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. 3
and
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. 5
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)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
On September 12, 1996, it filed its 24f-2 notice for fiscal 1996.
Approximate date of proposed public offering:
It is proposed that this filing become effective on December 1, 1996,
pursuant to paragraph (a) of rule 485.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
CROSS REFERENCE SHEET
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ITEM NUMBER OF CAPTIONS IN PROSPECTUS (PART "A")
PART "A" OF FORM N-1A
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1. Cover Page Cover Page
2. Synopsis Expenses
3. Financial Highlights Financial Highlights; Investment Results
4. General Description of Registrant Fund Organization and Management; Investment
Policies and Risks;
Securities and Investment
Techniques
5. Management of the Fund Financial Highlights; Fund
Organization and Management
6. Capital Stock and Other Securities Investment Policies and Risks;
Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered Purchasing Shares; Fund Organization
and Management; Other Important Things to Remember
8. Redemption or Repurchase Selling Shares
9. Legal Proceedings N/A
</TABLE>
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ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
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10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History N/A
13. Investment Objectives and Policies Description of Certain Securities;
Fundamental Policies;
Investment Restrictions
14. Management of the Registrant Fund Officers and Directors
15. Control Persons and Principal Holders Fund Officers and Directors
of Securities
16. Investment Advisory and Other Services Fund Officers and Directors;
Fund Organization and
Management (Part "A");
General Information;
Management
17. Brokerage Allocation and Other Practices Execution of Portfolio Transactions;
Fund Organization and Management (Part "A")
18. Capital Stock and Other Securities None
19. Purchase, Redemption and Pricing of Purchase of Shares; Redeeming Shares;
Securities Being Offered Shareholder Account Services and Privileges;
Purchasing Shares (Part "A"); General Information
20. Tax Status Dividends and Distributions
21. Underwriter Management -- Principal Underwriter;
Fund Organization and Management (Part "A")
22. Calculation of Performance Data Investment Results
23. Financial Statements Financial Statements
</TABLE>
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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
DECEMBER 1, 1996
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
333 South Hope Street
Los Angeles, CA 90071
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 & POOR'S CORPORATION OR UNRATED BUT DETERMINED TO BE OF COMPARABLE
QUALITY. SECURITIES RATED BA AND 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 POLICIES AND RISKS," PAGE 4; AND
"SECURITIES AND INVESTMENT TECHNIQUES - DEBT SECURITIES," PAGE 4.)
This prospectus presents information you should know before investing in the
fund. You should keep it on file for future reference.
More detailed information about the fund, including the fund's financial
statements, is contained in the statement of additional information dated
December 1, 1996, which has been filed with the Securities and Exchange
Commission and is available to you without charge, by writing to the Secretary
of the fund at the above address or calling American Funds Service Company.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. The likelihood of loss is greater
if you intend to invest for a shorter period of time. Your investment in the
fund is not a deposit or obligation of, or insured or guaranteed by, any entity
or person including the U.S. Government and the Federal Deposit Insurance
Corporation.
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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
40-010-1296
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TABLE OF CONTENTS Fund Organization and
Expenses Management
Financial Highlights Shareholder Services
Investment Policies and Purchasing Shares
Risks
Securities and Selling Shares
Investment Techniques
Investment Results Other Important Things
to Remember
Dividends,
Distributions and Taxes
</TABLE>
EXPENSES
THE EFFECT OF THE EXPENSES DESCRIBED BELOW IS REFLECTED IN THE FUND'S SHARE
PRICE OR RETURN.
You may pay certain shareholder transaction expenses when you buy or sell
shares of a fund. Annual fund operating expenses are paid out of the fund's
assets and are factored into its share price.
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Shareholder Transaction Expenses
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Maximum sales charge on purchases (as a 4.75%
percentage of offering price)
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SALES CHARGES ARE REDUCED OR ELIMINATED FOR LARGER PURCHASES. The fund has no
sales charge on reinvested dividends, and no deferred sales charge or
redemption or exchange fees. A contingent deferred sales charge of 1% applies
on certain redemptions made within 12 months following purchases without a
sales charge.
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Annual Fund Operating Expenses (as a percentage of average net assets after fee waiver)
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Management fees %/1/
12b-1 expenses %/2/
Other expenses %
Total fund operating expenses %
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/1/ 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 0.86% of the average daily net assets. Without such a
waiver, fees (as a percentage of average net assets) would have been %.
/2/ 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually. 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.
Examples
Assuming a hypothetical annual return of 5% and shareholder transaction and
operating expenses as described above, for every $1,000 you invested, you would
pay the following expenses annually:
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One year $
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Three years
Five years
Ten years
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THESE EXAMPLES ARE NOT MEANT TO REPRESENT YOUR ACTUAL INVESTMENT RESULTS OR
EXPENSES, WHICH MAY VARY.
FINANCIAL HIGHLIGHTS
The following information has been derived from the fund's financial statements
which have been audited by Price Waterhouse LLP, independent accountants. This
table should be read toghether with the financial statements which are included
in the statement of additional information and the annual report.
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SELECTED PER-SHARE DATA
Years ended 1996 1995/1/
July 31
Net Asset Value, Beginning of Period $ $
INCOME FROM INVESTMENT OPERATIONS
Net investment income
Net realized and unrealized gain (loss) on investments
Total income from investment operations
LESS DISTRIBUTIONS
Dividends from net investment income ( ) ( )
From net realized gains ( ) ---
Total distributions ( ) ( )
Net Asset Value, End of Period $ $
Total Return/2/ % %/3/
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in millions) $ $
Ratio of expenses to average net assets %/4/ %/3/,/4/
Ratio of net income to average net assets % %/3/
Portfolio turnover rate % %/3/
</TABLE>
/1/The period ended July 31, 1995 represents the initial period of operations
from September 26, 1994 to July 31, 1995.
/2/Excludes maximum sales charge of 4.75%.
/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 . % and . % for
the periods shown.
INVESTMENT POLICIES AND RISKS
THE FUND'S INVESTMENT OBJECTIVE IS TO PROVIDE SHAREHOLDERS WITH A HIGH LEVEL OF
CURRENT INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAXES.
In achieving its objective, the fund may forego opportunities that would result
in capital gains and may accept prudent risks to capital value, in each case to
take advantage of opportunities for higher current income. Under normal market
conditions, at least 80% of the fund's total assets will be invested in tax
exempt securities with at least 65% in bonds rated A or below or unrated but
determined to be of comparable quality, and at least 50% in securities rated
Baa or BBB or below or unrated but determined to be of comparable quality. For
these purposes, bonds are considered to be any debt securities having
maturities in excess of one year. The fund may invest without limitation in
tax-exempt securities believed to pay interest constituting an item of tax
preference subject to alternative minimum taxes; therefore, while the fund's
distributions are not subject to regular federal income tax, a portion or all
may be included in determining a shareholder's federal alternative minimum tax.
The fund's investment policies are described below. A COMPLETE DESCRIPTION OF
THE INVESTMENT POLICIES IS CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL
INFORMATION.
The fund's investment restrictions (which are described in the statement of
additional information) and objective may not be changed without shareholder
approval. All other investment practices may be changed by the fund's board of
directors.
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.
SECURITIES AND INVESTMENT TECHNIQUES
DEBT SECURITIES Bonds and other debt securities are used by issuers to borrow
money. The issuer pays the investor a fixed or variable rate of interest, and
must repay the amount borrowed at maturity. Some debt securities, such as zero
coupon bonds, do not pay current interest, but are purchased at a discount from
their face values.
In general, bond prices rise when interest rates fall, and vice versa. Debt
securities have varying levels of sensitivity to changes in interest rates and
varying degrees of quality as measured by Moody's Investors Service, Inc.
(which rates bonds from Aaa to C) or Standard & Poor's Corporation (which rates
bonds from AAA to D) or as rated by the fund's investment adviser. Longer-term
bonds are generally more sensitive to interest rate changes than short-term
bonds.
The fund may invest its assets in securities rated Ba and BB or below. These
securities are commonly known as "junk" or "high-yield, high-risk" bonds.
High-yield, high-risk bonds have speculative characteristics and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness, or they may already be in default. The market prices of
these securities may fluctuate more than higher-quality securities and may
decline significantly. It may be more difficult to dispose of, or to determine
the value of, high-yield, high-risk bonds.
Up to 5% of the fund's total assets may be invested in "high-yield, high-risk"
securities rated as low as C or D. 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 13 for a complete
description of the bond ratings.
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 corporate and
legislative developments.
During the previous fiscal year, money market instruments and cash made up
7.20% of the fund's portfolio. The average monthly composition of the fund's
portfolio based on the higher of Moody's or S&P ratings for the fiscal year
ended July 31, 1996 was as follows:
Aaa/AAA - 3.91%
A/A - 6.74%
Baa/BBB - 43.20%
Ba/BB - 5.40%
Non-rated- 33.55%
Some or all of thse non-rated securities were determined to be equivalent to
securities rated by Moody's or S&P as follows:
Baa/BBB - 9.20%
Ba/BB - 17.85%
B/B - 6.50%
MUNICIPAL BONDS Municipal bonds are debt obligations generally issued to obtain
funds for various public purposes, including the construction of public
facilities. The interest on these obligations is generally not included in
gross income for federal income tax purposes. 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. 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. 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.
There are, in addition, a variety of hybrid and special types of municipal
obligations, such as zero coupon and pre-refunded bonds, 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.
FIRM COMMITMENTS The fund may purchase securities on a when-issued or
delayed-delivery basis or sell them on a delayed-delivery basis and enter into
firm commitment agreements. These are trading practices in which payment and
delivery for the securities take place at a future date. The fund does not
participate in further gains or losses with respect to the security. If the
other party to a delayed delivery transactions fails to deliver or pay for the
securities, the fund could miss a favorable price or yield opportunity, or
could experience a loss.
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.
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 securities with maturities in excess of three years.
ILLIQUID SECURITIES The fund will invest no more than 15% of its aggregate net
assets in illiquid securities, which generally are 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 issuers 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 for all such securities is exempt
from federal income tax. 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. 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.
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. Counselors decide how their
respective segments 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 on the following page.
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PORTFOLIO PRIMARY TITLE(S) YEARS OF EXPERIENCE YEARS OF EXPERIENCE AS
COUNSELORS FOR AS PORTFOLIO INVESTMENT PROFESSIONAL
AMERICAN HIGH-INCOME COUNSELOR FOR (APPROXIMATE)
MUNICIPAL BOND FUND AMERICAN
HIGH-INCOME
MUNICIPAL BOND FUND
(APPROXIMATE)
WITH CAPITAL TOTAL YEARS
RESEARCH AND
MANAGEMENT
COMPANY OR ITS
AFFILIATES
David A. Vice President, Less than 1 year 5 years 9 years
Hoag Capital Research
Company*
Neil L. Langberg Senior Vice President Since the fund began 18 years 18 years
of the fund. Vice operations**
President - Investment
Management Group,
Capital Research and
Management Company
Mark R. Vice President of the Since the fund began 2 years 11 years
Macdonald fund. Vice President operations**
- Investment
Management Group,
Capital Research and
Management Company
* A wholly owned subsidiary of Capital Research and Management Company
** The fund began operations on September 26, 1994
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INVESTMENT RESULTS
THE FUND MAY FROM TIME TO TIME COMPARE INVESTMENT RESULTS TO VARIOUS INDICES OR
OTHER MUTUAL FUNDS. FUND RESULTS MAY BE CALCULATED ON A TOTAL RETURN, YIELD,
AND/OR DISTRIBUTION RATE BASIS. RESULTS CALCULATED WITHOUT A SALES CHARGE WILL
BE HIGHER.
+ TOTAL RETURN is the change in value of an investment in the fund over a
given period, assuming reinvestment of any dividends and capital gain
distributions.
+ YIELD refers to the income generated by an investment in the fund over a
given period of time, expressed as an annual percentage rate. Because yield is
calculated using a formula mandated by the Securities and Exchange Commission
that differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
+ DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by annualizing the current month's dividend and
dividing by the average price for the month. The SEC yield reflects income the
fund expects to earn based on its current portfolio of securities, while the
distribution rate is based solely on the fund's past dividends. Accordingly,
the fund's SEC yield and distribution rate may differ.
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AVERAGE ANNUAL
COMPOUND RETURNS/#/
FUND/*/ LEHMAN /**/
One year +_____% +_____%
Lifetime/##/ +_____% +_____%
30-DAY
YIELD/#/ Distribution Rate
_____% %
/#/ All returns are as of September 30,
1996.
/*/ These fund results were calculated
according to a standard that is required by the
Securities and Exchange Commission. The
maximum sales charge has been deducted.
/**/ Lehman Brothers Municipal Bond Index
represents the long-term investment grade
municipal bond market.
/##/ The fund began investment operations
September 26, 1994.
</TABLE>
Past results 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 obtained without charge by writing to the Secretary of the
fund at the address indicated on the cover of this prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS The fund declares dividends from its net investment
income daily and distributes the accrued dividends to shareholders each month.
Dividends begin accruing one day after payment for shares is received by the
fund or American Funds Service Company. Capital gains, if any, are usually
distributed in November or December. When a capital gain is distributed, the
net asset value per share is reduced by the amount of the payment.
TAXES In any fiscal year in which the fund so qualifies and distributes to
shareholders all of its net investment income and net capital gains, the fund
itself is relieved of federal income tax. The fund is permitted to pass
through to its shareholders federally tax-exempt income subject to certain
requirements. However, the fund may invest in obligations which pay interest
that is subject to state and local taxes when distributed by the fund.
Dividends derived from taxable interest income or distributions of capital
gains will not be exempt from federal, state or local income tax.
Capital gains are taxable whether they are reinvested or received in
cash--unless you are exempt from taxation or entitled to tax deferral. Early
each year, you will be notified as to the amount and tax status of all income
distributions paid during the prior year. 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).
YOU MUST PROVIDE THE FUND WITH A CERTIFIED CORRECT TAXPAYER IDENTIFICATION
NUMBER (GENERALLY YOUR SOCIAL SECURITY NUMBER) AND CERTIFY THAT YOU ARE NOT
SUBJECT TO BACKUP WITHHOLDING. IF YOU FAIL TO DO SO THE IRS CAN REQUIRE THE
FUND TO WITHHOLD 31% OF YOUR TAXABLE DISTRIBUTIONS AND REDEMPTIONS. Federal
law also requires the fund to withhold 30% or the applicable tax treaty rate
from dividends paid to certain nonresident alien, non-U.S. partnership and
non-U.S. corporation shareholder accounts.
FUND ORGANIZATION AND MANAGEMENT
FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-end, diversified
management investment company, was organized as a Maryland corporation on June
14, 1994. All fund operations are supervised by the fund's board of directors
who meet periodically and perform duties required by applicable state and
federal laws. The fund does not hold annual meetings of shareholders.
However, significant corporate matters which require shareholder approval, such
as certain elections of board members or a change in a fundamental investment
policy, will be presented to shareholders at a meeting called for such purpose.
Shareholders have one vote per share owned.
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 headquartered at 333
South Hope Street, Los Angeles, CA 90071. Capital Research and Management
Company manages the investment portfolio and business affairs of the fund. The
management fee paid by the fund to Capital Research and Management Company is
composed of a basic management fee which may not exceed 0.30% of the fund's
average net assets annually and declines at certain asset levels, plus 3% of
the fund's annual gross income. The total management fee paid by the fund for
the previous fiscal year is listed above under "Expenses."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the Investment Company
Institute's Advisory Group on Personal Investing. (See the statement of
additional information.) This policy has also been incorporated into the
fund's "code of ethics" which is available from the fund's Secretary upon
request.
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 preceding 12 months and accrued
while the plan is in effect. The 12b-1 fee paid by the fund for the last
fiscal year is listed above under "Expenses."
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 underwriter, 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. In the
over-the-counter market, purchases and sales are transacted directly with
principal market-makers except in those circumstances where it appears better
prices and executions are available elsewhere.
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 who
have sold shares of the fund or have provided investment research, statistical,
and other related services for the benefit of the fund and/or other funds
served by Capital Research and Management Company.
PRINCIPAL UNDERWRITER AND TRANSFER AGENT American Funds Distributors, Inc. and
American Funds Service Company serve as the principal underwriter and transfer
agent for the fund, respectively. They are headquartered at 333 South Hope
Street, Los Angeles, CA 90071 and 135 South State College Boulevard, Brea, CA
92821, respectively.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREA
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SERVICE AREA ADDRESS AREAS SERVED
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WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92822-2205 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.
</TABLE>
PHONE NUMBERS TO CALL FOR SERVICE AND
INFORMATION
Call American Funds Service Company
for shareholder services 800/421-0180
ext. 1
Call American Funds Distributors
for dealer services 800/421-9900
ext. 11
Call American FundsLine/R/
for 24-hour information 800/325-3590
Telephone conversations may be recorded or
monitored for verification,
recordkeeping and quality assurance purposes.
APPENDIX
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities in 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."
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 on interest is being paid."
"D - In default and payment of interest and/or repayment of principal is in
arrears."
<PAGE>
SHAREHOLDER SERVICES
The fund offers you a valuable array of services you can use to alter your
investment program as your needs and circumstances change. These services,
which are summarized below, are available only in states where they may be
legally offered and may be terminated or modified at any time upon 60 days'
written notice. A COMPLETE DESCRIPTION OF SHAREHOLDER SERVICES AND ACCOUNT
POLICIES IS CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION. In
addition, an easy-to-read guide to owning a fund in The American Funds Group
titled "Welcome to the Family" is sent to new shareholders and isavailable upon
request.
PURCHASING SHARES
HOW TO PURCHASE SHARES You may open an account by contacting any investment
dealer authorized to sell the fund's shares. You may add to your account
through your dealer or directly through American Funds Service Company by mail,
wire, or bank debit. You may also establish or add to your account by
exchanging shares from any of your other accounts in The American Funds Group
(see below).
Various purchase options are available as described below subject to certain
investment minimums and limitations described in the statement of additional
information.
+ Automatic Investment Plan
You may invest monthly or quarterly through automatic withdrawals from your
bank account.
+ Automatic Reinvestment
You may reinvest your dividends and capital gain distributions into the fund
(with no sales charge). This will be done automatically UNLESS you elect to
have the dividends and/or capital gain distributions paid to you in cash.
+ Cross-Reinvestment
You may invest your dividend and capital gain distributions into any other fund
in The American Funds Group.
+ Exchange Privilege
You may exchange your shares into other funds in The American Funds Group with
no sales charge. Exchanges of shares from the money market funds that were
initially purchased with no sales charge will generally be subject to the
appropriate sales charge. You may also elect to automatically exchange shares
among any of the funds in The American Funds Group. Exchange requests may be
made in writing, by telephone including American FundsLine/R/ (see below) or by
fax. EXCHANGES HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
+ Retirement Plans
You may invest in the funds through various retirement plans. For further
information contact your investment dealer or American Funds Distributors.
SHARE PRICE The fund's share price, also called net asset value, is determined
as of the close of trading (normally 4:00 p.m., Eastern time) every day the New
York Stock Exchange is open. The fund calculates its net asset value per share
by dividing the total value of its assets after subtracting liabilities by the
number of its shares outstanding. Shares are purchased at the offering price
next determined after your investment is received and accepted by American
Funds Service Company. The offering price is the net asset value plus a sales
charge, if applicable.
SHARE CERTIFICATES Shares are credited to your account and certificates are
not issued unless you request them by writing to American Funds Service
Company.
INVESTMENT MINIMUMS
<TABLE>
<CAPTION>
<S> <C>
To establish an account $1,000
To add to an account $50
</TABLE>
SALES CHARGES You may pay a sales charge when purchasing shares. Sales charges
may be reduced for larger purchases as indicated below.
<TABLE>
<CAPTION>
Investment Sales Charge as a Percentage of Dealer Concession as %
of Offering Price
<S> <C> <C> <C>
Offering Price Net Amount
Invested
Less than $25,000 4.75% 4.99% 4.00%
$25,000 but less than $50,000 4.50% 4.71% 3.75%
$50,000 but less than $100,000 4.00% 4.17% 3.25%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1 million 2.00% 2.04% 1.60%
$1 million or more and certain other see below see below see below
investments described below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES Investments of $1 million or more and
investments made by employer-sponsored defined contribution-type plans with 200
or more eligible employees are sold with no initial sales charge. A 1%
CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED ON CERTAIN REDEMPTIONS MADE
WITHIN ONE YEAR OF PURCHASE BY THESE ACCOUNTS. A dealer concession of up to 1%
may be paid by the fund from its Plan of Distribution on these investments.
Investments by retirement plans with $100 million or more in assets may be made
with no sales charge and are not subject to a contingent deferred sales charge.
A dealer concession of up to 1% may be paid by American Funds Distributors on
these investments. Investments by certain individuals and entities including
employees and other associated persons of dealers authorized to sell shares of
the fund and Capital Research and Management Company and its affiliated
companies are not subject to a sales charge.
ADDITIONAL DEALER COMPENSATION In addition to the concessions listed, up to
0.25% of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. During 1996,
American Funds Distributors will also provide additional compensation to the
top one hundred dealers who have sold shares of funds in The American Funds
Group based on the pro rata share of a qualifying dealer's sales.
REDUCING YOUR SALES CHARGE You and your immediate family may combine
investments to reduce your costs. 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 below.
+ Aggregation Investments that may be aggregated include those made by you,
your spouse and your children under the age of 21, if all parties are
purchasing shares for their own account(s), including any retirement plan or
business account solely "controlled by", as well as any trust account solely
for the benefit, of these individuals. Investments made for multiple employee
benefit plans of a single employer or "affiliated" employers may be aggregated
provided they are not also aggregated with individual accounts. Finally,
investments made by a common trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating fund shares may be
aggregated.
Purchases made for nominee or street name accounts will generally not be
aggregated with those made for other accounts unless qualified as described
above.
+ Concurrent Purchases
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.
+ Right of Accumulation
You may take into account the current value of
your existing holdings in The American Funds Group to determine your sales
charge. Direct purchases of the money market funds are excluded.
+ Statement of Intention
You may enter into a non-binding commitment to invest a certain amount in
non-money market fund shares over a 13-month period. A portion of your account
may 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.
SELLING SHARES
HOW TO SELL SHARES You may sell (redeem) shares in your account by contacting
your investment dealer or American Funds Service Company. You may also use
American FundsLine/R/ (see below). You may also sell shares in amounts of $50
or more automatically. If you sell shares through your investment dealer you
may be charged for this service. Shares held for you in your dealer's street
name must be sold through the dealer.
Shares are sold at the net asset value next determined after your request is
received and accepted by American Funds Service Company. Sale requests may be
made in writing, by telephone including American FundsLine/R/ (see below) or by
fax. Sales by telephone or fax are limited to $10,000 in accounts registered
to individual(s) (including non-retirement trust accounts). In addition,
checks must be made payable to the registered shareholder(s) and mailed to an
address of record that has been used with the account for at least 10 days.
Proceeds will not be mailed until sufficient time has passed to provide
reasonable assurance that checks or drafts (including certified or cashier's
check) for shares purchased have cleared. 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), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
The fund may, with 60 days' written notice, close your account if due to a sale
of shares, the account has a value of less than the minimum required initial
investment.
Generally, written requests to sell shares must be signed by you and must
include any shares you wish to sell that are in certificate form. Your
signature must be guaranteed by a bank, savings association, credit union, or
member firm of a domestic stock exchange or the National Association of
Securities Dealers, Inc., that is an eligible guarantor institution. A
signature guarantee is not currently required for any sale of $50,000 or less
provided the check is made payable to the registered shareholder(s) and is
mailed to the address of record on the account, provided the address has been
used with the account for at least 10 days. Additional documentation may be
required for sale of shares held in corporate, partnership or fiduciary
accounts.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge in any fund in The American Fund Group
within 90 days after the date of the redemption or distribution. Reinvestment
will be at the next calculated net asset value after receipt and acceptance by
American Funds Service Company.
OTHER IMPORTANT THINGS TO REMEMBER
AMERICAN FUNDSLINE/R/ You may check your share balance, the price of your
shares, or your most recent account transactions, sell 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.
TELEPHONE PURCHASES, SALES AND EXCHANGES Unless you opt out of the telephone
(including American FundsLine/R/) or fax purchase, sale and/or exchange options
(see below), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges.
Generally, all shareholders are automatically eligible to use these options.
However, you may elect to opt out of these options by writing American Funds
Service Company. (You may also reinstate them at any time by writing to
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.
ACCOUNT STATEMENTS You will receive regular confirmation statements reflecting
transactions in your account. Purchases through automatic investment plans
will be confirmed at least quarterly.
THIS PROSPECTUS HAS BEEN PRINTED ON RECYCLED PAPER USING SOY-BASED INK.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
Part B
Statement of Additional Information
December 1, 1996
This document is not a prospectus but should be read in conjunction
with the current prospectus dated December 1, 1996 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 18
Redeeming Shares 24
Shareholder Account Services and Privileges 26
Execution of Portfolio Transactions 28
General Information 28
Investment Results 29
Financial Statements
</TABLE>
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Policies and Risks."
HIGH-YIELD, HIGH-RISK BONDS - The fund may invest in bonds that are rated Ba
or below by Moody's and BB or below by S&P or determined to be of comparable
quality, commonly known as "junk" or "high-yield, high-risk" bonds.
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 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.
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
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.
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 additional cash to meet its obligations
thereunder.
TEMPORARY INVESTMENTS -- The fund may invest in short-term municipal
obligations of up to one year in maturity during periods of temporary defensive
strategy resulting from abnormal market conditions, or when such investments
are considered advisable for liquidity. Generally, the income from all such
securities is exempt from federal income tax. See "Additional Information
Concerning Taxes" below. 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 investments
may include: (1) obligations of the U.S. Treasury; (2) obligations of agencies
and instrumentalities of the U.S. Government; and (3) money market instruments,
such as certificates of deposit issued by 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).
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.
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 POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
AGE WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
REGISTRANT DURING (INCLUDING FROM ALL FUNDS OF FUND
PAST 5 YEARS VOLUNTARILY MANAGED BY BOARDS ON
(POSITIONS WITHIN DEFERRED CAPITAL WHICH
THE COMPENSATION/1/) RESEARCH AND DIRECTOR
ORGANIZATIONS FROM THE MANAGEMENT SERVES/2/
LISTED MAY HAVE COMPANY COMPANY/2/ FOR
CHANGED DURING THIS DURING FISCAL THE YEAR ENDED
PERIOD) YEAR ENDED JULY 31, 1996
JULY 31, 1996
<S> <C> <C> <C> <C> <C>
++ H. Frederick Director Private Investor. $/3/ $ 18
Christie The Mission
P.O. Box 144 Group (non-utility
Palos Verdes holding
Estates, CA 90274 Company, subsidiary
Age: 63 of Southern
California Edison
Company),
former President
and Chief
Executive Officer
Diane C. Creel Director CEO and President, $ $ 12
100 W. Broadway The Earth
Suite 5000 Technology
Long Beach, CA Corporation
90802 (environmental
Age: 47 engineering)
Martin Fenton, Jr. Director Chairman, Senior $ $ 16
4350 Executive Resource Group
Drive (management of
Suite 101 senior living
San Diego, CA centers)
92121-2116
Age: 61
Leonard R. Fuller Director President, Fuller & $ $ 12
4337 Marina City Company, Inc.
Drive (financial
Suite 841 ETN management
Marina del Rey, CA consulting
90292 firm)
Age: 50
+* Abner D. President, Capital Research none/4/ none/4/ 12
Goldstine PEO and and Management
Age: 66 Director Company, Senior
Vice President
and Director
+**Paul G. Haaga, Chairman Capital Research none/4/ none/4/ 14
Jr. of and Management
Age: 47 the Board Company, Senior
Vice President
and Director
Herbert Hoover III Director Private Investor $ $ 14
1520 Circle Drive
San Marino, CA
91108
Age: 68
Richard G. Newman Director Chairman, President $/3/ $ 13
3250 Wilshire and CEO,
Boulevard AECOM Technology
Los Angeles, CA Corporation
90010-1599 (architectural
Age: 61 engineering)
Peter Valli Director Chairman, BW/IP $/3/ $ 12
45 Sea Isle Drive International Inc.
Long Beach, CA (industrial
90803 manufacturing)
Age: 69
</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: H. Frederick Christie ($ ), Richard G. Newman ($ ) and
Peter C. Valli ($ ). 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. Hall, VICE PRESIDENT. 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
** Anthony W. Hynes, Jr., TREASURER. Capital Research and Management
Company, Vice President - Fund Business Management Group
* Kimberly S. Verdick, ASSISTANT SECRETARY. Capital Research and Management
Company, Assistant Vice President - Fund Business Management Group
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92821.
*** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
No compensation is paid by the fund to any officer or 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 (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have years of investment experience. The
Investment Adviser is located at 333 South Hope Street, Los Angeles, CA 90071,
and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world.
The Investment Adviser believes that it is able to attract and retain quality
personnel. The Investment Adviser is a wholly owned subsidiary of The Capital
Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of
stocks, bonds and money market instruments and 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 May 31, 1997, unless sooner terminated,
and may be renewed from year to year thereafter provided that any such renewal
has been specifically approved at least annually by (i) the Board of 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).
The Investment Adviser receives a fee at the annual rate of $0.30% on
the first $60 million of 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.
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. CRMC has also
voluntarily agreed to waive its fees to the extent necessary to ensure that the
fund's expenses do not exceed 0.74% of the average daily net assets. There can
be no assurance that this voluntary fee waiver will continue in the future.
During the period, the Investment Adviser's total fees amounted to $ .
Voluntary fee waivers amounted to $ for the period ended July 31,
1996.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of Distribution
(the "Plan"), pursuant to rule 12b-1 under the 1940 Act. The Principal
Underwriter receives amounts payable pursuant to the Plan (see below) and
commissions consisting of that portion of the sales charge remaining after the
discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the period ended July 31,
1996 amounted to $ after allowance of $ 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 (including purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees). 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 $ under the plan as
compensation to dealers. As of July 31, 1996, accrued and unpaid distribution
expenses were $ .
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 federal individual tax rate applicable to ordinary income is 35%
(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
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
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See "Investment Minimums $50 minimum (except where a lower
and Fund Numbers" for minimum is noted under "Investment
initial investment Minimums and Fund Numbers").
minimums.
By contacting Visit any investment Mail directly to your investment
your dealer who is registered dealer's address printed on your
investment in the state where the account statement.
dealer purchase is made and who
has a sales agreement with
American Funds
Distributors.
By mail Make your check payable to Fill out the account additions form
the fund and mail to the at the bottom of a recent account
address indicated on the statement, make your check payable to
account application. the fund, write your account number
Please indicate an on your check, and mail the check and
investment dealer on the form in the envelope provided with
account application. your account statement.
By telephone Please contact your Complete the "Investments by Phone"
investment dealer to open section on the account application or
account, then follow the American FundsLink Authorization
procedures for additional Form. Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call American
FundsLine(r) and make investments by
telephone (subject to conditions
noted in "Telephone Purchases,
Redemptions and Exchanges" below).
By wire Call 800/421-0180 to Your bank should wire your additional
obtain your account investments in the same manner as
number(s), if necessary. described under "Initial Investment."
Please indicate an
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.
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PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In the case of orders sent directly to the fund or American Funds
Service Company, and investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated closing price. The net asset value per share of the money
market funds normally will remain constant at $1.00 based on the fund's current
practice of valuing their shares using the penny-rounding method in accordance
with rules of the Securities and Exchange Commission.
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) as set forth below each day the
New York Stock Exchange is open. 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.
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):
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MINIMUM FUND
FUND INITIAL NUMBER
INVESTMENT
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STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
SMALLCAP World Fund(sm) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(sm) 40
$1,000
American High-Income Trust(r) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(r) 31
1,000
Intermediate Bond Fund of America(r) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(sm) 19
1,000
The Tax-Exempt Fund of California(r)* 20
1,000
The Tax-Exempt Fund of Maryland(r)* 24
1,000
The Tax-Exempt Fund of Virginia(r)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the
money market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
STATEMENT OF INTENTION - The reduced sales charges and offering prices set
forth in the prospectus apply to purchases of $25,000 or more made within a
13-month period subject to the following statement of intention (the
"Statement") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize the Statement in order
to qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by the
Transfer Agent. All dividends and capital gain distributions on these shares
held in escrow will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser 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 45 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. Existing
holdings eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement
plans by payroll deduction, the sales charge for the investments made during
the 13-month period will be handled as follows: The regular monthly payroll
deduction investment will be multiplied by 13 and then multiplied by 1.5. The
current value of existing American Funds investments (other than money market
fund investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period are
added to the figure determined above. The sum is the Statement amount and
applicable breakpoint level. On the first investment and all other investments
made pursuant to the Statement, a sales charge will be assessed according to
the sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a
Statement indicate their acceptance of these terms with their first
purchase.
DEALER COMMISSIONS - The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
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SALES CHARGE AS DEALER
AMOUNT OF PURCHASE PERCENTAGE OF THE: CONCESSION
AT THE OFFERING PRICE AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $50,000
6.10% 5.75% 5.00%
$50,000 but less than $100,000
4.71 4.50 3.75
BOND FUNDS
Less than $25,000
4.99 4.75 4.00
$25,000 but less than $50,000
4.71 4.50 3.75
$50,000 but less than $100,000
4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000
3.63 3.50 2.75
$250,000 but less than $500,000
2.56 2.50 2.00
$500,000 but less than $1,000,000
2.04 2.00 1.60
$1,000,000 or more (see below)
none none
</TABLE>
Commissions of up to 1% will be paid, to dealers who initiate and are
responsible for purchases of $1 million or more, for purchases by any
employer-sponsored 403(b) plan or purchases by any defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
American Funds Distributors, at its expense (from a designated
percentage of its income), will, during calendar year 1996, provide additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or any other purchaser
investing at least $1 million in shares of the fund (or in combination with
shares of other funds in The American Funds Group other than the money market
funds) may purchase shares at net asset value; however, a contingent deferred
sales charge of 1% is imposed on certain redemptions made within twelve months
of the purchase. (See "Redeeming Shares--Contingent Deferred Sales
Charge.")
Qualified dealers currently are paid a continuing service fee not to
exceed 0.25% of average net assets (0.15% in the case of the money market
funds) annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
NET ASSET VALUE PURCHASES - The stock, stock/bond and bond funds may sell
shares at net asset value to: (1) current or retired directors, trustees,
officers and advisory board members of the funds managed by Capital Research
and Management Company, employees of Washington Management Corporation,
employees and partners of The Capital Group Companies, Inc. and its affiliated
companies, certain family members of the above persons, and trusts or plans
primarily for such persons; (2) current registered representatives, retired
registered representatives with respect to accounts established while active,
or full-time employees (and their spouses, parents, and children) of dealers
who have sales agreements with American Funds Distributors (or who clear
transactions through such dealers) and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer; (4) trustees or other fiduciaries purchasing shares for
certain retirement plans of organizations with retirement plan assets of $100
million or more; (5) insurance company separate accounts; (6) accounts managed
by subsidiaries of The Capital Group Companies, Inc.; and (7) The Capital Group
Companies, Inc., its affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to these persons and
organizations due to anticipated economies in sales effort and expense.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
Redeeming Shares
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By writing to American Funds Send a letter of instruction specifying the name of the
Service Company (at the fund, the number of shares or dollar amount to be sold,
appropriate address indicated your name and account number. You should also enclose
under "Fund Organization and any share certificates you wish to redeem. For
Management - Transfer Agent") redemptions over $50,000 and for certain redemptions of
$50,000 or less (see below), your signature must be
guaranteed by a bank, savings association, credit union,
or member firm of a domestic stock exchange or the
National Association of Securities Dealers, Inc. that is
an eligible guarantor institution. You should verify
with the institution that it is an eligible guarantor
prior to signing. Additional documentation may be
required for redemption of shares held in corporate,
partnership or fiduciary accounts. Notarization by a
Notary Public is not an acceptable signature guarantee.
By contacting your investment If you redeem shares through your investment dealer, you
dealer may be charged for this service. SHARES HELD FOR YOU IN
YOUR INVESTMENT DEALER'S STREET NAME MUST BE REDEEMED
THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is
check sent to you by using registered in the name of an individual(s), a UGMA/UTMA
American FundsLine(r) or by custodian, or a non-retirement plan trust. These
telephoning, faxing, or redemptions may not exceed $10,000 per day, per fund
telegraphing American Funds account and the check must be made payable to the
Service Company (subject to shareholder(s) of record and be sent to the address of
the conditions noted in this record provided the address has been used with the
section and in "Telephone account for at least 10 days. See "Transfer Agent" and
Purchases, Redemptions and "Exchange Privilege" below for the appropriate telephone
Exchanges" below) or fax number.
In the case of the money Upon request (use the account application for the money
market funds, you may have market funds) you may establish telephone redemption
redemptions wired to your bank privileges (which will enable you to have a redemption
by telephoning American Funds sent to your bank account) and/or check writing
Service Company ($1,000 or privileges. If you request check writing privileges,
more) or by writing a check you will be provided with checks that you may use to
($250 or more) draw against your account. These checks may be made
payable to anyone you designate and must be signed by
the authorized number of registered shareholders exactly
as indicated on your checking account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY REDEMPTION OF
$50,000 OR LESS PROVIDED THE REDEMPTION CHECK IS MADE PAYABLE TO THE REGISTERED
SHAREHOLDER(S) AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE ADDRESS HAS
BEEN USED WITH THE ACCOUNT FOR AT LEAST 10 DAYS.
CONTINGENT DEFERRED SALES CHARGE - A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 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.
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 at least quarterly. Participation in the plan will
begin within 30 days after receipt of the account application. If the
shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or closing of the account, the plan may be terminated and
the related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing the Transfer
Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
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).
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The
American Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company
(see "Redeeming Shares"), by contacting your investment dealer, by using
American FundsLine(r) (see "American FundsLine(r)" below), or by telephoning
800/421-0180 toll-free, faxing (see "Transfer Agent" below for the appropriate
fax numbers) or telegraphing American Funds Service Company. (See "Telephone
Redemptions and Exchanges" below.) Shares held in corporate-type retirement
plans for which Capital Guardian Trust Company serves as trustee may not be
exchanged by telephone, fax or telegraph. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "Purchase of Shares--Price of Shares.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND
PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of
$50 or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
ACCOUNT STATEMENTS Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans will be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) You may check your share balance, the price of your
shares, or your most recent account transaction, redeem shares (up to $10,000
per fund, per account each day), or exchange shares around the clock with
American FundsLine(r). To use this service, call 800/325-3590 from a TouchTonet
telephone. Redemptions and exchanges through American FundsLine(r) are subject
to the conditions noted above and in "Redeeming Shares--Telephone Redemptions
and Exchanges" below. You will need your fund number (see the list of funds in
The American Funds Group under "Purchase of Shares--Investment Minimums and
Fund Numbers"), personal identification number (the last four digits of your
Social Security number or other tax identification number associated with your
account) and account number.
TELEPHONE REDEMPTIONS AND EXCHANGES - By using the telephone (including
American FundsLineR), 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.
REDEMPTION OF SHARES
The fund's Declaration of Trust permits the fund to direct the Transfer
Agent to redeem the shares of any shareholder if the shares owned by such
shareholder through redemptions, market decline or otherwise, have a value of
less than the minimum initial investment amount required of new shareholders of
that series or Class, (determined, for this purpose only as the greater of the
shareholder's cost or the current net asset value of the shares, including any
shares acquired through reinvestment of income dividends and capital gain
distributions). Prior notice of at least 60 days will be given to a
shareholder before the involuntary redemption provision is made effective with
respect to the shareholder's account. The shareholder will have not less than
30 days from the date of such notice within which to bring the account up to
the minimum determined as set forth above.
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.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary
of the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. When fund shares are purchased by an insurance
company separate account to serve as the underlying investment vehicle for
variable insurance contracts, the fund may pay a fee to the insurance company
or another party for performing certain transfer agent services with respect to
contract owners having interests in the fund. It was paid a fee of $
for the fiscal year ended July 31, 1996.
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
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1996
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $
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) $
</TABLE>
INVESTMENT RESULTS
The fund's yield is % based on a 30-day (or one month) period
ended July 31, 1996, computed by dividing the net investment income per share
earned during the period by the maximum offering price per share on the last
day of the period, according to the following formula:
YIELD = 2[(a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund may also calculate a 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, 1996 was %.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by annualizing the current
month's dividend and dividing by the average net asset value or maximum
offering price for the month. The distribution rate may differ from the
yield.
As of July 31, 1996, the fund's total return over the past twelve
months and average annual total return over its lifetime were % and
%, respectively. Over the fund's lifetime (September 26, 1994 to July 31,
1996) the Lehman Brothers Municipal Bond Index/1/ had an average annual total
return of %.
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.
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 January 1, 1966 during which those funds were managed by
Capital Research and Management Company (121 in all), those funds have had
better total returns than the Standard and Poor's 500 Stock Composite Index in
94 of the 121 periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may also refer to results compiled by organizations such as
Lipper Analytical Services, Morningstar, Inc. and Wiesenberger Investment
Companies Services. Additionally, the fund may, from time to time, refer to
results published in various newspapers or periodicals, including Barrons,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.
/1/ The Lehman Brothers 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 BBB by
Standard & Poor's Corporation.
PART C
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights (to be provided by amendment)
Included in Statement of Additional Information - Part B (to be provided by
amendment)
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. (to be provided by amendment)
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. (to be provided by amendment)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of July 31, 1996
<TABLE>
<CAPTION>
Title of Class Number of
Record Holders
<S> <C>
Capital Stock 7,460
($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).
ITEM 27. INDEMNIFICATION (CONT.)
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,
Suite 227A
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Bryn Wood 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
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior 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 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
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
* Larry P. Clemmensen Director and Treasurer None
* Kevin G. Clifford Director and Senior None
Vice President
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
4116 Woodbine Street
Chevy Chase, MD 20815
* Carl D. Cutting Vice President None
+ Charline Dawkins Assistant Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street, Suite A
Jenks, OK 74037
Kirk D. Dodge Regional 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
* Paul H. Fieberg Senior Vice President None
John Fodor Regional Vice President None
15 Latisquama Road
Southborough, MA 01772
* 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 S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
* Michael J. Johnston Chairman of the Board None
* Robert L. Johansen Vice President and None
Controller
# Damien Jordan Senior Vice President None
* V. John Kriss Senior Vice President None
P.O. Box 274
Surfside, CA 90743
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
* Lorin E. Liesy Assistant Vice President None
* Susan G. Lindgren Vice President - None
Institutional Investment
Services Division
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Director and Senior None
Vice President
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
920 Edgeside Avenue
Tucson, AZ 85748
& 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 98029
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
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 S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
* James F. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
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, Suite 4
Marina del Rey, CA 90292
Joseph D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* Daniel B. Seivert Assistant Vice President None
* R. Michael Shanahan Director None
* David W. Short Director and Senior Vice None
President
* 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
* Mary E. Smith Assistant Vice President - None
Institutional Investment
Services Division
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
Thomas A. Stout Regional Vice President None
12913 Kendale Lane
Bowie, MD 20715
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
* Drew Taylor Assistant Vice President None
& 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
# Laura Wimberly Assistant Vice President None
*@ Marshall D. Wingo Director and Senior Vice None
President
* Robert L. Winston Director and Senior Vice None
President
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
Scott D. Zambon Regional Vice President None
209 Robinson Drive
Tustin Ranch, CA 92782
</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 92821
& 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 92821.
Records covering shareholder accounts are maintained and kept by the
transfer agent, American Funds Service Company, 135 South State College Blvd.,
Brea, CA 92821, 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 has duly caused this
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
26th day of September, 1996.
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 its registration statement has been signed below on September 26, 1996, 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:
Treasurer
/s/ Anthony W. Hynes, Jr.
(Anthony W. Hynes, Jr.)
(3) Directors:
H. Frederick Christie* Director
Diane C. Creel* Director
Martin Fenton, Jr.* Director
Leonard R. Fuller* Director
/s/ Abner D. Goldstine President and Director
(Abner D. Goldstine)
Herbert Hoover III* Director
Richard G. Newman* Director
Peter C. Valli* Director
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
</TABLE>
