CAPITAL WORLD GROWTH AND INCOME FUND
1997 Annual Report for the year ended November 30
[THE AMERICAN FUNDS GROUP (R)]
[cover: photo of globe and various international flags]
CAPITAL WORLD GROWTH AND INCOME FUND(sm) seeks long-term capital growth while
providing current income. It invests on a global basis in a diversified
portfolio consisting primarily of common stocks and other equity securities.
Capital World Growth and Income Fund is one of the 28 mutual funds in The
American Funds Group,(R) managed by Capital Research and Management Company.
Since 1931, Capital has invested with a long-term focus based on thorough
research and attention to risk.
RESULTS AT A GLANCE
(with dividends reinvested)
AVERAGE ANNUAL COMPOUND RETURN
<TABLE>
<CAPTION>
12 Months 3 Years Lifetime Lifetime Total Return
Through 11/30/97 12/1/94-11/30/97 3/26/93-11/30/97 3/26/93-11/30/97
<S> <C> <C> <C> <C>
CAPITAL
WORLD GROWTH
AND INCOME FUND +16.4% +19.8% +17.3% +111.3%
Morgan Stanley
Capital
International
World Index +13.0 +17.0 +15.0 +92.1
Lipper
Global Stock
Fund Average +11.5 +14.7 +13.6 +81.4
</TABLE>
[picture of globe]
The MSCI World Index is unmanaged and measures all of the world's major stock
markets, including the U.S.
Fund results were computed without a sales charge, unless otherwise indicated.
Here are the fund's total returns and average annual compound returns with all
distributions reinvested for periods ended December 31, 1997 (the most recent
calendar quarter), assuming payment of the 5.75% maximum sales charge at the
beginning of the stated periods (sales charges are lower for accounts of
$50,000 or more):
Since inception on 3/26/93: +102.99%, or +16.01% a year; 3 years: +64.04%, or
+17.94% a year; 12 months: +11.21%.
The fund's 30-day yield as of December 31, 1997, calculated in accordance with
the Securities and Exchange Commission formula, was 2.27%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. INVESTING OUTSIDE THE
UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS,
POLITICAL INSTABILITY, DIFFERING SECURITIES REGULATIONS AND PERIODS OF
ILLIQUIDITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS.
FELLOW SHAREHOLDERS:
Fiscal 1997, which ended November 30, was another rewarding year for investors
in Capital World Growth and Income Fund. The value of your holdings increased
16.4% assuming you reinvested the quarterly dividends totaling 65 cents a share
and two capital gain distributions totaling 91.5 cents a share. If you took
your dividends in cash, the value of your investment rose 13.4% and you
received an income return of 2.8%.
The fund's 16.4% gain surpassed the broad unmanaged global stock market indexes
and most similar mutual funds. Over the same period, the Morgan Stanley Capital
International (MSCI) World Index, which tracks 23 major markets including the
United States, returned 13.0% with dividends reinvested. The Lipper Global
Stock Fund Average, comprising 185 global stock funds tracked by mutual fund
research firm Lipper Analytical Services, returned 11.5%, also on a reinvested
basis.
The portfolio counselors of Capital World Growth and Income Fund remain firmly
grounded in the belief that long time horizons and broad diversification
provide an effective investment strategy for smoothing the ups and downs
typical of business cycles. They can also help cushion sudden, and sometimes
extreme, price movements in individual stock markets.
That certainly has been the case recently. In fiscal 1997 there were severe
fluctuations in a number of stock markets as well as currencies, in particular
in Southeast Asia. Relative to most currencies, the U.S. dollar strengthened
dramatically. A strong dollar vis-a-vis most currencies had the effect of
lowering returns for U.S. investors.
[photo: various international flags]
[Begin caption]
Capital World Growth and Income Fund's investment counselors and analysts scour
the globe for well-managed companies that can add value in terms of both share
appreciation and dividend growth.
[End caption]
THE YEAR IN REVIEW
During fiscal 1997 many of the world's major equity markets enjoyed striking
growth. The runup in market values can be attributed to continued investor
enthusiasm for large-capitalization stocks not only in the United States but in
Europe as well. Many markets in developed countries enjoyed double-digit gains
both in local currency and in U.S. dollars, despite the dollar's relative
strength.
Share values were underpinned by ongoing trends worldwide to eliminate exchange
controls and dismantle barriers to cross-border trade and investment.
Additional contributing factors were moderate to low inflation, low interest
rates, buoyant profit expectations and sustained capital inflows from confident
investors.
At the same time, a number of Asian markets stumbled badly in the second half
of the year, demoralized by currency crises that contributed to the
destabilization of economies throughout the region. So far the crisis in Asia
has had minimal impact on the fund. The fund has not had investments in
Malaysia, and its combined exposure to Indonesia, the Philippines, South Korea
and Taiwan was a mere 1.0% of the total portfolio. Japan and Hong Kong together
accounted for less than 6.0%.
We attribute this minimal exposure to the region to our style of value
investing - that is, the portfolio counselors' insistence on reasonable stock
valuations - supported by bottom-up, fundamental research. This led us to
believe that better values and dividend yields could be found outside Asia.
Capital World Growth and Income Fund's portfolio is broadly diversified,
representing holdings in 33 countries and some three dozen industries. At
fiscal year-end the portfolio had 330 equity securities, with equities making
up 85.3% of the portfolio, bonds and notes 1.1%, and cash and equivalents
13.6%. Of the stocks held throughout the year, 164 rose in price and 79
declined. Overall portfolio turnover was a moderate 32.4%.
While Capital World Growth and Income Fund invests company by company - not
country by country or industry by industry - the fund in the aggregate had
sizable holdings in markets that did well.
[Begin sidebar]
[Begin pie chart]
<TABLE>
CAPITAL WORLD GROWTH & INCOME FUND
Where the Fund's Assets Were Invested
At November 30, 1997
<S> <C> <C> <C>
THE AMERICAS 36.8%
United States 28.5
Canada 5.0
Argentina 1.6
Mexico .7
Brazil .7
Chile .3
EUROPE 34.8%
United Kingdom 14.6
France 4.2
Netherlands 3.4
Sweden 2.4
Italy 2.2
Portugal 2.1
Spain 1.6
Germany 1.2
Finland .7
Denmark .7
Norway .6
Luxembourg .4
Switzerland .3
Belgium .2
Austria .1
Ireland .1
ASIA/PACIFIC RIM 12.5%
Australia 4.3
Hong Kong 3.3
Japan 2.6
New Zealand 1.2
Philippines .5
Taiwan .2
Indonesia .2
South Korea .1
Other Asia/Pac .1
OTHER 1.2%
Supranational .7
South Africa .5
BONDS, CASH &
EQUIVALENTS 14.7%
</TABLE>
[End sidebar]
[End pie chart]
IN THE UNITED STATES, where the fund had its largest concentration of assets,
the MSCI USA Index rose 29.6% with dividends reinvested over the fiscal
year.(1) The U.S. economy continued on an even growth path, helped by increases
in productivity, stable labor costs and low inflation. Following the moderate
interest rate increase in March, the benign economic backdrop allowed the
Federal Reserve Board to resist raising interest rates again.
As the fund's fiscal year closed, many U.S. companies had not shown immediate
adverse effects from the turbulence in Southeast Asia. We should note, however,
repercussions of the economic uncertainties in Southeast Asia are likely to be
felt in many markets, including the United States, for some time. Because of an
anticipated general contraction in economic activity and a period of austerity,
companies that export goods or services to the region are the most vulnerable
to some level of fallout.
Elsewhere in the Americas, Mexico gained 46.0% in U.S. dollars, and Canada was
up only 6.7% after an exceptional 35.2% gain a year earlier.
IN EUROPE, securities markets were especially robust. Interest rates trended
lower in countries that are candidates for membership in the European Monetary
Union and that must meet certain monetary and fiscal criteria for entry.
Privatizations of state industries and the increasing embrace by companies of
the concept of shareholder value also gave impetus to the upward trend in share
prices.
Of the 16 European markets in which the fund had investments, all posted
double-digit returns in U.S. dollars except Austria and Luxembourg,(2) which
had negative returns.(3) In the United Kingdom, the fund's second-largest
country of emphasis, the MSCI UK Index rose 22.3%. On the continent, a strong
U.S. dollar partly diluted stellar gains in local currencies.
/1/ All individual country returns are measured in U.S. dollars by MSCI and
include reinvestment of dividends.
/2/ Luxembourg return is with dividends in cash; return with reinvested
dividends unavailable.
/3/ Austria and Luxembourg had positive returns in local currency.
IN ASIA AND THE PACIFIC RIM, the fiscal year saw widespread currency
devaluations along with a meltdown in securities markets. The exceptions were
Australia, New Zealand and Taiwan. As mentioned earlier, the fund had little
exposure in Southeast Asia generally, and only 2.6% in Japan at year-end. In
Japan the yen weakened further, to Y128 from Y114 against the dollar, and the
Japanese economy continued its prolonged recession.
INDUSTRY DIVERSIFICATION
Industry concentrations, like country concentrations, are a byproduct of
judgments made on the outlook for individual companies. Unlike many funds, the
stocks in Capital World Growth and Income Fund are not required to reflect
preconceived regional or industry weightings. Telecommunications, at 13.1% of
assets, is the largest percentage of fund holdings by industry followed by
banks at just under 12.0%.
[Begin sidebar]
[begin mountain chart]
How a $10,000 Investment Has Grown
Here's how a $10,000 investment in the fund grew between March 26, 1993, when
the fund began operations, and November 30, 1997, the end of its latest fiscal
year. As you can see, that $10,000, with all distributions reinvested, would
have grown to $19,917, an average increase of 15.85% a year.
$23,803/1/
Standard & Poor's
500 Composite
Index
$19,917/1/,/2/
Capital World
Growth and
Income Fund
$19,211/1/
Morgan Stanley
Capital
International
World Index
$11,247/3/
U.S. Consumer
Price Index
(inflation)
[chart]
<TABLE>
<CAPTION>
Date Capital World Morgan Stanley U.S. Consumer Price Standard & Poor's
Growth and Income Capital Index (inflation) 500 Composite Index
Fund /1/ /2/ International World /3/ /1/
Index /1/
<S> <C> <C> <C> <C>
3/26/93 $9,425 $10,000 $10,000 $10,000
5/31/93 9,719 10,836 10,042 10,054
8/31/93 10,401 11,474 10,084 10,428
11/30/93 10,782 10,923 10,153 10,460
2/28/94 11,615 12,061 10,216 10,652
5/31/94 11,315 11,935 10,272 10,479
8/31/94 12,038 12,500 10,376 10,996
11/30/94 11,592 11,981 10,425 10,565
2/28/95 11,860 12,096 10,508 11,433
5/31/95 12,788 13,241 10,599 12,593
8/31/95 13,412 13,597 10,648 13,354
11/30/95 13,841 14,259 10,696 14,477
2/28/96 14,700 15,041 10,787 15,406
5/31/96 15,326 15,672 10,905 16,183
8/31/96 15,414 15,378 10,954 15,857
11/30/96 17,118 17,002 11,045 18,521
2/28/97 17,848 17,135 11,114 18,515
5/31/97 18,908 18,425 11,149 20,953
8/31/97 19,755 18,890 11,198 22,314
11/30/97 19,917 19,211 11,247 23,803
</TABLE>
Average Annual Compound Returns(4)
For periods ended
11/30/97 12/31/97
Lifetime (since 3/26/93) +15.85% +16.01%
One Year +9.67% +11.21%
* For the period March 26 to May 31, 1993.
/1/ With all distributions reinvested.
/2/ This number, unlike those shown earlier in this report, reflects payment of
the maximum sales charge of 5.75% on the $10,000 investment. Thus, the net
amount invested was $9,425. As outlined in the prospectus, the sales charge is
reduced for investments of $50,000 or more. There is no sales charge on
dividends or capital gain distributions that are reinvested in additional
shares. Results shown do not take into account income or capital gain taxes.
/3/ Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
/4/ Assumes reinvestment of all distributions and payment of the 5.75% maximum
sales charge at the beginning of the stated periods.
The indexes are unmanaged and do not reflect sales charges, commissions or
expenses. Past results are not predictive of future results.
[end mountain chart]
[End sidebar]
Privatization of telecommunications companies in many parts of the world has
forced formerly state-controlled monopolies to submit to competitive market
conditions. That has given providers of telecommunications in both developed
and developing countries new opportunities to expand their markets, offer new
products and services, as well as form strategic partnerships and/or
cross-border alliances.
For example, Chicago-based Ameritech has extended its reach from the Pacific
Rim to the North Sea. With U S WEST, it has a 50% investment in Telecom Corp.
of New Zealand, and has purchased a 25% share from the Danish government in
Tele Danmark, the national telecommunications operator.
Across the Atlantic, Spain's Telefonica de Espana has initiated partnerships
throughout Latin America where it is a major force behind the building of a
modern regional communications infrastructure.
Five of the fund's 10 largest holdings are in telecommunications stocks. Of
these, three showed excellent capital appreciation in dollars: Portugal
Telecom, Telefonica de Espana and Telecom Italia were up 73.4%, 31.5% and 28.3%
respectively from a year earlier. In contrast, Koninklijke PTT Nederland
(+7.2%) and Telecom Corp. of New Zealand (-2.7%) lagged the sector average.
Over the year, several bank stocks were sold to capitalize on substantial price
appreciation. As a result, banking dropped to second place in terms of value,
though still a considerable emphasis. Many banks are still benefiting from
efforts to streamline operations, increase productivity through technology and
achieve greater efficiencies through mergers and acquisitions.
Emphasis by non-U.S. banks on boosting shareholder value is another trend.
Australia and New Zealand Banking Group, Bank of Scotland, Lloyds TSB Group and
National Bank of Canada are a few of our well-diversified bank holdings that
are consolidating their balance sheets by buying back their stock and promising
to increase dividends.
The fund also had selected investments in leading telecommunications, banking,
utilities and metal companies in developing markets such as Argentina, Brazil,
Chile, India and South Africa. Of these investments, metals in general were
laggards. In the wake of the turmoil in Asia, negative sentiment spilled over
in varying degrees to many of these smaller markets.
A NOTE ON DIVIDENDS AND CAPITAL GAINS
In a growth environment it is easy to underrate the importance to the fund of
dividend payments. Given its emphasis on providing income as well as capital
growth, the fund's results are notable for having returned an average annual
compound rate of 17.3% since inception in March 1993, with dividends
reinvested.
By comparison, the MSCI World Index returned 15.0% and the Lipper Global Stock
Fund Average 13.6% with dividends reinvested. According to Lipper Analytical
Services, that places Capital World Growth and Income Fund among the top 14% of
52 global stock funds over the lifetime of the fund, and in the top 25% of 185
funds on a one-year basis.
As many shareholders in the fund already know, dividends vary from quarter to
quarter. This is because companies outside North America usually pay dividends
annually or semi-annually (as opposed to quarterly in the United States).
Dividends paid by the fund in September, December and March are generally
smaller than the one paid in June.
At the close of the fiscal year the fund's distribution rate was 2.4%. This is
well above the MSCI World Index yield of 1.8%. In addition to the fund's
emphasis on dividend-paying stocks, its low expense ratio (0.82% vs. 1.92% for
the average global equity fund as calculated at November 30 year-end by Lipper)
has meant more income could be passed on to you.
Looking forward, the fund's total dividends per share for fiscal 1998 are
likely to be lower than the 65 cents paid in fiscal 1997. We anticipate fewer
companies will be paying special dividends.
On December 15, after the close of the fiscal year, the fund paid a capital
gain distribution of $1.73 per share. If you reinvested that gain distribution,
the number of shares working for you rose by about 7%.
While we expect many companies in the fund's portfolio to raise their dividends
steadily, there will be times when the fund's holdings fall out of favor with
many investors, and the fund's share price could fluctuate widely.
Nevertheless, we believe the fund's global focus on income and capital growth,
backed by our research-intensive approach, should continue to prove rewarding.
We look forward to reporting to you again in six months.
Cordially,
/s/ Thierry Vandeventer
Thierry Vandeventer
Chairman of the Board
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
President
January 19, 1998
[Begin pie chart]
LARGEST INDUSTRY HOLDINGS
13.10% Telecommunications
11.97% Banking
5.16% Utilities: Electric & Gas
5.08% Health & Personal Care
3.71% Business & Public Services
46.24% Other Industries
1.13% Bonds & Notes
13.61% Cash & Equivalents
[end pie chart]
[begin line chart]
YIELDS
WGI* vs. MSCI World Index(+)
Fiscal Year Ended November 30
<TABLE>
<CAPTION>
1994 1995 1996 1997
<S> <C> <C> <C> <C>
WGI 2.6% 3.1% 3.0% 2.4%
MSCI World Index 2.4% 2.2% 2.0% 1.8%
</TABLE>
*The fund numbers are 12-month distribution rates at NAV.
(+)The MSCI numbers are gross dividend yields.
[end line chart]
[begin bar chart]
DIVIDENDS
WGI's Dividend Distributions Since Inception
<TABLE>
<CAPTION>
1993* 1994 1995 1996 1997
<S> <C> <C> <C> <C>
0.23 0.46 0.63 0.72 0.65
</TABLE>
* For the period 3/26/93 - 11/30/93
[end bar chart]
[begin line chart]
ANNUAL RETURNS
WGI vs. MSCI World Index
Fiscal Year Ended November 30
<TABLE>
<CAPTION>
1993* 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
WGI - Dividends
Reinvested 14.4% 7.5% 19.4% 23.7% 16.4%
MSCI World Index -
Dividends Reinvested 9.2% 9.7% 19.0% 19.2% 13.0%
</TABLE>
* For the period 3/26/93 - 11/30/93
[end line chart]
[begin bar chart]
ASSETS UNDER MANAGEMENT
<TABLE>
<CAPTION>
Date Net Assets
<S> <C>
March 31, 1993 $511,341,690
May 31, 1993 $589,751,413
November 30, 1993 $1,520,998,481
May 31, 1994 $2,390,534,156
November 30, 1994 $2,784,353,715
May 31, 1995 $3,193,971,011
November 30, 1995 $3,611,230,833
May 31, 1996 $4,329,671,484
November 30, 1996 $5,139,485,333
May 31, 1997 $6,282,955,122
November 30, 1997 $7,206,547,242
</TABLE>
[end bar chart]
[photo collage: map, globe, various navigational instruments]
SMOOTH SAILING IN STORMY SEAS
Some investors in global markets had a rough passage in 1997. Stock markets in
most countries suffered from above-average volatility and many saw significant
declines at some point during the year.
In the U.S., for example, the stock market saw its first decline of more than
10% since 1990. Asian markets fared even worse: Most not only were turbulent,
there was panic in the air as both currencies and stock prices plunged. The
overall effect for investors in some Asian markets during the fiscal year has
been overwhelmingly negative. Japan's Nikkei 225 Index, for example, declined
21% and South Korea's Composite Index declined 44%.
In contrast, holders of Capital World Growth and Income Fund have enjoyed
relatively smooth sailing. The fund has achieved relative stability and has
proven less vulnerable than the average global fund to buffeting from the
shifting winds of market sentiment and sudden switches in economic policy. We
thought it might be helpful to explore why this has been the case.
[photo: sailboat]
[Begin caption]
STEERING FOR SAFETY: IN GOOD TIMES AND BAD
[End caption]
There are a number of reasons for the fund's relative stability. They are
grounded in its long-term objectives, the way the portfolio is structured, the
expertise of the professionals at its helm, their conservative safety-first
approach, and their discipline in holding to a steady course despite the ebb
and flow of market volatility. It is a formula that, over the past four and a
half years, has generated shareholder value in good times and bad.
Explains portfolio counselor Steve Bepler: "Any experienced sailor will tell
you that navigating around the eye of a storm is not the fastest route, but
it's a safer and more prudent route. That's an apt analogy for this fund."
A key factor in the fund's ability to weather stormy seas is its emphasis on
generating income in addition to capital appreciation. "Providing income along
with growth is uncommon among global funds," adds Bepler. "We believe there is
a need for a fund that offers share-holders an important cushion, a safer route
if you will, against inevitable periodic volatility in global markets."
[Begin caption]
SAFE HARBORS: COMPANIES THAT DELIVER SHAREHOLDER VALUE
[End caption]
In seeking to achieve both steady income and capital appreciation, the
portfolio counselors and research analysts who steer the fund invest
predominantly in well-established companies with records of consistent dividend
payments.
The companies they select tend to be financially strong, are market leaders and
proven performers. Because they are mature, these companies typically generate
enough free cash flow to finance dividend payments as well as future growth -
or even buy back their shares in the market. And because dividend payments
provide the only return in declining markets, they help to underpin stock
prices in difficult times.
Of course, not all companies fit these income and value guidelines. In fact, in
recent years they have been found mostly in a select group of industries.
"Telecommunications, banking and pharmaceuticals are three sectors that
exemplify consistent emphasis on shareholder value as well as growth through
globalization," notes Janet McKinley, another of the fund's five portfolio
counselors. "It's therefore no surprise that these stocks, in aggregate,
comprise our largest holdings."
Specifically, at 13.1%, telecommunications represents the largest industry in
the portfolio, followed by banking at 12.0%. Health care/pharmaceuticals is
fourth at 5.1%. Among the fund's 10 largest stock holdings, five are in
telecommunications, three in banking/financial services, one in insurance and
one in health care/pharmaceuticals.
[Begin charts]
MARKET INDEXES
Plotted monthly for the period
November 30, 1994 to November 30, 1997
MSCI WORLD
P/E: 22.7*
Yield: 1.8%*
<TABLE>
<CAPTION>
Date
<S> <C>
11/30/94 613.676
12/30/94 618.59
1/31/95 608.263
2/28/95 616.074
3/31/95 644.674
4/28/95 666.043
5/31/95 670.635
6/30/95 669.317
7/31/95 701.687
8/31/95 684.957
9/29/95 703.797
10/31/95 691.604
11/30/95 714.509
12/29/95 734.28
1/31/96 746.451
2/29/96 749.857
3/29/96 761.184
4/30/96 777.929
5/31/96 777.437
6/28/96 780.202
7/31/96 751.451
8/30/96 758.902
9/30/96 787.436
10/31/96 791.751
11/29/96 834.929
12/31/96 820.362
1/31/97 829.082
2/28/97 837.44
3/31/97 819.678
4/30/97 845.281
5/30/97 896.244
6/30/97 939.746
7/31/97 981.845
8/29/97 914.974
9/30/97 963.489
10/31/97 911.569
11/28/97 926.496
</TABLE>
MSCI EUROPE
P/E: 20.6
Yield: 2.2%
<TABLE>
<CAPTION>
Date
<S> <C>
11/30/94 614.671
12/30/94 617.002
1/31/95 610.993
2/28/95 623.62
3/31/95 651.249
4/28/95 670.769
5/31/95 683.201
6/30/95 688.312
7/31/95 722.839
8/31/95 693.595
9/29/95 713.212
10/31/95 708.503
11/30/95 712.22
12/29/95 733.448
1/31/96 736.94
2/29/96 748.998
3/29/96 756.568
4/30/96 760.684
5/31/96 765.168
6/28/96 772.185
7/31/96 761.075
8/30/96 782.207
9/30/96 797.231
10/31/96 814.284
11/29/96 854.069
12/31/96 869.129
1/31/97 870.096
2/28/97 880.185
3/31/97 907.148
4/30/97 901.196
5/30/97 938.207
6/30/97 983.669
7/31/97 1028.33
8/29/97 968.114
9/30/97 1060.528
10/31/97 1006.861
11/28/97 1020.833
</TABLE>
MSCI USA
P/E: 22.6
Yield: 1.6%
<TABLE>
<CAPTION>
Date
<S> <C>
11/30/94 425.963
12/30/94 431.264
1/31/95 442.209
2/28/95 458.693
3/31/95 470.035
4/28/95 483.842
5/31/95 501.775
6/30/95 513.16
7/31/95 529.623
8/31/95 528.691
9/29/95 551.427
10/31/95 550.189
11/30/95 573.394
12/29/95 581.071
1/31/96 600.799
2/29/96 606.038
3/29/96 611.159
4/30/96 619.162
5/31/96 634.651
6/28/96 637.351
7/31/96 608.263
8/30/96 620.827
9/30/96 654.551
10/31/96 670.235
11/29/96 719.848
12/31/96 705.16
1/31/97 752.397
2/28/97 756.645
3/31/97 721.7
4/30/97 768.16
5/30/97 810.584
6/30/97 846.458
7/31/97 912.322
8/29/97 857.096
9/30/97 900.777
10/31/97 875.148
11/28/97 916.448
</TABLE>
MSCI JAPAN
P/E: 45.4
Yield: 0.9%
<TABLE>
<CAPTION>
Date
<S> <C>
11/30/94 3311.031
12/30/94 3347.371
1/31/95 3150.473
2/28/95 2996.602
3/31/95 3270.419
4/28/95 3428.473
5/31/95 3213.473
6/30/95 3057.961
7/31/95 3299.458
8/31/95 3165.121
9/29/95 3190.285
10/31/95 3010.224
11/30/95 3186.762
12/29/95 3348.075
1/31/96 3302.525
2/29/96 3242.147
3/29/96 3355
4/30/96 3544.155
5/31/96 3360.214
6/28/96 3376.471
7/31/96 3223.71
8/30/96 3078.094
9/30/96 3183.24
10/31/96 2968.193
11/29/96 3023.328
12/31/96 2812.892
1/31/97 2505.34
2/28/97 2562.466
3/31/97 2476.684
4/30/97 2565.181
5/30/97 2847.001
6/30/97 3058.294
7/31/97 2963.691
8/29/97 2705.247
9/30/97 2662.946
10/31/97 2413.481
11/28/97 2264.014
</TABLE>
MSCI ASIA
(excluding Japan)
P/E: 14.19
Yield: 2.8%
<TABLE>
<CAPTION>
Date
<S> <C>
11/30/94 365.168
12/30/94 354.497
1/31/95 317.693
2/28/95 343.841
3/31/95 342.716
4/28/95 337.333
5/31/95 374.736
6/30/95 368.327
7/31/95 374.609
8/31/95 356.747
9/29/95 360.453
10/31/95 353.803
11/30/95 345.308
12/29/95 361.931
1/31/96 389.609
2/29/96 393.31
3/29/96 395.511
4/30/96 409.094
5/31/96 403.856
6/28/96 397.075
7/31/96 367.012
8/30/96 377.441
9/30/96 383.42
10/31/96 375.741
11/29/96 393.048
12/31/96 391.267
1/31/97 398.861
2/28/97 401.9
3/31/97 378.278
4/30/97 372.102
5/30/97 388.1
6/30/97 401.537
7/31/97 404.065
8/29/97 331.861
9/30/97 329.888
10/31/97 256.028
11/28/97 238.114
</TABLE>
*All P/E and yield ratios at 11/30/97
P/E = Price/earnings per share. Yield = Dividend/price per share.
[End charts]
[photo: man on sailboat]
[Begin caption]
WEATHERING STORMS: THE BENEFIT OF DIVERSIFICATION
[End caption]
Diversification across companies, industries and countries is another article
of faith among the fund's portfolio management team. A fund that has its
investment eggs in many baskets, as Capital World Growth and Income Fund does -
330 equity securities in 33 countries spread across 35 industries - reduces
volatility and the downside risk of the portfolio as a whole.
Example: When some currencies are strengthening against the U.S. dollar, others
will be weakening. As a result, exposure to the risk of substantial loss from
adverse currency movements is limited. And should some industries enter a
slower growth phase, others are likely to be accelerating. That is true also
for companies in weak economies. Export-oriented companies, whose revenues are
earned abroad, stand to benefit from weakness in the domestic currency. On the
other hand, importers tend to suffer.
Not surprisingly, the majority of Capital World Growth and Income's holdings
are in advanced industrial countries that favor open markets and transparent
business practices.
[Begin caption]
CHARTING A SOLID COURSE: A QUEST FOR VALUE
[End caption]
[photo: map and navigational instruments]
Above all, those who manage the fund are on a quest for value: sound companies
whose stocks are attractively priced and which can deliver both growth in
dividends and capital appreciation over the long haul. These companies tend to
have managements who believe in creating value for shareholders and sharing
with them some of their profit.
Interestingly, a country's tax system plays an important role in the fund's
investment selections. Notes London-based portfolio counselor Mark Denning:
"Taxes on income are an important consideration." That's because not all
countries are dividend-friendly.
Japan's tax structure, for example, is punitive to dividends. Its corporate
tax rate as well as the rate of taxation paid by individuals on income is very
high. Partly as a result, Japanese companies traditionally pay minimal
dividends. On the other hand, many European countries, the U.K. and the
Netherlands in particular, as well as countries such as Australia and Hong
Kong, treat dividends more favorably and companies reward shareholders with
more generous dividends. "Companies in more mature industries in these
countries are well represented in the fund. They contribute handily to yields,"
adds Denning.
Then there is the unique way the fund is managed in its search for value.
Management of the fund's portfolio is shared among five portfolio counselors
and a pool of research analysts who operate independently within broad
guidelines. This process encourages both individual creativity and the
cross-fertilization of ideas within a disciplined framework.
Operating from nine offices worldwide, Capital Research and Management Company
(CRMC), investment adviser to the fund, and its affiliates deploy more than 100
investment professionals from 31 countries speaking 37 languages. Research
analysts and portfolio counselors criss-cross the world visiting companies and
plants, speaking with chief executives as well as workers on the shop floor,
government representatives and ordinary citizens. Together they've logged 7,500
research visits in 54 countries over the past year, making CRMC one of the
world's foremost investment intelligence-gathering networks.
[Begin caption]
INSTRUMENTS OF NAVIGATION: BOTTOM-UP RESEARCH
[End caption]
The fund's portfolio counselors and research analysts look for long-term value.
They focus on companies - not industries or regions - to find the best
prospects at the most reasonable prices. Explains Bepler: "It used to be enough
to say I like U.K. banks. Now you have to ask, how do they compare with French,
German or Canadian banks?" Adds fund Chairman Thierry Vandeventer: "The job of
an investment professional is not simply to analyze companies and trends. It's
to discern relative value. That means assessing the relative investment merit
of opportunities not only among countries and industries but companies as
well."
That focus on relative value, more than anything, is what has kept the fund
from investing heavily in markets that have seen most of the recent volatility.
In the 1980s and 1990s, some so-called emerging markets recorded economic
growth rates and stock market returns well in excess of those of North America
and Western Europe. As a result, many of the smaller markets attracted capital
inflows that overwhelmed financial institutions and led to over-lending to real
estate and manufacturing projects. This sowed the seeds for economic
destabilization in many Asian markets.
Capital World Growth and Income Fund has had a small allocation to most
developing markets, preferring to invest in the more advanced, and more stable,
economies - primarily because of lower valuation levels. Exposure to Asia has
been relatively small. In fiscal 1997 Indonesia, Korea, Taiwan and the
Philippines accounted for a negligible 1.0% of the total portfolio. The largest
Asian holding was the 3.3% in Hong Kong.
Commenting on Asia's current troubles, Thierry Vandeventer says: "However
difficult and painful a period this may be for these countries, it may turn out
to be a watershed event. If greater transparency in the way business is
practiced is an outcome, then the long-term outlook is very positive indeed."
Janet McKinley echoes that sentiment. "It is true that up to now we have
preferred the more developed markets," she says. "However, if our analysis of a
company measures up to the standards we apply to all companies, and if we find
value, we will buy that stock, even if it's the stock of a company in Southeast
Asia."
[Begin caption]
CIRCUMNAVIGATING SQUALLS: SEEKING A SAFE AND STEADY COURSE
[End caption]
Naturally, a fund built on the principle of reduced volatility cannot deliver
the spectacular returns sometimes earned by pure growth funds or by those
narrowly focused on particular industry sectors or regions experiencing rapid
domestic growth. The trade-off for Capital World Growth and Income Fund
shareholders is receiving current income as well as growth, along with an
opportunity for greater certainty, less volatility and fewer unpleasant
surprises.
"Back some five plus years ago when we were creating the fund, we had four
goals," recalls portfolio counselor Bill Grimsley. "We hoped to generate a
higher total return than the MSCI World Index. We hoped to generate more income
than the index. We hoped dividends would grow. And we hoped to accomplish all
this with lower than average volatility."
As the fund approaches its fifth anniversary in March 1998, it is gratifying to
report that the fund has achieved each of those goals. Fund shareholders have
indeed enjoyed smoother sailing in sometimes stormy seas.
[photo: sailboat]
[photo: maps]
[Begin caption]
KEEPING AN EVEN KEEL
[End caption]
<PAGE>
<TABLE>
CAPITAL WORLD GROWTH AND INCOME FUND
INVESTMENT PORTFOLIO, NOVEMBER 30, 1997
<S> <C> <C> <C>
Percent
of Net
10 Largest Holdings Country Assets
Portugal Telecom Portugal 1.75%
ING Groep Netherlands 1.67
Astra Sweden 1.33
Australia and New Zealand Banking Group Australia 1.19
Telefonica de Espana Spain 1.16
Bank of New York USA 1.15
Royal Bank of Canada Canada 1.12
Telecom Italia Italy .94
Koninklijke PTT Nederland Netherlands .91
Telecom Corp. of New Zealand New Zealand .89
- ------------------------------------------- ---------- ---------- ----------
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>
<PAGE>
<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.
<PAGE>
<TABLE>
Per-Share Data and Ratios
<S> <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>
<PAGE>
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.
<PAGE>
[THE AMERICAN FUNDS GROUP(R)]
Capital World Growth and Income Fund
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President and
Chief Executive Officer, The Mission Group;
former President, Southern California
Edison Company
PAUL G. HAAGA, JR.
Los Angeles, California
President of the fund
Executive Vice President and Director,
Capital Research and Management Company
MARY MYERS KAUPPILA
Boston, Massachusetts
Founder and President, Energy Investment, Inc.
GAIL L. NEALE
Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of the Salzburg
Seminar; former Director of Development and
of the Capital Campaign, Hampshire College
ROBERT J. O'NEILL, PH.D.
Oxford, England
Professor and Fellow, All Souls College,
University of Oxford
DONALD E. PETERSEN
Birmingham, Michigan
Retired; former Chairman of the Board and
Chief Executive Officer, Ford Motor Company
FRANK STANTON
New York, New York
President Emeritus, CBS Inc.
THIERRY VANDEVENTER
Geneva, Switzerland
Chairman of the Board of the fund
Director, Capital Research and
Management Company
CHARLES WOLF, JR., PH.D.
Santa Monica, California
Dean, The RAND Graduate School; Senior
Economic Adviser, The RAND Corporation
STEFANIE POWERS
Beverly Hills, California
Actor and Founder and President of
The William Holden Wildlife Foundation
has been re-elected a director of the fund.
OTHER OFFICERS
STEPHEN E. BEPLER
New York, New York
Senior Vice President of the fund
Senior Vice President,
Capital Research Company
LARRY P. CLEMMENSEN
Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company;
President and Director,
The Capital Group Companies, Inc.
MARK E. DENNING
London, England
Senior Vice President of the fund
Director, Capital Research and
Management Company
JANET A. MCKINLEY
New York, New York
Senior Vice President of the fund
Director, Capital Research and
Management Company
CARL M. KAWAJA
San Francisco, California
Vice President of the fund
Vice President, Capital Research Company
VINCENT P. CORTI
Los Angeles, California
Secretary of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
R. MARCIA GOULD
Brea, California
Treasurer of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
DIANA J. PROHOROFF
Brea, California
Assistant Treasurer of the fund
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
This report is for the information of shareholders of Capital World Growth and
Income Fund, but it may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after March 31, 1998, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA AGD/GRS/3221
Lit. No. WGI-011-0198
Printed on recycled paper
