[THE AMERICAN FUNDS GROUP(R)]
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
1998
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED JANUARY 31
[Cover: illustration of a tree-lined road]
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
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), managed by Capital Research and Management
Company. Since 1931, Capital has invested with a long-term focus based on
thorough research and attention to risk.
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, 1997
(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:
+20.54%, or +4.51% a year; 12 months: +2.22%. Sales charges are lower for
accounts of $25,000 or more. These results reflect the effect of a contractual
fee waiver. Without the waiver, the results would have been lower. The fund's
30-day yield as of February 28, 1998, calculated in accordance with the
Securities and Exchange Commission formula, was 3.73%. The fund's distribution
rate as of that date was 4.14%.*
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE 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.
FELLOW SHAREHOLDERS:
The first half of Limited Term Tax-Exempt Bond Fund of America's 1998 fiscal
year saw solid returns for the fund and the municipal bond market in general. A
combination of falling interest rates and a strengthening of many state and
local economies helped the fund provide attractive tax-free income as well as
modest capital appreciation.
During the fiscal period ended January 31, the fund paid dividends totaling 33
cents a share, all exempt from regular federal income taxes.
- - If you took those dividends in cash, they represented a tax-free income
return of 2.2% (4.4% on an annualized basis).
- - If you reinvested your dividends in additional fund shares, your income
return was 2.3% (4.6% on an annualized basis).
- -To match a 4.6% annualized tax-free income return, a shareholder in the 36%
federal tax bracket would have had to earn 7.2% in income from a taxable
investment.
In addition, an appreciation in the value of the fund's holdings added to
shareholders' total return. A number of the bonds in the fund's portfolio rose
in value, pushing the share price to $14.90 on January 31, from $14.79 at the
start of the fiscal year. This gain, combined with the fund's income return,
produced a total return of 3.0% (not annualized) if you reinvested your
dividends, as most shareholders do.
Over the six-month period, the 143 intermediate municipal bond funds tracked by
Lipper Analytical Services gained an average of 3.2%, while the unmanaged
Lehman Brothers 7-Year Municipal Bond Index (which pays no expenses) rose 3.6%,
both with distributions reinvested.
A CONSERVATIVE APPROACH
Limited Term Tax-Exempt Bond Fund has always strived to offer its shareholders
much of the income of longer term bonds without their accompanying higher
volatility. Because of this mission, the fund's managers have been concerned
with preserving capital as well as generating income. As a result, the fund has
tended to own bonds with shorter maturities than other limited-term tax-exempt
bond funds. The shorter a bond's maturity, the less its price typically
fluctuates with changes in interest rates.
This cautious strategy means that the fund's total return will usually lag its
competition during periods of falling interest rates but produce better results
in times of rising rates. Over a full interest-rate cycle, we believe the
combination of superior research and attention to preserving capital will offer
the opportunity to reward shareholders well.
INCREASING CREDIT QUALITY
During the recent period, the interest rate "spread" between bonds of differing
quality narrowed. As a result, the incentive to buy lower grade bonds
diminished greatly. We have found more attractive values at the higher end of
the spectrum, including many AAA-rated bonds. As a consequence, the percentage
of securities in the fund's portfolio rated in the top three categories - AAA,
AA and A - has grown since the beginning of our fiscal year to just under 74%
on January 31.
Another factor in the fund's increasing credit quality has been a number of
"upgrades." The fund's investment analysts conduct extensive research to find
issuers that have solid prospects for financial improvement or that stand to
benefit from anticipated strengthening of municipal and state economies. This
research was rewarded during the period when the improving financial standing
of many issuers - including the state of New York and city of Detroit - was
reflected by higher ratings from independent agencies such as Moody's and
Standard & Poor's. Other issuers took advantage of lower interest rates to
refund existing debt, often with higher quality securities.
LOOKING AHEAD
The U.S. economy has continued to grow at a steady pace, and inflation has
remained low - an unusually favorable confluence of events. It is difficult,
however, to predict how economic troubles in Asia will affect our nation's
businesses and economy going forward. It has been nearly a year since the
Federal Reserve Board raised the federal funds rate (the interest rate banks
charge each other on overnight loans). The strong economy might suggest the Fed
could raise rates again, but with inflation remaining low and the Asian crisis
looming as a potential drag on U.S. economic activity, we now have conflicting
signals. We will continue to monitor events here and around the world and make
appropriate changes in the portfolio as necessary.
On January 31, the fund's portfolio consisted of 120 debt issues from 34 states
and the District of Columbia. These securities help states and municipalities
develop projects that improve the lives of their residents. Our largest
holdings remain concentrated in housing and student loan bonds.
We welcome all our new shareholders to the fund and look forward to reporting
to you again in six months.
Cordially,
/s/Paul G. Haaga, Jr. /s/Abner D. Goldstine
Paul G. Haaga, Jr. Abner D. Goldstine
Chairman of the Board President
March 17, 1998
<TABLE>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
INVESTMENT PORTFOLIO
January 31, 1998 (unaudited)
<S> <C> <C>
- ---------------------------------------------------- --------- ---------
Portfolio Composition
[pie chart]
New York 11.57%
Michigan 9.23%
California 6.99%
Maine 6.96%
Texas 3.29%
Massachusetts 5.57%
South Dakota 3.72%
Washington 4.28%
Illinois 4.88%
Wisconsin 3.66%
Other states 35.78%
Cash & Equivalents 4.07%
[end pie chart]
- --------------------------------------------------- --------- ---------
Principal Market
Amount Value
(000) (000)
--------- ---------
Tax-Exempt Securities Maturing in More than
One Year - 95.93%
Alabama - 1.46%
Industrial Development Board of the City of Butler,
Pollution Control Refunding Revenue Bonds (James River
Project), Series 1993, 5.50% 2005 $3,000 $3,105
Alaska - 1.83%
Student Loan Corp., Student Loan Revenue Bonds:
1988 Series A, AMBAC Insured AMT, 8.40% 2003 2,750 2,845
1997 Series A, AMBAC Insured AMT, 5.20% 2006 1,000 1,046
Arizona - 1.97%
Educational Loan Marketing Corp.,
1992 Educational Loan Revenue Bonds:
Series A, 6.70% 2000 3,000 3,129
Series B AMT, 6.95% 2001 1,000 1,061
California - 6.99%
Health Facilities Financing Authority,
Hospital Revenue Bonds (Downey Community
Hospital), Series 1993, 5.30% 2004 1,010 1,050
City of Fremont, Multifamily Housing Revenue Refunding Bonds,
Issue A of 1995 (Durham Greens Project), 5.40% 2026 (2006) ( 1,830 1,921
Long Beach Aquarium of the Pacific, Revenue Bonds
(Aquarium of the Pacific Project),
1995 Series A, 5.75% 2005 1,500 1,604
County of Los Angeles, Certificates of Participation,
Marina del Rey, Series A, 6.25% 2003 3,100 3,369
Pleasanton Joint Powers Financing Authority,
Reassessment Revenue Bonds, 1993 Series A,
5.70% 2001 945 989
Sacramento:
Cogeneration Authority, Cogeneration
Project Revenue Bonds (Proctor & Gamble Project),
1995 Series, 7.00% 2004 2,200 2,509
Power Authority, Cogeneration Project Revenue
Bonds (Campbell Soup Project), 1995 Series:
6.50% 2004 2,000 2,229
6.50% 2005 1,100 1,227
Colorado - 2.69%
Housing and Finance Authority, Single
Family Program Senior Bonds, 1995 Series C-2,
5.625% 2009 (2000) (1) 875 912
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 2,663
Eaglebend Affordable Housing Corporation,
Multifamily Housing Project Revenue Refunding Bonds:
Series 1997A, 5.45% 2002 550 554
Series 1997A, 5.75% 2007 1,585 1,609
District of Columbia - 1.01%
General Obligation Refunding Bonds,
Series 1994D, FGIC Insured, 5.10% 2002 1,000 1,041
Hospital Revenue Refunding Bonds
(Medlantic Healthcare Group, Inc. Issue),
Series A, MBIA Insured, 6.00% 2006 1,000 1,106
Connecticut - 1.03%
Mashantucket (Western) Pequot Tribe, Special Revenue Bonds,
1996 Series A: (2)
6.25% 2002 (Escrowed to Maturity) 500 545
6.25% 2002 500 540
6.375% 2004 (Escrowed to Maturity) 995 1,116
6.375% 2004 2,010 2,223
Illinois - 3.88%
Health Facilities Authority:
Revenue Refunding Bonds, Series 1997A, (Advocate Health
Care Network):
5.50% 2004 1,250 1,324
5.10% 2005 1,815 1,882
Revenue Bonds:
Series 1993 (OSF Healthcare System)
5.25% 2001 2,025 2,103
Series 1997 (Victory Health Services)
5.25% 2004 1,755 1,824
The County of Cook, General Obligation Capital Improvement
Bonds, Series 1996, FGIC Insured, 6.00% 2006 1,000 1,123
City of Chicago, General Obligation Certificates,
Series 1997, 5.25% 2006 2,030 2,144
Indiana - 0.82%
Employment Development Commission,
Pollution Control Revenue Bonds (Chrysler
Corp. Project), Series 1985, 5.70% 1999 1,700 1,739
Iowa - 1.02%
Student Loan Liquidity Corp., Student Loan Revenue Bonds,
Series C AMT, 6.80% 2005 2,000 2,178
Kentucky - 0.95%
Economic Development Finance Authority, Hospital System
Refunding and Improvement Revenue Bonds, Series 1997,
(Appalachian Regional Healthcare, Inc. Project):
5.40% 2006 1,500 1,548
5.50% 2007 465 483
Louisiana - 2.56%
Offshore Terminal Authority,
Deepwater Port Refunding Revenue Bonds
(LOOP INC. Project), First Stage,
Series E, 7.45% 2004 5,000 5,452
Maine - 6.96%
Educational Loan Marketing Corp.,
Senior Student Loan Revenue Bonds:
Series 1991 AMT, 6.90% 2003 2,595 2,744
Series 1994A-4 AMT:
5.95% 2003 1,000 1,069
6.05% 2004 1,500 1,587
Housing Authority, Mortgage Purchase Bonds:
1994 Series E, 6.30% 2002 1,650 1,722
1994 Series C-1, 5.90% 2015 (1999) (1) 5,965 6,194
Student Loan Revenue Refunding Bonds,
Series 1992A-1 AMT:
6.20% 2003 525 556
6.30% 2004 895 948
Maryland - 1.76%
Community Development Administration, Department
of Housing and Community Development,
Single Family Program Bonds:
1994 First Series, 5.70% 2017 (2004) (1) 2,405 2,484
1994 Fifth Series AMT, 5.875% 2017 (2001) (1) 1,225 1,263
Massachusetts - 4.30%
Health and Educational Facilities Authority Revenue Bonds,
Caregroup Issue, Series A, MBIA Insured, 5.00% 2006 (3) 2,600 2,711
Housing Finance Agency, Housing Project Revenue Bonds,
Series A, AMBAC Insured,
5.35% 2003 750 785
The New England Education Loan Marketing
Corp., Student Loan Revenue Refunding Bonds:
1992 Senior Issue D, 6.20% 2000 2,000 2,104
1992 Senior Issue A, 6.50% 2002 4,500 4,917
1992 Issue C AMT, 6.75% 2002 1,250 1,353
Michigan - 9.23%
Hospital Finance Authority, Hospital Revenue Refunding Bonds:
Genesys Health System Obligated Group, Series 1995A,
7.20% 2003 2,375 2,676
Pontiac Osteopathic, Series A, 5.375% 2006 4,000 4,101
Housing Development Authority, Rental Housing Revenue Bonds,
1992 Series A, AMBAC Insured, 6.40% 2005 1,200 1,299
City of Detroit, General Obligation Refunding Bonds
(Unlimited Tax):
Series A:
6.10% 2003 1,800 1,940
6.25% 2004 2,165 2,367
Series 1995-B, 6.75% 2003 4,500 4,982
Series A, FGIC Insured:
5.50% 2005 1,240 1,328
6.00% 2006 875 970
Minnesota - 0.80%
Housing and Finance Authority, Single Family Mortgage,
Series Q, 6.25% 2014 (1999) (1) 615 642
Maplewood Health Care Facility Revenue Bonds (HealthEast
Project), 5.80% 2003 1,000 1,058
Mississippi - 0.50%
Claiborne County Adjustable/Fixed-Rate Pollution
Control Revenue Bonds (Middle South Energy,
Inc. Project), Series C, 9.875% 2014 (1998) (1) 1,000 1,072
New Jersey - 1.40%
Housing and Mortgage Finance Agency, Home Buyer Revenue
Bonds, 1994 Series I, MBIA Insured, 5.60% 2016 2,900 2,986
New Mexico - 0.56%
Educational Assistance Foundation, Student
Loan Revenue Bonds, Subordinate 1992 Series One-B AMT,
6.85% 2005 1,110 1,195
New York - 11.57%
Dormitory Authority Revenue Bonds:
Center for Nursing & Rehabilitation,Inc, FHA-Insured Mortage,
Nursing Home Revenue Bonds, Series 1997,
4.75% 2007 1,000 1,014
City University Issue, Series U, 6.10% 2001 1,500 1,592
City University of New York, as Lessee (John Jay
College of Criminal Justice Project Refunding),
5.75% 2005 2,000 2,149
State University Educational Facilities, Series 1994B,
5.70% 2004 1,000 1,078
State Medical Care Facilities Finance Agency,
Mental Health Services Facilities Improvement
Revenue Bonds, Series B:
5.30% 2004 1,620 1,704
5.30% 2004 2,000 2,111
6.00% 2007 3,000 3,328
Castle Rest Residential Health Care Facility, FHA-Insured
Mortgage Revenue Bonds, Series 1997A,
4.875% 2007 1,400 1,441
Urban Development Corp.,
Correctional Capital Facilities Revenue Bonds:
1993A Refunding Series, 6.30% 2003 1,305 1,418
Series 6, 6.00% 2006 1,500 1,638
The City of New York General Obligation Bonds:
Fiscal 1993 Series A, 6.25% 2003 2,000 2,175
Series E, 6.50% 2004 1,000 1,105
Series A-1, AMBAC Insured, 6.25% 2005 1,000 1,122
Series I, 6.25% 2006 1,000 1,109
Series I, 6.50% 2006 1,500 1,686
North Carolina - 2.67%
Municipal Power Agency Number 1,
Catawba Electric Revenue Bonds, Series 1992,
6.00% 2004 3,000 3,240
Eastern Municipal Power Agency
Power System Revenue Bonds
Refunding Series 1993B, 6.00% 2005 (2003) (1) 1,000 1,073
Refunding Series 1993C, 5.50% 2007 1,305 1,372
Ohio - 1.74%
Housing Finance Agency, Single Family
Mortgage Revenue Bonds, 1992 Series A-2 AMT,
5.70% 2013 (1999) (1) 1,415 1,465
The Student Loan Funding Corp., Cincinnati,
Senior Subordinated Revenue Bonds,
Series 1993A AMT, 5.75% 2003 1,000 1,052
County of Franklin, Hospital Facilities
Revenue Refunding and Improvement Bonds (Doctors
Hospital Project), Series 1993, 5.70% 2004 1,120 1,200
Oklahoma - 0.55%
Housing Finance Agency, Single Family Mortgage
Revenue Bonds (Homeownership Loan Program),
1994 Series A-1 AMT, 6.25% 2016 (1999) (1) 1,120 1,165
Pennsylvania - 2.50%
Higher Education Assistance Agency,
Student Loan Adjustable Rate Tender Revenue
Refunding Bonds, 1985 Series A, FGIC Insured,
6.80% 2000 3,700 3,968
Hospital and Higher Education Facilities Authority
of Philadelphia, Hospital Revenue Bonds (Jefferson Health System),
Series 1997A
5.50% 2006 1,265 1,362
Rhode Island - 0.67%
Student Loan Authority, Student Loan
Revenue Refunding Bonds, Series 1992B AMT
6.90% 2003 (2001) (1) 1,300 1,417
South Carolina - 1.17%
Florence County Hospital Revenue Bonds,
McLeod Regional Medical Center Project, MBIA Insured,
Series A, 5.50% 2007 (3) 2,330 2,502
South Dakota - 3.72%
Housing Development Authority, Homeownership Mortgage
Bonds, 1996 Series A, 5.50% 2010 985 1,018
Student Loan Finance Corp., Student Loan
Revenue Bonds, Series 1994-A AMT:
5.95% 2001 (2001) (1) 2,500 2,615
6.35% 2005 2,000 2,143
6.45% 2006 (2001) (1) 2,000 2,143
Texas - 3.29%
General Obligation Bonds,
Veterans' Housing Assistance Program, Fund I
Series 1994C Refunding Bonds, 6.25% 2015 (2000) (1) 1,690 1,757
Brazos Higher Education Authority, Inc.,
Student Loan Revenue Refunding Bonds:
1992C-1 AMT, 6.20% 2000 1,000 1,036
Subordinate Series, 1993C-2 AMT, 5.875% 2004 1,955 2,033
Harris County Health Facilities Development Corp.,
Hospital Revenue Refunding Bonds, Children's Hospital
Project, Series 1995, MBIA Insured, 6.00% 2004 1,000 1,098
Tarrant County Health Facilities, Development Corp. Health
Resources System Revenue Bonds,
Series 1997A, 5.50% 2007 1,000 1,078
Utah - 1.20%
Housing Finance Agency, Single Family Mortgage Bonds,
Purchase Refunding Bonds, Series 1996 (Federally
Insured or Guranteed Mortgage Loans):
5.45% 2004 1,385 1,449
Series 1997F AMT , 5.50% 2010 1,100 1,117
Vermont - 0.13%
Housing Finance Agency, Single Family
Housing Bonds, Series 4, 5.75% 2012 (1999) (1) 280 287
Virginia - 2.14%
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 1,296
Blue Ridge Regional Jail Authority
Series 1997, 5.25% 2006 1,150 1,227
Norfolk Industrial Development Authority, Revenue
Bonds, 6.50% 2007 (2002) (1) 3,000 3,324
Washington - 4.28%
Health Care Facilities Authority, Weekly Rate Demand
Revenue Bonds (Virginia Mason Medical Center),
MBIA Insured, 6.00% 2006 1,000 1,110
Public Power Supply System:
Nuclear Project No. 1 Refunding Revenue Bonds,
Series 1993A, 6.30% 2001 1,000 1,068
Nuclear Project No. 2 Refunding Revenue Bonds:
Series 1993A, AMBAC Insured, 5.50% 2004 1,000 1,067
Series 1992A, 5.90% 2004 1,500 1,627
Series A, 5.00% 2005 1,000 1,033
Series B, 5.50% 2006 3,000 3,203
West Virginia - 0.49%
The State Building Commission, Lottery Revenue Bonds,
1997 Series A, MBIA Insured, 5.00% 2003 1,000 1,044
Wisconsin - 2.69%
Health and Educational Facilities Authority:
Variable Rate Hospital Revenue Bonds (Charity Obligated Group,
Daughters of Charity National Health System,
Series 1997D, 4.90% 2015 (2005) (1) 2,000 2,062
Revenue Bonds (Luther Hospital
Project), Series 1992A, 6.00% 2003 1,000 1,085
Housing and Economic Development
Authority, Housing Revenue Bonds:
6.20% 2001 1,500 1,567
Series B AMT, 5.30% 2006 3,000 3,076
---------
204,371
---------
Tax-Exempt Securities Maturing in
One Year or Less - 4.43%
State of Texas, Grapevine Industrial Development Revenue Bonds,
American Airlines, 3.70% 12/01/24 (1998) (1) 300 300
State of Texas, Lone Star Airport Authority Revenue Bonds,
American Airlines, 3.70% 12/01/14 (1998) (1) 300 300
State of California, Los Angeles County, Tax and Revenue
Anticipation Notes, Series A, 4.50% 6/30/98 900 903
State of New Mexico, 1997-98 Tax and Revenue Ancticipation Notes,
Series 1997, 4.50% 6/30/98 1,700 1,706
State of Pennsylvania, School District of Philadelphia, Tax and
Revenue Anticipation Notes, Series of 1997-1998,
4.50% 6/30/98 1,100 1,104
State of Texas, Tax and Revenue Anticipation Notes, Series 1997A
4.75% 8/31/98 5,100 5,133
---------
9,446
---------
TOTAL TAX-EXEMPT SECURITIES (cost: $206,212,000) 213,817
Excess of cash, prepaids and receivables over
payables (768)
---------
NET ASSETS $213,049
=========
(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 parenthesis
(2)Purchased in a private placement transaction; resale may be
limited to qualified institutional buyers; resale to the
public may require registration.
(3)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 January 31, 1998 (dollars in thousands)
<S> <C> <C>
Assets: (Unaudited)
Tax-exempt securities
(cost: $206,212) $213,817
Cash 30
Prepaid organization expense 2
Receivables for--
Sales of investments $4,478
Sales of fund's shares 1,448
Accrued interest 3,234 9,160
---------- ----------
223,009
Liabilities:
Payables for--
Purchases of investments $8,487
Repurchases of fund's shares 1,051
Dividends payable 251
Management services 69
Accrued expenses 102 9,960
---------- ----------
Net Assets at January 31, 1998 --
Equivalent to $14.90 per share on 14,300,861
shares of beneficial interest issued and
outstanding; unlimited shares authorized $213,049
==========
Statement of Operations
for the six months ended January 31, 1998
(dollars in thousands)
Investment Income: (Unaudited)
Income:
Interest on tax-exempt securities $5,369
Expenses:
Management services fee $406
Distribution expenses 306
Transfer agent fee 32
Reports to shareholders 34
Registration statement and prospectus 40
Postage, stationery and supplies 6
Trustees' fees 7
Auditing and legal fees 31
Custodian fee 3
Taxes other than federal income tax 0
Organization expense 1
Other expenses 4
----------
Total expenses before reimbursement 870
Reimbursement of expenses 94 776
---------- ----------
Net investment income 4,593
----------
Realized Loss and Unrealized
Appreciation on Investments:
Net realized gain 766
Net unrealized appreciation
on investments:
Beginning of period 6,808
End of period 7,605
----------
Net increase in unrealized appreciation
appreciation on investments 797
----------
Net realized gain and unrealized
appreciation on investments 1,563
----------
Net Increase in Net Assets
Resulting from Operations $6,156
==========
Statement of Changes in Net Assets
(dollars in thousands) Six months
ended Year ended
January 31, July 31,
1998* 1997
---------- ----------
Operations:
Net investment income $4,593 $9,574
Net realized gain (loss) on investments 766 (761)
Net unrealized appreciation on investments 797 6,412
---------- ----------
Net increase in net assets
resulting from operations 6,156 15,225
---------- ----------
Dividends Paid from Net
Investment Income (4,592) (9,603)
---------- ----------
Capital Share Transactions:
Proceeds from shares sold:
2,845,273 and 6,106,012 shares, respectively 42,049 88,463
Proceeds from shares issued in
reinvestment of net investment
income dividends:
214,441 and 465,326 shares, respectively 3,166 6,740
Cost of shares repurchased:
2,495,831 and 6,523,758 shares, respectively (36,853) (94,336)
---------- ----------
Net increase in net assets
resulting from capital share
transactions 8,362 867
---------- ----------
Total Increase in Net Assets 9,926 6,489
Net Assets:
Beginning of period 203,123 196,634
---------- ----------
End of period $213,049 $203,123
========== ==========
*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 ten years.
The following paragraphs summarize the significant accounting policies
consistently followed by the fund in the preparation of its financial
statements:
Tax-exempt securities are valued at prices obtained from a pricing
service, when such prices are available; however, in circumstances where the
investment adviser deems it appropriate to do so, such securities will be
valued at the mean quoted bid and asked prices or at prices for securities of
comparable maturity, quality and type. Securities with original maturities of
one year or less having 60 days or less to maturity are amortized to maturity
based on their cost if acquired within 60 days of maturity or, if already held
on the 60th day, based on the value determined on the 61st day. Securities and
assets for which representative market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed by
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. 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
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.
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, 1998, net unrealized appreciation on investments for
book and federal income tax purposes aggregated $7,605,000, of which $7,827,000
related to appreciated securities and $222,000 related to depreciated
securities. There was no difference between book and tax realized gains on
securities transactions for the six months ended January 31, 1998. The fund had
available at July 31, 1997 a net capital loss carryforward totaling $4,067,000
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 $206,212,000 at January 31, 1998.
3. The fee of $406,000 for management services was incurred 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; plus
3.00% of the fund's monthly gross investment income. The Investment Advisory
and Service Agreement provides for a fee reduction to the extent that 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 twelve 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 $94,000 for
the six months ended January 31, 1998.
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,
1998, distribution expenses under the Plan were limited to $306,000,
representing .30% of average net assets. Had no limitation been in effect, the
fund would have paid $368,000 in distribution expenses under the Plan. As of
January 31, 1998, accrued and unpaid distribution expenses were $58,000.
American Funds Service Company (AFS), the transfer agent for the fund, was
paid a fee of $32,000. American Funds Distributors, Inc. (AFD), the principal
underwriter of the fund's shares, received $59,000 (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,
1998, aggregate amounts deferred and earnings thereon were $43,000.
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, 1998, accumulated net realized loss on investments was
$3,667,000 and paid-in capital was $209,110,000.
The fund made purchases and sales of investment securities, excluding
short-term securities, of $43,897,000 and $35,743,000, respectively, during the
six months ended January 31, 1998.
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 $3,000 includes $1,000 that was paid by these credits
rather than in cash.
<TABLE>
Per-Share Data and Ratios
<S> <C> <C> <C> <C> <C>
Six Period
months October
ended Year ended July 31 6,1993 /2/
January 31, to July
1998 /1/ 1997 1996 1995 31, 1994
--------- --------- --------- --------- ---------
Net Asset Value, Beginning of Period $14.79 $14.36 $14.29 $14.10 $14.29
--------- --------- --------- --------- ---------
Income From Investment Operations:
Net investment income .33 .68 .69 .69 .49
Net realized and unrealized
gain (loss) on investments .11 .43 .07 .19 (.19)
--------- --------- --------- --------- ---------
Total income from investment operations .44 1.11 .76 .88 .30
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from net investment income (.33) (.68) (.69) (.69) (.49)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period $14.90 $14.79 $14.36 $14.29 $14.10
========= ========= ========= ========= =========
Total Return /3/ 3.02% /4/ 7.96% 5.39% 6.45% 2.11% /4/
Ratios/Supplemental Data:
Net assets, end of period (in millions) 213 $203 $197 $191 $189
Ratio of expenses to average net assets before fee waiver .42%/4/ .83% .85% .90% .73% /4/
Ratio of expenses to average net assets after fee waiver .38% /4/ .75% .74% .64% .51% /4/
Ratio of net income to average net assets 2.23% /4/ 4.70% 4.77% 4.88% 3.67% /4/
Portfolio turnover rate 17.91% /4/ 31.89% 34.95% 45.82% 42.21% /4/
/1/Unaudited
/2/Commencement of operations.
/3/Excludes maximum sales charge of 4.75%.
/4/Based on operations for the period shown and, accordingly,
not representative of a full year's operations.
</TABLE>
THE AMERICAN FUNDS GROUP SHAREHOLDER SERVICES
INVESTING WITH STYLE
AMERICAN FUNDSLINE(R) AND FUNDSLINE ONLINE(SM) - Handle transactions using your
phone or computer 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 a prospectus (Web site only),
duplicate statements and order checks. Just call 800/325-3590 or visit our Web
site 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. 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. (Certain
restrictions apply.)
- - Have dividends mailed or sent electronically to you or to someone else.
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 - usually without paying a
sales charge.* To open an account in a different fund, you must meet that
fund's minimum investment requirement. An exchange generally constitutes a sale
and purchase for tax purposes. Please read the prospectus before you exchange
shares.
*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 unless the shares were originally purchased
in another American Fund that required a sales charge, then later exchanged
into our money market funds.
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 American Funds Service Company and read it carefully
before you invest or send money. These services are subject to change or
termination.
YOUR FINANCIAL ADVISER WILL BE HAPPY TO EXPLAIN THESE SERVICES IN GREATER
DETAIL. OR, TO TALK TO AN AMERICAN FUNDS SHAREHOLDER SERVICES REPRESENTATIVE,
CALL TOLL-FREE (8 A.M.to 8 P.M. EASTERN TIME) FROM ANYWHERE IN THE U.S.:
800/421-0180.
VISIT US AT WWW.AMERICAN FUNDS.COM ON THE WORLD WIDE WEB.
[THE AMERICAN FUNDS GROUP(R)]
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
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
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, 1998, 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/3720
Lit. No. LTEX-013-0398
