497 1 filing.txt AMERICAN HIGH-INCOME TRUST(SM) SUPPLEMENT TO PROSPECTUS DATED FEBRUARY 15, 2002 July 15, 2002 Beginning July 15, 2002, Class R-5 shares of American High- Income Trust will be available to certain clients of the Personal Investment Management Group of Capital Guardian Trust Company. Accordingly, the prospectus for this fund is supplemented as follows: FEES AND EXPENSES OF THE FUND - pages 5-6 Shareholder Fees Table (paid directly from your investment) Class R-5 Maximum sales charge imposed on purchases (as a percentage of offering price) none Maximum sales charge imposed on reinvested dividends none Maximum deferred sales charge none Redemption or exchange fees none Annual Fund Operating Expenses Table (deducted from fund assets) Class R-5/1/ Management Fees 0.47% Distribution and/or Service (12b-1) Fees none Other Expenses 0.14% Total Annual Fund Operating Expenses 0.61% /1/ Based on estimated amounts for the current fiscal year. Example The example below 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, that your investment has a 5% return each year, that all dividend and capital gain distributions are reinvested, and that the fund's operating expenses remain the same as shown on the previous page. Although your actual costs may be higher or lower, based on these assumptions, your cumulative estimated expenses would be: One Year Three Years Five Years Ten Years Class R-5 $62 $195 $340 $762 PURCHASE AND EXCHANGE OF SHARES - pages 14-15 Class R-5 Shares Class R-5 shares of the fund are only available to certain clients of the Personal Investment Management Group of Capital Guardian Trust Company. Please contact Capital Guardian Trust Company if you wish to purchase Class R-5 shares of this fund. SALES CHARGES - pages 16-17 Class R-5 Shares Class R-5 shares are sold with no initial or deferred sales charges. In addition, no dealer compensation is paid on sales of Class R-5 shares. AMERICAN HIGH-INCOME TRUST Part B Statement of Additional Information February 15, 2002 (as amended July 15, 2002) This document is not a prospectus but should be read in conjunction with the current prospectus of American High-Income Trust (the "fund" or "AHIT") dated February 15, 2002. 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 Trust Attention: Secretary 333 South Hope Street Los Angeles, California 90071 (213) 486-9200 Shareholders who purchase shares at net asset value through eligible retirement plans should note that not all of the services or features described below may be available to them. They should contact their employer for details. TABLE OF CONTENTS
Item Page No. ---- -------- Certain Investment Limitations and Guidelines . . . . . . . . . . . 2 Description of Certain Securities and Investment Techniques . . . . 2 Fundamental Policies and Investment Restrictions. . . . . . . . . . 9 Management of the Fund . . . . . . . . . . . . . . . . . . . . . . 11 Taxes and Distributions . . . . . . . . . . . . . . . . . . . . . . 22 Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 27 Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 33 Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 37 Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Shareholder Account Services and Privileges . . . . . . . . . . . . 40 Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 43 General Information . . . . . . . . . . . . . . . . . . . . . . . . 44 Class A Share Investment Results and Related Statistics . . . . . . 45 Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Financial Statements
American High-Income Trust - Page 1 CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES The following limitations and guidelines are considered at the time of purchase, under normal circumstances, 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. DEBT SECURITIES .. The fund will invest at least 65% of its assets in lower quality, lower rated debt securities, (rated Ba or below by Moody's Investor Service, Inc. or BB or below by Standard & Poor's Corporation or unrated but determined to be of equivalent quality) and other similar securities including preferred stock. EQUITY SECURITIES AND SECURITIES WITH DEBT AND EQUITY CHARACTERISTICS .. The fund may invest up to 25% of its assets in equity securities (including common stock) and securities with a combination of debt and equity characteristics (including convertible preferred stocks and convertible debentures). .. The fund may invest up to 5% of its assets in warrants and rights (but no more than 2% of the fund's assets may be invested in warrants or rights that are not listed on either the New York Stock Exchange or American Stock Exchange). NON-U.S. SECURITIES .. The fund may invest up to 25% of its assets in securities of issuers domiciled outside the U.S. The fund may experience difficulty liquidating certain portfolio securities during significant market declines or periods of heavy redemptions. DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES The descriptions below are intended to supplement the material in the prospectus under "Investment Objectives, Strategies 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 increase when interest rates fall. Lower rated bonds, rated Ba or below by Moody's and BB or below by S&P or unrated but considered to be of equivalent quality, 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 than higher rated bonds, or they may already be in default. The market prices of these securities may fluctuate more than higher quality securities and may decline significantly in periods of general economic difficulty. It may be more difficult to dispose of, or to determine the value of, lower rated bonds. American High-Income Trust - Page 2 Certain risk factors relating to lower rated bonds are discussed below. SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower rated bonds, like other bonds, may be sensitive to adverse economic changes and political and corporate developments and may be sensitive to interest rate changes. During an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience increased 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. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices and yields of lower rated bonds. PAYMENT EXPECTATIONS - Lower rated bonds, like other bonds, may contain redemption or call provisions. If an issuer exercises 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 to investors. If the issuer of a bond defaults on its obligations to pay interest or principal or enters into bankruptcy proceedings, the fund may incur losses or expenses in seeking recovery of amounts owed to it. 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 value and liquidity of lower rated bonds. The Investment Adviser 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, but there can be no assurance that it will be successful in doing so. MATURITY - There are no restrictions on the maturity composition of the portfolio, although it is anticipated that the fund normally will be invested substantially in securities with maturities in excess of three years. Under normal market conditions, longer term securities yield more than shorter term securities, but are subject to greater price fluctuations. EQUITY SECURITIES - Equity securities represent an ownership position in a company. These securities may include common stocks and securities with equity conversion or purchase rights. The prices of equity securities fluctuate based on changes in the financial condition of their issuers and on market and economic conditions. WARRANTS AND RIGHTS - The fund may purchase warrants, which may be issued together with bonds or preferred stocks. Warrants generally entitle the holder to buy a proportionate amount of common stock at a specified price, usually higher than the current market price. Warrants may be issued with an expiration date or in perpetuity. Rights are similar to warrants except that they normally entitle the holder to purchase common stock at a lower price than the current market price. SECURITIES WITH EQUITY AND DEBT CHARACTERISTICS - The fund may invest in securities that have a combination of equity and debt characteristics. These securities may at times behave more like equity than debt and vice versa. Some types of convertible bonds or preferred stock automatically convert into common stock. The prices and yields of non-convertible preferred American High-Income Trust - Page 3 stock generally move with changes in interest rates and the issuer's credit quality, similar to the factors affecting debt securities. Convertible bonds, convertible preferred stock, and other securities may sometimes be converted into common stock or other securities at a stated conversion ratio. These securities, prior to conversion, pay a fixed rate of interest or a dividend. Because convertible securities have both debt and equity characteristics, their value varies in response to many factors, including the value of the underlying equity, general market and economic conditions, and convertible market valuations, as well as changes in interest rates, credit spreads, and the credit quality of the issuer. INVESTING IN VARIOUS COUNTRIES - Investing outside the U.S. involves special risks, caused by, among other things: currency controls and fluctuating currency values; different accounting, auditing, and financial reporting regulations and practices in some countries; changing local and regional economic, political, and social conditions; expropriation or confiscatory taxation; greater market volatility; differing securities market structures; and various administrative difficulties such as delays in clearing and settling portfolio transactions or in receiving payment of dividends. However, in the opinion of Capital Research and Management Company, investing outside the U.S. also can reduce certain portfolio risks due to greater diversification opportunities. The risks described above are potentially heightened in connection with investments in developing countries. Although there is no universally accepted definition, a developing country is generally considered to be a country which is in the initial stages of its industrialization cycle with a low per capita gross national product. For example, political and/or economic structures in these countries may be in their infancy and developing rapidly. Historically, the markets of developing countries have been more volatile than the markets of developed countries. The fund may invest in securities of issuers in developing countries only to a limited extent. Additional costs could be incurred in connection with the fund's investment activities outside the U.S. Brokerage commissions may be higher outside the U.S., and the fund will bear certain expenses in connection with its currency transactions. Furthermore, increased custodian costs may be associated with the maintenance of assets in certain jurisdictions. CURRENCY TRANSACTIONS - The fund can purchase and sell currencies to facilitate securities transactions and enter into forward currency contracts to protect against changes in currency exchange rates. A forward currency contract is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. Forward currency contracts entered into by the fund will involve the purchase or sale of one currency against the U.S. dollar. While entering into forward currency transactions could minimize the risk of loss due to a decline in the value of the hedged currency, it could also limit any potential gain which might result from an increase in the value of the currency. The fund will not generally attempt to protect against all potential changes in exchange rates. The fund will segregate liquid assets which will be marked to market daily to meet its forward contract commitments to the extent required by the Securities and Exchange Commission. Certain provisions of the Internal Revenue Code may affect the extent to which the fund may enter into forward contracts. Such transactions may also affect the character and timing of income, gain or loss recognized by the fund for U.S. federal income tax purposes. American High-Income Trust - Page 4 RESTRICTED SECURITIES AND LIQUIDITY - The fund may purchase securities subject to restrictions on resale. Securities not actively traded will be considered illiquid unless they have been specifically determined to be liquid under procedures adopted by the fund's board of trustees, 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. VARIABLE AND FLOATING RATE OBLIGATIONS - The interest rates payable on certain securities in which the fund may invest may not be fixed but may fluctuate based upon changes in market rates. Variable and floating rate obligations bear coupon rates that are adjusted at designated intervals, based on the then current market rates of interest. Variable and floating rate obligations permit the fund to "lock in" the current interest rate for only the period until the next scheduled rate adjustment, but the rate adjustment feature tends to limit the extent to which the market value of the obligation will fluctuate. REINSURANCE RELATED NOTES AND BONDS - The fund may invest in reinsurance related notes and bonds. These instruments, which are typically issued by special purpose reinsurance companies, transfer an element of insurance risk to the note or bond holders. For example, the reinsurance company would not be required to repay all or a portion of the principal value of the notes or bonds if losses due to a catastrophic event under the policy (such as a major hurricane) exceed certain dollar thresholds. Consequently, the fund may lose the entire amount of its investment in such bonds or notes if such an event occurs and losses exceed certain dollar thresholds. In this instance, investors would have no recourse against the insurance company. These instruments may be issued with fixed or variable interest rates and rated in a variety of credit quality categories by the rating agencies. PASS-THROUGH SECURITIES - The fund may invest in various debt obligations backed by a pool of mortgages or other assets including, but not limited to, loans on single family residences, home equity loans, mortgages on commercial buildings, credit card receivables, and leases on airplanes or other equipment. Principal and interest payments made on the underlying asset pools backing these obligations are typically passed through to investors. Pass-through securities may have either fixed or adjustable coupons. These securities include those discussed below. "Mortgage-backed securities" are issued both by U.S. government agencies, including the Government National Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), and by private entities. The payment of interest and principal on securities issued by U.S. government agencies is guaranteed by the full faith and credit of the U.S. government (in the case of GNMA securities) or the issuer (in the case of FNMA and FHLMC securities). However, the guarantees do not apply to the market prices and yields of these securities, which vary with changes in interest rates. Mortgage-backed securities issued by private entities are structured similarly to mortgage-backed securities issued by GNMA, FNMA, and FHLMC. These securities and the underlying mortgages are not guaranteed by government agencies. In addition, these securities generally are structured with one or more types of credit enhancement. Mortgage-backed securities generally permit borrowers to prepay their underlying mortgages. Prepayments can alter the effective maturity of these instruments. "Collateralized mortgage obligations" (CMOs) are also backed by a pool of mortgages or mortgage loans, which are divided into two or more separate bond issues. CMOs issued by U.S. American High-Income Trust - Page 5 government agencies are backed by agency mortgages, while privately issued CMOs may be backed by either government agency mortgages or private mortgages. Payments of principal and interest are passed through to each bond at varying schedules resulting in bonds with different coupons, effective maturities, and sensitivities to interest rates. In fact, some CMOs may be structured in a way that when interest rates change the impact of changing prepayment rates on these securities' effective maturities is magnified. "Commercial mortgage-backed securities" are backed by mortgages of commercial property, such as hotels, office buildings, retail stores, hospitals, and other commercial buildings. These securities may have a lower prepayment uncertainty than other mortgage-related securities because commercial mortgage loans generally prohibit or impose penalties on prepayments of principal. In addition, commercial mortgage-related securities often are structured with some form of credit enhancement to protect against potential losses on the underlying mortgage loans. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate securing the underlying mortgage loans, including the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants. "Asset-backed securities" are backed by other assets such as credit card, automobile or consumer loan receivables, retail installment loans, or participations in pools of leases. Credit support for these securities may be based on the underlying assets and/or provided through credit enhancements by a third party. The values of these securities are sensitive to changes in the credit quality of the underlying collateral, the credit strength of the credit enhancement, changes in interest rates, and at times the financial condition of the issuer. Some asset-backed securities also may receive prepayments which can change the securities' effective maturities. REPURCHASE AGREEMENTS - The fund may enter 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. Repurchase agreements permit the fund to maintain liquidity and earn income over periods of time as short as overnight. 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, realization of the collateral by the fund may be delayed or limited. U.S. TREASURY AND AGENCY SECURITIES - U.S. Treasury securities include direct obligations of the U.S. Treasury, such as Treasury bills, notes and bonds. For these securities, the payment of principal and interest is unconditionally guaranteed by the U.S. government, and thus they are of the highest possible credit quality. Such securities are subject to variations in market value due to fluctuations in interest rates, but, if held to maturity, will be paid in full. U.S. agency securities include those issued by certain U.S. government instrumentalities and certain federal agencies. These securities are neither direct obligations of, nor guaranteed by, the Treasury. However, they generally involve federal sponsorship in one way or another; some are backed by specific types of collateral; some are supported by the issuer's right to borrow from the Treasury; some are supported by the discretionary authority of the Treasury to purchase certain American High-Income Trust - Page 6 obligations of the issuer; and others are supported only by the credit of the issuing government agency or instrumentality. These agencies and instrumentalities include, but are not limited to: Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Tennessee Valley Authority, and Federal Farm Credit Bank System. CASH AND CASH EQUIVALENTS - These securities include: (i) commercial paper (e.g., short-term notes up to 9 months in maturity issued by corporations, governmental bodies or bank/ corporation sponsored conduits (asset-backed commercial paper)), (ii) commercial bank obligations (e.g., certificates of deposit, bankers' acceptances (time drafts on a commercial bank where the bank accepts an irrevocable obligation to pay at maturity)), (iii) savings association and savings bank obligations (e.g., bank notes and certificates of deposit issued by savings banks or savings associations), (iv) securities of the U.S. government, its agencies or instrumentalities that mature, or may be redeemed, in one year or less, and (v) corporate bonds and notes that mature, or that may be redeemed, in one year or less. LOAN PARTICIPATIONS AND ASSIGNMENTS - The fund may invest, subject to an overall 15% limit on loans, in loan participations or assignments. Loan participations are loans or other direct debt instruments which are interests in amounts owed by a corporate, governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates to suppliers of goods or services, or to other parties. The fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing participations, the fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to loan, nor any rights of set-off against the borrower, and the fund may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, the fund will assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, a fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. When the fund purchases assignments from lenders it will acquire direct rights against the borrower on the loan. However, because assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligations acquired by a fund as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender. Investments in loan participations and assignments present the possibility that the fund could be held liable as a co-lender under emerging legal theories of lender liability. In addition, if the loan is foreclosed, the fund could be part owner of any collateral and could bear the costs and liabilities of owning and disposing of the collateral. The fund anticipates that such securities could be sold only to a limited number of institutional investors. In addition, some loan participations and assignments may not be rated by major rating agencies and may not be protected by the securities laws. 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. American High-Income Trust - Page 7 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. The fund may also enter into reverse repurchase agreements and "roll" transactions. A reverse repurchase agreement is the sale of a security by a fund and its agreement to repurchase the security at a specified time and price. A "roll" transaction is the sale of mortgage-backed or other securities together with a commitment to purchase similar, but not identical securities at a later date. The fund assumes the rights and risks of ownership, including the risk of price and yield fluctuations as of the time of the agreement. The fund intends to treat "roll" transactions as two separate transactions: one involving the purchase of a security and a separate transaction involving the sale of a security. Since the fund does not intend to enter into "roll" transactions for financing purposes, it may treat these transactions as not falling within the definition of "borrowing" in Section 2(a)(23) of the Investment Company Act of 1940. The fund will segregate liquid assets which will be marked to market daily in an amount sufficient to meet its payment obligations under "roll" transactions and reverse repurchase agreements with broker-dealers (no collateral is required for reverse repurchase agreements with banks). The fund may also engage in the following investment practices, although it has no current intention to do so over the next twelve months: LOANS OF PORTFOLIO SECURITIES - The fund is authorized to lend portfolio securities to selected securities dealers or other institutional investors whose financial condition is monitored by 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 10% of the value of its total assets, measured at the time any such loan is made. OPTIONS ON U.S. TREASURY SECURITIES - The fund may purchase put and call options on U.S. Treasury securities ("Treasury securities"). A put (call) option gives the fund as purchaser of the option the right (but not the obligation) to sell (buy) a specified amount of Treasury securities at the exercise price until the expiration of the option. The value of a put (call) option on Treasury securities generally increases (decreases) with an increase (decrease) in prevailing interest rates. Accordingly, the fund would purchase puts (calls) in anticipation of, or to protect against, an increase in interest rates. These options are listed on an exchange or traded over-the-counter ("OTC options"). Exchange-traded options have standardized exercise prices and expiration dates; OTC options are two-party contracts with negotiated exercise prices and expiration dates. OTC options differ from exchange-traded options in that OTC options are transacted with dealers American High-Income Trust - Page 8 directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of a quote provided by the dealer. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. * * * * * * PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length of time particular investments may have been held. Short-term trading profits are not the fund's objective, and changes in its investments are generally accomplished gradually, though short-term transactions may occasionally be made. High portfolio turnover (100% or more) 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, although the price usually includes a profit to the dealer. A fund's portfolio turnover rate would equal 100% if each security in the fund's portfolio was replaced once per year. See "Financial Highlights" in the prospectus for the fund's annual portfolio turnover for each of the last five fiscal periods. FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies and investment restrictions which may not be changed without approval by holders of a majority of its outstanding shares. Such majority is defined in 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 are considered at the time securities are purchased and are based on the fund's net assets unless otherwise indicated. None of the following investment restrictions involving a maximum percentage of assets will be considered violated unless the excess occurs immediately after, and is caused by, an acquisition by the fund. These restrictions provide that the fund may not: 1. Purchase any security (other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities) if immediately after and as a result of such investment, more than 5% of the fund's total assets would be invested in securities of the issuer; 2. Invest 25% or more of the value of its total assets in the securities of issuers conducting their principal business activities in the same industry; 3. Invest in companies for the purpose of exercising control or management; 4. Buy or sell real estate or commodities or commodity contracts; however, the fund may invest in debt securities secured by real estate or interests therein or issued by companies which American High-Income Trust - Page 9 invest in real estate or interests therein, including real estate investment trusts, and may purchase or sell currencies (including forward currency contracts); 5. Acquire illiquid securities, if, immediately after and as a result, the value of illiquid securities held by the fund would exceed, in the aggregate, 15% of the fund's net assets; 6. Engage in the business of underwriting securities of other issuers, except to the extent that the disposal of an investment position may technically cause it to be considered an underwriter as that term is defined under the Securities Act of 1933; 7. Lend any security or make any other loan if, as a result, more than 15% of its total assets would be lent to third parties, but this limitation does not apply to purchases of debt securities or to repurchase agreements; 8. 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; 9. Purchase securities on margin, provided that the fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of securities; 10. Borrow money, except from banks for temporary or emergency purposes not in excess of 5% of the value of the fund's total assets. The fund will not purchase securities while such borrowings are outstanding. This restriction shall not prevent the fund from entering into reverse repurchase agreements or "roll" transactions, provided that these transactions and any other transactions constituting borrowing by the fund may not exceed one-third of the fund's total assets. 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; 11. Write, purchase or sell put options, call options or combinations thereof, except that this shall not prevent the purchase of put or call options on currencies or U. S. Government securities. NON-FUNDAMENTAL POLICIES - The following non-fundamental policies may be changed without shareholder approval: 1. The fund does not currently intend to lend portfolio securities or other assets to third parties, except by acquiring loans, loan participations, or forms of direct debt instruments. (This limitation does not apply to purchases of debt securities or to repurchase agreements.) 2. The fund may not invest in securities of other investment companies, except as permitted by the Investment Company Act of 1940, as amended. 3. The fund will not invest in securities of an issuer if the investment would cause the fund to own more than 10% of the outstanding voting securities of any one issuer. American High-Income Trust - Page 10 MANAGEMENT OF THE FUND BOARD OF TRUSTEES AND OFFICERS
YEAR FIRST NUMBER OF BOARDS POSITION ELECTED WITHIN THE FUND OTHER DIRECTORSHIPS/3/ WITH THE A TRUSTEE PRINCIPAL OCCUPATION(S) DURING COMPLEX/2/ ON WHICH HELD NAME AND AGE FUND OF THE FUND/1/ PAST 5 YEARS TRUSTEE SERVES BY TRUSTEE ----------------------------------------------------------------------------------------------------------------------------------- "NON-INTERESTED" TRUSTEES ----------------------------------------------------------------------------------------------------------------------------------- Richard G. Capen, Trustee 1999 Corporate Director and author; 14 Carnival Corporation Jr. former United States Age: 67 Ambassador to Spain; former Vice Chairman, Knight Ridder, Inc.; former Chairman and Publisher, The --- Miami Herald ------------ ----------------------------------------------------------------------------------------------------------------------------------- H. Frederick Trustee 1987 Private Investor; former 19 Ducommun Incorporated; Christie President IHOP Corporation; Age: 68 and Chief Executive Officer, Southwest Water Company The Mission Group (non-utility holding company subsidiary of Southern California Edison Company) ----------------------------------------------------------------------------------------------------------------------------------- Diane C. Creel Trustee 1994 CEO and President, The Earth 12 Allegheny Technologies; Age: 53 Technology Corporation BF Goodrich; (international consulting Teledyne Technologies engineering) ----------------------------------------------------------------------------------------------------------------------------------- Martin Fenton Trustee 1989 Managing Director, Senior 16 None Age: 66 Resource Group LLC (development and management of senior living communities) ----------------------------------------------------------------------------------------------------------------------------------- Leonard R. Fuller Trustee 1994 President, Fuller Consulting 13 None Age: 55 (financial management consulting firm) ----------------------------------------------------------------------------------------------------------------------------------- Richard G. Newman Trustee 1991 Chairman and CEO, AECOM 13 Southwest Water Company Age: 67 Technology Corporation (engineering, consulting and professional services) ----------------------------------------------------------------------------------------------------------------------------------- Frank M. Sanchez Trustee 1999 President, The Sanchez Family 12 None Age: 58 Corporation dba McDonald's Restaurants (McDonald's licensee) -----------------------------------------------------------------------------------------------------------------------------------
American High-Income Trust - Page 11
PRINCIPAL OCCUPATION(S) DURING YEAR FIRST PAST 5 YEARS AND ELECTED POSITIONS HELD NUMBER OF BOARDS POSITION A TRUSTEE WITH AFFILIATED ENTITIES WITHIN THE FUND OTHER DIRECTORSHIPS/3/ WITH THE AND/OR OFFICER OR THE PRINCIPAL UNDERWRITER COMPLEX/2/ ON WHICH HELD NAME AND AGE FUND OF THE FUND/1/ OF THE FUND TRUSTEE SERVES BY TRUSTEE OR OFFICER ----------------------------------------------------------------------------------------------------------------------------------- "INTERESTED" TRUSTEES/4//,5/ ----------------------------------------------------------------------------------------------------------------------------------- David C. Barclay President 1995 Senior Vice President and 1 None Age: 45 and Trustee Director, Capital Research and Management Company ----------------------------------------------------------------------------------------------------------------------------------- Abner D. Trustee 1987 Senior Vice President and 12 None Goldstine Director, Age: 72 Capital Research and Management Company ----------------------------------------------------------------------------------------------------------------------------------- Paul G. Haaga, Chairman of 1987 Executive Vice President and 16 None Jr. the Board Director, Capital Research and Age: 53 Management Company; Director, American Funds Distributors, Inc.*; Director, The Capital Group Companies, Inc.* -----------------------------------------------------------------------------------------------------------------------------------
American High-Income Trust - Page 12
PRINCIPAL OCCUPATION(S) DURING POSITION YEAR FIRST ELECTED PAST 5 YEARS AND POSITIONS HELD WITH THE AN OFFICER WITH AFFILIATED ENTITIES NAME AND AGE FUND OF THE FUND/1/ OR THE PRINCIPAL UNDERWRITER OF THE FUND ----------------------------------------------------------------------------------------------------------------------------------- OTHER OFFICERS/5/ ----------------------------------------------------------------------------------------------------------------------------------- Susan M. Tolson Senior Vice President 1997 Senior Vice President, Capital Research Company* Age: 39 ----------------------------------------------------------------------------------------------------------------------------------- Michael J. Downer Vice President 1994 Vice President and Secretary, Capital Research and Management Age: 46 Company; Secretary, American Funds Distributors, Inc.*; Director, Capital Bank and Trust Company* ----------------------------------------------------------------------------------------------------------------------------------- Jennifer L. Hinman Vice President 2001 Vice President, Capital Research Company* Age: 43 ----------------------------------------------------------------------------------------------------------------------------------- Julie F. Williams Secretary 1987 Vice President - Fund Business Management Group, Capital Age: 53 Research and Management Company ----------------------------------------------------------------------------------------------------------------------------------- Anthony W. Hynes, Jr. Treasurer 1993 Vice President - Fund Business Management Group, Capital Age: 39 Research and Management Company ----------------------------------------------------------------------------------------------------------------------------------- Kimberly S. Verdick Assistant Secretary 1994 Assistant Vice President - Fund Business Management Group, Age: 37 Capital Research and Management Company ----------------------------------------------------------------------------------------------------------------------------------- Susi M. Silverman Assistant Treasurer 2001 Vice President - Fund Business Management Group, Capital Age: 31 Research and Management Company -----------------------------------------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company. 1 Trustees and officers of the fund serve until their resignation, removal or retirement. 2 Capital Research and Management Company manages the American Funds consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series and Anchor Pathway Fund, which serve as the underlying investment vehicles for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain non-profit organizations. 3 This includes all directorships (other than those in the American Funds Group) that are held by each trustee as a director of a public company or a registered investment company. 4 "Interested persons" within the meaning of the 1940 Act on the basis of their affiliation with the fund's Investment Adviser, Capital Research and Management Company, or its affiliated entities (including the fund's principal underwriter). 5 All of the officers listed are officers and/or directors/trustees of one or more of the other funds for which Capital Research and Management Company serves as Investment Adviser. THE ADDRESS FOR ALL TRUSTEES AND OFFICERS OF THE FUND IS THE OFFICE OF THE FUND, 333 SOUTH HOPE STREET - 55TH FLOOR, LOS ANGELES, CALIFORNIA 90071, ATTENTION: FUND SECRETARY. American High-Income Trust - Page 13 FUND SHARES OWNED BY TRUSTEES AS OF DECEMBER 31, 2001
AGGREGATE DOLLAR RANGE/1/ OF SHARES OWNED IN ALL FUNDS WITHIN AMERICAN FUNDS DOLLAR RANGE/1/ OF FUND FAMILY OVERSEEN NAME SHARES OWNED BY TRUSTEE ------------------------------------------------------------------------------- "NON-INTERESTED" TRUSTEES ------------------------------------------------------------------------------- Richard G. Capen, Jr. None Over $100,000 ------------------------------------------------------------------------------- H. Frederick Christie None Over $100,000 ------------------------------------------------------------------------------- Diane C. Creel $ 1 - $10,000 $10,001 - $50,000 ------------------------------------------------------------------------------- Martin Fenton $ 1 - $10,000 Over $100,000 ------------------------------------------------------------------------------- Leonard R. Fuller $10,001 - $50,000 $50,001 - $100,000 ------------------------------------------------------------------------------- Richard G. Newman $ 1 - $10,000 Over $100,000 ------------------------------------------------------------------------------- Frank M. Sanchez $ 1 - $10,000 $10,001 - $50,000 ------------------------------------------------------------------------------- "INTERESTED" TRUSTEES/2/ ------------------------------------------------------------------------------- David C. Barclay Over $100,000 Over $100,000 ------------------------------------------------------------------------------- Abner D. Goldstine Over $100,000 Over $100,000 ------------------------------------------------------------------------------- Paul G. Haaga, Jr. Over $100,000 Over $100,000 -------------------------------------------------------------------------------
1 Ownership disclosure is made using the following ranges: None; $1 - $10,000; $10,001 - $50,000; $50,001 - $100,000 and Over $100,000. The amounts listed for "interested" trustees include shares owned through The Capital Group Companies, Inc. retirement plan and 401(k) plan. 2 "Interested persons" within the meaning of the 1940 Act on the basis of their affiliation with the fund's Investment Adviser, Capital Research and Management Company, or its affiliated entities (including the fund's principal underwriter). TRUSTEE COMPENSATION PAID DURING THE FISCAL YEAR ENDED SEPTEMBER 30, 2001 No compensation is paid by the fund to any officer or Trustee who is a director, officer or employee of the Investment Adviser or its affiliates. The fund pays annual fees of $3,000 to Trustees who are not affiliated with the Investment Adviser, plus $210 for each Board of Trustees meeting attended, and $200 for each meeting attended as a member of a committee of the Board of Trustees. No pension or retirement benefits are accrued as part of fund expenses. The Trustees 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 Trustees who are not affiliated with the Investment Adviser. American High-Income Trust - Page 14
TOTAL COMPENSATION (INCLUDING AGGREGATE COMPENSATION VOLUNTARILY DEFERRED COMPENSATION/1/) (INCLUDING VOLUNTARILY FROM ALL FUNDS MANAGED BY DEFERRED COMPENSATION/1/) CAPITAL RESEARCH AND MANAGEMENT NAME FROM THE FUND COMPANY OR ITS AFFILIATES/2/ ------------------------------------------------------------------------------------------ Richard G. Capen, $4,676/3/ $ 94,620/3/ Jr. ------------------------------------------------------------------------------------------ H. Frederick $4,676/3/ $199,620/3/ Christie ------------------------------------------------------------------------------------------ Diane C. Creel $4,133/3/ $ 51,600/3/ ------------------------------------------------------------------------------------------ Martin Fenton $4,343/3/ $183,120/3/ ------------------------------------------------------------------------------------------ Leonard R. Fuller $4,676 $ 80,120 ------------------------------------------------------------------------------------------ Richard G. Newman $4,343 $116,120 ------------------------------------------------------------------------------------------ Frank M. Sanchez $4,343 $ 55,120 ------------------------------------------------------------------------------------------
1 Amounts may be deferred by eligible Trustees under a non-qualified deferred compensation plan adopted by the fund in 1993. 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 Trustees. 2 Capital Research and Management Company manages the American Funds consisting of 29 funds. Capital Research and Management Company also manages American Funds Insurance Series and Anchor Pathway Fund, which serve as the underlying investment vehicles for certain variable insurance contracts, and Endowments, whose shareholders are limited to certain non-profit organizations. 3 Since the deferred compensation plan's adoption, the total amount of deferred compensation accrued by the fund (plus earnings thereon) through the 2001 fiscal year for participating Trustees is as follows: Richard G. Capen, Jr. ($6,848), H. Frederick Christie ($10,164), Diane C. Creel ($9,887), and Martin Fenton ($13,949). Amounts deferred and accumulated earnings thereon are not funded and are general unsecured liabilities of the fund until paid to the Trustees. As of January 15, 2002, the officers and Trustees of the fund and their families, as a group, owned beneficially or of record less than 1% of the outstanding shares of the fund. FUND ORGANIZATION AND THE BOARD OF TRUSTEES The fund, an open-end, diversified management investment company, was organized as a Massachusetts business trust on October 1, 1987. All fund operations are supervised by the fund's Board of Trustees, which 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 above. They may elect to defer all or a portion of these fees through a deferred compensation plan in effect for the fund. The fund has several different classes of shares, including classes A, B, C, F, 529-A, 529-B, 529- C, 529-E and 529-F. The 529 share classes are available only through CollegeAmerica to investors establishing qualified higher education savings accounts. The shares of each class represent an interest in the same investment portfolio. Each class has pro rata rights as to voting, redemption, dividends and liquidation, except that each class bears different distribution expenses and may bear different transfer agent fees and other expenses properly attributable to the particular class as approved by the Board of Trustees and set forth in the fund's rule 18f-3 Plan. Each class' shareholders have exclusive voting rights with respect to the respective class' rule 12b-1 Plans adopted in connection with the distribution of shares and on other matters in which the interests of one class are different from interests in another class. Shares of all American High-Income Trust - Page 15 classes of the fund vote together on matters that affect all classes in substantially the same manner. Each class votes as a class on matters that affect that class alone. Note, CollegeAmerica account owners are technically not shareholders of the fund and accordingly, do not have the rights of a shareholder, including the right to vote any proxies relating to fund shares. 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 the 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. COMMITTEES OF THE BOARD OF TRUSTEES The fund has an Audit Committee comprised of Richard G. Capen, Jr., H. Frederick Christie and Leonard R. Fuller, none of whom is considered an "interested person" of the fund within the meaning of the 1940 Act. The Committee oversees the fund's accounting and financial reporting policies and practices, its internal controls and the internal controls of the fund's principal service providers. The Committee acts as a liaison between the fund's independent auditors and the full Board of Trustees. There were two Audit Committee meetings held during the 2001 fiscal year. The fund has a Contracts Committee comprised of Richard G. Capen, Jr., H. Frederick Christie, Diane C. Creel, Martin Fenton, Leonard R. Fuller, Richard G. Newman and Frank M. Sanchez, none of whom is considered an "interested person" of the fund within the meaning of the 1940 Act. The Committee's function is to request, review and consider the information deemed necessary to evaluate the terms of certain agreements between the fund and its Investment Adviser or the Investment Adviser's affiliates, such as the investment advisory and service agreement, principal underwriting agreement, and plans of distribution under rule 12b-1, that the fund may enter into, renew or continue, and to make its recommendations to the full Board of Trustees on these matters. There was one Contracts Committee meeting during the 2001 fiscal year. The fund has a Nominating Committee comprised of Richard G. Capen, Jr., H. Frederick Christie, Diane C. Creel, Martin Fenton, Leonard R. Fuller, Richard G. Newman and Frank M. Sanchez, none of whom is considered an "interested person" of the fund within the meaning of the 1940 Act. The Committee periodically reviews such issues as the Board's composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Trustees. The Committee also evaluates, selects and nominates candidates for independent trustees to the full Board of Trustees. While the Committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board. Such suggestions must be sent in writing to the Nominating Committee of the fund, c/o the fund's Secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the Committee. There was one Nominating Committee meeting during the 2001 fiscal year. INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management Company, founded in 1931, maintains research facilities in the U.S. and abroad (Los Angeles, San American High-Income Trust - Page 16 Francisco, New York, Washington, D.C., London, Geneva, Hong Kong, Singapore and Tokyo) with a staff of professionals, many of whom have significant 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. The Investment Adviser is responsible for managing more than $350 billion of stocks, bonds and money market instruments and serves over 11 million shareholder accounts 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 October 31, 2002, 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 Trustees, 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 Trustees 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). In determining whether to renew the Agreement each year, the Contracts Committee of the Board of Trustees evaluates information provided by the Investment Adviser in accordance with Section 15(c) of the 1940 Act, and presents its recommendations to the full Board of Trustees. At its most recent meeting, the Committee considered a number of factors in recommending renewal of the existing Agreement, including the quality of services provided to the fund, fees and expenses borne by the fund, and financial results of the Investment Adviser. In reviewing the quality of services provided to the fund, the Committee noted that although the fund's absolute results were negative during 2000, its results relative to its peers were highly favorable both for 2000 and for the six months and five years ended June 30, 2001. The Committee also considered the quality and depth of the Investment Adviser's organization in general and of the investment professionals currently providing services to the fund. In reviewing the fees and expenses borne by the fund, the Committee noted, among other things, that the fund's advisory fees and its total expenses as a percentage of its average net assets over various periods were highly favorable in relation to its peer group. The Committee also considered steps taken in recent years by the Investment Adviser to help control the fund's transfer agency expenses. Based on their review, the Committee and the Board concluded that the advisory fees and other expenses of the fund are fair, both absolutely and in comparison with those of other funds in the American High-Income Trust - Page 17 industry, and that shareholders have received reasonable value in return for paying such fees and expenses. The Investment Adviser, in addition to providing investment advisory services, furnishes the services and pays the compensation and travel expenses of persons to perform the executive, administrative, clerical and bookkeeping functions of the fund, and provides suitable office space, necessary small office equipment and utilities, 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; shareholder recordkeeping and administrative 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 of the fund (including stock certificates, registration and qualification fees and expenses); expenses pursuant to the fund's Plans of Distribution (described below); legal and auditing expenses; compensation, fees and expenses paid to trustees 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 management fee is based upon the net assets of the fund and monthly gross investment income. Gross investment income is determined in accordance with generally accepted accounting principles and does not include gains or losses from sales of capital assets. The management fee is based on the following rates and month-end net asset levels: NET ASSET LEVEL
RATE IN EXCESS OF UP TO ------------------------------------------------------------------------------ 0.30% $ 0 $ 60,000,000 ------------------------------------------------------------------------------ 0.21 60,000,000 1,000,000,000 ------------------------------------------------------------------------------ 0.18 1,000,000,000 3,000,000,000 ------------------------------------------------------------------------------ 0.16 3,000,000,000 ------------------------------------------------------------------------------
The agreement also provides for fees based on monthly gross investment income at the following rates: MONTHLY GROSS INVESTMENT
RATE INCOME IN EXCESS OF UP TO ------------------------------------------------------------------------------ 3.00% $ 0 8,333,333 ------------------------------------------------------------------------------ 2.50 8,333,333 25,000,000 ------------------------------------------------------------------------------ 2.00 25,000,000 ------------------------------------------------------------------------------
Assuming net assets of $3.1 billion and gross investment income levels of 5%, 6%, 7%, 8%, and 9%, management fees would be 0.33%, 0.36%, 0.38%, 0.41% and 0.43%, respectively. American High-Income Trust - Page 18 The Investment Adviser has agreed that in the event the Class A expenses of the fund (with the exclusion of interest, taxes, brokerage costs, extraordinary expenses such as litigation and acquisitions or other expenses excludable under applicable state securities laws or regulations) for any fiscal year ending on a date on which the Agreement is in effect, exceed the expense limitations, if any, applicable to the fund pursuant to state securities laws or any regulations thereunder, it will reduce its fee by the extent of such excess and, if required pursuant to any such laws or any regulations thereunder, will reimburse the fund in the amount of such excess. To the extent the fund's management fee must be waived due to Class A share expense ratios exceeding the above limit, management fees will be reduced similarly for all classes of shares of the fund or other Class A fees will be waived in lieu of management fees. For the fiscal years ended 2001, 2000, and 1999, the Investment Adviser received from the fund advisory fees of $13,981,000, $12,688,000, and $12,363,000, respectively. ADMINISTRATIVE SERVICES AGREEMENT - The Administrative Services Agreement (the "Administrative Agreement") between the fund and the Investment Adviser relating to the fund's Class C, F and 529 shares will continue in effect until October 31, 2002, 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 the vote of a majority of Trustees who are not parties to the Administrative 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 Administrative Agreement provides that the fund may terminate the agreement at any time by vote of a majority of Trustees who are not interested persons of the fund. The Investment Adviser has the right to terminate the Administrative Agreement upon 60 days' written notice to the fund. The Administrative Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act). Under the Administrative Agreement, the Investment Adviser provides certain transfer agent and administrative services for shareholders of the fund's Class C and F shares, and all Class 529 shares. The Investment Adviser contracts with third parties, including American Funds Service Company, the fund's Transfer Agent, to provide these services. Services include, but are not limited to, shareholder account maintenance, transaction processing, tax information reporting, and shareholder and fund communications. In addition, the Investment Adviser monitors, coordinates and oversees the activities performed by third parties providing such services. As compensation for its services, the Investment Adviser receives transfer agent fees for transfer agent services provided to the fund's applicable share classes. Transfer agent fees are paid monthly according to a fee schedule contained in a Shareholder Services Agreement between the fund and American Funds Service Company. The Investment Adviser also receives an administrative services fee for administrative services provided to the fund's applicable share classes. Administrative services fees are paid monthly, accrued daily and calculated at the annual rate of 0.15% of the average daily net assets of each respective applicable share class. Administrative service fees paid for Class C and F shares for the fiscal period ended 2001 were $31,000 and $21,000, respectively. PRINCIPAL UNDERWRITER AND PLANS OF DISTRIBUTION - 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; 3500 Wiseman Boulevard, San Antonio, TX 78251; 8332 American High-Income Trust - Page 19 Woodfield Crossing Boulevard, Indianapolis, IN 46240; and 5300 Robin Hood Road, Norfolk, VA 23513. The Principal Underwriter receives revenues from sales of the fund's shares. For Class A and 529-A shares, the Principal Underwriter receives commission revenue consisting of that portion of the Class A and 529-A sales charge remaining after the allowances by the Principal Underwriter to investment dealers. For Class B and 529-B shares, the Principal Underwriter sells the rights to the 12b-1 fees paid by the fund for distribution expenses to a third party and receives the revenue remaining after compensating investment dealers for sales of Class B and 529-B shares. The fund also pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers of Class B and 529-B shares. For Class C and 529-C shares, the Principal Underwriter receives any contingent deferred sales charges that apply during the first year after purchase. The fund pays the Principal Underwriter for advancing the immediate service fees and commissions paid to qualified dealers of Class C and 529-C shares. For Class 529-E shares, the fund pays the Principal Underwriter for advancing the immediate service fees and commissions paid to qualified dealers. For Class F and 529-F shares, the fund pays the Principal Underwriter for advancing the immediate service fees paid to qualified dealers and advisers who sell Class F and 529-F shares. Commissions, revenue or service fees retained by the Principal Underwriter after allowances or compensation to dealers were:
COMMISSIONS, ALLOWANCE OR FISCAL YEAR/PERIOD REVENUE COMPENSATION --------------------------------------------------------------- OR FEES RETAINED TO DEALERS -------------------------------------- CLASS A 2001 $2,648,000 $10,203,000 2000 $1,874,000 $ 7,354,000 1999 $2,990,000 $12,281,000 ----------------------------------------------------------------------------------------------------- CLASS B 2001 $ 765,000 $ 4,307,000 2000 $ 233,000 $ 1,067,000 -----------------------------------------------------------------------------------------------------
The fund has adopted Plans of Distribution (the "Plans"), pursuant to rule 12b-1 under the 1940 Act. The Principal Underwriter receives amounts payable pursuant to the Plans (see below). As required by rule 12b-1 and the 1940 Act, the Plans (together with the Principal Underwriting Agreement) have been approved by the full Board of Trustees and separately by a majority of the trustees who are not "interested persons" of the fund and who have no direct or indirect financial interest in the operation of the Plans or the Principal Underwriting Agreement. Potential benefits of the Plans to the fund include: 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 trustees who are not "interested persons" of the fund are committed to the discretion of the trustees who are not "interested persons" during the existence of the Plans. The Plans may not be amended to increase materially the amount spent American High-Income Trust - Page 20 for distribution without shareholder approval. Plan expenses are reviewed quarterly and the Plans must be renewed annually by the Board of Trustees. Under the Plans, the fund may annually expend the following amounts to finance any activity primarily intended to result in the sale of fund shares, provided the fund's Board of Trustees has approved the category of expenses for which payment is being made: (i) for Class A shares, up to 0.30% of its average daily net assets attributable to Class A shares; (ii) for Class 529-A shares, up to 0.50% of its average daily net assets attributable to Class 529-A shares; (iii) for Class B and 529-B shares, 1.00% of its average daily net assets attributable to Class B and 529-B shares, respectively; (iv) for Class C and 529-C shares, 1.00% of its average daily net assets attributable to Class C and 529-C shares, respectively; (v) for Class 529-E shares, up to 0.75% of its average daily net assets attributable to Class 529-E shares; and (vi) for Class F and 529-F shares, up to 0.50% of its average daily net assets attributable to Class F and 529-F shares, respectively. For Class A and 529-A shares, (i) up to 0.25% is reimbursed to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) up to the amount allowable under the fund's Class A and 529-A 12b-1 limit is reimbursed to the Principal Underwriter for paying distribution-related expenses, including for Class A and 529-A shares dealer commissions and wholesaler compensation paid on sales of shares of $1 million or more purchased without a sales charge (including purchases by employer-sponsored defined contribution-type retirement plans investing $1 million or more or with 100 or more eligible employees, and retirement plans, endowments and foundations with $50 million or more in assets) ("no load purchases"). Commissions on no load purchases of Class A shares, in excess of the Class A and 529-A Plan limitations not reimbursed to the Principal Underwriter 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 these commissions are not recoverable. For Class B and 529-B shares, (i) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) 0.75% is paid to the Principal Underwriter for distribution-related expenses, including the financing of commissions paid to qualified dealers. For Class C and 529-C shares, (i) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) 0.75% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class 529-E shares, (i) 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers, and (ii) 0.25% is paid to the Principal Underwriter for paying distribution-related expenses, including commissions paid to qualified dealers. For Class F and 529-F shares, 0.25% is paid to the Principal Underwriter for paying service-related expenses, including service fees paid to qualified dealers or advisers. Currently, no compensation is paid under the fund's Class F and 529-F Plans for distribution-related expenses. American High-Income Trust - Page 21 During the 2001 fiscal year, 12b-1 expenses accrued and paid, and if applicable, unpaid, were:
12B-1 EXPENSES 12B-1 LIABILITY -------------------------- ACCRUED OUTSTANDING ---------------------------------------------------- CLASS A $7,186,000 $569,000 ------------------------------------------------------------------------------ CLASS B $ 713,000 $101,000 ------------------------------------------------------------------------------ CLASS C $ 115,000 $ 35,000 ------------------------------------------------------------------------------ CLASS F $ 22,000 $ 6,000 ------------------------------------------------------------------------------
OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from a designated percentage of its income), currently provides additional compensation to dealers. Currently, these payments are limited to the top 100 dealers who have sold shares of the fund or other funds in The American Funds Group. These payments will be based principally on a pro rata share of a qualifying dealer's sales. The Principal Underwriter will, on an annual basis, determine the advisability of continuing these payments. TAXES AND DISTRIBUTIONS FUND TAXATION - The fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code ("Code"). A regulated investment company qualifying under Subchapter M of the Code is required to distribute to its shareholders at least 90% of its investment company taxable income (including the excess of net short-term capital gain over net long-term capital losses) and generally is not subject to federal income tax to the extent that it distributes annually 100% of its investment company taxable income and net realized capital gains in the manner required under the Code. The fund intends to distribute annually all of its investment company taxable income and net realized capital gains and therefore does not expect to pay federal income tax, although in certain circumstances the fund may determine that it is in the interest of shareholders to distribute less than that amount. To be treated as a regulated investment company under Subchapter M of the Code, the fund must also (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 securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to the business of investing in such 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, U.S. government securities and securities of other regulated investment companies, and other securities (for purposes of this calculation, generally limited in respect of any one issuer, to an amount not greater than 5% of the market value 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 two or more issuers which the fund controls and which are determined to be engaged in the same or similar trades or businesses. American High-Income Trust - Page 22 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. Although the fund intends to distribute its net investment income and net capital gains so as to avoid excise tax liability, the fund may determine that it is the interest of shareholders to distribute a lesser amount. DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS - Dividends and capital gain distributions on fund shares will be reinvested in shares of the fund of the same class, unless shareholders indicate in writing that they wish to receive them in cash or in shares of the same class of other American Funds, as provided in the prospectus. Distributions of investment company taxable income and net realized capital gains to individual shareholders will be taxable whether received in shares or in cash. Shareholders electing to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the net asset value of that share on the reinvestment date. Dividend and capital gain distributions by 529 share classes will be automatically reinvested. DIVIDENDS - The fund intends to follow the practice of distributing substantially all of its investment company taxable income, which includes any excess of net realized short-term gains over net realized long-term capital losses. Investment company taxable income generally includes dividends, interest, net short-term capital gains in excess of net long-term capital losses, and certain foreign currency gains, if any, less expenses and certain foreign currency losses. Under the Code, gains or losses attributable to fluctuations in exchange rates which occur between the time the fund accrues receivables or liabilities denominated in a foreign currency and the time the fund actually collects such receivables, or pays such liabilities, generally are treated as ordinary income or ordinary loss. Similarly, on disposition of debt securities denominated in a foreign currency and on disposition of certain futures contracts, forward contracts and options, gains or losses attributable to fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition are also treated as ordinary gain or loss. These gains or losses, referred to under the Code as "Section 988" gains or losses, may increase or decrease the amount of the fund's investment company taxable income to be distributed to its shareholders as ordinary income. If the fund invests in stock of certain passive foreign investment companies, the fund may be subject to U.S. federal income taxation on a portion of any "excess distribution" with respect to, or gain from the disposition of, such stock. The tax would be determined by allocating such distribution or gain ratably to each day of the fund's holding period for the American High-Income Trust - Page 23 stock. The distribution or gain so allocated to any taxable year of the fund, other than the taxable year of the excess distribution or disposition, would be taxed to the fund at the highest ordinary income rate in effect for such year, and the tax would be further increased by an interest charge to reflect the value of the tax deferral deemed to have resulted from the ownership of the foreign company's stock. Any amount of distribution or gain allocated to the taxable year of the distribution or disposition would be included in the fund's investment company taxable income and, accordingly, would not be taxable to the fund to the extent distributed by the fund as a dividend to its shareholders. To avoid such tax and interest, the fund intends to elect to treat these securities as sold on the last day of its fiscal year and recognize any gains for tax purposes at that time. Under this election, deductions for losses are allowable only to the extent of any prior recognized gains, and both gains and losses will be treated as ordinary income or loss. The fund will be required to distribute any resulting income, even though it has not sold the security and received cash to pay such distributions. Upon disposition of these securities, any gain recognized is treated as ordinary income and loss is treated as ordinary loss to the extent of any prior recognized gain. Dividends from domestic corporations are expected to comprise some portion of the fund's gross income. To the extent that such dividends constitute any of the fund's gross income, a portion of the income distributions of the fund will be eligible for the deduction for dividends received by corporations. Shareholders will be informed of the portion of dividends which so qualify. The dividends-received deduction is reduced to the extent that either the fund shares, or the underlying shares of stock held by the fund, with respect to which dividends are received, are treated as debt-financed under federal income tax law and is eliminated if the shares are deemed to have been held by the shareholder or the fund, as the case may be, for less than 46 days during the 90-day period beginning on the date which is 45 days before the date on which the shares become ex-dividend. Capital gain distributions are not eligible for the dividends-received deduction. A portion of the difference between the issue price of zero coupon securities and their face value ("original issue discount") is considered to be income to the fund each year, even though the fund will not receive cash interest payments from these securities. This original issue discount (imputed income) will comprise a part of the investment company taxable income of the fund which must be distributed to shareholders in order to maintain the qualification of the fund as a regulated investment company and to avoid federal income taxation at the level of the fund. In addition, some of the bonds may be purchased by a fund at a discount that exceeds the original issue discount on such bonds, if any. This additional discount represents market discount for federal income tax purposes. The gain realized on the disposition of any bond having a market discount may be treated as taxable ordinary income to the extent it does not exceed the accrued market discount on such bond or a fund may elect to include the market discount in income in tax years to which it is attributable. Generally, accrued market discount may be figured under either the ratable accrual method or constant interest method. If the fund has paid a premium over the face amount of a bond, the fund has the option of either amortizing the premium until bond maturity and reducing the fund's basis in the bond by the amortized amount, or not amortizing and treating the premium as part of the bond's basis. In the case of any debt security having a fixed maturity date of not more than one year from its date of issue, the gain realized on American High-Income Trust - Page 24 disposition generally will be treated as short-term capital gain. In general, any gain realized on disposition of a security held less than one year is treated as short-term capital gain. Dividend and interest income received by the fund from sources outside the U.S. may be subject to withholding and other taxes imposed by such foreign jurisdictions. Tax conventions between certain countries and the U.S. may reduce or eliminate these foreign taxes, however. Most foreign countries do not impose taxes on capital gains in respect of investments by foreign investors. CAPITAL GAIN DISTRIBUTIONS - The fund also intends to follow the practice of distributing the entire excess of net realized long-term capital gains over net realized short-term capital losses. Net capital gains for a fiscal year are computed by taking into account any capital loss carry-forward of the fund. If any net long-term capital gains in excess of net short-term capital losses are retained by the fund for reinvestment, requiring federal income taxes to be paid thereon by the fund, the fund intends to elect to treat such capital gains as having been distributed to shareholders. As a result, each shareholder will report such capital gains as long-term capital gains taxable to individual shareholders at a maximum 20% capital gains rate, will be able to claim a pro rata share of federal income taxes paid by the fund on such gains as a credit against personal federal income tax liability, and will be entitled to increase the adjusted tax basis on fund shares by the difference between a pro rata share of the retained gains and such shareholder's related tax credit. SHAREHOLDER TAXATION - In January of each year, individual shareholders of the fund will receive a statement of the federal income tax status of all distributions. Shareholders of the fund also may be subject to state and local taxes on distributions received from the fund. Distributions of the excess of net long-term capital gains over net short-term capital losses which the fund properly designates as "capital gain dividends" generally will be taxable to individual shareholders at a maximum 20% capital gains rate, regardless of the length of time the shares of the fund have been held by such shareholders. Any loss realized upon the redemption of shares held at the time of redemption for six months or less from the date of their purchase will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain during such six-month period. Distributions by the fund result in a reduction in the net asset value of the fund's shares. Should a distribution reduce the net asset value below a shareholder's cost basis, such distribution would nevertheless be taxable to the shareholder as ordinary income or capital gain as described above, even though, from an investment standpoint, it may constitute a partial return of investment capital. For this reason, investors should consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will then receive a partial return of investment capital upon the distribution, which will nevertheless be taxable to them. Redemptions of shares, including exchanges for shares of another American Fund, may result in federal, state and local tax consequences (gain or loss) to the shareholder. However, conversion from one class to another class in the same fund should not be a taxable event. American High-Income Trust - Page 25 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 will 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 the 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. The fund will be required to report to the IRS all distributions of investment company taxable income and capital gains as well as gross proceeds from the redemption or exchange of fund shares, except in the case of certain exempt shareholders. Under the backup withholding provisions of Section 3406 of the Code, distributions of investment company taxable income and capital gains and proceeds from the redemption or exchange of a regulated investment company may be subject to withholding of federal income tax in the case of non-exempt U.S. shareholders who fail to furnish the investment company with their taxpayer identification numbers and with required certifications regarding their status under the federal income tax law. Withholding may also be required if the fund is notified by the IRS or a broker that the taxpayer identification number furnished by the shareholder is incorrect or that the shareholder has previously failed to report interest or dividend income. If the withholding provisions are applicable, any such distributions and proceeds, whether taken in cash or reinvested in additional shares, will be reduced by the amounts required to be withheld. The foregoing discussion of U.S. federal income tax law relates solely to the application of that law to U.S. persons, i.e., U.S. citizens and residents and U.S. corporations, partnerships, trusts and estates. Each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or a lower rate under an applicable income tax treaty) on dividend income received by the shareholder. Shareholders should consult their tax advisers about the application of federal, state and local tax law in light of their particular situation. UNLESS OTHERWISE NOTED, ALL REFERENCES IN THE FOLLOWING PAGES TO CLASS A, B, C OR F SHARES ALSO REFER TO THE CORRESPONDING CLASS 529-A, 529-B, 529-C OR 529-F SHARES. CLASS 529 SHAREHOLDERS SHOULD ALSO REFER TO THE COLLEGEAMERICA PROGRAM DESCRIPTION FOR INFORMATION ON POLICIES AND SERVICES SPECIFICALLY RELATING TO COLLEGEAMERICA ACCOUNTS. American High-Income Trust - Page 26 PURCHASE OF SHARES
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS ------------------------------------------------------------------------------- See "Purchase $50 minimum (except where a Minimums" for initial lower minimum is noted under investment minimums. "Purchase Minimums"). ------------------------------------------------------------------------------- By contacting Visit any investment Mail directly to your your investment dealer dealer who is investment dealer's address registered in the printed on your account state where the statement. purchase is made, has a sales agreement with American Funds Distributors and is authorized to sell a CollegeAmerica account in the case of 529 shares. ------------------------------------------------------------------------------- By mail Make your check Fill out the account additions payable to the fund form at the bottom of a recent and mail to the account statement, make your address indicated on check payable to the fund, the account write your account number on application. Please your check, and mail the check indicate an investment and form in the envelope dealer on the account provided with your account application. statement. ------------------------------------------------------------------------------- By telephone Please contact your Complete the "Investments by investment dealer to Phone" section on the account open account, then application or American follow the procedures FundsLink Authorization Form. for additional Once you establish the investments. privilege, you, your financial advisor or any person with your account information can call American FundsLine(R) and make investments by telephone (subject to conditions noted in "Shareholder Account Services and Privileges - Telephone and Internet Purchases, Redemptions and Exchanges" below). ------------------------------------------------------------------------------- By Internet Please contact your Complete the American FundsLink investment dealer to Authorization Form. Once you open account, then establish the privilege, you, follow the procedures your financial advisor or any for additional person with your account investments. information may access American FundsLine OnLine(R) on the Internet and make investments by computer (subject to conditions noted in "Shareholder Account Services and Privileges - Telephone and Internet Purchases, Redemptions and Exchanges" below). ------------------------------------------------------------------------------- By wire Call 800/421-0180 to Your bank should wire your obtain your account additional investments in the number(s), if same manner as described under necessary. Please "Initial Investment." indicate an investment dealer on the account. Instruct your bank to wire funds to: Wells Fargo Bank 155 Fifth Street, Sixth Floor San Francisco, CA 94106 (ABA#121000248) For credit to the account of: American Funds Service Company a/c# 4600-076178 (fund name) (your fund acct. no.) -------------------------------------------------------------------------------
The fund and the Principal Underwriter reserve the right to reject any purchase order. Generally, Class F shares are generally only available to fee-based programs of investment firms that have special agreements with the fund's distributor and certain registered investment advisers. Class B and C shares are generally not available to certain employer-sponsored retirement plans, such as 401(k) plans, 457 plans, employer-sponsored 403(b) plans, and money purchase pension and American High-Income Trust - Page 27 profit sharing plans. Class 529 shares may be purchased by investors only through CollegeAmerica accounts. Class 529-E shares may only be purchased by investors participating in CollegeAmerica through an eligible employer plan. Class R-5 shares of the fund are available to clients of the Personal Investment Management Group of Capital Guardian Trust Company who do not have an intermediary associated with their accounts. In addition, the state tax-exempt funds are only offered in certain states, and tax-exempt funds in general should not serve as retirement plan investments. PURCHASE MINIMUMS - The minimum initial investment for all funds in The American Funds Group, except the money market funds and the state tax-exempt funds, is $250. The minimum initial investment for the money market funds (The Cash Management Trust of America, The Tax-Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase 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. The minimum is $50 for additional investments (except for retirement plan payroll deductions as noted above). PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B shares for all American Funds is $100,000. Direct purchases of Class B shares of The Cash Management Trust of America are not permitted; shares may be acquired only by exchanging from Class B shares of other American Funds. For investments above $100,000, Class A shares are generally a less expensive option over time due to sales charge reductions or waivers. PURCHASE MAXIMUM FOR CLASS C SHARES - The maximum purchase order for Class C shares for all American Funds is $500,000. Direct purchases of Class C shares of The Cash Management Trust of America are not permitted; shares may be acquired only by exchanging from Class C shares of other American Funds. FUND NUMBERS - Here are the fund numbers for use with our automated telephone line, American FundsLine/(R)/ (see description below):
FUND NUMBERS ---------------------------------------- FUND CLASS A CLASS B CLASS C CLASS F ---------------------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . 002 202 302 402 American Balanced Fund/(R)/ . . . . . . . . . . . . 011 211 311 411 American Mutual Fund/(R)/ . . . . . . . . . . . . . 003 203 303 403 Capital Income Builder/(R)/ . . . . . . . . . . . . 012 212 312 412 Capital World Growth and Income Fund/SM/ . . . . . 033 233 333 433 EuroPacific Growth Fund/(R)/ . . . . . . . . . . . 016 216 316 416 Fundamental Investors/SM/ . . . . . . . . . . . . . 010 210 310 410 The Growth Fund of America/(R)/ . . . . . . . . . . 005 205 305 405 The Income Fund of America/(R)/ . . . . . . . . . . 006 206 306 406 The Investment Company of America/(R)/ . . . . . . 004 204 304 404 The New Economy Fund/(R)/ . . . . . . . . . . . . . 014 214 314 414 New Perspective Fund/(R)/ . . . . . . . . . . . . . 007 207 307 407 New World Fund/SM/ . . . . . . . . . . . . . . . . 036 236 336 436 SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . 035 235 335 435 Washington Mutual Investors Fund/SM/ . . . . . . . 001 201 301 401 BOND FUNDS American High-Income Municipal Bond Fund/(R)/ . . . 040 240 340 440 American High-Income Trust/SM/ . . . . . . . . . . 021 221 321 421 The Bond Fund of America/SM/ . . . . . . . . . . . 008 208 308 408 Capital World Bond Fund/(R)/ . . . . . . . . . . . 031 231 331 431 Intermediate Bond Fund of America/SM/ . . . . . . . 023 223 323 423 Limited Term Tax-Exempt Bond Fund of America/SM/ . 043 243 343 443 The Tax-Exempt Bond Fund of America/(R)/ . . . . . 019 219 319 419 The Tax-Exempt Fund of California/(R)/* . . . . . . 020 220 320 420 The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . 024 224 324 424 The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . 025 225 325 425 U.S. Government Securities Fund/SM/ . . . . . . . . 022 222 322 422 MONEY MARKET FUNDS The Cash Management Trust of America/(R)/ . . . . . 009 209 309 409 The Tax-Exempt Money Fund of America/SM/ . . . . . 039 N/A N/A N/A The U.S. Treasury Money Fund of America/SM/ . . . . 049 N/A N/A N/A ___________ *Available only in certain states.
American High-Income Trust - Page 28
FUND NUMBERS --------------------------------------------- CLASS CLASS CLASS CLASS CLASS FUND 529-A 529-B 529-C 529-E 529-F ------------------------------------------------------------------------------- STOCK AND STOCK/BOND FUNDS AMCAP Fund/(R)/ . . . . . . . . 1002 1202 1302 1502 1402 American Balanced Fund/(R)/ . . 1011 1211 1311 1511 1411 American Mutual Fund/(R)/ . . . 1003 1203 1303 1503 1403 Capital Income Builder/(R)/ . . 1012 1212 1312 1512 1412 Capital World Growth and Income Fund/SM/ . . . . . . . . . . . 1033 1233 1333 1533 1433 EuroPacific Growth Fund/(R)/ . 1016 1216 1316 1516 1416 Fundamental Investors/SM/ . . . 1010 1210 1310 1510 1410 The Growth Fund of America/(R)/ 1005 1205 1305 1505 1405 The Income Fund of America/(R)/ 1006 1206 1306 1506 1406 The Investment Company of America/(R)/. . . . . . . . . . 1004 1204 1304 1504 1404 The New Economy Fund/(R)/ . . . 1014 1214 1314 1514 1414 New Perspective Fund/(R)/ . . . 1007 1207 1307 1507 1407 New World Fund/SM/ . . . . . . 1036 1236 1336 1536 1436 SMALLCAP World Fund/(R)/ . . . 1035 1235 1335 1535 1435 Washington Mutual Investors Fund/SM/ . . . . . . . . . . . 1001 1201 1301 1501 1401 BOND FUNDS American High-Income Trust/SM/ 1021 1221 1321 1521 1421 The Bond Fund of America/SM/ . 1008 1208 1308 1508 1408 Capital World Bond Fund/(R)/ . 1031 1231 1331 1531 1431 Intermediate Bond Fund of America/SM/ . . . . . . . . . . 1023 1223 1323 1523 1423 U.S. Government Securities Fund/SM/. . . . . . . . . . . . 1022 1222 1322 1522 1422 MONEY MARKET FUND The Cash Management Trust of America/(R)/. . . . . . . . . . 1009 1209 1309 1509 1409
American High-Income Trust - Page 29 SALES CHARGES CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares of 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 "Fund Numbers" above for a listing of the funds.)
DEALER SALES CHARGE AS COMMISSION PERCENTAGE OF THE: AS PERCENTAGE ------------------ OF THE AMOUNT OF PURCHASE AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING -INVESTED- PRICE PRICE ------------------------------------------------------------------- -------- ----- ----- STOCK AND STOCK/BOND FUNDS Less than $25,000 . . . . . . . . . 6.10% 5.75% 5.00% $25,000 but less than $50,000 . . . 5.26 5.00 4.25 $50,000 but less than $100,000. . 4.71 4.50 3.75 BOND FUNDS Less than $100,000 . . . . . . . . 3.90 3.75 3.00 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 $750,000 . 2.04 2.00 1.60 $750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more. . . . . . . . none none (see below) ------------------------------------------------------------------------------
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type plans investing $1 million or more, or with 100 or more eligible employees, and Individual Retirement Account rollovers from retirement plans with assets invested in the American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may invest with no sales charge and are not subject to a CDSC. 403(b) plans may be treated as employer-sponsored plans for sales charge purposes if: (i) the American Funds are principal investment options; (ii) the employer facilitates the enrollment process by, for example, allowing for onsite group enrollment meetings held during working hours; and (iii) there is only one dealer firm assigned to the plans. 403(b) plans meeting these criteria may invest with no sales charge and are not subject to a CDSC if investing $1 million or more or having 100 or more eligible employees. Investments made through accounts that purchased Class A shares of the fund before March 15, 2001 and are part of certain qualified fee-based programs, and retirement plans, endowments or foundations with $50 million or more in assets, may also be made with no sales charge and are not subject to a CDSC. A dealer concession of up to 1% may be paid by the fund under its Class A Plan of Distribution on investments made with no initial sales charge. American High-Income Trust - Page 30 A transfer from the Virginia Prepaid Education Program or the Virginia Education Savings Trust to a CollegeAmerica account will be made with no sales charge. No commission will be paid to the dealer on such a transfer. In addition, Class A shares of the stock, stock/bond and bond funds may be sold at net asset value to: (1) current or retired directors, trustees, officers and advisory board members of, and certain lawyers who provide services to, the funds managed by Capital Research and Management Company, current or retired employees of Washington Management Corporation, current or retired employees and partners of The Capital Group Companies, Inc. and its affiliated companies, certain family members and employees 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 the Principal Underwriter (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) insurance company separate accounts; (5) accounts managed by subsidiaries of The Capital Group Companies, Inc.; (6) The Capital Group Companies, Inc., its affiliated companies and Washington Management Corporation; (7) an individual or entity with a substantial business relationship with The Capital Group Companies, Inc. or its affiliates, as determined by a Vice President or more senior officer of the Capital Research and Management Company Fund Administration and Compliance Unit; and (8) wholesalers and full-time employees directly supporting wholesalers involved in the distribution of insurance company separate accounts whose underlying investments are managed by any affiliate of The Capital Group Companies, Inc. Shares are offered at net asset value to these persons and organizations due to anticipated economies in sales effort and expense. CONTINGENT DEFERRED SALES CHARGE ON CLASS A AND C SHARES - Except as described above, a CDSC of 1% applies to redemptions of Class A shares of the American Funds, other than the money market funds, made within 12 months following the purchase of Class A shares of $1 million or more made without an initial sales charge. A CDSC of 1% also applies to redemptions of Class C shares of the American Funds made within 12 months following the purchase of the Class C shares. 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 the longest are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC may be waived in certain circumstances. See "CDSC Waivers for Class A Shares" and "CDSC Waivers for Class B and C Shares" below. American High-Income Trust - Page 31 CLASS B SALES CHARGES - Class B shares are sold without any initial sales charge. However, a CDSC may be applied to shares you sell within six years of purchase, as shown in the table below:
CONTINGENT DEFERRED SALES CHARGE ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD -------------------------------------------------------------------------- 1 5.00% 2 4.00 3 4.00 4 3.00 5 2.00 6 1.00
There is no CDSC on appreciation in share value above the initial purchase price or on shares acquired through reinvestment of dividends or capital gain distributions. In addition, the CDSC may be waived in certain circumstances. See "CDSC Waivers for Class B and C shares" below. The CDSC is based on the original purchase cost or the current market value of the shares being sold, whichever is less. In processing redemptions of Class B shares, shares that are not subject to any CDSC will be redeemed first followed by shares that you have owned the longest during the six-year period. CLASS F AND CLASS 529-E SALES CHARGE - Class F and 529-E shares are sold with no initial or contingent deferred sales charge. DEALER COMMISSIONS AND COMPENSATION - For Class A shares, commissions (up to 1%) are paid to dealers who initiate and are responsible for purchases of $1 million or more, for purchases by any employer-sponsored defined contribution-type plan investing $1 million or more or with 100 or more eligible employees, IRA rollover accounts (as described in "Individual Retirement Account (IRA) Rollovers" below), and for purchases made at net asset value by certain retirement plans, endowments and foundations with assets of $50 million or more. Commissions on investments in Class A shares are paid at the following rates: 1.00% on amounts of $1 million to $4 million, 0.50% on amounts over $4 million to $10 million, and 0.25% on amounts over $10 million. Commissions are based on cumulative investments and are not annually reset. For Class B shares, compensation equal to 4.00% of the amount invested is paid by the Principal Underwriter to dealers who sell Class B shares. For Class C shares, compensation equal to 1.00% of the amount invested is paid by the Principal Underwriter to dealers who sell Class C shares. CONVERSION OF CLASS B AND C SHARES - Class B shares automatically convert to Class A shares in the month of the eight-year anniversary of the purchase date. Class C shares automatically convert to Class F shares in the month of the ten-year anniversary of the purchase date. Class 529-C shares will not convert to Class 529-F shares. The conversion of shares is subject to the Internal Revenue Service's continued position that the conversions are not subject to federal income tax. In the event the Internal Revenue Service no longer takes this position, the American High-Income Trust - Page 32 automatic conversion feature may be suspended, in which event no further conversions of Class B or C shares would occur while such suspension remained in effect. In that event, at your option, Class B shares could be exchanged for Class A shares and Class C shares for Class F shares on the basis of the relative net asset values of the two classes, without the imposition of a sales charge or fee; however, such an exchange could constitute a taxable event for you. Absent such an exchange, Class B and C shares would continue to be subject to higher expenses for longer than eight years and ten years, respectively. SALES CHARGE REDUCTIONS AND WAIVERS REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your spouse and your children under age 21) may combine investments to reduce your costs. You must let your investment dealer or American Funds Service Company (the "Transfer Agent") know at the time you purchase shares 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 future appreciation of your investment or reinvested distributions. The reduced sales charges and offering prices set forth in the Prospectus apply to purchases of $25,000 or more for equity funds and $100,000 or more for bond funds made within a 13-month period subject to the following statement of intention (the "Statement"). The Statement is not a binding obligation to purchase the indicated amount. When a shareholder elects to use a 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 any capital gain distributions on 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 will remit to the Principal Underwriter the difference between the sales charge actually paid and the sales charge which would have been paid if the total of such purchases had been made at a single time. The dealer assigned to the account at the end of the period will receive an appropriate commission adjustment. If the difference is not paid by the close of the Statement period, the appropriate number of shares held in escrow 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. Accordingly, upon your request, the sales charge paid on investments made 90 days prior to the Statement revision will be adjusted to reflect the revised Statement. Existing holdings eligible for rights of accumulation (see below), including Class A shares held in a fee-based arrangement, other classes of shares of the American Funds, and any individual investments in American Legacy variable annuities and variable life insurance policies (American Legacy, American Legacy II and American Legacy III variable American High-Income Trust - Page 33 annuities, American Legacy Life, American Legacy Variable Life, and American Legacy Estate Builder) 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. The Statement will be considered completed if the shareholder dies within the 13-month Statement period. Commissions will not be adjusted or paid on the difference between the Statement amount and the amount actually invested before the shareholder's death. When the trustees 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 total monthly 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 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 made by you and your immediate family (your spouse and your children under the age of 21), if all parties are purchasing shares for their own accounts and/or: .individual-type employee benefit plan(s), such as an IRA, 403(b) plan (see exception below), or single-participant Keogh-type plan; .business accounts solely controlled by you or your immediate family (for example, you own the entire business); .trust accounts established by you or your immediate family. However, if the person(s) who established the trust is deceased, the trust account may be aggregated with accounts of the person who is the primary beneficiary of the trust; .endowments or foundations established and controlled by you or your immediate family; or .CollegeAmerica accounts. Accounts will be aggregated at the account owner level. Class 529-E accounts may only be aggregated with an eligible employer plan. Individual purchases by a trustee(s) or other fiduciary(ies) may also be aggregated if the investments are: .for a single trust estate or fiduciary account, including employee benefit plans other than the individual-type employee benefit plans described above; American High-Income Trust - Page 34 .made for two or more employee benefit plans of a single employer or of affiliated employers as defined in the 1940 Act, again excluding individual-type employee benefit plans described above; .for a diversified common trust fund or other diversified pooled account not specifically formed for the purpose of accumulating fund shares; .for non-profit, charitable or educational organizations (or any employer-sponsored retirement plan for such an endowment or foundation) or any endowments or foundations established and controlled by the organization; or .for participant accounts of a 403(b) plan that is treated as an employer-sponsored plan (see "Class A Purchases Not Subject to Sales Charges" above), or made for two or more 403(b) plans that are treated as employer-sponsored plans of a single employer or affiliated employers as defined in the 1940 Act. 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 all classes of shares of two or more funds in The American Funds Group, as well as individual holdings in American Legacy variable annuities and variable life insurance policies. Shares of money market funds purchased through an exchange, reinvestment or cross-reinvestment from a fund having a sales charge also qualify. However, direct purchases of the money market funds are excluded. RIGHTS OF ACCUMULATION - Subject to the limitations described under the aggregation policy, you may take into account the current value (or if greater, the amount you invested less any withdrawals) of your existing holdings in all share classes of The American Funds Group, as well as your holdings in Endowments (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. When determining your sales charge, you may also take into account the value of your individual holdings, as of the end of the week prior to your investment, in various American Legacy variable annuities and variable life insurance policies. Direct purchases of the money market funds are excluded. CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in the following cases: (1) Exchanges (except if shares acquired by exchange are then redeemed within 12 months of the initial purchase). (2) Distributions due to death or post-purchase disability of a shareholder. In the case of joint tenant accounts, if one joint tenant dies, the surviving joint tenant(s), at the time they notify the Transfer Agent of the decedent's death and remove his/her name from the account, may redeem shares from the account without incurring a CDSC. Redemptions subsequent to the notification to the Transfer Agent of the death of one of the joint owners will be subject to a CDSC. American High-Income Trust - Page 35 (3) Distributions from 403(b) plans or IRAs due to attainment of age 59-1/2, and required minimum distributions from retirement accounts upon the attainment of age 70-1/2. Such distributions may not exceed 12% of the value of the account annually. (4) Tax-free returns of excess contributions to IRAs. (5) Redemptions through systematic withdrawal plans (see "Automatic Withdrawals" below), not exceeding 12% each year of the lesser of the original purchase cost or the current market value of the shares being sold that would otherwise be subject to a CDSC. (6) For Class 529-A shareholders only, redemptions due to a beneficiary's death, post-purchase disability or receipt of a scholarship. CDSC WAIVERS FOR CLASS B AND C SHARES - Any CDSC on Class B and C shares may be waived in the following cases: (1) Redemptions through systematic withdrawal plans ("SWPs") (see "Automatic Withdrawals" below) not exceeding 12% each year of the lesser of the original purchase cost or the current market value of the shares being sold that would otherwise be subject to a CDSC. Shares not subject to a CDSC (such as shares representing reinvestment of distributions) will be redeemed first and will count toward the 12% limitation. If there are insufficient shares not subject to a CDSC, shares subject to the lowest CDSC will be redeemed next until the 12% limit is reached. The 12% SWP limit is calculated on a pro rata basis at the time the first payment is made and is recalculated thereafter on a pro rata basis at the time of each SWP payment. Shareholders who establish a SWP should be aware that the amount of that payment not subject to a CDSC may vary over time depending on fluctuations in net asset value of their account. This privilege may be revised or terminated at any time. (2) Required minimum distributions taken from retirement accounts upon the attainment of age 70-1/2. Such distributions may not exceed 12% of the value of the account annually. (3) Distributions due to death or post-purchase disability of a shareholder. In the case of joint tenant accounts, if one joint tenant dies, the surviving joint tenant(s), at the time they notify the Transfer Agent of the decedent's death and remove his/her name from the account, may redeem shares from the account without incurring a CDSC. Redemptions subsequent to the notification to the Transfer Agent of the death of one of the joint owners will be subject to a CDSC. (4) For Class 529-B and 529-C shareholders only, redemptions due to a beneficiary's death, post-purchase disability or receipt of a scholarship. CDSC waivers on Class A, B and C shares are allowed only in the cases listed above. For example, CDSC waivers will not be allowed for: .Redemptions of dividend and capital gain distributions, redemptions of appreciated shares, redemptions through SWPs, and required minimum distributions, to the extent in aggregate they exceed 12% of an account value; or .Redemptions of Class 529-B and 529-C shares due to: termination of CollegeAmerica; a determination by the Internal Revenue Service that American High-Income Trust - Page 36 CollegeAmerica does not qualify as a qualified tuition program under the Code; proposal or enactment of law that eliminates or limits the tax-favored status of CollegeAmerica; or the Virginia College Savings Plan eliminating the fund as an option for additional investment within CollegeAmerica. INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS Assets from a retirement plan (plan assets) may be invested in any class of shares of the American Funds through an IRA rollover plan. All such rollover investments will be subject to the terms and conditions for Class A, B, C and F shares contained in the fund's current prospectus and statement of additional information. An IRA rollover involving plan assets that offered an investment option managed by any affiliate of The Capital Group Companies, Inc., including any of the American Funds, may be invested in: 1) Class A shares at net asset value; 2) Class A shares subject to the applicable initial sales charge; 3) Class B shares; 4) Class C shares; or 5) Class F shares. Plan assets invested in Class A shares with a sales charge, B, C or F shares are subject to the terms and conditions contained in the fund's current prospectus and statement of additional information. Advisers will be compensated according to the policies associated with each share class and described in the fund's current prospectus and statement of additional information. Plan assets invested in Class A shares at net asset value will not be subject to a contingent deferred sales charge and will immediately begin to accrue service fees (i.e., shares do not have to age). Dealer commissions will be paid only on IRA rollovers of $1 million or more according to the schedule applicable to Class A share investments of $1 million or more (see "Dealer Commissions and Compensation" above). IRA rollovers that do not indicate which share class plan assets should be invested in and which do not have an adviser associated with the account will be invested in Class F shares. Additional plan assets may be rolled into the account holding F shares; however, subsequent contributions will not be allowed to be invested in F shares. PRICE OF SHARES Shares are purchased at the offering price or sold at the net asset value price next determined after the purchase or sell order is received and accepted by the fund or the Transfer Agent; the offering or net asset value 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 or their authorized designees, accepted by the Principal Underwriter, the Transfer Agent, a dealer or any of their designees. In the case of orders sent directly to the fund or the Transfer Agent, an investment dealer MUST be indicated. The dealer is responsible for promptly transmitting purchase and sell orders to the Principal Underwriter. Orders received by the investment dealer or authorized designee, 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 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 price you pay for shares, the offering price, is based on the net asset value per share which is calculated once daily as of approximately 4:00 p.m. New York time, which is American High-Income Trust - Page 37 the normal close of trading on the New York Stock Exchange each day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the fund's share price would still be determined as of 4:00 p.m. New York time. The New York Stock Exchange is currently closed on weekends and on the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' 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 (other than money market funds) 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. Short-term securities maturing within 60 days are valued at amortized cost which approximates market value. Assets or liabilities initially expressed in terms of non-U.S. 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 procedures adopted by authority of the fund's Board. The fair value of all other assets is added to the value of securities to arrive at the total assets; 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 Principal Underwriter will not knowingly sell shares of the fund directly or indirectly to any person or entity, where, after the sale, such person or entity would own beneficially directly or indirectly more than 4.5% of the outstanding shares of the fund without the consent of a majority of the fund's Board of Trustees. American High-Income Trust - Page 38 SELLING SHARES Shares are sold at the net asset value next determined after your request is received in good order by the Transfer Agent, dealer or any of their designees. Sales of certain Class A, B and C shares may be subject to a CDSC. Generally, Class F shares may only be sold through fee-based programs of investment firms and registered investment advisers with special agreements with the fund's distributor. You may sell (redeem) other classes of 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 $75,000; - 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. 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. The Transfer Agent reserves the right to require a signature guarantee on any redemptions. - Additional documentation may be required for sales of shares held in corporate, partnership or fiduciary accounts. - You must include with your written request any shares you wish to sell that are in certificate form. TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR USING THE INTERNET -Redemptions by telephone, fax or the Internet (including American FundsLine/(R)/ and American FundsLine OnLine/(R)/) are limited to $75,000 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. American High-Income Trust - Page 39 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 of registered shareholders exactly as indicated on your checking account signature card. - Check writing is not available for any of the 529 share classes or B, C or F share classes of The Cash Management Trust of America. If you sell Class A, B or C shares and request a specific dollar amount to be sold, we will sell sufficient shares so that the sale proceeds, after deducting any applicable CDSC, equals the dollar amount requested. 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 1940 Act), 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. You may reinvest proceeds from a redemption or a dividend or capital gain distribution without a sales charge in any fund in The American Funds Group within 90 days after the date of the redemption or distribution. Proceeds from a Class B share redemption where a CDSC was charged will be reinvested in Class A shares. Proceeds from any other type of redemption and all dividend and capital gain distributions will be reinvested in the same share class from which the original redemption or distribution was made. Any CDSC on Class B or C shares will be credited to your account. Redemption proceeds of Class A shares representing direct purchases in the money market funds that are reinvested in non-money market funds will be subject to a sales charge. Proceeds will be reinvested at the next calculated net asset value after your request is received and accepted by the Transfer Agent. SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES The following services and privileges are generally available to all shareholders. However, certain services and privileges may not be available for Class 529 shareholders or if your account is held with an investment dealer. AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make monthly or quarterly investments in The American Funds through automatic debits from your bank account. To set up a plan you must fill out an account application and specify the amount you would like to invest ($50 minimum) and the date on which you would like your investments to occur. The plan American High-Income Trust - Page 40 will begin within 30 days after your account application is received. Your bank account will be debited on the day or a few days before your investment is made, depending on the bank's capabilities. The Transfer Agent will then invest your money into the fund you specified on or around the date you specified. If the date you specified falls on a weekend or holiday, your money will be invested on the following business day. However, if the following business day falls in the next month, your money will be invested on the business day immediately preceding the weekend or holiday. If your bank account cannot be debited due to insufficient funds, a stop-payment or the closing of the account, the plan may be terminated and the related investment reversed. You may change the amount of the investment or discontinue the plan at any time by writing to the Transfer Agent. AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested in additional shares of the same class and fund at net asset value 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, the Transfer Agent or your investment dealer. Dividend and capital gain distributions paid by the 529 share classes will automatically be reinvested. If you have elected to receive dividends and/or capital gain distributions in cash, and the postal or other delivery service is unable to deliver checks to your address of record, or you do not respond to mailings from American Funds Service Company with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and other distributions reinvested in additional shares. CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - For all share classes, except the 529 classes of shares, you may cross-reinvest dividends and capital gains ("distributions") of the same share class into any other fund in The American Funds Group at net asset value, subject to the following conditions: (a) The aggregate value of your account(s) in the fund(s) paying distributions equals or exceeds $5,000 (this is waived if the value of the account in the fund receiving the distributions equals or exceeds that fund's minimum initial investment requirement), (b) If the value of the account of the fund receiving distributions is below the minimum initial investment requirement, distributions must be automatically reinvested, (c) If you discontinue the cross-reinvestment of distributions, the value of the account of the fund receiving distributions must equal or exceed the minimum initial investment requirement. If you do not meet this requirement within 90 days of notification, the fund has the right to automatically redeem the account. EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The American Funds Group within the same class. However, exchanges from Class A shares of The Cash Management Trust of America may be made to Class B or C shares of any other American Fund for dollar cost averaging purposes. 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. Exchanges of Class F shares generally may only be done through fee-based American High-Income Trust - Page 41 programs of investment firms that have special agreements with the fund's distributor and certain registered investment advisers. Exchanges from Class A, C or F shares to the corresponding 529 share class, particularly in the case of Uniform Gifts to Minors Act or Uniform Transfer to Minors Act custodial accounts, may result in significant legal and tax consequences as described in the CollegeAmerica Program Description. Please consult your financial adviser prior to making such an exchange. You may exchange shares of other classes by writing to the Transfer Agent (see "Selling Shares"), by contacting your investment dealer, by using American FundsLine and American FundsLine OnLine (see "American FundsLine and American FundsLine OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see "American Funds Service Company Service Areas" in the prospectus for the appropriate fax numbers) or telegraphing the Transfer Agent. (See "Telephone and Internet Purchases, Redemptions and Exchanges" below.) Shares held in corporate-type retirement plans for which Capital Bank and Trust Company serves as trustee may not be exchanged by telephone, Internet, fax or telegraph. Exchange redemptions and purchases are processed simultaneously at the share prices next determined after the exchange order is received. (See "Price of Shares" above.) THESE TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES. AUTOMATIC EXCHANGES - For all share classes, except the 529 classes of shares, you may automatically exchange shares of the same class 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. AUTOMATIC WITHDRAWALS - For all share classes, except the 529 classes of shares, you may automatically withdraw shares from any of the funds in The American Funds Group. You can make automatic withdrawals of $50 or more as often as you wish if your account is worth at least $10,000, or up to four times a year for an account worth at least $5,000. You can designate the day of each period for withdrawals and request that checks be sent to you or someone else. Withdrawals may also be electronically deposited to your bank account. The Transfer Agent will withdraw your money from the fund you specify on or around the date you specify. If the date you specified falls on a weekend or holiday, the redemption will take place on the previous business day. However, if the previous business day falls in the preceding month, the redemption will take place on the following business day after the weekend or holiday. 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, will be reflected on regular confirmation statements from the Transfer Agent. Dividend and capital gain reinvestments, purchases through automatic investment plans and certain retirement plans, as well as automatic exchanges and withdrawals will be confirmed at least quarterly. American High-Income Trust - Page 42 AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share balance, the price of your shares, or your most recent account transaction, redeem shares (up to $75,000 per American Funds shareholder each day) from non-retirement plan accounts, or exchange shares around the clock with American FundsLine and American FundsLine OnLine. To use these services, 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 and American FundsLine OnLine are subject to the conditions noted above and in "Telephone and Internet Purchases, Redemptions and Exchanges" below. You will need your fund number (see the list of funds in The American Funds Group under "Purchase of Shares - Fund Numbers"), personal identification number (generally the last four digits of your Social Security number or other tax identification number associated with your account) and account number. TELEPHONE AND INTERNET PURCHASES, REDEMPTIONS AND EXCHANGES - By using the telephone (including American FundsLine) or the Internet (including American FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange options, you agree to hold the fund, the Transfer Agent, any of its affiliates or mutual funds managed by such affiliates, and each of their respective directors, trustees, officers, employees and agents harmless from any losses, expenses, costs or liability (including attorney fees) which may be incurred in connection with the exercise of these privileges. Generally, all shareholders are automatically eligible to use these options. However, you may elect to opt out of these options by writing the Transfer Agent (you may also reinstate them at any time by writing the Transfer Agent). If the Transfer Agent does not employ reasonable procedures to confirm that the instructions received from any person with appropriate account information are genuine, it and/or the fund may be liable for losses due to unauthorized or fraudulent instructions. In the event that shareholders are unable to reach the fund by telephone because of technical difficulties, market conditions, or a natural disaster, redemption and exchange requests may be made in writing only. REDEMPTION OF SHARES - The fund's Declaration of Trust permit the fund to direct the Transfer Agent to redeem the shares of any shareholder for their then current net asset value per share if at such time the shareholder of record owns shares having an aggregate net asset value of less than the minimum initial investment amount required of new shareholders as set forth in the fund's current registration statement under the 1940 Act, and subject to such further terms and conditions as the Board of Trustees of the fund may from time to time adopt. SHARE CERTIFICATES - Shares are credited to your account and certificates are not issued unless you request them by writing to the Transfer Agent. Certificates are not available for the 529 share classes. 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 quality of executions. When, in the opinion of the Investment Adviser, two or more brokers (either directly or through their correspondent clearing agents) are in a position to obtain the best price and execution, preference may be given to brokers who have sold shares of the fund or who have provided investment research, statistical, or other related services to the Investment Adviser. The fund does not consider that it has an obligation to obtain the lowest available commission rate to the exclusion of price, service and qualitative considerations. American High-Income Trust - Page 43 There are occasions on which portfolio transactions for the fund may be executed as part of concurrent authorizations to purchase or sell the same security for other funds served by the Investment Adviser, or for trusts or other accounts served by affiliated companies of the Investment Adviser. Although such concurrent authorizations potentially could be either advantageous or disadvantageous to the fund, they are effected only when the Investment Adviser believes that to do so is in the interest of the fund. When such concurrent authorizations occur, the objective is to allocate the executions in an equitable manner. The fund will not pay a mark-up for research in principal transactions. Brokerage commissions paid on portfolio transactions, including dealer concessions on underwritings, for the fiscal years ended September 30, 2001, 2000 and 1999, amounted to $9,841,000, $5,763,000 and $9,489,000, respectively. 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 JPMorgan Chase Bank, 270 Park Avenue, New York, NY 10017-2070, as Custodian. If the fund holds non-U.S. securities, the Custodian may hold these securities pursuant to sub-custodial arrangements in non-U.S. banks or non-U.S. branches of U.S. banks. TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of the Investment Adviser, maintains the records 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. American Funds Service Company was paid a fee of $2,173,000 for Class A shares and $60,000 for Class B shares for the 2001 fiscal year. INDEPENDENT AUDITORS - Deloitte & Touche LLP, Two California Plaza, 350 South Grand Avenue, Suite 200, Los Angeles, CA 90071, serves as the fund's independent auditors providing audit services, preparation of tax returns and review of certain documents to be filed with the Securities and Exchange Commission. The financial statements included in this Statement of Additional Information from the Annual Report have been so included in reliance on the report of Deloitte & Touche LLP, independent auditors, given on the authority of said firm as experts in accounting and auditing. The selection of the fund's independent auditors is reviewed and determined annually by the Board of Trustees. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS - The fund's fiscal year ends on September 30. Shareholders are provided updated prospectuses annually and at least semiannually with reports showing the investment portfolio, financial statements and other information. The fund's annual financial statements are audited by the fund's independent auditors, Deloitte & Touche LLP. In addition, shareholders may also receive proxy statements for the fund. In an effort to reduce the volume of mail shareholders receive from the fund when a household owns more than one account, the Transfer Agent has taken steps to eliminate duplicate mailings of prospectuses, shareholder reports and proxy statements. To receive additional copies of a prospectus, report or proxy statement, shareholders should contact the Transfer Agent. PERSONAL INVESTING POLICY - The fund, Capital Research and Management Company and its affiliated companies, including the fund's principal underwriter, have adopted codes of ethics American High-Income Trust - Page 44 which allow for personal investments, including securities in which the fund may invest from time to time. 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. OTHER INFORMATION - The financial statements including the investment portfolio and the report of Independent Auditors contained in the Annual Report are included in this Statement of Additional Information. The following information is not included in the Annual Report: DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- SEPTEMBER 30, 2001
Net asset value and redemption price per share (Net assets divided by shares outstanding) . . . . . . . . . $11.27 Maximum offering price per share (100/96.25 of net asset value per share, which takes into account the fund's current maximum sales charge). . . . . . . . . . . . . . . . . . . . . . . . $11.71
CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS The fund's yield was 9.92% based on a 30-day (or one month) period ended September 30, 2001, 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 as required by the Securities and Exchange Commission: 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's one-year total return and five- and ten-year average annual total returns at the maximum offering price for the periods ended September 30, 2001 were -6.99%, 3.44%, and 7.69%, respectively. The fund's one-year total return and five- and ten-year average annual total returns at net asset value for the periods ended September 30, 2001 were -3.39%, 4.24%, and 8.10%, respectively. American High-Income Trust - Page 45 The average total return ("T") is computed by equating the value at the end of the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a period of years ("n") according to the following formula as required by the Securities and Exchange Commission: P(1+T)/n/ = ERV. In calculating average annual total return at the maximum offering price, the fund assumes: (1) deduction of the maximum sales load of 3.75% 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. In addition, the fund will provide lifetime average total return figures. From time to time, the fund may calculate investment results for Class B, C, and F shares, as well as the 529 share classes. The fund may also, at times, calculate total return based on net asset value per share (rather than the offering price), in which case the figure would not reflect the effect of any sales charges which would have been paid if shares were purchased during the period reflected in the computation. Consequently, total return calculated in this manner will be higher. These total returns may be calculated over periods in addition to those described above. Total return for the unmanaged indices will be calculated assuming reinvestment of dividends and interest, but will not reflect any deductions for advisory fees, brokerage costs or administrative expenses. The fund may include information on its investment results and/or comparisons of its investment results to various unmanaged indices (such as the Dow Jones Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock Index) or results of other mutual funds or investment or savings vehicles in advertisements or in reports furnished to present or prospective shareholders. The fund may also, from time to time, combine its results with those of other funds in The American Funds Group for purposes of illustrating investment strategies involving multiple funds. The fund may refer to results and surveys compiled by organizations such as CDA/ Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar, Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer to results published in various newspapers and periodicals, including Barron's, --------- Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine, ------------------------------------------------------------------------------- Money, U.S. News and World Report and The Wall Street Journal. --------------------------------- ----------------------- The fund may illustrate the benefits of tax-deferral by comparing taxable investments to investments made through tax-deferred retirement plans. The fund may compare its investment results with the Consumer Price Index, which is a measure of the average change in prices over time in a fixed market basket of goods and services (e.g. food, clothing, fuels, transportation, and other goods and services that people buy for day-to-day living). The fund may also compare its investment results with the following: (1) The Credit Suisse First Boston High Yield Index is an unmanaged, trader priced portfolio constructed to mirror the high yield debt market (revisions to the index are effected weekly). The Index has several modules representing different sectors of the high yield market including a cash paying module, a zerofix module, a pay-in-kind module, and a defaulted module. The Index is divided into other categories including industry, rating, seniority, liquidity, market value, security American High-Income Trust - Page 46 price range, yield range and other sector divisions. There are a total of 250 sectors which are followed by the Index. (2) Salomon Smith Barney High-Yield Index, which is a market value weighted index of bonds having a minimum issue size of $100 million, a minimum maturity of 10 years and that carry a minimum/maximum quality rating of C/BB+. (3) Salomon Smith Barney Broad Investment-Grade Bond Index, which is a market capitalization weighted index and includes Treasury, Government-sponsored mortgage and investment-grade fixed-rate corporates (BBB/Baa3) with a maturity of one year or longer and a minimum of $50 million outstanding at entry, and remain in the Index until their amount falls below $25 million. (4) Lipper's "High Current Yield" funds average, which is the arithmetic average of Total Return of a number of mutual funds with investment objectives and policies similar to those of the Fund, as published by Lipper Analytical Services. The number of funds contained in the data base varies as funds are added or deleted over time. (5) Average of Savings Accounts, which is a measure of all kinds of savings deposits, including longer-term certificates (based on figures supplied by the U.S. League of Savings Institutions). Savings accounts offer a guaranteed rate of return on principal, but no opportunity for capital growth. The period shown may include periods during which the maximum rates paid on some savings deposits were fixed by law. American High-Income Trust - Page 47 APPENDIX Description of Commercial Paper Ratings MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate ------- commercial paper having the highest capacity for timely repayment. Issuers rated Prime-1 have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity. Issues rated Prime-2 have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. S&P ratings of commercial paper are graded into four categories ranging from "A" --- for the highest quality obligations to "D" for the lowest. A - Issues assigned its highest rating are regarded as having the greatest capacity for timely payment. Issues in this category are delineated with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 - This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics will be denoted with a plus (+) sign designation. A-2 - Capacity for timely payments on issues with this designation is strong; however, the relative degree of safety is not as high as for issues designated "A-1." American High-Income Trust - Page 48 American High-Income Trust Investment Portfolio, September 30, 2001 [pie chart] U.S. corporate bonds 72% Non-U.S. corporate bonds 14% Non-U.S. government bonds 2% Stocks 1% U.S. Treasuries 2% Cash & equivalents 9% [end pie chart] TEN LARGEST HOLDINGS (as a percentage of net assets) Charter Communications 3.57% Nextel Communications 2.32% Dobson Communications 2.28% Crown Castle 2.13% J.C. Penney 2.06% VoiceStream Wireless 1.99% Edison International 1.83% Georgia-Pacific 1.76% Container Corp. of America 1.70% Rite Aid 1.63% Principal Market Percent amount (000) Value of Net BONDS, NOTES & EQUITY SECURITIES or shares (000) Assets Media - 20.55% Charter Communications Holdings, LLC: 10.00% 2009 $4,500 $4,230 0%/11.75% 2010 (1) 3,250 2,064 0%/9.92% 2011(1) 41,250 26,812 11.125% 2011 18,900 19,231 3.57 0%/11.75% 2011(1)(2) 60,925 32,290 0%/13.50% 2011(1) 33,500 19,597 Avalon Cable Holdings LLC 0%/11.875% 2008(1) 10,875 7,776 Fox/Liberty Networks, LLC, FLN Finance, Inc.: 8.875% 2007 17,000 17,425 0%/9.75% 2007(1) 34,000 31,960 1.58 Adelphia Communications Corp.: 9.25% 2002 6,000 5,850 0% 2003 4,565 3,835 10.50% 2004 8,500 8,287 1.56 Series B, 13.00% preferred 2009(3) 20,000 shares 1,800 10.25% 2011 $33,450 29,269 NTL Inc.:(1) 0%/9.75% 2008 10,000 3,400 0%/10.75% 2008 Pounds10,000 3,971 NTL Communications Corp.: 1.22 12.375% 2008 Euro14,750 6,784 9.875% 2009 8,750 3,506 11.875% 2010 $11,525 5,762 Comcast UK Cable Partners Ltd. 11.20% 2007 21,605 14,799 Fox Family Worldwide, Inc.: 9.25% 2007 11,590 12,054 0%/10.25% 2007(1) 26,450 24,863 1.18 American Media Operations, Inc. 10.25% 2009 25,680 26,065 .83 Antenna TV S.A.: 9.00% 2007 12,450 10,396 9.75% 2008 Euro17,750 13,740 .77 Young Broadcasting Inc.: Series B, 9.00% 2006 $7,750 6,432 Series B, 8.75% 2007 2,000 1,600 .72 10.00% 2011(2) 18,250 14,600 Telemundo Holdings, Inc.:(1) 0%/11.50% 2008(2) 2,685 2,255 Series A, 0%/11.50% 2008 22,950 19,278 .69 Emmis Communications Corp., 0% 2011(1) 37,500 20,062 .64 Liberty Media Corp.: 7.875% 2009 8,000 7,973 8.50% 2029 6,000 5,515 .61 8.25% 2030 6,450 5,767 Key3Media Group, Inc. 11.25% 2011 28,000 19,180 .61 TransWestern Publishing Co. LLC: 9.625% 2007(2) 3,000 2,940 9.625% 2007 16,050 15,729 .60 Chancellor Media Corp. of Los Angeles: Series B, 8.75% 2007 6,450 6,676 8.00% 2008 8,500 8,755 .49 Sun Media Corp.: 9.50% 2007 11,078 10,579 9.50% 2007 3,947 3,769 .46 ACME Intermediate Holdings, LLC, Series B, 12,689 8,882 0%/12.00% 2005(1) ACME Television, LLC, Series A, 10.875% 2004 5,750 5,261 .45 Cumulus Media Inc. 13.75% preferred 2009 (3)(4) 15,420 shares 13,878 .44 Gray Communications Systems, Inc. 10.625% 2006 $13,870 13,593 .43 TeleWest PLC 9.625% 2006 4,000 2,440 Telewest Communictions PLC: 11.25% 2008 5,000 3,200 .43 0%/11.375% 2010(1) 24,000 7,920 Lenfest Communications, Inc.: 8.375% 2005 5,000 5,549 7.625% 2008 6,750 7,129 .40 British Sky Broadcasting Group PLC 8.20% 2009 10,500 10,590 .34 Big City Radio, Inc. 11.25% 2005 20,795 9,566 .31 Univision Communications Inc. 7.85% 2011(2) 8,625 8,929 .29 Penton Media, Inc. 10.375% 2011(2) 13,725 8,921 .28 Sinclair Capital preferred 88,750 shares 7,544 .24 Cablevision Industries Corp. 9.875% 2013 $6,000 6,150 .20 Radio One, Inc. 8.875% 2011(2) 6,000 5,940 .19 Carmike Cinemas, Inc., Series B, 9.375% 2009(5) 8,450 5,915 .19 Cox Radio, Inc. 6.625% 2006 5,000 5,149 .16 Globo Comunicacoes E Participacoes SA:(2) 10.50% 2006 3,570 2,544 10.625% 2008 2,485 1,597 .13 STC Broadcasting, Inc. 11.00% 2007 4,000 3,920 .13 A. H. Belo Corp.: 7.25% 2027 2,500 1,919 7.75% 2027 2,000 1,630 .11 RBS Participacoes SA 11.00% 2007(2) 4,500 3,206 .10 Multicanal Participacoes SA, Series B, 12.625% 2004 2,900 2,617 .08 V2 Music Holdings PLC 6.50% convertible 7,873 2,126 debentures 2012(6) United Pan-Europe Communications NV: 0%/13.375% 2009(1) 7,000 490 .12 11.50% 2010 1,225 178 0%/13.75% 2010(1) 9,500 808 644,467 20.55 Wireless Telecommunication Services - 11.07% Dobson Communications Corp.:(3)(4) 12.25% exchangeable preferred, redeemable 2008 23,829 shares 22,518 12.25% exchangeable preferred, redeemable 2008 31,330 29,607 13.00% senior exchangeable preferred 2009 9,071 8,527 Dobson/Sygnet Communications Co. 12.25% 2008 $6,500 6,760 American Cellular Corp. 9.50% 2009 4,250 3,953 2.28 Nextel Communications, Inc.: 0%/9.75% 2007(1) 10,000 5,350 0%/10.65% 2007(1) 18,750 10,781 0%/9.95% 2008(1) 24,675 12,337 12.00% 2008 1,500 1,102 9.375% 2009 3,000 1,830 1.96 Series D, 13.00% exchangeable preferred 2009 (3) (4) 38,253 shares 12,050 5.25% convertible senior notes 2010 $12,000 6,289 Series E, 11.25% exchangeable preferred, 36,985 shares 11,650 redeemable 2010 (3) (4) Leap Wireless International, Inc.: 1.22 12.50% 2010 $20,675 13,439 0%/14.50% 2010(1) 40,055 11,215 Cricket Communications, Inc.:(7) 8.50% 2007 12,720 8,395 8.563% 2007 8,000 5,280 TeleCorp PCS, Inc.: 0%/11.625% 2009(1) 25,925 15,296 10.625% 2010 17,250 15,266 1.14 Tritel PCS, Inc. 10.375% 2011 6,000 5,160 Centennial Cellular Corp. 10.75% 2008 41,065 35,521 1.13 Nextel Partners, Inc.: 0%/14.00% 2009(1) 42,082 18,937 11.00% 2010 21,250 13,387 1.03 CFW Communications Co. 13.00% 2010 36,800 28,704 .92 PTC International Finance BV 0%/10.75% 2007(1) 19,100 15,137 .48 Microcell Telecommunications Inc., Series B, 18,750 8,437 .27 0%/14.00% 2006(1) AirGate PCS, Inc. 0%/13.50% 2009(1) 6,950 4,483 .14 PageMart Wireless, Inc.: (5) (6) 15.00% 2005 19,250 1,540 0%/11.25% 2008(1) 61,010 1,907 .11 Triton PCS, Inc. 9.375% 2011 3,125 3,070 .10 Cellco Finance NV: 12.75% 2005 3,250 1,958 15.00% 2005 1,590 990 .09 AT&T Wireless Services, Inc. 7.875% 2011(2) 2,250 2,401 .08 PanAmSat Corp.: 6.125% 2005 1,025 934 6.375% 2008 1,250 1,078 .07 Teletrac Holdings, Inc. 9.00% 2004(2)(4)(6) 1,626 1,301 .04 Nuevo Grupo Iusacell, SA de CV 14.25% 2006 380 377 .01 346,967 11.07 Hotels, Restaurants & Leisure - 8.83% Boyd Gaming Corp.: 9.25% 2003 25,000 24,500 9.50% 2007 7,500 6,750 1.29 9.25% 2009(2) 10,000 9,100 Premier Parks Inc.: 9.25% 2006 5,375 5,079 9.75% 2007 13,875 13,112 0%/10.00% 2008(1) 9,250 7,215 1.22 Six Flags Inc. 9.50% 2009 11,000 10,780 Six Flags Entertainment Corp. 8.875% 2006 2,250 2,205 Horseshoe Gaming Holding Corp., Series B, 23,500 23,030 .73 8.625% 2009 William Hill Finance 10.625% 2008 pounds 12,700 20,077 .64 Jupiters Ltd. 8.50% 2006 $19,180 18,509 .59 International Game Technology: 7.875% 2004 11,750 11,633 8.375% 2009 4,250 4,250 .51 Argosy Gaming Co.: 10.75% 2009 6,250 6,688 9.00% 2011 8,350 8,350 .48 KSL Recreation Group, Inc. 10.25% 2007 15,455 14,373 .46 Station Casinos, Inc. 8.375% 2008 14,250 13,466 .43 Mirage Resorts, Inc.: 6.625% 2005 1,950 1,900 6.75% 2007 4,250 3,911 6.75% 2008 2,250 2,051 .41 MGM Mirage Inc. 8.50% 2010 5,350 5,158 Harrah's Operating Co., Inc.: 7.875% 2005 6,725 6,658 7.125% 2007(2) 3,000 2,901 .40 7.50% 2009 3,000 2,905 Ameristar Casinos, Inc. 10.75% 2009 11,250 11,475 .37 Hard Rock Hotel, Inc., Series B, 9.25% 2005 12,954 11,011 .35 Florida Panthers Holdings, Inc. 9.875% 2009 11,000 11,000 .35 Hollywood Casino Corp. 11.25% 2007 6,190 6,376 .20 Eldorado Resorts LLC 10.50% 2006 7,000 6,230 .20 Mohegan Tribal Gaming Authority 8.375% 2011(2) 4,000 4,040 .13 Royal Caribbean Cruises Ltd.: 7.00% 2007 1,400 1,050 6.75% 2008 1,300 1,001 .07 AMF Bowling Worldwide, Inc.: 10.875% 2006(5) 4,250 21 12.25% 2006(5) 12,043 60 .00 0% convertible debentures 2018 (2) (6) 10,508 1 276,866 8.83 Materials - 6.83% Georgia-Pacific Corp.: 7.50% 2006 1,250 1,267 8.125% 2011 37,400 37,514 8.875% 2031 12,000 11,597 1.76 Fort James Corp. 6.875% 2007 5,000 4,837 Container Corp. of America: Series B, 10.75% 2002 7,250 7,286 9.75% 2003 33,750 33,919 1.70 Stone Container Corp. 9.75% 2011 12,000 12,240 Printpack, Inc.: Series B, 9.875% 2004 7,750 7,653 10.625% 2006 19,305 19,305 .86 Potlatch Corp. 10.00% 2011(2) 18,300 18,575 .59 Kappa Beheer BV: 10.625% 2009 11,750 10,997 .56 0%/12.50% 2009(1) Euro 9,500 6,546 Tekni-Plex, Inc., Series B, 12.75% 2010 $13,875 12,141 .39 Kaiser Aluminum & Chemical Corp. 12.75% 2003 11,875 8,550 .27 Freeport-McMoRan Copper & Gold Inc.: 7.50% 2006 100 70 7.20% 2026 7,825 6,593 .21 Packaging Corp. of America, Series B, 9.625% 2009 3,250 3,380 .11 Advance Agro Capital BV 13.00% 2007 7,125 3,527 .11 Doe Run Resources Corp., Series B, 11.25% 2005 7,950 2,703 .09 Indah Kiat Finance Mauritius Ltd.:(5) 11.875% 2002 7,900 1,955 10.00% 2007 5,200 793 .09 Oregon Steel Mills, Inc. 11.00% 2003 2,005 1,875 .06 Pindo Deli Finance Mauritius Ltd.:(5) 10.25% 2002 5,000 563 10.75% 2007 2,925 329 .03 APP International Finance Co. BV 11.75% 2005(5) 275 65 .00 214,280 6.83 Communications Equipment - 6.16% Crown Castle International Corp.: 0%/10.625% 2007(1) 21,700 16,926 12.75% senior exchangeable preferred 2010(3)(4) 27,455 shares 20,858 0%/10.375% 2011(1) $21,950 12,511 10.75% 2011 9,750 8,970 0%/11.25% 2011(1) 13,500 7,560 2.13 SpectraSite Holdings, Inc., Series B: 0%/12.00% 2008(1) 8,500 3,655 0%/11.25% 2009(1) 30,125 9,489 10.75% 2010 5,750 3,795 12.50% 2010 25,500 18,233 0%/12.875% 2010(1) 11,075 3,046 1.22 SBA Communications Corp.: 0%/12.00% 2008(1) 7,350 5,072 10.25% 2009 33,000 26,730 1.01 American Tower Corp.: 9.375% 2009 19,500 16,575 5.00% convertible debentures 2010 5,000 3,727 .65 Nortel Networks Ltd. 6.125% 2006 19,682 15,390 .49 Adaptec, Inc. 4.75% convertible subordinated 10,000 8,957 .29 notes 2004 Motorola, Inc.: 7.625% 2010 2,000 2,000 7.50% 2025 2,000 1,760 .17 6.50% 2028 1,200 926 5.22% 2097 1,200 732 Loral Orion Network Systems, Inc. 11.25% 2007 11,725 4,104 .13 Lucent Technologies Inc. 7.25% 2006 2,500 2,050 .07 193,066 6.16 Retail - 5.85% J.C. Penney Co., Inc.: 7.375% 2004 2,000 1,910 7.05% 2005 6,850 6,302 7.60% 2007 7,120 6,604 7.375% 2008 7,030 6,362 6.875% 2015 9,900 7,920 2.06 7.65% 2016 3,380 2,704 7.95% 2017 1,000 815 9.75% 2021(8) 8,013 7,212 8.25% 2022(8) 5,625 4,725 8.125% 2027 2,675 2,086 7.40% 2037 12,125 11,034 7.625% 2097 9,875 6,878 Rite Aid Corp.: 7.125% 2007 9,750 8,044 11.25% 2008(2) 6,625 6,724 6.875% 2013 14,725 10,676 1.63 7.70% 2027 24,225 17,684 6.875% 2028(2) 12,000 8,040 Dillard's, Inc.: 6.125% 2003 5,300 5,031 6.43% 2004 1,825 1,692 6.69% 2007 1,000 845 6.30% 2008 2,450 2,007 .49 6.625% 2008 1,500 1,231 6.625% 2018 5,165 3,663 7.00% 2028 1,470 1,013 Kmart Corp., pass-through certificates, 10,500 7,756 .48 Series 1995 K-2, 9.78% 2020(8) DR Securitized Lease Trust, Series 1994 9,855 7,307 K-2, 9.35% 2019(8) Amazon.com, Inc. 6.875% PEACS convertible Euro 36,200 13,022 .42 subordinated notes 2010 Office Depot, Inc. 10.00% 2008(2) $8,000 8,120 .26 Saks Inc. 7.375% 2019 9,825 5,649 .18 Federated Department Stores, Inc. 6.625% 2011 5,500 5,258 .17 Sunglass Hut International Ltd. 5.25% 5,500 5,019 .16 convertible debentures 2003 183,333 5.85 Diversified Telecommunication Services - 4.44% Voicestream Wireless Corp.: 10.375% 2009 10,948 12,520 0%/11.875% 2009(1) 40,275 35,198 1.99 Omnipoint Corp. 11.50% 2009(2)(6) 13,050 14,779 TELUS Corp.: 7.50% 2007 14,200 14,888 8.00% 2011 3,500 3,722 .59 COLT Telecom Group PLC: 0%/12.00% 2006(1) 23,750 13,775 8.875% 2007 DM8,000 1,863 .51 7.625% 2008 1,000 210 France Telecom:(2)(7) 7.45% 2006 $7,000 7,445 8.00% 2011 3,000 3,223 .34 CenturyTel, Inc., Series H, 8.375% 2010 7,750 8,425 .27 Allegiance Telecom, Inc.: 0%/11.75% 2008(1) 10,000 3,500 12.875% 2008 5,725 3,091 .21 Nortel Inversora SA, Class A, preferred 675,397 shares 5,792 .18 (Argentina)(2)(6) Williams Communications Group, Inc.: 11.70% 2008 5,150 2,163 10.875% 2009 4,500 1,890 .13 XO Communications, Inc. 14.00% preferred 2009(3)(4) 39 Shares NEXTLINK Communications, Inc.: 9.625% 2007 $2,250 450 0%/12.125% 2009(1) 11,975 1,138 0%/12.25% 2009(1) 11,750 1,175 .09 Hyperion Telecommunications, Inc., Series B, 5,000 2,250 .07 13.00% 2003 IXC Communications, Inc. 12.50% exchangeable 1,976 shares 1,857 .06 preferred, redeemable 2009 (3) GT Group Telecom Inc., units 0%/13.25% 2010(1) $11,000 1,980 .06 KMC Telecom Holdings, Inc. 0%/12.50% 2008(1) 22,500 1,575 .05 VersaTel Telecom International NV 4.00% Euro 6,825 1,243 .04 convertible notes 2005 (Netherlands) Global TeleSystems Group, Inc. 9.875% 2005(5) $6,000 705 .02 IMPSAT Corp. 12.375% 2008 2,000 225 .01 Netia Holdings BV 0%/11.25% 2007(1) 1,000 75 .00 145,157 4.62 Technology Hardware & Equipment - 4.16% Solectron Corp.LYON: 0% convertible notes 2020 23,300 11,769 0% convertible notes 2020 61,650 25,354 1.18 Micron Technology, Inc. 6.50% 2005(2) 34,000 27,540 .88 Fairchild Semiconductor Corp.: 10.125% 2007(8) 4,525 4,276 10.50% 2009 8,300 7,906 .39 Conexant Systems, Inc. 4.00% convertible 14,700 8,042 .26 subordinated notes 2007 SCI Systems, Inc. 3.00% convertible 10,500 7,963 .25 subordinated debentures 2007 Flextronics International Ltd.: 8.75% 2007 4,875 4,631 9.875% 2010 2,150 2,107 .22 Zilog, Inc. 9.50% 2005(5) 33,150 5,967 .19 LSI Logic Corp. 4.00% convertible 5,961 4,769 .15 subordinated notes 2005 TranSwitch Corp. 4.50% convertible notes 2005 5,600 3,947 .13 Vitesse Semiconductor Corp. 4.00% convertible 4,200 3,407 .11 subordinated debentures 2005 TriQuint Semiconductor, Inc. 4.00% convertible 4,240 3,284 .10 subordinated notes 2007 Analog Devices, Inc. 4.75% convertible 3,200 2,946 .09 subordinated notes 2005 Cypress Semiconductor Corp. 3.75% convertible 3,080 2,450 .08 subordinated notes 2005 Celestica Inc. 0% convertible debenture 2020 5,850 2,112 .07 Hyundai Semiconductor America, Inc. 8.625% 2007(2) 3,565 1,618 .05 RF Micro Devices, Inc. 3.75% convertible 451 347 .01 subordinated notes 2005 130,435 4.16 Financials - 3.99% IBJ Preferred Capital Co. LLC, Series A, 2,500,000 shares 2,233 8.79% noncumulative preferred(undated)(2)(7) Fuji JGB Investment LLC, Series A, 9.87% 23,250 20,920 .74 noncumulative preferred (undated)(2)(7) GS Escrow Corp.: 7.00% 2003 $4,500 4,589 7.125% 2005 17,000 17,327 .70 First Pacific Co. Ltd. convertible note 2.00% 2002 12,000 15,120 .48 Chevy Chase Preferred Capital Corp. 10.375% 214,000 shares 12,144 .39 Providian Financial Corp. 9.525% 2027(2) $15,000 11,961 .38 Komercni Banka, AS 9.00%/10.75% 2008 (1) (2) 10,500 10,841 .35 Sakura Capital Funding 4.463% (undated)(2)(7) 10,000 9,975 .32 Superior Financial Corp. 8.65% 2003(2) 6,000 6,025 .19 BNP U.S. Funding LLC, Series A, 7.738% 4,750,000 shares 5,081 .16 noncumulative preferred (undated)(2)(7) BankUnited Capital Trust, BankUnited $4,500 4,106 .13 Financial Corp., 10.25% 2026 Advanta Capital Trust I, Series B, 8.99% 2026 4,500 2,880 .09 Chevy Chase Bank, FSB 9.25% 2008 2,000 1,960 .06 125,162 3.99 Commercial Services & Supplies - 3.40% Allied Waste North America, Inc.: 7.625% 2006 500 489 8.875% 2008(2) 6,250 6,359 1.42 10.00% 2009 37,625 37,625 Waste Management, Inc.: 4.00% convertible debentures 2002 12,000 11,862 7.70% 2002 5,700 5,899 6.875% 2009 1,500 1,508 7.375% 2010 3,000 3,175 1.10 USA Waste Services, Inc. 6.50% 2002 2,000 2,051 WMX Technologies, Inc.: 6.375% 2003 7,500 7,775 7.10% 2026 2,150 2,234 KinderCare Learning Centers, Inc., 13,200 11,946 .38 Series B, 9.50% 2009 Iron Mountain Inc.: 8.125% 2008 875 871 8.75% 2009 5,370 5,424 .20 Stericycle, Inc., Series B, 12.375% 2009 5,250 5,617 .18 Protection One Alarm Monitoring, Inc. 5,166 3,720 .12 13.625% 2005(7) Safety-Kleen Services, Inc. 9.25% 2008(5)(6) 7,000 70 .00 106,625 3.40 Electric Utilities - 2.92% Edison International 6.875% 2004 6,000 5,130 Mission Energy Holding Co. 13.50% 2008(2) 12,000 12,180 Edison Mission Energy: 10.00% 2008(2) 7,000 7,033 1.83 7.73% 2009 11,000 10,063 9.875% 2011 17,875 18,087 Edison Mission Holdings Co. 8.734% 2026(8) 5,000 4,901 AES Drax Holdings Ltd., Series A, 10.41% 2020(8) 23,075 23,363 .74 TNP Enterprises, Inc., Series B, 10.25% 2010 7,250 7,685 .25 Israel Electric Corp. Ltd. 7.75% 2027(2) 2,550 2,195 .07 AES Corp. 9.50% 2009 1,075 967 .03 91,604 2.92 Food & Beverages - 1.24% Canandaigua Wine Co., Inc.: 8.75% 2003 8,150 8,150 Series C, 8.75% 2003 9,750 9,750 .57 Aurora Foods Inc.: Series B, 9.875% 2007 8,522 7,244 Series D, 9.875% 2007 4,953 4,210 .37 Fage Dairy Industry SA 9.00% 2007 10,000 9,200 .29 DGS International Finance Co. BV 10.00% 2007(2)(5) 4,050 294 .01 38,848 1.24 Oil & Gas - 1.24% Pogo Producing Co.: 8.75% 2007 16,500 16,500 10.375% 2009 6,500 6,760 .74 Premcor USA, Inc. 11.50% senior exchangeable 23,719 shares 9,488 preferred 2009(3)(4) Clark Refining & Marketing, Inc. 8.875% 2007 $1,050 766 .33 Newfield Exploration Co.: Series B, 7.45% 2007 1,750 1,770 7.625% 2011 3,500 3,496 .17 38,780 1.24 Transportation - 1.19% International Shipholding Corp.: 9.00% 2003 5,750 5,520 Series B, 7.75% 2007 8,375 7,119 .40 Teekay Shipping Corp. 8.875% 2011 11,750 11,427 .37 American Airlines 8.608% 2011(2) 5,000 5,135 .16 United Air Lines, Inc. 9.00% 2003 3,000 2,610 .08 Gearbulk Holding Ltd. 11.25% 2004 2,000 2,000 .06 USAir, Inc., Pass Through Trust, Series 3,150 1,795 .06 1993-A3, 10.375% 2013 (8) Delta Air Lines 9.750% 2021 2,200 1,694 .06 37,300 1.19 Capital Goods - 1.19% Cummins Capital Trust I 7.00% QUIPS 180,000 shares 8,471 .27 convertible preferred 2031(2) Swire Pacific Offshore Financing Ltd. 9.33% 352,000 8,352 .27 cumulative guaranteed perpetual preferred capital securities(2) Terex Corp., Class B, 10.375% 2011 $6,750 6,514 .21 McDermott Inc. 9.375% 2002 6,775 6,267 .20 AGCO Corp. 9.50% 2008(2) 5,750 5,692 .18 EarthWatch Inc., Series B, 7.00% convertible 833,553 shares 1,875 .06 preferred 2009 (3)(4)(6) 37,171 1.19 Health Care Providers & Services - 1.05% Columbia/HCA Healthcare Corp. 6.91% 2005 $12,250 12,434 .40 Clarent Hospital Corp. 11.50% 2005(6)(9) 13,136 10,115 .32 Omnicare, Inc. 5.00% convertible debentures 2007 10,000 8,962 .29 Integrated Health Services, Inc.:(5) 10.25% 2006(7)(6) 11,250 113 Series A, 9.50% 2007(6) 37,500 375 .03 Series A, 9.25% 2008 (6) 46,250 463 Sun Healthcare Group, Inc.:(5) Series B, 9.50% 2007(6) 24,875 249 9.375% 2008(2)(6) 19,110 191 .01 Mariner Health Group, Inc. 9.50% 2006(5)(6) 13,625 136 .00 33,038 1.05 Consumer Durables - 0.79% Levi Strauss & Co.: 6.80% 2003 5,025 3,819 11.625% 2008 7,100 5,219 .29 Boyds Collection, Ltd., Series B, 9.00% 2008 8,803 8,627 .27 Salton/Maxim Housewares, Inc. 10.75% 2005 5,050 3,990 .13 Hasbro, Inc. 7.95% 2003 3,250 3,088 .10 24,743 .79 Other - 1.23% Dana Corp. 9.00% 2011(2) 12,190 10,605 .34 Playtex Products, Inc. 9.375% 2011 5,750 5,779 .19 Chase Commercial Mortgage Securities Corp., 5,000 4,839 .15 Series 1998-2, Class E, 6.39% 2030(8) Mediterranean Re PLC 9.411% 2005(2)(7)(8) 5,000 4,785 .15 HMH Properties, Inc., Series A, 7.875% 2005 5,000 4,350 .14 Gramercy Place Insurance Ltd., Series 1998-A, 3,049 3,045 .10 Class C-2, 8.95% 2002(2)(8) GMAC Commercial Mortgage Securities, Inc., 2,500 2,429 .08 Series 1997-C2, Class E, 7.624% 2011(8) Tenneco Automotive Inc. 11.625% 2009 4,000 1,300 .04 Elizabeth Arden, Inc., Series B, 11.75% 2011 750 694 .02 Exodus Communications, Inc. 11.625% 2010(5) 5,000 550 .02 Key Plastics Holdings, Inc., Series B, 10.25% 2007(5) 9,650 82 - 38,458 1.23 U.S. Treasury Notes and Bonds - 1.87% 7.50% November 2001 20,000 20,119 7.50% February 2005 6,000 6,755 4.75% November 2008 10,000 10,227 1.87 7.875% February 2021 4,000 5,173 6.125% November 2027 15,000 16,313 58,587 1.87 Non-U.S. Government Obligations - 1.83% Panama (Republic of): 9.625% 2011 1,500 1,496 Interest Reduction Bond 4.75% 2014(7)(8) 12,470 10,506 .45 10.75% 2020 415 424 8.875% 2027 2,000 1,765 United Mexican States Government: Series A, 0% 2003 1,963 15 Eurobonds: Global, 8.625% 2008 1,240 1,277 Global, 11.375% 2016 5,251 6,078 .44 Global, 8.125% 2019 1,695 1,527 Global, 8.30% 2031 5,440 4,801 Russian Federation: 12.75% 2028 5,000 4,908 5.00% 2030(7)(8) 5,000 2,288 .23 Brazil (Federal Republic of): Eligible Interest Bond 5.438% 2006(7)(8) 1,436 1,199 Bearer 8.00% 2014(4)(8) 3,955 2,675 .18 8.875% 2024 1,895 1,066 11.00% 2040 915 600 Turkish Treasury Bill: 0% 2001 TRL195,000,000 112 0% 2002 509,000,000 258 0% 2002 1,571,000,000 778 .14 0% 2002 201,000,000 81 12.375% 2009 $3,675 3,335 Bulgaria (Republic of) Front Loaded Interest 3,660 2,904 .09 Reduction Bond, 4.539% 2012(7)(8) Argentina (Republic of): Series E, 0% 2003 1,500 1,099 Eurobond 6.00% 2023(7) 1,145 664 .08 12.00% 2031(8) 1,396 740 Dominican Republic 9.50% 2006 (2) 2,130 2,071 .07 South Africa (Republic of) 13.00% 2010 ZAR13,600 1,707 .05 Philippines (Republic of): 9.875% 2019 $500 399 10.625% 2025 945 780 .04 Venezuela (Republic of) Eurobond 4.75% 2007(7)(8) 1,238 986 .03 Peru (Republic of):(7)(8) Front-Loaded Interest Reduction Eurobond 400 258 4.00% 2017 Past Due Interest Eurobond 4.50% 2017 875 616 .03 57,413 1.83 Number of Shares Common Stocks & Warrants - 1.40% Price Communications Corp. (3) 960,382 16,278 .52 Nextel Communications, Inc., Class A(2)(3) 1,315,149 11,363 .36 Rural Cellular Corp., Class A(3) 100,000 2,430 .08 Viacom Inc., Class B (merged with Infinity 63,225 2,181 .07 Broadcasting Corp., Class A)(3) Clear Channel Communications, Inc. (3) 51,012 2,028 .07 ACME Communications, Inc. (3) 213,145 1,492 .05 Radio One, Inc., Class A (3) 22,000 255 Radio One, Inc. (3) 44,000 508 .02 Cumulus Media Inc., Class A (3)(4) 100,000 695 .02 WorldCom, Inc. - WorldCom Group (3) 31,500 474 WorldCom, Inc. - MCI Group 1,260 19 .02 Leap Wireless International, Inc., warrants, 37,900 246 .01 expire 2010(2)(3) GT Group Telecom Inc., warrants, expire 2010 11,000 41 - (Canada)(2)(3)(6) Allegiance Telecom, Inc., warrants, 5,000 25 - expire 2008(2)(3) (6) Viatel, Inc. (3) 58,503 3 - NTELOS, Inc., warrants, expire 2010(3)(6) 36,800 2 - Protection One Alarm Monitoring, Inc., 30,400 2 - warrants, expire 2005(2)(3)(6) Comunicacion Celular SA, Class B, warrants, 15,000 2 - expire 2003 (Colombia)(2)(3)(6) NTL Inc., warrants, expire 2008 (2)(3)(6) 6,412 1 - KMC Telecom Holdings Inc., warrants, 22,500 - - expire 2008 (2)(3) McCaw International, Ltd., warrants, 8,500 - - expire 2007 (2)(3)(6) Clarent Hospital Corp. (3)(6) 616,906 - - Tultex Corp.:(3) (6) Warrants, expire 2007 81,220 - - Warrants, expire 2007 40,610 - - V2 Music Holdings PLC, (United Kingdom):(3) (6) Warrants, expire 2008 (2) 10,905 - - Warrants, expire 2008 (2) Pounds 2,250 - - 38,045 1.22 Total Bonds, Notes & Equity Securities 2,860,345 91.23 (cost: $3,460,128,000) Principal Market Percent Amount Value of Net Short-Term Securities (000) (000) Assets Corporate Short-Term Notes - 4.92% JP Morgan Chase & Co.: 3.50% due 10/11/01 $16,900 16,882 3.42% due 10/19/01 7,800 7,786 .79 CIT Group, Inc. 3.45% due 10/01/01 23,780 23,773 .76 Monsanto Co. 3.45% due 10/19/01(2) 21,500 21,461 .68 Triple-A One Funding Corp. 3.01% due 10/03/01(2) 20,000 19,995 .64 Electronic Data Systems Corp. 3.41% 19,007 18,960 .60 due 10/26/01(2) BellSouth Corp. 3.46% due 10/12/01(2) 11,000 10,987 .35 Corporate Asset Funding Co. Inc. 3.00% 11,000 10,978 .35 due 10/24/01(2) Wal-Mart Stores, Inc. 2.97% due 10/10/01(2) 10,000 9,990 .32 Estee Lauder Companies Inc. 3.60% due 10/11/01(2) 8,500 8,491 .27 Preferred Receivables Funding Corp. 2.59% 5,185 5,170 .16 due 11/09/01(2) 154,473 4.92 Federal Agency Short-Term Obligations - 1.84% Fannie Mae 3.45% due 10/04/01 23,000 22,991 .73 Federal Home Loan Banks 3.40% due 10/26/01 18,500 18,454 .59 Federal Farm Credit Bank 3.41% due 10/26/01 8,500 8,479 .27 Freddie Mac 3.57% due 10/12/01 7,700 7,691 .25 57,615 1.84 TOTAL SHORT-TERM SECURITIES (cost: $212,088,000) 212,088 6.76 TOTAL INVESTMENT SECURITIES (cost: $3,672,216,000) 3,072,433 97.99 Excess of cash and receivables over payables 63,055 2.01 NET ASSETS $3,135,488 100.00% (1) Step bond; coupon rate will increase at a later date. (2) Purchased in a private placement transaction; resale may be limited to qualified institutional buyers; resale to public may require registration. (3) Non-income-producing security. (4) Payment in kind; the issuer has the option of paying additional securities in lieu of cash. (5) Company not making interest (or dividend) payments; bankruptcy proceedings pending. (6) Valued under procedures established by the Board of Trustees. (7) Coupon rate may change periodically. (8) Pass-through securities backed by a pool of mortgages or other loans on which principal payments are periodically made. Therefore, the effective maturities are shorter than the stated maturities. (9) The fund owns 10.10% of the outstanding voting securities of Clarent Hospital Corp. and thus is considered an affiliate as defined the Investment Company Act of 1940. See Notes to Financial Statements
American High Income Trust Financial statements Statement of assets and liabilities at September 30, 2001 (dollars in thousands) Assets: Investment securities at market (cost: $3,672,216) $3,072,433 Cash 1,982 Receivables for - Sales of investments $10,725 Sales of fund's shares 16,193 Dividends and interest 66,854 Other 264 94,036 3,168,451 Liabilities: Payables for - Purchases of investments 17,463 Repurchases of fund's shares 2,383 Forward currency contracts - net 823 Dividends on fund's shares 10,108 Management services 1,185 Other expenses 1,001 32,963 Net assets at September 30, 2001 $3,135,488 Shares of beneficial interest issued and outstanding - unlimited shares authorized Class A shares: Net assets $2,935,837 Shares outstanding 260,486,923 Net asset value per share $11.27 Class B shares: Net assets $122,766 Shares outstanding 10,891,928 Net asset value per share $11.27 Class C shares: Net assets $44,341 Shares outstanding 3,933,926 Net asset value per share $11.27 Class F shares: Net assets $32,544 Shares outstanding 2,887,340 Net asset value per share $11.27 Statement of operations for the year ended September 30, 2001 (dollars in thousands) Investment income: Income: Interest $308,714 Dividends 6,395 $315,109 Expenses: Management services fee 13,981 Distribution expenses - Class A 7,186 Distribution expenses - Class B 713 Distribution expenses - Class C 115 Distribution expenses - Class F 22 Transfer agent fee - Class A 2,173 Transfer agent fee - Class B 60 Administrative services fees - Class C 31 Administrative services fees - Class F 21 Reports to shareholders 123 Registration statement and prospectus 272 Postage, stationery and supplies 371 Trustees' fees 41 Auditing and legal fees 66 Custodian fee 84 Taxes other than federal income tax 49 Other expenses 18 25,326 Net investment income 289,783 Realized loss and unrealized depreciation on investments: Net realized loss (167,826) Net unrealized depreciation on: Investments (242,410) Open forward currency contracts (1,935) Net unrealized depreciation (244,345) Net realized loss and unrealized depreciation on investments (412,171) Net decrease in net assets resulting from operations $(122,388)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION - American High-Income Trust, Inc. (the "fund") is registered under the Investment Company Act of 1940 as an open-end, diversified management investment company. The fund seeks a high level of current income and, secondarily, capital appreciation through a carefully supervised portfolio consisting primarily of lower rated, higher risk corporate bonds. The fund offers four classes of shares as described below: Class A shares are sold with an initial sales charge of up to 3.75%. Class B shares are sold without an initial sales charge but are subject to a contingent deferred sales charge ("CDSC") paid upon redemption. This charge declines from 5% to zero over a period of six years. Class B shares automatically convert to Class A shares after eight years. Class C shares are sold without an initial sales charge but are subject to a CDSC of 1% for redemptions within one year of purchase. Class C shares automatically convert to Class F shares after ten years. Class F shares, which are sold exclusively through fee-based programs, are sold without an initial sales charge or CDSC. Holders of all classes of shares have equal pro rata rights to assets, dividends, liquidation and other rights. Each class has identical voting rights, except for exclusive rights to vote on matters affecting only its class. Each class of shares may have different distribution, administrative services and transfer agent fees and expenses. Differences in class-specific expenses will result in the payment of different per share dividends by each class. SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by the fund in the preparation of its financial statements: SECURITY VALUATION - 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. Short-term securities maturing within 60 days are valued at amortized cost, which approximates market value. The ability of the issuers of the debt securities held by the fund to meet their obligations may be affected by economic developments in a specific industry, state or region. Forward currency contracts are valued at the mean of their representative quoted bid and asked prices. Securities and assets for which representative market quotations are not readily available are valued at fair value as determined in good faith by a committee appointed by the fund's Board of Trustees. NON-U.S. CURRENCY TRANSLATION - Assets and liabilities initially expressed in terms of non-U.S. currencies are translated into U.S. dollars at the prevailing market rates at the end of the reporting period. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are combined with the net realized and unrealized gain or loss on investment securities for financial reporting purposes. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are accounted for as of the trade date. Realized gains and losses from securities transactions are determined based on specific identified cost. [In the event securities are purchased on a delayed delivery or when-issued basis, the fund will instruct the custodian to segregate liquid assets sufficient to meet its payment obligations in these transactions. Dividend income is recognized on the ex-dividend date and interest income is recognized on an accrual basis. Market discounts, premiums, and original issue discounts on fixed-income securities are amortized daily over the expected life of the security. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are declared daily after the determination of the fund's net investment income and are paid to shareholders monthly. Distributions paid to shareholders are recorded on the ex-dividend date. Forward currency contracts - The fund may enter into forward currency contracts, which represent agreements to exchange currencies of different countries at specified future dates at specified rates. The fund enters into these contracts to manage its exposure to fluctuations in foreign exchange rates arising from investments denominated in non-U.S. currencies. The fund's use of forward currency contracts involves market risk in excess of the amount recognized in the Statement of Assets and Liabilities. The contracts are recorded in the Statement of Assets and Liabilities at their net unrealized value. The fund records realized gains or losses at the time the forward contract is closed or offset by a matching contract. The face or contract amount in U.S. dollars reflects the total exposure the fund has in that particular contract. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from possible movements in non-U.S. exchange rates and securities' values underlying these instruments. Purchases and sales of forward currency exchange contracts having the same settlement date and broker are offset and presented net in the Statement of Assets and Liabilities. CLASS ALLOCATIONS - Income, expenses (other than class-specific expenses) and realized and unrealized gains and losses are allocated daily among the various share classes based on their relative net asset values. Distribution expenses, administrative services fees, certain transfer agent fees and other applicable class-specific expenses are accrued daily and charged to the respective share class. 2. NON-U.S. INVESTMENTS INVESTMENT RISK - Investments in securities of non-U.S. issuers in certain countries involve special investment risks. These risks may include, but are not limited to, investment and repatriation restrictions, revaluation of currencies, adverse political, social and economic developments, government involvement in the private sector, limited and less reliable investor information, lack of liquidity, certain local tax law considerations, and limited regulation of the securities markets. CURRENCY GAINS AND LOSSES - Net realized currency losses on dividends, interest, sales of non-U.S. bonds and notes, forward contracts, and other receivables and payables, on a book basis, were $13,353,000 for the year ended September 30, 2001. 3. FEDERAL INCOME TAXATION The fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and intends to distribute all of its net taxable income and net capital gains for the fiscal year. As a regulated investment company, the fund is not subject to income taxes if such distributions are made. Required distributions are based on net investment income and net realized gains determined on a tax basis and may differ from such amounts for financial reporting purposes. In addition, the fiscal year in which amounts are distributed may differ from the year in which the net investment income is earned and the net gains are realized by the fund. As of September 30, 2001, the cost of investment securities, excluding forward currency contracts, for book and federal income tax reporting purposes was $3,672,216,000. Net unrealized depreciation on investments, excluding forward currency contracts, aggregated $599,783,000; $96,428,000 related to appreciated securities and $696,211,000 related to depreciated securities. For the year ended September 30, 2001, the fund realized tax basis net capital losses of $9,548,000. The fund had available at September 30, 2001, a net capital loss carryforward totaling $9,548,000 which may be used to offset capital gains realized during subsequent years through 2009 and thereby relieve the fund and its shareholders of any federal income tax liability with respect to the capital gains that are so offset. The fund will not make distributions from capital gains while a capital loss carryforward remains. In addition, the fund has deferred, for tax purposes, to fiscal year ending September 30, 2001, the recognition of capital losses totaling $149,672,000 and net losses relating to non-U.S. currency transactions of $10,752,000 which were realized during the period November 1, 2000 through September 30, 2001. Net losses related to non-U.S. currency transactions of $13,353,000 are treated as an adjustment to ordinary income for federal income tax purposes. 4. FEES AND TRANSACTIONS WITH RELATED PARTIES INVESTMENT ADVISORY FEE - The fee of $13,981,000 for management services was incurred pursuant to an agreement with Capital Research and Management Company ("CRMC") with which certain officers and Trustees of the fund are affiliated. The Investment Advisory and Service Agreement provides for monthly fees accrued daily, based on a series of rates beginning with 0.30% per annum of the first $60 million of daily net assets decreasing to 0.16% of such assets in excess of $3 billion. The agreement also provides for monthly fees, accrued daily, based on a series of rates beginning with 3.00% per annum of the first $8,333,333 of the fund's monthly gross investment income decreasing to 2.00% of such income in excess of $25,000,000. For the year ended September 30, 2001, the management services fee was equivalent to an annualized rate of 0.466% of average net assets. DISTRIBUTION EXPENSES - The fund has adopted plans of distribution under which it may finance activities primarily intended to sell fund shares, provided the categories of expenses are approved in advance by the fund's Board of Trustees. The plans provide for annual expenses, based on average daily net assets, of up to 0.30% for Class A shares, 1.00% for Class B and Class C shares and up to 0.50% for Class F shares. All share classes may use up to 0.25% of these expenses to pay service fees, or to compensate American Funds Distributors, Inc.("AFD"), the principal underwriter of the fund's shares, for paying service fees to firms that have entered into agreements with AFD for providing certain shareholder services. The balance may be used for approved distribution expenses as follows: CLASS A SHARES - Approved categories of expense include reimbursements to AFD for commissions paid to dealers and wholesalers in respect of certain shares sold without a sales charge. Those reimbursements are permitted for amounts billed to the fund within the prior 15 months but only to the extent that the overall 0.30% annual expense limit for Class A shares is not exceeded. For the year ended September 30, 2001, aggregate distribution expenses were $7,186,000, or 0.249% of average daily net assets attributable to Class A shares. CLASS B SHARES - In addition to service fees of 0.25%, approved categories of expense include fees of 0.75% per annum of average daily net assets attributable to Class B shares payable to AFD. AFD sells the rights to receive such payments (as well as any contingent deferred sales charges payable in respect of shares sold during the period) in order to finance the payment of dealer commissions. For the year ended September 30, 2001, aggregate distribution expenses were $713,000, or 1.00% of average daily net assets attributable to Class B shares. CLASS C SHARES - In addition to service fees of 0.25%, the Board of Trustees has approved the payment of 0.75% per annum of average daily net assets attributable to Class C shares to AFD to compensate firms selling Class C shares of the fund. For the period ended September 30, 2001, aggregate distribution expenses were $115,000, or 1.00% of average daily net assets attributable to Class C shares. CLASS F SHARES - The plan has an expense limit of 0.50%. However, the Board of Trustees has presently approved expenses under the plan of 0.25% per annum of average daily net assets attributable to Class F shares. For the period ended September 30, 2001, aggregate distribution expenses were $22,000, or 0.25% of average daily net assets attributable to Class F shares. As of September 30, 2001, aggregate distribution expenses payable to AFD for all share classes were $711,000. AFD received $2,648,000 (after allowances to dealers) as its portion of the sales charges paid by purchasers of the fund's Class A shares for the year ended September 30, 2001. Such sales charges are not an expense of the fund and, hence, are not reflected in the accompanying Statement of Operations. TRANSFER AGENT FEE - A fee of $2,233,000 was incurred during the year ended September 30, 2001, pursuant to an agreement with American Funds Service Company ("AFS"), the transfer agent for the fund. As of September 30, 2001, aggregate transfer agent fees payable to AFS for Class A and Class B shares were $171,000. ADMINISTRATIVE SERVICES FEES - The fund has an administrative services agreement with CRMC for Class C and Class F shares. Pursuant to this agreement, CRMC provides transfer agency and other related shareholder services. CRMC may contract with third parties to perform these services. Under the agreement, the fund pays CRMC a fee equal to 0.15% per annum of average daily net assets of Class C and Class F shares, plus amounts payable for certain transfer agency services according to a specified schedule. For the period ended September 30, 2001, total fees under the agreement were $52,000. As of September 30, 2001, aggregate administrative services fees payable to CRMC for Class C and Class F shares were $12,000. DEFERRED TRUSTEES' FEES - Since the adoption of the deferred compensation plan in 1993, Trustees who are unaffiliated with CRMC may elect to defer the receipt of part or all of their compensation. Deferred compensation amounts, which remain in the fund, are treated as if invested in shares of the fund or other American Funds. These amounts represent general, unsecured liabilities of the fund and vary according to the total returns of the selected funds. As of September 30, 2001, the cumulative amount of these liabilities was $63,000. Trustees' fees on the Statement of Operations include the current fees (either paid in cash or deferred) and the net increase or decrease in the value of deferred compensation. Trustees' fees during the year ended September 30,2001, were $41,000, comprised of $31,000 in current fees (either paid in cash or deferred), and $10,000, representing the net increase in the value of deferred compensation. AFFILIATED OFFICERS AND TRUSTEES - CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC. Officers and certain Trustees of the fund are or may be considered to be affiliated with CRMC, AFS and AFD. No such persons received any remuneration directly from the fund. 5. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES The fund made purchases and sales of investment securities, excluding short-term securities,of $1,776,133,000 and $1,218,074,000, respectively, during the year ended September 30, 2001. Pursuant to the custodian agreement, the fund receives credits against its custodian fee for imputed interest on certain balances with the custodian bank. For the year ended September 30, 2001, the custodian fee of $84,000 was paid by these credits rather than in cash. For the year ended September 30, 2001, the fund reclassified $183,000 from undistributed net capital gain and $2,046,000 from undistributed net investment income to additional paid-in capital to reflect permanent differences between book and tax reporting. As of September 30, 2001, net assets consisted of the following: (dollars in thousands) Capital paid in on shares of beneficial interest $3,911,695 Distributions in excess of net investment income (16,237) Accumulated net realized loss (159,531) Net unrealized depreciation (600,439) Net assets $3,135,488
Capital share transactions in the fund were as follows: Year ended September 30, 2001 Amount (000) Shares Class A Shares: Sold $ 945,528 76,788,508 Reinvestment of dividends and distributions 205,256 16,849,197 Repurchased (598,181) (48,881,216) Net increase in Class A 552,603 44,756,489 Class B Shares: (1) Sold 113,387 9,245,041 Reinvestment of dividends and distributions 3,921 324,248 Repurchased (8,864) (733,390) Net increase in Class B 108,444 8,835,899 Class C Shares: (2) Sold 49,894 4,126,762 Reinvestment of dividends and distributions 629 53,081 Repurchased (2,893) (245,917) Net increase in Class C 47,630 3,933,926 Class F Shares: (2) Sold 52,824 4,369,644 Reinvestment of dividends and distributions 507 42,986 Repurchased (18,396) (1,525,290) Net increase in Class F 34,935 2,887,340 Total net increase in fund $ 743,612 60,413,654 Year ended September 30, 2000 Amount (000) Shares Class A Shares: Sold $ 709,127 52,802,532 Reinvestment of dividends and distributions 186,881 13,990,142 Repurchased (758,788) (56,441,175) Net increase in Class A 137,220 10,351,499 Class B Shares: (1) Sold 27,276 2,071,283 Reinvestment of dividends and distributions 375 28,676 Repurchased (577) (43,930) Net increase in Class B 27,074 2,056,029 Class C Shares: (2) Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class C - - Class F Shares: (2) Sold - - Reinvestment of dividends and distributions - - Repurchased - - Net increase in Class F - - Total net increase in fund $ 164,294 12,407,528 (1) Class B shares were not offered before March 15, 2000. (2) Class C and Class F shares were not offered before March 15, 2001.
At September 30, 2001, the fund had outstanding forward currency contracts to sell non-U.S. currencies as follows: Contract Amount U.S. Valuations at 09/30/2001 --------- --------- --------- --------- Non-U.S. Currency Unrealized Contracts Non-U.S. U.S. Amount Depreciation -------------------------- --------- --------- --------- --------- Sales: Euros expiring 10/24/2001 to 26,539,000 23,988,000 24,126,000 (138,000) 12/17/2001 British Pounds expiring 10/11/2001 to 13,018,000 18,499,000 19,093,000 (594,000) 12/19/2001 --------- --------- --------- 42,487,000 43,219,000 $(732,000) --------- --------- =========
Per-share data and ratios Class A Year ended September 30, 2001 2000 1999 Net asset value, beginning of year $12.93 $13.52 $13.75 Income from investment operations : Net investment income 1.20 (1) 1.18 (1) 1.28 Net gains/(losses) on securities (1.61) (1) (.48) (1) (.17) (both realized and unrealized) Total from investment operations (.41) .70 1.11 Less distributions : Dividends (from net investment income) (1.25) (1.29) (1.29) Distributions (from capital gains) .00 .00 (.05) Total distributions (1.25) (1.29) (1.34) Net asset value, end of year $11.27 $12.93 $13.52 Total return (2) (3.39)% 5.29% 8.11% Ratios/supplemental data: Net assets, end of year (in millions) $2,936 $2,788 $2,777 Ratio of expenses to average net assets .83% .82% .82% Ratio of net income to average net assets 9.75% 8.87% 9.21% 1998 1997 Net asset value, beginning of year $15.69 $14.86 Income from investment operations : Net investment income 1.30 1.26 Net gains/(losses) on securities (1.60) .83 (both realized and unrealized) Total from investment operations (.30) 2.09 Less distributions : Dividends (from net investment income) (1.30) (1.24) Distributions (from capital gains) (.34) (.02) Total distributions (1.64) (1.26) Net asset value, end of year $13.75 $15.69 Total return (2) (2.40)% 14.66% Ratios/supplemental data: Net assets, end of year (in millions) $2,360 $2,108 Ratio of expenses to average net assets .81% .82% Ratio of net income to average net assets 8.76% 8.35% Class B Year ended March 15 to September 30, September 30, 2001 2000 (3) Net asset value, beginning of period $12.93 $13.57 Income from investment operations : Net investment income (1) 1.10 .52 Net losses on securities (both (1.61) (.53) realized and unrealized) (1) Total from investment operations (.51) (.01) Less distributions : Dividends (from net investment income) (1.15) (.63) Net asset value, end of period $11.27 $12.93 Total return (2) (4.12)% (.10)% Ratios/supplemental data: Net assets, end of period (in millions) $123 $27 Ratio of expenses to average net assets 1.57% 1.52% Ratio of net income to average net assets 8.75% 8.18% Class C Class F March 15 to March 15 to September 30, September 30, 2001 (3) 2001 (3) Net asset value, beginning of period $12.48 $12.48 Income from investment operations : Net investment income (1) .53 .57 Net losses on securities (both (1.15) (1.15) realized and unrealized) (1) Total from investment operations (.62) (.58) Less distributions : Dividends (from net investment income) (.59) (.63) Net asset value, end of period $11.27 $11.27 Total return (2) (5.11)% (4.86)% Ratios/supplemental data: Net assets, end of period (in millions) $44 $32 Ratio of expenses to average net assets 1.73% .95% Ratio of net income to average net assets 8.54% 9.32% Supplemental data - all classes Year ended September 30, 2001 2000 1999 Portfolio turnover rate 43.89% 46.43% 29.79% 1998 1997 Portfolio turnover rate 54.63% 53.55% 1) Based on average shares outstanding. 2) Total returns exclude all sales charges, including contingent deferred sales charges. 3) Based on operations for the period shown and, accordingly, not representative of a full year (unless otherwise noted). 4) Annualized.
Independent Auditors' Report To the Board of Trustees and Shareholders of American High-Income Trust: We have audited the accompanying statement of assets and liabilities of American High-Income Trust (the "Fund"), including the investment portfolio, as of September 30, 2001, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the per-share data and ratios for each of the five years in the period then ended for Class A shares, and the period March 15, 2000, through September 30, 2000 and the year ended September 30, 2001 for Class B shares, and the period March 15, 2001 through September 30, 2001 for Class C and Class F shares. These financial statements and per-share data and ratios are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and per-share data and ratios based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and per-share data and ratios are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2001, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and per-share data and ratios referred to above present fairly, in all material respects, the financial position of American High-Income Trust as of September 30, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the per-share data and ratios for each of the five years in the period then ended for Class A shares, and the period March 15, 2000 through September 30, 2000 and the year ended September 30, 2001 for Class B shares, and the period March 15, 2001 through September 30, 2001 for Class C and Class F shares, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Los Angeles, California November 6, 2001 Tax Information (unaudited) We are required to advise you within 60 days of the fund's fiscal year-end regarding the federal tax status of certain distributions received by shareholders during such fiscal year. Corporate shareholders may exclude up to 70% of qualifying dividends received during the year. For purposes of computing this exclusion, 1.8% of the dividends paid by the fund from net investment income represent qualifying dividends. Certain states may exempt from income taxation that portion of the dividends paid from net investment income that was derived from direct U.S. Treasury obligations. For purposes of computing this exclusion, 0.6% of the dividends paid by the fund from net investment income were derived from interest on direct U.S. Treasury obligations. Dividends and distributions received by retirement plans such as IRAs, Keogh-type plans and 403(b) plans need not be reported as taxable income. However, many retirement plan trusts may need this information for their annual information reporting. SINCE THE INFORMATION ABOVE IS REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX INFORMATION WHICH WILL BE MAILED IN JANUARY 2002 TO DETERMINE THE CALENDAR YEAR AMOUNTS TO BE INCLUDED ON THEIR 2001 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISERS.