======================================================
SEC FILE NOS. 33-5270
811-4653
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 11
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 10
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(202) 842-5665
HARRY J. LISTER
WASHINGTON MANAGEMENT CORPORATION
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
J. JUDE O'DONNELL, ESQ.
THOMPSON, O'DONNELL, MARKHAM, NORTON & HANNON
805 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(COUNSEL FOR THE REGISTRANT)
THE REGISTRANT HAS FILED A DECLARATION PURSUANT TO RULE 24F-2
REGISTERING AN INDEFINITE NUMBER OF SHARES UNDER THE SECURITIES ACT OF 1933.
ON SEPTEMBER 11, 1995 IT FILED ITS 24F-2 NOTICE FOR FISCAL 1995.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
|X| IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON NOVEMBER 15,
1995, PURSUANT TO PARAGRAPH (B) OF RULE 485.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER CAPTIONS IN PROSPECTUS (PART "A")
OF PART "A"
OF FORM N-1A
<S> <C>
1. Cover Page............................................... Cover Page
2. Synopsis .................................................. Summary of Expenses
3. Condensed Financial Information ................... Financial Highlights
4. General Description of Registrant ................... Investment Obective and Policies;
Certain Securities and Investment
Techniques
5. Management of the Fund ............................. Financial Highlights; Certain Securities
and Investment Techniques; Fund Organization and Management; Summary of Expenses
6. Capital Stock and Other Securities .................. Investment Objectives and Policies;
Fund Organization and Management;
Dividends, Distributions and Taxes
7. Purchase of Securities Being Offered ............... Purchasing Shares; Fund Organization and
Management; Shareholder Services;
Retirement Plans
8. Redemption or Repurchase ........................... Redeeming Shares
9. Legal Proceedings ...................................... N/A
</TABLE>
__________
<TABLE>
<CAPTION>
ITEM NUMBER CAPTIONS IN STATEMENT OF
OF PART "B" ADDITIONAL INFORMATION (PART "B")
OF FORM N-1A
<S> <C>
10. Cover Page ............................................. Cover
11. Table of Contents ..................................... Table of Contents
12. General Information and History .................. Fund Organization and Management
(Part "A")
13. Investment Objectives and Policies ............... Description of Certain Securities and
Investment Techniques (Part "A");
Investment Restrictions
14. Management of the Registrant ..................... Trust Officers and Trustees, including
Trustee Compensation; Management
15. Control Persons and Principal Trust Officers and Trustees
Holders of Securities .........................
16. Investment Advisory and Other Fund Organization and Management
Services .................................... (Part "A"); Shareholder Account Services
and Privileges; General Information
17. Brokerage Allocation and Execution of Portfolio Transactions
Other Practices ............................
18. Capital Stock and Other Securities .............. None
19. Purchase, Redemption and Pricing Purchase of Shares; Shareholder Account
of Securities Being Offered .................... Services and Privileges; Purchasing Shares (Part "A"); General Information;
Management
20. Tax Status .............................................. Additional Information Concerning Taxes;
Dividends, Distributions and Taxes (Part "A")
21. Underwriters ........................................... Fund Organization and Management
(Part "A")
22. Calculation of Performance Data ................. Investment Results
23. Financial Statements .................................. Financial Statements
</TABLE>
_____________
ITEM IN PART "C"
OF FORM N-1-A
24. Financial Statements and Exhibits
25. Persons Controlled by or Under Common Control with Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
Signature Page
<PAGE>
P R O S P E C T U S
The American Funds Tax-Exempt Series I
THE TAX-EXEMPT
FUND OF MARYLAND-Registered Trademark-
THE TAX-EXEMPT
FUND OF VIRGINIA-Registered Trademark-
----------------------------------
AN OPPORTUNITY FOR INCOME
FREE FROM FEDERAL AND MARYLAND
OR VIRGINIA INCOME TAXES.
ADDITIONALLY, EACH FUND SEEKS
TO PRESERVE CAPITAL.
[American
Funds Logo] N o v e m b e r 1 5, 1 9 9 5
THE AMERICAN FUNDS
TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
THE TAX-EXEMPT FUND OF VIRGINIA
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 842-5665
The American Funds Tax-Exempt Series I (the "Trust") is a fully managed,
diversified, open-end investment company consisting of two separate
series of shares, The Tax-Exempt Fund of Maryland (the "Maryland Fund"
or "Fund") and The Tax-Exempt Fund of Virginia (the "Virginia Fund" or
"Fund"). Except where the context indicates otherwise, all references
herein to the "Fund" apply to each of these two tax-exempt bond funds.
The Fund invests primarily in investment grade tax-exempt securities
issued by the respective state, its political subdivisions,
municipalities and public authorities.
This prospectus presents information you should know before investing in
the Fund. It should be retained for future reference.
You may obtain the statement of additional information, dated November
15, 1995, which contains the Fund's financial statements, without
charge, by writing to the Secretary of the Fund at the above address or
telephoning 800/421-0180. These requests will be honored within three
business days of receipt.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR
GUARANTEED BY, THE U.S. GOVERNMENT, ANY FINANCIAL INSTITUTION, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER AGENCY, ENTITY OR
PERSON. THE PURCHASE OF FUND SHARES INVOLVES INVESTMENT RISKS, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
24/25-010-1195
<PAGE>
SUMMARY OF EXPENSES
AVERAGE ANNUAL EXPENSES PAID OVER A 10-YEAR PERIOD WOULD BE APPROXIMATELY $14
PER YEAR, ASSUMING A $1,000 INVESTMENT AND A 5% ANNUAL RETURN.
TABLE OF CONTENTS
Summary of Expenses........ ....... 2
Financial Highlights............... 3
Investment Objectives and..........
Policies 3
Certain Securities and.............
Investment Techniques 5
Investment Results................. 7
Dividends, Distributions...........
and Taxes 7
Fund Organization and..............
Management 9
Appendix........................... 12
The American Funds.................
Shareholder Guide 14
Purchasing Shares................ 14
Reducing Your Sales..............
Charge 18
Shareholder Services............. 19
Redeeming Shares................. 21
Retirement Plans................. 23
IMPORTANT PHONE
NUMBERS
Shareholder Services
800/421-0180 ext. 1
Dealer Services
800/421-9900 ext. 11
American
FundsLine-Registered Trademark-
800/325-3590
(24-hour information)
This table is designed to help you understand costs of
investing in the Fund. These are historical expenses;
your actual expenses may vary.
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF
--------------------------
SHAREHOLDER TRANSACTION EXPENSES MARYLAND VIRGINIA
---------- ----------
<S> <C> <C>
Maximum sales charge on purchases
(as a percentage of offering
price)(1)............................. 4.75% 4.75%
The Fund has no sales charge on reinvested dividends, deferred sales
charge,(2) redemption fees or exchange fees.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net
assets)
Management fees......................... 0.47% 0.45%
12b-1 expenses(3)....................... 0.21% 0.23%
Other expenses (such as audit, legal,
shareholder services, transfer agent
and custodian)........................ 0.10% 0.11%
Total Fund operating expenses........... 0.78% 0.79%
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ------ ------- ------- --------
THE TAX-EXEMPT FUND OF MARYLAND
<S> <C> <C> <C> <C>
You would pay the following $ 55 $ 71 $ 89 $ 140
cumulative expenses on a THE TAX-EXEMPT FUND OF VIRGINIA
$1,000 investment, assuming
a 5% annual return.(4) $ 55 $ 72 $ 89 $ 141
</TABLE>
(1) Sales charges are reduced for purchases of $25,000 or more. (See "The
American Funds Shareholder Guide: Purchasing Shares--Sales Charges.")
(2) Purchases of $1 million or more are not subject to an initial sales
charge. However, a contingent deferred sales charge of 1% applies on
certain redemptions within 12 months following such purchases. (See "The
American Funds Shareholder Guide: Redeeming Shares--Contingent Deferred
Sales Charge.")
(3) These expenses may not exceed 0.25% of the Fund's average net
assets annually. (See "Fund Organization and Management--Plan of
Distribution.")
Due to these distribution expenses, long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers.
<PAGE>
<TABLE>
<S> <C>
(4) Use of this assumed 5% return is required by the Securities and Exchange
Commission; it is not an illustration of past or future investment
results. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
</TABLE>
3
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE FISCAL YEAR)
The following information has been audited by Price
Waterhouse LLP, independent accountants, whose
unqualified report covering each of the most recent
five years is included in the statement of additional
information. This information should be read in
conjunction with the financial statements and
accompanying notes which are also included in the
statement of additional information.
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------ LESS DISTRIBUTIONS
NET REALIZED ---------------------------------------
YEAR NET ASSET & UNREALIZED TOTAL DIVIDENDS DISTRIBUTIONS NET ASSET
ENDED VALUE, NET GAIN (LOSS) FROM FROM NET FROM VALUE,
JULY BEGINNING INVESTMENT ON INVESTMENT INVESTMENT CAPITAL TOTAL END OF TOTAL
31 OF YEAR INCOME INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS YEAR RETURN(1)
- ----------------------------------------------------------------------------------------------------------------------------------
THE TAX-EXEMPT FUND OF MARYLAND
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 $ 14.29 $ .74 $ (.83) $ (.09) $ (.74) -- $ (.7400) $ 13.46 (.84)%
1988 13.46 .85 .07 .92 (.85) $ (.0015) (.8515) 13.53 7.18
1989 13.53 .85 .69 1.54 (.85) -- (.8500) 14.22 11.76
1990 14.22 .83 (.10) .73 (.83) -- (.8300) 14.12 5.35
1991 14.12 .85 .17 1.02 (.85) -- (.8500) 14.29 7.44
1992 14.29 .83 .93 1.76 (.83) -- (.8300) 15.22 12.72
1993 15.22 .79 .31 1.10 (.79) -- (.7900) 15.53 7.44
1994 15.53 .76 (.53) .23 (.76) -- (.7600) 15.00 1.42
1995 15.00 .80 .29 1.09 (.80) -- (.8000) 15.29 7.58
THE TAX-EXEMPT FUND OF VIRGINIA
1987 $ 14.29 $ .82 $ (.38) $ .44 $ (.82) -- $ (.8200) $ 13.91 2.87%
1988 13.91 .87 (.05) .82 (.87) $ (.0016) (.8716) 13.86 6.26
1989 13.86 .87 .69 1.56 (.87) -- (.8700) 14.55 11.60
1990 14.55 .87 (.05) .82 (.87) -- (.8700) 14.50 5.87
1991 14.50 .87 .25 1.12 (.87) -- (.8700) 14.75 8.01
1992 14.75 .85 .97 1.82 (.85) -- (.8500) 15.72 12.80
1993 15.72 .82 .29 1.11 (.82) -- (.8200) 16.01 7.29
1994 16.01 .80 (.52) .28 (.80) -- (.8000) 15.49 1.74
1995 15.49 .83 .30 1.13 (.83) -- (.8300) 15.79 7.56
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------
RATIO
YEAR RATIO OF OF NET
ENDED NET ASSETS, EXPENSES INCOME PORTFOLIO
JULY END OF YEAR TO AVERAGE TO AVERAGE TURNOVER
31 (IN MILLIONS) NET ASSETS NET ASSETS RATE
- ---------------
<S> <C> <C> <C> <C>
1987 $ 22 .32%(2) 5.42%(2) 13.68%
1988 26 .61(2) 6.35(2) 22.89
1989 29 .98(2) 6.12(2) 7.82
1990 31 .99 5.89 21.75
1991 35 .94 5.98 .88
1992 48 .91 5.60 8.11
1993 64 .83 5.12 9.05
1994 75 .75 4.90 10.01
1995 75 .78 5.38 20.91
1987 $ 21 .31%(2) 5.62%(2) 5.00%
1988 24 .61(2) 6.38(2) 18.50
1989 29 .98(2) 6.10(2) 9.90
1990 34 .99 6.04 35.37
1991 39 .97 6.00 13.60
1992 57 .93 5.61 6.84
1993 80 .84 5.18 4.96
1994 93 .78 5.04 2.36
1995 92 .79 5.37 32.18
</TABLE>
- ------------
(1)This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of the Fund's offering price.
(2)Net of fees waived where expenses were borne by the Business Manager and the
Investment Adviser.
INVESTMENT OBJECTIVES AND POLICIES
THE FUND'S GOAL IS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL
AND MARYLAND OR VIRGINIA INCOME TAXES WHILE PRESERVING CAPITAL.
The Fund's investment objective is a high level of
current income exempt from federal and the respective
state's (Maryland or Virginia) income taxes. Consistent
with this primary objective is the additional objective
of preserving capital. Treating high current income as
the primary investment objective means that 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. For example, the Fund may purchase, at
prices above their principal amounts, bonds that
provide a higher yield and interest income than current
market rates.
As a matter of fundamental policy, the Fund will, under
normal market conditions, invest at least 80% of its
assets in, or derive at least 80% of its income from,
securities that are exempt both from federal and the
respective state's (Maryland or Virginia) income taxes.
The assets of the Fund will be invested primarily in
securities rated at the time of purchase
3
<PAGE>
within the four highest categories for bonds and the
two highest categories for notes and commercial paper
(for ratings of notes and commercial paper, see the
statement of additional information) by either Moody's
Investors Service, Inc. (Aaa, Aa, A, Baa for bonds; MIG
1 and MIG 2 for notes; and Prime-1 and Prime-2 for
commercial paper) or Standard & Poor's Corporation
(AAA, AA, A, BBB for bonds; SP-1 and SP-2 for notes;
and A-1 and A-2 for commercial paper) or in securities
that are not rated but are determined to be comparable.
Bonds rated Baa or BBB are considered "investment
grade" but also have certain speculative
characteristics. Up to 20% of the Fund's assets may be
invested in tax-exempt bonds rated Ba and BB or below
(or in comparable nonrated tax-exempt securities).
These bonds (which are commonly known as "junk bonds")
carry a higher degree of investment risk and are
considered speculative. For a description of the
ratings, see the Appendix.
The average monthly composition of the Funds'
portfolios based on the higher of the Moody's or S&P
ratings for the fiscal year ended July 31, 1995 was as
follows for the Maryland Fund and Virginia Fund,
respectively: bonds--Aaa/AAA--44.46% and 45.47%;
Aa/AA--23.27% and 40.09%; A/A--14.52% and 7.27%;
Baa/BBB--3.47% and 4.31%; and non-rated--10.34% and
0.00%; some or all of these non-rated securities in the
Maryland Fund were determined to be equivalent to
securities rated by Moody's or S&P as follows:
Baa/BBB--2.08%; Ba/BB--6.61%; and B/B--1.65%. Cash made
up 3.94% and 2.87% of the Funds' portfolios.
The Fund may invest up to 20% of its assets in certain
tax-exempt securities, the interest of which would
constitute an item of tax preference subject to federal
alternative minimum tax on corporations and
individuals. See "Certain Securities and Investment
Techniques" below. When in the opinion of Capital
Research and Management Company, the Fund's investment
adviser, abnormal market conditions require a temporary
defensive position, the Fund may invest in taxable
short-term fixed income securities.
The Fund's investment restrictions (which are described
in the statement of additional information) and
objectives cannot be changed without shareholder
approval. All other investment practices may be changed
by the Board of Trustees.
ACHIEVEMENT OF THE FUND'S INVESTMENT OBJECTIVE CANNOT,
OF COURSE, BE ASSURED DUE TO THE RISK OF CAPITAL LOSS
FROM FLUCTUATING PRICES INHERENT IN ANY INVESTMENT IN
SECURITIES.
4
<PAGE>
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
INVESTING IN BONDS
INVOLVES CERTAIN RISKS.
RISKS The market values of fixed-income securities
tend to vary inversely with the level of interest
rates--when interest rates rise, their values will tend
to decline and vice versa. Although under normal market
conditions longer term securities yield more than
shorter term securities of similar quality, they are
subject to greater price fluctuations. Fluctuations in
the value of the Fund's investments will be reflected
in its net asset value per share.
Capital Research and Management Company 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.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT
AGREEMENTS The Fund may purchase securities on a
delayed delivery or "when-issued" basis and enter into
firm commitment agreements (transactions whereby the
payment obligation and interest rate are fixed at the
time of the transaction but the settlement is delayed).
The Fund as purchaser assumes the risk of any decline
in value of the security beginning on the date of the
agreement or purchase. As the Fund's aggregate
commitments under these transactions increase the
opportunity for leverage similarly may increase.
VARIABLE AND FLOATING RATE OBLIGATIONS The Fund may
invest in variable and floating rate obligations which
have interest rates that are adjusted at designated
intervals, or whenever there are changes in the market
rates of interest on which the interest rates are
based. The rate adjustment feature tends to limit the
extent to which the market value of the obligation will
fluctuate.
MATURITY There are no restrictions on the maturity
composition of the portfolio, although it is
anticipated that the Fund normally will be invested in
intermediate-term (3 to 10 years to maturity) and
long-term (over 10 years to maturity) securities.
SPECIAL CONSIDERATIONS Because the Fund will invest
primarily in securities issued by one state, its
political subdivisions, municipalities and public
authorities, the Fund is more susceptible to factors
adversely affecting issuers of Maryland or Virginia
securities than would be a comparable municipal bond
mutual fund which has not concentrated in these issuers
to this degree.
In addition, the interest on "private activity" bonds,
as defined under the Internal Revenue Code, is an item
of tax preference subject to an
5
<PAGE>
alternative minimum tax on corporations and
individuals. The Fund may invest up to 20% of its total
assets in "private activity" bonds which pay interest
constituting an item of tax preference. Accordingly, a
portion of the Fund's dividends may be an item of tax
preference in computing a shareholder's alternative
minimum tax for federal income tax purposes. In
addition, with respect to corporate shareholders of the
Fund, all interest on municipal bonds and other
tax-exempt obligations, including exempt-interest
dividends paid by the Fund, is included in adjusted
current earnings in calculating federal alternative
minimum taxable income, and may also affect corporate
federal "environmental tax" liability.
MULTIPLE PORTFOLIO COUNSELOR SYSTEM The basic
investment philosophy of Capital Research and
Management Company is to seek fundamental values at
reasonable prices, using a system of multiple portfolio
counselors in managing mutual fund assets. Under this
system the portfolio of the Fund is divided into
segments, which are managed by individual counselors.
Each counselor decides how their segment will be
invested (within the limits provided by the Fund's
objective and policies and by Capital Research and
Management Company's investment committee). In
addition, Capital Research and Management Company's
research professionals make investment decisions with
respect to a portion of the Fund's portfolio. The
primary individual portfolio counselors for the Fund
are listed below.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE
AS INVESTMENT
PROFESSIONAL
YEARS OF EXPERIENCE (APPROXIMATE)
AS WITH CAPITAL
PORTFOLIO COUNSELOR RESEARCH AND
FOR MANAGEMENT
PORTFOLIO COUNSELORS THE AMERICAN FUNDS COMPANY OR
FOR THE AMERICAN FUNDS TAX-EXEMPT SERIES I ITS TOTAL
TAX-EXEMPT SERIES I PRIMARY TITLE(S) (APPROXIMATE) AFFILIATES YEARS
<S> <C> <C> <C> <C>
Mark R. Macdonald Vice President, Investment 1 year 2 years 10 years
Management Group, Capital
Research and Management
Company
David A. Hoag Vice President, Capital 2 years 4 years 8 years
(Maryland only) Research Company*
Brenda S. Ellerin Tax-Exempt Securities Analyst, 2 years 4 years 6 years
(Virginia only) Capital Research Company*
* A wholly owned subsidiary of Capital Research and Management Company.
</TABLE>
6
<PAGE>
INVESTMENT
RESULTS
THE MARYLAND AND VIRGINIA FUNDS HAVE AVERAGED A TOTAL RETURN OF 6.12% AND
6.54% A YEAR, RESPECTIVELY (ASSUMING THE MAXIMUM SALES CHARGE WAS PAID) OVER
THEIR LIFETIME (AUGUST 14, 1986 THROUGH SEPTEMBER 30, 1995).
The Fund may from time to time compare its investment
results to various unmanaged indices or other mutual
funds in reports to shareholders, sales literature and
advertisements. The results may be calculated on a
total return, yield and/or distribution rate basis for
various periods, with or without sales charges. Results
calculated without a sales charge will be higher. Total
returns assume the reinvestment of all dividends and
capital gain distributions.
The Funds' yields and the average total returns are
calculated in accordance with Securities and Exchange
Commission requirements which provide that the maximum
sales charge be reflected. The Funds' distribution
rates are calculated by annualizing the current month's
dividend and dividing by the average price for the
month. The Maryland and Virginia Funds' yields for the
30-day period ended September 30, 1995 were 4.42% and
4.34%, respectively and the distribution rates were
5.05% and 5.00%, respectively, at maximum offering
price. The SEC yields reflect income earned by the
Funds, while the distribution rates reflect dividends
paid by the Funds. Among the elements used to calculate
the SEC yields are the dividend and interest income
earned and expenses paid by the Funds, whereas the
income paid to shareholders is used to calculate the
distribution rate. The Maryland Fund's total return
over the past 12 months and average annual total
returns over the past five-year and lifetime periods
(August 14, 1986 through September 30, 1995), as of
September 30, 1995, were 5.44%, 6.77% and 6.12%,
respectively. The Virginia Fund's total return over the
past 12 months and average annual total returns over
the past five-year and lifetime periods, as of
September 30, 1995, were 5.07%, 7.02% and 6.54%,
respectively. Of course, past results are not an
indication of future results. Further information
regarding the Fund's investment results is contained in
the Fund's annual report which may be obtained without
charge by writing to the Secretary of the Fund at the
address indicated on the cover of this prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAXES
INCOME DISTRIBUTIONS ARE MADE EACH MONTH.
DIVIDENDS AND DISTRIBUTIONS The Fund declares
dividends from its net investment income daily and
distributes the accrued dividends to shareholders each
month. Dividends begin accruing one day after payment
for shares is received by the Fund or American Funds
Service Company. All capital gains, if any, are
distributed annually, usually in December. When a
capital gain is declared, the net asset value per share
is reduced by the amount of the payment.
TAXES The Fund intends to operate as a "regulated
investment company" under the Internal Revenue Code. As
a regulated investment company, the Fund is permitted
to pass through to its shareholders federally
tax-exempt income subject to certain requirements which
the Fund intends to satisfy. In any fiscal year in
which the Fund so qualifies and distributes to
shareholders substantially all of its net investment
7
<PAGE>
income and capital gain net income, the Fund itself is
relieved of federal income tax. This favorable tax
treatment may not apply to shareholders who are
"substantial users" (or "related persons") of
facilities financed by securities held by the Fund. See
the statement of additional information.
The Fund may invest in certain obligations which pay
interest that is subject to state and local taxes when
distributed by the Fund even though the interest, if
realized directly, would be exempt from these income
taxes. In addition, to the extent shareholders receive
dividends derived from taxable interest income or
distributions of capital gains, these dividends or
distributions will not be exempt from federal (or state
and local) income tax.
In the opinion of legal counsel to the Trust,
shareholders in the Maryland Fund or the Virginia Fund
who are otherwise subject to Maryland or Virginia
individual or corporate income taxes, respectively,
will not be subject to such taxes on distributions with
respect to their shares to the extent that such
distributions are attributable to interest on
obligations of that state or on other obligations
paying interest exempt from that state's taxes, such as
those issued by the Commonwealth of Puerto Rico, the
Virgin Islands or Guam.
You will by advised as to the federal and the Maryland
or Virginia personal income tax consequences of
dividends and capital gain distributions. You are
required by the Internal Revenue Code to report to the
federal government all Fund exempt-interest dividends
(and all other tax-exempt interest).
IF YOU HAVE NOT FURNISHED A CERTIFIED CORRECT TAXPAYER
IDENTIFICATION NUMBER (GENERALLY YOUR SOCIAL SECURITY
NUMBER) AND HAVE NOT CERTIFIED THAT WITHHOLDING DOES
NOT APPLY, OR IF THE INTERNAL REVENUE SERVICE HAS
NOTIFIED THE FUND THAT THE TAXPAYER IDENTIFICATION
NUMBER LISTED ON YOUR ACCOUNT IS INCORRECT ACCORDING TO
THEIR RECORDS OR THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, FEDERAL LAW GENERALLY REQUIRES THE FUND TO
WITHHOLD 31% FROM DIVIDENDS (OTHER THAN TAX-EXEMPT
DIVIDENDS) AND/OR REDEMPTIONS (INCLUDING EXCHANGE
REDEMPTIONS). Amounts withheld are applied to your
federal tax liability; a refund may be obtained from
the Service if withholding results in overpayment of
taxes. Federal law also requires the Fund to withhold
30% or the applicable tax treaty rate from dividends
paid to certain nonresident alien, non-U.S. partnership
and non-U.S. corporation shareholder accounts.
This is a brief summary of some of the tax laws that
affect your investment in the Fund. Please see the
statement of additional information and your tax
adviser for further information.
8
<PAGE>
FUND ORGANIZATION AND MANAGEMENT
THE FUND IS A MEMBER OF THE AMERICAN FUNDS GROUP, WHICH IS MANAGED BY ONE OF THE
LARGEST AND MOST EXPERIENCED INVESTMENT ADVISERS.
FUND ORGANIZATION AND VOTING RIGHTS The Trust, an
open-end, diversified management investment company,
was organized as a Massachusetts business trust in
1986. The Trust's board supervises Fund operations and
performs duties required by applicable state and
federal law. Members of the board who are not
affiliated with the business manager or investment
adviser or their affiliates are paid certain fees for
services rendered to the Funds as described in the
statement of additional information. They may elect to
defer all or a portion of these fees through a deferred
compensation plan in effect for the Funds. Shareholders
have one vote per share owned and, at the request of
the holders of at least 10% of the shares, the Trust
will hold a meeting at which any member of the board
could be removed by a majority vote. There will not
usually be a shareholder meeting in any year, except,
for example, when the election of trustees is required
to be acted upon by shareholders under the Investment
Company Act of 1940. Since the Funds use a combined
prospectus, each Fund may be liable for misstatements,
inaccuracies, or incomplete disclosure concerning any
other Fund contained in this prospectus.
THE BUSINESS MANAGER Washington Management
Corporation, 1101 Vermont Avenue N.W., Washington, D.C.
20005, is the business manager and provides all
services required to carry on the Fund's general
administrative and corporate affairs. These services
include all executive personnel, clerical staff, office
space and equipment, arrangements for and supervision
of all shareholder services, federal and state
regulatory compliance and responsibility for accounting
and recordkeeping facilities. Washington Management
Corporation provides similar services to other mutual
funds. The Business Manager receives a fee at the
annual rate of 0.135% of the first $60 million of the
Fund's net assets plus 0.09% of the Fund's net assets
in excess of $60 million plus 1.35% of gross investment
income.
THE INVESTMENT ADVISER Capital Research and Management
Company, a large and experienced investment management
organization founded in 1931, is the investment adviser
to the Fund and the other funds in The American Funds
Group. Capital Research and Management Company is
located at 333 South Hope Street, Los Angeles, CA 90071
and at 135 South State College Boulevard, Brea, CA
92621. (See "The American Funds Shareholder
Guide--Investment Minimums and Fund Numbers" for a
listing of funds in The American Funds Group.) Capital
Research and Management Company manages the investment
portfolio of the Fund and receives a fee at the annual
rate of 0.165% of the first $60 million of the Fund's
net assets plus 0.12% of the Fund's net assets in
excess of $60 million plus 1.65% of gross investment
income. Assuming
9
<PAGE>
net assets of $100 million and gross income levels of
4%, 5%, 6%, 7%, 8% and 9%, the combined management fees
would total .38%, .41%, .44%, .47%, .50% and .53% of
average net assets, respectively.
Capital Research and Management Company is a wholly
owned subsidiary of The Capital Group Companies, Inc.
(formerly "The Capital Group, Inc.") which is located
at 333 South Hope Street, Los Angeles, CA 90071. The
research activities of Capital Research and Management
Company are conducted by affiliated companies which
have offices in Los Angeles, San Francisco, New York,
Washington, D.C., London, Geneva, Singapore, Hong Kong
and Tokyo.
Capital Research and Management Company and its
affiliated companies have adopted a personal investing
policy that is consistent with the recommendations
contained in the report dated May 9, 1994 issued by the
Investment Company Institute's Advisory Group on
Personal Investing. (See the statement of additional
information.)
PORTFOLIO TRANSACTIONS Orders for the Fund's portfolio
securities transactions are placed by Capital Research
and Management Company which strives to obtain the best
available prices taking into account the costs and
quality of executions. Fixed-income securities are
generally traded on a "net" basis with a dealer acting
as principal for its own account without a stated
commission, although the price of the security usually
includes a profit to the dealer. In underwritten
offerings, securities are usually purchased at a fixed
price which includes an amount of compensation to the
underwriter generally referred to as the underwriter's
concession or discount. On occasion, securites may be
purchased directly from an issuer in which case no
commissions or discounts are paid.
Subject to the above policy, in circumstances in which
two or more brokers are in a position to offer
comparable prices and executions, preference may be
given to brokers that have sold shares of the Fund or
have provided investment research, statistical, and
other related services for the benefit of the Fund
and/or of other funds served by Capital Research and
Management Company.
PRINCIPAL UNDERWRITER American Funds Distributors,
Inc., a wholly owned subsidiary of Capital Research and
Management Company, is the principal underwriter of the
Fund's shares. American Funds Distributors, Inc. is
located at 333 South Hope Street, Los Angeles, CA
90071, 135 South State College Boulevard, Brea, CA
92621, 8000 IH-10 West, San Antonio, TX 78230, 8332
Woodfield Crossing Boulevard, Indianapolis, IN 46240
and 5300 Robin Hood Road, Norfolk, VA 23513. Telephone
conversations with American Funds Distributors may be
recorded or monitored for verification, recordkeeping
and quality assurance purposes.
10
<PAGE>
PLAN OF DISTRIBUTION The Fund has a plan of
distribution or "12b-1 Plan" under which it may finance
activities primarily intended to sell shares, provided
the categories of expenses are approved in advance by
the board and the expenses paid under the plan were
incurred within the last 12 months and accrued while
the plan is in effect. Expenditures by the Fund under
the plan may not exceed 0.25% of its average net assets
annually (all of which may be for service fees). See
"The American Funds Shareholder Guide: Purchasing
Shares--Sales Charges" below.
TRANSFER AGENT American Funds Service Company, a
wholly owned subsidiary of Capital Research and
Management Company, is the transfer agent and performs
shareholder service functions. It was paid a fee of
$27,000 and $32,000, respectively, by the Maryland Fund
and the Virginia Fund for the fiscal year ended July
31, 1995. Telephone conversations with American Funds
Service Company may be recorded or monitored for
verification, recordkeeping and quality assurance
purposes.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
<TABLE>
<CAPTION>
SERVICE
AREA ADDRESS STATES SERVED
<S> <C> <C>
WEST P.O. Box 2205 AK, AZ, CA, HI, ID, MT, NV,
Brea, CA 92622-2205 OR, UT, WA and outside the
Fax: 714/671-7080 U.S.
CENTRAL- P.O. Box 659522 AR, CO, IA, KS, LA, MN, MO,
WEST San Antonio, TX ND, NE, NM, OK, SD, TX and WY
78265-9522
Fax: 210/530-4050
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI, MS, OH,
EAST Indianapolis, IN TN and WI
46206-6007
Fax: 317/735-6620
EAST P.O. Box 2280 CT, DE, FL, GA, MA, MD, ME,
Norfolk, VA NC, NH, NJ, NY, PA, RI, SC,
23501-2280 VA, VT, WV and Washington,
Fax: 804/670-4773 D.C.
ALL SHAREHOLDERS MAY CALL AMERICAN FUNDS SERVICE COMPANY AT
800/421-0180 FOR SERVICE.
[Map]
</TABLE>
WEST (LIGHT GREY); CENTRAL-WEST (WHITE); CENTRAL-EAST
(DARK GREY); EAST (BLUE)
11
<PAGE>
APPENDIX
DESCRIPTION OF BOND RATINGS.
Moody's Investors Service, Inc. rates the long-term
debt securities issued by various entities in
categories ranging from "Aaa" to "C," according to
quality as described below.
"Aaa -- Best quality. These securities 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 shares."
"Aa -- High quality by all standards. They are rated
lower than the best bond because margins of protection
may not be as large as in Aaa securities, fluctuation
of protective elements may be of greater amplitude, or
there may be other elements present which make the
long-term risks appear somewhat greater."
"A -- Upper medium grade obligations. These bonds
possess many favorable investment attributes. 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."
"Baa -- Medium grade obligations. 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."
"Ba -- Have speculative elements; future cannot be
considered as well assured. 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. Bonds in this class are characterized
by uncertainty of position."
"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."
"Caa -- Of poor standing. Issues may be in default or
there may be present elements of danger with respect to
principal or interest."
"Ca -- Speculative in a high degree; often in default
or have other marked shortcomings."
"C -- Lowest rated class of bonds; can be regarded as
having extremely poor prospects of ever attaining any
real investment standing."
12
<PAGE>
Standard & Poor's Corporation rates the long-term debt
securities issued by various entities in categories
ranging from "AAA" to "D," according to quality as
described below.
"AAA -- Highest rating. Capacity to pay interest and
repay principal is extremely strong."
"AA -- High grade. Very strong capacity to pay
interest and repay principal. Generally, these bonds
differ from AAA issues only in a small degree."
"A -- Have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible
to the adverse effects of change in circumstances and
economic conditions, than debt in higher rated
categories."
"BBB -- Regarded as having adequate capacity to pay
interest and repay principal. These bonds normally
exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest
and repay principal than for debt in higher rated
categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as
predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree
of speculation and C the highest degree of speculation.
While such debt will likely have some quality and
protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse
conditions."
"C1 -- Reserved for income bonds on which no interest
is being paid."
"D -- In default and payment of interest and/or
repayment of principal is in arrears."
13
<PAGE>
PURCHASING SHARES THE AMERICAN FUNDS SHAREHOLDER GUIDE
YOUR INVESTMENT DEALER CAN HELP YOU ESTABLISH YOUR ACCOUNT--AND HELP YOU ADD TO
IT WHENEVER YOU LIKE.
<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
<S> <C> <C>
See "Investment Minimums and $50 minimum (except where a lower
Fund Numbers" for initial minimum is noted under
investment minimums. "Investment
Minimums and Fund Numbers").
By contacting Visit any investment dealer Mail directly to your investment
your who is dealer's address printed on your
investment registered in the state where account statement.
dealer the
purchase is made and who has a
sales agreement with American
Funds Distributors.
By mail Make your check payable to the Fill out the account additions
fund and mail to the address form at
indicated on the account the bottom of a recent account
application. Please indicate statement, make your check
an investment dealer on the payable to
account application. the fund, write your account
number on your check, and mail
the
check and slip in the envelope
provided
with your account statement.
By wire Call 800/421-0180 to obtain Your bank should wire your
your additional
account number(s) if investments in the same manner as
necessary. described under "Initial
Please indicate an investment Investment."
dealer
on the account application.
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>
SHARE PRICE Shares are purchased at the next offering
price after the order is received by the Fund or
American Funds Service Company. In the case of orders
sent directly to the Fund or American Funds Service
Company, an investment dealer MUST be indicated. This
price is the net asset value plus a sales charge, if
applicable. Dealers are responsible for promptly
transmitting orders. (See the statement of additional
information under "Purchase of Shares--Price of
Shares.")
The net asset value per share is determined as of the
close of regular trading (currently 4:00 p.m., New York
time) on each day the New York Stock Exchange is open.
The current value of the Fund's total assets, less all
liabilities, is divided by the total number of shares
outstanding and the result, rounded to the nearer cent,
is the net asset value per share. The net asset value
per share of the money market funds normally will
remain constant at $1.00 based on the funds' current
practice of valuing their shares using the
penny-rounding method in accordance with rules of the
Securities and Exchange Commission.
14
<PAGE>
SHARE CERTIFICATES Shares are credited to your account
and certificates are not issued unless specifically
requested. This eliminates the costly problem of lost
or destroyed certificates.
If you would like certificates issued, please request
them by writing to American Funds Service Company.
There is usually no charge for issuing certificates in
reasonable denominations. CERTIFICATES ARE NOT
AVAILABLE FOR THE MONEY MARKET FUNDS.
INVESTMENT MINIMUMS AND FUND NUMBERS Here are the
minimum initial investments required by the funds in
The American Funds Group along with fund numbers for
use with our automated phone line, American
FundsLine-Registered Trademark- (see description
below):
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL FUND INITIAL FUND
FUND INVESTMENT NUMBER FUND INVESTMENT NUMBER
- -------------------------------------- ---------- ------ -------------------------------------- ---------- ------
STOCK AND STOCK/BOND FUNDS BOND FUNDS
<S> <C> <C> <C> <C> <C>
AMCAP Fund-Registered Trademark-...... $ 1,000 02 American High-Income Municipal Bond
American Balanced Fund-Registered
Trademark-............................ 500 11 Fund-SM-.............................. $ 1,000 40
American Mutual Fund-Registered American High-Income Trust-Registered
Trademark-............................ 250 03 Trademark-............................ 1,000 21
Capital Income Builder-Registered
Trademark-............................ 1,000 12 The Bond Fund of America-SM-.......... 1,000 08
Capital World Bond Fund-Registered
Capital World Growth and Income Trademark-........................... 1,000 31
Intermediate Bond Fund of
Fund-SM-............................. 1,000 33 America-Registered Trademark-......... 1,000 23
EuroPacific Growth Fund-Registered
Trademark-............................ 250 16 Limited Term Tax-Exempt Bond Fund of
Fundamental Investors-SM-............. 250 10 America-SM-........................... 1,000 43
The Growth Fund of America-Registered The Tax-Exempt Bond Fund of
Trademark-............................ 1,000 05 America-SM- . 1,000 19
The Income Fund of America-Registered The Tax-Exempt Fund of
Trademark-............................ 1,000 06 California-Registered Trademark-*..... 1,000 20
The Investment Company of The Tax-Exempt Fund of
America-Registered Trademark- . 250 04 Maryland-Registered Trademark-*...... 1,000 24
The New Economy Fund-Registered The Tax-Exempt Fund of
Trademark-............................ 1,000 14 Virginia-Registered Trademark-*....... 1,000 25
New Perspective Fund-Registered
Trademark-............................ 250 07 U.S. Government Securities Fund-SM-... 1,000 22
SMALLCAP World Fund-SM-............... 1,000 35 MONEY MARKET FUNDS
Washington Mutual Investors The Cash Management Trust of
Fund-SM-.............................. 250 01 America-Registered Trademark- . 2,500 09
The Tax-Exempt Money Fund of
America-SM- . 2,500 39
The U.S. Treasury Money Fund of
America-SM-........................... 2,500 49
* Available only in certain states.
</TABLE>
For retirement plan investments, the minimum is $250
except that the money market funds have a minimum of
$1,000 for individual retirement accounts (IRAs).
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
15
<PAGE>
American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE
AS RETIREMENT PLAN INVESTMENTS. The minimum is $50 for
additional investments (except as noted above.)
SALES CHARGES The sales charges you pay when
purchasing the 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 "Investment Minimums and Fund
Numbers" for a listing of the funds.)
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS COMMISSION
PERCENTAGE OF THE: AS PERCENTAGE
---------------------------- OF THE
AMOUNT OF PURCHASE NET AMOUNT OFFERING OFFERING
AT THE OFFERING PRICE INVESTED PRICE PRICE
- --------------------- ---------------------------- --------------
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $50,000................. 6.10% 5.75% 5.00%
$50,000 but less than $100,000.... 4.71 4.50 3.75
BOND FUNDS
Less than $25,000................. 4.99 4.75 4.00
$25,000 but less than $50,000..... 4.71 4.50 3.75
$50,000 but less than $100,000.... 4.17 4.00 3.25
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
$1,000,000........................ 2.04 2.00 1.60
$1,000,000 or more................ none none (see below)
</TABLE>
Commissions of 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 403(b) plan or defined contribution
plan qualified under Section 401(a) of the Internal
Revenue Code including a "401(k)" plan with 200 or more
eligible employees (paid pursuant to the Fund's Plan of
Distribution) and for purchases made at net asset value
by certain retirement plans of organizations with
collective retirement plan assets of $100 million or
more as set forth in the statement of additional
information (paid by American Funds Distributors).
American Funds Distributors, at its expense (from a
designated percentage of its income), will during
calendar year 1996 provide additional promotional
incentives to dealers. Currently these incentives are
limited to the top one hundred dealers who have sold
shares of the Fund or other funds in The American Funds
Group. These incentive
16
<PAGE>
payments will be based on a pro rata share of a
qualifying dealer's sales. American Funds Distributors
will, on an annual basis, determine the advisability of
continuing these promotional incentives.
Any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees or any other purchaser
investing at least $1 million in shares of the Fund (or
in combination with shares of other funds in The
American Funds Group other than the money market funds)
may purchase at net asset value; however, a contingent
deferred sales charge of 1% is imposed on certain
redemptions within one year of the purchase. (See
"Redeeming Shares-- Contingent Deferred Sales Charge.")
Qualified dealers currently are paid a continuing
service fee not to exceed 0.25% of average net assets
(0.15% in the case of the money market funds) annually
in order to promote selling efforts and to compensate
them for providing certain services. (See "Fund
Organization and Management--Plan of Distribution").
These services include processing purchase and
redemption transactions, establishing shareholder
accounts and providing certain information and
assistance with respect to the Fund.
NET ASSET VALUE PURCHASES The stock, stock/bond and
bond funds may sell shares at net asset value to: (1)
current or retired directors, trustees, officers and
advisory board members of the funds managed by Capital
Research and Management Company, employees of
Washington Management Corporation, employees and
partners of The Capital Group Companies, Inc. and its
affiliated companies, certain family members 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 American Funds
Distributors or who clear transactions through such
dealers and plans for such persons or the dealer; (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 $100 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.
17
<PAGE>
REDUCING YOUR SALES CHARGE
YOU AND YOUR IMMEDIATE FAMILY MAY COMBINE INVESTMENTS TO REDUCE YOUR COSTS.
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 account(s), which may include
purchases through employee benefit plan(s) such as an
IRA, individual-type 403(b) plan or single-participant
Keogh-type plan or by a business solely controlled by
these individuals (for example, the individuals own the
entire business) or by a trust (or other fiduciary
arrangement) solely for the benefit of these
individuals. Individual purchases by a trustee(s) or
other fiduciary(ies) may also be aggregated if the
investments are (1) for a single trust estate or
fiduciary account, including an employee benefit plan
other than those described above or (2) made for two or
more employee benefit plans of a single employer or of
affiliated employers as defined in the Investment
Company Act of 1940, again excluding employee benefit
plans described above, or (3) 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 To qualify for a reduced sales
charge, you may combine concurrent purchases of two or
more funds in The American Funds Group, except direct
purchases of the money market funds. (Shares of the
money market funds purchased through an exchange,
reinvestment or cross-reinvestment from a fund having a
sales charge do qualify.) For example, if you
concurrently invest $25,000 in one fund and $25,000 in
another, the sales charge would be reduced to reflect a
$50,000 purchase.
RIGHT OF ACCUMULATION The sales charge for your
investment may also be reduced by taking into account
the current value of your existing holdings in The
American Funds Group. Direct purchases of the money
market funds are excluded. (See account application.)
STATEMENT OF INTENTION You may reduce sales charges on
all investments by meeting the terms of a statement of
intention, a non-binding commitment to invest a certain
amount in Fund shares subject to a commission within a
13-month period. Five percent of the statement amount
will be held in escrow to cover additional sales
charges which may be due if your total investments over
the statement period are insufficient to qualify for a
sales charge reduction. (See account application and
the statement of additional information under "Purchase
of Shares-- Statement of Intention.")
18
<PAGE>
YOU MUST LET YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY KNOW IF YOU QUALIFY FOR A REDUCTION IN
YOUR SALES CHARGE USING ONE OR ANY COMBINATION OF THE
SHAREHOLDER SERVICES METHODS DESCRIBED ABOVE.
THE FUND OFFERS YOU A VALUABLE ARRAY OF SERVICES DESIGNED TO INCREASE THE
CONVENIENCE AND FLEXIBILITY OF YOUR INVESTMENT-- SERVICES YOU CAN USE TO ALTER
YOUR INVESTMENT PROGRAM AS YOUR NEEDS AND CIRCUMSTANCES CHANGE.
AUTOMATIC INVESTMENT PLAN You may make regular monthly
or quarterly investments through automatic charges to
your bank account. Once a plan is established, your
account will normally be charged by the 10th day of the
month during which an investment is made (or by the
15th day of the month in the case of any retirement
plan for which Capital Guardian Trust Company--another
affiliate of The Capital Group Companies, Inc.--acts as
trustee or custodian).
AUTOMATIC REINVESTMENT Dividends and capital gain
distributions are reinvested in additional shares 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, American Funds Service
Company or your investment dealer.
CROSS-REINVESTMENT You may cross-reinvest dividends or
dividends and capital gain distributions paid by one
fund into another fund in The American Funds Group,
subject to conditions outlined in the statement of
additional information. Generally, to use this service
the value of your account in the paying fund must equal
at least $5,000.
EXCHANGE PRIVILEGE You may exchange shares into other
funds in The American Funds Group. 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 having
a sales charge, or by reinvestment or
cross-reinvestment of dividends or capital gain
distributions.
You may exchange shares by writing to American Funds
Service Company (see "Redeeming Shares"), by contacting
your investment dealer, by using American
Fundsline-Registered Trademark- (see "Shareholder
Services--American Fundsline-Registered Trademark- "
below), or by telephoning 800/421-0180 toll-free,
faxing (see "Transfer Agent" above for the appropriate
fax numbers) or telegraphing American Funds Service
Company. (See "Telephone Redemptions and Exchanges"
below.) Shares held in corporate-type retirement plans
for which Capital Guardian Trust Company serves as
trustee may not be exchanged by telephone, fax or
telegraph. Exchange redemptions and purchases are
processed simultaneously at the share
19
<PAGE>
prices next determined after the exchange order is
received. (See "Purchasing Shares--Share Price.") THESE
TRANSACTIONS HAVE THE SAME TAX CONSEQUENCES AS ORDINARY
SALES AND PURCHASES.
AUTOMATIC EXCHANGES You may automatically exchange
shares (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. You must
either meet the minimum initial investment requirement
for the receiving fund OR the originating fund's
balance must be at least $5,000 and the receiving
fund's minimum must be met within one year.
AUTOMATIC WITHDRAWALS You may make automatic
withdrawals of $50 or more as follows: five or more
times per year if you have an account of $10,000 or
more, or four or fewer times per year if you have an
account of $5,000 or more. Withdrawals are made on or
about the 15th day of each month you designate, and
checks will be sent within seven days. (See "Other
Important Things to Remember.") Additional investments
in a withdrawal account must not be less than one
year's scheduled
withdrawals or $1,200, whichever is greater. However,
additional investments in a withdrawal account may be
inadvisable due to sales charges and tax liabilities.
THE ABOVE SERVICES ARE AVAILABLE ONLY IN STATES WHERE
THE FUND TO BE PURCHASED MAY BE LEGALLY OFFERED AND MAY
BE TERMINATED OR MODIFIED AT ANY TIME UPON 60 DAYS'
WRITTEN NOTICE.
ACCOUNT STATEMENTS Your account is opened in
accordance with your registration instructions.
Transactions in the account, such as additional
investments and dividend reinvestments, will be
reflected on regular confirmation statements.
AMERICAN FUNDSLINE-Registered Trademark- You may check
your share balance, the price of your shares, or your
most recent account transaction, redeem shares (up to
$10,000 per fund, per account each day) or exchange
shares around the clock with American
FundsLine-Registered Trademark-. To use this service,
call 800/325-3590 from a TouchTone-TM- telephone.
Redemptions and exchanges through American
FundsLine-Registered Trademark- are subject to the
conditions noted above and in "Redeeming
Shares--Telephone Redemptions and Exchanges" below. You
will need your fund number (see the list of Funds in
the American Funds Group under "Purchasing
Shares--Investment Minimums and Fund Numbers"),
personal identification number (the last four digits of
your Social Security number or other tax identification
number associated with your account) and fund account
number.
20
<PAGE>
<TABLE>
<CAPTION>
REDEEMING SHARES
YOU MAY TAKE MONEY OUT OF YOUR ACCOUNT WHENEVER YOU PLEASE.
<S> <C>
By writing to American Funds Send a letter of instruction specifying the name of the fund, the number of
Service Company (at the shares or dollar amount to be sold, your name and account number. You should
appropriate address indicated also enclose any certificate shares you wish to redeem. For redemptions over
under "Fund Organization and $50,000 and for certain redemptions of $50,000 or less (see below), your
Management-- signature must be guaranteed by a bank, savings association, credit union, or
Transfer Agent") member firm of a domestic stock exchange or the National Association of
Securities Dealers, Inc. that is an eligible guarantor institution. You should
verify with the institution that it is an eligible guarantor prior to signing.
Additional documentation may be required for redemption of shares held in
corporate, partnership or fiduciary accounts. Notarization by a Notary Public is
not an acceptable signature guarantee.
By contacting If you redeem shares through your investment dealer, you may be charged for this
your investment dealer service. SHARES HELD FOR YOU IN YOUR INVESTMENT DEALER'S STREET NAME MUST BE
REDEEMED THROUGH THE DEALER.
You may have a redemption You may use this option, provided the account is registered in the name of an
check sent to you by using individual(s), a UGMA/UTMA custodian, or a non-retirement plan trust. These
American Fundsline-Registered redemptions may not exceed $10,000 per day, per fund account and the check must
Trademark- or by telephoning, be made payable to the shareholder(s) of record and be sent to the address of
faxing, or telegraphing record provided the address has been used with the account for at least 10 days.
American Funds Service See "Transfer Agent" and "Exchange Privilege" above for the appropriate
Company (subject to the telephone or fax number.
conditions noted in this
section and in "Telephone
Redemptions and Exchanges"
below)
In the case of the money Upon request (use the account application for the money market funds) you may
market funds, you may have establish telephone redemption privileges (which will enable you to have a
redemptions wired to your redemption sent to your bank account) and/or check writing privileges. If you
bank by telephoning American request check writing privileges, you will be provided with checks that you may
Funds Service Company ($1,000 use to draw against your account. These checks may be made payable to anyone you
or more) or by writing a designate and must be signed by the authorized number of registered shareholders
check ($250 or more) exactly as indicated on your checking account signature card.
</TABLE>
A SIGNATURE GUARANTEE IS NOT CURRENTLY REQUIRED FOR ANY
REDEMPTION OF $50,000 OR LESS PROVIDED THE REDEMPTION
CHECK IS MADE PAYABLE TO THE REGISTERED SHAREHOLDER(S)
AND IS MAILED TO THE ADDRESS OF RECORD, PROVIDED THE
ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST 10
DAYS.
THE PRICE YOU RECEIVE FOR THE SHARES YOU REDEEM IS THE
NET ASSET VALUE NEXT DETERMINED AFTER YOUR ORDER AND
ALL REQUIRED DOCUMENTATION ARE RECEIVED BY THE FUND OR
AMERICAN FUNDS SERVICE COMPANY. (SEE "PURCHASING
SHARES--SHARE PRICE.")
TELEPHONE REDEMPTIONS AND EXCHANGES By using the
telephone (including American FundsLine-Registered
Trademark-), fax or telegraph redemption and/or
exchange options, you agree to hold the Fund, American
Funds
21
<PAGE>
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
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
American Funds Service Company (you may reinstate them
at any time also by writing American Funds Service
Company). If American Funds Service Company 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.
CONTINGENT DEFERRED SALES CHARGE A contingent deferred
sales charge of 1% applies to certain redemptions
within the first year on investments of $1 million or
more and on any investment made with no initial sales
charge by any employer-sponsored 403(b) plan or defined
contribution plan qualified under Section 401(a) of the
Internal Revenue Code including a "401(k)" plan with
200 or more eligible employees. 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 for the
longest period are assumed to be redeemed first for
purposes of calculating this charge. The charge is
waived for exchanges (except if shares acquired by
exchange were then redeemed within 12 months of the
initial purchase); for distributions from qualified
retirement plans and other employee benefit plans; for
redemptions resulting from participant-directed
switches among investment options within a
participant-directed employer-sponsored retirement
plan; for distributions from 403(b) plans or IRAs due
to death, disability or attainment of age 59 1/2; for
tax-free returns of excess contributions to IRAs; for
redemptions through certain automatic withdrawals not
exceeding 10% of the amount that would otherwise be
subject to the charge; and for redemptions in
connection with loans made by qualified retirement
plans.
REINSTATEMENT PRIVILEGE You may reinvest proceeds from
a redemption or a dividend or capital gain distribution
without sales charge (any contingent deferred sales
charge paid will be credited to your account) in any
fund in The American Funds Group. Send a written
request and a check to American Funds Service Company
within 90 days after the date of the redemption or
distribution. Reinvestment will be at the next
calculated net asset value after receipt. The tax
status of a gain
22
<PAGE>
realized on a redemption will not be affected by
exercise of the reinstatement privilege, but a loss may
be nullified if you reinvest in the same fund within 30
days. See the statement of additional information for
tax consequences where, within 90 days of purchasing
fund shares, they are redeemed and reinstated in the
same fund or exchanged into another fund.
OTHER IMPORTANT THINGS TO REMEMBER The net asset value
for redemptions is determined as indicated under
"Purchasing Shares-- Share Price." Because each stock,
stock/bond and bond fund's net asset value fluctuates,
reflecting the market value of the fund's portfolio,
the amount a shareholder receives for shares redeemed
may be more or less than the amount paid for them.
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 Investment Company Act of
1940), redemption proceeds will be paid on or before
the seventh day following receipt of a proper
redemption request.
A fund may, with 60 days' written notice, close your
account if, due to a redemption, the account has a
value of less than the minimum required initial
investment. (For example, a fund may close an account
if a redemption is made shortly after a minimum initial
investment is made.)
RETIREMENT PLANS
You may invest in the funds through various retirement
plans including the following plans for which Capital
Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh-type and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact
American Funds Distributors or your investment dealer.
To determine which retirement plan is appropriate for
you, please consult your tax adviser. TAX-EXEMPT FUNDS
SHOULD NOT SERVE AS INVESTMENTS FOR RETIREMENT PLANS.
FOR MORE INFORMATION, PLEASE REFER TO THE ACCOUNT
APPLICATION OR THE STATEMENT OF ADDITIONAL INFORMATION.
IF YOU HAVE ANY QUESTIONS ABOUT ANY OF THE SHAREHOLDER
SERVICES DESCRIBED HEREIN OR YOUR ACCOUNT, PLEASE
CONTACT YOUR INVESTMENT DEALER OR AMERICAN FUNDS
SERVICE COMPANY.
THIS PROSPECTUS HAS BEEN PRINTED ON
RECYCLED PAPER
THAT MEETS THE GUIDELINES OF THE
UNITED STATES ENVIRONMENTAL PROTECTION
AGENCY.
23
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
THE TAX-EXEMPT FUND OF VIRGINIA
PART B
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 15, 1995
This document is not a prospectus but should be read in conjunction with the
current Prospectus dated November 15, 1995 of The American Funds Tax-Exempt
Series I (the "Trust"). The Trust currently consists of two series, The
Tax-Exempt Fund of Maryland (the "Maryland Fund" or "Fund") and The Tax-Exempt
Fund of Virginia (the "Virginia Fund" or "Fund"). Except where the context
indicates otherwise, all references herein to the "Fund" apply to each of the
two funds. The Prospectus may be obtained from your investment dealer or
financial planner or by writing to the Trust at the following address:
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Attention: Secretary
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 842-5665
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE NO.
<S> <C>
Description of Certain Securities and Investment Techniques B-1
Investment Restrictions B-4
Trust Officers and Trustees, including Trustee Compensation B-7
Management B-10
Dividends and Distributions B-12
Additional Information Concerning Taxes B-12
Purchase of Shares B-14
Shareholder Account Services and Privileges B-16
Execution of Portfolio Transactions B-16
General Information B-17
Investment Results B-19
Description of Ratings for Notes and Commercial Paper B-21
Financial Statements B-23
</TABLE>
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
INVESTMENT POLICIES - The Maryland Fund and the Virginia Fund invest
principally in tax-exempt securities the interest on which is not included in
gross income for federal income tax purposes (herein referred to from time to
time generally as "municipal bonds") primarily consisting of bonds and notes
issued by its respective state (Maryland or Virginia as the case may be), and
its political subdivisions, municipalities and public authorities. Investments
may be made in short-term taxable obligations only when such investments are
considered advisable for liquidity or for temporary defensive purposes.
CERTAIN RISK FACTORS RELATING TO HIGH-YIELD, HIGH-RISK BONDS
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - High-yield, high-risk bonds
can be very sensitive to adverse economic changes and corporate developments.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers or issuers whose revenue is very sensitive to economic
conditions 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. If the issuer of
a bond defaulted on its obligations to pay interest or principal or entered
into bankruptcy proceedings, the Fund may incur losses or expenses in seeking
recovery of amounts owed to it. In addition, periods of economic uncertainty
and changes can be expected to result in increased volatility of market prices
and yields of high-yield, high-risk bonds.
PAYMENT EXPECTATIONS - High-yield, high-risk bonds may contain redemption or
call provisions. If an issuer exercised these provisions in a declining
interest rate market, the Fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
a high-yield, high-risk bond's value will decrease in a rising interest market,
as will the value of the Fund's assets.
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 high-yield, high-risk bonds, especially in a thin
market.
The Fund's investments will be rated according to the quality standards set
forth in the Prospectus. Subsequent to its purchase by the Fund, an issue of
municipal bonds or notes may cease to be rated or its rating may be reduced
below the minimum rating required for its purchase. Neither event requires the
elimination of such obligation from a Fund's portfolio, but the Investment
Adviser will consider such an event in its determination of whether a Fund
should continue to hold such obligation in its portfolio. If, however, as a
result of downgrades or otherwise, the Fund holds more than 20% of its net
assets in high-yield, high-risk bonds, the Fund will dispose of the excess as
expeditiously as possible.
MUNICIPAL BONDS - Municipal bonds are generally debt obligations issued to
obtain funds for various public purposes, including the construction of public
facilities. Municipal bonds may be issued to refund outstanding obligations,
to obtain funds for general operating expenses or for public improvements or
for lending to private institutions or corporations funds for the construction
of educational facilities, hospitals, housing, industrial facilities or for
other public purposes. The interest on these obligations is generally not
included in gross income for federal income tax purposes. See "Additional
Information Concerning Taxes" below. Opinions relating to the validity of
municipal bonds and to the exclusion from gross income for federal income tax
purposes and, where applicable, the exemption from state and local income tax
are rendered by bond counsel to the respective issuing authorities at the time
of issuance.
The two principal classifications of municipal bonds are general obligation
and limited obligation (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 and may be considered a general obligation of the entity
making annual rental payments to the extent such rental payments are
appropriated annually.
The principal security for a limited obligation or revenue bond is generally
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 principal 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.
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 are secured
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 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.
There are, in addition, a variety of hybrid and special types of municipal
obligations as well as numerous differences in the security of municipal bonds,
both within and between the two primary classifications described above.
The amount of information about the financial condition of an issuer of
municipal bonds may not be as extensive as that which is made available by
corporations whose securities are publicly traded.
TEMPORARY INVESTMENTS - The Fund may invest in short-term municipal obligations
with a maturity of one year or less during periods of temporary defensive
strategy or when such investments are considered advisable for liquidity.
These include public housing notes that are fully secured by a pledge of the
full faith and credit of the United States, tax anticipation notes, bond
anticipation notes and revenue anticipation notes. Generally, the income from
all such securities is exempt from federal income tax. See "Additional
Information Concerning Taxes" below. Further, a portion of the Fund's assets,
which normally will be less than 20%, may be held in cash or invested in high
quality taxable short-term securities with a maturity of one year or less.
Such temporary investments may include: (1) obligations of the U.S. Treasury;
(2) obligations of agencies and instrumentalities of the U.S. Government; (3)
money market instruments, such as certificates of deposit issued by domestic
banks, corporate commercial paper, and bankers' acceptances; and (4) repurchase
agreements (which are described below).
REPURCHASE AGREEMENTS - Although the Fund currently does not anticipate doing
so during the next 12 months, it may enter on a temporary basis into repurchase
agreements, under which the 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 Fund to maintain liquidity and earn
income over periods of time as short as overnight. The seller must maintain
with the Fund's custodian bank collateral equal to at least 100% of the
repurchase price including accrued interest, as monitored daily by the
Investment Adviser. The Fund will only enter into repurchase agreements
involving securities in which it 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 Fund 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 a Fund may be delayed or limited.
PORTFOLIO MANAGEMENT - In seeking to achieve the Fund's objectives, the
Investment Adviser purchases securities which it believes represent the best
values then currently available in the marketplace. Such values are a function
of yield, maturity, issue classification and quality characteristics, coupled
with expectations regarding the economy, movements in the general level and
term structure of interest rates, political developments, and variations in the
supply of funds available for investment in the tax-exempt market relative to
the demand for the funds placed upon it. These latter factors change
continuously and should be met with a dynamic, responsive approach to the
investment process. Some of the more important portfolio management techniques
that are utilized by the Investment Adviser are set forth below.
ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Longer term securities ordinarily yield more than shorter term
securities but are subject to greater and more rapid price fluctuation.
Keeping in mind the Fund's objective of producing a high level of current
income, the Investment Adviser will increase the 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. 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.
QUALITY - 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 also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced 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 Fund to make 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.
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover 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. See "Financial
Highlights" in the Prospectus for the Fund's portfolio turnover.
SPECIAL CONSIDERATIONS - The Internal Revenue Code of 1986 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. The provisions of the Code generally apply to bonds
issued after August 15, 1986. 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. These restrictions
in the Code also may affect the availability of certain municipal securities.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which may not be changed
without a majority vote of its outstanding shares. Such majority is defined by
the Investment Company Act of 1940, (the "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 expressed in the following investment
restrictions are measured immediately after and giving effect to the relevant
transaction. These restrictions provide that the Fund may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer or hold more than 10% of any class of securities of any one
issuer (for this purpose all indebtedness of an issuer shall be deemed a single
class), provided that this limitation shall apply only to 75% of the value of
the Fund's total assets and, provided further, that the limitation shall not
apply to obligations of the U.S. Government or its agencies or
instrumentalities;
2. Enter into any repurchase agreement maturing in more than seven days
(unless subject to a demand feature of seven days or less) if any such
investment, together with any illiquid securities held by the Fund, exceeds 10%
of the value of its total assets;
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. Acquire securities subject to legal or contractual restrictions on
disposition;
5. Make loans to others, except for the purchase of debt securities or
entering into repurchase agreements;
6. 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;
7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales;
8. 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;
9. Mortgage, pledge, or hypothecate its assets, except in an amount up to 10%
of the value of its total assets, but only to secure borrowings for temporary
or emergency purposes;
10. 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;
11. Invest in companies for the purpose of exercising control or management;
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition, or reorganization;
13. Buy or sell commodities or commodity contracts or oil, gas or other
mineral exploration or development programs;
14. Write, purchase or sell puts, calls, straddles, spreads or any combination
thereof;
15. Purchase or retain the securities of any issuer, if, to the knowledge
of the Fund, those individual officers and Trustees of the Trust, its
Investment Adviser, or principal underwriter, each owning beneficially more
than 1/2 of 1% of the securities of such issuer, together own more than 5% of
the securities of such issuer;
16. Invest more than 5% of the value of the Fund's total assets in securities
of any issuer with a record of less than three years continuous operation,
including predecessors, except those issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, or municipal bonds rated at
least "A" by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation; or
17. Invest more than 25% of its assets in securities of any industry although,
for purposes of this limitation, the issuers of municipal securities and U. S.
Government obligations are not considered to be part of any industry.
Notwithstanding Investment Restriction #12, the Fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
the Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.
For the purpose of the Fund's investment restrictions, the identification of
the "issuer" of municipal bonds which are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the obligation
as described, the most significant of which is the ultimate source of funds for
the payment of principal of and interest on such bonds.
For purposes of investment restriction number 13, the term "oil, gas or other
mineral exploration or development programs" includes oil, gas or other mineral
exploration or development leases.
Another policy of the Fund which is not deemed a fundamental policy, and thus
may be changed by the Board of Trustees without shareholder approval, is that
the Fund may not invest 25% or more of its 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, however, invest more than an aggregate of 25%
of its total assets in industrial development bonds.
TRUST OFFICERS AND TRUSTEES
(WITH THEIR PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS)#
TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) AGGREGATE COMPENSATION TOTAL COMPENSATION TOTAL
NUMBER
REGISTRANT DURING PAST 5 YEARS# (INCLUDING VOLUNTARILY DEFERRED FROM ALL FUNDS OF
FUND
COMPENSATION/1/) FROM FUNDS AFFILIATED WITH THE BOARDS ON
DURING FISCAL YEAR ENDED AMERICAN FUNDS WHICH
7/31/95 GROUP FOR THE YEAR DIRECTOR
ENDED 7/31/95 SERVES
<S> <C> <C> <C> <C> <C>
Cyrus A. Ansary Trustee Investment Services $2,900 $39,900 3
1725 K Street, N.W., Suite 410 International Co.,
Washington, D.C. 20006 President
Age: 61
Frank M. Ewing Trustee Frank M. Ewing Co., Inc. $2,700 $15,700 3
P. O. Box 2248 President and Chairman of
Gaithersburg, MD 20886 the Board
Age: 80
Stephen Hartwell*{ Chairman Emeritus Washington Management none/3/ none/3/ 3
Age: 80 and Trustee Corporation, Chairman of
the Board
James H. Lemon, Jr.*{ Chairman of the The Johnston-Lemon none/3/ none/3/ 3
Age: 59 Trust Group, Incorporated,
Chairman of the Board
and
Chief Executive Officer
Harry J. Lister*{ President and Trustee Washington Management none/3/ none/3/ 3
Age: 59 Corporation, President
and
Director
Jean Head Sisco Trustee Sisco Associates, $2,900 $38,400 3
2517 Massachusetts Avenue, N.W. Management Consulting
Washington, D.C. 20008 Firm, Partner
Age: 70
T. Eugene Smith Trustee T. Eugene Smith, Inc., $2,325 $36,525 3
2830 Graham Road, Suite 200 President
Falls Church, VA 22042
Age: 65
Stephen G. Yeonas Trustee Stephen G. Yeonas $3,500/2/ $41,300 3
1611 North Kent Street, Suite 802 Company, Chairman of
Arlington, VA 22209 the
Age: 70 Board and Chief
Executive
Officer
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
<S> <C>
LOIS A. ERHARD{ HOWARD L. KITZMILLER{
Vice President Vice President, Secretary and Treasurer
Washington Management Corporation, Washington Management Corporation,
Vice President Director, Senior Vice President, Secretary and
Assistant Treasurer
</TABLE>
# Positions within the organizations listed may have changed during this
period.
* Trustees who are considered "interested persons" as defined in the 1940 Act,
on the basis of their affiliation with the Fund's Business Manager, Washington
Management Corporation.
{ Address is 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
/1/Amounts may be deferred by eligible trustees under a non-qualified deferred
compensation plan adopted by the Fund in 1993. 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 Trustee.
/2/Since the plan's adoption, the total amount of deferred compensation accrued
by the Funds (plus earnings thereon) through 9/30/95, the latest calendar
quarter, for participants is as follows: Trustee Stephen G. Yeonas ($6,393).
Amounts deferred and accumulated earnings thereon are not funded and are
general unsecured liabilities of the Funds until paid to the Trustee.
/3/Stephen Hartwell, James H. Lemon, Jr. and Harry J. Lister are affiliated
with the Business Manager and, accordingly, receive no compensation from the
Trust.
All of the officers listed are officers of the Business Manager. Most of the
Trustees and officers are also officers and/or directors of one or more of the
other funds for which Washington Management Corporation serves as Business
Manager. No Trustee compensation is paid by the Trust to any officer or
Trustee who is a director, officer or employee of the Business Manager, the
Investment Adviser or affiliated companies. The Trust pays an annual retainer
fee of $1,500, an attendance fee of $400 per meeting and $200 per Committee
meeting to unaffiliated Trustees. The Trustees may elect, on a voluntary
basis, to defer all or a portion of those fees through a deferred compensation
plan in effect for the Fund. The Trust also reimburses certain meeting-related
expenses of the Trustees.
As of November 1, 1995, the officers and Trustees and their families as a
group, owned beneficially or of record less than 1% of the outstanding shares
of the Trust.
MANAGEMENT
BUSINESS MANAGER - Since its inception, the Trust has operated under a
Business Management Agreement with Washington Management Corporation (the
"Business Manager"), 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
The Business Manager provides all services required to carry on the Fund's
general administrative and corporate affairs. These services include all
executive personnel, clerical staff, office space and equipment, arrangements
for and supervision of all shareholder services, Federal and state regulatory
compliance and responsibility for accounting and record keeping facilities. The
Business Manager provides similar services to other mutual funds.
For the fiscal years ended July 31, 1995, 1994, and 1993 the Business
Manager's fees were $153,000, $147,000 and $119,000 for the Maryland Fund and
$183,000, $179,000 and $144,000 for the Virginia Fund, respectively. For the
fiscal year ended July 31, 1995, the Business Manager's fees for the Maryland
Fund amounted to 0.210% of average net assets and the Virginia Fund amounted to
0.202% of average net assets.
INVESTMENT ADVISER - The Investment Adviser, founded in 1931, maintains
research facilities in the U.S. and abroad, with a staff of professionals, many
of whom have a number of years of investment experience. 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 responsible for more than $100 billion of stocks,
bonds and money market instruments and serves over five million investors of
all types. These investors include privately owned businesses and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
BUSINESS MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT - The
Business Management Agreement and Investment Advisory Agreement, unless sooner
terminated, will continue in effect until
July 31, 1996 and may be renewed from year to year thereafter, provided that
any such renewal has been specifically approved at least annually as to the
Fund by (i) the Board of 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 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 also provide that either party has the right to terminate them,
without penalty, upon sixty (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).
Subject to the expense limitation described below, the Fund pays all expenses
not specifically assumed by the Business Manager or the Investment Adviser,
including, but not limited to, registration and filing fees with federal and
state agencies; blue sky expenses; expenses of shareholders' meetings; the
expense of reports to existing shareholders; expenses of printing proxies and
prospectuses; insurance premiums; legal and auditing fees; dividend
disbursement expenses; the expense of the issuance, transfer and redemption of
its shares; custodian fees; printing and preparation of registration
statements; taxes; the Fund's distribution expenses pursuant to the Plan of
Distribution; compensation, fees and expenses paid to Trustees who are not
"interested persons" of the Trust; association dues; and costs of stationery,
forms and certificates prepared exclusively for the Fund.
Since during the initial period of the Trust's operations its asset size may
be relatively small and its expenses, as a percentage of assets, higher than
those of a larger investment company, the Business Manager and the Investment
Adviser have agreed to pay the foregoing expenses (with the exception of
interest, taxes, brokerage costs and extraordinary expenses such as litigation
and acquisitions) for a period ending not later than August 1, 1996, all
subject to reimbursement by the Trust. To accomplish such reimbursement, the
Business Manager and the Investment Adviser may receive expenses reimbursement
fees which together, on an annual basis, are equivalent to the difference
between the fees of the Business manager and the Investment Adviser and 1% of
the daily net assets of the Fund. The expense reimbursement fees are for
reimbursement of actual expenses incurred by or on behalf of the Fund and have
the effect of assuring that the total normal operating expenses of the Fund
during the expense reimbursement period will not exceed 1% per annum. The
expense reimbursement obligation will terminate either (1) when all such
expenses of the Trust which have been paid by the Business Manager and the
Investment Adviser have been reimbursed by the Trust, or (2) on August 1, 1996,
whichever is earlier. It is the Fund's present position that this obligation
does not require recognition of a liability on its financial statements because
at this time the likelihood that the Fund will be required to make payment
thereunder appears remote.
For the fiscal years ended July 31, 1995, 1994 and 1993 the Investment
Adviser's fees were $188,000, $181,000, and $146,000 for the Maryland Fund and
$227,000, $221,000 and $176,000 for the Virginia Fund, respectively. For the
fiscal year ended July 31, 1995, the Investment Adviser's fees for the Maryland
Fund amounted to 0.259% of average net assets and the Virginia Fund amounted to
0.251% of average net assets. The advisory fees under the Agreement as a
percentage of average net assets would be 0.38% if gross income were 4%, 0.41%
at 5%, 0.44% at 6%, 0.47% at 7%, 0.50% at 8% and 0.53% at 9%.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. is the Trust's
principal underwriter of the Fund's shares. The Trust has adopted a Plan of
Distribution (the "Plan"), pursuant to rule 12b-1 under the 1940 Act (see
"Principal Underwriter" in the Prospectus). The Principal Underwriter receives
amounts payable pursuant to the Plan (see below) and commissions consisting of
that portion of the sales charge remaining after the discounts which it allows
to investment dealers. For the fiscal years ended July 31, 1995, 1994 and 1993
the commissions on Maryland Fund shares totalled $222,000, $484,000 and
$533,000 of which the Principal Underwriter retained $42,000, $92,000 and
$97,000, respectively, while the commissions on the Virginia Fund shares
totalled $236,000 $574,000 and $600,000 of which the Principal Underwriter
retained $46,000 $112,000 and $121,000, respectively. On its retail sales of
the Maryland and Virginia Funds and the Distribution Plan of the Funds,
Johnston, Lemon & Co. Incorporated received commission amounts of $50,000
$116,000 and $56,000, and $27,000 $57,000 and $46,000, respectively, for the
fiscal years ended July 31, 1995, 1994 and 1993, but received no net brokerage
commissions resulting from purchases and sales of securities for the investment
account of the Funds.
As required by rule 12b-1 the Plan (together with the Principal Underwriting
Agreement) has been approved by the full Board of Trustees and separately by a
majority of the Trustees who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
the Principal Underwriting Agreement, and the Plan has been approved by the
vote of a majority of the outstanding voting securities of the Trust. The
officers and Trustees who are "interested persons" of the Trust may be
considered to have a direct or indirect financial interest in the operation of
the Plan due to present or past affiliations with the Business Manager.
Potential benefits of the Plan to the Fund are improved shareholder services,
savings to the Fund in transfer agency costs, savings to the Fund 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 Trustees who are not "interested
persons" of the Trust shall be committed to the discretion of the Trustees who
are not interested persons during the existence of the Plan. The Plan may not
be amended to increase materially the amount to be spent for distribution
without shareholder approval. The Board of Trustees reviews quarterly a
written report of amounts expended under the Plan or any related agreement and
the purposes for which such expenditures were made and approves annually any
continuance of the Plan.
Under the Plan the Fund may expend up to 0.25% of its average net assets
annually to finance any activity which is primarily intended to result in the
sale of Fund shares, provided the Board of Trustees has approved the category
of expenses for which payment is being made. These primarily include service
fees for qualified dealers and dealer commissions and wholesaler compensation
on sales of 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 a
"401(k)" plan with 200 or more eligible employees. During the Trust's fiscal
year ended July 31, 1995, the Maryland Fund and the Virginia Fund paid under
the Plan $154,000 and $211,000, respectively, to the Principal Underwriter, all
of which was used as compensation to dealers.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS AND DISTRIBUTIONS - For the purpose of calculating dividends, daily
net investment income of the Fund consists of: (a) all interest income accrued
on the Fund's investments including any discount or 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.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional federal, state and
local tax considerations generally affecting the Fund and its shareholders. No
attempt is made to present a detailed explanation of the tax treatment of the
Fund or its shareholders, and the discussion here and in such Fund's 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.
GENERAL - The Fund is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Shares of the
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, Keogh-type plans and individual retirement accounts).
Such retirement plans would not gain any additional benefit from the tax-exempt
nature of the Fund's dividends because such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the Fund
may not be an appropriate investment for entities which are "substantial users"
of facilities financed by industrial development 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
their 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 Fund intends to meet all the requirements and to elect the tax status of a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). As such, the Fund will not be
subject to federal income taxes to the extent it distributes its net investment
income and net realized capital gains, if any, to shareholders. The Fund must
distribute 90% of the aggregate interest excludable from gross income and 90%
of the investment company taxable income earned by it during the taxable year.
There are additional requirements including one that less than 30% of the
Fund's gross income must be derived from the sale or disposition of securities
held for less than three months.
The percentage of total dividends paid by the Fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") for Federal tax purposes will be the same for all shareholders
receiving dividends during such year. In order for the 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 the Trust's and Fund's assets
must consist of tax-exempt obligations. Not later than 60 days after the close
of its taxable year, the Fund will notify each shareholder of the portion of
the dividends paid by the 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 the 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 the 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 Fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually. The
Fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held the Fund's shares. Such
distributions will be designated as a capital gains dividend in a written
notice mailed by the Fund to shareholders not later than 60 days after the
close of the Fund's taxable year. The Fund may also make a distribution of net
realized long-term capital gains near the end of the calendar year to comply
with certain requirements of the Code. Gain recognized on the disposition of a
debt obligation (including tax-exempt obligations purchased after April 30,
1993) purchased by the Fund at a market discount (generally at a price less
than the 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 the
Fund held the debt obligation. Similarly, while the Fund does not expect to
earn any taxable income, any taxable income earned by the Fund will be
distributed and will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
If for any taxable year the Fund does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will 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 may
be eligible for the dividends received deduction for corporations.
Under the Code, if, within 90 days after Fund shares are purchased, such
shares are redeemed and either reinstated in the same fund or exchanged for
shares of any other fund in The American Funds Group and the otherwise
applicable sales charge is waived, then the amount of the sales charge
previously incurred in purchasing Fund shares shall not be taken into account
for purposes of determining the amount of any gain or loss on the redemption,
but will be treated as having been incurred in the purchase of the fund shares
acquired in the reinstatement or exchange.
The tax status of a gain realized on a redemption will not be affected by
exercise of the reinstatement privilege, but a loss may be nullified if you
reinvest in the same fund within 30 days.
As of the date of this statement of additional information, the maximum
federal individual stated 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 gain is 28%; and the maximum corporate tax
applicable to ordinary income and net capital gain is 35%. Naturally, the
amount of tax payable by a shareholder with respect to either distributions
from the Fund or disposition of Fund shares will be affected by a combination
of tax rules covering e.g., deductions, credits, deferrals, exemptions, sources
of income and other matters. Under the Code, an individual is entitled to
establish and contribute to an IRA each year (prior to the tax return filing
for that year) whereby earnings on investments are tax-deferred. In addition,
in some cases, the IRA contribution itself may be deductible.
FEDERAL TAXES - 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 percent of ordinary income (generally net
investment income) for the calendar year, (ii) 98 percent of capital gain net
income (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 (ii) any amount on which
such Fund pays income tax for the year. Each Fund intends to meet these
distribution requirements to avoid the excise tax liability.
Individuals and corporations may be subject to alternative minimum tax. The
Code treats interest on private activity bonds, as defined therein, as an item
of tax preference for alternative minimum tax purposes. Also, shareholders
will not be permitted to deduct any of their share of Fund expenses in
computing alternative minimum taxable income. Further, under the Code federal
exempt-interest dividends are includable in adjusted current earnings in
calculating corporate alternative minimum taxable income.
Fund shareholders are required by the Code to report to the federal government
all exempt-interest dividends, and all other tax-exempt interest received
during tax years beginning on or after January 1, 1987.
PURCHASE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the Fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of net asset value and, in the case of orders placed
with dealers, accepted by the Principal Underwriter prior to its close of
business. The dealer is responsible for promptly transmitting purchase orders
to the Principal Underwriter. Orders received by the investment dealer, the
Transfer Agent, or the Fund after the time of determination of the net asset
value will be entered at the next calculated offering price. Prices which
appear in the newspaper are not always indicative of prices at which you will
be purchasing and redeeming shares of the 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 public offering price (net asset value plus
a sales charge, if applicable), is based on the net asset value per share which
is calculated once daily at the close of trading (currently 4:00 p.m., New York
time) each day the New York Stock Exchange is open. The New York Stock
Exchange is currently closed on weekends and on the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas Day. The net asset value per share is
determined as follows:
1. Municipal bonds and notes and other securities with more than 60 days
remaining to maturity normally are valued at prices representing the mean
between bid and asked quotations, which are obtained from a national municipal
bond pricing service. The pricing service takes into account various factors
such as quality, yield and maturity of municipal bonds comparable to those held
by each Fund, as well as actual bid and asked prices on a particular day.
All securities with 60 days or less to maturity are amortized to maturity
based on their cost to the Fund if acquired within 60 days of maturity or, if
already held by the Fund on the 60th day, based on the value determined on the
61st day. The maturities of variable or floating rate instruments, or
instruments with the right to sell them at par to the issuer or dealer, are
deemed to be the time remaining until the next interest adjustment date or
until they can be redeemed at par.
When market prices or market quotations are not readily available, securities
are valued at fair value as determined in good faith by a committee appointed
by the Board of Trustees. The fair value of all other assets is added to the
value of securities to arrive at the total assets;
2. There are deducted from the total assets, thus determined, the liabilities,
including accruals of taxes and other expense items; and
3. The net assets so obtained are then divided by the total number of shares
outstanding (excluding treasury shares), 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 the
Trust. The Trust will not knowingly sell Fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the Fund without the consent of a
majority of the Board of Trustees.
STATEMENT OF INTENTION - 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") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize the Statement in order
to qualify for a reduced sales charge, shares equal to up 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 purchases had been made at a
single time. If the difference is not paid within 45 days after written
request by the Principal Underwriter or the investment dealer, 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 and there will be
no retroactive reduction of the sales charges paid on prior purchases.
Existing holdings eligible for rights of accumulation (see the prospectus and
account application) may be credited toward satisfying the Statement. During
the Statement period reinvested dividends and capital gains distributions,
investments in money market funds, and investments made under a right of
reinstatement will not be credited toward satisfying the Statement.
In the case of purchase orders by the trustees of certain retirement plans by
payroll deductions, 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 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 of intention, a sales charge will be assessed
according to the sales charge breakpoint thus determined. There will be no
retroactive adjustments in sales charges previously made during the 13-month
period.
Shareholders purchasing shares at a reduced sales charge under the Statement
indicate their acceptance of these terms with their first purchase.
DEALER COMMISSIONS - The following commissions will be paid to dealers who
initiate and are responsible for purchases of $1 million or more, for 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 a
"401(k)" plan with 200 or more eligible employees, and for purchases made at
net asset value by certain retirement plans of organizations with collective
retirement plan assets of $100 million or more: 1.00% on sales to $2 million,
0.80% on amounts over $2 million to $3 million, 0.50% on amounts over $3
million to $50 million, 0.25% on amounts over $50 million to $100 million, and
0.15% on amounts over $100 million. The level of dealer commissions will be
determined based on sales made over a 12-month period commencing from the date
of the first sale at net asset value. See "The American Funds Shareholder
Guide" in the Fund's prospectus for more information.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular monthly or quarterly investments in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum), which will be automatically invested in shares
at the offering price on or about the 10th day of the month (or on or about the
15th day of the month in the case of accounts for retirement plans where
Capital Guardian Trust Company serves as custodian or trustee.) Bank accounts
will be charged on the day or a few days before investments are credited,
depending on the bank's capabilities, and shareholders will receive a
confirmation statement showing the current transaction. Participation in the
plan will begin within 30 days after receipt of the account application. If
your bank account cannot be charged due to insufficient funds, a stop-payment
order or closing of your account, the plan may be terminated and the related
investment reversed. The shareholder may change the amount of the investment
or discontinue the plan at any time by writing the Transfer Agent.
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 systematic withdrawals. Withdrawals
of amounts exceeding reinvested dividends and distributions and increases in
share value could 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.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - A shareholder in one fund
may elect to cross-reinvest dividends or dividends and capital gain
distributions paid by that fund (the "paying fund") into any other fund in The
American Funds Group (the "receiving fund") subject to the following
conditions: (i) the aggregate value of the shareholder's account(s) in the
paying fund(s) must equal or exceed $5,000 (this condition is waived if the
value of the account in the receiving fund equals or exceeds that fund's
minimum initial investment requirement), (ii) as long as the value of the
account in the receiving fund is below that fund's minimum initial investment
requirement, dividends and capital gain distributions paid by the receiving
fund must be automatically reinvested in the receiving fund, and (iii) if this
privilege is discontinued with respect to a particular receiving fund, the
value of the account in that fund must equal or exceed the fund's minimum
initial investment requirement or the fund shall have the right, if the
shareholder fails to increase the value of the account to such minimum within
90 days after being notified of the deficiency, to automatically redeem the
account and send the proceeds to the shareholder. These cross-reinvestments of
dividends and capital gain distributions will be at net asset value (without
sales charge).
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the Fund's portfolio securities transactions are placed by the
Investment Adviser. There are occasions on which portfolio transactions for
the Trust 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 Trust, they are effected only when the
Investment Adviser believes that to do so is in the interest of the Trust.
When such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner.
Johnston, Lemon & Co. Incorporated, which together with the Business Manager
is wholly owned by The Johnston-Lemon Group, Incorporated, may serve as broker
for the Fund in effecting certain portfolio transactions, and may retain
commissions, in accordance with certain regulations of the Securities and
Exchange Commission.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the Trust, including
proceeds from the sale of shares of the Trust and of securities in the Trust's
portfolio, are held by The Chase Manhattan Bank, N.A., Three Metrotech Center,
Brooklyn, NY 11245, as Custodian.
INDEPENDENT ACCOUNTANTS - Price Waterhouse LLP, 400 South Hope Street, Los
Angeles, CA 90071, has served as the Trust's independent accountants since its
inception, 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 have
been so included in reliance on the report of Price Waterhouse LLP given on the
authority of that firm as experts in accounting and auditing.
REPORTS TO SHAREHOLDERS - The Trust's fiscal year ends on July 31. Shareholders
are provided, at least semiannually, with reports showing the investment
portfolio and financial statements audited annually by the Trust's independent
accountants, Price Waterhouse LLP, whose selection is determined annually by
the Trustees.
PERSONAL INVESTING POLICY - Capital Research and Management Company and its
affiliated companies have adopted a personal investing policy consistent with
Investment Company Institute guidelines. 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; disclosure of personal
holdings by certain investment personnel prior to recommendation for purchase
for the fund; blackout periods for 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.
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:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE -- JULY 31, 1995
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF Maryland THE TAX-EXEMPT FUND OF VIRGINIA
<S> <C> <C>
Net asset value and redemption price per share $15.29 $15.79
(Net assets divided by shares outstanding)
Maximum Offering price per share (100/95.25 of $16.05 $16.58
net asset value per share, which takes into
account the Fund's current maximum sales charge)
</TABLE>
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts, where the Trust was organized, shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the Trust. However, the
risk of a shareholder incurring any financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides that notice of the disclaimer may be given in any agreement,
obligation, or instrument which is entered into or executed by the Trust or
Trustees. The Declaration of Trust provides for indemnification out of Trust
property of any shareholder held personally liable for the obligations of the
Trust and also provides for the Trust to reimburse such shareholder for all
legal and other expenses reasonably incurred in connection with any such claim
or liability.
Under the Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Trust
will provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder.
SHAREHOLDER VOTING RIGHTS - As permitted by Massachusetts law, there will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders. At that time, the Trustees then in
office will call a shareholders' meeting for the election of Trustees. The
Trustees must call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when requested to do so by the record
holders of 10% of the outstanding shares of the Trust. At such a meeting, a
Trustee may be removed after the holders of record of not less than a majority
of the outstanding shares of the Trust have declared that the Trustee be
removed either by declaration in writing or by votes cast in person or by
proxy. Except as set forth above, the Trustees shall continue to hold office
and may appoint successor Trustees. The shares do not have cumulative voting
rights, which means that the holders of a majority of the shares of the Trust
voting for the election of Trustees can elect all the Trustees. No amendment
may be made to the Declaration of Trust without the affirmative vote of a
majority of the outstanding shares of the Trust except that amendments to
change the name of the Trust, to correct any ambiguous, defective or
inconsistent provision of, or to supply any omission to, the Declaration of
Trust, to establish new Funds, or to reduce or eliminate the payment of taxes
by the Trust may be made by the Trustees without the vote or consent of
Shareholders. If not terminated by the vote or written consent of a majority
of the outstanding shares, the Trust will continue indefinitely.
The Fund currently issues shares in two series and the Board of Trustees may
establish additional series of shares in the future. Each "series" of shares
represents interests in a separate portfolio and has its own investment
objective and policies. When more than one series of shares is outstanding,
shares of all series will vote together for a single set of Trustees, and on
other matters affecting the entire Trust, with each share entitled to a single
vote. On matters affecting only one series, only the shareholders of that
series shall be entitled to vote. On matters relating to more than one series
but affecting the series differently, separate votes by series are required.
INVESTMENT RESULTS
The Maryland Fund yield is 4.65% and the Virginia Fund yield is 4.57% based on
a 30-day (or one month) period ended July 31, 1995, 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.
The Fund 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. The Maryland Fund's tax-equivalent yield
based on the maximum combined effective federal/state/county tax rate of 44.13%
for the 30-day (or one month) period ended July 31, 1995 was 8.32%. For the
Virginia Fund investors with the maximum combined effective federal/state tax
rate of 43.07%, the tax-equivalent yield was 8.03% for the period ended July
31, 1995.
The Maryland Fund average annual total return for the one-year, five-year and
lifetime periods ending on July 31, 1995 was +2.45%, +6.23 % and +6.04%,
respectively. The Virginia Fund average annual total return for the same time
periods was +2.47%, +6.39% and +6.51%, respectively. The average annual 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.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
4.75% 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. The
Fund will calculate total return for ten-year periods after such a period has
elapsed. In addition, the Fund will provide lifetime average total return
figures.
The Funds may also calculate distribution rates on a taxable and tax
equivalent basis. The distribution rates are computed by annualizing the
current month's dividend and dividing by the average net asset value or maximum
offering price for the month. The distribution rates may differ from the
yields.
SEE THE DIFFERENCE TIME CAN MAKE IN AN INVESTMENT PROGRAM
... and taken all
distributions in shares,
If you had invested your investment would
$10,000 in the Fund have been worth this
this many years ago... much at July 31, 1995
<TABLE>
<CAPTION>
Number of Years Periods Maryland Value** Virginia Value**
8/1-7/31
<S> <C> <C> <C>
1 1994-1995 $10,246 $10,247
2 1993-1995 10,395 10,422
3 1992-1995 11,165 11,186
4 1991-1995 12,589 12,611
5 1990-1995 13,526 13,628
6 1989-1995 14,245 14,421
7 1988-1995 15,927 16,100
8 1987-1995 17,066 17,111
9 1986-1995 16,920 17,597
</TABLE>
ILLUSTRATION OF A $10,000 INVESTMENT IN THE TAX-EXEMPT FUND OF MARYLAND
WITH DIVIDENDS REINVESTED
(For the lifetime of the Fund August 14, 1986 - July 31, 1995)
COST OF SHARES
VALUE OF SHARES**
<TABLE>
<CAPTION>
Fiscal Annual Dividends Total From From Total
Year End Dividends (cumulative) Investment Initial Dividends Value
July 31 Cost Investment Reinvestment
<S> <C> <C> <C> <C> <C> <C>
1987* $ 493 $ 493 $ 10,493 $ 8,973 $ 471 $ 9,444
1988 617 1,110 11,110 9,021 1,101 10,122
1989 653 1,763 11,763 9,481 1,832 11,313
1990 681 2,444 12,444 9,414 2,504 11,918
1991 736 3,180 13,180 9,528 3,276 12,804
1992 764 3,944 13,944 10,148 4,285 14,433
1993 765 4,709 14,709 10,354 5,154 15,508
1994 773 5,482 15,482 10,001 5,727 15,728
1995 860 6,342 16,342 10,194 6,726 16,920
</TABLE>
ILLUSTRATION OF A $10,000 INVESTMENT IN THE TAX-EXEMPT FUND OF VIRGINIA
WITH DIVIDENDS REINVESTED
(For the lifetime of the Fund August 14, 1986 - July 31, 1995)
COST OF SHARES
VALUE OF SHARES**
<TABLE>
<CAPTION>
Fiscal Annual Dividends Total From From Total
Year End Dividends (cumulative) Investment Initial Dividends Value
July 31 Cost Investment Reinvestment
<S> <C> <C> <C> <C> <C> <C>
1987* $ 545 $ 545 $ 10,545 $ 9,273 $ 525 $ 9,798
1988 640 1,185 11,185 9,241 1,171 10,412
1989 671 1,856 11,856 9,701 1,919 11,620
1990 716 2,572 12,572 9,668 2,634 12,302
1991 760 3,332 13,332 9,834 3,454 13,288
1992 791 4,123 14,123 10,481 4,508 14,989
1993 800 4,923 14,923 10,674 5,407 16,081
1994 826 5,749 15,749 10,328 6,032 16,360
1995 892 6,641 16,641 10,528 7,069 17,597
</TABLE>
* From inception on August 14, 1986.
** Results assume deduction of the maximum sales charge of 4.75% from the
initial purchase payment.
EXPERIENCE OF INVESTMENT ADVISER - Capital Research and Management Company
manages nine common stock funds that are at least 10 years old. In all of the
10-year periods during which those funds were managed by Capital Research and
Management Company since 1964 (115 in all), those funds have had better total
returns than the Standard and Poor's 500 Stock Composite Index in 94 of the 115
periods.
Note that past results are not an indication of future investment results.
Also, the Fund has different investment policies than the funds mentioned
above. These results are included solely for the purpose of informing
investors about the experience and history of Capital Research and Management
Company, the Fund's Investment Adviser.
The Fund may also refer to results compiled by organizations such as CDA
Investment Technologies, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc. and Wiesenberger Investment Companies Services and the U.S.
Department of Commerce. Additionally, the Fund may, from time to time, refer
to results published in various newspapers or periodicals, including "Barrons",
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance
Magazine, Money, U.S. News and World Report and "The Wall Street Journal."
DESCRIPTION OF RATINGS FOR NOTES AND COMMERCIAL PAPER
COMMERCIAL PAPER --
Moody's Investors Service, Inc. ratings:
"Issuers rated Prime-1 (or related supporting institutions) 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.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) 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 appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained."
Standard & Poor's Corporation ratings:
"The A-1 designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.
The A-2 designation indicates a capacity for timely payment on issues so
designated is strong; however, the relative degree of safety is not as high as
for issues designated A-1."
NOTES --
Moody's Investors Service, Inc. ratings:
"The MIG 1 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.
The MIG 2 designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
Standard & Poor's Corporation ratings:
"The SP-1 rating denotes a very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.
The SP-2 rating denotes a satisfactory capacity to pay principal and
interest."
The Tax-Exempt Fund of Maryland
Investment Portfolio, July 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal
Amount Market
(000) Value
---------- ----------
TAX-EXEMPT SECURITIES MATURING IN MORE THAN ONE YEAR - 93.88%
COLLEGE & UNIVERSITY REVENUE - 5.03%
Frederick County, College Revenue Bonds, (Hood College Project),
1990 Series:
7.05% 2004 $410 $453,874
7.05% 2005 455 501,592
Maryland Health and Higher Educational Facilities Authority,
Refunding Revenue Bonds, Johns Hopkins University Issue,
Series 1988, 7.375% 2008 1,000 1,093,830
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds:
1992 Series A, 6.30% 2009 750 787,875
1993 Refunding Series C, 5.00% 2010 1,000 939,140
----------
3,776,311
----------
GENERAL OBLIGATIONS (LOCAL) - 10.10%
Anne Arundel County, Consolidated Water and Sewer:
1993 Refunding Series, 5.25% 2011 1,000 964,670
1985 Refunding Series, 5.30% 2016 1,000 935,510
Baltimore County:
Consolidated Public Improvement Bonds, 1990 Series, 6.75% 1999 600 650,172
Metropolitan District Bonds, 63rd Issue, 1992 Series, 6.10% 2006
250 268,833
Frederick County, Public Facilities Bonds:
1990, 8.875% 2002 250 311,650
1993, Series B, 5.125% 2007 995 987,547
Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 530 539,699
Howard County Consolidated Public Improvement Refunding Bonds,
1993 Series A, 5.25% 2007 1,500 1,505,760
Montgomery County, Consolidated Public Improvement Refunding
Bonds of 1993, Series A, 5.00% 2010 1,000 946,960
Wicomico County, Consolidated Public Improvement Bonds of
1993, 4.60% 2005 500 476,600
----------
7,587,401
----------
HOSPITAL & HEALTH FACILITIES REVENUE - 15.22%
Maryland Health and Higher Educational Facilities Authority:
Good Samaritan Hospital Issue, Revenue Bonds, Series 1993,
5.70% 2009 1,000 996,140
Greater Baltimore Medical Center Issue, Revenue Bonds,
Series 1991, 6.00% 2021 625 587,525
Howard County, General Hospital Issue, Series 1993:
5.50% 2013 1,500 1,309,485
5.50% 2021 2,000 1,655,700
Johns Hopkins Hospital Issue, Revenue Refunding Bonds, Series 1993:
5.60% 2009 850 841,857
5.00% 2023 1,000 849,770
Memorial Hospital of Cumberland Issue, Revenue Refunding
Bonds, Series 1992, 6.50% 2010 750 764,670
Peninsula Regional Medical Center Issue, Project and Refunding
Revenue Bonds, Series 1993, 5.00% 2023 2,000 1,671,640
Suburban Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.125% 2021 3,000 2,527,260
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue), Series 1992, 7.20% 2006 215 233,802
----------
11,437,849
----------
HOUSING FINANCE AUTHORITY REVENUE - 7.10%
Maryland Community Development Administration, Department of
Housing and Community Development, Single-Family Program Bonds:
1990 First Series, 7.60% 2017 495 529,675
1994 Fifth Series, 5.875% 2017 1,490 1,495,126
1988 Third Series, 8.00% 2018 1,000 1,069,650
Montgomery County, Maryland Housing Opportunities Commission,
Single Family Mortgage Revenue, 1986 Series C, 7.25% 2013 750 781,005
Prince George's County Housing Authority, GNMA/FNMA
Collateralized Single Family Mortgage Bonds,
Series 1994 A, 6.60% 2025 1,000 1,021,610
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 95 101,146
1988 Series B, 7.65% 2022 320 340,895
----------
5,339,107
----------
INDUSTRIAL DEVELOPMENT REVENUE - 1.44%
Mayor and City Council of Baltimore, Port Facilities Revenue
Bonds (Consolidation Coal Sales Company Project):
Series 1984 A, 6.50% 2011 500 540,915
Series 1984 B, 6.50% 2011 500 540,916
----------
1,081,831
----------
INSURED - 17.22%
City of Baltimore, Refunding Revenue Bonds, FGIC Insured:
1995, Series A, 7.25% 2005 2,000 2,361,340
1994, Series A, 6.00% 2015 1,500 1,542,240
Charles County, Consolidated Public Improvement Bonds of 1993,
Series A, FGIC Insured, 5.25% 2003 715 741,619
City of Frederick, General Improvement Bonds, 1992 Refunding
Series, FGIC Insured, 6.125% 2008 890 952,220
Maryland Health and Higher Educational Facilities Authority:
Anne Arundel Medical Center Issue, Revenue Bonds,
AMBAC Insured:
Series 1993, 5.25% 2013 1,000 932,830
Series 1993, 5.00% 2023 500 432,035
Francis Scott Key Medical Center Issue, Refunding Revenue
Bonds, Series 1993, FGIC Insured, 5.00% 2013 500 451,635
Holy Cross Hospital Issue, Series 1990 A,
AMBAC Insured, 7.011% 2004 750 827,775
Memorial Hospital of Easton, Series 1989 B,
MBIA Insured, 7.00% 2012 1,200 1,300,548
Sinai Hospital of Baltimore Issue Project and Revenue
Refunding Bonds, Series 1993, AMBAC Insured, 5.25% 2019 2,000 1,808,340
Commonwealth of Puerto Rico, Public Improvement Bonds of 1987,
MBIA Insured, 6.75% 2006 500 530,735
Washington, D.C. Metropolitan Area Transit Authority,
Gross Revenue Transit Refunding Bonds, Series 1993,
FGIC Insured, 6.00% 2008 1,000 1,061,920
----------
12,943,237
----------
LIFE CARE FACILITIES REVENUE - 9.45%
Calvert County, Economic Development Revenue Bonds
(Asbury-Solomons Island Facility), Series 1995, 8.625% 2024 2,000 2,130,780
Maryland Health and Higher Educational Facilities Authority,
First Mortgage Refunding Revenue Bonds, Roland Park Place Issue,
Series 1989, 7.75% 2012 2,000 2,133,360
Prince George's County, Refunding Revenue Bonds, Collington
Episcopal Life Care Community, Inc., Series 1994 A, 6.00% 2013 3,000 2,837,430
----------
7,101,570
----------
MULTI-FAMILY HOUSING - 2.76%
Montgomery County, Maryland Housing Opportunities Commission,
Single Family Mortgage Revenue, 1994 Series A-2, 7.50% 2024 2,000 2,073,720
----------
PRE-REFUNDED$ - 19.62%
Frederick County, Public Facilities Bonds:
1989, 7.20% 2006 (1999) 350 389,925
1991, Series B, 6.30% 2011 (2002) 1,370 1,521,399
1986 Series, 7.40% 2012 (2001) 310 362,133
Harford County, Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 (2002) 970 1,057,397
Howard County:
Consolidated Public Improvement Bonds,
1990 Series A, 7.00% 2009 (2000) 500 554,400
Metropolitan District Refunding Bonds,
1991 Series A, 6.625% 2021 (2001) 500 557,555
Maryland Department of Transportation, Consolidated
Transportation Bonds, 1989 Series, 6.50% 2003 (1998) 500 540,465
STATE OF MARYLAND, GENERAL OBLIGATION BONDS, STATE AND
Local Facilities:
Loan of 1990, Third Series, 6.75% 2003 (2000) 400 443,904
1989 First Series, 6.80% 2004 (1999) 1,000 1,099,330
Maryland State Health and Higher Educational Facilities
Authority:
Junior Lien Revenue Bonds, Francis Scott Key Medical Center
Issue, 1990 Series A, 7.00% 2025 (2000) 250 281,888
Sinai Hospital of Baltimore Issue, Revenue Bonds,
1990 Series, AMBAC Insured, 7.00% 2019 (2000) 700 789,285
Suburban Hospital Issue Revenue Bonds:
Series 1988, 7.50% 2008 (1998) 1,250 1,386,763
Series 1992, 6.50% 2017 (2002) 500 561,110
University of Maryland Medical System Issue, Revenue Bonds,
Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1,000 1,099,020
Morgan State University Academic Fees and Auxiliary Facilities
Fees Revenue Bonds, 1990 Series A, MBIA Insured,
7.00% 2020 (2000) 475 535,586
Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1,203,912
Commonwealth of Puerto Rico, Housing Bank and Finance Agency,
Single Family Mortgage Revenue Bonds, Homeownership
5th Portfolio, 1986 Series, 7.50% 2015 (2000) 495 559,503
Commonwealth of Puerto Rico, Public Improvement Bonds of 1992,
MBIA Insured, 6.50% 2009 (2002) 1,000 1,124,910
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds, 1989 Series B, 7.00% 2007 (1999) 600 671,440
----------
14,739,925
----------
RESOURCE RECOVERY - 3.99%
Montgomery County, Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue:
6.00% 2006 1,000 1,002,320
6.00% 2007 1,000 1,002,470
Series 1993 A, 6.30% 2016 1,000 993,040
----------
2,997,830
----------
TURNPIKES & TOLL ROADS REVENUE - 1.40%
Maryland Transportation Authority Facilities Project:
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1,000 1,050,300
----------
WATER & SEWER REVENUE - .55%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series 1991 B, 0.00% 2005 700 415,919
----------
70,545,000
----------
TAX-EXEMPT SECURITIES MATURING IN ONE YEAR OR LESS - 5.56%
PORTS - .93%
Anne Arundel County, Baltimore Gas and Electric Co.,
Economic Development Revenue Bonds, Series 1985, 3.60% 1995 700 699,999
----------
PRE-REFUNDED$ - 1.55%
Baltimore County Pension Fund, 1988 Series, 7.75% 2016 (1996) 1,125 1,166,603
----------
TRANSPORTATION - 3.08%
Maryland Department of Transportation, Consolidated Transportation
Bonds, 6.20% 1995 2,300 2,314,904
----------
4,181,506
----------
TOTAL TAX-EXEMPT SECURITIES (COST: $72,053,000) 74,726,506
Excess of cash and receivables over payables 417,576
----------
NET ASSETS $75,144,082
==========
</TABLE>
- --------
The Tax-Exempt Fund of Virginia
Investment Portfolio, July 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal
Amount Market
(000) Value
---------- -----------
TAX-EXEMPT SECURITIES MATURING IN MORE THAN ONE YEAR - 95.49%
COLLEGE & UNIVERSITY REVENUE - 4.13%
Rockingham County Industrial Development Authority, Educational
Facilities Revenue Bonds (Bridgewater College),
Series 1993, 6.00% 2023 $1,100 $1,037,333
University of Virginia, General Revenue Pledge Bonds,
Series 1993 B, 5.375% 2010 1000 999920
Virginia College Building Authority Educational Facilities Revenue
Bonds (Marymount University Project), Series 1992, 6.875% 2007 1650 1753142
-----------
3790395
-----------
GENERAL OBLIGATIONS (LOCAL) - 11.88%
Arlington County Public Improvement Bonds,
Series 1993, 5.30% 2009 2500 2490175
Chesapeake:
Public Improvement Bonds, Series of 1992, 6.00% 2006 1600 1707344
Refunding Bonds, Series of 1993, 5.40% 2008 1000 1006540
Covington, Water and Sewer Refunding Bonds,
Series of 1994, 5.25% 2013 250 230703
Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1195 1205002
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1000 979880
Newport News General Obligation, Water Bonds,
Series A of 1992, 6.125% 2009 1170 1225201
Norfolk Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 500 506920
Roanoke Public Improvement and Refunding Bonds,
Series 1992 A and B:
6.375% 2009 250 264003
6.40% 2011 500 525710
Spotsylvania Public Improvement Bonds,
Series of 1992, 5.75% 2011 750 749970
-----------
10891448
-----------
GENERAL OBLIGATIONS (STATE) - 1.70%
Commonwealth of Virginia, Public Facilities Bonds,
1993 Series A, 5.40% 2005 1500 1560825
-----------
HOSPITAL & HEALTH FACILITIES REVENUE - 13.22%
Arlington County Industrial Development Authority, Hospital
Revenue Refunding Bonds (The Arlington Hospital), Series 1993:
5.125% 2008 1000 929970
5.00% 2021 1000 838990
Fairfax County Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 1500 1442205
5.25% 2019 1500 1338510
5.00% 2023 2000 1692040
Lynchburg Industrial Development Authority, Hospital
Facilities, Revenue Refunding Bonds, Centra
Health, Inc., Series 1988, 8.125% 2016 1000 1100800
Norfolk Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals-Norfolk Project),
Series A of 1994, 5.00% 2020 1750 1481637
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding Bonds (Mary
Immaculate Project), 1994 Series, 6.875% 2010 1900 1938912
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 1300 1353560
-----------
12116624
-----------
HOUSING FINANCE AUTHORITY REVENUE - 4.99%
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 80 85175
1988 Series B, 7.65% 2022 345 367529
Virginia Housing Development Authority, Commonwealth
Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 528205
1995 Series A-AMT, Sub-Series A-1, 6.60% 2004 1000 1062890
1994 Series I-AMT, Sub-Series I-1, 6.40% 2005 800 843784
1989 Series B, Sub-Series B-2, 7.625% 2017 250 265385
1994 Series H, Sub-Series H-2, 6.55% 2017 1000 1023330
1992 Series A, 7.10% 2022 380 399847
-----------
4576145
-----------
INSURED - 15.02%
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1000 1025420
Danville, Virginia Industrial Development Authority, Hospital
Revenue Bonds, Danville Regional Medical Center,
Series 1994 FGIC Insured, 6.00% 2007 1000 1054920
Industrial Development Authority of the County of Hanover,
Hospital Revenue Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA Insured:
6.50% 2010 1375 1487956
6.375% 2018 1000 1067250
Loudoun County Sanitation Authority, Water and Sewer System
Revenue Bonds, Refunding Series 1992,
FGIC Insured, 6.25% 2010 2000 2086580
Metropolitan Washington, D.C. Airports Authority, Airport
System Revenue and Refunding Bonds, MBIA Insured AMT:
Series 1992 A, 6.625% 2019 750 774592
Series 1994 A, 5.75% 2020 2000 1873800
County of Prince William, Virginia, Lease Participation Certificates,
Series 1995, MBIA Insured, 5.20% 2005 1000 998340
Southeastern Public Service Authority of Virginia, Senior Revenue
Refunding Bonds (Regional Solid Waste System),
Series 1993 A, MBIA Insured, 5.125% 2013 1500 1381740
City of Virginia Beach Development Authority, Hospital Revenue
Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1000 1032710
Washington, D.C. Metropolitan Area Transit Authority,
Gross Revenue Transit Refunding Bonds,
Series 1993, FGIC Insured, 4.70% 2003 1000 983740
-----------
13767048
-----------
LEASE REVENUE (STATE) - 2.02%
Virginia Public Building Authority, State Building Revenue Bonds
Series 1991 A, 6.50% 2011 1750 1853915
-----------
LOCAL APPROPRIATION - .84%
Fairfax County Economic Development Authority, Parking Revenue
Bonds (Huntington Metrorail Station Project),
Series 1990 A, 6.75% 2015 500 519305
Hampton Museum Revenue Refunding Bonds, Series 1994, 4.40% 2000 255 252720
-----------
772025
-----------
PRE-REFUNDED$ - 21.24%
Chesapeake, Hospital Authority Facility for Chesapeake
General Hospital First Mortgage Revenue, BIG Insured
Series 1988, 7.625% 2018 (1998) 1000 1112810
Fairfax County:
Industrial Development Authority Hospital Revenue Bonds
(Fairfax Hospital Association System),
Series 1985 A, 7.875% 2017 (1996) 250 268765
(Fairfax Hospital System Project), INOVA Health Systems,
Series 1991 C, 6.664% 2023 (2001) 1000 1127210
Water Authority Revenue, Series 1989, 7.30% 2021 (2000) 1250 1411937
Henry County Public Service Authority, Water and Sewer Revenue
Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1250 1420200
Loudoun County Sanitation Authority, Water and Sewer System
Revenue Bonds, Series 1989, AMBAC Insured:
7.50% 2010 (1999) 900 1005813
7.50% 2017 (1999) 375 419089
Norfolk Industrial Development Authority,
Hospital Revenue Bonds:
(Children's Hospital of the King's Daughters Obligated
Group), Series 1991, AMBAC Insured, 7.00% 2011 (2001) 400 455392
(Sentara Hospitals-Norfolk Project), Series 1991, 7.00% 2020 (2000) 250 282995
Portsmouth Improvement Bonds, Public Improvement Refunding
Bonds, Series 1987, 7.50% 2012 (1997) 500 549030
Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 757744
Richmond Public Utility Revenue Bonds,
Series 1988 A, 8.00% 2018 (1998) 1500 1662060
Roanoke:
Industrial Development Authority, Hospital Revenue Bonds,
Carilion Health System (Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 853860
Water System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 750 835748
Southeastern Public Service Authority, Regional Solid Waste
System, Senior Revenue Refunding Bonds,
Series 1989, BIG Insured:
7.00% 2006 (1999) 500 556435
7.00% 2013 (1999) 1000 1112870
Suffolk, Series 1989, 7.00% 2005 (1998) 1000 1101240
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2001) 25 28686
University of Virginia Hospital (The Rectors and Visitors
Hospital), Revenue Refunding Bonds,
Series 1985 D, 7.15% 2017 (1998) 500 549135
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 751345
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1000 1134200
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 285705
Commonwealth of Virginia Transportation Board,
Transportation Contract Revenue Bonds, Route 28 Project,
Series 1988:
7.70% 2008 (1998) 890 983067
7.80% 2016 (1998) 500 553495
Warrenton, Series of 1990, 7.10% 2003 (1998) 230 254249
-----------
19473080
-----------
RESOURCE RECOVERY - 2.17%
Fairfax County Economic Development Authority, Resource Recovery
Revenue Bonds, Series 1988 A AMT, (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2011 500 541035
Roanoke Valley Resource Authority, Solid Waste System Revenue
Bonds, Series 1992, 5.75% 2012 1500 1447755
-----------
1988790
-----------
STATE AUTHORITY - 4.35%
Virginia Public School Authority, School Financing Bonds:
(1987 Resolution), 1991 Refunding Series C, 6.25% 2007 1500 1604070
(1991 Resolution), Series 1994 A, 6.20% 2014 1500 1550745
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A, 7.50% 2017 50 52744
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 777083
-----------
3984642
-----------
STUDENT LOAN - 3.07%
Virginia Education Loan Authority, Student Loan Program Revenue
Refunding Bonds, Senior Series of 1993 D AMT:
5.40% 2001 1800 1823148
5.95% 2009 1000 993350
-----------
2816498
-----------
TRANSPORTATION - 3.49%
Commonwealth of Virginia Transportation Board,
Transportation Revenue Refunding Bonds:
(Northern Virginia Transportation District Program),
Series 1993 C, 5.30% 2009 2565 2520497
(U.S. Route 58 Corridor Development Program),
Series 1993 A, 5.25% 2012 730 681645
-----------
3202142
-----------
WATER & SEWER REVENUE - 7.37%
Chesterfield County Water and Sewer Revenue Refunding Bonds,
Series 1992, 6.375% 2009 1250 1325537
Fairfax County Water Authority, Water Refunding Revenue Bonds,
Series 1992, 5.75% 2029 3000 2870940
Prince William County, Virginia Resources Authority,
Solid Waste Disposal System Revenue Refunding Bonds,
1995 Series A, 5.50% 2015 1960 1864901
Rivanna Water and Sewer Authority, Regional Water and Sewer
System Refunding Revenue Bonds, Series 1991, 6.40% 2007 645 690840
-----------
6752218
-----------
87545795
-----------
TAX-EXEMPT SECURITIES MATURING IN ONE YEAR OR LESS - 3.28%
GENERAL OBLIGATIONS (LOCAL) - .27%
Suffolk, Series 1988, 8.25% 1995 250 250028
-----------
PRE-REFUNDED$ - 2.35%
Bedford Electric System Revenue Refunding Bonds,
Series 1986, AMBAC Insured, 7.25% 2025 (1996) 1000 1048020
Chesapeake, Certificates of Participation,
1986 Series, 7.75% 2006 (1996) 1000 1054900
Chesterfield County Refunding Bonds,
1986 Series, 7.50% 2001 (1996) 50 52581
-----------
2155501
-----------
RESOURCE RECOVERY - .66%
City of Alexandria Industrial Development Authority,
Adjustable Tender Resource Recovery Revenue Bonds,
1986 Series A, 4.10% 2016/2/ 600 600000
-----------
3005529
-----------
TOTAL TAX-EXEMPT SECURITIES (cost: $87,073,000) 90551324
Excess of cash and receivables over payables 1131286
-----------
NET ASSETS $91,682,610
==========
</TABLE>
- -------------------
Statement of Assets and Liabilities
July 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The The
Tax-Exempt Tax-Exempt
Fund of Fund of
Maryland Virginia
- -------------------------------------------- --------- ---------
Assets:
Tax-exempt securities:
Maturing in more than one year a
(cost: $67,916 and $84,184, respectively) $70,545 $87,546
Maturing in one year or less
(cost: $4,137 and $2,889, respectively) 4182 3005
Cash 171 48
Receivables for --
Sales of investments -- 704
Sales of Funds' shares 21 50
Accrued interest 786 1318
--------- ---------
Total Assets 75705 92671
--------- ---------
Liabilities:
Payables for --
Purchases of investments -- 702
Repurchases of Funds' shares 387 75
Dividends 113 139
Adviser and management services 30 35
Accrued expenses 31 37
--------- ---------
Total Liabilities 561 988
--------- ---------
Net Assets:
Net assets applicable to Funds'
shares issued and outstanding $75,144 $91,683
========= ========
Funds' shares outstanding$ 4914453 5806683
Net asset value per share $15.29 $15.79
</TABLE>
$Shares of beneficial interest, unlimites shares authorized.
See Notes to Financial Statements
Statement of Operations
For the year ended July 31, 1995
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The The
Tax-Exempt Tax-Exempt
Fund of Fund of
Maryland Virginia
- -------------------------------------------- ----------- -----------
Investment Income:
Income:
Interest on tax-exempt securities $4,478 $5,572
----------- -----------
Expenses:
Investment adviser fee 188 227
Business management fee 153 183
Distribution fee 154 211
Transfer agent fee 27 32
Reports to shareholders 6 11
Registration statements and prospectus 5 10
Postage, stationery and supplies 7 14
Trustees' fees 7 7
Custodian fee 3 5
Auditing and legal fees 15 15
----------- -----------
Total expenses 565 715
----------- -----------
Net investment income 3913 4857
----------- -----------
Realized Gain and Unrealized Appreciation
on Investments:
Net realized gain 105 501
----------- -----------
Net increase in unrealized appreciation
on investments:
Beginning of year 1598 2345
End of year 2674 3478
----------- -----------
Net unrealized appreciation
on investments 1076 1133
----------- -----------
Net realized gain and unrealized
appreciation on investments 1181 1634
----------- -----------
Net Increase in Net Assets
Resulting from Operations $5,094 $6,491
=========== ========
</TABLE>
See notes to Financial Statements
Statement of Changes in Net Assets
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Year Ended July 31,
1995 1994
----------- -----------
The Tax-Exempt Fund of Maryland
Operations:
Net investment income $3,913 $3,533
Net realized gain on investments 105 15
Net change in unrealized appreciation
on investments 1076 -2776
----------- -----------
Net increase in net assets
resulting from operations 5094 772
----------- -----------
Dividends Paid to Shareholders
from Net Investment Income -3923 -3523
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
778,353 and 1,205,365
shares, respectively 11540 18790
Proceeds from shares issued in
reinvestment of net investment
income dividends:
168,487 and 148,181 shares,
respectively 2494 2289
Cost of shares repurchased:
1,015,670 and 521,577
shares, respectively -14835 -8023
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions -801 13056
----------- -----------
Total Increase in Net Assets 370 10305
Net Assets:
Beginning of year 74774 64469
----------- -----------
End of year (prior year includes undistributed
net investment income of $10) $75,144 $74,774
======== ========
Statement of Changes in Net Assets
(dollars in thousands)
Year Ended July 31,
1995 1994
----------- -----------
The Tax-Exempt Fund of Virginia
Operations:
Net investment income $4,857 $4,528
Net realized gain on investments 501 75
Net change in unrealized appreciation
on investments 1133 -3590
----------- -----------
Net increase in net assets
resulting from operations 6491 1013
----------- -----------
Dividends Paid to Shareholders
from Net Investment Income -4871 -4514
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
951,297 and 1,670,010
shares, respectively 14430 26882
Proceeds from shares issued in
reinvestment of net investment
income dividends:
180,954 and 167,755 shares,
respectively 2768 2674
Cost of shares repurchased:
1,361,785 and 779,481
shares, respectively -20619 -12284
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions -3421 17272
----------- -----------
Total Increase (Decrease) in Net Assets -1801 13771
Net Assets:
Beginning of year 93484 79713
----------- -----------
End of year (prior year includes undistributed
net investment income of $14) $91,683 $93,484
=========== =========
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
1. The American Funds Tax-Exempt Series I (the "Trust") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company and has initially issued two series of shares, The
Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia (the "Funds").
The following paragraphs summarize the significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements:
Tax-exempt securities with original or remaining maturities in excess of 60
days are valued at prices obtained from a national municipal bond pricing
service. The pricing service takes into account various factors such as
quality, yield, and maturity of tax-exempt securities comparable to those held
by the Trust, as well as actual bid and asked prices on a particular day.
Other securities with original or remaining maturities in excess of 60
days, including securities for which pricing service values are not available,
are valued at the mean of their quoted bid and asked prices. All securities
with 60 days or less to maturity are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith by the
committee appointed by the Board of Trustees.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. Realized gains
and losses from securities transactions are reported on an identified cost
basis. Interest income is reported on the accrual basis. Premiums and
original issue discounts on securities purchased are amortized over the life of
the respective securities. Dividends to shareholders are declared daily from
net investment income.
Pursuant to the custodian agreement, the Funds receive credits against
their custodian fees for imputed interest on certain balances with the
custodian bank. The custodian fees of $3,000 and $5,000 for the Maryland and
Virginia Funds, respectively, include $3,000 and $2,000 paid by these credits
rather than in cash.
2. It is the Trust's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of July 31, 1995, net unrealized appreciation on investments for book and
federal income tax purposes for the Maryland Fund aggregated $2,674,000, of
which $3,719,000 related to appreciated securities and $1,045,000 related to
depreciated securities. For the Virginia Fund, net unrealized appreciation
aggregated $3,478,000, of which $4,127,000 related to appreciated securities
and $649,000 related to depreciated securities. There was no difference
between book and tax realized gains on securities transactions for the year
ended July 31, 1995. During the year ended July 31, 1995, the Maryland and
Virginia Funds utilized capital loss carryforwards totaling $105,000 and
$316,000, respectively, to offset, for tax purposes, capital gains realized
during the year up to such amount. The Maryland Fund has available at July 31,
1995 a net capital loss carryforward totaling $81,000, which may be used to
offset capital gains realized during subsequent years through July 31, 1999.
It is the intention of the Maryland Fund not to make distributions from capital
gains until the capital loss carryforward is utilized. The cost of portfolio
securities for book and federal income tax purposes was $72,053,000 and
$87,073,000 for the Maryland and Virginia Funds, respectively, at July 31,
1995.
3. Officers of the Trust received no remuneration from the Funds in such
capacities. Their remuneration was paid by Washington Management Corporation
(WMC), a wholly owned subsidiary of The Johnston-Lemon Group, Incorporated.
Fees of $153,000 and $183,000 were recognized by the Maryland and Virginia
Funds, respectively, and were paid or are payable to WMC as Business Manager of
the Trust pursuant to the business management contract under which WMC provides
the officer personnel, accounting, and clerical staff of the Trust, together
with office space and equipment. The business management contract provides for
monthly fees, accrued daily, based on an annual rate of 0.135% of the first $60
million of average net assets of each of the Funds; 0.09% of such assets in
excess of $60 million; plus 1.35% of the gross investment income (excluding any
net capital gains from transactions in portfolio securities). Johnston, Lemon
& Co. Incorporated, a wholly owned subsidiary of The Johnston-Lemon Group,
Incorporated, has informed the Funds that it has earned $50,000 and $27,000 on
its retail sales of shares and under the distribution plan of the Maryland and
Virginia Funds, respectively, but received no net brokerage commissions
resulting from purchases and sales of securities for the investment account of
the Funds. All the officers of the Trust and three of its trustees are
affiliated with WMC.
Fees of $188,000 and $227,000 were recognized by the Maryland and Virginia
Funds, respectively, and were paid or are payable to Capital Research and
Management Company (CRMC) as Investment Adviser pursuant to an investment
advisory contract with the Trust. The investment advisory contract provides
for monthly fees, accrued daily, based on an annual rate of 0.165% of the first
$60 million of average net assets of each of the Funds; 0.12% of such assets in
excess of $60 million; plus 1.65% of the gross investment income (excluding any
net capital gains from transactions in portfolio securities).
Pursuant to a Plan of Distribution, the Funds may expend up to 0.25% of
their average net assets annually for any activities primarily intended to
result in sales of Fund shares, provided the categories of expenses for which
reimbursement is made are approved by the Funds' Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the year ended July 31, 1995,
distribution expenses under the Plan were $154,000 and $211,000, including
accrued and unpaid expenses of $26,000 and $31,000, for the Maryland and
Virginia Funds, respectively.
American Funds Service Company (AFS), the transfer agent for the Maryland
and Virginia Funds, was paid fees of $27,000 and $32,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
Funds' shares, has informed the Funds that it has received $42,000 and $46,000
(after allowances to dealers) for the Maryland and Virginia Funds,
respectively, as its portion of the sales charges paid by purchasers of the
Funds' shares. Such sales charges are not an expense of the Funds and, hence,
are not reflected in the accompanying statement of operations.
Trustees of the Funds who are unaffiliated with WMC 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 Funds. As
of July 31, 1995, aggregate amounts deferred were $3,000 each for the Maryland
and Virginia Funds.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC.
4. As of July 31, 1995:
The Tax-Exempt The Tax-Exempt
Fund of Fund of
Maryland Virginia
Accumulated
undistributed net
realized gain (loss)
on investments $ (81,000) $ 185,000
Paid-in capital 72,551,000 88,020,000
Purchases and sales of
investment securities,
excluding short-term
securities, during
the year ended
July 31, 1995:
Purchases 14,440,000 28,271,000
Sales 14,566,000 30,261,000
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
In our opinion, the accompanying statements of assets and liabilities,
including the investment portfolios, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of The Tax-Exempt Fund of
Maryland and The Tax-Exempt Fund of Virginia (constituting The American Funds
Tax-Exempt Series I, hereafter referred to as the "Trust") at July 31, 1995,
the results of each of their operations, the changes in each of their net
assets and each of their per-share data and ratios for the periods indicated,
in conformity with generally accepted accounting principles. These financial
statements and per-share data and ratios (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Los Angeles, California
August 31, 1995
Shareholders may exclude from Federal taxable income any exempt-interest
dividends paid from net investment income. All of the dividends paid from net
investment income qualifies as exempt-interest dividends.
Since the amounts above are reported for the fiscal year and not a calendar
year, shareholders should refer to their Form 1099 DIV which will be mailed in
January 1996 to determine the CALENDAR YEAR amounts to be included on their
respective 1995 tax returns. Shareholders should consult their tax advisers.
Per-Share Data and Ratios
The Tax-Exempt Fund of Maryland
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year En ded Jul y 31
-------- -------- ------- ------- -------
1995 1994 1993 1992 1991
---------- -------- ------- ------- -------
Net Asset Value,
Beginning of year $15.00 $15.53 $15.22 $14.29 $14.12
---------- -------- ------- ------- -------
Income from Investment
Operations:
Net investment income .80 .76 .79 .83 .85
Net realized and
unrealized gain (loss)
on investments .29 (.53) .31 .93 .17
---------- -------- ------- ------- -------
Total income from
investment operations 1.09 .23 1.10 1.76 1.02
---------- -------- ------- ------- -------
Less Distributions:
Dividends from net
investment income (.80) (.76) (.79) (.83) (.85)
---------- -------- ------- ------- -------
Net Asset Value,
End of year $15.29 $15.00 $15.53 $15.22 $14.29
========== ======== ======= ======= =======
Total Return$ 7.58% 1.42% 7.44% 12.72% 7.44%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $75 $75 $64 $48 $35
Ratio of expenses to
average net assets .78% .75% .83% .91% .94%
Ratio of net income to
average net assets 5.38% 4.90% 5.12% 5.60% 5.98%
Portfolio turnover rate 20.91% 10.01% 9.05% 8.11% .88%
</TABLE>
$This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of each Fund's offering price.
Per Share Data and Ratios
The Tax-Exempt Fund of Virginia
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year En ded Jul y 31
-------- -------- ------- ------- -------
1995 1994 1993 1992 1991
---------- -------- ------- ------- -------
Net Asset Value,
Beginning of Year $15.49 $16.01 $15.72 $14.75 $14.50
---------- -------- ------- ------- -------
Income from Investment
Operations:
Net investment income .83 .80 .82 .85 .87
Net realized and
unrealized gain (loss)
on investments .30 (.52) .29 .97 .25
---------- -------- ------- ------- -------
Total income from
investment operations 1.13 .28 1.11 1.82 1.12
---------- -------- ------- ------- -------
Less Distributions:
Dividends from net
investment income (.83) (.80) (.82) (.85) (.87)
---------- -------- ------- ------- -------
Net Asset Value,
End of Year $15.79 $15.49 $16.01 $15.72 $14.75
========== ======== ======= ======= ======
Total Return$ 7.56% 1.74% 7.29% 12.80% 8.01%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $92 $93 $80 $57 $39
Ratio of expenses to
average net assets .79% .78% .84% .93% .97%
Ratio of net income to
average net assets 5.37% 5.04% 5.18% 5.61% 6.00%
Portfolio turnover rate 32.18% 2.36% 4.96% 6.84% 13.60%
</TABLE>
$This was calculated without deducting a sales charge. The maximum sales
charge os 4.75% of each Fund's offering price.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS:
Included in Prospectus - Part A
Financial Highlights
Included in Statement of Additional Information - Part B
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Selected Per-Share Data and Ratios
Report of Independent Accountants
(
B) EXHIBITS:
1. On file (see SEC file nos. 811-4653 and 33-5270)
2. On file (see SEC file nos. 811-4653 and 33-5270)
3. None.
4. On file (see SEC file nos. 811-4653 and 33-5270)
5. On file (see SEC file nos. 811-4653 and 33-5270)
6. On file (see SEC file nos. 811-4653 and 33-5270)
7. None.
8. On file (see SEC file nos. 811-4653 and 33-5270)
9. On file (see SEC file nos. 811-4653 and 33-5270)
10. Not applicable to this filing.
11. Consent of Independent Accountants.
12. None.
13. On file (see SEC File nos. 811-4653 and 33-5270)
14. None.
15. On file (see SEC file nos. 811-4653 and 33-5270)
16. Updates to previously filed schedule for computation of each performance
quotation provided in the Registration Statement in response to Item 22 (see
SEC file nos. 811-4653 and 33-5270).
17. EX-27 Financial Data Schedule
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of July 31, 1995.
Number of
Title of Class Record-Holders
Shares of Beneficial MD 2,218
Interest (no par value) VA 2,610
ITEM 27. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policy written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual 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 the Registrant itself is not permitted to indemnify the individual.
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
director, 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 director, 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,
ITEM 27. INDEMNIFICATION (CONT.)
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).
(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.
(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 and security 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.
(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, officer, distributor, investment adviser or controlling
shareholder 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. 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.
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 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 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 29. 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 II, American High-Income
Municipal Bond Fund, American High-Income Trust, American Mutual Fund, Inc.,
The Bond Fund of America, Inc., Capital Income Builder, Inc., Capital World
Bond Fund, Inc., Capital World Growth and Income Fund, Inc., The Cash
Management Trust of America, EuroPacific Growth Fund, Fundamental Investors,
Inc., The Growth Fund of America, Inc., The Income Fund of America, Inc.,
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., SMALLCAP World Fund, Inc., The Tax-Exempt Bond Fund of America,
Inc., The Tax-Exempt Money Fund of America, The U.S. Treasury Money Fund of
America and Washington Mutual Investors Fund, Inc.
(b)
<TABLE>
<CAPTION>
(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 Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University Drive
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Brynwood Drive
Madison, WI 53711
& Richard L. Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Vice President None
8000 Town Line Avenue So.
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
1190 Rockmart Circle
Kennesaw, GA 30144
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
Ian B. Bodell ^ Vice President None
3100 West End Avenue, Suite 870
Nashville, TN 37215
Mick L. Brethower Vice President None
108 Hagen Court
Georgetown, TX 78628
C. Alan Brown Regional Vice President None
4619 McPherson Avenue
St. Louis, MO 63108
* Daniel C. Brown Senior Vice President, Director None
@ J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
9508 Cable Drive
Kensington, MD 20895
Victor C. Cassato Vice President None
999 Green Oaks Drive
Littleton, CO 80121
Christopher J. Cassin Regional Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1425 Vallejo, #203
San Francisco, CA 94109
* Larry P. Clemmensen Treasurer, Director None
* Kevin G. Clifford Senior Vice President None
Ruth M. Collier Vice President None
145 W. 67th Street #12K
New York, NY 10023
^
Thomas E. Cournoyer Vice President None
2333 Granada Blvd.
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
3521 Rittenhouse St., N.W.
Washington, D.C. 20015
* Carl D. Cutting Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
3622 East 87th Street
Tulsa, OK 74137
Kirk D. Dodge ^Vice President None
2617 Salisbury Road
Ann Arbor, MI 48103
Peter J. Doran Senior Vice President None
1205 Franklin Avenue
Garden City, NY 11530
* Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
+ Lloyd G. Edwards Vice President None
@ Richard A. Eychner Vice President None
* Paul H. Fieberg Senior Vice President None
^
John R. Fodor Regional Vice President None
5 Marlborough Street
Suite 51
Boston, MA 02116
* Mark P. Freeman, Jr. President, Director None
Clyde E. Gardner Vice President None
Rt. 2, Box 3162
Osage Beach, MO 65065
# Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Regional Vice President None
5898 Heather Glen Court
Dublin, OH 43017
* Paul G. Haaga, Jr. Director Senior Vice
President
David E. Harper Vice President None
R.D. 1, Box 210, Rte. 519
Frenchtown, NJ 08825
Ronald R. Hulsey Regional Vice President None
6744 Avalon
Dallas, TX 75214
* Robert L. Johansen Vice President, Controller None
Victor J. Kriss, Jr. Senior Vice President None
P.O. Box 274
Surfside, CA 90743
Arthur J. Levine Vice President None
12558 Highlands Place
Fishers, IN 46038
# Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
12585-E
East Tennessee Circle
Aurora, CO 80012
* Heather A. Maier Assistant Vice President, None
Institutional Investment Service
Division
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Senior Vice President None
* E. Lee McClennahan ^ Senior Vice President None
Laurie B. McCurdy Regional Vice President None
6008 E. Anderson Drive
Scottsdale, AZ 85255
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Rd.
St. Louis, MO 63131
* R. William Melinat Vice President, Institutional None
Investment Services Division
^
David R. Murray Regional Vice President None
25701 S.E. 32nd Place
Issaquah, WA 98027
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
* Barbara G. Nicolich Assistant Vice President, None
Institutional Investment Services
Division
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Regional Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Regional Vice President None
62 Park Drive
Glenview, IL 60025
Fredric Phillips Regional Vice President None
32 Ridge Avenue
Newton Centre, MA 02161
# Candance D. Pilgram Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, SE
Mercer Island, WA 98040
* John O. Post, Jr. Vice President None
Steven J. Reitman Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Regional Vice President None
12025 Delmahoy Drive
Charlotte, NC 28277
* George L. Romine, Jr. Vice President, Institutional None
Investment Services Division
George S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
Douglas F. Rowe Regional Vice President None
104 River Road
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joe D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* R. Michael Shanahan Chairman None
^
David W. Short Senior Vice President None
1000 RIDC Plaza, Ste. 212
Pittsburgh, PA 15238
* Victor S. Sidhu Vice President, None
Institutional Investment Services
Division
William P. Simon, Jr. Vice President None
554 Canterbury Lane
Berwyn, PA 19312
* John C. Smith Assistant Vice President, None
Institutional Investment Services
Division
* Mark S. Smith Senior Vice President, None
Director
* Mary E. Smith Assistant Vice President, None
Institutional Investment Services
Division
Rodney G. Smith Regional Vice President None
2350 Lakeside Blvd., #850
Richardson, TX 75082
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
Daniel S. Spradling Senior Vice President None
4 West 4th Avenue, Suite 406
San Mateo, CA 94402
Craig R. Strauser Regional Vice President None
17040 Summer Place
Lake Oswego, OR 97035
Francis N. Strazzeri Regional Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
& James P. Toomey Assistant Vice President None
+ Christopher E. Trede Assistant Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Regional Vice President None
606 Glenwood Avenue
Mill Valley, CA 94941
@ Andrew J. Ward Vice President None
* David M. Ward Assistant Vice President, None
Institutional Investment Services
Division
Thomas E. Warren Regional Vice President None
4001 Crockers Lake Blvd., #1012
Sarasota, FL 34238
# J. Kelly Webb Senior Vice President None
Gregory J. Weimer Regional Vice President None
125 Surrey Drive
Canonsburg, PA 15317
# Timothy W. Weiss Director None
N. Dexter Williams Vice President None
Four Embarcadero Center
San Francisco, CA 94111
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
* Marshall D. Wingo Senior Vice President None
* Robert L. Winston Senior Vice President, None
Director
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet Young Regional Vice President None
1616 Vermont
Houston, TX 77006
</TABLE>
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
# Business Address, 135 South State College Blvd., Brea, CA 92621
+ Business Address, 83320 Woodfield Crossing Boulevard, Indianapolis, IN 46240
& Business Address, 8000 IH-10, Suite 1400, San Antonio, TX 78230
@ Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
(c) None.
ITEM 30. 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 kept in the
offices of the Trust, 1101 Vermont Avenue, N.W., Washington, D.C. 20005, and
its investment adviser, Capital Research and Management Company, 333 South Hope
Street, Los Angeles, CA 90071. Certain accounting records are maintained and
kept in the offices of the Fund's accounting department 135 South State College
Blvd., Brea, CA 92621.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92621.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, N.A., One Chase Manhattan Plaza, New York,
New York, 10081.
ITEM 31. MANAGEMENT SERVICES.
None.
ITEM 32. UNDERTAKINGS.
As reflected in the prospectus, the Funds undertake to provide each person to
whom a prospectus is delevered with a copy of the Funds' annual report to
shareholders, upon request and without charge.
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 Washington, District of Columbia, on the 8th
day of November 1995.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By
(James H. Lemon, 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 November 8th, 1995, by the
following persons in the capacities indicated.
SIGNATURE TITLE
(1)Principal Executive Officer:
Harry J. Lister* President
(2)Principal Financial Officer and
Principal Accounting Officer:
Howard L. Kitzmiller Vice President, Secretary and
Treasurer
(3) Trustees:
James H. Lemon, Jr. Chairman of the Board
Stephen Hartwell* Chairman Emeritus and Trustee
Harry J. Lister* President and Trustee
Cyrus A. Ansary* Trustee
Frank M. Ewing* Trustee
Jean Head Sisco* Trustee
T. Eugene Smith* Trustee
Stephen G. Yeonas* Trustee
*By
Howard L. Kitzmiller, Attorney-in-Fact
Counsel reports that the Amendment does not contain disclosures that would
render the Amendment ineligible for effectiveness under the provisions of Rule
485 (b).
Howard L. Kitzmiller
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Stephen Hartwell
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Harry J. Lister
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Cyrus A. Ansary
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Frank M. Ewing
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in her name, place and stead (1) to sign her name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of November, 1988.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Jean Head Sisco
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: T. Eugene Smith
POWER OF ATTORNEY
The undersigned trustee of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint Stephen
Hartwell, Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his name, place and stead (1) to sign his name as
a trustee of said Trust to any and all amendments to the Registration Statement
of The American Funds Tax-Exempt Series I, File No. 33-5270 under the
Securities Act of 1933 as amended, said amendments to be filed with the
Securities and Exchange Commission, and to any and all reports, applications or
renewal of applications required by any State in the United States of America
in which this Trust is registered to sell shares, and (2) to deliver any and
all such amendments to such Registration Statement, so signed, for filing with
the Securities and Exchange Commission under the provisions of the Securities
Act of 1933 as amended, granting to said attorneys-in-fact, and each of them,
full power and authority to do and perform every act and thing whatsoever
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and approving the acts of said attorneys-in-fact.
EXECUTED at Washington, D.C., this 17th day of July, 1986.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Trustee: Stephen G. Yeonas
SHAREHOLDER SERVICES AGREEMENT
1. The parties to this Agreement, which is effective as of January 1, 1995,
are American Funds Tax-Exempt Series I (hereinafter called "the Fund") and
American Funds Service Company, a California corporation (hereinafter called
"AFS"). AFS is a wholly owned subsidiary of Capital Research and Management
Company (hereinafter called "CRMC"). This Agreement will continue in effect
until amended or terminated in accordance with its terms.
2. The Fund hereby employs AFS, and AFS hereby accepts such employment by the
Fund, as its transfer agent. In such capacity AFS will provide the services of
stock transfer agent, dividend disbursing agent, redemption agent, and such
additional related services as the Fund may from time to time require, all of
which services are sometimes referred to herein as "shareholder services."
3. AFS has entered into substantially identical agreements with other
investment companies for which CRMC serves as investment adviser. (For the
purposes of this Agreement, such investment companies, including the Fund, are
called "participating investment companies.")
4. AFS has entered into an agreement with DST Systems, Inc. (hereinafter
called "DST"), to provide AFS with electronic data processing services
sufficient for the performance of the shareholder services referred to in
paragraph 2.
5. The Fund, together with the other participating companies, will maintain a
Review and Advisory Committee, which Committee will review and may make
recommendations to the boards of the participating investment companies
regarding all fees and charges provided for in this Agreement, as well as
review the level and quality of the shareholder services rendered to the
participating investment companies and their shareholders. Each participating
investment company may select one director or trustee who is not affiliated
with CRMC, or any of its affiliated companies, or with Washington Management
Corporation or any of its affiliated companies, to serve on the Review and
Advisory Committee.
6. AFS will provide to the participating investment companies the shareholder
services referred to herein in return for the following fees:
ANNUAL ACCOUNT MAINTENANCE FEE (PAID MONTHLY):
$.67 per month for each open account on AFS books or in Level 2 or 4 Networking
($8.04 per year)
$.09 per month for each open account maintained in Street Name or Level 1 or 3
Networking ($1.08 per year)
No annual fee will be charged for a participant account underlying a 401(k) or
other defined contribution plan where the plan maintains a single account on
AFS books and responds to all participant inquiries
TRANSACTION FEES:
$2.00 per non-automated transaction
$0.50 per automated transaction
For this purpose, "transactions" shall include all types of transactions
included in an "activity index" as reported to the Review and Advisory
Committee at least annually. AFS will bill the Fund monthly, on or shortly
after the first of each calendar month, and the Fund will pay to AFS within
five business days of such billing.
Any revision of the schedule of charges set forth herein shall require the
affirmative vote of a majority of the members of the board of
directors/trustees of the Fund.
7. All fund-specific charges from third parties -- including DST charges,
payments described in the next sentence, postage, NSCC transaction charges and
similar out-of-pocket expenses -- will be passed through directly to the Fund
or other participating investment companies, as applicable. AFS, subject to
approval of its board of directors, is authorized in its discretion to
negotiate payments to third parties for account maintenance and/or transaction
processing services provided such payments do not exceed the anticipated
savings to the Fund, either in fees payable to AFS hereunder or in other direct
Fund expenses, that AFS reasonably anticipates would be realized by the Fund
from using the services of such third party rather than maintaining the
accounts directly on AFS' books and/or processing non-automated transactions.
8. It is understood that AFS may have income in excess of its expenses and may
accumulate capital and surplus. AFS is not, however, permitted to distribute
any net income or accumulated surplus to its parent, CRMC, in the form of a
dividend without the affirmative vote of a majority of the members of the
boards of directors/trustees of the Fund and all participating investment
companies.
9. This Agreement may be amended at any time by mutual agreement of the
parties, with agreement of the Fund to be evidenced by affirmative vote of a
majority of the members of the board of directors/trustees of the Fund.
10. This Agreement may be terminated on 180 days' written notice by either
party. In the event of a termination of this Agreement, AFS and the Fund will
each extend full cooperation in effecting a conversion to whatever successor
shareholder service provider(s) the Fund may select, it being understood that
all records relating to the Fund and its shareholders are property of the Fund.
11. In the event of a termination of this Agreement by the Fund, the Fund will
pay to AFS as a termination fee the Fund's proportionate share of any costs of
conversion of the Fund's shareholder service from AFS to a successor. In the
event of termination of this Agreement and all corresponding agreements with
all the participating investment companies, all assets of AFS will be sold or
otherwise converted to cash, with a view to the liquidation of AFS when it
ceases to provide shareholder services for the participating investment
companies. To the extent any such assets are sold by AFS to CRMC and/or any of
its affiliates, such sales shall be at fair market value at the time of sale as
agreed upon by AFS, the purchasing company or companies, and the Review and
Advisory Committee. After all assets of AFS have been converted to cash and
all liabilities of AFS have been paid or discharged, an amount equal to any
capital or paid-in surplus of AFS that shall have been contributed by CRMC or
its affiliates shall be set aside in cash for distribution to CRMC upon
liquidation of AFS. Any other capital or surplus and any assets of AFS
remaining after the foregoing provisions for liabilities and return of capital
or paid-in surplus to CRMC shall be distributed to the participating investment
companies in such proportions as may be determined by the Review and Advisory
Committee.
12. In the event of disagreement between the Fund and AFS, or between the Fund
and other participating investment companies as to any matter arising under
this Agreement, which the parties to the disagreement are unable to resolve,
the question shall be referred to the Review and Advisory Committee for
resolution. If the Review and Advisory Committee is unable to resolve the
question to the satisfaction of both parties, either party may elect to submit
the question to arbitration; one arbitrator to be named by each party to the
disagreement and a third arbitrator to be selected by the two arbitrators named
by the original parties. The decision of a majority of the arbitrators shall
be final and binding on all parties to the arbitration. The expenses of such
arbitration shall be paid by the party electing to submit the question to
arbitration.
13. The obligations of the Fund under this Agreement are not binding upon any
of the directors, trustees, officers, employees, agents or shareholders of the
Fund individually, but bind only the Fund itself. AFS agrees to look solely to
the assets of the Fund for the satisfaction of any liability of the Fund in
respect to this Agreement and will not seek recourse against such directors,
trustees, officers, employees, agents or shareholders, or any of them or their
personal assets for such satisfaction.
AMERICAN FUNDS SERVICE COMPANY WASHINGTON MUTUAL INVESTORS FUND
By___________________________________ By_________________________________
Don R. Conlan, Chairman Stephen Hartwell, Chairman
By___________________________________ By_________________________________
Kenneth R. Gorvetzian, Secretary Howard L. Kitzmiller, Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 11 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 31, 1995, relating to the financial statements and per share data and
ratios of The American Funds Tax-Exempt Series I, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the heading "General
Information" in such Statement of Additional Information and to the reference
to us under the heading "Financial Highlights" in the Prospectus.
PRICE WATERHOUSE LLP
Los Angeles, California
November 1, 1995
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
10/01/94 1000 15.42 4.75 % 64.851 14.69 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/95 1000 54 54 1054 0 999 0 999 55 1054.36 68.465
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
10/01/90 1000 14.53 4.75 % 68.823 13.84 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/91 1000 60 60 1060 0 998 0 998 61 1059.31 73.056
09/30/92 1000 61 121 1121 0 1028 0 1028 124 1152.7 77.207
09/30/93 1000 62 183 1183 0 1096 0 1096 198 1294.42 81.257
09/30/94 1000 63 246 1246 0 1011 0 1011 243 1254.03 85.366
09/30/95 1000 71 317 1317 0 1060 0 1060 327 1387.86 90.121
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 1000 15 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/86 1000 2 2 1002 0 954 0 954 2 956.02 66.808
09/30/87 1000 57 59 1059 0 856 0 856 54 910.47 70.909
09/30/88 1000 63 122 1122 0 911 0 911 122 1033.55 75.607
09/30/89 1000 66 188 1188 0 931 0 931 191 1122.29 80.336
09/30/90 1000 69 257 1257 0 923 0 923 257 1180.07 85.265
09/30/91 1000 75 332 1332 0 967 0 967 345 1312.35 90.507
09/30/92 1000 76 408 1408 0 995 0 995 433 1428.02 95.648
09/30/93 1000 77 485 1485 0 1062 0 1062 541 1603.61 100.666
09/30/94 1000 78 563 1563 0 979 0 979 574 1553.6 105.759
09/30/95 1000 88 651 1651 0 1027 0 1027 692 1719.41 111.65
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
10/01/94 1000 15.92 4.75 % 62.814 15.16 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/95 1000 53 53 1053 0 996 0 996 54 1050.65 66.287
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
10/01/90 1000 14.81 4.75 % 67.522 14.11 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/91 1000 61 61 1061 0 1009 0 1009 61 1070.81 71.674
09/30/92 1000 62 123 1123 0 1041 0 1041 126 1167.49 75.762
09/30/93 1000 64 187 1187 0 1108 0 1108 201 1309.09 79.774
09/30/94 1000 66 253 1253 0 1024 0 1024 248 1272.45 83.935
09/30/95 1000 71 324 1324 0 1070 0 1070 333 1403.93 88.576
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 1000 15 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
09/30/86 1000 3 3 1003 0 961 0 961 3 964.07 66.903
09/30/87 1000 61 64 1064 0 887 0 887 59 946.72 71.182
09/30/88 1000 65 129 1129 0 934 0 934 129 1063.6 75.917
09/30/89 1000 67 196 1196 0 951 0 951 200 1151.06 80.663
09/30/90 1000 73 269 1269 0 941 0 941 268 1209.45 85.716
09/30/91 1000 77 346 1346 0 996 0 996 363 1359.35 90.987
09/30/92 1000 79 425 1425 0 1027 0 1027 455 1482.07 96.176
09/30/93 1000 81 506 1506 0 1094 0 1094 567 1661.89 101.273
09/30/94 1000 83 589 1589 0 1011 0 1011 604 1615.37 106.555
09/30/95 1000 91 680 1680 0 1057 0 1057 725 1782.28 112.447
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/94 1000 15.75 4.75 % 63.492 15 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 1000 52 52 1052 0 971 0 971 53 1024.54 67.007
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/90 1000 14.82 4.75 % 67.476 14.12 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/91 1000 59 59 1059 0 964 0 964 59 1023.61 71.631
07/31/92 1000 61 120 1120 0 1027 0 1027 126 1153.81 75.809
07/31/93 1000 61 181 1181 0 1048 0 1048 191 1239.7 79.826
07/31/94 1000 62 243 1243 0 1012 0 1012 245 1257.3 83.82
07/31/95 1000 69 312 1312 0 1032 0 1032 320 1352.58 88.462
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 1000 15 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/87 1000 49 49 1049 0 897 0 897 47 944.39 70.163
07/31/88 1000 62 111 1111 0 902 0 902 110 1012.22 74.813
07/31/89 1000 65 176 1176 0 948 0 948 183 1131.3 79.557
07/31/90 1000 68 244 1244 0 941 0 941 250 1191.81 84.406
07/31/91 1000 74 318 1318 0 953 0 953 327 1280.46 89.605
07/31/92 1000 76 394 1394 0 1015 0 1015 428 1443.28 94.828
07/31/93 1000 77 471 1471 0 1035 0 1035 515 1550.76 99.856
07/31/94 1000 77 548 1548 0 1000 0 1000 572 1572.8 104.853
07/31/95 1000 86 634 1634 0 1019 0 1019 672 1691.99 110.66
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/94 1000 16.26 4.75 % 61.501 15.49 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 1000 52 52 1052 0 971 0 971 53 1024.69 64.895
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/90 1000 15.22 4.75 % 65.703 14.5 953
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/91 1000 59 59 1059 0 969 0 969 60 1029.03 69.765
07/31/92 1000 61 120 1120 0 1033 0 1033 127 1160.8 73.842
07/31/93 1000 62 182 1182 0 1052 0 1052 193 1245.42 77.79
07/31/94 1000 64 246 1246 0 1018 0 1018 249 1267.02 81.796
07/31/95 1000 69 315 1315 0 1037 0 1037 325 1362.8 86.308
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 1000 15 4.75 % 66.667 14.287 952
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/87 1000 55 55 1055 0 927 0 927 52 979.81 70.439
07/31/88 1000 64 119 1119 0 924 0 924 117 1041.18 75.121
07/31/89 1000 67 186 1186 0 970 0 970 192 1162.01 79.863
07/31/90 1000 72 258 1258 0 967 0 967 263 1230.18 84.84
07/31/91 1000 76 334 1334 0 983 0 983 345 1328.75 90.085
07/31/92 1000 79 413 1413 0 1048 0 1048 450 1498.89 95.349
07/31/93 1000 80 493 1493 0 1067 0 1067 541 1608.17 100.448
07/31/94 1000 83 576 1576 0 1033 0 1033 603 1636.07 105.621
07/31/95 1000 89 665 1665 0 1053 0 1053 706 1759.78 111.449
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 10000 15 4.75 %666.667 14.287 9525
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/87 10000 493 493 10493 0 8973 0 8973 470 9443.87 701.625
07/31/88 10000 617 1110 11110 1 9020 1 9021 1101 10122.16 748.127
07/31/89 10000 653 1763 11763 0 9480 1 9481 1831 11312.91 795.563
07/31/90 10000 681 2444 12444 0 9413 1 9414 2503 11917.8 844.037
07/31/91 10000 736 3180 13180 0 9527 1 9528 3276 12804.27 896.03
07/31/92 10000 764 3944 13944 0 10147 1 10148 4284 14432.96 948.289
07/31/93 10000 765 4709 14709 0 10353 1 10354 5153 15507.5 998.551
07/31/94 10000 773 5482 15482 0 10000 1 10001 5726 15727.62 1048.508
07/31/95 10000 860 6342 16342 0 10193 1 10194 6725 16919.65 1106.583
TOTAL $1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/87 10000 14.13 4.75 %707.714 13.46 9526
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/88 10000 623 623 10623 1 9575 1 9576 634 10210.04 754.622
07/31/89 10000 659 1282 11282 0 10064 1 10065 1346 11411.14 802.471
07/31/90 10000 687 1969 11969 0 9993 1 9994 2027 12021.25 851.363
07/31/91 10000 742 2711 12711 0 10113 1 10114 2801 12915.43 903.809
07/31/92 10000 771 3482 13482 0 10771 1 10772 3786 14558.23 956.52
07/31/93 10000 771 4253 14253 0 10991 1 10992 4650 15642.03 1007.214
07/31/94 10000 779 5032 15032 0 10616 1 10617 5247 15864.11 1057.607
07/31/95 10000 868 5900 15900 0 10821 1 10822 6244 17066.47 1116.185
TOTAL $1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/88 10000 14.2 4.75 %704.225 13.53 9528
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/89 10000 615 615 10615 0 10014 0 10014 635 10649.05 748.878
07/31/90 10000 641 1256 11256 0 9944 0 9944 1274 11218.44 794.507
07/31/91 10000 693 1949 11949 0 10063 0 10063 1989 12052.9 843.45
07/31/92 10000 719 2668 12668 0 10718 0 10718 2868 13586.03 892.643
07/31/93 10000 720 3388 13388 0 10937 0 10937 3660 14597.52 939.956
07/31/94 10000 727 4115 14115 0 10563 0 10563 4241 14804.78 986.985
07/31/95 10000 810 4925 14925 0 10768 0 10768 5158 15926.89 1041.654
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/89 10000 14.93 4.75 %669.792 14.22 9524
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/90 10000 573 573 10573 0 9457 0 9457 576 10033.71 710.603
07/31/91 10000 619 1192 11192 0 9571 0 9571 1209 10780.09 754.38
07/31/92 10000 643 1835 11835 0 10194 0 10194 1957 12151.31 798.378
07/31/93 10000 644 2479 12479 0 10402 0 10402 2653 13055.93 840.691
07/31/94 10000 650 3129 13129 0 10047 0 10047 3194 13241.3 882.753
07/31/95 10000 724 3853 13853 0 10241 0 10241 4003 14244.9 931.648
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/90 10000 14.82 4.75 %674.764 14.12 9528
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/91 10000 588 588 10588 0 9642 0 9642 594 10236.38 716.332
07/31/92 10000 611 1199 11199 0 10270 0 10270 1268 11538.43 758.11
07/31/93 10000 611 1810 11810 0 10479 0 10479 1918 12397.43 798.289
07/31/94 10000 618 2428 12428 0 10121 0 10121 2452 12573.44 838.229
07/31/95 10000 688 3116 13116 0 10317 0 10317 3209 13526.41 884.657
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/91 10000 15 4.75 %666.667 14.29 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/92 10000 568 568 10568 0 10147 0 10147 591 10738.44 705.548
07/31/93 10000 569 1137 11137 0 10353 0 10353 1184 11537.94 742.945
07/31/94 10000 575 1712 11712 0 10000 0 10000 1701 11701.73 780.115
07/31/95 10000 640 2352 12352 0 10193 0 10193 2395 12588.64 823.325
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/92 10000 15.98 4.75 %625.782 15.22 9524
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/93 10000 505 505 10505 0 9718 0 9718 515 10233.48 658.949
07/31/94 10000 510 1015 11015 0 9387 0 9387 991 10378.73 691.915
07/31/95 10000 568 1583 11583 0 9568 0 9568 1597 11165.37 730.24
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/93 10000 16.3 4.75 %613.497 15.53 9528
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/94 10000 475 475 10475 0 9202 0 9202 460 9662.93 644.195
07/31/95 10000 528 1003 11003 0 9380 0 9380 1015 10395.3 679.876
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF MARYLAND
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/94 10000 15.75 4.75 %634.921 15 9524
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10000 521 521 10521 0 9708 0 9708 537 10245.66 670.089
TOTAL $0
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/14/86 10000 15 4.75 %666.667 14.287 9525
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/87 10000 545 545 10545 0 9273 0 9273 525 9798.01 704.386
07/31/88 10000 640 1185 11185 1 9240 1 9241 1170 10411.69 751.204
07/31/89 10000 671 1856 11856 0 9700 1 9701 1918 11619.79 798.611
07/31/90 10000 716 2572 12572 0 9667 1 9668 2633 12301.81 848.401
07/31/91 10000 760 3332 13332 0 9833 1 9834 3453 13287.51 900.848
07/31/92 10000 791 4123 14123 0 10480 1 10481 4507 14988.63 953.475
07/31/93 10000 800 4923 14923 0 10673 1 10674 5407 16081.29 1004.453
07/31/94 10000 826 5749 15749 0 10327 1 10328 6032 16360.48 1056.196
07/31/95 10000 892 6641 16641 0 10527 1 10528 7069 17597.4 1114.465
TOTAL $1
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/87 10000 14.6 4.75 %684.932 13.91 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/88 10000 623 623 10623 1 9493 1 9494 630 10124.16 730.459
07/31/89 10000 652 1275 11275 0 9966 1 9967 1331 11298.95 776.56
07/31/90 10000 696 1971 11971 0 9932 1 9933 2029 11962.14 824.975
07/31/91 10000 739 2710 12710 0 10103 1 10104 2816 12920.6 875.973
07/31/92 10000 770 3480 13480 0 10767 1 10768 3806 14574.75 927.147
07/31/93 10000 778 4258 14258 0 10966 1 10967 4670 15637.24 976.717
07/31/94 10000 803 5061 15061 0 10610 1 10611 5297 15908.69 1027.03
07/31/95 10000 867 5928 15928 0 10815 1 10816 6295 17111.43 1083.688
TOTAL $1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/88 10000 14.55 4.75 %687.285 13.86 9526
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/89 10000 614 614 10614 0 10000 0 10000 631 10631.1 730.66
07/31/90 10000 655 1269 11269 0 9966 0 9966 1289 11255.07 776.212
07/31/91 10000 695 1964 11964 0 10137 0 10137 2019 12156.89 824.196
07/31/92 10000 724 2688 12688 0 10804 0 10804 2909 13713.26 872.345
07/31/93 10000 732 3420 13420 0 11003 0 11003 3709 14712.97 918.986
07/31/94 10000 755 4175 14175 0 10646 0 10646 4322 14968.39 966.326
07/31/95 10000 816 4991 14991 0 10852 0 10852 5248 16100.05 1019.636
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/89 10000 15.28 4.75 % 654.45 14.55 9522
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/90 10000 587 587 10587 0 9490 0 9490 591 10081.14 695.251
07/31/91 10000 623 1210 11210 0 9653 0 9653 1235 10888.89 738.23
07/31/92 10000 649 1859 11859 0 10288 0 10288 1994 12282.92 781.356
07/31/93 10000 655 2514 12514 0 10478 0 10478 2700 13178.31 823.13
07/31/94 10000 677 3191 13191 0 10137 0 10137 3270 13407.11 865.533
07/31/95 10000 731 3922 13922 0 10334 0 10334 4086 14420.75 913.284
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/90 10000 15.22 4.75 % 657.03 14.5 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/91 10000 588 588 10588 0 9691 0 9691 599 10290.25 697.644
07/31/92 10000 613 1201 11201 0 10329 0 10329 1278 11607.62 738.398
07/31/93 10000 619 1820 11820 0 10519 0 10519 1934 12453.78 777.875
07/31/94 10000 639 2459 12459 0 10177 0 10177 2492 12669.97 817.945
07/31/95 10000 691 3150 13150 0 10375 0 10375 3252 13627.89 863.071
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/91 10000 15.49 4.75 %645.578 14.75 9522
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/92 10000 567 567 10567 0 10148 0 10148 593 10741.37 683.293
07/31/93 10000 573 1140 11140 0 10336 0 10336 1188 11524.4 719.825
07/31/94 10000 592 1732 11732 0 10000 0 10000 1724 11724.44 756.904
07/31/95 10000 639 2371 12371 0 10194 0 10194 2416 12610.87 798.662
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/92 10000 16.5 4.75 %606.061 15.72 9527
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/93 10000 508 508 10508 0 9703 0 9703 518 10221.86 638.467
07/31/94 10000 525 1033 11033 0 9388 0 9388 1011 10399.3 671.356
07/31/95 10000 567 1600 11600 0 9570 0 9570 1615 11185.56 708.395
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/93 10000 16.81 4.75 %594.884 16.01 9524
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/94 10000 489 489 10489 0 9215 0 9215 474 9689.44 625.529
07/31/95 10000 528 1017 11017 0 9393 0 9393 1029 10422.03 660.04
TOTAL $0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF VIRGINIA
SALES NET ASSINITIAL
INITIAL OFFERINCHARGE SHARES VALUE NET ASSET
DATE INVESTMENT PRICE INCLUDED PURCHASEPER SHARE VALUE
08/01/94 10000 16.26 4.75 %615.006 15.49 9526
DIVIDENDS AND CAPITAL GAINS REINVESTED
============COST OF SHARES============= ================VALUE OF SHARES====================
CURRENT CUM. TOTAL CURRENT FROM FROM
CUM INCOME INCOMINVM'T CAP GAIN FROM CAP GAINSUB- DIVS TOTAL SHARES
DATE INV'M'T DIVS DIVS COST DISTRIB'N INV'M'T REINV'DTOTAL REINV'D VALUE HELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10000 519 519 10519 0 9711 0 9711 535 10246.7 648.936
TOTAL $0
PAGE: 1
</TABLE>
EXHIBIT 16
SCHEDULE FOR COMPUTATION OF EACH PERFORMANCE QUOTATION
PROVIDED IN THE TEFMD/TEFVA REGISTRATION STATEMENT
(1) ENDING REDEMPTION VALUE AND TOTAL RETURN
Value of an initial investment at the end of a period and total return for the
period are computed as set forth below.
(A) INITIAL INVESTMENT divided by
PUBLIC OFFERING PRICE FOR ONE SHARE AT
BEGINNING OF PERIOD equals
NUMBER OF SHARES INITIALLY PURCHASED
(B) NUMBER OF SHARES INITIALLY PURCHASED plus
NUMBER OF SHARES ACQUIRED AT NET ASSET
VALUE THROUGH REINVESTMENT OF DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS DURING
PERIOD equals
NUMBER OF SHARES PURCHASED DURING PERIOD
(C) NUMBER OF SHARES PURCHASED DURING PERIOD multiplied by
NET ASSET VALUE OF ONE SHARE AS OF THE
LAST DAY OF THE PERIOD equals
VALUE OF INVESTMENT AT END OF PERIOD
(D) VALUE OF INVESTMENT AT END OF PERIOD divided by
INITIAL INVESTMENT
MINUS ONE AND THEN MULTIPLIED BY 100 equals
TOTAL RETURN FOR THE PERIOD EXPRESSED
AS A PERCENTAGE
(2) AVERAGE ANNUAL TOTAL RETURN
Average annual total return quotations for the one-year, five-year and lifetime
periods ended on the date of the most recent balance sheet are computed
according to the formula set forth below.
P(1+T)/n/ = ERV
WHERE: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 investment as of the
end of one-year, five-year and lifetime periods (computed in accordance with
the formula shown in (1), above)
THUS:
MARYLAND FUND AVERAGE ANNUAL TOTAL RETURN AT PUBLIC OFFERING PRICE:
One Year Total Return 1,000(1+T)/1/ = 1,024.54 T = +2.45%
Five Year Average Total Return 1,000(1+T)/5/ = 1,352.58 T = +6.23%
Lifetime Average Annual Total Return 1,000(1+T)/8.962/=1,691.99 T = +6.04%
VIRGINIA FUND AVERAGE ANNUAL TOTAL RETURN AT PUBLIC OFFERING PRICE:
One Year Total Return 1,000(1+T)/1/ = 1,024.69 T = +2.47%
Five Year Average Total Return 1,000(1+T)/5/ = 1,362.80 T = +6.39%
Lifetime Average Annual Total Return 1,000(1+T)/8.962/=1,759.78 T = +6.51%
Hypothetical illustrations based on $1,000 and $10,000 initial investments used
to obtain ending values over various time periods are attached.
(3) YIELD
Yield is computed as set forth below.
(A) DIVIDENDS AND INTEREST EARNED DURING
THE PERIOD minus
EXPENSES ACCRUED FOR THE PERIOD equals
NET INVESTMENT INCOME
(B) NET INVESTMENT INCOME divided by
AVERAGE DAILY NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD THAT
WERE ENTITLED TO RECEIVE DIVIDENDS equals
NET INVESTMENT INCOME PER SHARE EARNED
DURING THE PERIOD
(C) NET INVESTMENT INCOME PER SHARE
EARNED DURING THE PERIOD divided by
MAXIMUM OFFERING PRICE PER SHARE
ON LAST DAY OF THE PERIOD equals
CURRENT MONTH'S YIELD
(D) CURRENT MONTH'S YIELD plus one
raised to the
sixth power
equals
SEMIANNUAL COMPOUNDED YIELD
(E) SEMIANNUAL COMPOUNDED YIELD minus one
multiplied by two
equals
ANNUALIZED RATE
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> THE TAX-EXEMPT FUND OF MARYLAND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 72053
<INVESTMENTS-AT-VALUE> 74727
<RECEIVABLES> 807
<ASSETS-OTHER> 171
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75705
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 561
<TOTAL-LIABILITIES> 561
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72551
<SHARES-COMMON-STOCK> 4914
<SHARES-COMMON-PRIOR> 4983
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (81)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2674
<NET-ASSETS> 75144
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4478
<OTHER-INCOME> 0
<EXPENSES-NET> 565
<NET-INVESTMENT-INCOME> 3913
<REALIZED-GAINS-CURRENT> 105
<APPREC-INCREASE-CURRENT> 1076
<NET-CHANGE-FROM-OPS> 5094
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3923
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 778
<NUMBER-OF-SHARES-REDEEMED> 1016
<SHARES-REINVESTED> 168
<NET-CHANGE-IN-ASSETS> 370
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (186)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 565
<AVERAGE-NET-ASSETS> 72707
<PER-SHARE-NAV-BEGIN> 15.00
<PER-SHARE-NII> .80
<PER-SHARE-GAIN-APPREC> .29
<PER-SHARE-DIVIDEND> .80
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.29
<EXPENSE-RATIO> .78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> THE TAX-EXEMPT FUND OF VIRGINIA
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 87073
<INVESTMENTS-AT-VALUE> 90551
<RECEIVABLES> 2072
<ASSETS-OTHER> 48
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 92671
<PAYABLE-FOR-SECURITIES> 702
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 988
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 88020
<SHARES-COMMON-STOCK> 5807
<SHARES-COMMON-PRIOR> 6036
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 185
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3478
<NET-ASSETS> 91683
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5572
<OTHER-INCOME> 0
<EXPENSES-NET> 715
<NET-INVESTMENT-INCOME> 4857
<REALIZED-GAINS-CURRENT> 501
<APPREC-INCREASE-CURRENT> 1133
<NET-CHANGE-FROM-OPS> 6491
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4871
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 951
<NUMBER-OF-SHARES-REDEEMED> 1362
<SHARES-REINVESTED> 181
<NET-CHANGE-IN-ASSETS> (1801)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (316)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 410
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 715
<AVERAGE-NET-ASSETS> 90462
<PER-SHARE-NAV-BEGIN> 15.49
<PER-SHARE-NII> .83
<PER-SHARE-GAIN-APPREC> .30
<PER-SHARE-DIVIDEND> .83
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.79
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
