CAPITAL INCOME BUILDER
Semi-Annual Report
For the six months ended
April 30, 1996
Capital Income Builder's goal is to provide a growing dividend - with higher
income distributions every quarter as far as possible - together with a current
yield which exceeds that paid by U.S. stocks generally.
[The American Funds Group(R)]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
returns with all distributions reinvested for periods ended March 31, 1996 (the
most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods - Since inception on July 30,
1987: +151.09% or +11.20% a year; 5 years: +68.78% or +11.04% a year; 12
months: +15.50%. Sales charges are lower for accounts of $50,000 or more. The
fund's 30-day yield as of May 31, 1996, calculated in accordance with the
Securities and Exchange Commission formula, was 4.09%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW INVESTORS:
In June 1996, Capital Income Builder's dividend was raised for the 35th
consecutive quarter to 45.5 cents a share.
These regular dividend increases, each quarter as far as possible, are part of
our clearly defined investment objective to provide above-average and growing
income for our shareholders.
If, like most shareholders, you reinvested the fund's capital gain distribution
of 50 cents a share in December, the June dividend represented an increase of
6.0% over the dividend paid a year ago. It was 67.9% higher than the first
full-quarter payment of 28 cents in December 1987, also with capital gains
reinvested. That represents an annual compound growth rate of 6.3%. The
dividend increases alone - not counting the increased value of the stocks and
other investments in the CIB portfolio - far outpaced the 35.4% cumulative
increase and 3.7% annual compound growth rate for the Consumer Price Index
during the period December 31, 1987 through April 30, 1996. The benefit of
reinvesting and our steady quarterly progress are shown below.
CIB's Quarterly Dividends Compared with Inflation (cents per share)
CIB's Quarterly Dividends Compared with Inflation
(cents per share) (Index: December 1987=100)
[GRAPH APPEARS HERE]
<TABLE>
Additional
Income earned
on initial shares
if the capital
gain distributions
paid in December Inflation=
1991, 1992, 1993 Consumer Price
and 1994 were Index (through
Dividend reinvested October 1995)
------------ ------------ -------------
<S> <C> <C> <C>
4th Qtr, 1987 22 - -
1st Qtr, 1988 28 - 100.0
2nd Qtr, 1988 28.5 - 101.0
3rd Qtr, 1988 29 - 102.3
4th Qtr, 1988 29.5 - 103.8
1st Qtr, 1989 30 - 104.4
2nd Qtr, 1989 30.5 - 105.9
3rd Qtr, 1989 31 - 107.5
4th Qtr, 1989 31.5 - 108.4
1st Qtr, 1990 32.5 - 109.2
2nd Qtr, 1990 33 - 111.5
3rd Qtr, 1990 33.5 - 112.6
4th Qtr, 1990 34 - 115.0
1st Qtr, 1991 34.5 - 116.0
2nd Qtr, 1991 35 - 117.0
3rd Qtr, 1991 35.5 - 117.8
4th Qtr, 1991 36 - 118.9
1st Qtr, 1992 36.5 - 119.5
2nd Qtr, 1992 37 37.3 120.7
3rd Qtr, 1992 37.5 37.8 121.5
4th Qtr, 1992 38 38.3 122.4
1st Qtr, 1993 38.5 38.8 123.0
2nd Qtr, 1993 39 39.5 124.4
3rd Qtr, 1993 39.5 40.0 125.1
4th Qtr, 1993 40 40.5 125.7
1st Qtr, 1994 40.5 41.0 126.4
2nd Qtr, 1994 41 41.6 127.6
3rd Qtr, 1994 41.5 42.1 128.2
4th Qtr, 1994 42 42.6 129.4
1st Qtr, 1995 42.5 43.1 129.7
2nd Qtr, 1995 43 43.8 131.2
3rd Qtr, 1995 43.5 44.3 132.1
4th Qtr, 1995 44 44.8 132.8
1st Qtr, 1996 44.5 45.3 133.0
2nd Qtr, 1996 45 46.4 134.9
3rd Qtr, 1996 45.5 47.0
</TABLE>
7
<PAGE>
CIB'S ABOVE-AVERAGE DIVIDEND YIELD
Capital Income Builder has continued to provide a well-above-average dividend
yield at a time when U.S. equities on average are currently paying dividends at
an historically low rate. At the end of April 1996 the dividend yield of U.S.
stocks, as measured by the unmanaged Standard & Poor's 500 Composite Index, was
2.2% on an annual basis, in marked contrast with CIB's dividend yield of 4.8%
of net asset value.
CIB'S RESULTS COMPARED WITH GENERAL EQUITY MUTUAL FUNDS
For the period 7/31/87 to 4/30/96
General Equity Funds +160.14%*
CIB +171.81%
*Average for 500 General Equity Mutual Funds
Total return as calculated by Lipper Analytical Services
Results do not reflect the effect of sales charges.
CIB's regular dividend increases are supported by the widespread dividend
growth of the common stocks in our portfolio. Of 85 stocks owned for the entire
12 months through the end of April, 64 increased dividends, 20 were unchanged
and one lowered its dividend. The median increase among the 64 stocks was 9.2%.
FOCUSING ON THE LONG TERM
As we have explained frequently in these reports, CIB's focus on providing
above-average dividend yield and growing income requires careful selection of
individual securities, supported by painstaking research and a long-term
perspective. This may at times cause the fund's results to trail those of the
broad equities market.
Companies that meet our stringent criteria for growing dividends as well as
strong cash flow and solid balance sheets periodically may be out of favor with
investors seeking rapid growth with less concern for dividends. The 12 months
ended April 30 was a period in which the market rewarded growth stocks,
particularly technology stocks, few of which are appropriate for CIB since most
do not pay dividends. For the first six months of our current fiscal year, CIB
had a total return of 7.1%, compared with 13.8% for the S&P 500. Over its
lifetime, however, the fund's compound annual return of 11.9% nearly matches
the 12.0% of the S&P index.
As shown in the chart at the top of page 2, since July 31, 1987, CIB's total
return (change in value with all dividends and distributions reinvested) was
171.81% through April 30, 1996, compared with 160.14% for the average of 500
general equity funds, according to Lipper Analytical Services.
Comparing results against the overall stock market is an imprecise exercise.
One-year results record the impact of a short-term rise or fall in stock prices
but say little about the value of a longer term approach to investing.
Five-year returns have been a more significant measure in the past, when such
periods encompassed a full market cycle. Currently, however, it has been over
five years since a normal down period has occurred. The fact that CIB's results
have lagged the broad market recently reflects in large part our general
concern about the level of risk in a stock market where prices have risen so
much and for so long.
CIB'S EQUITY HOLDINGS SHOWING LARGEST INDUSTRIES BY COUNTRY
(percent of net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Hong New
U.S. U.K. Kong Zealand Netherlands
Banking 15.97 - - - -
Telecommunications 4.68 - .43 2.07 .95
Utilities: Electric & Gas 4.68 3.51 .65 - -
Health & Personal Care 5.25 - - - -
Business & Public Services .77 3.83 .24 - -
----- ----- ----- ----- -----
Five Largest Industries 31.35 7.34 1.32 2.07 .95
Other Industries 16.39 2.96 .99 - .75
Total Equities 47.74 10.30 2.31 2.07 1.70
===== ===== ===== ===== =====
Australia Italy Spain Canada Total
Banking .95 - - .24 17.16
Telecommunications - .69 .61 - 9.43
Utilities: Electric & Gas .03 - - - 8.87
Health & Personal Care - - - - 5.25
Business & Public Services - - - - 4.84
----- ----- ----- ----- -----
Five Largest Industries .98 .69 .61 .24 45.55
Other Industries .13 - - - 21.22
===== ===== ===== ===== =====
Total Equities 1.11 .69 .61 .24 66.77
</TABLE>
BANKING
Bank stocks continue to be the fund's largest industry holding, representing
17.2% of net assets at April 30. In the six months through April, U.S. bank
stocks generally rose but the gains were limited by the rise in interest rates.
Some banks were strong, however: BankAmerica (up 31.7%), Comerica (29.4%) and
First Union (23.9%) substantially exceeded the overall trend.
Banks continued to pay above-average dividends. In addition, several banks in
the CIB portfolio declared large dividend increases during the 12 months ended
April 30. They include Westpac (a 55.6% dividend increase), CoreStates
Financial (23.5%), BankAmerica (17.4%), First Union (13.0%), National City
(12.5%) and Chase Manhattan, the result of the merger of Chase Manhattan and
Chemical Banking (27.3%). We remain positive on CIB's bank holdings, which meet
our investment criteria with an average yield of 3.8% at April 30 and estimated
dividend growth averaging 9.5% a year.
Percent of
LARGEST INDIVIDUAL HOLDINGS Net Assets
American Home Products 3.21%
Telecom Corp. of New Zealand 2.07
Banc One 1.69
Philip Morris 1.63
Ameritech 1.52
CoreStates Financial 1.41
Ford Motor 1.40
Comerica 1.36
Chevron 1.35
Pacific Telesis 1.34
TELECOMMUNICATIONS
Our investments in telecommunications companies, the second-largest industry
holding (9.4% of net assets), also generally rose in value but not as much as
the broad stock market. Ameritech, our largest U.S. telecommunications holding,
increased its dividend by 6.0% in the 12-month period ended April 30. Pacific
Telesis, currently merging with SBC Communications, announced plans to reduce
its dividend. Telecom Corp. of New Zealand, the fund's second-largest holding
overall, raised its dividend by 20.4%. Two telecommunications companies were
added to the portfolio: Telecom Italia and Telefonica de Espana.
UTILITIES
CIB's investments in U.S. electric and gas utilities, which comprise 4.7% of
net assets, have long helped the fund provide above-average and growing
dividends. But in the past six months the U.S. utilities sector was negatively
affected by the rise in interest rates, new competitive pressures and
regulatory concerns.
As we explained in the annual report, our holdings in U.K. utilities have
offered greater dividend growth and price appreciation, but not without a fair
amount of volatility. These stocks, which make up 3.5% of our net assets, have
been buffeted over the past six months by concerns over utility policies of a
possible Labor government and uncertainty over the outcome of intense merger
and acquisition activity, some of which has been discouraged by the current
government. Nonetheless, a number of our U.K. utility companies declared
sizable dividend increases over the 12 months ended April 30. They include
Southern Electric (26.3%), National Power (26.0%) and East Midlands Electricity
(20.8%).
GROWTH OF NET ASSETS
At April 30, fund assets stood at nearly $5 billion, up from $4.5 billion on
October 31, 1995, while the number of shareholders increased to 308,950 from
292,104.
We remain confident in Capital Income Builder's objective of investing in
companies that provide above-average current income and dividend growth, and
thank you, our fellow shareholders, for your continued support of the fund's
long-term investment approach.
Jon B. Lovelace Paul G. Haaga, Jr.
Chairman of the Board President
June 12, 1996
<TABLE>
CAPITAL INCOME BUILDER Unaudited
Investment Portfolio April 30, 1996
<S> <C> <C> <C>
Percent of
Largest Individual Holdings Net Assets
- -------------------------------------------------- ----------
American Home Products 3.21%
Telecom Corp. of New Zealand 2.07
Banc One 1.69
Philip Morris 1.63
Ameritech
CoreStates Financial 1.41
Ford Motor
Comerica 1.36
Chevron
Pacific Telesis
Equity-Type
Securities Shares or Market Percent
Principal Value of Net
Energy Amount (Millions) Assets
- ---------------------------------------------- ----------------------------------
Energy Sources - 2.94%
Amoco Corp. 430,000 $31.390 0.63%
Burmah Castrol PLC 646839 10.334 .21
Chevron Corp. 1165000 67.570 1.35
Phillips Petroleum Co. 750000 31.125 .62
Royal Dutch Petroleum Co. (New York Registered
Shares) 260000 37.245 .75
- ---------------------------------------------- ----------------------------------
Utilities: Electric & Gas - 8.87%
Australian Gas Light Co. 372662 1.554 .03
British Gas PLC 900000 3.194
British Gas PLC (American Depositary Receipts) 60000 2.123 .10
Brooklyn Union Gas Co. 200,000 5.250 .11
Central and South West Corp. 2000000 54.500 1.09
Detroit Edison Co. 450000 13.950 .28
East Midlands Electricity PLC 1450000 13.660 .27
Entergy Corp. 2100000 55.650 1.12
General Public Utilities Corp. 1250000 39.688 .79
Hongkong Electric Holdings Ltd. 10,231,500 32.539 .65
Houston Industries Inc. 200,000 4.275 .09
Long Island Lighting Co. 2125000 34.531 .69
National Grid Group PLC 12930550 39.762 .80
National Power PLC 6910000 58.239 1.17
Pacific Gas and Electric Co. 1000000 22.750 .46
PECO Energy Co. 100000 2.488 .05
Southern Electric PLC 4645350 58.501 1.17
---------------------
620.318 12.43
---------------------
Materials
- ---------------------------------------------- ----------------------------------
Chemicals - 0.16%
E.I. du Pont de Nemours and Co. 100000 8.038 .16
- ---------------------------------------------- ----------------------------------
Forest Products & Paper - 0.20%
James River Corp. of Virginia, DECS convertible
preferred shares 225000 5.709 .11
Potlatch Corp. 101800 4.339 .09
---------------------
18.086 .36
---------------------
Capital Equipment
- ---------------------------------------------- ----------------------------------
Data Processing & Reproduction - 0.29%
MacNeal-Schwendler Corp. 670000 9.129 .18
Unisys Corp., convertible preferred shares,
Series A 193300 5.678 .11
---------------------
14.807 .29
---------------------
Consumer Goods
- ---------------------------------------------- ----------------------------------
Automobiles - 1.40%
Ford Motor Co., Class A 1950000 69.956 1.40
- ---------------------------------------------- ----------------------------------
Beverages & Tobacco - 2.92%
Philip Morris Companies Inc. 905,000 81.563 1.63
RJR Nabisco Holdings Corp. 700,000 20.913 .42
UST Inc. 1,350,000 43.200 .87
- ---------------------------------------------- ----------------------------------
Health & Personal Care - 5.25%
American Home Products Corp. 1,520,000 160.360 3.21
Bristol-Myers Squibb Co. 757500 62.304 1.25
Merck & Co., Inc. 250000 15.125 .30
Pharmacia & Upjohn, Inc. 145000 5.546 .11
Schering-Plough Corp. 130000 7.459 .15
Warner-Lambert Co. 100000 11.175 .23
---------------------
477.601 9.57
---------------------
Services
- ---------------------------------------------- ----------------------------------
Broadcasting & Publishing - 0.29%
South China Morning Post (Holdings) Ltd. 3600000 2.443 .05
Time Warner Inc., 10.25% Series K /1/ 3750 3.750 .08
U S WEST Media Group /2/ 404707 7.892 .16
- ---------------------------------------------- ----------------------------------
Business & Public Services - 4.84%
American Water Works Co., Inc. 480600 18.263 .36
Consumers Water Co. 229000 3.893 .08
Dun & Bradstreet Corp. 275000 16.741 .33
Hutchison Delta Finance Ltd., 7.00% convertible
debentures 2001 /1/ $11,000,000 11.848 .24
Hyder PLC (formerly Welsh Water PLC) 3745864 41.400 .83
Southern Water PLC 4085533 46.782 .94
Thames Water PLC 6000000 51.742 1.04
United Utilities PLC (formerly North West Water
Group PLC) 5682857 50.759 1.02
- ---------------------------------------------- ----------------------------------
Telecommunications - 9.43%
ALLTEL Corp. 350,000 11.506 .23
Ameritech Corp. 1,300,000 75.887 1.52
GTE Corp. 1300000 56.388 1.13
Hong Kong Telecommunications Ltd. (American
Depositary Receipts) 1,142,478 21.707 .43
Koninklijke PTT Nederland NV 1,259,700 47.216 .95
Pacific Telesis Group 1,950,000 66.788 1.34
Telecom Corp. of New Zealand Ltd. 15,784,160 66.946
Telecom Corp. of New Zealand Ltd. /1/ 8,380,000 35.542 2.07
Telecom Corp. of New Zealand Ltd. (American
Depositary Receipts) 12,500 .844
Telecom Italia SpA 20,698,700 34.528 .69
Telefonica de Espana, SA 1,700,000 30.233 .61
U S WEST Communications Group (formerly
U S WEST, Inc.) 704,707 23.079 .46
- ---------------------------------------------- ----------------------------------
Transportation: Airlines - 0.31%
British Airways PLC (American Depositary Receipts) 200000 15.650 .31
- ---------------------------------------------- ----------------------------------
Transportation: Shipping - 0.13%
Shun Tak Holdings Ltd. 9,078,184 6.572 .13
---------------------
748.399 15.00
---------------------
Finance
- ---------------------------------------------- ----------------------------------
Banking - 17.16%
AmSouth Bancorporation 800,000 30.700 .62
Banc One Corp. 2,420,000 84.095 1.69
BankAmerica Corp. 304000 23.028 .46
Boatmen's Bancshares, Inc. 400000 15.500 .31
Central Fidelity Banks, Inc. 1301200 44.891 .90
Chase Manhattan Corp. (New) (formerly Chemical
Banking Corp.) 850000 58.544 1.17
Comerica Inc. 1560000 67.860 1.36
CoreStates Financial Corp 1800000 70.200 1.41
First Chicago NBD Corp. (formerly First Chicago Corp.) 1210000 49.912 1.00
First Hawaiian Bank 510000 14.917 .30
First Security Corp. (Utah) 1637500 41.347 .83
First Union Corp. 967500 59.501 1.19
Huntington Bancshares Inc. 1,522,500 36.921 .74
J.P Morgan & Co. Inc. 180,000 15.142 .30
KeyCorp 1,035,000 39.977 .80
National Australia Bank Ltd. 2407694 21.639 .43
National City Corp. 900000 33.187 .66
Old Kent Financial Corp. 525000 19.687 .39
PNC Bank Corp. 800000 24.200 .49
Royal Bank of Canada 500000 11.839 .24
Wachovia Corp. 660000 29.040 .58
Washington Federal Savings and Loan Assn. 550000 11.550 .23
Westpac Banking Corp. 5,350,000 26.021 .52
Wilmington Trust Corp. 850,000 26.881 .54
- ---------------------------------------------- ----------------------------------
Financial Services - 0.66%
Beneficial Corp. 340,000 18.785 .38
Manhattan Card Co. Ltd. 23,200,000 13.797 .28
- ---------------------------------------------- ----------------------------------
Insurance - 2.35%
American General Corp. 160000 5.620 .11
Lincoln National Corp. 1230000 59.348 1.19
Ohio Casualty Corp. 717,500 24.754 .49
Prudential Corp. PLC 3557546 24.474 .49
SAFECO Corp. 100,000 3.300 .07
- ---------------------------------------------- ----------------------------------
Real Estate - 4.22%
Bradley Real Estate, Inc. (formerly Tucker 761,800 11.237 .23
Properties Corp.)
Camden Property Trust 400,000 9.500 .19
Kimco Realty Corp. 598,250 15.555 .31
Security Capital Atlantic, Inc. /1/ /3/ 2,782,607 32.000 .64
Security Capital Industrial Trust 702328 12.115 .24
Security Capital Pacific Trust 1900000 39.663
Security Capital Pacific Trust, convertible
preferred shares, Series A 300000 7.688 .95
Security Capital Realty Inc. /1/ /2/ /3/ 24900 25.493
Security Capital Realty Inc. 12.00%
convertible debentures 2014 /1/ /3/ $18,862,000 18.462 .88
Sun Hung Kai Properties Ltd. 1486000 14.168 .28
Washington Real Estate Investment Trust 145,500 2.346 .05
Weingarten Realty Investors 504,000 17.703 .36
Western Investment Real Estate Trust 412500 4.641 .09
---------------------
1,217.228 24.39
---------------------
Multi-Industry & Miscellaneous
- ---------------------------------------------- ----------------------------------
Multi-Industry - 2.33%
B A T Industries PLC 5,895,597 44.548 .89
Hanson PLC (American Depositary Receipts) 3500000 52.937 1.06
Hutchison Whampoa Ltd. 1960000 12.163 .25
Lend Lease Corp. Ltd. 411257 6.279 .13
- ---------------------------------------------- ----------------------------------
Miscellaneous - 2.40%
Equity-type securities in initial period of
acquisition 119.922 2.40
---------------------
235.849 4.73
---------------------
TOTAL EQUITY-TYPE SECURITIES (cost:
$2,650.555 million) 3,332.288 66.77
---------------------
Principal
Bonds and Notes Amount
- ---------------------------------------------- ----------------------------------
Corporate
- ---------------------------------------------- ----------------------------------
360 Communications Company 7.125% 2003 $7,000,000 6.702 .13
ADT Operations 9.25% 2003 2000000 2.080 .04
AnnTaylor, Inc. 8.75% 2000 4802000 4.394 .09
Arkla, Inc. 10.00% 2019 3000000 3.296 .07
California Energy Co., Inc. 0%/10.25% 2004 /4/ 4300000 4.128 .08
Century Communications Corp. 9.75% 2002 1000000 1.010 .02
Columbia Gas System, Inc. Series G, 7.62% 2025 3000000 2.800
Columbia Gas System, Inc. Series C, 6.80% 2005 10000000 9.598 .25
Consumers Power Co. 6.375% 2003 5000000 4.646 .09
Container Corp. of America 9.75% 2003 3500000 3.500 .07
Continental Cablevision, Inc. 9.50% 2013 1000000 1.105
Continental Cablevision, Inc. 9.00% 2008 1000000 1.075
Continental Cablevision, Inc. 8.875% 2005 2000000 2.130
Continental Cablevision, Inc. 8.30% 2006 /1/ 6250000 6.391 .22
Delta Air Lines, Inc., pass-through certificates,
Series 1993-B2, 10.06% 2016 /5/ 3000000 3.433 .12
Delta Air Lines, Inc., 1991 Equipment
Certificates Trust, Series K, 10.00% 2014 /1/ 2000000 2.272
El Paso Electric Company 8.90% 2006 1500000 1.481 .03
Falcon Drilling Company Inc., 8.875% 2003 /1/ 4000000 3.960 .08
Fort Howard Corp. 10.00% 2003 500000 .500
Fort Howard Corp. 8.25% 2002 3000000 2.895 .07
Harrah's Operating Co. Inc. 10.875% 2002 3000000 3.240 .06
Infinity Broadcasting Corp. 10.375% 2002 4500000 4.837 .10
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
2015 /1/ /5/ 5000000 5.412 .11
Long Island Lighting Co. 8.90% 2019 10000000 9.108
Long Island Lighting Co. 7.30% 1999 23000000 22.521 .63
McDermott Inc. 9.375% 2002 4000000 4.313 .09
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 7329336.65 7.687
Midland Cogeneration Venture LP, Secured Lease .19
Obligation Bonds, Series C-94, 10.33% 2002 2076869.77 2.178
News America Holdings Inc. 9.25% 2013 2000000 2.160
News America Holdings Inc. 9.125% 1999 3000000 3.208
News America Holdings Inc. 8.625% 2003 2000000 2.129 .14
NorAm Energy Corp. 7.50% 2000 6000000 6.024 .12
Occidental Petroleum Corp. 8.50% 2004 8000000 8.353 .17
Riggs National Corp. 8.50% 2006 2600000 2.626 .05
Rogers Cantel Mobile Communications Inc.
10.75% 2001 2000000 2.100 .04
Rykoff-Sexton, Inc. 8.875% 2003 4500000 4.297 .09
Smith's Food & Drug Centers, Inc.,
pass-through certificates, Series 1994-A2,
8.64% 2012 /3/ /5/ 6000000 4.635 .09
Time Warner Inc. 10.15% 2012 5000000 5.786
Time Warner Inc. 7.45% 1998 4000000 4.046 .20
TKR Cable I, Inc. 10.50% 2007 7000000 7.764 .16
TransTexas Gas Corp. 11.50% 2002 8500000 8.500 .17
WestPoint Stevens Inc. 8.75% 2001 2000000 1.985 .04
---------------------
190.305 3.81
---------------------
Principal
Governments and Governmental Authorities Amount
- ---------------------------------------------- ----------------------------------
Canada 10.75% March 1998 C$10,000,000 7.952 .16
New Zealand 8.00% November 2006 NZ$5,000,000 3.314 .07
New Zealand 8.00% July 1998 NZ$45,000,000 30.247 .60
---------------------
41.513 .83
---------------------
U.S. Treasury Notes
- ---------------------------------------------- ----------------------------------
6.00% November 1997 $60,000,000 60.028 1.20
6.375% June 1997 50,000,000 50.321 1.01
8.50% May 1997 90,000,000 92.489 1.86
---------------------
202.838 4.07
---------------------
TOTAL BONDS AND NOTES (cost: $437.110 million) 434.656 8.71
---------------------
TOTAL INVESTMENT SECURITIES (cost: $3,087.665
million) 3,766.944 75.48
---------------------
SHORT-TERM SECURITIES
- ---------------------------------------------- ----------------------------------
Corporate Short-Term Notes
- ---------------------------------------------- ----------------------------------
A.I. Credit Corp. 5.30% due 5/20/96 25000000 24.926 .50
American Express Credit Corp. 5.30% due 5/15-5/29/96 43000000 42.846 .86
Walt Disney Co. 5.30% due 5/14/96 25000000 24.948 .50
E.I. DuPont de Nemours and Co. 5.28% due 6/27/96 26500000 26.274 .53
Ford Motor Credit Co. 5.23%-5.32% due 5/1-6/17/96 46200000 46.137 .92
General Electric Capital Corp. 5.28%-5.32% due
5/31-6/7/96 58250000 57.949 1.16
H.J. Heinz Co. 5.03% due 5/16/96 /1/ 30600000 30.528 .61
IBM Credit Corp. 5.26%-5.32% due 5/7-6/4/96 43400000 43.297 .87
J.C. Penney Funding Corp. 5.31%-5.34% due
5/3-6/13/96 31150000 30.984 .62
PepsiCo, Inc. 5.27%-5.32% due 5/10-5/24/96 49600000 49.470 .99
Procter & Gamble Co. 5.10%-5.28% due 5/16-5/21/96 72840000 72.649 1.46
Weyerhaeuser Co. 5.25%-5.30% due 5/3-6/24/96 64500000 64.333 1.29
Xerox Corp. 5.13%-5.30% due 5/8-6/25/96 42900000 42.662 .85
---------------------
557.003 11.16
---------------------
Federal Agency Discount Notes
- ---------------------------------------------- ----------------------------------
Federal Home Loan Bank 5.00%-5.04% due 5/22-6/5/96 58300000 58.065 1.17
Federal Home Loan Mortgage Corp. 4.99%-5.20% due
5/13-6/17/96 111900000 111.337 2.23
Federal National Mortgage Corp. 4.98-5.04% due
5/9-5/30/96 119220000 118.912 2.38
---------------------
288.314 5.78
---------------------
U.S. Treasury Short-Term Notes
- ---------------------------------------------- ----------------------------------
6.875% due 4/30/97 50000000 50.555 1.01
6.75% due 2/28/97 80000000 80.750 1.62
8.00% due 1/15/97 90,000,000 91.505 1.83
6.875% die 10/31/96 50000000 80.562 1.62
7.875% due 7/15/96 90,000,000 90.464 1.81
---------------------
393.836 7.89
---------------------
TOTAL SHORT-TERM SECURITIES (cost: $1,247.035
million) 1,239.153 24.83
EXCESS OF PAYABLES OVER CASH AND RECEIVABLES 15.298 .31
---------------------
TOTAL SHORT-TERM SECURITIES, CASH AND
RECEIVABLES, NET OF PAYABLES 1,223.855 24.52
---------------------
NET ASSETS $4,990.799 100.00%
=====================
/1/ Purchased in a private placement transaction;
resale to the public may require registration
or may extend only to qualified institutional
buyers.
/2/ Non-income-producing securities.
/3/ Valued under procedures established by the Board
of Directors.
/4/ Represents a zero coupon bond which will
convert to an interest-bearing security at a
later date.
/5/ Pass-through securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore,
the effective maturity of these securities
is shorter than the stated maturity.
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital Income Builder (Unaudited)
Financial Statements
<S> <C> <C>
Statement of Assets and Liabilities
at April 30, 1996 (dollars in
millions)
Assets:
Investment securities at market (cost:$3,087.665) $3,766.944
Short-term securities (cost:$1,247.035) 1,239.153
Cash 1.025
Receivables for-
Sales of investments $ 5.943
Sales of fund's shares 6.450
Dividends and accrued interest 33.441 45.834
------------ ------------
5,052.956
Liabilities:
Payables for-
Purchases of investments 18.789
Repurchases of fund's shares 4.935
Management services 1.336
Dividends payable 35.193
Accrued expenses 1.904 62.157
------------ ------------
Net Assets at April 30, 1996 - Equivalent to
$37.31 per share on 133,760,933 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 200,000,000 shares) $4,990.799
============
Statement of Operations
for the six months ended April 30, 1996
(dollars in millions)
Investment Income:
Income:
Dividends $87.030
Interest 58.914 $145.944
------------
Expenses:
Management services fee 8.938
Distribution expenses 5.232
Transfer agent fee 1.750
Reports to shareholders .424
Registration statement and prospectus .256
Postage, stationery and supplies .352
Directors' fees .048
Auditing and legal fees .044
Custodian fee .353
Taxes other than federal income tax .063
Other expenses .044 17.504
------------ ------------
Net investment income 128.440
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 94.864
Net increase in unrealized appreciation on investments: 100.577
------------
Net realized gain and increase in unrealized
appreciation on investments 195.441
------------
Net Increase in Net Assets Resulting from Operations $323.881
============
See Notes to Financial Statements
Statement of Changes in Net Assets
(dollars in millions) Six months Year
ended ended
4/30/96* 10/31/95
------------ ------------
Operations:
Net investment income $128.440 $197.764
Net realized gain on investments 94.864 64.236
Net change in unrealized appreciation on investments 100.577 387.255
------------ ------------
Net increase in net assets resulting from
operations 323.881 649.255
------------ ------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (128.258) (199.581)
Distributions from net realized gain on investments (62.913) (11.162)
------------ ------------
Total dividends and distributions (191.171) (210.743)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold: 12,134,083 and
23,777,252 shares, respectively 450.728 796.496
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 4,116,200 and
5,248,005 shares, respectively 152.141 174.909
Cost of shares repurchased: 7,483,299 and 15,065,188
shares, respectively (278.136) (505.097)
------------ ------------
Net increase in net assets resulting from capital
share transactions 324.733 466.308
------------ ------------
Total Increase in Net Assets 457.443 904.820
Net Assets:
Beginning of period 4,533.356 3,628.536
------------ ------------
End of period (including undistributed net investment
income: $1.585 and $1.403, respectively) $4,990.799 $4,533.356
============ ============
*Unaudited
See Notes to Financial Statements
</TABLE>
CAPITAL INCOME BUILDER
Notes to Financial Statements
1. Capital Income Builder, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund seeks to provide a growing dividend together with a current yield
which exceeds that paid by U.S. stocks generally. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Equity-type securities traded on a national securities exchange (or reported
on the NASDAQ national market) and securities traded in the over-the-counter
market are stated at the last reported sales price on the day of valuation;
other securities, and securities for which no sale was reported on that date,
are stated at the last quoted bid price. Bonds and notes are valued at prices
obtained from a bond-pricing service provided by a major dealer in bonds, when
such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean of their representative quoted bid and asked prices or, if such prices are
not available, at the mean of such prices for securities of comparable
maturity, quality, and type. Short-term securities with original or remaining
maturities in excess of 60 days are valued at the mean of their quoted bid and
asked prices. Short-term securities with 60 days or less to maturity are valued
at amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Valuation Committee of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Dividend and interest income is reported on the accrual basis. Discounts
on securities purchased are amortized over the life of the respective
securities. The fund does not amortize premiums on securities purchased.
Dividends to shareholders are declared daily from net investment income.
Distributions from capital gains paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities denominated in
non-U.S. currencies are recorded in the financial statements after translation
into U.S. dollars utilizing rates of exchange on the last business day of the
period. Purchases and sales of investment securities, income, and expenses are
calculated using the prevailing exchange rate as accrued. The fund does not
identify the portion of each amount shown in the fund's statement of operations
under the caption "Realized Gain and Unrealized Appreciation on Investments"
that arises from changes in non-U.S. currency exchange rates.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $353,000 includes $59,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of April 30, 1996, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $671,397,000, of which $736,445,000
related to appreciated securities and $65,048,000 related to depreciated
securities. During the six months ended April 30, 1996, the fund realized, on a
tax basis, a net capital gain of $94,831,000 on securities transactions. Net
gains related to non-U.S. currency and other transactions of $33,000 were
treated as ordinary income for federal income tax purposes. The cost of
portfolio securities for book and federal income tax purposes was
$4,334,700,000 at April 30, 1996.
3. The fee of $8,938,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Directors of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.24% of the first $1 billion of average net assets; 0.20%
of such assets in excess of $1 billion but not exceeding $2 billion; 0.18% of
such assets in excess of $2 billion but not exceeding $3 billion; 0.165% of
such assets in excess of $3 billion but not exceeding $5 billion; 0.155% of
such assets in excess of $5 billion but not exceeding $8 billion;and 0.15% of
such assets in excess of $8 billion; plus 3.0% of the fund's gross investment
income. For purposes of the Investment Advisory and Service Agreement, gross
investment income means gross income, computed without taking account of gains
or losses from sales of capital assets.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended April 30,
1996, distribution expenses under the Plan were $5,232,000. As of April 30,
1996, accrued and unpaid distribution expenses were $1,616,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,750,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $2,351,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's shares. Such sales charges are not an expense of the fund and,
hence, are not reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of April 30, 1996,
aggregate amounts deferred and earnings thereon were $124,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. As of April 30, 1996, accumulated undistributed net realized gain on
investments was $85,303,000 and additional paid-in capital was $4,230,927,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $666,307,000 and $292,955,000, respectively, during
the six months ended April 30, 1996.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
six months ended April 30, 1996, such non-U.S. taxes were $6,744,000. Net
realized currency gains on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $470,000 for the six months ended
April 30, 1996.
<TABLE>
Per-Share Data and Ratios
Six months Year ended October 31
ended
4/30/96 /1/ 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 36.27 $ 32.68 $ 34.42 $30.77 $28.67 $23.37
--------- --------- --------- ------- ------- -------
Income From Investment Operations:
Net investment income .99 1.69 1.73 1.53 1.44 1.37
Net realized and unrealized gain
(loss) on investments 1.54 3.69 (1.62) 3.76 2.33 5.39
--------- --------- --------- ------- ------- -------
Total income from investment operations 2.53 5.38 .11 5.29 3.77 6.76
--------- --------- --------- ------- ------- -------
Less Distributions:
Dividends from net investment income (.99) (1.69) (1.73) (1.53) (1.44) (1.46)
Distributions from net realized gains (.50) (.10) (.12) (.11) (.23) -
--------- --------- --------- ------- ------- -------
Total distributions (1.49) (1.79) (1.85) (1.64) (1.67) (1.46)
--------- --------- --------- ------- ------- -------
Net Asset Value, End of Period $ 37.31 $ 36.27 $ 32.68 $34.42 $30.77 $28.67
========= ========= ========= ======= ======= =======
Total Return /2/ 7.05% /3/ 16.98% .47% 17.58% 13.46% 29.27%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $4,991 $4,533 $3,629 $2,826 $1,203 $563
Ratio of expenses to average net assets .36% /3/ .72% .73% .72% .81% .98%
Ratio of net income to average net assets 2.67% /3/ 4.96% 5.29% 4.69% 4.71% 5.09%
Average commissions paid per share /1/ /4/ 2.24 cents2.10 cents3.63 cents2.90 cent2.48 cent5.32 cents
Portfolio turnover rate 7.54% /3/ 18.06% 36.19% 11.22% 16.57% 13.99%
/1/ Unaudited
/2/ Calculated without deducting a sales
charge. The maximum sales charge is 5.75% of
the fund's offering price.
/3/ Based on operations for the period indicated
and, accordingly, not representative of a full
year's operations.
/4/ Brokerage commissions paid on portfolio
transfactions increase the cost of securities
purchased or reduce the proceeds of securities
sold, and are not reflected in the fund's
statement of operations. Shares traded on a
principal basis, such as most over-the-counter
and fixed-income transactions, are excluded. Generally,
non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share
but higher when expressed as a percentage of
transactions because of the lower per-share
prices of many non-U.S. securities.
</TABLE>
Capital Income Builder
Board of Directors
H. Frederick Christie
Rolling Hills Estates, California
Private investor; former President and
Chief Executive Officer, The Mission Group;
former President, Southern California
Edison Company
Paul G. Haaga, Jr., Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
Mary Myers Kauppila, Boston, Massachusetts
Founder and President, Energy Investment, Inc.
Jon B. Lovelace, Los Angeles, California
Chairman of the Board of the fund
Vice Chairman of the Board and
Chairman of the Executive Committee,
Capital Research and Management Company
Gail L. Neale, Middlebury, Vermont
Executive Vice President of the Salzburg Seminar;
former Director of Development and of the Capital Campaign, Hampshire College
Robert J. O'Neill, Ph.D., Oxford, England
Professor and Fellow, All Souls College, University of Oxford
Donald E. Petersen, Birmingham, Michigan
Retired; former Chairman of the Board and Chief Executive Officer, Ford Motor
Company
Stefanie Powers, Beverly Hills, California
Actor; Founder and President,
The William Holden Wildlife Foundation
Frank Stanton, New York, New York
President Emeritus, CBS Inc.
Charles Wolf, Jr., Ph.D.
Santa Monica, California
Dean, The RAND Graduate School;
Senior Economic Adviser,
The Rand Corporation
Officers
James B. Lovelace, Los Angeles, California
Executive Vice President of the fund
Vice President,
Capital Research and Management Company
Larry P. Clemmensen, Los Angeles, California
Senior Vice President of the fund President and Director,
The Capital Group Companies, Inc.
Senior Vice President and Director,
Capital Research and Management Company
Janet A. McKinley, New York, New York
Senior Vice President of the fund
Senior Vice President,
Capital Research Company
Catherine M. Ward, Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
Joyce E. Gordon, Los Angeles, California
Vice President of the fund
Senior Vice President and Director,
Capital Research Company
Darcy B. Kopcho, Los Angeles, California
Vice President of the fund
Vice President and Director,
Capital Research Company
Vincent P. Corti, Los Angeles, California
Secretary of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
R. Marcia Gould, Brea, California
Treasurer of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
Offices of the fund and of the investment adviser,
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
Transfer agent for shareholder accounts
American Funds Service Company
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
Custodian of assets
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
Counsel
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
This report is for the information of shareholders of Capital Income Builder,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
June 30, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
[The American Funds Group (R)]
Litho in USA TAG/GRS/2992
Lit. No. CIB-013-0696
