LIMITED TERM TAX EXEMPT BOND FUND OF AMERICA
485BPOS, 2000-10-31
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MARKED
SEC. File Nos. 33-66214
               811-7888

                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

                                   FORM N-1A
                            Registration Statement
                                     Under
                          the Securities Act of 1933
                        Post-Effective Amendment No. 11
                                      and
                            Registration Statement
                                     Under
                      The Investment Company Act of 1940
                                Amendment No. 13

                 LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
              (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
              LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
                         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
                        LOS ANGELES, CA 90071-2371
                       (COUNSEL FOR THE REGISTRANT)

                Approximate date of proposed public offering:
It is proposed that this filing will 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>



                                       1

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.


                                       2

                                   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.




                                       3

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.


                                       4

                                   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.


                                       5

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.


                                       6

                                   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.


                                       7

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.


                                       8

                                   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.


                                       9

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.


                                       10

                                   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.


                                       11

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.

 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.

 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.


                                       12

                                   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.

 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.

 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.


                                       13

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.

 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.

 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.


                                       14

                                   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.


                                       15

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>



                                       16

                                   NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>



                                       17

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.


                                       18

                                   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>



                                       19

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>



                                       20

                                   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


                                       21

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."


                                       22

                                   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


                                       23

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.


                                       24

                                   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.


                                       25

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.


                                       26

                                   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.


                                       27

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.


                                       28

                                   NATIONAL TAX-EXEMPT INCOME FUNDS / PROSPECTUS

<PAGE>



 AMERICAN HIGH-INCOME MUNICIPAL BOND FUND/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
 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.


                                       29

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.


                                       30

                                   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.

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.


                    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



<TABLE>
<CAPTION>

                                                                                                  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.


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 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



<TABLE>
Limited Term Tax-Exempt Bond Fund of America
Investment Portfolio, July 31, 2000

[Begin pie chart]
Michigan(MI)  -  9.65%
California(CA)  -  9.59%
Illinois(IL)  -  7.18%
Texas(TX)  -  6.85%
New York(NY)  -  6.85%
North Carolina(NC)  -  6.14%
Washington(WA)  -  4.70%
Louisiana(LA)  -  3.83%
Pennsylvania(PA)  -  3.59%
Massachusetts(MA)  -  3.45%
[End pie chart]                                                                                   Principal       Market
                                                                                      Amount        Value
                                                                                        (000)        (000)
                                                                                    --------     --------
<S>                                                                              <C>         <C>
Tax-Exempt Securities Maturing in More Than One
Year - 96.28%

Alabama  -  1.14%
Industrial Dev. Board of the City of Butler, Pollution                                 $3,000       $2,957
Control Ref. Rev. Bonds (James River Project), Series
1993, 5.50% 2005

Alaska  -  1.16%
Industrial Dev. And Export Auth. Power Rev. Bonds,                                        930          943
First Series AMT (Snettisham Hydroelectric Project),
AMBAC Insured, 5.25% 2005
Industrial Dev. And Export Auth. Power Rev. Bonds,                                         70           71
(Snettisham Hydroelectric Project), First Series,
AMBAC Insured, 5.25% 2005 (Escrowed to Maturity)
Student Loan Corp., Student Loan Rev. Bonds, AMBAC
Insured AMT:
1997 Series A, 5.20% 2006                                                               1,000        1,012
1999 Series A, 4.80% 2007                                                               1,000          978

Arizona  -  0.70%
Industrial Dev. Auth. of the County of Maricopa,                                        1,950        1,804
Health Fac. Rev. Bonds (Catholic Healthcare West Project),
1998 Series A, 4.30% 2005

California  -  9.59%
Health Facs Fncg. Auth.:
Hospital Rev. Bonds (Downey Community Hospital),
Series 1993:
5.20% 2003                                                                              1,000          998
5.30% 2004                                                                              1,010        1,009
Rev. Bonds (Catholic Healthcare West), 1998 Series A:
5.00% 2006                                                                              1,000          939
5.00% 2007                                                                              1,000          926
Pollution Control Fncg. Auth., Solid Waste Disposal Ref.                                3,500        3,202
Rev. Bonds (USA Waste Services, Inc. Project), Series
1998A AMT, 5.10% 2018 (Put 2008)(1)
Statewide Communities Dev. Auth., Apartment Dev. Rev.                                   4,000        3,840
Ref. Bonds (Irvine Apartment Communities, LP), Series
1998A-1 AMT, 5.05% 2025 (Put 2008)(1)
Association of Bay Area Governments Fin Auth. For
Nonprofit Corps., Ref. Rev. Cert. of  Part. (Episcopal
Homes Foundation):
Series 1997A, 5.25% 2007                                                                  840          791
Series 1998, 5.00% 2007                                                                 1,405        1,379
Fin. Auth., Taxable Rev. Ref. Cert. of Part. (American                                  1,000          956
Baptist Homes of the West Facs. Project), 5.50% 2007
City of Duarte, City of Hope National Medical Center,                                   1,000          941
Cert. of Part., Series 1999A, 5.25% 2008
Long Beach Aquarium of the Pacific, Rev. Bonds (Aquarium
of the Pacific Project), 1995 Series A:
5.75% 2005                                                                              3,500        3,524
5.75% 2006                                                                                780          784
County of Los Angeles, Capital Asset Leasing Corp., Cert.                               1,020        1,046
of Part. (Marina del Rey), 1993 Series A, 6.25% 2003
Sacramento Cogeneration Auth., Cogeneration Project Rev.                                2,200        2,355
Bonds (Procter & Gamble Project), 1995 Series, 7.00% 2004
Sacramento Power Auth., Cogeneration Project Rev.                                       2,000        2,101
Bonds (Campbell Soup Project), 1995 Series, 6.50% 2004

Colorado  -  1.68%
Housing and Fin. Auth., Single Family Program Senior                                      470          471
Bonds, 1995 Series C-2, 5.625% 2009 (2000)(1)
Eaglebend Affordable Housing Corp., Multi-family Housing
Project Rev. Ref. Bonds, Series 1997 A:
5.45% 2002                                                                                255          255
5.75% 2007                                                                              2,585        2,573
University of Colorado Hospital Auth., Hospital Ref.                                    1,000        1,043
Rev. Bonds, Series 1997A, AMBAC Insured, 5.50% 2007

Connecticut  -  0.61%
Mashantucket (Western) Pequot Tribe, Special Rev.
Bonds, 1996 Series A:(2)
6.25% 2002 (Escrowed to Maturity)                                                         500          518
6.375% 2004 (Escrowed to Maturity)                                                        995        1,061

District of Columbia  -  1.74%
G.O. Ref. Bonds, Series 1993D, FGIC Insured:
5.10% 2002 (Escrowed to Maturity)                                                         932          945
5.10% 2002                                                                                 68           69
Fixed Rate Rev. Bonds (National Academy of Sciences                                     1,065        1,072
Project), Series 1999A, AMBAC Insured, 5.00% 2007
Hospital Rev. Ref. Bonds (Medlantic Healthcare
Group, Inc. Issue), Series 1997A, MBIA  Insured:
6.00% 2006 (Escrowed to Maturity)                                                       1,000        1,063
6.00% 2007 (Escrowed to Maturity)                                                       1,250        1,338

Florida  -  0.96%
Lee County Industrial Dev. Auth., Healthcare Facs. Rev.                                 1,500        1,427
Bonds, Series 1999A (Shell Point/Alliance Obligated
Group, Shell Point Village Project), 5.25% 2005
Meadow Pointe II, Community Dev. Dist. (Pasco County),                                  1,060        1,053
Capital Improvement Rev. Bonds, Series 1998A, 5.25% 2003

Hawaii  -  1.58%
Cert. of Part. (Kapolei State Office Building), 1998
Series A, AMBAC Insured:
4.10% 2004                                                                              2,125        2,046
5.00% 2005                                                                              1,000        1,007
Housing and Community Dev. Corporation of Hawaii, Single                                1,000        1,025
Family Mortgage Purchase Rev. Bonds, Series 2000 A AMT,
5.90% 2008

Idaho  -  1.10%
Housing and Fin. Association, Single Family Mortgage
Bonds, AMT:
1998 Series C-2 , 5.25% 2011                                                              500          492
1998 Series E-3, 5.125% 2011                                                              690          676
1998 Series H, 4.65% 2012                                                               1,170        1,130
1998 Series I-2, 4.70% 2012                                                               580          554

Illinois  -  7.18%
Health Facs. Auth., Rev. Ref. Bonds:
Series 1997A, (Advocate Health Care Network):
5.50% 2004                                                                              1,250        1,270
5.10% 2005                                                                              1,815        1,811
Series 1998A (Advocate Health Care Network), 5.00% 2006                                 1,730        1,710
Series 1998 (Centegra Health System), 5.50% 2007                                        2,480        2,424
Series 1997A (Highland Park Hospital Project), FGIC                                     1,490        1,537
Insured, 5.50% 2005
Series 1998 (Northwestern Medical Faculty Foundation,                                   1,810        1,848
Inc.), MBIA Insured,  5.25% 2006
Series 1993, (OSF Healthcare System), 5.25% 2001                                        2,300        2,304
Series 1999 (OSF Healthcare System):
5.25% 2005                                                                                855          843
5.375% 2006                                                                               900          888
5.50% 2008                                                                              1,000          984
Series 1997A (Victory Health Services), 5.25% 2004                                      1,755        1,731
Housing Dev. Auth., Multi-family Housing Bonds, 1992                                    1,165        1,202
Series A, 6.55% 2003

Indiana  -  2.11%
Health Fac. Fncg. Auth., Hospital Rev. Bonds:
Charity Obligated Group, Series 1999D, 5.50% 2008                                       1,000        1,018
Clarian Health Partners, Inc., Series 1996A,                                            1,000        1,020
MBIA Insured, 5.25% 2008
Hospital Auth.:
City of Fort Wayne, Rev. Bonds, Series 1998 (Parkview                                   1,000          959
Health System, Inc. Project), MBIA Insured, 4.10% 2004
St. Joseph County, Health System Bonds, (Memorial                                       1,010        1,048
Health System), Series 1998A, MBIA Insured, 5.50% 2008
Housing Fin. Auth., Multi-Family Housing Rev. Bonds                                     1,400        1,406
(Indiana Affordable Housing, Inc.), Series 1999A,
5.40% 2009

Iowa  -  1.15%
Fin. Auth., Hospital Facs. Rev. Bonds:
Series 1998 A (Iowa Health System), MBIA Insured,                                       1,895        1,937
5.25% 2007
Series 1999 (Mercy Medical Center Project), FSA                                         1,000        1,023
Insured, 5.30% 2009

Kentucky  -  2.04%
Econ. Dev. Fin. Auth., Hospital System Ref. and
Improvement Rev. Bonds, (Appalachian Regional
Healthcare, Inc. Project),  Series 1997:
5.20% 2004                                                                              1,000          877
5.40% 2006                                                                              1,500        1,253
5.50% 2007                                                                                465          381
Econ. Dev. Fin. Auh. Rev. Bonds (Catholic Health                                        1,000        1,010
Initiatives), Series 2000A, 5.50% 2009
City of Ashland, Pollution Control Ref. Rev. Bonds,                                     1,750        1,757
Series 1999 (Ashland Inc. Project), 5.70% 2009

Louisiana  -  3.83%
Public Facs. Auth., Hospital Rev. and Ref. Bonds                                        4,500        4,648
(Franciscan Missionaries of Our Lady Health System
Project), Series 1998A, FSA Insured, 5.50% 2006
Jefferson Parish Hospital Service Dist. No. 2, Parish of                                2,150        2,171
Jefferson, Hospital Rev. Bonds, Series 1998, FSA
Insured, 5.00% 2005
Lake Charles Harbor and Terminal Dist., Port Facs. Rev.                                 1,000        1,076
Ref. Bonds (Trunkline LNG  Co. Project), Series
1992, 7.75% 2022
Parish of St. Charles, Pollution Control Rev. Ref.                                      2,000        1,995
Bonds (Entergy Louisiana, Inc. Project), Series
1999-C, 5.35% 2029 (Put 2003)(1)

Maine  -  2.59%
Educational Loan Marketing Corp., Senior Student Loan
Rev. Bonds, AMT, Series 1994A-4:
5.95% 2003                                                                              1,000        1,035
6.05% 2004                                                                              1,500        1,562
Housing Auth., Mortgage Purchase Bonds:
1994 Series E, 6.30% 2002                                                               1,280        1,288
1994 Series C-1, 5.90% 2015                                                             1,325        1,362
Student Loan Rev. Ref. Bonds, Series 1992A-1 AMT:
6.20% 2003                                                                                515          532
6.30% 2004                                                                                880          910

Maryland  -  1.15%
G.O. Bonds, State and Local Facs. Loan of 2000,                                         1,000        1,052
Series F, 5.50% 2008
Community Dev. Administration, Dept. of Housing and                                     1,905        1,911
Community Dev., Single Family Program Bonds, 1994 First
Series, 5.70% 2017 (2004)(1)

Massachusetts  -  3.45%
Educational Fncg. Auth., Education Loan Rev. and Ref. Bonds,                            3,335        3,434
Issue G, Series 2000A AMT, MBIA Insured, 5.55% 2008
Industrial Fin. Agcy. Resource Recovery Rev. Ref.                                       1,550        1,470
(Ogden Haverhill Project), Series 1998A AMT, 5.15% 2007
The New England Education Loan Marketing Corp., Student                                 1,000        1,038
Loan Rev. Ref. Bonds, 1992 Senior Issue A, 6.50% 2002
Port Auth. Special Facs. Rev. Bonds (United Air Lines,                                  3,000        2,974
 Inc. Project), Series 1999A AMT, 5.75% 2029

Michigan  -  9.65%
Hospital Fin. Auth.:
Rev. and Ref. Bonds:
The Detroit Medical Center Obligated Group, AMBAC Insured:
Series 1993B, 5.00% 2006                                                                1,000        1,005
Series 1997A, 5.00% 2006                                                                1,000        1,011
Hackley Hospital Obligated Group, Series 1998A, 4.90% 2007                              1,140        1,062
Henry Ford Health System, Series 1999A, 5.50% 2008                                      1,000        1,014
Mercy Health Services, Series 1997T, 6.25% 2011                                         1,000        1,070
Sinai Hospital of Greater Detroit, Series 1995, 6.00% 2008                              2,000        1,892
Rev. Ref. Bonds:
Genesys Health System Obligated Group, Series 1995A,                                    1,375        1,481
7.20% 2003 (Escrowed to Maturity)
Pontiac Osteopathic, Series 1994A, 5.375% 2006                                          4,345        4,074
Variable Rate Rev. Bonds (Ascension Health Credit Group):
Series 1999B-3, 5.30% 2033 (Put 2006)(1)                                                5,000        4,972
Series 1999B-4, 5.375% 2033 (Put 2007)(1)                                               2,000        1,987
Housing Dev. Auth., Rental Housing Rev. Bonds, 1992                                     1,200        1,251
Series A, AMBAC Insured, 6.40% 2005
City of Detroit, G.O. Refunding Bonds (Unlimited Tax):
Series 1995-A, 6.25% 2004                                                               1,000        1,043
Series 1995-B, 6.75% 2003                                                               2,000        2,091
City of Flint Hospital Building Auth., Rev. Ref. Bonds                                  1,000          975
(Hurley Medical Center), Series 1998A, 5.00% 2003

Minnesota  -  0.39%
City of Minneapolis, G.O. Various Purpose Bonds, Series                                 1,000        1,009
2000, 5.00% 2001

Nebraska  -  0.52%
Hospital Auth. No. 1 of Lancaster County, Rev. Bonds,                                   1,310        1,351
Series 1991A (Sisters of Charity Health Care Systems,
Inc.), MBIA Insured, 6.375% 2005

Nevada  -  0.35%
Housing Division, Single Family Mortgage Bonds, 1998                                      945          905
Series B-1, 5.20% 2011

New Jersey  -  2.09%
Econ. Dev. Auth., First Mortgage Rev. Ref. Bonds
(Fellowship Village Project), Series 1998A:
5.00% 2006                                                                              1,275        1,196
5.05% 2007                                                                              1,375        1,274
Housing and Mortgage Fin. Agcy., Home Buyer Rev. Bonds,                                 2,900        2,921
1994 Series I, MBIA  Insured, 5.60% 2016
1994 Series I, MBIA  Insured, 5.60% 2016

New Mexico  -  0.27%
Educational Assistance Foundation, Student Loan Rev. Bonds,                               695          712
Subordinate 1992 Series One-B AMT, 6.85% 2005

New York  -  6.85%
Dormitory Auth.:
Center for Nursing & Rehabilitation, Inc., FHA-Insured                                    785          777
Mortgage Nursing Home Rev. Bonds, Series 1997, 4.75% 2007
Cert. of Part., on behalf of the City University of                                     1,500        1,585
New York, as Lessee (John Jay College of Criminal Justice
Project Ref.), 6.00% 2006
Secured Hospital Rev. Bonds:
Saint Agnes Hospital, Series 1998A, 4.80% 2006                                          1,000          994
Wyckoff Heights Medical Center, Series 1998H, 5.125% 2008                               1,000        1,006
Housing Fin. Agcy., Health Facs. Rev. Bonds (New York City),                            5,450        5,717
1996 Series A Ref., 6.00% 2006
Port Auth. of New York and New Jersey, Special Project                                  2,000        2,093
Bonds (Delta Air Lines, Inc. Project), LaGuardia Airport
Passenger Terminal, Series 1R, 6.95% 2008
State Medical Care Facs. Fin. Agcy., Mental Health                                      1,000        1,057
Services Facs. Improvement Rev. Bonds, Series 1997B,
6.00% 2007
Castle Rest Residential Health Care Fac., FHA-Insured                                   1,400        1,403
Mortgage Rev. Bonds,  Series 1997A, 4.875% 2007
Dutchess County Industrial Dev. Agcy., Industrial Dev.                                  2,000        2,022
Bonds (IBM Project), Series 1999 AMT, 5.45% 2029
(Put 2009)(1)
City of New York, G.O. Bonds, 1997 Series L, MBIA                                       1,000        1,047
Insured, 5.625% 2007

North Carolina  -  6.14%
Eastern Municipal Power Agcy., Power System Rev. Bonds, Ref.:
Bonds, Ref.:
Series 1993B:
6.00% 2005 (2003)(1)                                                                    1,330        1,360
6.125% 2009                                                                             1,750        1,805
Series 1993C, 5.50% 2007                                                                1,550        1,546
Series 1999D, 5.45% 2004                                                                1,000        1,004
Municipal Power Agcy. Number 1, Catawba Electric
Rev. Bonds, Series 1992:
5.90% 2003                                                                              1,000        1,015
6.00%  2004                                                                             4,525        4,620
6.00% 2005                                                                              1,250        1,279
MBIA Insured, 6.0% 2010                                                                 3,000        3,229

Ohio  -  0.82%
The Student Loan Funding Corp., Cincinnati, Student Loan                                1,000        1,004
Rev. Bonds, Series 1988B-3 AMT, AMBAC Insured, 5.125% 2005
County of Knox, Hospital Facs. Ref. Rev. Bonds, Series                                  1,155        1,110
1998 (Knox Community Hospital), Asset Guaranty
Insured, 4.70% 2008

Oklahoma  -  0.51%
Industries Auth., Health System Rev. Ref. Bonds (INTEGRIS                               1,300        1,328
Health), Series 1995D, AMBAC Insured,  5.25% 2006

Pennsylvania  -  3.59%
Blair County Hospital Auth., Hospital Rev. Bonds                                        1,000        1,009
(Altoona Hospital Project), 1998 Series A, AMBAC
Insured, 5.00% 2005
Hospitals and Higher Education Facs. Auth. of
Philadelphia, Health System Rev. Bonds (Jefferson
Health System), Series 1997 A:
5.50% 2006                                                                              2,045        2,054
5.50% 2008                                                                              1,000          997
Philadelphia Auth. for Industrial Dev., Airport Rev.                                    3,410        3,445
Bonds (Philadelphia Airport System Project), Series
1998A AMT, FGIC Insured, 5.25% 2009
Westmoreland County Industrial Dev. Auth., Variable Rate                                2,000        1,767
Rev. Bonds, Series 1993 AMT (National Waste and
Energy Corp.; Valley Landfill Expansion
Project) 5.10% 2018 (2009)(1)

Rhode Island  -  0.52%
Student Loan Auth., Student Loan Rev. Ref. Bonds,                                       1,300        1,354
Series 1992B AMT, 6.90% 2003 (2001)(1)

South Carolina  -  0.60%
State Housing Fin. And Dev. Auth Mortgage Rev. Bonds,                                   1,490        1,545
Series 2000 A-2 AMT, FSA Insured, 5.875% 2009

South Dakota  -  0.24%
Housing Dev. Auth., Homeownership Mortgage Bonds,                                         610          618
1996 Series A, 5.50% 2010

Tennessee  -  0.39%
Housing Dev. Agcy., Homeownership Program Bonds,                                        1,000          995
Issue 1999-2A AMT, 5.05% 2008

Texas  -  6.85%
G.O. Bonds, Veterans' Housing Assistance Program,                                         280          281
Fund I, Series 1994C Ref.  Bonds, 6.25% 2015 (2000)(1)
Dept. of Housing and Community Affairs, Single Family                                     565          566
Mortgage Rev. Bonds, 1996 Series B, MBIA Insured, 5.55% 2011
Board of Regents of the Texas A&M University System, Rev.                               2,000        2,020
Fncg. System Bonds, 5.10% 2010
Bell County Health Facs. Dev. Corp.:
Hospital Rev. Ref. and Improvement Bonds (Cook Children's                               1,965        2,005
Medical Center Project), Series 1998, FSA
Insured, 5.25% 2008
Retirement Fac. Rev. Bonds (Buckner Retirement Services,
Inc. Obligated Group Project), Series 1998:
5.00% 2005                                                                              1,330        1,294
5.00% 2007                                                                              1,470        1,399
Harris County Health Facs. Dev. Corp.:
Hospital Rev. Bonds (Memorial Hermann Hospital System                                   1,000        1,018
Project), Series 1998, FSA Insured, 5.25% 2008
Hospital Rev. Ref. Bonds, Children's Hospital Project,                                  1,000        1,051
Series 1995, MBIA Insured, 6.00% 2004
City of Houston, Airport System, Subordinate Lien Rev.                                  3,500        3,536
Bonds, Series 1998B AMT, FGIC Insured, 5.25% 2009
City of San Antonio, Electric and Gas Systems Rev. Ref.                                 3,455        3,505
Bonds, Series 1998B, 5.125% 2009
Tarrant County, Health Facs. Dev. Corp., Health Resources                               1,000        1,018
Systems Rev. Bonds, Series 1997A, MBIA Insured, 5.50% 2007

Utah  -  1.41%
Housing Fin. Agcy. (Federally Insured or Guaranteed
Mortgage Loans):
Single Family Mortgage Purchase Ref. Bonds, Series                                        610          619
1996, 5.45% 2004
Single Family Mortgage Bonds, AMT:
1998 Issue D-2, 5.25% 2012(1)                                                             370          358
1998 Issue E-1, 5.25% 2012(1)                                                             360          348
1998 Issue F-2, 4.25% 2008                                                              2,430        2,313

Vermont  -  1.01%
Educational and Health Buildings Fncg. Agcy. Hospital Rev.                              2,500        2,597
Bonds (Medical Center Hospital of Vermont Project),
Series 1993, FGIC Insured, 5.75% 2007

Virginia  -  2.07%
Virginia Housing Dev. Auth.:
Commonwealth Mortgage Bonds, 2000 Series A-1 AMT, 5.55% 2008                            1,175        1,194
Rental Housing Bonds, 2000 Series D AMT, 5.50% 2008                                     1,070        1,079
Industrial Dev. Auth. of the City of Norfolk, Hospital Rev.                             2,000        2,121
Bonds (Daughters of Charity National Health System-DePaul
Medical Center), Series 1992A,6.50% 2007 (2002)(1)
Pocahontas Parkway Association, Route 895 Connector Toll                                1,000          954
Road Rev. Bonds, Senior Current Interest Bonds, Series
1998A, 5.25% 2007

Virgin Islands  -  0.77%
Public Fin. Auth., Rev. and Ref. Bonds (Matching Fund                                   2,000        2,000
Loan Notes), Series 1998 C, 5.00% 2002

Washington  -  4.70%
Washington Various Purpose G.O. Bonds, Series 2000B,                                    3,130        3,381
FSA Insured, 6.00% 2010
Health Care Facs. Auth., Weekly Rate Demand Rev. Bonds                                  1,000        1,059
(Virginia Mason Medical Center), 1997 Series A, MBIA
Insured, 6.00% 2006
Public Power Supply System:
Nuclear Project No. 1 Ref. Rev. Bonds, Series 1991A,                                    1,000        1,017
6.30% 2001
Nuclear Project No. 2, Ref. Rev. Bonds:
Series 1992A, 5.90% 2004                                                                1,500        1,563
Series 1997B, 5.50%  2006                                                               2,000        2,070
Series 1998A, 5.00%  2005                                                               1,000        1,010
Nuclear Project No. 3 Ref. Rev. Bonds, Series 1990B,                                    1,000        1,030
7.375% 2004
Central Puget Sound Regional Transit Auth., Sales Tax                                   1,000        1,021
and Motor Vehicle Excise Tax Bonds, Series 1999, FGIC
Insured, 5.25% 2010

Wisconsin  -  2.78%
G.O Ref. Bonds of 1998, Series 2, 5.00% 2008                                            1,000        1,013
Health and Educational Facs. Auth.:
Rev. Bonds, Series 1999 (The Monroe Clinic, Inc.),                                      1,010          903
4.60% 2008
Var. Rate Hospital Rev. Bonds (Charity Obligated Group,                                 3,715        3,748
Daughters of Charity National Health System), Series
1997D, 4.90% 2015 (Put 2005)(1)
Housing and Econ. Dev. Auth., Housing Rev. Ref. Bonds,                                  1,500        1,519
Series 1992A, 6.20% 2001
                                                                                               ----------
                                                                                                   248,764
                                                                                               ----------

Tax-Exempt Securities Maturing in One Year or Less - 2.99%
Collier County Health Facs. Auth., Health Fac. Rev. Bonds,                              1,200        1,200
(The Moorings, Incorporated Project), Series 2000
4.75% 2024(3)
City of Houston, Tax and Rev. Anticipation Notes,                                       1,000        1,006
Series 2000, 5.00% 2001
State of Idaho Tax Anticipation Notes, Series 2000,                                     1,000        1,010
5.375% 2001
Power County, Idaho, Pollution Control Rev. Bonds                                       1,000        1,000
(FMR Corp. Project), 3.70% 2010(3)
Industrial Dev. Auth. of the City of Roanoke (Hospital                                  1,600        1,600
Rev. Bonds), Series 1995 3.00% 2019(3)
State of Texas, Tax and Rev. Anticipation Notes,                                        1,900        1,901
Series 1999A, 4.50% 8/31/00
                                                                                               ----------
                                                                                                    7,717
                                                                                               ----------

Total Tax-Exempt Securities (cost: $259,325,195)                                                   256,481
Excess of cash and receivables over payables                                                         1,895
                                                                                               ----------
NET ASSETS                                                                                       $258,376
                                                                                               ----------


(1) Valued on the basis of the effective maturity -
that is, the date at which the security is expected
to be called or refunded by the issuer.

(2) Purchased in a private placement transaction;
resale may be limited to qualified institutional
buyers; resale to the public may require registration.

(3) 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
Ref. = Refunding
Rev. = Revenue


</TABLE>
<TABLE>
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
at July 31, 2000                                                        (dollars in thousands)
Assets:
<S>                                                               <C>           <C>
Investment securities at market
 (cost: $259,325)                                                                        $256,481
Cash                                                                                           73
Receivables for--
 Sales of fund's shares                                                   1,597
 Accrued interest                                                         3,202             4,799
                                                                                          261,353
Liabilities:
Payables for--
 Purchases of investments                                                 2,118
 Repurchases of fund's shares                                               342
 Dividends on fund's shares                                                 298
 Management services                                                         82
 Other expenses                                                             137             2,977
Net Assets at July 31, 2000--                                                            $258,376
 Total authorized capital stock-- unlimited shares
Class A shares
 Net Assets                                                                              $257,784
 Shares outstanding                                                                    17,860,535
 Net asset value per share                                                                 $14.43
Class B shares
 Net Assets                                                                                  $592
 Shares outstanding                                                                        41,007
 Net asset value per share                                                                 $14.43



STATEMENT OF OPERATIONS
for the year ended July 31, 2000                                    (dollars in thousands)

Investment Income:
Income:
 Interest on tax-exempt securities                                                        $13,894

Expenses:
 Management services fee                                                  1,045
 Distribution expenses - Class A                                            817
 Distribution expenses - Class B                                              1
 Transfer agent fee - Class A                                               117
 Transfer agent fee - Class B                                                 -
 Reports to shareholders                                                     42
 Registration statement and prospectus                                       90
 Postage, stationery and supplies                                            24
 Directors' fees                                                             15
 Auditing and legal fees                                                     37
 Custodian fee                                                                5
 Taxes other than federal income tax                                          4
 Other expenses                                                              17
  Total expenses before reimbursement                                     2,214
  Reimbursement of expenses                                                 163             2,051
 Net investment income                                                                     11,843

Realized Loss and Unrealized
 Depreciation on Investments:
Net realized loss                                                                          (1,337)
Net change in unrealized depreciation
 on investments                                                                            (2,771)
 Net realized loss and
  unrealized depreciation
  on investments                                                                           (4,108)
Net Increase in Net Assets Resulting
 from Operations                                                                           $7,735




STATEMENT OF CHANGES IN NET ASSETS                                  (dollars in        thousands)

                                                                    year  ended          July 31,
                                                                            2000              1999
Operations:
Net investment income                                                   $11,843           $10,926
Net realized (loss) gain on investments                                  (1,337)            1,150
Net unrealized depreciation
 on investments                                                          (2,771)           (6,206)
 Net increase in net assets
  resulting from operations                                               7,735             5,870
Dividends Paid from Net
 Investment Income:
  Class A                                                               (11,848)          (10,912)
  Class B                                                                    (4)                -
Total Dividends                                                         (11,852)          (10,912)

Capital Share Transactions:
 Proceeds from shares sold                                              143,484           150,785
 Proceeds from shares issued in reinvestment
  of net investment income dividends                                      8,453             7,841
 Cost of shares repurchased                                            (172,075)          (97,927)
  Net(decrease) increase in net assets resulting
   from capital share transactions                                      (20,138)           60,699
Total (Decrease) Increase in Net Assets                                 (24,255)           55,657

Net Assets:
Beginning of year                                                       282,631           226,974
End of year (including
 undistributed net investment
 income: $46 and $34,
 respectively)                                                         $258,376          $282,631

See Notes to Financial Statements

</TABLE>




NOTES TO FINANCIAL STATEMENTS
LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - Limited Term Tax-Exempt Bond Fund of America (the "fund") is
registered under the Investment Company Act of 1940 as an open-end, diversified
management investment company.  The fund seeks current income exempt from
federal income taxes, consistent with preservation of capital, through
investments in tax-exempt securities with effective maturities between three
and ten years. The 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 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 Trustees. 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 Class A
and Class B 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 July 31, 2000, net unrealized depreciation on investments for book and
federal income tax purposes aggregated $2,844,000, of which $1,826,000 related
to appreciated securities and $4,670,000 related to depreciated securities.
There was no difference between book and tax realized losses on securities
transactions for the year ended July 31, 2000. The fund had available at July
31, 2000 a net capital loss carryforward totaling $2,093,000 which may be used
to offset capital gains realized during subsequent years through 2004 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. In addition, the fund has deferred, for tax purposes, to fiscal year
ending July 31, 2001, the recognition of capital losses totaling $1,098,000
which were realized during the period November 1, 1999 through July 31, 2000.

The cost of portfolio securities for book and federal income tax purposes was
$259,325,000 at July 31, 2000.

3. FEES AND TRANSACTIONS WITH RELATED PARTIES

INVESTMENT ADVISORY FEE - The fee of $1,045,000 for management services during
the year ended July 31, 2000 was incurred pursuant to an agreement with Capital
Research and Management Company (CRMC), with which certain officers and
Trustees of the fund are affiliated. The Investment Advisory and Service
Agreement provides for monthly fees, accrued daily, based on an annual rate of
0.30% of the first $60 million of average net assets; 0.21% of such assets in
excess of $60 million; plus 3.00% of the fund's monthly gross investment
income.

The Investment Advisory and Service Agreement provides for a fee reduction to
the extent that annual operating expenses exceed 0.75% of the average daily net
assets of the fund, during a period which will terminate at the earlier of such
time as no reimbursement has been required for a period of 12 consecutive
months, provided no advances are outstanding, or October 1, 2003.  Expenses
that are not subject to these limitations are interest, taxes, brokerage
commissions, transaction costs, and extraordinary expenses. Fee reductions were
$163,000 for the year ended July 31, 2000.

DISTRIBUTION EXPENSES - Pursuant to a Plan of Distribution for Class A shares,
the fund may expend up to 0.30% of Class A average 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 Trustees. Pursuant to a Plan of
Distribution for Class B shares, the fund may expend 1.00% of Class B average
daily net assets annually to compensate dealers for their selling and servicing
efforts. During the year ended July 31, 2000, distribution expenses for Class A
were limited to $817,000 on Class A shares. Had no limitation been in effect,
the fund would have paid $928,000 in distribution expenses for Class A.Some or
all of the unpaid amounts may be paid by the fund in the future. During the
year ended July 31, 2000, distribution expenses under the Plan of Distribution
for Class B were $1,000. As of July 31, 2000, accrued and unpaid distribution
expenses for Class A and Class B shares were $71,000 and $0, respectively.

American Funds Distributors, Inc. (AFD), the principal underwriter of the
fund's shares, received $111,000 (after allowances to dealers) during the year
ended July 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 - American Funds Service Company (AFS), the transfer agent
for the fund, was paid a fee of $117,000 during the year ended July 31, 2000.

DEFERRED TRUSTEES' FEES -   Trustees who are unaffiliated with CRMC may elect
to defer part or all of the fees earned for services as members of the Board.
Amounts deferred are not funded and are general unsecured liabilities of the
fund. As of July 31, 2000, aggregate deferred amounts and earnings thereon
since the deferred compensation plan's adoption (1994), net of any payments to
Trustees, were $57,000.

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 Trustees 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 $88,416,000 and $98,523,000, respectively, during the
year ended July 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 July 31, 2000, the custodian fee of $5,000 was paid by
these credits rather than in cash.

[Begin chart]
AS OF JULY 31, 2000, NET ASSETS CONSISTED OF THE FOLLOWING:


<TABLE>
                                                                      (dollars in thousands)
<S>                                                             <C>
Capital paid in on shares of beneficial interest                                    $264,365
Undistributed net investment income                                                       46
Accumulated net realized loss                                                         (3,191)
Net unrealized depreciation                                                           (2,844)
Net Assets                                                                          $258,376

</TABLE>

<TABLE>
                                                                      Year ended                        Year ended
                                                                   July 31, 2000                     July 31, 2000
                                                                    Amount (000)           Shares     Amount (000)          Shares
<S>                                                             <C>              <C>              <C>              <C>
Class A Shares:
  Sold                                                               $   142,783        9,945,084      $   150,785      10,081,007
  Reinvested of dividends                                                  8,450          589,816            7,841         525,895
  Repurchased                                                           (171,956)     (12,004,361)         (97,927)     (6,566,151)
   Net (decrease) increase in Class A                                    (20,723)      (1,469,461)          60,699       4,040,751
Class B Shares:*
  Sold                                                                       701           49,100                -               -
  Reinvested of dividends                                                      3              232                -               -
  Repurchased                                                               (119)          (8,325)               -               -
   Net increase in Class B                                                   585           41,007                -               -
Total net (decrease) increase in fund                                $   (20,138)      (1,428,454)     $    60,699       4,040,751


* The period ended 2000 represents the 138-day
 period ended July 31, 2000. Class B shares were
 not offered before March 15, 2000.
</TABLE>



<TABLE>
PER-SHARE DATA AND RATIOS (1)
                                                                                                         Net
                                                                  Net asset                    gains/(losses)
                                                                      value,         Net        on securities
                                                                   beginning   investment      (both realized
Year ended                                                  of year          income       and unrealized)
<S>                                                         <C>              <C>          <C>
Class A:
2000                                                                   $14.62    $.73 (2)          $(.30) (2)
1999                                                                    14.85          .61               (.23)
1998                                                                    14.79          .66                 .06
1997                                                                    14.36          .68                 .43
1996                                                                    14.29          .69                 .07
1995                                                                    14.29          .76                 .85
Class B:
2000                                                                    14.79     .24 (2)           (.31) (2)


                                                                                Dividends
                                                                 Total from    (from net        Distributions
                                                                  investment   investment       (from capital
Year ended                                                        operations      income)              gains)

Class A:
2000                                                                    $.43        $(.62)               $.00
1999                                                                      .38        (.61)                 .00
1998                                                                      .72        (.66)                 .00
1997                                                                    1.11         (.68)                 .00
1996                                                                      .76        (.69)                 .00
1995                                                                    1.61         (.76)                 .00
Class B:
2000                                                                    (.07)        (.29)                 .00



                                                                               Net asset
                                                                       Total   value, end              Total
Year ended                                                     distributions      of year              return

Class A:
2000                                                                   $(.62)       $14.43               3.09%
1999                                                                    (.61)        14.62                2.59
1998                                                                    (.66)        14.85                4.95
1997                                                                    (.68)        14.79               7.96
1996                                                                    (.69)        14.36                5.39
1995                                                                    (.76)        15.14               11.62
Class B:
2000                                                                    (.29)        14.43                2.59

                                                                                 expenses            expenses
                                                                               to average          to average
                                                                 Net assets,   net assets          net assets
                                                                 end of year       before               after
Year ended                                                     (in millions)       waiver              waiver

Class A:
2000                                                                    $258          .81%                .75%
1999                                                                      283          .77                 .75
1998                                                                      227          .83                 .75
1997                                                                      203          .83                 .75
1996                                                                      197          .85                 .74
1995                                                                      157          .94                 .94
Class B:
2000                                                                        1    1.88 (3)            1.60 (3)


                                                                   Ratio of
                                                                  net income    Portfolio
                                                                  to average     turnover
Year ended                                                        net assets         rate

Class A:
2000                                                                    5.08%  34.38% (4)
1999                                                                     4.12        17.00
1998                                                                     4.40        34.07
1997                                                                     4.70        31.89
1996                                                                     4.77        34.95
1995                                                                     5.66        46.42
Class B:
2000                                                                4.23 (3)    34.38 (4)



(1) The periods 1996 through 2000 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
year ended July 31, 2000.
</TABLE>



REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF LIMITED TERM TAX-EXEMPT BOND FUND
OF AMERICA

In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the  per-share data and ratios present fairly, in all
material respects, the financial position of Limited Term Tax-Exempt Bond Fund
of America(the "Fund") at July 31, 2000, the results of its operations, the
changes in its net assets and the per-share data and ratios for the years
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 July 31, 2000 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

PRICEWATERHOUSECOOPERS LLP

Los Angeles, California
August 31, 2000



TAX INFORMATION (UNAUDITED)

During the fiscal year ended July 31, 2000, the fund paid 62 cents per share of
exempt-interest distributions within the meaning of Section 852(b)(5)(A) of the
Internal Revenue Code.

The fund designates a capital gain distribution a portion of earnings and
profits paid to shareholders in redemption of their shares.

THIS INFORMATION IS GIVEN TO MEET CERTAIN REQUIREMENTS OF THE INTERNAL REVENUE
CODE AND SHOULD NOT BE USED BY SHAREHOLDERS FOR PREPARING THEIR INCOME TAX
RETURNS.  FOR TAX RETURN PREPARATION PURPOSES, PLEASE REFER TO THE CALENDAR
YEAR-END INFORMATION YOU RECEIVE FROM THE FUND'S TRANSFER AGENT.




                                   PART C
                            OTHER  INFORMATION
                  LIMITED TERM TAX-EXEMPT BOND FUND OF AMERICA

ITEM 23. EXHIBITS

(a) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(b) Previously filed (see Post-Effective Amendment No. 6 filed 9/29/97)
(c) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(d) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(e) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(f) None
(g) Previously filed (see Post-Effective Amendment No. 6 filed 9/29/97)
(h) None
(i) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(j) Consent of Independent Accountants
(k) None
(l) Previously filed (see Post-Effective Amendment No. 6 filed 9/29/97)
(m) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(n) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)
(o) None
(p) Previously filed (see Post-Effective Amendment No. 10 filed 3/15/00)

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 trustees against certain liabilities.  However, in no
event will Registrant maintain insurance to indemnify any such person for any
act for which Registrant itself is not permitted to indemnify the individual.

ITEM 25.  INDEMNIFICATION (CONTINUED)

 Article VI of the Trust's By-Laws states:

 (a) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a 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 action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
Trustee, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful.  The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.

 (b) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a Trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.

 (c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).

ITEM 25.  INDEMNIFICATION (CONTINUED)

 (d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b).  Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion; and any
determinations so made shall be conclusive.

 (e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein.  Such determination must be
made by disinterested trustees or independent legal counsel.

 (f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.

 (g) Any indemnification pursuant to this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled and shall
continue as to a person who has ceased to be Trustee or officer and shall inure
to the benefit of the heirs, executors and administrators of such person.

 (h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed to
protect any Trustee or officer of the Trust against any liability to the Trust
or to its shareholders to which such person would otherwise be subject by
reason of willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office.

 (i) The Trust shall have power to purchase and maintain insurance on behalf of
any person against any liability asserted against or incurred by such person,
whether or not the Trust would have the power to indemnify such person against
such liability under the provisions of this Article.  Nevertheless, insurance
will not be purchased or maintained by the Trust if the purchase or maintenance
of such insurance would result in the indemnification of any person in
contravention of any rule or regulation of the Securities and Exchange
Commission.

 Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and

ITEM 25.  INDEMNIFICATION (CONTINUED)

is, therefore, unenforceable.  In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

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, Fundamental
Investors, Inc., EuroPacific Growth Fund, The Growth Fund of America, Inc., The
Income Fund of America, Inc., The Investment Company of America, Intermediate
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 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 Trustee



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              None
                                              President



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

 (c) None

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
31/st/ day of October, 2000.


  LIMITED TERM TAX-EXEMPT BOND FUND
   OF AMERICA
   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/ Abner D. Goldstine                        President and Trustee

            (Abner D. Goldstine)



(2)      Principal Financial Officer and
         Principal Accounting Officer:



            /s/ Anthony W. Hynes, Jr.                   Treasurer

            (Anthony W. Hynes, Jr.)



(3)      Trustees:



         Richard G. Capen, Jr.*                         Trustee

         H. Frederick Christie*                         Trustee
         Don R. Conlan*                                 Trustee
         Diane C. Creel*                                Trustee

         Martin Fenton*                                 Trustee
         Leonard R. Fuller*                             Trustee



          /s/ Abner D. Goldstine                        President and Trustee

            (Abner D. Goldstine)



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

            (Paul G. Haaga, Jr.



         Richard G. Newman*                             Trustee

         Frank M. Sanchez*                              Trustee

</TABLE>

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

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

    /s/ Michael J. Downer
    Michael J. Downer


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