[The American Funds Group(R)]
CAPITAL INCOME BUILDER
Semi-Annual Report 1998
For the six months ended April 30
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.
[GRAPHIC: CIB logo]
Capital Income Builder is one of the 28 mutual funds in The American Funds
Group,(R) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
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, 1998 (the
most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods - 10 years: +281.99%, or +14.34%
a year; 5 years: +97.02%, or +14.53% a year; 12 months: +23.41%. Sales charges
are lower for accounts of $50,000 or more. The fund's 30-day yield as of May
31, 1998, calculated in accordance with the Securities and Exchange Commission
formula, was 3.44%.
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.
[GRAPHIC: CIB logo]
FELLOW INVESTORS:
CIB continued to achieve what it set out to do when the fund began in July
1987: to provide income above that paid by stocks generally and to build
growing income that will outpace inflation over the long term. In June 1998,
Capital Income Builder's dividend was raised by 0.5 cents to 48.5 cents a
share.
If, like most shareholders, you reinvested the fund's capital gain distribution
of $1.61 per share paid in December, the June dividend represented an increase
of 6.7% over the dividend income received a year ago (see chart on pages 2-3).
It was 88.2% higher than the first full-quarter payment of 28 cents per share
in December 1987, also with capital gains reinvested. This represents an annual
compound growth rate in income of 6.2%. The dividend increases alone - not
counting the increased value of the stocks and other investments in the CIB
portfolio - far outpaced the 3.4% annual compound growth rate for the Consumer
Price Index from December 31, 1987 through April 30, 1998.
CIB'S ABOVE-AVERAGE DIVIDEND RATE
Capital Income Builder has provided a well-above-average dividend rate at a
time when U.S. equities on average are currently paying dividends at an
historically low rate. At the end of April 1998, the annual dividend rate of
the unmanaged Standard & Poor's 500 Stock Composite Index was 1.4%, while CIB's
dividend rate, after expenses, was 3.9% of net asset value.
CIB's regular dividend increases are supported by the dividend growth of the
common stocks in the fund's portfolio. Already this fiscal year, several
holdings have provided large increases over what they paid last year. The
dividend of Portugal Telecom, one of the fund's largest holdings, was 28%
higher than that of a year ago. Apartment Investment and Management, a real
estate investment trust, increased its dividend by 22%. Two of our bank
holdings, First Union and Chase Manhattan, each declared 16% increases.
Dividend increases of holdings such as these drive the growth of Capital Income
Builder's dividend.
RECENT RESULTS
As we have previously explained in these reports, CIB's focus on providing
above-average and growing income may at times cause the fund's results to trail
those of the broad equities markets. During the six months ended April 30, the
market rewarded large, lower yielding U.S. companies, many of which do not meet
CIB's stringent dividend requirements. For the six months, CIB had a total
return of 12.9% compared with 22.5% for the S&P 500. Because CIB currently has
significant bond investments, it is useful to look at an additional index
comparison. The unmanaged Lehman Aggregate Bond Index, a broad index of the
U.S. bond market, had a total return of 3.6% for the six-month period. About
33% of the fund's assets are currently invested in bonds, notes or cash
equivalents, providing above-average income at a time of historic low yields in
the stock market.
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, 1995, 1996 and Index (through
Fiscal Quarters Dividend 1997 were reinvested March 1998)
<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
2 Feb-Apr 1997 46.5 1.6 137.4
3 May-Jul 1997 47.0 2.4 138.9
4 Aug-Oct 1997 47.5 2.4 139.7
1 Nov-Jan 1998 48.0 2.4 139.8
2 Feb-Apr 1998 48 4.2 140.6
3 mAY-jUL 998 48.5 4.2
</TABLE>
* After less than a full quarter of operations
[end chart]
CIB'S LARGEST HOLDINGS
Bank stocks continue to be the fund's largest industry concentration,
representing 20.3% of net assets at April 30. We continue to be positive on
CIB's bank holdings, which had an average yield of 2.6% at April 30 and
estimated dividend growth of 9% a year. The fund's bank holdings have strong
balance sheets, growing earnings and excess capital, which they can use to pay
dividends and buy back shares.
The current trend of merger activity in banking makes these companies even more
attractive, positively impacting a number of CIB's bank investments. First
Union, a North Carolina-based bank holding company operating in 14 states, is
now CIB's largest position as the result of First Union's acquisition of
CoreStates Financial, which had been another of the fund's major investments.
First Union has indicated that it plans to increase its dividend at a greater
rate than in the past.
Telecommunications companies are CIB's second-largest industry (11.3% of net
assets). They provided an average yield of 2.7% over the past 12 months, and
several increased their dividends. We have already mentioned that Portugal
Telecom increased its dividend 28%. Other large dividend increases were
provided by Telecom Argentina, up 21%, and Telecom Italia, up 7%. All three
companies have experienced strong cellular telephone growth and have good free
cash flow, which they can use to increase dividends.
We are heartened that interest in our conservative investing approach has
continued to grow. At April 30, fund assets were nearly $8.6 billion, up more
than 17% from $7.3 billion at October 31, 1997. The number of shareholder
accounts increased to more than 300,000 from about 275,000. We thank you, our
shareholders, for your continued support and look forward to reporting to you
again following the October 31 close of the fund's fiscal year.
/S/ PAUL G. HAAGA, JR. /S/ JAMES B. LOVELACE
Paul G. Haaga, Jr. James B. Lovelace
CHAIRMAN OF THE BOARD PRESIDENT
June 12, 1998
<TABLE>
CAPITAL INCOME BUILDER Unaudited
Investment Portfolio April 30, 1998
Equity Securities Shares or Market Percent
Principal Value of Net
Energy Amount (Millions) Assets
- ---------------------------------------------- ----------------------------------
<S> <C> <C> <C>
Energy Sources - 2.49%
Amoco Corp. 1860000.00 $ 82.305 0.96%
Atlantic Richfield Co. 380000.00 29.640 0.38
CalEnergy Capital Trust II, 6.25% convertible preferred 20 130000.00 6.435 0.08
Chevron Corp. 800000.00 66.150 0.86
Phillips Petroleum Co. 800000.00 39.650 0.51
Royal Dutch Petroleum Co. (New York Registered Shares) 880000.00 49.775 0.65
- ---------------------------------------------- ----------------------- ----------
Utilities: Electric & Gas - 7.32%
Australian Gas Light Co. 372662 2.771 0.04
Central and South West Corp. 1450000 37.791 0.49
DPL Inc. 2000000 36.375 0.47
DTE Energy Co. 450000 17.634 0.23
GPU, Inc. 850000 33.681 0.43
Hongkong Electric Holdings Ltd. 2298800 7.064 0.09
KeySpan Energy Corp. 200000 6.825 0.09
Long Island Lighting Co. 2125000 63.617 0.82
National Power PLC 8200000 76.125 0.99
Nevada Power Co. 920000 22.598 0.30
NIPSCO Industries, Inc. 600000 16.088 0.21
PECO Energy Co. 55900 1.331 0.02
PowerGen PLC 1600000 21.632 0.28
Southern Electric PLC 12600000 113.708 1.47
Williams Companies, Inc. 3383250 106.995 1.39
- ---------------------------------------------- ----------------------------------
---------------------
Materials
- ---------------------------------------------- ----------------------------------
Chemicals - 0.11%
E.I. du Pont de Nemours and Co. 120000 8.738 0.11
- ---------------------------------------------- ----------------------------------
Forest Products & Paper - 1.05%
Chesapeake Energy Corp. 300000 10.912 0.14
Potlatch Corp. 613800 29.079 0.38
Rayonier Inc. 215600 10.807 0.14
Union Camp Corp. 500000 30.187 0.39
- ---------------------------------------------- ----------------------------------
Metals: Nonferrous - 0.14%
USX Corp., 6.75% DECS convertible preferred 2000 500000 10.500 0.14
- ---------------------------------------------- ----------------------------------
100.223 1.30
---------------------
Capital Equipment
- ---------------------------------------------- ----------------------------------
Industrial Components - 0.42%
Tomkins PLC 5500000 32.400 0.42
- ---------------------------------------------- ----------------------- ----------
Consumer Goods
- ---------------------------------------------- ----------------------------------
Automobiles - 1.69%
Chrysler Corp. 1240000 49.833 0.65
Ford Motor Co., Class A 1750000 80.172 1.04
- ---------------------------------------------- ----------------------------------
Beverages & Tobacco - 2.72%
Foster's Brewing Group Ltd. 16000000 34.822 0.45
Gallaher Group PLC 2300000 11.959 0.16
Philip Morris Companies Inc. 2715000 101.303 1.31
RJR Nabisco Holdings Corp. 875000 24.336 0.32
UST Inc. 1350000 37.209 0.48
- ---------------------------------------------- ----------------------------------
Health & Personal Care - 0.55%
Bristol-Myers Squibb Co. 400000 42.350 0.55
- ---------------------------------------------- ----------------------------------
381.984 4.95
---------------------
Services
- ---------------------------------------------- ----------------------------------
Broadcasting & Publishing - 0.57%
Golden Books Family Entertainment, Inc., 8.75% convertible
TOPrS 2016 (1) 100000 5.425 0.07
Houston Industries Inc., 7.00% ACES convertible preferred 340000 23.588 0.31
West Australian Newspapers Holdings Ltd. 4165000 15.171 0.20
- ---------------------------------------------- ----------------------------------
Business & Public Services - 5.88%
American Water Works Co., Inc. 1850000 55.384 0.72
Autopistas del Mare Nostrum, SA Concesionaria del Estado 750000 14.772 0.19
Consumers Water Co. 300000 6.038 0.08
Hutchison Delta Finance Ltd., 7.00% convertible
debentures 2002 (1,2) 11000000 11.000 0.14
Hyder PLC 4700000 75.640 0.98
Thames Water PLC 7150000 117.101 1.52
United Utilities PLC 12484885 173.595 2.25
- ---------------------------------------------- ----------------------------------
Leisure & Tourism - 0.30%
Host Marriott Financial Trust, 6.75% QUIPS convertible
preferred 2026 (1) 400000 22.800 0.30
- ---------------------------------------------- ----------------------------------
Merchandising - 1.21%
J.C. Penney Co., Inc. 800000 56.850 0.74
Safeway PLC 6100000 36.343 0.47
- ---------------------------------------------- ----------------------------------
Telecommunications - 12.52%
Ameritech Corp. 2752600 117.158 1.52
France Telecom (3) 850000 46.240 0.60
Hong Kong Telecommunications Ltd. 6845628 12.815
Hong Kong Telecommunications Ltd. (American 0.76
Depositary Receipts) 2379506 45.954
Koninklijke PTT Nederland NV 1778900 91.903 1.19
Portugal Telecom, SA 2286000 122.804 1.59
SBC Communications Inc. 1500000 62.156 0.81
Telecom Argentina SA, Class B (American Depositary Receipt 784800 28.253 0.37
Telecom Corp. of New Zealand Ltd. 15784160 74.819
Telecom Corp. of New Zealand Ltd. (1) 8380000 39.722 1.50
Telecom Corp. of New Zealand Ltd. (American
Depositary Receipts) 25000 0.958
Telecom Italia SpA 18255800 96.200 1.25
Telefonica de Argentina SA, Class B (American Depositary
Receipts) 136300 5.256 0.07
Telefonica de Espana, SA 3580000 149.480 1.94
TELUS Corp. 1300000 35.070 0.45
U S WEST Communications Group 704707 37.173 0.48
- ---------------------------------------------- ----------------------------------
Transportation: Airlines - 0.32%
Qantas Airways Ltd. 16367597 24.956 0.32
- ---------------------------------------------- ----------------------------------
1,604.624 20.80
---------------------
Finance
- ---------------------------------------------- ----------------------------------
Banking - 22.49%
AmSouth Bancorporation 1000000 62.375 0.81
Australia and New Zealand Banking Group Ltd. 2400000 16.738 0.22
Banc One Corp. 2266000 133.269 1.73
Bank of Nova Scotia 4191600 115.130 1.50
Barclays PLC 3500000 100.957 1.31
Chase Manhattan Corp. 400000 55.425 0.72
Comerica Inc. 600000 40.163 0.52
Commonwealth Bank of Australia 1500000 17.994 0.23
First Chicago NBD Corp. 700000 65.013 0.84
First Hawaiian Bank 400000 15.700 0.20
First Security Corp. (Utah) 2420500 59.302 0.77
First Union Corp. 4433506 267.673 3.47
ForeningsSparbanken AB (formerly Sparbanken Sverige AB) 845000 26.423 0.34
HSBC Holdings PLC 1016583 29.006 0.38
Huntington Bancshares Inc. 1776925 63.192 0.82
KeyCorp 2070000 82.153 1.06
Keystone Financial, Inc. 993450 38.745 0.50
J.P. Morgan & Co. Inc. 300000 39.375 0.51
National Australia Bank Ltd. 2480654 35.237 0.46
National City Corp. 800000 55.400 0.72
Old Kent Financial Corp. 700000 27.213 0.35
Royal Bank of Canada 1715000 102.492 1.33
United Bankshares, Inc. 600000 15.675 0.20
Wachovia Corp. 1899375 161.328 2.09
Westpac Banking Corp. 6950000 46.645 0.60
Wilmington Trust Corp. 950000 61.394 0.80
- ---------------------------------------------- ----------------------------------
Financial Services - 1.50%
Associates First Capital Corp., Class A 458648 34.284 0.44
Beneficial Corp. 300000 39.113 0.51
Health Care Property Investors, Inc. 880000 29.700 0.38
Imperial Credit Commercial Mortgage Investment Corp. 900000 12.994 0.17
- ---------------------------------------------- ----------------------------------
Insurance - 4.00%
American General Corp. 160000 10.660 0.14
EXEL Ltd. 790000 59.003 0.76
Guardian Royal Exchange PLC 6504200 44.023 0.58
HIH Winterthur International Holdings Ltd. 4528777 9.384 0.12
Lincoln National Corp. 1280000 113.680 1.47
Ohio Casualty Corp. 717500 34.709 0.45
Royal & Sun Alliance Group PLC 3286656 36.485 0.47
- ---------------------------------------------- ----------------------------------
Real Estate - 4.89%
AMB Property Corp. 675000 15.525 0.20
Apartment Investment and Management Co., Class A 1100000 41.113 0.53
Bradley Real Estate, Inc. 1045000 21.749 0.27
CarrAmerica Realty Corp. 1791400 52.398 0.67
CCA Prison Realty Trust 301000 10.667 0.13
Kimco Realty Corp. 400000 14.825 0.19
Meditrust Corp., paired stock 800000 24.050 0.31
Pacific Retail Trust (1,2) 2850000 37.050 0.48
Security Capital Atlantic Inc. 2015217 44.461 0.58
Security Capital Group Inc., Class B, warrants,
expire 9/18/98 (3) 368244 1.036 0.01
Security Capital Industrial Trust 1191114 29.108 0.38
Security Capital Pacific Trust 3219368 72.033 0.93
Washington Real Estate Investment Trust 145500 2.501 0.03
Weingarten Realty Investors 300000 12.788 0.17
- ---------------------------------------------- ----------------------------------
2,537.356 32.89
---------------------
Multi-Industry and Miscellaneous
- ---------------------------------------------- ----------------------------------
Multi-Industry - 0.72%
B.A.T Industries PLC 2000000 19.002 0.25
Hunting PLC 4260000 17.086 0.23
Lend Lease Corp. Ltd. 693689 15.910 0.21
Thermo Instrument Systems Inc., 4.50% convertible
debentures 2003 (1) 3000000 3.120 0.04
- ---------------------------------------------- ----------------------------------
Miscellaneous - 2.34%
Equity securities in initial period of
acquisition 180.328 2.34
- ---------------------------------------------- ---------------------
235.446 3.06
---------------------
TOTAL EQUITY SECURITIES (cost:
$3,435.659 million) 4,892.033 63.42
---------------------
Principal
Bonds and Notes Amount
- ---------------------------------------------- ----------------------------------
Corporate
- ---------------------------------------------- ----------------------------------
Airplanes Pass Through Trust, pass-through certificates,
Series 1, Class C, 8.15% 2019 (4) 5525000 5.760 0.07
Allegiance Corp. 7.80% 2016 3000000 3.234 0.04
Atlas Air, Inc., 1998-1 Pass Through Trust,
Class B, 7.68% 2014 (1,4) 5000000 5.072
Atlas Air, Inc., 1998-1 Pass Through Trust, 0.18
Class A, 7.38% 2018 (1,4) 9000000 9.161
Boyd Gaming Corp. 9.25% 2003 1250000 1.325 0.02
Cable & Wireless Communications PLC 6.75% 2008 1875000 1.887
Cable & Wireless Communications PLC 6.625% 2005 1750000 1.758 0.05
Cablevision Systems Corp. 8.125% 2009 2500000 2.606
Cablevision Systems Corp. 7.875% 2007 3000000 3.075 0.07
California Energy Co., Inc. 10.25% 2004 4300000 4.613 0.06
California Infrastructure PG&E-1, Series 1997-1,
Class A-7, 6.42% 2008 2250000 2.286 0.03
Camden Property Trust 7.00% 2006 5000000 4.990 0.06
CarrAmerica Realty Corp. 7.375% 2007 6000000 6.188
CarrAmerica Realty Corp. 6.625% 2005 (1) 10000000 9.866 0.21
Century Communications Corp. 8.75% 2007 2000000 2.080 0.03
Chateau Properties, 6.92% MOPPRS 2014 10500000 10.490 0.14
Columbia Gas System, Inc., Series G, 7.62% 2025 3000000 3.075
Columbia Gas System, Inc., Series C, 6.80% 2005 2000000 2.038 0.07
Columbia/HCA Healthcare Corp. 6.91% 2005 5500000 5.226
Columbia/HCA Healthcare Corp. 6.87% 2003 5425000 5.164
Columbia/HCA Healthcare Corp. 6.41% 2000 5255000 5.080 0.22
Columbia/HCA Healthcare Corp. 6.125% 2000 1400000 1.334
Comcast Cellular Corp., Series B, 9.50% 2007 5000000 5.200 0.07
Consumers International Inc. 10.25% 2005 (1) 5000000 5.462 0.07
Container Corp. of America 9.75% 2003 8485000 9.079 0.12
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class A, 7.461% 2016 (4) 1982027 2.107
Continental Airlines, Inc., pass-through certificates,
7.42% 2007 (4) 2944600 3.044 0.13
Continental Airlines, Inc., pass-through certificates,
Series 1997-4, Class A, 6.90% 2018 (4) 5000000 5.091
Delta Air Lines, Inc., 1991 Equipment
Certificates Trust, Series K, 10.00% 2014 (1) 2000000 2.535 0.03
DLJ Mortgage Acceptance Corp., Series 1996-CF1,
Class A-1A, 7.28% 2028 2175477 2.247 0.03
Domtar Inc. 8.75% 2006 5000000 5.197 0.07
EOP Operating LP, 6.75% 2008 (1) 2250000 2.236
EOP Operating LP, 6.625% 2005 (1) 1000000 0.996 0.07
EOP Operating LP, 6.375% 2003 (1) 2300000 2.289
FIRSTPLUS Home Loan Owner Trust, Series 1997-1,
Class A-6, 6.95% 2015 (4) 4000000 4.054 0.05
Freeport-McMoRan Copper & Gold Inc. 7.50% 2006 2000000 1.672
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 2000000 1.730 0.04
Hearst-Argyle Television, Inc. 7.00% 2018 1250000 1.241 0.02
Highwoods/Forsyth LP, 6.835% MOPPRS 2003 5000000 5.021 0.07
HMH Properties, Inc., Series B, 8.875% 2007 1000000 1.109 0.01
Irvine Apartment Communities, LP 7.00% 2007 7000000 6.948 0.09
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
2015 (1) 5000000 6.160 0.08
McDermott Inc. 9.375% 2002 6000000 6.414 0.08
J. Ray McDermott, SA 9.375% 2006 8000000 8.560 0.11
M.D.C. Holdings, Inc. 8.375% 2008 5000000 5.006 0.06
Merrill Lynch Mortgage Investors, Inc., Seller Manufactured
Housing Contract, Series 1995-C2, Class A-1, 7.1092% 2021 1147210 1.166 0.02
Fred Meyer, Inc. 7.45% 2008 4000000 4.005
Fred Meyer, Inc. 7.375% 2005 1000000 1.002 0.06
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 2846251 3.070 0.04
Occidental Petroleum Corp. 8.50% 2004 8000000 8.206 0.11
Ocean Energy, Inc. 8.875% 2007 5000000 5.250 0.07
Omega Healthcare Investors, Inc. 6.95% 2007 8000000 7.850 0.10
Owens-Illinois, Inc. 8.10% 2007 1000000 1.060
Owens-Illinois, Inc. 7.85% 2004 1000000 1.051 0.03
Paperboard Industries International Inc. 8.375% 2007 4500000 4.590 0.06
Parker & Parsley Petroleum Co. 8.25% 2007 5000000 5.499 0.07
The Price REIT, Inc. 7.50% 2006 11000000 11.504 0.15
Riggs National Corp. 8.50% 2006 2600000 2.725 0.04
Rite Aid Corp. 7.125% 2007 5000000 5.160 0.07
Royal Caribbean Cruises Ltd. 7.25% 2018 1000000 0.996
Royal Caribbean Cruises Ltd. 7.00% 2007 3500000 3.529 0.06
Rykoff-Sexton, Inc. 8.875% 2003 2000000 2.060 0.03
Security Capital Industrial Trust 7.81% 2015 2000000 2.092 0.03
Security Capital Pacific Trust 7.25% 2004 5000000 5.144 0.07
Shopping Center Associates 6.75% 2004 (1) 3000000 3.009 0.04
Spieker Properties, LP 6.875% 2005 10000000 10.042 0.19
Spieker Properties, LP 6.75% 2008 5000000 4.937
TCI Communications, Inc. 6.875% 2006 4000000 4.055 0.05
Tele-Communications, Inc. 8.00% 2005 5000000 5.391 0.07
Time Warner Inc. 10.15% 2012 5000000 6.428 0.08
TKR Cable I, Inc. 10.50% 2007 7000000 7.708 0.10
United States Surgical Corp. 7.25% 2008 8250000 8.252 0.11
Wellsford Residential Property Trust 7.75% 2005 2500000 2.633 0.03
Woolworth Corp., Series A, 7.00% 2002 2000000 2.043
Woolworth Corp., Series A, 6.98% 2001 14500000 14.758 0.22
- ---------------------------------------------- ----------------------------------
334.921 4.332
---------------------
Federal Agency Obligations: Mortgage Pass-Throughs (4)
- ---------------------------------------------- ----------------------------------
Fannie Mae 7.50% 2024 2547840 2.614 0.03
- ---------------------------------------------- ----------------------------------
U.S. Treasuries
- ---------------------------------------------- ----------------------------------
6.875% July 1999 100000000 101.516 1.32
8.00% August 1999 150000000 154.454 2.00
8.50% February 2000 150000000 157.289 2.04
8.875% May 2000 150000000 159.329 2.07
6.375% May 2000 100000000 101.453 1.32
8.75% August 2000 150000000 159.962 2.07
6.125% September 2000 30000000 30.338 0.39
8.00% May 2001 6000000 6.390 0.08
6.50% May 2001 3000000 3.072 0.04
15.75% November 2001 75000000 98.977 1.28
14.25% February 2002 75000000 96.750 1.25
6.50% May 2005 7500000 7.829 0.10
6.375% August 2027 9000000 9.470 0.12
- ---------------------------------------------- ----------------------------------
1,086.829 14.09
---------------------
TOTAL BONDS AND NOTES (cost: $1,423.823 million) 1,424.364 18.46
---------------------
TOTAL INVESTMENT SECURITIES (cost: $4,859.482
million) 6,316.397 81.88
---------------------
SHORT-TERM SECURITIES
- ---------------------------------------------- ----------------------------------
Corporate Short-Term Notes
- ---------------------------------------------- ----------------------------------
Associates Corp. of North America 5.45% due 5/13-7/6/98 42800000 42.505 0.55
Atlantic Richfield Co. 5.42%-5.50% due 5/8-7/13/98 70300000 69.868 0.91
BellSouth Telecommunications, Inc. 5.48%-5.49%
due 5/7-5/12/98 30500000 30.448 0.39
Chevron USA Inc. 5.50% due 5/20/98 45500000 45.361 0.59
Coca-Cola Co. 5.45%-5.50% due 6/16-6/24/98 73100000 72.537 0.94
E.I. du Pont de Nemours and Co. 5.45%-5.49%
due 6/17-6/22/98 44400000 44.062 0.56
Emerson Electric Co. 5.48%-5.50% due 5/4-5/26/98 66000000 65.830 0.85
General Electric Capital Corp. 5.46% due 7/7/98 42000000 41.559 0.54
General Motors Acceptance Corp. 5.50%-5.51%
due 5/6-5/21/98 39600000 39.502 0.51
H.J. Heinz Co. 5.48%-5.52% due 5/11-6/1/98 27440000 27.346 0.35
International Lease Finance Corp. 5.46%-5.48%
due 5/8-6/16/98 50300000 50.028 0.65
Merck & Co., Inc. 5.45%-5.47% due 5/7-6/19/98 58000000 57.759 0.74
Motorola, Inc. 5.46%-5.50% due 5/11-6/25/98 34500000 34.287 0.44
National Rural Utilities Cooperative Finance Corp.
5.43%-5.50% due 5/22-7/8/98 54500000 54.083 0.70
Procter & Gamble Co. 5.37%-5.48% due 6/2-6/16/98 97200000 96.649 1.25
SBC Communications Inc. 5.44% due 7/7/98 (1) 25000000 24.739 0.32
- ---------------------------------------------- ----------------------------------
796.563 10.33
---------------------
Federal Agency Discount Notes
- ---------------------------------------------- ----------------------------------
Fannie Mae 5.35%-5.42% due 5/1-6/23/98 205200000 204.546 2.65
Federal Home Loan Banks 5.34%-5.41% due 5/8-6/3/98 93165000 92.857 1.20
Freddie Mac 5.38%-5.42% due 6/4-7/1/98 56333000 55.839 0.72
International Bank for Reconstruction and Development
5.40% due 6/2/98 31000000 30.845 0.40
- ---------------------------------------------- ----------------------------------
384.087 4.98
U.S. Treasury Short-Term Notes
- ---------------------------------------------- ----------------------------------
5.875%-8.875% due 10/31/98-3/31/99 188000000 188.639 2.45
- ---------------------------------------------- ----------- ---------------------
TOTAL SHORT-TERM SECURITIES (cost: $1,369.391
million) 1369.289 17.75
EXCESS OF CASH AND RECEIVABLES OVER PAYABLES 28.635 0.37
---------------------
TOTAL SHORT-TERM SECURITIES, CASH AND
RECEIVABLES, NET OF PAYABLES 1,397.924 18.11
---------------------
NET ASSETS 7,714.321 100.00
=====================
(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 approved 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 is shorter than the stated
maturity.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
Capital Income Builder Unaudited
Financial Statements
Statement of Assets and Liabilities
at April 30, 1998 (dollars in
millions)
Assets:
Investment securities at market (cost:$4,859.482) $7,154.587
Short-term securities (cost:$1,369.391) 1,369.289
Cash 3.301
Receivables for-
Sales of investments $ 8.834
Sales of fund's shares 16.178
Dividends and accrued interest 50.650 75.662
------------ ------------
8,602.839
Liabilities:
Payables for-
Purchases of investments 12.240
Repurchases of fund's shares 4.947
Management services 2.018
Dividends payable 27.786
Accrued expenses 3.337 50.328
------------ ------------
Net Assets at April 30, 1998 - Equivalent to
$49.42 per share on 173,065,973 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 200,000,000 shares) $8,552.511
============
Statement of Operations
for the six months ended April 30, 1998
(dollars in millions)
Investment Income:
Income:
Dividends $90.343
Interest 89.966 $180.309
------------
Expenses:
Management services fee 12.302
Distribution expenses 9.205
Transfer agent fee 1.924
Reports to shareholders .539
Registration statement and prospectus .371
Postage, stationery and supplies .467
Directors' fees .059
Auditing and legal fees .057
Custodian fee .609
Taxes other than federal income tax .069
Other expenses .091 25.693
------------ ------------
Net investment income 154.616
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 285.042
Net increase in unrealized appreciation on investments 515.961
------------
Net realized gain and increase in unrealized
appreciation on investments 801.003
------------
Net Increase in Net Assets Resulting from Operations $955.619
============
See Notes to Financial Statements
Statement of Changes in Net Assets Six months Year
(dollars in millions) ended ended
4/30/98* 10/31/97
------------ ------------
Operations:
Net investment income $ 154.616 $ 259.582
Net realized gain on investments 285.042 280.827
Net increase in unrealized appreciation on inves 515.961 776.609
------------ ------------
Net increase in net assets resulting from
operations 955.619 1,317.018
------------ ------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (153.550) (262.498)
Distributions from net realized gain on investme (256.425) (99.910)
------------ ------------
Total dividends and distributions (409.975) (362.408)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold: 15,451,962 and
29,804,485 shares, respectively 744.357 1,285.671
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 7,801,361 and
7,455,750 shares, respectively 366.726 314.663
Cost of shares repurchased: 8,431,891 and 15,485,458
shares, respectively (405.542) (671.331)
------------ ------------
Net increase in net assets resulting from capital
share transactions 705.541 929.003
------------ ------------
Total Increase in Net Assets 1,251.185 1,883.613
Net Assets:
Beginning of period 7,301.326 5,417.713
------------ ------------
End of period (including undistributed net investment
income: $4.094 and $3.028, respectively) $8,552.511 $7,301.326
============ ============
* 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 securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the investment adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type. Securities with
original maturities of one year or less having 60 days or less to maturity are
amortized to maturity based on their cost if acquired within 60 days of
maturity or, if already held on the 60th day, based on the value determined on
the 61st day. Assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the prevailing market rates at
the end of the reporting period. Purchases and sales of securities and income
and expenses are translated into U.S. dollars at the prevailing market rates on
the dates of such transactions. The effects of changes in foreign currency
exchange rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities. Securities and assets for
which representative market quotations are not readily available are valued at
fair value as determined in good faith by a committee appointed by the Board of
Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. 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.
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, 1998, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $2,295,003,000, of which $2,335,498,000
related to appreciated securities and $40,495,000 related to depreciated
securities. During the six months ended April 30, 1998, the fund realized, on a
tax basis, a net capital gain of $287,698,000 on securities transactions. Net
losses related to non-U.S. currency transactions of $2,656,000 were treated as
an adjustment to ordinary income for federal income tax purposes. The cost of
portfolio securities for book and federal income tax purposes was
$6,228,873,000 at April 30, 1998.
3. The fee of $12,302,000 for management services was incurred 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 monthly 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,
1998, distribution expenses under the Plan were $9,205,000. As of April 30,
1998, accrued and unpaid distribution expenses were $2,980,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,924,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $3,464,000 (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, 1998,
aggregate amounts deferred and earnings thereon were $274,000.
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, 1998, accumulated undistributed net realized gain on
investments was $294,169,000 and additional paid-in capital was $5,967,760,000.
The fund made purchases and sales of investment securities excluding
short-term securities, of $919,496,000 and $1,025,830,000, respectively, during
the six months ended April 30, 1998.
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 $609,000 includes $19,000 that was paid by these credits
rather than in cash.
Dividend and interest income is recorded net of non-U.S. taxes paid. For the
six months ended April 30, 1998, such non-U.S. taxes were $3,941,000. Net
realized currency losses on dividends, interest, withholding taxes reclaimable,
and sales of non-U.S. bonds and notes, on a book basis, were $10,154,000 for
the six months ended April 30, 1998.
<TABLE>
Per-Share Data and Ratios
Six
months Year ended October 31
ended
4/30/98(1) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $46.14 $39.70 $36.27 $32.68 $34.42 $30.77
--------- ------- ------- ------- ------- -------
Income From Investment Operations:
Net investment income .93 1.74 1.95 1.69 1.73 1.53
Net realized and unrealized gain
(loss) on investments 4.89 7.20 3.92 3.69 (1.62) 3.76
--------- ------- ------- ------- ------- -------
Total income from investment operations 5.82 8.94 5.87 5.38 .11 5.29
--------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income (.93) (1.77) (1.94) (1.69) (1.73) (1.53)
Distributions from net realized gains (1.61) (.73) (.50) (.10) (.12) (.11)
--------- ------- ------- ------- ------- -------
Total distributions (2.54) (2.50) (2.44) (1.79) (1.85) (1.64)
--------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $49.42 $46.14 $39.70 $36.27 $32.68 $34.42
========= ======= ======= ======= ======= =======
Total Return (2) 12.92%(3) 23.16% 16.76% 16.98% .47% 17.58%
Ratios/Supplemental Data:
Net assets, end of period (in millions) $8,553 $7,301 $5,418 $4,533 $3,629 $2,826
Ratio of expenses to average net assets .32%(3) .65% .71% .72% .73% .72%
Ratio of net income to average net assets 1.94%(3) 4.04% 5.19% 4.96% 5.29% 4.69%
Average commissions paid per share (4) 2.17c 1.89c 2.20c 2.10c 3.63c 2.90c
Portfolio turnover rate 13.03%(3) 27.65% 27.56% 18.06% 36.19% 11.22%
(1)Unaudited
(2)Excludes maximum sales charge of 5.75%.
(3)Based on operations for the period shown
and, accordingly, not representative of a full
year.
(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 transaction amount because
of the lower per-share prices of many non-U.S.
securities.
</TABLE>
[The American Funds Group(R)]
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, 1998, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Litho in USA TAG/GRS/3804
Lit. No. CIB-013-0698
