SEC. File Nos. 33-66214
811-7888
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 3
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 5
LIMITED TERM TAX-EXEMPT BOND FUND
OF AMERICA
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)
Registrant's telephone number, including area code:
(213) 486-9200
JULIE F. WILLIAMS
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)
Copies to:
Cary I. Klafter, Esq.
MORRISON & FOERSTER
345 California Street
San Francisco, California 94104
(Counsel for the Registrant)
The Registrant has filed a declaration pursuant to rule 24f-2
registering an indefinite number of shares under the Securities Act of 1933.
Approximate date of proposed public offering:
It is proposed that this filing become effective on September 29, 1995,
pursuant to paragraph (b) of rule 485.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
CROSS REFERENCE SHEET
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ITEM NUMBER OF
PART "A" OF FORM N-1A CAPTIONS IN PROSPECTUS (PART "A")
1. COVER PAGE COVER PAGE
2. SYNOPSIS SUMMARY OF EXPENSES
3. CONDENSED FINANCIAL INFORMATION FINANCIAL HIGHLIGHTS
4. GENERAL DESCRIPTION OF REGISTRANT INVESTMENT OBJECTIVE AND POLICIES; CERTAIN SECURITIES
AND INVESTMENT TECHNIQUES; FUND ORGANIZATION AND
MANAGEMENT
5. MANAGEMENT OF THE FUND SUMMARY OF EXPENSES; FUND ORGANIZATION AND MANAGEMENT
6. CAPITAL STOCK AND OTHER SECURITIES INVESTMENT OBJECTIVE AND POLICIES; CERTAIN
SECURITIES AND INVESTMENT TECHNIQUES;
FUND ORGANIZATION AND MANAGEMENT;
DIVIDENDS, DISTRIBUTIONS AND TAXES
7. PURCHASE OF SECURITIES BEING OFFERED PURCHASING SHARES
8. REDEMPTION OR REPURCHASE REDEEMING SHARES
9. LEGAL PROCEEDINGS N/A
ITEM NUMBER OF CAPTIONS IN STATEMENT OF
PART "B" OF FORM N-1A ADDITIONAL INFORMATION (PART "B")
10. COVER PAGE COVER
11. TABLE OF CONTENTS TABLE OF CONTENTS
12. GENERAL INFORMATION AND HISTORY GENERAL INFORMATION; INVESTMENT RESTRICTIONS
13. INVESTMENT OBJECTIVES AND POLICIES DESCRIPTION OF CERTAIN SECURITIES AND
INVESTMENT TECHNIQUES; INVESTMENT RESTRICTIONS
14. MANAGEMENT OF THE REGISTRANT FUND OFFICERS AND TRUSTEES; MANAGEMENT
15. CONTROL PERSONS AND PRINCIPAL HOLDER
OF SECURITIES FUND OFFICERS AND TRUSTEES
16. INVESTMENT ADVISORY AND OTHER
SERVICES MANAGEMENT
17. BROKERAGE ALLOCATION AND OTHER
PRACTICES EXECUTION OF PORTFOLIO TRANSACTIONS
18. CAPITAL STOCK AND OTHER SECURITIES N/A
19. PURCHASE, REDEMPTION AND PRICING OF
SECURITIES BEING OFFERED PURCHASE OF SHARES; SHAREHOLDER ACCOUNT
SERVICES AND PRIVILEGES; REDEMPTION OF SHARES
20. TAX STATUS DIVIDENDS AND DISTRIBUTIONS
21. UNDERWRITER MANAGEMENT -- PRINCIPAL UNDERWRITER
22. CALCULATION OF PERFORMANCE DATA INVESTMENT RESULTS
23. FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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ITEM IN PART "C"
24. FINANCIAL STATEMENTS AND EXHIBITS
25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
26. NUMBER OF HOLDERS OF SECURITIES
27. INDEMNIFICATION
28. BUSINESS AND OTHER CONNECTIONS OF
INVESTMENT ADVISER
29. PRINCIPAL UNDERWRITERS
30. LOCATION OF ACCOUNTS AND RECORDS
31. MANAGEMENT SERVICES
32. UNDERTAKINGS
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SIGNATURE PAGE
<PAGE>
PROSPECTUS LIMITED TERM TAX-EXEMPT BOND FUND
OF AMERICA
333 South Hope Street
LIMITED Los Angeles, CA 90071
TERM
TAX-EXEMPT Limited Term Tax-Exempt Bond Fund
BOND FUND of America is an open-end
OF AMERICA(SM) diversified management investment
company with the objective of
providing investors with current
income, exempt from federal
income taxes, consistent with its
stated maturity and quality
standards and preservation of
capital. It seeks to achieve this
objective by investing in a
portfolio of tax-exempt fixed-
income securities with a dollar-
weighted average effective
maturity of between 3 and 10
years.
This prospectus presents
information you should know
before investing in the fund. It
should be retained for future
reference.
A statement of additional
information for the fund dated
October 1, 1995, containing the
fund's financial statements, has
been filed with the Securities
and Exchange Commission and is
incorporated by reference into
this prospectus. This statement
may be obtained, without charge,
by writing to the Secretary of
the fund at the above address or
telephoning 800/421-0180. These
requests will be honored within
three business days of receipt.
SHARES OF THE FUND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR
INSURED OR GUARANTEED BY, THE
U.S. GOVERNMENT, ANY FINANCIAL
INSTITUTION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, OR ANY
OTHER AGENCY, ENTITY OR PERSON.
THE PURCHASE OF FUND SHARES
INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE
AN OPPORTUNITY FOR CURRENT SECURITIES AND EXCHANGE
INCOME EXEMPT FROM FEDERAL COMMISSION OR ANY STATE
INCOME TAXES AND PRESERVATION SECURITIES COMMISSION PASSED UPON
OF CAPITAL THROUGH INVESTMENTS THE ACCU- RACY OR ADEQUACY OF
IN TAX-EXEMPT SECURITIES WITH THIS PROSPECTUS. ANY
EFFECTIVE MATURITIES BETWEEN REPRESENTATION TO THE CONTRARY IS
3 AND 10 YEARS A CRIMINAL OFFENSE.
October 1, 1995 43-010-1095
[LOGO OF THE AMERICAN FUNDS GROUP(R)]
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SUMMARY OF This table is designed to help you understand costs of
EXPENSES investing in the fund. These are historical expenses;
your actual expenses may vary.
Average annual
expenses paid over
a 10-year period
would be
approximately $12
per year, assuming
a $1,000
investment and a
5% annual return.
TABLE OF
CONTENTS
Summary of Expenses.......... 2
Financial Highlights......... 3
Investment Objective and
Policies.................... 3
Certain Securities and
Investment Techniques....... 5
Investment Results........... 7
Dividends, Distributions
and Taxes................... 8
Fund Organization
and Management.............. 9
The American Funds
Shareholder Guide............ 12
Purchasing Shares............ 12
Reducing Your Sales Charge... 15
Shareholder Services......... 16
Redeeming Shares............. 18
Retirement Plans............. 20
IMPORTANT PHONE NUMBERS
Shareholder Services:
800/421-0180 ext. 1
Dealer Services:
800/421-9900 ext. 11
American FundsLine(R)
800/325-3590 (24-hour
information)
SHAREHOLDER TRANSACTION EXPENSE
Maximum sales charge on purchases
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(as a percentage of offering price)..................... 4.75%/1/
The fund has no sales charge on reinvested dividends,
deferred sales charge,/2/ redemption fees or exchange
fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets after fee waiver)
Management fees......................................... 0.14%/3/
12b-1 expenses.......................................... 0.30%/4/
Other expenses (including audit, legal, shareholder
services, transfer agent and custodian expenses)........ 0.20%
Total fund operating expenses........................... 0.64%
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------- ------ ------- ------- --------
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You would pay the following
expenses on a $1,000 investment $54 $67 $81 $124/5/
assuming a 5% annual return./6/
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/1/ Sales charges are reduced for certain large purchases. (See "The American
Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
/2/ Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies on certain
redemptions within 12 months following such purchases. (See "The American
Funds Shareholder Guide: Redeeming Shares--Contingent Deferred Sales
Charge.")
/3/ The Investment Advisory and Service Agreement provides for fee reductions to
the extent that annual operating expenses exceed 0.75% of the average net
assets of the fund. Capital Research and Management Company has been
voluntarily waiving fees to the extent necessary to ensure that the fund's
expenses do not exceed 0.71% of the average daily net assets. Without such a
waiver, fees (as a percentage of average net assets) would have been 0.40%.
/4/ These expenses may not exceed 0.30% of the fund's net assets annually. (See
"Fund Organization and Management--Plan of Distribution.") Due to these
distribution expenses, long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers.
/5/ The total for ten years is cumulative. The annual average expenses paid over
a ten-year period would be approximately $12 per year. Expenses are based on
the amounts listed under "Annual Fund Operating Expenses."
/6/ Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment results.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
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FINANCIAL The following information has been audited by Price
HIGHLIGHTS Waterhouse LLP, independent accountants, whose
(For a share unqualified report covering the period October 6, 1993
outstanding (commencement of operations) to July 31, 1995 is
throughout the included in the statement of additional information.
period) This information should be read in conjunction with the
financial statements and accompanying notes which are
also included in the statement of additional
information.
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YEAR ENDED JULY 31
--------------------------
1995 1994/1/
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Net Asset Value, Beginning of Period...... $ 14.10 $ 14.29
---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................... .69 .49
Net realized and unrealized gain (loss)
on investments.......................... .19 (.19)
---------- ----------
Total income from investment operations. .88 .30
---------- ----------
LESS DISTRIBUTIONS
Dividends from net investment income..... (.69) (.49)
---------- ----------
Net Asset Value, End of Period............ $ 14.29 $ 14.10
========== ==========
Total Return/2/ 6.45% 2.11%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions).. $ 191 $ 189
Ratio of expenses to average net assets.. .64%/4/ .51%/3/,/4/
Ratio of net income to average net
assets.................................. 4.88% 3.67%/3/
Portfolio turnover rate.................. 45.82% 42.21%/3/
</TABLE>
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/1/ The period ended July 31, 1994 represents the initial period of
operations from October 6, 1993 to July 31, 1994.
/2/ This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the fund's offering price.
/3/ Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
/4/ Had Capital Research and Management Company not waived fees, the
fund's ratio of expenses to average net assets would have been 0.73%
and 0.90% for the period October 6, 1993 to July 31, 1994, and the
year ended July 31, 1995, respectively.
INVESTMENT The fund's investment objective is to seek current
OBJECTIVE income exempt from federal income taxes, consistent
AND POLICIES with its stated maturity and quality standards and
preservation of capital. The fund will attempt to
The fund's goal is achieve this objective by investing in a portfolio of
to provide you tax-exempt fixed-income securities with a dollar-
with current weighted average effective maturity of between 3 to 10
income exempt from years. The fund will not purchase any security with an
federal income effective maturity greater than 10 years. Additionally,
taxes and the average nominal or stated maturity of the fund's
preservation of portfolio will not exceed 15 years. See "Maturity"
capital. below.
During periods of normal market conditions, at least
80% of the fund's total assets will be invested in tax-
exempt securities consisting primarily of state,
municipal and public authority bonds and notes. State,
municipal and public authority bonds and notes the
interest on which is subject to alternative minimum tax
will not be counted towards such 80% policy. Moreover,
at least 65% of the fund's assets will be invested in
tax-exempt bonds and other debt securities (a) having
initial maturities in excess of one year and (b) that
are rated by either Moody's
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Investors Service, Inc. (Moody's) or Standard & Poor's
Corporation (S&P) at the time of purchase in one of the
three highest categories (or unrated but determined to
be of comparable quality by Capital Research and
Management Company, the fund's investment adviser). The
fund may hold a portion of its assets in short-term
obligations (generally, securities with original or
remaining maturities of one year or less) issued by
states, municipalities, and public authorities.
Up to 35% of the fund's assets may be invested in tax-
exempt securities rated Baa by Moody's or BBB by S&P
(or unrated but determined to be of comparable
quality). Securities rated Baa or BBB are deemed to
have speculative characteristics by the rating
agencies. (See the statement of additional information
for a description of the ratings.)
The fund may invest up to 20% of its assets in certain
tax-exempt securities, the interest on which would
constitute an item of tax preference subject to federal
alternative minimum tax on corporations and
individuals. (See "Certain Securities and Investment
Techniques--Special Considerations" below.) When in the
opinion of Capital Research and Management Company
abnormal market conditions require a temporary
defensive position, the fund may invest in taxable
short-term fixed-income securities (generally,
securities with original or remaining maturities of one
year or less).
The fund's investment restrictions (which are described
in the statement of additional information) and
objective cannot be changed without shareholder
approval. All other investment practices may be changed
by the fund's board.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
4
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CERTAIN RISKS The market values of fixed-income securities
SECURITIES AND generally vary inversely with the level of interest
INVESTMENT rates--when interest rates rise, their values will
TECHNIQUES generally decline and vice versa. The magnitude of
these changes generally will be greater the longer the
Investing in this remaining maturity of the security. Fluctuations in the
fund involves value of the fund's investments will be reflected in
certain risks. its net asset value per share which will typically
decline when interest rates rise.
The fund will not purchase securities rated Ba by
Moody's and BB by S&P or below or unrated but of
comparable quality (commonly known as "junk bonds" or
high-yield, high-risk bonds). However, subsequent to
its purchase by the fund, the rating of an issue of
securities may be reduced below the current minimum
rating required for its purchase, or in the case of an
unrated issue of securities, its credit quality may
become equivalent to an issue of securities rated Ba
and BB or below. Neither event requires the elimination
of such an obligation from the fund's portfolio, but
Capital Research and Management Company will consider
such an event in determining whether the fund should
continue to hold such an obligation in its portfolio.
If, as a result of a downgrade or otherwise, the fund
holds more than 5% of its net assets in high-yield,
high-risk bonds, the fund will dispose of the excess as
expeditiously as possible.
In addition to ratings, Capital Research and Management
Company will consider factors such as term, yield, and
liquidity in selecting fixed-income securities. Capital
Research and Management Company attempts to reduce the
risks 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.
MUNICIPAL LEASE OBLIGATIONS The fund may invest in
municipal lease revenue obligations. The fund currently
intends to purchase only municipal lease revenue
obligations that are determined to be liquid by Capital
Research and Management Company. In determining whether
these securities are liquid, Capital Research and
Management Company will consider, among other things,
the credit quality and support, including strengths and
weaknesses of the issuer and lessee, the terms of the
lease, frequency and volume of trading, and number of
dealers.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT
AGREEMENTS The fund may purchase securities on a
delayed delivery or "when-issued" basis and enter into
firm commitment agreements (transactions whereby the
payment obligation and interest rate are fixed at the
time of the transaction but the settlement is delayed).
The fund as purchaser assumes the risk of any decline
in value of the security beginning on the date of the
agreement or purchase. As the fund's
5
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aggregate commitments under these transactions
increase, the opportunity for leverage similarly may
increase. (See statement of additional information.)
VARIABLE AND FLOATING RATE OBLIGATIONS The fund may
invest in variable and floating rate obligations which
have interest rates that are adjusted at designated
intervals, or whenever there are changes in the market
rates of interest on which the interest rates are
based. The rate adjustment feature tends to limit the
extent to which the market value of the obligation will
fluctuate.
MATURITY Under normal market conditions, the fund's
dollar-weighted average effective portfolio maturity
will range between 3 and 10 years. The fund will not
purchase any security with an effective maturity of
more than 10 years. In calculating effective maturity,
a feature such as a put, call or sinking fund will be
considered to the extent it results in a security whose
market characteristics indicate a maturity of 10 years
or less, even though the nominal or stated maturity may
be beyond 10 years. Capital Research and Management
Company will consider the impact on effective maturity
of potential changes in the financial condition of
issuers and in market interest rates in making
investment selections for the fund.
Additionally, the fund's dollar-weighted average
nominal or stated portfolio maturity will not exceed 15
years, and the fund will not purchase any security with
a nominal or stated maturity in excess of 25 years. For
purposes of determining nominal or stated maturity, the
fund will consider only the techniques approved for
such purposes by the staff of the Securities and
Exchange Commission which currently do not include any
call or sinking fund features but are limited to those
described in rule 2a-7(d) under the Investment Company
Act of 1940 applicable to money market funds.
SPECIAL CONSIDERATIONS The fund may invest up to 20% of
its total assets in "private activity" bonds which pay
interest constituting an item of tax preference subject
to an alternative minimum tax on corporations and
individuals. Accordingly, a portion of the fund's
dividends may be an item of tax preference in computing
a shareholder's alternative minimum tax for federal
income tax purposes. In addition, with respect to
corporate shareholders of the fund, all interest on
municipal bonds and other tax-exempt obligations,
including exempt-interest dividends paid by the fund,
is included in adjusted current earnings in calculating
federal alternative minimum taxable income, and may
also affect corporate federal "environmental tax"
liability.
6
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MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the fund is divided into
segments which are managed by individual counselors.
Each counselor decides how the segment will be invested
(within the limits provided by the fund's objective and
policies and by Capital Research and Management
Company's investment committee). In addition, Capital
Research and Management Company's research
professionals make investment decisions with respect to
a portion of the fund's portfolio. The primary
individual portfolio counselors for the fund are listed
below.
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YEARS OF EXPERIENCE
AS INVESTMENT
PROFESSIONAL
PORTFOLIO COUNSELORS YEARS OF EXPERIENCE (APPROXIMATE)
FOR AS PORTFOLIO COUNSELOR WITH CAPITAL
LIMITED TERM FOR LIMITED TERM RESEARCH AND
TAX-EXEMPT TAX-EXEMPT MANAGEMENT
BOND FUND BOND FUND COMPANY OR ITS TOTAL
OF AMERICA PRIMARY TITLE(S) OF AMERICA AFFILIATES YEARS
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Neil L. Langberg Senior Vice President of Since the fund 17 years 17 years
the fund. began operations*
Vice President --
Investment
Management Group, Capital
Research
and Management Company
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Mark R. Macdonald Vice President -- 1 year 1 year 10 years
Investment Management
Group, Capital Research
and Management Company
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* The fund began operations on October 6, 1993.
INVESTMENT The fund may from time to time compare its investment
RESULTS results to various indices or other mutual funds in
reports to shareholders, sales literature and
The fund has advertisements. The results may be calculated on a
averaged a total total return and/or yield basis for various periods,
return of 1.56% with or without sales charges. Results calculated
(assuming the without a sales charge will be higher. Total returns
maximum sales assume the reinvestment of all dividends and capital
charge was paid) gain distributions.
and 4.44%
(assuming no sales The fund's yield and the average annual total returns
charge was paid) are calculated in accordance with Securities and
over its lifetime Exchange Commission requirements which provide that the
(October 6, 1993 maximum sales charge be reflected. The fund's yield for
through June 30, the 30-day period ended June 30, 1995, was 4.49%. The
1995). fund's average annual total returns over the past one-
year and lifetime periods, as of June 30, 1995, were
1.59% and 1.56%, respectively, assuming the maximum
sales charge was paid. Assuming no sales charge was
paid, the one-year and lifetime returns were 6.67% and
4.44%, respectively. Of course, past results are not a
guarantee of future results. Further information
regarding the fund's investment results is contained in
the
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fund's annual report which may be obtained without
charge by writing to the Secretary of the fund at the
address indicated on the cover of this prospectus.
DIVIDENDS, DIVIDENDS AND DISTRIBUTIONS The fund declares dividends
DISTRIBUTIONS from its net investment income daily and distributes
AND TAXES the accrued dividends to shareholders each month.
Dividends begin accruing one day after payment for
Income shares is received by the fund or American Funds
distributions Service Company. All capital gains, if any, are
are made each distributed annually, usually in December. When a
month. capital gain is declared, the net asset value per share
is reduced by the amount of the payment.
FEDERAL TAXES The fund intends to operate as a
"regulated investment company" under the Internal
Revenue Code. For any fiscal year in which the fund so
qualifies and distributes to shareholders all of its
net investment income and any net capital gains, the
fund itself is relieved of federal income tax.
As a regulated investment company, the fund is
permitted to pass through to its shareholders federally
tax-exempt income subject to certain requirements which
the fund intends to satisfy.
The fund may invest in obligations which pay interest
that is subject to state and local taxes when
distributed by the fund even though the interest, if
realized directly, would be exempt from these taxes.
For example, a state may require that a fund hold a
specified percentage of that state's bonds in order for
the fund to pass through interest paid on these bonds
to its shareholders on a state tax-exempt basis,
whereas if the bonds were held directly by shareholders
the interest would be exempt from state tax. In
addition, to the extent shareholders receive dividends
derived from taxable interest income or distributions
of capital gains, these dividends or distributions will
not be exempt from federal (or state or local) income
tax.
You will be advised as to the tax consequences of
dividends and capital gain distributions. You are
required by the Internal Revenue Code to report to the
federal government all fund exempt-interest dividends
(and all other tax-exempt interest).
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE FUND THAT THE TAXPAYER IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO
THEIR RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE FUND TO
WITHHOLD 31% FROM ANY DIVIDENDS (OTHER THAN TAX-EXEMPT
DIVIDENDS) AND/OR REDEMPTIONS (INCLUDING EXCHANGE
REDEMPTIONS). Amounts withheld are applied to your
federal tax liability; a refund may be obtained from
the Service if withholding results in overpayment of
taxes.
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This is a brief summary of some of the tax laws that
affect your investment in the fund. Please see the
statement of additional information and your tax
adviser for further information.
FUND FUND ORGANIZATION AND VOTING RIGHTS The fund, an open-
ORGANIZATION end diversified management investment company, was
AND organized as a Massachusetts business trust on July 12,
MANAGEMENT 1993. The fund's board supervises fund operations and
performs duties required by applicable state and
The fund is a federal law. Members of the board who are not employed
member of The by Capital Research and Management Company or its
American Funds affiliates are paid certain fees for services rendered
Group, which is to the fund as described in the statement of additional
managed by one of information. They may elect to defer all or a portion
the largest and of these fees through a deferred compensation plan in
most effect for the fund. Shareholders have one vote per
experienced share owned and, at the request of the holders of at
investment least 10% of the shares, the fund will hold a meeting
advisers. at which any member of the board could be removed by a
majority vote. There will not usually be a shareholder
meeting in any year except, for example, when the
election of the board is required to be acted upon by
shareholders under the Investment Company Act of 1940.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the fund and other funds, including those in The
American Funds Group. Capital Research and Management
Company is located at 333 South Hope Street, Los
Angeles, CA 90071 and at 135 South State College
Boulevard, Brea, CA 92621. (See "The American Funds
Shareholder Guide: Purchasing Shares--Investment
Minimums and Fund Numbers" for a listing of funds in
The American Funds Group.) Capital Research and
Management Company manages the investment portfolio and
business affairs of the fund and receives a fee at the
annual rate of 0.30% on the first $60 million of the
fund's net assets, plus 0.21% on net assets in excess
of $60 million, plus 3% of annual gross income.
Assuming net assets of $200 million and gross income
levels of 3%, 4%, 5%, 6%, 7% and 8%, management fees
would be .33%, .36%, .39%, .42%, .45% and .48%,
respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc."), which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by
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the Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the fund's portfolio
securities transactions are placed by Capital Research
and Management Company, which strives to obtain the
best available prices, taking into account the costs
and quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated
commission, although the price of the security usually
includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's
concession or discount. On occasion, securities may be
purchased directly from an issuer, in which case no
commissions or discounts are paid.
Subject to the above policy, in circumstances in which
two or more brokers are in a position to offer
comparable prices and executions, preference may be
given to brokers that have sold shares of the fund or
have provided investment research, statistical, and
other related services for the benefit of the fund
and/or of other funds served by Capital Research and
Management Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
fund's shares. American Funds Distributors is located
at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92621, 8000 IH-
10 West, San Antonio, TX 78230, 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood
Road, Norfolk, VA 23513. Telephone conversations with
American Funds Distributors may be recorded or
monitored for verification, recordkeeping and quality
assurance purposes.
PLAN OF DISTRIBUTION The fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months. Expenditures by the
fund under the plan may not exceed 0.30% of its average
net assets annually (0.25% of which may be for service
fees). See "Sales Charges" below.
OTHER FUND EXPENSES The fund pays all expenses not
specifically assumed by Capital Research and Management
Company, including, but not limited to: custodian,
stock transfer and dividend disbursing fees and
expenses; expenses pursuant to the fund's plan of
distribution; costs of designing, printing and mailing
reports, prospectuses, proxy statements
10
<PAGE>
- --------------------------------------------------------------------------------
and notices to shareholders; taxes; expenses of the
issuance and redemption of shares of the fund
(including stock certificates, registration and
qualification fees and expenses); legal and auditing
fees and expenses; compensation, fees, and expenses
paid to trustees not affiliated with Capital Research
and Management Company; association dues; and costs of
stationery and forms prepared exclusively for the fund.
TRANSFER AGENT American Funds Service Company, a wholly
owned subsidiary of Capital Research and Management
Company, is the transfer agent and performs shareholder
service functions (including the payment of dividends).
It was paid a fee of $77,000 for the fiscal year ended
July 31, 1995. Telephone conversations with American
Funds Service Company may be recorded or monitored for
verification, recordkeeping and quality assurance
purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
SERVICE
AREA ADDRESS AREAS SERVED
--------------------------------------------------------
WEST P.O. Box 2205 AK, AZ, CA, HI, ID,
Brea, CA 92622-2205 MT, NV, OR, UT, WA
Fax: 714/671-7080 and outside the U.S.
--------------------------------------------------------
CENTRAL P.O. Box 659522 AR, CO, IA, KS, LA,
- WEST San Antonio, TX 78265-9522 MN, MO, ND, NE, NM,
Fax: 210/530-4050 OK, SD, TX, and WY
--------------------------------------------------------
CENTRAL P.O. Box 6007 AL, IL, IN, KY, MI,
- EAST Indianapolis, IN 46206-6007 MS, OH, TNand WI
Fax: 317/735-6620
--------------------------------------------------------
EAST P.O. Box 2280 CT, DE, FL, GA, MA,
Norfolk, VA 23501-2280 MD, ME, NC, NH, NJ,
Fax: 804/670-4773 NY, PA, RI, SC, VA,
VT, WV and
Washington, D.C.
--------------------------------------------------------
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE
COMPANY AT 800/421-0180 FOR SERVICE.
--------------------------------------------------------
[LOGO OF UNITED STATES OF MAP]
--------------------------------------------------------
West (light grey); Central-West (white); Central-East
(dark grey); East (blue)
11
<PAGE>
[LOGO OF THE AMERICAN FUNDS SHAREHOLDER GUIDE]
PURCHASING METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
SHARES --------------------------------------------------------
Your investment See "Investment $50 minimum (except
dealer can help Minimums and Fund where a lower
you establish your Numbers" for minimum is noted
account--and help initial under "Investment
you add to it investment Minimums and Fund
whenever you like. minimums. Numbers").
---------------------------------------------------------
By Visit any Mail directly to
contacting investment dealer your investment
your who is registered dealer's address
investment in the state printed on your
dealer where the account statement.
purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check
account payable to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the
account envelope provided
application. with your account
statement.
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San
Francisco,CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
SHARE PRICE Shares are purchased at the next offering
price after the order is received by the fund or
American Funds Service Company. In the case of orders
sent directly to the fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of trading (currently 4:00 p.m., New York time) on
each day the New York Stock Exchange is open. The
current value of the fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will remain
constant at $1.00 based on the funds' current practice
of valuing their shares on the basis of the penny-
rounding method in accordance with rules of the
Securities and Exchange Commission.
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost or
destroyed certificates.
12
<PAGE>
- -------------------------------------------------------------------------------
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT
AVAILABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund(R)................................. $1,000 02
American Balanced Fund(R)..................... 500 11
American Mutual Fund(R)....................... 250 03
Capital Income Builder(R)..................... 1,000 12
Capital World Growth and
Income Fund(SM).............................. 1,000 33
EuroPacific Growth Fund(R).................... 250 16
Fundamental Investors(SM)..................... 250 10
The Growth Fund of America(R)................. 1,000 05
The Income Fund of America(R)................. 1,000 06
The Investment Company of America(R).......... 250 04
The New Economy Fund(R)....................... 1,000 14
New Perspective Fund(R)....................... 250 07
SMALLCAP World Fund(SM)....................... 1,000 35
Washington Mutual Investors Fund(SM).......... 250 01
<CAPTION>
MINIMUM
INITIAL FUND
FUND INVESTMENT NUMBER
---- ---------- ------
<S> <C> <C>
BOND FUNDS
American High-Income Municipal
Bond Fund(SM)................................ $1,000 40
American High-Income Trust(R)................. 1,000 21
The Bond Fund of America(SM).................. 1,000 08
Capital World Bond Fund(R).................... 1,000 31
Intermediate Bond Fund of America(R).......... 1,000 23
Limited Term Tax-Exempt Bond Fund of
America(SM).................................. 1,000 43
The Tax-Exempt Bond Fund of AmericaSM......... 1,000 19
The Tax-Exempt Fund of California(R)*......... 1,000 20
The Tax-Exempt Fund of Maryland(R)*........... 1,000 24
The Tax-Exempt Fund of Virginia(R)*........... 1,000 25
U.S. Government Securities Fund(SM)........... 1,000 22
MONEY MARKET FUNDS
The Cash Management Trust of America(R)....... 2,500 09
The Tax-Exempt Money Fund of America(SM)...... 2,500 39
The U.S. Treasury Money Fund of America(SM)... 2,500 49
</TABLE>
* Available only in certain states.
For retirement plan investments, the minimum is $250,
except that the money market funds have a minimum of
$1,000 for individual retirement accounts (IRAs).
Minimums are reduced to $50 for purchases through
"Automatic Investment Plans" (except for the money
market funds) or to $25 for purchases by retirement
plans through payroll deductions and may be reduced or
waived for shareholders of other funds in The American
Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above).
SALES CHARGES The sales charges you pay when purchasing
the stock, stock/bond, and bond funds of The American
Funds Group are set forth below. The money market funds
of The American Funds Group are offered at net asset
value. (See "Investment Minimums and Fund Numbers" for
a listing of the funds.)
13
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
--------------------- ---------- -------- -------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000................. 6.10% 5.75% 5.00%
$50,000 but less than $100,000.... 4.71 4.50 3.75
BOND FUNDS
Less than $25,000................. 4.99 4.75 4.00
$25,000 but less than $50,000..... 4.71 4.50 3.75
$50,000 but less than $100,000.... 4.17 4.00 3.25
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000... 3.63 3.50 2.75
$250,000 but less than $500,000... 2.56 2.50 2.00
$500,000 but less than $1,000,000. 2.04 2.00 1.60
$1,000,000 or more................ none none (see below)
</TABLE>
Commissions of up to 1% will be paid to dealers who
initiate and are responsible for purchases of $1
million or more, for purchases by any defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees (paid pursuant to the
fund's plan of distribution), and for purchases made at
net asset value by certain retirement plans of
organizations with collective retirement plan assets of
$100 million or more as set forth in the statement of
additional information (paid by American Funds
Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will provide
additional promotional incentives to dealers. Currently
these incentives are limited to the top one hundred
dealers who have sold shares of the fund or other funds
in The American Funds Group. These incentive payments
will be based on a pro rata share of a qualifying
dealer's sales.
Any defined contribution plan qualified under Section
401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees or
any other purchaser investing at least $1 million in
shares of the fund (or in combination with shares of
other funds in The American Funds Group other than the
money market funds) may purchase shares at net asset
value; however, a contingent deferred sales charge of
1% is imposed on certain redemptions within one year of
the purchase. (See "Redeeming Shares--Contingent
Deferred Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization
14
<PAGE>
- -------------------------------------------------------------------------------
and Management--Plan of Distribution.") These services
include processing purchase and redemption
transactions, establishing shareholder accounts and
providing certain information and assistance with
respect to the fund.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of
Washington Management Corporation, employees and
partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members of the
above persons, and trusts or plans primarily for such
persons; (2) current or retired registered
representatives or full-time employees and their
spouses and minor children of dealers having sales
agreements with American Funds Distributors and plans
for such persons; (3) companies exchanging securities
with the fund through a merger, acquisition or exchange
offer; (4) trustees or other fiduciaries purchasing
shares for certain retirement plans of organizations
with retirement plan assets of $100 million or more;
(5) insurance company separate accounts; (6) accounts
managed by subsidiaries of The Capital Group Companies,
Inc.; and (7) The Capital Group Companies, Inc., its
affiliated companies and Washington Management
Corporation. Shares are offered at net asset value to
these persons and organizations due to anticipated
economies in sales effort and expense.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE include those by you, your spouse and your children
under the age of 21, if all parties are purchasing
You and your shares for their own account(s), which may include
immediate family purchases through employee benefit plan(s) such as an
may combine IRA, individual-type 403(b) plan or single-participant
investments to Keogh-type plan or by a business solely controlled by
reduce your costs. these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) for a diversified common
trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating
fund shares. Purchases made for nominee or street name
accounts (securities held in the name of an investment
dealer or another nominee such as a bank trust
department instead of the customer) may not be
aggregated with those made for other accounts and may
not be aggregated with other nominee or street name
accounts unless otherwise qualified as described above.
15
<PAGE>
- -------------------------------------------------------------------------------
CONCURRENT PURCHASES To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your invest-
ment may also be reduced by taking into account the
current value of your existing holdings in The American
Funds Group. Direct purchases of the money market funds
are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares--Statement of Intention.")
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF THE
METHODS DESCRIBED ABOVE.
AUTOMATIC INVESTMENT PLAN You may make regular monthly
SHAREHOLDER or quarterly investments through automatic charges to
SERVICES your bank account. Once a plan is established, your ac-
count will normally be charged by the 10th day of the
The fund offers month during which an investment is made (or by the
you a valuable 15th day of the month in the case of any retirement
array of services plan for which Capital Guardian Trust Company--another
designed to affiliate of The Capital Group Companies, Inc.--acts as
increase the trustee or custodian).
convenience and
flexibility of AUTOMATIC REINVESTMENT Dividends and capital gain dis-
your investment-- tributions are reinvested in additional shares at no
services you can sales charge unless you indicate otherwise on the
use to alter your account application. You also may elect to have divi-
investment program dends and/or capital gain distributions paid in cash by
as your needs and informing the fund, American Funds Service Company or
circumstances your investment dealer.
change.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of ad-
ditional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
EXCHANGE PRIVILEGE You may exchange shares into other
funds in The American Funds Group. Exchange purchases
are subject to the minimum investment requirements of
the fund purchased and no sales
16
<PAGE>
- -------------------------------------------------------------------------------
charge generally applies. However, exchanges of shares
from the money market funds are subject to applicable
sales charges on the fund being purchased, unless the
money market fund shares were acquired by an exchange
from a fund having a sales charge, or by reinvestment
or cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American FundsLine(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for
which Capital Guardian Trust Company serves as trustee
may not be exchanged by telephone, fax or telegraph.
Exchange redemptions and purchases are processed simul-
taneously at the share prices next determined after the
exchange order is received. (See "Purchasing Shares--
Share Price.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES You may automatically exchange
shares (in amounts of $50 or more) among any of the
funds in The American Funds Group on any day (or pre-
ceding business day if the day falls on a non-business
day) of each month you designate. You must either meet
the minimum initial investment requirement for the re-
ceiving fund OR the originating fund's balance must be
at least $5,000 and the receiving fund's minimum must
be met within one year.
AUTOMATIC WITHDRAWALS You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled withdrawals or $1,200, whichever is
greater. However, additional investments in a
withdrawal account may be inadvisable due to sales
charges and tax liabilities.
THESE SERVICES ARE AVAILABLE ONLY IN STATES WHERE THE
FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND MAY BE
TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in accordance
with your registration instructions. Transactions in
the account, such as additional investments and
dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service
Company.
17
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, redeem shares (up to $10,000 per fund, per
account each day), or exchange shares around the clock
with American FundsLine(R). To use this service, call
800/325-3590 from a TouchTone(TM) telephone.
Redemptions and exchanges through American FundsLine(R)
are subject to the conditions noted above and in
"Redeeming Shares--Telephone Redemptions and Exchanges"
below. You will need your fund number (see the list of
funds in The American Funds Group under "Purchasing
Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of
your Social Security number or other tax identification
number associated with your account) and account
number.
--------------------------------------------------------
REDEEMING By writing to Send a letter of instruction
SHARES American specifying the name of the fund, the
Funds Service number of shares or dollar amount to
You may take money Company (at be sold, your name and account
out of your the number. You should also enclose any
account whenever appropriate share certificates you wish to
you please. address redeem. For redemptions over $50,000
indicated and for certain redemptions of
under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") Association of Securities Dealers,
Inc., that is an eligible guarantor
institution. You should verify with
the institution that it is an
eligible guarantor prior to signing.
Additional documentation may be
required for redemption of shares
held in corporate, partnership or
fiduciary accounts. Notarization by a
Notary Public is not an acceptable
signature guarantee.
--------------------------------------------------------
By contacting If you redeem shares through your
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
--------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Redemptions
and
Exchanges"
below)
--------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
--------------------------------------------------------
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST 10
DAYS.
18
<PAGE>
- -------------------------------------------------------------------------------
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine(R)), fax or
telegraph redemption and/or exchange options, you agree
to hold the fund, American Funds Service Company, any
of its affiliates or mutual funds managed by such
affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or liability (including
attorney fees) which may be incurred in connection with
the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these
options. However, you may elect to opt out of these
options by writing American Funds Service Company (you
may reinstate them at any time also by writing American
Funds Service Company). If American Funds Service
Company does not employ reasonable procedures to
confirm that the instructions received from any person
with appropriate account information are genuine, the
fund may be liable for losses due to unauthorized or
fraudulent instructions. In the event that shareholders
are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural
disaster, redemption and exchange requests may be made
in writing only.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any defined contribution plan qualified under
Section 401(a) of the Internal Revenue Code including a
"401(k)" plan with 200 or more eligible employees. The
charge is 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares.
Shares held for the longest period are assumed to be
redeemed first for purposes of calculating this charge.
The charge is waived for exchanges (except if shares
acquired by exchange were then redeemed within 12
months of the initial purchase); for distributions from
qualified retirement plans and other employee benefit
plans; for redemptions resulting from participant-
directed switches among investment options within a
401(k) plan; for distributions from 403(b) plans or
IRAs due to death, disability or attainment of age 59
1/2; for tax-free returns of excess contributions to
IRAs; for redemptions through certain automatic
withdrawals not exceeding 10% of the amount that would
otherwise be subject to the charge; and for redemptions
in connection with loans made by qualified retirement
plans.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without sales charge (any contingent deferred sales
charge paid will be credited to your
19
<PAGE>
- -------------------------------------------------------------------------------
account) in any fund in The American Funds Group. Send
a written request and a check to American Funds Service
Company within 90 days after the date of the redemption
or distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain realized on a redemption will not be
affected by exercise of the reinstatement privilege,
but a loss may be nullified if you reinvest in the same
fund within 30 days. If you redeem your shares within
90 days after purchase and the sales charge on the
purchase of other shares is waived under the
reinstatement privilege, the sales charge you
previously paid for the shares may not be taken into
account when you calculate your gain or loss on that
redemption.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares--Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
Redemption proceeds will not be mailed until sufficient
time has passed to provide reasonable assurance that
checks or drafts (including certified or cashier's
checks) for shares purchased have cleared (which may
take up to 15 calendar days from the purchase date).
Except for delays relating to clearance of checks for
share purchases or in extraordinary circumstances (and
as permissible under the Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT You may invest in the funds through various retirement
PLANS plans including the following plans for which Capital
Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
[LOGO OF This prospectus has been printed on
RECYCLED PAPER] recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
20
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
Part B
Statement of Additional Information
October 1, 1995
This document is not a prospectus but should be read in conjunction with
the current prospectus dated October 1,1995 of Limited Term Tax-Exempt Bond
Fund of America (the "fund"). The prospectus may be obtained from your
investment dealer or financial planner or by writing to the fund at the
following address:
Limited Term Tax-Exempt Bond Fund of America
Attention: Secretary
333 South Hope Street
Los Angeles, CA 90071
(213) 486-9200
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
ITEM PAGE NO.
Description of Certain Securities and Investment Techniques 1
Investment Restrictions 5
Fund Officers and Trustees 8
Management 11
Dividends and Distributions 14
Additional Information Concerning Taxes 14
Purchase of Shares 17
Shareholder Account Services and Privileges 18
Redemption of Shares 19
Execution of Portfolio Transactions 20
General Information 20
Investment Results 21
Description of Ratings for Debt Securities 23
Financial Statements Attached
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
INVESTMENT POLICIES -- The fund intends to invest in securities rated in the
top four categories by Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's") or unrated but determined to be of
comparable quality by Capital Research and Management Company. (See
"Description of Ratings for Debt Securities" below.) However, subsequent to
its purchase by the fund, an issue of bonds or notes may cease to be rated or
its rating may be reduced below the minimum rating required for its purchase.
Neither event requires the elimination of such obligation from the fund's
portfolio, but the Investment Adviser will consider such an event in its
determination of whether the fund should continue to hold such obligation in
its portfolio. If, however, as a result of a downgrade or otherwise, the fund
holds more than 5% of its net assets in bonds rated lower than Baa by Moody's
or BBB by S&P or unrated but of comparable quality (commonly known as "junk
bonds" or high-yield, high-risk bonds), the fund will dispose of the excess as
expeditiously as possible.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk bonds
can be sensitive to adverse economic changes and municipal and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers or issuers whose revenue is very
sensitive to economic conditions may experience financial stress that would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices and yields of high-yield, high-risk
bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest rate market, the fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
a high-yield, high-risk bond's value will decrease in a rising interest rate
market, as will the value of the fund's assets.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high-yield, high-risk bonds, especially in a thin
market.
MUNICIPAL BONDS -- Municipal bonds are generally debt obligations issued to
obtain funds for various public purposes, including the construction of public
facilities. Municipal bonds may be used to refund outstanding obligations, to
obtain funds for general operating expenses or for public improvements or for
lending private institutions or corporations funds for the construction of
educational facilities, hospitals, housing, industrial facilities or for other
public purposes. The interest on these obligations is generally not included
in gross income for federal income tax purposes. See "Additional Information
Concerning Taxes" below. Opinions relating to the validity of municipal bonds
and to the exclusion from gross income for federal income tax purposes and,
where applicable, state and local income tax are rendered by bond counsel to
the respective issuing authorities at the time of issuance.
The two principal classifications of municipal bonds are general obligation
and limited obligation (or revenue) bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit including, if
available, its taxing power for the payment of principal and interest. Issuers
of general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality. Annual rental payments are payable to the extent such
rental payments are appropriated annually.
Typically, the only security for a limited obligation or revenue bond is
the net revenue derived from a particular facility or class of facilities
financed thereby or, in some cases, from the proceeds of a special tax or other
special revenues Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many
provide additional security in the form of a debt service reserve fund which
may also be used to make principal and interest payments on the issuer's
obligations. In addition, some revenue obligations (as well as general
obligations) are insured by a bond insurance company or backed by a letter of
credit issued by a banking institution.
Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured
by the revenues of the authority derived from payments by the private entity
which owns or operates the facility financed with the proceeds of the bonds.
Obligations of housing finance authorities have a wide range of security
features including reserve funds and insured or subsidized mortgages, as well
as the net revenues from housing or other public projects. Most of these bonds
do not generally constitute the pledge of the credit of the issuer of such
bonds. The credit quality of such revenue bonds is usually directly related to
the credit standing of the user of the facility being financed or of an
institution which provides a guarantee, letter of credit, or other credit
enhancement for the bond issue.
There are, in addition, a variety of hybrid and special types of municipal
obligations as well as numerous differences in the security of municipal bonds,
both within and between the two primary classifications described above.
The amount of information about the financial condition of an issuer of
municipal bonds may not be as extensive as that which is made available by
corporations whose equity securities are publicly traded.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS - The fund may purchase
securities on a delayed delivery or "when-issued" basis and enter into firm
commitment agreements (transactions whereby the payment obligation and interest
rate are fixed at the time of the transaction but the settlement is delayed).
The fund as purchaser assumes the risk of any decline in value of the security
beginning on the date of the agreement or purchase.
The fund will identify liquid assets such as cash, U.S. Government securities
or other appropriate high-grade debt obligations in an amount sufficient to
meet its payment obligations in these transactions. Although these
transactions will not be entered into for leveraging purposes, to the extent
the fund's aggregate commitments under these transactions exceed its holdings
of cash and securities that do not fluctuate in value (such as short-term money
market instruments), the fund temporarily will be in a leveraged position
(because it will 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
will likely occur than were it not in such a position. The fund will not
borrow money to settle these transactions and, therefore, will liquidate other
portfolio securities in advance of settlement if necessary to generate
additional cash to meet its obligations thereunder.
TEMPORARY INVESTMENTS -- The fund may invest in short-term municipal
obligations of up to one year in maturity during periods of temporary defensive
strategy resulting from abnormal market conditions, or when such investments
are considered advisable for liquidity. Generally, the income from all such
securities is exempt from federal income tax. See "Additional Information
Concerning Taxes" below. Further, a portion of the fund's assets, which will
normally be less than 20%, may be held in cash or invested in high-quality
taxable short-term securities of up to one year in maturity. Such investments
may include: (1) obligations of the U.S. Treasury; (2) obligations of agencies
and instrumentalities of the U.S. Government; and (3) money market instruments,
such as certificates of deposit issued by domestic banks, corporate commercial
paper, and bankers' acceptances.
PORTFOLIO MANAGEMENT -- In seeking to achieve the fund's objective, the
Investment Adviser causes the fund to purchase securities which it believes
represent the best values then currently available in the marketplace. Such
values are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the economy, movements in
the general level and term structure of interest rates, political developments,
and variations in the supply of funds available for investment in the
tax-exempt market relative to the demand for the funds placed upon it. These
latter factors change continuously and should be met with a dynamic, responsive
approach to the investment process. Some of the more important portfolio
management techniques that are utilized by the Investment Adviser are set forth
below.
ADJUSTMENT OF MATURITIES -- The Investment Adviser seeks to anticipate
movements in interest rates and adjusts the maturity distribution of the
portfolio accordingly subject to maintaining, under normal market conditions,
an average dollar-weighted portfolio maturity of three to ten years. Longer
term securities ordinarily yield more than shorter term securities but are
subject to greater and more rapid price fluctuation. Keeping in mind the
fund's objective the Investment Adviser will increase the Fund's exposure to
this price volatility only when it appears likely to increase current income
without undue risk to capital.
ISSUE CLASSIFICATION -- Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which
they were issued, often tend to trade at different yields. These yield
differentials tend to fluctuate in response to political and economic
developments, as well as temporary imbalances in normal supply/demand
relationships. The Investment Adviser monitors these fluctuations closely, and
will attempt to adjust portfolio concentrations in various issue
classifications according to the value disparities brought about by these yield
relationship fluctuations.
QUALITY -- Securities issued for similar purposes and with the same general
maturity characteristics, but which vary according to the creditworthiness of
their respective issuers, tend to trade at different yields. These yield
differentials also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced by these
yield relationship fluctuations.
The Investment Adviser believes that, in general, the market for municipal
bonds is less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the fund to make purchases and sales of securities
in the foregoing manner may, at any particular time and with respect to any
particular securities, be limited (or non-existent).
PORTFOLIO TURNOVER -- Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. See "Financial
Highlights" in the prospectus for the fund's annual portfolio turnover over its
lifetime .
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES -- The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without a majority vote of
its outstanding shares. Such majority is defined by law as the vote of the
lesser of (i) 67% or more of the outstanding voting securities present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present in person or by proxy, or (ii) more than 50% of the outstanding
voting securities. All percentage limitations expressed in the following
investment restrictions are measured immediately after and giving effect to the
relevant transaction. The fund may not:
1. With respect to 75% of the fund's total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S. Government
or any of its agencies or instrumentalities) if, as a result, (a) more than 5%
of the fund's total assets would be invested in the securities of that issuer,
or (b) the fund would hold more than 10% of the outstanding voting securities
of that issuer;
2. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the fund from
investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business);
3. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments or engage in futures transactions;
4. Invest 25% or more of the fund's total assets in the securities of issuers
in the same industry. Obligations of the U.S. Government, its agencies and
instrumentalities are not subject to this 25% limitation on industry
concentration;
5. Invest more than 15% of the value of its net assets in securities which
are not readily marketable (including repurchase agreements maturing in more
than seven days) or engage in the business of underwriting securities of other
issuers, except to the extent that the purchase or disposal of an investment
position may technically constitute the fund as an underwriter as that term is
defined under the Securities Act of 1933;
6. Invest in companies for the purpose of exercising control or management;
7. Make loans to others except for (a) purchasing debt securities; (b)
entering into repurchase agreements; and (c) loaning portfolio securities;
8. Issue senior securities, except as permitted under the Investment Company
Act of 1940;
9. Borrow money, except from banks for temporary purposes in an amount not to
exceed one-third of the value of the fund's total assets. Moreover, in the
event that the asset coverage for such borrowing falls below 300%, the fund
will reduce, within three days, the amount of its borrowing in order to provide
for 300% asset coverage;
10. Pledge or hypothecate assets in excess of one-third of the fund's total
assets;
11. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (this restriction does not prevent the fund from investing in
securities with put and call features); nor
12. Invest in oil, gas, or other mineral exploration or development programs
or leases.
NON-FUNDAMENTAL POLICIES -- The following policies may be changed by action of
the Board of Trustees without shareholder approval.
1. The fund does not currently intend (at least for the next 12 months) to
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.
2. The fund does not currently intend (at least for the next 12 months) to
purchase the securities of any issuer (other than securities issued or
guaranteed by the governments of any country or political subdivisions thereof)
if, as a result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have a record
of less than three years of continuous operation.
3. The fund does not currently intend (at least for the next 12 months) to
invest in the securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or as deemed
advisable by its officers in connection with the administration of a deferred
compensation plan adopted by Trustees and to the extent such investments are
allowed by an exemptive order granted by the U.S. Securities and Exchange
Commission.
4. The fund does not currently intend (at least for the next 12 months) to
purchase the securities of any issuer if those Officers and Trustees of the
fund, its Investment Adviser or principal underwriter who individually own more
than 1/2 of 1% of the securities of such issuer together own more than 5% of
such issuer's securities.
5. The fund does not currently intend (at least for the next 12 months) to
invest more than 5% of its net assets, valued at the lower of cost or market at
the time of purchase, in warrants, including not more than 2% of such net
assets in warrants that are not listed on a major stock exchange. However,
warrants acquired in units or attached to securities may be deemed to be
without value for the purpose of this restriction.
6. The fund does not currently intend (at least for the next 12 months) to
invest more than 5% of its net assets in restricted securities (excluding Rule
144A securities).
7. The fund does not currently intend (at least for the next 12 months) to
purchase securities in the event its borrowings exceed 5%.
8. The fund does not currently intend (at least for the next 12 months) to
invest 25% or more of its assets in municipal bonds the issuers of which are
located in the same state, unless such securities are guaranteed by the U.S.
Government, or more than 25% of its total assets in securities the interest on
which is paid from revenues of similar type projects (such as hospitals and
health facilities; turnpikes and toll roads; ports and airports; or colleges
and universities). The fund may on occasion invest more than an aggregate of
25% of its total assets in industrial development bonds. There could be
economic, business or political developments which might affect all municipal
bonds of a similar category or type or issued by issuers within any particular
geographical area or jurisdiction.
9. The fund does not currently intend (at least for the next 12 months) to
loan portfolio securities.
For the purpose of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds that are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the bonds as
described, the most significant of which is the ultimate source of funds for
the payment of principal and interest on such bonds.
FUND OFFICERS AND TRUSTEES
Trustees and Trustee Compensation
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) DURING AGGREGATE TOTAL COMPENSATION TOTAL
NUMBER
REGISTRANT PAST 5 YEARS (POSITIONS WITHIN THE COMPENSATION FROM ALL FUNDS OF FUND
ORGANIZATIONS LISTED MAY HAVE (INCLUDING MANAGED BY CAPITAL BOARDS ON
CHANGED DURING THIS PERIOD) VOLUNTARILY DEFERRED RESEARCH AND WHICH
COMPENSATION/1/) FROM MANAGEMENT COMPANY/2/ TRUSTEE
THE COMPANY DURING FISCAL YEAR ENDED JULY 31, 1995
SERVES/2/
<S> <C> <C> <C> <C> <C>
++ H. Frederick Christie Trustee Private Investor. The Mission $2,659/3/ $142,891 18
P.O. Box 144 Group (non-utility holding
Palos Verdes Estates, CA 90274 Company, subsidiary of Southern
Age: 62 California Edison Company),
former President and Chief
Executive Officer
Diane C. Creel Trustee Chairwoman, CEO and President, $1,856 $28,019 12
100 W. Broadway The Earth Technology Corporation
Suite 5000
Long Beach, CA 90802
Age: 46
Martin Fenton, Jr. Trustee Chairman, Senior Resource Group $3,272/3/ $105,628 15
4350 Executive Drive (management of senior living
Suite 101 centers)
San Diego, CA 92121-2116
Age: 59
Leonard R. Fuller Trustee President, Fuller & Company, Inc. $1,711 $28,664 12
4337 Marina City Drive (financial management consulting
Suite 841 ETN firm)
Marina del Rey, CA 90292
Age: 48
+* Abner D. Goldstine President, Capital Research and Management none/4/ none/4/ 12
Age: 65 PEO and Company, Senior Vice President
Trustee and Director
+** Paul G. Haaga, Jr. Chairman of Capital Research and Management none/4/ none/4/ 14
Age: 46 the Board Company, Senior Vice President
and Director
Herbert Hoover III Trustee Private Investor $2,477 $61,573 14
200 S. Los Robles Avenue
Suite 520
Pasadena, CA 91101-2431
Age: 67
Richard G. Newman Trustee Chairman, President and CEO, $3,091/3/ $40,559 12
3250 Wilshire Boulevard AECOM Technology Corporation
Los Angeles, CA 90010-1599 (architectural engineering)
Age: 60
Peter Valli Trustee Chairman and CEO, BW/IP $2,800/3/ $38,650 12
200 Oceangate Boulevard International Inc. (industrial
Suite 900 manufacturing)
Long Beach, CA 90802
Age: 68
</TABLE>
+ Trustees who are considered "interested persons as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"), on
the basis of their affiliation with the fund's Investment Adviser, Capital
Research and Management Company.
++ May be deemed an "interested person" of the fund due to membership on the
board of trustees of the parent company of a registered broker-dealer.
* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071//
/1/ Amounts may be deferred by eligible trustees under a non-qualified deferred
compensation plan adopted by the Fund in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/ Capital Research and Management Company manages The American Funds Group
consisting of 28 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash Management
Trust of America, Capital Income Builder, Inc., Capital World Growth and Income
Fund, Inc., Capital World Bond Fund, Inc., EuroPacific Growth Fund, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., Intermediate Bond Fund of America, The Investment Company of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of
America, Inc., The Tax-Exempt Fund of California, The Tax-Exempt Fund of
Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, The U. S. Treasury Money Fund of America, U.S. Government Securities
Fund and Washington Mutual Investors Fund, Inc. Capital Research and
Management Company also manages American Variable Insurance Series and Anchor
Pathway Fund which serve as the underlying investment vehicle for certain
variable insurance contracts; and Bond Portfolio for Endowments, Inc. and
Endowments, Inc. whose shares may be owned only by tax-exempt organizations.
/3/ Since the plan's adoption, the total amount of deferred compensation
accrued by the fund (plus earnings thereon) for participating Trustees is as
follows: H. Frederick Christie ($1,385), Martin Fenton, Jr. ($4,179), Richard
G. Newman ($5,524) and Peter C. Valli ($4,828). Amounts deferred and
accumulated earnings thereon are not funded and are general unsecured
liabilities of the fund until paid to the Trustee.
/4/ Paul G. Haaga, Jr. and Abner D. Goldstine are affiliated with the
Investment Adviser and, accordingly, receive no compensation from the Fund.
OFFICERS
*** Neil L. Langberg, SENIOR VICE PRESIDENT. Capital Research and Management
Company, Vice President - Investment Management Group
** Mary C. Cremin, VICE PRESIDENT AND TREASURER. Capital Research and
Management Company, Senior Vice President - Fund Business Management Group
* Michael J. Downer, VICE PRESIDENT. Capital Research and Management Company,
Senior Vice President - Fund Business Management Group
* Julie F. Williams, SECRETARY. Capital Research and Management Company, Vice
President - Fund Business Management Group
* Kimberly S. Verdick, ASSISTANT SECRETARY, Capital Research and Management
Company, Compliance Associate - Fund Business Management Group
** Anthony W. Hynes, Jr., ASSISTANT TREASURER. Capital Research and Management
Company, Vice President - Fund Business Management Group
# Positions within the organizations listed may have changed during this
period.
* Address is 333 South Hope Street, Los Angeles, CA 90071.
** Address is 135 South State College Boulevard, Brea, CA 92621.
*** Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025.
No compensation is paid by the fund to any officer or Trustee who is a
director, officer, or employee of the Investment Adviser. The fund pays annual
fees of $1,200 to Trustees who are not affiliated with the Investment Adviser,
plus $200 for each Board of Trustees meeting attended, plus $200 for each
meeting attended as a member of a committee of the Board of Trustees. The
Trustees may elect, on a voluntary basis, to defer all or a portion of these
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.
MANAGEMENT
INVESTMENT ADVISER -- The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad with a staff of professionals, many
of whom have years of investment experience. 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.
An affiliate of the Investment Adviser compiles indices for major stock
markets around the world and compiles and edits the Morgan Stanley Capital
International Perspective, providing financial and market information about
more than 2,400 companies around the world.
The Investment Adviser is responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types throughout the world. These investors include privately owned
businesses and large corporations, as well as schools, colleges, foundations
and other non-profit and tax-exempt organizations.
INVESTMENT ADVISORY AND SERVICE AGREEMENT -- The Investment Advisory and
Service Agreement (the "Agreement") between the fund and the Investment Adviser
will continue in effect until September 30, 1995, 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).
Under the Agreement, the Investment Adviser will receive from the fund a
monthly fee, at an annual rate of 0.30% per annum on the first $60 million of
the fund's net assets; plus 0.21% per annum on the portion of such net assets
in excess of $60 million, plus 3% of the Fund's gross investment income for the
preceding month.
For the purposes of such computations under the Agreement, the fund's gross
investment income does not reflect any net realized gains or losses on the sale
of portfolio securities but does include original-issue discount as defined for
federal income tax purposes.
The Investment Adviser, in addition to providing investment advisory
services, furnishes the services and pays the compensation and travel expenses
of qualified persons to perform the executive and related administrative,
clerical and bookkeeping functions of the fund, provides suitable office space,
necessary small office equipment and general purpose accounting forms,
supplies, and postage used at the offices of the fund. The fund pays all
expenses not assumed by the Investment Adviser, including, but not limited to,
custodian, stock transfer and dividend disbursing fees and expenses; costs of
the designing, printing and mailing of reports, prospectuses, proxy statements,
and notices to its shareholders, taxes; expenses of the issuance and redemption
of shares (including stock certificates, registration and qualification fees
and expenses); legal and auditing expenses; compensation, fees, and expenses
paid to trustees unaffiliated with the Investment Adviser; association dues;
and costs of stationery and forms prepared exclusively for the fund.
The Investment Adviser has agreed to waive its fees by any amount necessary to
assure that such expenses do not exceed applicable expense limitations in any
state in which the funds' shares are being offered for sale. Only one state
(California) continues to impose expense limitations on funds registered for
sale therein. The California provision currently limits annual expenses to the
sum of 2-1/2% of the first $30 million of average net assets, 2% of the next
$70 million and 1-1/2% of the remaining average net assets. Rule 12b-1
distribution expenses would be excluded from this limit. Other expenses which
are not subject to these limitations include interest, taxes, brokerage
commissions, transaction costs, and extraordinary items such as litigation, as
well as, for purposes of the state expense limitations, any amounts excludable
under the applicable regulation. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses.
The Investment Adviser has agreed to bear any fund expenses (with the
exception of interest, taxes, brokerage costs and extraordinary expenses such
as litigation and acquisitions) in excess of 0.75% of the fund's average net
assets per annum, subject to reimbursement by the fund, during a period which
will terminate at the earlier of (i) such time as no reimbursement has been
required for a period of 12 consecutive months, provided no advances are
outstanding, or (ii) October 1, 2003. Each month, to the extent the fund owes
money to the Investment Adviser pursuant to this provision of the Agreement and
the fund's annualized expense ratio for the month is below 0.75%, the fund will
reimburse the Investment Adviser until the fund's annualized expense ratio
equals 0.75% or the debt is repaid, whichever comes first. CRMC has also
voluntarily agreed to waive its fees to the extent necessary to ensure that the
fund's expenses do not exceed 0.71% of the average net assets. There can be no
assurance that this voluntary fee waiver will continue in the future. During
the period, the Investment Adviser's total fees amounted to $757,000. Fee
waivers amounted to $488,000 for the year ended July 31, 1995.
PRINCIPAL UNDERWRITER -- American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The fund has
adopted a Plan of Distribution (the "Plan"), pursuant to rule 12b-1 under the
1940 Act (see "Principal Underwriter" in the prospectus). The Principal
Underwriter receives amounts payable pursuant to the Plan (see below) and
commissions consisting of that portion of the sales charge remaining after the
discounts which it allows to investment dealers. Commissions retained by the
Principal Underwriter on sales of fund shares during the period amounted to
$197,000 after allowance of $793,000 to dealers.
As required by rule 12b-1, the Plan (together with the Principal Underwriting
Agreement) has been approved by a majority of the entire 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 Plan or the Principal Underwriting Agreement, and the Plan has been
approved by the vote of a majority of the outstanding voting securities of the
fund. The officers and Trustees who are "interested persons" of the fund due
to present or past affiliations with the Investment Adviser and related
companies may be considered to have a direct or indirect financial interest in
the operation of the Plan. Potential benefits of the Plan to the fund are
improved shareholder services, savings to the fund in transfer agency costs,
savings to the fund in advisory fees and other expenses, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
Trustees who are not "interested persons" of the fund shall be committed to the
discretion of the Trustees who are not "interested persons" during the
existence of the Plan. The Plan is reviewed quarterly and must be renewed
annually by the Board of Trustees.
Under the Plan, the fund may expend up to 0.30% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of fund shares, provided the fund's Board of Trustees has approved the
category of expenses for which payment is being made. These include service
fees for qualified dealers and dealer commissions and wholesaler compensation
on sales of shares exceeding $1 million. During the period, the fund paid
$560,000 under the Plan as compensation to dealers. As of July 31, 1994,
accrued and unpaid distribution expenses were $47,000.
The Glass-Steagall Act and other applicable laws, among other things,
generally prohibit commercial banks from engaging in the business of
underwriting, selling or distributing securities, but permit banks to make
shares of mutual funds available to their customers and to perform
administrative and shareholder servicing functions. However, judicial or
administrative decisions or interpretations of such laws, as well as changes in
either federal or state statutes or regulations relating to the permissible
activities of banks or their subsidiaries of affiliates, could prevent a bank
from continuing to perform all or a part of its servicing activities. If a
bank were prohibited from so acting, shareholder clients of such bank would be
permitted to remain shareholders of the fund and alternate means for continuing
the servicing of such shareholders would be sought. In such event, changes in
the operation of the fund might occur and shareholders serviced by such bank
might no longer be able to avail themselves of any automatic investment or
other services then being provided by such bank. It is not expected that
shareholders would suffer with adverse financial consequences as a result of
any of these occurrences.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and certain banks and financial
institutions may be required to be registered as dealers pursuant to state law.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS AND DISTRIBUTIONS -- The fund declares dividends from its net
investment income daily and distributes the accrued dividends to shareholders
each month. The percentage of the distribution that is tax-exempt may vary
from distribution to distribution. For the purpose of calculating dividends,
daily net investment income of the fund consists of: (a) all interest income
accrued on the fund's investments including any discount or premium ratably
amortized to the date of maturity or determined in such other manner as may be
deemed appropriate; minus (b) all liabilities accrued, including interest,
taxes and other expense items, amounts determined and declared as dividends or
distributions and reserves for contingent or undetermined liabilities, all
determined in accordance with generally accepted accounting principles.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and local
tax considerations generally affecting the fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
fund or its shareholders, and the discussion here and in the fund's prospectus
is not intended as a substitute for careful tax planning. Investors are urged
to consult their tax advisers with specific reference to their own tax
situations.
The fund is not intended to constitute a balanced investment program and is
not designed for investors seeking capital appreciation or maximum tax-exempt
income irrespective of fluctuations in principal. Shares of the fund would
generally not be suitable for tax-exempt institutions or tax-deferred
retirement plans (E.G., plans qualified under Section 401 of the Internal
Revenue Code, Keogh-type plans and individual retirement accounts.) Such
retirement plans would not gain any benefit from the tax-exempt nature of the
fund's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, the fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.
The fund intends to meet all the requirements and has elected the tax status
of a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Under Subchapter M, if the fund
distributes within specified times at least 90% of its taxable and tax-exempt
net investment income, it will be taxed only on that portion, if any, which it
retains.
To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; (b) derive less than 30% of its gross income from the gains or sale
or other disposition of stock or securities held less than three months, and
(c) diversify its holdings so that, at the end of each fiscal quarter, (i) at
least 50% of the market value of the fund's assets is represented by cash, cash
items, U.S. Government securities, securities of other regulated investment
companies, and other securities which must be limited, in respect of any one
issuer to an amount not greater than 5% of the fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies) or in two or more issuers which the fund controls and which are
engaged in the same or similar trades or businesses or related trades or
businesses.
The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") will be the same for all shareholders receiving dividends during
such year. In order for the fund to pay exempt-interest dividends during any
taxable year, at the close of each fiscal quarter at least 50% of the aggregate
value of the fund's assets must consist of tax-exempt obligations. Not later
than 60 days after the close of its taxable year, the fund will notify each
shareholder of the portion of the dividends paid by the fund to the shareholder
with respect to such taxable year which constitutes exempt-interest dividends.
The aggregate amount of dividends so designated cannot, however, exceed the
excess of the amount of interest excludable from gross income from tax under
Section 103 of the Code received by the fund during the taxable year over any
amounts disallowed as deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if the fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, any loss on the sale or exchange
of such share will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the fund does not expect to realize substantial long-term capital
gains, any net realized long-term capital gains will be distributed annually.
The fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held fund shares. Such distributions
will be designated as a capital gains distribution in a written notice mailed
by the fund to shareholders not later than 60 days after the close of the
fund's taxable year. If a shareholder receives a designated capital gain
distribution (treated by the shareholder as a long-term capital gain) with
respect to any fund share and such fund share is held for six months or less,
then (unless otherwise disallowed) any loss on the sale or exchange of that
fund share will be treated as long-term capital loss to the extent of the
designated capital gain distribution. The fund also may make a distribution of
net realized long-term capital gains near the end of the calendar year to
comply with certain requirements of the Code. Gain recognized on the
disposition of a debt obligation (including tax-exempt obligations purchased
after April 30, 1993) purchased by the fund at a market discount (generally at
a price less than its principal amount) will be treated as ordinary income to
the extent of the portion of the market discount which accrued during the
period of time the fund held the debt obligation.
Similarly, while the fund does not expect to earn any significant investment
company taxable income in the event that any taxable income is earned by the
fund it will be distributed. In general, the fund's investment company taxable
income will be its taxable income subject to certain adjustments and excluding
the excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The fund would be taxed on any
undistributed investment company taxable income. Since any such income will be
distributed, it will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
The Code imposes limitations on the use and investment of the proceeds of
state and local governmental bonds and upon other funds of the issuers of such
bonds. These limitations must be satisfied on a continuing basis to maintain
the exclusion from gross income of interest on such bonds. These provisions of
the Code generally apply to bonds issued after August 15, 1986. Bond counsel
qualify their opinions as to the federal tax status of new issues of bonds by
making such opinions contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date
the bonds were issued.
In most cases, the interest on "private activity" bonds as defined under the
Code is an item of tax preference subject to the alternative minimum tax
("AMT") on corporations and individuals. The fund may invest up to 20% of its
total assets in "private activity" bonds. As of the date of this statement of
additional information, individuals are subject to an AMT at a maximum rate of
28% and corporations at a rate of 20%. Shareholders will not be permitted to
deduct any of their share of fund expenses in computing alternative minimum tax
income. With respect to corporate shareholders of the fund, all interest on
municipal bonds and other tax-exempt obligations, including exempt-interest
dividends paid by the fund, is included in adjusted current earnings in
calculating federal alternative minimum taxable income, and may also affect
corporate federal "environmental tax" liability.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain net income (both long-term and
short-term) for the one-year period ending on October 31 (as though the
one-year period ending on October 31 were the regulated investment company's
taxable year), and (iii) the sum of any untaxed, undistributed net investment
income and net capital gains of the regulated investment company for prior
periods. The term "distributed amount" generally means the sum of (i) amounts
actually distributed by the fund from its current year's ordinary income and
capital gain net income and (ii) any amount on which the fund pays income tax
during the periods described above. The fund intends to distribute net
investment income and net capital gains so as to minimize or avoid the excise
tax liability.
If for any taxable year the fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and may
be eligible for the dividends received deduction for corporations. Under
normal circumstances, no part of the distributions to shareholders by the fund
is expected to qualify for the dividends-received deduction allowed to
corporate shareholders.
If a shareholder exchanges or otherwise disposes of shares of the fund within
90 days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously
incurred in acquiring the fund's shares shall not be taken into account (to the
extent such previous sales charges do not exceed the reduction in sales
charges) for the purposes of determining the amount of gain or loss on the
exchange, but will be treated as having been incurred in the acquisition of
such other funds. Also, any loss realized on a redemption or exchange of
shares of a fund will be disallowed to the extent shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.
As of the date of this statement of additional information, the maximum
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains is 28%; and the maximum corporate tax applicable to ordinary
income and net capital gains is 35%. However, to eliminate the benefit of
lower marginal corporate income tax rates, corporations which have taxable
income in excess of $100,000 for a taxable year will be required to pay an
additional amount of tax of up to $11,750 and corporations which have taxable
income in excess of $15,000,000 for a taxable year will be required to pay an
additional amount of income tax of up to $100,000. Naturally, the amount of
tax payable by a taxpayer will be affected by a combination of tax law rules
covering, E.G., deductions, credits, deferrals, exemptions, sources of income
and other matters.
Under the Code, distributions of net investment income by the fund to a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
non-U.S. corporation, or non-U.S. partnership (a "non-U.S. shareholder") will
be subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate, if
applicable). Withholding will not apply if a dividend paid by the fund to a
non-U.S. shareholder is "effectively connected" with a U.S. trade or business,
in which case the reporting and withholding requirements applicable to U.S.
citizens, U.S. residents, or domestic corporations will apply.
PURCHASE OF SHARES
PRICE OF SHARES -- Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. The dealer is responsible for promptly transmitting purchase
orders to the Principal Underwriter. Orders received by the investment dealer,
the Transfer Agent, or the fund after the time of the determination of the net
asset value will be entered at the next calculated offering price. Prices
which appear in the newspaper are not always indicative of prices at which you
will be purchasing and redeeming shares of the fund, since such prices
generally reflect the previous day's closing price whereas purchases and
redemptions are made at the next calculated closing price.
The price you pay for shares, the public offering price, is based on the
net asset value per share which is calculated once daily at the close of
trading (currently 4:00 p.m., New York time) each day the New York Stock
Exchange is open. The New York Stock Exchange is currently closed on weekends
and on the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas Day. The
net asset value per share is determined as follows:
1. Municipal bonds and notes and any other securities with more than 60
days remaining to maturity normally are valued at prices obtained from a
national municipal bond pricing service, except that, where such prices are not
available or determined by the fund's officers not to represent market value,
they are valued at prices representing the mean between bid and asked
quotations (on the sale of similar issues) obtained from one or more
broker/dealers dealing in such municipal bonds and notes.
All securities with 60 days or less to maturity are amortized to maturity
based on their cost to the fund if acquired within 60 days of maturity or, if
already held by the fund on the 60th day, based on the value determined on the
61st day. The maturities of variable or floating rate instruments, or
instruments with the right to sell them at par to the issuer or dealer, are
deemed to be the time remaining until the next interest adjustment date or
until they can be redeemed at par.
Where market prices or market quotations are not readily available, securities
are valued at fair value as determined in good faith by the Board of Trustees
or a committee thereof. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including proper accruals of expense items; and
3. The value of the net assets so obtained are then divided by the total
number of shares outstanding and the result, rounded to the nearer cent, is the
net asset value per share.
Any purchase order may be rejected by the Principal Underwriter or by the
fund. The fund will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the fund without the consent of a
majority of the Board of Trustees.
STATEMENT OF INTENTION -- The reduced sales charges and public offering prices
set forth in the prospectus apply to purchases of $25,000 or more made within a
13-month period pursuant to the terms of a written statement of intention (the
"Statement") in the form provided by the Principal Underwriter and signed by
the purchaser. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder signs 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 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 purchases had been made at a single time. If
the difference is not paid within 20 days after written request by the
Principal Underwriter or the securities dealer, the appropriate number of
escrowed shares will be redeemed to pay such difference. If the proceeds from
this redemption are inadequate, the purchaser will be liable to the Principal
Underwriter for the balance still outstanding. The Statement may be revised
upward at any time during the 13-month period, and such a revision will be
treated as a new Statement, except that the 13-month period during which the
purchase must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases.
DEALER COMMISSIONS - The following commissions will be paid, as described in
the prospectus, to dealers who initiate and are responsible for purchases of $1
million or more, for purchases by any defined contribution plan qualified under
section 401(a) of the Internal Revenue Code including a "401(k)" plan with 200
or more eligible employees, and for purchases made at net asset value by
certain retirement plans of organizations with collective retirement plan
assets of $100 million or more: 1% on amounts of $1 million to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value. See "The American Funds Shareholder
Guide" in the fund's prospectus for more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN -- The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans where
Capital Guardian Trust Company serves as custodian or trustee.) Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
the shareholder's bank account cannot be charged due to insufficient funds, a
stop-payment order or closing of the account, the plan may be terminated and
the related investment reversed. The shareholder may change the amount of the
investment or discontinue the plan at any time by writing to the Transfer
Agent.
AUTOMATIC WITHDRAWALS -- Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, automatically to redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
REDEMPTION OF SHARES
The fund's Declaration of Trust permits the fund to direct the Transfer Agent
to redeem the shares of any shareholder if the shares owned by such shareholder
through redemptions, market decline or otherwise, have a value of less than the
minimum initial investment amount required of new shareholders of that series
or Class, (determined, for this purpose only as the greater of the
shareholder's cost or the current net asset value of the shares, including any
shares acquired through reinvestment of income dividends and capital gain
distributions). Prior notice of at least 60 days will be given to a
shareholder before the involuntary redemption provision is made effective with
respect to the shareholder's account. The shareholder will have not less than
30 days from the date of such notice within which to bring the account up to
the minimum determined as set forth above.
EXECUTION OF PORTFOLIO TRANSACTIONS
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund does not intend to pay a mark-up
in exchange for research in connection with principal transactions.
GENERAL INFORMATION
CUSTODIAN OF ASSETS -- Securities and cash owned by the fund, including
proceeds from the sale of shares of the fund and of securities in the fund's
portfolio, are held by The Chase Manhattan Bank, N.A., One Chase Manhattan
Plaza, New York, NY 10081, as custodian.
INDEPENDENT ACCOUNTANTS -- Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, provides audit services, preparation of tax returns and
review of certain documents to be filed with the Securities and Exchange
Commission. The Financial Statements included in this Statement of Additional
Information have been so included in reliance on the report of the independent
accountants given on the authority of said firm as experts in accounting and
auditing.
SHAREHOLDER VOTING RIGHTS -- At any meeting of shareholders, duly called and at
which a quorum is present, the shareholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
trustee or trustees from office and may elect a successor or successors to fill
any resulting vacancies for the unexpired terms of removed trustees. The fund
has made an undertaking, at the request of the staff of the Securities and
Exchange Commission, to apply the provisions of section 16(c) of the 1940 Act
with respect to the removal of trustees, as though the fund were a common-law
trust. Accordingly, the trustees of the fund shall promptly call a meeting of
shareholders for the purpose of voting upon the question of removal of any
trustee when requested in writing to do so by the record holders of not less
than 10% of the outstanding shares.
REPORTS TO SHAREHOLDERS -- The fund's fiscal year ends on July 31.
Shareholders are provided at least semi-annually with reports showing the
investment portfolio and financial statements audited annually by the fund's
independent accountants, Price Waterhouse LLP, whose selection is determined
annually by the Trustees.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. This policy includes: a ban on
acquisitions of securities pursuant to an initial public offering; restrictions
on acquisitions of private placement securities; pre-clearance and reporting
requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods on personal investing for certain investment
personnel; ban on short-term trading profits for investment personnel;
limitations on service as a director of publicly traded companies; and
disclosure of personal securities transactions.
The financial statements including the investment portfolio and the report of
Independent Accountants contained in the Annual Report are included in this
Statement of Additional Information. The following information is not included
in the Annual Report:
<TABLE>
<CAPTION>
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
<S> <C>
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1995
Net asset value and redemption price per share
(Net assets divided by shares outstanding) $ 14.29
Maximum offering price per share (100/95.25 of
per share net asset value, which takes into account
the fund's current maximum sales charge) $ 15.00
</TABLE>
INVESTMENT RESULTS
The fund's yield is 4.55% based on a 30-day (or one month) period ended
July 31, 1995, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of
the period, according to the following formula:
YIELD = 2[(a-b/cd + 1)/6/ -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that were
entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
The fund may also calculate a tax equivalent yield based on a 30-day (or
one month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of
the yield (as computed by the formula stated above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield that is not tax-exempt. The fund's tax equivalent yield based on
the maximum individual effective federal tax rate of 39.6% for the 30-day (or
one month) period ended July 31, 1995 was 7.53%.
The fund's average annual total return ("T") will be computed by equating the
value at the end of the period ("ERV") with a hypothetical initial investment
of $1,000 ("P") over a number of years ("n") according to the following formula
as required by the Securities and Exchange Commission: P(1+T)/n/=ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
4.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. The
fund will calculate total return for one, five and ten-year periods after such
a period has elapsed.
During its lifetime (October 6, 1993 to July 31, 1995), the fund had a
total return of 3.55% compared with 7.86% for The Lehman Brothers 7-Year
Municipal Bond Index./1/
EXPERIENCE OF INVESTMENT ADVISER -- Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In all of the
10-year periods during which those funds were managed by Capital Research and
Management Company since 1964 (115 in all), those funds have had better total
returns than the Standard and Poor's 500 Stock Composite Index in 94 of the 115
periods.
Note that past results are not an indication of future investment results.
Also, the fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company.
The fund may also refer to results compiled by organizations such as Lipper
Analytical Services, Morningstar, Inc. and Wiesenberger Investment Companies
Services. Additionally, the fund may, from time to time, refer to results
published in various newspapers or periodicals, including Barrons, Forbes,
Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine, Money,
U.S. News and World Report and The Wall Street Journal.
/1/ The Lehman Brothers 7-Year Municipal Bond Index is unmanaged, reflects no
expenses or management fees and consists of a large universe of municipal bonds
issued as state general obligations or revenue bonds with a minimum rating of
BBB by Standard & Poor's Corporation.
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of the municipal bonds
which they undertake to rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings
may have the same yield.
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." Moody's applies the numerical modifiers 1,
2, and 3 in each generic rating classification from AA through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. Ratings are described as follows:
BONDS --
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, I.E.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
NOTES --
"The MIG 1 designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
The MIG 2 designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
COMMERCIAL PAPER --
"Issuers rated Prime-1 (or related supporting institutions) 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.
- -- Well established access to a range of financial markets and assured sources
of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) 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 appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained."
Standard & Poor's Corporation rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Ratings are described as follows:
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
NOTES --
"The SP-1 rating denotes a very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
The SP-2 rating denotes a satisfactory capacity to pay principal and
interest."
COMMERCIAL PAPER --
The A-1 designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation."
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
INVESTMENT PORTFOLIO - JULY 31, 1995
PORTFOLIO COMPOSITION
New York 8.5%
Louisiana 7.3%
Texas 7.0%
Maine 6.2%
Massachusetts 6.1%
Minnesota 5.6%
California 5.5%
Pennsylvania 5.1%
Mississippi 4.6%
Ohio 3.8%
Other states 34.4%
Cash equivalents 5.9%
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Market
Amount Value
(000) (000)
TAX-EXEMPT SECURITIES MATURING IN MORE THAN
ONE YEAR - 95.28%
ALASKA - 1.60%
Alaska Student Loan Corporation, Student Loan
Revenue Bonds, 1988 Series A, AMBAC Insured,
8.40% 2003 $2,750 $3,047
ARIZONA - 2.21%
Arizona Educational Loan Marketing Corp.,
1992 Educational Loan Revenue Bonds, Series A,
6.70% 2000 4,000 4,220
CALIFORNIA - 5.53%
Health Facilities Financing Authority, Hospital
Revenue Bonds (Downey Community Hospital),
Series 1993, 5.00% 2001 1,250 1,230
Public Works Board, Lease Revenue Bonds
(Department of Corrections),
1991 Series A (State Prisons, Imperial
County), 5.00% 2001 2,250 2,243
Los Angeles County, Certificate of Participation
(Marina Del Rey), Series A:
5.75% 1998 1,000 1,016
6.25% 2003 3,100 3,010
Pleasanton Joint Powers Financing Authority,
Reassessment Revenue Bonds, 1993 Series A,
5.70% 2001 1,985 1,984
Sacramento Cogeneration Authority, Cogeneration
Project Revenue Bonds (Proctor & Gamble
Project), 1995 Series, 7.00% 2004 1,000 1,063
COLORADO - 3.67%
Housing and Finance Authority, Single Family
Program Senior Bonds, 1995 Series C-2,
5.625% 2009(1997)/1/ 1,000 999
City and County of Denver, Airport System
Revenue Bonds, Series 1991D:
6.60% 1996 1,465 1,509
6.80% 1997 1,170 1,226
7.30% 2000 3,000 3,269
DISTRICT OF COLUMBIA - 2.31%
General Obligation Refunding Bonds:
Series 1994C, 4.90% 1998 500 493
Series 1994A-3, 4.70% 1999 2,000 1,931
Series 1994C, FGIC Insured, 5.00% 2001 1,000 997
Series 1994D, FGIC Insured, 5.10% 2002 1,000 996
GEORGIA - 1.74%
Municipal Electric Authority, Power Revenue
Bonds, Series Q, 8.375% 2016 (crossover
refunded 1998) 500 553
Fulco Hospital Authority, Revenue Anticipation
Certificates (Saint Joseph's Hospital of
Atlanta, Inc.), Series 1994:
4.55% 1999 855 831
4.70% 2000 2,000 1,931
GUAM - 1.05%
Government of Guam, General Obligation Bonds,
1995 Series A, 5.25% 1999 2,000 2,007
ILLINOIS - 3.11%
Health Facilities Authority, Revenue Bond:
(Rush Presbyterian-St. Luke's Medical Center
Obligated Group), Series 1993, MBIA Insured,
4.70% 2001 1,470 1,463
(OSF Healthcare System), Series 1993, 5.25% 2001 2,025 2,018
Toll Highway Authority, Toll Highway Refunding
Revenue Bonds, 1993 Series A, 4.70% 2001 2,475 2,457
INDIANA - 1.43%
Employment Development Commission, Pollution
Control Revenue Bonds (Chrysler Corporation
Project), Series 1985, 5.70% 1999 2,700 2,737
KENTUCKY - 1.04%
Higher Education Student Loan Corporation,
Insured Student Loan Revenue Bonds,
1993 Series B, 5.00% 2002 2,000 1,979
LOUISIANA - 7.33%
Parish of St. Charles, Adjustable/Fixed Rate
Pollution Control Revenue Bonds (Louisiana
Power & Light Company Project), Second Series
1984, 8.00% 2014 (1999)/1/ 6,250 6,893
Parish of West Feliciana, Pollution Control
Revenue Bonds (Gulf States Utilities Company
Project), Series 1985-B, 9.00% 2015 (2000)/1/ 1,500 1,707
Offshore Terminal Authority, Deepwater Port
Refunding Revenue Bonds (Loop Inc. Project):
First Stage Series 1992B:
6.00% 2001 1,500 1,575
6.20% 2003 1,500 1,600
First Stage Series E, 7.45% 2004 2,000 2,222
MAINE - 6.18%
Educational Loan Marketing Corporation:
Student Loan Revenue Refunding Bonds:
Series 1992A-1, 6.20% 2003 585 609
Series 1992A-4, 6.30% 2004 1,010 1,059
Senior Student Loan Revenue Bonds, Series
1994A-4, 5.85% 2002 1,000 1,034
State Housing Authority, Mortgage Purchase Bonds,
1994 Series C-1, 5.90% 2015 9,000 9,087
MARYLAND - 1.71%
Community Development Administration, Department
of Housing and Community Development, Single
Family Program Bonds, 1994 Fifth Series,
5.875% 2017 (2000)/1/ 1,500 1,505
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery County
Resource Recovery Project), Series 1993A,
5.90% 2005 1,750 1,756
MASSACHUSETTS - 6.13%
Water Resources Authority, General Revenue Bonds,
1993 Series C, 5.25% 2001 3,625 3,713
The New England Education Loan Marketing
Corporation:
Student Loan Refunding Bonds:
1992 Senior Issue A, 6.00% 1998 2,100 2,179
1992 Senior Issue A, 6.50% 2002 2,500 2,675
Student Loan Revenue Refunding Bonds, 1992
Senior Issue D, 6.20% 2000 3,000 3,136
MICHIGAN - 2.09%
Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Genesys Health System
Obligated Group), Series 1995A, 7.20% 2003 2,375 2,528
State Housing Development Authority, Rental
Housing Revenue Bonds, 1994 Series A,
4.70% 2000 1,500 1,464
MINNESOTA - 5.59%
Housing and Redevelopment Authority of the City
of Saint Paul, Minnesota, Hospital Facility
Revenue Bonds (HealthEast Project):
Series 1987 A, 9.75% 2017 (crossover refunded
1997) 2,500 2,783
Series 1987 B, 9.75% 2017 (1997)/1/ 2,255 2,474
Series 1987 C, 9.75% 2017 (crossover refunded
1997) 1,975 2,167
City of Minneapolis and Housing and
Redevelopment Authority of the City of St.
Paul, Health Care System Revenue Bonds
(Health Span), Series 1993B, AMBAC Insured,
4.50% 2001 3,300 3,250
MISSISSIPPI - 4.59%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 (1998)/1/ 7,500 8,754
NEW JERSEY - 0.60%
Economic Development Authority, Market Transition
Facility Senior Lien Revenue Bonds, Series
1994A, MBIA Insured, 7.00% 2003 1,000 1,141
NEW YORK - 8.46%
Dormitory Authority of the State of New York:
City University Refunding Bonds, Issue 1993G,
5.00% 2001 1,000 986
Revenue Bonds, City University Issue, Series U,
6.10% 2001 1,500 1,590
Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1993 Series F
Refunding, 4.60% 1999 1,000 987
Metropolitan Transportation Authority, Transit
Facilities 1987 Service Contract Bonds,
Series 7, 4.85% 2001 500 493
Urban Development Corporation:
Correctional Facilities Revenue Bonds, 1993A
Refunding Series, 6.30% 2003 1,305 1,369
State Facilities Revenue Bonds, Series 1991,
7.30% 2001 1,800 1,972
City of New York General Obligation Bonds:
1994 Series C, 4.70% 1999 770 755
1994 Series A, 6.00% 2000 2,000 2,059
1994 Series B, 6.25% 2001 1,000 1,041
1994 Series A, 6.10% 2002 1,800 1,853
1994 Series D, 5.70% 2002 1,000 1,007
City of New York General Obligation Bonds:
Fiscal 1993 Series A, 6.25% 2003 2,000 2,040
NORTH CAROLINA - 3.11%
Municipal Power Agency Number 1, Catawba Electric
Revenue Bonds, Series 1992, 6.00% 2004 3,000 3,049
Eastern Municipal Power Agency, Power System
Revenue Bonds, Refunding Series 1993 C,
5.00% 2002 3,000 2,890
OHIO - 3.78%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds, 1992 Series A-2, 5.70% 2013(1999)/1/ 2,100 2,118
The Student Loan Funding Corporation, Cincinatti:
Student Loan Refunding Bonds, Series 1986A,
5.50% 2001 1,000 1,007
Student Loan Revenue Refunding Bonds,
Series 1992A, 5.40% 1999 925 936
Student Loan Senior Subordinated Revenue Bonds,
Series 1993A, 5.75% 2003 2,000 2,024
County of Franklin, Hospital Facilities Revenue
Refunding and Improvement Bonds (Doctors
Hospital Project), Series 1993, 5.70% 2004 1,120 1,126
OKLAHOMA - 1.06%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds (Homeownership Loan Program),
1994 Series A-1, 6.25% 2016 (1999)/1/ 2,000 2,019
PENNSYLVANIA - 5.05%
Higher Education Assistance Agency, Student Loan
Adjustable Rate Tender Revenue Refunding Bonds,
1985 Series A, FGIC Insured, 6.80% 2000 8,000 8,527
City of Philadelphia, Water and Wastewater
Revenue Bonds, Series 1995, MBIA Insured,
6.75% 2004 1,000 1,119
SOUTH CAROLINA - 0.74%
Public Service Authority, Revenue Bonds, 1996
Refunding Series A, MBIA Insured, 6.25% 2005 1,350 1,412
SOUTH DAKOTA - 1.35%
Student Loan Finance Corporation, Student Loan
Revenue Bonds, Series 1994-A, 5.95% 2001/2/ 2,500 2,583
TEXAS - 6.98%
General Obligation Bonds, Veterans' Housing
Assistance Program, Fund I Series 1994C
Refunding Bonds, 6.25% 2015 (1998)/1/ 3,000 3,046
City of Austin, Combined Utility Systems
Revenue Refunding Bonds, Series 1992A,
7.00% 2002 1,000 1,083
Brazos Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds:
Series 1992C-1, 6.00% 1999 1,500 1,559
Series 1993C-1, 5.50% 2002 1,000 1,014
Series 1994A-2, 5.85% 2001 1,000 1,034
Central Texas Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds,
Senior Series 1993C, 4.75% 2001 1,500 1,462
Cities of Dallas and Fort Worth, Dallas-Fort
Worth International Airport, Dallas-Fort
Worth Regional Airport Joint Revenue
Refunding Bonds Series 1992B, 6.00% 2002 1,000 1,061
City of Houston General Obligation Bonds,
6.00% 2000 2,000 2,082
Panhandle-Plains Higher Education Authority,
Inc., Student Loan Revenue Refunding Bonds,
Series 1993D, 5.55% 2005 1,000 985
UTAH - 0.56%
Intermountain Power Agency, Power Supply Revenue
Refunding Bonds, 1996 Series B, MBIA Insured,
6.50% 2004 1,000 1,074
VERMONT - 0.66%
Housing Finance Agency, Single Family Housing
Bonds, Series 4, 5.75% 2012 (1996)/1/ 1,250 1,253
VIRGINIA - 0.93%
Housing Development Authority, Commonwealth
Mortgage Bonds, Subseries A-1, 6.60% 2004 1,200 1,275
County of Prince William, Lease Participation
Certificates, Series 1995, MBIA Insured,
4.90% 2002 500 500
WASHINGTON - 3.49%
Washington Public Power Supply System:
Nuclear Project No. 1 Refunding Revenue Bonds,
Series 1993A, 6.30% 2001 1,000 1,063
Nuclear Project No. 2 Refunding Revenue Bonds:
Series 1993A, 5.10% 2000 1,750 1,766
Series 1990C, 7.30% 2000 1,500 1,649
Nuclear Project No. 3 Refunding Revenue Bonds,
Series 1989B, 7.10% 2000 2,000 2,182
WISCONSIN - 1.20%
Housing and Economic Development Authority,
Housing Revenue Bonds, 1995 Series A,
5.15% 2002 1,250 1,242
Health and Educational Facilities Authority,
Revenue Bonds, (Luther Hospital Project),
Series 1992, 6.00% 2003 1,000 1,045
---------
$181,857
---------
TAX-EXEMPT SECURITIES MATURING IN
ONE YEAR OR LESS - 5.90%
State of California, 1994 Revenue Anticipation
Warrants, Series C, FGIC Insured, 5.75% 4/25/96 1,600 1,624
State of Georgia, General Obligation Bonds,
Series 1993F, 6.50% 12/1/95 2,000 2,020
Sabine River Authority of Texas, Collateralized
Pollution Control Revenue Refunding Bonds (Texas
Utilities Electric Company Project), Daily
Adjustable Rate, Series 1995B, 4.25% 8/1/95/3/ 100 100
Sublette County, Wyoming, Daily Adjustable Rate
Pollution Control Revenue Bonds (Exxon
Project), Series 1984, 3.85% 8/1/95/3/ 200 200
Southwestern Illinois Development Authority,
Solid Waste Disposal Revenue Bonds (Shell Oil
Company Wood River Project), Daily Adjustable
Rate, Series 1991, 4.00% 8/1/95/3/ 200 200
State of Michigan, Full Faith and Credit General
Obligation Notes, 5.00 9/29/95 3,700 3,707
State of Texas, Tax and Revenue Anticipation
Notes, Series 1994, 5.00% 8/31/95 2,400 2,403
State of Texas, Tax and Revenue Anticipation
Notes, Series 1995, 5.00% 8/31/95 1,000 1,001
---------
11,255
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $193,176,000) $193,112
Excess of payables over cash, prepaids and
receivables (2,256)
---------
NET ASSETS $190,856
=========
</TABLE>
/1/These investments are valued in the market in the basis of their effective
maturity - that is, the
dates at which the securities are expected to be called or refunded by the
issuers. The effective maturity dates are shown in parentheses.
/2/Represent a when-issued security
/3/These are valued in the basis of their effective maturity-that is, the dated
at which the investor can put the securities to the issuers for redemption.
See Notes to Financial Statements
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
<S> <C> <C>
at July 31, 1995 (dollars in thousands)
ASSETS:
Tax-exempt securities
(cost: $193,176) $193,112
Cash 269
Prepaid organization expense 9
Receivables for-
Sale of investments 11,784
Sales of fund's shares 216
Accrued interest 2,866 14,866
--------- ---------
208,256
LIABILITIES:
Payables for-
Purchases of investments 16,219
Repurchases of fund's shares 805
Dividends payable 248
Management services 65
Accrued expenses 63 17,400
--------- ---------
NET ASSETS AT JULY 31, 1995-
Equivalent to $14.29 per share on 13,359,030
shares of beneficial interest issued and
outstanding;
unlimited shares authorized $190,856
=========
STATEMENT OF OPERATIONS
for the year ended July 31, 1995
(dollars in thousands)
INVESTMENT INCOME:
Income:
Interest on tax-exempt securities $10,355
---------
Expenses:
Management services fee $757
Distribution expenses 560
Transfer agent fee 77
Reports to shareholders 62
Registration statement and prospectus 112
Postage, stationery and supplies 20
Trustees' fees 22
Auditing and legal fees 30
Custodian fee 9
Taxes other than federal income tax 5
Organization expense 28
Other expenses 8
---------
Total expenses before reimbursement 1,690
Reimbursement of expenses 488 1,202
--------- ---------
Net investment income 9,153
---------
REALIZED LOSS AND UNREALIZED
DEPRECIATION ON INVESTMENTS:
Net realized loss (1,626)
Net unrealized depreciation:
Beginning of year (4,011)
End of year (64)
---------
Net change in unrealized depreciation 3,947
---------
Net realized loss and change in
unrealized depreciation on investments 2,321
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $11,474
=========
(dollars in thousands)
STATEMENT OF CHANGES IN NET ASSETS Period
October 6,
Year ended 6, 1993/1/
July 31, to January
1995 31, 1995
OPERATIONS:
Net investment income $9,153 $5,285
Net realized loss on investments (1,626) (2,384)
Net change in unrealized depreciation
on investments 3,947 (4,011)
--------- ---------
Net increase (decrease) in net assets
resulting from operations 11,474 (1,110)
--------- ---------
DIVIDENDS PAID FROM NET
INVESTMENT INCOME (9,177) (5,261)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
8,657,597 and 20,341,276 shares, respectively 120,121 294,347
Proceeds from shares issued in
reinvestment of net investment
income dividends:
449,087 and 256,486 shares, respectively 6,265 3,644
Cost of shares repurchased:
9,148,603 and 7,203,811 shares, respectively (126,763) (102,784)
--------- ---------
Net (decrease) increase in net assets
resulting from capital share
transactions (377) 195,207
--------- ---------
TOTAL INCREASE IN NET ASSETS 1,920 188,836
NET ASSETS:
Beginning of year 188,936 100
--------- ---------
End of year $190,856 $188,936
========= =========
</TABLE>
/1/Commencement of operations
See Notes to Financial Statements
Notes to Financial Statements
1. Limited Term Tax-Exempt Bond Fund of America (the "fund") is registered
under the Investment Company Act of 1940 as an open-end, diversified management
investment company. The following paragraphs summarize the significant
accounting policies consistently followed by the fund in the preparation of its
financial statements:
Tax-exempt securities with original or remaining maturities in excess of 60
days are valued at prices obtained from a national municipal bond pricing
service. The pricing service takes into account various factors such as
quality, yield and maturity of tax-exempt securities comparable to those held
by the fund, as well as actual bid and asked prices on a particular day. Other
securities with original or remaining maturities in excess of 60 days,
including securities for which pricing service values are not available, are
valued at the mean of their quoted bid and asked prices. However, in
circumstances where the investment advisor deems it appropriate to do so,
securities will be valued at the mean of their representative quoted bid and
asked prices, or, if such prices are not available at the mean of such prices
for securities of comparable maturity, quality and type. All securities with 60
days or less to maturity are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
are valued at fair value as determined in good faith by the Valuation Committee
of the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Premiums and original
issue discounts on securities purchased are amortized over the life of the
respective securities. Dividends are declared on a daily basis after
determination of the fund's net investment income and paid to shareholders on a
monthly basis.
Prepaid organizational expenses include registration fees which are charged to
income over 12 months, the estimated period of benefit. Other organizational
expenses are amortized over a period not exceeding five years from commencement
of operations. In the event that Capital Research and Management Company
(CRMC), the funds investment adviser, redeems any of its original shares prior
to the end of the five-year period, the proceeds of the redemption payable in
respect of such shares shall be reduced by the pro rata share (based on the
proportionate share of the original shares redeemed to the total number of
original shares outstanding at the time of such redemption) of the unamortized
deferred organization expenses as of the date of such redemption. In the event
that the fund liquidates prior to the end of the five-year period, CRMC shall
bear any unamortized deferred organization expenses.
Pursuant to the custodian agreement, the fund may receive credit against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended July 31, 1995, no credit was used to offset the custodian
fee.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of July 31, 1995, net unrealized depreciation on investments for book and
federal income tax purposes aggregated $64,000, of which $1,805,000 related to
appreciated securities and $1,869,000 related to depreciated securities. There
was no difference between book and tax realized gains on securities
transactions for the year ended July 31, 1995. The fund has available at July
31, 1995 a net capital loss carryforward totaling $276,000 which may be used to
offset capital gains realized during subsequent years through 2002 and thereby
relieve the fund and its shareholders of nay federal income tax liability with
respect to the capital gains that are so offset. It is the intention of the
fund not to make distributions from capital gains while there is a capital loss
carry forward. The cost of portfolio securities for book and federal income tax
purposes was $193,176,000 at July 31, 1995.
3. The fee of $757,000 for management services was paid pursuant to an
agreement with 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 an annual rate of 0.30% of the first $60 million
of average net assets; 0.21% of such assets in excess of $60 million; and 3.00%
of the fund's monthly gross investment income. The Investment Advisory and
Service Agreement provides for fee reductions to the extent that annual
operating expenses exceed 0.75% of the average net assets of the fund, during a
period which will terminate at the earlier of such time as no reimbursement has
been required for a period of 12 consecutive months, provided no advances are
outstanding, or October 1, 2003. For the current period, CRMC has also
voluntarily agreed to waive its fees to the extent necessary to ensure that the
fund's expenses do not exceed 0.71% of the average net assets. Expenses that
are not subject to these limitations are interest, taxes, brokerage
commissions, transaction costs, and extraordinary expenses. There can be no
assurance that this voluntary fee waiver will continue in the future. Fee
reductions amounted to $488,000 for the year ended July 31, 1995.
Pursuant to a Plan of Distribution, the fund may expend up to 0.30% of its
average net assets annually for any activities primarily intended to result in
sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the fund's Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended July 31, 1995,
distribution expenses under the Plan were $560,000. As of July 31, 1995,
accrued and unpaid distribution expenses were $47,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $77,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $197,000 (after allowances to
dealers) as its portion of the sales charges paid by purchasers of the fund's
shares. Such sales charges are not an expense of the fund and, hence, are not
reflected in the accompanying statement of operations.
Trustees of the fund who are unaffiliated with CRMC may elect to defer part or
all of the fees earned for services as members of the board. Amounts deferred
are not funded and are general unsecured liabilities of the fund. As of July
31, 1995, aggregate amounts deferred were $13,000.
CRMC is owned by the Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Trustees and officers of the fund are or may
be considered to be affiliated with CRMC, AFS and AFD. No such persons
received any remuneration directly from the fund.
4. As of July 31, 1995, accumulated undistributed net realized loss on
investments was $4,010,000 and paid-in capital was $181,570,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $82,413,000 and $82,036,000 respectively, during the
year ended July 31, 1995.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Period
Year October
ended 6, 1993/1/
July 31, to July
1995 31, 1994
<S> <C> <C>
Net Asset Value, Beginning
of Year $14.10 $14.29
------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .68 .49
Net realized and
unrealized gain
on investments .19 (.19)
------- -------
Total income from
investment operations .87 .30
------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (.68) (.49)
------- -------
Net Asset Value, End of Year $14.29 $14.10
======= =======
Total Return/2/ 6.45% 2.11%/3/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $191 $189
Ratio of expenses to average net assets .64%/4/ .51%/3/ /4/
Ratio of net income to average net assets 4.88% 3.67%/3/
Portfolio turnover rate 45.82% 42.21%/3/
</TABLE>
/1/Commencement of operations.
/2/This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
/3/Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
/4/Had CRMC not waived fees, the fund's ratio of expenses to average net assets
would have been 0.73% and 0.90% for the period October 6, 1993 to
July 31, 1994, and the year ended July 31,1995, respectively.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Limited Term Tax-Exempt Bond Fund of America:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of Limited Term Tax-Exempt
Bond Fund of America (the "Fund") at July 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and the
per-share data and ratios for the period indicated, in conformity with
generally accepted accounting principles. These financial statements and
per-share data and ratios (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at July 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Los Angeles, California
August 31, 1995
Tax Information (Unaudited)
All of the distributions paid by the fund from investment income earned in the
period ended July 31, 1995 were exempt-interest distributions within the
meaning of Section 852(b)(5)(A) of the Internal Revenue Code.
This information is given to meet certain requirements of the Internal Revenue
Code and should not be used by shareholders for preparing their income tax
returns. For tax return preparation purposes, please refer to the year-end
information you receive from the fund's transfer agent.
PART C
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
Investment Portfolio Notes to Financial Statements
Statement of Assets and Liabilities Per-Share Data and Ratios
Statement of Operations Report of Independent Accountants
Statement of Changes in Net Assets
(B) EXHIBITS:
1. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 2 on Form
N-1A filed 10/4/93).
2. On file (see SEC file No. 33-66214, Post-Effective Amendment No.1 on Form
N-1A filed 3/24/94).
3. None.
4. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 2 on form
N-1A filed 10/4/93).
5. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 1 on Form
N-1A filed 9/9/93).
6. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 1 on Form
N-1A filed 9/9/93).
7. None.
8. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 1 on Form
N-1A filed 9/9/93).
9. Form of Shareholder Services Agreement between Registrant and American
Funds Service Compcny, as amended 1/1/95.
10. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 2 on Form
N-1A filed 10/4/93).
11. Consent of Independent Accountants.
12. None.
13. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 2 on Form
N-1A filed 10/4/93).
14. On file (see SEC file No. 33-66214, initial Registration Statement on Form
N-1A filed 7/19/93).
15. On file (see SEC file No. 33-66214, Pre-Effective Amendment No. 1 on Form
N-1A filed 9/9/93).
16. Schedule for computation of each performance quotation provided in the
Registration Statement in response to Item 22.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of July 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Number of
Title of Class Record Holders
Shares of beneficial
5,026
interest (no par value)
</TABLE>
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund
Errors and Omissions Policy. The carrier of the primary policy in the amount
of $15 million is American International Surplus Lines Insurance Company, and
it has a $250,000 deductible. The carrier of the secondary policy in the
amount of $10 million is Chubb Custom Insurance Company. The carrier of the
excess policy in the amount of $20 million is ICI Mutual Insurance Company.
Article VI of the Trust's By-Laws states:
(a) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the
Trust, and, with resect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion; and any
determinations so made shall be conclusive.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested trustees or independent legal counsel.
(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a person who has ceased to be Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such person.
(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed
to protect any Trustee or officer of the Trust against any liability to the
Trust or to its shareholders to which such person would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.
(i) The Trust shall have power to purchase and maintain insurance on behalf
of any person against any liability asserted against or incurred by such
person, whether or not the Trust would have the power to indemnify such person
against such liability under the provisions of this Article. Nevertheless,
insurance will not be purchased or maintained by the Trust if the purchase or
maintenance of such insurance would result in the indemnification of any person
in contravention of any rule or regulation of the Securities and Exchange
Commission.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The fund will comply with the indemnification requirements contained in the
1940 Act Releases No. 7221 (June 9, 1972) and No. 11330 (September 4, 1980).
In addition, indemnification by the Trust shall be consistent with the
requirements of rule 484 under the Securities Act of 1933. Furthermore, the
fund has undertaken to the staff of the Securities and Exchange Commission that
the fund's indemnification provisions quoted above prohibit indemnification for
liabilities arising under the Securities Act of 1933 and the Investment Company
Act of 1940.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., Intermediate Bond Fund of America, The Investment
Company of America, The New Economy Fund, New Perspective Fund, Inc., SMALLCAP
World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt
Money Fund of America, The U.S. Treasury Money Fund of America and Washington
Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(b)(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
<S> <C> <C> <C>
# David A. Abzug Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University Drive
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Brynwood Drive
Madison, WI 53711
& Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
160 Del Monte Drive
Walnut Creek, CA 94595
Steven L. Barnes Vice President None
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
1190 Rockmart Circle
Kennesaw, GA 30144
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
Ian B. Bodell Regional Vice President None
3100 West End Avenue,
Suite 870
Nashville, TN 37215
Michael L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Director, Senior Vice President None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MO 20895
Victor C. Cassato Vice President None
999 Green Oaks Drive
Littleton, CO 80121
Christopher J. Cassin Regional Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1425 Vallejo, #203
San Francisco, CA 94109
* Larry P. Clemmensen Director, Treasurer None
* Kevin G. Clifford Senior Vice President None
Ruth M. Collier Vice President None
145 West 67th Street, Suite 12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Blvd.
Coral Gables, FL 33134
% Douglas A. Critchell Vice President None
* Carl D. Cutting Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07430
G. Michael Dill Senior Vice President None
3622 E. 87th Street
Tulsa, OK 74137
Kirk D. Dodge Regional Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary Vice President
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
+ Lloyd G. Edwards Vice President None
@ Richard A. Eychner Vice President None
* Paul H. Fieberg Senior Vice President None
John R. Fodor Regional Vice President None
5 Marlborough Street
Suite 51
Boston, MA 02116
* Mark P. Freeman, Jr. Director, President None
Clyde E. Gardner Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
* Paul G. Haaga, Jr. Director Chairman of the Board
David E. Harper Vice President None
R.D. 1, Box 210, Rte 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President None
6744 Avalon
Dallas, TX 75214
* Robert J. Johansen Vice President, Controller None
* Victor J. Kriss, Jr. Senior Vice President None
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E East Tennessee Circle
Aurora, CO 80012
* Heather A. Maier Assistant Vice President - None
Institutional Investment Services
Division
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 South Race Street
Littleton, CO 80121
* John C. Massar Vice President None
* E. Lee McClennahan Vice President None
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
* R. William Melinat Vice President-Institutional None
Investment Services Division
David R. Murray Regional Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Road
Charlotte, NC 28226
* Barbara G. Nicholich Assistant Vice President-Institutional None
Investment Services Division
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Regional Vice President None
32 Ridge Avenue
Newton Centre, MA 02159
# Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy
Charlotte, NC 28277
* George L. Romaine, Jr. Vice President - Institutional Investment Services Division None
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07962
* Julie D. Roth Vice President None
Douglas F. Rowe Regional Vice President None
104 River Road
Georgetown, TX 78628
* Christopher Rowey Regional Vice President None
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe, Ave., No. 4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* R. Michael Shanahan Chairman of the Board None
David W. Short Vice President None
1000 RIDC Plaza, Suite 212
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President - Institutional None
Investment Services Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President-Institutional None
Investment Services Division
# Mark S. Smith Director, Senior Vice President None
* Mary E. Smith Assistant Vice President, None
Institutional Investment
Services Division
Rodney G. Smith Regional Vice President None
2350 Lakeside Blvd., #850
Richardson, TX 75082
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
#4 West Fourth Avenue
Suite 406
San Mateo, CA 94402
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
& James P. Toomey Assistant Vice President None
+ Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
@ Andrew Ward Vice President None
* David M. Ward Assistant Vice President-Institutional None
Investment Services Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
# J. Kelly Webb Senior Vice President None
Gregory J. Weimer Regional Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
** N. Dexter Williams Vice President None
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
* Marshall D. Wingo Senior Vice President None
* Robert L. Winston Director and Senior Vice President None
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
</TABLE>
_______________________
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
** Business Address, Four Embarcadero Center, Suite 1800, San Francisco, CA
94111
# Business Address, 135 South State College Blvd., Brea, CA 92621
& Business Address, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
+ Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
% Business Address, 3000 K. Street, Suite 230, Washington, D.C.
20007-5124
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Fund and its investment adviser, Capital Research and Management
Company, 333 South Hope Street, Los Angeles, CA 90071. Certain accounting
records are maintained and kept in the offices of the Fund's accounting
department, 135 South State College Blvd., Brea, CA 92621.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92621, 8000 IH-10 West, Suite 1400, San Antonio, TX 78230, 5300 Robin Hood
Road, Norfolk, VA 23513 and 8332 Woodfield Crossing Blvd., Indianapolis, IN
46240.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
(c) As reflected in the prospectus, the fund undertakes to provide each person
to whom a prospectus is delivered with a copy of the fund's latest annual
report to shareholders, upon request and without charge.
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
25th day of September, 1995.
LIMITED TERM TAX-EXEMPT BOND
FUND OF AMERICA
By/s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on September 25, 1995, by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
(1) Principal Executive Officer:
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
(2) Principal Financial Officer and
Principal Accounting Officer:
/s/ Mary C. Cremin Treasurer
(Mary C. Cremin)
(3) Trustees:
H. Frederick Christie Trustee
Martin Fenton, Jr. Trustee
/s/ Abner D. Goldstine President and Trustee
(Abner D. Goldstine)
Diane C. Creel/1/ Trustee
Leonard R. Fuller/1/ Trustee
Herbert Hoover III Trustee
Richard G. Newman Trustee
Peter C. Valli Trustee
</TABLE>
*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact
/1/ Powers of Attorney are attached hereto.
Counsel represents that this amendment does not contain disclosures that
would make the amendment ineligible for effectiveness under the provisions of
Rule 485(b).
/s/ Michael J. Downer
(Michael J. Downer)
C-13
POWER OF ATTORNEY
I, Diane C. Creel, the undersigned Director of Limited Term Tax-Exempt Bond
Fund of America, a Massachusetts business trust, revoking all prior powers of
attorney given as a Trustee of Limited Term Tax-Exempt Bond Fund of America do
hereby constitute and appoint Mary C. Cremin, Michael J. Downer, Paul G. Haaga,
Jr., Kimberly S. Verdick and Julie F. Williams, or any of them, to act as
attorneys-in-fact for and in my name, place and stead (1) to sign my name as
Trustee of said Trust to any and all Registration Statements of Limited Term
Tax-Exempt Bond Fund of America, File Nos. 33-66214 and 811-7888, under the
Securities Act of 1933 as amended and the Investment Company Act of 1940, as
amended, and any and all amendments thereto, said Registration Statements and
amendments to be filed with the Securities and Exchange Commission, and to any
and all reports, applications or renewal of applications required by any State
in the United States of America in which this Trust is registered to sell
shares, and (2) to deliver any and all such Registration Statements and
amendments, so signed, for filing with the Securities and Exchange Commission
under the provisions of the Securities Act of 1933 as amended and/or the
Investment Company Act of 1940, as amended, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform every act and
thing whatsoever requisite and necessary to be done in and about the premises
as fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 12th day of December, 1994.
Diane C. Creel, Trustee
POWER OF ATTORNEY
I, Leonard R. Fuller, the undersigned Trustee of Limited Term Tax-Exempt Bond
Fund of America, a Maryland corporation, revoking all prior powers of attorney
given as a Trustee of Limited Term Tax-Exempt Bond Fund of America do hereby
constitute and appoint Mary C. Cremin, Michael J. Downer, Paul G. Haaga, Jr.,
Kimberly S. Verdick and Julie F. Williams, or any of them, to act as
attorneys-in-fact for and in my name, place and stead (1) to sign my name as
Trustee of said Corporation to any and all Registration Statements of Limited
Term Tax-Exempt Bond Fund of America, File No. 33-80630, under the Securities
Act of 1933 as amended and/or the Investment Company Act of 1940, as amended,
and any and all amendments thereto, said Registration Statements and amendments
to be filed with the Securities and Exchange Commission, and to any and all
reports, applications or renewal of applications required by any State in the
United States of America in which this Trust is registered to sell shares, and
(2) to deliver any and all such Registration Statements and amendments, so
signed, for filing with the Securities and Exchange Commission under the
provisions of the Securities Act of 1933 as amended and/or the Investment
Company Act of 1940, as amended, granting to said attorneys-in-fact, and each
of them, full power and authority to do and perform every act and thing
whatsoever requisite and necessary to be done in and about the premises as
fully to all intents and purposes as the undersigned might or could do if
personally present, hereby ratifying and approving the acts of said
attorneys-in-fact.
EXECUTED at Los Angeles, California, this 12th day of December, 1994.
Leonard R. Fuller, Trustee
SHAREHOLDER SERVICES AGREEMENT
1. The parties to this Agreement, which is effective as of January 1, 1995,
are LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA (hereinafter called "the
Fund") and American Funds Service Company, a California corporation
(hereinafter called "AFS"). AFS is a wholly owned subsidiary of Capital
Research and Management Company (hereinafter called "CRMC"). This Agreement
will continue in effect until amended or terminated in accordance with its
terms.
2. The Fund hereby employs AFS, and AFS hereby accepts such employment by the
Fund, as its transfer agent. In such capacity AFS will provide the services of
stock transfer agent, dividend disbursing agent, redemption agent, and such
additional related services as the Fund may from time to time require, all of
which services are sometimes referred to herein as "shareholder services."
3. AFS has entered into substantially identical agreements with other
investment companies for which CRMC serves as investment adviser. (For the
purposes of this Agreement, such investment companies, including the Fund, are
called "participating investment companies.")
4. AFS has entered into an agreement with DST Systems, Inc. (hereinafter
called "DST"), to provide AFS with electronic data processing services
sufficient for the performance of the shareholder services referred to in
paragraph 2.
5. The Fund, together with the other participating companies, will maintain a
Review and Advisory Committee, which Committee will review and may make
recommendations to the boards of the participating investment companies
regarding all fees and charges provided for in this Agreement, as well as
review the level and quality of the shareholder services rendered to the
participating investment companies and their shareholders. Each participating
investment company may select one director or trustee who is not affiliated
with CRMC, or any of its affiliated companies, or with Washington Management
Corporation or any of its affiliated companies, to serve on the Review and
Advisory Committee.
6. AFS will provide to the participating investment companies the shareholder
services referred to herein in return for the following fees:
ANNUAL ACCOUNT MAINTENANCE FEE (PAID MONTHLY):
$.67 per month for each open account on AFS books or in Level 2 or 4
Networking ($8.04 per year)
$.09 per month for each open account maintained in Street Name or Level 1 or
3 Networking ($1.08 per year)
No annual fee will be charged for a participant account underlying a 401(k)
or other defined contribution plan where the plan maintains a single account
on AFS books and responds to all participant inquiries
EXHIBIT 9
TRANSACTION FEES:
$2.00 per non-automated transaction
$0.50 per automated transaction
For this purpose, "transactions" shall include all types of transactions
included in an "activity index" as reported to the Review and Advisory
Committee at least annually. AFS will bill the Fund monthly, on or shortly
after the first of each calendar month, and the Fund will pay to AFS within
five business days of such billing.
Any revision of the schedule of charges set forth herein shall require the
affirmative vote of a majority of the members of the board of
directors/trustees of the Fund.
7. All fund-specific charges from third parties -- including DST charges,
payments described in the next sentence, postage, NSCC transaction charges and
similar out-of-pocket expenses -- will be passed through directly to the Fund
or other participating investment companies, as applicable. AFS, subject to
approval of its board of directors, is authorized in its discretion to
negotiate payments to third parties for account maintenance and/or transaction
processing services provided such payments do not exceed the anticipated
savings to the Fund, either in fees payable to AFS hereunder or in other direct
Fund expenses, that AFS reasonably anticipates would be realized by the Fund
from using the services of such third party rather than maintaining the
accounts directly on AFS' books and/or processing non-automated transactions.
8. It is understood that AFS may have income in excess of its expenses and may
accumulate capital and surplus. AFS is not, however, permitted to distribute
any net income or accumulated surplus to its parent, CRMC, in the form of a
dividend without the affirmative vote of a majority of the members of the
boards of directors/trustees of the Fund and all participating investment
companies.
9. This Agreement may be amended at any time by mutual agreement of the
parties, with agreement of the Fund to be evidenced by affirmative vote of a
majority of the members of the board of directors/trustees of the Fund.
10. This Agreement may be terminated on 180 days' written notice by either
party. In the event of a termination of this Agreement, AFS and the Fund will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service provider(s) the Fund may select, it being understood that
all records relating to the Fund and its shareholders are property of the Fund.
11. In the event of a termination of this Agreement by the Fund, the Fund will
pay to AFS as a termination fee the Fund's proportionate share of any costs of
conversion of the Fund's shareholder service from AFS to a successor. In the
event of termination of this Agreement and all corresponding agreements with
all the participating investment companies, all assets of AFS will be sold or
otherwise converted to cash, with a view to the liquidation of AFS when it
ceases to provide shareholder services for the participating investment
companies. To the extent any such assets are sold by AFS to CRMC and/or any of
its affiliates, such sales shall be at fair market value at the time of sale as
agreed upon by AFS, the purchasing company or companies, and the Review and
Advisory Committee. After all assets of AFS have been converted to cash and
all liabilities of AFS have been paid or discharged, an amount equal to any
capital or paid-in surplus of AFS that shall have been contributed by CRMC or
its affiliates shall be set aside in cash for distribution to CRMC upon
liquidation of AFS. Any other capital or surplus and any assets of AFS
remaining after the foregoing provisions for liabilities and return of capital
or paid-in surplus to CRMC shall be distributed to the participating investment
companies in such proportions as may be determined by the Review and Advisory
Committee.
12. In the event of disagreement between the Fund and AFS, or between the Fund
and other participating investment companies as to any matter arising under
this Agreement, which the parties to the disagreement are unable to resolve,
the question shall be referred to the Review and Advisory Committee for
resolution. If the Review and Advisory Committee is unable to resolve the
question to the satisfaction of both parties, either party may elect to submit
the question to arbitration; one arbitrator to be named by each party to the
disagreement and a third arbitrator to be selected by the two arbitrators named
by the original parties. The decision of a majority of the arbitrators shall
be final and binding on all parties to the arbitration. The expenses of such
arbitration shall be paid by the party electing to submit the question to
arbitration.
13. The obligations of the Fund under this Agreement are not binding upon any
of the directors, trustees, officers, employees, agents or shareholders of the
Fund individually, but bind only the Fund itself. AFS agrees to look solely to
the assets of the Fund for the satisfaction of any liability of the Fund in
respect to this Agreement and will not seek recourse against such directors,
trustees, officers, employees, agents or shareholders, or any of them or their
personal assets for such satisfaction.
AMERICAN FUNDS SERVICE COMPANY Limited Term Tax-Exempt Bond Fund of America
By /s/ Don R. Conlan By /s/ Paul G. Haaga, Jr.
Don R. Conlan, Chairman Paul G. Haaga, Jr., Chairman
By /s/ Kenneth R. Gorvetzian By /s/ Julie F. Williams
Kenneth R. Gorvetzian, Secretary Julie F. Williams, Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 31, 1995, relating to the financial statements and per share data and
ratios of Limited Term Tax-Exempt Bond Fund of America, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "General
Information - Independent Accountants" and "General Information - Reports to
Shareholders" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in the Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
September 28, 1995
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
7/01/94 1000.00 14.01 0.00 % 71.378 14.010 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/95 1000 50 50 1050 0 1016 0 1016 50 1066.68 74.960
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
7/01/94 1000.00 14.71 4.75 % 67.981 14.010 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/95 1000 48 48 1048 0 967 0 967 48 1015.87 71.389
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/06/93 1000.00 14.29 0.00 % 69.979 14.290 1000
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 1000 31 31 1031 0 980 0 980 30 1010.75 72.145
6/30/95 1000 50 81 1081 0 996 0 996 82 1078.12 75.764
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/06/93 1000.00 15.00 4.75 % 66.667 14.290 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6/30/94 1000 30 30 1030 0 934 0 934 28 962.92 68.731
6/30/95 1000 48 78 1078 0 949 0 949 78 1027.14 72.181
TOTAL $ 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SALES NET ASSET INITIAL
INITIAL OFFERING CHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASED PER SHARE VALUE
10/06/93 10000.00 15.00 4.75 % 666.667 14.290 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES=====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOME INVM'T CAP GAIN FROM CAP GAINS SUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'D TOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
7/31/94 10000 332 332 10332 0 9400 0 9400 327 9727.84 689.918
7/31/95 10000 485 817 10817 0 9527 0 9527 828 10355.48 724.666
TOTAL $ 0
</TABLE>
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE REGISTRATION STATEMENT
(1) ENDING REDEMPTION VALUE AND TOTAL RETURN
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) Initial investment DIVIDED BY
Public offering price for one share at
beginning of period EQUALS
Number of shares initially purchased
(B) Number of shares initially purchased PLUS
Number of shares acquired at net asset
value through reinvestment of dividends
and capital gain distributions during period EQUALS
Number of shares purchased during period
(C) Number of shares purchased during period MULTIPLIED BY
Net asset value of one share as of the last day
of the period EQUALS
Value of investment at end of period
(D) Value of investment at end of period DIVIDED BY
Initial investment
minus one and then multiplied by 100 EQUALS
Total return for the period expressed as a
percentage
EXHIBIT 16
(2) AVERAGE ANNUAL TOTAL RETURN
Average annual total return quotations for the one-year and lifetime period
ended on the date of the most recent balance sheet is computed according to the
formula set forth below.
P(1+T)/n/ = ERV
WHERE: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment as of the
end of the one-year and lifetime periods (computed in accordance with the
formula set forth in (1), above)
THUS:
TOTAL RETURN AT PUBLIC OFFERING PRICE:
1 Year Rate of Return 1,000(1+T)/1/ = 1,014.19
T = 1.42%
Lifetime Total Return 1,000(1+T)/1.82/ = 1,035.58
T = 1.94%
Hypothetical illustrations which are based on $1,000 and $10,000 initial
investments used to obtain ending values over various time periods are
attached.
(3) YIELD
Yield is computed as set forth below.
(A) Dividends and interest earned during the period MINUS
Expenses accrued for the period EQUALS
Net investment income
(B) Net income investment DIVIDED BY
Average daily number of shares
outstanding during the period that
were entitled to receive dividends EQUALS
Net investment income per share earned
during the period
(C) Net investment income per share earned
during the period DIVIDED BY
Maximum offering price per share on
last day of the period EQUALS
Current month's yield
(D) Current months yield PLUS ONE RAISED TO THE SIXTH POWER EQUALS
Semiannual compounded yield
(E) Semiannual compounded yield MINUS ONE MULTIPLIED
BY TWO EQUALS
Annualized rate
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 193,176
<INVESTMENTS-AT-VALUE> 193,112
<RECEIVABLES> 14,866
<ASSETS-OTHER> 278
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 208,256
<PAYABLE-FOR-SECURITIES> 16,219
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,181
<TOTAL-LIABILITIES> 17,400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 181,570
<SHARES-COMMON-STOCK> 13,359,030
<SHARES-COMMON-PRIOR> 13,400,949
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,010)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (64)
<NET-ASSETS> 190,856
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,355
<OTHER-INCOME> 0
<EXPENSES-NET> 1,202
<NET-INVESTMENT-INCOME> 9,153
<REALIZED-GAINS-CURRENT> (1,626)
<APPREC-INCREASE-CURRENT> 3,947
<NET-CHANGE-FROM-OPS> 11,474
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 9,177
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,657,598
<NUMBER-OF-SHARES-REDEEMED> 9,148,603
<SHARES-REINVESTED> 449,087
<NET-CHANGE-IN-ASSETS> 1,920
<ACCUMULATED-NII-PRIOR> 24
<ACCUMULATED-GAINS-PRIOR> (2,384)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 757
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,690
<AVERAGE-NET-ASSETS> 187,472
<PER-SHARE-NAV-BEGIN> 14.10
<PER-SHARE-NII> .69
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> (.69)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.29
<EXPENSE-RATIO> .006
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
