SEC. File Nos. 2-12967
811-5085
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 17
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 19
CAPITAL INCOME BUILDER, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
Vincent P. Corti
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
MICHAEL J. FAIRCLOUGH, ESQ.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing become effective on January 1, 2001, pursuant
to paragraph (b) of rule 485.
<PAGE>
Capital Income Builder/(R)/
Prospectus
JANUARY 1, 2001
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
---------------------------------------------------------
CAPITAL INCOME BUILDER, INC.
333 South Hope Street
Los Angeles, California 90071
<TABLE>
<CAPTION>
TICKER NEWSPAPER FUND
SYMBOL ABBREVIATION NUMBER
------------------------------------------------------------
<S> <C> <C> <C>
Class A CAIBX CapIB 12
Class B CIBBX CapIBB 212
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Fund 5
-------------------------------------------------------
Investment Objectives, Strategies and Risks 6
-------------------------------------------------------
Management and Organization 9
-------------------------------------------------------
Shareholder Information 11
-------------------------------------------------------
Choosing a Share Class 12
-------------------------------------------------------
Purchase and Exchange of Shares 13
-------------------------------------------------------
Sales Charges 14
-------------------------------------------------------
Sales Charge Reductions and Waivers 16
-------------------------------------------------------
Plans of Distribution 18
-------------------------------------------------------
How to Sell Shares 19
-------------------------------------------------------
Distributions and Taxes 20
-------------------------------------------------------
Financial Highlights 21
-------------------------------------------------------
</TABLE>
1
CAPITAL INCOME BUILDER / PROSPECTUS
CIB-010-0101/MC
<PAGE>
---------------------------------------------------------
RISK/RETURN SUMMARY
The fund primarily seeks to provide you with a level of current income that
exceeds the average yield on U.S. stocks generally and a growing stream of
income over the years. Secondarily, the fund strives to make your investment
grow over time. The fund invests primarily in a broad range of
income-producing securities, including stocks with a history of, or potential
for, increasing dividends. The fund may also invest significantly in non-U.S.
securities.
The fund is designed for investors seeking current income and capital
appreciation through a mix of investments that provide above-average price
stability. An investment in the fund is subject to risks, including the
possibility that the fund's income and the value of its investments may
fluctuate in response to economic, political or social events in the U.S. or
abroad. The prices of equity securities owned by the fund may be affected by
events specifically involving the companies issuing those securities. The
values of debt securities may be affected by changing interest rates and credit
risk assessments. Although all securities in the fund's portfolio may be
adversely affected by currency fluctuations or world political, social and
economic instability, investments outside the U.S. may be affected to a greater
extent.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.
2
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
INVESTMENT RESULTS
The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year to year
and by showing how the fund's average annual total returns for various periods
compare with those of a broad measure of market performance. Past results are
not an indication of future results.
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1990 3.89%
1991 25.70%
1992 10.00%
1993 15.28%
1994 -2.26%
1995 25.05%
1996 17.64%
1997 23.33%
1998 11.75%
1999 -2.77%
[end chart]
The fund's year-to-date return for the nine months ended September 30, 2000
was 6.66%.
------------------------------------------------------------------------------
The fund's highest/lowest quarterly results during this time period were:
<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 11.08% (quarter ended December 31, 1990)
LOWEST -7.02% (quarter ended September 30, 1990)
</TABLE>
3
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 7/30/87
(with the maximum sales charge -8.37% 13.19% 11.64% 11.53%
imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
S&P 500/2/ 21.01% 28.49% 18.17% 16.15%
------------------------------------------------------------------------------
Lipper Income Funds Average/3/ 4.97% 13.65% 11.11% 13.82%
------------------------------------------------------------------------------
</TABLE>
Class A yield: 4.28%
(For current yield information, please call American FundsLine at
1-800-325-3590).
1 Lifetime figures are from the date the fund's Class A shares began investment
operations.
2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
measurement of changes in stock market conditions based on the weighted
average performance of 500 widely held common stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Lipper Income Funds Average represents an average of funds that normally
seek a high level of cuirrent income through investing in income-producing
stocks, bonds, and money market instruments. The results of the underlying
funds in the average include the reinvestment of dividend and capital gain
distributions and brokerage commissions paid by the funds for portfolio
transactions but do not reflect sales charges.
Unlike the bar chart on the previous page, this table reflects the fund's
investment results with the maximum initial or deferred sales charge imposed,
as required by Securities and Exchange Commission rules. Class A share results
reflect the maximum initial sales charge of 5.75%. Sales charges are reduced
for purchases of $25,000 or more. Results would be higher if they were
calculated at net asset value. All fund results reflect the reinvestment of
dividend and capital gain distributions.
Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge declines thereafter until it reaches 0% after six years. Class B
shares convert to Class A shares after eight years. Since the fund's Class B
shares were first made available on March 15, 2000, comparable results are not
available as of the most recent calendar year-end.
4
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
FEES AND EXPENSES OF THE FUND
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 5.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>
1 Sales charges are reduced or eliminated for purchases of $25,000 or more.
2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.
3 Deferred sales charges are reduced after 12 months and eliminated after six
years.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets) CLASS A CLASS B/1/
-----------------------------------------------
<S> <C> <C>
Management Fees 0.34% 0.34%
Distribution and/or Service (12b-1) Fees 0.23%/2/ 1.00%
Other Expenses 0.10% 0.09%
Total Annual Fund Operating Expenses 0.67% 1.43%
</TABLE>
1 Annualized.
2 Class A 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated, that your investment
has a 5% return each year and that the fund's operating expenses remain the
same as shown above. The "Class A" example reflects the maximum initial sales
charge in Year One. The "Class B - assuming redemption" example reflects
applicable contingent deferred sales charges through Year Six (after which time
they are eliminated). Both Class B examples reflect Class A expenses for Years
9 and 10 since Class B shares automatically convert to Class A after eight
years. Although your actual costs may be higher or lower, based on these
assumptions your cumulative expenses would be:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
<S> <C> <C> <C> <C>
Class A $640 $777 $927 $1,362
----------------------------------------------------------------------------
Class B - assuming redemption $646 $852 $982 $1,506
Class B - assuming no redemption $146 $452 $782 $1,506
</TABLE>
5
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund has two primary investment objectives - 1) to provide you with a level
of current income that exceeds the average yield on U.S. stocks generally and
2) to provide you with a growing stream of income over the years. The fund's
secondary objective is to provide you with growth of capital. The fund invests
primarily in a broad range of income-producing securities, including stocks and
bonds. The fund may also invest significantly in securities of issuers
domiciled outside the U.S.
The fund normally will invest at least 90% of its assets in income-producing
securities (with at least 50% of its assets in common stocks). The prices of
common stocks and other equity-type securities held by the fund may decline in
response to certain events including those directly involving issuers of these
securities, adverse conditions affecting the general economy, overall market
declines, world political, social and economic instability, and currency
fluctuations. The values of most debt securities held by the fund may be
affected by changing interest rates, and individual securities by changes in
their effective maturities and credit ratings. For example, the values of bonds
in the fund's portfolio generally will decline when interest rates rise and
vice versa.
Investments outside the U.S. may be affected by these events to a greater
extent and may also be affected by differing securities regulations, higher
transaction costs, and administrative difficulties such as delays in clearing
and settling portfolio transactions.
The fund may also hold cash or money market instruments. The size of the fund's
cash position will vary and will depend on various factors, including market
conditions and purchases and redemptions of fund shares. A larger cash position
could detract from the achievement of the fund's objectives, but it also would
reduce the fund's exposure in the event of a market downturn and provide
liquidity to make additional investments or to meet redemptions.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
investments. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.
6
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
ADDITIONAL INVESTMENT RESULTS
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 7/30/87 -2.77% 14.54% 12.30% 12.06%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
S&P 500/2/ 21.01% 28.49% 18.17% 16.15%
------------------------------------------------------------------------------
Lipper Income Funds Average/3/ 4.97% 13.65% 11.11% 13.82%
------------------------------------------------------------------------------
</TABLE>
1 Lifetime figures are from the date the fund's Class A shares began investment
operations.
2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
measurement of changes in stock market conditions based on the weighted
average performance of 500 widely held common stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Lipper Income Funds Average represents an average of funds that normally
seek a high level of cuirrent income through investing in income-producing
stocks, bonds, and money market instruments. The results of the underlying
funds in the average include the reinvestment of dividend and capital gain
distributions and brokerage commissions paid by the funds for portfolio
transactions but do not reflect sales charges.
7
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
The following chart illustrates the industry mix of the fund's investment
portfolio as of the end of the fund's fiscal year, October 31, 2000.
LARGEST INDUSTRY HOLDINGS
[pie chart]
Banks 17.91%
Electric Utilities 6.55%
Real Estate 6.07%
Diversified Telecommunication Services 5.16%
Oil & Gas 4.46%
Other Industries 31.98%
Bonds & Notes 15.47%
Cash & Equivalents 12.40%
[end pie}
<TABLE>
<CAPTION>
TEN LARGEST INDIVIDUAL EQUITY HOLDINGS PERCENT OF
(AS OF THE END OF THE FUND'S FISCAL YEAR, OCTOBER 31, 2000) NET ASSETS
--------------------------------------------------------------------------
<S> <C>
Thames Water 2.34%
--------------------------------------------------------------------------
Williams Companies 1.91
--------------------------------------------------------------------------
Telecom Italia 1.78
--------------------------------------------------------------------------
XL Capital 1.71
--------------------------------------------------------------------------
Bank of Nova Scotia 1.64
--------------------------------------------------------------------------
Royal Dutch Petroleum/"Shell" Transport and Trading 1.62
--------------------------------------------------------------------------
Philip Morris 1.57
--------------------------------------------------------------------------
Royal Bank of Canada 1.56
--------------------------------------------------------------------------
Archstone Communities Trust 1.53
--------------------------------------------------------------------------
Pinnacle West Capital 1.47
</TABLE>
Because the fund is actively managed, its holdings will change from time to
time.
8
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the fund. The total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is discussed earlier under
"Fees and Expenses of the Fund."
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested, within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for Capital Income Builder are listed on the following
page.
9
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF
EXPERIENCE
AS AN INVESTMENT
PROFESSIONAL
(INCLUDING THE LAST FIVE
YEARS OF EXPERIENCE YEARS)
AS PORTFOLIO COUNSELOR -----------------------------
PORTFOLIO (AND RESEARCH PROFESSIONAL, WITH CAPITAL
COUNSELORS FOR IF APPLICABLE) FOR RESEARCH AND
CAPITAL INCOME CAPITAL INCOME BUILDER MANAGEMENT
BUILDER PRIMARY TITLE(S) (APPROXIMATE) COMPANY
-------------------------------------------------------------------------------------OR AFFILIATES TOTAL YEARS
-----------------------------
<S> <C> <C> <C> <C>
JAMES B. President, Principal 12 years 19 years 19 years
LOVELACE Executive Officer and
Director of the fund. Senior
Vice President, Capital
Research and Management
Company
------------------------------------------------------------------------------------------------------------------
JON B. Vice Chairman of the Board of 13 years (since the fund began 49 years 49 years
LOVELACE the fund. Chairman Emeritus, operations)
Capital Research and
Management Company
------------------------------------------------------------------------------------------------------------------
JOYCE E. Senior Vice President of the 1 year (plus 11 years as a research 25 years 25 years
GORDON fund. Senior Vice President, professional prior to becoming a
Capital Research Company* portfolio counselor for the fund)
-----------------------------
-------------------------------------------------------------------------------------
JANET A. Senior Vice President of the 13 years (since the fund began 19 years 25 years
MCKINLEY fund. Director, Capital operations)
Research and Management
Company. Senior Vice
President, Capital Research
Company*
------------------------------------------------------------------------------------------------------------------
STEVEN T. Vice President of the fund. 2 years (plus 5 years as a research 11 years 11 years
WATSON Senior Vice President, professional prior to becoming a
Capital Research Company* portfolio counselor for the fund)
------------------------------------------------------------------------------------------------------------------
The fund began investment operations on July 30, 1987.
* Company affiliated with Capital Research and Management Company
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
[map of the United States]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, Class B
shares generally are not available to certain retirement plans (for example,
group retirement plans such as 401(k) plans, employer-sponsored 403(b) plans,
and money purchase pension and profit sharing plans). Some retirement plans or
accounts held by investment dealers may not offer certain services. If you
have any questions, please contact American Funds Service Company, your plan
administrator/trustee or dealer.
11
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
CHOOSING A SHARE CLASS
The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.
Factors you should consider in choosing a class of shares include:
. How long you expect to own the shares
. How much you intend to invest
. The expenses associated with owning shares of each class
. Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)
EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.
Differences between Class A and Class B shares include:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to No initial sales charge.
5.75%. Sales charges are reduced or
eliminated for purchases of $25,000
or more (see "Sales Charges - Class
A").
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.30% annually. of 1.00% annually.
------------------------------------------------------------------------------
Higher dividends, if any, than Lower dividends, if any, than Class A
Class B shares due to lower annual shares due to higher distribution fees
expenses. and other expenses.
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge if
(except on certain redemptions on you sell shares within six years of
purchases of $1 million or more buying them. The charge starts at 5%
bought without an initial sales and declines thereafter until it
charge). reaches 0% after six years. (See "Sales
Charges - Class B.")
------------------------------------------------------------------------------
No purchase maximum. Maximum purchase of $100,000.
------------------------------------------------------------------------------
Automatic conversion to Class A shares
after eight years, reducing future
annual expenses.
------------------------------------------------------------------------------
</TABLE>
12
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account (including retirement plan accounts) $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>
13
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
SHARE PRICE
The fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In calculating net
asset value, market prices are used when available. The fund has adopted
procedures to make "fair value" determinations when reliable market prices for
particular securities are not available.
Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.
---------------------------------------------------------
SALES CHARGES
CLASS A
The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced or eliminated for larger
purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%
------------------------------------------------------------------------------
$25,000 but less than 5.00% 5.26% 4.25%
$50,000
------------------------------------------------------------------------------
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
------------------------------------------------------------------------------
$750,000 but less than $1
million 1.50% 1.52% 1.20%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE
14
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type
plans investing $1 million or more, or with 100 or more eligible employees, and
Individual Retirement Account rollovers involving retirement plan assets
invested in the American Funds, may invest with no sales charge and are not
subject to a contingent deferred sales charge. Investments made through
retirement plans, endowments or foundations with $50 million or more in assets,
or through certain qualified fee-based programs may also be made with no sales
charge and are not subject to a contingent deferred sales charge. The fund may
pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.
CLASS B
Class B shares are sold without any initial sales charge. However, a contingent
deferred sales charge may be applied to the value of the shares you redeem
within six years of purchase, as shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares sold within year 1 2 3 4 5 6
----------------------------------------------------------------
Contingent deferred sales charge 5% 4% 4% 3% 2% 1%
</TABLE>
Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B Shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
American Funds Distributors pays compensation equal to 4% of the amount
invested to dealers who sell Class B shares.
CLASS B CONVERSION TO A SHARES
Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.
15
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below, in the statement of additional information and
"Welcome to the Family."
REDUCING YOUR CLASS A SALES CHARGE
You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.
AGGREGATING ACCOUNTS
To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:
. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.
. solely controlled business accounts.
. single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to qualify for a
reduced Class A sales charge. Direct purchases of money market funds are
excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value (or if greater, the amount you
invested less any withdrawals) of your existing Class A and B holdings in the
American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your Class
A sales charge. Direct purchases of money market funds are excluded.
16
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
STATEMENT OF INTENTION
You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine the applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be
due if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.
CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES
The contingent deferred sales charge on Class B shares may be waived in the
following cases:
. when receiving payments through systematic withdrawal plans (up to 12% of
the value of your account);
. when receiving required minimum distributions from retirement accounts upon
reaching age 70 1/2; or
. for redemptions due to death or post-purchase disability of the
shareholder.
For more information, please consult your financial adviser, the statement of
additional information or "Welcome to the Family."
17
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
PLANS OF DISTRIBUTION
The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. The plans
provide for annual expenses of up to 0.30% for Class A shares and 1.00% for
Class B shares. Up to 0.25% of these payments are used to pay service fees to
qualified dealers for providing certain shareholder services. The remaining
0.75% expense for Class B shares is used for financing commissions paid to your
dealer. The 12b-1 fees paid by the fund, as a percentage of average net assets,
for the previous fiscal year is indicated above under "Fees and Expenses of the
Fund." Since these fees are paid out of the fund's assets or income on an
ongoing basis, over time they will increase the cost and reduce the return of
an investment. The higher fees for Class B shares may cost you more over time
than paying the initial sales charge for Class A shares.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
18
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
. Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
. Requests must be signed by the registered shareholder(s).
. A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
. American Funds Service Company reserves the right to require signature
guarantee(s) on all redemptions.
. Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:
. Redemptions by telephone, fax, or computer (including American FundsLine
and American FundsLine OnLine) are limited to $50,000 per shareholder each
day.
. Checks must be made payable to the registered shareholder.
. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American
19
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, it and/or the fund may be
liable for losses due to unauthorized or fraudulent instructions.
---------------------------------------------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund intends to distribute dividends to you, if any, usually in March,
June, September and December. Capital gains, if any, are usually distributed in
December. When a dividend or capital gain is distributed, the net asset value
per share is reduced by the amount of the payment.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do not elect
to take capital gain distributions in cash because these distributions reduce
principal value.
TAXES ON DISTRIBUTIONS
Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
20
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
FINANCIAL HIGHLIGHTS/1/
The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
Net gains/(losses) on
Net asset securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Years ended beginning of investment and investment investment (from capital Total value, end of
October 31 year income unrealized) operations income) gains) distributions year
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $44.90 $1.99/2/ $.26/2/ $2.25 $(1.92) $(1.54) $(3.46) $43.69
1999 48.40 1.93 (.70) 1.23 (1.92) (2.81) (4.73) 44.90
1998 46.14 2.09 3.87 5.96 (2.09) (1.61) (3.70) 48.40
1997 39.70 1.74 7.20 8.94 (1.77) (.73) (2.50) 46.14
1996 36.27 1.95 3.92 5.87 (1.94) (.50) (2.44) 39.70
CLASS B:
2000 40.33 .96/2/ 3.44/2/ 4.40 (1.04) - (1.04) 43.69
<CAPTION>
Ratio of Ratio of
Net assets, expenses to income to
Years ended end of year average net average net Portfolio
October 31 Total return (in millions) assets assets turnover rate
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 5.55% $7,368 .67% 4.67% 41.37%/4/
1999 2.53 8,773 .64 4.15 20.56
1998 13.33 8,747 .64 4.35 24.38
1997 23.16 7,301 .65 4.04 27.65
1996 16.76 5,418 .71 5.19 27.56
CLASS B:
2000 10.97 18 1.44/3/ 3.90/3/ 41.37/4/
</TABLE>
1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended
October 31. The period ended 2000 represents, for Class B shares, the 230-day
period ended October 31, 2000. Class B shares were not offered before March 15,
2000. Total return for Class B is based on activity during the period and thus
is not representative of a full year. Total returns exclude all sales charges,
including contingent deferred sales charges.
2 Based on average shares outstanding.
3 Annualized.
4 Represents portfolio turnover rate (equivalent for all share classes) for the
year ended October 31, 2000.
21
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
22
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
MULTIPLE TRANSLATIONS This prospectus may be translated into other languages.
If there is any inconsistency or ambiguity as to the meaning of any word or
phrase in a translation, the English text will prevail.
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information
about the fund including financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing market conditions
and the fund's investment strategies, and the independent accountants' report
(in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
more detailed information on all aspects of the fund, including the fund's
financial statements and is incorporated by reference into this prospectus.
The Codes of Ethics describe the personal investing policies adopted by the
fund and the fund's investment adviser and its affiliated companies.
The Codes of Ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the fund
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the fund. In order to reduce the
volume of mail you receive, when possible, only one copy of these documents
will be sent to shareholders that are part of the same family and share the
same residential address.
* * * * *
If you would like to receive individual copies of these documents at no
charge, please call American Funds Service Company at 800/421-0180 or write to
the Secretary of the fund at 333 South Hope Street, Los Angeles, California
90071.
Investment Company File No. 811-5085
Printed on recycled paper
THE FUND PROVIDES SPANISH TRANSLATIONS IN CONNECTION WITH THE PUBLIC OFFERING
AND SALE OF ITS SHARES. THE FOLLOWING IS A FAIR AND ACCURATE ENGLISH
TRANSLATION OF A SPANISH LANGUAGE PROSPECTUS FOR THE FUND.
/s/ Vincent P. Corti
Vincent P. Corti
Secretary
<PAGE>
Capital Income Builder/(R)/
Prospectus
JANUARY 1, 2001
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
---------------------------------------------------------
CAPITAL INCOME BUILDER, INC.
333 South Hope Street
Los Angeles, California 90071
<TABLE>
<CAPTION>
TICKER NEWSPAPER FUND
SYMBOL ABBREVIATION NUMBER
------------------------------------------------------------
<S> <C> <C> <C>
Class A CAIBX CapIB 12
Class B CIBBX CapIBB 212
</TABLE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Fund 5
-------------------------------------------------------
Investment Objectives, Strategies and Risks 6
-------------------------------------------------------
Management and Organization 9
-------------------------------------------------------
Shareholder Information 11
-------------------------------------------------------
Choosing a Share Class 12
-------------------------------------------------------
Purchase and Exchange of Shares 13
-------------------------------------------------------
Sales Charges 14
-------------------------------------------------------
Sales Charge Reductions and Waivers 16
-------------------------------------------------------
Plans of Distribution 18
-------------------------------------------------------
How to Sell Shares 19
-------------------------------------------------------
Distributions and Taxes 20
-------------------------------------------------------
Financial Highlights 21
-------------------------------------------------------
</TABLE>
1
CAPITAL INCOME BUILDER / PROSPECTUS
CIB-010-0101/MC
<PAGE>
---------------------------------------------------------
RISK/RETURN SUMMARY
The fund primarily seeks to provide you with a level of current income that
exceeds the average yield on U.S. stocks generally and a growing stream of
income over the years. Secondarily, the fund strives to make your investment
grow over time. The fund invests primarily in a broad range of
income-producing securities, including stocks with a history of, or potential
for, increasing dividends. The fund may also invest significantly in non-U.S.
securities.
The fund is designed for investors seeking current income and capital
appreciation through a mix of investments that provide above-average price
stability. An investment in the fund is subject to risks, including the
possibility that the fund's income and the value of its investments may
fluctuate in response to economic, political or social events in the U.S. or
abroad. The prices of equity securities owned by the fund may be affected by
events specifically involving the companies issuing those securities. The
values of debt securities may be affected by changing interest rates and credit
risk assessments. Although all securities in the fund's portfolio may be
adversely affected by currency fluctuations or world political, social and
economic instability, investments outside the U.S. may be affected to a greater
extent.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.
2
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
INVESTMENT RESULTS
The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year to year
and by showing how the fund's average annual total returns for various periods
compare with those of a broad measure of market performance. Past results are
not an indication of future results.
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1990 3.89%
1991 25.70%
1992 10.00%
1993 15.28%
1994 -2.26%
1995 25.05%
1996 17.64%
1997 23.33%
1998 11.75%
1999 -2.77%
[end chart]
The fund's year-to-date return for the nine months ended September 30, 2000
was 6.66%.
------------------------------------------------------------------------------
The fund's highest/lowest quarterly results during this time period were:
<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 11.08% (quarter ended December 31, 1990)
LOWEST -7.02% (quarter ended September 30, 1990)
</TABLE>
3
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 7/30/87
(with the maximum sales charge -8.37% 13.19% 11.64% 11.53%
imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
S&P 500/2/ 21.01% 28.49% 18.17% 16.15%
------------------------------------------------------------------------------
Lipper Income Funds Average/3/ 4.97% 13.65% 11.11% 13.82%
------------------------------------------------------------------------------
</TABLE>
Class A yield: 4.28%
(For current yield information, please call American FundsLine at
1-800-325-3590).
1 Lifetime figures are from the date the fund's Class A shares began investment
operations.
2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
measurement of changes in stock market conditions based on the weighted
average performance of 500 widely held common stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Lipper Income Funds Average represents an average of funds that normally
seek a high level of cuirrent income through investing in income-producing
stocks, bonds, and money market instruments. The results of the underlying
funds in the average include the reinvestment of dividend and capital gain
distributions and brokerage commissions paid by the funds for portfolio
transactions but do not reflect sales charges.
Unlike the bar chart on the previous page, this table reflects the fund's
investment results with the maximum initial or deferred sales charge imposed,
as required by Securities and Exchange Commission rules. Class A share results
reflect the maximum initial sales charge of 5.75%. Sales charges are reduced
for purchases of $25,000 or more. Results would be higher if they were
calculated at net asset value. All fund results reflect the reinvestment of
dividend and capital gain distributions.
Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge declines thereafter until it reaches 0% after six years. Class B
shares convert to Class A shares after eight years. Since the fund's Class B
shares were first made available on March 15, 2000, comparable results are not
available as of the most recent calendar year-end.
4
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
FEES AND EXPENSES OF THE FUND
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 5.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>
1 Sales charges are reduced or eliminated for purchases of $25,000 or more.
2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.
3 Deferred sales charges are reduced after 12 months and eliminated after six
years.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets) CLASS A CLASS B/1/
-----------------------------------------------
<S> <C> <C>
Management Fees 0.34% 0.34%
Distribution and/or Service (12b-1) Fees 0.23%/2/ 1.00%
Other Expenses 0.10% 0.09%
Total Annual Fund Operating Expenses 0.67% 1.43%
</TABLE>
1 Annualized.
2 Class A 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated, that your investment
has a 5% return each year and that the fund's operating expenses remain the
same as shown above. The "Class A" example reflects the maximum initial sales
charge in Year One. The "Class B - assuming redemption" example reflects
applicable contingent deferred sales charges through Year Six (after which time
they are eliminated). Both Class B examples reflect Class A expenses for Years
9 and 10 since Class B shares automatically convert to Class A after eight
years. Although your actual costs may be higher or lower, based on these
assumptions your cumulative expenses would be:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
<S> <C> <C> <C> <C>
Class A $640 $777 $927 $1,362
----------------------------------------------------------------------------
Class B - assuming redemption $646 $852 $982 $1,506
Class B - assuming no redemption $146 $452 $782 $1,506
</TABLE>
5
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund has two primary investment objectives - 1) to provide you with a level
of current income that exceeds the average yield on U.S. stocks generally and
2) to provide you with a growing stream of income over the years. The fund's
secondary objective is to provide you with growth of capital. The fund invests
primarily in a broad range of income-producing securities, including stocks and
bonds. The fund may also invest significantly in securities of issuers
domiciled outside the U.S.
The fund normally will invest at least 90% of its assets in income-producing
securities (with at least 50% of its assets in common stocks). The prices of
common stocks and other equity-type securities held by the fund may decline in
response to certain events including those directly involving issuers of these
securities, adverse conditions affecting the general economy, overall market
declines, world political, social and economic instability, and currency
fluctuations. The values of most debt securities held by the fund may be
affected by changing interest rates, and individual securities by changes in
their effective maturities and credit ratings. For example, the values of bonds
in the fund's portfolio generally will decline when interest rates rise and
vice versa.
Investments outside the U.S. may be affected by these events to a greater
extent and may also be affected by differing securities regulations, higher
transaction costs, and administrative difficulties such as delays in clearing
and settling portfolio transactions.
The fund may also hold cash or money market instruments. The size of the fund's
cash position will vary and will depend on various factors, including market
conditions and purchases and redemptions of fund shares. A larger cash position
could detract from the achievement of the fund's objectives, but it also would
reduce the fund's exposure in the event of a market downturn and provide
liquidity to make additional investments or to meet redemptions.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
investments. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.
6
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
ADDITIONAL INVESTMENT RESULTS
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 7/30/87 -2.77% 14.54% 12.30% 12.06%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
S&P 500/2/ 21.01% 28.49% 18.17% 16.15%
------------------------------------------------------------------------------
Lipper Income Funds Average/3/ 4.97% 13.65% 11.11% 13.82%
------------------------------------------------------------------------------
</TABLE>
1 Lifetime figures are from the date the fund's Class A shares began investment
operations.
2 The Standard & Poor's 500 Composite Index is a market capitalization-weighted
measurement of changes in stock market conditions based on the weighted
average performance of 500 widely held common stocks. This index is unmanaged
and does not reflect sales charges, commissions or expenses.
3 The Lipper Income Funds Average represents an average of funds that normally
seek a high level of cuirrent income through investing in income-producing
stocks, bonds, and money market instruments. The results of the underlying
funds in the average include the reinvestment of dividend and capital gain
distributions and brokerage commissions paid by the funds for portfolio
transactions but do not reflect sales charges.
7
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
The following chart illustrates the industry mix of the fund's investment
portfolio as of the end of the fund's fiscal year, October 31, 2000.
LARGEST INDUSTRY HOLDINGS
[pie chart]
Banks 17.91%
Electric Utilities 6.55%
Real Estate 6.07%
Diversified Telecommunication Services 5.16%
Oil & Gas 4.46%
Other Industries 31.98%
Bonds & Notes 15.47%
Cash & Equivalents 12.40%
[end pie}
<TABLE>
<CAPTION>
TEN LARGEST INDIVIDUAL EQUITY HOLDINGS PERCENT OF
(AS OF THE END OF THE FUND'S FISCAL YEAR, OCTOBER 31, 2000) NET ASSETS
--------------------------------------------------------------------------
<S> <C>
Thames Water 2.34%
--------------------------------------------------------------------------
Williams Companies 1.91
--------------------------------------------------------------------------
Telecom Italia 1.78
--------------------------------------------------------------------------
XL Capital 1.71
--------------------------------------------------------------------------
Bank of Nova Scotia 1.64
--------------------------------------------------------------------------
Royal Dutch Petroleum/"Shell" Transport and Trading 1.62
--------------------------------------------------------------------------
Philip Morris 1.57
--------------------------------------------------------------------------
Royal Bank of Canada 1.56
--------------------------------------------------------------------------
Archstone Communities Trust 1.53
--------------------------------------------------------------------------
Pinnacle West Capital 1.47
</TABLE>
Because the fund is actively managed, its holdings will change from time to
time.
8
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the fund. The total management fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is discussed earlier under
"Fees and Expenses of the Fund."
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested, within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for Capital Income Builder are listed on the following
page.
9
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE YEARS OF
EXPERIENCE
AS AN INVESTMENT
PROFESSIONAL
(INCLUDING THE LAST FIVE
YEARS OF EXPERIENCE YEARS)
AS PORTFOLIO COUNSELOR -----------------------------
PORTFOLIO (AND RESEARCH PROFESSIONAL, WITH CAPITAL
COUNSELORS FOR IF APPLICABLE) FOR RESEARCH AND
CAPITAL INCOME CAPITAL INCOME BUILDER MANAGEMENT
BUILDER PRIMARY TITLE(S) (APPROXIMATE) COMPANY
-------------------------------------------------------------------------------------OR AFFILIATES TOTAL YEARS
-----------------------------
<S> <C> <C> <C> <C>
JAMES B. President, Principal 12 years 19 years 19 years
LOVELACE Executive Officer and
Director of the fund. Senior
Vice President, Capital
Research and Management
Company
------------------------------------------------------------------------------------------------------------------
JON B. Vice Chairman of the Board of 13 years (since the fund began 49 years 49 years
LOVELACE the fund. Chairman Emeritus, operations)
Capital Research and
Management Company
------------------------------------------------------------------------------------------------------------------
JOYCE E. Senior Vice President of the 1 year (plus 11 years as a research 25 years 25 years
GORDON fund. Senior Vice President, professional prior to becoming a
Capital Research Company* portfolio counselor for the fund)
-----------------------------
-------------------------------------------------------------------------------------
JANET A. Senior Vice President of the 13 years (since the fund began 19 years 25 years
MCKINLEY fund. Director, Capital operations)
Research and Management
Company. Senior Vice
President, Capital Research
Company*
------------------------------------------------------------------------------------------------------------------
STEVEN T. Vice President of the fund. 2 years (plus 5 years as a research 11 years 11 years
WATSON Senior Vice President, professional prior to becoming a
Capital Research Company* portfolio counselor for the fund)
------------------------------------------------------------------------------------------------------------------
The fund began investment operations on July 30, 1987.
* Company affiliated with Capital Research and Management Company
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180
[map of the United States]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
You may invest in the fund through various retirement plans. However, Class B
shares generally are not available to certain retirement plans (for example,
group retirement plans such as 401(k) plans, employer-sponsored 403(b) plans,
and money purchase pension and profit sharing plans). Some retirement plans or
accounts held by investment dealers may not offer certain services. If you
have any questions, please contact American Funds Service Company, your plan
administrator/trustee or dealer.
11
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
CHOOSING A SHARE CLASS
The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.
Factors you should consider in choosing a class of shares include:
. How long you expect to own the shares
. How much you intend to invest
. The expenses associated with owning shares of each class
. Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)
EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.
Differences between Class A and Class B shares include:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to No initial sales charge.
5.75%. Sales charges are reduced or
eliminated for purchases of $25,000
or more (see "Sales Charges - Class
A").
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.30% annually. of 1.00% annually.
------------------------------------------------------------------------------
Higher dividends, if any, than Lower dividends, if any, than Class A
Class B shares due to lower annual shares due to higher distribution fees
expenses. and other expenses.
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge if
(except on certain redemptions on you sell shares within six years of
purchases of $1 million or more buying them. The charge starts at 5%
bought without an initial sales and declines thereafter until it
charge). reaches 0% after six years. (See "Sales
Charges - Class B.")
------------------------------------------------------------------------------
No purchase maximum. Maximum purchase of $100,000.
------------------------------------------------------------------------------
Automatic conversion to Class A shares
after eight years, reducing future
annual expenses.
------------------------------------------------------------------------------
</TABLE>
12
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account (including retirement plan accounts) $ 250
For a retirement plan account through payroll deduction $ 25
To add to an account $ 50
For a retirement plan account through payroll deduction $ 25
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>
13
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
SHARE PRICE
The fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In calculating net
asset value, market prices are used when available. The fund has adopted
procedures to make "fair value" determinations when reliable market prices for
particular securities are not available.
Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.
---------------------------------------------------------
SALES CHARGES
CLASS A
The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced or eliminated for larger
purchases as indicated below.
<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%
------------------------------------------------------------------------------
$25,000 but less than 5.00% 5.26% 4.25%
$50,000
------------------------------------------------------------------------------
$50,000 but less than 4.50% 4.71% 3.75%
$100,000
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
------------------------------------------------------------------------------
$750,000 but less than $1
million 1.50% 1.52% 1.20%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE
14
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type
plans investing $1 million or more, or with 100 or more eligible employees, and
Individual Retirement Account rollovers involving retirement plan assets
invested in the American Funds, may invest with no sales charge and are not
subject to a contingent deferred sales charge. Investments made through
retirement plans, endowments or foundations with $50 million or more in assets,
or through certain qualified fee-based programs may also be made with no sales
charge and are not subject to a contingent deferred sales charge. The fund may
pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.
CLASS B
Class B shares are sold without any initial sales charge. However, a contingent
deferred sales charge may be applied to the value of the shares you redeem
within six years of purchase, as shown in the table below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares sold within year 1 2 3 4 5 6
----------------------------------------------------------------
Contingent deferred sales charge 5% 4% 4% 3% 2% 1%
</TABLE>
Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B Shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
American Funds Distributors pays compensation equal to 4% of the amount
invested to dealers who sell Class B shares.
CLASS B CONVERSION TO A SHARES
Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.
15
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below, in the statement of additional information and
"Welcome to the Family."
REDUCING YOUR CLASS A SALES CHARGE
You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.
AGGREGATING ACCOUNTS
To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:
. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.
. solely controlled business accounts.
. single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to qualify for a
reduced Class A sales charge. Direct purchases of money market funds are
excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value (or if greater, the amount you
invested less any withdrawals) of your existing Class A and B holdings in the
American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your Class
A sales charge. Direct purchases of money market funds are excluded.
16
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
STATEMENT OF INTENTION
You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine the applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be
due if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.
CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES
The contingent deferred sales charge on Class B shares may be waived in the
following cases:
. when receiving payments through systematic withdrawal plans (up to 12% of
the value of your account);
. when receiving required minimum distributions from retirement accounts upon
reaching age 70 1/2; or
. for redemptions due to death or post-purchase disability of the
shareholder.
For more information, please consult your financial adviser, the statement of
additional information or "Welcome to the Family."
17
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
PLANS OF DISTRIBUTION
The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. The plans
provide for annual expenses of up to 0.30% for Class A shares and 1.00% for
Class B shares. Up to 0.25% of these payments are used to pay service fees to
qualified dealers for providing certain shareholder services. The remaining
0.75% expense for Class B shares is used for financing commissions paid to your
dealer. The 12b-1 fees paid by the fund, as a percentage of average net assets,
for the previous fiscal year is indicated above under "Fees and Expenses of the
Fund." Since these fees are paid out of the fund's assets or income on an
ongoing basis, over time they will increase the cost and reduce the return of
an investment. The higher fees for Class B shares may cost you more over time
than paying the initial sales charge for Class A shares.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
18
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
. Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
. Requests must be signed by the registered shareholder(s).
. A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
. American Funds Service Company reserves the right to require signature
guarantee(s) on all redemptions.
. Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:
. Redemptions by telephone, fax, or computer (including American FundsLine
and American FundsLine OnLine) are limited to $50,000 per shareholder each
day.
. Checks must be made payable to the registered shareholder.
. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American
19
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
Funds Service Company employs reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine. If reasonable procedures are not employed, it and/or the fund may be
liable for losses due to unauthorized or fraudulent instructions.
---------------------------------------------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund intends to distribute dividends to you, if any, usually in March,
June, September and December. Capital gains, if any, are usually distributed in
December. When a dividend or capital gain is distributed, the net asset value
per share is reduced by the amount of the payment.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do not elect
to take capital gain distributions in cash because these distributions reduce
principal value.
TAXES ON DISTRIBUTIONS
Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
20
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
FINANCIAL HIGHLIGHTS/1/
The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the statement of additional information,
which is available upon request.
<TABLE>
<CAPTION>
Net gains/(losses) on
Net asset securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Years ended beginning of investment and investment investment (from capital Total value, end of
October 31 year income unrealized) operations income) gains) distributions year
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $44.90 $1.99/2/ $.26/2/ $2.25 $(1.92) $(1.54) $(3.46) $43.69
1999 48.40 1.93 (.70) 1.23 (1.92) (2.81) (4.73) 44.90
1998 46.14 2.09 3.87 5.96 (2.09) (1.61) (3.70) 48.40
1997 39.70 1.74 7.20 8.94 (1.77) (.73) (2.50) 46.14
1996 36.27 1.95 3.92 5.87 (1.94) (.50) (2.44) 39.70
CLASS B:
2000 40.33 .96/2/ 3.44/2/ 4.40 (1.04) - (1.04) 43.69
<CAPTION>
Ratio of Ratio of
Net assets, expenses to income to
Years ended end of year average net average net Portfolio
October 31 Total return (in millions) assets assets turnover rate
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 5.55% $7,368 .67% 4.67% 41.37%/4/
1999 2.53 8,773 .64 4.15 20.56
1998 13.33 8,747 .64 4.35 24.38
1997 23.16 7,301 .65 4.04 27.65
1996 16.76 5,418 .71 5.19 27.56
CLASS B:
2000 10.97 18 1.44/3/ 3.90/3/ 41.37/4/
</TABLE>
1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended
October 31. The period ended 2000 represents, for Class B shares, the 230-day
period ended October 31, 2000. Class B shares were not offered before March 15,
2000. Total return for Class B is based on activity during the period and thus
is not representative of a full year. Total returns exclude all sales charges,
including contingent deferred sales charges.
2 Based on average shares outstanding.
3 Annualized.
4 Represents portfolio turnover rate (equivalent for all share classes) for the
year ended October 31, 2000.
21
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
---------------------------------------------------------
NOTES
22
CAPITAL INCOME BUILDER / PROSPECTUS
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
MULTIPLE TRANSLATIONS This prospectus may be translated into other languages.
If there is any inconsistency or ambiguity as to the meaning of any word or
phrase in a translation, the English text will prevail.
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information
about the fund including financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing market conditions
and the fund's investment strategies, and the independent accountants' report
(in the annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
more detailed information on all aspects of the fund, including the fund's
financial statements and is incorporated by reference into this prospectus.
The Codes of Ethics describe the personal investing policies adopted by the
fund and the fund's investment adviser and its affiliated companies.
The Codes of Ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the fund
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the fund. In order to reduce the
volume of mail you receive, when possible, only one copy of these documents
will be sent to shareholders that are part of the same family and share the
same residential address.
* * * * *
If you would like to receive individual copies of these documents at no
charge, please call American Funds Service Company at 800/421-0180 or write to
the Secretary of the fund at 333 South Hope Street, Los Angeles, California
90071.
Investment Company File No. 811-5085
Printed on recycled paper
<PAGE>
CAPITAL INCOME BUILDER, INC.
Part B
Statement of Additional Information
January 1, 2001
This document is not a prospectus but should be read in conjunction with the
current prospectus of Capital Income Builder (the "fund" or "CIB") dated January
1, 2001. The prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:
Capital Income Builder, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them, and they should contact their employer for details.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item Page No.
---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 8
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 10
Fund Directors and Other Officers . . . . . . . . . . . . . . . . . 11
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 17
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 26
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 29
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Shareholder Account Services and Privileges . . . . . . . . . . . . 32
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 34
General Information . . . . . . . . . . . . . . . . . . . . . . . . 35
Class A Share Investment Results and Related Statistics . . . . . . 36
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Financial Statements
</TABLE>
Capital Income Builder - Page 1
<PAGE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.
OBJECTIVE
. The fund will invest at least 90% of its assets in income-producing
securities.
EQUITY SECURITIES
. The fund will invest at least 50% of its assets in common stocks.
DEBT SECURITIES
. The fund may invest up to 5% of its assets in straight debt securities
rated BB by Standard & Poor's Corporation and Ba by Moody's Investors
Service, Inc. or below or unrated but determined to be of equivalent
quality.
NON-U.S. SECURITIES
. The fund may invest up to 40% of its assets in securities of issuers
domiciled outside the U.S.
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."
EQUITY SECURITIES - Equity securities represent an ownership position in a
company. These securities may include common stocks and securities with equity
conversion or purchase rights. The prices of equity securities fluctuate based
on changes in the financial condition of their issuers and on market and
economic conditions. The fund's results will be related to the overall markets
for these securities.
INVESTING IN SMALLER CAPITALIZATION STOCKS - The fund may invest in the stocks
of smaller companies (typically companies with market capitalizations of less
than $1.5 billion at the time of purchase). The Investment Adviser believes that
the issuers of smaller capitalization stocks often provide attractive investment
opportunities. However, investing in smaller capitalization stocks can involve
greater risk than is customarily associated with investing in stocks of larger,
more established companies. For example, smaller companies often have limited
product lines, markets, or financial resources, may be dependent for management
on one or a few key persons, and can be more susceptible to losses. Also, their
securities may be thinly traded (and therefore have to be sold at a discount
from current prices or sold in small lots over an extended period of time), may
be followed by fewer investment research analysts, and may be subject to wider
price swings thus creating a greater chance of loss than securities of larger
capitalization companies.
DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt
Capital Income Builder - Page 2
<PAGE>
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. The prices of debt securities
fluctuate depending on such factors as interest rates, credit quality, and
maturity. In general, their prices decline when interest rates rise and vice
versa.
Lower rated bonds, rated Ba or below by Standard & Poor's Corporation and BB or
below by Moody's Investors Services, Inc. or unrated but considered to be of
equivalent quality, are described by the rating agencies as speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness than higher rated bonds, or they may already be in default. The
market prices of these securities may fluctuate more than higher quality
securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, lower rated bonds.
Certain risk factors relating to "lower rated bonds" are discussed below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower rated bonds may
be more sensitive to adverse economic changes and political and corporate
developments and may be more sensitive to interest rate changes than higher
rated bonds. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
that would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals, and to
obtain additional financing. In addition, periods of economic uncertainty
and changes can be expected to result in increased volatility of market
prices and yields of lower rated bonds.
PAYMENT EXPECTATIONS - Lower rated bonds, like other bonds, may contain
redemption or call provisions. If an issuer exercises these provisions in a
declining interest rate market, the fund would have to replace the security
with a lower yielding security, resulting in a decreased return for
investors. If the issuer of a bond defaults on its obligations to pay
interest or principal or enters into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it.
LIQUIDITY AND VALUATION - There may be little trading in the secondary
market for particular bonds, which may affect adversely the fund's ability
to value accurately or dispose of such bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of lower rated bonds.
The Investment Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.
INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special
risks, caused by, among other things: currency controls, fluctuating currency
values; different accounting, auditing, and financial reporting regulations and
practices in some countries; changing local and regional economic, political,
and social conditions; expropriation or confiscatory taxation; greater market
volatility; differing securities market structures; and various administrative
difficulties such as delays in clearing and settling portfolio transactions or
in receiving payment of dividends. However, in the opinion of Capital Research
and Management Company, investing outside the U.S. also can reduce certain
portfolio risks due to greater diversification opportunities.
Capital Income Builder - Page 3
<PAGE>
The risks described above are potentially heightened in connection with
investments in developing countries. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of its industrialization cycle with a low per capita
gross national product. For example, political and/or economic structures in
these countries may be in their infancy and developing rapidly. Historically,
the markets of developing countries have been more volatile than the markets of
developed countries. The fund may only invest in securities of issuers in
developing countries to a limited extent.
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar. While entering into forward currency transactions could
minimize the risk of loss due to a decline in the value of the hedged currency,
it could also limit any potential gain which might result from an increase in
the value of the currency. The fund will not generally attempt to protect
against all potential changes in exchange rates. The fund will segregate liquid
assets which will be marked to market daily to meet its forward contract
commitments to the extent required by the Securities and Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The fund may invest in
securities that have a combination of equity and debt characteristics such as
non-convertible preferred stocks and convertible securities. These securities
may at times resemble equity more than debt and vice versa. The risks of
convertible preferred stock may be similar to those of equity securities. Some
types of convertible bonds or preferred stock automatically convert into common
stock. Non-convertible preferred stock with stated redemption rates are similar
to debt in that they have a stated dividend rate akin to the coupon of a bond or
note even though they are often classified as equity securities. The prices and
yields of non-convertible preferred stock generally move with changes in
interest rates and the issuer's credit quality, similar to the factors affecting
debt securities.
Convertible bonds, convertible preferred stock, and other securities may
sometimes be converted into common stock or other securities at a stated
conversion ratio. These securities, prior to conversion, pay a fixed rate of
interest or a dividend. Because convertible securities have both debt and equity
characteristics, their value varies in response to many factors, including the
value of the underlying equity, general market and economic conditions,
convertible market valuations, as well as changes in interest rates, credit
spreads, and the credit quality of the issuer.
Capital Income Builder - Page 4
<PAGE>
U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include direct obligations of the U.S. Treasury (such as Treasury bills, notes
and bonds). For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. Government, and thus they are of the
highest possible credit quality. Such securities are subject to variations in
market value due to fluctuations in interest rates, but, if held to maturity,
will be paid in full.
Certain securities issued by U.S. Government instrumentalities and certain
federal agencies are neither direct obligations of, nor guaranteed by, the
Treasury. However, they generally involve federal sponsorship in one way or
another; some are backed by specific types of collateral; some are supported by
the issuer's right to borrow from the Treasury; some are supported by the
discretionary authority of the Treasury to purchase certain obligations of the
issuer; and others are supported only by the credit of the issuing government
agency or instrumentality. These agencies and instrumentalities include, but are
not limited to, Farmers Home Administration, Federal Home Loan Bank, Federal
Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee
Valley Authority, and Federal Farm Credit Bank System.
PASS-THROUGH SECURITIES - The fund may invest in various debt obligations backed
by a pool of mortgages or other assets including loans on single family
residences, home equity loans, mortgages on commercial buildings, credit card
receivables, and leases on airplanes or other equipment. Principal and interest
payments made on the underlying asset pools backing these obligations are
typically passed through to investors. Pass-through securities may have either
fixed or adjustable coupons. These securities include those discussed below.
"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities) or
the issuer (in the case of FNMA and FHLMC securities). However, the guarantees
do not apply to the market prices and yields of these securities, which vary
with changes in interest rates.
Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed securities generally permit borrowers to
prepay their underlying mortgages. Prepayments can alter the effective maturity
of these instruments.
"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages.
Payments of principal and interest are passed through to each bond at varying
schedules resulting in bonds with different coupons, effective maturities, and
sensitivities to interest rates. In fact, some CMOs may be structured in a way
that when interest rates change the impact of changing prepayment rates on these
securities' effective maturities is magnified.
"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment uncertainty
than other mortgage-related securities because commercial mortgage loans
generally prohibit or impose penalties on prepayments of
Capital Income Builder - Page 5
<PAGE>
principal. In addition, commercial mortgage-related securities often are
structured with some form of credit enhancement to protect against potential
losses on the underlying mortgage loans. Many of the risks of investing in
commercial mortgage-backed securities reflect the risks of investing in the real
estate securing the underlying mortgage loans, including the effects of local
and other economic conditions on real estate markets, the ability of tenants to
make loan payments, and the ability of a property to attract and retain tenants.
"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer. Some asset-backed securities also may receive prepayments which can
change the securities' effective maturities.
LOANS OF PORTFOLIO SECURITIES - The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the Investment Adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. Government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The Investment Adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The fund will limit
its loans of portfolio securities to an aggregate of 33 1/3% of the value of its
total assets, measured at the time any such loan is made.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities,
it assumes the risk of any decline in value of the security beginning on the
date of the agreement. When the fund agrees to sell such securities, it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of the
fund's portfolio securities decline while the fund is in a leveraged position,
greater depreciation of its net assets would likely occur than were it not in
such a position. The fund will not borrow money to settle these transactions and
therefore, will liquidate other portfolio securities in advance of settlement if
necessary to generate additional cash to meet its obligations thereunder.
The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement is the sale of a security by a fund
and its agreement to repurchase the security at a specified time and price. A
"roll" transaction is the sale of mortgage-backed or other
Capital Income Builder - Page 6
<PAGE>
securities together with a commitment to purchase similar, but not identical
securities at a later date. The fund assumes the rights and risks of ownership,
including the risk of price and yield fluctuations as of the time of the
agreement. The fund intends to treat "roll" transactions as two separate
transactions: one involving the purchase of a security and a separate
transaction involving the sale of a security. Since the fund does not intend to
enter into "roll" transactions for financing purposes, it may treat these
transactions as not falling within the definition of "borrowing" set forth in
Section 2(a)(23) of the Investment Company Act of 1940. The fund will segregate
liquid assets which will be marked to market daily in an amount sufficient to
meet its payment obligations under "roll" transactions and reverse repurchase
agreements with broker-dealers (no collateral is required for reverse repurchase
agreements with banks).
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the Investment Adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
fund may be delayed or limited.
REAL ESTATE INVESTMENT TRUSTS - The fund may invest in securities issued by real
estate investment trusts (REITs), which are pooled investment vehicles that
primarily invest in real estate or real estate related loans. REITs are not
taxed on income distributed to shareholders provided they meet requirements
imposed by the Internal Revenue Code. The risks associated with REIT debt
investments are similar to the risks of investing in corporate-issued debt. In
addition, the return on REITs is dependent on such factors as the skill of
management and the real estate environment in general.
VARIABLE AND FLOATING RATE OBLIGATIONS - The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate based
upon changes in market rates. Variable and floating rate obligations bear coupon
rates that are adjusted at designated intervals, based on the then current
market rates of interest. Variable and floating rate obligations permit the fund
to "lock in" the current interest rate for only the period until the next
scheduled rate adjustment, but the rate adjustment feature tends to limit the
extent to which the market value of the obligation will fluctuate.
RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures which have been adopted by the fund's board of directors,
taking into account factors such as the frequency and volume of trading, the
commitment of dealers to make markets and the availability of qualified
investors, all of which can change from time to time. The fund may incur certain
additional costs in disposing of illiquid securities.
* * * * * *
Capital Income Builder - Page 7
<PAGE>
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.
The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio was replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.
FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.
1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities) if immediately after and
as a result of such investment, more than 5% of the fund's total assets would be
invested in securities of the issuer; except that, as to 25% of the fund's total
assets, up to 10% of its total assets may be invested in securities issued or
guaranteed as to payment of interest and principal by a foreign government or
its agencies or instrumentalities or by a multinational agency;
2. Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry;
3. Invest in companies for the purpose of exercising control or management;
4. Knowingly purchase securities of other management investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
5. Buy or sell real estate or commodities or commodity contracts; however, the
fund may invest in debt securities secured by real estate or interests therein
or issued by companies which invest in real estate or interests therein,
including real estate investment trusts, and may purchase or sell currencies
(including forward currency contracts);
6. Acquire securities subject to restrictions on disposition or securities for
which there is no readily available market, or enter into repurchase agreements
or purchase time deposits
Capital Income Builder - Page 8
<PAGE>
maturing in more than seven days, if, immediately after and as a result, the
value of such securities would exceed, in the aggregate, 10% of the fund's total
assets;
7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933;
8. Make loans, except that the fund may purchase debt securities, enter into
repurchase agreements and make loans of portfolio securities;
9. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
11. Borrow money, except from banks for temporary or emergency purposes not in
excess of 5% of the value of the fund's total assets (in the event that the
asset coverage for such borrowings falls below 300%, the fund will reduce,
within three days, the amount of its borrowings in order to provide for 300%
asset coverage), and except that the fund may enter into reverse repurchase
agreements and engage in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the fund may not exceed one-third of the fund's total assets;
12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the transfer of securities in connection with any
permissible borrowing;
13. Purchase or retain the securities of any issuer, if those individual
officers and Directors of the fund, its investment adviser, or distributor, each
owning beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;
14. Invest in interests in oil, gas, or other mineral exploration or
development programs;
15. Invest more than 5% of its total assets in securities of companies having,
together with their predecessors, a record of less than three years of
continuous operation;
16. Write, purchase or sell put options, call options or combinations thereof;
A further investment policy of the fund, which may be changed by action of the
Board of Directors without shareholder approval, is that the fund will not
invest in securities of an issuer if the investment would cause the fund to own
more than 10% of any class of securities of any one issuer.
With respect to investment restriction number 2, in determining industry
classifications for issuers domiciled outside the U.S., the fund will use
reasonable classifications that are not so broad that the primary economic
characteristic of the companies in a single class is materially different. The
fund will determine such classifications of issuers domiciled outside the U.S.
based on the issuer's principal or major business activities.
Capital Income Builder - Page 9
<PAGE>
Notwithstanding investment restriction number 4, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Directors pursuant to an exemptive order granted by the Securities and Exchange
Commission.
FUND ORGANIZATION AND VOTING RIGHTS
The fund, an open-end, diversified management investment company, was organized
as a Maryland corporation on June 8, 1987.
All fund operations are supervised by the fund's Board of Directors which meets
periodically and performs duties required by applicable state and federal laws.
Members of the board who are not employed by Capital Research and Management
Company or its affiliates are paid certain fees for services rendered to the
fund as described in "Directors and Director Compensation" below. They may elect
to defer all or a portion of these fees through a deferred compensation plan in
effect for the fund.
The fund has two classes of shares - Class A and Class B. The shares of each
class represent an interest in the same investment portfolio. Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to the particular class as
approved by the Board of Directors. Class A and Class B shareholders have
exclusive voting rights with respect to the rule 12b-1 Plans adopted in
connection with the distribution of shares and on other matters in which the
interests of one class are different from interests in another class. Shares of
all classes of the fund vote together on matters that affect all classes in
substantially the same manner. Each class votes as a class on matters that
affect that class alone.
The fund does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the fund will hold a meeting at which any member of the board could be removed
by a majority vote.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
Director from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed Directors. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of Directors, as though the fund were a common-law trust. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any Directors when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.
Capital Income Builder - Page 10
<PAGE>
FUND DIRECTORS AND OFFICERS
Directors and Director Compensation
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
FROM THE FUND
POSITION DURING FISCAL YEAR
WITH PRINCIPAL OCCUPATION(S) DURING ENDED
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS OCTOBER 31, 2000
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Frederick Christie Director Private Investor. Former President $ 17,900/3/
P.O. Box 144 and Chief Executive Officer, The
Palos Verdes Estates, CA Mission Group (non-utility holding
90274 company, subsidiary of Southern
Age: 67 California Edison Company)
------------------------------------------------------------------------------------------------------------------
+ Paul G. Haaga, Jr. Chairman of the Executive Vice President and None/4/
333 South Hope Street Board Director, Capital Research and
Los Angeles, CA 90071 Management Company
Age: 52
------------------------------------------------------------------------------------------------------------------
Mary Myers Kauppila Director Private Investor; former Owner and $ 19,400/3/
One Winthrop Square President, Energy Investment, Inc.
Boston, MA 02110
Age: 46
------------------------------------------------------------------------------------------------------------------
+ James B. Lovelace President and Senior Vice President, Capital None/4/
333 South Hope Street Director Research and Management Company
Los Angeles, CA 90071
Age: 44
------------------------------------------------------------------------------------------------------------------
+ Jon B. Lovelace Vice Chairman Chairman Emeritus, Capital Research None/4/
333 South Hope Street of the Board and Management Company
Los Angeles, CA 90071
Age: 73
------------------------------------------------------------------------------------------------------------------
Gail L. Neale President, The Lovejoy Consulting $ 18,500/3/
The Lovejoy Consulting Director Group, Inc.; former Executive Vice
Group President, Salzburg Seminar
154 Prospect Parkway
Burlington, VT 05401
Age: 65
------------------------------------------------------------------------------------------------------------------
Robert J. O'Neill Chichele Professor of the History of $20,300
Whitney, OXON Director War and Fellow, All Souls College,
United Kingdom University of Oxford
Age: 64
------------------------------------------------------------------------------------------------------------------
Donald E. Petersen Director Former Chairman of the Board and $ 18,400/3/
255 East Brown Chief Executive Officer, Ford Motor
Birmingham, MI 48009 Company
Age: 74
------------------------------------------------------------------------------------------------------------------
Stefanie Powers Director Actor; President, William Holden $16,800
2661 Hutton Drive Wildlife Foundation
Beverly Hills, CA 90210
Age: 58
------------------------------------------------------------------------------------------------------------------
Frank Stanton Director Retired; former President, CBS Inc. $20,300
25 West 52nd Street (1946-1973)
New York, NY 10019
Age: 92
------------------------------------------------------------------------------------------------------------------
Charles Wolf, Jr. Director Economic Adviser and Corporate $19,300
1700 Main Street Fellow in International Economics,
Santa Monica, CA 90407 The RAND Corporation
Age: 76
------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/2/ FOR THE DIRECTOR
NAME, ADDRESS AND AGE YEAR ENDED OCTOBER 31, 2000 SERVES/2/
---------------------------------------------------------------------------
<S> <C> <C>
H. Frederick Christie $ 214,700/3/ 19
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 67
---------------------------------------------------------------------------
+ Paul G. Haaga, Jr. None/4/ 15
333 South Hope Street
Los Angeles, CA 90071
Age: 52
---------------------------------------------------------------------------
Mary Myers Kauppila $ 116,300/3/ 5
One Winthrop Square
Boston, MA 02110
Age: 46
---------------------------------------------------------------------------
+ James B. Lovelace None/4/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 44
---------------------------------------------------------------------------
+ Jon B. Lovelace None/4/ 3
333 South Hope Street
Los Angeles, CA 90071
Age: 73
---------------------------------------------------------------------------
Gail L. Neale $91,000/3/ 6
The Lovejoy Consulting
Group
154 Prospect Parkway
Burlington, VT 05401
Age: 65
---------------------------------------------------------------------------
Robert J. O'Neill $50,300 3
Whitney, OXON
United Kingdom
Age: 64
---------------------------------------------------------------------------
Donald E. Petersen $ 105,000/3/ 5
255 East Brown
Birmingham, MI 48009
Age: 74
---------------------------------------------------------------------------
Stefanie Powers $34,500 2
2661 Hutton Drive
Beverly Hills, CA 90210
Age: 58
---------------------------------------------------------------------------
Frank Stanton $41,500 2
25 West 52nd Street
New York, NY 10019
Age: 92
---------------------------------------------------------------------------
Charles Wolf, Jr. $40,500 2
1700 Main Street
Santa Monica, CA 90407
Age: 76
---------------------------------------------------------------------------
</TABLE>
+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Investment Adviser, Capital Research and
Management Company, or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.
1 Amounts may be deferred by eligible Directors under a non-qualified deferred
compensation plan adopted by the fund in 1993. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Directors.
2 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.
3 Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2000
fiscal year for participating Directors is as follows: H. Frederick Christie
($111,767), Mary Myers Kauppila ($166,897) and Donald E. Petersen ($58,287).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the fund until paid to the Directors.
4 Paul G. Haaga, Jr., James B. Lovelace and Jon B. Lovelace are affiliated with
the Investment Adviser and, accordingly, receive no compensation from the
fund.
Capital Income Builder - Page 13
<PAGE>
OTHER OFFICERS
<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Joyce E. Gordon 44 Senior Vice Senior Vice President, Capital
333 South Hope Street President Research Company*
Los Angeles, CA 90071
-------------------------------------------------------------------------------
Janet A. McKinley 46 Senior Vice Director, Capital Research and
630 Fifth Avenue President Management Company. Senior Vice
New York, NY 10111 President, Capital Research
Company*
-------------------------------------------------------------------------------
Catherine M. Ward 53 Executive Vice Senior Vice President and
333 South Hope Street President Director,
Los Angeles, CA 90071 Capital Research and Management
Company
-------------------------------------------------------------------------------
Darcy B. Kopcho 47 Vice President Director, Capital Research and
333 South Hope Street Management Company. Executive
Los Angeles, CA 90071 Vice President and Director,
Capital Research Company*
-------------------------------------------------------------------------------
Steven T. Watson 45 Vice President Senior Vice President, Capital
25 Bedford Street Research Company*
London, England
-------------------------------------------------------------------------------
Vincent P. Corti 44 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research
and Management Company
-------------------------------------------------------------------------------
R. Marcia Gould 46 Treasurer Vice President - Fund Business
135 South State Management Group, Capital
College Blvd. Research
Brea, CA 92821 and Management Company
-------------------------------------------------------------------------------
</TABLE>
* Company affiliated with Capital Research and Management Company.
All of the officers listed are officers and/or directors/trustees of one or more
of the other funds for which Capital Research and Management Company serves as
Investment Adviser.
No compensation is paid by the fund to any officer or Director who is a
director, officer or employee of the Investment Adviser or affiliated companies.
The fund pays annual fees of $13,000 to Directors who are not affiliated with
the Investment Adviser, plus $1,000 for each Board of Directors meeting
attended, plus $500 for each meeting attended as a member of a committee of the
Board of Directors. No pension or retirement benefits are accrued as part of
fund expenses. The Directors may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the Directors who are not
affiliated with the Investment Adviser. As of December 1, 2000 the officers and
Directors of the fund and their families, as a group, owned beneficially or of
record less than 1% of the outstanding shares of the fund.
Capital Income Builder - Page 14
<PAGE>
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the U.S. and abroad
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong
Kong, Singapore and Tokyo), with a staff of professionals, many of whom have a
number of years of investment experience. The Investment Adviser is located at
333 South Hope Street, Los Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92821. The Investment Adviser's research professionals
travel several million miles a year, making more than 5,000 research visits in
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and retain quality personnel. The Investment Adviser is a
wholly owned subsidiary of The Capital Group Companies, Inc.
The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts of all types throughout the world. These investors include
privately owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement") between the Fund and the Investment Adviser will
continue in effect until October 31, 2001, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors, or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it, without
penalty, upon 60 days' written notice to the other party, and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the fund. The Fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
fund (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the fund's Plans of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms prepared exclusively for the fund; and costs of assembling
and storing shareholder account data.
Capital Income Builder - Page 15
<PAGE>
The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income is determined in accordance with
generally accepted accounting principles and does not include gains or losses
from sales of capital assets.
The management fee is based on an annual rate of 0.24% of the first $1 billion
of average net assets; 0.20% of such assets in excess of $1 billion but not
exceeding $2 billion; 0.18% of such assets in excess of $2 billion but not
exceeding $3 billion; 0.165% of such assets in excess of $3 billion but not
exceeding $5 billion; 0.155% of such assets in excess of $5 billion but not
exceeding $8 billion; and 0.15% of such assets in excess of $8 billion; plus
3.0% of the fund's gross investment income. Assuming net assets of $8 billion
and gross investment income levels of 3%, 4%, 5%, 6%, and 7%, management fees
would be 0.27%, 0.30%, 0.33%, 0.36%, and 0.39%, respectively.
The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed 1-1/2% of
the first $30 million of the net assets of the fund and 1% of the average net
assets in excess thereof.
Expenses which are not subject to these limitations are interest, taxes, and
extraordinary expenses. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies are accounted for as capital items and not as expenses. To
the extent the fund's management fee must be waived due to Class A share expense
ratios exceeding this limit, management fees will be reduced similarly for all
classes of shares of the fund or other Class A fees will be waived in lieu of
management fees. For the fiscal years ended 2000, 1999, and 1998, the Investment
Adviser received advisory fees of $25,990,000, $28,908,000, and $26,651,000,
respectively.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513.
The fund has adopted Plans of Distribution (the "Plans"), pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). In addition, the Principal Underwriter receives
revenues from sales of the fund's shares. For Class A shares, the Principal
Underwriter receives commission revenue consisting of that portion of the Class
A sales charge remaining after the allowances which it allows to investment
dealers. For Class B shares, the Principal Underwriter sells the rights to 12b-1
fees paid by the fund for distribution expenses to a third party and receives
the revenue remaining after compensating investment dealers for sales of Class B
shares. The fund also reimburses the Principal Underwriter for the immediate
service fees advanced and paid to dealers by the Principal Underwriter for sales
of Class B shares.
Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $1,778,000 after allowance of $8,086,000
to dealers. During the fiscal years ended 1999 and 1998, the Principal
Underwriter retained $5,326,000 and $6,716,000, respectively, on sales of Class
A shares after an allowance of $25,137,000 and $32,535,000 to dealers,
respectively. Revenue retained and service fee reimbursements received by the
Capital Income Builder - Page 16
<PAGE>
Principal Underwriter on sales of Class B shares during the 2000 fiscal year
amounted to $112,000 after compensation of $704,000 to dealers.
As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Board of
Directors and separately by a majority of the directors who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. The officers
and directors who are "interested persons" of the fund may be considered to have
a direct or indirect financial interest in the operation of the Plans due to
present or past affiliations with the Investment Adviser and related companies.
Potential benefits of the Plans to the fund include shareholder services,
savings to the fund in transfer agency costs, savings to the fund in advisory
fees and other expenses, benefits to the investment process from growth or
stability of assets and maintenance of a financially healthy management
organization. The selection and nomination of directors who are not "interested
persons" of the fund are committed to the discretion of the directors who are
not "interested persons" during the existence of the Plans. The Plans may not be
amended to increase materially the amount spent for distribution without
shareholder approval. Plan expenses are reviewed quarterly and the Plans must be
renewed annually by the Board of Directors.
Under the Plans, the fund may expend up to 0.30% of its net assets annually for
Class A shares and 1.00% of its net assets annually for Class B shares to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Directors has approved the category of
expenses for which payment is being made. For Class A shares, these include up
to 0.25% in service fees for qualified dealers and dealer commissions and
wholesaler compensation on sales of shares exceeding $1 million purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, rollover IRA accounts as described in "Individual
Retirement Account (IRA) Rollovers" below, and retirement plans, endowments or
foundations with $50 million or more in assets). For Class B shares, these
include 0.25% in service fees for qualified dealers and 0.75% in payments to the
Principal Underwriter for financing commissions paid to qualified dealers
selling Class B shares.
Commissions on sales of Class A shares exceeding $1 million (including purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Class A Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, these commissions are not recoverable.
During the 2000 fiscal year, the fund paid or accrued $17,652,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares and $54,000 under the Plan for Class B shares. As of October 31, 2000,
accrued and unpaid distribution expenses for Class A and Class B shares were
$2,780,000 and $14,000, respectively.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS - The fund intends to follow the practice of distributing
substantially all of its investment company taxable income, which includes any
excess of net realized short-term gains over net realized long-term capital
losses. Additional distributions may be made, if necessary. The fund also
intends to follow the practice of distributing the entire excess of net realized
long--
Capital Income Builder - Page 17
<PAGE>
term capital gains over net realized short-term capital losses. However, the
fund may retain all or part of such gain for reinvestment, after paying the
related federal taxes for which shareholders may then be able to claim a credit
against their federal tax liability. If the fund does not distribute the amount
of capital gain and/or net investment income required to be distributed by an
excise tax provision of the Code, the fund may be subject to that excise tax. In
certain circumstances, the fund may determine that it is in the interest of
shareholders to distribute less than the required amount. In this case, the fund
will pay any income or excise taxes due.
Dividends on Class A and Class B shares will be reinvested in shares of the fund
of the same class unless shareholders indicate in writing that they wish to
receive them in cash or in shares of the same class of other American Funds, as
provided in the prospectus.
TAXES - The fund has elected to be treated as a regulated investment company
under Subchapter M of the Code. A regulated investment company qualifying under
Subchapter M of the Code is required to distribute to its shareholders at least
90% of its investment company taxable income (including the excess of net
short-term capital gain over net long-term capital losses) and generally is not
subject to federal income tax to the extent that it distributes annually 100% of
its investment company taxable income and net realized capital gains in the
manner required under the Code. The fund intends to distribute annually all of
its investment company taxable income and net realized capital gains and
therefore does not expect to pay federal income tax, although in certain
circumstances the fund may determine that it is in the interest of shareholders
to distribute less than that amount.
To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income
(including, but no limited to, gains from options, futures or forward contracts)
derived with respect to the business of investing in such securities or
currencies, and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and securities of other
regulated investment companies, and other securities (for purposes of this
calculation generally limited, in respect of any one issuer, to an amount not
greater than 5% of the market value of the fund's assets and 10% of the
outstanding voting securities of such issuer), and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies), or two or more issuers which the fund controls and which are
determined to be engaged in the same or similar trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (ii) any amount on which the fund pays income tax during the periods
described above. The fund
Capital Income Builder - Page 18
<PAGE>
intends to distribute net investment income and net capital gains so as to
minimize or avoid the excise tax liability.
Investment company taxable income generally includes dividends, interest, net
short-term capital gains in excess of net long-term capital losses, and certain
foreign currency gains, if any, less expenses and certain foreign currency
losses, if any. Net capital gains for a fiscal year are computed by taking into
account any capital loss carry-forward of the fund.
If any net long-term capital gains in excess of net short-term capital losses
are retained by the fund for reinvestment, requiring federal income taxes to be
paid thereon by the fund, the fund intends to elect to treat such capital gains
as having been distributed to shareholders. As a result, each shareholder will
report such capital gains as long-term capital gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by the fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.
Distributions of the excess of net long-term capital gains over net short-term
capital losses which the fund properly designates as "capital gain dividends"
generally will be taxable to individual shareholders at a maximum 20% capital
gains rate, regardless of the length of time the shares of the fund has been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less from the date of their
purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gain during such six-month
period.
Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
Redemptions of shares, including exchanges for shares of another American Fund,
may result in tax consequences (gain or loss) to the shareholder.
If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other funds. Also,
any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.
Dividends from domestic corporations are expected to comprise some portion of
the fund's gross income. To the extent that such dividends constitute any of the
fund's gross income, a portion of the income distributions of the fund will be
eligible for the deduction for dividends received by corporations. Shareholders
will be informed of the portion of dividends which so qualify. The
Capital Income Builder - Page 19
<PAGE>
dividends-received deduction is reduced to the extent that either the fund
shares, or the underlying shares of stock held by the fund, with respect to
which dividends are received, are treated as debt-financed under federal income
tax law and is eliminated if the shares are deemed to have been held by the
shareholder or the fund, as the case may be, for less than 46 days during the
90-day period beginning on the date which is 45 days before the date on which
the shares become ex-dividend.
Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.
The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the fund is notified by the IRS or a broker
that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding provisions are applicable, any such
distributions and proceeds, whether taken in cash or reinvested in additional
shares, will be reduced by the amounts required to be withheld.
Shareholders of the fund may be subject to state and local taxes on
distributions received from the fund and on redemptions of the fund's shares.
In January of each year fund shareholders will receive a statement of the
federal income tax status of all distributions.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an
applicable income tax treaty) on dividend income received by him or her.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
Capital Income Builder - Page 20
<PAGE>
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
-------------------------------------------------------------------------------
<S> <C> <C>
See "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase Minimums").
-------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
-------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
-------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)
For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
-------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
-------------------------------------------------------------------------------
</TABLE>
PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--
Capital Income Builder - Page 21
<PAGE>
Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase
minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived for shareholders of
other funds in The American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for additional investments
(except as noted above).
PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.
FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):
<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . 40 240
American High-Income Trust/SM/ . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . 22 222
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . 49
___________
*Available only in certain states.
</TABLE>
Capital Income Builder - Page 22
<PAGE>
SALES CHARGES
CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of stock, stock/bond, and bond funds of The American Funds Group are set forth
below. The money market funds of The American Funds Group are offered at net
asset value. (See "Fund Numbers" for a listing of the funds.)
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
------------------------------------------ -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000 . . . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 . 3.63 3.50 2.75
$250,000 but less than $500,000 . 2.56 2.50 2.00
$500,000 but less than $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
-----------------------------------------------------------------------------
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF
PURCHASE. Employer-sponsored defined contribution-type plans investing $1
million or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from retirement plans with assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. 403(b) plans may be
Capital Income Builder - Page 23
<PAGE>
treated as employer-sponsored plans for sales charge purposes if; (i) the
American Funds are principal investment options; (ii) the employer facilitates
the enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (iii) there is only one dealer firm
assigned to all employee accounts invested in the American Funds. 403(b) plans
meeting the above criteria may invest with no sales charge and are not subject
to a contingent deferred sales charge if investing $1 million or more or have
100 or more eligible employees. Investments made by investors in certain
qualified fee-based programs, and retirement plans, endowments or foundations
with $50 million or more in assets may also be made with no sales charge and are
not subject to a CDSC. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial sales charge.
In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:
(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation.
Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense.
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. The charge is 1% of the lesser of
the value of the shares redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares. Shares held the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.
Capital Income Builder - Page 24
<PAGE>
DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (up to 1%) will
be paid to dealers who initiate and are responsible for purchases of $1 million
or more, for purchases by any employer-sponsored defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective assets of $50
million or more: 1.00% on amounts of $1 million to $4 million, 0.50% on amounts
over $4 million to $10 million, and 0.25% on amounts over $10 million.
CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE ON
SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances. See
"CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.
Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.
CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the event
the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; however, such an exchange could constitute a taxable event for
you and, absent such an exchange, Class B shares would continue to be subject to
higher expenses for longer than eight years.
Capital Income Builder - Page 25
<PAGE>
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.
STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to use a Statement in order to qualify for a reduced sales charge,
shares equal to 5% of the dollar amount specified in the Statement will be
held in escrow in the shareholder's account out of the initial purchase (or
subsequent purchases, if necessary) by the Transfer Agent. All dividends
and any capital gain distributions on shares held in escrow will be
credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see below), including Class A shares held in a fee-based
arrangement, as well as purchases of Class B shares, and any individual
investments in American Legacy variable annuities and variable life
insurance policies (American Legacy, American Legacy II and American Legacy
III variable annuities, American Legacy Life, American Legacy Variable
Life, and American Legacy Estate Builder) may be credited toward satisfying
the Statement. During the Statement period reinvested dividends and capital
gain distributions, investments in money market funds, and investments made
under a right of reinstatement will not be credited toward satisfying the
Statement. The Statement will be considered completed if the shareholder
dies within the 13-month Statement period. Commissions will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy variable annuities and
variable life
Capital Income Builder - Page 26
<PAGE>
insurance policies are added to the figure determined above. The sum is the
Statement amount and applicable breakpoint level. On the first investment
and all other investments made pursuant to the Statement, a sales charge
will be assessed according to the sales charge breakpoint thus determined.
There will be no retroactive adjustments in sales charges on investments
made during the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those made by you, and your
immediate family (your spouse and your children under the age of 21), if
all parties are purchasing shares for their own accounts and/or:
. individual-type employee benefit plan(s), such as an IRA, 403(b) plan
(see exception below), or single-participant Keogh-type plan;
. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);
. trust accounts established by you or your immediate family. However,
if the person(s) who established the trust is deceased, the trust
account may be aggregated with accounts of the person who is the
primary beneficiary of the trust; or
. endowments or foundations established and controlled by you or your
immediate family.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:
. for a single trust estate or fiduciary account, excluding
individual-type employee benefit plans described above;
. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above;
. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares;
. for non-profit, charitable or educational organizations, such as an
employer-sponsored retirement plan, endowment or foundation
established and controlled by the organization; or
. for participant accounts of a 403(b) plan that is treated as an
employer-sponsored plan (see "Class A Purchases Not Subject to Sales
Charges" above), or made for two or more 403(b) plans that are treated
as employer-sponsored plans of a single employer or affiliated
employers as defined in the 1940 Act.
Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be
Capital Income Builder - Page 27
<PAGE>
aggregated with other nominee or street name accounts unless otherwise
qualified as described above.
CONCURRENT PURCHASES - You may combine purchases of Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
policies. Direct purchases of the money market funds are excluded. Shares
of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHTS OF ACCUMULATION - You may take into account the current value (or if
greater, the amount you invested less any withdrawals) of your existing
Class A and B holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or
charity. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy variable annuities and variable
life insurance policies. Direct purchases of the money market funds are
excluded.
CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:
(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).
(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.
(3) Tax-free returns of excess contributions to IRAs.
(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a CDSC.
CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:
(1) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below) not exceeding 12% each year of the lesser of the original
purchase cost or the current market value of the shares being sold that would
otherwise be subject to a CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation. If there are insufficient shares not subject to
a CDSC, shares subject to the lowest CDSC will be redeemed next until the 12%
limit is reached.
The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. This privilege may be revised
or terminated at any time.
Capital Income Builder - Page 28
<PAGE>
(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.
(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS
Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets that offered an investment option managed by any
affiliate of The Capital Group Companies, Inc., including any American Funds,
the assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule applicable to
investments of $1 million or more (see "Dealer Commissions on Class A Shares"
above).
PRICE OF SHARES
Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the fund or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter prior to its close of business. In the case of orders sent
directly to the fund or the Transfer Agent, an investment dealer MUST be
indicated. The dealer is responsible for promptly transmitting purchase orders
to the Principal Underwriter.
Orders received by the investment dealer, the Transfer Agent, or the fund after
the time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper do not always
indicate prices at which you will be purchasing and redeeming shares of the
fund, since such prices generally reflect the previous day's closing price
whereas purchases and redemptions are made at the next calculated price. The
price you pay for shares, the offering price, is based on the net asset value
per share which is calculated once daily as of approximately 4:00 p.m. New York
time, which is the normal close of trading on the New York Stock Exchange each
day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the
fund's share price would still be determined as of 4:00 p.m. New York time. The
New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:
1. 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
Capital Income Builder - Page 29
<PAGE>
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.
Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.
Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- Shares held for you in your dealer's street name must be sold
through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s).
- A signature guarantee is required if the redemption is:
- Over $50,000;
Capital Income Builder - Page 30
<PAGE>
- Made payable to someone other than the registered shareholder(s);
or
- Sent to an address other than the address of record, or an
address of record which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on all redemptions.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- You must include any shares you wish to sell that are in
certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/
- Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.
- Checks must be made payable to the registered shareholder(s).
- Checks must be mailed to an address of record that has been used
with the account for at least 10 days.
MONEY MARKET FUNDS
- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- You may establish check writing privileges (use the money market funds
application).
- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.
- Check writing is not available for Class B shares of The Cash
Management Trust.
If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays
Capital Income Builder - Page 31
<PAGE>
relating to clearance of checks for share purchases or in extraordinary
circumstances (and as permissible under the 1940 Act), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by the Transfer Agent.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments in The American Funds through automatic debits
from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. For
example, if the date you specified falls on a weekend or holiday, your money
will be invested on the next business day. If your bank account cannot be
debited due to insufficient funds, a stop-payment or the closing of the account,
the plan may be terminated and the related investment reversed. You may change
the amount of the investment or discontinue the plan at any time by writing to
the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares of the same class at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.
If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
Capital Income Builder - Page 32
<PAGE>
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. Exchange purchases
are subject to the minimum investment requirements of the fund purchased and no
sales charge generally applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on the fund being
purchased, unless the money market fund shares were acquired by an exchange from
a fund having a sales charge, or by reinvestment or cross-reinvestment of
dividends or capital gain distributions.
You may exchange shares by writing to the Transfer Agent (see "Selling Shares"),
by contacting your investment dealer, by using American FundsLine and American
FundsLine OnLine (see "American FundsLine and American FundsLine OnLine" below),
or by telephoning 800/421-0180 toll-free, faxing (see "American Funds Service
Company Service Areas" -- "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing the Transfer Agent.
(See "Telephone and Computer Purchases, Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for which Capital Bank and Trust
Company serves as trustee may not be exchanged by telephone, computer, fax or
telegraph. Exchange redemptions and purchases are processed simultaneously at
the share prices next determined after the exchange order is received. (See
"Purchase of Shares"--"Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in
amounts of $50 or more among any of the funds in The American Funds Group on any
day (or preceding business day if the day falls on a non-business day) of each
month you designate.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com.
Capital Income Builder - Page 33
<PAGE>
Redemptions and exchanges through American FundsLine and American FundsLine
OnLine are subject to the conditions noted above and in "Telephone and Computer
Purchases, Redemptions and Exchanges" below. You will need your fund number (see
the list of funds in The American Funds Group under "Purchase of Shares -
Purchase Minimums" and "Purchase of Shares - Fund Numbers"), personal
identification number (generally the last four digits of your Social Security
number or other tax identification number associated with your account) and
account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, and each of their respective
directors, trustees, officers, employees and agents harmless from any losses,
expenses, costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing the Transfer Agent (you may also reinstate them
at any time by writing the Transfer Agent). If the Transfer Agent does not
employ reasonable procedures to confirm that the instructions received from any
person with appropriate account information are genuine, it and/or the fund may
be liable for losses due to unauthorized or fraudulent instructions. In the
event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption and
exchange requests may be made in writing only.
REDEMPTION OF SHARES - The fund's Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Directors of the fund may from time to time
adopt.
SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund does not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.
There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment
Capital Income Builder - Page 34
<PAGE>
Adviser believes that to do so is in the interest of the fund. When such
concurrent authorizations occur, the objective is to allocate the executions in
an equitable manner. The fund will not pay a mark-up for research in principal
transactions.
Brokerage commissions paid on portfolio transactions for the fiscal years ended
2000, 1999 and 1998, amounted to $7,658,000, $3,190,000 and $2,797,000,
respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or non-U.S. branches of U.S. banks.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$5,411,000 for Class A shares and $4,000 for Class B shares for the 2000 fiscal
year.
INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 350 South Grand Avenue,
Los Angeles, CA 90071, serves as the fund's independent accountants providing
audit services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The financial statements
included in this Statement of Additional Information from the Annual Report have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Directors.
PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on
October 31. Shareholders are provided updated prospectuses annually. In
addition, shareholders are provided at least semiannually with reports showing
the investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
PricewaterhouseCoopers LLP. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
prospectuses and shareholder reports. To receive additional copies of a
prospectus or report, shareholders should contact the Transfer Agent.
PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments, including
securities in which the fund may invest from time to time. This policy includes:
a ban on acquisitions of securities pursuant to an initial public offering;
restrictions on acquisitions of private placement securities; pre-clearance and
reporting requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.
Capital Income Builder - Page 35
<PAGE>
OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- OCTOBER 31, 2000
<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $43.69
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $ 46.36
</TABLE>
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS
The fund's yield was 4.17% based on a 30-day (or one month) period ended October
31, 2000, computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b =
expenses accrued for the period (net of reimbursements).
c =
the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d =
the maximum offering price per share on the last day of the
period.
The fund's one-year total return and five- and ten-year average annual total
return at the maximum offering price for the periods ended October 31, 2000 were
-0.52%, 10.69% and 12.91%, respectively. The fund's one-year total return and
five- and ten-year average annual total return at net asset value for the
periods ended October 31, 2000 were 5.55%, 12.01% and 13.58%, respectively.
The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.
In calculating average annual total return at the maximum offering price, the
fund assumes: (1) deduction of the maximum sales load of 5.75% from the $1,000
initial investment; (2) reinvestment of dividends and distributions at net asset
value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated. In
Capital Income Builder - Page 36
<PAGE>
addition, the fund will provide lifetime average total return figures. From time
to time, the fund may calculate investment results for Class B shares.
The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.
The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.
The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.
The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).
Capital Income Builder - Page 37
<PAGE>
APPENDIX
Description of Commercial Paper Ratings
MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate
-------
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging from "A"
---
for the highest quality obligations to "D" for the lowest.
A - Issues assigned its highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 - Capacity for timely payments on issues with this designation is strong;
however, the relative degree of safety is not as high as for issues designated
"A-1."
Description of Bond Ratings
BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.
Moody's rates the long-term debt securities issued by various entities from
-------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:
Capital Income Builder - Page 38
<PAGE>
"Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt edge.'
Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
S & P rates the long-term securities debt of various entities in categories
-----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:
"Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong."
Capital Income Builder - Page 39
<PAGE>
"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."
"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.
"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."
"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."
"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."
Capital Income Builder - Page 40
<TABLE>
<S> <C>
Percent of
Largest Industry Holdings Net Assets
Banks 17.91
Electric Utilities 6.55
Real Estate 6.07
Diversified Telecommunication Services 5.16
Oil & Gas 4.46
Other industries 31.98
Bonds and notes 15.47
Cash & equivalents 12.40
Net Assets 100.00
</TABLE>
<TABLE>
<S> <C>
Percent of
Largest Individual Equity Holdings Net Assets
Thames Water 2.3
Williams Companies 1.9
Telecom Italia 1.8
XL Capital 1.7
Bank of Nova Scotia 1.6
Royal Dutch Petroleum/"Shell" Transport and Trading 1.6
Philip Morris 1.6
Royal Bank of Canada 1.6
Archstone Communities Trust 1.5
Pinnacle West Capital 1.5
</TABLE>
<TABLE>
<S> <C> <C> <C>
Capital Income Builder, Inc.
Investment Portfolio, October 31, 2000
Shares or Market Percent
Principal Value of Net
Equity Securities Amount (Millions) Assets
ENERGY
OIL & GAS - 4.46%
BP Amoco PLC (ADR) 800,000 $40.750 .55%
Chevron Corp. 1,000,000 82.125 1.11
Coastal Corp. 6.625% FELINE PRIDES convertible 280,000 12.040 .16
preferred 2004
Fortum Oyj 4,600,000 15.222 .21
Kerr-McGee Corp. 282,800 18.470 .25
Phillips Petroleum Co. 250,000 15.438 .21
Royal Dutch Petroleum Co. (New York registered) 1,100,000 65.313
"Shell" Transport and Trading Co., PLC (New 1,100,000 54.106 1.62
York registered)
Ultramar Diamond Shamrock Corp. 1,000,000 26.250 .35
329.714 4.46
MATERIALS
CHEMICALS - 0.37%
Dow Chemical Co. 600,000 18.375 .25
RPM, Inc. 1,000,000 8.938 .12
CONTAINERS & PACKAGING - 0.23%
Chesapeake Corp. 300,000 5.887 .08
Crown Cork & Seal Co., Inc. 1,200,000 10.950 .15
METALS & MINING - 1.45%
Anglogold Ltd. 996,900 28.398 .38
Billiton PLC 11,000,000 41.922 .57
De Beers Consolidated Mines Ltd. 850,000 23.425 .32
Iluka Resources Ltd. 6,500,000 13.587 .18
PAPER & FOREST PRODUCTS - 1.82%
Georgia-Pacific Corp., Georgia-Pacific Group 480,000 15.390 .21
7.50% PEPS convertible preferred 2004, units
Louisiana-Pacific Corp. 2,000,000 17.000 .23
Norske Skogindustrier ASA(1) 425,000 15.347 .21
PaperlinX Ltd. 4,500,000 7.703 .10
Potlatch Corp. 1,047,900 35.105 .48
Rayonier Inc. 465,600 16.383 .22
Stora Enso Oyj 1,000,000 10.267 .14
Westvaco Corp. 600,000 17.100 .23
285.777 3.87
CAPITAL GOODS
ELECTRICAL EQUIPMENT - 1.02%
Hubbell Inc., Class B 2,575,000 61.639 .83
Innogy Holdings PLC(1) 4,800,000 13.911 .19
INDUSTRIAL CONGLOMERATES - 0.38%
Hunting PLC 4,260,000 8.951 .12
Tomkins PLC 8,200,000 19.487 .26
MACHINERY - 0.49%
IHC Caland NV 813,513 35.894 .49
139.882 1.89
TRANSPORTATION
AIRLINES - 0.42%
Qantas Airways Ltd. 15,399,100 30.992 .42
ROAD & RAIL - 0.46%
Canadian National Railway Co. 220,000 10.450 .14
5.25% convertible preferred 2029
CSX Corp. 600,000 15.188 .21
SMRT Corp. Ltd.(1) 20,125,000 7.912 .11
TRANSPORTATION INFRASTRUCTURE - 0.53%
Autopistas del Mare Nostrum, 750,000 11.391 .15
SA Concesionaria del Estado
BRISA-Auto-Estradas de Portugal, SA(2) 1,950,000 15.073 .20
Hutchison Delta Finance Ltd. 11,000,000 13.035 .18
7.00% convertible debentures 2002
104.041 1.41
MEDIA
MEDIA - 0.78%
Seagram Co. Ltd. 720,000 37.800 .51
7.50% ACES convertible preferred 2002, units
Time Warner Inc. 125,000 9.489 .13
West Australian Newspapers Holdings Ltd. 3,817,917 10.595 .14
57.884 .78
FOOD & DRUG RETAILING
FOOD & DRUG RETAILING - 0.66%
Safeway PLC 7,932,700 32.934 .45
Somerfield PLC 14,015,000 15.638 .21
48.572 .66
FOOD, BEVERAGE & TOBACCO
BEVERAGES - 0.60%
Foster's Brewing Group Ltd. 19,488,200 44.174 .60
FOOD PRODUCTS - 2.23%
Devro PLC 5,000,000 3.949 .05
General Mills, Inc. 900,000 37.575 .51
H.J. Heinz Co. 400,000 16.775 .23
Kellogg Co. 600,000 15.225 .21
Nabisco Group Holdings Corp. 1,500,000 43.313 .59
Sara Lee Corp. 2,200,000 47.438 .64
TOBACCO - 3.86%
Altadis SA 2,150,827 31.937 .43
Gallaher Group PLC 8,800,000 51.455 .70
Philip Morris Companies Inc. 3,165,000 115.918 1.57
R.J. Reynolds Tobacco Holdings, Inc. 1,450,000 51.837 .70
UST Inc. 1,350,000 34.087 .46
493.683 6.69
BANKS
BANKS - 17.91%
ABN AMRO Holding NV 760,281 17.611 .24
AmSouth Bancorporation 2,000,000 27.875 .38
Australia and New Zealand Banking Group Ltd. 4,088,786 30.222 .41
BancWest Corp. 800,000 16.350 .22
Bank of America Corp. 2,170,000 104.296 1.41
Bank of Nova Scotia 4,241,600 121.006 1.64
BANK ONE CORP. 2,511,000 91.652 1.24
Barclays PLC 2,750,000 78.585 1.06
Comerica Inc. 1,250,000 75.391 1.02
Commonwealth Bank of Australia 1,326,000 19.746 .27
First Union Corp. 3,368,706 102.114 1.38
Hang Seng Bank Ltd. 4,130,000 48.590 .66
HSBC Holdings PLC 3,082,384 42.885 .58
Huntington Bancshares Inc. 2,365,000 33.997 .46
J.P. Morgan & Co. Inc. 120,000 19.860 .27
JCG Holdings Ltd. 20,958,000 11.153 .15
Lloyds TSB Group PLC 4,500,000 45.777 .62
National Australia Bank Ltd. 1,842,246 25.609 .35
National City Corp. 1,600,000 34.200 .46
Royal Bank of Canada 3,650,000 115.618 1.56
United Bankshares, Inc. 1,775,000 34.613 .47
Valley National Bancorp 630,000 17.443 .24
Wachovia Corp. 1,250,000 67.500 .91
Washington Mutual, Inc. 500,000 22.000 .30
Wells Fargo & Co. 568,000 26.305 .36
Westpac Banking Corp. 7,293,755 49.841 .67
Wilmington Trust Corp. 815,700 42.926 .58
1,323.165 17.91
DIVERSIFIED FINANCIALS
DIVERSIFIED FINANCIALS - 0.93%
Irish Life & Permanent PLC 2,920,000 29.261 .40
Lend Lease Corp. Ltd. 420,000 4.920 .07
OM Gruppen AB 961,600 34.367 .46
68.548 .93
INSURANCE
INSURANCE - 3.66%
American General Corp. 250,000 20.125 .27
Lincoln National Corp. 1,720,000 83.205 1.13
Royal & Sun Alliance Insurance Group PLC 5,759,390 40.937 .55
XL Capital Ltd., Class A 1,642,800 126.290 1.71
270.557 3.66
REAL ESTATE
REAL ESTATE - 6.07%
AMB Property Corp. 1,500,000 35.250 .48
Apartment Investment and Management Co., Class A 1,125,000 51.398 .70
Archstone Communities Trust 4,784,585 112.737 1.53
Cabot Industrial Trust 695,000 13.118 .18
Equity Residential Properties Trust 545,000 25.649 .35
Health Care Property Investors, Inc. 1,545,000 45.384 .61
HKR International Ltd. 29,038,000 12.102 .16
Hongkong Land Holdings Ltd. 9,800,000 18.130 .25
Host Marriott Financial Trust 400,000 14.450 .20
6.75% QUIPS convertible preferred 2026
Kimco Realty Corp. 510,000 20.528 .28
ProLogis Trust 1,191,114 25.013 .34
Spieker Properties, Inc. 250,000 13.844 .19
Washington Real Estate Investment Trust 300,000 6.000 .08
Weingarten Realty Investors 1,260,000 52.841 .72
446.444 6.07
TELECOMMUNICATION SERVICES
DIVERSIFIED TELECOMMUNICATION SERVICES - 5.16%
Koninklijke KPN NV 467,306 9.465 .13
(formerly Koninklijke PTT Nederland NV)
SBC Communications Inc. 1,700,000 98.069 1.33
Swisscom AG 251,391 63.826 .86
Telecom Argentina STET-France Telecom SA, 359,200 6.174 .08
Class B (ADR)
Telecom Corp. of New Zealand Ltd. 12,240,000 27.122
Telecom Corp. of New Zealand Ltd.(2) 8,380,000 18.569 .62
Telecom Italia SpA 24,145,621 131.694 1.78
TELUS Corp. (formerly BCT. TELUS 1,010,489 26.342 .36
Communications Inc.)
381.261 5.16
UTILITIES
ELECTRIC UTILITIES - 6.55%
American Electric Power Co., Inc. 870,000 36.105 .49
Beijing Datang Power Generation Co. Ltd., 71,000,000 16.934 .23
Class H(1)
Consolidated Edison, Inc. 1,798,600 63.288 .86
Dominion Resources, Inc. 250,000 14.891 .20
DPL Inc. 86,936 2.467 .03
GPU, Inc. 450,000 14.878 .20
International Power PLC (formerly 4,800,000 19.337 .26
National Power PLC)
Northeast Utilities 263,200 5.363 .07
Pinnacle West Capital Corp. 2,500,000 108.594 1.47
PowerGen PLC 7,500,000 58.036 .79
Scottish and Southern Energy PLC 11,600,000 96.319 1.30
Scottish Power PLC 3,100,000 23.247 .31
Southern Co. 845,000 24.822 .34
GAS UTILITIES - 0.63%
Australian Gas Light Co. 1,168,320 7.045 .10
Columbia Energy Group 541,800 38.976 .53
MULTI-UTILITIES - 4.31%
NiSource Inc. 3,551,200 88.558 1.20
Sierra Pacific Resources 317,400 5.455 .07
United Utilities PLC 8,287,423 83.224 1.13
Williams Companies, Inc. 3,383,250 141.462 1.91
WATER UTILITIES - 2.95%
American Water Works Co., Inc. 1,850,000 45.094 .61
Thames Water PLC 9,877,083 172.900 2.34
1,066.995 14.44
OTHER
OTHER - 1.17%
Cendant Corp., rights, 2001(1) 333,300 2.312 .03
Ford Motor Co. 2,625,000 68.578 .93
Newell Rubbermaid Inc. 500,000 9.594 .13
Radiometer A/S, Class B 59,793 1.445 .02
Sky City Ltd. 1,491,862 4.348 .06
86.277 1.17
MISCELLANEOUS
Equity securities in initial period of acquisition 224.091 3.03
Total Equity Securities 5,326.891 72.13
(cost: $4,160.620 million)
Market Percent
Principal Value of Net
Bonds and Notes Amount (Millions) Assets
CORPORATE, MORTGAGE- & ASSET-BACKED SECURITIES
AFLAC Inc. 6.50% 2009 8,000,000 7.406 .10
Airplanes Pass Through Trust, pass-through 12,747,079 12.570
certificates, Series 1, Class B, 7.37% 2019(3),(4)
Airplanes Pass Through Trust, pass-through 5,154,273 4.934 .24
certificates, Series 1, Class C, 8.15% 2019(3)
Allegiance Corp. 7.80% 2016 3,000,000 2.942 .04
Allstate Corp. 7.20%-7.875% 2005-2009 10,500,000 10.498 .14
Associates Corp. of North America 5.80% 2004 15,000,000 14.409 .20
Atlas Air, Inc., 1998-1 Pass-Through Trust, 8,701,215 8.177
Class A, 7.38% 2019(3)
Atlas Air, Inc., 1998-1 Pass-Through Trust, 4,855,903 4.678 .17
Class B, 7.68% 2014(3)
Bank One Corp. 7.875% 2010 5,000,000 5.021 .07
Bear Stearns Commercial Mortgage Securities Inc., 28,432,532 28.313 .38
pass-through certificates, Series 1999-WF2,
Class A-1, 6.80% 2031(3)
BHP Finance Ltd. 6.69% 2006 6,480,000 6.316 .09
Capital One Bank 8.25% 2005 8,000,000 8.043 .11
CenturyTel, Inc., Series H, 8.375% 2010 8,000,000 8.012 .11
Chase Commercial Mortgage Securities Corp., 9,784,172 10.074 .14
pass-through certificates, Series 2000-1,
Class A-1, 7.656% 2032(3)
Clear Channel Communications, Inc. 6.625% 2008 8,245,000 7.578 .10
Coast to Coast Motor Vehicle Owner Trust, 10,300,000 10.349 .14
Series 2000-A, Class A-4, 7.33% 2006(2),(3)
Columbia/HCA Healthcare Corp. 11,325,000 10.841 .15
6.125%-6.91% 2000-2005
Container Corp. of America 9.75% 2003 3,500,000 3.496 .05
Continental Airlines, Inc., pass-through 2,662,837 2.628
certificates, Series 1997-1, Class C,
7.42% 2007(3),(4)
Continental Airlines, Inc., pass-through 4,721,563 4.503
certificates, Series 1997-4, Class A,
6.90% 2018(3)
Continental Airlines, Inc., pass-through 10,000,000 10.133
certificates, Series 2000-1, Class A-1,
8.048% 2020(3)
Continental Airlines, Inc., pass-through 5,500,000 5.637 .31
certificates, Series 2000-1, Class B,
8.388% 2020(3)
Continental Auto Receivables Owner Trust, 8,250,000 8.333 .11
Series 2000-A, Class A4, 7.42% 2004(2),(3)
Cox Radio, Inc. 6.375% 2005 3,250,000 3.133 .04
CS First Boston Mortgage Securities Corp., 6,550,000 6.265 .08
pass-through certificates, Series 1998-C1,
Class C, 6.78% 2009(3)
Delta Air Lines, Inc., 1991 Equipment Certificates 2,000,000 2.000 .03
Trust, Series K, 10.00% 2014(2)
Deutsche Bank Capital Funding Trust I, 5,000,000 4.777 .06
7.872% 2049(4)
EQCC Home Equity Loan Trust, asset-backed 5,000,000 4.728 .06
certificates, Series 1999-2, Class A-4F,
6.753% 2027(3)
FIRSTPLUS Home Loan Owner Trust, Series 1997-1, 4,099,891 4.085 .06
Class A-6, 6.95% 2015(3)
Ford Motor Credit Co. 7.50% 2005 15,000,000 15.048 .20
Fox/Liberty Networks, LLC, FLN Finance, 3,000,000 3.015 .04
Inc. 8.875% 2007
Fred Meyer, Inc. 7.375%-7.45% 2005-2008 5,000,000 4.875
Kroger Co. 6.375% 2008 4,000,000 3.642 .12
GMAC Commercial Mortgage Securities, Inc., 14,595,000 14.140 .19
pass-through certificates, Series 1998-C1,
Class D, 6.974% 2030(3)
Hasbro, Inc. 7.95%-8.50% 2003-2006 13,750,000 13.125 .18
Household Finance Corp. 7.875% 2007 15,000,000 15.268 .21
HSBC Capital Funding LP, Series 1, 10,000,000 10.623 .14
9.547% noncumulative preferred 2049(4)
Jet Equipment Trust, Series 1995-B, Class C, 5,000,000 5.210 .07
9.71% 2015(2)
Joseph E. Seagram & Sons, Inc. 13,000,000 13.257 .18
6.625%-7.60% 2005-2028
Liberty Media Corp. 7.875% 2029 12,000,000 11.606 .16
McDermott Inc. 9.375% 2002 6,000,000 5.340 .07
Metris Master Trust, Series 2000-1, Class C, 11,000,000 11.021 .15
8.02% 2008(2),(3),(4)
Midland Cogeneration Venture LP, Secured Lease 1,573,161 1.603 .02
Obligation Bonds, Series C-91, 10.33% 2002
Money Store Residential Trust 1997-1, Class M-1, 15,000,000 14.883 .20
7.085% 2016(3)
Morgan Stanley Aircraft Finance, Series 2, 9,999,000 10.033 .14
Class B-2, 7.669% 2025(2),(3),(4)
Nabisco, Inc. 6.375% 2035(4) 10,020,000 9.469 .13
PanAmSat Corp. 6.00% 2003 5,000,000 4.783 .06
Pegasus Aviation Lease Securitization, 9,733,352 9.761
Series 2000-1, Class A-1, 7.245% 2015(2),(3),(4)
Pegasus Aviation Lease Securitization, 1,000,000 1.030 .15
Series 2000-1, Class A-2, 8.37% 2030(2),(3)
ReliaStar Financial Corp. 6.50% 2008 10,000,000 9.284 .13
Security National Mortgage Loan Trust, 6,800,000 6.803 .09
Series 2000-1, Class A-2, 8.75% 2024(2),(3)
SocGen Real Estate Co. LLC, Series A, 10,000,000 9.351 .13
7.64% 2049(4)
Starwood Asset Receivables Trust, Series 2000-1, 10,000,000 9.947 .13
Class D, 8.072% 2022(2),(3),(4)
TRW Inc. 8.75% 2006 15,000,000 15.457 .21
USA Waste Services, Inc. 6.125% 2011(4) 5,725,000 5.604
WMX Technologies, Inc. 6.375%-7.10% 2003-2026 12,749,000 12.277 .24
Vodafone AirTouch PLC, 7.625%-7.75% 2005-2010 20,000,000 20.302 .27
World Omni Master Owner Trust, Series 2000-1, 6,000,000 6.002 .08
Class B, 7.071% 2005(3),(4)
492.638 6.67
GOVERNMENTS & GOVERNMENTAL AUTHORITIES
Canadian Government 7.00% September 2001 40,000,000 26.464 .36
Fannie Mae:
7.00% February 2030(3) 16,005,590 15.680
7.50% April 2030(3) 995,036 .994
8.00% May 2030(3) 5,726,577 5.796
8.00% June 2030(3) 973,245 .985 .32
Freddie Mac 5.125% October 2008 10,960,000 9.912 .13
59.831 .81
U.S. TREASURIES
6.50% May 2001 3,000,000 3.001 .04
8.00% May 2001 6,000,000 6.050 .08
7.50% November 2001 100,000,000 101.172 1.37
6.50% May 2002 100,000,000 100.594 1.36
6.375% August 2002 350,000 .352 .00
10.75% May 2003 150,000,000 166.383 2.26
11.125% August 2003 10,000,000 11.302 .15
12.375% May 2004 80,000 .096 .00
6.50% May 2005 7,500,000 7.699 .11
3.375% January 2007(5) 10,929,800 10.621 .14
6.125% August 2007 2,200,000 2.231 .03
8.375% August 2008 43,000,000 45.399 .62
8.75% November 2008 100,000,000 107.125 1.45
8.875% February 2019 14,095,000 18.524 .25
6.375% August 2027 9,000,000 9.485 .13
590.034 7.99
Total Bonds & Notes (cost: $1,138.256 million) 1,142.503 15.47
Market Percent
Principal Value of Net
Short-Term Securities Amount (Millions) Assets
CORPORATE SHORT-TERM NOTES
AIG Funding, Inc. 6.46%-6.50% 50,000,000 49.542 .67
due 11/10/2000-1/30/2001
Alcoa Inc. 6.46%-6.50% due 11/10/2000-1/18/2001 50,000,000 49.513 .67
American Express Credit Corp. 6.48% 50,000,000 49.856 .67
due 11/10-11/22/2000
AT&T Corp. 6.48% due 11/8/2000 31,450,000 31.404 .43
BellSouth Telecommunications, Inc. 41,600,000 41.444 .56
6.46%-6.47% due 11/3-12/11/2000
Bestfoods 6.47% due 11/14/2000(2) 37,000,000 36.906 .50
Ciesco LP 6.47%-6.54% due 11/29/2000-1/12/2001 50,000,000 49.536 .67
Coca-Cola Co. 6.46%-6.48% due 12/14/2000-1/26/2001 50,000,000 49.465 .67
Eastman Kodak Co. 6.47% due 11/13-11/14/2000 50,500,000 50.378 .68
Household Finance Corp. 6.49% due 11/7/2000 36,000,000 35.954 .49
International Lease Finance Corp. 6.46%-6.49% 60,500,000 59.971 .81
due 11/9/2000-1/19/2001
Merck & Co. Inc. 6.48% due 11/28-11/29/2000 50,000,000 49.742 .67
Minnesota Mining and Manufacturing Co. 6.47% 50,000,000 49.658 .67
due 12/8/2000
PACCAR Financial Corp. 6.47%-6.50% 36,000,000 35.598 .48
due 11/14/2000-1/19/2001
Procter & Gamble Co. 6.46% due 12/7/2000 50,000,000 49.668 .67
SBC Communications Inc. 6.46%-6.51% 45,000,000 44.584 .60
due 12/4/2000-1/11/2001(2)
USAA Capital Corp. 6.45%-6.47% due 11/1-12/8/2000 63,500,000 63.281 .86
Verizon Global Funding Corp. 6.47% 25,000,000 24.779 .34
due 12/18-12/20/2000
821.279 11.11
FEDERAL AGENCY DISCOUNT NOTES
Fannie Mae 6.37%-6.40% due 11/2-12/18/2000 70,000,000 69.802 .94
Federal Home Loan Banks 6.39%-6.44% 16,200,000 16.139 .22
due 11/17-11/22/2000
85.941 1.16
Total Short Term Securities 907.220 12.27
(cost: $907.236 million)
Total Investment Securities 7,376.614 99.87
(cost: $6,206.112 million)
Excess of cash and receivables over payables 9.870 .13
NET ASSETS $7,386.484 100.00%
(1) Non-income-producing security.
(2) Purchased in a private placement
transaction; resale to the public may require
registration or sale only to qualified
institutional buyers.
(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) Index-linked bond whose principal amount
moves with a government retail price index.
ADR = American Depositary Receipts
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
CAPITAL INCOME BUILDER, INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
at October 31, 2000 (dollars in millions)
Assets:
Investment securities at market
(cost: $6,206,112) $7,376.614
Cash .243
Receivables for -
Sales of investments $25.326
Sales of fund's shares 4.521
Dividends and accrued interest 46.706
Other .004 76.557
7,453.414
Liabilities:
Payables for -
Purchases of investments 12.121
Repurchases of fund's shares 7.756
Dividends on fund's shares 41.580
Management services 1.837
Other expenses 3.636 66.930
Net Assets at October 31, 2000 - $7,386.484
Total authorized capital stock - 400,000,000 shares
Class A shares, $.01 par value
Net Assets $7,367.981
Shares outstanding 168,633,635
Net asset value per share $43.69
Class B shares, $.01 par value
Net Assets $18.503
Shares outstanding 423,486
Net asset value per share $43.69
STATEMENT OF OPERATIONS
for the year ended October 31, 2000 (dollars in millions)
Investment Income:
Income:
Dividends $236.062
Interest 174.677 $410.739
Expenses:
Management services fee 25.990
Distribution expenses - Class A 17.652
Distribution expenses - Class B .054
Transfer agent fee - Class A 5.411
Transfer agent fee - Class B .004
Reports to shareholders .073
Registration statement and prospectus .426
Postage, stationery and supplies .592
Directors' fees .151
Auditing and legal fees .068
Custodian fee .928
Taxes other than federal income tax .111
Other expenses .147 51.607
Net investment income 359.132
Realized Gain and Change in Unrealized
Appreciation on Investments:
Net realized gain 236.081
Net change in unrealized appreciation
on investments (232.473)
Net realized gain and change in
unrealized appreciation on investments 3.608
Net Increase in Net Assets Resulting
from Operations $362.740
See Notes to Financial Statements
STATEMENT OF CHANGES IN NET ASSETS
(dollars in millions)
Year ended
October 31,
Operations: 2000 1999
Net investment income $359.132 $378.400
Net realized gain on investments 236.081 329.823
Net change in unrealized appreciation
on investments (232.473) (484.382)
Net increase in net assets
resulting from operations 362.740 223.841
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (344.133) (376.344)
Class B (.210) -
Distributions from net realized gains on investments:
Class A (294.288) (510.675)
Class B - -
Total Dividends and Distributions (638.631) (887.019)
Capital Share Transactions:
Proceeds from shares sold 529.464 1,227.223
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on investments 580.245 799.504
Cost of shares repurchased (2,220.107) (1,337.580)
Net (decrease) increase in net assets resulting from (1,110.398) 689.147
capital share transactions
Total (Decrease) Increase in Net Assets (1,386.289) 25.969
Net Assets:
Beginning of year 8,772.773 8,746.804
End of year (including
undistributed net investment
income: $18.160 and $5.250
respectively) $7,386.484 $8,772.773
See Notes to Financial Statements
</TABLE>
CAPITAL INCOME BUILDER, INC.
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. The fund
offers Class A and Class B shares. Class A shares are sold with an initial
sales charge of up to 5.75%. Class B shares are sold without an initial sales
charge but are subject to a contingent deferred sales charge paid upon
redemption. This charge declines from 5% to zero over a period of six years.
Class B shares have higher distribution expenses and transfer agent fees than
Class A shares. Class B shares are automatically converted to Class A shares
eight years after the date of purchase. Holders of both classes of shares have
equal pro rata rights to assets and identical voting, dividend, liquidation and
other rights, except that each class bears different distribution and transfer
agent expenses, and each class shall have exclusive rights to vote on matters
affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with accounting principles generally accepted in the United
States, 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 fixed-income 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 fixed-income 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 fixed-income securities.
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.
Allocations - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between Class A
and Class B based on their relative net asset values. Distribution expenses,
transfer agent fees and any other class-specific expenses are accrued daily and
charged to the applicable share class.
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, 2000, such non-U.S. taxes were $11,049,000.
CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, sales of non-U.S. bonds and notes, and other receivables and
payables, on a book basis, were $1,878,000 for the year ended October 31, 2000.
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, 2000, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $1,170,502,000; $1,397,298,000 related
to appreciated securities and $22,796,000 related to depreciated securities.
During the year ended October 31, 2000, the fund realized, on a tax basis, a
net capital gain of $234,214,000 on securities transactions.
Net losses related to non-U.S. currency transactions of $1,878,000 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
$6,206,112,000 at October 31, 2000.
4. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEE - The fee of $25,990,000 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 the following rates and average net asset levels:
<TABLE>
<CAPTION>
<S> <C> <C>
Average Net Asset Level
Rate In Excess of Up to
0.240% $0 $1 billion
0.200 1 billion 2 billion
0.180 2 billion 3 billion
0.165 3 billion 5 billion
0.155 5 billion 8 billion
0.150 8 billion
</TABLE>
The agreement also provides for fees based on 3% of the fund's monthly gross
investment income.
DISTRIBUTION EXPENSES - American Funds Distributors, Inc. ("AFD"), the
principal underwriter of the fund's shares, received $1,778,000 (after
allowances to dealers) as its portion of the sales charges paid by purchasers
of the fund's Class A shares during the year ended October 31, 2000. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying Statement of Operations.
The fund has adopted plans of distribution under which it may finance
activities primarily intended to sell fund shares, provided the categories of
expense are approved in advance by the fund's Board of Directors. The plans
provide for aggregate annual expense limits of 0.30% of average daily net
assets for Class A shares, and 1.00% of average daily net assets for Class B
shares.
For Class A shares, approved categories of expense include dealer service fees
of up to 0.30% of net assets. Also included are monthly reimbursements to AFD
for commissions paid during the prior 15-month period to dealers and
wholesalers in respect of certain shares sold without a sales charge. These
reimbursements are permitted only to the extent that the fund's overall 0.30%
annual expense limit is not exceeded. For the year ended
October 31, 2000, aggregate distribution expenses were $17,652,000, or 0.23% of
net assets attributable to Class A shares.
For Class B shares, approved categories of expense include fees of 0.75% per
annum payable to AFD. AFD sells the rights to receive such payments (as well as
any contingent deferred sales charges payable in respect of shares sold during
the period) in order to finance the payment of dealer commissions. Also
included are service fees of 0.25% per annum. These fees are paid to AFD to
compensate AFD for paying service fees to qualified dealers. For the year
ended October 31, 2000, aggregate distribution expenses were $54,000, or 1.00%
of net assets attributable to Class B shares.
As of October 31, 2000, accrued and unpaid distribution expenses payable to AFD
for Class A and Class B shares were $2,780,000 and $14,000, respectively.
TRANSFER AGENT FEE - A fee of $5,415,000 was incurred during the year ended
October 31, 2000 pursuant to an agreement with American Funds Service Company
(AFS), the transfer agent for the fund.
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, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993), net of any payments to
Directors, were $337,000.
AFFILIATED DIRECTORS AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Officers of the fund and certain Directors 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 $2,589,340,000 and $2,919,857,000, respectively,
during the year ended October 31, 2000.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended October 31, 2000, the custodian fee of $928,000
includes $51,000 that was paid by these credits rather than in cash.
The fund reclassified $1,878,000 from undistributed net investment income to
undistributed net realized gains and reclassified $38,259,000 from
undistributed net realized gains to additional paid-in capital for the year
ended October 31, 2000, as a result of permanent differences between book and
tax.
As of October 31, 2000, net assets consisted of the following:
insert chart
Capital share transactions in the fund were as follows:
<TABLE>
<S> <C>
Capital paid in on shares of capital stock $5,981,247,000
Undistributed net investment income 18,160,000
Accumulated net realized gain 216,849,000
Net unrealized appreciation 1,170,228,000
Net assets $7,386,484,000
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Year ended October 31, 2000 Year ended October 31, 1999
Amount (millions) Shares Amount (millions) Shares
Class A Shares:
Sold $511.386 12,051,067 $1,227.223 26,060,446
Reinvestment of dividends 580.132 13,874,734 799.504 17,234,396
and distributions
Repurchased (2,219.953) (52,677,443) (1,337.580) (28,645,287)
Net (decrease) increase (1,128.435) (26,751,642) 689.147 14,649,555
in Class A
Class B Shares:/*/
Sold 18.078 424,465 - -
Reinvestment of dividends 0.113 2,630 - -
and distributions
Repurchased (0.154) (3,609) - -
Net (decrease) increase 18.037 423,486 - -
in Class B
Total Net (Decrease) $(1,110.398) (26,328,156) $689.147 14,649,555
Increase in fund
/*/ Class B shares were
not offered before
March 15, 2000.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
PER-SHARE DATA AND RATIOS /1/
Net
Net asset gains/(losses)
value, Net on securities Total from
beginning investment (both realized investment
Year ended of year income and unrealized) operations
Class A:
2000 $44.90 $1.99 /2/ $.26 /2/ $2.25
1999 48.40 1.93 (.70) 1.23
1998 46.14 2.09 3.87 5.96
1997 39.70 1.74 7.20 8.94
1996 36.27 1.95 3.92 5.87
Class B:
2000 40.33 0.96 /2/ 3.44 /2/ 4.40
Dividends
(from net Distributions Net asset
investment (from capital Total value, end
Year ended income) gains) distributions of year
Class A:
2000 $(1.92) $(1.54) $(3.46) $43.69
1999 (1.92) (2.81) (4.73) 44.90
1998 (2.09) (1.61) (3.70) 48.40
1997 (1.77) (.73) (2.50) 46.14
1996 (1.94) (.50) (2.44) 39.70
Class B:
2000 (1.04) - (1.04) 43.69
Ratio of Ratio of
Net assets, expenses net income
Total end of year to average to average
Year ended return (in millions) net assets net assets
Class A:
2000 5.55% $7,368 .67% 4.67%
1999 2.53 8,773 .64 4.15
1998 13.33 8,747 .64 4.35
1997 23.16 7,301 .65 4.04
1996 16.76 5,418 .71 5.19
Class B:
2000 10.97 18 1.44 /3/ 3.90 /3/
Portfolio
turnover
Year ended rate
Class A:
2000 41.37% /4/
1999 20.56
1998 24.38
1997 27.65
1996 27.56
Class B:
2000 41.37 /4/
<table/>
/1/ The periods 1996 through 2000 represent, for Class A shares, fiscal years
ended October 31. The period ended 2000 represents, for Class B shares,
the 230-day period ended October 31, 2000. Class B shares were not
offered before March 15, 2000. Total return for Class B is based on
activity during the period and thus is not representative of a full year.
Total returns exclude all sales charges, including contingent deferred
sales charges.
/2/ Based on average shares outstanding.
/3/ Annualized.
/4/ Represents portfolio turnover rate (equivalent for all share classes) for
the year ended October 31, 2000.
Capital Income Builder, Inc.
Report of Independent Accountants
To the Board of Directors and Shareholders of Capital Income Builder:
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 (the
"Fund") at October 31, 2000, the results of its operations, the changes in its
net assets and the per-share data and ratios for each of the periods presented
in conformity with accounting principles generally accepted in the United
States. 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 auditing standards generally accepted in the
United States, 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, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS
Los Angeles, California
November 30, 2000
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year.
During the fiscal year ended October 31, 2000, the fund paid a long-term
capital gains distribution of $294,288,000 to Class A shareholders. The fund
also designated 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, 29% 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, 14% 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 2001 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR
TAX ADVISERS.
PART C
OTHER INFORMATION
CAPITAL INCOME BUILDER, INC.
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(b) Previously filed (see Post-Effective Amendment No. 12 filed 12/30/97)
(c) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(d) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(e) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(f) None
(g) Previously filed (see Post-Effective Amendment No. 15 filed 1/7/00)
(h) None
(i) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(j) Consent of Independent Accountants
(k) None
(l) None
(m) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(n) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
(o) None
(p) Previously filed (see Post-Effective Amendment No. 16 filed 3/13/00)
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. INDEMNIFICATION
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policies written by American International Surplus Lines
Insurance Company, Chubb Custom Insurance Company and ICI Mutual Insurance
Company which insures its officers and directors against certain liabilities.
However, in no event will Registrant maintain insurance to indemnify any such
person for any act for which Registrant itself is not permitted to indemnify
the individual.
ITEM 25. INDEMNIFICATION (CONTINUED)
Article VIII of the Articles of Incorporation of the Fund provides that "The
Corporation shall indemnify (1) its directors to the full extent provided by
the general laws of the State of Maryland now or hereafter in force, including
the advance of expenses under the procedures provided by such laws; (2) its
officers to the same extent it shall indemnify its directors; and (3) its
officers who are not directors to such further extent as shall be authorized by
the Board of Directors and be consistent with law. The foregoing shall not
limit the authority of the Corporation to indemnify other employees and agents.
Any indemnification by the Corporation shall be consistent with the
requirements of law, including the Investment Company Act of 1940."
Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually incurred by him in connection
with such action, suit or proceeding unless it is established that: (i) the
act or omission of the person was material to the cause of action adjudicated
in the proceeding and was committed in bad faith or was the result of active
and deliberate dishonesty; or (ii) the person actually received an improper
personal benefit of money, property or services; or (iii) with respect to any
criminal action or proceeding, the person had reasonable cause to believe that
the act or omission was unlawful.
Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such a quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which directors who are parties may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).
Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any rights to which the indemnified
party may be entitled; that the scope of indemnification extends to directors,
officers, employees or agents of a constituent corporation absorbed in a
consolidation or merger and persons serving in that capacity at the request of
the constituent corporation for another; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against and incurred by
such person in any such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify such person
against such liabilities under Section 2-418.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
None
ITEM 27. PRINCIPAL UNDERWRITERS
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital World Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The
Cash Management Trust of America, EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America,
U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.
</TABLE>
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David L. Abzug Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
1501 N. University, Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Suite 1
Boulder, CO 80301-3508
B Carl R. Bauer Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
J. Walter Best, Jr. Regional Vice President None
9013 Brentmeade Blvd.
Brentwood, TN 37027
Joseph T. Blair Senior Vice President None
148 E. Shore Ave.
Groton Long Point, CT 06340
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Mick L. Brethower Senior Vice President None
2320 North Austin Avenue
Georgetown, TX 78626
Alan Brown Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
B J. Peter Burns Vice President None
Brian C. Casey Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Greenwood Village, CO 80120
Christopher J. Cassin Senior Vice President None
19 North Grant Street
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and None
Co-Chief
Executive Officer
Ruth M. Collier Senior Vice President None
29 Landsdowne Drive
Larchmont, NY 10538
S David Coolbaugh Assistant Vice President None
H Carlo O. Cordasco Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
William F. Daugherty Regional Vice President None
1216 Highlander Way
Mechanicsburg, PA 17055
Daniel J. Delianedis Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
James A. DePerno, Jr. Regional Vice President None
91 Church Street
East Aurora, NY 14052
Michael A. DiLella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
2627 Mission Street
San Marino, CA 91108
Peter J. Doran Director, Executive Vice None
President
100 Merrick Road, Suite 216W
Rockville Centre, NY 11570
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
John Fodor Senior Vice President None
15 Latisquama Road
Southborough, MA 01772
Daniel B. Frick Regional Vice President None
845 Western Avenue
Glen Ellyn, IL 60137
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director Chairman of the Board
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
150 Old Franklin School Road
Pittstown, NJ 08867
H Mary Pat Harris Assistant Vice President None
Ronald R. Hulsey Senior Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Senior Vice President None
John P. Keating Regional Vice President None
2285 Eagle Harbor Parkway
Orange Park, FL 32073
Dorothy Klock Vice President None
515 East 89th Street, Apt. 4G
New York, NY 10128
H Diane Koske Assistant Vice President
Andrew R. LeBlanc Regional Vice President None
78 Eton Road
Garden City, NY 11530
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Vice President None
5506 East Mineral Lane
Littleton, CO 80122
Mark J. Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Vice President None
Louis Linquata Regional Vice President None
170 South Battin
Wichita, KS 67218
LW Robert W. Lovelace Director None
Stephen A. Malbasa Senior Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
James R. McCrary Regional Vice President None
963 1st Street, #1
Hermosa Beach, CA 90254
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
William E. Noe Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Jeffrey Olson Regional Vice President None
930 S. Cowley Street, #305
Spokane, WA 99202
Gary A. Peace Regional Vice President None
291 Kaanapali Drive
Napa, CA 94558
Samuel W. Perry Regional Vice President None
4730 East Indian School Road
Suite 120
Phoenix, AZ 85018
David Petzke Regional Vice President None
4016 Saint Lucia Street
Boulder, CO 80301
Fredric Phillips Senior Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
7455 80th Place, S.E.
Mercer Island, WA 98040
L John O. Post Senior Vice President None
S Richard P. Prior Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 388
Glenville, NC 28736
George S. Ross Senior Vice President None
P.O. Box 376
Southport, ME 04576
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
414 Logan Ranch Road
Georgetown, TX 78628
Christopher S. Rowey Vice President None
10538 Cheviot Drive
Los Angeles, CA 90064
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
Brad W. Short Regional Vice President None
1601 Seal Way
Seal Beach, CA 90740
David W. Short Chairman of the Board and None
1000 RIDC Plaza, Suite 212 Co-Chief Executive
Officer
Pittsburgh, PA 15238
William P. Simon Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
Rodney G. Smith Senior Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
S Sherrie L. Snyder-Senft Assistant Vice President None
Anthony L. Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
L Therese L. Souiller Assistant Vice President None
Nicholas D. Spadaccini Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue
Suite 228
San Mateo, CA 94401
LW Eric H. Stern Director None
B Max D. Stites Vice President None
Thomas A. Stout Vice President None
1004 Ditchley Road
Virginia Beach, VA 23451
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
3021 Kensington Trace
Tarpon Springs, FL 34689
L Drew W. Taylor Vice President None
Gary J. Thoma Regional Vice President None
604 Thelosen Drive
Kimberly, WI 54136
L James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Senior Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
J. David Viale Regional Vice President None
39 Old Course Drive
Newport Beach, CA 92660
Thomas E. Warren Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer and Controller
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George J. Wenzel Regional Vice President None
251 Barden Road
Bloomfield, MI 48304
H J. D. Wiedmaier Assistant Vice President None
SF N. Dexter Williams Senior Vice President None
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice None
President
L Robert L. Winston Director, Senior Vice None
President
William R. Yost Senior Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Jonathan A. Young Regional Vice President None
329 Downing Drive
Chesapeake, VA 23322
Scott D. Zambon Regional Vice President None
2887 Player Lane
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
SF Business Address, One Market, Steuart Tower, Suite 1800, San Francisco, CA
94105-1016
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and held in the
offices of its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92821.
Registrant's records covering shareholder accounts are maintained and kept by
its transfer agent, American Funds Service Company, 135 South State College
Boulevard, Brea,
California 92821, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
3500 Wiseman Boulevard, San Antonio, Texas 78251 and 5300 Robin Hood Road,
Norfolk, VA 23513.
Registrant's records covering portfolio transactions are maintained and kept
by its custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 10081.
ITEM 29. MANAGEMENT SERVICES
None
ITEM 30. UNDERTAKINGS
n/a
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
26th day of December, 2000.
CAPITAL INCOME BUILDER, INC.
By /s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on December 26, 2000, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ James B. Lovelace President and Director
(James B. Lovelace)
(2) Principal Financial Officer
& Principal Accounting Officer:
/s/ R. Marcia Gould Treasurer
(R. Marcia Gould)
(3) Directors:
H. Frederick Christie* Director
/s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr.) Chairman of the Board
Mary Myers Kauppila Director
/s/ James B. Lovelace
(James B. Lovelace) President and Director
Jon B. Lovelace* Vice Chairman of the Board
Gail L. Neale* Director
Robert J. O'Neill Director
Donald E. Petersen* Director
Stefanie Powers Director
Frank Stanton* Director
Charles Wolf, Jr.* Director
</TABLE>
*By /s/ Vincent P. Corti
(Vincent P. Corti, Attorney-in-Fact)
Counsel represents that this amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of rule
485(b).
/s/ Michael J. Downer
(Michael J. Downer)