UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-7338
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
Date of fiscal year end: November 30, 2003
Date of reporting period: November 30, 2003
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)
ITEM 1 - Reports to Stockholders
[logo - American Funds(R)]
The right choice for the long term(R)
CAPITAL WORLD GROWTH AND INCOME FUND
[photo of measuring tape on wooden table]
Measuring success: A 10-year look back
Annual report for the year ended November 30, 2003
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.
This fund is one of the 29 American Funds, the nation's third-largest mutual
fund family. For more than seven decades, Capital Research and Management
Company,SM the American Funds adviser, has invested with a long-term focus based
on thorough research and attention to risk.
Contents
Letter to shareholders 1
The value of a long-term perspective 5
Measuring success: A 10-year look back 6
Investment portfolio 12
Financial statements 27
Directors and officers 38
What makes American Funds different? back cover
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended DECEMBER 31, 2003 (the most recent
calendar quarter):
1 year 5 years 10 years
CLASS A SHARES
Average annual total returns +31.06% +8.34% +11.82%
THE FUND'S 30-DAY YIELD FOR CLASS A SHARES AS OF DECEMBER 31, 2003, REFLECTING
THE 5.75% MAXIMUM SALES CHARGE and calculated in accordance with the Securities
and Exchange Commission formula, was 1.63%.
Results for other share classes can be found on page 37. Please see the inside
back cover for important information about other share classes.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. CURRENT
RESULTS MAY BE LOWER OR HIGHER THAN THOSE SHOWN. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY. FOR MORE CURRENT INFORMATION AND MONTH-END RESULTS,
VISIT AMERICANFUNDS.COM. RESULTS SHOWN REFLECT DEDUCTION OF THE MAXIMUM SALES
CHARGE OF 5.75%.
Investing for short periods makes losses more likely. Investments are not
FDIC-insured, nor are they deposits of or guaranteed by a bank or any other
entity. Investing outside the United States is subject to additional risks, such
as currency fluctuations and political instability, which are detailed in the
fund's prospectus.
[small photo of measuring tape on wooden table]
FELLOW SHAREHOLDERS:
Global stock markets sprang back to life during Capital World Growth and Income
Fund's 2003 fiscal year. With major conflict in Iraq having ended in spring,
investors focused on signs of economic resurgence and enthusiastically bid up
equity prices. U.S.-based investors in international markets received an
additional boost as major currencies strengthened against the dollar.
For the 12 months ended November 30, Capital World Growth and Income Fund
delivered a substantial gain of 28.5%. That return assumes reinvestment of
quarterly dividends totaling 56 cents a share that were paid during the year.
Shareholders who elected to take dividends in cash had an income return of 2.5%
and saw the value of their investment rise 25.5%.
The fund finished the year well ahead of its relevant benchmarks. The unmanaged
MSCI World Index, which measures 23 major stock markets including the U.S.,
returned 19.8% on a reinvested basis. Meanwhile, the 323 global funds tracked by
Lipper returned an average of 19.5%.
The fund's emphasis on established, dividend-paying companies has kept it in
good stead, providing solid participation in rising markets and considerable
resilience during periods of decline. As the table below shows, over the past
five years -- a period roughly tracing the latest full market cycle -- Capital
World Growth and Income Fund has done considerably better than both the World
Index and the Lipper global funds average. That trend holds true for longer time
frames as well, although there have been periods when the fund has trailed these
benchmarks.
U.S. STOCKS RISE FROM THE DOLDRUMS
The fund's fiscal year got off to a shaky start in December, with stock prices
weighed down by lackluster economic growth, rising oil prices and the looming
conflict with Iraq. In late April, however, as the war entered a new phase, the
gloom lifted. A stream of encouraging data bolstered investors' confidence that
the U.S. economy was firmly on the mend -- a conviction that was confirmed by a
third-quarter growth rate of 8.2%. Underlying the good news were improved
corporate profits, rising productivity, renewed business investment and a
pick-up in manufacturing. The approval in Congress of a reduction in the tax on
dividends and long-term capital gains benefited income-focused investors by
eliminating the gap between these two components of total return.
For the 12 months ended November 30, U.S. equity prices rose 15.3%.* The
greatest gains went to technology stocks, but other economically sensitive
sectors also did well.
*Country returns are based on MSCI indexes, in U.S. dollars with gross
dividends reinvested.
RESULTS AT A GLANCE
(as of November 30, 2003, with all distributions reinvested)
Average annual total returns
Lifetime
1 year 5 years 10 years (since 3/26/93)
Capital World Growth and Income Fund +28.5% +8.9% +12.6% +13.1%
MSCI World Index (1) +19.8 -0.7 +7.4 +7.8
Lipper global funds average (2) +19.5 +2.5 +7.9 +8.5
(1) The MSCI World Index is unmanaged and does not reflect the effects of sales
charges, commissions or expenses.
(2) The Lipper global funds average consists of funds that invest at least 25%
of their portfolios in securities traded outside the U.S. Lipper averages
do not reflect the effects of sales charges.
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com. Results shown are at net asset value. If the sales
charge had been deducted (maximum 5.75%), results would have been lower.
[Begin Sidebar]
A company-by-company emphasis contributed to Capital World Growth and Income
Fund's superior returns during the broad market rally.
[End Sidebar]
[photo of a plumb bob]
CURRENCY GAINS ENHANCE GLOBAL RETURNS
Outside the U.S., improving business conditions likewise had a salutary effect
on stock prices. Returns for U.S. investors were magnified -- in some cases
substantially -- by currency appreciation versus the dollar. The euro gained a
hefty 20.6% against the dollar. As a result, the 13.3% increase in German stock
prices in euros translated into a 36.6% gain in dollar terms, with similar
escalations for France (4.4% in euros versus 25.8% in dollars) and Spain (11.8%
versus 34.7%). In the Netherlands, currency gains transformed a 7.0% decline in
euros into a 12.0% increase when measured in dollars. Outside the eurozone, U.K.
stock prices rose 20.2% in dollar terms, reflecting a 10.6% increase in sterling
against the dollar.
Elsewhere, the Australian and Canadian dollars appreciated 29.2% and 20.6%,
respectively, versus their U.S. counterpart, contributing to stock price
increases of 36.9% and 46.2%.
STRENGTH IN ASIA
Asian stocks bounced back smartly as well during the year. In Japan (+24.0%),
investors grew increasingly heartened by new signs of economic life. Banks have
begun to shed bad loans, a number of companies have restructured and the
country's gross domestic product has been inching upward. The strong yen
accounted for a good part of the return for U.S. investors -- it appreciated
12.0% against the dollar for the year -- although it restrained profits for
Japanese exporters.
Finally, stock prices rose in Taiwan (+30.8%), Hong Kong (+25.2%) and South
Korea (+15.5%), buoyed by the rosier economic picture and by growing demand for
technology and electronics.
BROAD GAINS IN THE PORTFOLIO
As we have often mentioned in these pages, we choose investments from the bottom
up, focusing on individual businesses we believe provide exceptional value and
have attractive prospects for growth over time. That company-by-company emphasis
contributed to Capital World Growth and Income Fund's superior returns during
this broad market rally. Indeed, there were few missteps during the year: Of 204
companies held over the full year, only 25 declined in price.
Among the fund's 10 largest investments, all advanced solidly during the year.
Freeport-McMoRan, a giant copper and gold producer, gained 180.8% in price,+
while Cia Vale do Rio Doce, another mining firm, gained 54.3%. Altria, shrugging
off certain litigation worries, rose 37.9%. Societe Generale (+42.3%) likewise
did well, as did most of our bank holdings. Koninklijke Numico (+107.8%), a
leading producer of baby food and nutritional supplements, rebounded from steep
declines in 2002; as we had built much of our position while the stock price was
still quite low, the fund was able to capture a good part of that gain.
+Stock price changes are expressed in U.S. dollars.
LARGEST EQUITY HOLDINGS
(as of November 30, 2003)
Company Country Percent of net assets
Altria Group U.S. 1.8%
AstraZeneca U.K. 1.3
Koninklijke Numico Netherlands 1.2
Cia Vale do Rio Doce Brazil 1.1
Unilever NV Netherlands 1.0
DEPFA BANK Ireland 1.0
ING Groep Netherlands 1.0
Societe Generale France 1.0
Freeport-McMoRan Copper & Gold U.S. .9
Scottish Power U.K. .9
Because they tend not to pay dividends, the fund has relatively low exposure to
technology stocks. Of those in the portfolio, however, Agere Systems (+156.5%)
and Samsung SDI (+38.5%) posted noteworthy gains. Near the end of the year, we
capitalized on a stock price rally for Samsung Electronics (+19.3%) by selling a
large portion of the position.
Other cyclical companies -- including the mining concern Phelps Dodge (+102.7%)
and paper and forest companies Norske Skogindustrier (+21.4%) and
Georgia-Pacific (+31.6%) -- also had an impact on results.
Telecommunications stocks based outside the U.S. generally did well. Telekom
Austria (+28.3%), Vodafone (+21.1%), BCE (+22.2%) and KPN (+18.0%) helped
support returns. Closer to home, SBC Communications (-18.3%) was hampered by a
difficult business environment in the U.S. We believe the company has good
prospects for the long term; in the meantime, the stock's dividend yield of
about 5.0% is helping us stay patient.
Finally, pharmaceuticals turned in more mixed results. AstraZeneca (+20.7%) rose
during the summer when Crestor, its new cholesterol-lowering drug, won FDA
approval. Shionogi (+20.6%), which had developed the compound, benefited as
well. Forest Labs (+1.8%) and Eli Lilly (+0.4%) were weak; the latter suffered
from an investigation into its manufacturing process and a delay in bringing
several new drugs to market.
WHERE THE FUND'S ASSETS WERE INVESTED
Percent by country as of November 30, 2003
[begin pie chart]
The Americas-- 33.1%
Europe-- 31.5%
Bonds, cash
& equivalents-- 14.3%
Asia/Pacific-- 18.9%
Other -- 2.2%
[end pie chart]
Capital World Growth MSCI
and Income Fund World Index
o THE AMERICAS 33.1% 58.3%
United States 24.4 55.6
Canada 6.1 2.7
Brazil 1.6 --
Mexico 1.0 --
o EUROPE 31.5% 29.4%
United Kingdom 9.6 10.9
Netherlands 6.1 2.1
Germany 3.0 2.8
France 2.1 4.1
Norway 1.5 .2
Denmark 1.1 .3
Ireland 1.1 .3
Spain 1.1 1.5
Sweden 1.0 .9
Switzerland 1.0 3.1
Austria .9 .1
Italy .9 1.6
Portugal .9 .1
Finland .6 .8
Belgium .4 .4
Other Europe .2 .2
o ASIA/PACIFIC 18.9% 12.3%
Japan 6.4 9.0
Australia 2.9 2.1
South Korea 2.6 --
Hong Kong 2.2 .7
Taiwan 1.5 --
India 1.3 --
Singapore .7 .4
Other Asia/Pacific 1.3 .1
o OTHER 2.2% --
o BONDS, CASH & equivalents 14.3% --
The MSCI World Index is weighted by market capitalization.
[Begin Sidebar]
Over the past decade, the fund's growth-and-income goal has provided solid
participation in rising markets and considerable resilience during periods of
decline.
[End Sidebar]
[photo of a rooster weather vane]
SHIFTS IN THE PORTFOLIO
During the year, substantial inflows to the fund allowed us to take advantage of
many new investment opportunities. We have concentrated new investments outside
the U.S., where our research analysts have uncovered a number of attractively
valued securities. Among industries, diversified telecommunications services is
now our largest concentration, at 7.1% of net assets. We have added to several
of our European bank holdings, as well as select chemical companies, and food
and beverage manufacturers. At the same time, we lightened up on several
insurance positions. During the year, we also advantageously sold off a large
investment in Nextel, which reduced the fund's concentration in wireless
telecommunications.
A STRATEGY FOR GROWTH
Capital World Growth and Income Fund has experienced remarkable growth over the
past year. Net assets have risen 57%, to $16.7 billion from $10.7 billion 12
months ago. We are gratified that a large part of that increase is due to the
many new additions to our shareholder family, which now stands at more than
900,000 strong. We welcome those of you who have recently joined.
The fund's method of investment management is well suited to accommodating
growth. The multiple portfolio counselor system, as it is called, was developed
more than 40 years ago by the fund's investment adviser, Capital Research and
Management Company. Because assets are divided among a number of portfolio
counselors, managers can be added as the fund expands. The system also
encourages a diversity of investment styles, a strategy we believe has helped us
moderate risk while smoothing out returns. Capital World Growth and Income Fund
currently has seven portfolio counselors, and a research portfolio involving
more than three dozen analysts.
STICKING WITH THE FUNDAMENTALS
Looking forward, the underpinnings of growth appear to be reasonably secure.
Inflation around the world remains subdued, and interest rates are still quite
low, both of which should help stimulate expansion in the months ahead.
Unemployment is still a concern, however, and the weaker dollar, while a boon
for investors, has constrained the competitiveness of many non-U.S. exporters.
These uncertainties suggest that stock prices may have gotten ahead of
themselves. While a 12-month return of 28.5% is always welcome, it is also
significantly higher than the fund's 13.1% average annual return since beginning
operations in March of 1993 through the end of November 2003.
Regardless of market conditions, our focus holds steady -- on seasoned,
well-managed businesses that are likely to weather downturns and prosper in more
fortunate times. Moreover, we believe that the new parity between taxes on
dividends and capital gains should support our balanced investment approach.
That approach has served shareholders well over the years. As we head into our
second decade, we are hopeful that it will continue to do so.
In the article that begins on page 6, we invite you to hear from a number of the
fund's investment professionals as they look back at the fund's first 10 years.
Cordially,
/s/ Gina H. Despres
Gina H. Despres
Chairman of the Board
/s/ Stephen E. Bepler
Stephen E. Bepler
President
January 13, 2004
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com. Results shown are at net asset value. If the sales
charge had been deducted (maximum 5.75%), results would have been lower.
THE VALUE OF A LONG-TERM PERSPECTIVE
LOW EXPENSES, LOW TURNOVER RATE
(for the 12 months ended November 30, 2003)
Capital World Growth and Income Fund's expense ratio for Class A shares was
0.81% in fiscal 2003. That's only $81 for every $10,000 invested and
substantially less than the 1.71% average expense ratio for front-end load
global funds as measured by Lipper.
The fund's turnover rate (the rate at which holdings are bought and sold) is
also low, at 27%, keeping transaction costs and tax consequences contained. The
average global fund, meanwhile, has a turnover rate of 95%, according to Lipper.
HOW A $10,000 INVESTMENT HAS GROWN
Fund figures reflect deduction of the maximum sales charge of 5.75% on the
$10,000 investment. Thus, the net amount invested was $9,425.
[mountain chart]
DATE CAPITAL CAPITAL WORLD U.S. ORIGINAL
WORLD GROWTH GROWTH AND CONSUMER INVESTMENT
AND INCOME MSCI INCOME FUND PRICE
FUND with WORLD INDEX with dividends INDEX
dividends with dividends excluded (2) (INFLATION) (4)
reinvested (1) reinvested (3)
<s> <c> <c> <c> <c> <c>
3/26/93 $9,425 $10,000 $9,425 $10,000 $10,000
5/31/93* $9,719 $10,837 $9,719 $10,042 $10,000
8/31/93 $10,401 $11,475 $10,313 $10,084 $10,000
11/30/93 $10,782 $10,924 $10,625 $10,153 $10,000
2/28/94 $11,615 $12,062 $11,388 $10,216 $10,000
5/31/94 $11,315 $11,936 $11,044 $10,272 $10,000
8/31/94 $12,038 $12,501 $11,656 $10,376 $10,000
11/30/94 $11,592 $11,982 $11,131 $10,425 $10,000
2/28/95 $11,860 $12,097 $11,293 $10,508 $10,000
5/31/95 $12,788 $13,242 $12,094 $10,599 $10,000
8/31/95 $13,412 $13,598 $12,557 $10,648 $10,000
11/30/95 $13,841 $14,260 $12,850 $10,696 $10,000
2/29/96 $14,700 $15,042 $13,553 $10,787 $10,000
5/31/96 $15,327 $15,673 $14,031 $10,905 $10,000
8/31/96 $15,414 $15,379 $13,947 $10,954 $10,000
11/30/96 $17,118 $17,004 $15,362 $11,045 $10,000
2/28/97 $17,849 $17,136 $15,936 $11,114 $10,000
5/31/97 $18,908 $18,427 $16,782 $11,149 $10,000
8/31/97 $19,755 $18,892 $17,380 $11,198 $10,000
11/30/97 $19,917 $19,212 $17,414 $11,247 $10,000
2/28/98 $21,881 $21,351 $19,050 $11,274 $10,000
5/31/98 $22,801 $22,198 $19,763 $11,337 $10,000
8/31/98 $19,885 $19,671 $17,104 $11,379 $10,000
11/30/98 $23,007 $23,138 $19,676 $11,421 $10,000
2/28/99 $23,904 $24,151 $20,375 $11,455 $10,000
5/31/99 $25,004 $25,203 $21,214 $11,574 $10,000
8/31/99 $26,177 $26,263 $22,063 $11,636 $10,000
11/30/99 $27,396 $28,141 $23,014 $11,720 $10,000
2/29/00 $29,908 $28,765 $25,027 $11,825 $10,000
5/31/00 $30,124 $28,718 $25,119 $11,943 $10,000
8/31/00 $31,516 $29,799 $26,121 $12,033 $10,000
11/30/00 $29,142 $26,067 $24,016 $12,124 $10,000
2/28/01 $30,810 $24,728 $25,334 $12,242 $10,000
5/31/01 $31,113 $24,514 $25,404 $12,375 $10,000
8/31/01 $29,274 $22,316 $23,786 $12,361 $10,000
11/30/01 $28,613 $21,975 $23,111 $12,354 $10,000
2/28/02 $28,826 $21,266 $23,225 $12,382 $10,000
5/31/02 $30,788 $21,514 $24,700 $12,521 $10,000
8/31/02 $26,985 $18,550 $21,503 $12,584 $10,000
11/30/02 $27,405 $18,697 $21,693 $12,625 $10,000
2/28/03 $25,681 $16,961 $20,237 $12,751 $10,000
5/31/03 $29,144 $19,487 $22,806 $12,779 $10,000
8/31/03 $31,622 $20,680 $24,576 $12,855 $10,000
11/30/03 $35,220 $22,391 $27,230 $12,848 $10,000
Year ended November 30 1993* 1994 1995 1996 1997 1998 1999
TOTAL VALUE
Dividends reinvested $144 295 421 506 488 478 440
Value at year-end $10,782 11,592 13,841 17,118 19,917 23,007 27,396
WGI TOTAL RETURN 7.8% 7.5 19.4 23.7 16.4 15.5 19.1
Year ended November 30 2000 2001 2002 2003
TOTAL VALUE
Dividends reinvested 577 578 569 679
Value at year-end 29,142 28,613 27,405 35,220
WGI TOTAL RETURN 6.4 (1.8) (4.2) 28.5
Average annual total return for 10-2/3 years 12.5% (1)
AVERAGE ANNUAL TOTAL RETURN REFLECTING 5.75% MAXIMUM SALES CHARGE
(based on a $1,000 investment with all distributions reinvested)
Periods ended
CLASS A SHARES* 11/30/03
1 year +21.13%
5 years +7.60%
10 years +11.90%
*Results for other share classes can be found on page 37.
* For the period March 26 through November 30, 1993.
(1) Includes reinvested dividends of $5,174 and reinvested capital gain
distributions of $9,598.
(2) Results calculated with capital gains reinvested.
(3) The World Index is unmanaged and does not reflect the effects of sales
charges, commissions or expenses.
(4) Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
The results shown are before taxes on fund distributions and sale of fund
shares.
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com.
[photo of a tide indicator on a beach]
MEASURING SUCCESS
A 10-YEAR LOOK BACK
In 1993, Capital World Growth and Income Fund was created as a vehicle for
shareholders who wanted to take a more conservative approach to global
investing. Over the past eventful decade, that goal was amply tested -- but
ultimately prevailed.
[Begin Sidebar]
[photo of a barometer]
A dual growth-and-income strategy has helped the fund negotiate a smoother path
through turbulent market conditions.
[End Sidebar]
In relatively short order, we experienced one of the great bull markets of the
century, followed by the steepest stock decline since the 1930s. With the
creation of the eurozone, the decline of Japan, and the emergence of China and
Korea as economic forces, we have seen profound shifts in economic
relationships. At the same time, technological innovation -- powerful
semiconductors, wireless communication and the Internet -- has transformed
businesses and households in every corner of the world.
Through it all, Capital World Growth and Income Fund's investment professionals
have responded by hewing to the fund's time-tested strategy of relying on
fundamental research to find seasoned, attractively valued companies that were
likely to reward patient investors. That discipline has indeed proved to be
beneficial over the years.
An anniversary is an appropriate occasion for reviewing the goals of the fund,
reflecting on the investment environment of the past decade and describing the
factors that have contributed to Capital World Growth and Income Fund's success
over that time.
Joining Gina Despres, the fund's chairman of the board, are fund president and
portfolio counselor Steve Bepler, and portfolio counselors Mark Denning, Tim
Dunn, Gregg Ireland and Carl Kawaja.
GINA: LET'S BEGIN AT THE BEGINNING. WHAT WAS THE ORIGINAL IMPETUS FOR CREATING
A GLOBAL GROWTH-AND-INCOME FUND?
GREGG: Given the difficulties and greater volatility of investing overseas, we
thought it would make sense to offer a fund that aimed to provide a smoother
ride for investors by delivering a bit of income in addition to growth. Although
the concept of global investing was already well developed by 1993, this dual
focus was pretty unusual at the time -- and it still is today.
STEVE: Back then, we had done some statistical work which showed that over a
10-year period, nearly 70% of the total return from stocks came from reinvested
dividends. From our perspective, that meant that by emphasizing
well-established, seasoned companies -- the sort that traditionally pay and
raise dividends -- you could mitigate some of the additional risks of investing
outside the U.S. and still achieve growth over time.
GINA: AND, IN FACT, GLOBAL MARKETS HAVE BEEN QUITE VOLATILE SINCE THEN,
INCLUDING AN UNPRECEDENTED RUN-UP AND A PAINFUL DECLINE AFTERWARDS. HOW HAS THE
FUND NEGOTIATED THESE CROSSCURRENTS?
STEVE: Extremely well, I would say. Our conservative posture has helped us avoid
the extremes of the marketplace. That included both the speculative bubble of
the late 1990s and the precipitous collapse that followed it. We aim for a
balanced approach. Our thesis is that if you take care to protect yourself on
the downside, you don't have to take as many risks on the upside to succeed.
MARK: The numbers tell the story pretty compellingly -- a lifetime annualized
return of 13% through November 30, versus 8% for both the MSCI World Index and
the Lipper global funds average, and 10% for the S&P 500. I would emphasize that
the fund's returns were achieved during a period in which non-U.S. stocks
generally underperformed U.S. markets. So the fact that Capital World Growth and
Income Fund did better than the S&P 500 over its lifetime really speaks to the
value of our research-driven, company-by-company approach.
FLEXIBILITY IS KEY
GINA: INTERESTINGLY, YOU MIGHT THINK THAT SUCH A CAUTIOUS STRATEGY WOULD PUT A
LOT OF LIMITATIONS ON THE FUND, BUT THAT'S NOT THE CASE AT ALL.
TIM: That's exactly right. In fact, I think a key contributor to the fund's
success is its flexibility. As portfolio counselors, we have the opportunity to
build a portfolio that includes not only blue chip companies like Unilever or
Pfizer, but also slower growing, higher yielding companies that support the
current income objective and, we hope, will do well down the line. One of the
reasons we have the freedom to go beyond the more obvious choices is that we can
take advantage of the immense research capabilities of Capital Research and
Management Company, the fund's investment adviser.
[Begin Sidebar]
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com. Results shown are at net asset value. If the sales
charge had been deducted (maximum 5.75%), results would have been lower.
[End Sidebar]
[Begin Photo Caption]
[photo of Margaret and Richard Bourque]
Margaret and Richard Bourque,
10-year fund shareholders
[End Photo Caption]
[Begin Sidebar]
INVESTING FOR ALL SEASONS
Richard and Margaret Bourque, American Funds shareholders for close to 30 years,
know firsthand the importance of patience and the value of a long-term
perspective. In 1984, the close-knit Bourque family suffered a serious blow when
the headquarters of their school bus company burned to the ground. They had only
nine mortgage payments left and were underinsured. "Everything we'd worked so
hard for had virtually vanished," Margaret says. "We had to rebuild the company
from scratch." And that they did. Eighteen months later, on their wedding
anniversary, the Bourques celebrated the grand reopening of their new building
and their company.
The Bourques' determination is equally apparent in their investment strategy.
Richard and Margaret began investing in Capital World Growth and Income Fund in
1993, the year of the fund's inception. "The fund helps diversify our portfolio
by giving it a global dimension," says Richard. "That perspective has been very
advantageous, particularly during the latest bear market, when the fund held up
so well."
Following the advice of Richard's father, George, who began investing in
American Funds right before the bear market of 1973 and 1974, the New Jersey
couple made their first investments in American Funds soon after they were
married. When their children were born, the Bourques started American Funds
accounts for them as well. Richard, now 27, a musician and avid traveler, is
heading to graduate school. Kim, 31, a teacher, and her husband Randy are
following in the investment footsteps of her parents. Their 19-month-old son,
Ethan, is the family's fourth generation of American Funds shareholders.
Happily, the family business recovered from the earlier setback and is doing
well. But with retirement on the horizon, Richard and Margaret both look forward
to having the time to pursue the things they love: expanding their garden,
taking cooking classes, and visiting family and friends more frequently. Their
long-term approach to investing has served them well, and they are relying on
Capital World Growth and Income Fund and the rest of their American Funds
portfolio to serve as the anchor of their retirement dreams.
[End Sidebar]
[Begin Photo Caption]
[photo of Gina Despres]
You might think that our cautious strategy would put a lot of limitations on
the fund, but that's not the case at all.--GINA DESPRES, CHAIRMAN OF THE BOARD
[End Photo Caption]
CARL: That latitude also expresses itself geographically, of course, in that
Capital World Growth and Income Fund can invest anywhere in the world our
research analysts uncover promising opportunities. So the portfolio can hold a
Japanese utility or a U.K. retailer or a French bank or a U.S. machinery
exporter, and so on. If you were to thumb through the portfolio listing at the
back of this report, you would see how broadly diversified the fund is: more
than 280 companies based in three dozen countries and as many industries. To a
large degree, the breadth of our investable universe helps make the fund more
responsive to changing market conditions.
EARLY SUCCESSES
GINA: LOOKING BACK OVER THE 10 YEARS, WHAT WERE THE MOST SALIENT TRENDS THAT
INFLUENCED THE FUND'S RETURNS?
GREGG: I think it would be fair to split that time frame right down the middle.
During the first five years, roughly 1993 to 1998, the fund had a number of
strong successes -- among banks and pharmaceutical holdings, and particularly
from our telecommunications investments. In contrast, I would characterize the
past five years as protecting the portfolio in the midst of an extremely
difficult market environment -- and ultimately doing it quite well.
MARK: Yes, that's right. I think our move into telecoms in those early days is a
good illustration of how we approach all of our investment decisions. Right out
of the starting gate, we were intrigued by the potential for cellular telephony,
thanks to the work of David Riley, our global telecommunications analyst, and
his colleagues. I would mention that at the time the market generally didn't
share our enthusiasm. Because our analysts were evaluating these companies on a
global basis, however, and not just within their local markets, they were seeing
extremely attractive valuations given their expectations for the sector. Within
the fund's first fiscal year, we had invested in more than a dozen telecom
operators, a few of which, such as Telefonos de Mexico and Telecom New Zealand,
had only recently been privatized. By 1998, the fund held something like 15% of
assets in telecoms, which enabled it to ride this great tailwind as the sector
soared over the next two years.
STEVE: Mind you, we weren't investing in the sector wholesale, but choosing our
holdings carefully, based on the collective research we had gathered. A good
example is Mannesmann, a German manufacturing company that was in the process of
transitioning into mobile phone operation. Most investors were negative on the
stock because of the enormous outlays of cash the company was making to build
out its network. But we had a number of American Funds analysts scrutinizing the
company from different angles and they agreed that the strong profits from
Mannesmann's traditional businesses would offset these losses until the cellular
business gained a firm foothold. Armed with that information, we built up a very
large position through 1999. In 2000, Vodafone made a very large premium bid for
Mannesmann -- to Capital World Growth and Income Fund's great benefit. To my
recollection, it was one of the fund's most profitable investments ever.
[Begin Sidebar]
BEAR MARKET RESILIENCE
Resilience in down markets has helped deliver a smoother ride for shareholders.
During the recent boom and bust, Capital World Growth and Income Fund
participated judiciously on the upside and held up well when markets declined.
For people saving for college, or a new home or retirement, protecting principal
in difficult markets can mean the difference between meeting your goal or
falling short of it.
LOW-TO-HIGH HIGH-TO-LOW LOW-TO-LOW
10/5/98-3/27/00 3/27/00-10/9/02 10/5/98-10/9/02
Capital World Growth
and Income Fund +59.5% -25.9% +18.2%
MSCI World Index +62.9 -49.4 -17.5
Lipper global funds
average +83.7 -43.5 -1.3
Periods shown are determined by declines of 15% or greater in the unmanaged MSCI
World Index as of November 30, 2003. Returns are with distributions reinvested.
Returns for the World Index are in U.S. dollars.
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com. Results shown are at net asset value. If the sales
charge had been deducted (maximum 5.75%), results would have been lower.
[End Sidebar]
[Begin Sidebar]
[photo of a metronome]
We aim for balance. Our thesis is that if you take care to protect yourself on
the downside, you don't have to take as many risks on the upside to succeed.
- --STEVE BEPLER, PRESIDENT AND PORTFOLIO COUNSELOR
[End Sidebar]
RESILIENCE DURING A BOOM AND BUST
GINA: THAT EXAMPLE NEATLY ENCAPSULATES ALL OF THE MAJOR CHARACTERISTICS OF HOW
WE CHOOSE COMPANIES FOR THE PORTFOLIO: FUNDAMENTAL RESEARCH, A LONG-TERM VIEW,
MULTIPLE VIEWPOINTS AND A GLOBAL PERSPECTIVE. LET'S TURN NOW TO THE MORE RECENT
PAST-- THE BOOM AND BUST THAT BEGAN IN THE LATE 1990S.
GREGG: In some respects, the Internet bubble may have been the greatest
challenge in the fund's history. Although stock levels were soaring through the
roof, in reality markets were pretty sharply bifurcated. On the one hand,
technology and related sectors were climbing to unjustified levels given their
future earnings capabilities; on the other hand, investors were punishing many
stocks that paid dividends, no matter how solid their fundamentals. Because we
pay such close attention to valuations, however, we simply refused to play the
`crazy game.' So the fund suffered temporarily. Although on an absolute basis it
did fairly well, it lagged behind the MSCI World Index in 1998 and 1999.
TIM: Of course, that scenario completely reversed itself in March of 2000, when
the bubble burst. All of the major indexes declined for the 2000 fiscal year,
but Capital World Growth and Income Fund managed to finish that period in
positive territory. The next two years were even worse for the market, as the
damage spread beyond the technology sector. The fund declined as well, but much
less so than the indexes. If you look at the full market cycle, the fund did
well for two reasons -- first, by participating judiciously on the upside, and
second, by holding up so well on the downside. That balance was critical.
CARL: You know, the fund's resilience also highlighted the importance of
dividends, which provided a cushion when stock prices collapsed. Longer term,
reinvested dividends have made a meaningful contribution to the fund's total
return. As the `mountain' chart on page 5 shows, $10,000 invested at the fund's
inception has grown to roughly $35,000 if you reinvested dividends, but only
$27,000 if you took dividends in cash. That's a difference of nearly 25%. What's
more, the effect of compounding becomes increasingly pronounced over time.
AN APPROACH FOR ALL SEASONS
GINA: WHAT DEVELOPMENTS DO YOU SEE IN THE YEARS AHEAD THAT COULD AFFECT CAPITAL
WORLD GROWTH AND INCOME FUND?
STEVE: A recent development is the change in the dividend tax rate, which should
eventually have a favorable impact for income-oriented investors. Already, some
businesses, such as telecommunications operators, have become more willing to
pass earnings along to shareholders. The overall trend is encouraging: In 2003,
the number of dividend-paying companies in the S&P 500 reached a 20-year high.
MARK: From an investment standpoint, our global growth-and-income mandate is as
relevant today as it ever was. We are seeing valuations, in terms of yield and
other measures, that are very attractive, particularly outside the U.S.
GREGG: Of course, none of us can predict what markets have in store. You know,
10 years ago when we rolled out Capital World Growth and Income Fund, we had no
way of knowing that we were about to experience one of the most volatile market
environments in recent memory. What we did know, however, was that if you got to
know companies very well, paid close attention to risk and had the patience to
look beyond current trends, you would have a good chance of being successful
over time. That approach has certainly served shareholders well thus far and we
believe it will continue to do so over the next 10 years.
[photo of Steve Bepler]
[photo of Mark Denning]
[photo of Tim Dunn]
[photo of Gregg Ireland]
[photo of Carl Kawaja]
[photo of Jim Lovelace]
[photo of Steve Watson]
Years of Years with
Portfolio investment American
counselors experience Funds
Steve Bepler 38 31
Mark Denning 22 22
Tim Dunn 18 14
Gregg Ireland 31 31
Carl Kawaja 16 13
Jim Lovelace 22 22
Steve Watson 16 14
THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital World Growth and Income Fund is managed by seven portfolio counselors,
each of whom manages a portion of assets independently, in keeping with the
fund's objective. The benefits of the multiple portfolio counselor system, which
is employed by all of the American Funds, include: a history of consistent
long-term results, a range of investment styles, manageable pools of assets and
continuity of investment approach. An additional portion of fund assets is
managed by about three dozen research analysts who likewise pursue their highest
conviction ideas.
INVESTMENT PORTFOLIO November 30, 2003
[begin pie chart]
PERCENT
OF NET
INDUSTRY DIVERSIFICATION ASSETS
Diversified Telecommunication Services 7.12 %
Commercial Banks 7.02
Metals & Mining 6.03
Beverages & Tobacco 5.46
Pharmaceuticals 4.72
Bonds & notes 1.01
Other industries 55.40
Cash & equivalents 13.24
[end pie chart]
Shares Market
EQUITY SECURITIES (COMMON AND PREFERRED STOCKS AND CONVERTIBLE or principal value
DEBENTURES) - 85.75% amount (000)
DIVERSIFIED TELECOMMUNICATION SERVICES - 7.12%
Portugal Telecom, SA (Portugal) 15,810,000 $ 148,732
Telekom Austria AG (Austria) (1) 8,740,000 101,388
SBC Communications Inc. (USA) 3,800,000 88,464
Telecom Italia SpA, nonvoting (Italy) (1) 45,870,596 87,679
TDC A/S (Denmark) 2,352,568 78,861
Swisscom AG (Switzerland) 259,389 77,997
Telefonica, SA (Spain) 5,973,120 77,308
Telefonos de Mexico, SA de CV, Class L (ADR) (Mexico) 1,996,600 66,067
Telefonos de Mexico, SA de CV 4.25% convertible debentures 2004 $ 9,220,000 10,626
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk,
Class B (Indonesia) 96,837,500 70,065
BCE Inc. (Canada) 2,907,166 64,726
Verizon Communications Inc. (USA) 1,750,000 57,347
Chunghwa Telecom Co., Ltd. (ADR) (Taiwan) 3,400,000 49,946
Royal KPN NV (Netherlands) (1) 6,088,400 47,718
BT Group PLC (United Kingdom) 14,000,000 41,863
Deutsche Telekom AG (Germany) (1) 994,500 16,507
Deutsche Telekom International Finance BV 6.50% convertible bonds 2006 Euro 12,000,000 16,257
France Telecom, SA (France) (1) 956,000 24,632
Telecom Corp. of New Zealand Ltd. (New Zealand) 6,187,900 20,561
KT Corp. (South Korea) 520,000 20,073
TELUS Corp., nonvoting (Canada) 764,945 13,686
Singapore Telecommunications Ltd. (Singapore) 6,171,000 6,410
NTL Inc. (USA) (1) 77,003 5,018
NTL Europe, Inc., Series A, 10.00% preferred 2023 (France) 129 1
COMMERCIAL BANKS - 7.02%
DEPFA BANK PLC (Ireland) 1,461,107 167,569
Societe Generale (France) 2,090,000 167,311
ABN AMRO Holding NV (Netherlands) 6,324,440 139,154
Bank of America Corp. (USA) 1,200,000 90,516
HSBC Holdings PLC (United Kingdom) 4,562,063 69,170
HSBC Holdings PLC (Hong Kong) 1,372,282 21,027
Toronto-Dominion Bank (Canada) 2,544,700 80,362
Royal Bank of Scotland Group PLC (United Kingdom) 2,205,000 61,590
SMFG Finance (Cayman) Ltd. 2.25% mandatorily exchangeable preferred 2005,
units (Japan) 3,750,000,000 60,659
DnB Holding ASA (Norway) 7,600,000 45,921
Wachovia Corp. (USA) 724,000 33,123
Bank of Nova Scotia (Canada) 600,000 29,655
Wells Fargo & Co. (USA) 500,000 28,665
Westpac Banking Corp. (Australia) 2,449,210 27,123
Royal Bank of Canada (Canada) 518,400 24,667
National Australia Bank Ltd. (Australia) 1,000,000 20,932
FleetBoston Financial Corp. (USA) 500,000 20,300
Svenska Handelsbanken Group, Class A (Sweden) 1,029,300 19,018
Bank of the Philippine Islands (Philippines) 20,568,480 15,907
Bank Austria Creditanstalt (Austria) (1) 350,000 15,897
Malayan Banking Bhd. (Malaysia) 5,235,300 13,777
HBOS PLC (United Kingdom) 1,070,000 13,443
Skandinaviska Enskilda Banken AB, Class A (Sweden) 800,000 10,437
METALS & MINING - 6.03%
Cia. Vale do Rio Doce, Class A, preferred nominative (Brazil) 3,938,800 152,953
Cia. Vale do Rio Doce, ordinary nominative (ADR) 747,000 32,711
Freeport-McMoRan Copper & Gold Inc., Class B (USA) 3,569,800 155,393
Barrick Gold Corp. (Canada) 6,090,000 136,355
Phelps Dodge Corp. (USA) (1) 1,500,000 95,520
Gold Fields Ltd. (South Africa) 6,500,000 89,937
Anglogold Ltd. (South Africa) 1,500,000 72,262
Impala Platinum Holdings Ltd. (South Africa) 702,389 66,263
Newcrest Mining Ltd. (Australia) 6,000,000 55,588
Yanzhou Coal Mining Co. Ltd., Class H (China) 50,800,000 41,209
POSCO (South Korea) 333,000 39,616
Xstrata PLC (United Kingdom) 3,000,000 30,668
Alumina Ltd. (Australia) 7,143,900 30,507
Arcelor SA 3.875% convertible preferred 2005 (Luxembourg) 410,000 10,245
BEVERAGES & TOBACCO - 5.46%
Altria Group, Inc. (USA) 5,766,500 299,858
Diageo PLC (United Kingdom) 10,800,000 134,754
Foster's Group Ltd. (Australia) 36,214,319 115,332
R.J. Reynolds Tobacco Holdings, Inc. (USA) 1,900,000 104,880
Orkla AS (Norway) 2,985,714 66,338
Imperial Tobacco Group PLC (United Kingdom) 3,291,413 60,327
Swedish Match AB (Sweden) 5,500,550 49,541
Gallaher Group PLC (United Kingdom) 3,601,373 36,723
Coca-Cola HBC SA (Greece) 712,182 15,585
Fomento Economico Mexicano, SA de CV (ADR) (Mexico) 353,700 12,160
SABMiller PLC (South Africa) 850,716 8,499
UST Inc. (USA) 200,000 7,198
Wolverhampton & Dudley Breweries, PLC (United Kingdom) 251,493 3,242
PHARMACEUTICALS - 4.72%
AstraZeneca PLC (Sweden) 4,467,000 205,600
AstraZeneca PLC (United Kingdom) 325,000 14,761
Novo Nordisk A/S, Class B (Denmark) 2,644,800 101,444
Forest Laboratories, Inc. (USA) (1) 1,650,840 90,202
Sepracor Inc. (USA) (1) 1,500,000 37,170
Sepracor Inc. 5.75% convertible notes 2006 $ 30,000,000 28,987
Sepracor Inc. 5.75% convertible notes 2006 (2) $ 10,000,000 9,662
Eli Lilly and Co. (USA) 1,050,000 71,988
Sanofi-Synthelabo (France) 944,000 63,918
Shionogi & Co., Ltd. (Japan) 3,841,000 63,526
Pfizer Inc (USA) 1,035,000 34,724
Bristol-Myers Squibb Co. (USA) 1,140,000 30,039
Elan Corp., PLC (ADR) (Ireland) (1) 3,055,500 16,683
Elan Finance Corp. Ltd. 0% convertible notes 2018 $ 12,000,000 7,305
Merck KGaA (Germany) 378,221 14,831
OIL & GAS - 4.64%
Shell Canada Ltd. (Canada) 3,418,100 145,639
Canadian Oil Sands Trust (Canada) (2) 2,175,000 69,609
Canadian Oil Sands Trust 1,779,366 56,947
"Shell" Transport and Trading Co., PLC (ADR) (United Kingdom) 1,325,000 51,211
"Shell" Transport and Trading Co., PLC 2,850,000 18,050
Royal Dutch Petroleum Co. (Netherlands) 580,000 26,051
Royal Dutch Petroleum Co. (New York registered) 460,000 20,654
Petro-Canada (Canada) 2,475,000 106,314
Norsk Hydro ASA (Norway) 1,461,100 83,676
Petroleo Brasileiro SA - Petrobras, ordinary nominative (ADR) (Brazil) 1,550,000 37,308
Petroleo Brasileiro SA - Petrobras, preferred nominative (ADR) 1,160,000 26,123
Husky Energy Inc. (Canada) 3,745,000 62,701
ENI SpA (Italy) 1,500,000 25,567
Unocal Corp. (USA) 540,000 17,161
Sunoco, Inc. (USA) 325,000 15,603
Sasol Ltd. (South Africa) 1,100,000 14,008
FOOD PRODUCTS - 3.79%
Koninklijke Numico NV, Class C (Netherlands) (1) 8,080,000 205,281
Unilever NV (New York registered) (Netherlands) 1,840,000 110,584
Unilever NV 1,025,000 61,479
Nissin Food Products Co., Ltd. (Japan) 5,520,000 131,321
Nestle SA (Switzerland) 390,000 90,708
Unilever PLC (United Kingdom) 2,100,000 18,251
Groupe Danone (France) 104,500 16,280
INSURANCE - 3.50%
PartnerRe Holdings Ltd. (polynational) 1,875,000 104,475
Mitsui Sumitomo Insurance Co., Ltd. (Japan) 12,064,000 90,012
Allstate Corp. (USA) 1,700,000 68,646
Chubb Corp. (USA) 1,027,000 67,217
XL Capital Ltd., Class A (USA) 655,000 49,256
Sompo Japan Insurance Inc. (Japan) 6,000,000 44,548
Berkshire Hathaway Inc., Class A (USA) (1) 444 37,185
AEGON NV (Netherlands) 1,832,000 24,436
Aioi Insurance Co. Ltd. (Japan) 5,561,000 18,841
Sun Life Financial Inc. (formerly Sun Life Financial Services of Canada Inc.)
(Canada) 726,480 17,698
NIPPONKOA Insurance Co., Ltd. (Japan) 3,725,000 17,689
QBE Insurance Group Ltd. (Australia) 2,370,136 17,481
Millea Holdings, Inc. (Japan) 1,546 16,660
Travelers Property Casualty Corp. 4.50% convertible subordinated notes 2032(USA) $ 500,000 11,905
ELECTRIC UTILITIES - 3.08%
Scottish Power PLC (United Kingdom) 24,740,000 153,066
Korea Electric Power Corp. (South Korea) 6,364,240 134,221
E.ON AG (Germany) 1,425,000 80,775
Southern Co. (USA) 1,200,000 35,124
Korea Deposit Insurance Corp. 2.25% convertible debentures 2005 (South Korea)(2) $ 17,700,000 21,904
Dominion Resources, Inc. 9.50% PIES convertible preferred 2004 (USA) 365,400 units 20,079
American Electric Power Co., Inc. (USA) 700,000 19,383
FPL Group, Inc. (USA) 300,000 19,065
Consolidated Edison, Inc. (USA) 362,000 14,589
Ameren Corp. (USA) 250,000 11,032
Xcel Energy Inc. (USA) 206,200 3,444
DTE Energy Co. (USA) 87,100 3,285
SPECIALTY RETAIL - 2.64%
Lowe's Companies, Inc. (USA) 1,550,000 90,365
Yamada Denki Co., Ltd. (Japan) 2,470,000 73,310
Dixons Group PLC (United Kingdom) 30,882,596 72,548
Limited Brands, Inc. (USA) 3,176,900 56,930
Gap, Inc. (USA) 1,100,000 23,650
Gap, Inc. 5.75% convertible notes 2009 (2) $ 15,000,000 21,994
Kingfisher PLC (United Kingdom) 9,270,288 43,994
Kesa Electricals PLC (United Kingdom) 9,105,010 38,391
CarMax, Inc. (USA) (1) 650,000 21,404
REAL ESTATE - 2.59%
Hang Lung Properties Ltd. (Hong Kong) 46,000,000 56,861
Hongkong Land Holdings Ltd. (Hong Kong) 35,858,900 56,298
Sun Hung Kai Properties Ltd. (Hong Kong) 6,757,500 54,382
Hysan Development Co. Ltd. (Hong Kong) 30,550,593 43,664
Hang Lung Group Ltd. (Hong Kong) 27,537,000 33,330
Nippon Building Fund, Inc. (Japan) 4,620 29,070
Developers Diversified Realty Corp. (USA) 900,000 28,359
Japan Real Estate Investment Corp. (Japan) 4,600 28,062
Plum Creek Timber Co., Inc. (USA) 1,027,500 27,362
Kerry Properties Ltd. (Hong Kong) 18,140,161 23,358
Kimco Realty Corp. (USA) 525,000 23,100
Unibail Holding (France) 232,700 20,636
SM Prime Holdings, Inc. (Philippines) 52,885,000 6,183
Security Capital Global Realty (Luxembourg) (1) (2) (3) 126,752 2,142
HKR International Ltd. (Hong Kong) (1) 4,824,800 1,538
AUTOMOBILES - 2.30%
Toyota Motor Corp. (Japan) 3,570,000 107,263
Fuji Heavy Industries Ltd. (Japan) 13,419,000 63,602
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred
2032 (USA) 1,172,950 58,518
Suzuki Motor Corp. (Japan) 2,865,000 40,581
Honda Motor Co., Ltd. (Japan) 750,000 30,685
Bayerische Motoren Werke AG (Germany) 617,000 27,159
Hyundai Motor Co., nonvoting preferred, Series 2 (South Korea) 1,407,550 25,411
General Motors Corp. (USA) 375,000 16,042
Nissan Motor Co., Ltd. (Japan) 1,400,000 16,007
DIVERSIFIED FINANCIAL SERVICES - 2.25%
ING Groep NV (Netherlands) 7,822,468 167,521
Fortis (Belgium) 4,000,000 74,780
Investor AB, Class B (Sweden) 5,333,090 48,386
Wharf (Holdings) Ltd. (Hong Kong) 11,000,000 27,478
Swire Pacific Ltd., Class A (Hong Kong) 4,500,000 26,654
Brascan Corp., Class A (Canada) 743,000 22,060
Hong Kong Exchanges and Clearing Ltd. (Hong Kong) 4,624,000 9,467
CHEMICALS - 2.08%
Potash Corp. of Saskatchewan Inc. (Canada) 1,110,000 90,065
Lyondell Chemical Co. (USA) 3,400,000 50,456
Formosa Chemicals & Fibre Corp. (Taiwan) 31,750,000 48,416
Formosa Plastics Corp. (Taiwan) 31,750,000 47,020
Dow Chemical Co. (USA) 1,250,000 46,937
DSM NV (Netherlands) 834,828 38,468
Nan Ya Plastics Corp. (Taiwan) 20,000,000 26,393
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.08%
Samsung SDI Co., Ltd. (South Korea) 1,015,000 103,020
Solectron Corp. (USA) (1) 6,750,000 39,488
Solectron Corp. 7.25% ACES convertible preferred 2004 800,000 13,104
Solectron Corp. 0% LYON convertible notes 2020 $ 16,000,000 9,120
Flextronics International Ltd. (Singapore) (1) 3,000,000 48,090
Hoya Corp. (Japan) 430,000 37,699
Electrocomponents PLC (United Kingdom) 5,000,000 29,472
Agilent Technologies, Inc. (USA) (1) 950,000 26,866
Orbotech Ltd. (Israel) (1) 1,035,500 24,386
Murata Manufacturing Co., Ltd. (Japan) 274,000 15,489
Kyoden Co., Ltd. (Japan) 200,000 970
WIRELESS TELECOMMUNICATION SERVICES - 2.03%
Vodafone Group PLC (United Kingdom) 64,804,642 148,891
AT&T Wireless Services, Inc. (USA) (1) 10,750,000 80,625
Sprint Corp. 7.125% convertible preferred 2004 (USA) 3,800,000 units 22,990
Advanced Info Service PCL (Thailand) 13,263,300 21,607
China Unicom Ltd. (China) 20,409,600 19,841
KDDI Corp. (Japan) 3,000 15,644
America Movil SA de CV, Series L (ADR) (Mexico) 600,000 15,384
Dobson Communications Corp., Class A (USA) (1) (2) 1,287,280 7,595
Crown Castle International Corp. 6.25% convertible preferred 2012 (USA) (1) 158,800 6,670
Crown Castle International Corp. (1) 10,919 136
THRIFTS & MORTGAGE FINANCE - 1.75%
Housing Development Finance Corp. Ltd. (India) 10,667,500 129,296
Housing Development Finance Corp. Ltd. (2) 940,000 11,393
Washington Mutual, Inc. (USA) 2,000,000 91,620
Freddie Mac (USA) 600,000 32,652
Fannie Mae (USA) 400,000 28,000
PAPER & FOREST PRODUCTS - 1.69%
Norske Skogindustrier ASA, Class A (Norway) 3,075,000 59,077
Georgia-Pacific Corp., Georgia-Pacific Group (USA) 1,998,300 54,534
UPM-Kymmene Corp. (Finland) 2,784,000 51,480
Stora Enso Oyj (ADR) (Finland) 1,086,300 14,470
Stora Enso Oyj, Class R 1,000,000 13,458
International Paper Co. (USA) 600,000 22,326
Holmen AB, Class B (Sweden) 620,000 21,515
M-real Oyj, Class B (Finland) 2,369,500 21,467
Sappi Ltd. (South Africa) 1,239,000 15,965
Aracruz Celulose SA, Class B, preferred nominative (ADR) (Brazil) 308,000 8,285
CAPITAL MARKETS - 1.59%
J.P. Morgan Chase & Co. (USA) 3,861,500 136,543
Allied Capital Corp. (USA) 3,548,000 96,789
Deutsche Bank AG (Germany) 470,000 32,759
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.58%
Agere Systems Inc. 6.50% convertible notes 2009 (USA) $ 34,000,000 50,575
Agere Systems Inc., Class A (1) 6,465,156 22,887
ASML Holding NV (New York registered)(Netherlands) (1) 2,000,000 37,640
ASML Holding NV 5.50% convertible notes 2010 Euro 17,450,000 29,904
Samsung Electronics Co., Ltd. (South Korea) 95,000 36,751
Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) (1) 19,368,720 36,068
KLA-Tencor Corp. (USA) (1) 300,000 17,583
Texas Instruments Inc. (USA) 558,500 16,621
Linear Technology Corp. (USA) 375,000 16,178
MEDIA - 1.55%
Time Warner Inc. (formerly AOL Time Warner) (USA) (1) 7,360,000 119,821
John Fairfax Holdings Ltd. (Australia) 14,420,104 36,322
Mediaset SpA (Italy) 2,500,000 28,342
News Corp. Ltd., preferred (Australia) 3,580,739 25,244
Viacom Inc., Class B, nonvoting (USA) 500,000 19,660
EMI Group PLC (United Kingdom) 3,550,000 10,371
Comcast Corp., Class A (USA) (1) 323,500 10,151
SCMP Group Ltd. (Hong Kong) 19,760,671 9,033
Antena 3 Television, SA (Spain) (1) 10,053 423
UnitedGlobalCom, Inc., Class A (USA) (1) (2) (3) 20,092 131
HEALTH CARE PROVIDERS & SERVICES - 1.27%
Fresenius Medical Care AG (Germany) 970,000 61,575
Fresenius Medical Care AG, preferred 1,300,000 59,824
CIGNA Corp. (USA) 900,000 48,285
HCA Inc. (USA) 1,030,000 43,167
HOTELS, RESTAURANTS & LEISURE - 1.22%
Rank Group PLC (United Kingdom) 13,700,000 68,375
InterContinental Hotels Group PLC (United Kingdom) 4,823,267 44,596
Harrah's Entertainment, Inc. (USA) 750,000 35,903
J D Wetherspoon PLC (United Kingdom) 6,159,424 28,615
Carnival Corp., units (USA) 700,000 24,633
Greene King PLC (United Kingdom) 104,799 1,509
MULTI-UTILITIES & UNREGULATED POWER - 1.17%
National Grid Transco PLC (United Kingdom) 13,745,000 92,965
National Grid Transco PLC (ADR) 439,725 15,030
Williams Companies, Inc. 9.00% FELINE PACS convertible preferred 2005 (USA) 2,480,000 units 31,521
Williams Companies, Inc. 1,337,300 12,544
Duke Energy Corp. (USA) 986,700 17,800
Equitable Resources, Inc. (USA) 375,000 15,450
United Utilities PLC (United Kingdom) 1,000,000 8,510
United Utilities PLC, Class A (1) 555,555 2,861
INDUSTRIAL CONGLOMERATES - 1.17%
Tyco International Ltd. (USA) 5,500,000 126,225
General Electric Co. (USA) 1,900,000 54,473
Wesfarmers Ltd. (Australia) 770,000 15,717
COMPUTERS & PERIPHERALS - 1.17%
Sun Microsystems, Inc. (USA) (1) 20,500,000 87,535
International Business Machines Corp. (USA) 590,000 53,419
Hewlett-Packard Co. (USA) 1,812,500 39,313
Quanta Computer Inc. (Taiwan) 4,212,461 9,944
Dell Inc. (formerly Dell Computer Corp.) (USA) (1) 150,000 5,175
GAS UTILITIES - 0.97%
Gas Natural SDG, SA (Spain) 5,219,500 107,524
Enbridge Inc. (Canada) 907,283 36,384
NiSource Inc. (USA) 900,000 18,675
FOOD & STAPLES RETAILING - 0.94%
Koninklijke Ahold NV (Netherlands) (1) 7,567,700 54,596
Koninklijke Ahold NV, rights, expire 2003 (1) 7,567,700 7,074
Woolworths Ltd. (Australia) 5,590,676 45,888
Loblaw Companies Ltd. (Canada) 630,000 29,953
Albertson's, Inc. (USA) 600,000 12,768
Coles Myer Ltd. (Australia) 1,258,300 6,776
OFFICE ELECTRONICS - 0.69%
Xerox Corp. (USA) (1) 6,500,000 79,170
Xerox Capital Trust II 7.50% convertible preferred 2021 (2) 500,000 35,875
HOUSEHOLD DURABLES - 0.56%
Daito Trust Construction Co., Ltd. (Japan) 2,813,900 79,406
Sony Corp. (Japan) 435,400 15,110
AEROSPACE & DEFENSE - 0.54%
Singapore Technologies Engineering Ltd. (Singapore) 45,200,000 51,671
Raytheon Co. - RC Trust I 8.25% convertible preferred 2006 (USA) 380,000 units 19,494
BAE SYSTEMS PLC (United Kingdom) 6,471,800 19,408
OTHER - 3.77%
Schneider SA (France) 1,023,000 63,015
Kimberly-Clark de Mexico, SA de CV, Class A, ordinary participation
certificates (Mexico) 23,396,100 58,172
QUALCOMM Inc. (USA) 1,225,000 54,574
Target Corp. (USA) 1,247,500 48,303
Infosys Technologies Ltd. (India) 371,378 40,013
Deutsche Lufthansa AG (Germany) 2,500,000 38,199
Capital One Financial Corp. 6.25% Upper DECS 2005 (USA) 600,000 units 27,822
Sonoco Products Co. (USA) 1,200,000 25,680
Li & Fung Ltd. (Hong Kong) 13,000,000 22,263
Brambles Industries Ltd. (Australia) 6,600,000 21,831
IHC Caland NV (Netherlands) 418,259 19,548
Uni-Charm Corp. (Japan) 398,000 19,009
Asahi Diamond Industrial Co., Ltd. (Japan) (4) 3,950,000 18,722
Motorola, Inc. 7.00% convertible preferred 2004 (USA) 400,000 units 17,244
Smurfit-Stone Container Corp. (USA) (1) 974,200 15,938
TPG NV (Netherlands) 716,400 15,454
Microsoft Corp. (USA) 600,000 15,420
Vedior NV (Netherlands) 985,700 14,919
Qantas Airways Ltd. (Australia) 6,021,000 14,512
Volvo AB, Class B (Sweden) 497,450 14,396
Schlumberger Ltd. (USA) 300,000 14,076
Singapore Post Private Ltd. (Singapore) 32,160,000 12,877
Brambles Industries PLC (United Kingdom) 4,000,000 12,013
Fluor Corp. (USA) 257,900 9,455
Corning Inc. 3.50% convertible debentures 2008 (USA) $ 7,000,000 9,205
Zhejiang Expressway Co. Ltd., Class H (China) 9,039,300 5,558
Juniper Networks, Inc. 4.75% convertible subordinated notes 2007 (USA) $ 2,593,000 2,697
TI Automotive Ltd., Class A (United Kingdom) (1) (3) 1,068,000 0
MISCELLANEOUS - 2.79%
Other equity securities in initial period of acquisition 467,868
TOTAL EQUITY SECURITIES (cost: $11,337,489,000) 14,357,441
Principal Market
amount value
BONDS & notes - 1.01% (000) (000
WIRELESS TELECOMMUNICATION SERVICES - 0.28%
AT&T Wireless Services, Inc. 8.125% 2012 $ 40,750 $ 46,598
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.16%
Solectron Corp. 9.625% 2009 15,000 16,650
Flextronics International Ltd. 6.50% 2013 10,000 10,050
FOOD & STAPLES RETAILING - 0.14%
Ahold Finance U.S.A., Inc. 8.25% 2010 12,990 14,224
Ahold Finance U.S.A., Inc. 6.25% 2009 9,065 9,156
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.11%
TeleWest PLC 11.00% 2007 (5) 31,493 18,502
MULTI-UTILITIES & UNREGULATED POWER - 0.10%
El Paso Corp. 7.875% 2012 14,500 12,833
Southern Natural Gas Co. 8.00% 2032 3,615 3,669
Northwest Pipeline Corporation 8.125% 2010 500 556
AIRLINES - 0.07%
British Airways PLC 8.75% 2016 (6) Pound 7,000 12,167
HEALTH CARE PROVIDERS & SERVICES - 0.06%
HCA - The Healthcare Co. 8.75% 2010 $ 9,000 10,458
OIL & GAS - 0.05%
Premcor Refining Group Inc. 7.50% 2015 8,000 8,240
ELECTRICAL EQUIPMENT - 0.04%
Elektrim Finance BV 2.00% 2005 (3) (7) Euro 6,230 6,346
PAPER & FOREST PRODUCTS - 0.00%
APP International Finance Co. BV 11.75% 2005 (5) $ 1,150 489
TOTAL BONDS & NOTES (cost: $154,866,000) 169,938
Principal Market
amount value
SHORT-TERM SECURITIES - 12.83% (000) (000
CORPORATE SHORT-TERM NOTES - 12.53%
BNP Paribas Finance Inc. 1.04%-1.07% due 12/15/2003-1/23/2004 $ 100,000 $ 99,906
Bank of Ireland 1.04%-1.09% due 12/22/2003-2/13/2004 (2) 100,000 99,871
Dexia Delaware LLC 1.04%-1.075% due 12/5/2003-2/23/2004 100,000 99,865
KfW International Finance Inc. 1.03%-1.07% due 12/9/2003-2/24/2004 (2) 100,000 99,854
Danske Corp. 1.05%-1.07% due 12/19/2003-2/24/2004 100,000 99,831
Credit Lyonnais N.A. Inc. 1.04%-1.09% due 12/5/2003-2/23/2004 100,000 99,819
Toronto-Dominion Holdings USA Inc. 1.05%-1.08% due 12/18/2003-2/12/2004 100,000 99,799
Westpac Trust Securities NZ Ltd. 1.06%-1.09% due 12/2/2003-2/13/2004 100,000 99,796
UBS Finance (Delaware) LLC 1.02%-1.08% due 12/1/2003-2/17/2004 93,200 93,085
Stadshypotek Delaware Inc. 1.05% due 12/1-12/3/2003 (2) 33,400 33,398
Svenska Handelsbanken Inc. 1.08% due 1/26-2/6/2004 50,000 49,904
Alcon Capital Corp 1.04%-1.07% due 12/4/2003-2/19/2004 (2) 80,000 79,867
TotalFinaElf Capital SA 1.02%-1.04% due 12/8-12/17/2003 (2) 75,000 74,969
Shell Finance (U.K.) PLC 1.03%-1.07% due 12/10/2003-2/5/2004 50,000 49,941
Shell Finance (U.K.) PLC 1.08% due 3/11/2004 (2) 25,000 24,921
Societe Generale North America Inc. 1.04%-1.05% due 12/10/2003-1/13/2004 65,000 64,942
Bank of Nova Scotia 1.06%-1.09% due 1/26-2/11/2004 65,000 64,869
Rio Tinto PLC 1.02%-1.08% due 12/2/2003-1/14/2004 (2) 60,000 59,966
ANZ (Delaware) Inc. 1.04% due 12/8-12/9/2003 50,000 49,987
Rabobank Nederland NV 1.02%-1.05% due 12/3-12/16/2003 50,000 49,983
BMW U.S. Capital Corp. 1.02% due 12/16-12/18/2003 50,000 49,976
Barclays U.S. Funding Corp. 1.05%-1.055% due 12/2/2003-1/13/2004 50,000 49,956
Aventis S.A. 1.03%-1.07% due 12/4/2003-1/22/2004 (2) 50,000 49,950
Spintab AB (Swedmortgage) 1.05%-1.085% due 12/11/2003-1/22/2004 50,000 49,946
American Honda Finance Corp. 1.02%-1.07% due 12/22/2003-1/27/2004 50,000 49,944
Edison Asset Securitization LLC 1.07%-1.09% due 1/7-1/23/2004 (2) 50,000 49,935
Royal Bank of Scotland PLC 1.08% due 1/16/2004 50,000 49,928
ABN AMRO North America Finance Inc. 1.06%-1.08% due 1/14-2/3/2004 50,001 49,907
ING (U.S.) Funding LLC 1.08%-1.09% due 1/21-2/10/2004 50,000 49,905
Allied Irish Banks N.A. Inc. 1.05%-1.055% due 12/19/2003 37,500 37,479
Royal Bank of Canada 1.05% due 12/5-12/19/2003 25,000 24,992
HSBC USA Inc. 1.07% due 1/13/2004 25,000 24,966
Sony Capital Corp. 1.05%-1.06% due 12/17/2003 (2) 20,000 19,990
Siemens Capital Corp. 1.05% due 1/5/2004 16,500 16,482
Electricite de France 1.04% due 12/3/2003 15,000 14,999
Telstra Corp. Ltd. 1.06% due 12/31/2003 15,000 14,986
CERTIFICATES OF DEPOSIT - 0.30%
HBOS Treasury Services PLC 1.09%-1.12% due 1/28/2004 50,000 49,999
TOTAL SHORT-TERM SECURITIES (cost: $2,147,982,000) 2,147,913
TOTAL INVESTMENT SECURITIES (cost: $13,640,337,000) 16,675,292
New Taiwanese Dollar (cost: $5,526,000) NT$182,768 5,360
Other assets less liabilities 63,113
NET ASSETS $16,743,765
(1) Security did not produce income during the last 12 months.
(2) Purchased in a private placement transaction; resale may be
limited to qualified institutional buyers; resale to the public
may require registration.
(3) Valued under fair value procedures adopted by authority of the Board
of Directors.
(4) The fund owns 5.46% of the outstanding voting securities of Asahi Diamond
Industrial Co., Ltd., and thus is considered an affiliate of this company
under the Investment Company Act of 1940.
(5) Company not making scheduled interest payments;
bankruptcy proceedings pending.
(6) Coupon rate may change periodically.
(7) Pass-through security backed by a pool of
mortgages or other loans on which principal payments are
periodically made. Therefore, the effective maturity
is shorter than the stated maturity.
ADR = American Depositary Receipts
See Notes to Financial Statements
EQUITY SECURITIES APPEARING IN THE PORTFOLIO SINCE MAY 31, 2003:
Advanced Info Service
Agilent
Antena 3 Television
Aracruz Celulos
Bank Austria
Brascan
BT Group
Chunghwa Telecom
CIGNA
Coles Myer
Consolidated Edison
Daito Trust Construction
DEPFA BANK
Deutsche Bank
Diageo
DnB Holding
Dobson Communications
DTE Energy
EMI Group
Equitable Resources
Fannie Mae
Formosa Chemicals & Fibre
Formosa Plastics
Fortis
FPL Group
Harrah's Entertainment
InterContinental Hotels Group
John Fairfax Holdings
Koninklijke Ahold
Korea Electric Power
KT
Malayan Banking
Merck KGaA
Nan Ya Plastics
Potash Corp. of Saskatchewan
Quanta Computer
Rank Group
Royal Bank of Scotland Group
SABMiller
Singapore Post
Singapore Technologies Engineering
Svenska Handelsbanken
TDC
Toyota Motor
TPG
Uni-Charm
Vedior
Verizon Communications
Wells Fargo
Wesfarmers
Xcel Energy
Yamada Denki
EQUITY SECURITIES ELIMINATED FROM THE PORTFOLIO SINCE MAY 31, 2003:
ABB
Allied Irish Banks
AT&T
Australian Gas Light
BOC Group
British Airways
Chubb PLC
EULER & HERMES
Gencor
Great Eagle Holdings
Greek Organization of Football Prognostics
H.J. Heinz
Hang Seng Bank
Hays
Invensys
James Hardie Industries
KirchPayTV GmbH
Lloyds TSB Group
Mercury General
Munchener Ruckversicherungs-Gesellschaft
Nextel Communications
NICOR
Panafon
Pinnacle West Capital
Promina Group
Robert Half International
Siemens
Village Roadshow
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (dollars and shares in thousands,
at November 30, 2003 except per-share amounts)
ASSETS:
Investment securities at market:
Unaffiliated issuers (cost: $13,619,242) $16,656,570
Affiliated issuers (cost: $21,095) 18,722 16,675,292
Cash denominated in non-U.S. currencies 5,360
(cost: $5,526)
Cash 35
Receivables for:
Sales of investments 12,751
Sales of fund's shares 107,372
Dividends and interest 36,042
Other 135 156,300
16,836,987
LIABILITIES:
Payables for:
Purchases of investments 65,042
Repurchases of fund's shares 6,451
Investment advisory services 5,413
Services provided by affiliates 8,725
Deferred Directors' compensation 548
Other fees and expenses 7,043 93,222
NET ASSETS AT NOVEMBER 30, 2003 $16,743,765
NET ASSETS CONSIST OF:
Capital paid in on shares of capital stock $13,470,415
Undistributed net investment income 72,260
Undistributed net realized gain 172,399
Net unrealized appreciation 3,028,691
NET ASSETS AT NOVEMBER 30, 2003 $16,743,765
TOTAL AUTHORIZED CAPITAL STOCK - 1,000,000 SHARES, $.01 PAR VALUE
Net assets Shares outstanding Net asset value per share(1)
Class A $14,703,266 513,742 $28.62
Class B 536,616 18,830 28.50
Class C 614,443 21,612 28.43
Class F 469,821 16,434 28.59
Class 529-A 92,452 3,234 28.59
Class 529-B 17,654 619 28.51
Class 529-C 29,227 1,025 28.50
Class 529-E 5,072 178 28.56
Class 529-F 1,493 52 28.59
Class R-1 4,968 174 28.50
Class R-2 57,338 2,015 28.45
Class R-3 76,426 2,679 28.53
Class R-4 24,667 863 28.60
Class R-5 110,322 3,853 28.63
(1) Maximum offering price and redemption price per share were equal
to the net asset value per share for all share classes, except for classes
A and 529-A, for which the maximum offering prices per share were $30.37
and $30.33, respectively.
See Notes to Financial Statements
STATEMENT OF OPERATIONS
for the year ended November 30, 2003 (dollars in thousands)
INVESTMENT INCOME:
Income:
Dividends (net of non-U.S. withholding
tax of $25,347; also includes
$354 from affiliates) $ 375,778
Interest (net of non-U.S. withholding
tax of $29) 52,206 $427,984
Fees and expenses:
Investment advisory services 50,748
Distribution services 35,706
Transfer agent services 10,752
Administrative services 1,694
Reports to shareholders 456
Registration statement and prospectus 552
Postage, stationery and supplies 1,284
Directors' compensation 347
Auditing and legal 102
Custodian 3,355
State and local taxes 156
Other 118
Total expenses before reimbursement 105,270
Reimbursement of expenses 186 105,084
Net investment income 322,900
NET REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS
AND NON-U.S. CURRENCY:
Net realized gain (loss) on:
Investments 240,790
Non-U.S. currency transactions (3,803) 236,987
Net unrealized appreciation (depreciation) on:
Investments 2,773,471
Non-U.S. currency translations (5,129) 2,768,342
Net realized gain and
unrealized appreciation
on investments and non-U.S. currency 3,005,329
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,328,229
STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)
Year ended
November 30
2003 2002
OPERATIONS:
Net investment income $322,900 $235,407
Net realized gain on investments and
non-U.S. currency transactions 236,987 280,535
Net unrealized appreciation (depreciation)
on investments and non-U.S. currency translations 2,768,342 (1,005,895)
Net increase (decrease) in net assets
resulting from operations 3,328,229 (489,953)
DIVIDENDS PAID TO SHAREHOLDERS FROM NET INVESTMENT INCOME (272,642) (214,996)
CAPITAL SHARE TRANSACTIONS 3,020,303 803,023
TOTAL INCREASE IN NET ASSETS 6,075,890 98,074
NET ASSETS:
Beginning of year 10,667,875 10,569,801
End of year (including
undistributed
net investment income: $72,260 and $21,501,
respectively) $16,743,765 $10,667,875
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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 fund offers 14 share classes consisting of four retail share classes, five
CollegeAmerica savings plan share classes and five retirement plan share
classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C,
529-E and 529-F) are sponsored by the Commonwealth of Virginia and can be
utilized to save for college education. The five retirement plan share classes
(R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry
any conversion rights. The fund's share classes are described below:
- ---------------------------------------------------------------------------------------------------------
Share class Initial sales charge Contingent deferred sales Conversion feature
charge upon redemption
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes A and 529-A Up to 5.75% None (except 1% for None
certain redemptions
within one year of
purchase without an
initial sales charge)
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes B and 529-B None Declines from 5% to Classes B and 529-B
zero for redemptions convert to classes A and
within six years of 529-A, respectively, after
purchase eight years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class C None 1% for redemptions within Class C converts to Class F
one year of purchase after 10 years
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-C None 1% for redemptions within None
one year of purchase
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Class 529-E None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes F and 529-F None None None
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Classes R-1, R-2, R-3, None None None
R-4 and R-5
- ---------------------------------------------------------------------------------------------------------
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation. Each share class has identical voting rights, except for the
exclusive right to vote on matters affecting only its class. Share classes have
different fees and expenses ("class-specific fees and expenses"), primarily due
to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared to
comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the fund:
SECURITY VALUATION - Equity securities are valued at the official
closing price of, or 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. Prices for each security are taken from
the principal exchange or market in which the security trades.
Fixed-income securities are valued at prices obtained from an
independent pricing service, when such prices are available. However,
where the investment adviser deems it appropriate, such securities will
be valued at the mean quoted bid and asked prices or at prices for
securities of comparable maturity, quality and type. Short-term
securities maturing within 60 days are valued at amortized cost, which
approximates market value. The ability of the issuers of the debt
securities held by the fund to meet their obligations may be affected
by economic developments in a specific industry, state or region.
Securities and other assets for which representative market quotations
are not readily available are fair valued as determined in good faith
by authority of the fund's Board of Directors. If events occur that
materially affect the value of securities (particularly non-U.S.
securities) between the close of trading in those securities and the
close of regular trading on the New York Stock Exchange, the securities
are fair valued.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security
transactions are recorded by the fund as of the date the trades are
executed with brokers. Realized gains and losses from security
transactions are determined based on the specific identified cost of
the securities. Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. Market
discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
CLASS ALLOCATIONS - Income, fees and expenses (other than
class-specific fees and expenses) and realized and unrealized gains and
losses are allocated daily among the various share classes based on
their relative net assets. Class-specific fees and expenses, such as
distribution, administrative and shareholder services, are charged
directly to the respective share class.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and
distributions paid to shareholders are recorded on the ex-dividend
date.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities, including
investment securities, denominated in non-U.S. currencies are
translated into U.S. dollars at the exchange rates in effect at the end
of the reporting period. Purchases and sales of investment securities
and income and expenses are translated into U.S. dollars at the
exchange rates on the dates of such transactions. In the accompanying
financial statements, the effects of changes in non-U.S. exchange rates
on investment securities are included with the net realized gain or
loss and net unrealized appreciation or depreciation on investments.
The realized gain or loss and unrealized appreciation or depreciation
resulting from all other transactions denominated in non-U.S.
currencies are disclosed separately.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange non-U.S. currencies
on specific future dates at predetermined rates. The fund enters into
these contracts to manage its exposure to changes in non-U.S. exchange
rates arising from investments denominated in non-U.S. currencies. Upon
entering into these contracts, risks may arise from the potential
inability of counterparties to meet the terms of their contracts and
from possible movements in non-U.S. exchange rates. Due to these risks,
the fund could incur losses up to the entire contract amount, which may
exceed the net unrealized value shown in the accompanying financial
statements. On a daily basis, the fund values forward currency
contracts based on the applicable exchange rates and records unrealized
gains or losses. The fund records realized gains or losses at the time
the forward contract is closed or offset by another contract with the
same broker for the same settlement date and currency.
SECURITIES LENDING - The fund may lend portfolio securities from time
to time in order to earn additional income; however, it does not
currently intend to engage in an ongoing or regular securities lending
program. When the fund lends securities, it receives collateral in an
amount not less than 100% of the market value of the loaned securities
throughout the period of the loan. The market value of the loaned
securities is determined at the close of business of the fund and any
additional required collateral is delivered on the next business day.
If the borrower defaults on its obligation to return the securities
loaned, the fund could experience delays and costs in recovering the
securities loaned or in gaining access to the collateral. Income earned
is included in interest income in the accompanying financial
statements.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - The risks of investing in securities of non-U.S. issuers may
include, but are not limited to, investment and repatriation restrictions;
revaluation of currencies; adverse political, social and economic developments;
government involvement in the private sector; limited and less reliable investor
information; lack of liquidity; certain local tax law considerations; and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes paid.
Gains realized by the fund on the sale of securities in certain countries are
subject to non-U.S. taxes. The fund records a liability based on unrealized
gains to provide for potential non-U.S. taxes payable upon the sale of these
securities. For the year ended November 30, 2003, there were no non-U.S. taxes
paid on realized gains. As of November 30, 2003, non-U.S. taxes provided on
unrealized gains were $6,661,000.
3. FEDERAL INCOME TAXATION AND DISTRIBUTIONS
The fund complies with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intends to distribute substantially
all of its net taxable income and net capital gains each year. The fund is not
subject to income taxes to the extent such distributions are made.
DISTRIBUTIONS - Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
non-U.S. currency gains and losses; short-term capital gains and losses; capital
losses related to sales of securities within 30 days of purchase; unrealized
appreciation of certain investments in non-U.S. securities; deferred expenses;
and net capital losses. The fiscal year in which amounts are distributed may
differ from the year in which the net investment income and net realized gains
are recorded by the fund. As of November 30, 2003, the cost of investment
securities and cash denominated in non-U.S. currencies, for federal income tax
purposes was $13,783,141,000.
During the year ended November 30, 2003, the fund reclassified $501,000 from
undistributed net realized gains to undistributed net investment income to align
financial reporting with tax reporting.
As of November 30, 2003, the components of distributable earnings on a tax basis
were as follows:
(dollars in thousands)
Undistributed net investment income and currency gains $208,854
Undistributed short-term capital gains 45,235
Undistributed long-term capital gains 129,024
Gross unrealized appreciation on investment securities 3,291,854
Gross unrealized depreciation on investment securities (394,343)
These numbers reflect the utilization of the remaining capital loss carryforward
of $52,223,000.
Distributions paid to shareholders from net investment income were as follows
(dollars in thousands):
Year ended November 30
Share class 2003 2002(1)
Class A $ 254,064 $ 208,278
Class B 4,808 2,354
Class C 4,321 1,551
Class F 5,139 1,874
Class 529-A 1,080 233
Class 529-B 138 29
Class 529-C 225 50
Class 529-E 49 7
Class 529-F 16 -*
Class R-1 27 1
Class R-2 421 8
Class R-3 512 10
Class R-4 146 1
Class R-5 1,696 600
Total $ 272,642 $ 214,996
* Amount less than one thousand.
(1) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning
February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were
offered beginning May 15, 2002.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
Capital Research and Management Company ("CRMC"), the fund's investment adviser,
is the parent company of American Funds Service Company ("AFS"), the fund's
transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal
underwriter of the fund's shares.
INVESTMENT ADVISORY SERVICES - The Investment Advisory and Service Agreement
with CRMC provides for monthly fees accrued daily. These fees are based on a
declining series of annual rates beginning with 0.600% on the first $500 million
of daily net assets and decreasing to 0.385% on such assets in excess of $17
billion. For the year ended November 30, 2003, the investment advisory services
fee was $50,748,000, which was equivalent to an annualized rate of 0.415% of
average daily net assets.
CLASS-SPECIFIC FEES AND EXPENSES - Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
DISTRIBUTION SERVICES - The fund has adopted plans of distribution for
all share classes, except Class R-5. Under the plans, the Board of
Directors approves certain categories of expenses that are used to
finance activities primarily intended to sell fund shares. The plans
provide for annual expenses, based on a percentage of average daily net
assets, ranging from 0.30% to 1.00% as noted below. In some cases, the
Board of Directors has approved expense amounts lower than plan limits.
------------------------------------------------ ----------------------------- -----------------------------
SHARE CLASS CURRENTLY APPROVED LIMITS PLAN LIMITS
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class A 0.30% 0.30%
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class 529-A 0.30 0.50
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes B and 529-B 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes C, 529-C and R-1 1.00 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Class R-2 0.75 1.00
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes 529-E and R-3 0.50 0.75
------------------------------------------------ ----------------------------- -----------------------------
------------------------------------------------ ----------------------------- -----------------------------
Classes F, 529-F and R-4 0.25 0.50
------------------------------------------------ ----------------------------- -----------------------------
All share classes may use up to 0.25% average daily net assets to pay
service fees, or to compensate AFD for paying service fees, to firms
that have entered into agreements with AFD for providing certain
shareholder services. Expenses in excess of these amounts, up to
approved limits, may be used to compensate dealers and wholesalers for
shares sold.
For classes A and 529-A, the Board of Directors has also approved the
reimbursement of dealer and wholesaler commissions paid by AFD for
certain shares sold without a sales charge. Each class reimburses AFD
for amounts billed within the prior 15 months but only to the extent
that the overall annual expense limit of 0.30% is not exceeded. As of
November 30, 2003, there were no unreimbursed expenses subject to
reimbursement for classes A or 529-A.
TRANSFER AGENT SERVICES - The fund has a transfer agent agreement with
AFS for classes A and B. Under this agreement, these share classes
compensate AFS for transfer agent services including shareholder
recordkeeping, communications and transaction processing. AFS is also
compensated for certain transfer agent services provided to all other
share classes from the administrative services fees paid to CRMC
described below.
ADMINISTRATIVE SERVICES - The fund has an administrative services
agreement with CRMC to provide transfer agent and other related
shareholder services for all classes of shares other than classes A and
B. Each relevant class pays CRMC annual fees of 0.15% (0.10% for Class
R-5) based on its respective average daily net assets. Each relevant
class also pays AFS additional amounts for certain transfer agent
services. CRMC and AFS may use these fees to compensate third parties
for performing these services. During the start-up period for classes
R-1, R-2, R-3 and R-4, CRMC has voluntarily agreed to pay a portion of
these fees. Each 529 share class is subject to an additional annual
administrative services fee of 0.10% of its respective average daily
net assets; this fee is payable to the Commonwealth of Virginia for the
maintenance of the CollegeAmerica plan. Although these amounts are
included with administrative services fees in the accompanying
financial statements, the Commonwealth of Virginia is not considered a
related party. Administrative services fees are presented gross of any
payments made by CRMC.
Expenses under the agreements described above for the year ended
November 30, 2003, were as follows (dollars in thousands):
- ---------------------------------------------------------------------------------------------------------------
Administrative services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Share class Distribution Transfer agent CRMC Transfer agent Commonwealth of
services services administrative services Virginia
services administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class A $28,180 $10,393 Not applicable Not applicable Not applicable
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class B 3,157 359 Not applicable Not applicable Not applicable
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class C 2,988 Included $448 $97 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class F 622 Included 373 67 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-A 71 Included 77 8 $ 52
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-B 101 Included 15 6 10
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-C 163 Included 25 8 16
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-E 14 Included 4 -* 3
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class 529-F 2 Included 1 -* -*
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-1 21 Included 3 4 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-2 207 Included 42 242 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-3 159 Included 48 57 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-4 21 Included 12 4 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Class R-5 Not applicable Included 70 2 Not applicable
in
administrative
services
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total $35,706 $10,752 $1,118 $495 $81
- ---------------------------------------------------------------------------------------------------------------
* Amount less than one thousand.
DEFERRED DIRECTORS' COMPENSATION - Since the adoption of the deferred
compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to
defer the cash payment of part or all of their compensation. These deferred
amounts, which remain as liabilities of the fund, are treated as if invested in
shares of the fund or other American Funds. These amounts represent general,
unsecured liabilities of the fund and vary according to the total returns of the
selected funds. Directors' compensation in the accompanying financial statements
includes the current fees (either paid in cash or deferred) and the net increase
or decrease in the value of the deferred amounts.
AFFILIATED OFFICERS AND DIRECTORS - Officers and certain Directors of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated
officers or Directors received any compensation directly from the fund.
5. CAPITAL SHARE TRANSACTIONS
Capital share transactions in the fund were as follows (dollars and shares in
thousands):
Reinvestments of
Share class Sales(1) dividends and distributions
Amount Shares Amount Shares
Year ended November 30, 2003
Class A $3,476,313 140,934 $ 237,800 10,000
Class B 259,243 10,380 4,639 194
Class C 418,374 16,667 4,056 169
Class F 433,428 17,892 4,586 190
Class 529-A 50,028 2,023 1,080 45
Class 529-B 9,652 396 138 6
Class 529-C 16,305 665 225 9
Class 529-E 3,123 128 49 2
Class 529-F 1,100 46 16 1
Class R-1 4,397 180 27 1
Class R-2 49,218 2,044 421 17
Class R-3 69,964 2,827 511 21
Class R-4 24,692 964 145 6
Class R-5 41,012 1,628 1,282 53
Total net increase
(decrease) $4,856,849 196,774 $ 254,975 10,714
Year ended November 30, 2002(2)
Class A $2,122,788 90,372 $ 194,311 8,192
Class B 130,869 5,543 2,266 97
Class C 198,372 8,536 1,464 63
Class F 202,758 8,645 1,659 71
Class 529-A 29,154 1,224 233 10
Class 529-B 5,290 225 29 1
Class 529-C 8,700 366 50 2
Class 529-E 1,210 52 7 -*
Class 529-F 127 6 -* -*
Class R-1 182 8 1 -*
Class R-2 5,622 261 8 1
Class R-3 5,069 233 10 1
Class R-4 1,571 72 1 -*
Class R-5 60,666 2,447 493 22
Total net increase
(decrease) $2,772,378 117,990 $ 200,532 8,460
Share class Repurchases(1) Net increase (decrease)
Amount Shares Amount Shares
Year ended November 30, 2003
Class A $ (1,776,963) (76,452) $ 1,937,150 74,482
Class B (32,120) (1,375) 231,762 9,199
Class C (71,149) (3,097) 351,281 13,739
Class F (185,371) (8,093) 252,643 9,989
Class 529-A (1,204) (51) 49,904 2,017
Class 529-B (166) (7) 9,624 395
Class 529-C (336) (14) 16,194 660
Class 529-E (92) (4) 3,080 126
Class 529-F -* (1) 1,116 46
Class R-1 (341) (13) 4,083 168
Class R-2 (6,714) (281) 42,925 1,780
Class R-3 (9,216) (382) 61,259 2,466
Class R-4 (4,158) (175) 20,679 795
Class R-5 (3,691) (152) 38,603 1,529
Total net increase
(decrease) $ (2,091,521) (90,097) $ 3,020,303 117,391
Year ended November 30, 2002(2)
Class A $ (1,976,245) (85,210) $ 340,854 13,354
Class B (27,646) (1,229) 105,489 4,411
Class C (62,951) (2,813) 136,885 5,786
Class F (98,126) (4,212) 106,291 4,504
Class 529-A (375) (17) 29,012 1,217
Class 529-B (40) (2) 5,279 224
Class 529-C (81) (3) 8,669 365
Class 529-E (13) (1) 1,204 51
Class 529-F - - 127 6
Class R-1 (31) (2) 152 6
Class R-2 (543) (26) 5,087 236
Class R-3 (449) (21) 4,630 213
Class R-4 (88) (4) 1,484 68
Class R-5 (3,299) (145) 57,860 2,324
Total net increase
(decrease) $ (2,169,887) (93,685) $ 803,023 32,765
* Amount less than one thousand.
(1) Includes exchanges between share classes of the fund.
(2) Class 529-A, 529-B, 529-C, 529-E and 529-F shares were offered beginning
February 15, 2002. Class R-1, R-2, R-3, R-4 and R-5 shares were offered
beginning May 15, 2002.
6. RESTRICTED SECURITIES
The fund has invested in certain securities for which resale may be limited to
qualified buyers or which are otherwise restricted. These securities are
identified in the investment portfolio. As of November 30, 2003, the total value
of restricted securities was $773,026,000, which represented 4.62% of the net
assets of the fund.
7. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding short-term
securities, of $4,985,435,000 and $2,954,681,000, respectively, during the year
ended November 30, 2003.
The fund receives a reduction in its custodian fee equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
year ended November 30, 2003, the custodian fee of $3,355,000 includes $18,000
that was offset by this reduction, rather than paid in cash.
FINANCIAL HIGHLIGHTS (1)
Income (loss) from
investment operations(2)
Net
Net asset gains(losses)
value, Net on securities Total from
beginning investment (both realized investment
of period income and unrealized) operations
Class A:
Year ended 11/30/2003 $22.80 $.65 $5.73 $6.38
Year ended 11/30/2002 24.29 .52 (1.53) (1.01)
Year ended 11/30/2001 28.29 .53 (.90) (.37)
Year ended 11/30/2000 29.03 .62 1.20 1.82
Year ended 11/30/1999 27.15 .48 4.17 4.65
Class B:
Year ended 11/30/2003 22.72 .45 5.72 6.17
Year ended 11/30/2002 24.21 .27 (1.45) (1.18)
Year ended 11/30/2001 28.21 .31 (.87) (.56)
Period from 3/15/2000 to 11/30/2000 29.57 .32 (1.41) (1.09)
Class C:
Year ended 11/30/2003 22.68 .42 5.71 6.13
Year ended 11/30/2002 24.18 .20 (1.40) (1.20)
Period from 3/15/2001 to 11/30/2001 25.35 .12 (1.15) (1.03)
Class F:
Year ended 11/30/2003 22.78 .61 5.75 6.36
Year ended 11/30/2002 24.27 .31 (1.34) (1.03)
Period from 3/15/2001 to 11/30/2001 25.40 .27 (1.15) (.88)
Class 529-A:
Year ended 11/30/2003 22.78 .63 5.73 6.36
Period from 2/15/2002 to 11/30/2002 24.29 .36 (1.47) (1.11)
Class 529-B:
Year ended 11/30/2003 22.74 .40 5.73 6.13
Period from 2/21/2002 to 11/30/2002 23.96 .23 (1.13) (.90)
Class 529-C:
Year ended 11/30/2003 22.74 .41 5.71 6.12
Period from 2/22/2002 to 11/30/2002 23.98 .23 (1.15) (.92)
Class 529-E:
Year ended 11/30/2003 22.77 .54 5.73 6.27
Period from 3/4/2002 to 11/30/2002 25.12 .31 (2.28) (1.97)
Class 529-F:
Year ended 11/30/2003 22.80 .61 5.72 6.33
Period from 9/17/2002 to 11/30/2002 21.79 .08 1.07 1.15
Class R-1:
Year ended 11/30/2003 22.75 .38 5.77 6.15
Period from 6/7/2002 to 11/30/2002 25.08 .14 (2.37) (2.23)
Class R-2:
Year ended 11/30/2003 22.73 .43 5.71 6.14
Period from 6/7/2002 to 11/30/2002 25.08 .13 (2.35) (2.22)
Class R-3:
Year ended 11/30/2003 22.77 .50 5.75 6.25
Period from 6/6/2002 to 11/30/2002 25.42 .17 (2.52) (2.35)
Class R-4:
Year ended 11/30/2003 22.81 .55 5.80 6.35
Period from 6/27/2002 to 11/30/2002 23.78 .20 (1.02) (.82)
Class R-5:
Year ended 11/30/2003 22.81 .70 5.74 6.44
Period from 5/15/2002 to 11/30/2002 26.11 .30 (3.27) (2.97)
Dividends and distributions
Dividends
(from net Distributions Net asset
investment (from capital Total value, end
income) gains) distributions of period
Class A:
Year ended 11/30/2003 $(.56) $ - $(.56) $28.62
Year ended 11/30/2002 (.48) - (.48) 22.80
Year ended 11/30/2001 (.50) (3.13) (3.63) 24.29
Year ended 11/30/2000 (.58) (1.98) (2.56) 28.29
Year ended 11/30/1999 (.48) (2.29) (2.77) 29.03
Class B:
Year ended 11/30/2003 (.39) - (.39) 28.50
Year ended 11/30/2002 (.31) - (.31) 22.72
Year ended 11/30/2001 (.31) (3.13) (3.44) 24.21
Period from 3/15/2000 to 11/30/2000 (.27) - (.27) 28.21
Class C:
Year ended 11/30/2003 (.38) - (.38) 28.43
Year ended 11/30/2002 (.30) - (.30) 22.68
Period from 3/15/2001 to 11/30/2001 (.14) - (.14) 24.18
Class F:
Year ended 11/30/2003 (.55) - (.55) 28.59
Year ended 11/30/2002 (.46) - (.46) 22.78
Period from 3/15/2001 to 11/30/2001 (.25) - (.25) 24.27
Class 529-A:
Year ended 11/30/2003 (.55) - (.55) 28.59
Period from 2/15/2002 to 11/30/2002 (.40) - (.40) 22.78
Class 529-B:
Year ended 11/30/2003 (.36) - (.36) 28.51
Period from 2/21/2002 to 11/30/2002 (.32) - (.32) 22.74
Class 529-C:
Year ended 11/30/2003 (.36) - (.36) 28.50
Period from 2/22/2002 to 11/30/2002 (.32) - (.32) 22.74
Class 529-E:
Year ended 11/30/2003 (.48) - (.48) 28.56
Period from 3/4/2002 to 11/30/2002 (.38) - (.38) 22.77
Class 529-F:
Year ended 11/30/2003 (.54) - (.54) 28.59
Period from 9/17/2002 to 11/30/2002 (.14) - (.14) 22.80
Class R-1:
Year ended 11/30/2003 (.40) - (.40) 28.50
Period from 6/7/2002 to 11/30/2002 (.10) - (.10) 22.75
Class R-2:
Year ended 11/30/2003 (.42) - (.42) 28.45
Period from 6/7/2002 to 11/30/2002 (.13) - (.13) 22.73
Class R-3:
Year ended 11/30/2003 (.49) - (.49) 28.53
Period from 6/6/2002 to 11/30/2002 (.30) - (.30) 22.77
Class R-4:
Year ended 11/30/2003 (.56) - (.56) 28.60
Period from 6/27/2002 to 11/30/2002 (.15) - (.15) 22.81
Class R-5:
Year ended 11/30/2003 (.62) - (.62) 28.63
Period from 5/15/2002 to 11/30/2002 (.33) - (.33) 22.81
Ratio of Ratio of
Net asset, expenses net income
Total end of period to average to average
return(3) (in millions) net assets net assets
Class A:
Year ended 11/30/2003 28.52% $14,703 .81% 2.70%
Year ended 11/30/2002 (4.22) 10,016 .82 2.22
Year ended 11/30/2001 (1.81) 10,346 .78 2.05
Year ended 11/30/2000 6.37 10,716 .79 2.08
Year ended 11/30/1999 19.08 10,022 .79 1.93
Class B:
Year ended 11/30/2003 27.52 537 1.58 1.85
Year ended 11/30/2002 (4.93) 219 1.59 1.47
Year ended 11/30/2001 (2.57) 126 1.56 1.21
Period from 3/15/2000 to 11/30/2000 (3.73) 55 1.55 (5) 1.45 (5)
Class C:
Year ended 11/30/2003 27.40 615 1.65 1.71
Year ended 11/30/2002 (4.95) 179 1.65 1.43
Period from 3/15/2001 to 11/30/2001 (4.08) 50 1.78 (5) .73 (5)
Class F:
Year ended 11/30/2003 28.43 470 .89 2.49
Year ended 11/30/2002 (4.29) 147 .91 2.17
Period from 3/15/2001 to 11/30/2001 (3.45) 47 .92 (5) 1.55 (5)
Class 529-A:
Year ended 11/30/2003 28.43 93 .87 2.55
Period from 2/15/2002 to 11/30/2002 (4.61) 28 1.03 (5) 2.08 (5)
Class 529-B:
Year ended 11/30/2003 27.28 18 1.78 1.64
Period from 2/21/2002 to 11/30/2002 (3.82) 5 1.79 (5) 1.31 (5)
Class 529-C:
Year ended 11/30/2003 27.25 29 1.76 1.66
Period from 2/22/2002 to 11/30/2002 (3.90) 8 1.77 (5) 1.33 (5)
Class 529-E:
Year ended 11/30/2003 27.97 5 1.23 2.17
Period from 3/4/2002 to 11/30/2002 (7.88) 1 1.23 (5) 1.85 (5)
Class 529-F:
Year ended 11/30/2003 28.31 1 .98 2.48
Period from 9/17/2002 to 11/30/2002 5.33 - (4) .20 .39
Class R-1:
Year ended 11/30/2003 27.43 5 1.66 (6) 1.48
Period from 6/7/2002 to 11/30/2002 (8.85) - (4) .80 (6) .66
Class R-2:
Year ended 11/30/2003 27.44 57 1.62 (6) 1.72
Period from 6/7/2002 to 11/30/2002 (8.80) 5 .79 (6) .61
Class R-3:
Year ended 11/30/2003 27.90 76 1.24 (6) 1.98
Period from 6/6/2002 to 11/30/2002 (9.25) 5 .60 (6) .80
Class R-4:
Year ended 11/30/2003 28.36 25 .89 (6) 2.18
Period from 6/27/2002 to 11/30/2002 (3.42) 2 .38 (6) .92
Class R-5:
Year ended 11/30/2003 28.82 110 .56 2.88
Period from 5/15/2002 to 11/30/2002 (11.37) 53 .56 (5) 2.48 (5)
Year ended November 30
2003 2002 2001 2000 1999
Portfolio turnover rate for all classes of shares 27% 32% 45% 41% 34%
(1) Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
(2) Year ended 1999 is based on shares outstanding on the last day of
the year; all other periods are
based on average shares outstanding.
(3) Total returns exclude all sales charges, including contingent
deferred sales charges.
(4) Amount less than 1 million.
(5) Annualized.
(6) During the start-up period for this class, CRMC voluntarily agreed to
pay a portion of the fees relating to transfer agent services.
Had CRMC not paid such fees, expense ratios would have been 1.78%,
2.23%, 1.29% and .90% for classes R-1, R-2, R-3 and R-4,
respectively, during the year ended November 30, 2003, and 1.41%,
.93%, .69% and .46% for classes R-1, R-2, R-3 and R-4,
respectively, during the period ended November 30, 2002.
REPORT OF INDEPENDENT AUDITORS
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 changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of Capital World Growth and Income Fund, Inc.
(the "Fund") at November 30, 2003, and the results of its operations, the
changes in its net assets and its financial highlights for each of the periods
presented in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(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 auditing standards generally accepted in
the United States of America, which require that we plan and perform the audits
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 owned at November 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PRICEWATERHOUSE COOPERS, LLP
Los Angeles, California
December 23, 2003
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 certain distributions received by
shareholders during such fiscal year.
The fund makes an election under the Internal Revenue Code Section 853 to pass
through certain non-U.S. taxes paid by the fund to its shareholders as a foreign
tax credit. The amount of foreign tax credit passed through to shareholders for
the fiscal year ended November 30, 2003 is $24,236,000. Foreign source income
earned by the fund for the fiscal year ended November 30, 2003 was $308,424,000.
Shareholders are entitled to a foreign tax credit or an itemized deduction, at
their discretion. Generally, it is more advantageous to claim a credit than to
take a deduction.
As a result of recent tax legislation, individual shareholders are now eligible
for reduced tax rates on qualified dividend income received during 2003. For
purposes of computing the dividends eligible for reduced tax rates, all of the
dividends paid by the fund from net investment income from January 1 through the
end of the fund's fiscal year are considered qualified dividend income.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 25.25% 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 retirement plan trusts may need this information for their annual
information reporting.
SINCE THE INFORMATION ABOVE IS REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2004 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2003 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
OTHER SHARE CLASS RESULTS (UNAUDITED)
CLASS B, CLASS C, CLASS F AND CLASS 529
TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 2003 (THE MOST RECENT CALENDAR
QUARTER):
1 year Life of class
CLASS B SHARES
Reflecting applicable contingent deferred sales charge (CDSC), maximum of 5%,
payable only if shares are
sold within six years of purchase +33.02% +4.34% (1)
Not reflecting CDSC +38.02% +5.04% (1)
CLASS C SHARES
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase +36.90% +7.72% (2)
Not reflecting CDSC +37.90% +7.72% (2)
CLASS F SHARES (3)
Not reflecting annual asset-based fee charged
by sponsoring firm +39.04% +8.57% (2)
CLASS 529-A SHARES
Reflecting 5.75% maximum sales charge +31.01% +11.43% (4)
Not reflecting maximum sales charge +39.02% +15.00% (4)
CLASS 529-B SHARES
Reflecting applicable CDSC, maximum of 5%, payable
only if shares are sold within six years of purchase +32.76% +13.11% (5)
Not reflecting CDSC +37.76% +15.04% (5)
CLASS 529-C SHARES
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase +36.78% +15.02% (6)
Not reflecting CDSC +37.78% +15.02% (6)
CLASS 529-E SHARES (3) +38.57% +13.00% (7)
CLASS 529-F SHARES (3)
Not reflecting annual asset-based fee charged by sponsoring firm +38.90% +32.24% (8)
Figures shown are past results and are not predictive of future results. Current
results may be lower or higher than those shown. Share price and return will
vary, so you may lose money. For more current information and month-end results,
visit americanfunds.com.
(1) Average annual total return from March 15, 2000, when Class B shares were
first sold.
(2) Average annual total return from March 15, 2001, when Class C and Class F
shares were first sold.
(3) These shares are sold without any initial or contingent deferred sales
charge.
(4) Average annual total return from February 15, 2002, when Class 529-A shares
were first sold.
(5) Average annual total return from February 21, 2002, when Class 529-B shares
were first sold.
(6) Average annual total return from February 22, 2002, when Class 529-C shares
were first sold.
(7) Average annual total return from March 4, 2002, when Class 529-E shares
were first sold.
(8) Average annual total return from September 17, 2002, when Class 529-F
shares were first sold.
BOARD OF DIRECTORS AND OTHER OFFICERS
"NON-INTERESTED" DIRECTORS
Year first
elected a
Director of
Name and age the fund(1) Principal occupation(s) during past five years
H. FREDERICK CHRISTIE, 70 1993 Private investor; former President and CEO, The Mission Group
(non-utility holding company, subsidiary of Southern California Edison
Company)
MERIT E. JANOW, 45 2001 Professor, Columbia University, School of International and Public
Affairs
MARY MYERS KAUPPILA, 49 1993 Private investor; Chairman of the Board and CEO, Ladera Management
Company (venture capital and agriculture); former owner and President,
Energy Investment, Inc.
GAIL L. NEALE, 68 1993 President, The Lovejoy Consulting Group, Inc. (a pro bono consulting
group advising nonprofit organizations)
ROBERT J. O'NEILL, Ph.D., 67 1993 Deputy Chairman of the Council and Chairman of the International
Advisory Panel, Graduate School of Government, University of Sydney,
Australia; Member of the Board of Directors, The Lowy Institute for
International Policy Studies, Sydney, Australia; Chairman of the
Council, Australian Strategic Policy Institute; former Chichele
Professor of the History of War and Fellow, All Souls College,
University of Oxford; former Chairman of the Council, International
Institute for Strategic Studies
DONALD E. PETERSEN, 77 1993 Retired; former Chairman of the Board and CEO, Ford Motor Company
STEFANIE POWERS, 61 1993-1996 Actor, Producer; Co-founder and President of The William Holden
1997 Wildlife Foundation; conservation consultant to Land Rover and Jaguar
North America; author of The Jaguar Conservation Trust
STEADMAN UPHAM, 54 2001 President and University Professor of Archaeology, Claremont Graduate
University Education
CHARLES WOLF, JR., Ph.D., 79 1993 Senior Economic Adviser and Corporate Fellow in International
Economics, The RAND Corporation; former Dean, The RAND Graduate School
"NON-INTERESTED" DIRECTORS
Number of boards
within the fund
complex (2) on which
Name and age Director serves Other directorships(3) held by Director
H. FREDERICK CHRISTIE, 70 19 Ducommun Incorporated; IHOP Corporation; Southwest Water Company;
Valero L.P.
MERIT E. JANOW, 45 2 None
MARY MYERS KAUPPILA, 49 5 None
GAIL L. NEALE, 68 5 None
ROBERT J. O'NEILL, Ph.D., 67 3 None
DONALD E. PETERSEN, 77 2 None
STEFANIE POWERS, 61 2 None
STEADMAN UPHAM, 54 2 None
CHARLES WOLF, JR., Ph.D., 79 2 None
"INTERESTED" DIRECTORS (4)
Year first
elected a
Director or Principal occupation(s) during past five years
Name, age and officer and positions held with affiliated entities or the
position with fund of the fund(1) principal underwriter of the fund
GINA H. DESPRES, 62 1999 Senior Vice President, Capital Research and
Chairman of the Board Management Company; Vice President, Capital Strategy Research, Inc.(5)
PAUL G. HAAGA, Jr., 55 1993 Executive Vice President and Director, Capital
Vice Chairman of the Board Research and Management Company; Director, The Capital Group
Companies, Inc.;(5) Director, American Funds Distributors, Inc.(5)
"Interested" Directors(4)
Number of
boards within
the fund
complex (2)
Name, age and on which
position with fund Director serves Other directorships(3) held by Director
GINA H. DESPRES, 62 4 None
Chairman of the Board
PAUL G. HAAGA, Jr., 55 17 None
Vice Chairman of the Board
FOUNDING DIRECTOR EMERITUS
FRANK STANTON, 95 Retired; former President, CBS Inc. (1946-1973)
THE STATEMENT OF ADDITIONAL INFORMATION INCLUDES ADDITIONAL INFORMATION ABOUT
FUND DIRECTORS AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY CALLING AMERICAN
FUNDS SERVICE COMPANY AT 800/421-0180. THE ADDRESS FOR ALL DIRECTORS AND
OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET, LOS ANGELES, CA 90071, ATTENTION:
FUND SECRETARY.
OTHER OFFICERS
Year first
elected an Principal occupation(s) during past five years
Name, age and officer of and positions held with affiliated entities or the
position with fund the fund(1) principal underwriter of the fund
STEPHEN E. BEPLER, 61 1993 Senior Vice President, Capital Research Company(5)
President
GREGG E. IRELAND, 54 1999 Senior Vice President, Capital Research and
Executive Vice President Management Company
MARK E. DENNING, 46 1993 Director, Capital Research and Management
Senior Vice President Company; Director, The Capital Group Companies, Inc.;(5) Senior Vice
President, Capital Research Company(5)
JEANNE K. CARROLL, 55 2001 Senior Vice President, Capital Research Company(5)
Vice President
TIMOTHY P. DUNN, 42 2003 Vice President, Capital Research and Management
Vice President Company; Senior Vice President, Capital Research Company(5)
CARL M. KAWAJA, 39 1997 Senior Vice President, Capital Research Company;(5)
Vice President Director, Capital International, Inc.(5)
ANDREW B. SUZMAN, 36 2003 Executive Vice President and Director, Capital
Vice President Research Company;5 Director, Capital International Research, Inc.(5)
STEVEN T. WATSON, 48 2001 Senior Vice President, Capital Research Company(5)
Vice President
VINCENT P. CORTI, 47 1993 Vice President-- Fund Business Management
Secretary Group, Capital Research and Management Company
JEFFREY P. REGAL, 32 2003 Vice President-- Fund Business Management
Treasurer Group, Capital Research and Management Company
VALERIE Y. LEWIS, 47 2003 Fund Boards Specialist, Capital Research and
Assistant Secretary Management Company
SHERYL F. JOHNSON, 35 2003 Vice President-- Fund Business Management
Assistant Treasurer Group, Capital Research and Management Company
(1) Directors and officers of the fund serve until their resignation, removal or
retirement.
(2) Capital Research and Management Company manages the American Funds,
consisting of 29 funds. Capital Research and Management Company also manages
American Funds Insurance Series(R) and Anchor Pathway Fund, which serve as
the underlying investment vehicles for certain variable insurance contracts;
and Endowments, whose shareholders are limited to certain nonprofit
organizations.
(3) This includes all directorships (other than those in the American Funds)
that are held by each Director as a director of a public company or a
registered investment company.
(4) "Interested persons" within the meaning of the 1940 Act on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
(5) Company affiliated with Capital Research and Management Company.
OFFICES
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 25065
Santa Ana, CA 92799-5065
P.O. Box 659522
San Antonio, TX 78265-9522
P.O. Box 6007
Indianapolis, IN 46206-6007
P.O. Box 2280
Norfolk, VA 23501-2280
CUSTODIAN OF ASSETS
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
There are several ways to invest in Capital World Growth and Income Fund. Class
A shares are subject to a 5.75% maximum up-front sales charge that declines for
accounts (and aggregated investments) of $25,000 or more. Other share classes,
which are generally not available for certain employer-sponsored retirement
plans, have no up-front sales charges but are subject to additional annual
expenses and fees. Annual expenses for Class B shares were 0.77 percentage
points higher than for Class A shares; Class B shares convert to Class A shares
after eight years of ownership. If redeemed within six years, Class B shares may
also be subject to a contingent deferred sales charge ("CDSC") of up to 5% that
declines over time. Class C shares were subject to annual expenses 0.84
percentage points higher than those for Class A shares and a 1% CDSC if redeemed
within the first year after purchase. Class C shares convert to Class F shares
after 10 years. Class F shares, which are available only through certain
fee-based programs offered by broker-dealer firms and registered investment
advisers, had higher annual expenses (by 0.08 percentage points) than did Class
A shares, and an annual asset-based fee charged by the sponsoring firm. Expenses
are deducted from income earned by the fund. As a result, dividends and
investment results will differ for each share class.
INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES
OF CAPITAL WORLD GROWTH AND INCOME FUND AND COLLEGEAMERICA CAREFULLY. THIS AND
OTHER IMPORTANT INFORMATION IS CONTAINED IN THE PROSPECTUS, WHICH CAN BE
OBTAINED FROM YOUR FINANCIAL ADVISER AND SHOULD BE READ CAREFULLY BEFORE
INVESTING.
"AMERICAN FUNDS PROXY VOTING GUIDELINES" -- WHICH DESCRIBES HOW WE VOTE PROXIES
RELATING TO PORTFOLIO SECURITIES -- IS AVAILABLE UPON REQUEST, FREE OF CHARGE,
BY CALLING AMERICAN FUNDS SERVICE COMPANY AT 800/421-0180, VISITING THE AMERICAN
FUNDS WEBSITE AT AMERICANFUNDS.COM OR ACCESSING THE U.S. SECURITIES AND EXCHANGE
COMMISSION WEBSITE AT WWW.SEC.GOV.
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, 2004, this report must be accompanied by an
American Funds statistical update for the most recently completed calendar
quarter.
[logo - American Funds(R)]
The right choice for the long term(R)
WHAT MAKES AMERICAN FUNDS DIFFERENT?
For more than 70 years, we have followed a consistent philosophy that we firmly
believe is in our investors' best interests. The range of opportunities offered
by our family of just 29 carefully conceived, broadly diversified funds has
attracted over 20 million shareholder accounts.
Our unique combination of strengths includes these five factors:
o A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow fads, we pursue a consistent strategy, focusing on each
investment's long-term potential.
o AN UNPARALLELED GLOBAL RESEARCH EFFORT
American Funds draws on one of the industry's most globally integrated
research networks.
o THE MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is divided among a number of portfolio counselors. Each
takes responsibility for a portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time this method has contributed to a consistency of results and continuity
of management.
o EXPERIENCED INVESTMENT PROFESSIONALS
The recent market decline was not the first for most of the portfolio
counselors who serve the American Funds. Nearly 70% of them were in the
investment business before the sharp market decline of 1987.
o A COMMITMENT TO LOW OPERATING EXPENSES
American Funds' operating expenses are among the lowest in the mutual fund
industry. Our portfolio turnover rates are low as well, keeping transaction
costs and tax consequences contained.
29 MUTUAL FUNDS, CONSISTENT PHILOSOPHY, CONSISTENT RESULTS
o GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
o GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(R)
> CAPITAL WORLD GROWTH AND INCOME FUND(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
o EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
o BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
o BOND FUNDS
Emphasis on current income through bonds
American High-Income TrustSM
The Bond Fund of AmericaSM
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities FundSM
o TAX-EXEMPT BOND FUNDS
Emphasis on tax-free current income through municipal bonds American
High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of AmericaSM
The Tax-Exempt Bond Fund of America(R)
STATE-SPECIFIC TAX-EXEMPT FUNDS
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
o MONEY MARKET FUNDS
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of AmericaSM
The U.S. Treasury Money Fund of AmericaSM
THE CAPITAL GROUP COMPANIES
American Funds
Capital Research and Management
Capital International
Capital Guardian
Capital Bank and Trust
Lit. No. MFGEAR-933-0104
Litho in USA WG/L/8072
Printed on recycled paper
ITEM 2 - Code of Ethics
This Registrant has adopted a Code of Ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The Registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made to American Funds Service Company at
800/421-0180 or to the Secretary of the Registrant, 333 South Hope Street, Los
Angeles, California 90071.
ITEM 3 - Audit Committee Financial Expert
The Registrant's Board has determined that Steadman Upham, a member of the
Registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item. This designation will not
increase the designee's duties, obligations or liability as compared to his
duties, obligations and liability as a member of the Audit Committee and of the
Board; nor will it reduce the responsibility of the other Audit Committee
members. There may be other individuals who, through education or experience,
would qualify as "audit committee financial experts" if the Board had designated
them as such. Most importantly, the Board believes each member of the Audit
Committee contributes significantly to the effective oversight of the
Registrant's financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
Form N-CSR disclosure requirement not yet effective with respect to Registrant.
ITEM 5 - Audit Committee Disclosure for Listed Companies
Not applicable.
ITEM 6 - Reserved
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Reserved
ITEM 9 - Controls and Procedures
(a) The officers providing the certifications in this report in accordance with
rule 30a-2 under the Investment Company Act of 1940 have concluded, based
on their evaluation of the Registrant's disclosure controls and procedures
(as such term is defined in such rule), that such controls and procedures
are adequate and reasonably designed to achieve the purposes described in
paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of
1940) that occurred during the Registrant's last fiscal half-year (the
Registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 10 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required
by Item 2 is attached as an exhibit hereto.
(b) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002 are attached as exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CAPITAL WORLD GROWTH AND INCOME FUND, INC.
By /s/ Stephen E. Bepler
Stephen E. Bepler, President and PEO
Date: February 5, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Stephen E. Bepler
Stephen E. Bepler, President and PEO
Date: February 5, 2004
By /s/ Jeffrey P. Regal
Jeffrey P. Regal, Treasurer
Date: February 5, 2004