[THE AMERICAN FUNDS GROUP(R)]
[cover: 10]
AMERICAN HIGH-INCOME TRUST
Annual Report for the year ended September 30, 1998
A DECADE OF RESEARCH
American High-Income Trust(SM) 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.
American High-Income Trust is one of the 28 mutual funds in The American Funds
Group,(r) managed by Capital Research and Management Company. Since 1931,
Capital has invested with a long-term focus based on thorough research and
attention to risk.
RESULTS AT A GLANCE
<TABLE>
<CAPTION>
One Year Five Years Ten Years
RETURNS (for periods ended September 30, 1998)* annualized annualized
<S> <C> <C> <C>
American High-Income Trust -2.40% 7.94% 10.44%
Credit Suisse First Boston High Yield Index -0.52 8.51 10.69
Salomon Smith Barney Broad Investment-Grade
(BIG) Bond Index 11.47 7.22 9.35
Salomon Smith Barney Long-Term High-Yield Index 8.32 11.18 11.98
Lipper High Current Yield Bond Funds Index -1.65 8.01 9.39
</TABLE>
- --
<TABLE>
<CAPTION>
30-DAY RATES (as of October 31, 1998)
<S> <C>
Yield based on Securities and Exchange Commission formula 10.05%
Distribution rate based on offering price 9.00
Distribution rate based on net asset value 9.45
</TABLE>
For the 10 years ended September 30, 1998, American High-Income Trust ranked
sixth in total return among the 53 high current yield funds in existence
throughout the period, according to Lipper Analytical Services. For the five
years ended September 30, it ranked 39th of 82, and for the 12 months ended
September 30, the fund ranked 147th of 233. Lipper rankings do not reflect the
effects of sales charges.
*Change in value of investment with dividends and capital gains distributions
reinvested.
The SEC yield reflects income the fund expects to earn based on its current
portfolio of securities, while the distribution rate is based solely on the
fund's past dividends. Accordingly, the fund's SEC yield and distribution rate
may differ.
PREPARING FOR THE YEAR 2000
The fund's key service providers - Capital Research and Management Company, the
investment adviser, and American Funds Service Company, the transfer agent -
are updating their computer systems to process date-related information
properly following the turn of the century. Both are on track to complete
modifications of significant internal systems by the end of 1998. Testing with
business partners, vendors and other service providers is already under way. We
will continue to keep you up to date in our regular publications. If you'd like
more detailed information, call Shareholder Services at 800/421-0180, ext. 21,
or visit our Web site at www.americanfunds.com.
Fund results in this report were computed without a sales charge unless
otherwise indicated. The maximum sales charge is 4.75%; sales charges are lower
for accounts of $25,000 or more. FIGURES SHOWN ARE PAST RESULTS. SHARE PRICE
AND RETURN WILL VARY, SO YOU MAY LOSE MONEY. INVESTING FOR SHORT PERIODS MAKES
LOSSES MORE LIKELY. INVESTMENTS ARE NOT FDIC-INSURED, NOR ARE THEY DEPOSITS OF
OR GUARANTEED BY A BANK OR ANY OTHER ENTITY.
FELLOW SHAREHOLDERS:
American High-Income Trust passed a significant milestone when it reached its
tenth anniversary in February 1998. Over its lifetime, your fund has compiled a
solid record, producing a 10.4% average annual compound return and ranking
seventh among the 52 high-yield bond funds tracked by Lipper Analytical
Services. Near the conclusion of the fund's fiscal year on September 30,
however, the high-yield bond market experienced a brief but pronounced setback
and your fund's short-term results suffered.
Investors in American High-Income Trust saw the value of their holdings decline
2.4% during the fiscal year, assuming they reinvested their distributions,
including capital gains, monthly dividends totaling $1.22 and the
8-cent-a-share special dividend paid in December. Investors who took their
dividends in cash earned an income return of 8.4% and saw the value of their
holdings decline 10.4%.
Shareholders received a 33.6-cent-a-share capital gain in December 1997, and we
expect the fund to pay a capital gain of about 5 cents a share again this
December.
Results in the bond market were mixed during this fiscal year. The Lipper High
Current Yield Bond Funds Index, which measures the returns of the 30 largest
high-yield bond funds, declined 1.7%. For the same period, the unmanaged
Salomon Smith Barney Broad Investment-Grade Index, which measures results of
higher quality bonds, rose 11.5%.
Disparity in results is not uncommon, although the magnitude of the divergence
this year was unusual. The impact of economic changes, political events and the
usual forces of supply and demand varied from one segment of the bond market to
the next. This past summer, prices of U.S. Treasury bonds rose sharply while
all other bonds lagged behind. Treasury securities benefited from a "flight to
quality," as international investors, nervous about economic crises in Asia,
Russia and Latin America, sought a safe haven for their assets. With added
concerns about weak corporate profits and a possible economic slowdown, prices
of most investment-grade bonds trailed Treasury securities, and prices of
high-yield issues declined.
The "flight to quality" was a global phenomenon affecting corporate and
sovereign debt around the world. German government bonds, also a haven during
financial crises, were among the few debt securities to keep pace with U.S.
Treasury bonds, while almost all other corporate and many government bonds saw
only modest gains or suffered losses.
As high-yield bond prices fell, technical factors added to the decline. For
example, when prices declined, a few highly leveraged hedge funds were forced
to sell their substantial bond holdings, adding to the downward pressure.
In this environment, some of American High-Income Trust's largest holdings,
notably bonds issued by telecommunications companies and non-U.S. sovereign
debt, lost value. However, some of the fund's other holdings, in particular
those in broadcasting and consumer products, held their value in the face of
the overall market decline.
This is the third time in American High-Income Trust's history that high-yield
bond prices have gone through a significant downward cycle. They fell in
1989-90 and again in 1994. While no one enjoys watching the value of an
investment fall, we know from experience that lower prices often create
investment opportunities. The fund's analysts and portfolio counselors continue
to search for securities that may be undervalued in the current market but have
the potential for long-term rewards. This approach has paid off over time. For
its lifetime, your fund's 10.4% average annual compound return handily outpaced
the 9.3% return of the Lipper High Current Yield Bond Funds Index.
For some time, we have tracked the results of the fund's investment universe
using the Salomon Smith Barney Long-Term High-Yield Index. With this report we
are inaugurating use of the Credit Suisse First Boston High Yield Index, one of
the most commonly used benchmarks to judge high-yield bond managers' results.
We believe this index gives a better representation of the breadth of the
market because it includes bonds of short, intermediate and long maturities
sold by a wide variety of issuers.
There has been a 24% increase in the number of shareholder accounts this year
to just over 98,000. We wish to welcome our new shareholders. We look forward
to reporting to you again in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
November 13, 1998
CHARTING AN INVESTMENT
Here's how a $10,000 investment in American High-Income Trust grew between
February 19, 1988, when the fund began operations, and September 30, 1998, the
end of its latest fiscal year. As you can see, that $10,000 grew to $27,202
with all distributions reinvested.
$32,556/1/
Salomon Smith Barney
Long-Term
High-Yield Index
$28,841/1/
Credit Suisse First Boston
High Yield Index
$27,202/2,3/
American
High-Income Trust
with dividends reinvested
$25,688/1/
Lipper High Current
Yield Bond Funds Index
$24,975/1/
Salomon Smith Barney
Broad Investment-Grade
Bond Index
$14,103/4/
Consumer Price Index
(inflation)
$10,000/2/
original investment
[chart]
<TABLE>
<CAPTION>
Year ended American Lipper High Salomon
High-Income Current Brothers
Year ended Salomon Credit Suisse Trust/2/,/3/ Yield Broad Consumer
Brothers Boston with Bond Funds Investment- Price Index
September Long-Term High- High Yield dividends Index/1/ Grade Bond (inflation)
30 Yield Index/1/ Index reinvested Index/1/ /4/
<S> <C> <C> <C> <C> <C> <C>
1988/5/ $10,506 $10,446 $10,074 $10,475 $10,222 $10,328
1989 11,010 11,367 11,073 10,935 11,367 10,776
1990 9,560 12,237 10,628 9,570 12,237 11,440
1991 13,190 14,198 13,723 12,290 14,198 11,828
1992 16,298 15,999 16,204 15,132 15,999 12,181
1993 19,162 17,627 18,568 17,473 17,627 12,509
1994 18,957 17,063 18,866 17,899 17,063 12,879
1995 23,330 19,461 21,382 20,178 19,461 13,207
1996 25,295 20,423 24,308 22,612 20,423 13,603
1997 30,057 22,406 27,872 25,995 22,406 13,897
1998 32,556 28,841 27,202 25,668 24,975 14,103
</TABLE>
[end chart]
/1/All results calculated with dividends reinvested or interest compounded. The
Salomon Smith Barney indexes and the Credit Suisse First Boston Index are
unmanaged and do not reflect sales charges, commissions or expenses. The Lipper
index is at net asset value.
/2/This figure, unlike those shown earlier in this report, reflects payment of
the maximum sales charge of 4.75% on the $10,000 investment. Thus, the net
amount invested was $9,525. As outlined in the prospectus, the sales charge is
reduced for larger investments. There is no sales charge on dividends or
capital gain distributions that are reinvested in additional shares. No
adjustment has been made for income or capital gain taxes.
/3/Includes reinvested dividends of $17,516 and reinvested capital gain
distributions of $1,202.
/4/Computed from data supplied by the U.S. Department of Labor, Bureau of Labor
Statistics.
/5/For the period February 19 through September 30, 1988.
Past results are not predictive of future results.
AVERAGE ANNUAL COMPOUND RETURNS* (for periods ended September 30, 1998)
Ten Years +9.90%
Five Years +6.89
One Year -7.03
*Assumes reinvestment of all distributions and payment of the 4.75% maximum
sales charge at the beginning of the stated periods.
A DECADE OF RESEARCH AND GROWTH
The belief that the high-yield bond market offers opportunities for both high
current income and solid total returns over time was one of the primary reasons
that Capital Research and Management Company introduced American High-Income
Trust 10 years ago. Judging from the fund's first decade, it appears our
assessment was correct.
A $10,000 investment on the day American High-Income Trust began operations
would have been worth $27,202 at the end of this fiscal year, assuming payment
of a full sales charge and that all distributions were reinvested, for an
average annual return of 9.89% and a total return of 172.02%. These results set
American High-Income Trust apart from many of its peers. For its lifetime,
American High-Income Trust ranks seventh out of 52 similar funds tracked by
Lipper Analytical Services.
The fund has grown substantially during the past 10 years. Today the fund's
assets total more than $2.3 billion and the number of shareholder accounts has
risen to more than 98,000.
The fund's first decade has been a time of sweeping historical, political and
economic changes - the Berlin Wall fell, symbolically ending Communism in
Eastern Europe; the U.S. and its allies defeated Iraq in a war; the U.S. stock
market rose almost 300%; and high-yield bonds became a staple of the financial
markets. Interest rates have gone through three complete cycles, ending the
decade substantially lower than they were 10 years ago. Despite these changes,
the fund has maintained the same research-intensive approach it adopted on its
first day. Today, as in February 1988, the fund seeks to invest in bonds that
offer a high current yield and opportunity for price appreciation over time.
[photograph: construction site]
In the next few pages, we'll look at the fund's earliest days, discuss its
approach to investing and look at opportunities being created amid the changes
in today's market.
[photographs: inside a bottling company, turbine, and computer]
EARLY HEADWINDS
American High-Income Trust began operations under less than ideal conditions.
In October 1987, just four months before the fund began operations, the stock
market crashed. By early 1988, the outlook for the stock market was still
uncertain. Interest rates were rising and bond prices were falling.
Similar conditions - falling high-yield bond prices and volatility in the stock
market - also marked the close of the fiscal year ended September 30, 1998. But
today's market situation differs greatly from the environment of 10 years ago
in several important ways. When the fund began, most investors associated
high-yield bonds with Michael Milken and his employer, Drexel Burnham Lambert,
which single-handedly spurred the market's growth and made "junk bonds" a
familiar expression. But less than a year after American High-Income Trust
began operations, Drexel had gone out of business and Milken went to prison.
Today no one man or firm dominates the market as Milken and Drexel once did.
The market for high-yield bonds now spans the globe. American High-Income
Trust's portfolio alone contains bonds issued by companies in Asia, Europe, and
North and South America.
The variety of companies seeking financing in the high-yield market has also
increased. Ten years ago the market was dominated by leveraged buyouts, but
today companies in new industries, such as wireless communications, are raising
money in the high-yield market to fund their growth and expansion. At the same
time, old-line manufacturing firms are using the high-yield market to fund
restructuring and acquisitions.
One measure of the market's growth can be seen in the number of high-yield
mutual funds available to investors. While there were only about 50 high-yield
funds tracked by Lipper Analytical Associates when American High-Income Trust
began, there are more than 200 today. As the number of buyers and sellers
increased, the number of analysts studying high-yield bonds has grown and the
amount of research and the information available to investors about high-yield
bonds has multiplied. This benefits analysts researching high-yield bonds but
can also increase the competition to find good, long-term value in the market.
Through all these changes, the fund has built its track record of solid growth
by making a bond's yield the first, but not only, step in evaluating a
potential investment.
"A bond's yield should be a measure of risk," says Susan Tolson, a portfolio
counselor for American High-Income Trust. "We try to make sure a bond's yield
adequately reflects its risk. But it's just part of what we look at when we're
judging the potential return on an investment."
A COMPANY-BY-COMPANY APPROACH
The fund's portfolio counselors and analysts also look for companies with
improving financial strength. As a company's fortunes improve, its bonds'
prices may rise, giving investors a solid total return. Investing for total
return requires in-depth research and means extensively studying the companies
issuing debt. The fund's investment professionals interview each firm's top
managers and talk to competitors, customers and suppliers. They study company
finances and talk with other Capital Research analysts who follow similar
companies.
"I want to know where a company will be in a few years, not a few months,"
Tolson says.
The fund's emphasis on the long term often pays its greatest rewards during
difficult times. A slumping economy, rising interest rates or industry problems
may either be signals to sell or opportunities for greater gains. Without
knowing the company that issued the bonds, it is often very difficult to know
whether to buy, sell or simply stand pat.
[photographs: radio tower, satellite, shopping carts]
AN EXPANDING GLOBAL MARKET
As the fund has grown, its scope has broadened. Today it invests across a
spectrum of industries from manufacturing to transportation to satellite
communications. The fund is more geographically diversified than at any time in
its history. In the early years, American High-Income Trust had few holdings
outside the United States. Today almost 20% of the fund's assets are invested
in bonds issued by companies abroad.
As international commerce increases, where a company is domiciled becomes less
relevant than where it sells its products or raises money. Today opportunities
can be found in countries around the world. For example, Container Corporation
of America, one of the fund's oldest holdings, is now owned by a subsidiary of
Jefferson Smurfit, headquartered in Dublin, Ireland. Impress Metal Packaging
Holdings, one of the fund's newest holdings, is headquartered in France, owns a
plant in Belgium and has issued bonds denominated in deutsche marks.
Of course, investments in non-U.S. securities are subject to additional risks
- -currency fluctuations, political and social instability, differing securities
regulations and accounting standards, higher transaction costs, and possible
changes in taxation - which is why it is important to have an investment
manager with international experience.
"The high-yield market outside the United States is still developing. It's a
lot like the U.S market was 10 years ago. This gives us a chance to benefit
from our extensive global research capabilities," says David Barclay, a
portfolio counselor for the fund. Capital Research and its affiliates have
offices in five countries outside the United States and, Barclay notes, "We
have bond-research people throughout the organization. That's a lot of
capability."
A TIME-TESTED APPROACH
The fund's first 10 years were a time of rapid change. Capitalism replaced
communism in Eastern Europe and Russia. International trade doubled. Eleven
European countries agreed to adopt a single currency, the U.S. stock market
enjoyed one of the longest bull markets in history, and the World Wide Web now
instantly links buyers and sellers around the world with a few taps on a
keyboard.
There is little reason to think the pace will slow in the future. Yet
regardless of the changes and innovations ahead, we believe American
High-Income Trust's approach to investing will remain appropriate and timely.
It will always rely on thorough research to find good companies and invest for
the long term, whether in old-line industries or an industry that hasn't even
been thought of yet.
<TABLE>
American High-Income Trust
Investment Portfolio
September 30, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------
U.S. Corporate Bonds 70%
Non-U.S. Corporate Bonds 17%
U.S. Treasuries 2%
Non-U.S. Government Bonds 2%
Mortgage & Asset-Backed Bonds 1%
Stocks 2%
Cash Equivalents 6%
Ten Largest Corporate Percent of Net
Bond Holdings Assets
- -------------------------------------------------- -------------
NEXTEL Communications 3.99%
Integraged Health Services 2.45
Fox/Liberty Networks 1.96
Omnipoint 1.95
CBS 1.74
Falcon Holding 1.66
Clearnet Communications 1.46
Chancellor Media 1.45
Container Corp. of America 1.45
COLT Telecom 1.41
- -------------------------------------------------- --------- ----------- --------
Shares or
Principal Market Percent
Amount Value of Net
Bonds, Notes & Equity Securities (000) (000) Assets
Broadcasting & Media - 18.04%
Fox/Liberty Networks, LLC, FLN Finance, Inc.:
0%/9.75% 2007(1) $28,750 $19,119 1.96
8.875% 2007 27,625 27,072
American Radio Systems Corp. 9.00% 2006 17,470 18,693 1.74
CBS RADIO INC 11.375% 2009(2) 16,197 18,707
EZ Communications, Inc. 9.75% 2005 3,250 3,551
Falcon Holding Group, LP, Falcon Funding Corp.:
0%/9.285% 2010(1) 31,750 21,114 1.66
8.375% 2010 18,250 18,067
Chancellor Media Corp. of Los Angeles 9.00% 2008(3) 1,000 1,010 1.45
Chancellor Media Corp. of Los Angeles, (formerly Chancellor
Radio Broadcasting Co.):
9.375% 2004 14,500 14,790
8.125% 2007 9,500 9,167
Series B, 8.75% 2007 9,350 9,350
NTL Inc.:
0%/12.75% 2005(1) 1,000 870 1.30
Series B, 10.00% 2007 5,750 5,821
0%/9.75% 2008(1),(3) 12,500 7,563
Sterling, 0%/10.75% 2008(1),(3) L18,500 16,335
Adelphia Communications Corp.:
Series B, 9.25% 2002 $6,000 6,240 .97
8.125% 2003(3) 5,000 4,975
10.50% 2004 8,500 9,265
Series B, 13.00% 2009(4) 20shares 2,300
Comcast UK Cable Partners Ltd. 0%/11.20% 2007(1) $22,000 17,820 .75
Lenfest Communications, Inc.:
8.375% 2005 6,000 6,270 .69
7.625% 2008(3) 6,750 6,733
8.25% 2008(3) 3,250 3,226
Ziff-Davis Inc. 8.50% 2008 16,500 16,005 .68
Cablevision Industries Corp.:
8.125% 2009 8,500 9,079 .66
9.875% 2013 6,000 6,480
Telemundo Holdings, Inc. 0%/11.50% 2008(1),(3) 23,000 12,190 .52
Century Communications Corp.:
8.75% 2007 4,000 4,200 .50
0.00% 2008 16,000 7,520
Sun Media Corp.:
9.50% 2007 2,434 2,483 .46
9.50% 2007 8,386 8,386
Big City Radio, Inc. 0%/11.25% 2005(1) 13,000 9,100 .39
TeleWest PLC 9.625% 2006 9,000 9,045 .38
GRAY Communication Systems, Inc. 10.625% 2006 8,120 8,485 .36
TransWestern Publishing Co. 9.625% 2007 7,750 7,905 .33
ACME Intermediate Holdings, LLC/ACME Intermediate Finance, Inc.
%/12.00% 2005(1) 12,689 7,486 .32
Antenna TV SA 9.00% 2007 8,000 7,280 .31
RCN Corp.:
0%/11.125% 2007(1) 4,500 2,498 .28
10.00% 2007 4,500 4,208
Newsquest Capital PLC:
11.00% 2006 3,150 3,528 .28
Series B, 11.00% 2006 2,750 3,080
Young Broadcasting Inc.:
10.125% 2005 3,500 3,675 .24
Series B, 8.75% 2007 2,000 1,990
V2 Music (Holdings) PLC:
Dollar Units 0%/14.00% 2008(1),(3) 7,250 3,589 .23
Sterling Units 0%/14.00% 2008(1),(3) L2,250 1,891
Globo Comunicacoes E Partcipacoes Ltd.:
10.50% 2006 2,000 1,030 .22
10.50% 2006(3) 8,280 4,264
FrontierVision 11.00% 2006 4,500 4,927 .21
American Media Operations, Inc. 11.625% 2004 4,650 4,813 .20
Radio One, Inc. 7.00%/12.00% 2004(1) 4,750 4,608 .20
Multicanal Participacoes SA, Series B, 12.625% 2004 5,150 3,605 .15
STC Broadcasting, Inc. 11.00% 2007 3,000 3,165 .13
Fox Family Worldwide, Inc.:
0%/10.25% 2007(1) 2,000 1,240 .12
9.25% 2007 1,750 1,654
Coaxial Communications of Central Ohio, Inc. 10.00% 2006(3) 3,000 2,850 .12
Jones Intercable, Inc. 9.625% 2002 2,000 2,140 .09
RBS Participacoes SA 11.00% 2007(3) 4,500 1,665 .07
Tevecap SA 12.625% 2004 2,025 871 .04
Grupo Televisa, SA 0%/13.25% 2008(1) 1,000 680 .03
----------- --------
425,673 18.04
----------- --------
Wireless Communications - 16.78%
NEXTEL Communications, Inc.:
0%/9.75% 2004(1) 1,750 1,680 3.99
0%/9.75% 2007(1) 13,500 7,965
0%/10.65% 2007(1) 14,000 8,120
0%/9.95% 2008(1) 44,000 25,520
Series D, 13.00% exchangeable preferred, redeemable 2009(2),(4) 14shares 14,756
Series E, preferred, 11.125% 2010(2),(4) 29shares 27,049
NEXTEL International, Inc. 0%/12.125% 2008(1) $21,000 9,135
Omnipoint Corp.:
Units 12.00% 2000(3),(5) 12,500 11,200 1.95
8.938% 2006(3) 13,455 12,446
11.625% 2006 2,500 1,700
11.625% 2006 23,500 15,980
7.00% convertible preferred(3) 185shares 4,625
Clearnet Communications Inc.:
0%/11.75% 2007(1) C$52,375 18,540 1.46
0%/10.40% 2008(1) 50,325 15,835
PageMart Wireless, Inc. 0%/11.25% 2008(1) $49,760 27,119 1.15
American Cellular Corp. 10.50% 2008(3) 24,250 23,401 .99
Mobile Telecommunication Technologies Corp.:
13.50% 2002 17,875 20,020 .97
Convertible preferred $2.25 100shares 2,875
Centennial Cellular Corp.:
8.875% 2001 $14,500 15,515 .79
10.125% 2005 2,500 3,087
CCPR Services, Inc. 10.00% 2007 19,500 16,770 .71
CellNet Data Systems, Inc. 0%/14.00% 2007(1) 34,985 11,370 .48
Cellular Communications International, Inc. 0%/9.50% 2005(1) ECU13,500 10,884 .46
Comunicacion Celular SA 0%/13.125% 2003(1) $16,000 10,400 .44
Crown Castle International Corp. 0%/10.625% 2007(1) 16,250 9,750 .41
Comcast Cellular Corp., Series B, 9.50% 2007 9,500 9,738 .41
McCaw International, Ltd. 0%/13.00% 2007(1) 17,625 8,813 .37
Esat Holdings Ltd. 0%/12.50% 2007(1) 13,250 8,480 .36
Teletrac Holdings, Inc. 14.00% 2007(3),(4) 13,550 8,333 .35
Netia Holdings BV:
0%/11.25% 2007(1) 5,750 2,300 .23
10.25% 2007 4,125 3,094
Price Communications Cellular Holdings, Inc. 11.25% 2008(2) 5,000 4,500 .19
Pinnacle Holdings Inc. 0%/10.00% 2008(1) 7,700 4,004 .17
Spectrasite Holdings 0%/12.00% 2008(1),(3) 8,500 3,910 .17
OCCIDENTE Y CARI 0%/14.00% 2004(1) 5,000 3,600 .15
PILTEL INTL HLDG REG S CV 1.75% 2006 5,875 3,349 .14
Western Wireless Corp. 10.50% 2006 3,000 3,090 .13
Conecel Holdings Ltd., Series A, 14.00% 2000(3) 5,500 2,750 .12
Vanguard Cellular Systems, Inc. 9.375% 2006 2,000 2,020 .09
Globalstar LP 11.375% 2004 3,000 1,980 .08
CELLCO FINANCE 15.00% 2005(3) 500 401 .02
----------- --------
396,104 16.78
----------- --------
Telecommunications - 10.90%
COLT Telecom Group PLC:
0%/12.00% 2006(1) 26,250 20,475 1.41
8.875% 2007 DM15,000 8,578
7.625% 2008 8,250 4,347
Viatel, Inc.:
0%/12.40% 2008(1),(3) $22,500 6,737 1.38
0%/12.50% 2008(1),(3) 24,500 12,005
11.15% 2008(3) DM5,000 2,695
11.25% 2008(3) $10,000 9,050
10.00% convertible 2011(3) 1,443 959
Series A, convertible preferred 10.00%(2),(4) 17shares 1,029
Nextlink Capital, Inc. 12.50% 2006 $1,750 1,890 1.00
NEXTLINK Communications, Inc.:
9.625% 2007 13,000 12,707
9.00% 2008 9,500 8,977
Orion Network Systems, Inc. 11.25% 2007 21,475 19,757 .84
Time Warner Telecommunications 9.75% 2008 19,250 19,346 .82
Global TeleSystems Group, Inc.:(3)
8.75% convertible debentures 2000 7,500 13,275 .78
9.875% 2005 6,000 5,100
US Xchange 15.00% 2008(3) 18,375 18,375 .78
TVN Entertainment 14.00% 2008(3) 13,250 12,190 .52
PTC International Finance BV 0%/10.75% 2007(1) 18,500 11,100 .47
Hermes Euro Railtel BV 11.50% 2007 10,000 10,450 .44
KMC Telecom Holdings, Inc. 0%/12.50% 2008(1) 22,500 10,350 .44
GST Equipment Funding, Inc. 13.25% 2007 9,000 9,450 .40
Teligent, Inc. 11.50% 2007 10,500 8,085 .34
IXC Communications, Inc., preferred 12.50% 2009(2),(4) 7shares 7,708 .33
Level 3 Communications, Inc. 9.125% 2008 $7,750 7,343 .31
QWest Communications International Inc. 0%/9.47% 2007(1) 6,000 4,620 .20
IMPSAT Corp. 12.375% 2008(3) 5,750 4,111 .17
Allegiancetelecom, Inc. 0%/11.75% 2008(1) 5,000 2,150 .09
Intermedia Communications Inc. 0%/11.25% 2007(1) 3,000 2,130 .09
Telesystem International Wireless, Inc. 0%/13.25% 2007(1) 3,600 1,908 .08
CEI Citicorp Holdings SA 11.25% 2007(3) ARP500 270 .01
----------- --------
257,167 10.90
----------- --------
Manufacturing - 7.21%
Graham Packaging:
Graham Packaging Co., GPC Capital Corp. I 8.75% 2008 17,250 16,733 1.13
Graham Packaging Holdings Co., GPC Capital Corp. II 16,500 9,900
0%/10.75% 2009(1),(3)
Anchor Glass Container Corp.:
11.25% 2005 17,250 17,897 1.09
9.875% 2008 8,250 7,714
BREED Technologies Inc. 9.25% 2008(3) 28,500 23,370 .99
Printpack Inc.:
Series B, 9.875% 2004 5,750 5,750 .83
10.625% 2006 13,730 13,730
Lifestyle Furnishings International Ltd. 10.875% 2006 17,755 18,465 .78
Consumers International Inc. 10.25% 2005 12,250 12,556 .53
Impress Metal Packaging Holdings B.V. 9.875% 2007 DM17,250 10,329 .44
Ball Corp.:
7.75% 2006(3) $7,500 7,725 .40
8.25% 2008(3) 1,750 1,798
Key Plastics, Inc., Series B, 10.25% 2007 9,650 9,071 .38
Westinghouse Air Brake Co. 9.375% 2005 5,750 5,808 .25
Tekni-Plex, Inc. 9.25% 2008 5,250 5,040 .21
Hayes Wheels International Inc. 9.125% 2007 2,500 2,513 .11
Tultex Corp. 10.625% 2005 1,500 1,290 .05
Reliance Industries Ltd. 10.50% 2046(3) 500 402 .02
----------- --------
170,091 7.21
----------- --------
Health & Personal Care - 4.77%
Integrated Health Services, Inc.:
10.25% 2006 11,250 11,250 2.45
Series A:
9.50% 2007 22,250 21,138
9.25% 2008 27,000 25,380
Paracelsus Healthcare Corp. 10.00% 2006 34,825 32,039 1.35
Mariner Health Group, Inc. 9.50% 2006 11,875 11,756 .50
Tenet Healthcare Corp.:
8.00% 2005 4,750 4,821 .27
8.125% 2008(3) 1,500 1,508
Unison HealthCare Corp.:
13.50% 1999(3),(6),(7) 2,000 1,900 .20
13.75% 2006(3),(7) 8,750 2,800
----------- --------
112,592 4.77
----------- --------
Energy Related - 4.76%
Kelley Oil & Gas Corp.:
7.875% 1999 3,245 3,018 1.00
8.50% 2000 2,291 2,108
10.375% 2006(3) 7,950 6,519
Series C, 10.375% 2006 11,225 9,204
Convertible preferred $2.62 170shares 2,720
Cross Timbers Oil Co.:
Series B, 9.25% 2007 $9,275 8,533 1.00
8.75% 2009 16,620 14,958
Pogo Producing Co. 8.75% 2007 18,000 17,100 .72
Benton Oil and Gas Co.:
11.625% 2003 7,000 5,950 .52
9.375% 2007 8,750 6,300
Petro Stopping Centers, LP 10.50% 2007 11,500 10,983 .47
Michael Petoleum Corp. 11.50% 2005(3) 7,750 6,897 .29
Clark Refining & Marketing, Inc.:
8.375% 2007 1,500 1,350 .22
8.875% 2007 4,500 3,937
Lomak Petroleum, Inc. 8.75% 2007 4,000 3,560 .15
Ocean Energy, Inc. 8.875% 2007 3,500 3,500 .15
Casecnan Water and Energy Co., Inc., Series B, 11.95% 2010 3,500 2,905 .12
McDermott Inc. 9.375% 2002 2,525 2,726 .12
----------- --------
112,268 4.76
----------- --------
Leisure & Tourism - 4.47%
AMF Bowling, Inc. 0% convertible debentures 2018(3) 21,900 2,300 1.26
AMF Bowling Worldwide, Inc. (formerly AMF Group Inc.):
0%/12.25% 2006(1) 12,543 7,714
10.875% 2006 22,250 19,580
William Hill Finance PLC 10.625% 2008(3) L16,200 24,894 1.06
Boyd Gaming Corp. 9.25% 2003 $18,250 18,706 .79
Friendly Ice Cream Corp. 10.50% 2007 16,625 14,713 .62
Premier Parks Inc.:
9.25% 2006 4,000 3,920 .38
0%/10.00% 2008(1) 8,000 4,980
Sun International Hotels, Ltd., Sun International
North America, Inc.
9.00% 2007 4,000 4,080 .17
Rio Hotel & Casino, Inc. 10.625% 2005 1,500 1,635 .07
Hard Rock Hotel, Inc. 9.25% 2005(3) 1,500 1,500 .06
KSL Recreation Group, Inc. 10.25% 2007 1,000 1,000 .04
Six Flags Entertainment Corp. 8.875% 2006 500 496 .02
----------- --------
105,518 4.47
----------- --------
Banking & Financial Services - 3.72%
Advanta Corp.:
7.50% 2000 7,500 7,342 .78
6.814% 2002 10,000 9,412
6.98% 2002 2,000 1,892
Chevy Chase Bank, FSB 9.25% 2008 2,000 1,940 .55
Chevy Chase Preferred Capital Corp. 10.375% 214shares 11,021
Amresco, Inc. 9.875% 2005 $12,900 10,320 .44
Fuji JGB Investment LLC, Series A, 9.87% noncumulative
preferred securities, perpetual(3) 22,500 9,979 .42
Tokai Preferred Capital Co. LLC, Series A,
9.98% noncumulative preferred(3) 12,500 9,375 .40
Komercni Finance BV 9.0%/10.75% 2008(1),(3) 9,950 8,009 .34
Superior Financial Corp. 8.65% 2003(3) 6,000 6,075 .26
SB Treasury Co. LLC, Series A, 9.40% noncumulative
preferred securities, perpetual(3) 5,500 4,673 .20
BNP U.S. Funding LLC, Series A, 7.738% 2049(3) 4,750 4,400 .19
IBJ Preferred Capital Co. LLC, Series A, 8.79% noncumulative
preferred securities, perpetual(3) 4,650 3,389 .14
----------- --------
87,827 3.72
----------- --------
Consumer Products - 3.31%
Canandaigua Wine Co., Inc.:
8.75% 2003 11,000 11,083 .80
Series C, 8.75% 2003 7,750 7,847
Delta Beverage Group, Inc. 9.75% 2003 13,735 13,598 .58
Standard Commercial Tobacco Co., Inc. 8.875% 2005 13,750 13,475 .57
Fage Dairy Industry SA 9.00% 2007 9,250 8,232 .35
Favorite Brands International, Inc. 10.75% 2006(3) 9,375 7,266 .31
AKI Inc. 10.50% 2008(3) 4,500 4,230 .25
AKI Holding Inc. 0%/13.50% 2009(1),(3) 3,750 1,631
DGS International Finance Co. BV:
10.00% 2007 275 154 .15
10.00% 2007(3) 6,250 3,500
Home Products International, Inc. 9.625% 2008 3,250 2,893 .12
Sparkling Spring Water Group Ltd. 11.50% 2007 2,250 2,261 .10
Westpoint Stevens Inc. 7.875% 2005 1,000 1,010 .04
Aurora Foods Inc., Series B, 8.75% 2008 1,000 1,007 .04
----------- --------
78,187 3.31
----------- --------
Forest Products & Paper - 3.12%
Container Corp. of America:
Series B, 10.75% 2002 5,250 5,355 1.45
9.75% 2003 23,500 23,265
Series A, 11.25% 2004 5,500 5,665
Norampac Inc.:
9.375% 2008 C$5,000 3,196 .70
9.50% 2008 $13,500 13,230
Advance Agro PCL 13.00% 2007(3) 10,500 7,980 .34
Indah Kiat Finance Mauritius Ltd.:
11.875% 2002 4,750 2,565 .24
10.00% 2007 6,875 3,059
Pindo Deli Finance Mauritius Ltd.:
10.25% 2002 7,500 3,188 .20
10.75% 2007 3,775 1,548
Copamex Industrias, SA de CV, Series B, 11.375% 2004 4,625 3,746 .16
Grupo Industrial Durango, SA de CV 12.00% 2001 1,000 730 .03
----------- --------
73,527 3.12
----------- --------
Merchandising - 2.32%
Boyds Collection Ltd. 9.00% 2008(3) 14,750 14,013 .59
Randall's Food Markets, Inc. 9.375% 2007 12,000 12,480 .53
K Mart Corp. 9.78% 2020(8) 10,500 11,267 .48
DR Securitized Lease Trust Pass-Through Certificates,
Series 1994 K-2, 9.35% 2019(8) 9,855 10,279 .44
Carr-Gottstein Foods Co. 12.00% 2005 4,000 4,560 .19
Fred Meyer, Inc.:
7.375% 2005 1,000 1,038 .09
7.45% 2008 1,000 1,047
----------- --------
54,684 2.32
----------- --------
Miscellaneous Service Companies - 2.24%
Allied Waste North America, Inc. 10.25% 2006 22,435 24,454 1.04
LES, Inc. 9.25% 2008(3) 13,125 13,125 .56
Iron Mountain Inc.:
8.75% 2009 5,370 5,209 .35
10.125% 2009 3,000 3,150
Protection One Alarm Monitoring, Inc. 0%/13.625% 2005(1) 6,166 6,921 .29
----------- --------
52,859 2.24
----------- --------
Technology and Electronics - 2.10%
Flextronics International Ltd. 8.75% 2007 15,750 14,805 .63
Zilog Inc. 9.50% 2005 11,750 7,403 .31
Advanced Micro Devices, Inc. 11.00% 2003 6,000 6,060 .25
Therma-Wave, Inc. 10.625% 2004 13,250 5,962 .25
Fairchild Semiconductor Corp. 10.125% 2007 6,000 5,400 .23
EarthWatch Inc.:
Units 12.50% 2001(3),(5),(7) 6,000 4,800 .22
Series C, convertible preferred, 12.00%(2),(3),(4),(5),(7) 675shares 338
Samsung Electronics Co., Ltd. 7.45% 2002(3) $6,000 4,905 .21
----------- --------
49,673 2.10
----------- --------
Transportation - 1.11%
Teekay Shipping Corp. 8.32% 2008 12,500 12,063 .51
USAir, Inc., pass-through trust, Series 1993-A3, 10.375% 2013(8) 5,650 6,209 .26
Northwest Airlines, Inc. 7.625% 2005 5,000 4,996 .21
Kitty Hawk Inc. 9.95% 2004 3,000 3,030 .13
----------- --------
26,298 1.11
----------- --------
Miscellaneous - 1.07%
M.D.C. Holdings, Inc. 8.375% 2008 9,250 8,880 .38
Felcor Suites LP 7.375% 2004 8,250 8,074 .34
Wharf International Finance Ltd., Series A, 7.625% 2007 10,000 5,903 .25
Swire Pacific Offshore Financing Ltd. 9.33% cumulative
guaranteed perpetual capital securities (Hong Kong)(3) 146shares 2,370 .10
----------- --------
25,227 1.07
----------- --------
Metals and Materials - 0.80%
Doe Run Co. 11.25% 2005(3) $9,500 7,410 .31
AK Steel Corp. 9.125% 2006 5,500 5,500 .23
Kaiser Aluminum & Chemical Corp.:
12.75% 2003 4,500 4,365 .23
Series B, 10.875% 2006 1,000 970
Texas Petrochemicals Corp. 11.125% 2006 650 611 .03
----------- --------
18,856 .80
----------- --------
Governments (Excluding U.S.) - 1.87%
United Mexican States Government Eurobonds:
Series C, 0.00% 2003(5) 768 0
Global, 11.375% 2016 7,695 7,416 .55
Series A, Units, 6.594% 2019(6) 500 392
Global, 11.50% 2026 5,125 5,125
Panama (Republic of):
Interest Reduction Bond 4.00% 2014(3),(6) 11,500 8,280 .41
Past Due Interest Eurobond 6.688% 2016(6) 527 380
8.875% 2027 1,250 1,059
Argentina (Republic of):
Series L, 6.625% Eurobonds 2005(6) 950 760 .31
11.00% 2006 250 230
11.75% 2007(3) ARP4,130 2,984
11.375% 2017 $2,250 2,070
9.75% 2027 1,575 1,307
Philippines (Republic of):
8.875% 2008 4,500 3,746 .19
8.75% 2016 1,000 750
Korea (Republic of) 8.875% 2008 5,000 4,294 .18
Poland (Republic of), Past Due Interest Bond, Bearer 4.00% 2,500 2,163 .09
2014(6)
Venezuela (Republic of):
Eurobond 6.625% 2007(6) 1,810 1,040 .07
Front Loaded Interest Reduction Bond, Series A, 6.625% 2007(6) 857 472
Peru (Republic of):
Past Due Interest Eurobond 4.00% 2017(6) 750 420 .03
Front Loaded Interest Reduction Bond 3.25% 2049(3),(6) 500 236
Ecuador (Republic of):
Past Due Interest Registered Bond 6.625% 2015(6) 707 251 .02
Past Due Interest Bearer Bond 6.625% 2015(6) 425 151
Past Due Interest Discount Bond 6.625% 2025(6) 250 121
Brazil (Federal Republic of), Debt Conversion Bond, Series L, 750 383 .02
6.688% 2012(6)
----------- --------
44,030 1.87
----------- --------
U.S. Treasury Obligations - 1.83%
6.875% July 1999 19,000 19,336 .82
7.50% November 2001 10,000 10,898 .46
7.50% February 2005 11,000 12,867 .55
-------- --------
43,101 1.83
----------- --------
Private Issue Collateralized Mortgage Obligations/Asset-Backed
!Securities - 0.84%
Gramercy, Series 1998-A, Class C, 8.95% 2002(3) 10,000 10,050 .43
Trinity Re, Ltd., Class A-2, 10.071% 1998(3),(6) 6,600 6,468 .27
Residential Reinsurance Limited 9.848% 1999(3),(6) 3,250 3,234 .14
Resolution Trust Corp., Series 1993-C1, Class E, 9.50% 2024 98 98 .00
----------- --------
19,850 .84
----------- --------
Number of
Common Stocks & Warrants Shares
Nortel Inversora SA, preferred, Class A
(American Depositary Receipts) (Argentina)(3),(5) 1,057,146 12,369 .53
Integrated Health Services, Inc. 506,206 8,511 .36
COLT Telecom Group PLC, warrants, expire 2006 18,250 3,650 .16
(United Kingdom),(3),(4)
Jacor Communications, Inc.(4) 70,000 3,544 .15
Cellular Communications International, Inc.(4) 49,200 2,669 .14
Cellular Communications International, Inc., warrants, 17,250 604
expire 2003(4)
Omnipoint Corp.(3),(4) 278,001 2,068 .09
CellNet Data Systems, Inc.(4),(5) 256,000 1,229 .07
CellNet Data Systems, Inc., warrants, expire 2007(3),(4) 47,786 478
ACME Intermediate Holdings, LLC (3),(4) 11,939 716 .06
Acme Televison LLC(4) 725 725
Comunicacion Celular SA, Class B, warrants, expire 2003 15,000 1,200 .05
(Colombia),(3),(4)
WorldCom, Inc.(4) 21,000 1,026 .04
KMC Telecom Holdings Inc., warrants, expire 2008(3),(4) 22,500 990 .04
Verio Inc., warrants, expire 2004(3),(4) 18,450 719 .03
Teletrac Holdings, Inc., warrants, expire 2007(3) 13,550 461 .02
Esat Holdings Ltd., warrants, expire 2007 (Ireland),(3),(4) 11,250 349 .02
Protection One Alarm Monitoring, Inc., warrants, 30,400 319 .01
expire 2005(3),(4)
NEXTEL Communications, Inc., Class A(4) 13,942 281
NEXTEL Communications, Inc., warrants, expire 1999(4),(5) 21,250 2 .01
Orion Network Systems, Inc., warrants, expire 2007(4) 25,475 194 .01
Conecel Holdings Ltd., Class B, warrants, expire 2000 74,250 111 .00
(Ecuador),(3),(4),(5)
Globalstar Telecommunications Ltd., warrants, expire 2004(4) 3,000 105 .00
Allegiance Telecom Inc., warrants, expire 2008(3),(4) 5,000 100 .00
McCaw International, Ltd., warrants, expire 2007(3),(4) 8,500 32 .00
----------- --------
42,452 1.79
----------- --------
Principal
Amount
(000)
Miscellaneous
Investment securities in initial period of acquisition $6,033 17,693 .75
----------- --------
Total Bonds, Notes and Equity Securities (cost: $2,399,838,000) 2,213,677 93.80
----------- --------
Short-Term Securities
Associates Corp. of North America 5.77% due 11/2/98 38,470 38,464 1.63
Ford Motor Credit Co.:
5.40% due 10/1/98 15,000 14,998 1.41
5.52% due 10/6/98 8,200 8,192
5.53% due 10/6/98 10,000 9,991
Ciesco LP 5.50% due 10/1/98 15,000 14,998 .64
Duke University 5.48% due 10/23/98 15,000 14,947 .63
----------- --------
Total Short-Term Securities (cost: $101,590,000) 101,590 4.31
----------- --------
Total Investment Securities (cost: $2,501,428,000) 2,315,267 98.11
Excess of cash and receivables over payables 44,626 1.89
----------- --------
$2,359,893 100.00
Net Assets =========== ========
(1)Step bond; coupon rate will increase at a later date.
(2)Payment in kind. The issuer has the option of paying
additional securities in lieu of cash.
(3)Purchased in a private placement transaction; resale may be
limited to qualified institutional buyers; resale to the
public may require registration.
(4)Non-income-producing security.
(5)Valued under procedures established by the Board of Trustees.
(6)Coupon rate may change periodically.
(7)Company not making interest payments, bankruptcy
proceedings pending.
(8)Pass-through security backed by a pool of mortgages or other l
loans on which principal payments are periodically made.
Therefore, the effective maturity is shorter than the stated
maturity.
See Notes to Financial Statements
</TABLE>
<TABLE>
American High-Income Trust
Financial Statements
Statement of Assets and Liabilities
at September 30, 1998 (dollars in thousands)
<S> <C> <C>
Assets:
Investment securities
(cost: $2,501,428) $ 2,315,267
Cash 4,159
Receivables for--
Sales of investments $ 6,439
Sales of fund's shares 7,885
Accrued dividends and interest 49,457 63,781
------- -------
2,383,207
Liabilities:
Payables for--
Purchases of investments 14,969
Repurchases of fund's shares 3,094
Dividends on fund's shares 1,200
Forward currency contracts 2,742
Management services 890
Accrued expenses 419 23,314
------- -------
Net Assets at September 30, 1998 --
Equivalent to $13.75 per share on
171,624,748 shares of beneficial
interest issued and outstanding;
unlimited shares authorized $ 2,359,893
==========
Statement of Operations
for the year ended September 30, 1998
(dollars in thousands)
Investment Income:
Income:
Dividends $ 5,931
Interest 219,681 $ 225,612
-------
Expenses:
Management services fee 10,751
Distribution expenses 5,960
Transfer agent fee 1,388
Reports to shareholders 123
Registration statement and prospectus 377
Postage, stationery and supplies 296
Trustees' fees 27
Auditing and legal fees 49
Custodian fee 52
Taxes other than federal income tax 29
Other expenses 18 19,070
------- -------
Net investment income 206,542
-------
Realized Gain and Change in Unrealized
Depreciation on Investments:
Net realized gain 16,864
Net unrealized depreciation on:
Investments (296,102)
Open forward currency contracts (2,750) (298,852)
------- -------
Net realized gain and unrealized
depreciation on investments (281,988)
-------
Net Decrease in Net Assets
Resulting from Operations ($75,446)
=======
Statement of Changes in Net Assets
(dollars in thousands)
Year ended September 30
1998 1997
Operations: ------- -------
Net investment income $ 206,542 $ 151,05
Net realized gain on investments 16,864 42,701
Net increase in unrealized appreciation
on investments (298,852) 56,861
------- -------
Net increase in net assets
resulting from operations (75,446) 250,616
------- -------
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (200,841) (147,273)
Distributions from net realized
gain on investments (47,160) (1,653)
------- -------
Total dividends and distributions (248,001) (148,926)
------- -------
Capital Share Transactions:
Proceeds from shares sold:
64,577,666 and 52,744,058
shares, respectively 986,681 800,316
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on
investments: 11,414,562 and
6,173,899 shares, respectively 172,376 93,692
Cost of shares repurchased:
38,731,190 and 28,680,906
shares, respectively (583,545) (434,766)
------- -------
Net increase in net assets
resulting from capital share
transactions 575,512 459,242
------- -------
Total Increase in Net Assets 252,065 560,932
Net Assets:
Beginning of year 2,107,828 1,546,896
------- -------
End of year (including undistributed
net investment income: $14,347
and $10,740, respectively) $ 2,359,893 $ 2,107,828
======= ======
See Notes to Financial Statements
</TABLE>
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - 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.
SIGNIFICANT ACCOUNTING POLICIES - The following is a summary of the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
SECURITY VALUATION - Equity securities, including depositary receipts, are
valued at the last reported sale price on the exchange or market on which such
securities are traded, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid price. In
cases where equity securities are traded on more than one exchange, the
securities are valued on the exchange or market determined by the investment
adviser to be the broadest and most representative market, which may be either
a securities exchange or the over-the-counter market. Fixed-income securities
are valued at prices obtained from a pricing service, when such prices are
available; however, in circumstances where the investment adviser deems it
appropriate to do so, such securities will be valued at the mean quoted bid and
asked prices or at prices for securities of comparable maturity, quality and
type. 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 their representative quoted bid and asked prices. 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.
NON-U.S. CURRENCY TRANSLATION - Assets or liabilities initially expressed in
terms of non-U.S. currencies are translated into U.S. dollars at the prevailing
market rates at the end of the reporting period. Purchases and sales of
securities and income and expenses are translated into U.S. dollars at the
prevailing market rates on the dates of such transactions. The effects of
changes in non-U.S. currency exchange rates on investment securities are
included with the net realized and unrealized gain or loss on investment
securities.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - 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 AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the fund's net investment income and
are paid to shareholders monthly.
FORWARD CURRENCY CONTRACTS - The fund may enter into forward currency
contracts, which represent agreements to exchange currencies of different
countries at specified future dates at specified rates. 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. FEDERAL INCOME TAXATION
It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of September 30, 1998, net unrealized depreciation on investments, excluding
forward currency contracts, for book and federal income tax purposes aggregated
$186,161,000, of which $52,616,000 related to appreciated securities and
$238,777,000 related to depreciated securities. During the year ended September
30, 1998, the fund realized, on a tax basis, a net capital gain of $18,492,000
on securities transactions. Net losses related to non-U.S. currency
transactions of $254,000 are treated as an adjustment to ordinary income for
federal income tax purposes. In addition, the fund has deferred, for tax
purposes, to fiscal year ending September 30, 1999, the recognition of losses
related to non-U.S. currency transactions totaling $4,121,000 which were
realized during the period November 1, 1997 through September 30, 1998. The
cost of portfolio securities, excluding forward currency contracts, for book
and federal income tax purposes was $2,501,428,000 at September 30, 1998.
3. FEES AND TRANSACTIONS WITH RELATED PARTIES
INVESTMENT ADVISORY FEES - The fee of $10,751,000 for management services was
incurred 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.
DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution, the fund may expend
up to 0.30% of its average net assets annually for any activities primarily
intended to result in sales of fund shares, provided the categories of expenses
for which reimbursement is made are approved by the fund's Board of 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, 1998,
distribution expenses under the Plan were $5,960,000. As of September 30, 1998,
accrued and unpaid distribution expenses were $363,000.
TRANSFER AGENT FEES - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $1,388,000. American Funds Distributors, Inc.
(AFD), the principal underwriter of the fund's shares, received $3,016,000
(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.
DEFERRED TRUSTEES' FEES - 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, 1998, aggregate amounts deferred and earnings thereon
were $40,000.
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. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
The fund made purchases and sales of investment securities, excluding
short-term securities, of $1,725,448,000 and $1,205,545,000, respectively,
during the year ended September 30, 1998.
As of September 30, 1998, accumulated undistributed net realized gain on
investments was $10,079,000 paid-in capital was $2,524,231,000. The fund
reclassified $2,094,000 and $30,000 of realized currency losses from
undistributed net realized gain to undistributed net investment income and
additional paid-in capital in the year ended September 30, 1998.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $52,000 was paid by these credits rather than in cash.
Net realized currency losses on interest and sales of non-U.S. bonds, on a book
basis, were $1,757,000 for the year ended September 30, 1998.
At September 30, 1998, 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 9/30/98
------------------------------------------------------------
Unrealized
Non-U.S. Currency Sales Contracts Non-U.S. U.S. Amount Depreciation
- -----------------------------------------------------------------------------------------------
German Deutsche Marks
expiring 10/5/98 to 2/26/99 DM47,562,000 $26,859,000 $28,535,000 $(1,676,000)
European Currency Units
expiring 11/16/98 ECU8,425,000 9,778,000 9,936,000 $(158,000)
British Pounds
expiring 11/16/98 to 8/10/99 L16,338,000 26,598,000 27,441,000 $(843,000)
---------------------------------------------
$63,235,000 $65,912,000 $(2,677,000)
============= ============= =============
</TABLE>
<TABLE>
Per-Share
Data and Ratios
<S> <C> <C> <C> <C> <C>
Year endedSeptember 30
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Net Asset Value, Beginning
of Year $15.69 $14.86 $14.30 $13.97 $15.18
-------- -------- -------- -------- --------
Income from Investment
Operations:
Net investment income 1.30 1.26 1.29 1.33 1.25
Net realized and
unrealized gain
(loss) on investments (1.60) .83 .59 .39 (.99)
-------- -------- -------- -------- --------
Total income from
investment operations (.30) 2.09 1.88 1.72 .26
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net
investment income (1.30) (1.24) (1.32) (1.32) (1.21)
Distributions from net
realized gains (.34) (.02) - (.07) (.26)
-------- -------- -------- -------- --------
Total distributions (1.64) (1.26) (1.32) (1.39) (1.47)
-------- -------- -------- -------- --------
Net Asset Value, End of Yea $13.75 $15.69 $14.86 $14.30 $13.97
======== ======== ======== ======== ========
Total Return* (2.40)% 14.66% 13.68% 13.34% 1.60%
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $2,360 $2,108 $1,547 $1,111 $835
Ratio of expenses to average
net assets .81% .82% .87% .89% .86%
Ratio of net income to
average net assets 8.76% 8.35% 8.90% 9.72% 8.63%
Portfolio turnover rate 54.63% 53.55% 39.74% 29.56% 42.03%
*Excludes maximum sales charge of 4.75%.
</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, 1998, 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, 1998, 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, 1998, 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.
/s/Deloitte & Touche LLP
Los Angeles, California
November 6, 1998
1998 TAX INFORMATION (unaudited)
We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of distributions.
Corporate shareholders may exclude up to 70% of qualifying dividends
received during the year. For purposes of computing this exclusion, 2% of the
dividends paid by the fund from net investment income represents qualifying
dividends.
Certain states may exempt from income taxation a portion of the dividends
paid from net investment income that was derived from direct U.S. Treasury
obligations. For purposes of computing this exclusion, 2% 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.
The fund designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
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 1999 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON
THEIR 1999 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.
BOARD OF TRUSTEES
H. FREDERICK CHRISTIE, Rolling Hills Estates, California
Private investor; former President and Chief Executive
Officer, The Mission Group; former President,
Southern California Edison Company
DON R. CONLAN, South Pasadena, California
President (retired), The Capital Group Companies, Inc.
DIANE C. CREEL, Long Beach, California
President and Chief Executive Officer,
The Earth Technology Corporation
(international consulting engineering)
MARTIN FENTON, JR., San Diego, California
Chairman of the Board, Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER, Marina del Rey, California
President, Fuller Consulting
(management consultants)
ABNER D. GOLDSTINE, Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR., Los Angeles, California
Chairman of the Board of the fund
Executive Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III, San Marino, California
Private investor
RICHARD G. NEWMAN, Los Angeles, California
Chairman of the Board, President and Chief Executive
Officer, AECOM Technology Corporation
(architectural engineering)
OTHER OFFICERS
DAVID C. BARCLAY, Los Angeles, California
Executive Vice President of the fund
Senior Vice President, Capital Research Company;
Vice President, Capital Research and
Management Company
MICHAEL J. DOWNER, Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management
Group, Capital Research and Management Company
SUSAN M. TOLSON, Los Angeles, California
Vice President of the fund
Vice President and Director, Capital Research Company
JULIE F. WILLIAMS, Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, Jr., Brea, California
Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK, Los Angeles, California
Assistant Secretary of the fund
Assistant Vice President - Fund Business Management
Group, Capital Research and Management Company
TODD L. MILLER, Brea, California
Assistant Treasurer of the fund
Assistant Vice President - Fund Business Management
Group, Capital Research and Management Company
PETER C. VALLI retired from the Board of Trustees effective March 17, 1998. He
had been a Trustee of the fund since 1991. The Trustees wish to thank him for
his many contributions to the fund.
[THE AMERICAN FUNDS GROUP(R)]
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH
AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5823
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1000 Wilshire Boulevard
Los Angeles, California 90017-2472
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
THIS REPORT IS FOR THE INFORMATION OF SHAREHOLDERS OF AMERICAN HIGH-INCOME
TRUST, BUT IT MAY ALSO BE USED AS SALES LITERATURE WHEN PRECEDED OR ACCOMPANIED
BY THE CURRENT PROSPECTUS, WHICH GIVES DETAILS ABOUT CHARGES, EXPENSES,
INVESTMENT OBJECTIVES AND OPERATING POLICIES OF THE FUND. IF USED AS SALES
MATERIAL AFTER DECEMBER 31, 1998, THIS REPORT MUST BE ACCOMPANIED BY AN
AMERICAN FUNDS GROUP STATISTICAL UPDATE FOR THE MOST RECENTLY COMPLETED
CALENDAR QUARTER.
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
Printed on recycled paper
Litho in USA SG/GRS/3910
Lit. No. AHIT-011-1198
