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. 12
                                and
                       Registration Statement
                               Under
                 The Investment Company Act of 1940
                          Amendment No. 14    
                                  
                  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)
                                     
Title of Securities being Registered: Shares of Capital Stock ($0.01 par
value)    
                 Approximate date of proposed public offering:
   
It is proposed that this filing become effective on January 2, 1998, pursuant 
                        to paragraph (b) of rule 485.    
 
<PAGE>
CAPITAL INCOME BUILDER, INC.
CROSS REFERENCE SHEET
 
<TABLE>
<CAPTION>
ITEM NUMBER OF                                                                                 
 
PART "A" OF FORM N-1A                       CAPTIONS IN PROSPECTUS (PART "A")        
 
<S>    <C>                                  <C>                                      
1.     Cover Page                           Cover Page                               
 
2.     Synopsis                             Expenses                                 
 
3.     Condensed Financial Information      Financial Highlights; Investment Results   
 
4.     General Description of Registrant    Investment Policies and Risks; Securities and    
 
                                            Investment Techniques; Multiple Portfolio Counselor   
 
                                            System; Fund Organization and Management   
 
5.     Management of the Fund               Expenses; Financial Highlights; Securities and    
 
                                            Investment Techniques; Multiple Portfolio Counselor   
 
                                            System; Fund Organization and Management   
 
6.     Capital Stock and Other Securities   Investment Policies and Risks; Securities and   
 
                                            Investment Techniques; Dividends, Distributions and   
 
                                            Taxes; Fund Organization and Management   
 
7.     Purchase of Securities Being Offered   Purchasing Shares; Fund Organization and   
 
                                            Management; Shareholder Services         
 
8.     Redemption or Repurchase             Selling Shares                           
 
9.     Legal Proceedings                    N/A                                      
 
</TABLE>
 
 
<TABLE>
<CAPTION>
ITEM NUMBER OF                              CAPTIONS IN STATEMENT OF                 
 
PART "B" OF FORM N-1A                       ADDITIONAL INFORMATION (PART "B")        
 
<S>    <C>                                  <C>                                      
10.    Cover Page                           Cover                                    
 
11.    Table of Contents                    Table of Contents                        
 
12.    General Information and History      Fund Organization and Management (Part "A")   
 
13.    Investment Objectives and Policies   Securities and Investment Techniques (Part "A");   
 
                                            Description of Securities and Investment Techniques;   
 
                                            Investment Restrictions                  
 
14.    Management of Registrant             Fund Directors and Officers; Management   
 
15.    Control Persons and Principal        Holders of Securities                    
 
                                            Fund Directors and Officers              
 
16.    Investment Advisory and Other Services   Management; Fund Organization and Management (Part   
 
                                            "A"); General Information                
 
17.    Brokerage Allocation and Other Practices   Execution of Portfolio Transactions      
 
18.    Capital Stock and Other Securities   N/A                                      
 
19.    Purchase, Redemption and Pricing     Purchase of Shares; Purchasing Shares (Part "A");  
 
       of Securities Being Offered          Shareholder Account Services and Privileges;
 
                                            Redeeming Shares
 
20.    Tax Status                           Dividends, Distributions and Federal Taxes   
 
21.    Underwriter                          Management -- Principal Underwriter      
 
22.    Calculation of Performance Data      Investment Results                       
 
23.    Financial Statements                 Financial Statements                     
 
</TABLE>
 
 
<TABLE>
<CAPTION>
ITEM IN PART "C"                                                                               
 
<S>    <C>                                                                         
24.    Financial Statements and Exhibits                                           
 
25.    Persons Controlled by or Under Common                                       
 
       Control with Registrant                                                     
 
26.    Number of Holders of Securities                                             
 
27.    Indemnification                                                             
 
28.    Business and Other Connections of                                           
 
       Investment Adviser                                                          
 
29.    Principal Holders                                                           
 
30.    Location of Accounts and Records                                            
 
31.    Management Services                                                         
 
32.    Undertakings                                                                
 
       Signature Page                                                              
 
</TABLE>
 
 
                            The American Funds Logo
 
--------------------------------------------------------------------------------
 
                                 Capital Income
                                    Builder
                                   Prospectus
   
                                JANUARY 2, 1998
    
 
<PAGE>
 
CAPITAL INCOME BUILDER, INC.
333 South Hope Street
Los Angeles, CA 90071
 
--------------------------------------------------------------------------------
TABLE OF CONTENTS
 
<TABLE>
<S>                           <C>
Expenses                         3
 .................................................................
Financial Highlights             4
 .................................................................
Investment Policies and Risks    5
 .................................................................
Securities and Investment
Techniques                       5
 .................................................................
Multiple Portfolio Counselor
System                           9
Investment Results              10
 .................................................................
Dividends, Distributions and
Taxes                           11
 .................................................................
Fund Organization and
Management                      12
 .................................................................
Shareholder Services            15
</TABLE>
 
--------------------------------------------------------------------------------
   
The fund strives to accomplish two primary investment objectives -- 1) to
provide to shareholders a level of current income which exceeds the average
yield on U.S. stocks generally and 2) to provide to shareholders a growing
stream of income over the years. Secondarily, the fund will seek growth of
capital. The fund will invest in a diversified portfolio of securities that
include common stocks and fixed-income securities. Up to 40% of the fund's
assets may be invested in non-U.S. securities.    
 
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
 
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME. YOUR INVESTMENT IN THE FUND IS NOT A
DEPOSIT OR OBLIGATION OF, OR INSURED OR GUARANTEED BY, ANY ENTITY OR PERSON
INCLUDING THE U.S. GOVERNMENT AND THE FEDERAL DEPOSIT INSURANCE CORPORATION.
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
   
12-010-0198    
 
 
<PAGE>
 
--------------------------------------------------------------------------------
EXPENSES
The effect of the expenses described below is reflected in the fund's share
price and return.
   
You may pay certain shareholder transaction expenses when you buy or sell shares
of the fund. Operating expenses are paid by the fund.    
 
SHAREHOLDER TRANSACTION EXPENSES
 
<TABLE>
<S>                                                         <C>
Maximum sales charge on purchases
(as a percentage of offering price)                          5.75%
 .....................................................................................................................
</TABLE>
 
SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. There is no sales
charge on reinvested dividends, and no deferred sales charge or redemption or
exchange fees. A contingent deferred sales charge of 1% applies on certain
redemptions made within 12 months following purchases without a sales charge.
   
FUND OPERATING EXPENSES
(as a percentage of average net assets)
--------------------------------------------------------------------------------
 
<TABLE>
<S>                                                        <C>
Management fees                                            0.31%
 .....................................................................................................................
12b-1 expenses                                             0.23%(1)
 .....................................................................................................................
Other expenses                                             0.11%
 .....................................................................................................................
Total fund operating expenses                              0.65%
</TABLE>    
   
(1) 12b-1 expenses may not exceed 0.30% of the fund's average net assets
    annually.    
 
EXAMPLES
 
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following total expenses over the following periods:
--------------------------------------------------------------------------------
   
<TABLE>
<S>                                                          <C>
One year                                                     $  64
 .....................................................................................................................
Three years                                                  $  77
 .....................................................................................................................
Five years                                                   $  92
 .....................................................................................................................
Ten years                                                    $ 134
</TABLE>    
 
THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY. YOUR EXPENSES WILL BE LESS IF YOU QUALIFY TO PURCHASE
SHARES AT A REDUCED OR NO SALES CHARGE.
 
                                        CAPITAL INCOME BUILDER / PROSPECTUS    3
 
 
<PAGE>
 
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
 
The following information has been audited by Price Waterhouse LLP, independent
auditors. This table should be read together with the financial statements which
are included in the statement of additional information and annual report.
 
PER-SHARE DATA AND RATIOS
   
<TABLE>
<CAPTION>
                                                       YEAR ENDED OCTOBER 31
                                                    ---------------------------
                      1997     1996     1995     1994     1993     1992     1991     1990     1989      1988
                     -----------------------------------------------------------------------------------------
<S>                  <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Net asset value,
beginning of year     $39.70   $36.27   $32.68   $34.42   $30.77   $28.67   $23.37   $25.05   $22.63    $21.22
--------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS:
Net investment
income                  1.74     1.95     1.69     1.73     1.53     1.44     1.37     1.39     1.30      1.15
 .....................................................................................................................
Net realized and
unrealized gain
(loss) on
investments             7.20     3.92     3.69    (1.62)    3.76     2.33     5.39    (1.76)    2.41      1.41
 .....................................................................................................................
Total income from
investment
operations              8.94     5.87     5.38      .11     5.29     3.77     6.76     (.37)    3.71      2.56
--------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net
investment income      (1.77)   (1.94)   (1.69)   (1.73)   (1.53)   (1.44)   (1.46)   (1.31)   (1.29)    (1.15)
 .....................................................................................................................
Distributions from
net realized gains      (.73)    (.50)    (.10)    (.12)    (.11)    (.23)      --       --       --        --
 .....................................................................................................................
Total distributions    (2.50)   (2.44)   (1.79)   (1.85)   (1.64)   (1.67)   (1.46)   (1.31)   (1.29)    (1.15)
 .....................................................................................................................
Net asset value,
end of year           $46.14   $39.70   $36.27   $32.68   $34.42   $30.77   $28.67   $23.37   $25.05    $22.63
--------------------------------------------------------------------------------------------------------------
Total return(1)       23.16%   16.76%   16.98%     .47%   17.58%   13.46%   29.27%   (1.62%)  16.74%    12.27%
--------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets,
end of year
(in millions)         $7,301   $5,418   $4,533   $3,629   $2,826   $1,203     $563     $206     $195      $126
 .....................................................................................................................
Ratio of expenses to
average net assets      .65%     .71%     .72%     .73%     .72%     .81%     .98%    1.01%    1.11%     1.16%
 .....................................................................................................................
Ratio of net income
to average net
assets                 4.04%    5.19%    4.96%    5.29%    4.69%    4.71%    5.09%    5.70%    5.44%     5.24%
 .....................................................................................................................
Average commissions
paid per share(2)      1.89c    2.20c    2.10c    3.63c    2.90c    2.48c    5.32c    3.44c    4.07c     6.39c
 .....................................................................................................................
Portfolio turnover
rate                  27.65%   27.56%   18.06%   36.19%   11.22%   16.57%   13.99%   24.68%   16.30%    35.88%
--------------------------------------------------------------------------------------------------------------
</TABLE>    
   
(1) Excludes maximum sales charge of 5.75%.
(2) Brokerage commissions paid on portfolio transactions increase the cost of
    securities purchased or reduce the proceeds of securities sold, and are not
    separately reflected in the fund's statement of operations. Shares traded on
    a principal basis (without commissions), such as most over-the-counter and
    fixed-income transactions, are excluded. Generally, non-U.S. commissions are
    lower than U.S. commissions when expressed as cents per share but higher
    when expressed as a percentage of transactions because of the lower
    per-share prices of many non-U.S. securities.    
 
  4   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
--------------------------------------------------------------------------------
INVESTMENT POLICIES AND RISKS
The fund is an equity-income mutual fund that strives tp accomplishm two primary
investment objectives -- 1) to provide to shareholders a level of current income
which exceeds the average yield on U.S. stocks generally, using as a measure the
yield on the Standard & Poor's 500 Stock Composite Index and 2) to provide to
shareholders a growing stream of income over the years. Secondarily, the fund
will seek growth of capital, in the sense that achieving the objective of
growing income implies that the fund will also, over time, achieve significant
capital growth.
   
The fund will invest in a diversified portfolio of securities that includes
common stocks and fixed-income securities including preferred stocks and
securities convertible into common stocks. Normally at least 50% of its total
assets will be invested in common stocks. Under normal market conditions, at
least 90% of the fund's portfolio will be invested in income-producing
securities. Up to 40% of the fund's assets may be invested in securities of
issuers that are domiciled outside the U.S. (which are generally denominated in
currencies other than the U.S. dollar), although there is no requirement that
the fund maintain investments in these securities. The fund may invest in notes
and bonds issued by governments, their agencies or instrumentalities or
corporations in which the principal value and interest payments vary with the
rate of inflation. In addition, the fund may invest in certain pass-through
securities, smaller capitalization stocks, and cash and cash equivalents. MORE
INFORMATION ON THE FUND'S INVESTMENT POLICIES IS CONTAINED IN ITS STATEMENT OF
ADDITIONAL INFORMATION.    
   
Investment limitations are considered at the time securities are purchased.
These limits are based on the fund's net assets unless otherwise indicated. The
fund's fundamental investment restrictions (described in the statement of
additional information) and objectives may not be changed without shareholder
approval.    
   
THE FUND MAY NOT ACHIEVE ITS INVESTMENT OBJECTIVES DUE TO MARKET CONDITIONS AND
OTHER FACTORS. IN ADDITION, THE FUND MAY EXPERIENCE DIFFICULTY LIQUIDATING
CERTAIN PORTFOLIO SECURITIES DURING SIGNIFICANT MARKET DECLINES OR PERIODS OF
HEAVY REDEMPTIONS.    
 
--------------------------------------------------------------------------------
SECURITIES AND INVESTMENT TECHNIQUES
 
EQUITY SECURITIES
   
Equity securities represent an ownership position in a company. 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 market for these securities.    
 
                                        CAPITAL INCOME BUILDER / PROSPECTUS    5
 
 
<PAGE>
 
DEBT SECURITIES
 
Bonds and other debt securities are used by issuers to borrow money. Issuers pay
investors interest, and 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.
 
The fund may invest up to 5% of its total assets in debt securities rated Ba and
BB or below by Moody's Investors Service, Inc. or Standard & Poor's Corporation
or in unrated securities that are determined to be of equivalent quality. These
securities are commonly known as "high-yield, high-risk" or "junk" bonds. The
market prices of these securities may fluctuate more than higher-quality
securities and may decline significantly in periods of general economic
difficulty.
 
The fund's investments in debt securities outside the U.S. will principally be
in securities issued or guaranteed as to principal and interest by governments
or their agencies or instrumentalities or by multinational agencies.
 
Capital Research and Management Company 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.
   
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.
 
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.    
 
  6   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
INVESTING IN VARIOUS COUNTRIES
   
The fund has the flexibility to invest outside the U.S. Investing outside the
U.S. involves special risks, particularly in certain developing countries,
caused by, among other things: fluctuating currency values; different
accounting, auditing, and financial reporting regulations and practices in some
countries; expropriation or confiscatory taxation; changing local and regional
economic, political, and social conditions; 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.    
 
Additional costs could be incurred in connection with the fund's investment
activities outside the U.S. Brokerage commissions may be higher outside the
U.S., and the fund will bear certain expenses in connection with its currency
transactions. Furthermore, increased custodian costs may be associated with the
maintenance of assets in certain jurisdictions.
 
CURRENCY TRANSACTIONS
   
The fund can purchase and sell currencies to facilitate securities transactions
and enter into forward currency contracts to hedge against changes in currency
exchange rates. 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 currency. The fund will not generally attempt to protect against all
potential changes in exchange rates.    
 
FORWARD COMMITMENTS
   
The fund may enter into commitments to purchase or sell securities at a future
date. When the fund purchases such securities it assumes the risk of any decline
in value of the securities beginning on the date of the agreement. When the fund
sells such securities, it does not participate in further gains or losses with
respect to the securities. 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.    
 
                                        CAPITAL INCOME BUILDER / PROSPECTUS    7
 
 
<PAGE>
 
RESTRICTED SECURITIES AND LIQUIDITY
   
The fund may purchase securities subject to restrictions on resale. All such
securities whose principal trading market is in the U.S. will be considered
illiquid unless they have been specifically determined to be liquid under
procedures which may be adopted by the fund's board of directors, taking into
account factors such as the frequency and volume of trading, the commitment of
dealers to make markets and the availability of qualified investors, all of
which can change from time to time. The fund may incur certain additional costs
in disposing of illiquid securities.    
 
  8   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
--------------------------------------------------------------------------------
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
   
The basic investment philosophy of Capital Research and Management Company is to
seek fundamental values at reasonable prices, using a system of multiple
portfolio counselors in managing mutual fund assets. Under this system 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 the fund are listed below.    
    
<TABLE>
<CAPTION>
                                                                           YEARS OF EXPERIENCE AS
                                                                           INVESTMENT PROFESSIONAL
                                                                                (APPROXIMATE)
                                                                         ---------------------------
                                                                         WITH CAPITAL
    PORTFOLIO                                   YEARS OF EXPERIENCE      RESEARCH AND
    COUNSELORS                                 AS PORTFOLIO COUNSELOR     MANAGEMENT
   FOR CAPITAL                                   FOR CAPITAL INCOME       COMPANY OR
      INCOME                                          BUILDER                ITS
     BUILDER            PRIMARY TITLE(S)           (APPROXIMATE)          AFFILIATES     TOTAL YEARS
 ---------------------------------------------------------------------------------------------------
 <S>                 <C>                       <C>                       <C>             <C>
 JAMES B.            President and Director    9 years                   16 years        16 years
 LOVELACE            of the fund; Senior
                     Vice President,
                     Capital Research and
                     Management Company
 ---------------------------------------------------------------------------------------------------
 JON B. LOVELACE     Vice Chairman of the      10 years (since the       46 years        46 years
                     Board of the fund;        fund began operations)
                     Vice Chairman of the
                     Board, Capital
                     Research and
                     Management Company
 ---------------------------------------------------------------------------------------------------
 JANET A.            Senior Vice President     10 years (since the       16 years        22 years
 MCKINLEY            of the fund; Director,    fund began operations)
                     Capital Research and
                     Management Company
 ---------------------------------------------------------------------------------------------------
 WILLIAM R.          Senior Vice President     10 years (since the       28 years        35 years
 GRIMSLEY            and Director, Capital     fund began operations)
                     Research and
                     Management Company
 ---------------------------------------------------------------------------------------------------
 THIERRY             Director, Capital         10 years (since the       35 years        35 years
 VANDEVENTER         Research and              fund began operations)
                     Management Company
 ---------------------------------------------------------------------------------------------------
   The fund began operations on July 30, 1987.
</TABLE>    
 
                                        CAPITAL INCOME BUILDER / PROSPECTUS    9
 
 
<PAGE>
 
--------------------------------------------------------------------------------
INVESTMENT RESULTS
The fund may from time to time compare investment results to various indices or
other mutual funds. Fund results may be calculated on a total return, yield,
and/or distribution rate basis. Results calculated without a sales charge will
be higher.
 
X TOTAL RETURN is the change in value of an investment in the fund over a given
  period, assuming reinvestment of any dividends and capital gain distributions.
 
X YIELD refers to the income the fund expects to earn based on its current
  portfolio over a given period of time, expressed as an annual percentage rate.
  Because yield is calculated using a formula mandated by the Securities and
  Exchange Commission, this yield may be different than the income actually paid
  to shareholders.
 
X DISTRIBUTION RATE reflects dividends that were paid by the fund. The
  distribution rate is calculated by annualizing the most recent quarterly
  dividend and dividing by the average price per share over the last 3 months.
   
                               INVESTMENT RESULTS
                     (FOR PERIODS ENDED SEPTEMBER 30, 1997)
 
<TABLE>
<CAPTION>
                                           THE FUND         THE FUND
                                            AT NET         AT MAXIMUM
             AVERAGE ANNUAL                 ASSET             SALES           S&P
             TOTAL RETURNS:                VALUE(1)        CHARGE(1,2)       500(3)
------------------------------------------------------------------------------------
<S>                                      <C>             <C>                <C>
One year                                    29.72%            22.25%          40.40%
 .....................................................................................................................
Five years                                  14.78%            13.43%          20.73%
 .....................................................................................................................
Ten years                                   13.75%            13.08%          14.72%
 .....................................................................................................................
Lifetime(4)                                 13.56%            12.90%          14.66%
------------------------------------------------------------------------------------
</TABLE>    
   
Yield(1,2): 3.55%
Distribution Rate(2): 3.93%
    
(1) These fund results were calculated according to a standard formula that is
    required for all stock and bond funds.
(2) The maximum sales charge has been deducted.
(3) The Standard & Poor's 500 Index represents stocks. This index in unmanaged
    and does not reflect sales charges, commissions or expenses.
(4) The fund began investment operations on July 30, 1987.
 
  10   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
                                                                            .
                                                                            .
 
  Here are the fund's annual total returns calculated without a sales charge.
          This information is being supplied on a calendar year basis.
   
[bar chart]
'88'                          12.45
'89'                          19.98
'90'                          3.89
'91'                          25.7
'92'                          10
'93'                          15.28
'94'                          -2.26
'95'                          25.05
'96'                          17.64
[end bar chart]     
Past results are not an indication of future results.
 
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
 
DIVIDENDS AND DISTRIBUTIONS
 
The fund declares dividends from its net investment income daily and usually
distributes such accrued dividends to shareholders in March, June, September and
December. Capital gains, if any, are usually distributed in December. When a
dividend or capital gain is distributed, the net asset value per share is
reduced by the amount of the payment.
   
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.    
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    11
 
 
<PAGE>
 
FEDERAL TAXES
 
In any fiscal year in which the fund qualifies as a regulated investment company
and distributes to shareholders all of its net investment income and net capital
gains, the fund itself is relieved of federal income tax.
 
Generally, all dividends and capital gains are taxable whether they are
reinvested or received in cash -- unless you are exempt from taxation or
entitled to tax deferral. Early each year, you will be notified as to the amount
and federal tax status of all dividends and capital gains paid during the prior
year. Such distributions may also be subject to state or local taxes. The tax
treatment of redemptions from a retirement plan account may differ from
redemptions from an ordinary shareholder account.
 
YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE FUND
TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal law also
requires the fund to withhold 30% or the applicable tax treaty rate from
dividends paid to certain nonresident alien, non-U.S. partnership and non-U.S.
corporation shareholder accounts.
 
This is a brief summary of some of the tax laws that affect your investment in
the fund. Please see the statement of additional information and your tax
adviser for further information.
 
--------------------------------------------------------------------------------
FUND ORGANIZATION AND MANAGEMENT
 
FUND ORGANIZATION AND VOTING RIGHTS
   
The fund, an open-end, diversified management investment company, was organized
as a Maryland corporation in 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 the statement of
additional information. 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 that 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.
    
  12   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
THE INVESTMENT ADVISER
   
Capital Research and Management Company, a large and experienced investment
management organization founded in 1931, is the 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 management fee paid by the fund to Capital
Research and Management Company is composed of a management fee, which may not
exceed 0.24% of the fund's average net assets annually and declines at certain
asset levels, and 3% of the fund's gross investment income. The total management
fee paid by the fund, as a percentage of average net assets, for the previous
fiscal year is discussed earlier under "Expenses."    
 
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.
 
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 board. The 12b-1 fee paid by the fund,
as a percentage of average net assets, for the last fiscal year is discussed
earlier under "Expenses." Since these fees are paid out of the fund's assets on
an ongoing basis, over time they will increase the cost of an investment and may
cost you more than paying other types of sales loads.    
 
PORTFOLIO TRANSACTIONS
 
Orders for the fund's portfolio securities transactions are placed by Capital
Research and Management Company, which strives to obtain the best available
prices, taking into account the costs and quality of executions. Fixed-income
securities are generally traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. In underwritten offerings,
securities are usually purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as a concession or
discount. On occasion, securities may be purchased directly from an issuer, in
which case no commissions or discounts are paid. In the over-the-counter market,
purchases and sales are transacted directly with principal market-makers
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    13
 
 
<PAGE>
 
except in those circumstances where it appears better prices and executions are
available elsewhere.
   
Subject to the above policy, when two or more brokers (either directly or
through their correspondent clearing agents) are in a position to offer
comparable prices and executions, preference may be given to brokers who have
sold shares of the fund or have provided investment research, statistical, and
other related services for the benefit of the fund and/or other funds served by
Capital Research and Management Company.    
 
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
 
American Funds Distributors, Inc. and American Funds Service Company serve as
the principal underwriter and transfer agent for the fund, respectively. They
are headquartered at 333 South Hope Street, Los Angeles, CA 90071 and 135 South
State College Boulevard, Brea, CA 92821, respectively.
 
                  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
 
<TABLE>
    <S>                    <C>                    <C>                      <C>
    WESTERN SERVICE        WESTERN CENTRAL        EASTERN CENTRAL          EASTERN SERVICE
      CENTER               SERVICE CENTER         SERVICE CENTER           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: 210/530-4050      Fax: 317/735-6620        Fax: 804/670-4773
</TABLE>
 
  14   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
SHAREHOLDER SERVICES
 
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services, which
are summarized below, are available only in states where they may be legally
offered and may be terminated or modified at any time upon 60 days' written
notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT POLICIES IS
CONTAINED 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.
   
THE SERVICES DESCRIBED MAY NOT BE AVAILABLE THROUGH SOME RETIREMENT PLANS OR
ACCOUNTS HELD BY INVESTMENT DEALERS. IF YOU ARE INVESTING IN SUCH A MANNER, YOU
SHOULD CONTACT YOUR PLAN ADMINISTRATOR/TRUSTEE OR DEALER ABOUT WHAT SERVICES ARE
AVAILABLE AND WITH QUESTIONS ABOUT YOUR ACCOUNT.    
 
--------------------------------------------------------------------------------
PURCHASING SHARES
 
HOW TO PURCHASE SHARES
   
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may add to your account through your
dealer or directly through American Funds Service Company by mail, computer,
wire, or bank debit. You may also establish or add to your account by exchanging
shares from any of your other accounts in The American Funds Group. The fund and
American Funds Distributors reserve the right to reject any purchase order for
any reason. This includes exchange purchase orders that may place an unfair
burden on other shareholders due to their frequency.    
 
Various purchase options are available as described below, subject to certain
investment minimums and limitations described in the statement of additional
information and "Welcome to the Family."
 
X Automatic Investment Plan
 
  You may invest monthly or quarterly through automatic withdrawals from your
  bank account.
 
X Automatic Reinvestment
 
  You may reinvest your dividends and capital gain distributions into the fund
  (with no sales charge). This will be done automatically unless you elect to
  have the dividends and/or capital gain distributions paid to you in cash.
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    15
 
 
<PAGE>
 
X Cross-Reinvestment
 
  You may invest your dividends and capital gain distributions into any other
  fund in The American Funds Group.
 
X Exchange Privilege
   
  You may exchange your shares into other funds in The American Funds Group,
  generally with no sales charge. Exchanges of shares from the money market
  funds that were initially purchased with no sales charge will generally be
  subject to the appropriate sales charge. You may also elect to automatically
  exchange shares among any of the funds in The American Funds Group. Exchange
  requests may be made in writing, by telephone including American FundsLine(R),
  by computer using American FundsLine OnLine(SM) (see below), or by fax.
  EXCHANGES HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.    
 
X Retirement Plans
 
  You may invest in the fund through various retirement plans. For further
  information contact your investment dealer or American Funds Distributors.
 
SHARE PRICE
 
The fund's share price, also called net asset value, is determined as of the
close of trading (normally 4:00 p.m., Eastern time) every day the New York Stock
Exchange is open. The fund calculates its net asset value per share, generally
using market prices, by dividing the total value of its assets after subtracting
liabilities by the number of its shares outstanding. Shares are purchased at the
offering price next determined after your investment is received and accepted by
American Funds Service Company. The offering price is the net asset value plus a
sales charge, if applicable.
 
SHARE CERTIFICATES
 
Shares are credited to your account, and certificates are not issued unless you
request them by writing to American Funds Service Company.
 
INVESTMENT MINIMUMS
--------------------------------------------------------------------------------
 
<TABLE>
<S>                                                          <C>
To establish an account...................................   $ 1,000
     For a retirement plan account........................   $   250
     For a retirement plan account through payroll           $    25
       deduction..........................................
To add to an account......................................   $    50
     For a retirement plan account........................   $    25
</TABLE>
 
  16   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
SALES CHARGES
 
A sales charge may apply, as described below, when purchasing shares. Sales
charges may be reduced for larger purchases as indicated below.
 
<TABLE>
<CAPTION>
                                      
                                      SALES CHARGE AS A
                                        PERCENTAGE OF              DEALER
                                  -------------------------  NET CONCESSION AS
                                   OFFERING        AMOUNT       % OF OFFERING
           INVESTMENT               PRICE         INVESTED          PRICE
-----------------------------------------------------------------------------
<S>                               <C>            <C>            <C>
Less than $50,000                      5.75%          6.10%           5.00%
 .....................................................................................................................
$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 $1 million      2.00%          2.04%           1.60%
 .....................................................................................................................
$1 million or more and certain
other investments described below  see below      see below       see below
</TABLE>
 
PURCHASES NOT SUBJECT TO SALES CHARGES
   
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. Investments by retirement plans, foundations or endowments with $50
million or more in assets may 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 and/or by American Funds
Distributors on investments made with no initial sales charge. Investments by
certain individuals and entities including employees and other associated
persons of dealers authorized to sell shares of the fund and Capital Research
and Management Company and its affiliated companies are not subject to a sales
charge.    
 
ADDITIONAL DEALER COMPENSATION
   
In addition to the concessions listed, up to 0.25% of average net assets is paid
annually to qualified dealers for providing certain services pursuant to the
fund's Plan of Distribution. American Funds Distributors currently provides
additional compensation to the top 100 dealers who have sold shares of funds in
The American Funds Group based on the pro rata share of a qualifying dealer's
sales.    
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    17
 
 
<PAGE>
 
REDUCING YOUR SALES CHARGE
 
You and your immediate family may combine investments to reduce your costs. 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.
 
X Aggregation
 
  Investments that may be aggregated include those made by you, your spouse and
  your children under the age of 21, if all parties are purchasing shares for
  their own account(s), including any business account solely "controlled by,"
  as well as any retirement plan or trust account solely for the benefit of,
  these individuals. Investments made for multiple employee benefit plans of a
  single employer or "affiliated" employers may be aggregated provided they are
  not also aggregated with individual accounts. Finally, investments made by a
  common trust fund or other diversified pooled account not specifically formed
  for the purpose of accumulating fund shares may be aggregated.
 
  Purchases made for nominee or street name accounts will generally not be
  aggregated with those made for other accounts unless qualified as described
  above.
 
X Concurrent Purchases
 
  You may combine concurrent purchases of two or more funds in The American
  Funds Group, except direct purchases of the money market funds. Shares of the
  money market funds purchased through an exchange, reinvestment or
  cross-reinvestment from a fund having a sales charge do qualify.
 
X Right of Accumulation
 
  You may take into account the current value of your existing holdings in The
  American Funds Group to determine your sales charge. Direct purchases of the
  money market funds are excluded.
 
X Statement of Intention
   
  You may enter into a non-binding commitment to invest a certain amount (which,
  at your request, may include purchases made during the previous 90 days) in
  non-money market fund shares over a 13-month period. A portion of your account
  may be held in escrow to cover additional sales charges that may be due if
  your total investments over the statement period are insufficient to qualify
  for the applicable sales charge reduction.    
 
  18   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
--------------------------------------------------------------------------------
SELLING SHARES
 
HOW TO SELL SHARES
   
You may sell (redeem) shares in your account by contacting your investment
dealer or American Funds Service Company. You may also use American FundsLine(R)
or American FundsLine OnLine(SM) (see below). In addition, you may sell shares
in amounts of $50 or more automatically. If you sell shares through your
investment dealer you may be charged for this service. Shares held for you in
your dealer's street name must be sold through the dealer.    
   
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. Sale requests may be
made in writing, by telephone, including American FundsLine(R), by computer
using American FundsLine OnLine(SM), or by fax. Sales by telephone, computer or
fax are limited to $50,000 in accounts registered to individual(s) (including
non-retirement trust accounts). In addition, checks must be made payable to the
registered shareholder(s) and mailed to an address of record that has been used
with the account for at least 10 days.    
   
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
Investment Company Act of 1940), 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.    
 
The fund may, with 60 days' written notice, close your account if due to a sale
of shares the account has a value of less than the minimum required initial
investment.
 
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your signature
must be guaranteed by a member firm of a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association, or credit
union that is an eligible guarantor institution. A signature guarantee is not
currently required for any sale of $50,000 or less provided the check is made
payable to the registered shareholder(s) and is mailed to the address of record
on the account, and provided the address has been used with the account for at
least 10 days. Additional documentation may be required for sale of shares held
in corporate, partnership or fiduciary accounts.
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    19
 
 
<PAGE>
   
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.
Reinvestment will be at the next calculated net asset value after receipt and
acceptance by American Funds Service Company.    
 
--------------------------------------------------------------------------------
OTHER IMPORTANT THINGS TO REMEMBER
   
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM)    
   
You may check your share balance, the price of your shares, or your most recent
account transactions, sell shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(R) or American
FundsLine OnLine(SM). 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.    
   
TELEPHONE AND COMPUTER PURCHASES, SALES AND EXCHANGES    
   
Unless you opt out of the telephone or computer (including American FundsLine(R)
or American FundsLine OnLine(SM)) or fax purchase, sale and/or exchange options
(see below), 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.    
 
Generally, all shareholders are automatically eligible to use these options.
However, you may elect to opt out of these options by writing American Funds
Service Company. (You may also reinstate them at any time by writing to American
Funds Service Company.)
 
ACCOUNT STATEMENTS
   
You will receive regular confirmation statements reflecting transactions in your
account. Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.    
 
  20   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
NOTES
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    21
 
 
<PAGE>
 
NOTES
 
  22   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
NOTES
 
                                       CAPITAL INCOME BUILDER / PROSPECTUS    23
 
 
<PAGE>
   
<TABLE>
  <S>                         <C>                    <C>
  FOR SHAREHOLDER SERVICES    FOR RETIREMENT PLAN    FOR DEALER SERVICES
  American Funds              SERVICES               American Funds
  Service Company             Call your employer     Distributors
  800/421-0180 ext. 1         or plan                800/421-9900 ext. 11
                              administrator
 
                      FOR 24-HOUR INFORMATION
 
                 American          American Funds
                 FundsLine(R)      Internet Web site
                 800/325-3590      http://www.americanfunds.com
 
  Telephone conversations may be recorded or monitored for
  verification, recordkeeping and quality assurance purposes.
  ---------------------------------------------------------------
  MULTIPLE TRANSLATIONS
 
  This prospectus may be translated into other languages. In the
  event of 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
 
  Includes financial statements, detailed performance
  information, portfolio holdings, a statement from portfolio
  management 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.
  A current SAI has been filed with the Securities and Exchange
  Commission ("SEC"). It is incorporated by reference into this
  prospectus and is available along with other related materials
  on the SEC's Internet Web site at http://www.sec.gov.
 
  CODE OF ETHICS
 
  Includes a description of the fund's personal investing policy.
  To request a free copy of any of the documents above:
 
  Call American                    Write to the Secretary
  Funds                  or        of the fund
  Service Company                  333 South Hope Street
  800/421-0180 ext. 1              Los Angeles, CA 90071
</TABLE>
    
This prospectus has been printed on recycled paper.        [LOGO]
 
  24   CAPITAL INCOME BUILDER / PROSPECTUS
 
 
<PAGE>
 
                        CAPITAL  INCOME  BUILDER,  INC.
 
                                      Part B
                       Statement of Additional Information
   
                                JANUARY 2, 1998    
   
This document is not a prospectus but should be read in conjunction with the
current Prospectus of Capital Income Builder, Inc. (the fund or CIB) dated
January 2, 1998.  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, CA  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>        
Description of Securities and Investment Techniques                     
                                                             1          
 
Certain Risk Factors Relating to High-Yield Bonds                       
                                                             5          
 
Investment Restrictions                                                 
                                                             5          
 
Fund Directors and Officers                                             
                                                             8          
 
Management                                                              
                                                             12         
 
Dividends, Distributions and Federal Taxes                              
                                                             14         
 
Purchase of Shares                                                      
                                                             17         
 
Redeeming Shares                                             23       
 
Shareholder Account Services and Privileges                             
                                                             24         
 
Execution of Portfolio Transactions                                     
                                                             26         
 
General Information                                                     
                                                             27         
 
Investment Results                                                      
                                                             28         
 
Description of Commercial Paper and Bond Ratings                        
                                                             32         
 
Financial Statements                                         Attached   
 
</TABLE>
 
              DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
 
THE DESCRIPTIONS BELOW ARE INTENDED TO SUPPLEMENT THE MATERIAL IN THE
PROSPECTUS UNDER "INVESTMENT POLICIES AND RISKS."
 
CURRENCY TRANSACTIONS -- The fund may enter into forward currency contracts
("forward contracts") in connection with its investments in securities of
non-U.S. issuers.  A forward contract is an obligation to purchase or sell a
currency against another currency at a future date and price as agreed upon by
the parties.  The fund may either accept or make delivery of the currency at
the maturity of the forward contract or, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract. 
The fund engages in forward contracts in anticipation of, or to protect itself
against, fluctuations in exchange rates. The fund might sell a particular
currency forward, for example, when it wanted to hold securities denominated in
that currency but anticipated, and wished to be protected against, a decline in
the currency against the U.S. dollar.  Similarly it might purchase a currency
forward to "lock in" the U.S. dollar price of securities denominated in that
currency which it anticipated purchasing.  Although forward contracts typically
will involve the purchase and sale of a non-U.S. currency against the U.S.
dollar, the fund also may purchase or sell one non-U.S. currency forward
against another non-U.S. currency.
 
PORTFOLIO TRADING -- The fund intends to engage in portfolio trading when
Capital Research and Management Company (the "Investment Adviser") believes
that the sale of a security owned by the fund and the purchase of another
security of better value can enhance principal and/or increase income.  A
security may be sold to avoid any prospective decline in market value in light
of what is evaluated as an expected rise in prevailing yields, or a security
may be purchased in anticipation of a market rise (a decline in prevailing
yields).  A security also may be sold and a comparable security purchased
coincidentally in order to take advantage of what is believed to be a disparity
in the normal yield and price relationship between the two securities, or in
connection with a "roll" transaction as described below.
 
LOANS OF PORTFOLIO SECURITIES -- Although the fund has no current intention of
doing so during the next 12 months, the fund is authorized to lend portfolio
securities to selected securities dealers or to 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
one-third 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 for which payment and delivery for the securities take place at a
future date.  When the fund purchases such securities it assumes the risk of
any decline in value of the securities beginning on the date of the agreement
or purchase.  When the fund sells such securities, it does not participate in
further gains or losses with respect to the securities.  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 also may enter into "roll" transactions, which is the sale of GNMA
certificates or other securities together with a commitment to purchase
similar, but not identical, securities at a later date.  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 "1940 Act").    
   
Although the fund has no current intention of doing so during the next 12
months, the fund is authorized to enter into reverse repurchase agreements.  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.    
   
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 (but no collateral is
required on reverse repurchase agreements with banks).  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.    
 
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. 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 Capital
Research and Management Company.  If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the collareral securing the
repurchase agreement has declined and may occur disposition costs in connection
with liquidating the collateral.  If bankruptcy proceedings are commenced with
respect to the seller, liquidation of the collateral by the fund may be delayed
or limited.
   
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 do not affect the rights of
borrowers to prepay their underlying  mortgages.  Prepayments can alter the
effective maturity of these instruments.    
    
"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages,
while privately issued CMOs may be backed by either government agency mortgages
or private 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 risk 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.    
 
MATURITY -- There are no restrictions on the maturity composition of the
portfolio.  Under normal market conditions, longer term securities yield more
than shorter term securities, but are subject to greater price fluctuations.
 
VARIABLE AND FLOATING RATE OBLIGATIONS -- The fund may invest in securities
with interest rates that are not fixed but fluctuate based upon changes in
market rates or designated indexes.  Variable rate obligations have interest
rates that are adjusted at designated intervals, and interest rates on floating
rate obligations are adjusted whenever there are exchanges in the indexes or
market rates on which their interest rates are based.  In some cases the fund
has the ability to demand payment from the dealer or issuer at par plus accrued
interest on short notice (seven days or less).  The effective maturity of a
floating or variable rate obligation is deemed to be the longer of (i) the
notice period required before the fund is entitled to receive payment of the
obligation upon demand or (ii) the period remaining until the obligation's next
interest rate adjustment.  If not sold or redeemed by the fund through the
demand feature, these obligations would mature on a specified date which may
range up to 30 years or more from the date of issuance.
 
               CERTAIN RISK FACTORS RELATING TO HIGH-YIELD BONDS
 
The fund is currently authorized to invest up to 5% of its assets in bonds
rated Ba by Moody's Investors Service, Inc. and BB by Standard and Poor's
Corporation or below (or unrated but determined to be equivalent by the
Investment Adviser).  Certain risk factors relating to investing in below
investment grade securities ("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 corporate developments. 
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.  If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it.  In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high-yield, high-risk bonds.
 
PAYMENT EXPECTATIONS -- High-yield, high-risk bonds may contain redemption or
call provisions.  If an issuer exercised 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.  Conversely,
a high-yield, high-risk bond's value will decrease in a rising interest rate
market, as it will with all bonds.
 
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.
 
                            INVESTMENT RESTRICTIONS
   
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares.  Such majority is defined within the 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.  Investment limitations expressed in the
following restrictions are considered at the time securities are purchased and
are based on the fund's net assets unless otherwise indicated.  These
restrictions provide that the fund may not:    
 
1. Purchase any security (other than securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities) if immediately after and
as a result of such investment, more than 5% of the fund's total assets would
be invested in securities of the issuer; except that, as to 25% of the fund's
total assets, up to 10% of its total assets may be invested in securities
issued or guaranteed as to payment of interest and principal by a foreign
government or its agencies or instrumentalities or by a multinational agency;
 
2. Invest 25% or more of the value of its total assets in the securities of
issuers conducting their principal business activities in the same industry;
 
3. Invest in companies for the purpose of exercising control or management;
 
4. Knowingly purchase securities of other management investment companies,
except in connection with a merger, consolidation, acquisition, or
reorganization;
 
5. Buy or sell real estate or commodities or commodity contracts; however, the
fund may invest in debt securities secured by real estate or interests therein
or issued by companies which invest in real estate or interests therein,
including real estate investment trusts, and may purchase or sell currencies
(including forward currency contracts);
 
6. Acquire securities subject to restrictions on disposition or securities for
which there is no readily available market, or enter into repurchase agreements
or purchase time deposits maturing in more than seven days, if, immediately
after and as a result, the value of such securities would exceed, in the
aggregate, 10% of the fund's total assets;
 
7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933;
 
8. Make loans, except that the fund may purchase debt securities, enter into
repurchase agreements and make loans of portfolio securities;
 
9. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
 
10. Purchase securities on margin, except that the fund may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities;
 
11. Borrow money, except from banks for temporary or emergency purposes not in
excess of 5% of the value of the fund's total assets (in the event that the
asset coverage for such borrowings falls below 300%, the fund will reduce,
within three days, the amount of its borrowings in order to provide for 300%
asset coverage), and except that the fund may enter into reverse repurchase
agreements and engage in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the fund may not exceed one-third of the fund's total assets;
 
12. Mortgage, pledge, or hypothecate any of its assets, provided that this
restriction shall not apply to the transfer of securities in connection with
any permissible borrowing;
 
13. Purchase or retain the securities of any issuer, if those individual
officers and Directors of the fund, its investment adviser, or distributor,
each owning beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;
 
14. Invest in interests in oil, gas, or other mineral exploration or
development programs;
 
15. Invest more than 5% of its total assets in securities of companies having,
together with their predecessors, a record of less than three years of
continuous operation;
 
16. Write, purchase or sell put options, call options or combinations thereof;
 
A further investment policy of the fund, which may be changed by action of the
Board of Directors without shareholder approval, is that the fund will not
invest in securities of an issuer if the investment would cause the fund to own
more than 10% of any class of securities of any one issuer.
 
With respect to investment restriction number 2, in determining industry
classifications for issuers domiciled outside the U.S., the fund will use
reasonable classifications that are not so broad that the primary economic
characteristic of the companies in a single class is materially different.  The
fund will determine such classifications of issuers domiciled outside the U.S.
based on the issuer's principal or major business activities.
 
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 DIRECTORS AND OFFICERS
                      DIRECTORS AND DIRECTOR COMPENSATION
   
<TABLE>
<CAPTION>
NAME, ADDRESS   POSITION WITH   PRINCIPAL OCCUPATION(S) DURING      AGGREGATE               TOTAL COMPENSATION      TOTAL NUMBER   
AND AGE         REGISTRANT      PAST 5 YEARS (POSITIONS WITHIN THE  COMPENSATION            (INCLUDING VOLUNTARILY  OF FUND        
                                ORGANIZATIONS LISTED MAY HAVE       (INCLUDING VOLUNTARILY  DEFERRED                BOARDS ON      
                                CHANGED DURING THIS PERIOD)         DEFERRED                COMPENSATION/1/) FROM   WHICH          
                                                                    COMPENSATION/1/)        ALL FUNDS MANAGED BY    DIRECTOR       
                                                                    FROM THE FUND DURING    CAPITAL RESEARCH AND    SERVES         
                                                                    FISCAL YEAR ENDED       MANAGEMENT                        
                                                                    10/31/97                COMPANY/2/ FOR THE YEAR
                                                                                            ENDED 10/31/97                    
 
<S>                     <C>        <C>                                       <C>            <C>                     <C>            
H. Frederick Christie   Director   Private investor; former President and    $16,312        $166,300                18
P.O. Box 144                       Chief Executive Officer, The Mission              
Palos Verdes Estates, CA  90274    Group (non-utility holding company,                                              
Age:  64                           subsidiary of Southern California
                                   Edison Company)                                                                
 
+  Paul G. Haaga, Jr.   Chairman   Executive Vice President and              None/4/        None/4/                 14             
333 South Hope Street   of the     Director, Capital Research and
Los Angeles, CA  90071  Board      Management Company                                                             
Age:  49                                                                                                                 
 
Mary Myers Kauppila     Director   Founder and President, Energy             $17,500/3/     $88,400/3/               4              
One Winthrop Square                Investment, Inc.                                                               
Boston, MA  02110                                                                                                        
Age:  43                                                                                                                 
 
+  James B. Lovelace    President   Senior Vice President, Capital           None/4/        None/4/                  1
333 South Hope Street   and         Research and Management Company                                                        
Los Angeles, CA  90071  Director                                                                                                  
Age:  41                                                                                                                 
 
+  Jon B. Lovelace      Vice        Vice Chairman of the Board, Capital      None/4/        None/4/                  4
333 South Hope Street   Chairman    Research and Management Company
Los Angeles, CA  90071  of the Board                                                    
Age:  70                                                                                                                 
 
Gail L. Neale           Director     President, The Lovejoy Consulting       $17,100/3/     $56,500/3/               4              
The Lovejoy Consulting Group         Group, Inc.; former Executive Vice                                                        
154 Prospect Parkway                 President of the Salzburg Seminar;                                                        
Burlington, VT  05401                former Director of Development and                                                        
Age:  62                             the Capital Campaign, Hampshire                                                        
                                     College                                                                        
 
Robert J. O'Neill       Director     Chichele Professor of the History of    $18,000        $39,700                  3
Vine Cottage                         War and Fellow, All Souls College,                                                        
Whitney, OXON                        University of Oxford                                                           
United Kingdom                                                                                                           
Age:  61                                                                                                                 
 
Donald E. Petersen      Director     Retired; former Chairman of the         $17,100/3/     $71,050/3/               4             
255 East Brown                       Board and Chief Executive Officer,                                                        
Birmingham, MI  48009                Ford Motor Company                                                             
Age:  71                                                                                                                 
 
Stefanie Powers         Director     Actor; President, William Holden        $0/5/          $0/5/                    2              
2661 Hutton Drive                    Wildlife Foundation                                                            
Beverly Hills, CA  90210                                                                                                    
Age:  55                                                                                                                 
 
Frank Stanton           Director     President Emeritus, CBS Inc.;           $18,400        $34,800                  2              
25 West 52nd Street                  Chairman  Emeritus, The American                                                        
New York, NY  10019                  Red Cross                                                                      
Age:  89                                                                                                                 
 
Charles Wolf, Jr.       Director     Dean, The RAND Graduate School;         $16,700        $59,700                  2              
1700 Main Street                     Senior Economic Adviser, The RAND                                                        
Santa Monica, CA  90407              Corporation                                                                    
Age:  73                                                                                                                 
 
</TABLE>    
   
+ Directors who are considered "interested persons" of the fund as defined in
the 1940 Act on the basis of their affiliation with the fund's Investment
Adviser, Capital Research and Management Company.
 
/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 Director.
 
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds:  AMCAP Fund, 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., 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 vehicles for certain variable
insurance contracts; and Bond Portfolio for Endowments, Inc. and Endowments,
Inc. whose shares may be owned only by tax-exempt organizations.
 
/3/ Since the deferred compensation plan's adoption, the total amount of
deferred compensation accrued by the fund (plus earnings thereon) as of the
fiscal year ended October 31, 1997 for participating Directors is as follows: 
H. Frederick Christie ($33,420), Mary Myers Kauppila ($84,554), Gail L. Neale
($62,133) and Donald E. Petersen ($47,515).  Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured liabilities of the
fund until paid to the Director.
 
/4/ Paul G. Haaga, Jr., James B. Lovelace and Jon B. Lovelace are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
 
/5/ Stefanie Powers was elected to the Board of Directors on December 4, 1997. 
She received no compensation from the fund during the fiscal year ended October
31, 1997.    
 
                                    OFFICERS
   
<TABLE>
<CAPTION>
<S>                        <C>      <C>             <C>                              
NAME AND ADDRESS           AGE      POSITION(S) HELD   PRINCIPAL OCCUPATION(S) DURING   
                                    WITH REGISTRANT   PAST 5 YEARS                     
 
Paul G. Haaga, Jr.                                                                   
 (see above)                                                                         
 
Jon B. Lovelace                                                                      
 (see above)                                                                         
 
James B. Lovelace                                                                    
 (see above)                                                                         
 
Larry P. Clemmensen        50       Senior Vice     Senior Vice President and Director,   
333 South Hope Street               President       Capital Research and Management   
Los Angeles, CA  90071                              Company; President, The Capital Group   
                                                    Companies, Inc.                  
 
Janet A. McKinley          43       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          50       Senior Vice     Senior Vice President and Director,   
333 South Hope Street               President       Capital Research and Management   
Los Angeles, CA  90071                              Company                          
 
Joyce E. Gordon            41       Vice President   Senior Vice President and Director,   
333 South Hope Street                               Capital Research Company         
Los Angeles, CA  90071                                                               
 
Darcy B. Kopcho            44       Vice President   Vice President and Director,     
333 South Hope Street                               Capital Researrch Company        
Los Angeles, CA  90071                                                               
 
Steven T. Watson           42       Vice President   Vice President, Capital Research   
25 Bedford Street                                   Company                          
London, England                                                                      
 
Vincent P. Corti           41       Secretary       Vice President - Fund Business   
333 South Hope Street                               Mangement Group, Capital Research   
Los Angeles, CA  90071                              and Management Company           
 
R. Marcia Gould            43       Treasurer       Vice President - Fund Business   
135 South State College Blvd.                            Mangement Group, Capital Research   
Brea, CA  92821                                     and Management Company           
 
Diana J. Prohoroff         48       Assistant       Assistant Vice President - Fund Business   
135 South State College Blvd.            Treasurer       Mangement Group, Capital Research   
Brea, CA  92821                                     and Management Company           
 
</TABLE>    
   
All of the officers listed are officers or employees of Investment Adviser or
affiliated companies.  No compensation is paid by the fund to any director or
officer who is a director, officer or employee of the Investment Adviser or
affiliated companies.  The fund pays fees of $11,000 per annum to directors who
are not affiliated with the Investment Adviser, plus $800 for each Board of
Directors meeting attended, plus $400 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.  As of December  1, 1997, the officers and
directors 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, Singapore, Hong Kong 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 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 on more
than 2,400 companies around the world.
   
The Investment Adviser is responsible for more than $175 billion of stocks,
bonds and money market instruments and serves over eight million investors of
all types.  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, dated March 1, 1995, will continue in effect until October 31, 1998
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 Advisory 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, 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
qualified persons to perform the executive and related administrative functions
of the fund, provides necessary office space, all necessary office equipment
and telephone facilities and utilities, and general purpose forms, supplies,
stationery and postage used at the office of the fund relating to the services
furnished by the Investment Adviser.  The fund will pay all expenses not
expressly assumed by the Investment Adviser, including, but not limited to,
compensation and expenses of Directors who are not affiliated persons of the
Investment Adviser; fees and expenses of the transfer agent, dividend
disbursing agent, legal counsel and independent public accountants and
custodian, including charges of such custodian for the preparation and
maintenance of the books of account and records of the fund and the daily
determination of the fund's net asset value per share; costs of designing,
printing, and mailing reports, prospectuses, proxy statements and notices to
shareholders; fees and expenses of sale (including federal and state
registration and qualification), issuance (including costs of any share
certificates) and redemption of shares; expenses pursuant to the fund's Plan of
Distribution (described below); association dues; interest; and taxes.  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  $4.5
billion and gross investment income levels of 4%, 5%, 6%, 7% and 8%, management
fees would be 0.31%, 0.34%, 0.37%, 0.40% and 0.43%, respectively.
   
During the fiscal years ended October 31, 1997, 1996 and 1995, the Investment
Adviser's total fees amounted to $20,097,000, $18,213,000 and $14,623,000,
respectively.    
 
Only one state (California) continues to impose expense limitations on funds
registered for sale therein.  The California provision currently limits annual
expenses to the sum of 2-1/2% of the first $30 million of average net assets,
2% of the next $70 million and 1-1/2% of the remaining average net assets. 
Rule 12b-1 distribution plan expenses would be excluded from this limit. 
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.  The fund might be eligible
to exclude certain additional expenses, such as expenses of maintaining foreign
custody of certain of its portfolio securities, or to obtain a waiver of such
limit in its entirety.
   
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, 8000 IH-10 West, San Antonio, TX
78230, 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 (described
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
year ended October 31, 1997 amounted to $6,383,000 after allowance of
$32,064,000 to dealers.  During the fiscal years ended October 31, 1996 and
1995 the Principal Underwriter retained $4,007,000 and $3,768,000 after
allowance of $20,341,000 and $19,378,000, respectively.    
 
As required by rule 12b-1, 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 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
Directors and Officers 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 are 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. 
Expenditures under the Plan are reviewed quarterly and the Plan 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 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
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).  During the fiscal year ended October 31, 1997, the fund paid
$14,932,000 under the Plan.    
 
The Glass-Stegall 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 of 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.
 
                   DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
 
The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the Code).  Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its investment
company taxable income it will be taxed only on that portion, if any, of the
investment company taxable income which it retains.
 
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and
gains from the sale or other disposition of stock, securities, currencies or
other income derived with respect to its business of investing in such stock,
securities or currencies; (b) derive less than 30% of its gross income from the
sale or other disposition of stock or securities held for less than three
months; and (c) diversify its holdings so that at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, U.S. Government securities and other securities which must
be limited, in respect of any one issuer, to an amount not greater than 5% of
the fund's assets and 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its assets is invested in the
securities of any one issuer (other than U.S. Government securities or the
securities of other regulated investment companies), or in two or more issuers
which the fund controls and which are engaged in the same or similar trades or
businesses or related trades or businesses.
 
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year.  The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gains (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
for the year. The fund intends, to the extent practicable, to meet these
distribution requirements to minimize or avoid the excise tax liability.
 
Distributions of investment company taxable income, including short-term
capital gains, generally are taxable to the shareholder as ordinary income,
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the fund.  The fund also intends to continue distributing
to shareholders all of the excess of net long-term capital gain over net
short-term capital loss on sales of securities.  A capital gain distribution,
whether paid in cash or reinvested in shares, is taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has
held the shares or whether such gain was realized by the fund before the
shareholder acquired such shares and was reflected in the price paid for the
shares.
 
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares.  Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
 
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, non-U.S. corporation, or non-U.S.
partnership (a "non-U.S. shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate).  Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens or domestic corporations will apply. 
Distributions of capital gains not effectively connected with a U.S. trade or
business are not subject to the withholding, but if the non-U.S. shareholder
was an individual who was physically present in the U.S. during the tax year
for more than 182 days and such shareholder is nonetheless treated as a
nonresident alien, the distributions would be subject to a 30% tax.
 
Under the Code, a fund's taxable income for each year will be computed without
regard to any net foreign currency loss attributable to transactions after
October 31, and any such net foreign currency loss will be treated as arising
on the first day of the following taxable year.
   
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than eighteen months is 20%, and on assets
held more than one year and not more than eighteen months is 28%; and the
maximum corporate tax applicable to ordinary income and net capital gain is
35%.  (However, to eliminate the benefit of lower marginal corporate income tax
rates, corporations which have income in excess of $100,000 for a taxable year
will be required to pay an additional amount of tax up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of tax up to $100,000). 
Naturally, the amount of tax payable by an individual will be affected by a
combination of tax law rules covering, e.g., deductions, credits, deferrals,
exemptions, sources of income and other matters.  Under the Code, an individual
is entitled to establish an IRA each year (prior to the tax return filing
deadline for that year) whereby earnings on investments are tax-deferred. In
addition, in some cases, the IRA contribution itself may be deductible.    
 
The foregoing is limited to a summary discussion of federal taxation and should
not be viewed as a comprehensive discussion of all provisions of the Code
relevant to investors.  Dividends and capital gain distributions may also be
subject to state or local taxes.  Shareholders should consult their own tax
advisers for additional details as to their particular tax status.
 
                               PURCHASE OF SHARES
   
<TABLE>
<CAPTION>
<S>                <C>                                  <C>                                  
METHOD            INITIAL INVESTMENT                    ADDITIONAL INVESTMENTS               
 
                  See "Investment Minimums and Fund     $50 minimum (except where a lower minimum is   
                  Numbers" for initial investment       noted under "Investment Minimums and Fund   
                  minimums.                             Numbers").                           
 
By contacting     Visit any investment dealer who is     Mail directly to your investment dealer's address   
your investment   registered in the state where the      printed on your account statement.   
dealer            purchase is made and who has a sales                                        
                  agreement with American Funds                                        
                  Distributors.                                                     
 
By mail           Make your check payable to the fund    Fill out the account additions form at the bottom of a   
                  and mail to the address indicated on   recent account statement, make your check payable   
                  the account application.  Please       to the fund, write your account number on your   
                  indicate an investment dealer on the   check, and mail the check and form in the envelope   
                  account application.                   provided with your account statement.   
 
By telephone      Please contact your investment dealer  Complete the "Investments by Phone" section on the   
                  to open account, then follow the       account application or American FundsLink   
                  procedures for additional investments. Authorization Form. Once you establish the 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 "Telephone and Computer   
                                                         Purchases, Redemptions and Exchanges" below).   
 
By computer       Please contact your investment dealer  Complete the American FundsLink Authorization   
                  to open account, then follow the       Form.  Once you establish the privilege, you, your   
                  procedures for additional investments. financial advisor or any person with your account   
                                                         information may access American FundsLine   
                                                         OnLine(SM) on the Internet and make investments   
                                                         by computer (subject to conditions noted in   
                                                         "Telephone and Computer Purchases, Redemptions   
                                                         and Exchanges" below).               
 
By wire           Call 800/421-0180 to obtain your       Your bank should wire your additional   
                  account number(s), if necessary.       investments in the same manner as    
                  Please indicate an investment dealer   described under "Initial Investment."   
                  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>
    
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>
<S>                                          <C>                     <C>         
FUND                                         MINIMUM                 FUND        
                                             INITIAL                 NUMBER      
                                             INVESTMENT                          
 
STOCK AND STOCK/BOND FUNDS                                                       
 
AMCAP Fund(R)                                $1,000                  02          
 
American Balanced Fund(R)                    500                     11          
 
American Mutual Fund(R)                      250                     03          
 
Capital Income Builder(R)                    1,000                   12          
 
Capital World Growth and Income Fund(SM)     1,000                   33          
 
EuroPacific Growth Fund(R)                   250                     16          
 
Fundamental Investors(SM)                    250                     10          
 
The Growth Fund of America(R)                1,000                   05          
 
The Income Fund of America(R)                1,000                   06          
 
The Investment Company of America(R)         250                     04          
 
The New Economy Fund(R)                      1,000                   14          
 
New Perspective Fund(R)                      250                     07          
 
SMALLCAP World Fund(R)                       1,000                   35          
 
Washington Mutual Investors Fund(SM)         250                     01          
 
BOND FUNDS                                                                       
 
American High-Income Municipal Bond Fund(R)   1,000                   40          
 
American High-Income Trust(SM)               1,000                   21          
 
The Bond Fund of America(SM)                 1,000                   08          
 
Capital World Bond Fund(R)                   1,000                   31          
 
Intermediate Bond Fund of America(SM)        1,000                   23          
 
Limited Term Tax-Exempt Bond Fund of         1,000                   43          
America(SM)                                                                      
 
The Tax-Exempt Bond Fund of America(R)       1,000                   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)          1,000                   22          
 
MONEY MARKET FUNDS                                                               
 
The Cash Management Trust of America(R)      2,500                   09          
 
The Tax-Exempt Money Fund of America(SM)     2,500                   39          
 
The U.S. Treasury Money Fund of America(SM)   2,500                   49          
 
___________                                                                      
*Available only in certain states.                                               
 
</TABLE>
 
 
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs).  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).
 
DEALER COMMISSIONS -- 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>
<S>                              <C>              <C>              <C>              
AMOUNT OF PURCHASE               SALES CHARGE AS                   DEALER           
AT THE OFFERING PRICE            PERCENTAGE OF THE:                CONCESSION       
                                                                   AS PERCENTAGE    
                                                                   OF THE           
                                                                   OFFERING         
                                                                   PRICE            
 
                                 NET AMOUNT       OFFERING                          
                                 INVESTED         PRICE                             
 
STOCK AND STOCK/BOND FUNDS                                                          
 
Less than $50,000                6.10%            5.75%            5.00%            
 
$50,000 but less than $100,000   4.71             4.50             3.75             
 
BOND FUNDS                                                                          
 
Less than $25,000                4.99             4.75             4.00             
 
$25,000 but less than $50,000    4.71             4.50             3.75             
 
$50,000 but less than $100,000   4.17             4.00             3.25             
 
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 $1,000,000   2.04             2.00             1.60             
 
$1,000,000 or more               none             none             (see below)      
 
</TABLE>
   
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 $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million.  The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.    
   
American Funds Distributors, 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 hundred dealers who have sold shares
of the fund or other funds in The American Funds Group. These payments will be
based on a pro rata share of a qualifying dealer's sales. American Funds
Distributors will, on an annual basis, determine the advisability of continuing
these payments.    
   
Any employer-sponsored 403(b) plan or 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 any other purchaser investing at least $1 million
in shares of the fund (or in combination with shares of other funds in The
American Funds Group other than the money market funds) may purchase shares at
net asset value; however, a contingent deferred sales charge of 1% is imposed
on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.")  Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.    
 
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.
   
NET ASSET VALUE PURCHASES -- 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 of 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; (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 American Funds Distributors (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, foundations, and endowments with 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.     
 
STATEMENT OF INTENTION -- The reduced sales charges and offering prices set
forth in the Prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the
"Statement") terms.  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 within 45 days after written
request by the Principal Underwriter or the securities dealer, 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 and there will be
no retroactive reduction of the sales charges paid on prior purchases. 
Existing holdings eligible for rights of accumulation (see the prospectus and
account application) 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.
 
In the case of purchase orders by the trustees of certain retirement plans 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 are
added to the figure determined above.  The sum is the Statement amount and
applicable breakpoint level.  On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined.  There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
 
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
 
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) 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.
 
PRICE OF SHARES -- Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company (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 case of orders sent directly to
the fund or American Funds Service Company, 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.  Any 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 share prices
generally reflect the previous day's closing price whereas purchases and
redemptions are made at the next calculated price.
 
The price you pay for shares, the offering price, is based on the net asset
value per share which is calculated once daily at the close of trading
(currently 4:00 p.m., New York Time) each day the New York Stock Exchange is
open.  The New York Stock Exchange is currently closed on weekends and on the
following holidays: New Year's Day, Martin Luther King Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day.  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. 
 
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day.  Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
 
Assets or liabilities initially expressed in terms of foreign 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 Board
of Directors.    
 
 
 
   
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 15 DAYS.    
 
                               REDEEMING SHARES  
   
<TABLE>
<CAPTION>
                                                                                     
 
<S>                           <C>                                                    
By writing to American        Send a letter of instruction specifying the            
Funds Service Company         name of the fund, the number of shares or              
(at the appropriate           dollar amount to be sold, your name and                
address indicated             account number.  You should also enclose any           
under "Principal              share certificates you wish to redeem.  For            
Underwriter and               redemptions over $50,000 and for certain               
Transfer Agent" in the        redemptions of $50,000 or less (see below),            
prospectus)                   your signature must be guaranteed by a member          
                              firm of a domestic stock exchange or the               
                              National Association of Securities Dealers,            
                              Inc., bank, savings association or credit              
                              union that is an eligible guarantor                    
                              institution.  You should verify with the               
                              institution that it is an eligible guarantor           
                              prior to signing.  Additional documentation            
                              may be required for redemption of shares held          
                              in corporate, partnership or fiduciary                 
                              accounts.  Notarization by a Notary Public is          
                              not an acceptable signature guarantee.                 
 
By contacting your            If you redeem shares through your investment           
investment dealer             dealer, you may be charged for this service.           
                              SHARES HELD FOR YOU IN YOUR INVESTMENT                 
                              DEALER'S STREET NAME MUST BE REDEEMED THROUGH          
                              THE DEALER.                                            
 
You may have a                You may use this option, provided the account          
redemption check sent         is registered in the name of an                        
to you by using               individual(s), a UGMA/UTMA custodian, or a             
American FundsLine(R)         non-retirement plan trust.  These redemptions          
or American FundsLine         may not exceed $50,000 per shareholder each            
OnLine(SM) or by              day and the check must be made payable to the          
telephoning, faxing,          shareholder(s) of record and be sent to the            
or telegraphing               address of record provided the address has             
American Funds Service        been used with the account for at least 10             
Company (subject to           days.  See "Principal Underwriter and                  
the conditions noted          Transfer Agent" in the prospectus and                  
in this section and in        "Exchange Privilege" below for the                     
"Telephone and                appropriate telephone or fax number.                   
Computer Purchases,                                                                  
Redemptions and                                                                      
Exchanges" below)                                                                    
 
In the case of the            Upon request (use the account application for          
money market funds,           the money market funds) you may establish              
you may have                  telephone redemption privileges (which will            
redemptions wired to          enable you to have a redemption sent to your           
your bank by                  bank account) and/or check writing                     
telephoning American          privileges.  If you request check writing              
Funds Service Company         privileges, you will be provided with checks           
($1,000 or more) or by        that you may use to draw against your                  
writing a check ($250         account.  These checks may be made payable to          
or more)                      anyone you designate and must be signed by             
                              the authorized number of registered                    
                              shareholders exactly as indicated on your              
                              checking account signature card.                       
 
</TABLE>    
   
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees. 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 qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; 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; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.    
 
                  SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
 
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts.  With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select.   Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly.  Participation in the plan will begin within 30 days after
receipt of the account application.  If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or the closing of
the account, the plan may be terminated and the related investment reversed. 
The shareholder 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 may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
 
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the paying fund) into any other fund in The
American Funds Group (the receiving fund) subject to the following conditions:
(i) the aggregate value of the shareholder's account(s) in the paying fund(s)
must equal or exceed $5,000 (this condition is waived if the value of the
account in the receiving fund equals or exceeds that fund's minimum initial
investment requirement), (ii) as long as the value of the account in the
receiving fund is below that fund's minimum initial investment requirement,
dividends and capital gain distributions paid by the receiving fund must be
automatically reinvested in the receiving fund, and (iii) if this privilege is
discontinued with respect to a particular receiving fund, the value of the
account in that fund must equal or exceed the fund's minimum initial investment
requirement or the fund shall have the right, if the shareholder fails to
increase the value of the account to such minimum within 90 days after being
notified of the deficiency, automatically to redeem the account and send the
proceeds to the shareholder.  These cross-reinvestments of dividends and
capital gain distributions will be at net asset value (without sales charge).
 
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 American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(R) or American FundsLine OnLine(SM) (see "American FundsLine(R) and 
American FundsLine OnLine(SM)" 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 American Funds
Service Company. (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 meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
 
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 American
Funds Service Company. Dividend and capital gain reinvestments and purchases
through automatic investment plans and certain retirement plans will be
confirmed at least quarterly.    
   
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM)-- 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(R)  or American
FundsLine OnLine(SM). To use this service, 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(R) and  American FundsLine OnLine(SM) 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 or computer (including American FundsLine(R)) or  American FundsLine
OnLine(SM)), fax or telegraph redemption and/or exchange options, 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 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 American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company 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 permit the fund to
direct the Transfer Agent to redeem the shares of any shareholder if the shares
owned by such shareholder through redemptions have a value of less than $1,000
(determined, for this purpose only as the greater of the shareholder's cost or
the current net asset value of the shares, including any shares acquired
through the reinvestment of income dividends and capital gain distributions). 
Prior notice of at least 60 days will be given to a shareholder before the
involuntary redemption provision is made effective with respect to the
shareholder's account.  The shareholder will have not less than 30 days from
the date of such notice within which to bring the account up to the minimum
determined as set forth above.  While payment of redemptions normally will be
in cash, the fund's Articles of Incorporation permit payment of the redemption
price wholly or partly in securities or other property included in the assets
belonging to the fund when in the opinion of the fund's Board of Directors,
which shall be conclusive, conditions exist which make payment wholly in cash
unwise or undesirable.
 
                      EXECUTION OF PORTFOLIO TRANSACTIONS
   
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser.  The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions.  When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker.  This may or may not be a
broker who has provided investment research, statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by 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 of the 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 transactioins.
   
Brokerage commissions paid on portfolio transactions for the fiscal years ended
October 31, 1997, 1996 and 1995 amounted to $2,123,000, $2,365,000 and
$1,244,000, respectively.    
 
                              GENERAL INFORMATION
 
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY  10081, as Custodian.  Non-U.S. securities may be held by the
Custodian 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 $3,398,000 for the fiscal year ended October 31, 1997.    
 
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA  90071, has served as the fund's independent accountants since the
fund's inception, providing audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission.  The financial statements, included in this Statement of Additional
Information from the Annual Report, have been so included in reliance on the
report of Price Waterhouse LLP given on the authority of said firm as experts
in auditing and accounting.
 
REMOVAL OF DIRECTORS BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors.  The fund has made an undertaking, 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 shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
 
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,
Price Waterhouse LLP, whose selection is determined annually by the Board of
Directors.
   
PERSONAL INVESTING POLICY -- Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy 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.    
 
The financial statements including the investment portfolio and 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, 1997
 
 Net asset value and redemption price per share
  (Net assets divided by shares outstanding)  $46.14
 Maximum offering price per share
  (100/94.25 of per share net asset value, which takes
    into account the fund's current maximum sales charge)  $48.95
    
                               INVESTMENT RESULTS
   
The fund's 3.77% yield is based on a 30-day (or one month) period ended October
31, 1997 computed by dividing the net investment income per share earned during
the period by the maximum offering price per share on the last day of the
period, according to the following formula:    
 
                         YIELD = 2[( a-b/cd + 1)/6/ -1]
 
Where: a = dividends and interest earned during the period.
       b = expenses accrued for the period (net of reimbursements).
       c = the average daily number of shares outstanding during the period
that  were entitled to receive dividends.
       d = the maximum offering price per share on the last day of the period.
   
The fund's one-year total return and average annual total returns for the five-
and ten-year periods  ended October 31, 1997 was 16.09% , 13.36% and 13.47%,
respectively.  The average annual 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.    
 
To calculate total return, an initial investment is divided by the offering
price (which includes the sales charge) as of the first day of the period in
order to determine the initial number of shares purchased.  Subsequent
dividends and capital gain distributions are then reinvested at net asset value
on the reinvestment date determined by the Board of Directors.  The sum of the
initial shares purchased and shares acquired through reinvestment is multiplied
by the net asset value per share as of the end of the period in order to
determine ending value.  The difference between the ending value and the
initial investment divided by the initial investment converted to a percentage
equals total return.  The resulting percentage indicates the positive or
negative investment results that an investor would have experienced from
reinvested dividends and capital gain distributions and changes in share price
during the period.  Total return may be calculated for one year, five years and
for other periods of years.  The average annual total return over periods
greater than one year also may be computed by utilizing ending values as
determined above.
 
The following assumptions will be reflected in computations made in accordance
with the formula stated above:  (1) deduction of the maximum sales charge 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.  The
fund may also calculate a distribution rate on a taxable and tax equivalent
basis.  The distribution rate is computed by dividing the dividends paid by the
fund over the last 12 months by the sum of the month-end net asset value or
maximum offering price and the capital gains paid over the last 12 months.  The
distribution rate may differ from the yield.
 
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.  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 refer to results compiled by organizations such as CDA
Investment Technologies, Ibbottson Associates, Lipper Analytical Services and
Wiesenberger Investment Companies Services.  Additionally, the fund may, from
time to time, refer to results published in various 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 from time to time illustrate the benefits of tax-deferral by
comparing taxable investments to investments made through tax-deferred
retirement plans.
 
The fund may also from time to time compare its investment results with the
following:
 
 (1) Average of Savings Institutions deposits, which is a measure of all kinds
of savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions).  Savings deposits offer a
guaranteed rate of return on principal, but no opportunity for capital growth. 
The period shown may include periods during which the maximum rates paid on
some savings deposits were fixed by law.
 
 (2) 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, shelter and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines and other goods and services that
people buy for day-to-day living).
 
The fund may also, from time to time, refer to statistics compiled by the U.S.
Department of Commerce.
   
EXPERIENCE OF THE INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old.  In the 10-year
periods since January 1, 1967 (127 in all), those funds have had better total
returns than the Standard and Poor's 500 Stock Composite Index in  91 of the
127 periods.    
 
Note that past results are not an indication of future investment results. 
Also, the fund has different investment policies than some of 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 set forth below were calculated as described in the
fund's prospectus.
   
<TABLE>
<CAPTION>
CIB VS. VARIOUS UNMANAGED INDICES                                                  
 
                                                                        
 
Lifetime                   CIB            DJIA/1/         S&P 500/2/    
 
                                                                        
 
<S>                      <C>              <C>             <C>           
1987*- 10/31/97          +237.5%          +296.7%         +288.2%       
 
</TABLE>    
 
 (*Since inception 7/30/87)
/1/ The Dow Jones Average of 30 Industrial Stocks is comprised of 30 industrial
companies such as General Motors and General Electric.
 
/2/ The Standard & Poor's 500 Stock Composite Index is comprised of industrial,
transportation, public utilities, and financial stocks and represents a large
portion of the value of issues traded on the New York Stock Exchange.  Selected
issues traded on the American Stock Exchange are also included.
   
               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, 1997)
 
<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>            <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               19,307         1,452           12,989         33,748         
 
</TABLE>
    
   
# From July 30, 1987
   
The dollar amount of capital gain distributions during the period was
$1,131.    
 
                DESCRIPTION OF COMMERCIAL PAPER AND BOND RATINGS
 
COMMERCIAL PAPER RATINGS - MOODY'S INVESTORS SERVICE, INC. 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.
 
STANDARD & POOR'S CORPORATION'S 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."
 
CORPORATE DEBT SECURITIES - MOODY'S INVESTORS SERVICE, INC. rates the long-term
debt securities issued by various entities from "Aaa" to "C".
 
"AAA -- Best quality.  These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge."  Interest payments are
protected by a large, or by an exceptionally stable margin and principal is
secure.  While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such issues."
 
"AA -- High quality by all standards.  They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
 
"A -- Upper medium grade obligations.  These bonds possess many favorable
investment attributes.  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."
 
"BAA -- Medium grade obligations.  Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unre liable over any great length of time.  Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
 
"BA -- Have speculative elements; future cannot be considered as well assured. 
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. 
Bonds in this class are characterized by uncertainty of position."
 
"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."
 
"CAA -- Of poor standing.  Issues may be in default or there may be present
elements of danger with respect to principal or interest."
 
"CA -- Speculative in a high degree; often in default or have other marked
shortcomings."
 
"C -- Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
STANDARD & POOR'S CORPORATION rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality.
 
"AAA -- Highest rating.  Capacity to pay interest and repay principal is
extremely strong."
 
"AA -- High grade.  Very strong capacity to pay interest and repay principal. 
Generally, these bonds differ from AAA issues only in a small degree."
 
"A -- Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
 
"BBB -- Regarded as having adequate capacity to pay interest and repay
principal.  These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
 
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation.  BB indicates the lowest degree of speculation and C
the highest degree of speculation.  While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
 
"C1 -- Reserved for income bonds on which no interest is being paid."
 
"D -- In default and payment of interest and/or repayment of principal is in
arrears."
 
<PAGE>
<TABLE>
CAPITAL INCOME BUILDER
Investment Portfolio October 31, 1997
<S>                                                       <C>              <C>            <C>
                                                                                             Percent of
Largest Individual Holdings                                                                  Net Assets
--------------------------------------------------                                        --------------
American Home Products                                                                             2.39%
United Utilities
CoreStates Financial
Banc One
Telecom Corp. of New Zealand                                                                        1.62
Thames Water                                                                                        1.47
Philip Morris                                                                                       1.47
Telefonica de Espana
Central Fidelity Banks                                                                             1.31
Portugal Telecom                                                                                    1.28
 
 
 
 
Equity Securities                                                Shares or        Market        Percent
                                                                 Principal          Value        of Net
Energy                                                              Amount     (Millions)        Assets
----------------------------------------------            ----------------------------------------------
Energy Sources - 3.57%
Amoco Corp.                                                        930,000       $ 85.269           1.17 %
Atlantic Richfield Co.                                               300000        24.694            .33
CalEnergy Capital Trust II, 6.25% convertible preferred
 shares                                                              130000         6.760            .09
Chevron Corp.                                                        800000        66.350            .91
Phillips Petroleum Co.                                               650000        31.444            .43
Royal Dutch Petroleum Co. (New York Registered
 Shares)                                                             880000        46.310            .64
----------------------------------------------            ----------------------------------------------
Utilities: Electric & Gas - 6.17%
Australian Gas Light Co.                                             372662         2.491            .04
Central and South West Corp.                                        1650000        35.578            .49
DPL Inc.                                                             500000        12.406            .17
DTE Energy Co.                                                       450000        13.838            .19
GPU, Inc.                                                            850000        30.759            .42
Hongkong Electric Holdings Ltd.                                 10,231,500         34.679            .48
KeySpan Energy Corp.  (formerly Brooklyn Union Gas Co.)            200,000          6.213            .09
Long Island Lighting Co.                                            2125000        53.523            .73
National Grid Group PLC                                             3431000        16.159            .22
National Power PLC                                                  4405000        36.692            .50
NIPSCO Industries, Inc.                                              300000        13.181            .18
PECO Energy Co.                                                       97900         2.221            .03
PowerGen PLC                                                        1600000        17.779            .24
Southern Electric PLC                                              12000000        92.314           1.26
Williams Companies, Inc.                                            1617900        82.412           1.13
                                                          ----------------------------------------------
                                                                                  711.072           9.74
                                                                           -----------------------------
 
Materials
----------------------------------------------            ----------------------------------------------
Chemicals - 0.11%
E.I. du Pont de Nemours and Co.                                      120000         6.825            .09
ICI Australia Ltd. (1)                                               218827         1.647            .02
----------------------------------------------            ----------------------------------------------
 
Forest Products & Paper - 0.95%
Fort James Corp. (formerly James River Corp. of Virginia)            345225        13.701            .19
Potlatch Corp.                                                       485500        24.214            .33
Rayonier Inc.                                                         90600         3.958            .06
Union Camp Corp.                                                     500000        27.094            .37
                                                          ----------------------------------------------
 
 
Metals: Nonferrous - 0.34%
Aluminum Co. of America                                              190000        13.870            .19
USX Corp., DECS convertible preferred                                500000        11.313            .15
----------------------------------------------            ----------------------------------------------
                                                                                  102.622           1.40
                                                                           -----------------------------
 
 
Capital Equipment
----------------------------------------------            ----------------------------------------------
Industrial Components - 0.28%
Tomkins PLC                                                         4000000        20.514            .28
----------------------------------------------            ----------------------------------------------
                                                                                   20.514            .28
                                                                           -----------------------------
 
Consumer Goods
----------------------------------------------            ----------------------------------------------
Automobiles - 1.57%
Chrysler Corp.                                                   1,065,000         37.541            .52
Ford Motor Co., Class A                                             1750000        76.453           1.05
----------------------------------------------            ----------------------------------------------
Beverages & Tobacco - 2.89%
Foster's Brewing Group Ltd.                                     16,000,000         30.395            .42
Gallaher Group PLC                                               2,300,000         11.044            .15
Philip Morris Companies Inc.                                     2,715,000        107.582           1.47
RJR Nabisco Holdings Corp.                                         700,000         22.181            .30
UST Inc.                                                         1,350,000         40.416            .55
----------------------------------------------            ----------------------------------------------
Health & Personal Care - 2.87%
American Home Products Corp.                                     2,350,000        174.194           2.39
Bristol-Myers Squibb Co.                                             400000        35.100            .48
                                                                           -----------------------------
                                                                                  534.906           7.33
                                                                           -----------------------------
Services
----------------------------------------------            ----------------------------------------------
Broadcasting & Publishing - 0.69%
Golden Books Family Entertainment, Inc., 8.75% convertible
 TOPrS (1)                                                           100000         5.225            .07
Houston Industries Inc., 7.00% ACES convertible preferred            340000        18.615            .25
Reader's Digest Assn., Inc., Class A                                 150000         3.413            .05
Time Warner Inc., 10.25% preferred, Series M                         4,349          4.980            .07
West Australian Newspapers Holdings Ltd.                         4,165,000         18.609            .25
 
----------------------------------------------            ----------------------------------------------
Business & Public Services - 5.36%
American Water Works Co., Inc.                                      1850000        41.856            .57
Autopistas del Mare Nostrum, SA Concesionaria del Estado             750000        11.739            .16
Consumers Water Co.                                                  300000         5.475            .07
Hutchison Delta Finance Ltd., 7.00% convertible
 debentures 2002 (1)                                           $11,000,000         12.386            .17
Hyder PLC                                                           4300000        64.825            .89
Thames Water PLC                                                    7100000       107.691           1.47
United Utilities PLC                                               12141809       148.247           2.03
----------------------------------------------            ----------------------------------------------
 
Leisure & Tourism - 0.35%
Host Marriott Financial Trust, 6.75% QUIPS convertible
 preferred 2026 (1)                                                  400000        25.700            .35
 
 
----------------------------------------------            ----------------------------------------------
 
Merchandising - 0.64%
J.C. Penney Co., Inc.                                                800000        46.950            .64
----------------------------------------------            ----------------------------------------------
 
 
Telecommunications - 9.65%
Ameritech Corp.                                                  1,376,300         89.460           1.23
Hong Kong Telecommunications Ltd.                                   6572887        12.585
Hong Kong Telecommunications Ltd. (American                                                          .78
 Depositary Receipts)                                            2,323,004         44.573
Koninklijke PTT Nederland NV                                     1,778,900         67.818            .93
Portugal Telecom, SA                                             2,286,000         93.633           1.28
SBC Communications Inc.                                            914,312         58.173            .80
Telecom Argentina SA (American Depositary Receipts)                784,800         19.865            .27
Telecom Corp. of New Zealand Ltd.                               15,784,160         76.419
Telecom Corp. of New Zealand Ltd. (1)                            8,380,000         40.572           1.62
Telecom Corp. of New Zealand Ltd. (American
 Depositary Receipts)                                               25,000           .973
Telecom Italia SpA                                              18,255,813         73.498           1.01
Telefonica de Espana, SA                                         3,580,000         97.567           1.34
U S WEST Communications Group                                      704,707         28.056            .39
----------------------------------------------            ----------------------------------------------
 
Transportation:  Airlines - 0.27%
Qantas Airways Ltd.                                                10800000        19.377            .27
                                                                           -----------------------------
                                                                                1,238.280          16.96
                                                                           -----------------------------
Finance
----------------------------------------------            ----------------------------------------------
Banking - 19.37%
AmSouth Bancorporation                                           1,200,000         57.675            .79
Banc One Corp.                                                   2,300,000        119.888           1.64
Bank of Nova Scotia                                              1,943,000         85.704           1.17
Barclays PLC                                                        3500000        87.579           1.20
Central Fidelity Banks, Inc.                                        2062500        95.906           1.31
Chase Manhattan Corp.                                                400000        46.150            .63
Comerica Inc.                                                        500000        39.531            .54
CoreStates Financial Corp                                           1971300       143.412           1.96
First Chicago NBD Corp.                                             1210000        88.028           1.21
First Hawaiian Bank                                                  400000        15.600            .21
First Security Corp. (Utah)                                         1950000        56.550            .78
First Union Corp.                                                    400000        19.625            .27
HSBC Holdings PLC                                                    999800        22.635            .31
Huntington Bancshares Inc.                                       1,842,225         59.527            .82
KeyCorp                                                          1,035,000         63.329            .87
Keystone Financial, Inc.                                           827,550         28.447            .39
J.P. Morgan & Co. Inc.                                             180,000         19.755            .27
National Australia Bank Ltd.                                        2480654        33.948            .46
National City Corp.                                                  800000        47.800            .66
Old Kent Financial Corp.                                             578812        36.538            .50
Royal Bank of Canada                                                1715000        91.714           1.26
Sparbanken Sverige AB                                                670000        15.193            .21
Wachovia Corp.                                                       600000        45.188            .62
Westpac Banking Corp.                                            6,950,000         40.489            .56
Wilmington Trust Corp.                                             950,000         52.962            .73
----------------------------------------------            ----------------------------------------------
 
Financial Services - 1.02%
Beneficial Corp.                                                   340,000         26.074            .36
Health Care Property Investors, Inc.                               880,000         33.770            .46
Imperial Credit Commercial Mortgage Investment Corp. (2)           900,000         14.850            .20
----------------------------------------------            ----------------------------------------------
 
Insurance - 3.39%
American General Corp.                                               160000         8.160            .11
EXEL Ltd.                                                            545200        32.951            .45
Guardian Royal Exchange PLC                                         2000000         9.989            .14
HIH Winterthur International Holdings Ltd.                          4408965         8.221            .11
Lincoln National Corp.                                              1230000        84.563           1.16
Ohio Casualty Corp.                                                717,500         31.749            .43
Prudential Corp. PLC                                                3557546        37.921            .52
Royal & Sun Alliance Insurance Group PLC                            3080267        29.504            .40
SAFECO Corp.                                                       100,000          4.762            .07
----------------------------------------------            ----------------------------------------------
Real Estate - 4.68%
Bradley Real Estate, Inc.                                        1,045,000         20.508            .28
CarrAmerica Realty Corp.                                         1,844,800         54.998            .75
Kimco Realty Corp.                                                 400,000         12.800            .18
Pacific Retail Trust (1,3)                                       2,358,599         28.303            .39
Security Capital Atlantic Inc.                                     450,000          9.816
Security Capital Atlantic Inc. (1,3)                             1,565,217         34.141            .60
Security Capital Group Inc., Class B, warrants (2)                   368246         1.772            .02
Security Capital Industrial Trust                                   1191114        29.257            .40
Security Capital Pacific Trust                                      3219368        72.033            .99
Security Capital Realty Inc., Class A (2)                             24900        37.350
Security Capital Realty Inc. 12.00%                                                                  .88
 convertible debentures 2014                                   $18,862,000         27.049
Washington Real Estate Investment Trust                            145,500          2.382            .03
Weingarten Realty Investors                                        300,000         11.944            .16
                                                                           -----------------------------
                                                                                2,078.040          28.46
                                                                           -----------------------------
Multi-Industry & Miscellaneous
----------------------------------------------            ----------------------------------------------
Multi-Industry - 1.28%
B.A.T Industries PLC                                             7,125,597         62.280            .85
Hutchison Whampoa Ltd.                                              1960000        13.565            .19
Lend Lease Corp. Ltd.                                                693689        14.213            .20
Thermo Instrument Systems Inc., 4.50% convertible
 debentures 2003 (1)                                            $3,000,000          3.146            .04
----------------------------------------------            ----------------------------------------------
Miscellaneous - 2.97%
Equity securities in initial period of
 acquisition                                                                      217.116           2.97
                                                                           -----------------------------
                                                                                  310.320           4.25
                                                                           -----------------------------
TOTAL EQUITY SECURITIES (cost:
 $3,231.789 million)                                                            4,995.754          68.42
                                                                           -----------------------------
 
 
                                                                 Principal
Bonds and Notes                                                     Amount
----------------------------------------------            ----------------------------------------------
Corporate
----------------------------------------------            ----------------------------------------------
Airplanes Pass Through Trust, pass-through certificates,
 Class C, 8.15% 2019 (4)                                        $5,525,000          5.836            .08
Allegiance Corp. 7.80% 2016                                         3000000         3.193            .04
Boyd Gaming Corp. 9.25% 2003                                        1250000         1.288            .02
Cablevision Systems Corp. 8.125% 2009 (1)                           2500000         2.506            .03
California Energy Co., Inc. 10.25% 2004                             4300000         4.711            .06
Camden Property Trust 7.00% 2006                                    5000000         5.063            .07
CarrAmerica Realty Corp. 7.375% 2007 (1)                            6000000         6.146            .08
Century Communications Corp. 8.75% 2007                             2000000         2.000            .03
Columbia Gas System, Inc., Series G, 7.62% 2025                     3000000         3.130
Columbia Gas System, Inc., Series C, 6.80% 2005                     2000000         2.041            .07
Columbia/HCA Healthcare Corp. 6.91% 2005                            2500000         2.477
Columbia/HCA Healthcare Corp. 6.87% 2003                            3000000         3.028
Columbia/HCA Healthcare Corp. 6.41% 2000                            5255000         5.247            .17
Columbia/HCA Healthcare Corp. 6.125% 2000                           1400000         1.381
Comcast Cellular Corp. 9.50% 2007 (1)                               5000000         5.175            .07
Consumers International 10.25% 2005 (1)                             5000000         5.400            .07
Container Corp. of America 9.75% 2003                               4985000         5.384            .07
Continental Airlines, Inc., pass-through certificates,
 Series 1997-1, Class A, 7.461% 2016 (4)                            2000000         2.104
Continental Airlines, Inc., pass-through certificates,
 7.42% 2007 (4)                                                     3000000         3.108            .14
Continental Airlines, Inc., pass-through certificates,
 Series 1997-4, Class A, 6.90% 2018 (4)                             5000000         5.070
Delta Air Lines, Inc., 1991 Equipment
 Certificates Trust, Series K, 10.00% 2014 (1)                      2000000         2.504            .03
Domtar Inc. 8.75% 2006                                              2500000         2.684            .04
Export-Import Bank of Japan 2.875% 2005                          Y1,380,000        12.487            .17
Falcon Drilling Company, Inc., Series B, 9.75% 2001                 2750000         2.881
Falcon Drilling Company, Inc., Series B, 8.875% 2003                4000000         4.230            .10
FIRSTPLUS Home Loan Owner Trust, Series 1997-1,
 Class A-6, 6.95% 2015 (4)                                          4000000         4.062            .05
Freeport-McMoRan Copper & Gold Inc. 7.50% 2006                      2000000         1.982
Freeport-McMoRan Copper & Gold Inc. 7.20% 2026                      2000000         2.039            .06
Fuji Bank, Ltd. 7.30/7.9391% 2049                                   3000000         2.986            .04
HMH Properties, Inc. 8.875% 2007 (1)                                1000000         1.020            .01
Irvine Apartment Communities, Inc. 7.00% 2007                       7000000         7.088            .10
Jet Equipment Trust, Series 1995-B, Class C, 9.71%
 2015 (1)                                                           5000000         6.210            .08
Lloyds Trustee Savings Banking Group 8.50% 2006                 L3,000,000          5.380            .07
McDermott Inc. 9.375% 2002                                          6000000         6.456            .09
J. Ray McDermott, SA 9.375% 2006                                    8000000         8.400            .12
Midland Cogeneration Venture LP, Secured Lease
 Obligation Bonds, Series C-91, 10.33% 2002                         3139000         3.445            .05
News America Holdings Inc. 9.25% 2013                               2000000         2.342
News America Holdings Inc. 9.125% 1999                              3000000         3.164            .11
News America Holdings Inc. 8.625% 2003                              2000000         2.169
Occidental Petroleum Corp. 8.50% 2004                               8000000         8.241            .11
Ocean Energy, Inc. 8.875% 2007                                      5000000         5.125            .07
Omega Healthcare Investors, Inc. 6.95% 2007                         8000000         8.077            .11
Owens-Illinois, Inc. 8.10% 2007                                     1000000         1.061
Owens-Illinois, Inc. 7.85% 2004                                     1000000         1.050            .03
Parker & Parsley Petroleum Co. 8.25% 2007                           5000000         5.501            .08
The Price REIT, Inc. 7.50% 2006                                     4000000         4.175            .06
Riggs National Corp. 8.50% 2006                                     2600000         2.730            .04
Rite Aid Corp. 7.125% 2007                                          5000000         5.150            .07
Royal Caribbean 7.00% 2007                                          3500000         3.514            .05
Rykoff-Sexton, Inc. 8.875% 2003                                     2000000         2.020            .03
Samsung Electronics Co., Ltd. 7.45% 2002 (1)                        2000000         1.882            .03
Security Capital Industrial Trust 7.81% 2015                        2000000         2.150            .03
Security Capital Pacific Trust 7.25% 2004                           5000000         5.169            .07
Shopping Center Associates 6.75% 2004 (1)                           3000000         3.024            .04
TCI Communications, Inc. 6.875% 2006                                8000000         7.923            .11
Tele-Communications, Inc. 8.00% 2005                                5000000         5.295            .07
Time Warner Inc. 10.15% 2012                                        5000000         6.245
Time Warner Inc. 7.45% 1998                                         4000000         4.011            .22
Time Warner Inc. 7.25% 2017                                         6000000         5.948
TKR Cable I, Inc. 10.50% 2007                                       7000000         7.819            .11
Wellsford Residential Property Trust 7.75% 2005                     2500000         2.652            .04
Woolworth Corp., Series A, 7.00% 2002                               2000000         2.038
Woolworth Corp., Series A, 6.98% 2001                              14500000        14.730            .23
                                                                           -----------------------------
                                                                                  271.347           3.72
                                                                           -----------------------------
 
 
Federal Agency Obligations:  Mortgage Pass-Throughs (4)
----------------------------------------------
Fannie Mae (formerly Federal National
 Mortgage Assn.) 7.50% 2024                                      2,815,000          2.876            .04
Freddie Mac (formerly Federal Home Loan
 Mortgage Corp.) 9.00% 2025                                      2,851,000          3.035            .04
                                                                           -----------------------------
                                                                                    5.911            .08
                                                                           -----------------------------
 
 
Governments and Governmental Authorities
----------------------------------------------            -----------------   ----------- --------------
Canadian Government 9.75% December 2001                        C$9,000,000          7.482
Canadian Government 9.00% December 2004                          2,000,000          1.722            .21
Canadian Government 4.25% December 2026 (5)                      8,529,000          6.431
Danish Government 8.00% May 2003                             DKr22,000,000          3.731            .05
Fannie Mae 2.125% October 2007 (4)                            Y620,000,000          5.251            .07
Fannie Mae Global 6.50% July 2002 (4)                          A$5,750,000          4.190            .06
International Bank for Reconstruction and Development
 4.50% March 2003                                             Y750,000,000          7.267            .10
Irish Government 8.00% August 2006                            IRL5,000,000          8.468
Irish Government 6.25% October 2004                              1,250,000          1.916            .14
Italian Government 9.50% February 2001                     Lr9,200,000,000          6.030            .08
New Zealand Government 8.00% July 1998                       NZ$40,000,000         24.967
New Zealand Government 8.00% April 2004                          5,000,000          3.351
New Zealand Government 8.00% November 2006                       5,000,000          3.411            .48
New Zealand Government 4.50% February 2016 (5)                   5,697,000          3.409
Poland (Republic of) Past Due Interest Bond 4.00% October
 2014 (6)                                                    US$11,500,000          9.459            .13
South Africa (Republic of) 13.00% August 2010                ZAR10,000,000          1.890            .03
Spain (Kingdom of) 3.10% September 2006                     Y1,300,000,000         11.907            .16
Spanish Government 8.40% April 2001                       Pta1,500,000,000         11.332
Spanish Government 6.75% April 2000                            400,000,000          2.852            .20
Treuhandanstalt 7.125% January 2003                            DM8,000,000          5.051            .07
United Kingdom 8.50% December 2005                              L4,000,000          7.485            .10
                                                                           -----------------------------
                                                                                  137.602           1.88
                                                                           -----------------------------
 
 
U.S. Treasuries
----------------------------------------------            ----------------------------------------------
8.875% February 1999                                           $10,000,000         10.397            .14
5.875% March 1999                                               90,000,000         90.310           1.24
6.875 July 1999                                                100,000,000        102.000           1.40
8.00% August 1999                                              150,000,000        155.906           2.13
8.50% February 2000                                            150,000,000        158.930           2.18
6.375% May 2000                                                100,000,000        101.594           1.39
8.875% May 2000                                                150,000,000        161.226           2.21
8.75% August 2000                                              150,000,000        161.555           2.21
6.125% September 2000                                           30,000,000         30.319            .42
6.50% May 2001                                                   3,000,000          3.072            .04
8.00% May 2001                                                   9,000,000          9.643            .13
7.25% August 2004                                                5,000,000          5.388            .07
6.375% August 2027                                               4,000,000          4.122            .06
 
                                                                           -----------------------------
                                                                                  994.462          13.62
                                                                           -----------------------------
TOTAL BONDS AND NOTES (cost: $1,395.043 million)                                1,409.322          19.30
                                                                           -----------------------------
TOTAL INVESTMENT SECURITIES (cost: $4,626.832
 million)                                                                       6,405.076          87.72
                                                                           -----------------------------
 
 
SHORT-TERM SECURITIES
----------------------------------------------            ----------------------------------------------
Corporate Short-Term Notes
----------------------------------------------            ----------------------------------------------
A.I. Credit Corp. 5.47%-5.50% due 11/6/97-1/9/98                   43700000        43.406            .60
Coca-Cola Co. 5.46%-5.47% due 12/8-12/16/97                        37800000        37.558            .52
Commercial Credit Co. 5.50% due 11/18/97-1/8/98                    32000000        31.743            .43
John Deere Capital Corp. 5.51%-5.56% due 11/6/97-1/23/98           33500000        33.238            .46
Ford Motor Credit Co. 5.51%-5.60% due 1/8-1/9/98                   40000000        39.566            .54
Gannett Co., Inc. 5.48% due 11/12/97 (1)                           35300000        35.235            .48
Hershey Foods Corp. 5.48% due 11/14/97                             38000000        37.918            .52
Lucent Technologies Inc. 5.49% due 12/10/97-1/22/98                28800000        28.503            .39
National Rural Utilities Cooperative Finance Corp.
 5.48% due 11/7-11/14/97                                           37300000        37.222            .51
J.C. Penney Funding Corp. 5.50% due 11/4-12/8/97 (1)               45000000        44.869            .61
Procter & Gamble Co. 5.47% due 12/1-12/11/97                       49500000        49.228            .67
Warner-Lambert Co. 5.48% due 12/12/97 (1)                          50000000        49.680            .68
                                                                           -----------------------------
                                                                                  468.166           6.41
                                                                           -----------------------------
 
Federal Agency Discount Notes
----------------------------------------------            ----------------------------------------------
Fannie Mae 5.395%-5.485% 11/6/97-2/5/98                           138600000       138.262           1.89
                                                                           -----------------------------
 
U.S. Treasury Short-Term Notes
----------------------------------------------            ----------------------------------------------
5.625%-6.00% due 11/30/97-10/31/98                                250000000       250.242           3.43
                                                                           -----------------------------
 
 
 
TOTAL SHORT-TERM SECURITIES (cost: $855.592
 million)                                                                         856.670          11.73
EXCESS OF CASH AND RECEIVABLES OVER PAYABLES                                       39.580            .55
                                                                           -----------------------------
TOTAL SHORT-TERM SECURITIES, CASH AND
 RECEIVABLES, NET OF PAYABLES                                                     896.250          12.28
                                                                           -----------------------------
NET ASSETS                                                                     $7,301.326        100.00%
                                                                              ===========    ==========
 
(1) Purchased in a private placement transaction;
 resale to the public may require registration
 or sale only to qualified institutional buyers.
 
(2) Non-income-producing securities.
 
(3) Valued under procedures approved by the Board of
 Directors.
 
(4) Pass-through securities 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.
 
(5) Index-linked bond whose principal amount moves
 with a government retail price index.
 
(6) Coupon rate changes periodically.
 
See Notes to Financial Statements
</TABLE>
 
<TABLE>
Capital Income Builder
Financial Statements
 
<S>                                                 <C>           <C>
Statement of Assets and Liabilities
at October 31, 1997                                                 (dollars in
                                                                      millions)
Assets:
Investment securities at market (cost:$4,626.832)                    $6,405.076
Short-term securities (cost:$855.592)                                   856.670
Cash                                                                       .254
Receivables for-
 Sales of investments                                     $43.912
 Sales of fund's shares                                    16.301
 Dividends and accrued interest                            43.157       103.370
                                                     ------------  ------------
                                                                      7,365.370
Liabilities:
Payables for-
 Purchases of investments                                  16.273
 Repurchases of fund's shares                              12.353
 Forward currency contracts                                  .426
 Management services                                        1.363
 Dividends payable                                         30.606
 Accrued expenses                                           3.023        64.044
                                                     ------------  ------------
Net Assets at October 31, 1997 - Equivalent to
 $46.14 per share on 158,244,541 shares of $0.01
 par value capital stock outstanding
 (authorized capital stock - 200,000,000 shares)                     $7,301.326
                                                                   ============
 
Statement of Operations
for the year ended October 31, 1997
(dollars in millions)
 
 
Investment Income:
Income:
 Dividends                                               $165.482
 Interest                                                 135.648    $  301.130
                                                     ------------
Expenses:
 Management services fee                                   20.097
 Distribution expenses                                     14.932
 Transfer agent fee                                         3.398
 Reports to shareholders                                     .471
 Registration statement and prospectus                       .405
 Postage, stationery and supplies                            .593
 Directors' fees                                             .121
 Auditing and legal fees                                     .048
 Custodian fee                                              1.262
 Taxes other than federal income tax                         .077
 Other expenses                                              .144        41.548
                                                     ------------  ------------
 Net investment income                                                  259.582
                                                                   ------------
Realized Gain and Unrealized Appreciation on
 Investments:
Net realized gain                                                       280.827
Net increase in unrealized appreciation on investmen      777.035
Net unrealized depreciation on
 forward currency contracts                                (0.426)      776.609
                                                     ------------  ------------
 Net realized gain and increase in unrealized
  appreciation on investments                                         1,057.436
                                                                   ------------
Net Increase in Net Assets Resulting from Operations                 $1,317.018
                                                                   ============
 
See Notes to Financial Statements
Statement of Changes in Net Assets
 (dollars in millions)                                 Year ended    October 31
                                                              1997          1996
                                                     ------------  ------------
Operations:
Net investment income                                  $  259.582    $  257.878
Net realized gain on investments                          280.827        87.347
Net increase in unrealized appreciation on investmen      776.609       431.666
                                                     ------------  ------------
 Net increase in net assets resulting from
  operations                                            1,317.018       776.891
                                                     ------------  ------------
Dividends and Distributions Paid to
 Shareholders:
Dividends from net investment income                     (262.498)     (257.053)
Distributions from net realized gain on investments       (99.910)      (62.913)
                                                     ------------  ------------
 Total dividends and distributions                       (362.408)     (319.966)
                                                     ------------  ------------
Capital Share Transactions:
Proceeds from shares sold: 29,804,485 and
 20,891,053 shares, respectively                        1,285.671       782.282
Proceeds from shares issued in reinvestment of net
 investment income dividends and distributions of
 net realized gain on investments: 7,455,750 and
 6,760,213 shares, respectively                           314.663       251.534
Cost of shares repurchased: 15,485,458 and 16,175,451
 shares, respectively                                    (671.331)     (606.384)
                                                     ------------  ------------
 Net increase in net assets resulting from capital
  share transactions                                      929.003       427.432
                                                     ------------  ------------
Total Increase in Net Assets                            1,883.613       884.357
 
Net Assets:
Beginning of year                                       5,417.713     4,533.356
                                                     ------------  ------------
End of year (including undistributed net investment
 income: $3.028 and $2.228, respectively)              $7,301.326    $5,417.713
                                                     ============  ============
 
 
 
See Notes to Financial Statements
</TABLE>
 
CAPITAL INCOME BUILDER
Notes to Financial Statements
 
1. Capital Income Builder, Inc. (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified  management investment company.
The fund seeks to provide a growing dividend together with a current yield
which exceeds that paid by U.S. stocks generally. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
 
   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  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.
 
   Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of representative quoted bid and asked prices.
 
   Assets or liabilities initially expressed in terms of foreign 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. The effects of changes
in foreign currency exchange rates on investment securities are included with
the net realized and unrealized gain or loss on investment securities.
 
   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.
 
   As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Dividend and
interest income is reported on the accrual basis. The  fund  does not amortize
premiums on securities purchased. Amortization of market discounts on
securities is recognized upon disposition, subject to applicable tax
requirements. Dividends to shareholders are declared daily from net investment
income. Distributions paid to shareholders are recorded on the ex-dividend
date.
 
   The fund may enter into forward currency contracts, which represent an
agreement to exchange currencies of different countries at a specified future
date at a specified rate. The  fund enters into these contracts to reduce its
exposure to fluctuations in foreign exchange rates arising from investments
denominated in non-U.S. currencies. The fund's use of forward currency
contracts involves market risk in excess of the amount recognized in the
statement of assets and liabilities. The contracts are recorded in the
statement of assets and liabilities at their net unrealized value. The fund
records realized gains or losses at the time the forward contract is closed or
offset by a matching contract. The face or contract amount in U.S. dollars
reflects the total exposure the fund has in that particular contract. Losses
may arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from possible movements
in non-U.S. exchange rates and securities values underlying these instruments.
 
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable  income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
 
   As of October 31, 1997, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $1,779,322,000, of which $1,806,486,000 related to appreciated
securities and $27,164,000 related to depreciated securities. During the year
ended October 31, 1997, the fund realized, on a tax basis, a net capital gain
of $277,420,000 on securities transactions. Net gains related to non-U.S.
currency and other transactions of $3,407,000 were treated as ordinary income
for federal income tax purposes. The cost of portfolio securities, excluding
forward currency contracts, for book and federal income tax purposes was
$5,482,424,000 at October 31, 1997. 
  
3.  The fee of $20,097,000 for management services was paid 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 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.
 
   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,  1997,
distribution expenses under the Plan were $14,932,000. As of October 31, 1997,
accrued and unpaid distribution expenses were $2,548,000.
 
   American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $3,398,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $6,383,000 (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.
 
   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,
1997, aggregate amounts deferred and earnings thereon were $228,000.
 
   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.
 
4. As of October 31, 1997, accumulated undistributed net realized gain on
investments was $255,286,000 and additional paid-in capital was $5,262,385,000.
To conform to its tax reporting, the fund reclassified $3,716,000 from
undistributed net realized gains to undistributed net investment income and
$8,297,000 from undistributed net realized gains to undistributed currency
gains for the year ended October 31, 1997.
 
   The fund made purchases and sales of investment securities, excluding
short-term securities, of $2,870,448,000 and $1,449,198,000 respectively,
during the year ended October 31, 1997.
 
   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 $1,262,000 includes $56,000 that was paid by these credits
rather than in cash.
 
   Dividend and interest income is recorded net of non-U.S. taxes paid. For the
year ended October 31, 1997, such non-U.S. taxes were $8,497,000. Net realized
currency losses on dividends, interest, withholding taxes reclaimable, and
sales of non-U.S. bonds and notes were $8,607,000 for the year ended October
31, 1997.
 
   At October 31, 1997, the fund had outstanding forward currency contracts to
sell non-U.S. currencies as follows:
 
<TABLE>
<CAPTION>
<S>                       <C>                  <C>              <C>                <C>                  
                          Contract Amounts                      U.S. Valuation at 10/31/97                        
 
                                                                                   Unrealized           
 
Non-U.S. Currency                                                                  Appreciation/        
 
Sale Contracts            Non-U.S.             U.S.             Amount             (Depreciation)       
 
Australian Dollars        A$4,991,404          $3,641,673       $3,517,150         $124,523             
 
expiring 11/24/97                                                                                       
 
to 1/16/98                                                                                              
 
British Pounds            L2,455,155           4,000,000        4,101,285          (101,285)            
 
expiring 1/23/98                                                                                        
 
Danish Kroner             DKr24,000,000        3,616,092        3,683,543          (67,451)             
 
expiring 4/7/98                                                                                         
 
German Marks              DM8,190,760          4,600,000        4,770,556          (170,556)            
 
expiring 1/23/98                                                                                        
 
Irish Pounds              IRL6,592,791         9,841,652        9,900,568          (58,916)             
 
expiring 12/4/97                                                                                        
 
to 1/20/98                                                                                              
 
Japanese Yen              Y3,789,275,950       31,713,634       31,928,726         (215,092)            
 
expiring 12/22/97                                                                                       
 
to 3/30/98                                                                                              
 
New Zealand Dollars       NZ$6,332,621         4,000,000        3,937,376          62,624               
 
expiring 11/24/97                                                                                       
 
</TABLE>
 
<TABLE>
Per-Share Data and Ratios
<S>                                     <C>       <C>       <C>       <C>       <C>
                                             Year
                                            ended
                                          October
                                               31
                                              1997      1996     1995      1994    1993
 
Net Asset Value, Beginning of Year       $   39.70 $   36.27 $   32.68 $   34.42 $30.77
                                        --------- --------- --------- --------- -------
 Income From Investment Operations:
  Net investment income                      1.74      1.95      1.69      1.73    1.53
  Net realized and unrealized gain
   (loss) on investments                     7.20       3.92     3.69    ($1.62)   3.76
                                        --------- --------- --------- --------- -------
   Total income from investment operatio     8.94      5.87      5.38       .11    5.29
                                        --------- --------- --------- --------- -------
 Less Distributions:
  Dividends from net investment income     ($1.77)   ($1.94)    (1.69)   ($1.73)  (1.53)
  Distributions from net realized gains    ($0.73)   ($0.50)     (.10)   ($0.12)   (.11)
                                        --------- --------- --------- --------- -------
   Total distributions                      (2.50)    (2.44)    (1.79)   ($1.85)  (1.64)
                                        --------- --------- --------- --------- -------
Net Asset Value, End of Year             $   46.14 $   39.70 $   36.27 $   32.68 $34.42
                                        ========= ========= ========= ========= =======
 
Total Return (1)                           23.16%   16.76%    16.98%       .47%   17.58%
 
 
Ratios/Supplemental Data:
 Net assets, end of year (in millions)      $7,301   $5,418    $4,533    $3,629  $2,826
 Ratio of expenses to average net assets     .65%       .71%      .72%      .73%    .72%
 Ratio of net income to average net asse    4.04%      5.19%     4.96%     5.29%   4.69%
 Average commissions paid per share (2)      1.89c    2.20c     2.10c     3.63c   2.90c
 Portfolio turnover rate                   27.65%     27.56%    18.06%    36.19%  11.22%
 
 
(1) Calculated without deducting a sales
 charge. The maximum sales charge is 5.75% of
 the fund's offering price.
 
(2) Brokerage commissions paid on portfolio
 transactions increase the cost of securities
 purchased or reduce the proceeds of securities
 sold and are not separately reflected
 in the fund's statement of operations.
 Shares traded on a principal basis (without
 commissions), such as most over-the-counter
 and fixed-income transactions, are excluded.
 Generally, non-U.S. commissions are lower
 than U.S. commissions when expressed
 as cents per share but higher when expressed
 as a percentage of transactions because of the
 lower per-share prices of many non-U.S.
 securities.
</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, 1997, 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, 1997 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
 
/s/Price Waterhouse LLP
Los Angeles, California
November 26, 1997
 
Tax Information (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
fund were earned from the following sources:
 
<TABLE>
<CAPTION>
<S>                     <C>                      <C>             <C>              <C>            
Dividends and Distributions per Share                                                                            
 
                                                                                                 
 
                                                 From Net        From Net         From Net       
 
                                                 From Net        Realized         Realized       
 
                                                 Investment      Short-term       Long-term      
 
Reinvest Date           Payment Date             Income          Gains            Gains          
 
December 6, 1996        December 9, 1996         $0.465                           $0.73          
 
March 10, 1997          March 11,1997             0.465                                          
 
June 9, 1997            June 10, 1997             0.470                                          
 
September 11,1997       September 12, 1997        0.475                                          
 
</TABLE>
 
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 33% 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, 12% 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 plan retirement 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 1998 to determine the calendar year
amounts to be included on their 1997 tax returns. Shareholders should consult
their tax advisers.
 
<PAGE>
                            PART C
                       OTHER INFORMATION
 
ITEM 24.  FINANCIAL STATEMENTS AND EXHIBITS
 
 (A) FINANCIAL STATEMENTS:
 
  Included in Prospectus - Part A
   Financial Highlights
 
  Included in Statement of Additional Information - Part B
   
   As of October 31, 1997:
    Investment Portfolio
    Statement of Assets and Liabilities
    Statement of Operations
    Statement of Changes in Net Assets
    Notes to Financial Statements
    Per-Share Data and Ratios
    Report of Independent Accountants    
   
 (B) EXHIBITS:
  1. Articles of Incorporation dated June 4, 1987; Articles of Amendment and
Restatement dated July 28, 1987.
  2. By-laws.
  3. None.
  4. Specimen share certificate.
  5. Investment Advisory and Service Agreement dated March 1, 1995.
  6. Principal Underwriting Agreement dated June 22, 1989; form of Selling
Group Agreement, Supplemental Selling Group Agreement, Bank Selling Group
Agreement, Hold Harmless Agreement, and State Addendum to Selling Group
Agreement.
  7. None.
  8. Global Custody Agreement.
  9. Shareholder Services Agreement.
  10. Opinion of counsel.
  11. Consent of Independent Accountants.
  12. None.
  13. Copy of investment letter from the Investment Adviser relating to initial
purchase of shares.
  14. Model Plans.
  15. Plan of Distribution dated June 22, 1989.
  16. On file (see SEC file numbers 811-5085 and 33-12967).
  17. Financial data schedule (EDGAR).
    
ITEM 25.  PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
 
  None.
 
ITEM 26.  NUMBER OF HOLDERS OF SECURITIES.
   
  As of November 30, 1997.
 
<TABLE>
<CAPTION>
                         Number of                            
 
Title of Class           Record-Holders                       
 
<S>                      <C>                                  
                                                              
 
Capital Stock                 279,509                         
 
($.01 par value)                                              
 
</TABLE>
    
ITEM 27.  INDEMNIFICATION.
 
 Registrant is a joint-insured under  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.
 
 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 28.  BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
 
 None.
 
ITEM 29.  PRINCIPAL UNDERWRITERS.
 
(A) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of:  AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital World Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The
Cash Management Trust of America, EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The 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., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money
Fund of America and Washington Mutual Investors Fund, Inc.
 
ITEM 29.  PRINCIPAL UNDERWRITERS (CONT.)
   
<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 A. Abzug                   Regional Vice President    None               
        4433 Leydon Avenue                                                            
        Woodland Hills, CA 91364                                                      
 
                                           
 
       John A. Agar                    Regional Vice President     None               
       1501 N. University Drive, Suite 227A                                                  
       Little Rock, AR 72207                                                          
 
       Robert B. Aprison               Vice President              None               
        2983 Bryn Wood Drive                                                          
        Madison, WI 53711                                                             
 
                                                                                      
 
S      Richard Armstrong               Assistant Vice President    None               
 
                                                                                      
 
L      William W. Bagnard              Vice President              None               
 
                                                                                      
 
       Steven L. Barnes                Senior Vice President       None               
        8000 Town Line Avenue South                                                   
        Suite 204                                                                     
        Minneapolis, MN 55438                                                         
 
                                                                                      
 
       Michelle A. Bergeron            Vice President              None               
        4160 Gateswalk Drive                                                          
        Smyrna, GA 30080                                                              
 
                                                                                      
 
       Joseph T. Blair                 Senior Vice President       None               
        27 Drumlin Road                                                               
        West Simsbury, CT 06092                                                       
 
                                                          
 
       John A. Blanchard               Regional 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                                                       
 
                                                                                      
 
       Michael L. Brethower            Vice President              None               
        108 Hagen Court                                                               
        Georgetown, TX 78628                                                          
 
                                                                                      
 
       C. Alan Brown                   Regional Vice President     None               
        4129 Laclede Avenue                                                           
        St. Louis, MO  63108                                                          
 
                                                                                      
 
L      Daniel C. Brown                 Senior Vice President       None               
 
H      J. Peter Burns                  Vice President              None               
 
                                                                                      
 
       Brian C. Casey                  Regional Vice President     None               
        9508 Cable Drive                                                              
        Kensington, MD  20895                                                         
 
                                                                                      
 
       Victor C. Cassato               Vice President              None               
        609 W. Littleton Blvd., Suite 310                                                  
        Littleton, CO  80120                                                          
 
                                                                                      
 
       Christopher J. Cassin           Senior Vice President       None               
        111 W. Chicago Avenue, Suite G3                                                  
        Hinsdale, IL 60521                                                            
 
                                                                 
 
       Denise M. Cassin                Regional Vice President     None               
        1301 Stoney Creek Drive                                                       
        San Ramon, CA 94538                                                           
 
L      Larry P. Clemmensen             Director                    Senior Vice President   
 
                                                                                      
 
L      Kevin G. Clifford               Director, Senior Vice President   None               
 
                                                                                      
 
       Ruth M. Collier                 Vice President              None               
        145 West 67th Street, 12K                                                     
        New York, NY  10023                                                           
 
                                                                                      
 
       Thomas E. Cournoyer             Vice President              None               
        2333 Granada Boulevard                                                        
        Coral Gables, FL  33134                                                       
 
                                                                                      
 
       Douglas A. Critchell            Vice President              None               
        4116 Woodbine St.                                                             
       Chevy Chase, MD 20815                                                          
 
                                                                                      
 
L      Carl D. Cutting                 Vice President              None               
 
       Dan J. Delianedis               Regional Vice President     None               
        8689 Braxton Drive                                                            
        Eden Prairie, MN 55346                                                        
 
                                                                                      
 
       Michael A. Dilella              Vice President              None               
        P.O. Box 661                                                                  
        Ramsey, NJ  07446                                                             
 
                                                                                      
 
       G. Michael Dill                 Senior Vice President       None               
        505 E. Mail Street                                                            
        Jenks, OK 74037                                                               
 
                                                                                      
 
       Kirk D. Dodge                   Regional Vice President     None               
        325 E. Eisenhower Parkway                                                     
        Suite 106, #16                                                                
        Ann Arbor, MI  48108                                                          
 
                                                                                      
 
       Peter J. Doran                  Senior Vice President       None               
        1205 Franklin Avenue                                                          
        Garden City, NY 11530                                                         
 
                                                                                      
 
L      Michael J. Downer               Secretary                   None               
 
                                                                                      
 
       Robert W. Durbin                Vice President              None               
        74 Sunny Lane                                                                 
        Tiffin, OH 44883                                                              
 
                                                                                      
 
I      Lloyd G. Edwards                Vice President              None               
 
                                                                                      
 
L      Paul H. Fieberg                 Senior Vice President       None               
 
                                                                                      
 
       John Fodor                      Regional Vice President     None               
        15 Latisquama Road                                                            
       Southborough, MA 01722                                                         
 
                                                                                      
 
L      Mark P. Freeman, Jr.            President and Director      None               
 
                                                                                      
 
       Clyde E. Gardner                Vice President              None               
        Route 2, Box 3162                                                             
        Osage Beach, MO 65065                                                         
 
                                                                                      
 
B      Evelyn K. Glassford             Vice President              None               
 
                                                                                      
 
       Jeffrey J. Greiner              Regional Vice President     None               
        12210 Taylor Road                                                             
        Plain City, OH  43064                                                         
 
                                                                                      
 
       David E. Harper                 Vice President              None               
        R.D. 1, Box 210, Rte. 519                                                     
        Frenchtown, NJ 08825                                                          
 
                                                                                      
 
       Ronald R. Hulsey                Regional Vice President     None               
        6744 Avalon                                                                   
        Dallas, TX 75214                                                              
 
                                                                                      
 
       Robert S. Irish                 Regional Vice President     None               
        1225 Vista Del Mar Drive                                                      
        Delray Beach, FL 33483                                                        
 
                                                                                      
 
L      Robert L. Johansen              Vice President and Controller   None               
 
                                                               
 
       Michael J. Johnston             Chairman of the Board       None               
       630 Fifth Ave., 36th Floor                                                     
       New York, NY 10111-0121                                                        
 
       V. John Kriss                   Senior Vice President       None               
       P.O. Box 274                                                                   
       Surfside, CA 90743                                                             
 
       Arthur J. Levine                Vice President              None               
        12558 Highlands Place                                                         
        Fishers, IN 46038                                                             
 
                                                                                      
 
B      Karl A. Lewis                   Assistant Vice President    None               
 
                                                                                      
 
       T. Blake Liberty                Regional Vice President     None               
        1940 Blake St., Suite 303                                                     
        Denver, CO 80202                                                              
 
                                                                                      
 
L      Lorin E. Liesy                  Assistant Vice President    None               
 
                                                                                      
 
L      Susan G. Lindgren               Vice President - Institutional   None               
                                       Investment Services Division                      
 
                                                                                      
 
L      Stella Lopez                    Vice President              None               
 
                                                                                      
 
LW     Robert W. Lovelace              Director                    None               
 
                                                                                      
 
       Steve A. Malbasa                Regional Vice President     None               
        13405 Lake Shore Blvd.                                                        
        Cleveland, OH  44110                                                          
 
                                                                                      
 
       Steven M. Markel                Vice President              None               
        5241 South Race Street                                                        
        Littleton, CO 90121                                                           
 
                                                                                      
 
L      John C. Massar                  Director, Senior Vice President   None               
 
                                                                                      
 
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 Division                      
 
       David R. Murray                 Vice President              None               
        25701 S.E. 32nd Place                                                         
        Issaquah, WA 98027                                                            
 
                                                                                      
 
       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                  Regional Vice President     None               
       3084 Wilds Ridge Court                                                         
       Prior Lake, MN 55372                                                           
 
       Eric P. Olson                   Regional Vice President     None               
       62 Park Drive                                                                  
       Glenview, IL 60025                                                             
 
       Fredric Phillips                Regional Vice President     None               
        32 Ridge Avenue                                                               
        Newton Centre, MA  02159                                                      
 
                                                                                      
 
B      Candance D. Pilgram             Assistant Vice President    None               
 
       Carl S. Platou                  Regional Vice President     None               
       4021 96th Avenue, SE                                                           
       Mercer Island, WA 98040                                                        
 
L      John O. Post, Jr.               Vice President              None               
 
       Steven J. Reitman               Vice President              None               
        212 The Lane                                                                  
        Hinsdale, IL  60521                                                           
 
                                                                                      
 
       Brian A. Roberts                Regional Vice President     None               
        P.O. Box 472245                                                               
        Charlotte, NC  28247                                                          
 
                                                                                      
 
       George S. Ross                  Vice President              None               
        55 Madison Avenue                                                             
        Morristown, NJ 07962                                                          
 
                                                                                      
 
L      Julie D. Roth                   Vice President              None               
 
                                                                                      
 
L      James F. Rothenberg             Director                    None               
 
                                                                                      
 
       Douglas F. Rowe                 Regional Vice President     None               
       30008 Oakland Hills Drive                                                      
       Georgetown, TX 78628                                                           
 
       Christopher Rowey               Regional Vice President     None               
       9417 Beverlywood Street                                                        
       Los Angeles, CA 90034                                                          
 
                                                                                      
 
       Dean B. Rydquist                Vice President              None               
        1080 Bay Pointe Crossing                                                      
       Alpharetta, GA 30005                                                           
 
                                                                                      
 
       Richard R. Samson               Vice President              None               
        4604 Glencoe, Ave., No. 4                                                     
        Marina del Rey, CA 90292                                                      
 
       Joe D. Scarpitti                Regional Vice President     None               
       31465 St. Andrews                                                              
       Westlake, OH 44145                                                             
 
                                                                                      
 
L      Daniel B. Seivert               Assistant Vice President    None               
 
                                                                                      
 
L      R. Michael Shanahan             Director                    None               
 
                                                                                      
 
       David W. Short                  Director, Senior Vice President   None               
        1000 RIDC Plaza, Suite 212                                                    
        Pittsburgh, PA  15238                                                         
 
                                                                                      
 
       William P. Simon, Jr.           Vice President              None               
        554 Canterbury Lane                                                           
        Berwyn, PA 19312                                                              
 
                                                                                      
 
L      John C. Smith                   Vice President -            None               
                                       Institutional Investment Services                      
                                       Division                                       
 
                                                                                      
 
L      Mary E. Smith                   Assistant Vice President,   None               
                                       Institutional Investment Services                      
                                       Division                                       
 
       Rodney G. Smith                 Regional Vice President     None               
        100 N. Central Exp., Suite 1214                                                  
        Richardson, TX 75080                                                          
 
       Nicholas D. Spadaccini          Regional Vice President     None               
       855 Markley Woods Way                                                          
       Cincinnati, OH 45230                                                           
 
                                                                                      
 
       Daniel S. Spradling             Senior Vice President       None               
        #4 West Fourth Avenue, Suite 406                                                  
        San Mateo, CA 94402                                                           
 
       Thomas A. Stout                 Regional Vice President     None               
        12913 Kendale Lane                                                            
       Bowie, MD 20715                                                                
 
                                                                                      
 
       Craig R. Strauser               Regional Vice President     None               
        17040 Summer Place                                                            
       Lake Oswego, OR 97035                                                          
 
       Francis N. Strazzeri            Regional Vice President     None               
       31641 Saddletree Drive                                                         
       Westlake Village, CA 91361                                                     
 
                                                                                      
 
L      Drew Taylor                     Assistant Vice President    None               
 
                                                                                      
 
S      James P. Toomey                 Assistant Vice President    None               
 
                                                                                      
 
I      Christopher E. Trede            Assistant Vice President    None               
 
                                                                                      
 
       George F. Truesdail             Vice President              None               
        400 Abbotsford Court                                                          
        Charlotte, NC 28270                                                           
 
                                                                                      
 
       Scott W. Ursin-Smith            Regional Vice President     None               
        60 Reedland Woods Way                                                         
        Tiburon, CA 94920                                                             
 
                                                                                      
 
L      David M. Ward                   Assistant Vice President -   None               
                                       Institutional Investment Services                      
                                       Division                                       
 
                                                                                      
 
       Thomas E. Warren                Regional Vice President     None               
        1701 Starling Drive                                                           
       Sarasota, FL 34231                                                             
 
                                                                                      
 
L      J. Kelly Webb                   Senior Vice President, Treasurer   None               
 
                                                                                      
 
       Gregory J. Weimer                Vice President             None               
        125 Surrey Drive                                                              
        Canonsburg, PA  15317                                                         
 
                                                                                      
 
B      Timothy W. Weiss                Director                    None               
 
                                                                                      
 
       N. Dexter Williams              Vice President              None               
        25 Whitside Court                                                             
        Danville, CA 94526                                                            
 
                                                                                      
 
       Timothy J. Wilson               Regional Vice President     None               
       113 Farmview Place                                                             
       Venetia, PA  15367                                                             
 
                                                                                      
 
B      Laura L. Wimberly               Assistant Vice President    None               
 
                                                                                      
 
H      Marshall D. Wingo               Director, Senior Vice President   None               
 
                                                                                      
 
L      Robert L. Winston               Director and Senior Vice    None               
                                       President                                      
 
                                                                                      
 
       Laurie B. Wood                  Regional Vice President     None               
        3500 West Camino de Urania                                                    
        Tucson, AZ 85741                                                              
 
                                                                                      
 
       William R. Yost                 Regional 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               
        320 Robinson Drive                                                            
        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
SF  Business Address, P.O. 7650, San Francisco, CA 94120
B   Business Address, 135 South State College Blvd., Brea, CA 92821
S   Business Address, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230
H  Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I   Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
 
(C) NONE.
 
ITEM 30.  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, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071.  Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA  92821.
 
 Records covering shareholder accounts are maintained and kept by the Transfer
Agent, American Funds Service Company, 135 South State College Blvd., Brea, CA 
92821, 8000 IH-10, Suite 1400, San Antonio, TX 78230, 5300 Robin Hood Road,
Norfolk, VA 23513 and 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240.
 
 Records covering portfolio transactions are also maintained and kept by the
Custodian, The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York,
New York, 10081.
 
ITEM 31. MANAGEMENT SERVICES.
 
 None.
 
ITEM 32. UNDERTAKINGS.
 
 As reflected in the prospectus, the fund undertakes to provide each person to
whom a prospectus is delivered with a copy of the fund's latest annual report
to shareholders, upon request and without charge.
 
<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) and has duly caused this Post-Effective amendment to its 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 29th
day of December, 1997.
 
   CAPITAL INCOME BUILDER, INC.
   By    /s/ Paul G. Haaga, Jr.                   
         Paul G. Haaga, Jr., President
 
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed below on December 29, 1997, by the
following persons in the capacities indicated.
 
<TABLE>
<CAPTION>
         SIGNATURE                                     TITLE                              
 
<S>      <C>                                           <C>                                
                                                                                          
 
(1)      Principal Executive Officer:                                                     
 
                                                                                          
 
                                                                                          
 
           /s/ Jon B. Lovelace                         Chairman of the Board              
 
             (Jon B. Lovelace)                                                            
 
                                                                                          
 
(2)      Principal Financial Officer and                                                  
 
         Principal Accounting Officer:                                                    
 
                                                                                          
 
                                                                                          
 
          /s/ R. Marcia Gould                          Treasurer                          
 
             (R. Marica Gould)                                                            
 
                                                                                          
 
(3)      Directors:                                                                       
 
                                                                                          
 
         H. Frederick Christie*                        Director                           
 
                                                                                          
 
                                                                                          
 
          /s/ Paul G. Haaga, Jr.                       President and Director             
 
         (Paul G. Haaga, Jr.)                                                             
 
         Mary Myers Kauppila                           Director                           
 
         Jon B. Lovelace*                              Director                                      
 
         Gail L. Neale*                                Director                           
 
         Robert J. O'Neill                             Director                           
 
         Donald E. Petersen*                           Director                           
 
         Stefanie Powers                               Director                           
 
         Frank Stanton*                                Director                           
 
         Charles Wolf, Jr.*                            Director                           
 
</TABLE>
 
 *By  /s/ Vincent P. Corti                       
  (Vincent P. Corti, Attorney-in-Fact)
 
 Counsel reports that the 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)