SEC File Nos. 33-54444
811-7338
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 7
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 9
CAPITAL WORLD GROWTH AND INCOME FUND, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
MICHAEL J. FAIRCLOUGH, ESQ.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
Title of Securities being Registered: Shares of Capital Stock ($0.01 par
value)
Approximate date of proposed public offering:
It is proposed that this filing become effective on February 1, 1998, pursuant
to paragraph (b) of rule 485.
CAPITAL WORLD GROWTH AND INCOME FUND, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF
PART "A" OF FORM N-1A CAPTIONS IN PROSPECTUS (PART "A")
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Financial Highlights; Investment Results
4. General Description of Registrant Investment Policies and Risks; Securities and
Investment Techniques; Multiple Portfolio
Counselor System; Fund Organization and
Management
5. Management of the Fund Expenses; Financial Highlights; Securities and
Investment Techniques; Multiple Portfolio
Counselor System; Fund Organization and
Management
6. Capital Stock and Other Securities Investment Policies and Risks; Securities and
Investment Techniques; Dividends, Distributions
and Taxes; Fund Organization and Management
7. Purchase of Securities Being Offered Purchasing Shares; Fund Organization and
Management; Shareholder Services
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
<S> <C> <C>
10. Cover Page Cover
11. Table of Contents Table of Contents
12. General Information and History Fund Organization and Management (Part "A")
13. Investment Objectives and Policies Securities and Investment Techniques (Part "A");
Description of Certain Securities and Investment
Techniques; Investment Restrictions
14. Management of Registrant Fund Directors and Officers; Management
15. Control Persons and Principal
Holders of Securities Fund Directors and Officers
16. Investment Advisory and Other Management; Fund Organization and Management (Part
Services "A"); General Information
17. Brokerage Allocation and Other Execution of Portfolio Transactions
Practices
18. Capital Stock and Other Securities N/A
19. Purchase, Redemption and Pricing
of Securities Being Offered Purchase of Shares; Purchasing Shares (Part "A");
Shareholder Account Services and Privileges;
Redeeming Shares
20. Tax Status Dividends, Distributions and Federal Taxes
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Item in Part "C"
<S> <C>
24. Financial Statements and Exhibits
25. Persons Controlled by or Under Common
Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of
Investment Adviser
29. Principal Holders
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
The American Funds Logo
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Capital World Growth
and Income Fund
Prospectus
FEBRUARY 1, 1998
<PAGE>
CAPITAL WORLD GROWTH AND INCOME FUND
333 South Hope Street
Los Angeles, CA 90071
- ----------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expenses 3
..................................
Financial Highlights 4
..................................
Investment Policies and Risks 5
..................................
Securities and Investment
Techniques 6
..................................
Multiple Portfolio Counselor
System 8
Investment Results 10
..................................
Dividends, Distributions and
Taxes 12
..................................
Fund Organization and
Management 13
..................................
Shareholder Services 16
</TABLE>
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The fund's investment objective is to seek long-term capital growth while
providing current income. The fund invests, on a global basis, in a diversified
portfolio of common stocks and other equity-type securities, bonds, and money
market instruments that are denominated in U.S. dollars or other currencies.
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT A
DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
33-010-0298
<PAGE>
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EXPENSES
The effect of the expenses described below is reflected in the fund's share
price and return.
You may pay certain shareholder transaction expenses when you buy or sell shares
of the fund. Operating expenses are paid by the fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum sales charge on purchases
(as a percentage of offering price) 5.75%
...................................................................
</TABLE>
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
FUND OPERATING EXPENSES
(as a percentage of average net assets)
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<TABLE>
<S> <C>
Management fees 0.44%
...................................................................
12b-1 expenses 0.23%(1)
...................................................................
Other expenses 0.15%
...................................................................
Total fund operating expenses 0.82%
</TABLE>
(1) 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually.
EXAMPLES
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
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<TABLE>
<S> <C>
One year $ 65
...................................................................
Three years $ 82
...................................................................
Five years $ 100
...................................................................
Ten years $ 153
</TABLE>
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 3
<PAGE>
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FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP, independent
accountants. This table should be read together with the financial statements
which are included in the statement of additional information and annual report.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
...........................
1997 1996 1995 1994 1993(1)
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.77 $20.22 $17.81 $17.00 $15.08
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INCOME FROM INVESTMENT OPERATIONS:
Net investment income .640 .70 .61 .52 .29
...................................................................................................
Net realized and unrealized gain on investments 3.045 3.91 2.72 .75 1.86
...................................................................................................
Total income from investment operations 3.685 4.61 3.33 1.27 2.15
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LESS DISTRIBUTIONS:
Distributions from net investment income (.650)(2) (.72)(2) (.63) (.46) (.23)
...................................................................................................
Distributions from net realized gains (.915) (.34) (.29) -- --
...................................................................................................
Total distributions (1.565) (1.06) (.92) (.46) (.23)
...................................................................................................
Net asset value, end of period $25.89 $23.77 $20.22 $17.81 $17.00
- ---------------------------------------------------------------------------------------------------
Total return(1) 16.36% 23.67% 19.41% 7.51% 14.39%(4)
- ---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $ 7,207 $ 5,139 $ 3,611 $ 2,784 $ 1,521
...................................................................................................
Ratio of expenses to average net assets .82% .85% .88% .87% .62%(3)
...................................................................................................
Ratio of net income to average net assets 2.53% 3.28% 3.24% 3.11% 2.01%(4)
...................................................................................................
Average commissions paid(5) .14c .25c 1.94c 1.24c 1.31c
...................................................................................................
Portfolio turnover rate 32.41% 30.18% 25.50% 18.66% 2.71%(4)
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</TABLE>
(1) The period ended November 30, 1993 represents the initial period of
operations which began March 26, 1993.
(2) Includes 0.2 cents and 1.5 cents realized non-U.S. currency gains treated as
ordinary income in 1997 and 1996, respectively, for federal income tax
purposes.
(3) Excludes maximum sales charge of 5.75%.
(4) Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
(5) Brokerage commissions paid on portfolio transactions increase the cost of
securities purchased or reduce the proceeds of securities sold and are not
separately reflected in the fund's statement of operations. Shares traded on
a principal basis (without commissions), such as most over-the-counter and
fixed-income transactions, are excluded. Generally, non-U.S. commissions are
lower than U.S. commissions when expressed as cents per share but higher
when expressed as a percentage of transactions because of the lower
per-share prices of many non-U.S. securities.
4 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
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INVESTMENT POLICIES AND RISKS
The fund has the investment objective of seeking long-term capital growth while
providing current income. The fund invests, on a global basis, in a diversified
portfolio that can include common stocks and other equity-type securities (such
as convertible bonds), bonds (and other fixed-income securities), and money
market instruments that are denominated in U.S. dollars or other currencies.
The fund's investment adviser, Capital Research and Management Company,
determines the relative mix of equity-type securities, fixed-income securities
and money market instruments for the fund's portfolio as well as the countries
and currencies in which the fund invests. It will do so based on its view of
long-term economic and market trends, taking the relative risks and
opportunities into account. Capital Research and Management Company does not
intend to make frequent shifts among equity-type securities, fixed-income
securities and money market instruments. Under normal market conditions, Capital
Research and Management Company expects that the fund will invest principally in
equity-type securities and that no more than 40% of its assets will be invested
in securities of issuers domiciled in any one country. While the fund, under
normal conditions, will invest principally in equity securities, the fund also
expects to invest in fixed-income securities (generally rated in the top three
quality categories by Standard & Poor's Corporation or Moody's Investors
Services, Inc. or unrated but determined to be of equivalent quality by Capital
Research and Management Company) on a regular basis in pursuit of its investment
objective. In addition, the fund may also hold cash or cash equivalents. For
temporary defensive purposes the fund may invest substantially in fixed-income
securities and/or money market instruments of issuers based around the world.
MORE INFORMATION ON THE FUND'S INVESTMENT POLICIES IS CONTAINED IN ITS STATEMENT
OF ADDITIONAL INFORMATION.
Investment limitations are considered at the time securities are purchased.
These limits are based on the fund's net assets unless otherwise indicated. The
fund's fundamental investment restrictions (described in the statement of
additional information) and objective may not be changed without shareholder
approval. All other investment practices may be changed by the fund's board of
directors.
THE FUND MAY NOT ACHIEVE ITS INVESTMENT OBJECTIVE DUE TO MARKET CONDITIONS AND
OTHER FACTORS. IN ADDITION, THE FUND MAY EXPERIENCE DIFFICULTY LIQUIDATING
CERTAIN PORTFOLIO SECURITIES DURING SIGNIFICANT MARKET DECLINES OR PERIODS OF
HEAVY REDEMPTIONS.
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 5
<PAGE>
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SECURITIES AND INVESTMENT TECHNIQUES
EQUITY SECURITIES
Equity securities represent an ownership position in a company. The prices of
equity securities fluctuate based on changes in the financial condition of their
issuers and on market and economic conditions. The fund's results will be
related to the overall market for these securities. Certain securities purchased
by the fund, particularly smaller capitalization stocks, may involve large price
swings and potential for loss.
DEBT SECURITIES
Bonds and other debt securities are used by issuers to borrow money. Issuers pay
investors interest and generally must repay the amount borrowed at maturity.
Some debt securities, such as zero coupon bonds, do not pay current interest,
but are purchased at a discount from their face values. The prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general their prices decline when interest rates rise and vice
versa.
The fund may invest up to 10% of its assets in debt securities rated Baa or BBB
or below by Moody's Investors Service, Inc. or Standard & Poor's Corporation or
in unrated securities that are determined to be of equivalent quality by Capital
Research and Management Company. The fund does not currently intend to invest
more than 5% of its assets in bonds rated Ba and BB or below or in unrated
securities that are determined to be of equivalent quality. These securities are
commonly known as "high-yield, high-risk" or "junk" bonds. The market prices of
these securities may fluctuate more than higher quality securities and may
decline significantly in periods of general economic difficulty.
Capital Research and Management Company attempts to reduce the risks described
above through diversification of the portfolio and by credit analysis of each
issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
While the fund may purchase debt obligations of corporations and financial
institutions domiciled around the world, it currently anticipates that most of
its intermediate- or long-term investments outside the U.S. principally will be
in governmental or quasi-governmental issues.
OTHER SECURITIES
The fund may also invest in securities that have equity and debt characteristics
such as non-convertible preferred stocks and convertible securities. These
securities may at times resemble equity more than debt and vice versa.
6 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
Non-convertible preferred stocks are similar to debt in that they have a stated
dividend rate akin to the coupon of a bond or note even though they are often
classified as equity securities. The prices and yields of non-convertible
preferred stocks generally move with changes in interest rates and the issuer's
credit quality, similar to the factors affecting debt securities.
Bonds, preferred stocks, and other securities may sometimes be converted into
common stock or other securities at a stated exchange ratio. These securities
prior to conversion pay a fixed rate of interest or a dividend. Because
convertible securities have both debt and equity characteristics, their value
varies in response to many factors, including the value of the underlying
equity, general market and economic conditions, convertible market valuations,
as well as changes in interest rates, credit spreads, and the issuer's credit
quality.
INVESTING IN VARIOUS COUNTRIES
The fund has the ability to invest outside the U.S. Investing outside the U.S.
involves special risks, particularly in certain developing countries, caused by,
among other things, fluctuating currency values; different accounting, auditing,
and financial reporting regulations and practices in some countries; changing
local and regional economic, political and social conditions; expropriation or
confiscatory taxation; greater market volatility; differing securities market
structures; and various administrative difficulties such as delays in clearing
and settling portfolio transactions or in receiving payment of dividends.
However, in the opinion of Capital Research and Management Company, investing
outside the U.S. also can reduce certain portfolio risks due to greater
diversification opportunities.
The fund does not intend to emphasize any particular country or region in making
its investments. Under normal market conditions, the fund will invest in
securities of issuers determined by Capital Research and Management Company to
be domiciled in at least three countries, with no more than 40% of its assets
invested in issuers domiciled in any one country. (In determining the domicile
of an issuer, Capital Research and Management Company takes into account such
factors as where the company is legally organized, maintains its principal
corporate offices, or conducts its principal operations.) For temporary
defensive purposes, the fund may invest principally or entirely in securities
that are denominated in U.S. dollars or whose issuers are domiciled in the
United States. Securities denominated in U.S. dollars include American
Depositary Receipts and European Depositary Receipts. Generally ADRs, in
registered form, are dollar denominated securities designed for use in the U.S.
securities markets, which represent and may be converted into the underlying
foreign security. EDRs, in bearer form, are designed for use in the European
securities markets.
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 7
<PAGE>
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CURRENCY TRANSACTIONS
The fund can purchase and sell currencies to facilitate securities transactions
and enter into forward currency contracts to hedge against changes in currency
exchange rates. While entering into forward currency transactions could minimize
the risk of loss due to a decline in the value of the hedged currency, it could
also limit any potential gain which might result from an increase in the value
of the currency. The fund will not generally attempt to protect against all
potential changes in exchange rates.
RESTRICTED SECURITIES AND LIQUIDITY
The fund may purchase securities subject to restrictions on resale. All such
securities whose principal trading market is in the U.S. will be considered
illiquid unless they have been specifically determined to be liquid under
procedures which may be adopted by the fund's board of directors, taking into
account factors such as the frequency and volume of trading, the commitment of
dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.
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MULTIPLE PORTFOLIO COUNSELOR SYSTEM
The basic investment philosophy of Capital Research and Management Company is to
seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system the
portfolio of a fund is divided into segments which are managed by individual
counselors. Counselors decide how their respective segments will be invested
(within the limits provided by the fund's objective(s) and policies and by
Capital Research and Management Company's investment committee). In addition,
Capital Research and Management Company's research professionals may
make investment decisions with respect to a portion of the fund's portfolio.
The primary individual portfolio counselors for the fund are listed on the
following page.
8 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
............................
YEARS OF EXPERIENCE WITH CAPITAL
PORTFOLIO AS PORTFOLIO COUNSELOR RESEARCH AND
COUNSELORS FOR MANAGEMENT
FOR CAPITAL CAPITAL WORLD GROWTH COMPANY OR
WORLD GROWTH AND AND INCOME FUND ITS
INCOME FUND PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES TOTAL YEARS
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<S> <C> <C> <C> <C>
THIERRY Chairman of the Board 5 years (since the 35 years 35 years
VANDEVENTER and Principal fund began operations)
Executive Officer of
the fund. Director,
Capital Research and
Management Company
- ----------------------------------------------------------------------------------------------------
STEPHEN E. Senior Vice President 5 years (since the 25 years 32 years
BEPLER of the fund. Senior fund began operations)
Vice President,
Capital Research
Company
- ----------------------------------------------------------------------------------------------------
MARK E. DENNING Senior Vice President 5 years (since the 16 years 16 years
of the fund. Director, fund began operations)
Capital Research and
Management Company
- ----------------------------------------------------------------------------------------------------
JANET A. Senior Vice President 5 years (since the 16 years 22 years
MCKINLEY of the fund. Director, fund began operations)
Capital Research and
Management Company
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WILLIAM R. Senior Vice President 5 years (since the 28 years 35 years
GRIMSLEY and Director, Capital fund began operations)
Research and
Management Company
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The fund began operations on March 26, 1993.
* Company affiliated with Capital Research and Management Company.
</TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 9
<PAGE>
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INVESTMENT RESULTS
The fund may from time to time compare investment results to various indices or
other mutual funds. Fund results may be calculated on a total return, yield
and/or distribution rate basis. Results calculated without a sales charge will
be higher.
X TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital
gain distributions.
X YIELD is computed by dividing the net investment income per share earned by
the fund over a given period of time by the maximum offering price per share
on the last day of the period, according to a formula mandated by the
Securities and Exchange Commission. A yield calculated using this formula may
be different than the income actually paid to shareholders.
X DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by dividing the dividends paid over the last
12 months by the sum of the month-end price and the capital gain distributions
paid over the last 12 months.
INVESTMENT RESULTS
(FOR PERIODS ENDED DECEMBER 31, 1997)
<TABLE>
<CAPTION>
THE FUND THE FUND
AT NET AT MAXIMUM
AVERAGE ANNUAL ASSET SALES MSCI
TOTAL RETURNS: VALUE(1) CHARGE(1,2) WORLD(3)
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<S> <C> <C> <C>
One year 17.99% 11.21% 16.23%
....................................................................................
Lifetime(4) 17.46% 16.01% 14.97%
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Yield(1,2): 2.27%
Distribution Rate(2): 2.30%
</TABLE>
(1) These fund results were calculated according to a standard formula that is
required for all stock and bond funds.
(2) The maximum sales charge has been deducted.
(3) Morgan Stanley Capital International World Index measures 22 major stock
markets throughout the world, including the U.S. This index is unmanaged and
does not reflect sales charges, commissions or expenses.
(4) The fund began investment operations on March 26, 1993.
10 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
Here are the fund's annual total returns calculated without a sales charge.
This information is being supplied on a calendar year basis.
<bar chart>
<TABLE>
<CAPTION>
93 94 95 96 97
<S> <C> <C> <C> <C>
22.22 1.22 21.39 21.55 17.99
</TABLE>
<end bar chart>
Past results are not an indication of future results.
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 11
<PAGE>
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DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund pays dividends, which may fluctuate, four times a year (usually in
March, June, September and December). Capital gains, if any, are also usually
distributed in December. When a dividend or capital gain is distributed, the net
asset value per share is reduced by the amount of the payment.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
FEDERAL TAXES
In any fiscal year in which the fund qualifies as a regulated investment company
and distributes to shareholders all of its net investment income and net capital
gains, the fund itself is relieved of federal income tax.
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the amount
and federal tax status of all income distributions paid during the prior year.
Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE FUND
TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law also
requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement of additional information and your tax
adviser for further information.
12 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
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FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Maryland corporation in 1992. All fund operations are supervised by the
fund's board of directors which meets periodically and performs duties required
by applicable state and federal laws. Members of the board who are not employed
by Capital Research and Management Company or its affiliates are paid certain
fees for services rendered to the fund as described in the statement of
additional information. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for the fund. The fund does not
hold annual meetings of shareholders. However, significant matters that require
shareholder approval, such as certain elections of board members or a change in
a fundamental investment policy, will be presented to shareholders at a meeting
called for such purpose. Shareholders have one vote per share owned. At the
request of the holders of at least 10% of the shares, the fund will hold a
meeting at which any member of the board could be removed by a majority vote.
THE INVESTMENT ADVISER
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the investment adviser to the fund
and other funds, including those in The American Funds Group. Capital Research
and Management Company, a wholly owned subsidiary of The Capital Group
Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA
90071. Capital Research and Management Company manages the investment portfolio
and business affairs of the fund. The management fee paid by the fund to Capital
Research and Management Company may not exceed 0.60% of the fund's average net
assets annually and declines at certain asset levels. The total management fee
paid by the fund, as a percentage of average net assets, for the previous fiscal
year is discussed earlier under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company Institute's
Advisory Group on Personal Investing. This policy has also been incorporated
into the fund's code of ethics.
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the board. The 12b-1 fee paid by the fund,
as a
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 13
<PAGE>
percentage of average net assets, for the previous fiscal year is discussed
earlier under "Expenses." Since these fees are paid out of the fund's assets on
an ongoing basis, over time they will increase the cost of an investment and may
cost you more than paying higher sales loads in lieu of these fees.
PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality of executions. Fixed-income
securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. In underwritten offerings,
securities are usually purchased at a fixed price which includes an amount of
compensation to the dealer, generally referred to as a concession or discount.
On occasion, securities may be purchased directly from an issuer, in which case
no commissions or discounts are paid. In the over-the-counter market,
purchases and sales are transacted directly with principal market-makers except
in those circumstances where it appears better prices and executions are
available elsewhere.
Subject to the above policy, when two or more brokers (either directly or
through their correspondent clearing agents) are in a position to offer
comparable prices and executions, preference may be given to brokers who have
sold shares of the fund or have provided investment research, statistical, and
other related services for the benefit of the fund and/or other funds served by
Capital Research and Management Company.<
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
14 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[MAP]
<TABLE>
<S> <C> <C> <C>
WESTERN SERVICE WESTERN CENTRAL EASTERN CENTRAL EASTERN SERVICE
CENTER SERVICE CENTER SERVICE CENTER CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/530-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 15
<PAGE>
SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services, which
are summarized below, are available only in states where they may be legally
offered and may be terminated or modified at any time upon 60 days' written
notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT POLICIES IS
CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. In addition, an
easy-to-read guide to owning a fund in The American Funds Group titled "Welcome
to the Family" is sent to new shareholders and is available by writing or
calling American Funds Service Company.
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS OR
ACCOUNTS HELD BY INVESTMENT DEALERS. IF YOU ARE INVESTING IN SUCH A MANNER, YOU
SHOULD CONTACT YOUR PLAN ADMINISTRATOR/TRUSTEE OR DEALER ABOUT WHAT SERVICES ARE
AVAILABLE AND WITH QUESTIONS ABOUT YOUR ACCOUNT.<
- --------------------------------------------------------------------------------
PURCHASING SHARES
HOW TO PURCHASE SHARES
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, computer,
wire, or bank debit. You may also establish or add to your account by exchanging
shares from any of your other accounts in The American Funds Group. The fund and
American Funds Distributors reserve the right to reject any purchase order for
any reason. This includes exchange purchase orders that may place an unfair
burden on other shareholders due to their frequency.<
Various purchase options are available as described below, subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
X Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
X Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the fund
(with no sales charge). This will be done automatically unless you elect to
have the dividends and/or capital gain distributions paid to you in cash.
16 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
X Cross-Reinvestment
You may invest your dividends and capital gain distributions into any other
fund in The American Funds Group.
X Exchange Privilege
You may exchange your shares into other funds in The American Funds Group,
generally with no sales charge. Exchanges of shares from the money market
funds that were initially purchased with no sales charge will generally be
subject to the appropriate sales charge. You may also elect to automatically
exchange shares among any of the funds in The American Funds Group. Exchange
requests may be made in writing, by telephone including American FundsLine(R),
by computer using American FundsLine OnLine(SM) (see below), or by fax.
EXCHANGES HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES
AND PURCHASES.<
X Retirement Plans
You may invest in the fund through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE
The fund's share price, also called net asset value, is determined as of 4:00
p.m. Eastern time (the normal close of trading) every day the New York Stock
Exchange is open. The fund calculates its net asset value per share, generally
using market prices, by dividing the total value of its assets after subtracting
liabilities by the number of its shares outstanding. Shares are purchased at the
offering price next determined after your investment is received and accepted by
American Funds Service Company. The offering price is the net asset value plus a
sales charge, if applicable.
SHARE CERTIFICATES
Shares are credited to your account, and certificates are not issued unless you
request them by writing to American Funds Service Company.
INVESTMENT MINIMUMS
- --------------------------------------------------------------------
<TABLE>
<S> <C>
To establish an account................................... $ 1,000
For a retirement plan account........................ $ 250
For a retirement plan account through payroll $ 25
deduction..........................................
To add to an account...................................... $ 50
For a retirement plan account........................ $ 25
</TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 17
<PAGE>
SALES CHARGES
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
........................ DEALER
NET CONCESSION AS
OFFERING AMOUNT % OF OFFERING
INVESTMENT PRICE INVESTED PRICE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
...........................................................................
$50,000 but less than $100,000 4.50% 4.71% 3.75%
...........................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
...........................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
...........................................................................
$500,000 but less than $1 million 2.00% 2.04% 1.60%
...........................................................................
$1 million or more and certain
other investments described below see below see below see below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. Investments by retirement plans, foundations or endowments with $50
million or more in assets may be made with no sales charge and are not subject
to a contingent deferred sales charge. A dealer concession of up to 1% may be
paid by the fund under its Plan of Distribution and/or by American Funds
Distributors on investments made with no initial sales charge. Investments by
certain individuals and entities including employees and other associated
persons of dealers authorized to sell shares of the fund and Capital Research
and Management Company and its affiliated companies are not subject to a
sales charge.<
ADDITIONAL DEALER COMPENSATION
In addition to the concessions listed, up to 0.25% of average net assets is paid
annually to qualified dealers for providing certain services pursuant to the
fund's Plan of Distribution. American Funds Distributors currently provides
additional compensation to the top 100 dealers who have sold shares of funds in
The American Funds Group based on the pro rata share of a qualifying dealer's
sales.<
18 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your costs. You
must let your investment dealer or American Funds Service Company know if you
qualify for a reduction in your sales charge using one or any combination of the
methods described below.
X Aggregation
Investments that may be aggregated include those made by you, your spouse and
your children under the age of 21, if (i) all parties are purchasing shares
for their own account(s), including any business account solely "controlled
by," as well as any retirement plan or trust account solely for the benefit
of, these individuals or (ii) these individuals are making gifts to other
individuals or charities. Investments made for multiple employee benefit plans
of a single employer or "affiliated" employers may be aggregated provided they
are not also aggregated with individual accounts. Finally, investments made by
a common trust fund or other diversified pooled account not specifically
formed for the purpose of accumulating fund shares may be aggregated.
Purchases made for nominee or street name accounts will generally not
be aggregated with those made for other accounts unless qualified as
described above.
X Concurrent Purchases
You may combine concurrent purchases of two or more funds in The American
Funds Group, except direct purchases of the money market funds. Shares of the
money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge
do qualify.
X Right of Accumulation
You may take into account the current value of your existing holdings in The
American Funds Group to determine your sales charge. Direct purchases of the
money market funds are excluded.
X Statement of Intention
You may enter into a non-binding commitment to invest a certain amount (which,
at your request, may include purchases made during the previous 90 days) in
non-money market fund shares over a 13-month period. A portion of your account
may be held in escrow to cover additional sales charges that may be due if
your total investments over the statement period are insufficient to qualify
for the applicable sales charge reduction.<
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 19
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES
HOW TO SELL SHARES
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American FundsLine(R)
or American FundsLine OnLine(SM) (see below). In addition, you may sell shares
in amounts of $50 or more automatically. If you sell shares through your
investment dealer you may be charged for this service. Shares held for you in
your dealer's street name must be sold through the dealer.<
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R), by computer
using American FundsLine OnLine(SM), or by fax. Sales by telephone, computer or
fax are limited to $50,000 in accounts registered to individual(s) (including
non-retirement trust accounts). In addition, checks must be made payable to the
registered shareholder(s) and mailed to an address of record that has been used
with the account for at least 10 days.<
Proceeds will not be mailed until sufficient time has passed to provide
reasonable assurance that checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may take up to 15 calendar days
from the purchase date). Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and as permissible under the
Investment Company Act of 1940), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or
redemption checks.<
The fund may, with 60 days' written notice, close your account if due to a
sale of shares the account has a value of less than the minimum required
initial investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your signature
must be guaranteed by a member firm of a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association, or credit
union that is an eligible guarantor institution. A signature guarantee is not
currently required for any sale of $50,000 or less provided the check is made
payable to the registered shareholder(s) and is mailed to the address of record
on the account, and provided the address has been used with the account for at
least 10 days. Additional documentation may be required for sales of shares held
in corporate, partnership or fiduciary accounts.
20 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. Redemption proceeds of
shares representing direct purchases in the money market funds are excluded.
Reinvestment will be at the next calculated net asset value after receipt and
acceptance by American Funds Service Company.<
- --------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM)
You may check your share balance, the price of your shares, or your most recent
account transactions, sell shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) or American
FundsLine OnLine(SM). To use these services, call 800/325-3590 from a
TouchTone(TM) telephone or access The American Funds Web site on the Internet at
www.americanfunds.com.<
TELEPHONE AND COMPUTER PURCHASES, SALES AND EXCHANGES
Unless you opt out of the telephone or computer (including American FundsLine(R)
or American FundsLine OnLine(SM)) or fax purchase, sale and/or exchange options
(see below), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liabilities (including attorney fees) which may be
incurred in connection with the exercise of these privileges, provided American
Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, the fund may be liable for
losses due to unauthorized or fraudulent instructions.<
Generally, all shareholders are automatically eligible to use these options.
However, you may elect to opt out of these options by writing American Funds
Service Company. (You may also reinstate them at any time by writing to American
Funds Service Company.)
ACCOUNT STATEMENTS
You will receive regular confirmation statements reflecting transactions in your
account. Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.<
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 21
<PAGE>
NOTES
22 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
NOTES
CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS 23
<PAGE>
<TABLE>
<S> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER SERVICES
SERVICES SERVICES American Funds
American Funds Call your employer Distributors
Service Company or 800/421-9900 ext. 11
800/421-0180 ext. 1 plan administrator
FOR 24-HOUR INFORMATION
American American Funds
FundsLine(R) Internet Web site
800/325-3590 http://www.americanfunds.com
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
---------------------------------------------------------------
MULTIPLE TRANSLATIONS
This prospectus may be translated into other languages. In the
event of any inconsistency or ambiguity as to the meaning of
any word or phrase in a translation, the English text will
prevail.
---------------------------------------------------------------
OTHER FUND INFORMATION
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS
Includes financial statements, detailed performance
information, portfolio holdings, a statement from portfolio
management and the independent accountant's report (in the
annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI)
Contains more detailed information on all aspects of the fund,
including the fund's financial statements.
A current SAI has been filed with the Securities and Exchange
Commission ("SEC"). It is incorporated by reference into this
prospectus and is available along with other related materials
on the SEC's Internet Web site at http://www.sec.gov.
CODE OF ETHICS
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
Call American Funds or Write to the Secretary
Service Company of the fund
800/421-0180 ext. 1 333 South Hope Street
Los Angeles, CA 90071
</TABLE>
This prospectus has been printed on recycled paper. [LOGO]
24 CAPITAL WORLD GROWTH AND INCOME FUND / PROSPECTUS
<PAGE>
CAPITAL WORLD GROWTH AND INCOME FUND, INC.
Part B
Statement of Additional Information
FEBRUARY 1, 1998<
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, 1998. 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
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 3
Fund Directors and Officers 6
Management 11
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 16
Redeeming Shares 22
Shareholder Account Services and Privileges 23
Execution of Portfolio Transactions 25
General Information 26
Investment Results 27
Description of Ratings for Debt Securities 29
Financial Statements Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER "INVESTMENT POLICIES AND RISKS."
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 unrated but determined to be of equivalent quality by the
fund's investment adviser, Capital Research and Management Company (the
"Investment Adviser") including bonds rated BB and Ba or below ("junk" bonds or
"high-yield, high-risk" bonds). (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 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 it buys a security and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and price. 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. 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, liquidation of the collateral by the fund may be
delayed or limited. For purposes of Investment Restriction number five, under
"Investment Restrictions" 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 -- The fund has the ability to enter into forward
currency contracts to protect against changes in currency exchange rates. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. Forward currency contracts entered into by the fund will involve the
purchase or sale of a currency against the U.S. dollar. The fund will
segregate liquid assets which will be marked to market daily to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions 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.
Certain 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 and others are supported only by the credit of the issuing
government agency or instrumentality.
CASH EQUIVALENTS -- The fund invests in various high-quality money market
instruments that mature, or may be redeemed or resold, in 13 months or less (25
months in the case of U.S. government securities). These include: (1)
commercial paper (notes issued by corporations or governmental bodies); (2)
certificates of deposit and banker's acceptances (time drafts on a commercial
bank where the bank accepts an irrevocable obligation to pay at maturity); (3)
savings association and bank obligations; (4) securities of the U.S.
Government, its agencies or instrumentalities; and (5) corporate bonds and
notes.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities
it assumes the risk of any decline in value of the security beginning on the
date of the agreement. When the fund agrees to sell such securities, it does
not participate in further gains or losses with respect to the securities
beginning on the date of the agreement. If the other party to such a
transaction fails to deliver or pay for the securities, the fund could miss a
favorable price or yield opportunity, or could experience a loss beginning on
the date of the agreement.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly may increase. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its
payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets will likely occur than were it
not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
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. Investment limitations expressed in the following
restrictions are considered at the time securities are purchased and are based
on the fund's net assets unless otherwise indicated. 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 as amended (the "1940 Act");
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 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 purchasing 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. (The fund currently
holds one security that is technically classified as an investment company
(which represents less than 0.1% of the fund's portfolio as of November 30,
1997)).
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
DIRECTORS AND DIRECTOR COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION WITH PRINCIPAL AGGREGATE TOTAL TOTAL
AND AGE REGISTRANT OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
DURING (INCLUDING (INCLUDING OF FUND
PAST 5 YEARS VOLUNTARILY VOLUNTARILY BOARDS
(POSITIONS DEFERRED DEFERRED ON WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION) DIRECTOR
ORGANIZATIONS FROM THE FUND FROM ALL FUNDS SERVES
LISTED MAY HAVE DURING FISCAL MANAGED BY
CHANGED DURING YEAR ENDED CAPITAL
THIS PERIOD) 11/30/97 RESEARCH AND
MANAGEMENT
COMPANY/2/
FOR THE YEAR
ENDED
11/30/97
<S> <C> <C> <C> <C> <C>
H. Frederick Director Private $15,112/4/ $163,900 18
Christie Investor; former
P.O. Box 144 President and
Palos Verdes Chief Executive
Estates, CA Officer, The
90274 Mission Group
Age: 64 (non-utility
holding company,
subsidiary of
Southern
California
Edison Company)
+Paul G. Haaga, Jr. President and Executive Vice None/3/ None/3/ 14
333 South Director President and
Hope Street Director,
Los Angeles, Capital Research
CA 90071 and Management
Age: 49 Company
Mary Myers Director President and $14,700/4/ $89,000 4
Kauppila Founder, Energy
One Winthrop Investment, Inc.
Square
Boston, MA
02110
Age: 43
Gail L. Neale Director President, The $15,500/4/ $58,100 4
The Lovejoy Lovejoy
Consulting Consulting
Group Group, Inc.;
154 Prospect former Executive
Parkway Vice President,
Burlington, Salzburg
VT 05401 Seminar; former
Age: 62 Director of
Development and
the Capital
Campaign,
Hampshire
College
Robert J. Director Chichele $15,200 $39,700 3
O'Neill Professor of the
Vine Cottage History of War
Whitney, OXON and Fellow of
United All Souls
Kingdom College,
Age: 61 University of
Oxford
Donald E. Director Retired; former $15,500 $71,850 4
Petersen Chairman of the
255 East Board and Chief
Brown Executive
Birmingham, Officer, Ford
MI 48009 Motor Company
Age: 71
Stefanie Powers Director Actor; $0/5/ $0/5/ 2
2661 Hutton President,
Drive William Holden
Beverly Wildlife
Hills, CA Foundation
90210
Age: 55
Frank Stanton Director President $16,800 $35,600 2
25 West 52nd Emeritus, CBS
Street Inc.; Chairman
New York, NY Emeritus, The
10019 American Red
Age: 89 Cross
+Thierry Vandeventer Chairman of the Director, None/3/ None/3/ 2
3 Place des Board and Capital Research
Bergues Principal and Management
1201 Geneva, Executive Company
Switzerland Officer
Age: 62
Charles Wolf, Director Dean, The RAND $15,500 $60,500 4
Jr. Graduate School;
1700 Main Senior Economic
Street Adviser, The
Santa Monica, RAND
CA 90407 Corporation.
Age: 73
</TABLE>
+ Directors who are considered "interested persons" of the fund as defined in
the 1940 Act on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company.<
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 of the funds in
The American Funds Group as designated by the director.
2 Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, American Balanced Fund, Inc., American
High-Income Municipal Bond Fund, Inc., American High-Income Trust, American
Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management Trust of
America, Capital Income Builder, Inc., Capital World Growth and Income Fund,
Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America.
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U.S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicles for certain
variable insurance contracts, and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.<
3 Paul G. Haaga, Jr. and Thierry Vandeventer are affiliated with the Investment
Adviser and, accordingly, receive no remuneration from the fund.
4 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) as of the fiscal year
ended November 30, 1997 for participating Directors is as follows: H. Frederick
Christie ($26,130); Mary Myers Kauppila ($71,921); Gail L. Neale ($55,852);
Donald E. Petersen ($45,453). Amounts deferred and accumulated earnings
thereon are not funded and are general unsecured liabilities of the fund until
paid to the Director.<
5 Stefanie Powers was elected to the Board of Directors on December 4, 1997.
She received no compensation from the fund during the fiscal year ended
November 30, 1997.<
OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
Thierry Vandeventer
(see above)
Paul G. Haaga, Jr.
(see above)
Larry P. Clemmensen 50 Senior Vice Senior Vice President and Director,
333 South Hope Street President Capital Research and Management
Los Angeles, CA 90071 Company; President and Director, The
Capital Group Companies, Inc.
Stephen E. Bepler 55 Senior Vice Senior Vice President,
630 Fifth Avenue President Capital Research Company
New York, NY 10111
Mark E. Denning 40 Senior Vice Director, Capital Research and Management
25 Bedford Street President Company; Senior Vice President and
London, England Director, Capital Research Company
Janet A. McKinley 43 Senior Vice Director, Capital Research and Management
630 Fifth Avenue President Company; Senior Vice President, Capital
New York, NY 10111 Research Company
Carl M. Kawaja 33 Vice President Vice President, Capital Research Company
P.O. Box 7650
San Francisco, CA 94120
Vincent P. Corti 41 Secretary Vice President - Fund Business Management
333 South Hope Street Group, Capital Research and Management
Los Angeles, CA 90071 Company
R. Marcia Gould 43 Treasurer Vice President - Fund Business Management
135 S. State College Blvd. Group, Capital Research and
Brea, CA 92821 Management
Company
Diana J. Prohoroff 48 Assistant Assistant Vice President - Fund Business
135 S. State College Blvd. Treasurer Management Group, Capital Research and
Brea, CA 92821 Management Company
</TABLE><
All of the officers listed are officers or employees of the Investment Adviser
or affiliated companies. No compensation is paid by the fund to any Director
or officer who is a director, officer or employee of the Investment Adviser or
affiliated companies. The fund pays fees of $9,000 per annum to Directors who
are not affiliated with the Investment Adviser, plus $800 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 January 1,
1998 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 (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have a number of years of investment
experience. The Investment Adviser is located at 333 South Hope Street, Los
Angeles, CA 90071, and at 135 South State College Boulevard, Brea, CA 92821.
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. The Investment Adviser is a wholly owned subsidiary of The
Capital Group Companies, Inc.
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 more than $175 billion of stocks,
bonds and money market instruments and serves over eight 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 as of February 1, 1993, will continue in effect until October
31, 1998, 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. The management fee is based on an annual rate of
0.60% of the first $500 million of average net assets; 0.50% of such assets in
excess of $500 million but not exceeding $1 billion; 0.46% of such assets in
excess of $1 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 billion; 0.40% of such assets in
excess of $4 billion but not exceeding $6.5 billion; and 0.395% of such assets
in excess of $6.5 billion.
During the fiscal years ended November 30, 1997, 1996 and 1995, the Investment
Adviser's total fee amounted to $27,481,000, $19,343,000, and $14,847,000
respectively.<
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1 under the 1940 Act . 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, 1997 amounted to $7,994,000 after allowance of $40,304,000 to
dealers. During the fiscal years ended November 30, 1996 and 1995, the
Principal Underwriter retained $4,496,000 and $2,990,000 after allowance of
$22,759,000 and $15,545,000, respectively.<
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
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees). During the fiscal year
ended November 30, 1997, the fund paid $14,623,000 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.
Distributions of investment company taxable income, including short-term
capital gains, generally are taxable to the shareholder as ordinary income,
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the fund. The fund also intends to continue distributing
to shareholders all of the excess of net long-term capital gain over net
short-term capital loss on sales of securities. A capital gain distribution,
whether paid in cash or reinvested in shares, is taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has
held the shares or whether such gain was realized by the fund before the
shareholder acquired such shares and was reflected in the price paid for the
shares.
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.
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.<
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 gains on assets held more than 18 months is 20%, and on assets held
more than one year and not more than 18 months is 28%; and the maximum
corporate tax applicable to ordinary income and net capital gain is 35% (
However, to eliminate the benefit of lower marginal corporate income tax rates,
corporations which have 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 Individual Retirement Account ("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
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums $50 minimum (except where a lower minimum is
and Fund Numbers" for noted under "Investment Minimums and Fund
initial investment minimums. Numbers").
By contacting Visit any investment dealer Mail directly to your investment dealer's address
your investment who is registered in the printed on your account statement.
dealer state where thepurchase is
made and who has a sales
agreement with American Funds
Distributors.
By mail Make your check payable to Fill out the account additions form at the bottom of a
the fund and mail to the recent account statement, make your check payable
address indicated on the to the fund, write your account number on your
account application. Please check, and mail the check and form in the envelope
indicate an investment provided with your account statement.
dealer on the account
application.
By telephone Please contact your Complete the "Investments by Phone" section on the
investment dealer to account application or American FundsLink
open account, then follow Authorization Form. Once you establish the
the procedures for privilege, you, your financial advisor or any person
additional investments. with your account information can call American
FundsLine(R) and make investments by telephone
(subject to conditions noted in "Shareholder Account
Services and Privileges - Telephone and Computer
Redemptions and Exchanges" below).
By computer Please contact your Complete the American FundsLink Authorization
investment dealer to open Form. Once you establish the privilege, you, your
account, then follow the financial adviser or any person with your account
procedures for additional information may access American FundsLine
investments. OnLine(SM) on the Internet and make investments
by computer (subject to conditions noted in
"Shareholder Account Services and Privileges -
Telephone and Computer Purchases, Redemptions
and Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your additional investments
obtain your account in the same manner as described under "Initial
number(s), if necessary. Investment."
Please indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
<
- --
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine(R) (see description
below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) $1,000 02
American Balanced Fund(R) 500 11
American Mutual Fund(R) 250 03
Capital Income Builder(R) 1,000 12
Capital World Growth and Income Fund(SM) 1,000 33
EuroPacific Growth Fund(R) 250 16
Fundamental Investors(SM) 250 10
The Growth Fund of America(R) 1,000 05
The Income Fund of America(R) 1,000 06
The Investment Company of America(R) 250 04
The New Economy Fund(R) 1,000 14
New Perspective Fund(R) 250 07
SMALLCAP World Fund(R) 1,000 35
Washington Mutual Investors Fund(SM) 250 01
BOND FUNDS
American High-Income Municipal Bond Fund(R) 1,000 40
American High-Income Trust(SM) 1,000 21
The Bond Fund of America(SM) 1,000 08
Capital World Bond Fund(R) 1,000 31
Intermediate Bond Fund of America(SM) 1,000 23
Limited Term Tax-Exempt Bond Fund of 1,000 43
America(SM)
The Tax-Exempt Bond Fund of America(R) 1,000 19
The Tax-Exempt Fund of California(R)* 1,000 20
The Tax-Exempt Fund of Maryland(R)* 1,000 24
The Tax-Exempt Fund of Virginia(R)* 1,000 25
U.S. Government Securities Fund(SM) 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(R) 2,500 09
The Tax-Exempt Money Fund of America(SM) 2,500 39
The U.S. Treasury Money Fund of America(SM) 2,500 49
___________
*Available only in certain states.
</TABLE>
- --
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for IRAs. Minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
The minimum is $50 for additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10% 5.75% 5.00%
$50,000 but less than $100,000 4.71 4.50 3.75
BOND FUNDS
Less than $25,000 4.99 4.75 4.00
$25,000 but less than $50,000 4.71 4.50 3.75
$50,000 but less than $100,000 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than $250,000 3.63 3.50 2.75
$250,000 but less than $500,000 2.56 2.50 2.00
$500,000 but less than $1,000,000 2.04 2.00 1.60
$1,000,000 or more none none (see below)
--
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $50 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
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value. <
The Principal Underwriter, at its expense (from a designated percentage of its
income), currently provides additional compensation to dealers. Currently these
payments are limited to the top one hundred dealers who have sold shares of the
fund or other funds in The American Funds Group. These payments will be based
on a pro rata share of a qualifying dealer's sales. The Principal Underwriter
will, on an annual basis, determine the advisability of continuing these
payments.<
Any employer-sponsored 403(b) plan or defined contribution plan qualified under
Section 401(a) of the Code including a "401(k)" plan with 100 or more eligible
employees or any other purchaser investing at least $1 million in shares of the
fund (or in combination with shares of other funds in The American Funds Group
other than the money market funds) may purchase shares at net asset value;
however, a contingent deferred sales charge of 1% is imposed on certain
redemptions made within twelve months of the purchase. (See "Redeeming
Shares--Contingent Deferred Sales Charge.") Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge.<
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES -- The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with the American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans, foundations and endowments with assets of $50 million
or more; (5) insurance company separate accounts; (6) accounts managed by
subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense. <
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 subject to the following statement of intention (the
"Statement") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize a Statement in order to
qualify for a reduced sales charge, 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 American
Funds Service Company (the "Transfer Agent"). All dividends and any capital
gain distributions on shares held in escrow will be credited to the
shareholder's account in shares (or paid in cash, if requested). If the
intended investment is not completed within the specified 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 of such purchases had been made at a single time. If the difference
is not paid within 45 days after written request by the Principal Underwriter
or the securities dealer, the appropriate number of shares held in escrow will
be redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser 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. Existing holdings eligible for rights
of accumulation (see the prospectus and account application) may be credited
toward satisfying the Statement. During the Statement period reinvested
dividends and capital gain distributions, investments in money market funds,
and investments made under a right of reinstatement will not be credited toward
satisfying the Statement.<
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 regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. 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.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if (i) all parties are purchasing shares for
their own account(s), which may include purchases through employee benefit
plan(s) such as an IRA, individual-type 403(b) plan or single-participant
Keogh-type plan or by a business solely controlled by these individuals (for
example, the individuals own the entire business) or by a trust (or other
fiduciary arrangement) solely for the benefit of these individuals or (ii)
these individuals are making gifts to other individuals or charities.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are (1) for a single trust estate or fiduciary
account, including an employee benefit plan other than those described above,
or (2) made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.<
PRICE OF SHARES -- Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or the Transfer
Agent; 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.
In case of orders sent directly to the fund or the Transfer Agent, an
investment dealer MUST be indicated. 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 you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at 4:00 p.m., New York time each
day the New York Stock Exchange is open. For example, if the Exchange closes
at 1:00 p.m. on one day and at 4:00 p.m. on the next, the fund's share price
would be determined as of 4:00 p.m. New York time on both days. The New York
Stock Exchange is currently closed on weekends and on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The
net asset value per share is determined as follows:<
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
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.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, 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.
The Principal Underwriter will not knowingly sell shares of the fund directly
or indirectly, to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 3% of the
outstanding shares of the fund without the consent of a majority of the fund's
Directors.<
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Send a letter of instruction specifying the name of the fund,
Funds Service Company (at the number of shares or dollar amount to be sold, your name
the appropriate address and account number. You should also enclose any share
indicated under "Fund certificates you wish to redeem. For redemptions over
Organization and $50,000 and for certain redemptions of $50,000 or less (see
Management - Principal below), your signature must be guaranteed by a bank,
Underwriter and Transfer savings association, credit union, or member firm of a
Agent" in the prospectus) domestic stock exchange or the National Association of
Securities Dealers, Inc. that is an eligible guarantor institution.
You should verify with the institution that it is an eligible
guarantor prior to signing. Additional documentation may be
required for redemption of shares held in corporate,
partnership or fiduciary accounts. Notarization by a Notary
Public is not an acceptable signature guarantee.
By contacting your If you redeem shares through your investment dealer, you
investment dealer may be charged for this service. SHARES HELD FOR YOU IN
YOUR INVESTMENT DEALER'S STREET NAME MUST BE REDEEMED
THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is registered in
check sent to you by using the name of an individual(s), a UGMA/UTMA custodian, or a
American FundsLine(R) or non-retirement plan trust. These redemptions may not
American FundsLine exceed $50,000 per shareholder each day and the check
OnLine(SM) or by must be made payable to the shareholder(s) of record and be
telephoning, faxing, or sent to the address of record provided the address has been
telegraphing American used with the account for at least 10 days. See "Fund
Funds Service Company Organization and Management - Principal Underwriter and
(subject to the conditions Transfer Agent" in the prospectus and "Exchange Privilege"
noted in this section and in below for the appropriate telephone or fax number.
"Telephone Purchases,
Sales and Exchanges" in the
prospectus)
In the case of the money Upon request (use the account application for the money
market funds, you may have market funds) you may establish telephone redemption
redemptions wired to your privileges (which will enable you to have a redemption sent to
bank by telephoning your bank account) and/or check writing privileges. If you
American Funds Service request check writing privileges, you will be provided with
Company ($1,000 or more) checks that you may use to draw against your account.
or by writing a check ($250 These checks may be made payable to anyone you
or more) designate and must be signed by the authorized number of
registered shareholders exactly as indicated on your checking
account signature card.
</TABLE>
<
- ---
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
REDEMPTION OF SHARES -- The Transfer Agent may redeem the shares of any
shareholder if the shares owned by such shareholder through redemptions, market
decline or otherwise, have a value of less than the minimum initial investment
amount required of new shareholders, (determined, for this purpose only as the
greater of the shareholder's cost or current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gains distributions). Prior notice of at least 60 days will be given
to a shareholder before the involuntary redemption provision is made effective
with respect to the shareholder's account. The shareholder will have not less
than 30 days from the date of such notice within which to bring the account up
to the minimum determined as set forth above.
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 dates you select. 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
at least quarterly. 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 REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
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).
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to the Transfer Agent (see "Redeeming
Shares"), by contacting your investment dealer, by using American FundsLine(R)
or American FundsLine OnLine(SM) (see "American FundsLine(R) and American
FundsLine OnLine(SM)" below), or by telephoning 800/421-0180 toll-free, faxing
(see "Principal Underwriter and Transfer Agent" in the prospectus for the
appropriate fax numbers) or telegraphing the Transfer Agent. (See "Telephone
and Computer Purchases, Redemptions and Exchanges" below.) Shares held in
corporate-type retirement plans for which Capital Guardian Trust Company serves
as trustee may not be exchanged by telephone, computer, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.<
AUTOMATIC EXCHANGES -- You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
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.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from the
Transfer Agent. Dividend and capital gain reinvestments and purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.<
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM)-- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) or American
FundsLine OnLine(SM). To use this service, call 800/325-3590 from a
TouchTone(TM) telephone or access the American Funds Web site on the Internet
at www.americanfunds.com. Redemptions and exchanges through American
FundsLine(R) and American FundsLine OnLine(SM) are subject to the conditions
noted above and in "Shareholder Account Services and Privileges - Telephone and
Computer Purchases, Redemptions and Exchanges" below. You will need your fund
number (see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.<
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone or computer (including American FundsLine(R) or American FundsLine
OnLine(SM)), fax or telegraph purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, the fund may be liable
for losses due to unauthorized or fraudulent instructions. In the event that
shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.<
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 (either directly or through their
correspondent clearing agent) 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.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
November 30, 1997, 1996 and 1995 amounted to $6,500,000, $5,545,000 and
$3,091,000 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, 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.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $4,345,000 for the fiscal year ended November 30, 1997.<
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 auditing and accounting.
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. In an effort to reduce the volume of mail
shareholders receive form the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
shareholder reports. To receive additional copies of a report shareholders
should contact the Transfer Agent.<
PERSONAL INVESTING POLICY -- The Investment Adviser 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; blackout periods on personal investing for
certain investment personnel; a 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. <
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.
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 28, 1997
Net asset value and redemption price per share
(net assets divided by shares outstanding) $ 25.89
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) $ 27.47
INVESTMENT RESULTS
The fund's yield is 2.28% based on a 30-day (or one month) period ended
November 30, 1997, 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, 1997 was 9.67% and 15.85% 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 also calculate a distribution rate on a taxable and tax equivalent
basis. The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months. The
distribution rate may differ from the yield.
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 -- The Investment Adviser manages nine common
stock funds that are at least 10 years old. In the 10-year periods since
January 1, 1967 (127 in all), those funds have had better total returns than
the Standard and Poor's 500 Stock Composite Index in 91 of the 127 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 the Investment Adviser.
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
BOND RATINGS --
The ratings of Moody's and S&P 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 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."
S & P 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 S & P. 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 --
S & P: "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: "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."
<TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND
INVESTMENT PORTFOLIO, NOVEMBER 30, 1997
<S> <C> <C> <C>
- ------------------------------------------- ---------- ---------- ----------
Equity Securities Shares or Market Percent
(common and preferred stocks and convertible Principal Value of Net
debentures) Amount (Millions) Assets
- ------------------------------------------- ---------- ---------- ----------
TELECOMMUNICATIONS- 11.37% .00
Portugal Telecom, SA (Portugal) 2,737,600 $125.954 1.75%
Telefonica de Espana, SA (Spain) 2,900,000 83.579 1.16
Telecom Italia SpA, savings shares (Italy) 16,246,151 63.800
Telecom Italia SpA 588,775 3.676 .94
Koninklijke PTT Nederland NV (Netherlands) 1,627,800 65.308 .91
Telecom Corp. of New Zealand Ltd. (New Zealand) 6,391,000 32.749
Telecom Corp. of New Zealand Ltd. (American Depositary .00
Receipts) 386,700 15.855 .89
Telecom Corp. of New Zealand Ltd. (1) 3,038,610 15.571
Mannesmann AG (Germany) 120,075 55.844 .77
Hong Kong Telecommunications Ltd. (Hong Kong) 29,261,547 55.648 .77
Tele Danmark AS, Class B (American Depositary Receipts) .00
(Denmark) 924,100 27.607 .70
Tele Danmark AS, Class B 382,500 22.832
Telecom Argentina SA, Class B (American .00
Depositary Receipts) (Argentina) 1,632,700 50.103 .70
U S WEST Communications Group (USA) 950,000 42.928 .60
France Telecom (France) (2) 1,080,000 39.645 .55
Telecom Italia Mobile SpA, savings shares (Italy) 12,565,800 27.459
Telecom Italia Mobile SpA 2,224,200 8.973 .51
TELUS Corp. (Canada) 1,691,700 36.417 .51
British Telecommunications PLC (United Kingdom) 4,150,000 32.012 .44
Telefonos de Mexico, SA de CV, Class L (American .00
Depositary Receipts) (Mexico) 582,300 28.824 .40
TELECEL - Comunicacoes Pessoais, SA (Portugal) (2) 296,400 27.110 .38
Nortel Inversora SA preferred, Class B, (American
Depositary Receipts) (Argentina) 760,800 18.830 .26
NTL, Inc., 7.25% convertible .00
debentures 2005 (USA) (1) 9,000,000 10.148 .14
SmarTone Telecommunications Holdings Ltd. (Hong Kong-- .00
Incorporated in Bermuda) (1) 4,000,000 9.625 .13
Philippine Long Distance Telephone Co. (American Depositary
Receipts) (Philippines) 375,000 9.281 .13
Telefonica de Argentina SA, Class B (American .00
Depositary Receipts) (Argentina) 277,500 9.175 .13
AT&T Corp. (USA) 150,000 8.381 .12
Bell Atlantic Corp. (USA) 75,000 6.694 .09
AirTouch Communications (USA) (2) 117,820 4.624 .06
Deutsche Telekom AG (Germany) 132,900 2.691 .04
Telecomunicacoes Brasileiras SA, preferred nominative .00
(American Depositary Receipts) (Brazil) 14,000 1.461 .02
BANKING- 11.97% .00
Australia and New Zealand Banking Group Ltd. (Australia) 12,571,382 85.903 1.19
Bank of New York Co., Inc. (USA) 1,540,000 82.775 1.15
Royal Bank of Canada (Canada) 1,509,200 80.770 1.12
ForengsSparbanken AB (Sweden) 1,577,000 40.120 .56
Bank of Scotland (United Kingdom) 4,200,000 35.659 .50
First Chicago NBD Corp. (USA) 452,500 35.408 .49
Lloyds TSB Group PLC (United Kingdom) 2,970,000 33.838 .47
ABN AMRO Holding NV (Netherlands) 1,772,396 33.773 .47
National Bank of Canada (Canada) 2,000,000 29.569 .41
Chase Manhattan Corp. (USA) 250,000 27.156 .38
Safra Republic Holdings SA (Luxembourg) 266,000 26.866 .37
HSBC Holdings PLC (United Kingdom) 1,050,000 25.334 .35
Westpac Banking Corp. (Australia) 4,025,164 25.176 .35
Istituto Mobiliare Italiano SpA (American Depositary .00
Receipts) (Italy) 600,000 18.638 .33
Istituto Mobiliare Italiano SpA 500,000 5.216
Grupo Financiero Banamex Accival, SA de CV, Class B
(Mexico) (2) 2,993,000 6.562
Grupo Financiero Banamex Accival, SA de CV, Class L (2) 509,000 1.054 .32
Banco Nacional de Mexico, SA 11.00% convertible .00
debentures 2003 (1) $15,000,000 15.713
Banc One Corp. (USA) 440,000 22.605 .31
Unibanco-Uniao de Bancos Brasileiros, SA (Global Depositary .00
Receipts) (Brazil) (2) 780,000 22.425 .31
Banco de Galicia y Buenos Aires SA (American Depositary .00
Receipts) (Argentina) 840,000 19.740 .27
First Union Corp. (USA) 400,000 19.500 .27
Commonwealth Bank of Australia (Australia) 1,624,000 19.178 .27
Cie. Financiere de Paribas, Class A (France) 250,000 18.054 .25
Wilmington Trust Corp. (USA) 300,000 17.512 .24
National Australia Bank Ltd. (Australia) 1,307,527 17.237 .24
Crestar Financial Corp. (USA) 300,000 15.413 .21
Hang Seng Bank, Ltd. (Hong Kong) 1,500,000 13.196 .18
Washington Mutual, Inc. (USA) 180,000 12.442 .17
Bank of Nova Scotia (Canada) 234,200 10.264 .14
Asahi Bank, Ltd. (Japan) 2,250,000 9.509 .13
Bank of the Philippine Islands (Philippines) 3,098,400 7.958 .11
Allied Irish Banks, PLC (Ireland) 900,000 7.808 .11
Banco de Santander, SA (Spain) 192,000 5.804 .08
TB Finance (Cayman) Ltd., non-cumulative mandatory .00
exchangeable preference shares (Japan) 520 5.454 .08
MBL International Finance (Bermuda), 3.00% convertible debentures .00
2002 (Bermuda) 3,800,000 4.057 .06
National Westminster Bank PLC (United Kingdom) 260,200 3.944 .05
Bangkok Bank PCL, 3.25% convertible debentures 2004 .00
(Thailand) (1) $5,448,000 2.288 .03
MULTI-INDUSTRY- 5.56% .00
Imasco Ltd. (Canada) 1,786,200 63.856 .89
Siebe PLC (United Kingdom) 2,720,000 49.446 .69
Suez Lyonnaise des Eaux (France) 390,243 41.958 .58
Orkla AS, Class B (Norway) 351,000 27.081
Orkla AS, Class A 156,000 13.446 .57
Williams Holdings PLC (United Kingdom) 6,500,000 35.328 .49
Hutchison Whampoa Ltd. (Hong Kong) 4,857,000 32.360 .45
Lend Lease Corp. Ltd. (Australia) 830,314 16.897 .23
Societe Generale de Belgique (Belgium) 135,000 12.585 .18
FMC Corp. (USA) (2) 170,000 12.421 .17
Canadian Pacific Ltd. (Canada) 400,000 11.325 .16
Ayala Corp., 3.00% convertible debentures 2000 .00
(Philippines) $10,000,000 10.850 .15
Swire Pacific Ltd., Class A (Hong Kong) 2,000,000 10.013 .14
Jardine Strategic Holdings Ltd. (Singapore--Incorporated .00
in Bermuda) 3,434,311 9.307 .13
Jardine Strategic Holdings Ltd., warrants, expire 1998 (2 375,000 .032
Textron Inc. (USA) 150,000 8.869 .12
B.A.T Industries PLC (United Kingdom) 901,981 8.099 .11
U.S. Industries, Inc. (USA) 285,195 7.344 .10
Brierley Investments Ltd. (New Zealand) 6,394,238 4.529
Brierley Investments Ltd., $0.85 convertible preferred .10
shares 4,025,000 2.702
Tenneco Inc. (USA) 150,000 6.497 .09
Industriforvaltnings AB Kinnevik, Class B (Sweden) 310,262 5.925 .08
Cie. Nationale a Portefeuille (Belgium) 58,532 3.777
Cie. Nationale a Portefeuille, warrants, .07
expire 1999 (2) 105,792 1.264
Preussag AG (Germany) 8,000 2.286
Preussag AG, warrants, expire 2001 (2) 3,100 .270 .03
Anglovaal Ltd., Class N (South Africa) 171,000 1.996 .03
UTILITIES: ELECTRIC & GAS- 5.16% .00
Williams Companies, Inc. (USA) 1,100,000 58.781 .82
Columbia Gas System, Inc. (USA) 481,500 35.029 .49
National Power PLC (United Kingdom) 3,480,000 33.217 .46
Southern Electric PLC (United Kingdom) 4,174,707 31.639 .44
Scottish Power PLC (United Kingdom) 3,066,250 24.842 .34
Empresa Nacional de Electricidad SA, (American .00
Depositary Receipts) (Chile) 1,252,746 23.254 .32
Sonat Inc. (USA) 454,100 19.782 .27
Public Service Co. of New Mexico (USA) 864,300 17.664 .25
Cia. Paulista de Forca e Luz - CPFL (Brazil) 137,000,000 17.295 .24
CalEnergy Co., Inc. (USA) (2) 500,000 16.625 .23
Hongkong Electric Holdings Ltd. (Hong Kong) 3,310,500 11.199 .16
Long Island Lighting Co. (USA) 400,000 10.800 .15
El Paso Natural Gas Co. (USA) 174,200 10.691 .15
BG PLC (American Depositary Receipts) .00
(United Kingdom) 264,000 6.039
BG PLC 794,117 3.807 .13
Northeast Utilities (USA) (2) 653,200 8.451 .12
Australian Gas Light Co. (Australia) 1,133,367 7.598 .11
NICOR Inc. (USA) 175,000 7.044 .10
Union Electric Co. (USA) 155,000 6.171 .09
National Fuel Gas Co. (USA) 127,000 5.929 .08
GPU, Inc. (USA) 150,000 5.925 .08
Centrais Eletricas Brasileiras SA - ELETROBRAS (Brazil) 240,000 5.850 .08
Centrica PLC (United Kingdom) (2) 2,400,000 3.484 .05
HEALTH & PERSONAL CARE- 5.08% .00
AB Astra, Class A (Sweden) 4,185,733 72.618
AB Astra, Class B 1,390,533 23.224 1.33
Glaxo Wellcome PLC (United Kingdom) 2,620,000 57.490 .80
Eli Lilly and Co. (USA) 800,000 50.450 .70
Merck & Co., Inc. (USA) 385,000 36.407 .51
Bristol-Myers Squibb Co. (USA) 350,000 32.769 .45
Pfizer Inc (USA) 438,000 31.864 .44
Warner-Lambert Co. (USA) 150,000 20.981 .29
American Home Products Corp. (USA) 278,800 19.481 .27
Novartis AG, 2.00% convertible debentures 2002 .00
(Switzerland) (1) $7,500,000 11.213 .16
Zeneca Group PLC (United Kingdom) 175,000 5.583 .08
Abbott Laboratories (USA) 50,000 3.250 .05
Allegiance Corp. (USA) 6,000 .190 .00
BUSINESS & PUBLIC SERVICES- 3.71% .00
United Utilities PLC (United Kingdom) 4,886,428 62.766 .87
Brambles Industries Ltd. (Australia) 1,524,354 29.057 .40
Electronic Data Systems Corp. (USA) 700,000 26.600 .37
Hyder PLC (United Kingdom) 1,495,000 23.771 .33
Thames Water PLC (United Kingdom) 1,575,000 23.713 .33
Columbia/HCA Healthcare Corp. (USA) 550,000 16.225 .23
American Water Works Co., Inc. (USA) 540,000 15.491 .21
Vanstar Financing Trust, 6.75% convertible preferred (USA 350,000 13.825 .19
Quintiles Transnational Corp., 4.25% convertible .00
debentures 2000 (USA) (1) $10,000,000 11.325 .16
Omnicom Group Inc. (USA) 100,000 7.412 .10
Loewen Group Inc. (Canada) 300,000 7.406 .10
USA Waste Services, Inc. (USA) (2) 215,000 7.108 .10
Hutchison Delta Finance Ltd., 7.00% convertible .00
debentures 2002 (Hong Kong--Incorporated in Cayman .00
Islands) (1) $6,000,000 6.720 .09
Rentokil Group PLC (United Kingdom) 1,500,000 6.317 .09
IKON Office Solutions, Inc. (USA) 160,000 4.870 .07
Thorn PLC (United Kingdom) 865,260 2.191 .03
PacifiCare Health Systems, Inc., Class A (USA) (2) 29,400 1.514 .02
Unisource Worldwide, Inc. (USA) 80,000 1.255 .02
BEVERAGES & TOBACCO- 3.70% .00
RJR Nabisco Holdings Corp. (USA) 1,575,000 57.389 .80
Gallaher Group PLC (United Kingdom) 7,500,000 40.636 .56
Philip Morris Companies Inc. (USA) 900,000 39.150 .54
Imperial Tobacco Ltd. (United Kingdom) 5,500,000 36.522 .51
Asahi Breweries, Ltd. (Japan) 1,580,000 22.135
Asahi Breweries, Ltd. 1.00% convertible debentures 2003 Y472,000,000 5.874
Asahi Breweries, Ltd. 0.90% convertible debentures 2001 Y267,000,000 3.323 .48
Asahi Breweries, Ltd. 0.95% convertible debentures 2002 Y212,000,000 2.638
Foster's Brewing Group Ltd. (Australia) 13,500,000 24.900 .35
Seagram Co. Ltd. (Canada) 525,000 16.964 .24
Coca-Cola Amatil Ltd. (Australia) 1,009,113 7.487 .10
UST Inc. (USA) 200,000 6.175 .09
Lion Nathan Ltd. (New Zealand) 990,400 2.342 .03
ENERGY SOURCES- 3.48% .00
ENI SpA (Italy) 4,700,000 27.395
ENI SpA (American Depositary Shares) 100,000 5.806 .46
Elf Aquitaine (France) 250,000 28.996 .40
"Shell" Transport and Trading Co., PLC (New York .00
Registered Shares) (United Kingdom) 400,000 16.675
Royal Dutch Petroleum Co. (Netherlands) 140,000 7.285 .39
Royal Dutch Petroleum Co. (New York Registered Shares) 80,000 4.215
TOTAL, Class B (France) 224,487 23.566 .33
Pioneer Natural Resources Co. (USA) 683,919 21.843 .30
Shell Canada Ltd., Class A (Canada) 1,155,800 20.538 .28
Repsol SA (American Depositary Receipts) (Spain) 425,000 18.328 .25
NGC Corp. (USA) 1,020,000 16.830 .23
YPF SA, Class D (American Depositary Receipts) .00
(Argentina) 450,000 15.103 .21
Mobil Corp. (USA) 200,000 14.387 .20
Unocal Corp. (USA) 360,000 14.333 .20
Engen Ltd. (South Africa) 1,176,000 6.598 .09
Esso SA Francaise (France) 78,567 6.319 .09
Burmah Castrol PLC (United Kingdom) 206,343 3.472 .05
MERCHANDISING- 3.38% .00
Tesco PLC (United Kingdom) 7,469,504 60.328 .84
Wal-Mart Stores, Inc. (USA) 1,096,000 43.772 .61
J.C. Penney Co., Inc. (USA) 400,000 25.700 .36
Dixons Group PLC (United Kingdom) 2,000,000 22.736 .32
Safeway PLC (United Kingdom) 3,850,000 21.055 .29
Kingfisher PLC (United Kingdom) 1,265,000 17.423 .24
AutoZone, Inc. (USA) (2) 550,000 16.500 .23
Giant Food Inc., Class A (USA) 350,000 11.812 .16
Amway Japan Ltd. (Japan) 179,000 2.900
AJL PEPS Trust, $1.44 convertible preferred shares .11
(Japan) (2) 465,000 4.999
Coles Myer Ltd. (Australia) 1,150,491 5.638 .08
Staples, Inc., 4.50% convertible debentures 2000 (USA) (1)$3,000,000 4.035 .06
Woolworths Ltd. (Australia) 1,219,586 3.727 .05
WHSmith Group PLC (United Kingdom) 350,000 2.274 .03
INSURANCE- 3.07% .00
ING Groep NV (Netherlands) 2,968,947 120.609 1.67
Norwich Union PLC (United Kingdom) (2) 3,954,000 23.893 .33
Transatlantic Holdings, Inc. (USA) 320,400 22.889 .32
National Mutual Asia Ltd. (Hong Kong) 22,008,000 20.357 .28
GIO Australia Holdings Ltd. (Australia) 5,851,689 14.099 .20
Guardian Royal Exchange PLC (United Kingdom) 1,100,000 5.292 .07
Prudential Corp. PLC (United Kingdom) 406,576 4.378 .06
Corporacion Mapfre, CIR, SA (Spain) 86,406 4.216 .06
Aetna Inc. (USA) 40,000 3.015 .04
PartnerRe Holdings Ltd. (Singapore - Incorporated in Berm 50,000 2.162 .03
Yasuda Fire and Marine Insurance Co., Ltd. (Japan) 190,000 .773 .01
FOREST PRODUCTS & PAPER- 2.81% .00
Sonoco Products Co. (USA) 925,000 30.352 .42
Fort James Corp. (USA) 764,270 29.902 .41
Metsa-Serla OY, 4.375% convertible debentures 2002
(Finland) (1) $30,000,000 28.725 .40
Bowater Inc. (USA) 500,000 22.437 .31
Jefferson Smurfit Corp. (USA) (2) 1,332,300 21.983 .31
Union Camp Corp. (USA) 300,000 18.019 .25
Champion International Corp. (USA) 330,000 17.676 .25
APP Global Finance (V) Ltd.,
2.00% convertible debentures 2000 (Indonesia) (1) $15,000,000 13.500 .19
UPM-Kymmene Corp. (Finland) 508,960 10.931 .15
MAYR-MELNHOF Karton AG (Austria) 145,000 8.122 .11
Carter Holt Harvey Ltd. (New Zealand) 616,770 .893 .01
FOOD & HOUSEHOLD PRODUCTS- 2.38% .00
Reckitt & Colman PLC (United Kingdom) 3,643,812 53.078 .74
Cadbury Schweppes PLC (United Kingdom) 4,685,225 48.635 .67
Unilever PLC (United Kingdom) 2,600,000 20.483
Unilever NV (Netherlands) 120,000 6.974 .38
Nestle SA (Switzerland) 8,452 12.432 .17
Groupe Danone (France) 76,480 12.198 .17
Cultor Ltd. (Finland) 227,500 11.992 .17
McCormick & Co. (USA) 205,000 5.433 .08
CHEMICALS- 1.95% .00
Praxair, Inc. (USA) 1,092,500 48.002 .67
Millennium Chemicals Inc. (USA) 1,550,000 35.650 .49
Sherwin-Williams Co.(USA) 872,000 24.907 .35
Airgas, Inc. (USA) (2) 1,720,100 24.081 .33
L'Air Liquide (France) 50,599 7.959 .11
ELECTRONIC COMPONENTS- 1.85% .00
Micron Technology, Inc. (USA) (2) 1,350,000 33.581 .47
Advanced Micro Devices, Inc. (USA) (2) 1,500,000 32.719 .45
Hoya Corp. (Japan) 527,000 16.086 .22
Intel Corp. (USA) 200,000 15.525 .22
Murata Manufacturing Co., Ltd. (Japan) 440,000 13.189 .18
Altera Corp. (USA) (2) 200,000 9.362 .13
Delta Electronics, Inc. (Taiwan) 1,965,000 8.754 .12
Lite-On Technology Corp., 0.75% convertible debentures 2004
(Taiwan) $5,000,000 4.875 .06
REAL ESTATE- 1.84% .00
CarrAmerica Realty Corp. (USA) 750,000 22.594 .31
Cheung Kong (Holdings) Ltd. (Hong Kong) 3,000,000 21.152 .29
Land Securities PLC, 6.00% convertible debentures 2007
(United Kingdom) $10,000,000 20.120 .28
Amoy Properties Ltd. (Hong Kong) 21,751,500 18.713 .26
Kerry Properties Ltd. (Hong Kong) 9,760,500 16.415 .23
Sun Hung Kai Properties Ltd. (Hong Kong) 1,760,000 13.434 .19
Meditrust Corp., paired stock (USA) 300,339 11.413 .16
SM Prime Holdings, Inc. (Philippines) 52,885,000 8.394 .12
AUTOMOBILES- 1.74% .00
Chrysler Corp. (USA) 1,265,000 43.405 .60
Regie Nationale des Usines Renault, SA (France) (2) 1,346,677 37.691 .52
Ford Motor Co., Class A (USA) 398,300 17.127 .24
Suzuki Motor Corp. (Japan) 1,114,000 12.119 .17
Bayerische Motoren Werke AG (Germany) 12,000 8.953 .12
Toyota Motor Corp. (Japan) 235,000 6.768 .09
BROADCASTING & PUBLISHING- 1.62% .00
Tele-Communications, Inc., Series A, Liberty Media Group .00
(USA) (2) 997,500 33.666 .47
Time Warner Inc. (USA) 450,000 26.212 .36
Viacom Inc., Class B (USA) (2) 425,000 14.875 .21
CanWest Global Communications Corp. (Canada) 741,300 12.548 .18
CANAL+ (France) 59,356 10.321 .14
Tidnings AB Marieberg, Class A (Sweden) 300,000 7.691 .11
News Corp. Ltd., preferred (Australia) 1,362,268 6.603 .09
Modern Times Group MTG AB, Class B (American Depositary
Receipts) (Sweden) (2) 100,550 3.519 .05
ProSieben Media AG (Germany) (1,2) 20,800 .997 .01
FINANCIAL SERVICES- 1.61% .00
Household International, Inc. (USA) 261,700 32.974 .46
Freddie Mac (USA) 700,000 28.875 .40
Nichiei Co., Ltd. (Japan) 182,000 19.942 .28
Associates First Capital Corp., Class A (USA) 190,000 12.208 .17
Fannie Mae (USA) 200,000 10.563 .15
Medallion Financial Corp. (USA) 275,000 5.913 .08
United Companies Financial Corp., 6.75% PRIDES .00
convertible preferred shares (USA) 75,000 2.962 .04
Beneficial Corp. (USA) 32,300 2.507 .03
METALS: NONFERROUS- 1.45% .00
Aluminum Co. of America (USA) 464,300 31.224 .43
Pechiney, Class A (France) 651,800 25.582 .35
Inco Ltd. (Canada) 850,000 16.203 .22
Teck Corp., 3.75% convertible debentures 2006 (Canada) $14,950,000 12.110 .17
Freeport-McMoRan Copper & Gold Inc., Class A (USA) 480,300 9.576 .13
Noranda Inc. (Canada) 525,000 8.831 .12
Indian Aluminium Co., Ltd. (Global Depositary Receipts) .00
(India) 532,300 1.264 .03
Indian Aluminium Co., Ltd. 527,700 .963
DATA PROCESSING & REPRODUCTION- 1.16% .00
3Com Corp. (USA) (2) 500,000 18.125 .25
Ascend Communications, Inc. (USA) (2) 720,000 17.955 .25
Oracle Corp. (USA) (2) 525,000 17.489 .24
Computer Associates International, Inc. (USA) 300,000 15.619 .22
Fujitsu Ltd. (Japan) 1,000,000 11.192
Fujitsu Ltd., warrants, expire 2000 (2) 3,000 2.700 .20
MISCELLANEOUS MATERIALS & COMMODITIES- 1.13% .00
English China Clays PLC (United Kingdom) 6,891,000 29.776 .41
Bunzl PLC (United Kingdom) 5,912,500 22.704 .32
Cie. de Saint-Gobain (France) 111,377 15.124 .21
Crown Cork & Seal Co., Inc. (USA) 275,000 13.423 .19
MACHINERY & ENGINEERING- 0.99% .00
Caterpillar Inc. (USA) 550,000 26.366 .37
Sidel SA (France) 210,000 11.936 .17
Svedala Industri AB (Sweden) 600,000 11.109 .15
Triplex Lloyd PLC (United Kingdom) 2,534,461 8.813 .12
Daewoo Heavy Industries Ltd. (South Korea) 1,800,000 8.219 .11
Kawasaki Heavy Industries, Ltd. (Japan) 2,100,000 5.144 .07
ELECTRICAL & ELECTRONIC- 0.96% .00
Premier Farnell PLC (United Kingdom) 3,238,000 22.053
Premier Farnell PLC, $1.35 convertible preferred (American .38
Depositary Receipts) 225,000 4.950
York International Corp. (USA) 550,000 25.472 .35
Lucent Technologies Inc. (USA) 85,000 6.811 .09
Telefonaktiebolaget LM Ericsson, Class B (Sweden) 147,400 6.011 .08
Northern Telecom Ltd. (Canada) 51,500 4.625 .06
ENERGY EQUIPMENT- 0.89% .00
Schlumberger Ltd. (Netherlands Antilles) 455,000 37.452 .52
Halliburton Co. (USA) 500,000 26.969 .37
INDUSTRIAL COMPONENTS- 0.87% .00
Tomkins PLC (United Kingdom) 4,400,000 22.355 .31
Lear Corp. (USA) (2) 352,300 16.492 .23
Morgan Crucible Co. PLC (United Kingdom) 2,119,487 15.902 .22
Federal-Mogul Corp. (USA) 200,000 8.225 .11
GOLD MINES- 0.85% .00
Barrick Gold Corp. (Canada) 1,000,000 16.562 .23
Normandy Mining Ltd. (Australia) 17,335,365 14.866
Normandy Mining Ltd., options, expire 2001 (2) 4,875,799 .498 .22
Driefontein Consolidated Ltd. (South Africa) 2,200,000 14.993 .21
Kloof Gold Mining Co. Ltd. (South Africa) 2,200,000 7.746 .11
Newcrest Mining Ltd. (Australia) (2) 6,000,000 5.962 .08
LEISURE & TOURISM- 0.55% .00
AMF Bowling, Inc. (USA) (2) 600,000 14.888 .21
Village Roadshow Ltd., Class A, 5.5% preferred shares (Au 2,518,592 4.885
Village Roadshow Ltd., Class A, 5.5% preferred shares (1) 2,500,000 4.849 .18
Village Roadshow Ltd. 1,200,000 2.875
Thistle Hotels PLC (United Kingdom) 4,250,000 11.191 .16
METALS: STEEL- 0.47% .00
Usinor Sacilor (France) 1,400,000 21.998 .31
Allegheny Teledyne Inc. (USA) 377,000 9.708 .13
Ispat Industries Ltd., 3.00% convertible debentures .00
2001 (India) (1) $2,800,000 1.428 .02
N.T.S. Steel Group PCL, 4.00% Eurobond, .00
2008 (Thailand) $6,670,000 .800 .01
APPLIANCES & HOUSEHOLD DURABLES- 0.46% .00
Sony Corp. (Japan) 350,000 29.858 .41
Philips Electronics NV (Netherlands) 55,000 3.631 .05
TEXTILES & APPAREL- 0.17% .00
Courtaulds Textiles PLC (United Kingdom) 1,641,500 9.725 .13
Nine West Group Inc. (USA) (2) 110,000 2.991 .04
AEROSPACE & MILITARY TECHNOLOGY- 0.17% .00
Boeing Co. (USA) 140,000 7.438 .10
General Motors Corp., Class H (USA) 75,000 5.025 .07
TRANSPORTATION: AIRLINES- 0.15% .00
Air New Zealand Ltd., Class B (New Zealand) 5,320,000 10.813 .15
BUILDING MATERIALS & COMPONENTS- 0.13% .00
Friedrich Grohe AG (Germany) 35,000 9.715 .13
TRANSPORTATION: RAIL & ROAD- 0.12% .00
Westshore Terminals Inc. (Canada) 3,498,000 8.598 .12
CONSTRUCTION & HOUSING- 0.06% .00
Philipp Holzmann AG (Germany) (2) 15,000 4.147 .06
RECREATION & OTHER CONSUMER PRODUCTS- 0.02% .00
EMI Group PLC (United Kingdom) 165,067 1.243 .02
MISCELLANEOUS- 0.65% .00
Other equity securities in initial .00
period of acquisition 46.407 .65
-------- --------
TOTAL EQUITY SECURITIES (cost:
$4,830.245 million) 6,143.926 85.26
-------- --------
- ------------------------------------------ -------------
Principal
Amount
Bonds and Notes (Millions)
- ------------------------------------------ -------------
INDUSTRIALS- 0.22%
Container Corp. of America 11.25% May 2004 $6.000 6.570
Container Corp. of America 9.75% April 2003 1.000 1.075 .10
Telecom Argentina STET-France Telecom SA 12.00% .00
November 2002 5.500 6.410 .09
Multicanal Participacoes SA 12.625% June 2004 (1) 2.250 2.160 .03
.00
FINANCIAL- 0.09% .00
Netia Holdings BV 10.25% November 2007 (1) 4.125 3.908
Netia Holdings BV 0%/11.25% November 2007 (1,3) 3.750 2.119 .09
.00
ARGENTINEAN GOVERNMENT- 0.30% .00
Argentina (Republic of) 11.75% February 2007 (1) ARP8.000 7.703
Argentina (Republic of) 11.00% October 2006 $7.000 7.455 .30
Argentina (Republic of) 11.375% January 2017 6.000 6.408
.00
SOUTH AFRICAN GOVERNMENT- 0.52% .00
South Africa 13.00% August 2010 ZAR197.500 37.524 .52
.00
.00
-------- --------
TOTAL BONDS AND NOTES (cost: $85.142 million) 81.332 1.13
-------- --------
- ------------------------------------------ -------------------------------
Short-Term Securities
- ------------------------------------------ -------------------------------
CORPORATE SHORT-TERM NOTES- 10.44%
Lloyds Bank PLC 5.50%-5.63% due 12/5/97-1/27/98 83.600 83.081 1.15
Barclays U.S. Funding Corp. 5.55%-5.70% due 12/16/97-3/3/ 74.900 74.326 1.03
ABN AMRO North America Finance Inc. 5.50%-5.55%
due 12/16/97-2/24/98 61.700 61.243 .85
Halifax Building Society 5.65%-5.66% due 2/23-2/27/98 43.900 43.301 .60
Deutsche Bank Financal Inc. 5.49%-5.52% due 1/6-1/8/98 43.200 42.946 .60
Societe Generale NA Inc. 5.49%-5.52% due 12/10/97-1/16/98 41.600 41.441 .58
Daimler-Benz North America Corp. 5.51%-5.70%
due 12/4/97-1/13/98 33.000 32.824 .45
Rank Xerox Capital (Europe) PLC 5.50% due 12/12/97 32.200 32.141 .45
National Australia Funding 5.48% due 12/9/97-1/8/98 30.000 29.866 .41
Svenska Handelsbanken Group 5.55% due 1/5/98 30.000 29.834 .41
Caisse d'amortissement de la dette sociale 5.52% due 2/23 30.000 29.598 .41
Siemens Capital Corp. 5.63% due 1/28/98 25.000 24.769 .34
American Express Credit Corp. 5.54% due 12/16/97 23.400 23.342 .32
Commerzbank AG 5.70% due 1/20/98 23.000 22.814 .32
Toronto-Dominion Holdings USA Inc. 5.55% due 2/6/98 23.000 22.749 .32
Coca-Cola Co. 5.47% due 12/9/97 20.000 19.973 .28
Bayerische Landesbank Girozentrale 5.48% due 1/14/98 20.000 19.859 .27
Canada Bills 5.50% due 1/26/98 20.000 19.824 .27
Abbey National North America 5.55% due 2/5/98 18.000 17.809 .25
Sweden (Kingdom of) 5.53% due 2/24/98 18.000 17.757 .25
Lucent Technologies Inc. 5.50% due 12/4-12/12/97 17.400 17.375 .24
France Telecom 5.70% due 1/29/98 15.000 14.859 .21
RTZ America, Inc. 5.55% due 1/16/98 (2) 11.700 11.613 .16
Minnesota Mining & Manufacturing Co. 5.53 due 12/16/97 10.000 9.976 .14
Bank of Montreal 5.67% due 1/23/98 6.100 6.048 .08
Ford Credit Europe PLC 5.60% due 1/9/98 4.000 3.975 .05
.00
FEDERAL AGENCY DISCOUNT NOTES- 1.73% .00
Freddie Mac 5.43%-5.47% due 12/1-12/24/97 106.800 106.607 1.48
SLM Holding Corp. 5.47% due 1/27/98 9.200 9.117 .13
Fannie Mae 5.44% due 1/20/98 8.800 8.731 .12
.00
U.S. TREASURY OBLIGATIONS- 0.33% .00
5.065% February 1998 24.000 23.751 .33
.00
CERTIFICATES OF DEPOSIT- 0.79% .00
Credit Suisse 5.63% due 1/5/98 30.000 29.998 .42
Dresdner Bank 5.65% due 1/9/98 27.000 27.000 .37
.00
NON-U.S. CURRENCY- 0.08% .00
New Taiwanese Dollar NT$183.887 5.729 .08
.00
-------- --------
TOTAL SHORT-TERM SECURITIES (cost: $965.162
million) 964.276 13.37
-------- ------
TOTAL INVESTMENT SECURITIES (cost: $5,880.549
million) 7,189.534 99.76
Excess of cash and receivables over payables 17.013 .24
-------- ------
NET ASSETS $7,206.547 100.00%
======================================================== ==================
(1) Purchased in a private placement
transaction; resale to the public may
require registration or sale only
to qualified institutional buyers.
(2) Non-income-producing securities.
(3) Step bond; coupon rate will increase
at a later date.
The descriptions of the companies shown in the portfolio,
which were obtained from published reports and other sources
believed to be reliable, are supplemental and are not covered
by the Report of Independent Accountants.
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital World Growth and Income Fund, Inc.
Financial Statements
<S> <C> <C>
- ---------------------------------------- ----------------------------
Statement of Assets and Liabilities (dollars in
at November 30, 1997 millions)
- ----------------------------------------- ----------------------------
Assets:
Investment securities at market
(cost: $5,880.549) $7,189.534
Cash 0.001
Receivables for--
Sales of investments $25.605
Sales of fund's shares 8.329
Dividends and accrued interest 19.395 53.329
----------------------------
7,242.864
Liabilities:
Payables for--
Purchases of investments 20.586
Repurchases of fund's shares 3.867
Management services 2.539
Accrued expenses 9.325 36.317
----------------------------
Net Assets at November 30, 1997--
Equivalent to $25.89 per share on
278,330,687 shares of $0.01 par value
capital stock outstanding (authorized
capital stock - 400,000,000 shares) $7,206.547
===============
---------------
Statement of Operations (dollars in
for the year ended November 30, 1997 millions)
- --------------------------------------------- ----------------------------
Investment Income:
Income:
Dividends $151.622
Interest 58.378 $210.000
------------
Expenses:
Management services fee 27.481
Distribution expenses 14.623
Transfer agent fee 4.345
Reports to shareholders 0.504
Registration statement and prospectus 0.634
Postage, stationery and supplies 0.770
Directors' fees 0.142
Auditing and legal fees 0.048
Custodian fee 2.490
Taxes other than federal income tax 0.073
Other expenses 0.143 51.253
---------------------------
Net investment income 158.747
--------------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 522.194
Net increase in unrealized appreciation on investments 221.200
Net realized gain and increase in unrealized ---------------
appreciation on investments 743.394
---------------
Net Increase in Net Assets Resulting
from Operations $902.141
===============
- ---------------------------------------------- ----------------------------
Year ended
Statement of Changes in Net Assets November 30
(dollars in millions) 1997 1996
- ---------------------------------------------- ----------------------------
Operations:
Net investment income $ 158.747 $ 140.176
Net realized gain on investments 522.194 207.627
Net increase in unrealized appreciation
on investments 221.200 584.880
----------------------------
Net increase in net assets
resulting from operations 902.141 932.683
----------------------------
Dividends and Distributions Paid to Shareholders:
Dividends from net investment income (160.940) (138.616)
Distributions from net realized gain on investm (201.626) (64.705)
----------------------------
Total dividends and distributions (362.566) (203.321)
Capital Share Transactions:
Proceeds from shares sold: 74,465,301
and 48,019,573 shares, respectively 1,853.652 1,027.076
Proceeds from shares issued in reinvestment
of net investment income dividends and distributions
of net realized gain on investments:
14,610,266 and 9,172,617 shares, respectively 342.876 190.709
Cost of shares repurchased: 26,987,023
and 19,581,034 shares, respectively (669.041) (418.893)
----------------------------
Net increase in net assets
resulting from capital share
transactions 1,527.487 798.892
----------------------------
Total Increase in Net Assets 2,067.062 1,528.254
Net Assets:
Beginning of year 5,139.485 3,611.231
----------------------------
End of year (including undistributed
net investment income: $20.571
and $22.074, respectively) $7,206.547 $5,139.485
============================
See Notes to Financial Statements
</TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND
Notes to the 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 fund seeks long-term capital growth while providing
current income. The following paragraphs summarize the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:
Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the investment adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the counter market.
Fixed-income securities are valued at prices obtained from a pricing
service, when such prices are available; however, in circumstances where the
investment adviser deems it appropriate to do so, such securities will be
valued at the mean quoted bid and asked prices or at prices for securities of
comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day.
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 effects of
changes in foreign currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith by a
committee appointed by the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Dividend and
interest income is reported on the accrual basis. Discounts and premiums on
securities purchased are amortized over the life of the respective securities.
Dividends and distributions paid to shareholders are recorded on the
ex-dividend date.
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, 1997, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $1,308,985,000, of which
$1,627,355,000 related to appreciated securities and $318,370,000 related to
depreciated securities. During the year ended November 30, 1997, the fund
realized, on a tax basis, a net capital gain of $523,742,000 on securities
transactions. Net losses related to non-U.S. currency and other transactions of
$1,548,000 were treated as ordinary income for federal income tax purposes. The
capital gain distribution paid in December 1996 includes $433,000 of realized
non-U.S. currency gains. The cost of portfolio securities for book and federal
income tax purposes was $5,880,549,000 at November 30, 1997.
3. The fee of $27,481,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.60% of the first $500 million of net assets; 0.50% of
such assets in excess of $500 million but not exceeding $1 billion; 0.46% of
such assets in excess of $1 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 billion; 0.40% of
such assets in excess of $4 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, 1997,
distribution expenses under the Plan were $14,623,000. As of November 30, 1997,
accrued and unpaid distribution expenses were $3,502,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $4,345,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $7,994,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of November 30,
1997, aggregate amounts deferred and earnings thereon were $199,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of November 30, 1997, accumulated undistributed net realized gain on
investments was $521,490,000 and additional paid-in capital was $5,352,653,000.
To conform to its tax reporting, the fund reclassified $690,000 to
undistributed net investment income and $3,652,000 to undistributed net
realized currency gains, respectively, from undistributed net realized gains
for the year ended November 30, 1997.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,536,931,000 and $1,730,520,000, respectively,
during the year ended November 30, 1997.
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 $2,490,000 includes $73,000 that was paid by these credits
rather than in cash.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the year ended November 30, 1997, such non-U.S. taxes were $14,109,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $838,000 for the year ended November
30, 1997.
<TABLE>
Per-Share Data and Ratios
<S> <C> <c<C> <c<C> <c<C> <c<C> <C>
Period
Year ended November 30 3/26/93 (1)
1997 1996 1995 1994 to 11/30/93
---------- ---------- ---------- ---------- ----------
Net Asset Value, Beginning of Period $23.77 $20.22 $17.81 $17.00 $15.08
--------- --------- ---------- ---------- ----------
Income From Investment Operations:
Net investment income .640 .70 .61 .52 .29
Net realized and unrealized gain on 3.045 3.91 2.72 .75 1.86
investments ---------- ---------- ---------- ---------- ----------
Total income from investment operations 3.685 4.61 3.33 1.27 2.15
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from net investment income (.650)(2 (.72)(2 (.63) (.46) (.23)
Distributions from net realized gains (.915) (.34) (.29) -- --
---------- ---------- ---------- ---------- ----------
Total distributions (1.565) (1.06) (.92) (.46) (.23)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period $25.89 $23.77 $20.22 $17.81 $17.00
=======================================================
Total Return (3) 16.36% 23.67% 19.41% 7.51% 14.39% (4)
Ratios/Supplemental Data:
Net assets, end of period (in millions) $7,207 $5,139 $3,611 $2,784 $1,521
Ratio of expenses to average net assets .82% .85% .88% .87% .62% (4)
Ratio of net income to average net assets 2.53% 3.28% 3.24% 3.11% 2.01% (4)
Average commissions paid per share (5) .14c .25c 1.94c 1.24c 1.31c
Portfolio turnover rate 32.41% 30.18% 25.50% 18.66% 2.71% (4)
(1) Commencement of operations
(2) Includes 0.2 cents and 1.5 cents
realized non-U.S. currency gains treated
as ordinary income in 1997 and 1996,
respectively, for federal income tax
purposes.
(3) Calculated without deducting a sales
charge. The maximum sales charge is 5.75%
of the fund's offering price.
(4) Based on operations for the period shown
and, accordingly, not representative of a
full year's operations.
(5) Brokerage commissions paid on portfolio
transactions increase the cost of securities
purchased or reduce the proceeds of
securities sold and are not separately
reflected in the fund's statement of operations.
Shares traded on a principal basis (without
commissions), such as most over-the-counter
and fixed-income transactions, are excluded.
Generally, non-U.S. commissions are lower than
U.S. commissions when expressed as cents per
share but higher when expressed as a percentage
of transactions because of the lower per-share
prices of many non-U.S. securities.
</TABLE>
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, 1997, 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, 1997 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.
/s/Price Waterhouse LLP
Los Angeles, California
December 31, 1997
1997 Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
Dividends and Distributions Per Share
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
To Payment Date From Net From Net From Net
Realized Realized
To Shareholders Payment Investment Short-term Long-Term
of Record Date Income Gains Gains
December 6, 1996 December 9, 1996 $0.12 $0.078 $0.702
March 21, 1997 March 24,1997 0.14 0.053 0.082
June 6, 1997 June 9, 1997 0.22 - -
September 26,1997 September 29, 1997 0.17 - -
</TABLE>
The fund makes an election under the Internal Revenue Code Section 853 to pass
through non-U.S. taxes paid by the fund to its shareholders. The amount of
non-U.S. taxes for the fiscal year ended November 30, 1997 is $0.05412 on a
per-share basis. Shareholders are entitled to a foreign tax credit or an
itemized deduction, at their option. Generally, it is more advantageous to
claim a credit rather than to take a deduction.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 14% of the dividends
paid by the fund from net investment income represent qualifying dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER
INFORMATION WHICH WILL BE MAILED IN JANUARY 1998 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1997 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
