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Previous: ANALYSTS INVESTMENT TRUST, NSAR-B/A, 1995-10-05 |
Next: AMERICAN SEPARATE ACCOUNT NO 2, 497, 1995-10-05 |
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
1995 ANNUAL REPORT FOR THE YEAR ENDED JULY 31
[The American Funds Group(R)]
[Side Bar] Limited Term Tax-Exempt Bond Fund of America(SM) seeks an
opportunity for current income exempt from federal income taxes, and
preservation of capital, through investments in tax-exempt securities with
effective maturities between three and 10 years. [End Side Bar]
[Photo Caption] ABOUT OUR COVER: Alsea Bay Bridge in Lincoln County, Oregon
[End Photo Caption]
FELLOW SHAREHOLDERS:
Marked as it was by a turnaround in the bond market, our first full fiscal
year proved to be a challenging and rewarding one.
A year ago, rising interest rates had cast a pall over the nation's credit
markets. The economy was operating close to full capacity, the Federal Reserve
Board was in the midst of tightening monetary policy and the rate of inflation
was widely expected to rise.
In November, the picture brightened for fixed-income investors as a newly
elected Congress pledged to press the fight for deficit reduction. Interest
rates turned down, and bond prices, which move inversely to interest rates,
rose. A slowdown in consumer spending and reports of a weakening economy eased
concerns about inflation and continued to fuel the bond market rally through
the first half of the calendar year.
Over the 12 months ended July 31, the fund paid dividends totaling 69 cents
a share, all exempt from regular federal income taxes.* This represented a
tax-free income return of...
4.9% if you took your dividends in cash, or
5.0% if, like most shareholders, you compounded your earnings by
reinvesting your dividends in additional fund shares. To match that tax-free
income return, an investor in the 39.6% federal tax bracket would have had to
earn 8.3% from a taxable investment.
Meanwhile, the fund's share value began the fiscal year on August 1, 1994 at
$14.10 and ended it July 31 at $14.29. This increase, combined with the income
return of 5.0%, produced a total return of 6.5% for those who reinvested
dividends.
* While the fund invests for income that is exempt from regular federal income
taxes, that income may be subject to state or local income taxes and/or federal
alternative minimum taxes. Capital gain distributions, if any, are taxable.
By comparison, the 104 intermediate municipal bond funds tracked by Lipper
Analytical Services gained an average of 6.4%, while the unmanaged Lehman
Brothers 7-Year Municipal Bond Index rose 8.1%, both with distributions
reinvested. The Lehman index's result largely reflects its longer maturity.
The effective maturity of the bonds in the fund's portfolio stood at an
average of 5.4 years at the beginning of the fiscal period and 5.1 years at the
fiscal close. The longer a bond's maturity, the more its price tends to rise or
fall in response to changes in interest rates.
Over the fund's brief 22-month lifetime, during which bond prices declined
dramatically and then recovered much of their lost ground, the fund outpaced
the Lipper averages for intermediate-term municipal bond funds, as well as the
Lehman Brothers 7-Year Municipal Bond Index:
LIFETIME TOTAL RETURNS (with dividends reinvested)
October 6, 1993 - July 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Limited Term Tax-Exempt Bond Fund of America +8.7%
Lehman Brothers 7-Year Municipal Bond Index (unmanaged) +7.9%
Lipper Intermediate Municipal Bond Fund Average +6.0%
</TABLE>
During this period, the fund demonstrated greater price stability than
longer term bonds. And it provided higher returns than short-term tax-exempt
securities. Tax-free money market funds - which seek to maintain a stable net
asset value - returned 4.8% over the fund's lifetime, according to Donoghue's
Tax-Free Money Fund Average. Over the past 12 months, their return averaged
3.1%. As you may recall, a goal in launching Limited Term Tax-Exempt Bond Fund
of America was to deliver higher and more stable tax-free income than
short-term securities and greater price stability than longer term bonds. We
believe we have achieved that objective.
As of July 31, the fund's portfolio consisted of 91 bond issues from 29
states. These securities are helping to provide funding for better schools,
hospitals, highways and other municipal services. Over the year-and over its
lifetime-the fund avoided areas that led some fixed-income investors into
difficulties. It steered entirely clear of highly volatile derivative
securities and held no direct or indirect obligations of Orange County,
California, which declared bankruptcy last December.
On July 6, toward the close of our fiscal year, the Federal Reserve lowered
its target for the federal funds rate, a key short-term interest rate, by a
quarter of one percent. The nation's central bank appeared at that time to take
the view that inflationary pressures had subsided and that some easing was
warranted to avoid a recession. This was a change in direction for the Fed,
which for more than a year had focused on raising rates and warding off
inflation.
Our view for the months ahead is clouded by the fact that it is not yet
clear how much economic growth has slowed in response to the Fed's seven
increases in short-term interest rates between February 1994 and February 1995.
However, we feel that the long-term outlook for inflation, the bond markets and
the fund is encouraging.
Cordially,
Paul G. Haaga, Jr. Chairman of the Board
Abner D. Goldstine President
September 12, 1995
CHARTING A $10,000 INVESTMENT IN LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
(for the period October 6, 1993 to July 31, 1995 with dividends reinvested)
[chart]
The fund at net asset value (without any sales charge)-$10,870
Lehman Brothers 7-Year Intermediate Municipal Bond Index-$10,786
The fund at maximum offering price*-$10,355
[end chart]
Past results are not predictive of future results.
*These figures, unlike those in the letter to shareholders, reflect payment of
the maximum sales charge of 4.75% on a $10,000 investment. Thus, the net amount
invested was $9,525. As outlined in the prospectus, the sales charge is reduced
for larger investments.
The Lehman index is unmanaged and has no expenses.
RETURNS AFTER DEDUCTING THE MAXIMUM SALES CHARGE
<TABLE>
<CAPTION>
Period ending 6/30/95 Period ending 7/31/95
Total Average Annual Total Average AnnualCompound Return
Return Compound Return Return
<S> <C> <C> <C> <C>
Lifetime (since 10/6/93) +2.71% +1.56% +3.56% +1.94%
One Year +1.59% - +1.42% -
</TABLE>
THE FUND'S 30-DAY YIELD AS OF AUGUST 31, 1995, CALCULATED IN ACCORDANCE WITH
THE SECURITIES AND EXCHANGE COMMISSION FORMULA, WAS 4.40%.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
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
<S> <C> <C>
1995 31, 1994
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.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
BOARD OF TRUSTEES
H. FREDERICK CHRISTIE
Palos Verdes Estates, California
Private investor; former President and
Chief Executive Officer, The Mission Group; former President, Southern
California Edison Company
DIANE C. CREEL
Long Beach, California
Chairwoman, Chief Executive Officer and President, The Earth Technology
Corporation
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board, Senior Resource Group, Inc. (senior living centers
management)
LEONARD R. FULLER
Los Angeles, California
President, Fuller & Company, Inc.
(financial management consulting firm)
ABNER D. GOLDSTINE
Los Angeles, California
President of the Fund
Senior Vice President and Director,
Capital Research and Management Company
PAUL G. HAAGA, JR.
Los Angeles, California
Chairman of the Board of the Fund
Senior Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
Pasadena, California
Private investor
RICHARD G. NEWMAN
Los Angeles, California
Chairman of the Board, President and Chief Executive Officer,
Aecom Technology Corporation
(architectural engineering)
PETER C. VALLI
Long Beach, California
Chairman of the Board and Chief Executive Officer, BW/IP International, Inc.
(industrial manufacturing)
OTHER OFFICERS
NEIL L. LANGBERG
Los Angeles, California
Senior Vice President of the Fund
Vice President-Investment Management Group,
Capital Research and Management Company
MARY C. CREMIN
Los Angeles, California
Vice President and Treasurer of the Fund
Senior Vice President-Fund Business Management Group,
Capital Research and Management Company
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the Fund
Senior Vice President-Fund Business Management Group,
Capital Research and Management Company
JULIE F. WILLIAMS
Los Angeles, California
Secretary of the Fund
Vice President-Fund Business Management Group,
Capital Research and Management Company
KIMBERLY S. VERDICK
Los Angeles, California
Assistant Secretary of the Fund
Compliance Associate-Fund Business Management Group,
Capital Research and Management Company
ANTHONY W. HYNES, JR.
Los Angeles, California
Assistant Treasurer of the Fund
Vice President-Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND AND OF THE INVESTMENT ADVISER,
CAPITAL RESEARCH AND MANAGEMENT COMPANY
333 South Hope Street
Los Angeles, California 90071-1443
135 South State College Boulevard
Brea, California 92621-5804
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
P.O. Box 2205
Brea, California 92622-2205
P.O. Box 659522
San Antonio, Texas 78265-9522
P.O. Box 6007
Indianapolis, Indiana 46206-6007
P.O. Box 2280
Norfolk, Virginia 23501-2280
CUSTODIAN OF ASSETS
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081-0001
COUNSEL
Morrison & Foerster
345 California Street
San Francisco, California 94104-2675
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR SECURITIES DEALER OR FINANCIAL PLANNER, OR CALL THE FUND'S
TRANSFER AGENT, TOLL-FREE, AT 800/421-0180.
This report is for the information of shareholders of Limited Term Tax-Exempt
Bond Fund of America, but it may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the fund. If used as
sales material after September 30, 1995, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA W/GRS/2713
Lit. No. LTEX-011-0995
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