SEC File Nos. 33-80630
811-8576
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement Under the Securities Act of 1933 [X]
Post-Effective Amendment No. 2
and
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. 4
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
JULIE F. WILLIAMS
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Cary I. Klafter, Esq.
MORRISON & FOERSTER
345 California Street
San Francisco, California 94104
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2 registering an
indefinite number of shares under the Securities Act of 1933.
Approximate date of proposed public offering:
It is proposed that this filing become effective on September 29, 1995,
pursuant to paragraph (b) of rule 485.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
CROSS REFERENCE SHEET
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<CAPTION>
ITEM NUMBER OF CAPTIONS IN PROSPECTUS (PART "A")
PART "A" OF FORM N-1A
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Financial Highlights Financial Highlights
4. General Description of Registrant Investment Objective and Policies; Certain Securities
and Investment Techniques;
Fund Organization and Management
5. Management of the Fund Summary of Expenses; Fund
Organization and Management
6. Capital Stock and Other Securities Investment Objective and Policies; Certain
Securities and Investment Techniques;
Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares
8. Redemption or Repurchase Redeeming Shares
9. Legal Proceedings N/A
</TABLE>
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information; Investment Restrictions
13. Investment Objectives and Policies Description of Certain Securities and Investment
Techniques; Investment Restrictions
14. Management of the Registrant Fund Officers and Directors; Management
15. Control Persons and Principal Holders Fund Officers and Directors
of Securities
16. Investment Advisory and Other Services Management
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions
18. Capital Stock and Other Securities None
19. Purchase, Redemption and Pricing of Purchase of Shares; Shareholder
Securities Being Offered Account Services and Privileges; Redemption of Shares
20. Tax Status Dividends and Distributions
21. Underwriter Management -- Principal Underwriter
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
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24. Financial Statements and Exhibits
25. Persons Controlled by or under
Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of
Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
</TABLE>
<PAGE>
PROSPECTUS
AMERICAN
HIGH-
INCOME
MUNICIPAL
BOND FUND(SM)
AN OPPORTUNITY FOR A HIGH
LEVEL OF CURRENT INCOME
EXEMPT FROM REGULAR
FEDERAL INCOME TAXES
THROUGH INVESTMENTS IN
MUNICIPAL BONDS
October 1, 1995
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
The fund's investment objective is to provide shareholders with a high level
of current income exempt from regular federal income taxes through investments
in municipal bonds. From time to time income may be subject to various taxes,
including federal alternative minimum and state taxes.
UNDER NORMAL MARKET CONDITIONS, THE FUND WILL INVEST AT LEAST 65% OF ITS
ASSETS IN BONDS RATED A OR BELOW AND AT LEAST 50% OF ITS TOTAL ASSETS IN SUCH
SECURITIES RATED Baa OR BBB OR BELOW BY MOODY'S INVESTORS SERVICE, INC. OR
STANDARD AND POOR'S CORPORATION OR UNRATED BUT DETERMINED TO BE OF COMPARABLE
QUALITY. SECURITIES RATED Ba OR BB OR BELOW ARE COMMONLY KNOWN AS "JUNK" BONDS
AND ARE SUBJECT TO GREATER FLUCTUATIONS IN VALUE AND RISK OF LOSS OF INCOME
AND PRINCIPAL, INCLUDING RISK OF DEFAULT, THAN ARE LOWER YIELDING, HIGHER
RATED BONDS; THEREFORE, THESE INVESTMENTS MAY NOT BE SUITABLE FOR ALL
INVESTORS AND SHOULD BE CONSIDERED CAREFULLY PRIOR TO INVESTING. (FOR
ADDITIONAL INFORMATION SEE "INVESTMENT OBJECTIVE AND POLICIES," PAGE 3; AND
"CERTAIN SECURITIES AND INVESTMENT TECHNIQUES -- RISKS OF INVESTING IN BONDS,"
PAGE 4.)
This prospectus presents information you should know before investing in the
fund. It should be retained for future reference. You may obtain the statement
of additional information for the fund dated October 1, 1995, which contains
the fund's financial statements, without charge, by writing to the Secretary
of the fund at 333 South Hope Street, Los Angeles, CA 90071 or telephoning
800/421-0180. These requests will be honored within three business days of
receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. THE
PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
40-010-1095
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SUMMARY OF
EXPENSES
Average annual expenses
paid over a 10-year
period would be
approximately $12 per
year, assuming a $1,000
investment and a 5%
annual return.
TABLE OF CONTENTS
Summary of Expenses........2
Financial Highlights.......3
Investment Objective and
Policies..................3
Certain Securities and
Investment Techniques.....4
Risks of Investing in
Bonds.....................4
Investment Results........10
Dividends, Distributions
and Taxes................10
Fund Organization
and Management...........11
Appendix..................14
The American Funds
Shareholder Guide........16
Purchasing Shares........16
Reducing Your Sales
Charge..................19
Shareholder Services.....20
Redeeming Shares.........22
Retirement Plans.........24
IMPORTANT PHONE NUMBERS
Shareholder Services:
800/421-0180 ext. 1
Dealer Services:
800/421-9900 ext. 11
American FundsLine(R)
800/325-3590 (24-hour
information)
This table is designed to help you understand the costs of investing in the
fund. These are historical expenses; your actual expenses may vary.
SHAREHOLDER TRANSACTION EXPENSES
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Maximum sales charge on purchases
(as a percentage of offering price)................................... 4.75%/1/
</TABLE>
The fund has no sales charge on reinvested dividends, deferred sales
charge,/2/ redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets after
fee waiver)
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Management fees....................................................... 0.10%/3/
12b-1 expenses........................................................ 0.30%/4/
Other expenses (including audit, legal, shareholder services, transfer
agent and custodian expenses)........................................ 0.22%
Total fund operating expenses......................................... 0.62%
</TABLE>
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following cumulative
expenses on a $1,000 investment, assuming a 5%
annual return./6/ $54 $66 $80 $121/5/
</TABLE>
/1/ Sales charges are reduced for certain large purchases. (See "The American
Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
/2/ Purchases of $1 million or more are not subject to an initial sales charge
as described in this prospectus. However, a contingent deferred sales charge
of 1% applies on certain redemptions within 12 months following such
purchases. (See "The American Funds Shareholder Guide: Redeeming Shares--
Contingent Deferred Sales Charge.")
/3/ The Investment Advisory and Service Agreement provides for fee reductions
to the extent that annual operating expenses exceed 0.90% of the average net
assets of the fund. Capital Research and Management Company has been
voluntarily waiving fees to the extent necessary to ensure that the fund's
expenses do not exceed 0.76% of the average daily net assets. Without such a
waiver, fees (as a percentage of average net assets) would be 0.42%.
/4/ These expenses may not exceed 0.30% of the fund's average net assets
annually. (See "Fund Organization and Management--Plan of Distribution.")
Due to these distribution expenses, long-term shareholders may pay more than
the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers.
/5/ The total for ten years is cumulative. The annual average expenses paid
over a ten-year period would be approximately $12 per year. Expenses are
based on the amounts listed under "Annual Fund Operating Expenses."
/6/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
2
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FINANCIAL The following information has been audited by Price
HIGHLIGHTS Waterhouse LLP, independent accountants, whose
(For a share unqualified report covering the period September 26,
outstanding 1994 (commencement of operations) to July 31, 1995 is
throughout the included in the statement of additional information.
period) This information should be read in conjunction with the
financial statements and accompanying notes which are
also included in the statement of additional
information.
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<CAPTION>
PERIOD
SEPTEMBER 26, 1994/1/ TO
JULY 31, 1995
------------------------
<S> <C>
Net Asset Value, Beginning of Period................. $14.29
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................... .76
Net realized and unrealized gain on investments..... .85
------
Total income from investment operations............. 1.61
------
LESS DISTRIBUTIONS:
Dividends from net investment income................ (.76)
------
Net Asset Value, End of Period....................... $15.14
======
Total Return/2/...................................... 11.62%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions).............. $ 157
Ratio of expenses to average net assets.............. .62%/3/,/4/
Ratio of net income to average net assets............ 5.66%/3/
Portfolio turnover rate.............................. 46.42%/3/
</TABLE>
--------
/1/ Commencement of operations.
/2/ This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
/3/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
/4/ Had Capital Research and Management Company not waived fees, the
fund's ratio of expenses to average net assets would have been
0.94% for the period.
INVESTMENT The fund's investment objective is to provide
OBJECTIVE shareholders with a high level of current income exempt
AND POLICIES from regular federal income taxes. In seeking to
achieve its investment objective, the fund may forego
The fund's goal is opportunities that would result in capital gains and
to provide you may accept prudent risks to capital value, in each case
with high current to take advantage of opportunities for higher current
income exempt from income. For example, the fund may purchase, at prices
regular federal above their principal amounts, bonds that provide a
income taxes. higher yield and interest income than current market
rates.
During periods of normal market conditions, at least
80% of the fund's total assets will be invested in tax-
exempt securities consisting primarily of state,
municipal and public authority bonds and notes, with an
emphasis on higher yielding, higher risk, lower rated
or unrated bonds.
Under normal market conditions, the fund will invest at
least 65% of its total assets in bonds that are rated A
or below by Moody's Investors Service, Inc. ("Moody's")
or Standard and Poor's Corporation ("S&P") or unrated
but are determined to be of comparable quality by the
fund's investment adviser, Capital Research and
Management Company. (For
3
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this purpose, bonds are considered to be any debt
securities having initial maturities in excess of one
year.) In addition, at least 50% of its total assets
will be invested in such securities that are rated Baa
or below by Moody's or BBB or below by S&P or unrated
but are determined to be of comparable quality.
Bonds that are rated Ba or below by Moody's or BB or
below by S&P or unrated but are determined to be of
comparable quality are commonly known as "junk" or
"high-yield, high-risk" bonds and typically are subject
to greater market fluctuations and risk of loss of
income and principal than are investments in lower
yielding, higher rated bonds. The fund may invest
without limitation in bonds rated as low as Ca by
Moody's or CC by S&P (or in unrated bonds that are
determined to be of comparable quality). In addition,
the fund may invest up to 5% of its total assets in
bonds rated C by Moody's or D by S&P (or in unrated
bonds that are determined to be of comparable quality).
The fund may invest without limitation in those tax-
exempt securities believed to pay interest constituting
an item of tax preference subject to alternative
minimum taxes; therefore, while the fund's
distributions from tax-exempt securities are not
subject to regular federal income tax, a portion or all
may be included in determining a shareholder's federal
alternative minimum tax. In addition, investments may
be made in short-term taxable obligations (generally,
securities with original or remaining maturities of one
year or less) when, for economic reasons, these
investments are considered advisable. (See "Certain
Securities and Investment Techniques--Temporary
Investments.")
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
CERTAIN RISKS OF INVESTING IN BONDS The market values of fixed-
SECURITIES AND income securities generally vary inversely with the
INVESTMENT level of interest rates--when interest rates rise,
TECHNIQUES their values will generally decline and vice versa. The
magnitude of these changes generally will be greater
Investing in this the longer the remaining maturity of the security.
fund involves Fluctuations in the value of the fund's investments
special risks. will be reflected in its net asset value per share
which will typically decline when interest rates rise.
High-yield, high-risk bonds (bonds rated Ba or BB or
lower or comparable unrated bonds) typically are
subject to greater market fluctuations and to greater
risk of loss of income and principal due to the lower
credit quality of the issuer than are higher rated
bonds. Their values tend to be more
4
<PAGE>
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sensitive to adverse economic changes than lower
yielding, higher rated bonds. In addition, it may be
more difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds. Bonds rated Ba or BB
or lower are considered speculative. Bonds rated C or D
are described by the ratings agencies as "having
extremely poor prospects of ever attaining any real
investment standing" or "in default and payment of
interest and/or repayment of principal is in arrears."
See the Appendix (on page 14) for a complete
description of the bond ratings.
The average monthly composition of the fund's portfolio
based on the higher of the Moody's or S&P ratings for
the fiscal year ended July 31, 1995 was as follows:
bonds--Aaa/AAA-1.70%; Aa/AA-1.05%; A/A-3.14%; Baa/BBB-
47.63%; Ba/BB-7.38%; and non-rated-29.03%; some or all
of these non-rated securities were determined to be
equivalent to securities rated by Moody's or S&P as
follows: Baa/BBB-10.82%; Ba/BB-13.41% and B/B-4.80%.
Money market instruments and cash made up 10.07% of the
fund's portfolio.
High-yield, high-risk bonds are very sensitive to
adverse economic changes. During an economic downturn
or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress that
would adversely affect their ability to service their
principal and interest payment obligations, to meet
projected financial goals, and to obtain additional
financing. If the issuer of a bond defaulted on its
obligations to pay interest or principal, the fund may
incur losses or expenses in seeking recovery of amounts
owed to it. In addition, periods of economic
uncertainty and changes can be expected to result in
increased volatility of market prices and yields of
high-yield, high-risk bonds and the fund's net asset
value. From time to time legislation has been proposed
that would limit the use of high-yield, high-risk bonds
in certain instances. The impact that such legislation,
if enacted, could have on the market for such bonds
cannot be predicted.
High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these
provisions in a declining interest rate market, the
fund would have to replace the security with a lower
yielding security, resulting in a decreased return for
investors. Conversely, a high-yield, high-risk bond's
value will decrease in a rising interest rate market,
as will the value of the fund's assets. If the fund
experiences unexpected net redemptions, this may force
it to sell high-yield, high-risk bonds without regard
to their investment merits, thereby decreasing the
asset base upon which expenses can be spread and
possibly reducing the fund's rate of return.
There may be little trading in the secondary market for
particular bonds, which may affect adversely the fund's
ability to value accurately or dispose
5
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of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of
high-yield, high-risk bonds, especially in a thin
market.
Capital Research and Management Company attempts to
reduce the risks described above through
diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic
trends and other relevant developments.
MUNICIPAL BONDS Municipal bonds are debt obligations
generally issued to obtain funds for various public
purposes, including the construction of public
facilities. Municipal bonds may be used to refund
outstanding obligations, to obtain funds for general
operating expenses or for public improvements or for
lending private institutions or corporations funds for
the construction of educational facilities, hospitals,
housing, industrial facilities or for other public
purposes. The interest on these obligations is
generally not included in gross income for federal
income tax purposes. (See "Additional Information
Concerning Taxes" in the statement of additional
information.) Opinions relating to the validity of
municipal bonds and to the exclusion from gross income
for federal income tax purposes and, where applicable,
the exemption from state and local income tax are
rendered by bond counsel to the respective issuing
authorities at the time of issuance.
The two principal classifications of municipal bonds
are general obligation and limited obligation (or
revenue) bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit
including, if available, its taxing power for the
payment of principal and interest. Issuers of general
obligation bonds include states, counties, cities,
towns and various regional or special districts. The
proceeds of these obligations are used to fund a wide
range of public facilities such as the construction or
improvement of schools, highways and roads, water and
sewer systems and facilities for a variety of other
public purposes. Limited obligation or revenue bonds
are secured by the net revenue derived from a
particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a
special tax or other special revenues. Revenue bonds
have been issued to fund a wide variety of revenue-
producing public capital projects including: electric,
gas, water and sewer systems; highways, bridges and
tunnels; port and airport facilities; colleges and
universities; hospitals; and convention, recreational
and housing facilities. Although the security behind
these bonds varies widely, many provide additional
security in the form of a debt service reserve fund
which may also be used to make principal and interest
payments on the issuer's obligations.
Revenue bonds also include, for example, pollution
control, health care and housing bonds, which, although
nominally issued by municipal
6
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authorities, are generally not secured by the taxing
power of the municipality but are secured by the
revenues of the authority derived from payments by the
private entity which owns or operates the facility
financed with the proceeds of the bonds. Obligations of
housing finance authorities have a wide range of
security features including reserve funds and insured
or subsidized mortgages, as well as the net revenues
from housing or other public projects. Most of these
bonds do not generally constitute the pledge of the
credit of the issuer of such bonds. The credit quality
of such revenue bonds is usually directly related to
the credit standing of the user of the facility being
financed or of an institution which provides a
guarantee, letter of credit, or other credit
enhancement for the bond issue. Lease revenue bonds or
certificates of participation in leases are another
type of limited obligation or revenue bond. These are
payable from annual lease rental payments from a state
or locality. Annual rental payments are payable to the
extent such rental payments are appropriated annually.
(Of course, these instruments are subject to the risk
that such funds will not be appropriated or that, as a
result of damage or destruction to the leased facility,
the lessee may be relieved of its obligation to make
lease payments.)
There are, in addition, a variety of hybrid and special
types of municipal obligations, such as zero coupon and
pre-refunded bonds (see the statement of additional
information) as well as numerous differences in the
security of municipal bonds, both within and between
the two primary classifications described above.
The amount of information about the financial condition
of an issuer of municipal bonds may not be as extensive
as that which is made available by corporations whose
equity securities are publicly traded.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT
AGREEMENTS The fund may purchase securities on a
delayed delivery or "when-issued" basis and enter into
firm commitment agreements (transactions whereby the
payment obligation and interest rate are fixed at the
time of the transaction but the settlement is delayed).
The fund as purchaser assumes the risk of any decline
in the value of the security beginning on the date of
the agreement or purchase. As the fund's aggregate
commitments under these transactions increase, the
opportunity for leverage similarly may increase. (See
the statement of additional information.)
VARIABLE AND FLOATING RATE OBLIGATIONS The fund may
invest in variable and floating rate obligations which
have interest rates that are adjusted at designated
intervals, or whenever there are changes in the market
rates of interest on which the interest rates are
based. The rate adjustment feature tends to limit the
extent to which the market value of the obligation will
fluctuate.
7
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MATURITY There are no restrictions on the maturity
composition of the portfolio, although it is
anticipated that the fund normally will be invested
substantially in intermediate-term (3 to 10 years to
maturity) and long-term (over 10 years to maturity)
securities.
ILLIQUID SECURITIES The fund will invest no more than
15% of its net assets, in aggregate, in illiquid
securities (generally securities that are not readily
marketable).
The fund may invest in municipal lease revenue
obligations, some of which may be illiquid subject to
the above described limitation. The fund may purchase,
without limitation, municipal lease revenue obligations
that are determined to be liquid by Capital Research
and Management Company. In determining whether these
securities are liquid, Capital Research and Management
Company will consider, among other things, the credit
quality and support, including strengths and weaknesses
of the issuer and lessees, the terms of the lease,
frequency and volume of trading and number of dealers.
CONCENTRATION OF INVESTMENTS The fund may invest more
than 25% of its assets in municipal obligations of
issuers located in the same state or in municipal
obligations of the same type which pay interest on
their obligations from revenue of similar projects such
as hospitals, electric utility systems, multi-family
housing, nursing homes, commercial facilities
(including hotels), or life care facilities. This may
make the fund more susceptible to similar economic,
political, or regulatory occurrences such as changes in
healthcare regulations, environmental considerations
related to construction, construction cost increases
and labor problems, failure of healthcare facilities to
maintain adequate occupancy levels, and inflation. As
the similarity in issuers increases, the potential for
fluctuation of the net asset value of shares of the
fund also increases. The fund will not invest 25% or
more of its assets in municipal securities of the same
project type issued by non-governmental entities.
TEMPORARY INVESTMENTS The fund may invest all or a
portion of its assets in short-term municipal
obligations of up to one year in maturity for temporary
defensive purposes. Generally, the income from all such
securities is exempt from federal income tax. (See
"Additional Information Concerning Taxes" in the
statement of additional information.) Further, a
portion of the fund's assets, which will normally be
less than 20%, may be held in cash or invested in high
quality taxable short-term securities of up to one year
in maturity. Such temporary investments may include:
(1) obligations of the U.S. Treasury; (2) obligations
of agencies and instrumentalities of the U.S.
Government; (3) money market instruments, such as
certificates of deposit issued by
8
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domestic banks, corporate commercial paper, and
bankers' acceptances; and (4) repurchase agreements
(which are subject to the limitations described in the
statement of additional information).
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how the segment will be invested
(within the limits provided by the fund's objective and
policies and by Capital Research and Management
Company's investment committee). In addition, Capital
Research and Management Company's research
professionals make investment decisions with respect to
a portion of the fund's portfolio. The primary
individual portfolio counselors for the fund are listed
below.
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YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
PORTFOLIO COUNSELORS YEARS OF EXPERIENCE AS (APPROXIMATE)
FOR PORTFOLIO COUNSELOR
AMERICAN PRIMARY TITLE(S) FOR AMERICAN WITH CAPITAL
HIGH-INCOME HIGH-INCOME RESEARCH AND
MUNICIPAL MUNICIPAL MANAGEMENT
BOND FUND BOND FUND COMPANY OR TOTAL
ITS AFFILIATES YEARS
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<S> <C> <C> <C> <C>
Neil L. Langberg Senior Vice President of Since the fund began 17 years 17 years
the fund. operations*
Vice President--
Investment Management
Group, Capital
Research and Management
Company
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Mark R. Macdonald Vice President--Invest- Since the fund began 1 year 10 years
ment Management Group, operations*
Capital Research and
Management Company
- ------------------------------------------------------------------------------------------------
John H. Smet Vice President, Capital Since the fund began 12 years 13 years
Research and operations*
Management Company
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</TABLE>
* THE FUND BEGAN OPERATIONS ON SEPTEMBER 26, 1994
9
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INVESTMENT The fund may from time to time compare its investment
RESULTS results to various indices or other mutual funds in re-
ports to shareholders, sales literature and advertise-
The fund's total ments. The results may be calculated on a total return
return over its and/or yield basis for various periods, with or without
lifetime sales charges. Results calculated without a sales charge
(September 26, will be higher. Total returns assume the reinvestment of
1994 through June all dividends and capital gain distributions.
30, 1995)
was 5.40% The fund's yield and the average total return are calcu-
(assuming the lated in accordance with Securities and Exchange Commis-
maximum sales sion requirements which provide that the maximum sales
charge was paid) charge be reflected. The fund's yield for the 30-day pe-
and 10.64% riod ended June 30, 1995, was 5.76%. The fund's total
(assuming no sales return over its lifetime, as of June 30, 1995, was 5.40%
charge was paid). (assuming the maximum sales charge was paid) and 10.64%
(assuming no sales charge was paid). Of course, past re-
sults are not an indication of future results. Further
information regarding the fund's investment results is
contained in the fund's annual report which may be ob-
tained without charge by writing to the Secretary of the
fund at the address indicated on the cover of this pro-
spectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS The fund declares dividends
DISTRIBUTIONS from its net investment income daily and distributes the
AND TAXES accrued dividends to shareholders each month. Dividends
begin accruing one day after payment for shares is
Income received by the fund or American Funds Service Company.
distributions are All capital gains, if any, are distributed annually,
made each month. usually in December. When a capital gain is declared,
the net asset value per share is reduced by the amount
of the payment.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. For any fiscal year in which the fund so
qualifies and distributes to shareholders all of its net
investment income and any net capital gains, the fund
itself is relieved of federal income tax.
As a regulated investment company, the fund is permitted
to pass through to its shareholders federally tax-exempt
income subject to certain requirements which the fund
intends to satisfy.
The fund may invest in obligations which pay interest
that is subject to state and local taxes when
distributed by the fund even though the interest, if
realized directly, would be exempt from these taxes. For
example, a state may require that a fund hold a
specified percentage of that state's bonds in order for
the fund to pass through interest paid on these bonds to
its shareholders on a state tax-exempt basis, whereas if
the bonds were held directly by shareholders the
interest would be exempt from state tax. In addition, to
the extent shareholders receive dividends derived from
taxable interest income or distributions of capital
gains, these dividends or distributions will not be
exempt from federal (or state or local) income tax.
10
<PAGE>
- -------------------------------------------------------------------------------
You will be advised as to the tax consequences of
dividends and capital gain distributions. You are
required by the Internal Revenue Code to report to the
federal government all fund exempt-interest dividends
(and all other tax-exempt interest).
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE FUND THAT THE TAXPAYER IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO
ITS RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE FUND TO
WITHHOLD 31% FROM ANY DIVIDENDS (OTHER THAN TAX-EXEMPT
DIVIDENDS) AND/OR REDEMPTIONS (INCLUDING EXCHANGE
REDEMPTIONS). Amounts withheld are applied to your
federal tax liability; a refund may be obtained from
the Service if withholding results in overpayment of
taxes.
This is a brief summary of some of the tax laws that
affect your investment in the fund. Please see the
statement of additional information and your tax
adviser for further information.
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end diversified management investment company, was
AND organized as a Maryland corporation on June 14, 1994.
MANAGEMENT The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid certain fees for services rendered
Group, which is to the fund as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most experienced effect for the fund. Shareholders have one vote per
investment share owned and, at the request of the holders of at
advisers. least 10% of the shares, the fund will hold a meeting
at which any member of the board could be removed by a
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rate of 0.30% on the first $60 million of
11
<PAGE>
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average net assets, plus 0.21% on net assets over $60
million, plus 3% of gross investment income. Assuming
net assets of $200 million and gross investment income
levels of 3%, 4%, 5%, 6% and 7%, management fees would
be 0.33%, 0.36%, 0.39%, 0.42% and 0.45%, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its affili-
ated companies have adopted a personal investing policy
that is consistent with the recommendations contained
in the report dated May 9, 1994 issued by the Invest-
ment Company Institute's Advisory Group on Personal In-
vesting. (See the statement of additional information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated
commission, although the price of the security usually
includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the
dealer, generally referred to as a concession or
discount. On occasion, securities may be purchased
directly from an issuer, in which case no commissions
or discounts are paid.
Subject to the above policy, when two or more brokers
are in a position to offer comparable prices and
executions, preference may be given to brokers that
have sold shares of the fund or have provided
investment research, statistical, and other related
services for the benefit of the fund and/or of other
funds served by Capital Research and Management
Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors is located
at 333 South Hope Street, Los Angeles, CA 90071-1447;
135 South State College Boulevard, Brea, CA 92621-5804;
8000 IH-10 West, San Antonio, TX 78230-3874; 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240-
4319 and 5300 Robin Hood Road, Norfolk, VA 23513-2407.
Telephone conversations with American Funds
Distributors may be recorded or monitored for
verification, recordkeeping and quality assurance
purposes.
12
<PAGE>
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PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the fund under
the plan may not exceed 0.30% of its average net assets
annually (0.25% of which may be for service fees). (See
"Purchasing Shares--Sales Charges" below.)
TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions. It was paid a fee of $41,000 for the
fiscal year ended July 31, 1995. Telephone
conversations with American Funds Service Company may
be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE
AREA ADDRESS STATES SERVED
--------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA
Fax: 714/671-7080 and outside the U.S.
--------------------------------------------------------
CENTRAL P.O. Box 659522 AR, CO, IA, KS, LA,
- WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX and WY
--------------------------------------------------------
CENTRAL P.O. Box 6007 AL, IL, IN, KY, MI,
- EAST Indianapolis, IN 46206-6007 MS, OH, TN and WI
Fax: 317/735-6620
--------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and
Washington, D.C.
--------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
--------------------------------------------------------
[LOGO OF UNITED STATES MAP]
West (light grey); Central-West (white); Central-East
(dark grey), East (blue)
13
<PAGE>
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APPENDIX Moody's Investors Service, Inc. rates the long-term
Description of debt securities issued by various entities in
bond ratings. categories ranging from "Aaa" to "C," according to
quality as described below.
"Aaa -- Best quality. These securities carry the
smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are
protected by a large, or by an exceptionally stable
margin and principal is secure. While the various
protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the
fundamentally strong position of such shares."
"Aa -- High quality by all standards. They are rated
lower than the best bond because margins of protection
may not be as large as in Aaa securities, fluctuation
of protective elements may be of greater amplitude, or
there may be other elements present which make the
long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds
possess many favorable investment attributes. Factors
giving security to principal and interest are
considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the
future."
"Baa -- Medium grade obligations. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative
characteristics as well."
"Ba -- Have speculative elements; future cannot be
considered as well assured. The protection of interest
and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times
over the future. Bonds in this class are characterized
by uncertainty of position."
"B -- Generally lack characteristics of the desirable
investment; assurance of interest and principal
payments or of maintenance of other terms of the
contract over any long period of time may be small."
"Caa -- Of poor standing. Issues may be in default or
there may be present elements of danger with respect to
principal or interest."
"Ca -- Speculative in a high degree; often in default
or having other marked shortcomings."
"C -- Lowest rated class of bonds; can be regarded as
having extremely poor prospects of ever attaining any
real investment standing."
14
<PAGE>
- -------------------------------------------------------------------------------
Standard & Poor's Corporation rates the long-term debt
securities issued by various entities in categories
ranging from "AAA" to "D," according to quality as
described below.
"AAA -- Highest rating. Capacity to pay interest and
repay principal is extremely strong."
"AA -- High grade. Very strong capacity to pay interest
and repay principal. Generally, these bonds differ from
AAA issues only in a small degree."
"A -- Have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible
to the adverse effects of change in circumstances and
economic conditions, than debt in higher rated
categories."
"BBB -- Regarded as having adequate capacity to pay
interest and repay principal. These bonds normally
exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest
and repay principal than for debt in higher rated
categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as
predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation.
While such debt will likely have some quality and
protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions."
"C1 -- Reserved for income bonds on which no interest
is being paid."
"D -- In default and payment of interest and/or
repayment of principal is in arrears."
15
<PAGE>
[LOGO OF THE AMERICAN FUNDS SHAREHOLDER GUIDE]
PURCHASING METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
SHARES ---------------------------------------------------------
See "Investment $50 minimum (except
Your investment Minimums and Fund where a lower
dealer can help Numbers" for minimum is noted
you establish your initial under "Investment
account--and help investment Minimums and Fund
you add to it minimums. Numbers").
whenever you like. --------------------------------------------------------
By Visit any Mail directly to
contacting investment dealer your investment
your who is registered dealer's address
investment in the state printed on your
dealer where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
--------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
--------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
--------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
SHARE PRICE Shares are purchased at the next offering
price after the order is received by the fund or
American Funds Service Company. In the case of orders
sent directly to the fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The
current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will remain
constant at $1.00 based on the funds' current practice
of valuing their shares on the basis of the penny-
rounding method in accordance with rules of the
Securities and Exchange Commission.
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost or
destroyed certificates.
16
<PAGE>
- -------------------------------------------------------------------------------
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT
AVAILABLE FOR THE MONEY MARKET FUNDS.
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>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R).............................. $1,000 02
American Balanced Fund(R).................. 500 11
American Mutual Fund(R).................... 250 03
Capital Income Builder(R).................. 1,000 12
Capital World Growth and
Income Fund(SM)........................... 1,000 33
EuroPacific Growth Fund(R)................. 250 16
Fundamental Investors(SM).................. 250 10
The Growth Fund of America(R).............. 1,000 05
The Income Fund of America(R).............. 1,000 06
The Investment Company of America(R)....... 250 04
The New Economy Fund(R).................... 1,000 14
New Perspective Fund(R).................... 250 07
SMALLCAP World Fund(SM).................... 1,000 35
Washington Mutual Investors Fund(SM)....... 250 01
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
BOND FUNDS
American High-Income Municipal
Bond Fund(SM)............................. $1,000 40
American High-Income Trust(R).............. 1,000 21
The Bond Fund of America(SM)............... 1,000 08
Capital World Bond Fund(R)................. 1,000 31
Intermediate Bond Fund of America(R)....... 1,000 23
Limited Term Tax-Exempt
Bond Fund of America(SM).................. 1,000 43
The Tax-Exempt Bond Fund of America(SM).... 1,000 19
The Tax-Exempt Fund of California(R)*...... 1,000 20
The Tax-Exempt Fund of Maryland(R)*........ 1,000 24
The Tax-Exempt Fund of Virginia(R)*........ 1,000 25
U.S. Government Securities Fund(SM)........ 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(R).... 2,500 09
The Tax-Exempt Money Fund of America(SM)... 2,500 39
The U.S. Treasury Money Fund of America(SM). 2,500 49
</TABLE>
--------
*Available only in certain states.
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).
SALES CHARGES 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.)
17
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000................. 6.10% 5.75% 5.00%
$50,000 but less than $100,000.... 4.71 4.50 3.75
BOND FUNDS
Less than $25,000................. 4.99 4.75 4.00
$25,000 but less than $50,000..... 4.71 4.50 3.75
$50,000 but less than $100,000.... 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000... 3.63 3.50 2.75
$250,000 but less than $500,000... 2.56 2.50 2.00
$500,000 but less than $1,000,000. 2.04 2.00 1.60
$1,000,000 or more................ none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1
million or more, for purchases by any defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees (paid pursuant to the
fund's plan of distribution), and for purchases made at
net asset value by certain retirement plans of
organizations with collective retirement plan assets of
$100 million or more as set forth in the statement of
additional information (paid by American Funds
Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will provide
additional promotional incentives to dealers. Currently
these incentives are limited to the top one hundred
dealers who have sold shares of the fund or other funds
in The American Funds Group. These incentive payments
will be based on a pro rata share of a qualifying
dealer's sales.
Any defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees 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 within one year of
the purchase. (See "Redeeming Shares--Contingent
Deferred Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization and Management--
18
<PAGE>
- -------------------------------------------------------------------------------
Plan of Distribution.") 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 or retired registered
representatives or full-time employees and their
spouses and minor children of dealers having sales
agreements with American Funds Distributors and plans
for such persons; (3) companies exchanging securities
with the fund through a merger, acquisition or exchange
offer; (4) trustees or other fiduciaries purchasing
shares for certain retirement plans of organizations
with retirement plan assets of $100 million or more;
(5) insurance company separate accounts; (6) accounts
managed by subsidiaries of The Capital Group Companies,
Inc.; and (7) The Capital Group Companies, Inc., its
affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to
these persons and organizations due to anticipated
economies in sales effort and expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for other accounts and may
not be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
19
<PAGE>
- -------------------------------------------------------------------------------
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares--Statement of Intention.")
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF THE
METHODS DESCRIBED ABOVE.
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular monthly
SERVICES or quarterly investments through automatic charges to
your bank account. Once a plan is established, your ac-
The fund offers count will normally be charged by the 10th day of the
you a valuable month during which an investment is made (or by the
array of services 15th day of the month in the case of any retirement
designed to plan for which Capital Guardian Trust Company--another
increase the affiliate of The Capital Group Companies, Inc.--acts as
convenience and trustee or custodian).
flexibility of
your investment-- AUTOMATIC REINVESTMENT Dividends and capital gain dis-
services you can tributions are reinvested in additional shares at no
use to alter your sales charge unless you indicate otherwise on the
investment program account application. You also may elect to have divi-
as your needs and dends and/or capital gain distributions paid in cash by
circumstances informing the fund, American Funds Service Company or
change. your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
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
20
<PAGE>
- -------------------------------------------------------------------------------
charge generally applies. However, exchanges of shares
from the money market funds are subject to applicable
sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange
from a fund having a sales charge, or by reinvestment
or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for
which Capital Guardian Trust Company serves as trustee
may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simul-
taneously at the share prices next determined after the
exchange order is received. (See "Purchasing Shares--
Share Price.") 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 pre-
ceding 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 re-
ceiving 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 You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled withdrawals or $1,200, whichever is
greater. However, additional investments in a
withdrawal account may be inadvisable due to sales
charges and tax liabilities.
THESE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE
FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND MAY BE
TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company.
21
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
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.
--------------------------------------------------------
REDEEMING By writing Send a letter of instruction
SHARES to American specifying the name of the fund, the
Funds Service number of shares or dollar amount to
You may take money Company (at be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate share certificates you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") 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 If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
--------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the conditions
noted in this
section and
in "Telephone
Redemptions
and Exchanges"
below)
--------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
--------------------------------------------------------
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 10
DAYS.
22
<PAGE>
- -------------------------------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), fax or
telegraph redemption and/or exchange options, you agree
to hold the fund, American Funds Service Company, any
of its affiliates or mutual funds managed by such
affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may reinstate them at any time also 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.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. 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
401(k) plan; for distributions from 403(b) plans or
IRAs due to death, disability or attainment of age 59
1/2; 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.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without sales charge (any contingent deferred sales
charge paid will be credited to your
23
<PAGE>
- -------------------------------------------------------------------------------
account) in any fund in The American Funds Group. Send
a written request and a check to American Funds Service
Company within 90 days after the date of the redemption
or distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for the shares may not be taken into
account when you calculate your gain or loss on that
redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT You may invest in the funds through various retirement
PLANS plans including the following plans for which Capital
Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[LOGO OF This prospectus has been printed on
RECYCLED PAPER] recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
24
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
Part B
Statement of Additional Information
October 1, 1995
This document is not a prospectus but should be read in conjunction with
the current prospectus dated October 1, 1995 of American High-Income Municipal
Bond Fund, Inc. (the "fund"). The prospectus may be obtained from your
investment dealer or financial planner or by writing to the fund at the
following address:
American High-Income Municipal Bond Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Table of Contents
<TABLE>
<CAPTION>
ITEM Page No.
<S> <C>
Description of Securities and Investment Techniques 1
Investment Restrictions 5
Fund Officers and Directors 8
Management 11
Dividends and Distributions 14
Additional Information Concerning Taxes 14
Purchase of Shares 17
Shareholder Account Services and Privileges 19
Execution of Portfolio Transactions 19
General Information 20
Investment Results 21
Financial Statements 23
</TABLE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Objective and Policies."
PORTFOLIO TRADING - The fund intends to engage in portfolio trading when it is
believed 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.
ZERO COUPON BONDS - Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the securities begin paying
current interest. They are issued and traded at a discount from their face
amount or par value, which discount varies depending on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the
security, and the perceived credit quality of the issuer.
PRE-REFUNDED BONDS - From time to time, a municipality may refund a bond that
it has already issued prior to the original bond's call date by issuing a
second bond, the proceeds of which are used to purchase securities. The
securities are placed in an escrow account pursuant to an agreement between the
municipality and an independent escrow agent. The principal and interest
payments on the securities are then used to pay off the original bondholders.
For the purposes of diversification, pre-refunded bonds will be treated as
governmental issues.
VARIABLE AND FLOATING RATE OBLIGATIONS - The interest rates payable on certain
securities in which the fund may invest may not be fixed but may fluctuate
based upon changes in market rates. 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 only ensure 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.
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 a loan of its
portfolio securities and obtain the return of the loaned securities. The fund
will receive any interest paid on the loaned securities and a fee or a portion
of the interest earned on the collateral. The fund will limit its loans of
portfolio securities to an aggregate of 33$% of the value of its total assets,
taken at the time any such loan is made.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS - The fund may
purchase securities on a delayed delivery or "when-issued" basis and enter into
firm commitment agreements (transactions whereby the payment obligation and
interest rate are fixed at the time of the transaction but the settlement is
delayed). The fund as purchaser assumes the risk of any decline in value of
the security beginning on the date of the agreement or purchase. 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 leveraging purposes, and will
identify liquid assets such as cash, U.S. Government securities or other
appropriate high-grade debt obligations 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 holdings of cash and securities
that do not fluctuate in value (such as short-term money market instruments),
the fund temporarily will be in a leveraged position (in other words, it will
have an amount greater than its net assets subject to market risk). Should the
fund be in a leveraged position during a period of declining bond prices,
greater depreciation of its net assets would likely occur than were it not in
such a position. The fund will not borrow money to settle these transactions
and, therefore, will liquidate other portfolio securities in advance of
settlement if necessary to generate addetional cash to meet its obligations
thereunder.
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 Capital
Research and Management Company. If the seller under the repurchase agreement
defaults, the fund may incur a loss if the value of the collateral securing the
repurchase agreement has declined and may incur disposition costs in connection
with liquidating the collateral. If bankruptcy proceedings are commenced with
respect to the seller, liquidation of the collateral by the fund may be delayed
or limited.
PORTFOLIO MANAGEMENT - In seeking to achieve the fund's objectives, the
Investment Adviser causes the fund to purchase securities that it believes
represent the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the economy, movements in
the general level and term structure of interest rates, political developments,
and variations in the supply of funds available for investment in the
tax-exempt market relative to the demand for the funds placed upon it. These
latter factors change continuously and should be met with a dynamic, responsive
approach to the investment process. Some of the more important portfolio
management techniques that are utilized by the Investment Adviser are set forth
below.
ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Longer term securities ordinarily yield more than shorter term
securities but are subject to greater and more rapid price fluctuation.
Keeping in mind the fund's objective of producing a high level of current
income, the Investment Adviser will increase the fund's exposure to this price
volatility only when it appears likely to increase current income without undue
risk to capital.
ISSUE CLASSIFICATION - Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which
they were issued, often tend to trade at different yields. These yield
differentials tend to fluctuate in response to political and economic
developments, as well as temporary imbalances in normal supply/demand
relationships. The Investment Adviser monitors these fluctuations closely, and
will attempt to adjust portfolio concentrations in various issue
classifications according to the value disparities brought about by these yield
relationship fluctuations.
QUALITY - Securities issued for similar purposes and with the same general
maturity characteristics, but which vary according to the creditworthiness of
their respective issuers, tend to trade at different yields. These yield
differentials also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced by these
yield relationship fluctuations.
The Investment Adviser believes that, in general, the market for municipal
bonds is less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the fund to make purchases and sales of securities
in the foregoing manner may, at any particular time and with respect to any
particular securities, be limited (or non-existent.)
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.
INVESTMENT RESTRICTIONS
The fund has adopted the following fundamental policies and investment
restrictions which may not be changed without a majority vote of its
outstanding shares. Such majority is defined by the 1940 Act as the vote of
the lesser of (i) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (ii) more than 50% of the outstanding
voting securities. All percentage limitations expressed in the following
investment restrictions are measured immediately after and giving effect to the
relevant transaction. These restrictions provide that the fund may not:
1. With respect to 75% of the fund's total assets, purchase the security of
any issuer (other than securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities) if, as a result, (a) more than 5% of the
fund's total assets would be invested in securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer. For the purpose of this restriction, the fund will regard each state,
each political subdivision, agency or instrumentality of such state, each
multi-state agency of which such state is a member, and each public authority
which issues industrial development bonds on behalf of a private entity as a
separate issuer;
2. Invest in companies for the purpose of exercising control or management;
3. Purchase or sell real estate (including real estate limited partnerships)
unless acquired as a result of ownership of securities or other instruments
(but this shall not prevent the fund from investing in securities or other
instruments backed by real estate or securities of companies engaged in the
real estate business);
4. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments or engage in futures transactions;
5. Engage in the business of underwriting securities of other issuers, except
to the extent that the purchase or disposal of an investment position may
technically constitute the fund as an underwriter as that term is defined under
the Securities Act of 1933;
6. Make loans in an aggregate amount in excess of 33$% of the value of the
fund's total assets, taken at the time any loan is made, provided that the
purchase of debt securities pursuant to the fund's investment objective and
entering into repurchase agreements maturing in seven days or less shall not be
deemed loans for the purposes of this restriction and that loans of portfolio
securities may be made;
7. Issue senior securities, except as permitted under the Investment Company
Act of 1940;
8. Borrow money, except from banks for temporary or emergency purposes not to
exceed one-third of the value of the fund's total assets. Moreover, 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;
9. Pledge, or hypothecate any of its assets, except in an amount up to
one-third of the value of its total assets, but only to secure borrowings for
temporary or emergency purposes;
10. Invest in interests in oil, gas, or other mineral exploration or
development programs (or leases);
11. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (this restriction does not prevent the fund from investing in
securities with put and call features);
12. Invest 25% or more of its assets in municipal securities of the same
project type issued by non-governmental entities. However, the fund may invest
more than 25% of its assets in municipal obligations of issuers located in the
same state or in municipal obligations of the same type, including without
limitation the following: general obligations of states and localities; lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public
housing authorities; or industrial development or pollution control bonds
issued for hospitals, electric utility systems, life care facilities or other
purposes. As a result, the fund may be more susceptible to adverse economic,
political, or regulatory occurrences affecting a particular category of
issuers. As the concentration in the securities of a particular category of
issuer increases, the potential for fluctuation in the value of the fund's
shares also increases; nor
13. 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.
For the purposes of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds that are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the bonds as
described, the most significant of which is the ultimate source of funds for
the payment of principal and interest on such bonds.
NON-FUNDAMENTAL POLICIES - The fund has adopted the following non-fundamental
investment policies, which may be changed by action of the Board of Directors
without shareholder approval:
1. The fund does not currently intend to lend portfolio securities. However,
if such action is authorized by the Board of Directors, loans of portfolio
securities as described under "Loans of Portfolio Securities" shall be made in
accordance with the terms and conditions therein set forth and consistent with
fundamental investment restriction #6;
2. The fund will not invest more than 15% of the value of its net assets in
securities which are not readily marketable (including repurchase agreements
maturing in more than seven days), nor invest more than 5% of its net assets in
restricted securities (excluding Rule 144A securities);
3. The fund will not invest more than 15% of its total assets in the
securities of issuers (excluding securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities) which together with any
predecessors have a record of less than three years continuous operation;
4. The fund does not currently intend to purchase or retain the securities of
any issuer, if those individual officers and Directors of the fund, its
investment adviser, or principal underwriter who individually own more than 1/2
of 1% of the securities of such issuer, together own more than 5% of such
issuer's securities;
5. The fund does not currently intend to invest in the securities of other
registered management investment companies, except in connection with a merger,
consolidation, acquisition, reorganization, or in connection with the
implementation of any deferred compensation plan as adopted by the Board of
Directors;
6. The fund will not invest more than 5% of its net assets, valued at the
lower of cost or market at the time of purchase, in warrants, including not
more than 2% of such net assets in warrants that are not listed on a major
stock exchange. However, warrants acquired in units or attached to securities
may be deemed to be without value for the purpose of this restriction; and
7. The fund does not currently intend to purchase securities in the event its
borrowings exceed 5% of total assets.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) DURING AGGREGATE TOTAL COMPENSATION TOTAL NUMBER
REGISTRANT PAST 5 YEARS (POSITIONS WITHIN THE COMPENSATION FROM ALL FUNDS OF FUND
ORGANIZATIONS LISTED MAY HAVE (INCLUDING MANAGED BY CAPITAL BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY DEFERRED RESEARCH AND WHICH
COMPENSATION/1/) FOR MANAGEMENT COMPANY/2/ DIRECTOR
THE PERIOD FOR THE PERIOD SERVES/2/
SEPTEMBER 26, 1994 SEPTEMBER 26, 1994 TO
TO JULY 31, 1995 JULY 31, 1995
<S> <C> <C> <C> <C> <C>
++ H. Frederick Christie Director Private Investor. The Mission $1,400/4/ $142,891 18
P.O. Box 144 Group (non-utility holding
Palos Verdes Estates, CA Company, subsidiary of Southern
90274 California Edison Company),
Age: 62 former President and Chief
Executive Officer
Diane C. Creel Director Chairwoman, CEO and President, $800 $28,019 12
100 W. Broadway The Earth Technology Corporation
Suite 5000
Long Beach, CA 90802
Age: 46
Martin Fenton, Jr. Director Chairman, Senior Resource Group $1,400 $105,628 16
4350 Executive Drive (management of senior living
Suite 101 centers)
San Diego, CA 92121-2116
Age: 60
Leonard R. Fuller Director President, Fuller & Company, Inc. $800 $28,664 12
4337 Marina City Drive (financial management consulting
Suite 841 ETN firm)
Marina del Rey, CA 90292
Age: 49
+* Abner D. Goldstine President, Capital Research and Management none/4/ none/4/ 12
Age: 65 PEO and Company, Senior Vice President
Director and Director
+** Paul G. Haaga, Jr. Chairman of Capital Research and Management none/4/ none/4/ 14
Age: 46 the Board Company, Senior Vice President
and Director
Herbert Hoover III Director Private Investor $1,400 $61,573 14
200 S. Los Robles Avenue
Suite 520
Pasadena, CA 91101-2431
Age: 67
Richard G. Newman Director Chairman, President and CEO, $1,400/4/ $40,559 12
3250 Wilshire Boulevard AECOM Technology Corporation
Los Angeles, CA 90010-1599 (architectural engineering)
Age: 60
Peter Valli Director Chairman and CEO, BW/IP $1,400/4/ $38,650 12
200 Oceangate Boulevard International Inc. (industrial
Suite 900 manufacturing)
Long Beach, CA 90802
Age: 68
</TABLE>
+ Directors who are considered "interested persons" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of directors of the parent company of a registered broker-dealer.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071//
/1/ Amounts may be deferred by eligible directors 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 Director.
/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 Directors is as
follows: Martin Fenton, Jr. ($1,549), Richard G. Newman ($1,626) and Peter C.
Valli ($1,561). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
Director.
/4/ Paul G. Haaga, Jr. and Abner D. Goldstine are affiliated with the
Investment Adviser and, accordingly, receive no compensation from the Fund.
OFFICERS
*** Neil L. Langberg, SENIOR VICE PRESIDENT. Capital Research and Management
Company, Vice President - Investment Management Group
** Mary C. Cremin, VICE PRESIDENT AND TREASURER. Capital Research and
Management Company, Senior Vice President - Fund Business Management Group
* Michael J. Downer, VICE PRESIDENT. Capital Research and Management Company,
Senior Vice President - Fund Business Management Group
* Julie F. Williams, SECRETARY. Capital Research and Management Company,
Vice President - Fund Business Management Group
* Kimberly S. Verdick, ASSISTANT SECRETARY. Capital Research and Management
Company, Compliance Associate - Fund Business Management Group
** Anthony W. Hynes, Jr., ASSISTANT TREASURER. Capital Research and Management
Company, Vice President - Fund Business Management Group
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92621.
*** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
No compensation is paid by the fund to any officer or Director who is a
director or officer of the Investment Adviser. The fund pays annual fees of
$1,200 to Directors who are not affiliated with the Investment Adviser. No
fees are paid for attendance at Board of Directors meetings or meetings of a
committee of the Board of Directors. The Directors may elect, on a voluntary
basis, to defer all or a portion of their fees through a deferred compensation
plan in effect for the fund. The fund also reimburses certain expenses of the
Directors who are not affiliated with the Investment Adviser.
MANAGEMENT
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have years of investment experience. 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.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations as well as schools, colleges, foundations and
other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreement (the "Agreement"), between the fund and the Investment Adviser will
continue in effect until September 25, 1996, unless sooner terminated, and may
be renewed from year to year thereafter provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors or by the
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Directors who are
not parties to the 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).
For the purposes of such computations under the Agreement, the fund's gross
investment income does not reflect any net realized gains or losses on the sale
of portfolio securities but does include original-issue discount as defined for
federal income tax purposes.
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform the executive and related administrative, clerical
and bookkeeping functions of the fund, provides suitable office space,
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 directors unaffiliated with the Investment Adviser; association dues;
and costs of stationery and forms prepared exclusively for the fund.
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 funds' shares are being offered for sale. Only one state
(California) continues to impose expense limitations on funds registered for
sale therein. The California provision currently limits annual expenses to the
sum of 2-1/2% of the first $30 million of average net assets, 2% of the next
$70 million and 1-1/2% of the remaining average net assets. Rule 12b-1
distribution expenses would be excluded from this limit. 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 has agreed to bear any fund expenses (with the
exception of interest, taxes, brokerage costs and extraordinary expenses such
as litigation and acquisitions) in excess of 0.90% of the fund's average net
assets per annum, subject to reimbursement by the fund, during a period which
will terminate at the earlier of (i) such time as no reimbursement has been
required for a period of 12 consecutive months, provided no advances are
outstanding, or (ii) October 1, 2004. Each month, to the extent the fund owes
money to the Investment Adviser pursuant to this provision of the Agreement and
the fund's annualized expense ratio for the month is below 0.90%, the fund will
reimburse the Investment Adviser until the fund's annualized expense ratio
equals 0.90% or the debt is repaid, whichever comes first. During the period,
the Investment Adviser's total fees amounted to $403,000. Voluntary fee
waivers amounted to $306,000 for the period ended July 31, 1995.
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 (see "Principal Underwriter" in the prospectus). 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 period ended July 31,
1995 amounted to $266,000 after allowance of $2,846,000 to dealers.
As required by rule 12b-1 the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors and separately by a
majority of the Directors who are not interested persons of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by a vote
of a majority of the outstanding voting securities of the fund. The officers
and Directors 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 Directors who
are not "interested persons" of the fund shall be committed to the discretion
of the Directors who are not "interested persons" during the existence of the
Plan. The Plan is reviewed quarterly and must be renewed annually by the Board
of Directors.
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 Directors 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. Only expenses incurred during the preceding 12
months and accrued while the Plan is in effect may be paid by the fund. During
the period, the fund paid $260,000 under the plan as compensation to dealers.
As of July 31, 1995, accrued and unpaid distribution expenses were $11,000.
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 with 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 AND DISTRIBUTIONS
DIVIDENDS AND DISTRIBUTIONS - The fund declares dividends from its net
investment income daily and distributes the accrued dividends to shareholders
each month. The percentage of the distribution that is tax-exempt may vary
from year to year. For the purpose of calculating dividends, daily net
investment income of the fund consists of: (a) all interest income accrued on
the fund's investments including any original issue discount or market premium
ratably amortized to the date of maturity or determined in such other manner as
may be deemed appropriate; minus (b) all liabilities accrued, including
interest, taxes and other expense items, amounts determined and declared as
dividends or distributions and reserves for contingent or undetermined
liabilities, all determined in accordance with generally accepted accounting
principles.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and local
tax considerations generally affecting the fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
fund or its shareholders, and the discussion here and in the fund's Trustee is
not intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax situations.
The fund is not intended to constitute a balanced investment program and is
not designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the fund would
generally not be suitable for tax-exempt institutions or tax-deferred
retirement plans (e.g., plans qualified under Section 401 of the Internal
Revenue Code, Keogh-type plans and individual retirement accounts.) Such
retirement plans would not gain any benefit from the tax-exempt nature of the
fund's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, the fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Under Subchapter M, if the fund
distributes within specified times at least 90% of its taxable and tax-exempt
net investment income, it will be taxed only on that portion, if any, which it
retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; (b) derive less than 30% of its gross income from the gains on sale
or other disposition of stock or securities held less than three months; and
(c) diversify its holdings so that, at the end of each fiscal quarter, (i) at
least 50% of the market value of the fund's assets is represented by cash, cash
items, U.S. Government securities, securities of other regulated investment
companies, and other securities which must be limited, in respect of any one
issuer to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies) or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the aggregate
value of the fund's assets must consist of tax-exempt obligations. Not later
than 60 days after the close of its taxable year, the fund will notify each
shareholder of the portion of the dividends paid by the fund to the shareholder
with respect to such taxable year which constitutes exempt-interest dividends.
The aggregate amount of dividends so designated cannot, however, exceed the
excess of the amount of interest excludable from gross income from tax under
Section 103 of the Code received by the fund during the taxable year over any
amounts disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if the fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, any loss on the sale or exchange
of such share will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually. The
fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held fund shares. Such distributions
will be designated as a capital gains distribution in a written notice, in the
form of the fund's annual report, mailed by the fund to shareholders not later
than 60 days after the close of the fund's taxable year. If a shareholder
receives a designated capital gain distribution (treated by the shareholder as
a long-term capital gain) with respect to any fund share and such fund share is
held for six months or less, then (unless otherwise disallowed) any loss on the
sale or exchange of that fund share will be treated as long-term capital loss
to the extent of the designated capital gain distribution. The fund also may
make a distribution of net realized long-term capital gains near the end of the
calendar year to comply with certain requirements of the Code. Gain recognized
on the disposition of a debt obligation (including tax-exempt obligations
purchased after April 30, 1993) purchased by the fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the fund held the debt obligation.
Similarly, while the fund does not expect to earn any significant investment
company taxable income, in the event that any taxable income is earned by the
fund it will be distributed. In general, the fund's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The fund would be taxed on any
undistributed investment company taxable income. Since any such income will be
distributed, it will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
The Code imposes limitations on the use and investment of the proceeds of
state and local governmental bonds and upon other funds of the issuers of such
bonds. These limitations must be satisfied on a continuing basis to maintain
the exclusion from gross income of interest on such bonds. These provisions of
the Code generally apply to bonds issued after August 15, 1986. Bond counsel
qualify their opinions as to the federal tax status of new issues of bonds by
making such opinions contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date
the bonds were issued.
In most cases, the interest on "private activity" bonds as defined under the
Code is an item of tax preference subject to the alternative minimum tax
("AMT") on corporations and individuals. The fund may invest without
limitation in "private activity" bonds. As of the date of this statement of
additional information, individuals are subject to an AMT at a maximum marginal
rate of 28% and corporations at a rate of 20%. Shareholders will not be
permitted to deduct any of their share of fund expenses in computing
alternative minimum tax income. With respect to corporate shareholders of the
fund, all interest on municipal bonds and other tax-exempt obligations,
including exempt-interest dividends paid by the fund, is included in adjusted
current earnings in calculating federal alternative minimum taxable income, and
may also affect corporate federal "environmental tax" liability.
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 during
the periods described above. The fund intends to distribute net investment
income and net capital gains so as to minimize or avoid the excise tax
liability.
If for any taxable year the fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and may
be eligible for the dividends- received deduction for corporations. Under
normal circumstances, no part of the distributions to shareholders by the fund
is expected to qualify for the dividends-received deduction allowed to
corporate shareholders.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purposes of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other funds. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
As of the date of this statement of additional information, the maximum
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 gains is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gains is 35%. However, to eliminate the benefit of
lower marginal corporate income tax rates, corporations which have taxable
income in excess of $100,000 for a taxable year will be required to pay an
additional amount of income 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 of up to $100,000. Naturally, the
amount of tax payable by a taxpayer will be affected by a combination of tax
law rules covering deductions, credits, deferrals, exemptions, sources of
income and other matters.
Under the Code, distributions of net investment income by the Fund to a
resident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign shareholder") will be
subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate, if
applicable). Withholding will not apply if a dividend paid by the fund 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.
PURCHASE OF SHARES
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. 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 closing 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, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas Day. The net asset value per share is determined as follows:
1. Municipal bonds and notes and any other securities with more than 60 days
remaining to maturity normally are valued at prices obtained from a national
municipal bond pricing service, except that, where such prices are not
available or determined by the fund's officers not to represent market value,
they are valued at prices representing the mean between bid and asked
quotations (on the sale of similar issues) obtained from one or more
broker/dealers dealing in such municipal bonds and notes.
All securities with 60 days or less to maturity are amortized to maturity
based on their cost to the fund if acquired within 60 days of maturity or, if
already held by the fund on the 60th day, based on the value determined on the
61st day. The maturities of variable or floating rate instruments, or
instruments with the right to sell them at par to the issuer or dealer, are
deemed to be the time remaining until the next interest adjustment date or
until they can be redeemed at par.
Where market prices or market quotations are not readily available, securities
are valued at fair value as determined in good faith by the Board of Directors
or a committee thereof. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including proper accruals of expense items; and
3. The value of the net assets so obtained are then divided by the total
number of shares outstanding and the result, rounded to the nearer cent, is the
net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially 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 Directors.
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $25,000 or more made within a
13-month period pursuant to the terms of a written statement of intention (the
"Statement") in the form provided by the Principal Underwriter and signed by
the purchaser. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder signs a Statement in order to qualify for
a reduced sales charge, shares equal to 5% of the dollar amount specified in
the Statement will be held in escrow in the shareholder's account out of the
initial purchase (or subsequent purchases, if necessary) by the Transfer Agent.
All dividends and 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 must remit to the Principal Underwriter the
difference between the sales charge actually paid and the sales charge which
would have been paid if the total purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Principal Underwriter or the investment 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.
DEALER COMMISSIONS - The following commissions will be paid, as described in
the prospectus, to dealers who initiate and are responsible for purchases of $1
million or more, for purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $100 million or more: 1.00% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value. See "The American Funds Shareholder
Guide" in the fund's prospectus for more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of retirement plans for which Capital
Guardian Trust Company serves as trustee or custodian). Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
showing the current transaction. Participation in the plan will begin within
30 days after receipt of the account application. If the shareholder's bank
account cannot be charged due to insufficient funds, a stop-payment order or
closing of the account, the plan may be terminated and the related investment
reversed. The shareholder may change the amount of the investment or
discontinue the plan at any time by writing the Transfer Agent.
AUTOMATIC 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.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund does not intend to pay a mark-up
in exchange for research in connection with principal transactions.
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, N.A., One Chase Manhattan Plaza, New
York, NY 10081, as Custodian.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, serves as the fund's independent auditors, providing audit
services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The Statement of Assets and
Liabilities 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.
REMOVAL OF DIRECTORS BY SHAREHOLDERS - At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any director or directors from office and may elect a successor
or successors to fill any resulting vacancies for the unexpired terms of
removed directors. The fund has made an undertaking, at the request of the
staff of the Securities and Exchange Commission, to apply the provisions of
section 16(c) of the 1940 Act with respect to the removal of directors, as
though the fund were a common-law trust. Accordingly, the directors of the
fund shall promptly call a meeting of shareholders for the purpose of voting
upon the question of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding shares.
REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on July 31. Shareholders
are provided at least semiannually with reports showing the investment
portfolio, financial statements and other information audited annually by the
fund's independent auditors, Price Waterhouse LLP, whose selection is
determined annually by the Directors.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
The financial statements including the investment portfolio and the report
of Independent Accountants contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
<S> <C>
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1995
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $ 15.14
Maximum offering price per share (100/95.25 of
per share net asset value, which takes into account
the fund's current maximum sales charge) $ 15.90
</TABLE>
INVESTMENT RESULTS
The fund's yield is 5.70% based on a 30-day (or one month) period ended
July 31, 1995, 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 tax equivalent yield based on a 30-day (or
one month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of
the yield (as computed by the formula stated above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield that is not tax-exempt. The fund's tax equivalent yield based on
the maximum individual effective federal tax rate of 39.6% for the 30-day (or
one month) period ended July 31, 1995 was 9.44%.
The fund's 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 number 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
a period has elapsed.
During its lifetime (September 26, 1994 to July 31, 1995), the fund had a
total return of 6.34% compared with 9.10% for The Lehman Brothers Municipal
Bond Index./1/
/1/ The Lehman Brothers 7-Year Municipal Bond Index is unmanaged, reflects
no expenses or management fees and consists of a large universe of municipal
bonds issued as state general obligations or revenue bonds with a minimum
rating of A BBB by Standard & Poor's Corporation.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In all of the
10-year periods since 1964 during which those funds were managed by Capital
Research and Management Company (115 in all), those funds have had better total
returns than the Standard and Poor's 500 Stock Composite Index in 94 of the 115
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.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
Investment Portfolio, July 31, 1995
QUALITY RATINGS
AAA: 3.0%
A: 4.2%
BBB: 56.0%
BB: 23.3%
B: 5.0%
Not Rated: 0.5%
Cash Equivalents: 8.0%
<TABLE>
<CAPTION>
Principal Market
Amount Value
(000) (000)
<S> <C> <C>
TAX-EXEMPT SECURITIES MATURING IN MORE THAN
ONE YEAR - 91.45%
ARIZONA - 2.01%
Arizona Educational Loan Marketing Corp.,
Educational Loan Revenue Bonds, Junior
Subordinate Series 1993, 6.30% 2008 $3,155 3,155
CALIFORNIA - 6.43%
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue Bonds, Series 1995A (Fixed
Rate) Senior Lien Current Interest Bonds,
6.00% 2034 2,150 1,949
Los Angeles County Capital Asset Leasing
Corporation, Certificates of Participation
(Marina del Rey), Series A, 6.25% 2003 3,715 3,607
Pleasanton Joint Powers Financing Authority,
Subordinate Reassessment Revenue Bonds,
1993 Series B, 6.125% 2002 4,530 4,528
COLORADO - 5.45%
Colorado Student Obligation Bond Authority,
Student Loan Asset-Backed Bonds, Senior
Subordinate 1995 Series II-B, 6.20% 2008 1,000 1,002
City and County of Denver, Airport System
Revenue Bonds:
Series 1991D, 7.75% 2013 1,000 1,186
Series 1992C, 6.55% 2003 4,500 4,748
Series 1994A:
7.00% 1999 1,000 1,073
7.50% 2023 500 533
DISTRICT OF COLUMBIA - 0.98%
Hospital Revenue Refunding Bonds (Washington
Hospital Center Issue), Series 1992A,
7.00%, 2005 1,500 1,537
FLORIDA - 3.91%
Broward County, Resource Recovery Revenue Bonds,
Series 1984 North Project, 7.95% 2008 865 964
The Crossings at Fleming Island Community
Development District (Clay County), Special
Assessment Bonds, Series 1995, 8.25% 2016 5,000 5,166
GEORGIA - 1.46%
Fulco Hospital Authority, Revenue Anticipation
Certificates (Georgia Baptist Health Care
System Project):
Series 1992A, 6.375% 2022 2,250 2,095
Series 1992B, 6.375% 2022 200 186
ILLINOIS - 10.80%
Health Facilities Authority:
Revenue Refunding Bonds (Edward Hospital
Project), Series 1993A, 6.00% 2019 1,000 929
Revenue Bonds (Fairview Obligated Group Project),
Series 1992A, 9.50% 2022 2,750 2,960
City of Chicago, Chicago-O'Hare International
Airport, Special Facility Revenue Bonds
(United Air Lines, Inc. Project):
Series 1988A, 8.95% 2018 1,925 2,171
Series 1988B, 8.85% 2018 1,170 1,328
City of Chicago, Skyway Toll Bridge Refunding
Revenue Bonds, Series 1994:
6.50% 2010 1,500 1,497
6.75% 2017 1,500 1,509
Village of Robbins, Cook County, Resource
Recovery Revenue Bonds (Robbins Resource
Recovery Partners, L.P. Project), Series 1994A:
8.75% 2005 1,000 1,067
9.25% 2014 5,000 5,470
INDIANA - 3.18%
Indianapolis Airport Authority (United Air Lines,
Inc., Indianapolis Maintenance Center Project),
Special Facilities Revenue Bonds, Series 1995 A,
6.50% 2031 1,000 956
City of East Chicago, Pollution Control
Refunding Revenue Bonds:
(Inland Steel Company Project No. 10),
Series 1993, 6.80% 2013 1,000 1,005
(Inland Steel Company Project No. 11),
Series 1994, 7.125% 2007 2,000 2,065
City of Sullivan, Pollution Control Revenue
Refunding Bonds (Indiana Michigan Power Company
Project), Series C, 5.95% 2009 1,000 969
KENTUCKY - 5.09%
Kenton County Airport Board (Commonwealth of
Kentucky), Special Facilities Revenue Bonds
(Delta Air Lines, Inc. Project), 1992 Series A:
6.75% 2002 1,000 1,035
7.50% 2012 2,225 2,332
6.125% 2022 5,000 4,622
LOUISIANA - 11.03%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1995A-2, 7.80% 2026 4,145 4,688
Parish of Beauregard, Solid Waste Disposal
Revenue Bonds (Boise Cascade Corporation
Project), Series 1993, 6.30% 2023 3,500 3,362
Industrial Development Board of the Parish of
Calcasieu, Inc., Pollution Control Revenue
Refunding Bonds (Gulf States Utilities Company
Project), Series 1992, 6.75% 2012 3,000 2,985
Orleans Levee District, Levee Improvement Fixed
Rate Refunding Bonds, Series 1987A, 8.25% 2014 5,000 5,163
Parish of St. Charles, Adjustable/Fixed Rate
Pollution Control Revenue Bonds (Louisiana
Power & Light Company Project), Series 1984,
8.25% 2014 1,000 1,107
MARYLAND - 3.36%
Health and Higher Educational Facilities
Authority, Revenue Bonds, Howard County General
Hospital Issue, Series 1993, 5.50% 2021 2,000 1,656
Housing Opportunities Commission of Montgomery
County, Multifamily Revenue Bonds (Strathmore
Court at White Flint), 1994 Issue A-2:
7.50 2024 1,000 1,037
7.50 2027 500 516
Baltimore County, Pollution Control Revenue
Refunding Bonds (Bethlehem Steel Corporation
Project), Series 1994A, 7.55% 2017 2,000 2,068
MICHIGAN - 8.60%
Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Genesys Health System
Obligated Group), Series 1995A:
8.00% 2005 2,000 2,198
7.50% 2027 3,500 3,559
The Economic Development Corporation of the
County of Midland, Subordinated Pollution
Control Limited Obligation Revenue Refunding
Bonds (Midland Cogeneration Project),
Series 1990B, 9.50% 2009 7,100 7,731
MISSISSIPPI - 1.12%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 1,500 1,751
NEW HAMPSHIRE - 0.62%
Business Finance Authority, Pollution control
Refunding Revenue Bonds (The United Illuminating
Company Project), 1993 Series A, 5.875% 2033 1,100 974
NEW JERSEY - 2.02%
Economic Development Authority, First Mortgage
Revenue Fixed Rate Bonds (Fellowship Village
Project), Series 1995A, 9.25% 2025 3,000 3,175
NEW YORK - 0.66%
The City of New York, General Obligation Bonds,
Fiscal 1995 Series B, 7.00% 2016 1,000 1,036
OHIO - 0.93%
The Student Loan Funding Corporation, Cincinnati,
Student Loan Revenue Refunding Bonds, Series
1991A, 7.20% 2003 1,400 1,454
PENNSYLVANIA - 8.78%
Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Colver Project),
Series 1994 D, 7.15% 2018 3,000 3,060
The Hospitals Authority of Philadelphia,
Hospital Revenue Bonds (Temple University
Hospital), Series of 1983, 6.625% 2023 2,250 2,264
Cambria County Industrial Development Authority,
Pollution Control Revenue Refunding Bonds
(Bethlehem Steel Corporation Project),
Series 1994, 7.50% 2015 2,500 2,571
Schuylkill County Industrial Development
Authority, Resource Recovery Revenue Refunding
Bonds (Schuylkill Energy Resources, Inc.
Project), Series 1993, 6.50% 2010 5,875 5,869
SOUTH CAROLINA - 2.82%
York County, Pollution Control Facilities
Revenue Bonds (Bowater Incorporated Project),
Series 1990, 7.625% 2006 4,000 4,427
TENNESSEE - 1.77%
Memphis-Shelby County Airport Authority, Special
Facilities Revenue Bonds (Federal Express
Corporation), Series 1984, 7.875% 2009 2,500 2,783
TEXAS - 8.39%
Alliance Airport Authority, Inc., Special
Facilities Revenue Bonds (American Airlines,
Inc. Project), Series 1990, 7.00% 2011 5,000 5,213
Dallas-Fort Worth International Airport
Facility Improvement Corporation, American
Airlines, Inc., Revenue Bonds, Series 1992,
7.25% 2030 1,500 1,550
Tomball Hospital Authority, Hospital Revenue
Refunding Bonds, Series 1993, 6.125% 2023 5,030 4,487
West Side Calhoun County Navigation District,
Solid Waste Disposal Revenue Bonds (Union
Carbide Chemicals and Plastics Company Inc.
Project), Series 1993, 6.40% 2023 1,980 1,915
WEST VIRGINIA - 1.42%
City of South Charleston, Pollution Control
Revenue Refunding Bonds ( Union Carbide
Corporation Project), Series 1985, 7.625% 2005 2,000 2,222
WASHINGTON - 0.62%
The Public Industrial Corporation (Port of
Camas-Washougal), Pollution Control Refunding
Revenue Bonds (James River Project),
Series 1993, 6.70% 2023 1,000 980
---------
$143,445
---------
TAX-EXEMPT SECURITIES MATURING IN
ONE YEAR OR LESS - 6.46%
State of California, 1994 Revenue Anticipation
Warrants, Series C, FGIC Insured 5.75% 4/25/96 1,500 1,522
County of Los Angeles, California, 1995-96 Tax
and Revenue Anticipation Notes, Series A,
4.50% 7/1/96 1,900 1,911
Southwestern Illinois Development Authority,
Solid Waste Disposal Revenue Bonds (Shell Oil
Company Wood River Project), Daily Adjustable
Rate, 4.00% 8/1/95* 600 600
State of Michigan, Full Faith and Credit General
Obligation Notes, 5.00% 9/29/95 2,000 2,004
Grapevine Industrial Development Corporation
(Texas), Multiple Mode Revenue Bonds (American
Airlines, Inc. Project), Daily Adjustable Rate,
Series B-4, 3.90% 8/1/95* 100 100
State of Texas, Tax and Revenue Anticipation
Notes, Series 1994, 5.00% 8/31/95 3,800 3,804
Peninsula Ports Authority of Virginia, Coal
Terminal Revenue Refunding Bonds (Dominion
Terminal Associates Project), Variable Rate
Demand Note, 3.80% 8/1/95* 200 200
---------
10,141
---------
TOTAL TAX-EXEMPT SECURITIES (COST: $146,795,000) $153,586
Excess of cash, prepaids and receivables over
payables 3,278
---------
NET ASSETS $156,864
=========
</TABLE>
*Coupon rates may change periodically; yield at
acquisition reflects current coupon rate.
See Notes to Financial Statements
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
at July 31, 1995 (dollars in thousands)
ASSETS:
<S> <C> <C>
Tax-exempt securities
(cost: $146,795) $153,586
Cash 23
Prepaid organization expense 20
Receivables for-
Sales of fund's shares 772
Accrued interest 2,903 3,675
--------- ---------
157,304
LIABILITIES:
Payables for-
Repurchases of fund's shares 126
Dividends payable 275
Management services 23
Accrued Expenses 16 440
--------- ---------
NET ASSETS AT JULY 31, 1995-
Equivalent to $15.14 per share on 10,363,011
shares of $0.01 par value capital stock
outstanding (ahthorized capital stock - $156,864
200,000,000 shares) =========
STATEMENT OF OPERATIONS
for the period September 26, 1994*
to July 31, 1995 (dollars in thousands)
INVESTMENT INCOME:
Income:
Interest on tax-exempt securities $5,969
---------
Expenses:
Management services fee $403
Distribution expenses 260
Transfer agent fee 41
Report to shareholders 24
Registration statement and prospectus 66
Postage, stationery and supplies 14
Director's fees 10
Auditing and legal fees 13
Custodian fee 4
Taxes other than federal income tax 2
Organization expense 50
Other expenses 7
---------
Total expenses before reimbursement 894
Reimbursement of expenses 306 588
--------- ---------
Net investment income 5,381
---------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 2,246
Net unrealized appreciation
on investments 6,791
---------
Net realized gain and unrealized
appreciation on investments 9,037
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $14,418
=========
STATEMENT OF CHANGES IN NET ASSETS
for the period September 26, 1994*
to July 31, 1995 (dollars in thousands)
OPERATIONS:
Net investment income $5,381
Net realized gain on investments 2,246
Net unrealized appreciation
on investments 6,791
---------
Net increase in net assets
resulting from operations 14,418
---------
DIVIDENDS PAID FROM NET
INVESTMENT INCOME (5,381)
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
11,466,307 shares 164,049
Proceeds from shares issued in
reinvestment of net investment
income dividends: 239,900 shares 3,535
Cost of shares repurchased:
1,350,194 shares (19,857)
---------
Net increase in net assets
resulting from capital share
transactions 147,727
---------
TOTAL INCREASE IN NET ASSETS 156,764
NET ASSETS:
Beginning of period 100
---------
End of period $156,864
=========
</TABLE>
*Commencement of operations
See Notes to Financial Statements
Notes to Financial Statements
1. American High-Income Municipal Bond Fund, Inc. (the "fund") was organized on
June 14, 1994 as a Maryland Corporation. On August 25, 1994, the fund obtained
its initial capital of $100,000 from the sale of 6,998 shares of its capital
stock at $14.29 per share to Capital Research and Management Company (CRMC),
the investment adviser. Operations commenced on September 26, 1994 upon the
initial purchase of investment securities. The fund's fiscal year ends July
31. The fund is registered under the Investment Company Act of 1940 as an
open-end, diversified management investment company. The following paragraphs
summarize the significant accounting policies consistently followed by the fund
in the preparation of its financial statements:
Tax-exempt securities with original or remaining maturities in excess of 60
days are valued at prices obtained from a national municipal bond pricing
service. The pricing service takes into account various factors such as
quality, yield and maturity of tax-exempt securities comparable to those held
by the fund, as well as actual bid and asked prices on a particular day. Other
securities with original or remaining maturities in excess of 60 days,
including securities for which pricing service values are not available, are
valued at the mean of their quoted bid and asked prices. However, in
circumstances where the investment adviser deems it appropriate to do so,
securities will be valued at the mean of their representive quoted bid and
asked prices, if such prices are not available, at the mean of such prices for
securities of comparable maturity, quality and type. All securities with 60
days or less to maturity are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Valuation Committee
of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Premiums and
original issue discounts on securities purchased are amortized over the life of
the respective securities. Dividends are declared on a daily basis after
determination of the fund's net investment income and paid to shareholders on a
monthly basis.
Prepaid organizational expenses include registration fees which are charged to
income over 12 months, the estimated period of benefit. Other organizational
expenses are amortized over a period not exceeding five years from commencement
of operations. In the event that CRMC redeems any of its original shares prior
to the end of the five-year period, the proceeds of the redemption payable in
respect of such shares shall be reduced by the pro rata share (based on the
proportionate share of the original shares redeemed to the total number of
original shares outstanding at the time of such redemption) of the unamortized
deferred organization expenses as of the date of such redemption. In the event
that the fund liquidates prior to the end of the five-year period, CRMC shall
bear any unamortized deferred organization expenses.
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 $4,000 included $3,000 that was paid by the credits rather
than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of July 31, 1995, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $6,791,000, of which $6,984,000 related
to appreciated securities and $193,000 related to depreciated securities. There
was no difference between book and tax realized gains on securities
transactions for the period ended July 31, 1995. The cost of portfolio
securities for book and federal income tax purposes was $146,795,000 at July
31, 1995.
3. The fee of $403,000 for management services was paid pursuant to an
agreement with CRMC, with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement provides for monthly
fees, accrued daily, based on an annual rate of 0.30% of the first $60 million
of average net assets; 0.21% of such assets in excess of $60 million; and 3.00%
of the fund's monthly gross investment income. The Investment Advisory and
Service Agreement provides for fee reductions to the extent that annual
operating expenses exceed 0.90% of the average net assets of the fund, during a
period which will terminate at the earlier of such time as no reimbursement has
been required for a period of 12 consecutive months, provided no advances are
outstanding, or October 1, 2004. CRMC has also voluntarily agreed to waive its
fees to the extent necessary to ensure that the fund's expenses do not exceed
0.76% of the average net assets. Expenses that are not subject to these
limitations are interest, taxes, brokerage commissions, transaction costs, and
extraordinary expenses. There can be no assurance that this voluntary fee
waiver will continue in the future. Fee reductions amounted to $306,000 for
the period ended July 31, 1995.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the period ended July 31, 1995,
distribution expenses under the Plan were $260,000. As of July 31, 1995,
accrued and unpaid distribution expenses were $11,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $41,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $266,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Directors of the fund 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 July 31, 1995, aggregate amounts deferred were $4,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS and AFD. No such
persons received any remuneration directly from the fund.
4. As of July 31, 1995, accumulated undistributed net realized gain on
investments was $2,246,000 and paid-in capital was $147,827,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $174,488,000 and $40,049,000 respectively, during the
period ended July 31, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Net Asset Value, Beginning of Period Period
September 26, 1994/1/
to July 31, 1995
<S> <C>
$14.29
-------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .76
Net realized and
unrealized gain
on investments .85
-------
Total income from
investment operations 1.61
-------
LESS DISTRIBUTIONS:
Dividends from net
investment income (.76)
-------
Net Asset Value, End of Period $15.14
=======
Total Return/2/ 11.62%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $157
Ratio of expenses to average net assets .61%/3/ /4/
Ratio of net income to average net assets 5.66%/3/
Portfolio turnover rate 46.42%/3/
</TABLE>
/1/Commencement of operations.
/2/This was calculated without deducting a sales charge. The
maximum sales charge is 4.75% of the fund's offering price.
/3/Based on operations for the period shown and, accordingly,
not representative of a full year's operations.
/4/Had CRMC not waived fees, the fund's ratio of expenses to
average net assets would have been 0.94% for the period.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
American High-Income Municipal Bond Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of American High-Income
Municipal Bond Fund, Inc. (the "Fund") at July 31, 1995, the results of its
operations, the changes in its net assets and the per-share data and ratios for
the period indicated, in conformity with generally accepted accounting
principles. These financial statements and per-share data and ratios
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audits of these
financial statements in accordance with generally accepted auditing standard,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at July 31, 1995 by correspondence with the
custodian , provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Los Angeles, California
August 31, 1995
Tax Information (Unaudited)
All of the distributions paid by the fund from investment income earned in the
period ended July 31, 1995 were exempt-interest distributions within the
meaning of Section 852(b)(5)(A) of the Internal Revenue Code.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the year-end
information you receive from the fund's transfer agent.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
Investment Portfolio Notes to Financial Statements
Statement of Assets and Liabilities Per-Share Data and Ratios
Statement of Operations Report of Independent Accountants
Statement of Changes in Net Assets
(B) EXHIBITS
1. On file (see SEC file No. 33-80630, initial Registration Statement on Form
N-1A filed 6/23/94).
2. On file (see SEC file No. 33-80630, initial Registration Statement on Form
N-1A filed 6/23/94).
3. None.
4. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 1 on Form
N-1A filed 7/12/94).
5. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 1 on Form
N-1A filed 7/12/94).
6. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 1 on Form
N-1A filed 7/12/94).
7. None.
8. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 1 on Form
N-1A filed 7/12/94).
9. On file (see SEC file No. 33-80630, Post-Effective Amendment No. 2 on
Form N-1A filed 3/23/95).
10. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 2 on Form
N-1A filed 9/2/94).
11. Consent of Independent Accountants.
12. None.
13. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 2 on Form
N-1A filed 9/2/94).
14. Copies of the model plan used in the establishment of any retirement plan
- - not applicable
15. On file (see SEC file No. 33-80630, Pre-Effective Amendment No. 1 on Form
N-1A filed 7/12/94).
16. Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of July 31, 1995
<TABLE>
<CAPTION>
Title of Class Number of
Record Holders
<S> <C>
Capital Stock 5,154
($0.01 par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Registrant, upon the effective date of this Registration Statement, will
become a joint-insured under an Investment Advisor/Mutual Fund Errors and
Omissions Policy. The carrier of the primary policy in the amount of $15
million is American International Surplus Lines Insurance Company and it has a
$250,000 deductible. The carrier of the secondary policy in the amount of $10
million is Chubb Custom Insurance Company. The carrier of the excess policy in
the amount of $20 million is ICI Mutual Insurance Company.
Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually incurred by him in connection
with such action, suit or proceeding unless it is established that: (i) the
act or omission of the person was material to the matter giving rise to the
proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the person actually received an improper personal
benefit of money, property or services; or (iii) with respect to any criminal
action or proceeding, the person had reasonable cause to believe his act or
omission was unlawful.
Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which any director who is a party may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).
Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any rights to which the indemnified
party may be entitled; that the scope of indemnification extends to directors,
officers, employees or agents of a constituent corporation absorbed in a
consolidation or merger and persons serving in that capacity at the request of
the constituent corporation for another; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in any such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify such person
against such liabilities under Section 2-418.
Article VIII (h) of the Articles of Incorporation of the Fund provides that
"The Corporation shall indemnify (1) its directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law, and (2) its other employees and agents to
such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of this
Charter of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. Nothing contained herein shall be construed
to authorize the Corporation to indemnify any director or officer of the
Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Any indemnification by the Corporation
shall be consistent with the requirements of law, including the Investment
Company Act of 1940."
Registrant will comply with the indemnification requirements contained in the
1940 Act Releases No. 7221 (June 9, 1972) and No. 11330 (September 4, 1980).
In addition, indemnification by the Corporation shall be consistent with the
requirements of rule 484 under the Securities Act of 1933.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. PRINCIPAL UNDERWRITERS.
(A) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Trust, American Mutual Fund, Inc.,
The Bond Fund of America, Inc., Capital Income Builder, Inc., Capital World
Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The Cash
Management Trust of America, EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc.,
Intermediate Bond Fund of America, The Investment Company of America, Limited
Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective
Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America,
Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money Fund of
America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
# David A. Abzug Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University Drive
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Brynwood Drive
Madison, WI 53711
& Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Vice President None
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
1190 Rockmart Circle
Kennesaw, GA 30144
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
Ian B. Bodell Vice President None
3100 West End Avenue, Suite 870
Nashville, TN 37215
Michael L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Director and Senior Vice President None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
999 Green Oaks Drive
Littleton, CO 80121
Christopher J. Cassin Regional Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1425 Vallejo, #203
San Francisco, CA 94109
* Larry P. Clemmensen Director and Treasurer None
* Kevin G. Clifford Senior Vice President None
Ruth M. Collier Vice President None
145 West 67th Street, #12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
% Douglas A. Critchell Vice President None
* Carl D. Cutting Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
3622 E. 87th Street
Tulsa, OK 74137
Kirk D. Dodge Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
+ Lloyd G. Edwards Vice President None
@ Richard A. Eychner Vice President None
* Paul H. Fieberg Senior Vice President None
John Fodor Regional Vice President None
5 Marlborough Street, Suite 51
Boston, MA 02116
* Mark P. Freeman, Jr. Director and President None
Clyde E. Gardner Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
* Paul G. Haaga, Jr. Director Chairman of the Board
David E. Harper Vice President None
R.D. 1, Box 210, Rte. 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President None
6744 Avalon
Dallas, TX 75214
* Robert L. Johansen Vice President and Controller None
* V. John Kriss Senior Vice President None
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E East Tennessee Circle
Aurora, CO 80012
* Heather A. Maier Assistant Vice President - None
Institutional Investment
Services Division
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Senior Vice President None
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
6008 E. Anderson Drive
Scottsdale, AZ 85255
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
* R. William Melinat Vice President - Institutional None
Investment Services Division
David R. Murray Regional Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
* Barbara G. Nicholich Assistant Vice President - None
Institutional Investment
Services Division
William E. Noe Regional Vice President None
12535 Barkley
Overland Park, KS 66209
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Regional Vice President None
32 Ridge Avenue
Newton Centre, MA 02161
# Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
* George L. Romaine, Jr. Vice President - Institutional None
Investment Services Division
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
Douglas F. Rowe Regional Vice President None
104 River Road
Georgetown, TX 78628
* Christopher S. Rowey Regional Vice President None
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe, Avenue, # 4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* R. Michael Shanahan Chairman of the Board None
David W. Short Senior Vice President None
1000 RIDC Plaza, Suite 212
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President - Institutional None
Investment Services Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President - None
Institutional Investment
Services Division
# Mark S. Smith Director and Senior Vice President None
* Mary E. Smith Assistant Vice President,
Institutional Investment
Services Division None
Rodney G. Smith Regional Vice President None
2350 Lakeside Blvd., #850
Richardson, TX 75082
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
#4 West Fourth Avenue, Suite 406
San Mateo, CA 94402
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
& James P. Toomey Assistant Vice President None
+ Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
@ Andrew J. Ward Vice President None
* David M. Ward Assistant Vice President - None
Institutional Investment
Services Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
# J. Kelly Webb Senior Vice President None
Gregory J. Weimer Regional Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
** N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
* Marshall D. Wingo Senior Vice President None
* Robert L. Winston Director and Senior Vice President None
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
</TABLE>
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
** Business Address, Four Embarcadero Center, Suite 1800, San Francisco, CA
94111
# Business Address, 135 South State College Blvd., Brea, CA 92621
& Business Address, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
+ Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
% Business Address, 3000 K. Street, N.W., Suite 230, Washington, D.C.
20007-5124
(c) None
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071. Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA 92621.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92621, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, 8000 IH-10
West, Suite 1400, San Antonio, TX 78230 and 5300 Robin Hood Road, Norfolk, VA
23514.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(c) As reflected in the prospectus, Registrant undertakes to provide each
person to whom a prospectus is delivered with a copy of the fund's latest
annual report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
25th day of September, 1995.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
By /s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on September 25th, 1995, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and Director
(Abner D. Goldstine)
(2) Principal Financial Officer and
Principal Accounting Officer:
Vice President and Treasurer
/s/ Mary C. Cremin
(Mary C. Cremin)
(3) Directors:
H. Frederick Christie* Director
Diane C. Creel* Director
Martin Fenton, Jr.* Director
Leonard R. Fuller* Director
Herbert Hoover III* Director
Richard G. Newman* Director
Peter C. Valli* Director
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
</TABLE>
Counsel represents that this amendment does not contain disclosures that would
make the amendment ineligible for effectiveness under the provisions of Rule
485(b).
/s/ Michael J. Downer
Michael J. Downer
C-12
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 2 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 31, 1995, relating to the financial statements and per share data and
ratios of American High-Income Municipal Bond Fund, Inc., which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "General
Information - Independent Accountants" and "General Information - Reports to
Shareholders" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in the Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
September 28, 1995
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/26/94 1000.00 14.29 0.00 % 69.979 14.290 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/95 1000 49 49 1049 0 1055 0 1055 51 1106.36 73.366
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/26/94 1000.00 15.00 4.75 % 66.667 14.290 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/95 1000 47 47 1047 0 1005 0 1005 49 1054.00 69.894
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
9/26/94 10000.00 15.00 4.75 % 666.667 14.290 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/95 10000 470 470 10470 0 10053 0 10053 487 10540.18 698.951
7/31/95 10000 52 522 10522 0 10093 0 10093 541 10634.06 702.382
TOTAL $ 0
</TABLE>
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEMPTION VALUE AND TOTAL RETURN
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) Initial investment DIVIDED BY
Public offering price for one share at
beginning of period EQUALS
Number of shares initially purchased
(B) Number of shares initially purchased PLUS
Number of shares acquired at net asset
value through reinvestment of dividends
and capital gain distributions during period EQUALS
Number of shares purchased during period
(C) Number of shares purchased during period MULTIPLIED BY
Net asset value of one share as of the last day
of the period EQUALS
Value of investment at end of period
(D) Value of investment at end of period DIVIDED BY
Initial investment
minus one and then multiplied by 100 EQUALS
Total return for the period expressed as a
percentage
EXHIBIT 16
(2) TOTAL RETURN
Total return quotations for the lifetime period ended on the date of the most
recent balance sheet is computed according to the formula set forth below.
P(1+T)/n/ = ERV
WHERE: P = a hypothetical initial investment of $1,000
T = total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment as of the
end of the lifetime period (computed in accordance with the formula set
forth in (1), above)
THUS:
TOTAL RETURN AT PUBLIC OFFERING PRICE:
Lifetime Total Return 1,000(1+T)/1/ = $1,063.39
T = 6.34%
Hypothetical illustrations which are based on $1,000 and $10,000 initial
investments used to obtain ending values over various time periods are
attached.
(3) YIELD
Yield is computed as set forth below.
(A) Dividends and interest earned during the period MINUS
Expenses accrued for the period EQUALS
Net investment income
(B) Net income investment DIVIDED BY
Average daily number of shares
outstanding during the period that
were entitled to receive dividends EQUALS
Net investment income per share earned
during the period
(C) Net investment income per share earned
during the period DIVIDED BY
Maximum offering price per share on
last day of the period EQUALS
Current month's yield
(D) Current months yield PLUS ONE RAISED TO THE SIXTH POWER EQUALS
Semiannual compounded yield
(E) Semiannual compounded yield MINUS ONE MULTIPLIED
BY TWO EQUALS
Annualized rate
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 146,795
<INVESTMENTS-AT-VALUE> 153,586
<RECEIVABLES> 3,675
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 20
<TOTAL-ASSETS> 157,304
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 440
<TOTAL-LIABILITIES> 440
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,827
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<APPREC-INCREASE-CURRENT> 6,791
<NET-CHANGE-FROM-OPS> 14,418
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<ACCUMULATED-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 95,069
<PER-SHARE-NAV-BEGIN> 14.29
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> .85
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<PER-SHARE-NAV-END> 15.14
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
