AMERICAN HIGH-INCOME TRUST
Part B
Statement of Additional Information
December 1, 1997
(as amended December 16, 1997)
This document is not a prospectus but should be read in conjunction with a
current prospectus dated December 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
<TABLE>
<CAPTION>
ItemPage No.
<S> <C>
Description of Securities and Investment Techniques 1
Investment Restrictions 6
Fund Officers and Trustees 9
Management 12
Dividends, Distributions and Federal Taxes 15
Purchase of Shares 18
Redeeming Shares 24
Shareholder Account Services and Privileges 25
Execution of Portfolio Transactions 27
General Information 27
Investment Results 29
Appendix 32
Financial Statements Attached
</TABLE>
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 at a future date. When the fund agrees to purchase such securities
it assumes the risk of any decline in value of the security beginning on the
date of the agreement. When the fund agrees to sell such securities, it does
not participate in further gains or losses with respect to the securities
beginning on the date of the agreement. If the other party to such a
transaction fails to deliver or pay for the securities, the fund could miss a
favorable price or yield opportunity, or could experience a loss 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.
PRIVATE PLACEMENTS - The fund will invest no more than 15% of its net assets,
in aggregate, in securities that are not readily marketable, including certain
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.
INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed bonds issued
by governments, their agencies or instrumentalities or corporations. The
principal value of this type of bond is periodically adjusted according to
changes in the rate of inflation. The interest rate is generally fixed at
issuance; however, interest payments are based on an inflation adjusted
principal value. For example, in a period of falling inflation, principal
value will be adjusted downward, reducing the interest payable.
Repayment of the original bond principal upon maturity (as adjusted for
inflation) is guaranteed in the case of U.S. Treasury inflation indexed bonds,
even during a period of deflation. However, the current market value of the
bonds is not guaranteed, and will fluctuate. The fund may also invest in other
bonds which may or may not provide a similar guarantee. If a guarantee of
principal is not provided, the adjusted principal value of the bond repaid at
maturity may be less than the original principal.
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.
PASS-THROUGH SECURITIES -- The fund may invest in various debt obligations
backed by a pool of mortgages or other assets including loans on single family
residences, home equity loans, mortgages on commercial buildings, credit card
receivables, and leases on airplanes or other equipment. Principal and
interest payments made on the underlying asset pools backing these obligations
are typically passed through to investors. Pass-through securities may have
either fixed or adjustable coupons. These securities include those discussed
below.
"Mortgage-backed securities" are issued both by U.S. government agencies,
including the Government National Mortgage Association (GNMA), the Federal
National Mortgage Association (FNMA), and the Federal Home Loan Mortgage
Corporation (FHLMC), and by private entities. The payment of interest and
principal on securities issued by U.S. government agencies is guaranteed by the
full faith and credit of the U.S. government (in the case of GNMA securities)
or the issuer (in the case of FNMA and FHLMC securities). However, the
guarantees do not apply to the market prices and yields of these securities,
which vary with changes in interest rates.
Mortgage-backed securities issued by private entities are structured similarly
to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities
and the underlying mortgages are not guaranteed by government agencies. In
addition, these securities generally are structured with one or more types of
credit enhancement. Mortgage-backed securities do not affect the rights of
borrowers to prepay their underlying mortgages. Prepayments can alter the
effective maturity of these instruments.
"Collateralized mortgage obligations" (CMOs) are also backed by a pool of
mortgages or mortgage loans, which are divided into two or more separate bond
issues. CMOs issued by U.S. government agencies are backed by agency mortgages,
while privately issued CMOs may be backed by either government agency mortgages
or private mortgages. Payments of principal and interest are passed-through to
each bond at varying schedules resulting in bonds with different coupons,
effective maturities, and sensitivities to interest rates. In fact, some CMOs
may be structured in a way that when interest rates change the impact of
changing prepayment rates on these securities' effective maturities is
magnified.
"Commercial mortgage-backed securities" are backed by mortgages of commercial
property, such as hotels, office buildings, retail stores, hospitals, and other
commercial buildings. These securities may have a lower prepayment risk than
other mortgage-related securities because commercial mortgage loans generally
prohibit or impose penalties on prepayments of principal. In addition,
commercial mortgage-related securities often are structured with some form of
credit enhancement to protect against potential losses on the underlying
mortgage loans. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans, including the effects of local and other economic
conditions on real estate markets, the ability of tenants to make loan
payments, and the ability of a property to attract and retain tenants.
"Asset-backed securities" are backed by other assets such as credit card,
automobile or consumer loan receivables, retail installment loans, or
participations in pools of leases. Credit support for these securities may be
based on the underlying assets and/or provided through credit enhancements by a
third party. The values of these securities are sensitive to changes in the
credit quality of the underlying collateral, the credit strength of the credit
enhancement, changes in interest rates, and at times the financial condition of
the issuer. Some asset-backed securities also may receive prepayments which
can change the securities' effective maturities.
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 - The fund has no current intention to invest in warrants or
rights, valued at the lower of cost or market, in excess of 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. The fund's policy regarding
investments in warrants and rights is not a fundamental policy 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 options are listed on an exchange or traded
over-the-counter ("OTC options"). Exchange-traded 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 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 ten 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. Investment limitations expressed in the following
restrictions are considered at the time securities are purchased. 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
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AND AGE REGISTRANT DURING PAST 5 (INCLUDING (INCLUDING OF FUND
YEARS VOLUNTARILY VOLUNTARILY BOARDS ON
(POSITIONS DEFERRED DEFERRED WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) TRUSTEE
ORGANIZATIONS FROM THE FUND FROM ALL FUNDS SERVES/2/
LISTED MAY DURING MANAGED BY
HAVE CHANGED FISCAL YEAR CAPITAL
DURING THIS ENDED RESEARCH AND
PERIOD) SEPTEMBER 30, MANAGEMENT
1997 COMPANY/2/ FOR
THE YEAR ENDED
SEPTEMBER 30,
1997
<S> <C> <C> <C> <C> <C>
H. Trustee Private $4,411/3/ $166,300 18
Frederick Investor.
Christie Former
Age: 64 President and
P.O. Box CEO, The
144 Mission Group
Palos (non-utility
Verdes holding
Estates, company,
CA 90274 subsidiary of
Southern
California
Edison
Company)
+Don R. Trustee President none/4/ none/4/ 12
Conlan (retired),
Age: 61 The Capital
1630 Milan Group
Avenue Companies,
South Inc.
Pasadena,
CA 91030
Diane C. Trustee CEO and $3,700 $43,000 12
Creel President,
Age: 49 The Earth
100 W. Technology
Broadway Corporation
Suite 5000 (international
Long consulting
Beach, CA engineering)
90802
Martin Trustee Chairman, $4,025/3/ $134,000 16
Fenton, Senior
Jr. Resource Group
Age: 62 (management of
4350 senior living
Executive centers)
Drive
Suite 101
San Diego,
CA 92121-2116
Leonard R. Trustee President, $4,467 $48,200 12
Fuller Fuller
Age: 51 Consulting
4337 (management
Marina consultants)
City Drive
Suite 841
ETN
Marina del
Rey, CA
90292
+*Abner D. President and Senior Vice none/4/ none/4/ 12
Goldstine Trustee President and
Age: 67 Director,
Capital
Research and
Management
Company
+**Paul G. Chairman Executive Vice none/4/ none/4/ 14
Haaga, Jr. of President and
Age: 48 the Board Director,
Capital
Research and
Management
Company
Herbert Trustee Private $4,243 $70,000 14
Hoover III Investor
Age: 70
1520
Circle
Drive
San
Marino, CA
91108
Richard G. Trustee Chairman, $4,054/3/ $100,000 13
Newman President and
Age: 63 CEO,
3250 AECOM
Wilshire Technology
Boulevard Corporation
Los (architectural
Angeles, engineering)
CA 90010-1599
Peter C. Trustee Retired. $4,067/3/ $48,200 12
Valli Former
Age: 70 Chairman and
45 Sea CEO, BW/IP
Isle Drive International
Long Inc.
Beach, CA (industrial
90803 manufacturing)
</TABLE>
+ 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.
* 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 ($7,923), Martin Fenton, Jr. ($9,633), Richard
G. Newman ($17,445), and Peter C. Valli ($15,559). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Trustee .
/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
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
REGISTRANT PAST 5 YEARS
<S> <C> <C> <C>
David C. Barclay 41 Executive Vice President Senior Vice President and
11100 Santa Monica Blvd. Director, Capital Research
Los Angeles, CA 90025 Company
Michael J. Downer 43 Vice President Senior Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
Mary C. Hall 39 Vice President Senior Vice President - Fund
135 South State College Blvd. Business Management Group,
Brea, CA 92821 Capital Research and Management
Company
Susan M. Tolson 35 Vice President Vice President and Director,
11100 Santa Monica Blvd. Capital Research Company
Los Angeles, CA 90025
Julie F. Williams 49 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
Anthony W. Hynes, Jr. 34 Treasurer Vice President - Fund Business
135 South State College Blvd. Management Group, Capital
Brea, CA 92821 Research and Management Company
Kimberly S. Verdick 32 Assistant Secretary Assistant Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
Todd L. Miller 38 Assistant Treasurer Assistant Vice President - Fund
135 South State College Blvd. Business Management Group,
Brea, CA 92821 Capital Research and Management
Company
</TABLE>
# Positions within the organizations listed may have changed during this period
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 November 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 $175 billion of stocks,
bonds and money market instruments and serve over eight million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations as well as schools, colleges, foundations and
other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement"), between the fund and the Investment Adviser will
continue in effect until October 31, 1998, unless sooner terminated, and may be
renewed from year to year thereafter provided that any such renewal has been
specifically approved at least annually by (i) the Board of 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, 0.21% on average net
assets in excess of $60 million but not exceeding $1 billion, 0.18% on average
net assets in excess of $1 billion, plus 3% of the first $100 million of annual
gross investment income, plus 2.5% of annual gross investment income in excess
of $100 million. Assuming net assets of $2 billion and gross investment income
levels of 5%, 6%, 7%, 8% and 9%, management fees would be 0.35%, 0.37%, 0.40%,
0.42% and 0.45%, respectively.
During the fiscal years ended September 30, 1997, 1996, and 1995, the
Investment Adviser's total fees amounted to $8,242,000, $6,481,000, and
$4,916,000, 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, 1997 amounted to 2,289,000 after
allowance of 9,491,000 to dealers. During the fiscal years ended September 30,
1996 and 1995 , the Principal Underwriter retained $$1,943,000 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 100 or more eligible
employees). Since these fees are paid out of the fund's assets on an ongoing
basis, over time these fees will increase the cost of an investment and may
cost the investor more than paying other types of sales loads. During the
fund's fiscal year ended September 30, 1997, the fund paid $4,552,000 under the
Plan as compensation to dealers. As of September 30, 1997, accrued and unpaid
distribution expenses were $328,000.
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; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, 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 in effect 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 will 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 the fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
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 U. S. 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 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 on assets held more than 18 months is 20%, and on assets held more
than one year and not more than 18 months is 28%; and the maximum corporate tax
applicable to ordinary income and net capital gain is 35%. However, to
eliminate the benefit of lower marginal corporate income tax rates,
corporations which have 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>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and $50 minimum (except where a
Fund Numbers" for initial lower minimum is noted under
investment minimums. "Investment Minimums and Fund
Numbers").
By contacting Visit any investment dealer who Mail directly to your
your is registered in the state investment dealer's address
investment where the purchase is made and printed on your account
dealer who has a sales agreement with statement.
American Funds Distributors.
By mail Make your check payable to the Fill out the account additions
fund and mail to the address form at the bottom of a recent
indicated on the account account statement, make your
application. Please indicate check payable to the fund,
an investment dealer on the write your account number on
account application. your 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
dealer to open account, then Phone" section on the account
follow the procedures for application or American
additional investments. FundsLink Authorization Form.
Once you establish the
privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(r) and make
investments by telephone
(subject to conditions noted in
"Telephone Purchases, Sales and
Exchanges" below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then Authorization Form. Once you
follow the procedures for establish the privilege, you,
additional investments. your financial advisor or any
person with your account
information may access American
FundsLine(r) on the Internet
and make investments by
computer (subject to conditions
noted in "Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
By wire Call 800/421-0180 to obtain Your bank should wire your
your account number(s), if additional investments in the
necessary. Please indicate an same manner as described under
investment dealer on the "Initial Investment."
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>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
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 America(sm) 43
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 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $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), currently provides 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 100 or more eligible employees or any other purchaser investing at least
$1 million in shares of the fund (or in combination with shares of other funds
in The American Funds Group other than the money market funds) may purchase
shares at net asset value; however, a contingent deferred sales charge of 1% is
imposed on certain redemptions made within twelve months of the purchase. (See
"Redeeming Shares--Contingent Deferred Sales Charge.") Investments by
retirement plans, foundations or endowments with $50 million or more in assets
may be made with no sales charge and are not subject to a contingent deferred
sales charge.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of foundations or endowments with assets of $50
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $50,000 or more made within a
13-month period subject to the following statement of intention (the Statement)
terms. The Statement is not a binding obligation to purchase the indicated
amount. When a shareholder elects to utilize 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 45 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 directors 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 1940 Act, 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, Martin Luther
King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company, other than the money market funds, are valued, and the net asset value
per share is determined as follows:
1. Equity securities, including depositary receipts, are valued at the
last reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board. The fair value of all other assets is
added to the value of securities to arrive at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by
the fund. The 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 Funds Service Send a letter of instruction specifying the
Company (at the appropriate address name of the fund, the number of shares or
indicated under "Principal Underwriter and dollar amount to be sold, your name and
Transfer Agent" in the Prospectus) account number. You should also enclose any
share certificates you wish to redeem. For
redemptions over $50,000 and for certain
redemptions of $50,000 or less (see 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 investment dealer If you redeem shares through your investment
dealer, you may be charged for this service.
SHARES HELD FOR YOU IN YOUR INVESTMENT
DEALER'S STREET NAME MUST BE REDEEMED THROUGH
THE DEALER.
You may have a redemption check sent to you You may use this option, provided the account
by using American FundsLine(r) or American is registered in the name of an individual(s),
FundsLine OnLine(sm) or by telephoning, a UGMA/UTMA custodian, or a non-retirement
faxing, or telegraphing American Funds plan trust. These redemptions may not exceed
Service Company (subject to the conditions $50,000 per shareholder per day, per fund
noted in this section and in "Telephone and account and the check must be made payable to
Computer Purchases, Sales and Exchanges" the shareholder(s) of record and be sent to
below) the address of record provided the address has
been used with the account for at least 10
days. See "Fund Organization and Management
- Principal Underwriter and Transfer Agent" in
the Prospectus and "Exchange Privilege" below
for the appropriate telephone or fax number.
In the case of the money market funds, you Upon request (use the account application for
may have redemptions wired to your the money market funds) you may establish
bank by telephoning American Funds Service telephone redemption privileges (which will
Company ($1,000 or more) or by writing a enable you to have a redemption sent to your
check ($250 or more) bank account) and/or check writing privileges.
If you request check writing privileges, you
will be provided with checks that you may use
to draw against your account. These checks
may be made payable to anyone you designate
and must be signed by the authorized number of
registered shareholders exactly as indicated
on your 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 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 591/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables you to make
regular monthly or quarterly investments in shares through automatic charges to
your 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 you will receive a confirmation statement at least
quarterly. Participation in the plan will begin within 30 days after receipt
of the account application. If your 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. You 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 -You 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 your 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 will
have the right, if you fail 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 you. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) or American FundsLine OnLine(sm) (see "American FundsLine(r) and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Principal Underwriter and Transfer Agent" in the
Prospectus for the appropriate fax numbers) or telegraphing American Funds
Service Company. (See "Telephone and Computer Purchases, Redemptions and
Exchanges" below.) Shares held in corporate-type retirement plans for which
Capital Guardian Trust Company serves as trustee may not be exchanged by
telephone, fax or telegraph. Exchange redemptions and purchases are processed
simultaneously at the share prices next determined after the exchange order is
received. (See "Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE
THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments , will be reflected on regular confirmation statements from
American Funds Service Company. Dividend and capital gain reinvestments and
purchases through automatic investment plans and certain retirement plans will
be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) - You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) and American
FundsLine OnLine(sm). To use this service, call 800/325-3590 from a
TouchTone(tm) telephone or access the American Funds Web site on the Internet
at www.americanfunds.com. Redemptions and exchanges through American
FundsLine(r) and American FundsLine OnLine(sm) are subject to the conditions
noted above and in "Redeeming Shares--Telephone and Computer Purchases,
Redemptions and Exchanges" below. You will need your fund number (see the list
of funds in The American Funds Group under "Purchase of Shares--Investment
Minimums and Fund Numbers"), personal identification number (the last four
digits of your Social Security number or other tax identification number
associated with your account) and account number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine(r)) and American FundsLine OnLine(sm),
fax or telegraph redemption and/or exchange options, you agree to hold the
fund, American Funds Service Company, any of its affiliates or mutual funds
managed by such affiliates, and each of their respective directors, trustees,
officers, employees and agents harmless from any losses, expenses, costs or
liability (including attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all shareholders are automatically
eligible to use these options. However, you may elect to opt out of these
options by writing American Funds Service Company (you may also reinstate them
at any time by writing American Funds Service Company). If American Funds
Service Company does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, the fund may be liable for losses due to unauthorized or fraudulent
instructions. In the event that shareholders are unable to reach the fund by
telephone because of technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made in writing only.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not consider that it has
an obligation to obtain the lowest available commission rate to the exclusion
of price, service and qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other 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, 1997
amounted to $19,318,000. Dealer concessions on underwritings for the fiscal
years ended September 30, 1996 and 1995 amounted to $8,510,000 and $3,523,000,
respectively.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. Non-U.S. securities may be held by the Custodian pursuant
to sub-custodial agreements 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 1,100,000 for the fiscal year ended September 30, 1997.
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; 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:
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<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
OFFERING PRICE PER SHARE -- September 30, 1997
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $15.69
Offering price per share (100/95.25 of per share
net asset value, which takes into account the
fund's current maximum sales charge) 16.47
</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 will 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 7.35% based on the 30-day (or one month) period ended
September 30, 1997, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[( a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund 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, 1997 was
9.23%, 10.37% and 11.25%, 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 nine common stock funds that are at least 10 years old. In the
rolling 10-year periods since January 1, 1967 (127 in all), those funds have
had better total returns than the Standard and Poor's 500 Stock Composite Index
in 91 of the 127 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than 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
(10/1/96-9/30/97) (10/1/94-9/30/97) (2/19/88-9/30/97)
$2,184 $7,482 $36,915
</TABLE>
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
<TABLE>
<CAPTION>
If you had invested ... and taken all distributions
$10,000 in the Fund in shares your investment
this many years ago... would have been worth this
much at September 30, 1997
<S> <C> <C>
| |
Periods
Number of Years 10/1-9/30 Value**
1 1996 - 1997 $10,922
1 1995 - 1997 12,418
2 1994 - 1997 14,069
3 1993 - 1997 14,295
4 1992 - 1997 16,381
5 1991 - 1997 19,340
6 1990 - 1997 24,978
7 1989 - 1997 23,981
8 1988 - 1997 26,346
Lifetime 2/19/88 - 1997 27,872
</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, 1997)
<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
1997 2,108 15,068 25,068 10,460 641 16,771 27,872
</TABLE>
The dollar amount of capital gain distributions during the period was $597.
* 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.
<TABLE>
<S> <C> <C> <C>
American High-Income Trust
Investment Portfolio
September 30, 1997
- --------------------------------------------------
U.S. Corporate Bonds 61%
Non-U.S. Corporate Bonds 16%
U.S. Treasuries 5%
Stocks 6%
Non-U.S. Government Bonds 3%
Cash Equivalents 9%
Percent
Ten Largest Corporate of Net
Bond Holdings Assets
- ------------------------ --------
Omnipoint 1.86%
USAir 1.71
Bell Cablemedia/Videotron Holdings 1.70
Integrated Health Services 1.55
Container Corp. of America 1.53
Paracelsus Healthcare 1.51
California Energy 1.48
PriCellular Wireless 1.36
Orion Network Systems 1.31
International CableTel/NTL 1.25
- -------------------------------------------------- --------- ----------- --------
Principal Market Percent
Amount Value of Net
Bonds & Notes - 84.55% (000) (000) Assets
Banking & Financial Services - 0.42%
Chevy Chase Bank, FSB 9.25% 2008 $2,000 $2,030 0.10%
First Nationwide Holdings Inc.:
10.625% 2003(1) 4,000 4,400
12.50% 2003 2,000 2,250 .32
----------- --------
8,680 .42
----------- --------
Beverages - 1.70%
Canandaigua Wine Co., Inc.:
8.75% 2003 12,000 12,120
8.75% 2003(1) 5,250 5,355 .83
Delta Beverage Group, Inc. 9.75% 2003(1) 11,100 11,669 .55
Dr Pepper Bottling Co. of Texas 10.25% 2000 6,500 6,695 .32
----------- --------
35,839 1.70
----------- --------
Broadcasting & Publishing - 4.99%
Acme Intermediate 0%/12.00% 2005 (1),(2) 11,939 6,667 .32
American Media Operations, Inc. 11.625% 2004 13,400 14,673 .70
American Radio Systems Corp. 9.00% 2006 12,750 13,515 .64
Antenna TV, SA 9.00% 2007(1) 4,500 4,511 .21
Chancellor Broadcasting Co.:
9.375% 2004 11,000 11,522
8.75% 2007(1) 6,500 6,646 .86
EZ Communications, Inc. 9.75% 2005 1,500 1,650 .08
Gray Communications Systems, Inc. 10.625% 2006 6,870 7,385 .35
Grupo Televisa, SA:
Series A, 11.375% 2003 1,250 1,391
0%/13.25% 2008(2) 1,000 752 .10
ITT Publimedia BV 9.375% 2007(1) 5,750 6,038 .29
Newsquest Capital PLC:
11.00% 2006 3,250 3,624
Series B, 11.00% 2006 6,750 7,526 .53
Radio One, Inc. 7%/12.00% 2004(1),(2) 4,750 4,560 .22
STC Broadcasting, Inc. 11.00% 2007(1) 3,000 3,203 .15
Sun Media Corp.:
9.50% 2007 1,500 1,553
9.50% 2007 1,000 1,035 .12
TV Azteca, SA de CV:
10.125% 2004 4,250 4,468
10.125% 2004 750 788 .25
Young Broadcasting Inc. 10.125% 2005 3,500 3,675 .17
----------- --------
105,182 4.99
----------- --------
Cable & Telephone in the United
Kingdom - 5.20%
Bell Cablemedia PLC 0%/11.95% 2004(2) 11,000 10,092
(owned by Cable and Wireless PLC)
Videotron Holdings PLC (owned by Cable and Wireless PLC):
0%/11.125% 2004(2) 24,000 22,380
0%/11.00% 2005(2) 4,000 3,450 1.70
COLT Telecom Group PLC Units 0%/12.00% 2006(2) 18,250 13,687 .65
Comcast UK Cable Partners Ltd. 0%/11.20% 2007(2) 20,750 16,289 .77
International CableTel Inc.:
0%/10.875% 2003(2) 21,175 19,375
0%/12.75% 2005(2) 1,000 800
NTL Inc., Series B, 10.00% 2007 5,750 6,009 1.25
TeleWest PLC:
9.625% 2006 9,000 9,338
0%/11.00% 2007(2) 11,000 8,250 .83
----------- --------
109,670 5.20
----------- --------
Cellular, Paging & Wireless
Communications - 13.42%
Cellular, Inc. 0%/11.75% 2003(2) 2,000 1,980 .09
Cellular Communications International, Inc.:
0.00% 2000 1,000 777
Units 0.00% 2000 17,250 13,455 .68
Cellular Communications of Puerto Rico, Inc. 10.00% 2007 17,000 17,510 .83
Centennial Cellular Corp.:
8.875% 2001 17,000 17,255
10.125% 2005 2,500 2,681 .95
Clearnet Communications Inc. 0%/11.75% 2007(2) C$ 19,375 8,555 .41
Comcast Cellular Holdings, Inc. 9.50% 2007(1) $12,000 12,540 .60
Comunicacion Celular SA 0%/13.125% 2003(2) 16,000 12,400 .59
Esat Telecom Group PLC 0%/12.50% 2007(2) 11,250 7,369 .35
Geotek Communications, Inc. 0%/15.00% 2005(2) 1,000 605 .03
Globalstar, LP 11.375% 2004 3,000 3,120 .15
Heartland Wireless Communications, Inc. 13.00% 2003 5,300 2,199 .10
InterCel, Inc.:
0%/12.00% 2006(2) 13,500 9,214
11.125% 2007(1) 7,500 7,819 .81
McCaw International, Ltd. 0%/13.00% 2007(2) 8,500 5,164 .24
Mobile Telecomm 13.50% 2002 15,875 18,018 .85
MobileMedia Communications, Inc.:(8)
0%/10.50% 2003(2) 14,900 2,570
9.375% 2007 6,500 1,446 .19
NEXTEL Communications, Inc.:
0%/11.50% 2003(2) 2,250 2,177
0%/10.125% 2004(2) 11,500 10,149 .58
Omnipoint Corp.:
12.00% 2000(3) 12,500 12,500
11.625% 2006 25,500 26,265
11.625% 2006 500 515 1.86
Orion Network Systems, Inc. Units 11.25% 2007 25,475 27,640 1.31
PriCellular Wireless Corp.:
0%/14.00% 2001(2) 8,000 8,780
0%/12.25% 2003(2) 15,710 15,553
10.75% 2004 4,000 4,320 1.36
PTC International Finance BV 0%/10.75% 2007 12,800 8,384 .40
Rogers Cantel Mobile Communications Inc.:
11.125% 2002 2,500 2,589
9.375% 2008 3,000 3,210 .28
Sprint Spectrum LP, Sprint Spectrum Finance Corp. 11.00% 2006 1,000 1,120 .05
Telesystems International, Inc. 0%/13.25% 2007(1),(2) 3,225 2,000 .09
Teletrac, Inc. Units 14.00% 2007(1) 7,500 7,837 .37
Vanguard Cellular Systems, Inc. 9.375% 2006 2,000 2,070 .10
Western Wireless Corp. 10.50% 2006(1) 3,000 3,135 .15
----------- --------
282,921 13.42
----------- --------
Construction & Housing - 0.43%
M.D.C. Holdings, Inc. 11.125% 2003 8,250 9,034 .43
----------- --------
Diversified Media, Cable Television &
Telecommunications - 9.50%
Adelphia Communications Corp.:
9.25% 2002(1) 15,000 15,075
10.50% 2004(1) 9,000 9,540 1.17
Brooks Fiber Properties, Inc.:
10.00% 2007 7,000 7,927
0%/10.875% 2006(2) 4,750 3,800 .55
Cablevision Systems Corp.:
8.125% 2009(1) 9,500 9,619
9.875% 2013 7,000 7,560 .82
CEI Citicorp Holdings SA 11.25% 2007(1) 2,500 2,556 .12
Century Communications Corp., Senior Note 8.75% 2007 4,000 4,000 .19
Comcast Corp. 10.25% 2001 3,200 3,552 .17
Comtel Brasileira Ltda. 10.75% 2004(1) 4,250 4,526 .21
Conecel Holdings Ltd., Series A, Units 14.00% 2000(1) 5,500 5,672 .27
Fox/Liberty Networks, LLC 8.875% 2007(1) 6,500 6,541 .31
FrontierVision 11.00% 2006 2,500 2,728 .13
Globo Comunicacoes E Participacoes LTDA.:
10.50% 2006(1) 10,500 10,972
10.50% 2006 2,000 2,090 .62
GST Equipment Funding, Inc. 13.25% 2007(1) 9,000 10,395 .49
Hermes Euro Railtel BV 11.50% 2007(1) 7,000 7,577 .36
IntelCom Group Inc., IntelCom Group (USA), Inc. 0%/13.50% 2005(2) 1,000 795 .04
Intermedia Communications Inc. 0%/11.25% 2007(1)(2) 3,000 2,078 .10
IXC Communications, Inc. 12.50% 2005 4,500 5,158 .24
Jones Intercable, Inc. 9.625% 2002 2,000 2,130 .10
Multicanal Participacoes SA 12.625% 2004 6,250 7,078 .34
Nextlink Communications, Inc. 9.625% 2007 11,000 11,412
Nextlink Communications LLC, Nextlink Capital, Inc. 12.50% 2006(1) 1,750 2,013 .64
Qwest Communications International, Inc. 10.875% 2007 5,000 5,600 .27
RBS Participacoes SA 11.00% 2007(1) 5,000 5,281 .25
TCI Communications, Inc. 6.375% 1999 3,500 3,497 .17
Teleport Communications Group Inc. 9.875% 2006 3,000 3,263 .15
TEVECAP, SA 12.625% 2004 7,875 8,357 .40
Verio Inc. Units 13.50% 2004 3,000 3,450 .16
Viacom International Inc.:
9.125% 1999 4,859 4,950
10.25% 2001 4,000 4,380
7.75% 2005 2,000 2,011 .54
WorldCom, Inc. 9.375% 2004 13,814 14,692 .70
----------- --------
200,275 9.51
----------- --------
Electric & Gas Utilities - 0.14%
Columbia Gas System, Inc., Series A, 6.39% 2000 3,000 3,009 .14
----------- --------
Energy & Related Companies - 5.79%
Abraxas Petroleum Corp. 11.50% 2004 20,000 21,800 1.03
Benton Oil and Gas Co. 11.625% 2003 7,000 7,700 .37
Falcon Drilling Co., Inc.:
9.75% 2001 2,500 2,631
8.875% 2003 4,250 4,484 .34
Forcenergy Inc.:
9.50% 2006 5,950 6,188
8.50% 2007 3,000 2,992 .43
Gulf Canada Resources Ltd. 9.25% 2004 4,000 4,232 .20
J. Ray McDermott, SA 9.375% 2006 2,250 2,346 .11
Kelley Oil & Gas Corp. 10.375% 2006 11,225 11,646 .55
Lomak Petroleum, Inc. 8.75% 2007 11,250 10,969 .52
Mariner Energy, Inc. 10.50% 2006 2,500 2,525 .12
McDermott Inc. 9.375% 2002 5,525 5,901 .28
Mesa Operating Co. 10.625% 2006 14,650 16,774 .80
Ocean Energy, Inc. 8.875% 2007(1) 3,500 3,587 .17
Pogo Producing Co. 8.75% 2007(1) 18,000 18,360 .87
----------- --------
122,135 5.79
----------- --------
Food Retailing - 1.86%
Bruno's, Inc. 10.50% 2005 22,000 12,980 .61
Carr-Gottstein Foods Co. 12.00% 2005 4,000 4,440 .21
Quality Food Centers, Inc. 8.70% 2007(1) 2,000 2,040 .10
Randall's Food Markets, Inc. 9.375% 2007(1) 9,750 9,848 .47
Rykoff-Sexton, Inc. 8.875% 2003 4,000 4,060 .19
Star Markets Co., Inc. 13.00% 2004 2,000 2,280 .11
Stater Brothers Holdings Inc. 11.00% 2001 3,250 3,575 .17
----------- --------
39,223 1.86
----------- --------
Forest Products & Paper - 3.00%
Container Corp. of America:
10.75% 2002 6,000 6,630
9.75% 2003 18,000 19,440
11.25% 2004 5,500 6,077 1.53
Copamex Industrias, SA de CV 11.375% 2004(1) 7,625 8,483 .40
Indah Kiat Finance Mauritius Ltd.:
10.00% 2007 2,000 1,955
10.00% 2007(1) 7,000 6,843 .42
MAXXAM Group Inc. 11.25% 2003 3,000 3,180 .15
Pacific Lumber Co. 10.50% 2003 7,000 7,245 .34
Pindo Deli Finance Mauritius Ltd.:
10.25% 2002(1) 1,500 1,518
10.75% 2007(1) 1,750 1,787 .16
----------- --------
63,158 3.00
----------- --------
Health & Personal Care - 6.00%
Integrated Health Services, Inc.:
10.75% 2006(1) 11,250 12,066
9.50% 2007(1) 14,750 15,119
9.25% 2008(1) 5,500 5,583 1.55
Mariner Health Group, Inc. 9.50% 2006 10,000 10,400 .49
Merit Behavioral Care Corp. 11.50% 2005 4,750 5,273 .25
Paracelsus Healthcare Corp. 10.00% 2006 30,825 31,827 1.51
Regency Health Services, Inc.:
9.875% 2002 15,250 16,699
12.25% 2003(1) 3,750 4,463 1.00
Sun Healthcare Group, Inc. 9.50% 2007(1) 3,000 3,090 .15
Tenet Healthcare Corp. 8.00% 2005 2,000 2,040 .10
Unison HealthCare Corp. 13.00% 2006(1) 4,000 3,480 .17
Universal Health Services, Inc. 8.75% 2005 5,100 5,393 .26
UroHealth Systems, Inc. 12.50% 2004(1) 7,000 6,965 .33
Vencor, Inc. 8.625% 2007(1) 4,000 4,060 .19
----------- --------
126,458 6.00
----------- --------
Independent Power Producers - 1.67%
California Energy Co., Inc. 10.25% 2004 28,750 31,206 1.48
CE Casecnan Water and Energy Co., Inc., Series B, 11.95% 2010 3,500 3,903 .19
----------- --------
35,109 1.67
----------- --------
Insurance - 0.14%
Integon Capital I, Integon Corp. 10.75% 2027 2,400 2,928 .14
----------- --------
Leisure, Tourism & Restaurants - 4.70%
AMF Group Inc.:
0%/12.25% 2006(2) 19,500 14,527
10.875% 2006 7,500 8,175 1.08
Aztar Corp. 11.00% 2002 2,000 2,060 .10
Boyd Gaming Corp.:
9.25% 2003 12,750 13,324
9.50% 2007(1) 6,000 6,120 .92
California Hotel Finance Corp. 11.00% 2002 4,000 4,200 .20
FelCor Suites LP 7.375% 2004 4,250 4,236 .20
Foodmaker, Inc.:
9.25% 1999 3,572 3,652
9.75% 2002 6,450 6,627 .49
KSL Recreation Group Inc. 10.25% 2007(1) 4,500 4,793 .23
Rio Hotel & Casino, Inc.:
10.625% 2005 6,400 6,960
9.50% 2007(1) 1,250 1,316 .39
Station Casinos, Inc. 9.625% 2003 15,225 15,111 .71
Sun International Hotels Ltd., Sun International 2,750 2,860 .14
North America, Inc. 9.00% 2007
Wyndham Hotel Corp. 10.50% 2006 4,500 5,085 .24
----------- --------
99,046 4.70
----------- --------
Manufacturing & Materials - 10.06%
AK Steel Corp.:
10.75% 2004 1,250 1,356
9.125% 2006 7,000 7,367 .41
Altos Hornos de Mexico, SA de CV:
11.375% 2002(1) 3,500 3,793
11.875% 2004(1) 4,250 4,728 .40
Anchor Glass Container Corp. 11.25% 2005(1) 17,250 18,673 .89
Coleman Escrow 0.00% 2001(1) 5,600 3,808 .18
Consumers International Inc. 10.25% 2005(1) 8,250 8,910 .42
Derlan Manufacturing Inc. 10.00% 2007 18,950 19,992 .95
DGS International Finance Co. BV 10.00% 2007(1) 6,250 6,383 .30
Fage Dairy Industry SA 9.00% 2007(1) 9,250 9,019 .43
Fairchild Semiconductor Corp. 10.125% 2007 10,250 10,993 .52
Impress Metal Packaging Holdings BV 9.875% 2007(1) DM 9,400 5,668 .27
Kaiser Aluminum & Chemical Corp.:
9.875% 2002 $9,750 10,164
12.75% 2003 5,750 6,210
10.875% 2006 4,000 4,330
Series B, 10.875% 2006 2,750 3,015 1.13
Key Plastics, Inc. 10.25% 2007 9,150 9,608 .46
Lifestyle Furnishings International Ltd. 10.875% 2006 13,005 14,533 .69
Nortek, Inc. 9.25% 2007 5,850 5,945 .28
Polymer Group, Inc. 9.00% 2007(1) 2,000 2,015 .10
Printpack, Inc.:
Series B, 9.875% 2004 6,250 6,562
10.625% 2006 1,980 2,136 .41
Standard Commercial Corp. 8.875% 2005 12,250 12,311 .58
Texas Petrochemicals Corp. 11.125% 2006 11,250 12,262 .58
Therma-Wave, Inc. 10.625% 2004(1) 6,000 6,450 .31
UCAR Global Enterprises Inc. 12.00% 2005 4,500 5,124 .24
U.S. Can Corp. 10.125% 2006 3,000 3,184 .15
Westinghouse Air Brake Co. 9.375% 2005 7,250 7,522 .36
----------- --------
212,061 10.06
----------- --------
Merchandising - 0.18%
Barnes & Noble, Inc. 11.875% 2003 1,100 1,184 .06
Loehmann's, Inc. 11.875% 2003 2,500 2,587 .12
----------- --------
3,771 .18
----------- --------
Miscellaneous Services - 3.18%
Allied Waste North America, Inc. 10.25% 2006 17,200 18,834 .89
Cellnet Data Systems, Inc. Units 0%/14.00% 2007(1),(2) 47,786 24,311 1.15
EarthWatch Inc. Units 12.50% 2001(1),(3) 6,000 6,000 .28
Petro Stopping Centers, LP, Petro Financial Corp. 10.50% 2007(1) 17,500 18,156 .86
----------- --------
67,301 3.18
----------- --------
Protection Services - 0.80%
Borg-Warner Security Corp. 9.625% 2007 6,250 6,469 .31
Protection One Alarm Monitoring, Inc.0%/13.625% 2005(2),(3) 9,500 10,307 .49
----------- --------
16,776 .80
----------- --------
Real Estate - 0.20%
B.F. Saul Real Estate Investment Trust
11.625% 2002 4,000 4,290 .20
----------- --------
Textiles & Apparel - 0.32%
Dawson Production Services, Inc. 9.375% 2007 4,000 4,100 .20
Tultex Corp. 10.625% 2005 1,000 1,105 .05
WestPoint Stevens Inc. 8.75% 2001 1,500 1,560 .07
----------- --------
6,765 .32
----------- --------
Transportation - 2.90%
Airplanes Pass Through Trust, pass-through 6,625 7,586 .36
certificates, Class D, 10.875% 2019(4)
Continental Airlines, Inc. 9.50% 2001 4,500 4,759 .23
Teekay Shipping Corp. 8.32% 2008 12,500 12,688 .60
USAir, Inc.:
8.625% 1998 1,000 1,015
9.625% 2001 12,000 12,480
9.625% 2003 2,240 2,397
10.00% 2003 11,500 12,017
Pass-through trust, Series 1993-A3,
10.375% 2013(4) 7,400 8,281 1.71
----------- --------
61,223 2.90
----------- --------
Private Issue Collateralized Mortgage/Asset-Backed
Obligations(4) - 0.22%
Residential Reinsurance Ltd., Class A-2, 11.45% 1998(1),(5) 4,250 4,338 .21
Resolution Trust Corp.:
Series 1993-C1, Class E, 9.50% 2024 186 186
Series 1993-C2, Class E, 8.50% 2025 41 41 .01
----------- --------
4,565 .22
----------- --------
Non-U.S. Governments and Governmental
Authorities - 3.10%
Argentina (Republic of):
6.75% 2005(5) 970 923
11.00% 2006 925 1,055
11.75% 2007(1) ARP 17,380 19,635
11.375% 2017 $4,250 4,958 1.26
Brazil (Federal Republic of):
Debt Conversion Bond 6.938% 2012(5) 750 637
Capitalization Bond PIK 8.00% 2014(6) 280 239 .04
Ecuador (Republic of) Past Due Interest Bonds:
Registered 6.688% 2015(5) 5,878 4,335
Bearer 6.688% 2015(5) 410 303
Registered 6.438% 2025 250 208 .22
New Zealand Index-Linked 4.66% 2016(5),(7) NZ$ 4,000 2,482 .12
Panama (Republic of) Interest Reduction Bonds:
3.75% 2014(1)(5) $11,500 8,927
6.688% 2016(5) 514 445 .44
Peru (Republic of):
Front Loaded Interest Reduction Bond 3.25% 2017(1),(5) 500 308
Past Due Interest Bond 4.00% 2017 750 503 .04
Poland (Republic of):
Treasury Bill 1997 18,400 5,255
Treasury Bill 1998 27,370 6,801
Past Due Interest Bond 4.00% 2014(7) 2,000 1,755 .66
United Mexican States:
Collateralized Eurobond, Series A, 6.453% 2019(5) 500 477 .02
Government:
11.375% 2016 3,695 4,393
11.50% 2026 125 152 .22
Venezuela (Republic of):
6.75% 2007(5) 750 716
Front Loaded Interest Reduction Bond 6.50% 2007(5) 952 908 .08
----------- --------
65,415 3.10
----------- --------
U.S. Treasury Obligations - 4.62%
7.25% 1998 5,000 5,031
6.875% 1999 39,000 39,695
7.50% 2001 19,000 20,024
8.00% 2001 5,000 5,328
6.625% 2002 3,000 3,072
5.75% 2003 6,000 5,907
11.625% 2004 14,000 18,382 4.62
-------- --------
97,439 4.62
----------- --------
Total Bonds & Notes (cost: $1,701,328,000) 1,782,273 84.55
----------- --------
Number of
Stocks (Common & Preferred) - 5.70% Shares
Acme Television, LLC(1),(8) 725 725 .03
American Radio Systems Corp., Class A(8) 20,000 952 .04
American Radio Systems Corp., exchangeable preferred(6),(8) 161,966 18,869 .96
AnnTaylor, Inc.(8) 40,000 595 .03
CalEnergy Co., Inc. (formerly California Energy Co. Inc.)(8) 65,000 2,161 .10
CellNet Data Systems, Inc.(8),(3) 256,000 2,573 .12
Cellular Communications International, Inc.(8) 32,800 1,361 .06
Chancellor Media Corp., Class A(8) 37,091 1,952
Chancellor Radio Broadcasting Co.,
exchangeable preferred(1),(8) 125,999 14,490 .78
Columbia Gas System, Inc. 14,700 1,029 .05
Comcast Corp., Class A 10,000 256
Comcast Corp., Class A, special stock 20,000 515 .04
Comunicacion Celular SA,
warrants, expire 11/15/03(8) 15,000 82 .00
EarthWatch Inc. 12.00% convertible preferred(1),(3),(8) 675,000 5,400 .26
Esat Holdings Ltd., warrants, expire 2007(1),(8) 11,250 338 .02
Falcon Drilling Co., Inc.(8) 50,000 1,766 .08
Globalstar Telecommunications Ltd., 3,000 315 .01
warrants, expire 2004(8)
Heartland Wireless Communications, Inc., 22,800 0 .00
warrants, expire 4/26/00(1),(8),(3)
ICG Holdings (Canada), Inc., warrants, expire 8/8/05(1)(8) 33,000 186 .01
Integrated Health Services, Inc. 62,500 2,090 .10
IXC Communications, Inc., preferred, 12.50% 2009(1),(6),(8) 6,751 7,864 .37
J. Ray McDermott, SA(8) 130,000 6,370 .30
Jacor Communications, Inc.(8) 45,000 1,988 .09
Kelley Oil & Gas Corp., convertible preferred(8) 170,000 4,165 .20
Marriott International, Inc. 13,896 987 .05
McCaw International, Ltd., warrants, expire 2007(1),(8) 8,500 26 .00
McDermott International, Inc. 60,000 2,190 .10
NEXTEL Communications, Inc., Class A(8) 13,942 403
NEXTEL Communications, Inc.,warrants, expire 1999(8) 21,250 0
NEXTEL Communications, Inc. preferred 13.00%(1),(6),(8) 5,750 6,627 .31
Nortel Inversora SA, Class A, preferred 1,174,607 15,751 .75
(American Depositary Receipts)(1),(3)
Omnipoint Corp.(1),(3),(8) 278,001 4,865 .23
Orion Network Systems, Inc., warrants, expire 1/1/07(8) 25,475 382 .02
Pioneer Natural Resources Co. 91,766 3,843 .18
Protection One Alarm Monitoring, Inc., 30,400 365 .02
warrants, expire 6/30/05(1),(8)
Station Casinos, Inc.(8) 41,600 338
Station Casinos, Inc. 7.00% convertible preferred 90,000 3,864 .20
Sterling Chemicals, Inc., warrants, expire 8/15/08(8) 3,000 108 .01
Time Warner Inc. 10.25% exchangeable preferred 3,108 3,543 .17
UroHealth Systems, Inc., warrants, expire 4/1/04(1),(8) 7,000 4 .00
WorldCom, Inc.(8) 21,000 743 .04
----------- --------
120,081 5.70
Total Stocks (cost: $92,081,000) ----------- --------
Principal
Amount
(000)
Convertible Debentures - 0.99%
Banco Nacional de Mexico, SA 11.00% 2003 $500 538 .03
Global Telesystems Group 8.75% 2000(1) 7,500 7,875 .37
Integrated Health Services, Inc. 6.00% 2003(1) 6,500 7,166 .34
Kelley Oil & Gas Corp.:
7.875% 1999 2,291 2,268
8.50% 2000 3,245 3,083 .25
----------- --------
Total Convertible Debentures (cost: 20,930 .99
$19,864,000) ----------- --------
Short-Term Securities
Corporate Short-Term Notes - 7.35%
AT&T Corp. 5.48% due 10/8/97 12,000 11,985 .57
Bell Atlantic Financial Services, Inc.:
5.53% due 10/16/97 14,900 14,863
5.54% due 11/3/97 7,000 6,964 1.03
E.I. du Pont de Nemours and Co. 5.46% due 10/3/97 20,000 19,991 .95
General Electric Capital Corp. 6.50% due 10/1/97 6,860 6,859 .33
International Lease Finance Corp. 5.49% due 10/9/97 13,000 12,982 .62
MCI Communications Corp. 5.48% due 10/1/97 25,000 24,996 1.19
PACCAR Financial Corp. 5.51% due 10/16/97 8,000 7,980 .38
PepsiCo, Inc. 5.49% due 10/6/97 29,800 29,773 1.41
Sony Capital Corp. 5.53% due 10/16/97 18,390 18,345 .87
----------- --------
Total Short-Term Securities (cost: 154,738 7.35
$154,739,000) ----------- --------
Total Investment Securities (cost: 2,078,022 98.59
$1,968,012,000)
Excess of cash and receivables over payables 29,806 1.41
----------- --------
$2,107,828 100.00%
Net Assets =========== ========
(1)Purchased in a private placement transaction;
resale may be limited to qualified institutional
buyers; 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 securities backed by a pool of
mortgages or other loans on which principal
payments are periodically made. Therefore, the
effective maturity is shorter than the stated
maturity.
(5)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>
<TABLE>
<S> <C> <C>
American High-Income Trust
Financial Statements
Statement of Assets and Liabilities
at September 30, 1997 (dollars in thousands)
Assets:
Investment securities
(cost: $1,968,012) $ 2,078,022
Cash 16
Receivables for--
Sales of investments $ 19,006
Sales of fund's shares 6,461
Forward currency contracts 73
Accrued dividends and interest 37,359 62,899
-------- --------
2,140,937
Liabilities:
Payables for--
Purchases of investments 28,417
Repurchases of fund's shares 1,838
Dividends on fund's shares 1,675
Management services 787
Accrued expenses 392 33,109
-------- --------
Net Assets at September 30, 1997 --
Equivalent to $15.69 per share on
134,363,710 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $ 2,107,828
==============
Statement of Operations
for the year ended September 30, 1997
(dollars in thousands)
Investment Income:
Income:
Dividends $ 2,267
Interest 163,573 $ 165,840
--------
Expenses:
Management services fee 8,242
Distribution expenses 4,552
Transfer agent fee 1,100
Reports to shareholders 132
Registration statement and prospectus 249
Postage, stationery and supplies 301
Trustees' fees 29
Auditing and legal fees 44
Custodian fee 92
Taxes other than federal income tax 25
Other expenses 20 14,786
-------- --------
Net investment income 151,054
--------
Realized Gain and Increase in Unrealized
Appreciation on Investments:
Net realized gain 42,701
Net unrealized appreciation on
Investments 56,784
Open forward currency contracts 77 56,861
-------- --------
Net realized gain and unrealized
appreciation on investments 99,562
--------
Net Increase in Net Assets
Resulting from Operations $ 250,616
==============
Statement of Changes in Net Assets
(dollars in thousands)
Year ended September 30
1997 1996
Operations: -------- --------
Net investment income $ 151,054 $ 118,127
Net realized gain on investments 42,701 4,164
Net increase in unrealized appreciation
on investments 56,861 47,452
-------- --------
Net increase in net assets
resulting from operations 250,616 169,743
-------- --------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (147,273) (118,864)
Distributions from net realized
gain on investments (1,653) --------
-------- --------
Total dividends and distributions (148,926) (118,864)
-------- --------
Capital Share Transactions:
Proceeds from shares sold:
52,744,058 and 43,729,904
shares, respectively 800,316 636,739
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on
investments: 6,173,899 and
5,021,604 shares, respectively 93,692 73,124
Cost of shares repurchased:
28,680,906 and 22,319,120
shares, respectively (434,766) (324,832)
-------- --------
Net increase in net assets
resulting from capital share
transactions 459,242 385,031
-------- --------
Total Increase in Net Assets 560,932 435,910
Net Assets:
Beginning of year 1,546,896 1,110,986
-------- --------
End of year (including undistributed
net investment income: $10,740
and $7,102, respectively) $ 2,107,828 $ 1,546,896
============== ==============
See Notes to Financial Statements
</TABLE>
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:
Equity securities, including depositary receipts, are valued at the last
reported sales price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the investment adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates. The effects of changes
in foreign currency tares on investment securities are included with the net
realized and unrealized gain or loss on investment securities.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith by a
committee appointed by the Board of Trustees.
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. Dividends to shareholders are declared
daily after the determination of the fund's net investment income and are paid
to shareholders monthly. Distributions paid to shareholders are recorded on the
ex-dividend date.
The fund may enter into forward currency contracts, which represent an
agreement to exchange currencies of different countries at a specified future
date at a specified rate. The fund enters into these contracts to reduce its
exposure to fluctuations in foreign exchange rates arising from investments
denominated in non-U.S. currencies. The fund's use of forward currency
contracts involves market risk in excess of the amount recognized in the
statement of assets and liabilities. The contracts are recorded in the
statement of assets and liabilities at their net unrealized value. The fund
records realized gains or losses at the time the forward contract is closed or
offset by a matching contract. The face or contract amount in U.S. dollars
reflects the total exposure the fund has in that particular contract. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from possible movements
in non-U.S. exchange rates and securities values underlying these instruments.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of September 30, 1997, net unrealized appreciation on investments,
excluding forward currency contracts, for book and federal income tax purposes
aggregated $110,010,000, of which $138,405,000 related to appreciated
securities and $28,395,000 related to depreciated securities. During the year
ended September 30, 1997, the fund realized, on a tax basis, a net capital gain
of $43,118,000 on securities transactions. Net losses related to non-U.S.
currency transactions of $417,000 were treated as an adjustment to ordinary
income for federal tax purposes. The cost of portfolio securities, excluding
forward currency contracts, for book and federal income tax purposes was
$1,968,012,000 at September 30, 1997.
3. The fee of $8,242,000 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, 1997,
distribution expenses under the Plan were $4,552,000. As of September 30, 1997,
accrued and unpaid distribution expenses were $328,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $1,100,000. American Funds Distributors, Inc. (AFD), the
principal underwriter of the fund's shares, received $2,289,000 (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,
1997, aggregate amounts deferred and earnings thereon were $51,000.
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, 1997, accumulated undistributed net realized gain on
investments was $38,829,000 and paid-in capital was $1,948,752,000. The fund
reclassified $143,000 of realized currency losses to undistributed net
investment income from undistributed net realized gains for the year ended
September 30, 1997.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,259,096,000 and $875,661,000 respectively, during
the year ended September 30, 1997.
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 $92,000 includes $86,000 that was paid by these credits
rather than in cash.
At September 30, 1997, the fund had outstanding forward currency contracts to
sell non-U.S. currencies as follows:
<TABLE>
<S> <C> <C> <C> <C>
Contract Amount U.S. Valuation at 9/30/97
-------------- -------------- ------------------------ --------------
Unrealized
Appreciation
Non-U.S. Currency Sales Contracts Non-U.S. U.S. Amount (Depreciation)
- -------------------------------------------- -------------- -------------- ------------------------ --------------
German Deutsch Marks expiring 11/28/97 DM5,700,000 $3,414,196 $3,246,606 $167,590
German Deutsch Marks expiring 11/05/97 DM3,431,000 $1,857,320 $1,951,640 $(94,320)
-
$73,270
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share
Data and Ratios Year ended September 30
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Net Asset Value, Beginning
of Year $14.86 $14.30 $13.97 $15.18 $14.58
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 1.26 1.29 1.33 1.25 1.28
Net realized and
unrealized gain
(loss) on investments .83 .59 .39 (.99) .74
-------- -------- -------- -------- --------
Total income from
investment operations 2.09 1.88 1.72 .26 2.02
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income (1.24) (1.32) (1.32) (1.21) (1.29)
Distributions from net
realized gains (.02) - (.07) (.26) (.13)
-------- -------- -------- -------- --------
Total distributions (1.26) (1.32) (1.39) (1.47) (1.42)
-------- -------- -------- -------- --------
Net Asset Value, End of Year $15.70 $14.86 $14.30 $13.97 $15.18
======== ======== ======== ======== ========
Total Return* 14.66% 13.68% 13.34% 1.60% 14.59%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $2,108 $1,547 $1,111 $835 $707
Ratio of expenses to average
net assets .82% .87% .89% .86% .87%
Ratio of net income to
average net assets 8.35% 8.90% 9.72% 8.63% 8.60%
Portfolio turnover rate 53.55 % 39.74% 29.56% 42.03% 44.37%
*Calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the fund's offering price.
</TABLE>
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, 1997, 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
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, 1997, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing 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, 1997, 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 31, 1997
1997 TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 1% 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 1998 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR
1997 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
