[The American Funds Group(r)]
CAPITAL INCOME BUILDER
ANNUAL REPORT 1999
FOR THE YEAR ENDED OCTOBER 31
The goal of Capital Income Builder(r) 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.
CIB is one of the 29 mutual funds in The American Funds Group(r), the nation's
third-largest mutual fund family. For more than six decades, Capital Research
and Management Company, the American Funds adviser, 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 September 30, 1999
(the most recent calendar quarter), assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods - 10 years: +208.63%, or +11.93%
a year; 5 years: +84.45%, or +13.03% a year; 12 months: -1.77%. Sales charges
are lower for accounts of $50,000 or more. The fund's 30-day yield as of
November 30, 1999, calculated in accordance with the Securities and Exchange
Commission formula, was 4.16%.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. INVESTING OUTSIDE THE
UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS AND
POLITICAL INSTABILITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS.
FELLOW INVESTORS:
In a difficult year for many dividend-paying stocks, Capital Income Builder
managed a total return of 2.5% compared with 25.7% for Standard & Poor's 500
Stock Composite Index. When stock markets are soaring, it becomes all too easy
for investors to forsake those stocks. In the euphoria over rising prices,
forgotten is the relative stability a good income flow can provide in a down
market and the significant contribution dividends and their reinvestment
historically have made to total stock market returns.
Capital Income Builder seeks a balance. The fund was created expressly for
those seeking above-average and growing income, along with resistance to down
markets and reasonable participation in rising ones. Over the fund's lifetime,
it has met those objectives.
The charts on these pages amply tell the income story. In addition, the fund
has done well relative to falling markets - in the latest correction, between
July 16 and October 15, 1999, the S&P 500 lost 12% not counting dividends,
while CIB lost only 8%. The previous summer, when the S&P index dropped 19%
between July 17 and August 31, CIB declined only 11%. From its inception on
July 30, 1987, the fund has produced a compound average annual total return of
12.3% compared with 15.7% for the S&P 500. The fund's total return for that
period, as measured by Lipper, Inc., exceeds the average of equity-income funds
323% to 286%.
Considering the stock market's record-low yield environment, we take particular
pleasure in reporting that CIB's December dividend again rose by 0.5 cents a
share to 49.5 cents. If you reinvest your capital gains, as do 96% of our
shareholders, the income produced by that dividend is 104% higher than CIB's
first full-quarter dividend in December 1987. That represents a compound annual
growth rate of 6.1%, nearly twice the 3.2% pace of inflation as measured by the
Consumer Price Index. For a look at how the fund's dividend income growth
compares with that of a theoretical investment in the S&P 500 Index, see the
chart on page 2.
[Begin sidebar]
CIB'S QUARTERLY DIVIDENDS COMPARED WITH INFLATION
Dividends as declared and as adjusted for reinvested capital gains
[Begin Bar Chart]
(cents per share)
(Index: December 1987 = 100)
<TABLE>
<CAPTION>
Additional income earned Inflation=
on initial shares if the Consumer Price
capital gain distributions Index (through
Fiscal Quarters Dividend were reinvested September 1999)
<S> <C> <C> <C>
4 Aug-Oct 1987 22* - -
1 Nov-Jan 1988 28 - 100
2 Feb-Apr 1988 28.5 - 101
3 May-Jul 1988 29 - 102.3
4 Aug-Oct 1988 29.5 - 103.8
1 Nov-Jan 1989 30 - 104.4
2 Feb-Apr 1989 30.5 - 106
3 May-Jul 1989 31 - 107.5
4 Aug-Oct 1989 31.5 - 108.3
1 Nov-Jan 1990 32.5 - 109.3
2 Feb-Apr 1990 33 - 111.5
3 May-Jul 1990 33.5 - 112.6
4 Aug-Oct 1990 34 - 115
1 Nov-Jan 1991 34.5 - 115.9
2 Feb-Apr 1991 35 - 117
3 May-Jul 1991 35.5 - 117.9
4 Aug-Oct 1991 36 - 118.9
1 Nov-Jan 1992 36.5 - 119.5
2 Feb-Apr 1992 37 .3 120.7
3 May-Jul 1992 37.5 .3 121.5
4 Aug-Oct 1992 38 .3 122.4
1 Nov-Jan 1993 38.5 .3 123
2 Feb-Apr 1993 39 .5 124.4
3 May-Jul 1993 39.5 .5 125.1
4 Aug-Oct 1993 40 .5 125.7
1 Nov-Jan 1994 40.5 .5 126.3
2 Feb-Apr 1994 41 .6 127.6
3 May-Jul 1994 41.5 .6 128.2
4 Aug-Oct 1994 42 .6 129.5
1 Nov-Jan 1995 42.5 .6 129.7
2 Feb-Apr 1995 43 .8 131.2
3 May-Jul 1995 43.5 .8 132.1
4 Aug-Oct 1995 44 .8 132.8
1 Nov-Jan 1996 44.5 .8 133
2 Feb-Apr 1996 45 1.4 134.9
3 May-Jul 1996 45.5 1.5 135.8
4 Aug-Oct 1996 46 1.5 136.7
1 Nov-Jan 1997 46.5 1.5 137.4
2 Feb-Apr 1997 46.5 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 1.6 139.8
2 Feb-Apr 1998 48.0 4.2 140.6
3 May-Jul 1998 48.5 4.2 141.2
4 Aug-Oct 1998 49.0 4.3 141.8
1 Nov-Jan 1999 49.5 4.3 142.0
2 Feb-Apr 1999 48.0 7.3 143.0
3 May-Jul 1999 48.5 7.4 144.0
4 Aug-Oct 1999 49.0 7.5 145.5
</TABLE>
[End Bar Chart]
Dividend
Additional income earned on initial shares if capital gain distributions were
reinvested.
Inflation = Consumer Price Index (through September 1999)
Fiscal Quarters:
1 November-January
2 February-April
3 May-July
4 August-October
*Not a full quarter
[End sidebar]
The December income distribution maintains an unbroken record of quarterly
increases over the fund's 12-year lifetime for shareholders who reinvest
capital gains. The annual dividend rate after expenses was 4.1% of net asset
value at October 31, the end of the fund's fiscal year. Contrast that with only
1.2% and 1.4%, respectively, for the S&P 500 Index and the average
equity-income fund, measured by Lipper.
THANKS TO DIVIDENDS, A POSITIVE TOTAL RETURN FOR THE YEAR
As stated, Capital Income Builder's total return for the year was far below the
S&P 500's. The index, however, is asset-weighted and thus dominated by a few
large companies, many of which pay little or no dividends. Of the 471 stocks in
the index for the full 12 months, more than 40% had a negative total return.
[Begin sidebar]
CIB vs. S&P 500
Quarterly dividends on a $10,000 investment
[Begin bar chart]
<TABLE>
<CAPTION>
<S> <C> <C>
Date CIB S&P 500
December 1987* 124 69
September 1993 179 101
September 1999 250 140
</TABLE>
[End bar chart]
The quarterly dividends produced by a hypothetical $10,000 investment in CIB
and the S&P 500 at the fund's inception on July 30, 1987. This snapshot at
three intervals over the lifetime of the fund shows that CIB has maintained a
substantially higher dividend than the S&P throughout its 12-year history. All
results are calculated at net asset value with dividends taken in cash and
capital gain distributions reinvested.
*First full calendar quarter.
[End sidebar]
As a measure of just how neglected the higher yielding stocks were, those in
the S&P 500 yielding in excess of 3.5% for the fiscal year averaged a total
return of barely 1%, which means without the dividend they had a negative total
return. Stocks paying no dividend at all soared more than 70%. Moreover, the
non-dividend payers - including big market-capitalized companies like Microsoft
and Cisco Systems - accounted for 19% of the S&P Index, thus driving its
overall rise. Such is not always so. Dividend reinvestment, in fact, has
accounted for 51% of the S&P 500's total return over the past 20 years.
OUTLOOK FOR MARCH DIVIDEND
If, as we anticipate, the March dividend is at the same per-share rate as in
December, shareholders who reinvest this December's capital gain distribution
of $1.54 a share (3.6% of net asset value) will see a 3.7% increase in income
for the quarter. This reflects the added shares they will hold.
While there is no guarantee that the fund can continue to climb the income
stairway without interruption, its flexibility to seek companies with strong
dividend potential on a global basis certainly helps the cause. Beginning on
page 4, we examine that global reach and prospects for three industries that
account for the largest share of the fund's equity portfolio.
A DIFFICULT YEAR FOR BANKS, UTILITIES
Banks, utilities and telecommunications companies have fueled much of Capital
Income Builder's growth in income and portfolio appreciation in previous years.
As typically happens in a period of rising interest rates, however, bank and
utility stocks were hurt this past year as investors fretted over the possible
negative impact on earnings. The fund's telecommunications holdings generally
did well; our largest holding, Deutsche Telekom, was up 69%.
As a group, our bank holdings, by far the largest segment of the equity
portfolio, produced a roughly flat total return for CIB during the year,
despite providing an above-average dividend yield and rallying sharply in price
toward the end of the period. First Union, our second-largest holding, was down
26% and BANK ONE, our fourth-largest, was down 23%. Those banks had particular
problems of their own, but in both cases we anticipate turnarounds.
STICKING TO OUR OBJECTIVES
While price appreciation and dividend yield have been an odd couple for several
years, we are confident of a happier future for the two. We continue to look
for unusual values, a number of which are being created by the very
out-of-favor nature of many better yielding stocks.
Our approach emphasizes holding securities to realize their value over a number
of years. The fund's turnover rate - the degree to which we change the holdings
in the portfolio during a year - was just over 20% this past year, well below
overall mutual fund industry levels, as measured by Lipper. The fund also
maintained an expense ratio relative to assets that is a far-below-average
0.64%.
We look forward to reporting to you again in six months.
/s/Paul G. Haaga, Jr. /s/James B. Lovelace
Paul G. Haaga, Jr. James B. Lovelace
Chairman of the Board President
December 9, 1999
[Begin sidebar]
THE VALUE OF A LONG-TERM PERSPECTIVE
(with all dividends and distributions reinvested)
Average Annual Compound Returns*
(for periods ended October 31, 1999)
Ten Years +12.11%
Five Years +12.98
One Year -3.37
*Assuming reinvestment of all distributions and payment of the 5.75% maximum
sales charge at the beginning of the stated periods.
$59,405/1/
S&P 500
$39,200/2/
CIB
$38,600/3/
Lipper
Equity-
Income
Funds
Average
$10,000
original
investment
Average
annual
compound
return for
12-1/4 years
11.8%
[begin chart]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CIB S&P 500 CIB Total Return
July 30, 1987 $9,425 $10,000
October 1, 1987 8,929 7,972 (10.1)%++
October 1, 1988 10,029 9,154 12.3
October 1, 1989 11,689 11,559 16.7
October 1, 1990 11.502 10,960 (1.6)
October 1, 1991 14,858 14,271 29.3
October 1, 1992 16,893 15,688 13.5
October 1, 1993 19,897 18,024 17.6
October 1, 1994 19,936 18,722 0.5
October 1, 1995 23,367 23,655 17.0
October 1, 1996 27,200 29,338 16.8
October 1, 1997 33,605 38,757 23.2
October 1, 1998 38,238 47,274 13.3
</TABLE>
[End Chart]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Jul. 30 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
1987 1987 1988 1989 1990 1991 1992 1993
CIB
Total
Return (10.1)% 12.3 16.7 (1.6) 29.3 13.5 17.6
/4/
Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
1994 1995 1996 1997 1998 1999
CIB
Total
Return 0.5 17.0 16.8 23.2 13.3 2.5
</TABLE>
/1/Standard & Poor's 500 Stock Composite Index is unmanaged and does not
reflect sales charges, commissions or expenses.
/2/Reflects payment of the maximum sales charge of 5.75% on a $10,000 initial
investment. Thus, the net amount invested was $9,425. Sales charges are lower
for accounts of $50,000 or more.
/3/The Lipper average does not reflect sales charges.
/4/For the period July 30 through October 31, 1987.
Past results are not predictive of future results.
[End sidebar]
[photos: powerline tower, satelite dish, building columns]
THE GLOBAL DIMENSIONS OF CAPITAL INCOME BUILDER
From its launch 12 years ago, Capital Income Builder has occupied a special
place in the mutual fund spectrum by providing a rising stream of income
quarter after quarter. The fund has another significant attribute: In its
search for quality companies generating the dividends to sustain that income
growth, it has the flexibility to search all over the world.
With dividend yields of U.S. companies at historic lows, the global flexibility
of your fund takes on added importance. But the broad experience and depth of
effort of the fund's adviser, Capital Research and Management Company, brings
more than just a far greater choice of investments. It also means the ability
to compare companies and managements across national boundaries.
At the end of its latest fiscal year, 29% of Capital Income Builder's assets
were invested outside the United States. "The best opportunities in recent
years for extraordinary dividend growth and above-average yields have come from
stocks outside the U.S.," observes Jim Lovelace, CIB's president. That being
the case, we thought this would be a good time to focus on the global nature of
the fund's investment effort, how it is organized and some of the individuals
who make it work. In doing so, we will look at companies in three industries
that have been recent sources of strong dividends as well as basic value. They
are telecommunications, utilities and banking.
THE BENEFITS OF INTERACTION
Capital Income Builder, like the other 28 funds in The American Funds Group,
draws on a network of more than 100 analysts and portfolio counselors based on
three continents. A number of them have been visiting companies and assessing
values for a quarter-century or more. Each year, they make some 9,000 visits to
companies, their suppliers, customers and competitors.
Capital Research brings these investment professionals into the management of
CIB's portfolio in a unique manner. Each of the fund's portfolio counselors -
Thierry Vandeventer in Geneva, Janet McKinley in New York, Steven Watson in
London, Jon Lovelace and Jim Lovelace in Los Angeles - manages a portion of the
portfolio independently, within the fund's objectives. Together, they have 130
years of experience with the firm. Their independence provides a diversity of
approaches, allows them to follow their highest convictions and makes possible
a seamless succession when anyone retires.
In addition, analysts go beyond recommending stocks to the counselors to
participate directly in portfolio management by investing a portion of CIB's
assets in companies within their area of specialization. Counselors and
analysts from the U.S., Europe and Asia get together regularly by telephone and
video to share information.
THE SHIFTING SOURCES OF GOOD YIELDS
Capital Income Builder's flexibility to invest anywhere in the world is
especially meaningful today. The portion of the portfolio currently invested in
European and Asian companies has contributed significantly to CIB's ability to
sustain growth in income distributions. Privatization of state-owned telephone
systems and electric and water utilities has provided many attractive
investments. Because they were there, Capital Research's analysts identified
those opportunities early in the process. Similarly, the ability to share
information on a global basis has helped the fund find exceptional dividend
income in the banking industry.
In all of these industries, CIB takes a global approach. Let's look at how the
fund's investments in each of them have evolved over recent years. Bear in
mind, however, that the search for good investments is based on the value of
individual companies - industry concentrations are simply the outgrowth of
those assessments.
[Begin sidebar]
CIB'S EQUITY HOLDINGS
Largest Industries by Country or Region
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Europe Europe
U.S. U.K. Continental Canada Australia
Banking 13.31% 1.22% .35% 1.84% 1.61%
Diversified
Telecommunication
Services 2.44 - 6.01 .24 -
Utilities:
Electric & Gas 5.44 2.46 - - .07
Real Estate 4.57 - - - -
Business Services .86 3.17 .34 - -
Five Largest
Industries 26.62 6.85 6.70 2.08 1.68
Other Industries 10.99 4.17 1.75 .54 1.52
Total Equities 37.61% 11.02% 8.45% 2.62% 3.20%
Hong New
Kong Zealand Other Total
Banking .42% - - 18.75%
Diversified
Telecommunication
Services - 1.12% .11% 9.92
Utilities:
Electric & Gas - - - 7.97
Real Estate - - - 4.57
Business Services .13 - - 4.50
Five Largest
Industries .55 1.12 .11 45.71
Other Industries .08 .11 .92 20.08
Total Equities .63% 1.23% 1.03% 65.79%
</TABLE>
[End sidebar]
[photos: satelite dishes]
TELECOMMUNICATIONS:
A REVOLUTION
A wave of privatizations has transformed telecommunications companies around
the world. In stock offerings worth some $160 billion, governments have sold
off all or portions of their national telephone systems in the past 15 years.
British Telecommunications was the first, in 1984. More recent privatizations
in the 1990s include Telecom New Zealand, Deutsche Telekom, France Telecom, KPN
(Netherlands) and Swisscom. CIB has owned each of these stocks at one time or
another.
Deutsche Telekom, Europe's largest provider of telecommunications services, was
CIB's largest holding at fiscal year-end. CIB bought a small number of shares
when the company was privatized in 1996. "It generated a 3.8% yield and
prospects for dividend growth looked moderately attractive," says David Riley,
who covers European telecommunications companies from Washington, D.C. after
many years based in our Geneva office.
A year later the stock hadn't gained much compared with its initial public
offering and looked like an especially good value. Many investors had become
negative on the stock because the company was facing greater competition. But
David believed the positives outweighed the negatives. For one thing, the
company had completed a new telecommunications network for eastern Germany,
ending a huge capital expenditure program and freeing up funds to enhance
dividends. It had also begun experiencing very strong cash flow growth. CIB
began to buy more shares and eventually built up a large position. Deutsche
Telekom has maintained its dividend and the stock price has tripled.
Other sizable European telecommunications investments are Telecom Italia,
France Telecom, KPN and Swisscom. These companies provide varying degrees of
good yield, good dividend growth and good free cash flow. (For a discussion of
"free cash flow" and other aspects of forecasting dividends, see "Dividend
Projection" on page 9.)
[Begin caption]
David Riley & Brad Vogt
[End caption]
[Begin caption]
Harry Tai
[End caption]
HIGH YIELD, SOLID DIVIDEND GROWTH
Telecom New Zealand has been one of the fund's most successful telecom
investments. "It has helped the fund tremendously by providing a high yield and
solid dividend growth," says Harry Tai, who follows Asian companies from New
York. In the late 1980s and early 1990s, the New Zealand government privatized
a number of companies, revitalizing the economy and reducing the deficit.
Telecom New Zealand has consistently yielded more than 5% annually and has
grown dividends at a rate of more than 10% a year.
The structural changes in New Zealand and Europe are reminiscent of events in
the U.S. in 1984 when AT&T was forced by court order to spin off its regional
telephone operating companies. CIB has invested heavily in the Bell operating
companies - or "Baby Bells" - through the years.
Brad Vogt, a U.S. telecom analyst in Washington, D.C., says: "They were stable
businesses, had good free cash flow and dividend-paying capacity. They began to
add to growth through value-added features such as voice mail, call waiting and
forwarding, and second lines. For many years these telephone companies were
ideal CIB stocks: They had relatively high yields and were able to boost
dividends regularly as their earnings increased."
Ameritech, a Midwestern telecommunications company, and SBC Communications,
which recently acquired Ameritech, are prime examples. Both companies have been
in CIB's portfolio from the fund's beginning and both have appreciated much
more than the S&P 500. They have also provided an above-average dividend yield
ranging from 2% to 5% and annual dividend growth varying from 5% to 12%.
[photo: powerline towers]
UTILITIES: ANOTHER TRANSFORMATION
Electric and water utilities in the United Kingdom are another example of how
industries can flourish after privatization and provide good investment
opportunities. A major part of Prime Minister Margaret Thatcher's privatization
program in the 1980s, they have long been very successful CIB investments.
These companies, however, have been battered recently by tough government
regulatory reviews and rising interest rates in the U.K., says Steven Watson, a
utilities analyst as well as a CIB counselor.
As a result, the utilities are selling at steep discounts from their regulatory
asset value. But they have a number of positive attributes: Many still offer
reasonable dividend yields in excess of 4% with the prospect of further
dividend growth. In addition, utilities have "safe harbor" characteristics,
attracting greater investment interest when the general market suffers a
decline or is volatile. These companies still have more cost cutting and
efficiencies ahead. Foreign interest in acquiring them could re-ignite local
interest. Steven's conclusion: Price weakness offers us opportunity in the
group.
MERGERS AND ACQUISITIONS
U.S. utilities are beginning to transform from regulated local monopolies to
free-market competitors. Change is everywhere. "All of CIB's U.S. utility
holdings have participated in this global transformation," says analyst Mary
Sheridan, who covers U.S., Latin American and European utilities. "There have
been mergers, acquisitions, initial public offerings and state-specific
regulatory rulings impacting the industry and CIB holdings."
[Begin caption]
Isabelle de Wismes & Steven Watson
[End caption]
[Begin caption]
Andrew Suzman & Mary Sheridan
[End caption]
Because of the steady income from dividends and dividend increases, U.S.
utilities have been favored investments for CIB. In November 1992, the National
Energy Act introduced the opportunity for competition in the traditionally
monopolistic utility market. As a result, electric companies are buying gas
companies and gas companies are buying electric utilities. Companies that
previously competed for customers are joining forces. The goal is to deliver
increased efficiency through size, scale and scope from a historically
fragmented group. The operational productivity translates to financial savings
that are shared between the utility's ratepayers and its shareholders.
In the future, there will probably be fewer U.S. utilities serving a greater
number of customers. These utilities are likely to be larger and perhaps
stronger operationally and financially. Some of those utilities are likely to
maintain a dividend policy that meets the CIB investment objectives. Current
analysis suggests that many will not. As a result, CIB has reduced its overall
exposure in U.S. utilities, retaining investments in fewer companies.
[Begin sidebar]
DIVIDEND PROJECTION:
A KEY PART OF MEETING CIB'S INVESTMENT OBJECTIVES
Analysts searching the world for investments that will help Capital Income
Builder meet its commitment to provide above-average and growing income follow
a discipline that is unique to your fund: They make an effort to project a
company's dividend payout for several years ahead.
A number of important considerations are part of that discipline. The analysts
examine a management's record of giving shareholder interests some priority.
They look at past dividend payments and management's inclination to raise them
as the business grew and to sustain them when it didn't.
There's also a more technical side to the research. The analysts estimate a
company's free cash flow to judge how much cash will be available in coming
years to pay dividends. Free cash flow, simply put, is the amount left over
after the company meets operating costs, requirements for investment in
research and new plant and equipment, as well as servicing the corporate debt.
Obviously, such considerations are in addition to the basic effort to assess
the company's competitive strength, trends in its industry and external forces
that will affect it.
After all of that, there's a certain amount of art that goes with the science
as analysts draw on their own experience to make a judgment. Their call isn't
always right, but it has been close enough often enough to guide CIB into
investments that have kept that stairway chart on page 1 moving upward.
[End sidebar]
[photo: building columns]
BANKS:
FIRST THE UNITED STATES, THEN CANADA, AUSTRALIA AND THE UNITED KINGDOM
Banks have been major investments for CIB through the 1990s. While most of our
bank holdings have been in the U.S., banks in other parts of the world have
also proved to be successful investments.
UNITED STATES - U.S. bank stocks have had a difficult time for most of the past
fiscal year. They were buffeted by rising interest rates, concerns about
inflation and some earnings difficulties, says Joyce Gordon, a bank analyst
with Capital for 12 years.
In the final two weeks of the fiscal year, however, bank stocks as a group rose
20%. Banks reported strong third-quarter earnings, and economic reports showed
very little inflation (bank stock prices usually decline when inflation and
interest rates rise). In addition, legislation was passed allowing banks,
insurance companies and brokerage firms to exist under one holding company - a
favorable development for banks that allows them to further diversify their
products and services.
[photo: Joyce Gordon]
Joyce figures the average retail bank is trading at a price that is 14 times
estimated year 2000 earnings. By comparison, the S&P 500 is trading at 28 times
earnings. "Banks tend to trade in a range between 50% and 90% of the S&P 500's
price/earnings ratio. We are still at the lower end of that range, so bank
stock prices have room to rise further. The average yield on regional banks is
3% and dividend growth is 8% to 10% a year. That works for CIB."
Banks have long been known for their consistency in paying and raising
dividends. "Banks know their shareholder base - citizens in the community in
which they operate - likes to receive dividends," says Joyce. "Many retired
investors count on dividend income for living expenses. Even as banks have
become bigger, they have retained the strategy of pleasing shareholders with
rising dividend income." Accounting rules limit banks' share buybacks, which
places further emphasis on dividends.
CANADA - Canadian banks offer opportunities because they provide slightly
higher dividend yields than U.S. banks. The average Canadian bank yields 3.3%,
with dividend growth estimated at 6% to 8%. Valuations have been lower than
U.S. banks since the Canadian finance minister ruled against further mergers
among Canada's largest five banks. "Although this was a setback for the group,
Canadian banks have been able to put into place extensive cost-cutting
measures, allowing earnings per share and dividend growth."
The Bank of Nova Scotia is an unusual Canadian bank, and an interesting
investment opportunity for CIB. "It is one of the world's largest Latin
American lenders," says Joyce. It has a large operation in the Caribbean, and
has made investments in banks in Chile, Argentina and Mexico. "These are
fast-growing markets that are more profitable than domestic banking in Canada,
adding to the bank's earnings and dividend growth."
[photo: Andrew Suzman]
AUSTRALIA - Australian banks have been good long-term holdings for CIB because
they provide higher dividend yields than their U.S. counterparts and have solid
asset quality. "The best reason to invest in Australian banks was their
above-average yields (most over 5%) and the prospect of dividend growth well in
excess of the rate of inflation," says New York-based Andrew Suzman, whose
three trips a year Down Under have helped him understand the unique aspects of
the country's banking system. Australian tax law gives banks an incentive to
pay out a higher proportion of their income in dividends. As of October 31, CIB
had investments in Commonwealth Bank of Australia, Australia and New Zealand
Banking Group, National Australia Bank and Westpac Banking.
UNITED KINGDOM - Barclays is CIB's largest bank investment outside the United
States. Barclays is a solid investment with a yield of 3% and dividend growth
of around 10% a year, says Isabelle de Wismes, London-based bank analyst. "It
has a strong domestic franchise with about a 25% market share in lending to
small and medium-size companies, a leading market share in credit cards and a
strong individual customer franchise." Further efficiencies can be derived
through re-engineering the retail network and additional restructuring of the
large corporate banking business.
THE ABILITY TO BENEFIT FROM THREE DRIVING FORCES
As examples of the three industries show, it is important for Capital Income
Builder to have flexibility to take advantage of trends and developments
wherever in the world they emerge. Thanks to its ability to invest up to 40% of
its assets outside the United States, CIB has been able to invest in companies
benefiting from three major factors driving world stock markets -
globalization, privatization and consolidation. As those forces change, Capital
Research has the resources to stay abreast of them for Capital Income Builder.
<PAGE>
[photos: American flag, globe, map]
WHAT MAKES THE AMERICAN FUNDS DIFFERENT?
As a shareholder in Capital Income Builder, you are also a member of The
American Funds Group, the nation's third-largest mutual fund family. You won't
find us advertised, yet thousands of financial advisers recommend the American
Funds for their clients' serious money - money set aside for education, a home,
retirement and other important dreams.
What the 29 funds in our group have in common is a commitment to your best
interests and the proven approach of our investment adviser, Capital Research
and Management Company. In business since 1931, Capital's calling cards
include:
A LONG-TERM, VALUE-ORIENTED APPROACH
Rather than follow short-term fads, we rely on our own intensive research to
find well-managed companies with reasonably priced shares and solid, long-term
potential. Despite our size, we offer relatively few funds compared with many
large fund families, allowing us to maintain a careful focus on our objectives
and to benefit from economies of scale.
A GLOBAL PERSPECTIVE
We opened our first overseas office in 1962, well before most mutual funds
began investing internationally. Today, the American Funds draw on one of the
industry's most globally integrated research networks. Capital Research spends
substantial resources getting to know companies and industries around the
world.
A MULTIPLE PORTFOLIO COUNSELOR SYSTEM
More than 40 years ago, we developed a unique strategy for managing investments
that blends teamwork with individual accountability. Every American Fund is
divided among a number of portfolio counselors, each of whom manages his or her
portion independently, within each fund's objectives; in most cases, research
analysts manage a portion as well. Over time, this method has contributed to
consistency of results and continuity of management.
EXPERIENCED INVESTMENT PROFESSIONALS
Nearly 90% of the portfolio counselors who serve the American Funds were in the
investment business before the stock market decline of October 1987. Long
tenure and experience through a variety of market conditions mean we aren't
"practicing" with your money.
A COMMITMENT TO LOW OPERATING EXPENSES
You can't control market returns, but you can control what you invest in and
how much you pay to own it. American Funds provide exceptional value for
shareholders, with operating expenses that are among the lowest in the mutual
fund industry. Our portfolio turnover rates are low as well, keeping
transaction costs and tax consequences contained.
A PORTFOLIO FOR EVERY INVESTOR
Most financial advisers suggest that investors balance their portfolios by
investing across several types of investments. Which mix is right for you? That
depends on a number of things - including your risk tolerance, investment time
horizon and financial goals. The American Funds Group offers 29 funds with an
array of investment objectives to help you and your financial adviser build a
portfolio specifically tailored to your needs.
GROWTH FUNDS
Emphasis on long-term growth through stocks
AMCAP Fund(r)
EuroPacific Growth Fund(r)
The Growth Fund of America(r)
The New Economy Fund(r)
New Perspective Fund(r)
New World Fund(SM)
SMALLCAP World Fund(r)
GROWTH-AND-INCOME FUNDS
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(r)
Capital World Growth and Income Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(r)
Washington Mutual Investors Fund(SM)
EQUITY-INCOME FUNDS
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(r)
The Income Fund of America(r)
BALANCED FUND
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(r)
Income Funds
Emphasis on current income through bonds
American High-Income Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(r)
Intermediate Bond Fund of America(r)
U.S. Government Securities Fund(SM)
TAX-EXEMPT INCOME FUNDS
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(r)
Limited Term Tax-Exempt Bond Fund of America(SM)
The Tax-Exempt Bond Fund of America(r)
State-Specific Tax-Exempt Funds
The Tax-Exempt Fund of California(r)
The Tax-Exempt Fund of Maryland(r)
The Tax-Exempt Fund of Virginia(r)
MONEY MARKET FUNDS
Seeking stable monthly income through money market instruments
The Cash Management Trust of America(r)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
For more complete information about any of the funds, including charges and
expenses, please obtain a prospectus from your financial adviser, download one
from our Web site at www.americanfunds.com, or phone American Funds Service
Company, the funds' transfer agent, at 800/421-0180. Please read the prospectus
carefully before you invest or send money. For more information, ask your
financial adviser for a copy of our brochure A Portfolio for Every Investor.
<TABLE>
<S> <C>
10 Largest Individual Percent of
Equity Holdings Net Assets
- ---------------------------- ---------
Deutsche Telekom 2.42%
First Union 2.38
SBC Communications 1.92
BANK ONE 1.75
Scottish and Southern Energy 1.48
Williams Companies 1.45
Ford Motor 1.38
United Utilities 1.35
Pinnacle West Capital 1.35
Telecom Italia 1.30
</TABLE>
<TABLE>
Capital Income Builder
Investment Portfolio October 31, 1999
<S> <C> <C> <C>
Shares or Market Percent
Principal Value Of Net
Equity Securities Amount (Million Assets
- -------------------------------------------- -------- ----------------
ENERGY
ENERGY SOURCES - 4.19%
BP Amoco PLC (ADR) 1,500,000 $ 86.62 .99%
CalEnergy Capital Trust II 6.25% convertible 130,000 5.330 .06
preferred 2012 (1)
Chevron Corp. 917,500 83.779 .95
Conoco Inc., Class B 147,408 3.998 .05
Fortum Oyj 3,600,000 17.426 .20
Kerr-McGee Corp. 200,000 10.750 .12
Phillips Petroleum Co. 1,125,000 52.313 .60
Royal Dutch Petroleum Co. (New York Registered Shares) 880,000 52.745
"Shell" Transport and Trading Co., PLC (New York 850,000 38.994 1.04
Registered Shares)
Ultramar Diamond Shamrock Corp. 650,000 15.925 .18
UTILITIES: ELECTRIC & GAS - 7.97%
Australian Gas Light Co. 1,168,320 6.440 .07
Central and South West Corp. 1,950,000 43.266 .49
Coastal Corp. 6.625% FELINE PRIDES convertible 280,000 7.420 .08
preferred 2002
Dominion Resources, Inc. 250,000 12.031 .14
DPL Inc. 1,000,000 20.250 .23
GPU, Inc. 850,000 28.847 .33
KeySpan Corp. 1,928,800 54.248 .62
National Power PLC 10,600,000 71.633 .82
NiSource Inc. 1,500,000 30.750 .35
Pinnacle West Capital Corp. 3,200,000 118.000 1.35
PowerGen PLC 1,600,000 13.965 .16
Scottish and Southern Energy PLC 13,640,000 129.405 1.48
Sierra Pacific Resources (formerly Nevada Power Co.) 920,000 20.700 .24
Williams Companies, Inc. 3,383,250 126.872 1.45
Wisconsin Energy Corp. 690,000 15.439 .16
------------------
1,067.15 12.16
------------------
MATERIALS
CHEMICALS - 0.11%
E.I. du Pont de Nemours and Co. 70,031 4.513 .05
Hickson International PLC 8,700,000 5.431 .06
FOREST PRODUCTS & PAPER - 1.31%
Chesapeake Corp. 300,000 9.000 .10
Georgia-Pacific Corp., Georgia-Pacific Group 360,000 15.570 .18
7.50% PEPS convertible preferred 2004 Units
Potlatch Corp. 936,000 39.487 .45
Rayonier Inc. 465,600 19.090 .22
Stora Enso Oyj 1,023,647 13.441 .15
Westvaco Corp. 600,000 17.812 .21
METALS: NONFERROUS - 0.59%
Billiton PLC 11,000,000 47.899 .55
USX Corp. 6.75% DECS convertible preferred 2000 500,000 3.625 .04
MISCELLANEOUS MATERIALS & COMMODITIES - 0.26%
De Beers Consolidated Mines Ltd. 850,000 23.230 .26
------------------
183.528 2.09
------------------
CAPITAL EQUIPMENT
ELECTRONIC INSTRUMENTS - 0.03%
Thermo Instrument Systems Inc. 4.50% convertible $3,000,000 2.468 .03
debentures 2003 (1)
INDUSTRIAL COMPONENTS - 0.39%
Tomkins PLC 10,250,000 34.519 .39
MACHINERY & ENGINEERING - 0.15%
Foster Wheeler Corp. 1,200,000 13.500 .15
------------------
50.487 .57
------------------
CONSUMER GOODS
AUTOMOBILES - 1.38%
Ford Motor Co. 2,200,000 120.725 1.38
BEVERAGES & TOBACCO - 2.88%
Foster's Brewing Group Ltd. 16,000,000 42.500 .48
Gallaher Group PLC 8,800,000 53.340 .61
Nabisco Group Holdings Corp.(formerly RJR 1,500,000 19.219 .22
Nabisco Holdings Corp.)
Philip Morris Companies Inc. 2,715,000 68.384 .78
Societe Nationale d'Exploitation Industrielle des 575,000 32.069 .37
Tabacs et Allumettes "SEITA"
UST Inc. 1,350,000 37.378 .42
FOOD & HOUSEHOLD PRODUCTS - 0.09%
Devro PLC 5,000,000 7.639 .09
HEALTH & PERSONAL CARE - 0.70%
Bristol-Myers Squibb Co. 800,000 61.450 .70
------------------
442.704 5.05
------------------
SERVICES
BROADCASTING & PUBLISHING - 0.34%
Houston Industries, Inc. (converting to Time
Warner Inc.)
7.00% ACES convertible preferred 2000 150,000 17.212 .20
West Australian Newspapers Holdings Ltd. 3,817,917 12.944 .14
BUSINESS SERVICES - 4.50%
American Water Works Co., Inc. 1,850,000 53.997 .62
Autopistas del Mare Nostrum, SA Concesionaria 750,000 14.372 .16
del Estado
BRISA-Auto-Estradas de Portugal, SA 390,000 15.369 .18
Cendant Corp. 7.50% FELINE PRIDES convertible 400,000 11.200 .13
preferred 2001
Hutchison Delta Finance Ltd. 7.00% convertible $11,000,000 11.000 .13
debentures 2002 (1),(2)
Hyder PLC 6,353,807 57.195 .65
Philadelphia Suburban Corp. 429,600 9.881 .11
Thames Water PLC 6,977,083 102.423 1.17
United Utilities PLC 11,920,000 118.675 1.35
DIVERSIFIED TELECOMMUNICATION SERVICES - 9.92%
BCT.TELUS Communications Inc. 1,010,489 21.007 .24
Deutsche Telekom AG 4,607,300 211.869 2.42
France Telecom SA 200,000 19.331 .22
Koninklijke PTT Nederland NV 1,833,782 94.150 1.07
SBC Communications Inc. 3,303,000 168.246 1.92
Swisscom AG 287,391 87.571 1.00
Telecom Argentina STET-France Telecom SA, 359,200 9.878 .11
Class B (ADR)
Telecom Corp. of New Zealand Ltd. 15,784,160 63.390
Telecom Corp. of New Zealand Ltd. (1) 8,380,000 33.655 1.12
Telecom Corp. of New Zealand Ltd. (ADR) 25,000 .812
Telecom Italia SpA 23,221,200 114.481 1.30
U S WEST, Inc. 750,000 45.797 .52
LEISURE & TOURISM - 0.67%
Host Marriott Financial Trust 6.75% QUIPS 400,000 13.400 .15
convertible preferred 2026
Seagram Co. Ltd. 7.50% convertible preferred 720,000 35.595 .41
2002 Units
Sky City Ltd., installment receipts 4,800,000 9.566 .11
MERCHANDISING - 0.74%
J.C. Penney Co., Inc. 1,050,000 26.644 .30
Safeway PLC 12,150,000 38.156 .44
TRANSPORTATION: AIRLINES - 0.63%
Qantas Airways Ltd. 17,495,065 55.637 .63
TRANSPORTATION: RAIL & ROAD - 0.13%
Canadian National Railway Co. 5.25% convertible 220,000 11.110 .13
preferred 2029
------------------
1,484.56 16.93
------------------
FINANCE
BANKING - 18.75%
ABN AMRO Holding NV 1,262,722 30.548 .35
AmSouth Bancorporation 3,150,000 81.112 .92
Australia and New Zealand Banking Group Ltd. 2,456,986 16.205 .18
BancWest Corp. 400,000 16.725 .19
Bank of America Corp. 1,000,000 64.375 .73
Bank of Nova Scotia 4,241,600 96.865 1.10
BANK ONE CORP. 4,090,000 153.631 1.75
Barclays PLC 3,500,000 107.119 1.22
Chase Manhattan Corp. 800,000 69.900 .80
Comerica Inc. 600,000 35.663 .41
Commonwealth Bank of Australia 1,326,000 21.718 .25
First Security Corp. 1,933,600 49.548 .56
First Union Corp. 4,895,706 208.985 2.38
HSBC Holdings PLC 3,049,749 36.608 .42
Huntington Bancshares Inc. 2,310,000 68.434 .78
J.P. Morgan & Co. Inc. 120,000 15.705 .18
KeyCorp 2,190,000 61.183 .70
Keystone Financial, Inc. 1,127,550 28.259 .32
National Australia Bank Ltd. 3,708,453 57.194 .65
National City Corp. 1,885,000 55.608 .63
Royal Bank of Canada 1,515,000 65.335 .74
United Bankshares, Inc. 1,775,000 43.709 .50
Valley National Bancorp 600,000 16.013 .18
Wachovia Corp. 1,237,875 106.767 1.22
Washington Mutual, Inc. 1,100,000 39.531 .45
Westpac Banking Corp. 7,293,755 46.771 .53
Wilmington Trust Corp. 950,000 51.538 .61
FINANCIAL SERVICES - 0.57%
Health Care Property Investors, Inc. 1,545,000 40.556 .46
Imperial Credit Commercial Mortgage Investment Corp. 900,000 9.788 .11
INSURANCE - 2.66%
American General Corp. 160,000 11.870 .14
Lincoln National Corp. 1,720,000 79.335 .90
Ohio Casualty Corp. 1,435,000 23.947 .27
Royal & Sun Alliance Insurance Group PLC 4,059,390 27.739 .32
Union des Assurances Federales 75,000 9.660 .11
XL Capital Ltd. 1,500,800 80.574 .92
REAL ESTATE - 4.57%
AMB Property Corp. 1,500,000 29.812 .34
Apartment Investment and Management Co., Class A 1,125,000 42.328 .48
Archstone Communities Trust 4,784,585 95.692 1.09
Bradley Real Estate, Inc. 1,045,000 17.504 .20
Cabot Industrial Trust 695,000 13.900 .16
CarrAmerica Realty Corp. 1,620,000 36.045 .41
Duke-Weeks Realty Corp. (formerly Weeks Corp.) 669,300 13.135 .15
Equity Residential Properties Trust 545,000 22.788 .26
Glenborough Realty Trust Inc., Series A, 7.75% 400,000 6.125 .07
convertible preferred 2049
Kimco Realty Corp. 510,000 17.404 .20
Meditrust Corp., paired stock 2,960,000 23.865 .27
ProLogis Trust 1,191,114 23.003 .26
Spieker Properties, Inc. 250,000 8.734 .10
Washington Real Estate Investment Trust 145,500 2.219 .03
Weingarten Realty Investors 1,260,000 48.195 .55
------------------
2,329.26 26.55
------------------
MULTI-INDUSTRY, GOLD MINES & MISCELLAEOUS
MULTI-INDUSTRY - 0.23%
Hunting PLC 4,260,000 9.658 .11
Lend Lease Corp. Ltd. 921,354 10.594 .12
GOLD MINES - 0.66%
Anglogold Ltd. 1,025,000 57.927 .66
MISCELLANEOUS - 1.37%
Equity securities in initial period of acquisition 120.903 1.37
------------------
199.082 2.26
------------------
TOTAL EQUITY SECURITIES (cost: $4,324.362 million) 5,772.35 65.79
Principal Market Percent
Amount Value Of Net
Bonds and Notes (Million Assets
- -------------------------------------------- -------- ----------------
Corporate
- --------------------------------------------
Airplanes Pass Through Trust, pass-through
certificates,
Series 1, Class C, 8.15% 2019 (3) $5,400,135 $ 5.11 .06%
Allegiance Corp. 7.80% 2016 3,000,000 2.996 .03
Allied Waste North America, Inc. 7.625% 2006 3,000,000 2.621 .03
Atlas Air, Inc., 1998-1 Pass Through Trust, Class A, 8,845,153 8.261
7.38% 2018 (3)
Atlas Air, Inc., 1998-1 Pass Through Trust, Class B, 4,942,074 4.588 .15
7.68% 2014 (3)
Bear Stearns Commercial Mortgage Securities Inc.,
pass-through certificates, Series 1999-WF2, 29,837,184 29.649 .34
Class A-1, 6.80% 2031 (3)
British Sky Broadcasting Group PLC 8.20% 2009 (1) 3,000,000 2.924 .03
Cable & Wireless Communications PLC 9,625,000 9.695 .10
6.625%-6.75% 2005-2008
Cablevision Systems Corp. 7.875%-8.125% 2007-2009 5,500,000 5.339 .06
Canandaigua Brands, Inc. 8.625% 2006 4,000,000 3.940 .04
CarrAmerica Realty Corp. 6.625% 2000 10,000,000 9.922 .11
Century Communications Corp. 8.75% 2007 2,000,000 1.910 .02
Chancellor Media Corp. of Los Angeles 8.00% 2008 3,000,000 2.948 .03
Charter Communications Holdings, LLC 8.25% 2007 (1) 6,000,000 5.700 .06
Columbia Gas System, Inc., Series G, 7.62% 2025 3,000,000 2.811
Columbia Gas System, Inc., Series C, 6.80% 2005 2,000,000 1.928 .05
Columbia/HCA Healthcare Corp. 6.125%-6.91% 2000-2045 51,830,000 49.829 .58
Conoco Inc. 5.90% 2004 43,000,000 41.395 .47
Container Corp. of America 9.75% 2003 8,485,000 8.655 .10
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class A, 7.461% 2016 (3) 1,892,826 1.858
Continental Airlines, Inc., pass-through certificates,
Series 1997-4, Class A, 6.90% 2018 (3) 4,895,937 4.586 .11
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class C, 7.42% 2007 (3,4) 2,819,426 2.784
Cox Radio, Inc. 6.375% 2005 3,500,000 3.317 .04
Delta Air Lines, Inc., 1991 Equipment Certificates Trust,
Series K, 10.00% 2014 (1) 2,000,000 2.225 .03
DLJ Mortgage Acceptance Corp., Series 1996-CF1, 1,750,247 1.763 .02
Class A-1A, 7.28% 2028
EOP Operating LP 6.75% 2008 2,250,000 2.089 .02
EQCC Home Equity Loan Trust, Asset Backed Certificates,
Series 1999-2, Class A-4F, 6.753% 2027 (3) 5,000,000 4.861 .06
Federal-Mogul Corp. 7.50% 2009 (1) 5,000,000 4.480 .05
FIRSTPLUS Home Loan Owner Trust, Series 1997-1,
Class A-6, 6.95% 2015 (3) 4,250,000 4.221 .05
Fred Meyer, Inc. 7.375%-7.45% 2005-2008 5,000,000 4.939 .06
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 2,000,000 1.510 .02
Hearst-Argyle Television, Inc. 7.00% 2007-2018 3,000,000 2.732 .03
Highwoods/Forsyth LP 6.835% MOPPRS 2003 2,500,000 2.406 .03
Irvine Apartment Communities, LP 7.00% 2007 7,000,000 6.303 .07
Jet Equipment Trust, Series 1995-B, Class C, 9.71% 2015 (1) 5,000,000 5.366 .06
Liberty Media Corp. 7.875% 2009 (1) 3,000,000 3.009 .03
McDermott Inc. 9.375% 2002 6,000,000 6.196 .07
McKesson Corp. 6.40% 2008 4,000,000 3.312 .04
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1995-C2, 1,231,960 1.226 .01
Class A-1, 6.919% 2021 (4)
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 2,240,961 2.326 .03
Omega Healthcare Investors, Inc. 6.95% 2002-2007 10,500,000 9.695 .11
Owens-Illinois, Inc. 7.85%-8.10% 2004-2007 2,000,000 1.939 .02
PanAmSat Corp. 6.00% 2003 5,000,000 4.670 .05
Paperboard Industries International Inc. 8.375% 2007 4,750,000 4.382 .05
Price REIT, Inc. 7.50% 2006 11,000,000 10.825 .12
ProLogis Trust 7.05% 2006 3,000,000 2.854 .03
Qwest Communications International Inc. 2,000,000 1.587 .02
0%/9.47% 2007 (5)
Security Capital Group Inc. 7.15% 2007 7,500,000 6.795 .08
Spieker Properties, LP 6.75%-6.875% 2005-2008 15,000,000 14.231 .16
Tenet Healthcare Corp. 8.125% 2008 (1) 10,000,000 9.000 .10
Waste Management, Inc. 6.375% 2003 3,749,000 3.255 .04
Wellsford Residential Property Trust 7.75% 2005 2,500,000 2.515 .03
WestPoint Stevens Inc. 7.875% 2005 5,000,000 4.650 0.07000
------------------
348.134 3.97
------------------
GOVERNMENTS AND GOVERNMENTAL AUTHORITIES
Canadian Government 7.00% September 2001 C$ 40,000,0 27.723 .32
Freddie Mac 5.125% October 2008 $10,960,000 9.776 .11
------------------
37.499 .43
------------------
U.S. TREASURIES
8.00% May 2001 6,000,000 6.192 .07
6.50% May 2001 3,000,000 3.032 .03
14.25% February 2002 75,000,000 88.219 1.01
11.125% August 2003 75,000,000 87.527 1.00
6.50% May 2005 7,500,000 7.637 .09
6.125% August 2007 2,200,000 2.192 .02
6.375% August 2027 9,000,000 8.969 .10
------------------
203.768 2.32
------------------
TOTAL BONDS AND NOTES (cost: $619.589 million) 589.401 6.72
------------------
TOTAL INVESTMENT SECURITIES (cost: $4,943.951 million) 6,361.75 72.51
------------------
Principal Market Percent
Amount Value Of Net
Short-Term Securities (Million Assets
- -------------------------------------------- -------- ----------------
CORPORATE SHORT-TERM NOTES
American Express Credit Corp. 5.29%-5.73% $90,400,000 $ 88.95 1.02%
due 12/15/1999-2/17/2000
Archer Daniels Midland Co. 5.35% due 2/14/2000 25,000,000 24.554 .28
Associates First Capital Corp. 5.15%-5.69% due 95,000,000 94.550 1.08
11/1/1999-2/24/2000
AT&T Corp. 5.30%-5.70% due 12/6/1999-2/28/2000 55,700,000 55.103 .63
BellSouth Capital Funding Corp. 5.67%-5.93% 62,300,000 61.165 .70
due 1/20-3/16/2000 (1)
Ciesco LP 5.25%-5.98% due 11/4/1999-2/7/2000 75,500,000 74.518 .85
Coca-Cola Co. 5.29%-5.86% due 1/25-1/28/2000 71,800,000 70.750 .81
Eastman Kodak Co. 5.30%-5.72% due 11/2/1999-2/24/2000 82,000,000 81.127 .92
E.I. du Pont de Nemours and Co. 5.25%-5.70% 63,000,000 62.072 .70
due 11/29/1999-3/10/2000
Emerson Electric Co. 5.30%-5.31% due 1/24-2/1/2000 54,300,000 53.500 .61
Ford Motor Credit Co. 5.19%-5.84% due 71,700,000 70.973 .81
12/3/1999-1/13/2000
General Electric Capital Corp. 5.41%-5.97% 81,200,000 79.831 .91
due 1/25-2/23/2000
H.J. Heinz Co. 5.50%-5.53% due 1/27-2/2/2000 69,500,000 68.432 .77
Household Finance Corp. 5.23%-5.95% due 68,600,000 67.685 .77
12/9/1999-1/28/2000
IBM Credit Corp. 5.24%-5.95% due 12/15/1999-1/19/2000 53,000,000 52.517 .60
International Lease Finance Corp. 5.29%-5.60% 42,266,000 41.841 .47
due 11/8/1999-2/3/2000
Johnson & Johnson 5.30%-5.60% due 1/25-2/16/99 (1) 37,300,000 36.681 .41
Merck & Co. Inc. 5.30%-5.34% due 2/3-2/4/2000 64,000,000 62.972 .72
Motiva Enterprises LLC 5.75%-5.94% due 1/27-2/18/2000 52,800,000 51.904 .59
National Rural Utilities Cooperative Finance Corp. 62,700,000 62.127 .71
5.28%-5.75% due 11/10/1999-2/18/2000
Pfizer Inc. 5.77%-5.80% due 3/14-3/17/2000 (1) 54,500,000 53.272 .60
Procter & Gamble Co. 5.29%-5.90% due 11/30/1999-1/31/2000 81,600,000 80.712 .92
SBC Communications Inc. 5.68% due 2/10/2000 (1) 34,162,000 33.583 .38
USAA Capital Corp. 5.73%-5.85% due 1/24-2/2/2000 52,500,000 51.685 .62
Walt Disney Co. 5.84%-5.89% due 1/21-2/18/2000 61,600,000 60.639 .69
1,541.14 17.57
------------------
FEDERAL AGENCY DISCOUNT NOTES
Fannie Mae 4.75%-5.40% due 11/4/1999-2/9/2000 139,524,000 138.791 1.58
Federal Home Loan Banks 4.81%-5.44% due 125,800,000 124.724 1.42
11/12/1999-2/25/2000
Freddie Mac 4.78%-5.52% due 11/4/1999-3/2/2000 226,495,000 224.921 2.57
------------------
488.436 5.57
------------------
U.S. TREASURY SHORT-TERM NOTES
6.125%-8.75% due 2/15-9/30/2000 430,000,000 435.590 4.97
TOTAL SHORT-TERM SECURITIES (cost: 2,465.17 28.11
$2,480.272 million)
Excess of payables over cash and receivables 54.153 .62
------------------
TOTAL SHORT-TERM SECURITIES, CASH AND RECEIVABLES,
NET OF PAYABLES 2,411.02 27.49
------------------
NET ASSETS $8,772.7100.00%
====== ======
(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) Pass-through security backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore,
the effective maturity is shorter than the stated
maturity.
(4) Coupon rate may change periodically.
(5) Step bond; coupon rate will increase at a later date.
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
<TABLE>
Capital Income Builder
Financial Statements
<S> <C> <C>
Statement of Assets and Liabilities
at October 31, 1999 (dollars in
millions)
Assets:
Investment securities at market (cost:$4,943.951) $6,361.753
Short-term securities (cost:$2,480.272) 2,465.173
Cash .029
Receivables for-
Sales of investments $2.631
Sales of fund's shares 4.321
Dividends and accrued interest 38.869 45.821
----------------------
8,872.776
Liabilities:
Payables for-
Purchases of investments 20.239
Repurchases of fund's shares 10.210
Management services 2.306
Dividends payable 63.323
Accrued expenses 3.925 100.003
----------------------
Net Assets at October 31, 1999 - Equivalent to
$44.90 per share on 195,385,277 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 400,000,000 shares) $8,772.773
============
Statement of Operations
for the year ended October 31, 1999 (dollars in
millions)
Investment Income:
Income:
Dividends $ 230.043
Interest 206.791 $436.834
------------
Expenses:
Management services fee 28.908
Distribution expenses 21.496
Transfer agent fee 5.195
Reports to shareholders .246
Registration statement and prospectus .476
Postage, stationery and supplies .733
Directors' fees .172
Auditing and legal fees .059
Custodian fee .948
Taxes other than federal income tax .099
Other expenses .102 58.434
----------------------
Net investment income 378.400
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 329.823
Net change in unrealized appreciation on investments (484.382)
------------
Net realized gain and change in unrealized
appreciation on investments (154.559)
------------
Net Increase in Net Assets Resulting from Operations $223.841
============
See Notes to Financial Statements
Statement of Changes in Net Assets (dollars imillions)
Year endedOctober 31
----------------------
1999 1998
----------------------
Operations:
Net investment income $ 378.400$ 357.940
Net realized gain on investments 329.823 519.943
Net change in unrealized appreciation on investmen (484.382) 108.040
----------------------
Net increase in net assets resulting from
operations 223.841 985.923
----------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (376.344) (360.241)
Distributions from net realized gain on investment (510.675) (256.425)
----------------------
Total dividends and distributions (887.019) (616.666)
----------------------
Capital Share Transactions:
Proceeds from shares sold: 26,060,446 and
30,081,411 shares, respectively 1,227.223 1,451.894
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 17,234,396 and
10,721,248 shares, respectively 799.504 505.404
Cost of shares repurchased: 28,645,287 and 18,311,478
shares, respectively (1,337.580 (881.077)
----------------------
Net increase in net assets resulting from capital
share transactions 689.147 1,076.221
----------------------
Total Increase in Net Assets 25.969 1,445.478
Net Assets:
Beginning of year 8,746.804 7,301.326
----------------------
End of year (including undistributed net investment
income: $5.250 and $3.480, respectively) $8,772.773$8,746.804
======================
See Notes to Financial Statements
</TABLE>
CAPITAL INCOME BUILDER
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - 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. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. 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.
NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed
in terms of non-U.S. 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 non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost.
Dividend income is recognized on the ex-dividend date, and interest income is
recognized on an accrual basis. Original issue discounts on securities are
amortized daily over the expected life of the security. Amortization of market
discounts on securities is recognized upon disposition. The fund does not
amortize premiums on securities purchased.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily from net investment income. Distributions paid to shareholders
are recorded on the ex-dividend date.
2. NON-U.S. INVESTMENTS
INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.
TAXATION - Dividend and interest income is recorded net of non-U.S. taxes
paid. For the year ended October 31, 1999, such non-U.S. taxes were $9,269,000.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, and other receivables and payables, on a book basis, were $286,000
for the year ended October 31, 1999.
3. FEDERAL INCOME TAXATION
The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.
As of October 31, 1999, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $1,402,703,000, of which
$1,757,313,000 related to appreciated securities and $354,610,000 related to
depreciated securities. During the year ended October 31, 1999, the fund
realized, on a tax basis, a net capital gain of $332,283,000 on securities
transactions. Net gains related to non-U.S. currency and other transactions of
$2,460,000 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 $7,424,223,000 at October 31, 1999.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $28,908,000 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.
DISTRIBUTION EXPENSES - 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, 1999, distribution expenses under the Plan were $21,496,000. As of
October 31, 1999, accrued and unpaid distribution expenses were $3,131,000.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $5,326,000 (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.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $5,195,000.
DEFERRED DIRECTORS' FEES - 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, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993), net of any
payments to Directors, were $360,000.
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.
5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,459,940,000 and $1,590,820,000, respectively,
during the year ended October 31, 1999.
As of October 31, 1999, accumulated undistributed net realized gain on
investments was $277,135,000 and additional paid-in capital was $7,085,733,000.
The fund reclassified $286,000 from undistributed net realized currency losses
to undistributed net investment income and $34,300,000 to additional paid in
capital from undistributed net realized gains for the year ended October 31,
1999 as a result of permanent differences between book and tax.
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 $948,000 includes $52,000 that was paid by these credits
rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share Data and Ratios
Year ended October 31
----------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------
Net Asset Value, Beginning of Year $48.40 $46.14 $39.70 $36.27 $32.68
----------------------------------------------
Income from Investment Operations:
Net investment income 1.93 2.09 1.74 1.95 1.69
Net (loss) gain on securities (both
realized and unrealized) ($.70) 3.87 7.20 3.92 3.69
----------------------------------------------
Total from investment operations 1.23 5.96 8.94 5.87 5.38
----------------------------------------------
Less Distributions:
Dividends (from net investment income) (1.92) (2.09) (1.77) (1.94) (1.69)
Distributions (from capital gains) (2.81) (1.61) (.73) (.50) (.10)
----------------------------------------------
Total distributions (4.73) (3.70) (2.50) (2.44) (1.79)
----------------------------------------------
Net Asset Value, End of Year $44.90 $48.40 $46.14 $39.70 $36.27
==================================== =======
Total Return (1) 2.53% 13.33% 23.16% 16.76% 16.98%
Ratios/Supplemental Data:
Net assets, end of year (in millions) $8,773 $8,747 $7,301 $5,418 $4,533
Ratio of expenses to average net assets .64% .64% .65% .71% .72%
Ratio of net income to average net assets 4.15% 4.35% 4.04% 5.19% 4.96%
Portfolio turnover rate 20.56% 24.38% 27.65% 27.56% 18.06%
(1) Excludes maximum sales charge of 5.75%.
</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, 1999, 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, 1999 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
Los Angeles, California
November 30, 1999
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year
regarding the federal tax status of distributions.
During the fiscal year ended October 31, 1999, the fund paid a long-term
capital gain distribution of $2.81 per share.
The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 26% of the dividends
paid by the fund from net investment income represent 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, 16% of the dividends
paid by the fund from net investment income were 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 retirement plan 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 OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2000 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.
CAPITAL INCOME BUILDER
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE, Rolling Hills Estates, California
Private investor; former President and Chief
Executive Officer, The Mission Group;
former President, Southern California Edison Company
PAUL G. HAAGA, JR., Los Angeles, California
Chairman of the Board of the fund
Executive Vice President and Director,
Capital Research and Management Company
MARY MYERS KAUPPILA, Boston, Massachusetts
Private investor; former owner and President,
Energy Investment, Inc.
JAMES B. LOVELACE, Los Angeles, California
President and Principal Executive Officer of the fund
Senior Vice President,
Capital Research and Management Company
JON B. LOVELACE, Los Angeles, California
Vice Chairman of the Board of the fund
Chairman Emeritus,
Capital Research and Management Company
GAIL L. NEALE, Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of the
Salzburg Seminar
ROBERT J. O'NEILL, Ph.D., Oxford, England
Chichele Professor of the History of War;
Fellow of All Souls College, University of Oxford
DONALD E. PETERSEN, Birmingham, Michigan
Retired; former Chairman of the Board and
Chief Executive Officer, Ford Motor Company
STEFANIE POWERS, Beverly Hills, California
Actor; Founder and President,
The William Holden Wildlife Foundation
FRANK STANTON, New York, New York
Retired; former President, CBS Inc. (1946-1973)
CHARLES WOLF, JR., PH.D., Santa Monica, California
Senior Economic Adviser and Corporate Fellow in
International Economics, The RAND Corporation
OFFICERS
JANET A. MCKINLEY, New York, New York
Senior Vice President of the fund
Director,
Capital Research and Management Company
CATHERINE M. WARD, Los Angeles, California
Senior Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
JOYCE E. GORDON, Los Angeles, California
Vice President of the fund
Senior Vice President and Director,
Capital Research Company
DARCY B. KOPCHO, Los Angeles, California
Vice President of the fund
Executive Vice President and Director,
Capital Research Company
STEVEN T. WATSON, London, England
Vice President of the fund
Vice President and Director,
Capital Research Company
VINCENT P. CORTI, Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
R. MARCIA GOULD, Brea, California
Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
[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 92821-5823
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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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
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, 1999, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
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.
Printed on recycled paper
Litho in USA TAG/AL/4378
Lit. No. CIB-011-1299
