[The American Funds Group(r)]
Capital World Bond Fund
Semi-Annual Report
For the six months ended March 31, 1998
[cover photo: two piles of international coins]
Capital World Bond Fund(r)
[sidebar]
The fund seeks to maximize 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.
That total return is made up of three elements: interest income, any change in
the market value of the fund's investments and any change in the value of other
currencies against the U.S. dollar.
Capital World Bond Fund is one of the 28 mutual funds in The American Funds
Group,(r) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
[end sidebar]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended March 31, 1998,
assuming payment of the 4.75% maximum sales charge at the beginning of the
stated periods.
<TABLE>
<CAPTION>
Total Average Annual
Return Compound Return
<S> <C> <C>
Ten Years +95.41% +6.93%
Five Years +35.81 +6.31
One Year -1.08 -
</TABLE>
Sales charges are lower for accounts of $25,000 or more. The fund's 30-day
yield as of April 30, 1998, calculated in accordance with the Securities and
Exchange Commission formula, was 4.88%. The fund's distribution rate as of that
date was 4.93%. 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 AND ARE NOT PREDICTIVE OF
FUTURE 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. Investing in non-U.S. bonds is subject to additional risks.
They include currency fluctuations, political and social instability, differing
securities regulations and accounting standards, and higher transaction costs.
FELLOW SHAREHOLDERS:
The past six months have been anything but smooth sailing for global bond
investors. While interest rates declined in most countries, causing bond prices
to increase, a fall in the value of many countries' currencies greatly reduced
those gains for U.S. investors. Meanwhile, the financial turmoil which began in
Asia last summer continued to surface, sometimes in unexpected places.
Over the six months ended March 31, Capital World Bond Fund posted a gain
of 0.3% if you reinvested income dividends totaling 40 cents a share and
December's capital gain distribution of 27.6 cents a share.
The fund's total return for the six-month period trailed the 1.0% return
of the Salomon Brothers World Government Bond Index, which measures major world
bond markets. For the same period, the Salomon Brothers Broad Investment-Grade
Bond Index, which measures the U.S. bond market, posted a return of 4.6%. (Both
indexes are unmanaged and measure returns with interest compounded.)
Over the 12-month period ended March 31, the fund's total return was 3.8%
with dividends reinvested. That compares with a 12-month total return of 5.4%
for Salomon Brothers' global bond index and 12.0% for its U.S. index.
THE ASIAN RIPPLE EFFECT
The dominant economic theme of the past six months was the Asian financial
crisis, which has been well-documented in the press. Less well-understood were
the resulting worldwide repercussions. For example, New Zealand, Australia and
Canada are all suppliers of raw materials to Asia; all three suffered from
falling commodity prices and reduced export opportunities. As a result, these
countries' currencies headed lower against the U.S. dollar, diminishing the
returns from their bonds. In the past, we have found excellent value in the
bonds of New Zealand, Australia and Canada. While we have temporarily reduced
our exposure to these countries, we are looking for opportunities to reenter
these markets as conditions in Asia stabilize.
INVESTMENT RESULTS AT A GLANCE
6-month total return
(10/1/97 - 3/31/98) +0.3%
12-month total return
(4/1/97 - 3/31/98) +3.8
Lifetime total return
(8/4/87 - 3/31/98) +138.4
Lifetime average annual
compound return
(8/4/87 - 3/31/98) +8.5
A FLIGHT TO QUALITY
From an investment standpoint, credit problems in Asia sparked a worldwide
"flight to quality." Many investors sold their Asian holdings and purchased
assets denominated in U.S. dollars, further boosting the value of the dollar.
The stronger dollar and prospects for slower growth in the United States -
helped by sagging demand in Asia for U.S. exports - kept inflation fears at
bay. In response, investors pushed the 10-year U.S. government bond yield down
from 6.1% at the end of September to 5.7% on March 31, its lowest level since
1993.
CAPITAL WORLD BOND FUND GEOGRAPHIC DIVERSITY
[begin pie chart]
The Americas 66.8%
Europe & Africa* 25.6%
Pacific Basin 7.6%
[end pie chart]
WORLD BOND MARKET
[begin pie chart]
The Americas 37.3%
Europe 43.6%
Pacific Basin 19.1%
[end pie chart]
*Includes bonds in South Africa, which is not included in the world bond market
index.
Percentages weighted by currency, based on the table on page 4.
This environment of falling U.S. interest rates and rising bond prices
helped to increase the value of the fund's U.S. dollar bond holdings. There
were some exceptions, however - particularly bonds of issuers in Asia or with a
significant Asian involvement. For example, bonds issued by Samsung, a
world-class South Korean electronics company, and Freeport-McMoRan, a well-run
U.S. mining company with the bulk of its operations in Indonesia, were hurt by
investors' sudden wariness toward Asian securities. Several of these holdings
have begun to recover.
JAPAN'S CONTINUING SAGA
In Japan, bond yields continued to fall and bond prices rose as the country
dealt with impending recession. The continued weakness of the yen, however,
converted the country's six-month government bond return from +2.2% in yen to
- -7.5% expressed in U.S. dollars. We were able to offset much of the currency
loss by hedging most of our yen exposure back into dollars. In fact, the fund's
hedging of yen provided dual benefits: protection against a depreciating yen
and an increase in current yield resulting from the difference between U.S. and
Japanese interest rates.
EUROPEAN CONVERGENCE
Less connected with events in Asia were the European bond markets. European
countries scrambled to cut deficits to meet the strict budgetary guidelines
mandated by the impending monetary union, set to start in January 1999. As a
result, interest rates throughout continental Europe converged toward lower
German rates. In spite of declining interest rates, the U.S. dollar's continued
strength pared returns for U.S. investors in European bond markets (except in
the United Kingdom, where the pound was strong).
SUMMARY
Looking ahead, we feel that the fund is well-positioned to take advantage of
new opportunities arising in several markets. We have bolstered our exposure to
the U.S. dollar while we seek out attractively priced bonds in markets affected
- - either directly or indirectly - by the Asian financial crisis. In other
countries, declining interest rates have driven corporations to issue new bonds
at lower rates, providing new opportunities for global bond investors.
As always, it is difficult to predict what will happen to currencies and
equally difficult to know how individual investors will react to regional
economic conditions. That said, it's clear that over the long term, the fund's
broad diversification has enhanced its total return. Since its inception in
August 1987, Capital World Bond Fund's average annual compound return of 8.5%
has kept shareholders well ahead of the 3.4% average annual rate of inflation,
as measured by the Consumer Price Index.
We would like to thank you for the trust you place in us to navigate
through the choppy waters of global bond investing. We believe opportunities
abound for those who know where to find them, and we feel confident in our
ability to provide our shareholders with diversification, income and attractive
total return over the long term.
Cordially,
[/s/ Paul G. Haaga, Jr.]
Paul G. Haaga, Jr.
Chairman of the Board
[/s/ Abner D. Goldstine]
Abner D. Goldstine
President
May 13, 1998
CURRENCIES IN WHICH THE FUND'S ASSETS ARE INVESTED
as of March 31, 1998
<TABLE>
<CAPTION>
Capital World Salomon Brothers
Bond Fund World Government
Net Assets Bond Index
Currency of Securities Currency Currency
Denomination Weighting# Weighting# Weighting
<S> <C> <C> <C>
United States 42.5% 62.9% 34.0%
Germany 16.4 7.4 8.8
United Kingdom 9.6 8.0 6.8
Japan 7.2 2.1 18.3
New Zealand 6.3 4.2 *
Canada 4.3 3.9 3.3
Australia 3.2 1.3 0.8
Poland 2.7 2.7 *
Sweden 2.4 2.4 1.5
Denmark 1.6 1.4 1.5
Ireland 1.4 1.3 0.4
Greece 1.2 1.2 *
Italy 0.8 0.8 6.8
Finland 0.2 0.2 0.6
European Currency 0.1 0.1 *
Units
South Africa 0.1 0.1 *
France - - 7.6
Spain - - 2.9
Netherlands - - 2.9
Belgium - - 2.5
Austria - - 0.9
Switzerland - - 0.4
100.0% 100.0% 100.0%
</TABLE>
#Securities and currency weightings may differ due to the use of forward
foreign exchange contracts by the fund. Short-term investments, cash and
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, 1998 (Unaudited) Amount Value of Net
(000) (000) Assets
<S> <C> <C> <C>
Bonds & Notes
Australian Dollars
Australian Government:
10.00% 2002 A$1,850 US$ 1,452 .22%
10.00% 2006 1,500 1,263 .19
Fannie Mae (formerly Federal National Mortgage
Assn.) 6.50% 2002 8,500 5,816 .89
News America Holdings Inc. 8.625% 2014 9,000 6,331 .96
New South Wales Treasury:
11.50% 1999 1,000 714 .11
7.00% 2004 3,000 2,107 .32
Southern Australia Finance Authority
11.25% 2001 1,500 1,162 .18
Statens Bostadfinansier 6.50% 2000 2,800 1,889 .29
-------- --------
20,734 3.16
-------- --------
British Pounds
Bank of Ireland 9.75% 2005 Pounds4,985 9,565 1.46
European Investment Bank 6.00% 2004 250 412 .06
FP Finance 9.125% 2049 2,000 3,705 .56
Halifax Building Society 11.00% 2014 2,100 4,886 .74
Land Securities 9.00% 2020 750 1,595 .24
Lloyds Trustee Savings Banking Group
8.50% 2006 3,000 5,525 .84
NPI Finance 9.625% 2049 750 1,424 .22
Royal Bank of Scotland 8.375% 2007 3,000 5,487 .83
Scott Life 9.00% 2049 2,750 5,039 .77
United Kingdom:
9.50% 1999 2,000 3,407 .52
8.00% 2000 3,500 6,063 .92
7.00% 2001 1,000 1,705 .26
8.50% 2005 6,450 12,393 1.89
7.50% 2006 1,000 1,845 .28
-------- --------
63,051 9.59
-------- --------
Canadian Dollars
Canadian Government:
8.50% 2000 C$1,750 1,310 .20
9.75% 2001 8,000 6,489 .99
7.25% 2003 8,250 6,340 .96
7.50% 2003 3,750 2,931 .45
9.00% 2004 3,000 2,549 .39
4.25% 2021(1) 3,278 2,377 .36
4.25% 2026(1) 6,720 4,880 .74
Canadian Trust 6.75% 2001 1,796 1,295 .20
-------- --------
28,171 4.29
-------- --------
Danish Kroner
Danish Government:
9.00% 1998 DKr3,000 437 .07
8.00% 2001 10,000 1,574 .24
8.00% 2003 10,000 1,623 .24
7.00% 2007 42,000 6,774 1.03
-------- --------
10,408 1.58
-------- --------
European Currency Units
Reliance Industries Ltd. 8.125% 2005 ECU1,000 959 .15
-------- --------
Finnish Markkaa
Finnish Government 11.00% 1999 FM6,000 1,129 .17
-------- --------
German Marks
Bayerische Vereinsbank AG:
6.50% 2005 DM6,000 3,534 .54
5.50% 2008 28,000 15,576 2.37
Bundesobligation 5.875% 2000 8,150 4,559 .69
Bundesrepublik 6.00% 2007 11,000 6,409 .98
Bundesschatzanweisung 5.75% 1999 5,500 3,034 .46
Deutschland Republic:
8.00% 2002 22,000 13,488 2.05
6.75% 2003 19,500 11,560 1.76
6.50% 2005 22,750 13,559 2.06
6.875% 2005 21,000 12,736 1.94
Treuhandanstalt:
7.125% 2003 21,250 12,736 1.94
7.50% 2004 16,750 10,403 1.58
-------- --------
107,594 16.37
-------- --------
Greek Drachmas
Hellenic Republic 8.80% 2007 GRD2,375,000 7,764 1.18
-------- --------
Irish Pounds
Ireland (Republic of):
6.25% 1999 IR Pounds2,500 3,447 .53
6.50% 2001 1,800 2,587 .39
6.25% 2004 2,000 2,912 .44
-------- --------
8,946 1.36
-------- --------
Italian Lire
Italian Government National 9.50% 2001 Lr5,000,000 3,090 .47
KfW International Finance Inc.
11.625% 1998 4,000,000 2,289 .35
- --------
5,379 .82
-------- --------
Japanese Yen
Austria (Republic of) 4.50% 2005 Y250,000 2,248 .34
European Investment Bank 6.75% 2001 200,000 1,768 .27
Fannie Mae(Formerly Federal National Mortgage Assn) 150,000 1,151 .18
2.125% 2007
GMAC International Finance 3.75% 1999 300,000 2,347 .36
International Bank for Reconstruction
and Development:
4.50% 2003 1,288,500 11,167 1.70
4.75% 2004 700,000 6,323 .96
2.00% 2008 1,700,000 12,898 1.96
Japan Development Bank, 6.50% 2001 40,000 356 .05
Nippon Telegraph & Telephone Corp. 2.50% 2007 590,000 4,590 .70
Spain (Kingdom of) 3.10% 2006 550,000 4,547 .69
-------- --------
47,395 7.21
-------- --------
New Zealand Dollars
Canadian Government 6.625% 2007 NZ$8,500 4,421 .67
Fannie Mae(Formerly Federal National Mortgage Assn) 12,250 6,582 1.00
7.25% 2002
New Zealand Government:
8.00% 2001 7,000 3,893 .59
8.00% 2004 8,500 4,847 .74
8.00% 2006 3,000 1,752 .27
7.00% 2009 17,800 9,835 1.49
4.50% 2016(1) 20,574 10,381 1.58
-------- --------
41,711 6.34
-------- --------
Polish Zloty
Poland (Republic of)Treasury Bill 1998 PLZ2,100 528 .08
Polish Government:
12.00% 2001 5,000 1,174 .18
13.00% 2001 39,500 9,597 1.46
12.00% 2002 10,500 2,436 .37
12.00% 2003 17,500 3,970 .60
-------- --------
17,705 2.69
-------- --------
South African Rands
South Africa (Republic of) 13.00% 2010 ZAR2,000 393 .06
- -
Swedish Kronor
Spintab AB 6.25% 2002 SKr 80,000 10,321 1.57
Stadshypotek AB 5.75% 2003 32,000 4,053 .62
Swedish Government 11.00% 1999 11,500 1,504 .23
-------- --------
15,878 2.42
-------- --------
United States Dollars
Abbey National PLC 6.69% 2005 US$1,000 1,019 .15
Airplanes Pass Through Trust, pass-through
certificates, Class C, 8.15% 2019(2) 6,000 6,245 .95
Asset-Backed Securities Investment
Trust, Series 1997-D, 6.79% 2003(3) 5,000 5,017 .76
Associates Corp. of North America
5.85% 2001 3,000 2,984 .45
Banco General, SA 7.70% 2002(3) 1,500 1,466 .22
Banco Nacional de Mexico, SA 1995 Trust
Certificates, 0% 2002(2),(3) 4,278 3,639 .55
Cable & Wireless Communications PLC:
6.375% 2003 2,750 2,752 .42
6.625% 2005 3,000 3,017 .46
California Infrastructure PG&E-1, Series
1997-1, Class A-7, 6.42% 2008 2,300 2,327 .35
CarrAmerica Realty Corp. 6.875% 2008 (3) 1,000 986 .15
Chase Manhattan Bank 7.25% 2007 1,500 1,578 .24
China (People's Republic of)
9.00% 2096 500 546 .08
Colombia (Republic of):
8.70% 2016 500 486 .07
8.375% 2027 3,000 2,756 .42
Columbia HCA Healthcare Corp.:
6.50% 1999 1,000 987 .15
6.125% 2000 2,000 1,902 .29
7.00% 2007 900 825 .12
8.85% 2007 1,000 1,023 .15
Continental Airlines, Inc.:
Series 1996A, 6.94% 2015(2),(3) 1,922 1,974 .30
Series 1997-1A, 7.461% 2016(2),(3) 2,000 2,130 .32
DLJ Mortgage Acceptance Corp.:
Series 1997-CF1, Class A1A, 7.40% 2006(3) 2,141 2,234 .34
Series 1996-CF2, Class A1A, 7.29% 2021(3) 1,000 1,050 .16
Series 1996-CF1, Class A1A, 7.40% 2028(3) 2,191 2,261 .34
Fannie Mae(Formerly Federal National Mortgage Assn) 1,227 1,258 .19
7.50% 2025(2)
Freddie Mac (formerly Federal Home Loan
Mortgage Corp.):
5.78% 2003(2) 4,000 3,913 .59
6.19% 2004(2) 7,500 7,379 1.12
Freeport-McMoRan Copper & Gold Inc.:
7.50% 2006 1,000 795 .12
7.20% 2026 3,000 2,490 .38
Government National Mortgage Assn.:
9.00% 2017-2024(2) 5,228 5,629 .86
8.50% 2021(2) 462 494 .08
6.50% 2024(2),(4) 2,522 2,507 .38
7.00% 2026(2),(4) 1,848 1,866 .28
Gruma SA de CV 7.625% 2007 1,000 996 .15
Hellenic Republic 6.95% 2008 2,500 2,541 .39
Hyundai Semiconductor America, Inc.,
Tranche A, 8.25% 2004 (3) 2,000 1,680 .26
Inter America Development Bank
8.875% 2001 2,000 2,170 .33
J.P. Morgan & Co., Inc. 5.994% 2012(4) 1,000 926 .14
Korea Development Bank:
7.125% 2001 2,000 1,881 .29
7.375% 2004 3,250 2,930 .45
McDermott Inc. 9.375% 2002 2,000 2,141 .33
Merita Bank Ltd. 6.50% 2006 1,000 993 .15
Merrill Lynch Mortgage Investors, Inc.,
Seller Manufactured Housing Contract,
Series 1995-C2, Class A-1, 6.7252% 2021(4) 1,171 1,189 .18
Morgan Stanley Capital Inc.:
1997-HF1, Class A-2, 7.27% 2007(3) 2,000 2,101 .32
1997-WF1, Class A-1, 6.83% 2029(3) 2,912 2,977 .45
NASC Commercial Mortgage Trust, pass-through
certificates, Series 1972-D6, Interest Only,
1.265% 2031(2) 9,752 1,000 .15
Parker & Parsley Petroleum Co. 8.25% 2007 2,000 2,171 .33
Petrozuata Finance Inc. 7.63% 2009(3) 500 510 .08
Pioneer Natural Resources Co. 7.20% 2028 1,500 1,474 .22
Poland (Republic of)Past Due Interest Bonds:
Bearer shares 4.00% 2014(4) 5,900 5,295 .81
Registered shares 4.00% 2014(4) 3,500 3,141 .48
The Price REIT Inc. 7.50% 2006 1,000 1,040 .16
Quebec (Province of) 8.625% 2005 1,250 1,404 .21
Reliance Industries Ltd. 10.25% 2097(3) 2,500 2,419 .37
Samsung Electronics Co., Ltd., 7.45% 2002 2,000 1,820 .28
Skandinaviska Enskilda Banken 6.875% 2009 2,000 2,016 .31
Svenska Handelsbanken 8.125% 2007 1,075 1,187 .18
TCI Communications Inc. 6.875% 2006 3,000 3,033 .46
Telefonica de Argentina 11.875% 2004 500 575 .09
Thailand (Kingdom of) 7.75% 2007 750 719 .11
Time Warner Inc., pass-through certificates,
Series 1997-1:
6.10% 2001(2),(3) 5,000 4,913 .75
6.95% 2028 (3) 2,000 1,939 .30
UCFC Acceptance Corp., pass-through
certificates, Series 1996-B1, Class A3,
7.30% 2014(2) 3,000 3,031 .46
United States Treasury:
6.375% 1999 5,000 5,048 .77
6.875% 1999 1,075 1,092 .17
6.75% 2000 1,500 1,533 .23
8.50% 2000 1,000 1,069 .16
6.625% 2001 1,450 1,492 .23
7.50% 2001 2,000 2,118 .32
7.75% 2001 2,500 2,640 .40
6.375% 2002 20,000 20,541 3.13
6.625% 2002 550 568 .09
5.50% 2003 700 696 .11
5.75% 2003 660 662 .10
7.25% 2004 4,600 4,974 .76
11.625% 2004 9,500 12,540 1.91
6.50% 2005 19,500 20,366 3.10
3.375% 2007(1) 3,162 3,066 .47
6.125% 2007 175 180 .03
6.25% 2007 1,500 1,552 .24
10.375% 2009 840 1,047 .16
7.50% 2016 3,750 4,373 .67
7.125% 2023 7,875 8,987 1.37
6.375% 2027 4,750 5,017 .76
U.S. Surgical Corp. 7.25% 2008 500 494 .08
Woolworth Corp., Series A:
7.00% 2000 1,000 1,014 .15
6.98% 2001 3,000 3,054 .46
7.00% 2002 2,000 2,043 .31
8.50% 2022 1,000 1,108 .17
Worldcom Inc. 7.75% 2007 3,000 3,234 .49
YPF SA:
8.00% 2004 1,350 1,371 .21
7.75% 2007 3,000 3,087 .47
-------- --------
250,713 38.15
-------- --------
Total Bonds and Notes (cost:
$641,298,000) 627,930 95.54
-------- --------
Short-Term Securities
Corporate Short-Term Notes
Daimler-Benz North America:
5.57% due 4/2/98 4,025 4,024 .61
5.54% due 4/29/98 8,000 7,964 1.21
General Electric Capital Corp.,
6.125% due 4/1/98 6,500 6,499 .99
Total Short-Term Securities (cost: -------- --------
$18,486,000) 18,487 2.81
-------- --------
Total Investment Securities (cost:
$659,784,000) 646,417 98.35
Excess of cash and receivables over
payables 10,864 1.65
-------- --------
Net Assets $657,281 100.00%
======== ========
(1)Index-linked bond whose principal
amount moves with a government retail
price index.
(2)Pass-through securities backed by a pool
of mortgages or other loans on which
principal payments are periodically
made. Therefore, the effective maturity
is shorter than the stated maturity.
(3)Purchased in a private placement
transaction; resale may be limited to
qualified institutional buyers; resale to
the public may require registration.
(4)Coupon rate may change periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital World Bond Fund
Financial Statements
Statement of Assets and Liabilities
at March 31, 1998 (dollars in thousands) Unaudited
<S> <C> <C>
Assets:
Investment securities at market
(cost: $659,784) $646,417
Cash 1,168
Receivables for--
Sales of investments $ 9,475
Sales of fund's shares 472
Forward currency contracts - net 1,412
Accrued interest 12,949 24,308
--------- ---------
671,893
Liabilities:
Payables for--
Purchases of investments 11,816
Repurchases of fund's shares 2,174
Management services 383
Accrued expenses 239 14,612
--------- ---------
Net Assets at March 31, 1998--
Equivalent to $15.77 per share on
41,671,083 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 200,000,000 shares) $657,281
=========
Statement of Operations
for the six months ended March 31, 1998 Unaudited
(dollars in thousands)
Investment Income:
Income:
Interest $21,630
Expenses:
Management services fee $ 2,384
Distribution expenses 811
Transfer agent fee 275
Reports to shareholders 70
Registration statement and prospectus 0
Postage, stationery and supplies 68
Directors' fees 10
Auditing and legal fees 43
Custodian fee 75
Taxes other than federal income tax 21
Other expenses 60 3,817
--------- ---------
Net investment income 17,813
---------
Realized Loss and Unrealized Depreciation
on Investments:
Net realized loss (8,415)
Net unrealized appreciation (depreciation) on:
Investments (12,208)
Open forward currency contracts 4,816
---------
Net unrealized depreciation (7,392)
---------
Net realized loss and unrealized
depreciation on investments (15,807)
---------
Net Increase in Net Assets Resulting
from Operations $2,006
=========
Statement of Changes in Net Assets
(dollars in thousands)
Six Year
months ended ended
3/31/98* 9/30/97
--------- ---------
Operations:
Net investment income $17,813 $41,320
Net realized gain (loss) on investments (8,415) 8,579
Net unrealized depreciation on investment (7,392) (15,766)
--------- ---------
Net increase in net
assets resulting from operations 2,006 34,133
--------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (17,126) (55,642)
Distributions from net realized gain
on investments (12,122) -
--------- ---------
Total dividends and distributions (29,248) (55,642)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
3,576,168 and 11,728,432
shares, respectively 57,616 195,677
Proceeds from shares issued in
reinvestment of net investment
income dividends:
1,594,862 and 2,810,625 shares, respecti 25,229 46,526
Cost of shares repurchased:
9,686,348 and 16,458,455
shares, respectively (155,831) (274,024)
--------- ---------
Net decrease in net assets
resulting from capital share
transactions (72,986) (31,821)
--------- ---------
Total Decrease in Net Assets (100,228) (53,330)
Net Assets:
Beginning of period 757,509 810,839
--------- ---------
End of period (including undistributed
net investment income: $(9,297) and
$(9,984), respectively) $657,281 $757,509
========= =========
* 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 to maximize 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:
Fixed-income securities are valued at prices obtained from a pricing service,
when such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean quoted bid and asked prices or at prices for securities of comparable
maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of their representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates at the end of the
reporting period. Purchases and sales of securities and income and expenses
are translated into U.S. dollars at the prevailing market rates on the dates of
such transactions. The effects of changes in foreign currency exchange rates
on investment securities are included in with the net realized and unrealized
gain or loss on investment securities.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith by a
committee appointed by the Board of Directors.
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. Dividends and distributions paid to shareholders are
recorded on the ex-dividend date.
The fund may enter into forward currency contracts, which represent
agreements to exchange currencies of different countries at specified future
dates at specified rates. The fund enters into these contracts to reduce its
exposure to fluctuations in foreign exchange rates arising from investments
denominated in non-U.S. currencies. The fund's use of forward currency
contracts involves market risk in excess of the amount recognized in the
statement of assets and liabilities. The contracts are recorded in the
statement of assets and liabilities at their net unrealized value. The fund
records realized gains or losses at the time the forward contract is closed or
offset by a matching contract. The face or contract amount in U.S. dollars
reflects the total exposure the fund has in that particular contract. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from possible movements
in non-U.S. exchange rates and securities values underlying these instruments.
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 investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of March 31, 1998, net unrealized depreciation on investments, excluding
forward currency contracts, for book and federal income tax purposes aggregated
$13,367,000, of which $10,082,000 related to appreciated securities and
$23,449,000 related to depreciated securities. During the six months ended
March 31, 1998, the fund realized, on a tax basis, a net capital loss of
$7,987,000 on securities transactions. Net losses related to non-U.S. currency
transactions of $13,192,000 are reported as an adjustment to ordinary income
for federal income tax purposes. Dividends paid to shareholders included
$12,122,000 of non-U.S. currency gains treated as income dividends for tax
purposes. The cost of portfolio securities, excluding forward currency
contracts, for book and federal income tax purposes was $659,784,000 at March
31, 1998.
3. The fee of $2,384,000 for management services was incurred pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.70% 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. As of March 31, 1998, accrued and unpaid
distribution expenses were $118,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $275,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $138,000 (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, 1998,
aggregate amounts deferred and earnings thereon were $43,000.
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, 1998, accumulated undistributed net realized gain on
investments, on a book basis, was $26,959,000 and additional paid-in capital
was $669,985,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $361,323,000 and $442,942,000, respectively, during
the six months ended March 31, 1998.
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 $75,000 includes $18,000 that was paid by these credits
rather than in cash.
At March 31, 1998, 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
Currency ------------------ ------------- Unrealized
Contracts Non-U.S. U.S. Amount (Depreciation)
Appreciation
- -------------------------- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales:
Australian Dollars
expiring 5/19 to
5/26/98 A$18,539,000 $12,459,000 $12,288,000 $ 171,000
Canadian Dollars
expiring 6/19/98 C$3,540,000 2,500,000 2,500,000 -
Danish Kroner
expiring 4/23/98 DKr10,178,000 1,467,000 1,444,000 23,000
German Marks
expiring 4/14 to
9/16/98 DM108,923,000 59,935,000 59,049,000 886,000
British Pounds
expiring 4/7 to
6/23/98 Pounds6,232,000 10,171,000 10,406,000 (235,000)
Irish Pounds
expiring 6/4/98 IR Pounds 605,000 891,000 821,000 70,000
Japanese Yen
expiring 4/20 to
8/25/98 Y4,627,260,000 37,063,000 35,005,000 2,058,000
New Zealand Dollars
expiring 4/21 to
6/3/98 NZ$24,575,000 14,245,000 13,499,000 746,000
---------------------------------------------------
138,731,000 135,012,000 3,719,000
Purchases: ---------------------------------------------------
Japanese Yen
expiring 6/23/98 Y154,584,000 1,200,000 1,172,000 (28,000)
---------------------------------------------------
Forward currency contracts - net $137,531,000 $133,840,000 $3,691,000
=============== =============== ================
</TABLE>
<TABLE>
Per-Share Data and Ratios
Six months
ended September
March 31, Year Ended 30
1998 (1) 1997 1996 1995 1994 1993
--------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $16.40 $16.86 $16.81 $15.33 $16.48 $15.95
--------- ------ ------ ------ ------ ------
Income From Investment Operations:
Net investment income .40 .88 1.09 1.09 1.05 .91
Net realized and unrealized gain (loss)
on investments (.35) (.16) .16 1.57 (1.14) .65
--------- ------ ------ ------ ------ ------
Total income from investment operations .05 .72 1.25 2.66 (.09) 1.56
--------- ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (.40) (.95) (1.08) (1.18) (.90) (.81)
Dividends from net realized non-U.S. (.28) (.23) (.12) - (.04) (.03)
currency gains (2)
Distributions from net realized gains - - - - (.12) (.19)
--------- ------ ------ ------ ------ ------
Total distributions (.68) (1.18) (1.20) (1.18) (1.06) (1.03)
--------- ------ ------ ------ ------ ------
Net Asset Value, End of Period $15.77 $16.40 $16.86 $16.81 $15.33 $16.48
========= ====== ====== ====== ====== ======
Total Return (3) .30% (4) 4.38% 7.67% 18.10% (.62)% 10.40%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $657 $758 $811 $653 $576 $450
Ratio of expenses to average net assets .554% (4) 1.07% 1.09% 1.12% 1.11% 1.19%
Ratio of net income to average net assets 2.50% (4) 5.21% 6.07% 6.83% 6.88% 6.25%
Portfolio turnover rate 49.96% (4) 79.00% 91.27% 104.96% 77.04% 27.95%
(1) Unaudited
(2) Realized non-U.S. currency gains are
treated as ordinary income for federal
income tax purposes.
(3) Excludes maximum sales charge of 4.75%.
(4) Based on operations for the period
shown and, accordingly, not representative
of a full year.
</TABLE>
CAPITAL WORLD BOND FUND
DIRECTORS AND OFFICERS
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
DON R. CONLAN
South Pasadena, California
President (retired),
The Capital Group Companies, Inc.
DIANE C. CREEL
Long Beach, California
President and Chief Executive Officer,
The Earth Technology Corporation
(international consulting 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 Consulting
(management consultants)
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
Executive Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
San Marino, 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 retired from the Board
of Directors effective March 17, 1998.
He had been a director of the fund since December 11, 1991. The Directors wish
to thank him for his many contributions to the fund.
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 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
ANTHONY W. HYNES, JR.
Brea, California
Treasurer 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
TODD L. MILLER
Brea, California
Assistant Treasurer of the fund
Assistant Vice President - Fund Business Management Group, Capital Research
and Management Company
[The American Funds Group(r)]
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 92821-5804
TRANSFER AGENT FOR
SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
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, 1998, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Printed on recycled paper
Litho in USA WG/INS/3778
Lit. No. WBF-013-0598
