SEC File Nos. 811-8576
33-80630
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 6
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 8
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
JULIE F. WILLIAMS, Secretary
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
ROBERT E. CARLSON, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. Flower Street
Los Angeles, CA 90071-2371
(Counsel for the Registrant)
Approximate date of proposed public offering:
It is proposed that this filing will become effective on October 1, 1998,
pursuant to paragraph (a) of rule 485.
AMERICAN HIGH-INCOME MUNICIPAL TAX FUND, INC.
CROSS REFERENCE SHEET
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ITEM NUMBER OF CAPTIONS IN PROSPECTUS (PART "A")
PART "A" OF FORM N-1A
<S> <C> <C>
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risk/Return Summary
Risks and Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary
4. Investment Objectives, Principal Investment Objective, Strategies and Risks
Strategies, and Related Risks
5. Management's Discussion of Fund N/A
Performance
6. Management, Organization, and Capital Management and Organization
Structure
7. Shareholder Information Shareholder Information
8. Distribution Arrangements Distribution Arrangements
9. Financial Highlights Information Financial Highlights
</TABLE>
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ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
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10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History Fund Organization and Voting Rights
12. Description of the Fund and its Fund Organization and Voting Rights;
Investments and Risks Investment Restrictions; Description of
Securities and Investment Techniques
13. Management of the Fund Management; Fund Officers and Directors
14. Control Persons and Principal Holders N/A
of Securities
15. Investment Advisory and Other Services Management; General Information; Fund Officers
and Directors
16. Brokerage Allocation and Other Management; Execution of Portfolio
Practices Transactions
17. Capital Stock and Other Securities None
18. Purchase, Redemption and Pricing of Purchase of Shares; Selling Shares;
Shares Shareholder Account Services and Privileges;
General Information
19. Taxation of Fund Dividends and Distributions
20. Underwriters Management
21. Calculation of Performance Data Investment Results
22. Financial Statements Financial Statements
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART "C"
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23. Exhibits
24. Persons Controlled by or under Common Control with Registrant
25. Indemnification
26. Business and Other Connections of Investment Adviser
27. Principal Underwriters
28. Location of Accounts and Records
29. Management Services
30. Undertakings
Signature Page
</TABLE>
American High-Income
Municipal Bond Fund(r)
PROSPECTUS
OCTOBER 1, 1998
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT CONSIDERED THE MERITS OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
333 South Hope Street
Los Angeles, California 90071
TICKER SYMBOL: AMHIX
NEWSPAPER ABBREV.: HilnMuni
FUND NO.: 40
TABLE OF CONTENTS
Risk/Return Summary
Fees and Expenses
Investment Objective, Strategies and Risks
Important Recent Developments
Management and Organization
Shareholder Information
Distribution Arrangements
Financial Highlights
Appendix
RISK/RETURN SUMMARY
The fund seeks to provide you with high current income that is exempt from
regular federal income tax by investing in municipal bonds, including lower
quality bonds. The fund emphasizes undervalued but fundamentally sound
investments in municipal obligations supporting roads, schools, hospitals,
airports and other public needs.
The fund is suited for investors seeking a high level of current income exempt
from federal taxes who are able to tolerate greater credit risk and price
fluctuations than funds investing in higher quality bonds.
The value of your investment may decline in response to certain events
including those directly involving issuers of securities held in the fund's
portfolio, adverse economic conditions affecting the general economy, or
overall market declines. In addition, the value of higher rated bonds in the
fund's portfolio generally will decline when interest rates rise. Accordingly,
you may lose money by investing in the fund. The likelihood of loss is greater
if you invest for a shorter period of time.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other entity or
person.
INVESTMENT RESULTS
The fund calculates its results in the following ways:
- - TOTAL RETURN is the change in value of an investment in the fund over a given
period, assuming reinvestment of any dividends and capital gain distributions.
- - YIELD generally reflects the income return on the fund's investments based on
the current portfolio as calculated by a formula mandated by the Securities and
Exchange Commission. Yield is computed by dividing the net investment income
per share earned by the fund over a given period of time by the maximum
offering price per share on the last day of the period. A yield calculated
using this formula may be different than the income actually paid to
shareholders.
- - DISTRIBUTION RATE reflects dividends that were paid by the fund. The
distribution rate is calculated by annualizing the current month's dividend and
dividing by the average price for the month.
The following information illustrates how the fund's results fluctuate:
For periods ended December 31, 1997:
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<S> <C> <C> <C> <C>
Average Annual The fund at The fund at Lehman Lipper
Total Return net asset maximum sales Index/3/ Average/4/
value/1/ charge/1,2/
One Year xx.xx% xx.xx% xx.xx% xx.xx%
Five Years xx.xx% xx.xx% xx.xx% xx.xx%
Lifetime/5/ xx.xx% xx.xx% xx.xx%/5/ xx.xx%
</TABLE>
SEC Yield/1,2/: x.xx%
Distribution Rate/2/: x.xx%
(For current yield and distribution rate information, please call
1-800-421-9900)
/1/ THESE FUND RESULTS WERE CALCULATED ACCORDING TO A STANDARD FORMULA THAT IS
REQUIRED FOR ALL STOCK AND BOND FUNDS.
/2/ INCLUDES THE MAXIMUM SALES CHARGE.
/3/ LEHMAN BROTHERS BOND INDEX REPRESENTS THE LONG-TERM INVESTMENT GRADE
MUNICIPAL BOND MARKET. THIS INDEX IS UNMANAGED AND DOES NOT REFLECT SALES
CHARGES, COMMISSIONS OR EXPENSES.
/4/ THE LIPPER HIGH YIELD MUNICIPAL DEBT AVERAGE IS COMPRISED OF FUNDS THAT
INVEST AT LEAST 50% OF THEIR ASSETS IN LOWER RATED MUNICIPAL DEBT ISSUES.
/5/ THE FUND BEGAN INVESTMENT OPERATIONS ON SEPTEMBER 26, 1994.
Here are the fund's results calculated without a sales charge on a calendar
year basis. (If a sales charge were included, results would be lower.)
1994 -0.09
1995 19.05
1996 6.45
The fund's year-to-date return for the period ending June 30, 1998 was %.
The fund's highest/lowest quarterly results during this time period were:
- - Highest xxxx (quarter ended xx)
- - Lowest xxxx (quarter ended xx)
Past results are not an indication of future results.
FEES AND EXPENSES OF THE FUND
THE FOLLOWING DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND
HOLD SHARES OF THE FUND.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge imposed on purchases
(as a percentage of offering price) 4.75%
Sales charges are reduced or eliminated for larger purchases. There is no
sales charge on reinvested dividends, and no deferred sales charge or
redemption or exchange fees. A contingent deferred sales charge of 1% applies
on certain redemptions made within 12 months following any purchases you made
without a sales charge.
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ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM
THE FUND ASSETS)
<S> <C> <C>
Management Fees xx.xx%
Service (12b-1) Fees xx.xx%*
Other Expenses xx.xx%
____________________ xx.xx%
____________________ xx.xx%
____________________ xx.xx%
Total Annual Fund Operating Expenses xx.xx%
</TABLE>
*12B-1 EXPENSES MAY NOT EXCEED 0.30% OF THE FUND'S AVERAGE NET ASSETS ANNUALLY.
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that
the fund's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
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<S> <C>
One year $xx
Three years $xx
Five years $xx
Ten years $xx
</TABLE>
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The fund's investment objective is to provide investors with a high level of
current income exempt from regular federal income taxes by investing in
municipal bonds, including lower quality bonds. Municipal bonds are debt
obligations generally issued to obtain funds for various public purposes,
including the construction of public facilities. Normally, the fund invests
substantially in lower quality debt securities (rated Baa or BBB or below). In
addition, the fund may purchase securities that would subject you to federal
alternative minimum taxes. The fund may temporarily invest in taxable debt
securities in response to unfavorable market conditions (which would prevent
the fund from achieving its investment objective).
Your investment may be adversely affected by market conditions and other
factors. For example, credit rating downgrades and rising interest rates may
cause the value of the fund's investments to decline. The fund may invest
significantly in municipal obligations of issuers in the same state or of
similar project type. This may make the fund more susceptible to similar
economic, political or regulatory occurrences. As a result, as the similarity
of issuers increases the potential for fluctuation in the fund's share price
may also increase. In addition, the value of lower quality municipal bonds may
decline more than higher quality bonds in response to unfavorable developments.
The fund's investment adviser attempts to reduce these risks through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring economic and legislative developments.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek values at reasonable prices.
The following chart illustrates the quality ratings of the various bonds held
in the portfolio as of the end of the fund's fiscal year. See the Appendix for
a description of quality ratings.
[PIE CHART]
FIVE LARGEST PROJECT TYPES Percent of Net Assets
Because the fund is actively managed, its holdings will change from time to
time.
IMPORTANT RECENT DEVELOPMENTS
YEAR 2000
The date-related computer issue known as the "Year 2000 problem" could have an
adverse impact on the quality of services provided to the fund and its
shareholders. However, the fund understands that its key service
providers--including the investment adviser and its affiliates--are taking
steps to address the issue. In addition, the Year 2000 problem may adversely
affect the issuers in which the fund invests. For example, issuers may incur
substantial costs to address the problem. They may also suffer losses caused
by corporate and governmental data processing errors. The fund and its
investment adviser will continue to monitor developments relating to this
issue.
MANAGEMENT AND ORGANIZATION
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071.
Capital Research and Management Company manages the investment portfolio and
business affairs of the fund. The total management fee paid by the fund, as a
percentage of average net assets, for the previous fiscal year is discussed
earlier under "Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investment. This policy has also been
incorporated into the fund's code of ethics.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this system the portfolio of a
fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested (within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee). In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for American High-Income Municipal Bond Fund are listed on
the following page.
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=======================================================================================
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(APPROXIMATE)
..........................
PORTFOLIO
COUNSELORS YEARS OF EXPERIENCE WITH CAPITAL
FOR AMERICAN AS PORTFOLIO COUNSELOR FOR RESEARCH AND
HIGH-INCOME AMERICAN HIGH-INCOME MANAGEMENT
MUNICIPAL MUNICIPAL BOND FUND COMPANY OR
BOND FUND PRIMARY TITLE(S) (APPROXIMATE) ITS AFFILIATES TOTAL YEARS
- ---------------------------------------------------------------------------------------
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NEIL L. Senior Vice 3 years (since 19 years 19 years
LANGBERG President of the fund began
the fund. Vice operations)
President--
Investment
Management
Group, Capital
Research and
Management
Company
- ---------------------------------------------------------------------------------------
MARK R. Vice President 3 years (since 3 years 12 years
MACDONALD of the fund. the fund began
Vice operations)
President--
Investment
Management
Group, Capital
Research and
Management
Company
- ---------------------------------------------------------------------------------------
DAVID A. Vice President, 1 year 6 years 9 years
HOAG Capital
Research
Company*
========================================================================================
</TABLE>
The fund began operations on September 26, 1994
* A wholly owned subsidiary of Capital Research and Management Company
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services are available only in states
where they may be legally offered and may be terminated or modified at any time
upon 60 days written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET);
800/421-0180
[REGIONAL MAP OF THE UNITED STATES APPEARS HERE]
Western Service Center
American Funds Service Company
P.O. Box 2205
Brea, California
92822-2205
Fax: 714/671-7080
Western Central Service Center
American Funds Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
Fax: 210/530-4050
Eastern Central Service Center
American Funds Service Company
P.O. Box 6007
Indianapolis, Indiana
46206-6007
Fax: 317/735-6620
Eastern Service Center
American Funds Service Company
P.O. Box 2280
Norfolk, Virginia
23501-2280
Fax: 804/670-4773
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER ARE DESCRIBED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.
TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
Additionally, accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your dealer.
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into other funds in The American Funds Group
generally without a sales charge. Exchanges of shares from the money market
funds initially purchased without a sales charge generally will be subject to
the appropriate sales charge. Exchanges have the same tax consequences as
ordinary sales and purchases.
See "Transactions by Telephone . . ." for information regarding electronic
exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.
INVESTMENT MINIMUMS
To establish an account $1,000
To add to an account $ 50
SHARE PRICE
The fund determines its share price, also called net asset value, as of 4:00
p.m. New York time, which is the normal close of trading on the New York Stock
Exchange, every day the Exchange is open. In calculating net asset value,
market prices are used when available. If a market price for a particular
security is not available, the fund will determine the appropriate price for
the security.
Your shares will be purchased at the offering price, or sold at the net asset
value, next determined after American Funds Service Company receives and
accepts your request. The offering price is the net asset value plus a sales
charge, if applicable.
SALES CHARGE
A sales charge may apply to your purchase. Your sales charge may be reduced
for larger purchases as indicated below.
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Sales Charge as a
Percentage of
Investment Offering Net Dealer
Price Amount Concession
Invested as % of
Offering
Price
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Less than $25,000 4.75% 4.99% 4.00%
$25,000 but less than $50,000 4.50% 4.71% 3.75%
$50,000 but less than $100,000 4.00% 4.17% 3.25%
$100,000 but less than $250,000 3.50% 3.63% 2.75%
$250,000 but less than $500,000 2.50% 2.56% 2.00%
$500,000 but less than $1 million 2.00% 2.04% 1.60%
$1 million or more and certain see below see below see below
other investments described below
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more and investments made by employer-sponsored
defined contribution-type plans with 100 or more eligible employees are sold
with no initial sales charge. A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE
IMPOSED ON CERTAIN REDEMPTIONS BY THESE ACCOUNTS MADE WITHIN ONE YEAR OF
PURCHASE. A dealer concession of up to 1% may be paid by the fund under its
Plan of Distribution and/or by American Funds Distributors on investments made
with no initial sales charge.
REDUCING YOUR SALES CHARGE
You and your immediate family may combine investments to reduce your sales
charge. You must let your investment dealer or American Funds Service Company
know if you qualify for a reduction in your sales charge using one or any
combination of the methods described in the statement of additional information
and "Welcome to the Family."
PLAN OF DISTRIBUTION
The fund has a Plan of Distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of directors. Up to 0.25%
of average net assets is paid annually to qualified dealers for providing
certain services pursuant to the fund's Plan of Distribution. The 12b-1 fee
paid by the fund, as a percentage of average net assets, for the previous
fiscal year is indicated earlier under "Fees and Expenses of the Fund." Since
these fees are paid out of the fund's assets on an ongoing basis, over time
they will increase the cost of an investment and may cost you more than paying
higher initial sales charges.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for dealers as described in the statement of additional
information.
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's name must be sold through the dealer
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- --Over $50,000;
- --Made payable to someone other than the registered shareholder(s); or
- --Sent to an address other than the address of record, or an address of record
which has been changed within the last 10 days.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(SM):
- - Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(sm)) are limited to $50,000 per shareholder each day
- - Checks must be made payable to the registered shareholder(s)
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE(R), OR AMERICAN FUNDSLINE
ONLINE(SM)
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American Funds Service Company employs reasonable procedures to confirm that
the instructions received from any person with appropriate account information
are genuine. If reasonable procedures are not employed, the fund may be liable
for losses due to unauthorized or fraudulent instructions.
DISTRIBUTION ARRANGEMENTS
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and
distributes accrued dividends to you each month. Capital gains, if any, are
usually distributed in November or December.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash.
TAX CONSEQUENCES
Interest on municipal bonds is generally not included in gross income for
federal income tax purposes. The fund is permitted to pass through to its
shareholders federally tax-exempt income subject to certain requirements.
However, the fund may invest in obligations which pay interest that is subject
to state and local taxes when distributed by the fund. Dividends derived from
taxable interest income, distributions of capital gains and dividends on gains
from the disposition of certain market discount bonds will not be exempt from
federal, state or local income tax.
Dividends and capital gains are generally taxable whether they are reinvested
or received in cash--unless you are exempt from taxation or entitled to tax
deferral. Capital gains may be taxed at different rates depending on the
length of time the fund holds its assets.
You must provide the fund with a certified correct taxpayer identification
number (generally your Social Security Number) and certify that you are not
subject to backup withholding. If you fail to do so, the IRS can require the
fund to withhold 31% of your taxable distributions and redemptions. Federal
law also requires the fund to withhold 30% of the applicable tax treaty rate
from dividends paid to certain non-resident alien, non-US partnership and
non-U.S. corporation shareholder accounts.
Please see the statement of additional information, "Welcome to the Family,"
and your tax adviser for further information.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the past five years. Certain information reflects
financial results for a single fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Price Waterhouse LLP, whose report, along with
the fund's financial statements, are included in the statement of additional
information, which is available upon request.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1998 1997 1996 1995/1/
Net Asset Value, Beginning of $15.23 $15.14 $14.29
Period
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income .87 .88 .76
Net Gains or Losses on .80 .37 .85
Securities (both realized and
unrealized)
Total From Investment 1.67 1.25 1.61
Operations
LESS DISTRIBUTIONS:
Dividends (from net investment (.86) (.88) (.76)
income)
Distributions (from capital (.14) (.28) -
gains)
Returns of Capital xx.xx xx.xx xx.xx
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%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period $316 $217 $157
Ratio of Expenses to Average
Net Assets Before Fee Waiver .87% .88% .94%
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/
</TABLE>
/1/ The period ended July 31, 1995 represents the initial period of operations
from September 26, 1994 to July 31, 1995.
/2/ Excludes maximum sales charge of 4.75%.
/3/ Based on operations for the period shown and, accordingly, are not
representatives of a full year's operations.
APPENDIX
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities in categories ranging from "Aaa" to "C," according to quality
as described below.
"Aaa - Best quality. These securities carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large, or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally
strong position of such shares."
"Aa - High quality by all standards. They are rated lower than the best bond
because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may be
other elements present which make the long-term risks appear somewhat greater."
"A - Upper medium grade obligations. These bonds possess many favorable
investment attributes. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility
to impairment sometime in the future."
"Baa - Medium grade obligations. Interest payments and principal security
appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and, in fact, have
speculative characteristics as well."
"Ba - Have speculative elements; future cannot be considered as well assured.
The protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Bonds in this class are characterized by uncertainty of position."
"B - Generally lack characteristics of the desirable investment; assurance of
interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small"
"Caa - Of poor standing. Issues may be in default or there may be present
elements of danger with respect to principal or interest."
"Ca - Speculative in a high degree; often in default of having other marked
shortcomings."
"C - Lowest rated class of bonds; can be regarded as having extremely poor
prospects of ever attaining any real investment standing."
Standard & Poor's rates the long-term debt securities issued by various
entities in categories ranging from "AAA" to "D," according to quality as
described below.
"AAA - Highest rating. Capacity to pay interest and repay principal is
extremely strong."
"AA - High grade. Very strong capacity to pay interest and repay principal.
Generally, these bonds differ from AAA issues only in a small degree."
"A - Have a strong capacity to pay interest and repay principal, although they
are somewhat more susceptible to the adverse effects of change in circumstances
and economic conditions, than debt in higher rated categories."
"BBB - Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal than for debt in
higher rated categories."
"BB, B, CCC, CC, C - Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"C1 - Reserved for income bonds on which interest is being paid."
"D - In default and payment of interest and/or repayment of principal is in
arrears."
<TABLE>
<CAPTION>
<S> <C> <C>
For Shareholder For Retirement Plan Services For Dealer Services
Services Call your employer or plan American Funds
American Funds administrator Distributors
Service Company 800/421-9900 ext.11
800/421/0180
</TABLE>
For 24-hour Information
<TABLE>
<CAPTION>
<S> <C>
American FundsLine(r) American Funds
800/352-3590 Internet Web site
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for verification,
recordkeeping and quality assurance purposes.
Multiple Translations
This prospectus may be translated into other languages. If there are any
inconsistencies or ambiguities, the English text will prevail.
OTHER FUND INFORMATION
Annual/Semi-Annual Report to Shareholders
Contains additional information about the fund including financial statements,
investment results, portfolio holdings, a statement from portfolio management
discussing market conditions and the fund's investment strategies, and the
independent accountants' report (in the annual report).
Statement of Additional Information (SAI)
Contains more detailed information on all aspects of the fund, including the
fund's financial statements.
A current SAI has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this prospectus. The SAI and
other related materials about the fund are available for review or to be copied
at the SEC's Public Reference Room (1-800-SEC-0330) or on the SEC's Internet
Web site at http://www.sec.gov.
Code of Ethics
Includes a description of the fund's personal investing policy.
To request a free copy of any of the documents above:
<TABLE>
<CAPTION>
<S> <C>
Call American Funds or Write to the Secretary of the fund
Service Company 333 South Hope Street
800/421-0180 ext.1 Los Angeles, California 90071
Investment Company File No. 811-8576
</TABLE>
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
Part B
Statement of Additional Information
October 1, 1998
This document is not a prospectus but should be read in conjunction with
the current prospectus dated October 1, 1998 of American High-Income Municipal
Bond Fund, Inc. (the "fund"). The prospectus may be obtained from your
investment dealer or financial planner or by writing to the fund at the
following address:
American High-Income Municipal Bond Fund, Inc.
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Table of Contents
<TABLE>
<CAPTION>
ITEM Page No.
<S> <C>
Certain Investment Limitations 2
Description of Securities and Investment Techniques 3
Investment Restrictions 7
Fund Organization and Voting Rights 9
Fund Officers and Directors 11
Management 14
Dividends and Distributions 17
Additional Information Concerning Taxes 17
Purchase of Shares 21
Selling Shares 27
Shareholder Account Services and Privileges 28
Execution of Portfolio Transactions 30
General Information 31
Investment Results 32
Financial Statements attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
TAX-EXEMPT SECURITIES
- - Portion of the fund that must be in tax-exempt securities 80%
(including securities subject to alternative minimum taxes)
DEBT SECURITIES
- - Portion of the fund that must be in debt rated A or below 65%
- - Portion of the fund that must be rated BBB/Baa or below 50%
MUNICIPAL BONDS
- - Portion of the fund that must be in tax-exempt bonds (any debt 65%
securities having initial maturities in excess of one year)
MATURITY
- - Cash or high-quality taxable short-term securities up to one year 20%
in maturity under normal market conditions
CONCENTRATION OF INVESTMENTS
- - Municipal securities of the same project type issued by 25%
non-governmental entities
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
The descriptions below are intended to supplement the material in the
prospectus under "Investment Policies and Risks."
DEBT SECURITIES -- Bonds and other debt securities are used by issuers to
borrow money. Issuers pay investors interest and generally must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds,
do not pay current interest, but are purchased at a discount from their face
values. The prices of debt securities fluctuate depending on such factors as
interest rates, credit quality, and maturity. In general their prices decline
when interest rates rise and vice versa.
There are no restrictions on the maturity composition of the portfolio,
although it is anticipated that the fund normally will be invested
substantially in securities with maturities in excess of three years.
The fund may invest in debt securities rated Ba and BB or below by Moody's
or S&P or in unrated securities that are determined to be of equivalent quality
by Capital Research and Management Company. These securities are commonly known
as "high-yield, high-risk" or "junk" bonds. High-yield, high-risk bonds are
described by the rating agencies as speculative and involve greater risk of
default or price changes due to changes in the issuer's creditworthiness, or
they may already be in default. The market prices of these securities may
fluctuate more than higher quality securities and may decline significantly. It
may be more difficult to dispose of, or to determine the value of, high-yield,
high-risk bonds.
The fund may invest in bonds rated as low as C by Moody's or D by S&P. See
the Appendix in the prospectus for a complete description of the bond
ratings.
Capital Research and Management Company attempts to reduce the risks
described above through diversification of the portfolio and by credit analysis
of each issuer as well as by monitoring broad economic trends and corporate and
legislative developments.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES -- High-yield, high-risk
bonds can be very sensitive to adverse economic changes and political and
corporate developments and may be less sensitive to interest rate changes.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would adversely
affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay interest
or principal or entered into bankruptcy proceedings, the fund may incur losses
or expenses in seeking recovery of amounts owed to it. In addition, periods of
economic uncertainty and changes can be expected to result in increased
volatility of market prices and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS -- High-yield, high-risk bonds may contain redemption
or call provisions. If an issuer exercised these provisions in a declining
interest rate market, the fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. A
high-yield, high-risk bond's value will decrease in a rising interest rate
market, as will the value of the fund's assets.
LIQUIDITY AND VALUATION -- There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
MUNICIPAL BONDS -- Municipal bonds are debt obligations generally issued to
obtain funds for various public purposes, including the construction of public
facilities. Opinions relating to the validity of municipal bonds and to the
exclusion from gross income for federal income tax purposes and, where
applicable, the exemption from state and local income tax are rendered by bond
counsel to the issuing authorities at the time of issuance.
The two principal classifications of municipal bonds are general obligation
and limited obligation, or revenue, bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit including, if
available, its taxing power for the payment of principal and interest. Issuers
of general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality. Annual rental payments are payable to the extent such
rental payments are appropriated annually.
Typically, the only security for a limited obligation or revenue bond is the
net revenue derived from a particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a special tax or other special
revenues. Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many
provide additional security in the form of a debt service reserve fund which
may also be used to make principal and interest payments on the issuer's
obligations. In addition, some revenue obligations (as well as general
obligations) are insured by a bond insurance company or backed by a letter of
credit issued by a banking institution.
Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but by the
revenues of the authority derived from payments by the private entity which
owns or operates the facility financed with the proceeds of the bonds.
Obligations of housing finance authorities have a wide range of security
features including reserve funds and insured or subsidized mortgages, as well
as the net revenues from housing or other public projects. Most of these bonds
do not generally constitute the pledge of the credit of the issuer of such
bonds. The credit quality of such revenue bonds is usually directly related to
the credit standing of the user of the facility being financed or of an
institution which provides a guarantee, letter of credit, or other credit
enhancement for the bond issue.
MUNICIPAL LEASE OBLIGATIONS -- The fund may invest in municipal lease revenue
obligations, some of which may be considered illiquid. The fund may purchase,
without limitation, municipal lease revenue obligations that are determined to
be liquid by Capital Research and Management Company. In determining whether
these securities are liquid, Capital Research and Management Company will
consider among other things, the credit quality and support, including
strengths and weaknesses of the issuers and lessees, the terms of the lease,
frequency and volume of trading and number of dealers.
ZERO COUPON BONDS -- Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the securities begin paying
current interest. They are issued and traded at a discount from their face
amount or par value, which discount varies depending on the time remaining
until cash payments begin, prevailing interest rates, liquidity of the
security, and the perceived credit quality of the issuer.
PRE-REFUNDED BONDS -- From time to time, a municipality may refund a bond that
it has already issued prior to the original bond's call date by issuing a
second bond, the proceeds of which are used to purchase securities. The
securities are placed in an escrow account pursuant to an agreement between the
municipality and an independent escrow agent. The principal and interest
payments on the securities are then used to pay off the original bondholders.
For the purposes of diversification, pre-refunded bonds will be treated as
governmental issues.
VARIABLE AND FLOATING RATE OBLIGATIONS -- The fund may invest in variable
and floating rate obligations which have interest rates that are adjusted at
designated intervals or whenever interest
rates change. The rate adjustment feature tends to limit the extent to which
the market value of the obligation will fluctuate.
FORWARD COMMITMENTS -- The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities
it assumes the risk of any decline in value of the security beginning on the
date of the agreement. When the fund agrees to sell such securities, it does
not participate in further gains or losses with respect to the securities
beginning on the date of the agreement. If the other party to such a
transaction fails to deliver or pay for the securities, the fund could miss a
favorable price or yield opportunity, or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its
payment obligations in these transactions. Although these transactions will
not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets would likely occur than were
it not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
RESTRICTED SECURITIES AND LIQUIDITY -- The fund may purchase securities
subject to restrictions on resale. All such securities whose principal trading
market is in the U.S. will be considered illiquid unless they have been
specifically determined to be liquid under procedures which have been adopted
by the fund's board of directors, taking into account factors such as the
frequency and volume of trading, the commitment of dealers to make markets and
the availability of qualified investors, all of which can change from time to
time. The fund may incur certain additional costs in disposing of illiquid
securities.
REPURCHASE AGREEMENTS -- Although the fund has no current intention to do so
during the next 12 months, the fund may enter on a temporary basis into
repurchase agreements, under which the fund buys a security and obtains a
simultaneous commitment from the seller to repurchase the security at a
specified time and price. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price including accrued
interest, as monitored daily by the Investment Adviser. The fund will only
enter into repurchase agreements involving securities in which it could
otherwise invest and with selected banks and securities dealers whose financial
condition is monitored by the Investment Adviser. If the seller under the
repurchase agreement defaults, the fund may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, liquidation of the
collateral by the fund may be delayed or limited.
* * *
CONCENTRATION OF INVESTMENTS -- The fund may invest more than 25% of its
assets in municipal obligations of issuers located in the same state or in
municipal obligations of the same type which pay interest on their obligations
from revenue of similar projects. This may make the fund more susceptible to
similar economic, political, or regulatory occurrences such as changes in
healthcare regulations, environmental considerations related to construction,
construction cost increases and labor problems, failure of healthcare
facilities to maintain adequate occupancy levels, and inflation. As the
similarity in issuers increases, the potential for fluctuation of the net asset
value of shares of the fund also increases. The fund will not invest 25% or
more of its assets in municipal securities of the same project type issued by
non-governmental entities.
TEMPORARY INVESTMENTS -- The fund may invest in short-term municipal
obligations of up to one year in maturity during periods of temporary defensive
strategy resulting from abnormal market conditions, or when such investments
are considered advisable for liquidity. Generally, the income from all such
securities is exempt from federal income tax. See "Additional Information
Concerning Taxes" below. Further, a portion of the fund's assets, which will
normally be less than 20%, may be held in cash or invested in high-quality
taxable short-term securities of up to one year in maturity. Such investments
may include: (1) obligations of the U.S. Treasury; (2) obligations of agencies
and instrumentalities of the U.S. Government; (3) money market instruments,
such as certificates of deposit issued by domestic banks, corporate commercial
paper, and bankers' acceptances; and (4) repurchase agreements (which are
subject to the limitations described below).
LOANS OF PORTFOLIO SECURITIES -- Although the fund has no current intention to
do so during the next 12 months, the fund is authorized to lend portfolio
securities to selected securities dealers or other institutional investors
whose financial condition is monitored by Capital Research and Management
Company (the "Investment Adviser"). The borrower must maintain with the fund's
custodian collateral consisting of cash, cash equivalents or U.S. Government
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Investment Adviser will monitor the adequacy of the
collateral on a daily basis. The fund may at any time call a loan of its
portfolio securities and obtain the return of the loaned securities. The fund
will receive any interest paid on the loaned securities and a fee or a portion
of the interest earned on the collateral. The fund will limit its loans of
portfolio securities to an aggregate of 33$% of the value of its total assets,
taken at the time any such loan is made.
SECURITIES SUBJECT TO ALTERNATIVE MINIMUM TAXES -- The fund may invest
without limitation in tax-exempt securities believed to pay interest
constituting an item of tax preference subject to alternative minimum taxes;
therefore, while the fund's distributions from tax-exempt securities are not
subject to regular federal income tax, a portion or all may be included in
determining a shareholder's federal alternative minimum tax.
PORTFOLIO MANAGEMENT -- In seeking to achieve the fund's objective, the
Investment Adviser causes the fund to purchase securities which it believes
represent the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the economy, movements in
the general level and term structure of interest rates, political developments,
and variations in the supply of funds available for investment in the
tax-exempt market relative to the demand for the funds placed upon it. These
latter factors change continuously and should be met with a dynamic, responsive
approach to the investment process. Some of the more important portfolio
management techniques that are utilized by the Investment Adviser are set forth
below.
ADJUSTMENT OF MATURITIES -- The Investment Adviser seeks to anticipate
movements in interest rates and adjusts the maturity distribution of the
portfolio accordingly. Longer term securities ordinarily yield more than
shorter term securities but are subject to greater and more rapid price
fluctuation. Keeping in mind the fund's objective of producing a high level of
current income, the Investment Adviser will increase the fund's exposure to
this price volatility only when it appears likely to increase current income
without undue risk to capital.
ISSUE CLASSIFICATION -- Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which
they were issued, often tend to trade at different yields. These yield
differentials tend to fluctuate in response to political and economic
developments, as well as temporary imbalances in normal supply/demand
relationships. The Investment Adviser monitors these fluctuations closely, and
will attempt to adjust portfolio concentrations in various issue
classifications according to the value disparities brought about by these yield
relationship fluctuations.
QUALITY -- Securities issued for similar purposes and with the same general
maturity characteristics, but which vary according to the creditworthiness of
their respective issuers, tend to trade at different yields. These yield
differentials also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced by these
yield relationship fluctuations.
The Investment Adviser believes that, in general, the market for municipal
bonds is less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the fund to make purchases and sales of securities
in the foregoing manner may, at any particular time and with respect to any
particular securities, be limited (or non-existent).
PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. The fund does not
anticipate its portfolio turnover will exceed 100% annually. The fund's
portfolio turnover rate would equal 100% if each security in the fund's
portfolio were replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover over its lifetime.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without a majority vote of
its outstanding shares. Such majority is defined by the Investment Company Act
of 1940 ("1940 Act") as the vote of the lesser of (i) 67% or more of the
outstanding voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities are present in person or by proxy, or
(ii) more than 50% of the outstanding voting securities. All percentage
limitations expressed in the following investment restrictions are measured
immediately after and giving effect to the relevant transaction. These
restrictions provide that the fund may not:
1. With respect to 75% of the fund's total assets, purchase the security of
any issuer (other than securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities) if, as a result, (a) more than 5% of the
fund's total assets would be invested in securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer. For the purpose of this restriction, the fund will regard each state,
each political subdivision, agency or instrumentality of such state, each
multi-state agency of which such state is a member, and each public authority
which issues industrial development bonds on behalf of a private entity as a
separate issuer;
2. Invest in companies for the purpose of exercising control or management;
3. Purchase or sell real estate (including real estate limited partnerships)
unless acquired as a result of ownership of securities or other instruments
(but this shall not prevent the fund from investing in securities or other
instruments backed by real estate or securities of companies engaged in the
real estate business);
4. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments or engage in futures transactions;
5. Engage in the business of underwriting securities of other issuers, except
to the extent that the purchase or disposal of an investment position may
technically constitute the fund as an underwriter as that term is defined under
the Securities Act of 1933;
6. Make loans in an aggregate amount in excess of 33$% of the value of the
fund's total assets, taken at the time any loan is made, provided that the
purchase of debt securities pursuant to the fund's investment objective and
entering into repurchase agreements maturing in seven days or less shall not be
deemed loans for the purposes of this restriction and that loans of portfolio
securities may be made;
7. Issue senior securities, except as permitted under the Investment Company
Act of 1940;
8. Borrow money, except from banks for temporary or emergency purposes not to
exceed one-third of the value of the fund's total assets. Moreover, in the
event that the asset coverage for the fund's borrowings falls below 300%, the
fund will reduce, within three days (excluding Sundays and holidays), the
amount of its borrowings in order to provide for 300% asset coverage;
9. Pledge or hypothecate any of its assets, except in an amount up to
one-third of the value of its total assets, but only to secure borrowings for
temporary or emergency purposes;
10. Invest in interests in oil, gas, or other mineral exploration or
development programs (or leases);
11. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (this restriction does not prevent the fund from investing in
securities with put and call features);
12. Invest 25% or more of its assets in municipal securities of the same
project type issued by non-governmental entities. However, the fund may invest
more than 25% of its assets in municipal obligations of issuers located in the
same state or in municipal obligations of the same type, including without
limitation the following: general obligations of states and localities; lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public
housing authorities; or industrial development or pollution control bonds
issued for hospitals, electric utility systems, life care facilities or other
purposes. As a result, the fund may be more susceptible to adverse economic,
political, or regulatory occurrences affecting a particular category of
issuers. As the concentration in the securities of a particular category of
issuer increases, the potential for fluctuation in the value of the fund's
shares also increases; nor
13. Sell securities short, except to the extent that the fund
contemporaneously owns, or has the right to acquire at no additional cost,
securities identical to those sold short.
NON-FUNDAMENTAL POLICIES -- The following policies may be changed by the
Board of Directors:
1. The fund does not currently intend (at least for the next 12 months) to
lend portfolio securities. However, if such action is authorized by the Board
of Directors, loans of portfolio securities as described under "Loans of
Portfolio Securities" shall be made in accordance with the terms and conditions
therein set forth and consistent with fundamental investment restriction
#6;
2. The fund will not invest more than 15% of the value of its net assets in
securities which are not readily marketable (including repurchase agreements
maturing in more than seven days), nor invest more than 5% of its net assets in
restricted securities (excluding Rule 144A securities);
3. The fund will not invest more than 15% of its total assets in the
securities of issuers (excluding securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities) which together with any
predecessors have a record of less than three years continuous operation;
4. The fund does not currently intend (at least for the next 12 months) to
invest in the securities of other registered management investment companies,
except in connection with a merger, consolidation, acquisition, reorganization,
or in connection with the implementation of any deferred compensation plan as
adopted by the Board of Directors;
5. The fund does not currently intend (at least for the next 12 months) to
purchase securities in the event its borrowings exceed 5% of total assets.
For the purposes of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds that are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the bonds as
described, the most significant of which is the ultimate source of funds for
the payment of principal and interest on such bonds.
FUND ORGANIZATION AND VOTING RIGHTS
The fund is an open-end, diversified management investment company. It was
organized as a Maryland corporation in 1994.
All fund operations are supervised by the fund's board of directors. The
board meets periodically and performs duties required by applicable state and
federal laws. Members of the board who are not employed by Capital Research
and Management Company or its affiliates are paid certain fees for services
rendered to the fund as described in "Directors and Director Compensation"
below. They may elect to defer all or a portion of these fees through a
deferred compensation plan in effect for the fund.
The fund does not hold annual meetings of shareholders. However,
significant matters which require shareholder approval, such as certain
elections of board members or a change in a fundamental investment policy, will
be presented to shareholders at a meeting called for such purpose.
Shareholders have one vote per share owned. At the request of holders of at
least 10% of the shares, the fund will hold a meeting at which any member of
the board could be removed by a majority vote.
FUND OFFICERS AND DIRECTORS
Directors and Director Compensation
<TABLE>
<CAPTION>
NAME, POSITION PRINCIPAL AGGREGATE TOTAL TOTAL
ADDRESS AND WITH OCCUPATION(S) COMPENSATION COMPENSATION NUMBER
AGE REGISTRANT DURING (INCLUDING (INCLUDING OF FUND
PAST 5 YEARS VOLUNTARILY VOLUNTARILY BOARDS ON
(POSITIONS DEFERRED DEFERRED WHICH
WITHIN THE COMPENSATION/1/) COMPENSATION/1/) DIRECTOR
ORGANIZATIONS FROM THE FUND FROM ALL FUNDS SERVES/2/
LISTED MAY DURING FISCAL MANAGED BY
HAVE YEAR ENDED CAPITAL RESEARCH
CHANGED JULY 31, 1998 AND
DURING THIS MANAGEMENT
PERIOD) COMPANY/2/ FOR
THE YEAR ENDED
JULY 31, 1998
<S> <C> <C> <C> <C> <C>
H. Frederick Director Private $ $ 19
Christie Investor.
P.O. Box 144 Former
Palos Verdes President and
Estates, CA 90274 Chief
Age:65 Executive
Officer, The
Mission Group
(non-utility
holding
Company,
subsidiary of
Southern
California
Edison
Company)
+Don R. Director President none/4/ none/4/ 12
Conlan (retired),
Age: 62 The Capital
Group
Companies,
Inc.
Diane C. Director CEO and $ $ 12
Creel President,
100 W. The Earth
Broadway Technology
Suite 5000 Corporation
Long Beach, (international consulting
CA 90802 engineering)
Age: 49
Martin Director Chairman, $ $ 15
Fenton, Jr. Senior
4660 La Resource
Jolla Group
Village (management
Drive of senior
Suite 725 living
centers)
San Diego,
CA 92122
Age: 63
Leonard R. Director President, $ $ 12
Fuller Fuller &
4337 Marina Company, Inc.
City Drive (financial
Suite 841 management
ETN consulting
Marina del firm)
Rey, CA
90292
Age: 52
+*Abner D. President, Capital none/4/ none/4/ 12
Goldstine PEO and Research and
Age: 68 Director Management
Company,
Senior Vice
President
and Director
+**Paul G. Chairman Capital none/4/ none/4/ 14
Haaga, Jr. of Research and
Age: 49 the Board Management
Company,
Executive
Vice
President and
Director
Herbert Director Private $ $ 13
Hoover III Investor
1520 Circle
Drive
San Marino,
CA 91108
Age: 70
Richard G. Director Chairman, $ /3/ $ 13
Newman President and
3250 CEO,
Wilshire AECOM
Boulevard Technology
Los Angeles, Corporation
CA 90010-1599 (architectural
Age: 63 engineering)
</TABLE>
+ Directors who are considered "interested persons" as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071
/1/ Amounts may be deferred by eligible directors under a non-qualified
deferred compensation plan adopted by the Fund in 1994. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Director.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicle for certain
variable insurance contracts; and Endowments whose shares may be owned only by
tax-exempt organizations.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Directors is as
follows: H. Frederick Christie ($ ), Martin Fenton, Jr. ($ ),
Leonard R. Fuller ($ ), and Richard G. Newman ($ ) . Amounts
deferred and accumulated earnings thereon are not funded and are general
unsecured liabilities of the fund until paid to the Director.
/4/ Don R. Conlan, Paul G. Haaga, Jr. and Abner D. Goldstine are affiliated
with the Investment Adviser and, accordingly, receive no compensation from the
Fund.
OFFICERS
(with their principal occupations during the past five years)#
<TABLE>
<CAPTION>
NAME AND ADDRESS AGE POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING
WITH REGISTRANT PAST 5 YEARS
<S> <C> <C> <C>
Neil L. Langberg 45 Senior Vice Vice President - Investment Management
11100 Santa Monica Blvd. President Group, Capital Research Company
Los Angeles, CA 90025
Michael J. Downer 43 Vice President Senior Vice President - Fund Business
333 South Hope Street Management Group, Capital Research and
Los Angeles, CA 90071 Management Company
Mary C. Hall 40 Vice President Senior Vice President - Fund Business
135 South State College Management Group, Capital Research and
Blvd. Management Company
Brea, CA 92821
Julie F. Williams 50 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital Research and
Los Angeles, CA 90071 Management Company
Anthony W. Hynes, Jr. 35 Treasurer Vice President - Fund Business
135 South State College Management Group, Capital Research and
Blvd. Management Company
Brea, CA 92821
Kimberly S. Verdick 33 Assistant Assistant Vice President - Fund
333 South Hope Street Secretary Business Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
Todd L. Miller 39 Assistant Assistant Vice President - Fund
135 South State College Treasurer Business Management Group, Capital
Blvd. Research and Management Company
Brea, CA 92821
</TABLE>
# Positions within the organizations listed may have changed during this period
No compensation is paid by the fund to any officer or Director who is a
director or officer of the Investment Adviser. The fund pays annual fees of
$900 to Directors who are not affiliated with the Investment Adviser, plus $200
for each Board of Directors meeting attended, plus $200 for each meeting
attended as a member of a committee of the Board of Directors. The Directors
may elect, on a voluntary basis, to defer all or a portion of their fees
through a deferred compensation plan in effect for the fund. The fund also
reimburses certain expenses of the Directors who are not affiliated with the
Investment Adviser. As of July 1, 1998 the officers and Directors and their
families as a group owned beneficially or of record less than 1% of the
outstanding shares of the fund.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad (Los Angeles, San Francisco, New
York, Washington D.C., London, Geneva, Singapore, Hong Kong and Tokyo), with a
staff of professionals, many of whom have years of investment experience. The
Investment Adviser is located at 333 South Hope Street, Los Angeles, CA 90071,
and at 135 South State College Boulevard, Brea, CA 92821. The Investment
Adviser's research professionals travel several million miles a year, making
more than 5,000 research visits in more than 50 countries around the world.
The Investment Adviser believes that it is able to attract and retain quality
personnel. The Investment Adviser is a wholly owned subsidiary of The Capital
Group Companies, Inc.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations as well as schools, colleges, foundations and
other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the "Agreement"), between the fund and the Investment
Adviser will continue in effect until May 31, 1999, unless sooner terminated,
and may be renewed from year to year thereafter, provided that any such renewal
has been specifically approved at least annually by (I) the Board of Directors
or by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the fund, and (ii) the vote of a majority of Directors who
are not parties to the Agreement or interested persons (as defined in the 1940
Act) of any such party, cast in person, at a meeting called for the purpose of
voting on such approval. The Agreement provides that the Investment Adviser
has no liability to the fund for its acts or omissions in the performance of
its obligations to the fund not involving willful misconduct, bad faith, gross
negligence or reckless disregard of its obligations under the Agreement. The
Agreement also provides that either party has the right to terminate it without
penalty, upon 60 days' written notice to the other party and that the Agreement
automatically terminates in the event of its assignment (as defined in the 1940
Act).
The Investment Adviser receives a fee at the annual rate of 0.30% on the first
$60 million of average net assets, plus 0.21% on net assets over $60 million,
plus 3% of gross investment income. Assuming net assets of $300 million and
gross investment income levels of 3%, 4%, 5%, 6% and 7%, management fees would
be 0.32%, 0.35%, 0.38%, 0.41% and 0.44%, respectively. For the purposes of
such computations under the Agreement, the fund's gross investment income does
not reflect any net realized gains or losses on the sale of portfolio
securities but does include original-issue discount as defined for federal
income tax purposes.
The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of
qualified persons to perform the executive and related administrative, clerical
and bookkeeping functions of the fund, and provides suitable office space,
necessary small office equipment and general purpose accounting forms,
supplies, and postage used at the offices of the fund. The fund pays all
expenses not assumed by the Investment Adviser, including, but not limited to,
custodian, stock transfer and dividend disbursing fees and expenses; costs of
the designing, printing and mailing of reports, prospectuses, proxy statements,
and notices to its shareholders, taxes; expenses of the issuance and redemption
of shares (including stock certificates, registration and qualification fees
and expenses); legal and auditing expenses; compensation, fees, and expenses
paid to directors unaffiliated with the Investment Adviser; association dues;
costs of stationery and forms prepared exclusively for the fund; and costs of
assembling and storing shareholder account data.
The Investment Adviser has agreed to waive its fees by any amount necessary to
assure that such expenses do not exceed applicable expense limitations in any
state in which the funds' shares are being offered for sale.
The Investment Adviser has agreed to bear any fund expenses (with the
exception of interest, taxes, brokerage costs and extraordinary expenses such
as litigation and acquisitions) in excess of 0.90% of the fund's average net
assets per annum, subject to reimbursement by the fund, during a period which
will terminate at the earlier of (I) such time as no reimbursement has been
required for a period of 12 consecutive months, provided no advances are
outstanding, or (ii) October 1, 2004. Each month, to the extent the fund owes
money to the Investment Adviser pursuant to this provision of the Agreement and
the fund's annualized expense ratio for the month is below 0.90%, the fund will
reimburse the Investment Adviser until the fund's annualized expense ratio
equals 0.90% or the debt is repaid, whichever comes first. During the period,
the Investment Adviser's total fees amounted to $ .
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 8000 IH-10 West, San Antonio, TX
78230, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, and 5300
Robin Hood Road, Norfolk, VA 23513. The fund has adopted a Plan of Distribution
(the "Plan"), pursuant to rule 12b-1 under the 1940 Act. The Principal
Underwriter receives amounts payable pursuant to the Plan (see below) and
commissions consisting of that portion of the sales charge remaining after the
discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the period ended July 31,
1998 amounted to $ after allowance of $ to dealers. During
the fiscal years ended 1997 and 1996, the Principal Underwriter received
$345,000 and $348,000, after allowance of $1,424,000 and $1,467,000,
respectively.
As required by rule 12b-1 the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Directors and separately by a
majority of the Directors who are not interested persons of the fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by a vote
of a majority of the outstanding voting securities of the fund. The officers
and directors who are "interested persons" of the fund due to present or past
affiliations with the Investment Adviser and related companies may be
considered to have a direct or indirect financial interest in the operation of
the Plan. Potential benefits of the Plan to the fund include improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of directors who
are not "interested persons" of the fund shall be committed to the discretion
of the directors who are not "interested persons" during the existence of the
Plan. Plan expenditures are reviewed quarterly and must be renewed annually by
the Board of Directors.
Under the Plan the fund may expend up to 0.30% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Directors has approved the
category of expenses for which payment is made. These include service fees for
qualified dealers and dealers commissions and wholesaler compensation on sales
of shares exceeding $1 million (including purchases by any employer-sponsored
403(b) plan or purchases by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a "401(k)" plan with 100
or more eligible employees).
Commissions on sales of shares exceeding $1 million (including purchases by
any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters provided that such commissions do not exceed the annual
expense limit. After five quarters, commissions are not recoverable. During
the period, the fund paid under the Plan as compensation to dealers. As of
July 31, 1998, accrued and unpaid distribution expenses were $ .
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit federally chartered or supervised banks from engaging in the
business of underwriting, selling or distributing securities, but permit banks
to make shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries of affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or
other services then being provided by such bank. It is not expected that
shareholders would suffer with adverse financial consequences as a result of
any of these occurrences. In addition, state securities laws on this issue may
differ from the interpretations of federal law expressed herein and certain
banks and financial institutions may be required to be registered as dealers
pursuant to state law.
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from its net investment income daily and
distributes the accrued dividends to shareholders each month. The percentage
of the distribution that is tax-exempt may vary from year to year. For the
purpose of calculating dividends, daily net investment income of the fund
consists of: (a) all interest income accrued on the fund's investments,
including any original issue discount or market premium ratably amortized to
the date of maturity or determined in such other manner as may be deemed
appropriate; minus (b) all liabilities accrued, including interest, taxes and
other expense items, amounts determined and declared as dividends or
distributions and reserves for contingent or undetermined liabilities, all
determined in accordance with generally accepted accounting principles.
Capital gains, if any, are usually distributed in November or December.
When a capital gain is distributed, the net asset value per share is reduced by
the amount of the payment.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and local
tax considerations generally affecting the fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
fund or its shareholders, and the discussion here and in the fund's prospectus
is not intended as a substitute for careful tax planning. Investors are urged
to consult their tax advisers with specific reference to their own tax
situations.
The fund is not intended to constitute a balanced investment program and is
not designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the fund would
generally not be suitable for tax-exempt institutions or tax-deferred
retirement plans (e.g., plans qualified under Section 401 of the Internal
Revenue Code, Keogh-type plans and individual retirement accounts.) Such
retirement plans would not gain any benefit from the tax-exempt nature of the
fund's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, the fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Under Subchapter M, if the fund
distributes within specified times at least 90% of its taxable and tax-exempt
net investment income, it will be taxed only on that portion, if any, which it
retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (I) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of
other regulated investment companies, and other securities which must be
limited, in respect of any one issuer to an amount not greater than 5% of the
fund's assets and 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies) or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.
The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the aggregate
value of the fund's assets must consist of certain tax-exempt obligations. Not
later than 60 days after the close of its taxable year, the fund will notify
each shareholder in writing of the portion of the dividends paid by the fund to
the shareholder with respect to such taxable year which constitutes
exempt-interest dividends. The aggregate amount of dividends so designated
cannot, however, exceed the excess of the amount of interest excludable from
gross income from tax under Section 103 of the Code received by the fund during
the taxable year over any amounts disallowed as deductions under Sections 265
and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if the fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, any loss on the sale or exchange
of such share will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually. The
fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held fund shares. Such distributions
will be designated as a capital gains distribution in a written notice, in the
form of the fund's annual report, mailed by the fund to shareholders not later
than 60 days after the close of the fund's taxable year. If a shareholder
receives a designated capital gain distribution (treated by the shareholder as
a long-term capital gain) with respect to any fund share and such fund share is
held for six months or less, then (unless otherwise disallowed) any loss on the
sale or exchange of that fund share will be treated as long-term capital loss
to the extent of the designated capital gain distribution. The fund also may
make a distribution of net realized long-term capital gains near the end of the
calendar year to comply with certain requirements of the Code. Gain recognized
on the disposition of a debt obligation (including tax-exempt obligations
purchased after April 30, 1993) purchased by the fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the fund held the debt obligation.
Similarly, while the fund does not expect to earn any significant investment
company taxable income, in the event that any taxable income is earned by the
fund it will be distributed. In general, the fund's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The fund would be taxed on any
undistributed investment company taxable income. Since any such income will be
distributed, it will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
The Code imposes limitations on the use and investment of the proceeds of
state and local governmental bonds and upon other funds of the issuers of such
bonds. These limitations must be satisfied on a continuing basis to maintain
the exclusion from gross income of interest on such bonds. These provisions of
the Code generally apply to bonds issued after August 15, 1986. Bond counsel
qualify their opinions as to the federal tax status of new issues of bonds by
making such opinions contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date
the bonds were issued.
In most cases, the interest on "private activity" bonds as defined under the
Code is an item of tax preference subject to the alternative minimum tax
("AMT") on corporations and individuals. The fund may invest without
limitation in "private activity" bonds. As of the date of this statement of
additional information, individuals are subject to an AMT at a maximum marginal
rate of 28% (20% on capital gains with respect to assets held more than 18
months) and corporations at a rate of 20%. Shareholders will not be permitted
to deduct any of their share of fund expenses in computing alternative minimum
tax income. With respect to corporate shareholders of the fund, all interest
on municipal bonds and other tax-exempt obligations, including exempt-interest
dividends paid by the fund, is included in adjusted current earnings in
calculating federal alternative minimum taxable income, and may also affect
corporate federal "environmental tax" liability.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (I) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (I) amounts actually
distributed by the fund from its current year's ordinary income and capital
gain net income and (ii) any amount on which the fund pays income tax during
the periods described above. The fund intends to distribute net investment
income and net capital gains so as to minimize or avoid the excise tax
liability.
If for any taxable year the fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and may
be eligible for the dividends- received deduction for corporations. Under
normal circumstances, no part of the distributions to shareholders by the fund
is expected to qualify for the dividends-received deduction allowed to
corporate shareholders.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purposes of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other funds. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent substantially identical
shares are reacquired within the 61-day period beginning 30 days before and
ending 30 days after the shares are disposed of.
As of the date of this statement of additional information, the maximum
federal individual tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than 18 months is 20%; and on assets held
more than one year and not more than 18 months is 28%; and the maximum
corporate tax applicable to ordinary income and net capital gains is 35%.
However, to eliminate the benefit of lower marginal corporate income tax rates,
corporations which have taxable income in excess of $100,000 for a taxable year
will be required to pay an additional amount of income tax of up to $11,750 and
corporations which have taxable income in excess of $15,000,000 for a taxable
year will be required to pay an additional amount of income tax of up to
$100,000. Naturally, the amount of tax payable by a taxpayer will be affected
by a combination of tax law rules covering deductions, credits, deferrals,
exemptions, sources of income and other matters.
Under the Code, distributions of net investment income by the Fund to a
resident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign shareholder") will be
subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate, if
applicable). Withholding will not apply if a dividend paid by the fund is
"effectively connected" with a U.S. trade or business, in which case the
reporting and withholding requirements applicable to U.S. citizens, U.S.
residents, or domestic corporations will apply.
PURCHASE OF SHARES
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and Fund $50 minimum (except where a lower
Numbers" for initial investment minimum is noted under "Investment
minimums. Minimums and Fund Numbers").
By contacting Visit any investment dealer who Mail directly to your investment
your is registered in the state where dealer's address printed on your
investment the purchase is made and who has account statement.
dealer a sales agreement with American
Funds Distributors.
By mail Make your check payable to the Fill out the account additions form
fund and mail to the address at the bottom of a recent account
indicated on the account statement, make your check payable to
application. Please indicate an the fund, write your account number
investment dealer on the account on your check, and mail the check and
application. form in the envelope provided with
your account statement.
By telephone Please contact your investment Complete the "Investments by Phone"
dealer to open account, then section on the account application or
follow the procedures for American FundsLink Authorization
additional investments. Form. Once you establish the
privilege, you, your financial
advisor or any person with your
account information can call American
FundsLine(r) and make investments by
telephone (subject to conditions
noted in "Telephone and Computer
Purchases, Redemptions and Exchanges"
below).
By computer Please contact your investment Complete the American FundsLink
dealer to open account, then Authorization Form. Once you
follow the procedures for establish the privilege, you, your
additional investments. financial advisor or any person with
your account information may access
American FundsLine(r) on the Internet
and make investments by computer
(subject to conditions noted in
"Telephone and Computer Purchases,
Redemptions and Exchanges" below).
By wire Call 800/421-0180 to obtain your Your bank should wire your additional
account number(s), if necessary. investments in the same manner as
Please indicate an investment described under "Initial Investment."
dealer on the account. Instruct
your bank to wire funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
</TABLE>
INVESTMENT MINIMUMS AND FUND NUMBERS -- Here are the minimum initial
investments required by the funds in The American Funds Group along with fund
numbers for use with our automated phone line, American FundsLine(r) (see
description below):
<TABLE>
<CAPTION>
FUND MINIMUM FUND
INITIAL NUMBER
INVESTMENT
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(r) 02
$1,000
American Balanced Fund(r) 11
500
American Mutual Fund(r) 03
250
Capital Income Builder(r) 12
1,000
Capital World Growth and Income Fund(sm) 33
1,000
EuroPacific Growth Fund(r) 16
250
Fundamental Investors(sm) 10
250
The Growth Fund of America(r) 05
1,000
The Income Fund of America(r) 06
1,000
The Investment Company of America(r) 04
250
The New Economy Fund(r) 14
1,000
New Perspective Fund(r) 07
250
SMALLCAP World Fund(sm) 35
1,000
Washington Mutual Investors Fund(sm) 01
250
BOND FUNDS
American High-Income Municipal Bond Fund(sm) 40
1,000
American High-Income Trust(r) 21
1,000
The Bond Fund of America(sm) 08
1,000
Capital World Bond Fund(r) 31
1,000
Intermediate Bond Fund of America(r) 23
1,000
Limited Term Tax-Exempt Bond Fund of America(sm) 43
1,000
The Tax-Exempt Bond Fund of America(sm) 19
1,000
The Tax-Exempt Fund of California(r)* 20
1,000
The Tax-Exempt Fund of Maryland(r)* 24
1,000
The Tax-Exempt Fund of Virginia(r)* 25
1,000
U.S. Government Securities Fund(sm) 22
1,000
MONEY MARKET FUNDS
The Cash Management Trust of America(r) 09
2,500
The Tax-Exempt Money Fund of America(sm) 39
2,500
The U.S. Treasury Money Fund of America(sm) 49
2,500
___________
*Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250, except that the money
market funds have a minimum of $1,000 for individual retirement accounts
(IRAs). Minimums are reduced to $50 for purchases through "Automatic
Investment Plans" (except for the money market funds) or to $25 for purchases
by retirement plans through payroll deductions and may be reduced or waived for
shareholders of other funds in The American Funds Group. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES--The sales charges you pay when purchasing the stock,
stock/bond, and bond funds of The American Funds Group are set forth below.
The money market funds of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for a listing of the
funds.)
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000 6.10%
5.75% 5.00%
$50,000 but less than $100,000 4.71
4.50 3.75
BOND FUNDS
Less than $25,000 4.99
4.75 4.00
$25,000 but less than $50,000 4.71
4.50 3.75
$50,000 but less than $100,000 4.17
4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 3.63
3.50 2.75
$250,000 but less than $500,000 2.56
2.50 2.00
$500,000 but less than $1,000,000 2.04
2.00 1.60
$1,000,000 or more none (see below)
none
</TABLE>
PURCHASES NOT SUBJECT TO SALES CHARGES -- Investments of $1 million or more
and investments made by employer-sponsored defined contribution-type plans with
100 or more eligible employees are sold with no initial sales charge. A
contingent deferred sales charge may be imposed on certain redemptions by these
accounts made within one year of purchase. Investments by retirement plans,
foundations or endowments with $50 million or more in assets may be made with
no sales charge and are not subject to a contingent deferred sales charge.
In addition, the stock, stock/bond and bond funds may sell shares at net
asset value to:
(1) current or retired directors, trustees, officers and advisory board
members of the funds managed by Capital Research and Management Company,
employees of Washington Management Corporation, employees and partners of The
Capital Group Companies, Inc. and its affiliated companies, certain family
members of the above persons, and trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives
with respect to accounts established while active, or full-time employees (and
their spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger,
acquisition or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $100 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.
DEALER COMMISSIONS -- Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on amounts of $1 million
to $2 million, 0.80% on amounts over $2 million to $3 million, 0.50% on amounts
over $3 million to $50 million, 0.25% on amounts over $50 million to $100
million, and 0.15% on amounts over $100 million. The level of dealer
commissions will be determined based on sales made over a 12-month period
commencing from the date of the first sale at net asset value.
OTHER COMPENSATION TO DEALERS -- American Funds Distributors, at its expense
(from a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
Qualified dealers currently are paid a continuing service fee not to exceed
0.25% of average net assets (0.15% in the case of the money market funds)
annually in order to promote selling efforts and to compensate them for
providing certain services. These services include processing purchase and
redemption transactions, establishing shareholder accounts and providing
certain information and assistance with respect to the fund.
REDUCING YOUR SALES CHARGE -- You and your immediate family may combine
investments to reduce your costs. You must let your investment dealer or
American Funds Service Company know if you qualify for a reduction in your
sales charge using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the prospectus apply to purchases of $50,000 or more made
within a 13-month period subject to the following statement of intention (the
"Statement") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to use the Statement in order to
qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by the
Transfer Agent. All dividends and capital gain distributions on these shares
held in escrow will be credited to the shareholder's account in shares (or paid
in cash, if requested). If the intended investment is not completed within the
specified 13-month period, the purchaser must pay to the Principal Underwriter
the difference between the sales charge actually paid and the sales charge
which would have been paid if the total purchases had been made at a single
time. If the difference is not paid within 45 days after written request by
the Principal Underwriter or the investment dealer, the appropriate number of
escrowed shares will be redeemed to pay such difference. If the proceeds from
this redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases. Existing holdings
eligible for rights of accumulation (see the prospectus and account
application) may be credited toward satisfying the Statement. During the
Statement period reinvested dividends and capital gain distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
When the directors of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments)
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period are added to the
figure determined above. The sum is the Statement amount and applicable
breakpoint level. On the first investment and all other investments made
pursuant to the Statement, a sales charge will be assessed according to the
sales charge breakpoint thus determined. There will be no retroactive
adjustments in sales charges on investments previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION -- Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own account(s), which may include purchases through employee benefit plan(s)
such as an IRA, individual-type 403(b) plan or single-participant Keogh-type
plan or by a business solely controlled by these individuals (for example, the
individuals own the entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these individuals. Individual purchases
by a trustee(s) or other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or fiduciary account, including
an employee benefit plan other than those described above, or (2) made for two
or more employee benefit plans of a single employer or of affiliated employers
as defined in the Investment Company Act of 1940, again excluding employee
benefit plans described above, or (3) for a diversified common trust fund or
other diversified pooled account not specifically formed for the purpose of
accumulating fund shares. Purchases made for nominee or street name accounts
(securities held in the name of an investment dealer or another nominee such as
a bank trust department instead of the customer) may not be aggregated with
those made for other accounts and may not be aggregated with other nominee or
street name accounts unless otherwise qualified as described above.
CONCURRENT PURCHASES -- You may combine purchases of two or more funds in
The American Funds Group, except direct purchases of the money market funds.
Shares of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing holdings in The American Funds Group, as well as your holdings in
Endowments, Inc. (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or charity.
Direct purchases of the money market funds are excluded.
PRICE OF SHARES -- Shares are purchased at the offering price next
determined after the purchase order is received and accepted by the fund or
American Funds Service Company; this offering price is effective for orders
received prior to the time of determination of the net asset value and, in the
case of orders placed with dealers, accepted by the Principal Underwriter prior
to its close of business. In the case of orders sent directly to the fund or
American Funds Service Company, an investment dealer MUST be indicated. The
dealer is responsible for promptly transmitting purchase orders to the
Principal Underwriter. Orders received by the investment dealer, the Transfer
Agent, or the fund after the time of the determination of the net asset value
will be entered at the next calculated offering price. Prices which appear in
the newspaper do not always indicate the prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price. The net asset value per share of the money market
funds normally will remain constant at $1.00 based on the fund's current
practice of valuing their shares using the penny-rounding method in accordance
with rules of the Securities and Exchange Commission.
The price you pay for fund shares, the public offering price, is based on the
net asset value per share which is calculated once daily at the close of
trading (currently 4:00 p.m., New York time) as set forth below each day the
New York Stock Exchange is open. The New York Stock Exchange is currently
closed on weekends and on the following holidays: New Year's Day, Martin Luther
King, Jr.'s Birthday, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
All portfolio securities of funds managed by Capital Research and Management
Company are valued, and the net asset value per share is determined, as
follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if acquired
within 60 days of maturity or, if already held on the 60th day, based on the
value determined on the 61st day. Forward currency contracts are valued at the
mean of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the fund without the consent of a
majority of the Board of Directors.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by American Funds Service Company. You may sell
(redeem) shares in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
- -- Over $50,000;
- -- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address that has not been used with the account for at least 10
days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE(R) OR AMERICAN FUNDSLINE ONLINE(SM)
- - Redemptions by telephone or fax (including American FundsLine(r) and American
FundsLine OnLine(sm)) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application).
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
The fund may, with 60 days' written notice, close your account if due to a
sale of shares the account has a value of less than the minimum required
initial investment.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution without a sales charge (any contingent deferred sales charge paid
will be credited to your account) in any fund in The American Funds Group
within 90 days after the date of the redemption or distribution. Redemption
proceeds of shares representing direct purchases in the money market funds are
excluded. Proceeds will be reinvested at the next calculated net asset value
after your request is received and accepted by American Funds Service
Company.
CONTINGENT DEFERRED SALES CHARGE -- A contingent deferred sales charge of 1%
applies to certain redemptions made within twelve months of purchase on
investments of $1 million or more and on any investment made with no initial
sales charge by any employer-sponsored 403(b) plan or defined contribution plan
qualified under Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 100 or more eligible employees. The charge is 1% of the
lesser of the value of the shares redeemed (exclusive of reinvested dividends
and capital gain distributions) or the total cost of such shares. Shares held
for the longest period are assumed to be redeemed first for purposes of
calculating this charge. The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12 months of the initial
purchase); for distributions from qualified retirement plans and other employee
benefit plans; for redemptions resulting from participant-directed switches
among investment options within a participant-directed employer-sponsored
retirement plan; for distributions from 403(b) plans or IRAs due to death,
disability or attainment of age 59-1/2; for tax-free returns of excess
contributions to IRAs; for redemptions through certain automatic withdrawals
not exceeding 10% of the amount that would otherwise be subject to the charge;
and for redemptions in connection with loans made by qualified retirement
plans.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the dates you select. Bank accounts will be
charged on the day or a few days before investments are credited, depending on
the bank's capabilities, and shareholders will receive a confirmation statement
at least quarterly. Participation in the plan will begin within 30 days after
receipt of the account application. If the shareholder's bank account cannot
be charged due to insufficient funds, a stop-payment order or closing of the
account, the plan may be terminated and the related investment reversed. The
shareholder may change the amount of the investment or discontinue the plan at
any time by writing the Transfer Agent.
AUTOMATIC REINVESTMENT -- Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXCHANGE PRIVILEGE -- You may exchange shares into other funds in The American
Funds Group. Exchange purchases are subject to the minimum investment
requirements of the fund purchased and no sales charge generally applies.
However, exchanges of shares from the money market funds are subject to
applicable sales charges on the fund being purchased, unless the money market
fund shares were acquired by an exchange from a fund having a sales charge, or
by reinvestment or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds Service Company (see
"Redeeming Shares"), by contacting your investment dealer, by using American
FundsLine(r) or American FundsLine OnLine(sm) (see "American FundsLine(r) and
American FundsLine OnLine(sm)" below), or by telephoning 800/421-0180
toll-free, faxing (see "Transfer Agent" below for the appropriate fax numbers)
or telegraphing American Funds Service Company. (See "Telephone and Computer
Redemptions and Exchanges" below.) Shares held in corporate-type retirement
plans for which Capital Guardian Trust Company serves as trustee may not be
exchanged by telephone, fax or telegraph. Exchange redemptions and purchases
are processed simultaneously at the share prices next determined after the
exchange order is received. (See "Purchase of Shares--Price of Shares.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES -- You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate. You must either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's balance must be at least
$5,000 and the receiving fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS -- Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE(R) AND AMERICAN FUNDSLINE ONLINE(SM) -- You may check your
share balance, the price of your shares, or your most recent account
transaction, redeem shares (up to $50,000 per shareholder each day), or
exchange shares around the clock with American FundsLine(r) and American
FundsLine OnLine(sm). To use this service, call 800/325-3590 from a
TouchTone(tm) telephone or access the American Funds Website on the Internet at
www.americanfunds.com. Redemptions and exchanges through American FundsLine(r)
and American FundsLine OnLine(sm) are subject to the conditions noted above and
in "Redeeming Shares--Telephone and Computer Redemptions and Exchanges" below.
You will need your fund number (see the list of funds in The American Funds
Group under "Purchase of Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of your Social Security
number or other tax identification number associated with your account) and
account number.
TELEPHONE AND COMPUTER REDEMPTIONS AND EXCHANGES -- By using the telephone or
computer (including American FundsLine(r) and American FundsLine OnLine(sm),
fax or telegraph redemption and/or exchange options, you agree to hold the
fund, American Funds Service Company, any of its affiliates or mutual funds
managed by such affiliates, and each of their respective directors, trustees,
officers, employees and agents harmless from any losses, expenses, costs or
liabilities (including attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all shareholders are
automatically eligible to use these options. However, you may elect to opt out
of these options by writing American Funds Service Company (you may reinstate
them at any time also by writing American Funds Service Company). If American
Funds Service Company does not employ reasonable procedures to confirm that the
instructions received from any person with appropriate account information are
genuine, the fund may be liable for losses due to unauthorized or fraudulent
instructions. In the event that shareholders are unable to reach the fund by
telephone because of technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made in writing only.
SHARE CERTIFICATES -- Shares are credited to your account and certificates
are not issued unless you request them by writing to American Funds Service
Company.
REDEMPTION OF SHARES -- The Transfer Agent may redeem the shares of any
shareholder if the shares owned by such shareholder through redemptions, market
decline or otherwise, have a value of less than the minimum initial investment
amount required of new shareholders of that series or Class, (determined, for
this purpose only as the greater of the shareholder's cost or the current net
asset value of the shares, including any shares acquired through reinvestment
of income dividends and capital gain distributions). Prior notice of at least
60 days will be given to a shareholder before the involuntary redemption
provision is made effective with respect to the shareholder's account. The
shareholder will have not less than 30 days from the date of such notice within
which to bring the account up to the minimum determined as set forth above.
EXECUTION OF PORTFOLIO TRANSACTIONS
The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available
prices in its portfolio transactions taking into account the costs and
promptness of executions. When circumstances relating to a proposed
transaction indicate that a particular broker (either directly or through their
correspondent clearing agents) is in a position to obtain the best price and
execution, the order is placed with that broker. This may or may not be a
broker who has provided investment research statistical, or other related
services to the Investment Adviser or has sold shares of the fund or other
funds served by the Investment Adviser. The fund does not have an obligation
to obtain the lowest available commission rate to the exclusion of price,
service and qualitative considerations.
Portfolio transactions for the fund may be executed as part of concurrent
authorizations to purchase or sell the same security for other funds served by
the Investment Adviser, or for trusts or other accounts served by affiliated
companies of the Investment Adviser. Although such concurrent authorizations
potentially could be either advantageous or disadvantageous to the fund, they
are effected only when the Investment Adviser believes that to do so is in the
interest of the fund. When such concurrent authorizations occur, the objective
is to allocate the executions in an equitable manner. The fund does not intend
to pay a mark-up in exchange for research in connection with principal
transactions.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, NY 10081, as Custodian.
TRANSFER AGENT -- American Funds Service Company, a wholly owned subsidiary
of the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. It was paid a fee of $ for the fiscal
year ended July 31, 1998.
INDEPENDENT ACCOUNTANTS -- PricewaterhouseCoopers LLP, 400 South Hope
Street, Los Angeles, CA 90071, provides audit services, preparation of tax
returns and review of certain documents to be filed with the Securities and
Exchange Commission. The financial statements included in this statement of
additional information have been so included in reliance on the report of the
independent accountants given on the authority of said firm as experts in
accounting and auditing.
SHAREHOLDER VOTING RIGHTS -- At any meeting of shareholders, duly called and
at which a quorum is present, the shareholders may, by the affirmative vote of
the holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors. The
fund has agreed, at the request of the staff of the Securities and Exchange
Commission, to apply the provisions of section 16(c) of the 1940 Act with
respect to the removal of directors, as though the fund were a common-law
trust. Accordingly, the directors of the fund will promptly call a meeting of
shareholders for the purpose of voting upon the removal of any director when
requested in writing to do so by the record holders of at least 10% of the
outstanding shares.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on July 31. It
provides shareholders at least semiannually with reports showing the investment
portfolio, financial statements and other information audited annually by the
fund's independent accountants, Pricewaterhouse Coopers LLP, whose selection is
determined annually by the Board of Directors.
PERSONAL INVESTING POLICY -- The Investment Adviser and its affiliated
companies have adopted a personal investing policy consistent with Investment
Company Institute guidelines. This policy includes: a ban on acquisitions of
securities pursuant to an initial public offering; restrictions on acquisitions
of private placement securities; pre-clearance and reporting requirements;
review of duplicate confirmation statements; annual recertification of
compliance with codes of ethics; ; blackout periods on personal investing for
certain investment personnel; ban on short-term trading profits for investment
personnel; limitations on service as a director of publicly traded companies;
and disclosure of personal securities transactions. You may obtain a summary
of the personal investing policy by contacting the Secretary of the Fund.
The financial statements including the investment portfolio and the report of
independent accountants contained in the annual report are included in this
statement of additional information. The following information is not included
in the annual report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1998
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $
Maximum offering price per share (100/95.25 of
per share net asset value, which takes into account
the fund's current maximum sales charge) $
</TABLE>
INVESTMENT RESULTS
The fund's yield is based on a 30-day (or one month) period ended July
31, 1998, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[(a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund may also calculate a tax equivalent yield based on a 30-day (or
one month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of
the yield (as computed by the formula stated above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield that is not tax-exempt. The fund's tax equivalent yield based on
the maximum individual effective federal tax rate of 39.6% for the 30-day (or
one month) period ended July 31, 1998 was %.
The fund may also calculate a distribution rate on a taxable and tax
equivalent basis. The distribution rate is computed by annualizing the current
month's dividend and dividing by the average net asset value or maximum
offering price for the month. The distribution rate may differ from the yield.
As of July 31, 1998, the fund's total return over the past twelve months
and average annual total return over its lifetime were % and %,
respectively. Over the fund's lifetime (September 26, 1994 to July 31, 1998)
the Lehman Brothers Municipal Bond Index/1/ and the Lipper High Yield Municipal
Debt Funds Average/2/ had average annual total returns of % and %,
respectively.
The fund's average annual total return ("T") will be computed by equating the
value at the end of the period ("ERV") with a hypothetical initial investment
of $1,000 ("P") over a number of years ("n") according to the following formula
as required by the Securities and Exchange Commission: P(1+T)/n/=ERV.
/1/ The Lehman Brothers Municipal Bond Index is unmanaged, reflects no
expenses or management fees and consists of a large universe of municipal bonds
issued as state general obligations or revenue bonds with a minimum rating of
BBB by Standard & Poor's Corporation
/2/The Lipper High Yield Municipal Debt Funds Average is comprised of funds
that invest at least 50% of their assets in lower rated municipal debt issues.
In calculating average annual total return, the fund assumes: (1)
deduction of the maximum sales load of 4.75% from the $1,000 initial
investment; (2) reinvestment of dividends and distributions at net asset value
on the reinvestment date determined by the Board; and (3) a complete redemption
at the end of any period illustrated. The fund will calculate total return for
one, five and ten-year periods after such a period has elapsed.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may also refer to results compiled by organizations such as Lipper
Analytical Services, Morningstar, Inc. and Wiesenberger Investment Companies
Services. Additionally, the fund may refer to results published in various
newspapers or periodicals, including Barrons, Forbes, Fortune, Institutional
Investor, Kiplinger's Personal Finance Magazine, Money, U.S. News and World
Report and The Wall Street Journal.
PART C
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(b) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(c) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(d) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(e) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(f) None.
(g) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(h) None.
(i) Not applicable to this filing.
(j) Consent of Independent Accountants (to be provided by amendment)
(k) None.
(l) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(m) Previously filed (see Post-Effective Amendment No. 5 filed 9/29/97).
(n) EX-27 Financial Data Schedule (EDGAR).
(o) None
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under Investment Advisor/Mutual Fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custon Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.
Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually incurred by him in connection
with such action, suit or proceeding unless it is established that: (i) the
act or omission of the person was material to the matter giving rise to the
proceeding and was committed in bad faith or was the result
of active and deliberate dishonesty; (ii) the person actually received an
improper personal benefit of money, property or services; or (iii) with respect
to any criminal action or proceeding, the person had reasonable cause to
believe his act or omission was unlawful.
ITEM 25. INDEMNIFICATION (CONTINUED)
Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which any director who is a party may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).
Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any rights to which the indemnified
party may be entitled; that the scope of indemnification extends to directors,
officers, employees or agents of a constituent corporation absorbed in a
consolidation or merger and persons serving in that capacity at the request of
the constituent corporation for another; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against or incurred by
such person in any such capacity or arising out of such person's status as such
whether or not the corporation would have the power to indemnify such person
against such liabilities under Section 2-418.
Article VIII (h) of the Articles of Incorporation of the Fund provides that
"The Corporation shall indemnify (1) its directors and officers, whether
serving the Corporation or at its request any other entity, to the full extent
required or permitted by the General Laws of the State of Maryland now or
hereafter in force, including the advance of expenses under the procedures and
to the full extent permitted by law, and (2) its other employees and agents to
such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of this
Charter of the Corporation shall limit or eliminate the right to
indemnification provided hereunder with respect to acts or omissions occurring
prior to such amendment or repeal. Nothing contained herein shall be construed
to authorize the Corporation to indemnify any director or officer of the
Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Any indemnification by the Corporation
shall be consistent with the requirements of law, including the Investment
Company Act of 1940."
Registrant will comply with the indemnification requirements contained in the
1940 Act Releases No. 7221 (June 9, 1972) and No. 11330 (September 4, 1980).
In addition, indemnification by the Corporation shall be consistent with the
requirements of rule 484 under the Securities Act of 1933.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(A) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Trust, American Mutual Fund, Inc.,
The Bond Fund of America, Inc., Capital Income Builder, Inc., Capital World
Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The Cash
Management Trust of America, EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc.,
Intermediate Bond Fund of America, The Investment Company of America, Limited
Term Tax-Exempt Bond Fund of America, The New Economy Fund, New Perspective
Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America,
Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money Fund of
America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(b) (1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
<S> <C> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Regional Vice President None
1501 N. University Drive,
Suite 227A
Little Rock, AR 72207
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
S Richard L. Armstrong Assistant Vice President None
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mt. Meeker
Boulder, CO 80301
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Senior Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Michael L. Brethower Vice President None
2320 N. Austin Avenue
Georgetown, TX 78626
C. Alan Brown Regional Vice President
4129 Laclede Avenue None
St. Louis, MO 63108
L Daniel C. Brown Senior Vice President None
H J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Senior Vice President None
111 W. Chicago Avenue,
Suite G3
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94583
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and None
Co-Chief Executive Officer
Ruth M. Collier Vice President None
145 West 67th Street, #12K
New York, NY 10023
S David Coolbaugh Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell None
Senior Vice President
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
L Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
L Mark P. Freeman, Jr. Director, None
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director Chairman of the Board
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
R.D. 1, Box 210, Rte. 519
Frenchtown, NJ 08825
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
L Robert L. Johansen Vice President None
Michael J. Johnston Director None
630 Fifth Ave., 36th Floor
New York, NY 10111-0121
B Damien M. Jordan Vice President None
V. John Kriss Senior Vice President None
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - None
Institutional Investment
Services
S Stella Lopez Vice President None
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice None
President
L E. Lee McClennahan Senior Vice President None
L James R. McCrary Assistant Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - None
Institutional
Investment Services
David R. Murray None
Vice President
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P. O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Frederic Phillips None
Vice President
175 Highland Avenue
Needham, MA 02194
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
L John O. Post, Jr. Vice President None
S Richard P. Prior Assistant Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
P.O. Box 472245
Charlotte, NC 28247
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07960
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30008 Oakland Hills Drive
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Regional Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
David W. Short Director, Chairman of the Board and Co-Chief Executive Officer None
11 Chestnut Lane
Cheswick, PA15024
William P. Simon, Jr. Senior Vice President None
554 Canterbury Lane
Berwyn, PA 19312
L John C. Smith Assistant Vice President - None
Institutional Investment
Services
Rodney G. Smith Vice President None
100 N. Central Expressway, Suite 1214
Richardson, TX 75080
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue, Suite 228
San Mateo, CA 94401
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
3919 Whooping Crane Circle
Virginia Beach, VA 23455
Craig R. Strauser Regional Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
L David M. Ward Vice President - None
Institutional Investment
Services
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, Treasurer None
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
N. Dexter Williams Senior Vice President None
P.O. Box 2200
Danville, CA 94526
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice None
President
L Robert L. Winston Director, Senior Vice None
President
Laurie B. Wood Regional Vice President None
3500 W. Camino de Urania
Tucson, AZ 85741
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
320 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
_______________________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles,
CA 90025
B Business Address, 135 South State College Blvd., Brea, CA 92821
S Business Address, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071. Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA 92821.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92821, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240, 8000 IH-10
West, Suite 1400, San Antonio, TX 78230 and 5300 Robin Hood Road, Norfolk, VA
23514.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
n/a
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, and State of California, on the 27th day of July,
1998.
AMERICAN HIGH-INCOME MUNICIPAL
BOND FUND, INC.
By/s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on July 27, 1998, by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and
Director
(Abner D. Goldstine)
(2) Principal Financial Officer
and Principal Accounting Officer:
/s/ Anthony W. Hynes, Jr. Treasurer
(Anthony W. Hynes, Jr.)
(3) Directors:
H. Frederick Christie* Director
Don R. Conlan* Director
Diane C. Creel* Director
Martin Fenton, Jr.* Director
Leonard R. Fuller* Director
/s/ Abner D. Goldstine President and
Director
(Abner D. Goldstine)
/s/ Paul G. Haaga, Jr. Chairman and
Director
(Paul G. Haaga, Jr.
Herbert Hoover III* Director
Richard G. Newman* Director
</TABLE>
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
