The American Funds Tax-Exempt Series I
The Tax-Exempt Fund of Maryland
The Tax-Exempt Fund of Virginia
Semi-Annual Report
January 31, 1996
(Logo)
The American Funds Group(R)
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia seek a
high level of current income free from Federal and their respective state
income taxes. Additionally, each Fund seeks to preserve capital.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual
compound returns with all distributions reinvested for periods ended
December 31, 1995 (the most recent calendar quarter), assuming payment of
the 4.75% maximum sales charge at the beginning of the stated periods - For
The Tax-Exempt Fund of Maryland's lifetime (from 8/14/86): +79.06%, or
+6.41% a year; 5 years: +38.84%, or +6.78% a year; 12 months: +10.88%. For
The Tax-Exempt Fund of Virginia's lifetime (from 8/14/86): +85.25%, or
+6.79% a year; 5 years: +40.31%, or +7.01% a year; 12 months: +10.34%.
Sales charges are lower for accounts of $25,000 or more.
The Funds' 30-day yields as of February 29, 1996, calculated in accordance
with the Securities and Exchange Commission formula, were 4.06% for the
Maryland Fund and 3.91% for the Virginia Fund. The Funds' distribution
rates as of that date were 4.72% and 4.69%, respectively. The SEC yield
reflects income each Fund expects to earn based on its current portfolio of
securities, while the distribution rate is based solely on the Fund's past
dividends. Accordingly, the Fund's SEC yields and distribution rates may
differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. ALL INVESTMENTS ARE
SUBJECT TO CERTAIN RISKS. INVESTMENTS IN THE FUNDS ARE SUBJECT TO INTEREST
RATE FLUCTUATIONS. ADDITIONALLY, EACH FUND IS MORE SUSCEPTIBLE TO FACTORS
ADVERSELY AFFECTING ISSUERS OF THEIR STATE'S TAX-EXEMPT SECURITIES THAN A
MORE WIDELY DIVERSIFIED MUNICIPAL BOND FUND. SHARE PRICE AND RETURN WILL
VARY; THEREFORE, YOU MAY GAIN OR LOSE MONEY BY INVESTING IN A FUND.
INVESTORS SHOULD MAINTAIN A LONG-TERM INVESTMENT PERSPECTIVE. FUND SHARES
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
Fellow Shareholders
Municipal bonds rallied strongly during the six months ended January 31,
1996, and your investment benefited.
The net asset value of a share in The Tax-Exempt Fund of Maryland rose
from $15.29 to $15.85. The Fund paid dividends totaling 40.4 cents a
share. If you reinvested those dividends, the value of your holdings
increased 6.4%. If you took your dividends in cash, your gain was 3.7%.
Meanwhile, The Tax-Exempt Fund of Virginia's net asset value rose from
$15.79 to $16.27 a share. If you reinvested the dividends which totaled
41.1 cents a share, as well as a capital gain distribution of 5.5 cents a
share paid in November, your total return was 6.1%. If you took your
dividends in cash, the value of your investment rose 3.4%.
Based upon the Funds' 30-day tax-free distribution rates for January
1996 - 4.65% for Maryland and 4.73% for Virginia - the equivalent taxable
yield for individuals in the top tax bracket was 8.32% and 8.31%,
respectively, as reported in the "Highlights" on page 3.
For the same six-month period, the overall municipal bond market did
slightly better. It was up 6.9% on a reinvested basis, according to the
Lehman Brothers Municipal Bond Index, which measures the national
investment-grade tax-exempt market. In retrospect, we may have been too
cautious with the average maturity of our portfolios, which dropped from
10.95 years to 9.86 years for the Maryland Fund and 11.31 years to 9.53
years for the Virginia Fund. Bonds with longer maturities typically react
more favorably to market rallies but can be more volatile.
We prefer to err on the side of caution. The past two calendar years
have provided ample reasons why: 1994 was among the worst years ever in the
bond markets, while 1995 was the third best. In this turbulent environment
our conservative stance served the Funds well. Over the two years through
January, both Funds produced 4.8% average annual compound returns.
According to Lipper Analytical Services, the average Maryland municipal
bond fund returned 3.8% for the period, while the average Virginia fund
returned 4.0%.
As the current presidential campaign unfolds, several candidates are
devoting attention to the idea of a "flat tax," which could eliminate the
tax advantages of municipal bonds. We continue to believe the risk to
municipal bonds is a relatively remote one, and that the market has already
discounted it appropriately.
Our strategy remains, as always, to research the market and the
individual issuers thoroughly and continuously, and then to invest only in
bonds which we feel will produce strong tax-free income with acceptable
risk. With these criteria in mind, we are redoubling our efforts to add
value through careful investments in higher yielding, higher risk (lower
than A or nonrated) bonds. Over the past six months, however, we have
found few such opportunities and increased such holdings only slightly -
from 17.42% to 17.66% of assets in the Maryland Fund and from 5.16% to
5.21% of assets in the Virginia Fund. At the other end of the quality
scale, 41.47% of the Maryland Fund's assets and 45.42% of the Virginia
Fund's assets were invested in top-rated (AAA) bonds.
Both portfolios continue to reflect broad diversification among
municipalities, industries and projects.
We look forward to reporting to you in greater detail in the Funds'
annual report, six months from now.
Sincerely,
(Signatures)
James H. Lemon, Jr. Harry J. Lister
Chairman President
March 18, 1996
At the Board of Trustees' October 19, 1995 meeting, James H. Lemon, Jr. was
elected Chairman, succeeding Stephen Hartwell. Mr. Hartwell, who had been
Chairman from the inception of the Funds, was praised by the Board for his
significant contributions and will continue to serve the Funds as a Trustee
and Chairman Emeritus.
Highlights as of January 31, 1996
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Assets:
Net Assets $80,206,077 $94,902,933
Net Asset Value Per Share $15.85 $16.27
Distribution Rate<F1> 4.65% 4.73%
Quality Diversification:
Moody's/S&P Ratings (best of either)
Aaa/AAA 41.47% 45.42%
Aa/AA 20.75 35.08
A/A 14.51 9.81
Lower than A or nonrated 17.66 5.21
Cash and Equivalents 5.61 4.48
Total 100.00% 100.00%
Maturity Diversification:<F2>
Under 1 year 5.61% 4.48%
1 to 10 years 30.26 33.65
10+ to 20 years 40.04 46.17
20+ to 30 years 24.09 15.70
Total 100.00% 100.00%
Average Life<F3> 9.86 years 9.53
years
To match Maryland's triple tax-free distribution rate of 4.65%, investors
with a combined effective Federal/state/county tax rate of 44.1% would have
to earn a taxable yield of 8.32%. For Virginia investors with a combined
effective Federal/state tax rate of 43.1%, it would take a taxable yield of
8.31% to equal the Fund's double tax-free distribution rate of 4.73%.
[FN]
<F1> Distribution rate for January 1996 is one month's dividend annualized,
divided by the average offering price for the month. The 30-day yield for
January, calculated per the Securities and Exchange Commission formula, at
maximum sales charge: Maryland, 3.99% and Virginia, 4.09%. For the latest
yields based on actual distributions, call toll-free 800/421-0180.
<F2> Securities are included at pre-refunded dates, not maturity dates.
<F3> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Maryland Fund and the Virginia Fund is 15.76 years and 16.27 years,
respectively.
[/FN]
The Tax-Exempt Fund of Maryland
Investment Portfolio, January 31, 1996
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in
More than One Year-94.39%
College & University Revenue - 5.24%
Frederick County, College Revenue Bonds,
(Hood College Project), 1990 Series:
7.05% 2004 $ 410 $ 458,380
7.05% 2005 455 506,752
Maryland Health and Higher Educational
Facilities Authority, Refunding Revenue
Bonds, Johns Hopkins University Issue,
Series 1988, 7.375% 2008 1,000 1,091,130
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds:
1992 Series A, 6.30% 2009 1,050 1,141,476
1993 Refunding Series C, 5.00% 2010 1,000 1,001,070
4,198,808
General Obligations (Local) - 9.89%
Anne Arundel County, Consolidated Water and
Sewer:
1993 Refunding Series, 5.25% 2011 1,000 1,019,300
1985 Refunding Series, 5.30% 2016 1,000 1,011,030
Baltimore County:
Consolidated Public Improvement Bonds,
1990 Series, 6.75% 1999 600 652,770
Metropolitan District Bonds, 63rd Issue,
1992 Series, 6.10% 2006 250 275,163
Frederick County, Public Facilities Bonds:
1990, 8.875% 2002 250 315,395
1993, Series B, 5.125% 2007 995 1,024,472
Harford County Consolidated Public
Improvement Bonds, Series 1992, 5.80% 2010 530 564,106
Howard County Consolidated Public
Improvement Refunding Bonds, 1993
Series A, 5.25% 2007 1,500 1,564,560
Montgomery County, Consolidated Public
Improvement Refunding Bonds of 1993,
Series A, 5.00% 2010 1,000 1,004,880
Wicomico County, Consolidated Public
Improvement Bonds of 1993, 4.60% 2005 500 504,104
7,935,780
Hospital & Health Facilities Revenue - 15.51%
Maryland Health and Higher Educational
Facilities Authority:
Good Samaritan Hospital Issue, Revenue
Bonds, Series 1993, 5.70% 2009 $1,000 $ 1,047,320
Greater Baltimore Medical Center Issue,
Revenue Bonds, Series 1991, 6.00% 2021 625 628,256
Howard County, General Hospital Issue,
Series 1993:
5.50% 2013 2,000 1,898,960
5.50% 2021 2,000 1,853,160
Johns Hopkins Hospital Issue, Revenue
Refunding Bonds, Series 1993:
5.60% 2009 850 883,881
5.00% 2023 1,000 946,480
Memorial Hospital of Cumberland Issue,
Revenue Refunding Bonds, Series 1992,
6.50% 2010 750 795,540
Peninsula Regional Medical Center Issue,
Project and Refunding Revenue Bonds,
Series 1993, 5.00% 2023 1,500 1,371,630
Suburban Hospital Issue, Revenue Refunding
Bonds, Series 1993, 5.125% 2021 3,000 2,771,640
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1992, 7.20% 2006 215 241,099
12,437,966
Housing Finance Authority Revenue - 7.77%
Maryland Community Development
Administration, Department of Housing and
Community Development, Single-Family
Program Bonds:
1994 First Series, 5.70% 2017 970 982,455
1990 First Series, 7.60% 2017 495 517,265
1994 Fifth Series, AMT, 5.875% 2017 1,475 1,501,417
1988 Third Series, 8.00% 2018 1,000 1,061,740
Montgomery County, Maryland Housing
Opportunities Commission, Single Family
Mortgage Revenue, 1986 Series C, 7.25% 2013 750 779,153
Prince George's County Housing Authority,
GNMA/FNMA Collateralized Single Family
Mortgage Bonds, Series 1994 A,
AMT, 6.60% 2025 930 967,330
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family Mortgage
Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 95 101,155
1988 Series B, 7.65% 2022 300 319,031
6,229,546
Industrial Development Revenue - 1.38%
Mayor and City Council of Baltimore, Port
Facilities Revenue Bonds (Consolidation
Coal Sales Company Project):
Series 1984 A, 6.50% 2011 500 551,810
Series 1984 B, 6.50% 2011 500 551,810
1,103,620
Insured - 18.38%
City of Baltimore, Refunding Revenue Bonds,
FGIC Insured:
1995, Series A, 7.25% 2005 2,000 2,427,240
1994, Series A, 6.00% 2015 1,500 1,662,120
Charles County, Consolidated Public
Improvement Bonds of 1993, Series A,
FGIC Insured, 5.25% 2003 715 755,462
City of Frederick, General Improvement
Bonds, 1992 Refunding Series, FGIC
Insured, 6.125% 2008 890 980,967
Maryland Health and Higher Educational
Facilities Authority:
Anne Arundel Medical Center Issue,
Revenue Bonds, AMBAC Insured:
Series 1993, 5.25% 2013 1,000 998,260
Series 1993, 5.00% 2023 500 472,560
Francis Scott Key Medical Center Issue,
Refunding Revenue Bonds, Series 1993,
FGIC Insured, 5.00% 2013 500 484,990
Holy Cross Hospital Issue, Series 1990 A,
AMBAC Insured, 7.00% 2004 750 834,555
Memorial Hospital of Easton, Series 1989 B,
MBIA Insured, 7.00% 2012 1,200 1,319,604
Sinai Hospital of Baltimore Issue Project and
Revenue Refunding Bonds, Series 1993,
AMBAC Insured, 5.25% 2019 2,000 1,953,800
Commonwealth of Puerto Rico:
Electric & Power Authority,
MBIA Insured, 7.00% 2007 1,000 1,212,750
Public Improvement Bonds of 1987,
MBIA Insured, 6.75% 2006 500 528,365
Washington, D.C. Metropolitan Area Transit
Authority, Gross Revenue Transit Refunding
Bonds, Series 1993, FGIC Insured,
6.00% 2008 1,000 1,113,710
14,744,383
Life Care Facilities Revenue - 9.15%
Calvert County, Economic Development
Revenue Bonds (Asbury-Solomons Island
Facility), Series 1995, 8.625% 2024 2,000 2,188,220
Maryland Health and Higher Educational
Facilities Authority, First Mortgage
Refunding Revenue Bonds, Roland Park
Place Issue, Series 1989, 7.75% 2012 2,000 2,143,700
Prince George's County, Refunding Revenue
Bonds, Collington Episcopal Life Care
Community, Inc., Series 1994 A, 6.00% 2013 3,000 3,004,230
7,336,150
Multi-Family Housing - 2.63%
Montgomery County, Maryland Housing
Opportunities Commission, Single Family
Mortgage Revenue, 1994 Series A-2,
7.50% 2024 2,000 2,109,220
Pre-Refunded<F1> - 18.55%
Frederick County, Public Facilities Bonds:
1989, 7.20% 2006 (1999) 350 390,597
1991, Series B, 6.30% 2011 (2002) 1,370 1,548,799
1986 Series, 7.40% 2012 (2001) 310 366,191
Harford County, Consolidated Public
Improvement Bonds, Series 1992,
5.80% 2010 (2002) 970 1,074,954
Howard County:
Consolidated Public Improvement Bonds,
1990 Series A, 7.00% 2009 (2000) 500 558,125
Metropolitan District Refunding Bonds,
1991 Series A, 6.625% 2021 (2001) 500 563,200
Maryland Department of Transportation,
Consolidated Transportation Bonds,
1989 Series, 6.50% 2003 (1998) 500 540,315
State of Maryland, General Obligation
Bonds, State and Local Facilities:
Loan of 1990, Third Series, 6.75% 2003 (2000) 400 447,480
1989 First Series, 6.80% 2004 (1999) 1,000 1,103,660
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) 250 284,058
Sinai Hospital of Baltimore Issue, Revenue
Bonds, 1990 Series, AMBAC Insured,
7.00% 2019 (2000) 700 795,361
Suburban Hospital Issue Revenue Bonds:
Series 1988, 7.50% 2008 (1998) 1,250 1,381,050
Series 1992, 6.50% 2017 (2002) 500 570,825
University of Maryland Medical System
Issue, Revenue Bonds, Series 1991 A,
FGIC Insured, 6.50% 2021 (2001) 1,000 1,113,940
Morgan State University Academic Fees and
Auxiliary Facilities Fees Revenue Bonds,
1990 Series A, MBIA Insured,
7.00% 2020 (2000) 475 539,709
Prince George's County, Hospital Revenue
Bonds (Dimensions Health Corporation
Issue), Series 1992, 7.20% 2006 (2002) 1,035 1,221,942
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency,
Single Family Mortgage Revenue Bonds,
Homeownership 5th Portfolio,
1986 Series, 7.50% 2015 (2000) 495 563,265
Public Improvement Bonds of 1992,
MBIA Insured, 6.50% 2009 (2002) 1,000 1,143,290
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds,
1989 Series B, 7.00% 2007 (1999) 600 674,009
14,880,770
Resource Recovery - 3.97%
Montgomery County, Northeast Maryland
Waste Disposal Authority, Solid Waste
Revenue Bonds AMT:
6.00% 2006 1,000 1,071,980
6.00% 2007 1,000 1,072,630
Series 1993 A, 6.30% 2016 1,000 1,042,830
3,187,440
Turnpikes & Toll Roads Revenue - 1.36%
Maryland Transportation Authority Facilities
Project, Transportation Facilities Projects
Revenue Bonds, Series 1992, 5.80% 2006 1,000 1,094,490
Water & Sewer Revenue - .56%
Maryland Water Quality Financing
Administration, Revolving Loan Fund
Revenue Bonds, Series 1991 B, 0.00% 2005 700 448,063
75,706,236
Tax-Exempt Securities Maturing in
One Year or Less - 4.00%
General Obligations (Local) - 4.00%
Montgomery County, Maryland Consolidated
Commercial Paper Bond Anticipation
Notes, 1995 Series:
3.20% 1996 2,500 2,500,000
5.00% 1996 700 708,050
3,208,050
TOTAL TAX-EXEMPT SECURITIES
(cost: $73,519,000) 78,914,286
Excess of cash and receivables over payables 1,291,791
NET ASSETS $80,206,077
[FN]
<F1>Parenthetical year represents date of pre-refunding.
See Notes to Financial Statements
[/FN]
The Tax-Exempt Fund of Virginia
Investment Portfolio, January 31, 1996
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year - 95.52%
College & University Revenue - 4.18%
Rockingham County Industrial Development
Authority, Educational Facilities Revenue
Bonds (Bridgewater College), Series 1993,
6.00% 2023 $1,100 $ 1,114,784
University of Virginia, General Revenue
Pledge Bonds, Series 1993 B, 5.375% 2010 1,000 1,038,580
Virginia College Building Authority Educational
Facilities Revenue Bonds (Marymount
University Project), Series 1992, 6.875% 2007 1,650 1,809,984
3,963,348
Escrowed to Maturity - 1.57%
Virginia Education Loan Authority, Student Loan
Program Revenue Refunding Bonds,
Senior Series of 1993 D AMT, 5.40% 2001 1,410 1,487,635
General Obligations (Local) - 10.56%
Arlington County Public Improvement Bonds,
Series 1993, 5.30% 2009 1,250 1,294,625
Chesapeake:
Public Improvement Bonds, Series of 1992,
6.00% 2006 1,600 1,748,912
Refunding Bonds, Series of 1993, 5.40% 2008 1,000 1,057,420
Covington, Water and Sewer Refunding Bonds,
Series of 1994, 5.25% 2013 250 247,288
Leesburg Refunding Bonds, Series 1993,
5.60% 2008 1,195 1,259,506
Lynchburg Public Improvement Refunding
Bonds, Series 1993, 5.25% 2009 1,000 1,023,670
Newport News General Obligation,
Water Bonds, Series A of 1992, 6.125% 2009 1,170 1,266,537
Norfolk Capital Improvement and Refunding
Bonds, Series 1992 A, 6.00% 2011 500 525,465
Roanoke Public Improvement and
Refunding Bonds, Series 1992 B:
6.375% 2009 250 271,360
6.40% 2011 500 541,190
Spotsylvania Public Improvement Bonds,
Series of 1992, 5.75% 2011 750 788,827
10,024,800
General Obligations (State) - 1.70%
Commonwealth of Virginia, Public Facilities
Bonds, 1993 Series A, 5.40% 2005 1,500 1,617,885
Hospital & Health Facilities Revenue - 14.55%
Arlington County Industrial Development
Authority, Hospital Revenue Refunding
Bonds (The Arlington Hospital), Series 1993:
5.125% 2008 1,000 990,820
5.00% 2021 1,000 918,910
Fairfax County Industrial Development
Authority, Hospital Revenue Refunding
Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 1,500 1,513,725
5.25% 2019 1,500 1,447,920
5.00% 2023 2,000 1,852,280
Hampton Industrial Development
Authority, Hospital Revenue
Bonds (Sentara Hospitals), 5.125% 2016 1,000 936,810
Lynchburg Industrial Development Authority,
Hospital Facilities, Revenue Refunding
Bonds, Centra Health, Inc., Series 1988,
8.125% 2016 1,000 1,093,150
Norfolk Industrial Development Authority,
Hospital Revenue Bonds (Sentara Hospitals-
Norfolk Project), Series A of 1994,
5.00% 2020 1,750 1,624,490
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding
Bonds (Mary Immaculate Project),
1994 Series, 6.875% 2010 1,900 2,017,496
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 1,300 1,411,540
13,807,141
Housing Finance Authority Revenue - 4.64%
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family
Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 80 85,183
1988 Series B, 7.65% 2022 325 345,618
Virginia Housing Development Authority,
Commonwealth Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 523,615
1995 Series A-AMT, Sub-Series A-1,
6.60% 2004 1,000 1,054,120
1994 Series I-AMT, Sub-Series I-1,
6.40% 2005 800 840,208
1994 Series H, Sub-Series H-2, 6.55% 2017 1,000 1,037,840
1989 Series B, Sub-Series B-2, 7.625% 2017 110 113,200
1992 Series A, 7.10% 2022 380 402,819
4,402,603
Industrial Development - 1.06%
Industrial Development Authority of the
County of Henrico, Solid Waste Disposal
Revenue Bonds (Browning-Ferris Industries of
South Atlantic, Inc. Project),
Series 1996 A AMT, 5.30% 2011 1,000 1,008,770
Insured - 19.69%
Augusta, Hospital Revenue Bonds,
AMBAC Insured, 5.125% 2021 1,100 1,056,055
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1,000 1,057,860
Danville, Virginia Industrial Development
Authority, Hospital Revenue Bonds,
Danville Regional Medical Center, Series 1994,
FGIC Insured, 6.00% 2007 1,000 1,090,450
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 1,375 1,579,339
6.375% 2018 1,000 1,146,890
Loudoun County:
Industrial Development Authority, Hospital
Revenue Bonds, FSA Insured, 6.00% 2005 1,000 1,092,490
Sanitation Authority, Water and Sewer System
Revenue Bonds, Refunding Series 1992,
FGIC Insured, 6.25% 2010 2,000 2,178,520
County of Prince William, Lease Participation
Certificates, Series 1995,
MBIA Insured, 5.20% 2005 1,000 1,040,540
Richmond, FGIC Insured:
5.50% 2005 1,000 1,073,400
5.00% 2021 1,000 960,720
Southeastern Public Service Authority of Virginia,
Senior Revenue Refunding Bonds
(Regional Solid Waste System), Series 1993 A,
MBIA Insured, 5.125% 2013 2,500 2,479,700
Upper Occoquan Sewage Authority,
Regional Sewerage System Revenue
Refunding Bonds, Series 1995B,
MBIA Insured, 5.15% 2020 1,000 993,770
City of Virginia Beach Development Authority,
Hospital Revenue Bonds (Virginia Beach
General Hospital Project), Series 1993,
AMBAC Insured, 6.00% 2011 1,000 1,109,860
Washington, D.C. Metropolitan Area:
Airports Authority, Airport System Revenue
and Refunding Bonds, MBIA Insured AMT,
Series 1992 A, 6.625% 2019 750 812,850
Transit Authority, Gross Revenue Transit
Refunding Bonds, Series 1993,
FGIC Insured, 4.70% 2003 1,000 1,014,660
18,687,104
Local Appropriation - .56%
Fairfax County Economic Development
Authority, Parking Revenue Bonds (Huntington
Metrorail Station Project), Series 1990 A,
6.75% 2015 500 531,950
Pre-Refunded<F1> - 20.63%
Chesapeake, Hospital Authority Facility for
Chesapeake General Hospital, First Mortgage
Revenue, BIG Insured, Series 1988,
7.625% 2018 (1998) 1,000 1,107,710
Fairfax County:
Industrial Development Authority Hospital
Revenue Bonds (Fairfax Hospital System
Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1,000 1,141,510
Water Authority Revenue, Series 1989,
7.30% 2021 (2000) 1,250 1,418,550
Henry County Public Service Authority,
Water and Sewer Revenue Bonds, FGIC
Insured, Series 1990, 7.20% 2019 (2000) 1,250 1,431,825
Loudoun County Sanitation Authority,
Water and Sewer System Revenue Bonds,
Series 1989, AMBAC Insured:
7.50% 2010 (1999) 900 1,006,677
7.50% 2017 (1999) 375 419,449
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) 400 460,852
(Sentara Hospitals-Norfolk Project),
Series 1991, 7.00% 2020 (2000) 250 285,455
Portsmouth Improvement Bonds,
Public Improvement Refunding Bonds,
Series 1987, 7.50% 2012 (1997) 500 544,670
Prince William County Service Authority,
Water and Sewer System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 768,373
Richmond Public Utility Revenue Bonds,
Series 1988 A, 8.00% 2018 (1998) 1,500 1,649,385
Roanoke:
Industrial Development Authority, Hospital
Revenue Bonds, Carilion Health System
(Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25%
2017 (2000) 750 859,688
Water System Revenue Bonds, Series 1991,
FGIC Insured, 6.50% 2021 (2001) 750 847,470
Southeastern Public Service Authority, Regional
Solid Waste System, Senior Revenue
Refunding Bonds, Series 1989, BIG Insured:
7.00% 2006 (1999) 500 558,390
7.00% 2013 (1999) 1,000 1,116,780
Suffolk, Series 1989, 7.00% 2005 (1998) 1,000 1,099,250
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured,
9.875% 2001 (2001) 25 28,529
Upper Occoquan Sewage Authority, Regional
Sewerage System Revenue Bonds, Series 1991,
MBIA Insured, 6.00% 2021 (2001) 700 762,923
Virginia Education Loan Authority, Student
Loan Program Revenue Refunding Bonds,
Senior Series of 1993 D AMT, 5.95% 2009 (2005) 790 864,734
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1,000 1,139,480
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 287,605
Commonwealth of Virginia Transportation
Board, Transportation Contract Revenue Bonds,
Route 28 Project, Series 1988:
7.70% 2008 (1998) 890 977,772
7.80% 2016 (1998) 500 550,300
Warrenton, Series of 1990, 7.10% 2003 (1998) 230 253,714
19,581,091
Resource Recovery - 2.18%
Fairfax County Economic Development Authority,
Resource Recovery Revenue Bonds,
Series 1988 A AMT (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2003 500 544,235
Roanoke Valley Resource Authority,
Solid Waste System Revenue Bonds, Series 1992,
5.75% 2012 1,500 1,523,760
2,067,995
State Authority - 6.37%
Virginia Public Building Authority, State Building
Revenue Bonds, Series 1991 A, 6.50% 2011 1,750 1,903,808
Virginia Public School Authority, School
Financing Bonds:
(1987 Resolution), 1991 Refunding Series C,
6.25% 2007 1,500 1,647,735
(1991 Resolution), Series 1994 A,
6.20% 2014 1,500 1,634,940
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A,
7.50% 2017 50 52,479
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 800,616
6,039,578
Transportation - 3.55%
Commonwealth of Virginia Transportation Board,
Transportation Revenue Refunding Bonds:
(Northern Virginia Transportation District
Program), Series 1993 C, 5.30% 2009 2,565 2,635,820
(U.S. Route 58 Corridor Development
Program), Series 1993 A, 5.25% 2012 730 729,540
3,365,360
Water & Sewer Revenue - 4.28%
Chesterfield County Water and Sewer Revenue
Refunding Bonds, Series 1992, 6.375% 2009 1,250 1,377,738
Prince William County, Virginia Resources
Authority, Solid Waste Disposal System
Revenue Refunding Bonds, 1995 Series A,
5.50% 2015 1,960 1,978,580
Rivanna Water and Sewer Authority,
Regional Water and Sewer System Refunding
Revenue Bonds, Series 1991, 6.40% 2007 645 708,010
4,064,328
90,649,588
Tax-Exempt Securities Maturing in
One Year or Less - 3.15%
Ports<F2> - .63%
Peninsula Ports Authority:
Coal Terminal Revenue Refunding Bonds
(Dominion Terminal Associates Project),
Series 1987 A, 3.70% 2016 100 100,000
Refunding Port Facilities (Shell Oil Company),
1987 Series, 3.45% 2005 500 500,000
600,000
Pre-Refunded<F1> - 2.52%
Bedford Electric System Revenue Refunding Bonds,
Series 1986, AMBAC Insured, 7.25% 2025 (1996) 1,000 1,032,850
Chesapeake, Certificates of Participation,
1986 Series, 7.75% 2006 (1996) 1,000 1,037,930
Chesterfield County Refunding Bonds,
1986 Series, 7.50% 2001 (1996) 50 51,764
Fairfax County, Industrial Development Authority
Hospital Revenue Bonds (Fairfax Hospital
Association System), Series 1985 A,
7.875% 2017 (1996) 250 264,888
2,387,432
2,987,432
TOTAL TAX-EXEMPT SECURITIES
(cost: $87,455,000) 93,637,020
Excess of cash and receivables over payables 1,265,913
NET ASSETS $94,902,933
[FN]
<F1>Parenthetical year represents date of pre-refunding.
<F2> Coupon rate may change periodically.
See Notes to Financial Statements
[/FN]
Statement of Assets and Liabilities
January 31, 1996 (dollars in thousands)
Unaudited
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $70,313 and $84,556,
respectively) $75,706 $90,650
Maturing in one year or less
(cost: $3,206 and $2,899,
respectively) 3,208 2,987
Cash 609 64
Receivables for -
Sales of Funds' shares 150 74
Accrued interest 773 1,365
Total Assets 80,446 95,140
Liabilities:
Payables for -
Repurchases of Funds' shares 75 29
Dividends 119 143
Adviser and management
services 30 35
Accrued expenses 16 30
Total Liabilities 240 237
Net Assets:
Net assets applicable to Funds'
shares issued and outstanding $80,206 $94,903
Funds' shares outstanding<F1> 5,061,789 5,834,100
Net asset value per share $15.85 $16.27
[FN]
<F1>Shares of beneficial interest, unlimited shares authorized.
See Notes to Financial Statements
[/FN]
Statement of Operations
For the six months ended (dollars in thousands)
January 31, 1996
Unaudited
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Investment Income:
Income:
Interest on tax-exempt securities $2,312 $2,761
Expenses:
Investment adviser fee 98 115
Business management fee 80 93
Distribution fee 92 102
Transfer agent fee 17 21
Reports to shareholders 6 10
Registration statements and
prospectus 3 5
Postage, stationery and supplies 4 8
Trustees' fees 4 4
Custodian fee 2 2
Auditing and legal fees 10 10
Total expenses 316 370
Net investment income 1,996 2,391
Realized Gain and
Unrealized Appreciation
on Investments:
Net realized gain 20 394
Net increase in unrealized
appreciation on investments:
Beginning of period 2,674 3,478
End of period 5,395 6,182
Net unrealized appreciation
on investments 2,721 2,704
Net realized gain and unrealized
appreciation on investments 2,741 3,098
Net Increase in Net Assets
Resulting from Operations $4,737 $5,489
See Notes to Financial Statements
Statement of Changes in Net Assets
The Tax-Exempt (dollars in thousands)
Fund of Maryland
Six Months Ended Year Ended
January 31, 1996<F1> July 31, 1995
Operations:
Net investment income $ 1,996 $ 3,913
Net realized gain on investments 20 105
Net unrealized appreciation on
investments 2,721 1,076
Net increase in net assets
resulting from operations 4,737 5,094
Dividends Paid to Shareholders
from Net Investment Income (1,995) (3,923)
Capital Share Transactions:
Proceeds from shares sold:
369,059 and 778,353
shares, respectively 5,752 11,540
Proceeds from shares issued in
reinvestment of net investment
income dividends:
81,798 and 168,487 shares,
respectively 1,271 2,494
Cost of shares repurchased:
303,521 and 1,015,670
shares, respectively (4,703) (14,835)
Net increase (decrease) in net assets
resulting from capital
share transactions 2,320 (801)
Total Increase in Net Assets 5,062 370
Net Assets:
Beginning of period 75,144 74,774
End of period $80,206 $75,144
[FN]
<F1>Unaudited
See Notes to Financial Statements
[/FN]
Statement of Changes in Net Assets
The Tax-Exempt (dollars in thousands)
Fund of Virginia
Six Months Ended Year Ended
January 31, 1996<F1> July 31, 1995
Operations:
Net investment income $ 2,391 $ 4,857
Net realized gain on investments 394 501
Net unrealized appreciation
on investments 2,704 1,133
Net increase in net assets
resulting from operations 5,489 6,491
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (2,390) (4,871)
Distributions from net realized
gain on investments (320) -
Total dividends and distributions (2,710) (4,871)
Capital Share Transactions:
Proceeds from shares sold:
322,771 and 951,297
shares, respectively 5,168 14,430
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
103,668 and 180,954 shares, respectively 1,658 2,768
Cost of shares repurchased:
399,022 and 1,361,785
shares, respectively (6,385) (20,619)
Net increase (decrease) in net assets
resulting from capital
share transactions 441 (3,421)
Total Increase (Decrease) in Net Assets 3,220 (1,801)
Net Assets:
Beginning of period 91,683 93,484
End of period $94,903 $91,683
[FN]
<F1>Unaudited
See Notes to Financial Statements
[/FN]
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 Funds seek a high level of current income exempt from
Federal and their respective state income taxes. 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. Amortization of market discounts on
securities is recognized upon disposition, subject to applicable tax
requirements. Dividends to shareholders are declared daily from net
investment income. Distributions paid to shareholders are recorded on the
ex-dividend date.
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 $2,000 and $2,000 for the Maryland
and Virginia Funds, respectively, include $2,000 and $1,000 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 January 31, 1996, net unrealized appreciation on investments for book
and federal income tax purposes for the Maryland Fund aggregated
$5,395,000, of which $5,536,000 related to appreciated securities and
$141,000 related to depreciated securities. For the Virginia Fund, net
unrealized appreciation aggregated $6,182,000, of which $6,216,000 related
to appreciated securities and $34,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended January 31, 1996. During the six
months ended January 31, 1996, the Maryland Fund utilized a capital loss
carry-forward totaling $20,000 to offset, for tax purposes, capital gains
realized during the six months. The Maryland Fund has available at January
31, 1996 a net capital loss carryforward totaling $61,000, 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 $73,519,000 and $87,455,000 for the Maryland and Virginia
Funds, respectively, at January 31, 1996.
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. WMC, business manager of the Funds, was paid fees of $80,000
and $93,000 by the Maryland and Virginia Funds, respectively, for business
management services. 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 $22,000 and $12,000 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 $98,000 and $115,000 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 six months ended
January 31, 1996, distribution expenses under the Plan were $92,000 and
$102,000, including accrued and unpaid expenses of $27,000 and $34,000, 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 $17,000 and $21,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
Funds' shares, has informed the Funds that it has received $25,000 and
$28,000 (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 January 31, 1996, aggregate amounts deferred were $4,000 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 January 31, 1996:
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Accumulated undistributed
net realized gain (loss)
on investments $ (61,000) $ 259,000
Paid-in capital 74,871,000 88,461,000
Purchases and sales of investment
securities, excluding short-term
securities, during the six months
ended January 31, 1996:
Purchases 2,919,000 8,972,000
Sales 1,716,000 9,030,000
The Tax-Exempt Fund of Maryland
Per-Share Data and Ratios
Six Months
Ended Year Ended July 31
1/31/96<F1> 1995 1994 1993 1992 1991
Net Asset Value,
Beginning of Period $15.29 $15.00 $15.53 $15.22 $14.29 $14.12
Income from Investment
Operations:
Net investment income .40 .80 .76 .79 .83 .85
Net realized and
unrealized gain (loss)
on investments .56 .29 (.53) .31 .93 .17
Total income from
investment operations .96 1.09 .23 1.10 1.76 1.02
Less Distributions:
Dividends from net
investment income (.40) (.80) (.76) (.79) (.83) (.85)
Net Asset Value,
End of Period $15.85 $15.29 $15.00 $15.53 $15.22 $14.29
Total Return<F2> 6.38%<F3> 7.58% 1.42% 7.44% 12.72% 7.44%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $80 $75 $75 $64 $48 $35
Ratio of expenses to
average net assets .41%<F3> .78% .75% .83% .91% .94%
Ratio of net income to
average net assets 2.59%<F3> 5.38% 4.90% 5.12% 5.60% 5.98%
Portfolio turnover rate 2.31%<F3> 20.91% 10.01% 9.05% 8.11% .88%
[FN]
<F1> Unaudited
<F2> This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the Fund's offering price.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
[/FN]
The Tax-Exempt Fund of Virginia
Per-Share Data and Ratios
Six Months
Ended Year Ended July 31
1/31/96<F1> 1995 1994 1993 1992 1991
Net Asset Value,
Beginning of Period $15.79 $15.49 $16.01 $15.72 $14.75 $14.50
Income from Investment
Operations:
Net investment income .41 .83 .80 .82 .85 .87
Net realized and
unrealized gain (loss)
on investments .53 .30 (.52) .29 .97 .25
Total income from
investment operations .94 1.13 .28 1.11 1.82 1.12
Less Distributions:
Dividends from net
investment income (.41) (.83) (.80) (.82) (.85) (.87)
Distributions from
net realized gains (.05) - - - - -
Total distributions (.46) (.83) (.80) (.82) (.85) (.87)
Net Asset Value,
End of Period $16.27 $15.79 $15.49 $16.01 $15.72 $14.75
Total Return<F2> 6.08%<F3> 7.56% 1.74% 7.29% 12.80% 8.01%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $95 $92 $93 $80 $57 $39
Ratio of expenses to
average net assets .40%3 .79% .78% .84% .93% .97%
Ratio of net income to
average net assets 2.57%<F3> 5.37% 5.04% 5.18% 5.61% 6.00%
Portfolio turnover rate 9.82%<F3> 32.18% 2.36% 4.96% 6.84% 13.60%
[FN]
<F1> Unaudited
<F2> This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the Fund's offering price.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
[/FN]
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Chairman and Chief Executive Officer,
The Johnston-Lemon Group, Incorporated
Stephen Hartwell
Chairman Emeritus of the Trust
Chairman, Washington Management Corporation
Harry J. Lister
President of the Trust
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International Company
Frank M. Ewing
Chairman and President,
Frank M. Ewing Co., Inc.
Jean Head Sisco
Partner, Sisco Associates
T. Eugene Smith
President, T. Eugene Smith, Inc.
Stephen G. Yeonas
Chairman and Chief Executive Officer,
Stephen G. Yeonas Company
Other Officers
Howard L. Kitzmiller
Senior Vice President, Secretary/
Treasurer of the Trust
Senior Vice President, Secretary and Assistant Treasurer,
Washington Management Corporation
Lois A. Erhard
Vice President of the Trust
Vice President, Washington
Management Corporation
Michael W. Stockton
Assistant Treasurer of the Trust
Assistant Vice President and Assistant Treasurer,
Washington Management Corporation
Office of the Funds and
of The Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92621-5804
Transfer Agent
American Funds Service Company
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-0001
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005-2216
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1462
For information about your account or any of the Funds' services, please
contact your securities dealer or financial planner, or call the Funds'
transfer agent, toll-free, at 800/421-0180.
This report is for the information of shareholders in the Funds that
comprise The American Funds Tax-Exempt Series I, but it may also be used as
sales literature when preceded or accompanied by the current prospectus,
which gives details about charges, expenses, investment objectives and
operating policies of the Funds. If used as sales material after March 31,
1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
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