AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
1997 ANNUAL REPORT
for the year ended July 31
[The American Funds Group(R)]
[illustration: metropolitan area]
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.
American High-Income Municipal Bond Fund is one of the 28 mutual funds in The
American Funds Group,(R) a family of funds managed by Capital Research and
Management Company. With a history dating back to 1931, The American Funds
Group has more than $150 billion in assets.
ABOUT OUR COVER: American High-Income Municipal Bond Fund helps finance public
works across the country, including vital infrastructure projects that help
cities grow and prosper.
CHARTING A $10,000 INVESTMENT IN AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
(For the period September 26, 1994 to July 31, 1997, with dividends reinvested)
[begin line graph]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The fund at net The fund at Lehman Lipper
asset value maximum Brothers High-Yield
(without any offering Municipal Municipal
sales charge) price (with Bond Index Debt Fund
4.75% sales /2/ Average /3/
charge
deducted)
9/26/94 $10,000 $ 9,525 $10,000 $10,000
10/31/94 9,886 9,418 9,822 9,875
1/31/95 10,287 9,800 10,139 10,114
4/30/95 10,760 10,251 10,566 10,504
7/31/95 11,162 10,634 10,910 10,788
10/31/95 11,534 10,988 11,280 11,112
1/31/96 11,904 11,340 11,665 11,497
4/30/96 11,692 11,139 11,406 11,232
7/31/96 12,108 11,535 11,630 11,444
10/31/96 12,452 11,863 11,923 11,745
1/31/97 12,687 12,086 12,113 11,939
4/30/97 12,863 12,254 12,162 12,041
7/31/97 13,484 12,845 /1/ 12,822 12,645
</TABLE>
/1/ This figure reflects payment of the maximum sales charge of 4.75% on the
$10,000 investment. Thus, the net amount invested was $9,525. There is no sales
charge on dividends or capital gain distributions that are reinvested in
additional shares. No adjustment has been made for income or capital gain
taxes.
/2/ The index is unmanaged and does not reflect sales charges, commissions or
expenses.
/3/ Calculated by Lipper Analytical Services. The average does not reflect
sales charges.
Past results are not predictive of future results.
[end line graph]
[illustration: business woman talking on phone]
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the average annual compound returns with all
distributions reinvested for periods ended June 30, 1997, the most recent
calendar quarter, and July 31, 1997, the fiscal year-end, assuming payment of
the 4.75% maximum sales charge at the beginning of the stated periods. Sales
charges are lower for accounts of $25,000 or more.
6/30/97 7/31/97
(last calendar quarter) (fiscal year-end)
Lifetime +8.55% +9.20%
(since September 26, 1994)
One Year +4.63% +6.06%
The fund's 30-day yield as of August 31, 1997, calculated in accordance with
the Securities and Exchange Commission formula, was 4.59%. The fund's
distribution rate as of that date was 5.01%. The SEC yield reflects income the
fund expects to earn based on its current holdings, 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. Income may be subject to
state or local income taxes and/or federal alternative minimum taxes. Certain
other income, as well as capital gain distributions, may be taxable.
FELLOW SHAREHOLDERS:
Low inflation and declining interest rates helped American High-Income
Municipal Bond Fund to another successful year in fiscal 1997. During the year,
which ended July 31, investors who reinvested their distributions saw the value
of their holdings rise 11.4%. The fund will pay a capital gain distribution of
at least 3.5 cents a share in late November.
The fund again outpaced the majority of its peers and the unmanaged broader
market index during the year. High-yield municipal bond funds had an average
total return of 10.5%, according to Lipper Analytical Services, a leading
mutual fund tracking service. Meanwhile, the unmanaged Lehman Brothers
Municipal Bond Index, which measures investment-grade municipal bonds, rose
10.3%.
During the year, shareholders received monthly dividends totaling 86.2 cents a
share and a 14 cents-a-share capital gain distribution paid in November 1996.
If you reinvested the capital gain distribution and took dividends in cash,
your income return was 5.7%, which is equivalent to a 9.4% taxable return for
taxpayers in the 39.6% tax bracket. If you reinvested dividends, your income
return was slightly higher - 5.8% - because of the benefit of compounding. The
balance of the fund's 11.4% total return was a result of the rise in the price
of many bonds in the portfolio.
Since its inception in September 1994, the fund has outpaced most other
high-income municipal bond funds. Based on total return, Lipper ranks American
High-Income Municipal Bond Fund second of 35 funds in existence over its brief
lifetime and ninth of 47 funds for the past fiscal year. The rankings do not
reflect the effects of sales charges.
While we are pleased with the fund's results, we wish to remind our
shareholders that they should not expect such relatively high returns to
continue indefinitely. The favorable economic climate of falling interest rates
and low inflation over most of the fund's lifetime could change at any time.
During the past 12 months, municipal bond rates approached a 20-year low. The
lower rates prompted municipalities and other tax-exempt entities across the
country to raise money in the debt market and put it in escrow to repay older,
higher rate debt at the earliest date allowed by the bonds' covenants. This was
the case for some of American High-Income Municipal Bond Fund's holdings that
were refunded ahead of schedule, reducing the risk of default and sending their
prices higher. For instance, Colorado's Arapahoe County Highway Revenue Bonds
increased 18% in price since we purchased them in 1995, with most of the rise
coming after the bonds were "prerefunded."
Interest rate changes also prompted a slight shift in the fund toward higher
credit quality. As rates declined, the difference between the yields of higher
risk bonds and those with better credit ratings narrowed. We took advantage of
this narrowing to increase our holdings of AA-rated housing bonds, which had
the same yield as some lower rated bonds but whose capacity to pay interest and
repay principal is much stronger.
The fund's assets grew more than 45% during the year, and the number of
shareholder accounts increased 22%. We welcome our new shareholders and look
forward to reporting to all of you again in six months.
Cordially,
/s/ Paul G. Haaga, Jr. /s/ Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
September 19, 1997
[illustration: business man looking at computer]
MANAGING DIFFERENT KINDS OF RISK
A traveler passes through New York's John F. Kennedy International Airport. A
couple buys a home in Louisiana. A family in North Carolina turns on the
television as night falls.
At first glance, there may appear to be little connection between these people.
But, in each instance, a municipal bond held by American High-Income Municipal
Bond Fund plays an important role.
At JFK, one of the fund's portfolio holdings helped finance a new cooling and
heating system that more comfortably sends travelers on their way. In
Louisiana, another of the fund's municipal bonds enables low-income families to
buy homes. And in North Carolina, one of the fund's investments helps provide
electricity to more than 200,000 customers.
Each of these bonds, like thousands of other municipal bonds across the country
that are helping clean water and air, improve schools and build bridges and
roads, has potential risks as well as potential rewards. In this report, we
look at three types of risk - credit risk, interest rate risk, and timing risk.
[illustration: airplane]
CREDIT RISK
The risk most people associate with bonds is that interest payments may not be
made or principal repaid in a timely fashion.
In the case of the new heating and cooling facility at JFK, one factor
contributing to the risk was the plant's dependence on natural gas. If natural
gas prices escalated, what would that do to the facility's costs and its
ability to repay its debt? Another concern was that the plant was designed to
generate twice as much electricity as the airport currently needs. Kennedy
International Airport Co-Generation Partners (KIAC), which issued the bonds,
planned to sell the excess power on the open market. But if the price of
electricity fell as the electric utility industry was deregulated, that source
of income might be undermined.
After closely examining the project, American High-Income Municipal Bond Fund's
credit analysts concluded that shareholders would be compensated attractively
for the risks involved. They determined that KIAC could meet its obligations to
bondholders without selling any excess electricity. And they were reassured by
the fact that KIAC had a seven-year contract to buy natural gas at a set price.
INTEREST RATE RISK
Another important risk common to all bonds - but one often overlooked by many
investors new to fixed-income investing - is interest rate risk. Interest rates
and bond prices move inversely. When interest rates go down, the prices of
outstanding bonds go up. And when interest rates rise, the prices of
outstanding bonds fall. Additionally, the longer a bond's maturity, the more
its price tends to move up or down in response to changes in interest rates.
One of the longer term obligations in the portfolio is the bonds issued by
North Carolina's Eastern Municipal Power Agency, which provides electricity to
more than 200,000 homes and businesses. The bonds, which mature in 2026, were
added to the portfolio after research showed they weren't fully appreciated by
the market and were selling at an attractive price, giving investors a good
yield.
To control interest rate risk, the fund's investment professionals keep a close
watch on the outlook for interest rates by monitoring such factors as economic
growth, inflation and Federal Reserve Board policies. And they adjust the
maturity mix of the bonds in the portfolio to try to protect principal and
enhance results.
TIMING OR PREPAYMENT RISK
Many investors purchased individual bonds expecting an attractive level of
income for years. As interest rates have declined, though, many investors have
had their principal unexpectedly returned. That is because many bonds have
provisions that allow the issuers to "call," or repay, them early. If interest
rates fall, such provisions enable the issuer to sell new bonds at a lower rate
and pay off their older bonds.
Housing bonds often include prepayment risk because some homeowners may repay
their loans early if they sell their homes or refinance their mortgages. As a
result, housing bonds require in-depth research to evaluate their long-term
prospects as well as their yield and value. The mortgage-backed securities
issued by the Louisiana Housing Finance Agency held in the portfolio are a good
example. The agency buys mortgages from banks that lend to low-income buyers at
artificially low rates, then pools the mortgages and sells bonds, backed by the
mortgages in the pool, in the municipal bond market.
[illustration: business people working in office]
[Begin caption]
Before American High-Income Municipal Bond Fund invests in any project, the
fund's analysts and portfolio counselors thoroughly research the issue.
[End caption]
[illustration: utility pole]
A healthy economy and falling interest rates tend to increase prepayments. When
interest rates fall, many homeowners refinance and pay off their mortgages
early. And as a state's economic fortunes improve, homeowners may sell their
property, repay their mortgages and "move up" to more expensive homes.
In order to reduce the risk of unexpected prepayments, the fund's portfolio
counselors and analysts carefully examine the specific conditions under which
securities can be redeemed or refunded before maturity. With mortgage-backed
securities, they examine such factors as the type of loan as well as when,
where and to whom the loans were issued, in order to gauge likely prepayment
rates. While studying the Louisiana issue, the fund's analysts learned that the
homeowners had received a state subsidy which they would have to repay if they
sold their homes during the first 10 years, a provision not widely appreciated
by bond buyers. Research also showed that Louisiana residents don't move as
often as the national average. Based on their research, the analysts concluded
that shareholders would be rewarded particularly well by an investment in these
bonds.
PROFESSIONAL MANAGEMENT
Every bond in the fund's portfolio has some risk, of course. But before they
make any investment, the portfolio counselors and analysts of American
High-Income Municipal Bond Fund carefully examine those risks in an effort to
ensure shareholders will be properly rewarded. Professional management,
research and diversification of risk are just three of the reasons fixed-income
investors can benefit by turning to bond funds rather than buying individual
bonds.
[illustration: face of office worker]
TAX-FREE YIELDS VS. TAXABLE YIELDS
To use the table below, find your estimated 1997 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 5.04% tax-free
distribution rate in July.
For example, a couple with a taxable income of $152,000 faces a federal tax
rate of 36%. In this bracket, the fund's 5.04% distribution rate is equivalent
to a 7.88% return on a taxable issue. Investors in the highest tax bracket
(39.6%) would need a taxable distribution rate of 8.34% to match the fund's
distribution rate.
<TABLE>
<CAPTION>
IF YOUR TAXABLE INCOME IS... ...AS OF 7/31/97 YOUR
TAX-EXEMPT DISTRIBU-
...THEN YOUR TION RATE OF 5.04%
FEDERAL TAX IS EQUIVALENT TO A
SINGLE JOINT RATE IS... TAXABLE RATE OF...
<S> <C> <C> <C>
$ 0 - 24,650 $ 0 - 41,200 15.0% 5.93%
24,651 - 59-750 41,201 - 99,600 28.0 7.00
59,751 - 124,650 99,601 - 151,750 31.0 7.30
124,651 - 271,050 151,751 - 271-050 36.0 7.88
Over 271,050 Over 271,050 39.6 8.34
</TABLE>
*Based on 1997 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, 1997
Quality Ratings
<S> <C> <C>
AAA: 4.82%
AA: 3.34%
A: 4.83%
BBB: 48.13%
BB: 23.45%
B: 8.86%
Cash & Equivalents: 6.57%
Principal Market
Amount Value
(000) (000)
Tax-Exempt Securities Maturing in More than
One Year - 93.43%
Alabama - 1.56%
The Industrial Development Board of the Town of
Courtland, Variable Rate Demand Industrial Development
Refunding Revenue Bonds (Champion International Corp.
Project), Series A, 7.20% 2013 $1,475 $1,645
The Industrial Development Board of the City of
Mobile, Solid Waste Revenue Refunding
Bonds (Mobile Energy Services Co., LLC
Projects), Series 1995, 6.95% 2020 3,000 3,291
California - 9.46%
Pollution Control Financing Authority, Solid Waste
Disposal Revenue Bonds (CanFibre of Riverside Project),
Tax-Exempt Series 1997A AMT, 9.00% 2019 1,000 1,015
Rural Home Mortgage Finance Authority,
Single Family Mortgage Revenue Bonds
(Mortgage-Backed Securities Program),
1995 Series B AMT, 7.75% 2026 945 1,088
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 1,080
7.00% 2010 2,000 2,180
Central Valley Financing Authority, Cogeneration
Project Revenue Bonds (Carson Ice-Gen Project),
Series 1993, 6.10% 2013 1,400 1,469
Long Beach Aquarium of the Pacific, Revenue Bonds
(Aquarium of the Pacific Project), 1995 Series A:
6.10% 2010 1,000 1,042
6.125% 2015 1,000 1,030
6.125% 2023 3,000 3,079
The City of Los Angeles, Multifamily Housing Revenue Bonds
(GNMA Collateralized - Ridgecroft Apartments Project),
Series 1997E AMT, 6.00% 2017 500 515
Los Angeles County Capital Asset Leasing
Corp., Certificates of Participation
(Marina del Rey), Series A, 6.25% 2003 3,715 4,005
City of Oxnard, Assessment District No. 97-1-R
(Pacific Commerce Center), Limited Obligation Refunding
Bonds, 5.70% 2006 1,500 1,547
Pleasanton Joint Powers Financing Authority,
Subordinate Reassessment Revenue Bonds,
1993 Series B, 6.125% 2002 4,390 4,650
Redding Joint Powers Financing Authority, Solid
Waste and Corp. Yard Revenue Bonds, 1993
Series A, 5.00% 2023 1,000 932
Sacramento Cogeneration Authority, Cogeneration
Project Revenue Bonds, 6.00% 2003 1,000 1,074
County of Sacramento, Laguna Creek Ranch/Elliott Ranch
Community Facilities District No. 1, Improvement Area
No. 2 Special Tax Refunding Bonds (Elliott Ranch):
6.10% 2013* 330 331
6.125% 2014* 250 249
6.30% 2021* 500 500
County of San Diego, Reassessment District No. 97-1
(4-S Ranch), Limited Obligation Improvement Bonds:
6.00% 2009* 1,000 1,000
6.25% 2012* 1,000 1,000
Redevelopment Agency of the City and County of San
Francisco, Residential Facility Revenue Bonds (Coventry
Park Project), Series 1996A AMT, 8.50% 2026 1,000 1,043
South Tahoe Joint Powers Financing Authority,
Refunding Revenue Bonds (South Tahoe
Redevelopment Project Area No. 1), 1995 Series B,
6.25% 2020 1,000 1,047
Colorado - 5.40%
Housing and Finance Authority, Single Family Program
Senior Bonds:
1995 Series B AMT, 7.90% 2025 1,105 1,243
1995 Series A AMT, 8.00% 2025 1,555 1,740
1997 Series B AMT, 7.00% 2026 1,000 1,108
Student Obligation Bond Authority,
Student Loan Asset-Backed Bonds, Senior
Subordinate 1995 Series II-B AMT, 6.20% 2008 1,000 1,054
Arapahoe County, Capital Improvement
Trust Fund Highway Revenue Bonds (E-470 Project):
6.90% 2015 (Prerefunded 2005) 1,250 1,479
6.95% 2020 (Prerefunded 2005) 4,500 5,341
City and County of Denver, Airport System
Revenue Bonds:
Series 1991D AMT, 7.75% 2013 1,000 1,265
Series 1992C AMT:
6.55% 2003 2,000 2,185
6.75% 2013 1,000 1,080
Series 1994A AMT, 7.50% 2023 500 581
Connecticut - 3.87%
Health and Educational Facilities Authority Revenue Bonds,
University of Hartford Issue, Series D, 6.75% 2012 1,000 1,029
Eastern Connecticut Resource Recovery Authority,
Solid Waste Revenue Bonds (Wheelabrator Lisbon
Project), Series 1993 A AMT, 5.50% 2020 1,500 1,462
Mashantucket (Western) Pequot Tribe Special Revenue Bonds,
1996 Series A:
6.25% 2003 1,000 1,081
6.375% 2004 1,000 1,093
6.40% 2011 7,000 7,578
Delaware - 1.61%
Economic Development Authority, First Mortgage Revenue
Bonds (Peninsula United Methodist Homes, Inc. Issue),
Series 1997A:
6.00% 2008 500 529
6.10% 2010 500 527
6.20% 2015 2,875 2,992
6.30% 2022 1,000 1,044
District of Columbia - 0.52%
Hospital Revenue Refunding Bonds (Washington
Hospital Center Issue), Series 1992A,
7.00% 2005 1,500 1,637
Florida - 5.59%
Arbor Green Community Development District (City of Tampa,
Hillsborough County), Special Assessment Revenue Bonds,
Series 1996, 7.00% 2003 3,000 3,047
The Crossings at Fleming Island Community
Development District (Clay County), Special
Assessment Bonds, Series 1995, 8.25% 2016 4,915 5,335
Meadow Pointe II Community Development District
(Pasco County), Capital Improvement
Revenue Bonds, Series 1995, 7.25% 2002 4,075 4,184
Northern Palm Beach County Improvement District, Water
Control and Improvement Bonds, Unit of Development No. 9A,
Series 1996A:
6.80% 2006 1,000 1,062
7.30% 2027 1,500 1,608
Ocean Highway and Port Authority, Solid Waste/Pollution
Control Revenue Refunding Bonds, Series 1996 (Jefferson
Smurfit Corp. (U.S.) Project), 6.50% 2006 1,305 1,339
Polk County Industrial Development Authority, Industrial
Development Revenue Bonds (IMC Fertilizer, Inc. Project),
1991 Tax-Exempt Series A AMT, 7.525% 2015 1,000 1,088
Illinois - 10.68%
Health Facilities Authority:
Revenue Refunding Bonds:
Advocate Health Care Network, Series 1997A:
5.70% 2011 750 786
5.80% 2016 3,000 3,111
Edward Hospital Project, Series 1993A, 6.00% 2019 1,000 1,029
Fairview Obligated Group Project, 1995 Series A:
6.25% 2003 1,245 1,271
7.40% 2023 2,630 2,765
Fairview Obligated Group Project, Revenue Bonds,
1992 Series A, 9.50% 2022 (Prerefunded 2002) 2,750 3,438
City of Chicago:
Chicago-O'Hare International
Airport, Special Facility Revenue Bonds
(United Air Lines, Inc. Project):
Series 1988A AMT, 8.95% 2018 3,340 3,813
Series 1988B, 8.85% 2018 1,130 1,289
Skyway Toll Bridge Refunding
Revenue Bonds, Series 1994:
6.50% 2010 (Prerefunded 2004) 1,500 1,689
6.75% 2017 (Prerefunded 2004) 1,500 1,710
Village of Robbins, Cook County, Resource Recovery Revenue
Bonds (Robbins Resource Recovery Partners, L.P. Project),
Series 1994A AMT:
8.375% 2010 1,000 1,071
8.375% 2016 10,990 11,765
Indiana - 2.61%
City of East Chicago, Pollution Control
Refunding Revenue Bonds, Inland Steel Co.:
Project No. 11, Series 1994, 7.125% 2007 2,000 2,200
Project No. 10, Series 1993, 6.80% 2013 1,000 1,065
Indianapolis Airport Authority, Special Facilities Revenue
Bonds, Series 1994 (Federal Express Corp. Project)
AMT, 7.10% 2017 3,500 3,946
City of Sullivan, Pollution Control Revenue
Refunding Bonds (Indiana Michigan Power Co.
Project), Series C, 5.95% 2009 1,000 1,033
Kentucky - 2.45%
City of Ashland, Sewage and Solid Waste Revenue Bonds,
Series 1995 (Ashland Inc. Project) AMT, 7.125% 2022 1,000 1,122
Kenton County Airport Board, Special Facilities
Revenue Bonds (Delta Air Lines, Inc. Project),
1992 Series A AMT:
6.75% 2002 1,000 1,076
7.50% 2012 2,225 2,467
6.125% 2022 3,000 3,061
Louisiana - 3.38%
Health Education Authority, Revenue Bonds (Lambeth
House Project), Series 1996, 9.00% 2026 2,850 3,062
Housing Finance Agency, Single Family Mortgage
Revenue Bonds:
Series 1997B-2 AMT, 5.60% 2017* 1,000 1,000
Series 1995A-2 AMT, 7.80% 2026 2,920 3,270
Parish of West Feliciana, Pollution Control Revenue Bonds
(Gulf States Utilities Co. Project),
Series 1984-II, 7.70% 2014 3,000 3,336
Maine - 0.30%
Educational Loan Marketing Corp., Student Loan Revenue
Refunding Bonds, Series 1991 AMT, 6.90% 2003 910 962
Maryland - 1.44%
Health and Higher Educational Facilities
Authority, Revenue Bonds, Howard County General
Hospital Issue, Series 1993, 5.50% 2021 2,000 1,939
Housing Opportunities Commission of Montgomery
County, Multifamily Revenue Bonds (Strathmore
Court at White Flint), 1994 Issue A-2:
7.50% 2024 1,000 1,069
7.50% 2027 500 534
Housing Authority of Prince George's County, Mortgage
Revenue Bonds, Series 1997A (GNMA Collateralized - Langley
Gardens Apartments Project), 5.75% 2029* 1,000 1,005
Massachusetts - 1.87%
Industrial Finance Agency Revenue
Bonds, Edgewood Retirement Community Project,
Series 1995A, 9.00% 2025 5,300 5,924
Michigan - 7.20%
Hospital Finance Authority,
Hospital Revenue Refunding Bonds:
Genesys Health System Obligated Group,
Series 1995A:
8.00% 2005 2,000 2,324
7.50% 2007 1,500 1,703
8.10% 2013 1,000 1,178
7.50% 2027 2,200 2,477
Pontiac Osteopathic, Series 1994 A:
5.375% 2006 1,000 999
6.00% 2014 1,500 1,528
Sinai Hospital of Greater Detroit, Series 1995,
6.625% 2016 2,755 2,971
City of Detroit:
Limited Tax General Obligation Bonds:
Series 1995 B, 6.75% 2003 1,000 1,106
Series 1995 A, 6.40% 2005 1,145 1,260
Downtown Development Authority, Tax
Increment Bonds (Development Area No. 1 Projects),
Series 1996C, 6.20% 2017 1,000 1,070
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 3,100 3,430
Charter County of Wayne, Special
Airport Facilities Revenue Refunding Bonds
(Northwest Airlines, Inc., Facilities),
Series 1995, 6.75% 2015 2,495 2,718
Nevada - 2.46%
City of Henderson, Local Improvement
District No. T-10 (Seven Hills) Limited Obligation
Improvement Bonds, 7.50% 2015 5,500 5,678
City of Las Vegas, Special Improvement District No. 707
(Summerlin Area), Local Improvement Bonds,
7.10% 2016 2,000 2,081
New Jersey - 2.46%
Economic Development Authority, First Mortgage
Revenue Fixed-Rate Bonds:
Fellowship Village Project,
Series 1995A, 9.25% 2025 3,000 3,583
Winchester Gardens at Ward Homestead Project,
Series 1996A:
8.50% 2016 1,000 1,065
8.625% 2025 1,000 1,070
The Union County Utilities Authority, Solid Waste
System Revenue Bonds, 1991 Series A AMT, 7.10% 2006 2,000 2,055
New York - 12.10%
Dormitory Authority, Mental Health Services Facilities
Improvement Revenue Bonds, Series 1997B:
5.30% 2004 1,000 1,041
5.60% 2008 2,945 3,104
Certificates of Participation, on behalf of the City
University of New York, As lessee (John Jay College
of Criminal Justice Project Refunding), 6.00% 2006 1,975 2,138
State Environmental Facilities Corp.,
Solid Waste Disposal Revenue Bonds (Occidental
Petroleum Corp. Project), Series 1993 Subseries A AMT:
5.50% 2003 2,500 2,585
5.70% 2028 1,235 1,243
State Thruway Authority, Local Highway and
Bridge Service Contract Bonds, Series 1992,
6.25% 2006 1,000 1,068
Urban Development Corp., Correctional
Capital Facilities Revenue Bonds, Series 6, 6.00% 2006 1,000 1,082
The City of New York, General Obligation Bonds:
Series A:
7.00% 2005 2,000 2,294
6.25% 2009 1,000 1,093
Fiscal 1995 Series B1:
7.00% 2016 (Prerefunded 2004) 140 163
7.00% 2016 860 980
Fiscal 1996 Series E, 6.50% 2004 1,500 1,653
New York City Industrial Development Agency, Solid
Waste Disposal Revenue Bonds (1995 Visy Paper
(NY), Inc. Project) AMT, 7.55% 2005 9,000 9,811
The Port Authority of New York and New Jersey, Special
Project Bonds, Series 4 AMT, KIAC Partners Project:
7.00% 2007 5,000 5,617
6.75% 2011 4,000 4,365
North Carolina - 0.33%
Eastern Municipal Power Agency, Power System Revenue
Bonds, Refunding Series 1993B, 6.00% 2026 1,000 1,057
Ohio - 0.45%
The Student Loan Funding Corp.,
Cincinnati, Student Loan Revenue
Refunding Bonds,Series 1991A AMT, 7.20% 2003 1,320 1,417
Oklahoma - 0.69%
Trustees of the Tulsa Municipal Airport Trust,
1988 Adjustable Rate Revenue Obligations, American
Airlines Inc. AMT, 7.375% 2020 2,000 2,173
Pennsylvania - 6.74%
Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Colver Project),
Series 1994 D AMT, 7.15% 2018 3,000 3,303
Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1997-58A AMT, 5.85% 2017 2,500 2,559
Lehigh County General Purpose Authority, College Revenue
and Refunding Bonds, Series A and B of 1996 (Cedar Crest
College), 6.65% 2017 1,750 1,844
Hospitals and Higher Education Facilities
Authority of Philadelphia, Hospital
Revenue Bonds (Temple University Hospital),
Series of 1997, 5.70% 2009 1,000 1,031
Hospital Authority of Philadelphia,
Hospital Revenue Bonds (Temple University
Hospital), Series of 1983, 6.625% 2023 1,000 1,084
Schuylkill County Industrial Development
Authority, Resource Recovery Revenue Refunding
Bonds (Schuylkill Energy Resources, Inc.
Project), Series 1993 AMT, 6.50% 2010 3,260 3,316
Scranton-Lackawanna Health and Welfare Authority,
City of Scranton, Lackawanna County, Hospital
Revenue Bonds (Moses Taylor Hospital Project),
Series of 1997:
5.75% 2006 1,585 1,628
5.80% 2007 1,680 1,728
5.90% 2008 1,730 1,787
6.00% 2009 940 973
6.10% 2011 2,005 2,043
South Carolina - 0.86%
York County, Pollution Control Facilities
Revenue Bonds (Bowater Inc. Project),
Series 1990 AMT, 7.625% 2006 2,300 2,706
Tennessee - 1.94%
The Industrial Development Board of the County of McMinn,
Solid Waste Recycling Facilities Revenue Bonds,
Series 1992 (Calhoun Newsprint Co. Project - Bowater Inc.
Obligor) AMT, 7.625% 2016 3,000 3,308
Memphis-Shelby County Airport Authority, Special
Facilities Revenue Bonds (Federal Express
Corp.), Series 1984, 7.875% 2009 2,500 2,825
Texas - 4.25%
Alliance Airport Authority, Inc., Special
Facilities Revenue Bonds (American Airlines,
Inc. Project), Series 1990 AMT, 7.00% 2011 4,250 4,937
Hidalgo County Health Services Corp., Hospital Revenue
Bonds (Mission Hospital, Inc. Project), Series 1996:
7.00% 2008 2,365 2,592
6.75% 2016 1,000 1,063
Tomball Hospital Authority, Hospital Revenue
Refunding Bonds, Series 1993, 6.125% 2023 4,740 4,845
Vermont - 0.48%
Housing Finance Agency, Single Family Housing Bonds,
Series 9 AMT, 5.70% 2012 1,500 1,530
Virginia - 0.34%
Virginia College Building Authority, Educational
Facilities Revenue Bonds (Marymount University
Project), Series of 1992, 7.00% 2022 1,000 1,075
West Virginia - 0.37%
City of South Charleston, Pollution Control
Revenue Refunding Bonds (Union Carbide
Corp. Project), Series 1985, 7.625% 2005 1,000 1,176
Wisconsin - 0.96%
Housing and Economic Development Authority, Housing
Revenue Bonds, 1993 Series B AMT, 5.30% 2006 3,000 3,039
Wyoming- 1.06%
Sweetwater County, Solid Waste Disposal Revenue
Bonds (FMC Corp. Project), Series 1994A AMT, 7.00% 2024 3,000 3,334
---------
295,237
---------
Tax-Exempt Securities Maturing in
One Year or Less - 6.52%
State of Colorado, General Fund Tax and Revenue
Anticipation Notes, Series 1997A, 4.50% 6/26/98 1,200 1,207
County of Los Angeles, California, 1997-98 Tax and Revenue
Anticipation Notes, Series A, 4.50% 6/30/98 7,450 7,496
State of Michigan, Full Faith and Credit General Obligation
Notes, 4.50% 9/30/97 3,650 3,654
State of Texas, Tax and Revenue Anticipation Notes,
Series 1996, 4.75% 8/29/97 8,250 8,256
---------
20,613
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $294,625,000) 315,850
Excess of cash, prepaids and receivables over
payables 144
---------
NET ASSETS $315,994
*Represents a when-issued security. =========
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
American High-Income Municipal Bond Fund
Financial Statements
Statement of Assets and Liabilities
at July 31, 1997 (dollars in thousands)
<S> <C> <C>
Assets:
Tax-exempt securities
(cost: $294,625) $315,850
Cash 86
Prepaid organization expense 5
Receivables for--
Sales of fund's shares $772
Accrued interest 5,402 6,174
--------- ---------
322,115
Liabilities:
Payables for--
Purchases of investments 5,073
Repurchases of fund's shares 269
Dividends payable 509
Management services 107
Accrued expenses 163 6,121
--------- ---------
Net Assets at July 31, 1997--
Equivalent to $15.90 per share on 19,869,024
shares of $0.01 par value capital stock
outstanding (authorized capital stock - $315,994
200,000,000 shares) =========
Statement of Operations
for the year ended July 31, 1997
(dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $16,692
Expenses:
Management services fee $1,100
Distribution expenses 767
Transfer agent fee 97
Reports to shareholders 60
Registration statement and prospectus 120
Postage, stationery and supplies 25
Directors' fees 18
Auditing and legal fees 30
Custodian fee 13
Taxes other than federal income tax 6
Organization expense 3
Other expenses 41 2,280
--------- ---------
Net investment income 14,412
---------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized gain 835
Net unrealized appreciation
on investments:
Beginning of year 7,574
End of year 21,225
---------
Net increase in unrealized appreciation
on investments 13,651
Net realized gain and unrealized ---------
appreciation on investments 14,486
Net Increase in Net Assets Resulting ---------
from Operations $28,898
=========
Statement of Changes in Net Assets
(dollars in thousands)
Year ended
July 31
1997 1996
Operations:
Net investment income $14,412 $11,033
Net realized gain on investments 835 3,233
Net unrealized appreciation
on investments 13,651 783
--------- ---------
Net increase in net assets
resulting from operations 28,898 15,049
--------- ---------
Dividends and Distributions Paid to
Shareholders:
Dividends paid from net
investment income (14,416) (11,032)
Distributions from net realized gain
on investments (2,176) (3,336)
--------- ---------
Total dividends and distributions (16,592) (14,368)
--------- ---------
Capital Share Transactions:
Proceeds from shares sold:
7,873,913 and 6,164,069 shares, respectively 121,500 93,928
Proceeds from shares issued in reinvestment
of net investment income dividends and distributions
of net realized gain on investments:
720,458 and 645,325 shares, respectively 11,126 9,858
Cost of shares repurchased: 2,986,900 and
2,910,852 shares, respectively (46,078) (44,191)
--------- ---------
Net increase in net assets
resulting from capital share
transactions 86,548 59,595
--------- ---------
Total Increase in Net Assets 98,854 60,276
Net Assets:
Beginning of year 217,140 156,864
--------- ---------
End of year $315,994 $217,140
========= =========
See Notes to Financial Statements
</TABLE>
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. Securities for which
market quotations are not readily available are valued at fair value by the
Board of Directors or a committee thereof. All securities with 60 days or less
to maturity are valued at amortized cost, which approximates market value.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed-delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Premiums and original issue discounts
on securities purchased are amortized. 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 that 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 $13,000 includes $12,000 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, 1997, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $21,225,000, of which $21,229,000
related to appreciated securities and $4,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1997. The cost of portfolio securities
for book and federal income tax purposes was $294,625,000 at July 31, 1997.
3. The fee of $1,100,000 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. Expenses that are not subject to these
limitations are interest, taxes, brokerage commissions, transaction costs and
extraordinary expenses.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of 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, 1997,
distribution expenses under the Plan were limited to $767,000, representing
0.30% of average net assets. Had no limitation been in effect, the fund would
have paid $798,000 in distribution expenses under the Plan. As of July 31,
1997, accrued and unpaid distribution expenses were $81,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $97,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $345,000 (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, 1997,
aggregate amounts deferred and earnings thereon were $24,000.
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, 1997, accumulated undistributed net realized gain on
investments was $740,000 and additional paid-in capital was $274,102,000.
The fund made purchases and sales of investment securities of $115,238,000
and $37,162,000, respectively, during the year ended July 31, 1997.
<PAGE>
<TABLE>
Per-Share Data and Ratios
<S> <C> <C> <C>
Period
September 26
Year ended Year ended 1994 /1/ to
July 31 July 31 July 31,
1997 1996 1995
Net Asset Value, Beginning
of Period $15.23 $15.14 $14.29
------------ ------------ ------------
Income From Investment
Operations:
Net investment income .87 .88 .76
Net realized and
unrealized gain
on investments .80 .37 .85
------------ ------------ ------------
Total income from investment operations 1.67 1.25 1.61
------------ ------------ ------------
Less Distributions:
Dividends from net investment income (.86) (.88) (.76)
Distributions from net realized gains (.14) (.28) --
------------ ------------ ------------
Total distributions (1.00) (1.16) (.76)
------------ ------------ ------------
Net Asset Value, End of Period $15.90 $15.23 $15.14
============ ============ ============
Total Return /2/ 11.36% 8.48% 11.62% /3/
Ratios/Supplemental Data:
Net assets, end of period (in millions) $316 $217 $157
Ratio of expenses to average net assets before fee waiver .87% .88% .94% /3/
Ratio of expenses to average net assets after fee waiver .87% .86% .62% /3/
Ratio of net income to average net assets 5.51% 5.74% 5.66% /3/
Portfolio turnover rate 15.31% 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.
</TABLE>
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, 1997, 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, 1997 by correspondence with the custodian and brokers
and the application of alternative procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Los Angeles, California
August 29, 1997
TAX INFORMATION (UNAUDITED)
During the fiscal year ended July 31, 1997, the fund paid 85.5 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>
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
Don R. Conlan
South Pasadena, California
Former President,
The Capital Group Companies, Inc.
Diane C. Creel
Long Beach, California
Chief Executive Officer and President,
The Earth Technology Corporation
(international engineering consulting)
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
Executive Vice President and Director,
Capital Research and Management Company
Herbert Hoover III
San Marino, California
Private investor
Richard G. Newman
Los Angeles, California
Chairman of the Board, President and
Chief Executive Officer,
AECOM Technology Corporation
(architectural engineering)
Peter C. Valli
Long Beach, California
Former 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
Todd L. Miller
Brea, California
Assistant Treasurer 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
One Chase Manhattan Plaza
New York, New York 10081-0001
Counsel
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
Independent accountants
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180, OR VISIT WWW.AMERICANFUNDS.COM ON THE
WORLD WIDE WEB.
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, 1997, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA AGD/INS/3199
Lit. No. AHIM-011-0997
[The American Funds Group(R)]
Printed on recycled paper
