AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
1996 ANNUAL REPORT
for the year ended July 31
[The American Funds Group(R)]
American High-Income Municipal Bond Fund(R) seeks a high level of current
income exempt from regular federal income taxes through a diversified,
carefully researched portfolio of higher yielding, lower rated, higher risk
municipal bonds. It may invest up to 100% of its assets in bonds subject to the
alternative minimum tax.
About our cover: Investors in American High-Income Municipal Bond Fund finance
public works projects across the country, including those that bring together
private enterprise and the public good.
Total Returns After Deducting the
Maximum Sales Charge
(for periods ended July 31, 1996)
Lifetime
(since inception on September 26, 1994) +15.35%
One Year +3.29
[chart]
Charting a $10,000 Investment in American High-Income
Municipal Bond Fund (for the period September 26, 1994 to
July 31, 1996, with dividends reinvested)
<TABLE>
<CAPTION>
The fund at Lehman The fund at
net asset Brothers maximum
value Municipal offering
(without Bond Index price (with
any sales /1/ 4.75% sales
charge) charge
deducted) /2/
<S> <C> <C> <C>
9/26/94 $10,000 $10,000 $9,525
10/31/94 9,886 9,822 9,418
1/31/95 10,287 10,139 9,800
4/30/95 10,760 10,566 10,251
7/31/95 11,162 10,910 10,634
10/31/95 11,534 11,280 10,988
1/31/96 11,904 11,665 11,340
4/30/96 11,692 11,406 11,139
7/31/96 12,108 11,630 11,535
</TABLE>
/1/The index is unmanaged and does not reflect sales charges, commissions or
expenses.
/2/These figures, unlike those shown elsewhere in this report, reflect payment
of the maximum sales charge of 4.75% on the $10,000 investment. Thus, the net
amount invested was $9,525.
Past results are not predictive of future results.
[end chart]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual compound
return with all distributions reinvested for periods ended June 30, 1996 (the
most recent calendar quarter), assuming payment of the 4.75% maximum sales
charge at the beginning of the stated periods - Since inception on September
26, 1994: +14.12%, or +7.79% a year; 12 months: +3.15%. Sales charges are lower
for accounts of $25,000 or more. These results reflect the effect of a fee
waiver. Without the waiver, the results would have been lower. The fund's
30-day yield as of August 31, 1996, calculated in accordance with the
Securities and Exchange Commission formula, was 5.51%. The fund's distribution
rate as of that date was 5.50%. 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.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON. While the fund invests for
income that is exempt from regular federal income taxes, that income may be
subject to state or local income taxes and/or federal alternative minimum
taxes. Also, distributions from gains on the disposition of certain bonds
purchased at less than par value and capital gain distributions, if any, are
taxable.
FELLOW SHAREHOLDERS:
American High-Income Municipal Bond Fund enjoyed a successful year in fiscal
1996, earning solid returns during a period that saw a full cycle of declining
and rising interest rates.
For the 12 months ended July 31, the value of your holdings rose 8.5% if
you reinvested your dividends, as most shareholders do. That outpaced the 6.0%
total return of the average high-yield municipal bond fund, as measured by
Lipper Analytical Services, a leading mutual fund tracking service. The
unmanaged Lehman Brothers Municipal Bond Index, which measures investment-grade
municipal bonds, returned 6.6% over the same period.
Shareholders received monthly dividends totaling 88 cents a share and a
capital gain distribution of 28 cents a share during the year. Shareholders who
took their dividends in cash saw the value of their investment rise 2.4%. They
also received an income return of 5.9%. This translates into an equivalent
taxable income return of 9.8% for taxpayers in the 39.6% income tax bracket.
These strong results helped your fund achieve a number one Lipper ranking
among its peers for the year (1 of 41) and over its brief lifetime (1 of 35)
since September 1994. Lipper rankings do not reflect the effects of sales
charges.
As this fiscal year began, interest rates continued their downward
movement. This, as you know, is good for bond prices, which move inversely to
yields. In February, rates reversed course for several months before turning
down again in mid-June.
American High-Income Municipal Bond Fund's fortunes, while influenced by
interest rates, also are linked to the strength of the economy. A strong
economy means healthier financial statements for many municipalities, which can
raise the value of their bonds.
As your fund grows and matures, its portfolio is changing. Taking
advantage of all the research resources of the fund's investment adviser,
Capital Research and Management Company (CRMC), the portfolio counselors and
analysts are gradually increasing holdings in lower rated securities. We
believe CRMC's extensive research can help find bonds which offer the best
opportunity for reward in the high-yield municipal bond market.
In the following pages, you'll find a report on corporate-backed municipal
bonds and your fund's search for value in these securities.
Shareholders should bear in mind that research cannot eliminate all the
risks inherent in high-yield bonds. Although American High-Income Municipal
Bond Fund has earned solid returns over its lifetime (a cumulative 21.1%, or
10.9% on an annualized basis, assuming dividends were reinvested), every fund
eventually faces some challenges. There will be periods in which your fund will
not be able to maintain the returns it has generated over its brief lifetime.
We are pleased to note that our shareholder base has continued to expand.
We welcome all our new shareholders and look forward to reporting to you again
in six months.
Cordially,
Paul G. Haaga, Jr.
Chairman of the Board
Abner D. Goldstine
President
September 12, 1996
[photo caption]
Shareholders in American High-Income Municipal Bond Fund are helping finance
pollution controls at an Inland Steel Company blast furnace. This project is
typical of the corporate-backed "public-purpose" bonds in the fund's portfolio.
[end photo caption]
CORPORATE-BACKED MUNICIPAL BONDS: BENEFITING THE
COMMUNITY, BUSINESS AND SHAREHOLDERS
When Inland Steel Company wanted to raise money for pollution control
equipment, it turned to an unlikely source of financing: America's municipal
bond market. It was a smart move. Not only did the citizens of East Chicago,
Indiana get cleaner air and water, Inland Steel saved millions in annual
interest payments.
America's municipal bond market traditionally has been the domain of
cities, counties, school districts and other local government agencies. It is
where much of the money is raised for investment in roads, bridges, schools and
hospitals. Corporations usually raise money in the taxable market. But where
there is a direct public benefit, they also can sell bonds in the municipal
market. American High-Income Municipal Bond Fund owns many bonds backed by
well-known American corporations, including Northwest Airlines, Federal Express
and Boise Cascade.
America's corporations have access to the lower cost financing available in
the municipal market for projects that further the "public good." Inland Steel
met this qualification because cleaner water and air emissions benefited the
public directly by reducing pollution.
When corporations tap the municipal bond market, everyone can benefit,
including the companies, taxpayers and investors. Companies win because
municipal bonds allow them to pay lower interest rates than taxable bonds.
Taxpayers win by having cleaner air and water. Investors win by gaining access
to tax-free bonds backed by some of the nation's biggest companies.*
Northwest Airlines turned to the municipal market to raise money to expand
its hub facilities at Detroit Metropolitan Airport. Northwest's shareholders
benefit directly because lower borrowing costs help the company's bottom line.
Joe Francht, Northwest's treasurer, estimates the company is paying three
percentage points less in interest in the municipal market than it would have
paid in the taxable market.
*Interest on private-use, public-purpose bonds may subject certain investors to
the alternative minimum tax.
[photo caption]
Northwest Airlines turned to the municipal bond market to refinance
construction of gates at Detroit Metropolitan Airport, the 15th-busiest airport
in the world. American High-Income Municipal Bond Fund has invested in many
bond issues backed by major airlines.
[end photo caption]
The municipal market also broadens the investor base available to
corporations, Francht says. For airlines, which are frequent and heavy users of
the credit markets, it is important to have as broad a base of investors as
possible, he says.
The community benefits because Northwest's investment helped the airport
grow; an economically healthy, expanding airport can spur commercial
development while boosting tax revenues. Additionally, Northwest's expanded
service helped create jobs in the area.
Investors in American High-Income Municipal Bond Fund can benefit because
corporate-backed bonds usually pay a higher yield than traditional municipal
bonds. Corporate-backed bonds, which represented about one-third of the fund's
holdings on July 31, also help diversify its portfolio.
There are thousands of corporate-backed bond issues in the municipal bond
market. But finding those that offer the best opportunity for reward isn't
easy. Investors need to understand the general outlook for interest rates and
the economy. They also must be able to research the projects and have an
in-depth knowledge of the companies issuing the bonds. This type of in-depth
research is an area in which Capital Research and Management Company (CRMC),
the investment adviser to American High-Income Municipal Bond Fund, has its
greatest advantage. The fund's portfolio counselors and analysts have access to
research conducted by CRMC's fixed-income and equity analysts, who are among
the most experienced in the investment business. They often share insights and
knowledge, giving the fund's fixed-income analysts an edge other investors
don't enjoy.
The bonds sold by Northwest Airlines are a good example. When the
portfolio counselors of American High-Income Municipal Bond Fund first
considered the bonds, they already knew a great deal about the airport, the
15th-busiest in the world. They knew that the region's economy was healthy and
the airport had strong traffic growth - more than 28 million passengers in 1995
- - suggesting that demand for gates would remain high. The bonds in the
portfolio are backed by leases on the gates.
Still, the portfolio counselors needed to know more about Northwest
Airlines. They turned to CRMC's airline industry analysts and learned that
Northwest, the world's fourth-largest passenger airline, was in the middle of a
successful financial turnaround. Its revenues were increasing and it had
reduced costs. Additionally, it had lucrative routes from Detroit to Asia,
including nonstop service to Tokyo, Osaka, Seoul and Beijing. Having studied
the region, the airport and the airline, CRMC's investment professionals
invested in the Northwest bonds.
Investments in corporate-backed municipal bonds aren't without risk, of
course. The corporations can fail, or the market can lose confidence in them.
And like any bonds, they can lose value without credit problems if interest
rates rise. However, thorough research and analysis can help increase the
chances of identifying those bonds which will be solid investments for
shareholders. Of course, the Northwest Airlines, Inland Steel and other
corporate-backed municipal bonds are just parts of what you own as a
shareholder in American High-Income Municipal Bond Fund. But, unlike many
tax-exempt bonds, these issues give your fund the opportunity for solid returns
while helping companies and taxpayers as well as shareholders.
TAX-FREE YIELDS VS. TAXABLE YIELDS$
To use the table below, find your estimated 1996 taxable income to determine
your federal tax rate. Then look in the right-hand column to see what you would
have had to earn from a taxable investment to equal the fund's 5.53% tax-free
distribution rate in July.
For example, a couple with a taxable income of $150,000 faces a federal
tax rate of 36%. In this bracket, the fund's 5.53% distribution rate is
equivalent to an 8.64% return on a taxable issue. Investors in the highest tax
bracket (39.6%) would need a taxable distribution rate of 9.16% to match the
fund's distribution rate.
<TABLE>
<CAPTION>
IF YOUR TAXABLE INCOME IS... ...THEN YOUR ...AS OF 7/31/96 YOUR
FEDERAL TAX TAX-EXEMPT DISTRIBUTION
RATE IS... RATE OF 5.53% IS
EQUIVALENT TO A TAXABLE
RATE OF...
SINGLE JOINT
<S> <C> <C> <C>
0- 24,000 $0- 40,100 15.0% 6.51%
24,001- 58,150 40,101- 96,900 28.0 7.68
58,151-121,300 96,901-147,700 31.0 8.01
121,301-263,750 147,701-263,750 36.0 8.64
Over 263,750 Over 263,750 39.6 9.16
</TABLE>
*Based on 1996 federal tax rates. The federal rates do not include an
adjustment for the loss of personal exemptions and the phase-out of itemized
deductions applicable to certain taxable income levels.
<PAGE>
<TABLE>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
Investment Portfolio, July 31, 1996
Quality Ratings
<S> <C> <C>
AAA: 3.59%
A: 8.05%
BBB: 48.22%
BB: 23.59%
B: 10.03%
Cash Equivalents: 6.52%
Principal Market
Amount Value
(000) (000)
Tax-Exempt Securities Maturing in More than
One Year - 93.48%
Alabama - 0.48%
The Industrial Development Board of the City of
Mobile, Solid Waste Revenue Refunding
Bonds (Mobile Energy Services Company, L.L.C.
Projects), Series 1995, 6.95% 2020 $1,000 $1,045
California - 10.28%
Resource Recovery Revenue Bonds,
Waste Management Inc., Guarantee Bond, Series A AMT,
7.15% 2011 2,000 2,132
Rural Home Mortgage Finance Authority,
Single Family Mortgage Revenue Bonds
(Mortgage-Backed Securities Program),
1995 Series B AMT, 7.75% 2026 995 1,113
Student Education Loan Marketing Corp. (A
Non-Profit Public Benefit Corp. Organized Under
the Laws of the State of California) AMT, Student
Loan Program Revenue Bonds:
7.00% 2005 1,000 1,038
7.00% 2010 2,000 2,081
Central Valley Financing Authority, Cogeneration
Project Revenue Bonds (Carson Ice-Gen Project),
1993 Series, 6.10% 2013 1,400 1,393
Long Beach Aquarium of the Pacific, Revenue Bonds
(Aquarium of the Pacific Project), 1995 Series A:
6.10% 2010 1,000 987
6.125% 2015 1,000 957
6.125% 2023 1,500 1,410
Los Angeles County Capital Asset Leasing
Corporation, Certificates of Participation
(Marina del Rey), Series A, 6.25% 2003 3,715 3,824
Pleasanton Joint Powers Financing Authority,
Subordinate Reassessment Revenue Bonds,
1993 Series B, 6.125% 2002 4,505 4,570
Redding Joint Powers Financing Authority, Solid
Waste and Corporation Yard Revenue Bonds, 1993
Series A, 5.00% 2023 1,000 829
Sacramento Cogeneration Authority, Cogeneration
Project Revenue Bonds, 6.00% 2003 1,000 1,010
South Tahoe Joint Powers Financing Authority,
Refunding Revenue Bonds (South Tahoe
Redevelopment Project Area No.1), 1995 Series B,
6.25% 2020 1,000 987
Colorado - 5.49%
Student Obligation Bond Authority,
Student Loan Asset-Backed Bonds, Senior
Subordinate 1995 Series II-B AMT, 6.20% 2008 1,000 1,012
Arapahoe County, Capital Improvement
Trust Fund Highway Revenue Bonds (E-470 Project):
6.90% 2015 1,250 1,315
6.95% 2020 4,500 4,735
City and County of Denver, Airport System
Revenue Bonds:
Series 1991D AMT, 7.75% 2013 1,000 1,180
Series 1992C AMT:
6.55% 2003 2,000 2,105
6.75% 2013 1,000 1,031
Series 1994A, 7.50% 2023 500 550
Connecticut - 1.12%
Eastern Connecticut Resource Recovery Authority,
Solid Waste Revenue Bonds (Wheelabrator Lisbon
Project) Series 1993 A AMT, 5.50% 2020 2,700 2,429
District of Columbia - 0.72%
Hospital Revenue Refunding Bonds (Washington
Hospital Center Issue), Series 1992A,
7.00% 2005 1,500 1,574
Florida - 4.70%
The Crossings at Fleming Island Community
Development District (Clay County), Special
Assessment Bonds, Series 1995, 8.25% 2016 5,000 5,298
Meadow Pointe II, Community Development District
(Pasco County) Capital Improvement
Revenue Bonds, Series 1995, 7.25% 2002 4,845 4,901
Illinois - 10.95%
Health Facilities Authority:
Revenue Refunding Bonds (Edward Hospital
Project), Series 1993A, 6.00% 2019 1,000 974
Revenue Bonds (Fairview Obligated Group Project),
Series 1992A:
9.50% 2022 (Prerefunded 2002) 2,750 3,429
7.40% 2023 2,630 2,630
City of Chicago:
Chicago-O'Hare International
Airport, Special Facility Revenue Bonds
(United Air Lines, Inc. Project):
Series 1988A AMT:
8.95% 2018 1,895 2,128
7.875% 2025 1,000 1,073
Series 1988B, 8.85% 2018 1,155 1,299
City of Chicago:
Skyway Toll Bridge Refunding
Revenue Bonds, Series 1994:
6.50% 2010 1,500 1,540
6.75% 2017 1,500 1,536
Village of Robbins, Cook County, Resource
Recovery Revenue Bonds (Robbins Resource
Recovery Partners, L.P. Project), Series 1994A AMT:
8.75% 2005 1,000 957
9.25% 2014 8,430 8,219
Indiana - 1.86%
City of East Chicago, Pollution Control
Refunding Revenue Bonds:
(Inland Steel Company Project No. 10),
Series 1993, 6.80% 2013 1,000 1,003
(Inland Steel Company Project No. 11),
Series 1994, 7.125% 2007 2,000 2,048
City of Sullivan, Pollution Control Revenue
Refunding Bonds (Indiana Michigan Power Company
Project), Series C, 5.95% 2009 1,000 984
Kentucky - 3.38%
Kenton County Airport Board, Special Facilities
Revenue Bonds (Delta Air Lines, Inc. Project),
1992 Series A AMT:
6.75% 2002 2,000 2,084
7.50% 2012 2,225 2,374
6.125% 2022 3,000 2,877
Louisiana - 3.31%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1995A-2 AMT, 7.80% 2026 2,920 3,254
Orleans Levee District, Levee Improvement Fixed-
Rate Refunding Bonds, Series 1987A, 8.25% 2014 3,900 3,939
Maine - 0.50%
Educational Loan Marketing Corp., Student Loan Revenue
Refunding Bonds, Series 1991 AMT, 6.90% 2003 1,000 1,077
Maryland - 1.54%
Health and Higher Educational Facilities
Authority, Revenue Bonds, Howard County General
Hospital Issue, Series 1993, 5.50% 2021 2,000 1,764
Housing Opportunities Commission of Montgomery
County, Multifamily Revenue Bonds (Strathmore
Court at White Flint), 1994 Issue A-2:
7.50% 2024 1,000 1,050
7.50% 2027 500 528
Massachusetts - 2.50%
Industrial Finance Agency Revenue
Bonds, Edgewood Retirement Community Project,
Series 1995A, 9.00% 2025 5,300 5,437
Michigan - 9.75%
Hospital Finance Authority,
Hospital Revenue Refunding Bonds:
Sinai Hospital of Greater Detroit, Series 1995
6.625% 2016 2,755 2,724
Genesys Health System Obligated Group,
Series 1995A:
8.00% 2005 2,000 2,210
7.50% 2027 2,200 2,287
City of Detroit:
Limited Tax General Obligation:
Series 1995 B, 6.75% 2003 1,000 1,061
Series 1995 A, 6.40% 2005 1,145 1,189
Downtown Development Authority, Tax
Increment Bonds (Development Area No.1 Projects),
Series 1996C, 6.20% 2017 1,000 1,010
The Economic Development Corporation of the
County of Midland, Subordinated Pollution
Control Limited Obligation Revenue Refunding
Bonds (Midland Cogeneration Project),
Series 1990B AMT, 9.50% 2009 6,600 7,147
Charter County of Wayne, Special
Airport Facilities Revenue Refunding Bonds,
(Northwest Airlines, Inc., Facilities),
Series 1995, 6.75% 2015 3,500 3,540
Nevada - 2.57%
City of Henderson, Local Improvement
District No. T-10 (Seven Hills) Limited Obligation
Improvement Bonds, 7.50% 2015 5,500 5,585
New Jersey - 3.92%
Economic Development Authority, First Mortgage
Revenue Fixed-Rate Bonds:
Fellowship Village Project,
Series 1995A, 9.25% 2025 3,000 3,290
Winchester Gardens at Ward Homestead Project,
Series 1996A:
8.50% 2016 1,000 1,022
8.625% 2025 1,000 1,022
The Union County Utilities Authority, Solid Waste
System Revenue Bonds, 1991 Series A AMT, 7.10% 2006 3,090 3,177
New York - 12.92%
State Environmental Facilities Corp. AMT,
Solid Waste Disposal Revenue Bonds, (Occidental
Petroleum Corp. Project), Series 1993 Subseries A:
5.50% 2003 2,500 2,469
5.70% 2028 1,235 1,101
New York State Thruway Authority, Local Highway and
Bridge Service Contract Bonds, Series 1992,
6.25% 2006 1,000 1,040
The City of New York, General Obligation Bonds:
Fiscal 1996 Series C, 6.40% 2003 1,000 1,036
Fiscal 1996 Series E, 6.50% 2004 3,000 3,140
Fiscal 1995 Series H, 6.50% 2005 1,650 1,724
Fiscal 1995 Series B, 7.00% 2016 1,000 1,054
New York City Industrial Development Agency, Solid
Waste Disposal Revenue Bonds (1995 Visy Paper
(NY), Inc. Project) AMT, 7.55% 2005 9,000 9,286
The Port Authority of New York and New Jersey, Special
Project Bonds, Series 4 AMT, KIAC Partners Project:
7.00% 2007 3,000 3,164
6.75% 2011 4,000 4,032
Ohio - 2.71%
Solid Waste Revenue Bonds (Republic Engineered Steel,
Inc. Project), Series 1996 AMT, 9.00% 2021 4,000 4,136
The Student Loan Funding Corporation,
Cincinnati, Student Loan Revenue
Refunding Bonds,Series 1991A AMT, 7.20% 2003 1,630 1,739
Pennsylvania - 4.09%
Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Colver Project),
Series 1994 D AMT, 7.15% 2018 3,000 3,170
Cambria County Industrial Development Authority,
Pollution Control Revenue Refunding Bonds
(Bethlehem Steel Corporation Project),
Series 1994, 7.50% 2015 1,250 1,285
The Hospitals Authority of Philadelphia,
Hospital Revenue Bonds (Temple University
Hospital), Series of 1983, 6.625% 2023 1,000 1,015
Schuylkill County Industrial Development
Authority, Resource Recovery Revenue Refunding
Bonds (Schuylkill Energy Resources, Inc.
Project), Series 1993 AMT, 6.50% 2010 3,425 3,410
South Carolina - 1.20%
York County, Pollution Control Facilities
Revenue Bonds (Bowater Incorporated Project),
Series 1990 AMT, 7.625% 2006 2,300 2,609
Tennessee - 1.28%
Memphis-Shelby County Airport Authority, Special
Facilities Revenue Bonds (Federal Express
Corporation), Series 1984, 7.875% 2009 2,500 2,778
Texas - 6.68%
Alliance Airport Authority, Inc., Special
Facilities Revenue Bonds (American Airlines,
Inc. Project), Series 1990 AMT, 7.00% 2011 5,250 5,657
Hidalgo County Health Services Corp., Hospital Revenue
Bonds (Mission Hospital, Inc. Project), Series 1996:
7.00% 2008 2,365 2,448
6.75% 2016 1,000 986
Tomball Hospital Authority, Hospital Revenue
Refunding Bonds, Series 1993, 6.125% 2023 5,740 5,419
Virginia - 0.48%
Virginia College Building Authority, Educational
Facilities Revenue Bonds (Marymount University
Project) Series of 1992, 7.00% 2022 1,000 1,037
West Virginia - 1.05%
City of South Charleston, Pollution Control
Revenue Refunding Bonds (Union Carbide
Corporation Project), Series 1985, 7.625% 2005 2,000 2,276
---------
202,985
---------
Tax-Exempt Securities Maturing in
One Year or Less - 5.20%
State of Colorado, General Fund Tax and Revenue
Anticipation Notes, Series 1996A, 4.50% 6/27/97 1,300 1,306
County of Los Angeles, California, 1996-97 Tax and
Revenue Anticipation Notes, Series A, 4.50% 6/30/97 3,900 3,919
State of Michigan, Full Faith and Credit General
Obligation Notes, 4.00% 9/30/96 3,250 3,251
State of Texas, Tax and Revenue Anticipation
Notes, Series 1995 A, 4.75% 8/30/96 2,820 2,823
---------
11,299
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $206,710,000) 214,284
Excess of cash, prepaids and receivables over
payables 2,856
---------
NET ASSETS $217,140
=========
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
American High-Income Municipal Bond Fund
Financial Statements
Statement of Assets and Liabilities
at July 31, 1996 (dollars in thousands)
<S> <C> <C>
Assets:
Tax-exempt securities
(cost: $206,710) $214,284
Cash 39
Prepaid organization expense 8
Receivables for--
Sales of fund's shares $684
Accrued interest 3,742 4,426
--------- ---------
218,757
Liabilities:
Payables for--
Purchases of investments 1,067
Repurchases of fund's shares 30
Dividends payable 371
Management services 83
Accrued Expenses 66 1,617
--------- ---------
Net Assets at July 31, 1996--
Equivalent to $15.23 per share on 14,261,553
shares of $0.01 par value capital stock
outstanding (authorized capital stock - $217,140
200,000,000 shares) =========
Statement of Operations
for the year ended July 31, 1996
(dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $12,681
---------
Expenses:
Management services fee $838
Distribution expenses 496
Transfer agent fee 90
Report to shareholders 71
Registration statement and prospectus 90
Postage, stationery and supplies 23
Director's fees 18
Auditing and legal fees 30
Custodian fee 10
Taxes other than federal income tax 3
Organization expense 12
Other expenses 8
---------
Total expenses before reimbursement 1,689
Reimbursement of expenses 41 1,648
--------- ---------
Net investment income 11,033
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 3,233
Net unrealized appreciation
on investments:
Beginning of year 6,791
End of year 7,574
---------
Net increase in unrealized appreciation
on investments 783
Net realized gain and unrealized ---------
appreciation on investments 4,016
Net Increase in Net Assets Resulting ---------
from Operations $15,049
=========
Statement of Changes in Net Assets
(dollars in thousands) Period
September 26
Year Ended 1994* to
July 31, July 31,
1996 1995
Operations:
Net investment income $11,033 $5,381
Net realized gain on investments 3,233 2,246
Net unrealized appreciation
on investments 783 6,791
--------- ---------
Net increase in net assets
resulting from operations 15,049 14,418
--------- ---------
Dividends and Distributions Paid to
Shareholders:
Dividends Paid from net
investment income (11,032) (5,381)
Distributions from net realized gain on
investments (3,336) -
--------- ---------
Total dividends and distributions (14,368) (5,381)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
6,164,069 and 11,466,307 shares, respecti 93,928 164,049
Proceeds from shares issued in reinvestment
of net investment income dividends and distributions
of net realized gain on investments:
645,325 and 239,900 shares, respectively 9,858 3,535
Cost of shares repurchased: 2,910,852 and
1,350,194 shares, respectively (44,191) (19,857)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 59,595 147,727
--------- ---------
Total Increase in Net Assets 60,276 156,764
Net Assets:
Beginning of period 156,864 100
--------- ---------
End of period 217,140 156,864
========= =========
*Commencement of operations
See Notes to Financial Statements
</TABLE>
<PAGE>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
1. American High-Income Municipal Bond Fund, Inc. (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The fund seeks a high level of current income exempt from
regular federal income taxes through a diversified, carefully researched
portfolio of higher yielding, lower rated, higher risk municipal bonds. The
following paragraphs summarize the significant accounting policies consistently
followed by the fund in the preparation of its financial statements:
Tax-exempt securities with original or remaining maturities in excess of 60
days are valued at prices obtained from a national municipal bond pricing
service. The pricing service takes into account various factors such as
quality, yield and maturity of tax-exempt securities comparable to those held
by the fund, as well as actual bid and asked prices on a particular day. Other
securities with original or remaining maturities in excess of 60 days,
including securities for which pricing service values are not available, are
valued at the mean of their quoted bid and asked prices. However, in
circumstances where the investment adviser deems it appropriate to do so,
securities will be valued at the mean of their representative quoted bid and
asked prices, or, if such prices are not available, at the mean of such prices
for securities of comparable maturity, quality and type. All securities with 60
days or less to maturity are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Valuation Committee
of the Board of Directors.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Premiums and original
issue discounts on securities purchased are amortized over the life of the
respective securities. Amortization of market discounts on securities is
recognized upon disposition, subject to applicable tax requirements. Dividends
to shareholders are declared daily after determination of the fund's net
investment income and paid to shareholders monthly.
Prepaid organization expenses are amortized over the estimated period of
benefit, not to exceed five years from commencement of operations. In the event
that Capital Research and Management Company (CRMC), the fund's investment
adviser, redeems any of its original shares prior to the end of the five-year
period, the proceeds of the redemption payable with respect to such shares
shall be reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares outstanding at
the time of such redemption) of the unamortized prepaid organization expenses
as of the date of such redemption. In the event the fund liquidates prior to
the end of the five-year period, CRMC shall bear any unamortized prepaid
organization expenses.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $10,000 includes $7,000 that was paid by these credits
rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of July 31, 1996, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $7,574,000, of which $7,845,000 related
to appreciated securities and $271,000 related to depreciated securities. There
was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1996. The cost of portfolio securities
for book and federal income tax purposes was $206,710,000 at July 31, 1996.
3. The fee of $838,000 for management services was paid pursuant to an
agreement with CRMC, with which certain officers and Directors of the fund are
affiliated. The Investment Advisory and Service Agreement provides for monthly
fees, accrued daily, based on an annual rate of 0.30% of the first $60 million
of average net assets; 0.21% of such assets in excess of $60 million; and 3.00%
of the fund's monthly gross investment income. The Investment Advisory and
Service Agreement provides for fee reductions to the extent annual operating
expenses exceed 0.90% of the average daily net assets of the fund, during a
period which will terminate at the earlier of such time as no reimbursement has
been required for a period of 12 consecutive months, provided no advances are
outstanding, or October 1, 2004. CRMC has also voluntarily agreed to waive its
fees to the extent necessary to ensure the fund's expenses do not exceed 0.86%
of the average daily net assets. Expenses that are not subject to these
limitations are interest, taxes, brokerage commissions, transaction costs, and
extraordinary expenses. Fee reductions were $41,000 for the year ended July 31,
1996. There can be no assurance that this voluntary fee waiver will continue in
the future.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Directors. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended July 31, 1996,
distribution expenses under the Plan were $496,000. As of July 31, 1996,
accrued and unpaid distribution expenses were $50,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $90,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $348,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Directors who are unaffiliated with CRMC may elect to defer part or all of
the fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the fund. As of July 31, 1996,
aggregate amounts deferred and earnings thereon were $13,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain Directors and officers of the fund
are or may be considered to be affiliated with CRMC, AFS, and AFD. No such
persons received any remuneration directly from the fund.
4. As of July 31, 1996, accumulated undistributed net realized gain on
investments was $2,143,000 and additional paid-in capital was $193,160,000.
The fund made purchases and sales of investment securities excluding
short-term securities, of $118,315,000 and $62,577,000, respectively, during
the year ended July 31, 1996.
<PAGE>
<TABLE>
Per-Share Data and Ratios
Period
September 26
Year Ended 1994 /1/ to
July 31, July 31,
1996 1995
Net Asset Value, Beginning
of Period $15.14 $14.29
------------ ------------
<S> <C> <C>
Income From Investment
Operations:
Net investment income .88 .76
Net realized and
unrealized gain
on investments .37 .85
------------ ------------
Total income from investment operations 1.25 1.61
------------ ------------
Less Distributions:
Dividends from net investment income (.88) (.76)
Distributions from net realized gains (.28) --
------------ ------------
Total distributions (1.16) (.76)
------------ ------------
Net Asset Value, End of Period $15.23 $15.14
============ ============
Total Return /2/ 8.48% 11.62% /3/
Ratios/Supplemental Data:
Net assets, end of period (in millions) $217 $157
Ratio of expenses to average net assets .86% /4/ .62% /3/ /4/
Ratio of net income to average net assets 5.74% 5.66% /3/
Portfolio turnover rate 35.22% 46.42% /3/
/1/ Commencement of operations.
/2/ Calculated without deducting a sales charge. The
maximum sales charge is 4.75% of the fund's offering price.
/3/ Based on operations for the period shown and, accordingly,
not representative of a full year's operations.
/4/ Had CRMC not waived fees, the fund's ratios of expenses to
average net assets would have been 0.88% and 0.94%, respectively,
for the periods shown.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
American High-Income Municipal Bond Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of American High-Income
Municipal Bond Fund, Inc. (the "Fund") at July 31, 1996, the results of its
operations, the changes in its net assets and the per-share data and ratios for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and per-share data and ratios
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1996 by correspondence with the
custodian and broker, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Los Angeles, California
August 30, 1996
Tax Information (unaudited)
During the fiscal year ended July 31, 1996 the fund paid 87.5 cents per share
of exempt-interest distributions within the meaning of Section 852(b)(5)(A) of
the Internal Revenue Code.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the calendar
year-end information you receive from the fund's transfer agent.
<PAGE>
The American Funds Group(R)
Fund Services
These handy services can add convenience and flexibility to your American Funds
investments.
ADDING TO YOUR INVESTMENT
There are three ways you can group your American Funds purchases to qualify for
a quantity discount:
- - Right of accumulation: You can combine the value of your existing shares with
those you are purchasing to qualify for a discount.
- - Statement of Intention: You can, without obligation, use a Statement of
Intention that allows you to combine the value of your existing shares and the
purchases you intend to make over a 13-month period so you can take immediate
advantage of the maximum quantity discount available.
- - Concurrent purchases: By purchasing shares in more than one of the American
Funds simultaneously, you may qualify for a quantity discount.
(Shares of money market funds purchased directly do not apply to quantity
discounts. Additionally, certain accounts may not be eligible to be grouped.
See the fund's prospectus or your investment professional for more details.)
Subsequent investments by mail: Once your account has been established and
you've selected a broker/dealer, simply send a check for $50 or more, along
with the bottom portion of your account statement, to American Funds Service
Company.
PUTTING YOUR INVESTMENTS ON AUTOPILOT
Automatic investment plan: You can make automatic investments regularly by
authorizing American Funds Service Company to deduct a specified sum from your
bank account.
Automatic exchange plan: You can automatically exchange $50 or more between
funds on a regular basis.
Automatic withdrawal plan: You can arrange to have regular checks for specified
amounts sent to you or to anyone you designate in any month(s) you choose.
CHOOSING THE PAYOUT SYSTEM THAT'S RIGHT FOR YOU
Automatic reinvestment: All dividends and capital gain distributions can be
automatically reinvested in additional fund shares without a sales charge.
Cross-reinvestment: You can reinvest dividends and/or capital gains from one
fund to another fund at no charge if you have a balance of at least $5,000 in
the originating fund or meet the minimum initial investment for the receiving
fund.
Dividends in cash: You can elect to take dividends in cash.
REPORTS YOU'LL RECEIVE FROM US
Confirmations of transactions: You will receive account statements reflecting
the transactions in your account.
Consolidated quarterly statements: If you have more than one account with the
American Funds, you can request a quarterly statement combining certain
accounts registered to the same individual.
Year-end tax reports: At the end of each year, you will receive an individual
report which shows the tax status of the distributions paid to you during the
year. In many instances, these reports can help you calculate taxes due on
shares sold by reporting average cost.
SPECIAL SERVICES
Exchange privileges: You can transfer some or all of your holdings into other
American Funds by mail or by phone. Certain restrictions apply (a sales charge
may apply if one has not already been paid), and it's important to remember
that an exchange constitutes a sale and purchase for tax purposes.
Telephone information service: American FundsLine(R) is a toll-free service
which gives you account information as well as current prices for all American
Funds. Just call 800/325-3590.
Safekeeping of certificates: Your shares are credited to your account and
certificates are not issued unless specifically requested. (Certificates are
not available for money market funds.)
Free check-writing withdrawal service: If you have a money market fund account,
this service enables you to write checks for $250 or more against the account.
The account continues to earn daily interest until checks clear the fund's
bank.
Retirement plans: A wide variety of plans is available.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
FINANCIAL ADVISER, OR CALL AMERICAN FUNDS SERVICE COMPANY, TOLL-FREE, AT
800/421-0180. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND
MONEY. THESE SERVICES ARE SUBJECT TO CHANGE OR TERMINATION.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
BOARD OF DIRECTORS
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President
and Chief Executive Officer,
The Mission Group; former President,
Southern California Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive
Officer and President,
The Earth Technology Corporation
(environmental engineering)
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board,
Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER
Marina del Rey, California
President, Fuller & Company, Inc.
(financial management consulting)
ABNER D. GOLDSTINE
Los Angeles, California
President of the fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the fund
Senior Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
San Marino, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President and Chief Executive Officer,
AECOM Technology Corporation
(architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman of the Board,
BW/IP International, Inc.
(industrial manufacturing)
OTHER OFFICERS
NEIL L. LANGBERG
Los Angeles, California
Senior Vice President of the fund
Vice President -
Investment Management Group,
Capital Research and Management Company
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
MARY C. HALL
Brea, California
Vice President of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
MARK R. MACDONALD
Los Angeles, California
Vice President of the fund
Vice President -
Investment Management Group,
Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR.
Brea, California
Treasurer of the fund
Vice President -
Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the fund
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE
INVESTMENT ADVISER, CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92821-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster LLP
345 California Street
San Francisco, California 94104-2675
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
This report is for the information of shareholders of American High-Income
Municipal Bond Fund, but it may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after September 30, 1996, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA AGD/ALI/3042
Lit No. AHIM-011-0996
[The American Funds Group(R)]
Printed on recycled paper
