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AMERICAN HIGH-INCOME TRUST
Part B
Statement of Additional Information
February 1, 1997
(as amended June 2, 1997)
This document is not a prospectus but should be read in conjunction with a
current prospectus dated February 1, 1997 of American High-Income Trust (the
"fund"). A prospectus may be obtained from your investment dealer or financial
planner or by writing to the fund at the following address:
American High-Income Trust
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Shareholders who purchase shares at net asset value through employer-sponsored
defined contribution plans should note that not all of the services or features
described below may be available to them, and they should contact their
employer for details.
Table of Contents
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Item Page No.
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Description of Securities and Investment Techniques 1
Investment Restrictions 5
Fund Officers and Trustees 8
Management 10
Dividends, Distributions and Federal Taxes 13
Purchase of Shares 16
Redeeming Shares 22
Shareholder Account Services and Privileges 23
Execution of Portfolio Transactions 25
General Information 25
Investment Results 27
Appendix 30
Financial Statements Attached
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DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under "Securities and Investment Techniques."
PORTFOLIO TRADING - The fund intends to engage in portfolio trading when
Capital Research and Management Company (the "Investment Adviser") believes
that the sale of a security owned by the fund and the purchase of another
security of better value can enhance principal and/or increase income. A
security may be sold to avoid any prospective decline in market value in light
of what is evaluated as an expected rise in prevailing yields, or a security
may be purchased in anticipation of a market rise (a decline in prevailing
yields). A security also may be sold and a comparable security purchased
coincidentally in order to take advantage of what is believed to be a disparity
in the normal yield and price relationship between the two securities.
COMMERCIAL BANK OBLIGATIONS - The fund will invest in certificates of deposit
(interest-bearing time deposits) and bankers' acceptances (time drafts drawn on
a commercial bank where the bank accepts an irrevocable obligation to pay at
maturity) only to the extent that such items represent direct or contingent
obligations of commercial banks with assets in excess of $1 billion, based on
latest published reports, or obligations issued by commercial banks with assets
of less than $1 billion if the principal amount of such obligation is federally
insured.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities. When the fund agrees to purchase such securities it assumes the
risk of any decline in value of the security beginning on the date of the
agreement. When the fund agrees to sell such securities, it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails
to deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss beginning on the date of the
agreement.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly may increase. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its
payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets will likely occur than were it
not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
Although the fund has no current intention of doing so during the next 12
months, the fund is authorized to enter into reverse repurchase agreements and
"roll" transactions. A reverse repurchase agreement is the sale of a security
by a fund and its agreement to repurchase the security at a specified time and
price. A "roll" transaction is the sale of GNMA certificates or other
securities together with a commitment to purchase similar, but not identical,
securities at a future date. The fund will segregate liquid assets which will
be marked to market daily in an amount sufficient to cover its obligations
under "roll" transactions and reverse repurchase agreements with broker-dealers
(but no collateral is required on reverse repurchase agreements with banks).
Under the Investment Company Act of 1940 (the "1940 Act"), these transactions
may be considered borrowings by the fund; accordingly, the fund will limit
these transactions, together with any other borrowings, to no more than
one-third of its total assets. Although these transactions will not be entered
into for the purpose of leveraging, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it will have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets would likely occur than were
it not in such a position. As the fund's aggregate commitments under these
transactions increase, the opportunity for leverage similarly increases. If
the income and gains on securities purchased with the proceeds of reverse
repurchase or roll agreements exceed the costs of the agreements, the fund's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if the income and gains fail to exceed the costs, earnings or
net asset value would decline faster than otherwise would be the case.
U.S. PRIVATE PLACEMENTS - The fund will invest no more than 15% of its net
assets, in aggregate, in securities that are not readily marketable, including
securities acquired in private placements (which are direct sales of securities
to a limited number of investors). Private placements may be either purchased
from another institutional investor that originally acquired the securities in
a private placement or directly from the issuers of the securities. Generally,
securities acquired in such private placements are subject to contractual
restrictions on resale and may not be resold except pursuant to a registration
statement under the Securities Act of 1933 or in reliance upon an exemption
from the registration requirements under the Act, for example, private
placements sold pursuant to Rule 144A. Accordingly, all private placements
will be deemed illiquid unless they have been specifically determined to be
liquid taking into account factors such as the frequency and volume of trading
and the commitment of dealers to make markets under procedures adopted by the
fund's board of trustees.
VARIABLE, FLOATING RATE AND SYNTHETIC OBLIGATIONS - The interest rates payable
on certain securities in which the fund may invest may not be fixed but may
fluctuate based upon changes in market rates. Variable and floating rate
obligations bear coupon rates that are adjusted at designated intervals, based
on the then current market rates of interest on which the coupon rates are
based. Variable and floating rate obligations permit the fund to "lock in" the
current interest rate for only the period until the next scheduled rate
adjustment, but the rate adjustment feature tends to limit the extent to which
the market value of the obligation will fluctuate. Although the fund has no
current intention of doing so during the next 12 months, the fund may also
invest in "synthetic" securities whose value depends on the level of
currencies, commodities, securities, securities indexes, or other financial
indicators or statistics. For example, these could include fixed-income
securities whose value or interest rate is determined by reference to the value
of a foreign currency relative to the U.S. dollar, or to the value of different
foreign currencies relative to each other. The value or interest rate of these
securities may increase or decrease as the value of the underlying instrument
changes.
REINSURANCE RELATED NOTES AND BONDS - The fund may invest in reinsurance
related notes and bonds. These instruments, which are typically issued by
special purpose reinsurance companies, transfer an element of insurance risk to
the note or bond holders. For example, the reinsurance company would not be
required to repay all or a portion of the principal value of the notes or bonds
if losses due to a catastrophic event under the policy (such as a major
hurricane) exceed certain dollar thresholds. Consequently, the fund may lose
the entire amount of its investment in such bonds or notes if such an event
occurs and losses exceed certain dollar thresholds. In this instance,
investors would have no recourse against the insurance company. These
instruments may be issued with fixed or variable interest rates and rated in a
variety of credit quality categories by the rating agencies.
CASH AND CASH EQUIVALENTS - Subject to the requirement that it maintain at
least 65% of its assets in high-risk, high-yield bonds under normal market
conditions, the fund may maintain assets in cash or cash equivalents. Cash
equivalents include (1) commercial paper (short-term notes up to 9 months in
maturity issued by corporations or governmental bodies); (2) commercial bank
obligations such as certificates of deposit, (interest-bearing time deposits);
and bankers' acceptances, (time drafts on a commercial bank where the bank
accepts an irrevocable obligation to pay at maturity); (3) savings association
obligations (certificates of deposit issued by mutual savings banks or savings
and loan associations); (4) securities of the U.S. Government, its agencies or
instrumentalities that mature, or may be redeemed, in one year or less; and (5)
corporate bonds and notes that mature, or that may be redeemed, in one year or
less.
WARRANTS OR RIGHTS - As a condition of its continuing registration in a state,
the fund has undertaken that its investments in warrants or rights, valued at
the lower of cost or market, will not exceed 5% of the value of its net assets.
Included within that amount, but not to exceed 2% of the fund's net assets, may
be warrants or rights that are not listed on either the New York Stock Exchange
or the American Stock Exchange. Warrants or rights acquired by the fund in
units or attached to securities will be deemed to be without value for purposes
of these restrictions. These limits are not fundamental policies of the fund
and may be changed by the Board of Trustees without shareholder approval.
CURRENCY TRANSACTIONS - The fund has the ability to 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 a currency against the U.S. dollar. The fund will
segregate liquid assets which will be marked to market daily to meet its
forward contract commitments to the extent required by the Securities and
Exchange Commission.
Certain provisions of the Internal Revenue Code may affect the extent to which
the fund may enter into forward contracts. Such transactions may also affect,
for U.S. federal income tax purposes, the character and timing of income, gain
or loss recognized by the fund.
LOANS OF PORTFOLIO SECURITIES - Although the fund has no current intention to
do so during the next 12 months, the fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors
whose financial condition is monitored by Capital Research and Management
Company (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 in 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 10% of the value of its total assets,
computed at the time any such loan is made.
REPURCHASE AGREEMENTS - Although the fund has no current intention to do so
during the next 12 months, the fund may enter into repurchase agreements, under
which it buys a security and obtains a simultaneous commitment from the seller
to repurchase the security at a specified time and price. The seller must
maintain with the fund's custodian collateral equal to at least 100% of the
repurchase price including accrued interest, as monitored daily by the
Investment Adviser. If the seller under the repurchase agreement defaults, the
fund may incur a loss if the value of the collateral security under 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, liquidation of the collateral by the fund may be delayed
or limited.
OPTIONS ON U.S. TREASURY SECURITIES - Although the fund has no current
intention of doing so during the next 12 months, from time to time, the fund
may purchase put and call options on U.S. Treasury securities ("Treasury
securities"). A put (call) option gives the fund as purchaser of the option the
right (but not the obligation) to sell (buy) a specified amount of Treasury
securities at the exercise price until the expiration of the option. The value
of a put (call) option on Treasury securities generally increases (decreases)
with an increase (decrease) in prevailing interest rates. Accordingly, the
fund would purchase puts (calls) in anticipation of, or to protect against, an
increase in interest rates. These put options are listed on an exchange or
traded over-the-counter ("OTC options"). Exchange-traded put options have
standardized exercise prices and expiration dates; OTC options are two-party
contracts with negotiated exercise prices and expiration dates. OTC options
differ from exchange-traded options in that OTC options are transacted with
dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of a quote
provided by the dealer. In the case of OTC options, there can be no assurance
that a liquid secondary market will exist for any particular option at any
specific time.
Although the fund may purchase options to reduce the risk of increases in
interest rates, it cannot thereby eliminate all such risks. For example, while
the value of options on Treasury securities principally is related to general
levels of interest rates on Treasury securities, the values of higher yielding
corporate obligations in which the fund primarily invests also are affected by
credit and other factors. The fund is subject to the loss of its entire
premium payment where the put option is allowed to expire without exercise.
The fund may not purchase any additional options if, as a result, the value of
all options owned by the fund would exceed 5% of the fund's total assets.
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the
length of time particular investments may have been held. 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.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. The fund does not
anticipate its portfolio turnover to exceed 100% annually. The fund's
portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. See "Financial Highlights" in the
Prospectus for the fund's portfolio turnover for each of the last nine years.
INVESTMENT RESTRICTIONS
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by the 1940 Act as the vote of
the lesser of (i) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (ii) more than 50% of the outstanding
voting securities. All percentage limitations expressed in the following
investment restrictions are measured immediately after and giving effect to the
relevant transaction. 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;
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 registered 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 illiquid securities, if, immediately after and as a result, the
value of illiquid securities held by the fund would exceed, in the aggregate,
15% of the fund's net assets;
7. Engage in the business of underwriting securities of other issuers, except
to the extent that the disposal of an investment position may technically cause
it to be considered an underwriter as that term is defined under the Securities
Act of 1933;
8. Make loans, except that this does not prevent the fund from purchasing
debt securities, entering into repurchase agreements or making 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, provided 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. The fund will not
purchase securities while such borrowings are outstanding. This restriction
shall not prevent the fund from entering into reverse repurchase agreements or
"roll" transactions, provided that these transactions and any other
transactions constituting borrowing by the fund may not exceed one-third of the
fund's total assets. In the event that the asset coverage for the fund's
borrowings falls below 300%, the fund will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage;
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 Trustees 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,
except that this shall not prevent the purchase of put or call options on
currencies or U. S. Government securities.
A further investment policy of the fund, which may be changed by action of the
Board of Trustees without shareholder approval, is that the Fund will not
invest in securities of an issuer if the investment would cause the fund to own
more than 10% of the outstanding voting securities of any one issuer.
Notwithstanding Investment Restriction #4, the fund may invest in securities
of other managed investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
Trustees and to the extent such investments are allowed by an exemptive order
granted by the U.S. Securities and Exchange Commission.AMERICAN HIGH-INCOME
TRUST
FUND OFFICERS AND TRUSTEES
TRUSTEES AND TRUSTEE COMPENSATION
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NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATION(S) DURING AGGREGATE TOTAL COMPENSATION TOTAL NUMBER
WITH PAST 5 YEARS (POSITIONS WITHIN THE COMPENSATION (INCLUDING OF FUND
REGISTRANT ORGANIZATIONS LISTED MAY HAVE (INCLUDING VOLUNTARILY DEFERRED BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY DEFERRED COMPENSATION/1/) WHICH
COMPENSATION/1/) FROM FROM ALL FUNDS TRUSTEE
THE FUND DURING MANAGED BY CAPITAL SERVES/2/
FISCAL YEAR ENDED RESEARCH AND
SEPTEMBER 30, 1996 MANAGEMENT COMPANY
SEPTEMBER 30, 1996 FOR THE YEAR ENDED
SEPTEMBER 30, 1996 9/30/96/2/
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++ H. Frederick Christie Private Investor. Former President and 3,400 $137,600 18
Age: 63 Trustee Chief Executive Officer, The Mission /3/
P.O. Box 144 Group (non-utility holding company,
Palos Verdes Estates, CA 90274 subsidiary of Southern California Edison
Company)
+ Don R. Conlan Trustee President Emeritus, The Capital Group none/4/ none/4/ 12
Age: 61 Companies, Inc.
1630 Milan Avenue
South Pasadena, CA 91030
Diane C. Creel Trustee CEO and President, $2,600 $37,300 12
Age: 48 The Earth Technology Corporation
100 W. Broadway
Suite 5000
Long Beach, CA 90802
Martin Fenton, Jr. Trustee Chairman, Senior Resource Group $2,800 $116,300 16
Age: 61 (management of senior living centers)
4350 Executive Drive
Suite 101
San Diego, CA 92121-2116
Leonard R. Fuller Trustee President, Fuller & Company, Inc. $3,200 $40,300 12
Age: 50 (financial management consulting firm)
4337 Marina City Drive
Suite 841 ETN
Marina del Rey, CA 90292
+* Abner D. Goldstine Trustee Capital Research and Management none/4/ 12
Age: 67 Company, Senior Vice President none/4/
and Director
+** Paul G. Haaga, Jr. Chairman of Capital Research and Management none/4/ none/4/ 14
Age: 48 the Board Company, Executive Vice President and
Director
Herbert Hoover III Trustee Private Investor $2,800 $61,400 14
Age: 69
1520 Circle Drive
San Marino, CA 91108
Richard G. Newman Trustee Chairman, President and CEO, $2,800
Age: 62 AECOM Technology Corporation /3/ $65,300 13
3250 Wilshire Boulevard (architectural engineering)
Los Angeles, CA 90010-1599
Peter C. Valli Trustee Chairman, BW/IP International Inc. $2,800
Age: 69 (industrial manufacturing) /3/ $37,950 12
45 Sea Isle Drive
Long Beach, CA 90803
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+ Trustees who are considered "interested persons" as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of directors of the parent company of a registered broker-dealer.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071
/1/ Amounts may be deferred by eligible Trustees under a non-qualified deferred
compensation plan adopted by the fund in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicle for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Trustees is as
follows: H. Frederick Christie ($6,112), Martin Fenton, Jr. ($4,876), Richard
G. Newman ($9,913), and Peter C. Valli ($9,701). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Director.
/4/ Don R. Conlan, Abner D. Goldstine and Paul G. Haaga, Jr. are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
fund.
OFFICERS
*** Richard T. Schotte, PRESIDENT. Capital Research Company, Senior Vice
President
* Michael J. Downer, VICE PRESIDENT. Capital Research and Management Company,
Senior Vice President - Fund Business Management Group
** Mary C. Hall, VICE PRESIDENT . Capital Research and Management
Company, Senior Vice President - Fund Business Management Group
* Julie F. Williams, SECRETARY. Capital Research and Management Company,
Vice President - Fund Business Management Group
** Anthony W. Hynes, Jr., TREASURER. Capital Research and Management Company,
Vice President - Fund Business Management Group
* Kimberly S. Verdick, ASSISTANT SECRETARY. Capital Research and Management
Company,
Assistant Vice President - Fund Business Management Group
** Todd L. Miller, ASSISTANT TREASURER. Capital Research and Management
Company, Assistant Vice President - Fund Business Management Group
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92821.
*** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
No compensation is paid by the fund to any officer or Trustee who is a
director or officer of the Investment Adviser. The fund pays annual fees of
$2,500 to Trustees who are not affiliated with the Investment Adviser, plus
$200 for each Board of Trustees meeting attended, plus $200 for each meeting
attended as a member of a committee of the Board of Trustees. The Trustees 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 Trustees who are not affiliated with the Investment
Adviser. As of January 1, 1997, the officers and Trustees and their families
as a group, owned beneficially or of record fewer than 1% of the outstanding
shares of the fund.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington, D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have years of investment experience. The
Investment Adviser is located at 333 South Hope Street, Los Angeles, CA 90071,
and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world.
The Investment Adviser believes that it is able to attract and retain quality
personnel. The Investment Adviser is a wholly owned subsidiary of The Capital
Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serve over five million investors of all
types throughout the world. These investors include privately owned businesses
and large corporations as well as schools, colleges, foundations and other
non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement"), between the fund and the Investment Adviser will
continue in effect until October 31, 1997, unless sooner terminated, and may be
renewed from year to year thereafter provided that any such renewal has been
specifically approved at least annually by (i) the Board of Trustees or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Trustees who are not
parties to the Agreement or interested persons (as defined in the 1940 Act) of
any such party, cast in person, at a meeting called for the purpose of voting
on such approval. The Agreement provides that the Investment Adviser has no
liability to the fund for its acts or omissions in the performance of its
obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it without
penalty, upon 60 days' written notice to the other party, and that the
Agreement automatically terminates in the event of its assignment (as defined
in the 1940 Act).
The Investment Adviser has voluntarily agreed to waive its fees by any amount
necessary to assure that the fund's expenses will not exceed 1.00% of the
average daily net assets. Additionally, the Investment Adviser has agreed to
waive its fees by any amount necessary to assure that such expenses do not
exceed applicable expense limitations in any state in which the fund's shares
are being offered for sale. Other expenses which are not subject to these
limitations include interest, taxes, brokerage commissions, transaction costs,
and extraordinary items such as litigation, as well as, for purposes of the
state expense limitations, any amounts excludable under the applicable
regulation. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and not as expenses.
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the fund, and provides suitable office space and utilities, necessary small
office equipment and general purpose accounting forms, supplies, and postage
used at the offices of the fund. The fund pays all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer
and dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares
(including stock certificates, registration and qualification fees and
expenses); legal and auditing expenses; compensation, fees, and expenses paid
to trustees unaffiliated with the Investment Adviser; association dues; costs
of stationery and forms prepared exclusively for the fund; and costs of
assembling and storing shareholder account data.
The management fee is based upon the net assets of the fund and monthly gross
investment income. Gross investment income means gross income, computed
without taking account of gains or losses from sales of capital assets, but
including original issue discount as defined for federal income tax purposes.
The Internal Revenue Code in general defines original issue discount to mean
the difference between the issue price and the stated redemption price at
maturity of certain debt obligations. The holder of such indebtedness is in
general required to treat as ordinary income the proportionate part of the
original issue discount attributable to the period during which the holder held
the indebtedness. The management fee is based upon the annual rates of 0.30%
of the first $60 million of the fund's average net assets, plus 0.21% on
average net assets in excess of $60 million but not exceeding $1 billion, plus
0.18% on average net assets in excess of $1 billion, plus 3% of the first $100
million of annual gross income, plus 2.5% of annual gross investment income in
excess of $100 million. Assuming net assets of $1.5 billion and gross
investment income levels of 5%, 6%, 7%, 8% and 9%, management fees would be
0.35%, 0.38%, 0.41%, 0.44%, and 0.46%, respectively.
During the fiscal years ended September 30, 1996, 1995, and 1994, the
Investment Adviser's total fees amounted to $6,481,000, $4,916,000, and
$4,005,000, respectively.
The fund pays all expenses not specifically assumed by the Investment Adviser,
including, but not limited to, registration and filing fees with federal and
state agencies, blue sky expenses, expenses of shareholders meetings, the
expense of reports to existing shareholders, expenses of printing proxies and
prospectuses, insurance premiums, legal and auditing fees, dividend
disbursement expenses, the expense of the issuance, transfer and redemption of
its shares, expenses pursuant to the fund's Plan of Distribution, custodian
fees, costs of printing and preparation of registration statements, taxes and
compensation and expenses of Trustees who are not affiliated with the
Investment Adviser.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The fund has
adopted a Plan of Distribution (the "Plan"), pursuant to rule 12b-1 under the
1940 Act. The Principal Underwriter receives amounts payable pursuant to the
Plan (see below) and commissions consisting of that portion of the sales charge
remaining after the discounts which it allows to investment dealers.
Commissions retained by the Principal Underwriter on sales of fund shares
during the fiscal year ended September 30, 1996 amounted to $1,943,000 after
allowance of $8,164,000 to dealers. During the fiscal years ended September
30, 1995 and 1994, the Principal Underwriter retained $1,209,000 and
$1,298,000, respectively.
As required by rule 12b-1 the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Trustees and separately by a
majority of the Trustees who are not interested persons of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by a vote
of a majority of the outstanding voting securities of the fund. The officers
and Trustees who are "interested persons" of the fund due to present or past
affiliations with the Investment Adviser and related companies may be
considered to have a direct or indirect financial interest in the operation of
the Plan. Potential benefits of the Plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of Trustees who
are not "interested persons" of the fund shall be committed to the discretion
of the Trustees who are not "interested persons" during the existence of the
Plan. Plan expenditures are reviewed quarterly and must be renewed annually by
the Board of Trustees.
Under the Plan the fund may expend up to 0.30% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Trustees has approved the
category of expenses for which payment is made. These include service fees for
qualified dealers and dealers commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or any defined contribution plan qualified under Section 401(a) of
the Internal Revenue Code, including a "401(k)" plan with 200 or more eligible
employees). During the fund's fiscal year ended September 30, 1996, the fund
paid $3,079,000 under the Plan as compensation to dealers. As of September 30,
1996, accrued and unpaid distribution expenses were $221,000.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities, but permit banks
to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries of affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or
other services then being provided by such bank. It is not expected that
shareholders would suffer adverse financial consequences as a result of any of
these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS, DISTRIBUTIONS AND FEDERAL TAXES
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). Under Subchapter M, if
the fund distributes within specified times at least 90% of its investment
company taxable income (net investment income and the excess of net short-term
capital gains over net long-term capital losses), it will be taxed only on that
portion (if any) of such investment company taxable income and any net capital
gain that it retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; (b) derive less than 30% of its gross income from the sale or
other disposition of stock or securities held less than three months; and (c)
diversify its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of the fund's assets is represented by cash, cash
items, U.S. Government securities, securities of other regulated investment
companies and other securities (but such other securities must be limited, in
respect of any one issuer, to an amount not greater than 5% of the fund's
assets and 10% of the outstanding voting securities of such issuer) and (ii)
not more than 25% of the value of its assets is invested in the securities of
any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies), or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually
distributed by the fund from its current year's ordinary income and capital
gain net income and (ii) any amount on which the fund pays income tax for the
year. The fund intends to distribute net investment income and net capital
gains so as to minimize or avoid the excise tax liability.
The fund also intends to distribute to shareholders all of the excess of net
long-term capital gain over net short-term capital loss on sales of
securities. If the net asset value of shares of the fund should, by reason of
a distribution of realized capital gains, be reduced below a shareholder's
cost, such distribution would to that extent be a return of capital to that
shareholder even though taxable to the shareholder, and a sale of shares by a
shareholder at net asset value at that time would establish a capital loss for
federal tax purposes. In particular, investors should consider the tax
implications of purchasing shares just prior to a dividend or distribution
record date. Those investors purchasing shares just prior to such a date will
then receive a partial return of capital upon the dividend or distribution,
which will nevertheless be taxable to them as an ordinary or capital gains
dividend.
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 shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purpose of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other shares. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
Under the Code, distributions of net investment income by the fund to a
shareholder who, as to the U.S., is a nonresident alien individual, nonresident
alien fiduciary of a trust or estate, non-U.S. corporation, or non-U.S.
partnership (a "non-U.S. shareholder") will be subject to U.S. withholding tax
(at a rate of 30% or lower treaty rate). Withholding will not apply if a
dividend paid by the fund to a non-U.S. shareholder is "effectively connected"
with a U.S. trade or business, in which case the reporting and withholding
requirements applicable to U.S. citizens, U.S. residents or domestic
corporations will apply. However, if the distribution is effectively connected
with the conduct of the non-U.S. shareholder's trade or business within the
U.S., the distribution would be included in the net income of the shareholder
and subject to U.S. income tax at the applicable marginal rate. Distributions
of capital gains not effectively connected with a U.S. trade or business are
not subject to the withholding, but if the non-U.S. shareholder was an
individual who was physically present in the U.S. during the tax year for more
than 182 days and such shareholder is nonetheless treated as a nonresident
alien, the distributions would be subject to a 30% tax.
The fund may be required to pay withholding and other taxes imposed by
countries outside the U.S. which would reduce the fund's investment income,
generally at rates from 10% to 40%. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. If more than 50% in
value of the fund's total assets at the close of its taxable year consist of
securities of non-U.S. corporations, the fund will be eligible to file
elections with the Internal Revenue Service pursuant to which shareholders of
the fund will be required to include their respective pro rata portions of such
withholding taxes in their federal income tax returns as gross income, treat
such amounts as foreign taxes paid by them, and deduct such amounts in
computing their taxable incomes or, alternatively, use them as foreign tax
credits against their federal income taxes. The fund does not currently expect
to meet the eligibility requirement for filing this election as its investments
in securities of non-U.S. issuers are limited to 25% of its assets.
The fund may enter into forward currency contracts in connection with its
non-U.S. investments. The amount of any realized gain or loss on closing out a
forward contract will generally result in a realized capital gain or loss for
tax purposes. Under Code Section 1256, forward currency contracts held by the
fund at the end of each fiscal year will be required to be "marked to market"
for federal income tax purposes, that is, deemed to have been sold at market
value. Sixty percent of any net gain or loss recognized on these deemed sales
and 60% of any net realized gain or loss from any actual sales, will be treated
as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss. Code Section 988 may also apply to forward
contracts. Under Section 988, each foreign currency gain or loss is generally
computed separately and treated as ordinary income or loss. In the case of
overlap between Sections 1256 and 988, special provisions determine the
character and timing of any income, gain or loss. The fund will attempt to
monitor Section 988 transactions to avoid an adverse tax impact.
Dividends and distributions generally are taxable to shareholders at the time
they are paid. However, dividends and distributions declared in October,
November and December and made payable to shareholders of record in such a
month are treated as paid and are thereby taxable as of December 31, provided
that the fund pays the dividend no later than the end of January of the
following year.
As of the date of this statement of additional information, the maximum
Federal individual tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gain is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gain is 35%. However, to eliminate the benefit of lower
marginal corporate income tax rates, corporations which have taxable income in
excess of $100,000 in a taxable year will be required to pay an additional
amount of tax of up to $11,750, and corporations which have taxable income in
excess of $15,000,000 for a taxable year will be required to pay an additional
amount of income tax up to $100,000. Naturally, the amount of tax payable by a
taxpayer will be affected by a combination of tax law rules covering, E.G.,
deductions, credits, deferrals, exemptions, sources of income and other
matters. Under the Code, an individual is entitled to establish an IRA each
year (prior to the tax return filing deadline for that year) whereby earnings
on investments are tax-deferred. In addition, in some cases, the IRA
contribution itself may be deductible.
The foregoing is limited to a summary discussion of federal taxation and
should not be viewed as a comprehensive discussion of all provisions of the
Code relevant to investors. Dividends and distributions may also be subject to
state or local taxes. Investors should consult their own tax advisers for
additional details to their own tax status.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
<S> <C> <C>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under "Investment
investment minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer who is Mail directly to your investment
your registered in the state where the dealer's address printed on your
investment purchase is made and who has a account statement.
dealer sales agreement with American
Funds Distributors.
By mail Make your check payable to the fund Fill out the account additions form at the
and mail to the address indicated on bottom of a recent account statement,
the account application. Please make your check payable to the fund,
indicate an investment dealer on the write your account number on your
account application. check, and mail the check and form in
the envelope provided with your account
statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then follow section on the account application or
the procedures for additional American FundsLink Authorization Form.
investments. Once you establish the privilege, you,
your financial advisor or any person with
your account information can call
American FundsLine(R) and make
investments by telephone (subject to
conditions noted in "Telephone
Purchases, Sales and Exchanges"
below).
By wire Call 800/421-0180 to obtain Your bank should wire your additional
your account number(s), if investments in the same manner as
necessary. Please indicate an described under "Initial Investment."
investment dealer on the
account. Instruct your bank to
wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS - Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(R) (see
description below):
<TABLE>
<CAPTION>
<S> <C> <C>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R) 02
$1,000
American Balanced Fund(R) 11
500
American Mutual Fund(R) 03
250
Capital Income Builder(R) 12
1,000
Capital World Growth and Income Fund(SM) 33
1,000
EuroPacific Growth Fund(R) 16
250
Fundamental Investors(SM) 10
250
The Growth Fund of America(R) 05
1,000
The Income Fund of America(R) 06
1,000
The Investment Company of America(R) 04
250
The New Economy Fund(R) 14
1,000
New Perspective Fund(R) 07
250
SMALLCAP World Fund(R) 35
1,000
Washington Mutual Investors Fund(SM) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(R) 40
1,000
American High-Income Trust(SM) 21
1,000
The Bond Fund of America(SM) 08
1,000
Capital World Bond Fund(R) 31
1,000
Intermediate Bond Fund of America(SM) 23
1,000
Limited Term Tax-Exempt Bond Fund of 43
America(SM) 1,000
The Tax-Exempt Bond Fund of America(R) 19
1,000
The Tax-Exempt Fund of California(R)* 20
1,000
The Tax-Exempt Fund of Maryland(R)* 24
1,000
The Tax-Exempt Fund of Virginia(R)* 25
1,000
U.S. Government Securities Fund(SM) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(R) 09
2,500
The Tax-Exempt Money Fund of America(SM) 39
2,500
The U.S. Treasury Money Fund of America(SM) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000
6.10% 5.75% 5.00%
$50,000 but less than $100,000
4.71 4.50 3.75
BOND FUNDS
Less than $25,000
4.99 4.75 4.00
$25,000 but less than $50,000
4.71 4.50 3.75
$50,000 but less than $100,000
4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND
FUNDS
$100,000 but less than $250,000
3.63 3.50 2.75
$250,000 but less than $500,000
2.56 2.50 2.00
$500,000 but less than $1,000,000
2.04 2.00 1.60
$1,000,000 or more (see below)
none none
</TABLE>
Commissions of up to 1% will be paid to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated percentage of
its income), will, during calendar year 1997, provide additional compensation
to dealers. Currently these payments are limited to the top one hundred dealers
who have sold shares of the fund or other funds in The American Funds Group.
These payments will be based on a pro rata share of a qualifying dealer's
sales. American Funds Distributors will, on an annual basis, determine the
advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan qualified
under Section 401(a) of the Internal Revenue Code including a "401(k)" plan
with 200 or more eligible employees or any other purchaser investing at least
$1 million in shares of the fund (or in combination with shares of other funds
in The American Funds Group other than the money market funds) may purchase
shares at net asset value; however, a contingent deferred sales charge of 1% is
imposed on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of organizations with retirement plan assets of $100
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $25,000 or more made within a
13-month period subject to the following statement of intention (the Statement)
terms. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder elects to utilize the Statement in order to qualify
for a reduced sales charge, shares equal to 5% of the dollar amount specified
in the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and capital gain distributions on these shares held in escrow
will be credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the specified
13-month period, the purchaser will remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Principal Underwriter or the securities dealer, the appropriate number of
escrowed shares will be redeemed to pay such difference. If the proceeds from
this redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deduction, the sales charge for the investments made during the
13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the statement of intention, a sales charge will be assessed
according to the sales charge breakpoint thus determined. There will be no
retroactive adjustments in sales charges on investments previously made during
the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company. This offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for fund shares, the public offering price, is based on the
net asset value per share which is calculated once daily at the close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open as set forth below. The New York Stock Exchange is currently
closed on weekends and on the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. The net asset value per share is determined as follows:
1. Stocks and convertible debentures are stated at market value based
upon closing sales prices reported on recognized securities exchanges on the
last business day of the year or, for listed securities having no sales
reported, upon last-reported bid prices on that date. Securities traded in the
over-the-counter market are valued at the last available sale prior to the time
of valuation or, lacking any sales, at the last reported bid price.
Bonds and Treasury notes are valued at prices obtained from a bond-pricing
service provided by a major dealer in bonds, 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 of their representative
quoted bid and asked prices or, if such prices are not available, at prices for
securities of comparable maturity, quality and type. Short-term securities
with original or remaining maturities in excess of 60 days, including forward
currency contracts, are valued at the mean of their quoted bid and asked
prices. Short-term securities with 60 days or less to maturity are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by the Valuation committee of the Board of Trustees.
2. The value of each security denominated in a currency other than U.S.
dollars will be translated into U.S. dollars at the prevailing market rate as
determined by the fund's officers.
3. The fund's liabilities, including proper accruals of expense items,
are deducted from total assets; and
4. The net assets so obtained are then divided by the total number of
shares outstanding and the result, rounded to the nearer cent, is the net asset
value per share.
Any purchase order may be rejected by the Principal Underwriter or by
the fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
beneficially own directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the fund without the consent of a
majority of the Board of Trustees.
REDEEMING SHARES
<TABLE>
<CAPTION>
<S> <C>
By writing to American Send a letter of instruction specifying the name of the fund,
Funds Service Company (at the number of shares or dollar amount to be sold, your name
the appropriate address and account number. You should also enclose any share
indicated under "Principal certificates you wish to redeem. For redemptions over
Underwriter and Transfer $50,000 and for certain redemptions of $50,000 or less (see
Agent" in the Prospectus) below), your signature must be guaranteed by a bank,
savings association, credit union, or member firm of a
domestic stock exchange or the National Association of
Securities Dealers, Inc. that is an eligible guarantor institution.
You should verify with the institution that it is an eligible
guarantor prior to signing. Additional documentation may be
required for redemption of shares held in corporate,
partnership or fiduciary accounts. Notarization by a Notary
Public is not an acceptable signature guarantee.
By contacting your If you redeem shares through your investment dealer, you
investment dealer may be charged for this service. SHARES HELD FOR YOU IN
YOUR INVESTMENT DEALER'S STREET NAME MUST BE REDEEMED
THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is registered in
check sent to you by using the name of an individual(s), a UGMA/UTMA custodian, or a
American FundsLine(R) or non-retirement plan trust. These redemptions may not
by telephoning, faxing, or exceed $10,000 per day, per fund account and the check
telegraphing American must be made payable to the shareholder(s) of record and be
Funds Service Company sent to the address of record provided the address has been
(subject to the conditions used with the account for at least 10 days. See "Principal
noted in this section and in Underwriter and Transfer Agent" in the Prospectus and
"Telephone Purchases, "Exchange Privilege" below for the appropriate telephone or
Sales and Exchanges" fax number.
below)
In the case of the money Upon request (use the account application for the money
market funds, you may have market funds) you may establish telephone redemption
redemptions wired to your privileges (which will enable you to have a redemption sent to
bank by telephoning your bank account) and/or check writing privileges. If you
American Funds Service request check writing privileges, you will be provided with
Company ($1,000 or more) checks that you may use to draw against your account.
or by writing a check ($250 These checks may be made payable to anyone you designate
or more) and must be signed by the authorized number of registered
shareholders exactly as indicated on your checking account
signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF $50,000
OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 15 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or closing of the
account, the plan may be terminated and the related investment reversed. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(R) (see "American FundsLine(R)" below), or by telephoning
800/421-0180 toll-free, faxing (see "Principal Underwriter and Transfer Agent"
in the Prospectus for the appropriate fax numbers) or telegraphing American
Funds Service Company. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for which Capital Guardian Trust
Company serves as trustee may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simultaneously at the share
prices next determined after the exchange order is received. (See "Purchase of
Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS
ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) - You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $10,000
per fund, per account each day), or exchange shares around the clock with
American FundsLine(R). To use this service, call 800/325-3590 from a
TouchTone(TM) telephone. Redemptions and exchanges through American
FundsLine(R) are subject to the conditions noted above and in "Redeeming
Shares--Telephone Redemptions and Exchanges" below. You will need your fund
number (see the list of funds in The American Funds Group under "Purchase of
Shares--Investment Minimums and Fund Numbers"), personal identification number
(the last four digits of your Social Security number or other tax
identification number associated with your account) and account number.
TELEPHONE REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLine(R)), fax or telegraph redemption and/or exchange options,
you agree to hold the fund, American Funds Service Company, any of its
affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options. However, you may
elect to opt out of these options by writing American Funds Service Company
(you may also reinstate them at any time by writing American Funds Service
Company). If American Funds Service Company does not employ reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine, the fund may be liable for losses
due to unauthorized or fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of technical difficulties,
market conditions, or a natural disaster, redemption and exchange requests may
be made in writing only.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund does not intend to pay a mark-up
in exchange for research in connection with principal transactions.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal year ended September 30, 1996
amounted to $8,510,000. Dealer concessions on underwritings for the fiscal
years ended September 30, 1995 and 1994 amounted to $3,523,000 and $4,991,000,
respectively. No brokerage commissions were paid for the fiscal year ended
September 30, 1994.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, ., One Chase Manhattan Plaza, New York,
NY 10081, as Custodian. Non-U.S. securities may be held by the Custodian in
non-U.S. banks or securities depositories 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 each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $976,000 for the fiscal year ended September 30, 1996.
INDEPENDENT AUDITORS - Deloitte & Touche LLP, 1000 Wilshire Boulevard, 15th
Floor, Los Angeles, CA 90017, has served as the fund's independent auditors
since its inception, providing audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission. The financial statements included in this Statement of Additional
Information have been so included in reliance on the report of the independent
auditors given on the authority of said firm as experts in accounting and
auditing.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on September 30.
Shareholders are provided at least semiannually with reports showing the
investment portfolio, financial statements and other information. The fund's
financial statements are audited annually by the fund's independent auditors,
Deloitte & Touche LLP, whose selection is determined annually by the Trustees.
PERSONAL INVESTING POLICY - The Investment Adviser and its affiliated companies
have adopted a personal investing policy consistent with Investment Company
Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; disclosure of personal holdings by certain
investment personnel prior to recommendation for purchase for the fund;
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. You may obtain a summary of the personal investing policy by
contacting the Secretary of the fund.
The financial statements including the investment portfolio and the report of
Independent Auditors contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE -- September 30, 1996
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $14.86
Offering price per share (100/95.25 of per share
net asset value, which takes into account the
fund's current maximum sales charge) 15.60
</TABLE>
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts, where the Fund was organized, and California, where
the Fund's principal office is located, shareholders of a Massachusetts
business trust may, under certain circumstances, be held personally liable as
partners for the obligations of the Fund. However, the risk of a shareholder
incurring any financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
The Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund and provides that notice of the
disclaimer may be given in each agreement, obligation, or instrument which is
entered into or executed by the Fund or Trustees. The Declaration of Trust
provides for indemnification out of Fund property of any shareholder held
personally liable for the obligations of the Fund and also provides for the
Fund to reimburse such shareholder for all legal and other expenses reasonably
incurred in connection with any such claim or liability.
Under the Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however, they 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. The Fund will
provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
SHAREHOLDER VOTING RIGHTS - At any meeting of shareholders, duly called and at
which a quorum is present, the shareholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
trustee or trustees from office and may elect a successor or successors to fill
any resulting vacancies for the unexpired terms of removed trustees. The fund
has made an undertaking, at the request of the staff of the Securities and
Exchange Commission, to apply the provisions of section 16(c) of the 1940 Act
with respect to the removal of trustees, as though the fund were a common-law
trust. Accordingly, the trustees of the fund shall promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the record holders of not less
than 10% of the outstanding shares.
INVESTMENT RESULTS
The fund's yield is 8.18% based on the 30-day (or one month) period ended
September 30, 1996, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by annualizing the current
month's dividend and dividing by the average net asset value or maximum
offering price for the month. The distribution rate may differ from the yield.
The fund's total return over the past 12 months and average annual total
return for the five-year and lifetime periods ending on September 30, 1996 was
8.31%, 11.02% and 10.86%, respectively. The average annual total return ("T")
will be computed by equating the value at the end of the period ("ERV") with a
hypothetical initial investment of $1,000 ("P") over a period of years ("n")
according to the following formula as required by the Securities and Exchange
Commission: P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
4.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. The
Fund will calculate total return for one, five and ten-year periods after such
periods have elapsed. In addition, the Fund will provide lifetime average
total return figures.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages eight common stock funds that are at least 10 years old. In the
rolling 10-year periods since January 1, 1996 (121 in all), those funds have
had better total returns than the Standard and Poor's 500 Stock Composite Index
in 94 of the 121 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may also refer to results compiled by organizations such as Lipper
Analytical Services, Morningstar, Inc. and Wiesenberger Investment Companies
Services. Additionally, the fund may, from time to time, refer to results
published in various newspapers or periodicals, including Barrons, Forbes,
Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine, Money,
U.S. News and World Report and The Wall Street Journal.
The fund may from time to time compare its investment results with the
following:
(1) Salomon Brothers High-Yield Index, which is a market value weighted index
of bonds having a minimum issue size of $50 million, a minimum maturity of 10
years and that carry a minimum/maximum quality rating of CCC/BB+.
(2) Salomon Brothers Broad Investment-Grade Bond Index, which is a market
capitalization weighted index and includes Treasury, Government-sponsored
mortgage and investment-grade fixed-rate corporates (BBB/Baa3) with a maturity
of one year or longer and a minimum of $50 million outstanding at entry, and
remain in the Index until their amount falls below $25 million.
(3) Lipper's "High Current Yield" funds average, which is the arithmetic
average of Total Return of a number of mutual funds with investment objectives
and policies similar to those of the Fund, as published by Lipper Analytical
Services. The number of funds contained in the data base varies as funds are
added or deleted over time.
(4) Average of Savings Accounts, which is a measure of all kinds of savings
deposits, including longer-term certificates (based on figures supplied by the
U.S. League of Savings Institutions). Savings accounts offer a guaranteed rate
of return on principal, but no opportunity for capital growth. The period
shown may include periods during which the maximum rates paid on some savings
deposits were fixed by law.
(5) The Consumer Price Index, which is a measure of the average change in
prices over time in a fixed market basket of goods and services (e.g. food,
clothing, shelter, and fuels, transportation fares, charges for doctors' and
dentists' services, prescription medicines, and other goods and services that
people buy for day-to-day living).
<TABLE>
<CAPTION>
Here's how much you would have if you
invested $2,000 a year in the fund:
<S> <C> <C>
1 year 3 years Lifetime
(10/1/95-9/30/96) (10/1/93-9/30/96) (2/19/88-9/30/96)
$2,166 $7,113 $30,389
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
... and taken all distributions
If you had invested in shares your investment
$10,000 in the Fund would have been worth this
this many years ago... much at September 30, 1996
<S> <C> <C>
| |
Periods
Number of Years 10/1-9/30 Value**
1 1995 - 1996 $10,830
2 1994 - 1996 12,269
3 1993 - 1996 12,467
4 1992 - 1996 14,286
5 1991 - 1996 16,867
6 1990 - 1996 21,784
7 1989 - 1996 20,914
8 1988 - 1996 22,977
Lifetime 2/19/88 - 1996 24,308
</TABLE>
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
* * * * *
ILLUSTRATION OF A $10,000 INVESTMENT IN THE FUND WITH DIVIDENDS REINVESTED
(For the lifetime of the fund February 19, 1988 - September 30, 1996)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
COST OF SHARES VALUE OF SHARES**
Fiscal Total From From From
Year End Annual Dividends Investment Initial Capital Gains Dividends Total
September 30 Dividends (cumulative) Cost Investment Reinvested Reinvested Value
1988* $ 640 $ 640 $10,640 $9,433 --- $ 641 $10,074
1989 1,188 1,828 11,828 9,273 --- 1,800 11,073
1990 1,334 3,162 13,162 7,873 --- 2,755 10,628
1991 1,411 4,573 14,573 9,040 --- 4,683 13,723
1992 1,404 5,977 15,977 9,720 --- 6,484 16,204
1993 1,503 7,480 17,480 10,120 155 8,293 18,568
1994 1,555 9,035 19,035 9,313 438 9,115 18,866
1995 1,879 10,914 20,914 9,533 561 11,288 21,382
1996 2,046 12,960 22,960 9,907 583 13,818 24,308
</TABLE>
The dollar amount of capital gain distributions during the period was $572.
* From inception on February 19, 1988.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc. employs the designations "Prime-1," "Prime-2"
and "Prime-3" to indicate commercial paper having the highest capacity for
timely repayment. Issuers rated Prime-1 have a superior capacity for repayment
of short-term promissory obligations. Prime-1 repayment capacity will normally
be evidenced by the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and well-established access to a
range of financial markets and assured sources of alternate liquidity. Issuers
rated Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3
have an acceptable capacity for repayment of short-term obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Standard & Poor's Corporation's ratings of commercial paper are graded into
four categories ranging from "A" for the highest quality obligations to "D" for
the lowest. A -- Issues assigned its highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 --
This designation indicates that the degree of safety regarding timely payment
is either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (+) sign
designation. A-2 -- Capacity for timely payments on issues with this
designation is strong. However, the relative degree of safety is not as high
as for issues designated "A-1." A-3 -- Issues carrying this designation have a
satisfactory capacity for timely payment. They are, however, somewhat more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations.
<PAGE>
<TABLE>
American High-Income Trust
Investment Portfolio
September 30, 1996
[CHART]
- -------------------------------------------------- --------- ----------- --------
<S> <C> <C> <C>
U.S. Corporate Bonds 67%
Non-U.S. Corporate Bonds 12%
U.S. Treasuries 6%
Stocks 4%
Non-U.S. Government Bonds 2%
Cash Equivalents 9%
[END CHART]
TEN LARGEST HOLDINGS
MFS Communications 3.36%
California Energy 1.95
Container Corp. of America 1.83
Videotron Holdings 1.76
USAir 1.60
Bell Cablemedia 1.54
Integrated Health Services 1.46
Fort Howard Paper 1.36
CellNet Data Systems 1.35
NEXTEL Communications 1.27
- -------------------------------------------------- --------- ----------- --------
Principal Market Percent
Amount Value of Net
Bonds & Notes - 87.17% (000) (000) Assets
Banking & Financial Services - 0.50%
First Nationwide Holdings Inc.:
10.625% 2003 /1/ $4,000 $4,175
12.50% 2003 2,000 2,165 .41%
Ocwen Financial Corp. 11.875% 2003 1,375 1,444 .09
----------- --------
7,784 .50
----------- --------
Beverages - 1.28%
Canandaigua Wine Co., Inc. 8.75% 2003 12,000 11,580 .75
Dr Pepper Bottling Co. of Texas 10.25% 2000 8,000 8,280 .53
----------- --------
19,860 1.28
----------- --------
Broadcasting & Publishing - 4.09%
American Media Operations, Inc. 11.625% 2004 16,400 17,261 1.12
American Radio Systems Corp. 9.00% 2006 8,750 8,487 .55
Chancellor Broadcasting Co.:
9.375% 2004 10,000 9,900
12.50% 2004 1,185 1,332 .73
EZ Communications, Inc. 9.75% 2005 4,750 4,821 .31
Grupo Televisa, S.A.
Series A, 11.375% 2003 /1/ 1,250 1,309
0%/13.25% 2008 /1/ /2/ 3,750 2,325 .23
Infinity Broadcasting Corp. 10.375% 2002 6,000 6,330 .41
Newsquest Capital PLC 11.00% 2006 /1/ 3,250 3,347 .22
Univision Television Group, Inc. 11.75% 2001 4,350 4,611 .30
Young Broadcasting Inc. 10.125% 2005 3,500 3,482 .22
----------- --------
63,205 4.09
----------- --------
Cable & Telephone in the United
Kingdom - 6.42%
Bell Cablemedia PLC 0%/11.95% 2004 /2/ 31,000 23,870 1.54
Comcast UK Cable Partners Ltd. 0%/11.20% 2007 /2/ 25,750 16,319 1.06
International CableTel Inc.:
0%/10.875% 2003 /2/ 21,175 15,987
0%/12.75% 2005 /2/ 1,000 675 1.08
Ionica, PLC Units 13.50% 2006 /1/ 6,000 6,015 .39
TeleWest PLC:
9.625% 2006 8,000 7,920
0%/11.00% 2007 /2/ 2,000 1,270 .59
Videotron Holdings PLC:
0%/11.125% 2004 /2/ 31,000 23,250
0%/11.00% 2005 /2/ 6,000 3,975 1.76
----------- --------
99,281 6.42
----------- --------
Cellular, Paging & Wireless
Communications - 14.45%
CAI Wireless Systems, Inc. 12.25% 2002 5,200 5,421 .35
CellNet Data Systems, Inc. 0%/13.00% 2005 /1/ /2/ /3/ 32,000 20,960 1.35
Cellular, Inc. 0%/11.75% 2003 /2/ 8,500 7,183 .46
Cellular Communications International, Inc.
Units, 0.00% 2000 17,250 11,299 .73
Centennial Cellular Corp.:
8.875% 2001 17,000 15,980
10.125% 2005 2,500 2,431 1.19
Comunicacion Celular S.A. 0%/13.125% 2003 /2/ 15,000 9,150 .59
Geotek Communications, Inc. 0%/15.00% 2005 /2/ 2,000 1,295 .08
Heartland Wireless Communications, Inc.
13.00% 2003 3,800 4,076 .26
Horizon Cellular Telephone Co., LP
0%/11.375% 2000 /2/ 17,065 16,428 1.06
InterCel, Inc. 0%/12.50% 2006 /2/ 12,500 7,156 .46
Mobile Telecomm 13.50% 2002 5,750 5,980 .39
MobileMedia Communications, Inc.:
0%/10.50% 2003 /2/ 21,150 13,959
9.375% 2007 5,000 3,950 1.16
NEXTEL Communications, Inc.:
0%/11.50% 2003 /2/ 7,250 5,365
0%/9.75% 2004 /2/ 3,000 1,935
0%/10.125% 2004 (formerly CenCall) /2/ 18,750 12,375 1.27
Omnipoint Corp.:
6.00%/12.00% 2000 /2/ /3/ 12,500 12,250
11.625% 2006 6,000 6,240 1.20
Paging Network, Inc. 11.75% 2002 14,750 15,782 1.02
PanAmSat, LP:
9.75% 2000 6,500 6,857
0%/11.375% 2003 /2/ 7,000 6,370 .86
PriCellular Wireless Corp.:
0%/14.00% 2001 /2/ 4,000 3,780
0%/12.25% 2003 /2/ 16,210 13,049 1.09
Rogers Cantel Mobile Communications Inc.:
11.125% 2002 2,500 2,625
9.375% 2008 3,000 2,963 .36
Sprint Spectrum LP, Sprint Spectrum Finance Corp.:
0%/12.50% 2006 /2/ 1,000 585
11.00% 2006 3,000 3,090 .24
Vanguard Cellular Systems, Inc. 9.375% 2006 2,000 1,980 .13
Western Wireless Corp. 10.50% 2006 /1/ 3,000 3,045 .20
----------- --------
223,559 14.45
----------- --------
Construction & Housing - 1.45%
Del Webb Corp. 9.75% 2003 2,250 2,250 .15
M.D.C. Holdings, Inc. 11.125% 2003 5,000 4,975 .32
The Ryland Group, Inc. 10.50% 2006 2,500 2,494 .16
Toll Corp. 9.50% 2003 4,000 4,090 .26
Triangle Pacific Corp. 10.50% 2003 8,250 8,580 .56
----------- --------
22,389 1.45
----------- --------
Diversified Media, Cable Television &
Telecommunications - 8.15%
Brooks Fiber Properties, Inc. 0%/10.875% 2006 /2/ 11,750 7,226 .47
Cablevision Systems Corp. 9.875% 2013 4,000 3,850 .25
Comcast Corp. 10.25% 2001 3,200 3,328 .22
Comtel Brasileira Ltda. 10.75% 2004 /1/ 4,000 4,095 .26
Insight Communications Co., LP 11.25% 2000 3,000 3,075 .20
IntelCom Group Inc.:
0%/13.50% 2005 /2/ 12,000 8,055
0%/12.50% 2006 /2/ 6,000 3,780 .76
Jones Intercable, Inc. 9.625% 2002 4,500 4,680 .30
MFS Communications Co., Inc.:
0%/9.375% 2004 /2/ 59,350 49,854
0%/8.875% 2006 /2/ 3,000 2,100 3.36
Multicanal Participacoes SA 12.625% 2004 /1/ 10,000 10,738 .69
Muzak, LP Muzak Capital Corp. 10.00% 2003 2,750 2,771 .18
Storer Communications, Inc. 10.00% 2003 3,034 3,072 .20
Telecom Argentina STET - France Telecom SA
12.00% 2002 3,000 3,225 .21
Teleport Communications Group Inc. 9.875% 2006 5,000 5,125 .33
Viacom International Inc.:
9.125% 1999 4,859 4,968
10.25% 2001 4,000 4,270
7.75% 2005 2,000 1,932 .72
----------- --------
126,144 8.15
----------- --------
Electric & Gas Utilities - 0.19%
Columbia Gas System, Inc., Series A, 6.39% 2000 3,000 2,946 .19
----------- --------
Energy & Related Companies - 5.98%
Benton Oil and Gas Co. 11.625% 2003 7,000 7,578 .49
Chesapeake Energy Corp.:
10.50% 2002 4,700 4,959
9.125% 2006 6,260 6,182 .72
Cliffs Drilling Co. 10.25% 2003 5,500 5,720 .37
Dual Drilling Co. 9.875% 2004 9,450 10,017 .65
Falcon Drilling Co., Inc.:
9.75% 2001 2,500 2,531
8.875% 2003 5,000 4,900 .48
Flores & Rucks, Inc. 13.50% 2004 10,150 11,926 .77
Global Marine, Inc. 12.75% 1999 5,900 6,372 .41
Kelley Oil & Gas Corp. 13.50% 1999 6,570 7,424 .48
Mariner Energy, Inc. 10.50% 2006 /1/ 6,750 6,986 .45
Mesa Operating Co.:
0%/11.625% 2006 /2/ 2,000 1,280
10.625% 2006 1,000 1,050 .15
Triton Energy Corp. 0%/9.75% 2000 /2/ 8,000 8,080 .53
Tuboscope Vetco International Inc. 10.75% 2003 7,000 7,438 .48
----------- --------
92,443 5.98
----------- --------
Food Retailing - 3.44%
Bruno's, Inc. 10.50% 2005 12,500 12,813 .83
Carr-Gottstein Foods Co. 12.00% 2005 4,000 4,230 .27
The Penn Traffic Co. 9.625% 2005 2,000 1,350 .09
Rykoff-Sexton, Inc. 8.875% 2003 10,000 9,125 .59
Safeway Inc. 10.00% 2002 1,700 1,910 .12
Star Markets Co., Inc. 13.00% 2004 11,000 11,577 .75
Stater Brothers Holdings Inc. 11.00% 2001 11,500 12,190 .79
----------- --------
53,195 3.44
----------- --------
Forest Products & Paper - 5.66%
Container Corp. of America:
10.75% 2002 6,000 6,300
9.75% 2003 18,000 18,270
11.25% 2004 3,500 3,718 1.83
Fort Howard Paper Co.:
9.25% 2001 13,500 13,770
8.25% 2002 2,000 1,960
11.00% 2002 2,058 2,140
9.00% 2006 3,250 3,201 1.36
Four M Corp., Series A, 12.00% 2006 13,250 14,045 .91
Grupo Industrial Durango, SA de CV 12.625% 2003 1,000 1,068 .07
MAXXAM Group Inc. 11.25% 2003 3,000 3,075 .20
Pacific Lumber Co. 10.50% 2003 7,000 6,895 .44
PT Indah Kiat Pulp & Paper Corp., 11.875% 2002 1,000 1,077 .07
PT Pabrik Kertas Tjiwi Kimia 13.25% 2001 8,500 9,478 .61
Repap Wisconsin, Inc.:
First Priority 9.25% 2002 1,140 1,154
Second Priority 9.875% 2006 1,500 1,470 .17
----------- --------
87,621 5.66
----------- --------
Health & Personal Care - 4.57%
Integrated Health Services, Inc.:
9.625% 2002 4,485 4,597
10.75% 2004 6,000 6,323
10.25% 2006 /1/ 11,250 11,616 1.46
Mariner Health Group, Inc. 9.50% 2006 8,000 8,100 .52
Merit Behavioral Care Corp. 11.50% 2005 4,750 5,011 .32
Paracelsus Healthcare Corp. 10.00% 2006 8,250 8,539 .55
Regency Health Services, Inc.:
9.875% 2002 13,050 13,115
12.25% 2003 /1/ 3,000 3,188 1.06
Universal Health Services, Inc. 8.75% 2005 10,200 10,251 .66
----------- --------
70,740 4.57
----------- --------
Independent Power Producers - 2.34%
California Energy Co., Inc.
0%/10.25% 2004 /2/ 29,750 30,196 1.95
CE Casecnan Water and Energy Co., Inc.:
Series A, 11.45% 2005 2,000 2,145
Series B, 11.95% 2010 3,500 3,780 .39
----------- --------
36,121 2.34
----------- --------
Leisure, Tourism & Restaurants - 4.53%
AMF Group Inc.:
10.875% 2006 6,000 6,150
0%/12.25% 2006 /2/ 10,500 6,261 .80
California Hotel Finance Corp. 11.00% 2002 7,000 7,350 .47
Casino America, Inc. 12.50% 2003 3,500 3,662 .24
Foodmaker, Inc.:
9.25% 1999 8,950 8,950
9.75% 2002 6,000 5,850 .96
Four Seasons Hotels Inc. 9.125% 2000 /1/ 7,000 7,070 .46
Plitt Theatres, Inc. 10.875% 2004 1,025 1,038 .07
Rio Hotel & Casino, Inc. 10.625% 2005 5,400 5,670 .36
Station Casinos, Inc. 9.625% 2003 8,750 8,466 .55
Trump Atlantic City Associates, Trump Atlantic
City Funding, Inc. 11.25% 2006 5,000 4,925 .32
Wyndham Hotel Corp. 10.50% 2006 4,500 4,618 .30
----------- --------
70,010 4.53
----------- --------
Manufacturing & Materials - 7.64%
Acme Metals Inc.:
12.50% 2002 7,000 7,420
0%/13.50% 2004 /2/ 5,750 5,577 .84
Advanced Micro Devices, Inc. 11.00% 2003 9,000 9,292 .60
AGCO Corp. 8.50% 2006 6,000 6,000 .39
AK Steel Corp. 10.75% 2004 1,250 1,363 .09
Coltec Industries Inc.:
9.75% 1999 2,500 2,588
9.75% 2000 16,000 16,560 1.24
Kaiser Aluminum & Chemical Corp.:
9.875% 2002 4,750 4,833
12.75% 2003 7,500 8,138 .84
Knoll Group, Inc. 10.875% 2006 5,000 5,225 .34
Lifestyle Furnishings International Ltd.
10.875% 2006 5,500 5,693 .37
MagneTek, Inc. 10.75% 1998 5,700 5,786 .37
Oregon Steel Mills 11.00% 2003 4,750 4,993 .32
Owens-Illinois, Inc. 11.00% 2003 4,750 5,195 .34
Printpack Inc. 10.625% 2006 2,500 2,562 .16
Sterling Chemicals, Inc.:
11.75% 2006 2,500 2,612
Unit, 0%/13.50% 2008 /2/ 3,000 1,845 .29
Texas Petrochemicals Corp. 11.125% 2006 /1/ 7,500 7,912 .51
UCAR Global Enterprises Inc. 12.00% 2005 6,430 7,338 .47
Westinghouse Air Brake Co. 9.375% 2005 7,250 7,196 .47
----------- --------
118,128 7.64
----------- --------
Merchandising - 1.88%
Ann Taylor 8.75% 2000 3,500 3,395 .22
Barnes & Noble, Inc. 11.875% 2003 10,450 11,390 .73
Loehmann's 11.875% 2003 2,500 2,650 .17
Thrifty PayLess, Inc. 12.25% 2004 10,549 11,762 .76
----------- --------
29,197 1.88
----------- --------
Miscellaneous Services - 0.39%
Neodata Services, Inc. 12.00% 2003 6,000 6,060 .39
----------- --------
Protection Services - 0.68%
ADT Operations 9.25% 2003 2,000 2,070 .13
Protection One Alarm Monitoring, Inc.
0%/13.625% 2005 /2/ 9,500 8,455 .55
----------- --------
10,525 .68
----------- --------
Real Estate - 0.28%
B.F. Saul Real Estate Investment Trust ----------- --------
11.625% 2002 4,000 4,260 .28
----------- --------
Textiles & Apparel - 0.17%
Tultex Corp. 10.625% 2005 1,000 1,050 .07
WestPoint Stevens Inc. 8.75% 2001 1,500 1,519 .10
----------- --------
2,569 .17
----------- --------
Transportation - 3.51%
Airplanes Pass Through Trust, pass-through
certificates, Class D, 10.875% 2019 /4/ 13,375 14,412 .93
Teekay Shipping Corp. 8.32% 2008 13,500 12,859 .83
TNT Transport (Europe) PLC/TNT (USA)
Inc. 11.50% 2004 500 521 .03
USAir, Inc.:
9.625% 2001 8,000 7,600
9.625% 2003 1,490 1,460
10.00% 2003 8,000 7,600
Pass-through trust, Series 1993-A3,
10.375% 2013 /4/ 8,150 8,109 1.60
ValuJet, Inc. 10.25% 2001 /1/ 2,000 1,810 .12
----------- --------
54,371 3.51
----------- --------
Private Issue Collateralized Mortgage/Asset-Backed
Obligations 4 - 0.75%
Fifth Avenue Capital Trust, Class C, 12.36% 2002 /1/ 10,000 10,975 .71
Resolution Trust Corp.:
Series 1993-C1, Class E, 9.50% 2024 274 272
Series 1993-C2, Class E, 8.50% 2025 363 358 .04
----------- --------
11,605 .75
----------- --------
Non-U.S. Governments and Governmental
Authorities - 2.38%
Argentina (Republic of):
8.375% 2003 1,500 1,348
6.312% 2005 /5/ 3,960 3,317
Bocon PIK 4.717% 2007 /5/ /6/ ARP 6,000 2,858 .48
Brazil (Federal Republic of):
Eligible Interest Bond 6.50% 2006 /5/ $1,000 872
Debt Conversion Bond 6.563% 2012 /5/ 500 378
Capitalization Bond PIK 8.00% 2014 /6/ 271 191 .09
Ecuador (Republic of) Past Due Interest Bond
6.50% 2015 /5/ 8,459 4,335 .28
New Zealand Index Linked
4.59% 2016 /7/ NZ$ 3,000 1,827 .12
Panama (Republic of) Interest Reduction Bond
3.50% 2014 /1/ /5/ $11,500 7,245 .47
Peru (Republic of) Front Loaded Interest
Reduction Bond 0.00% 2049 /1/ 500 261 .02
Poland (Republic of):
Past Due Interest Bonds:
Bearer 3.75% 2014 /5/ 1,375 1,090
Registered 3.75% 2014 /5/ 375 297
Treasury Bill 1997 PLZ 8,000 2,472 .25
Russia Interest Arrears Notes:
Euro 2015 /5/ $2,000 1,287
SF 2015 /5/ 4,250 2,736 .26
United Mexican States:
Collateralized Eurobond:
Series A, 6.398% 2019 500 422
Series B, 6.25% 2019 3,000 2,081 .34
Government 9.75% 2001 1,000 1,020
Government 11.50% 2026 1,784 1,773
Venezuela (Republic of):
Front Loaded Interest Reduction Bond 6.375% 2007 500 422
6.625% 2007 750 622 .07
----------- --------
36,854 2.38
----------- --------
U.S. Treasury Obligations - 6.44%
6.00% 1998 3,000 2,997
7.25% 1998 5,000 5,081
6.875% 1999 39,000 39,579
6.625% 2001 7,000 7,042
7.50% 2001 16,000 16,692
8.00% 2001 4,000 4,244
5.75% 2003 13,000 12,401
7.875% 2004 1,000 1,075
11.625% 2004 8,000 10,445
----------- --------
99,556 6.44
----------- --------
Total Bonds & Notes (cost: $1,308,727,000) 1,348,423 87.17
----------- --------
Number of
Stocks (Common & Preferred) - 3.40% Shares
AnnTaylor, Inc. /8/ 40,000 675 .04
California Energy Co., Inc. /8/ 65,000 2,072 .13
CellNet Data Systems, Inc.,
warrants, expire 6/15/05 /3/ /8/ 128,000 2,816 .18
Columbia Gas System, Inc. 14,700 823 .05
Comcast Corp., Class A 10,000 154
Comcast Corp., Class A, special stock 20,000 308 .03
Comunicacion Celular SA
warrants, expire 11/15/03 /8/ 15,000 90 .01
El Paso Electric Co., Series A, preferred
11.40% 2008 /6/ 6,000 690 .05
Earthwatch Inc., preferred 12.00% /3/ 675,000 7,092 .46
Falcon Drilling Co., Inc. /8/ 35,000 910 .06
Foodmaker, Inc. /8/ 30,000 300 .02
Heartland Wireless Communications, Inc.,
warrants, expire 4/26/00 /8/ 22,800 137 .01
Host Marriott Corp. /8/ 13,896 201 .01
IntelCom Group Inc., warrants, expire 8/8/05 /2/ /8/ 42,900 691 .05
Kelley Oil & Gas Corp. convertible preferred 70,000 1,733 .11
Kmart Corp. 7.75% convertible preferred 60,000 2,933 .19
MFS Communications Co., Inc. /8/ 10,000 436 .03
Marriott International, Inc. 13,896 766 .05
MESA Inc. /8/ 275,000 1,134
MESA Inc. 8.00% convertible preferred, Series A 276,945 1,454 .17
Nacional Financiera SNC PRIDES 11.25% 1998 20,000 640 .04
NEXTEL Communications, Inc. warrants /3/ /8/ 21,250 0 .00
Nortel Inversora SA, Class A, preferred
(American Depositary Receipts) /1/ /3/ 1,174,607 13,978 .90
Omnipoint Corp./3/ /8/ 278,001 6,477 .42
Protection One Alarm Monitoring, Inc.,
warrants, expire 6/30/05 /8/ 30,400 274 .02
Station Casinos, Inc. 7.00% convertible preferred 30,000 1,582 .10
Thrifty PayLess Inc., Class B /8/ 11,400 212 .01
Time Warner Inc. exchangeable preferred, Series K 2,811 2,937 .19
Viacom International Inc., Class B /8/ 30,000 1,065 .07
----------- --------
Total Stocks (cost: $39,470,000) 52,580 3.40
----------- --------
Principal
Amount
(000)
Convertible Debentures - 0.54%
Banco Nacional de Mexico, SA 11.00% 2003 $500 512 .03
Euro Disney S.C.A. 6.75% 2001 7,700 1,505 .10
Integrated Health Services, Inc. 6.00% 2003 6,500 6,403 .41
----------- --------
Total Convertible Debentures (cost:
$7,993,000) 8,420 .54
----------- --------
Short-Term Securities
Corporate Short-Term Notes - 9.51%
American Express Credit Corp.:
5.37% due 10/11/96 10,000 9,984
5.41% due 10/25/96 4,290 4,274 .92
Ciesco LP:
5.32% due 10/9/96 10,000 9,987
5.46% due 12/2/96 9,300 9,212 1.24
Hewlett-Packard Co.:
5.45% due 10/1/96 6,050 6,049
5.34% due 12/20/96 10,000 9,880 1.03
International Lease Finance Corp.:
5.39% due 10/23/96 15,000 14,948
5.42% due 12/11/96 4,500 4,452 1.26
J.C. Penney Funding Corp.:
5.29% due 10/2/96 11,200 11,197
5.39% due 11/20/96 12,300 12,206 1.51
Raytheon Co. 5.34% due 10/18/96 12,700 12,666 .82
SAFECO Credit Co. Inc. 5.47% due 11/6/96 10,000 9,944 .64
UBS Finance (Delaware) Inc. 5.85% due 10/1/96 32,300 32,295 2.09
----------- --------
Total Short-Term Securities (cost:
$147,096,000) 147,094 9.51
----------- --------
Total Investment Securities (cost:
$1,503,286,000) 1,556,517 100.62
Excess of payables over cash and
receivables 9,621 .62
----------- --------
Net Assets $1,546,896 100.00%
=========== ========
/1/ Purchased in a private placement transaction;
resale to the public may require registration.
/2/ Step bond; coupon rate will increase at a later date.
/3/ Valued under procedures established by the Board of Trustees.
/4/ Pass-through security backed by a pool of mortgages
or other loans on which principal payments are
periodically made. Therefore, the effective maturity
is shorter than the stated maturity.
/5/ Coupon rate may change periodically.
/6/ Payment in kind. The issuer has the option of
paying additional securities in lieu of cash.
/7/ Index-linked bond, which is a floating rate
bond whose principal amount
moves with a government retail price index.
/8/ Non-income-producing security.
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
American High-Income Trust
Financial Statements
Statement of Assets and Liabilities
at September 30, 1996 (dollars in thousands)
<S> <C> <C>
Assets:
Investment securities
(cost: $1,503,286) $ 1,556,517
Cash 80
Receivables for--
Sales of investments $ 5,519
Sales of fund's shares 7,557
Accrued dividends and interest 28,538 41,614
-------- ---------
1,598,211
Liabilities:
Payables for--
Purchases of investments 43,105
Repurchases of fund's shares 2,210
Forward currency contracts 4
Dividends on fund's shares 5,137
Management services 597
Accrued expenses 262 51,315
-------- ---------
Net Assets at September 30, 1996 --
Equivalent to $14.86 per share on
104,126,659 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $ 1,546,896
========
Statement of Operations
for the year ended September 30, 1996
(dollars in thousands)
Investment Income:
Income:
Dividends $ 2,300
Interest 127,327 $ 129,627
--------
Expenses:
Management services fee 6,481
Distribution expenses 3,079
Transfer agent fee 976
Reports to shareholders 164
Registration statement and prospectus 289
Postage, stationery and supplies 343
Trustees' fees 21
Auditing and legal fees 45
Custodian fee 64
Taxes other than federal income tax 20
Other expenses 18 11,500
-------- ---------
Net investment income 118,127
---------
Realized Gain and Increase in Unrealized
Appreciation on Investments:
Net realized gain 4,164
Net unrealized appreciation
on investments:
Beginning of year 5,775
End of year 53,227
---------
Net increase in unrealized
appreciation on investments 47,452
---------
Net realized gain and unrealized
appreciation on investments 51,616
---------
Net Increase in Net Assets
Resulting from Operations $ 169,743
========
Statement of Changes in Net Assets
(dollars in thousands)
Year ended September 30
1996 1995
Operations: -------- ---------
Net investment income $ 118,127 $ 89,824
Net realized gain (loss) on investments 4,164 (7,154)
Net increase in unrealized appreciation
on investments 47,452 36,963
-------- ---------
Net increase in net assets
resulting from operations 169,743 119,633
-------- ---------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (118,864) (87,231)
Distributions from net realized
gain on investments - (4,494)
-------- ---------
Total dividends and distributions (118,864) (91,725)
-------- ---------
Capital Share Transactions:
Proceeds from shares sold:
43,729,904 and 30,002,672
shares, respectively 636,739 414,416
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on
investments: 5,021,604 and
4,145,269 shares, respectively 73,124 56,782
Cost of shares repurchased:
22,319,120 and 16,228,009
shares, respectively (324,832) (223,033)
-------- ---------
Net increase in net assets
resulting from capital share
transactions 385,031 248,165
-------- ---------
Total Increase in Net Assets 435,910 276,073
Net Assets:
Beginning of year 1,110,986 834,913
-------- ---------
End of year (including undistributed
net investment income: $7,102
and $7,839, respectively) $ 1,546,896 $ 1,110,986
======== ========
See Notes to Financial Statements
</TABLE>
<PAGE>
Notes to Financial Statements
1. American High-Income Trust (the "fund") is registered under the Investment
Company Act of 1940 as an open-end, diversified management investment company.
The fund seeks a high level of current income and, secondarily, capital
appreciation through a diversified, carefully supervised portfolio consisting
primarily of lower rated, higher risk corporate bonds. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Stocks and convertible debentures traded on a national securities exchange (or
reported on the NASDAQ national market) and securities traded in the
over-the-counter market are stated at the last reported sales price on the day
of valuation; other securities, and securities for which no sale was reported
on that date, are stated at the last quoted bid price.
Bonds and notes are valued at prices obtained from a bond-pricing service
provided by a major dealer in bonds, 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 of their representative quoted bid
and asked prices or, if such prices are not available, at prices for securities
of comparable maturity, quality and type. Securities denominated in non-U.S.
currencies are generally valued on the basis of bid quotations. The value of
each security denominated in a currency other than U.S. dollars will be
translated into U.S. dollars at the prevailing market rate provided by a
pricing service in accordance with procedures established by the fund's
officers. Securities for which market quotations are not readily available are
valued at fair value by the Board of Trustees or a committee thereof.
Short-term securities with original or remaining maturities in excess of 60
days, including forward currency contracts, are valued at the mean of their
quoted bid and asked prices. Short-term securities with 60 days or less to
maturity are valued at amortized cost, which approximates market value.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Dividend and
interest income is reported on the accrual basis. Discounts and premiums on
securities purchased are amortized over the life of the respective securities.
Dividends to shareholders are declared daily after determination of the fund's
net investment income and paid to shareholders monthly.
Investment securities and other assets and liabilities, including forward
currency contracts, denominated in non-U.S. currencies are recorded in the
financial statements after translation into U.S. dollars utilizing rates of
exchange on the last business day of the year. Purchases and sales of
investment securities, income and expenses are calculated using the prevailing
exchange rate as accrued. The effects of changes in foreign currency exchange
rates on investment securities are included with the net realized and
unrealized gain or loss on investment securities.
Pursuant to the custodian agreement, the fund receives credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $64,000 includes $62,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of September 30, 1996, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $53,231,000, of which $65,293,000 related to appreciated securities
and $12,062,000 related to depreciated securities. During the year ended
September 30, 1996, the fund realized, on a tax basis, a net capital gain of
$4,435,000 on securities transactions. Net gains related to non US currency
transactions of $271,000 are reported as ordinary income for federal tax
purposes. The fund has available at September 30, 1996 a net capital loss
carryforward totaling $2,672,000 which may be used to offset capital gains
realized during subsequent years through 2002 and thereby relieve the fund and
its shareholders of any federal income tax liability with respect to the
capital gains that are so offset. It is the intention of the fund not to make
distributions from capital gains while there is a capital loss carryforward.
The cost of portfolio securities, excluding forward currency contracts, for
book and federal income tax purposes was $1,503,286,000 at September 30, 1996.
3. The fee of $6,481,000 for management services was paid pursuant to an
agreement with Capital Research and Management Company (CRMC), with which
certain officers and Trustees of the fund are affiliated. The Investment
Advisory and Service Agreement provides for monthly fees, accrued daily, based
on an annual rate of 0.30% of the first $60 million of average net assets;
0.21% of such assets in excess of $60 million but not exceeding $1 billion; and
0.18% of such assets in excess of $1 billion; plus 3.00% on the first $100
million of the fund's annual gross investment income; and 2.50% of such income
in excess of $100 million.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended September 30, 1996,
distribution expenses under the Plan were $3,079,000. As of September 30, 1996,
accrued and unpaid distribution expenses were $221,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $976,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $1,943,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Trustees who are unaffiliated with CRMC may elect to defer part or all of the
fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of September 30,
1996, aggregate amounts deferred and earnings thereon were $30,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly
owned subsidiaries of CRMC. Certain Trustees and officers of the fund are or
may be considered to be affiliated with CRMC, AFS and AFD. No such persons
received any remuneration directly from the fund.
4. As of September 30, 1996, accumulated net realized loss on investments was
$2,943,000 and paid-in capital was $1,489,510,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $771,970,000 and $483,596,000, respectively, during
the year ended September 30, 1996.
The fund purchases and sells forward currency contracts in anticipation of, or
to protect itself against, fluctuations in exchange rates. The contracts are
recorded in the statement of assets and liabilities at their net unrealized
value; the fund's maximum potential liability in these contracts is equal to
the full contract amounts. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from the possible movements in foreign exchange rates and securities values
underlying these instruments. At September 30, 1996, the fund had outstanding
forward currency contracts to purchase and sell non-U.S. currencies as follows:
<TABLE>
Contract Amount U.S. Valuation at 9/30/96
------------------------------------------------------
Unrealized
Non-U.S. Currency Sales Contract Non-U.S. U.S. Amount Depreciation
- --------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
French Francs expiring 11/24/96 FF5,100,000 $986,000 $990,000 $(4,000)
</TABLE>
<PAGE>
<TABLE>
Per-Share
Data and Ratios Year ended September 30
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Year $14.30 $13.97 $15.18 $14.58 $13.56
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 1.29 1.33 1.25 1.28 1.35
Net realized and
unrealized gain
(loss) on investments .59 .39 (.99) .74 .99
-------- -------- -------- -------- --------
Total income from
investment operations 1.88 1.72 .26 2.02 2.34
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income (1.32) (1.32) (1.21) (1.29) (1.32)
Distributions from net
realized gains - (.07) (.26) (.13) -
-------- -------- -------- -------- --------
Total distributions (1.32) (1.39) (1.47) (1.42) (1.32)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $14.86 $14.30 $13.97 $15.18 $14.58
======== ======== ======== ======== ========
Total Return* 13.68% 13.34% 1.60% 14.59% 18.08%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $1,547 $1,111 $835 $707 $438
Ratio of expenses to average
net assets .87% .89% .86% .87% .94%
Ratio of net income to
average net assets 8.90% 9.72% 8.63% 8.60% 9.58%
Portfolio turnover rate 39.74% 29.56% 42.03% 44.37% 58.04%
*Calculated without deducting a sales charge.
The maximum sales charge is 4.75% of the
fund's offering price.
</TABLE>
<PAGE>
Independent Auditors' Report
To the Board of Trustees and Shareholders of
American High-Income Trust:
We have audited the accompanying statement of assets and liabilities of
American High-Income Trust (the "Fund"), including the schedule of portfolio
investments, as of September 30, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the per-share data and ratios for each
of the five years in the period then ended. These financial statements and the
per-share data and ratios are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
per-share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per-share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and per-share data and ratios
referred to above present fairly, in all material respects, the financial
position of American High-Income Trust as of September 30, 1996, 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 the per-share data and ratios
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Los Angeles, California
October 29, 1996
1996 TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 2% of the dividends
paid by the fund from net investment income represents qualifying dividends.
Certain states may exempt from income taxation a portion of the dividends paid
from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 4% of the dividends paid
by the fund from net investment income was derived from interest on direct U.S.
Treasury obligations.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many plan retirement trusts may need this information for their annual
information reporting.
SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FISCAL YEAR AND NOT THE CALENDAR
YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV WHICH WILL BE MAILED IN
JANUARY 1997 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR
1996 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
<PAGE>
