CAPITAL INCOME BUILDER INC, 485BPOS, 2000-01-07

CAPITAL INCOME BUILDER INC
485BPOS, 2000-01-07

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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. 15

and

Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 17

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 10, 2000, pursuant
to paragraph (b) of rule 485.

<PAGE>

Capital Income Builder/(R)/

Prospectus

JANUARY 10, 2000

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>
<S> <C> <C>
TICKER SYMBOL: CAIBX NEWSPAPER ABBREV: CapIB FUND NO: 12
</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 8
-------------------------------------------------------
Shareholder Information 10
-------------------------------------------------------
Purchase and Exchange of Shares 11
-------------------------------------------------------
Distributions and Taxes 16
-------------------------------------------------------
Financial Highlights 17
-------------------------------------------------------
</TABLE>

CIB-010-0100/MC
CAPITAL INCOME BUILDER / PROSPECTUS

<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. Normally, the fund will invest at least 90% of its
assets in income-producing securities (with at least 50% of its assets in
common stocks). 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 may decline in value 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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.

Here are the fund's results calculated without a sales charge on a calendar
year basis. (If a sales charge were included, results would be lower.)

[bar chart]
1989 19.98
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
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 1999
was -3.33%.
------------------------------------------------------------------------------

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>

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

For periods ended December 31, 1998:

<TABLE>
<CAPTION>
THE FUND WITH
AVERAGE ANNUAL MAXIMUM SALES
TOTAL RETURN CHARGE DEDUCTED/1/ S&P 500/2/
<S> <C> <C>
One Year 5.33% 28.52%
--------------------------------------------------------
Five Years 13.31% 24.02%
--------------------------------------------------------
Ten Years 14.01% 19.16%
--------------------------------------------------------
Lifetime/3/ 12.88% 15.73%
--------------------------------------------------------
</TABLE>

30-day yield/1/: 3.49%
(For current yield information, please call American FundsLine/^/ at
1-800-325-3590)

1 These fund results were calculated according to a formula which requires that
the maximum sales charge of 5.75% be deducted and include the reinvestment of
dividend and capital gain distributions. Results would be higher if they were
calculated at net asset value.

2 The Standard & Poor's 500 Composite Index is a broad-based measurement of
changes in stock market conditions based on the average performance of 500
widely held common stocks. This index is unmanaged and does not reflect sales
charges, commissions or expenses.

3 The fund began investment operations on July 30, 1987.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
FEES AND EXPENSES OF THE FUND

The following describes the fees and expenses that you may pay if you buy and
hold shares of the fund.

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment)
----------------------------------------------------------------
<S> <C>
Maximum sales charge imposed on purchases 5.75%/1/
(as a percentage of offering price)
----------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0%
----------------------------------------------------------------
Maximum deferred sales charge 0%/2/
----------------------------------------------------------------
Redemption or exchange fees 0%
</TABLE>

1 Sales charges are reduced or eliminated for larger purchases.

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.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
----------------------------------------------------------
<S> <C>
Management Fees 0.32%
Service (12b-1) Fees 0.24%*
Other Expenses 0.08%
Total Annual Fund Operating Expenses 0.64%
</TABLE>

/*/ 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 and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your cumulative expenses would
be:

<TABLE>
<CAPTION>
<S> <C>
One year $ 637
-----------------------------------------------------------
Three years $ 768
-----------------------------------------------------------
Five years $ 911
-----------------------------------------------------------
Ten years $1,327
</TABLE>

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, 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
provides greater liquidity to meet redemptions or to make additional
investments, and it would reduce the fund's exposure in the event of a market
downturn.

The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. 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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

[bar chart]
S&P 500 CIB(NAV)
December 1987* 69 124
September 1993 101 179
September 1999 140 250

The quarterly dividends produced by a hypothetical $10,000 investment in CIB
and the S&P 500 at the fund's inception on July 30, 1987. This snapshot at
three intervals over the lifetime of the fund shows that CIB has maintained
a substantially higher dividend than the S&P 500 throughout its 12-year
history. All results are calculated at net asset value with dividends taken
in cash and capital gain distribution reinvested.

*First full calendar quarter
[end bar chart]

<TABLE>
<CAPTION>
Ten Largest Individual Equity Holdings PERCENT OF
(as of the end of the fund's fiscal year, October 31, 1999) NET ASSETS
--------------------------------------------------------------------------
<S> <C>
Deutsche Telekom 2.42%
--------------------------------------------------------------------------
First Union 2.38
--------------------------------------------------------------------------
SBC Communications 1.92
--------------------------------------------------------------------------
BANK ONE 1.75
--------------------------------------------------------------------------
Scottish and Southern Energy 1.48
--------------------------------------------------------------------------
Williams Companies 1.45
--------------------------------------------------------------------------
Ford Motor 1.38
--------------------------------------------------------------------------
United Utilities 1.35
--------------------------------------------------------------------------
Pinnacle West Capital 1.35
--------------------------------------------------------------------------
Telecom Italia 1.30
</TABLE>

Because the fund is actively managed, its holdings will change from time to
time.

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."

Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing. This policy has also been
incorporated into the fund's code of ethics.

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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
YEARS OF EXPERIENCE AS AN INVESTMENT PROFESSIONAL
AS PORTFOLIO COUNSELOR (INCLUDNG THE LAST FIVE YEARS)
(AND RESEARCH -----------------------------------
PORTFOLIO 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 11 years 18 years 18 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 12 years (since the 48 years 48 years
LOVELACE the fund. Chairman Emeritus, fund began operations)
Capital Research and
Management Company
----------------------------------------------------------------------------------------------------------
JANET A. Senior Vice President of the 12 years (since the 18 years 24 years
MCKINLEY fund. Director, Capital fund began operations)
Research and Management
Company. Senior Vice
President, Capital Research
Company*
----------------------------------------------------------------------------------------------------------
STEVEN T. Vice President of the fund. 2 years (plus 5 years 10 years 10 years
WATSON Senior Vice President and as a research
Director, Capital Research professional prior to
Company* becoming a portfolio
counselor for the
fund)
----------------------------------------------------------------------------------------------------------
THIERRY Director, Capital Research 12 years (since the 37 years 37 years
VANDEVENTER and Management Company fund began operations)

The fund began investment operations on July 30, 1987.
* Company affiliated with Capital Research and Management Company.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

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, some
retirement plans or accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your plan administrator/
trustee or dealer.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

Generally, you may open an account by contacting any investment dealer
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 other funds in The American Funds Group,
generally without a sales charge. 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>
INVESTMENT MINIMUMS
<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
</TABLE>

SHARE PRICE

The fund calculates its share price, also called net asset value, as of 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. If a market price for a particular
security is not available, the fund will determine the appropriate price for
the security.

Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

your request. The offering price is the net asset value plus a sales charge, if
applicable.

SALES CHARGE

A sales charge may apply to your purchase. Your sales charge may be reduced 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 $50,000 5.00% 5.26% 4.25%
-----------------------------------------------------------------------
$50,000 but less than $100,000 4.50% 4.71% 3.75%
-----------------------------------------------------------------------
$100,000 but less than $250,000 3.50% 3.63% 2.75%
-----------------------------------------------------------------------
$250,000 but less than $500,000 2.50% 2.56% 2.00%
-----------------------------------------------------------------------
$500,000 but less than $750,000 2.00% 2.04% 1.60%
-----------------------------------------------------------------------
$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>

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
MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type
plans investing $1 million or more, or with 100 or more eligible employees, may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by 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 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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

REDUCING YOUR SALES CHARGE

You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your sales charge. You must let your
investment dealer or American Funds Service Company know if you qualify for a
reduction in your sales charge using one or any combination of the methods
described below and in the statement of additional information and "Welcome to
the Family."

AGGREGATING ACCOUNTS

To receive a reduced 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 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 sales charge. Direct
purchases of money market funds are excluded.

RIGHTS OF ACCUMULATION

You may take into account the current value of your existing holdings in The
American Funds Group, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your sales
charge. Direct purchases of money market funds are excluded.

STATEMENT OF INTENTION

You may establish a Statement of Intention (SOI) that allows you to combine the
purchases you intend to make over a 13-month period in any non-money market
fund or individual American Legacy variable annuity or variable life insurance
policy. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

capital gains do not apply toward these combined purchases. An SOI allows you
to take immediate advantage of the maximum quantity discount available. A
portion of your account may be held in escrow to cover additional sales charges
which may be due if your total investments over the 13-month period do not
qualify for the applicable sales charge reduction.

PLAN OF DISTRIBUTION

The fund has a Plan of Distribution or "12b-1 Plan" 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. Up to 0.25%
of average net assets is paid annually to qualified dealers for providing
certain shareholder services. The 12b-1 fee paid by the fund, as a percentage
of average net assets, for the previous fiscal year is indicated earlier 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 and may cost you more than paying higher
initial sales charges.

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.

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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

. 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 or fax (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 AMERICAN 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 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, the fund may be liable
for losses due to unauthorized or fraudulent instructions.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

The fund intends to distribute dividends to you, usually in March, June,
September and December. Capital gains, if any, are usually distributed in
December. When a 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.</r?

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
FINANCIAL HIGHLIGHTS

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>
YEARS ENDED OCTOBER 31
------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, $ 48.40 $ 46.14 $ 39.70 $ 36.27 $ 32.68
Beginning of Year
------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income 1.93 2.09 1.74 1.95 1.69
Net gains or losses on
securities (both (.70) 3.87 7.20 3.92 3.69
realized and unrealized)
------------------------------------------------------------------------------
Total from investment 1.23 5.96 8.94 5.87 5.38
operations
------------------------------------------------------------------------------
Less Distributions:
Dividends (from net
investment income) (1.92) (2.09) (1.77) (1.94) (1.69)
Distributions (from (2.81) (1.61) (.73) (.50) (.10)
capital gains)
------------------------------------------------------------------------------
Total distributions (4.73) (3.70) (2.50) (2.44) (1.79)
------------------------------------------------------------------------------
Net Asset Value, $ 44.90 $ 48.40 $ 46.14 $ 39.70 $ 36.27
End of Year
------------------------------------------------------------------------------
Total return* 2.53% 13.33% 23.16% 16.76% 16.98%
------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year $ 8,773 $ 8,747 $ 7,301 $ 5,418 $ 4,533
(in millions)
------------------------------------------------------------------------------
Ratio of expenses to .64% .64% .65% .71% .72%
average net assets
------------------------------------------------------------------------------
Ratio of net income 4.15% 4.35% 4.04% 5.19% 4.96%
to average net assets
------------------------------------------------------------------------------
Portfolio turnover rate 20.56% 24.38% 27.65% 27.56% 18.06%
* Excludes maximum sales charge of 5.75%.
</TABLE>

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR SHAREHOLDER FOR RETIREMENT PLAN FOR DEALER
SERVICES SERVICES SERVICES
American Funds Call your employer or American Funds
Service Company plan administrator Distributors
800/421-0180 800/421-9900 ext. 11
</TABLE>

<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
800/325-3590 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.

---------------------------------------------------------
OTHER FUND INFORMATION

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)

Contains more detailed information on all aspects of the fund, including the
fund's financial statements.

CODE OF ETHICS

Includes a description of the fund's personal investing policy.

The fund's code of ethics and current SAI has been filed with the Securities
and Exchange Commission ("SEC"). The SAI is incorporated by reference into
this prospectus. 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. (1-800-SEC-0330) or on the SEC's Internet Web site at http://www.sec.gov.

To request a free copy of any of the documents above:

<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or 333 South Hope Street
800/421-0180 ext. 1 Los Angeles, California 90071
</TABLE>

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 10, 2000

<PAGE>

---------------------------------------------------------
CAPITAL INCOME BUILDER, INC.

333 South Hope Street Los Angeles, California 90071

<TABLE>
<CAPTION>
<S> <C> <C>
TICKER SYMBOL: CAIBX NEWSPAPER ABBREV: CapIB FUND NO: 12
</TABLE>

CIB-010-0100/MC
CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
RISK/RETURN SUMMARY

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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information illustrates how the fund's results fluctuate. Past
results are not an indication of future results.

Here are the fund's results calculated without a sales charge on a calendar
year basis. (If a sales charge were included, results would be lower.)

[bar chart]
1989 19.98
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
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 1999
was -3.33%.
------------------------------------------------------------------------------

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>

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

For periods ended December 31, 1998:

30-day yield/1/: 3.49%
(For current yield information, please call American FundsLine/^/ at
1-800-325-3590)

3 The fund began investment operations on July 30, 1987.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
FEES AND EXPENSES OF THE FUND

The following describes the fees and expenses that you may pay if you buy and
hold shares of the fund.

1 Sales charges are reduced or eliminated for larger purchases.

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.

/*/ 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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

[bar chart]
S&P 500 CIB(NAV)
December 1987* 69 124
September 1993 101 179
September 1999 140 250

*First full calendar quarter
[end bar chart]

Because the fund is actively managed, its holdings will change from time to
time.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
MANAGEMENT AND ORGANIZATION

INVESTMENT ADVISER

MULTIPLE PORTFOLIO COUNSELOR SYSTEM

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
SHAREHOLDER INFORMATION

SHAREHOLDER SERVICES

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]

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

EXCHANGE

SHARE PRICE

Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

your request. The offering price is the net asset value plus a sales charge, if
applicable.

SALES CHARGE

A sales charge may apply to your purchase. Your sales charge may be reduced 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

PURCHASES NOT SUBJECT TO SALES CHARGE

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

REDUCING YOUR SALES CHARGE

AGGREGATING ACCOUNTS

To receive a reduced sales charge, investments made by you and your immediate
family (see above) may be aggregated if made for their own account(s) and/or:

. 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

RIGHTS OF ACCUMULATION

STATEMENT OF INTENTION

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

PLAN OF DISTRIBUTION

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.

HOW TO SELL SHARES

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.

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

. 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 or fax (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 AMERICAN FUNDSLINE
ONLINE

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

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.

TAXES ON TRANSACTIONS

Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.</r?

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
FINANCIAL HIGHLIGHTS

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

CAPITAL INCOME BUILDER / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
FOR 24-HOUR INFORMATION
American FundsLine(R) American FundsLine OnLine(R)
800/325-3590 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.

---------------------------------------------------------
OTHER FUND INFORMATION

ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS

STATEMENT OF ADDITIONAL INFORMATION (SAI)

Contains more detailed information on all aspects of the fund, including the
fund's financial statements.

CODE OF ETHICS

Includes a description of the fund's personal investing policy.

To request a free copy of any of the documents above:

<TABLE>
<CAPTION>
<S> <C> <C>
Call American Funds Write to the Secretary of the fund
Service Company or 333 South Hope Street
800/421-0180 ext. 1 Los Angeles, California 90071
</TABLE>

Investment Company File No. 811-5085
Printed on recycled paper

<PAGE>

CAPITAL INCOME BUILDER, INC.

Part B
Statement of Additional Information

January 10, 2000

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
10, 2000. 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 Officers . . . . . . . . . . . . . . . . . . . . 11
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 18
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 21
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Shareholder Account Services and Privileges . . . . . . . . . . . . 29
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 32
General Information . . . . . . . . . . . . . . . . . . . . . . . . 32
Investment Results and Related Statistics . . . . . . . . . . . . . 33
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
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.

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

Capital Income Builder -- Page 2

<PAGE>

convertible securities. These securities may at times resemble equity more than
debt and vice versa. The risks of convertible preferred stocks are similar to
those of equity securities and they often automatically convert into common
stock. Non-convertible preferred stocks 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 stocks generally move with changes in
interest rates and the issuer's credit quality, similar to the factors affecting
debt securities.

Bonds, convertible preferred stocks, 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.

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 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.

High-yield, high-risk 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, high-yield, high-risk bonds.

Certain risk factors relating to "high-yield, high-risk bonds" are discussed
below.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk
bonds can be sensitive to adverse economic changes and political and
corporate developments and may be less sensitive to interest rate changes.
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 high-yield, high-risk bonds.

PAYMENT EXPECTATIONS - High-yield, high-risk 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.

Capital Income Builder -- Page 3

<PAGE>

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 values and liquidity of high-yield, high-risk bonds,
especially in a thin market.

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.

U.S. GOVERNMENT SECURITIES - Securities guaranteed by the U.S. Government
include: (1) direct obligations of the U.S. Treasury (such as Treasury bills,
notes and bonds) and (2) federal agency obligations guaranteed as to principal
and interest by the U.S. Treasury. 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.

Capital Income Builder -- Page 4

<PAGE>

"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 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.

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.

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.

Capital Income Builder -- Page 5

<PAGE>

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.

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.

Capital Income Builder -- Page 6

<PAGE>

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 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 it 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. Debt that is issued by
REITs is typically rated by the credit rating agencies as investment grade or
above.

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

Capital Income Builder -- Page 7

<PAGE>

can change from time to time. The fund may incur certain additional costs in
disposing of illiquid securities.

* * * * * *

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 were 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;

Capital Income Builder -- Page 8

<PAGE>

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 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.

Capital Income Builder -- Page 9

<PAGE>

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.

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 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, 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
H. Frederick Christie Director Private Investor. Former President $21,500/3/
P.O. Box 144 and Chief Executive Officer, The
Palos Verdes Estates, CA Mission Group (non-utility holding
90274 company, subsidiary of Southern
Age: 66 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: 51
- ------------------------------------------------------------------------------------------------------------------
Mary Myers Kauppila Director Private Investor; former Owner and $22,500/3/
One Winthrop Square President, Energy Investment, Inc.
Boston, MA 02110
Age: 45
- ------------------------------------------------------------------------------------------------------------------
+ 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: 43
- ------------------------------------------------------------------------------------------------------------------
+ Jon B. Lovelace Vice Chairman Chairman Emeritus, Capital Research None/4/
333 South Hope Street of and Management Company
Los Angeles, CA 90071 the Board
Age: 72
- ------------------------------------------------------------------------------------------------------------------
Gail L. Neale President, The Lovejoy Consulting $ 21,500
The Lovejoy Consulting Director Group, Inc.; former Executive Vice
Group President, Salzburg Seminar
154 Prospect Parkway
Burlington, VT 05401
Age: 64
- ------------------------------------------------------------------------------------------------------------------
Robert J. O'Neill Chichele Professor of the History of $ 21,500
Whitney, OXON Director War and Fellow, All Souls College,
United Kingdom University of Oxford
Age: 63
- ------------------------------------------------------------------------------------------------------------------
Donald E. Petersen Director Former Chairman of the Board and $ 21,500
255 East Brown Chief Executive Officer, Ford Motor
Birmingham, MI 48009 Company
Age: 73
- ------------------------------------------------------------------------------------------------------------------
Stefanie Powers Director Actor; President, William Holden $ 20,000
2661 Hutton Drive Wildlife Foundation
Beverly Hills, CA 90210
Age: 57
- ------------------------------------------------------------------------------------------------------------------
Frank Stanton Director Retired; former President, CBS Inc. $ 22,500
25 West 52nd Street (1946-1973)
New York, NY 10019
Age: 91
- ------------------------------------------------------------------------------------------------------------------
Charles Wolf, Jr. Director Economic Adviser and Corporate $ 21,500
1700 Main Street Fellow in International Economics,
Santa Monica, CA 90407 The RAND Corporation
Age: 75
- ------------------------------------------------------------------------------------------------------------------
<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, 1999 SERVES/2/
- ---------------------------------------------------------------------------
<S> <C> <C>
H. Frederick Christie $209,000/3/ 19
P.O. Box 144
Palos Verdes Estates, CA
90274
Age: 66
- ---------------------------------------------------------------------------
+ Paul G. Haaga, Jr. None/4/ 14
333 South Hope Street
Los Angeles, CA 90071
Age: 51
- ---------------------------------------------------------------------------
Mary Myers Kauppila $120,000/3/ 5
One Winthrop Square
Boston, MA 02110
Age: 45
- ---------------------------------------------------------------------------
+ James B. Lovelace None/4/ 1
333 South Hope Street
Los Angeles, CA 90071
Age: 43
- ---------------------------------------------------------------------------
+ Jon B. Lovelace None/4/ 3
333 South Hope Street
Los Angeles, CA 90071
Age: 72
- ---------------------------------------------------------------------------
Gail L. Neale $ 95,500 5
The Lovejoy Consulting
Group
154 Prospect Parkway
Burlington, VT 05401
Age: 64
- ---------------------------------------------------------------------------
Robert J. O'Neill $ 50,250 3
Whitney, OXON
United Kingdom
Age: 63
- ---------------------------------------------------------------------------
Donald E. Petersen $ 95,000 5
255 East Brown
Birmingham, MI 48009
Age: 73
- ---------------------------------------------------------------------------
Stefanie Powers $ 39,000 2
2661 Hutton Drive
Beverly Hills, CA 90210
Age: 57
- ---------------------------------------------------------------------------
Frank Stanton $ 44,000 2
25 West 52nd Street
New York, NY 10019
Age: 91
- ---------------------------------------------------------------------------
Charles Wolf, Jr. $ 43,000 2
1700 Main Street
Santa Monica, CA 90407
Age: 75
- ---------------------------------------------------------------------------
</TABLE>

Capital Income Builder -- Page 11

<PAGE>

Capital Income Builder -- Page 12

<PAGE>

+ "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) as of fiscal year
ended October 31, 1999 for participating Directors is as follows: H. Frederick
Christie ($86,748), Mary Myers Kauppila ($138,719), Gail L. Neale ($78,951)
and Donald E. Petersen ($55,210). 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, Jon B. Lovelace are affiliated with the
Investment Adviser and, accordingly, receive no compensation from the fund.

Capital Income Builder -- Page 13

<PAGE>

OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Paul G. Haaga, Jr.
(see above)
- -------------------------------------------------------------------------------
Jon B. Lovelace
(see above)
- -------------------------------------------------------------------------------
James B. Lovelace
(see above)
- -------------------------------------------------------------------------------
Janet A. McKinley 45 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 52 Senior Vice Senior Vice President and
333 South Hope Street President Director,
Los Angeles, CA 90071 Capital Research and Management
Company
- -------------------------------------------------------------------------------
Joyce E. Gordon 43 Vice President Senior Vice President and
333 South Hope Street Director,
Los Angeles, CA 90071 Capital Research Company
- -------------------------------------------------------------------------------
Darcy B. Kopcho 46 Vice President Executive Vice President and
333 South Hope Street Director,
Los Angeles, CA 90071 Capital Research Company
- -------------------------------------------------------------------------------
Steven T. Watson 44 Vice President Senior Vice President and
25 Bedford Street Director,
London, England Capital Research Company
- -------------------------------------------------------------------------------
Vincent P. Corti 43 Secretary Vice President - Fund Business
333 South Hope Street Mangement Group, Capital Research
Los Angeles, CA 90071 and Management Company
- -------------------------------------------------------------------------------
R. Marcia Gould 45 Treasurer Vice President - Fund Business
135 South State Mangement Group, Capital Research
College Blvd. and Management Company
Brea, CA 92821
- -------------------------------------------------------------------------------
</TABLE>

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 $12,500 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

Capital Income Builder -- Page 14

<PAGE>

affiliated with the Investment Adviser. As of December 10, 1999 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.

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, 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.

An affiliate of the Investment Adviser compiles indices for major stock markets
around the world and compiles and edits the Morgan Stanley Capital International
Perspective, providing financial and market information about more than 2,400
companies around the world.

The Investment Adviser is responsible for managing more than $200 billion of
stocks, bonds and money market instruments and serves over eight million
investors 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, 2000, 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 Plan of Distribution (described

Capital Income Builder -- Page 15

<PAGE>

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.

The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income means gross income, computed without
taking account of gains or losses from sales of capital assets, but including
original issue discount as defined for federal income tax purposes. The Internal
Revenue Code in general defines original issue discount to mean the difference
between the issue price and the stated redemption price at maturity of certain
debt obligations. The holder of such indebtedness is in general required to
treat as ordinary income the proportionate part of the original issue discount
attributable to the period during which the holder held the indebtedness.

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
fund's annual ordinary operating expenses exceed 1-1/2% of the first $30 million
of the net assets of the fund and 1% of the net assets in excess thereof.
Expenses which are not subject to this limitation 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.

For the fiscal years ended October 31, 1999, 1998, and 1997, the Investment
Adviser received advisory fees of $28,908,000, $26,651,000, and $20,097,000,
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 a Plan of
Distribution (the Plan), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plan (see below)
and commissions consisting of that portion of the sales charge remaining after
the discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the fiscal period ended
October 31, 1999 amounted to $5,326,000 after allowance of $25,137,000 to
dealers. During the fiscal years ended 1998 and 1997 the Principal Underwriter
retained $6,716,000 and $6,383,000, respectively after an allowance of
$32,535,000 and $32,064,000 to dealers, respectively.

As required by rule 12b-1 and the 1940 Act, the Plan (together with the
Principal Underwriting Agreement) has 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

Capital Income Builder -- Page 16

<PAGE>

interest in the operation of the Plan or the Principal Underwriting Agreement,
and the Plan has been approved by the vote of a majority of the outstanding
voting securities of the fund. 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 Plan due to present or past affiliations with
the Investment Adviser and related companies. Potential benefits of the Plan to
the fund include improved 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 Plan. The Plan is reviewed quarterly and must be renewed
annually by the Board of Directors.

Under the Plan the fund may expend up to 0.30% of its net assets annually 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. These include service fees for
qualified dealers and dealer commissions and wholesaler compensation on sales of
shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan, any defined contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with 100 or more eligible
employees or a community foundation).

Commissions on sales of 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 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, commissions are not recoverable. During the
fiscal period ended October 31, 1999, the fund paid or accrued $21,496,000 for
compensation to dealers under the Plan.

The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit commercial banks from engaging in the business of underwriting, selling
or distributing securities, but permit banks to make shares of mutual funds
available to their customers and to perform administrative and shareholder
servicing functions. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank from continuing to perform all
or a part of its servicing activities. If a bank were prohibited from so acting,
shareholder clients of such bank would be permitted to remain shareholders of
the fund and alternate means for continuing the servicing of such shareholders
would be sought. In such event, changes in the operation of the fund might occur
and shareholders serviced by such bank might no longer be able to avail
themselves of any automatic investment or other services then being provided by
such bank. It is not expected that shareholders would suffer adverse financial
consequences as a result of any of these occurrences.

In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein, and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.

Capital Income Builder -- Page 17

<PAGE>

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-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 will be reinvested in shares of the fund unless shareholders indicate
in writing that they wish to receive them in cash or in shares of other American
Funds, as provided in the prospectus.

TAXES - The fund intends to elect 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.

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 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

Capital Income Builder -- Page 18

<PAGE>

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 investment company taxable income are taxable to shareholders
as ordinary income.

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 have 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 as described above, 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.

All distributions of investment company taxable income and net realized capital
gain, whether received in shares or in cash, must be reported by each
shareholder subject to tax on his or her federal income tax return. Dividends
and capital gains distributions declared in October, November or December and
payable to shareholders of record in such a month will be deemed to have been
received by shareholders on December 31 if paid during January of the following
year. Redemptions of shares, including exchanges for shares of another American
Fund, may result in tax consequences (gain or loss) to the shareholder and must
also be reported on the shareholder's federal income tax return.

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
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.

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

Capital Income Builder -- Page 19

<PAGE>

partial return of investment capital upon the distribution, which will
nevertheless be taxable to them.

A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to
the fund each year, even though the fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the investment company taxable income of the fund which must
be distributed to shareholders in order to maintain the qualification of the
fund as a regulated investment company and to avoid federal income tax at the
level of the fund. Shareholders will be subject to income tax on such original
issue discount, whether or not they elect to receive their distributions in
cash.

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.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. 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 "Investment $50 minimum (except where a
Purchase Minimums" for lower minimum is noted under
initial investment "Investment Purchase
minimums. 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>

Capital Income Builder -- Page 21

<PAGE>

INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial investments
required by the funds in The American Funds Group along with fund numbers for
use with our automated phone line, American FundsLine/(R)/ (see description
below):

<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 250 02
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 11
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 03
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 12
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . . . . . . 250 33
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 16
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . . . . . . 250 10
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 250 05
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . . . . . . 250 06
The Investment Company of America/(R)/ . . . . . . . . . . . . . . . . . 250 04
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 14
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 250 07
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 36
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . . 250 35
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . . . . . . 250 01
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . . . . . . 250 40
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . . . . . . 250 21
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . . . . . . 250 08
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . 250 31
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 250 23
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . . . . . . 250 43
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . . . . . . 250 19
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . . . . . . 1,000 20
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . . . . . . 1,000 24
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . . . . . . 1,000 25
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . . . . . . 250 22
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . . . . . . 1,000 09
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . . . . . . 1,000 39
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . . . . . . 1,000 49
___________
*Available only in certain states.
</TABLE>

Investment 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).

Capital Income Builder -- Page 22

<PAGE>

SALES CHARGES - The sales charges you pay when purchasing the 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
"Investment Minimums and 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
$1,000,000 or more . . . . . . . . . . none none (see below)
- -----------------------------------------------------------------------------
</TABLE>

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 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, may invest with no sales charge and are
not subject to a contingent deferred sales charge. Investments made by
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 contingent
deferred sales charge. 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, the stock, stock/bond and bond funds may sell shares at net asset
value to:

(1) current or retired directors, trustees, officers and advisory board
members, and certain lawyers who provide services to the funds managed by
Capital Research and Management Company, employees of Washington Management
Corporation, employees and partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the above persons, and trusts or
plans primarily for such persons;

Capital Income Builder -- Page 23

<PAGE>

(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.

DEALER COMMISSIONS - Commissions of 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 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at net
asset value by certain retirement plans of organizations with collective
retirement plan 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.

OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.

Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing certain
information and assistance with respect to the fund.

REDUCING YOUR 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 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 dis-

Capital Income Builder -- Page 24

<PAGE>

tributions. 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 utilize 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 the account application) and any individual
investments in American Legacy variable annuities or variable life
insurance policies (American Legacy, American Legacy II, American Legacy
III, and American Legacy Shareholder's Advantage 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.

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 or
variable life 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.

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 by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:

. employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;

. business accounts solely controlled by these individuals (for example,
the individuals own the entire business);

Capital Income Builder -- Page 25

<PAGE>

. 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.

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, including an employee
benefit plan other than those 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; or

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares.

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 aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES - You may combine purchases of two or more funds in
The American Funds Group, as well as individual holdings in various
American Legacy variable annuities and variable life insurance policies to
qualify for a reduced sales charge. 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 of
your existing 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.

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 are not always indicative
of 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.

Capital Income Builder -- Page 26

<PAGE>

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 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 the Exchange closes at 1:00 p.m. on one day and at 4:00
p.m. on the next, the fund's share price would be determined as of 4:00 p.m. New
York time on both days. 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 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.

Capital Income Builder -- Page 27

<PAGE>

SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. 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;

- 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.

. 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).

Capital Income Builder -- Page 28

<PAGE>

- 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.

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 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 without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group within
90 days after the date of the redemption or distribution. 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.

CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions from funds other than the money market funds made
within 12 months of purchase on investments of $1 million or more (other than
redemptions by employer-sponsored retirement plans). 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
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from 403(b) plans or IRAs due to death, disability
or attainment of age 591/2; for tax-free returns of excess contributions to
IRAs; and for redemptions through certain automatic withdrawals not exceeding
10% of the amount that would otherwise be subject to the charge.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments into 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. 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 at no sales charge unless you indicate otherwise on the
account application. You also

Capital Income Builder -- Page 29

<PAGE>

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") 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,

(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 exchange shares into other funds in The American
Funds Group. 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 "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 Guardian 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 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.
You must either (a) meet the minimum initial investment requirement for the
receiving fund OR (b) the originating fund's balance must be at least $5,000 and
the receiving fund's minimum must be met within one year.

Capital Income Builder -- Page 30

<PAGE>

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. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Shareholder Account Services and
Privileges - 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 - Investment Minimums and Fund Numbers"),
personal identification number (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, 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 owns of record
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.

Capital Income Builder -- Page 31

<PAGE>

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 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
October 31, 1999, 1998 and 1997, amounted to $3,190,000, $2,797,000 and
$2,123,000, respectively.

The fund is required to disclose information regarding investments in the
securities of broker-dealers (or parents of broker-dealers that derive more than
15% of their revenue from broker-dealer activities) which have certain
relationships with the fund. During the last fiscal year, J.P. Morgan & Co. and
Merrill Lynch, Pierce, Fenner, & Smith, Inc. were among the top 10 dealers that
received the largest amount of brokerage commissions and that acted as
principals in portfolio transactions. The fund held equity securities of J.P.
Morgan & Co. in the amount of $15,705,000 and debt securities of Merrill Lynch,
Pierce, Fenner, & Smith, Inc. in the amount of $1,226,000 as of the close of its
most recent fiscal year.

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 foreign 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
$5,195,000 for the fiscal period ended October 31, 1999.

Capital Income Builder -- Page 32

<PAGE>

INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 400 South Hope Street, Los
Angeles, California 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 PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Directors.

REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on October 31.
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
shareholder reports. To receive additional copies of a 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. The personal
investing policy is consistent with Investment Company Institute guidelines.
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.

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 -- OCTOBER 31, 1999

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $44.90
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). . . . . . . . . . . . . . . . . . . . . . . . $47.64
</TABLE>

INVESTMENT RESULTS AND RELATED STATISTICS

The fund's yield was 4.14% based on a 30-day (or one month) period ended October
31, 1999, 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]

Capital Income Builder -- Page 33

<PAGE>

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 average annual total return for the five-
and ten-year periods ended October 31, 1999 were -3.37%, +12.98% and +12.11%,
respectively. The fund's average annual total return at net asset value for the
one-, five- and ten-year periods ended on October 31, 1999 were +2.53%, +14.33%
and +12.77, 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, 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 addition, the fund will provide lifetime
average total return figures.

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.

Capital Income Builder -- Page 34

<PAGE>

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).

EXPERIENCE OF INVESTMENT ADVISER - The Investment Adviser manages nine growth
and growth-income funds that are at least 10 years old. In the rolling 10-year
periods since January 1, 1969 (138 in all), those funds have had better total
returns than their comparable Lipper indexes in 128 of 138 periods.

Note that past results are not an indication of future investment results. Also,
the fund has different investment policies than the funds mentioned above. These
results are included solely for the purpose of informing investors about the
experience and history of Capital Research and Management Company.

The investment results for the fund set forth below were calculated as described
in the fund's prospectus. The fund's results will vary from time to time
depending upon market conditions, the composition of the fund's portfolio and
operating expenses of the fund, so that any investment results reported by the
fund should not be considered representative of what an investment in the fund
may earn in any future period. These factors and possible differences in
calculation methods should be considered when comparing the fund's investment
results with those published for other mutual funds, other investment vehicles
and unmanaged indices. The fund's results also should be considered relative to
the risks associated with the fund's investment objective and policies.

CIB VS. VARIOUS UNMANAGED INDICES
<TABLE>
<CAPTION>
10- YEAR PERIODS
(11/1 - 10/31) CIB DJIA/2/ S&P 500/3/
- -------------- --- ------- ----------
<S> <C> <C> <C>

1987/1/ - 1999 +292.0% +490.8% +494.1%
1989 - 1999 +213.6% +426.5% +414.0%
1988 - 1998 +257.1% +432.0% +416.5%
1987 - 1997 +253.9% +406.5% +386.2%
</TABLE>

1 Since inception July 30, 1987.

2 The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric. This index is unmanaged
and does not reflect sales charges, commissions or expenses.

3 The Standard and Poor's 500 Stock Composite Index is a broad-based measurement
of changes in stock market conditions based on the average performance of 500
widely held common stocks. This index is unmanaged and does not reflect sales
charges, commissions or expenses.

Capital Income Builder -- Page 35

<PAGE>

ILLUSTRATION OF A $10,000 INVESTMENT IN CIB WITH
DIVIDENDS REINVESTED AND CAPITAL GAIN DISTRIBUTIONS TAKEN IN SHARES
(FOR THE PERIOD JULY 30, 1987 THROUGH OCTOBER 31, 1999)

<TABLE>
<CAPTION>
COST OF SHARES VALUE OF SHARES
--------------- ----------------
YEAR TOTAL FROM FROM
ENDED ANNUAL DIVIDENDS INVESTMENT FROM INITIAL CAPITAL GAINS DIVIDENDS TOTAL
OCTOBER 31 DIVIDENDS (CUMULATIVE) COST INVESTMENT REINVESTED REINVESTED VALUE
---------- --------- ------------ ---- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
1987# $ 92 $ 92 $10,092 $ 8,842 - $ 87 $ 8,929
1988 494 586 10,586 9,429 - 600 10,029
1989 556 1,142 11,142 10,437 - 1,252 11,689
1990 633 1,775 11,775 9,737 - 1,765 11,502
1991 708 2,483 12,483 11,946 - 2,912 14,858
1992 792 3,275 13,275 12,821 $ 130 3,942 16,893
1993 881 4,156 14,156 14,342 212 5,343 19,897
1994 975 5,131 15,131 13,617 267 6,052 19,936
1995 1,079 6,210 16,210 15,112 367 7,888 23,367
1996 1,199 7,409 17,409 16,542 751 9,907 27,200
1997 1,324 8,733 18,733 19,225 1,446 12,934 33,605
1998 1,468 10,201 20,201 20,167 2,740 15,053 37,960
1999 1,623 11,824 21,824 18,844 4,717 15,639 39,200
</TABLE>

# From July 30, 1987

The dollar amount of capital gain distributions during the period was $4,508.

Capital Income Builder -- Page 36

<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:

"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

Capital Income Builder -- Page 37

<PAGE>

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."

"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."

Capital Income Builder -- Page 38

<PAGE>

"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 39

Capital Income Builder
Investment Portfolio October 31, 1999
<TABLE>
<S> <C>
10 Largest Individual Percent of
Equity Holdings Net Assets
- ---------------------------- ---------
Deutsche Telekom 2.42%
First Union 2.38
SBC Communications 1.92
BANK ONE 1.75
Scottish and Southern Energy 1.48
Williams Companies 1.45
Ford Motor 1.38
United Utilities 1.35
Pinnacle West Capital 1.35
Telecom Italia 1.30

</TABLE>

<TABLE>
Capital Income Builder
Investment Portfolio October 31, 1999
<S> <C> <C> <C>
Shares or Market Percent
Principal Value Of Net
Equity Securities Amount (Million Assets
- -------------------------------------------- -------- ----------------
ENERGY
ENERGY SOURCES - 4.19%
BP Amoco PLC (ADR) 1,500,000 $ 86.62 .99%
CalEnergy Capital Trust II 6.25% convertible 130,000 5.330 .06
preferred 2012 (1)
Chevron Corp. 917,500 83.779 .95
Conoco Inc., Class B 147,408 3.998 .05
Fortum Oyj 3,600,000 17.426 .20
Kerr-McGee Corp. 200,000 10.750 .12
Phillips Petroleum Co. 1,125,000 52.313 .60
Royal Dutch Petroleum Co. (New York Registered Shares) 880,000 52.745
"Shell" Transport and Trading Co., PLC (New York 850,000 38.994 1.04
Registered Shares)
Ultramar Diamond Shamrock Corp. 650,000 15.925 .18
UTILITIES: ELECTRIC & GAS - 7.97%
Australian Gas Light Co. 1,168,320 6.440 .07
Central and South West Corp. 1,950,000 43.266 .49
Coastal Corp. 6.625% FELINE PRIDES convertible 280,000 7.420 .08
preferred 2002
Dominion Resources, Inc. 250,000 12.031 .14
DPL Inc. 1,000,000 20.250 .23
GPU, Inc. 850,000 28.847 .33
KeySpan Corp. 1,928,800 54.248 .62
National Power PLC 10,600,000 71.633 .82
NiSource Inc. 1,500,000 30.750 .35
Pinnacle West Capital Corp. 3,200,000 118.000 1.35
PowerGen PLC 1,600,000 13.965 .16
Scottish and Southern Energy PLC 13,640,000 129.405 1.48
Sierra Pacific Resources (formerly Nevada Power Co.) 920,000 20.700 .24
Williams Companies, Inc. 3,383,250 126.872 1.45
Wisconsin Energy Corp. 690,000 15.439 .16
------------------
1,067.15 12.16
------------------

MATERIALS
CHEMICALS - 0.11%
E.I. du Pont de Nemours and Co. 70,031 4.513 .05
Hickson International PLC 8,700,000 5.431 .06
FOREST PRODUCTS & PAPER - 1.31%
Chesapeake Corp. 300,000 9.000 .10
Georgia-Pacific Corp., Georgia-Pacific Group 360,000 15.570 .18
7.50% PEPS convertible preferred 2004 Units
Potlatch Corp. 936,000 39.487 .45
Rayonier Inc. 465,600 19.090 .22
Stora Enso Oyj 1,023,647 13.441 .15
Westvaco Corp. 600,000 17.812 .21
METALS: NONFERROUS - 0.59%
Billiton PLC 11,000,000 47.899 .55
USX Corp. 6.75% DECS convertible preferred 2000 500,000 3.625 .04
MISCELLANEOUS MATERIALS & COMMODITIES - 0.26%
De Beers Consolidated Mines Ltd. 850,000 23.230 .26
------------------
183.528 2.09
------------------

CAPITAL EQUIPMENT
ELECTRONIC INSTRUMENTS - 0.03%
Thermo Instrument Systems Inc. 4.50% convertible $3,000,000 2.468 .03
debentures 2003 (1)

INDUSTRIAL COMPONENTS - 0.39%
Tomkins PLC 10,250,000 34.519 .39
MACHINERY & ENGINEERING - 0.15%
Foster Wheeler Corp. 1,200,000 13.500 .15
------------------
50.487 .57
------------------

CONSUMER GOODS
AUTOMOBILES - 1.38%
Ford Motor Co. 2,200,000 120.725 1.38
BEVERAGES & TOBACCO - 2.88%
Foster's Brewing Group Ltd. 16,000,000 42.500 .48
Gallaher Group PLC 8,800,000 53.340 .61
Nabisco Group Holdings Corp.(formerly RJR 1,500,000 19.219 .22
Nabisco Holdings Corp.)
Philip Morris Companies Inc. 2,715,000 68.384 .78
Societe Nationale d'Exploitation Industrielle des 575,000 32.069 .37
Tabacs et Allumettes "SEITA"
UST Inc. 1,350,000 37.378 .42
FOOD & HOUSEHOLD PRODUCTS - 0.09%
Devro PLC 5,000,000 7.639 .09
HEALTH & PERSONAL CARE - 0.70%
Bristol-Myers Squibb Co. 800,000 61.450 .70
------------------
442.704 5.05
------------------

SERVICES
BROADCASTING & PUBLISHING - 0.34%
Houston Industries, Inc. (converting to Time
Warner Inc.)
7.00% ACES convertible preferred 2000 150,000 17.212 .20
West Australian Newspapers Holdings Ltd. 3,817,917 12.944 .14
BUSINESS SERVICES - 4.50%
American Water Works Co., Inc. 1,850,000 53.997 .62
Autopistas del Mare Nostrum, SA Concesionaria 750,000 14.372 .16
del Estado
BRISA-Auto-Estradas de Portugal, SA 390,000 15.369 .18
Cendant Corp. 7.50% FELINE PRIDES convertible 400,000 11.200 .13
preferred 2001
Hutchison Delta Finance Ltd. 7.00% convertible $11,000,000 11.000 .13
debentures 2002 (1),(2)
Hyder PLC 6,353,807 57.195 .65
Philadelphia Suburban Corp. 429,600 9.881 .11
Thames Water PLC 6,977,083 102.423 1.17
United Utilities PLC 11,920,000 118.675 1.35
DIVERSIFIED TELECOMMUNICATION SERVICES - 9.92%
BCT.TELUS Communications Inc. 1,010,489 21.007 .24
Deutsche Telekom AG 4,607,300 211.869 2.42
France Telecom SA 200,000 19.331 .22
Koninklijke PTT Nederland NV 1,833,782 94.150 1.07
SBC Communications Inc. 3,303,000 168.246 1.92
Swisscom AG 287,391 87.571 1.00
Telecom Argentina STET-France Telecom SA, 359,200 9.878 .11
Class B (ADR)
Telecom Corp. of New Zealand Ltd. 15,784,160 63.390
Telecom Corp. of New Zealand Ltd. (1) 8,380,000 33.655 1.12
Telecom Corp. of New Zealand Ltd. (ADR) 25,000 .812
Telecom Italia SpA 23,221,200 114.481 1.30
U S WEST, Inc. 750,000 45.797 .52
LEISURE & TOURISM - 0.67%
Host Marriott Financial Trust 6.75% QUIPS 400,000 13.400 .15
convertible preferred 2026
Seagram Co. Ltd. 7.50% convertible preferred 720,000 35.595 .41
2002 Units
Sky City Ltd., installment receipts 4,800,000 9.566 .11
MERCHANDISING - 0.74%
J.C. Penney Co., Inc. 1,050,000 26.644 .30
Safeway PLC 12,150,000 38.156 .44
TRANSPORTATION: AIRLINES - 0.63%
Qantas Airways Ltd. 17,495,065 55.637 .63
TRANSPORTATION: RAIL & ROAD - 0.13%
Canadian National Railway Co. 5.25% convertible 220,000 11.110 .13
preferred 2029
------------------
1,484.56 16.93
------------------

FINANCE
BANKING - 18.75%
ABN AMRO Holding NV 1,262,722 30.548 .35
AmSouth Bancorporation 3,150,000 81.112 .92
Australia and New Zealand Banking Group Ltd. 2,456,986 16.205 .18
BancWest Corp. 400,000 16.725 .19
Bank of America Corp. 1,000,000 64.375 .73
Bank of Nova Scotia 4,241,600 96.865 1.10
BANK ONE CORP. 4,090,000 153.631 1.75
Barclays PLC 3,500,000 107.119 1.22
Chase Manhattan Corp. 800,000 69.900 .80
Comerica Inc. 600,000 35.663 .41
Commonwealth Bank of Australia 1,326,000 21.718 .25
First Security Corp. 1,933,600 49.548 .56
First Union Corp. 4,895,706 208.985 2.38
HSBC Holdings PLC 3,049,749 36.608 .42
Huntington Bancshares Inc. 2,310,000 68.434 .78
J.P. Morgan & Co. Inc. 120,000 15.705 .18
KeyCorp 2,190,000 61.183 .70
Keystone Financial, Inc. 1,127,550 28.259 .32
National Australia Bank Ltd. 3,708,453 57.194 .65
National City Corp. 1,885,000 55.608 .63
Royal Bank of Canada 1,515,000 65.335 .74
United Bankshares, Inc. 1,775,000 43.709 .50
Valley National Bancorp 600,000 16.013 .18
Wachovia Corp. 1,237,875 106.767 1.22
Washington Mutual, Inc. 1,100,000 39.531 .45
Westpac Banking Corp. 7,293,755 46.771 .53
Wilmington Trust Corp. 950,000 51.538 .61
FINANCIAL SERVICES - 0.57%
Health Care Property Investors, Inc. 1,545,000 40.556 .46
Imperial Credit Commercial Mortgage Investment Corp. 900,000 9.788 .11
INSURANCE - 2.66%
American General Corp. 160,000 11.870 .14
Lincoln National Corp. 1,720,000 79.335 .90
Ohio Casualty Corp. 1,435,000 23.947 .27
Royal & Sun Alliance Insurance Group PLC 4,059,390 27.739 .32
Union des Assurances Federales 75,000 9.660 .11
XL Capital Ltd. 1,500,800 80.574 .92
REAL ESTATE - 4.57%
AMB Property Corp. 1,500,000 29.812 .34
Apartment Investment and Management Co., Class A 1,125,000 42.328 .48
Archstone Communities Trust 4,784,585 95.692 1.09
Bradley Real Estate, Inc. 1,045,000 17.504 .20
Cabot Industrial Trust 695,000 13.900 .16
CarrAmerica Realty Corp. 1,620,000 36.045 .41
Duke-Weeks Realty Corp. (formerly Weeks Corp.) 669,300 13.135 .15
Equity Residential Properties Trust 545,000 22.788 .26
Glenborough Realty Trust Inc., Series A, 7.75% 400,000 6.125 .07
convertible preferred 2049
Kimco Realty Corp. 510,000 17.404 .20
Meditrust Corp., paired stock 2,960,000 23.865 .27
ProLogis Trust 1,191,114 23.003 .26
Spieker Properties, Inc. 250,000 8.734 .10
Washington Real Estate Investment Trust 145,500 2.219 .03
Weingarten Realty Investors 1,260,000 48.195 .55
------------------
2,329.26 26.55
------------------

MULTI-INDUSTRY, GOLD MINES & MISCELLAEOUS
MULTI-INDUSTRY - 0.23%
Hunting PLC 4,260,000 9.658 .11
Lend Lease Corp. Ltd. 921,354 10.594 .12

GOLD MINES - 0.66%
Anglogold Ltd. 1,025,000 57.927 .66

MISCELLANEOUS - 1.37%
Equity securities in initial period of acquisition 120.903 1.37
------------------
199.082 2.26
------------------

TOTAL EQUITY SECURITIES (cost: $4,324.362 million) 5,772.35 65.79

Principal Market Percent
Amount Value Of Net
Bonds and Notes (Million Assets
- -------------------------------------------- -------- ----------------
Corporate
- --------------------------------------------
Airplanes Pass Through Trust, pass-through
certificates,
Series 1, Class C, 8.15% 2019 (3) $5,400,135 $ 5.11 .06%
Allegiance Corp. 7.80% 2016 3,000,000 2.996 .03
Allied Waste North America, Inc. 7.625% 2006 3,000,000 2.621 .03
Atlas Air, Inc., 1998-1 Pass Through Trust, Class A, 8,845,153 8.261
7.38% 2018 (3)
Atlas Air, Inc., 1998-1 Pass Through Trust, Class B, 4,942,074 4.588 .15
7.68% 2014 (3)
Bear Stearns Commercial Mortgage Securities Inc.,
pass-through certificates, Series 1999-WF2, 29,837,184 29.649 .34
Class A-1, 6.80% 2031 (3)
British Sky Broadcasting Group PLC 8.20% 2009 (1) 3,000,000 2.924 .03
Cable & Wireless Communications PLC 9,625,000 9.695 .10
6.625%-6.75% 2005-2008
Cablevision Systems Corp. 7.875%-8.125% 2007-2009 5,500,000 5.339 .06
Canandaigua Brands, Inc. 8.625% 2006 4,000,000 3.940 .04
CarrAmerica Realty Corp. 6.625% 2000 10,000,000 9.922 .11
Century Communications Corp. 8.75% 2007 2,000,000 1.910 .02
Chancellor Media Corp. of Los Angeles 8.00% 2008 3,000,000 2.948 .03
Charter Communications Holdings, LLC 8.25% 2007 (1) 6,000,000 5.700 .06
Columbia Gas System, Inc., Series G, 7.62% 2025 3,000,000 2.811
Columbia Gas System, Inc., Series C, 6.80% 2005 2,000,000 1.928 .05
Columbia/HCA Healthcare Corp. 6.125%-6.91% 2000-2045 51,830,000 49.829 .58
Conoco Inc. 5.90% 2004 43,000,000 41.395 .47
Container Corp. of America 9.75% 2003 8,485,000 8.655 .10
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class A, 7.461% 2016 (3) 1,892,826 1.858
Continental Airlines, Inc., pass-through certificates,
Series 1997-4, Class A, 6.90% 2018 (3) 4,895,937 4.586 .11
Continental Airlines, Inc., pass-through certificates,
Series 1997-1, Class C, 7.42% 2007 (3,4) 2,819,426 2.784
Cox Radio, Inc. 6.375% 2005 3,500,000 3.317 .04
Delta Air Lines, Inc., 1991 Equipment Certificates Trust,
Series K, 10.00% 2014 (1) 2,000,000 2.225 .03
DLJ Mortgage Acceptance Corp., Series 1996-CF1, 1,750,247 1.763 .02
Class A-1A, 7.28% 2028
EOP Operating LP 6.75% 2008 2,250,000 2.089 .02
EQCC Home Equity Loan Trust, Asset Backed Certificates,
Series 1999-2, Class A-4F, 6.753% 2027 (3) 5,000,000 4.861 .06
Federal-Mogul Corp. 7.50% 2009 (1) 5,000,000 4.480 .05
FIRSTPLUS Home Loan Owner Trust, Series 1997-1,
Class A-6, 6.95% 2015 (3) 4,250,000 4.221 .05
Fred Meyer, Inc. 7.375%-7.45% 2005-2008 5,000,000 4.939 .06
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026 2,000,000 1.510 .02
Hearst-Argyle Television, Inc. 7.00% 2007-2018 3,000,000 2.732 .03
Highwoods/Forsyth LP 6.835% MOPPRS 2003 2,500,000 2.406 .03
Irvine Apartment Communities, LP 7.00% 2007 7,000,000 6.303 .07
Jet Equipment Trust, Series 1995-B, Class C, 9.71% 2015 (1) 5,000,000 5.366 .06
Liberty Media Corp. 7.875% 2009 (1) 3,000,000 3.009 .03
McDermott Inc. 9.375% 2002 6,000,000 6.196 .07
McKesson Corp. 6.40% 2008 4,000,000 3.312 .04
Merrill Lynch Mortgage Investors, Inc., Seller
Manufactured Housing Contract, Series 1995-C2, 1,231,960 1.226 .01
Class A-1, 6.919% 2021 (4)
Midland Cogeneration Venture LP, Secured Lease
Obligation Bonds, Series C-91, 10.33% 2002 2,240,961 2.326 .03
Omega Healthcare Investors, Inc. 6.95% 2002-2007 10,500,000 9.695 .11
Owens-Illinois, Inc. 7.85%-8.10% 2004-2007 2,000,000 1.939 .02
PanAmSat Corp. 6.00% 2003 5,000,000 4.670 .05
Paperboard Industries International Inc. 8.375% 2007 4,750,000 4.382 .05
Price REIT, Inc. 7.50% 2006 11,000,000 10.825 .12
ProLogis Trust 7.05% 2006 3,000,000 2.854 .03
Qwest Communications International Inc. 2,000,000 1.587 .02
0%/9.47% 2007 (5)
Security Capital Group Inc. 7.15% 2007 7,500,000 6.795 .08
Spieker Properties, LP 6.75%-6.875% 2005-2008 15,000,000 14.231 .16
Tenet Healthcare Corp. 8.125% 2008 (1) 10,000,000 9.000 .10
Waste Management, Inc. 6.375% 2003 3,749,000 3.255 .04
Wellsford Residential Property Trust 7.75% 2005 2,500,000 2.515 .03
WestPoint Stevens Inc. 7.875% 2005 5,000,000 4.650 0.07000
------------------
348.134 3.97
------------------

GOVERNMENTS AND GOVERNMENTAL AUTHORITIES
Canadian Government 7.00% September 2001 C$ 40,000,0 27.723 .32
Freddie Mac 5.125% October 2008 $10,960,000 9.776 .11
------------------
37.499 .43
------------------

U.S. TREASURIES
8.00% May 2001 6,000,000 6.192 .07
6.50% May 2001 3,000,000 3.032 .03
14.25% February 2002 75,000,000 88.219 1.01
11.125% August 2003 75,000,000 87.527 1.00
6.50% May 2005 7,500,000 7.637 .09
6.125% August 2007 2,200,000 2.192 .02
6.375% August 2027 9,000,000 8.969 .10
------------------
203.768 2.32
------------------
TOTAL BONDS AND NOTES (cost: $619.589 million) 589.401 6.72
------------------
TOTAL INVESTMENT SECURITIES (cost: $4,943.951 million) 6,361.75 72.51
------------------

Principal Market Percent
Amount Value Of Net
Short-Term Securities (Million Assets
- -------------------------------------------- -------- ----------------
CORPORATE SHORT-TERM NOTES

American Express Credit Corp. 5.29%-5.73% $90,400,000 $ 88.95 1.02%
due 12/15/1999-2/17/2000
Archer Daniels Midland Co. 5.35% due 2/14/2000 25,000,000 24.554 .28
Associates First Capital Corp. 5.15%-5.69% due 95,000,000 94.550 1.08
11/1/1999-2/24/2000
AT&T Corp. 5.30%-5.70% due 12/6/1999-2/28/2000 55,700,000 55.103 .63
BellSouth Capital Funding Corp. 5.67%-5.93% 62,300,000 61.165 .70
due 1/20-3/16/2000 (1)
Ciesco LP 5.25%-5.98% due 11/4/1999-2/7/2000 75,500,000 74.518 .85
Coca-Cola Co. 5.29%-5.86% due 1/25-1/28/2000 71,800,000 70.750 .81
Eastman Kodak Co. 5.30%-5.72% due 11/2/1999-2/24/2000 82,000,000 81.127 .92
E.I. du Pont de Nemours and Co. 5.25%-5.70% 63,000,000 62.072 .70
due 11/29/1999-3/10/2000
Emerson Electric Co. 5.30%-5.31% due 1/24-2/1/2000 54,300,000 53.500 .61
Ford Motor Credit Co. 5.19%-5.84% due 71,700,000 70.973 .81
12/3/1999-1/13/2000
General Electric Capital Corp. 5.41%-5.97% 81,200,000 79.831 .91
due 1/25-2/23/2000
H.J. Heinz Co. 5.50%-5.53% due 1/27-2/2/2000 69,500,000 68.432 .77
Household Finance Corp. 5.23%-5.95% due 68,600,000 67.685 .77
12/9/1999-1/28/2000
IBM Credit Corp. 5.24%-5.95% due 12/15/1999-1/19/2000 53,000,000 52.517 .60
International Lease Finance Corp. 5.29%-5.60% 42,266,000 41.841 .47
due 11/8/1999-2/3/2000
Johnson & Johnson 5.30%-5.60% due 1/25-2/16/99 (1) 37,300,000 36.681 .41
Merck & Co. Inc. 5.30%-5.34% due 2/3-2/4/2000 64,000,000 62.972 .72
Motiva Enterprises LLC 5.75%-5.94% due 1/27-2/18/2000 52,800,000 51.904 .59
National Rural Utilities Cooperative Finance Corp. 62,700,000 62.127 .71
5.28%-5.75% due 11/10/1999-2/18/2000
Pfizer Inc. 5.77%-5.80% due 3/14-3/17/2000 (1) 54,500,000 53.272 .60
Procter & Gamble Co. 5.29%-5.90% due 11/30/1999-1/31/2000 81,600,000 80.712 .92
SBC Communications Inc. 5.68% due 2/10/2000 (1) 34,162,000 33.583 .38
USAA Capital Corp. 5.73%-5.85% due 1/24-2/2/2000 52,500,000 51.685 .62
Walt Disney Co. 5.84%-5.89% due 1/21-2/18/2000 61,600,000 60.639 .69
1,541.14 17.57
------------------

FEDERAL AGENCY DISCOUNT NOTES

Fannie Mae 4.75%-5.40% due 11/4/1999-2/9/2000 139,524,000 138.791 1.58
Federal Home Loan Banks 4.81%-5.44% due 125,800,000 124.724 1.42
11/12/1999-2/25/2000
Freddie Mac 4.78%-5.52% due 11/4/1999-3/2/2000 226,495,000 224.921 2.57
------------------
488.436 5.57
------------------

U.S. TREASURY SHORT-TERM NOTES
6.125%-8.75% due 2/15-9/30/2000 430,000,000 435.590 4.97

TOTAL SHORT-TERM SECURITIES (cost: 2,465.17 28.11
$2,480.272 million)
Excess of payables over cash and receivables 54.153 .62
------------------
TOTAL SHORT-TERM SECURITIES, CASH AND RECEIVABLES,
NET OF PAYABLES 2,411.02 27.49
------------------

NET ASSETS $8,772.7100.00%
====== ======

(1) Purchased in a private placement transaction;
resale to the public may require registration
or sale only to qualified institutional buyers.

(2) Valued under procedures established by the Board of
Directors.

(3) Pass-through security backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore,
the effective maturity is shorter than the stated
maturity.

(4) Coupon rate may change periodically.

(5) Step bond; coupon rate will increase at a later date.

ADR = American Depositary Receipts

See Notes to Financial Statements

</TABLE>

<TABLE>
Capital Income Builder
Financial Statements

<S> <C> <C>
Statement of Assets and Liabilities
at October 31, 1999 (dollars in
millions)
Assets:
Investment securities at market (cost:$4,943.951) $6,361.753
Short-term securities (cost:$2,480.272) 2,465.173
Cash .029
Receivables for-
Sales of investments $2.631
Sales of fund's shares 4.321
Dividends and accrued interest 38.869 45.821
----------------------
8,872.776
Liabilities:
Payables for-
Purchases of investments 20.239
Repurchases of fund's shares 10.210
Management services 2.306
Dividends payable 63.323
Accrued expenses 3.925 100.003
----------------------
Net Assets at October 31, 1999 - Equivalent to
$44.90 per share on 195,385,277 shares of $0.01
par value capital stock outstanding
(authorized capital stock - 400,000,000 shares) $8,772.773
============

Statement of Operations
for the year ended October 31, 1999 (dollars in
millions)
Investment Income:
Income:
Dividends $ 230.043
Interest 206.791 $436.834
------------
Expenses:
Management services fee 28.908
Distribution expenses 21.496
Transfer agent fee 5.195
Reports to shareholders .246
Registration statement and prospectus .476
Postage, stationery and supplies .733
Directors' fees .172
Auditing and legal fees .059
Custodian fee .948
Taxes other than federal income tax .099
Other expenses .102 58.434
----------------------
Net investment income 378.400
------------
Realized Gain and Unrealized Appreciation on
Investments:
Net realized gain 329.823
Net change in unrealized appreciation on investments (484.382)
------------
Net realized gain and change in unrealized
appreciation on investments (154.559)
------------
Net Increase in Net Assets Resulting from Operations $223.841
============

See Notes to Financial Statements
Statement of Changes in Net Assets (dollars imillions)
Year endedOctober 31
----------------------
1999 1998
----------------------
Operations:
Net investment income $ 378.400$ 357.940
Net realized gain on investments 329.823 519.943
Net change in unrealized appreciation on investmen (484.382) 108.040
----------------------
Net increase in net assets resulting from
operations 223.841 985.923
----------------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (376.344) (360.241)
Distributions from net realized gain on investment (510.675) (256.425)
----------------------
Total dividends and distributions (887.019) (616.666)
----------------------
Capital Share Transactions:
Proceeds from shares sold: 26,060,446 and
30,081,411 shares, respectively 1,227.223 1,451.894
Proceeds from shares issued in reinvestment of net
investment income dividends and distributions of
net realized gain on investments: 17,234,396 and
10,721,248 shares, respectively 799.504 505.404
Cost of shares repurchased: 28,645,287 and 18,311,478
shares, respectively (1,337.580 (881.077)
----------------------
Net increase in net assets resulting from capital
share transactions 689.147 1,076.221
----------------------
Total Increase in Net Assets 25.969 1,445.478

Net Assets:
Beginning of year 8,746.804 7,301.326
----------------------
End of year (including undistributed net investment
income: $5.250 and $3.480, respectively) $8,772.773$8,746.804
======================

See Notes to Financial Statements

</TABLE>

CAPITAL INCOME BUILDER
Notes to Financial Statements

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - Capital Income Builder, Inc. (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks to provide a growing dividend together with
a current yield which exceeds that paid by U.S. stocks generally.

SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:

SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. The ability of the issuers of the debt securities held by the fund to
meet their obligations may be affected by economic developments in a specific
industry, state or region. Short-term securities maturing within 60 days are
valued at amortized cost, which approximates market value. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
the Board of Directors.

NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed
in terms of non-U.S. currencies are translated into U.S. dollars at the
prevailing market rates at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities and other
assets and liabilities are included with the net realized and unrealized gain
or loss on investment securities.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost.
Dividend income is recognized on the ex-dividend date, and interest income is
recognized on an accrual basis. Original issue discounts on securities are
amortized daily over the expected life of the security. Amortization of market
discounts on securities is recognized upon disposition. The fund does not
amortize premiums on securities purchased.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily from net investment income. Distributions paid to shareholders
are recorded on the ex-dividend date.

2. NON-U.S. INVESTMENTS

INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain
countries involve special investment risks. These risks may include, but are
not limited to, investment and repatriation restrictions, revaluation of
currencies, adverse political, social, and economic developments, government
involvement in the private sector, limited and less reliable investor
information, lack of liquidity, certain local tax law considerations, and
limited regulation of the securities markets.

TAXATION - Dividend and interest income is recorded net of non-U.S. taxes
paid. For the year ended October 31, 1999, such non-U.S. taxes were $9,269,000.

CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends,
interest, and other receivables and payables, on a book basis, were $286,000
for the year ended October 31, 1999.

3. FEDERAL INCOME TAXATION

The fund complies with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intends to distribute all of
its net taxable income and net capital gains for the fiscal year. As a
regulated investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.

As of October 31, 1999, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $1,402,703,000, of which
$1,757,313,000 related to appreciated securities and $354,610,000 related to
depreciated securities. During the year ended October 31, 1999, the fund
realized, on a tax basis, a net capital gain of $332,283,000 on securities
transactions. Net gains related to non-U.S. currency and other transactions of
$2,460,000 were treated as an adjustment to ordinary income for federal income
tax purposes. The cost of portfolio securities for book and federal income tax
purposes was $7,424,223,000 at October 31, 1999.

4. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $28,908,000 for management services
was incurred pursuant to an agreement with Capital Research and Management
Company (CRMC), with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement provides for monthly
fees, accrued daily, based on an annual rate of 0.24% of the first $1 billion
of average net assets; 0.20% of such assets in excess of $1 billion but not
exceeding $2 billion; 0.18% of such assets in excess of $2 billion but not
exceeding $3 billion; 0.165% of such assets in excess of $3 billion but not
exceeding $5 billion; 0.155% of such assets in excess of $5 billion but not
exceeding $8 billion; and 0.15% of such assets in excess of $8 billion; plus
3.0% of the fund's monthly gross investment income. For purposes of the
Investment Advisory and Service Agreement, gross investment income means gross
income, computed without taking account of gains or losses from sales of
capital assets.

DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may
expend up to 0.30% of its average net assets annually for any activities
primarily intended to result in sales of fund shares, provided the categories
of expenses for which reimbursement is made are approved by the fund's Board of
Directors. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
October 31, 1999, distribution expenses under the Plan were $21,496,000. As of
October 31, 1999, accrued and unpaid distribution expenses were $3,131,000.

American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $5,326,000 (after allowances to dealers) as its portion
of the sales charges paid by purchasers of the fund's shares. Such sales
charges are not an expense of the fund and, hence, are not reflected in the
accompanying statement of operations.

TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer
agent for the fund, was paid a fee of $5,195,000.

DEFERRED DIRECTORS' FEES - Directors who are unaffiliated with CRMC may
elect to defer part or all of the fees earned for services as members of the
Board. Amounts deferred are not funded and are general unsecured liabilities of
the fund. As of October 31, 1999, aggregate deferred amounts and earnings
thereon since the deferred compensation plan's adoption (1993), net of any
payments to Directors, were $360,000.

CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.

5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES

The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,459,940,000 and $1,590,820,000, respectively,
during the year ended October 31, 1999.

As of October 31, 1999, accumulated undistributed net realized gain on
investments was $277,135,000 and additional paid-in capital was $7,085,733,000.
The fund reclassified $286,000 from undistributed net realized currency losses
to undistributed net investment income and $34,300,000 to additional paid in
capital from undistributed net realized gains for the year ended October 31,
1999 as a result of permanent differences between book and tax.

Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $948,000 includes $52,000 that was paid by these credits
rather than in cash.
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share Data and Ratios
Year ended October 31
----------------------------------------------
1999 1998 1997 1996 1995
----------------------------------------------
Net Asset Value, Beginning of Year $48.40 $46.14 $39.70 $36.27 $32.68
----------------------------------------------
Income from Investment Operations:
Net investment income 1.93 2.09 1.74 1.95 1.69
Net (loss) gain on securities (both
realized and unrealized) ($.70) 3.87 7.20 3.92 3.69
----------------------------------------------
Total from investment operations 1.23 5.96 8.94 5.87 5.38
----------------------------------------------
Less Distributions:
Dividends (from net investment income) (1.92) (2.09) (1.77) (1.94) (1.69)
Distributions (from capital gains) (2.81) (1.61) (.73) (.50) (.10)
----------------------------------------------
Total distributions (4.73) (3.70) (2.50) (2.44) (1.79)
----------------------------------------------
Net Asset Value, End of Year $44.90 $48.40 $46.14 $39.70 $36.27
==================================== =======

Total Return (1) 2.53% 13.33% 23.16% 16.76% 16.98%

Ratios/Supplemental Data:
Net assets, end of year (in millions) $8,773 $8,747 $7,301 $5,418 $4,533
Ratio of expenses to average net assets .64% .64% .65% .71% .72%
Ratio of net income to average net assets 4.15% 4.35% 4.04% 5.19% 4.96%
Portfolio turnover rate 20.56% 24.38% 27.65% 27.56% 18.06%

(1) Excludes maximum sales charge of 5.75%.

</TABLE>

Report of Independent Accountants

To the Board of Directors and Shareholders of Capital Income Builder, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the per-share data and ratios present fairly, in all
material respects, the financial position of Capital Income Builder, Inc. (the
"Fund") at October 31, 1999, the results of its operations, the changes in its
net assets and the per-share data and ratios for the years indicated in
conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at October 31, 1999 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.

/s/PricewaterhouseCoopers LLP
Los Angeles, California

November 30, 1999

Tax Information (unaudited)

We are required to advise you within 60 days of the fund's fiscal year
regarding the federal tax status of distributions.

During the fiscal year ended October 31, 1999, the fund paid a long-term
capital gain distribution of $2.81 per share.

The fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.

Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 26% of the dividends
paid by the fund from net investment income represent qualifying dividends.

Certain states may exempt from income taxation that portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 16% of the dividends
paid by the fund from net investment income were derived from interest on
direct U.S. Treasury obligations.

Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their annual
information reporting.

SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S fiscal year AND NOT THE
calendar year, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2000 TO DETERMINE THE calendar year
AMOUNTS TO BE INCLUDED ON THEIR 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.

<PAGE>

PART C

OTHER INFORMATION
CAPITAL INCOME BUILDER, INC.

ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(b) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(c) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(d) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(e) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(f) None
(g) Foreign Custody Manager Agreement
(h) None
(i) Not applicable to this filing
(j) Consent of Independent Auditors
(k) None
(l) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(m) Previously filed (see Post-Effective Amendment No. 12 filed December 30,
1997)
(n) None
(o) None
(p) Code of Ethics

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.

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 Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, 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>
<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 Regional Vice President None

27304 Park Vista Road

Agoura Hills, CA 91301

John A. Agar Vice President None

#61 Point West Circle

Little Rock, AR 72211

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 Assistant 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 Regional Vice President None

4129 Laclede Avenue

St. Louis, MO 63108

B J. Peter Burns Vice President None

Brian C. Casey Regional 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 Co-Chief None

Executive Officer

Ruth M. Collier Senior Vice President None

29 Landsdowne Drive

Larchmont, NY 10538

S David Coolbaugh Assistant Vice President None

H Carlo 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

Daniel J. Delianedis Regional Vice President None

8689 Braxton Drive

Eden Prairie, MN 55347

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

633 Menlo Avenue, Suite 210

Menlo Park, CA 94025

Peter J. Doran Director, Senior Vice None
President

Suite 216W

100 Merrick Road

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

L Paul H. Fieberg Senior Vice President None

John Fodor 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 Vice President None

6744 Avalon

Dallas, TX 75214

Robert S. Irish Regional 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 Vice President None

Arthur J. Levine Senior Vice President None

12558 Highlands Place

Fishers, IN 46038

B Karl A. Lewis Assistant Vice President None

T. Blake Liberty Regional 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 Assistant Vice President None

L Susan G. Lindgren Vice President - Institutional None

Investment Services

LW Robert W. Lovelace Director None

Stephen A. Malbasa 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

S John V. McLaughlin Senior Vice President None

Terry W. McNabb Vice President None

2002 Barrett Station Road

St. Louis, MO 63131

L R. William Melinat Vice President - Institutional None

Investment Services

David R. Murray Vice President None

60 Briant Drive

Sudbury, MA 01776

Stephen S. Nelson Vice President None

P.O. Box 470528

Charlotte, NC 28247-0528

William E. Noe Regional 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

Gary A. Peace Regional Vice President None

291 Kaanapali Drive

Napa, CA 94558

Samuel W. Perry Regional Vice President None

6133 Calle del Paisano

Scottsdale, AZ 85251

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 472245

Charlotte, NC 28247

George S. Ross Senior Vice President None

55 Madison Avenue

Morristown, NJ 07960

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 Regional Vice President None

9417 Beverlywood Street

Los Angeles, CA 90034

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

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

L John C. Smith Assistant Vice President - None

Institutional Investment
Services

Rodney G. Smith Vice President None

100 N. Central Expressway

Suite 1214

Richardson, TX 75080

S Sherrie Snyder-Senft Assistant Vice President None

Anthony L. Soave Regional Vice President None

8831 Morning Mist Drive

Clarkston, MI 48348

Theresa Souiller Assistant Vice President None

2652 Excaliber Court

Virginia Beach, VA 23454

Nicholas D. Spadaccini Regional 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 Regional 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

31641 Saddletree Drive

Westlake Village, CA 91361

L Drew W. Taylor Assistant Vice President None

S James P. Toomey Vice President None

I Christopher E. Trede Vice President None

George F. Truesdail 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

7 Gladstone Lane

Laguna Niguel, CA 92677

Thomas E. Warren Regional 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 Wenzel Regional Vice President None

3406 Shakespeare Drive

Troy, MI 48084

H J. D. Wiedmaier Assistant 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 Vice President None

9320 Overlook Trail

Eden Prairie, MN 55347

Janet M. Young Regional Vice President None

1616 Vermont

Houston, TX 77006

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
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240

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

<PAGE>
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
3rd day of January, 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 January 3, 2000, by the
following persons in the capacities indicated.

SIGNATURE TITLE

(1) Principal Executive Officer:
/s/ James B. Lovelace President and Director
(James B. Lovelace)
(2) Principal Financial Officer and
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

*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)

January 15, 1999
Capital Research and Management Company
333 South Hope Street, 55/th/ Floor
Los Angeles, CA 90071
RE: DELEGATION OF RESPONSIBILITIES UNDER RULE 17F-5
Dear Mesdames/Sirs:
This Agreement confirms, and sets forth the responsibilities of the parties in
connection with, the appointment of Capital Research and Management Company
("CRMC") as the Foreign Custody Manager of Capital Income Builder, Inc. (the
"Corporation"), in accordance with rule 17f-5, as amended, under the Investment
Company Act of 1940 (the "1940 Act"). CRMC hereby accepts such appointment as
of the date first written above. All capitalized terms used herein and not
otherwise defined have the meanings assigned in rule 17f-5.
The Corporation may, from time to time and in accordance with this Agreement,
place or maintain in the care of an Eligible Foreign Custodian, any of the
Corporation's investments (including non-U.S. currencies) for which the primary
market is outside the United States, and such cash and cash equivalents as are
reasonably necessary to effect the Corporation's transactions in such
investments, PROVIDED THAT:

(a) CRMC, as Foreign Custody Manager, determines that the Corporation's assets
will be subject to reasonable care, based on the standards applicable to
custodians in the relevant market, if maintained with the custodian, after
considering all factors relevant to the safekeeping of such assets, including,
without limitation:
(1) the custodian's practices, procedures, and internal controls, including,
but not limited to, the physical protections available for certificated
securities (if applicable), the method of keeping custodial records, and the
security and data protection practices;
(2) whether the custodian has the requisite financial strength to provide
reasonable care for the Corporation's assets;
Capital Research and Management Company
January 15, 1999
Page
(3) the custodian's general reputation and standing and, in the case of a
securities depository, the depository's operating history and number of
participants; and
(4) whether the Corporation will have jurisdiction over and be able to
enforce judgments against the custodian, such as by virtue of the existence of
any offices of the custodian in the U.S. or the custodian's consent to service
of process in the U.S.
(b) Each of the Corporation's non-U.S. custody arrangements are governed by a
written contract (or, in the case of a Securities Depository, by such a
contract, by the rules or established practices or procedures of the
depository, or by any combination of the foregoing) that CRMC, as Foreign
Custody Manager, has determined will provide reasonable care for the
Corporation's assets based on the standards set forth in paragraph (a) above.

(1) Such contract shall include provisions that provide:
(i) for indemnification or insurance arrangements (or any combination of the
foregoing) such that the Corporation will be adequately protected against the
risk of loss of assets held in accordance with such contract;
(ii) that the Corporation's assets will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of the custodian or its
creditors except a claim of payment for their safe custody or administration
or, in the case of cash deposits, liens or rights in favor of creditors of the
custodian arising under bankruptcy, insolvency, or similar laws;
(iii) that beneficial ownership for the Corporation's assets will be freely
transferable without the payment of money or value other than for safe custody
or administration;
Capital Research and Management Company
January 15, 1999
Page
(iv) that adequate records will be maintained identifying the assets as
belonging to the Corporation or as being held by a third party for the benefit
of the Corporation;
(v) that the Corporation's independent public accountants will be given access
to those records or confirmation of the contents of those records; and
(vi) that the Corporation will receive periodic reports with respect to the
safekeeping of the Corporation's assets, including, but not limited to,
notification of any transfer to or from the Corporation's account or a third
party account containing assets held for the benefit of the Corporation.
(2) Such contract may contain, in lieu of any or all of the provisions
specified in subparagraph (1) above, such other provisions that CRMC, as
Foreign Custody Manager, determines will provide, in their entirety, the same
or a greater level of care and protection for Corporation assets as the
specified provisions, in their entirety.

(c) (1) CRMC, as Foreign Custody Manager, will have established a system to
monitor the appropriateness of maintaining the Corporation's assets with a
particular custodian under paragraph (a) above, and the contract governing the
Corporation's arrangements under paragraph (b) above.

(2) If an arrangement no longer meets the requirements of paragraph (c), the
Corporation must withdraw its assets from the custodian as soon as reasonably
practicable.
CRMC, as Foreign Custody Manager, will provide written reports notifying the
Corporation's Board of Directors of the placement of the Corporation's assets
with a particular custodian and of any material change in the Corporation's
arrangements, with the reports to be provided to the Board at such times as the
Board deems reasonable and appropriate based on the circumstances of the
Corporation's non-U.S. custody arrangements.
CRMC, in performing the responsibilities delegated to it as the Corporation's
Foreign Custody Manager, will exercise reasonable care, prudence and diligence
such as a person having responsibility for the safekeeping of the Corporation's
assets would exercise.
Capital Research and Management Company
January 15, 1999
Page
This Agreement (and the appointment of CRMC as the Corporation's Foreign
Custody Manager) may be terminated at any time, without payment or any penalty,
by the Board of Directors of the Corporation or by vote of a majority (within
the meaning of the 1940 Act) of the outstanding voting securities of the Trust,
on sixty (60) days' written notice to CRMC, or by CRMC on like notice to the
Corporation.
The obligations of the Corporation under this Agreement are not binding upon
any of the Directors, officers, employees, agents or shareholders of the
Corporation individually, but bind only the Corporation's estate. CRMC agrees
to look solely to the assets of the Corporation for the satisfaction of any
liability in respect of the Corporation under this Agreement and will not seek
recourse against such Directors, officers, employees, agents or shareholders,
or any of them, or any of their personal assets for such satisfaction.
Very truly yours,
CAPITAL INCOME BUILDER, INC.
By: /s/ Vincent P. Corti
Vincent P. Corti, Secretary
ACCEPTED AND AGREED as of the date first written above:
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
By: /s/ Michael J. Downer
Michael J. Downer
Secretary

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 15 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
October 31, 1999, relating to the financial statements and per-share data and
ratios of Capital Income Builder, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the headings "Independent
Accountants" and "Reports to Shareholders" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.

PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
January 5, 2000

THE CAPITAL GROUP COMPANIES
CODE OF CONDUCT
(as of October 1, 1999)

All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.

Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.

REPORTING VIOLATIONS

If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.

You can report confidentially to:

- - Your manager or department head
- - CGC Audit Committee:

Donnalisa Barnum
Larry P. Clemmensen
Roberta Conroy
Bill Hurt
Sonny Kamm
Mike Kerr
John McLaughlin
Bob O'Donnell
Tom Rowland
John Smet
Mark Smith
Wally Stern
Antonio Vegezzi
Shaw Wagener
Kelly Webb
- - Mike Downer or any other lawyer in the CGC Legal Group
- - Don Wolfe of Deloitte & Touche LLP (CGC's auditors)

CONFLICTS OF INTEREST

A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.

REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.

GIFTS POLICY COMMITTEE

The Gifts Policy Committee oversees administration of and compliance with the
Policy.

INSIDER TRADING

Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.

While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties. All associates must read the Insider Trading Policy in the
Appendix of the CGC Handbook for Associates.

PERSONAL INVESTING POLICY

As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.

You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.

There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.

ALL ASSOCIATES

Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.

Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to any initial public offering or any other
securities offering that is subject to allocation (so-called "hot issues").
Generally, this prohibition applies to spouses of associates and any family
member residing in the same household. However, an associate may request that
the Personal Investing Policy Committee consider granting an exception.

COVERED PERSONS

Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. You should take the time to review this memo as ongoing interpretations
of the policy will be explained therein.

Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.

Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, and investment administration
personnel (see below).

PRE-CLEARANCE OF SECURITIES TRANSACTIONS

Before buying or selling securities, covered persons should find out if the
purchase or sale of a particular security would involve a conflict of interest.
This involves checking with the CGC Legal Group based in LAO by calling [phone
number]. (You will generally receive a response within one business day.)
Unless a shorter period is specified, clearance is good for two trading days
(including the day you check). If you have not executed your transaction
within this period, you must again pre-clear your transaction.

Covered persons must promptly submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: gifts
or bequests of securities (although pre-clearance and reporting are required if
these securities are later sold); open-end investment companies (mutual funds);
shares of CGC stock; money market instruments with maturities of one year or
less; direct obligations of the U.S. Government, bankers' acceptances, CDs or
other commercial paper; commodities; and options or futures on broad-based
indices. Covered persons must also report transactions made by family members
in their household and by those for which they are a trustee or custodian.
Reporting forms will be supplied at the appropriate times.

In addition, the following transactions must be reported but need not have been
pre-cleared: transactions in debt instruments rated "A" or above by at least
one national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).

BROKERAGE ACCOUNTS

Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. The broker is
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc., [P.O. Box address]. ALL
DOCUMENTS RECEIVED IN THIS POST OFFICE BOX ARE KEPT STRICTLY CONFIDENTIAL.

[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]

ANNUAL RECERTIFICATION

All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.

ADDITIONAL RULES FOR INVESTMENT PERSONNEL

DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any associate who is in a
position to recommend the purchase or sale of securities by the fund or client
accounts must not recommend securities that s/he personally owns without FIRST
disclosing ownership. Typically, a complete disclosure of holdings (such as in
the annual disclosure of personal securities) satisfies this requirement.

BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND OR CLIENT ACCOUNT THAT HIS OR HER COMPANY MANAGES transacts in that
security. Profits resulting from transactions occurring within this time
period are subject to special review and may be subject to disgorgement.

BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.

ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS - Investment personnel will
be required to disclose all personal securities holdings upon commencement of
employment and thereafter on an annual basis. Reporting forms will be supplied
for this purpose.

SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company BEFORE
SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY TRADED COMPANIES.

PERSONAL INVESTING POLICY COMMITTEE

Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Policy Committee.