CAPITAL INCOME BUILDER
ANNUAL REPORT 1996
For the year ended October 31
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)]
[Logo: Capital Income Builder]
The reason CIB has been able to provide growing income in a low-yield market
lies in our careful selection of companies.
We believe that research is necessary to reveal value. The fund is currently
invested heavily in banking stocks in the U.S. and elsewhere and in
telecommunications companies around the world.
We often find more reasonable valuations and higher dividend prospects outside
the United States. The fund currently has more than 21% of its equities in
non-U.S. securities.
CIB'S EQUITY HOLDINGS SHOWING LARGEST INDUSTRIES BY COUNTRY
<TABLE>
<CAPTION>
Europe
(except New Hong
U.S. U.K. U.K.) Zealand Kong Canada Australia Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Banking 17.71% 1.01% - - - 1.84% 1.13% 21.69%
Telecommunications 4.03 - 3.58% 2.33% .47% - - 10.41
Utilities: Electric & Gas 3.09 2.60 - - .60 - .04 6.33
Health & Personal Care 5.74 - - - - - - 5.74
Business & Public Services .99 3.60 .42 - .22 - - 5.23
Five Largest Industries 31.56 7.21 4.00 2.33 1.29 1.84 1.17 49.40
Other Industries 15.78 1.56 .80 - 1.02 - .15 19.31
Total Equities 47.34% 8.77% 4.80% 2.33% 2.31% 1.84% 1.32% 68.71%
</TABLE>
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the fund's average annual compound returns with
all distributions reinvested as of September 30, 1996, assuming payment of the
5.75% maximum sales charge at the beginning of the stated periods: Since
inception on July 30, 1987: +11.21% a year; 5 years: +10.85% a year; 12 months:
+6.88%. The fund's 30-day SEC yield as of November 30, 1996 was 3.68%. 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:
We are pleased to announce that over the fiscal year ended October 31, Capital
Income Builder(R) continued to meet its very clear goals. From the outset, they
have been to provide current income above that paid by U.S. stocks generally
and to provide growing income that will outpace inflation over the long term.
ABOVE-AVERAGE CURRENT INCOME
CIB's dividend return on net asset value at fiscal year-end was 4.8% after
expenses, more than double the 2.1% yield of the unmanaged Standard & Poor's
500 Stock Composite Index, which is at an all-time low in 70 years of S&P
recordkeeping. CIB was able to provide this dividend yield even though
dividends on common stocks have risen at a slower rate than both earnings and
stock prices over the past five calendar years. In addition, CIB's yield was
more than twice the 2.2% average yield of the 151 equity-income funds tracked
by Lipper Analytical Services.
GROWING INCOME
In December 1996, CIB's dividend was raised to 46.5 cents per share. This
payment was the fund's 37th consecutive quarterly increase since CIB began. The
December dividend is 66% higher than the first full-quarter payment of 28 cents
in December 1987, far outpacing the more than 37% rise in the Consumer Price
Index during the period. If you reinvested all the capital gain distributions,
the December dividend would be close to 6% higher than the dividend paid in
December 1995.
Of course, as we have noted in past reports, we cannot guarantee a dividend
increase every quarter without exception, but long-term dividend growth
continues to be one of our central goals.
[chart]
CIB'S QUARTERLY DIVIDENDS COMPARED WITH INFLATION
(cents per share)
(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 and 1995 were Index (through
Fiscal Quarters Dividend reinvested September 1996)
<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
</TABLE>
* After less than a full quarter of operations
[end chart]
In December 1996, you also received a per-share distribution from net realized
capital gains of 73 cents. These capital gains resulted from portfolio changes
over the past year as the rise in stock and bond prices continued. If you
reinvest the capital gain distribution, as the vast majority of our
shareholders do, it will mean that should the per-share dividend on income not
be increased in the March quarter, the income you receive would still rise. The
increase would be more than the amount of most previous quarterly increases
because of the greater number of shares you would hold.
To the best of our knowledge, CIB is still the only mutual fund with the
primary objective of providing above-average and growing income, and the only
fund with a record of such steady dividend growth.
RESULTS FOR THE LATEST YEAR
Despite periods of volatility, stock prices continued to rise broadly during
the fiscal year as a result of earnings growth and declining interest rates.
Because of our dividend-based approach, we did not participate in the more
speculative extremes of the up market. However, compared with the 7.6% decline
of the S&P 500 during May to July, CIB's net asset value was down only 2.3% -a
sign of resilience we will discuss later.
CIB's total return of 16.8% for the 12 months was less than the S&P 500's 24.1%
increase. As we have said in the past, CIB's approach of investing to provide
regular dividend increases means that at times we will lag the broad market.
This is particularly true when growth stocks which pay small or no dividends
are the favorites of investors. Such was the case in recent months.
As we have previously noted, our goals are to provide above-average income
which grows at least as much as the cost of living, to hold up in down markets
better than the stock market as a whole, and to participate in up markets.
It is also worth pointing out that although we provide the S&P 500 comparison,
it is not entirely relevant, both because of CIB's global focus (the S&P index
essentially calculates results for the largest U.S. stocks), and because most
of the stocks in the index do not meet CIB's criteria for dividend yield and
growth of dividends.
As a measure of our caution at current U.S. market levels, we have a slightly
higher percentage of CIB's assets in companies domiciled outside the United
States than a year ago (21.4% at fiscal year-end compared with 19.4% a year
earlier). We often find more reasonable valuations and higher dividend growth
prospects outside the United States. According to its prospectus, CIB can
invest up to 40% of its assets outside the U.S. We discuss some of our new and
existing international holdings in more detail on page 5.
PERSPECTIVE ON AVERAGE ANNUAL RETURNS OF COMMON STOCKS
Stock market results over the long term can help put the market's recent gains
in perspective. Over the 70 years for which S&P 500 results have been
calculated, the average annual compound return is close to 11%, but for some
shorter periods, it has been negative. From 1968 to 1974, for example, the
average annual compound return was about -2%. Such high S&P 500 rates of return
as 26.4% and 24.1% for the past two CIB fiscal years would therefore appear to
be very difficult to sustain.
[chart]
DIVIDENDS FOR CIB AND THE S&P 500 INDEX
(based on trailing 12-month periods)
CIB MOVING 12-MONTH DIVIDEND PAID ($ PER SHARE)
S&P 500 MOVING 12-MONTH DIVIDEND
<TABLE>
<CAPTION>
CIB with capital
Month S&P 500 CIB gains reinvested
<S> <C> <C> <C>
Sept. 1988 9.46 1.15
Dec. 1988 9.73 1.17
Mar. 1989 9.98 1.19
June 1989 10.30 1.21
Sept. 1989 10.67 1.23
Dec. 1989 11.05 1.255
Mar. 1990 11.32 1.28
June 1990 11.67 1.305
Sept. 1990 11.84 1.33
Dec. 1990 12.10 1.35
Mar. 1991 12.12 1.37
June 1991 12.15 1.39
Sept. 1991 12.28 1.41
Dec. 1991 12.20 1.43
Mar. 1992 12.32 1.45 1.453
June 1992 12.32 1.47 1.476
Sept. 1992 12.39 1.49 1.499
Dec. 1992 12.38 1.51 1.522
Mar. 1993 12.48 1.53 1.544
June 1993 12.52 1.55 1.566
Sept. 1993 12.52 1.57 1.588
Dec. 1993 12.58 1.59 1.610
Mar. 1994 12.71 1.61 1.631
June 1994 12.84 1.63 1.652
Sept. 1994 12.93 1.65 1.673
Dec. 1994 13.18 1.67 1.694
Mar. 1995 13.18 1.69 1.716
June 1995 13.37 1.71 1.738
Sept. 1995 13.58 1.73 1.760
Dec. 1995 13.79 1.75 1.782
Mar. 1996 14.10 1.77 1.808
June 1996 14.27 1.79 1.835
Sept. 1996 14.66 1.81 1.862
Dec. 1996 1.83 1.889
</TABLE>
[end chart]
DIVIDENDS AND OVERALL RETURN
In analyzing stock market returns, it is important to consider the often
overlooked contribution of reinvested dividends to total return. Reinvested
dividends have amounted to 45% of the average annual return for the S&P 500
stocks since 1926. Capital return, excluding dividends, has amounted to 5.9
percentage points, or 55%, of the S&P 500's 10.7% average annual return.
CIB'S LIFETIME RESULTS
Despite its emphasis on providing dividend growth and above-average income,
CIB's lifetime return is nearly equal to the return of the S&P 500, which has
no such objectives. Over its 9 1/4-year history, CIB's average annual compound
return is 12.2%, just a shade below the 12.4% of the unmanaged S&P 500.
RESILIENCE IN DOWN MARKETS
Because of the above-average dividend yield of the companies in CIB's portfolio
and the generally reliable nature of those dividend-paying companies, CIB has
shown resilience in the two significant down markets in its lifetime:
- - In the period August 25 to December 4, 1987, which included the severe market
break of October 19, the S&P 500 declined 33.5%. CIB's net asset value was down
only 11.2%.
- - In the decline of July 16 to October 11, 1990, which was caused by the Gulf
War, the S&P 500 was down 19.9%, while CIB's net asset value declined only 9.6%
DIVIDEND GROWTH AND PORTFOLIO SELECTION
The reason CIB has been able to provide growing income in a low-yield market
lies in our careful selection of companies. We concentrate on investing in
companies whose dividends we believe will be increased or maintained.
It is increasingly difficult to find companies which combine
better-than-average income with better-than-average growth prospects. As a
result, CIB invests in a mix of different kinds of companies since no one type
is likely to meet the fund's goals completely. Often, the income provided by
the fund's sizable ownership of bonds and high-yielding, low-growth stocks
enables CIB to invest in other lower-current-income stocks with considerable
growth potential.
To accomplish its goals, CIB invests in three main types of companies:
1. Companies providing high current income but not necessarily any dividend
growth;
2. Companies with yields of 3% to 4% and a moderate level of dividend growth;
3. Companies with yields above the 2% market average and prospects for rapid
dividend growth in the future.
DIVIDEND GROWTH AND CAPITAL APPRECIATION
CIB's focus on dividend growth, we believe, also leads over time to capital
appreciation. Companies which can produce a steadily growing stream of dividend
payments generally do so by achieving significant improvements in net earnings.
Sooner or later, the combination of superior earnings and dividend growth will
lead as well to a stock price that is superior to the market. Companies which
pay good dividends and continue to increase them over the years usually have
another desirable attribute: They tend to have managements which are strongly
shareholder-oriented.
[chart]
CIB'S RESULTS COMPARED WITH
GENERAL EQUITY MUTUAL FUNDS
For the period 7/31/87 to 10/31/96
General Equity Funds +171.57%*
CIB +197.94%
*Average for 492 general equity mutual funds
Total return as calculated by Lipper Analytical Services
Results do not reflect the effects of sales charges.
[end chart]
CIB'S CURRENT PORTFOLIO
We believe that even in high-priced markets, intensive research can reveal
value. The BANKING sector, which increased to 21.7% of our net assets from
15.3% a year ago, provides a number of opportunities. Banks generate sizable
free cash flow, potentially available to shareholders in the form of dividend
increases and share buybacks. Despite some appreciation, we believe bank stocks
continue to offer good investment values.
Another positive aspect of the banking industry is the consolidation trend.
Mergers and acquisitions continue as operating economies encourage the more
than 10,000 U.S. banks (down from 14,000 ten years ago) to reduce their numbers
even more.
Some banking developments in the portfolio:
- - CoreStates Financial, owned since February 1994 and one of two bank stocks
new to CIB's top 10 holdings, raised its dividend 23.5% in December 1995.
- - Boatmen's Bancshares, added in November 1995, agreed to be acquired by
NationsBank for 2.7 times book value and 15 times estimated 1997 net earnings
(as of the August 30, 1996 announcement date) - an event showing the merger
trend at work in CIB's portfolio.
While U.S. banks constitute nearly 18% of our banking holdings, another 4% is
invested in banks in Canada, Australia and the United Kingdom. These banks have
many of the positive aspects of the U.S. banking sector at lower market
valuations and several have shown strong dividend growth during CIB's fiscal
year. Barclays, owned since May 1996, increased its dividend 24.4%. Westpac,
owned since November 1994, raised its dividend 34.8% and National Australia
Bank, owned since May 1993, raised its dividend 8.9%.
GLOBAL TELECOMMUNICATIONS remains an attractive sector as the trend continues
toward privatization and strategic global partnerships between leading
companies.
An important factor in telecommunications, as in other privatized industries,
is the continued more favorable competitive environment overseas compared with
the United States.
Among our telecommunications holdings is Telecom New Zealand (the
second-largest CIB holding at 2.3% of net assets), which yields roughly 6%.
New telecommunications holdings include:
- - Portugal Telecom, with an opportunity to participate in potentially vigorous
growth in telecommunications revenues, is a strong cash producer with a growing
dividend.
- - Telecom Italia, with double-digit growth in earnings per share and a current
4.3% yield to U.S. investors, is an attractive investment at a modest
valuation. It also has strong cash flow with a growing dividend.
CURRENCY EXPOSURE AND GLOBAL RESEARCH
How other currencies react to the U.S. dollar can be an important factor in
investing outside the United States. We take account of currency conditions
when making investment decisions and continue to monitor those conditions while
a position is held. Capital Research and Management Company, CIB's investment
adviser, places great emphasis on global investment research with nine research
offices, including London, Geneva, Singapore, Hong Kong and Tokyo.
A LONG-TERM PERSPECTIVE
It seems clear to us that CIB's growth-of-dividends approach - with a dividend
yield more than double that of the S&P 500 - is working well to provide
above-average and growing income for our shareholders. Besides supplying
much-valued resilience in down markets, we believe CIB can continue to provide
rewarding and sustainable long-term results in all kinds of markets. We thank
you, our shareholders, for your support.
/s/ Jon B. Lovelace
Jon B. Lovelace
CHAIRMAN OF THE BOARD
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
PRESIDENT OF THE FUND
December 18, 1996
[chart]
CIB'S NET ASSETS
Annually at October 31
(in $ millions)
<TABLE>
<CAPTION>
CIB's
Net
Year Assets
<S> <C>
October 1987 53.269
October 1988 125.950
October 1989 194.866
October 1990 206.320
October 1991 563.039
October 1992 1,203.329
October 1993 2,826.097
October 1994 3,628.536
October 1995 4,533.356
October 1996 5,417.713
</TABLE>
[end chart]
[chart]
TOTAL RETURN RESULTS OF A $10,000 INVESTMENT
IN CIB* COMPARED WITH THE S&P 500**
(with all dividends and distributions reinvested)
<TABLE>
<CAPTION>
Date CIB S&P 500
<S> <C> <C>
July 30, 1987 $9,425 $10,000
October 31, 1987 8,929 7,970
October 31, 1988 10,029 9,163
October 31, 1989 11,689 11,573
October 31, 1990 11,502 10,701
October 31, 1991 14,858 14,283
October 31, 1992 16,893 15,711
October 31, 1993 19,897 18,052
October 31, 1994 19,936 18,739
October 31, 1995 23,367 23,692
October 31, 1996 27,409 29,397
</TABLE>
* Reflects payment of the maximum sales charge
of 5.75%. Sales charges are lower for accounts
of $50,000 or more.
**The Standard & Poor's 500 Index is unmanaged and
does not reflect the sales charges, commissions or
expenses.
Past results are not predictive of future results.
[end chart]
TOTAL RETURN RESULTS*
<TABLE>
<CAPTION>
Based on a $1,000
investment for periods
ended October 31, 1996
(with all dividends and Ending Total Annualized
distributions reinvested Balance Return Return
<S> <C> <C> <C>
One year from 11/1/95 $1,101 10.05% 10.05%
Two years from 11/1/94 1,287 28.73 13.46
Three years from 11/1/93 1,293 29.34 8.96
Four years from 11/1/92 1,521 52.06 11.05
Five years from 11/1/91 1,725 72.53 11.52
Six years from 11/1/90 2,230 122.99 14.30
Seven years from 11/1/89 2,193 119.27 11.87
Eight years from 11/1/88 2,560 155.96 12.47
Nine years from 11/1/87 2,874 187.42 12.45
Lifetime from 7/30/87 2,741 174.12 11.51
</TABLE>
*Calculated so as to reflect payment of
the maximum sales charge of 5.75%.
<PAGE>
<TABLE>
<S> <C> <C> <C>
CAPITAL INCOME BUILDER
Investment Portfolio October 31, 1996
Percent of
Largest Individual Holdings Net Assets
- -------------------------------------------------- ----------
American Home Products 3.44%
Telecom Corp. of New Zealand 2.33
Banc One
United Utilities
CoreStates Financial
Philip Morris 1.55
Comerica
Bristol-Myers Squibb 1.48
Chevron
Ameritech 1.35
Equity-Type
Securities Shares or Market Percent
Principal Value of Net
Energy Amount (Millions) Assets
- ---------------------------------------------- ------------- ----------- ----------
Energy Sources - 3.80%
Amoco Corp. 555,000 $42.041 .78
Atlantic Richfield Co. 135000 17.888 .33
Chevron Corp. 1165000 76.599 1.41
Phillips Petroleum Co. 650000 26.650 .49
Royal Dutch Petroleum Co. (New York Registered
Shares) 260000 42.998 .79
- ---------------------------------------------- ------------- ----------- ----------
Utilities: Electric & Gas - 6.33%
Australian Gas Light Co. 372662 2.043 .04
Brooklyn Union Gas Co. 200,000 5.800 .11
Central and South West Corp. 2000000 53.000 .98
DTE Energy Co. (formerly Detroit Edison Co.) 450000 13.556 .25
East Midlands Electricity PLC 3183300 28.235 .52
Entergy Corp. 760000 21.280 .39
GPU Inc. (formerly General Public Utilities Corp.) 850000 27.944 .52
Hongkong Electric Holdings Ltd. 10,231,500 32.752 .60
Houston Industries Inc. 200,000 4.575 .08
Long Island Lighting Co. 2125000 38.516 .71
National Grid Group PLC 10323000 30.409 .56
National Power PLC 4205000 27.922 .52
PECO Energy Co. 100000 2.525 .05
Southern Electric PLC 5145350 53.929 1.00
------------- ----------- ----------
548.662 10.13
----------- ----------
Materials
- ---------------------------------------------- ------------- ----------- ----------
Chemicals - 0.17%
E.I. du Pont de Nemours and Co. 100000 9.275 .17
- ---------------------------------------------- ------------- ----------- ----------
Forest Products & Paper - 0.73%
James River Corp. of Virginia, DECS convertible
preferred shares 375000 11.062 .20
Potlatch Corp. 332500 14.214 .26
Union Camp Corp. 300000 14.625 .27
------------- ----------- ----------
Metals: Nonferrous - 0.15%
Aluminum Co. of America 140000 8.208 .15
- ---------------------------------------------- ------------- ----------- ----------
57.384 1.05
----------- ----------
Consumer Goods
- ---------------------------------------------- ------------- ----------- ----------
Automobiles - 1.12%
Ford Motor Co., Class A 1950000 60.937 1.12
- ---------------------------------------------- ------------- ----------- ----------
Beverages & Tobacco - 2.64%
Philip Morris Companies Inc. 905,000 83.826 1.55
RJR Nabisco Holdings Corp. 700,000 20.213 .37
UST Inc. 1,350,000 38.981 .72
- ---------------------------------------------- ------------- ----------- ----------
Health & Personal Care - 5.74%
American Home Products Corp. 3,040,000 186.200 3.44
Bristol-Myers Squibb Co. 757500 80.106 1.48
Merck & Co., Inc. 250000 18.531 .34
Pharmacia & Upjohn, Inc. 145000 5.220 .10
Schering-Plough Corp. 130000 8.320 .15
Warner-Lambert Co. 200000 12.725 .23
----------- ----------
515.059 9.50
----------- ----------
Services
- ---------------------------------------------- ------------- ----------- ----------
Broadcasting & Publishing - 0.24%
Golden Books Family Entertainment Inc., 8.75% convertible
TOPrS/1/ 100000 5.587 .10
South China Morning Post (Holdings) Ltd. 3600000 3.073 .06
Time Warner Inc., 10.25% Series K/1/ 3,931 4.172 .08
- ---------------------------------------------- ------------- ----------- ----------
Business & Public Services - 5.23%
American Water Works Co., Inc. 1661200 33.847 .62
Autopistas del Mare Nostrum, SA Concesionaria del Estado 1580000 22.503 .42
Consumers Water Co. 229000 4.179 .08
Dun & Bradstreet Corp. 275000 15.916 .29
Hutchison Delta Finance Ltd., 7.00% convertible
debentures 2002/1/ $11,000,000 12.045 .22
Hyder PLC 3951688 45.534 .84
Thames Water PLC 6000000 54.098 1.00
United Utilities PLC 10294309 95.330 1.76
- ---------------------------------------------- ------------- ----------- ----------
Telecommunications - 10.41%
ALLTEL Corp. 350,000 10.675 .20
Ameritech Corp. 1,337,900 73.250 1.35
GTE Corp. 1300000 54.763 1.01
Hong Kong Telecommunications Ltd. (American
Depositary Receipts) 1,442,478 25.424 .47
Koninklijke PTT Nederland NV 1,259,700 45.500 .84
Pacific Telesis Group 1,700,000 57.800 1.07
Portugal Telecom, SA 2,293,000 59.648 1.10
Telecom Corp. of New Zealand Ltd. 15,784,160 82.010
Telecom Corp. of New Zealand Ltd./1/ 8,380,000 43.540 2.33
Telecom Corp. of New Zealand Ltd. (American
Depositary Receipts) 12,500 1.041
Telecom Italia SpA 28,962,100 54.781 1.01
Telefonica de Espana, SA 1,700,000 34.056 .63
U S WEST Communications Group 704,707 21.405 .40
- ---------------------------------------------- ------------- ----------- ----------
Transportation: Airlines - 0.04%
British Airways PLC (American Depositary Receipts) 25800 2.328 .04
- ---------------------------------------------- ------------- ----------- ----------
862.505 15.92
----------- ----------
Finance
- ---------------------------------------------- ------------- ----------- ----------
Banking - 21.69%
AmSouth Bancorporation 800,000 37.100 .68
Banc One Corp. 2,300,000 97.463 1.80
Bank of Nova Scotia 1,358,700 42.852 .79
BankAmerica Corp. 304000 27.816 .51
Barclays PLC 3500000 54.883 1.01
Boatmen's Bancshares, Inc. 400000 24.300 .45
Central Fidelity Banks, Inc. 2062500 52.336 .97
Chase Manhattan Corp. 850000 72.888 1.34
Comerica Inc. 1560000 82.875 1.53
CoreStates Financial Corp 1800000 87.525 1.61
First Chicago NBD Corp. 1210000 61.710 1.14
First Hawaiian Bank 400000 12.400 .23
First Security Corp. (Utah) 1637500 48.102 .89
First Union Corp. 967500 70.386 1.30
Huntington Bancshares Inc. 1,674,750 40.194 .74
KeyCorp 1,035,000 48.257 .89
Keystone Financial, Inc. 827,550 21.516 .40
J.P Morgan & Co. Inc. 180,000 15.548 .29
National Australia Bank Ltd. 2407694 26.420 .49
National City Corp. 800000 34.700 .64
Old Kent Financial Corp. 551250 24.875 .46
PNC Bank Corp. 800000 29.000 .53
Royal Bank of Canada 1715000 56.714 1.05
Wachovia Corp. 660000 35.475 .65
Westpac Banking Corp. 6,050,000 34.513 .64
Wilmington Trust Corp. 950,000 35.862 .66
- ---------------------------------------------- ------------- ----------- ----------
Financial Services - 0.58%
Beneficial Corp. 340,000 19.890 .37
Manhattan Card Co. Ltd. 23,200,000 11.477 .21
- ---------------------------------------------- ------------- ----------- ----------
Insurance - 2.21%
American General Corp. 160000 5.960 .11
Lincoln National Corp. 1230000 59.655 1.10
Ohio Casualty Corp. 717,500 23.319 .43
Prudential Corp. PLC 3557546 26.865 .50
SAFECO Corp. 100,000 3.775 .07
- ---------------------------------------------- ------------- ----------- ----------
Real Estate - 5.13%
Bradley Real Estate, Inc. 1,045,000 17.373 .32
Camden Property Trust 353,200 9.625 .18
CarrAmerica Realty Corp. 1,720,000 43.215 .80
Pacific Retail Trust/1/ 190,909 2.100 .04
Security Capital Atlantic, Inc. 334,800 7.952
Security Capital Atlantic, Inc./1/,/2/ 1,391,303 33.043 .75
Security Capital Industrial Trust 1210855 21.947 .41
Security Capital Pacific Trust 3037560 68.345 1.26
Security Capital Realty Inc./1/,/2/,/3/ 24900 27.130
Security Capital Realty Inc. 12.00% .87
convertible debentures 2014/1/,/2/ $18,862,000 19.648
Washington Real Estate Investment Trust 145,500 2.310 .04
Weingarten Realty Investors 504,000 19.341 .36
Western Investment Real Estate Trust 412500 5.259 .10
----------- ----------
1,603.939 29.61
----------- ----------
Multi-Industry & Miscellaneous
- ---------------------------------------------- ------------- ----------- ----------
Multi-Industry - 1.19%
B A T Industries PLC 5,895,597 41.067 .76
Hutchison Whampoa Ltd. 1960000 13.689 .25
Lend Lease Corp. Ltd. 411257 6.969 .13
Thermo Instrument Systems Inc., 4.50% convertible
debentures 2003 $3,000,000 2.970 .05
- ---------------------------------------------- ------------- ----------- ----------
Miscellaneous - 1.31%
Equity-type securities in initial period of
acquisition 70.600 1.31
----------- ----------
135.295 2.50
----------- ----------
TOTAL EQUITY-TYPE SECURITIES (cost:
$2,730.239 million) 3,722.844 68.71
----------- ----------
Principal
Bonds and Notes Amount
- ---------------------------------------------- ------------- ----------- ----------
Corporate
- ---------------------------------------------- ------------- ----------- ----------
ADT Operations 9.25% 2003 $2,000,000 2.105 .04
Airplanes Pass Through Trust, pass-through certificates,
Class C, 8.15% 2019 /4/ 5000000 5.181 .10
Allegiance Corp. 7.80% 2016 3000000 3.040 .06
Ann Taylor, Inc. 8.75% 2000 4802000 4.610 .09
California Energy Co., Inc. 0%/10.25% 2004 /5/ 4300000 4.407 .08
Columbia Gas System, Inc., Series G, 7.62% 2025 3000000 2.926
Columbia Gas System, Inc., Series C, 6.80% 2005 2000000 1.973 .09
Container Corp. of America 9.75% 2003 3500000 3.587 .07
Delta Air Lines, Inc., 1991 Equipment
Certificates Trust, Series K, 10.00% 2014/1/ 2000000 2.341 .04
Falcon Drilling Company, Inc., Series B, 9.75% 2001 2750000 2.819
Falcon Drilling Company, Inc., Series B, 8.875% 2003 4000000 3.900 .12
Fort Howard Corp. 8.25% 2002 3000000 2.970 .05
Infinity Broadcasting Corp. 10.375% 2002 4500000 4.770 .09
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
2015/1/,4 5000000 5.608 .10
Long Island Lighting Co. 8.90% 2019 10000000 9.736
Long Island Lighting Co. 7.30% 1999 23000000 22.827 .60
McDermott Inc. 9.375% 2002 5000000 5.223
McDermott Inc. 9.375% 2006 8000000 8.240 .25
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 6844715.24 7.238 .13
News America Holdings Inc. 9.25% 2013 2000000 2.246
News America Holdings Inc. 9.125% 1999 3000000 3.217 .14
News America Holdings Inc. 8.625% 2003 2000000 2.165
Occidental Petroleum Corp. 8.50% 2004 8000000 8.460 .16
The Price REIT, Inc. 7.50% 2006 4000000 3.991 .07
Riggs National Corp. 8.50% 2006 2600000 2.688 .05
Rykoff-Sexton, Inc. 8.875% 2003 4500000 4.162 .08
Security Capital Pacific Trust 7.25% 2004 5000000 5.056 .09
Smith's Food & Drug Centers, Inc.,
pass-through certificates, Series 1994-A2,
8.64% 2012/2/,/4/ 6000000 4.965 .09
360 Communications Co. 7.125% 2003 2500000 2.478 .05
Time Warner Inc. 10.15% 2012 5000000 5.985
Time Warner Inc. 7.45% 1998 4000000 4.059 .18
TKR Cable I, Inc. 10.50% 2007 7000000 7.803 .14
Wellsford Residential Property Trust 7.75% 2005 2500000 2.537 .05
WestPoint Stevens Inc. 8.75% 2001 2000000 2.020 .04
Woolworth Corp., Series A, 7.00% 2002 2000000 1.981
Woolworth Corp., Series A, 6.98% 2001 2750000 2.736 .09
----------- ----------
170.050 3.14
----------- ----------
Principal
Governments and Governmental Authorities Amount
- ---------------------------------------------- ------------- ----------- ----------
New Zealand 8.00% July 1998 NZ$40,000,000 28.695 .51
----------- ----------
U.S. Treasury Notes
- ---------------------------------------------- ------------- ----------- ----------
6.00% November 1997 $90,000,000 90.393 1.68
5.625% January 1998 70,000,000 69.989 1.29
----------- ----------
160.382 2.97
----------- ----------
TOTAL BONDS AND NOTES (cost: $350.040 million) 359.127 6.62
----------- ----------
TOTAL INVESTMENT SECURITIES (cost: $3,080.279
million) 4,081.971 75.33
----------- ----------
SHORT-TERM SECURITIES
- ---------------------------------------------- ------------- ----------- ----------
Corporate Short-Term Notes
- ---------------------------------------------- ------------- ----------- ----------
Abbott Laboratories 5.22%-5.23% due 11/22-12/27/96 61700000 61.449 1.14
American Express Credit Corp. 5.26%-5.28% due
11/1-12/10/96 46200000 46.101 .85
Baltimore Gas & Electric Co. 5.23%-5.28% due
11/21-12/3/96 30335000 30.227 .56
Campbell Soup Co. 5.25%-5.29% due 11/8-12/12/96 45300000 45.153 .83
Walt Disney Co. 5.25%-5.29% due 11/18/96-1/27/97 86200000 85.272 1.57
Ford Motor Credit Co. 5.24%-5.36% due
11/4/96-1/9/97 96700000 96.104 1.77
General Electric Capital Corp. 5.24%-5.32% due
11/7/96-1/14/97 68700000 68.506 1.26
H.J. Heinz Co. 5.23%-5.41% due 11/6-12/4/96 76300000 76.014 1.40
Hewlett-Packard Co. 5.23%-5.40% due 11/6-12/20/96 75097000 74.860 1.38
International Lease Finance Corp. 5.33% due 12/16/96 43000000 42.710 .79
Eli Lilly and Co. 5.24%-5.28% due 12/18/96-1/22/97 75000000 74.239 1.37
Lucent Technologies Inc. 5.23%-5.30% due
11/12/96-1/6/97 66300000 65.863 1.22
National Rural Utilities Cooperative Finance Corp. 5.31%
due 1/13-1/17/97 70000000 69.206 1.28
J.C. Penney Funding Corp. 5.23%-5.31% due
12/3-12/16/96 80925000 80.459 1.49
Procter & Gamble Co. 5.27%-5.34% due
11/6/96-1/16/97 67900000 67.356 1.24
Weyerhaeuser Co. 5.24%-5.38% due 11/5/96-1/10/97 77000000 76.537 1.41
----------- ----------
1,060.056 19.56
----------- ----------
Federal Agency Discount Notes
- ---------------------------------------------- ------------- ----------- ----------
Federal Home Loan Bank 5.24%-5.36% due
11/20-12/19/96 97700000 97.116 1.79
Federal Home Loan Mortgage Corp. 5.20%-5.40% due
11/12-12/31/96 53900000 53.525 .99
Federal National Mortgage Assn. 5.34%-5.44% due
12/6-12/19/96 47700000 47.442 .88
----------- ----------
198.083 3.66
----------- ----------
U.S. Treasury Short-Term Notes
- ---------------------------------------------- ------------- ----------- ----------
6.375% due 6/30/97 8000000 8.048 .15
6.875% due 4/30/97 30000000 30.220 .56
6.75% due 2/28/97 65000000 65.284 1.20
----------- ----------
103.552 1.91
----------- ----------
TOTAL SHORT-TERM SECURITIES (cost: $1,361.041
million) 1,361.691 25.13
EXCESS OF PAYABLES OVER CASH AND RECEIVABLES 25.949 .46
----------- ----------
TOTAL SHORT-TERM SECURITIES, CASH AND
RECEIVABLES, NET OF PAYABLES 1,335.742 24.67
----------- ----------
NET ASSETS $5,417.713 100.00%
=========== ==========
/1/ Purchased in a private placement transaction;
resale to the public may require registration
or sale only to qualified institutional buyers
/2/ Valued under procedures established by the Board
of Directors.
/3/ Non-income-producing securities.
/4/ 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.
/5/ Represents a zero-coupon bond which will
convert to an interest-bearing security at a
later date.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Capital Income Builder
Financial Statements
Statement of Assets and Liabilities
at October 31, 1996 (dollars in
millions)
Assets:
Investment securities at market (cost:$3,080.279) $4,081.971
Short-term securities (cost:$1,361.041) 1,361.691
Cash .006
Receivables for-
Sales of investments $ 6.132
Sales of fund's shares 8.031
Dividends and accrued interest 18.548 32.711
------------ ------------
5,476.379
Liabilities:
Payables for-
Purchases of investments 8.829
Repurchases of fund's shares 4.822
Management services 1.324
Dividends payable 41.219
Accrued expenses 2.472 58.666
------------ ------------
Net Assets at October 31, 1996 - Equivalent to
$39.70 per share on 136,469,764 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 200,000,000 shares) $5,417.713
============
Statement of Operations
for the year ended October 31, 1996
(dollars in millions)
Investment Income:
Income:
Dividends $181.465
Interest 111.502 $292.967
------------
Expenses:
Management services fee 18.213
Distribution expenses 10.741
Transfer agent fee 3.396
Reports to shareholders .654
Registration statement and prospectus .300
Postage, stationery and supplies .642
Directors' fees .107
Auditing and legal fees .053
Custodian fee .845
Taxes other than federal income tax .063
Other expenses .075 35.089
------------ ------------
Net investment income 257.878
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 87.347
Net increase in unrealized appreciation on investments: 431.666
------------
Net realized gain and increase in unrealized
appreciation on investments 519.013
------------
Net Increase in Net Assets Resulting from Operations $776.891
============
Statement of Changes in Net Assets
(dollars in millions) Year ended October 31
1996 1995
------------ ------------
Operations:
Net investment income $257.878 $197.764
Net realized gain on investments 87.347 64.236
Net change in unrealized appreciation on investments 431.666 387.255
------------ ------------
Net increase in net assets resulting from
operations 776.891 649.255
------------ ------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (257.053) (199.581)
Distributions from net realized gain on investments (62.913) (11.162)
------------ ------------
Total dividends and distributions (319.966) (210.743)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold: 20,891,053 and
23,777,252 shares, respectively 782.282 796.496
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 6,760,213 and
5,248,005 shares, respectively 251.534 174.909
Cost of shares repurchased: 16,175,451 and 15,065,188
shares, respectively (606.384) (505.097)
------------ ------------
Net increase in net assets resulting from capital
share transactions 427.432 466.308
------------ ------------
Total Increase in Net Assets 884.357 904.820
Net Assets:
Beginning of year 4,533.356 3,628.536
------------ ------------
End of year (including undistributed net investment
income: $2.228 and $1.403, respectively) $5,417.713 $4,533.356
============ ============
See Notes to Financial Statements
</TABLE>
<PAGE>
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 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. Where
pricing service or market quotations are not readily available, securities will
be valued at fair value by the Board of Directors or a committee thereof.
Short-term securities with 60 days or less to maturity are valued at amortized
cost, which approximates market value.
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 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
year. 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 $845,000 includes $78,000 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 October 31, 1996, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $1,000,668,000, of which
$1,021,175,000 related to appreciated securities and $20,507,000 related to
depreciated securities. During the year ended October 31, 1996, the fund
realized, on a tax basis, a net capital gain of $86,961,000 on securities
transactions. Net gains related to non-U.S. currency transactions of $386,000
were treated as ordinary income for federal income tax purposes. The cost of
portfolio securities for book and federal income tax purposes was
$4,442,994,000 at October 31, 1996.
3. The fee of $18,213,000 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 year ended October 31, 1996,
distribution expenses under the Plan were $10,741,000. As of October 31, 1996,
accrued and unpaid distribution expenses were $1,782,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $3,396,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $4,007,000 (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 October 31,
1996, aggregate amounts deferred and earnings thereon were $160,000.
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 October 31, 1996, accumulated undistributed net realized gain on
investments was $77,870,000 and additional paid-in capital was $4,333,599,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,201,233,000 and $1,126,743,000, respectively,
during the year ended October 31, 1996.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended October 31, 1996, such non-U.S. taxes were $13,631,000. Net realized
currency gains on dividends, interest, withholding taxes reclaimable, and sales
of non-U.S. bonds and notes were $1,117,000 for the year ended October 31,
1996.
The fund reclassified $731,000 from undistributed currency gains to
undistributed net realized gains and $42,000 from undistributed net investment
income to undistributed net realized gains for the year ended October 31, 1996.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share Data and Ratios Year
ended
October
31
1996 1995 1994 1993 1992
Net Asset Value, Beginning of Year $ 36.27 $ 32.68 $ 34.42 $30.77 $28.67
--------- - --------- - --------- - ------- -------
Income From Investment Operations:
Net investment income 1.95 1.69 1.73 1.53 1.44
Net realized and unrealized gain
(loss) on investments 3.92 3.69 (1.62) 3.76 2.33
--------- --------- --------- ------- -------
Total income from investment operations 5.87 5.38 .11 5.29 3.77
--------- --------- --------- ------- -------
Less Distributions:
Dividends from net investment income (1.94) (1.69) (1.73) (1.53) (1.44)
Distributions from net realized gains (.50) (.10) (.12) (.11) (.23)
--------- --------- --------- ------- -------
Total distributions (2.44) (1.79) (1.85) (1.64) (1.67)
--------- --------- --------- ------- -------
Net Asset Value, End of Year $ 39.70 $ 36.27 $ 32.68 $34.42 $30.77
========= ========= ========= ======= =======
Total Return/1/ 16.76% 16.98% .47% 17.58% 13.46%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $5,418 $4,533 $3,629 $2,826 $1,203
Ratio of expenses to average net assets .71% .72% .73% .72% .81%
Ratio of net income to average net assets 5.19% 4.96% 5.29% 4.69% 4.71%
Average commissions paid per share/2/ 2.20cents 2.10cents 3.63cents 2.90cents 2.48cents
Portfolio turnover rate 27.56% 18.06% 36.19% 11.22% 16.57%
/1/ Calculated without deducting a sales
charge. The maximum sales charge is 5.75% of
the fund's offering price.
/2/ 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 are excluded. Generally,
non-U.S. commissions are lower than U.S.
commissions when expressed as cents per share
but higher when expressed as a percentage of
transactions because of the lower per-share
prices of many non-U.S. securities.
</TABLE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Capital Income Builder, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of Capital Income Builder, Inc. (the
"Fund") at October 31, 1996, the results of its operations, the changes in its
net assets and the per-share data and ratios for the years indicated in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at October 31, 1996 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Los Angeles, California
November 27, 1996
U. S. Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
Dividends and Distributions Per Share
<TABLE>
<CAPTION>
Dividends From From
Reinvest Payment from Net Net Realized Net Realized
Date Date Investment Income Short-Term Gains Long-Term Gains
<S> <C> <C> <C> <C>
December 18, 1995 December 19, 1995 $0.445 - $0.50
March 4, 1996 March 5, 1996 0.450 - -
June 4, 1996 June 5, 1996 0.455 - -
August 13, 1996 August 14, 1996 0.460 - -
</TABLE>
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 34% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 14% of the dividends
paid by the fund from net investment income was derived from interest on direct
U.S. Treasury obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE
MAILED IN JANUARY 1997 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON
THEIR 1996 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
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
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,
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
Stefanie Powers, a Director since 1989, has resigned from the Board because
professional commitments have been making it impossible for her to attend Board
meetings for a period of time. The Directors wish to thank her for her many
contributions to the fund.
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
(Please write to the address nearest you.)
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
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER OR CALL AMERICAN FUNDS SERVICE COMPANY,
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
December 31, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA TAG/GRS/3140
Lit. No. CIB-011-1296
[The American Funds Group (R)]
