The American Funds Group/r/
Capital Income Builder
[illustration of a mountain side]
Annual Report 2000
For the year ended October 31
Capital Income Builder/r/ is one of the 29 American Funds, the nation's
third-largest mutual fund family. For nearly seven decades, Capital Research
and Management Company, the American Funds adviser, has invested with a
long-term focus based on thorough research and attention to risk.
Capital Income Builder seeks to provide a growing dividend - with higher income
distributions every quarter as far as possible - together with a current yield
exceeding that of U.S. stocks generally.
There are two ways to invest in Capital Income Builder. Class A shares are
subject to a 5.75% maximum up-front sales charge that declines for accounts of
$25,000 or more. Class B shares, which are not available for certain
employer-sponsored retirement plans, have no up-front sales charge. They are,
however, subject to additional expenses of approximately 0.75% a year over the
first eight years of ownership. If redeemed within six years, they may also be
subject to a contingent deferred sales charge (5% maximum) that declines over
time. Because expenses are first deducted from income, dividends for Class B
shares will be lower.
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are average
annual compound returns on a $1,000 investment with all distributions
reinvested for periods ended September 30, 2000 (the most recent calendar
quarter):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10 Years 5 Years 1 Year
CLASS A SHARES
reflecting 5.75% maximum sales charge +13.11% +10.79% +1.10%
CLASS B SHARES 3/15-9/30/2000
reflecting 5% maximum contingent +5.93*
deferred sales charge(CDSC)
(payable only if shares are sold)
not reflecting CDSC +10.93*
</TABLE>
* Class B shares were not offered before March 15, 2000. Returns are not
annualized.
The fund's 30-day yield as of November 30, 2000, calculated in accordance with
the Securities and Exchange Commission formula, was 4.21%.
FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF FUTURE RESULTS. SHARE
PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS
MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY
DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER ENTITY. INVESTING OUTSIDE THE
UNITED STATES IS SUBJECT TO ADDITIONAL RISKS, SUCH AS CURRENCY FLUCTUATIONS AND
POLITICAL INSTABILITY, WHICH ARE DETAILED IN THE FUND'S PROSPECTUS.
FELLOW SHAREHOLDERS:
Capital Income Builder's 2000 fiscal year coincided with unusually strong
crosscurrents in global stock markets. Technology stocks, which had fueled a
"new economy" boom at the beginning of the period, collapsed in late winter,
taking broader markets on a bumpy ride that has continued through early autumn
and beyond.
We are pleased to report that, true to form, Capital Income Builder resisted
much of the slide in global stock prices that began in March. Indeed, a solid
8.7% gain in the second half of the fiscal year more than redressed an earlier
setback, resulting in a 5.5% total return for the full 12 months ended October
31. The Standard and Poor's 500 Stock Composite Index reversed that pattern,
declining slightly in the second half, but posting a 6.1% return for the full
year. The 91 income funds tracked by Lipper Inc. returned an average of 6.6%.
Since its inception on July 30, 1987, CIB has produced an average annual
compound return of 11.8%, exceeding the 10.8% average return of its peers,
according to Lipper.
DECEMBER DIVIDEND STEPS UP
Capital Income Builder's above-average and growing income stream proved to be
an anchor in the storm. The quarterly dividend increased again in December
2000, as in most quarters, by a half-cent a share, lifting the total dividend
to 51 cents a share. For the vast majority of you who reinvest capital gain
distributions, that continues an unbroken string of quarterly increases in
dividend income since the fund began more than 13 years ago.
[Begin sidebar]
CIB'S QUARTERLY DIVIDENDS COMPARED WITH INFLATION
Dividends as declared and as adjusted for reinvested capital gains
[Begin Bar Chart]
(cents per share)
(Index: December 1987 = 100)
<TABLE>
<CAPTION>
Additional income earned Inflation=
on initial shares if the Consumer Price
capital gain distributions Index (through
Fiscal Quarters Dividend were reinvested September 1999)
<S> <C> <C> <C>
4 Aug-Oct 1987 22* - -
1 Nov-Jan 1988 28 - 100
2 Feb-Apr 1988 28.5 - 101
3 May-Jul 1988 29 - 102.3
4 Aug-Oct 1988 29.5 - 103.8
1 Nov-Jan 1989 30 - 104.4
2 Feb-Apr 1989 30.5 - 106
3 May-Jul 1989 31 - 107.5
4 Aug-Oct 1989 31.5 - 108.3
1 Nov-Jan 1990 32.5 - 109.3
2 Feb-Apr 1990 33 - 111.5
3 May-Jul 1990 33.5 - 112.6
4 Aug-Oct 1990 34 - 115
1 Nov-Jan 1991 34.5 - 115.9
2 Feb-Apr 1991 35 - 117
3 May-Jul 1991 35.5 - 117.9
4 Aug-Oct 1991 36 - 118.9
1 Nov-Jan 1992 36.5 - 119.5
2 Feb-Apr 1992 37 .3 120.7
3 May-Jul 1992 37.5 .3 121.5
4 Aug-Oct 1992 38 .3 122.4
1 Nov-Jan 1993 38.5 .3 123
2 Feb-Apr 1993 39 .5 124.4
3 May-Jul 1993 39.5 .5 125.1
4 Aug-Oct 1993 40 .5 125.7
1 Nov-Jan 1994 40.5 .5 126.3
2 Feb-Apr 1994 41 .6 127.6
3 May-Jul 1994 41.5 .6 128.2
4 Aug-Oct 1994 42 .6 129.5
1 Nov-Jan 1995 42.5 .6 129.7
2 Feb-Apr 1995 43 .8 131.2
3 May-Jul 1995 43.5 .8 132.1
4 Aug-Oct 1995 44 .8 132.8
1 Nov-Jan 1996 44.5 .8 133
2 Feb-Apr 1996 45 1.4 134.9
3 May-Jul 1996 45.5 1.5 135.8
4 Aug-Oct 1996 46 1.5 136.7
1 Nov-Jan 1997 46.5 1.5 137.4
2 Feb-Apr 1997 46.5 1.6 137.4
3 May-Jul 1997 47.0 2.4 138.9
4 Aug-Oct 1997 47.5 2.4 139.7
1 Nov-Jan 1998 48.0 1.6 139.8
2 Feb-Apr 1998 48.0 4.2 140.6
3 May-Jul 1998 48.5 4.2 141.2
4 Aug-Oct 1998 49.0 4.3 141.8
1 Nov-Jan 1999 49.5 4.3 142.0
2 Feb-Apr 1999 48.0 7.3 143.0
3 May-Jul 1999 48.5 7.4 144.0
4 Aug-Oct 1999 49.0 7.5 145.5
1 Nov-Jan 2000 49.5 7.6 145.8
2 Feb-Apr 2000 49.5 9.7 148.4
3 May-Jul 2000 50.0 9.8 149.4
4 Aug-Oct 2000 50.5 9.9 150.5
1 Nov-Jan 2001 51.0 10.0
</TABLE>
[End Bar Chart]
Dividend
Additional income earned on initial shares if capital gain distributions were
reinvested.
Inflation = Consumer Price Index (through September 1999)
Fiscal Quarters:
1 November-January
2 February-April
3 May-July
4 August-October
*Not a full quarter
[End sidebar]
With the reinvestment of last December's capital gain distribution of $1.54 a
share, this latest dividend is 6.8% higher than in the same period a year
before. It is 117.9% higher than CIB's first full-quarter payment in December
1987, representing an average annual compound growth rate for income of 6.2%.
As the familiar stair-step chart above makes clear, even without counting
capital appreciation in the portfolio, this far outpaces the average inflation
rate as measured by the Consumer Price Index.
[Begin Sidebar]
CIB'S 10 LARGEST HOLDINGS
(as of 10/31/2000)
<TABLE>
<CAPTION>
PERCENT OF 12-MONTH
COMPANY NET ASSETS DIVIDEND GROWTH
<S> <C> <C>
Thames Water 2.3% 12.7%
Williams Companies 1.9 0.0
Telecom Italia 1.8 106.7
XL Capital 1.7 2.3
Bank of Nova Scotia 1.6 16.7
Royal Dutch Petroleum/"Shell" 1.6 3.0/3.6
Philip Morris 1.6 10.4
Royal Bank of Canada 1.6 25.0
Archstone Communities Trust 1.5 4.1
Pinnacle West Capital 1.5 7.1
</TABLE>
[End Sidebar]
Given the stock market's low-yield environment, we are gratified to note that
the fund continued to meet its goal of above-average income, with an annual
dividend rate of 4.7% of net asset value as of October 31. That was more than
four times the 1.1% rate for the S&P 500 Index; it also surpassed the 4.1%
average dividend rate of income funds, as measured by Lipper Inc.
DIVIDENDS CUSHION A FALL
The fund's fiscal year began in November, shortly after the start of a
powerful, but narrowly focused, rally in technology, media and
telecommunications stocks. The euphoria came to an abrupt end in late March.
The Nasdaq Index, a benchmark for technology stocks, plunged 39% from its
all-time high on March 10 to a fiscal-year low on October 12. Broader markets
were also affected, though less severely: The S&P declined nearly 11% from
March 24 to April 14, then wobbled back through the summer, only to drop 12%
from September 1 to October 12. (Both indexes have dropped even lower since the
close of the reporting period.)
Hand-in-hand with its emphasis on rising income, Capital Income Builder was
designed to provide a cushion in down markets. It weathered these latest
gyrations admirably, declining less than 1% during the March-to-April drop, and
falling just 2% during the six-week downturn this autumn.
OVERLOOKED SECTORS YIELD GEMS
As investors fled technology-related stocks, a number of neglected sectors came
to the fore. Real estate investment trusts (REITs), accounting for some 5% of
net assets, proved to be the standouts for the year. Reflecting strong real
estate fundamentals across the country, most holdings posted double-digit price
increases, while delivering current yields of roughly 5% to 7%. Archstone
Community Trust, our largest REIT holding, yielded 6.5% and gained 18% in
price. Spieker Properties, a relatively small holding, rose a remarkable 59% in
price, benefiting from its investments in desirable office properties in
Northern California.
Utilities, which are well-represented in the fund's portfolio, rallied on
rising power demand and surging natural gas prices. Among them was Pinnacle
West, which combined an 18% increase in share price with an attractive 3.5%
yield. Williams Companies, a longtime holding, rose 12%.
Bank holdings, by far the largest segment of the equity portfolio, rallied
selectively during the year as interest rate worries settled. Of note are two
Canadian banks, both among our 10 largest holdings: Royal Bank of Canada, which
rose 47% in price, and The Bank of Nova Scotia, which appreciated 25%.
At the other end of the spectrum, however, a number of the fund's international
holdings were hurt by a combination of declining stock prices and a strong
dollar, which trimmed returns for U.S. investors.
As Internet stocks grabbed headlines earlier in the fiscal year, our analysts
were busily uncovering attractive prospects among sectors that had fallen out
of favor. Recent additions to the portfolio include food companies, specialty
chemical manufacturers and paper producers. In addition to offering relatively
high current yields, many of these businesses have suitable profiles for strong
dividend growth.
LOOKING AHEAD
The recent rout in stock prices was a sobering reminder for investors that
financial markets do not only go up. Fortunately for Capital Income Builder
shareholders, the downturn was also an object lesson in the relative stability
a good income flow can provide when markets tumble. We realize how difficult it
can be to stay the course while others are chasing headier quarry, but
experience has taught us that discipline generally pays off in the long run.
Over the years, that discipline - of identifying and investing in solid
companies with strong dividend prospects - has helped shareholders participate
judiciously in market upswings without sacrificing downside protection.
Finally, please note that for the March 2001 quarter, the dividend will be
raised another half-cent, to 51.5 cents a share. Shareholders who reinvest the
December 2000 capital gain distribution of approximately 93 cents a share will
see an annualized increase in income of slightly over 6%. This reflects the
added shares they will hold.
We look forward to reporting to you again in six months.
Cordially,
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Chairman of the Board
/s/ James B. Lovelace
James B. Lovelace
President
December 8, 2000
[begin sidebar]
THE VALUE OF A LONG-TERM PERSPECTIVE
(with all dividends and distributions reinvested)
[begin table]
AVERAGE ANNUAL COMPOUND RETURNS
(for the periods ended October 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10 YEARS 5 YEARS 1 YEAR
CLASS A SHARES +12.91% +10.69% -0.52%
reflecting 5.75% maximum sales charge
</TABLE>
[end table]
[begin mountain chart]
$63,001 /1/ S&P 500
$41,350 /2/ CIB
$39,023 /3/ Lipper Income Funds Average
$10,000 /2/ Original Investment
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FY End Original
(Oct 31) S&P 500 CIB Lipper Income Funds Average Investment
Initial $10,000 $9,425 $10,000 $10,000
1987 /#/ $7,972 $8,929 $9,067 $10,000
1988 $9,152 $10,029 $10,362 $10,000
1989 $11,559 $11,689 $11,972 $10,000
1990 $10,690 $11,502 $11,332 $10,000
1991 $14,272 $14,858 $14,604 $10,000
1992 $15,689 $16,893 $16,249 $10,000
1993 $18,025 $19,897 $19,153 $10,000
1994 $18,722 $19,936 $18,755 $10,000
1995 $23,656 $23,367 $21,931 $10,000
1996 $29,339 $27,200 $25,299 $10,000
1997 $38,758 $33,605 $30,608 $10,000
1998 $47,275 $37,960 $33,332 $10,000
1999 $59,406 $38,918 $38,061 $10,000
2000 $63,001 /1/ $41,350 /2/ $39,023 /3/ $10,000 /2/
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Jul. 30 Oct. 31 /#/ Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
1987 1987 1988 1989 1990 1991 1992
CIB Total (10.1)% 12.3 16.7 (1.6) 29.3 13.5
Return
Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31
1993 1994 1995 1996 1997 1998
CIB Total 17.6 0.5 17.0 16.8 23.2 13.3
Return
Average Annual
Oct. 31 Oct. 31 Compound Return
1999 2000 For 13-1/4 years
CIB Total 2.5 5.5 10.8% /2/
Return
</TABLE>
/#/ For the period July 30 through October 31, 1987.
/1/ Standard & Poor's 500 Stock Composite Index is unmanaged and does not
reflect the effects of sales charges, commissions or expenses.
/2/ Reflects payment of maximum sales charge of 5.75%. Thus, the net amount
invested was $9,425. Sales charges are lower for accounts of $25,000 or
more.
/3/ With dividends reinvested. The Lipper average does not reflect sales
charges.
Past results are not predictive of future results.
[end mountain chart]
[end sidebar]
AN INCOME ORIENTATION:
A LOOK AT CIB'S UNIQUE OBJECTIVE
Capital Income Builder strives to capture the potential of dividends by seeking
a higher yield than the U.S. stock market generally and an income stream that
grows over time. A byproduct of that orientation has been a fruitful
participation in market upswings and a reassuring resilience when stock prices
have taken a fall. Our commitment is a bold one - and unusual in a fund that
emphasizes stocks - but over the years, it has served shareholders very well.
On the following pages, we invite you to meet a few of the investment
professionals who manage your fund. These men and women share some insights
about why focusing on income makes so much sense over the long term. They also
discuss how they find appropriate securities for the fund - and what makes
Capital Income Builder so special.
AN INSTITUTIONAL MODEL
Capital Income Builder began in 1987 with a novel premise for a mutual fund.
"We created the fund as a way to allow individuals to participate in the
institutional approach," explains Jon Lovelace, the fund's original chairman of
the board and a portfolio counselor. "Like endowments and other organizations
that finance ongoing projects, many people need to increase their assets even
as they are drawing on the income they produce. That means providing growing
income is essential, while principal remains invested."
[illustration of an arrow on the bullseye of a target]
Many types of investments produce income, but few can generate an income stream
that rises quarter after quarter. Bonds, for example, pay a specified rate of
interest until maturity, but that rate is usually fixed and ultimately might
not offset the rising cost of living. Short-term instruments, another income
option, put investors at the mercy of prevailing interest rates, which
fluctuate. While Capital Income Builder holds a reserve of cash equivalents and
has the flexibility to invest a portion of assets in bonds, its primary focus
has been on stocks with attractive dividend profiles. The rationale is a simple
one: Because dividend income reflects the growing profits of well-managed
corporations, it has risen faster and more predictably than income from other
assets.
[Begin Barchart]
A HISTORY OF ABOVE-AVERAGE INCOME
<TABLE>
<CAPTION>
<S> <C> <C>
Date CIB S&P 500
10/31/1987 * $97 $70
10/31/1988 $605 $365
10/31/1989 $1,149 $703
10/31/1990 $1,737 $1,075
10/31/1991 $2,361 $1,461
10/31/1992 $3,023 $1,852
10/31/1993 $3,725 $2,246
10/31/1994 $4,465 $2,652
10/31/1995 $5,244 $3,079
10/31/1996 $6,067 $3,540
10/31/1997 $6,934 $4,023
10/31/1998 $7,857 $4,530
10/31/1999 $8,837 $5,053
10/31/2000 $9,882 $5,567
</TABLE>
* (For the period 7/30/87 - 10/31/87)
Figures show cumulative dividends produced by hypothetical $10,000 investments
in CIB and the S&P 500 on July 30, 1987. Results are as of October 31 of each
year and are calculated at net asset value, assuming dividends are taken in
cash and capital gains are reinvested. One cannot invest directly in the S&P
500.
[End Barchart]
PURSUING A CHALLENGING AGENDA
Although hundreds of stock funds make dividends a part of their investment
strategies, Capital Income Builder's dual focus on above-average and growing
income makes it unique in the mutual fund universe. Because the fund doesn't
fit comfortably into a niche though, its mandate can sometimes be difficult to
understand. "Even though it invests in stocks, this fund is not primarily about
capital appreciation," stresses fund president and portfolio counselor Jim
Lovelace, "although we do expect total return to follow. Conceptually, the way
I think of our program is that we're trying to produce a dividend rate of, say,
5% a year and grow our income stream by another 5% or so. Long term, that can
add up in very interesting ways."
How successfully has the fund met that challenge? While there are no guarantees
for the future, the stair-step chart on page 1 of this report clearly
demonstrates one part of the story: income increases over 53 consecutive
quarters, assuming reinvestment of capital gain distributions, through a
variety of market cycles. And, as you can see from the table above, Capital
Income Builder's quarterly dividends have consistently exceeded those produced
by the S&P 500 Stock Composite Index.
[Begin Sidebar]
The fund's charms may not be overwhelmingly evident in the near term, but over
longer periods, its quiet dependability may be one of its greatest
achievements.
[End Sidebar]
AN INTEGRATED RESEARCH APPROACH
Because there are relatively few individual securities that both provide a high
current yield and grow their dividends, your fund's portfolio typically blends
companies that, as a totality, meet both criteria. Holdings generally range
from stocks with high yields and little dividend growth to those with a
moderate yield and moderate growth to lower yielding securities with strong
potential for growing dividends.
If the parameters are straightforward, fulfilling them can be challenging,
particularly as stock yields have drifted to historic lows and paying dividends
has fallen out of favor with many corporations. Fundamental research, a
hallmark of all of the American Funds, takes on another dimension when it comes
to finding appropriate securities for Capital Income Builder. In addition to
cultivating broad industry knowledge and assessing the health of individual
companies, research analysts must project dividend payouts for the next several
years by paying close attention to cash flow, management attitudes and other
factors.
Joyce Gordon, an American Funds research analyst who has been following the
banking industry since 1988, notes that she applies special standards to banks
she considers for Capital Income Builder. "I'll often look at seven or eight
banks in a week," she says, "and usually only one will stand out for this fund.
It may be because dividend growth is important to management, or the company is
increasing the percentage of earnings paid out as dividends. Or something may
have happened that resulted in a step-up in the stock yield. If any of these is
the case, a bell will go off in my head that this stock is right for the fund."
Joyce and other American Funds analysts are aided in their efforts by an
integrated, collaborative research effort that helps broaden the context of
their investment recommendations. They leverage their many hours of work by
participating in "clusters" of portfolio counselors and analysts with similar
areas of expertise. Like fitting together pieces of a jigsaw puzzle, they visit
companies together, share insights at regular teleconferences and write
frequent reports on the companies they follow. The fund's unique requirements
are given additional attention at special monthly meetings. The result is a
range of perspectives and a broad base of knowledge that has been especially
useful for identifying opportunities for the fund.
[illustration of a jigsaw puzzle]
[Begin Sidebar]
THE POWER OF DIVIDENDS
As stock prices surged during the late 1990s, many pundits began sounding the
death knell for dividends. Their observations have been short-sighted: Over
meaningful time frames, old-fashioned dividends have been the unsung heroes of
the stock market's extraordinary growth.
A recent study by two California economists* evaluated the share price and
dividend components of the Standard & Poor's 500 Stock Composite Index and
other stock market benchmarks over very long periods. The economists' findings
suggested that, without dividends, the S&P 500's 11.1% average annual return
from 1925 to 1998 would have been trimmed nearly in half, to 6.5%. Inflation,
incidentally, whittled that return even further, to 7.8% with dividends and
3.3% without them. Looked at another way, $10,000 invested on January 1, 1926
would have grown to $1,120,219 by October 31, 2000 without dividends, but
swollen to $27,311,847 with dividends reinvested.
For cautious investors, dividends also serve as a cushion when markets are flat
or retreating. As many investors discovered this past spring, focusing solely
on share price can sometimes be an uncomfortable - and disappointing -
experience. "Dividends are the wonderfully tangible component of your total
return," stresses Janet McKinley, a portfolio counselor based in New York.
"Investors who were chasing the Internet bubble conveniently forgot that, but
when the Nasdaq crumpled, many of them were left without much to show for it."
Although Capital Income Builder focuses primarily on the income component of
total return, dividends and capital growth are often part of a virtuous circle.
That's because corporations that produce a steadily growing income stream
generally do so by improving profits, which should eventually lead to an
increase in share price as well. "In my experience, a company that's generating
good cash flow and growing its dividend is probably a healthy company," notes
Janet. "That should mean that over time, over a complete market cycle, its
stock price should also do well."
For patient investors, dividends can also be an indication of value. A rising
yield may suggest that a fundamentally sound company is underpriced, providing
an opportunity for capital growth.
*Source: Clarke, Roger G. and Meir Statman. The DJIA Crossed 652,230. The
Journal of Portfolio Management. Winter 2000.
[End Sidebar]
Darcy Kopcho, an auto analyst and one of several research directors for the
American Funds, cites a major advantage of approaching industries on a global
basis. "As yields ebb and flow in different sectors around the world," she
says, "analysts can focus on areas that could be a boon for the fund. Clusters
bring it all together by providing a forum for comparing those areas and
assessing good prospects for dividend growth."
A GLOBAL PORTFOLIO
Research is not your fund's only global characteristic. Although the majority
of assets have typically been held in U.S.-based companies, the fund has the
flexibility to invest anywhere in the world our analysts find attractive
securities. "CIB's orientation has been global from the outset," says Jim
Lovelace. "That freedom has really helped us add value, because our research
capabilities are so far-flung, and because no one can accurately predict where
the next great market will be. Sometimes, U.S. stocks have shone; at other
times, superior dividend growth has come from companies based outside our
borders."
[Begin Sidebar]
A LIFETIME OF RESISTANCE
Capital Income Builder versus the S&P 500 during market declines of 10% or
more*
<TABLE>
<CAPTION>
<S> <C> <C>
Dates of Decline S&P Return CIB Return
8/25 - 12/4/1987 -33.51% -11.20%
1/2 - 1/30/1990 -10.21 -4.77
7/16 - 10/11/1990 -19.92 -9.56
10/7 - 10/27/1997 -10.80 -5.35
7/17 - 8/31/1998 -19.34 -11.14
7/16 - 10/15/1999 -12.08 -8.30
3/24 - 10/12/2000 -12.94 +2.01
</TABLE>
*Figures show capital returns with capital gains reinvested.
[End Sidebar]
Brad Vogt, a telecom analyst who is also a research director, agrees. "Capital
Income Builder definitely has an advantage in that we can seek income
globally," he notes. "I would guess that over the years, a substantial portion
of our dividend growth has come from overseas. Income funds that are investing
solely in the U.S. just don't have that edge." Today, stocks of companies based
outside this country account for close to one-third of net assets, including a
growing portion in continental Europe.
A SYSTEM FOR ALL SEASONS
If research encourages diversity among holdings, the multiple portfolio
counselor system, the management approach used by all of the American Funds,
helps pull it together. Your fund has five portfolio counselors, each of whom
independently manages a portion of assets within the fund's objectives; one of
them, Mark MacDonald, concentrates on the fixed-income component. An additional
segment is managed by 31 research analysts, who bring their industry expertise
to bear on investment decisions. Given Capital Income Builder's very particular
income directive, these multiple perspectives provide critical checks and
balances throughout the investment process. The result is a balanced blend of
investment styles that over full market cycles has delivered a consistency a
single manager would find almost impossible to match.
[Begin Sidebar]
AS BROAD MARKETS PLUNGED THIS PAST YEAR, CIB HELD UP BETTER
(Capital returns for the period 3/24 - 10/12/2000)
<TABLE>
<CAPTION>
INDEX RETURN
<S> <C>
S&P 500 -12.94%
Nasdaq -39.10
MSCI World -15.29
Capital Income Builder + 2.01
</TABLE>
The period shown reflects the S&P's 2000 high-to-low as of 10/31. The indexes
are unmanaged.
[End Sidebar]
A CALM HARBOR
For stock investors seeking relative stability, CIB's income focus has also
tended to provide a smoother ride. Our goal of providing downside protection
was tested right at the starting gate - the fund began just a few months before
the October 1987 crash - but the fund has weathered every substantial decline
in its lifetime, as the tables at left and above make clear.
[illustration of a ship in a harbor]
That resilience has also helped us share in the fruits of market upswings over
the years, a significant accomplishment for a fund that pays close attention to
risk. Exceptions have been the extraordinary stock surges in 1998 and 1999, but
as we have seen the market froth subside in recent months, the fund's strengths
have once again come into sharp relief. "In many ways, Capital Income Builder
is a real workhorse of a fund, grinding away slowly," says Jim. "Its charms may
not be overwhelmingly evident in the near term, but over longer periods, its
quiet dependability may be one of its greatest achievements."
Capital Income Builder, Inc.
Investment Portfolio, October 31, 2000
<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>
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.
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.
WHAT MAKES THE AMERICAN FUNDS DIFFERENT?
Capital Income Builder is a member of the American Funds family, the nation's
third-largest. All American Funds are managed by Capital Research and
Management Company, which was founded in 1931. Thousands of financial advisers
recommend the American Funds for their clients' serious money because they
endorse our commitment to shareholder interests - a commitment reflected in our
investment standards and practices.
A LONG-TERM, VALUE-ORIENTED APPROACH
We rely on our own intensive research to find well-managed companies with
reasonably priced securities and solid, long-term potential. Despite our size,
we offer relatively few funds, allowing us to focus on each fund's objectives
and enabling you to benefit from economies of scale.
AN UNPARALLELED GLOBAL RESEARCH EFFORT
We opened our first overseas office in 1962, well before most U.S. investment
firms. Today, we operate one of the industry's most globally integrated
research networks.
A MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Every American Fund is managed by several portfolio counselors, each of whom
invests a portion of the fund's assets independently in accordance with the
fund's objectives; in most cases, research analysts manage a portion as well.
Over time, this method fosters consistency of results and continuity of
management.
EXPERIENCED INVESTMENT PROFESSIONALS
More than 75% of our portfolio counselors were in the investment business
before the sharp stock market decline in October 1987. Long tenure and
experience gained through various market conditions mean we aren't "practicing"
with your money.
A COMMITMENT TO LOW OPERATING EXPENSES
Our operating expenses are among the lowest in the mutual fund industry,
providing exceptional value for shareholders. Our portfolio turnover rates are
low as well, keeping transaction costs and tax consequences contained.
A PORTFOLIO FOR EVERY INVESTOR
Most financial advisers urge investors to diversify their portfolios among
several types of investments. The American Funds offer 29 mutual funds with an
array of objectives to help you and your financial adviser build a portfolio
tailored to your individual goals.
GROWTH FUNDS
AMCAP Fund/r/
EuroPacific Growth Fund/r/
The Growth Fund of America/r/
The New Economy Fund/r/
New Perspective Fund/r/
New World Fund/sm/
SMALLCAP World Fund/r/
GROWTH-AND-INCOME FUNDS
American Mutual Fund/r/
Capital World Growth and Income Fund/sm/
Fundamental Investors/sm/
The Investment Company of America/r/
Washington Mutual Investors Fund/sm/
EQUITY-INCOME FUNDS
Capital Income Builder/r/
The Income Fund of America/r/
BALANCED FUND
American Balanced Fund/r/
INCOME FUNDS
American High-Income Trust/sm/
The Bond Fund of America/sm/
Capital World Bond Fund/r/
Intermediate Bond Fund of America/r/
U.S. Government Securities Fund/sm/
TAX-EXEMPT INCOME FUNDS
American High-Income Municipal Bond Fund/r/
Limited Term Tax-Exempt Bond Fund of America/sm/
The Tax-Exempt Bond Fund of America/r/
STATE-SPECIFIC TAX-EXEMPT INCOME FUNDS
The Tax-Exempt Fund of California/r/
The Tax-Exempt Fund of Maryland/r/
The Tax-Exempt Fund of Virginia/r/
MONEY MARKET FUNDS
The Cash Management Trust of America/r/
The Tax-Exempt Money Fund of America/sm/
The U.S. Treasury Money Fund of America/sm/
We also offer a full line of retirement plans and variable annuities.
For more complete information about the funds, please obtain a prospectus from
your financial adviser or from our Web site (www.americanfunds.com), or phone
American Funds Service Company, toll-free, at 800/421-0180. Please read the
prospectus carefully before you invest or send money.
The American Funds Group/r/
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE,
Rolling Hills Estates, California
Private investor; former President and Chief
Executive Officer, The Mission Group; former
President, Southern California Edison Company
PAUL G. HAAGA, JR., Los Angeles, California
Chairman of the Board of the fund
Executive Vice President and Director,
Capital Research and Management Company
MARY MYERS KAUPPILA, Boston, Massachusetts
Private investor; former owner and President,
Energy Investment, Inc.
JAMES B. LOVELACE, Los Angeles, California
President and Principal Executive Officer of the
fund Senior Vice President, Capital Research and
Management Company
JON B. LOVELACE, Los Angeles, California
Vice Chairman of the Board of the fund
Chairman Emeritus, Capital Research and
Management Company
GAIL L. NEALE, Burlington, Vermont
President, The Lovejoy Consulting Group, Inc.;
former Executive Vice President of the Salzburg
Seminar
ROBERT J. O'NEILL, PH.D., Oxford, England
Chichele Professor of the History of War;
Fellow of All Souls College, University of Oxford
DONALD E. PETERSEN, Birmingham, Michigan
Retired; former Chairman of the Board and
Chief Executive Officer, Ford Motor Company
STEFANIE POWERS, Beverly Hills, California
Actor; Founder and President,
The William Holden Wildlife Foundation
FRANK STANTON, New York, New York
Retired; former President, CBS Inc. (1946-1973)
CHARLES WOLF, JR., PH.D., Santa Monica, California
Senior Economic Adviser and Corporate Fellow in
International Economics, The RAND Corporation
OFFICERS
CATHERINE M. WARD, Los Angeles, California
Executive Vice President of the fund
Senior Vice President and Director,
Capital Research and Management Company
JOYCE E. GORDON, Los Angeles, California
Senior Vice President of the fund
Senior Vice President, Capital Research Company
JANET A. MCKINLEY, New York, New York
Senior Vice President of the fund
Director, Capital Research and Management
Company
DARCY B. KOPCHO, Los Angeles, California
Vice President of the fund
Executive Vice President and Director,
Capital Research Company
STEVEN T. WATSON, Hong Kong
Vice President of the fund
Vice President, Capital Research Company
VINCENT P. CORTI, Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management
Group, Capital Research and Management
Company
R. MARCIA GOULD, Brea, California
Treasurer of the fund
Vice President - Fund Business Management
Group, Capital Research and Management
Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
AMERICAN FUNDS SERVICE COMPANY
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071-2899
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, California 90071-3405
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of Capital Income Builder,
but it may also be used as sales literature when preceded or accompanied by the
current prospectus, which gives details about charges, expenses, investment
objectives and operating policies of the fund. If used as sales material after
December 31, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, OR FOR A
PROSPECTUS FOR ANY OF THE AMERICAN FUNDS, PLEASE CONTACT YOUR FINANCIAL
ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE COMPANY, TOLL-FREE, AT
800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD WIDE WEB. PLEASE READ
THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Printed on recycled paper
Litho in USA DD/CG/4875
Lit. No. CIB-011-1200
</TABLE>
