Capital Income Builder Seeks Board Elections, Fee Revamp, and Fund Reclassification

Capital Income Builder DEF 14A Filing Summary
FieldDetail
CompanyCapital Income Builder
Form TypeDEF 14A
Filed DateSep 9, 2025
Risk Levelmedium
Pages15
Reading Time18 min
Key Dollar Amounts$1.70
Sentimentmixed

Sentiment: mixed

Topics: Shareholder Meeting, Proxy Statement, Fund Governance, Advisory Fees, Diversification, Investment Company Act of 1940, Mutual Funds

TL;DR

**CAPITAL INCOME BUILDER is shaking up its governance and fee structure, and TEFNY is taking on more risk for potential upside – pay attention to these changes, they'll impact your wallet!**

AI Summary

CAPITAL INCOME BUILDER, alongside other American Funds and Capital Group ETFs, is holding a special shareholder meeting on November 25, 2025, to address three key proposals. Shareholders will vote to elect Board members, a necessary step as it has been several years since the last election, allowing the Boards to add new members without frequent shareholder meetings. Additionally, ten bond funds, including American Funds Mortgage Fund and The Bond Fund of America, are proposing an amendment to their Investment Advisory and Service Agreement to shift from a variable asset and income-based fee schedule to a more stable asset-only advisory fee schedule, aiming to eliminate fee volatility during dynamic interest rate environments. Finally, American Funds Tax-Exempt Fund of New York (TEFNY) seeks approval to change its classification from a 'diversified' to a 'non-diversified' fund under the 1940 Act, which would grant its investment adviser, Capital Research and Management Company (CRMC), greater investment flexibility, albeit with increased risk. The Boards of all affected Funds unanimously recommend voting 'FOR' all proposals.

Why It Matters

This DEF 14A filing signals significant governance and operational changes across a broad spectrum of American Funds and Capital Group ETFs, including CAPITAL INCOME BUILDER. For investors, the proposed shift to an asset-only advisory fee for ten bond funds could stabilize costs, particularly in volatile interest rate markets, impacting net returns. The reclassification of TEFNY to 'non-diversified' offers CRMC enhanced investment flexibility, potentially leading to higher returns but also increased risk concentration, which investors must weigh carefully. These changes reflect a strategic adaptation to market conditions and regulatory frameworks, aiming to optimize fund performance and operational efficiency in a highly competitive asset management landscape.

Risk Assessment

Risk Level: medium — The risk level is medium due to the proposed reclassification of American Funds Tax-Exempt Fund of New York (TEFNY) from 'diversified' to 'non-diversified.' This change, as stated in Proposal 3, means TEFNY will no longer be subject to the 1940 Act's limits on investing more than 5% of total assets in one issuer or holding more than 10% of an issuer's voting securities, introducing additional concentration risk for shareholders.

Analyst Insight

Investors should carefully review the specific proposals, especially the fee schedule changes for the ten bond funds and the diversification reclassification for TEFNY. Vote 'FOR' or 'AGAINST' based on your personal investment goals and risk tolerance, considering the potential for stabilized fees versus increased concentration risk.

Financial Highlights

total Assets
Not Disclosed
total Debt
Not Disclosed

Key Numbers

  • 2025-09-09 — Filing Date (Date the DEF 14A was filed)
  • 2025-11-25 — Shareholder Meeting Date (Date of the Joint Special Meetings of Shareholders)
  • 9:00 a.m. Pacific Time — Meeting Time (Scheduled start time for the shareholder meetings)
  • 3 — Number of Proposals (Total number of proposals to be voted on by shareholders)
  • 10 — Number of Funds (Number of bond funds proposing a change to their investment advisory and service fee schedule)
  • 1 — Fund Reclassification (Number of funds proposing a change from diversified to non-diversified classification (American Funds Tax-Exempt Fund of New York))
  • 2025-08-28 — Record Date (Date for determining shareholders entitled to vote)
  • $1.70 — Estimated Cost Per Shareholder Account (Average estimated cost for obtaining shareholder approval of proposals)
  • 888-615-7476 — Computershare Contact Number (Phone number for shareholder assistance with voting)
  • 1 — Votes Per Share (Shareholder voting power per share owned)

Key Players & Entities

  • CAPITAL INCOME BUILDER (company) — Registrant for DEF 14A filing
  • American Funds Mortgage Fund (company) — Fund proposing fee schedule amendment
  • American High-Income Trust (company) — Fund proposing fee schedule amendment
  • The Bond Fund of America (company) — Fund proposing fee schedule amendment
  • American Funds Tax-Exempt Fund of New York (company) — Fund proposing diversification classification change and fee schedule amendment
  • Capital Research and Management Company (company) — Investment adviser for TEFNY
  • Michael W. Stockton (person) — Executive Vice President of the Funds
  • Computershare Fund Services (company) — Company hired to assist with shareholder meetings and collect votes
  • SEC (regulator) — Regulates the filing of DEF 14A
  • Capital Group (company) — Parent company and location of shareholder meeting

FAQ

What are the key proposals for CAPITAL INCOME BUILDER shareholders to vote on?

CAPITAL INCOME BUILDER shareholders, along with others in the American Funds and Capital Group ETFs, will vote on three key proposals: the election of Board members, the approval of an amended Investment Advisory and Service Agreement for ten bond funds to modify their fee schedules, and the reclassification of American Funds Tax-Exempt Fund of New York from a 'diversified' to a 'non-diversified' fund.

When and where is the special shareholder meeting for CAPITAL INCOME BUILDER?

The Joint Special Meetings of Shareholders, including for CAPITAL INCOME BUILDER, will be held on November 25, 2025, at 9:00 a.m. Pacific Time, at the office of Capital Group, located at 333 South Hope Street, Los Angeles, California 90071.

Why are the Boards recommending a change to the investment advisory fee schedule for certain funds?

The Boards recommend changing the fee structure for ten bond funds, including American Funds Mortgage Fund, to an asset-only advisory fee schedule. This aims to create stability and consistency in fees for investors, eliminating the potential for higher advisory fees during times of rising or higher interest rates, as the current schedule has both asset and income components.

What does changing American Funds Tax-Exempt Fund of New York's classification to 'non-diversified' mean?

Changing American Funds Tax-Exempt Fund of New York's classification to 'non-diversified' means it will no longer be subject to certain 1940 Act regulatory limits. Specifically, it can invest more than 5% of its total assets in securities of a single issuer and hold more than 10% of an issuer's voting securities, providing greater investment flexibility but also introducing additional risks.

Who is Michael W. Stockton and what is his role in this filing?

Michael W. Stockton is the Executive Vice President of the Funds. He signed the Dear Shareholder letter, urging shareholders to vote at the upcoming complex-wide shareholder meeting and emphasizing the importance of their participation.

What is the record date for voting at the CAPITAL INCOME BUILDER shareholder meeting?

The record date for determining shareholders entitled to notice of and to vote at the CAPITAL INCOME BUILDER shareholder meeting is August 28, 2025. Only shareholders of record at the close of business on this date are eligible to vote.

What happens if a proposal is not approved by shareholders?

If there are not enough votes to approve a proposal for a Fund, the meeting may be adjourned to solicit further proxy votes. If a proposal is ultimately not approved (other than for EMEF or EUPAC's Proposal 1), the Fund will continue to operate as it currently does.

How can shareholders vote their shares for CAPITAL INCOME BUILDER?

Shareholders can vote their shares online, by phone, by mail, or in person at the shareholder meeting. Instructions and identifying numbers are provided on the proxy card or meeting notice, and assistance is available by calling Computershare at (888) 615-7476.

What are the estimated costs associated with obtaining shareholder approval for these proposals?

The estimated costs associated with obtaining shareholder approval for the proposals, including printing, mailing, and proxy solicitation, are deemed appropriate expenses for the Funds to incur. These costs are estimated to average approximately $1.70 per shareholder account across all Funds.

Why is the election of Board members necessary at this time?

The election of Board members is necessary because it has been several years since the Funds held shareholder meetings for this purpose, and subsequent changes in Board composition necessitate new elections. This allows the Boards to add new members for a longer period without the expense of conducting additional shareholder meetings, maintaining the two-thirds elected member requirement under the 1940 Act.

Risk Factors

  • 1940 Act Classification Change [medium — regulatory]: American Funds Tax-Exempt Fund of New York (TEFNY) is seeking to change its classification from 'diversified' to 'non-diversified' under the 1940 Act. This change grants the investment adviser, CRMC, greater investment flexibility but also introduces increased investment risk for shareholders.
  • Interest Rate Volatility Impact on Fees [medium — market]: Ten bond funds are proposing to shift from a variable asset and income-based fee schedule to a stable asset-only advisory fee schedule. This aims to eliminate fee volatility that can occur during dynamic interest rate environments, which could otherwise lead to higher advisory fees for investors.
  • Board Member Election Necessity [low — operational]: Shareholder meetings are being held to elect Board members, as it has been several years since the last election. This is necessary to allow the Boards to add new members without frequent shareholder meetings, streamlining governance.

Industry Context

The mutual fund industry, particularly within the American Funds and Capital Group families, is subject to ongoing regulatory oversight and market dynamics. Funds must adapt to changing interest rate environments and evolving investor needs. The proposals reflect a strategic effort to optimize fund operations, fee structures, and investment flexibility to maintain competitiveness and potentially enhance long-term shareholder value.

Regulatory Implications

The proposed changes, particularly the reclassification of American Funds Tax-Exempt Fund of New York to a non-diversified status, fall under the purview of the 1940 Act. This requires shareholder approval and may lead to increased investment risk. The shift in fee structures for bond funds also addresses regulatory considerations related to fee transparency and stability.

What Investors Should Do

  1. Vote 'FOR' Proposal 1 to elect Board members, ensuring proper governance and allowing for streamlined board composition updates.
  2. Vote 'FOR' Proposal 2 to approve the amendment to the Investment Advisory and Service Agreement for specific bond funds, aiming for more stable fee structures.
  3. Vote 'FOR' Proposal 3 to approve the change in classification for American Funds Tax-Exempt Fund of New York from diversified to non-diversified, granting greater investment flexibility.
  4. Review the Joint Proxy Statement thoroughly to understand the implications of each proposal before casting your vote.
  5. Contact Computershare at 888-615-7476 for any questions or assistance with the voting process.

Key Dates

  • 2025-09-09: Filing Date — Indicates when the definitive proxy statement was officially submitted to the SEC, marking the start of the formal shareholder communication period.
  • 2025-08-28: Record Date — Determines which shareholders are eligible to vote at the upcoming meeting, crucial for understanding voting power.
  • 2025-11-25: Shareholder Meeting Date — The date when shareholders will vote on the proposed changes, a critical event for the funds' governance and operations.
  • 2025-11-25: Meeting Time — The scheduled start time for the shareholder meetings, important for logistical planning for any attending shareholders.

Glossary

DEF 14A
A definitive proxy statement filed with the SEC by publicly traded companies and mutual funds to solicit shareholder votes. (This document contains the official proposals and information shareholders need to make informed voting decisions.)
1940 Act
The Investment Company Act of 1940, a U.S. federal law that regulates the organization and operation of mutual funds and other investment companies. (Key provisions of this act govern fund classifications (diversified vs. non-diversified) and board composition requirements, directly impacting proposals 1 and 3.)
Diversified Fund
Under the 1940 Act, a diversified fund has limitations on its investments in any single issuer. Specifically, it cannot invest more than 5% of its assets in one issuer and cannot hold more than 10% of the voting securities of any one issuer for at least 75% of its total assets. (American Funds Tax-Exempt Fund of New York is proposing to change from this classification, which will alter its investment strategy and risk profile.)
Non-diversified Fund
Under the 1940 Act, a non-diversified fund is not subject to the strict percentage limitations on investments in single issuers that apply to diversified funds. (This classification offers greater investment flexibility to the fund's adviser but may increase investment risk.)
Investment Advisory and Service Agreement
The contract between a fund and its investment adviser that outlines the services provided and the fees charged. (Ten bond funds are proposing to amend this agreement to change their fee structure from a variable asset/income-based fee to a stable asset-only fee.)

Year-Over-Year Comparison

This filing is a definitive proxy statement for a special shareholder meeting, not an annual report. Therefore, direct year-over-year comparisons of financial metrics like revenue or net income are not applicable. The focus is on proposed operational and structural changes rather than performance reporting.

Filing Stats: 4,405 words · 18 min read · ~15 pages · Grade level 13.7 · Accepted 2025-09-09 16:17:58

Key Financial Figures

  • $1.70 — average across all Funds approximately $1.70 per shareholder account. How many vote

Filing Documents

– The Proposals

Part I – The Proposals     Proposal 1 – To elect Board members of the Funds   3 Proposal 2 – To approve the proposed amendment of the Investment Advisory and Service Agreement to modify the investment advisory and service fee schedule for each of American Funds Mortgage Fund, American High -Income Trust, The Bond Fund of America, U.S. Government Securities Fund, Intermediate Bond Fund of America, American High -Income Municipal Bond Fund, Limited Term Tax -Exempt Bond Fund of America, The Tax -Exempt Bond Fund of America, The Tax -Exempt Fund of California, and American Funds Tax -Exempt Fund of New York   8 Proposal 3 – To approve the proposed change to the diversification classification for American Funds Tax -Exempt Fund of New York from a diversified to a non -diversified registered investment company   13 Part II     Additional Information about the Funds   15 Audit Committee   16 Further Information About Voting and the Shareholder Meetings   17 EXHIBITS     Exhibit A – Series and Included Fund(s )     Exhibit B – Form of Nominating and Governance Committee Charte r     APPENDICES     Appendix 1 – Board Member and Nominee Informatio n     Appendix 2 – Board and Committee Meetings; Committee Compositio n     Appendix 3 – Board Member Compensation and Fund Ownershi p     Appendix 4 – Executive Officer s     Appendix 5 – Total Shares Outstandin g     Appendix 6 – Principal Beneficial Holder s     Appendix 7 – Independent Auditors and Related Fee s     Appendix 8 – Comparison of Current and Proposed A

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