CAPITAL INCOME BUILDER
SEMI-ANNUAL REPORT
For the six months ended April 30, 1997
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.
[Logo: Capital Income Builder(r)]
[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, 1997 (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: +193.99%, or +11.80% a year; 5 years: +78.61%, or +12.30% a year; 12
months: +10.37%. Sales charges are lower for accounts of $50,000 or more. The
fund's 30-day yield as of May 31, 1997, calculated in accordance with the
Securities and Exchange Commission formula, was 3.80%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE 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.
[Logo: Capital Income Builder (r)]
FELLOW INVESTORS:
In June 1997, Capital Income Builder's dividend was increased by 0.5 cents to
47 cents a share. CIB has continued to achieve what it set out to do when the
fund began in July 1987: to provide current income above that paid by stocks
generally and to build growing income which will outpace inflation over the
long term.
If, like most of our shareholders, you reinvested the fund's capital gain
distribution of 73 cents a share paid in December 1996, the June dividend
represents an increase of 5.1% over the dividend paid a year ago. Your June
dividend is 76.4% higher than the first full-quarter payment of 28 cents in
December 1987, also with capital gains reinvested. The dividend increases alone
- - not counting the increased value of the stocks and other investments in CIB's
portfolio - far outpaced the 38.9% increase in the Consumer Price Index during
the period October 31, 1987 through April 30, 1997. The benefit of reinvesting
and our steady quarterly progress are shown below.
CIB'S QUARTERLY DIVIDENDS COMPARED WITH INFLATION
Dividends as Declared and as Adjusted for Reinvested Capital Gains (cents per
share)
[bar chart]
(Index: December 1987 = 100)
<TABLE>
<CAPTION>
Additional income earned
on initial shares if the
capital gain distributions Inflation=
paid in December 1991, 1992, Consumer Price
1993, 1994, 1995 and 1996 Index (through
Fiscal Quarters Dividend were reinvested March 1997)
<S> <C> <C> <C>
4 Aug-Oct 1987 22* - -
1 Nov-Jan 1988 28 - 100
2 Feb-Apr 1988 28.5 - 101
3 May-Jul 1988 29 - 102.3
4 Aug-Oct 1988 29.5 - 103.8
1 Nov-Jan 1989 30 - 104.4
2 Feb-Apr 1989 30.5 - 106
3 May-Jul 1989 31 - 107.5
4 Aug-Oct 1989 31.5 - 108.3
1 Nov-Jan 1990 32.5 - 109.3
2 Feb-Apr 1990 33 - 111.5
3 May-Jul 1990 33.5 - 112.6
4 Aug-Oct 1990 34 - 115
1 Nov-Jan 1991 34.5 - 115.9
2 Feb-Apr 1991 35 - 117
3 May-Jul 1991 35.5 - 117.9
4 Aug-Oct 1991 36 - 118.9
1 Nov-Jan 1992 36.5 - 119.5
2 Feb-Apr 1992 37 .3 120.7
3 May-Jul 1992 37.5 .3 121.5
4 Aug-Oct 1992 38 .3 122.4
1 Nov-Jan 1993 38.5 .3 123
2 Feb-Apr 1993 39 .5 124.4
3 May-Jul 1993 39.5 .5 125.1
4 Aug-Oct 1993 40 .5 125.7
1 Nov-Jan 1994 40.5 .5 126.3
2 Feb-Apr 1994 41 .6 127.6
3 May-Jul 1994 41.5 .6 128.2
4 Aug-Oct 1994 42 .6 129.5
1 Nov-Jan 1995 42.5 .6 129.7
2 Feb-Apr 1995 43 .8 131.2
3 May-Jul 1995 43.5 .8 132.1
4 Aug-Oct 1995 44 .8 132.8
1 Nov-Jan 1996 44.5 .8 133
2 Feb-Apr 1996 45 1.4 134.9
3 May-Jul 1996 45.5 1.5 135.8
4 Aug-Oct 1996 46 1.5 136.7
1 Nov-Jan 1997 46.5 1.5 137.4
2 Feb-Apr 1997 46.5 2.4 138.6
3 May-Jul 1997 47 2.4
</TABLE>
* After less than a full quarter of operations
Fiscal Quarters:
1 Nov-Jan
2 Feb-Apr
3 May-Jul
4 Aug-Oct
CIB'S ABOVE-AVERAGE DIVIDEND RATE
Capital Income Builder has continued to provide an above-average dividend rate.
At the end of April 1997, the annual dividend rate of the unmanaged Standard &
Poor's 500 Stock Composite Index was 1.9%, while CIB's dividend rate was 4.4%
of net asset value.
CIB's regular dividend increases are maintained by the dividend growth of the
common stocks in the fund's portfolio. Of 85 stocks owned for the full 12
months through the end of April, 70 dividends were increased, 14 were unchanged
and only one was lowered. The median increase among the 70 stocks was 10.0%.
[BAR CHART]
CIB'S RESULTS COMPARED WITH GENERAL EQUITY MUTUAL FUNDS
For the period 7/31/87 to 4/30/97
General Equity Funds +188.11%*
CIB +225.84%
*Average for 485 general equity mutual funds
Total return as calculated by Lipper Analytical Services
Results do not reflect the effects of sales charges.
[END CHART]
INVESTING FOR THE LONG TERM
The success of the fund's long-term investment strategy is best illustrated by
its lifetime results. As shown in the chart at the right, since July 31, 1987,
CIB's total return (change in value with all dividends and distributions
reinvested) was 225.8% through April 30, 1997, compared with 188.1% for the
average of 485 general equity funds, according to Lipper Analytical Services.
As we have previously explained, CIB often lags the broader market averages in
strong up markets. During the six months ended April 30, the market focus was
on large, lower yielding U.S. companies, many of which were not appropriate for
CIB because they did not meet the fund's criteria of providing above-average
and growing income. For the six months, CIB had a total return of 9.4%,
compared with 14.7% for the S&P 500.
RESILIENCE IN DOWN MARKETS
CIB has continued to show resilience in down markets. In the recent period from
February 18 to April 11, for example, when the S&P 500 declined 9.6%, CIB's net
asset value was down only 5.1%.
CIB'S LARGEST HOLDINGS
Bank stocks continue to be the fund's largest industry concentration,
representing 19.1% of net assets at April 30. We remain positive on CIB's bank
holdings, which had an average yield of 3.4% at April 30 and estimated dividend
growth averaging 10.4% a year. Telecommunications investments are CIB's
second-largest concentration (9.7% of net assets). This remains an attractive
sector as privatizations continue and leading companies forge strategic global
partnerships. Our telecommunications holdings provided an average yield of 3.9%
and increased their dividends by an average of 14.3% over the past 12 months.
GROWTH IN NET ASSETS
We are encouraged that interest in our long-term investing approach continues
to grow. At April 30, fund assets stood at nearly $6.3 billion, up about 16%
from $5.4 billion on October 31, 1996, and the number of shareholder accounts
increased to 260,300 from 238,500. We thank you, our shareholders, for your
continued support.
[/S/ Jon B. Lovelace]
Jon B. Lovelace
Chairman of the Board
[/s/ Paul G. Haaga, Jr.]
Paul G. Haaga, Jr.
President
June 13, 1997
<TABLE>
CAPITAL INCOME BUILDER Unaudited
Investment Portfolio April 30, 1997
<S> <C> <C> <C>
Equity-Type
Securities Shares or Market Percent
Principal Value of Net
Energy Amount (Millions) Assets
- ---------------------------------------------- ------------- ----------- ----------
Energy Sources - 2.35%
Amoco Corp. 730,000 61.046 .97%
Atlantic Richfield Co. 150,000 20.419 .33
CalEnergy Capital Trust II, 6.25% convertible preferred
shares /1/ 130,000 7.150 .11
Chevron Corp. 800,000 54.800 .87
Phillips Petroleum Co. 650,000 25.594 .41
Royal Dutch Petroleum Co. (New York Registered
Shares) 220,000 39.655 .63
- ---------------------------------------------- ------------- ----------- ----------
Utilities: Electric & Gas - 5.53%
Australian Gas Light Co. 372,662 2.136 .03
Brooklyn Union Gas Co. 200,000 5.475 .09
Central and South West Corp. 1,650,000 33.206 .53
DTE Energy Co. 450,000 12.037 .19
GPU, Inc. 850,000 27.412 .44
Hongkong Electric Holdings Ltd. 10,231,500 36.192 .58
Long Island Lighting Co. 2,125,000 48.609 .78
National Grid Group PLC 10,323,000 37.464 .60
National Power PLC 4,205,000 36.428 .58
PECO Energy Co. 350,000 6.913 .11
PowerGen PLC 1,600,000 16.446 .26
Southern Electric PLC 11,779,015 83.724 1.34
------------- ----------- ----------
554.706 8.85
----------- ----------
Materials
- ---------------------------------------------- ------------- ----------- ----------
Chemicals - 0.17%
E.I. du Pont de Nemours and Co. 100,000 10.612 .17
- ---------------------------------------------- ------------- ----------- ----------
Forest Products & Paper - 0.93%
James River Corp. of Virginia, DECS convertible
preferred shares 375,000 10.406 .16
Potlatch Corp. 485,500 19.906 .32
Rayonier Inc. 90,600 3.658 .06
Union Camp Corp. 500,000 24.313 .39
------------- ----------- ----------
Metals: Nonferrous - 0.38%
Aluminum Co. of America 190,000 13.276 .21
USX Corp., DECS convertible preferred shares 500,000 10.375 .17
- ---------------------------------------------- ------------- ----------- ----------
92.546 1.48
----------- ----------
Consumer Goods
- ---------------------------------------------- ------------- ----------- ----------
Automobiles - 1.08%
Ford Motor Co., Class A 1,950,000 67.762 1.08
- ---------------------------------------------- ------------- ----------- ----------
Beverages & Tobacco - 2.60%
Philip Morris Companies Inc. 2,715,000 106.903 1.71
RJR Nabisco Holdings Corp. 700,000 20.825 .33
UST Inc. 1,350,000 35.269 .56
- ---------------------------------------------- ------------- ----------- ----------
Health & Personal Care - 3.74%
American Home Products Corp. 2,690,000 178.213 2.84
Bristol-Myers Squibb Co. 400,000 26.200 .42
Schering-Plough Corp. 130,000 10.400 .17
Warner-Lambert Co. 200,000 19.600 .31
----------- ----------
465.172 7.42
----------- ----------
Services
- ---------------------------------------------- ------------- ----------- ----------
Broadcasting & Publishing - 0.54%
Golden Books Family Entertainment, Inc., 8.75% convertible
TOPrS /1/ 100,000 4.750 .08
Reader's Digest Assn., Inc., Class A 300,000 6.900 .11
Time Warner Inc., 10.25% preferred, Series M 4,136 4.426 .07
Western Australia Newspapers 4,165,000 17.187 .28
- ---------------------------------------------- ------------- ----------- ----------
Business & Public Services - 5.20%
American Water Works Co., Inc. 1,661,200 35.301 .56
Autopistas del Mare Nostrum, SA Concesionaria del Estado 1,380,000 19.934 .32
Consumers Water Co. 229,000 3.693 .06
Hutchison Delta Finance Ltd., 7.00% convertible
debentures 2002 /1/ 11,000,000 12.012 .19
Hyder PLC 4,300,000 59.943 .96
Thames Water PLC 6,350,000 69.858 1.12
United Utilities PLC 11,294,309 124.435 1.99
- ---------------------------------------------- ------------- ----------- ----------
Leisure & Tourism - 0.37%
Host Marriott Financial Trust, 6.75% QUIPS convertible
preferred 2026 400,000 22.800 .37
- ---------------------------------------------- ------------- ----------- ----------
Merchandising - 0.60%
J.C. Penney Co., Inc. 789,500 37.699 .60
- ---------------------------------------------- ------------- ----------- ----------
Telecommunications - 9.67%
Ameritech Corp. 1,376,300 84.126 1.34
Hong Kong Telecommunications Ltd. 5,950,887 10.218
Hong Kong Telecommunications Ltd. (American
Depositary Receipts) 2,323,004 39.781 .80
Koninklijke PTT Nederland NV 1,259,700 44.751 .72
Portugal Telecom, SA 2,286,000 84.250 1.34
SBC Communications Inc. (Formerly Pacific Telesis Group) 914,312 50.744 .81
Telecom Corp. of New Zealand Ltd. 15,784,160 70.721
Telecom Corp. of New Zealand Ltd. /1/ 8,380,000 37.546 1.73
Telecom Corp. of New Zealand Ltd. (American
Depositary Receipts) 25,000 0.900
Telecom Italia SpA 31,400,000 67.952 1.08
Telefonica de Espana, SA 3,580,000 91.785 1.46
U S WEST Communications Group 704,707 24.753 .39
- ---------------------------------------------- ------------- ----------- ----------
1,026.465 16.38
----------- ----------
Finance
- ---------------------------------------------- ------------- ----------- ----------
Banking - 19.11%
AmSouth Bancorporation 800,000 42.200 .67
Banc One Corp. 2,300,000 97.462 1.55
Bank of Nova Scotia 1,843,000 70.047 1.12
Barclays PLC 3,500,000 65.244 1.04
Central Fidelity Banks, Inc. 2,062,500 57.234 .91
Chase Manhattan Corp. 400,000 37.050 .59
Comerica Inc. 600,000 35.100 .56
CoreStates Financial Corp 1,800,000 91.125 1.46
First Chicago NBD Corp. 1,210,000 68.062 1.09
First Hawaiian Bank 400,000 12.300 .20
First Security Corp. (Utah) 1,637,500 58.336 .93
First Union Corp. 967,500 81.270 1.30
HSBC Holdings PLC 999,800 25.298 .40
Huntington Bancshares Inc. 1,674,750 47.940 .77
KeyCorp 1,035,000 53.949 .86
Keystone Financial, Inc. 827,550 21.103 .34
J.P Morgan & Co. Inc. 180,000 18.337 .29
National Australia Bank Ltd. 2,480,654 33.953 .54
National City Corp. 800,000 39.000 .62
Old Kent Financial Corp. 551,250 27.976 .45
PNC Bank Corp. 800,000 32.900 .52
Royal Bank of Canada 1,715,000 68.622 1.09
Wachovia Corp. 600,000 35.100 .56
Westpac Banking Corp. 6,950,000 37.454 .60
Wilmington Trust Corp. 950,000 40.850 .65
- ---------------------------------------------- ------------- ----------- ----------
Financial Services - 0.46%
Beneficial Corp. 340,000 21.760 .35
Manhattan Card Co. Ltd. 23,200,000 7.188 .11
- ---------------------------------------------- ------------- ----------- ----------
Insurance - 2.63%
American General Corp. 160,000 6.980 .11
HIH Winterthur International Holdings Ltd. 9,641,441 22.483 .36
Lincoln National Corp. 1,230,000 68.880 1.10
Ohio Casualty Corp. 717,500 27.893 .44
Prudential Corp. PLC 3,557,546 34.689 .55
SAFECO Corp. 100,000 4.000 .07
- ---------------------------------------------- ------------- ----------- ----------
Real Estate - 4.68%
Bradley Real Estate, Inc. 1,045,000 19.986 .32
CarrAmerica Realty Corp. 1,844,800 51.424 .82
Pacific Retail Trust /1/ /3/ 1,909,090 21.000 .34
Security Capital Atlantic, Inc. 400,000 8.600
Security Capital Atlantic, Inc. /1/ /3/ 1,391,303 29.913 .62
Security Capital Industrial Trust 1,091,855 21.974 .35
Security Capital Pacific Trust 3,094,360 70.397 1.12
Security Capital Realty Inc. /1/ /2/ /3/ 24,900 30.316
Security Capital Realty Inc. 12.00% .83
convertible debentures 2014 /1/ /3/ 18,862,000 21.955
Washington Real Estate Investment Trust 145,500 2.583 .04
Weingarten Realty Investors 300,000 12.788 .20
Western Investment Real Estate Trust 196,200 2.477 .04
----------- ----------
1,685.198 26.88
----------- ----------
Multi-Industry & Miscellaneous
- ---------------------------------------------- ------------- ----------- ----------
Multi-Industry - 1.44%
B A T Industries PLC 7,125,597 60.283 .96
Hutchison Whampoa Ltd. 1,960,000 14.549 .23
Lend Lease Corp. Ltd. 683,559 13.083 .21
Thermo Instrument Systems Inc., 4.50% convertible
debentures 2003 /1/ 3,000,000 2.895 .04
- ---------------------------------------------- ------------- ----------- ----------
Miscellaneous - 2.32%
Equity-type securities in initial period of
acquisition 1,608,800 145.250 2.32
----------- ----------
236.060 3.76
----------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost:
$2,858.459 million) 4,060.147 64.77
----------- ----------
Principal
Bonds and Notes Amount
- ---------------------------------------------- ------------- ----------- ----------
Corporate
- ---------------------------------------------- ------------- ----------- ----------
Airplanes Pass Through Trust, pass-through certificates,
Class C, 8.15% 2019 /4/ 5,000,000 5.119 .08
Allegiance Corp. 7.80% 2016 3,000,000 2.964 .05
AnnTaylor, Inc. 8.75% 2000 4,802,000 4.706 .08
Boyd Gaming Corp. 9.25% 2003 1,250,000 1.206 .02
California Energy Co., Inc. 10.25% 2004 4,300,000 4.579 .07
Camden Property Trust 7.00% 2006 5,000,000 4.803 .08
Columbia Gas System, Inc., Series G, 7.62% 2025 3,000,000 2.859
Columbia Gas System, Inc., Series C, 6.80% 2005 2,000,000 1.931 .08
Consumers International 10.25% 2005 /1/ 5,000,000 5.188 .08
Container Corp. of America 9.75% 2003 4,985,000 5.135 .08
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class C-1, 7.42% 2008 /1/ /4/ 3,000,000 2.994 .05
Delta Air Lines, Inc., 1991 Equipment
Certificates Trust, Series K, 10.00% 2014 /1/ 2,000,000 2.289 .04
Falcon Drilling Company, Inc., Series B, 9.75% 2001 2,750,000 2.805
Falcon Drilling Company, Inc., Series B, 8.875% 2003 4,000,000 3.960 .11
FIRSTPLUS Home Loan Owner Trust 1997-1, Class A-6,
6.95% 2015 /4/ 4,000,000 3.924 .06
Fort Howard Corp. 9.00% 2006 1,500,000 1.523
Fort Howard Corp. 8.25% 2002 3,000,000 2.955 .07
Freeport-McMoRan Copper & Gold Inc. 7.50% 2006 2,000,000 1.959
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 2,000,000 1.954 .06
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
2015 /1/ 5,000,000 5.548 .09
Lloyds Trustee Savings Banking Group 8.50% 2006 pounds3,000,000 4.938 .08
Long Island Lighting Co. 8.90% 2019 10,000,000 10.360
Long Island Lighting Co. 7.30% 1999 23,000,000 23.142 .54
McDermott Inc. 9.375% 2002 6,000,000 6.075
J. Ray McDermott, SA 9.375% 2006 8,000,000 7.920 .23
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 3,417,906 3.657 .06
Millennium America Inc. 7.00% 2006 15,575,000 14.900 .24
News America Holdings Inc. 9.25% 2013 2,000,000 2.170
News America Holdings Inc. 9.125% 1999 3,000,000 3.158 .12
News America Holdings Inc. 8.625% 2003 2,000,000 2.115
Northwest Airlines, Inc. 8.70% 2007 5,000,000 4.954 .08
Occidental Petroleum Corp. 8.50% 2004 8,000,000 8.222 .13
Parker & Parsley Petroleum Co. 8.25% 2007 5,000,000 5.171 .08
The Price REIT, Inc. 7.50% 2006 4,000,000 3.979 .06
Riggs National Corp. 8.50% 2006 2,600,000 2.626 .04
Rite Aid Corp. 7.125% 2007 5,000,000 4.926 .08
Rykoff-Sexton, Inc. 8.875% 2003 4,500,000 4.275 .07
Security Capital Industrial Trust 7.81% 2015 2,000,000 1.984 .03
Security Capital Pacific Trust 7.25% 2004 5,000,000 4.963 .08
Shopping Center Associates 6.75% 2004 /1/ 3,000,000 2.902 .05
Tenet Healthcare Corp. 8.625% 2007 1,000,000 0.995 .01
Time Warner Inc. 10.15% 2012 5,000,000 5.933
Time Warner Inc. 7.45% 1998 4,000,000 4.022 .15
TKR Cable I, Inc. 10.50% 2007 7,000,000 7.623 .12
U S WEST Capital Funding, Inc. 7.30% 2007 10,500,000 10.328 .16
Wellsford Residential Property Trust 7.75% 2005 2,500,000 2.527 .04
WestPoint Stevens Inc. 8.75% 2001 2,000,000 2.030 .03
Woolworth Corp., Series A, 7.00% 2002 2,000,000 1.964
Woolworth Corp., Series A, 6.98% 2001 14,500,000 14.315 .26
----------- ----------
240.575 3.84
----------- ----------
Federal Agency Obligations: Mortgage Pass-Throughs /4/
- ----------------------------------------------
Federal Home Loan Mortgage Corp. 9.00% 2025 3,184,819 3.348 .05
Federal National Mortgage Assn. 7.50% 2024 2,973,207 2.951 .05
----------- ----------
6.299 .10
----------- ----------
Governments and Governmental Authorities
- ---------------------------------------------- ------------- ----------- ----------
Australian Government 10.00% October 2002 A$10,000,000 8.701
Australian Government 7.00% April 2000 A$5,000,000 3.924 .20
Canadian Government 9.75% December 2001 C$5,000,000 4.112
Canadian Government 9.00% December 2004 C$2,500,000 2.061 .20
Canadian Government 7.00% December 2006 C$9,000,000 6.618
Danish Government 8.00% May 2003 DKr22,000,000 3.704 .06
German Unity Fund 8.00% 2002 DM25,000,000 16.382 .26
International Bank for Reconstruction and Development
4.75% 2004 Yen450,000,000 4.157
International Bank for Reconstruction and Development
4.50% 2003 Yen350,000,000 3.144 .12
Irish Government 6.25% October 2004 IRpounds1,250,000 1.862
Irish Government 8.00% August 2006 IRpounds8,750,000 14.254 .26
New Zealand Government 8.00% July 1998 NZ$40,000,000 27.922 .44
Poland (Republic of) Past Due Interest Bond 4.00% October
2014 US$5,000,000 4.075 .07
Spanish Government 8.80% April 2006 Pta600,000,000 4.658
Spanish Government 8.40% April 2001 Pta600,000,000 4.475 .14
Swedish Government 10.25% May 2003 SKR24,000,000 3.606 .06
Treuhandanstalt 7.125% January 2003 DM27,000,000 17.150 .27
United Kingdom 8.50% December 2005 pounds2,750,000 4.756 .08
----------- ----------
135.561 2.16
----------- ----------
U.S. Treasury Notes
- ---------------------------------------------- ------------- ----------- ----------
5.875% October 1998 90,000,000 89.620 1.43
8.875% February 1999 14,000,000 14.617 .23
5.875% March 1999 90,000,000 89.396 1.43
5.875% November 1999 90,000,000 88.917 1.42
6.125% September 2000 30,000,000 29.676 .47
8.00% May 2001 19,500,000 20.505 .33
6.125% December 2001 10,900,000 10.711 .17
----------- ----------
343.442 5.48
----------- ----------
TOTAL BONDS AND NOTES (cost: $729.937 million) 725.877 11.58
----------- ----------
TOTAL INVESTMENT SECURITIES (cost: $3,588.396
million) 4,786.024 76.35
----------- ----------
SHORT-TERM SECURITIES
- ---------------------------------------------- ------------- ----------- ----------
Corporate Short-Term Notes
- ---------------------------------------------- ------------- ----------- ----------
AIG Funding Inc. 5.48%-5.53% due 5/14-5/29/97 41,800,000 41.640 .67
American Brands Inc. 5.26%-5.52% due 5/1-5/19/97 20,000,000 19.970 .32
Ameritech Corp. 5.50%-5.505% due 5/9-6/19/97 50,000,000 49.755 .79
Avco Financial Services Inc. 5.25%-5.61% due 5/28-7/24/97 28,700,000 28.484 .45
Coca-Cola Co. 5.50%-5.52% due 5/1-6/2/97 62,900,000 62.705 1.00
John Deere Capital Corp. 5.25%-5.55% due 5/7-6/11/97 39,400,000 39.308 .63
E.I. du Pont de Nemours and Co. 5.38%-5.50% due
5/9-6/25/97 75,000,000 74.595 1.19
Ford Motor Credit Co. 5.55% due 5/30-6/18/97 42,400,000 42.124 .67
General Electric Capital Corp. 5.55%-5.56% due
6/24-6/26/97 44,400,000 44.014 .70
IBM Credit Corp. 5.24%-5.58% due 5/5-7/1/97 66,100,000 65.831 1.05
International Lease Finance Corp. 5.25%-5.57% due
5/2-6/13/97 66,000,000 65.893 1.05
Lucent Technologies Inc. 5.51%-5.56% due 5/23-6/20/97 67,200,000 66.833 1.07
Monsanto Co. 5.25%-5.63% due 5/19-6/23/97 75,700,000 75.194 1.20
J.C. Penney Funding Corp. 5.29%-5.30% due 5/14-5/21/97 /1/ 30,200,000 30.115 .48
PepsiCo, Inc. 5.50% due 5/13-5/27/97 50,000,000 49.869 .80
Pitney Bowes Credit Corp. 5.35%-5.53% due 5/23-6/17/97 36,600,000 36.406 .58
Procter & Gamble Co. 5.30%-5.51% due 6/3-6/9/97 49,300,000 49.029 .78
Warner-Lambert Co. 5.30%-5.54% due 6/2-6/27/97 /1/ 42,995,000 42.727 .68
Weyerhaeuser Co. 5.35%-5.55% due 5/21-6/19/97 60,000,000 59.719 .95
----------- ----------
944.211 15.06
----------- ----------
Federal Agency Discount Notes
- ---------------------------------------------- ------------- ----------- ----------
Federal Home Loan Banks 5.21%-5.42% due 5/8-5/29/97 104,200,000 103.799 1.66
Federal Home Loan Mortgage Corp. 5.185%-5.47% due
5/9-6/30/97 130,575,000 129.918 2.07
Federal National Mortgage Assn. 5.18%-5.51% due
5/7-7/24/97 144,300,000 143.382 2.29
----------- ----------
377.099 6.02
----------- ----------
U.S. Treasury Short-Term Notes
- ---------------------------------------------- ------------- ----------- ----------
5.625%-6.375% due 6/30/97-1/31/98 168,000,000 167.942 2.68
----------- ----------
TOTAL SHORT-TERM SECURITIES (cost: $1,488.377
million) 1,489.252 23.76
EXCESS OF PAYABLES OVER CASH AND RECEIVABLES 6.689 .11
----------- ----------
TOTAL SHORT-TERM SECURITIES, CASH AND
RECEIVABLES, NET OF PAYABLES 1,482.563 23.65
----------- ----------
NET ASSETS 6,268.587 100.00%
=========== ==========
/1/Purchased in a private placement transaction;
resale to the public may require registration
or sale only to qualified institutional buyers.
/2/Non-income-producing securities.
/3/Valued under procedures established by the Board of
Directors.
/4/Pass-through securities 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.
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital Income Builder Unaudited
Financial Statements
<S> <C> <C>
Statement of Assets and Liabilities
at April 30, 1997 (dollars in
millions)
Assets:
Investment securities at market (cost:$3,588.396) $4,786.024
Short-term securities (cost:$1,488.377) 1,489.252
Cash 2.262
Receivables for-
Sales of investments $ .080
Sales of fund's shares 11.816
Forward currency contracts 1.373
Dividends and accrued interest 29.942 43.211
------------ ------------
6,320.749
Liabilities:
Payables for-
Purchases of investments 9.894
Repurchases of fund's shares 3.428
Management services 1.467
Dividends payable 34.898
Accrued expenses 2.475 52.162
------------ ------------
Net Assets at April 30, 1997 - Equivalent to
$41.80 per share on 149,971,378 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 200,000,000 shares) $6,268.587
============
Statement of Operations
for the six months ended April 30, 1997
(dollars in millions)
Investment Income:
Income:
Dividends $72.785
Interest 61.936 $134.721
------------
Expenses:
Management services fee 9.297
Distribution expenses 6.906
Transfer agent fee 1.703
Reports to shareholders .318
Registration statement and prospectus .361
Postage, stationery and supplies .333
Directors' fees .063
Auditing and legal fees .047
Custodian fee .554
Taxes other than federal income tax .078
Other expenses .092 19.752
------------ ------------
Net investment income 114.969
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 203.628
Net increase in unrealized appreciation on investments: 197.251
------------
Net realized gain and increase in unrealized
appreciation on investments 400.879
------------
Net Increase in Net Assets Resulting from Operations $515.848
============
See Notes to Financial Statements
Statement of Changes in Net Assets Six months Year
(dollars in millions) ended ended
4/30/97* 10/31/96
------------ ------------
Operations:
Net investment income $ 114.969 $ 257.878
Net realized gain on investments 203.628 87.347
Net increase in unrealized appreciation on investments 197.251 431.666
------------ ------------
Net increase in net assets resulting from
operations 515.848 776.891
------------ ------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (123.464) (257.053)
Distributions from net realized gain on investments (99.910) (62.913)
------------ ------------
Total dividends and distributions (223.374) (319.966)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold: 16,001,484 and
20,891,053 shares, respectively 663.576 782.282
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 4,844,319 and
6,760,213 shares, respectively 198.643 251.534
Cost of shares repurchased: 7,344,189 and 16,175,451
shares, respectively (303.819) (606.384)
------------ ------------
Net increase in net assets resulting from capital
share transactions 558.400 427.432
------------ ------------
Total Increase in Net Assets 850.874 884.357
Net Assets:
Beginning of period 5,417.713 4,533.356
------------ ------------
End of period (including undistributed net investment
income: $(6.267) and $2.228, respectively) $6,268.587 $5,417.713
============ ============
* Unaudited
See Notes to Financial Statements
</TABLE>
CAPITAL INCOME BUILDER
Notes to Financial Statements Unaudited
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 prices for securities of comparable
maturity, quality, and type. Securities denominated in non-U.S. currencies are
generally valued on the basis of bid quotations. Short-term securities with
original or remaining maturities in excess of 60 days, including forward
currency contracts, 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 by the Board of
Directors or a committee thereof.
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. The fund
does not amortize premiums on securities purchased. Amortization of market
discounts on securities is recognized upon disposition, subject to applicable
tax requirements. Dividends to shareholders are declared daily from net
investment income. Distributions paid to shareholders are recorded on the
ex-dividend date.
Investment securities and other assets and liabilities, including forward
currency contracts, 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 effects of changes in foreign currency exchange
rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities.
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 $554,000 includes $28,000 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, 1997, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $1,198,503,000, of which $1,238,822,000 related to appreciated
securities and $40,319,000 related to depreciated securities. During the six
months ended April 30, 1997, the fund realized, on a tax basis, a net capital
gain of $200,512,000 on securities transactions. Net gains related to non-U.S.
currency transactions of $3,363,000 were treated as ordinary income for federal
income tax purposes. The cost of portfolio securities, excluding forward
currency contracts, for book and federal income tax purposes was $5,076,773,000
at April 30, 1997.
3. The fee of $9,297,000 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,
1997, distribution expenses under the Plan were $6,906,000. As of April 30,
1997, accrued and unpaid distribution expenses were $2,087,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,703,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $3,273,000 (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, 1997
aggregate amounts deferred and earnings thereon were $194,000.
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, 1997, accumulated undistributed net realized gain on
investments was $183,408,000 and additional paid-in capital was $4,891,864,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,132,166,000 and $755,536,000, respectively, during
the six months ended April 30, 1997.
Dividend and interest income is recorded net of non-U.S. taxes paid. For
the six months ended April 30, 1997, such non-U.S. taxes were $2,842,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes were $1,820,000 for the six months ended
April 30, 1997.
The fund may enter into forward currency contracts, which represent an
agreement to exchange currencies of different countries at a specified future
date at a specified rate. The fund enters into these contracts to reduce its
exposure to fluctuations in foreign exchange rates arising from investments
denominated in non-U.S. currencies. The fund's use of forward currency
contracts involves market risk in excess of the amount recognized in the
statement of assets and liabilities. The contracts are recorded in the
statement of assets and liabilities at their net unrealized value. The face or
contract amount in U.S. dollars reflects the total exposure the fund has in
that particular contract. Losses may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from possible movements in non-U.S. exchange rates and securities values
underlying these instruments. At April 30, 1997, the fund had outstanding
forward currency contracts to sell non-U.S. currencies as follows:
<TABLE>
<CAPTION>
Contract Amount U.S. Valuation at 4/30/97
NON-U.S. CURRENCY Unrealized
SALE CONTRACTS Non-U.S. U.S. Amount Appreciation
<S> <C> <C> <C> <C>
British Pounds expiring 5,903,000 pounds $9,608,184 $9,578,984 $29,200
5/12/97 to 7/10/97
Canadian Dollars C$8,146,000 5,900,000 5,863,454 36,546
expiring 7/10/97
Danish Kroner DKr24,330,000 3,849,684 3,707,055 142,629
expiring 7/7/97
German Marks expiring DM42,656,000 25,501,255 24,761,817 739,438
7/7/97 to 7/24/97
Japanese Yen expiring Yen883,177,000 7,462,227 7,113,538 348,689
8/4/97 to 11/12/97
Swedish Kronor SKR28,900,000 3,782,227 3,705,488 76,739
expiring 7/28/97
</TABLE>
<TABLE>
Per-Share Data and Ratios
Six months Year ended October 31
ended
4/30/97 /1/ 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $39.70 $36.27 $32.68 $34.42 $30.77 $28.67
--------- - --------- - --------- - --------- - ------- -------
Income From Investment Operations:
Net investment income .80 1.95 1.69 1.73 1.53 1.44
Net realized and unrealized gain
(loss) on investments 2.89 3.92 3.69 (1.62) 3.76 2.33
--------- --------- --------- --------- ------- -------
Total income from investment operations 3.69 5.87 5.38 .11 5.29 3.77
--------- --------- --------- --------- ------- -------
Less Distributions:
Dividends from net investment income (.86) (1.94) (1.69) (1.73) (1.53) (1.44)
Distributions from net realized gains (.73) (.50) (.10) (.12) (.11) (.23)
--------- --------- --------- --------- ------- -------
Total distributions (1.59) (2.44) (1.79) (1.85) (1.64) (1.67)
--------- --------- --------- --------- ------- -------
Net Asset Value, End of Period $41.80 $39.70 $36.27 $32.68 $34.42 $30.77
========= ========= ========= ========= ======= =======
Total Return /2/ 9.39% /3/ 16.76% 16.98% .47% 17.58% 13.46%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $6,269 $5,418 $4,533 $3,629 $2,826 $1,203
Ratio of expenses to average net assets .33% /3/ .71% .72% .73% .72% .81%
Ratio of net income to average net assets 1.94% /3/ 5.19% 4.96% 5.29% 4.69% 4.71%
Average commissions paid per share /4/ 2.41 c 2.20c 2.10c 3.63c 2.90c 2.48c
Portfolio turnover rate 16.27% /3/ 27.56% 18.06% 36.19% 11.22% 16.57%
/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 shown
and, accordingly, not representative of a full
year's operations.
/4/Brokerage commissions paid on portfolio
transactions increase the cost of securities
purchased or reduce the proceeds of securities
sold and are not separately reflected
in the fund's statement of operations.
Shares traded on a principal basis (without
commissions), such as most over-the-counter
and fixed-income transactions, are excluded.
Generally, non-U.S. commissions are lower
than U.S. commissions when expressed
as cents per share but higher when expressed
as a percentage of transactions because of the
lower per-share prices of many non-U.S.
securities.
</TABLE>
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
Executive 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,
Capital Research and Management Company
Gail L. Neale
Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of the Salzburg Seminar; former Director of
Development and of the Capital Campaign, Hampshire College
Robert J. O'Neill, Ph.D.
Oxford, England
Professor and Fellow, All Souls College, University of Oxford
Donald E. Petersen
Birmingham, Michigan
Retired; former Chairman of the Board and Chief Executive Officer, Ford Motor
Company
Frank Stanton
New York, New York
President Emeritus, CBS Inc.
Charles Wolf, Jr., Ph.D.
Santa Monica, California
Dean, The RAND Graduate School;
Senior Economic Adviser,
The RAND Corporation
Officers
Larry P. Clemmensen
Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
James B. Lovelace
Los Angeles, California
Executive Vice President of the fund
Vice President,
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,
Capital Research Company
Darcy B. Kopcho
Geneva, Switzerland
Vice President of the fund
Vice President,
Capital Research Company
Vincent P. Corti
Los Angeles, California
Secretary of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
R. Marcia Gould
Brea, California
Treasurer of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
Diana J. Prohoroff
Brea, California
Assistant Treasurer of the fund
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180, OR VISIT WWW.AMERICANFUNDS.COM ON THE
WORLD WIDE WEB.
This report is for the information of shareholders of Capital 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, 1997, 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/3430
Lit. No. CIB-013-0697
