LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
1997 Annual Report
For the Year Ended July 31
[The American Funds Group(r)]
[cover: illustration of country road]
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA(SM) seeks an opportunity for
current income exempt from federal income taxes, consistent with preservation
of capital, through investments in tax-exempt securities with effective
maturities between three and 10 years.
Limited Term Tax-Exempt Bond Fund of America is one of the 28 mutual funds in
The American Funds Group,(r) a family of funds managed by Capital Research and
Management Company. With a history dating back to 1931, The American Funds
Group has more than $150 billion in assets.
CHARTING A $10,000 INVESTMENT IN
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
(for the period since the fund's inception on October 6, 1993 to
July 31, 1997, with dividends reinvested)
[begin chart]
<TABLE>
<CAPTION>
Date The fund at The fund at net Lehman Brothers Lipper
maximum asset value 7-Year Intermediate
offering price* (without any Municipal Bond Municipal
sales charge) Index Fund Average
<S> <C> <C> <C> <C>
10/6/93 $9,525 $10,000 $10,000 $10,000
10/31/93 9,689 10,171 10,026 10,020
1/31/94 9,976 10,472 10,228 10,229
4/30/94 9,573 10,049 9,810 9,771
7/31/94 9,728 10,211 9,979 9,944
10/31/94 9,616 10,094 9,836 9,766
1/31/95 9,732 10,215 10,024 9,964
4/30/95 10,050 10,550 10,384 10,297
7/31/95 10,355 10,870 10,786 10,599
10/31/95 10,604 11,131 11,051 10,867
1/31/96 10,833 11,371 11,341 11,150
04/30/96 10,768 11,304 11,171 10,975
7/31/96 10,914 11,456 11,333 11,144
10/31/96 11,137 11,691 11,565 11,353
1/31/97 11,262 11,821 11,764 11,516
04/30/97 11,325 11,888 11,766 11,541
07/31/97 11,782 12,368 12,309 12,049
</TABLE>
$12,368 The fund at net asset value (without any sales charge)
$12,309 Lehman Brothers 7-Year Municipal Bond Index
$12,049 Lipper Intermediate Municipal Fund Average
$11,782 The fund at maximum offering price*
*This figure reflects payment of the maximum sales charge of 4.75% on the
$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. It was calculated from
9/30/93.
Past results are not predictive of future results.
RETURNS AFTER DEDUCTING THE MAXIMUM SALES CHARGE
<TABLE>
<CAPTION>
Periods ended 6/30/97 Periods ended 7/31/97
TOTAL AVERAGE ANNUAL TOTAL AVERAGE ANNUAL
RETURN COMPOUND RETURN RETURN COMPOUND RETURN
<S> <C> <C> <C> <C>
Lifetime (since 10/6/93) +15.56% +3.95% +17.83% +4.39%
One Year +1.78 - +2.80 -
</TABLE>
These results reflect the effect of a voluntary fee waiver. Without the waiver,
the results would have been lower. The fund's 30-day yield as of August 31,
1997, calculated in accordance with the Securities and Exchange Commission
formula, was 3.89% (3.53% without the fee waiver). The fund's distribution rate
as of that date was 4.30% (3.95% without the fee waiver).
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. Income may be subject to
state or local income taxes and/or federal alternative minimum taxes. Certain
other income, as well as capital gain distributions, may be taxable.
The SEC yield reflects 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.
About our cover:
LIMITED TERM TAX-EXEMPT FUND OF AMERICA takes a middle path; it works to
provide more income than short-term tax-exempt securities with less price
fluctuation than longer term bonds.
FELLOW SHAREHOLDERS:
Limited Term Tax-Exempt Bond Fund of America's latest fiscal year was a
favorable one for the fund and for the tax-exempt bond market in general. The
fund continued to produce attractive tax-free income, and a downward trend in
interest rates raised the value of many of the bonds in its portfolio.
During the 12 months ended July 31, the fund paid dividends totaling 68.3 cents
a share, virtually all exempt from regular federal income taxes.
- -If you took your dividends in cash, this represented a tax-free income return
of 4.8%.
- -If you reinvested your dividends in additional fund shares, your income return
was 4.9%.
- -To match a 4.9% tax-free return, a shareholder in the top federal tax bracket
of 39.6% would have had to earn 8.1% from a taxable investment.
An additional part of the fund's return came from a change in value of the
fund's holdings. Market forces, coupled with lower interest rates, pushed
Limited Term Tax-Exempt Bond Fund's net asset value up 43 cents a share to
finish the year at $14.79. This gain, combined with the fund's income return,
produced an 8.0% total return for those who reinvested dividends.
Over the same period, the 135 intermediate municipal bond funds tracked by
Lipper Analytical Services gained an average of 7.9%, while the unmanaged
Lehman Brothers 7-Year Municipal Bond Index rose 8.6%, both with distributions
reinvested. Since the fund's inception on October 6, 1993, it has posted a
total return of 23.7%, while the Lipper average rose 20.5% and the Lehman index
gained 23.1%.
Intermediate municipal bond funds seek to produce much of the income of longer
term municipal bond funds but with less fluctuation in principal value. Limited
Term Tax-Exempt Bond Fund goes a step further, taking a particularly cautious
approach to its investments. In its effort to conserve principal, the fund
typically holds bonds with shorter maturities than many other intermediate-term
funds. (Generally, the longer a bond's maturity, the more its value tends to
rise or fall in response to changes in interest rates.) The fund closed the
fiscal year with an effective maturity of 5.4 years compared with the 7.0-year
average maturity of the Lehman index.
In light of this shorter average maturity, which suggests that the fund would
ordinarily trail a rising bond market, we are particularly pleased with the
fund's results relative to similar funds.
Although interest rates fell during the fiscal year, there were some bumps
along the way. Rates turned upward in December 1996 when concerns that
inflation might accelerate eroded bond investor confidence. On March 25, the
Federal Reserve Board increased the federal funds rate (the interest rate banks
charge each other on overnight loans) by a quarter percent to 5.5%. Interest
rates rose in response, but soon fell again as economic growth slowed to a
favorable "not-too-hot, not-too-cold" pace and concerns about inflationary
pressures eased. All the while, inflation remained remarkably benign.
As of July 31, the fund's portfolio consisted of 105 debt issues from 32 states
and territories. More than 65% of these securities were rated in the three top
categories-AAA, AA, A-by independent bond-rating services.
Bonds in the fund's portfolio are helping states and municipalities to develop
projects that improve the lives of their residents. Beginning on page 2, we
focus on three of the fund's holdings-an aquarium, a hospital system and a
state housing agency-to illustrate how your investments help build America's
communities.
Cordially,
[/s/ Paul G. Haaga, Jr.] [/s/ Abner D. Goldstine]
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
September 15, 1997
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA: WEAVING THE FABRIC OF AMERICA'S
COMMUNITIES
The fabric of a town or city is woven of myriad threads of public and private
sector interests that transform a collection of streets and buildings into a
community. At the intersection of many of those streets you will find projects
funded by municipal bonds.
Through Limited Term Tax-Exempt Bond Fund of America, you support the
development of 105 of these projects. This year we profile three specific bond
issuers-an aquarium, a hospital system and a state housing authority-to
illustrate the way your investments in the fund are strengthening the fabric of
America's communities.
LONG BEACH AQUARIUM OF THE PACIFIC
Anchored in the new Queensway Bay Development, Long Beach Aquarium of the
Pacific will serve as a tourist destination and a major research center. "Our
desire is to be a catalyst for the conservation of the Pacific Ocean," says
Warren Iliff, president and chief executive officer of the new facility. "We
will work with area schools and universities to help instill a sense of
stewardship for the ocean."
Limited Term Tax-Exempt Bond Fund holds nearly $1.6 million of the revenue
bonds that have provided construction funding for a facility that will cover
more than 150,000 square feet and contain tanks holding nearly one million
gallons of salt water.
"This project is a good example of our intensive credit research in the muni
market," says David Hoag, one of the fund's research analysts. "The bonds did
not have a high credit rating, but we felt the project was solid and
well-secured by projected attendance figures and revenue sources the city had
dedicated to fund the project." Investment professionals at Capital Research
and Management Company, the fund's investment adviser, carefully analyzed the
bond's specific terms and conditions, then conducted site visits and met with
senior officials before recommending an investment in the project.
The aquarium will be surrounded by a convention center and a shopping and
entertainment complex. "Each piece in the redevelopment area complements the
others," says Hoag. This larger scale project was designed by the urban
planners responsible for the revitalization of Battery Park in New York City.
[photo: dolphin]
[begin caption]
Set to open in June 1998, Long Beach Aquarium of the Pacific hopes to instill
its visitors with a sense of stewardship for the ocean.
Permanent exhibits will showcase the inhabitants of the Pacific's many regions
in a facility covering over 150,000 square feet. [end caption]
[photo: hand holding medical instrument]
[begin caption]
Advocate Health Care believes that being an active member of the Chicago
community is an essential element in its mission.
The organization offers programs such as student mentoring and senior citizen
wellness centers.[end caption]
"It's exciting to establish an aquarium here that looks westward across the
ocean," says Iliff. "It is so appropriate for Southern California. People from
all of the Pacific Rim cultures live in Long Beach and the Los Angeles basin."
Long Beach Aquarium of the Pacific is scheduled to open in June 1998.
ILLINOIS HEALTH FACILITIES AUTHORITY - ADVOCATE HEALTH CARE
If someone told you that Chicago's third-largest private-sector employer had
served nearly 1.1 million customers in 1996, that probably wouldn't surprise
you. What might surprise you was a look at the company's list of "products."
Right near the top you would find babies. Yes, the Windy City's third-largest
employer is a hospital system-Advocate Health Care. Its doctors and nurses
helped more than 18,000 newborns into the world last year.
Affiliated with the Evangelical Lutheran Church in America and the United
Church of Christ, Advocate Health Care derives its sense of purpose from its
ecumenical philosophy. The organization's commitment to top-notch medical care
is only the beginning. The remainder of Advocate's mission is fulfilled in the
community. "We are committed to partnering with others to address local needs
such as children's health," says Karen Shickedanz, Advocate's director of
corporate communications. For example, Advocate's first system-wide Healthy
Communities initiative takes aim at the nation's number one child killer: motor
vehicle accidents. Advocate is providing education to new parents and existing
families on the safe use of children's car seats and seat belts.
Your fund holds Advocate bonds valued at just over $3 million. These
obligations were issued to refinance existing debt and provide funding for
maintenance and facilities upkeep. Brenda Ellerin, a portfolio counselor for
the fund, notes that the refinancing was a plus, in that it allowed the
hospitals to operate as one system with common goals. The dynamics of the
municipal market also helped make the bonds attractive. "Short-term supply
factors had driven down the price and we were comfortable with the revenue
streams that secured the bonds. It was a good issue for Limited Term Tax-Exempt
Bond Fund."
Ellerin says that the creation of the Advocate system, which includes eight
hospitals and more than 200 sites of care, has benefited each of the individual
facilities. "Not only have the hospitals been able to control costs, but they
are leveraging off each other's community involvement as well. That has led to
more efficient delivery of unreimbursed services, such as charity care, and to
broader programs like high school mentoring and senior wellness centers."
WISCONSIN HOUSING AND ECONOMIC DEVELOPMENT AUTHORITY
"We continually ask ourselves: $How can we create the most low- and
moderate-income housing in the cities and rural areas of Wisconsin?' " says
Sherry Pohlman, treasury manager at the Wisconsin Housing and Economic
Development Authority (WHEDA). One way the Madison-based organization pursues
its mission is by selling housing revenue bonds backed by mortgages on the
properties it finances.
The fund holds two different series of WHEDA bonds representing a total
investment of more than $4.5 million. The bonds were sold to finance the
development of low- and moderate-income multifamily apartments.
"We have about 15% of the fund's portfolio in housing revenue bonds," says
analyst Ed Nahmias. "We like them because the market often doesn't distinguish
among the different types of housing bonds, which can create some excellent
values." As with all mortgage-related securities, analysts must determine
exposure to prepayment risk-that is, the potential for borrowers to repay their
mortgages early when interest rates decline-in addition to examining the credit
quality of the bonds.
WHEDA's mandate is to ensure that there is a good stock of well-maintained low-
to moderate-income housing in Wisconsin communities. "We conduct yearly site
inspections and review each project's annual budget and financial statement,"
says Pohlman. "We need to preserve good value for the tenants, the bond
investors and for ourselves, as holders of the asset."
WHEDA is involved with Wisconsin communities at many levels. For instance, the
agency recently funded a major renovation in Waukesha. The refurbishment of 68
apartments stimulated sweeping development, helping to resurrect an extremely
depressed area. The authority also finances projects such as group homes for
the physically and emotionally challenged.
A FINELY WROUGHT CLOTH
A fascinating underwater seascape exposing young and old to the importance and
beauty of the Pacific Ocean. A hospital system reaching beyond the examination
room to help sick and well alike. An organization assisting thousands each year
afford housing.
These are only three of the holdings of Limited Term Tax-Exempt Bond Fund of
America. However, each of the bonds in your fund touches people in some vital
way. Together-with your help-they are weaving the fabric of community across
America.
[photo: building under construction]
[begin caption]
The Wisconsin Housing and Economic Development Authority is dedicated to
providing Wisconsinites with affordable housing.
Once involved with a project, WHEDA helps make sure it maintains its value over
the long term.[end caption]
<TABLE>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
INVESTMENT PORTFOLIO
July 31, 1997
- ---------------------------------------------------- ------------------
<S>
[pie chart] <C> <C>
Portfolio Composition
New York 12.93%
Michigan 9.59%
California 8.28%
Maine 7.78%
Texas 5.43%
Massachusetts 5.00%
Pennsylvania 4.24%
Washington 4.24%
Illinois 3.69%
Louisiana 3.51%
Other states 31.12%
Cash & equivalents 4.19%
[end pie chart]
- ---------------------------------------------------- ------------------
Principal Market
Amount Value
(000) (000)
------------------
Tax-Exempt Securities Maturing in More than
One Year - 95.81%
Alabama - 1.51%
Industrial Development Board of the City of Butler,
Pollution Control Refunding Revenue Bonds (James River
Project), Series 1993, 5.50% 2005 $3,000 $3,063
Alaska - 1.93%
Student Loan Corp., Student Loan Revenue Bonds:
1988 Series A, AMBAC Insured AMT, 8.40% 2003 2,750 2,881
1997 Series A, AMBAC Insured AMT, 5.20% 2006 1,000 1,031
Arizona - 2.07%
Educational Loan Marketing Corp.,
1992 Educational Loan Revenue Bonds:
Series A, 6.70% 2000 3,000 3,145
Series B AMT, 6.95% 2001 1,000 1,067
California - 8.28%
Health Facilities Financing Authority,
Hospital Revenue Bonds (Downey Community
Hospital), Series 1993:
5.00% 2001 1,250 1,278
5.30% 2004 1,010 1,045
City of Fremont, Multifamily Housing Revenue Refunding Bonds,
Issue A of 1995 (Durham Greens Project), 5.40% 2026 (2006) /1/ 2,830 2,965
Long Beach Aquarium of the Pacific, Revenue Bonds
(Aquarium of the Pacific Project),
1995 Series A, 5.75% 2005 1,500 1,578
County of Los Angeles, Certificates of Participation:
1991 Master Refunding Project, 6.40% 2000 1,000 1,057
Marina del Rey, Series A, 6.25% 2003 3,100 3,342
Pleasanton Joint Powers Financing Authority,
Reassessment Revenue Bonds, 1993 Series A,
5.70% 2001 955 997
Sacramento:
Cogeneration Authority, Cogeneration
Project Revenue Bonds (Proctor & Gamble Project),
1995 Series, 7.00% 2004 1,000 1,136
Power Authority, Cogeneration Project Revenue
Bonds (Campbell Soup Project), 1995 Series:
6.50% 2004 2,000 2,213
6.50% 2005 1,100 1,210
Colorado - 1.76%
Housing and Finance Authority, Single
Family Program Senior Bonds, 1995 Series C-2,
5.625% 2009 (2000) /1/ 935 968
The Regents of the University of Colorado, Master Lease
Purchase Agreement, Refunding Certificates of
Participation (Telecommunications and Cogeneration
Projects), Series 1996, AMBAC Insured, 6.00% 2005 2,415 2,637
Connecticut - 2.68%
Mashantucket (Western) Pequot Tribe Special Revenue Bonds,
1996 Series A:
6.25% 2002 1,000 1,074
6.375% 2004 4,000 4,372
District of Columbia - 1.05%
General Obligation Refunding Bonds,
Series 1994D, FGIC Insured, 5.10% 2002 1,000 1,033
Hospital Revenue Refunding Bonds
(Medlantic Healthcare Group, Inc. Issue),
Series A, MBIA Insured, 6.00% 2006 1,000 1,094
Illinois - 3.69%
Health Facilities Authority:
Revenue Refunding Bonds, Series 1997A, (Advocate Health
Care Network):
5.50% 2004 1,250 1,314
5.10% 2005 1,815 1,864
Revenue Bonds, Series 1993 (OSF Healthcare System),
5.25% 2001 2,025 2,096
City of Chicago, Chicago-O'Hare International Airport,
Special Facilities Revenue Bonds for United Air Lines,
Series B AMT, 8.95% 2018 975 1,113
The County of Cook, General Obligation Capital Improvement
Bonds, Series 1996, FGIC Insured, 6.00% 2006 1,000 1,118
Indiana - 0.86%
Employment Development Commission,
Pollution Control Revenue Bonds (Chrysler
Corp. Project), Series 1985, 5.70% 1999 1,700 1,741
Iowa - 1.07%
Student Loan Liquidity Corp., Student Loan Revenue Bonds,
Series C AMT, 6.80% 2005 2,000 2,178
Louisiana - 3.51%
Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds
(LOOP INC. Project), First Stage:
Series 1992B, 6.20% 2003 1,500 1,626
Series E, 7.45% 2004 5,000 5,507
Maine - 7.78%
Educational Loan Marketing Corp.,
Senior Student Loan Revenue Bonds:
Series 1991 AMT, 6.90% 2003 2,740 2,897
Series 1994A-4 AMT:
5.95% 2003 1,000 1,062
6.05% 2004 1,500 1,585
Student Loan Revenue Refunding Bonds:
Series 1992A-1 AMT, 6.20% 2003 525 557
Series 1992A-4 AMT, 6.30% 2004 895 949
Housing Authority, Mortgage Purchase Bonds:
1994 Series E, 6.30% 2002 1,650 1,724
1994 Series C-1, 5.90% 2015 (1999) /1/ 6,785 7,022
Maryland - 1.95%
Community Development Administration, Department
of Housing and Community Development,
Single Family Program Bonds,
1994 First Series, 5.70% 2017 (2004) /1/ 2,500 2,545
1994 Fifth Series AMT, 5.875% 2017 (2001) /1/ 1,380 1,415
Massachusetts - 5.00%
Housing Finance Agency, Housing Project Revenue Bonds,
Series A, AMBAC Insured:
5.25% 2002 1,000 1,034
5.35% 2003 750 779
The New England Education Loan Marketing
Corp., Student Loan Revenue Refunding Bonds:
1992 Senior Issue D, 6.20% 2000 2,000 2,106
1992 Senior Issue A, 6.50% 2002 4,500 4,895
1992 Issue C AMT, 6.75% 2002 1,250 1,347
Michigan - 9.59%
Hospital Finance Authority, Hospital Revenue Refunding
Bonds:
Genesys Health System Obligated Group, Series 1995A,
7.20% 2003 2,375 2,648
Pontiac Osteopathic, Series A, 5.375% 2006 4,000 3,998
Housing Development Authority, Rental Housing Revenue Bonds,
1992 Series A, AMBAC Insured, 6.40% 2005 1,200 1,296
City of Detroit, General Obligation Refunding Bonds
(Unlimited Tax):
Series A:
6.10% 2003 1,800 1,932
6.25% 2004 2,165 2,352
Series 1995-B, 6.75% 2003 4,500 4,975
Series A, FGIC Insured:
5.50% 2005 1,240 1,317
6.00% 2006 875 962
Minnesota - 0.91%
Housing and Finance Authority, Single Family Mortgage,
Series Q, 6.25% 2014 (1999) /1/ 770 801
Maplewood Health Care Facility Revenue Bonds (HealthEast
Project), 5.80% 2003 1,000 1,039
Mississippi - 0.54%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 (1998) /1/ 1,000 1,089
New Jersey - 1.46%
Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds, 1994 Series I, MBIA Insured, 5.60% 2016 2,900 2,965
New Mexico - 0.73%
New Mexico Educational Assistance Foundation, Student
Loan Revenue Bonds, Subordinate 1992 Series One-B AMT,
6.85% 2005 1,375 1,476
New York - 12.93%
Dormitory Authority Revenue Bonds:
City University Issue, Series U, 6.10% 2001 1,500 1,601
State University Educational Facilities, Series 1994B,
5.70% 2004 2,000 2,126
The City University of New York, as Lessee (John Jay
College of Criminal Justice Project Refunding),
5.75% 2005 2,000 2,129
State Medical Care Facilities Finance Agency,
Mental Health Services Facilities Improvement
Revenue Bonds, Series B:
5.30% 2004 1,620 1,682
5.30% 2004 2,000 2,082
6.00% 2007 3,000 3,259
Urban Development Corp.:
Correctional Capital Facilities Revenue Bonds,
1993A Refunding Series, 6.30% 2003 1,305 1,418
Revenue Refunding Bonds, PJ-CTR for Individual
Innovation, 5.25% 2003 1,500 1,555
Series 6, 6.00% 2006 1,500 1,623
The City of New York General Obligation Bonds:
1994 Series A, 6.00% 2000 1,000 1,052
Fiscal 1993 Series A, 6.25% 2003 2,000 2,175
Series E, 6.50% 2004 1,000 1,102
Series A-1, AMBAC Insured, 6.25% 2005 3,000 3,354
Series I, 6.25% 2006 1,000 1,098
North Carolina - 2.06%
Eastern Municipal Power Agency,
Power System Revenue Bonds, Refunding
Series 1993 C, 5.00% 2002 2,000 2,036
Municipal Power Agency Number 1,
Catawba Electric Revenue Bonds, Series 1992,
6.00% 2004 2,000 2,140
Ohio - 1.90%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds, 1992 Series A-2 AMT,
5.70% 2013 (1999) /1/ 1,585 1,635
County of Franklin, Hospital Facilities
Revenue Refunding and Improvement Bonds (Doctors
Hospital Project), Series 1993, 5.70% 2004 1,120 1,182
The Student Loan Funding Corp., Cincinnati,
Senior Subordinated Revenue Bonds,
Series 1993A AMT, 5.75% 2003 1,000 1,041
Oklahoma - 0.70%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds (Homeownership Loan Program),
1994 Series A-1 AMT, 6.25% 2016 (1999) /1/ 1,380 1,428
Pennsylvania - 4.24%
Higher Education Assistance Agency,
Student Loan Adjustable Rate Tender Revenue
Refunding Bonds, 1985 Series A, FGIC Insured,
6.80% 2000 8,000 8,610
South Dakota - 1.78%
Housing Development Authority, Homeownership Mortgage
Bonds, 1996 Series A, 5.50% 2010 985 1,014
Student Loan Finance Corporation, Student Loan
Revenue Bonds, Series 1994-A AMT, 5.95% 2001 (2001) /1/ 2,500 2,609
Texas - 5.43%
General Obligation Bonds,
Veterans' Housing Assistance Program, Fund I
Series 1994C Refunding Bonds, 6.25% 2015 (2000) /1/ 1,985 2,057
Brazos Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds:
1992C-1 AMT, 6.20% 2000 1,000 1,048
Subordinate Series, 1993C-2 AMT, 5.875% 2004 4,000 4,190
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 1,081
Harris County Health Facilities Development Corp.,
Hospital Revenue Refunding Bonds, Children's Hospital
Project, Series 1995, MBIA Insured, 6.00% 2004 1,000 1,090
Houston Water Conveyance Systems Contract, Certificates
of Participation, Series 1993-C, AMBAC Insured,
7.00% 2004 1,350 1,565
Utah - 0.78%
Housing Finance Agency, Single Family Mortgage
Purchase Refunding Bonds, Series 1996 (Federally
Insured or Guranteed Mortgage Loans), 5.45% 2004 1,525 1,581
Vermont - 0.14%
Housing Finance Agency, Single Family
Housing Bonds, Series 4, 5.75% 2012 (1999 /1/ 280 286
Virginia - 1.17%
Housing Development Authority, Commonwealth Mortgage
Bonds, 1995 Series A AMT, Subseries A-1:
6.50% 2003 1,000 1,076
6.60% 2004 1,200 1,304
Washington - 4.24%
Health Care Facilities Authority, Weekly Rate Demand
Revenue Bonds (Virginia Mason Medical Center),
MBIA Insured, 6.00% 2006 /2/ 1,000 1,091
Public Power Supply System:
Nuclear Project No. 1 Refunding Revenue Bonds:
Series 1993A, 6.30% 2001 1,000 1,069
Series 1989B, 7.25% 2003 (2000) /1/ 1,000 1,092
Nuclear Project No. 2 Refunding Revenue Bonds:
Series 1990C, 7.30% 2000 1,500 1,622
Series 1993A, AMBAC Insured, 5.50% 2004 1,000 1,057
Series 1992A, 5.90% 2004 1,500 1,609
Nuclear Project No. 3 Refunding Revenue Bonds,
Series 1989B, 7.10% 2000 1,000 1,076
West Virginia - 1.27%
The State Building Commission, Lottery Revenue Bonds,
1997 Series A, MBIA Insured, 5.00% 2003 2,500 2,580
Wisconsin - 2.80%
Health and Educational Facilities
Authority, Revenue Bonds (Luther Hospital
Project), Series 1992A, 6.00% 2003 1,000 1,077
Housing and Economic Development
Authority, Housing Revenue Bonds:
6.20% 2001 1,500 1,570
Series B AMT, 5.30% 2006 3,000 3,039
---------
194,621
--C286-------
Tax-Exempt Securities Maturing in
One Year or Less - 2.39%
Houston, Texas, Tax and Revenue Anticipation Notes,
4.50% 6/30/98 1,500 1,509
County of Los Angeles, California 1997 Tax and Revenue
Anticipation Notes, Series A, 4.50% 6/30/98 2,100 2,113
The Housing and Redevelopment Authority of the City of Saint Paul, Minnesota,
Hospital Facility Revenue Bonds (HealthEast Project), Series 1987-B,
9.75% 2017 (1997) /1/ 1,000 1,033
State of Texas, Tax and Revenue Anticipation Notes,
Series 1996, 4.75% 8/29/97 1,700 1,701
---------
6,356
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $194,169,000) 200,977
Excess of cash, prepaids and receivables over
payables 2,146
---------
NET ASSETS $203,123
=========
/1/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/Represents a when-issued security.
See Notes to Financial Statements
</TABLE>
<TABLE>
Limited Term Tax-Exempt Bond Fund of America
Financial Statements
Statement of Assets and Liabilities
at July 31, 1997 (dollars in thousands)
<S> <C> <C>
Assets:
Tax-exempt securities
(cost: $194,169) $200,977
Cash 99
Prepaid organization expense 3
Receivables for--
Sales of fund's shares $774
Accrued interest 3,119 3,893
---------- ----------
204,972
Liabilities:
Payables for--
Purchase of investments $1,090
Repurchases of fund's shares 357
Dividends payable 242
Management services 64
Accrued expenses 96 1,849
---------- ----------
Net Assets at July 31, 1997 --
Equivalent to $14.79 per share on 13,736,978
shares of beneficial interest issued and
outstanding; unlimited shares authorized $203,123
==========
Statement of Operations
for the year ended July 31, 1997
(dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $11,105
----------
Expenses:
Management services fee $815
Distribution expenses 610
Transfer agent fee 71
Reports to shareholders 36
Registration statement and prospectus 72
Postage, stationery and supplies 20
Trustees' fees 16
Auditing and legal fees 30
Custodian fee 10
Taxes other than federal income tax 4
Organization expense 3
Other expenses 13
----------
Total expenses before reimbursement 1,700
Reimbursement of expenses 169 1,531
---------- ----------
Net investment income 9,574
----------
Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (761)
Net unrealized appreciation
on investments:
Beginning of year 396
End of year 6,808
----------
Net increase in unrealized appreciation
appreciation on investments 6,412
----------
Net realized loss and unrealized
appreciation on investments 5,651
----------
Net Increase in Net Assets
Resulting from Operations $15,225
==========
Statement of Changes in Net Assets
(dollars in thousands)
Year ended Year ended
July 31 July 31
1997 1996
---------- ----------
Operations:
Net investment income $9,574 $9,651
Net realized (loss) gain on investments (761) 367
Net unrealized appreciation on investments 6,412 460
---------- ----------
Net increase in net assets
resulting from operations 15,225 10,478
---------- ----------
Dividends Paid from Net
Investment Income (9,603) (9,651)
---------- ----------
Capital Share Transactions:
Proceeds from shares sold:
6,106,012 and 6,334,113 shares, respectively 88,463 91,389
Proceeds from shares issued in
reinvestment of net investment
income dividends:
465,326 and 461,784 shares, respectively 6,740 6,661
Cost of shares repurchased:
6,523,758 and 6,465,529 shares, respectively (94,336) (93,099)
---------- ----------
Net increase in net assets
resulting from capital share
transactions 867 4,951
---------- ----------
Total Increase in Net Assets 6,489 5,778
Net Assets:
Beginning of year 196,634 190,856
---------- ----------
End of year $203,123 $196,634
========== ==========
See Notes to Financial Statements
</TABLE>
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 fund seeks current income exempt from federal income
taxes, consistent with preservation of capital, through investments in
tax-exempt securities with effective maturities between three 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. Securities for which
market quotations are not readily available are valued at fair value by the
Board of Trustees or a committee thereof. All securities with 60 days or less
to maturity are valued at amortized cost, which approximates market value.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the fund purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. 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. 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 organization 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 that 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 $10,000 includes $1,000 that 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 taxable income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision is
required.
As of July 31, 1997, net unrealized appreciation on investments for book
and federal income tax purposes aggregated $6,808,000, of which $7,119,000
related to appreciated securities and $311,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the year ended July 31, 1997. The fund has
available at July 31, 1997 a net capital loss carryforward totaling $4,404,000
which may be used to offset capital gains realized during subsequent years
through 2003 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 $194,169,000 at July 31, 1997.
3. The fee of $815,000 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. Expenses that are not subject to these
limitations are interest, taxes, brokerage commissions, transaction costs and
extraordinary expenses. Fee reductions were $169,000 for the year ended July
31, 1997.
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, 1997,
distribution expenses under the Plan were limited to $610,000, representing
.30% of average net assets. Had no limitation been in effect, the fund would
have paid $1,022,000 in distribution expenses under the Plan. As of July 31,
1997, accrued and unpaid distribution expenses were $58,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $71,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $155,000 (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 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, 1997,
aggregate amounts deferred and earnings thereon were $39,000.
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 July 31, 1997, accumulated net realized loss on investments was
$4,404,000 and paid-in capital was $200,749,000.
The fund made purchases and sales of investment securities of $64,370,000
and $62,189,000, respectively, during the year ended July 31, 1997.
<TABLE>
Per-Share Data and Ratios
<S> <C> <C> <C> <C>
Period
October 6,
Year ended 1993 /1/
to July
1997 1996 1995 31, 1994
--------- --------- --------- ---------
Net Asset Value, Beginning of Period $14.36 $14.29 $14.10 $14.29
--------- --------- --------- ---------
Income From Investment Operations:
Net investment income .68 .69 .69 .49
Net realized and unrealized
gain (loss) on investments .43 .07 .19 (.19)
--------- --------- --------- ---------
Total income from investment operations 1.11 .76 .88 .30
--------- --------- --------- ---------
Less Distributions:
Dividends from net investment income (.68) (.69) (.69) (.49)
--------- --------- --------- ---------
Net Asset Value, End of Period $14.79 $14.36 $14.29 $14.10
========= ========= ========= =========
Total Return /2/ 7.96% 5.39% 6.45% 2.11% /3/
Ratios/Supplemental Data:
Net assets, end of period (in millions) $203 $197 $191 $189
Ratio of expenses to average net assets before fee waiver .83% .85% .90% .73% /3/
Ratio of expenses to average net assets after fee waiver .75% .74% .64% .51% /3/
Ratio of net income to average net assets 4.70% 4.77% 4.88% 3.67% /3/
Portfolio turnover rate 31.89% 34.95% 45.82% 42.21% /3/
/1/Commencement of operations.
/2/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.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees 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, 1997, the results of its
operations, the changes in its net assets and the per-share data and ratios for
the periods 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, 1997 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 29, 1997
TAX INFORMATION (UNAUDITED)
During the fiscal year ended July 31, 1997, the fund paid 68.1 cents per
share of 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 calendar
year-end information you receive from the fund's transfer agent.
FOR INFORMATION ABOUT YOUR ACCOUNT OR ANY OF THE FUND'S SERVICES, PLEASE
CONTACT YOUR FINANCIAL ADVISER. YOU MAY ALSO CALL AMERICAN FUNDS SERVICE
COMPANY, TOLL-FREE, AT 800/421-0180 OR VISIT WWW.AMERICANFUNDS.COM ON THE WORLD
WIDE WEB.
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 ltierature 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, 1997, this report must be accompanied by an
American Funds Group Statistical Update for the most recently completed
calendar quarter.
Printed on recycled paper
Litho in USA CMG/FS/3213
Lit. No. LTEX-011-0997
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
[THE AMERICAN FUNDS GROUP(R)]
BOARD OF TRUSTEES
H. FREDERICK CHRISTIE
Rolling Hills Estates, California
Private investor; former President and
Chief Executive Officer, The Mission
Group; former President, Southern
California Edison Company
DON R. CONLAN
South Pasadena, California
President Emeritus,
The Capital Group Companies, Inc.
DIANE C. CREEL
Long Beach, California
Chief Executive Officer and President,
The Earth Technology Corporation
(international engineering consulting)
MARTIN FENTON, JR.
San Diego, California
Chairman of the Board,
Senior Resource Group, Inc.
(senior living centers management)
LEONARD R. FULLER
Marina del Rey, California
President, Fuller & Company, Inc.
(financial management consulting)
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
Executive Vice President and Director,
Capital Research and Management Company
HERBERT HOOVER III
San Marino, 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
Retired; former Chairman of the Board,
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
MICHAEL J. DOWNER
Los Angeles, California
Vice President of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
MARY C. HALL
Brea, California
Vice President of the fund
Senior Vice President -
Fund Business Management Group,
Capital Research and Management Company
MARK R. MACDONALD
Los Angeles, California
Vice President of the fund
Vice President -
Investment 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
ANTHONY W. HYNES, JR.
Brea, California
Treasurer 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
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
TODD L. MILLER
Brea, California
Assistant Treasurer of the fund
Assistant Vice President -
Fund Business Management Group,
Capital Research and Management Company
OFFICES OF THE FUND
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 92821-5804
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
American Funds Service Company
(Please write to the address nearest you.)
P.O. Box 2205
Brea, California 92822-2205
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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
400 South Hope Street
Los Angeles, California 90071-2889
COUNSEL
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street
Los Angeles, California 90071-2371
PRINCIPAL UNDERWRITER
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, California 90071-1462
