TAX EXEMPT BOND FUND OF AMERICA INC, 485BPOS, 2000-10-31

TAX EXEMPT BOND FUND OF AMERICA INC
485BPOS, 2000-10-31

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SEC. FILE NOS. 2-49291
811-2421

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
Registration Statement
Under
the Securities Act of 1933
Post-Effective Amendment No. 28
and
Registration Statement
Under
The Investment Company Act of 1940
Amendment No. 28

THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
(Exact Name of Registrant as specified in charter)
333 South Hope Street
Los Angeles, California 90071
(Address of principal executive offices)

Registrant's telephone number, including area code:
(213) 486-9200

JULIE F. WILLIAMS, Secretary
The Tax-Exempt Bond Fund of America, Inc.
333 South Hope Street
Los Angeles, California 90071
(name and address of agent for service)

Copies to:
Robert E. Carlson, Esq.
PAUL, HASTINGS, JANOFSKY & WALKER LLP
555 S. Flower Street, 23rd Floor
Los Angeles, CA 90071-2371
(Counsel for the Registrant)

Approximate date of proposed public offering:
It is proposed that this filing become effective on November 1, 2000, pursuant
to paragraph (b) of rule 485.

<PAGE>

NATIONAL TAX-EXEMPT INCOME FUNDS

The Tax-Exempt Bond Fund of America(R)
American High-Income Municipal Bond Fund/SM/
Limited Term Tax-Exempt Bond Fund/SM/

Prospectus
NOVEMBER 1, 2000

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<PAGE>

---------------------------------------------------------
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

333 South Hope Street
Los Angeles, California 90071

<TABLE>
<CAPTION>
TICKER NEWSPAPER FUND
FUND SYMBOL ABBREV NO.
-----------------------------------------------------------------------
<S> <C> <C> <C>
The Tax-Exempt Bond Fund of America
Class A AFTEX TxEx 19
Class B TEBFX TxBxB 219
-----------------------------------------------------------------------
American High-Income Municipal Bond Fund
Class A AMHIX HilnMuni 40
Class B ABHMX HiInMuniB 240
-----------------------------------------------------------------------
Limited Term Tax-Exempt Bond Fund of America
Class A LTEBX LtdTEBd 43
Class B LTXBX LtdTEBdB 243
</TABLE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Funds 7
-------------------------------------------------------
Investment Objective, Strategies and Risks 10
-------------------------------------------------------
Management and Organization 15
-------------------------------------------------------
Shareholder Information 18
-------------------------------------------------------
Choosing a Share Class 19
-------------------------------------------------------
Purchase and Exchange of Shares 20
-------------------------------------------------------
Sales Charges 21
-------------------------------------------------------
Sales Charge Reductions and Waivers 22
-------------------------------------------------------
Plans of Distribution 24
-------------------------------------------------------
How to Sell Shares 25
-------------------------------------------------------
Distributions and Taxes 27
-------------------------------------------------------
Financial Highlights 28
-------------------------------------------------------
</TABLE>

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS
TEX-010-1100/D

<PAGE>

---------------------------------------------------------
RISK/RETURN SUMMARY

The funds seek to provide you with high current income that is exempt from
regular federal income tax by investing in municipal bonds. The Tax-Exempt Bond
Fund of America may invest in lower quality municipal bonds and American
High-Income Municipal Bond Fund invests a substantial portion of its portfolio
in lower quality municipal bonds. Limited Term Tax-Exempt Bond Fund invests
primarily in municipal bonds with average effective maturities between 3 and 10
years and with quality ratings of A or better, but may also invest
significantly in bonds rated Baa or BBB. The funds emphasize undervalued but
fundamentally sound investments in municipal obligations including those issued
to finance roads, schools, hospitals, airports and other public needs.
Municipalities include counties, cities, towns, and various regional or special
districts.

The funds are designed for investors seeking a high level of current income
exempt from federal income tax and, in the case of American High-Income
Municipal Bond Fund, investors who are able to tolerate greater credit risk and
price fluctuations than funds investing in higher quality bonds. An investment
in the fund is subject to risks, including the possibility that a fund may
provide less income or decline in value in response to economic, political or
social events in the U.S. or abroad. The values of debt securities may be
affected by changing interest rates and credit risk assessments. Lower quality
or longer maturity bonds may be subject to greater price fluctuations than
higher quality or shorter maturity bonds.

Your investment in the funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.

YOU MAY LOSE MONEY BY INVESTING IN THE FUNDS. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information provides some indication of the risks of investing in
the funds by showing changes in the funds' investment results from year to year
and by showing how the funds' average annual total returns for various periods
compare with those of a broad measure of market performance. Past results are
not an indication of future results.

Unlike the bar charts, the investment result tables reflect each fund's
investment results with the maximum initial or deferred sales charge deducted,
as required by Securities and Exchange Commission rules. Class A share results
are shown with the maximum initial sales charge of 3.75% deducted. Sales
charges are reduced for purchases of $100,000 or more. Results would be higher
if they were calculated at net asset value. All fund results reflect the
reinvestment of dividend and capital gain distributions.

Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge declines thereafter until it reaches 0% after six years. Class B
shares convert to Class A shares after eight years. Since the funds' Class B
shares began investment operations on March 15, 2000, no results are available
as of the most recent calendar year-end.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

THE TAX-EXEMPT BOND FUND OF AMERICA

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1990 6.17
1991 11.17
1992 9.03
1993 11.72
1994 -4.82
1995 17.28
1996 4.57
1997 8.98
1998 6.04
1999 -2.32
[end chart]

The fund's year-to-date return for the nine months ended September 30, 2000
was 6.00%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 6.87% (quarter ended March 31, 1995)
LOWEST -4.93% (quarter ended March 31, 1994)
</TABLE>

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 10/3/79
(with the maximum sales charge -5.95% 5.92% 6.20% 7.78%
imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
Lehman Municipal Bond Index/2/ -2.06% 6.91% 6.89% N/A
------------------------------------------------------------------------------
Lipper General Municipal Debt -4.63% 5.77% 6.19% 7.84%
Average/3/
------------------------------------------------------------------------------
</TABLE>

Class A yield: 4.80%
(For current yield information, please call American FundsLine at
1-800-325-3590).

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers Municipal Bond Index represents the long-term investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses. This index was not in existence as of
the date the fund began investment operations, therefore, lifetime results are
not available.

3 The Lipper General Municipal Debt Funds Average represent funds that invest
at least 65% of assets in municipal debt issues in the top four rating
categories. The results of the underlying funds in the average include the
reinvestment of dividend and capital gain distributions, but do not reflect
sales charges and commissions.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1995 19.05
1996 6.45
1997 10.37
1998 4.89
1999 -2.31
[end bar chart]
The fund's year-to-date return for the nine months ended September 30, 2000
was 5.34%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 7.46% (quarter ended March 31, 1995)
LOWEST -1.40% (quarter ended December 31, 1999)
</TABLE>

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS LIFETIME/1/
<S> <C> <C> <C>
Class A - began 9/26/94 -5.97% 6.64% 6.28%
(with the maximum sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A
------------------------------------------------------------------------------
Lehman Municipal Bond Index/2/ -2.06% 6.91% 6.26%
------------------------------------------------------------------------------
Lipper High Yield Municipal Debt -4.16% 6.07% 5.53%
Average/3/
------------------------------------------------------------------------------
</TABLE>

Class A yield: 5.17%
(For current yield information, please call American FundsLine at
1-800-325-3590).

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers Municipal Bond Index represents the long-term investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

3 The Lipper High Yield Municipal Debt Funds Average represents an average of
funds in the objective that invest at least 50% of their assets in lower rated
municipal debt issues. The results of the underlying funds in the average
include the reinvestment of dividend and capital gain distributions, but do
not reflect sales charges and commissions.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

(Results do not include a sales charge, if one were included; results would
be lower.)
[bar chart]
1994 -2.90
1995 12.35
1996 4.46
1997 7.30
1998 5.50
1999 -0.60
[end bar chart]
The fund's year-to-date return for the nine months ended September 30, 2000
was 4.64%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 4.38% (quarter ended March 31, 1995)
LOWEST -3.44% (quarter ended March 31, 1994)
</TABLE>

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS LIFETIME/1/
<S> <C> <C> <C>
Class A - began 10/6/93 -4.30% 4.91% 4.00%
(with the maximum sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A
------------------------------------------------------------------------------
Lehman 7-Year Municipal Bond Index/2/ -0.14% 6.35% 4.79%
------------------------------------------------------------------------------
Lipper Intermediate Municipal Debt -1.65% 5.56% 4.15%
Average/3/
------------------------------------------------------------------------------
</TABLE>

Class A yield: 4.23%
(For current yield information, please call American FundsLine at
1-800-325-3590).

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers 7-Year Municipal Bond Index represents the investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

3 The Lipper Intermediate Municipal Debt Funds Average is comprised of funds
that invest in municipal debt issues with dollar-weighted average maturities
of five to ten years. The results of the underlying funds in the average
include the reinvestment of dividend and capital gain distributions, but do
not reflect sales charges and commissions.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 3.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>

1 Sales charges are reduced or eliminated for purchases of $100,000 or more.

2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.

3 Deferred sales charges are reduced after 12 months and eliminated after six
years.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
CLASS A CLASS B/1/
---------------------------------------------------------------------
<S> <C> <C>
THE TAX-EXEMPT BOND FUND OF AMERICA
---------------------------------------------------------------------
Management Fees 0.36% 0.36%
Distribution and/or Service (12b-1) Fees 0.25%/2/ 1.00%/3/
Other Expenses 0.06% 0.03%
Total Annual Fund Operating Expenses 0.67% 1.39%
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND

---------------------------------------------------------------------
Management Fees 0.41% 0.41%
Distribution and/or Service (12b-1) Fees 0.30%/4/ 1.00%/3/
Other Expenses 0.09% 0.05%
Total Annual Fund Operating Expenses 0.80% 1.46%
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
---------------------------------------------------------------------
Management Fees 0.44% 0.44%
Distribution and/or Service (12b-1) Fees 0.30%/4/ 1.00%/3/
Other Expenses 0.07% 0.44%
Total Annual Fund Operating Expenses 0.81% 1.88%
Expense Reimbursement/5/ 0.06% 0.28%
Net Expenses 0.75% 1.60%
</TABLE>

1 Annualized.

2 Class A 12b-1 expenses may not exceed 0.25%% of the fund's average net assets
annually.

3 Class B 12b-1 expenses are 1.00% of the fund's average net assets annually.

4 Class A 12b-1 expenses may not exceed 0.30% of the fund's average net assets
annually.

5 During the year, Capital Research and Management Company paid certain
expenses of the fund to ensure the expense ratio of the Class A shares did not
exceed 0.75% of average net assets annually. Under certain circumstances as
described in the statement of additional information, the fund may be required
to repay amounts waived.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the funds
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in each fund for the time periods indicated, that your
investment has a 5% return each year and that each fund's operating expenses
remain the same as shown above. The "Class A" example reflects the maximum
initial sales charge in Year One. The "Class B - assuming redemption" example
reflects applicable contingent deferred sales charges through Year Six (after
which time they are eliminated). Both Class B examples reflect Class A expenses
for Years 9 and 10 since Class B shares automatically convert to Class A after
eight years. Although your actual costs may be higher or lower, based on these
assumptions your cumulative expenses would be:

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE TAX-EXEMPT BOND FUND OF AMERICA
Class A $441 $ 581 $ 734 $1,178
Class B - assuming redemption $642 $ 840 $ 961 $1,472
assuming no redemption $142 $ 440 $ 761 $1,472
--------------------------------------------------------------------------
AMERICAN HIGH-INCOME MUNICIPAL BOND
FUND
--------------------------------------------------------------------------
Class A $454 $ 621 $ 803 $1,328
Class B - assuming redemption $649 $ 862 $ 997 $1,567
assuming no redemption $149 $ 462 $ 797 $1,567
--------------------------------------------------------------------------
LIMITED TERM TAX-EXEMPT BOND FUND OF
AMERICA*
Class A $455 $ 624 $ 808 $1,339
Class B - assuming redemption $691 $ 991 $1,216 $1,921
assuming no redemption $191 $ 591 $1,016 $1,921
</TABLE>

* Does not reflect expense reimbursement.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS

THE TAX-EXEMPT BOND FUND OF AMERICA

The fund's investment objective is to provide you with a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. It seeks to achieve this objective by investing primarily in
municipal bonds, including lower quality bonds.

Normally, the fund will invest at least 80% of its assets in securities exempt
from regular federal income tax. The fund will invest at least 65% of its
assets in debt securities rated A or better. The fund may also invest up to 35%
of its assets in debt securities rated Baa or BBB or below by Moody's Investors
Service, Inc. or Standard & Poor's Corporation or unrated but determined to be
of equivalent quality (however, no more than 20% of its assets may be invested
in lower quality debt securities rated Ba and BB or below).

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND

The fund's investment objective is to provide you with a high level of current
income exempt from regular federal income tax. In seeking to achieve its
objective, the fund may forego opportunities that would result in capital gains
and may accept prudent risks to capital value, in each case to take advantage
of opportunities for higher current income. The fund invests primarily in
municipal bonds and will invest at least 50% of its assets in debt securities
rated Baa or BBB or below or unrated but determined to be of equivalent
quality. The fund may also purchase securities that would subject you to
federal alternative minimum tax; therefore, while the fund's distributions from
tax-exempt securities are not subject to regular federal income tax, a portion
or all may be included in determining a shareholder's federal alternative
minimum tax.

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

The fund's investment objective is to provide you with current income that is
exempt from regular federal income tax, consistent with its stated maturity and
quality standards and preservation of capital. The fund invests primarily in
municipal bonds with average effective maturities between 3 and 10 years and
with quality ratings of A or better. Normally, the fund will invest at least
80% of its assets in securities exempt from regular federal income tax. The
fund may also invest significantly in municipal bonds rated Baa or BBB. In
addition, the fund may purchase securities that would subject you to federal
alternative minimum tax; therefore, while the fund's distributions from
tax-exempt securities are not subject to regular federal income tax, a portion
or all may be included in determining a shareholder's federal alternative
minimum tax.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

Municipal bonds are debt obligations generally issued to obtain funds for
various public purposes, including the construction of public facilities. The
values of most debt securities held by the funds may be affected by changing
interest rates, and individual securities by changes in their effective
maturities and credit ratings. For example, the values of bonds in each fund's
portfolio generally will decline when interest rates rise and vice versa. Debt
securities are also subject to credit risk, which is the possibility that the
credit strength of an issuer will weaken and/or an issuer of a debt security
will fail to make timely payments of principal or interest and the security
will go into default. The values of lower quality or longer maturity bonds will
be subject to greater price fluctuations than higher quality or shorter
maturity bonds. See the Appendix in the Statement of Additional Information for
credit rating descriptions.

A bond's effective maturity is the market's trading assessment of its maturity
and represents an estimate of the most likely time period after which an
investor in that bond will receive payment of principal. For example, as
market interest rates decline, issuers may exercise call provisions which acts
to shorten the bond's effective maturity. Conversely, if interest rates rise,
effective maturities tend to lengthen. The average effective maturity is the
market-weighted average (i.e., more weight is given to larger holdings) of all
effective maturities in the portfolio.

The funds' investment adviser attempts to reduce these risks through
diversification of each portfolio and with ongoing credit analysis of each
issuer as well as by monitoring economic and legislative developments.

The funds may also hold cash, money market instruments or taxable debt
securities. The size of each fund's cash position will vary and will depend on
various factors, including market conditions and purchases and redemptions of
fund shares. A larger cash position could detract from the achievement of each
fund's objective, but it also would reduce each fund's exposure in the event of
a market downturn and provide liquidity to make additional investments or to
meet redemptions.

Each fund relies on the professional judgment of its investment adviser,
Capital Research and Management Company, to make decisions about each fund's
portfolio investments. The basic investment philosophy of the investment
adviser is to seek undervalued securities that represent good long-term
investment opportunities. Securities may be sold when the investment adviser
believes they no longer represent good long-term value.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

THE TAX-EXEMPT BOND FUND OF AMERICA

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 10/3/79 -2.32% 6.72% 6.60% 7.98%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
Lehman Municipal Bond Index/2/ -2.06% 6.91% 6.89% N/A
------------------------------------------------------------------------------
Lipper General Municipal Debt -4.63% 5.77% 6.19% 7.84%
Average/3/
------------------------------------------------------------------------------
</TABLE>

Class A distribution rate/4/: 5.10%

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

4 The distribution rate represents actual distributions paid by the fund. It
was calculated at net asset value by annualizing dividends paid by the fund
over one month and dividing that number by the fund's average net asset value
for the month.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS LIFETIME/1/
<S> <C> <C> <C>
Class A - began 9/26/94 -2.31% 7.46% 7.06%
(with no sales charge imposed)
---------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A
---------------------------------------------------------------------
Lehman Municipal Bond Index/2/ -2.06% 6.91% 6.26%
---------------------------------------------------------------------
Lipper High Yield Municipal -4.16% 6.07% 5.53%
Debt Average/3/
---------------------------------------------------------------------
</TABLE>

Class A distribution rate/4/: 5.50%

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers Municipal Bond Index represents the long-term investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

For periods ended December 31, 1999:

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS LIFETIME/1/
<S> <C> <C> <C>
Class A - began 10/6/93 -0.60% 5.72% 4.64%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A
------------------------------------------------------------------------------
Lehman 7-Year Municipal Bond Index/2/ -0.14% 6.35% 4.79%
------------------------------------------------------------------------------
Lipper Intermediate Municipal Debt -1.65% 5.56% 4.15%
Average/3/
------------------------------------------------------------------------------
</TABLE>

Class A distribution rate/4/: 4.30%

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers 7-Year Municipal Bond Index represents the investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
MANAGEMENT AND ORGANIZATION

INVESTMENT ADVISER

Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the funds and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio and business
affairs of the funds. The total management fees paid by the funds, as a
percentage of average net assets, for the previous fiscal year are discussed
earlier under "Fees and Expenses of the Funds."

Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the May 9, 1994 report issued by the Investment Company
Institute's Advisory Group on Personal Investing and with the Securities and
Exchange Commission rules adopted in 1999 governing Codes of Ethics. This
policy has also been incorporated into each fund's Code of Ethics.

MULTIPLE PORTFOLIO COUNSELOR SYSTEM

Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested, within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for The Tax-Exempt Bond Fund of America, American
High-Income Municipal Bond Fund, and Limited Term Tax-Exempt Bond Fund of
America are listed on the following pages.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
AS AN INVESTMENT PROFESSIONAL
YEARS OF EXPERIENCE (INCLUDING THE LAST FIVE YEARS)
AS PORTFOLIO COUNSELOR -----------------------------------
(AND RESEARCH PROFESSIONAL, WITH CAPITAL
PORTFOLIO IF APPLICABLE) FOR RESEARCH AND
COUNSELORS FOR THE FUNDS MANAGEMENT
THE FUNDS PRIMARY TITLE(S) (APPROXIMATE) COMPANY
-------------------------------------------------------------------------- OR AFFILIATES TOTAL YEARS
-----------------------------------
<S> <C> <C> <C> <C>
BRENDA S. Vice President of Tax-Exempt Bond Fund of America 9 years 11 years
ELLERIN Tax-Exempt Bond Fund of - 2 years (plus 6 years as a
America, Limited Term research professional prior to
Tax-Exempt Bond Fund. becoming a portfolio counselor
Vice President and for the fund)
Director, Capital American High-Income Municipal
Research Company* Bond Fund - 2 years (plus 4
years as a research
professional prior to becoming
a portfolio counselor for the
fund)
Limited Term Tax-Exempt Bond
Fund - 4 years
-----------------------------------
--------------------------------------------------------------------------
REBECCA L. Vice President - Tax-Exempt Bond Fund of America 18 years 18 years
FORD Investment Management - 15 years
Group, Capital Research
and Management Company

DAVID A. Vice President of Tax-Exempt Bond Fund of America 9 years 12 years
HOAG Tax-Exempt Bond Fund of - 2 years (plus 6 years as a
America, American research professional prior to
High-Income Municipal becoming a portfolio counselor
Bond Fund. Vice for the fund)
President and Director, American High-Income Municipal
Capital Research Bond Fund - 4 years (plus 2
Company* years as a research
professional prior to becoming
a portfolio counselor for the
fund)
--------------------------------------
-----------------------------------------------------------------------------------
NEIL L. President and Director Tax-Exempt Bond Fund of 22 years 22 years
LANGBERG of Tax-Exempt Bond Fund America- 21 years (since the
of America; Senior Vice fund began operations)
President of American American High-Income Municipal
High-Income Municipal Bond Fund -
Bond Fund, Limited Term 6 years (since the fund began
Tax-Exempt Bond Fund. operations)
Vice President - Limited Term Tax-Exempt Bond
Investment Management Fund - 7 years (since the fund
Group, Capital Research began operations)
and Management Company
--------------------------------------------------------------------

-----------------------------------------
MARK R. President and Director Tax-Exempt Bond Fund of America 6 years 15 years
MACDONALD of American High-Income - 6 years
Municipal Bond Fund; American High-Income Municipal
Senior Vice President, Bond Fund -
Limited Term Tax-Exempt 6 years (since the fund began
Bond Fund; Vice operations)
President of Tax-Exempt
Bond Fund of America.
Vice President -
Investment Management
Group, Capital Research
and Management Company
--------------------------------------------------------------------

-----------------------------------------
The Tax-Exempt Bond Fund of America began investment operations on October 3, 1979.
American High-Income Municipal Bond Fund began investment operations on September 26, 1994.
Limited Term Tax-Exempt Bond Fund of America began investment operations on October 6, 1993.
* Company affiliated with Capital Research and Management Company
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
SHAREHOLDER INFORMATION

SHAREHOLDER SERVICES

American Funds Service Company, the funds' transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.

AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS

Call toll-Free from anywhere in the U.S.
(8 a.m. to 8 p.m. ET):
800/421-0180

[map of the United States]

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Western Western Central Eastern Central Eastern
Service Center Service Center Service Center Service Center
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Indiana Norfolk, Virginia
92822-2205 78265-9522 46206-6007 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 Fax: 317/735-6620 Fax: 757/670-4773
</TABLE>

A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUNDS'
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.

TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS.
Additionally, accounts held by investment dealers may not offer certain
services. If you have any questions, please contact your dealer.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
CHOOSING A SHARE CLASS

Each fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.

Factors you should consider in choosing a class of shares include:

. How long you expect to own the shares

. How much you intend to invest

. The expenses associated with owning shares of each class

. Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)

EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.

Differences between Class A and Class B shares include:

<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to No initial sales charge.
3.75%. Sales charges are reduced or
eliminated for purchases of
$100,000 or more (see "Sales
Charges - Class A").
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.25% or 0.30% of 1.00% annually.
annually.
------------------------------------------------------------------------------
Higher dividends than Class B Lower dividends than Class A shares due
shares due to lower annual to higher distribution fees and other
expenses. expenses.
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge if
(except on certain redemptions on you sell shares within six years of
purchases of $1 million or more buying them. The charge starts at 5%
bought without an initial sales and declines thereafter until it
charge). reaches 0% after six years. (see "Sales
Charges - Class B").
------------------------------------------------------------------------------
No purchase maximum. Maximum purchase of $100,000.
------------------------------------------------------------------------------
Automatic conversion to Class A shares
after eight years, reducing future
annual expenses.
------------------------------------------------------------------------------
</TABLE>

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell each fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."

EXCHANGE

You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.

Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.

THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS, EACH FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUNDS.

<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account $ 250
To add to an account $ 50
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

SHARE PRICE

Each fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In calculating net
asset value, market prices are used when available. If a market price for a
particular security is not available, each fund will determine the appropriate
price for the security.

Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.

---------------------------------------------------------
SALES CHARGES

CLASS A

The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced or eliminated for larger
purchases as indicated below.

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.75% 3.90% 3.00%
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
------------------------------------------------------------------------------
$750,000 but less than $1
million 1.50% 1.52% 1.20%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>

CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE

Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined
contribution-type plans investing $1 million or more, or with 100 or more
eligible employees, and Individual Retirement Account rollovers involving
retirement plan assets invested in the American Funds, may invest with no sales
charge and are not

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

subject to a contingent deferred sales charge. Investments made through
retirement plans, endowments or foundations with $50 million or more in assets,
or through certain qualified fee-based programs may also be made with no sales
charge and are not subject to a contingent deferred sales charge. Each fund may
pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.

CLASS B

Class B shares are sold without any initial sales charge. However, a contingent
deferred sales charge may be applied to the value of the shares you redeem
within six years of purchase, as shown in the table below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares sold within year 1 2 3 4 5 6
----------------------------------------------------------------
Contingent deferred sales charge 5% 4% 4% 3% 2% 1%
</TABLE>

Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B Shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
American Funds Distributors pays compensation equal to 4% of the amount
invested to dealers who sell Class B shares.

CLASS B CONVERSION TO A SHARES

Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.

---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS

You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below, in the statement of additional information and
"Welcome to the Family."

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

REDUCING YOUR CLASS A SALES CHARGE

You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.

AGGREGATING ACCOUNTS

To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:

. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.

. solely controlled business accounts.

. single-participant retirement plans.

Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.

CONCURRENT PURCHASES

You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to qualify for a
reduced Class A sales charge. Direct purchases of money market funds are
excluded.

RIGHTS OF ACCUMULATION

You may take into account the current value (or if greater, the amount you
invested less any withdrawals) of your existing Class A and B holdings in the
American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your Class
A sales charge. Direct purchases of money market funds are excluded.

STATEMENT OF INTENTION

You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine the applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

due if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.

CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES

The contingent deferred sales charge on Class B shares may be waived in the
following cases:

. when receiving payments through systematic withdrawal plans (up to 12% of
the value of your account);

. when receiving required minimum distributions from retirement accounts upon
reaching age 70 1/2; or

. for redemptions due to death or post-purchase disability of the
shareholder.

For more information, please consult your financial adviser, the statement of
additional information or "Welcome to the Family."

---------------------------------------------------------
PLANS OF DISTRIBUTION

Each fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by each fund's board of directors/trustees.
The plans provide for annual expenses of up to 0.25% or 0.30% for Class A
shares and 1.00% for Class B shares. Up to 0.25% of these payments are used to
pay service fees to qualified dealers for providing certain shareholder
services. The remaining 0.75% expense for Class B shares is used for financing
commissions paid to your dealer. The 12b-1 fees paid by each fund, as a
percentage of average net assets, for the previous fiscal year is indicated
above under "Fees and Expenses of the Funds." Since these fees are paid out of
each fund's assets or income on an ongoing basis, over time they will increase
the cost and reduce the return of an investment. The higher fees for Class B
shares may cost you more over time than paying the initial sales charge for
Class A shares.

OTHER COMPENSATION TO DEALERS

American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
HOW TO SELL SHARES

Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:

THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)

. Shares held for you in your dealer's name must be sold through the dealer.

WRITING TO AMERICAN FUNDS SERVICE COMPANY

. Requests must be signed by the registered shareholder(s).

. A signature guarantee is required if the redemption is:

-- Over $50,000;

-- Made payable to someone other than the registered shareholder(s); or

-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.

. American Funds Service Company reserves the right to require signature
guarantee(s) on all redemptions.

. Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:

. Redemptions by telephone, fax, or computer (including American FundsLine
and American FundsLine OnLine) are limited to $50,000 per shareholder each
day.

. Checks must be made payable to the registered shareholder.

. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE

Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.

Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold each fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, and each of their
respective directors, trustees, officers, employees and agents harmless from
any losses, expenses, costs or liabilities (including attorney fees) which may
be incurred in connection with the exercise of these privileges, provided
American Funds Service Company employs reasonable procedures to confirm that
the instructions received from any person with appropriate account information
are genuine. If reasonable procedures are not employed, it and/or each fund may
be liable for losses due to unauthorized or fraudulent instructions.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

---------------------------------------------------------
DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

Each fund declares dividends from net investment income daily and distributes
the accrued dividends, which may fluctuate, to shareholders each month.
Dividends begin accruing one day after payment for shares is received by the
fund or American Funds Service Company. Capital gains, if any, are usually
distributed in November or December. When a dividend or capital gain is
distributed, the net asset value per share is reduced by the amount of the
payment.

You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of these funds or any other fund in The American
Funds Group or you may elect to receive them in cash. Most shareholders do not
elect to take capital gain distributions in cash because these distributions
reduce principal value.

TAX CONSEQUENCES

Interest on municipal bonds is generally not included in gross income for
federal income tax purposes. Each fund is permitted to pass through to its
shareholders federally tax-exempt income subject to certain requirements.
However, each fund may invest in obligations which pay interest that is
subject to state and local taxes when distributed by each fund.

TAXES ON DISTRIBUTIONS

Distributions you receive from the funds may be subject to income tax and may
also be subject to state or local taxes - unless you are exempt from taxation.

For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The funds' distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the funds will normally be taxable to
you when made, regardless of whether you reinvest distributions or receive them
in cash.

TAXES ON TRANSACTIONS

Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the funds is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.

Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand each fund's
results for the past five years. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the funds (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with each fund's
financial statements, is included in the statement of additional information,
which is available upon request.

THE TAX-EXEMPT BOND FUND OF AMERICA/1/

<TABLE>
<CAPTION>
Net gains/(losses)
Net asset on securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Year ended beginning of investment and investment investment (from capital Total value, end of
August 31 year income unrealized) operations income) gains) distributions year
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $11.86 $.60/2/ $(.01)/2/ $.59 $(.60) $(.04) $(.64) $11.81
1999 12.60 .59 (.55) .04 (.59) (.19) (.78) 11.86
1998 12.27 .62 .37 .99 (.62) (.04) (.66) 12.60
1997 11.86 .64 .45 1.09 (.64) (.04) (.68) 12.27
1996 11.94 .64 .01 .65 (.64) (.09) (.73) 11.86
CLASS B:
2000 11.50 .21/2/ .34/2/ .55 (.24) - (.24) 11.81
<CAPTION>

Ratio of Ratio of net
Net assets, expenses to income to
Year ended end of year average net average net Portfolio
August 31 Total return (in millions) assets assets turnover rate
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 5.27% $1,831 .67% 5.22% 28.64%/4/
1999 0.22 1,917 .65 4.78 14.56
1998 8.26 1,795 .66 4.98 23.19
1997 9.39 1,593 .68 5.27 14.39
1996 5.51 1,476 .68 5.35 26.89
CLASS B:
2000 4.88 3 1.39/3/ 4.29/3/ 28.64/4/
</TABLE>

1 The years 1996 through 2000 represent, for Class A shares, fiscal years ended
August 31. The period ended 2000 represents, for Class B shares, the 169-day
period ended August 31, 2000. Class B shares were not offered before March 15,
2000. Total returns for such periods are based on activity during the period
and thus are not representative of a full year. Total returns exclude all sales
charges, including contingent deferred sales charges.

2 Based on average shares outstanding.

3 Annualized

4 Represents portfolio turnover rate (equivalent for all share classes) for the
fiscal year ended August 31, 2000.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND/1/

Net gains/(losses)
Net asset on securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Year ended beginning of investment and investment investment (from capital Total value, end of
July 31 year income unrealized) operations income) gains) distributions year
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $15.49 $.82/2/ $(.58)/2/ $.24 $(.83) $(.03) $(.86) $14.87
1999 16.12 .81 (.54) .27 (.82) (.08) (.90) 15.49
1998 15.90 .84 .26 1.10 (.84) (.04) (.88) 16.12
1997 15.23 .87 .80 1.67 (.86) (.14) (1.00) 15.90
1996 15.14 .88 .37 1.25 (.88) (.28) (1.16) 15.23
CLASS B:
2000 14.79 .23/2/ .14/2/ .37 (.29) .00 (.29) 14.87
<CAPTION>
Ratio of
Ratio of expenses to
expenses to average Ratio of net
Net assets, average net net assets income to
Year ended end of year assets before after average net Portfolio
July 31 Total return (in millions) fee waiver fee waiver assets turnover rate
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 1.61% $550 .80% .80% 5.53% 33.20%/4/
1999 1.63 564 .78 .78 5.09 16.67
1998 7.05 464 .79 .79 5.19 16.38
1997 11.36 316 .87 .87 5.51 15.31
1996 8.48 217 .88 .86 5.74 35.22
CLASS B:
2000 3.16 2 1.46/3/ 1.46/3/ 4.87/3/ 33.20/4/
</TABLE>

1 The years 1996 through 2000, for Class A shares, represent fiscal years ended
July 31. The period ended 2000 represents, for Class B shares, the 138-day
period ended July 31, 2000. Class B shares were not offered before March 15,
2000. Total return for Class B is based on activity during the period and thus
is not representative of a full year. Total returns exclude all sales charges,
including contingent deferred sales charges.

2 Based on average shares outstanding.

3 Annualized

4 Represents portfolio turnover rate (equivalent for all share classes) for the
fiscal year ended July 31, 2000.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA/1/

<TABLE>
<CAPTION>
Net gains/(losses)
Net asset on securities Dividends
value, Net (both realized Total from (from net Net asset
Year ended beginning of investment and investment investment Total value, end
July 31 year income unrealized) operations income) distributions of year Total return
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $14.62 $.73/2/ $(.30)/2/ $.43 $(.62) $(.62) $14.43 3.09%
1999 14.85 .61 (.23) .38 (.61) (.61) 14.62 2.59
1998 14.79 .66 .06 .72 (.66) (.66) 14.85 4.95
1997 14.36 .68 .43 1.11 (.68) (.68) 14.79 7.96
1996 14.29 .69 .07 .76 (.69) (.69) 14.36 5.39
CLASS B:
2000 14.27 .24/2/ .13/2/ .37 (.21) (.21) 14.43 2.59
<CAPTION>
Ratio of Ratio of
expenses to expenses to Ratio of net
Net assets, average net average net income to
Year ended end of year assets before assets after average net Portfolio
July 31 (in millions) fee waiver fee waiver assets turnover rate
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 $258 .81% .75% 5.08% 34.38%/4/
1999 283 .77 .75 4.12 17.00
1998 227 .83 .75 4.40 34.07
1997 203 .83 .75 4.70 31.89
1996 197 .85 .74 4.77 34.95
CLASS B:
2000 1 1.88/3/ 1.60/3/ 4.23/3/ 34.38/4/
</TABLE>

1 The years 1996 through 2000, for Class A shares, represent fiscal years ended
July 31. The period ended 2000 represents, for Class B shares, the 138-day
period ended July 31, 2000. Class B shares were not offered before March 15,
2000. Total returns for Class B is based on activity during the period and thus
is not representative of a full year.

2 Based on average shares outstanding.

3 Annualized

4 Represents portfolio turnover rate (equivalent for all share classes) for the
fiscal year ended July 31, 2000.

NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
http://www.americanfunds.com

</TABLE>

Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.

* * * * *

MULTIPLE TRANSLATIONS This prospectus may be translated into other languages.
If there is any inconsistency or ambiguity as to the meaning of any word or
phrase in a translation, the English text will prevail.

ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information
about the funds including financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing market conditions
and the funds' investment strategies, and the independent accountants' report
(in the annual report).

STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
more detailed information on all aspects of each fund, including each fund's
financial statements and is incorporated by reference into this prospectus.
The Codes of Ethics describe the personal investing policies adopted by each
fund and the funds' investment adviser and its affiliated companies.

The Codes of Ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the funds
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the funds. In order to reduce
the volume of mail you receive, when possible, only one copy of these
documents will be sent to shareholders that are part of the same family and
share the same residential address.

If you would like to receive individual copies of these documents, or a free
copy of the SAI or Codes of Ethics, please call American Funds Service Company
at 800/421-0180 or write to the Secretary of the funds at 333 South Hope
Street, Los Angeles, California 90071.

Printed on Recyled Paper
Investment Company File No. 811-2421 (The Tax-Exempt Bond Fund of America)
Investment Company File No. 811-8576 (American High-Income Municipal Bond Fund)
Investment Company File No. 811-7888 (Limited Term Tax-Exempt Bond Fund of
America)

<PAGE>

THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
AMERICAN HIGH-INCOME MUNICIPAL BOND FUND, INC.
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

Part B
Statement of Additional Information

November 1, 2000

This document is not a prospectus but should be read in conjunction with the
current prospectus of The Tax-Exempt Bond Fund of America, Inc. ("TEBF"),
American High-Income Municipal Bond Fund, Inc. ("AHIM"), and Limited Term
Tax-Exempt Bond Fund of America ("LTEX") dated November 1, 2000. The prospectus
may be obtained from your investment dealer or financial planner or by writing
to the fund at the following address:

The Tax-Exempt Bond Fund of America, Inc.
American High-Income Municipal Bond Fund, Inc.
Limited Term Tax-Exempt Bond Fund of America
Attention: Secretary
333 South Hope Street
Los Angeles, California 90071
(213) 486-9200

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Page No.
---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 3
Fundamental Policies and Investment Restrictions. . . . . . . . . . 8
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 13
Fund Directors/Trustees and Other Officers. . . . . . . . . . . . . 15
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 24
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 30
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 34
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 37
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Shareholder Account Services and Privileges . . . . . . . . . . . . 41
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 43
General Information . . . . . . . . . . . . . . . . . . . . . . . . 44
Class A Share Investment Results and Related Statistics . . . . . . 45
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Financial Statements
</TABLE>

National Tax-Exempt Income Funds - Page 1

<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the funds' net
assets unless otherwise noted. This summary is not intended to reflect all of
the funds' investment limitations.

THE TAX-EXEMPT BOND FUND OF AMERICA
-----------------------------------

. The fund will invest at least 80% of its assets in securities exempt from
regular federal income tax.

. The fund will not invest in securities subject to alternative minimum tax.

. The fund will invest at least 65% of its assets in debt securities rated A
or better by Standard & Poor's Corporation (S&P) or Moody's Investors
Service, Inc. (Moody's) or unrated but determined to be of equivalent
quality.
. The fund may invest up to 35% of its assets in straight debt securities
rated BBB by S&P or Baa by Moody's or below or unrated but determined to be
of equivalent quality (with no more than 20% of its assets in straight debt
securities rated BB/Ba or below or unrated but determined to be of
equivalent quality).
. The fund will invest substantially in securities with maturities in excess
of three years.

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
----------------------------------------

. The fund will invest at least 80% of its assets in securities exempt from
regular federal income tax (including securities subject to alternative
minimum tax).
. The fund will invest at least 65% of its assets in debt securities rated A
or below by S&P or Moody's or unrated but determined to be of equivalent
quality.
. The fund will invest at least 50% of its assets in debt securities rated
BBB/Baa or below or unrated but determined to be of equivalent quality.
. The fund will invest at least 65% of its assets in bonds (any debt
securities having initial maturities in excess of one year).

. The fund may invest more than 25% of its assets in municipal obligations of
issuers located in the same state or in obligations of the same type
(however, the fund may not invest 25% or more in municipal securities of
the same project type issued by non-governmental entities).

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
--------------------------------------------

. The fund will invest at least 80% of its assets in securities exempt from
regular federal income tax.
. The fund will invest up to 65% of its assets in bonds (any debt securities
having initial maturities in excess of one year).
. The fund may invest up to 20% of its assets in securities subject to
federal alternative minimum tax.
. The fund will invest at least 65% of its assets in debt securities rated A
or better by Moody's Investors Services, Inc. (Moody's) or Standard &
Poor's Corporation (S&P) or unrated but determined to be of equivalent
quality.

. The fund may invest up to 35% of its assets in straight debt securities
rated BBB/Baa by Moody's or S&P or unrated but determined to be of
equivalent quality. The fund is not normally required to dispose of a
security in the event its rating is reduced below the

National Tax-Exempt Income Funds - Page 2

<PAGE>

current minimum rating for its purchase (or it is not rated and its quality
becomes equivalent to such a security).
. The dollar-weighted average effective maturity of the fund's portfolio will
be between 3 and 10 years.
. The maximum dollar-weighted average nominal or stated maturity of the
fund's portfolio will be 15 years.
. The maximum effective maturity of any one security in the fund's portfolio
will be 10 years.
. The maximum nominal or stated maturity of any security in the fund's
portfolio will be 25 years.

The funds may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment Objective, Strategies and Risks."

THE TAX-EXEMPT BOND FUND OF AMERICA, AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
-----------------------------------------------------------------------------
AND LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
------------------------------------------------

DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general their prices decline when
interest rates rise and vice versa.

Lower quality, lower rated bonds rated Ba or below by Standard & Poor's
Corporation and BB or below by Moody's Investors Services, Inc. or unrated but
considered to be of equivalent quality are described by the rating agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already be
in default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, lower quality, lower rated bonds.

Certain risk factors relating to "lower quality, lower rated bonds" are
discussed below.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower quality, lower
rated bonds can be sensitive to adverse economic changes and political and
corporate developments and may be less sensitive to interest rate changes.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers may experience financial stress that would
adversely affect their ability to service their principal and interest
payment obligations, to meet projected business goals, and to obtain
additional financing. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices
and yields of lower quality, lower rated bonds.

PAYMENT EXPECTATIONS - Lower quality, lower rated bonds, like other bonds,
may contain redemption or call provisions. If an issuer exercises these
provisions in a

National Tax-Exempt Income Funds - Page 3

<PAGE>

declining interest rate market, the fund would have to replace the security
with a lower yielding security, resulting in a decreased return for
investors. If the issuer of a bond defaults on its obligations to pay
interest or principal or enters into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it.

LIQUIDITY AND VALUATION - There may be little trading in the secondary
market for particular bonds, which may affect adversely the fund's ability
to value accurately or dispose of such bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of lower quality, lower rated bonds,
especially in a thin market.

The Investment Adviser attempts to reduce the risks described above through
diversification of the portfolio and by credit analysis of each issuer as well
as by monitoring broad economic trends and corporate and legislative
developments, but there can be no assurance that it will be successful in doing
so.

MUNICIPAL BONDS - Municipal bonds are debt obligations generally issued to
obtain funds for various public purposes, including the construction of public
facilities. Opinions relating to the validity of municipal bonds, their
exclusion from gross income for federal income tax purposes and, where
applicable, state and local income tax are rendered by bond counsel to the
issuing authorities at the time of issuance.

The two principal classifications of municipal bonds are general obligation
bonds and limited obligation or revenue bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit including, if
available, its taxing power for the payment of principal and interest. Issuers
of general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality. Annual rental payments are payable to the extent such rental
payments are appropriated annually.

Typically, the only security for a limited obligation or revenue bond is the net
revenue derived from a particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a special tax or other special
revenues. Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many provide
additional security in the form of a debt service reserve fund which may also be
used to make principal and interest payments on the issuer's obligations. In
addition, some revenue obligations (as well as general obligations) are insured
by a bond insurance company or backed by a letter of credit issued by a banking
institution.

Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but by the
revenues of the authority derived from payments by the private entity which owns
or operates the facility financed with the proceeds of the bonds. Obligations of
housing finance authorities have a wide range of security features including

National Tax-Exempt Income Funds - Page 4

<PAGE>

reserve funds and insured or subsidized mortgages, as well as the net revenues
from housing or other public projects. Most of these bonds do not generally
constitute the pledge of the credit of the issuer of such bonds. The credit
quality of such revenue bonds is usually directly related to the credit standing
of the user of the facility being financed or of an institution which provides a
guarantee, letter of credit, or other credit enhancement for the bond issue.

MUNICIPAL LEASE OBLIGATIONS - The funds may invest, without limitation, in
municipal lease revenue obligations that are determined to be liquid by the
Investment Adviser. In determining whether these securities are liquid, the
Investment Adviser will consider, among other things, the credit quality and
support, including strengths and weaknesses of the issuers and lessees, the
terms of the lease, the frequency and volume of trading and the number of
dealers trading the securities.

U.S. VIRGIN ISLANDS AND PUERTO RICO OBLIGATIONS - The funds may invest in
obligations of the Commonwealth of Puerto Rico and its agencies and authorities
and the U.S. Virgin Islands to the extent such obligations are exempt from
federal and state income taxes. Adverse political and economic conditions and
developments, affecting Puerto Rico and the U.S. Virgin Islands, may in turn
affect negatively the value of the funds' holdings in such obligations.

ZERO COUPON BONDS - Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the securities begin paying
current interest. They are issued and traded at a discount from their face
amount or par value, which discount varies depending on the time remaining until
cash payments begin, prevailing interest rates, liquidity of the security, and
the perceived credit quality of the issuer.

PRE-REFUNDED BONDS - From time to time, a municipality may refund a bond that it
has already issued prior to the original bond's call date by issuing a second
bond, the proceeds of which are used to purchase securities. The securities are
placed in an escrow account pursuant to an agreement between the municipality
and an independent escrow agent. The principal and interest payments on the
securities are then used to pay off the original bondholders. For the purposes
of diversification, pre-refunded bonds will be treated as governmental issues.

CASH AND CASH EQUIVALENTS - These securities include, but are not limited to:
(i) tax-exempt commercial paper (e.g., short-term notes obligations issued by
municipalities that mature, or may be redeemed in 270 days or less), (ii)
municipal notes (e.g., bond anticipation notes, revenue anticipation notes, and
tax anticipation notes issued by municipalities that mature, or may be redeemed
in one year or less), (iii) municipal obligations backed by letters of credit
issued by banks or other financial institutions or government agencies that
mature, or may be redeemed in one year or less, (iv) tax-exempt variable rate
debt issued by municipal conduits for corporate obligors, and (v) securities of
the U.S. Government, its agencies or instrumentalities that mature, or may be
redeemed in one year or less.

TEMPORARY INVESTMENTS - The funds may invest in short-term municipal obligations
of up to one year in maturity during periods of temporary defensive strategy
resulting from abnormal market conditions, or when such investments are
considered advisable for liquidity. Generally, the income from all such
securities is exempt from federal income tax. Further, a portion of the fund's
assets, which will normally be less than 20%, may be held in cash or invested in
high-quality taxable short-term securities of up to one year in maturity. Such
investments may include: (1) obligations of the U.S. Treasury; (2) obligations
of agencies and instrumentalities of the U.S.

National Tax-Exempt Income Funds - Page 5

<PAGE>

Government; (3) money market instruments, such as certificates of deposit issued
by domestic banks, corporate commercial paper, and bankers' acceptances; and (4)
repurchase agreements.

FORWARD COMMITMENTS - The funds may enter into commitments to purchase or sell
securities at a future date. When the funds agree to purchase such securities
they assume the risk of any decline in value of the security beginning on the
date of the agreement. When the funds agree to sell such securities they do not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the funds could miss a favorable price or
yield opportunity, or could experience a loss.

As the funds' aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The funds will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the funds' aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because they may have an amount
greater than their net assets subject to market risk). Should market values of
the funds' portfolio securities decline while the funds are in a leveraged
position, greater depreciation of its net assets would likely occur than were it
not in such a position. The funds will not borrow money to settle these
transactions and therefore, will liquidate other portfolio securities in advance
of settlement if necessary to generate additional cash to meet its obligations
thereunder.

VARIABLE AND FLOATING RATE OBLIGATIONS - The interest rates payable on certain
securities in which the funds may invest may not be fixed but may fluctuate
based upon changes in market rates. Variable and floating rate obligations bear
coupon rates that are adjusted at designated intervals, based on the then
current market rates of interest. Variable and floating rate obligations permit
the funds to "lock in" the current interest rate for only the period until the
next scheduled rate adjustment, but the rate adjustment feature tends to limit
the extent to which the market value of the obligation will fluctuate.

ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Keeping in mind each fund's objective, the Investment Adviser will
increase each fund's exposure to this price volatility only when it appears
likely to increase current income without undue risk to capital.<

ISSUE CLASSIFICATION - Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which they
were issued, often tend to trade at different yields. Correspondingly,
securities issued for similar purposes and with the same general maturity
characteristics, but which vary according to the creditworthiness of their
respective issuers, tend to trade at different yields. These yield differentials
tend to fluctuate in response to political and economic developments, as well as
temporary imbalances in normal supply/demand relationships. The Investment
Adviser monitors these fluctuations closely, and will attempt to adjust
portfolio concentrations in various issue classifications according to the value
disparities brought about by these yield relationship fluctuations.

The Investment Adviser believes that, in general, the market for municipal bonds
is less liquid than that for taxable fixed-income securities. Accordingly, the
ability of the funds to make

National Tax-Exempt Income Funds - Page 6

<PAGE>

purchases and sales of securities in the foregoing manner may, at any particular
time and with respect to any particular securities, be limited (or
non-existent).

PRIVATE PLACEMENTS - Generally, municipal securities acquired in private
placements are subject to contractual restrictions on resale. Accordingly, all
private placements will be considered illiquid unless they have been
specifically determined to be liquid, taking into account factors such as the
frequency and volume of trading and the commitment of dealers to make markets
under procedures adopted by the fund's board of directors.

RESTRICTED SECURITIES AND LIQUIDITY - The funds may purchase securities subject
to restrictions on resale. All such securities not actively traded will be
considered illiquid unless they have been specifically determined to be liquid
under procedures which have been adopted by the funds' board of
directors/trustees, taking into account factors such as the frequency and volume
of trading, the commitment of dealers to make markets and the availability of
qualified investors, all of which can change from time to time. The funds may
incur certain additional costs in disposing of illiquid securities.

REPURCHASE AGREEMENTS - The funds may enter into repurchase agreements, under
which each fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the funds to maintain liquidity and earn income over periods
of time as short as overnight. The seller must maintain with the funds'
custodian collateral equal to at least 100% of the repurchase price, including
accrued interest, as monitored daily by the Investment Adviser. The funds will
only enter into repurchase agreements involving securities in which they could
otherwise invest and with selected banks and securities dealers whose financial
condition is monitored by the Investment Adviser. If the seller under the
repurchase agreement defaults, the funds may incur a loss if the value of the
collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, realization upon the
collateral by the funds may be delayed or limited.

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA AND AMERICAN HIGH-INCOME MUNICIPAL
-------------------------------------------------------------------------------
BOND FUND
---------

SECURITIES SUBJECT TO ALTERNATIVE MINIMUM TAX - The funds may invest in
tax-exempt securities believed to pay interest constituting an item of tax
preference subject to alternative minimum tax; therefore, while each fund's
distributions from tax-exempt securities are not subject to regular federal
income tax, a portion or all may be included in determining a shareholder's
federal alternative minimum tax.

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
----------------------------------------

CONCENTRATION OF INVESTMENTS - The fund may invest more than 25% of its assets
in municipal obligations of issuers located in the same state or in municipal
obligations of the same type which pay interest on their obligations from
revenue of similar projects. This may make the fund more susceptible to similar
economic, political, or regulatory occurrences such as changes in healthcare
regulations, environmental considerations related to construction, construction
cost increases and labor problems, failure of healthcare facilities to maintain
adequate occupancy levels, and inflation. As the similarity in issuers
increases, the potential for fluctuations in the

National Tax-Exempt Income Funds - Page 7

<PAGE>

fund's share price may increase. The fund may invest more than 25% of its assets
in industrial development bonds.

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
--------------------------------------------

MATURITY - Under normal market conditions, the fund's dollar-weighted average
effective portfolio maturity will range between 3 and 10 years. The fund will
not purchase any security with an effective maturity of more than 10 years. In
calculating effective maturity, a feature such as a put, call or sinking fund
will be considered to the extent it results in a security whose market
characteristics indicate a maturity of 10 years or less, even though the nominal
or stated maturity may be beyond 10 years. The Investment Adviser will consider
the impact on effective maturity of potential changes in the financial condition
of issuers and in market interest rates in making investment selections for the
fund.

Additionally, the fund's dollar-weighted average nominal or stated portfolio
maturity will not exceed 15 years, and the fund will not purchase any security
with a nominal or stated maturity in excess of 25 years. For purposes of
determining nominal or stated maturity, the fund will consider only the
techniques approved for such purposes by the staff of the Securities and
Exchange Commission which currently do not include any call or sinking fund
features but are limited to those described in rule 2a-7(d) under the Investment
Company Act of 1940 applicable to money market funds.

* * * * * *

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the funds' objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.

Each fund's portfolio turnover rate would equal 100% if each security in each
fund's portfolio was replaced once per year. See "Financial Highlights" in the
prospectus for each fund's annual portfolio turnover for each of the last five
fiscal periods.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
<
FUNDAMENTAL POLICIES - Each fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a

National Tax-Exempt Income Funds - Page 8

<PAGE>

maximum percentage of assets will be considered violated unless the excess
occurs immediately after, and is caused by, an acquisition by the fund.

THE TAX-EXEMPT BOND FUND OF AMERICA
-----------------------------------

These restrictions provide that the fund may not:

1. With respect to 75% of the Fund's total assets, purchase the security of
any issuer (other than securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities) if, as a result, (a) more than 5% of the
Fund's total assets would be invested in securities of that issuer, or (b) the
Fund would hold more than 10% of the outstanding voting securities of that
issuer;

2. Enter into any repurchase agreement if, as a result, more than 10% of the
value of the fund's total assets would be subject to repurchase agreements
maturing in more than seven days;

3. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in securities secured by real estate or interests therein;

4. Make loans to others, except for the purchase of debt securities or
entering into repurchase agreements;

5. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;

6. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales;

7. Borrow money, except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale of
portfolio securities to accommodate unusually heavy redemption requests, if they
should occur; it is not intended for investment purposes;

8. Underwrite any issue of securities, except to the extent that the purchase
of municipal bonds directly from the issuer in accordance with the fund's
investment objective, policies and restrictions, and later resale may be deemed
to be an underwriting;

9. Invest in companies for the purpose of exercising control or management;

10. Buy or sell commodities or commodity contracts or oil, gas or other mineral
exploration or development programs;

11. Write, purchase or sell puts, calls, straddles, spreads or any combination
thereof;

For the purpose of the fund's investment restrictions, the identification of the
"issuer" of municipal bonds that are not general obligation bonds is made by the
Investment Adviser on the basis of the characteristics of the bonds as
described, the most significant of which is the ultimate source of funds for the
payment of principal and interest on such bonds.

National Tax-Exempt Income Funds - Page 9

<PAGE>

For purposes of Investment Restriction #10, the term "oil, gas or other mineral
exploration or development programs" includes oil, gas or other mineral
exploration or development leases.

NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:

(a) The fund may not invest 25% or more of its assets in municipal bonds
the issuers of which are located in the same state, unless such securities
are guaranteed by the U.S. Government, or more than 25% of its total assets
in securities the interest on which is paid from revenues of similar type
projects (such as hospitals and health facilities; turnpikes and toll
roads; ports and airports; or colleges and universities). The fund may on
occasion invest more than an aggregate of 25% of its total assets in
industrial development bonds. There could be economic, business or
political developments which might affect all municipal bonds of a similar
category or type or issued by issuers within any particular geographical
area or jurisdiction;

(b)
The fund may not invest more than 15% of its net assets in securities which
are not readily marketable.

(c) The fund may not invest in securities of other investment companies,
except as permitted by the Investment Company Act of 1940, as amended.

AMERICAN HIGH-INCOME MUNICIPAL BOND FUND
----------------------------------------

These restrictions provide that the fund may not:

1. With respect to 75% of the fund's total assets, purchase the security of
any issuer (other than securities issued or guaranteed by the U.S. Government or
its agencies or instrumentalities) if, as a result, (a) more than 5% of the
fund's total assets would be invested in securities of that issuer, or (b) the
fund would hold more than 10% of the outstanding voting securities of that
issuer.

2. Invest in companies for the purpose of exercising control or management;

3. Purchase or sell real estate (including real estate limited partnerships)
unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent the fund from investing in securities or other
instruments backed by real estate or securities of companies engaged in the real
estate business);

4. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments or engage in futures transactions;

5. Engage in the business of underwriting securities of other issuers, except
to the extent that the purchase or disposal of an investment position may
technically constitute the fund as an underwriter as that term is defined under
the Securities Act of 1933;

6. Make loans in an aggregate amount in excess of 33(alpha)% of the value of
the fund's total assets, taken at the time any loan is made, provided that the
purchase of debt securities pursuant to the fund's investment objective and
entering into repurchase agreements maturing in

National Tax-Exempt Income Funds - Page 10

<PAGE>

seven days or less shall not be deemed loans for the purposes of this
restriction and that loans of portfolio securities may be made;

7. Issue senior securities, except as permitted under the Investment Company
Act of 1940;

8. Borrow money, except from banks for temporary or emergency purposes not to
exceed one-third of the value of the fund's total assets. Moreover, in the event
that the asset coverage for the fund's borrowings falls below 300%, the fund
will reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage;

9. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (this restriction does not prevent the fund from investing in securities
with put and call features);

10. Invest 25% or more of its assets in municipal securities of the same
project type issued by non-governmental entities. However, the fund may invest
more than 25% of its assets in municipal obligations of issuers located in the
same state or in municipal obligations of the same type, including without
limitation the following: general obligations of states and localities; lease
rental obligations of state and local authorities; obligations of state and
local housing finance authorities, municipal utilities systems or public housing
authorities; or industrial development or pollution control bonds issued for
hospitals, electric utility systems, life care facilities or other purposes. As
a result, the fund may be more susceptible to adverse economic, political, or
regulatory occurrences affecting a particular category of issuers. As the
concentration in the securities of a particular category of issuer increases,
the potential for fluctuation in the value of the fund's shares also increases;
nor

11. Sell securities short, except to the extent that the fund contemporaneously
owns, or has the right to acquire at no additional cost, securities identical to
those sold short.

NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:

1. The fund does not currently intend (at least for the next 12 months) to
lend portfolio securities. However, if such action is authorized by the Board of
Directors, loans of portfolio securities as described under "Loans of Portfolio
Securities" shall be made in accordance with the terms and conditions therein
set forth and consistent with fundamental investment restriction #6;

2. The fund will not invest more than 15% of the value of its net assets in
illiquid securities;

3. The fund does not currently intend (at least for the next 12 months) to
invest in the securities of other registered management investment companies,
except in connection with a merger, consolidation, acquisition, reorganization,
or in connection with the implementation of any deferred compensation plan as
adopted by the Board of Directors;

4. The fund does not currently intend (at least for the next 12 months) to
purchase securities in the event its borrowings exceed 5% of total assets.

For the purposes of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds that are not general obligation bonds is made by
the Investment Adviser on the

National Tax-Exempt Income Funds - Page 11

<PAGE>

basis of the characteristics of the bonds as described, the most significant of
which is the ultimate source of funds for the payment of principal and interest
on such bonds.

LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
--------------------------------------------

These restrictions provide that the fund may not:

1. With respect to 75% of the fund's total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by the U.S. Government or
any of its agencies or instrumentalities) if, as a result, (a) more than 5% of
the fund's total assets would be invested in the securities of that issuer, or
(b) the fund would hold more than 10% of the outstanding voting securities of
that issuer;

2. Purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the fund from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);

3. Purchase or sell commodities unless acquired as a result of ownership of
securities or other instruments or engage in futures transactions;

4. Invest 25% or more of the fund's total assets in the securities of issuers
in the same industry. Obligations of the U.S. Government, its agencies and
instrumentalities are not subject to this 25% limitation on industry
concentration;

5. Invest more than 15% of the value of its net assets in securities which are
not readily marketable (including repurchase agreements maturing in more than
seven days) or engage in the business of underwriting securities of other
issuers, except to the extent that the purchase or disposal of an investment
position may technically constitute the fund as an underwriter as that term is
defined under the Securities Act of 1933;

6. Invest in companies for the purpose of exercising control or management;

7. Make loans to others except for (a) purchasing debt securities; (b)
entering into repurchase agreements; and (c) loaning portfolio securities;

8. Issue senior securities, except as permitted under the Investment Company
Act of 1940;

9. Borrow money, except from banks for temporary purposes in an amount not to
exceed one-third of the value of the fund's total assets. Moreover, in the event
that the asset coverage for such borrowing falls below 300%, the fund will
reduce, within three days, the amount of its borrowing in order to provide for
300% asset coverage; nor

10. Purchase or sell puts, calls, straddles, or spreads, or combinations
thereof (this restriction does not prevent the fund from investing in securities
with put and call features).

National Tax-Exempt Income Funds - Page 12

<PAGE>

NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed without shareholder approval:

1. The fund does not currently intend (at least for the next 12 months) to
sell securities short, except to the extent that the fund contemporaneously
owns, or has the right to acquire at no additional cost, securities identical to
those sold short.

2. The fund does not currently intend (at least for the next 12 months) to
invest in the securities of other investment companies except as permitted by
the Investment Company Act of 1940, as amended.

3. The fund does not currently intend (at least for the next 12 months) to
purchase securities in the event its borrowings exceed 5%.

4. The fund does not currently intend (at least for the next 12 months) to
invest 25% or more of its assets in municipal bonds the issuers of which are
located in the same state, unless such securities are guaranteed by the U.S.
Government, or more than 25% of its total assets in securities the interest on
which is paid from revenues of similar type projects. The fund may on occasion
invest more than an aggregate of 25% of its total assets in industrial
development bonds. There could be economic, business or political developments
which might affect all municipal bonds of a similar category or type or issued
by issuers within any particular geographical area or jurisdiction.

5. The fund does not currently intend (at least for the next 12 months) to
loan portfolio securities.

FUND ORGANIZATION AND VOTING RIGHTS

Each fund is an open-end, diversified management investment company. The
Tax-Exempt Bond Fund of America and American High-Income Municipal Bond Fund
were each organized as a Maryland corporation on July 20, 1979 and June 14,
1994, respectively. Limited Term Tax-Exempt Bond Fund of America was organized
as a Massachusetts business trust on July 12, 1993.

All fund operations are supervised by each fund's Board of Directors/Trustees
which meets periodically and performs duties required by applicable state and
federal laws. Members of the board who are not employed by Capital Research and
Management Company or its affiliates are paid certain fees for services rendered
to the fund as described in "Directors/Trustees and Director/Trustee
Compensation" below. They may elect to defer all or a portion of these fees
through a deferred compensation plan in effect for each fund.

The funds have two classes of shares - Class A and Class B. The shares of each
class represent an interest in the same investment portfolio. Each class has
equal rights as to voting, redemption, dividends and liquidation, except that
each class bears different distribution expenses and may bear different transfer
agent fees and other expenses properly attributable to

National Tax-Exempt Income Funds - Page 13

<PAGE>

the particular class as approved by the Board of Directors/Trustees. Class A and
Class B shareholders have exclusive voting rights with respect to the rule 12b-1
Plans adopted in connection with the distribution of shares and on other matters
in which the interests of one class are different from interests in another
class. Shares of all classes of the fund vote together on matters that affect
all classes in substantially the same manner. Each class votes as a class on
matters that affect that class alone.

The funds do not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the funds will hold a meeting at which any member of the board could be removed
by a majority vote.

National Tax-Exempt Income Funds - Page 14

<PAGE>

FUND DIRECTORS/TRUSTEES AND OFFICERS

Directors/Trustees and Director/Trustee Compensation

AGGREGATE
COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/)
POSITION FROM THE FUND
WITH PRINCIPAL OCCUPATION(S) DURING DURING THE
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS 2000 FISCAL YEAR/2/
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard G. Capen, Jr. Director/ Corporate Director and author; former TEBF $3,097/4/
6077 San Elijo, Box 2494 Trustee United States Ambassador to Spain; AHIM $1,464/4/
Rancho Santa Fe, CA 92067 former Vice Chairman of the Board, LTEX $1,464/4/
Age: 66 Knight-Ridder, Inc., former Chairman
and Publisher, The Miami Herald
----------------
--------------------------------------------------------------------------------------------------------------------
H. Frederick Christie Director/ Private Investor. Former President and TEBF $3,658/4/
P.O. Box 144 Trustee Chief Executive Officer, The Mission AHIM $2,258/4/
Palos Verdes Estates, CA Group (non-utility holding company, LTEX $2,258/4/
90274 subsidiary of Southern California
Age: 67 Edison Company)
--------------------------------------------------------------------------------------------------------------------
+ Don R. Conlan LTEX: Trustee President (retired), The Capital Group none/5/
1630 Milan Avenue Companies, Inc.
South Pasadena, CA 91030
Age: 64
--------------------------------------------------------------------------------------------------------------------
Diane C. Creel Director/ CEO and President, The Earth Technology TEBF $3,500/4/
100 W. Broadway Trustee Corporation (international consulting AHIM $1,900/4/
Suite 5000 engineering) LTEX $1,900/4/
Long Beach, CA 90802
Age: 51
--------------------------------------------------------------------------------------------------------------------
Martin Fenton Director/ Managing Director, Senior Resource TEBF $4,100/4/
4660 La Jolla Village Trustee Group LLC (development and management AHIM $2,700/4/
Drive of senior living communities) LTEX $2,700/4/
Suite 725
San Diego, CA 92121-2116
Age: 65
--------------------------------------------------------------------------------------------------------------------
Leonard R. Fuller Director/ President, Fuller Consulting (financial TEBF $3,731/4/
4337 Marina City Drive Trustee management consulting firm) AHIM $2,330/4/
Suite 841 ETN LTEX $2,331/4/
Marina del Rey, CA 90292
Age: 54
--------------------------------------------------------------------------------------------------------------------
+* Abner D. Goldstine AHIM and Senior Vice President and Director, none/5/
Age: 70 TEBF: Capital Research and Management Company
Vice
Chairman
and
Director

LTEX:
President
and
Trustee
--------------------------------------------------------------------------------------------------------------------
+** Paul G. Haaga, Jr. Chairman of Executive Vice President and Director, none/5/
Age: 51 the Board Capital Research and Management Company

--------------------------------------------------------------------------------------------------------------------
+*Neil L. Langberg TEBF: President Vice President - Investment Management none/5/
Age: 47 and Director Group, Capital Research and Management
Company
AHIM and LTEX:
Senior Vice
President
--------------------------------------------------------------------------------------------------------------------
+*Mark R. Macdonald TEBF: Vice Vice President - Investment Management none/5/
Age: 41 President Group, Capital Research and Management
Company
AHIM: President
and Director

LTEX: Senior
Vice President
--------------------------------------------------------------------------------------------------------------------
Richard G. Newman Director/ Chairman, President and CEO, AECOM TEBF $4,131/4/
3250 Wilshire Boulevard Trustee Technology Corporation (architectural AHIM $2,730/4/
Los Angeles, CA 90010-1599 engineering) LTEX $2,731/4/
Age: 65
--------------------------------------------------------------------------------------------------------------------
Frank M. Sanchez Director/ President, The Sanchez Family TEBF $3,333/4/
5234 Via San Delarro, #1 Trustee Corporation dba McDonald's Restaurants AHIM $1,700/4/
Los Angeles, CA 90022 (McDonald's licensee) LTEX $1,700/4/
Age: 57
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL COMPENSATION
(INCLUDING VOLUNTARILY
DEFERRED
COMPENSATION/1/) FROM TOTAL NUMBER
ALL FUNDS MANAGED BY OF FUND
CAPITAL RESEARCH AND BOARDS
MANAGEMENT COMPANY ON WHICH
OR ITS AFFILIATES/3/ FOR THE DIRECTOR/TRUSTEE
NAME, ADDRESS AND AGE 2000 FISCAL YEAR END SERVES/2/
------------------------------------------------------------------------------
<S> <C> <C>
Richard G. Capen, Jr. 7/31/00 $84,133 14
6077 San Elijo, Box 2494 8/31/00 $88,153
Rancho Santa Fe, CA 92067 ------------------
Age: 66
------------------------------------------------------------
H. Frederick Christie 7/31/00 $216,133 19
P.O. Box 144 8/31/00 $214,453
Palos Verdes Estates, CA ------------------
90274
Age: 67
------------------------------------------------------------
+ Don R. Conlan none/5/ 7
1630 Milan Avenue
South Pasadena, CA 91030
Age: 64
------------------------------------------------------------------------------
Diane C. Creel 7/31/00 $42,800 12
100 W. Broadway 8/31/00 $42,320
Suite 5000 ------------------
Long Beach, CA 90802
Age: 51
------------------------------------------------------------
Martin Fenton 7/31/00 $128,633 16
4660 La Jolla Village 8/31/00 $128,153
Drive ------------------
Suite 725
San Diego, CA 92121-2116
Age: 65
------------------------------------------------------------
Leonard R. Fuller 7/31/00 $87,633 13
4337 Marina City Drive 8/31/00 $87,953
Suite 841 ETN ------------------
Marina del Rey, CA 90292
Age: 54
------------------------------------------------------------
+* Abner D. Goldstine none/5/ 12
Age: 70

------------------------------------------------------------------------------
+** Paul G. Haaga, Jr. none/5/ 15
Age: 51

------------------------------------------------------------------------------
+*Neil L. Langberg none/5/ 1
Age: 47
------------------------------------------------------------------------------
+*Mark R. Macdonald none/5/ 1
Age: 41
------------------------------------------------------------------------------
Richard G. Newman 7/31/00 $105,800 13
3250 Wilshire Boulevard 8/31/00 $105,320
Los Angeles, CA 90010-1599 ------------------
Age: 65
------------------------------------------------------------
Frank M. Sanchez 7/31/00 $40,933 12
5234 Via San Delarro, #1 8/31/00 $43,953
Los Angeles, CA 90022 ------------------
Age: 57
------------------------------------------------------------
</TABLE>

National Tax-Exempt Income Funds - Page 15

<PAGE>

+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the funds' Investment Adviser, Capital Research and
Management Company, or the parent company of the Investment Adviser, The
Capital Group Companies, Inc.

* Address is 11100 Santa Monica Boulevard, Los Angeles, CA 90025
** Address is 333 South Hope Street, Los Angeles, CA 90071

1 Amounts may be deferred by eligible Directors/Trustees under a non-qualified
deferred compensation plan adopted by the funds in 1993/1994. Deferred amounts
accumulate at an earnings rate determined by the total return of one or more
funds in The American Funds Group as designated by the Directors/Trustees.

2 The Tax-Exempt Bond Fund of America's fiscal year ends on August 31.
American High-Income Municipal Bond Fund's and Limited Term Tax-Exempt Bond
Fund of America's fiscal year ends on July 31.

3 Capital Research and Management Company manages The American Funds Group
consisting of 29 funds: AMCAP Fund, Inc., American Balanced Fund, Inc.,
American High-Income Municipal Bond Fund, Inc., American High-Income Trust,
American Mutual Fund, Inc., The Bond Fund of America, Inc., The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World
Growth and Income Fund, Inc., Capital World Bond Fund, Inc., EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc.,
The Income Fund of America, Inc., Intermediate Bond Fund of America, The
Investment Company of America, Limited Term Tax-Exempt Bond Fund of America,
The New Economy Fund, New Perspective Fund, Inc., New World Fund, Inc.,
SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America, Inc., The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, The Tax-Exempt
Fund of Virginia, The Tax-Exempt Money Fund of America, The U. S. Treasury
Money Fund of America, U.S. Government Securities Fund and Washington Mutual
Investors Fund, Inc. Capital Research and Management Company also manages
American Variable Insurance Series and Anchor Pathway Fund, which serve as the
underlying investment vehicle for certain variable insurance contracts; and
Endowments, whose shareholders are limited to (i) any entity exempt from
taxation under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended ("501(c)(3) organization"); (ii) any trust, the present or future
beneficiary of which is a 501(c)(3) organization, and (iii) any other entity
formed for the primary purpose of benefiting a 501(c)(3) organization. An
affiliate of Capital Research and Management Company, Capital International,
Inc., manages Emerging Markets Growth Fund, Inc.

4 Since the deferred compensation plans' adoption, the total amount of deferred
compensation accrued by each fund (plus earnings thereon) through the 2000
fiscal year for participating Directors/Trustees is as follows:

TEBF - Richard G. Capen, Jr. ($2,485), H. Frederick Christie ($9,739), Diane
C. Creel ($8,776), Martin Fenton ($19,642), Leonard R. Fuller ($13,151) and
Richard G. Newman ($46,355).
AHIM - Richard G. Capen, Jr. ($1,579), H. Frederick Christie ($6,441) Diane C.
Creel ($2,987), Martin Fenton ($1,505), Leonard R. Fuller ($4,523), and
Richard G. Newman ($21,759).
LTEX - Richard G. Capen, Jr. ($1,579), H. Frederick Christie ($6,107), Diane
C. Creel ($2,987), Martin Fenton ($11,443), Leonard R. Fuller ($4,523) and
Richard G. Newman ($30,805).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the fund until paid to the
Directors/Trustees.

5 Don R. Conlan, Abner D. Goldstine, Paul G. Haaga, Jr., Neil L. Langberg and
Mark R. Macdonald are affiliated with the Investment Adviser and, accordingly,
receive no compensation from the funds.

National Tax-Exempt Income Funds - Page 18

<PAGE>

OTHER OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S) DURING
NAME AND ADDRESS AGE WITH REGISTRANT PAST 5 YEARS#
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael J. Downer 45 Vice President Senior Vice President - Fund
333 South Hope Street Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
-------------------------------------------------------------------------------
Brenda S. Ellerin 37 Vice President - Vice President and Director,
11100 Santa Monica TEBF and LTEX Capital Research Company*
Blvd.
Los Angeles, CA 90025
-------------------------------------------------------------------------------
David A. Hoag 35 Vice President - Vice President and Director,
11100 Santa Monica TEBF and AHIM Capital Research Company*
Blvd.
Los Angeles, CA 90025
-------------------------------------------------------------------------------
Edward B. Nahmias 48 Vice President - Vice President, Capital Research
11100 Santa Monica AHIM Company*
Blvd.
Los Angeles, CA 90025
-------------------------------------------------------------------------------
Julie F. Williams 52 Secretary Vice President - Fund Business
333 South Hope Street Management Group, Capital
Los Angeles, CA 90071 Research and Management Company
-------------------------------------------------------------------------------
Anthony W. Hynes, Jr. 37 Treasurer Vice President - Fund Business
135 South State Management Group, Capital
College Blvd. Research and Management Company
Brea, CA 92821
-------------------------------------------------------------------------------
Kimberly S. Verdick 36 Assistant Assistant Vice President - Fund
333 South Hope Street Secretary Business Management Group,
Los Angeles, CA 90071 Capital Research and Management
Company
-------------------------------------------------------------------------------
</TABLE>

# Positions within the organizations listed may have changed during this period.
* Company affiliated with Capital Research and Management Company.

All of the officers listed are officers, and/or directors/trustees of one or
more of the other funds for which Capital Research and Management Company serves
as Investment Adviser.

No compensation is paid by the fund to any officer or Director/Trustee who is a
director, officer or employee of the Investment Adviser or affiliated companies.
TEBF pays annual fees of $2,500 to Directors who are not affiliated with the
Investment Adviser, plus $210 for each Board of Directors meeting attended, plus
a pro rata portion of $2,510 for each meeting of the Contracts Committee
attended and a pro rata portion of $1,000 for each meeting of the Audit and
Nominating Committees attended.

AHIM and LTEX pay annual fees of $1,500 to Directors/Trustees who are not
affiliated with the Investment Adviser. In addition, each fund pays $210 for
each Board of Directors/Trustees meeting attended, plus a pro rata portion of
$2,520 for each meeting of the Contracts Committee attended and a pro rata
portion of $1,000 for each meeting of the Audit and Nominating Committees
attended. No pension or retirement benefits are accrued as part of fund
expenses. The Directors/Trustees may elect, on a voluntary basis, to defer all
or a portion of their fees through a deferred compensation plan in effect for
the funds. The funds also reimburse certain

National Tax-Exempt Income Funds - Page 19

<PAGE>

expenses of the Directors/Trustees who are not affiliated with the Investment
Adviser. As of October 1, 2000 the officers and Directors/Trustees of each fund
and their families, as a group, owned beneficially or of record less than 1% of
the outstanding shares of each fund.

MANAGEMENT

INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the U.S. and abroad
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong
Kong, Singapore and Tokyo), with a staff of professionals, many of whom have a
number of years of investment experience. The Investment Adviser is located at
333 South Hope Street, Los Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92821. The Investment Adviser's research professionals
travel several million miles a year, making more than 5,000 research visits in
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and retain quality personnel. The Investment Adviser is a
wholly owned subsidiary of The Capital Group Companies, Inc.

The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts of all types throughout the world. These investors include
privately owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.

INVESTMENT ADVISORY AND SERVICE AGREEMENT - The Investment Advisory and Service
Agreements (the "Agreements") between the funds and the Investment Adviser will
continue in effect until May 31, 2001, unless sooner terminated, and may be
renewed from year to year thereafter, provided that any such renewal has been
specifically approved at least annually by (i) the Board of Directors/Trustees,
or by the vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the fund, and (ii) the vote of a majority of
Directors/Trustees who are not parties to the Agreements or interested persons
(as defined in the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreements provide that
the Investment Adviser has no liability to the funds for its acts or omissions
in the performance of its obligations to the funds not involving willful
misconduct, bad faith, gross negligence or reckless disregard of its obligations
under the Agreements. The Agreements also provide that either party has the
right to terminate them, without penalty, upon 60 days' written notice to the
other party, and that the Agreements automatically terminate in the event of
their assignment (as defined in the 1940 Act).

The Investment Adviser, in addition to providing investment advisory services,
furnishes the services and pays the compensation and travel expenses of persons
to perform the executive, administrative, clerical and bookkeeping functions of
the funds, and provides suitable office space, necessary small office equipment
and utilities, general purpose accounting forms, supplies, and postage used at
the offices of the funds. The funds pay all expenses not assumed by the
Investment Adviser, including, but not limited to, custodian, stock transfer and
dividend disbursing fees and expenses; costs of the designing, printing and
mailing of reports, prospectuses, proxy statements, and notices to its
shareholders; taxes; expenses of the issuance and redemption of shares of the
funds (including stock certificates, registration and qualification fees and
expenses); expenses pursuant to the funds' Plans of Distribution (described
below); legal and auditing expenses; compensation, fees, and expenses paid to
directors unaffiliated with the Investment Adviser; association dues; costs of
stationery and forms

National Tax-Exempt Income Funds - Page 20

<PAGE>

prepared exclusively for the funds; and costs of assembling and storing
shareholder account data.

For TEBF the Investment Adviser receives a monthly fee based on the following
rates and net asset levels:

NET ASSET LEVEL

<TABLE>
<CAPTION>
RATE IN EXCESS OF UP TO
------------------------------------------------------------------------------
<S> <S> <S>
0.30% $ 0 $ 60,000,000
------------------------------------------------------------------------------
0.21 60,000,000 1,000,000,000
------------------------------------------------------------------------------
0.18 1,000,000,000 3,000,000,000
------------------------------------------------------------------------------
0.16 3,000,000,000
------------------------------------------------------------------------------
</TABLE>

The agreement also provides for fees based on monthly gross investment income at
the following rates:

MONTHLY GROSS INVESTMENT

<TABLE>
<CAPTION>
INCOME RATE IN EXCESS OF UP TO
--------------------------------------------------------------------------------
<S> <S> <S>
3.00% $ 0 $3,333,333
--------------------------------------------------------------------------------
2.50 3,333,333 8,333,333
--------------------------------------------------------------------------------
2.25 8,333,333
--------------------------------------------------------------------------------
</TABLE>

Assuming net assets of $1.8 billion and gross investment income levels of 3%,
4%, 5%, 6% and 7%, management fees would be 0.29%, 0.31%, 0.34%, 0.36% and
0.38%, respectively. For the purposes of such computations under the Agreement,
the fund's gross investment income shall be determined in accordance with
generally accepted accounting principles and does not reflect any net realized
gains or losses on the sale of portfolio securities but does include
original-issue discount as defiined for federal income tax purposes.

The Agreement provides for a management fee reduction to the extent that the
annual ordinary operating expenses of the fund's Class A shares exceed the
lesser of either 25% of gross income of the Fund for the preceding year or the
sum or (a) 1-1/2% of the average daily net assets of the preceding year up to
and including $30,000,000 and (b) 1% of any excess of average daily net assets
of the preceding year over $30,000,000.

Expenses which are not subject to these limitations are interest, taxes, and
extraordinary expenses. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, which are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies are accounted for as capital items and not as expenses. To
the extent the fund's management fee must be waived due to Class A share expense
ratios exceeding this limit, management fees will be reduced similarly for all
classes of shares of the fund or other Class A fees will be waived in lieu of
management fees.

National Tax-Exempt Income Funds - Page 21

<PAGE>

For AHIM the Investment Adviser receives a monthly fee at the annual rate of
0.30% on the first $60 million of average net assets, plus 0.21% on net assets
over $60 million, plus 3% of gross investment income. Assuming net assets of
$600 million and gross investment income levels of 3%, 4%, 5%, 6% and 7%,
management fees would be 0.31%, 0.34%, 0.37%, 0.40% and 0.43%, respectively.
For the purposes of such computations under the Agreement, the fund's gross
investment income shall be determined in accordance with generally accepted
accounting principles and does not reflect any net realized gains or losses on
the sale of portfolio securities but does include original-issue discount as
defined for federal income tax purposes.

The Investment Adviser has agreed that in the event the expenses of Class A
shares of the fund (with the exclusion of interest, taxes, brokerage costs,
extraordinary expenses such as litigation and acquisitions or other expenses
excludable under applicable state securities laws or regulations) for any fiscal
year ending on a date on which the Agreement is in effect, exceed the expense
limitations, if any, applicable to the fund pursuant to state securities laws or
any regulations thereunder, it will reduce its fee by the extent of such excess
and, if required pursuant to any such laws or any regulations thereunder, will
reimburse the fund in the amount of such excess. To the extent the fund's
management fee must be waived due to Class A share expense ratios exceeding the
above limit, management fees will be reduced similarly for all classes of shares
of the fund or other Class A fees will be waived in lieu of management fees.

For LTEX the Investment Adviser receives a monthly fee, at an annual rate of
0.30% per annum on the first $60 million of the fund's average net assets, plus
0.21% per annum on the portion of such net assets in excess of $60 million, plus
3% of the fund's gross investment income for the preceding month. Assuming net
assets of $300 million and gross income levels of 3%, 4%, 5%, 6%, and 7%,
management fees would be 0.32%, 0.35%, 0.38%, 0.41% and 0.44%, respectively.
For the purposes of such computations under the Agreement, the fund's gross
Investment income shall be determined in accordance with generally accepted
accounting principles and does not reflect any net realized gains or losses on
the sale of portfolio securities but does include original-issue discount as
defined for federal income tax purposes.

For the fiscal years ended 2000, 1999, and 1998, the Investment Adviser received
advisory fees from TEBF of $6,502,000, $6,526,000, and $5,969,000, respectively.
For the fiscal years ended 2000, 1999, and 1998, the Investment Adviser received
advisory fees from AHIM of $2,240,000, $2,083,000, and $1,544,000, respectively.
For the fiscal years ended 2000, 1999, and 1998, the Investment Adviser received
advisory fees from LTEX of $1,045,000, $999,000, and $830,000, respectively.

PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope

National Tax-Exempt Income Funds - Page 22

<PAGE>

Street, Los Angeles, CA 90071, 135 South State College Boulevard, Brea, CA
92821, 3500 Wiseman Boulevard, San Antonio, TX 78251, 8332 Woodfield Crossing
Boulevard, Indianapolis, IN 46240, and 5300 Robin Hood Road, Norfolk, VA 23513.
Each fund has adopted Plans of Distribution (the "Plans"), pursuant to rule
12b-1 under the 1940 Act. The Principal Underwriter receives amounts payable
pursuant to the Plans (see below). In addition, the Principal Underwriter
receives revenues from sales of the
fund's shares. For Class A shares, the Principal Underwriter receives commission
revenue consisting of that portion of the Class A sales charge remaining after
the discounts which it allows to investment dealers. For Class B shares, the
Principal Underwriter sells the rights to 12b-1 fees paid by the fund for
distribution expenses to a third party and receives the revenue remaining after
compensating investment dealers for sales of Class B shares. The fund also
reimburses the Principal Underwriter for the immediate service fees advanced and
paid to dealers by the Principal Underwriter for sales of Class B shares.

Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $502,000 after allowance of $1,952,000
to dealers for TEBF; $229,000 after allowance of $901,000 to dealers for AHIM;
$111,000 after allowance of $443,000 to dealers for LTEX.

For TEBF during the fiscal years ended 1999 and 1998 the Principal Underwriter
retained $1,005,000 and $827,000, respectively on sales of Class A shares after
an allowance of $3,987,000 and $3,336,000 to dealers, respectively. Revenue
retained by the Principal Underwriter on sales of Class B shares during the 2000
fiscal year amounted to $28,724 after compensation of $134,323 to dealers.

For AHIM during the fiscal years ended 1999 and 1998 the Principal Underwriter
retained $450,000 and $487,000, respectively on sales of Class A shares after an
allowance of $1,829,000 and $2,007,000 to dealers, respectively. Revenue
retained by the Principal Underwriter on sales of Class B shares during the 2000
fiscal year amounted to $15,938 after compensation of $74,986 to dealers.

For LTEX during the fiscal years ended 1999 and 1998 the Principal Underwriter
retained $189,000 and $113,000, respectively on sales of Class A shares after an
allowance of $737,000 and $463,000 to dealers, respectively. Revenue retained by
the Principal Underwriter on sales of Class B shares during the 2000 fiscal year
amounted to $5,864 after compensation of $28,030 to dealers.

As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Boards of
Directors/Trustees and separately by a majority of the directors/trustees who
are not "interested persons" of the funds and who have no direct or indirect
financial interest in the operation of the Plans or the Principal Underwriting
Agreement. The officers and directors/trustees who are "interested persons" of
the funds may be considered to have a direct or indirect financial interest in
the operation of the Plans due to present or past affiliations with the
Investment Adviser and related companies. Potential benefits of the Plans to the
funds include shareholder services, savings to the fund in transfer agency
costs, savings to the funds in advisory fees and other expenses, benefits to the
investment process from growth or stability of assets and maintenance of a
financially healthy management organization. The selection and nomination of
directors/trustees who are not "interested persons" of the funds are committed
to the discretion of the directors/trustees who are not "interested

National Tax-Exempt Income Funds - Page 23

<PAGE>

persons" during the existence of the Plans. The Plans may not be amended to
increase materially the amount spent for distribution without shareholder
approval. Plan expenses are reviewed quarterly and the Plans must be renewed
annually by the Boards of Directors/Trustees.

Under the Plans, TEBF may expend up to 0.25%, 0.30% in the case of AHIM and
LTEX, of its net assets annually for Class A shares and 1.00% of its net assets
annually for Class B shares to finance any activity which is primarily intended
to result in the sale of fund shares, provided the fund's Board of
Directors/Trustees has approved the category of expenses for which payment is
being made. For Class A shares, these include up to 0.25% in service
fees for qualified
dealers and dealer commissions and wholesaler compensation on sales of shares
exceeding $1 million purchased without a sales charge (including purchases by
employer-sponsored defined contribution-type retirement plans investing $1
million or more or with 100 or more eligible employees, rollover IRA accounts as
described in "Individual Retirement Account (IRA) Rollovers" below, and
retirement plans, endowments or foundations with $50 million or more in assets).
For Class B shares, these include 0.25% in service fees for qualified dealers
and 0.75% in payments to the Principal Underwriter for financing commissions
paid to qualified dealers selling Class B shares.

Commissions on sales of Class A shares exceeding $1 million (including purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Class A Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, these commissions are not recoverable.

During the 2000 fiscal year, distribution expenses under TEBF Plan for Class A
shares were limited to $4,549,000 for compensation to dealers or the Principal
Underwriter. Had no limitation been in effect, TEBF would have paid $4,823,000
in distribution expenses under the Plan for Class A shares. Distribution
expenses under the TEBF Plan for Class B shares were $7,000. During the 2000
fiscal year, AHIM, and LTEX paid or accrued $$1,634,000, and $817,000 for
compensation to dealers or the Principal Underwriter under the Plan for Class A
shares and $4,000, and 1,000, respectively, under the Plan for Class B shares.

As of the end of the 2000 fiscal year end, accrued and unpaid distribution
expenses for Class A shares for TEBF, AHIM and LTEX were $905,000, $177,000 and
$71,000, respectively. Accrued and unpaid distribution expenses for Class B
shares for TEBF, AHIM and LTEX were $3,000, $1,000, and $473, respectively.

OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS - The funds declare dividends from their net investment income daily
and distributes the accrued dividends to shareholders each month. The
percentage of the distribution that is

National Tax-Exempt Income Funds - Page 24

<PAGE>

tax-exempt may vary from distribution to distribution. For the purpose of
calculating dividends, daily net investment income of the funds consists of: (a)
all interest income accrued on the funds' investments including any original
issue discount or market premium ratably amortized to the date of maturity or
determined in such other manner as may be deemed appropriate; minus (b) all
liabilities accrued, including interest, taxes and other expense items, amounts
determined and declared as dividends or distributions and reserves for
contingent or undetermined liabilities, all determined in accordance with
generally accepted accounting principles.

Dividends on Class A and Class B shares will be reinvested in shares of each
fund of the same class unless shareholders indicate in writing that they wish to
receive them in cash or in shares of the same class of other American Funds, as
provided in the prospectus.

The following is only a summary of certain additional federal, state and local
tax considerations generally affecting the funds and their shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
funds or their shareholders, and the discussion here and in the funds'
Prospectus is not intended as a substitute for careful tax planning. Investors
are urged to consult their tax advisers with specific reference to their own tax
situations.

TAXES - Each fund is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income without fluctuation of principal. Shares of each fund
generally would not be suitable for tax-exempt institutions or tax-deferred
retirement plans (e.g., plans qualified under Section 401 of the Internal
Revenue Code, and individual retirement accounts). Such retirement plans would
not gain any benefit from the tax-exempt nature of the fund's dividends because
such dividends would be ultimately taxable to beneficiaries when distributed to
them. In addition, each fund may not be an appropriate investment for entities
which are "substantial users" of facilities financed by private activity bonds
or "related persons" thereof. "Substantial user" is defined under U.S. Treasury
Regulations to include a non-exempt person who regularly uses a part of such
facilities in his trade or business and whose gross revenues derived with
respect to the facilities financed by the issuance of bonds are more than 5% of
the total revenues derived by all users of such facilities, or who occupies more
than 5% of the usable area of such facilities or for whom such facilities or a
part thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations, a
partnership and its partners and an S Corporation and its shareholders.

The Internal Revenue Code of 1986 (the "Code") imposes limitations on the use
and investment of the proceeds of state and local governmental bonds and of
other funds of the issuers of such bonds. These limitations must be satisfied
on a continuing basis to maintain the exclusion from gross income of interest on
such bonds. Bond counsel qualify their opinions as to the federal tax status of
new issues of bonds by making such opinions contingent on the issuer's future
compliance with these limitations. Any failure on the part of an issuer to
comply could cause the interest on its bonds to become taxable to investors
retroactive to the date the bonds were issued.

Each fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Code. Under Subchapter M, if each fund distributes within specified times at
least 90% of the sum of its taxable and tax-exempt net investment income, it
will be taxed only on that portion of its investment company taxable income, if
any, which it retains.

National Tax-Exempt Income Funds - Page 25

<PAGE>

To qualify, each fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of each fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies, and other securities which must be limited, in
respect of any one issuer to an amount not greater than 5% of the fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies) or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.

The percentage of total dividends paid by each fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest dividends")
will be the same for all shareholders receiving dividends during such year. In
order for each fund to pay exempt-interest dividends during any taxable year, at
the close of each fiscal quarter at least 50% of the aggregate value of each
fund's assets must consist of certain tax-exempt obligations. Not later than 60
days after the close of its taxable year, each fund will notify each shareholder
in writing of the portion of the dividends paid by each fund to the shareholder
with respect to such taxable year which constitutes exempt-interest dividends.
The aggregate amount of dividends so designated cannot, however, exceed the
excess of the amount of interest excludable from gross income from tax under
Section 103 of the Code received by each fund during the taxable year over any
amounts disallowed as deductions under Sections 265 and 171(a)(2) of the Code.

Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if each fund
distributes exempt-interest dividends during the shareholder's taxable year. If
a shareholder receives an exempt-interest dividend with respect to any share and
such share is held for six months or less, any loss on the sale or exchange of
such share will be disallowed to the extent of the amount of such
exempt-interest dividend.

While the funds do not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually except as
indicated above. The funds will have no tax liability with respect to such
distributed gains, and the distributions will be taxable to shareholders as
long-term capital gains, regardless of how long a shareholder has held fund
shares. Such distributions will be designated as a capital gains dividend in a
written notice mailed by each fund to shareholders not later than 60 days after
the close of each fund's taxable year. If a shareholder receives a designated
capital gain distribution (treated by the shareholder as a long-term capital
gain) with respect to any fund share and such fund share is held for six months
or less, then (unless otherwise disallowed) any loss on the sale or exchange of
that fund share will be treated as long-term capital loss to the extent of the
designated capital gain distribution. Gain recognized on the disposition of a
debt obligation (including tax-exempt obligations purchased after April 30,
1993) purchased by each fund at a market discount (generally, at a price less
than its principal amount) will be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time each
fund held the debt obligation.

In addition, while the funds do not expect to earn any significant investment
company taxable income, in the event that any taxable income is earned by the
funds they will be distributed

National Tax-Exempt Income Funds - Page 26

<PAGE>

except as indicated above. In general, each fund's investment company taxable
income will be its taxable income (for example, its short-term capital gains)
subject to certain adjustments and excluding the excess of any net long-term
capital gain for the taxable year over the net short-term capital loss, if any,
for such year. Each fund would be taxed on any undistributed investment company
taxable income. Any such income distributed will be taxable to shareholders as
ordinary income (whether distributed in cash or additional shares).

Distributions by each fund result in a reduction in the net asset value of the
fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of investment
capital. For this reason, investors should consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of investment
capital upon the distribution, which will nevertheless be taxable to them.

If any net long-term capital gains in excess of net short-term capital losses
are retained by each fund for reinvestment, requiring federal income taxes to be
paid thereon by each fund, each fund intends to elect to treat such capital
gains as having been distributed to shareholders. As a result, each shareholder
will report such capital gains as long-term gains taxable to individual
shareholders at a maximum 20% capital gains rate, will be able to claim a pro
rata share of federal income taxes paid by each fund on such gains as a credit
against personal federal income tax liability, and will be entitled to increase
the adjusted tax basis on fund shares by the difference between a pro rata share
of the retained gains and their related tax credit.

Redemptions of shares, including exchanges for shares of another American Fund,
may result in tax consequences (gain or loss) to the shareholder.

If a shareholder exchanges or otherwise disposes of shares of a fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other funds.
Also, any loss realized on a redemption or exchange of shares of the fund will
be disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain (both long-term and short-term)
for the one-year period ending on October 31 (as though the one-year period
ending on October 31 were the regulated investment company's taxable year), and
(iii) the sum of any untaxed, undistributed net investment income and net
capital gains of the regulated investment company for prior periods. The term
"distributed amount" generally means the sum of (i) amounts actually distributed
by each fund from its current year's ordinary income and capital gain net income
and<

National Tax-Exempt Income Funds - Page 27

<PAGE>

(ii) any amount on which each fund pays income tax during the periods described
above. Except as indicated above, each fund intends to meet these distribution
requirements to avoid the excise tax liability.

If for any taxable year each fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income would be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits, and might be
eligible for the dividends-received deduction for corporations. Under normal
circumstances, no part of the distributions to shareholders by each fund is
expected to qualify for the dividends-received deduction allowed to corporate
shareholders.

As of the date of this statement of additional information, the maximum
individual tax rate applicable to ordinary income is 39.6% (effective tax rates
may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than one year is 20% and the maximum corporate
tax applicable to ordinary income and net capital gains is 35%. However, to
eliminate the benefit of lower marginal corporate income tax rates, corporations
which have taxable income in excess of $100,000 for a taxable year will be
required to pay an additional amount of tax of up to $11,750 and corporations
which have taxable income in excess of $15,000,000 for a taxable year will be
required to pay an additional amount of tax of up to $100,000. Naturally, the
amount of tax payable by a taxpayer will be affected by a combination of tax law
rules covering, e.g., deductions, credits, deferrals, exemptions, sources of
income and other matters.

In most cases, the interest on "private activity" bonds as defined under the
Code is an item of tax preference subject to the alternative minimum tax ("AMT")
on corporations and individuals. AHIM and LTEX may invest in "private activity"
bonds. As of the date of this statement of additional information, individuals
are subject to an AMT at a maximum marginal rate of 28% (20% on capital gains
with respect to assets held more than 12 months) and corporations at a rate of
20%. Shareholders will not be permitted to deduct any of their share of fund
expenses in computing alternative minimum taxable income. With respect to
corporate shareholders, all interest on municipal bonds and other tax-exempt
obligations, including exempt-interest dividends paid by the fund, is included
in adjusted book income and adjusted current earnings in calculating federal
alternative minimum taxable income, and may also affect corporate federal
"environmental tax" liability.

Fund shareholders are required by the Code to report to the federal government
all exempt-interest dividends and all other tax-exempt interest received.

Each fund will be required to report to the IRS all distributions of investment
company taxable income and capital gains as well as gross proceeds from the
redemption or exchange of fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of investment company taxable income and capital gains and
proceeds from the redemption or exchange of the shares of a regulated investment
company may be subject to withholding of federal income tax at the rate of 31%
in the case of non-exempt U.S. shareholders who fail to furnish the investment
company with their taxpayer identification numbers and with required
certifications regarding their status under the federal income tax law.
Withholding may also be required if the funds are notified by the IRS or a
broker that the taxpayer identification number furnished by the shareholder is
incorrect or that the shareholder has previously failed to report interest or
dividend income. If the withholding

National Tax-Exempt Income Funds - Page 28

<PAGE>

provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld.

Under the Code, distributions of taxable income (other than capital gain
distributions) by the funds to a nonresident alien individual, nonresident alien
fiduciary of a trust or estate, foreign corporation, or foreign partnership (a
"foreign shareholder") will be subject to U.S. withholding tax (at a rate of 30%
or a lower treaty rate, if applicable). Withholding will not apply if a
dividend paid by the fund is "effectively connected" with a U.S. trade or
business, in which case the reporting and withholding requirements applicable to
U.S. citizens, U.S. residents, or domestic corporations will apply.

National Tax-Exempt Income Funds - Page 29

<PAGE>

PURCHASE OF SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
-------------------------------------------------------------------------------
<S> <C> <C>
See "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase Minimums").
-------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
-------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
-------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:

Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)

For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
-------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
-------------------------------------------------------------------------------
</TABLE>

PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--

National Tax-Exempt Income Funds - Page 30

<PAGE>

Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase
minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived for shareholders of
other funds in The American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for additional investments
(except as noted above).

PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.

FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):

<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . . . . . 40 240
American High-Income Trust/SM/ . . . . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ . . . 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . . . . . 22 222

MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . . . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . . . . . 49 N/A
___________
*Available only in certain states.
</TABLE>

National Tax-Exempt Income Funds - Page 31

<PAGE>

SALES CHARGES

CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of stock, stock/bond, and bond funds of The American Funds Group are set forth
below. The money market funds of The American Funds Group are offered at net
asset value. (See "Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
------------------------------------------ -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000 . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 . 3.63 3.50 2.75
$250,000 but less than $500,000 . 2.56 2.50 2.00
$500,000 but less than $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
-----------------------------------------------------------------------------
</TABLE>

CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF
PURCHASE. Employer-sponsored defined contribution-type plans investing $1
million or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from retirement plan assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by

National Tax-Exempt Income Funds - Page 32

<PAGE>

investors in certain qualified fee-based programs, and retirement plans,
endowments or foundations with $50 million or more in assets may also be made
with no sales charge and are not subject to a CDSC. A dealer concession of up
to 1% may be paid by the fund under its Plan of Distribution on investments made
with no initial sales charge.

In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:

(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees of the above persons, and trusts or plans primarily for such persons;

(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;

(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;

(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and

(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation.

Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense.

CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. The charge is 1% of the lesser of
the value of the shares redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares. Shares held the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.

DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (up to 1%) will
be paid to dealers who initiate and are responsible for purchases of $1 million
or more, for purchases by any employer-sponsored defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective assets of $50
million or more: 1.00% on amounts of

National Tax-Exempt Income Funds - Page 33

<PAGE>

$1 million to $4 million, 0.50% on amounts over $4 million to $10 million, and
0.25% on amounts over $10 million.

CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>

There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.

Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.

CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the event
the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; HOWEVER, SUCH AN EXCHANGE COULD CONSTITUTE A TAXABLE EVENT FOR
YOU AND, ABSENT SUCH AN EXCHANGE, CLASS B SHARES WOULD CONTINUE TO BE SUBJECT TO
HIGHER EXPENSES FOR LONGER THAN EIGHT YEARS.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you

National Tax-Exempt Income Funds - Page 34

<PAGE>

qualify for a reduction in your sales charge using one or any combination of the
methods described below.

STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to use a Statement in order to qualify for a reduced sales charge,
shares equal to 5% of the dollar amount specified in the Statement will be
held in escrow in the shareholder's account out of the initial purchase (or
subsequent purchases, if necessary) by the Transfer Agent. All dividends
and any capital gain distributions on shares held in escrow will be
credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see below), including Class A shares held in a fee-based
arrangement as well as purchases of Class B shares, and any individual
investments in American Legacy variable annuities and variable life
insurance policies (American Legacy, American Legacy II and American Legacy
III variable annuities, American Legacy Life, American Legacy Variable
Life, and American Legacy Estate Builder) may be credited toward satisfying
the Statement. During the Statement period reinvested dividends and capital
gain distributions, investments in money market funds, and investments made
under a right of reinstatement will not be credited toward satisfying the
Statement. The Statement will be considered completed if the shareholder
dies within the 13-month Statement period. Commissions will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy variable annuities and
variable life insurance policies are added to the figure determined above.
The sum is the Statement amount and applicable breakpoint level. On the
first investment and all other investments made pursuant to the Statement,
a sales charge will be assessed according to the sales charge breakpoint
thus determined. There will be no retroactive adjustments in sales charges
on investments made during the 13-month period.

National Tax-Exempt Income Funds - Page 35

<PAGE>

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.

AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:

. employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;

. business accounts solely controlled by these individuals (for example,
the individuals own the entire business);

. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares.

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES - You may combine purchases of Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
policies. Direct purchases of the money market funds are excluded. Shares
of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.

RIGHTS OF ACCUMULATION - You may take into account the current value (or if
greater, the amount you invested less any withdrawals) of your existing
Class A and B holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or
charity. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy variable annuities and variable
life insurance policies. Direct purchases of the money market funds are
excluded.

National Tax-Exempt Income Funds - Page 36

<PAGE>

CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:

(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).

(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.

(3) Tax-free returns of excess contributions to IRAs.

(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.

CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:

(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic Withdrawals" below) may withdraw up to 12% of the net asset value of
their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.

The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. This privilege may be revised
or terminated at any time.

(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.

(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS

Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets from a plan that offered the American Funds, the
assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule

National Tax-Exempt Income Funds - Page 37

<PAGE>

applicable to investments of $1 million or more (see "Dealer Commissions on
Class A Shares" above).

PRICE OF SHARES

Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the funds or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter prior to its close of business. In the case of orders sent
directly to the fund or the Transfer Agent, an investment dealer MUST be
indicated. The dealer is responsible for promptly transmitting purchase orders
to the Principal Underwriter.

Orders received by the investment dealer, the Transfer Agent, or the funds after
the time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper do not always
indicate prices at which you will be purchasing and redeeming shares of each
fund, since such prices generally reflect the previous day's closing price
whereas purchases and redemptions are made at the next calculated price. The
price you pay for shares, the offering price, is based on the net asset value
per share which is calculated once daily as of approximately 4:00 p.m. New York
time, which is the normal close of trading on the New York Stock Exchange each
day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m.,
each fund's share price would still be determined as of 4:00 p.m. New York time.
The New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.

All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:

1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. Fixed-income 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.

Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

National Tax-Exempt Income Funds - Page 38

<PAGE>

Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by each fund's Board. The fair value of all other assets is added to
the value of securities to arrive at the total assets;

2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and

3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.

Any purchase order may be rejected by the Principal Underwriter or by each fund.
The Principal Underwriter will not knowingly sell shares of each fund directly
or indirectly to any person or entity, where, after the sale, such person or
entity would own beneficially directly or indirectly more than 4.5% of the
outstanding shares of each fund without the consent of a majority of each fund's
Board of Directors/Trustees.

SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:

THROUGH YOUR DEALER (certain charges may apply)

-
Shares held for you in your dealer's street name must be sold through the
dealer.

WRITING TO AMERICAN FUNDS SERVICE COMPANY

- Requests must be signed by the registered shareholder(s).

- A signature guarantee is required if the redemption is:

- Over $50,000;

- Made payable to someone other than the registered
shareholder(s); or

- Sent to an address other than the address of record,
or an address of record which has been changed within
the last 10 days.

Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on all redemptions.

- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

- You must include any shares you wish to sell that are in
certificate form.

National Tax-Exempt Income Funds - Page 39

<PAGE>

TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/

- Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.

- Checks must be made payable to the registered shareholder(s).

- Checks must be mailed to an address of record that has been
used with the account for at least 10 days.

MONEY MARKET FUNDS

- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.

- You may establish check writing privileges (use the money market funds
application).

- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.

- Check writing is not available for Class B shares of The Cash
Management Trust.

If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by the Transfer Agent.

National Tax-Exempt Income Funds - Page 40

<PAGE>

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments in The American Funds through automatic debits
from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's capabilities. The Transfer Agent will then invest your
money into the fund you specified on or around the date you specified. For
example, if the date you specified falls on a weekend or holiday, your money
will be invested on the next business day. If your bank account cannot be
debited due to insufficient funds, a stop-payment or the closing of the account,
the plan may be terminated and the related investment reversed. You may change
the amount of the investment or discontinue the plan at any time by writing to
the Transfer Agent.

AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares of the same class at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:

(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),

(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,

(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. Exchange purchases
are subject to the minimum investment requirements of the fund purchased and no
sales charge generally applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on the fund being
purchased, unless the money market fund shares were acquired by an exchange from
a fund

National Tax-Exempt Income Funds - Page 41

<PAGE>

having a sales charge, or by reinvestment or cross-reinvestment of dividends or
capital gain distributions.

You may exchange shares by writing to the Transfer Agent (see "Selling Shares"),
by contacting your investment dealer, by using American FundsLine and American
FundsLine OnLine (see "American FundsLine and American FundsLine OnLine" below),
or by telephoning 800/421-0180 toll-free, faxing (see "American Funds Service
Company Service Areas" -- "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing the Transfer Agent.
(See "Telephone and Computer Purchases, Redemptions and Exchanges" below.)
Shares held in corporate-type retirement plans for which Capital Bank and Trust
Company serves as trustee may not be exchanged by telephone, computer, fax or
telegraph. Exchange redemptions and purchases are processed simultaneously at
the share prices next determined after the exchange order is received. (See
"Purchase of Shares"--"Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in
amounts of $50 or more among any of the funds in The American Funds Group on any
day (or preceding business day if the day falls on a non-business day) of each
month you designate.

AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.

ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.

AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Telephone and Computer Purchases,
Redemptions and Exchanges" below. You will need your fund number (see the list
of funds in The American Funds Group under "Purchase of Shares - Purchase
Minimums" and "Purchase of Shares - Fund Numbers"), personal identification
number (generally the last four digits of your Social Security number or other
tax identification number associated with your account) and account number.

TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, and each of their

National Tax-Exempt Income Funds - Page 42

<PAGE>

respective directors, trustees, officers, employees and agents harmless from any
losses, expenses, costs or liability (including attorney fees) which may be
incurred in connection with the exercise of these privileges. Generally, all
shareholders are automatically eligible to use these options. However, you may
elect to opt out of these options by writing the Transfer Agent (you may also
reinstate them at any time by writing the Transfer Agent). If the Transfer Agent
does not employ reasonable procedures to confirm that the instructions received
from any person with appropriate account information are genuine, it and/or the
fund may be liable for losses due to unauthorized or fraudulent instructions. In
the event that shareholders are unable to reach the fund by telephone because of
technical difficulties, market conditions, or a natural disaster, redemption and
exchange requests may be made in writing only.

REDEMPTION OF SHARES - The funds' Articles of Incorporation or Declaration of
Trust permits the funds to direct the Transfer Agent to redeem the shares of any
shareholder for their then current net asset value per share if at such time the
shareholder owns of record shares having an aggregate net asset value of less
than the minimum initial investment amount required of new shareholders as set
forth in the fund's current registration statement under the 1940 Act, and
subject to such further terms and conditions as the Board of Directors/Trustees
of the fund may from time to time adopt.

EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the funds' portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
funds do not consider that they have an obligation to obtain the lowest
available commission rate to the exclusion of price, service and qualitative
considerations.

There are occasions on which portfolio transactions for the funds may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either advantageous
or disadvantageous to the funds, they are effected only when the Investment
Adviser believes that to do so is in the interest of the funds. When such
concurrent authorizations occur, the objective is to allocate the executions in
an equitable manner. The funds will not pay a mark-up for research in principal
transactions.

Dealer concessions paid on underwriting transactions for the 2000, 1999 and 1998
fiscal years for TEBF, amounted to $1,036,000, $1,261,000 and $1,673,,000,
respectively, respectively.

Dealer concessions paid on underwriting transactions for the 2000, 1999 and 1998
fiscal years for AHIM, amounted to $602,000, $690,000 and $642,000,
respectively.

Dealer concessions paid on underwriting transactions for the 2000, 1999 and 1998
fiscal years for LTEX, amounted to $147,000, $221,000 and $262,000,
respectively.

National Tax-Exempt Income Funds - Page 43

<PAGE>

GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the funds, including proceeds
from the sale of shares of the funds and of securities in each fund's portfolio,
are held by The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY
10081, as Custodian. If the fund holds non-U.S. securities, the Custodian may
hold these securities pursuant to sub-custodial arrangements in non-U.S. banks
or non-U.S. branches of U.S. banks.

TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases and redemptions of the funds' shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee of
$530,000, $190,000, and $117,000, by TEBF, AHIM and LTEX, respectively, for
Class A shares and $227, $144 and $38 for Class B shares, for the 2000 fiscal
year.

INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 350 South Grand Street,
Los Angeles, CA 90071, serves as each fund's independent accountants providing
audit services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The financial statements
included in this Statement of Additional Information from the Annual Report have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. The selection of the funds' independent accountants is
reviewed and determined annually by the Board of Directors/Trustees.

PROSPECTUSES AND REPORTS TO SHAREHOLDERS - TEBF'S fiscal year ends on August 31.
AHIM's and LTEX's fiscal year ends on July 31. Shareholders are provided
updated prospectuses annually. In addition, shareholders are provided at least
semiannually with reports showing the investment portfolio, financial statements
and other information. The funds' annual financial statements are audited by the
funds' independent accountants, PricewaterhouseCoopers LLP. In an effort to
reduce the volume of mail shareholders receive from the fund when a household
owns more than one account, the Transfer Agent has taken steps to eliminate
duplicate mailings of prospectuses and shareholder reports. To receive
additional copies of a prospectus or report, shareholders should contact the
Transfer Agent.

PERSONAL INVESTING POLICY - The funds, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments. This policy
includes: a ban on acquisitions of securities pursuant to an initial public
offering; restrictions on acquisitions of private placement securities;
pre-clearance and reporting requirements; review of duplicate confirmation
statements; annual recertification of compliance with codes of ethics; blackout
periods on personal investing for certain investment personnel; ban on
short-term trading profits for investment personnel; limitations on service as a
director of publicly traded companies; and disclosure of personal securities
transactions.

OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:

National Tax-Exempt Income Funds - Page 44

<PAGE>

DETERMINATION OF TEBF'S NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- AUGUST 31, 2000

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $11.81
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $12.27
</TABLE>

DETERMINATION OF AHIM'S NET ASSET VALUE, REDEMPTION PRICE AND

MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- JULY 31, 2000

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $14.86
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $15.44
</TABLE>

DETERMINATION OF LTEX'S NET ASSET VALUE, REDEMPTION PRICE AND

MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- JULY 31, 2000

<TABLE>
<CAPTION>
<S> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . $14.43
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . $14.99
</TABLE>

CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS

TEBF's yield was 4.62% based on a 30-day (or one month) period ended August 31,
2000. AHIM's and LTEX's yield was 5.50% and 4.36%, respectively, based on a
30-day (or one month) period ended July 31, 2000. The yield was computed by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[( a-b/cd + 1)/6/ -1]

Where: a = dividends and interest earned during the period.

b =
expenses accrued for the period (net of reimbursements).

c =
the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d =
the maximum offering price per share on the last day of the
period.

National Tax-Exempt Income Funds - Page 45

<PAGE>

The funds may also calculate a tax equivalent yield based on a 30-day (or one
month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of the
yield (as computed by the formula stated above) which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any, of the
yield that is not tax-exempt. TEBF'S tax-equivalent yield based on the maximum
federal tax rate of 39.6% for the 30-day (or one month) period ended August 31,
2000 was 7.65%. AHIM's and LTEX's tax-equivalent yield based on the maximum
federal tax rate of 39.6% for the 30-day (or one month) period ended July 31,
2000 was 9.11 and 7.22%, respectively.

As of August 31, 2000, TEBF's total return over the past 12 months and average
annual total return for the five- and ten-year periods were 1.34%, 4.87% and
6.72%, respectively. The fund's one year total return and average annual total
return at net asset value for the five- and ten-year periods ended on August 31,
2000 were 5.27%, 5.68% and 7.13%, respectively.

As of July 31, 2000, AHIM's total return over the past 12 months and average
annual total return for five years and its lifetime were -2.18%, 5.15% and
6.36%, respectively. Over the fund's lifetime (September 26, 1994 to July 31,
2000), the Lehman Brothers Municipal Bond Index<F1> and the Lipper High Yield
Municipal Debt Funds Average<F2> had average annual total returns of 6.67% and
5.28%, respectively. The fund's total return at net asset value over the past 12
months and average annual total return over its lifetime at July 31, 2000 were
1.61%, 5.95% and 7.06%, respectively.

As of July 31, 2000, LTEX's total return over the past twelve months and average
annual total return over five years and its lifetime were -0.78%, 3.97% and
4.17%, respectively. Over the fund's lifetime (October 6, 1993 to July 31,
2000), the Lehman Brothers 7-Year Municipal Bond Index<F3> and the Lipper
Intermediate Municipal Debt Funds Average<F4> had average annual total returns
of 5.05% and 4.43%, respectively. The fund's one year total return and average
annual total return at net asset value over the past five years and its lifetime
at July 31, 2000 were 3.09%, 4.78% and 4.75%, respectively.

The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.

In calculating average annual total return at the maximum offering price, the
funds assume: (1) deduction of the maximum sales load of 3.75% from the $1,000
initial investment; (2) reinvestment of dividends and distributions at net asset
value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated. In addition, the funds will
provide lifetime average total return figures. From time to time, the funds may
calculate investment results for Class B shares.
[FN]
<F1> The Lehman Brothers Municipal Bond Index represents the long-term
investment grade municipal bond market. This index is unmanaged and does not
reflect sales charges, commissions or expenses.
<F2> The Lipper High Yield Municipal Debt Funds Average represents an average
of funds in the objective that invest at least 50% of their assets in lower
rated municipal debt issues. The results of the underlying funds in the average
include the reinvestment of dividend and capital gain distributions, but do not
reflect sales charges and commissions.
<F3> The Lehman Brothers 7-Year Municipal Bond Index is unmanaged, reflects no
expenses or management fees and consists of a large universe of municipal bonds
issued as state general obligations or revenue bonds with a minimum rating of
BBB by Standard & Poor's Corporation.
<F4> The Lipper Intermediate Municipal Debt Funds Average is comprised of funds
that invest in municipal debt issues with dollar-weighted average maturities of
five to ten years.

National Tax-Exempt Income Funds - Page 46

<PAGE>

The funds may also, at times, calculate total return based on net asset value
per share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the unmanaged indices will be calculated assuming reinvestment of dividends
and interest, but will not reflect any deductions for advisory fees, brokerage
costs or administrative expenses.

The funds may include information on their investment results and/or comparisons
of their investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The funds may also, from time to time, combine their results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.

The funds may refer to results and surveys compiled by organizations such as
CDA/ Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the funds may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.

The funds may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.

The funds may compare their investment results with the Consumer Price Index,
which is a measure of the average change in prices over time in a fixed market
basket of goods and services (e.g. food, clothing, and fuels, transportation,
and other goods and services that people buy for day-to-day living).

National Tax-Exempt Income Funds - Page 47

<PAGE>

APPENDIX
Description of Bond Ratings

BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.

Moody's rates the long-term debt securities issued by various entities from
-------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:

"Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt edge.'
Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues."

"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."

"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."

"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."

"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class."

"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."

National Tax-Exempt Income Funds - Page 48

<PAGE>

"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."

"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."

"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."

S & P rates the long-term securities debt of various entities in categories
-----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:

"Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong."

"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."

"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."

"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."

"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.

"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."

"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."

"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."

"The rating 'C1' is reserved for income bonds on which no interest is being
paid."

National Tax-Exempt Income Funds - Page 49

<PAGE>

"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."

Note Ratings

STANDARD & POOR'S CORPORATION: "SP-1" and "SP-2" are the two highest note rating
categories, and are described as follows:

"SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation."

"SP-2 Satisfactory capacity to pay principal and interest."

MOODY'S INVESTORS SERVICE, INC.: "MIG-1" and "MIG-2" are the two highest note
rating categories, and are described as follows:

"MIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing."

"MIG 2: This designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
Description of Commercial Paper Ratings

MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate
-------
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P ratings of commercial paper are graded into four categories ranging from "A"
---
for the highest quality obligations to "D" for the lowest.

A - Issues assigned its highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.

National Tax-Exempt Income Funds - Page 50

<PAGE>

A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 - Capacity for timely payments on issues with this designation is strong;
however, the relative degree of safety is not as high as for issues designated
"A-1."

National Tax-Exempt Income Funds - Page 51

The Tax-Exempt Bond Fund of America, Inc.
Investment Portfolio, August 31, 2000

<TABLE>
<S> <C> <C>
Shares/Principal Market
Amount Value
Fixed Income Securities (000) (000)
-------------------------------------------- ------------ -----------

Tax-Exempt Securities Maturing in More Than One
Year - 93.09%
Alabama - 0.25%
Jefferson County, Sewer Rev. Capital Improvement $4,865 $4,496
Warrants, Series 1999A, FGIC Insured, 5.125% 2029

Alaska - 0.61%
Housing Fin. Corp., Collateralized Bonds (Veterans 2,285 2,361
Mortgage Program), Series1992A-1, 6.75% 2032
Municipality of Anchorage:
1995 G.O. Ref. General Purpose Bonds, Series B, 2,895 3,176
FGIC Insured, 6.00% 2012
Municipal Light & Power, Senior Lien Ref. Electric 5,000 5,694
Rev. Bonds, Series 1996, MBIA Insured, 6.50% 2014

Arizona - 0.48%
State Transportation Board, Subordinated Highway 1,850 1,947
Rev. Bonds, Series 1992B, 6.50% 2008 (Preref. 2002)
Health Facs. Auth., Rev. Bonds (Catholic Healthcare 4,000 4,064
West), Series 1999A, 6.125% 2009
Industrial Dev. Auth. of the County of Maricopa, 2,850 2,720
Health Fac. Rev. Bonds (Catholic Healthcare West
Project), 1998 Series A, 5.25% 2006

California - 7.02%
G.O. Bonds, 5.25% 2016 5,320 5,403
Educational Facs. Auth., Rev. Bonds, Stanford 3,000 2,988
University, Series N, 5.35% 2027
Health Facs. Fncg. Auth., Hospital Rev. Bonds (Downey 1,500 1,442
Community Hospital), Series 1993, 5.75% 2015
Housing Fin. Agcy., Single Family Mortgage Rev.
Bonds, 1998 Series C-4, Class I:
5.10% 2007 1,680 1,740
5.20% 2009 1,235 1,286
Public Works Board, Lease Rev. Bonds, California 1,315 1,461
Community Colleges, 1994 Series B (Various Community
College Projects), 7.00% 2007 (Preref. 2004)
Statewide Communities Dev. Auth., (Apartment Dev. 4,000 3,957
Rev. Ref. Bonds Irvine Apartment
Communities, LP), Series 1998A-3, 5.10% 2025
(Put 2010)
City of Antioch, Public Fncg. Auth., 1 1,485 1,504
998 Reassessment
Rev. Bonds, Subordinated Series B, 5.85% 2015
Association of Bay Area Governments, Fin. Auth. for
Nonprofit Corps., Ref. Rev. Cert. of Part.:
(American Baptist Homes Foundation), Series 4,400 3,992
1998A, 6.10% 2017
(American Baptist Homes of the West Facs. 1,335 1,283
Project), 5.50% 2007
(Episcopal Homes Foundation), Series 1998:
5.00% 2008 1,350 1,346
5.125% 2013 2,000 1,906
Bonita Canyon Public Facs. Fncg. Auth., Community 3,500 3,177
Facs. Dist. No. 98-1, Special Tax Bonds, Series
1998, 5.375% 2028
Central Valley Fncg. Auth., Cogeneration Project 1,000 1,072
Rev. Bonds (Carson Ice-Gen Project), Series 1993,
6.10% 2013 (Preref. 2003)
County of El Dorado, Community Facs. Dist. No. 1992-1 995 998
(El Dorado Hills Dev.), Series 1999 Special Tax
Bonds, 6.125% 2016
City of Folsom, Community Facs. Dist. No. 10, Special 2,000 2,124
Tax Bonds, Series 1999, 7.00% 2024
City of Fontana, Community Facs. Dist. No. 12 (Sierra 1,000 1,041
Lakes), Special Tax Bonds, Series 1999, 6.50% 2015
City of Irvine, Limited Obligation Improvement Bonds:
Group One:
Assessment Dist. No. 94-13 (Oak Creek), 5.50% 2022 2,000 1,855
Assessment Dist. No. 97-17 (Northwood), 6.00% 2023 1,500 1,502
Group Two, Assessment Dist. No. 94-13 (Oak 1,250 1,252
Creek), 6.00% 2022
Group Three, Assessment Dist. No. 95-12, Fixed 2,750 2,564
Rate Bonds, 5.50% 2021
Long Beach Aquarium of the Pacific, Rev. Bonds
(Aquarium of the Pacific Project), 1995 Series A:
6.10% 2010 4,000 4,123
6.125% 2015 5,000 5,063
6.125% 2023 14,500 13,806
City of Los Angeles:
Community Redev. Agcy., Central Business Dist. Redev. 2,000 2,012
Project, Tax Allocation Ref. Bonds, Series I,
5.00% 2001
Regional Airports Improvement Corp., Facs. Lease 2,000 2,045
Ref. Rev. Bonds, Issue of 1992, United Air Lines,
Inc. (L.A. Intl. Airport), 6.875% 2012
County of Los Angeles,
Capital Asset Leasing Corp., Cert. of Part. (Marina
del Rey), 1993 Series A:
6.25% 2003 3,500 3,597
6.50% 2008 4,750 5,040
County of Orange:
Aliso Viejo Special Tax Bonds of Community Facs.
Dist. No. 88-1, Series A of 1992:
7.15% 2006 (Preref. 2002) 2,000 2,155
7.35% 2018 (Preref. 2002) 4,000 4,326
Limited Obligation Improvement Bonds, Irvine Coast 900 898
Assessment Dist. No. 88-1, 1998 Series A, 5.30% 2010
Pleasanton Joint Powers Fncg. Auth., Reassessment 465 471
Rev. Bonds, 1993 Series A, 5.70% 2001
City of Roseville:
Highland Reserve North Community Facs. Dist. No. 1, 3,085 3,223
Special Tax Bonds, Series 1999, 6.00% 2011
North Central Roseville Community Facs. Dist. No. 1,
Special Tax Ref. Bonds, Series 1999:
5.30% 2007 2,865 2,912
5.80% 2017 3,000 2,957
North Roseville Community Facs. Dist. No. 1, Special 1,115 1,095
Tax Bonds, Series 1998, 5.20% 2007
Woodcreek West Community Facs. Dist. No. 1, Special 1,465 1,537
Tax Bonds, Series 1999, 6.50% 2015
Tax Bonds, Series 1999, 6.50% 2015
Sacramento Cogeneration Auth., Cogeneration Project
Rev. Bonds (Procter & Gamble Project), 1995 Series:
6.00% 2003 2,200 2,275
6.375% 2010 500 536
6.375% 2010 (Preref. 2005) 500 557
County of Sacramento, Laguna Creek Ranch/Elliott 500 512
Ranch Community Facs. Dist. No. 1, Improvement
Area No. 2 Special Tax Ref. Bonds (Elliott Ranch),
6.30% 2021
County of San Bernardino, Housing Auth., Multifamily 1,500 1,436
Housing Rev. Ref. Bonds (Equity Residential/Redlands
Lawn & Tennis Apartments), Issue 1999A,
5.20% 2029 (09
County of San Diego, Reassessment Dist. No. 97-1 1,000 1,033
(4-S Ranch), Limited Obligation Improvement Bonds,
6.25% 2012
San Diego Unified School Dist., 1999 G.O. Bonds 3,690 1,516
(Election of 1998, Series A), Capital Appreciation
Bonds, FGIC Insured, 0.00% 2017
San Marcos Public Facs. Auth., Ref. Rev. Bonds, 3,000 2,838
Series 1998, 5.80% 2027
San Marcos Unified School Dist., Community Facs. 3,150 2,915
Dist. No. 5 (Rancho Carrillo), Series 1999 Special
Tax Bonds, 5.60% 2029
Community Facs. Dist. No. 99-1 (Talega) of the Santa 1,195 1,221
Margarita Water Dist., Series 1999 Special Tax
Bonds, 6.10% 2014
South Tahoe Joint Powers Fncg. Auth.,
Subordinate Bond
Anticipation Notes (South Tahoe Redev. Project
Area No. 1):
Series 1999A, 7.30% 2007 7,000 7,050
Series 1999B, 7.30% 2007 1,905 1,918
The Regents of the University of California, Various 2,000 2,013
University of California Projects, 1993 Series A,
5.50% 2021
Inc. (L.A. Intl. Airport), 6.875% 2012 1,300 1,263
West Sacramento Fncg. Auth., Special Tax Rev. Bonds,
Series F:
5.75% 2011 1,540 1,515
6.10% 2029 1,000 951

Colorado - 4.17%
Housing and Fin. Auth.:
Multi-family Housing Insured Mortgage Rev. Bonds:
1982 Series A, 9.00% 2025 1,515 1,518
1997 Series C-3, 5.65% 2015 1,300 1,300
Single Family Housing Program Senior and Subordinate
Bonds:
1997 Series:
A-3, 7.00% 2016 1,495 1,628
B-3, 6.80% 2028 860 948
C-3, 6.75% 2017 1,000 1,059
1998 Series:
B-3, 6.55% 2025 5,160 5,545
D-3, 6.125% 2023 1,980 2,057
Arapahoe County, Capital Improvement Trust Fund
Highway Rev. Bonds (E-470 Project):
6.90% 2015 (Preref. 2005) 2,500 2,832
6.95% 2020 (Preref. 2005) 17,500 19,861
City and County of Denver, Airport System Rev.
Bonds, Series 1992A:
7.25% 2025 (Preref. 2002) 5,590 6,028
7.25% 2025 (Preref. 2002) 14,210 15,323
E-470 Public Highway Auth. Senior Rev. Bonds, Series 7,500 603
2000B (Capital Appreciation Bonds), 0.00% 2034
Eagle County, Bachelor Gulch Metropolitan Dist., 3,400 3,409
G.O. Bonds, Series 1999, 6.70% 2019
Eaglebend Affordable Dowd Housing Corp., Multi-family
Housing Project Rev. Ref. Bonds, Series 1997 A:
6.40% 2017 1,000 974
6.45% 2021 2,175 2,112
Eaglebend Dowd Affordable Housing Corp., Multi-family
Housing Project Rev. Bonds, Series 1998A:
6.35% 2014 1,065 1,035
6.63% 2039 2,000 1,914
Metropolitan Football Stadium Dist., Capital
Appreciation Sales Tax Rev. Bonds, MBIA Insured:
Series 1999A
0.00% 2008 2,675 1,876
0.00% 2012 3,200 1,786
Series 1999B 0.00% 2006 6,000 4,661

Connecticut - 0.89%
Dev. Auth., Pollution Control Rev. Ref. Bonds (The 5,025 4,786
Connecticut Light and Power Co. Project),
Series 1993A, 5.85% 2028
Health and Educational Fac. Auth., Rev. Bonds, 1,800 1,856
University of Hartford Issue, Series D, 6.75% 2012
Mashantucket (Western) Pequot Tribe, Special
Rev. Bonds, 1996 Series A: (1)
6.25% 2002 (Escrowed to Maturity) 1,000 1,037
6.375% 2004 (Escrowed to Maturity) 1,985 2,131
6.50% 2005 (Escrowed to Maturity) 1,490 1,629
6.40% 2011 2,025 2,143
6.40% 2011 (Preref. 2007) 2,470 2,766

Delaware - 0.05%
Econ. Dev. Auth., First Mortgage Rev. Bonds 1,000 987
(Peninsula United Methodist Homes, Inc. Issue),
Series 1997A, 6.00% 2009

District of Columbia - 0.87%
G.O. Bonds:
Series 1992 B, MBIA Insured, 6.30% 2010 (Preref. 2002) 2,900 3,046
Series 1993 A, AMBAC Insured:
5.875% 2005 1,525 1,604
5.875% 2005 (Escrowed to Maturity) 1,475 1,563
Series 1993 B-1, AMBAC Insured, 5.50% 2009 1,500 1,568
Convention Center Auth. (Washington, D.C.), Senior
Lien Dedicated Tax Rev. Bonds, Series 1998, AMBAC
Insured:
5.00% 2006 1,105 1,128
4.75% 2028 2,500 2,147
Hospital Rev. and Ref. Bonds:
Medlantic Healthcare Group, Inc. Issue, Series 1992 B, 2,000 2,073
6.50% 2002 (Escrowed to Maturity)
Washington Hospital Center Issue, Series 1992A, 1,595 1,673
7.00% 2005 (Preref. 2002)
Redev. Land Agcy., Sports Arena Special Tax Rev. Bonds, 1,225 1,235
Series 1996, 5.625% 2010

Florida - 4.33%
Arbor Greene Community Dev. Dist. (City of Tampa,
Hillsborough County), Special Assessment Rev. Bonds:
Series 1996, 7.60% 2018 950 1,003
Series 1998, 5.75% 2006 800 789
Series 2000, 6.50% 2007 1,000 1,006
Broward County, Resource Rev. Bonds, Series 1984:
North Project, 7.95% 2008 6,930 7,152
South Project, 7.95% 2008 9,415 9,717
Championsgate Community Dev. Dist., Capital 1,515 1,482
Improvement Rev. Bonds, Series 1998B, 5.70% 2005
The Crossings at Fleming Island Community Dev. Dist.
(Clay County), Special Assessment Bonds:
Series 1995, 8.25% 2016 1,045 1,213
Series 2000C, 7.1% 2030 7,000 7,143
Fleming Island Plantation Community Dev. Dist. (Clay 3,000 3,054
County), Series 2000B (Long Term), 7.375% 2031
Heritage Harbor Community Dev. Dist. Rev. Bonds, 1,810 1,806
Series B, 6.00% 2003
Heritage Palms Community Dev. Dist. (Fort Myers),
Capital Improvement Rev. Bonds:
Series 1998, 5.40% 2003 1,360 1,346
Series 1999, 6.25% 2004 2,500 2,503
Heritage Pines Community Dev. Dist. (Pasco County), 2,700 2,623
Capital Improvement Rev. Bonds, Series 1998B,
5.50% 2005
Heritage Springs Community Dev. Dist. (Pasco County), 2,345 2,340
Capital Improvement Rev. Bonds, Series 1999B,
6.25% 2005 Lee County Industrial Dev.
Auth., Healthcare Facs. Rev. Bonds:
Series 1997A (Cypress Cove at Healthpark Florida,
Inc. Project):
5.80% 2006 1,005 977
6.25% 2017 5,550 4,991
Series 1999A (Shell Point/Alliance Obligated Group,
Shell Point Village Project):
5.25% 2006 1,150 1,093
5.50% 2010 1,500 1,374
5.75% 2012 1,360 1,247
5.75% 2013 1,840 1,670
5.75% 2015 1,000 888
5.50% 2021 1,550 1,301
Marshall Creek Community Dev. Dist. (St. Johns
County), Special Assessment Bonds:
Series 2000A, 7.65% 2032 4,000 4,080
Series 2000B, 6.75% 2007 2,080 2,098
Meadow Pointe II, Community Dev. Dist. (Pasco
County), Capital Improvement Rev. Bonds:
Series 1998A, 5.25% 2003 655 652
Series 1998B, 5.50% 2005 1,670 1,635
Mid-Bay Bridge Auth., Rev. Ref. Bonds:
Series 1991B, 8.50% 2022 (Subject to Crossover 2,000 2,127
Refunding)
Series 1993D, 6.10% 2022 500 501
Northern Palm Beach County Improvement Dist.,
Water Control and Improvement Bonds:
Unit of Dev. No. 9A, Series 1996A:
6.80% 2006 910 963
7.30% 2027 1,500 1,597
Unit of Dev. No. 9B, Series 1999:
5.85% 2013 1,000 984
6.00% 2029 2,200 2,106
North Springs Improvement Dist. Special Assessment 525 524
Bonds, (Parkland Isles Project), Series 1997B,
6.25% 2005
City of Orlando, Special Assessment Rev. Bonds
(Conroy Road Interchange Project), Series 1998A:
5.50% 2010 1,000 946
5.80% 2026 2,000 1,775
River Ridge Community Dev. Dist. (Lee County), Capital 1,235 1,198
Improvement Rev. Bonds, Series 1998, 5.75% 2008
Sarasota County Public Hospital Board, Fixed Rate 1,500 1,463
Hospital Rev. Ref. Bonds, Series 1998B (Sarasota
Memorial Hospital Project), MBIA Insured, 5.25% 2024

Georgia - 1.96%
Municipal Electric Auth.:
General Power Rev. Bonds, Series X, 6.50% 2012 1,215 1,358
Project One Senior Bond, Fourth Crossover Series, 5,700 6,462
MBIA Insured, 6.50% 2012
City of Atlanta:
Airport Facs. Rev. Ref. Bonds, Series 1994A, AMBAC MBIA 1,000 1,122
MBIA Insured, 6.50% 2012
Water and Wastewater Rev. Bonds, Series 1999, FGIC 8,500 8,658
Insured, 5.50% 2022
Housing Auth. of the County of DeKalb, Multi-family
Housing Rev. Ref. Bonds (The Park at Briarcliff
Apartments Project):
Series 1998A, 4.55% 2028 (Put 2008) 8,000 7,696
Series 1998B, 4.70% 2028 (Put 2008) 1,960 1,905
Fulco Hospital Auth., Rev. Anticipation Certificates,
Georgia Baptist Health Care System Project:
Series 1992 A (Preref. 2002)
6.40% 2007 1,000 1,057
6.25% 2013 2,100 2,209
6.375% 2022 1,595 1,681
Series 1992 B, 6.375% 2022 610 643
Dev. Auth. of Fulton County, Special Facs. Rev. Bonds 3,115 3,203
(Delta Air Lines, Inc. Project), Series 1992,
6.95% 2012

Hawaii - 0.38%
G.O. Bonds of 1997, Series CN, FGIC Insured, 5.25% 5,000 5,046
2013 City and County of Honolulu, G.O. Bonds, Ref.
and Improvement Series, 1993B:
5.00% 2013 1,370 1,359
5.00% 2013 (Escrowed to Maturity) 630 631

Illinois - 10.75%
Build Illinois Bonds (Sales Tax Rev. Bonds), 1,000 1,026
Series O, 6.00% 2002
Civic Center Bonds (Special State Obligation Bonds), 6,500 7,062
Series 1991, AMBAC Insured, 6.25% 2020
Dev. Fin. Auth., Rev. Bonds, Series 1998A (Provena 5,000 5,219
Health), MBIA Insured, 5.50% 2010
Educational Facs. Auth., Rev. Bonds:
MJH Education Assistance Illinois III LLC, Series 1,500 1,502
1999D, AMBAC Insured, 5.45% 2014
Wesleyan University, Series 1993, 5.625% 2018 1,490 1,495
Health Facs. Auth.:
Rev. Bonds:
Advocate Health Care Network:
Series 1998A:
5.00% 2007 1,620 1,601
5.00% 2008 1,870 1,840
4.50% 2009 1,930 1,785
4.625% 2010 3,000 2,781
Series 1998B:
4.875% 2013 2,460 2,249
5.25% 2018 2,500 2,365
Alexian Brothers Health System, Series 1999,
FSA Insured:
5.00% 2008 1,230 1,244
5.25% 2012 6,960 7,023
5.00% 2025 2,000 1,796
5.125% 2028 2,000 1,825
Centegra Health System, Series 1998:
5.50% 2008 1,640 1,611
5.50% 2009 2,290 2,238
5.50% 2010 2,440 2,368
5.20% 2012 2,200 2,012
5.25% 2013 2,430 2,203
5.25% 2018 2,500 2,144
5.25% 2024 2,000 1,872
The Children's Memorial Hospital, Series 1999A,
AMBAC Insured:
5.75% 2010 1,835 1,953
5.75% 2011 1,690 1,791
Edward Hospital Association Project, Series 1992, 1,000 1,054
7.00% 2022 (Preref. 2002)
Northwestern Memorial Hospital, Series 1994A, 2,000 2,015
6.00% 2024
OSF Healthcare System:
Series 1993, 5.75% 2007 6,760 6,843
Series 1999, 6.25% 2019 4,500 4,482
Riverside Health System, Series 2000, 6.85% 2029 2,500 2,582
Sherman Health Systems, Series 1997, AMBAC 2,595 2,700
Insured, 5.50% 2010
Rev. Ref. Bonds:
Advocate Health Care Network, Series 1997A:
5.50% 2008 2,110 2,145
5.80% 2016 8,000 7,909
Edward Hospital Project, Series 1993 A:
5.75% 2009 1,550 1,565
6.00% 2019 1,435 1,401
Fairview Obligated General Project, 1995 Series A:
6.50% 2006 770 773
7.40% 2023 3,000 2,972
Rev. and Rev. Ref. Bonds:
Evangelical Hospitals Corp., Series C, 6.25% 2022 4,000 4,284
(Escrowed to Maturity)
Lutheran General Health, Series C, 6.00% 2018 2,705 2,669
Housing Dev. Auth., Multi-family Housing Bonds, 1,490 1,561
1992 Series A, 7.00% 2010
Metropolitan Pier and Exposition Auth., McCormick
Place Expansion Project:
Series 1992A, 6.50% 2027 (Preref. 2003) 3,910 4,195
Ref. Bonds, Series 1996A, MBIA Insured, 0.00% 2022 13,455 3,879
City of Chicago:
G.O. Bonds, Series 1999, FGIC Insured:
(City Colleges of Chicago Capital Improvement Project), 7,700 3,316
0.00% 2016
(Emergency Telephone System), Ref. Bonds, 5.25% 2020 2,000 1,965
Board of Trustees of Chicago State University, 1,000 1,006
Auxiliary Facs. System Rev. Bonds, Series 1998, MBIA
Insured, 5.50% 2023
Chicago O'Hare International Airport, Special :
Fac. Rev. Ref. Bonds
Series 1994 (American Airlines, Inc. 2,750 3,016
Project), 8.20% 2024
Series 1999A (United Air Lines, Inc. 10,735 9,421
Project), 5.35% 2016
Metropolitan Water Reclamation Dist. of
Greater Chicago, Series B:
Capital Improvement Bonds, 5.25% 2004 5,000 5,150
Ref. Bonds, 5.30% 2005 5,325 5,518
Sales Tax Rev. Bonds, Series 1997, FGIC 5,000 4,816
Insured, 5.375% 2027
School Reform Board of Trustees of the Board of
Education of the City of Chicago, Unlimited Tax G.O.
Bonds, Series 1997A, AMBAC Insured:
0.00% 2011 2,745 1,551
Capital Appreciation Bonds, 0.00% 2015 9,730 4,241
(Dedicated Tax Rev.):
6.75% 2012 1,000 1,162
0.00% 2014 7,085 3,297
5.25% 2030 2,000 1,880
Skyway Toll Bridge Ref. Rev. Bonds, Series 1994:
6.50% 2010 (Preref. 2004) 13,250 14,326
6.75% 2014 (Preref. 2004) 6,500 7,078
Second Lien Wastewater Transmission Rev. Bonds, 2,500 2,260
Series 1998B, MBIA Insured, 5.00% 2030
Water Rev. Bonds, Series 1997, 0.00% 2014 3,500 1,628
County of Cook, G.O. Capital Improvement Bonds, 4,000 4,556
Series 1996, FGIC Insured, 6.50% 2011
Regional Transportation Auth., Cook, Du Page, Kane, 4,500 5,762
Lake, McHenry and Will Counties, G.O. Bonds,
Series 1994D, FGIC Insured, 7.75% 2019
Township High School Dist. No. 205, Cook County 4,730 3,173
( Thornton ), G.O. Limited Capital Appreciation
Bonds, Series 1998D, FSA Insured, 0.00% 2008

Indiana - 4.56%
State Dev. Fin. Auth.:
Pollution Control Rev. Bonds (Inland Steel Co. 2,500 2,373
Project No. 12), 6.85% 2012
Rev. Ref. Bonds, Exempt Fac.-Inland Steel, 5.75% 2011 4,000 3,468
Educational Facs. Auth., Educational Facs. Rev. Bonds 1,000 1,010
(University of Evansville Project), Series
1996, 5.25% 2005
Health Fac. Fncg. Auth., Hospital Rev. Bonds:
Charity Obligated Group:
Series 1997D, 5.00% 2026 (Put 2007) 15,325 15,559
Series 1999D, 5.25% 2016 3,000 2,887
Clarian Health Partners, Inc., Series 1996A:
MBIA Insured, 5.25% 2008 1,700 1,748
MBIA Insured, 5.50% 2016 4,000 4,001
5.50% 2016 10,250 10,108
Holy Cross Health System Corp., Hospital Rev. Bonds, 7,095 7,334
Series 1998, MBIA Insured, 5.375% 2010
Sisters of St. Francis Health Services, Inc. Project:
Series 1997A, MBIA Insured:
5.00% 2008 1,000 1,012
5.125% 2017 1,000 949
Series 1999A, 5.00% 2029 6,000 5,355
Housing Fin. Auth., Single Family Mortgage Ref. Rev. 1,275 1,314
Bonds, 1992 Series A, 6.75% 2010
State Office Building Commission, Correctional 8,490 9,473
Facs. Program Rev. Bonds, Series 1995B, AMBAC
Insured, 6.25% 2012
Transportation Fin. Auth., Airport Facs.
Lease Rev. Bonds, Series A:
6.50% 2007 1,160 1,219
6.50% 2007 (Preref. 2002) 3,755 3,990
6.75% 2011 (Preref. 2002) 2,400 2,562
City of East Chicago, Pollution Control Rev. 3,000 2,950
Ref. Bonds, Inland Steel Co. Project No. 11,
Series 1994, 7.125% 2007
Hospital Auth. of the City of Fort Wayne, Rev.
Bonds (Parkview Memorial Hospital Inc. Project),
Series 1992:
6.375% 2013 (Preref. 2002) 4,000 4,236
6.40% 2022 (Preref 2002) 2,000 2,119

Iowa - 0.85%
Econ. Dev. Rev. Bonds (Foundation for Affordable 1,500 1,530
Housing Project), Series 2000A, FNMA Insured,
5.65% 2033 (Put 2013)
Fin. Auth.:
Hospital Rev. Bonds (Mercy Medical Center Project),
Series 1999, FSA Insured:
5.50% 2011 1,420 1,475
5.60% 2012 1,375 1,428
Rev. and Ref. Bonds (Mercy Health Services Obligated 1,565 1,570
Group), 1997 Series V, FSA Insured, 5.00% 2010
Rev. Bonds (Catholic Health Initiatives), Series 3,000 3,008
2000A, 6.00% 2018
Single Family Mortgage Bonds, 1997 1,925 1,924
Series F, 5.55% 2016
Polk County, Rev. Bonds, Catholic Health Initiatives:
Series 1997A, 5.50% 2007 1,520 1,563
Series A, 5.125% 2012 3,170 3,088

Kentucky - 0.69%
Econ. Dev. Fin. Auth., Hospital System Ref. and
Improvement Rev. Bonds, Series 1997 (Appalachian
Regional Healthcare, Inc. Project):
5.20% 2004 1,540 1,355
5.60% 2008 630 507
5.60% 2009 3,305 2,597
5.70% 2010 490 378
5.75% 2011 2,190 1,663
5.85% 2017 2,000 1,406
City of Ashland, Pollution Control Ref. Rev. Bonds, 3,750 3,792
Series 1999 (Ashland Inc. Project), 5.70% 2009
Kenton County Airport Board, Special Facs. Rev. 1,000 1,021
Bonds (Delta Air Lines, Inc. Project), Series 1985,
7.80% 2015

Louisiana - 5.65%
Health Education Auth. (Lambeth House Project):
Rev. Bonds, Series 1996, 9.00% 2026 (Preref. 2006) 9,000 11,219
Rev. Ref. Bonds, Series 1998A:
5.50% 2010 5,505 4,885
6.15% 2018 2,000 1,693
6.20% 2028 3,950 3,192
Public Facs. Auth., Hospital Rev. Ref. Bonds
(Franciscan Missionaries of Our Lady Health System
Project), Series 1998A, FSA Insured:
5.75% 2014 3,495 3,622
5.75% 2015 3,825 3,950
Jefferson Parish Hospital Services:
Dist. No. 1, Parish of Jefferson (West Jefferson
Medical Center), FSA Insured, Hospital Rev. Bonds,
Series 1998A:
5.25% 2011 2,070 2,100
5.25% 2012 1,930 1,942
Dist. No. 2, Parish of Jefferson, Hospital Rev. 3,520 3,606
Bonds, Series 1998, FSA Insured, 5.25% 2011
Lake Charles Harbor and Terminal Dist., Port Facs. 24,000 25,784
Rev. Ref. Bonds (Trunkline LNG Co. Project),
Series 1992, 7.75% 2022
Local Government Environmental Fac. and Community
Dev. Auth. Rev. Bonds (Capital Projects and
Equipment Acquisition Program), AMBAC Insured:
Series 1999, 4.50% 2018 4,500 3,959
Series 2000A, 6.30% 2030 11,500 12,777
Offshore Terminal Auth., Deepwater Port Ref. Rev. 6,000 5,583
Bonds (LOOP LLC Project), Series 1998, 5.20% 2018
Parish of West Feliciana, Pollution Control Rev.
Bonds (Gulf States Utilities Company Project):
Series 1985-B, 9.00% 2015 2,000 2,069
Series 1985D, 5.80% 2015 3,750 3,585
Series 1999A, 5.65% 2028 (Put 2004) 13,500 13,610

Maine - 0.33%
Health and Higher Educational Facs. Auth., Rev.
Bonds, Piper Shores Issue, Series 1999A:
7.50% 2019 3,000 2,944
7.55% 2029 2,575 2,518
Housing Auth., Mortgage Purchase Bonds, 1994 Series 600 619
C-1, 5.90% 2015

Maryland - 1.41%
Community Dev. Administration, Dept. of Housing and 5,815 5,974
Community Dev., Single Family Program Bonds, 1997
First Series, 5.25% 2005
Health and Higher Educational Facs. Auth.:
First Mortgage Rev. Bonds, PUMH of Maryland, Inc.
Issue (Heron Point of Chestertown), Series 1998A:
5.60% 2013 1,000 919
5.75% 2019 2,400 2,104
Project and Ref. Rev. Bonds, Roland Park Place 500 471
Issue, Series 1999, 5.50% 2013
Rev. Bonds, Howard County General Hospital Issue,
Series 1993 (Escrowed to Maturity):
5.50% 2013 2,000 2,069
5.50% 2021 1,225 1,241
Anne Arundel County, Special Obligation Bonds:
(Arundel Mills Project), Series 1999, 7.10% 2029 5,750 5,851
(National Business Park Project), Series 2000, 1,000 1,020
7.375% 2028
Calvert County, Econ. Dev. Rev. Bonds 2,500 2,926
(Ashbury-Solomons Island Facility), Series 1995,
8.625% 2024 (Preref. 2005)
Frederick County, Special Obligation Bonds (Urbana 2,500 2,443
Community Dev. Auth.), Series 1998, 6.625% 2025
Prince George's County, Hospital Rev. Bonds, 750 802
Dimensions Health Corp. Issue, Series 1992, 7.25%
2017 (Preref. 2002)

Massachusetts - 1.30%
G.O. Bond Anticipation Notes, 2000 Series A, 5,000 5,037
5.00% 2001
Massachussetts Bay Transportation Auth., General 5,000 5,675
Transportation System Bonds, 1994 Series A Ref.
Bonds, 7.00% 2007
Turnpike Auth., Metropolitan Highway System Rev. 10,000 8,978
Bonds, Series 1999A, AMBAC Insured, 5.00% 2039
The New England Loan Marketing Corp., Student Loan 1,500 1,518
Ref. Bonds, 1993 Series G, 5.20% 2002
Water Resources Auth., General Rev. Ref. 2,500 2,544
Bonds, 1993 Series B, 5.25% 2009

Michigan - 5.96%
Hospital Fin. Auth.:
Hospital Rev. Bonds:
The Detroit Medical Center Obligated Group,
Series 1998A:
5.00% 2012 1,370 1,143
5.00% 2013 1,000 820
5.00% 2014 1,525 1,235
5.25% 2023 1,955 1,439
Henry Ford Health System, Series 1999A:
5.70% 2011 2,985 3,058
5.80% 2012 1,075 1,100
Hospital Rev. and Ref. Bonds:
Daughters of Charity, National Health System, 1,375 1,409
5.50% 2005 (Escrowed to Maturity)
The Detroit Medical Center Obligated Group:
Series 1993A:
6.375% 2009 2,000 1,890
6.25% 2013 4,250 3,785
6.50% 2018 7,000 6,196
Series 1993B, AMBAC Insured, 5.00% 2006 1,365 1,382
Genesys Health system Obligated Group, Series 1995A:
7.10% 2002 (Escrowed to Maturity) 285 300
7.20% 2003 (Escrowed to Maturity) 1,000 1,080
8.00% 2005 (Escrowed to Maturity) 8,880 10,293
8.10% 2013 (Preref. 2005) 5,000 5,898
8.125% 2021 (Preref. 2005) 4,500 5,313
7.50% 2027 (Preref. 2005) 4,520 5,135
Hackley Hospital Obligated Group, Series 1998A:
4.85% 2006 1,105 1,055
5.00% 2008 1,215 1,151
5.30% 2013 3,650 3,350
Henry Ford Health System, Series 1995A, 5.25% 2025 4,845 4,315
McLaren Obligated Group, Series 1993A, 5.375% 2013 2,985 2,844
Pontiac Osteopathic, Series 1994 A:
5.375% 2006 1,000 940
6.00% 2014 5,905 5,246
6.00% 2024 4,775 3,990
Sinai Hospital of Greater Detroit, Series 1995:
6.00% 2008 2,000 1,896
6.625% 2016 3,190 2,913
Variable Rate Rev. Bonds (Ascension Health
Credit Group):
Series 1999B-3, 5.30% 2033 (Put 2006) 2,000 2,000
Series 1999B-4, 5.375% 2033 (Put 2007) 3,000 2,998
Housing Dev. Auth., Rental Housing Rev. Bonds:
1992 Series A, AMBAC Insured, 6.40% 2005 2,350 2,450
1994 Series A, 6.20% 2003 1,600 1,641
City of Detroit:
G.O. Ref. Bonds (Unlimited Tax), Series 1995-B:
6.75% 2003 2,000 2,095
7.00% 2004 2,500 2,675
6.25% 2008 1,730 1,824
6.25% 2009 1,195 1,257
6.25% 2010 1,250 1,311
Downtown Dev. Auth., Tax Increment Bonds (Dev. Area 2,900 3,193
No. 1 Projects), Series 1996C, 6.20%
2017 (Preref. 2006)
School Dist. of the City of Detroit, Wayne County, 1,955 1,896
School Building and Site Improvement Ref. Bonds,
Series 1998C, FGIC Insured, 5.25% 2025
City of Royal Oak, Hospital Fncg. Auth., Hospital Rev. 3,000 2,808
Ref. Bonds (William Beaumont Hospital), Series 1993 G,
5.25% 2019
Charter County of Wayne, Special Airport Facs. Rev. 3,975 3,980
Ref. Bonds (Northwest Airlines, Inc.), Series
1995, 6.75% 2015

Minnesota - 0.46%
Housing Fin. Agcy.:
Multi-Family Housing Dev. Bonds, 1991 Series A, 2,535 2,604
6.85% 2007
Single Family Mortgage Bonds, 1994 1,765 1,792
Series E, 5.60% 2013
City of Minneapolis, G.O. Various Purpose Bonds, 4,000 4,036
Series 2000, 5.00% 2001

Mississippi - 0.18%
Perry County, Pollution Control Ref. Rev. Bonds (Leaf 3,500 3,256
River Forest Products, Inc. Project), Series
1999, 5.20% 2012

Nebraska - 0.12%
City of Kearney, Industrial Dev. Rev. Bonds (The Great 2,750 2,157
Platte River Road Memorial Foundation Project),
Series 1998, 6.75% 2028

Nevada - 1.90%
Housing Division, Single Family Mortgage Bonds, 800 759
1999 Series A-1, 4.75% 2012
Clark County, Special Improvement Dist. No. 121
(Southern Highlands Area), Local Improvement
Bonds, Series 1999:
7.00% 2009 2,500 2,559
7.50% 2019 14,000 14,334
City of Henderson:
Health Fac. Rev. Bonds (Catholic Healthcare West), 7,000 5,749
1998 Series A, 5.375% 2026
Local Improvement Dist. No. T-4C (Green Valley
Properties), Limited Obligation Ref. Bonds,
1999 Series A:
5.65% 2009 1,495 1,474
5.75% 2013 3,990 3,763
5.90% 2018 2,990 2,786
Local Improvement Dist. No. T-10 (Seven Hills) 1,420 1,468
Limited Obligation Improvement Bonds, 7.50% 2015
City of Las Vegas, Special Improvement Bonds, 1,975 2,043
(Summerlin Area), Local Improvement Bonds, 7.10% 2016

New Jersey - 2.48%
Econ. Dev. Auth.:
Econ. Dev. Bonds, Kapkowski Road Landfill Reclamation
Improvement Dist. Project (City of Elizabeth),
Series 1998A:
6.375% 2018 1,000 994
6.375% 2031 17,405 17,049
First Mortgage Rev. Fixed Rate Bonds:
Fellowship Village Project:
Series 1998A:
4.95% 2005 1,230 1,179
5.50% 2018 2,295 1,898
5.50% 2025 1,500 1,187
Series 1995, 9.25% 2025 (Preref. 2005) 7,000 8,375
Winchester Gardens at Ward Homestead Project,
Series 1996A:
8.50% 2016 4,000 4,227
8.625% 2025 3,500 3,712
Housing and Mortgage Fin. Agcy., Section 8 Bonds,
1991 Series A:
6.80% 2005 2,570 2,657
6.85% 2006 2,500 2,586
Gloucester County Improvement Auth., Solid Waste 1,585 1,650
Resource Recovery Rev. Ref. Bonds (Waste
Management, Inc. Project), Series 1999A, 6.85% 2029
(Put 2009)

New Mexico - 0.02%
Mortgage Fin. Auth., Single Family Mortgage Purchase 335 339
Ref. Senior Bonds, 1992 Series A-1, 6.85% 2010

New York - 6.41%
Dormitory Auth.:
Center for Nursing/Rehabilitation, Inc. Rev. Bonds, 2,100 2,105
5.45% 2017
City University System Consolidated Third General 2,000 2,086
Resolution Rev. Bonds, 1998 Series 2, AMBAC Insured,
5.50% 2008
Edgar Health Care Center (Nursing Home) Rev. Bonds, 2,375 2,309
FHA Insured, 4.90% 2013
Mental Health Services Facs. Improvement Rev. Bonds:
Series 1997A, 6.00% 2007 1,750 1,878
Series 1997B:
6.00% 2007 2,500 2,682
5.60% 2008 1,300 1,366
Series 1998B:
5.375% 2009 1,270 1,308
5.00% 2010 1,495 1,496
5.00% 2010 1,530 1,531
Series 1998C, 5.00% 2010 1,760 1,761
Series 1998D, MBIA Insured, 5.00% 2017 2,815 2,708
Montefiore Medical Center, FHA-Insured Mortgage 3,300 3,189
Hospital Rev. Bonds, Series 1999, AMBAC Insured,
5.25% 2019
Secured Hospital:
Rev. Bonds (Interfaith Medical Center), Series 2,000 2,049
1998D, 5.25% 2007
Rev. Ref. Bonds, Brookdale Hospital, Series 2,500 2,532
1998J, 5.125% 2009
State University Educational Facs.:
Rev. Bonds:
Series 1997, 6.00% 2007 3,000 3,225
Series 1998A, MBIA Insured, 5.00% 2015 4,000 3,900
Series 1998B, 5.00% 2018 2,500 2,345
Rev. Ref. Bonds:
Series 1990A, 7.50% 2013 3,500 4,273
Series 1990B, 7.50% 2011 1,720 2,015
Environmental Fac. Corp., State Water Pollution 230 239
Control Revolving Fund Rev. Bonds (New York City
Municipal Water Fin. Auth. Project), Series 1991
E, 6.875% 2010
Housing Fin.Agcy.:
Health Facs. Rev. Bonds (New York City), 1996 3,000 3,171
Series A Ref., 6.00% 2006
Service Contract Obligation Rev. Ref. Bonds, 1,750 1,778
Series 1997C, 5.20% 2010
Local Government Assistance Corp.:
Series 1991 C, Capital Appreciation Bonds, 0.00% 2005 5,000 4,060
Series 1991 D:
7.00% 2011 (Preref. 2002) 2,000 2,121
6.75% 2021 (Preref. 2002) 1,350 1,427
Series 1992 C, 5.50% 2022 1,000 983
State Medical Care Facs. Fin. Agcy.:
Hospital Insured Mortgage Rev. Bonds, 1994
Series A Ref., FHA Insured:
5.10% 2010 2,580 2,595
5.25% 2014 5,000 4,997
Mental Health Services Facs. Improvement Rev. Bonds, 1,000 928
1993 Series D, 5.25% 2023
St. Luke's-Roosevelt Hospital Center, FHA-Insured 12,550 12,890
Mortgage Rev. Bonds, 1993 Series A, 5.60% 2013
Mortgage Agcy., Homeowner Mortgage Rev. Bonds, 7,500 7,160
Series 80, 5.10% 2017
Urban Dev. Corp., Correctional Capital Facs.
Rev. Bonds:
Ref. Series 1993 A, 5.30% 2005 2,800 2,863
Series 7, 5.25% 2009 1,375 1,408
Castle Rest Residential Health Care Fac., FHA Insured 1,700 1,728
Mortgage Rev. Bonds, Series 1997A, 5.60% 2017
City of New York, G.O. Bonds:
Fiscal 1992 Series C, 6.50% 2004 (Preref. 2002) 470 496
Fiscal 1992 Series H, 6.875% 2002 155 160
Fiscal 1995 Series F:
6.60% 2010 (Preref. 2005) 2,000 2,194
6.625% 2025 (Preref. 2005) 1,500 1,647
Fiscal 1996 Series E, 6.50% 2006 3,000 3,262
Fiscal 1999 Series H, 5.00% 2029 3,000 2,696
Transitional Fin. Auth., Future Tax Secured Bonds:
Fiscal 1998 Series A, 5.00% 2027 1,500 1,373
Fiscal 1998 Series C, 5.00% 2018 2,000 1,908
Fiscal 1999 Series B, 4.75% 2023 5,725 5,080
City of New York, Health and Hospital Corporation, 4,950 4,626
Health System Bonds, 1999 Series A, AMBAC
Insured, 5.00% 2020
Triborough Bridge and Tunnel Auth., General Purpose 1,000 1,095
and Rev. Bonds, Series Y, 6.00% 2012

North Carolina - 3.13%
Eastern Municipal Power Agcy., Power System Rev.
Bonds: Ref. Series 1993B:
6.00% 2006 3,120 3,229
7.25% 2007 5,425 5,971
7.00% 2008 10,720 11,753
6.125% 2009 4,000 4,176
6.00% 2022 2,000 1,941
6.00% 2026 1,990 1,917
MBIA Insured, 6.00% 2026 2,500 2,678
Series 1993 C, 5.00% 2021 2,300 1,941
Ref. Series 1999B:
5.55% 2014 1,800 1,736
5.60% 2015 7,000 6,731
5.65% 2016 2,000 1,918
5.70% 2017 4,775 4,573
Series 1999D, 6.75% 2026 3,500 3,621
Municipal Power Agcy. Number One (Catawba Electric 3,935 4,245
Rev. Bonds), Series 1999A, MBIA Insured, 6.0% 2008
County of Catawba, Hospital Ref. Rev. Bonds (Catawba 1,000 976
Memorial Hospital Project), Series 1999,
AMBAC Insured, 4.60% 2010

Ohio - 0.53%
County of Franklin, Hospital Facs. Rev. Ref. and 750 767
Improvement Bonds (Doctors Hospital Project),
5.60% 2006
County of Knox, Hospital Facs. Ref. Rev. Bonds, 2,175 2,117
Series 1998 (Knox Community Hospital), Asset Guaranty
Insured, 4.60% 2007
County of Lorain, Health Care Facs. Rev. Ref. Bonds 2,000 1,601
(Kendal at Oberlin), Series 1998A, 5.25% 2021
County of Montgomery, Hospital Facs. Rev. Bonds
(Kettering Medical Center Network Obligated Group),
Series 1999:
6.75% 2018 1,000 1,009
6.75% 2022 1,000 988
County of Richland, Hospital Fac. Rev. Improvement
Bonds, Series 2000B (MedCentral Health System
Obligated Group):
6.375% 2022 1,250 1,250
6.375% 2030 2,000 1,964

Oklahoma - 0.58%
Health System Rev. Bonds, Baptist Medicine Center of 2,500 2,708
Oklahoma, Series 1995 C, AMBAC Insured, 6.375% 2009
Industrial Auth., Health System Rev. Ref. Bonds 2,500 2,700
(Obligated Group consisting of
INTEGRIS Baptist Medical
Center, Inc., INTEGRIS South Oklahoma, City Hospital
Corp. and INTEGRIS Rural Health, Inc.),
AMBAC Insured, 6.00% 2009
Industries Auth., Health Facs. Rev. Ref. Bonds 2,505 2,423
(Sisters of Mercy Health System, St. Louis, Inc.),
Series 1993A, 5.00% 2013
Tulsa Industrial Auth., Hospital Rev. and Ref. Bonds, 3,000 2,849
St. John Medical Center Project, Series 1996,
5.375% 2017

Oregon - 0.88%
City of Klamath Falls, Electric Rev. Bonds (Klamath
Cogeneration Project), Series 1999:
5.75% 2013 7,000 6,442
5.875% 2016 3,500 3,176
6.00% 2025 7,250 6,477

Pennsylvania - 7.80%
Convention Center Auth., Ref. Rev. Bonds, 1994 10,000 10,255
Series A, 6.25% 2004
Higher Educational Facs. Auth.:
Rev. Bonds (Thomas Jefferson University), 1992
Series A, MBIA Insured:
6.625% 2009 375 396
6.625% 2009 (Preref. 2002) 875 927
State System of Higher Education Rev. Bonds, 3,130 2,964
Series P, AMBAC Insured, 5.00% 2019
UPMC Health System Rev. Bonds, Series 1999A, FSA 2,000 2,009
Insured, 5.00% 2009
Housing Fin. Agcy., Rev. Bonds, Rental Housing
Ref. Bonds, FNMA Insured:
Issue 1992, 6.50% 2023 2,000 2,074
Issue 1993, 5.80% 2018 4,000 4,003
Housing Fin. Auth., Single Family Mortgage Rev. 1,000 1,035
Bonds, Series 1992-33, 6.85% 2009
Allegheny County, Hospital Dev. Auth. Rev. Bonds:
Catholic Health Systems, AMBAC Insured:
Series 1998A, 5.50% 2008 1,000 1,045
Series A, 5.00% 2010 2,705 2,719
Allegheny County, Cert. of Part. (ACJCT Fac. 2,150 2,015
Holdings L.P.), AMBAC Insured, 5.00% 2019
UPMC Health System Rev. Ref. Bonds, Series 1999B, 5,160 5,315
AMBAC Insured, 5.25% 2008
Blair County Hospital Auth., Hospital Rev. Bonds 3,415 3,503
(Altoona Hospital Project), 1998 Series A,
AMBAC Insured, 5.25% 2009
Chester County Health and Education Facs. Auth., 7,500 6,633
Health System Rev. Bonds (Jefferson Health System),
Series 1997B, 5.375% 2027
Delaware County, Auth. Rev. Bonds, Catholic Health
Systems, Series A, AMBAC Insured:
5.00% 2010 2,465 2,478
5.25% 2011 4,115 4,185
Lehigh County, General Purpose Auth. Rev. Bonds 1,500 1,521
(KidsPeace Obligated Group), 5.70% 2009
Montgomery County Industrial Dev. Auth., Retirement 9,000 7,489
Community Rev. Bonds (Acts Retirement-Likfe
Communities, Inc. Obligated Group), Series 1998,
5.25% 2028
City of Philadelphia, G.O. Ref. Bonds, Series 1998, 3,300 2,951
FGIC Insured, 4.75% 2020
Hospitals and Higher Education Facs. Auth. of
Philadelphia:
Hospital Rev. Bonds (The Children's Hospital of
Philadelphia Project):
Series A of 1992:
6.50% 2009 (Pre2002) 4,500 4,721
6.50% 2021 (Pre2002) 3,000 3,147
Series A of 1993, 5.375% 2014 1,505 1,448
Frankford Hospital, Series A (Escrowed to Maturity):
6.00% 2014 3,705 3,832
6.00% 2023 4,000 4,068
Jefferson Health System Rev. Bonds, Series 1997A:
5.50% 2006 2,285 2,321
5.50% 2007 1,995 2,020
5.50% 2008 2,000 2,020
5.00% 2009 1,000 963
5.00% 2010 1,000 955
5.00% 2018 1,475 1,280
Temple University Hospital Rev. Bonds:
Series of 1983, 6.625% 2023 15,385 14,238
Series of 1993 A, 6.50% 2008 15,500 15,295
Series of 1997, 5.70% 2009 1,000 935
Philadelphia Auth. for Industrial Dev., Rev. Bonds 2,815 2,616
(Cathedral Village Project), Series of
1998, 5.50% 2010
Public Auditorium Auth. of Pittsburgh and Allegheny 2,000 2,044
County, Regional Asset Dist. Sales Tax Rev. Bonds,
Series of 1999, AMBAC Insured, 5.00% 2008
City of Pottsville Hospital Auth., Hospital Rev. Bonds 8,500 9,411
(The Pottsville Hospital and Warne Clinic), Series
of 1994, 7.25% 2024 (Preref. 2004)
Scranton-Lackawanna Health and Welfare Auth., City of
Scranton, Lackawanna County, Hospital Rev.
Bonds (Moses Taylor Hospital Project), Series 1997:
6.05% 2010 1,000 930
6.15% 2012 2,245 2,057
6.15% 2014 3,000 2,694
6.20% 2017 3,000 2,625

Rhode Island - 0.52%
Depositors Econ. Protection Corp., Special Obligation
Bonds, 1993 Series A:
5.75% 2021 2,715 2,800
5.75% 2021 (Escrowed to Maturity) 1,210 1,248
MBIA Insured, 5.75% 2012 4,850 5,225
Housing and Mortgage Fin. Corp., Homeownership 295 301
Opportunity Bonds, Series 3-A, 7.80% 2010

South Carolina - 1.31%
Florence County, Hospital Rev. Bonds, McLeod Regional 2,785 2,861
Medical Center Project, MBIA Insured,
Series 1998A, 5.25% 2010
Lexington County Health Services Dist. Inc., Hospital
Rev. Ref. and Improvement Bonds, Series 1997,
FSA Insured:
5.50% 2007 2,000 2,096
5.00% 2009 1,000 1,014
5.125% 2021 2,000 1,868
Piedmont Municipal Power Agcy., Electric Rev. Bonds:
1999A Ref. Series, 5.25% 2015 12,420 11,006
1991 Ref. Series, FGIC Insured, 6.25% 2021 4,640 5,102

South Dakota - 0.83%
Building Auth., Rev. Capital Appreciation Bonds, 3,780 1,767
Series 1996A, AMBAC Insured, 0.00% 2014
Health and Educational Facs. Auth., Rev. Ref. Bonds,
Series 1999 (Rapid City Regional Hospital Issue),
MBIA Insured:
5.00% 2007 2,045 2,076
5.00% 2009 4,010 4,048
5.00% 2010 4,175 4,201
Housing Dev. Auth., Homeownership Mortgage Bonds, 3,000 3,071
1995 Series A, 5.80% 2014

Tennessee - 1.44%
Health and Educational Facs. Board of the Metropolitan 6,600 7,763
Government of Nashville and Davidson County
(Blakeford Project), 9.25% 2024 (Preref. 2004)
Memphis-Shelby County Airport Auth., Special Facs. 17,850 18,619
Rev. Bonds, Ref. Series 1992 (Federal Express
Corp.), 6.75% 2012

Texas - 4.64%
Bell County Health Facs. Dev. Corp., Retirement Fac.
Rev. Bonds (Buckner Retirement Services, Inc.
Obligated Group Project), Series 1998:
5.25% 2009 1,620 1,579
5.00% 2010 1,705 1,602
5.25% 2028 9,400 7,780
Brazos River Auth., Rev. Ref. Bonds (Houston 8,360 7,828
Industries Incorporated Project), MBIA
Insured, 4.90% 2015
Industrial Dev. Corp.of Port of Corpus Christi, Rev. 5,000 4,386
Ref. Bonds (Valero Refining and Marketing Co.
Project), 5.40% 2018
Cypress-Fairbanks Independent School Dist. (Harris 6,675 3,471
County), Unlimited Tax Ref. Bonds, Capital
Appreciation Bonds, 0.00% 2013
El Paso Independent School Dist. (El Paso County), 3,420 3,104
Unlimited Tax Ref. Bonds, Series 1999, 4.75% 2018
Harris County Health Facs. Dev. Corp.:
Hospital Rev. Bonds (Memorial Hermann Hospital System 1,890 1,940
Project), Series 1998, FSA Insured, 5.25% 2008
Rev. Bonds (CHRISTUS Health), Series 1999A, MBIA 3,380 3,493
Insured, 5.50% 2010
SCH Health Care System Rev. Bonds (Sisters of Charity 1,500 1,637
of the Incarnate Word, Houston), Series 1997B,
6.25% 2027
Harris County, Toll Road Unlimited Tax and Subordinate 5,500 5,307
Lien Rev. Ref. Bonds, Series 1997, 5.125% 2017
Hidalgo County Health Services Corp., Hospital Rev.
Bonds, (Mission Hospital, Inc. Project), Series 1996:
7.00% 2008 1,000 1,018
6.75% 2016 1,740 1,657
City of Houston:
Public Improvement Ref. Bonds, Series 2,500 2,388
1997A, 5.00% 2017
Airport System Subordinate Lien Rev. Bonds, Series 5,000 4,540
1998C, FGIC Insured, 5.00% 2028
Water and Sewer System Junior Lien Rev. Ref. Bonds, 3,000 1,013
Series 1998A, FSA Insured, 0.00% 2019
North Central Health Facs. Dev. Corp., Hospital Rev. 5,000 4,608
and Ref. Bonds (Baylor Health Care System Project),
Series 1998, MBIA Insured, 5.00% 2019
Northeast Medical Clinic, Hospital Auth., County of 1,000 1,107
Humble, Rev. Bonds, FSA Insured, 6.25% 2012
Richardson Independent School Dist. (Dallas County), 2,500 2,340
Unlimited Tax School Building Bonds, Series 1998B,
5.00% 2021
City of San Antonio, Electric and Gas Systems Rev. 6,205 5,316
Ref. Bonds, New Series 1998A, 4.50% 2021
Tarrant County Health Facs., Dev. Corporation
Texas Health Resources System Rev. Bonds, Series
1997A, MBIA Insured:
5.50% 2007 4,000 4,064
5.75% 2015 3,000 3,025
Tomball Hospital Auth., Rev. Ref. Bonds, Series 5,250 4,697
1993, 6.125% 2023
Water Dev. Board, State Revolving Fund, Senior Lien 7,500 7,225
Rev. Bonds, Series 1997B, 5.00% 2016

Utah - 0.44%
Housing Fin. Agcy., Single Family Mortgage Bonds, 435 438
1995 Issue E (Federally Insured or Guaranteed
Mortgage Loans), 5.50% 2024
Salt Lake City, Hospital Rev. Bonds, Series 1992 8,100 7,613
(IHC Hospitals, Inc.), 5.50% 2021

Vermont - 0.13%
Educational and Health Buildings Fncg. Agcy. Hospital 2,250 2,348
Rev. Bonds (Medical Center Hospital of Vermont
Project), Series 1993, FGIC Insured, 5.75% 2007

Virginia - 1.97%
Dulles Town Center Community Dev. Auth. (Loudoun 2,500 2,403
County), Special Assessment Bonds (Dulles Town Center
Project), Series 1998, 6.25% 2026
Fairfax County:
Econ. Dev. Auth., Retirement Community Rev. Bonds 15,500 15,814
(Greenspring Village, Inc. Fac.), Series 1999 A,
7.50% 2029
Industrial Dev. Auth., Hospital Rev. Ref. Bonds
Inova Health Systems Hospital Project), Series 1993 A:
4.80% 2005 1,850 1,863
5.00% 2011 1,300 1,304
5.00% 2023 1,200 1,117
Gateway Community Dev. Auth. (Prince William County), 2,130 1,984
Special Assessment Bonds, Series 1999, 6.25% 2026
Industrial Dev. Auth., Hanover County, Hospital Rev 1,000 1,126
Bonds (Memorial Regional Medical Center Project at
Hanover Medical Park), Series 1995, MBIA Insured,
6.50% 2009
Heritage Hunt Commercial Community Dev. Auth. (Prince
William County), Special Assessment Bonds:
Series 1999A, 6.85% 2019 3,715 3,734
Series 1999B, 7.00% 2029 1,000 1,001
Peninsula Ports Auth. Health System Rev. Ref. Bonds 1,000 999
(Riverside Health System Project), Series 1998,
5.00% 2010
Pocahontas Parkway Association, Route 895 Connector 5,000 4,746
Toll Road Rev. Bonds, Series 1998A, 5.25% 2008

Virgin Islands - 0.10%
Public Fin. Auth., Rev. and Ref. Bonds (Matching Fund 1,840 1,843
Loan Notes), Series 1998 D, 5.50% 2002

Washington - 3.03%
G.O. Bonds, Series B, 5.50% 2010 2,000 2,110
Health Care Fac. Auth. Rev. Bonds (Swedish Health 2,000 1,855
Services), Series 1998, AMBAC Insured, 5.125% 2022
Public Power Supply System:
Nuclear Project No. 1 Ref. Rev. Bonds, Series 1997B, 5,000 4,884
5.13% 2014
Nuclear Project No. 2 Ref. Rev. Bonds:
Series 1993B, FSA Insured, 5.65% 2008 3,030 3,203
Series 1994A, 6.00% 2007 19,900 21,306
Nuclear Project No. 3 Ref. Rev. Bonds, Series 1989 B, 5,250 6,219
7.125% 2016
Central Puget Sound Regional Transit Auth., Sales Tax 5,500 5,362
and Motor Vehicle Excise Tax Bonds, Series
1999, FGIC Insured, 5.25% 2021
Public Utility Dist. No. 1 of Chelan County, Columbia 11,345 3,948
River-Rock Island Hydro- Electric System Rev.
Ref. Capital Appreciation Bonds, Series 1997A, MBIA
Insured, 0.00% 2019
King County, Limited Tax G.O. Ref. Bonds, Series 3,680 3,402
1998B, 4.75% 2016
City of Seattle, Municipal Light and Power Rev. 3,410 3,247
Ref. Bonds, 1998 Series A, 5.00% 2016

Wisconsin - 1.68%
Health and Educational Facs. Auth., Rev. Bonds:
Series 1997 (Aurora Health Care, Inc.), MBIA 2,500 2,323
Insured, 5.25% 2027
Children's Hospital Project, Series 1993, FGIC 2,000 2,083
Insured, 5.50% 2006
Children's Hospital of Wisconsin, Inc., Series 1,130 1,166
1998, AMBAC Insured, 5.625% 2015
The Monroe Clinic, Inc.:
Series 1998:
4.80% 2010 1,110 1,002
4.90% 2011 1,165 1,047
Series 1999, 5.375% 2022 2,000 1,710
Medical College of Wisconsin, Series 1993, 5.95% 2015 3,000 3,065
Housing and Econ. Dev. Auth., Housing Rev. Bonds, 3,480 3,625
1992 Series A, 6.40% 2003
Pollution Control and Industrial Dev. Rev. Bonds 3,000 3,102
(General Motors Corp. Projects), City of Janesville,
Series 1984, 5.55% 2009
City of Nekoosa, Pollution Control Funding Rev. Bonds 5,000 4,686
(Nekoosa Papers Inc. Project), Series
1999B, 5.50% 2015
City of Superior, Limited Obligation Ref. Rev. Bonds 6,000 7,063
(Midwest Energy Resources Co. Project),
Series E-1991 (Collateralized), FGIC
Insured, 6.90% 2021
----------
1,707,281
----------

Tax-Exempt Securities Maturing in One Year or
Less - 5.94%
State of Texas, Angelina and Neches 2,200 2,200
River Auth. Industrial
Dev. Corporation, Solid Waste Disposal Fac. Rev.
Bonds (TEEC Inc. Project), Series 1984B, 4.35% 2014(2)
State of Texas, Brazos River Auth., Variable Rate 2,000 2,000
Demand Pollution Control Rev. Ref. Bonds (Monsanto
Company Project), Series 1988, 4.35% 2000(2)
City of Chicago, Chicago-O'Hare International Airport, 2,000 2,000
Special Fac. Rev. Bonds (American Airlines, Inc.
Project), Series 1983, 4.30% 2017(2)
State of Tennessee, Public Building Auth. of the City 4,000 4,000
of Clarksville, Adjustable Rate Pooled Fncg. Rev.
Bonds, Series 1999, 4.25% 2029(2)
State of Colorado, General Fund Tax and Rev. 5,000 5,029
Anticipation Notes, Series 2000A, 5.00% 2001
City of Detroit, Sewage Disposal System Rev. Ref. 1,990 1,990
Bonds, Series 1998-A, MBIA Insured, 4.20% 2023(2)
State of Texas, Guadalupe-Blanco River Authority 1,200 1,200
(Texas) Pollution Control Rev. Ref. Bonds
(Central Power and
Light Company Project), Series 1995, 4.35% 2015(2)
State of Texas, Harris County Health Facs. Dev. Corp., 3,000 3,126
SCH Health Care System Rev. Bonds (Sisters of
Charity of the Incarnate Word, Houston),
Series 1991A, 7.10% 2021 (Preref. 2001)
City of Houston, Tax and Rev. Anticipation Notes, 2,000 2,012
Series 2000, 5.00% 2001
State of Idaho Tax Anticipation Notes, Series 2000, 2,000 2,018
5.375% 2001
State of Illinois, Health Facs. Auth., Rev. Ref. 570 573
Bonds (Fairview Obligated General Project),
1995 Series A, 6.25% 2001 (Preref. 2001)
State of Arizona, Maricopa County, Arizona Pollution
Control Rev. Ref. Bonds (Palo Verde Project):
Series 1994B, 4.30% 2029(2) 2,500 2,500
Series 1994F, 4.30% 2029(2) 1,400 1,400
State of Massachusetts Dev. Fin. Agcy., First Mortgage 5,000 5,000
Rev. Variable Rate Bonds (LaSell Village Project),
Series 1998C, 4.25% 2008(2)
State of Massachusetts, Health and Educational Facs. 7,000 7,277
Auth. Rev. Bonds, Brigham and Women's Hospital
Issue, Series D, 6.75% 2024 (Preref. 2001)
State of Michigan, Municipal Bond Auth., Rev. Notes, 2,700 2,718
Series 2000C-2, 5.00% 2001
State of Missouri, Curators of the University of 1,500 1,512
Missouri Capital Projects Notes, Series FY 2000-2001,
5.25% 2001
State of New Mexico 2000-2001 Tax and Rev. 5,000 5,030
Anticipation Notes, Series 2000, 5.00% 2001
State of New York, Environmental Fac. Corp., State 1,270 1,321
Water Pollution Control Revolving Fund Rev. Bonds
(NYC Municipal Water Fin. Auth. Project), Series
1991E, 6.875% 2010 (Preref. 2001)
New York City Municipal Water Fin. Auth., Water and 5,000 5,207
Sewer System Rev. Bonds, Fiscal 1991 Series C,
7.75% 2020 (Preref. 2001)
New York Local Government Assistance Corp., Series 6,925 7,190
1991 B, 7.50% 2020 (Preref. 2001)
State of New York, Triborough Bridge and Tunnel Auth., 1,800 1,810
General Purpose Rev. Bonds, Series T,
6.00% 2022 (Preref. 2001)
North Carolina Medical Care Commission Variable Rate 4,300 4,300
Hospital Rev. Bonds (Pooled Fncg. Project),
Series 1996A, 4.35% 2016(2)
State of Texas, Northside Independent School Dist. 3,500 3,531
(Bexar, Medina and Bandera Counties), Unlimited Tax
School Building Bonds, Series 1991, 6.375%
2008 (Preref. 2001)
State of Idaho, Power County, Idaho, Pollution 1,200 1,200
Control Rev. Bonds (FMR Corp. Project), 4.35% 2010(2)
State of South Carolina, Econ. Dev. Auth. 3,650 3,650
Hospital Rev.
Bonds (Baptist Healthcare System of South Carolina,
Inc.), Series 1995, 4.30% 2017(2)
State of Texas, Tax and Rev. Anticipation Notes, 19,000 19,185
Series 2000, 5.25% 2001
State of Wyoming, Uinta County, Pollution Control 1,100 1,100
Ref. Rev. Bonds (Chevron U.S.A. Inc. Project),
Series 1993, 4.30% 2020(2)
State of Virginia, The Hospital Auth. of the City of 1,200 1,200
Petersburg, Variable Rate Hospital Fac. Bonds
(Southside Regional Medical Center),
Series 1997, 4.35% 2017(2)
State of Washington, Public Power Supply System, 2,500 2,601
Nuclear Project No. 1 Ref. Rev. Bonds,
Series 1991A, 6.875% 2017
State of Wyoming, General Fund Tax and Rev. 5,000 5,028
Anticipation Notes, Series 2000A, 5.00% 2001

----------
108,908
----------

TOTAL TAX-EXEMPT SECURITIES (cost: $1,783,672,000) 1,816,189

Excess of cash and receivables over payables 17,829
----------
NET ASSETS 1,834,018
----------

(1)Purchased in a private placement transaction;
resale to the public may require registration or sale
only to qualified institutional buyers.

(2)Coupon rate may change periodically.

Key to Abbreviations

Agcy. = Agency
Auth. = Authority
Cert. of Part. = Certificates of Participation
Dept. = Department
Dev. = Development
Dist. = District
Econ. = Economic
Fac. = Facility
Facs. = Facilities
Fin. = Finance
Fncg. = Financing
G.O. = General Obligation
Preref. = Prerefunded
Redev. = Redevelopment
Ref. = Refunding
Rev. = Revenue

</TABLE>

The Tax-Exempt Bond Fund of America
FINANCIAL STATEMENTS

<TABLE>
<S> <C> <C>
STATEMENT OF ASSETS AND LIABILITIES
at August 31, 2000 (dollars in thousands)

Assets:
Investment securities at market
(cost: $1,783,672) $1,816,189
Cash 13
Receivables for --
Sales of investments $1,751
Sales of fund's shares 4,128
Accrued interest 25,292
Other 4 31,175
1,847,377
Liabilities:
Payables for --
Purchases of investments 6,663
Repurchases of fund's shares 1,945
Dividends on fund's shares 3,139
Management services 545
Other expenses 1,067 13,359
Net Assets at August 31, 2000 --
Total authorized capital stock -- 200,000,000 shares $1,834,018

Class A shares, $.001 par value
Net assets $1,830,682
Shares outstanding 155,068,050
Net asset value per share $11.81
Class B shares, $.001 par value
Net assets $3,336
Shares outstanding 282,580
Net asset value per share $11.81

STATEMENT OF OPERATIONS
for the year ended August 31, 2000 (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $107,351

Expenses:
Management services fee $6,502
Distribution expenses - Class A 4,549
Distribution expenses - Class B 7
Transfer agent fee - Class A 530
Transfer agent fee - Class B -
Reports to shareholders 126
Registration statement and prospectus 219
Postage, stationery and supplies 176
Directors' fees 27
Auditing and legal fees 26
Custodian fee 33
Taxes other than federal income tax 30 12,225
Net investment income 95,126

Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (2,279)
Net change in unrealized appreciation on
investments (1,685)
Net realized loss and change in unrealized
appreciation on investments (3,964)

Net Increase in Net Assets Resulting from
Operations $91,162

STATEMENT OF CHANGES IN NET ASSETS (dollars in thousands)

Year ended
August 31,
2000 1999
Operations:
Net investment income $95,126 $90,571
Net realized (loss) gain on investments (2,279) 12,422
Net change in unrealized appreciation
on investments (1,685) (101,754)
Net increase in net assets
resulting from operations 91,162 1,239

Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (94,620) (90,695)
Class B (32) -
Distributions from net realized gain
on investments:
Class A (6,722) (27,512)
Class B - -
Total dividends and distributions (101,374) (118,207)

Capital Share Tranactions:
Proceeds from shares sold 353,333 477,680
Proceeds from shares issued in reinvestment
of net investment income dividends and
distributions of net realized gain on
investments 64,719 80,021
Cost of shares repurchased (490,988) (318,929)
Net (decrease) increase in net assets
resulting from capital share transactions (72,936) 238,772
Total (Decrease) Increase in Net Assets (83,148) 121,804

Net Assets:
Beginning of year 1,917,166 1,795,362
End of year(including
undistributed net investment
income: $36 and $121 respectively) $1,834,018 $1,917,166

See Notes to Financial Statements
</TABLE>

THE TAX-EXEMPT BOND FUND OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - The Tax-Exempt Bond Fund of America, Inc. (the "fund") is
registered under the Investment Company Act of 1940 as an open-end, diversified
management investment company. The fund seeks a high level of federally
tax-free current income, consistent with the preservation of capital, through a
diversified portfolio of municipal bonds. The fund offers Class A and Class B
shares. Class A shares are sold with an initial sales charge of up to 3.75%.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge paid upon redemption. This charge declines
from 5% to zero over a period of six years. Class B shares have higher
distribution expenses and transfer agent fees than Class A shares. Class B
shares are automatically converted to Class A shares eight years after the date
of purchase. Holders of both classes of shares have equal pro rata rights to
assets and identical voting, dividend, liquidation and other rights, except
that each class bears different distribution and transfer agent expenses, and
each class shall have exclusive rights to vote on matters affecting only their
class.

SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies consistently followed by the fund in the preparation of its financial
statements:

SECURITY VALUATION - 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. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates market
value.

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 Directors. The ability of the issuers of
the fixed-income securities held by the fund to meet their obligations may be
affected by economic developments in a specific industry, state or region.

SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions are
accounted for as of the trade date. Realized gains and losses from securities
transactions are determined based on specific identified cost. In the event
securities are purchased on a delayed delivery or "when-issued" basis, the fund
will instruct the custodian to segregate liquid assets sufficient to meet its
payment obligations in these transactions. Interest income is recognized on an
accrual basis. Premiums and original issue discounts on securities are
amortized daily over the expected life of the security. Amortization of market
discounts on securities is recognized upon disposition.

DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the fund's net investment income and
are paid to shareholders monthly.

ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between the share
classes based on their relative net asset values. Distribution expenses,
transfer agent fees and any other class-specific expenses, are accrued daily
and charged to the applicable share class.

2. FEDERAL INCOME TAXATION

The fund complies with the requirements of the Internal Revenue Code applicable
to regulated investment companies and intends to distribute all of its net
taxable income and net capital gains for the fiscal year. As a regulated
investment company, the fund is not subject to income taxes if such
distributions are made. Required distributions are determined on a tax basis
and may differ from net investment income and net realized gains for financial
reporting purposes. In addition, the fiscal year in which amounts are
distributed may differ from the year in which the net investment income and net
realized gains are recorded by the fund.

As of August 31, 2000, net unrealized appreciation on investments for book and
federal income tax purposes aggregated $32,517,000; $62,755,000 related to
appreciated securities and $30,238,000 related to depreciated securities.
During the year ended August 31, 2000 the fund realized, on a tax basis, a net
capital loss of $2,709,000 on securities transactions, of which the fund has
deferred, for tax purposes, to fiscal year ending August 31, 2001, the
recognition of capital losses totaling $917,000 which were realized during the
period November 1, 1999 through August 31, 2000. The fund had available at
August 31, 2000 a net capital loss carryforward totaling $1,792,000 which may
be used to offset capital gains realized during subsequent years through 2008
and thereby relieve the fund and its shareholders of any federal income tax
liability with respect to the capital gains that are so offset. The fund will
not make distributions from capital gains while a capital loss carryforward
remains. The cost of portfolio securities for book and federal income tax
purposes was $1,783,672,000 at August 31, 2000.

3. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $6,502,000 for management services was
incurred pursuant to an agreement with Capital Research and Management Company
(CRMC), with which certain officers and Directors of the fund are affiliated.
The Investment Advisory and Service Agreement provides for monthly fees accrued
daily, based on the following rates and net asset levels:

<TABLE>
<CAPTION>
Net Asset Level
<S> <C> <C>
Rate In Excess of Up to
0.30% $0 $0.06 billion
0.21 0.06 billion 1 billion
0.18 1 billion 3 billion
0.16 3 billion

</TABLE>

<TABLE>
<CAPTION>
Monthly Gross Investment Income
<S> <C> <C>
Rate In Excess of Up to
3.00% $0 $3,333,333
2.50 3,333,333 8,333,333
2.25 8,333,333

</TABLE>

DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.25% of Class A daily 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 in advance
by the fund's Board of Directors. Fund expenses under the Plan include payments
to dealers to compensate them for their selling and servicing efforts. Pursuant
to a Plan of Distribution for Class B shares, the fund may expend 1.00% of
Class B daily net assets annually to compensate dealers for their selling and
servicing efforts. Some or all of the unpaid amounts may be paid by the fund
in the future. During the year ended August 31, 2000, distribution expenses
under the Plans of Distribution for Class A were limited to $4,549,000 on Class
A shares. Had no limitation been in effect, the fund would have paid
$4,823,000 in distribution expenses for Class A shares under the plan. During
the year ended August 31, 2000, distribution expenses under the Plan of
Distribution for Class B shares were $7,000. As of August 31, 2000, accrued and
unpaid distribution expenses for Class A and Class B shares were $905,000 and
$3,000, respectively.

American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares received $502,000 (after allowances to dealers) during the year
ended August 31, 2000, as its portion of the sales charges paid by purchasers
of the fund's Class A shares. Such sales charges are not an expense of the fund
and, hence, are not reflected in the accompanying statement of operations.

TRANSFER AGENT FEE - A fee of $530,000 was incurred during the year ended
August 31, 2000 pursuant to an agreement with American Funds Service Company
(AFS), the transfer agent for the fund.

DEFERRED DIRECTORS' FEES - Directors 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 August 31, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1993) net of any payments to
Directors, were $100,000.

AFFILIATED DIRECTORS' AND OFFICERS - CRMC is owned by The Capital Group
Companies, Inc. AFS and AFD are both wholly owned subsidiaries of CRMC.
Officers of the fund and certain Directors are or may be considered to be
affiliated with CRMC, AFS and AFD. No such persons received any remuneration
directly from the fund.

4. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES

The fund made purchases and sales of investment securities, excluding
short-term securities, of $492,349,000 and $590,025,000 respectively, during
the year ended August 31, 2000.

Pursuant to the custodian agreement, the fund receives credits against its
custodian fee for imputed interest on certain balances with the custodian bank.
During the year ended August 31, 2000, the custodian fee of $33,000 includes
$13,000 that was paid by these credits rather than in cash.
The fund reclassified $847,000 from undistributed net realized gains to
additional paid-in capital for the year ended August 31, 2000 as a result of
permanent differences between book and tax.

As of August 31, 2000, net assets consisted of the following:
<TABLE>
(dollars in thousands)
<S> <C>
Capital paid in on shares of capital stock $ 1,803,822
Undistributed net investment income 36
Accumulated net realized loss (2,357)
Net unrealized appreciation 32,517
------------
Net Assets $ 1,834,018
------------
</TABLE>
[end chart]

Capital share transactions in the fund were as follows:
<TABLE>
Capital share transactions table:
<S> <C> <C> <C> <C>
Year Ended Year Ended
August 31, 2000 August 31, 1999
Amount (000) Shares Amount (000) Shares
Class A Shares:
Sold $ 349,973 30,217,094 $ 477,680 38,674,257
Reinvestment of dividends 64,695 5,585,672 80,021 6,494,510
and distributions
Repurchased (490,875) (42,438,287) (318,929) (25,928,672)
Net (decrease) increase in (76,207) (6,635,521) 238,772 19,240,095
Class A
Class B Shares: *
Sold 3,360 290,305 - -
Reinvestment of dividends 24 2,086 - -
and distributions
Repurchased (113) (9,811) - -
Net increase in Class B 3,271 282,580 - -
Total net (decrease) increase
in fund $ (72,936) (6,352,941) $ 238,772 19,240,095

* Class B shares not offered before March 15, 2000.

</TABLE>

<TABLE>
PER-SHARE DATA AND RATIOS (1)
<S> <C> <C> <C> <C> <C>
Net
Net asset gains/(losses)
value, Net on securities
beginning investment (both realized
Year ended of year income and unrealized)
Class A:
2000 $11.86 $.60 (2) $(.01)(2)
1999 12.60 .59 (.55)
1998 12.27 .62 .37
1997 11.86 .64 .45
1996 11.94 .64 .01
Class B:
2000 11.50 .21 (2) .34(2)

Dividends
Total from (from net Distributions
investment investment (from capital Total
Year ended operations income) gains) distributions
Class A:
2000 $.59 $(.60) $(.04) $(.64)
1999 0.04 (.59) (.19) (.78)
1998 0.99 (.62) (.04) (.66)
1997 1.09 (.64) (.04) (.68)
1996 0.65 (.64) (.09) (.73)
Class B:
2000 0.55 (.24) - (.24)

Ratio of
Net asset Net assets, expenses
value, end Total end of year to average
Year ended of year return (in millions) net assets
Class A:
2000 $11.81 5.27% $1,831 .67%
1999 11.86 0.22 1,917 .65
1998 12.60 8.26 1,795 .66
1997 12.27 9.39 1,593 .68
1996 11.86 5.51 1,476 .68
Class B:
2000 11.81 4.88 3 1.39(3)

Ratio of
net income Portfolio
to average turnover
Year ended net assets rate
Class A:
2000 5.22% 28.64% (4)
1999 4.78 14.56
1998 4.98 23.19
1997 5.27 14.39
1996 5.35 26.89
Class B:
2000 4.29 (3) 28.64 (4)

</TABLE>

(1) The years 1996 through 2000 represent, for Class A shares, fiscal years
ended August 31. The period ended 2000 represents, for Class B shares,
the 169-day period ended August 31, 2000. Class B shares were not offered
before March 15, 2000. Total returns for such periods are based
on activity during the period and thus are not representative of a full year.
Total returns exclude all sales charges, including contingent deferred sales
charges.

(2) Based on average shares outstanding.

(3) Annualized.

(4) Represents portfolio turnover rate (equivalent for all share classes) for
the year ended August 31, 2000.

Report of Independent Accountant

To the Board of Directors and Shareholders of The Tax-Exempt Bond Fund of
America, Inc.

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 The Tax-Exempt Bond Fund of
America, Inc.(the "Fund") at August 31, 2000, 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 accounting principles generally accepted in the
United States. 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 auditing standards generally accepted
in the United States, 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 August 31, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
September 29, 2000

August 31, 2000

Tax Information (unaudited)

We are required to advise you within 60 days of the fund's fiscal year-end
regarding the federal tax status of certain distributions received by
shareholders during such fiscal year.

During the fiscal year ended August 31, 2000, the fund paid a long-term capital
gain distribution of $6,722,000.

Shareholders may exclude from federal taxable income any exempt-interest
dividends paid from net investment income. All of the dividends paid from net
investment income for Class A and Class B qualify as exempt-interest dividends.
Any distributions paid from realized net short-term or long-term capital gains
are not exempt from federal taxation.

SINCE THE AMOUNTS ABOVE ARE REPORTED FOR THE FUND'S FISCAL YEAR AND NOT THE
CALENDAR YEAR, SHAREHOLDERS SHOULD REFER TO THEIR FORM 1099-DIV OR OTHER TAX
INFORMATION WHICH WILL BE MAILED IN JANUARY 2001 TO DETERMINE THE CALENDAR YEAR
AMOUNTS TO BE INCLUDED ON THEIR 2000 TAX RETURNS. SHAREHOLDERS SHOULD CONSULT
THEIR TAX ADVISERS.

PART C
OTHER INFORMATION
THE TAX-EXEMPT BOND FUND OF AMERICA, INC.

ITEM 23. EXHIBITS

(a) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(b) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97)
(c) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(d) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(e) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(f) None
(g) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97)
(h) None
(i) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(j) Consent of Independent Accountants
(k) None
(l) Previously filed (see Post-Effective Amendment No. 23 filed 10/29/97)
(m) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(n) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)
(o) None
(p) Previously filed (see Post-Effective Amendment No. 27 filed 3/14/00)

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

None

ITEM 25. INDEMNIFICATION

Registrant is a joint-insured under Investment Advisor/Mutual fund Errors and
Omissions Policies written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual Insurance Company which
insures its officers and directors against certain liabilities. However, in
no event will Registrant maintain insurance to indemnify any such person for
any act for which Registrant itself if not permitted to indemnify the
individual.

ITEM 25. INDEMNIFICATION (CONTINUED)

Subsection (b) of Section 2-418 of the General Corporation Law of Maryland
empowers a corporation to indemnify any person who was or is party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against reasonable expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding unless it is established that:
(i) the act or omission of the person was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the person actually received an improper personal
benefit of money, property or services; or (iii) with respect to any criminal
action or proceeding, the person had reasonable cause to believe his act or
omission was unlawful.

Indemnification under subsection (b) of Section 2-418 may not be made by a
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification is permissible in the circumstances because
the party to be indemnified has met the standard of conduct set forth in
subsection (b). This determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of directors not, at the time,
parties to the proceeding, or, if such quorum cannot be obtained, then by a
majority vote of a committee of the Board consisting solely of two or more
directors not, at the time, parties to such proceeding and who were duly
designated to act in the matter by a majority vote of the full Board in which
the designated directors who are parties may participate; (ii) by special legal
counsel selected by the Board of Directors of a committee of the Board by vote
as set forth in subparagraph (i), or, if the requisite quorum of the full Board
cannot be obtained therefor and the committee cannot be established, by a
majority vote of the full Board in which any director who is a party may
participate; or (iii) by the stockholders (except that shares held by any party
to the specific proceeding may not be voted). A court of appropriate
jurisdiction may also order indemnification if the court determines that a
person seeking indemnification is entitled to reimbursement under subsection
(b).

Section 2-418 further provides that indemnification provided for by Section
2-418 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; that the scope of indemnification extends to
directors, officers, employees or agents of a constituent corporation absorbed
in a consolidation, or merger and persons serving in that capacity at the
request of the constituent corporation for another; and empowers the
corporation to purchase and maintain insurance on behalf of a director,
officer, employee or agent of the corporation against any liability asserted
against or incurred by such person in any such capacity or arising out of such
person's status as such whether or not the corporation would have the power to
indemnify such person against such liabilities under Section 2-418.

Article VI of the Articles of Incorporation of the Fund provides that
"Nothing in these Articles of Incorporation or in the By-Laws shall be deemed
to protect any director or officer of the Corporation against any liability to
the Corporation or to its security holders to which he would otherwise be
subject by reason of willful malfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office."

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

None

ITEM 27. PRINCIPAL UNDERWRITERS

(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, EuroPacific
Growth Fund, Fundamental Investors, Inc., The Growth Fund of America, Inc., The
Income Fund of America, Inc., The Investment Company of America, Intermediate
Bond Fund of America, Limited Term Tax-Exempt Bond Fund of America, The New
Economy Fund, New Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World
Fund, Inc., The Tax-Exempt Money Fund of America, U.S. Treasury Money Fund of
America and Washington Mutual Investors Fund, Inc.

<TABLE>
<CAPTION>
(B) (1) (2) (3)

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES

BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT

<S> <C> <C> <C>
David L. Abzug Vice President None

27304 Park Vista Road

Agoura Hills, CA 91301

John A. Agar Vice President None

1501 N. University, Suite 227A

Little Rock, AR 72207

Robert B. Aprison Vice President None

2983 Bryn Wood Drive

Madison, WI 53711

L William W. Bagnard Vice President None

Steven L. Barnes Senior Vice President None

5400 Mount Meeker Road

Suite 1

Boulder, CO 80301-3508

B Carl R. Bauer Vice President None

Michelle A. Bergeron Senior Vice President None

4160 Gateswalk Drive

Smyrna, GA 30080

J. Walter Best, Jr. Regional Vice President None

9013 Brentmeade Blvd.

Brentwood, TN 37027

Joseph T. Blair Senior Vice President None

148 E. Shore Ave.

Groton Long Point, CT 06340

John A. Blanchard Vice President None

6421 Aberdeen Road

Mission Hills, KS 66208

Ian B. Bodell Senior Vice President None

P.O. Box 1665

Brentwood, TN 37024-1665

Mick L. Brethower Senior Vice President None

2320 North Austin Avenue

Georgetown, TX 78626

Alan Brown Vice President None

4129 Laclede Avenue

St. Louis, MO 63108

B J. Peter Burns Vice President None

Brian C. Casey Vice President None

8002 Greentree Road

Bethesda, MD 20817

Victor C. Cassato Senior Vice President None

609 W. Littleton Blvd., Suite 310

Greenwood Village, CO 80120

Christopher J. Cassin Senior Vice President None

19 North Grant Street

Hinsdale, IL 60521

Denise M. Cassin Vice President None

1301 Stoney Creek Drive

San Ramon, CA 94538

L Larry P. Clemmensen Director None

L Kevin G. Clifford Director, President and Co-Chief None

Executive Officer

Ruth M. Collier Senior Vice President None

29 Landsdowne Drive

Larchmont, NY 10538

S David Coolbaugh Assistant Vice President None

H Carlo O. Cordasco Assistant Vice President None

Thomas E. Cournoyer Vice President None

2333 Granada Boulevard

Coral Gables, FL 33134

Douglas A. Critchell Senior Vice President None

3521 Rittenhouse Street, N.W.

Washington, D.C. 20015

L Carl D. Cutting Vice President None

William F. Daugherty Regional Vice President None

1216 Highlander Way

Mechanicsburg, PA 17055

Daniel J. Delianedis Vice President None

8689 Braxton Drive

Eden Prairie, MN 55347

Michael A. DiLella Vice President None

P. O. Box 661

Ramsey, NJ 07446

G. Michael Dill Senior Vice President None
505 E. Main Street

Jenks, OK 74037

Kirk D. Dodge Senior Vice President None

2627 Mission Street

San Marino, CA 91108

Peter J. Doran Director, Executive Vice None
President

100 Merrick Road, Suite 216W

Rockville Centre, NY 11570

L Michael J. Downer Secretary Vice President

Robert W. Durbin Vice President None

74 Sunny Lane

Tiffin, OH 44883

I Lloyd G. Edwards Senior Vice President None

John Fodor Senior Vice President None

15 Latisquama Road

Southborough, MA 01772

Daniel B. Frick Regional Vice President None

845 Western Avenue

Glen Ellyn, IL 60137

Clyde E. Gardner Senior Vice President None

Route 2, Box 3162

Osage Beach, MO 65065

B Evelyn K. Glassford Vice President None

Jeffrey J. Greiner Vice President None

12210 Taylor Road

Plain City, OH 43064

L Paul G. Haaga, Jr. Director Chairman and Director

B Mariellen Hamann Assistant Vice President None

David E. Harper Senior Vice President None

150 Old Franklin School Road

Pittstown, NJ 08867

H Mary Pat Harris Assistant Vice President None

Ronald R. Hulsey Senior Vice President None

6744 Avalon

Dallas, TX 75214

Robert S. Irish Vice President None

1225 Vista Del Mar Drive

Delray Beach, FL 33483

Michael J. Johnston Director None

630 Fifth Avenue, 36th Floor

New York, NY 10111

B Damien M. Jordan Vice President None

John P. Keating Regional Vice President None

2285 Eagle Harbor Parkway

Orange Park, FL 32073

Andrew R. LeBlanc Regional Vice President None

10 Saint James Street South

Garden City, NY 11530

Arthur J. Levine Senior Vice President None

12558 Highlands Place

Fishers, IN 46038

B Karl A. Lewis Assistant Vice President None

T. Blake Liberty Vice President None

5506 East Mineral Lane

Littleton, CO 80122

Mark J. Lien Regional Vice President None

5570 Beechwood Terrace

West Des Moines, IA 50266

L Lorin E. Liesy Vice President None

LW Robert W. Lovelace Director None

Stephen A. Malbasa Senior Vice President None

13405 Lake Shore Blvd.

Cleveland, OH 44110

Steven M. Markel Senior Vice President None

5241 South Race Street

Littleton, CO 80121

L J. Clifton Massar Director, Senior Vice President None

L E. Lee McClennahan Senior Vice President None

James R. McCrary Regional Vice President None

963 1st Street, #1

Hermosa Beach, CA 90254

S John V. McLaughlin Senior Vice President None

Terry W. McNabb Vice President None

2002 Barrett Station Road

St. Louis, MO 63131

David R. Murray Vice President None

1263 Brookwood Street

Birmingham, MI 48009

Stephen S. Nelson Vice President None

P.O. Box 470528

Charlotte, NC 28247-0528

William E. Noe Vice President None

304 River Oaks Road

Brentwood, TN 37027

Peter A. Nyhus Vice President None

3084 Wilds Ridge Court

Prior Lake, MN 55372

Eric P. Olson Vice President None

62 Park Drive

Glenview, IL 60025

Gary A. Peace Regional Vice President None

291 Kaanapali Drive

Napa, CA 94558

Samuel W. Perry Regional Vice President None

6133 Calle del Paisano

Scottsdale, AZ 85251

Fredric Phillips Senior Vice President None

175 Highland Avenue, 4th Floor

Needham, MA 02494

B Candance D. Pilgrim Assistant Vice President None

Carl S. Platou Vice President None

7455 80th Place, S.E.

Mercer Island, WA 98040

L John O. Post Senior Vice President None

S Richard P. Prior Vice President None

Steven J. Reitman Senior Vice President None

212 The Lane

Hinsdale, IL 60521

Brian A. Roberts Vice President None

P.O. Box 452

Glenville, NC 28736

George S. Ross Senior Vice President None

P.O. Box 376

Southport, ME 04576

L Julie D. Roth Vice President None

L James F. Rothenberg Director None

Douglas F. Rowe Vice President None

414 Logan Ranch Road

Georgetown, TX 78628

Christopher S. Rowey Vice President None

10538 Cheviot Drive

Los Angeles, CA 90064

Dean B. Rydquist Senior Vice President None

1080 Bay Pointe Crossing

Alpharetta, GA 30005

Richard R. Samson Senior Vice President None

4604 Glencoe Avenue, #4

Marina del Rey, CA 90292

Joseph D. Scarpitti Vice President None

31465 St. Andrews

Westlake, OH 44145

L R. Michael Shanahan Director None

Brad W. Short Regional Vice President None

1601 Seal Way

Seal Beach, CA 90740

David W. Short Chairman of the Board and None

1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer

Pittsburgh, PA 15238

William P. Simon Senior Vice President None

912 Castlehill Lane

Devon, PA 19333

Rodney G. Smith Senior Vice President None

100 N. Central Expressway

Suite 1214

Richardson, TX 75080

S Sherrie L. Snyder-Senft Assistant Vice President None

Anthony L. Soave Regional Vice President None

8831 Morning Mist Drive

Clarkston, MI 48348

L Therese L. Souiller Assistant Vice President None

Nicholas D. Spadaccini Vice President None

855 Markley Woods Way

Cincinnati, OH 45230

L Kristen J. Spazafumo Assistant Vice President None

Daniel S. Spradling Senior Vice President None

181 Second Avenue

Suite 228

San Mateo, CA 94401

LW Eric H. Stern Director None

B Max D. Stites Vice President None

Thomas A. Stout Vice President None

1004 Ditchley Road

Virginia Beach, VA 23451

Craig R. Strauser Vice President None

3 Dover Way

Lake Oswego, OR 97034

Francis N. Strazzeri Senior Vice President None

3021 Kensington Trace

Tarpon Springs, FL 34689

L Drew W. Taylor Assistant Vice President None

Gary J. Thoma Regional Vice President None

604 Thelosen Drive

Kimberly, WI 54136

L James P. Toomey Vice President None

I Christopher E. Trede Vice President None

George F. Truesdail Senior Vice President None

400 Abbotsford Court

Charlotte, NC 28270

Scott W. Ursin-Smith Vice President None

60 Reedland Woods Way

Tiburon, CA 94920

J. David Viale Regional Vice President None

204 Fernleaf Drive

Corona Del Mar, CA 92625

Thomas E. Warren Vice President None

119 Faubel Street

Sarasota, FL 34242

L J. Kelly Webb Senior Vice President, None

Treasurer and Controller

Gregory J. Weimer Vice President None

206 Hardwood Drive

Venetia, PA 15367

B Timothy W. Weiss Director None

George J. Wenzel Regional Vice President None

251 Barden Road

Bloomfield, MI 48304

H J. D. Wiedmaier Assistant Vice President None

Timothy J. Wilson Vice President None

113 Farmview Place

Venetia, PA 15367

B Laura L. Wimberly Vice President None

H Marshall D. Wingo Director, Senior Vice None
President

L Robert L. Winston Director, Senior Vice None
President

William R. Yost Senior Vice President None

9320 Overlook Trail

Eden Prairie, MN 55347

Janet M. Young Regional Vice President None

1616 Vermont

Houston, TX 77006

Jonathan A. Young Regional Vice President None

329 Downing Drive

Chesapeake, VA 23322

Scott D. Zambon Regional Vice President None

2887 Player Lane

Tustin Ranch, CA 92782

</TABLE>

__________

L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and held in the
offices of its investment adviser, Capital Research and Management Company, 333
South Hope Street, Los Angeles, California 90071, and/or 135 South State
College Boulevard, Brea, California 92821.

Registrant's records covering shareholder accounts are maintained and kept by
its transfer agent, American Funds Service Company, 135 South State College
Boulevard, Brea, California 92821, 8332 Woodfield Crossing Boulevard,
Indianapolis, IN 46240, 3500 Wiseman Boulevard, San Antonio, Texas 78251 and
5300 Robin Hood Road, Norfolk, VA 23513.

Registrant's records covering portfolio transactions are maintained and kept
by its custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New
York, New York 10081.

ITEM 29. MANAGEMENT SERVICES

None

ITEM 30. UNDERTAKINGS

n/a

SIGNATURE OF REGISTRANT

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, and State of California, on the
31st day of October, 2000.

THE TAX-EXEMPT BOND FUND OF
AMERICA, INC.
By /s/ Paul G. Haaga, Jr.
(Paul G. Haaga, Jr., Chairman of the Board)

Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on October 31, 2000, by the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE

<S> <C> <C>
(1) Principal Executive Officer:

/s/ Neil L. Langberg President and Director

(Neil L. Langberg)

(2) Principal Financial Officer and
Principal Accounting Officer:

/s/ Anthony W. Hynes Treasurer

(Anthony W. Hynes, Jr.)

(3) Directors:

Richard G. Capen, Jr.* Director

H. Frederick Christie* Director

Diane C. Creel* Director

Martin Fenton* Director

Leonard R. Fuller* Director

/s/ Abner D. Goldstine Vice Chairman and Director

(Abner D. Goldstine)

/s/ Paul G. Haaga, Jr. Chairman and Director

(Paul G. Haaga, Jr.)

/s/ Neil L. Langberg President and Director

(Neil L. Langberg)

Richard G. Newman* Director

Frank M. Sanchez* Director

</TABLE>

*By /s/ Julie F. Williams
Julie F. Williams, Attorney-in-Fact

Counsel represents that this amendment does not contain disclosures that
would make the amendment ineligible for effectiveness under the provisions of
rule 485(b).

/s/ Michael J. Downer
(Michael J. Downer)