1,2		1,690,000			38,050
Taiwan Cement Corp.¹		49,164,209			36,904
Sino-Forest Corp.^2,3		9,422,800			36,005
Nikanor PLC^1,2		3,225,836			34,549
James Hardie Industries Ltd.¹		5,841,446			32,554
Bema Gold Corp.²		7,025,000			30,929
AptarGroup, Inc.		600,000			30,528
Asian Paints Ltd.¹		2,062,500			30,409
Hyundai Steel Co.¹		845,000			29,533
Fuji Seal International, Inc.¹		1,070,000			28,121
Hecla Mining Co.²		4,740,800			27,212
Kenmare Resources PLC^1,2,3		39,316,000			27,011
Central African Mining & Exploration Co. PLC^1,2		29,546,569			26,011
Silver Wheaton Corp.²		2,505,000			23,514
PT Indocement Tunggal Prakarsa¹		37,750,000			20,188
Hindalco Industries Ltd.¹		5,000,000			18,724
Associated Cement Companies Ltd.¹		830,000			17,998
Apex Silver Mines Ltd.²		998,000			16,627
Galaxy Entertainment Group Ltd.^1,2		19,016,000			16,594
Mineral Deposits Ltd.^1,2,3		16,220,000			16,040
Owens-Illinois, Inc.²		1,000,000			15,420
Minara Resources Ltd.¹		5,073,334			15,379
Northern Orion Resources Inc.^2,4		2,800,000			11,025
Northern Orion Resources Inc.²		1,100,000			4,331
Banro Corp.^2,4		1,750,000			15,268
PT Semen Gresik¹		5,000,000			14,742
Abitibi-Consolidated Inc.		5,775,300			14,265
S&B Industrial Minerals SA¹		1,344,000			14,190
Eldorado Gold Corp.²		3,000,000			13,020
Cementerie del Tirreno S.p.A.¹		1,600,000			12,330
Hanwha Chemical Corp.¹		1,135,000			12,157
Hung Hing Printing Group Ltd.¹		17,199,000			9,265
Eastern Platinum Ltd.²		4,561,700			4,858
Eastern Platinum Ltd.^2,4		3,500,000			3,727
Ballarat Goldfields NL^1,2,3		53,355,000			6,787
Ballarat Goldfields NL^1,2,3,4		10,250,000			1,304
Valspar Corp.		300,000			7,980
Anhui Conch Cement Co. Ltd., Class H¹		3,950,000			7,817
Aricom PLC^1,2		9,443,505			7,546
Golden Star Resources Ltd.²		2,700,000			7,297
European Minerals Corp. (United Kingdom)^1,2		6,880,000			4,405
European Minerals Corp.²		3,300,000			2,303
Hanil Cement Co., Ltd.¹		82,500			6,134
Energem Resources Inc.^2,3		8,002,500			6,087
Oriel Resources PLC^1,2,4		5,000,000			4,068
Mwana Africa PLC^1,2,4		5,980,000			3,750
Avocet Mining PLC^1,2		1,250,000			2,387
Ivanhoe Mines Ltd.²		282,700			1,763
Thistle Mining Inc.^1,2		30,000			11
Thistle Mining Inc. (United Kingdom)^1,2		22,625			8
					1,102,040

ENERGY — 5.94%
OPTI Canada Inc.^2,3		10,409,600			166,740
OPTI Canada Inc.^2,3,4		420,000			6,728
Quicksilver Resources Inc.^2,3		4,999,150			159,473
Delta Petroleum Corp.^2,3		2,829,000			63,709
Denbury Resources Inc.²		1,995,200			57,661
Oilexco Inc.²		6,808,600			39,359
Oilexco Inc. (United Kingdom)^1,2,4		2,900,000			16,708
CARBO Ceramics Inc.³		1,473,240			53,081
First Calgary Petroleums Ltd. (United Kingdom)^1,2		4,800,000			31,492
First Calgary Petroleums Ltd.²		3,146,000			19,791
UrAsia Energy Ltd.²		22,000,000			50,595
BA Energy Inc.^1,2,3,4		5,661,692			48,131
Aventine Renewable Energy, Inc.^2,3		2,200,000			47,058
Bill Barrett Corp.²		1,893,500			46,504
WorleyParsons Ltd.¹		3,677,497			46,203
Warren Resources, Inc.^2,3		3,255,000			39,646
Synenco Energy Inc., Class A^2,3		1,815,000			24,541
Synenco Energy Inc., Class A^2,3,4		1,100,000			14,873
Expro International Group PLC¹		2,500,000			31,139
Southwestern Energy Co.²		905,600			27,050
Regal Petroleum PLC^1,2,3		7,817,000			22,561
FMC Technologies, Inc.²		350,000			18,795
Hydril Co.²		317,500			17,799
Centennial Coal Co. Ltd.¹		5,850,000			16,038
China Oilfield Services Ltd., Class H¹		20,363,300			10,949
Caspian Energy Inc. (United Kingdom)^1,2,3		3,450,000			4,802
Caspian Energy Inc.^2,3,4		2,000,000			2,685
Caspian Energy Inc.^2,3		450,000			604
Bankers Petroleum Ltd.²		13,703,800			6,745
FirstAfrica Oil PLC^1,2,3		172,338,000			5,969
					1,097,429

CONSUMER STAPLES — 2.34%
Lindt & Sprüngli AG, participation certificate¹		19,166			43,198
Lindt & Sprüngli AG¹		1,694			40,396
Coca-Cola Icecek AS, Class C^1,2		7,623,603			37,780
Delta and Pine Land Co.		800,000			32,400
WD-40 Co.³		900,000			32,103
China Mengniu Dairy Co.¹		17,251,000			28,916
IAWS Group PLC¹		1,500,000			27,865
BJ’s Wholesale Club, Inc.²		948,000			27,663
AMOREPACIFIC Corp.^1,2		50,264			23,317
Anadolu Efes Biracılık ve Malt Sanayii A S¸¹		900,000			22,304
Fresh Del Monte Produce Inc.		1,100,000			19,129
Church & Dwight Co., Inc.		474,500			18,558
Universal Robina Corp.¹		51,235,000			18,365
PGG Wrightson Ltd.^1,3		16,195,000			17,565
Poslovni Sistem Mercator, d.d.¹		63,333			13,920
Massmart Holdings Ltd.¹		1,840,000			13,484
American Italian Pasta Co., Class A²		900,000			7,002
Crown Confectionery Co., Ltd.¹		36,000			4,354
Cawachi Ltd.¹		130,400			3,950
Winn-Dixie Stores, Inc.²		3,500,000			308
					432,577

TELECOMMUNICATION SERVICES — 2.03%
Time Warner Telecom Inc., Class A²		4,512,600			85,785
LG Telecom Ltd.^1,2		6,370,000			74,754
Digi International Inc.¹		19,308,700			65,436
TIM Participações SA, preferred nominative (ADR)		1,709,528			47,610
NeuStar, Inc., Class A²		900,040			24,976
Telemig Celular Participações SA, preferred nominative		5,185,172,400			9,547
Telemig Celular Participações SA, preferred nominative (ADR)		163,000			6,015
Vivo Participações SA, preferred nominative²		2,300,013			7,083
Vivo Participações SA, preferred nominative (ADR)²		2,127,270			6,637
Vivo Participações SA, ordinary nominative²		72,055			391
NTELOS Holdings Corp.²		1,003,575			12,816
GLOBE TELECOM, Inc.¹		526,867			11,300
Partner Communications Co. Ltd.¹		935,000			9,262
Partner Communications Co. Ltd. (ADR)		125,000			1,223
WiderThan Co., Ltd. (ADR)²		480,000			8,035
Unwired Group Ltd.^1,2		12,400,000			3,234
					374,104

UTILITIES — 1.55%
Xinao Gas Holdings Ltd.^1,3		56,438,000			57,860
CESC Ltd.^1,3		5,829,000			39,006
AES Tietê SA, preferred nominative		1,150,000,000			30,439
Glow Energy PCL¹		37,970,000			28,504
PT Perusahaan Gas Negara (Persero) Tbk¹		20,450,000			26,808
Tata Power Co. Ltd.¹		2,108,047			26,145
Northumbrian Water Group PLC¹		3,425,000			17,788
Electricity Generating PCL¹		3,535,400			7,608
Electricity Generating PCL, nonvoting depositary receipt¹		3,000,100			6,391
Reliance Energy Ltd.¹		1,284,500			13,571
First Gen Corp.¹		13,500,000			13,202
Kot Addu Power Co., Ltd.¹		13,700,000			10,134
Energen Corp.		200,000			8,374
					285,830

MISCELLANEOUS — 4.81%
Other common stocks in initial period of acquisition					887,879


Total common stocks (cost: $13,031,096,000)					16,672,583



Preferred stocks — 0.05%					Market value (000	)

MISCELLANEOUS — 0.05%
Other common stocks in initial period of acquisition				$	9,265


Total preferred stocks (cost: $8,833,000)					9,265




Warrants — 0.08%		Shares

MATERIALS — 0.06%
Northern Orion Resources Inc., warrants, expire 2008^2,4		1,400,000			3,282
Kenmare Resources PLC, warrants, expire 2009^2,3		5,775,000			2,402
Eastern Platinum Ltd., purchase warrants, expire 2008^1,2		2,043,750			1,390
Eastern Platinum Ltd., purchase warrants, expire 2009^2,4		1,750,000			470
European Minerals Corp., warrants, expire 2010²		3,440,000			1,170
European Minerals Corp., warrants, expire 2011²		1,650,000			642
Oriel Resources PLC, warrants, expire 2010^1,2,4		2,500,000			795
Energem Resources Inc., warrants, expire 2008^1,2,3		1,200,000			151
					10,302

INFORMATION TECHNOLOGY — 0.02%
Kingboard Chemical Holdings Ltd., warrants, expire 2006^2,3		3,988,200			4,116


ENERGY — 0.00%
OPTI Canada Inc., warrants, expire 2008^1,2,3,4		105,000			895
BA Energy Inc., warrants, expire 2006^1,2,3,4		947,400			—
					895

HEALTH CARE — 0.00%
Gentium SpA (ADR), warrants, expire 2011^1,2,4		90,000			322


Total warrants (cost: $568,000)					15,635



Convertible securities — 0.01%		Shares or principal amount

TELECOMMUNICATION SERVICES — 0.01%
Time Warner Telecom Inc. 2.375% convertible debentures 2026	$	1,600,000			1,988
Multiplex, Inc., Series C, convertible preferred^1,2,4		1,358,696			52
					2,040

INFORMATION TECHNOLOGY — 0.00%
Socratic Technologies, Inc., Series A, convertible preferred^1,2,4		375,000			—


Total convertible securities (cost: $13,475,000)					2,040


		Principal amount			Market value
Bonds & notes — 0.10%		(000	)		(000	)

CONSUMER DISCRETIONARY — 0.06%
XM Satellite Radio Holdings Inc. 9.75% 2014⁴	$	11,650		$	11,242


CONSUMER STAPLES — 0.04%
Winn-Dixie Stores, Inc. 8.875% 2008⁵		11,925			6,600


Total bonds & notes (cost: $20,355,000)					17,842



Short-term securities — 9.37%

Amsterdam Funding Corp. 5.21%-5.27% due 10/11/2006-1/2/2007⁴		100,000			99,516
American Honda Finance Corp. 5.23%-5.26% due 10/5-12/8/2006		100,000			99,446
Danske Corp. 5.25%-5.255% due 10/27-12/8/2006⁴		100,000			99,324
Svenska Handelsbanken Inc. 5.22%-5.285% due 11/13-12/28/2006		100,000			99,138
Depfa Bank PLC 5.23%-5.37% due 10/10-12/19/2006⁴		90,000			89,604
Thunder Bay Funding, LLC 5.26%-5.28% due 10/5-10/16/2006⁴		60,571			60,462
Old Line Funding, LLC 5.26% due 10/16/2006⁴		22,300			22,248
Allied Irish Banks N.A. Inc. 5.25%-5.255% due 11/22-11/30/2006⁴		75,600			75,011
Westpac Banking Corp. 5.29%-5.345% due 10/24-11/14/2006⁴		46,300			46,017
Westpac Trust Securities NZ Ltd. 5.29% due 11/16/2006⁴		29,114			28,924
Toyota Motor Credit Corp. due 10/13-12/6/2006		75,000			74,602
Dexia Delaware LLC 5.24%-5.245% due 11/8-11/13/2006		75,000			74,572
Barclays U.S. Funding Corp. 5.235%-5.27% due 11/6-12/11/2006		75,000			74,487
Bank of Ireland 5.23%-5.26% due 10/23-12/18/2006⁴		75,000			74,395
BASF AG 5.22%-5.25% due 12/13/2006-1/19/2007⁴		75,000			74,056
Swedish Export Credit Corp. 5.22%-5.23% due 12/15-12/19/2006		72,400			71,592
Fannie Mae 5.21%-5.23% due 10/25-11/1/2006		53,700			53,501
UBS Finance (Delaware) LLC 5.25%-5.34% due 10/2-11/16/2006		51,400			51,072
ING (U.S.) Funding LLC 5.23%-5.33% due 10/10-10/26/2006		50,000			49,853
BNP Paribas Finance Inc. 5.24%-5.29% due 11/3-11/16/2006⁶		50,000			49,734
BMW U.S. Capital LLC 5.20%-5.23% due 11/1-11/17/2006⁴		50,000			49,710
HBOS Treasury Services PLC 5.23%-5.29% due 11/14-12/20/2006		50,000			49,551
Société Générale North America Inc. 5.23%--5.255% due 11/20/2006-1/19/2007		50,000			49,499
Citigroup Funding Inc. 5.31% due 10/12/2006		32,000			31,946
IXIS Commercial Paper Corp. 5.24% due 11/9/2006⁴		30,000			29,825
Park Avenue Receivables Co., LLC 5.30% due 10/4/2006⁴		25,000			24,985
Federal Home Loan Bank 5.145% due 12/1/2006		25,200			24,978
Export Development Canada 5.23% due 11/27/2006		25,000			24,793
Electricité de France 5.23% due 11/27/2006		25,000			24,793
CBA (Delaware) Finance Inc. 5.25% due 12/15/2006		25,000			24,731
Calyon North America Inc. 5.245% due 10/6/2006		20,600			20,582
ANZ (Delaware) Inc. 5.245% due 11/6/2006		7,500			7,460


Total short-term securities (cost: $1,730,121,000)					1,730,407


Total investment securities (cost: $14,804,448,000)					18,447,772
Other assets less liabilities					21,771

Net assets				$	18,469,543

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

¹Valued under fair value procedures adopted by authority of the board of directors. At September 30, 2006, 333 of the fund’s securities,

including those in "Miscellaneous" (with aggregate value of $7,938,109,000), were fair valued under procedures that took into account significant

price changes that occurred between the close of trading in those securities and the close of regular trading on the New York Stock Exchange.

² Security did not produce income during the last 12 months.

³Represents an affiliated company as defined under the Investment Company Act of 1940.

⁴Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require

registration. The total value of all such restricted securities was $985,313,000, which represented 5.33% of the net assets of the fund.

⁵ Scheduled interest and/or principal payment was not received.

⁶ This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

ADR = American Depositary Receipts

GDR = Global Depositary Receipts

SDR = Swedish Depositary Receipts

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so you may lose money.

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in each fund’s prospectus, which can be obtained from a financial adviser and should be read carefully before investing.

MFGEFP-935-1106-S6833

Summary investment portfolio, September 30, 2006

The following summary investment portfolio is designed to streamline the report and help investors better focus on a fund’s principal holdings. For details on how to obtain a complete schedule of portfolio holdings, please see the inside back cover.

[begin pie chart]

Industry sector diversification	Percent of net assets
Consumer discretionary		19.31	%
Industrials		13.63
Health care		12.51
Information technology		12.22
Financials		9.96
Other industries		22.88
Short-term securities & other assets less liabilities		9.49

[end pie chart]

		Shares			Market		Percent
					value		of net
Common stocks - 90.27%					(000	)	assets

Consumer discretionary - 19.31%
Michaels Stores, Inc.		3,000,000		$	130,620		.71	%
Schibsted ASA (1)		3,138,000			94,207		.51
CarMax, Inc. (2)		2,250,000			93,848		.51
Central European Media Enterprises Ltd., Class A (2)		1,270,500			85,187		.46
Big Lots, Inc. (2)		4,271,400			84,616		.46
Cheil Industries Inc. (1)		1,798,940			78,270		.42
Lions Gate Entertainment Corp. (2)		7,728,500			77,362		.42
Lojas Renner SA		1,330,000			77,142		.42
Cyrela Brazil Realty SA, ordinary nominative		4,335,500			73,823		.40
Jumbo SA (1)		4,164,956			63,182		.34
Aristocrat Leisure Ltd. (1)		6,000,000			63,066		.34
Fourlis (1)		3,310,000			58,607		.32
Praktiker Bau- und Heimwerkermärkte Holding AG (1)		1,733,383			57,453		.31
Ameristar Casinos, Inc.		2,600,000			56,446		.30
Other securities					2,472,682		13.39
					3,566,511		19.31

Industrials - 13.63%
Samsung Engineering Co., Ltd. (1)		2,587,640			124,070		.67
Corrections Corporation of America (2)		2,825,000			122,181		.66
Container Corp. of India Ltd. (1)		2,891,794			106,223		.58
Downer EDI Ltd. (1)		18,641,198			83,246		.45
ALL - América Latina Logística, units		10,015,650			77,918		.42
GS Engineering & Construction Co. Ltd. (1)		1,072,127			75,297		.41
Buhrmann NV (1)		4,953,600			74,520		.40
LS Industrial Systems Co., Ltd. (1)		1,950,000			71,614		.39
JetBlue Airways Corp. (2)		7,654,023			70,953		.38
Silitech Technology Corp. (1)		10,515,798			56,596		.31
Other securities					1,655,450		8.96
					2,518,068		13.63

Health care - 12.51%
Beckman Coulter, Inc.		2,300,000			132,388		.72
Medicis Pharmaceutical Corp., Class A		3,695,000			119,533		.65
Kyphon Inc. (2)		3,145,600			117,708		.64
Advanced Medical Optics, Inc. (2)		2,735,000			108,169		.58
Integra LifeSciences Holdings Corp. (2)		2,189,500			82,062		.44
Myogen, Inc. (2)		2,315,000			81,210		.44
FoxHollow Technologies, Inc. (2)		1,994,900			68,206		.37
ArthroCare Corp. (2)		1,431,700			67,089		.36
Wright Medical Group, Inc. (2)		2,742,800			66,513		.36
Alfresa Holdings Corp. (1)		929,300			59,029		.32
Other securities					1,409,165		7.63
					2,311,072		12.51

Information technology - 12.22%
Kingboard Chemical Holdings Ltd. (1)		45,946,000			165,405		.90
CNET Networks, Inc. (2)		10,655,000			102,075		.55
NHN Corp. (1) (2)		735,330			77,505		.42
Semtech Corp. (2)		5,900,000			75,284		.41
ValueClick, Inc. (2)		3,800,000			70,452		.38
PMC-Sierra, Inc. (2)		11,500,000			68,310		.37
Tripod Technology Corp. (1)		21,391,920			65,432		.35
MKS Instruments, Inc. (2)		2,849,944			57,882		.31
Other securities					1,575,130		8.53
					2,257,475		12.22

Financials - 9.96%
Daegu Bank, Ltd. (1)		10,399,890			173,750		.94
Pusan Bank (1)		11,477,500			142,406		.77
MCB Bank Ltd. (1)		19,560,080			82,443		.45
Greek Postal Savings Bank SA (1) (2)		3,672,400			73,796		.40
HDFC Bank Ltd. (1)		3,656,500			73,607		.40
Indiabulls Financial Services Ltd. (1)		8,069,292			72,452		.39
Housing Development Finance Corp. Ltd. (1)		2,059,346			68,958		.37
Sumitomo Real Estate Sales Co., Ltd. (1)		700,000			59,761		.32
Other securities					1,092,425		5.92
					1,839,598		9.96

Materials - 5.97%
Yamana Gold Inc.		8,915,000			82,170		.45
Taiwan Fertilizer Co., Ltd. (1)		45,041,000			73,159		.40
Dongkuk Steel Mill Co., Ltd. (1)		3,355,000			63,516		.34
Fortescue Metals Group Ltd. (1) (2)		9,479,902			58,905		.32
Cleveland-Cliffs Inc.		1,500,000			57,165		.31
Other securities					767,125		4.15
					1,102,040		5.97

Energy - 5.94%
OPTI Canada Inc. (2)		10,409,600			166,740
OPTI Canada Inc. (2) (3)		420,000			6,728		.94
Quicksilver Resources Inc. (2)		4,999,150			159,473		.86
Delta Petroleum Corp. (2)		2,829,000			63,709		.35
Denbury Resources Inc. (2)		1,995,200			57,661		.31
Other securities					643,118		3.48
					1,097,429		5.94

Consumer staples - 2.34%
Other securities					432,577		2.34


Telecommunication services - 2.03%
Time Warner Telecom Inc., Class A (2)		4,512,600			85,785		.47
LG Telecom Ltd. (1) (2)		6,370,000			74,754		.41
Digi International Inc. (1)		19,308,700			65,436		.35
Other securities					148,129		.80
					374,104		2.03

Utilities - 1.55%
Xinao Gas Holdings Ltd. (1)		56,438,000			57,860		.31
Other securities					227,970		1.24
					285,830		1.55


Miscellaneous - 4.81%
Other common stocks in initial period of acquisition					887,879		4.81


Total common stocks (cost: $13,031,096,000)					16,672,583		90.27



Preferred stocks - 0.05%

Miscellaneous - 0.05%
Other preferred stocks in initial period of acquisition					9,265		.05


Total preferred stocks (cost: $8,833,000)					9,265		.05



Warrants - 0.08%

Other - 0.08%
Other securities					15,635		.08


Total warrants (cost: $568,000)					15,635		.08



Convertible securities - 0.01%

Other - 0.01%
Other securities					2,040		.01


Total convertible securities (cost: $13,475,000)					2,040		.01



Bonds & notes - 0.10%

Other - 0.10%
Other securities					17,842		.10


Total bonds & notes (cost: $20,355,000)					17,842		.10



Short-term securities - 9.37%		Principal amount (000	)


Amsterdam Funding Corp. 5.21%-5.27% due 10/11/2006-1/2/2007 (3)	$	100,000			99,516		.54
American Honda Finance Corp. 5.23%-5.26% due 10/5-12/8/2006		100,000			99,446		.54
Danske Corp. 5.25%-5.255% due 10/27-12/8/2006 (3)		100,000			99,324		.54
Svenska Handelsbanken Inc. 5.22%-5.285% due 11/13-12/28/2006		100,000			99,138		.54
Depfa Bank PLC 5.23%-5.37% due 10/10-12/19/2006 (3)		90,000			89,604		.48
Thunder Bay Funding, LLC 5.26%-5.28% due 10/5-10/16/2006 (3)		60,571			60,462
Old Line Funding, LLC 5.26% due 10/16/2006 (3)		22,300			22,248		.45
Allied Irish Banks N.A. Inc. 5.25%-5.255% due 11/22-11/30/2006 (3)		75,600			75,011		.41
Westpac Banking Corp. 5.29%-5.345% due 10/24-11/14/2006 (3)		46,300			46,017
Westpac Trust Securities NZ Ltd. 5.29% due 11/16/2006 (3)		29,114			28,924		.41
Toyota Motor Credit Corp. 5.24%-5.25% due 10/13-12/6/2006		75,000			74,602		.40
Dexia Delaware LLC 5.24%-5.245% due 11/8-11/13/2006		75,000			74,572		.40
Barclays U.S. Funding Corp. 5.235%-5.27% due 11/6-12/11/2006		75,000			74,487		.40
Bank of Ireland 5.23%-5.26% due 10/23-12/18/2006 (3)		75,000			74,395		.40
BASF AG 5.22%-5.25% due 12/13/2006-1/19/2007 (3)		75,000			74,056		.40
Swedish Export Credit Corp. 5.22%-5.23% due 12/15-12/19/2006		72,400			71,592		.39
Other securities					567,013		3.07
					1,730,407		9.37


Total short-term securities (cost: $1,730,121,000)					1,730,407		9.37


Total investment securities (cost: $14,804,448,000)					18,447,772		99.88
Other assets less liabilities					21,771		.12

Net assets				$	18,469,543		100.00	%

"Miscellaneous" securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.
"Other securities" includes all issues that are not disclosed separately in the summary investment portfolio.

Investments in affiliates

A company is considered to be an affiliate of the fund under the Investment Company Act of 1940 if the fund's holdings in that company represent 5% or more of the outstanding voting shares of that company. Some of the fund's affiliated holdings listed below are also among the fund's largest holdings and are shown in the preceding summary investment portfolio. Affiliated companies not among the fund's largest holdings are included in the market value of "Other securities" under their respective industry sectors. Further details on these holdings and related transactions during the year ended September 30, 2006, appear below.

Company	Beginning shares	Purchases	Sales	Ending shares		Dividend income			Market value of affiliates at 9/30/06
						(000	)		(000	)

OPTI Canada Inc. (2)	4,373,000	6,036,600	-	10,409,600		-			166,740
OPTI Canada Inc. (2) (3)	-	420,000	-	420,000		-			6,728
OPTI Canada Inc., warrants, expire 2008 (1) (2) (3)	105,000	-	-	105,000		-			895
OPTI Canada Inc., convertible preferred	210,000	-	210,000	-		-			-
Daegu Bank, Ltd. (1)	10,339,890	60,000	-	10,399,890		3,429			173,750
Kingboard Chemical Holdings Ltd. (1)	45,946,000	-	-	45,946,000		1,660			165,405
Kingboard Chemical Holdings Ltd., warrants, expire 2006 (2)	3,988,200	-	-	3,988,200		-			4,116
Quicksilver Resources Inc. (2)	4,099,150	1,600,000	700,000	4,999,150		-			159,473
Pusan Bank (1)	10,370,500	1,107,000	-	11,477,500		3,462			142,406
Samsung Engineering Co., Ltd. (1)	2,587,640	-	-	2,587,640		853			124,070
Medicis Pharmaceutical Corp., Class A	2,450,000	1,245,000	-	3,695,000		430			119,533
Kyphon Inc. (2)	1,656,500	1,899,100	410,000	3,145,600		-			117,708
CNET Networks, Inc. (2)	10,655,000	-	-	10,655,000		-			102,075
Downer EDI Ltd. (1)	18,701,412	416,998	477,212	18,641,198		2,550			83,246
Integra LifeSciences Holdings Corp. (2)	-	2,189,500	-	2,189,500		-			82,062
Myogen, Inc. (2)	-	2,315,000	-	2,315,000		-			81,210
Lions Gate Entertainment Corp. (2)	3,800,000	3,928,500	-	7,728,500		-			77,362
Lions Gate Entertainment Corp. (Canada) (2)	2,728,500	900,000	3,628,500	-		-			-
Lojas Renner SA	1,380,000	-	50,000	1,330,000		2,047			77,142
Semtech Corp. (2)	5,900,000	-	-	5,900,000		-			75,284
LS Industrial Systems Co., Ltd. (1)	1,950,000	-	-	1,950,000		964			71,614
PMC-Sierra, Inc. (2)	6,500,000	5,000,000	-	11,500,000		-			68,310
FoxHollow Technologies, Inc. (2)	-	1,994,900	-	1,994,900		-			68,206
ArthroCare Corp. (2)	-	1,544,000	112,300	1,431,700		-			67,089
Wright Medical Group, Inc. (2)	2,000,000	742,800	-	2,742,800		-			66,513
Tripod Technology Corp. (1)	-	21,391,920	-	21,391,920		676			65,432
Delta Petroleum Corp. (2)	3,217,500	361,500	750,000	2,829,000		-			63,709
Jumbo SA (1)	2,852,797	1,312,159	-	4,164,956		736			63,182
Jumbo SA, rights, expire 2006 (2)	-	3,939,956	3,939,956	-		-			-
Fourlis (1)	3,310,000	-	-	3,310,000		632			58,607
MKS Instruments, Inc. (2)	1,050,000	1,799,944	-	2,849,944		-			57,882
Xinao Gas Holdings Ltd. (1)	43,066,000	13,372,000	-	56,438,000		350			57,860
Silitech Technology Corp. (1)	-	10,515,798	-	10,515,798		817			56,596
Restaurant Group PLC (1)	14,062,000	-	1,562,445	12,499,555		5,064			56,057
SEEK Ltd. (1)	12,697,300	4,463,285	2,391,588	14,768,997		881			55,711
Arbitron Inc.	751,060	745,700	-	1,496,760		450			55,395
Korea Kumho Petrochemical Co., Ltd. (1)	1,810,940	-	-	1,810,940		970			55,179
CARBO Ceramics Inc.	888,800	830,316	245,876	1,473,240		472			53,081
BA Energy Inc. (1) (2) (3)	1,071,430	4,590,262	-	5,661,692		-			48,131
BA Energy Inc., warrants, expire 2006 (1) (2) (3)	1,071,430	4,161,690	4,285,720	947,400		-			-
American Axle & Manufacturing Holdings, Inc.	-	2,850,000	-	2,850,000		600			47,567
Aventine Renewable Energy, Inc. (2)	-	2,200,000	-	2,200,000		-			47,058
Ekornes ASA (1)	2,020,598	217,000	-	2,237,598		2,238			46,167
Knot, Inc. (2)	1,378,820	1,200,000	1,378,820	1,200,000		-			26,556
Knot, Inc. (2) (3)	-	670,000	-	670,000		-			14,827
Centennial Bank Holdings, Inc. (2) (3)	2,700,000	-	-	2,700,000		-			26,136
Centennial Bank Holdings, Inc. (2)	-	1,515,000	-	1,515,000		-			14,665
Warren Resources, Inc. (2)	955,000	2,300,000	-	3,255,000		-			39,646
Greatbatch, Inc. (2)	990,400	754,000	-	1,744,400		-			39,458
Synenco Energy Inc., Class A (2)	-	1,815,000	-	1,815,000		-			24,541
Synenco Energy Inc., Class A (2) (3)	-	1,100,000	-	1,100,000		-			14,873
CESC Ltd. (1)	-	9,149,000	3,320,000	5,829,000		137			39,006
CESC Ltd. (GDR) (3)	3,320,000	-	3,320,000	-		178			-
Unibet Group PLC (SDR) (1)	1,370,850	407,620	-	1,778,470		547			37,389
Citi Trends, Inc. (2)	-	1,073,916	-	1,073,916		-			37,061
Sino-Forest Corp. (2)	6,022,800	3,400,000	-	9,422,800		-			36,005
NuVasive, Inc. (2)	-	1,709,000	-	1,709,000		-			34,368
Thanachart Capital PCL (1)	86,650,000	-	-	86,650,000		1,608			34,263
Apollo Hospitals Enterprise Ltd. (1)	1,433,400	2,894,700	1,053,100	3,275,000		294			33,987
Apollo Hospitals Enterprise Ltd. (GDR) (3)	1,053,100	-	1,053,100	-		-			-
GES International (1)	-	42,700,000	-	42,700,000		1,551			33,112
Marchex, Inc., Class B (2)	1,328,500	796,500	-	2,125,000		-			32,598
Veeco Instruments, Inc. (2)	1,598,523	-	-	1,598,523		-			32,210
WD-40 Co.	900,000	-	-	900,000		792			32,103
Bloomsbury Publishing PLC (1)	4,655,000	750,000	-	5,405,000		355			31,613
Baycorp Advantage Ltd. (1)	-	13,885,000	-	13,885,000		851			31,442
Blue Nile, Inc. (2)	400,000	585,375	125,000	860,375		-			31,275
IBT Education Ltd. (1)	-	21,727,690	-	21,727,690		1,398			29,500
Kenmare Resources PLC (1) (2)	39,316,000	-	-	39,316,000		-			27,011
Kenmare Resources PLC, warrants, expire 2009 (2)	5,775,000	-	-	5,775,000		-			2,402
ValueVision Media, Inc., Class A (2)	1,800,000	600,000	-	2,400,000		-			27,816
Volcano Corp. (2)	-	2,303,900	-	2,303,900		-			26,472
Ballast Nedam NV (1)	628,753	-	-	628,753		701			24,464
Regal Petroleum PLC (1) (2)	4,670,000	3,147,000	-	7,817,000		-			22,561
Nien Made Enterprise Co., Ltd. (1)	-	26,156,000	-	26,156,000		1,192			21,428
Progressive Gaming International Corp. (2)	-	2,600,000	-	2,600,000		-			21,320
O2Micro International Ltd. (ADR) (2)	2,495,000	560,000	-	3,055,000		-			21,110
Chart Industries, Inc. (2)	-	1,613,500	-	1,613,500		-			19,862
Internet Capital Group, Inc. (2)	-	2,100,000	-	2,100,000		-			19,845
Kyeryong Construction Industrial Co., Ltd. (1)	469,250	23,940	-	493,190		309			19,518
Ichia Technologies, Inc. (1) (2)	16,995,177	-	-	16,995,177		-			18,693
SFA Engineering Corp. (1)	437,500	116,200	-	553,700		502			17,979
Nabi Biopharmaceuticals (2)	3,050,000	-	-	3,050,000		-			17,629
PGG Wrightson Ltd. (1)	-	16,195,000	-	16,195,000		1,057			17,565
Hythiam, Inc. (2)	-	2,425,000	-	2,425,000		-			17,509
Hung Poo Real Estate Development Corp. (1)	-	16,367,000	-	16,367,000		680			17,430
Echelon Corp. (2)	2,000,000	-	-	2,000,000		-			16,440
Mineral Deposits Ltd. (1) (2)	-	16,220,000	-	16,220,000		-			16,040
YBM Sisa.com Inc. (1)	-	624,449	-	624,449		83			15,215
Michaniki SA (1)	-	3,935,000	-	3,935,000		693			15,120
Halla Engineering & Construction Corp. (1)	626,000	-	-	626,000		258			14,618
Spark Networks PLC (GDR) (1) (2)	747,000	553,000	-	1,300,000		-			7,419
Spark Networks PLC (ADR) (2)	-	1,103,000	-	1,103,000		-			6,618
Spark Networks PLC (2)	1,103,000	-	1,103,000	-		-			-
Career Technology (MFG.) Co., Ltd. (1)	5,255,894	9,701,665	-	14,957,559		397			13,109
Levitt Corp., Class A	500,000	500,000	-	1,000,000		50			11,760
SupportSoft, Inc. (2)	-	2,554,400	-	2,554,400		-			11,163
Plantynet Co., Ltd. (1)	-	537,600	-	537,600		49			10,777
Vical Inc. (2)	-	2,075,279	-	2,075,279		-			10,480
Sharper Image Corp. (2)	950,000	-	-	950,000		-			9,785
Phoenix PDE Co., Ltd. (1)	1,500,000	-	-	1,500,000		124			8,641
Ballarat Goldfields NL (1) (2)	-	53,355,000	-	53,355,000		-			6,787
Ballarat Goldfields NL (1) (2) (3)	-	10,250,000	-	10,250,000		-			1,304
Caspian Energy Inc. (United Kingdom) (1) (2)	3,450,000	-	-	3,450,000		-			4,802
Caspian Energy Inc. (2) (3)	-	2,000,000	-	2,000,000		-			2,685
Caspian Energy Inc. (2)	450,000	-	-	450,000		-			604
Billing Services Group PLC (1) (2)	16,548,800	-	-	16,548,800		-			7,533
TICON Property Fund (1)	-	24,700,000	-	24,700,000		131			6,249
Energem Resources Inc. (2)	8,002,500	-	-	8,002,500		-			6,087
Energem Resources Inc., warrants, expire 2008 (1) (2)	1,200,000	-	-	1,200,000		-			151
FirstAfrica Oil PLC (1) (2)	96,515,000	75,823,000	-	172,338,000		-			5,969
KEC Corp. (1)	-	3,926,550	-	3,926,550		-			5,749
Gaming VC Holdings SA (1)	2,023,800	-	-	2,023,800		526			5,339
Sanctuary Group PLC (1) (2)	23,546,700	14,295,000	23,428,967	14,412,733		-			5,048
Interflex Co., Ltd. (1)	799,000	-	-	799,000		66			4,966
Vision-Sciences, Inc. (2)	1,884,500	-	-	1,884,500		-			2,431
LTG Technologies PLC (1) (2)	17,785,714	-	-	17,785,714		-			1,997
KEC Holdings Co. Ltd. (1)	-	1,308,849	-	1,308,849		-			1,916
Infoteria Corp. (1) (2) (3)	2,672	-	95	2,577		-			873
ZOOTS (1) (2) (3)	25,173	-	-	25,173		-			234
Allion Healthcare, Inc. (2) (4)	864,221	314,100	1,178,321	-		-			-
Aricom PLC (1) (2) (4)	2,593,134	7,300,000	449,629	9,443,505		-			-
Atheros Communications, Inc. (2) (4)	3,180,000	-	3,180,000	-		-			-
Bankers Petroleum Ltd. (2) (4)	9,400,000	13,703,800	9,400,000	13,703,800		-			-
Banro Corp. (2) (3) (4)	1,750,000	-	-	1,750,000		-			-
Brooks Automation, Inc. (2) (4)	2,725,000	-	2,000,000	725,000		-			-
Can Do Co., Ltd. (4)	7,900	-	7,900	-		111			-
Capital Lease Funding, Inc. (4)	1,630,000	415,000	1,003,300	1,041,700		190			-
Cheil Industries Inc. (1) (4)	2,495,000	80,000	776,060	1,798,940		1,592			-
Conexant Systems, Inc. (2) (4)	24,000,000	-	24,000,000	-		-			-
Connetics Corp. (2) (4)	2,000,000	-	2,000,000	-		-			-
Cymer, Inc. (2) (4)	2,060,000	-	1,600,000	460,000		-			-
Eastern Platinum Ltd. (2) (3) (4)	-	3,500,000	-	3,500,000		-			-
Eastern Platinum Ltd. (2) (4)	4,087,500	474,200	-	4,561,700		-			-
Eastern Platinum Ltd., purchase warrants, expire 2008 (1) (2) (4)	2,043,750	-	-	2,043,750		-			-
Eastern Platinum Ltd., purchase warrants, expire 2009 (2) (3) (4)	-	1,750,000	-	1,750,000		-			-
Expro International Group PLC (1)	4,600,000	-	2,100,000	2,500,000		687			-
Fuji Seal International, Inc. (1) (4)	1,811,900	280,000	1,021,900	1,070,000		295			-
Gateway Distriparks Ltd. (4)	-	6,084,867	6,084,867	-		229			-
Gateway Distriparks Ltd. (GDR) (3) (4)	-	2,135,000	2,135,000	-		141			-
Golden Star Resources Ltd. (2) (4)	-	13,420,000	10,720,000	2,700,000		-			-
GSI Commerce, Inc. (2) (4)	2,794,491	-	2,794,491	-		-			-
Hanil Cement Co., Ltd. (1) (4)	491,700	-	409,200	82,500		325			-
Hanwha Chemical Corp. (1) (4)	6,492,000	-	5,357,000	1,135,000		1,873			-
Horizon Health Corp. (2) (4)	-	968,900	968,900	-		-			-
Hudson Highland Group, Inc. (2) (4)	1,244,000	330,000	1,574,000	-		-			-
Indiabulls Financial Services Ltd. (1) (4)	-	8,604,292	535,000	8,069,292		335			-
iVillage Inc. (2) (3) (4)	4,690,000	-	4,690,000	-		-			-
Kakaku.com, Inc. (1) (4)	6,179	5,850	9,289	2,740		18			-
KEC Corp. (4)	5,235,400	-	5,235,400	-		151			-
Keryx Biopharmaceuticals, Inc. (2) (4)	-	2,000,000	1,100,000	900,000		-			-
Kiryung Electronics Co., Ltd. (4)	1,780,000	-	1,780,000	-		-			-
Manhattan Associates, Inc. (2) (4)	1,950,000	-	825,000	1,125,000		-			-
NTELOS Holdings Corp. (2) (4)	-	1,150,000	146,425	1,003,575		-			-
NutriSystem, Inc. (2) (4)	1,706,800	-	1,606,800	100,000		-			-
ORCO PROPERTY GROUP SA (1) (4)	-	440,407	94,300	346,107		372			-
Paddy Power PLC (4)	2,521,700	-	2,521,700	-		-			-
Power Integrations, Inc. (2) (4)	2,300,000	-	1,250,000	1,050,000		-			-
RNB Retail and Brands AB (1) (4)	-	2,655,000	-	2,655,000		39			-
Saxon Capital, Inc. (4)	2,520,000	720,000	1,240,000	2,000,000		6,699			-
Silicon Graphics, Inc. (2) (4)	14,000,000	-	14,000,000	-		-			-
STX Shipbuilding Co., Ltd. (1) (4)	1,493,000	2,239,798	2,100,168	1,632,630		769			-
STX Shipbuilding Co., Ltd., rights, expire 2005 (2) (4)	373,399	-	373,399	-		-			-
Tetra Tech, Inc. (2) (4)	3,162,500	-	1,722,000	1,440,500		-			-
Toho Pharmaceutical Co., Ltd. (1) (4)	2,615,000	-	1,653,000	962,000		255			-
Ultraframe PLC (2) (4)	6,330,000	-	6,330,000	-		-			-
United Stationers Inc. (2) (4)	1,712,200	-	800,000	912,200		-			-
UrAsia Energy Ltd. (2) (4)	-	22,000,000	-	22,000,000		-			-
Vail Resorts, Inc. (2) (4)	2,050,000	-	2,050,000	-		-			-
Vivartia Industrial & Commercial Co. of Food Products & Catering Services SA (2) (4)	2,404,000	-	2,404,000	-		-			-
Wing Tai Holdings Ltd. (1) (4)	38,478,000	1,522,000	26,000,000	14,000,000		575			-
					$	58,466		$	4,293,708

The following footnotes apply to either the individual securities noted or one or more of the securities aggregated and listed as a single line item.

(1) Valued under fair value procedures adopted by authority of the board of directors. At September 30, 2006, 333 of the fund's securities, including those in "Other securities" and "Miscellaneous" in the summary investment portfolio (with aggregate value of $7,938,109,000), were fair valued under procedures that took into account significant price changes that occurred between the close of trading in those securities and the close of regular trading on the New York Stock Exchange.
(2) Security did not produce income during the last 12 months.
(3) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities, including those in "Other securities" in the summary investment portfolio, was $985,313,000, which represented 5.33% of the net assets of the fund.
(4) Unaffiliated issuer at 9/30/2006.

ADR = American Depositary Receipts
GDR = Global Depositary Receipts
SDR = Swedish Depositary Receipts

The descriptions of the companies shown in the summary investment portfolio, which were obtained from published reports and other sources believed to be reliable, are supplemental and are not covered by the Report of Independent Registered Public Accounting Firm.

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at September 30, 2006		(dollars and shares in thousands, except per-share amounts)

Assets:
Investment securities at market:
Unaffiliated issuers (cost: $11,227,175)	$	14,154,064
Affiliated issuers (cost: $3,577,273)		4,293,708	$	18,447,772
Cash denominated in non-U.S. currencies
(cost: $36,209)				35,931
Cash				689
Receivables for:
Sales of investments		164,181
Sales of fund's shares		34,434
Dividends and interest		9,919
Other assets		41		208,575
				18,692,967
Liabilities:
Payables for:
Purchases of investments		178,955
Repurchases of fund's shares		18,161
Investment advisory services		8,698
Services provided by affiliates		6,309
Deferred directors' compensation		1,231
Other fees and expenses		10,070		223,424
Net assets at September 30, 2006			$	18,469,543

Net assets consist of:
Capital paid in on shares of capital stock			$	13,485,195
Distributions in excess of net investment income				(88,583	)
Undistributed net realized gain				1,439,199
Net unrealized appreciation				3,633,732
Net assets at September 30, 2006			$	18,469,543

Total authorized capital stock - 800,000 shares, $.01 par value (477,084 total shares outstanding)
		Net assets	Shares outstanding		Net asset value per share*

Class A	$	15,167,069	390,156	$	38.87
Class B		581,159	15,533		37.41
Class C		695,573	18,692		37.21
Class F		445,402	11,524		38.65
Class 529-A		283,334	7,310		38.76
Class 529-B		47,429	1,256		37.77
Class 529-C		114,996	3,045		37.77
Class 529-E		18,258	476		38.40
Class 529-F		19,228	496		38.77
Class R-1		21,157	558		37.89
Class R-2		414,270	10,922		37.93
Class R-3		319,282	8,328		38.34
Class R-4		126,303	3,261		38.73
Class R-5		216,083	5,527		39.10
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Class A and 529-A, for which the maximum offering prices per share were $41.25 and $41.12, respectively.

See Notes to Financial Statements

Statement of operations
for the year ended September 30, 2006		(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. taxes of $19,538; also includes
$58,466 from affiliates)	$	215,517
Interest		73,201		$	288,718

Fees and expenses(*):
Investment advisory services		109,780
Distribution services		53,236
Transfer agent services		18,103
Administrative services		5,759
Reports to shareholders		818
Registration statement and prospectus		742
Postage, stationery and supplies		2,026
Directors' compensation		463
Auditing and legal		173
Custodian		6,410
State and local taxes		284
Other		223
Total fees and expenses before reimbursements/waivers		198,017
Less reimbursements/waivers of fees and expenses:
Investment advisory services		10,978
Administrative services		690
Total fees and expenses after reimbursements/waivers					186,349
Net investment income					102,369


Net realized gain and unrealized appreciation on investments and non-U.S. currency:
Net realized gain (loss) on:
Investments (including $118,038 net gain from affiliates)		1,700,826
Non-U.S. currency transactions		(1,701	)		1,699,125
Net unrealized appreciation (depreciation) on:
Investments		471,907
Non-U.S. currency translations		(55	)		471,852
Net realized gain and
unrealized appreciation
on investments and non-U.S. currency					2,170,977
Net increase in net assets resulting from operations				$	2,273,346

(*) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements



Statements of changes in net assets		(dollars in thousands)


		Year ended September 30
		2006			2005
Operations:
Net investment income	$	102,369		$	88,739
Net realized gain on investments and
non-U.S. currency transactions		1,699,125			1,240,219
Net unrealized appreciation
on investments and non-U.S. currency translations		471,852			1,634,043
Net increase in net assets
resulting from operations		2,273,346			2,963,001

Dividends and distributions paid to shareholders:
Dividends from net investment income and non-U.S. currency gain		(171,204	)		(119,377	)
Distributions from net realized gain on investments		(293,825	)		-
Total dividends and distributions paid to shareholders		(465,029	)		(119,377	)

Capital share transactions		1,970,025			823,855

Total increase in net assets		3,778,342			3,667,479

Net assets:
Beginning of year		14,691,201			11,023,722
End of year (including
distributions in excess of
net investment income: $88,583 and $36,611, respectively)	$	18,469,543		$	14,691,201


See Notes to Financial Statements

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.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica® savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights. The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Class A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Class B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Class B and 529-B convert to Class A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Class F and 529-F	None	None	None
Class R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds. Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies - The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation - Equity securities are valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type. Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available or are considered unreliable are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities (particularly non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities are fair valued.

Security transactions and related investment income - Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. 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 fixed-income securities are amortized daily over the expected life of the security.

Class allocations - Income, fees and expenses (other than class-specific fees and expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders - Dividends and distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation - Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

2.	Non-U.S. investments

Investment risk - The risks of investing in securities of non-U.S. issuers 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. Gains realized by the fund on the sale of securities in certain countries are subject to non-U.S. taxes. The fund records a liability based on unrealized gains to provide for potential non-U.S. taxes payable upon the sale of these securities. For the year ended September 30, 2006, non-U.S. taxes paid on realized gains were $1,982,000. As of September 30, 2006, non-U.S. taxes provided on unrealized gains were $9,403,000.

3. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made. Therefore, no federal income tax provision is required.

Distributions - Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; capital losses related to sales of certain securities within 30 days of purchase; unrealized appreciation of certain investments in non-U.S. securities; cost of investments sold; non-U.S. taxes on capital gains; and income on certain investments. 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 for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

During the year ended September 30, 2006, the fund reclassified $16,977,000 from undistributed net realized gain to distributions in excess of net investment income; and reclassified $114,000 from distributions in excess of net investment income and $90,000,000 from undistributed net realized gain to capital paid-in on the shares of capital stock to align financial reporting with tax reporting.

As of September 30, 2006, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investments were as follows:

(dollars in thousands)
Undistributed ordinary income	$	396,784
Post-October non-U.S. currency loss deferrals (realized during the period November 1, 2005, through September 30, 2006)*		(1,930	)
Undistributed long-term capital gain		1,272,620
Gross unrealized appreciation on investment securities		4,332,137
Gross unrealized depreciation on investment securities		(1,004,439	)
Net unrealized appreciation on investment securities		3,327,698
Cost of investment securities		15,120,074
*These deferrals are considered incurred in the subsequent year

The tax character of distributions paid to shareholders was as follows (dollars in thousands):

	Year ended September 30, 2006						Year ended September 30, 2005
		Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income	Long-term capital gains		Total distributions paid
Share class
Class A	$	149,401	$	247,786	$	397,187	$	109,685	-	$	109,685
Class B		3,425		9,479		12,904		1,283	-		1,283
Class C		3,828		9,872		13,700		1,395	-		1,395
Class F		3,420		5,484		8,904		1,691	-		1,691
Class 529-A		2,333		3,813		6,146		1,252	-		1,252
Class 529-B		238		714		952		73	-		73
Class 529-C		599		1,653		2,252		159	-		159
Class 529-E		129		249		378		57	-		57
Class 529-F		167		267		434		83	-		83
Class R-1		115		273		388		34	-		34
Class R-2		2,333		5,629		7,962		841	-		841
Class R-3		2,104		4,041		6,145		925	-		925
Class R-4		961		1,515		2,476		307	-		307
Class R-5		2,151		3,050		5,201		1,592	-		1,592
Total	$	171,204	$	293,825	$	465,029	$	119,377	-	$	119,377

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ^SM ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc.^SM ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services -The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.800% on the first billion of daily net assets and decreasing to 0.595% on such assets in excess of $27 billion. CRMC is currently waiving 10% of investment advisory services fees. During the year ended September 30, 2006, total investment advisory services fees waived by CRMC were $10,978,000. As a result, the fee shown on the accompanying financial statements of $109,780,000, which was equivalent to an annualized rate of 0.644%, was reduced to $98,802,000, or 0.579% of average daily net assets.

Class-specific fees and expenses - Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services - The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the board of directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted on the following page. In some cases, the board of directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25% of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD to provide certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For Class A and 529-A, the board of directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.30% is not exceeded. As of September 30, 2006, there were no unreimbursed expenses subject to reimbursement for Class A or 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.30%	0.30%
Class 529-A	0.30	0.50
Class B and 529-B	1.00	1.00
Class C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Class 529-E and R-3	0.50	0.75
Class F, 529-F and R-4	0.25	0.50

Transfer agent services - The fund has a transfer agent agreement with AFS for Class A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services - The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than Class A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended September 30, 2006, the total administrative services fees paid by CRMC were $6,000, $675,000, and $9,000 for Class R-1, R-2, and R-3, respectively. Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan. Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended September 30, 2006, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$34,860	$17,370	Not applicable	Not applicable	Not applicable
Class B	5,342	733	Not applicable	Not applicable	Not applicable
Class C	5,942	Included in administrative services	$892	$214	Not applicable
Class F	883		347	104	Not applicable
Class 529-A	421		247	53	$ 237
Class 529-B	417		43	23	42
Class 529-C	982		103	47	99
Class 529-E	76		16	3	15
Class 529-F	-		17	4	16
Class R-1	174		23	15	Not applicable
Class R-2	2,588		512	1,597	Not applicable
Class R-3	1,303		385	358	Not applicable
Class R-4	248		144	10	Not applicable
Class R-5	Not applicable		188	5	Not applicable
Total	$53,236	$18,103	$2,917	$2,433	$409

Deferred directors’ compensation - Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $463,000, shown on the accompanying financial statements, includes $282,000 in current fees (either paid in cash or deferred) and a net increase of $181,000 in the value of the deferred amounts.

Affiliated officers and directors - Officers and certain directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or directors received any compensation directly from the fund.

5. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales*			Reinvestments of dividends and distributions			Repurchases*					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Year ended September 30, 2006
Class A	$	2,685,423	71,453	$	381,591	10,807	$	(1,974,783	)	(52,904	)	$	1,092,231	29,356
Class B		122,373	3,363		12,552	367		(65,243	)	(1,807	)		69,682	1,923
Class C		265,083	7,319		13,251	390		(96,579	)	(2,688	)		181,755	5,021
Class F		226,333	6,037		7,921	225		(76,064	)	(2,044	)		158,190	4,218
Class 529-A		88,290	2,366		6,144	175		(13,640	)	(365	)		80,794	2,176
Class 529-B		9,920	271		952	28		(1,623	)	(44	)		9,249	255
Class 529-C		33,944	929		2,252	65		(7,790	)	(213	)		28,406	781
Class 529-E		5,862	159		378	11		(1,047	)	(28	)		5,193	142
Class 529-F		6,354	171		434	12		(1,707	)	(46	)		5,081	137
Class R-1		11,607	318		387	11		(4,858	)	(134	)		7,136	195
Class R-2		195,251	5,318		7,956	229		(80,898	)	(2,203	)		122,309	3,344
Class R-3		169,804	4,569		6,115	175		(69,063	)	(1,871	)		106,856	2,873
Class R-4		68,594	1,847		2,476	71		(21,588	)	(576	)		49,482	1,342
Class R-5		74,700	1,998		4,905	138		(25,944	)	(687	)		53,661	1,449
Total net increase
(decrease)	$	3,963,538	106,118	$	447,314	12,704	$	(2,440,827	)	(65,610	)	$	1,970,025	53,212

Year ended September 30, 2005
Class A	$	1,764,979	56,402	$	104,783	3,514	$	(1,571,969	)	(50,360	)	$	297,793	9,556
Class B		82,691	2,739		1,249	43		(42,411	)	(1,396	)		41,529	1,386
Class C		157,635	5,220		1,347	47		(54,448	)	(1,800	)		104,534	3,467
Class F		123,722	3,962		1,525	51		(41,375	)	(1,331	)		83,872	2,682
Class 529-A		56,362	1,807		1,252	42		(6,921	)	(220	)		50,693	1,629
Class 529-B		7,446	245		73	2		(1,115	)	(36	)		6,404	211
Class 529-C		23,292	760		159	6		(3,018	)	(98	)		20,433	668
Class 529-E		3,861	125		57	2		(311	)	(10	)		3,607	117
Class 529-F		3,591	116		82	3		(547	)	(17	)		3,126	102
Class R-1		6,890	224		34	1		(1,901	)	(62	)		5,023	163
Class R-2		127,485	4,134		841	29		(42,526	)	(1,375	)		85,800	2,788
Class R-3		101,847	3,299		925	31		(29,495	)	(950	)		73,277	2,380
Class R-4		46,825	1,502		307	10		(10,087	)	(321	)		37,045	1,191
Class R-5		25,084	791		1,405	47		(15,770	)	(506	)		10,719	332
Total net increase
(decrease)	$	2,531,710	81,326	$	114,039	3,828	$	(1,821,894	)	(58,482	)	$	823,855	26,672

*Includes exchanges between share classes of the fund.

6. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $8,035,940,000 and $6,944,375,000, respectively, during the year ended September 30, 2006.

Financial highlights(1)

			Income (loss) from investment operations(2)												Dividends and distributions

		Net asset value, beginning of period		Net investment income (loss	)				Net gains (losses) on securities (both realized and unrealized	)		Total from investment operations			Dividends (from net investment income	)		Distributions (from capital gains	)		Total dividends and distributions			Net asset value, end of period	Total return(3	)		Net assets, end of period (in millions	)			Ratio of expenses to average net assets before reimbursements/ waivers				Ratio of expenses to average net assets after reimbursements/ waivers		(4	)	Ratio of net income (loss) to average net assets
Class A:
Year ended 9/30/2006	$	34.77	$	.25				$	4.94		$	5.19		$	(.41	)	$	(.68	)	$	(1.09	)	$	38.87	15.27	%	$	15,167				1.08	%			1.01	%			.68	%
Year ended 9/30/2005		27.82		.24					7.02			7.26			(.31	)		-			(.31	)		34.77	26.28			12,544				1.09				1.04				.76
Year ended 9/30/2004		23.22		.02					4.61			4.63			(.03	)		-			(.03	)		27.82	19.95			9,771				1.12				1.12				.06
Year ended 9/30/2003		17.53		(.01	)				5.70			5.69			-			-			-			23.22	32.46			7,833				1.19				1.19				(.07	)
Year ended 9/30/2002		18.62		(.07	)				(.98	)		(1.05	)		(.04	)		-			(.04	)		17.53	(5.69	)		6,283				1.17				1.17				(.32	)
Class B:
Year ended 9/30/2006		33.59		(.03	)				4.78			4.75			(.25	)		(.68	)		(.93	)		37.41	14.39			581				1.85				1.78				(.09	)
Year ended 9/30/2005		26.90		-		(5	)		6.79			6.79			(.10	)		-			(.10	)		33.59	25.31			457				1.86				1.81				(.01	)
Year ended 9/30/2004		22.60		(.18	)				4.48			4.30			-			-			-			26.90	19.03			329				1.88				1.88				(.69	)
Year ended 9/30/2003		17.20		(.16	)				5.56			5.40			-			-			-			22.60	31.40			201				1.97				1.97				(.85	)
Year ended 9/30/2002		18.38		(.23	)				(.95	)		(1.18	)		-			-			-			17.20	(6.42	)		118				1.95				1.95				(1.09	)
Class C:
Year ended 9/30/2006		33.45		(.04	)				4.74			4.70			(.26	)		(.68	)		(.94	)		37.21	14.33			696				1.89				1.83				(.12	)
Year ended 9/30/2005		26.82		(.02	)				6.78			6.76			(.13	)		-			(.13	)		33.45	25.27			457				1.90				1.85				(.05	)
Year ended 9/30/2004		22.54		(.19	)				4.47			4.28			-			-			-			26.82	18.99			274				1.92				1.91				(.71	)
Year ended 9/30/2003		17.15		(.16	)				5.55			5.39			-			-			-			22.54	31.43			124				1.97				1.97				(.85	)
Year ended 9/30/2002		18.33		(.22	)				(.95	)		(1.17	)		(.01	)		-			(.01	)		17.15	(6.42	)		56				1.96				1.96				(1.08	)
Class F:
Year ended 9/30/2006		34.58		.26					4.91			5.17			(.42	)		(.68	)		(1.10	)		38.65	15.28			446				1.08				1.01				.70
Year ended 9/30/2005		27.70		.23					6.98			7.21			(.33	)		-			(.33	)		34.58	26.23			253				1.12				1.07				.72
Year ended 9/30/2004		23.16		.02					4.58			4.60			(.06	)		-			(.06	)		27.70	19.90			128				1.15				1.14				.06
Year ended 9/30/2003		17.48		(.01	)				5.69			5.68			-			-			-			23.16	32.49			57				1.18				1.18				(.06	)
Year ended 9/30/2002		18.60		(.07	)				(.98	)		(1.05	)		(.07	)		-			(.07	)		17.48	(5.73	)		24				1.20				1.20				(.32	)
Class 529-A:
Year ended 9/30/2006		34.68		.25					4.93			5.18			(.42	)		(.68	)		(1.10	)		38.76	15.25			284				1.11				1.05				.66
Year ended 9/30/2005		27.79		.22					7.00			7.22			(.33	)		-			(.33	)		34.68	26.19			178				1.14				1.08				.71
Year ended 9/30/2004		23.24		.02					4.60			4.62			(.07	)		-			(.07	)		27.79	19.90			97				1.14				1.14				.06
Year ended 9/30/2003		17.53		.01					5.70			5.71			-			-			-			23.24	32.57			42				1.11				1.11				.03
Period from 2/19/2002 to 9/30/2002		21.68		(.03	)				(4.12	)		(4.15	)		-			-			-			17.53	(19.14	)		15				1.18		(6	)	1.18		(6	)	(.25	)	(6	)
Class 529-B:
Year ended 9/30/2006		33.93		(.07	)				4.82			4.75			(.23	)		(.68	)		(.91	)		37.77	14.24			48				1.97				1.90				(.20	)
Year ended 9/30/2005		27.20		(.05	)				6.87			6.82			(.09	)		-			(.09	)		33.93	25.11			34				2.02				1.96				(.17	)
Year ended 9/30/2004		22.88		(.23	)				4.55			4.32			-			-			-			27.20	18.88			22				2.04				2.04				(.84	)
Year ended 9/30/2003		17.43		(.19	)				5.64			5.45			-			-			-			22.88	31.27			10				2.09				2.09				(.95	)
Period from 2/20/2002 to 9/30/2002		21.82		(.14	)				(4.25	)		(4.39	)		-			-			-			17.43	(20.12	)		3				2.08		(6	)	2.08		(6	)	(1.15	)	(6	)
Class 529-C:
Year ended 9/30/2006		33.94		(.07	)				4.83			4.76			(.25	)		(.68	)		(.93	)		37.77	14.27			115				1.96				1.90				(.19	)
Year ended 9/30/2005		27.21		(.05	)				6.87			6.82			(.09	)		-			(.09	)		33.94	25.13			77				2.00				1.95				(.16	)
Year ended 9/30/2004		22.89		(.22	)				4.54			4.32			-			-			-			27.21	18.87			43				2.03				2.03				(.83	)
Year ended 9/30/2003		17.44		(.18	)				5.63			5.45			-			-			-			22.89	31.25			20				2.07				2.07				(.94	)
Period from 2/20/2002 to 9/30/2002		21.82		(.14	)				(4.24	)		(4.38	)		-			-			-			17.44	(20.07	)		7				2.05		(6	)	2.05		(6	)	(1.12	)	(6	)
Class 529-E:
Year ended 9/30/2006		34.42		.12					4.89			5.01			(.35	)		(.68	)		(1.03	)		38.40	14.86			18				1.44				1.37				.34
Year ended 9/30/2005		27.58		.12					6.96			7.08			(.24	)		-			(.24	)		34.42	25.81			12				1.47				1.42				.37
Year ended 9/30/2004		23.09		(.08	)				4.59			4.51			(.02	)		-			(.02	)		27.58	19.52			6				1.50				1.49				(.29	)
Year ended 9/30/2003		17.50		(.07	)				5.66			5.59			-			-			-			23.09	31.94			3				1.53				1.53				(.38	)
Period from 3/15/2002 to 9/30/2002		23.21		(.06	)				(5.65	)		(5.71	)		-			-			-			17.50	(24.60	)		1				1.51		(6	)	1.51		(6	)	(.60	)	(6	)
Class 529-F:
Year ended 9/30/2006		34.64		.31					4.93			5.24			(.43	)		(.68	)		(1.11	)		38.77	15.44			19				.94				.87				.83
Year ended 9/30/2005		27.72		.23					6.99			7.22			(.30	)		-			(.30	)		34.64	26.22			12				1.11				1.06				.74
Year ended 9/30/2004		23.20		(.01	)				4.60			4.59			(.07	)		-			(.07	)		27.72	19.81			7				1.25				1.24				(.04	)
Year ended 9/30/2003		17.53		(.02	)				5.69			5.67			-			-			-			23.20	32.34			3				1.27				1.27				(.10	)
Period from 9/17/2002 to 9/30/2002		18.24		-		(5	)		(.71	)		(.71	)		-			-			-			17.53	(3.89	)		-		(7	)	.04				.04				.01



Class R-1:
Year ended 9/30/2006	$	34.07	$	(.04	)			$	4.83		$	4.79		$	(.29	)	$	(.68	)	$	(.97	)	$	37.89	14.31	%	$	21				1.92	%			1.82	%			(0.11	)%
Year ended 9/30/2005		27.34		(.01	)				6.90			6.89			(.16	)		-			(.16	)		34.07	25.27			12				1.97				1.85				(.05	)
Year ended 9/30/2004		23.00		(.19	)				4.55			4.36			(.02	)		-			(.02	)		27.34	18.98			6				2.01				1.91				(.71	)
Year ended 9/30/2003		17.49		(.16	)				5.67			5.51			-			-			-			23.00	31.50			2				2.43				1.93				(.78	)
Period from 6/19/2002 to 9/30/2002		21.60		(.04	)				(4.07	)		(4.11	)		-			-			-			17.49	(19.03	)		-		(7	)	7.56				.54				(.22	)
Class R-2:
Year ended 9/30/2006		34.09		(.03	)				4.83			4.80			(.28	)		(.68	)		(.96	)		37.93	14.35			414				2.06				1.80				(.09	)
Year ended 9/30/2005		27.36		(.01	)				6.90			6.89			(.16	)		-			(.16	)		34.09	25.28			258				2.17				1.82				(.03	)
Year ended 9/30/2004		23.00		(.18	)				4.56			4.38			(.02	)		-			(.02	)		27.36	19.05			131				2.30				1.88				(.67	)
Year ended 9/30/2003		17.49		(.15	)				5.66			5.51			-			-			-			23.00	31.50			46				2.59				1.89				(.75	)
Period from 5/31/2002 to 9/30/2002		22.62		(.05	)				(5.08	)		(5.13	)		-			-			-			17.49	(22.68	)		2				.85				.63				(.29	)
Class R-3:
Year ended 9/30/2006		34.39		.11					4.87			4.98			(.35	)		(.68	)		(1.03	)		38.34	14.82			319				1.49				1.42				.30
Year ended 9/30/2005		27.58		.11					6.96			7.07			(.26	)		-			(.26	)		34.39	25.75			188				1.51				1.44				.36
Year ended 9/30/2004		23.12		(.08	)				4.59			4.51			(.05	)		-			(.05	)		27.58	19.52			85				1.55				1.49				(.28	)
Year ended 9/30/2003		17.51		(.07	)				5.68			5.61			-			-			-			23.12	32.04			30				1.67				1.51				(.37	)
Period from 6/20/2002 to 9/30/2002		21.43		(.02	)				(3.90	)		(3.92	)		-			-			-			17.51	(18.29	)		2				.52				.42				(.11	)
Class R-4:
Year ended 9/30/2006		34.68		.25					4.91			5.16			(.43	)		(.68	)		(1.11	)		38.73	15.20			126				1.11				1.04				.67
Year ended 9/30/2005		27.79		.23					7.01			7.24			(.35	)		-			(.35	)		34.68	26.25			67				1.12				1.06				.74
Year ended 9/30/2004		23.22		.02					4.61			4.63			(.06	)		-			(.06	)		27.79	19.95			20				1.13				1.13				.07
Year ended 9/30/2003		17.53		-		(5	)		5.69			5.69			-			-			-			23.22	32.46			10				1.17				1.16				(.02	)
Period from 7/24/2002 to 9/30/2002		18.55		(.01	)				(1.01	)		(1.02	)		-			-			-			17.53	(5.50	)		-		(7	)	.70				.21				(.03	)
Class R-5:
Year ended 9/30/2006		34.93		.36					4.97			5.33			(.48	)		(.68	)		(1.16	)		39.10	15.60			216				.80				.74				.97
Year ended 9/30/2005		27.97		.33					7.05			7.38			(.42	)		-			(.42	)		34.93	26.62			142				.81				.76				1.04
Year ended 9/30/2004		23.33		.10					4.64			4.74			(.10	)		-			(.10	)		27.97	20.34			105				.82				.81				.36
Year ended 9/30/2003		17.55		.05					5.73			5.78			-			-			-			23.33	32.93			72				.83				.83				.28
Period from 5/15/2002 to 9/30/2002		23.36		-		(5	)		(5.81	)		(5.81	)		-			-			-			17.55	(24.87	)		53				.31				.31				.01

	Year ended September 30
	2006		2005		2004		2003		2002

Portfolio turnover rate for all classes of shares	45	%	45	%	48	%	49	%	51	%

(1) Based on operations for the periods shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) Total returns exclude all sales charges, including contingent deferred sales charges.

(4) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC. During some of the periods shown, CRMC reduced fees for investment advisory services for all share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5), CRMC agreed to pay a portion of the fees related to transfer agent services.

(5) Amount less than $.01.

(6) Annualized.

(7) Amount less than $1 million.

See Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2006, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2006, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of SMALLCAP World Fund, Inc. as of September 30, 2006, 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 financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Costa Mesa, California

November 8, 2006

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 certain distributions received by shareholders during such fiscal year. The fund hereby designates the following amounts for the fund’s fiscal year ended September 30, 2006:

Long-term capital gains	$	293,826,000
Foreign taxes		19,845,000
Foreign source income		253,273,000
Qualified dividend income		179,370,000
Corporate dividends received deduction		32,816,000
U.S. government income that may be exempt from state taxation		1,861,000

Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2007, to determine the calendar year amounts to be included on their 2006 tax returns. Shareholders should consult their tax advisers.