CAPITAL WORLD BOND FUND
SEMI-ANNUAL REPORT
for the six months ended March 31, 1996
[The American Funds Group(R)]
CAPITAL WORLD BOND FUND(R)
Seeks long-term total return, consistent with prudent management, by investing
in quality fixed-income securities issued by major governments and corporations
all over the world, including the U.S.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are returns, with all distributions reinvested,
through March 31, 1996, assuming payment of the 4.75% maximum sales charge at
the beginning of the stated periods.
Average Annual
Total Return Compound Return
Lifetime (since 8/4/87) +108.60% +8.86%
Five Years +50.70 +8.55
One Year +6.26 -
Sales charges are lower for accounts of $25,000 or more. The fund's 30-day
yield as of April 30, 1996, calculated in accordance with the Securities and
Exchange Commission formula, was 5.37%. The fund's distribution rate as of that
date was 6.88%. The SEC yield reflects income the fund expects to earn based on
its current portfolio of securities, while the distribution rate is based
solely on the fund's past dividends. Accordingly, the fund's SEC yield and
distribution rate may differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
The fiscal half-year ended March 31 was volatile for global bond markets. The
bull market for bonds continued during the first three months of the period,
bolstered by a widespread perception of modest economic growth and low
inflation around the world. But in the final three months, hints of strength in
the U.S. economy led to a bond market selloff in the U.S., which spread to a
number of other markets as well.
Despite the volatility, Capital World Bond Fund made steady progress. The
value of your investment rose 3.6% if, like most shareholders, you reinvested
income dividends totaling 76 cents a share. By comparison, the unmanaged
Salomon Brothers World Government Bond Index, which measures major world bond
markets, increased 1.0% for the same six months.
The fund's total return for the recent half-year also exceeded the 2.5%
total return of the unmanaged Salomon Brothers Broad Investment-Grade Bond
Index, a key measure of the U.S. bond market. Once again, our results showed
that active management and global diversification of fixed-income assets -
despite the added risks of investing overseas - can add value to an investor's
portfolio.
The fund outpaced the world bond index because of successful country
selection and timely currency hedging. The fund held only a small portion -
6.3% - of its assets in Japanese bonds. The Japanese bond market did not do
well in the recent period (-7.7%* in dollar terms), primarily because of the
weakening of the yen. For much of the period, the fund hedged a portion of its
yen exposure back into U.S. dollars. The fund also hedged a large portion of
its investment in German bonds back into U.S. dollars, protecting the fund
against the weakening of the German currency. On the positive side, investments
in Sweden (+12.2%*), Spain (+8.7%*) and Italy (+11.7%*) also aided returns.
[Sidebar]
The fund outpaced the world bond index because of successful country selection
and timely currency hedging.
[End Sidebar]
As we cautioned in our annual report, the exceptional returns of the last
fiscal year ended September 30, 1995 are not likely to continue. In 1995, low
inflation, progress toward a balanced budget agreement in the U.S. and moderate
economic growth around the world created a positive environment for bonds.
In the first quarter of 1996, the situation changed. Business activity in
the U.S. perked up and the balanced budget talks broke down. A sharp decline in
U.S. bond prices occurred on March 8 when the Labor Department reported the
biggest increase in non-agricultural payrolls in more than 12 years. The news
led many investors to believe that the Federal Reserve Board would be unlikely
to cut short-term interest rates further, something that the markets had been
expecting. In addition, sharp price increases in oil, gasoline and agricultural
commodities were seen by some market watchers as an early indication that the
U.S. inflation rate was about to edge higher.
*Country returns are based on the Salomon Brothers World Government Bond Index.
CAPITAL WORLD BOND FUND
NET ASSETS
North America 58.5%
Pacific Basin 12.4%
Europe & Other 29.1%
WORLD BOND MARKET
North America 36.5%
Pacific Basin 21.2%
Europe 42.3%
Percentages weighted by currency, based on the table on page 5.
We believe, however, that the bond market's fear of stronger economic
growth and higher rates of inflation may be overdone. Bond markets in the U.S.
and Europe appear to offer fairly attractive value if inflation continues at a
modest level. We hold our largest positions in the U.S. and Europe and continue
to maintain significant holdings in Canada and New Zealand.
[Sidebar]
Our results showed that active management and global diversification can add
value to a bond portfolio.
[End Sidebar]
In our recent annual report, we noted that we expected to identify some
investment-grade bonds in emerging markets that should provide long-term value
to investors. During the past six months, we purchased small positions in South
African bonds denominated in the South African rand and Polish bonds
denominated in U.S. dollars.
In December, shareholders received a calendar fourth-quarter dividend of
54 cents a share, and then in March received a dividend of 22 cents a share. As
we have explained in previous reports, the fund typically pays about the same
dividend in the first three quarters of the calendar year and then adjusts the
fourth-quarter dividend (up or down) to reflect currency gains or losses, which
we are required to distribute. The unusually large fourth-quarter dividend of
54 cents reflected net currency gains of 11.5 cents recorded during the fiscal
year in addition to income of 42.5 cents.
Looking back over the past 12 months, Capital World Bond Fund showed a
total return of 11.6% with dividends reinvested. Those results bring the fund's
total return since it began operations in August 1987 to 119.0%, or an average
compound return of 9.5% a year. That is two and one-half times the average
annual inflation rate of 3.7% as measured by the Consumer Price Index. We will
do our best to see that this success continues.
We look forward to reporting to you again in the fall, after the close of
our fiscal year.
Cordially,
Paul G. Haaga, Jr.
Chairman of the Board
Abner D. Goldstine
President
May 13, 1996
INVESTMENT RESULTS AT A GLANCE
Total return over
the fund's lifetime
(8/4/87 - 3/31/96) +119.0%
Total return for the
latest 12 months
(4/1/95 - 3/31/96) + 11.6%
Total return for the
latest six months
(10/1/95 - 3/31/96) + 3.6%
WHERE THE FUND'S ASSETS ARE INVESTED
<TABLE>
<CAPTION>
CAPITAL WORLD SALOMON BROS.
BOND FUND WORLD GOV'T
NET ASSETS BOND INDEX
Average Average
Currency of Maturity Maturity
Denomination Securities Currency by by
as of 3/31/96 Weighting# Weighting# Currency Weighting Currency
<S> <C> <C> <C> <C> <C>
UNITED STATES 37.8% 51.1% 7.5 yrs 33.6% 8.0 yrs
GERMANY 12.7 5.4 8.2 10.4 5.8
DENMARK 7.9 4.3 9.0 1.6 6.4
CANADA 7.6 7.4 12.1 2.9 8.7
JAPAN 4.9 6.3 5.2 20.2 6.7
NEW ZEALAND 4.9 4.6 7.2 * *
SPAIN 4.7 4.7 6.5 2.3 5.5
UNITED KINGDOM 4.5 4.5 7.3 5.1 10.1
NETHERLANDS 4.0 1.6 23.5 3.6 7.6
SWEDEN 2.8 2.8 3.9 1.6 6.5
ITALY 2.6 2.6 4.8 6.1 5.0
AUSTRALIA 2.4 1.5 11.3 1.0 6.2
IRELAND 1.8 1.8 5.9 * *
SOUTH AFRICA 1.0 1.0 14.4 * *
PORTUGAL 0.2 0.2 8.9 * *
EUROPEAN CURRENCY UNIT 0.1 0.1 6.0 * *
FINLAND 0.1 0.1 8.0 * *
FRANCE - - - 7.5 8.0
BELGIUM - - - 2.7 6.5
AUSTRIA - - - 0.9 5.4
SWITZERLAND - - - 0.5 7.1
100.0% 100.0% 100.0%
</TABLE>
# Securities and currency weightings may differ due to the fund's use of
hedging techniques designed to control its exposure to fluctuations in exchange
rates. Short-term investments, cash equivalents, receivables and payables are
included in the securities weighting.
* This market is not included in the index.
<TABLE>
Capital World Bond Fund Principal Market Percent
Investment Portfolio March 31, 1996 Amount Value of Net
Bonds & Notes (000) (000) Assets
<S> <S> <S> <S>
Australian Dollars
Australian Government 6.25% 1999 A$ 1,500 US$1,107 .16%
New South Wales Treasury:
11.50% 1999 1,000 841 .12
7.00% 2004 8,000 5,539 .78
News America Holdings Inc. 8.625% 2014 11,000 7,198 1.01
Southern Australia Finance Authority
11.25% 2001 2,500 2,124 .30
-------- --------
16,809 2.37
-------- --------
British Pounds
Bank of Ireland 9.75% 2005 Pound 735 1,166 .17
European Investment Bank 6.00% 2004 250 326 .05
United Kingdom:
9.50% 1999 2,000 3,227 .45
7.00% 2001 12,750 18,830 2.64
4.375% 2004 1 3,000 5,216 .73
8.00% 2015 2,000 2,939 .41
-------- --------
31,704 4.45
-------- --------
Canadian Dollars
Canadian Government:
6.25% 1998 C$ 2,000 1,471 .21
10.75% 1998 3,000 2,390 .34
9.75% 2001 16,000 13,132 1.84
0% 2003 1,500 613 .08
7.50% 2003 13,500 9,916 1.39
0% 2005 12,685 4,486 .63
8.75% 2005 2,550 2,011 .28
10.75% 2009 10,000 9,065 1.27
4.25% 2021 1 8,000 5,645 .79
9.00% 2025 7,000 5,613 .79
-------- --------
54,342 7.62
-------- --------
Danish Kroner
Danish Government:
9.00% 1998 DKr114,000 21,822 3.06
9.00% 2000 60,000 11,666 1.64
8.00% 2001 10,000 1,869 .26
8.00% 2003 52,500 9,727 1.36
7.00% 2024 73,500 11,058 1.55
-------- --------
56,142 7.87
-------- --------
Deutsche Marks
Bayerische Vereinsbank AG
6.50% 2005 DM11,000 7,415 1.04
Deutschland Republic:
8.25% 2001 15,500 11,794 1.65
8.00% 2002 19,500 14,643 2.05
6.75% 2003 15,500 10,887 1.53
6.50% 2005 4,000 2,712 .38
6.875% 2005 10,000 6,972 .98
6.25% 2024 7,400 4,446 .62
German Unity Fund 8.00% 2002 3,500 2,628 .37
Norddeutsche Landesbank Girozentrale
6.75% 2005 3,500 2,396 .34
Treuhandanstalt:
7.375% 2002 2,000 1,455 .20
7.125% 2003 29,600 21,239 2.98
7.50% 2004 5,500 3,995 .56
-------- --------
90,582 12.70
-------- --------
European Currency Units
France O.A.T.
8.50% 2002 ECU750 1,026 .14
-------- --------
Finnish Markkaa
Finnish Government:
9.50% 2004 FM4,000 956 .13
-------- --------
Irish Pounds
Ireland (Republic of):
6.25% 1999 Pound3,950 6,119 .86
6.25% 2004 4,780 6,740 .94
-------- --------
12,859 1.80
-------- --------
Italian Lire
Deutsche Bank Finance NV 11.00% 1996 Lr1,550,000 996 .14
Italian Government National:
10.50% 1998 8,600,000 5,555 .78
8.50% 1999 2,500,000 1,526 .21
8.50% 2004 8,500,000 4,823 .68
10.50% 2005 3,500,000 2,218 .31
KfW International Finance Inc.
11.625% 1998 5,500,000 3,670 .51
- --------
18,788 2.63
-------- --------
Japanese Yen
European Investment Bank 6.75% 2001 Yen 1,350,000 15,167 2.13
Export-Import Bank of Japan:
4.375% 2003 325,000 3,298 .46
2.875% 2005 170,000 1,539 .22
GMAC International Finance 3.75% 1999 300,000 2,926 .41
International Bank for Reconstruction
& Development 4.50% 2003 90,000 925 .13
Japan Development Bank:
5.00% 1999 590,000 6,095 .85
6.50% 2001 425,000 4,763 .67
-------- --------
34,713 4.87
-------- --------
Netherlands Guilders
Netherlands Government:
7.50% 1999 NLG 5,000 3,272 .46
7.00% 2005 1,500 946 .13
7.50% 2023 38,000 24,225 3.40
-------- --------
28,443 3.99
-------- --------
New Zealand Dollars
New Zealand Government:
8.00% 1998 NZ$ 3,000 2,025 .28
6.50% 2000 15,550 9,943 1.39
8.00% 2004 21,000 14,198 1.99
8.00% 2006 13,000 8,851 1.24
-------- --------
35,017 4.90
-------- --------
Portugese Escudo
Portugal (Republic of)
11.875% 2005 PTE180,000 1,341 .19
- -
South African Rand
South Africa (Republic of)
13.00% 2010 ZAR33,750 7,375 1.03
- -
Spanish Pesetas
Spain (Kingdom of):
11.45% 1998 Pta 770,000 6,552 .92
12.25% 2000 210,000 1,862 .26
10.50% 2003 2,240,000 18,953 2.66
8.00% 2004 830,000 6,092 .85
-------- --------
33,459 4.69
-------- --------
Swedish Kronor
Swedish Government:
10.75% 1997 SKr 10,000 1,546 .22
11.00% 1999 86,500 14,157 1.99
6.00% 2005 30,500 3,871 .54
-------- --------
19,574 2.75
-------- --------
United States Dollars
Airplanes Pass Through Trust, pass through
certificates, Class C 8.15% 2019 2 US$ 5,000 5,000 .70
Banco Nacional de Mexico, SA 1995 Trust
Certificates 0% 2002 3 6,179 4,727 .66
Bangkok Bank Public Co. Ltd. 3
7.25% 2005 250 247 .03
China (People's Republic of)
9.00% 2096 500 464 .06
Colombia (Republic of) 8.70% 2016 1,000 920 .13
Columbia Gas System, Inc., Series C
6.80% 2005 6,000 5,889 .83
ConAgra, Inc. 9.75% 2021 8,500 10,202 1.43
Continental Airlines, Series 1996A
6.94% 2015 3 2,000 1,923 .27
Credit Foncier de France 8.00% 2002 1,840 1,858 .26
Den Danske Bank 6.55% 2003 3 1,000 972 .14
Federal Home Loan Mortgage Corp.:
5.78% 2003 2 4,000 3,765 .53
6.19% 2004 2 9,000 8,603 1.21
Government National Mortgage Assn.:
9.00% 2017-2024 2 7,717 8,246 1.16
8.50% 2021 2 874 923 .13
7.00% 2022-2026 2 4,509 4,488 .63
6.00% 2024 2 2,850 2,889 .41
6.50% 2024 2 6,141 6,021 .84
5.50% 2025 2 2,921 2,899 .41
Inter America Development Bank
8.875% 2001 3,000 3,308 .46
Israel (State of) 6.375% 2005 4,500 4,293 .60
Italy (Republic of) 6.875% 2023 2,250 2,019 .28
Parker & Parsley Petroleum Co.
8.25% 2007 2,000 2,105 .29
Poland PDI:
Bearer shares 3.75% 2014 4 12,000 9,090 1.27
Registered shares 3.75% 2014 4 2,000 1,515 .21
Ontario (Province of):
7.75% 2002 2,000 2,109 .30
7.375% 2003 5,000 5,199 .73
7.00% 2005 1,750 1,764 .25
Reliance Industries Ltd.8.125% 2005 500 488 .07
Skandinaviska Enskilda Banken
6.875% 2009 1,000 964 .14
United States Treasury:
5.375% 1998 3,000 2,972 .42
6.375% 1999 24,000 24,277 3.40
6.75% 2000 10,925 11,186 1.57
7.50% 2001 11,000 11,674 1.64
7.75% 2001 1,500 1,603 .22
8.00% 2001 5,000 5,404 .76
6.375% 2002 18,000 18,104 2.54
7.25% 2004 2,500 2,636 .37
11.625% 2004 14,000 18,795 2.64
6.50% 2005 1,250 1,255 .18
10.375% 2009 6,000 7,506 1.05
7.625% 2022 3,000 3,263 .46
-------- --------
211,565 29.68
-------- --------
Total Bonds & Notes (cost:
$644,848,000) 654,695 91.81
-------- --------
Short-Term Securities
Corporate Short-Term Notes
Daimler-Benz North America Corp.:
5.13% due 4/23/96 2,500 2,492 .35
5.25% due 6/19/96 9,300 9,190 1.29
Ford Credit Europe PLC:
5.24% due 4/9/96 5,000 4,994 .70
5.22% due 4/10/96 5,000 4,993 .70
5.27% due 5/8/96 5,000 4,972 .70
5.30% due 5/24/96 1,600 1,587 .22
UBS Finance (Delaware) Inc.
5.43% due 4/1/96 12,000 11,998 1.68
-------- --------
40,226 5.64
-------- --------
Non-U.S. Currency
British Pound Deposit Pound 41 62 .01
Deutsche Mark Deposit DM167 113 .01
Italian Lira Deposit Lr551,983 353 .05
-------- --------
528 .07
-------- --------
Total Short-Term Securities (cost:
$40,747,000) 40,754 5.71
-------- --------
Total Investment Securities (cost:
$685,595,000) 695,449 97.52
Excess of cash and receivables over
payables 17,657 2.48
-------- --------
Net Assets $713,106 100.00%
======== ========
1 Index-linked bond, which
is a floating rate bond whose principal
amount moves with a government retail
price index.
2 Pass-through security backed by a pool
of mortgages or other loans on which
principal payments are periodically
made. Therefore, the effective maturity
of this security is shorter than the
stated maturity.
3 Purchased in a private placement
transaction; resale may be made to
qualified institutional buyers.
4 Coupon rates may change periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital World Bond Fund
Financial Statements
Statement of Assets and Liabilities
at March 31, 1996 (dollars in thousands) Unaudited
<S> <C> <C>
Assets:
Investment securities at market
(cost: $685,595) $695,449
Cash 118
Receivables for-
Sales of investments $3,426
Sales of fund's shares 1,557
Open forward currency contracts 244
Accrued interest 17,107 22,334
--------- ---------
717,901
Liabilities:
Payables for-
Purchases of investments 3,368
Repurchases of fund's shares 730
Management services 406
Accrued Expenses 291 4,795
--------- ---------
Net Assets at March 31, 1996-
Equivalent to $16.65 per share on
42,826,400 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 200,000,000 shares) $713,106
=========
Statement of Operations
for the six months ended March 31, 1996 Unaudited
(dollars in thousands)
Investment Income:
Income:
Interest $25,402
Expenses:
Management services fee $2,335
Distribution expenses 868
Transfer agent fee 292
Reports to shareholders 81
Registration statement and prospectus 58
Postage, stationery and supplies 55
Directors' fees 7
Auditing and legal fees 39
Custodian fee 108
Taxes other than federal income tax 18
Other expenses 144 4,005
--------- ---------
Net investment income 21,397
---------
Realized Gain and Unrealized Depreciation:
Net realized gain 16,790
Net unrealized depreciation on
investments (15,264)
Open forward currency contracts 563
---------
Net unrealized depreciation (14,701)
---------
Net realized gain and change in
unrealized depreciation on investments 2,089
---------
Net Increase in Net Assets Resulting
from Operations $23,486
=========
Statement of Changes in Net Assets
(dollars in thousands)
Six months Year
ended ended
3/31/96* 9/30/95
--------- ---------
Operations:
Net investment income $21,397 $40,840
Net realized gain on investments 16,790 3,523
Net unrealized (depreciation) appreciation
on investments (14,701) 52,599
--------- ---------
Net increase in net
assets resulting from operations 23,486 96,962
--------- ---------
Dividends Paid to Shareholders (30,925) (43,886)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
7,835,085 and 12,188,125
shares, respectively 133,477 198,146
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions of
net realized gain on investments:
1,516,549 and 2,348,338 shares, respe 25,445 37,011
Cost of shares repurchased:
5,362,911 and 13,243,810
shares, respectively (91,164) (211,052)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 67,758 24,105
--------- ---------
Total Increase in Net Assets 60,319 77,181
Net Assets:
Beginning of period 652,787 575,606
--------- ---------
End of period (including undistributed
net investment income: $6,404 and
$11,346, respectively) $713,106 $652,787
========= =========
*Unaudited
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. Capital World Bond Fund, Inc. (the "fund") is registered under the
Investment Company Act of 1940 as an open-end, nondiversified management
investment company. The fund seeks long-term total return, consistent with
prudent management, by investing in quality fixed-income securities issued by
major governments and corporations all over the world, including the United
States. The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, when such prices are available; however,
in circumstances where the investment adviser deems it appropriate to do so,
such securities will be valued at the mean of their representative quoted bid
and asked prices or, if such prices are not available, at the mean of such
prices for securities of comparable maturity, quality and type. Securities
denominated in non-U.S. currencies are generally valued on the basis of bid
quotations. Short-term securities with original or remaining maturities in
excess of 60 days, including forward currency contracts, are valued at the mean
of their quoted bid and asked prices. Short-term securities with 60 days or
less to maturity are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Valuation Committee of the Board
of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed-delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
Distributions to shareholders are recorded on the ex-dividend date.
Investment securities, cash balances, and other assets and liabilities,
including forward currency contracts, denominated in non-U.S. currencies are
recorded in the financial statements after translation into U.S. dollars
utilizing rates of exchange on the last business day of the period. Interest
income from such investments is calculated using the prevailing exchange rate
as accrued or when received. Purchases and sales of investment securities and
interest income are calculated at the rates of exchange prevailing on the
respective dates of such transactions. The fund does not identify the portion
of each amount shown in the fund's statement of operations under the caption
"Realized Gain and Unrealized Depreciation" that arises from changes in
non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $108,000 includes $8,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of March 31, 1996, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $9,854,000, of which $17,735,000 related to appreciated securities
and $7,881,000 related to depreciated securities. There was no difference
between book and tax realized gains on securities transactions for the six
months ended March 31, 1996. The cost of portfolio securities, excluding
forward currency contracts, for book and federal income tax purposes was
$685,595,000 at March 31, 1996.
3. The fee of $2,335,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.70% of the first $500 million of average net assets;
0.60% of such assets in excess of $500 million but not exceeding $1 billion;
and 0.50% of such assets in excess of $1 billion.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended March 31,
1996, distribution expenses under the Plan were $868,000. As of March 31,
1996, accrued and unpaid distribution expenses were $98,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $292,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $375,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of March 31, 1996,
aggregate amounts deferred and earnings thereon were $20,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of March 31, 1996, accumulated undistributed net realized gain on
investments was $9,400,000 and paid-in capital was $686,775,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $367,795,000 and $306,209,000, respectively, during
the six months ended March 31, 1996.
The fund purchases and sells forward currency contracts in anticipation
of, or to protect itself against, fluctuations in exchange rates. The contracts
are recorded in the statement of assets and liabilities at their net unrealized
value; the fund's maximum potential liability in these contracts is equal to
the full contract amounts. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from possible movements in foreign exchange rates and securities values
underlying these instruments. At March 31, 1996, the fund had outstanding
forward currency contracts to purchase and sell non-U.S. currencies as follows:
<TABLE>
U.S. Valuation
Non-U.S. Contract Amount at 3/31/96
Currency ----------------------------- Unrealized
Contracts Non-U.S. U.S. Amount (Depreciation)
Appreciation
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Australian Dollars
expiring 4/9 to
6/11/96 A$7,578,000 $5,757,000$ 5,916,000 $(159,000)
Canadian Dollars
expiring 5/2/96 C$2,300,000 1,674,000 1,688,000 (14,000)
Danish Kroner
expiring 4/9 to
7/19/96 DKr143,527,000 25,431,000 25,242,000 189,000
Deutsche Marks
expiring 4/22 to
9/19/96 DM76,946,000 52,773,000 52,360,000 413,000
Netherlands
Guilders
expiring 7/19 to
9/11/96 NLG28,228,000 17,258,000 17,256,000 2,000
New Zealand Dollars
expiring 4/18/96 NZ$3,638,000 2,500,000 2,473,000 27,000
------------
$458,000
============
Purchases:
Japanese Yen
expiring 4/22 Yen1,067,700,000 10,243,000 10,029,000 $(214,000)
6/7/96 ============
</TABLE>
<TABLE> Six months
Per-Share Data and Ratios ended
March 31, Year Ended Septe mber 30
1996 1 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.81 $15.33 $16.48 $15.95 $15.60 $14.46
---------- ---------- ------- ------- ------- -------
Income From Investment Operations:
Net investment income .62 1.09 1.05 .91 1.03 1.05
Net realized and unrealized (loss) gain
on investments (.02) 1.57 (1.14) .65 .40 1.19
--------- --------- ------- ------- ------- -------
Total income from investment operations .60 2.66 (.09) 1.56 1.43 2.24
--------- --------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income (.76) 2 (1.18) (.94) 2 (.84) 2 (1.01) 2 (1.10)
Distributions from net realized gains - - (.12) (.19) (.07) -
--------- --------- ------- ------- ------- -------
Total distributions (.76) (1.18) (1.06) (1.03) (1.08) (1.10)
--------- --------- ------- ------- ------- -------
Net Asset Value, End of Period $16.65 $16.81 $14.27 $15.45 $15.95 $15.60
======== ======== ======== ======= ======== =======
Total Return 3 3.58% 4 18.10% (.62)% 10.40% 9.46% 16.10%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $713 $653 $576 $450 $224 $76
Ratio of expenses to average net assets .58% 4 1.12% 1.11% 1.19% 1.38% 1.42%
Ratio of net income to average net assets 3.09% 4 6.83% 6.88% 6.25% 6.88% 7.54%
Portfolio turnover rate 48.60% 4 104.96% 77.04% 27.95% 95.11% 81.44%
1 Unaudited
2 Amount includes realized non-U.S. currency gains of
12 cents, 4 cents, 3 cents and 7 cents for the period ended March 31,
1996, and the years ended September 30, 1994, 1993
and 1992, respectively, treated as net investment income
for federal income tax purposes.
3 This was calculated without deducting a
sales charge. The maximum sales charge
is 4.75% of the fund's offering price.
4 Based on operations for the period shown and,
accordingly, not representative of a full year's operations.
</TABLE>
CAPITAL WORLD BOND FUND
FUND SERVICES
These handy services can add convenience and flexibility to your American Funds
investments.
ADDING TO YOUR INVESTMENT
There are three ways you can group your American Funds purchases to qualify for
a quantity discount:
RIGHT OF ACCUMULATION - You can combine the value of your existing shares with
those you are purchasing to qualify for a discount.
STATEMENT OF INTENTION - You can, without obligation, use a Statement of
Intention that allows you to combine the value of your existing shares and the
purchases you intend to make over a 13-month period so you can take immediate
advantage of the maximum quantity discount available.
CONCURRENT PURCHASES - By purchasing shares in more than one American Fund
simultaneously, you may qualify for a quantity discount.
(Shares of money market funds purchased directly do not apply to quantity
discounts. Additionally, certain accounts may not be eligible to be grouped.
See the fund's prospectus or your investment professional for more details.)
SUBSEQUENT INVESTMENTS BY MAIL - Once your account has been established and
you've selected a broker/dealer, simply send a check for $50 or more, along
with the bottom portion of your account statement, to American Funds Service
Company.
PUTTING YOUR INVESTMENTS ON AUTOPILOT
AUTOMATIC INVESTMENT PLAN - You can make automatic investments regularly by
authorizing American Funds Service Company to deduct a specified sum from your
bank account.
AUTOMATIC EXCHANGE PLAN - You can automatically exchange $50 or more between
funds on a regular basis.
AUTOMATIC WITHDRAWL PLAN - You can arrange to have regular checks for specified
amounts sent to you or to anyone you designate in any month(s) you choose.
CHOOSING THE PAYOUT SYSTEM THAT'S RIGHT FOR YOU
AUTOMATIC REINVESTMENT - All dividends and capital gain distributions can be
automatically reinvested in additional fund shares without a sales charge.
CROSS-REINVESTMENT - You can reinvest dividends and/or capital gains from one
fund to another fund at no charge if you have a balance of at least $5,000 in
the originating fund or meet the minimum initial investment for the receiving
fund.
DIVIDENDS IN CASH - You can elect to take dividends in cash.
REPORTS YOU'LL RECEIVE FROM US
CONFIRMATIONS OF TRANSACTIONS - You will receive account statements reflecting
the transactions in your account.
CONSOLIDATED QUARTERLY STATEMENTS - If you have more than one account with the
American Funds, you can request a quarterly statement combining certain
accounts registered to the same individual.
YEAR-END TAX REPORTS - At the end of each year, you will receive an individual
report which shows the tax status of the distributions paid to you during the
year. In many instances, these reports can help you calculate taxes due on
shares sold by reporting average cost.
SPECIAL SERVICES
EXCHANGE PRIVILEGES - You can transfer some or all of your holdings into other
American Funds by mail or by phone. Certain restrictions apply (a sales charge
may apply if one has not already been paid), and it's important to remember
that an exchange constitutes a sale and purchase for tax purposes.
TELEPHONE INFORMATION SERVICE - American FundsLine(r) is a toll-free service
which gives you account information as well as current prices for all American
Funds. Just call 800/325-3590.
SAFEKEEPING OF CERTIFICATES - Your shares are credited to your account and
certificates are not issued unless specifically requested. (Certificates are
not available for money market funds.)
FREE CHECK-WRITING WITHDRAWAL SERVICE - If you have a money market fund
account, this service enables you to write checks for $250 or more against the
account. The account continues to earn daily interest until checks clear the
fund's bank.
RETIREMENT PLANS - A wide variety of plans is available.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
SECURITIES DEALER OR FINANCIAL PLANNER, OR PHONE THE FUND'S TRANSFER AGENT,
AMERICAN FUNDS SERVICE COMPANY, AT 800/421-0180. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE SUBJECT TO CHANGE
OR TERMINATION.
CAPITAL WORLD BOND FUND
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President
and Chief Executive Officer,
The Mission Group;
former President, Southern
California Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive
Officer and President, The Earth Technology Corporation
(environmental engineering)
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board,
Senior Resource Group, Inc.
(senior living centers
management)
LEONARD R. FULLER
Marina del Rey, California
President, Fuller & Company, Inc.
(financial management
consulting)
ABNER D. GOLDSTINE
Los Angeles, California
President of the fund
Senior Vice President and
Director, Capital Research
and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director, Capital Research and Management Company
HERBERT HOOVER III
Pasadena, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President
and Chief Executive Officer,
AECOM Technology Corporation
(architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman of the Board,
BW/IP International, Inc.
(industrial manufacturing)
OTHER OFFICERS
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management Group, Capital Research
and Management Company
MARY C. HALL
Brea, California
Vice President and Treasurer of the fund
Senior Vice President - Fund Business
Management Group, Capital Research
and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group, Capital Research
and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Assistant Vice President - Fund Business Management Group, Capital Research
and Management Company
ANTHONY W. HYNES, JR.
Brea, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group, Capital Research
and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND
MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster LLP
345 California Street
San Francisco, California 94104-2675
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of Capital World Bond Fund,
but it may also 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
June 30, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA TAG/ALI/2977
Lit. No. WBF-013-0596
[The American Funds Group(r)]
Printed on recycled paper
