CAPITAL WORLD GROWTH AND INCOME FUND, INC.
Part B
Statement of Additional Information
FEBRUARY 1, 1995
(as amended June 22, 1995)
This document is not a prospectus but should be read in conjunction with the
current Prospectus of Capital World Growth and Income Fund, Inc. (the fund)
dated February 1, 1995. The Prospectus may be obtained from your investment
dealer or financial planner or by writing to the fund at the following address:
Capital World Growth and Income Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
The fund has two forms of prospectuses. Each reference to the prospectus in
the Statement of Additional Information includes all the fund's prospectuses.
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page No.
<S> <C>
Description of Certain Securities and Investment Techniques 1
Investment Restrictions 5
Fund Directors and Officers 8
Director Compensation 10
Management 11
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 15
Shareholder Account Services and Privileges 17
Execution of Portfolio Transactions 18
General Information 18
Investment Results 19
Description of Ratings for Debt Securities 21
Financial Statements
Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
INVESTMENT POLICIES -- The fund may invest up to 10% of its assets in debt
securities which are rated below the top three quality categories by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or
securities that are determined equivalent by the fund's investment adviser,
Capital Research and Management Company (the "Investment Adviser"). (See
"Description of Ratings for Debt Securities" below.)
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
bonds are very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly-leveraged issuers may experience financial stress that
would adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaults on its obligations to pay interest
or principal or enters into bankruptcy proceedings, the fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest rate market, the fund may have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
a high-yield, high-risk bond's is likely to decrease in a rising interest rate
market, as is generally true with all bonds.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
Subsequent to its purchase by the fund, certain bonds or notes may cease to be
rated or their ratings may be reduced below the minimum rating required for
purchase by the fund. Neither event requires the elimination of such
obligations from the fund's portfolio, but the Investment Adviser will consider
such an event in its determination of whether the fund should continue to hold
such obligations in its portfolio. If, however, as a result of a downgrade or
otherwise, the fund holds more than 5% of its net assets in high-yield,
high-risk bonds, the fund will dispose of the excess as expeditiously as
possible.
REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the fund's
custodian collateral equal to at least 100% of the repurchase price, including
accrued interest, as monitored daily by the Investment Adviser. (See
"Management" below.) The fund will only enter into repurchase agreements
involving securities in which it could otherwise invest and with selected banks
and securities dealers whose financial condition is monitored by the Investment
Adviser. If the seller under the repurchase agreement defaults, the fund may
incur a loss if the value of the collateral securing the repurchase agreement
has declined and may incur disposition costs in connection with liquidating the
collateral. If bankruptcy proceedings are commenced with respect to the
seller, realization upon the collateral by the fund may be delayed or limited.
For purposes of Investment Restriction number five, below, repurchase
agreements maturing in excess of seven days are considered not readily
marketable. The fund does not currently intend (at least for the next 12
months) to invest more than 5% of its net assets in repurchase agreements.
CURRENCY TRANSACTIONS -- For the purpose of hedging currency exchange rate
risks, the fund may enter into forward currency exchange contracts.
Additionally, although the fund has no current intention of doing so (at least
for the next 12 months), it may also enter into currency futures contracts or
purchase put or call options on currencies in the future to hedge currency
exchange risks.
A forward currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large commercial
banks). A currency futures contract is a standardized contract for the future
delivery of a specified amount of a currency at a future date at a price set at
the time of the contract. Currency futures contracts traded in the United
States are traded on regulated exchanges. Parties to futures contracts must
make initial "margin" deposits to secure performance of the contract, which
generally range from 2% to 5% of the contract price. The parties also pay or
receive daily "variation" margin payments as the value of the futures contract
fluctuates thereafter.
At the maturity of a forward or futures contract, the fund may either accept
or make delivery of the currency specified in the contract or, prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to the original
contract. Closing transactions with respect to futures contracts are effected
on an exchange. The fund will only enter into such a forward or futures
contract if it is expected that the fund can readily close out such contract.
There can, however, be no assurance that it will be able in any particular case
to do so, in which case the fund may suffer a loss.
A put option gives the fund as purchaser the right (but not the obligation) to
sell a specified amount of currency at the exercise price until the expiration
of the option. A call option gives the fund as purchaser the right (but not
the obligation) to purchase a specified amount of currency at the exercise
price until its expiration. The fund may purchase a currency put option, for
example, to protect itself during the contract period against a decline in the
U.S. dollar value of a currency in which the fund holds or anticipates holding
securities. If the currency's value should decline against the U.S. dollar,
the loss in currency value should be offset, in whole or in part, by an
increase in the value of the put. If the value of the currency instead should
rise against the U.S. dollar, any gain to the fund would be reduced by the
premium it had paid for the put option. A currency call option might be
purchased, for example, in anticipation of, or to protect against, a rise in
the value against the U.S. dollar of a currency in which the fund anticipates
purchasing securities.
Currency options may be either listed on an exchange or traded
over-the-counter ("OTC options"). Listed options are third-party contracts
(I.E., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation), and have standardized strike prices
and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. The fund will not purchase an OTC option
unless it believes that daily valuations for such options are readily
obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of a quote provided by the dealer. In the case of OTC
options, there can be no assurance that a liquid secondary market will exist
for any particular option at any specific time.
Only in extraordinary circumstances and for temporary defensive purposes would
it attempt to hedge all the risks involved in holding assets denominated in a
particular currency. Among other things, it is the Investment Adviser's view
that the cost of engaging in hedging transactions frequently equals or exceeds
the expected benefits from the potential reduction in exchange risk. Moreover,
even if it were to attempt to do so, the fund could not through hedging
transactions eliminate all the risks of holding assets denominated in a
currency, as there may be an imperfect correlation between price movements in
the futures or forward contracts and those of the underlying currency in which
the fund's assets are denominated. Also, where the fund enters into a hedging
transaction in anticipation of a currency movement but the currency moves in
the opposite direction, the transaction could lead to a poorer result than if
the fund had not engaged in any such transaction.
The fund will not enter into forward or futures contracts or maintain an
exposure to such contracts where: (i) the aggregate amount of initial margin
deposits on the fund's futures positions would exceed 5% of the value of the
fund's total assets; or (ii) where the consummation of such contracts would
obligate the fund to deliver an amount of currency in excess of the value of
the fund's portfolio securities or other assets denominated in that currency.
Where the fund is obligated to make deliveries under futures or forward
contracts, to avoid leverage, it will "cover" its obligations by segregating
liquid assets such as cash, U.S. Government securities or other appropriate
high-grade debt obligations in an amount sufficient to meet its obligations.
Certain provisions of the Internal Revenue Code may limit the extent to which
the fund may enter into forward or futures contracts. Such transactions may
also affect, for U.S. federal income tax purposes, the character and timing of
income, gain or loss recognized by the fund.
U.S. GOVERNMENT SECURITIES -- From time to time, the fund may invest in U.S.
Government securities. Securities guaranteed by the U.S. Government include:
(1) direct obligations of the U.S. Treasury (such as Treasury bills, notes and
bonds) and (2) federal agency obligations guaranteed as to principal and
interest by the U.S. Treasury. In these securities, the payment of principal
and interest is unconditionally guaranteed by the U.S. Government, and thus
they are of the highest possible credit quality. Such securities are subject
to variations in market value due to fluctuations in interest rates, but, if
held to maturity, will be paid in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the Treasury.
However, such securities generally involve federal sponsorship in one way or
another: some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer (in other words, no assurance can be given that the U.S. Government will
provide financial support since it is not lawfully obligated to do so); others
are supported only by the credit of the issuing government agency or
instrumentality. These agencies and instrumentalities include, but are not
limited to, Federal Land Banks, Farmers Home Administration, Central Bank
Cooperatives, and Federal Intermediate Credit Banks.
CASH EQUIVALENTS -- These securities include: (1) commercial paper (short-term
notes up to nine months in maturity issued by corporations or governmental
bodies); (2) commercial bank obligations such as certificates of deposit
(interest-bearing time deposits), banker's acceptances (time drafts on a
commercial bank where the bank accepts an irrevocable obligation to pay at
maturity), and documented discount notes (corporate promissory discount notes
accompanied by a commercial bank guarantee to pay at maturity), (3) savings
association obligations (certificates of deposit issued by mutual savings banks
or savings and loan associations); (4) securities of the U.S. Government, its
agencies or instrumentalities that mature, or may be redeemed, in one year or
less; and (5) corporate bonds and notes (corporate obligations that mature, or
that may be redeemed, in one year or less).
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without a majority vote of
its outstanding shares. Such majority is defined by law as the vote of the
lesser of (i) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (ii) more than 50% of the outstanding
voting securities. All percentage limitations expressed in the following
investment restrictions are measured immediately after and giving effect to the
relevant transaction. The fund may not:
1. With respect to 75% of the fund's total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (a) more than 5%
of the fund's total assets would be invested in the securities of that issuer,
or (b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
2. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the fund from
investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
3. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the fund from
engaging in currency-related options and forward or futures contracts);
4. Invest 25% or more of the fund's total assets in the securities of issuers
in the same industry. Obligations of the U.S. Government, its agencies and
instrumentalities are not subject to this 25% limitation on industry
concentration;
5. Invest more than 15% of the value of its net assets in securities which
are not readily marketable (including repurchase agreements maturing in more
than seven days or securities traded outside the U.S. for which there is no
recognized exchange or active and substantial over-the-counter market) or
engage in the business of underwriting securities of other issuers, except to
the extent that the purchase or disposal of an investment position may
technically constitute the fund as an underwriter as that term is defined under
the Securities Act of 1933;
6. Invest in companies for the purpose of exercising control or management;
7. Make loans to others except for (a) purchasing debt securities; (b)
entering into repurchase agreements; and (c) loaning portfolio securities;
8. Issue senior securities, except as permitted under the Investment Company
Act of 1940;
9. Borrow money, except from banks for temporary purposes in an amount not to
exceed one-third of the value of the fund's total assets. Moreover, in the
event that the asset coverage for such borrowing falls below 300%, the fund
will reduce, within three days, the amount of its borrowing in order to provide
for 300% asset coverage;
10. Pledge or hypothecate assets in excess of one-third of the fund's total
assets; or
11. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (except for currency options);
The fund does not currently intend (at least for the next 12 months) to loan
portfolio securities or invest in securities or other instruments backed by
real estate.
NON-FUNDAMENTAL POLICIES -- The following policies may be changed by action of
the Board of Directors without shareholder approval.
1. The fund does not currently intend (at least for the next 12 months) to
sell securities short, except to the extent that the fund contemporaneously
owns, or has the right to acquire at no additional cost, securities identical
to those sold short.
2. The fund does not currently intend (at least for the next 12 months) to
purchase securities on margin, except that margin payments in connection with
currency-related transactions shall not constitute purchasing securities on
margin.
3. The fund does not currently intend (at least for the next 12 months) to
purchase the securities of any issuer (other than securities issued or
guaranteed by the governments of any country or political subdivisions thereof)
if, as a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a record
of less than three years of continuous operation.
4. The fund does not currently intend (at least for the next 12 months) to
invest in oil, gas, or other mineral exploration or development programs or
leases.
5. The fund does not currently intend (at least for the next 12 months) to
purchase the securities of any issuer if those officers and Directors of the
fund, its Investment Adviser or principal underwriter who individually own more
than 1/2 of 1% of the securities of such issuer together own more than 5% of
such issuer's securities.
6. The fund does not currently intend (at least for the next 12 months) to
invest more than 5% of its net assets, valued at the lower of cost or market at
the time of purchase, in warrants, including not more than 2% of such net
assets in warrants that are not listed on a major stock exchange. However,
warrants acquired in units or attached to securities may be deemed to be
without value for the purpose of this restriction.
7. Although the fund has no current intention of investing in securities of
other investment companies (at least for the next 12 months), it has the
ability to invest up to 5% of its total assets in shares of closed-end
investment companies. Additionally, the fund would not acquire more than 3% of
the outstanding voting securities of any one closed-end investment company.
(To the extent that the fund invests in another investment company, it would
pay an investment advisory fee in addition to the fee paid to the Investment
Adviser.) Notwithstanding this restriction, the fund may invest in securities
of other managed investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Directors and to the extent such investments are allowed by an exemptive order
granted by the U.S. Securities and Exchange Commission.
8. The fund does not currently intend (at least for the next 12 months) to
invest more than 5% of its net assets in restricted securities (excluding Rule
144A securities).
9. The fund does not currently intend (at least for the next 12 months) to
purchase securities in the event its borrowings exceed 5%.
FUND DIRECTORS AND OFFICERS
(with their principal occupations during the past five years)#
DIRECTORS
++ H. FREDERICK CHRISTIE, P.O. Box 144, Palos Verdes Estates, CA 90274.
Private Investor; former President and Chief Executive Officer, The Mission
Group (non-utility holding company, subsidiary of Southern California Edison
Company); former President, Southern California Edison Company.
+* PAUL G. HAAGA, JR., President of the fund.
Senior Vice President and Director, Capital Research and Management Company.
MARY MYERS KAUPPILA, One Winthrop Square, Boston, MA 02110-1097.
President and Founder, Energy Investment, Inc.
GAIL L. NEALE, Salzburg Seminar, P.O. Box 886, The Marbleworks, Middlebury,
VT, 05753.
Executive Vice President, Salzburg Seminar; former Director of Development and
the Capital Campaign, Hampshire College; former Special Advisor, The
Commonwealth Fund and Mount Holyoke College.
ROBERT J. O'NEILL, St. Mary's Close, 27 Church Green, Whitney, OXON, U.K.
Chichele Professor of the History of War and Fellow of All Souls College,
University of Oxford.
DONALD E. PETERSEN, 255 East Brown, Birmingham, MI 48009.
Retired; former Chairman of the Board and Chief Executive Officer, Ford Motor
Company.
STEFANIE POWERS, 1901 Avenue of the Stars, Suite 1040, Los Angeles, CA 90067.
Actor; founder and President, The William Holden Wildlife Foundation.
FRANK STANTON, 25 West 52nd Street, New York, NY 10019.
President Emeritus, CBS Inc.; Chairman Emeritus, The American Red Cross.
+* THIERRY VANDEVENTER, Chairman of the Board of the fund.
Chairman of the Board and Chief Executive Officer, Capital Research Company.
CHARLES WOLF, JR., 1700 Main Street, Santa Monica, CA 90406.
Dean, The RAND Graduate School; Director, International Economic Studies, The
RAND Corporation.
___________________________________
++ May be deemed an "interested person" of the fund within the meaning of the
1940 Act due to membership on the board of directors of the parent company of a
registered broker-dealer.
+ Considered an "interested person" of the fund within the meaning of the 1940
Act on the basis of their affiliation with the Investment Adviser.
OFFICERS
THIERRY VANDEVENTER, Chairman of the Board (see above).
PAUL G. HAAGA, JR., President (see above).
* LARRY P. CLEMMENSEN, Senior Vice President and Treasurer.
Senior Vice President and Director, Capital Research and Management Company.
Executive Vice President and Principal Financial Officer, The Capital Group
Companies, Inc.
** STEPHEN E. BEPLER, Senior Vice President.
Senior Vice President and Director, Capital Research Company.
**** MARK E. DENNING, Vice President.
Senior Vice President, Capital Research Company.
** JANET A. FRANCO, Vice President.
Senior Vice President, Capital Research Company.
* VINCENT P. CORTI, Secretary.
Vice President - Fund Business Management Group, Capital Research and
Management Company.
*** MARY C. CREMIN, Assistant Treasurer.
Senior Vice President - Fund Business Management Group, Capital Research and
Management Company.
__________________________________
# Positions within the organizations listed may have changed during this
period.
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 630 Fifth Avenue, New York, NY 10111.
*** Address is 135 South State College Boulevard, Brea, CA 92621.
**** Address is 25 Bedford Street, London, England.
DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
Name of Director Aggregate Compensation Total Compensation Total Number of
(Including Voluntarily from All Funds Fund Boards on
Deferred Compensation/1/) Managed by Capital Research which Director
from Fund during and Management Company Serves
Fiscal Year
ended 11/30/94
<S> <C> <C> <C>
H. Frederick Christie $12,950 135,583 18
Paul G. Haaga, Jr. none/2/ none/2/ 14
Mary Myers Kauppila 12,364/3/ 67,200 4
Gail L. Neale 12,290/3/ 51,000 4
Robert J. O'Neill 12,150 35,000 3
Donald E. Petersen 10,919/3/ 30,800 3
Stefanie Powers 8,950 20,100 2
Frank Stanton 13,350 28,700 2
Thierry Vandeventer none/2/ none/2/ 2
Charles Wolf, Jr. 12,950 51,900 4
</TABLE>
________________
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the fund in 1993. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Paul G. Haaga, Jr. and Thierry Vandeventer are affiliated with the
Investment Adviser and, accordingly, receive no remuneration from the fund.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors is as
follows: Mary Myers Kauppila ($9,114); Gail L. Neale ($4,090); Donald E.
Petersen ($7,669). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
Directors.
All of the Directors and Officers are also officers and/or directors and/or
trustees of one or more of the other funds for which Capital Research and
Management Company serves as Investment Adviser. No compensation is paid by
the fund to any Officer or Director who is a director, officer or employee of
the Investment Adviser or affiliated companies. The fund pays fees of $8,000
per annum, plus $700 for each Board of Directors meeting attended, plus $400
for each meeting attended as a member of a committee of the Board of Directors.
No pension or retirement benefits are accrued as part of fund expenses. The
Directors may elect, on a voluntary basis, to defer all or a portion of these
fees through a deferred compensation plan in effect for the fund. The fund
also reimburses certain expenses of the directors who are not affiliated with
the Investment Adviser. As of December 31, 1994 the officers and Directors of
the fund and their families as a group owned beneficially or of record less
than 1% of the outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. The Investment
Adviser's professionals travel several million miles a year, making more than
5,000 research visits in more than 50 countries around the world. The
Investment Adviser believes that it is able to attract and retain quality
personnel.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information on more
than 2,400 companies around the world.
The Investment Adviser is responsible for approximately $100 billion of
stocks, bonds and money market instruments and serves over five million
investors of all types. These investors include privately owned businesses and
large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the Investment Adviser, dated
February 1, 1993, will continue in effect until October 31, 1995, unless sooner
terminated, and may be renewed from year to year thereafter, provided that any
such renewal has been specifically approved at least annually by (i) the Board
of Directors, or by the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the fund, and (ii) the vote of a majority of
Directors who are not parties to the Agreement or interested persons (as
defined in the 1940 Act) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. The Agreement provides that the
Investment Adviser has no liability to the fund for its acts or omissions in
the performance of its obligations to the fund not involving willful
misconduct, bad faith, gross negligence or reckless disregard of its
obligations under the Agreement. The Agreement also provides that either party
has the right to terminate, without penalty, upon 60 days' written notice to
the other party and that the Agreement automatically terminates in the event of
its assignment (as defined in the 1940 Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform the executive and related administrative functions
of the fund, provides suitable office space, necessary small office equipment
and telephone facilities and utilities, and general purpose forms, supplies,
stationery and postage used at the office of the fund relating to the services
furnished by the Investment Adviser.
The Investment Adviser agrees that in the event the expenses of the fund (with
the exclusion of interest, taxes, brokerage costs, extraordinary expenses such
as litigation and acquisitions or other expenses excludable under applicable
state securities laws or regulations) for any fiscal year ending on a date on
which the Agreement is in effect, exceed the expense limitations, if any,
applicable to the fund pursuant to state securities laws or any regulations
thereunder, it will reduce its fee by the extent of such excess and, if
required pursuant to any such laws or regulations, will reimburse the fund in
the amount of such excess.
During the fiscal year ending November 30, 1994 and for the period from March
26, 1993 (commencement of operations) to November 30, 1993, the Investment
Adviser's total fee amounted to $11,438,000 and $3,377,000 respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The fund has
adopted a Plan of Distribution (the Plan), pursuant to rule 12b-1 under the
1940 Act (see "Principal Underwriter" in the Prospectus). The Principal
Underwriter receives amounts payable pursuant to the Plan (see below) and
commissions consisting of that portion of the sales charge remaining after the
discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal year ended
November 30, 1994 amounted to $6,306,000 after allowance of $29,182,000 to
dealers. During the fiscal period from March 26, 1993 (commencement of
operations) to November 30, 1993 the Principal Underwriter received $4,277,000
after allowance of $45,070,000 to dealers.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors and separately by a
majority of the Directors who are not interested persons of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the fund. The
officers and Directors who are interested persons of the fund may be considered
to have a direct or indirect financial interest in the operation of the Plan
due to present or past affiliations with the Investment Adviser and related
companies. Potential benefits of the Plan to the fund are improved shareholder
services, savings to the fund in transfer agency costs, savings to the fund in
advisory fees and other expenses, benefits to the investment process from
growth or stability of assets and maintenance of a financially healthy
management organization. The selection and nomination of Directors who are not
interested persons of the fund is committed to the discretion of the Directors
who are not interested persons during the existence of the Plan. The Plan is
reviewed quarterly and must be renewed annually by the Board of Directors.
Under the Plan the fund may expend up to 0.30% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Directors has approved the
category of expenses for which payment is being made. These include service
fees for qualified dealers and dealer commissions and wholesaler compensation
on sales of shares exceeding $1 million (including purchases by any defined
contribution plan qualified under section 401 (a) of the Internal Revenue Code
including a "401(k)" plan with 200 or more eligible employees). Only expenses
incurred during the preceding 12 months and accrued while the Plan is in effect
may be paid by the fund. During the fiscal year ended November 30, 1994, the
fund paid $3,798,000 under the Plan.
The Glass-Stegall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting,
selling or distributing securities, but permit banks to make shares of mutual
funds available to their customers and to perform administrative and
shareholder servicing functions. However, judicial or administrative decisions
or interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or
their subsidiaries of affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. If a bank were prohibited
from so acting, shareholder clients of such bank would be permitted to remain
shareholders of the fund and alternate means for continuing the servicing of
such shareholders would be sought. In such event, changes in the operation of
the fund might occur and shareholders serviced by such bank might no longer be
able to avail themselves of any automatic investment or other services then
being provided by such bank. It is not expected that shareholders would suffer
with adverse financial consequences as a result of any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, (the Code). Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its investment
company taxable income it will be taxed only on that portion, if any, of the
investment company taxable income which it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and other securities which must
be limited, in respect of any one issuer, to an amount not greater than 5% of
the fund's assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more issuers
which the fund controls and which are engaged in the same or similar trades or
businesses or related trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
for the year. The fund intends to the extent practicable, to meet these
distribution requirements to minimize or avoid the excise tax liability.
The fund also intends to distribute to shareholders all of the excess of net
long-term capital gain over net short-term capital loss on sales of securities.
If the net asset value of shares of the fund should, by reason of a
distribution of realized capital gains, be reduced below a shareholder's cost,
such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes.
Except for transactions the fund has identified as hedging transactions, the
fund is required for federal income tax purposes to recognize as income for
each taxable year its net unrealized gains and losses on forward currency
contracts as of the end of the year as well as those actually realized during
the year. Except for transactions in forward currency contracts which are
classified as part of a "mixed straddle," the recognition of losses may be
deferred to a later taxable year. As defined in the Internal Revenue Code a
"mixed straddle" is a straddle (1) all of the positions of which are held as
capital assets; (2) at least one (but not all) of the positions of which is a
section 1256 contract; (3) for which an election under section 1256(d) has not
been made; and (4) which is not part of a larger straddle.
Sales of forward currency contracts which are intended to hedge against a
change in the value of securities or currencies held by the fund may affect the
holding period of such securities or currencies and, consequently, the nature
of the gain or loss on such securities or currencies upon disposition.
It is anticipated that any net gain realized from the closing out of forward
currency contracts will be considered gain from the sale of securities or
currencies and therefore be qualifying income for purposes of the 90% of gross
income from qualified sources requirement, as discussed above. In order to
avoid realizing excessive gains on securities or currencies held less than
three months, the fund may be required to defer the closing out of forward
currency contracts beyond the time when it would otherwise be advantageous to
do so. It is anticipated that unrealized gains on forward currency contracts,
which have been open for less than three months as of the end of the fund's
fiscal year and which are recognized for tax purposes, will not be considered
gains on securities or currencies held less than three months for purposes of
the 30% test, as discussed above.
The amount of any realized gain or loss on closing out forward currency
contracts such as a forward commitment for the purchase or sale of foreign
currency will generally result in a realized capital gain or loss for tax
purposes. Under Code Section 1256, forward currency contracts held by the fund
at the end of each fiscal year will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Code Section 988 may also apply to forward currency contracts. Under Section
988, each foreign currency gain or loss is generally computed separately and
treated as ordinary income or loss. In the case of overlap between Sections
1256 and 988, special provisions determine the character and timing of any
income, gain or loss. The fund will attempt to monitor Section 988
transactions to avoid an adverse tax impact.
The fund will distribute to shareholders annually any net long-term capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the fund's fiscal year) on forward currency
contract transactions. Such distributions will be combined with distributions
of capital gains realized on the fund's other investments.
Under the Code, if within 90 days after fund shares are purchased, such shares
are exchanged for the shares of any other fund in The American Funds Group and
the otherwise applicable sales charge is waived, then the amount of the sales
charge previously incurred in purchasing fund shares shall not be taken into
account for purposes of determining the amount of any gain or loss on the
exchange, but will be treated as having been incurred in the purchase of the
fund shares acquired in the exchange.
Under the Code, the fund's taxable income for each year will be computed
without regard to any net foreign currency loss attributable to transactions
after October 31, and any such net foreign currency loss will be treated as
arising on the first day of the following taxable year.
The fund's dividends will be based on its income for federal tax purposes.
Because some gains and losses from currency fluctuation are deemed to be income
or loss for federal tax purposes, the fund's dividends may be more or less than
interest and dividends earned by the fund.
Dividends generally are taxable to shareholders at the time they are paid.
However, dividends declared in October, November and December and made payable
to shareholders of record in such a month are treated as paid and are therefore
taxable in the current calendar year even if the fund pays the dividend after
December 31 but during January of the following year.
As of the date of this statement of additional information, the maximum
federal individual stated tax rate applicable to ordinary income is 39.6%
(effective tax rates may be higher for some individuals due to phase out of
exemptions and elimination of deductions); the maximum individual tax rate
applicable to net capital gain is 28%; and the maximum corporate tax applicable
to ordinary income and net capital gain is 35% (except that corporations which
have taxable income in excess of $100,000 for a taxable year will be required
to pay an additional amount of tax of up to $11,750 and corporations which have
taxable income in excess of $15,000,000 for a taxable year will be required to
pay an additional amount of tax of up to $100,000). Naturally, the amount of
tax payable by an individual will be affected by a combination of tax law rules
covering, E.G., deductions, credits, deferrals, exemptions, sources of income
and other matters. Under the Code, an individual is entitled to establish an
IRA each year (prior to the tax return filing deadline for that year) whereby
earnings on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary of federal taxation and should not be
viewed as a comprehensive discussion of all provisions of the Code relevant to
investors. Dividends and capital gain distributions may also be subject to
state or local taxes. Shareholders should consult their own tax advisers for
additional details as to their particular tax status.
PURCHASE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. The dealer is responsible for promptly transmitting purchase
orders to the Principal Underwriter. Orders received by the investment dealer,
the Transfer Agent, or the fund after the time of the determination of the net
asset value will be entered at the next calculated offering price. Prices
which appear in the newspaper are not always indicative of prices at which you
will be purchasing and redeeming shares of the fund, since such prices
generally reflect the previous day's closing price whereas purchases and
redemptions are made at the next calculated price.
The price paid for shares, the offering price, is based on the net asset value
per share which is calculated once daily at the close of trading (currently
4:00 p.m., New York time) each day the New York Stock Exchange is open. The
New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas Day. The net asset
value per share is determined as follows:
1. Portfolio securities, including ADRs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated by or under the authority of the Board of
Directors as the primary market. Securities traded in the over-the-counter
market are valued at the last reported sale price in the over-the-counter
market prior to the time of valuation or, lacking any sales, at the last
reported bid price. Securities and assets for which market quotations are not
readily available (including restricted securities which are subject to
limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Board of Directors. U.S. Treasury bills
and other short-term obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, with original or remaining maturities in
excess of 60 days are valued at the mean or representative quoted bid and asked
prices for such securities or, if such prices are not available, are valued at
the mean of representative quoted bid and asked prices for securities of
comparable maturity, quality and type. Short-term securities with 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. Trading in securities on European and Far
Eastern securities exchanges and over-the-counter markets is normally completed
well before the close of the business day in New York. In addition, European
or Far Eastern securities trading may not take place on all business days in
New York. Furthermore, trading takes place in various non-U.S. markets on days
which are not business days in New York and on which the fund's net asset value
is not calculated. The calculation of net asset value may not take place
contemporaneously with the determination of the prices of portfolio securities
used in such calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and the close of the
New York Stock Exchange will not be reflected in the fund's calculation of net
asset value unless the Board of Directors deems that the particular event would
materially affect net asset value, in which case an adjustment will be made.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares, into U.S. dollars at the prevailing market rates. The fair value of
all other assets is added to the value of securities to arrive at the total
assets;
2. There are deducted from the total assets, thus determined, the
liabilities, including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares) and the result, rounded to the nearer
cent, is the net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or the fund.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period pursuant to the terms of a written statement of intention (the
"Statement") in the form provided by the Principal Underwriter and signed by
the purchaser. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder signs a Statement in order to qualify for
a reduced sales chares, shares equal to 5% of the dollar amount specified in
the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and any capital gains distributions on shares held in escrow will
be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Principal Underwriter or the securities dealer, the appropriate number of
shares will be redeemed to pay such difference. If the proceeds from this
redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The investment made the first
month of the 13-month period will be multiplied by 13 and then multiplied by
1.5. On the first investment and all other investments made pursuant to the
Statement, a sales charge will be assessed according to the sales charge
breakpoint thus determined. There will be no retroactive adjustments in sales
charges on investments previously made during the 13-month period.
DEALER COMMISSIONS - The following commissions will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any defined contribution plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more eligible employees, and
for purchases made at net asset value by certain retirement plans of
organizations with collective retirement plan assets of $100 million or more:
1.00% on amounts of $1 million to $2 million, 0.80% on amounts over $2 million
to $3 million, 0.50% on amounts over $3 million to $50 million, 0.25% on
amounts over $50 million to $100 million, and 0.15% on amounts over $100
million. The level of dealer commission will be determined based on sales made
over a 12-month period commencing from the date of the first sale at net asset
value. See "The American Funds Shareholder Guide" in the fund's prospectus for
more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans for which
Capital Guardian Trust Company serves as custodian or trustee). Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
the shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or the closing of the account, the plan may be terminated
and the related investment reversed. The shareholder may change the amount of
the investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement); (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund; and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker is in a position to obtain the
best price and execution, the order is placed with that broker. This may or may
not be a broker who has provided investment research, statistical, or other
related services to the Investment Adviser or has sold shares of the fund or
other funds served by the Investment Adviser. The fund does not consider that
it has an obligation to obtain the lowest available commission rate to the
exclusion of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other of the funds served by the Investment Adviser, or for trusts
or other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
As of the end of the fund's most recent fiscal year, amounts held in certain
equity and debt securities of some of its regular brokers and dealers were as
follows: J.P. Morgan & Co, Inc ($4,700,000); American Express Co. ($4,444,000);
Ford Motor Credit Co. ($19,926,000); and Associates Corp. of North America
($2,940,000).
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal year ended November 30, 1994 and
for the period March 26, 1993 (commencement of operations) to November 30, 1993
amounted to $6,015,000 and $2,581,000 respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New
York, NY 10081, as Custodian. Non-U.S. securities may be held by the
Custodian pursuant to subcustodial arrangements in non-U.S. banks or foreign
branches of U.S. banks.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, provides audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission. The financial statements included in this Statement of Additional
Information have been so included in reliance on the report of Price Waterhouse
LLP given on the authority of said firm as experts in accounting and auditing.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to purchase for the fund; ban on
short-term trading profits for investment personnel limitations on service as a
director of publicly traded companies; and disclosure of personal securities
transactions.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on November 30.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio and financial statements audited annually by the fund's
independent auditors, Price Waterhouse LLP, whose selection is determined
annually by the Directors.
The financial statements including the investment portfolio and the report of
Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- NOVEMBER 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(net assets divided by shares outstanding) $ 17.81
Maximum offering price per share
(100/94.25 of net asset value per share, which takes
into account the fund's current maximum sales load) $ 18.90
</TABLE>
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors, as
though the fund were a common-law trust. Accordingly, the directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
INVESTMENT RESULTS
The fund's yield is 3.16% based on a 30-day (or one month) period ended
November 30, 1994, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[(a-b/cd+1)/6/-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund's one year total return and average annualized lifetime return ending
on November 30, 1994 was 1.31% and 9.18% respectively. Total return (T) is
computed by equating the value at the end of the period (ending redeemable
value or ERV) of a hypothetical initial investment of $1,000 (P) over a period
of years (n) according to the following formula as required by the Securities
and Exchange Commission: P(1+T)/n/ = ERV.
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased. Subsequent dividends
and capital gain distributions are then reinvested at net asset value on the
reinvestment date determined by the Board of Directors. The sum of the initial
shares purchased and shares acquired through reinvestment is multiplied by the
net asset value per share as of the end of the period in order to determine
ending value. The difference between the ending value and the initial
investment divided by the initial investment converted to a percentage equals
total return. The resulting percentage indicates the positive or negative
investment results that an investor would have experienced from reinvested
dividends and capital gain distributions and changes in share price during the
period. Total return may be calculated for one year, five years, ten years and
for other periods of years. The average annual total return over periods
greater than one year may also be computed by utilizing ending values as
determined above.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
5.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated.
The fund may include information on its investment results and/or comparisons
of its investment results to various unmanaged indices (such as The Dow Jones
Average of 30 Industrial Stocks and The Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may refer to results compiled by organizations such as CDA Investment
Technologies, Ibbottson Associates, Lipper Analytical Services, Morningstar,
Inc. and Wiesenberger Investment Companies Services and by the U.S. Department
of Commerce. Additionally, the fund may, from time to time, refer to results
published in various newspapers or periodicals, including BARRONS, FORBES,
FORTUNE, INSTITUTIONAL INVESTOR, KIPLINGER'S PERSONAL FINANCE MAGAZINE, MONEY,
U.S. NEWS AND WORLD REPORT and THE WALL STREET JOURNAL.
The fund may, from time to time, illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
The fund may from time to time compare its investment results with the
Consumer Price Index, which is a measure of the average change in prices over
time in a fixed market basket of goods and services (e.g. food, clothing,
fuels, transportation, and other goods and services that people buy for
day-to-day living).
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages eight common stock funds that are at least 10 years old. In the
10-year periods since 1963 (109 in all), those funds have had better total
returns than the Standard and Poor's 500 Stock Composite Index in 91 of the 109
periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
BOND RATINGS --
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of the municipal bonds
which they undertake to rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings
may have the same yield.
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." Moody's applies the numerical modifiers 1,
2, and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. Ratings are described as follows:
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
Standard & Poor's Corporation rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Ratings are described as follows:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.
"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied 'BB' or
'BB-' rating."
"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."
"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized."
COMMERCIAL PAPER RATINGS --
STANDARD & POOR'S CORPORATION: "A-1" and "A-2" are the two highest commercial
paper rating categories and are described as follows:
"A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong."
"A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
'A-1'."
MOODY'S INVESTORS SERVICE, INC.: "Prime-1" and "Prime-2" are the two highest
commercial paper rating categories and are described as follows:
"ISSUERS RATED PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
- Well established access to a range of financial markets and assured sources
of alternate liquidity."
"ISSUERS RATED PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained."
LARGEST INDUSTRY HOLDINGS
EQUITY-TYPE SECURITIES 83.59%
<TABLE>
<CAPTION>
<S> <C>
Banking 13.19%
Telecommunications 7.16%
Utilities: Electric & Gas 6.13%
Health & Personal Care 5.15%
Business & public Services 4.16%
Other Industries 47.80%
BONDS & NOTES 3.25%
CASH & EQUIVALENTS 13.16%
LARGEST INDIVIDUAL HOLDINGS PERCENT OF
NET ASSETS
Internationale Nederlanden Groep 2.50 %
Telecom Corp. of New Zealand 2.15
National Australia Bank 1.25
Koninklije PTT Nederland 1.22
Thorn EMI 1.20
Brierley Investments 1.09
First Union 1.04
Advance Bank Australia 1.03
Eastern Group 1.03
National Power 0.99
</TABLE>
- ----------------
CAPITAL WORLD GROWTH AND INCOME FUND
INVESTMENT PORTFOLIO, NOVEMBER 30, 1994
<TABLE>
<CAPTION>
Shares or Market Percent
Equity-Type Securities Principal Value of Net
(common and preferred stocks Amount (Millions) Assets
and convertible debentures)
<S> <C> <C> <C> <C>
- ------------------------------------------- ---------- --------- -------
BANKING- 13.19%
National Australia Bank Ltd. (Australia) 4,321,839 $34.838 1.25
First Union Corp. (USA) 725,000 28.909 1.04
Advance Bank Australia Ltd. (Australia) 4,403,395 28.734 1.03
ABN AMRO Holding NV (Netherlands) 711,279 24.588 .88
Australia and New Zealand Banking Group Ltd. (Australia) 7,529,100 22.889 .82
Bangkok Bank Ltd., 3.25% convertible
debentures 2004/1/ (Thailand) $21,200,000 18.868 .68
Christiania Bank/2/ (Norway) 4,350,000 8.338 .63
Christiania Bank (American
Depositary Receipts)/1/,/2/ 480,000 9.120
Bank of New York Co., Inc. (USA) 600,000 16.725 .60
Commonwealth Bank of Australia (Australia) 2,236,638 12.637 .45
First Chicago Corp. (USA) 250,000 11.625 .42
Banco Popular Espanol, SA (Spain) 91,800 11.534 .41
Stadshypotek AB, Class A (Sweden) 870,000 11.014 .40
Challenge Bank Ltd. (Australia) 4,842,840 10.707 .38
Banc One Corp. (USA) 385,100 10.350 .37
National City Corp. (USA) 400,000 10.050 .36
Safra Republic Holdings SA (Luxembourg) 110,000 9.653 .35
Credit local de France (France) 125,000 9.633 .35
Grupo Finaciero Banamex Accival,
SA de CV, 7.00% convertible debentures 1999 (Mexico) $8,210,000 8.908 .32
Bank of Montreal (Canada) 410,000 7.561 .27
Istituto Mobiliare Italiano SpA (American
Depositary Receipts) (Italy) 400,000 7.100 .25
Canadian Imperial Bank of Commerce (Canada) 250,000 5.973 .21
Banca Popolare di Bergamo-Credito Varesino
S.C.r.l. (Italy) 400,000 4.679 .19
Banca Popolare di Bergamo-Credito Varesino
S.C.r.l., 7.50% convertible debentures 1999 LIT1,000,000,000 .661
BankAmerica Corp. (USA) 120,000 4.920 .18
CS Holding Group (Switzerland) 11,500 4.861 .17
J.P. Morgan & Co. Inc. (USA) 80,000 4.700 .17
Westpac Banking Corp. (Australia) 1,440,164 4.644 .17
Kansallis-Osake-Pankki/2/ (Finland) 3,500,000 4.314 .15
Banco Bilbao Vizcaya, SA (Spain) 160,000 4.162 .15
Svenska Handelsbanken Group, Class A (Sweden) 275,000 3.773 .14
National Westminster Bank PLC (United 438,906 3.587 .13
Kingdom)
Banco de Santander, SA (American Depositary
Receipts) (Spain) 80,000 3.300 .12
Swiss Bank Corp. (Switzerland) 11,171 3.067 .11
Credit Foncier de France (France) 6,802 1.015 .04
MULTI-INDUSTRY- 8.02%
Brierley Investments Ltd. (New Zealand) 40,209,642 30.049 1.09
Brierley Investments Ltd., convertible
preferred shares 530,000 .369
B A T Industries PLC (United 3,511,000 24.624 .88
Kingdom)
Hutchison Whampoa Ltd. (Hong Kong) 5,990,000 23.856 .86
Incentive AB, Class B (Sweden) 520,000 16.923 .61
AB Industrivarden, Class A (Sweden) 592,000 15.421 .55
Hanson PLC (United 3,840,000 14.157 .51
Kingdom)
Harsco Corp. (USA) 345,000 14.145 .51
Industriforvaltnings AB Kinnevik, Series 3,
10.50% convertible debentures 1997 (Sweden) SKR50,250,000 13.989 .50
Jardine Strategic Holdings Ltd. (Hong Kong,
incorporated
in Bermuda) 3,000,000 9.737 .36
Jardine Strategic Holdings Ltd.,
7.50% convertible debentures 2049 $181,000 .195
Groupe Bruxelles Lambert SA (Belgium) 81,000 9.699 .35
LTV Corp./2/ (USA) 500,000 7.875 .28
Textron Inc. (USA) 155,000 7.285 .27
Compagnie Nationale a Portefeuille SA (Belgium) 100,000 5.964 .23
Compagnie Nationale a Portefeuille
SA, warrants, expire 1999/2/ 150,000 .627
Pearson PLC (United 650,000 6.258 .22
Kingdom)
Lend Lease Corp. Ltd. (Australia) 496,926 6.066 .22
Canadian Pacific Ltd. (Canada) 300,000 4.650 .17
Investor AB, Class B (Sweden) 160,000 4.072 .15
Tenneco Inc. (USA) 75,000 2.916 .10
Swire Pacific Ltd., Class A (Hong Kong) 350,000 2.331 .08
Preussag AG (Germany) 8,000 2.205 .08
TELECOMMUNICATIONS- 7.16%
Telecom Corp. of New Zealand Ltd. (New Zealand) 8,380,000 28.418 2.15
Telecom Corp. of New Zealand Ltd./2/ 4,048,000 13.728
Telecom Corp. of New Zealand Ltd. (American
Depositary Receipts) 331,000 17.916
Koninklije PTT Nederland NV (Netherlands) 1,087,800 33.955 1.22
Telefonos de Mexico, SA de CV, Class L
(American Depositary Receipts) (Mexico) 497,800 26.383 .95
Tele Danmark AS, Class B (American Depositary
Receipts)/2/ (Denmark) 685,100 17.727 .64
STET-Societa Finanziaria Telefonica p.a. (Italy) 890,000 2.594 .50
STET-Societa Finanziaria Telefonica p.a.,
nonconvertible savings shares 4,775,000 11.400
Vodafone Group PLC (American Depositary
Receipts) (United 270,000 8.775 .31
Kingdom)
Telecomunicacoes Brasileiras SA, preferred (Brazil)
nominative (American Depositary
Receipts) 139,117 6.608 .25
Telecomunicacoes Brasileiras SA, preferred
nominative (American Depositary
Receipts)/1/$/2/,/4/ 6,362 .302
Pacific Telesis Group (USA) 192,455 5.581 .20
BCE Mobile Communications Inc. (Canada) 150,000 5.001 .18
Cable and Wireless PLC (United 803,452 4.880 .18
Kingdom)
Telecom Italia SpA (Italy) 1,264,200 3.264 .12
Telefonica de Argentina SA, Class B (Argentina) 575,000 3.253 .12
AirTouch Communications/2/ (USA) 117,820 3.196 .11
U S WEST, Inc. (USA) 80,000 2.820 .10
Ameritech Corp. (USA) 60,000 2.370 .09
Bell Atlantic Corp. (USA) 24,000 1.203 .04
UTILITIES: ELECTRIC & GAS- 6.13%
Eastern Group PLC (United 2,275,000 28.581 1.03
Kingdom)
National Power PLC (United 3,560,000 27.643 .99
Kingdom)
Southern Electric PLC (United 2,170,000 27.007 .97
Kingdom)
Entergy Corp. (USA) 590,000 13.275 .48
British Gas PLC (United 900,000 4.361 .42
Kingdom)
British Gas PLC (American Depositary
Receipts) 150,000 7.238
General Public Utilities Corp. (USA) 347,000 8.935 .32
Iberdrola, SA (Spain) 1,320,000 8.851 .32
Hongkong Electric Holdings Ltd. (Hong Kong) 3,173,500 7.879 .28
Australian Gas Light Co. (Australia) 2,138,582 6.879 .25
Detroit Edison Co. (USA) 250,000 6.688 .24
Enersis SA (American Depositary Receipts) (Chile) 200,000 5.975 .21
Hong Kong and China Gas Co. Ltd. (Hong Kong) 3,567,600 5.813 .21
Hong Kong and China Gas Co. Ltd., warrants,
expire 1995/2/ 100,800 .016
Scottish Power PLC (United 1,000,000 5.518 .20
Kingdom)
China Light & Power Co. Ltd. (Hong Kong) 932,000 4.013 .14
Union Electrica Fenosa, SA (Spain) 500,000 2.135 .07
HEALTH & PERSONAL CARE- 5.15%
Eli Lilly and Co. (USA) 380,000 23.798 .85
Glaxo Holdings PLC (United 2,450,000 23.665 .85
Kingdom)
American Home Products Corp. (USA) 321,000 20.905 .75
AB Astra, Class A (Sweden) 700,000 18.837 .68
Bausch & Lomb Inc. (USA) 550,000 18.356 .66
Warner-Lambert Co. (USA) 164,000 12.690 .45
Bristol-Myers Squibb Co. (USA) 175,000 10.106 .36
Merck & Co., Inc. (USA) 135,000 5.029 .18
Tambrands Inc. (USA) 115,000 4.442 .16
Upjohn Co. (USA) 100,000 3.213 .12
Abbott Laboratories (USA) 50,000 1.594 .06
Baxter International Inc. (USA) 30,000 .773 .03
BUSINESS & PUBLIC SERVICES- 4.16%
North West Water Group PLC (United 2,245,000 19.031 .68
Kingdom)
Havas SA (France) 141,485 11.484 .41
Southern Water PLC (United 1,281,297 11.173 .40
Kingdom)
General Motors Corp., Class E (USA) 300,000 11.025 .40
American Water Works Co., Inc. (USA) 300,000 7.875 .28
Deluxe Corp. (USA) 282,800 7.848 .28
Welsh Water PLC (United 750,000 7.444 .28
Kingdom)
Autopistas, Concesionaria Espanola, SA (Spain) 869,400 7.262 .26
Hutch Delta Finance Ltd., 7.00% convertible
debentures 2001/1/ (Hong Kong) $6,000,000 5.864 .21
WMX Technologies, Inc. (USA) 225,000 5.794 .21
Alco Standard Corp. (USA) 80,000 4.480 .16
Thames Water PLC (United 546,896 4.187 .15
Kingdom)
Foote, Cone & Belding Communications, Inc. (USA) 90,000 3.724 .13
Omnicom Group Inc. (USA) 50,000 2.606 .09
Eurotunnel SA, units, comprised of one share
of Eurotunnel SA ordinary and one share of
Eurotunnel PLC ordinary/2/ (France) 640,000 2.524 .09
John H. Harland Co. (USA) 96,000 1.896 .07
Cross-Harbour Tunnel Co., Ltd. (Hong Kong) 750,000 1.561 .06
INSURANCE- 3.97%
Internationale Nederlanden Groep NV (Netherlands) 1,481,632 69.583 2.50
GIO Australia Holdings Ltd. (Australia) 5,711,167 10.128 .36
Societe Centrale Union des Assurances de
Paris (France) 238,810 6.738 .24
Yasuda Fire and Marine Insurance Co., Ltd. (Japan) 695,000 4.938 .17
Allstate Corp. (USA) 150,000 3.544 .13
National Mutual Asia Ltd. (Hong Kong) 5,668,000 3.335 .12
Tokio Marine and Fire Insurance Co., Ltd. (Japan) 234,000 2.696 .10
United Friendly Group PLC, Class B (United 300,000 2.094 .08
Kingdom)
Prudential Corp. PLC (United 406,576 2.049 .07
Kingdom)
20th Century Industries (USA) 200,000 2.025 .07
Refuge Group PLC (United 500,000 1.996 .07
Kingdom)
Willis Corroon Group PLC (United 700,000 1.578 .06
Kingdom)
AUTOMOBILES- 3.01%
Regie National des Usines Renault, SA (France) 715,400 24.062 .86
Daimler-Benz AG (Germany) 34,672 16.383 .75
Daimler-Benz AG (American Depositary 93,500 4.441
Receipts)
Bayerische Motoren Werke AG (Germany) 22,000 10.570 .51
Bayerische Motoren Werke AG, preferred shares 10,254 3.524
Volkswagen AG, preferred shares (Germany) 46,000 9.938 .36
General Motors Corp. (USA) 178,000 6.786 .24
Toyota Motor Corp. (Japan) 235,000 5.011 .18
Peugeot SA/2/ (France) 13,500 1.975 .07
Nissan Motor Co., Ltd. (Japan) 133,000 1.122 .04
FOREST PRODUCTS & PAPER- 2.67%
Jefferson Smurfit Corp./2/ (USA) 1,232,300 19.563 .70
James River Corp. of Virginia (USA) 450,000 9.506
James River Corp. of Virginia, .67
DECS convertible preferred shares 450,000 9.225
Sonoco Products Co. (USA) 700,000 14.613 .52
Fletcher Challenge Ltd. (New Zealand) 3,620,000 9.093 .35
Fletcher Challenge Forests Division
(American Depositary Receipts) 40,070 .461
MAYR-MELNHOF Karton AG (Austria) 145,000 7.411 .27
Federal Paper Board Co., Inc. (USA) 113,400 3.076 .11
Carter Holt Harvey Ltd. (New Zealand) 616,770 1.367 .05
ENERGY SOURCES- 2.45%
Royal Dutch Petroleum Co. (Netherlands) 85,000 9.216 .73
Royal Dutch Petroleum Co. (New York
Registered Shares) 50,000 5.431
"Shell" Transport and Trading Co., PLC
(New York Registered Shares) (United 80,000 5.350
Kingdom)
Phillips Petroleum Co. (USA) 400,000 13.200 .47
Amoco Corp. (USA) 175,000 10.631 .38
Chevron Corp. (USA) 175,000 7.634 .27
TOTAL, Class B (France) 116,495 7.287 .27
Sun Co., Inc. (USA) 125,000 3.641 .13
Petrofina SA (Belgium) 10,700 3.116 .11
Burmah Castrol PLC (United 203,972 2.617 .09
Kingdom)
CHEMICALS- 2.44%
Akzo NV (Netherlands) 193,000 21.398 .77
Praxair, Inc. (USA) 567,000 11.482 .41
European Vinyls Corp. NV/2/ (Netherlands) 120,000 5.240 .19
BTP PLC (United 1,135,000 5.082 .18
Kingdom)
Airgas, Inc./2/ (USA) 177,000 4.425 .16
L'Air Liquide (France) 30,314 4.181 .15
Bayer AG (Germany) 19,000 4.157 .15
E.I. du Pont de Nemours and Co. (USA) 71,000 3.825 .14
BASF AG (Germany) 15,250 2.952 .11
DSM NV (Netherlands) 30,000 2.234 .08
Hoechst AG (Germany) 7,500 1.501 .05
Rhone-Poulenc SA, Class A (France)
(American Depositary Receipts) 59,000 1.445 .05
MACHINERY & ENGINEERING- 2.03%
Mannesmann AG (Germany) 84,700 22.099 .79
Caterpillar Inc. (USA) 216,000 11.664 .42
Bombardier Inc., Class B (Canada) 700,000 11.446 .41
Triplex Lloyd PLC (United 2,000,000 3.914 .14
Kingdom)
Sandvik AB, Class A (Sweden) 75,000 1.273 .09
Sandvik AB, Class B 70,000 1.179
Zardoya Otis, SA (Spain) 19,613 2.057 .08
Atlas Copco AB, Class A (Sweden) 125,000 1.607 .06
Siu Fung Ceramics Holdings Ltd. (Hong Kong) 6,000,000 1.210 .04
MERCHANDISING- 1.90%
Tesco PLC (United 6,260,000 24.108 .88
Kingdom)
WHSmith Group PLC, Class A (United 1,150,000 8.029 .29
Kingdom)
Duty Free International, Inc. (USA) 470,000 5.699 .20
ShopKo Stores, Inc. (USA) 475,000 4.750 .17
Giant Food Inc., Class A (USA) 150,000 3.356 .12
Amway Japan Ltd. (Japan) 79,000 2.555 .09
TJX Companies, Inc. (USA) 150,000 2.269 .08
Delhaize "Le Lion" SA (Belgium) 50,000 2.011 .07
BEVERAGES & TOBACCO- 1.89%
Philip Morris Companies Inc. (USA) 310,000 18.523 .67
American Brands, Inc. (USA) 400,000 14.150 .51
Lion Nathan Ltd. (New Zealand) 5,000,000 8.949 .32
Coca-Cola Amatil Ltd. (Australia) 768,565 5.015 .18
Seagram Co. Ltd. (Canada) 120,000 3.495 .12
Heineken Holdings NV, Class A (Netherlands) 20,000 2.621 .09
FOOD & HOUSEHOLD PRODUCTS- 1.81%
Reckitt & Colman PLC (United 2,725,000 23.804 .89
Kingdom)
Reckitt & Colman PLC,convertible unsecured
loan stock/2/ 253,125 1.217
Clorox Co. (USA) 150,000 8.738 .31
Nestle SA (Switzerland) 8,452 7.832 .28
Hazlewood Foods PLC (United 3,000,000 5.307 .19
Kingdom)
Unilever NV (Netherlands) 30,000 3.360 .14
INDUSTRIAL COMPONENTS- 1.70%
Morgan Crucible Co. PLC (United 2,037,500 10.526 .38
Kingdom)
Goodyear Tire & Rubber Co. (USA) 300,000 10.162 .36
Federal-Mogul Corp. (USA) 365,000 7.391 .27
AB SKF, Class B/2/ (Sweden) 375,000 6.636 .24
Compagnie Generale des Etablissements
Michelin, Class B/2/ (France) 125,000 4.803 .18
Compagnie Generale des Etablissements
Michelin, convertible preferred shares 8,333 .400
BICC PLC (United 750,000 3.980 .14
Kingdom)
Continental AG (Germany) 15,800 2.177 .08
Magna International Inc., Class A (Canada) 38,000 1.283 .05
APPLIANCES & HOUSEHOLD DURABLES- 1.57%
THORN EMI PLC (United 2,136,000 33.539 1.20
Kingdom)
Electrolux AB, Class B (Sweden) 200,000 10.207 .37
METALS: NONFERROUS- 1.50%
Pechiney (France) 172,000 12.068 .43
Inco Ltd. (Canada) 425,000 11.687 .43
Teck Corp., 3.75% convertible debentures 2006 (Canada) $12,950,000 11.655 .42
Phelps Dodge Corp. (USA) 40,200 2.301 .09
Alcan Aluminium Ltd. (Canada) 80,000 1.980 .07
Indian Aluminum Co. Ltd. (Global Depositary
Receipts)/1/ (India) 150,000 1.688 .06
BROADCASTING & PUBLISHING- 1.38%
CANAL+ (France) 58,785 9.929 .36
Carlton Communications PLC (United 700,000 9.605 .34
Kingdom)
Elsevier NV (Netherlands) 575,000 5.721 .21
TeleWest Communications PLC
(American Depositary Receipts)/2/ (United 178,000 5.184 .18
Kingdom)
News International PLC (United 1,000,000 3.679 .13
Kingdom)
Shaw Brothers (Hong Kong) Ltd. (Hong Kong) 1,850,000 2.990 .11
Tele-Communications, Inc., Class A/2/ (USA) 60,000 1.418 .05
LEISURE & TOURISM- 1.29%
Forte PLC (United 5,255,442 19.499 .70
Kingdom)
Shangri-La Asia Capital Ltd., 2.875%
convertible debentures 2000/1/ (Hong Kong) $13,910,000 10.919 .39
PolyGram NV (New York Registered Shares) (Netherlands) 84,000 3.507 .12
Mandarin Oriental International Ltd. (Hong Kong, 2,023,313 2.106 .08
incorporated
in Bermuda)
REAL ESTATE- 1.18%
Burswood Property Trust (Australia) 9,250,000 8.450 .30
St Lukes Group Ltd. (New Zealand) 3,500,000 2.725 .27
St Lukes Group Ltd., 7,000,000 4.660
convertible preferred shares
Sun Hung Kai Properties Ltd. (Hong Kong) 1,120,000 7.198 .26
Tai Cheung Holdings Ltd. (Hong Kong, 4,739,570 4.719 .17
incorporated
in Bermuda)
Hysan Development Co., Ltd. (Hong Kong) 1,474,000 3.145 .11
Land Securities PLC (United 200,000 1.860 .07
Kingdom)
TEXTILES & APPAREL- 0.95%
Courtaulds Textiles PLC (United 2,391,500 16.922 .61
Kingdom)
Gamma Holding NV (Netherlands) 145,300 7.617 .28
Delta Woodside Industries, Inc. (USA) 185,000 1.804 .06
FINANCIAL SERVICES- 0.93%
Household International, Inc. (USA) 225,000 8.663 .31
ADVANTA Corp., Class A (USA) 250,000 6.813 .24
American Express Co. (USA) 150,000 4.444 .16
Federal National Mortgage Assn. (USA) 50,000 3.556 .13
Beneficial Corp. (USA) 40,000 1.460 .05
Kleinwort Benson Group PLC (United 70,000 .519 .02
Kingdom)
Grupo Financiero Bancomer, SA de CV, Class C (Mexico) 400,000 .487 .02
TRANSPORTATION: RAIL & ROAD- 0.75%
TNT Ltd., convertible preferred shares (Australia) 9,043,900 16.733 .60
CSX Corp. (USA) 60,000 4.170 .15
MISCELLANEOUS MATERIALS & COMMODITIES- 0.70%
English China Clays PLC (United 2,416,350 12.899 .46
Kingdom)
Compagnie de Saint-Gobain (France) 42,449 5.106 .18
Pilkington PLC (United 600,000 1.573 .06
Kingdom)
TRANSPORTATION: AIRLINES- 0.57%
Air New Zealand Ltd., Class B (New Zealand) 3,490,000 10.630 .38
British Airways PLC (United 500,000 2.959 .11
Kingdom)
Cathay Pacific Airways Ltd. (Hong Kong) 1,500,000 2.143 .08
DATA PROCESSING & REPRODUCTION- 0.54%
Apple Computer, Inc. (USA) 250,000 9.250 .33
Xerox Corp. (USA) 60,000 5.895 .21
ELECTRICAL & ELECTRONIC- 0.48%
Honeywell, Inc. (USA) 290,000 8.483 .30
BBC Brown Boveri Ltd., Class A (Switzerland) 3,500 2.930 .11
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 33,500 1.843 .07
METALS: STEEL- 0.43%
Allegheny Ludlum Corp. (USA) 450,000 8.550 .31
Nippon Denro Ispat Ltd., 3.00% convertible
debentures 2001/1/ (India) $2,800,000 2.058 .07
Thyssen AG/2/ (Germany) 9,000 1.601 .05
BUILDING MATERIALS & COMPONENTS- 0.41%
Southdown, Inc., Series D,
convertible preferred shares (USA) 150,000 5.212 .19
Medusa Corp., 6.00% convertible debentures
2003 (USA) $5,750,000 5.046 .18
Camas PLC (United 948,750 1.158 .04
Kingdom)
ENERGY EQUIPMENT- 0.39%
Schlumberger Ltd. (Netherlands 205,000 10.891 .39
Antilles)
WHOLESALE & INTERNATIONAL TRADE- 0.35%
Sime Darby Hong Kong Ltd. (Hong Kong) 9,264,000 9.943 .35
TRANSPORTATION: SHIPPING- 0.30%
Shun Tak Holdings Ltd. (Hong Kong) 10,632,471 8.249 .30
RECREATION & OTHER CONSUMER PRODUCTS- 0.26%
Hasbro, Inc. (USA) 250,000 7.375 .26
ELECTRONIC COMPONENTS- 0.03%
Motorola, Inc. (USA) 15,000 .846 .03
MISCELLANEOUS- 1.90%
Other equity-type securities in initial
period of acquisition 52.673 1.90
TOTAL EQUITY-TYPE SECURITIES (cost: -------- --------
$2,218.660 million) 2,327.628 83.59
-------- --------
- ------------------------------------------ -------------
Principal
Amount
Bonds and Notes (Millions)
- ------------------------------------------ -------------
INDUSTRIALS- 1.00%
Container Corp. of America 11.25% May 2004 $6.000 $6.060 .25
Container Corp. of America 9.75% April 2003 1.000 .940
Venezolana de Cementos, SACA Eurobond
9.25% November 1996 6.000 5.568 .20
Fort Howard Corp. 10.00% March 2003 1.500 1.388 .20
Fort Howard Corp. 8.25% February 2002 4.500 4.005
CEMEX, SA 8.875% June 1998/1/ 3.000 2.915 .10
Dial Call Communications, Inc. 0/12.25% April
2004/5/ 5.000 1.900 .07
SKF AB 7.625% July 2003 2.000 1.816 .07
P.T. Indah Kiat Pulp & Paper Corp. 8.875%
November 2000/1/ 1.500 1.286 .05
Paging Network, Inc. 8.875% February 2006 1.500 1.208 .04
Payless Cashways, Inc. 9.125% April 2003 .750 .675 .02
NEW ZEALAND GOVERNMENT- 0.72%
New Zealand 8.00% July 1998 NZ$33.250 20.152 .72
CANADIAN GOVERNMENT- 0.47%
Canada 6.250% February 1998 C$13.200 9.004 .32
Canada 7.50% July 1997 6.000 4.282 .15
U.S. TREASURY - 0.42%
7.125% February 2023 $13.000 11.663 .42
AUSTRALIAN GOVERNMENT- 0.21%
Australia 12.50% January 1998 A$7.100 5.794 .21
FINNISH GOVERNMENT- 0.16%
Finland 11.00% January 1999 FIM20.000 4.343 .16
SWEDISH GOVERNMENT- 0.15%
Sweden 11.00% January 1999 SKR30.000 4.044 .15
ARGENTINIAN GOVERNMENT- 0.07%
Argentina Eurobond 4.25% March 2023 $4.260 1.922 .07
SUPRANATIONAL- 0.05%
International Bank for Reconstruction and
Development 12.50% July 1997 NZ$2.000 1.344 .05
--------- --------
TOTAL BONDS AND NOTES (cost: $93.203 million) 90.309 3.25
--------- --------
- ------------------------------------------ ------------- --------- --------
Principal Market Percent
Amount Value of Net
Short-Term Securities (Millions) (Millions) Assets
- ------------------------------------------ ------------- --------- --------
CORPORATE SHORT-TERM NOTES- 8.65%
National Australia Funding (Delaware) Inc.
4.85%-5.47% due 12/15/94-1/3/95 38.400 38.257 1.37
Halifax Building Society 5.00%-5.50% due
12/19/94-1/3/95 26.400 26.290 .94
John Deere Capital Corp. 5.40% due 1/12/95 25.000 24.832 .89
H.J. Heinz Co. 5.07%-5.685% due
12/22/94-1/10/95 21.300 21.197 .76
Ford Motor Credit Co. 5.12%-5.20% due
12/5-12/13/94 19.950 19.926 .72
Toyota Motor Credit Corp. 5.50%-5.60% due
1/4-1/9/95 20.000 19.884 .71
RTZ America Inc. 5.15%-5.77% 17.700 17.620 .63
due 12/9/94-1/23/95
Canadian Wheat Board 5.70% due 1/12/95 15.650 15.543 .56
Unilever Capital Corp. 5.02% due 12/19/94 15.000 14.960 .54
Miles Inc. 5.75% due 1/17/95 13.500 13.396 .48
Beneficial Corp. 5.16% due 12/12/94 12.200 12.179 .44
Commonwealth Bank of Australia 5.32% 9.400 9.351 .34
due 1/3/95
British Telecommunications PLC 5.75% 4.545 4.509 .16
due 1/18/95
Associates Corp. of North America 5.72% due
12/1/94 2.940 2.940 .11
FEDERAL AGENCY DISCOUNT NOTES- 1.55%
Federal Home Loan Mortgage Corp. 4.97%-5.04%
due 12/27/94 29.200 29.090 1.04
Federal National Mortgage Assn. 4.81% due
12/2/94 12.460 12.457 .45
Federal Farm Credit Bank 5.10% due 12/2/94 1.700 1.700 .06
NON-U.S. GOVERNMENT SHORT-TERM NOTES- 1.55%
Alberta (Province of ) 4.96%-5.10% due
12/5-12/19/94 24.900 24.863 .89
British Columbia (Province of ) 4.81%-5.60%
due 12/7/94-1/10/95 18.400 18.316 .66
CERTIFICATES OF DEPOSIT- 0.72%
Swiss Bank Corp. 5.50% due 1/13/95 20.000 19.997 .72
-------- --------
TOTAL SHORT-TERM SECURITIES (cost: $347.325
million) 347.307 12.47
-------- ------
TOTAL INVESTMENT SECURITIES (cost: $2,659.188
million) 2,765.244 99.31
Excess of cash and receivables over payables 19.110 .69
-------- ------
NET ASSETS $2,784.354 100.00
============================================= ========= ========
</TABLE>
/1/Purchased in a private placement transaction; resale potential extends to
qualified institutional buyers.
/2/Non-income-producing securities
/3/Purchased in a private placement transaction; resale to the public may
require registration.
/4/Represents a when-issued security.
/5/represents a zero coupon bond which will convert to an interest-bearing
security at a later date.
See Notes to Financial Statements
COMPANIES ADDED TO THE PORTFOLIO
SINCE MAY 31, 1994
Alco Standard
Amway Japan
Astra
Australia and New Zealand Banking Group
Banc One
Bank of New York
Baxter International
BCE
Beneficial
CAMAS
Challenge Bank
Chevron
Clorox
Courtaulds Textiles
CXS
Detroit Edison
Electrolux
European Vinyls
Federal Paper Board
Giant Food
Goodyear Tire & Rubber
Hasbro
Hazlewood Foods
Hutchison Delta Finance
James River
J.P. Morgan
Koninklijke PTT Nederland
LTV
Mandarin Oriental International
Morgan Crucible
National Mutual Asia
Petrofina
Preussag
Regie Nationale des Usines Renault
Rhone-Poulenc
Scottish Power
Shaw Brothers
ShopKo Stores
Sonoco Products
Stadshypotek
Sun Co.
Svenska Handelsbanken Group
Tai Cheung Holdings
Teck
TeleWest Communications
Triplex Lloyd
COMPANIES ELIMINATED FROM THE PORTFOLIO
SINCE MAY 31, 1994
BellSouth
British Petroleum
British Telecommunications
Dow Chemical
General Sekiyu
Kingfisher
Lehman Brothers Holdings
Marui
Mattel
Oce-van der Grinten
SCANA
Schneider
Shared Medical Systems
Showa Shell Sekiyu
Signet Banking
Tonen
Walker
Woodside Petroleum
YPF
CAPITAL WORLD GROWTH AND INCOME FUND, INC.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES (dollars in
at November 30, 1994 millions)
- ----------------------------------------- ----------- ------------
<S> <C> <C>
ASSETS:
Investment securities at market
(cost: $2,659.188) $2,765.244
Cash 2.457
Prepaid organizational expense .004
Receivables for--
Sales of investments $22.018
Sales of fund's shares 7.831
Dividends and accrued interest 14.079 43.928
----------- ------------
2,811.633
LIABILITIES:
Payables for--
Purchases of investments 20.987
Repurchases of fund's shares 3.942
Management services 1.097
Accrued expenses 1.253 27.279
----------- ------------
NET ASSETS AT NOVEMBER 30, 1994--
Equivalent to $17.81 per share on
156,363,846 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 200,000,000 shares) $2,784.354
============
STATEMENT OF OPERATIONS (dollars in
for the year ended November 30, 1994 millions)
- --------------------------------------------- ----------- ------------
INVESTMENT INCOME:
Income:
Dividends $67.086
Interest 25.938 $93.024
-----------
Expenses:
Management services fee 11.438
Distribution expenses 3.798
Transfer agent fee 2.018
Reports to shareholders .343
Registration statement and prospectus .734
Postage, stationery and supplies .437
Directors' fees .093
Auditing and legal fees .034
Custodian fee 1.198
Taxes other than federal income tax .036
Other expenses .123 20.252
----------- ------------
Net investment income 72.772
------------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 44.965
Net increase in unrealized appreciation on investments:
Beginning of year 105.772
End of year 106.056 .284
----------- ------------
Net realized gain and
increase in unrealized appreciation
on investments 45.249
------------
NET INCREASE IN NET ASSETS RESULTING $118.021
FROM OPERATIONS ============
- ---------------------------------------------- ----------- ------------
(dollars in
millions) Period
Statement of Changes in Net Assets 03/26/93/1/
Year ended to
11/30/94 11/30/93
- ---------------------------------------------- ----------- ------------
OPERATIONS:
Net investment income $72.772 $17.768
Net realized gain (loss) on investments 44.965 (.207)
Net increase in unrealized appreciation
on investments .284 105.772
----------- ------------
Net increase in net assets
resulting from operations 118.021 123.333
----------- ------------
DIVIDENDS FROM NET INVESTMENT INCOME
PAID TO SHAREHOLDERS (59.675) (12.221)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold: 77,171,194
and 91,111,578 shares, respectively 1,389.345 1,437.158
Proceeds from shares issued in reinvestment
of net investment income dividends:
3,077,212 and 671,424 shares, respectively 54.546 10.623
Cost of shares repurchased: 13,345,775
and 2,328,418 shares, respectively (238.871) (38.005)
----------- ------------
Net increase in net assets
resulting from capital share
transactions 1,205.020 1,409.776
----------- ------------
TOTAL INCREASE IN NET ASSETS 1,263.366 1,520.888
NET ASSETS:
Beginning of year 1,520.988 .100
----------- ------------
End of year (including undistributed
net investment income: $18.654
and $5.547, respectively) $2,784.354 $1,520.988
=========== ============
</TABLE>
/1/ Commencement of operations
See Notes to Financial Statements
Notes to Financial Statements
1. Capital World Growth and Income Fund, Inc. ("the fund") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Equity-type securities are stated at market value based upon closing sales
prices reported on recognized securities exchanges on the last business day of
the year or, for listed securities having no sales reported and for unlisted
securities, upon last-reported bid prices on that date.
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 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. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis.
Discounts on securities purchased are amortized over the life of the respective
securities. Distributions to shareholders are recorded on the ex-dividend
date.
Investment securities and other assets and liabilities 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
year. Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. 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 Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
Prepaid organization expenses are amortized over the estimated period of
benefit, not to exceed five years from commencement of operations. In the
event that Capital Research and Management Company (CRMC), the fund's
investment adviser, redeems any of its original shares prior to the end of the
five-year period, the proceeds of the redemption payable with respect to such
shares shall be reduced by the pro rata share (based on the proportionate share
of the original shares redeemed to the total number of original shares
outstanding at the time of such redemption) of the unamortized prepaid
organization expenses as of the date of such redemption. In the event that the
fund liquidates prior to the end of the five-year period, CRMC shall bear any
unamortized prepaid organization expenses.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $1,198,000 includes $116,000 that was paid by these
credits rather than in cash.
During the current period, the fund adopted Statement of Position 93-2
"Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies."
Accordingly, book and tax basis differences relating to shareholder
distributions are reclassified to or from additional paid-in capital. As of
December 1, 1993, the cumulative effect of such differences totaling $16,000
was reclassified to undistributed net investment income from accumulated net
realized losses. During the year ended November 30, 1994, the fund
reclassified $6,000 from undistributed net investment income to undistributed
net realized gains. Net investment income, net realized gains, and net assets
were not affected by this change.
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 November 30, 1994, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $106,056,000, of which $215,500,000
related to appreciated securities and $109,444,000 related to depreciated
securities. During the year ended November 30, 1994, the fund realized, on a
tax basis, a net capital gain of $44,971,000 on securities transa ctions.
During the year ended November 30, 1994, the fund utilized the remaining
capital loss carryforward totaling $223,000 to offset, for tax purposes,
capital gains realized during the year up to such amount. The cost of
portfolio securities for book and federal income tax purposes was
$2,659,188,000 at November 30, 1994.
3. The fee of $11,438,000 for management services was paid pursuant to an
agreement with 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 0.60% of the first $500 million
of average net assets; 0.50% of such assets in excess $500 million but not
exceeding $1.0 billion; 0.46% of such assets in excess of $1.0 billion but not
exceeding $1.5 billion; 0.43% of such assets in excess of $1.5 billion but not
exceeding $2.5 billion; 0.41% of such assets in excess of $2.5 billion but not
exceeding $4.0 billion; 0.40% of such assets in excess of $4.0 billion but not
exceeding $6.5 billion; and 0.395% of such assets in excess of $6.5 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 year ended November 30, 1994,
distribution expenses under the Plan were $3,798,000. As of November 30, 1994,
accrued and unpaid distribution expenses were $1,003,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $2,018,000 under the terms of a contract that provides for
transfer agency services to be performed for the fund. American Funds
Distributors, Inc. (AFD), the principal underwriter of the fund's shares,
received $6,306,000 (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.
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 AFS and AFD.
4. As of November 30, 1994, accumulated undistributed net realized gain on
investments was $44,748,000 and additional paid-in capital was $2,613,332,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,569,892,000 and $356,601,000, respectively, during
the year ended November 30, 1994.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended November 30, 1994, such non-U.S. taxes were $6,113,000.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Year Period
Ended 3/26/93/1/
11/30/94 to 11/30/93
<S> <C> <C>
Net Asset Value, Beginning of Period $17.00 $15.08
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .52 .29
Net realized and unrealized gain on investments .75 1.86
---------- ----------
Total income from investment operations 1.27 2.15
---------- ----------
LESS DISTRIBUTIONS:
Dividends from net investment income (.46) (.23)
Distributions from net realized gains - -
---------- ----------
Total distributions (.46) (.23)
---------- ----------
Net Asset Value, End of Period $17.81 $17.00
========== ==========
Total Return/2/ 7.52% 14.39%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $2,784 $1,521
Ratio of expenses to average net assets .87% .62%/3/
Ratio of net income to average net assets 3.11% 2.01%/3/
Portfolio turnover rate 18.7% 2.7%/3/
</TABLE>
/1/ Commencement of operations
/2/ Does not take into account effect of sales charge, at a maximum rate of
5.75%.
/3/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
Report of Independent Accountants
To the Board of Directors and Shareholders of Capital World Growth and Income
Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of Capital World Growth and Income
Fund, Inc. (the "Fund") at November 30, 1994, the results of its operations,
the changes in its net assets and the per-share data and ratios for the periods
indicated in conformity with generally accepted accounting principles. These
financial statements and per-share data and ratios (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit 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, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at November 30, 1994 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Los Angeles, California
December 30, 1994
U.S. Tax Information (Unaudited)
The fund makes an election under the Internal Revenue Code Section 853 to pass
through foreign taxes paid by the fund to its shareholders. The total amount
of foreign taxes passed through to shareholders for the year ended November 30,
1994 totals $0.04108 per share.
During the fiscal year ended November 30, 1994, 16% of the dividends paid by
the fund from investment income earned qualifies for the corporate
dividends-received deduction. Of those dividends paid to shareholders, none
was derived from interest on direct U.S. Treasury obligations.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the information
supplied with the 1099 form you receive from the fund's transfer agent.
