AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
1995
ANNUAL REPORT FOR THE PERIOD ENDED JULY 31, 1995
[The American Funds Group(r)]
American High-Income Municipal Bond Fund(SM) seeks a high level of current
income exempt from regular federal income taxes through a diversified,
carefully researched portfolio of municipal bonds, including higher yielding,
lower rated, higher risk issues. It may invest up to 100% of its assets in
bonds subject to the alternative minimum tax.
[Begin Photo Caption]
ABOUT OUR COVER: Investors in American High-Income Municipal Bond Fund help
finance municipal construction across the country.
[End Photo Caption]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Between September 26, 1994 and June 30, 1995 (the end of
the most recent calendar quarter), the total return with all distributions
reinvested, assuming payment of the 4.75% maximum sales charge at the beginning
of the stated period, was +5.40%. Sales charges are lower for accounts of
$25,000 or more. The fund's 30-day yield as of August 31, 1995, calculated in
accordance with the Securities and Exchange Commission formula, was 5.58%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES 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. While the fund invests for
income that is exempt from regular federal income taxes, that income may be
subject to state or local income taxes and/or federal alternative minimum
taxes. Capital gain distributions, if any, are taxable.
[Begin Side Bar]
CHARTING A $10,000 INVESTMENT IN
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
(for the period September 26, 1994 to July 31, 1995, with dividends reinvested)
The fund at net asset value (without any sales charge) $11,162
Lehman Brothers Municipal Bond Index/1/ $10,910
The fund at maximum offering price (with 4.75% sales charge deducted)/2/
$10,634
/1/ The index is unmanaged and does not reflect sales charges, commissions or
expenses.
/2/ These figures, unlike those shown elsewhere in this report, reflect payment
of the maximum sales charge of 4.75% on the $10,000 investment. Thus, the net
amount invested was $9,525.
Past results are not predictive of future results.
LIFETIME TOTAL RETURN AFTER DEDUCTING THE MAXIMUM SALES CHARGE for the period
September 26, 1994 to July 31, 1995........+6.34%
[End Side Bar]
FELLOW SHAREHOLDERS:
American High-Income Municipal Bond Fund had a commendable first fiscal
period. Helped by a favorable combination of events, the fund outpaced the
major unmanaged municipal bond index and the average high-yield municipal bond
fund by substantial margins.
From the fund's introduction on September 26, 1994, through July 31, 1995,
the end of the fund's fiscal year, the fund had a total return of 11.6% with
dividends reinvested, well above the 7.9% average total return of other
high-income municipal bond funds over the same period, as measured by Lipper
Analytical Services. The unmanaged Lehman Brothers Municipal Bond Index had a
total return of 9.1%. During this period, your fund's assets grew to $157
million.
Dividends for the fiscal period totaled 76 cents a share. Shareholders who
reinvested these monthly dividends had an income return of 5.5% (not
annualized). Investors who took their dividends in cash received an income
return of 5.3% and saw the value of their accounts rise 5.9%. At the end of the
period, the fund's tax-free yield, calculated according to Securities and
Exchange Commission guidelines, was at the annual rate of 5.70%.
With hindsight, it is easy to see that the fund was launched at an opportune
time. When operations began, however, most investors would have guessed it to
be an inappropriate time to invest in bonds. The bond market was in the
final weeks of an 11-month spiral of rising interest rates and falling bond
prices. As prices fell, many investors feared additional interest rate
increases and kept selling, driving prices down further. As a new fund with
growing assets, American High-Income Municipal Bond Fund was able to acquire
some attractive securities for its portfolio at excellent prices.
Shortly after the fund's inauguration, interest rates began declining and
the prices of many bonds in the fund's portfolio began rising.
After the end of the fiscal year, the fund took advantage of rising bond prices
and sold some holdings for a profit. That resulted in taxable short-term
capital gains of at least 20 cents a share which will be paid to shareholders
toward the end of this calendar year.
Although the fund benefited from excellent timing in its first fiscal
period, it is not managed with the aim of timing the market. Rather, the fund's
managers rely on thorough research to find good investment opportunities that
may be misunderstood or undervalued by the market. Despite the fund's very
satisfying initial success, it may be several years before many of its
investments develop to their full value.
While we believe our emphasis on research will help us find good
opportunities, there are always risks in any investment. We continuously
monitor national and regional political and economic developments that could
have an impact on the fund's holdings.
In the past few months, several political leaders have proposed various
forms of a national flat tax, some of which involve the elimination of tax on
interest paid by all bonds. This could have serious repercussions in the
tax-free bond market because it could erode the advantage enjoyed by municipal
bonds. We do not foresee any action on this front in the near future, but will
continue to watch political developments closely. Similarly, we are keeping a
close eye on the crosscurrents in the nation's economy and how they may affect
interest rates.
We welcome all our new shareholders and look forward to reporting to you
again in six months.
Cordially,
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
September 12, 1995
BUILDING A FUTURE THROUGH INVESTMENT
FROM BLUEPRINTS TO PORTFOLIO: A SEARCH FOR VALUE
In the rolling green hills of central New Jersey, builders have almost
completed a continuing care community that will be home to 400 retirees.
In Chicago, construction has begun on an electricity-generating plant that
will turn garbage into power and bring jobs to a depressed area.
In Texas, construction has begun on new facilities at Dallas-Fort Worth
International Airport, while in Maryland, work is under way on a multi-family
housing project.
All these projects have one thing in common: they are being financed in part
by shareholders of American High-Income Municipal Bond Fund (AHIM).
A WORLD OF RISK AND REWARD
Many investors think of tax-free municipal bonds as safe, uncomplicated
investments in public entities watched over by government officials. But the
world of municipal bonds, never simple, has become even more complex through
the years. There is far more involved than funding state highways, county
bridges and local schools.
In many cases it is a world of risk and reward. Tax-free municipal bonds are
used to finance projects that have a public purpose. Often the bonds finance
big projects, such as an airport expansion or a new hospital wing, and payments
to the bondholders are made by well-known companies that use the facilities.
Municipal bonds also finance smaller projects with a more local focus.
Fellowship Village, the New Jersey continuing care retirement facility, was
able to finance its construction with tax-free municipal bonds because it
serves such a public purpose.
[Begin Photo Caption]
The process of buying or selling a bond for American High-Income Municipal Bond
Fund's portfolio often begins with the bond traders. Here, Sue
Wilander-McDermott, left, and Beverly Houston discuss an upcoming bond issue,
while Glen Payne monitors prices in the market. [End Photo Caption]
How these bonds came to be in the portfolio of American High-Income
Municipal Bond Fund is a testament to the value of hard work and experience.
It is a tale of finding diamonds among the rhinestones, a search that combines
trading, research and portfolio management. In the municipal bond market, as in
other bond markets, there are securities, undervalued by the marketplace,
offering investors the opportunity for extra returns that more than compensate
for the risk.
INTENSIVE RESEARCH TELLS THE STORY
The story of the bonds in your fund's portfolio is one of hours, even days,
of analysts looking for value that other investors may have missed. We believe
Fellowship Village is such a value.
In 1994, a small regional bond underwriter in New Jersey began calling
potential investors to tell them about Fellowship Village. Across the country,
in a West Los Angeles trading room overlooking the busy San Diego Freeway, the
salesman found a receptive listener in Sue Wilander-McDermott.
THE POWER OF KNOWLEDGE AND EXPERIENCE
Sue, a municipal bond trader for Capital Research and Management Company
(CRMC), the investment adviser to American High-Income Municipal Bond Fund, is
a veteran who knows bankers and bond underwriters across the country.
Unlike the stock market, the bond market has no central clearing-house, no
ticker tape showing prices and trades. Bond markets are
[Begin Photo Caption]
Before American High-Income Municipal Bond Fund makes an investment, the fund's
portfolio counselors and analysts thoroughly research the offering. Here
analysts David Hoag, left, and Brenda Ellerin, discuss a proposed construction
project with portfolio counselors John Smet, second from left, and Mark
Macdonald. [End Photo Caption]
more regionally oriented. It's common for bonds to be issued, bought and sold
in one state while investors in another part of the country never hear about
them. That's why CRMC's bond traders maintain daily contact with underwriters
all over the country, to keep abreast of the market and make sure they know
about potentially good investments among upcoming issues.
Buying or selling bonds in the secondary market likewise requires the
experience and knowledge of skilled traders who know how to negotiate the best
possible price. Because of its size and buying power, CRMC can often
buy or sell at a more favorable price than small investors.
When she heard about Fellowship Village, Sue began questioning the salesman
closely. One concern was the size of the issue. If the issue is too small, the
fund may not be able to buy enough bonds to justify the time needed for the
thorough research done before every purchase.
TAKING A CLOSER LOOK
After talking with the salesman, it seemed clear the bonds deserved closer
scrutiny. They offered a good yield but, more importantly, CRMC had the
expertise to research and understand the issue.
Every bond in the AHIM portfolio is purchased only after such comprehensive
research. The underlying philosophy of your fund is to investigate every
holding thoroughly before investing.
It's common for analysts and portfolio counselors to spend dozens of hours
examining documents and to visit a site as part of their research. At every
step, two questions are asked again and again: "What are the risks and are
shareholders being properly compensated for these risks?"
[Begin Photo Caption]
Portfolio counselors for American High-Income Municipal Bond Fund must stay
abreast of all economic and political developments that affect the bond market.
Here, Abner Goldstine, left, president of the fund, and Neil Langberg, senior
vice president of the fund and a portfolio counselor, discuss recent events
affecting the bond market. [End Photo Caption]
One AHIM analyst recently spent two full weeks investigating a bond issue
being sold to finance a toll road. He talked with economists and planners, and
even flew over the area in a helicopter. However, investing the time and effort
doesn't guarantee the analyst will recommend buying the bond. In this case, the
analyst decided the bond's yield was too low for the risk involved and
recommended against purchasing the bond.
FELLOWSHIP VILLAGE
Continuing care communities like Fellowship Village offer a good middle
ground between a traditional nursing home and an active retirement community.
They offer retirees independence and allow couples to be near each other if one
person needs prolonged medical care.
There are about 1,000 continuing care facilities in the United States and
their popularity is rising as the number of retired Americans increases.
Residents typically pay a large lump sum when they move in - at Fellowship
Village rates range from $72,900 for one person in a studio to $319,700 for a
couple living in a detached home. In addition, there are monthly fees ranging
from $1,135 to $3,565. Residents are guaranteed lifetime housing and medical
care, including treatment in the on-site medical facility.
The task of further investigating the Fellowship Village bond issue fell to
AHIM portfolio counselor Mark Macdonald, who has followed the continuing care
industry for years and understands the risks and potential pitfalls. Because of
his extensive industry knowledge, Mark acted as both analyst and porfolio
counselor on this issue.
[Begin Side Bar]
WHY TAX-FREE INVESTING CAN BE WORTHWHILE
To use this table, find your estimated 1995 taxable income to determine your
federal tax rate. Then look at the right-hand column to see what you would have
had to earn to equal the fund's 5.61% tax-free distribution rate in July.
Because of the higher tax rates, many high-income investors are finding that
their returns
HERE'S WHAT TAX BRACKETS ARE NOW...
<TABLE>
<CAPTION>
If your taxable income is... ...and your ...your tax-free
marginal distribution rate of
federal 1995 5.61% is equal to a
tax rate is... taxable distribution rate of...
Single Joint
<S> <C> <C> <C>
$ 0 - 23,350 $ 0 - 39,000 15.0% 6.60%
23,351 - 56,550 39,001 - 94,250 28.0 7.79
56,551 - 117,950 94,251 - 143,600 31.0 8.13
117,951 - 256,500 143,601 - 256,500 36.0 8.77
Over 256,500 Over 256,500 39.6 9.27
</TABLE>
on taxable fixed-income issues have to be even higher to match those currently
offered by tax-exempt municipals. For instance, a couple with a taxable income
of $150,000 faces a federal tax rate of 36%. In this bracket, the fund's
current 5.61% distribution rate would be equivalent to a return on a taxable
issue of 8.77%. Investors in the highest bracket (39.6%) would need a taxable
distribution rate of 9.27% to match the fund's distribution rate.
[End Side Bar]
First, Mark looked into the background of the sponsor, a church group, and
the credentials of both the developer and the builder. He double-checked the
estimated ongoing costs and examined the actuarial studies used by the
developers. If too many residents were in the nursing facility, costs could
soar because there is no additional charge for nursing care. He asked how many
of the 235 units had been purchased before construction and learned that 93%
had been sold, an unusually high number.
ON-SITE INSPECTIONS
Mark then traveled to New Jersey to see Fellowship Village firsthand. He met
the developers and managers and even checked the local real estate market. Many
of Fellowship Village's residents will come from the area; a soft local real
estate market could mean fewer people would be able to sell their homes to
raise the move-in costs.
Ultimately, Mark decided that the project looked sound and that shareholders
would be properly rewarded if the fund invested: The bonds were paying a 9.25%
tax-free yield which compared very favorably to high quality bonds that were
then paying 6.65%.
Mark's research into Fellowship Village is typical of the exhaustive work of
CRMC's analysts and portfolio counselors. Their research requires insights into
the local economic and political climate as well as knowledge of the experience
and integrity of those building the facility. Because most of AHIM's
investments are in income-producing facilities, such as hospitals and airports,
analysts also study the economic feasibility of the projects by examining the
estimated costs as well as the expected income.
CONSTANTLY WATCHING THE MARKET
Fellowship Village is typical of many of the bonds in American High-Income
Municipal Bond Fund. Its purchase utilized the experience and knowledge of a
team of analysts, traders and portfolio counselors. Extensive time, research
and effort can be devoted to an individual issue because in AHIM's portfolio,
bonds such as Fellowship Village are seen as potential long-term investments,
rather than short-term opportunities for profit.
Research doesn't end when a bond is purchased by the fund. AHIM's team of
professionals constantly watches developments that could affect an issuer's
credit standing while also monitoring the market for attractive new investment
opportunities.
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.
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE
Palos Verdes Estates, California
Private investor; former President and Chief Executive Officer,
The Mission Group; former President, Southern California Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive Officer and President,
The Earth Technology Corporation
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board, Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER
Los Angeles, California
President, Fuller & Company, Inc.
(financial management consulting company)
ABNER D. GOLDSTINE
Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
Pasadena, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President and Chief Executive Officer,
AECOM Technology Corporation
(architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman of the Board and Chief Executive Officer,
BW/IP International, Inc.
(industrial manufacturing)
OTHER OFFICERS
NEIL L. LANGBERG
Los Angeles, California
Senior Vice President of the fund
Vice President - Investment Management Group,
Capital Research and Management Company
MARY C. CREMIN
Los Angeles, California
Vice President and Treasurer of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President - Fund Business Management Group,
Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Compliance Associate - Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR.
Los Angeles, California
Assistant Treasurer of the fund
Vice President - Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER, CAPITAL RESEARCH AND
MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
This report is for the information of shareholders of American High-Income
Municipal Bond Fund, but it may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after September 30, 1995, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA AGD/AL/2605
Lit. No. AHIM-011-0995
[The American Funds Group(R)]
