LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
TAKING THE MIDDLE PATH
SEMI-ANNUAL REPORT
for the six months ended January 31, 1997
[The American Funds Group(R)]
[cover: Arrows pointing to the middle of a path in photograph.]
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.
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 periods ended December 31, 1996
(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:
+12.34%, or +3.66% a year; 12 months: -0.53%. Sales charges are lower for
accounts of $25,000 or more. 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 February 28, 1997, calculated in accordance with the
Securities and Exchange Commission formula, was 4.24% (4.10% without the fee
waiver). The fund's distribution rate as of that date was 4.57% (4.44% 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.
*The SEC yield reflects income the fund expects to earn based on its current
portfolio of securities, while the distribution rate is based solely on the
fund's past dividends. Accordingly, the fund's SEC yield and distribution rate
may differ.
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.
FELLOW SHAREHOLDERS:
Limited Term Tax-Exempt Bond Fund of America continued to produce attractive
tax-free income as it completed the first half of its fiscal year on January
31. The six-month period saw moderate gains throughout the bond market, which
benefited from an overall decline in interest rates.
During the fiscal period, the fund paid dividends totaling 34 cents a share,
virtually all exempt from 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 annualized income return for those of you who reinvest, a
shareholder in the 36% federal tax bracket would have had to earn 7.56% from a
taxable investment.
Meanwhile, the fund's share price rose to $14.47 on January 31, 1997 from
$14.36 at the start of the fiscal year. This gain, combined with the fund's
income return, produced a total return of 3.19% for the six months if you
reinvested your dividends, as most shareholders do.
Over the six-month period, the 144 intermediate municipal bond funds tracked by
Lipper Analytical Services gained an average of 3.24%, while the unmanaged
Lehman Brothers 7-Year Municipal Bond Index rose 3.81%, both with distributions
reinvested.
Since its inception on October 6, 1993, your fund has posted a total return of
18.21%, outpacing the Lipper average, which has gained 15.14%, and the Lehman
index, which has risen 17.64%.
[watermark of country road]
The fund's strong showing is noteworthy. Because of its conservative investment
approach, the fund could be expected to lag in rising markets and provide
better protection in periods of falling bond prices.
In its effort to conserve principal, the fund typically holds bonds with
somewhat shorter maturities than many intermediate-term bond funds. (The longer
a bond's maturity, the more its price tends to rise or fall in response to
interest rate fluctuations.) On January 31, the fund had an effective maturity
of 5.3 years, considerably shorter than the 8.3-year average maturity of
Morningstar's National Intermediate Municipal category.
Most bonds gained modest ground during the six-month period. Benign economic
data, low levels of inflation and continued inaction by the Federal Reserve
Board gave investors confidence in fixed-income securities, which in turn
brought interest rates down gradually throughout the summer and fall, although
rates did turn up again in December and January.
On the political front, the municipal bond market was remarkably unfazed by the
1996 election. Issues we discussed at this time last year, such as the flat
tax, have fallen off of the front pages for the foreseeable future.
Nonetheless, the long-term effect on the market of some policies debated in the
election is unclear. Proposals to shift some federal government
responsibilities to states and municipalities, for example, could affect local
budgets.
[photo: book ends]
Over the past 12 months, the economy continued to grow at a pace close to
"normal," but in fits and starts. Although the expansion has increased
manufacturing capacity and tightened the U.S. labor market, the rate of
inflation has shown no signs of accelerating. Still, other variables - such as
an increase in consumer spending or the recent run-up in stock prices - might
suggest that steps could be taken at some point to keep inflationary threats in
check. As always, we will continue to monitor developments closely. We would
also remind you that in the event of a stock market decline, your investment in
Limited Term Tax-Exempt Bond Fund of America can serve as a welcome buffer for
a portion of your portfolio.
As of January 31, the fund's total assets were $208 million and its portfolio
consisted of 103 bond issues from 32 states and the District of Columbia. 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.
[photo: roof gable on brick building]
We thank you for your support and look forward to reporting to you in more
detail in six months.
Cordially,
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr.
Chairman of the Board
/s/ Abner D. Goldstine
Abner D. Goldstine
President
March 7, 1997
<TABLE>
<S> <C> <C>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
INVESTMENT PORTFOLIO
January 31, 1997 (Unaudited)
- ---------------------------------------------------- --------- ---------
Portfolio Composition
New York 10.16%
Michigan 9.12%
California 7.85%
Maine 7.52%
Texas 5.78%
Massachusetts 5.36%
Washington 4.59%
Pennsylvania 4.12%
Illinois 3.55%
Louisiana 3.41%
Other states 33.34%
Cash & equivalents 5.20%
- ---------------------------------------------------- --------- ---------
Principal Market
Amount Value
(000) (000)
--------- ---------
Tax-Exempt Securities Maturing in More than
One Year - 94.80%
Alabama - 1.43%
Industrial Development Board of the City of Butler,
Pollution Control Refunding Revenue Bonds (James River
Project) Series 1993, 5.50% 2005 $3,000 $2,968
Alaska - 1.40%
Student Loan Corp., Student Loan
Revenue Bonds, 1988 Series A, AMBAC Insured AMT,
8.40% 2003 2,750 2,914
Arizona - 2.04%
Educational Loan Marketing Corporation,
1992 Educational Loan Revenue Bonds:
Series A, 6.70% 2000 3,000 3,155
Series B AMT, 6.95% 2001 1,000 1,076
California - 7.85%
Health Facilities Financing Authority,
Hospital Revenue Bonds (Downey Community
Hospital), Series 1993:
5.00% 2001 1,250 1,257
5.30% 2004 1,010 1,016
Housing Finance Agency, Single Family Mortgage Bonds,
1995 Series B-2, AMBAC Insured AMT, 5.70% 2007 10 10
City of Fremont, Multifamily Housing Revenue Refunding
Bonds, Issue A of 1995 (Durham Greens Project),
5.40% 2026 (2006)* 2,830 2,837
Long Beach Aquarium of the Pacific, Revenue
Bonds (Aquarium of the Pacific Project),
1995 Series A, 5.75% 2005 1,500 1,502
County of Los Angeles, Certificates of Participation:
1991 Master Refunding Project, 6.40% 2000 1,000 1,045
Marina Del Rey, Series A, 6.25% 2003 3,100 3,245
Pleasanton Joint Powers Financing Authority,
Reassessment Revenue Bonds, 1993 Series A,
5.70% 2001 960 984
Sacramento:
Cogeneration Authority, Cogeneration
Project Revenue Bonds (Proctor & Gamble Project),
1995 Series, 7.00% 2004 1,000 1,092
Power Authority, Cogeneration Project Revenue
Bonds (Campbell Soup Project), 1995 Series:
6.50% 2004 2,000 2,128
6.50% 2005 1,100 1,173
Colorado - 3.29%
Housing and Finance Authority, Single
Family Program Senior Bonds, 1995 Series C-2,
5.625% 2009 (1997)* 970 986
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 2,575
Student Obligation Bond Authority, Student
Loan Revenue Bonds, 1994 Series L, 6.00% 2001 1,065 1,114
City and County of Denver, Airport
System Revenue Bonds, Series 1991D AMT, 7.30% 2000 2,000 2,165
Connecticut - 2.50%
Mashantucket (Western) Pequot Tribe Special Revenue Bonds,
1996 Series A:
6.25% 2002 1,000 1,035
6.375% 2004 4,000 4,159
District of Columbia - 0.49%
General Obligation Refunding Bonds,
Series 1994D, FGIC Insured, 5.10% 2002 1,000 1,016
Georgia - 0.25%
Municipal Electric Authority, Power
Revenue Bonds, Series Q, 8.375% 2016
(crossover refunded 1998) 500 529
Illinois - 3.55%
Health Facilities Authority:
Revenue Refunding Bonds, Series 1997A, (Advocate Health
Care Network):
5.50% 2004 1,250 1,276
5.10% 2005 1,815 1,800
Revenue Bonds, Series 1993 (OSF Healthcare System),
5.25% 2001 2,025 2,060
City of Chicago, Chicago-O'Hare International Airport,
Special Facilities Revenue Bonds for United Air Lines,
Series B AMT, 8.95% 2018 1,000 1,136
Metropolitan Pier and Exposition Authority, Dedicated
State Tax Revenue Bonds, Series 1995, AMBAC Insured,
6.25% 2005 1,000 1,095
Indiana - 0.83%
Employment Development Commission,
Pollution Control Revenue Bonds (Chrysler
Corp. Project), Series 1985, 5.70% 1999 1,700 1,732
Iowa - 1.03%
Student Loan Liquidity Corp., Student Loan Revenue Bonds,
Series C AMT, 6.80% 2005 2,000 2,137
Louisiana - 3.41%
Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds
(LOOP INC. Project), First Stage:
Series 1992B, 6.20% 2003 1,500 1,595
Series E, 7.45% 2004 5,000 5,481
Maine - 7.52%
Educational Loan Marketing Corp.,
Senior Student Loan Revenue Bonds:
Series 1991 AMT, 6.90% 2003 2,740 2,809
Series 1994A-4 AMT:
5.95% 2003 1,000 1,043
6.05% 2004 1,500 1,573
Housing Authority, Mortgage Purchase Bonds:
1994 Series E, 6.30% 2002 1,650 1,710
1994 Series C-1, 5.90% 2015 (1999)* 6,785 6,915
Student Loan Revenue Refunding Bonds:
Series 1992A-1 AMT, 6.20% 2003 540 572
Series 1992A-4 AMT, 6.30% 2004 925 979
Maryland - 1.17%
Community Development Administration, Department
of Housing and Community Development,
Single Family Program Bonds,
1994 Fifth Series AMT, 5.875% 2017 (2001)* 1,380 1,393
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery County
Resource Recovery Project), Series 1993A AMT,
5.90% 2005 1,000 1,031
Massachusetts - 5.36%
Housing Finance Agency, Housing Project Revenue Bonds,
Series A, AMBAC Insured:
5.25% 2002 1,000 1,025
5.35% 2003 750 770
The New England Education Loan Marketing
Corp., Student Loan Revenue Refunding Bonds:
1992 Senior Issue A, 6.50% 2002 4,500 4,834
1992 Issue C AMT, 6.75% 2002 1,250 1,345
1992 Senior Issue D, 6.20% 2000 3,000 3,145
Michigan - 9.12%
Hospital Finance Authority, Hospital Revenue Refunding
Bonds:
Genesys Health System Obligated Group, Series 1995A,
7.20% 2003 2,375 2,559
Pontiac Osteopathic, Series A, 5.375% 2006 4,000 3,903
Housing Development Authority, Rental Housing Revenue
Bonds, 1992 Series A, AMBAC Insured, 6.40% 2005 1,200 1,288
City of Detroit, General Obligation Refunding Bonds
(Unlimited Tax):
Series A:
6.10% 2003 1,800 1,871
6.25% 2004 2,165 2,264
Series 1995-B, 6.75% 2003 4,500 4,820
Series A, FGIC Insured:
5.50% 2005 1,240 1,290
6.00% 2006 875 940
Minnesota - 2.67%
Housing and Finance Authority, Single Family Mortgage,
Series Q, 6.25% 2014 (1999)* 850 872
The Housing and Redevelopment Authority of the
City of Saint Paul, Hospital Facility
Revenue Bonds (HealthEast Project), Series 1987-B,
9.75% 2017 (1997)* 2,000 2,108
Maplewood Health Care Facility Revenue Bonds (HealthEast
Project), 5.80% 2003 1,000 1,003
Regents of the University of Minnesota, General
Obligations Bonds, Series 1996A, 5.50% 2006 1,500 1,565
Mississippi - 2.39%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 (1998)* 4,500 4,971
New Jersey - 1.41%
Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds, 1994 Series I, MBIA Insured, 5.60% 2016 2,900 2,920
New Mexico - 0.86%
New Mexico Educational Assistance Foundation, Student
Loan Revenue Bonds, Subordinate 1992 Series One-B AMT,
6.85% 2005 1,715 1,774
New York - 10.16%
Dormitory Authority Revenue Bonds:
City University Issue, Series U, 6.10% 2001 1,500 1,569
State University Educational Facilities, Series 1994B,
5.70% 2004 2,000 2,054
The City University of New York, As lessee (John Jay
College of Criminal Justice Project Refunding),
5.75% 2005 2,000 2,038
Environment Facilities Corp., Solid Waste Disposal
Revenue Bonds, (Occidental Petroleum Corp. Project),
Series 1993 Subseries B AMT, 5.50% 2003 1,135 1,137
Urban Development Corporation:
Correctional Capital Facilities Revenue Bonds,
1993A Refunding Series, 6.30% 2003 1,305 1,374
Revenue Refunding Bonds, PJ-CTR for Individual
Innovation, 5.25% 2003 1,500 1,501
The City of New York General Obligation Bonds:
1994 Series A:
6.00% 2000 2,000 2,080
6.10% 2002 1,800 1,883
1994 Series D, 5.70% 2002 1,000 1,028
Fiscal 1993 Series A, 6.25% 2003 2,000 2,101
Series E, 6.50% 2004 1,000 1,061
Series A-1, AMBAC Insured, 6.25% 2005 3,000 3,270
North Carolina - 1.97%
Eastern Municipal Power Agency,
Power System Revenue Bonds, Refunding
Series 1993 C, 5.00% 2002 2,000 1,985
Municipal Power Agency Number 1,
Catawba Electric Revenue Bonds, Series 1992,
6.00% 2004 2,000 2,096
Ohio - 3.01%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds, 1992 Series A-2 AMT,
5.70% 2013 (1999)* 1,890 1,918
County of Franklin, Hospital Facilities
Revenue Refunding and Improvement Bonds (Doctors
Hospital Project), Series 1993, 5.70% 2004 1,120 1,145
The Student Loan Funding Corp., Cincinnati:
Student Loan Revenue Refunding Bonds,
Series 1992A AMT, 5.40% 1999 2,130 2,161
Senior Subordinated Revenue Bonds,
Series 1993A AMT, 5.75% 2003 1,000 1,031
Oklahoma - 0.79%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds (Homeownership Loan
Program), 1994 Series A-1 AMT, 6.25% 2016 (1999)* 1,605 1,636
Pennsylvania - 4.12%
Higher Education Assistance Agency,
Student Loan Adjustable Rate Tender Revenue
Refunding Bonds, 1985 Series A, FGIC Insured,
6.80% 2000 8,000 8,551
South Dakota - 1.73%
Housing Development Authority, Homeownership Mortgage
Bonds, 1996 Series A, 5.50% 2010 1,000 1,011
Student Loan Finance Corporation, Student Loan
Revenue Bonds, Series 1994-A AMT, 5.95% 2001 (2001)* 2,500 2,588
Texas - 5.78%
General Obligation Bonds,
Veterans' Housing Assistance Program, Fund I
Series 1994C Refunding Bonds, 6.25% 2015 (1998)* 2,145 2,189
Brazos Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds:
Series 1994A-2 AMT, 5.85% 2001 1,000 1,031
Series 1993C-1 AMT, 5.50% 2002 1,000 1,017
Subordinate Series 1993C-2 AMT, 5.875% 2004 4,000 4,092
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 1,068
Harris County Health Facilities Development Corp.,
Hospital Revenue Refunding Bonds, Children's Hospital
Project, Series 1995, MBIA Insured, 6.00% 2004 1,000 1,069
Houston Water, AMBAC Insured, 7.00% 2004 1,350 1,541
Utah - 0.85%
Housing Finance Agency, Single Family Mortgage
Purchase Refunding Bonds, Series 1996 (Federally
Insured or Guranteed Mortgage Loans), 5.45% 2004 1,720 1,758
Vermont - 0.14%
Housing Finance Agency, Single Family
Housing Bonds, Series 4, 5.75% 2012 (1999)* 280 282
Virginia - 0.61%
Housing Development Authority, Commonwealth Mortgage
Bonds, 1995 Series A AMT, Subseries A-1, 6.60% 2004 1,200 1,256
Washington - 4.09%
Public Power Supply System:
Nuclear Project No. 1 Refunding Revenue Bonds:
Series 1993A, 6.30% 2001 1,000 1,052
Series 1996C, AMBAC Insured, 5.00% 2003 1,000 1,010
Series 1989B, 7.25% 2003 (2000)* 1,000 1,097
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 1,032
Series 1992A, 5.90% 2004 1,500 1,574
Nuclear Project No. 3 Refunding Revenue Bonds,
Series 1989B, 7.10% 2000 2,000 2,150
West Virginia - 1.22%
The State Building Commission, Lottery Revenue Bonds,
1997 Series A, MBIA Insured, 5.00% 2003 2,500 2,535
Wisconsin - 1.26%
Health and Educational Facilities
Authority, Revenue Bonds (Luther Hospital
Project), Series 1992A, 6.00% 2003 1,000 1,059
Housing and Economic Development
Authority, Housing Revenue Bonds, 6.20% 2001 1,500 1,561
---------
196,798
---------
Tax-Exempt Securities Maturing in
One Year or Less - 4.00%
County of Los Angeles, 1996-97 Tax and Revenue
Anticipation Notes, Series A, 4.50% 6/30/97 2,550 2,559
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)* 1,925 2,048
Series 1987-C, 9.75% 2017 (crossover refunded
1997)* 2,190 2,329
State of Texas, Tax and Revenue Anticipation Notes,
Series 1996, 4.75% 8/29/97 1,350 1,359
---------
8,295
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $202,992,000) 205,093
Excess of cash, prepaids and receivables over
payables 2,495
---------
NET ASSETS $207,588
=========
*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.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
Limited Term Tax-Exempt Bond Fund of America
Financial Statements
Statement of Assets and Liabilities
at January 31, 1997 (dollars in thousands)
Assets: (Unaudited)
Tax-exempt securities
(cost: $202,992) $205,093
Cash 61
Prepaid organization expense 5
Receivables for--
Sales of fund's shares $321
Accrued interest 3,275 3,596
---------- ----------
208,755
Liabilities:
Payables for--
Repurchases of fund's shares 782
Dividends payable 241
Management services 56
Accrued expenses 88 1,167
---------- ----------
Net Assets at January 31, 1997 --
Equivalent to $14.47 per share on 14,349,910
shares of beneficial interest issued and
outstanding; unlimited shares authorized $207,588
==========
Statement of Operations
for the six months ended January 31, 1997
(unaudited) (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $5,584
----------
Expenses:
Management services fee $410
Distribution expenses 301
Transfer agent fee 37
Reports to shareholders 19
Registration statement and prospectus 53
Postage, stationery and supplies 9
Trustees' fees 9
Auditing and legal fees 29
Custodian fee 5
Taxes other than federal income tax 1
Organization expense 2
Other expenses 6
----------
Total expenses before reimbursement 881
Reimbursement of expenses 108 773
---------- ----------
Net investment income 4,811
----------
Realized Gain and Unrealized
Appreciation on Investments:
Net realized loss (339)
Net unrealized
appreciation on investments:
Beginning of period 396
End of period 2,101
----------
Net increase in unrealized appreciation on investments 1,705
----------
Net realized loss and unrealized
appreciation on investments 1,366
----------
Net Increase in Net Assets
Resulting from Operations $6,177
==========
Statement of Changes in Net Assets
(dollars in thousands)
Six months
ended Year ended
January 31, July 31,
1997* 1996
---------- ----------
Operations:
Net investment income $4,811 $9,651
Net realized (loss) gain on investments (339) 367
Net unrealized appreciation on investments 1,705 460
---------- ----------
Net increase in net assets
resulting from operations 6,177 10,478
---------- ----------
Dividends Paid from Net
Investment Income (4,840) (9,651)
---------- ----------
Capital Share Transactions:
Proceeds from shares sold:
3,743,088 and 6,334,113 shares, respectively 54,173 91,389
Proceeds from shares issued in
reinvestment of net investment
income dividends:
236,675 and 461,784 shares, respectively 3,423 6,661
Cost of shares repurchased:
3,319,251 and 6,465,529 shares, respectively (47,979) (93,099)
---------- ----------
Net increase in net assets
resulting from capital share
transactions 9,617 4,951
---------- ----------
Total Increase in Net Assets 10,954 5,778
Net Assets:
Beginning of period 196,634 190,856
---------- ----------
End of period $207,588 $196,634
========== ==========
*Unaudited
See Notes to Financial Statements
</TABLE>
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 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, such
securities will be valued at the mean of their representative quoted bid and
asked prices, or, if such prices are not available, at 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. 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 organization expenses are amortized over the estimated period of
benefit, not to exceed five years from commencement of operations. In the event
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 includes $2,000 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 January 31, 1997, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $2,101,000, of which $3,188,000 related
to appreciated securities and $1,087,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended January 31, 1997. The fund has available
at January 31, 1997 a net capital loss carryforward totaling $3,643,000 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 $202,992,000 at January 31, 1997.
3. The fee of $410,000 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 this
limitation are interest, taxes, brokerage commissions, transaction costs and
extraordinary expenses. Fee reductions were $108,000 for the six months ended
January 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 six months ended January 31,
1997, distribution expenses under the Plan were limited to $301,000,
representing 0.30% of average net assets. Had no limitation been in effect, the
Fund would have paid $392,000 in distribution expense under the plan. As of
January 31, 1997, accrued and unpaid distribution expenses were $53,000.
American Funds Service Company (AFS), the transfer agent for the fund, was paid
a fee of $37,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $96,000 (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 January 31,
1997, aggregate amounts deferred and earnings thereon were $26,000.
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, 1997, accumulated net realized loss on investments was
$3,982,000 and paid-in capital was $209,498,000.
The fund made purchases and sales of investment securities of $41,777,000
and $30,232,000, respectively, during the six months ended January 31, 1997.
<TABLE>
<S> <C> <C> <C> <C>
Per-Share Data and Ratios
Six Period
months October
ended Year ended 6, 1993/2/
January July 31 to July
31, 1997/1/ 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 .34 .69 .69 .49
Net realized and unrealized
gain (loss) on investments .11 .07 .19 (.19)
--------- --------- --------- ---------
Total income from investment operations .45 .76 .88 .30
--------- --------- --------- ---------
Less Distributions:
Dividends from net investment income (.34) (.69) (.69) (.49)
--------- --------- --------- ---------
Net Asset Value, End of Period $14.47 $14.36 $14.29 $14.10
========= ========= ========= =========
Total Return/3/ 3.19%/4/ 5.39% 6.45% 2.11%/4/
Ratios/Supplemental Data:
Net assets, end of period (in millions) $208 $197 $191 $189
Ratio of expenses to average net assets before fee wa .43%/4/ .85% .90% .73%/4/
Ratio of expenses to average net assets after fee wai .38%/4/ .74% .64% .51%/4/
Ratio of net income to average net assets 2.36%/4/ 4.77% 4.88% 3.67%/4/
Portfolio turnover rate 15.59%/4/ 34.95% 45.82% 42.21%/4/
/1/Unaudited
/2/Commencement of operations.
/3/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.
</TABLE>
THE AMERICAN FUNDS GROUP(R) SHAREHOLDER SERVICES
ARE YOU AWARE OF YOUR RIGHTS?
Did you know you may be eligible for a sales charge discount when you buy
shares of most American Funds? The discounts begin when your investments total
$25,000 for bond funds or $50,000 for stock and stock/bond funds - and the good
news is you don't have to invest the whole amount at one time.
Through your right of accumulation, when you purchase additional shares you can
add the purchase amount to the value of shares you already own - in any of our
eligible funds* - in order to qualify for a sales charge discount on the new
investment.
Sales charges are reduced on a sliding scale as your investments increase.
You'll find a detailed breakdown of all discounts in your fund's prospectus,
which you can obtain from your financial adviser or by calling a Shareholder
Services Representative.
OTHER WAYS TO REDUCE SALES CHARGES
You can establish a statement of intention that allows you to invest at a
reduced sales charge immediately, based on purchases you intend to make over a
13-month period.* Or you can aggregate accounts by adding your purchase amount
to the total value of accounts you, your spouse and your minor children have
with The American Funds Group. Call a Shareholder Services Representative for
details and restrictions.
Whether you accumulate, aggregate or establish a statement of intention, it all
adds up - to more purchasing power for you.
SERVICES TO MATCH YOUR LIFESTYLE
Our many free services are designed to accommodate your needs quickly and
efficiently.
AMERICAN FUNDSLINE(R) AND FUNDSLINE ONLINE (SM) - Handle transactions using
your computer or phone 24 hours a day. Obtain current prices and investment
returns, exchange shares between funds, redeem shares, check your share
balances and confirm your most recent transaction. Request duplicate
statements and order checks (phone only). All on your timetable. Just call
800/325-3590 or reach us on the World Wide Web at www.americanfunds.com.
AMERICAN FUNDSLINK (SM) - Link your American Funds accounts with your bank
account. You can have fund dividends or automatic fund withdrawals deposited
directly into your bank account for fast, convenient, worry-free banking. Or
you can invest money directly from your bank account into your fund account on
either a systematic or on-demand basis.
OTHER AUTOMATIC TRANSACTIONS - You can reinvest dividends into the same fund or
another fund, make withdrawals, and exchange shares between funds - quarterly,
monthly or during the months you specify.
DIVIDEND AND CAPITAL GAIN OPTIONS - Use your dividend and capital gain
distributions to meet your changing needs. You may:
- - Automatically reinvest distributions back into the fund at no sales charge.
- - Cross-reinvest dividends into another fund at no sales charge for added
diversification. You can cross-reinvest if you have a balance of at least
$5,000 in the originating fund or meet the minimum initial investment for the
receiving fund.
- - Have dividends mailed or sent electronically to you or to someone else to
help meet your obligations.
EXCHANGE PRIVILEGES - When you and your investment adviser feel it's time to
adjust your portfolio to meet your changing investment goals, you can easily
exchange shares from one American Fund to another - without paying a sales
charge.* If you are opening an account in a different fund, you must meet that
fund's minimum investment requirement. Please remember that fund exchanges
among many types of accounts constitute a sale and purchase for tax purposes.
OTHER SERVICES - Stay on top of your investments with account statements that
keep you abreast of the activity in your account, consolidated quarterly
statements to reduce paperwork if you have multiple accounts and year-end tax
reports that show the dividends and capital gain distributions paid to you
during the year.
To reduce paperwork and avoid the problem of lost or destroyed certificates,
your shares are credited to your account and certificates are not issued unless
specifically requested.
*Investments in our money market funds - The Cash Management Trust of America,
The Tax-Exempt Money Fund of America and The U.S. Treasury Money Fund of
America - which are purchased without a sales charge, generally do not apply
when determining your sales charges. If, however, the shares were originally
purchased in another American Fund that required a sales charge, then later
exchanged into our money market funds, the value of the shares would apply
toward reducing sales charges.
FOR MORE COMPLETE INFORMATION ABOUT THESE SERVICES OR ABOUT ANY OF THE AMERICAN
FUNDS, INCLUDING CHARGES AND EXPENSES, PLEASE OBTAIN A PROSPECTUS FROM YOUR
FINANCIAL ADVISER OR PHONE AMERICAN FUNDS SERVICE COMPANY. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. THESE SERVICES ARE
SUBJECT TO CHANGE OR TERMINATION.
Call toll-free from anywhere in the U.S. (8 a.m. to 8 p.m. ET): 800/421-0180.
Visit us at www.americanfunds.com on the World Wide Web.
[illustration: map of the United States of America]
Western Service Center
American Funds Service Company
P.O. Box 2205
Brea, California
92822-2205
West Central Service Center
American Funds Service Company
P.O. Box 659522
San Antonio, Texas
78265-9522
East Central Service Center
American Funds Service Company
P.O. Box 6007
Indianapolis, Indiana 46206-6007
Eastern Service Center
American Funds Service Company
P.O. Box 2280
Norfolk, Virginia 23501-2280
Limited Term Tax-Exempt Bond Fund of America
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
TRANSFER AGENT FOR SHAREHOLDER ACCOUNTS
(PLEASE WRITE TO THE ADDRESS NEAREST YOU.)
American Funds Service Company
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
CUSTODIAN OF ASSETS
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, New York 10081-0001
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
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, 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/3366
Lit. No. LTEX-013-0397
[The American Funds Group(R)]
