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Previous: BURLINGTON RESOURCES COAL SEAM GAS ROYALTY TRUST, 10-K, 1996-04-01 |
Next: EV CLASSIC SENIOR FLOATING RATE FUND /MA/, POS AMI, 1996-04-01 |
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
SEMI-ANNUAL REPORT
for the six months ended January 31, 1996
[The American Funds Group(R)]
[Sidebar]
ABOUT OUR COVER: Alsea Bay Bridge in Lincoln County, Oregon
[End Sidebar]
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA(SM)
SEEKS CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES, AND THE PRESERVATION OF
CAPITAL, THROUGH INVESTMENTS IN TAX-EXEMPT SECURITIES WITH EFFECTIVE MATURITIES
BETWEEN 3 AND 10 YEARS.
Fund results in this report were computed without a sales charge, unless
otherwise indicated. Here are the total returns and average annual compound
return with all distributions reinvested for the periods ended December 31,
1995 (the most recent calendar quarter), assuming payment of the 4.75% maximum
sales charge at the beginning of the stated periods - Since inception on
10/6/93: +7.54%, or +3.30% a year; 12 months: +7.00%. Sales charges are lower
for accounts of $25,000 or more. These results reflect the effect of a fee
waiver. Without the waiver, the results would have been lower. The fund's
30-day yield as of February 29, 1996, calculated in accordance with the
Securities and Exchange Commission formula, was 4.06%. The fund's distribution
rate as of that date was 4.53%. The SEC yield reflects the income the fund
expects to earn based on its current portfolio of securities, while the fund's
distribution rate is based solely on the fund's past dividends. Accordingly,
the fund's SEC yield and distribution rate may differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. SHARE PRICE AND RETURN WILL
VARY, SO YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE SHORTER THE TIME
PERIOD OF YOUR INVESTMENT, THE GREATER THE POSSIBILITY OF LOSS. FUND SHARES ARE
NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
FELLOW SHAREHOLDERS:
The first half of Limited Term Tax-Exempt Bond Fund of America's fiscal year
saw solid gains for the fund and the bond market in general. Helped by falling
interest rates and rising bond prices, the fund provided both generous tax-free
income and modest capital appreciation.
Over the six months ended January 31, the fund paid dividends totaling 34 cents
a share, all exempt from regular federal income taxes.*
If you took those dividends in cash, this represented a tax-free income return
of 2.40% (4.80% on an annualized basis).
If you reinvested your dividends in additional fund shares, your income return
was 2.42% (4.84% on an annualized basis).
To match the latter annualized income return, a shareholder in the top federal
tax bracket of 39.6% would have had to earn 8.01% from a taxable investment.
Meanwhile, the fund's share price rose to $14.60 on January 31, 1996 from
$14.29 at the start of the fiscal year. This gain, combined with the fund's
income return, produced a total return of 4.6% (not annualized) for those who
reinvested dividends.
Over the six-month period, the unmanaged Lehman Brothers 7-Year Municipal Bond
Index rose 5.1% and the 132 intermediate municipal bond funds tracked by Lipper
Analytical Services also gained an average of 5.1%, both with distributions
reinvested.
*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. Also, distributions from gains on the disposition
of certain bonds purchased at less than par value and capital gain
distributions, if any, are taxable.
Since its inception on October 6, 1993, the fund has posted a total return of
13.7%, while the Lehman index rose 13.4% and the Lipper average of 76 funds
gained 11.4%.
The fund's recent results largely reflect its relatively short effective
maturity of 5.1 years. In keeping with its more conservative philosophy, the
fund tends to hold bonds with somewhat shorter maturities than many
intermediate-term bond funds. This is an effort to preserve capital in periods
of rising interest rates. The longer a bond's maturity, the more its price
tends to rise or fall in response to changes in interest rates.
During the fiscal half-year, economic policy debates sent ripples through the
bond markets. Discussions of a flat tax and disagreements over methods of
balancing the federal budget contributed to periods of short-term price
volatility in the tax-exempt bond market.
Despite the attention the flat tax proposal has been receiving, we believe that
such a fundamental shift in the U.S. tax code faces many obstacles. We do not
foresee action on this front in the near future, but will continue to watch
political developments closely.
As for the federal budget, we believe the debate is a useful one. All sides now
appear to agree on the wisdom of a plan that will lead to a balanced budget
within a number of years. Over the long term, any progress that is made in
tightening fiscal policy should help bring down borrowing costs and prove
favorable for the bond markets.
The period from August through December was marked by low inflation and rising
corporate profits, and by some evidence of a slowing economy. Since that time,
there have been mixed signals on the course of economic activity. Even though
there have been some signs of a pickup in the rate of economic expansion in the
U.S., it is also quite likely that the next several months will be
characterized by modest growth and low inflation, which would bode well for the
bond market.
As of January 31, the fund's portfolio consisted of 100 bond issues from 29
states and territories. These securities are helping to provide funding for
better schools, hospitals, transit systems and other municipal services. More
than 60% of these securities are rated A or better by independent bond-rating
services.
The lifetime of Limited Term Tax-Exempt Bond Fund of America encompasses a
particularly volatile and challenging period in the fixed-income markets.
Nevertheless, your continued support has moved the fund across the $200 million
mark in this past fiscal period.
We look forward to reporting to you in more detail in six months.
Cordially,
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
March 6, 1996
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
INVESTMENT PORTFOLIO
January 31, 1996 (unaudited)
- ----------------------------------------------------
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C> <C>
New York 10.92%
California 7.85%
Louisiana 7.72%
Texas 7.66%
Maine 7.62%
Michigan 6.01%
Massachusetts 4.98%
Pennsylvania 4.23%
Mississippi 4.18%
Minnesota 4.08%
Other states 29.89%
Cash equivalents 4.86%
- ---------------------------------------------------- --------- ---------
Principal Market
Amount Value
(000) (000)
--------- ---------
TAX-EXEMPT SECURITIES MATURING IN MORE THAN
ONE YEAR - 95.14%
ALASKA - 1.46%
Student Loan Corporation, Student Loan
Revenue Bonds, 1988 Series A, AMBAC Insured AMT,
8.40% 2003 $2,750 $2,998
ARIZONA - 2.08%
Educational Loan Marketing Corporation,
1992 Educational Loan Revenue Bonds, Series A,
6.70% 2000 4,000 4,263
CALIFORNIA - 7.85%
Various Purpose General Obligation Bonds, 7.00% 2004 1,100 1,295
Health Facilities Financing Authority,
Hospital Revenue Bonds (Downey Community
Hospital), Series 1993:
5.00% 2001 1,250 1,268
5.30% 2004 1,010 1,010
Housing Finance Agency, Single Family
Mortgage Bonds, 1995 Issue B-2, AMBAC Insured AMT,
5.70% 2007 1,400 1,427
County of Los Angeles, Certificates of
Participation (Marina Del Rey), Series A:
5.75% 1998 1,000 1,024
6.25% 2003 3,100 3,133
Long Beach Aquarium of the Pacific, Revenue
Bonds (Aquarium of the Pacific Project),
1995 Series A, 5.75% 2005 1,500 1,514
Pleasanton Joint Powers Financing Authority,
Reassessment Revenue Bonds, 1993 Series A,
5.70% 2001 985 1,009
Sacramento:
Cogeneration Authority, Cogeneration
Project Revenue Bonds (Proctor & Gamble Project),
1995 Series, 7.00% 2004 1,000 1,101
Power Authority, Cogeneration Project
Revenue Bonds, 1995 Series:
6.50% 2004 2,000 2,165
6.50% 2005 1,100 1,191
COLORADO - 2.71%
Housing and Finance Authority, Single
Family Program Senior Bonds, 1995 Series C-2,
5.625% 2009(1997)$ 1,000 1,019
Student Obligation Bond Authority, Student
Loan Revenue Bonds, 1994 Series L, 6.00% 2001 1,065 1,140
City and County of Denver, Airport
System Revenue Bonds, Series 1991D AMT:
6.80% 1997 1,170 1,224
7.30% 2000 2,000 2,186
DISTRICT OF COLUMBIA - 0.50%
General Obligation Refunding Bonds,
Series 1994D, FGIC Insured, 5.10% 2002 1,000 1,037
GEORGIA - 1.25%
Municipal Electric Authority of Georgia, Power
Revenue Bonds, Series Q, 8.375% 2016
(crossover refunded 1998) 500 545
Fulco Hospital Authority, Revenue Anticipation
Certificates (Saint Joseph's Hospital of
Atlanta, Inc.), Series 1994, 4.70% 2000 2,000 2,022
GUAM - 1.00%
General Obligation Bonds, 1995 Series A, 5.25% 1999 2,000 2,048
ILLINOIS - 1.75%
Health Facilities Authority,
Revenue Bonds, Series 1993:
(OSF Healthcare System), 5.25% 2001 2,025 2,087
(Rush-Presbyterian-St. Luke's Medical Center
Obligated Group), MBIA Insured, 4.70% 2001 1,470 1,501
INDIANA - 0.85%
Employment Development Commission,
Pollution Control Revenue Bonds (Chrysler
Corporation Project), Series 1985, 5.70% 1999 1,700 1,747
KENTUCKY - 0.76%
Higher Education Student Loan Corporation,
Insured Student Loan Revenue Bonds,
Series B, 6.20% 1999 1,490 1,568
LOUISIANA - 7.72%
Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds
(LOOP INC. Project), First Stage:
Series 1992B:
6.00% 2001 1,500 1,606
6.20% 2003 1,500 1,635
Series E, 7.45% 2004 5,000 5,576
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 7,051
MAINE - 7.62%
Educational Loan Marketing Corporation:
Senior Student Loan Revenue Bonds,
Series 1994A-4 AMT:
5.85% 2002 1,000 1,059
5.95% 2003 1,000 1,066
6.05% 2004 1,500 1,603
Housing Authority, Mortgage Purchase Bonds:
1994 Series E, 6.30% 2002 1,650 1,728
1994 Series C-1, 5.90% 2015 8,295 8,492
Student Loan Revenue Refunding Bonds:
Series 1992A-1 AMT, 6.20% 2003 585 629
Series 1992A-4 AMT, 6.30% 2004 1,010 1,086
MARYLAND - 1.64%
Community Development Administration, Department
of Housing and Community Development,
Single Family Program Bonds,
1994 Fifth Series AMT, 5.875% 2017 (2000)/1/ 1,485 1,512
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery County
Resource Recovery Project), Series 1993A AMT,
5.90% 2005 1,750 1,867
MASSACHUSETTS - 4.98%
Water Resources Authority, General
Revenue Bonds, 1993 Series C, 5.25% 2001 2,000 2,099
The New England Education Loan Marketing
Corporation, Student Loan Revenue Refunding Bonds:
1992 Senior Issue A:
6.00% 1998 2,100 2,195
6.50% 2002 2,500 2,734
1992 Senior Issue D, 6.20% 2000 3,000 3,194
MICHIGAN - 6.01%
Hospital Finance Authority, Hospital Revenue Refunding
Bonds (Genesys Health System Obligated Group),
Series 1995A, 7.20% 2003 2,375 2,597
Housing Development Authority, Rental Housing Revenue
Bonds, 1992 Series A, AMBAC Insured, 6.40% 2005 1,200 1,290
City of Detroit, General Obligation Refunding Bonds
(Unlimited Tax):
Series A:
5.60% 2001 1,000 1,019
6.10% 2003 1,800 1,888
6.25% 2004 2,165 2,289
Series 1995-B, 6.75% 2003 3,000 3,262
MINNESOTA - 4.08%
Housing and Finance Authority, Single Family Mortgage,
Series Q, 6.25% 2014 985 1,003
The Housing and Redevelopment Authority of the
City of Saint Paul, Hospital Facility
Revenue Bonds (HealthEast Project):
Series 1987-A, 9.75% 2017 (crossover refunded
1997) 1,950 2,172
Series 1987-B, 9.75% 2017 (1997)/1/ 2,500 2,727
Series 1987-C, 9.75% 2017 (crossover refunded
1997) 2,225 2,479
MISSISSIPPI - 4.18%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 (1998)/1/ 7,500 8,583
NEW YORK - 10.92%
Dormitory Authority of the State of New York,
Revenue Bonds, City University Issue, Series U,
6.10% 2001 1,500 1,585
Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1993 Series F
Refunding, 4.60% 1999 1,000 1,001
Metropolitan Transportation Authority, Transit
Facilities 1987 Service Contract Bonds,
Series 7, 4.85% 2001 500 503
Urban Development Corporation:
Correctional Capital Facilities Revenue Bonds:
Series 6, 6.00% 2003 2,000 2,113
1993A Refunding Series, 6.30% 2003 1,305 1,394
State Facilities Revenue Bonds, Series 1991,
7.30% 2001 (escrowed to maturity) 1,800 2,071
The City of New York General Obligation Bonds:
1994 Series A, 6.00% 2000 2,000 2,086
1994 Series B, 6.25% 2001 1,000 1,059
1994 Series A, 6.10% 2002 1,800 1,891
1994 Series D, 5.70% 2002 1,000 1,029
Fiscal 1993 Series A, 6.25% 2003 2,000 2,120
Series E, 6.50% 2004 1,000 1,073
Series A-1, AMBAC Insured, 6.25% 2005 4,000 4,508
NORTH CAROLINA - 2.52%
Eastern Municipal Power Agency,
Power System Revenue Bonds, Refunding
Series 1993 C, 5.00% 2002 3,000 3,027
Municipal Power Agency Number 1,
Catawba Electric Revenue Bonds, Series 1992,
6.00% 2004 2,000 2,143
Ohio - 3.65%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds, 1992 Series A-2 AMT,
5.70% 2013(1999)/1/ 2,030 2,080
County of Franklin, Hospital Facilities
Revenue Refunding and Improvement Bonds (Doctors
Hospital Project), Series 1993, 5.70% 2004 1,120 1,146
The Student Loan Funding Corporation, Cincinnati:
Student Loan Revenue Refunding Bonds,
Series 1992A AMT, 5.40% 1999 2,130 2,185
Senior Subordinated Revenue Bonds,
Series 1993A AMT, 5.75% 2003 2,000 2,078
OKLAHOMA - 0.99%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds (Homeownership Loan
Program), 1994 Series A-1 AMT, 6.25% 2016 (1999)/1/ 1,985 2,031
PENNSYLVANIA - 4.23%
Higher Education Assistance Agency,
Student Loan Adjustable Rate Tender Revenue
Refunding Bonds, 1985 Series A, FGIC Insured,
6.80% 2000 8,000 8,693
SOUTH CAROLINA - 0.73%
Public Service Authority, Revenue Bonds,
1996 Refunding Series A, MBIA Insured,
6.25% 2005 1,350 1,496
SOUTH DAKOTA - 1.27%
Student Loan Finance Corporation, Student Loan
Revenue Bonds, Series 1994-A AMT, 5.95% 2001 2,500 2,608
TEXAS - 7.66%
General Obligation Bonds,
Veterans' Housing Assistance Program, Fund I
Series 1994C Refunding Bonds, 6.25% 2015 (1998)/1/ 2,055 2,114
City of Austin, Combined Utility Systems
Revenue Refunding Bonds, Series 1992A,
MBIA Insured, 7.00% 2002 1,000 1,091
Brazos Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds:
Series 1992C-1 AMT, 6.00% 1999 1,435 1,509
Series 1994A-2 AMT, 5.85% 2001 1,000 1,062
Series 1993C-1 AMT, 5.50% 2002 1,000 1,037
Subordinate Series 1993C-2 AMT, 5.875% 2004 4,000 4,161
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 1,089
City of Houston General Obligation Bonds,
6.00% 2000 2,000 2,079
Houston Water, AMBAC Insured, 7.00% 2004 1,350 1,604
VERMONT - 0.62%
Housing Finance Agency, Single Family
Housing Bonds, Series 4, 5.75% 2012 (1996)/1/ 1,250 1,270
VIRGINIA - 0.62%
Housing Development Authority,
Commonwealth Mortgage Bonds, 1995 Series A-AMT,
Subseries A-1, 6.60% 2004 1,200 1,265
WASHINGTON - 3.58%
Washington Public Power Supply System:
Nuclear Project No. 1 Refunding Revenue Bonds,
Series 1993A, 6.30% 2001 1,000 1,088
Nuclear Project No. 2 Refunding Revenue Bonds:
Series 1990C, 7.30% 2000 1,500 1,675
Series 1993A, 5.10% 2000 750 772
Series 1992A, 5.90% 2004 1,500 1,612
Nuclear Project No. 3 Refunding Revenue Bonds,
Series 1989B, 7.10% 2000 2,000 2,218
WISCONSIN - 1.91%
Health and Educational Facilities
Authority, Revenue Bonds (Luther Hospital
Project), Series 1992, 6.00% 2003 1,000 1,083
Housing and Economic Development
Authority, Housing Revenue Bonds:
6.20% 2001 1,500 1,569
1995 Series A, 5.15% 2002 1,250 1,269
---------
195,450
---------
TAX-EXEMPT SECURITIES MATURING IN
ONE YEAR OR LESS - 3.20%
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1991D AMT, 6.60% 11/15/96 1,465 1,497
County of Los Angeles, California, 1995-96 Tax
and Revenue Anticipation Notes, Series A,
4.50% 7/1/96 400 402
City of New York General Obligation Bonds,
FGIC Insured, Daily Adjustable Rate, 3.80% 2/1/96/3/ 100 100
State of Texas, Tax and Revenue Anticipation
Notes, Series 1995A, 4.75% 8/30/96 3,550 3,579
State of Wisconsin, Operating Notes of 1995,
4.50% 6/17/96 1,000 1,004
---------
6,582
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $197,995,000) 202,032
Excess of cash, prepaids and receivables over
payables 3,411
---------
NET ASSETS $205,443
=========
</TABLE>
/1/These are valued on 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/These are valued on the basis of their effective maturity - that is, the
dates at which the securities can be put to the issuers for redemption.
See Notes to Financial Statements
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
FINANCIAL STATEMENTS (unaudited)
STATEMENT OF ASSETS AND LIABILITIES
at January 31, 1996 (dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Tax-exempt securities
(cost: $197,995) $202,032
Cash 94
Prepaid organization expense 8
Receivables for--
Sales of investments $1,066
Sales of fund's shares 2,117
Accrued interest 3,294 6,477
---------- ----------
208,611
LIABILITIES:
Payables for--
Purchases of investments 2,459
Repurchases of fund's shares 323
Dividends payable 249
Management services 69
Accrued expenses 68 3,168
---------- ----------
NET ASSETS AT JANUARY 31, 1996 --
Equivalent to $14.60 per share on 14,074,587
shares of beneficial interest issued and
outstanding; unlimited shares authorized $205,443
==========
STATEMENT OF OPERATIONS
for the six months ended January 31, 1996
(unaudited) (dollars in thousands)
INVESTMENT INCOME:
Income:
Interest on tax-exempt securities $5,479
----------
Expenses:
Management services fee $405
Distribution expenses 302
Transfer agent fee 41
Reports to shareholders 45
Registration statement and prospectus 39
Postage, stationery and supplies 8
Trustees' fees 8
Auditing and legal fees 29
Custodian fee 5
Taxes other than federal income tax 1
Organization expense 1
Other expenses 1
----------
Total expenses before reimbursement 885
Reimbursement of expenses 147 738
---------- ----------
Net investment income 4,741
----------
REALIZED GAIN AND UNREALIZED
APPRECIATION ON INVESTMENTS:
Net realized gain 144
Net unrealized (depreciation)
appreciation on investments:
Beginning of period (64)
End of period 4,037
----------
Net change from unrealized depreciation
to unrealized appreciation on investments 4,101
----------
Net realized gain and unrealized
appreciation on investments 4,245
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $8,986
==========
STATEMENT OF CHANGES IN NET ASSETS
(DOLLARS IN THOUSANDS) Six months
ended Year ended
January July 31,
31, 1996* 1995
---------- ----------
OPERATIONS:
Net investment income $4,741 $9,153
Net realized gain (loss) on investments 144 (1,626)
Net unrealized appreciation on investments 4,101 3,947
---------- ----------
Net increase in net assets
resulting from operations 8,986 11,474
---------- ----------
DIVIDENDS PAID FROM NET
INVESTMENT INCOME (4,742) (9,177)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
3,420,297 and 8,657,598 shares, respectively 49,462 120,121
Proceeds from shares issued in
reinvestment of net investment
income dividends:
223,555 and 449,087 shares, respectively 3,239 6,265
Cost of shares repurchased:
2,928,295 and 9,148,603 shares, respectively (42,358) (126,763)
---------- ----------
Net increase (decrease) in net assets
resulting from capital share
transactions 10,343 (377)
---------- ----------
TOTAL INCREASE IN NET ASSETS 14,587 1,920
NET ASSETS:
Beginning of period 190,856 188,936
---------- ----------
End of period $205,443 $190,856
========== ==========
</TABLE>
See Notes to Financial Statements
*Unaudited
Notes to Financial Statements
(unaudited)
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 fund 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 3 and 10 years. The
following paragraphs summarize the significant accounting policies consistently
followed by the fund in the preparation of its financial statements:
Tax-exempt securities with original or remaining maturities in excess of
60 days are valued at prices obtained from a national municipal bond pricing
service. The pricing service takes into account various factors such as
quality, yield and maturity of tax-exempt securities comparable to those held
by the fund, as well as actual bid and asked prices on a particular day. Other
securities with original or remaining maturities in excess of 60 days,
including securities for which pricing service values are not available, are
valued at the mean of their quoted bid and asked prices. However, in
circumstances where the investment adviser deems it appropriate to do so,
securities will be valued at the mean of their representative quoted bid and
asked prices, or, if such prices are not available, at the mean of such prices
for securities of comparable maturity, quality and type. 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. Amortization of market discounts on securities is
recognized upon disposition, subject to applicable tax requirements. Dividends
to shareholders are declared daily after determination of the fund's net
investment income and paid to shareholders monthly.
Prepaid organizational expenses are amortized over the estimated period of
benefit, not to exceed five years from commencement of operations. In the event
that Capital Research and Management Company (CRMC), the fund's investment
adviser, redeems any of its original shares prior to the end of the five-year
period, the proceeds of the redemption payable with respect to such shares
shall be reduced by the pro rata share (based on the proportionate share of the
original shares redeemed to the total number of original shares outstanding at
the time of such redemption) of the unamortized prepaid organization expenses
as of the date of such redemption. In the event the fund liquidates prior to
the end of the five-year period, CRMC shall bear any unamortized prepaid
organization expenses.
Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
The custodian fee of $5,000 was paid by these credits rather than in cash.
2. It is the fund's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of January 31, 1996, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $4,037,000, of which $4,951,000
related to appreciated securities and $914,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended January 31, 1996. The fund has
available at January 31, 1996 a net capital loss carryforward totaling $132,000
which may be used to offset capital gains realized during subsequent years
through 2002 and thereby relieve the fund and its shareholders of any 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 carryforward. The cost of portfolio securities for book
and federal income tax purposes was $197,995,000 at January 31, 1996.
3. The fee of $405,000 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 annual operating
expenses exceed 0.75% of the average daily net assets of the fund, during a
period which will terminate at the earlier of such time as no reimbursement has
been required for a period of 12 consecutive months, provided no advances are
outstanding, or October 1, 2003. CRMC has also voluntarily agreed to waive its
fees to the extent necessary to ensure the fund's expenses do not exceed 0.70%
of the average daily net assets. Expenses that are not subject to these
limitations are interest, taxes, brokerage commissions, transaction costs, and
extraordinary expenses. Fee reductions were $147,000 for the six months ended
January 31, 1996. There can be no assurance that this voluntary fee waiver will
continue in the future.
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 six months ended January 31,
1996, distribution expenses under the Plan were $302,000. As of January 31,
1996, accrued and unpaid distribution expenses were $49,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $41,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $128,000 (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 January 31, 1996, aggregate amounts deferred were $17,000.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC. Certain 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 January 31, 1996, accumulated net realized loss on investments was
$3,866,000 and paid-in capital was $205,273,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $47,633,000 and $36,311,000, respectively, during the
six months ended January 31, 1996.
PER-SHARE DATA AND RATIOS
<TABLE>
<CAPTION>
Six Period
months Year October
ended ended 6, 1993/2/
January July 31, to July
31, 1996/1/ 1995 31, 1994
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $14.29 $14.10 $14.29
--------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .34 .69 .49
Net realized and unrealized
gain (loss) on investments .31 .19 (.19)
--------- --------- ---------
Total income from investment operations .65 .88 .30
--------- --------- ---------
LESS DISTRIBUTIONS:
Dividends from net investment income (.34) (.69) (.49)
--------- --------- ---------
Net Asset Value, End of Period $14.60 $14.29 $14.10
========= ========= =========
Total Return/3/ 4.61%/4/ 6.45% 2.11%/4/
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in millions) $205 $191 $189
Ratio of expenses to average net assets .37%/4/ /5/ .64%/5/ .51%/4/ /5/
Ratio of net income to average net assets 2.36%/4/ 4.88% 3.67%/4/
Portfolio turnover rate 19.12%/4/ 45.82% 42.21%/4/
</TABLE>
/1/Unaudited
/2/Commencement of operations.
/3/This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the fund's offering price.
/4/Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
/5/Had CRMC not waived fees, the fund's ratio of expenses to average net assets
would have been 0.44%, 0.90%, and 0.73%, respectively, for the periods shown.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
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 LLP
345 California Street
San Francisco, California 94104-2675
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
FUND SERVICES
These handy services can add convenience and flexibility to your American Funds
investments.
ADDING TO YOUR INVESTMENT
There are three ways you can group your American Funds purchases to qualify for
a quantity discount:
RIGHT OF ACCUMULATION: You can combine the value of your existing shares with
those you are purchasing to qualify for a discount.
STATEMENT OF INTENTION: You can, without obligation, use a Statement of
Intention that allows you to combine the value of your existing shares and the
purchases you intend to make over a 13-month period so you can take immediate
advantage of the maximum quantity discount available.
CONCURRENT PURCHASES: By purchasing shares in more than one American Fund
simultaneously, you may qualify for a quantity discount.
(Shares of money market funds purchased directly do not apply to quantity
discounts. Additionally, certain accounts may not be eligible to be grouped.
See the fund's prospectus or your investment professional for more details.)
SUBSEQUENT INVESTMENTS BY MAIL: Once your account has been established and
you've selected a broker/dealer, simply send a check for $50 or more, along
with the bottom portion of your account statement, to American Funds Service
Company.
PUTTING YOUR INVESTMENTS ON AUTOPILOT
AUTOMATIC INVESTMENT PLAN: You can make automatic investments regularly by
authorizing American Funds Service Company to deduct a specified sum from your
bank account.
AUTOMATIC EXCHANGE PLAN: You can automatically exchange $50 or more between
funds on a regular basis.
AUTOMATIC WITHDRAWAL PLAN: You can arrange to have regular checks for specified
amounts sent to you or to anyone you designate in any month(s) you choose.
CHOOSING THE PAYOUT SYSTEM THAT'S RIGHT FOR YOU
AUTOMATIC REINVESTMENT: All dividends and capital gain distributions can be
automatically reinvested in additional fund shares without a sales charge.
CROSS-REINVESTMENT: You can reinvest dividends and/or capital gains from one
fund to another fund at no charge if you have a balance of at least $5,000 in
the originating fund or meet the minimum initial investment for the receiving
fund.
DIVIDENDS IN CASH: You can elect to take dividends in cash.
REPORTS YOU'LL RECEIVE FROM US
CONFIRMATIONS OF TRANSACTIONS: You receive account statements reflecting the
transactions in your account.
CONSOLIDATED QUARTERLY STATEMENTS: If you have more than one account with the
American Funds, you can request a quarterly statement combining certain
accounts registered to the same individual.
YEAR-END TAX REPORTS: At the end of each year, you will receive an individual
report which shows the tax status of the distributions paid to you during the
year. In many instances, these reports can help you calculate taxes due on
shares sold by reporting average cost.
SPECIAL SERVICES
EXCHANGE PRIVILEGES: You can transfer some or all of your holdings into other
American Funds by mail or by phone. Certain restrictions apply (a sales charge
may apply if one has not already been paid), and it's important to remember
that an exchange constitutes a sale and purchase for tax purposes.
TELEPHONE INFORMATION SERVICE: American FundsLine(R) is a toll-free service
which gives you account information as well as current prices for all American
Funds. Just call 800/325-3590.
SAFEKEEPING OF CERTIFICATES: Your shares are credited to your account and
certificates are not issued unless specifically requested. (Certificates are
not available for money market funds.)
FREE CHECK-WRITING WITHDRAWAL SERVICE: If you have a money market fund account,
this service enables you to write checks for $250 or more against the account.
The account continues to earn daily interest until checks clear the fund's
bank.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
SECURITIES DEALER OR FINANCIAL PLANNER, OR PHONE THE FUND'S TRANSFER AGENT,
AMERICAN FUNDS SERVICE COMPANY, AT 800/421-0180. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE SUBJECT TO CHANGE
OR TERMINATION.
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 March 31, 1996, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Litho in USA W/AL/2909
Lit. No. LTEX-013-0396
Printed on recycled paper
[The American Funds Group(R)]
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