Capital Income Builder, Inc.

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CAPITAL INCOME BUILDER, INC.

Part B
Statement of Additional Information

January 1, 2006
(as supplemented April 1, 2006)

This document is not a prospectus but should be read in conjunction with the
current prospectus or retirement plan prospectus of Capital Income Builder (the
"fund" or "CIB") dated January 1, 2006. You may obtain a prospectus from your
financial adviser or by writing to the fund at the following address:

Capital Income Builder, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
213/486-9200

Shareholders who purchase shares at net asset value through eligible retirement
plans should note that not all of the services or features described below may
be available to them. They should contact their employers for details.

TABLE OF CONTENTS

Item Page no.
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Certain investment limitations and guidelines . . . . . . . . . . . 2
Description of certain securities and investment techniques . . . . 2
Fundamental policies and investment restrictions. . . . . . . . . . 9
Management of the fund . . . . . . . . . . . . . . . . . . . . . . 12
Execution of portfolio transactions . . . . . . . . . . . . . . . . 33
Disclosure of portfolio holdings. . . . . . . . . . . . . . . . . . 34
Price of shares . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Taxes and distributions . . . . . . . . . . . . . . . . . . . . . . 37
Purchase and exchange of shares . . . . . . . . . . . . . . . . . . 42
Sales charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Sales charge reductions and waivers . . . . . . . . . . . . . . . . 47
Selling shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Shareholder account services and privileges . . . . . . . . . . . . 51
General information . . . . . . . . . . . . . . . . . . . . . . . . 54
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Financial statements

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CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal circumstances, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

INCOME PRODUCING SECURITIES

. The fund will invest at least 90% of its assets in income-producing
securities.

EQUITY SECURITIES

. The fund will invest at least 50% of its assets in equity securities.

DEBT SECURITIES

. The fund may invest up to 5% of its assets in nonconvertible debt
securities rated Ba or below by Moody's Investors Service ("Moody's") and
BB or below by Standard & Poor's Corporation ("S&P") or unrated but
determined to be of equivalent quality.

NON-U.S. SECURITIES

. The fund may invest up to 45% of its assets in securities of issuers
domiciled outside the United States.

* * * * * *

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment objectives, strategies and risks."

EQUITY SECURITIES -- Equity securities represent an ownership position in a
company. Equity securities held by the fund typically consist of common stocks.
The prices of equity securities fluctuate based on, among other things, events
specific to their issuers and market, economic and other conditions.

There may be little trading in the secondary market for particular equity
securities, which may adversely affect the fund's ability to value accurately or
dispose of such equity securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the value and/or
liquidity of equity securities.

INVESTING IN SMALLER CAPITALIZATION STOCKS -- The fund may invest in the stocks
of smaller capitalization companies (typically companies with market
capitalizations of less than $2.0 billion at the time of purchase). The
investment adviser believes that the issuers of smaller capitalization stocks
often provide attractive investment opportunities. However, investing in smaller
capitalization stocks can involve greater risk than is customarily associated
with investing in

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stocks of larger, more established companies. For example, smaller companies
often have limited product lines, limited markets or financial resources, may be
dependent for management on one or a few key persons and can be more susceptible
to losses. Also, their securities may be thinly traded (and therefore have to be
sold at a discount from current prices or sold in small lots over an extended
period of time), may be followed by fewer investment research analysts and may
be subject to wider price swings, thus creating a greater chance of loss than
securities of larger capitalization companies.

DEBT SECURITIES -- Debt securities are used by issuers to borrow money.
Generally, issuers pay investors periodic interest and repay the amount borrowed
either periodically during the life of the security and/or 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 and accrue interest at the
applicable coupon rate over a specified time period. The market prices of debt
securities fluctuate depending on such factors as interest rates, credit quality
and maturity. In general, market prices of debt securities decline when interest
rates rise and increase when interest rates fall.

Lower rated debt securities, rated Ba or below by Moody's and/or BB or below by
S&P or unrated but determined to be of equivalent quality, are described by the
rating agencies as speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness than higher rated debt
securities, or they may already be in default. The market prices of these
securities may fluctuate more than higher quality securities and may decline
significantly in periods of general economic difficulty. It may be more
difficult to dispose of, and to determine the value of, lower rated debt
securities.

Certain additional risk factors relating to debt securities are discussed below:

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- Debt securities may be
sensitive to economic changes, political and corporate developments, and
interest rate changes. In addition, during an economic downturn or
substantial period of rising interest rates, issuers that are highly
leveraged may experience increased financial stress that would adversely
affect their ability to meet projected business goals, to obtain additional
financing and to service their principal and interest payment obligations.
Periods of economic change and uncertainty also can be expected to result
in increased volatility of market prices and yields of certain debt
securities.

PAYMENT EXPECTATIONS -- Debt securities may contain redemption or call
provisions. If an issuer exercises these provisions in a lower interest
rate market, the fund would have to replace the security with a lower
yielding security, resulting in decreased income to investors. If the
issuer of a debt security defaults on its obligations to pay interest or
principal or is the subject of bankruptcy proceedings, the fund may incur
losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION -- There may be little trading in the secondary
market for particular debt securities, which may affect adversely the
fund's ability to value accurately or dispose of such debt securities.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and/or liquidity of debt
securities.

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The investment adviser attempts to reduce the risks described above through
diversification of the fund's portfolio and by credit analysis of each issuer,
as well as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.

SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS -- The fund may invest in
securities that have a combination of equity and debt characteristics. These
securities may at times behave more like equity than debt and vice versa. Some
types of convertible bonds or preferred stocks automatically convert into common
stocks. The prices and yields of nonconvertible preferred stocks generally move
with changes in interest rates and the issuer's credit quality, similar to the
factors affecting debt securities. Certain of these securities will be treated
as debt for fund investment limit purposes.

Convertible bonds, convertible preferred stocks and other securities may
sometimes be converted, or may automatically convert, into common stocks or
other securities at a stated conversion ratio. These securities, prior to
conversion, may pay a fixed rate of interest or a dividend. Because convertible
securities have both debt and equity characteristics, their value varies in
response to many factors, including the value of the underlying assets, general
market and economic conditions, and convertible market valuations, as well as
changes in interest rates, credit spreads and the credit quality of the issuer.

INVESTING IN VARIOUS COUNTRIES -- Investing outside the United States may
involve additional risks caused by, among other things, currency controls and
fluctuating currency values; different accounting, auditing, financial reporting
and legal standards and practices in some countries; changing local, regional
and global economic, political and social conditions; expropriation; changes in
tax policy; greater market volatility; differing securities market structures;
higher transaction costs; and various administrative difficulties, such as
delays in clearing and settling portfolio transactions or in receiving payment
of dividends. However, in the opinion of the investment adviser, investing
outside the United States also can reduce certain portfolio risks due to greater
diversification opportunities.

The risks described above may be heightened in connection with investments in
developing countries. Although there is no universally accepted definition, the
investment adviser generally considers a developing country as a country that is
in the earlier stages of its industrialization cycle with a low per capita gross
domestic product ("GDP") and a low market capitalization to GDP ratio relative
to those in the United States and the European Union. Historically, the markets
of developing countries have been more volatile than the markets of developed
countries. The fund may invest in securities of issuers in developing countries
only to a limited extent.

Additional costs could be incurred in connection with the fund's investment
activities outside the United States. Brokerage commissions may be higher
outside the United States, and the fund will bear certain expenses in connection
with its currency transactions. Furthermore, increased custodian costs may be
associated with maintaining assets in certain jurisdictions.

CURRENCY TRANSACTIONS -- The fund may purchase and sell currencies to facilitate
securities transactions and enter into forward currency contracts to protect
against changes in currency exchange rates. A forward currency contract is an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. Forward currency contracts
entered into by the fund will involve the purchase or sale of one currency
against the U.S. dollar.

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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 that may result from an increase in the value of the
currency. The fund will not generally attempt to protect against all potential
changes in exchange rates. The fund will segregate liquid assets that will be
marked to market daily to meet its forward contract commitments to the extent
required by the Securities and Exchange Commission.

Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions also may affect the
character and timing of income, gain or loss recognized by the fund for U.S.
federal income tax purposes.

U.S. GOVERNMENT OBLIGATIONS -- U.S. government obligations are securities backed
by the full faith and credit of the U.S. government. U.S. government obligations
include the following types of securities:

U.S. TREASURY SECURITIES -- U.S. Treasury securities include direct
obligations of the U.S. Treasury, such as Treasury bills, notes and bonds.
For these securities, the payment of principal and interest is
unconditionally guaranteed by the U.S. government, and thus they are of the
highest possible credit quality. Such securities are subject to variations
in market value due to fluctuations in interest rates, but, if held to
maturity, will be paid in full.

FEDERAL AGENCY SECURITIES BACKED BY "FULL FAITH AND CREDIT" -- The
securities of certain U.S. government agencies and government-sponsored
entities are guaranteed as to the timely payment of principal and interest
by the full faith and credit of the U.S. government. Such agencies and
entities include the Government National Mortgage Association (Ginnie Mae),
the Veterans Administration (VA), the Federal Housing Administration (FHA),
the Export-Import Bank (Exim Bank), the Overseas Private Investment
Corporation (OPIC), the Commodity Credit Corporation (CCC) and the Small
Business Administration (SBA).

OTHER FEDERAL AGENCY OBLIGATIONS -- Additional federal agency securities are
neither direct obligations of, nor guaranteed by, the U.S. government. These
obligations include securities issued by certain U.S. government agencies and
government-sponsored entities. However, they generally involve some form of
federal sponsorship: some operate under a government charter, some are backed by
specific types of collateral; some are supported by the issuer's right to borrow
from the Treasury; and others are supported only by the credit of the issuing
government agency or entity. These agencies and entities include, but are not
limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation
(Freddie Mac), Federal National Mortgage Association (Fannie Mae), Tennessee
Valley Authority and Federal Farm Credit Bank System.

PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by pools of mortgages or other assets including, but not limited to,
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:

"MORTGAGE-BACKED SECURITIES" -- These securities may be issued by U.S.
government agencies and government-sponsored entities, such as Ginnie Mae,
Fannie Mae and Freddie Mac, and by private entities. The payment of
interest and principal on mortgage--

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backed obligations issued by U.S. government agencies may be guaranteed by
the full faith and credit of the U.S. government (in the case of Ginnie
Mae), or may be guaranteed by the issuer (in the case of Fannie Mae and
Freddie Mac). However, these 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 those issued by U.S. government agencies. However, these
securities and the underlying mortgages are not guaranteed by any
government agencies. These securities generally are structured with one or
more types of credit enhancement. Mortgage-backed securities generally
permit borrowers to prepay their underlying mortgages. Prepayments can
alter the effective maturity of these instruments.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS) -- CMOs are also backed by a
pool of mortgages or mortgage loans, which are divided into two or more
separate bond issues. CMOs issued by U.S. government agencies are backed by
agency mortgages. Payments of principal and interest are passed through to
each bond issue at varying schedules resulting in bonds with different
coupons, effective maturities and sensitivities to interest rates. Some
CMOs may be structured in a way that when interest rates change, the impact
of changing prepayment rates on the effective maturities of certain issues
of these securities is magnified.

COMMERCIAL MORTGAGE-BACKED SECURITIES -- These securities are backed by
mortgages on commercial property, such as hotels, office buildings, retail
stores, hospitals and other commercial buildings. These securities may have
a lower prepayment uncertainty than other mortgage-related securities
because commercial mortgage loans generally prohibit or impose penalties on
prepayments of principal. In addition, commercial mortgage-related
securities often are structured with some form of credit enhancement to
protect against potential losses on the underlying mortgage loans. Many of
the risks of investing in commercial mortgage-backed securities reflect the
risks of investing in the real estate securing the underlying mortgage
loans, including the effects of local and other economic conditions on real
estate markets, the ability of tenants to make loan payments and the
ability of a property to attract and retain tenants.

ASSET-BACKED SECURITIES -- These 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 that can change their effective
maturities.

REAL ESTATE INVESTMENT TRUSTS -- The fund may invest in securities issued by
real estate investment trusts (REITs), which primarily invest in real estate or
real estate-related loans. Equity REITs own real estate properties, while
mortgage REITs hold construction, development and/or long-term mortgage loans.
The values of REITs may be affected by changes in the value of the underlying
property of the trusts, the creditworthiness of the issuer, property taxes,
interest rates and tax and regulatory requirements, such as those relating to
the environment. Both types of REITs are dependent upon management skill and the
cash flows generated by their holdings, the

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real estate market in general and the possibility of failing to qualify for any
applicable pass-through tax treatment or failing to maintain any applicable
exemptive status afforded under relevant laws.

VARIABLE AND FLOATING RATE OBLIGATIONS -- The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate based
upon changes in market rates or credit ratings. Variable and floating rate
obligations bear coupon rates that are adjusted at designated intervals, based
on the then current market rates of interest or credit ratings. The rate
adjustment features tend to limit the extent to which the market value of the
obligations will fluctuate.

CASH AND CASH EQUIVALENTS -- These include (a) commercial paper (for example,
short-term notes with maturities typically up to 12 months in length issued by
corporations, governmental bodies or bank/corporation sponsored conduits
(asset-backed commercial paper)) (b) short-term bank obligations (for example,
certificates of deposit, bankers' acceptances (time drafts on a commercial bank
where the bank accepts an irrevocable obligation to pay at maturity)) or bank
notes, (c) savings association and savings bank obligations (for example, bank
notes and certificates of deposit issued by savings banks or savings
associations), (d) securities of the U.S. government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less, and (e)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.

LOANS OF PORTFOLIO SECURITIES -- The fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors whose
financial condition is monitored by the investment adviser. The borrower must
maintain with the fund's custodian collateral consisting of cash, cash
equivalents or U.S. government securities equal to at least 100% of the value of
the borrowed securities, plus any accrued interest. The investment adviser will
monitor the adequacy of the collateral on a daily basis. The fund may at any
time call a loan of its portfolio securities and obtain the return of the loaned
securities. The fund will receive any interest paid on the loaned securities and
a fee or a portion of the interest earned on the collateral. The fund will limit
its loans of portfolio securities to an aggregate of 33-1/3% of the value of its
total assets, measured at the time any such loan is made.

FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities,
it assumes the risk of any decline in value of the security from the date of the
agreement. When the fund agrees to sell such securities, it does not participate
in further gains or losses with respect to the securities beginning on the date
of the agreement. If the other party to such a transaction fails to deliver or
pay for the securities, the fund could miss a favorable price or yield
opportunity, or could experience a loss.

The fund will not use these transactions for the purpose of leveraging and will
segregate liquid assets that will be marked to market daily in an amount
sufficient to meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent the
fund's aggregate commitments in connection with 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 if it were not in such a position. The fund will not borrow
money to settle these transactions and, therefore, will liquidate other
portfolio

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securities in advance of settlement if necessary to generate additional cash to
meet its obligations.

The fund may also enter into reverse repurchase agreements and "roll"
transactions. A reverse repurchase agreement involves the sale of a security by
a fund and its agreement to repurchase the security at a specified time and
price. A "roll" transaction involves the sale of mortgage-backed or other
securities together with a commitment to purchase similar, but not identical,
securities at a later date. The fund assumes the risk of price and yield
fluctuations during the time of the commitment. The fund will segregate liquid
assets that will be marked to market daily in an amount sufficient to meet its
payment obligations under "roll" transactions and reverse repurchase agreements
with broker-dealers (no collateral is required for reverse repurchase agreements
with banks).

REPURCHASE AGREEMENTS -- The fund may enter into repurchase agreements under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the investment adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the investment adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization of the collateral by the fund
may be delayed or limited.

RESTRICTED OR ILLIQUID SECURITIES -- The fund may purchase securities subject to
restrictions on resale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration under the
Securities Act of 1933 (the "1933 Act"), or in a registered public offering.
Where registration is required, the holder of a registered security may be
obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
it may be permitted to sell a security under an effective registration
statement. Difficulty in selling such securities may result in a loss or be
costly to the fund.

Securities (including restricted securities) not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures 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.

* * * * * *

PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. Short-term trading
profits are not the fund's objective, and changes in its investments are
generally accomplished gradually, though short-term transactions may
occasionally be made. High portfolio turnover involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

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Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. Transaction costs are
usually reflected in the spread between the bid and asked price.

A fund's portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. The fund's portfolio turnover rates for
the fiscal years ended October 31, 2005 and 2004 were 20% and 24%, respectively.
See "Financial highlights" in the prospectus for the fund's annual portfolio
turnover rate for each of the last five fiscal years.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions, which may not be changed without approval by
holders of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), as the vote of the
lesser of (a) 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 (b) more than 50% of the outstanding
voting securities. All percentage limitations are considered at the time
securities are purchased and are based on the fund's net assets unless otherwise
indicated. None of the following investment restrictions involving a maximum
percentage of assets will be considered violated unless the excess occurs
immediately after, and is caused by, an acquisition by the fund.

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;

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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;

With respect to investment restriction number 6, investments in 144A securities
and 4(2) commercial paper are excluded for the purposes of calculating the 10%
limitation.

With respect to investment restriction number 2, in determining industry
classifications for issuers domiciled outside the United States, 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 United
States 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.

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NONFUNDAMENTAL POLICIES -- The following policies may be changed without
shareholder approval.

1. The fund may not issue senior securities, except as permitted by the 1940
Act.

2. 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.

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MANAGEMENT OF THE FUND

BOARD OF DIRECTORS AND OFFICERS

YEAR FIRST NUMBER OF PORTFOLIOS
POSITION ELECTED WITHIN THE FUND
WITH THE A DIRECTOR PRINCIPAL OCCUPATION(S) DURING COMPLEX/2/ OVERSEEN
NAME AND AGE FUND OF THE FUND/1/ PAST FIVE YEARS BY DIRECTOR
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"NON-INTERESTED" DIRECTORS/4/
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Joseph C. Berenato Director 2005 Chairman of the Board and CEO, 6
Age: 59 Ducommun Incorporated (aerospace
components manufacturer)
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H. Frederick Director 1987 Private investor; former President and 19
Christie CEO, The Mission Group (non-utility
Age: 72 holding company, subsidiary of
Southern California Edison Company)
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Robert J. Denison Director 2005 Chair, First Security Management 6
Age: 64 (private investment)
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Koichi Itoh Director 2005 Executive Chairman of the Board, Itoh 5
Age: 65 Building Co., Ltd. (building
management); former President,
Autosplice KK (electronics)
------------------------------------------------------------------------------------------------------------------------
Merit E. Janow Director 2001 Professor, Columbia University, School 2
Age: 47 of International and Public Affairs
------------------------------------------------------------------------------------------------------------------------
Mary Myers Kauppila Chairman of 1992 Private investor; Chairman of the 5
Age: 51 the Board Board and CEO, Ladera Management
(Independent Company (venture capital and
and agriculture); former owner and
Non-Executive) President, Energy Investment, Inc.
------------------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY DIRECTOR
-----------------------------------------------------
"NON-INTERESTED" DIRECTORS/4/
-----------------------------------------------------

Joseph C. Berenato Ducommun Incorporated
Age: 59
-----------------------------------------------------
H. Frederick Ducommun Incorporated;
Christie IHOP Corporation;
Age: 72 Southwest Water Company
-----------------------------------------------------
Robert J. Denison None
Age: 64
-----------------------------------------------------
Koichi Itoh None
Age: 65
-----------------------------------------------------
Merit E. Janow The NASDAQ Stock Market,
Age: 47 Inc.
-----------------------------------------------------
Mary Myers Kauppila None
Age: 51
-----------------------------------------------------

Capital Income Builder -- Page 12

<PAGE>

Gail L. Neale Director 1987 President, The Lovejoy Consulting 6
Age: 70 Group, Inc. (a pro bono consulting
group advising nonprofit
organizations)
------------------------------------------------------------------------------------------------------------------------
Robert J. O'Neill Director 1992 Member of the Board of Directors, The 3
Age: 69 Lowy Institute of International
Policy, Sydney, Australia; former
Deputy Chairman of the Council and
Chairman of the International Advisory
Panel, Graduate School of Government,
University of Sydney, Australia;
former Chairman of the Council,
Australian Strategic Policy Institute;
former Chairman of the Council,
International Institute for Strategic
Studies; former Chichele Professor of
the History of War and Fellow, All
Souls College, University of Oxford
------------------------------------------------------------------------------------------------------------------------
Donald E. Petersen Director 1992 Retired; former Chairman of the Board 2
Age: 79 and CEO, Ford Motor Company
------------------------------------------------------------------------------------------------------------------------
Stefanie Powers Director 1989 - 1996 Actor, Producer; Co-founder and 2
Age: 63 1997 President, The William Holden Wildlife
Foundation; conservation consultant to
Land Rover and Jaguar North America;
author of The Jaguar Conservation
Trust
------------------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY DIRECTOR
-----------------------------------------------------
"NON-INTERESTED" DIRECTORS/4/
-----------------------------------------------------

Gail L. Neale None
Age: 70
-----------------------------------------------------
Robert J. O'Neill None
Age: 69
-----------------------------------------------------
Donald E. Petersen None
Age: 79
-----------------------------------------------------
Stefanie Powers None
Age: 63
-----------------------------------------------------

Capital Income Builder -- Page 13

<PAGE>

Steadman Upham Director 2001 President and Professor of 2
Age: 56 Anthropology, The University of Tulsa;
former President and Professor of
Archaeology, Claremont Graduate
University
------------------------------------------------------------------------------------------------------------------------
Charles Wolf, Jr. Director 1987 Senior Economic Adviser and Corporate 2
Age: 81 Fellow in International Economics, The
RAND Corporation; former Dean, The
RAND Graduate School
------------------------------------------------------------------------------------------------------------------------

OTHER DIRECTORSHIPS/3/ HELD
NAME AND AGE BY DIRECTOR
-----------------------------------------------------
"NON-INTERESTED" DIRECTORS/4/
-----------------------------------------------------

Steadman Upham None
Age: 56
-----------------------------------------------------
Charles Wolf, Jr. None
Age: 81
-----------------------------------------------------

PRINCIPAL OCCUPATION(S) DURING
YEAR FIRST PAST FIVE YEARS AND
ELECTED POSITIONS HELD NUMBER OF PORTFOLIOS
POSITION A DIRECTOR WITH AFFILIATED ENTITIES WITHIN THE FUND OTHER DIRECTORSHIPS/3/
WITH THE AND/OR OFFICER OR THE PRINCIPAL UNDERWRITER COMPLEX/2/ OVERSEEN HELD
NAME AND AGE FUND OF THE FUND/1/ OF THE FUND BY DIRECTOR BY DIRECTOR OR OFFICER
-----------------------------------------------------------------------------------------------------------------------------------
"INTERESTED" DIRECTORS/5/
-----------------------------------------------------------------------------------------------------------------------------------

James B. Lovelace Vice 1992 Senior Vice President and 2 None
Age: 49 Chairman of Director, Capital Research
the Board and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Paul G. Haaga, Director 1987 Executive Vice President and 16 None
Jr. Director, Capital Research
Age: 57 and Management Company;
Director, The Capital Group
Companies, Inc.*
-----------------------------------------------------------------------------------------------------------------------------------

Capital Income Builder -- Page 14

<PAGE>

PRINCIPAL OCCUPATION(S) DURING
POSITION YEAR FIRST ELECTED PAST FIVE YEARS AND POSITIONS HELD
WITH THE AN OFFICER WITH AFFILIATED ENTITIES
NAME AND AGE FUND OF THE FUND/1/ OR THE PRINCIPAL UNDERWRITER OF THE FUND
-----------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS/5/
-----------------------------------------------------------------------------------------------------------------------------------

Catherine M. President 1987 Senior Vice President and Director, Capital Research and
Ward Management Company; Director, American Funds Service Company*;
Age: 58 Secretary and Director, Capital Group Research, Inc.*
-----------------------------------------------------------------------------------------------------------------------------------
Joyce E. Gordon Executive Vice 1996 Senior Vice President and Director, Capital Research and
Age: 49 President Management Company*
-----------------------------------------------------------------------------------------------------------------------------------
Mark R. Senior Vice 2001 Senior Vice President and Director, Capital Research and
Macdonald President Management Company
Age: 46
-----------------------------------------------------------------------------------------------------------------------------------
Steven T. Watson Vice President 1997 Senior Vice President and Director, Capital Research Company*
Age: 50
-----------------------------------------------------------------------------------------------------------------------------------
Vincent P. Corti Secretary 1987 Vice President - Fund Business Management Group, Capital Research
Age: 49 and Management Company
-----------------------------------------------------------------------------------------------------------------------------------
Sheryl F. Treasurer 2003 Vice President - Fund Business Management Group, Capital Research
Johnson and Management Company
Age: 37
-----------------------------------------------------------------------------------------------------------------------------------
Jeffrey P. Regal Assistant Treasurer 2001 Vice President - Fund Business Management Group, Capital Research
Age: 34 and Management Company
-----------------------------------------------------------------------------------------------------------------------------------

* Company affiliated with Capital Research and Management Company.
/1/ Directors and officers of the fund serve until their resignation, removal or
retirement.
/2/ Capital Research and Management Company manages the American Funds, consisting
of 29 funds. Capital Research and Management Company also manages American
Funds Insurance Series,(R) which serves as the underlying investment vehicle
for certain variable insurance contracts, and Endowments, whose shareholders
are limited to certain nonprofit organizations.
/3/ This includes all directorships (other than those of the American Funds) that
are held by each Director as a director of a public company or a registered
investment company.
/4/ A "Non-Interested" Director refers to a Director who is not an "interested
person" within the meaning of the 1940 Act, on the basis of his or her
affiliation with the fund's investment adviser, Capital Research and Management
Company, or affiliated entities (including the fund's principal underwriter).
/5/ "Interested persons," within the meaning of the 1940 Act, on the basis of
their affiliation with the fund's investment adviser, Capital Research and
Management Company, or affiliated entities (including the fund's principal
underwriter).
/6/ All of the officers listed are officers and/or Directors/Trustees of one or
more of the other funds for which Capital Research and Management Company
serves as investment adviser.

THE ADDRESS FOR ALL DIRECTORS AND OFFICERS OF THE FUND IS 333 SOUTH HOPE STREET,
55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY.

Capital Income Builder -- Page 15

<PAGE>

FUND SHARES OWNED BY DIRECTORS AS OF DECEMBER 31, 2004

AGGREGATE DOLLAR RANGE/1/
OF SHARES
OWNED IN ALL FUNDS
IN THE AMERICAN FUNDS
DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN
NAME SHARES OWNED BY DIRECTOR
-------------------------------------------------------------------------------

"NON-INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
Joseph C. Berenato None/2/ $50,001 - $100,000/2/
-------------------------------------------------------------------------------
H. Frederick Christie Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Robert J. Denison None/2/ None/2/
-------------------------------------------------------------------------------
Koichi Itoh None/2/ Over $100,000/2/
-------------------------------------------------------------------------------
Merit E. Janow $10,001 - $50,000 $10,001 - $50,000
-------------------------------------------------------------------------------
Mary Myers Kauppila Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Gail L. Neale Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Robert J. O'Neill None None
-------------------------------------------------------------------------------
Donald E. Petersen Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Stefanie Powers Over $100,000 Over $100,000
-------------------------------------------------------------------------------
Steadman Upham $10,001 - $50,000 $50,001 - $100,000
-------------------------------------------------------------------------------
Charles Wolf, Jr. Over $100,000 Over $100,000
-------------------------------------------------------------------------------
"INTERESTED" DIRECTORS
-------------------------------------------------------------------------------
Paul G. Haaga, Jr. Over $100,000 Over $100,000
-------------------------------------------------------------------------------
James B. Lovelace Over $100,000 Over $100,000
-------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; and Over $100,000. The amounts listed
for "interested" Directors include shares owned through The Capital Group
Companies, Inc. retirement plan and 401(k) plan.
/2/ Messrs. Berenato, Denison and Itoh were elected Directors of the fund on
October 17, 2005. The dollar ranges of fund shares owned on that day were
"$10,001 - $50,000" (Berenato), "$10,001 - $50,000" (Denison) and "Over
$100,000" (Itoh). The aggregate dollar range of shares owned in the American
Funds family on that day were "Over $100,000" for all three Directors.

DIRECTOR COMPENSATION -- No compensation is paid by the fund to any officer or
Director who is a director, officer or employee of the investment adviser or its
affiliates. The fund typically pays each Non-Interested Director an annual fee
of $15,000. If the aggregate annual fees paid to a Non-Interested Director by
all funds advised by the investment adviser is less than $50,000, that
Non-Interested Director would be eligible for a $50,000 alternative fee. This
alternative fee is paid by those funds for which the Non-Interested Director
serves as a director on a pro rata basis according to each fund's relative share
of the annual fees that it would typically pay. The alternative fee reflects the
significant time and labor commitment required for a Director to oversee even
one fund. A Non-Interested Director who is Chairman of the Board (an
"independent chair") also receives an additional annual fee of $25,000, paid in
equal portions by the fund and the funds whose Boards and Committees typically
meet jointly with those of the fund. The fund pays to its independent chair an
attendance fee (as described below) for each meeting of a committee of the Board
of Directors attended as a non-voting ex-officio member.

Capital Income Builder -- Page 16
<PAGE>

In addition, the fund generally pays to Non-Interested Directors fees of (a)
$2,500 for each Board of Directors meeting attended and (b) $1,500 for each
meeting attended as a member of a committee of the Board of Directors.

Non-Interested Directors also receive attendance fees of (a) $2,500 for each
Director seminar or information session organized by the investment adviser, (b)
$1,500 for each joint Audit Committee meeting with all other audit committees of
funds advised by the investment adviser and (c) $500 for each meeting of the
Board or Committee Chairs of other funds advised by the investment adviser. The
fund and the other funds served by each Non-Interested Director each pay an
equal portion of these attendance fees.

The Nominating Committee of the Board of Directors, a Committee comprised
exclusively of Non-Interested Directors, reviews Director compensation
periodically, and typically recommends adjustments every other year. In making
its recommendations, the Nominating Committee considers a number of factors,
including operational, regulatory and other developments affecting the
complexity of the Board's oversight obligations, as well as comparative industry
data.

No pension or retirement benefits are accrued as part of fund expenses.
Non-Interested Directors may elect, on a voluntary basis, to defer all or a
portion of their fees through a deferred compensation plan in effect for the
fund. The fund also reimburses certain expenses of the Non-Interested Directors.

DIRECTOR COMPENSATION PAID DURING THE FISCAL YEAR ENDED OCTOBER 31, 2005

TOTAL COMPENSATION (INCLUDING
AGGREGATE COMPENSATION VOLUNTARILY DEFERRED COMPENSATION/1/)
(INCLUDING VOLUNTARILY FROM ALL FUNDS MANAGED BY
DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND MANAGEMENT
NAME FROM THE FUND COMPANY OR ITS AFFILIATES/2/
------------------------------------------------------------------------------------------

Joseph C. Berenato/3/ $ 4,583 $149,334
------------------------------------------------------------------------------------------
H. Frederick Christie/3/ 31,419 317,180
------------------------------------------------------------------------------------------
Robert J. Denison 3,667 94,837
------------------------------------------------------------------------------------------
Koichi Itoh/3/ 6,334 116,001
------------------------------------------------------------------------------------------
Merit E. Janow 42,450 87,500
------------------------------------------------------------------------------------------
Mary Myers Kauppila/3/ 32,400 186,500
------------------------------------------------------------------------------------------
Gail L. Neale 28,900 145,500
------------------------------------------------------------------------------------------
Robert J. O'Neill 41,450 94,000
------------------------------------------------------------------------------------------
Donald E. Petersen/3/ 38,200 78,000
------------------------------------------------------------------------------------------

Capital Income Builder -- Page 17
<PAGE>

Stefanie Powers 32,200 66,000
------------------------------------------------------------------------------------------
Steadman Upham/3/ 42,450 87,500
------------------------------------------------------------------------------------------
Charles Wolf, Jr. 43,450 89,500
------------------------------------------------------------------------------------------

/1/ Amounts may be deferred by eligible Directors under a nonqualified 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 American Funds
as designated by the Directors. Compensation shown in this table for the fiscal
year ended October 31, 2005 does not include earnings on amounts deferred in
previous fiscal years. See footnote 3 to this table for more information.
/2/ Capital Research and Management Company manages the American Funds, consisting
of 29 funds. Capital Research and Management Company also manages American
Funds Insurance Series,(R) which serves as the underlying investment vehicle
for certain variable insurance contracts, and Endowments, whose shareholders
are limited to certain nonprofit organizations.
/3/ Since the deferred compensation plan's adoption, the total amount of deferred
compensation accrued by the fund (plus earnings thereon) through the 2005
fiscal year for participating Directors is as follows: Joseph C. Berenato
($2,944), H. Frederick Christie ($186,880), Koichi Itoh ($2,541), Mary Myers
Kauppila ($421,715), Donald E. Petersen ($93,605) and Steadman Upham
($138,983). Amounts deferred and accumulated earnings thereon are not funded
and are general unsecured liabilities of the fund until paid to the Directors.

As of December 1, 2005, the officers and Directors of the fund and their
families, as a group, owned beneficially or of record less than 1% of the
outstanding shares of the fund.

FUND ORGANIZATION AND THE BOARD OF DIRECTORS -- The fund, an open-end,
diversified management investment company, was organized as a Maryland
corporation on June 8, 1987. Although the Board of Directors has delegated
day-to-day oversight to the investment adviser, all fund operations are
supervised by the fund's Board, which meets periodically and performs duties
required by applicable state and federal laws.

Under Maryland law, the business affairs of a fund are managed under the
direction of the Board of Directors, and all powers of the fund are exercised by
or under the authority of the Board except as reserved to the shareholders by
law or the fund's charter or by-laws. Maryland law requires each Director to
perform his/her duties as a Director, including his/her duties as a member of
any Board committee on which he/she serves, in good faith, in a manner he/she
reasonably believes to be in the best interest of the fund, and with the care
that an ordinarily prudent person in a like position would use under similar
circumstances.

Members of the Board who are not employed by the investment adviser or its
affiliates are paid certain fees for services rendered to the fund as described
above. They may elect to defer all or a portion of these fees through a deferred
compensation plan in effect for the fund.

The fund has several different classes of shares, including Class A, B, C, F,
529-A, 529-B, 529-C, 529-E, 529-F, R-1, R-2, R-3, R-4 and R-5 shares. The 529
share classes are available only through CollegeAmerica/(R)/ to investors
establishing qualified higher education savings accounts. The R share classes
are generally available only to employer-sponsored retirement plans. Class R-5
shares are also available to clients of the Personal Investment Management group
of Capital Guardian Trust Company who do not have an intermediary associated
with their accounts and without regard to the $1 million purchase minimum.

Capital Income Builder -- Page 18
<PAGE>

Shares of each class represent an interest in the same investment portfolio.
Each class has pro rata rights as to voting, redemption, dividends and
liquidation, except that each class bears different distribution expenses and
may bear different transfer agent fees and other expenses properly attributable
to the particular class as approved by the Board of Directors and set forth in
the fund's rule 18f-3 Plan. Each class' shareholders have exclusive voting
rights with respect to the respective class' rule 12b-1 plans adopted in
connection with the distribution of shares and on other matters in which the
interests of one class are different from interests in another class. Shares of
all classes of the fund vote together on matters that affect all classes in
substantially the same manner. Each class votes as a class on matters that
affect that class alone. Note that CollegeAmerica account owners are not
shareholders of the fund and, accordingly, do not have the rights of a
shareholder, such as the right to vote proxies relating to fund shares. As the
legal owner of the fund's shares, the Virginia College Savings Plan/SM/ will
vote any proxies relating to fund shares.

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.

The fund's Articles of Incorporation and by-laws as well as separate
indemnification agreements that the fund has entered into with Non-Interested
Directors provide in effect that, subject to certain conditions, the fund will
indemnify its officers and Directors against liabilities or expenses actually
and reasonably incurred by them relating to their service to the fund. However,
Directors are not protected from liability by reason of their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of their office.

REMOVAL OF DIRECTORS BY SHAREHOLDERS -- At any meeting of shareholders, duly
called and at which a quorum is present, shareholders may, by the affirmative
vote of the holders of a majority of the votes entitled to be cast, remove any
Director from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of removed Directors. The fund has
agreed, at the request of the staff of the Securities and Exchange Commission,
to apply the provisions of section 16(c) of the 1940 Act with respect to the
removal of Directors, as though the fund were a common-law trust. Accordingly,
the Directors of the fund will promptly call a meeting of shareholders for the
purpose of voting upon the removal of any Directors when requested in writing to
do so by the record holders of at least 10% of the outstanding shares.

COMMITTEES OF THE BOARD OF DIRECTORS -- The fund has an Audit Committee
comprised of H. Frederick Christie, Robert J. Denison, Merit E. Janow, Robert J.
O'Neill, Steadman Upham and Charles Wolf, Jr., none of whom is an "interested
person" of the fund within the meaning of the 1940 Act. The Committee provides
oversight regarding the fund's accounting and financial reporting policies and
practices, its internal controls and the internal controls of the fund's
principal service providers. The Committee acts as a liaison between the fund's
independent registered public accounting firm and the full Board of Directors.
Four Audit Committee meetings were held during the 2005 fiscal year.

The fund has a Nominating Committee comprised of Koichi Itoh, Gail L. Neale,
Donald E. Petersen, Stefanie Powers and Steadman Upham, none of whom is an
"interested person" of the fund within the meaning of the 1940 Act. The
Committee periodically reviews such

Capital Income Builder -- Page 19
<PAGE>

issues as the Board's composition, responsibilities, committees, compensation
and other relevant issues, and recommends any appropriate changes to the full
Board of Directors. The Committee also evaluates, selects and nominates
Non-Interested Director candidates to the full Board of Directors. While the
Committee normally is able to identify from its own and other resources an ample
number of qualified candidates, it will consider shareholder suggestions of
persons to be considered as nominees to fill future vacancies on the Board. Such
suggestions must be sent in writing to the Nominating Committee of the fund,
addressed to the fund's Secretary, and must be accompanied by complete
biographical and occupational data on the prospective nominee, along with a
written consent of the prospective nominee for consideration of his or her name
by the Committee. Two Nominating Committee meetings were held during the 2005
fiscal year.

The fund has a Contracts Committee comprised of Joseph C. Berenato, H. Frederick
Christie, Robert J. Denison, Koichi Itoh, Merit E. Janow, Mary Myers Kauppila,
Gail L. Neale, Robert J. O'Neill, Donald E. Petersen, Stefanie Powers, Steadman
Upham and Charles Wolf, Jr., none of whom is an "interested person" of the fund
within the meaning of the 1940 Act. The Committee's principal function is to
request, review and consider the information deemed necessary to evaluate the
terms of certain agreements between the fund and its investment adviser or the
investment adviser's affiliates, such as the Investment Advisory and Service
Agreement, Principal Underwriting Agreement, Administrative Services Agreement
and Plans of Distribution adopted pursuant to rule 12b-1 under the 1940 Act,
that the fund may enter into, renew or continue, and to make its recommendations
to the full Board of Directors on these matters. One Contracts Committee meeting
was held during the 2005 fiscal year.

The fund has a Proxy Committee comprised of Joseph C. Berenato, H. Frederick
Christie, Robert J. Denison, Koichi Itoh, Merit E. Janow, Mary Myers Kauppila,
Gail L. Neale, Robert J. O'Neill, Donald E. Petersen, Stephanie Powers, Steadman
Upham and Charles Wolf, Jr., none of whom is an "interested person" of the fund
within the meaning of the 1940 Act. The Committee's functions include reviewing
procedures and policies for voting proxies of companies held in the fund's
portfolio, monitoring certain contested proxy voting issues, and discussing
related current issues. Two Proxy Committee meetings were held during the 2005
fiscal year.

PROXY VOTING PROCEDURES AND GUIDELINES -- The fund and its investment adviser
have adopted Proxy Voting Guidelines (the "Guidelines") with respect to voting
proxies of securities held by the fund, other American Funds, Endowments and
American Funds Insurance Series. Certain American Funds, including the fund,
have established separate proxy committees that vote proxies or delegate to a
voting officer the authority to vote on behalf of those funds. Proxies for all
other funds are voted by a committee of the investment adviser under authority
delegated by those funds' Boards. Therefore, if more than one fund invests in
the same company, they may vote differently on the same proposal.

All U.S. proxies are voted. Non-U.S. proxies also are voted, provided there is
sufficient time and information available. After a proxy is received, the
investment adviser prepares a summary of the proposals in the proxy. A
discussion of any potential conflicts of interest is also included in the
summary. After reviewing the summary, one or more research analysts familiar
with the company and industry make a voting recommendation on the proxy
proposals. A second recommendation is made by a proxy coordinator (a senior
investment professional) based on the individual's knowledge of the Guidelines
and familiarity with proxy-related issues. The proxy summary and

Capital Income Builder -- Page 20
<PAGE>

voting recommendations are then sent to the appropriate proxy voting committee
for the final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible
for noting any potential material conflicts of interest. One example might be
where a director of one or more American Funds is also a director of a company
whose proxy is being voted. In such instances, proxy committee members are
alerted to the potential conflict. The proxy committee may then elect to vote
the proxy or seek a third-party recommendation or vote of an ad hoc group of
committee members.

The Guidelines, which have been in effect in substantially their current form
for many years, provide an important framework for analysis and decision-making
by all funds. However, they are not exhaustive and do not address all potential
issues. The Guidelines provide a certain amount of flexibility so that all
relevant facts and circumstances can be considered in connection with every
vote. As a result, each proxy received is voted on a case-by-case basis
considering the specific circumstances of each proposal. The voting process
reflects the funds' understanding of the company's business, its management and
its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio
securities during the 12-month period ended June 30 of each year will be
available on or about September 1 of each year (a) without charge, upon request
by calling American Funds Service Company at 800/421-0180 and (b) on the SEC's
website at www.sec.gov.

The following summary sets forth the general positions of the American Funds,
Endowments, American Funds Insurance Series and the investment adviser on
various proposals. A copy of the full Guidelines is available upon request, free
of charge, by calling American Funds Service Company at 800/421-0180 or visiting
the American Funds website.

DIRECTOR MATTERS -- The election of a company's slate of nominees for
director is generally supported. Votes may be withheld for some or all of
the nominees if this is determined to be in the best interest of
shareholders. Separation of the chairman and CEO positions may also be
supported. Typically, proposals to declassify the board (elect all
directors annually) are supported based on the belief that this increases
the directors' sense of accountability to shareholders.

SHAREHOLDER RIGHTS -- Proposals to repeal an existing poison pill, to
provide for confidential voting and to provide for cumulative voting are
usually supported. Proposals to eliminate the right of shareholders to act
by written consent or to take away a shareholder's right to call a special
meeting are not typically supported.

COMPENSATION AND BENEFIT PLANS -- Option plans are complicated, and many
factors are considered in evaluating a plan. Each plan is evaluated based
on protecting shareholder interests and a knowledge of the company and its
management. Considerations include the pricing (or repricing) of options
awarded under the plan and the impact of dilution on existing shareholders
from past and future equity awards. Compensation packages should be
structured to attract, motivate and retain existing employees and qualified
directors; however, they should not be excessive.

Capital Income Builder -- Page 21
<PAGE>

ROUTINE MATTERS -- The ratification of auditors, procedural matters
relating to the annual meeting and changes to company name are examples of
items considered routine. Such items are generally voted in favor of
management's recommendations unless circumstances indicate otherwise.

PRINCIPAL FUND SHAREHOLDERS -- The following table identifies those investors
who own of record or are known by the fund to own beneficially 5% or more of any
class of its shares as of the opening of business on December 1, 2005. Unless
otherwise indicated, the ownership percentages below represent ownership of
record rather than beneficial ownership.

NAME AND ADDRESS OWNERSHIP PERCENTAGE
----------------------------------------------------------------------------

Edward D. Jones & Co. Class A 34.12%
201 Progress Parkway Class B 20.10
Maryland Heights, MO 63043-3009
----------------------------------------------------------------------------
Citigroup Global Markets, Inc. Class B 8.72
333 W. 34th Street Class C 14.71
New York, NY 10001-2402
----------------------------------------------------------------------------
MLPF&S Class B 7.32
4800 Deer Lake Drive East, Floor 2 Class C 16.16
Jacksonville, FL 32246-6484
----------------------------------------------------------------------------
Hartford Life Insurance Co. Class R-1 18.48
P.O. Box 2999 Class R-3 21.34
Hartford, CT 06104-2999
----------------------------------------------------------------------------
Nationwide Trust Company Class R-3 10.79
P.O. Box 182029
Columbus, OH 43218-2029
----------------------------------------------------------------------------
Marshall & Ilsley Trust Co. Class R-4 16.17
11270 W. Park Place, Suite 400
Milwaukee, WI 53224-3638
----------------------------------------------------------------------------
CGTC Class R-5 18.95
333 S. Hope Street, Floor 49
Los Angeles, CA 90071
----------------------------------------------------------------------------

INVESTMENT ADVISER -- Capital Research and Management Company, the investment
adviser, founded in 1931, maintains research facilities in the United States and
abroad (Los Angeles, San Francisco, New York, Washington, DC, London, Geneva,
Hong Kong, Singapore and Tokyo). These facilities are staffed with experienced
investment professionals. The investment adviser is located at 333 South Hope
Street, Los Angeles, CA 90071 and 135 South State College Boulevard, Brea, CA
92821. It is a wholly owned subsidiary of The Capital Group Companies, Inc., a
holding company for several investment management subsidiaries. The investment
adviser manages equity assets for the American Funds through two divisions.
These divisions generally function separately from each other with respect to
investment research activities and they make investment decisions for the funds
on a separate basis.

Capital Income Builder -- Page 22
<PAGE>

POTENTIAL CONFLICTS OF INTEREST -- The investment adviser has adopted policies
and procedures that address conflicts of interest that may arise between a
portfolio counselor's management of the fund and his or her management of other
funds and accounts. Potential areas of conflict could involve allocation of
investment opportunities and trades among funds and accounts, use of information
regarding the timing of fund trades, personal investing activities, portfolio
counselor compensation and proxy voting of portfolio securities. The investment
adviser has adopted policies and procedures that it believes are reasonably
designed to address these conflicts. However, there is no guarantee that such
policies and procedures will be effective or that the investment adviser will
anticipate all potential conflicts of interest.

COMPENSATION OF INVESTMENT PROFESSIONALS -- As described in the prospectus, the
investment adviser uses a system of multiple portfolio counselors in managing
fund assets. In addition, Capital Research and Management Company's investment
analysts may make investment decisions with respect to a portion of a fund's
portfolio within their research coverage. Portfolio counselors and investment
analysts may also manage assets in other mutual funds advised by Capital
Research and Management Company.

Portfolio counselors and investment analysts are paid competitive salaries by
Capital Research and Management Company. In addition, they may receive bonuses
based on their individual portfolio results. Investment professionals also may
participate in profit-sharing plans. The relative mix of compensation
represented by bonuses, salary and profit-sharing will vary depending on the
individual's portfolio results, contributions to the organization and other
factors. In order to encourage a long-term focus, bonuses based on investment
results are calculated by comparing pretax total returns to relevant benchmarks
over both the most recent year and a four-year rolling average, with the greater
weight placed on the four-year rolling average. For portfolio counselors,
benchmarks may include measures of the marketplaces in which the relevant fund
invests and measures of the results of comparable mutual funds. For investment
analysts, benchmarks may include relevant market measures and appropriate
industry or sector indexes reflecting their areas of expertise. Capital Research
and Management Company also separately compensates analysts for the quality of
their research efforts. The benchmarks against which Capital Income Builder
portfolio counselors are measured include: Lipper Income Funds Index; Citigroup
Broad Investment-Grade 1-10 Year Bond Index and total return of the Cash
Management Trust of America.

PORTFOLIO COUNSELOR FUND HOLDINGS AND OTHER MANAGED ACCOUNTS -- As described
below, portfolio counselors may personally own shares of the fund. In addition,
portfolio counselors may manage a portion of other mutual funds or accounts
advised by Capital Research and Management Company or its affiliates.

Capital Income Builder -- Page 23
<PAGE>

THE FOLLOWING TABLE REFLECTS INFORMATION AS OF OCTOBER 31, 2005:

NUMBER NUMBER
OF OTHER OF OTHER NUMBER
REGISTERED POOLED OF OTHER
INVESTMENT INVESTMENT ACCOUNTS
COMPANIES (RICS) VEHICLES (PIVS) THAT
THAT THAT PORTFOLIO
PORTFOLIO PORTFOLIO COUNSELOR
DOLLAR RANGE COUNSELOR COUNSELOR MANAGES
OF FUND MANAGES MANAGES (ASSETS OF
PORTFOLIO SHARES (ASSETS OF RICS (ASSETS OF PIVS OTHER ACCOUNTS
COUNSELOR OWNED/1/ IN BILLIONS)/2/ IN BILLIONS)/3/ IN BILLIONS)/4/
-----------------------------------------------------------------------------------------

James B. Lovelace Over 2 $151.9 1 $0.04 None
$1,000,000
------------------------------------------------------------------------------------------
Joyce E. Gordon Over 2 $ 93.1 None None
$1,000,000
------------------------------------------------------------------------------------------
Mark R. Macdonald $500,001 - 4 $198.5 None None
$1,000,000
------------------------------------------------------------------------------------------
Steven T. Watson $100,001 - 3 $173.4 None None
$500,000
------------------------------------------------------------------------------------------
Timothy D. Armour $500,001 - 3 $103.5 None None
$1,000,000
------------------------------------------------------------------------------------------
Michael Cohen None/5/ None None None
------------------------------------------------------------------------------------------
David A. Hoag $500,001 - 1 $ 5.2 None None
$1,000,000
------------------------------------------------------------------------------------------
David M. Riley Over None None None
$1,000,000
------------------------------------------------------------------------------------------

/1/ Ownership disclosure is made using the following ranges: None; $1 - $10,000;
$10,001 - $50,000; $50,001 - $100,000; $100,001 - $500,000; $500,001 -
$1,000,000; and Over $1,000,000. The amounts listed include shares owned
through The Capital Group Companies, Inc. retirement plan and 401(k) plan.
/2/ Indicates fund(s) where the portfolio counselor also has significant
responsibilities for the day to day management of the fund(s). Assets noted are
the total net assets of the registered investment companies and are not
indicative of the total assets managed by the individual, which is a
substantially lower amount.
/3/ Represents funds advised or sub-advised by Capital Research and Management
Company and sold outside the United States. Assets noted are the total net
assets of the fund and are not indicative of the total assets managed by the
individual, which is a substantially lower amount.
/4/ Reflects other professionally managed accounts held at companies affiliated
with Capital Research and Management Company. Personal brokerage accounts of
portfolio counselors and their families are not reflected.
/5/ Portfolio counselor resides outside the United States. As such, tax
considerations may adversely influence his or her ability to own shares of the
fund.

INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and Service
Agreement (the "Agreement") between the fund and the investment adviser will
continue in effect until October 31, 2006, 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 (a) 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 (b) the vote of a majority of Directors who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party,

Capital Income Builder -- Page 24
<PAGE>

cast in person at a meeting called for the purpose of voting on such approval.
The Agreement provides that the investment adviser has no liability to the fund
for its acts or omissions in the performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that either
party has the right to terminate it, without penalty, upon 60 days' written
notice to the other party, and that the Agreement automatically terminates in
the event of its assignment (as defined in the 1940 Act).

In determining whether to renew the Agreement each year, the Contracts Committee
of the Board of Directors evaluates information provided by the investment
adviser in accordance with Section 15(c) of the 1940 Act, and presents its
recommendations to the full Board of Directors. That information typically
relates to: the nature, extent and quality of the investment adviser's services;
the fund's investment results on an absolute basis and as compared with various
indices and peer funds; the fund's advisory fee and other expenses on an
absolute basis and as compared with various indices and peer funds, as well as
other funds advised by the investment adviser; financial information concerning
the investment adviser, including profitability comparisons with certain
publicly-held mutual fund managers; information with respect to the sharing of
economies of scale; compliance and regulatory matters; fees charged by the
investment adviser's affiliates to institutional clients; and investment adviser
compliance, regulatory and personnel matters.

In addition to providing investment advisory services, the investment adviser
furnishes the services and pays the compensation and travel expenses of persons
to perform the fund's executive, administrative, clerical and bookkeeping
functions, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies and postage used at
the fund's offices. The fund pays all expenses not assumed by the investment
adviser, including, but not limited to, custodian, stock transfer and dividend
disbursing fees and expenses; shareholder recordkeeping and administrative
expenses; costs of the designing, printing and mailing of reports, prospectuses,
proxy statements and notices to its shareholders; taxes; expenses of the
issuance and redemption of fund shares (including stock certificates,
registration and qualification fees and expenses); expenses pursuant to the
fund's plans of distribution (described below); legal and auditing expenses;
compensation, fees and expenses paid to Non-Interested Directors; association
dues; costs of stationery and forms prepared exclusively for the fund; and costs
of assembling and storing shareholder account data.

The management fee is based upon the daily net assets of the fund and monthly
gross investment income. Gross investment income is determined in accordance
with generally accepted accounting principles.

The management fee is based on the following annualized rates and daily net
asset levels:

Net asset level

RATE IN EXCESS OF UP TO
-----------------------------------------------------------------------------

0.240% $ 0 $ 1,000,000,000
-----------------------------------------------------------------------------
0.200 1,000,000,000 2,000,000,000
-----------------------------------------------------------------------------
0.180 2,000,000,000 3,000,000,000
-----------------------------------------------------------------------------

Capital Income Builder -- Page 25
<PAGE>

Net asset level

RATE IN EXCESS OF UP TO
-----------------------------------------------------------------------------

0.165 3,000,000,000 5,000,000,000
-----------------------------------------------------------------------------
0.155 5,000,000,000 8,000,000,000
-----------------------------------------------------------------------------
0.150 8,000,000,000 13,000,000,000
-----------------------------------------------------------------------------
0.145 13,000,000,000 17,000,000,000
-----------------------------------------------------------------------------
0.140 17,000,000,000 21,000,000,000
-----------------------------------------------------------------------------
0.135 21,000,000,000 27,000,000,000
-----------------------------------------------------------------------------
0.130 27,000,000,000 34,000,000,000
-----------------------------------------------------------------------------
0.125 34,000,000,000 44,000,000,000
-----------------------------------------------------------------------------
0.120 44,000,000,000 55,000,000,000
-----------------------------------------------------------------------------
0.117 55,000,000,000
-----------------------------------------------------------------------------

The Board of Directors approved an amendment to the agreement effective November
1, 2005 providing for a reduced rate of 0.117% on daily net assets in excess of
$55 billion.

The Agreement also provides for fees based on monthly gross investment income at
the following annualized rates:

Monthly gross income

RATE IN EXCESS OF UP TO
----------------------------------------------------------------------------

3.00% $ 0 $100,000,000
----------------------------------------------------------------------------
2.50 100,000,000
----------------------------------------------------------------------------

Assuming net assets of $30 billion and gross investment income levels of 3%, 4%,
5%, 6% and 7%, management fees would be 0.24%, 0.27%, 0.30%, 0.32% and 0.35%,
respectively.

The investment adviser has agreed that in the event the Class A expenses of the
fund (with the exclusion of interest, taxes, brokerage costs, distribution
expenses pursuant to a plan under Rule 12b-1 and extraordinary expenses, such as
litigation and acquisitions) for any fiscal year ending on a date on which the
Agreement is in effect, exceed the expense limitations, if any, applicable to
the fund pursuant to state securities laws or any regulations thereunder, it
will reduce its fee by the extent of such excess and, if required pursuant to
any such laws or regulations thereunder, will reimburse the fund in the amount
of such excess. To the extent the investment adviser is required to reduce its
management fee due to Class A share expense ratios exceeding the above limit,
the investment adviser will either: (i) reduce its management fee similarly for
other classes of shares, or (ii) reimburse the fund for other expenses to the
extent necessary to result in an expense reduction only for Class A shares of
the fund.

Capital Income Builder -- Page 26
<PAGE>

For the fiscal years ended October 31, 2005 and 2004, the investment adviser was
entitled to receive from the fund management fees of $124,219,000 and
$81,037,000, respectively. After giving effect to the management fee waivers
described below, the fund paid the investment adviser management fees of
$114,050,000 (a reduction of $10,169,000) and $79,841,000 (a reduction of
$1,196,000) for the fiscal years ended October 31, 2005 and 2004, respectively.
For the fiscal year ended October 31, 2003, the fund paid the investment adviser
management fees of $48,915,000.

For the period from September 1, 2004 through March 31, 2005, the investment
adviser agreed to waive 5% of the management fees that it was otherwise entitled
to receive under the Agreement. Beginning April 1, 2005, this waiver increased
to 10% of the management fees that the investment adviser is otherwise entitled
to receive and is expected to continue at this level until further review. As a
result of this waiver, management fees will be reduced similarly for all classes
of shares of the fund.

In addition, during the year ended October 31, 2005, the investment adviser
waived the fees in excess of the rates provided in the November 1, 2005 amended
investment advisory and service agreement.

ADMINISTRATIVE SERVICES AGREEMENT -- The Administrative Services Agreement (the
"Administrative Agreement") between the fund and the investment adviser relating
to the fund's Class C, F, R and 529 shares will continue in effect until October
31, 2006, 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 the vote of a majority of Directors who are not parties to the
Administrative 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 fund may terminate the Administrative Agreement at any time
by vote of a majority of Non-Interested Directors. The investment adviser has
the right to terminate the Administrative Agreement upon 60 days' written notice
to the fund. The Administrative Agreement automatically terminates in the event
of its assignment (as defined in the 1940 Act).

Under the Administrative Agreement, the investment adviser provides certain
transfer agent and administrative services for shareholders of the fund's Class
C and F shares, and all Class R and 529 shares. The investment adviser contracts
with third parties, including American Funds Service Company, the fund's
Transfer Agent, to provide these services. Services include, but are not limited
to, shareholder account maintenance, transaction processing, tax information
reporting and shareholder and fund communications. In addition, the investment
adviser monitors, coordinates and oversees the activities performed by third
parties providing such services. For Class R-1 and R-2 shares, the investment
adviser has agreed to pay a portion of the fees payable under the Administrative
Agreement that would otherwise have been paid by the fund. For the year ended
October 31, 2005, the total fees paid by the investment adviser were $283,000.

As compensation for its services, the investment adviser receives transfer agent
fees for transfer agent services provided to the fund's Class C, F, R and 529
shares. Transfer agent fees are paid monthly according to a fee schedule
contained in a Shareholder Services Agreement between the fund and American
Funds Service Company. The investment adviser also receives an administrative
services fee at the annual rate of up to 0.15% of the average daily net assets
for each applicable share class (excluding Class R-5 shares) for administrative
services provided to these share classes. Administrative services fees are paid
monthly and accrued daily. The

Capital Income Builder -- Page 27
<PAGE>

investment adviser uses a portion of this fee to compensate third parties for
administrative services provided to the fund. Of the remainder, the investment
adviser will not retain more than 0.05% of the average daily net assets for each
applicable share class. For Class R-5 shares, the administrative services fee is
calculated at the annual rate of up to 0.10% of the average daily net assets.
This fee is subject to the same uses and limitations described above.

During the 2005 fiscal year, administrative services fees, gross of any payments
made by the investment adviser, were:

ADMINISTRATIVE SERVICES FEE
------------------------------------------------------------------------------

CLASS C $7,329,000
------------------------------------------------------------------------------
CLASS F 2,364,000
------------------------------------------------------------------------------
CLASS 529-A 459,000
------------------------------------------------------------------------------
CLASS 529-B 110,000
------------------------------------------------------------------------------
CLASS 529-C 226,000
------------------------------------------------------------------------------
CLASS 529-E 26,000
------------------------------------------------------------------------------
CLASS 529-F 6,000
------------------------------------------------------------------------------
CLASS R-1 46,000
------------------------------------------------------------------------------
CLASS R-2 1,066,000
------------------------------------------------------------------------------
CLASS R-3 407,000
------------------------------------------------------------------------------
CLASS R-4 74,000
------------------------------------------------------------------------------
CLASS R-5 252,000
------------------------------------------------------------------------------

PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION -- American Funds Distributors,
Inc. (the "Principal Underwriter") is the principal underwriter of the fund's
shares. The Principal Underwriter is located at 333 South Hope Street, Los
Angeles, CA 90071; 135 South State College Boulevard, Brea, CA 92821; 3500
Wiseman Boulevard, San Antonio, TX 78251; 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513.

The Principal Underwriter receives revenues from sales of the fund's shares. For
Class A and 529-A shares, the Principal Underwriter receives commission revenue
consisting of that portion of the Class A and 529-A sales charge remaining after
the allowances by the Principal Underwriter to investment dealers. For Class B
and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees
paid by the fund for distribution expenses to a third party and receives the
revenue remaining after compensating investment dealers for sales of Class B and
529-B shares. The fund also pays the Principal Underwriter for advancing the
immediate service fees paid to qualified dealers of Class B and 529-B shares.
For Class C and 529-C shares, the Principal Underwriter receives any contingent
deferred sales charges that apply during the first year after purchase. The fund
pays the Principal Underwriter for advancing the immediate service fees and
commissions paid to qualified dealers of Class C and 529-C shares. For Class
529-E shares, the fund pays the Principal Underwriter for advancing the
immediate service fees and commissions paid to qualified dealers. For Class F
and 529-F shares, the fund pays the Principal

Capital Income Builder -- Page 28
<PAGE>

Underwriter for advancing the immediate service fees paid to qualified dealers
and advisers who sell Class F and 529-F shares. For Class R-1, R-2, R-3 and R-4
shares, the fund pays the Principal Underwriter for advancing the immediate
service fees paid to qualified dealers and advisers who sell Class R-1, R-2, R-3
and R-4 shares.

Commissions, revenue or service fees retained by the Principal Underwriter after
allowances or compensation to dealers were:

COMMISSIONS, ALLOWANCE OR
REVENUE COMPENSATION
FISCAL YEAR/PERIOD OR FEES RETAINED TO DEALERS
-----------------------------------------------------------------------------------------------

CLASS A 2005 $62,521,000 $278,645,000
2004 39,449,000 176,000,000
2003 34,650,000 162,187,000
-----------------------------------------------------------------------------------------------
CLASS B 2005 3,982,000 30,029,000
2004 4,241,000 28,435,000
2003 4,991,000 35,354,000
-----------------------------------------------------------------------------------------------
CLASS C 2005 -- 23,732,000
2004 -- 15,511,000
2003 -- 11,256,000
-----------------------------------------------------------------------------------------------
CLASS 529-A 2005 1,102,000 5,196,000
2004 583,000 2,772,000
2003 466,000 2,298,000
-----------------------------------------------------------------------------------------------
CLASS 529-B 2005 120,000 734,000
2004 132,000 709,000
2003 132,000 806,000
-----------------------------------------------------------------------------------------------
CLASS 529-C 2005 -- 691,000
2004 -- 477,000
2003 -- 343,000
-----------------------------------------------------------------------------------------------

Capital Income Builder -- Page 29
<PAGE>

The fund has adopted plans of distribution (the "Plans") pursuant to rule 12b-1
under the 1940 Act. The Principal Underwriter receives amounts payable pursuant
to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans
(together with the Principal Underwriting Agreement) have been approved by the
full Board of Directors and separately by a majority of the Directors who are
not "interested persons" of the fund and who have no direct or indirect
financial interest in the operation of the Plans or the Principal Underwriting
Agreement. Potential benefits of the Plans to the fund include quality
shareholder services; savings to the fund in transfer agency costs; and benefits
to the investment process from growth or stability of assets. The selection and
nomination of Directors who are not "interested persons" of the fund are
committed to the discretion of the Directors who are not "interested persons"
during the existence of the Plans. The Plans may not be amended to increase
materially the amount spent for distribution without shareholder approval. Plan
expenses are reviewed quarterly and the Plans must be renewed annually by the
Board of Directors.

Under the Plans, the fund may annually expend the following amounts 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: (a) for Class A shares, up to 0.30% of the average daily
net assets attributable to Class A shares; (b) for Class 529-A shares, up to
0.50% of the average daily net assets attributable to Class 529-A shares; (c)
for Class B and 529-B shares, up to 1.00% of the average daily net assets
attributable to Class B and 529-B shares, respectively; (d) for Class C and
529-C shares, up to 1.00% of the average daily net assets attributable to Class
C and 529-C shares, respectively; (e) for Class 529-E shares, up to 0.75% of the
average daily net assets attributable to Class 529-E shares; (f) for Class F and
529-F shares, up to 0.50% of the average daily net assets attributable to Class
F and 529-F shares; (g) for Class R-1 shares, up to 1.00% of the average daily
net assets attributable to Class R-1 shares; (h) for Class R-2 shares, up to
1.00% of the average daily net assets attributable to Class R-2 shares; (i) for
Class R-3 shares, up to 0.75% of the average daily net assets attributable to
Class R-3 shares; and (j) for Class R-4 shares, up to 0.50% of the average daily
net assets attributable to Class R-4 shares. The fund has not adopted a Plan for
Class R-5 shares; accordingly, no 12b-1 fees are paid from Class R-5 share
assets.

For Class A and 529-A shares: (a) up to 0.25% is reimbursed to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to the amount allowable under the fund's Class
A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying
distribution-related expenses, including for Class A and 529-A shares dealer
commissions and wholesaler compensation paid on sales of shares of $1 million or
more purchased without a sales charge (including purchases by employer-sponsored
defined contribution-type retirement plans investing $1 million or more or with
100 or more eligible employees, and retirement plans, endowments and foundations
with $50 million or more in assets -- "no load purchases"). Commissions on no
load purchases of Class A and 529-A shares, in excess of the Class A and 529-A
plan limitations not reimbursed to the Principal Underwriter during the most
recent fiscal quarter are recoverable for five quarters, provided that such
commissions do not exceed the annual expense limit. After five quarters, these
commissions are not recoverable.

For Class B and 529-B shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including the financing of commissions paid to
qualified dealers.

Capital Income Builder -- Page 30
<PAGE>

For Class C and 529-C shares: (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.75% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class 529-E shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class F and 529-F shares: currently up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers or advisers.

For Class R-1 shares: (a) up to 0.25% is paid to the Principal Underwriter for
paying service-related expenses, including paying service fees to qualified
dealers, and (b) up to 0.75% is paid to the Principal Underwriter for
distribution-related expenses, including commissions paid to qualified dealers.

For Class R-2 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.50% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-3 shares: currently (a) up to 0.25% is paid to the Principal
Underwriter for paying service-related expenses, including paying service fees
to qualified dealers, and (b) up to 0.25% is paid to the Principal Underwriter
for paying distribution-related expenses, including commissions paid to
qualified dealers.

For Class R-4 shares: currently up to 0.25% is paid to the Principal Underwriter
for paying service-related expenses, including paying service fees to qualified
dealers or advisers.

As of the end of the 2005 fiscal year, total 12b-1 expenses, and the portion of
the expense that remained unpaid, were:

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
-------------------------------------------------------------------------------------

CLASS A $82,450,000 $10,074,000
-------------------------------------------------------------------------------------
CLASS B 30,223,000 3,246,000
-------------------------------------------------------------------------------------
CLASS C 48,483,000 7,522,000
-------------------------------------------------------------------------------------
CLASS F 4,332,000 874,000
-------------------------------------------------------------------------------------
CLASS 529-A 658,000 107,000
-------------------------------------------------------------------------------------
CLASS 529-B 709,000 81,000
-------------------------------------------------------------------------------------
CLASS 529-C 1,556,000 254,000
-------------------------------------------------------------------------------------
CLASS 529-E 103,000 19,000
-------------------------------------------------------------------------------------
CLASS 529-F 5,000 0
-------------------------------------------------------------------------------------

Capital Income Builder -- Page 31
<PAGE>

12B-1 UNPAID LIABILITY
12B-1 EXPENSES OUTSTANDING
-------------------------------------------------------------------------------------

CLASS R-1 222,000 53,000
-------------------------------------------------------------------------------------
CLASS R-2 1,413,000 280,000
-------------------------------------------------------------------------------------
CLASS R-3 978,000 198,000
-------------------------------------------------------------------------------------
CLASS R-4 115,000 28,000
-------------------------------------------------------------------------------------

OTHER COMPENSATION TO DEALERS -- As of January 2006, the top dealers that
American Funds Distributors anticipates will receive additional compensation
(as described in the prospectus) include:

A. G. Edwards & Sons, Inc.
AIG Advisors Group
American General Securities Inc.
Ameritas Investment Corp.
AXA Advisors, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Capital Analysts, Inc.
Commonwealth Financial Network
Cuna Brokerage Services, Inc.
Deutsche Bank Securities Inc.
Edward Jones
Ferris, Baker Watts, Inc.
Genworth Financial Securities Corp.
Hefren-Tillotson, Inc.
Hornor, Townsend & Kent, Inc.
ING Advisors Network Inc.
InterSecurities, Inc./Transamerica Financial Advisors, Inc.
Investacorp, Inc.
Janney Montgomery Scott LLC
Jefferson Pilot Securities Corporation
JJB Hilliard, WL Lyons, Inc./PNC Bank
Legg Mason Wood Walker, Inc.
Lincoln Financial Advisors Corporation
McDonald Investments Inc./Society National Bank
Merrill Lynch, Pierce, Fenner & Smith Inc.
Metlife Enterprises
MML Investors Services, Inc.
Morgan Keegan & Company, Inc.
Morgan Stanley DW
NatCity Investment, Inc.
National Planning Holdings Inc.
NFP Securities, Inc.
Northwestern Mutual Investment Services, LLC.
Pacific Select Distributors Inc.
Park Avenue Securities LLC
Piper Jaffray & Co.
Princor Financial Services
ProEquities, Inc.
Raymond James Financial Services/Raymond James & Associates
RBC Dain Rauscher Inc.
Robert W. Baird & Co. Inc.
Securian Financial Services/C.R.I. Securities Inc.
Securities Service Network Inc.
Signator Investors, Inc.
Smith Barney
Stifel, Nicolaus & Company, Inc.
The O.N. Equity Sales Company
UBS Financial Services Inc.
US Bancorp Investments, Inc.
Wachovia Securities

Capital Income Builder -- Page 32
<PAGE>

EXECUTION OF PORTFOLIO TRANSACTIONS

As described in the prospectus, the investment adviser places orders with
broker-dealers for the fund's portfolio transactions. Portfolio transactions for
the fund may be executed as part of concurrent authorizations to purchase or
sell the same security for other funds served by the investment adviser, or for
trusts or other accounts served by affiliated companies of the investment
adviser. When such concurrent authorizations occur, the objective is to allocate
the executions in an equitable manner.

Brokerage commissions paid on portfolio transactions, including investment
dealer concessions on underwritings, if applicable, for the fiscal years ended
October 31, 2005, 2004 and 2003 amounted to $34,660,000, $25,365,000 and
$20,946,000, respectively. With respect to fixed-income securities, brokerage
commissions include explicit investment dealer concessions and may exclude other
transaction costs which may be reflected in the spread between the bid and asked
price. The increase in brokerage commissions paid since 2004 is attributable to
growth in the sale of the fund's shares since 2004, which led the fund to
purchase additional securities for its portfolio, thereby increasing brokerage
commissions.

The fund is required to disclose information regarding investments in the
securities of its "regular" broker-dealers (or parent companies of its regular
broker-dealers) that derive more than 15% of their revenue from broker-dealer,
underwriter or investment adviser activities. A regular broker-dealer is (a) one
of the 10 broker-dealers that received from the fund the largest amount of
brokerage commissions by participating, directly or indirectly, in the fund's
portfolio transactions during the fund's most recent fiscal year; (b) one of the
10 broker-dealers that engaged as principal in the largest dollar amount of
portfolio transactions of the fund during the fund's most recent fiscal year; or
(c) one of the 10 broker-dealers that sold the largest amount of securities of
the fund during the fund's most recent fiscal year.

Capital Income Builder -- Page 33
<PAGE>

At the end of the fund's most recent fiscal year, the fund's regular
broker-dealers included Banc of America Securities LLC, Citigroup Global Markets
Inc., J.P. Morgan Securities Inc., UBS AG, A.B.N. AMRO Bank NV and Deutsche Bank
A.G. As of the fund's most recent fiscal year-end, the fund held equity
securities of Bank of America Corp. in the amount of $458,809,000, Citigroup
Inc. in the amount of $413,165,000, J.P. Morgan Chase & Co. in the amount of
$210,162,000, UBS AG in the amount of $108,949,000 and ABN AMRO Holding NV in
the amount of $106,108,000. The fund held debt securities of Bank of America
Corp. in the amount of $296,908,000, Citigroup Inc. in the amount of
$30,463,000, J.P. Morgan Chase & Co. in the amount of $133,608,000 and Deutsche
Bank A.G. in the amount of $8,330,000.

DISCLOSURE OF PORTFOLIO HOLDINGS

The fund's investment adviser, on behalf of the fund, has adopted policies and
procedures with respect to the disclosure of information about fund portfolio
securities. These policies and procedures have been reviewed by the fund's Board
of Directors and compliance will be periodically assessed by the Board in
connection with reporting from the fund's Chief Compliance Officer.

Under these policies and procedures, the fund's complete list of portfolio
holdings available for public disclosure, dated as of the end of each calendar
quarter, is permitted to be posted on the American Funds website no earlier than
the tenth day after such calendar quarter. In practice, the public portfolio
typically is posted on the website approximately 45 days after the end of the
calendar quarter. In addition, the fund's list of top 10 equity portfolio
holdings measured by percentage of net assets invested, dated as of the end of
each calendar month, is permitted to be posted on the American Funds website no
earlier than the tenth day after such month. Such portfolio holdings information
may then be disclosed to any person pursuant to an ongoing arrangement to
disclose portfolio holdings information to such person no earlier than one day
after the day on which the information is posted on the American Funds website.
Affiliates of the fund (including the fund's Board members and officers, and
certain personnel of the fund's investment adviser and its affiliates) and
certain service providers (such as the fund's custodian and outside counsel) who
require portfolio holdings information for legitimate business and fund
oversight purposes may receive the information earlier.

Affiliated persons of the fund as described above who receive portfolio holdings
information are subject to restrictions and limitations on the use and handling
of such information pursuant to applicable codes of ethics, including
requirements to maintain the confidentiality of such information, preclear
securities trades and report securities transactions activity, as applicable.
Third party service providers of the fund receiving such information are subject
to confidentiality obligations. When portfolio holdings information is disclosed
other than through the American Funds website to persons not affiliated with the
fund (which, as described above, would typically occur no earlier than one day
after the day on which the information is posted on the American Funds website),
such persons may be bound by agreements (including confidentiality agreements)
that restrict and limit their use of the information to legitimate business uses
only. Neither the fund nor its investment adviser or any affiliate thereof
receives compensation or other consideration in connection with the disclosure
of information about portfolio securities.

Subject to Board policies, the authority to disclose a fund's portfolio
holdings, and to establish policies with respect to such disclosure, resides
with the Investment Committee of the fund's investment adviser. In exercising
its authority, the Investment Committee determines whether

Capital Income Builder -- Page 34
<PAGE>

disclosure of information about the fund's portfolio securities is appropriate
and in the best interest of fund shareholders. The investment adviser has
implemented policies and procedures to address conflicts of interest that may
arise from the disclosure of fund holdings. For example, the investment
adviser's code of ethics specifically requires, among other things, the
safeguarding of information about fund holdings and contains prohibitions
designed to prevent the personal use of confidential, proprietary investment
information in a way that would conflict with fund transactions. In addition,
the investment adviser believes that its current policy of not selling portfolio
holdings information and not disclosing such information to unaffiliated third
parties until such holdings have been made public on the American Funds website
(other than to certain fund service providers for legitimate business and fund
oversight purposes) helps reduce potential conflicts of interest between fund
shareholders and the investment adviser and its affiliates.

PRICE OF SHARES

Shares are purchased at the offering price or sold at the net asset value price
next determined after the purchase or sell order is received and accepted by the
fund or the Transfer Agent; the offering or net asset value 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 or their authorized designees,
accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of
their designees. In the case of orders sent directly to the fund or the Transfer
Agent, an investment dealer MUST be indicated. The dealer is responsible for
promptly transmitting purchase and sell orders to the Principal Underwriter.

Orders received by the investment dealer or authorized designee, 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. Note that investment
dealers or other intermediaries may have their own rules about share
transactions and may have earlier cut-off times than those of the fund. For more
information about how to purchase through your intermediary, contact your
intermediary directly.

Prices that appear in the newspaper do not always indicate prices at which you
will be purchasing and redeeming shares of the fund, since such prices generally
reflect the previous day's closing price, while purchases and redemptions are
made at the next calculated price. The price you pay for shares, the offering
price, is based on the net asset value per share, which is calculated once daily
as of approximately 4:00 p.m. New York time, which is the normal close of
trading on the New York Stock Exchange, each day the Exchange is open. If, for
example, the Exchange closes at 1:00 p.m., the fund's share price would still be
determined as of 4:00 p.m. New York time. The New York Stock Exchange is
currently closed on weekends and on the following holidays: New Year's Day;
Martin Luther King, Jr. Day; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving; and Christmas Day. Each share class
of the fund has a separately calculated net asset value (and share price).

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset values per
share for each share class are determined, as follows:

1. Equity securities, including depositary receipts, are valued at the
official closing price of, or 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. Prices for each security are taken from the principal exchange or
market

Capital Income Builder -- Page 35
<PAGE>

in which the security trades. Fixed-income securities are valued at prices
obtained from an independent 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 bid prices, if asked prices are not available) or at prices for securities
of comparable maturity, quality and type. The pricing services base bond prices
on, among other things, an evaluation of the yield curve as of approximately
3:00 p.m. New York time. The fund's investment adviser performs certain checks
on these prices prior to the fund's net asset value being calculated.

Securities with both fixed-income and equity characteristics (e.g., convertible
bonds, preferred stocks, units comprised of more than one type of security,
etc.), or equity securities traded principally among fixed-income dealers, are
valued in the manner described above for either equity or fixed-income
securities, depending on which method is deemed most appropriate by the
investment adviser.

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 non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which market quotations are not readily available or
are considered unreliable are valued at fair value as determined in good faith
under policies approved by the fund's Board. Subject to Board oversight, the
fund's Board has delegated the obligation to make fair valuation determinations
to a Valuation Committee established by the fund's investment adviser. The Board
receives regular reports describing fair-valued securities and the valuation
methods used.

The Valuation Committee has adopted guidelines and procedures (consistent with
SEC rules and guidance) to ensure that certain basic principles and factors are
considered when making all fair value determinations. As a general principle,
securities lacking readily available market quotations, or that have quotations
that are considered unreliable, are valued in good faith by the Valuation
Committee based upon what the fund might reasonably expect to receive upon their
current sale. The Valuation Committee considers all indications of value
available to it in determining the fair value to be assigned to a particular
security, including, without limitation, the type and cost of the security,
contractual or legal restrictions on resale of the security, relevant financial
or business developments of the issuer, actively traded similar or related
securities, conversion or exchange rights on the security, related corporate
actions, significant events occurring after the close of trading in the security
and changes in overall market conditions.

2. Each class of shares represents interests in the same portfolio of
investments and is identical in all respects to each other class, except for
differences relating to distribution, service and other charges and expenses,
certain voting rights, differences relating to eligible investors, the
designation of each class of shares, conversion features and exchange
privileges. Expenses attributable to the fund, but not to a particular class of
shares, are borne by each class pro rata based on relative aggregate net assets
of the classes. Expenses directly attributable to a class of shares are borne by
that class of shares. Liabilities, including accruals of taxes and other

Capital Income Builder -- Page 36
<PAGE>

expense items attributable to particular share classes, are deducted from total
assets attributable to such share classes.

3. Net assets so obtained for each share class are then divided by the total
number of shares outstanding of that share class, and the result, rounded to the
nearer cent, is the net asset value per share for that share class.

TAXES AND DISTRIBUTIONS

FUND TAXATION -- The fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code (the "Code"). A
regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including the excess of net short-term capital gain over
net long-term capital losses) and generally is not subject to federal income tax
to the extent that it distributes annually 100% of its investment company
taxable income and net realized capital gains in the manner required under the
Code. The fund intends to distribute annually all of its investment company
taxable income and net realized capital gains and therefore does not expect to
pay federal income tax, although in certain circumstances, the fund may
determine that it is in the interest of shareholders to distribute less than
that amount.

To be treated as a regulated investment company under Subchapter M of the Code,
the fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain
publicly traded partnerships and gains from the sale or other disposition of
securities or foreign currencies, or other income (including, but not limited
to, gains from options, futures or forward contracts) derived with respect to
the business of investing in such securities or currencies, and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other
securities (for purposes of this calculation, generally limited in respect of
any one issuer, to an amount not greater than 5% of the market value of the
fund's assets and 10% of the outstanding voting securities of such issuer) and
(ii) not more than 25% of the value of its assets is invested in the securities
of (other than U.S. government securities or the securities of other regulated
investment companies) any one issuer; two or more issuers which the fund
controls and which are determined to be engaged in the same or similar trades or
businesses; or the securities of certain publicly traded partnerships.

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 (a) 98% of ordinary income (generally net investment income)
for the calendar year, (b) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year) and
(c) 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 (a) amounts actually distributed
by the fund from its current year's ordinary income and capital gain net income
and (b) any amount on which the fund pays income tax during the periods
described above. Although the fund intends to distribute its net investment
income and net capital gains so as to avoid excise tax liability, the fund may
determine that it is in the interest of shareholders to distribute a lesser
amount.

Capital Income Builder -- Page 37
<PAGE>

The following information may not apply to you if you hold fund shares in a
tax-deferred account, such as a retirement plan or education savings account.
Please see your tax adviser for more information.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS -- Dividends and capital gain
distributions on fund shares will be reinvested in shares of the fund of the
same class, unless shareholders indicate in writing that they wish to receive
them in cash or in shares of the same class of other American Funds, as provided
in the prospectus. Dividends and capital gain distributions by 529 share classes
will be automatically reinvested.

Distributions of investment company taxable income and net realized capital
gains to individual shareholders will be taxable whether received in shares or
in cash, unless such shareholders are exempt from taxation. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the net asset value of that share on the reinvestment date. Dividends and
capital gain distributions by the fund to a tax-deferred retirement plan account
are not taxable currently.

DIVIDENDS -- The fund intends to follow the practice of distributing
substantially all of its investment company taxable income, which includes
any excess of net realized short-term gains over net realized long-term
capital losses. Investment company taxable income generally includes
dividends, interest, net short-term capital gains in excess of net
long-term capital losses, and certain foreign currency gains, if any, less
expenses and certain foreign currency losses. To the extent the fund
invests in stock of domestic and certain foreign corporations and meets the
applicable holding period requirement, it may receive "qualified
dividends". The fund will designate the amount of "qualified dividends" to
its shareholders in a notice sent within 60 days of the close of its fiscal
year and will report "qualified dividends" to shareholders on Form
1099-DIV.

Under the Code, gains or losses attributable to fluctuations in exchange
rates that occur between the time the fund accrues receivables or
liabilities denominated in a foreign currency and the time the fund
actually collects such receivables, or pays such liabilities, generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and options, gains or losses
attributable to fluctuations in the value of foreign currency between the
date of acquisition of the security or contract and the date of disposition
are also treated as ordinary gain or loss. These gains or losses, referred
to under the Code as Section 988 gains or losses, may increase or decrease
the amount of the fund's investment company taxable income to be
distributed to its shareholders as ordinary income.

If the fund invests in stock of certain passive foreign investment
companies, the fund may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
disposition of, such stock. The tax would be determined by allocating such
distribution or gain ratably to each day of the fund's holding period for
the stock. The distribution or gain so allocated to any taxable year of the
fund, other than the taxable year of the excess distribution or
disposition, would be taxed to the fund at the highest ordinary income rate
in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the

Capital Income Builder -- Page 38
<PAGE>

fund's investment company taxable income and, accordingly, would not be
taxable to the fund to the extent distributed by the fund as a dividend to
its shareholders.

To avoid such tax and interest, the fund intends to elect to treat these
securities as sold on the last day of its fiscal year and recognize any
gains for tax purposes at that time. Under this election, deductions for
losses are allowable only to the extent of any prior recognized gains, and
both gains and losses will be treated as ordinary income or loss. The fund
will be required to distribute any resulting income, even though it has not
sold the security and received cash to pay such distributions. Upon
disposition of these securities, any gain recognized is treated as ordinary
income and loss is treated as ordinary loss to the extent of any prior
recognized gain.

Dividends from domestic corporations are expected to comprise some portion
of the fund's gross income. To the extent that such dividends constitute
any of the fund's gross income, a portion of the income distributions of
the fund may be eligible for the deduction for dividends received by
corporations. Corporate shareholders will be informed of the portion of
dividends that so qualifies. The dividends-received deduction is reduced to
the extent that either the fund shares, or the underlying shares of stock
held by the fund, with respect to which dividends are received, are treated
as debt-financed under federal income tax law, and is eliminated if the
shares are deemed to have been held by the shareholder or the fund, as the
case may be, for less than 46 days during the 90-day period beginning on
the date that is 45 days before the date on which the shares become
ex-dividend. Capital gain distributions are not eligible for the
dividends-received deduction.

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

In addition, some of the bonds may be purchased by the fund at a discount
that exceeds the original issue discount on such bonds, if any. This
additional discount represents market discount for federal income tax
purposes. The gain realized on the disposition of any bond having a market
discount may be treated as taxable ordinary income to the extent it does
not exceed the accrued market discount on such bond or a fund may elect to
include the market discount in income in tax years to which it is
attributable. Generally, accrued market discount may be figured under
either the ratable accrual method or constant interest method. If the fund
has paid a premium over the face amount of a bond, the fund has the option
of either amortizing the premium until bond maturity and reducing the
fund's basis in the bond by the amortized amount, or not amortizing and
treating the premium as part of the bond's basis. In the case of any debt
security having a fixed maturity date of not more than one year from its
date of issue, the gain realized on disposition generally will be treated
as a short-term capital gain. In general, any gain realized on disposition
of a security held less than one year is treated as a short-term capital
gain.

Capital Income Builder -- Page 39
<PAGE>

Dividend and interest income received by the fund from sources outside the
United States may be subject to withholding and other taxes imposed by such
foreign jurisdictions. Tax conventions between certain countries and the
United States, however, may reduce or eliminate these foreign taxes. Most
foreign countries do not impose taxes on capital gains with respect to
investments by foreign investors.

CAPITAL GAIN DISTRIBUTIONS -- The fund also intends to follow the practice
of distributing the entire excess of net realized long-term capital gains
over net realized short-term capital losses. Net capital gains for a fiscal
year are computed by taking into account any capital loss carry forward of
the fund.

If any net long-term capital gains in excess of net short-term capital
losses are retained by the fund for reinvestment, requiring federal income
taxes to be paid thereon by the fund, the fund intends to elect to treat
such capital gains as having been distributed to shareholders. As a result,
each shareholder will report such capital gains as long-term capital gains
taxable to individual shareholders at a maximum 15% capital gains rate,
will be able to claim a pro rata share of federal income taxes paid by the
fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on fund
shares by the difference between a pro rata share of the retained gains and
such shareholder's related tax credit.

SHAREHOLDER TAXATION -- In January of each year, individual shareholders holding
fund shares in taxable accounts will receive a statement of the federal income
tax status of all distributions. Shareholders of the fund also may be subject to
state and local taxes on distributions received from the fund.

DIVIDENDS -- Fund dividends are taxable to shareholders as ordinary income.
Under the 2003 Tax Act, all or a portion of a fund's dividend distribution
may be a "qualified dividend." If the fund meets the applicable holding
period requirement, it will distribute dividends derived from qualified
corporation dividends to shareholders as qualified dividends. Interest
income from bonds and money market instruments and nonqualified foreign
dividends will be distributed to shareholders as nonqualified fund
dividends. The fund will report on Form 1099-DIV the amount of each
shareholder's dividend that may be treated as a qualified dividend. If a
shareholder meets the requisite holding period requirement, qualified
dividends are taxable at a maximum rate of 15%.

CAPITAL GAINS -- Distributions of the excess of net long-term capital gains
over net short-term capital losses that the fund properly designates as
"capital gain dividends" generally will be taxable as long-term capital
gain. Regardless of the length of time the shares of the fund have been
held by a shareholder, a capital gain distribution by the fund is subject
to a maximum tax rate of 15%. Any loss realized upon the redemption of
shares held at the time of redemption for six months or less from the date
of their purchase will be treated as a long-term capital loss to the extent
of any amounts treated as distributions of long-term capital gains during
such six-month period.

Distributions by the fund result in a reduction in the net asset value of the
fund's shares. Investors should consider the tax implications of buying shares
just prior to a distribution. The price of shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just prior
to a distribution will subsequently receive a partial return of their investment
capital upon payment of the distribution, which will be taxable to them.

Capital Income Builder -- Page 40
<PAGE>

Redemptions of shares, including exchanges for shares of other American Funds,
may result in federal, state and local tax consequences (gain or loss) to the
shareholder. However, conversion from one class to another class in the same
fund should not be a taxable event.

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other fund(s).

Any loss realized on a redemption or exchange of shares of the fund will be
disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss disallowed under this rule will be added to the
shareholder's tax basis in the new shares purchased.

The fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of a regulated investment company may
be subject to backup withholding of federal income tax in the case of non-exempt
U.S. shareholders who fail to furnish the investment company with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. Withholding may also be required if the fund
is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.

The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons (i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates). Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or a
lower rate under an applicable income tax treaty) on dividend income received by
the shareholder.

Shareholders should consult their tax advisers about the application of federal,
state and local tax law in light of their particular situation.

UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C
OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F
SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM
DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO
COLLEGEAMERICA ACCOUNTS. SHAREHOLDERS HOLDING SHARES THROUGH AN ELIGIBLE
RETIREMENT PLAN SHOULD CONTACT THEIR PLAN'S ADMINISTRATOR OR RECORDKEEPER FOR
INFORMATION REGARDING PURCHASES, SALES AND EXCHANGES.

Capital Income Builder -- Page 41
<PAGE>

PURCHASE AND EXCHANGE OF SHARES

PURCHASES BY INDIVIDUALS -- As described in the prospectus, you may generally
open an account and purchase fund shares by contacting a financial adviser or
investment dealer authorized to sell the fund's shares. You may make investments
by any of the following means:

CONTACTING YOUR FINANCIAL ADVISER -- Deliver or mail a check to your
financial adviser.

BY MAIL -- for initial investments, you may mail a check, made payable to
the fund, directly to the address indicated on the account application.
Please indicate an investment dealer on the account application. You may
make additional investments by filling out the "Account Additions" form at
the bottom of a recent account statement and mailing the form, along with a
check made payable to the fund, using the envelope provided with your
account statement.

BY TELEPHONE -- using the American FundsLine. Please see the "Shareholder
account services and privileges" section of this document for more
information regarding this service.

BY INTERNET -- using americanfunds.com. Please see the "Shareholder account
services and privileges" section of this document for more information
regarding this service.

BY WIRE -- If you are making a wire transfer, instruct your bank to wire
funds to:

Wells Fargo Bank
ABA Routing No. 121000248
Account No. 4600-076178

Your bank should include the following information when
wiring funds:

For credit to the account of:
American Funds Service Company
(fund's name)

For further credit to:
(shareholder's fund account number)
(shareholder's name)

You may contact American Funds Service Company at 800/421-0180 if you have
questions about making wire transfers.

The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board.

Class 529 shares may be purchased only through CollegeAmerica by investors
establishing qualified higher education savings accounts. Class 529-E shares may
be purchased only by investors participating in CollegeAmerica through an
eligible employer plan. The R share classes are generally available only to
employer-sponsored retirement plans. Class R-5 shares are also

Capital Income Builder -- Page 42
<PAGE>

available to clients of the Personal Investment Management group of Capital
Guardian Trust Company who do not have an intermediary associated with their
accounts and without regard to the $1 million purchase minimum. In addition, the
American Funds state tax-exempt funds are qualified for sale only in certain
jurisdictions, and tax-exempt funds in general should not serve as retirement
plan investments. The fund and the Principal Underwriter reserve the right to
reject any purchase order.

PURCHASE MINIMUMS AND MAXIMUMS -- All investments are subject to the purchase
minimums and maximums described in the prospectus. Purchase minimums may be
waived or reduced in certain cases. For accounts established with an automatic
investment plan, the initial purchase minimum of $250 may be waived if the
purchases (including purchases through exchanges from another fund) made under
the plan are sufficient to reach $250 within five months of account
establishment.

The initial purchase minimum of $25 may be waived for the following account types:

. Payroll deduction retirement plan accounts (such as, but not limited
to, 403(b), 401(k), SIMPLE IRA, SARSEP and deferred compensation plan
accounts); and

. Employer-sponsored CollegeAmerica accounts.

The following account types may be established without meeting the initial
purchase minimum:

. Retirement accounts that are funded with employer contributions; and

. Accounts that are funded with monies set by court decree.

The following account types may be established without meeting the initial
purchase minimum, but shareholders wishing to invest in two or more funds must
meet the normal initial purchase minimum of each fund:

. Accounts that are funded with (a) transfers of assets, (b) rollovers
from retirement plans, (c) rollovers from 529 college savings plans or
(d) required minimum distribution automatic exchanges; and

. American Funds money market fund accounts registered in the name of
clients of Capital Guardian Trust Company's Personal Investment
Management group.

EXCHANGES -- You may only exchange shares into other American Funds within the
same share class. However, exchanges from Class A shares of The Cash Management
Trust of America may be made to Class B or C shares of other American Funds for
dollar cost averaging purposes. Exchange purchases are subject to the minimum
investment requirements of the fund purchased and no sales charge generally
applies. However, exchanges of shares from American Funds 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. Exchanges of Class F shares generally may only be made through
fee-based programs of investment firms that have special agreements with the
fund's distributor and certain registered investment advisers.

You may exchange shares of other classes by contacting the Transfer Agent, by
contacting your investment dealer or financial adviser, by using American
FundsLine or americanfunds.com, or by telephoning 800/421-0180 toll-free, or
faxing (see "American Funds Service Company service

Capital Income Builder -- Page 43
<PAGE>

areas" in the prospectus for the appropriate fax numbers) the Transfer Agent.
For more information, see "Shareholder account services and privileges" below.
THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND
PURCHASES.

Shares held in employer-sponsored retirement plans may be exchanged into other
American Funds by contacting your plan administrator or recordkeeper. Exchange
redemptions and purchases are processed simultaneously at the share prices next
determined after the exchange order is received (see "Price of shares" above).

FREQUENT TRADING OF FUND SHARES -- As noted in the prospectus, certain
redemptions may trigger a purchase block lasting 30 calendar days under the
fund's "purchase blocking policy." Under this policy, systematic redemptions
will not trigger a purchase block and systematic purchases will not be
prevented. For purposes of this policy, systematic redemptions include, for
example, regular periodic automatic redemptions and statement of intention
escrow share redemptions. Systematic purchases include, for example, regular
periodic automatic purchases and automatic reinvestments of dividends and
capital gain distributions.

OTHER POTENTIALLY ABUSIVE ACTIVITY -- In addition to implementing purchase
blocks, American Funds Service Company will monitor for other types of activity
that could potentially be harmful to the American Funds - for example,
short-term trading activity in multiple funds. When identified, American Funds
Service Company will request that the shareholder discontinue the activity. If
the activity continues, American Funds Service Company will freeze the
shareholder account to prevent all activity other than redemptions of fund
shares.

MOVING BETWEEN SHARE CLASSES

AUTOMATIC CONVERSIONS -- As described more fully in the prospectus, Class
B, 529-B and C shares automatically convert to Class A, 529-A and F shares,
respectively, after a certain period from the purchase date.

MOVING FROM CLASS B TO CLASS A SHARES -- Under the right of reinvestment
policy as described in the prospectus, if you redeem Class B shares during
the contingent deferred sales charge period, you may reinvest the proceeds
in Class A shares without paying a Class A sales charge if you notify
American Funds Service Company and the reinvestment occurs within 90 days
after the date of redemption. If you redeem your Class B shares after the
contingent deferred sales charge period and with the redemption proceeds
you purchase Class A shares, you are still responsible for paying any
applicable Class A sales charges.

MOVING FROM CLASS C TO CLASS A SHARES -- If you redeem Class C shares and
with the redemption proceeds purchase Class A shares, you are still
responsible for paying any Class C contingent deferred sales charges and
applicable Class A sales charges.

MOVING FROM CLASS F TO CLASS A SHARES -- You can redeem Class F shares held
in a qualified fee-based program and with the redemption proceeds purchase
Class A shares without paying an initial Class A sales charge if all of the
following are met: (a) you are leaving or have left the fee-based program,
(b) you have held the Class F shares in the program for at least one year,
and (c) you notify American Funds Service Company and purchase the Class A
shares within 90 days after redeeming the Class F shares.

Capital Income Builder -- Page 44
<PAGE>

MOVING FROM CLASS A TO CLASS F SHARES -- If you are part of a qualified
fee-based program and you wish to redeem your Class A shares and with the
redemption proceeds purchase Class F shares for the program, any Class A
sales charges (including contingent deferred sales charges) that you paid
or are payable will not be credited back to your account.

SALES CHARGES

CLASS A PURCHASES

PURCHASES BY CERTAIN 403(B) PLANS

Individual 403(b) plans may be treated similarly to employer-sponsored
plans for Class A sales charge purposes (i.e., individual participant
accounts are eligible to be aggregated together) if: (a) the American Funds
are principal investment options; (b) the employer facilitates the
enrollment process by, for example, allowing for onsite group enrollment
meetings held during working hours; and (c) there is only one dealer firm
assigned to the plans.

OTHER PURCHASES

Pursuant to a determination of eligibility by a vice president or more
senior officer of the Capital Research and Management Company Fund
Administration Unit, or by his or her designee, Class A shares of the
American Funds stock, stock/bond and bond funds may be sold at net asset
value to:

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

(2) currently registered representatives and assistants directly employed
by such representatives, retired registered representatives with
respect to accounts established while active, or full-time employees
(collectively, "Eligible Persons") (and their (a) spouses or
equivalents if recognized under local law, (b) parents and children,
including parents and children in step and adoptive relationships,
sons-in-law and daughters-in-law, and (c) parents-in-law, if the
Eligible Persons or the spouses, children or parents of the Eligible
Persons are listed in the account registration with the
parents-in-law) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such
dealers), plans for the dealers, and plans that include as
participants only the Eligible Persons, their spouses, parents and/or
children;

(3) currently registered investment advisers ("RIAs") and assistants
directly employed by such RIAs, retired RIAs with respect to accounts
established while active, or full-time employees (collectively,
"Eligible Persons") (and their (a) spouses or equivalents if
recognized under local law, (b) parents and children, including
parents and children in step and adoptive relationships, sons-in-law
and

Capital Income Builder -- Page 45
<PAGE>

daughters-in-law and (c) parents-in-law, if the Eligible Persons or
the spouses, children or parents of the Eligible Persons are listed in
the account registration with the parents-in-law) of RIA firms that
are authorized to sell shares of the funds, plans for the RIA firms,
and plans that include as participants only the Eligible Persons,
their spouses, parents and/or children;

(4) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.;

(7) The Capital Group Companies, Inc., its affiliated companies and
Washington Management Corporation;

(8) an individual or entity with a substantial business relationship with
The Capital Group Companies, Inc. or its affiliates, or an individual
or entity related or relating to such individual or entity;

(9) wholesalers and full-time employees directly supporting wholesalers
involved in the distribution of insurance company separate accounts
whose underlying investments are managed by any affiliate of The
Capital Group Companies, Inc.; and

(10) full-time employees of banks that have sales agreements with the
Principal Underwriter, who are solely dedicated to directly supporting
the sale of mutual funds.

Shares are offered at net asset value to these persons and organizations
due to anticipated economies in sales effort and expense. Once an account
is established under this net asset value privilege, additional investments
can be made at net asset value for the life of the account.

DEALER COMMISSIONS AND COMPENSATION -- Commissions (up to 1.00%) are paid to
dealers who initiate and are responsible for certain Class A share purchases not
subject to sales charges. These purchases consist of purchases of $1 million or
more, purchases by employer-sponsored defined contribution-type retirement plans
investing $1 million or more or with 100 or more eligible employees, and
purchases made at net asset value by certain retirement plans, endowments and
foundations with assets of $50 million or more. Commissions on such investments
(other than IRA rollover assets that roll over at no sales charge under the
fund's IRA rollover policy as described in the prospectus) are paid to dealers
at the following rates: 1.00% on amounts to $4 million, 0.50% on amounts over $4
million to $10 million and 0.25% on amounts over $10 million. Commissions are
based on cumulative investments and are not annually reset.

A dealer concession of up to 1% may be paid by the fund under its Class A plan
of distribution to reimburse the Principal Underwriter in connection with dealer
and wholesaler compensation paid by it with respect to investments made with no
initial sales charge.

Capital Income Builder -- Page 46
<PAGE>

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE -- As described in the prospectus, there are
various ways to reduce your sales charge when purchasing Class A shares.
Additional information about Class A sales charge reductions is provided below.

STATEMENT OF INTENTION -- By establishing a statement of intention (the
"Statement"), you enter into a nonbinding commitment to purchase shares of
American Funds non-money market funds over a 13-month period and receive
the same sales charge as if all shares had been purchased at once.

When a shareholder elects to use a Statement, 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 Statement 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. The dealer assigned to an account at the time of each purchase made
during the Statement period will receive an appropriate commission
adjustment. If the difference is not paid by the close of the Statement
period, the appropriate number of shares held in escrow will be redeemed to
pay such difference. If the proceeds from this redemption are inadequate,
the purchaser will be liable to the Principal Underwriter for the balance
still outstanding.

The Statement may be revised upward at any time during the Statement
period, and such a revision will be treated as a new Statement, except that
the Statement period during which the purchase must be made will remain
unchanged. Accordingly, upon your request, the sales charge paid on
investments made 90 days prior to the Statement revision will be adjusted
to reflect the revised Statement.

The market value of your existing holdings eligible to be aggregated (see
below) as of the day immediately before the start of the Statement period,
may be credited toward satisfying the Statement.

The Statement will be considered completed if the shareholder dies within
the Statement period. Commissions to dealers will not be adjusted or paid
on the difference between the Statement amount and the amount actually
invested before the shareholder's death.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the Statement
period will be handled as follows: the total monthly investment will be
multiplied by 13 and then multiplied by 1.5. The market value of existing
American Funds investments (other than shares representing direct purchases
of money market funds) as of the day immediately before the start of the
Statement period, and any rollovers or transfers reasonably anticipated to
be invested in non-money market American Funds during the Statement 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

Capital Income Builder -- Page 47
<PAGE>

determined. There will be no retroactive adjustments in sales charges on
investments made during the Statement period.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms and those in the prospectus with
their first purchase.

AGGREGATION -- Qualifying investments for aggregation include those made by
you and your "immediate family" as defined in the prospectus, if all
parties are purchasing shares for their own accounts and/or:

. individual-type employee benefit plan(s), such as an IRA, individual
403(b) plan (see exception in "Purchases by certain 403(b) plans"
under "Sales charges") or single-participant Keogh-type plan;

. business accounts solely controlled by you or your immediate family
(for example, you own the entire business);
.
trust accounts established by you or your immediate family (For trusts
with only one primary beneficiary, upon the trustor's death the trust
account may be aggregated with such beneficiary's own accounts; for
trusts with multiple primary beneficiaries, upon the trustor's death
the trustees of the trust may instruct American Funds Service Company
to establish separate trust accounts for each primary beneficiary;
each primary beneficiary's separate trust account may then be
aggregated with such beneficiary's own accounts);

. endowments or foundations established and controlled by you or your
immediate family; or

. CollegeAmerica accounts, which will be aggregated at the account owner
level (Class 529-E accounts may only be aggregated with an eligible
employer plan).

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including employee
benefit plans other than the individual-type employee benefit plans
described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, excluding the
individual-type employee benefit plans described above;

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

. for nonprofit, charitable or educational organizations, or any
endowments or foundations established and controlled by such
organizations, or any employer-sponsored retirement plans established
for the benefit of the employees of such organizations, their
endowments, or their foundations; or

. for individually established participant accounts of a 403(b) plan
that is treated similarly to an employer-sponsored plan for sales
charge purposes (see "Purchases by certain 403(b) plans" under "Sales
charges" above), or made for two or more such 403(b) plans that are
treated similarly to employer-sponsored plans for sales charge
purposes of a single employer or affiliated employers as defined in
the 1940 Act.

Capital Income Builder -- Page 48
<PAGE>

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES -- As described in the prospectus, you may reduce your
Class A sales charge by combining purchases of all classes of shares in the
American Funds, as well as individual holdings in Endowments, American
Legacy variable annuity contracts and variable life insurance policies.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge also qualify. However,
direct purchases of American Funds money market funds are excluded.

RIGHTS OF ACCUMULATION -- Subject to the limitations described in the
aggregation policy, you may take into account your accumulated holdings in
all share classes of the American Funds, as well as your holdings in
Endowments, to determine your sales charge on investments in accounts
eligible to be aggregated. Subject to your investment dealer's or
recordkeeper's capabilities, your accumulated holdings will be calculated
as the higher of (a) the current value of your existing holdings (the
"market value") or (b) the amount you invested (including reinvested
dividends and capital gains, but excluding capital appreciation) less any
withdrawals (the "cost value"). Depending on the entity on whose books your
account is held, the value of your holdings in that account may not be
eligible for calculation at cost value. For example, the value of accounts
held in nominee or street name are not eligible for calculation at cost
value and instead will be calculated at market value for purposes of rights
of accumulation.

The value of all of your holdings in accounts established in calendar year
2005 or earlier will be assigned an initial cost value equal to the market
value of those holdings as of the last business day of 2005. Thereafter,
the cost value of such accounts will increase or decrease according to
actual investments or withdrawals. You must contact your financial adviser
or American Funds Service Company if you have additional information that
is relevant to the calculation of the value of your holdings.

When determining your American Funds Class A sales charge, if you are not
an employer-sponsored retirement plan, you may also take into account the
market value (as of the end of the week prior to your American Funds
investment) of your individual holdings in various American Legacy variable
annuity contracts and variable life insurance policies. An
employer-sponsored retirement plan may also take into account the market
value of its investments in American Legacy Retirement Investment Plans.
Direct purchases of American Funds money market funds are excluded. If you
make a gift of American Funds Class A shares, upon your request, you may
purchase the shares at the sales charge discount allowed under rights of
accumulation of all of your American Funds and American Legacy accounts.

CDSC WAIVERS FOR CLASS A, B AND C SHARES -- As noted in the prospectus, a
contingent deferred sales charge ("CDSC") may be waived for redemptions due to
death or postpurchase disability of a shareholder (this generally excludes
accounts registered in the names of trusts and other entities). In the case of
joint tenant accounts, if one joint tenant dies, a surviving joint tenant, at
the time he or she notifies the Transfer Agent of the other joint tenant's death
and removes the decedent's name from the account, may redeem shares from the
account without

Capital Income Builder -- Page 49
<PAGE>

incurring a CDSC. Redemptions made after the Transfer Agent is notified of the
death of a joint tenant will be subject to a CDSC.

In addition, a CDSC may be waived for the following types of transactions, if
together they do not exceed 12% of the value of an "account" (defined below)
annually (the "12% limit"):

. Required minimum distributions taken from retirement accounts upon the
shareholder's attainment of age 70-1/2 (required minimum distributions
that continue to be taken by the beneficiary(ies) after the account
owner is deceased also qualify for a waiver).

. Redemptions through a systematic withdrawal plan (SWP) (see "Automatic
withdrawals" under "Shareholder account services and privileges"
below). For each SWP payment, assets that are not subject to a CDSC,
such as appreciation on shares and shares acquired through
reinvestment of dividends and/or capital gain distributions, will be
redeemed first and will count toward the 12% limit. If there is an
insufficient amount of assets not subject to a CDSC to cover a
particular SWP payment, shares subject to the lowest CDSC will be
redeemed next until the 12% limit is reached. Any dividends and/or
capital gain distributions taken in cash by a shareholder who receives
payments through a SWP will also count toward the 12% limit. In the
case of a SWP, the 12% limit is calculated at the time a systematic
redemption is first made, and is recalculated at the time each
additional systematic redemption is made. Shareholders who establish a
SWP should be aware that the amount of a payment not subject to a CDSC
may vary over time depending on fluctuations in the value of their
accounts. This privilege may be revised or terminated at any time.

For purposes of this paragraph, "account" means:

. in the case of Class A shares, your investment in Class A shares of
all American Funds (investments representing direct purchases of
American Funds money market funds are excluded);

. in the case of Class B shares, your investment in Class B shares of
the particular fund from which you are making the redemption; and

. in the case of Class C shares, your investment in Class C shares of
the particular fund from which you are making the redemption.

CDSC waivers are allowed only in the cases listed here and in the prospectus.
For example, CDSC waivers will not be allowed on redemptions of Class 529-B and
529-C shares due to termination of CollegeAmerica; a determination by the
Internal Revenue Service that CollegeAmerica does not qualify as a qualified
tuition program under the Code; proposal or enactment of law that eliminates or
limits the tax-favored status of CollegeAmerica; or the Virginia College Savings
Plan eliminating the fund as an option for additional investment within
CollegeAmerica.

Capital Income Builder -- Page 50
<PAGE>

SELLING SHARES

The methods for selling (redeeming) shares are described more fully in the
prospectus. If you wish to sell your shares by contacting American Funds Service
Company directly, any such request must be signed by the registered
shareholders.

A signature guarantee may be required for certain redemptions. In such an event,
your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on any redemptions.

Additional documentation may be required for sales of shares held in corporate,
partnership or fiduciary accounts. You must include with your written request
any shares you wish to sell that are in certificate form.

If you sell Class A, B or C shares and request a specific dollar amount to be
sold, we will sell sufficient shares so that the sale proceeds, after deducting
any applicable CDSC, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may request that redemption proceeds of $1,000 or more from money market
funds be wired to your bank by writing American Funds Service Company. A
signature guarantee is required on all requests to wire funds.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

The following services and privileges are generally available to all
shareholders. However, certain services and privileges may not be available for
Class 529 shareholders or if your account is held with an investment dealer or
through an employer-sponsored retirement plan.

AUTOMATIC INVESTMENT PLAN -- An automatic investment plan enables you to make
monthly or quarterly investments in the American Funds through automatic debits
from your bank account. To set up a plan, you must fill out an account
application and specify the amount that you would like to invest ($50 minimum)
and the date on which you would like your investments to occur. The plan will
begin within 30 days after your account application is received. Your bank
account will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. If the
date you specified falls on a weekend or holiday, your money will be invested on
the following business day. However, if the following business day falls in the
next month, your money will be invested on the business day immediately
preceding the weekend or holiday. If your bank account cannot be debited due to
insufficient funds, a stop-payment or the closing of the account, the plan may
be terminated and the related

Capital Income Builder -- Page 51
<PAGE>

investment reversed. You may change the amount of the investment or discontinue
the plan at any time by contacting the Transfer Agent.

AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares of the same class and fund at net asset value
unless you indicate otherwise on the account application. You also may elect to
have dividends and/or capital gain distributions paid in cash by informing the
fund, the Transfer Agent or your investment dealer. Dividends and capital gain
distributions paid to retirement plan shareholders or shareholders of the 529
share classes will be automatically reinvested.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- For all share classes,
except the 529 classes of shares, you may cross-reinvest dividends and capital
gains (distributions) into other American Funds in the same share class at net
asset value, subject to the following conditions:

(1) the aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement);

(2) if the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested; and

(3) if you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

AUTOMATIC EXCHANGES -- For all share classes, you may automatically exchange
shares of the same class in amounts of $50 or more among any of the American
Funds on any day (or preceding business day if the day falls on a nonbusiness
day) of each month you designate.

AUTOMATIC WITHDRAWALS -- For all share classes, except the R and 529 classes of
shares, you may automatically withdraw shares from any of the American Funds.
You can make automatic withdrawals of $50 or more as often as you wish if your
account is worth at least $10,000, or up to four times a year for an account
worth at least $5,000. You can designate the day of each period for withdrawals
and request that checks be sent to you or someone else. Withdrawals may also be
electronically deposited to your bank account. The Transfer Agent will withdraw
your money from the fund you specify on or around the date you specify. If the
date you specified falls on a weekend or holiday, the redemption will take place
on the previous business day. However, if the previous business day falls in the
preceding month, the redemption will take place on the following business day
after the weekend or holiday.

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

Capital Income Builder -- Page 52
<PAGE>

increases in share value would reduce the aggregate value of the shareholder's
account. The Transfer Agent arranges for the redemption by the fund of
sufficient shares, deposited by the shareholder with the Transfer Agent, to
provide the withdrawal payment specified.

ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments, will be reflected on regular confirmation statements from the
Transfer Agent. Dividend and capital gain reinvestments, purchases through
automatic investment plans and certain retirement plans, as well as automatic
exchanges and withdrawals will be confirmed at least quarterly.

AMERICAN FUNDSLINE AND AMERICANFUNDS.COM -- You may check your share balance,
the price of your shares or your most recent account transaction; redeem shares
(up to $75,000 per American Funds shareholder each day) from nonretirement plan
accounts; or exchange shares around the clock with American FundsLine or using
americanfunds.com. To use American FundsLine, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American FundsLine
and americanfunds.com are subject to the conditions noted above and in
"Telephone and Internet purchases, redemptions and exchanges" below. You will
need your fund number (see the list of the American Funds under "General
information -- fund numbers"), personal identification number (generally the
last four digits of your Social Security number or other tax identification
number associated with your account) and account number.

Generally, all shareholders are automatically eligible to use these services.
However, if you are not currently authorized to do so, you may complete an
American FundsLink Authorization Form. Once you establish this privilege, you,
your financial adviser or any person with your account information may use these
services.

TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES -- By using the
telephone (including American FundsLine) or the Internet (including
americanfunds.com), or fax purchase, redemption and/or exchange options, you
agree to hold the fund, the Transfer Agent, any of its affiliates or mutual
funds managed by such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from any losses, expenses,
costs or liability (including attorney fees) that may be incurred in connection
with the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these services. However, you may elect to opt out
of these services by writing the Transfer Agent (you may also reinstate them at
any time by writing the Transfer Agent). If the Transfer Agent does not employ
reasonable procedures to confirm that the instructions received from any person
with appropriate account information are genuine, it and/or the fund may be
liable for losses due to unauthorized or fraudulent instructions. In the event
that shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions or a natural disaster, redemption and exchange
requests may be made in writing only.

CHECKWRITING -- You may establish check writing privileges for Class A shares
(but not Class 529-A shares) of American Funds money market funds. This can be
done by using an account application. If you request check writing privileges,
you will be provided with checks that you may use to draw against your account.
These checks may be made payable to anyone you designate and must be signed by
the authorized number of registered shareholders exactly as indicated on your
account application.

Capital Income Builder -- Page 53
<PAGE>

REDEMPTION OF SHARES -- The fund's Articles of Incorporation permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder of record owns
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Directors of the fund may from time to time
adopt.

SHARE CERTIFICATES -- Shares are credited to your account and certificates are
not issued unless you request them by contacting the Transfer Agent.
Certificates are not available for the 529 or R share classes.

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 JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as
Custodian. If the fund holds non-U.S. securities, the Custodian may hold these
securities pursuant to subcustodial arrangements in non-U.S. banks or non-U.S.
branches of U.S. banks.

TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary of
the investment adviser, maintains the records of shareholder accounts, 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. The principal office of American Funds Service Company is
located at 135 South State College Boulevard, Brea, CA 92821-5823. American
Funds Service Company was paid a fee of $26,024,000 for Class A shares and
$2,558,000 for Class B shares for the 2005 fiscal year.

In the case of certain shareholder accounts, third parties who may be
unaffiliated with the investment adviser provide transfer agency and shareholder
services in place of American Funds Service Company. These services are rendered
under agreements with American Funds Service Company or its affiliates and the
third parties receive compensation according to such agreements. Compensation
for transfer agency and shareholder services, whether paid to American Funds
Service Company or such third parties, is ultimately paid from fund assets and
is reflected in the expenses of the fund as disclosed in the prospectus.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -- PricewaterhouseCoopers LLP, 350
South Grand Avenue, Los Angeles, CA 90071, serves as the fund's independent
registered public accounting firm, providing audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information from the annual report have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent registered public
accounting firm, given on the authority of said firm as experts in accounting
and auditing. The selection of the fund's independent registered public
accounting firm is reviewed and determined annually by the Board of Directors.

INDEPENDENT LEGAL COUNSEL -- O'Melveny & Myers LLP, 400 South Hope Street, Los
Angeles, CA 90071, serves as counsel for the fund and for Non-Interested
Directors in their capacities as such. Certain legal matters in connection with
the capital shares offered by the prospectus have been passed upon for the fund
by O'Melveny & Myers LLP. Counsel does not provide legal services to the fund's
investment adviser or any of its affiliated companies or control persons. A

Capital Income Builder -- Page 54
<PAGE>

determination with respect to the independence of the fund's "independent legal
counsel" will be made at least annually by the Non-Interested Directors of the
fund, as prescribed by the 1940 Act and related rules.

PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS -- The fund's fiscal
year ends on October 31. Shareholders are provided updated prospectuses annually
and at least semiannually with reports showing the summary investment portfolio,
financial statements and other information. The fund's annual financial
statements are audited by the fund's independent registered public accounting
firm, PricewaterhouseCoopers LLP. In addition, shareholders may also receive
proxy statements for the fund. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
prospectuses, shareholder reports and proxy statements. To receive additional
copies of a prospectus, report or proxy statement, shareholders should contact
the Transfer Agent.

CODES OF ETHICS -- The fund and Capital Research and Management Company and its
affiliated companies, including the fund's Principal Underwriter, have adopted
codes of ethics that allow for personal investments, including securities in
which the fund may invest from time to time. These codes include a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; preclearance 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.

LEGAL PROCEEDINGS -- On February 16, 2005, the NASD filed an administrative
complaint against the Principal Underwriter. The complaint alleges violations of
certain NASD rules by the Principal Underwriter with respect to the selection of
broker-dealer firms that buy and sell securities for mutual fund investment
portfolios. The complaint seeks sanctions, restitution and disgorgement.

On March 24, 2005, the investment adviser and Principal Underwriter filed a
complaint against the Attorney General of the State of California in Los Angeles
County Superior Court. The complaint alleged that the Attorney General
threatened to take enforcement actions against the investment adviser and
Principal Underwriter that are without merit and preempted by federal law. On
the same day, following the filing of the investment adviser's and Principal
Underwriter's complaint, the Attorney General of the State of California filed a
complaint against the Principal Underwriter and investment adviser. Filed in Los
Angeles County Superior Court, the Attorney General's complaint alleged
violations of certain sections of the California Corporations Code with respect
to so-called "revenue sharing" disclosures in mutual fund prospectuses and
statements of additional information. On November 22, 2005, the Los Angeles
Superior Court dismissed the Attorney General's complaint. On February 7, 2006,
the Attorney General filed a notice that he intends to appeal the Superior
Court's decision to California's Court of Appeal for the Second Appellate
District.

The investment adviser and Principal Underwriter believe that the likelihood
that these matters could have a material adverse effect on the fund or on the
ability of the investment adviser or Principal Underwriter to perform their
contracts with the fund is remote. The SEC is conducting a related investigation
as of the date of this statement of additional information. The investment
adviser and Principal Underwriter are cooperating fully. In addition, a class
action lawsuit has

Capital Income Builder -- Page 55
<PAGE>

been filed in the U.S. District Court, Central District of California, relating
to these matters. Although the suit was dismissed in its entirety, an amended
complaint relating to management fees has been filed. The investment adviser
believes that this suit is without merit and will defend itself vigorously.
Further updates on these issues will be available on the American Funds website
(americanfunds.com) under "American Funds regulatory matters."

OTHER INFORMATION -- The financial statements including the investment portfolio
and the report of the fund's independent registered public accounting firm
contained in the annual report are included in this statement of additional
information. The following information is not included in the annual report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE
PER SHARE FOR CLASS A SHARES -- OCTOBER 31, 2005

Net asset value and redemption price per share
(Net assets divided by shares outstanding). . $52.58
Maximum offering price per share
(100/94.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . $55.79

FUND NUMBERS -- Here are the fund numbers for use with our automated telephone
line, American FundsLine/(R)/, or when making share transactions:

FUND NUMBERS
------------------------------------
FUND CLASS A CLASS B CLASS C CLASS F
-----------------------------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . . . . 002 202 302 402
American Balanced Fund/(R)/ . . . . . . . . . . . . . . . . . 011 211 311 411
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . . . . 003 203 303 403
Capital Income Builder/(R)/ . . . . . . . . . . . . . . . . . 012 212 312 412
Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 033 233 333 433
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . . . . . 016 216 316 416
Fundamental Investors/SM/ . . . . . . . . . . . . . . . . . . 010 210 310 410
The Growth Fund of America/(R)/ . . . . . . . . . . . . . . . 005 205 305 405
The Income Fund of America/(R)/ . . . . . . . . . . . . . . . 006 206 306 406
The Investment Company of America/(R)/ . . . . . . . . . . . . 004 204 304 404
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . . . . 014 214 314 414
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . . . . 007 207 307 407
New World Fund/SM/ . . . . . . . . . . . . . . . . . . . . . . 036 236 336 436
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . . . . . 035 235 335 435
Washington Mutual Investors Fund/SM/ . . . . . . . . . . . . . 001 201 301 401
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . . . . 040 240 340 440
American High-Income Trust/SM/ . . . . . . . . . . . . . . . . 021 221 321 421
The Bond Fund of America/SM/ . . . . . . . . . . . . . . . . . 008 208 308 408
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . . . . . 031 231 331 431
Intermediate Bond Fund of America/SM/ . . . . . . . . . . . . 023 223 323 423
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . . . . . 043 243 343 443
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . . . . . 019 219 319 419
The Tax-Exempt Fund of California/(R)/* . . . . . . . . . . . 020 220 320 420
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . . . . 024 224 324 424
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . . . . 025 225 325 425
U.S. Government Securities Fund/SM/ . . . . . . . . . . . . . 022 222 322 422
MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . . . . 009 209 309 409
The Tax-Exempt Money Fund of America/SM/ . . . . . . . . . . . 039 N/A N/A N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . . . . 049 N/A N/A N/A
___________
*Qualified for sale only in certain jurisdictions.

Capital Income Builder -- Page 56
<PAGE>

FUND NUMBERS
---------------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND 529-A 529-B 529-C 529-E 529-F
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . 1002 1202 1302 1502 1402
American Balanced Fund . . . . 1011 1211 1311 1511 1411
American Mutual Fund . . . . . 1003 1203 1303 1503 1403
Capital Income Builder . . . . 1012 1212 1312 1512 1412
Capital World Growth and Income
Fund . . . . . . . . . . . . . 1033 1233 1333 1533 1433
EuroPacific Growth Fund . . . . 1016 1216 1316 1516 1416
Fundamental Investors . . . . . 1010 1210 1310 1510 1410
The Growth Fund of America . . 1005 1205 1305 1505 1405
The Income Fund of America . . 1006 1206 1306 1506 1406
The Investment Company of
America . . . . . . . . . . . . 1004 1204 1304 1504 1404
The New Economy Fund . . . . . 1014 1214 1314 1514 1414
New Perspective Fund . . . . . 1007 1207 1307 1507 1407
New World Fund . . . . . . . . 1036 1236 1336 1536 1436
SMALLCAP World Fund . . . . . . 1035 1235 1335 1535 1435
Washington Mutual Investors Fund
. . . . . . . . . . . . . . . 1001 1201 1301 1501 1401
BOND FUNDS
American High-Income Trust . . 1021 1221 1321 1521 1421
The Bond Fund of America . . . 1008 1208 1308 1508 1408
Capital World Bond Fund . . . . 1031 1231 1331 1531 1431
Intermediate Bond Fund of
America . . . . . . . . . . . . 1023 1223 1323 1523 1423
U.S. Government Securities Fund 1022 1222 1322 1522 1422
MONEY MARKET FUND
The Cash Management Trust of
America . . . . . . . . . . . . 1009 1209 1309 1509 1409

Capital Income Builder -- Page 57
<PAGE>

FUND NUMBERS
----------------------------------------
CLASS CLASS CLASS CLASS CLASS
FUND R-1 R-2 R-3 R-4 R-5
-------------------------------------------------------------------------------

STOCK AND STOCK/BOND FUNDS
AMCAP Fund . . . . . . . . . . . . . 2102 2202 2302 2402 2502
American Balanced Fund . . . . . . . 2111 2211 2311 2411 2511
American Mutual Fund . . . . . . . . 2103 2203 2303 2403 2503
Capital Income Builder . . . . . . . 2112 2212 2312 2412 2512
Capital World Growth and Income Fund 2133 2233 2333 2433 2533
EuroPacific Growth Fund . . . . . . 2116 2216 2316 2416 2516
Fundamental Investors . . . . . . . 2110 2210 2310 2410 2510
The Growth Fund of America . . . . . 2105 2205 2305 2405 2505
The Income Fund of America . . . . . 2106 2206 2306 2406 2506
The Investment Company of America . 2104 2204 2304 2404 2504
The New Economy Fund . . . . . . . . 2114 2214 2314 2414 2514
New Perspective Fund . . . . . . . . 2107 2207 2307 2407 2507
New World Fund . . . . . . . . . . . 2136 2236 2336 2436 2536
SMALLCAP World Fund . . . . . . . . 2135 2235 2335 2435 2535
Washington Mutual Investors Fund . . 2101 2201 2301 2401 2501
BOND FUNDS
American High-Income Municipal Bond
Fund . . . . . . . . . . . . . . . . N/A N/A N/A N/A 2540
American High-Income Trust . . . . . 2121 2221 2321 2421 2521
The Bond Fund of America . . . . . . 2108 2208 2308 2408 2508
Capital World Bond Fund . . . . . . 2131 2231 2331 2431 2531
Intermediate Bond Fund of America . 2123 2223 2323 2423 2523
Limited Term Tax-Exempt Bond Fund of
America. . . . . . . . . . . . . . . N/A N/A N/A N/A 2543
The Tax-Exempt Bond Fund of America N/A N/A N/A N/A 2519
The Tax-Exempt Fund of California* . N/A N/A N/A N/A 2520
The Tax-Exempt Fund of Maryland* . . N/A N/A N/A N/A 2524
The Tax-Exempt Fund of Virginia* . . N/A N/A N/A N/A 2525
U.S. Government Securities Fund . . 2122 2222 2322 2422 2522
MONEY MARKET FUNDS
The Cash Management Trust of America 2109 2209 2309 2409 2509
The Tax-Exempt Money Fund of America N/A N/A N/A N/A 2539
The U.S. Treasury Money Fund of
America . . . . . . . . . . . . . . 2149 2249 2349 2449 2549
___________
*Qualified for sale only in certain
jurisdictions.

Capital Income Builder -- Page 58
<PAGE>

APPENDIX

DESCRIPTION OF COMMERCIAL PAPER RATINGS

MOODY'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.

P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to
repay short-term debt obligations.

P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term obligations.

STANDARD & POOR'S
COMMERCIAL PAPER RATINGS (HIGHEST THREE RATINGS)

A-1
A short-term obligation rated A-1 is rated in the highest category by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is strong. Within this category, certain obligations are designated
with a plus sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.

A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

A-3
A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

The following descriptions of debt security ratings are based on information
provided by Moody's Investors Service and Standard & Poor's Corporation.

Capital Income Builder -- Page 59
<PAGE>

DESCRIPTION OF BOND RATINGS

MOODY'S
LONG-TERM RATING DEFINITIONS

Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal
credit risk.

Aa
Obligations rated Aa are judged to be of high quality and are subject to very
low credit risk.

A
Obligations rated A are considered upper-medium grade and are subject to low
credit risk.

Baa
Obligations rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative characteristics.

Ba
Obligations rated Ba are judged to have speculative elements and are subject to
substantial credit risk.

B
Obligations rated B are considered speculative and are subject to high credit
risk.

Caa
Obligations rated Caa are judged to be of poor standing and are subject to very
high credit risk.

Ca
Obligations rated Ca are highly speculative and are likely in, or very near,
default, with some prospect of recovery of principal and interest.

C
Obligations rated C are the lowest rated class of bonds and are typically in
default, with little prospect for recovery of principal or interest.

NOTE: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

Capital Income Builder -- Page 60
<PAGE>

STANDARD & POOR'S
LONG-TERM ISSUE CREDIT RATINGS

AAA
An obligation rated AAA has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA
An obligation rated AA differs from the highest-rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A
An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

BBB
An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

BB, B, CCC, CC, AND C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.

BB
An obligation rated BB is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

B
An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial, or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC
An obligation rated CC is currently highly vulnerable to nonpayment.

Capital Income Builder -- Page 61
<PAGE>

C
The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D
An obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-)
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.

Capital Income Builder -- Page 62

[logo - American Funds ®]

Capital Income Builder^®

Investment portfolio

October 31, 2005

					Market value
Common stocks — 66.46%		Shares			(000	)

FINANCIALS — 18.68%
Société Générale		4,189,400		$	478,409
Bank of America Corp.		10,489,460			458,809
Washington Mutual, Inc.		11,300,000			447,480
HSBC Holdings PLC (United Kingdom)		14,056,302			220,831
HSBC Holdings PLC (Hong Kong)		13,664,097			213,813
Citigroup Inc.		9,025,000			413,165
Westpac Banking Corp.		24,916,988			386,220
Fannie Mae		7,800,000			370,656
Lloyds TSB Group PLC		39,486,400			322,568
Fortis		11,215,720			319,355
Banco Santander Central Hispano, SA		21,507,614			274,357
iStar Financial, Inc.¹		7,065,500			260,505
Danske Bank A/S		7,041,000			220,912
Irish Life & Permanent PLC		12,474,949			219,856
J.P. Morgan Chase & Co.		5,739,000			210,162
Bank of Nova Scotia		5,647,200			205,531
U.S. Bancorp		6,800,000			201,144
Archstone-Smith Trust		4,815,000			195,345
ING Groep NV		6,739,729			194,330
Wells Fargo & Co.		3,035,000			182,707
Freddie Mac		2,959,300			181,553
Cathay Financial Holding Co., Ltd.		101,987,000			179,571
St. George Bank Ltd.		8,779,601			178,650
Boston Properties, Inc.		2,397,400			165,948
Arthur J. Gallagher & Co.¹		5,069,200			149,136
Royal Bank of Canada		2,090,000			147,443
Regions Financial Corp.		4,426,700			144,089
Equity Residential		3,550,500			139,357
DnB NOR ASA		12,870,000			131,670
Banco Itaú Holding Financeira SA, preferred nominative		5,480,000			131,388
Equity Office Properties Trust		4,200,000			129,360
Kimco Realty Corp.		4,116,600			121,934
CapitaMall Trust Management Ltd.¹		89,200,470			121,594
AMB Property Corp.		2,675,000			118,181
Developers Diversified Realty Corp.		2,670,000			116,626
Westfield Group		8,911,830			110,575
Westfield Group		114,617			1,408
UBS AG		1,283,310			108,949
Chinatrust Financial Holding Co., Ltd.		138,838,285			107,933
Fidelity National Financial, Inc.		2,850,000			106,761
UniCredito Italiano SpA		19,080,000			106,552
ABN AMRO Holding NV		4,485,768			106,108
Marsh & McLennan Companies, Inc.		3,600,000		$	104,940
Weingarten Realty Investors		2,634,750			93,692
Health Care Property Investors, Inc.		3,670,000			93,401
Fubon Financial Holding Co., Ltd.		107,785,000			93,281
Hongkong Land Holdings Ltd.		32,613,000			93,273
FirstMerit Corp.		3,445,000			90,845
Hang Lung Properties Ltd.		60,113,100			86,076
Ascendas Real Estate Investment Trust¹		70,189,600			83,254
ProLogis		1,750,000			75,250
United Bankshares, Inc.		1,775,000			64,788
KeyCorp		1,860,000			59,966
CapitaCommercial Trust Management Ltd.¹		58,257,000			54,317
Montpelier Re Holdings Ltd.		2,637,300			53,010
St. Paul Travelers Companies, Inc.		1,075,000			48,407
Camden Property Trust		850,000			47,897
Aareal Bank AG²		1,480,000			45,211
Wing Lung Bank Ltd.		6,307,600			45,159
KBC Groupe SA		525,000			42,801
XL Capital Ltd., Class A		642,800			41,178
Comerica Inc.		700,000			40,446
SunTrust Banks, Inc.		550,000			39,864
Fortune Real Estate Investment Trust¹		51,199,500			36,987
Dah Sing Financial Holdings Ltd.		5,476,400			33,274
Bank of New York Co., Inc.		1,020,000			31,916
Macquarie International Infrastructure Fund Ltd.¹		52,959,000			30,939
Lincoln National Corp.		541,500			27,405
JCG Holdings Ltd.		26,009,000			25,835
Mercury General Corp.		400,000			24,180
Independence Community Bank Corp.		571,600			22,607
Mapletree Logistics Trust^1,2		35,510,000			21,584
AmSouth Bancorporation		750,000			18,922
Singapore Exchange Ltd.		11,800,000			18,801
Shanghai Forte Land Co., Ltd., Class H		57,180,000			17,519
Wharf (Holdings) Ltd.		4,680,000			15,968
Suncorp-Metway Ltd.		1,020,000			14,683
					10,338,617

UTILITIES — 10.39%
E.ON AG		9,579,700			868,274
Exelon Corp.		11,470,000			596,784
National Grid Transco PLC		52,477,551			479,265
Scottish Power PLC		46,577,000			455,437
Veolia Environnement		10,306,100			429,123
Southern Co.		11,500,000			402,385
Gas Natural SDG, SA		10,120,000			276,265
PPL Corp.		8,650,000			271,091
FirstEnergy Corp.		5,010,500			237,999
Dominion Resources, Inc.		3,019,490			229,723
Public Service Enterprise Group Inc.		2,386,300			150,074
Edison International		3,000,000			131,280
NiSource Inc.		4,789,307			113,267
Cheung Kong Infrastructure Holdings Ltd.		36,022,000			111,989
Xcel Energy Inc.		6,016,000			110,273
Ameren Corp.		2,076,020			109,199
FPL Group, Inc.		2,000,000			86,120
Northeast Utilities		4,645,000			84,493
Consolidated Edison, Inc.		1,650,000			75,075
Progress Energy, Inc.		1,700,000			74,103
Equitable Resources, Inc.		1,780,000			68,797
Entergy Corp.		752,500		$	53,217
KeySpan Corp.		1,390,000			48,052
DTE Energy Co.		1,000,000			43,200
Scottish and Southern Energy PLC		2,400,000			41,588
Westar Energy, Inc.		1,800,000			39,780
Duke Energy Corp.		1,400,000			37,072
Pinnacle West Capital Corp.		800,000			33,408
Cinergy Corp.		819,000			32,678
Energy East Corp.		1,190,000			28,381
United Utilities PLC		1,666,666			18,375
Hong Kong and China Gas Co. Ltd.		7,800,000			16,099
					5,752,866

TELECOMMUNICATION SERVICES — 9.31%
SBC Communications Inc.		28,771,000			686,188
BellSouth Corp.		23,780,000			618,756
Koninklijke KPN NV		53,098,400			505,458
Verizon Communications Inc.		13,585,000			428,063
Chunghwa Telecom Co., Ltd. (ADR)		14,767,600			255,775
Chunghwa Telecom Co., Ltd.		78,348,000			132,805
Vodafone Group PLC		121,701,000			319,022
Vodafone Group PLC (ADR)		875,000			22,977
KT Corp. (ADR)		12,637,420			272,336
KT Corp.		270,720			10,870
Deutsche Telekom AG		15,310,000			270,739
Telefónica, SA		16,068,480			256,411
France Télécom, SA		8,770,000			227,951
TDC A/S		3,996,834			223,827
Belgacom SA		5,855,800			196,294
BT Group PLC		50,600,000			190,573
AT&T Corp.		8,130,000			160,811
Telecom Corp. of New Zealand Ltd.		39,363,919			160,484
Advanced Info Service PCL		27,980,000			68,646
Eircom Group PLC		27,132,800			65,059
Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk, Class B		111,427,500			55,080
Portugal Telecom, SGPS, SA		2,983,200			26,967
					5,155,092

CONSUMER STAPLES — 6.92%
Altria Group, Inc.		12,750,500			956,925
ConAgra Foods, Inc.		17,110,000			398,150
Nestlé SA		1,033,000			307,545
H.J. Heinz Co.		7,880,000			279,740
UST Inc.		6,575,000			272,139
Reynolds American Inc.		2,690,000			228,650
Altadis, SA		4,654,995			197,563
Gallaher Group PLC		11,980,292			185,886
Diageo PLC		12,353,443			182,392
Foster’s Group Ltd.		39,930,900			173,005
Imperial Tobacco Group PLC		5,790,000			165,854
Sara Lee Corp.		7,200,000			128,520
KT&G Corp.		2,050,000			83,886
General Mills, Inc.		1,700,000			82,042
Unilever NV		1,093,600			76,962
Unilever PLC		4,500,000			45,593
Lion Nathan Ltd.		4,431,066			26,116
Wolverhampton & Dudley Breweries, PLC		1,066,255			21,738
WD-40 Co.		636,650			17,527
					3,830,233

INDUSTRIALS — 4.77%
General Electric Co.		12,000,000		$	406,920
Abertis Infraestructuras SA		9,268,021			253,341
Macquarie Infrastructure Group		68,202,140			174,748
Sandvik AB		3,375,000			162,752
Macquarie Airports		44,982,621			100,806
Macquarie Airports		14,534,005			32,571
GS Engineering & Construction Co., Ltd.¹		2,550,000			109,356
Qantas Airways Ltd.		40,322,741			103,014
Emerson Electric Co.		1,470,000			102,238
Hubbell Inc., Class B		1,910,000			91,986
Kowloon Motor Bus Co. (1933) Ltd.		15,914,000			90,739
Hyundai Development Co.		2,470,000			89,947
Stagecoach Group PLC		46,814,168			88,778
Koninklijke BAM Groep NV		1,054,138			85,560
BRISA-Auto-Estradas de Portugal, SA		10,450,000			82,688
Transurban Group^1,2		16,230,502			77,595
Waste Management, Inc.		2,600,000			76,726
Singapore Technologies Engineering Ltd.		50,098,000			75,386
Uponor Oyj		3,480,000			75,057
Geberit AG		88,850			61,516
Leighton Holdings Ltd.		5,347,000			60,912
ComfortDelGro Corp. Ltd.		67,824,451			59,235
Spirax-Sarco Engineering PLC		3,336,391			46,605
SMRT Corp. Ltd.		73,763,000			44,834
Singapore Post Private Ltd.		44,060,000			29,640
Fong’s Industries Co. Ltd.¹		36,590,000			24,781
Seco Tools AB, Class B		505,000			23,844
KCI Konecranes International Corp.		212,350			9,229
					2,640,804

ENERGY — 4.57%
Royal Dutch Shell PLC, Class A (ADR)		6,828,000			423,609
Royal Dutch Shell PLC, Class B		6,997,187			228,024
Royal Dutch Shell PLC, Class B (ADR)		1,866,228			122,070
Husky Energy Inc.		9,315,000			429,790
ENI SpA		13,957,000			374,151
TOTAL SA (ADR)		1,752,900			220,900
TOTAL SA		375,000			94,144
Repsol YPF, SA		5,856,000			174,395
SBM Offshore NV¹		2,083,797			161,138
Kinder Morgan, Inc.		1,691,100			153,721
Enbridge Inc.		3,523,468			107,416
Marathon Oil Corp.		650,000			39,104
					2,528,462


MATERIALS — 2.50%
Dow Chemical Co.		4,400,000			201,784
UPM-Kymmene Corp.		6,600,000			127,633
Fletcher Building Ltd.		21,176,596			116,249
POSCO		495,000			100,328
Lyondell Chemical Co.		3,600,000			96,480
Norske Skogindustrier ASA, Class A		6,582,142			93,922
Akzo Nobel NV		2,135,000			92,122
Worthington Industries, Inc.		3,639,800			73,233
PaperlinX Ltd.¹		28,987,000			66,692
Aracruz Celulose SA, Class B, preferred nominative (ADR)		1,673,000			64,076
Stora Enso Oyj, Class R		5,000,000			63,961
RPM International, Inc.		3,025,000			56,326
Taiwan Fertilizer Co., Ltd.¹		49,000,000			47,378
AngloGold Ashanti Ltd.		987,000		$	39,421
Cía. Vale do Rio Doce, ordinary nominative (ADR)		800,000			33,064
M-real Oyj, Class B		4,996,500			23,782
Holmen AB, Class B		650,000			18,987
Temple-Inland Inc.		472,860			17,415
Hung Hing Printing Group Ltd.		29,024,000			17,223
Boral Ltd.		2,864,235			16,218
Compass Minerals International, Inc.		550,300			12,321
MeadWestvaco Corp.		200,000			5,244
					1,383,859


CONSUMER DISCRETIONARY — 2.22%
Kingfisher PLC		37,845,000			141,865
Dixons Group PLC		54,809,561			139,556
General Motors Corp.		4,950,000			135,630
Rank Group PLC		20,200,000			105,724
Accor SA		2,050,000			102,390
Kesa Electricals PLC		21,750,000			92,300
Shangri-La Asia Ltd.		60,472,000			84,640
Hilton Group PLC		11,900,000			71,384
Schibsted ASA		1,907,400			55,021
Hyatt Regency SA		3,949,380			48,391
Greene King PLC		3,927,110			43,920
Harrah’s Entertainment, Inc.		725,000			43,848
Intercontinental Hotels Group PLC		3,284,906			41,007
Hyundai Motor Co., nonvoting preferred, Series 2		750,000			38,021
ServiceMaster Co.		2,729,200			34,333
Ekornes ASA		1,455,425			26,422
Fisher & Paykel Appliances Holdings Ltd.		10,600,000			23,868
Pacifica Group Ltd.		887,670			1,247
					1,229,567

HEALTH CARE — 1.98%
Bristol-Myers Squibb Co.		16,500,000			349,305
Merck & Co., Inc.		10,500,000			296,310
Sanofi-Aventis		1,900,000			152,165
Sonic Healthcare Ltd.		13,348,349			145,380
Fisher & Paykel Healthcare Corp. Ltd.¹		33,061,000			80,225
Cochlear Ltd.		2,480,600			70,377
					1,093,762


INFORMATION TECHNOLOGY — 0.92%
Microsoft Corp.		13,185,000			338,854
Delta Electronics, Inc.		57,181,382			96,414
Taiwan Semiconductor Manufacturing Co. Ltd.		23,704,736			36,786
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR)		1,910,396			15,436
Rotork PLC		2,400,000			24,274
					511,764


MISCELLANEOUS — 4.20%
Other common stocks in initial period of acquisition					2,323,387


Total common stocks (cost: $30,338,669,000)					36,788,413

					Market value
Preferred stocks — 0.17%		Shares			(000	)

FINANCIALS — 0.10%
BNP Paribas Capital Trust 9.003% noncumulative trust preferred^3,4		22,500,000		$	26,148
Fannie Mae, Series O, 7.00% preferred³		245,000			13,475
iStar Financial, Inc., Series F, 7.80% cumulative redeemable preferred¹		400,000			10,160
HSBC Capital Funding LP, Series 1, 9.547% noncumulative step-up perpetual preferred^3,4		4,000,000			4,694
ING Capital Funding Trust III 8.439% noncumulative preferred⁴		2,500,000			2,845
					57,322


MISCELLANEOUS — 0.07%
Other preferred stocks in initial period of acquisition					37,198


Total preferred stocks (cost: $94,986,000)					94,520



Convertible securities — 0.93%		Shares or principal amount

FINANCIALS — 0.27%
Fannie Mae 5.375% convertible preferred		965			88,177
UnumProvident Corp. 8.25% ACES convertible 2006		1,000,000 units			39,300
Chubb Corp. 7.00% convertible preferred 2006		600,000 units			20,178
					147,655


CONSUMER DISCRETIONARY — 0.16%
Ford Motor Co. Capital Trust II 6.50% cumulative convertible trust preferred 2032		2,473,600			78,883
General Motors Corp., Series B, 5.25% convertible senior debentures 2032	$	17,500,000			11,550
					90,433


UTILITIES — 0.14%
PG&E Corp. 9.50% convertible note 2010	$	28,000,000			76,300


HEALTH CARE — 0.13%
Schering-Plough Corp. 6.00% convertible preferred 2007		1,000,000			52,720
Baxter International Inc. 7.00% convertible preferred 2006		400,000 units			21,668
					74,388


MATERIALS — 0.07%
Freeport-McMoRan Copper & Gold Inc. 5.50% convertible preferred³		35,000			38,771


CONSUMER STAPLES — 0.05%
Albertson’s, Inc. 7.25% convertible preferred 2007		1,200,000 units			29,040


TELECOMMUNICATION SERVICES — 0.03%
Deutsche Telekom International Finance BV 6.50% convertible bonds 2006		€12,000,000			15,736


INDUSTRIALS — 0.02%
Cummins Capital Trust I 7.00% QUIPS convertible preferred 2031³		100,000			9,069


MISCELLANEOUS — 0.06%
Other convertible securities in initial period of acquisition					30,855


Total convertible securities (cost: $533,200,000)					512,247


		Principal amount			Market value
Bonds & notes — 21.85%		(000	)		(000	)

MORTGAGE-BACKED OBLIGATIONS⁵— 5.47%
Fannie Mae 4.89% 2012	$	25,000		$	24,624
Fannie Mae 4.00% 2015		75,108			71,936
Fannie Mae 11.00% 2015		705			804
Fannie Mae 6.00% 2016		1,062			1,087
Fannie Mae 7.00% 2016		141			147
Fannie Mae 11.00% 2016		361			414
Fannie Mae 5.00% 2017		260			257
Fannie Mae 6.00% 2017		14,309			14,644
Fannie Mae 6.00% 2017		3,499			3,580
Fannie Mae 6.00% 2017		2,266			2,319
Fannie Mae 6.00% 2017		1,769			1,810
Fannie Mae 6.00% 2017		683			699
Fannie Mae 6.00% 2017		410			420
Fannie Mae 5.00% 2018		42,730			42,226
Fannie Mae 5.00% 2018		2,725			2,693
Fannie Mae 11.00% 2018		818			943
Fannie Mae 5.50% 2019		37,222			37,502
Fannie Mae 11.00% 2020		351			393
Fannie Mae 10.50% 2022		735			824
Fannie Mae, Series 2002-W3, Class A-5, 7.50% 2028		620			649
Fannie Mae 7.50% 2029		122			129
Fannie Mae 7.00% 2030		469			491
Fannie Mae 6.50% 2031		1,070			1,101
Fannie Mae 6.50% 2031		970			1,000
Fannie Mae 6.50% 2031		447			460
Fannie Mae 7.00% 2031		452			473
Fannie Mae 7.50% 2031		464			491
Fannie Mae 7.50% 2031		87			92
Fannie Mae 6.50% 2032		518			533
Fannie Mae 6.50% 2032		307			316
Fannie Mae 7.00% 2032		625			654
Fannie Mae 3.749% 2033⁴		17,457			17,073
Fannie Mae 4.028% 2033⁴		3,224			3,173
Fannie Mae 4.179% 2033⁴		3,906			3,857
Fannie Mae 6.00% 2033		391			394
Fannie Mae 6.50% 2033		6,706			6,899
Fannie Mae 5.50% 2034		26,915			26,562
Fannie Mae 5.50% 2034		25,018			24,702
Fannie Mae 5.50% 2034		13,167			12,994
Fannie Mae 6.00% 2034		65,981			66,581
Fannie Mae 6.00% 2034		10,125			10,217
Fannie Mae 6.00% 2034		7,107			7,171
Fannie Mae 6.00% 2034		4,428			4,469
Fannie Mae 6.00% 2034		4,094			4,132
Fannie Mae 6.00% 2034		3,724			3,758
Fannie Mae 6.00% 2034		3,706			3,739
Fannie Mae 6.00% 2034		3,469			3,501
Fannie Mae 6.00% 2034		3,236			3,266
Fannie Mae 6.00% 2034		3,195			3,224
Fannie Mae 6.00% 2034		3,029			3,057
Fannie Mae 6.00% 2034		2,979			3,006
Fannie Mae 6.00% 2034		2,670			2,695
Fannie Mae 6.00% 2034		2,134			2,157
Fannie Mae 6.00% 2034		1,214			1,225
Fannie Mae 6.00% 2034		977			986
Fannie Mae 6.00% 2034		194			196
Fannie Mae 6.00% 2034		193			194
Fannie Mae 6.00% 2034	$	83		$	84
Fannie Mae 6.50% 2034		10,913			11,226
Fannie Mae 4.50% 2035⁴		11,921			11,730
Fannie Mae 5.00% 2035		13,976			13,454
Fannie Mae 5.00% 2035		6,270			6,036
Fannie Mae 5.50% 2035		152,555			150,558
Fannie Mae 5.50% 2035		99,346			98,046
Fannie Mae 5.50% 2035		50,000			49,317
Fannie Mae 5.50% 2035		21,391			21,111
Fannie Mae 5.50% 2035		19,275			19,022
Fannie Mae 5.50% 2035		17,000			16,777
Fannie Mae 5.50% 2035		15,000			14,936
Fannie Mae 5.50% 2035		14,973			14,777
Fannie Mae 5.50% 2035		14,052			13,868
Fannie Mae 5.50% 2035		11,962			11,805
Fannie Mae, Series 2003-W10, Class 1A-2B, 3.112% 2037		4,043			4,023
Fannie Mae, Series 2001-50, Class BA, 7.00% 2041		723			761
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 7-A-1, 5.00% 2020		9,184			8,960
Countrywide Alternative Loan Trust, Series 2005-9CB, Class 2-A-1, 6.00% 2020		9,585			9,662
Countrywide Alternative Loan Trust, Series 2004-14T2, Class A-6, 5.50% 2034		5,787			5,759
Countrywide Alternative Loan Trust, Series 2005-62, Class 2-A-1, 4.163% 2035⁴		50,000			50,000
Countrywide Alternative Loan Trust, Series 2005-46CB, Class A-8, 5.50% 2035		83,352			83,348
Countrywide Alternative Loan Trust, Series 2005-49CB, Class A-1, 5.50% 2035		39,945			39,845
Countrywide Alternative Loan Trust, Series 2005-13CB, Class A-3, 5.50% 2035		20,768			20,682
Countrywide Alternative Loan Trust, Series 2005-64CB, Class 1-A-7, 5.50% 2035		20,000			20,018
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-9, 5.50% 2035		9,538			9,530
Countrywide Alternative Loan Trust, Series 2005-54CB, Class 4-P-4, 5.50% 2035		3,000			3,003
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 5-A-1, 5.75% 2035		6,949			6,879
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A-17, 6.00% 2035		42,148			42,290
Countrywide Alternative Loan Trust, Series 2004-36CB, Class 1-A-1, 6.00% 2035		34,037			34,062
Countrywide Alternative Loan Trust, Series 2004-28CB, Class 6-A-1, 6.00% 2035		3,098			3,100
Freddie Mac 4.00% 2015		88,160			83,635
Freddie Mac 6.00% 2017		660			674
Freddie Mac 4.50% 2018		7,411			7,183
Freddie Mac 5.00% 2018		14,914			14,737
Freddie Mac 6.50% 2032		6,880			7,069
Freddie Mac 7.50% 2032		3,488			3,692
Freddie Mac 6.00% 2033		2,145			2,167
Freddie Mac 6.00% 2034		11,649			11,770
Freddie Mac 6.00% 2034		8,714			8,804
Freddie Mac 6.00% 2034		7,485			7,562
Freddie Mac 4.648% 2035⁴		29,052			28,594
Freddie Mac 4.789% 2035⁴		31,767			31,365
Freddie Mac, Series 3061, Class PN, 5.50% 2035		30,000			29,916
Freddie Mac 6.00% 2035		19,945			20,152
Freddie Mac 6.00% 2035		9,078			9,172
Freddie Mac 6.00% 2035		1,272			1,286
Freddie Mac, Series T-056, Class A-2A, 2.842% 2036		140			140
CS First Boston Mortgage Securities Corp., Series 2004-HC1, Class A-1, 4.37% 2021^3,4		17,288			17,288
CS First Boston Mortgage Securities Corp., Series 2002-30, Class I-A-1, 7.50% 2032		5,048			5,088
CS First Boston Mortgage Securities Corp., Series 2002-34, Class I-A-1, 7.50% 2032		2,213			2,234
CS First Boston Mortgage Securities Corp., Series 2003-21, Class V-A-1, 6.50% 2033		2,585			2,638
CS First Boston Mortgage Securities Corp., Series 2003-29, Class V-A-1, 7.00% 2033		6,614			6,775
CS First Boston Mortgage Securities Corp., Series 2004-AR8, Class 2-A-1, 4.637% 2034⁴		11,086			10,808
CS First Boston Mortgage Securities Corp., Series 2003-AR30, Class II-A-1, 4.691% 2034⁴		27,072			26,731
CS First Boston Mortgage Securities Corp., Series 2004-AR1, Class II-A-1, 4.705% 2034⁴		12,604			12,442
CS First Boston Mortgage Securities Corp., Series 2001-CF2, Class A-3, 6.238% 2034		10,177			10,419
CS First Boston Mortgage Securities Corp., Series 2001-CK3, Class A-4, 6.53% 2034	$	2,790		$	2,969
CS First Boston Mortgage Securities Corp., Series 2005-6, Class VI-A-1, 6.00% 2035		8,730			8,765
CS First Boston Mortgage Securities Corp., Series 2001-CK1, Class A-3, 6.38% 2035		48,000			50,337
CS First Boston Mortgage Securities Corp., Series 2002-CKP1, Class G, 7.165% 2035³		1,435			1,558
CS First Boston Mortgage Securities Corp., Series 2002-CKS4, 4.485% 2036		5,361			5,264
CS First Boston Mortgage Securities Corp., Series 2004-C4, Class A-1, 3.466% 2039		13,788			13,430
CS First Boston Mortgage Securities Corp., Series 1998-C1, Class C, 6.78% 2040		6,550			6,891
CHL Mortgage Pass-Through Trust, Series 2003-56, Class 6-A-1, 4.842% 2033⁴		11,919			11,841
CHL Mortgage Pass-Through Trust, Series 2004-7, Class 3-A-1, 4.072% 2034⁴		8,012			7,794
CHL Mortgage Pass-Through Trust, Series 2004-12, Class 12-A-1, 4.823% 2034⁴		6,260			6,183
CHL Mortgage Pass-Through Trust, Series 2004-HYB6, Class A-3, 5.206% 2034⁴		6,257			6,239
CHL Mortgage Pass-Through Trust, Series 2005-12, Class 2-A-5, 5.50% 2035		13,684			13,539
CHL Mortgage Pass-Through Trust, Series 2005-HYB8, Class II-A-4, 5.90% 2036		79,860			79,764
Residential Accredit Loans, Inc., Series 2004-QS6, Class A-1, 5.00% 2019		7,957			7,795
Residential Accredit Loans, Inc., Series 2004-QS16, Class 1-A-1, 5.50% 2034		78,216			77,701
Residential Accredit Loans, Inc., Series 2005-QR1, Class A, 6.00% 2034		19,552			19,573
Residential Accredit Loans, Inc., Series 2004-QS12, Class M-1, 6.00% 2034		1,480			1,476
Bear Stearns ARM Trust, Series 2003-6, Class I-A-2, 4.004% 2033⁴		6,093			5,963
Bear Stearns ARM Trust, Series 2004-1, Class I-2-A-5, 4.424% 2034⁴		9,555			9,382
Bear Stearns ARM Trust, Series 2003-9, Class III-A-2, 4.993% 2034⁴		11,215			11,095
Bear Stearns ARM Trust, Series 2003-8, Class III-A, 5.153% 2034⁴		15,062			14,978
Bear Stearns ARM Trust, Series 2005-10, Class A-3, 4.65% 2035⁴		50,000			48,740
Bear Stearns Commercial Mortgage Securities Inc., Series 1999-WF2, Class A-1, 6.80% 2031		9,362			9,532
Bear Stearns Commercial Mortgage Securities Inc., Series 2002-PBW1, Class A-1, 3.97% 2035		56,351			54,882
Bear Stearns Commercial Mortgage Securities Inc., Series 2005-PWR9, Class A-AB, 4.804% 2042		26,000			25,357
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-CB2, Class VII-A, 5.50% 2019		12,229			12,121
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR7, Class A-7, 3.842% 2033⁴		5,644			5,519
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR8, Class A, 4.03% 2033⁴		4,976			4,952
WaMu Mortgage Pass-Through Certificates Trust, Series 2003-AR6, Class A-1, 4.35% 2033⁴		4,359			4,284
WaMu Mortgage Pass-Through Certificates Trust, Series 2004-AR11, Class A, 4.60% 2034⁴		5,804			5,695
WaMu Mortgage Pass-Through Certificates Trust, Series 2005-AR15, Class A-1-A, 4.34% 2045		35,456			35,456
Crown Castle Towers LLC, Series 2005-1, Class A-FX, 4.643% 2035³		26,000			25,300
Crown Castle Towers LLC, Series 2005-1, Class C, 5.074% 2035³		13,620			13,267
Crown Castle Towers LLC, Series 2005-1, Class D, 5.612% 2035³		20,000			19,552
Bear Stearns ALT-A Trust, Series 2005-9, Class II-6A-1, 5.903% 2035⁴		53,122			53,367
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-1, 6.079% 2033		11,605			11,842
GE Capital Commercial Mortgage Corp., Series 2001-1, Class A-2, 6.531% 2033		22,230			23,633
GE Capital Commercial Mortgage Corp., Series 2001-3, Class A-2, 6.07% 2038		13,250			13,852
Residential Asset Securitization Trust, Series 2005-A8CB, Class A-11, 6.00% 2035		43,400			43,435
Residential Asset Securitization Trust, Series 2005-A6CB, Class A-7, 6.00% 2035		4,744			4,783
Government National Mortgage Assn. 6.50% 2034		812			845
Government National Mortgage Assn. 4.00% 2035⁴		29,460			28,795
Government National Mortgage Assn. 4.00% 2035⁴		9,077			8,852
Government National Mortgage Assn. 4.00% 2035⁴		8,958			8,736
Mastr Alternative Loan Trust, Series 2003-2, Class 6-A-1, 6.00% 2033		1,208			1,210
Mastr Alternative Loan Trust, Series 2004-2, Class 2-A-1, 6.00% 2034		2,521			2,523
Mastr Alternative Loan Trust, Series 2005-3, Class 1-A-1, 5.50% 2035		10,087			10,006
Mastr Alternative Loan Trust, Series 2005-1, Class 1-A-1, 5.50% 2035		5,244			5,239
Mastr Alternative Loan Trust, Series 2005-3, Class 2-A-1, 6.00% 2035		11,219			11,288
Mastr Alternative Loan Trust, Series 2005-3, Class 3-A-1, 6.50% 2035		13,211			13,481
J.P. Morgan Mortgage Trust, Series 2005-A4, Class 3-A-1, 5.192% 2035⁴		44,031			43,547
Citigroup Mortgage Loan Trust Inc., Series 2004-HYB1, Class A-3-1, 4.55% 2034⁴		38,923			38,226
Morgan Stanley Mortgage Trust, Series 2004-3, Class 4-A, 5.702% 2034⁴		29,907			29,705
Morgan Stanley Mortgage Trust, Series 2004-3, Class 3-A, 6.00% 2034		8,405			8,412
GMAC Commercial Mortgage Securities, Inc., Series 1998-C1, Class D, 6.974% 2030		15,595			16,215
GMAC Commercial Mortgage Securities, Inc., Series 2001-C2, Class A-1, 6.25% 2034		16,187			16,552
GMAC Commercial Mortgage Securities, Inc., Series 2001-C2, Class A-2, 6.70% 2034		4,614			4,936
PNC Mortgage Acceptance Corp., Series 2001-C1, Class A-2, 6.36% 2034	$	28,625		$	30,173
Banc of America Commercial Mortgage Inc., Series 2002-PB2, Class A-2, 5.676% 2035		12,494			12,643
Banc of America Commercial Mortgage Inc., Series 2004-5, Class A-1, 3.812% 2041		11,349			11,091
Banc of America Commercial Mortgage Inc., Series 2002-2, Class A-1, 3.366% 2043		5,628			5,555
Bank of America, NA and First Union National Bank Commercial Mortgage Trust, Series 2001-3, Class A-1, 4.89% 2037		25,062			25,041
Meristar Commercial Mortgage Trust, Series 1999-C1, Class B, 7.90% 2016³		7,750			8,462
Meristar Commercial Mortgage Trust, Series 1999-C1, Class C, 8.29% 2016³		13,900			15,583
Structured Asset Securities Corp., Series 1998-RF2, Class A, 8.556% 2027^3,4		2,411			2,451
Structured Asset Securities Corp., Series 2005-6, Class 5-A-4, 5.00% 2035		14,636			13,850
Structured Asset Securities Corp., Series 2005-6, Class 5-A-9, 5.00% 2035		7,765			7,608
Salomon Brothers Commercial Mortgage Trust, Series 2001-C2, Class A-1, 4.482% 2006		4,027			4,022
Salomon Brothers Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.46% 2008		11,127			11,480
Salomon Brothers Commercial Mortgage Trust, Series 2001-C1, Class A-2, 6.226% 2035		7,786			7,893
Morgan Stanley Capital I, Inc., Series 2003-KIDS, Class B, 4.996% 2016^3,4		23,000			23,089
Banc of America Funding Corp., Series 2005-H, Class 9-A-1, 6.018% 2035⁴		20,000			20,106
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2001-C1, Class F, 6.847% 2035^3,4		2,000			2,138
J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2003-ML1, Class A-1, 3.972% 2039		18,227			17,607
Washington Mutual Securities Corp., WMALT Series 2005-1, Class 5-A-1, 6.00% 2020		16,794			16,937
Washington Mutual Securities Corp., WMALT Series 2005-1, Class 6-A-1, 6.50% 2020		2,092			2,120
Chase Commercial Mortgage Securities Corp., Series 2000-2, Class A-1, 7.543% 2032		9,935			10,442
Chase Commercial Mortgage Securities Corp., Series 2000-1, Class A-2, 7.757% 2032		7,052			7,594
Residential Asset Mortgage Products Trust, Series 2003-RZ3, Class A-6, 3.40% 2033		2,000			1,898
Residential Asset Mortgage Products Trust, Series 2004-RS12, Class A-I-6, 4.547% 2034		9,000			8,686
Residential Asset Mortgage Products Trust, Series 2004-RS12, Class M-I-1, 5.186% 2034		6,000			5,878
Morgan Stanley Dean Witter Capital I Trust, Series 2001-TOP5, Class A-1, 5.02% 2035		5,482			5,485
Morgan Stanley Dean Witter Capital I Trust, Series 2003-TOP9, Class A-1, 3.98% 2036		10,724			10,339
Structured Adjustable Rate Mortgage Loan Trust, Series 2005-22, Class 5-A-1, 6.07% 2035⁴		15,000			15,127
First Horizon Alternative Mortgage Securities Trust, Series 2005-FA8, Class I-A-14, 5.50% 2035		14,873			14,859
Commercial Mortgage Trust, Series 2000-C1, Class A-1, 7.206% 2033		12,285			12,467
Banc of America Alternative Loan Trust, Series 2005-6, Class 2-CB-2, 6.00% 2035		12,251			12,345
GSR Mortgage Loan Trust, Series 2005-AR1, Class 2-A-1, 4.969% 2035⁴		12,086			11,961
Banc of America Mortgage Securities Trust, Series 2003-G, Class 2-A-1, 4.088% 2033⁴		8,049			7,962
Banc of America Mortgage Securities Trust, Series 2004-B, Class 1-A-1, 3.405% 2034⁴		3,577			3,518
Hilton Hotel Pool Trust, Series 2000-HLTA, Class C, 7.458% 2015³		10,000			10,805
LB-UBS Commercial Mortgage Trust, Series 2002-C1, Class A-3, 6.226% 2026		9,765			10,142
Wells Fargo Mortgage-backed Securities Trust, Series 2005-AR10, Class II-A-6, 4.11% 2035⁴		10,000			9,657
Host Marriott Pool Trust, Series 1999-HMTA, Class A, 6.98% 2015³		7,815			8,112
RAAC Mortgage Loan Asset-backed Trust, Series 2004-SP3, Class A-I-5, 4.8902% 2032		5,000			4,796
First Union National Bank Commercial Mortgage Trust, Series 2002-C1, Class G, 7.188% 2034^3,4		2,000			2,163
					3,028,708


FINANCIALS — 3.61%
USA Education, Inc. 5.625% 2007		40,000			40,436
SLM Corp., Series A, 3.625% 2008		10,000			9,740
SLM Corp., Series A, 4.00% 2009		10,000			9,712
SLM Corp., Series A, 4.34% 2009⁴		20,000			19,999
SLM Corp., Series A, 4.37% 2009		10,000			9,793
SLM Corp., Series A, 4.50% 2010		51,000			49,815
SLM Corp., Series A, 5.375% 2014		10,000			10,094
ASIF Global Financing XXVIII 3.75% 2007^3,4		7,000			7,006
ASIF Global Financing XXIII 3.90% 2008³		13,605			13,207
ASIF Global Financing XIX 4.90% 2013³		4,000			3,945
AIG SunAmerica Global Financing VII 5.85% 2008³		7,500			7,676
International Lease Finance Corp., Series P, 3.125% 2007		5,000			4,872
International Lease Finance Corp. 4.35% 2008		28,500			27,956
International Lease Finance Corp. 4.50% 2008		17,000			16,770
International Lease Finance Corp. 3.50% 2009		2,000			1,896
International Lease Finance Corp., Series O, 4.55% 2009	$	4,600		$	4,541
International Lease Finance Corp. 4.75% 2009		3,000			2,949
International Lease Finance Corp. 6.375% 2009		15,000			15,589
International Lease Finance Corp. 5.00% 2010		6,560			6,516
International Lease Finance Corp. 5.00% 2012		10,000			9,760
American International Group 4.70% 2010³		5,000			4,916
American International Group, Inc. 4.25% 2013		2,000			1,886
American International Group 5.05% 2015³		3,000			2,938
Household Finance Corp. 6.50% 2006		20,000			20,096
Household Finance Corp. 5.75% 2007		11,000			11,128
Household Finance Corp. 4.125% 2008		6,000			5,856
Household Finance Corp. 6.40% 2008		60,000			62,149
HSBC Bank USA 4.625% 2014³		6,000			5,738
HSBC Finance Corp. 5.00% 2015		4,535			4,377
HSBC Holdings PLC 4.61% (undated)^3,4		6,000			5,610
Prudential Financial, Inc. 4.104% 2006		15,000			14,851
Prudential Insurance Co. of America 6.375% 2006³		35,445			35,845
PRICOA Global Funding I 3.97% 2007^3,4		2,000			2,003
PRICOA Global Funding I, Series 2003-2, 3.90% 2008³		4,500			4,368
Prudential Funding LLC 6.60% 2008³		12,412			12,930
Prudential Holdings, LLC, Series C, 8.695% 2023^3,5		15,000			18,839
EOP Operating LP 8.375% 2006		600			608
EOP Operating LP 7.75% 2007		45,000			47,433
EOP Operating LP 6.75% 2008		9,195			9,534
EOP Operating LP 4.65% 2010		19,500			18,994
Spieker Properties, LP 6.75% 2008		3,500			3,617
Spieker Properties, LP 7.125% 2009		2,000			2,120
Monumental Global Funding Trust II, Series 2001-B, 6.05% 2006³		25,000			25,084
Monumental Global Funding Trust II, Series 2003-F, 3.45% 2007³		10,000			9,786
Monumental Global Funding Trust II, Series 2004-E, 4.10% 2007^3,4		2,000			2,002
Monumental Global Funding Trust II, Series 2002-A, 5.20% 2007³		42,000			42,071
Bank One, National Association 5.50% 2007		20,000			20,204
J.P. Morgan Chase & Co. 3.50% 2009		10,000			9,563
J.P. Morgan Chase & Co. 4.50% 2010		20,000			19,502
J.P. Morgan Chase & Co. 4.891% 2015		20,000			19,761
Washington Mutual, Inc. 7.50% 2006		26,500			27,000
Washington Mutual, Inc. 5.625% 2007		7,000			7,059
Washington Mutual, Inc. 4.20% 2010		22,500			21,732
Washington Mutual, Inc. 4.361% 2012⁴		10,000			10,011
BankAmerica Corp. 7.125% 2006		1,000			1,011
BankAmerica Corp. 5.875% 2009		7,500			7,716
BankAmerica Corp. 7.125% 2011		1,750			1,914
BankBoston NA 7.00% 2007		7,500			7,793
Bank of America Corp. 3.875% 2008		4,400			4,319
Bank of America Corp. 5.25% 2007		20,000			20,121
Bank of America Corp. 4.50% 2010		18,000			17,628
Bank of America Corp. 4.875% 2012		2,000			1,976
Developers Diversified Realty Corp. 3.875% 2009		15,000			14,398
Developers Diversified Realty Corp. 4.625% 2010		19,750			19,097
Developers Diversified Realty Corp. 5.00% 2010		22,500			22,153
Capital One Bank 6.875% 2006		10,000			10,057
Capital One Bank 5.75% 2010		3,000			3,059
Capital One Bank 6.50% 2013		13,477			14,140
Capital One Financial Corp. 7.125% 2008		5,750			6,034
Capital One Financial Corp. 6.25% 2013		5,000			5,182
Capital One Financial Corp. 5.50% 2015		12,000			11,768
Allstate Corp. 5.375% 2006	$	20,000		$	20,097
Allstate Financial Global Funding LLC 5.25% 2007³		15,000			15,041
Allstate Life Global Funding Trust, Series 2004-1, 4.50% 2009		15,000			14,772
MBNA Corp. 5.625% 2007		26,000			26,382
MBNA Corp., Series F, 4.163% 2008⁴		7,500			7,569
MBNA America Bank, National Association 5.375% 2008		15,500			15,651
United Dominion Realty Trust, Inc., Series E, 4.50% 2008		19,500			19,294
United Dominion Realty Trust, Inc. 6.50% 2009		28,925			30,133
Liberty Mutual Group Inc. 5.75% 2014³		20,000			19,285
Liberty Mutual Group Inc. 6.50% 2035³		28,500			26,548
Resona Bank, Ltd. 5.85% (undated)^3,4		15,000			14,506
Resona Preferred Global Securities (Cayman), Ltd. 7.191% (undated)^3,4		28,250			28,831
Wells Fargo & Co. 5.125% 2007		27,500			27,561
Wells Fargo & Co. 4.125% 2008		15,000			14,809
CIT Group Inc. 3.65% 2007		11,000			10,742
CIT Group Inc. 3.375% 2009		5,000			4,744
CIT Group Inc. 6.875% 2009		16,000			17,065
CIT Group Inc. 4.25% 2010		10,000			9,688
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 4.375% 2010³		38,500			37,204
Westfield Capital Corp. Ltd. and WT Finance (Australia) Pty Ltd. and WEA Finance LLC 5.125% 2014³		5,000			4,891
CNA Financial Corp. 6.75% 2006		2,500			2,541
CNA Financial Corp. 6.60% 2008		4,000			4,151
CNA Financial Corp. 5.85% 2014		33,000			32,284
iStar Financial, Inc., Series B, 4.875% 2009¹		2,000			1,967
iStar Financial, Inc. 5.375% 2010¹		25,675			25,423
iStar Financial, Inc., Series B, 5.125% 2011¹		10,000			9,700
Lazard LLC 7.125% 2015³		35,000			34,138
XL Capital Ltd. 5.25% 2014		10,000			9,599
Mangrove Bay Pass Through Trust 6.102% 2033^3,4		24,070			23,743
Commercial Credit Co. 6.625% 2006		1,975			2,013
Citigroup Inc. 4.125% 2010		11,000			10,642
Citigroup Inc. 4.625% 2010		10,000			9,842
Citigroup Inc. 5.125% 2014		10,000			9,979
Willis North America, Inc. 5.125% 2010		20,950			20,741
Willis North America, Inc. 5.625% 2015		10,000			9,830
Hospitality Properties Trust 7.00% 2008		5,500			5,705
Hospitality Properties Trust 6.75% 2013		18,925			20,023
Hospitality Properties Trust 5.125% 2015		5,000			4,748
Nationwide Life Insurance Co. 5.35% 2007³		27,500			27,618
HBOS PLC 5.92% (undated)^3,4		25,000			24,681
American Express Credit Corp. 3.00% 2008		10,000			9,566
American Express Co. 4.75% 2009		15,000			14,902
Metropolitan Life Global Funding I, Series 2004-10, 3.375% 2007³		20,000			19,470
MetLife, Inc. 5.00% 2015		2,500			2,434
ING Security Life Institutional Funding 2.70% 2007³		15,000			14,532
ING Security Life Institutional Funding 4.34% 2010^3,4		4,000			4,006
Rouse Co. 3.625% 2009		5,000			4,650
Rouse Co. 7.20% 2012		9,446			9,854
Rouse Co. 5.375% 2013		4,000			3,760
Simon Property Group, LP 6.375% 2007		5,000			5,127
Simon Property Group, LP 5.375% 2008		2,000			2,019
Simon Property Group, LP 3.75% 2009		3,000			2,882
Simon Property Group, LP 4.875% 2010		5,000			4,945
Simon Property Group, LP 4.875% 2010		2,500			2,466
PNC Funding Corp. 5.75% 2006		7,500			7,556
PNC Funding Corp. 4.20% 2008		10,000			9,864
Archstone-Smith Operating Trust 5.00% 2007	$	5,000		$	5,003
Archstone-Smith Operating Trust 5.625% 2014		11,750			11,912
ERP Operating LP 4.75% 2009		6,360			6,300
ERP Operating LP 6.95% 2011		8,200			8,832
ERP Operating LP 6.625% 2012		1,250			1,339
ACE Capital Trust II 9.70% 2030		12,210			16,164
Marsh & McLennan Companies, Inc. 5.15% 2010		15,000			14,762
Berkshire Hathaway Finance Corp. 4.75% 2012		15,000			14,722
BNP Paribas 4.80% 2015³		5,000			4,826
BNP Paribas 5.186% noncumulative (undated)^3,4		10,000			9,633
Chuo Mitsui Trust and Banking Co., Ltd. 5.506% (undated)^3,4		14,520			13,773
Genworth Financial, Inc. 4.75% 2009		13,795			13,666
World Savings Bank, FSB, Bank Notes, Series 2008-FXR, 4.125% 2008		13,000			12,769
Zions Bancorporation 6.00% 2015		11,585			12,098
Price REIT, Inc. 7.50% 2006		4,900			5,028
Kimco Realty Corp., Series C, 3.95% 2008		5,000			4,894
Kimco Realty Corp. 6.00% 2012		2,000			2,076
ProLogis Trust 5.25% 2010³		10,000			9,971
Sumitomo Mitsui Banking Corp. 5.625% (undated)^3,4		10,000			9,799
Principal Life Global Funding I 4.40% 2010³		10,000			9,709
Popular North America, Inc., Series E, 3.875% 2008		10,000			9,702
Barclays Bank PLC 8.55% (undated)^3,4		8,080			9,352
Deutsche Bank Financial LLC 5.375% 2015		4,000			4,035
Deutsche Bank Capital Funding Trust I, 7.872% (undated)^3,4		3,950			4,295
National Westminster Bank PLC 7.375% 2009		3,000			3,261
National Westminster Bank PLC 7.75% (undated)⁴		4,588			4,817
Signet Bank 7.80% 2006		7,760			7,965
Boston Properties LP 6.25% 2013		6,500			6,787
Lincoln National Corp. 5.25% 2007		6,145			6,178
Federal Realty Investment Trust 6.125% 2007		4,500			4,583
Federal Realty Investment Trust 8.75% 2009		1,000			1,124
Protective Life Insurance Co., Series 2005-C, 4.85% 2010		5,000			4,971
New York Life Global Funding 4.625% 2010³		5,000			4,929
Independence Community Bank 3.75% 2014⁴		4,000			3,816
Assurant, Inc. 5.625% 2014		3,000			3,005
Skandinaviska Enskilda Banken AB 5.471% (undated)^3,4		3,000			2,943
Abbey National PLC 6.70% (undated)⁴		2,412			2,505
Jackson National Life Global Funding, Series 2002-1, 5.25% 2007³		2,000			2,009
Hartford Financial Services Group, Inc. 2.375% 2006		2,000			1,974
					1,997,990


U.S. GOVERNMENT & GOVERNMENT AGENCY BONDS & NOTES — 3.41%
U.S. Treasury 5.75% 2005		15,000			15,010
U.S. Treasury 6.50% 2006		45,000			45,868
U.S. Treasury 6.875% 2006		100,000			101,383
U.S. Treasury 7.00% 2006		20,000			20,362
U.S. Treasury 9.375% 2006		2,000			2,031
U.S. Treasury 3.25% 2007		43,188			42,344
U.S. Treasury 6.125% 2007		100,000			102,961
U.S. Treasury 6.25% 2007		100,000			102,406
U.S. Treasury 3.625% 2009		130,000			126,395
U.S. Treasury 3.875% 2009⁶		59,868			64,095
U.S. Treasury 6.00% 2009		100,000			105,367
U.S. Treasury 5.75% 2010		100,000			105,492
U.S. Treasury 6.50% 2010		10,000			10,784
U.S. Treasury 13.875% 2011		126,489			132,873
U.S. Treasury 10.375% 2012		25,000			27,883
U.S. Treasury 12.00% 2013	$	64,000		$	76,660
U.S. Treasury 13.25% 2014		20,000			25,728
U.S. Treasury Principal Strip 0% 2015		36,970			23,446
U.S. Treasury Principal Strip 0% 2018		11,460			6,299
U.S. Treasury 7.875% 2021		33,300			44,279
U.S. Treasury Principal Strip 0% 2029		16,950			5,573
Freddie Mac 5.25% 2006		80,000			80,154
Freddie Mac 3.375% 2007		15,284			14,932
Freddie Mac 5.125% 2008		75,000			75,860
Freddie Mac 5.75% 2009		75,000			77,355
Freddie Mac 6.625% 2009		75,000			79,902
Freddie Mac 4.125% 2010		35,000			34,023
Freddie Mac 5.875% 2011		75,000			77,974
Freddie Mac 4.50% 2014		10,000			9,741
Fannie Mae 6.34% 2007		20,000			20,594
Fannie Mae 7.125% 2007		50,000			51,645
Fannie Mae 5.75% 2008		40,000			40,934
Federal Home Loan Bank 3.375% 2007		93,295			91,020
Federal Agricultural Mortgage Corp. 4.25% 2008		45,000			44,406
					1,885,779


ASSET-BACKED OBLIGATIONS⁵— 2.18%
CWABS, Inc., Series 2004-15, Class AF-3, 4.025% 2031		20,000			19,569
CWABS, Inc., Series 2004-10, Class 2-AV-2, 4.388% 2033⁴		28,274			28,301
CWABS, Inc., Series 2005-BC1, Class 2-A-1, 4.128% 2035⁴		11,933			11,941
CWABS, Inc., Series 2005-3, Class 3-AV-1, 4.138% 2035⁴		19,531			19,509
CWABS, Inc., Series 2004-15, Class AF-6, 4.613% 2035		15,000			14,388
CWABS, Inc., Series 2004-12, Class AF-6, 4.634% 2035		8,000			7,703
CWABS, Inc., Series 2005-11, Class AF-6, 5.05% 2036		5,000			4,838
CPS Auto Receivables Trust, Series 2003-A, Class A-2, XLCA insured, 2.89% 2009³		2,049			2,003
CPS Auto Receivables Trust, Series 2002-B, Class A-2, XLCA insured, 3.50% 2009³		3,884			3,858
CPS Auto Receivables Trust, Series 2002-C, Class A-2, XLCA insured, 3.52% 2009³		1,265			1,261
CPS Auto Receivables Trust, Series 2004-A, Class A-2, FSA insured, 3.87% 2010³		10,000			9,852
CPS Auto Receivables Trust, Series 2004-B, Class A-2, XLCA insured, 3.56% 2011³		24,232			23,933
CPS Auto Receivables Trust, Series 2004-D, Class A-2, XLCA insured, 3.86% 2011³		28,616			28,240
CPS Auto Receivables Trust, Series 2005-B, Class A-2, FSA insured, 4.36% 2012³		12,000			11,833
CPS Auto Receivables Trust, Series 2005-C, Class A-2, FSA insured, 4.79% 2012³		12,500			12,375
Drivetime Auto Owner Trust, Series 2004-A, Class A-3, XLCA insured, 2.419% 2008³		6,300			6,208
Drivetime Auto Owner Trust, Series 2005-A, Class A-2, MBIA insured, 3.799% 2008³		17,744			17,667
Drivetime Auto Owner Trust, Series 2004-B, Class A-3, MBIA insured, 3.475% 2009³		16,656			16,463
Drivetime Auto Owner Trust, Series 2005-A, Class A-3, MBIA insured, 4.302% 2009³		18,579			18,434
Residential Funding Mortgage Securities II, Inc., Series 2005-HI1, Class A-5, FGIC insured, 5.45% 2035		16,000			15,812
Residential Funding Mortgage Securities II, Inc., Series 2005-HS1, Class A-1-5, FGIC insured, 4.95% 2035		40,500			39,171
Drive Auto Receivables Trust, Series 2003-1, Class A-3, MBIA insured, 2.41% 2007³		1,398			1,396
Drive Auto Receivables Trust, Series 2005-2, Class A-2, MBIA insured, 4.12% 2010³		21,400			21,186
Drive Auto Receivables Trust, Series 2004-1, Class A-4, MBIA insured, 4.14% 2010³		14,000			13,895
Drive Auto Receivables Trust, Series 2005-1, Class A-4, MBIA insured, 4.01% 2012		18,750			18,344
AmeriCredit Automobile Receivables Trust, Series 2002-C, Class A-4, FSA insured, 3.55% 2009		29,838			29,617
AmeriCredit Automobile Receivables Trust, Series 2003-C-F, Class A-4, FSA insured, 3.48% 2010		20,000			19,764
AmeriCredit Automobile Receivables Trust, Series 2004-B-M, Class A-4, MBIA insured, 2.67% 2011		5,000			4,851
Rental Car Finance Corp., Series 2005-1, Class A-2, XLCA insured, 4.59% 2011³		48,860			48,035
Advanta Business Card Master Trust, Series 2005-A1, Class A-1, 4.07% 2011⁴		17,000			16,966
Advanta Business Card Master Trust, Series 2005-A2, Class A-1, 4.13% 2013⁴		29,000			28,941
New Century Home Equity Loan Trust, Series 2004-A, Class A-II-3, FGIC insured, 4.45% 2034		25,881			25,650
New Century Home Equity Loan Trust, Series 2005-A, Class A-1A, 4.158% 2035⁴		13,828			13,828
Triad Automobile Receivables Trust, Series 2002-1, Class A-3, AMBAC insured, 3.00% 2009³		3,295			3,268
Triad Automobile Receivables Trust, Series 2005-A, Class A-4, AMBAC insured, 4.22% 2012		33,475			32,862
Consumer Credit Reference Index Securities Program Trust, Series 2002-1A, Class A, 5.924% 2007^3,4	$	35,000		$	35,469
Residential Asset Securities Corp. Trust, Series 2004-KS10, Class A-I-2, 4.358% 2029⁴		18,656			18,706
Residential Asset Securities Corp. Trust, Series 2004-KS12, Class A-1-2, 4.268% 2035⁴		15,075			15,094
UPFC Auto Receivables Trust, Series 2004-A, Class A-3, AMBAC insured, 3.27% 2010		19,850			19,577
UPFC Auto Receivables Trust, Series 2005-A, Class A-3, AMBAC insured, 4.34% 2010		14,000			13,901
DT Auto Owner Trust, Series 2005-B, Class A-3, XLCA insured, 4.429% 2010³		31,488			31,286
Long Beach Acceptance Auto Receivables Trust, Series 2004-C, Class A-4, FSA insured, 3.777% 2011		8,500			8,354
Long Beach Acceptance Auto Receivables Trust, Series 2005-B, Class A-4, FSA insured, 4.522% 2012		22,000			21,666
Bear Stearns Asset-backed Securities I Trust, Series 2004-FR3, Class I-A-I, 4.288% 2030⁴		4,465			4,467
Bear Stearns Asset-backed Securities I Trust, Series 2004-HE11, Class I-A-2, 4.338% 2033⁴		2,375			2,381
Bear Stearns Asset-backed Securities I Trust, Series 2005-CL1, Class A-1, 4.531% 2034⁴		23,006			23,013
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-7, 7.05% 2009		10,000			10,227
PP&L Transition Bond Co. LLC, Series 1999-1, Class A-8, 7.15% 2009		16,190			17,052
Capital One Prime Auto Receivables Trust, Series 2004-2, Class A-3, 3.06% 2008		26,895			26,685
Credit-Based Asset Servicing and Securitization LLC, Series 2004-CB8, Class AF-3, 5.09% 2032		16,798			16,497
Credit-Based Asset Servicing and Securitization LLC, Series 2005-CB4, Class AF-4, 5.028% 2035⁴		8,653			8,473
PG&E Energy Recovery Funding LLC, Series 2005-1, Class A-2, 3.87% 2011		23,530			23,144
First Investors Auto Owners Trust, Series 2003-A, Class A, MBIA insured, 2.58% 2011³		3,300			3,229
First Investors Auto Owners Trust, Series 2005-A, Class A-2, MBIA insured, 4.23% 2012³		20,000			19,841
Home Equity Asset Trust, Series 2004-7, Class M-2, 4.698% 2035⁴		20,000			20,146
Fremont Home Loan Trust, Series 2004-4, Class II-A2, 4.318% 2035⁴		20,000			20,046
Structured Asset Investment Loan Trust, Series 2004-BNC2, Class A-4, 4.358% 2034⁴		19,950			19,994
Providian Master Note Trust, Series 2005-A1A, Class A, 4.03% 2012^3,4		20,000			19,975
Cendant Timeshare Receivables Funding, LLC, Series 2005-1, Class A-1, FGIC insured, 4.67% 2017³		17,444			17,442
SLM Private Credit Student Loan Trust, Series 2002-A, Class A-2, 4.42% 2030⁴		15,000			15,395
World Financial Network Credit Card Master Note Trust, Series 2004-A, Class C, 4.97% 2013⁴		15,000			15,225
Providian Gateway Master Trust, Series 2004-DA, Class A, 3.35% 2011³		15,000			14,597
ARG Funding Corp., Series 2005-1, Class A-3, MBIA insured, 4.29% 2010³		15,000			14,588
Impac CMB Grantor Trust, Series 2004-6, Class 1-A-1, 4.438% 2034⁴		8,596			8,660
Impac CMB Grantor Trust, Series 2004-6, Class M-2, 4.638% 2034⁴		5,511			5,532
Prestige Auto Receivables Trust, Series 2004-1, Class A-2, FSA insured, 3.69% 2011³		13,078			12,916
MMCA Auto Owner Trust, Series 2001-3, Class B, 4.92% 2008⁴		428			428
MMCA Auto Owner Trust, Series 2002-4, Class A-4, 3.05% 2009		2,613			2,590
MMCA Auto Owner Trust, Series 2002-3, Class A-4, 3.57% 2009		4,043			4,032
MMCA Auto Owner Trust, Series 2002-2, Class A-4, 4.30% 2010		4,260			4,250
Vanderbilt Mortgage and Finance, Inc., Series 2000-D, Class A-4, 7.715% 2027		10,083			10,576
USAA Auto Owner Trust, Series 2004-3, Class A-3, 3.16% 2009		10,000			9,849
PSE&G Transition Funding II LLC, Series 2005-1, Class A-3, 4.49% 2015		10,000			9,617
Long Beach Mortgage Loan Trust, Series 2000-1, Class AF-3, 7.434% 2031		1,559			1,556
Long Beach Mortgage Loan Trust, Series 2005-WL2, Class III-A2, 4.148% 2035⁴		7,377			7,375
GMACM Home Equity Loan Trust, Series 2004-HE5, Class A-6, 4.388% 2034		8,000			7,741
Vanderbilt Acquisition Loan Trust, Series 2002-1, Class A-3, 5.70% 2023		7,500			7,524
Saxon Asset Securities Trust, Series 2005-3, Class A-2B, 4.218% 2036⁴		7,500			7,496
GE SeaCo Finance SRL, Series 2004-1, Class A, AMBAC insured, 4.27% 2019^3,4		7,097			7,098
Popular ABS Mortgage Pass-Through Trust, Series 2004-5, Class AF-6, 4.747% 2034		5,800			5,596
MBNA Master Credit Card Trust II, Series 2000-H, Class B, 4.57% 2013⁴		5,000			5,091
IndyMac Home Equity Mortgage Loan Asset-backed Trust, Series SPMD 2004-C, Class A-II-2, 4.308% 2035⁴		4,000			4,006
Impac CMB Trust, Series 2004-10, Class 1-A-2, FGIC insured, 4.388% 2035⁴		3,835			3,839
Navistar Financial Owner Trust, Series 2004-A, Class B, 2.56% 2011		3,173			3,068
ACE Securities Corp. Home Equity Loan Trust, Series 2003-NC1, Class A-2A, 4.458% 2033⁴		2,699			2,703
SeaWest Securitization, LLC, Series 2002-A, Class A-3, XLCA insured, 3.58% 2008³		171			171
SeaWest Securitization, LLC, Series 2003-A, Class A-2, XLCA insured, 2.84% 2009³		2,523			2,494
New South Motor Vehicle Trust, Series 2002-A, Class A-3, AMBAC insured, 3.03% 2010		2,215			2,210
NPF XII, Inc., Series 2001-1A, Class A, 1.99% 2004^3,4,7		3,000			135
NPF XII, Inc., Series 2001-3, Class A, 5.52% 2007^3,7		5,000			225
					1,205,210

CONSUMER DISCRETIONARY — 1.98%
Residential Capital Corp. 6.375% 2010³	$	18,990		$	19,308
General Motors Acceptance Corp. 7.75% 2010		5,985			6,028
General Motors Acceptance Corp. 6.875% 2011		33,274			32,301
General Motors Acceptance Corp. 7.25% 2011		121,940			120,071
General Motors Acceptance Corp. 6.875% 2012		2,617			2,524
General Motors Acceptance Corp. 7.00% 2012		26,672			25,906
Ford Motor Credit Co. 6.50% 2007		6,000			5,931
Ford Motor Credit Co. 7.20% 2007		5,000			4,992
Ford Motor Credit Co. 5.80% 2009		17,000			15,580
Ford Motor Credit Co. 5.70% 2010		15,000			13,510
Ford Motor Credit Co. 7.875% 2010		36,000			34,686
Ford Motor Credit Co. 7.375% 2011		15,000			14,103
DaimlerChrysler North America Holding Corp. 6.40% 2006		20,540			20,714
DaimlerChrysler North America Holding Corp. 4.05% 2008		6,480			6,295
DaimlerChrysler North America Holding Corp. 4.75% 2008		21,520			21,308
DaimlerChrysler North America Holding Corp. 7.20% 2009		3,000			3,169
DaimlerChrysler North America Holding Corp. 8.00% 2010		17,500			19,131
Comcast Cable Communications, Inc. 8.375% 2007		26,000			27,271
Comcast Cable Communications, Inc. 6.875% 2009		18,000			18,956
Tele-Communications, Inc. 7.875% 2013		10,000			11,285
Clear Channel Communications, Inc. 6.00% 2006		7,000			7,075
Clear Channel Communications, Inc. 6.625% 2008		8,245			8,457
Clear Channel Communications, Inc. 7.65% 2010		3,660			3,920
Chancellor Media Corp. of Los Angeles 8.00% 2008		34,000			36,246
Viacom Inc. 5.625% 2007		25,000			25,227
Viacom Inc. 7.70% 2010		25,000			27,260
Time Warner Inc. 8.18% 2007		10,000			10,531
AOL Time Warner Inc. 6.875% 2012		10,000			10,718
AOL Time Warner Inc. 6.15% 2007		15,000			15,265
Time Warner Companies, Inc. 9.125% 2013		10,000			11,956
May Department Stores Co. 4.80% 2009		38,750			38,238
May Department Stores Co. 5.75% 2014		3,785			3,788
May Department Stores Co. 6.65% 2024		3,465			3,511
Harrah’s Operating Co., Inc. 7.125% 2007		6,000			6,182
Harrah’s Operating Co., Inc. 7.50% 2009		15,000			15,961
Harrah’s Operating Co., Inc. 5.50% 2010		4,325			4,299
Harrah’s Operating Co., Inc. 5.625% 2015³		18,600			17,880
Liberty Media Corp. 8.50% 2029		9,160			8,779
Liberty Media Corp. 8.25% 2030		37,195			35,072
Pulte Homes, Inc. 4.875% 2009		15,000			14,727
Pulte Homes, Inc. 7.875% 2011		14,000			15,350
Pulte Homes, Inc. 8.125% 2011		7,500			8,286
Cox Radio, Inc. 6.625% 2006		37,567			37,749
Univision Communications Inc. 2.875% 2006		13,000			12,732
Univision Communications Inc. 3.875% 2008		4,100			3,935
Univision Communications Inc. 7.85% 2011		13,900			15,262
Kohl’s Corp. 6.30% 2011		27,690			29,091
Kohl’s Corp. 7.375% 2011		1,000			1,100
Marriott International, Inc., Series C, 7.875% 2009		16,323			17,881
Marriott International, Inc., Series F, 4.625% 2012		7,000			6,708
Toll Brothers, Inc. 6.875% 2012		2,000			2,120
Toll Brothers Finance Corp. 5.15% 2015³		22,500			20,872
Cox Communications, Inc. 7.75% 2006		22,351			22,827
Target Corp. 7.50% 2010		20,000			22,173
News America Inc. 5.30% 2014		22,585			22,158
Carnival Corp. 3.75% 2007		6,000			5,871
Carnival Corp. 6.15% 2008		15,725			16,161
Lowe’s Companies, Inc. 7.50% 2005	$	10,096		$	10,128
Lowe’s Companies, Inc., Series B, 6.70% 2007		5,455			5,622
Lowe’s Companies, Inc. 8.25% 2010		5,455			6,183
Centex Corp. 5.70% 2014		10,000			9,792
Centex Corp. 5.25% 2015		12,000			11,269
Hyatt Equities, LLC 6.875% 2007³		17,040			17,305
Ryland Group, Inc. 5.375% 2012		12,000			11,515
Ryland Group, Inc. 5.375% 2015		2,000			1,868
Hilton Hotels Corp. 7.625% 2008		4,000			4,166
Hilton Hotels Corp. 7.20% 2009		8,412			8,773
NVR, Inc. 5.00% 2010		8,000			7,783
Gap, Inc. 10.55% 2008⁴		6,250			6,978
Toys “R” Us, Inc. 7.875% 2013		7,520			6,091
Starwood Hotels & Resorts Worldwide, Inc. 7.375% 2007		1,500			1,543
Delphi Automotive Systems Corp. 6.50% 2009⁷		1,200			855
					1,098,308


TELECOMMUNICATION SERVICES — 1.40%
Verizon Wireless Capital LLC and Cellco Partnership 5.375% 2006		128,200			128,942
Cingular Wireless LLC 5.625% 2006		12,000			12,111
AT&T Wireless Services, Inc. 7.35% 2006		3,000			3,026
AT&T Wireless Services, Inc. 7.50% 2007		33,575			34,877
AT&T Wireless Services, Inc. 7.875% 2011		50,700			56,830
Sprint Capital Corp. 6.00% 2007		15,000			15,195
US Unwired Inc., Series B, 10.00% 2012		3,000			3,427
Nextel Communications, Inc. 6.875% 2013		37,125			38,869
Nextel Communications, Inc. 7.375% 2015		43,015			45,567
France Télécom 7.405% 2006⁴		12,000			12,104
France Télécom 7.75% 2011⁴		76,250			85,024
France Télécom 10.00% 2031⁴		4,250			5,570
Telecom Italia Capital SA, Series A, 4.00% 2008		8,000			7,746
Telecom Italia Capital SA 4.00% 2010		12,000			11,418
Telecom Italia Capital SA 4.875% 2010		30,000			29,413
Telecom Italia Capital SA, Series B, 5.25% 2013		43,400			42,498
SBC Communications Inc. 5.75% 2006		19,900			20,007
SBC Communications Inc. 4.125% 2009		10,000			9,637
SBC Communications Inc. 6.25% 2011		10,000			10,423
SBC Communications Inc. 5.875% 2012		27,000			27,664
Singapore Telecommunications Ltd. 6.375% 2011³		27,925			29,664
Singapore Telecommunications Ltd. 6.375% 2011		9,825			10,437
Koninklijke KPN NV 8.00% 2010		33,750			37,670
Deutsche Telekom International Finance BV 3.875% 2008		10,375			10,121
Deutsche Telekom International Finance BV 8.50% 2010⁴		8,500			9,495
Deutsche Telekom International Finance BV 8.75% 2030⁴		13,900			17,287
BellSouth Corp. 4.75% 2012		20,000			19,345
ALLTEL Corp. 4.656% 2007		17,000			16,923
Teléfonos de México, SA de CV 8.25% 2006		15,000			15,172
Vodafone Group PLC 5.375% 2015		5,750			5,771
PCCW-HKT Capital Ltd. 8.00% 2011^3,4		2,450			2,708
PCCW-HKT Capital Ltd. 7.75% 2011		1,800			1,989
					776,930


UTILITIES — 0.96%
Virginia Electric and Power Co., Series 2002-A, 5.375% 2007		6,000			6,036
Dominion Resources, Inc., Series A, 3.66% 2006		6,000			5,928
Dominion Resources, Inc., Series B, 4.125% 2008		10,000			9,827
Dominion Resources, Inc., Series 2002-D, 5.125% 2009		18,561			18,528
Dominion Resources, Inc., Series 2000-A, 8.125% 2010		35,000			39,042
Dominion Resources, Inc., Series 2002-C, 5.70% 2012⁴	$	4,250		$	4,326
Commonwealth Edison Co., Series 99, 3.70% 2008		2,750			2,662
Exelon Corp. 4.45% 2010		15,000			14,440
Exelon Corp. 6.75% 2011		17,000			17,993
Exelon Corp. 4.90% 2015		5,000			4,705
Exelon Generation Co., LLC 6.95% 2011		21,600			23,241
NiSource Finance Corp. 7.625% 2005		32,285			32,319
NiSource Finance Corp. 6.15% 2013		3,000			3,120
NiSource Finance Corp. 5.40% 2014		24,500			24,242
Duke Energy Corp. First and Ref. Mortgage Bonds, Series A, 3.75% 2008		10,000			9,747
Duke Capital Corp. 7.50% 2009		37,000			39,851
Duke Capital LLC 5.668% 2014		2,000			1,995
Scottish Power PLC 4.91% 2010		30,000			29,717
Scottish Power PLC 5.375% 2015		20,000			19,697
PSEG Power LLC 3.75% 2009		10,000			9,545
PSEG Power LLC 7.75% 2011		32,500			35,879
Ameren Corp. 4.263% 2007		2,500			2,467
Cilcorp Inc. 8.70% 2009		17,025			18,953
AmerenEnergy Generating Co., Series D, 8.35% 2010		5,000			5,610
Union Electric Co. 4.65% 2013		4,250			4,083
Cilcorp Inc. 9.375% 2029		5,000			6,903
American Electric Power Co., Inc. 4.709% 2007⁴		12,500			12,436
Appalachian Power Co., Series J, 4.40% 2010		10,000			9,681
Appalachian Power Co., Series I, 4.95% 2015		15,000			14,424
Centerpoint Energy Resources Corp., Series B, 7.875% 2013		18,000			20,357
Centerpoint Energy, Inc., Series B, 6.85% 2015		5,000			5,368
Alabama Power Co., Series Y, 2.80% 2006		5,000			4,901
Alabama Power Co., Series X, 3.125% 2008		1,800			1,726
Alabama Power Co., Series R, 4.70% 2010		1,750			1,721
Alabama Power Co., Series Q, 5.50% 2017		4,000			4,040
Southern Power Co., Series B, 6.25% 2012		6,000			6,295
Oncor Electric Delivery Co. 6.375% 2012		13,725			14,409
Progress Energy, Inc. 6.85% 2012		4,000			4,255
Progress Energy Florida, Inc., First Mortgage Bonds, 4.80% 2013		5,000			4,854
Carolina Power & Light Co. d/b/a Progress Energy Carolinas, Inc., First Mortgage Bonds, 5.15% 2015		5,000			4,918
Constellation Energy Group, Inc. 6.125% 2009		11,000			11,320
Equitable Resources, Inc. 5.15% 2012		2,500			2,510
Equitable Resources, Inc. 5.15% 2018		3,125			3,059
Southern California Gas Co., First Mortgage Bonds, Series II, 4.375% 2011		5,500			5,351
Public Service Co. of Colorado, First Collateral Trust Bonds, Series No. 12, 4.875% 2013		5,000			4,921
MidAmerican Energy Co. 5.125% 2013		1,500			1,492
Pacific Gas and Electric Co., First Mortgage Bonds, 4.20% 2011		1,000			953
					529,847


INDUSTRIALS — 0.71%
Cendant Corp. 6.875% 2006		17,588			17,819
Cendant Corp. 6.25% 2008		21,500			21,882
Cendant Corp. 7.375% 2013		24,355			26,654
General Electric Capital Corp., Series A, 5.00% 2007		47,500			47,706
General Electric Capital Corp. 4.25% 2008		10,000			9,887
BAE SYSTEMS 2001 Asset Trust, Series 2001, Class B, 7.156% 2011^3,5		42,756			44,761
Waste Management, Inc. 6.50% 2008		6,180			6,421
Waste Management, Inc. 6.875% 2009		15,000			15,838
Waste Management, Inc. 7.375% 2010		15,000			16,325
Waste Management, Inc. 5.00% 2014		890			864
American Airlines, Inc., Series 2001-2, Class B, 8.608% 2012		10,000			9,487
American Airlines, Inc., Series 2001-2, Class A-2, 7.858% 2013		15,530			15,932
Continental Airlines, Inc., Series 1997-4, Class A, 6.90% 2019⁵	$	4,818		$	4,665
Continental Airlines, Inc., Series 1999-1, Class A, 6.545% 2020⁵		4,033			3,904
Continental Airlines, Inc., Series 2000-1, Class A-1, 8.048% 2022⁵		14,904			14,790
Tyco International Group SA 6.125% 2008		13,000			13,411
Tyco International Group SA 6.125% 2009		7,000			7,221
Caterpillar Financial Services Corp., Series F, 4.30% 2008⁴		2,000			2,001
Caterpillar Inc. 4.50% 2009		2,500			2,470
Caterpillar Financial Services Corp. 4.30% 2010		14,300			13,949
Bombardier Inc. 6.30% 2014³		21,000			18,270
Raytheon Co. 4.85% 2011		16,000			15,801
Hutchison Whampoa International Ltd. 6.50% 2013³		11,800			12,391
Northwest Airlines, Inc., Series 1999-2, Class A, 7.575% 2020⁵		10,853			10,795
Northwest Airlines, Inc., Series 2002-1, Class G-2, MBIA insured, 6.264% 2023⁵		841			829
Delta Air Lines, Inc., Series 2001-1, Class A-2, 7.111% 2013		5,000			4,867
Delta Air Lines, Inc., Series 2002-1, Class C, 7.779% 2013⁵		7,450			5,070
Delta Air Lines, Inc., 1991 Equipment Certificates Trust, Series K, 10.00% 2014^3,5,7		2,000			460
Southwest Airlines Co., Series 2001-1, Class A-2, 5.496% 2006⁵		1,400			1,410
Southwest Airlines Co., Series 2001-1, Class B, 6.126% 2006⁵		8,500			8,549
American Standard Inc. 7.625% 2010		7,000			7,606
Northrop Grumman Systems Corp. 7.125% 2011		5,000			5,466
John Deere Capital Corp. 3.90% 2008		3,000			2,942
Deere & Co. 8.95% 2019		2,000			2,246
					392,689


HEALTH CARE — 0.61%
Allegiance Corp. 7.30% 2006		7,385			7,537
Cardinal Health, Inc. 6.25% 2008		13,155			13,517
Cardinal Health, Inc. 6.75% 2011		100,250			106,783
UnitedHealth Group Inc. 7.50% 2005		10,770			10,779
UnitedHealth Group Inc. 3.30% 2008		7,500			7,257
UnitedHealth Group Inc. 3.75% 2009		10,000			9,654
UnitedHealth Group Inc. 4.125% 2009		22,000			21,398
Hospira, Inc. 4.95% 2009		48,950			48,588
Wyeth 4.375% 2008⁴		45,250			44,765
Aetna Inc. 7.375% 2006		17,250			17,404
Schering-Plough Corp. 5.55% 2013⁴		14,000			14,196
Humana Inc. 7.25% 2006		12,850			13,023
Health Net, Inc. 9.875% 2011⁴		9,000			10,483
Amgen Inc. 4.00% 2009		10,000			9,690
Columbia/HCA Healthcare Corp. 7.25% 2008		5,000			5,187
					340,261


MATERIALS — 0.49%
Norske Skogindustrier ASA 7.625% 2011³		58,490			62,702
Norske Skogindustrier ASA 6.125% 2015³		1,250			1,209
Weyerhaeuser Co. 5.95% 2008		13,941			14,278
Weyerhaeuser Co. 5.25% 2009		20,024			19,987
Weyerhaeuser Co. 6.75% 2012		19,330			20,495
Weyerhaeuser Co. 6.875% 2033		4,000			4,084
UPM-Kymmene Corp. 5.625% 2014³		29,500			29,069
International Paper Co. 4.00% 2010		10,915			10,226
International Paper Co. 6.75% 2011		8,500			8,950
International Paper Co. 5.85% 2012		9,085			9,113
Packaging Corp. of America 4.375% 2008		25,000			24,226
Dow Chemical Co. 5.00% 2007		10,500			10,547
Dow Chemical Co. 5.75% 2008		10,500			10,792
Teck Cominco Ltd. 5.375% 2015		11,000			10,712
Alcan Inc. 6.45% 2011	$	1,000		$	1,052
Alcan Inc. 5.20% 2014		8,000			7,855
ICI Wilmington, Inc. 4.375% 2008		4,000			3,913
ICI Wilmington, Inc. 5.625% 2013		3,000			2,979
Yara International ASA 5.25% 2014³		6,000			5,796
MeadWestvaco Corp. 2.75% 2005		5,500			5,489
Temple-Inland Inc., Series F, 6.75% 2009		500			515
Temple-Inland Inc. 7.875% 2012		3,500			3,821
Praxair, Inc. 3.95% 2013		4,000			3,722
					271,532


ENERGY — 0.49%
Devon Financing Corp., ULC 6.875% 2011		75,500			81,852
Apache Corp. 6.25% 2012		38,000			40,788
Phillips Petroleum Co. 8.75% 2010		34,000			39,313
Williams Companies, Inc. 7.125% 2011		10,000			10,362
Williams Companies, Inc. 8.125% 2012		16,300			17,686
Transcontinental Gas Pipe Line Corp., Series B, 8.875% 2012		8,000			9,200
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009^3,5		6,642			6,404
Ras Laffan Liquefied Natural Gas Co. Ltd. 3.437% 2009⁵		1,047			1,009
Ras Laffan Liquefied Natural Gas II 5.298% 2020³		24,650			24,158
Sunoco, Inc. 6.75% 2011		7,500			8,034
Sunoco, Inc. 4.875% 2014		9,250			8,937
Pemex Finance Ltd. 8.875% 2010⁵		12,427			13,777
El Paso Corp. 7.875% 2012		8,000			8,200
					269,720


CONSUMER STAPLES — 0.24%
Wal-Mart Stores, Inc. 8.00% 2006		9,500			9,741
Wal-Mart Stores, Inc. 6.875% 2009		13,650			14,577
Wal-Mart Stores, Inc. 4.125% 2010		7,500			7,245
Anheuser-Busch Companies, Inc. 9.00% 2009		12,000			13,819
Anheuser-Busch Companies, Inc. 7.50% 2012		8,000			9,099
Diageo Capital PLC 4.375% 2010		12,000			11,718
Diageo Finance BV 5.30% 2015		2,300			2,294
Kraft Foods Inc. 4.625% 2006		1,000			997
Kraft Foods Inc. 6.25% 2012		1,855			1,953
Kraft Foods Inc. 6.50% 2031		500			541
Nabisco, Inc. 7.05% 2007		1,000			1,035
Nabisco, Inc. 7.55% 2015		6,645			7,741
CVS Corp. 4.00% 2009		10,000			9,626
CVS Corp. 6.117% 2013^3,5		2,231			2,306
Pepsi Bottling Group, Inc. 5.625% 2009³		10,000			10,242
Molson Coors Capital Finance ULC 4.85% 2010³		7,500			7,373
Kellogg Co. 6.60% 2011		5,250			5,630
Kellogg Co. 7.45% 2031		500			614
PepsiAmericas, Inc. 4.875% 2015		6,000			5,844
SUPERVALU INC. 7.50% 2012		5,220			5,582
Cadbury Schweppes US Finance LLC 5.125% 2013³		5,500			5,427
					133,404


INFORMATION TECHNOLOGY — 0.16%
Electronic Data Systems Corp., Series B, 6.50% 2013⁴		53,000			53,522
Motorola, Inc. 4.608% 2007		12,500			12,444
Motorola, Inc. 7.625% 2010		2,385			2,664
Motorola, Inc. 8.00% 2011		10,000			11,548
Jabil Circuit, Inc. 5.875% 2010		7,500			7,610
					87,788

MUNICIPALS — 0.10%
State of California, Golden State Tobacco Securitization Corp., Tobacco Settlement Asset-backed Bonds,
Series 2003-A1, 6.25% 2033	$	15,580		$	17,120
State of Wisconsin, Badger Tobacco Asset Securitization Corp., Tobacco Settlement Asset-backed Bonds, 6.125% 2027		14,665			15,551
State of South Dakota, Educational Enhancement Funding Corp., Tobacco Settlement Asset-backed Bonds,
Series 2002-A, Class A, 6.72% 2025⁵		10,195			10,091
State of Louisiana, Tobacco Settlement Authority, Asset-backed Bonds, Series 2001-B, 5.50% 2030		6,020			6,174
State of Louisiana, Tobacco Settlement Financing Corp., Tobacco Settlement Asset-backed Bonds,
Series 2001-A, Class A, 6.36% 2025⁵		6,007			5,991
					54,927


NON-U.S. GOVERNMENT BONDS & NOTES — 0.04%
United Mexican States Government Global 4.625% 2008		12,200			12,069
Corporación Andina de Fomento 6.875% 2012		10,000			10,825
					22,894



Total bonds & notes (cost: $12,245,739,000)					12,095,987


Short-term securities — 11.35%

Federal Home Loan Bank 3.585%-3.93% due 11/9-12/28/2005⁸		453,228			451,198
Variable Funding Capital Corp. 3.67%-4.05% due 11/4/2005-1/12/2006³		365,300			363,700
CAFCO LLC 3.68%-4.07% due 11/4/2005-1/17/2006³		287,428			286,333
Ciesco LLC 4.14% due 1/24/2006³		50,000			49,514
Wal-Mart Stores Inc. 3.63%-3.89% due 11/8-12/13/2005³		306,800			305,785
Freddie Mac 3.58%-3.99% due 11/1/2005-1/10/2006		292,100			290,580
International Lease Finance Corp. 3.66%-4.05% due 11/14/2005-1/5/2006⁸		290,100			289,056
Wells Fargo & Co. 3.73%-4.01% due 11/2-12/14/2005		283,200			283,200
Procter & Gamble Co. 3.62%-4.02% due 11/7/2005-1/19/2006³		283,228			282,055
Bank of America Corp. 3.68%-3.97% due 11/1-12/13/2005		235,000			234,430
Ranger Funding Co. LLC 3.90%-3.92% due 11/15-11/22/2005³		44,700			44,616
JP Morgan Chase & Co. 3.74%-3.95% due 11/1-12/9/2005		85,000			84,782
Preferred Receivables Funding Corp. 3.84% due 11/9/2005³		35,000			34,966
Park Avenue Receivables Co. LLC 3.71%-4.00% due 11/9-11/29/2005³		158,500			158,229
U.S. Treasury Bills 3.365%-3.826% due 12/1/2005-1/26/2006⁸		273,700			272,439
International Bank for Reconstruction and Development 3.54%-3.80% due 12/7-12/20/2005⁸		237,800			236,618
DuPont (E.I.) de Nemours & Co. 3.72%-3.85% due 11/3-12/6/2005		220,600			220,064
Pfizer Inc 3.71%-3.955% due 11/17-12/5/2005³		220,500			219,889
Clipper Receivables Co. LLC 3.67%-3.95% due 11/7/2005-1/9/2006³		212,500			211,877
Gannett Co. 3.73%-3.94% due 11/2-12/7/2005³		209,100			208,559
Tennessee Valley Authority 3.63%-3.795% due 11/17-12/15/2005		198,840			197,990
General Electric Capital Corp. 3.65% due 11/2/2005		50,000			49,991
General Electric Capital Services Inc. 3.64%-3.67% due 11/3/2005-1/11/2006		78,500			78,256
Edison Asset Securitization LLC 3.97% due 12/14-12/19/2005^3,8		52,200			51,935
Federal Farm Credit Banks 3.58%-3.70% due 11/1-12/23/2005		166,000			165,341
HSBC Finance Corp. 3.94%-4.06% due 12/12/2005-1/18/2006		160,000			158,839
Coca-Cola Co. 3.57%-4.04% due 11/2/2005-1/20/2006		150,300			149,594
SBC Communications Inc. 3.75%-3.97% due 11/8-11/29/2005³		132,600			132,247
BellSouth Corp. 3.74%-3.85% due 11/16-11/29/2005³		97,500			97,241
Private Export Funding Corp. 3.66%-3.80% due 11/15-12/20/2005³		71,500			71,234
American Express Credit Corp. 3.73%-4.12% due 11/21/2005-1/9/2006		65,000			64,630
Netjets Inc. 3.68%-3.97% due 11/10-12/27/2005³		60,000			59,835
FCAR Owner Trust 4.10% due 12/9/2005		50,000			49,783
Hershey Co. 3.60%-3.64% due 11/7-11/10/2005³		49,000			48,955
Triple-A One Funding Corp. 3.85% due 11/14/2005³		48,500			48,427
PepsiCo Inc. 3.73% due 11/4/2005³		42,900			42,882
The Concentrate Manufacturing Co. of Ireland 3.96% due 11/28/2005	$	3,300		$	3,290
Colgate-Palmolive Co. 3.72% due 11/1/2005³		43,400			43,396
Kimberly-Clark Worldwide Inc. 3.86% due 11/18/2005³		36,500			36,430
Illinois Tool Works Inc. 3.92% due 11/21/2005		36,500			36,416
United Parcel Service Inc. 3.72% due 12/2/2005		36,500			36,381
3M Co. 3.86% due 11/23/2005		30,000			29,926
USAA Capital Corp. 3.64% due 11/15/2005		26,000			25,960
Medtronic Inc. 3.73% due 11/2/2005³		25,000			24,995
Bank of New York Co., Inc. 3.93% due 11/30/2005		25,000			24,918
Anheuser-Busch Companies, Inc. 3.70% due 12/12/2005³		25,000			24,887

Total short-term securities (cost: $6,281,915,000)					6,281,669


Total investment securities (cost: $49,494,509,000)					55,772,836
Other assets less liabilities					(422,243	)

Net assets				$	55,350,593

“Miscellaneous” securities include holdings in their initial period of acquisition that have not previously been publicly disclosed.

¹ Represents an affiliated company as defined under the Investment Company Act of 1940.

² Security did not produce income during the last 12 months.

³ Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to the public may require registration. The total value of all such restricted securities was $4,427,286,000, which represented 8.00% of the net assets of the fund.

⁴ Coupon rate may change periodically.

⁵ Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturities are shorter than the stated maturities.

⁶ Index-linked bond whose principal amount moves with a government retail price index.

⁷ Company not making scheduled interest payments; bankruptcy proceedings pending.

⁸ This security, or a portion of this security, has been segregated to cover funding requirements on investment transactions settling in the future.

ADR = American Depositary Receipts

See Notes to Financial Statements

Financial statements

Statement of assets and liabilities
at October 31, 2005 (dollars and shares in thousands, except per-share amounts)

Assets:
Investment securities at market:
Unaffiliated issuers (cost:$ 48,364,863)	$54,400,107
Affiliated issuers (cost:$1,129,647)	1,372,729	$55,772,836
Cash denominated in non-U.S. currencies
(cost: $2,979)		2,951
Cash		50,686
Receivables for:
Sales of investments	22,525
Sales of fund's shares	177,217
Dividends and interest	214,789	414,531
		56,241,004
Liabilities:
Payables for:
Purchases of investments	606,652
Repurchases of fund's shares	33,923
Dividends on fund's shares	212,235
Investment advisory services	9,771
Services provided by affiliates	26,145
Deferred Directors' compensation	865
Other fees and expenses	820	890,411
Net assets at October 31, 2005		$55,350,593

Net assets consist of:
Capital paid in on shares of capital stock		$48,394,641
Undistributed net investment income		317,444
Undistributed net realized gain		360,543
Net unrealized appreciation		6,277,965
Net assets at October 31, 2005		$55,350,593

Total authorized capital stock - 2,000,000 shares, $.01 par value (1,052,664 total shares outstanding)
	Net assets		Shares outstanding		Net asset value per share (1)

Class A		$42,303,428		804,531		$52.58
Class B		3,371,112		64,112		52.58
Class C		5,867,181		111,583		52.58
Class F		2,140,548		40,709		52.58
Class 529-A		457,534		8,702		52.58
Class 529-B		83,114		1,581		52.58
Class 529-C		191,782		3,647		52.58
Class 529-E		25,085		477		52.58
Class 529-F		6,340		121		52.58
Class R-1		33,675		641		52.58
Class R-2		240,726		4,578		52.58
Class R-3		268,069		5,098		52.58
Class R-4		70,051		1,332		52.58
Class R-5		291,948		5,552		52.58
(1) Maximum offering price and redemption price per share were equal to the net asset value per share for all share classes, except for classes A and 529-A, for which the maximum offering prices per share were $55.79 each.

See Notes to Financial Statements


Statement of operations
for the year ended October 31, 2005	(dollars in thousands)
Investment income:
Income:
Dividends (net of non-U.S. withholding
tax of $84,169; also includes
$65,982 from affiliates)	$	1,469,211
Interest (net of non-U.S. withholding
tax of $44; also includes
$1,122 from affiliates)		597,182		$	2,066,393

Fees and expenses:(1)
Investment advisory services		124,219
Distribution services		171,247
Transfer agent services		28,582
Administrative services		12,976
Reports to shareholders		1,087
Registration statement and prospectus		3,187
Postage, stationery and supplies		3,459
Directors' compensation		465
Auditing and legal		244
Custodian		6,016
State and local taxes		333
Other		181
Total fees and expenses before reimbursements/waivers		351,996
Less reimbursement/waiver of fees and expenses:
Investment advisory services		10,169
Administrative services		283
Total fees and expenses after reimbursements/waivers					341,544
Net investment income					1,724,849

Net realized gain and change in unrealized
appreciation on investments
and non-U.S. currency:
Net realized gain (loss) on:
Investments (including $44,128 net gain from affiliates)		805,443
Non-U.S. currency transactions		(5,482	)		799,961
Net change in unrealized appreciation (depreciation) on:
Investments		1,044,467
Non-U.S. currency translations		(681	)		1,043,786
Net realized gain and change in
unrealized appreciation
on investments and non-U.S. currency					1,843,747
Net increase in net assets resulting
from operations				$	3,568,596

(1) Additional information related to class-specific fees and expenses is included in the Notes to Financial Statements.

See Notes to Financial Statements





Statements of changes in net assets	(dollars in thousands)


	Year ended October 31
		2005			2004
Operations:
Net investment income	$	1,724,849		$	1,025,334
Net realized gain on investments and
non-U.S. currency transactions		799,961			611,081
Net change in unrealized appreciation
on investments and non-U.S. currency translations		1,043,786			2,797,697
Net increase in net assets
resulting from operations		3,568,596			4,434,112

Dividends and distributions paid or accrued to
shareholders:
Dividends from net investment income and non-U.S. currency gains		(1,578,505	)		(1,061,748	)
Distributions from net realized gain
on investments		(675,038	)		(89,806	)
Total dividends and distributions paid or accrued
to shareholders		(2,253,543	)		(1,151,554	)

Capital share transactions		17,572,318			10,692,160

Total increase in net assets		18,887,371			13,974,718

Net assets:
Beginning of year		36,463,222			22,488,504
End of year (including undistributed
net investment income: $317,444 and $32,399,
respectively)	$	55,350,593		$	36,463,222

See Notes to Financial Statements

Notes to financial statements

1. Organization and significant accounting policies

Organization– Capital Income Builder, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks to provide a growing dividend – with higher income distributions every quarter to the extent possible – together with a current yield exceeding that of U.S. stocks generally.

The fund offers 14 share classes consisting of four retail share classes, five CollegeAmerica(R) savings plan share classes and five retirement plan share classes. The CollegeAmerica savings plan share classes (529-A, 529-B, 529-C, 529-E and 529-F) can be utilized to save for college education. The five retirement plan share classes (R-1, R-2, R-3, R-4 and R-5) are sold without any sales charges and do not carry any conversion rights.The fund’s share classes are described below:

Share class	Initial sales charge	Contingent deferred sales charge upon redemption	Conversion feature
Classes A and 529-A	Up to 5.75%	None (except 1% for certain redemptions within one year of purchase without an initial sales charge)	None
Classes B and 529-B	None	Declines from 5% to 0% for redemptions within six years of purchase	Classes B and 529-B convert to classes A and 529-A, respectively, after eight years
Class C	None	1% for redemptions within one year of purchase	Class C converts to Class F after 10 years
Class 529-C	None	1% for redemptions within one year of purchase	None
Class 529-E	None	None	None
Classes F and 529-F	None	None	None
Classes R-1, R-2, R-3, R-4 and R-5	None	None	None

Holders of all share classes have equal pro rata rights to assets, dividends and liquidation proceeds.Each share class has identical voting rights, except for the exclusive right to vote on matters affecting only its class. Share classes have different fees and expenses ("class-specific fees and expenses"), primarily due to different arrangements for distribution, administrative and shareholder services. Differences in class-specific fees and expenses will result in differences in net investment income and, therefore, the payment of different per-share dividends by each class.

Significant accounting policies– The financial statements have been prepared to comply with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the fund:

Security valuation– Equity securities are valued at the official closing price of, or 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. Prices for each security are taken from the principal exchange or market in which the security trades. Fixed-income securities, including short-term securities purchased with more than 60 days left to maturity, are valued at prices obtained from an independent pricing service when such prices are available. However, where the investment adviser deems it appropriate, such securities will be valued at the mean quoted bid and asked prices (or bid prices, if asked prices are not available) or at prices for securities of comparable maturity, quality and type.Securities with both fixed-income and equity characteristics, or equity securities traded principally among fixed-income dealers, are valued in the manner described above for either equity or fixed-income securities, depending on which method is deemed most appropriate by the investment adviser. Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par when they reach 60 days or less remaining to maturity. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Securities and other assets for which representative market quotations are not readily available are fair valued as determined in good faith under procedures adopted by authority of the fund's Board of Directors. Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions.

Security transactions and related investment income– Security transactions are recorded by the fund as of the date the trades are executed with brokers. Realized gains and losses from security transactions are determined based on the specific identified cost of the securities. In the event a security is purchased with a delayed payment date, the fund will segregate liquid assets sufficient to meet its payment obligations. Dividend income is recognized on the ex-dividend date and interest income is recognizedon an accrual basis. Market discounts, premiums and original issue discounts on fixed-income securities are amortized daily over the expected life of the security.

Class allocations –Income, fees and expenses (other than class-specific fees and expenses) are allocated daily among the various share classes based on the relative value of their settled shares. Realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net assets. Class-specific fees and expenses, such as distribution, administrative and shareholder services, are charged directly to the respective share class.

Dividends and distributions to shareholders–Dividends paid to shareholders are declared daily from net investment income and are paid to shareholders quarterly. Distributions paid to shareholders are recorded on the ex-dividend date.

Non-U.S. currency translation– Assets and liabilities, including investment securities, denominated in non-U.S. currencies are translated into U.S. dollars at the exchange rates in effect on the valuation date. Purchases and sales of investment securities and income and expenses are translated into U.S. dollars at the exchange rates on the dates of such transactions. In the accompanying financial statements, the effects of changes in non-U.S. exchange rates on investment securities are included with the net realized gain or loss and net unrealized appreciation or depreciation on investments. The realized gain or loss and unrealized appreciation or depreciation resulting from all other transactions denominated in non-U.S. currencies are disclosed separately.

Mortgage dollar rolls – The fund may enter into mortgage dollar roll transactions in which the fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a financing transaction, therefore, any gain or loss is considered unrealized until the roll reaches completion. Risks may arise due to the delayed payment date and the potential inability of counterparties to complete the transaction. Income is generated as consideration for entering into these transactions and is included in interest income on the accompanying financial statements.

2. Non-U.S. investments

Investment risk – The risks of investing in securities of non-U.S.issuers may include, but are not limited to, investment and repatriation restrictions; revaluation of currencies; adverse political, social and economic developments; government involvement in the private sector; limited and less reliable investor information; lack of liquidity; certain local tax law considerations; and limited regulation of the securities markets.

Taxation– Dividend and interest income is recorded net of non-U.S. withholding taxes paid.

3. Federal income taxation and distributions

The fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to mutual funds and intends to distribute substantially all of its net taxable income and net capital gains each year. The fund is not subject to income taxes to the extent such distributions are made.

Distributions– Distributions paid to shareholders are based on net investment income and net realized gains determined on a tax basis, which may differ from net investment income and net realized gains for financial reporting purposes. These differences are due primarily to differing treatment for items such as non-U.S. currency gains and losses; short-term capital gains and losses; unrealized appreciation of certain investments in non-U.S. securities; deferred expenses; cost of investments sold; paydowns on investments; and amortization of premiums or discounts.As of October 31, 2005, a portion of the difference between the tax basis undistributed net investment income and currency gains and the undistributed net investment income for financials reporting is attributed to amortization of premiums and discounts of $124,353,000 and appreciation of certain investments in non-U.S. securities of $152,820,000. The remainder of the difference is substantially attributed to the accrual of dividends payable to shareholders on fund shares for financial reporting purposes of $212,235,000. Such amounts are not deducted from tax basis undistributed net investment income and currency gains until paid. The fiscal year in which amounts are distributed may differ from the year in which the net investment income and net realized gains are recorded by the fund for financial reporting purposes. The fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes. As of October 31, 2005, the cost of investment securities for federal income tax purposes was $49,765,430,000.

During the year ended October 31, 2005, the fund reclassified $138,812,000 from undistributed net realized gains to undistributed net investment income; and $111,000 and $3,860,000, respectively, from undistributed net investment income and undistributed net realized gains to capital paid in on shares of capital stock to align financial reporting with tax reporting.

As of October 31, 2005, the components of distributable earnings on a tax basis were as follows (dollars in thousands):


Undistributed net investment income and non-U.S. currency gains	$788,715
Undistributed long-term capital gains	373,293
Gross unrealized appreciation on investment securities	7,176,059
Gross unrealized depreciation on investment securities	(1,168,653)
Net unrealized appreciation on investment securities	6,007,406

During the year ended October 31, 2005, the fund realized, on a tax basis, a net capital gain of $658,463,000.

The tax character of distributions paid or accrued to shareholders was as follows (dollars in thousands):

	Year ended October 31, 2005						Year ended October 31, 2004
		Distributions from ordinary income		Distributions from long-term capital gains		Total distributions paid or accrued		Distributions from ordinary income		Distributions from long-term capital gains		Total distributions paid or accrued
Share class
Class A		1,269,069		524,577	$	1,793,646	$	874,799	$	72,464	$	947,263
Class B		81,617		45,419		127,036		59,472		6,167		65,639
Class C		127,857		65,805		193,662		74,753		7,105		81,858
Class F		58,914		22,306		81,220		30,229		2,233		32,462
Class 529-A		12,159		4,587		16,746		6,677		500		7,177
Class 529-B		1,802		1,013		2,815		1,199		127		1,326
Class 529-C		3,993		2,113		6,106		2,352		224		2,576
Class 529-E		632		274		906		365		30		395
Class 529-F		157		52		209		69		5		74
Class R-1		582		222		804		222		21		243
Class R-2		4,972		2,421		7,393		2,708		238		2,946
Class R-3		6,057		2,337		8,394		2,646		202		2,848
Class R-4		1,588		353		1,941		320		23		343
Class R-5		9,106		3,559		12,665		5,937		467		6,404
Total	$	1,578,505	$	675,038	$	2,253,543	$	1,061,748	$	89,806	$	1,151,554

4. Fees and transactions with related parties

Capital Research and Management Company ("CRMC"), the fund’s investment adviser, is the parent company of American Funds Service Company ("AFS"), the fund’s transfer agent, and American Funds Distributors, Inc. ("AFD"), the principal underwriter of the fund’s shares.

Investment advisory services–The Investment Advisory and Service Agreement with CRMC provides for monthly fees accrued daily. These fees are based on a declining series of annual rates beginning with 0.240% on the first $1 billion of daily net assets and decreasing to 0.120% on such assets in excess of $44 billion. The agreement also provides for monthly fees, accrued daily, of 3.00% on the first $100,000,000 of the fund's monthly gross income and 2.50% on such income in excess of $100,000,000. The Board of Directors approved an amended agreement effective November 1, 2005, continuing the series of rates to include an additional annual rate of 0.117% on daily net assets in excess of $55 billion. During the year ended October 31, 2005, CRMC reduced investment advisory services rates to those provided by the amended agreement. CRMC is also currently waiving a portion of investment advisory services fees. At the beginning of the period, CRMC waived 5% of these fees and increased the waiver to 10% on April 1, 2005. During the year ended October 31, 2005, total investment advisory servicesfees waived by CRMC were $10,169,000. As a result, the fee shown on the accompanying financial statements of $124,219,000, which was equivalent to an annualized rate of 0.263%, was reduced to $114,050,000, or 0.241% of average daily net assets.

Class-specific fees and expenses – Expenses that are specific to individual share classes are accrued directly to the respective share class. The principal class-specific fees and expenses are described below:

Distribution services – The fund has adopted plans of distribution for all share classes, except Class R-5. Under the plans, the Board of Directors approves certain categories of expenses that are used to finance activities primarily intended to sell fund shares and service existing accounts. The plans provide for payments, based on an annualized percentage of average daily net assets, ranging from 0.30% to 1.00% as noted below. In some cases, the Board of Directors has limited the amounts that may be paid to less than the maximum allowed by the plans. All share classes may use up to 0.25%of average daily net assets to pay service fees, or to compensate AFD for paying service fees, to firms that have entered into agreements with AFD for providing certain shareholder services. The remaining amounts available to be paid under each plan are paid to dealers to compensate them for their sales activities.

For classes A and 529-A, the Board of Directors has also approved the reimbursement of dealer and wholesaler commissions paid by AFD for certain shares sold without a sales charge. These classes reimburse AFD for amounts billed within the prior 15 months but only to the extent that the overall annual expense limit of 0.30% is not exceeded. As of October 31, 2005, there were no unreimbursed expenses subject to reimbursement for classes A or 529-A.

Share class	Currently approved limits	Plan limits
Class A	0.30%	0.30%
Class 529-A	0.30	0.50
Classes B and 529-B	1.00	1.00
Classes C, 529-C and R-1	1.00	1.00
Class R-2	0.75	1.00
Classes 529-E and R-3	0.50	0.75
Classes F, 529-F and R-4	0.25	0.50

Transfer agent services–The fund has a transfer agent agreement with AFS for classes A and B. Under this agreement, these share classes compensate AFS for transfer agent services including shareholder recordkeeping, communications and transaction processing. AFS is also compensated for certain transfer agent services provided to all other share classes from the administrative services fees paid to CRMC described below.

Administrative services – The fund has an administrative services agreement with CRMC to provide transfer agent and other related shareholder services for all share classes other than classes A and B. Each relevant share class pays CRMC annual fees up to 0.15% (0.10% for Class R-5) based on its respective average daily net assets. Each relevant share class also pays AFS additional amounts for certain transfer agent services. CRMC and AFS may use these fees to compensate third parties for performing these services. CRMC has agreed to pay AFS on the fund's behalf for a portion of the transfer agent services fees for some of the retirement plan share classes. For the year ended October 31, 2005, the total administrative services fees paid by CRMC were $2,000 and $281,000 for classes R-1 and R-2, respectively.Administrative services fees are presented gross of any payments made by CRMC. Each 529 share class is subject to an additional annual administrative services fee of 0.10% of its respective average daily net assets; this fee is payable to the Commonwealth of Virginia for the maintenance of the CollegeAmerica plan.Although these amounts are included with administrative services fees on the accompanying financial statements, the Commonwealth of Virginia is not considered a related party.

Expenses under the agreements described above for the year ended October 31, 2005, were as follows (dollars in thousands):

Share class	Distribution services	Transfer agent services	Administrative services
Share class	Distribution services	Transfer agent services	CRMC administrative services	Transfer agent services	Commonwealth of Virginia administrative services
Class A	$82,450	$26,024	Not applicable	Not applicable	Not applicable
Class B	30,223	2,558	Not applicable	Not applicable	Not applicable
Class C	48,483	Included in administrative services	$6,525	$804	Not applicable
Class F	4,332		2,106	258	Not applicable
Class 529-A	658		419	40	$359
Class 529-B	709		84	26	71
Class 529-C	1,556		184	42	156
Class 529-E	103		24	2	4
Class 529-F	5		5	1	21
Class R-1	222		32	14	Not applicable
Class R-2	1,413		282	784	Not applicable
Class R-3	978		292	115	Not applicable
Class R-4	115		68	6	Not applicable
Class R-5	Not applicable		246	6	Not applicable
Total	$171,247	$28,582	$10,267	$2,098	$611

Deferred Directors’compensation– Since the adoption of the deferred compensation plan in 1993, Directors who are unaffiliated with CRMC may elect to defer the cash payment of part or all of their compensation. These deferred amounts, which remain as liabilities of the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. Directors’ compensation of $465,000, shown on the accompanying financial statements, includes $359,000 in current fees (either paid in cash or deferred) and a net increase of $106,000 in the value of the deferred amounts.

Affiliated officers and Directors – Officers and certain Directors of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No affiliated officers or Directors received any compensation directly from the fund.

5. Capital share transactions

Capital share transactions in the fund were as follows (dollars and shares in thousands):

Share class	Sales(1)			Reinvestments of dividends and distributions			Repurchases(1)					Net increase
		Amount	Shares		Amount	Shares		Amount		Shares			Amount	Shares
Year ended October 31, 2005
Class A	$	14,031,892	266,731	$	1,602,608	30,537	$	(2,814,883	)	(53,447	)	$	12,819,617	243,821
Class B		910,319	17,321		115,182	2,198		(213,844	)	(4,062	)		811,657	15,457
Class C		2,549,781	48,482		167,793	3,200		(452,488	)	(8,592	)		2,265,086	43,090
Class F		1,145,278	21,767		62,859	1,197		(270,418	)	(5,128	)		937,719	17,836
Class 529-A		205,690	3,908		15,977	304		(16,390	)	(310	)		205,277	3,902
Class 529-B		25,394	482		2,750	53		(2,141	)	(40	)		26,003	495
Class 529-C		78,964	1,500		5,904	112		(10,111	)	(191	)		74,757	1,421
Class 529-E		9,902	188		873	17		(960	)	(18	)		9,815	187
Class 529-F		3,531	67		194	4		(159	)	(3	)		3,566	68
Class R-1		25,005	476		733	14		(3,283	)	(62	)		22,455	428
Class R-2		137,881	2,619		7,062	134		(38,144	)	(723	)		106,799	2,030
Class R-3		166,923	3,171		7,897	150		(30,507	)	(578	)		144,313	2,743
Class R-4		61,900	1,173		1,723	32		(9,195	)	(174	)		54,428	1,031
Class R-5		107,386	2,038		9,538	182		(26,098	)	(496	)		90,826	1,724
Total net increase
(decrease)	$	19,459,846	369,923	$	2,001,093	38,134	$	(3,888,621	)	(73,824	)	$	17,572,318	334,233

Year ended October 31, 2004
Class A	$	8,575,196	177,997	$	815,422	16,984	$	(1,813,363	)	(37,709	)	$	7,577,255	157,272
Class B		798,922	16,609		56,724	1,182		(142,576	)	(2,962	)		713,070	14,829
Class C		1,656,850	34,412		66,256	1,379		(227,960	)	(4,738	)		1,495,146	31,053
Class F		624,829	12,944		23,499	489		(117,839	)	(2,449	)		530,489	10,984
Class 529-A		103,557	2,154		6,661	138		(7,810	)	(162	)		102,408	2,130
Class 529-B		19,180	398		1,248	26		(1,532	)	(32	)		18,896	392
Class 529-C		51,496	1,070		2,384	50		(3,916	)	(81	)		49,964	1,039
Class 529-E		6,390	133		368	7		(447	)	(9	)		6,311	131
Class 529-F		1,274	27		68	1		(134	)	(3	)		1,208	25
Class R-1		5,903	123		222	5		(1,056	)	(22	)		5,069	106
Class R-2		83,376	1,731		2,681	56		(24,014	)	(500	)		62,043	1,287
Class R-3		75,618	1,570		2,554	53		(13,447	)	(279	)		64,725	1,344
Class R-4		10,806	222		302	6		(2,403	)	(49	)		8,705	179
Class R-5		101,596	2,091		4,270	89		(48,995	)	(1,018	)		56,871	1,162
Total net increase
(decrease)	$	12,114,993	251,481	$	982,659	20,465	$	(2,405,492	)	(50,013	)	$	10,692,160	221,933


(1) Includes exchanges between share classes of the fund.

6. Investment transactions

The fund made purchases and sales of investment securities, excluding short-term securities, of $22,428,130,000 and $8,554,198,000, respectively, during the year ended October 31, 2005.

CollegeAmerica is a registered trademark of and sponsored by the Virginia College Savings Plan.^SM

Financial highlights(1)

		Income (loss) from investment operations(2)(3)			Dividends and distributions




	Net asset value, beginning of period	Net investment income	Net gains (losses) on securities (both realized and unrealized)	Total from investment operations	Dividends (from net investment income)	Distributions (from capital gains)	Total dividends and distributions	Net asset value, end of period	Total return (4)	Net assets, end of period (in millions)		Ratio of expenses to average net assets before reimbursements/ waivers		Ratio of expenses to average net assets after reimbursements/ waivers	(5)	Ratio of net income to average net assets	(6)
Class A:
Year ended 10/31/2005	$50.75	$2.01	$2.56	$4.57	$(1.84)	$(.90)	$(2.74)	$52.58	9.11%	$42,303		.59%		.57%		3.79%
Year ended 10/31/2004	45.29	1.76	5.68	7.44	(1.81)	(.17)	(1.98)	50.75	16.73	28,458		.60		.59		3.65
Year ended 10/31/2003	40.73	1.72	5.36	7.08	(2.00)	(.52)	(2.52)	45.29	17.95	18,273		.65		.65		4.04
Year ended 10/31/2002	43.80	1.82	(1.67)	.15	(2.05)	(1.17)	(3.22)	40.73	.16	10,006		.67		.67		4.19
Year ended 10/31/2001	43.69	1.94	1.19	3.13	(2.08)	(.94)	(3.02)	43.80	7.39	8,057		.66		.66		4.36
Class B:
Year ended 10/31/2005	50.75	1.59	2.56	4.15	(1.42)	(.90)	(2.32)	52.58	8.26	3,371		1.38		1.36		3.01
Year ended 10/31/2004	45.29	1.38	5.68	7.06	(1.43)	(.17)	(1.60)	50.75	15.81	2,469		1.40		1.39		2.85
Year ended 10/31/2003	40.73	1.38	5.36	6.74	(1.66)	(.52)	(2.18)	45.29	17.03	1,532		1.44		1.44		3.19
Year ended 10/31/2002	43.80	1.48	(1.67)	(.19)	(1.71)	(1.17)	(2.88)	40.73	(.61)	450		1.44		1.44		3.41
Year ended 10/31/2001	43.69	1.60	1.19	2.79	(1.74)	(.94)	(2.68)	43.80	6.56	118		1.41		1.41		3.35
Class C:
Year ended 10/31/2005	50.75	1.56	2.56	4.12	(1.39)	(.90)	(2.29)	52.58	8.19	5,867		1.44		1.42		2.94
Year ended 10/31/2004	45.29	1.34	5.68	7.02	(1.39)	(.17)	(1.56)	50.75	15.72	3,476		1.47		1.47		2.76
Year ended 10/31/2003	40.73	1.35	5.36	6.71	(1.63)	(.52)	(2.15)	45.29	16.94	1,696		1.51		1.51		3.08
Year ended 10/31/2002	43.80	1.45	(1.67)	(.22)	(1.68)	(1.17)	(2.85)	40.73	(.69)	424		1.52		1.52		3.31
Period from 3/15/2001 to 10/31/2001	44.15	.81	(.14)	.67	(1.02)	-	(1.02)	43.80	1.52	65		1.51	(7)	1.51	(7)	2.98	(7)
Class F:
Year ended 10/31/2005	50.75	1.96	2.56	4.52	(1.79)	(.90)	(2.69)	52.58	9.01	2,141		.68		.65		3.71
Year ended 10/31/2004	45.29	1.70	5.68	7.38	(1.75)	(.17)	(1.92)	50.75	16.58	1,161		.72		.71		3.51
Year ended 10/31/2003	40.73	1.67	5.36	7.03	(1.95)	(.52)	(2.47)	45.29	17.82	539		.76		.76		3.86
Year ended 10/31/2002	43.80	1.76	(1.67)	.09	(1.99)	(1.17)	(3.16)	40.73	.03	155		.79		.79		4.04
Period from 3/15/2001 to 10/31/2001	44.15	.99	(.14)	.85	(1.20)	-	(1.20)	43.80	1.94	17		.80	(7)	.80	(7)	3.70	(7)
Class 529-A:
Year ended 10/31/2005	50.75	1.95	2.56	4.51	(1.78)	(.90)	(2.68)	52.58	8.99	458		.71		.68		3.70
Year ended 10/31/2004	45.29	1.70	5.68	7.38	(1.75)	(.17)	(1.92)	50.75	16.59	244		.72		.71		3.53
Year ended 10/31/2003	40.73	1.70	5.36	7.06	(1.98)	(.52)	(2.50)	45.29	17.89	121		.70		.70		3.99
Period from 2/19/2002 to 10/31/2002	43.06	1.19	(2.13)	(.94)	(1.39)	-	(1.39)	40.73	(2.31)	32		.91	(7)	.91	(7)	4.05	(7)
Class 529-B:
Year ended 10/31/2005	50.75	1.50	2.56	4.06	(1.33)	(.90)	(2.23)	52.58	8.08	83		1.55		1.53		2.85
Year ended 10/31/2004	45.29	1.28	5.68	6.96	(1.33)	(.17)	(1.50)	50.75	15.58	55		1.60		1.60		2.66
Year ended 10/31/2003	40.73	1.30	5.36	6.66	(1.58)	(.52)	(2.10)	45.29	16.82	31		1.64		1.64		3.04
Period from 2/15/2002 to 10/31/2002	43.33	.98	(2.40)	(1.42)	(1.18)	-	(1.18)	40.73	(3.37)	8		1.66	(7)	1.66	(7)	3.32	(7)
Class 529-C:
Year ended 10/31/2005	50.75	1.51	2.56	4.07	(1.34)	(.90)	(2.24)	52.58	8.10	192		1.54		1.52		2.86
Year ended 10/31/2004	45.29	1.29	5.68	6.97	(1.34)	(.17)	(1.51)	50.75	15.60	113		1.59		1.58		2.67
Year ended 10/31/2003	40.73	1.31	5.36	6.67	(1.59)	(.52)	(2.11)	45.29	16.83	54		1.63		1.63		3.05
Period from 2/20/2002 to 10/31/2002	43.12	.97	(2.20)	(1.23)	(1.16)	-	(1.16)	40.73	(2.96)	13		1.65	(7)	1.65	(7)	3.31	(7)
Class 529-E:
Year ended 10/31/2005	50.75	1.78	2.56	4.34	(1.61)	(.90)	(2.51)	52.58	8.64	25		1.02		1.00		3.38
Year ended 10/31/2004	45.29	1.54	5.68	7.22	(1.59)	(.17)	(1.76)	50.75	16.19	15		1.07		1.07		3.18
Year ended 10/31/2003	40.73	1.53	5.36	6.89	(1.81)	(.52)	(2.33)	45.29	17.44	7		1.10		1.10		3.57
Period from 3/1/2002 to 10/31/2002	43.74	1.08	(2.83)	(1.75)	(1.26)	-	(1.26)	40.73	(4.09)	2		1.11	(7)	1.11	(7)	3.87	(7)
Class 529-F:
Year ended 10/31/2005	50.75	1.97	2.56	4.53	(1.80)	(.90)	(2.70)	52.58	9.04	6		.63		.60		3.78
Year ended 10/31/2004	45.29	1.65	5.68	7.33	(1.70)	(.17)	(1.87)	50.75	16.47	3		.82		.82		3.44
Year ended 10/31/2003	40.73	1.64	5.36	7.00	(1.92)	(.52)	(2.44)	45.29	17.72	1		.85		.85		3.78
Period from 9/17/2002 to 10/31/2002	41.74	.14	(.89)	(.75)	(.26)	-	(.26)	40.73	(1.79)	-	(8)	.10		.10		.35



Class R-1:
Year ended 10/31/2005	$50.75	$1.54	$2.56	$4.10	$(1.37)	$(.90)	$(2.27)	$52.58	8.15%	$34		1.50%		1.46%		2.91%
Year ended 10/31/2004	45.29	1.32	5.68	7.00	(1.37)	(.17)	(1.54)	50.75	15.69	11		1.53		1.50		2.74
Year ended 10/31/2003	40.73	1.35	5.36	6.71	(1.63)	(.52)	(2.15)	45.29	16.94	5		1.66		1.53		3.12
Period from 6/11/2002 to 10/31/2002	45.41	.52	(4.53)	(4.01)	(.67)	-	(.67)	40.73	(8.84)	-	(8)	.87		.60		1.27
Class R-2:
Year ended 10/31/2005	50.75	1.55	2.56	4.11	(1.38)	(.90)	(2.28)	52.58	8.18	241		1.61		1.44		2.95
Year ended 10/31/2004	45.29	1.34	5.68	7.02	(1.39)	(.17)	(1.56)	50.75	15.73	129		1.75		1.47		2.78
Year ended 10/31/2003	40.73	1.36	5.36	6.72	(1.64)	(.52)	(2.16)	45.29	16.99	57		1.85		1.49		3.11
Period from 5/31/2002 to 10/31/2002	46.10	.51	(5.16)	(4.65)	(.72)	-	(.72)	40.73	(10.10)	4		.77		.63		1.29
Class R-3:
Year ended 10/31/2005	50.75	1.80	2.56	4.36	(1.63)	(.90)	(2.53)	52.58	8.68	268		1.00		.98		3.41
Year ended 10/31/2004	45.29	1.53	5.68	7.21	(1.58)	(.17)	(1.75)	50.75	16.17	120		1.09		1.08		3.15
Year ended 10/31/2003	40.73	1.52	5.36	6.88	(1.80)	(.52)	(2.32)	45.29	17.42	46		1.15		1.11		3.46
Period from 6/4/2002 to 10/31/2002	45.74	.56	(4.80)	(4.24)	(.77)	-	(.77)	40.73	(9.27)	2		.62		.46		1.40
Class R-4:
Year ended 10/31/2005	50.75	1.95	2.56	4.51	(1.78)	(.90)	(2.68)	52.58	9.01	70		.70		.68		3.71
Year ended 10/31/2004	45.29	1.70	5.68	7.38	(1.75)	(.17)	(1.92)	50.75	16.57	15		.74		.73		3.49
Year ended 10/31/2003	40.73	1.68	5.36	7.04	(1.96)	(.52)	(2.48)	45.29	17.84	6		.79		.76		3.79
Period from 5/20/2002 to 10/31/2002	45.84	.65	(4.85)	(4.20)	(.91)	-	(.91)	40.73	(9.20)	-	(8)	.76		.34		1.59
Class R-5:
Year ended 10/31/2005	50.75	2.11	2.56	4.67	(1.94)	(.90)	(2.84)	52.58	9.33	292		.39		.37		4.00
Year ended 10/31/2004	45.29	1.85	5.68	7.53	(1.90)	(.17)	(2.07)	50.75	16.95	194		.41		.40		3.85
Year ended 10/31/2003	40.73	1.81	5.36	7.17	(2.09)	(.52)	(2.61)	45.29	18.20	121		.44		.44		4.28
Period from 5/15/2002 to 10/31/2002	45.87	.89	(5.02)	(4.13)	(1.01)	-	(1.01)	40.73	(9.04)	75		.21		.21		2.10

	Year ended October 31
		2005		2004		2003		2002		2001

Portfolio turnover rate for all classes of shares		20	%	24	%	27	%	36	%	37	%

(1) Based on operations for the period shown (unless otherwise noted) and, accordingly, may not be representative of a full year.

(2) Based on average shares outstanding.

(3) For the year ended October 31, 2002, net investment income was lower and net gains (losses) on securities

(both realized and unrealized) were higher by approximately $0.14 per share for Class A as a result of an accounting

change related to the amortization of bond premium. On an annualized basis, the impact of the accounting change on the other share classes

would have been approximately the same.

(4) Total returns exclude all sales charges, including contingent deferred sales charges.

(5) The ratios in this column reflect the impact, if any, of certain reimbursements/waivers from CRMC.

During some of the periods shown, CRMC reduced fees for investment advisory services for all

share classes. In addition, during the start-up period for the retirement plan share classes (except Class R-5),

CRMC agreed to pay a portion of the fees related to transfer agent services.

(6) For the year ended October 31, 2002, the ratio of net income to average net assets for Class A was lower by 0.34 percentage

points as a result of an accounting change related to the amortization of bond premium. On an annualized basis, the

impact of the accounting change on the other share classes would have been approximately the same.

(7) Annualized.

(8) Amount less than $1 million.

See Notes to Financial Statements

Report of independent registered public accounting firm

To the Board of Directors and Shareholders of Capital Income Builder, Inc.:

In our opinion, the accompanying statement of assets and liabilities, including the summary investment portfolio, and the related statements of operations and changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Capital Income Builder, Inc. (the "Fund") at October 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and it’s financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 owned at October 31, 2005 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Los Angeles, California

December 12, 2005

Tax information unaudited

We are required to advise you within 60 days of the fund’s fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. The information below is provided for the fund’s fiscal year ended October 31, 2005.

During the fiscal year ended, the fund paid a long-term capital gain distribution of $675,038,000. A portion of this amount was distributed to shareholders in redemption of their shares.

Individual shareholders are eligible for reduced tax rates on qualified dividend income. The fund designates $1,452,894,000 of the dividends received as qualified dividend income.

Corporate shareholders may exclude up to 70% of qualifying dividends. The fund designates $619,745,000 of dividends received as qualified dividend income.

For state tax purposes, certain states may exempt from income taxation that portion of the income dividends paid by the fund that were derived from direct U.S. government obligations. The fund designates $112,368,000 as interest derived on direct U.S. government obligations.

Individual shareholders should refer to their Form 1099-DIV or other tax information, which will be mailed in January 2006, to determine the calendar year amounts to be included on their 2005 tax returns. Shareholders should consult their tax advisers.