American Funds SMALLCAP World 529A (CSPAX) N-CSR Certified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

Certified Shareholder Report of

Registered Management Investment Companies

Investment Company Act File Number: 811-05888

SMALLCAP World Fund, Inc.

(Exact Name of Registrant as Specified in Charter)

333 South Hope Street

Los Angeles, California 90071

(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (213) 486-9200

Date of fiscal year end: September 30

Date of reporting period: September 30, 2008

Chad L. Norton

Capital Research and Management Company

333 South Hope Street

Los Angeles, California 90071

(Name and Address of Agent for Service)

Copies to:

Mark D. Perlow

K&L Gates LLP

Four Embarcadero Center, Suite 1200

San Francisco, California  94111

(Counsel for the Registrant)

ITEM 1 – Reports to Stockholders

[logo - American Funds®]

The right choice for the long term®

SMALLCAP World Fund

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Going the extra mile

Annual report for the year ended September 30, 2008

SMALLCAP World Fund® seeks long-term growth of capital through investments in smaller companies in the United States and around the world.

This fund is one of the 31 American Funds. American Funds is one of the nation’s largest mutual fund families. For more than 75 years, Capital Research and Management Company,SM the American Funds adviser, has invested with a long-term focus based on thorough research and attention to risk.

Fund results shown in this report, unless otherwise indicated, are for Class A shares at net asset value. If a sales charge (maximum 5.75%) had been deducted, the results would have been lower. Results are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity. For current information and month-end results, visit americanfunds.com.

Results at a glance
For periods ended September 30, 2008, with all distributions reinvested
				Average annual total returns
	Total returns									Lifetime
	1 year			5 years			10 years			(since 4/30/90)
SMALLCAP World Fund
(Class A shares)		–32.8	%		9.7	%		7.9	%		9.3	%
S&P Global <$3 Billion Index
(formerly S&P/Citigroup Global/
World Indexes)		–29.6			10.6			9.7			8.3
Lipper Global Small-Cap
Funds Average		–31.2			8.4			9.4			9.5

All market indexes cited in this report are unmanaged and their results include reinvested distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes. S&P Global <$3 Billion Index has been used since May 2006. Cumulative returns for periods beginning before May 2006 also include results from the comparative indexes used in those periods as follows: S&P Global <$2 Billion (May 2004 to April 2006), S&P Developed <$1.5 Billion (January 2000 to April 2004), and S&P Developed <$1.2 Billion (1990 to 1999). The S&P Global indexes better reflect the fund’s investment universe because they include both developed and developing countries. The S&P Developed indexes (used prior to May 2004) only include stocks in developed countries.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 25 and 26 for details.

Please see page 3 for Class A share results with relevant sales charges deducted. Results for other share classes can be found on page 31.

Investing outside the United States may be subject to additional risks, such as currency fluctuations and political instability, which are detailed in the fund’s prospectus. Investing in small-capitalization stocks can involve greater risk than is customarily associated with investing in stocks of larger, more established companies.

In this report
	Special feature
4	Going the extra mile
	There are thousands of small
	companies around the globe,
	each a potential investment.
	Our investment analysts go
	the extra mile to find possible
	small-company investments
	for SMALLCAP World Fund.
	Contents
1	Letter to shareholders
3	The value of a long-term
	perspective
9	Summary investment portfolio
17	Financial statements
32	Board of directors and
	other officers

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Fellow shareholders:

SMALLCAP World Fund’s results for the 2008 fiscal year were poor. For the 12 months ended September 30, 2008, the fund lost 32.8% on a total return basis. This figure assumes you reinvested the 76 cents in dividends and $4.17 in capital gain distributions, as virtually all shareholders do. This was the second-worst fiscal year in the fund’s history, surpassed only by the 44.9% decline suffered in the 2001 period.

These results were slightly worse than the returns of the fund’s major benchmarks: the Lipper Global Small-Cap Funds Average fell 31.2% for the same period, while the unmanaged S&P Global <$3 Billion Index (formerly S&P/Citigroup Global/World Indexes) lost 29.6%. The fund’s return for the period also fell well below the 22.0% loss seen in the unmanaged Standard & Poor’s 500 Composite Index, a measure of some of the largest U.S. companies.

We are in the midst of a major bear market that started about a year ago. Since the close of the fiscal year, global equity markets have experienced further substantial losses on top of those seen in the past fiscal year. And small-cap stocks, the primary focus of this fund, generally do poorly in market downturns.

A global financial crisis

As has been widely reported, the current market crisis originated with the U.S. housing market. Risky loans to homebuyers with poor credit led to major losses in securities tied to those loans. These securities were packaged and sold as investments to financial institutions around the world, and when the underlying loans became troubled, the value of those investments fell precipitously. These credit losses then spread to auto loans, credit cards, commercial real estate and other financial instruments.

As the balance sheets of financial institutions weakened dramatically, a major credit crunch ensued. This, in turn, has led to a major global economic downturn. While the financial sector led the decline, there were few, if any, areas of strength left in the stock market by the end of the fund’s fiscal year.

How the fund responded

As you’ll see in the following pages, the fund’s exposure to the financial sector was relatively small — just 9.4% of the fund’s total portfolio. We correctly identified the financial sector as the root cause of the problem, and sought to make investments that would counter the negative trends as we saw them. But again, as worries spread across global markets, more and more sectors fell prey to the selloff. There was simply nowhere to hide.

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Where are SMALLCAP’s holdings located?

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As of September 30, 2008	Percent of net assets
United States		37.1	%
Asia & Pacific Basin		26.1
Europe		17.9
Other (including Canada & Latin America)		6.1
Short-term securities & other assets less liabilities		12.8

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As of September 30, 2007	Percent of net assets
United States		32.3	%
Asia & Pacific Basin		32.0
Europe		19.4
Other (including Canada & Latin America)		8.5
Short-term securities & other assets less liabilities		7.8

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[End Sidebar]

Over the years, the fund sought to increase its opportunities for growth by expanding overseas investment. As the credit crisis took hold in the United States, this diversification seemed to be a prudent move, and the fund held just 37.1% of its assets in domestic stocks. However, while the root of the problem was in the United States, markets across the globe soon joined U.S. stocks in tumbling. Of our investments in 48 countries, 43 saw double-digit losses. And while domestic holdings fell 21.7% as measured by the unmanaged MSCI USA Index, many holdings from other nations fared worse, including those from both developed and emerging markets.

[Begin Sidebar]

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Largest equity holdings	Percent of net assets
Kingboard Chemical Holdings		1.0	%
OPTI Canada		.9
Concho Resources		.8
Nitori		.7
Downer EDI		.7
ResMed		.7
Container Corp. of India		.6
Oilexco		.6
Samsung Engineering		.6
MSC Industrial Direct		.6

[End Sidebar]

Our holdings in the health care sector were one of the few bright spots of the year: Vision Sciences rose 96.6%, United Therapeutics was up 58.1% and Vital Signs gained 41.7%. However, the vast majority of the fund’s holdings had negative returns for the year, most notably in the financials and metals sectors. Bank of Georgia lost 81.9%, Oxus Gold fell 83%, and Federal Agricultural Mortgage lost 86%.

Keeping a long-term perspective

This is truly an unprecedented time for investors. With very few exceptions, there has been a worldwide liquidation of stocks, bonds and commodities. As of the fiscal year end, credit markets had frozen, which can be particularly hard on small-cap companies that rely on credit to fuel their growth. Even large, well-established companies are finding it difficult to obtain the credit they need. In a series of coordinated actions, the eight major industrialized nations of the world have worked to stabilize global financial markets through the reduction of lending rates, injections of capital into the financial system, and moves to increase liquidity in commercial credit markets.

As it stands now, we are likely heading into a global recession, the length and depth of which cannot be forecast. Naturally, we remain very cautious when investing. The stocks that the fund now holds represent companies we believe will survive the current crisis and prosper when the inevitable recovery occurs. It is worth noting that, historically, small-company stocks traditionally have recovered quickly from downturns. We continue to use our research talents to find investment opportunities; you can read about some of our efforts starting on page 4. And we will continue to invest for the long term.

We do not pretend that it’s easy to withstand significant losses, and we understand keeping a long-term perspective can be daunting in today’s markets. However, investing for the long term is one of the bedrock principles of this fund, and all the American Funds. Over time, the benefits of such long-term investments have historically outweighed short-term market disruptions. We believe strongly that the fund will recover over time, and we will work hard to make that happen.

We appreciate your continued support and thank you for your continued patience.

Sincerely,

/s/ Gordon Crawford

Gordon Crawford

Vice Chairman of the Board

/s/ Gregory W. Wendt

Gregory W. Wendt
President

November 5, 2008

For current information about the fund, visit americanfunds.com.

The value of a long-term perspective

This chart shows how a $10,000 investment in SMALLCAP World Fund’s Class A shares grew from April 30, 1990 — the fund’s inception — through September 30, 2008, the end of the fund’s latest fiscal year. As you can see, the $10,000 would have grown to $48,685 even after deducting the maximum 5.75% sales charge.

S&P Global <$3 Billion Index (formerly S&P/Citigroup Global/World Indexes) has been used since May 2006. Cumulative returns for periods beginning before May 2006 also include results from the comparative indexes used in those periods as follows: S&P Global <$2 Billion (May 2004 to April 2006), S&P Developed <$1.5 Billion (January 2000 to April 2004), and S&P Developed <$1.2 Billion (1990 to 1999). The S&P Global indexes better reflect the fund’s investment universe because they include both developed and developing countries. The S&P Developed indexes (used prior to May 2004) only include stocks in developed countries. These indexes are unmanaged and their results include reinvested distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.

Fund results shown reflect deduction of the maximum sales charge of 5.75% on the $10,000 investment.1 Thus, the net amount invested was $9,425.

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	Date	SMALLCAP World Fund		Date	S&P Global <$3 Billion Index2,3		Date	Consumer Price Index4
	4/30/1990	$	9,425	4/30/1990	$	10,000	4/30/1990	$	10,000
Fiscal Year 1990
High	16-Jul-90	$	9,963	17-Jul-90	$	11,596	Sep-90	$	10,295
Low	28-Sep-90	$	8,288	28-Sep-90	$	8,918	Apr-90	$	10,000
Close	30-Sep-90	$	8,288	30-Sep-90	$	8,918	Sep-90	$	10,295
Fiscal Year 1991
High	30-Sep-91	$	11,307	17-Apr-91	$	11,421	Sep-91	$	10,644
Low	11-Oct-90	$	8,231	16-Jan-91	$	8,897	Oct-90	$	10,357
Close	30-Sep-91	$	11,307	30-Sep-91	$	11,210	Sep-91	$	10,644
Fiscal Year 1992
High	12-Feb-92	$	12,666	7-Feb-92	$	11,884	Sep-92	$	10,962
Low	9-Oct-91	$	11,140	12-Aug-92	$	10,570	Oct-91	$	10,659
Close	30-Sep-92	$	11,640	30-Sep-92	$	10,999	Sep-92	$	10,962
Fiscal Year 1993
High	30-Sep-93	$	15,418	3-Sep-93	$	14,469	Sep-93	$	11,257
Low	5-Oct-92	$	11,368	9-Oct-92	$	10,649	Oct-92	$	11,001
Close	30-Sep-93	$	15,418	30-Sep-93	$	14,341	Sep-93	$	11,257
Fiscal Year 1994
High	3-Feb-94	$	17,254	2-Sep-94	$	15,687	Sep-94	$	11,590
Low	24-Jun-94	$	15,474	29-Nov-93	$	13,616	Oct-93	$	11,303
Close	30-Sep-94	$	16,744	30-Sep-94	$	15,396	Sep-94	$	11,590
Fiscal Year 1995
High	11-Sep-95	$	20,046	11-Sep-95	$	16,967	Sep-95	$	11,885
Low	30-Jan-95	$	15,821	13-Dec-94	$	14,146	Oct-94	$	11,598
Close	30-Sep-95	$	19,856	30-Sep-95	$	16,896	Sep-95	$	11,885
Fiscal Year 1996
High	20-May-96	$	23,573	20-May-96	$	19,449	Sep-96	$	12,242
Low	18-Dec-95	$	19,323	27-Oct-95	$	16,209	Dec-95	$	11,908
Close	30-Sep-96	$	22,877	30-Sep-96	$	18,911	Sep-96	$	12,242
Fiscal Year 1997
High	30-Sep-97	$	28,689	30-Sep-97	$	21,459	Sep-97	$	12,506
Low	28-Apr-97	$	22,594	14-Apr-97	$	18,174	Oct-96	$	12,281
Close	30-Sep-97	$	28,689	30-Sep-97	$	21,459	Sep-97	$	12,506
Fiscal Year 1998
High	13-Oct-97	$	29,202	22-Apr-98	$	22,520	Sep-98	$	12,692
Low	31-Aug-98	$	22,174	31-Aug-98	$	16,699	Dec-97	$	12,514
Close	30-Sep-98	$	22,749	30-Sep-98	$	17,204	Sep-98	$	12,692
Fiscal Year 1999
High	13-Sep-99	$	33,760	15-Jul-99	$	22,614	Sep-99	$	13,026
Low	8-Oct-98	$	20,294	8-Oct-98	$	15,789	Dec-98	$	12,715
Close	30-Sep-99	$	32,172	30-Sep-99	$	21,980	Sep-99	$	13,026
Fiscal Year 2000
High	10-Mar-00	$	56,595	9-Mar-00	$	27,318	Sep-00	$	13,476
Low	18-Oct-99	$	31,127	18-Oct-99	$	21,263	Oct-99	$	13,049
Close	30-Sep-00	$	44,532	30-Sep-00	$	24,845	Sep-00	$	13,476
Fiscal Year 2001
High	2-Oct-00	$	43,857	2-Oct-00	$	24,598	Sep-01	$	13,832
Low	21-Sep-01	$	23,450	21-Sep-01	$	18,329	Oct-00	$	13,499
Close	30-Sep-01	$	24,516	30-Sep-01	$	19,352	Sep-01	$	13,832
Fiscal Year 2002
High	17-Apr-02	$	31,220	17-May-02	$	24,015	Sep-02	$	14,042
Low	24-Sep-02	$	22,831	24-Sep-02	$	18,610	Dec-01	$	13,708
Close	30-Sep-02	$	23,121	30-Sep-02	$	18,799	Sep-02	$	14,042
Fiscal Year 2003
High	19-Sep-03	$	31,932	19-Sep-03	$	27,147	Sep-03	$	14,368
Low	9-Oct-02	$	21,288	9-Oct-02	$	17,316	Dec-02	$	14,034
Close	30-Sep-03	$	30,626	30-Sep-03	$	26,252	Sep-03	$	14,368
Fiscal Year 2004
High	12-Apr-04	$	38,954	7-Apr-04	$	33,392	Sep-04	$	14,732
Low	1-Oct-03	$	31,035	1-Oct-03	$	26,673	Dec-03	$	14,298
Close	30-Sep-04	$	36,736	30-Sep-04	$	32,669	Sep-04	$	14,732
Fiscal Year 2005
High	30-Sep-05	$	46,392	30-Sep-05	$	42,041	Sep-05	$	15,423
Low	14-Oct-04	$	36,577	14-Oct-04	$	32,658	Dec-04	$	14,763
Close	30-Sep-05	$	46,392	30-Sep-05	$	42,041	Sep-05	$	15,423
Fiscal Year 2006
High	9-May-06	$	58,016	9-May-06	$	52,654	Aug-06	$	15,818
Low	27-Oct-05	$	43,590	20-Oct-05	$	39,698	Dec-05	$	15,268
Close	30-Sep-06	$	53,477	30-Sep-06	$	48,175	Sep-06	$	15,741
Fiscal Year 2007
High	19-Jul-07	$	73,253	19-Jul-07	$	63,720	Sep-07	$	16,175
Low	10-Jan-07	$	58,657	3-Oct-06	$	48,013	Nov-06	$	15,632
Close	30-Sep-07	$	72,413	30-Sep-07	$	61,742	Sep-07	$	16,175
Fiscal Year 2008
High	31-Oct-07	$	76,428	31-Oct-07	$	64,579	Jul-08	$	17,065
Low	29-Sep-08	$	47,556	29-Sep-08	$	43,353	Oct-07	$	16,175
Close	30-Sep-08	$	48,685	30-Sep-08	$	43,435	Sep-08	$	16,973

[end mountain chart]

Past results are not predictive of results in future periods. The results shown are before taxes on fund distributions and sale of fund shares.

1As outlined in the prospectus, the sales charge is reduced for accounts (and aggregated investments) of $25,000 or more and is eliminated for purchases of $1 million or more. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares.

2These indexes are unmanaged and their results include reinvested distributions, but do not reflect the effect of sales charges, commissions, expenses or taxes.

3High and low points between fiscal year-ends based on daily index values. For shareholder reports prior to 2005, only month-end values were available.

4Computed from data supplied by the U.S. Department of Labor, Bureau of Labor Statistics.

5For the period April 30, 1990 (when the fund began operations) through September 30, 1990.

Average annual total returns based on a $1,000 investment (for periods ended September 30, 2008)*
	1 year			5 years			10 years
Class A shares		–36.63	%		8.42	%		7.27	%
*Assumes reinvestment of all distributions and payment of the maximum 5.75% sales charge.

The total annual fund operating expense ratio for Class A shares as of the most recent fiscal year-end was 1.07%. This figure does not reflect a fee waiver currently in effect; therefore, the actual expense ratio is lower.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect actual expenses, with the waiver applied. Fund results would have been lower without the waiver. Please see the Financial Highlights table on pages 25 and 26 for details.

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Going the extra mile

There are thousands of small companies around the globe, each a potential investment. Our investment analysts go the extra mile to find possible small-company investments for SMALLCAP World Fund.

Research is the foundation upon which investment decisions are made. That’s been a core principle of American Funds since its inception in 1931, and it remains just as crucial today.

The analysts working on behalf of SMALLCAP World Fund certainly have their work cut out for them. There are more than 46,000 publicly traded companies around the world, according to the World Federation of Exchanges, with the majority of them being small-capitalization companies. The analyst’s job is to find the best potential investments for the fund — the needle in the haystack.

“I wouldn’t call it daunting. It’s a challenge, but an exciting one,” says Lawrence Kymisis, an analyst and research director. “The resources and the opportunities for research at our disposal allow us to really drill down and find what we feel are the best investments out there.”

SMALLCAP’s analysts go beyond mere deskwork to determine whether a company is a good investment. They are based around the world, and many spend more than half of their time on the road, meeting with company executives, touring facilities and talking to customers, suppliers and competitors. As you’ll see here, they’re always on the lookout for opportunities.

They’re also on the lookout for problems. “We work closely with many other analysts, which, I think, helped us get ahead of some of the problems in mortgages and banking,” says Julian Abdey, small-cap analyst for the financial sector. “Sometimes, it’s not about what you own, but what you’ve avoided.”

[Begin Sidebar]

[blue image of a world map]

[photo of Kristian Stromsoe]

Kristian Stromsoe

U.S. and European small caps

One of Kristian’s first investments was a European kitchen equipment maker. When Kristian first looked at the company in 2001, he was drawn to the company’s “combi-steamer” products. “The company just dominated the market in combi-steamers, which seemed impressive,” he says. “Of course, I had to figure out exactly what a combi-steamer was.”

As it turns out, a combi-steamer is a kind of large-scale oven that can cook dozens of meals all at once; if you’ve ever been at a wedding reception or banquet, chances are your meal was cooked in a combi-steamer. Kristian’s job was to figure out what made this company’s combi-steamers stand out, and whether they could continue to dominate that market.

“Naturally, you meet with the company, which I did in London. I also traveled to Germany to see their facilities firsthand,” Kristian says. “You can tell a lot from how they operate and manufacture their products.”

Kristian also attended the company’s sales demonstrations. The company routinely gathers chefs and restaurant managers from around the world to discuss and use its products. “That was a great opportunity to talk with the chefs and the people using the product. You find out what they need — ease of use, easy to train new people on,” he says.

Finally, Kristian tried using the product himself, alongside those same chefs. “I was surprised at how easy it was to use,” he says. “Certainly the best meal I ever cooked.”

[End Sidebar]

[Begin Footnote]

Our organization manages equity assets through separate divisions that make independent decisions.

[End Footnote]

[Begin Sidebar]

[green image of a world map]

[photo of Alex Nicolaou]

Alex Nicolaou

U.S. small-cap health care analyst

American Funds analysts don’t just keep up on individual companies. In many cases, they have to be well-versed in broad areas of science and technology in order to identify opportunities. That’s what brought Alex to the North American Spine Society Convention in 2005.

“You have to keep abreast of what’s going on. When I visit health care conventions, I often find some interesting leads,” Alex says. At the NASS convention, there was a lot of talk among medical professionals about minimally invasive surgical procedures to relieve back pain — and a disproportionate amount of foot-traffic was heading toward a booth in the corner sponsored by a surgical tool company.

“I talked with their sales representatives, spoke to a few physicians and decided the company was worth a closer look,” he says. He researched the company thoroughly, and talked to a number of company executives. The company, for its part, was so convinced that their product was unique, they asked Alex to see for himself.

“They had this training room where, each week, they brought doctors in to perform simulated surgery with the company’s tools,” he says. “So they had me visit and brought me in there. The doctors were so excited using the tools. It was like watching 10-year-olds with a new toy.”

[End Sidebar]

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The fund’s analysts recommend a “buy” or “sell” to the portfolio counselors. American Funds uses a multiple portfolio counselor system in which each portfolio counselor gets a piece of the fund’s assets to invest as he or she sees fit.

But there’s another participant in the fund as well — the analysts. The analysts collectively share a ninth piece of SMALLCAP’s assets, called the Research Portfolio (RP). Each analyst is given a sliver of this piece to invest in the stocks they recommend — anywhere from a few million to several hundred million dollars, depending on the strength of their convictions and their past success in choosing investment opportunities.

“The Research Portfolio is hugely important,” says Kristian Stromsoe, one of two RP coordinators for SMALLCAP. “This isn’t some practice portfolio. This is real money, and we are keenly aware of that. So when we recommend a stock, we take that very seriously, because we’ll be investing in it as well.”

[Begin Sidebar]

[red image of a world map]

[photo of Anne-Marie Peterson]

Anne-Marie Peterson

Retail and restaurant analyst

SMALLCAP’s analysts are always on the lookout for a good potential investment. Anne-Marie found one in her exercise class.

“There were people wearing these amazing clothes, bringing this big sense of comfort and fashion to the gym,” she says, noting that there were few examples of fashion-forward exercise clothing. “It was a big, gaping hole in the whole exercise culture, a real opportunity.”

The clothes were made by a small North American company that just expanded into the San Francisco area and was mulling its initial public stock offering. Anne-Marie went to work “kicking the tires.”

“You have to be a proactive investor and go out to get the whole story,” she says. That included touring stores and talking to managers and employees, as well as competitors and even those who had left the company. She also talked to customers and potential customers.

“I got a very clear picture of the kind of company it was,” she says. “The company has a very long-term approach to developing both its products and its employees.” Employees are highly focused and love the company’s health initiatives and career goal counseling. “The culture there was something very special, something that you see in highly successful companies.”

Anne-Marie invested last year, shortly after the IPO. While the stock has fallen since then, along with a wide variety of equities, she believes the stock is a good long-term investment. “I think it’s a special product line that creates demand,” she says. “The company remains sound, so I want to see it through the long term.”

[End Sidebar]

[Begin Sidebar]

[blue image of a world map]

[photo of Dawid Justus]

Dawid Justus

European and emerging

market analyst

South Africa’s latest initiative to revamp its infrastructure was greeted with skepticism by many investors when it launched in 2005. But Dawid saw a little anecdotal evidence firsthand; the South African native vacations twice a year in Arniston, a coastal town a few hours from Cape Town. “There’s a brick factory we drive by every year, and we started noticing that business was really picking up.”

That’s certainly not enough to justify investing in a nation that has had a poor record of infrastructure projects for more than two decades. So Dawid went to work to determine whether South Africa’s new initiative would bear fruit. “I visited with a number of government officials, and went to the state statistics department to get data on construction projects from around the country,” he says. “It was for real.”

The next step was to find a company that could benefit from the government’s investment. “There were only a few that were big enough for us to invest in, even in SMALLCAP, but there was one that stood out. They had seen it coming and had geared up for it.”

Dawid then researched that company, one of the nation’s top engineering and construction contractors. A management shakeup had led to a new team of aggressive leaders, and their preparedness for the coming boom was ahead of its competitors. A three-hour dinner in London with the chief executive also helped in making a decision. “Those face-to-face meetings are so important,” he says. “You can get a much stronger sense of the company’s leadership.”

[End Sidebar]

[Begin Sidebar]

A wealth of experience
SMALLCAP World Fund’s counselors bring together a wealth of investment experience. Here are the specific years* of experience for these primary decision-makers in the fund:
*As of December 2008.
Gordon Crawford	37 years
Claudia P. Huntington	36 years
Mark E. Denning	26 years
Noriko H. Chen	18 years
Brady L. Enright	17 years
Jonathan Knowles	17 years
J. Blair Frank	15 years
Lawrence Kymisis	14 years
Kristian Stromsoe	12 years
Terrance McGuire	10 years

[End Sidebar]

The system provides accountability for analysts, giving them greater incentive to thoroughly research their companies. “We all benefit from the RP,” says Gordon Crawford, the longest-tenured portfolio counselor on the fund. “The exchange of ideas and research we have with them, and with each other, is key to the success of the fund. And they’ve got a great deal of incentive to do it right.”

Of course, stocks can and do fall, as we’ve seen during the market’s recent turmoil, and small-cap stocks historically have suffered outsized losses during downturns. SMALLCAP is no exception, despite the analysts’ best efforts. “Research is not a crystal ball,” Kristian says. “Certainly, market conditions change. But we have to keep at it to find value whenever we can.” n

[Begin Sidebar]

[green image of a world map]

[photo of Lawrence Kymisis]

Lawrence Kymisis

Small-cap research director

IKEA is one of the best-known brands in the world, and is considered a highly successful, well-run company. The problem for investors is that it’s privately held. “It’s always been one of those companies you wish you could own,” Lawrence says.

Nonetheless, Lawrence found a way for SMALLCAP World Fund to participate in IKEA’s success, at least in a small way. “I saw in a newspaper article that a company had acquired franchising rights to IKEA in Greece,” he says. “I decided that we needed to visit them to see what effect this might have.”

The company had started life as a wholesaler, bringing goods to Europe from the Far East. Since then, it has diversified into a number of retail ventures, holding franchise rights for a number of strong global brands. “IKEA was important, but it wasn’t the only thing the company had going for it,” Lawrence says. “I think I saw 10 companies on that trip to Greece, but that one really stood out. It was exciting, because nobody else seemed to be looking at them.”

Lawrence did further research, and visited a number of company retailers. He also pored over the company’s plans for its IKEA franchise. “It started with one store in Greece’s second largest city in 2003. They’ve been opening one or two new stores each year,” he says. “The revenues and profit growth were impressive. They had an aggressive but realistic plan.”

[End Sidebar]

Summary investment portfolio, September 30, 2008

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)
Industrials	17.51	%
Consumer discretionary	14.17
Health care	11.95
Information technology	10.35
Financials	9.39
Other industries	23.75
Short-term securities & other assets less liabilities	12.76
Bonds & notes	0.12

[end pie chart]

Country diversification (percent of net assets)
United States	37.1	%
Euro zone (*)	9.7
South Korea	4.4
United Kingdom	4.2
Hong Kong	4.1
Australia	3.7
Canada	3.7
India	3.1
Japan	2.3
Switzerland	2.0
Singapore	2.0
Other countries	10.9
Short-term securities & other assets less liabilities	12.8
(*)Countries using the euro as a common currency; those represented in the fund's portfolio are Austria, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Slovenia and Spain.

Common stocks  - 86.76%	Shares		Value  (000)		Percent of net assets
Industrials  - 17.51%
Downer EDI Ltd. (1)  (2)		23,026,345	$	117,192		.67	%
Engineering and infrastructure maintenance company in Australia and New Zealand.
Container Corp. of India Ltd. (1)		5,783,588		102,987		.59
Provides rail transportation and other logistical support for cargo shipments within India.
Samsung Engineering Co., Ltd. (1)		1,587,400		99,171		.56
Korea-based engineering solutions provider for the petrochemical, refinery, oil and gas, industrial and environmental industries.
MSC Industrial Direct Co., Inc., Class A		2,106,000		97,023		.55
Distributes industrial maintenance and repair products.
Watsco, Inc.		1,544,000		77,632		.44
Major distributor of air conditioning, heating and refrigeration equipment.
Ellaktor SA (1)		8,186,000		76,191		.43
Greece-based provider of project management and consulting services in the fields of infrastructure, real estate and energy.
Kaba Holding AG (1)  (2)		262,800		69,625		.40
Security solutions provider based in Switzerland.
TaeWoong Co., Ltd. (1)  (2)		1,033,400		69,178		.39
South Korea-based manufacturer of forging products used in heavy industrial fields.
Resources Connection, Inc. (2)  (3)		3,027,336		68,206		.39
Its staff of accounting and finance professionals are hired by clients on a project basis.
Mine Safety Appliances Co.		1,627,300		62,033		.35
Manufacturer of health and safety products for a variety of industries.
Michael Page International PLC (1)		14,032,821		58,470		.33
One of the world's leading top-level professional recruitment companies.
URS Corp. (3)		1,528,000		56,032		.32
Engineering, construction and technical services provider, which serves as a contractor for the U.S. government and private industry clients.
Actuant Corp., Class A		2,150,000		54,266		.31
Makes hydraulic systems, industrial tools and electrical products.
Graco Inc.		1,507,900		53,696		.31
Manufacturer of fluid-handling equipment and components.
Other securities				2,016,622		11.47
				3,078,324		17.51
Consumer discretionary  - 14.17%
Nitori Co., Ltd. (1)		2,127,600		125,080		.71
Furniture and interior goods retailer based in Japan.
Schibsted ASA (1)  (2)		4,703,200		87,312		.50
Major Scandinavian publishing and media company.
Central European Media Enterprises Ltd., Class A (3)		1,234,811		80,757		.46
Television operator in central Europe and eastern Europe.
Jumbo SA (1)  (2)		4,844,956		78,639		.45
Manufactures and trades children's toys and games.
Fourlis (1)  (2)		4,074,000		77,874		.44
The largest Greek home appliance company.
Lions Gate Entertainment Corp. (2)  (3)		8,250,000		75,075		.43
Independent motion picture and television producer and distributor.
lululemon athletica inc. (3)		2,903,214		66,861		.38
Manufacturer and retailer of yoga-inspired athletic apparel.
Live Nation, Inc. (2)  (3)		4,000,000		65,080		.37
Produces and promotes live entertainment through the ownership and operation of venues in North America and Europe.
Cheil Industries Inc. (1)		1,300,000		57,185		.33
Korean manufacturer of fabrics, apparel and petrochemical products.
Kuoni Reisen Holding AG, Class B (1)  (2)		145,066		56,018		.32
A leading European tour operator and vacation planning firm based in Switzerland.
Café de Coral Holdings Ltd. (1)  (2)		31,550,000		55,058		.31
Operates Hong Kong's largest restaurant chains. Also owns quick-serve restaurants in Canada, Malaysia and the Philippines.
Nishimatsuya Chain Co., Ltd. (1)  (2)		5,565,000		53,362		.30
Retailer of children's and infant's clothing and products.
Other securities				1,613,275		9.17
				2,491,576		14.17
Health care  - 11.95%
ResMed Inc (3)		2,556,100		109,912
ResMed Inc (CDI) (1) (3)		1,500,000		6,520		.66
Makes devices to diagnose and treat breathing disorders that interrupt sleep.
American Medical Systems Holdings, Inc. (2)  (3)		5,370,000		95,371		.54
Makes medical devices that treat urological disorders.
Beckman Coulter, Inc.		997,500		70,813		.40
Manufacturer of lab equipment and instruments used in hospitals, medical schools and drug research.
NuVasive, Inc. (3)		1,403,461		69,233		.40
Medical device company that develops products for the minimally invasive surgical treatment of spine disorders.
Gerresheimer AG, non-registered shares (1)		1,435,000		65,672		.37
Manufacturer of specialty glass and plastic products for the pharmaceutical and life science industries.
Inverness Medical Innovations, Inc. (3)		2,161,456		64,844		.37
Manufacturer of consumer and professional medical diagnostic products focused on cardiology, women's health and infectious diseases.
Cochlear Ltd. (1)		1,325,467		63,296		.36
A major designer and manufacturer of hearing implants and hearing aids sold around the world.
Masimo Corp. (3)		1,631,800		60,703		.35
Medical technology company engaged in the development, manufacturing and marketing of non-invasive patient monitoring products.
ArthroCare Corp. (2) (3)		2,117,000		58,683		.33
Maker of disposable medical devices for minimally invasive surgical procedures.
Integra LifeSciences Holdings Corp. (3)		1,238,500		54,531		.31
Diversified medical device company for neurosurgery, reconstructive and general surgery applications.
ZOLL Medical Corp. (2) (3)		1,655,000		54,152		.31
Develops and markets non-invasive cardiac resuscitation devices and related software solutions.
Other securities				1,326,936		7.55
				2,100,666		11.95
Information technology  - 10.35%
Kingboard Chemical Holdings Ltd. (1)  (2)		52,648,200		178,411		1.02
Maker of printed circuit boards, as well as laminates, copper foil and chemicals used in printed circuit boards.
Heartland Payment Systems, Inc.  (2)		2,970,000		75,913		.43
Credit and debit card processor and payroll solutions provider.
SkillSoft PLC (ADR) (2) (3)		7,225,000		75,574		.43
Provides online courses on information technology, business skills and other topics.
Tripod Technology Corp. (1)  (2)		30,494,514		58,832		.33
Manufacturer of printed circuit boards, cash registers and computer automation production equipment.
Intersil Corp., Class A		3,125,000		51,813		.29
Manufactures analog semiconductors.
Verifone Holdings, Inc. (3)		3,114,500		51,514		.29
Supplier of electronic payment equipment and value-added services for point of sales.
Digital River, Inc. (3)		1,575,000		51,030		.29
Povides technology and services that enable its clients to sell their products on the Web.
Other securities				1,277,278		7.27
				1,820,365		10.35
Financials  - 9.39%
Daegu Bank, Ltd. (1)  (2)		10,570,000		94,830		.54
Korean commercial bank serving the city of Daegu and the North Gyeongsang province.
Pusan Bank (1)  (2)		9,594,500		87,216		.50
Commercial bank serving southeastern Korea.
Kotak Mahindra Bank Ltd. (1)		5,493,262		66,710		.38
Financial solutions provider based in India.
Hospitality Properties Trust		3,000,000		61,560		.35
Real estate investment trust with hotel and travel center holdings in the U.S., Puerto Rico and Canada.
Hopewell Holdings Ltd. (1)		13,755,000		49,486		.28
Invests in and develops real estate in Hong Kong and China, and builds toll roads and bridges in mainland China.
Other securities				1,290,259		7.34
				1,650,061		9.39
Energy  - 6.19%
OPTI Canada Inc. (2) (3)		15,001,600		156,105
OPTI Canada Inc. (2) (3) (4)		420,000		4,371		.91
Oil sands project development company.
Concho Resources Inc. (2) (3)		4,806,820		132,716		.75
Oil and natural gas company focused on properties located primarily in the Permian Basin of Southeast New Mexico and West Texas.
Oilexco Inc. (3)		6,808,600		67,002
Oilexco Inc. (GBP denominated)  (1) (3) (4)		2,900,000		28,923
Oilexco Inc. (3) (4)		520,000		5,117		.58
Oil and gas exploration and production company based in Canada.
Pacific Rubiales Energy Corp. (3)		8,150,000		51,652
Pacific Rubiales Energy Corp. (3) (4)		1,333,333		8,450		.34
Canada-based producer of heavy crude oil and natural gas focused in Colombia and northern Peru.
Banpu PCL (1)		6,651,700		59,314		.34
Thailand-based energy company focused on coal mining and coal-fired power generation.
Heritage Oil Ltd. (1) (2) (3)		12,898,000		50,295		.29
Canada-based oil and gas exploration, development and production company with a variety of global interests.
First Calgary Petroleums Ltd. (2) (3)		10,846,000		34,523
First Calgary Petroleums Ltd. (GBP denominated) (1) (2) (3)		4,800,000		15,215		.28
This oil and gas exploration company operates primarily in Yemen and Algeria.
Other securities				474,014		2.70
				1,087,697		6.19
Materials  - 5.40%
AMG Advanced Metallurgical Group NV (1) (2) (3)		2,143,960		88,066		.50
Global specialty metals company based in the Netherlands.
Rhodia SA (1)  (2)		5,093,401		79,180		.45
A leading producer of specialty chemicals used in plastics, fibers, consumer products and pharmaceuticals.
AptarGroup, Inc.		1,375,000		53,776		.31
Makes aerosol valves, dispensers and pumps for fragrances, pharmaceuticals and personal care products.
Calgon Carbon Corp. (2) (3)		2,459,300		50,071		.28
Global manufacturer and supplier of water and air purifying treatment systems.
Other securities				678,442		3.86
				949,535		5.40
Consumer Staples  - 3.62%
Hain Celestial Group, Inc. (2) (3)		2,580,000		71,027		.40
Sells natural and specialty food and beverage products.
Other securities				565,393		3.22
				636,420		3.62
Telecommunication services  - 1.61%
LG Telecom Ltd. (1)		6,370,000		53,282		.30
Korea-based mobile telecommunications services provider.
Other securities				229,368		1.31
				282,650		1.61
Utilities  - 1.60%
Xinao Gas Holdings Ltd. (1)  (2)		51,038,000		69,173		.39
This gas distributor also invests in and operates gas pipeline infrastructure in China.
Other securities				212,668		1.21
				281,841		1.60
Miscellaneous  -  4.97%
Other common stocks in initial period of acquisition				874,614		4.97
Total common stocks (cost: $17,125,818,000)				15,253,749		86.76
Warrants  - 0.03%
Other - 0.03%
Other securities				4,709		.03
Miscellaneous  -  0.00%
Other warrants in initial period of acquisition				207		.00
Total warrants (cost: $3,548,000)				4,916		.03
Convertible securities  - 0.33%
Other  - 0.33%
Other securities				58,254		.33
Total convertible securities (cost: $48,115,000)				58,254		.33
Bonds & notes  - 0.12%
Other - 0.12%
Other securities				22,013		.12
Total bonds & notes (cost: $24,743,000)				22,013		.12
Short-term securities  - 12.64%		Principal amount (000)
Federal Home Loan Bank 2.03%-2.75% due 10/3-12/29/2008	$	330,400		329,920		1.88
Freddie Mac 2.095%-2.75% due 10/20-12/19/2008		297,000		296,328		1.69
BASF AG 2.10%-2.82% due 10/2/2008-1/16/2009 (5)		167,600		166,906		.95
Fannie Mae 2.35%-2.45 due 11/13-12/9/2008		108,500		108,166		.61
Nestlé Capital Corp. 2.00%-2.10% due 10/14-10/15/2008 (5)		103,300		103,213		.59
BMW U.S. Capital LLC 2.04% due 10/9-10/14/2008 (5)		91,400		91,344		.52
American Honda Finance Corp. 2.19%-2.24% due 10/22-12/5/2008		90,000		89,567		.51
Novartis Finance Corp. 2.10%-2.21% due 10/24-11/17/2008 (5)		88,800		88,539		.50
Swedish Export Credit Corp. 2.20%-2.95% due 10/2-12/18/2008		87,000		86,679		.49
Jupiter Securitization Co., LLC 5.50% due 10/1/2008 (5)		50,000		49,992
Park Avenue Receivables Co., LLC 2.70% due 12/1/2008 (5)		30,000		29,778		.45
Stadshypotek Delaware Inc. 2.60% due 10/7/2008 (5)		78,800		78,759		.45
Caisse d'Amortissement de la Dette Sociale 2.13%-2.19% due 10/8-11/13/2008		75,000		74,868		.43
U.S. Treasury Bills 1.40%-1.86% due 2/5- 8/27/2009		72,200		71,488		.41
Toyota Credit de Puerto Rico Corp. 2.82% due 12/3/2008		50,000		49,743
Toyota Motor Credit Corp. 2.35% due 10/15/2008		11,500		11,489		.35
Procter & Gamble International Funding S.C.A. 2.12% due 11/24-12/5/2008 (5)		60,000		59,684		.34
Electricité de France 2.22%-2.26% due 10/16-11/12/2008 (5)		51,800		51,695		.29
Other securities				383,391		2.18
Total short-term securities (cost: $2,221,683,000)				2,221,549		12.64
Total investment securities (cost: $19,423,907,000)				17,560,481		99.88
Other assets less liabilities				21,628		.12
Net assets			$	17,582,109		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.

The fund's affiliated holdings listed below are either shown in the preceding summary investment portfolio

or included in thevalue of "Other securities" under their respective industry sectors. Further

details on these holdings and related transactions during the year ended September 30, 2008, appear below.

	Beginning shares		Additions		Reductions		Ending shares		Dividend  income  (000)		Value of affiliates at 9/31/08 (000)
Kingboard Chemical Holdings Ltd. (1)		49,934,200		2,714,000		-		52,648,200	$	7,045	$	178,411
OPTI Canada Inc. (3)		12,051,600		2,950,000		-		15,001,600		-		156,105
OPTI Canada Inc. (3) (4)		420,000		-		-		420,000		-		4,371
OPTI Canada Inc., warrants, expire 2008 (1) (3) (4)		105,000		-		-		105,000		-		64
Concho Resources Inc. (3)		2,161,240		3,306,680		661,100		4,806,820		-		132,716
Downer EDI Ltd. (1)		15,773,919		9,340,970		2,088,544		23,026,345		4,520		117,192
American Medical Systems Holdings, Inc. (3)		3,725,000		1,645,000		-		5,370,000		-		95,371
Daegu Bank, Ltd. (1)		10,570,000		-		-		10,570,000		5,634		94,830
AMG Advanced Metallurgical Group NV (1) (3)		1,456,000		687,960		-		2,143,960		-		88,066
Schibsted ASA (1)		3,138,000		1,565,200		-		4,703,200		4,360		87,312
Pusan Bank (1)		11,726,500		-		2,132,000		9,594,500		5,937		87,216
Rhodia SA (1)		-		5,093,401		-		5,093,401		1,072		79,180
Jumbo SA (1)		4,844,956		-		-		4,844,956		2,225		78,639
Fourlis (1)		4,074,000		-		-		4,074,000		1,910		77,874
Heartland Payment Systems, Inc.		1,200,000		1,770,000		-		2,970,000		851		75,913
SkillSoft PLC (ADR) (3)		6,450,000		775,000		-		7,225,000		-		75,574
Lions Gate Entertainment Corp. (3)		7,728,500		521,500		-		8,250,000		-		75,075
Hain Celestial Group, Inc. (3)		1,380,000		1,200,000		-		2,580,000		-		71,027
Kaba Holding AG (1)		107,000		155,800		-		262,800		758		69,625
TaeWoong Co., Ltd. (1)		635,000		664,400		266,000		1,033,400		34		69,178
Xinao Gas Holdings Ltd. (1)		56,438,000		-		5,400,000		51,038,000		878		69,173
Resources Connection, Inc. (3) (6)		900,000		2,127,336		-		3,027,336		-		68,206
Live Nation, Inc. (3)		-		4,000,000		-		4,000,000		-		65,080
Tripod Technology Corp. (1)		28,477,108		7,751,406		5,734,000		30,494,514		1,954		58,832
ArthroCare Corp. (3)		1,394,000		723,000		-		2,117,000		-		58,683
Kuoni Reisen Holding AG, Class B (1)		43,309		121,825		20,068		145,066		2,380		56,018
Café de Coral Holdings Ltd. (1)		23,750,000		7,800,000		-		31,550,000		1,871		55,058
ZOLL Medical Corp. (3)		-		1,655,000		-		1,655,000		-		54,152
Nishimatsuya Chain Co., Ltd. (1)		3,855,500		1,964,500		255,000		5,565,000		747		53,362
Heritage Oil Ltd. (1) (3)		-		17,003,000		4,105,000		12,898,000		-		50,295
Heritage Oil Corp.		-		1,564,900		1,564,900		-		-		-
Calgon Carbon Corp. (3)		-		2,459,300		-		2,459,300		-		50,071
First Calgary Petroleums Ltd. (3)		9,048,000		1,798,000		-		10,846,000		-		34,523
First Calgary Petroleums Ltd. (GBP denominated) (1) (3)		4,800,000		-		-		4,800,000		-		15,215
ACI Worldwide, Inc. (3)		-		2,742,400		-		2,742,400		-		48,047
Volcano Corp. (3)		2,436,800		340,600		-		2,777,400		-		48,021
Dolphin Capital Investors Ltd. (1) (3)		32,021,860		6,064,520		4,370,980		33,715,400		-		47,691
IVRCL Infrastructures & Projects Ltd. (1)		4,840,000		4,185,000		-		9,025,000		284		45,991
Medicis Pharmaceutical Corp., Class A		3,545,000		642,100		1,125,000		3,062,100		438		45,656
TK Corp. (1) (3)		1,580,000		79,000		-		1,659,000		-		45,398
Andersons, Inc.		1,000,000		247,000		-		1,247,000		405		43,919
Power Integrations, Inc.  (3)		-		1,775,200		-		1,775,200		-		42,782
Grontmij NV, depository receipts (1)		790,000		492,000		-		1,282,000		1,733		42,199
Major Drilling Group International Inc. (3)		1,637,500		700,000		837,500		1,500,000		-		41,911
Beacon Roofing Supply, Inc. (3)		2,695,400		-		20,600		2,674,800		-		41,780
Nakanishi Inc. (1)		219,800		271,300		-		491,100		258		41,629
Mentor Corp.		1,223,300		724,100		246,700		1,700,700		1,181		40,579
Blue Nile, Inc. (3)		1,037,940		-		96,800		941,140		-		40,347
Ekornes ASA (1)		2,237,598		700,000		-		2,937,598		3,671		39,571
SonoSite, Inc. (3)		93,819		1,237,281		76,234		1,254,866		-		39,403
Manila Water Co., Inc. (1)		35,000,000		76,206,800		-		111,206,800		650		39,137
Navitas Ltd. (1)		21,727,690		-		-		21,727,690		2,113		38,878
Trinity Ltd.  (1) (3) (4)		-		82,337,500		-		82,337,500		-		37,652
Cougar Biotechnology, Inc. (3) (4)		-		1,000,000		-		1,000,000		-		33,390
Cougar Biotechnology, Inc. (3)		-		100,000		-		100,000		-		3,339
Astaldi SpA (1)		-		5,263,954		-		5,263,954		-		35,255
Veeco Instruments Inc. (3)		1,598,523		707,873		-		2,306,396		-		34,158
Pyeong San Co., Ltd. (1)		1,220,032		145,171		145,032		1,220,171		57		32,351
Abaxis, Inc. (3)		-		1,609,700		-		1,609,700		-		31,711
Apollo Hospitals Enterprise Ltd. (1)		3,275,000		-		-		3,275,000		468		31,559
Jammu and Kashmir Bank Ltd. (1)		3,149,500		-		-		3,149,500		1,135		30,836
Superior Well Services, Inc. (3)		-		1,200,000		-		1,200,000		-		30,372
Houston Wire & Cable Co.		600,000		1,078,900		-		1,678,900		554		28,827
Peet's Coffee & Tea, Inc. (3)		1,015,000		-		-		1,015,000		-		28,339
Altra Holdings, Inc. (3)		1,905,548		-		-		1,905,548		-		28,126
Banyan Tree Holdings Ltd. (1)		45,405,000		7,640,000		8,712,000		44,333,000		653		27,617
Jackson Hewitt Tax Service Inc.		2,396,000		-		600,000		1,796,000		1,617		27,551
Emeco Holdings Ltd. (1)		28,710,000		12,317,381		-		41,027,381		1,647		26,392
eHealth, Inc. (3)		866,400		713,600		-		1,580,000		-		25,280
Internet Capital Group, Inc. (3)		2,600,000		496,000		-		3,096,000		-		25,109
Hyunjin Materials Co., Ltd. (1)		622,100		535,000		300,000		857,100		68		24,930
PetMed Express, Inc. (3)		1,500,000		-		-		1,500,000		-		23,550
United Laboratories International Holdings Ltd. (1)		36,000,000		35,242,000		-		71,242,000		1,270		23,293
American Axle & Manufacturing Holdings, Inc.		2,080,000		3,184,600		964,600		4,300,000		893		23,048
austriamicrosystems AG, non-registered shares (1)		575,000		140,000		-		715,000		1,428		22,320
Ipca Laboratories Ltd. (1)		1,794,000		-		-		1,794,000		349		21,541
InfoSpace.com, Inc. (3)		1,294,100		1,127,100		450,000		1,971,200		2,835		21,388
Hana Microelectronics PCL (1)		40,425,000		13,500,000		-		53,925,000		1,669		21,369
Hutchinson Technology Inc. (3)		1,286,035		550,000		-		1,836,035		-		21,261
UnionBank of the Philippines (1)		35,823,500		1,894,600		288,700		37,429,400		1,143		20,914
Genesis Lease Ltd. (ADR)		2,415,000		469,000		591,421		2,292,579		5,342		20,037
Kenmare Resources PLC (1) (3)		39,316,000		12,020,000		-		51,336,000		-		17,712
Kenmare Resources PLC, warrants, expire 2009		5,775,000		-		5,775,000		-		-		-
Home Federal Bancorp, Inc.		380,000		1,384,249		380,000		1,384,249		248		17,649
Gruppo MutuiOnline SpA (1)		3,160,000		-		-		3,160,000		380		17,002
Michaniki SA (1)		4,314,400		-		379,400		3,935,000		997		12,968
Michaniki SA, preference shares (1)		1,626,276		-		754,376		871,900		221		2,447
Northgate PLC (1)		2,230,000		1,884,822		-		4,114,822		2,042		15,054
Bloomsbury Publishing PLC (1)		5,405,000		-		-		5,405,000		429		14,495
Infotech Enterprises Ltd. (1)		3,000,000		-		-		3,000,000		84		13,616
Vital Images, Inc. (3)		1,023,000		589,000		820,000		792,000		-		11,880
Domino's Pizza Enterprises Ltd. (1)		-		4,563,190		-		4,563,190		434		11,575
G-Shank Enterprise Co., Ltd. (1)		5,884,320		10,954,118		-		16,838,438		500		9,561
Gulf Keystone Petroleum Ltd. (1) (3) (4)		-		23,700,000		-		23,700,000		-		9,007
Polo Resources Ltd. (1) (3)		-		123,872,500		-		123,872,500		-		8,862
Vision-Sciences, Inc. (3)		2,096,733		103,267		-		2,200,000		-		8,778
Arpida Ltd. (1) (3)		1,231,509		-		-		1,231,509		-		8,719
Halla Engineering & Construction Corp. (1)		626,000		-		-		626,000		278		8,290
AtriCure, Inc. (3) (6)		87,257		737,243		-		824,500		-		8,261
Trigon Agri A/S (1) (3)		-		8,150,000		-		8,150,000		-		7,808
Ono Sokki Co., Ltd. (1)		1,609,000		-		-		1,609,000		270		7,522
Cpl Resources PLC (1)		2,784,000		378,488		186,502		2,975,986		201		7,256
Hyflux Water Trust (1)		-		19,500,000		-		19,500,000		300		6,908
SourceForge, Inc. (3) (6)		1,000		4,699,000		-		4,700,000		-		6,392
I. Kloukinas - I. Lappas SA (1)		1,080,000		744,000		-		1,824,000		578		6,083
Kaboose Inc. (3)		-		8,000,000		-		8,000,000		-		6,027
Vical Inc. (3)		2,250,279		-		-		2,250,279		-		4,928
Solomon Mutual Savings Bank (1)		1,062,023		-		-		1,062,023		85		4,107
ValueVision Media, Inc., Class A (3)		1,930,000		-		30,000		1,900,000		-		3,515
Chuang's China Investments Ltd. (1)		95,968,000		24,027,000		7,556,000		112,439,000		230		3,028
MEMSIC, Inc. (3)		-		1,200,000		8,464		1,191,536		-		2,502
Entertainment Rights PLC (1) (3)		42,500,000		-		218,898		42,281,102		-		2,024
Zoloto Resources Ltd. (3)		5,425,000		2,750,000		-		8,175,000		-		1,617
CEC Unet PLC (1) (3)		-		35,100,775		-		35,100,775		-		968
BrisConnections Unit Trusts (1) (3)		-		27,300,000		-		27,300,000		-		837
Imagelinx PLC (1) (3)		21,385,714		-		-		21,385,714		-		571
AB Lindex (7)		5,118,000		-		5,118,000		-		-		-
Allscripts Healthcare Solutions, Inc. (3)  (7)		425,000		2,575,000		2,300,000		700,000		-		-
Arbitron Inc. (7)		1,496,760		-		743,616		753,144		489		-
A-TEC Industries AG (7)		436,800		35,000		471,800		-		-		-
BA Energy Inc. (7)		5,661,692		-		5,661,692		-		-		-
Bare Escentuals, Inc. (3)  (7)		2,124,300		6,355,000		4,654,900		3,824,400		-		-
BayWa AG (1)  (7)		1,892,790		331,744		709,780		1,514,754		776		-
Cascal NV (7)		-		1,723,300		196,349		1,526,951		275		-
Caspian Energy Inc. (7)		2,450,000		-		2,450,000		-		-		-
Caspian Energy Inc. (GBP denominated) (7)		3,450,000		-		3,450,000		-		-		-
CastlePoint Holdings, Ltd. (7)		1,070,200		995,900		1,964,526		101,574		189		-
CDNetworks Co., Ltd. (7)		685,615		-		685,615		-		-		-
Chart Industries, Inc. (7)		1,555,274		-		1,555,274		-		-		-
China Medical Technologies, Inc. (ADR) (7)		1,686,606		-		1,086,606		600,000		300		-
CNET Networks, Inc. (7)		10,655,000		-		10,655,000		-		-		-
Dore Holdings Ltd. (7)		78,934,000		15,888,368		82,753,177		12,069,191		619		-
Downey Financial Corp. (7)		875,000		1,350,000		2,225,000		-		591		-
Eastern Property Holdings Ltd. (7)		219,978		-		219,978		-		-		-
Eastern Property Holdings Ltd., rights, expire 2007 (7)		-		202,797		202,797		-		-		-
Echelon Corp. (3)  (7)		2,000,000		-		-		2,000,000		-		-
Energem Resources Inc. (7)		8,002,500		-		8,002,500		-		-		-
Energem Resources Inc. (7)		2,200,000		-		2,200,000		-		-		-
Energem Resources Inc., warrants, expire 2008 (7)		1,200,000		-		1,200,000		-		-		-
Energem Resources Inc., warrants, expire 2009 (1) (3) (4) (7)		2,200,000		-		-		2,200,000		-		-
FirstFed Financial Corp. (3)  (7)		-		735,000		135,000		600,000		-		-
Fleetwood Enterprises, Inc. (7)		4,405,000		-		4,405,000		-		-		-
FoxHollow Technologies, Inc. (7)		2,176,400		-		2,176,400		-		-		-
Funcom NV (1) (3)  (7)		2,628,750		371,250		2,503,007		496,993		-		-
Gaming VC Holdings SA (1)  (7)		2,023,800		-		627,000		1,396,800		1,029		-
Gentium SpA (ADR)  (7)		750,000		90,000		840,000		-		-		-
Gentium SpA (ADR), warrants, expire 2011 (7)		90,000		-		90,000		-		-		-
Greatbatch, Inc. (3)  (7)		1,359,700		-		369,300		990,400		-		-
GVK Power & Infrastructure Ltd. (1) (3)  (7)		3,357,464		38,242,526		-		41,599,990		-		-
Honeys Co., Ltd. (7)		1,725,000		493,000		2,218,000		-		699		-
Hung Poo Real Estate Development Corp. (1)  (7)		19,101,120		102,431		8,858,000		10,345,551		710		-
Hythiam, Inc. (3)  (7)		2,475,000		225,000		-		2,700,000		-		-
I-Flow Corp. (3)  (7)		1,658,800		-		858,800		800,000		-		-
Insulet Corp. (3)  (7)		2,012,680		-		1,628,280		384,400		-		-
Integra LifeSciences Holdings Corp. (3)  (7)		1,578,000		645,000		984,500		1,238,500		-		-
Interhyp AG (7)		454,850		73,000		527,850		-		651		-
Introgen Therapeutics, Inc. (7)		2,677,100		-		2,677,100		-		-		-
JetBlue Airways Corp. (7)		9,950,000		-		9,950,000		-		-		-
JVM Co., Ltd. (1)  (7)		506,000		-		333,500		172,500		135		-
Lonrho PLC (1) (3)  (7)		-		26,350,000		12,075,000		14,275,000		-		-
lululemon athletica inc. (3) (6) (7)		2,698,000		970,414		765,200		2,903,214		-		-
Michael Page International PLC (1)  (7)		8,771,190		9,170,000		3,908,369		14,032,821		2,709		-
Mineral Deposits Ltd. (1) (3)  (7)		16,220,000		-		77,156		16,142,844		-		-
Mineral Deposits Ltd. (CAD denominated) (1) (3)  (7)		-		6,300,000		-		6,300,000		-		-
Nien Made Enterprise Co., Ltd. (7)		28,170,012		-		28,170,012		-		-		-
Norfolk Group Ltd. (7)		6,500,000		-		6,500,000		-		353		-
Novell, Inc. (3)  (7)		17,978,000		-		10,150,000		7,828,000		-		-
Orco Property Group SA (7)		710,454		-		710,454		-		143		-
Phoenix PDE Co., Ltd. (1) (3)  (7)		1,500,000		-		623,910		876,090		-		-
Praktiker Bau- und Heimwerkermärkte Holding AG (1)  (7)		2,748,983		1,094,900		1,790,520		2,053,363		2,691		-
Redline Communications Group Inc. (7)		-		787,500		787,500		-		-		-
Redline Communications Group Inc., Class A  (7)		-		787,500		787,500		-		-		-
Redline Communications Inc. (7)		3,150,000		-		3,150,000		-		-		-
Regal Petroleum PLC (1) (3)  (7)		7,817,000		9,053,300		6,553,300		10,317,000		-		-
Rightmove PLC (1)  (7)		6,209,450		2,398,207		3,433,600		5,174,057		1,191		-
Samsung Engineering Co., Ltd. (1)  (7)		2,437,640		-		850,240		1,587,400		1,985		-
SFA Engineering Corp. (7)		592,140		-		592,140		-		-		-
Sharper Image Corp. (7)		950,000		-		950,000		-		-		-
Spark Networks, Inc. (7)		2,392,200		-		2,392,200		-		-		-
SupportSoft, Inc.(3) (7)		2,554,400		-		1,819,400		735,000		-		-
Synenco Energy Inc., Class A (7)		800,000		-		800,000		-		-		-
Synenco Energy Inc., Class A (7)		2,050,000		-		2,050,000		-		-		-
Thinkware Systems Corp. (7)		-		626,120		626,120		-		-		-
TICON Property Fund (1)  (7)		30,400,000		-		-		30,400,000		574		-
TICON Property Fund, rights, expire 2007  (7)		6,175,000		-		6,175,000		-		-		-
TICON Property Fund, rights, expire 2007 (7)		1,425,000		-		1,425,000		-		-		-
TradeDoubler AB (7)		1,820,000		300,000		2,120,000		-		824		-
Unisteel Technology Ltd. (7)		28,607,000		3,224,000		31,831,000		-		1,169		-
Unitech Corporate Parks PLC (1) (3)  (7)		23,399,700		-		8,968,797		14,430,903		-		-
Vital Signs, Inc. (7)		859,690		202,700		664,990		397,400		378		-
Winnebago Industries, Inc. (7)		-		1,673,000		1,673,000		-		450		-
YBM Sisa.com Inc. (1)  (7)		824,930		-		336,962		487,968		440		-
ZOOTS (7)		25,173		-		25,173		-		-		-
									$	100,684	$	4,204,830

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. The total value of all such securities, including those in "Miscellaneous" and "Other securities," was $7,871,196,000, which represented 44.77% of the net assets of the fund.

(2) Represents an affiliated company as defined under the Investment Company Act of 1940.

(3) Security did not produce income during the last 12 months.

(4) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale.  Further details on these holdings appear below.

	Acquisition date	Cost (000)		Value (000)		Percent of net assets
Trinity Ltd.	12/6/2007	$	37,508	$	37,652		.21	%
Oilexco Inc. (GBP denominated)	12/15/2005		9,456		28,923		.16
Oilexco Inc.	3/7/2007		3,454		5,117		.03
Cougar Biotechnology, Inc.	12/17/2007		29,000		33,390		.19
Gulf Keystone Petroleum Ltd.	7/22/2008		13,210		9,007		.05
Pacific Rubiales Energy Corp.	7/9/2007		5,551		8,450		.05
OPTI Canada Inc.	6/1/2005		4,610		4,371		.03
OPTI Canada Inc., warrants, expire 2008	6/1/2005		355		64		.00
Energem Resources Inc., warrants, expire 2009	3/6/2007		367		1		.00
Other restricted securities			201,046		157,337		.90
Total restricted securities		$	304,557	$	284,312		1.62	%

(5) Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities, including those in "Other securities," summary only was $1,041,504,000, which represented 5.92% of the net assets of the fund.

(6) This security was an unaffiliated issuer in its initial period of acquisition at 9/30/2007; and was not publicly disclosed.

(7) Unaffiliated issuer at 9/30/2008.

Key to abbreviations

ADR = American Depositary Receipts

CDI = CREST Depository Interest

CAD = Canadian dollars

GBP = British pounds

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at September 30, 2008	(dollars in thousands)
Assets:
Investment securities, at value:
Unaffiliated issuers (cost: $14,608,427)	$	13,355,651
Affiliated issuers (cost: $4,815,480)		4,204,830	$	17,560,481
Cash denominated in currencies other than U.S. dollars
(cost: $12,369)				12,346
Cash				2,475
Receivables for:
Sales of investments		132,582
Sales of fund's shares		21,166
Dividends and interest		27,273		181,021
				17,756,323
Liabilities:
Payables for:
Purchases of investments		100,508
Repurchases of fund's shares		52,781
Investment advisory services		9,060
Services provided by affiliates		8,636
Directors' deferred compensation		1,513
Other		1,716		174,214
Net assets at September 30, 2008			$	17,582,109
Net assets consist of:
Capital paid in on shares of capital stock			$	19,639,535
Distributions in excess of net investment income				(190,518	)
Distributions in excess of net realized gain				(1,960	)
Net unrealized depreciation				(1,864,948	)
Net assets at September 30, 2008			$	17,582,109

(dollars and shares in thousands, except per-share amounts)
Total authorized capital stock - 1,000,000 shares, $.01 par value (621,553 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share*
Class A	$	13,453,096		472,771	$	28.46
Class B		495,121		18,232		27.16
Class C		754,599		28,019		26.93
Class F-1		626,817		22,219		28.21
Class F-2		8,092		284		28.47
Class 529-A		370,648		13,088		28.32
Class 529-B		49,350		1,797		27.47
Class 529-C		139,692		5,092		27.43
Class 529-E		22,059		788		28.00
Class 529-F-1		29,926		1,056		28.33
Class R-1		28,358		1,031		27.51
Class R-2		493,770		17,921		27.55
Class R-3		434,703		15,556		27.94
Class R-4		236,175		8,348		28.29
Class R-5		439,703		15,351		28.64
(*) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for Classes A and 529-A, for which the maximum offering prices per share were $30.20 and $30.05, respectively.
See Notes to Financial Statements

Statement of operations
for the year ended September 30, 2008	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S.
taxes of $27,236; also includes
$100,684 from affiliates)	$	336,412
Interest		85,063		$	421,475
Fees and expenses*:
Investment advisory services		147,546
Distribution services		74,034
Transfer agent services		28,674
Administrative services		10,231
Reports to shareholders		1,267
Registration statement and prospectus		796
Postage, stationery and supplies		2,677
Directors' compensation		253
Auditing and legal		173
Custodian		4,461
State and local taxes		461
Other		287
Total fees and expenses before reimbursements/waivers		270,860
Less reimbursements/waivers of fees and expenses:
Investment advisory services		14,755
Administrative services		96
Total fees and expenses after reimbursements/waivers					256,009
Net investment income					165,466
Net realized gain and unrealized
depreciation on investments
and currency:
Net realized gain (loss) on:
Investments (including $383,364 net loss from affiliates)		601,933
Currency transactions		(13,777	)		588,156
Net unrealized depreciation on:
Investments		(9,480,052	)
Currency translations		(449	)		(9,480,501	)
Net realized gain and
unrealized depreciation
on investments and currency					(8,892,345	)
Net decrease in net assets resulting
from operations				$	(8,726,879	)
(*) 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,
	2008			2007
Operations:
Net investment income	$	165,466		$	173,780
Net realized gain on investments and
currency transactions		588,156			2,504,365
Net unrealized (depreciation) appreciation
on investments and currency translations		(9,480,501	)		3,981,821
Net (decrease) increase in net assets
resulting from operations		(8,726,879	)		6,659,966
Dividends and distributions paid to
shareholders:
Dividends from net investment income		(408,327	)		(318,872	)
Distributions from net realized gain
on investments		(2,355,189	)		(1,736,095	)
Total dividends and distributions paid
to shareholders		(2,763,516	)		(2,054,967	)
Net capital share transactions		2,691,993			3,305,969
Total (decrease) increase in net assets		(8,798,402	)		7,910,968
Net assets:
Beginning of year		26,380,511			18,469,543
End of year (including
distributions in excess of
net investment income: $(190,518) and $(104,765), respectively)	$	17,582,109		$	26,380,511
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 15 share classes consisting of five retail share classes, five 529 college savings plan share classes and five retirement plan share classes. The 529 college savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F-1) can be used to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are generally offered only through eligible employer-sponsored retirement plans.The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes 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
Classes B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to Classes 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-1 after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F-1, F-2 and 529-F-1	None	None	None
Classes R-1, R-2, R-3, R-4 and R-5	None	None	None

On August 1, 2008, the fund made an additional retail share class (Class F-2) available for sale pursuant to an amendment to its registration statement filed with the Securities and Exchange Commission. In addition, Class F shares were renamed Class F-1 and Class 529-F shares were renamed Class 529-F-1. Refer to the fund’s prospectus for more details.

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.

Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the investment adviser are fair valued as determined in good faith under procedures adopted by authority of the fund's board of directors. Market quotations may be considered unreliable if events occur that materially affect the value of securities (particularly securities outside the U.S.) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange. 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; significant events occurring after the close of trading in the security; and changes in overall market conditions.

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. 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.

Currency translation – Assets and liabilities, including investment securities, denominated in currencies other than U.S. dollars 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. On the accompanying financial statements, the effects of changes in 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 currencies other than U.S. dollars are disclosed separately.

2. Risk factors

Investing in the fund may involve certain risks including, but not limited to, those described below.

The prices of securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and commodity price fluctuations. The growth-oriented, equity-type securities generally purchased by the fund may involve large price swings and potential for loss, particularly in the case of smaller capitalization stocks. Smaller capitalization stocks are often more difficult to value or dispose of, more difficult to obtain information about and more volatile than stocks of larger, more established companies.

Investments in securities issued by entities based outside the United States may be subject to the risks described above to a greater extent and may also be affected by currency controls; different accounting, auditing, financial reporting, and legal standards and practices in some countries; 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. These risks may be heightened in connection with investments in developing countries.

Investing in countries with developing economies and/or markets may involve risks in addition to and greater than those generally associated with investing in developed countries. For instance, developing countries may have less developed legal and accounting systems. The governments of these countries may be more unstable and more likely to impose capital controls, nationalize a company or industry, place restrictions on foreign ownership and on withdrawing sale proceeds of securities from the country, and/or impose punitive taxes that could adversely affect security prices. In addition, the economies of these countries may be dependent on relatively few industries that are more susceptible to local and global changes. Securities markets in these countries are also relatively small and have substantially lower trading volumes. As a result, securities issued in these countries may be more volatile and less liquid than securities issued in countries with more developed economies or markets.

3. Taxation and distributions                                                                                     

Federal income taxation – 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.

As of and during the period ended September 30, 2008, the fund did not have a liability for any unrecognized tax benefits. The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statement of operations. During the period, the fund did not incur any interest or penalties.

The fund is not subject to examination by U.S. federal tax authorities for tax years before 2004, by state tax authorities for tax years before 2003 and by tax authorities outside the U.S. for tax years before 2001.

Non-U.S. 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, 2008, non-U.S. taxes paid on realized gains were $5,386,000. As of September 30, 2008, non-U.S. taxes provided on unrealized gains were $1,257,000.

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 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 securities outside the U.S. (passive foreign investment companies); 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, 2008, the fund reclassified $161,011,000 from distributions in excess of net realized gain to distributions in excess of net investment income; and reclassified $3,903,000 from distributions in excess of net investment income and $27,409,000 from distributions in excess of net realized gain to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of September 30, 2008, the fund had no distributable earnings on a tax basis.  Post-October loss deferrals, unrealized appreciation (depreciation) and cost of investment securities were as follows:

(dollars in thousands)
Post-October currency loss deferrals (realized during the period November 1, 2007, through September 30, 2008)*	$	(14,247	)
Post-October passive foreign investment company loss deferrals (realized during the period November 1, 2007, through September 30, 2008)*		(107,006	)
Gross unrealized appreciation on investment securities		2,009,412
Gross unrealized depreciation on investment securities		(4,049,550	)
Net unrealized depreciation on investment securities		(2,040,138	)
Cost of investment securities		19,600,619
*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, 2008						Year ended September 30, 2007
	Ordinary income		Long-term capital gains		Total distributions paid		Ordinary income		Long-term capital gains		Total distributions paid
Share class
Class A	$	334,625	$	1,839,497	$	2,174,122	$	408,840	$	1,271,426	$	1,680,266
Class B		8,096		75,117		83,213		11,225		51,014		62,239
Class C		11,673		105,858		117,531		14,213		62,804		77,017
Class F-1		14,517		77,785		92,302		13,503		40,771		54,274
Class F-2*		-		-		-		-		-		-
Class 529-A		7,942		44,191		52,133		8,151		25,160		33,311
Class 529-B		637		6,526		7,163		882		4,194		5,076
Class 529-C		1,785		17,600		19,385		2,285		10,443		12,728
Class 529-E		409		2,737		3,146		464		1,635		2,099
Class 529-F-1		643		3,238		3,881		588		1,702		2,290
Class R-1		412		3,689		4,101		476		2,004		2,480
Class R-2		6,744		62,474		69,218		8,616		37,175		45,791
Class R-3		7,952		52,541		60,493		7,972		28,485		36,457
Class R-4		4,695		25,247		29,942		3,801		11,572		15,373
Class R-5		8,197		38,689		46,886		6,796		18,770		25,566
Total	$	408,327	$	2,355,189	$	2,763,516	$	487,812	$	1,567,155	$	2,054,967
* Class F-2 was offered beginning August 1, 2008.

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® ("AFS"), the fund’s transfer agent, and American Funds Distributors,® Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services - The Investment Advisory and Service Agreement with CRMC providesfor 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, 2008, total investment advisory services fees waived by CRMC were $14,755,000. As a result, the fee shown on the accompanying financial statements of $147,546,000, which was equivalent to an annualized rate of 0.633%, was reduced to $132,791,000, or 0.570% 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 Classes F-2 and 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 below.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 except Classes F-2 and R-5 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 Classes 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, 2008, there were no unreimbursed expenses subject to reimbursement for Classes A or 529-A.

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

Transfer agent services –The fund hasa transfer agent agreement with AFS for Classes 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 Classes 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, 2008, the total administrative services fees paid by CRMC were $96,000 for Class R-2.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 529 college savings 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 on the previous page for the year ended September 30, 2008, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
			CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$43,281	$27,612	Not applicable	Not applicable	Not applicable
Class B	6,970	1,062	Not applicable	Not applicable	Not applicable
Class C	10,010	Included in administrative services	$1,493	$280	Not applicable
Class F-1	1,981		1,031	164	Not applicable
Class F-2*	Not applicable		1	- †	Not applicable
Class 529-A	901		530	94	$ 456
Class 529-B	636		74	24	64
Class 529-C	1,748		203	58	175
Class 529-E	139		32	6	28
Class 529-F-1	-		40	7	34
Class R-1	361		27	33	Not applicable
Class R-2	4,641		904	2,318	Not applicable
Class R-3	2,690		777	550	Not applicable
Class R-4	676		380	25	Not applicable
Class R-5	Not applicable		412	11	Not applicable
Total	$74,034	$28,674	$5,904	$3,570	$757

* Class F-2 was offered beginning August 1, 2008.

† Amount less than one thousand.

Directors’ deferred compensation – Since the adoption of the deferred compensation plan in 1993, directors who are unaffiliated with CRMCmay 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 $253,000, shown on the accompanying financial statements, includes $489,000 in current fees (either paid in cash or deferred) and a net decrease of $236,000 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, 2008
Class A	$	2,407,578		62,279	$	2,089,935		51,124	$	(3,043,852	)		(81,583	)	$	1,453,661		31,820
Class B		85,336		2,286		80,745		2,057		(141,282	)		(4,024	)		24,799		319
Class C		233,926		6,278		113,927		2,927		(198,879	)		(5,687	)		148,974		3,518
Class F-1		394,228		10,278		83,621		2,063		(268,755	)		(7,438	)		209,094		4,903
Class F-2†		8,949		286		-		-		(68	)		(2	)		8,881		284
Class 529-A		103,215		2,687		52,124		1,281		(37,637	)		(1,021	)		117,702		2,947
Class 529-B		7,967		213		7,161		180		(4,944	)		(136	)		10,184		257
Class 529-C		38,642		1,038		19,382		488		(18,948	)		(523	)		39,076		1,003
Class 529-E		5,442		143		3,145		78		(2,495	)		(69	)		6,092		152
Class 529-F-1		12,007		317		3,881		95		(3,630	)		(96	)		12,258		316
Class R-1		16,398		435		4,081		103		(11,800	)		(327	)		8,679		211
Class R-2		241,354		6,535		69,131		1,735		(180,872	)		(4,945	)		129,613		3,325
Class R-3		253,188		6,657		60,439		1,502		(166,174	)		(4,496	)		147,453		3,663
Class R-4		171,623		4,497		29,940		737		(88,296	)		(2,374	)		113,267		2,860
Class R-5		272,208		7,286		46,062		1,122		(56,010	)		(1,499	)		262,260		6,909
Total net increase
(decrease)	$	4,252,061		111,215	$	2,663,574		65,492	$	(4,223,642	)		(114,220	)	$	2,691,993		62,487
Year ended September 30, 2007
Class A	$	2,930,661		68,561	$	1,616,206		41,314	$	(2,518,024	)		(59,080	)	$	2,028,843		50,795
Class B		115,985		2,822		60,457		1,602		(83,699	)		(2,044	)		92,743		2,380
Class C		290,599		7,105		74,749		1,993		(134,061	)		(3,289	)		231,287		5,809
Class F-1		329,353		7,708		48,959		1,261		(135,080	)		(3,177	)		243,232		5,792
Class 529-A		108,306		2,552		33,308		854		(24,578	)		(575	)		117,036		2,831
Class 529-B		9,795		236		5,074		133		(3,527	)		(85	)		11,342		284
Class 529-C		42,098		1,018		12,727		334		(12,831	)		(308	)		41,994		1,044
Class 529-E		6,392		152		2,099		54		(1,951	)		(46	)		6,540		160
Class 529-F-1		10,353		244		2,290		59		(2,530	)		(59	)		10,113		244
Class R-1		18,702		449		2,465		64		(10,488	)		(251	)		10,679		262
Class R-2		254,368		6,115		45,744		1,195		(152,206	)		(3,636	)		147,906		3,674
Class R-3		241,982		5,753		36,433		943		(131,973	)		(3,131	)		146,442		3,565
Class R-4		130,964		3,088		15,370		395		(53,194	)		(1,256	)		93,140		2,227
Class R-5		143,393		3,282		24,707		629		(43,428	)		(996	)		124,672		2,915
Total net increase
(decrease)	$	4,632,951		109,085	$	1,980,588		50,830	$	(3,307,570	)		(77,933	)	$	3,305,969		81,982
(*) Includes exchanges between share classes of the fund.
† Class F-2 was offered beginning August 1, 2008.

6. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities and U.S. government obligations, if any, of $10,559,915,000 and $10,625,788,000, respectively, during the year ended September 30, 2008.

Financial highlights (1)

			(Loss) income from investment operations(2)											Dividends and distributions
	Net asset value, beginning of period		Net investment income (loss)					Net (losses) gains 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) (4)			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 (4)
Class A:
Year ended 9/30/2008	$	47.43	$	.31				$	(14.35	)	$	(14.04	)	$	(.76	)	$	(4.17	)	$	(4.93	)	$	28.46		(32.77	)%	$	13,453		1.07	%		1.01	%		.80	%
Year ended 9/30/2007		38.87		.37					12.50			12.87			(.70	)		(3.61	)		(4.31	)		47.43		35.41			20,913		1.04			.98			.86
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
Class B:
Year ended 9/30/2008		45.49		.01					(13.72	)		(13.71	)		(.45	)		(4.17	)		(4.62	)		27.16		(33.27	)		495		1.83			1.77			.03
Year ended 9/30/2007		37.41		.04					12.02			12.06			(.37	)		(3.61	)		(3.98	)		45.49		34.40			815		1.81			1.74			.10
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	)
Class C:
Year ended 9/30/2008		45.18		.01					(13.63	)		(13.62	)		(.46	)		(4.17	)		(4.63	)		26.93		(33.31	)		754		1.86			1.79			.02
Year ended 9/30/2007		37.21		.02					11.95			11.97			(.39	)		(3.61	)		(4.00	)		45.18		34.35			1,107		1.85			1.79			.04
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	)
Class F-1:
Year ended 9/30/2008		47.08		.31					(14.23	)		(13.92	)		(.78	)		(4.17	)		(4.95	)		28.21		(32.77	)		627		1.07			1.01			.82
Year ended 9/30/2007		38.65		.36					12.41			12.77			(.73	)		(3.61	)		(4.34	)		47.08		35.41			815		1.05			.98			.84
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
Class F-2:
Period from 8/1/2008 to 9/30/2008		33.66		.08					(5.27	)		(5.19	)		-			-			-			28.47		(15.42	)		8		.14			.13			.26
Class 529-A:
Year ended 9/30/2008		47.23		.29					(14.28	)		(13.99	)		(.75	)		(4.17	)		(4.92	)		28.32		(32.79	)		371		1.11			1.05			.78
Year ended 9/30/2007		38.76		.34					12.44			12.78			(.70	)		(3.61	)		(4.31	)		47.23		35.33			479		1.10			1.04			.79
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
Class 529-B:
Year ended 9/30/2008		45.96		(.02	)				(13.89	)		(13.91	)		(.41	)		(4.17	)		(4.58	)		27.47		(33.35	)		49		1.93			1.87			(.05	)
Year ended 9/30/2007		37.77		(.01	)				12.14			12.13			(.33	)		(3.61	)		(3.94	)		45.96		34.25			71		1.92			1.86			(.02	)
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	)
Class 529-C:
Year ended 9/30/2008		45.92		(.01	)				(13.89	)		(13.90	)		(.42	)		(4.17	)		(4.59	)		27.43		(33.36	)		140		1.93			1.86			(.04	)
Year ended 9/30/2007		37.77		(.01	)				12.13			12.12			(.36	)		(3.61	)		(3.97	)		45.92		34.23			188		1.92			1.86			(.02	)
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	)
Class 529-E:
Year ended 9/30/2008		46.76		.18					(14.15	)		(13.97	)		(.62	)		(4.17	)		(4.79	)		28.00		(33.01	)		22		1.42			1.35			.47
Year ended 9/30/2007		38.40		.21					12.33			12.54			(.57	)		(3.61	)		(4.18	)		46.76		34.93			30		1.41			1.35			.49
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	)
Class 529-F-1:
Year ended 9/30/2008	$	47.24	$	.37				$	(14.28	)	$	(13.91	)	$	(.83	)	$	(4.17	)	$	(5.00	)	$	28.33		(32.66	)%	$	30		.92	%		.85	%		.98	%
Year ended 9/30/2007		38.77		.42					12.44			12.86			(.78	)		(3.61	)		(4.39	)		47.24		35.56			35		.91			.85			.98
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	)
Class R-1:
Year ended 9/30/2008		46.04		.02					(13.91	)		(13.89	)		(.47	)		(4.17	)		(4.64	)		27.51		(33.29	)		28		1.84			1.77			.05
Year ended 9/30/2007		37.89		.01					12.17			12.18			(.42	)		(3.61	)		(4.03	)		46.04		34.32			38		1.88			1.80			.03
Year ended 9/30/2006		34.07		(.04	)				4.83			4.79			(.29	)		(.68	)		(.97	)		37.89		14.31			21		1.92			1.82			(.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	)
Class R-2:
Year ended 9/30/2008		46.13		(.01	)				(13.95	)		(13.96	)		(.45	)		(4.17	)		(4.62	)		27.55		(33.36	)		494		1.94			1.86			(.04	)
Year ended 9/30/2007		37.93		.03					12.18			12.21			(.40	)		(3.61	)		(4.01	)		46.13		34.36			673		1.93			1.77			.06
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	)
Class R-3:
Year ended 9/30/2008		46.68		.18					(14.12	)		(13.94	)		(.63	)		(4.17	)		(4.80	)		27.94		(32.99	)		435		1.42			1.35			.48
Year ended 9/30/2007		38.34		.20					12.31			12.51			(.56	)		(3.61	)		(4.17	)		46.68		34.88			555		1.42			1.35			.47
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	)
Class R-4:
Year ended 9/30/2008		47.20		.32					(14.29	)		(13.97	)		(.77	)		(4.17	)		(4.94	)		28.29		(32.78	)		236		1.07			1.01			.84
Year ended 9/30/2007		38.73		.35					12.45			12.80			(.72	)		(3.61	)		(4.33	)		47.20		35.41			259		1.06			1.00			.82
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
Class R-5:
Year ended 9/30/2008		47.70		.44					(14.45	)		(14.01	)		(.88	)		(4.17	)		(5.05	)		28.64		(32.57	)		440		.77			.70			1.17
Year ended 9/30/2007		39.10		.48					12.56			13.04			(.83	)		(3.61	)		(4.44	)		47.70		35.77			403		.77			.71			1.11
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 September 30
	2008			2007			2006			2005			2004
Portfolio turnover rate for all classes of shares		50	%		48	%		45	%		45	%		48	%

(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 any applicable sales charges, including contingent deferred sales charges.

(4) This column reflects the impact, if any, of certain reimbursements/waivers from CRMC.  During the periods shown, CRMC reduced fees for investment advisory services.  In addition, during some of the periods shown, CRMC paid a portion of the fund's transfer agent fees for certain retirement plan share classes.

(5) Amount less than $.01.

See Notes to Financial Statements

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of SMALLCAP World Fund, Inc.:

We have audited the accompanying statement of assets and liabilities, including the summary investment portfolio, of SMALLCAP World Fund, Inc. (the “Fund”), as of September 30, 2008, 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, 2008, 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, 2008, 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.

Deloitte & Touche LLP

Costa Mesa, California

November 5, 2008

Expense example

unaudited

As a shareholder of the fund, you incur two types of costs: (1) transaction costs such as initial sales charges on purchase payments and contingent deferred sales charges on redemptions (loads); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2008, through September 30, 2008).

Actual expenses:

The first line of each share class in the table on the next page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses paid during period" to estimate the expenses you paid on your account during this period.

Hypothetical example for comparison purposes:

The second line of each share class in the table on the next page provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio for the share class and an assumed rate of return of 5.00% per year before expenses, which is not the actual return of the share class. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5.00% hypothetical example with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Notes:

There are some account fees that are charged to certain types of accounts, such as individual retirement accounts and 529 college savings plan accounts (generally, a $10 fee is charged to set up the account and an additional $10 fee is charged to the account annually) that would increase the amount of expenses paid on your account. In addition, retirement plan participants may be subject to certain fees charged by the plan sponsor, and Class F-1, F-2 and 529-F-1 shareholders may be subject to fees charged by financial intermediaries, typically ranging from 0.75% to 1.50% of assets annually depending on services offered. You can estimate the impact of these fees by adding the amount of the fees to the total estimated expenses you paid on your account during the period as calculated above. In addition, your ending account value would also be lower by the amount of these fees.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of each share class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning account value 4/1/2008		Ending account value 9/30/2008		Expenses paid during period*		Annualized expense ratio
Class A -- actual return	$	1,000.00	$	785.10	$	4.55		1.02	%
Class A -- assumed 5% return		1,000.00		1,019.90		5.15		1.02
Class B -- actual return		1,000.00		782.05		7.97		1.79
Class B -- assumed 5% return		1,000.00		1,016.05		9.02		1.79
Class C -- actual return		1,000.00		781.94		7.97		1.79
Class C -- assumed 5% return		1,000.00		1,016.05		9.02		1.79
Class F-1 -- actual return		1,000.00		785.14		4.55		1.02
Class F-1 -- assumed 5% return		1,000.00		1.019.90		5.15		1.02
Class F-2 -- actual return †		1,000.00		845.82		1.15		.76
Class F-2 -- assumed 5% return †		1,000.00		1,021.20		3.84		.76
Class 529-A -- actual return		1,000.00		784.92		4.69		1.05
Class 529-A -- assumed 5% return		1,000.00		1,019.75		5.30		1.05
Class 529-B -- actual return		1,000.00		781.74		8.33		1.87
Class 529-B -- assumed 5% return		1,000.00		1,015.65		9.42		1.87
Class 529-C -- actual return		1,000.00		781.70		8.33		1.87
Class 529-C -- assumed 5% return		1,000.00		1,015.65		9.42		1.87
Class 529-E -- actual return		1,000.00		783.66		6.06		1.36
Class 529-E -- assumed 5% return		1,000.00		1,018.20		6.86		1.36
Class 529-F-1 -- actual return		1,000.00		785.65		3.84		.86
Class 529-F-1 -- assumed 5% return		1,000.00		1,020.70		4.34		.86
Class R-1 -- actual return		1,000.00		782.19		7.80		1.75
Class R-1 -- assumed 5% return		1,000.00		1,016.25		8.82		1.75
Class R-2 -- actual return		1,000.00		781.57		8.42		1.89
Class R-2 -- assumed 5% return		1,000.00		1,015.55		9.52		1.89
Class R-3 -- actual return		1,000.00		783.80		6.02		1.35
Class R-3 -- assumed 5% return		1,000.00		1,018.25		6.81		1.35
Class R-4 -- actual return		1,000.00		785.19		4.51		1.01
Class R-4 -- assumed 5% return		1,000.00		1,019.95		5.10		1.01
Class R-5 -- actual return		1,000.00		786.17		3.13		.70
Class R-5 -- assumed 5% return		1,000.00		1,021.50		3.54		.70

*The “expenses paid during period” are equal to the “annualized expense ratio,” multiplied by the average account value over the period, multiplied by the number of days in the period, and divided by 366 (to reflect the one-half year period).

† The period for the “annualized expense ratio” and “actual return” line is based on the number of days from August 1, 2008 (the initial sale of the share class), through September 30, 2008, and accordingly, is not representative of a full period. The “assumed 5% return” line is based on 183 days.

Tax information

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, 2008:

Long-term capital gains	$	2,382,802,000
Foreign taxes	0.05 per share
Foreign source income	0.62 per share
Qualified dividend income		100	%
Corporate dividends received deduction	$	38,618,000
U.S. government income that may be exempt from state taxation		2,603,000

Individual shareholders should refer to their Form 1099 or other tax information, which will be mailed in January 2009, to determine the calendar year amounts to be included on their 2008 tax returns. Shareholders should consult their tax advisers.

Approval of Investment Advisory and Service Agreement

The fund’s board has approved the fund’s Investment Advisory and Service Agreement (the “agreement”) with Capital Research and Management Company (“CRMC”) for an additional one-year term through November 30, 2009. The board approved the agreement following the recommendation of the fund’s Contracts Committee (the “committee”), which is composed of all of the fund’s independent board members. The board and the committee determined that the fund’s advisory fee structure was fair and reasonable in relation to the services provided and that approving the agreement was in the best interests of the fund and its shareholders.

In reaching this decision, the board and the committee took into account information furnished to them throughout the year, as well as information prepared specifically in connection with their review of the agreement and were advised by their independent counsel. They considered the factors discussed below, among others, but did not identify any single issue or particular piece of information that, in isolation, was the controlling factor.

1. Nature, extent and quality of services

The board and the committee considered the depth and quality of CRMC’s investment management process, including its global research capabilities; the experience, capability and integrity of its senior management and other personnel; the low turnover rates of its key personnel; the overall financial strength and stability of its organization; and the ongoing evolution of CRMC’s organizational structure designed to maintain and strengthen these qualities. The board and the committee also considered the nature, extent and quality of administrative, compliance and shareholder services provided by CRMC to the fund under the agreement and other agreements as well as the benefits to fund shareholders from investing in a fund that is part of a large family of funds. The board and the committee concluded that the nature, extent and quality of the services provided by CRMC have benefited and should continue to benefit the fund and its shareholders.

2. Investment results

The board and the committee considered the investment results of the fund in light of its objective of providing long-term growth of capital through investments primarily in stock of companies located around the world with small market capitalizations measured at the time of purchase. They compared the fund’s total returns with those of other relevant funds (including the other funds that are the basis of the Lipper index for the category in which the fund is included) and market data such as relevant market indices. In reviewing the fund’s relative results, the board and the committee took into account the fund’s unique characteristics and its asset size, diversification and range of investments. This report, including the letter to shareholders and related disclosures, contains certain information about the fund’s investment results. The board and the committee concluded that the fund’s short- and long-term results have been satisfactory and that CRMC’s record in managing the fund indicated that its continued management should benefit the fund and its shareholders.

3. Advisory fees and total expenses

The board and the committee compared the advisory fees and total expense levels of the fund to those of other relevant funds. They observed that the fund’s advisory fees and expenses remain significantly below those of most other relevant funds. The board and the committee also noted the breakpoint discounts in the fund’s advisory fee structure that reduce the level of fees charged by CRMC to the fund as fund assets increase as well as the 10% advisory fee waiver in effect since April 2005. In addition, they reviewed information regarding the advisory fees paid by institutional clients of an affiliate of CRMC with investment mandates similar to those of the fund. They noted that, although the fees paid by those clients generally were lower than those paid by the fund, the differences appropriately reflected the significant investment, operational and regulatory differences between advising mutual funds and institutional clients. The board and the committee concluded that the fund’s cost structure was fair and reasonable in relation to the services provided, and that the shareholders receive reasonable value in return for the advisory fees and other amounts paid to CRMC by the fund.

4. Ancillary benefits

The board and the committee considered a variety of other benefits received by CRMC and its affiliates as a result of CRMC’s relationship with the fund and the other American Funds, including fees for administrative services provided to certain share classes; fees paid to CRMC’s affiliated transfer agent; sales charges and distribution fees received and retained by the fund’s principal underwriter, an affiliate of CRMC; and possible ancillary benefits to CRMC’s institutional management affiliates. The board and the committee reviewed CRMC’s portfolio trading practices, noting that while CRMC receives the benefit of research provided by broker-dealers executing portfolio transactions on behalf of the fund, it does not obtain third-party research or other services in return for allocating brokerage to such broker-dealers. The board and the committee took these ancillary benefits into account in evaluating the reasonableness of the advisory fees and other amounts paid to CRMC by the fund.

5. Adviser financial information

The board and the committee reviewed information regarding CRMC’s costs of providing services to the American Funds, including personnel, systems and resources of investment, compliance, trading, accounting and other administrative operations. They considered CRMC’s costs and willingness to invest in technology, infrastructure and staff to maintain and expand services and capabilities, respond to industry and regulatory developments and attract and retain qualified personnel. They noted information previously received regarding the compensation structure for CRMC’s investment professionals. The board and the committee also compared CRMC’s profitability to the reported results of several large, publicly held investment management companies. The board and the committee noted the competitiveness and cyclicality of both the mutual fund industry and the capital markets, and the importance in that environment of CRMC’s long-term profitability for maintaining its independence, company culture and management continuity. They further considered the breakpoint discounts in the fund’s advisory fee structure and the impact of CRMC’s current 10% advisory fee waiver, reflecting benefits that may accrue from growth in assets. The board and the committee concluded that the fund’s advisory fee structure reflected a reasonable sharing of benefits between CRMC and the fund’s shareholders.

Other share class results

unaudited

Classes B, C, F and 529

Fund results shown are for past periods and are not predictive of results for future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. For current information and month-end results, visit americanfunds.com.

Average annual total returns for periods ended September 30, 2008:
	1 year			5 years			Life of class
Class B shares — first sold 3/15/00
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only
if shares are sold within six years of purchase		–36.26	%		8.59	%		–1.51	%
Not reflecting CDSC		–33.27			8.88			–1.51
Class C shares — first sold 3/15/01
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–33.90			8.83			5.45
Not reflecting CDSC		–33.31			8.83			5.45
Class F-1 shares1 — first sold 3/15/01
Not reflecting annual asset-based fee charged
by sponsoring firm		–32.77			9.70			6.30
Class F-2 shares1 — first sold 8/1/08
Not reflecting annual asset-based fee charged
by sponsoring firm		—			—			–15.42	2
Class 529-A shares3 — first sold 2/19/02
Reflecting 5.75% maximum sales charge		–36.66			8.37			7.39
Not reflecting maximum sales charge		–32.79			9.66			8.36
Class 529-B shares3 — first sold 2/20/02
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase		–36.34			8.45			7.31
Not reflecting CDSC		–33.35			8.74			7.31
Class 529-C shares3 — first sold 2/20/02
Reflecting CDSC, maximum of 1%, payable only
if shares are sold within one year of purchase		–33.95			8.74			7.32
Not reflecting CDSC		–33.36			8.74			7.32
Class 529-E shares1,3 — first sold 3/15/02		–33.01			9.32			6.96
Class 529-F-1 shares1,3 — first sold 9/17/02
Not reflecting annual asset-based fee charged
by sponsoring firm		–32.66			9.77			12.42
1 These shares are sold without any initial or contingent deferred sales charge.
2 Results are cumulative total returns; they are not annualized.
3 Results shown do not reflect the $10 initial account setup fee and an annual $10 account maintenance fee.

The fund’s investment adviser waived 5% of its management fees from September 1, 2004, through March 31, 2005, and increased the waiver to 10% on April 1, 2005. Fund results shown reflect the waiver, without which they would have been lower. Please see the Financial Highlights table on pages 25 and 26 for details.

For information regarding the differences among the various share classes, please refer to the fund’s prospectus.

Board of directors and other officers

“Independent” directors
	Year first
	elected
	a director
Name and age	of the fund1	Principal occupation(s) during past five years
Joseph C. Berenato, 62	2000	Chairman and CEO, Ducommun Incorporated (aerospace components manufacturer)
Ambassador	1993	Corporate director and author; former U.S.
Richard G. Capen, Jr., 74		Ambassador to Spain; former Vice Chairman, Knight-Ridder, Inc. (communications company); former Chairman and Publisher, The Miami Herald
H. Frederick Christie, 75	1990	Private investor; former President and CEO, The Mission Group (non-utility holding company, subsidiary of Southern California Edison Company)
Mary Anne Dolan, 61	2008	Founder and President, M.A.D., Inc. (communications company); former Editor-in-Chief, The Los Angeles Herald Examiner
John G. Freund, 55	2000	Founder and Managing Director, Skyline Ventures (venture capital investor in health care companies)
R. Clark Hooper, 62	2006	Private investor; former President, Dumbarton Group LLC (securities industry consulting); former Executive Vice President — Policy and Oversight, NASD
Leonade D. Jones, 61	1995	Co-founder, VentureThink LLC (developed and managed e-commerce businesses) and Versura Inc. (education loan exchange); former Treasurer, The Washington Post Company
William H. Kling, 66	1990	President and CEO, American Public Media Group
Chairman of the Board
(Independent and Non-Executive)
Christopher E. Stone, 52	2007	Daniel and Florence Guggenheim Professor of the Practice of Criminal Justice, John F. Kennedy School of Government, Harvard University; President and Director, Vera Institute of Justice
Patricia K. Woolf, Ph.D., 74	1990	Private investor; corporate director; former Lecturer, Department of Molecular Biology, Princeton University
“Independent” directors
	Number of
	portfolios
	in fund
	complex2
	overseen by
Name and age	director	Other directorships3 held by director
Joseph C. Berenato, 62	6	Ducommun Incorporated
Ambassador	15	Carnival Corporation
Richard G. Capen, Jr., 74
H. Frederick Christie, 75	21	AECOM Technology Corporation; DineEquity, Inc.; Ducommun Incorporated; SouthWest Water Company
Mary Anne Dolan, 61	5	None
John G. Freund, 55	2	Hansen Medical, Inc.; MAP Pharmaceuticals, Inc.; XenoPort, Inc.
R. Clark Hooper, 62	18	JPMorgan Value Opportunities Fund, Inc.; The Swiss Helvetia Fund, Inc.
Leonade D. Jones, 61	7	None
William H. Kling, 66	7	Irwin Financial Corporation
Chairman of the Board
(Independent and Non-Executive)
Christopher E. Stone, 52	2	None
Patricia K. Woolf, Ph.D., 74	7	None
“Interested” directors4
	Year first
	elected a
	director or	Principal occupation(s) during past five years and
Name, age and	officer of	positions held with affiliated entities or the principal
position with fund	the fund1	underwriter of the fund
Gordon Crawford, 61	1992	Senior Vice President — Capital Research Global
Vice Chairman of the Board		Investors, Capital Research and Management Company; Director, The Capital Group Companies, Inc.5
Gregory W. Wendt, 47	1992	Senior Vice President — Capital Research Global
President		Investors, Capital Research Company;5 Director, Capital Research and Management Company; Director, American Funds Distributors, Inc.;5 Director, Capital Management Services, Inc.5
“Interested” directors4
	Number of
	portfolios
	in fund
	complex2
Name, age and	overseen by
position with fund	director	Other directorships3 held by director
Gordon Crawford, 61	2	None
Vice Chairman of the Board
Gregory W. Wendt, 47	1	None
President

The fund’s statement of additional information includes additional information about fund directors and is available without charge upon request by calling American Funds Service Company at 800/421-0180. The address for all directors and officers of the fund is 333 South Hope Street, Los Angeles, CA 90071, Attention: Secretary.

1Directors and officers of the fund serve until their resignation, removal or retirement.

2Capital Research and Management Company manages the American Funds, consisting of 31 funds. Capital Research and Management Company also manages American Funds Insurance Series,® which is composed of 16 funds and serves as the underlying investment vehicle for certain variable insurance contracts; American Funds Target Date Retirement Series,® Inc., which is composed of nine funds and is available through tax-deferred retirement plans and IRAs; and Endowments, which is composed of two portfolios and is available to certain nonprofit organizations.

3This includes all directorships (other than those in the American Funds or other funds managed by Capital Research and Management Company) that are held by each director as a director of a public company or a registered investment company.

4“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).

5Company affiliated with Capital Research and Management Company.

Other officers
	Year first
	elected	Principal occupation(s) during past five years
Name, age and	an officer	and positions held with affiliated entities or the
position with fund	of the fund1	principal underwriter of the fund
Paul F. Roye, 54	2007	Senior Vice President — Fund Business Management
Executive Vice President		Group, Capital Research and Management Company; Director, American Funds Service Company;5 former Director of Investment Management, United States Securities and Exchange Commission
Brady L. Enright, 41	2004	Senior Vice President — Capital World Investors,
Senior Vice President		Capital Research and Management Company
J. Blair Frank, 42	1999	Senior Vice President — Capital Research Global
Senior Vice President		Investors, Capital Research and Management Company
Jonathan Knowles, Ph.D., 47	2000	Senior Vice President — Capital World Investors,
Senior Vice President		Capital Research Company5
Walter R. Burkley, 42	2007	Vice President and Senior Counsel — Fund Business
Vice President		Management Group, Capital Research and Management Company
Grant L. Cambridge, 46	2001	Senior Vice President — Capital World Investors,
Vice President		Capital Research Company;5 Director, Capital Research Company5
Noriko H. Chen, 41	2006	Senior Vice President — Capital World Investors,
Vice President		Capital Research Company;5 Director, Capital Research Company5
Bradford F. Freer, 39	2008	Senior Vice President — Capital World Investors,
Vice President		Capital Research Company5
Winnie Kwan, 36	2006	Vice President — Capital Research Global Investors,
Vice President		Capital Research Company5
Lawrence Kymisis, 38	2008	Vice President — Capital Research Global Investors,
Vice President		Capital Research Company;5 Director, Capital Research Company5
Kristian Stromsoe, 36	2008	Vice President — Capital Research Global Investors,
Vice President		Capital Research Company5
Chad L. Norton, 48	1990	Vice President — Fund Business Management
Secretary		Group, Capital Research and Management Company
David A. Pritchett, 42	1999	Vice President — Fund Business Management
Treasurer		Group, Capital Research and Management Company
Steven I. Koszalka, 44	2005	Vice President — Fund Business Management
Assistant Secretary		Group, Capital Research and Management Company
Neal F. Wellons, 37	2008	Assistant Vice President — Fund Business
Assistant Treasurer		Management Group, Capital Research and Management Company

Please see footnotes on page 32.

Offices of the fund and of the investment adviser

Capital Research and Management Company

333 South Hope Street

Los Angeles, CA 90071-1406

6455 Irvine Center Drive

Irvine, CA 92618

Principal underwriter

American Funds Distributors, Inc.

333 South Hope Street

Los Angeles, CA 90071-1406

Transfer agent for shareholder accounts

American Funds Service Company

(Please write to the address near you.)

P.O. Box 6007

Indianapolis, IN 46206-6007

P.O. Box 2280

Norfolk, VA 23501-2280

Custodian of assets

State Street Bank and Trust Company

One Lincoln Street

Boston, MA 02111

Counsel

K&L Gates LLP

55 Second Street, Suite 1700

San Francisco, CA 94105

Independent registered public accounting firm

Deloitte & Touche LLP

695 Town Center Drive

Suite 1200

Costa Mesa, CA 92626-7188

Investors should carefully consider the investment objectives, risks, charges and expenses of the American Funds. This and other important information is contained in the fund’s prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at 800/421-0180 or visit the American Funds website at americanfunds.com.

“American Funds Proxy Voting Guidelines” — which describes how we vote proxies relating to portfolio securities — is available free of charge on the U.S. Securities and Exchange Commission (SEC) website at sec.gov, on the American Funds website or upon request by calling AFS. The fund files its proxy voting record with the SEC for the 12 months ended June 30 by August 31. The report also is available on the SEC and American Funds websites.

A complete September 30, 2008, portfolio of SMALLCAP World Fund’s investments is available free of charge by calling AFS or visiting the SEC website (where it is part of Form N-CSR).

SMALLCAP World Fund files a complete list of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This filing is available free of charge on the SEC website. You may also review or, for a fee, copy this filing at the SEC’s Public Reference Room in Washington, D.C. (800/SEC-0330). Additionally, the list of portfolio holdings also is available by calling AFS.

This report is for the information of shareholders of SMALLCAP World Fund, but it also may be used as sales literature when preceded or accompanied by the current prospectus, which gives details about charges, expenses, investment objectives and operating policies of the fund. If used as sales material after December 31, 2008, this report must be accompanied by an American Funds statistical update for the most recently completed calendar quarter.

 [logo - American Funds®]

The right choice for the long term®

What makes American Funds different?

For more than 75 years, we have followed a consistent philosophy to benefit our investors. Our 31 carefully conceived, broadly diversified funds, in addition to the target date retirement series, offer opportunities that have attracted over 50 million shareholder accounts.

Our unique combination of strengths includes these five factors:

•	A long-term, value-oriented approach
	We seek to buy securities at reasonable prices relative to their prospects and hold them for the long term.

•	An extensive global research effort
	Our investment professionals travel the world to find the best investment opportunities and gain a comprehensive understanding of companies and markets.

•	The multiple portfolio counselor system
	Our unique method of portfolio management, developed 50 years ago, blends teamwork with individual accountability and has provided American Funds with a sustainable method of achieving fund objectives.

•	Experienced investment professionals
	American Funds portfolio counselors have an average of 26 years of investment experience, providing a wealth of knowledge and experience that few organizations have.

•	A commitment to low operating expenses
	The American Funds provide exceptional value for shareholders, with operating expenses that are among the lowest in the mutual fund industry.

American Funds span a range of investment objectives

•	Growth funds
	Emphasis on long-term growth through stocks

AMCAP Fund®

EuroPacific Growth Fund®

The Growth Fund of America®

The New Economy Fund®

New Perspective Fund®

New World FundSM

 > SMALLCAP World Fund®

•	Growth-and-income funds
	Emphasis on long-term growth and dividends through stocks

American Mutual Fund®

Capital World Growth and Income FundSM

Fundamental InvestorsSM

International Growth and Income FundSM

The Investment Company of America®

Washington Mutual Investors FundSM

•	Equity-income funds
	Emphasis on above-average income and growth through stocks and/or bonds

Capital Income Builder®

The Income Fund of America®

•	Balanced fund
	Emphasis on long-term growth and current income through stocks and bonds

American Balanced Fund®

•	Bond funds
	Emphasis on current income through bonds

American High-Income TrustSM

The Bond Fund of AmericaSM

Capital World Bond Fund®

Intermediate Bond Fund of America®

Short-Term Bond Fund of AmericaSM

U.S. Government Securities FundSM

•	Tax-exempt bond funds
	Emphasis on tax-free current income through municipal bonds

American High-Income Municipal Bond Fund®

Limited Term Tax-Exempt Bond Fund of AmericaSM

The Tax-Exempt Bond Fund of America®

State-specific tax-exempt funds

The Tax-Exempt Fund of California®

The Tax-Exempt Fund of Maryland®

The Tax-Exempt Fund of Virginia®

•	Money market funds
	The Cash Management Trust of America®

The Tax-Exempt Money Fund of AmericaSM

The U.S. Treasury Money Fund of AmericaSM

• American Funds Target Date Retirement Series®

The Capital Group Companies

American Funds Capital Research and Management Capital International Capital Guardian Capital Bank and Trust

Lit No. MFGEAR-935-1108P

Litho in USA BBC/L/8067-S16794

Printed on paper containing 10% post-consumer waste

Printed with inks containing soy and/or vegetable oil

ITEM 2 – Code of Ethics

The Registrant has adopted a Code of Ethics that applies to its Principal Executive Officer and Principal Financial Officer.  The Registrant undertakes to provide to any person without charge, upon request, a copy of the Code of Ethics.  Such request can be made to American Funds Service Company at 800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los Angeles, California 90071.

ITEM 3 – Audit Committee Financial Expert

The Registrant’s board has determined that Joseph C. Berenato, a member of the Registrant’s audit committee, is an “audit committee financial expert” and "independent," as such terms are defined in this Item. This designation will not increase the designee’s duties, obligations or liability as compared to his or her duties, obligations and liability as a member of the audit committee and of the board, nor will it reduce the responsibility of the other audit committee members.  There may be other individuals who, through education or experience, would qualify as "audit committee financial experts" if the board had designated them as such.  Most importantly, the board believes each member of the audit committee contributes significantly to the effective oversight of the Registrant’s financial statements and condition.

ITEM 4 – Principal Accountant Fees and Services

Registrant:
	a)  Audit Fees:
		2007	$97,000
		2008	$101,000
	b)  Audit-Related Fees:
		2007	$10,000
		2008	$6,000
		The audit-related fees consist of assurance and related services relating to the examination of the Registrant’s investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c)  Tax Fees:
		2007	$16,000
		2008	$25,000
		The tax fees consist of professional services relating to the preparation of the Registrant’s tax returns including returns relating to the Registrant’s investments in non-U.S. jurisdictions.
	d)  All Other Fees:
		2007	None
		2008	None
Adviser and affiliates (includes only fees for non-audit services billed to the adviser and affiliates for engagements that relate directly to the operations and financial reporting of the Registrant and were subject to the pre-approval policies described below):
	a)  Not Applicable
	b)  Audit-Related Fees:
		2007	$956,000
		2008	$1,047,000
		The audit–related fees consist of assurance and related services relating to the examination of the Registrant’s transfer agent, principal underwriter and investment adviser conducted in accordance with Statement on Auditing Standards Number 70 issued by the American Institute of Certified Public Accountants.
	c)  Tax Fees:
		2007	$2,000
		2008	$8,000
		The tax fees consist of consulting services relating to the registrant’s investments.
	d)  All Other Fees:
		2007	None
		2008	None

The Registrant’s audit committee will pre-approve all audit and permissible non-audit services that the committee considers compatible with maintaining the independent registered public accounting firm’s independence.  The pre-approval requirement will extend to all non-audit services provided to the Registrant, the investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant. The committee will not delegate its responsibility to pre-approve these services to the investment adviser. The committee may delegate to one or more committee members the authority to review and pre-approve audit and permissible non-audit services.  Actions taken under any such delegation will be reported to the full committee at its next meeting. The pre-approval requirement is waived with respect to non-audit services if certain conditions are met. The pre-approval requirement was not waived for any of the non-audit services listed above provided to the Registrant, adviser, and affiliates.

Aggregate non-audit fees paid to the Registrant’s auditors, including fees for all services billed to the Registrant and the adviser and affiliates that provide ongoing services to the Registrant were $1,251,000 for fiscal year 2007 and $1,381,000 for fiscal year 2008. The non-audit services represented by these amounts were brought to the attention of the committee and considered to be compatible with maintaining the auditors’ independence.

ITEM 5 – Audit Committee of Listed Registrants

Not applicable to this Registrant, insofar as the Registrant is not a listed issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934.

ITEM 6 – Schedule of Investments

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SMALLCAP World Fund®

Investment portfolio

September 30, 2008

Common stocks — 86.76%	Shares			Value (000)
INDUSTRIALS — 17.51%
Downer EDI Ltd.1,2		23,026,345		$	117,192
Container Corp. of India Ltd.1		5,783,588			102,987
Samsung Engineering Co., Ltd.1		1,587,400			99,171
MSC Industrial Direct Co., Inc., Class A		2,106,000			97,023
Watsco, Inc.		1,544,000			77,632
Ellaktor SA1		8,186,000			76,191
Kaba Holding AG1,2		262,800			69,625
TaeWoong Co., Ltd.1,2		1,033,400			69,178
Resources Connection, Inc.2,3		3,027,336			68,206
Mine Safety Appliances Co.		1,627,300			62,033
Michael Page International PLC1		14,032,821			58,470
URS Corp.3		1,528,000			56,032
Actuant Corp., Class A		2,150,000			54,266
Graco Inc.		1,507,900			53,696
Danieli & C. Officine Meccaniche SpA, nonconvertible shares1		2,817,000			41,825
Danieli & C. Officine Meccaniche SpA1		490,000			10,943
Delachaux SA1		636,423			48,420
LS Industrial Systems Co., Ltd.1		1,149,660			48,109
IVRCL Infrastructures & Projects Ltd.1,2		9,025,000			45,991
TK Corp.1,2,3		1,659,000			45,398
BayWa AG1		1,514,754			43,080
Grontmij NV, depository receipts1,2		1,282,000			42,199
Beacon Roofing Supply, Inc.2,3		2,674,800			41,780
United Stationers Inc.3		868,700			41,550
GfK AG1		1,365,500			41,476
SIA Engineering Co. Ltd.1		24,405,000			38,749
Corrections Corporation of America3		1,500,000			37,275
Murray & Roberts Holdings Ltd.1		3,043,000			37,207
Singapore Post Private Ltd.1		54,995,000			36,689
Aalberts Industries NV1		2,791,627			35,744
Astaldi SpA1,2		5,263,954			35,255
MITIE Group PLC1		9,381,000			34,961
Frigoglass SAIC1		1,967,833			34,345
Pyeong San Co., Ltd.1,2		1,220,171			32,351
Koninklijke BAM Groep NV1		2,390,000			30,982
Santos Brasil Participações SA, units		3,296,000			30,483
Bradken Ltd.1		4,240,000			29,770
Houston Wire & Cable Co.2		1,678,900			28,827
Altra Holdings, Inc.2,3		1,905,548			28,126
Société BIC SA1		540,000			28,080
KBR, Inc.		1,798,000			27,455
TrueBlue, Inc.3		1,649,398			26,654
Emeco Holdings Ltd.1,2		41,027,381			26,392
Uponor Oyj1		1,992,912			25,281
Hyunjin Materials Co., Ltd.1,2		857,100			24,930
Herman Miller, Inc.		1,007,500			24,654
Crane Group Ltd.1		2,771,573			24,387
Hays PLC1		16,652,701			23,961
Boart Longyear Ltd.1,4		23,449,651			21,376
Boart Longyear Ltd.1		2,727,833			2,487
EnerSys3		1,200,000			23,652
Goodpack Ltd.1		22,248,000			22,128
GS Engineering & Construction Corp.1		247,127			20,161
Aboitiz Equity Ventures, Inc.1		134,250,000			20,047
Genesis Lease Ltd. (ADR)2		2,292,579			20,037
AeroVironment, Inc.3		625,050			19,970
Sintex Industries Ltd.1		3,230,250			19,764
Shenzhen Expressway Co. Ltd., Class H1		42,916,000			17,513
Pentair, Inc.		500,000			17,285
Advisory Board Co.3		572,000			17,252
Grupo Aeroportuario del Pacífico, SAB de CV, Class B (ADR)		659,300			16,852
Continental Airlines, Inc., Class B3		1,000,000			16,680
Samsung Techwin Co., Ltd.1		743,700			16,517
Trakya Cam Sanayii AS1,3		16,186,936			15,999
Ennis, Inc.		1,032,000			15,955
Michaniki SA1,2		3,935,000			12,968
Michaniki SA, preference shares1,2		871,900			2,447
Wilson Sons Ltd. (BDR)		2,025,000			15,323
Steelcase Inc., Class A		1,425,000			15,319
Dalian Port (PDA) Co. Ltd., Class H1		42,504,000			15,103
Northgate PLC1,2		4,114,822			15,054
Nabtesco Corp.1		1,875,000			14,992
Wilh. Wilhelmsen ASA, Class A1		751,000			14,937
MISUMI Group Inc.1		862,000			14,836
Smit Internationale NV1		164,000			14,154
InnerWorkings, Inc.3		1,250,000			13,862
ESCO Technologies Inc.3		285,700			13,762
AirAsia Bhd.1,3		36,250,000			13,241
Sungkwang Bend Co., Ltd.1		700,000			12,847
Curtiss-Wright Corp.		268,600			12,208
Grindrod Ltd.1		5,505,000			11,978
Kingspan Group PLC1		1,280,000			11,718
PRONEXUS INC.1		1,627,000			11,250
Jain Irrigation Systems Ltd.1		1,248,000			10,839
Hubbell Inc., Class B		300,000			10,515
Corporate Executive Board Co.		333,032			10,407
Nagarjuna Construction Co. Ltd.1		4,904,544			10,188
Prosegur Compañía de Seguridad, SA1		282,000			9,833
Permasteelisa SpA1		615,000			9,827
Spirax-Sarco Engineering PLC1		605,000			9,775
Copa Holdings, SA, Class A		300,000			9,750
G-Shank Enterprise Co., Ltd.1,2		16,838,438			9,561
Georg Fischer Ltd1,3		25,850			9,312
S1 Corp.1		179,000			9,128
Geberit AG1		74,000			9,126
CoStar Group, Inc.3		200,000			9,078
DryShips Inc.		250,000			8,872
Kansas City Southern3		200,000			8,872
TransDigm Group Inc.3		250,000			8,558
Halla Engineering & Construction Corp.1,2		626,000			8,290
Daelim Industrial Co., Ltd.1		127,000			7,941
Melco International Development Ltd.1		26,200,000			7,453
Cpl Resources PLC1,2		2,975,986			7,256
NCI Building Systems, Inc.3		225,000			7,144
KCC Corp.1		22,480			7,064
Alaska Air Group, Inc.3		340,000			6,933
Hyflux Water Trust1,2		19,500,000			6,908
ALL – América Latina Logística, units		1,000,000			6,831
ITE Group PLC1		3,145,000			6,816
American Shipping Co. ASA1,3		544,600			6,483
Max India Ltd.1,3		1,795,000			6,435
Intertek Group PLC1		415,000			6,245
Hopewell Highway Infrastructure Ltd.1		8,774,600			6,117
I. Kloukinas – I. Lappas SA1,2		1,824,000			6,083
Wabash National Corp.		600,000			5,670
BELIMO Holding AG1		6,300			5,567
Ansaldo STS SpA1		390,000			5,539
Korea Electric Terminal Co., Ltd.1		350,000			5,522
Japan Airport Terminal Co. Ltd.1		500,000			5,084
J&P-AVAX SA1		1,105,000			4,898
Lonrho PLC1,3		14,275,000			4,718
Krones AG1		93,324			4,619
Chung-Hsin Electric and Machinery Manufacturing Corp.1		10,444,000			4,394
Hong Kong Aircraft Engineering Co. Ltd.1		355,600			4,092
Chen Hsong Holdings Ltd.1		14,598,000			3,680
Aker Philadelphia Shipyard ASA1,4		346,000			3,060
JVM Co., Ltd.1		172,500			2,497
Rollins, Inc.		130,000			2,467
NEPES Corp.1,3		701,634			2,286
BrisConnections Unit Trusts1,2,3		27,300,000			837
Imagelinx PLC1,2,3		21,385,714			571
Dore Holdings Ltd.1		12,069,191			279
Latécoère SA1,3		18,838			199
					3,078,324
CONSUMER DISCRETIONARY — 14.17%
Nitori Co., Ltd.1		2,127,600			125,080
Schibsted ASA1,2		4,703,200			87,312
Central European Media Enterprises Ltd., Class A3		1,234,811			80,757
Jumbo SA1,2		4,844,956			78,639
Fourlis1,2		4,074,000			77,874
Lions Gate Entertainment Corp.2,3		8,250,000			75,075
lululemon athletica inc.3		2,903,214			66,861
Live Nation, Inc.2,3		4,000,000			65,080
Cheil Industries Inc.1		1,300,000			57,185
Kuoni Reisen Holding AG, Class B1,2		145,066			56,018
Café de Coral Holdings Ltd.1,2		31,550,000			55,058
Nishimatsuya Chain Co., Ltd.1,2		5,565,000			53,362
Billabong International Ltd.1		4,345,000			47,540
CTC Media, Inc.3		3,100,000			46,500
GEOX SpA1		4,785,880			46,314
NVR, Inc.3		73,500			42,042
Blue Nile, Inc.2,3		941,140			40,347
Ekornes ASA1,2		2,937,598			39,571
Navitas Ltd.1,2		21,727,690			38,878
Trinity Ltd.1,2,3,4		82,337,500			37,652
Life Time Fitness, Inc.3		1,183,100			36,996
Hotai Motor Co., Ltd.1		17,003,415			36,502
Marvel Entertainment, Inc.3		1,000,000			34,140
Arbitron Inc.		753,144			33,658
Aristocrat Leisure Ltd.1		6,277,742			33,204
GOME Electrical Appliances Holding Ltd.1		108,652,000			31,724
Pantaloon Retail (India) Ltd.1		5,500,000			31,132
PETsMART, Inc.		1,250,000			30,888
Bosideng International Holdings Ltd.1		248,300,000			30,847
Timberland Co., Class A3		1,767,000			30,693
Saks Inc.3		3,207,500			29,669
O’Reilly Automotive, Inc.3		1,101,800			29,495
Peet’s Coffee & Tea, Inc.2,3		1,015,000			28,339
Polaris Industries Inc.		610,200			27,758
Banyan Tree Holdings Ltd.1,2		44,333,000			27,617
Chipotle Mexican Grill, Inc., Class A3		255,000			14,150
Chipotle Mexican Grill, Inc., Class B3		288,000			13,464
Jackson Hewitt Tax Service Inc.2		1,796,000			27,551
Harman International Industries, Inc.		800,000			27,256
Lojas Renner SA, ordinary nominative		2,150,000			26,550
Scientific Games Corp., Class A3		1,050,000			24,171
Leggett & Platt, Inc.		1,100,000			23,969
Choice Hotels International, Inc.		875,000			23,713
Rightmove PLC1		5,174,057			23,673
PetMed Express, Inc.2,3		1,500,000			23,550
American Axle & Manufacturing Holdings, Inc.2		4,300,000			23,048
CarMax, Inc.3		1,550,000			21,700
Urban Outfitters, Inc.3		675,000			21,512
American Public Education, Inc.3		425,000			20,519
Korea Kumho Petrochemical Co., Ltd.1		610,940			20,363
DeVry Inc.		400,000			19,816
Halfords Group PLC1		4,200,000			19,591
Tractor Supply Co.3		456,100			19,179
Praktiker Bau- und Heimwerkermärkte Holding AG1		2,053,363			19,057
ElringKlinger AG1		1,002,000			19,031
Brunswick Corp.		1,460,000			18,673
Pool Corp.		787,538			18,373
Spot Runner, Inc.1,3,4		2,980,544			17,883
K12 Inc.3		660,018			17,491
Keihin Corp.1		1,445,000			16,979
Galaxy Entertainment Group Ltd.1,3		80,148,000			15,794
REXCAPITAL Financial Holdings Ltd.1,3		364,300,000			15,327
TAKKT AG1		1,071,778			14,731
Bloomsbury Publishing PLC1,2		5,405,000			14,495
Fontainebleau Resorts LLC, Class A, nonvoting units1,3,4		1,900,000			13,680
American Apparel, Inc.3		1,471,200			12,064
Office Depot, Inc.3		2,055,000			11,960
Dolan Media Co.3		1,151,506			11,619
Domino’s Pizza Enterprises Ltd.1,2		4,563,190			11,575
Woolworths Holdings Ltd.1		8,064,947			11,439
Gafisa SA, ordinary nominative		900,000			11,398
TomTom NV1,3		500,000			9,249
Seobu Truck Terminal Co., Ltd.1,3		562,200			8,590
TOD’S SpA1		162,000			8,097
Gentex Corp.		525,000			7,508
Tokai Rika Co., Ltd.1		546,600			6,940
Prime Success International Group Ltd.1		15,200,000			6,728
Titan Industries Ltd.1		275,493			6,643
Restaurant Group PLC1		2,950,000			6,568
Boyd Gaming Corp.		700,000			6,552
Williams-Sonoma, Inc.		400,000			6,472
USS Co., Ltd.1		100,000			6,429
Next Media Ltd.1		22,100,000			5,434
HUGO BOSS AG1		215,000			5,156
Burani Designer Holding NV (CDI)1		1,299,170			5,079
Bijou Brigitte modische Accessoires AG1		52,000			5,047
Bob Evans Farms, Inc.		175,000			4,776
Brascan Residential Properties SA, ordinary nominative		1,692,900			3,914
Gaming VC Holdings SA1		1,396,800			3,866
Rambler Media Ltd.1,3		273,760			3,673
ValueVision Media, Inc., Class A2,3		1,900,000			3,515
YBM Sisa.com Inc.1		487,968			3,272
Haseko Corp.1		3,950,000			2,828
Cosi, Inc.3		1,247,234			2,457
Entertainment Rights PLC1,2,3		42,281,102			2,024
OSIM International Ltd.1,3		18,750,000			2,022
C C Land Holdings Ltd.1		5,973,000			1,283
Ten Alps PLC1,3		1,815,000			1,277
CEC Unet PLC1,2,3		35,100,775			968
Hi-Lex Corp.1		3,200			34
Mobile Travel Guide, Inc.1,3,4		96,033			24
					2,491,576
HEALTH CARE — 11.95%
ResMed Inc3		2,556,100			109,912
ResMed Inc (CDI)1,3		1,500,000			6,520
American Medical Systems Holdings, Inc.2,3		5,370,000			95,371
Beckman Coulter, Inc.		997,500			70,813
NuVasive, Inc.3		1,403,461			69,233
Gerresheimer AG, non-registered shares1		1,435,000			65,672
Inverness Medical Innovations, Inc.3		2,161,456			64,844
Cochlear Ltd.1		1,325,467			63,296
Masimo Corp.3		1,631,800			60,703
ArthroCare Corp.2,3		2,117,000			58,683
Integra LifeSciences Holdings Corp.3		1,238,500			54,531
ZOLL Medical Corp.2,3		1,655,000			54,152
Hikma Pharmaceuticals PLC1		6,769,153			48,255
Volcano Corp.2,3		2,777,400			48,021
Haemonetics Corp.3		747,700			46,148
Medicis Pharmaceutical Corp., Class A2		3,062,100			45,656
Nakanishi Inc.1,2		491,100			41,629
Mentor Corp.2		1,700,700			40,579
SonoSite, Inc.2,3		1,254,866			39,403
Cougar Biotechnology, Inc.2,3,4		1,000,000			33,390
Cougar Biotechnology, Inc.2,3		100,000			3,339
BioMarin Pharmaceutical Inc.3		1,350,000			35,761
Onyx Pharmaceuticals, Inc.3		975,000			35,275
Abaxis, Inc.2,3		1,609,700			31,711
Fisher & Paykel Healthcare Corp. Ltd.1		15,890,690			31,632
Apollo Hospitals Enterprise Ltd.1,2		3,275,000			31,559
Acorda Therapeutics, Inc.3		1,300,000			31,005
ev3 Inc.3		3,073,258			30,856
ABIOMED, Inc.3		1,680,000			29,820
Sirona Dental Systems, Inc.3		1,263,081			29,405
Vital Signs, Inc.		397,400			29,368
United Therapeutics Corp.3		250,000			26,292
Greatbatch, Inc.3		990,400			24,304
Hisamitsu Pharmaceutical Co., Inc.1		551,000			23,943
Intuitive Surgical, Inc.3		96,934			23,359
United Laboratories International Holdings Ltd.1,2		71,242,000			23,293
Invacare Corp.		935,000			22,571
Bumrungrad Hospital PCL1		23,355,300			22,347
Ipca Laboratories Ltd.1,2		1,794,000			21,541
Applera Corp., Celera Corp.3		1,392,000			21,506
OSI Pharmaceuticals, Inc.3		400,000			19,716
China Medical Technologies, Inc. (ADR)		600,000			19,548
Auxilium Pharmaceuticals, Inc.3		600,000			19,440
Laboratorios Almirall, SA1		2,051,800			18,891
Alpharma Inc., Class A3		500,000			18,445
Rhön-Klinikum AG, non-registered shares1		605,400			17,587
DiaSorin SpA1		877,100			17,129
CardioNet, Inc.3		664,000			16,573
Alexion Pharmaceuticals, Inc.3		400,000			15,720
Eurand NV3		825,000			14,982
Array BioPharma Inc.3		1,920,000			14,746
PSS World Medical, Inc.3		750,000			14,625
Tecan Group AG1		293,270			14,533
Phase Forward Inc.3		615,000			12,860
Vital Images, Inc.2,3		792,000			11,880
AMAG Pharmaceuticals, Inc.3		300,000			11,619
Orion Oyj, Class B1		655,000			11,083
Endo Pharmaceuticals Holdings Inc.3		550,000			11,000
AngioDynamics, Inc.3		600,000			9,480
Vision-Sciences, Inc.2,3		2,200,000			8,778
Arpida Ltd.1,2,3		1,231,509			8,719
Allscripts Healthcare Solutions, Inc.3		700,000			8,708
Biosensors International Group, Ltd.1,3		27,650,000			8,406
AtriCure, Inc.2,3		824,500			8,261
LifeCycle Pharma A/S1,3		2,275,000			8,228
Recordati SpA1		1,300,000			7,933
Eclipsys Corp.3		370,000			7,751
Genomma Lab Internacional, SAB de CV, Series B3		6,000,000			7,652
Apria Healthcare Group Inc.3		410,000			7,478
I-Flow Corp.3		800,000			7,448
EGIS NYRT1		107,000			7,147
Simcere Pharmaceutical Group (ADR)3		770,000			6,684
VNUS Medical Technologies, Inc.3		313,700			6,566
Newron Pharmaceuticals SpA1,3		257,000			6,550
Insulet Corp.3		384,400			5,351
Top Glove Corp. Bhd.1		4,495,100			5,251
AS ONE Corp.1		253,000			5,177
Vical Inc.2,3		2,250,279			4,928
Exelixis, Inc.3		775,000			4,712
Kendle International Inc.3		90,833			4,061
Clínica Baviera, SA1		420,000			4,008
A&D Pharma Holdings NV (GDR)1,3		775,200			3,544
Hythiam, Inc.3		2,700,000			3,483
WuXi PharmaTech (Cayman) Inc. (ADR)3		230,500			3,031
Krka, dd, Novo mesto1		27,820			2,921
Exiqon A/S1,3		450,000			2,058
Arcadia Resources, Inc.3		1,125,000			247
Allied Medical Ltd.1,3		147,030			30
					2,100,666
INFORMATION TECHNOLOGY — 10.35%
Kingboard Chemical Holdings Ltd.1,2		52,648,200			178,411
Heartland Payment Systems, Inc.2		2,970,000			75,913
SkillSoft PLC (ADR)2,3		7,225,000			75,574
Tripod Technology Corp.1,2		30,494,514			58,832
Intersil Corp., Class A		3,125,000			51,813
Verifone Holdings, Inc.3		3,114,500			51,514
Digital River, Inc.3		1,575,000			51,030
Mentor Graphics Corp.3		4,315,500			48,981
ACI Worldwide, Inc.2,3		2,742,400			48,047
Novellus Systems, Inc.3		2,275,000			44,681
Power Integrations, Inc.2,3		1,775,200			42,782
Novell, Inc.3		7,828,000			40,236
SRA International, Inc., Class A3		1,750,000			39,602
Avid Technology, Inc.3		1,633,400			39,300
AAC Acoustic Technologies Holdings Inc.1,3		44,865,000			34,493
Veeco Instruments Inc.2,3		2,306,396			34,158
Venture Corp. Ltd.1		5,969,600			32,640
Semtech Corp.3		2,196,053			30,657
Perfect World Co., Ltd., Class B (ADR)3		1,285,000			28,835
Solera Holdings, Inc.3		900,000			25,848
Polycom, Inc.3		1,100,000			25,443
Littelfuse, Inc.3		850,000			25,271
Internet Capital Group, Inc.2,3		3,096,000			25,109
Kingboard Laminates Holdings Ltd.1		53,064,236			23,407
Red Hat, Inc.3		1,550,000			23,359
Internet Brands, Inc., Class A3		3,254,895			22,687
austriamicrosystems AG, non-registered shares1,2		715,000			22,320
ASM Pacific Technology Ltd.1		3,840,000			22,068
Global Unichip Corp.1		3,780,076			21,752
SEEK Ltd.1		5,293,082			21,555
InfoSpace.com, Inc.2,3		1,971,200			21,388
Hana Microelectronics PCL1,2		53,925,000			21,369
Hutchinson Technology Inc.2,3		1,836,035			21,261
Echelon Corp.3		2,000,000			19,760
Halma PLC1		5,365,000			19,017
Neopost SA1		191,077			17,976
Kapsch TrafficCom AG1		534,130			17,609
Dice Holdings, Inc.3		2,477,600			17,591
Compal Electronics, Inc.1		20,200,500			14,564
MacDonald, Dettwiler and Associates Ltd.3		700,000			14,258
TIBCO Software Inc.3		1,915,000			14,018
Infotech Enterprises Ltd.1,2		3,000,000			13,616
DTS, Inc.3		482,300			13,422
Advantech Co., Ltd.1		6,753,860			13,038
SINA Corp.3		355,000			12,496
Finisar Corp.3		12,301,895			12,425
Varian Semiconductor Equipment Associates, Inc.3		487,500			12,246
VistaPrint Ltd.3		350,000			11,494
Applied Micro Circuits Corp.3		1,900,000			11,362
Euronet Worldwide, Inc.3		573,500			9,595
Euronet Worldwide, Inc. 3,4		100,000			1,673
Redington (India) Ltd.1		2,194,868			10,800
Chartered Semiconductor Manufacturing Ltd1,3		38,740,000			10,388
IAC/InterActiveCorp3		600,000			10,380
Blackboard Inc.3		250,000			10,073
LoopNet, Inc.3		1,001,500			9,845
Intermec, Inc.3		500,000			9,820
Stratasys, Inc.3		532,000			9,294
THQ Inc.3		771,000			9,283
Wacom Co., Ltd.1		5,005			9,206
Orbotech Ltd.3		1,128,317			9,015
Verigy Ltd.3		540,000			8,791
Rolta India Ltd.1		1,650,000			8,432
Renishaw PLC1		618,738			8,401
Comverse Technology, Inc.3		860,000			8,230
Insight Enterprises, Inc.3		595,000			7,979
Techwell, Inc.3		825,000			7,780
Konami Corp.1		300,000			7,559
Ono Sokki Co., Ltd.1,2		1,609,000			7,522
DigiTech Systems Co., Ltd.1,3		435,000			6,850
Monotype Imaging Holdings Inc.3		576,100			6,412
SourceForge, Inc.2,3		4,700,000			6,392
Cadence Design Systems, Inc.3		915,000			6,185
Kaboose Inc.2,3		8,000,000			6,027
Delta Electronics (Thailand) PCL1		12,150,000			5,762
Concur Technologies, Inc.3		142,869			5,466
Rubicon Technology, Inc.3		613,000			4,426
Oakton Ltd.1		1,520,000			4,284
Tessera Technologies, Inc.3		245,000			4,003
Cyntec Co., Ltd.1		2,900,333			3,473
DFI, Inc.1		1,947,966			3,346
Delta Networks, Inc.1		14,000,000			3,313
MEMSIC, Inc.2,3		1,191,536			2,502
HSW International, Inc.1,3,4		815,215			1,817
HSW International, Inc.1,3,4		294,693			547
SupportSoft, Inc.3		735,000			2,205
i2 Technologies, Inc.3		149,600			2,018
Simmtech Co., Ltd.1		1,020,000			1,991
Moneysupermarket.com Group PLC1		1,332,800			1,356
DK UIL Co., Ltd.1,3		140,000			781
Phoenix PDE Co., Ltd.1,3		876,090			750
Funcom NV1,3		496,993			459
Advanced Semiconductor Manufacturing Corp. Ltd., Class H1,3		18,190,000			453
Orbiscom Ltd.1,3,4		3,905,874			234
KEC Corp.1,3		20,000			15
ClearSpeed Technology PLC1,3		21,626			4
					1,820,365
FINANCIALS — 9.39%
Daegu Bank, Ltd.1,2		10,570,000			94,830
Pusan Bank1,2		9,594,500			87,216
Kotak Mahindra Bank Ltd.1		5,493,262			66,710
Hospitality Properties Trust		3,000,000			61,560
Hopewell Holdings Ltd.1		13,755,000			49,486
Dolphin Capital Investors Ltd.1,2,3		33,715,400			47,691
Dah Sing Financial Holdings Ltd.1		11,174,600			46,948
Mercury General Corp.		852,724			46,687
Hargreaves Lansdown PLC1		14,244,718			46,539
IG Group Holdings PLC1		8,036,771			45,836
Champion Real Estate Investment Trust1		101,458,000			41,768
Ascendas Real Estate Investment Trust1		31,486,550			41,747
Northwest Bancorp, Inc.		1,260,406			34,712
Wilmington Trust Corp.		1,200,000			34,596
Topdanmark A/S1,3		235,700			33,702
BOK Financial Corp.		670,000			32,435
Redwood Trust, Inc.		1,440,000			31,291
Challenger Financial Services Group Ltd.1		15,668,353			30,930
Jammu and Kashmir Bank Ltd.1,2		3,149,500			30,836
Industrial and Commercial Bank of China (Asia) Ltd.1		16,857,137			30,598
Banco De Oro Unibank, Inc.1		34,600,000			28,282
eHealth, Inc.2,3		1,580,000			25,280
Central Pattana PCL1		49,016,000			24,268
China Banking Corp.1		2,463,514			23,690
Rayonier Inc.		450,000			21,307
Union Bank of the Philippines1,2		37,429,400			20,914
Robinsons Land Corp., Class B1		122,188,300			20,179
First Niagara Financial Group, Inc.		1,224,300			19,283
Indiabulls Real Estate Ltd.1		5,175,644			19,157
JSE Ltd.1		2,745,000			17,916
Oslo Børs VPS Holding ASA1		1,002,335			17,898
Bank Sarasin & Cie AG, Class B1		466,100			17,845
Home Federal Bancorp, Inc.2		1,384,249			17,649
Gruppo MutuiOnline SpA1,2		3,160,000			17,002
Banco Macro SA, Class B (ADR)		914,600			16,920
PT Bank Niaga Tbk1		222,354,000			16,884
Brown & Brown, Inc.		775,000			16,755
MGIC Investment Corp.		2,350,000			16,521
East West Bancorp, Inc.		1,138,703			15,600
AEON Mall Co., Ltd.1		503,000			14,989
Asya Katilim Bankasi AS, Class B1,3		9,090,009			14,287
Portfolio Recovery Associates, Inc.3		287,558			13,984
Banco Cruzeiro do Sol SA, preferred nominative		5,543,100			12,816
S P Setia Bhd.1		13,950,000			12,672
CapitaRetail China Trust1		24,680,100			12,369
Banco Sofisa SA, preferred nominative		5,066,400			12,220
Islamic Arab Insurance Co. (Salama)3		21,700,000			11,225
Paraná Banco SA, preferred nominative		3,554,720			11,208
Azimut Holding SpA1		1,496,663			10,366
Credito Emiliano SpA1		1,200,000			10,240
Westamerica Bancorp.		170,000			9,780
TICON Property Fund1		30,400,000			9,734
Gladstone Capital Corp.		619,000			9,434
Banco ABC Brasil SA, preferred nominative		3,060,700			8,991
National Bank of Pakistan1		8,793,774			8,926
P/F Føroya Banki1		270,000			8,700
Banco Compartamos, SA, Institución de Banca Múltiple, Class O		3,000,000			8,292
Wing Tai Holdings Ltd.1		12,373,000			8,206
TMX Group Inc.		299,594			8,182
iStar Financial, Inc.		3,115,000			8,099
Banco Daycoval SA, preferred nominative		2,539,300			7,859
Bolsa Mexicana de Valores, SAB de CV, Series A3		9,400,000			7,827
Unitech Corporate Parks PLC1,3		14,430,903			7,131
VastNed Retail NV1		97,000			6,873
Amata Corp. PCL1		26,800,000			6,688
MCB Bank Ltd.1		2,587,500			6,656
Hung Poo Real Estate Development Corp.1		10,345,551			6,506
Kiatnakin Bank PCL1		12,200,000			6,193
Farglory Land Development Co., Ltd.1		6,218,000			5,971
Regent Pacific Group Ltd.1,3		145,950,000			5,242
Banco Patagonia SA, Class B (BDR)		559,000			5,199
Greek Postal Savings Bank SA1		479,210			4,973
Cathay Real Estate Development Co. Ltd.1		17,400,000			4,957
FirstFed Financial Corp.3		600,000			4,704
Ascendas India Trust1		12,750,000			4,659
TICON Industrial Connection PCL1		11,298,800			4,247
Solomon Mutual Savings Bank1,2		1,062,023			4,107
Federal Agricultural Mortgage Corp., Class C		777,000			3,186
Chuang’s China Investments Ltd.1,2		112,439,000			3,028
Sumitomo Real Estate Sales Co., Ltd.1		100,000			2,800
Bank of Georgia (GDR)1,3		375,000			2,443
Bank of Georgia (GDR)1,3,5		50,000			326
Banner Corp.		183,567			2,205
CastlePoint Holdings, Ltd.		101,574			1,131
UCBH Holdings, Inc.		150,000			962
					1,650,061
ENERGY — 6.19%
OPTI Canada Inc.2,3		15,001,600			156,105
OPTI Canada Inc.2,3,4		420,000			4,371
Concho Resources Inc.2,3		4,806,820			132,716
Oilexco Inc.3		6,808,600			67,002
Oilexco Inc. (GBP denominated)1,3,4		2,900,000			28,923
Oilexco Inc.3,4		520,000			5,117
Pacific Rubiales Energy Corp.3		8,150,000			51,652
Pacific Rubiales Energy Corp.3,4		1,333,333			8,450
Banpu PCL1		6,651,700			59,314
Heritage Oil Ltd.1,2,3		12,898,000			50,295
First Calgary Petroleums Ltd.2,3		10,846,000			34,523
First Calgary Petroleums Ltd. (GBP denominated)1,2,3		4,800,000			15,215
KNM Group Bhd.1		131,151,000			48,716
Oceaneering International, Inc.3		750,000			39,990
Value Creation Inc.1,3,4		4,529,354			36,831
Quicksilver Resources Inc.3		1,836,500			36,051
Straits Asia Resources Ltd.1		33,387,800			35,463
FMC Technologies, Inc.3		700,000			32,585
Uranium One Inc.3		14,705,500			31,851
Superior Well Services, Inc.2,3		1,200,000			30,372
EXCO Resources, Inc.3		1,500,000			24,480
Bill Barrett Corp.3		700,000			22,477
Rex Energy Corp.3		1,285,600			20,261
Centennial Coal Co. Ltd.1		5,927,391			17,754
Regal Petroleum PLC1,3		10,317,000			16,527
Encore Acquisition Co.3		350,000			14,623
WorleyParsons Ltd.1		589,556			14,578
Bankers Petroleum Ltd.3		4,567,933			12,217
Bankers Petroleum Ltd.3,4		733,333			1,961
Alpha Natural Resources, Inc.3		190,000			9,772
Gulf Keystone Petroleum Ltd.1,2,3,4		23,700,000			9,007
International Coal Group, Inc.3		1,220,000			7,613
Zhaikmunai LP (GDR)1,3,5		790,000			5,925
Sterling Energy PLC1,3		37,700,000			2,375
Mart Resources, Inc.3,4		12,459,375			1,408
High Arctic Energy Services Inc.3		1,923,000			1,177
					1,087,697
MATERIALS — 5.40%
AMG Advanced Metallurgical Group NV1,2,3		2,143,960			88,066
Rhodia SA1,2		5,093,401			79,180
AptarGroup, Inc.		1,375,000			53,776
Calgon Carbon Corp.2,3		2,459,300			50,071
Croda International PLC1		3,860,000			42,289
Major Drilling Group International Inc.2,3		1,500,000			41,911
James Hardie Industries NV1		9,037,609			37,075
Valspar Corp.		1,600,000			35,664
Intrepid Potash, Inc.3		1,076,813			32,455
Kemira Oyj1		2,216,189			26,130
Peter Hambro Mining PLC1		2,855,901			25,703
Timminco Ltd.3		1,860,000			25,573
Minerals Technologies Inc.		420,000			24,931
PBS Coals Ltd.1,3		3,375,600			24,159
FUCHS PETROLUB AG1		332,517			23,008
Symrise AG1		1,325,000			22,660
United Phosphorus Ltd.1		3,270,000			21,746
KazakhGold Group Ltd. (GDR)1,3,5		948,000			9,694
KazakhGold Group Ltd. (GDR)1,3		825,000			8,437
Kenmare Resources PLC1,2,3		51,336,000			17,712
Lynas Corp. Ltd.1,3		30,165,969			17,347
Asian Paints Ltd.1		670,200			17,053
LANXESS AG1		495,000			13,670
PT Indocement Tunggal Prakarsa Tbk1		21,125,000			13,318
Central African Mining & Exploration Co. PLC1,3		51,546,569			12,791
Mineral Deposits Ltd.1,3		16,142,844			8,944
Mineral Deposits Ltd. (CAD denominated)1,3		6,300,000			3,490
Coal of Africa Ltd.1,3		7,500,000			11,638
Eastern Platinum Ltd.3		10,105,450			9,326
Eastern Platinum Ltd.3,4		2,500,000			2,307
Sino-Forest Corp.3		900,000			11,366
Northern Iron Ltd.1,3		4,613,597			10,252
Yamana Gold Inc.		1,200,000			9,888
Gem Diamonds Ltd.1,3		800,000			9,825
PT Semen Gresik1		27,150,000			9,766
Nihon Parkerizing Co., Ltd.1		820,000			9,152
Sidenor Steel Products Manufacturing Co. SA1		1,217,865			9,025
New Gold Inc.3		1,916,667			8,916
Polo Resources Ltd.1,2,3		123,872,500			8,862
Taiwan Cement Corp.1		14,140,000			8,369
Murchison Metals Ltd.1,3		7,275,000			7,682
Cementir Holding SpA1		1,600,000			7,596
Ta Ann Holdings Bhd.1		5,300,000			7,267
SSCP Co., Ltd.1,3		645,000			5,655
Gold Wheaton Gold Corp.1,3,4		7,440,000			5,241
Shree Cement Ltd.1		350,000			3,776
Oxus Gold PLC1,3		15,915,000			2,899
River Diamonds PLC1,3,4		95,000,000			2,710
Banro Corp.3,4		890,000			2,347
J.K. Cement Ltd.1		945,000			2,112
Mwana Africa PLC1,3,4		5,980,000			1,805
Zoloto Resources Ltd.2,3		8,175,000			1,617
Mangalam Cement Ltd.1		900,000			1,414
Sunkar Resources PLC1,3,4		2,700,000			1,112
Hung Hing Printing Group Ltd.1		1,951,000			435
PT Sumalindo Lestari Jaya, Tbk1,3		5,348,000			322
					949,535
CONSUMER STAPLES — 3.62%
Lindt & Sprüngli AG, participation certificate1		19,166			46,586
Lindt & Sprüngli AG1		1,694			45,642
Hain Celestial Group, Inc.2,3		2,580,000			71,027
Andersons, Inc.2		1,247,000			43,919
Bare Escentuals, Inc.3		3,824,400			41,571
Olam International Ltd.1		31,553,300			40,513
Chattem, Inc.3		401,200			31,366
Kernel Holding SA1,3		3,243,300			25,861
China Yurun Food Group Ltd.1		19,267,000			24,904
ARYZTA AG1,3		614,500			23,946
First Pacific Co. Ltd.1		44,300,000			23,152
MARR SpA1		3,202,500			22,533
AMOREPACIFIC Corp.1		36,702			19,846
Poslovni sistem Mercator, dd1		69,933			19,709
Emmi AG1		135,800			15,093
Lakshmi Energy and Foods Ltd.1,3		2,401,000			14,333
China Huiyuan Juice Group Ltd.1		11,299,000			14,037
Coca-Cola Icecek AS, Class C1		1,672,785			13,493
China Milk Products Group Ltd.1		30,800,000			12,828
Origin Enterprises PLC1,3		3,213,300			12,564
Fresh Del Monte Produce Inc.3		525,000			11,655
Universal Robina Corp.1		51,235,000			10,364
Synear Food Holdings Ltd.1		44,500,000			9,351
PT Indofood Sukses Makmur Tbk1		43,284,500			8,972
Drogasil SA, ordinary nominative		1,563,900			8,341
Trigon Agri A/S1,2,3		8,150,000			7,808
PrimeAg Australia Ltd.1,3		7,000,000			7,554
Hypermarcas SA, ordinary nominative3		901,400			6,144
PT Astra Agro Lestari Tbk1		2,420,000			3,308
					636,420
TELECOMMUNICATION SERVICES — 1.61%
LG Telecom Ltd.1		6,370,000			53,282
tw telecom inc., Class A3		4,135,400			42,967
NTELOS Holdings Corp.		1,486,497			39,972
Cellcom Israel Ltd.		950,000			28,557
Cellcom Israel Ltd.(ILS denominated)1		350,000			10,449
DiGi.Com Bhd.1		2,927,500			19,131
Total Access Communication PCL1		17,046,000			18,747
Partner Communications Co. Ltd.1		935,000			17,862
Globe Telecom, Inc.1		526,867			11,547
Manitoba Telecom Services Inc.		300,000			11,089
True Corp. PCL1,3		107,000,000			9,860
Cbeyond, Inc.3		550,000			7,914
StarHub Ltd1		3,246,840			5,829
QSC AG1,3		1,969,863			3,634
Telemig Celular Participações SA, preferred nominative (ADR)		48,900			1,810
					282,650
UTILITIES — 1.60%
Xinao Gas Holdings Ltd.1,2		51,038,000			69,173
Manila Water Co., Inc.1,2		111,206,800			39,137
Glow Energy PCL1		42,550,000			35,349
GVK Power & Infrastructure Ltd.1,3		41,599,990			24,146
Northumbrian Water Group PLC1		4,170,000			21,278
AES Tietê SA, preferred nominative		2,400,000			19,422
Energy Development Corp.1		187,563,000			16,065
Cascal NV		1,526,951			16,033
CESC Ltd.1		1,746,400			10,385
Central Vermont Public Service Corp.		409,493			9,599
First Gen Corp.1,3		22,039,000			8,714
Ratchaburi Electricity Generating Holding PCL1		4,697,200			4,900
Electricity Generating PCL1		2,285,000			4,244
Energen Corp.		75,000			3,396
					281,841
MISCELLANEOUS — 4.97%
Other common stocks in initial period of acquisition					874,614
Total common stocks (cost: $17,125,818,000)					15,253,749
Warrants — 0.03%
MATERIALS — 0.02%
New Gold Inc., warrants, expire 20123,4		3,333,333			1,099
New Gold Inc., warrants, expire 20123,4		6,250,000			441
Gold Wheaton Gold Corp., warrants, expire 20131,3,4		3,720,000			695
Eastern Platinum Ltd., warrants, expire 20093		1,750,000			148
Energem Resources Inc., warrants, expire 20091,3,4		2,200,000			1
					2,384
ENERGY — 0.01%
Pacific Rubiales Energy Corp., warrants, expire 20123,4		666,667			1,262
Bankers Petroleum Ltd., warrants, expire 20123,4		366,667			553
OPTI Canada Inc., warrants, expire 20081,2,3,4		105,000			64
					1,879
INDUSTRIALS — 0.00%
Goodpack Ltd., warrants, expire 20093		2,459,750			446
MISCELLANEOUS — 0.00%
Other warrants in initial period of acquisition					207
Total warrants (cost: $3,548,000)					4,916
	Shares or			Value
Convertible securities — 0.33%	principal amount				(000	)
HEALTH CARE — 0.16%
Fluidigm Corp., Series E, convertible preferred1,3,4		4,378,695		$	17,515
BG Medicine, Inc., Series D convertible preferred1,3,4		1,538,462			10,000
					27,515
FINANCIALS — 0.11%
UCBH Holdings, Inc., Series B, 8.50% convertible preferred		13,000			19,675
CONSUMER DISCRETIONARY — 0.05%
Spot Runner, Inc., Series C, convertible preferred1,3,4		1,626,016			9,756
TELECOMMUNICATION SERVICES — 0.01%
tw telecom inc. 2.375% convertible debentures 2026	$	1,600,000			1,308
Total convertible securities (cost: $48,115,000)					58,254
	Principal amount
Bonds & notes — 0.12%		(000	)
ENERGY — 0.12%
International Coal Group, Inc. 10.25% 2014		15,000			13,463
James River Coal Co. 9.375% 2012		10,000			8,550
Total bonds & notes (cost: $24,743,000)					22,013
Short-term securities — 12.64%
Federal Home Loan Bank 2.03%–2.75% due 10/3–12/29/2008		330,400			329,920
Freddie Mac 2.095%–2.75% due 10/20–12/19/2008		297,000			296,328
BASF AG 2.10%–2.82% due 10/2/2008–1/16/20095		167,600			166,906
Fannie Mae 2.35%–2.45% due 11/13–12/9/2008		108,500			108,167
Nestlé Capital Corp. 2.00%–2.10% due 10/14–10/15/20085		103,300			103,213
BMW U.S. Capital LLC 2.04% due 10/9–10/14/20085		91,400			91,344
American Honda Finance Corp. 2.19%–2.24% due 10/22–12/5/2008		90,000			89,567
Novartis Finance Corp. 2.10%–2.21% due 10/24–11/17/20085		88,800			88,539
Swedish Export Credit Corp. 2.20%–2.95% due 10/2–12/18/2008		87,000			86,679
Jupiter Securitization Co., LLC 5.50% due 10/1/20085		50,000			49,992
Park Avenue Receivables Co., LLC 2.70% due 12/1/20085		30,000			29,778
Stadshypotek Delaware Inc. 2.60% due 10/7/20085		78,800			78,759
Caisse d’Amortissement de la Dette Sociale 2.13%–2.19% due 10/8–11/13/2008		75,000			74,868
U.S. Treasury Bills 1.40%–1.86% due 2/5–8/27/2009		72,200			71,488
Toyota Credit de Puerto Rico Corp. 2.82% due 12/3/2008		50,000			49,742
Toyota Motor Credit Corp. 2.35% due 10/15/2008		11,500			11,489
Procter & Gamble International Funding S.C.A. 2.12% due 11/24–12/5/20085		60,000			59,684
Electricité de France 2.22%–2.26% due 10/16–11/12/20085		51,800			51,695
Toronto-Dominion Holdings USA Inc. 2.49% due 11/13/20085		48,300			48,144
Westpac Banking Corp. due 2.23% 10/8–10/15/20085		40,000			39,974
Sheffield Receivables Corp. 2.67% due 11/6/20085		40,000			39,890
Shell International Finance BV 2.08%–2.25% due 11/13–11/26/20085		38,700			38,565
Hewlett-Packard Co. 2.17% due 10/3/20085		37,700			37,693
ING (U.S.) Funding LLC 2.59% due 11/5/2008		30,000			29,919
AT&T Inc. 2.16% due 10/10/20085		27,700			27,683
Bank of America Corp. 3.25% due 10/28/2008		26,300			26,233
United Parcel Service Inc. 2.07% due 12/10/20085		23,000			22,858
Calyon North America Inc. 2.44% due 10/7/2008		21,600			21,590
Eksportfinans ASA 2.30% due 10/24/20085		21,000			20,962
KfW 2.15% due 11/6/20085		20,000			19,956
Private Export Funding Corp. 2.38% due 12/16/20085		10,000			9,924
Total short-term securities (cost: $2,221,683,000)					2,221,549
Total investment securities (cost: $19,423,907,000)					17,560,481
Other assets less liabilities					21,628
Net assets				$	17,582,109

“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. The total value of all such securities, including those in “Miscellaneous,”

was $7,871,196,000, which represented 44.77% of the net assets of the fund.

2Represents an affiliated company as defined under the Investment Company Act of 1940.

3Security did not produce income during the last 12 months.

4Purchased in a transaction exempt from registration under the Securities Act of 1933. May be subject to legal or contractual restrictions on resale.

 Further details on these holdings appear below.

	Acquisition date(s)	Cost (000)		Value (000)		Percent of net assets
Trinity Ltd.	12/6/2007	$	37,508	$	37,652		.21	%
Value Creation Inc.	8/25/2005–9/1/2006		33,229		36,831		.21
Oilexco Inc.  (GBP denominated)	12/15/2005		9,456		28,923		.16
Oilexco Inc.	3/7/2007		3,454		5,117		.03
Cougar Biotechnology, Inc.	12/17/2007		29,000		33,390		.19
Spot Runner, Inc.	10/25/2006­–3/20/2008		15,071		17,883		.10
Spot Runner, Inc., Series C, convertible preferred	10/25/2006		6,000		9,756		.06
Boart Longyear Ltd.	4/4/2007		35,226		21,376		.12
Fluidigm Corp., Series E, convertible preferred	12/21/2006–10/24/2007		17,515		17,515		.10
Fontainebleau Resorts LLC, Class A, nonvoting units	10/5/2005–6/1/2007		21,500		13,680		.08
BG Medicine, Inc., Series D convertible preferred	7/9/2008		10,000		10,000		.06
Pacific Rubiales Energy Corp.	7/9/2007		5,551		8,450		.05
Pacific Rubiales Energy Corp., warrants, expire 2012	7/9/2007		932		1,262		.01
Gulf Keystone Petroleum Ltd.	7/22/2008		13,210		9,007		.05
Gold Wheaton Gold Corp.	6/27/2008		3,676		5,241		.03
Gold Wheaton Gold Corp., warrants, expire 2013	6/27/2008		—		695		.00
OPTI Canada Inc.	6/1/2005		4,610		4,371		.03
OPTI Canada Inc., warrants, expire 2008	6/1/2005		355		64		.00
Aker Philadelphia Shipyard ASA	12/5/2007		3,626		3,060		.02
River Diamonds PLC	6/4/2008		7,928		2,710		.02
Bankers Petroleum Ltd.	2/22/2007		1,173		1,961		.01
Bankers Petroleum Ltd., warrants, expire 2012	2/22/2007		—		553		.00
HSW International, Inc.	10/2/2007		3,000		1,817		.01
HSW International, Inc.	12/17/2007­		907		547		.00
Banro Corp.	7/26/2005		3,799		2,347		.01
Eastern Platinum Ltd.	4/3/2007		4,100		2,307		.01
Mwana Africa PLC	12/7/2005		5,032		1,805		.01
Euronet Worldwide, Inc.	3/8/2007		2,500		1,673		.01
New Gold Inc., warrants, expire 2012	3/21/2007		1,386		1,099		.01
New Gold Inc., warrants, expire 2012	11/26/2007		336		441		.00
Mart Resources, Inc.	1/16/2007–9/7/2007		5,594		1,408		.01
Sunkar Resources PLC	6/19/2008		6,348		1,112		.01
Orbiscom Ltd.	9/28/2000		12,144		234		.00
Mobile Travel Guide, Inc.	12/17/2007		24		24		.00
Energem Resources Inc., warrants, expire 2009	3/6/2007		367		1		.00
Total restricted securities		$	304,557	$	284,312		1.62	%

5Purchased in a transaction exempt from registration under the Securities Act of 1933. May be resold in the United States in transactions exempt from

 registration, normally to qualified institutional buyers. The total value of all such securities was $1,041,504,000, which represented 5.92% of the net assets

 of the fund.

Key to abbreviations

ADR = American Depositary Receipts  

BDR = Brazilian Depositary Receipts

CDI = CREST Depository Interest

GDR = Global Depositary Receipts

CAD = Canadian dollar

GBP = British pound

ILS = Israeli shekel

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 your financial professional and should be read carefully before investing.

MFGEFP-935-1108O-S15836

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INVESTMENT PORTFOLIO

To the Shareholders and Board of Directors of

SMALLCAP World Fund, Inc.:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements of SMALLCAP World Fund, Inc. (the “Fund”) as of September 30, 2008, and for the year then ended and have issued our report thereon dated November 5, 2008, which report and financial statements are included in Item 1 of this Certified Shareholder Report on Form N-CSR.  Our audit also included the Fund’s investment portfolio (the “Schedule”) as of September 30, 2008, appearing in Item 6 of this Form N-CSR.  This Schedule is the responsibility of the Fund’s management.  Our responsibility is to express an opinion based on our audit.  In our opinion, the Schedule referred to above, when considered in relation to the basic financial statements taken as a whole of the Fund referred to above, presents fairly, in all material respects, the information set forth therein.

DELOITTE & TOUCHE LLP

Costa Mesa, California

November 5, 2008

ITEM 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 8 – Portfolio Managers of Closed-End Management Investment Companies

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 9 – Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable to this Registrant, insofar as the Registrant is not a closed-end management investment company.

ITEM 10 – Submission of Matters to a Vote of Security Holders

There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s board of directors since the Registrant last submitted a proxy statement to its shareholders.  The procedures are as follows.  The Registrant has a committee on governance comprised solely of persons who are not considered ‘‘interested persons’’ of the Registrant within the meaning of the Investment Company Act of 1940, as amended. The committee periodically reviews such issues as the board’s composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes 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 of the Registrant, c/o the Registrant’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 on governance.

ITEM 11 – Controls and Procedures

(a)	The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.
(b)	There were no changes in the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

ITEM 12 – Exhibits

(a)(1)	The Code of Ethics that is the subject of the disclosure required by Item 2 is attached as an exhibit hereto.
(a)(2)	The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as exhibits hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SMALLCAP WORLD FUND, INC.

By /s/ Paul F. Roye

Paul F. Roye, Executive Vice President and

Principal Executive Officer

Date: December 8, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By /s/ Paul F. Roye

Paul F. Roye, Executive Vice President and

Principal Executive Officer

Date: December 8, 2008

By /s/ David A. Pritchett

David A. Pritchett, Treasurer and

Principal Financial Officer

Date: December 8, 2008