======================================================
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. 12
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 11
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 20, 1996 IT FILED ITS 24F-2 NOTICE FOR FISCAL 1996.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
|X| IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON NOVEMBER 15,
1996,
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 Obectives 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 6
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, The Tax-Exempt Fund of Maryland (the "Maryland Fund") and The
Tax-Exempt Fund of Virginia (the "Virginia Fund"). Except where the
context indicates otherwise, references 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.
A statement of additional information, dated November 15, 1996, which
contains the Fund's financial statements, has been filed with the
Securities and Exchange Commission and is available to you, 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.
24/25-010-1196
<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 WITH A MAXIMUM
SALES CHARGE.
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
The American Funds.................
Shareholder Guide 12
Purchasing Shares................ 12
Reducing Your Sales..............
Charge 15
Shareholder Services............. 16
Redeeming Shares................. 18
Retirement Plans................. 20
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............................................. 0.46% 0.45%
12b-1 expenses(3)........................................... 0.22% 0.21%
Other expenses (such as audit, legal, shareholder services,
transfer agent and custodian expenses).................... 0.13% 0.13%
Total Fund operating expenses............................... 0.81% 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 $ 72 $ 90 $ 143
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 made 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.
(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.
2
<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 NET REALIZED 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
1996 15.29 .80 .10 .90 (.80) -- (.8000) 15.39 5.95
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
1996 15.79 .81 .03 .84 (.81) (.05) (.8600) 15.77 5.46
<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
1996 80 .81 5.14 16.01
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
1996 90 .79 5.11 27.34
</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
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 statement of additional information.
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, 1996 was as
follows for the Maryland Fund and Virginia Fund,
respectively: bonds--Aaa/AAA--43.62% and 45.41%;
Aa/AA--20.18% and 36.70%; A/A--14.40% and 9.29%;
Baa/BBB--6.41% and 6.14%; Ba/BB--0.00% and 0.09%; and
non-rated--11.90% 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--1.99%;
Ba/BB--7.12%; and B/B--2.79%. Cash made up 3.49% and
2.37% 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.
High-yield, high-risk bonds (bonds rated Ba or BB
or below or comparable unrated bonds) typically are
subject to greater market fluctuations and to greater
risk of loss of income and principal due to default
by the issuer than are higher-rated bonds. Their
values tend to reflect short-term corporate, economic
, and market developments and investor perceptions of
the issuer's credit quality to a greater extent than
higher-rated bonds. In addition,it may be more
difficult to dispose of, or to determine the value
of, high-yield, high-risk bonds. Bonds rated Ba
or BB or below are considered speculative. [Bonds
rated Ca or CC are described by the rating agencies
as "speculative in a high degree; often in default
or [having] other marked shortcomings."]
Capital Research and Management Company attempts to
reduce the risks described above through
diversification of the portfolio and by 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 alternative minimum tax
on corporations and individuals. The Fund may invest up
to 20% of its total assets in "private activity" bonds
which pay
5
<PAGE>
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 2 years 3 years 11 years
Management Group, Capital
Research and Management
Company
David A. Hoag Vice President, Capital 3 years 5 years 9 years
(Maryland only) Research Company*
Brenda S. Ellerin Vice President, Capital 3 years 5 years 7 years
(Virginia only) 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 6.06% AND 6.40%
A YEAR, RESPECTIVELY (ASSUMING THE MAXIMUM SALES CHARGE WAS PAID) OVER THEIR
LIFETIME (AUGUST 14, 1986 THROUGH SEPTEMBER 30, 1996).
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 Fund's 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 Fund's distribution
rates are calculated by annualizing the current month's
dividend and dividing by the average price for the
month. The SEC yield reflects income the 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 Maryland
and Virginia Funds' yields for the 30-day period ended
September 30, 1996 were 4.50% and 4.33%, respectively
and the distribution rates were 4.89% and 4.84%,
respectively, at maximum offering price. The Maryland
Fund's total return over the past 12 months and average
annual total returns over the past five-year and
ten-year periods, as of September 30, 1996, were 0.55%,
5.68% and 6.11%, respectively. The Virginia Fund's
total return over the past 12 months and average annual
total returns over the past five-year and ten-year
periods, as of September 30, 1996, were 0.16%, 5.59%
and 6.35%, 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 November. 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
income and capital gain net income, the Fund itself is
relieved of federal
7
<PAGE>
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
92821. (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.,
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 who 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
92821, 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
$34,000 and $40,000, respectively, by the Maryland Fund
and the Virginia Fund for the fiscal year ended July
31, 1996. 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 92822-2205 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 78265-9522 ND, NE, NM, OK, SD, TX and WY
Fax: 210/530-4050
CENTRAL- P.O. Box 6007 AL, IL, IN, KY, MI, MS, OH, TN
EAST Indianapolis, IN 46206-6007 and WI
Fax: 317/735-6620
EAST P.O. Box 2280 CT, DE, FL, GA, MA, MD, ME,
Norfolk, VA 23501-2280 NC, NH, NJ, NY, PA, RI, SC,
Fax: 804/670-4773 VA, VT, WV and Washington,
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
THE AMERICAN FUNDS SHAREHOLDER GUIDE
<TABLE>
<CAPTION>
PURCHASING METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
SHARES ---------------------------------------------------------
<S> <C> <C> <C>
See "Investment $50 minimum (except
Minimums and Fund where a lower
Numbers" for minimum is noted
initial under "Investment
investment Minimums and Fund
minimums. Numbers").
---------------------------------------------------------
Your investment By Visit any Mail directly to
dealer can help contacting investment dealer your investment
you establish your your who is registered dealer's address
account--and help investment in the state printed on your
you add to it dealer where the account statement.
whenever you like. purchase is made
and who has a
sales agreement
with American
Funds
Distributors.
---------------------------------------------------------
By mail Make your check Fill out the account
payable to the additions form at the
fund and mail to bottom of a recent
the address account statement,
indicated on the make your check pay-
account able to the fund,
application. write your account
Please indicate number on your check,
an investment and mail the check
dealer on the and form in the enve-
account lope provided with
application. your account state-
ment.
---------------------------------------------------------
By Please contact Complete the "Invest-
telephone your investment ments by Phone"
dealer to open section on the ac-
account, then count application or
follow the American FundsLink
procedures for Authorization Form.
additional Once you establish
investments. the privilege, you,
your financial advi-
sor or any person
with your account in-
formation can call
American FundsLine(R)
and make investments
by telephone (subject
to conditions noted
in "Telephone Pur-
chases, Redemptions
and Exchanges" below)
---------------------------------------------------------
By wire Call 800/421-0180 Your bank should wire
to obtain your your additional
account investments in the
number(s), if same manner as
necessary. Please described under
indicate an "Initial Investment."
investment dealer
on the account.
Instruct your
bank to wire
funds to:
Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco,
CA 94106
(ABA #121000248)
For credit to the
account of:
American Funds
Service Company
a/c #4600-076178
(fund name)
(your fund acct.
no.)
---------------------------------------------------------
</TABLE>
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE
THE RIGHT TO REJECT ANY PURCHASE ORDER.
---------------------------------------------------------
SHARE PRICE Shares are purchased at the offering price
next determined after the order is received by the fund
or American Funds Service Company. This price is the net
asset value plus a sales charge, if applicable. In the
case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated.
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 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.
12
<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(R) (see description below):
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL FUND INITIAL FUND
FUND INVESTMENT NUMBER FUND INVESTMENT NUMBER
- ---- ---------- ------ ---- ---------- ------
<S> <C> <C> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS BOND FUNDS
AMCAP Fund(R)......... $1,000 02 American High-Income Mu-
American Balanced nicipal Bond Fund(SM).... $1,000 40
Fund(R).............. 500 11 American High-Income
American Mutual Trust(R)............... 1,000 21
Fund(R).............. 250 03 The Bond Fund of
Capital Income America(SM).............. 1,000 08
Builder(R)........... 1,000 12 Capital World Bond
Capital World Growth and Fund(R)................ 1,000 31
Income Fund(SM)...... 1,000 33 Intermediate Bond Fund
EuroPacific Growth of America(R).......... 1,000 23
Fund(R).............. 250 16 Limited Term Tax-Exempt
Fundamental Bond Fund of America(SM). 1,000 43
Investors(SM)........ 250 10 The Tax-Exempt Bond Fund
The Growth Fund of of America(SM)........... 1,000 19
America(R)........... 1,000 05 The Tax-Exempt Fund of
The Income Fund of California(R)*......... 1,000 20
America(R)........... 1,000 06 The Tax-Exempt Fund of
The Investment Company Maryland(R)*........... 1,000 24
of America(R)........ 250 04 The Tax-Exempt Fund of
The New Economy Virginia(R)*........... 1,000 25
Fund(R).............. 1,000 14 U.S. Government Securi-
New Perspective ties Fund(SM)............ 1,000 22
Fund(R).............. 250 07 MONEY MARKET FUNDS
SMALLCAP World Fund(SM). 1,000 35 The Cash Management
Washington Mutual In- Trust of America(R).... 2,500 09
vestors Fund(SM)....... 250 01 The Tax-Exempt Money
Fund of America(SM)...... 2,500 39
The U.S. Treasury Money
Fund of America(SM)...... 2,500 49
</TABLE>
- --------------
*Available only in certain states.
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 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.)
13
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
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 1997,
provide additional compensation to dealers. Currently these
payments are limited to the top 100 dealers who have sold shares
of the fund or other funds in The American Funds Group. These
payments will be based 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 payments.
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 shares at net asset value; however, a contingent
deferred sales charge of 1% is imposed on certain redemptions
made within 12 months 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
14
<PAGE>
- -------------------------------------------------------------------------------
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 dealers; (3) companies exchanging
securities with the fund through a merger, acquisition or
exchange offer; (4) trustees or other fiduciaries
purchasing shares for certain retirement plans of
organizations with retirement plan assets of $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.
REDUCING AGGREGATION Sales charge discounts are available for
YOUR SALES certain aggregated investments. Qualifying investments
CHARGE 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
You and your IRA, individual-type 403(b) plan or single-participant
immediate family Keogh-type plan or by a business solely controlled by
may combine these individuals (for example, the individuals own the
investments to entire business) or by a trust (or other fiduciary
reduce your costs. 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
15
<PAGE>
- -------------------------------------------------------------------------------
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.")
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
METHODS DESCRIBED ABOVE.
SHAREHOLDER AUTOMATIC INVESTMENT PLAN You may make regular invest-
SERVICES ments through automatic charges to your bank account.
Once a plan is established, your account will be
charged on or about the dates you select.
The fund offers AUTOMATIC REINVESTMENT Dividends and capital gain dis-
you a valuable tributions are reinvested in additional shares at no
array of services sales charge unless you indicate otherwise on the
designed to account application. You also may elect to have divi-
increase the dends and/or capital gain distributions paid in cash by
convenience and informing the fund, American Funds Service Company or
flexibility of your investment dealer.
your investment--
services you can CROSS-REINVESTMENT You may cross-reinvest dividends or
use to alter your dividends and capital gain distributions paid by one
investment program fund into another fund in The American Funds Group,
as your needs and subject to conditions outlined in the statement of
circumstances additional information. Generally, to use this service
change. 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
16
<PAGE>
- -------------------------------------------------------------------------------
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(R)
(see "Shareholder Services--American FundsLine(R)" be-
low), or by telephoning 800/421-0180 toll-free, faxing
(see "Transfer Agent" above for the appropriate fax
numbers) or telegraphing American Funds Service Compa-
ny. (See "Telephone Purchases, Redemptions and Ex-
changes" below.) Shares held in corporate-type retire-
ment 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 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 pre-
ceding 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 re-
ceiving 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 (through electronic credits to your bank
account or by check) 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 dates you select. Electronic credits will
generally be deposited to your bank account within
three business days, 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.
THESE 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 from American Funds Service
Company. Purchases through automatic investment plans
will be confirmed at least quarterly.
AMERICAN FUNDSLINE(R) You may check your share balance,
the price of your shares, or your most recent account
transaction, purchase
17
<PAGE>
- -------------------------------------------------------------------------------
shares (up to $50,000 per transaction, additional
documentation required) redeem shares (up to $10,000
per fund, per account each day), or exchange shares
around the clock with American FundsLine(R). To use
this service, call 800/325-3590 from a TouchTone(TM)
telephone. Redemptions and exchanges through American
FundsLine(R) are subject to the conditions noted above
and in "Redeeming Shares--Telephone Purchases,
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 account number.
By writing to Send a letter of instruction
REDEEMING American specifying the name of the fund, the
SHARES Funds Service number of shares or dollar amount to
Company (at be sold, your name and account
the number. You should also enclose any
You may take money appropriate share certificates you wish to
out of your address redeem. For redemptions over $50,000
account whenever indicated and for certain redemptions of
you please. under "Fund $50,000 or less (see below), your
Organization signature must be guaranteed by a
and bank, savings association, credit
Management-- union, or member firm of a domestic
Transfer stock exchange or the National
Agent") 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
your investment dealer, you may be charged
investment for this service. SHARES HELD FOR YOU
dealer IN YOUR INVESTMENT DEALER'S STREET
NAME MUST BE REDEEMED THROUGH THE
DEALER.
--------------------------------------------------------
You may have You may use this option, provided the
a redemption account is registered in the name of
check sent to an individual(s), a UGMA/UTMA
you by using custodian, or a non-retirement plan
American trust. These redemptions may not
FundsLine(R) exceed $10,000 per day, per fund
or by account and the check must be made
telephoning, payable to the shareholder(s) of
faxing, or record and be sent to the address of
telegraphing record provided the address has been
American used with the account for at least 10
Funds Service days. See "Transfer Agent" and
Company "Exchange Privilege" above for the
(subject to appropriate telephone or fax number.
the
conditions
noted in this
section and
in "Telephone
Purchases,
Redemptions
and
Exchanges"
below)
--------------------------------------------------------
In the case Upon request (use the account
of the money application for the money market
market funds, funds) you may establish telephone
you may have redemption privileges (which will
redemptions enable you to have a redemption sent
wired to your to your bank account) and/or check
bank by writing privileges. If you request
telephoning check writing privileges, you will be
American provided with checks that you may use
Funds Service to draw against your account. These
Company checks may be made payable to anyone
($1,000 or you designate and must be signed by
more) or by the authorized number of registered
writing a shareholders exactly as indicated on
check ($250 your checking account signature card.
or more)
--------------------------------------------------------
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, AND PROVIDED
THE ADDRESS HAS BEEN USED WITH THE ACCOUNT FOR AT LEAST
10 DAYS.
18
<PAGE>
- -------------------------------------------------------------------------------
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 PURCHASES, REDEMPTIONS AND EXCHANGES By using
the telephone (including American FundsLine(R)), fax or
telegraph, purchase, redemption and/or exchange options,
you agree to hold the fund, American Funds Service
Company, any of its affiliates or mutual funds managed by
such affiliates, and each of their respective directors,
trustees, officers, employees and agents harmless from
any losses, expenses, costs or 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, 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 made
within twelve months of purchase 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 a sales charge (any contingent deferred sales
charge paid will be credited to your
19
<PAGE>
- -------------------------------------------------------------------------------
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 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. If you redeem your shares within 90 days after
purchase and the sales charge on the purchase of other
shares is waived under the reinstatement privilege, the
sales charge you previously paid for the shares may not
be taken into account when you calculate your gain or
loss on that redemption.
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.)
You may invest in the funds through various retirement
RETIREMENT plans including the following plans for which Capital
PLANS Guardian Trust Company acts as trustee or custodian:
IRAs, Simplified Employee Pension plans, 403(b) plans
and Keogh- and corporate-type business retirement
plans. For further information about any of the plans,
agreements, applications and annual fees, contact your
investment dealer or American Funds Distributors. 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.
[RECYCLE LOGO] This prospectus has been printed on
recycled paper that meets the
guidelines of the United States
Environmental Protection Agency
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, 1996
This document is not a prospectus but should be read in conjunction with the
current Prospectus dated November 15, 1996 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 securities 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-5
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 Debt Securities B-22
Financial Statements B-25
</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. Up to
20% of the Fund's total assets may be invested in tax-exempt securities that
are rated below the four highest categories by Standard & Poor's Corporation
("S&P") or by Moody's Investors Service, Inc. ("Moody's") (or equivalent
securities that are not rated). These bonds are commonly known as "junk bonds"
or high-yield, high-risk bonds. See "Description of Ratings for Debt
Securities" below.
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.
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).
MUNICIPAL LEASE OBLIGATIONS- The Fund may invest in municipal lease revenue
obligations. The Fund currently intends to purchase only municipal lease
obligations that are determined to be liquid by Capital Research and Management
Company. In determining whether these securities are liquid, Capital Research
and Management Company will consider, among other things, the credit quality
and support, including strengths and weaknesses of the issuer and lessee, the
terms of the lease, frequency and volume of trading and number of dealers
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS - The Fund may purchase
securities on a when-issued or delayed-delivery basis or sell them on a
delayed-delivery basis and enter into firm commitment agreements. These are
trading practices in which payment and delivery for the securities take place
at a future date. The Fund does not participate in further gains or losses
with respect to the security. If the other party to a delayed-delivery
transaction fails to deliver or pay for the securities, the Fund could miss a
favorable price or yield opportunity, or could experience a loss. As the
Fund's aggregate commitments under these transactions increase, the opportunity
for leverage similarly increases.
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 $ 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
AFFILIATED FUND BOARDS ON WHICH
COMPENSATION/1/) FROM FUNDS AFFILIATED WITH THE TRUSTEE
DURING FISCAL YEAR ENDED AMERICAN FUNDS SERVES
7/31/96 GROUP FOR THE YEAR
ENDED 7/31/96
<S> <C> <C> <C> <C> <C>
Cyrus A. Ansary Trustee Investment Services $3,700 $42,850 3
1725 K Street, N.W., Suite 410 International Co.,
Washington, D.C. 20006 President
Age: 62
Frank M. Ewing Trustee Frank M. Ewing Co., Inc. $2,100 $15,075 3
P. O. Box 2248 President and Chairman of
Gaithersburg, MD 20886 the Board
Age: 81
Stephen Hartwell*{ Chairman Emeritus Washington Management none/3/ none/3/ 3
Age: 81 and Trustee Corporation, Chairman of
the Board
James H. Lemon, Jr.*{ Chairman of the The Johnston-Lemon none/3/ none/3/ 3
Age: 60 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: 60 Corporation, President
and
Director
Jean Head Sisco Trustee Sisco Associates, $3,700 $42,550 3
2517 Massachusetts Avenue, N.W. Partner
Washington, D.C. 20008
Age: 71
T. Eugene Smith Trustee T. Eugene Smith, Inc., $3,700 $44,350 3
2830 Graham Road, Suite 200 President
Falls Church, VA 22042
Age: 66
Stephen G. Yeonas Trustee Stephen G. Yeonas $3,700/2/ $46,050 3
1611 North Kent Street, Suite 802 Company,
Arlington, VA 22209 Chief Executive Officer
Age: 71
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C>
LOIS A. ERHARD{ HOWARD L. KITZMILLER{ MICHAEL W. STOCKTON{
Vice President Senior Vice President, Secretary Assistant Treasurer
Washington Management Corporation, and Treasurer Washington Management
Vice President (Age: 44) Washington Management Corporation, Corporation, Assistant
Director, Senior Vice President, Secretary and Vice President and Assistant
Assistant Treasurer (Age: 66) Treasurer (Age: 29)
</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 9/30/96, the latest calendar
quarter, for participants is as follows: Trustee Stephen G. Yeonas ($11,800).
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
Funds.
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 Funds to any officer or
Trustee who is a director, officer or employee of the Business Manager, the
Investment Adviser or affiliated companies. Each Fund pays an annual retainer
fee of $750, an attendance fee of $200 per meeting and $100 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 Funds. Each Fund also reimburses certain
meeting-related expenses of the Trustees.
As of November 1, 1996, 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, 1996, 1995, and 1994 the Business
Manager's fees were $160,000, $153,000, and $147,000 for the Maryland Fund and
$183,000, $183,000, and $179,000 for the Virginia Fund, respectively. For the
fiscal year ended July 31, 1996, the Business Manager's fees for the Maryland
Fund amounted to 0.205% of average net assets and for the Virginia Fund
amounted to 0.199% 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, 1997 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).
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.
For the fiscal years ended July 31, 1996, 1995, and 1994 the Investment
Adviser's fees were $197,000, $188,000, and $181,000, for the Maryland Fund and
$227,000, $227,000 and $221,000 for the Virginia Fund, respectively. For the
fiscal year ended July 31, 1996, the Investment Adviser's fees for the Maryland
Fund amounted to 0.253% of average net assets and for the Virginia Fund
amounted to 0.247% of average net assets.
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, 1996, 1995, and
1994 the commissions on Maryland Fund shares totaled $246,000, $222,000, and
$484,000 of which the Principal Underwriter retained $47,000, $42,000, and
$92,000, respectively, while the commissions on the Virginia Fund shares
totaled $300,000, $236,000 and $574,000 of which the Principal Underwriter
retained $58,000, $46,000 and $112,000, respectively.
Johnston, Lemon & Co. Incorporated ("Johnston, Lemon"), a wholly-owned
subsidiary of the business manager's parent company, The Johnston Lemon Group,
Inc. ("JLG"), received commission amounts of $43,000, $50,000 and $116,000, and
$31,000, $27,000 and $57,000, respectively, for the fiscal years ended July 31,
1996, 1995 and 1994, on its retail sales of the Maryland and Virginia Funds and
the Distribution Plan of the Funds, 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. Only expenses incurred
during the preceding 12 months and accrued while the Plan is in effect may be
paid by the Fund. During the Trust's fiscal year ended July 31, 1996,
distribution expenses under the Plan paid or payable to the Principal
Underwriter were $171,000 for the Maryland Fund and $197,000 for the Virginia
Fund, all of which was used as compensation to dealers and wholesalers. As of
July 31, 1996 accrued and unpaid distribution expenses were $26,000 and
$32,000, respectively.
All officers of the Fund and three of its Directors, who are "interested
persons" of the Fund, are officers or directors of Washington Management
Corporation, a wholly-owned subsidiary of JLG. Johnston, Lemon participates
in receiving dealer service fee payments from the Plan. Some of the Fund's
officers and three Directors who are "interested persons" of the Fund are also
registered representatives with Johnston, Lemon and, as such, to the extent
they have sold shares of the Fund, receive a portion of the service fee
payments in the same manner as all other Johnston, Lemon registered
representatives.
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.
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 with more than 60 days remaining to maturity
normally are valued at prices 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. Other
securities with remaining maturities in excess of 60 days, including securities
for which pricing service values are not available, are normally valued at the
mean of their quoted bid and asked prices.
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 securities 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, 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 a 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 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 day of the month the shareholder selects. 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 at least quarterly. Participation in the plan will begin within 30
days after receipt of the account application. If the shareholder's bank
account cannot be charged due to insufficient funds, a stop-payment order or
closing of the 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.
Substantially all portfolio transactions are effected on a principal basis
and ordinarily include a mark-up or mark-down , but no stated commission.
Brokerage commissions paid on portfolio transactions, including dealer
concessions on underwritings, for the fiscal year ended July 31, 1996 equaled
$38,000 for the Maryland Fund and $56,000 for the Virginia Fund, respectively.
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, 1996
<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 $15.39 $15.77
(Net assets divided by shares outstanding)
Maximum Offering price per share (100/95.25 of $16.16 $16.56
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 4.60% and the Virginia Fund yield is 4.43% based
on a 30-day (or one month) period ended July 31, 1996, 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 44.1%
for the 30-day (or one month) period ended July 31, 1996 was 8.23%. For the
Virginia Fund investors with the maximum combined effective federal/state tax
rate of 43.1%, the tax-equivalent yield was 7.79% for the period ended July 31,
1996.
The Maryland Fund average annual total return for the one-year, five-year and
lifetime periods ending on July 31, 1996 was +0.93%, +5.93% and +6.03%,
respectively. The Virginia Fund average annual total return for the same time
periods was +0.44%, +5.87% and +6.40%, 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, 1996
<TABLE>
<CAPTION>
Number of Years Periods Maryland Value** Virginia Value**
8/1-7/31
<S> <C> <C> <C>
1 1995-1996 $10,094 $10,044
2 1994-1996 10,856 10,806
3 1993-1996 11,014 10,991
4 1992-1996 11,830 11,796
5 1991-1996 13,338 13,299
6 1990-1996 14,332 14,372
7 1989-1996 15,093 15,208
8 1988-1996 16,875 16,979
9 1987-1996 18,083 18,046
10 1986-1996 17,927 18,558
</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, 1996)
COST OF SHARES
VALUE OF SHARES**
<TABLE>
<CAPTION>
Fiscal Annual Dividends Total From From From Total
Year End Dividends (cumulative) Investment Initial Capital Dividends Value
July 31 Cost Investment Gains Reinvested
Reinvested
<S> <C> <C> <C> <C> <C> <C> <C>
1987* $ 493 $ 493 $ 10,493 $ 8,973 $0 $ 471 $ 9,444
1988 617 1,110 11,110 9,020 1 1,101 10,122
1989 653 1,763 11,763 9,480 1 1,832 11,313
1990 681 2,444 12,444 9,413 1 2,504 11,918
1991 736 3,180 13,180 9,527 1 3,276 12,804
1992 764 3,944 13,944 10,147 1 4,285 14,433
1993 765 4,709 14,709 10,353 1 5,154 15,508
1994 773 5,482 15,482 10,000 1 5,727 15,728
1995 860 6,342 16,342 10,193 1 6,726 16,920
1996 901 7,243 17,243 10,260 1 7,666 17,927
</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, 1996)
COST OF SHARES
VALUE OF SHARES**
<TABLE>
<CAPTION>
Fiscal Annual Dividends Total From From Capital From Total
Year End Dividends (cumulative) Investment Initial Gains Dividends Value
July 31 Cost Investment Reinvested Reinvestment
<S> <C> <C> <C> <C> <C> <C> <C>
1987* $ 545 $ 545 $ 10,545 $ 9,273 $0 $ 525 $ 9,798
1988 640 1,185 11,185 9,240 1 1,171 10,412
1989 671 1,856 11,856 9,700 1 1,919 11,620
1990 716 2,572 12,572 9,667 1 2,634 12,302
1991 760 3,332 13,332 9,833 1 3,454 13,288
1992 791 4,123 14,123 10,480 1 4,508 14,989
1993 800 4,923 14,923 10,673 1 5,407 16,081
1994 826 5,749 15,749 10,327 1 6,032 16,360
1995 892 6,641 16,641 10,527 1 7,069 17,597
1996 928 7,569 17,569 10,513 63 7,982 18,558
</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 January 1, 1966 (121 in all), those funds have had
better total returns than the Standard and Poor's 500 Composite Stock Index in
94 of the 121 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 DEBT SECURITIES
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of the municipal bonds
which they undertake to rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings
may have the same yield.
Moody's Investors Service, Inc. rates the long-term debt securities issued
by various entities from "Aaa" to "C." Moody's applies the numerical modifiers
1, 2, and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. Ratings are described as follows:
BONDS --
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
"Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
"Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or having other marked
shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
NOTES --
"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."
COMMERCIAL PAPER --
"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, maybe
more affected by external conditions. Ample alternate liquidity is
maintained."
Standard & Poor's Corporation rates the long-term securities debt of
various entities in categories ranging from "AAA" to "D" according to quality.
The ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Ratings are described as follows:
BONDS --
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
"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."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized."
NOTES --
"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."
COMMERCIAL PAPER --
"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."
The Tax-Exempt Fund of Maryland
Investment Portfolio, July 31, 1996
<TABLE>
<S> <C> <C>
Principal
Amount Market
(000) Value
-------------------------
Tax-Exempt Securities Maturing in More than One Year - 96.30%
College & University Revenue - 4.46%
Frederick County, College Revenue Bonds, (Hood College Project),
1990 Series:
7.05% 2004 $410 $444,465
7.05% 2005 455 494840
Maryland Health and Higher Educational Facilities Authority,
Refunding Revenue Bonds, Johns Hopkins University Issue,
Series 1988, 7.375% 2008 500 536,565
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds:
1992 Series A, 6.30% 2009 1050 1125390
1993 Refunding Series C, 5.00% 2010 1000 964989
-------------
3,566,249
-------------
General Obligations (Local) - 4.04%
Anne Arundel County, Consolidated Water and Sewer, 1993
Refunding Series, 5.30% 2016 500 482480
Baltimore County:
Consolidated Public Improvement Bonds, 1990 Series, 6.75% 600 637782
Metropolitan District Bonds, 63rd Issue, 1992 Series, 6.10 250 267723
Frederick County, Public Facilities Bonds:
1990, 8.875% 2002 250 303513
1993, Series B, 5.125% 2007 995 994025
Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 530 543605
-------------
3,229,128
-------------
Hospital & Health Facilities Revenue - 15.42%
Maryland Health and Higher Educational Facilities Authority:
Good Samaritan Hospital Issue, Revenue Bonds, Series 1993,
5.70% 2009 1000 1018730
Howard County, General Hospital Issue, Series 1993:
5.50% 2013 2000 1804040
5.50% 2021 2000 1763620
Johns Hopkins Hospital Issue, Revenue Refunding Bonds,
Series 1993:
5.60% 2009 850 855406
5.00% 2023 2000 1759820
Memorial Hospital of Cumberland Issue, Revenue Refunding
Bonds, Series 1992, 6.50% 2010 750 774023
Peninsula Regional Medical Center Issue, Project and Refunding
Revenue Bonds, Series 1993, 5.00% 2023 500 435710
Suburban Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.125% 2021 3000 2682180
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue), Series 1992, 7.20% 2 215 240581
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds (Mennonite General Hospital Project),
1996 Series A, 6.375% 2006 1000 1007819
-------------
12,341,929
-------------
Housing Finance Authority Revenue - 10.00%
Maryland Community Development Administration, Department of
Housing and Community Development, Single-Family Program Bonds:
1994 First Series, 5.80% 2009 2000 2001280
1994 First Series, 5.70% 2017 960 962,602
1994 Fifth Series, AMT, 5.875% 2017 1435 1439592
1990 First Series, 7.60% 2017 495 513884
1988 Third Series, 8.00% 2018 1,000 1,045,780
Montgomery County, Maryland Housing Opportunities Commission,
Single Family Mortgage Revenue, 1986 Series C, 7.25% 2013 750 773,640
Prince George's County Housing Authority, GNMA/FNMA
Collateralized Single Family Mortgage Bonds,
Series 1994 A, AMT, 6.60% 2025 930 951483
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 15 15469
1988 Series B, 7.65% 2022 285 298962
-------------
8,002,692
-------------
Industrial Development Revenue - 1.35%
Mayor and City Council of Baltimore, Port Facilities Revenue
Bonds (Consolidation Coal Sales Company Project):
Series 1984 A, 6.50% 2011 500 541225
Series 1984 B, 6.50% 2011 500 542974
-------------
1,084,199
-------------
Insured - 22.31%
City of Baltimore, Refunding Revenue Bonds, FGIC Insured:
1995, Series A, 7.25% 2005 1000 1161470
1994, Series A, 6.00% 2015 1500 1564905
Charles County, Consolidated Public Improvement Bonds of 1993,
Series A, FGIC Insured, 5.25% 2003 715 734348
City of Frederick, General Improvement Bonds, 1992 Refunding
Series, FGIC Insured, 6.125% 2008 890 944717
Maryland Health and Higher Educational Facilities Authority:
Anne Arundel Medical Center Issue, Revenue Bonds,
Series 1993, AMBAC Insured, 5.25% 2013 1000 960420
Francis Scott Key Medical Center Issue, Refunding Revenue
Bonds, Series 1993, FGIC Insured, 5.00% 2013 500 465640
Johns Hopkins Medical Institutions Parking Facilities Issue,
Parking Revenue Bonds, Series 1996, AMBAC Insured, 5.50% 2 1200 1196916
Memorial Hospital of Easton, Series 1989 B,
MBIA Insured, 7.00% 2012 1,200 1,289,676
Mercy Medical Center Issue Project and Refunding Revenue
Bonds, Series 1996, FSA Insured, 6.50% 2013 2000 2224160
Sinai Hospital of Baltimore Issue Project and Revenue
Refunding Bonds, Series 1993, AMBAC Insured, 5.25% 2019 2000 1831820
Prince George's County, Solid Waste Management System
Revenue Bonds, Series 1993, 6.50% 2007 2,000 2,165,700
Commonwealth of Puerto Rico:
Electric & Power Authority, MBIA Insured, 7.00% 2007 1000 1,162,510
Highway and Transportation Authority, Highway Revenue Refunding
Bonds, Series Z, MBIA Insured, 6.25% 2014 1000 1,085,320
Washington, D.C. Metropolitan Area Transit Authority,
Gross Revenue Transit Refunding Bonds, Series 1993,
FGIC Insured, 6.00% 2008 1000 1070810
-------------
17,858,412
-------------
Life Care Facilities Revenue - 8.72%
Calvert County, Economic Development Revenue Bonds
(Asbury-Solomons Island Facility), Series 1995, 8.625% 2024 2300 2441289
Maryland Health and Higher Educational Facilities Authority,
First Mortgage Refunding Revenue Bonds, Roland Park Place Issue,
Series 1989, 7.75% 2012 2000 2112140
Prince George's County, Refunding Revenue Bonds, Collington
Episcopal Life Care Community, Inc., Series 1994 A, 6.00% 2 2500 2423025
-------------
6,976,454
-------------
Multi-Family Housing - 2.62%
Montgomery County, Maryland Housing Opportunities Commission,
Single Family Mortgage Revenue, 1994 Series A-2, 7.50% 2024 2,000 2,099,640
-------------
Ports - 1.25%
Puerto Rico Ports Authority, Special Facilities Revenue Bonds,
(American Airlines, Inc. Project), 1996 Series A, 6.25% 202 1000 998150
-------------
Pre-Refunded/1/A247 - 16.92%
Frederick County, Public Facilities Bonds:
1991, Series B, 6.30% 2011 (2002) 1370 1503205
1986 Series, 7.40% 2012 (2001) 310 354857
Harford County, Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 (2002) 970 1042343
Howard County, Metropolitan District Refunding Bonds,
1991 Series A, 6.625% 2021 (2001) 500 545860
Maryland Department of Transportation, Consolidated
Transportation Bonds, 1989 Series, 6.50% 2003 (1998) 500 530,915
State of Maryland, General Obligation Bonds, State and
Local Facilities:
Loan of 1990, Third Series, 6.75% 2003 (2000) 400 435,244
1989 First Series, 6.80% 2004 (1999) 1000 1,080,300
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 275785
Sinai Hospital of Baltimore Issue, Revenue Bonds,
1990 Series, AMBAC Insured, 7.00% 2019 (2000) 700 772198
Suburban Hospital Issue Revenue Bonds:
Series 1988, 7.50% 2008 (1998) 1250 1351000
Series 1992, 6.50% 2017 (2002) 500 552635
University of Maryland Medical System Issue, Revenue Bonds,
Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1000 1080660
Morgan State University Academic Fees and Auxiliary Facilities
Fees Revenue Bonds, 1990 Series A, MBIA Insured,
7.00% 2020 (2000) 475 524714
Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1179797
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency, Single Family Mortgage Revenue
Bonds, Homeownership 5th Portfolio, 1986 Series, 7.50% 201 495 546435
Public Improvement Bonds of 1992, MBIA Insured, 6.50% 2009 1,000 1,109,680
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds, 1989 Series B, 7.00% 2007 (1999) 600 657077
-------------
13,542,705
-------------
Resource Recovery - 7.34%
Maryland Energy Financing Administration, Limited Obligation Solid
Waste Disposal Revenue Bonds (Wheelabrator Water Technologies
Baltimore L.L.C. Projects), 1996 Series, 6.30% 2010 2750 2814873
Montgomery County, Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds AMT:
6.00% 2006 1000 1027770
6.00% 2007 1000 1028170
Series 1993 A, 6.30% 2016 1000 1003650
-------------
5874463
-------------
Turnpikes & Toll Roads Revenue - 1.32%
Maryland Transportation Authority Facilities Project,
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1000 1053990
-------------
Water & Sewer Revenue - .55%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series 1991 B, 0.00% 200 700 439516
-------------
77067527
-------------
Tax-Exempt Securities Maturing in One Year or Less - 2.53%
Industrial Development Revenue - .62%
Anne Arundel County, Economic Development Revenue Bonds
(Baltimore Gas and Electric Company Project), Series 1988,
3.10% 1996 500 500000
-------------
Pre-Refunded/1/- .66%
Commonwealth of Puerto Rico, Public Improvement Bonds of 1987,
MBIA Insured, 6.75% 2006 (1997) 500 524040
-------------
Water & Sewer Revenue- 1.25%
Washington Suburban Sanitary District (Montgomery and Prince
George's Counties, Maryland), General Obligation Variable Rate
Demand Bond Anticipation Notes, 1996 Series, 3.65% 1999/2/ 1000 1000000
-------------
2024040
-------------
TOTAL TAX-EXEMPT SECURITIES (COST: $76,053,000) 79,091,567
Excess of cash and receivables over payables 935,402
-------------
NET ASSETS $80,026,969
=============
</TABLE>
/1/Parenthetical year represents date of pre-refunding.
/2/Coupon rate may change periodically.
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
Investment Portfolio, July 31, 1996
<TABLE>
<S> <C> <C>
Principal
Amount Market
(000) Value
- -
Tax-Exempt Securities Maturing in More than One Year - 96.98%
College & University Revenue - 4.19%
Rockingham County Industrial Development Authority, Educational
Facilities Revenue Bonds (Bridgewater College),
Series 1993, 6.00% 2023 1,100 1,040,182
University of Virginia, General Revenue Pledge Bonds,
Series 1993 B, 5.375% 2010 1,000 992,220
Virginia College Building Authority Educational Facilities Revenue
Bonds (Marymount University Project), Series 1992, 6.875% 20 1,650 1,756,376
-
3788778
-
General Obligations (Local) - 10.95%
Chesapeake:
Public Improvement Bonds, Series 1992, 6.00% 2006 1600 1704560
Refunding Bonds, Series 1993, 5.40% 2008 1000 1014600
Water and Sewer Bonds, Series 1995 A, 5.375% 2020 1500 1438995
Covington, Water and Sewer Refunding Bonds,
Series 1994, 5.25% 2013 250 237633
Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1195 1214837
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1000 993080
Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 1170 1231975
Norfolk Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 500 509820
Roanoke Public Improvement and Refunding Bonds,
Series 1992 B:
6.375% 2009 250 265690
6.40% 2011 500 531575
Spotsylvania Public Improvement Bonds,
Series 1992, 5.75% 2011 750 762194
-
9904959
-
General Obligations (State) - 1.72%
Commonwealth of Virginia, Public Facilities Bonds,
1993 Series A, 5.40% 2005 1500 1555875
-
Hospital & Health Facilities Revenue - 16.65%
Arlington County Industrial Development Authority, Hospital
Revenue Refunding Bonds (The Arlington Hospital), Series 1993:
5.125% 2008 1000 956530
5.00% 2021 1000 867740
Fairfax County Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 1500 1467000
5.25% 2019 1500 1400325
5.00% 2023 500 445405
Hampton Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals), 5.125% 2016 1000 880540
Lynchburg Industrial Development Authority, Hospital
Facilities, Revenue Refunding Bonds, Centra
Health, Inc., Series 1988, 8.125% 2016 1000 1072380
Norfolk Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals-Norfolk Project),
Series A 1994, 5.00% 2020 1750 1553213
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding Bonds (Mary
Immaculate Project), 1994 Series, 6.875% 2010 1900 1975867
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 1300 1372722
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds (Mennonite General Hospital Project),
1996 Series A, 6.375% 2006 2000 2015640
Virginia Beach, Virginia Development Authority (Sentara Bayside
Hospital), 6.60% 2009 1000 1062170
-
15069532
-
Housing Finance Authority Revenue - 4.60%
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 20 20625
1988 Series B, 7.65% 2022 320 335677
Virginia Housing Development Authority, Commonwealth
Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 515820
1995 Series A-AMT, Sub-Series A-1, 6.60% 2004 1000 1038970
1994 Series I-AMT, Sub-Series I-1, 6.40% 2005 800 824920
1994 Series H, Sub-Series H-2, 6.55% 2017 1000 1025730
1992 Series A, 7.10% 2022 380 404578
-
4166320
-
Industrial Development Revenue - 1.09%
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 $987,050
Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), 1996 Series A, 6.25% 2026 1000 998150
-
1985200
-
Insured - 19.19%
Augusta, Hospital Revenue Bonds, AMBAC Insured, 5.125% 2021 1100 996380
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1000 1026640
Danville, Virginia Industrial Development Authority, Hospital
Revenue Bonds, Danville Regional Medical Center,
Series 1994, FGIC Insured, 6.00% 2007 1000 1055420
Fairfax County Industrial Development Authority,
Hospital Revenue Refunding Bonds (INOVA Health System
Hospitals Project), Series 1993 A, FSA Insured, 5.25% 2019 1540 1437667
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 1508953
6.375% 2018 1000 1084730
Loudoun County:
Industrial Development Authority, Hospital Revenue Bonds,
FSA Insured, 6.00% 2005 1000 1062550
Sanitation Authority, Water and Sewer System Revenue Bonds,
Refunding Series 1992, FGIC Insured, 6.25% 2010 2000 2115740
Pamunkey Regional Jail Authority, Jail Facility Revenue Bonds,
Series 1996, MBIA Insured, 5.70% 2010 1000 1015250
Richmond, FGIC Insured, 5.00% 2021 1000 901540
Southeastern Public Service Authority of Virginia, Senior Revenue
Refunding Bonds (Regional Solid Waste System),
Series 1993 A, MBIA Insured, 5.125% 2013 1500 1417350
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1995 A, MBIA Insured, 5.00% 2025 1000 894190
City of Virginia Beach Development Authority, Hospital Revenue
Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1000 1061430
Washington, D.C. Metropolitan Area:
Airports Authority, Airport System Revenue and Refunding Bonds,
MBIA Insured AMT, Series 1992 A, 6.625% 2019 750 790470
Transit Authority, Gross Revenue Transit Refunding Bonds,
Series 1993, FGIC Insured, 4.70% 2003 1000 992100
-
17360410
-
Lease Revenue (Local) - 2.05%
Fairfax County Economic Development Authority, Lease Revenue
Bonds (Government Center Properties), Series 1994, 5.25% 201 2000 1857300
-
Lease Revenue (State) - 1.57%
Virginia Public Building Authority, State Building Revenue
Bonds, Series 1995, 5.20% 2015 1500 1421145
-
Local Appropriation - .58%
Fairfax County Economic Development Authority, Parking Revenue
Bonds (Huntington Metrorail Station Project),
Series 1990 A, 6.75% 2015 500 524545
-
Pre-Refunded/1/ - 21.86%
Chesapeake, Hospital Authority Facility for Chesapeake
General Hospital, First Mortgage Revenue, BIG Insured
Series 1988, 7.625% 2018 (1998) 1000 1082890
Fairfax County:
Industrial Development Authority Hospital Revenue Bonds
(Fairfax Hospital System Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1000 1107030
Water Authority Revenue, Series 1989, 7.30% 2021 (2000) 1250 1383000
Henry County Public Service Authority, Water and Sewer Revenue
Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1250 1390263
Loudoun County Sanitation Authority, Water and Sewer System
Revenue Bonds, Series 1989, AMBAC Insured, 7.50% 2017 (1999) 375 409695
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 446552
(Sentara Hospitals-Norfolk Project), Series 1991, 7.00% 202 250 277585
Portsmouth Improvement Bonds, Public Improvement Refunding
Bonds, Series 1987, 7.50% 2012 (1997) 500 533615
Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured, 6.50% 2021 680 747272
Richmond Public Utility Revenue Bonds,
Series 1988 A, 8.00% 2018 (1998) 1500 1612980
Roanoke:
Industrial Development Authority, Hospital Revenue Bonds,
Carilion Health System (Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 834578
Water System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 750 824198
Southeastern Public Service Authority, Regional Solid Waste
System, Senior Revenue Refunding Bonds,
Series 1989, BIG Insured:
7.00% 2006 (1999) 500 545515
7.00% 2013 (1999) 1000 1091030
Suffolk, Series 1989, 7.00% 2005 (1998) 1000 1076800
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2001) 25 27479
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 742182
Virginia Education Loan Authority, Student Loan Program Revenue
Refunding Bonds, Senior Series 1993 D AMT, 5.95% 2009 (2005) 790 840402
Virginia Public Building Authority, State Building Revenue Bonds,
Series 1991 A, 6.50% 2011 (2001) 1750 1922008
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1000 1110760
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 279533
Commonwealth of Virginia Transportation Board,
Transportation Contract Revenue Bonds, Route 28 Project,
Series 1988:
7.70% 2008 (1998) 890 956634
7.80% 2016 (1998) 500 538192
-
19780193
-
Resource Recovery - 2.23%
Fairfax County Economic Development Authority, Resource Recovery
Revenue Bonds, Series 1988 A AMT (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2003 500 536615
Roanoke Valley Resource Authority, Solid Waste System Revenue
Bonds, Series 1992, 5.75% 2012 1500 1483650
-
2020265
-
State Authority - 5.56%
Virginia Public School Authority, School Financing Bonds:
(1991 Resolution), Series 1995 C, 5.00% 2002 1000 1016310
(1987 Resolution), 1991 Refunding Series C, 6.25% 2007 1500 1599465
(1991 Resolution), Series 1994 A, 6.20% 2014 1500 1569960
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A, 7.50% 2017 50 51458
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 789936
-
5027129
-
Transportation - 1.40%
Commonwealth of Virginia Transportation Board,
Transportation Revenue Refunding Bonds
(Northern Virginia Transportation District Program),
Series 1993 C, 5.30% 2009 1285 1268578
-
Water & Sewer Revenue - 2.24%
Chesterfield County Water and Sewer Revenue Refunding Bonds,
Series 1992, 6.375% 2009 1250 1337438
Rivanna Water and Sewer Authority, Regional Water and Sewer
System Refunding Revenue Bonds, Series 1991, 6.40% 2007 645 689363
-
2026801
-
87757030
-
Tax-Exempt Securities Maturing in One Year or Less - 1.94%
Industrial Development Revenue - 1.66%
Peninsula Ports Authority, Refunding Port Facilities
(Shell Oil Company), 1987 Series, 3.70% 2005/2/ 1500 1500000
-
Pre-Refunded/1/ - .28%
Fairfax County, Industrial Development Authority Hospital Revenue
Bonds (Fairfax Hospital Association System), Series 1985 A,
7.875% 2017 (1996) 250 259188
-
1759188
-
TOTAL TAX-EXEMPT SECURITIES (cost: $85,964,000) 89516218
Excess of cash and receivables over payables 975708.18
-
NET ASSETS $90,491,92
=
</TABLE>
/1/ Parenthetical year represents date of pre-refunding.
/2/ Coupon rate changes periodically.
See Notes to Financial Statements
Statement of Assets and Liabilities
July 31, 1996
(dollars in thousands)
<TABLE>
<S> <C> <C>
The The
Tax-Exempt Tax-Exempt
Fund of Fund of
Maryland Virginia
- ---------------------------------------------------------------------
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $74,070 and $84,205, respectively) $77,068 $87,757
Maturing in one year or less
(cost: $1,983 and $1,759, respectively) 2,024 1,759
Cash 421 122
Receivables for --
Sales of Funds' shares 5 112
Accrued interest 767 1,357
----------- -----------
Total Assets 80,285 91,107
----------- -----------
Liabilities:
Payables for --
Repurchases of Funds' shares 63 397
Dividends 128 143
Adviser and management services 31 34
Accrued expenses 36 41
----------- -----------
Total Liabilities 258 615
----------- -----------
Net Assets:
Net assets applicable to Funds'
shares issued and outstanding $80,027 $90,492
=========== =
Funds' shares outstanding* 5,200,410 5,739,628
Net asset value per share $15.39 $15.77
*Shares of beneficial interest,
unlimited shares authorized.
See Notes to Financial Statements
Statement of Operations The The
For the year ended July 31, 1996 Tax-Exempt Tax-Exempt
(dollars in thousands) Fund of Fund of
Maryland Virginia
- ----------------------------------------------------------------------
Investment Income:
Income:
Interest on tax-exempt securities $4,644 $5,432
----------- -----------
Expenses:
Investment adviser fee 197 227
Business management fee 160 183
Distribution fee 171 197
Transfer agent fee 34 40
Reports to shareholders 14 17
Registration statements and prospectus 6 5
Postage, stationery and supplies 13 16
Trustees' fees 9 9
Custodian fee 4 5
Auditing and legal fees 21 21
Other expenses 7 7
----------- -----------
Total expenses 636 727
----------- -----------
Net investment income 4,008 4,705
----------- -----------
Realized Gain and Unrealized Appreciation
on Investments:
Net realized gain 81 131
----------- -----------
Net unrealized appreciation:
Beginning of year 2,674 3,478
End of year 3,039 3,552
----------- -----------
Net change in unrealized appreciation 365 74
----------- -----------
Net realized gain and change in unrealized
appreciation 446 205
----------- -----------
Net Increase in Net Assets
Resulting from Operations $4,454 $4,910
=========== =
See Notes to Financial Statements
Statement of Changes in Net Assets
(dollars in thousands)
Year Ended July 31,
1996 1995
- ----------------------------------------------------------------------
The Tax-Exempt Fund of Maryland
Operations:
Net investment income $4,008 $3,913
Net realized gain on investments 81 105
Net unrealized appreciation
on investments 365 1,076
----------- -----------
Net increase in net assets
resulting from operations 4,454 5,094
----------- -----------
Dividends Paid to Shareholders
from Net Investment Income (4,008) (3,923)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
733,060 and 778,353
shares, respectively 11,338 11,540
Proceeds from shares issued in
reinvestment of net investment
income dividends:
165,984 and 168,487 shares,
respectively 2,565 2,494
Cost of shares repurchased:
613,087 and 1,015,670
shares, respectively (9,466) (14,835)
----------- -----------
Net increase (decrease) in net assets resulting
from capital share transactions 4,437 (801)
----------- -----------
Total Increase in Net Assets 4,883 370
Net Assets:
Beginning of year 75,144 74,774
----------- -----------
End of year $80,027 $75,144
=========== ===========
Statement of Changes in Net Assets
(dollars in thousands)
Year Ended July 31,
1996 1995
- ---------------------------------------------------------------------
The Tax-Exempt Fund of Virginia
Operations:
Net investment income $4,705 $4,857
Net realized gain on investments 131 501
Net change in unrealized appreciation
on investments 74 1,133
----------- -----------
Net increase in net assets
resulting from operations 4,910 6,491
----------- -----------
Dividends and Distributions Paid to Shareholders:
Dividends from net investment income (4,705) (4,871)
Distributions from net realized gain
on investments (320) -
----------- -----------
Total dividends and distributions (5,025) (4,871)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
655,816 and 951,297
shares, respectively 10,441 14,430
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net realized
gain on investments:
190,123 and 180,954 shares, respectively 3,020 2,768
Cost of shares repurchased:
912,994 and 1,361,785
shares, respectively (14,537) (20,619)
----------- -----------
Net decrease in net assets resulting
from capital share transactions (1,076) (3,421)
----------- -----------
Total Decrease in Net Assets (1,191) (1,801)
Net Assets:
Beginning of year 91,683 93,484
----------- -----------
End of year $90,492 $91,683
=========== =
</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 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 $4,000 and $5,000 for the Maryland and
Virginia Funds, respectively, include $4,000 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, 1996, net unrealized appreciation on investments for book and
federal income tax purposes for the Maryland Fund aggregated $3,039,000, of
which $3,553,000 related to appreciated securities and $514,000 related to
depreciated securities. For the Virginia Fund, net unrealized appreciation
aggregated $3,552,000, of which $3,939,000 related to appreciated securities
and $387,000 related to depreciated securities. There was no difference
between book and tax realized gains on securities transactions for the year
ended July 31, 1996. During the year ended July 31, 1996, the Maryland Fund
utilized a capital loss carryforward totaling $81,000 to offset, for tax
purposes, capital gains realized during the year. The Virginia Fund has
available at July 31, 1996 a net capital loss carryforward totaling $4,000,
which may be used to offset capital gains realized during subsequent years
through July 31, 2004. It is the intention of the Virginia 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 $76,053,000 and $85,964,000 for the Maryland and Virginia Funds,
respectively, at July 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 $160,000 and $183,000 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 $43,000 and $31,000 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 $197,000 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, 1996,
distribution expenses under the Plan were $171,000 and $197,000, including
accrued and unpaid expenses of $26,000 and $32,000, 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 $34,000 and $40,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
Funds' shares, has informed the Funds that it has received $47,000 and $58,000
(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 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, 1996,
aggregate amounts deferred and earnings thereon were $6,000 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, 1996:
The Tax-Exempt The Tax-Exempt
Fund of Fund of
Maryland Virginia
Accumulated
undistributed net
realized gain (loss)
on investments $ - $ (4,000)
Paid-in capital 76,988,000 86,944,000
Purchases and sales of
investment securities,
excluding short-term
securities, during
the year ended
July 31, 1996:
Purchases 17,422,000 24,653,000
Sales 12,040,000 26,840,000
Per-share
Data and Ratios
The Tax-Exempt
Fund of Maryland
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended July 31
-------- -------- -------- ------- -------
1996 1995 1994 1993 1992
-------- -------- -------- ------- -------
Net Asset Value,
Beginning of Year $15.29 $15.00 $15.53 $15.22 $14.29
---------- -------- -------- ------- -------
Income from Investment
Operations:
Net investment incom .80 .80 .76 .79 .83
Net realized and
unrealized gain (loss)
on investments .10 .29 (.53) .31 .93
---------- -------- -------- ------- -------
Total income from
investment operati .90 1.09 .23 1.10 1.76
---------- -------- -------- ------- -------
Less Distributions:
Dividends from net
investment income (.80) (.80) (.76) (.79) (.83)
---------- -------- -------- ------- -------
Net Asset Value,
End of Year $15.39 $15.29 $15.00 $15.53 $15.22
========== ======== ======== ======= =======
Total Return 5.95% 7.58% 1.42% 7.44% 12.72%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $80 $75 $75 $64 $48
Ratio of expenses to
average net assets .81% .78% .75% .83% .91%
Ratio of net income to
average net assets 5.14% 5.38% 4.90% 5.12% 5.60%
Portfolio turnover r 16.01% 20.91% 10.01% 9.05% 8.11%
Per-Share
Data and Ratios
The Tax-Exempt
Fund of Virginia
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Year End 31-Jul
------------------------------------
1996 1995 1994 1993 1992
Net Asset Value,
Beginning of Year $15.79 $15.49 $16.01 $15.72$14.75
------------------------------------
Income from Investment
Operations:
Net investment income .81 .83 .80 .82 .85
Net realized and
unrealized gain (loss)
on investments .03 .30 (.52) .29 .97
------------------------------------
Total income from
investment operations .84 1.13 .28 1.11 1.82
------------------------------------
Less Distributions:
Dividends from net
investment income (.81) (.83) (.80) (.82) (.85)
Distributions from
net realized gains (.05) - - - -
- - - - -
Total distributions (.86) (.83) (.80) (.82) (.85)
- - - - -
Net Asset Value,
End of Year $15.77 $15.79 $15.49 $16.01$15.72
====================================
Total Return/1/ 5.46% 7.56% 1.74% 7.29%12.80%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $90 $92 $93 $80 $57
Ratio of expenses to
average net assets .79% .79% .78% .84% .93%
Ratio of net income to
average net assets 5.11% 5.37% 5.04% 5.18% 5.61%
Portfolio turnover rate 27.34% 32.18% 2.36% 4.96% 6.84%
</TABLE>
/1/This was calculated without deducting a sales charge. The maximum sales
charge is 4.75% of each Funds's offering price.
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, 1996,
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, 1996 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.
Los Angeles, California
August 30, 1996
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 1997 to determine the CALENDAR YEAR amounts to be included on their
respective 1996 tax returns. Shareholders should consult their tax advisers.
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. Declaration of Trust
2. By-Laws
3. None.
4. Specimens of Stock Certificates
5. Investment Adviser Agreement
6. Principal Underwriting Agreement
7. None.
8. Custodian Contracts
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. Initial Capital Stock Letters
14. None.
15. Form of Plan of Distribution
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, 1996.
Number of
Title of Class Record-Holders
Shares of Beneficial MD 2,446
Interest (no par value) VA 2,786
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.
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.
<TABLE>
<CAPTION>
(b) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
# David A. Abzug Assistant Vice President None
John A. Agar Regional Vice President None
1501 N. University Drive, Suite 227A
Little Rock, AR 72207
Robert B. Aprison Regional Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
& Richard Armstrong Assistant Vice President None
* William W. Bagnard Vice President None
Steven L. Barnes Vice President None
8000 Town Line Avenue South
Suite 204
Minneapolis, MN 55438
Michelle A. Bergeron Regional Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
Joseph T. Blair Vice President None
27 Drumlin Road
West Simsbury, CT 06092
John A. Blanchard Regional Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
3100 West End Avenue, Suite 870
Nashville, TN 37215
Michael 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 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
609 W. Littleton Blvd., Suite 310
Littleton, CO 80120
Christopher J. Cassin Vice President None
231 Burlington
Clarendon Hills, IL 60514
Denise M. Cassin Regional Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
* Larry P. Clemmensen Director and Treasurer None
* Kevin G. Clifford Director and Senior Vice President None
Ruth M. Collier Vice President None
145 West 67th Street, #12K
New York, NY 10023
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Vice President None
4116 Woodbine Street
Chevy Chase, MD 20815
* Carl D. Cutting Vice President None
+ Charline Dawkins Assistant Vice President None
Michael A. Dilella Vice President None
P.O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street, Suite A
Jenks, OK 74037
Kirk D. Dodge Regional 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
* Paul H. Fieberg Senior Vice President None
John Fodor Regional Vice President None
15 Latisquama Road
Southborough, MA 01772
* Mark P. Freeman, Jr. Director and President None
Clyde E. Gardner Vice President None
Route 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 None
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 S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
* Michael J. Johnston Chairman of the Board None
* Robert L. Johansen Vice President and Controller None
# Damien Jordan Senior Vice President None
* V. John Kriss 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
* Lorin E. Liesy Assistant Vice President None
* Susan G. Lindgren Vice President - Institutional Investment Services Division None
Stephen A. Malbasa Regional Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Vice President None
5241 S. Race Street
Littleton, CO 80121
* John C. Massar Director and Senior Vice President None
* E. Lee McClennahan Senior Vice President None
Laurie B. McCurdy Regional Vice President None
920 Edgeside Avenue
Tucson, AZ 85748
& John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
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 98029
Stephen S. Nelson Vice President None
7215 Trevor Court
Charlotte, NC 28226
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. Pilgrim Assistant Vice President None
Carl S. Platou Regional Vice President None
4021 96th Avenue, S.E.
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 S. Ross Vice President None
55 Madison Avenue
Morristown, NJ 07960
* Julie D. Roth Vice President None
* James F. Rothenberg Director None
Douglas F. Rowe Regional Vice President None
30309 Oak Tree Drive
Georgetown, TX 78628
* Christopher S. Rowey Regional Vice President None
Dean B. Rydquist Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30202
Richard R. Samson Vice President None
4604 Glencoe Avenue, Suite 4
Marina del Rey, CA 90292
Joseph D. Scarpitti Regional Vice President None
25760 Kensington Drive
Westlake, OH 44145
* Daniel B. Seivert Assistant Vice President None
* R. Michael Shanahan Director None
* David W. Short Director and Senior Vice President None
* Victor S. Sidhu Vice President - Institutional None
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
* Mary E. Smith Assistant Vice President - Institutional Investment Services Division None
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 Fourth Avenue, Suite 406
San Mateo, CA 94402
Thomas A. Stout Regional Vice President None
12913 Kendale Lane
Bowie, MD 20715
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
* Drew Taylor Assistant Vice President None
& 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 - Institutional Investment Services Division None
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 Embarcedero Center
San Francisco, CA 94111
Timothy J. Wilson Regional Vice President None
113 Farmview Place
Venetia, PA 15367
# Laura Wimberly Assistant Vice President None
@ Marshall D. Wingo Director and Senior Vice President None
* Robert L. Winston Director and Senior Vice President None
William R. Yost Regional Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
209 Robinson Drive
Tustin Ranch, CA 92782
</TABLE>
* Business Address, 333 South Hope Street, Los Angeles, CA 90071
# Business Address, 135 South State College Blvd., Brea, CA 92821
+ 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 (CRMC), 333
South Hope Street, Los Angeles, CA 90071. Certain accounting records are
maintained and kept in the offices of CRMC's fund accounting department, 5300
Robin Hood Road, Norfolk, VA 23513.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92821.
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 delivered 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 7th
day of November 1996.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By /s/ Harry J. Lister
(Harry J. Lister, President)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on November 7, 1996, 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 Senior 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(s) of The American Funds Tax-Exempt Series I, a
Massachusetts business trust, does hereby constitute and appoint James H.
Lemon, Jr., Harry J. Lister and Howard L. Kitzmiller, or any of them to act as
attorneys-in-fact for and in his or her name, place and stead (1) to sign his
or 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 18th day of January, 1996.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Cyrus A. Ansary Harry J. Lister
Frank M. Ewing T. Eugene Smith
Stephen Hartwell Stephen G. Yeonas
James H. Lemon, Jr.
AS FILED WITH THE SECRETARY OF STATE CORPORATION DIVISION AND CITY CLERK'S
OFFICE --
CITY OF BOSTON
ON April 24, 1986
DECLARATION OF TRUST
OF
THE AMERICAN FUNDS
TAX-EXEMPT SERIES I
TABLE OF CONTENTS
Article Page
I. NAME AND DEFINITIONS 2
1.1 Name 2
1.2 Definitions 2
1.3 Purpose 4
II. TRUSTEES 5
2.1 Number of Trustees 5
2.2 Term and Election 5
2.3 Resignation and Removal by Trustees 5
2.4 Removal by Shareholders 6
2.5 Vacancies 6
2.6 Delegation of Power to Other Trustees 7
III. POWERS OF TRUSTEES 7
3.1 General 7
3.2 Investments 8
3.3 Legal Title 9
3.4 Issuance and Repurchase of Shares 10
3.5 Delegation; Committees 10
3.6 Collection and Payment 10
3.7 Expenses 10
3.8 Manner of Acting 10
3.9 By-Laws 10
3.10 Miscellaneous Powers 11
3.11 Principal Transactions 11
3.12 Trustees and Officers as Shareholders 12
3.13 Litigation 12
IV. CONTRACTS 12
4.1 Underwriting Contract 12
4.2 Investment Advisory or Management Contract 13
4.3 Transfer Agent 13
4.4 Affiliations of Trustees or Officers, Etc. 13
(i)
Article Page
V. LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS 14
5.1 No Personal Liability of Shareholders,
Trustees, etc. 14
5.2 Non-Liability of Trustees, etc.. 15
5.3 No Bond Required of Trustees 15
5.4 No Duty of Investigation; Notice in
Trust Instruments, etc. 15
5.5 Reliance on Experts, etc. 15
VI. SHARES OF BENEFICIAL INTEREST 16
6.1 Beneficial Interest 16
6.2 Rights of Shareholders 16
6.3 Trust Only 17
6.4 Issuance of Shares 17
6.5 Register of Shares; Share Certificates 17
6.6 Transfer of Shares 18
6.7 Notices 18
6.8 Treasury Shares 18
6.9 Voting Powers 19
6.10 Establishment of Fund; Series or
Classes of Shares 19
VII. REDEMPTION, REPURCHASE, AND REDUCTION
OF SHARES 22
7.1 Redemption of Shares 22
7.2 Price 23
7.3 Payment 23
7.4 Repurchase by Agreement 23
7.5 Redemption of Shareholder's Interest;
Redemption of Shares to Qualify as a
Regulated Investment Company; Disclosure
of Holdings 23
7.6 Suspension of Right of Redemption 24
7.7 Effect of Suspension of Determination
of Net Asset Value 25
7.8 Reductions of Shares 25
(ii)
Article Page
VIII. DETERMINATION OF NET ASSET VALUE,
NET INCOME, AND DISTRIBUTIONS 25
8.1 Net Asset Value 25
8.2 Distributions With Respect to
Outstanding Shares 26
8.3 Determination of Net Income 26
8.4 Power to Modify Foregoing Procedures 27
IX. DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC. 27
9.1 Duration 27
9.2 Termination of Trust 27
9.3 Amendment Procedure 28
9.4 Merger, Consolidation or Sale of Assets 29
9.5 Incorporation 29
X. MISCELLANEOUS 30
10.1 Filing 30
10.2 Resident Agent 30
10.3 Governing Law 30
10.4 Counterparts 31
10.5 Reliance by Third Parties 31
10.6 Provisions in Conflict with Law
or Regulations 31
10.7 Index and Heading for Reference Only 32
(iii)
DECLARATION OF TRUST
OF
THE AMERICAN FUNDS
TAX-EXEMPT SERIES I
Dated April 22, 1986
DECLARATION OF TRUST made April 22, 1986 by Michael J. Downer, David M. Elwood
and Paul G. Haaga, Jr., (the "Trustees");
WHEREAS , it is desired that the trust established hereby (the "Trust") be
managed and operated as a trust with transferable shares under the laws of
Massachusetts, of the type commonly known as and referred to as a Massachusetts
business trust, in accordance with the provisions hereinafter set forth;
WHEREAS, it is proposed that the assets held by the Trustees may be divided
into separate funds, each with its own separate investment portfolio,
investment objectives, policies and purposes, and that the beneficial interest
in each such fund when and if established shall be divided into transferable
Shares of Beneficial Interest, a separate Series of Shares for each fund, all
in accordance with the provisions hereinafter set forth; and
WHEREAS, it is proposed that the shares of the Trust of each separate Series
may be further divided into classes of Shares, with each such Class differing
from other classes representing interests in the same Fund in respect of
expenses and fees or such other matters as the Trustees shall determine;
NOW, THEREFORE, the Trustees declare that all money and property contributed to
the trust established hereunder shall be held and managed in trust for the
benefit of the holders, from time to time, of the Shares of Beneficial Interest
issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.1 - Name.
The name of the Trust created hereby is "The American Funds Tax-Exempt Series
I."
SECTION 1.2 - Definitions.
Wherever they are used herein, the following terms have the following
respective meanings:
(a) "By-Laws" means the By-Laws referred to in Section 3.9 hereof, as such
By-Laws may be amended from time to time.
(b) A "Class of Shares" means all Shares of Beneficial Interest representing
interests in the same Fund and subject to the same fees and expenses charged
against the income of the Fund and such other provisions as may be designated
by the Trustees in establishing such Class. Classes may be established from
time to time by the Trustees hereunder and may differ from other Classes in the
same Fund with respect to the expenses and fees charged to each such Class or
as to such other matters as the Trustees shall determine in establishing each
such Class, but Classes in the same Fund shall in each case represent interests
in the same Trust Property.
(c) The terms "Commission" and "Interested Person", have the meanings given
them in the 1940 Act.
(d) "Custodian" means any Person other than the Trust who has custody of any
Trust Property as required by Section 17(f) of the 1940 Act.
(e) "Declaration" means this Declaration of Trust as amended from time to time.
Reference in this Declaration to "Declaration", "hereof", "herein" and
"hereunder" shall be deemed to refer to this Declaration rather than
exclusively to the article or section in which such words appear.
(f) "Distributor" means the other person to any contract entered into by the
Trust pursuant to Section 4.1 hereof.
(g) "Fund" or "Funds" means one or more of the separate components of the Trust
Property which are now or hereafter established and designated under or in
accordance with the provisions of Article 6.10 hereof.
(h) "Fundamental Policies" means the investment restrictions set forth and
identified as such in the current registration statement of the Trust under the
1940 Act.
(i) "His" shall be deemed to include the feminine and neuter, as well as the
masculine, genders.
(j) "Investment Adviser" means the other Person to any contract entered into by
the Trust pursuant to Section 4.2 hereof.
(k) The "1940 Act" means the Investment Company Act of 1940, and the rules and
regulations thereunder, both as amended from time to time, and any order or
orders thereunder which may from time to time be applicable to the Trust.
(l) "Majority Shareholder Vote" as used with respect to the election of any
Trustee at a meeting of Shareholders, shall mean the vote for the election of
such Trustee of a plurality of all outstanding Shares of the Trust, without
regard to Series or Class, represented in person or by proxy and entitled to
vote thereon, provided that a quorum (as determined in accordance with the
By-Laws) is present, and as used with respect to any other action required or
permitted to be taken by Shareholders, shall mean the vote for such action of
the holders of that majority of all outstanding Shares of the Trust (or, where
a separate vote of Shares of any particular Series or Class is to be taken, the
affirmative vote of that majority of the outstanding Shares of that Series or
Class) which consists of: (i) a majority of all Shares (or of Shares of the
particular Series or Class) represented in person or by proxy and entitled to
vote on such action at the meeting of Shareholders at which such action is to
be taken, provided that a quorum (as determined in accordance with the By-Laws)
is present; or (ii) if such action is to be taken by written consent of
Shareholders, a majority of all Shares (or of Shares of the particular Class or
Series) issued and outstanding and entitled to vote on such action; provided,
that (iii) as used with respect to any action requiring the affirmative vote of
"a majority of the outstanding voting securities", as the quoted phrase is
defined in the 1940 Act, of the Trust or of any Series or Class, "Majority
Shareholder Vote" means the vote for such action at a meeting of Shareholders
of the smallest majority of all outstanding Shares of the Trust (or of Shares
of the particular Class or Series entitled to vote on such action) which
satisfies such 1940 Act voting requirement.
(m) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures, and other entities, whether or not legal
entities, governments and agencies and instrumentalities and political
subdivisions thereof, and quasi-governmental agencies and instrumentalities.
(n) "Prospectus" means the prospectus of the Trust effective from time to time
under the Securities Act of 1933, as amended from time to time.
(o) "Securities" shall include, without limitation, common and preferred
stocks; American Depository Receipts, futures and related options, options on
securities or indices of securities, certificates of deposit, finance paper,
commercial paper, bankers' acceptances; all kinds of repurchase agreements and
reverse repurchase debentures; bills; notes; other evidences of indebtedness;
negotiable or non-negotiable instruments; government securities, including,
without limitation, securities of the United States or any other government,
any state, municipality or other political subdivision thereof, or any
governmental or quasi-governmental agency or instrumentality.
(p) "Series" means one or more of the series of Shares authorized by the
Trustees to represent the entire beneficial interest in one or more of the
Funds. Shares of any Series may be classified or reclassified by the Trustees
into one or more Classes of Shares.
(q) "Shareholder" means a record owner of outstanding Shares of Beneficial
Interest of any Class of any Series.
(r) "Shares" means the equal proportionate transferable units of interest of
each Class and of each Series into which the beneficial interest in the Trust
shall be classified or reclassified from time to time by the Trustees acting
under this Declaration of Trust, or in the absence of such action, means the
equal proportionate transferable units of interest into which the entire
beneficial interest in the Trust shall be divided from time to time, and
includes fractions of Shares as well as whole Shares. All references herein to
"Shares" which are not accompanied by a reference to any particular Series or
Class shall be deemed to apply to outstanding shares without regard to Series
or Class. "Outstanding" Shares means those Shares shown from time to time on
the books of the Trust or its Transfer Agent as then issued and outstanding,
but shall not include Shares which have been redeemed or repurchased by the
Trust and which are at the time held in the Treasury of the Trust.
(s) "Transfer Agent" means the other Person to any contract entered into by the
Trust pursuant to Section 4.3 hereof.
(t) "Trust" means the Trust created by this Declaration.
(u) "Trust Property" means any and all property, real or personal, tangible or
intangible, which is owned or held by or for the account of the Trust or the
Trustees as such, without regard to the Fund to which such property is
allocated, but shall not include property owned by the Trustees as individuals.
(v) "Trustees" means the persons who have signed this Declaration, so long as
they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be serving as Trustees in accordance
with the provisions of Article II hereof, and reference herein to a Trustee or
the Trustees shall refer to such Person or Persons in his capacity as Trustee
or their capacities as Trustees hereunder and not in his or their individual
capacities except where the context otherwise requires.
SECTION 1.3 - Purpose.
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and selling
short, selling, assigning, negotiating or exchanging and otherwise disposing
of, and turning to account, realizing upon and generally dealing in and with,
in any manner, Securities of all kinds, and all as the Trustees in their
discretion shall determine to be necessary, desirable or appropriate, and to
exercise and perform any and every act, thing or power necessary, suitable or
desirable for the accomplishment of such purpose, the attainment of any of the
objectives or the furtherance of any of the powers given hereby which are
lawful purposes, objectives or powers of a trust with transferable shares of
the type commonly termed a Massachusetts business trust; and to do every other
act or acts or thing or things incidental or appurtenant to or growing out of
or in connection with the aforesaid objectives, purposes or powers, or any of
them, which a trust of the type commonly termed a Massachusetts business trust
is not now or hereafter prohibited from doing, exercising or performing.
ARTICLE II
TRUSTEES
SECTION 2.1 - Number of Trustees.
The number of Trustees shall be such number as shall be fixed from time to time
by written instrument signed by a majority of the Trustees, provided, however,
that the number of Trustees shall in no event be reduced to less than three by
such an instrument.
SECTION 2.2 - Term and Election.
The Trustees shall (except in the event of resignations or removals or
vacancies pursuant to Sections 2.3 or 2.4 hereof) hold office during the
lifetime of the Trust and until its termination as hereinafter provided. The
Trustees shall be elected by the Shareholders of the Trust at the first meeting
of Shareholders prior to the initial public offering of Shares of the Trust,
and the term of office of any Trustees in office before such election shall
terminate at the time of such election. Subject to Section 16(a) of the 1940
Act and to the preceding sentence of this Section, the Trustees shall have the
power to set and alter the terms of office of the Trustees, and at any time to
lengthen or shorten their own terms or make their terms of unlimited duration,
to elect their own successors and, pursuant to Section 2.5 hereof, to appoint
Trustees to fill vacancies; provided, that Trustees shall be elected by
Majority Shareholder Vote at any such time or times as the Trustees shall
determine that such action is required under Section 16(a) of the 1940 Act or,
if not so required, that such action is advisable; and, further provided that
after the initial election of Trustees by the Shareholders, the term of office
of any incumbent Trustee shall continue until the termination of this Trust or
such Trustee's removal, replacement or until the election of such Trustee's
successor in office has become effective in accordance with this section.
SECTION 2.3 - Resignation and Removal by Trustees.
Any Trustee may resign as such (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the
other Trustees and such resignation shall be effective upon such delivery, or
at a later date according to the terms of the instrument. Any of the Trustees
may be removed (provided the aggregate number of Trustees after such removal
shall not be less than the minimum number required by this Declaration) for
cause by the action of two-thirds of the remaining Trustees. Upon the
resignation or removal of a Trustee, or his otherwise ceasing to be a Trustee,
he shall execute and deliver such documents as the remaining Trustees shall
require for the purpose of conveying to the Trust or the remaining Trustees any
Trust Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
SECTION 2.4 - Removal by Shareholders.
The Shareholders shall have the power to remove a Trustee by Majority
Shareholder Vote, either by declaration in writing filed with the transfer
agent or by votes cast in person or by proxy at a meeting called for the
purpose of removal under this section. The Trustees shall promptly call such a
meeting of shareholders when requested to do so by the record holders of not
less than 10 per cent of such outstanding Shares.
Whenever ten or more Shareholders of record who have been Shareholders at least
six months preceding the date of application, and who hold in the aggregate
either Shares having a net asset value of at least $25,000 or at least 1 per
centum of the outstanding shares of all Series and all Classes in the
aggregate, whichever is less, shall apply to the Trustees in writing, stating
that they wish to communicate with other Shareholders with a view to obtaining
signatures to a request for a meeting pursuant to this Section 2.4 and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either:
(a) Afford to such applicants access to a list of the names and addresses of
all Shareholders as recorded on the books of the Trust; or
(b) Inform such applicants as to the approximate number of Shareholders of
record, and the approximate cost of mailing to them the proposed communication
and form of request.
SECTION 2.5 - Vacancies.
The term of office of a Trustee shall terminate and a vacancy shall occur in
the event of his death, resignation, removal, bankruptcy, adjudicated
incompetence or other permanent incapacity as two-thirds of the remaining
Trustees deem to have rendered him unable to perform the duties of the office
of a Trustee. No such vacancy shall operate to annul this Declaration or to
revoke any existing agency created pursuant to the terms of this Declaration.
In the case of an existing vacancy, including a vacancy existing by reason of
an increase in the number of Trustees, the remaining Trustees shall fill,
subject to the provisions of the 1940 Act, such vacancy by the appointment of
such other Person as they in their discretion shall see fit, made by a written
instrument signed by a majority of the Trustees then in office. No such
appointment shall become effective until the Person named in the written
instrument of appointment shall have accepted such appointment in writing and
agreed in writing to be bound by the terms of this Declaration . An appointment
of a Trustee may be made in anticipation of a vacancy to occur at a later date
by reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.4, the Trustees in office, regardless of their
number, shall have all the powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this Declaration. A written
instrument certifying the existence of such vacancy signed by a majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.
SECTION 2.6 - Delegation of Power to Other Trustees.
Any Trustee may, by power of attorney, delegate his power for a period not
exceeding six (6) months at any one time to any other Trustee or Trustees,
provided that in no case shall less than two (2) Trustees personally exercise
the powers granted to the Trustees under this Declaration except as herein
otherwise expressly provided, and provided further that this Section shall in
no way be deemed to limit the provisions of Section 3.5.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 - General.
The Trustees shall have exclusive and absolute control over the Trust Property
and over the business of the Trust to the same extent as if the Trustees were
the sole owners of the Trust Property and business in their own right.
The Trustees are responsible for the general policies of the Trust and for
such general supervision of the business of the Trust conducted by all
officers, employees, agents, Investment Advisers, Distributors, Custodians,
Transfer Agents or independent contractors of the Trust as may be necessary to
insure that such business conforms to the provisions of this Declaration.
However, the Trustees are not and shall not be required personally to conduct
the business of the Trust and, consistent with their ultimate responsibility as
stated above, the Trustees shall have the power to appoint, employ or contract
with any Person or Persons (including one or more of themselves or any Person
of which one or more of them may be directors, officers, agents, employees,
stockholders, partners or Trustees or with which one or more of them may be
otherwise affiliated) as the Trustees may deem necessary or proper for the
transaction of the business of the Trust, and for such purpose may grant or
delegate such authority to any such Person as the Trustees may in their sole
discretion deem necessary or desirable without regard to whether such authority
is normally granted or delegated by Trustees. The Trustees shall have the
power to determine the terms and compensation of any such Person and may
exercise broad discretion in allowing such Person to administer and regulate
the operations of the Trust, to act as agent for the Trust, to execute
documents on behalf of the Trustees or the Trust, and to make executive
decisions which conform to the general policies and general principles
previously established by the Trustees.
The Trustees shall have power to conduct the business of the Trust and carry
on its operations in any and all of its branches and maintain offices both
within and without the Commonwealth of Massachusetts, in any and all states of
the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, and possessions of the
United States of America and of foreign governments, and to do all such other
things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust in addition to those
things which are specifically mentioned herein. Any determination as to what
is in the interests of the Trust or as to the existence of powers or
authorities hereunder made by the Trustees in good faith shall be conclusive.
In construing the provisions of this Declaration, the presumption shall be in
favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid powers. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2 - Investments.
The Trustees shall have the power, subject to the Fundamental Policies:
(a) To operate as and carry on the business of an investment company, and
exercise all the powers necessary and appropriate to the conduct of such
business;
(b) To invest in, hold for investment, and reinvest in Securities or in "when
issued" or delayed delivery contracts for any Securities or retain all or any
part of the Trust Property in cash and at any time and from time to time to
change the investments of the Trust Property;
(c) To acquire (by purchase, subscription or otherwise), to hold, to trade in
and deal in, to sell or otherwise dispose of, to lend, and to pledge,
Securities;
(d) To exercise all rights, powers and privileges of ownership or interest in
all Securities included in the Trust Property, including the right to vote
thereon and otherwise act with respect thereto and to do all acts for the
preservation, protection, improvement and enhancement in value of all Trust
Property;
(e) To acquire (by purchase, lease or otherwise) and to hold, use, maintain,
develop and dispose of (by sale or otherwise) any property, real or personal,
tangible or intangible, including, without limitation, cash, and any interest
therein;
(f) To borrow money and in connection therewith to issue notes or other
evidences of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property or any portion thereof; to
endorse, guarantee, or undertake the performance of any obligation or
engagement of any other Person and to lend Trust Property;
(g) To aid by further investment any Person, any Security of or interest in
which is included in the Trust Property or in the affairs of which the Trustee,
as such, have any direct or indirect interest; to do all acts and things
designed to protect, preserve, improve or enhance the value of such Security or
interest; to guarantee or become surety on any or all of the contracts, stocks,
bonds, notes, debentures and other obligations of any such Person; and
(h) In general to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary, suitable
or proper for the accomplishment of any purpose or the attainment of any object
or the furtherance of any power herein set forth, either alone or in
association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
SECTION 3.3 - Legal Title.
Legal title to all the Trust Property shall be vested in the Trustees as joint
tenants except that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees, or
in the name of the Trust, or in the name of any other Person as nominee, on
such terms as the Trustees may determine. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
become a Trustee. Upon the termination of a Trustee's term of office, he shall
automatically cease to have any right, title, or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered.
SECTION 3.4 - Issuance and Repurchase of Shares.
The Trustees shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise
deal in Shares of any Series or Class and, subject to the provisions set forth
in Articles VII, VIII and IX, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares of any Series or Class, any
of the Fund Assets belonging to the Fund to which such Series or Class relates,
whether constituting capital or surplus or otherwise, to the full extent now or
hereafter not prohibited by the laws of the Commonwealth of Massachusetts.
SECTION 3.5 - Delegation; Committees.
The Trustees shall have power to delegate from time to time to such of their
number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
in the names of the Trustees or otherwise as the Trustees may deem expedient,
except as may be prohibited by the 1940 Act.
SECTION 3.6 - Collection and Payment.
The Trustees shall have power to collect all property due to the Trust; to pay
all claims, including, without limitation, taxes, against the Trust Property;
to prosecute, defend, compromise or abandon any claims relating to the Trust
Property; to foreclose any security interest securing any obligations, by
virtue of which any property is owed to the Trust; and to enter into releases,
agreements and other instruments.
SECTION 3.7 - Expenses.
The Trustees shall have the power to incur and pay any expenses which, in the
opinion of the Trustees, are necessary or incidental to carrying out any of the
purposes of this Declaration, to pay themselves reasonable compensation and to
reimburse themselves for expenses incurred in the performance of their duties
as Trustees from the Trust Property. The Trustees shall fix the compensation
of all officers, employees, agents and Trustees.
SECTION 3.8 - Manner of Acting.
Except as otherwise provided herein or in the By-Laws, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a meeting
of Trustees at which a quorum is present, including any meeting held by means
of a conference telephone circuit or similar communications equipment by means
of which all persons participating in the meeting can hear each other, or by
written consents of the entire number of Trustees then in office.
SECTION 3.9 - By-Laws.
The Trustees may adopt By-Laws not inconsistent with this Declaration to
provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
SECTION 3.10 - Miscellaneous Powers.
The Trustees shall have the power to:
(a) Employ or contract with such Person or Persons as the Trustees may deem
desirable for the transaction of the business of the Trust;
(b) Enter into joint ventures, partnerships and any other combinations or
associations;
(c) Remove Trustees or fill vacancies in or add to their number, elect and
remove such officers and appoint and terminate such agents or employees as they
consider appropriate, and appoint from their own number, and terminate, any one
or more committees which may exercise some or all of the power and authority of
the Trustees as the Trustees may determine;
(d) Purchase, and pay for out of Trust Property insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, Investment Advisers,
Distributors, Transfer Agents, Custodians, selected dealers or independent
contractors of the Trust against any and all claims and liabilities arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such claim or liability;
(e) Establish pension, profit-sharing, share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust;
(f) To the extent not prohibited by law, indemnify any Person with whom the
Trust has dealings, including any Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine;
(g) Guarantee indebtedness or contractual obligations of others;
(h) Determine and change the fiscal year of the Trust and the method by which
its accounts shall be kept; and
(i) Adopt a seal for the Trust, but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
SECTION 3.11 - Principal Transactions.
Except in transactions permitted by the 1940 Act or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares of any Series or Class) from
or sell any securities (other than Shares of any Series or Class) to, or lend
any assets of the Trust to, any Trustee or officer of the Trust or any firm of
which any such Trustee or officer is a member acting as principal, or have any
such dealings with the Manager, Distributor or Transfer Agent or with any
Affiliated Person of such person; but the Trust may employ any such Person, or
firm or company in which such Person is an Interested Person, as broker, legal
counsel, registrar, transfer agent, dividend disbursing agent or custodian upon
customary terms.
SECTION 3.12 - Trustees and Officers as Shareholders.
Any Trustee, officer, employee or agent of the Trust may acquire, own and
dispose of Shares to the same extent as if he were not such a Trustee, officer,
employee or agent; and the Trustees may issue and sell or cause to be issued
and sold Shares to and buy Shares from any such Person or any firm or company
in which he is an Interested Person.
SECTION 3.13 - Litigation.
The Trustees shall have the power to engage in and to prosecute, defend,
compromise, abandon, or adjust, by arbitration, or otherwise, any actions,
suits, proceedings, disputes, claims, and demands relating to the Trust, and
out of the assets of the Trust to pay or to satisfy any debts, claims or
expenses incurred in connection therewith, including those of litigation, and
such power shall include without limitation the power of the Trustees or any
appropriate committee thereof, in the exercise of their or its good faith
business judgment, to dismiss any action, suit, proceeding, dispute, claim, or
demand, derivative or otherwise brought by any person, including a Shareholder
in its own name or the name of the Trust, whether or not the Trust or any of
the Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
ARTICLE IV
CONTRACTS
SECTION 4.1 - Underwriting Contract.
Subject to the provisions of the 1940 Act, the Trustees may, in their
discretion, from time to time enter into, renew, amend, or modify an exclusive
or non-exclusive underwriting contract or contracts providing for the sale of
Shares of any one or more Series or Classes to net the Trust an amount per
Share not less than the amount provided for in Section 8.1 hereof, whereby the
Trustees may agree to sell the Shares to the other party to the contract and/or
appoint such other party sales agent of the Trust for the Shares, on such terms
and conditions as may be prescribed in the By-Laws, if any, and such further
terms and conditions as the Trustees may, in their discretion, determine not
inconsistent with the provisions of this Declaration or the By-Laws; and any
such contract may also provide for the repurchase of the Shares by such other
party as agent of the Trust and may provide that such other party may enter
into selected dealer agreements with registered securities dealers to further
the purpose of the distribution or repurchase of such Shares.
SECTION 4.2 - Investment Advisory or Management Contract.
Subject to the provisions of the 1940 Act, the Trustees may, in their
discretion, from time to time enter into, renew, amend, or modify an investment
advisory or management contract or contracts whereby the other party or parties
to such contract or contracts shall undertake to furnish to the Trust such
management, investment advisory, statistical, and research facilities and
services and such other facilities and services, if any, and all upon such
terms and conditions as the Trustees may, in their discretion, determine,
including the grant of authority to such other party to determine what
Securities shall be purchased or sold by the Trust and what portion of its
assets shall be uninvested, which authority shall include the power to make
changes in the Trust's investments. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment Adviser (subject to such
general or specific instructions as the Trustees may from time to time adopt)
to effect purchases, sales, loans or exchanges of Securities of the Trust on
behalf of the Trustees and may authorize any officer, employee or Trustee to
effect such purchases, sales, loans or exchanges pursuant to recommendations of
the Investment Adviser, all without further action by the Trustees. Any such
activities shall be deemed to have been authorized by all of the Trustees.
SECTION 4.3 - Transfer Agent.
The Trustees may in their discretion from time to time enter into a transfer
agency and shareholder service contract or contracts whereby the other party or
parties to such contract or contracts shall undertake to furnish transfer
agency and shareholder services to the Trust. Any such contract shall have
such terms and conditions not inconsistent with this Declaration or the By-Laws
as the Trustees may, in their discretion, determine. Such services may be
provided by one or more Persons.
SECTION 4.4 - Affiliations of Trustees or Officers, etc.
Any Shareholder, Trustee or officer of the Trust, individually, or any firm of
which any Shareholder, Trustee or officer of the Trust may be a member, or any
Person of which any Shareholder, Trustee or officer of the Trust may be an
officer or director or in which any Shareholder, Trustee or officer of the
Trust may be directly or indirectly interested as the holder of any amount of
its capital stock or otherwise, may be a party to, or may be financially or
otherwise interested in, any contract or transaction of the Trust, and in the
absence of fraud no contract or other transaction shall be thereby affected or
invalidated by reason of the existence or any such relationship; nor shall any
Person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the fact of any such interests or relationships shall
be disclosed or shall have been known to the Trustees or a majority thereof.
Any such Shareholder, Trustee or officer of the Trust may be counted in
determining the existence of a quorum at the meeting of the Trustees of the
Trust which shall authorize any such contract or transaction and may vote
thereat to authorize any such contract or transaction, with like force and
effect as if such other interests or relationships did not exist. In
furtherance and not in limitation of the foregoing, the Trustees of the Trust
are expressly authorized to contract for investment advisory and management
services of any nature, as described in Section 4.2, with any Person affiliated
with any Trustee or parent or affiliate or Interested Person of any such
Person, on such terms as the Trustees may deem desirable. The Trustees are
further expressly authorized to contract with any such Person or parent or
affiliate or Interested Person of any such Person on such terms as the Trustees
may deem desirable for the distribution of shares of the Trust as described in
Section 4.1 and to contract for other services, including, without limitation
services as Transfer Agent for the Trust's shares as described in Section 4.3
above with any such Person on such terms as the Trustees may deem desirable.
Any such Person or parent or affiliate or Interested Person of any such Person
which enters into one or more of such contracts may also perform similar or
identical services for other investment companies and other Persons without
restriction by reason of the relationship with the Trust.
ARTICLE V
LIMITATIONS OF LIABILITY OF
SHAREHOLDERS, TRUSTEES AND OTHERS
SECTION 5.1 - No Personal Liability of Shareholders, Trustees, etc.
No Shareholder as such shall be subject to any personal liability whatsoever
to any Person in connection with Trust Property or the acts, omissions,
obligations or affairs of the Trust. No Trustee, officer, employee or agent of
the Trust as such shall be subject to any Personal liability whatsoever to any
Person in connection with Trust Property or the affairs of the Trust, save only
that to which they would be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of their duties, or by reason of
their reckless disregard of their obligations and duties with respect to such
Person; and all Persons shall look solely to the Trust Property for
satisfaction of claims of any nature arising directly or indirectly in
connection with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust is made a party to any suit
or proceeding to enforce any such liability of the Trust, he shall not, on
account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities
to which such Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all legal and
other expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall
not exclude any other right to which such Shareholder may be lawfully entitled,
nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein, provided that a Shareholder of any Series
shall be indemnified only from the assets belonging to the Fund to which such
Series relates.
SECTION 5.2 - Non-Liability of Trustees, etc.
No trustee, officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without limitation
the failure to compel in any way any former or acting Trustee to redress any
breach of Trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
SECTION 5.3 - No Bond Required of Trustees.
No Trustee shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
SECTION 5.4 - No Duty of Investigation; Notice in Trust Instruments, etc.
No purchaser, lender, Transfer Agent, Custodian or other Person dealing with
the Trustees or any officer, employee or agent of the Trust shall be bound to
make any inquiry concerning the validity of any transaction purporting to be
made by the Trustees or by said officer, employee or agent or be liable for the
application of Trust Property paid, loaned, or delivered to or on the order of
the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Trust or
undertaking, and every other act or thing whatsoever executed in connection
with or on behalf of the Trust shall be conclusively presumed to have been
executed or done by the executors thereof only in their capacity as Trustees
under this Declaration or in their capacity as officers, employees or agents of
the Trust. Every written obligation, contract, instrument, certificate, Share,
other security of the Trust or undertaking made or issued by the Trustees may
recite, in substance, that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations
of the Trust under any such instrument are not binding upon any of the Trustees
or Shareholders individually, but bind only the Trust estate, and may contain
any further recital which they or he may deem appropriate, but the omission of
such recital shall not operate to bind the Trustee or Shareholders
individually. The Trustees may maintain insurance for the protection of the
Trust Property, its Shareholders, Trustees, officers, employees, and agents in
such amount as the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment
shall deem advisable.
SECTION 5.5 - Reliance on Experts, etc.
Each Trustee, officer, employee, or agent of the Trust shall, in the
performance of his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its officers, employees,
agents or by the Investment Adviser, the Distributor, Transfer Agent,
Custodian, selected dealers, accountants, appraisers or other experts or
consultants selected with reasonable care by the Trustees, officers, or
employees of the Trust, regardless of whether any such Person may also be a
Trustee or an Interested Person of the Trust.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 - Beneficial Interest.
The interest of the beneficiaries of the Trust shall be divided into
transferable shares and fractions of shares of beneficial interest without par
value. The number of shares of beneficial interest is unlimited. Initially
the shares of beneficial interest shall be of one series and of one class. The
Trustees shall have authority in their sole discretion to create one or more
separate, distinct and independent Funds into which assets of the Trust shall
be divided, and to authorize a separate Series of shares of beneficial interest
for such Fund (each of which Series, including without limitation, the Series
authorized in Section 6.10 hereof, shall represent interests only in the Fund
with respect to which such Series was authorized), or one or more additional
Classes of shares of beneficial interest, on such terms and conditions as they
may determine, without vote of the shareholders. The Trustees shall have
authority, in their sole discretion, to combine Series of shares of beneficial
interest or a Class of shares of beneficial interest with another Series of
shares of beneficial interest or another Class of shares of beneficial
interest, without vote of the shareholders, either
(a) through an exchange of shares of beneficial interest in one Series of
shares of beneficial interest or Class of shares of beneficial interest for
shares of beneficial interest in another Series of shares of beneficial
interest or Class of shares of beneficial interest, or
(b) by amendment of the terms of and conditions applicable to a Series of
shares of beneficial interest or to a Class of shares of beneficial interest to
conform such terms and conditions to the terms and conditions applicable to the
other Series of shares of beneficial interest or to the other Class of shares
of beneficial interest;
provided that any such combination of two or more Series of shares of
beneficial interest or two or more Classes of shares of beneficial interest
shall always be effected in a way which will preserve the relative net asset
value of the shares of beneficial interest affected. All shares of beneficial
interest issued hereunder including, without limitation, shares of beneficial
interest issued in connection with any dividend declared and paid in shares of
beneficial interest or any split of shares of beneficial interest, shall be
fully paid and non-assessable.
SECTION 6.2 - Rights of Shareholders.
The ownership of the Trust Property of every description and the right to
conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest in the Trust Property or
in the business of the Trust other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition,
divisions, dividend or distribution of any property, profits, rights or
interests of the Trust nor can they be called upon personally to share or
assume any losses of the Trust or suffer an assessment of any kind by virtue of
their ownership of Shares. The Shares of any Series or Class shall be personal
property giving only the rights specifically set forth in this Declaration.
The Shares of any Series or Class shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights except as the Trustees may
determine with respect to any Series or Class of shares.
SECTION 6.3 - Trust Only.
It is the intention of the Trustees to create only the relationship of trustee
and beneficiary between the Trustees and each Shareholder from time to time.
It is not the intention of the Trustees to create a general partnership,
limited partnership, joint stock association, joint venture, corporation,
bailment or any form of legal relationship other than a trust. Nothing in this
Declaration shall be construed to make the Shareholders, either by themselves
or with the Trustees, partners or members of a joint stock association.
SECTION 6.4 - Issuance of Shares.
The Trustees, in their discretion, may at any time and from time to time
without vote of the Shareholders, issue Shares of any Series or Class to such
party or parties and for such amount and type of consideration, including cash
or property, at such time or times, and on such terms as the Trustees may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities) and
businesses. In connection with any issuance of Shares of any Series or Class,
the Trustees may issue fractional Shares. The Trustees may from time to time
divide or combine the Shares of any Series or Class into a greater or lesser
number without thereby changing the proportionate beneficial interests in the
Trust and may classify or reclassify any unissued shares, or any shares of any
Series or Class previously issued and reacquired by the Trust, into shares of
one or more other Funds that may be established and designated from time to
time. The Trustees may also reduce the number of outstanding Shares of any
Series. Contributions to the Trust may be accepted for, and Shares of any
Series shall be redeemed as, whole Shares and/or 1/1,000ths of a Share or
integral multiples thereof.
SECTION 6.5 - Register of Shares; Share Certificates.
A register shall be kept at the principal office of the Trust or an office of
the Transfer Agent which books shall be maintained separately for the shares of
each Series that has been authorized and shall contain the names and addresses
of the Shareholders and the number of Shares held by them respectively and a
record of all transfers thereof. Such register shall be conclusive as to who
are the holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, or to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
SECTION 6.6 - Transfer of Shares.
All Shares shall be transferable on the register of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing,
upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer, together with such evidence of the genuineness of each
such execution and authorization and of such other matters as may reasonably be
required. Upon such delivery, the transfer shall be recorded on the register
of the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the Trustees nor any Transfer Agent or registrar, if any, nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any Person becoming entitled to Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, except as may otherwise be provided in the laws of the Commonwealth of
Massachusetts, shall be recorded on the register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Trustees or
the Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar, if any, nor any
officer or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law. Nothing in this
Declaration shall impose on the Trustees or a Transfer Agent a duty, or limit
their rights, to inquire into adverse claims.
SECTION 6.7 - Notices.
Any and all notices to which any Shareholder may be entitled and any and all
communications shall be deemed duly served or given if mailed, postage prepaid,
addressed to any Shareholder of record at his last known address as recorded on
the registrar of the Trust.
SECTION 6.8 - Treasury Shares.
Shares held in the treasury shall, until reissued pursuant to Section 6.4, not
confer any voting rights on the Trustees, nor shall such Shares be entitled to
any dividends or other distributions declared with respect to the Shares.
SECTION 6.9 - Voting Powers.
The Shareholders shall have power to vote with respect to such matters relating
to the Trust as may be required by law, this Declaration, the By-Laws, the 1940
Act, any registration of Trust with the Commission (or any successor agency) or
any state, or as the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any matter on which it is
entitled to vote and each fractional Share shall be entitled to a proportionate
fractional vote. There shall be no cumulative voting in the election of
Trustees. Shares shall not entitle the Shareholders to preference, appraisal,
conversion, exchange or preemptive rights of any kind. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required by law, this Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholder's
votes and meetings, setting of record dates, and related matters.
SECTION 6.10 - Establishment of Fund; Series or Classes of Shares.
Without limiting the authority of the Trustees as set forth herein to establish
and designate further Funds and/or Classes, the following Funds and Classes are
hereby established and designated: The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia, all of the Shares of which shall initially be
issued in single Classes. The following provisions shall be applicable to the
Funds:
(a) Each Fund established hereunder shall be a separate component of the assets
of the Trust, and the holders of Shares of the Series representing the
beneficial interest in the assets of that Fund shall be considered Shareholders
of such Fund, but such Shareholders shall also be considered Shareholders of
the Trust for purposes of receiving reports and notices and, except as
otherwise provided herein or in the Certificate of Designation of a particular
Fund as to such Fund, or as required by the 1940 Act or other applicable law,
the right to vote, all without distinction by Series. The Trustees shall have
exclusive power without the requirement of Shareholder approval to establish
and designate such separate and distinct Funds and to fix and determine the
relative rights and preferences as between the Shares of the respective Funds
as to rights of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights, and
conditions under which the Shareholders of the several Funds shall have
separate voting rights or no voting rights. Within each Fund so established
the Trustees shall have the exclusive power without the requirement of
shareholder approval to establish one or more Classes of Shares and to fix and
determine the relative rights and preferences as between Shares of the
respective Classes of a Fund as to rights of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the Shareholders of the several
Classes shall have separate voting rights or no voting rights.
(b) All provisions herein relating to the Trust shall apply equally to each
Series of the Trust except as the context otherwise requires.
(c) The power of the Trustees to invest and reinvest the Trust Property shall
be governed by Section 3.2 of this Declaration with respect to any one or more
Series which represents the interests in the assets of the Trust immediately
prior to the establishment of two or more Series and the power of the Trustees
to invest and reinvest assets applicable to any other Series shall be as set
forth in the instrument of the Trustees establishing such Series which is
hereinafter described.
(d) All consideration received by the Trust for the issue or sale of shares of
a particular Series together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits, and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors, and shall be
so recorded upon the books of account of the Trust. In the event that there are
any assets, income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular Series, the
Trustees shall allocate them among any one or more of the Series established
and designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series
for all purposes.
(e) The assets belonging to each particular Series shall be charged with the
liabilities of the Trust in respect of that Series and all expenses, costs,
charges and reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The Trustees may
further allocate such liabilities, expenses, costs, charges and reserves of a
Series among various Classes of Shares of that Series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of Shares of Classes of all Series for
all purposes. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders. The assets of a
particular Series of the Trust shall under no circumstances be charged with
liabilities attributable to any other Series of the Trust. All persons
extending credit to, or contracting with or having any claim against a
particular Series of the Trust shall look only to the assets of that particular
Series for payment of such credit, contract or claim.
(f) Each Share of a Series of the Trust shall represent a beneficial interest
in the net assets of such Series which shall be equal to the interest of all
other Shares of the same Class. Each holder of Shares of a Class shall be
entitled to receive his pro rata share of distribution of income and capital
gains made with respect to such Class. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or having been
a Shareholder of a Series, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust. Upon liquidation or
termination of a Series of the Trust, Shareholders of such Series of each Class
shall be entitled to receive a pro rata share of the net assets of such Series
equal to that of all other Shareholders of such Class. A Shareholder of a
particular Series of the Trust shall not be entitled to participate in a
derivative or class action on behalf of any other Series or the Shareholders of
any other Series of the Trust.
(g) Notwithstanding any other provision hereof, on any matter submitted to a
vote of Shareholders of the Trust, all Shares then entitled to vote shall be
voted by individual Series, except that (1) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series, and (2)
when the Trustees have determined that the matter affects only the interests of
Shareholders of a limited number of Series of a particular Class of a Series,
then only the Shareholders of such Series (or Class, as the case may be) shall
be entitled to vote thereon.
(h) The power of the Trustees to pay dividends and make distributions shall be
governed by Section 8.2 of this Declaration with respect to any one or more
Series or Classes which represents the interests in the assets of the Trust
immediately prior to the establishment of two or more Series or Classes. With
respect to any other Series or Class, dividends and distributions on shares of
a particular Series or Class may be paid with such frequency as the Trustees
may determine, which may be daily or otherwise, pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
Trustees may determine, to the holders of shares of that Series or Class, from
such of the income and capital gains, accrued or realized, from the assets
belonging to that series, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that Series or Class. All
dividends and distributions on shares of a particular Series or Class shall be
distributed pro rata to the holders of that Series or Class in proportion to
the number of shares of that Series or Class held by such holders at the date
and time of record established for the payment of such dividends or
distributions.
(i) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and dividend
rights, of each Class and Series of Shares.
(j) The establishment and designation of any Series or Class in addition to the
Series and Class established and designated in section 6.10 hereof and the
authorization of the Shares thereof shall be effective upon the execution by a
majority of the Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Fund
or such Class and the manner in which the same may be amended (a "Certificate
of Designation"), and may provide that the number of Shares of such Fund or
Class which may be issued is unlimited, or may limit the number issuable. At
any time that there are no Shares or Class outstanding of any particular Fund
or Class previously established and designated, including any Fund or Class
established and designated in Section 6.10 hereof, the Trustees may by an
instrument executed by a majority of the Trustees, terminate such Fund or Class
and the establishment and designation thereof and the authorization of its
Shares (a "Certificate of Termination"). Each Certificate of Designation,
Certificate of Termination and any instrument amending a Certificate of
Designation shall have the status of an amendment to this Declaration of Trust,
and shall be filed and become effective as provided in Section 10.1 hereof.
(k) In the event of the liquidation or dissolution of the Trust, the
Shareholders of each Fund of which Shares are outstanding shall be entitled to
receive, when and as declared by the Trustees, the excess of the Fund Assets
over the liabilities of such Fund divided among the Classes of Shares of the
Fund in accordance with Certificate(s) of Designation of the Fund and of any
such Class. The assets so distributable to the Shareholders of any particular
Fund or Class shall be distributed among such Shareholders in proportion to the
number of Shares of that Fund or Class held by them and recorded on the books
of the Trust. The liquidation of any particular Fund may be authorized by vote
of a majority of the Trustees, subject to the affirmative vote of "a majority
of the outstanding voting securities" of that Fund of all Classes voting
together, as the quoted phrase is defined in the 1940 Act, determined in
accordance with clause (iii) of the definition of "Majority Shareholder Vote"
in Section 1.2 hereof.
ARTICLE VII
REDEMPTION, REPURCHASE, AND
REDUCTION OF SHARES
SECTION 7.1 - Redemption of Shares.
All Shares of any Series or Class of the Trust shall be redeemable, at the
redemption price determined in the manner set out in this Declaration.
Redeemed or repurchased Shares may be reissued by the Trust.
The Trust shall redeem the Shares of any Series or Class at the price
determined as hereinafter set forth, upon the appropriately verified written
application of the record holder thereof (or upon such other form of request as
the Trustees may determine) at such office or agency as may be designated from
time to time for that purpose by the Trustees. The Trustees may from time to
time specify additional conditions not inconsistent with the 1940 Act regarding
the redemption of Shares.
SECTION 7.2 - Price.
Shares shall be redeemed at the price based on their net asset value determined
as set forth in Section 8.1 hereof as of such time as the Trustees shall have
theretofore prescribed by resolution. In the absence of such resolution, the
redemption price of Shares deposited shall be the price based on the net asset
value of such Shares next determined as set forth in Section 8.1 after receipt
of the application required by Section 7.1. No provision in this Declaration,
however, shall prohibit the imposition of any contingent deferred sales charge
as may be specified from time to time in the Prospectus.
SECTION 7.3 - Payment.
Payment for redeemed Shares shall be made at such time and in the manner, not
inconsistent with the 1940 Act or other applicable law, as may be specified
from time to time in the Prospectus, subject to the provision of Section 7.4
hereof.
SECTION 7.4 - Repurchase by Agreement.
The Trust may repurchase Shares of any Series or Class directly, or through the
Distributor or another agent designated for the purpose, by agreement with the
owner thereof at a price not exceeding the net asset value per Share next
determined after the time when the purchase or contract is made or the net
asset value as of any time which may be later determined pursuant to Section
8.1 hereof, provided payment is not made for the Shares prior to the time as of
which such net asset value is determined.
SECTION 7.5 - Redemption of Shareholder's Interest; Redemption of Shares to
Qualify as a Regulated Investment Company; Disclosure of Holdings.
The Trust shall have the right at any time to redeem the Shares of any
Shareholder for their then current net asset value per Share if at such time
the Shareholder owns of record, Shares of any Series or Class having an
aggregate net asset value of less than the minimum initial investment amount
required of new Shareholders of that Series or Class, subject to such terms and
conditions as the Trustee may approve and subject to the Trust's giving general
notice to all Shareholders of the existence of such right, either by
publication in the Trust's Prospectus, if any, or by such other means as the
Trustees may determine.
If the Trustees shall, at any time and in good faith, be of the opinion that
direct or indirect ownership of Shares or other securities of the Trust has or
may become concentrated in any Person to an extent which would disqualify the
Trust as a regulated investment company under the Internal Revenue Code, then
the Trustees shall have the power by lot or other means deemed equitable by
them to:
(a) Call for redemption by any such Person a number, or principal amount, of
Shares or other securities of the Trust sufficient to maintain or bring the
direct or indirect ownership of Shares or other securities of the Trust into
conformity with the requirements for such qualification, and
(b) Refuse to transfer or issue Shares or other securities of the Trust to any
Person whose acquisition of the Shares or other securities of the Trust in
question would, in the judgment of the Trustees, be likely to result in such
disqualification.
The redemption shall be effected at the redemption price.
The holders of Shares or other securities of the Trust shall upon demand
disclose to the Trustees in writing such information with respect to direct and
indirect ownership of Shares or other securities of the Trust as the Trustees
deem necessary to comply with the provisions of the Internal Revenue Code, or
to comply with the requirements of any other taxing authority.
SECTION 7.6 - Suspension of Right of Redemption.
The Trust may declare a suspension with respect to one or more Series or
Classes of Shares of the right of redemption or postpone the date of payment of
redemption for the whole or any part of any period:
(a) During which the New York Stock Exchange is closed other than customary
weekend and holiday closings;
(b) During which trading on the New York Stock Exchange is restricted;
(c) During which an emergency exists as a result of which disposal by the Trust
of Securities owned by the Trust within a Fund is not reasonably practicable or
it is not reasonably practicable for the Trust fairly to determine the value of
the net assets of a Fund; or
(d) During any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of the right of redemption
or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in subparagraphs (b), (c) or (d) exist.
Such suspension shall take effect at such time as the Trust shall specify but
not later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of redemption
or payment on redemption until the Trust shall declare the suspension at an
end, except that the suspension shall terminate in any event on the first day
on which said stock exchange shall have reopened or the period specified in
such paragraphs (b) or (c) above shall have expired (as to which in the absence
of an official ruling by the Commission, the determination of the Trust shall
be conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value next determined after the termination of the
suspension.
SECTION 7.7 - Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 8.1, the Trustees shall declare a suspension of the
determination of net asset value, the rights of Shareholders (including those
who shall have applied for redemption pursuant to Section 7.1, but who shall
not yet have received payment) to have Shares redeemed and paid for by the
Trust and the right of the Trust to redeem Shares at its option set forth in
Section 7.5, shall be suspended until the termination of such suspension is
declared. Any record holder who shall have his redemption right so suspended
may, during the period of such suspension, by appropriate written notice of
revocation at the office or agency where application was made, revoke any
application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 7.1 hereof after the termination of such suspension, and
payment shall be made within seven (7) days after the date upon which the
application was made plus the period after such application during which the
determination of net asset value was suspended.
SECTION 7.8 - Reductions of Shares.
The Trust may also reduce the number of outstanding Shares of any Series or
Class.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME, AND DISTRIBUTIONS
SECTION 8.1 - Net Asset Value.
The net asset value per Share of any Class of any Series shall be determined as
follows: the value of the Securities and other assets owned by the Fund
corresponding to that Series shall be valued by methods, reflecting their fair
value, as determined by the Trustees in good faith.
From the total value of said assets, there shall be deducted the liabilities of
the Fund attributable to each Class, including proper accruals of interest,
taxes and other expense items, amounts determined and declared as dividends or
distributions, and reserves for contingent or undetermined liabilities. The
net assets of the Fund attributable to each Class so obtained shall then be
divided by the total number of Shares of the Fund of that Class outstanding and
the result, rounded to the nearest cent, shall be the net asset value per Share
of the Fund of that Class. The net asset value of the Shares of that Fund of
that Class shall be determined once on each business day, as of the close of
trading on the New York Stock Exchange or as of such other time or times as the
Trustees shall determine. The power and duty to make the daily calculations
may be delegated by the Trustees to the Investment Adviser, the Custodian, the
Transfer Agent, or such other Person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset value
if to do so is not prohibited by the 1940 Act.
SECTION 8.2 - Distributions With Respect to Outstanding Shares.
The Trustees shall from time to time distribute ratably among the Outstanding
Shares of a Series and/or of a Class of a Series, such proportion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including, without limitation, any type of obligation of the Trust or
any assets thereof), and the Trustees may distribute ratably among the
Outstanding Shares of such Series or Class additional Shares of such Series or
Class or another Series or Class issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Outstanding Shares at the time of declaring a distribution or
among the Outstanding Shares at such later date as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time and date. The
Trustees may always retain from the net profits of the Trust such amount as
they may deem necessary to pay the debts or expenses of the Trust or to meet
the obligations of the Trust, or as they may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of
the business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans, or other plans as the Trustees
shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the Trust, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
At such time as the Trustees divide the Shares of the Trust into two or more
Series and/or two or more Classes of a Series, the distributions provided for
herein will be determined separately for the outstanding Shares of each Class
of each Series as set forth in Section 6.10(h) hereof.
SECTION 8.3 - Determination of Net Income; Constant Net Asset Value of Shares
of Certain Series or Classes; Reduction of Outstanding Shares.
The Trustees shall have the power to determine the net income of each Series of
Shares of the Trust one or more times on each business day and at each such
determination declare such net income as dividends in additional Shares of such
Series. The determination of net income and the resultant declaration of
dividends shall be as set forth in the Prospectus. In the event that any
Series or Class of the Trust attempts to maintain a constant net asset value
per Share, if, for any reason, the net income of such Series of the Trust
determined at any time is a negative amount, the Trustees shall have the power
(i) to offset each Shareholder's pro rata share of such negative amount from
the accrued dividend account of such Shareholder, or (ii) to reduce the number
of outstanding shares of such Series or Class of the Trust by reducing the
number of Shares in the account of such Shareholder by that number of full and
fractional Shares which represents the amount of such excess negative net
income, or (iii) to cause to be recorded on the books of the Trust an asset
account in the amount of such negative net income, which account may be reduced
by the amount, provided that the same shall thereupon become the property of
the Trust and shall not be paid to any Shareholder, of dividends declared
thereafter upon the outstanding Shares on the day such negative net income is
experienced, until such asset account is reduced to zero, or (iv) to combine
the methods described in clauses (i) and (ii) and (iii) of this sentence, in
order to cause the net asset value per Share of such Series or Class of the
Trust to remain at a constant amount per outstanding Share immediately after
each such determination and declaration. The Trustees shall also have the
power to fail to declare a dividend out of net income for the purpose of
causing the net asset value per Share of any such Series or Class to be
increased to a constant amount. The Trustees shall have full discretion to
determine whether any cash or property received shall be treated as income or
as principal and whether any item of expense shall be charged to the income or
the principal account, and their determination made in good faith shall be
conclusive upon the Shareholders. In the case of stock dividends received, the
Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal. The
Trustees shall not be required to adopt, but may at any time adopt, discontinue
or amend the practice of maintaining the net asset value per Share of any
Series or Class of the Trust at a constant amount.
SECTION 8.4 - Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article VIII, the
Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the per Share net asset value of any Series or Class of
the Trust's Shares or net income, or the declaration and payment of dividends
and distributions as they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS; ETC.
SECTION 9.1 - Duration.
The Trust shall continue without limitation of time, subject to the provisions
of this Article IX.
SECTION 9.2 - Termination of Trust.
(a) the Trust may be terminated by the vote of a majority of the Shares
outstanding and entitled to vote of each Fund of the Trust voting separately at
any meeting of Shareholders or by an instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of not
less than a majority of such Shares, or by such greater or different vote of
Shareholders of any Series as may be established by the Certificate of
Designation by which such Series was authorized. Upon the termination of the
Trust,
(i) the Trust shall carry on no business except for the purpose of winding up
its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the Trust and all of
the powers of the Trustees under this Declaration shall continue until the
affairs of the Trust shall have been wound up, including, without limitation,
the power to fulfill or discharge the contracts of the Trust, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or
any part of the remaining Trust Property to one or more Persons at public or
private sale for consideration which may consist in whole or in part of cash,
Securities or other property of any kind, discharge or pay its liabilities, and
do all other acts appropriate to liquidate its business; provided that any
sale, conveyance, assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property shall require Shareholder approval in
accordance with Section 9.4 hereof; and
(iii) after paying or adequately providing for the payment of all liabilities,
and upon receipt of such releases, indemnities and refunding agreements, as
they deem necessary, the Trustees may distribute the remaining Trust Property,
if any, in cash or in kind or partly each, among the Shareholders in conformity
with Section 6.10(k) hereof.
(b) After termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
duties hereunder, and the rights and interests of all Shareholders shall
thereupon cease.
SECTION 9.3 - Amendment Procedure.
(a) This Declaration may be amended by a majority shareholder vote, with each
Series or Class voting separately if such amendment shall have a materially
different effect on one or more particular Series or Classes and otherwise by
all Shares voting together, or by any instrument in writing, without a meeting,
signed by a majority of the Trustees and consented to by the holders of a
majority of the Shares outstanding and entitled to vote either separately by
Series or Classes or together, as appropriate. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to change the name of
the Trust, to supply any omission, to cure, correct or supplement any
ambiguous, defective or inconsistent provision hereof, to establish and
distinguish separate and distinct Funds and separate and distinct Classes as
provided in Section 6.10(a) hereof, or if they deem it necessary to conform
this Declaration to the requirements of, or to reduce or eliminate the payment
of taxes by the Trust or any Series thereof under applicable federal or state
laws or regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be held
liable for failing to do so;
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with a majority vote of the Shares of
the affected Series or Class. Nothing contained in this Declaration shall
permit the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of the
Trust or to permit assessments upon Shareholders; and
(c) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a Registration
Statement under the Securities Act of 1933, as amended, covering the first
public offering of Shares shall have become effective, this Declaration may be
terminated or amended in any respect by the affirmative vote of a majority of
the Trustees or by an instrument signed by a majority of the Trustees.
SECTION 9.4 - Merger, Consolidation or Sale of Assets.
The Trust may merge or consolidate with any other Person or may sell, lease or
exchange all or substantially all of the Trust Property, including its
goodwill, if any, upon such terms and conditions and for such consideration
when and as authorized, at any meeting of Shareholders called for the purpose,
by the affirmative vote of the holders of not less than two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of the Shares outstanding and entitled to vote or by such other vote
as may be established by the Trustees with respect to any series or class of
shares; provided, however, that if such merger, consolidation, sale, lease or
exchange is recommended by the Trustees, a majority shareholder vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the statutes of the Commonwealth of Massachusetts.
SECTION 9.5 - Incorporation.
With a Majority Shareholder Vote, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction, or any other trust, partnership, association or other
organization to take over all or substantially all of the Trust Property or to
carry on any business in which the Trust shall directly or indirectly have any
interest, and to sell, convey and transfer all or substantially all of the
Trust Property to any such corporation, trust, association or organization in
exchange for securities thereof or otherwise, and to lend money to, subscribe
for securities of, and enter into any contracts with any such corporation,
trust, partnership, association, or organization, or any corporation,
partnership, trust, association or organization in which the Trust holds or is
about to acquire Securities or any other interest. The Trustees may also cause
a merger or consolidation between the Trust or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent not prohibited by applicable law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations, and selling,
conveying or transferring a portion of the Trust Property to such organization
or entities.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 - Filing.
This Declaration and any amendment hereto (including each Certificate of
Designation and Certificate of Determination) shall be filed in the office of
the Secretary of the Commonwealth of Massachusetts and in such other places as
may be required under the laws of Massachusetts and may also be filed or
recorded in such other places as the Trustees deem appropriate. Each amendment
so filed shall be accompanied by a certificate signed and acknowledged by a
Trustee stating that such action was duly taken in a manner provided herein,
and unless such amendment or such certificate sets forth some later time for
the effectiveness of such amendment, such amendment shall be effective upon its
filing. A restated Declaration, integrating into a single instrument all of
the provisions of the Declaration which are then in effect and operative, may
be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
SECTION 10.2 - Resident Agent.
The name of the Trust's resident agent is CT Corporation System, and its post
office address is 2 Oliver Street, Boston, Massachusetts 02109.
SECTION 10.3 - Governing Law.
This Declaration is executed by the Trustees and delivered in the Commonwealth
of Massachusetts and with reference to the laws thereof, and the rights of all
parties and the validity and construction of every provision hereof shall be
subject to and construed according to the laws of said State.
SECTION 10.4 - Counterparts.
This Declaration may be simultaneously executed in several counterparts, each
of which shall be deemed to be an original, and such counterparts, together,
shall constitute one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.5 - Reliance by Third Parties.
Any certificate executed by an individual who, according to the records of the
Trust appears to be a Trustee hereunder or an officer of the Trust appointed by
the Trustees, certifying to:
(a) The number or identity of Trustees or Shareholders or agents or employees;
(b) The due authorization of the execution of any instrument in writing;
(c) The form of any vote passed at a meeting of Trustees or committees thereof
or Shareholders;
(d) The fact that the number of Trustees or Shareholders present at any meeting
or executing any written instrument satisfies the requirements of this
Declaration;
(e) The form of any By-Laws adopted by or the identity of any officers,
Trustees, agents or employees; or
(f) The existence of any fact or facts which in any manner relate to the
affairs of the Trust;
shall be conclusive evidence as to the matters so certified in favor of any
person dealing with the Trustees or their successors or the Trust.
SECTION 10.6 - Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable and, if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination; and
(b) If any provision of this Declaration shall be held invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall attach only to
such provision in such jurisdiction and shall not in any manner affect such
provision in any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
SECTION 10.7 - Index and Headings for Reference Only.
The Index and headings preceding the text, articles and sections hereof have
been inserted for convenience and reference only and shall not be construed to
affect the meaning, construction or effect of this Declaration.
IN WITNESS WHEREOF, the undersigned have executed this instrument this 22nd day
of April, 1986.
/s/ Michael J. Downer
Michael J. Downer, as Trustee and not individually
/s/ Paul G. Haaga, Jr.
Paul G. Haaga, Jr., as Trustee and not individually
Address: 333 South Hope Street
50th Floor
Los Angeles, CA 90071
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
Before me, Angela M. Mitchell, a Notary Public in and for the County of Los
Angeles, State of California, personally appeared this day Michael J. Downer
and Paul G. Haaga, Jr., to me known and known to me to be the same persons
whose names are signed to the foregoing instrument, and who acknowledged to me
that they executed the same as their free and voluntary act and deed.
WITNESS, my hand and notarial seal this 22nd day of April, 1986.
/s/ Angela M. Mitchell
Notary Public in and for said
County and State
IN WITNESS WHEREOF, the undersigned has executed this instrument on this 23rd
day of April, 1986.
/s/ David M. Elwood
David M. Elwood, as Trustee and not individually
Address: One Federal Street
Boston, MA 02110
COMMONWEALTH OF MASSACHUSETTS )
)
) SS.
)
)
COUNTY OF SUFFOLK )
Before me, Judith B. Bonaffini, a Notary Public in and for the County of
Suffolk, State of Massachusetts, personally appeared this day David M. Elwood,
to me known and known to me to be the same person whose name is signed to the
foregoing instrument, and who acknowledged to me that he executed the same as
his free and voluntary act and deed.
WITNESS, my hand and notarial seal this 23rd day of April, 1986.
/s/ Judith B. Bonaffini
Notary Public in and for said
County and State
BY-LAWS
OF
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
BY-LAWS
I N D E X
Section and Title Page
Article I. SHAREHOLDERS 1
1.01 Annual Meetings 1
1.02 Special Meetings 1
1.03 Place of Meetings 1
1.04 Notice of Meetings 1
1.05 Quorum 2
1.06 Votes Required 2
l.07 Proxies 2
1.08 List of Shareholders 2
1.09 Voting 2
1.10 Action by Shareholders Other than at a Meeting 3
Article II. BOARD OF TRUSTEES 3
2.01 Powers 3
2.02 Number of Trustees 3
2.03 Regular Meetings 3
2.04 Special Meetings 3
2.05 Notice of Meetings 4
2.06 Quorum 4
2.07 Compensation and Expenses 4
2.08 Action by Trustees Other than at a Meeting 4
2.09 Committees 4
2.10 Holding of Meetings by Conference Telephone Call 5
Article III. OFFICERS 5
3.01 Executive Officers 5
3.02 Chairman and Vice Chairman of the Board 5
3.03 President 6
3.04 Vice Presidents 6
3.05 Secretary and Assistant Secretaries 6
3.06 Treasurer and Assistant Treasurers 6 3.07 Subordinate Officers 7
3.08 Removal 7
Article IV. SHARES OF BENEFICIAL INTEREST 7
4.01 Certificates 7
4.02 Record Dates 8
Article V. GENERAL PROVISIONS 8
5.01 Checks 8
5.02 Custodian 8
5.03 Bonds 9
5.04 Inspection of Records 9
5.05 Representation of Shares 9
5.06 Offices of the Trust 9
Article VI. INDEMNIFICATION 9
Article VII. AMENDMENT OF BY-LAWS 12
BY-LAWS
OF
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
ARTICLE I
SHAREHOLDERS
Section 1.01. Annual Meetings. Unless otherwise required by law, the
Declaration of Trust as amended from time to time (the "Declaration") or by
these By-Laws, the Trust shall not be required to hold an annual meeting of
shareholders unless the Board of Trustees of the Trust (the "Board") determines
to hold an annual meeting. If the Board makes such a determination, the annual
meeting of shareholders shall be held at such date and time as may be
designated from time to time by the Board for the election of trustees and the
transaction of any business within the powers of the Trust. Any business of the
Trust may be designated in the notice, except such business as is specifically
required by statute or by the Declaration to be stated in the notice. Failure
to hold an annual meeting at the designated time shall not, however, invalidate
the existence of the Trust or affect otherwise valid acts of the Trust.
Section 1.02. Special Meetings. At any time in the interval between annual
meetings, special meetings of the shareholders may be called by the Chairman of
the Board or the President or by a majority of the Board by vote at a meeting
or in writing with or without a meeting, or, in writing
by those shareholders holding a majority of the outstanding shares of
beneficial interest of the Trust.
Section 1.03. Place of Meetings. Meetings of the shareholders for the election
of trustees shall be held at such place either within or without the State of
Massachusetts as shall be designated from time to time by the Board of Trustees
and stated in the notice of the meeting. Meetings of shareholders for any
other purpose may be held at such time and place, within or without the State
of Massachusetts, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 1.04. Notice of Meetings. Not less than ten days nor more than ninety
days before the date of every shareholders' meeting, the Secretary shall give
to each shareholder entitled to vote at such meeting, written or printed notice
stating the time and place of the meeting and, in case of a special meeting,
the purpose or purposes for which the meeting is called, either by mail or by
presenting it to the shareholder personally or by leaving it at the
shareholder's residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the shareholder at his post office address as it appears on the records of
the Trust, with postage thereon prepaid. Notwithstanding the foregoing
provision, a waiver of notice in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting in
person or by proxy, small be deemed equivalent to the giving of such notice to
such persons. Any meeting of shareholders, annual or special, may adjourn from
time to time to reconvene at the same or some other place, and no notice need
be given of any such adjourned meeting other than by announcement at the
meeting.
Section 1.05. Quorum. At any meeting of shareholders the presence in person or
by proxy of shareholders entitled to cast a majority of the votes thereat shall
constitute a quorum; but this Section shall not affect any requirement under
statute or under the Declaration for the vote necessary for the adoption of any
measure. In the absence of a quorum the shareholders present in person or by
proxy, by majority vote and without notice, may adjourn the meeting from time
to time until a quorum shall attend. At any such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 1.06. Votes Required. A majority of the votes cast at a meeting of
shareholders, duly called and at which a quorum is present, shall be sufficient
to take or authorize action upon any matter which may properly come before the
meeting, unless more than a majority of votes cast is required by statute or by
the Declaration.
Section 1.07. Proxies. A shareholder may vote the shares owned of record by
him either in person or by proxy executed in writing by the shareholder or by
the shareholder's duly authorized attorney-in-fact. No proxy shall be valid
after eleven months from its date, unless otherwise provided in the proxy.
Every proxy shall be in writing, subscribed by the shareholder or the
shareholder's duly authorized attorney, and dated, but need not be sealed,
witnessed or acknowledged.
Section 1.08. List of Shareholders. At each meeting of shareholders, a full,
true and complete list in alphabetical order of all shareholders entitled to
vote at such meeting, certifying the number of shares held by each, shall be
made available by the Secretary.
Section 1.09. Voting. In all elections for trustees every shareholder shall
have the right to vote, in person or by proxy, the shares owned of record by
the shareholder, for as many persons as there are trustees to be elected and
for whose election the shareholder has a right to vote. At all meetings of
shareholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions regarding the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. If demanded by shareholders,
present in person or by proxy, entitled to cast 10% in number of votes, or if
ordered by the chairman, the vote upon any election or question shall be taken
by ballot. Upon like demand or order, the voting shall be conducted by two
inspectors in which event the proxies and ballots shall be received, and all
questions regarding the qualification of voters and the validity of proxies and
the acceptance or rejection of votes shall be decided, by such inspectors.
Unless so demanded or ordered, no vote need be by ballot, and voting need not
be conducted by inspectors. Inspectors may be elected by the shareholders at
their annual meeting, to serve until the close of the next annual meeting and
their election may be held at the same time as the election of trustees. In
case of a failure to elect inspectors, or in case an inspector shall fail to
attend, or refuse or be unable to serve, the shareholders at any meeting may
choose an inspector or inspectors to act at such meeting, and in default of
such election the chairman of the meeting may appoint an inspector or
inspectors.
Section 1.10. Action by Shareholders Other than at a Meeting. Any action
required or permitted to be taken at any meeting of shareholders may be taken
without a meeting, if a consent in writing, setting forth such action, is
signed by all the shareholders entitled to vote on the subject matter thereof
and any other shareholders entitled to notice of a meeting of shareholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the
records of the Trust.
ARTICLE II
BOARD OF TRUSTEES
Section 2.01. Powers. The Board may exercise all the powers of the Trust,
except such as are by statute or the Declaration or these By-Laws conferred
upon or reserved to the shareholders. The Board shall keep full and fair
accounts of its transactions.
Section 2.02. Number of Trustees. The number of trustees shall be such number
as shall be fixed from time to time by a written instrument signed by a
majority of the trustees; provided, however, the number of trustees shall in no
event be reduced to less than three by such an instrument. The tenure of
office of a trustee shall not be affected by any decrease in the number of
trustees made by the Board.
Section 2.03. Regular Meetings. After each meeting of shareholders at which a
Board of Trustees shall have been elected, the Board so elected shall meet as
soon as practicable for the purpose of organization and the transaction of
other business. No notice of such first meeting shall be necessary if held
immediately after the adjournment, and at the site, of such meeting of
shareholders. Other regular meetings of the Board shall be held without notice
on such dates and at such places within or without the State of Massachusetts
as may be designated from time to time by the Board.
Section 2.04. Special Meetings. Special meetings of the Board may be called at
any time by the Chairman of the Board, the President or the Secretary of the
Trust, or by a majority of the Board by vote at a meeting, or in writing with
or without a meeting. Such special meetings shall be held at such place or
places within or without the State of Massachusetts as may be designated from
time to time by the Board. In the absence of such designation such meetings
shall be held at such places as may be designated in the calls.
Section 2.05. Notice of Meetings. Except as provided in Section 2.03, notice
of the place, day and hour of every regular and special meeting shall be given
to each trustee two days (or more) before the meeting, by delivering the same
personally, or by sending the same by telegraph, or by leaving the same at the
trustee's residence or usual place of business, or, in the alternative, by
mailing such notice three days (or more) before the meeting, postage prepaid,
and addressed to the trustee at the trustee's last known business or residence
post office address, according to the records of the Trust. Unless required by
these By-Laws or by resolution of the Board, no notice of any meeting of the
Board need state the business to be transacted thereat. No notice of any
meeting of the Board need be given to any trustee who attends, or to any
trustee who in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Any meeting of
the Board, regular or special, may adjourn from time to time to reconvene at
the same or some other place, and no notice need be given of any such adjourned
meeting other than by announcement at the adjourned meeting.
Section 2.06. Quorum. At all meetings of the Board, one-third of the entire
Board (but in no event fewer than two trustees) shall constitute a quorum for
the transaction of business. Except in cases in which it is by statute, by the
Declaration or by these By-Laws otherwise provided, the vote of a majority of
such quorum at a duly constituted meeting shall be sufficient to elect and pass
any measure. In the absence of a quorum, the trustees present by majority vote
and without notice other than by announcement at the meeting may adjourn the
meeting from time to time until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the meeting as originally notified.
Section 2.07. Compensation and Expenses. Trustees may, pursuant to resolution
of the Board, be paid fees for their services, which fees may consist of an
annual fee or retainer and/or a fixed fee for attendance at meetings. In
addition, trustees may in the same manner be reimbursed for expenses incurred
in connection with their attendance at meetings or otherwise in performing
their duties as trustees. Members of committees may be allowed like
compensation and reimbursement. Nothing herein contained shall preclude any
trustee from serving the Trust in any other capacity and receiving compensation
therefor.
Section 2.08. Action by Trustees Other than at a Meeting. Any action required
or permitted to be taken at any meeting of the Board, or of any committee
thereof, may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
Section 2.09. Committees. The Board may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
two or more of the trustees. The Board may designate one or more trustees as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution, shall have and may exercise the powers of the Board
in the management of the business and affairs of the Trust, provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board. Each committee small keep regular minutes of
its meetings and report the same to the Board when required.
Section 2.10. Holding of Meetings by Conference Telephone Call. At any regular
or special meeting of the Board or any committee thereof, members thereof may
participate in such meeting by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
Section 3.01. Executive Officers. The Board of Trustees shall choose a
President and may choose a Chairman of the Board and a Vice Chairman of the
Board from among the trustees, and shall choose a Secretary and a Treasurer who
need not be trustees. The Board of Trustees shall designate as principal
executive officer of the Trust either the Chairman of the Board, the Vice
Chairman of the Board, or the President. The Board of Trustees may choose an
Executive Vice President, one or more Senior Vice Presidents, one or more
Vice-Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers, none of whom need be a director. Any two or more of the
above-mentioned offices, except those of President and a Vice-President, may be
held by the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity if such instrument be required by law,
by the Declaration of Trust, by the By-Laws or by resolution of the Board of
Trustees to be executed by any two or more officers. Each such officer shall
hold office until his successor shall have been duly chosen and qualified, or
until he shall have resigned or shall have been removed. Any vacancy in any of
the above offices may be filled for the unexpired portion of the term of the
Board of Trustees at any regular or special meeting.
Section 3.02. Chairman and Vice Chairman of the Board. The Chairman of the
Board, if one be elected, shall preside at all meetings of the Board of
Trustees and of the shareholders at which is present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board of
Trustees. The Vice Chairman of the Board, if one be elected, shall, when
present and in the absence of the Chairman of the Board, preside at all
meetings of the shareholders and trustees, and he shall perform such other
duties as may from time to time be assigned to him by the Board of Trustees or
as may be required by law.
The Board may designate one or more persons as Chairman Emeritus which
designation shall be honorary and continuous unless revoked by the Board. A
Chairman Emeritus, in such capacity, shall receive no compensation, have none
of the powers or duties of a Trustee and may not vote but may attend Board
meetings and participate in Board discussions. Nothing herein shall preclude an
individual from serving as a Trustee, with all powers, duties and emoluments
thereof, and concurrently holding the designation of Chairman Emeritus. (As
amended October 19, 1995).
Section 3.03. President. In the absence of the Chairman or Vice Chairman of
the Board, the President shall preside at all meetings of the shareholders and
of the Board at which the President is present; and in general, shall perform
all duties incident to the office of a president of a trust, and such other
duties, as from time to time, may be assigned to him by the Board.
Section 3.04. Vice Presidents. The Vice President or Vice Presidents,
including any Executive or Senior Vice President or Presidents, at the request
of the President or in President's absence or during the President's inability
or refusal to act, shall perform the duties and exercise the functions of the
President, and when so acting shall have the powers of the President. If there
be more than one Vice President, the Board may determine which one or more of
the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President may
make such determination. The Vice President or Vice Presidents shall have such
other powers and perform such other duties as may be assigned by the Board, the
Chairman of the Board, or the President.
Section 3.05. Secretary and Assistant Secretaries. The Secretary shall: keep
the minutes of the meetings of the shareholders, of the Board and of any
committees, in books provided for the purpose; shall see that all notices are
duly given in accordance with the provisions of these By-Laws or as required by
law; be custodian of the records of the Trust; see that the corporate seal is
affixed to all documents the execution of which, on behalf of the Trust, under
its seal, is duly authorized, and when so affixed may attest the same; and in
general perform all duties incident to the office of a secretary of a trust,
and such other duties as, from time to time, may be assigned to him by the
Board, the Chairman of the Board, or the President.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board, the President or the Chairman
of the Board, shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.06. Treasurer and Assistant Treasurers. The Treasurer shall: have
charge of and be responsible for all funds, securities, receipts and
disbursements of the Trust, and shall deposit, or cause to be deposited in the
name of the Trust, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by the
Board in accordance with Section 5.04 of these By-Laws; render to the
President, the Chairman of the Board and to the Board, whenever requested, an
account of the financial condition of the Trust; and in general, perform all
the duties incident to the office of a treasurer of a trust, and such other
duties as may be assigned to him by the Board, the President or the Chairman of
the Board.
The Assistant Treasurer, or if there shall be more than one, the Assistant
Treasurers in the order determined by the Board, the President or the Chairman
of the Board shall, in the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.07. Subordinate Officers. The Board may from time to time appoint
such subordinate officers as it may deem desirable. Each such officer shall
hold office for such period and perform such duties as the Board, the President
or the Chairman of the Board may prescribe. The Board may, from time to time,
authorize any committee or officer to appoint and remove subordinate officers
and prescribe the duties thereof.
Section 3.08. Removal. Any officer or agent of the Trust may be removed by the
Board whenever, in its judgment, the best interests of the Trust will be served
thereby, but such removal shall be without prejudice to the contractual rights,
if any, of the person so removed.
ARTICLE IV
SHARES OF BENEFICIAL INTEREST
Section 4.01. Certificates. If the Board authorizes the issuance of
certificates representing the shares of beneficial interest, such certificates
shall be signed by the President, the Chairman of the Board or a Vice President
and countersigned by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and sealed with the seal of the Trust. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form of seal. No certificates shall be issued
for fractional shares. Such certificates shall be in such form, not
inconsistent with law or with the Declaration, as shall be approved by the
Board. In case any officer of the Trust who has signed any certificate ceases
to be an officer of the Trust, whether because of death, resignation or
otherwise, before such certificate is issued, the certificate may nevertheless
be issued and delivered by the Trust as if the officer had not ceased to be
such officer as of the date of its issue. Certificates need not be issued
except to shareholders who request such issuance in writing.
The Board may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or
such owner's legal representative, to advertise the same in such manner as it
shall require and/or to give the Trust a bond in such sum as it may direct as
indemnity against any claim that may be made against the Trust with respect to
the certificate alleged to have been lost, stolen or destroyed.
Section 4.02. Record Dates. The Board is hereby empowered to fix, in advance,
a date as the record date for the purpose of determining shareholders entitled
to notice of, or to vote at, any meeting of shareholders, or shareholders
entitled to receive payment of any dividend, capital gains distribution or the
allotment of any rights, or in order to make a determination of shareholders
for any other proper purpose. Such date in any case shall be not more than
sixty days, and in case of a meeting of shareholders, not less than ten days,
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken.
ARTICLE V
GENERAL PROVISIONS
Section 5.01. Checks. All checks or demands for money and notes of the Trust
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
Section 5.02. Custodian. All securities and cash of the Trust shall be placed
in the custody of a bank or trust company ("Custodian") having (according to
its last published report) not less than $2,000,0OO aggregate capital, surplus
and undivided profits, provided such a Custodian can be found ready and willing
to act (or maintained in such other manner as is consistent with Section 17(f)
of the Investment Company Act of 1940 and the rules and regulations promulgated
thereunder.) The Trust shall enter into a written contract with the Custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of the Trust held by the Board of Trustees of the
Trust. The Trust shall upon the resignation or inability to serve of the
Custodian use its best efforts to obtain a successor custodian; require that
the cash and securities owned by the Trust be delivered directly to the
successor custodian; and in the event that no successor custodian can be found,
submit to the shareholders, before permitting delivery of the cash and
securities owned by the Trust to other than a successor custodian, the question
whether or not the Trust shall be liquidated or shall function without a
custodian.
The Trustees may direct the Custodian to deposit all or any part of the
securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a national
securities association registered with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, or such other person as may be
permitted by the Securities and Exchange Commission, or otherwise in accordance
with applicable law, pursuant to which system all securities of any particular
class or series of any issuer deposited within the system are treated as
fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust.
The Trustees may direct the Custodian to accept written receipts or other
written evidences indicating purchases of securities held in book-entry form in
the Federal Reserve System in accordance with regulations promulgated by the
Board of Governors of the Federal Reserve System and the local Federal Reserve
Banks in lieu of receipt of certificates representing such securities.
Section 5.03. Bonds. The Board may require any officer, agent or employee of
the Trust to give a bond to the Trust, conditioned upon the faithful discharge
of such person's duties, with one or more sureties and in such amount as may be
satisfactory to the board.
Section 5.04. Inspection of Records. The records of the Trust shall be open to
inspection by shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
Section 5.05. Representation of Shares. Any officer of the Trust is authorized
to vote, represent and exercise of the Trust any and all rights incident to any
shares of any corporation or other business enterprise owned by the Trust.
Section 5.06. Offices of the Trust. Until changed by the Trustees the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk. The principal executive office of the
Trust is hereby fixed and located at 1101 Vermont Avenue, N.W., Washington,
D.C. 20005. The Trustees are granted full power and authority to change from
time to time the respective locations of said principal executive office. Any
such change shall be noted on the By-Laws opposite this Section, or this
Section may be amended to state the new location. Branch or subordinate
offices may be established at any time by the Trustees at any place or places.
ARTICLE VI
INDEMNIFICATION
The Trust shall provide any indemnification required by applicable law and
shall indemnify directors, officers, agents and employees as follows:
(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 of
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 did not act in good faith or in a manner 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 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, 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
attorney's 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 in
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, or (ii) if
such a quorum of disinterested Trustees so directs, by independent legal
counsel in a written opinion; and any determination so made shall be
conclusive.
(e) Expenses incurred in defending a civil or criminal action, writ or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested trustees or independent legal counsel.
(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled and
shall continue as to a person who has ceased to be a Trustee or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
(h) Nothing in the Declaration or in these By-Laws shall be deemed to protect
any Trustee or officer of the Trust against any liability to the Trust or to
its shareholders to which such person would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
(i) The Trust shall have power to purchase and maintain insurance on behalf
of any person against any liability asserted against or incurred by such
person, whether or not the Trust would have the power to indemnify such person
against such liability under the provisions of this Article. Nevertheless,
insurance will not be purchased or maintained by the Trust if the purchase or
maintenance of such insurance would result in the indemnification of any person
in contravention of any rule or regulation of the Securities and Exchange
Commission. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition in 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.
ARTICLE VII
AMENDMENT OF BY-LAWS
These By-Laws of the Trust may be altered, amended, added to or repealed by the
shareholders or by majority vote of the entire board.
Text of Stock Certificate for:
The American Funds Tax-Exempt Series I - The Tax-Exempt Fund of Maryland
[FRONT]
Number [Space] [Picture of Oriole] Number [Space]
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
A MASSACHUSETTS BUSINESS TRUST
THE TAX-EXEMPT FUND OF MARYLAND
The certifies that (space for registered owner) is the owner of (space for
number of shares)
*SEE REVERSE FOR CERTAIN ABBREVIATIONS CUSIP 02630C107 fully paid Shares of
Beneficial Interest in The Tax-Exempt Fund of Maryland, without par value,
transferable on the books of the Trust by the holder thereof in person or by
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent.
Witness, the facsimile signatures of duly authorized officers of the Trust.
Dated:
/s/ Howard L. Kitzmiller /s/ Harry J. Lister
Vice President and Secretary President
Countersigned
AMERICAN FUNDS SERVICE COMPANY
BY [SPACE FOR SIGNATURE] TRANSFER AGENT
AUTHORIZED SIGNATURE
[BACK OF CERTIFICATE]
EXPLANATION OF ABBREVIATIONS
*The following abbreviations, when used in the registration on the face of this
certificate, shall have the meanings assigned below:
ADM - Administratix
Administrator
COM PROP - Community Property
CUST - Custodian
DTD - Dated
EST - Estate
Of estate of
ET AL - (and) Others
EXEC - Executor
Executrix
FBO - For the benefit of
GDN - Guardian
JT TEN - Joint tenants with right of survivorship
LIFE TEN - Life tenant
TR - Trust
TEN COM - Tenants in common
TEN ENT - Tenants by the entireties
TTEE - Trustee
U/A - Under Agreement
UGMA/(State) - Gift to minors act in effect in the state indicated
UTMA/(State) - Transfers to minors act in effect in the state indicated
U/W - Last will and testament,
Under last will and testament of
Of will of
Under the will of
Of the will of
Note: Abbreviations refer where appropriate to the singular or plural, male or
female. Other abbreviations may also be used, including U.S. Post Office
Department two-letter state abbreviations.
NOTE: AS STATED IN THE FUND'S DECLARATION OF TRUST, THIS CERTIFICATE
REPRESENTING SHARES OF BENEFICIAL INTEREST OF THE TRUST MAY BE REDEEMED WITHOUT
THE CONSENT OR APPROVAL OF THE SHAREHOLDER FOR THE THEN CURRENT NET ASSET VALUE
PER SHARE IF AT SUCH TIME THE SHAREHOLDER OWNS OF RECORD SHARES HAVING AN
AGGREGATE NET ASSET VALUE OF LESS THAN THE MINIMUM INITIAL INVESTMENT AMOUNT.
REQUIREMENTS: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND EXACTLY WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR.
SIGNATURE(S) MUST BE GUARANTEED BY A BANK, SAVINGS ASSOCIATION, CREDIT UNION,
OR 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.
A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
For value received, the undersigned hereby sell, assign, and transfer [space]
shares of beneficial interest represented by this certificate to : [space]
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE and do hereby
irrevocably constitute and appoint [space] attorney to transfer the said shares
on the books of the trust with full power of substitution.
Dated: [space]
[space] Owner
[space] Signature of Co-owner, if any
IMPORTANT: BEFORE SIGNING, PLEASE READ AND COMPLY WITH REQUIREMENTS PRINTED
ABOVE.
Signature(s) guaranteed by: [space]
24-TEFMD-032593
Text of Stock Certificate for:
The American Funds Tax-Exempt Series I - The Tax-Exempt Fund of Virgnia
[FRONT]
Number [Space] [Picture of Oriole] Number [Space]
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
A MASSACHUSETTS BUSINESS TRUST
THE TAX-EXEMPT FUND OF VIRGINIA
The certifies that (space for registered owner) is the owner of (space for
number of shares)
*SEE REVERSE FOR CERTAIN ABBREVIATIONS CUSIP 02630C206 fully paid Shares of
Beneficial Interest in The Tax-Exempt Fund of Virginia, without par value,
transferable on the books of the Trust by the holder thereof in person or by
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent.
Witness, the facsimile signatures of duly authorized officers of the Trust.
Dated:
/s/ Howard L. Kitzmiller /s/ Harry J. Lister
Vice President and Secretary President
Countersigned
AMERICAN FUNDS SERVICE COMPANY
BY [SPACE FOR SIGNATURE] TRANSFER AGENT
AUTHORIZED SIGNATURE
[BACK OF CERTIFICATE]
EXPLANATION OF ABBREVIATIONS
*The following abbreviations, when used in the registration on the face of this
certificate, shall have the meanings assigned below:
ADM - Administratix
Administrator
COM PROP - Community Property
CUST - Custodian
DTD - Dated
EST - Estate
Of estate of
ET AL - (and) Others
EXEC - Executor
Executrix
FBO - For the benefit of
GDN - Guardian
JT TEN - Joint tenants with right of survivorship
LIFE TEN - Life tenant
TR - Trust
TEN COM - Tenants in common
TEN ENT - Tenants by the entireties
TTEE - Trustee
U/A - Under Agreement
UGMA/(State) - Gift to minors act in effect in the state indicated
UTMA/(State) - Transfers to minors act in effect in the state indicated
U/W - Last will and testament,
Under last will and testament of
Of will of
Under the will of
Of the will of
Note: Abbreviations refer where appropriate to the singular or plural, male or
female. Other abbreviations may also be used, including U.S. Post Office
Department two-letter state abbreviations.
NOTE: AS STATED IN THE FUND'S DECLARATION OF TRUST, THIS CERTIFICATE
REPRESENTING SHARES OF BENEFICIAL INTEREST OF THE TRUST MAY BE REDEEMED WITHOUT
THE CONSENT OR APPROVAL OF THE SHAREHOLDER FOR THE THEN CURRENT NET ASSET VALUE
PER SHARE IF AT SUCH TIME THE SHAREHOLDER OWNS OF RECORD SHARES HAVING AN
AGGREGATE NET ASSET VALUE OF LESS THAN THE MINIMUM INITIAL INVESTMENT AMOUNT.
REQUIREMENTS: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND EXACTLY WITH
THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR.
SIGNATURE(S) MUST BE GUARANTEED BY A BANK, SAVINGS ASSOCIATION, CREDIT UNION,
OR 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.
A NOTARY PUBLIC IS NOT AN ELIGIBLE GUARANTOR.
For value received, the undersigned hereby sell, assign, and transfer [space]
shares of beneficial interest represented by this certificate to : [space]
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE and do hereby
irrevocably constitute and appoint [space] attorney to transfer the said shares
on the books of the trust with full power of substitution.
Dated: [space]
[space] Owner
[space] Signature of Co-owner, if any
IMPORTANT: BEFORE SIGNING, PLEASE READ AND COMPLY WITH REQUIREMENTS PRINTED
ABOVE.
Signature(s) guaranteed by: [space]
24-TEFVA-032593
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, dated and effective as of the 1st day of
December, 1988, is made and entered into by and between THE AMERICAN FUNDS
TAX-EXEMPT SERIES I, a Massachusetts business trust, (hereinafter called the
"Trust"), and CAPITAL RESEARCH AND MANAGEMENT COMPANY, a Delaware corporation
(hereinafter called the "Adviser"). The parties agree as follows:
1.
The Trust is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets, and intends initially to offer shares of two series designated
The Tax-Exempt Fund of Maryland and The Tax- Exempt Fund of Virginia (the
"Fund(s)").
2.
The Trust hereby employs the Adviser to furnish advice to the Trust with
respect to the investment and reinvestment of the assets of the Fund(s). The
Adviser hereby accepts such employment and agrees to render the services and to
assume the obligations to the extent herein set forth, for the compensation
herein provided. The Adviser shall, for all purposes herein, be deemed an
independent contractor and not an agent of the Trust or the Fund(s).
3.
The Adviser agrees to provide supervision of the portfolio of the
Fund(s) and to determine what securities or other property shall be purchased
or sold by the Fund(s), giving due consideration to the policies of the Fund(s)
as expressed in the Trust's Declaration of Trust, Registration Statement under
the Investment Company Act of 1940, as amended (the "1940 Act"), Registration
Statement under the Securities Act of 1933, as amended (the "1933 Act"), and
prospectus as in use from time to time, as well as to the factors affecting the
Trust's status as a regulated investment company under the Internal Revenue
Code of 1954, as amended.
The Adviser shall provide adequate facilities and qualified personnel
for the placement of orders for the purchase, or other acquisition, and sale,
or other disposition, of portfolio securities for the Fund(s). With respect to
such transactions, the Adviser may place orders with broker-dealer firms which
have sold shares of the Fund(s) or of other mutual funds or insurance contracts
for which American Funds Distributors, Inc. serves as underwriter or which
furnish statistical and other information to the Adviser. Neither receipt by
the Adviser of any such statistical and other information or services, nor any
consideration given to sales of shares of the Fund(s) or such other mutual
funds or insurance contracts in selecting broker-dealer firms, shall be deemed
to give rise to any requirement for abatement of the advisory fee payable
pursuant to section 6 hereof.
4.
Except to the extent expressly assumed by the Adviser herein, and
subject to section 6 hereof, the Trust shall pay all costs and expenses in
connection with its operations. Without limiting the generality of the
foregoing, such costs and expenses shall include the following: 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 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 of Trustees who are not interested
persons of the Trust; association dues; and costs of stationery, forms and
certificates prepared exclusively for the Trust. The Adviser and Washington
Management Corporation, which manages the business affairs of the Trust (the
Business Manager") will pay the foregoing expenses in proportion to the fees
both receive from the Trust (with the exclusion 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 Adviser and the Business
Manager receive expense reimbursement fees which together on an annual basis,
are equivalent to the difference between the fees of the Adviser and the
Business Manager and 1% of the average daily net assets of each Fund. The
expense reimbursement fees are for reimbursement of actual expenses incurred by
or on behalf of each Fund and have the effect of assuring that the total normal
operating expenses of each Fund during the expense reimbursement period will
not exceed 1%. Such expense reimbursement fee agreement will terminate either
(1) when all such reimbursable expenses of the Trust which have been paid by
the Adviser and the Business Manager pursuant thereto have been reimbursed by
the Trust or (2) on August 1, 1996, whichever is earlier.
5.
The Adviser and the Business Manager will pay the expenses, in proportion to
the fees both receive from the Trust, incurred in connection with the
organization of the Trust, and its registration as an investment company under
the 1940 Act, and all fees and expenses including fees of legal counsel to the
Trust which would otherwise be required to be paid by the Trust pursuant to
section 4 and which are incurred by the Trust prior to the initial effective
date of its Registration Statements under the 1933 Act and 1940 Act except for
the costs of any share certificates and transfer agent fees and costs. The
provisions contained in Section 4 and 5 with respect to the Business Manager
are contained in the Business Management Agreement between the Trust and the
Business Manager.
6.
The Trust shall pay to the Adviser on or before the tenth (10th) day of
each month, as compensation for the services rendered by the Adviser during the
preceding month, the sum of the following amounts:
(a) 0.165% per annum of each Fund's average daily net assets
during the month ("Net Asset Portion"), plus
(b) 1.65% of each Fund's gross investment income for the preceding
month ("Investment Income Portion").
The Net Asset Portion shall be accrued daily at 1/365th of the
applicable annual rate set forth above. The net assets of the Fund(s) shall be
determined in the manner and on the dates set forth in the prospectus of the
Trust, and on days on which the net assets are not determined, shall be as of
the last preceding day on which the net assets shall have been determined.
The Investment Income Portion shall be accrued daily and "gross
investment income" for this purpose shall include accrual of discount as
defined for Federal income tax purposes but shall not include net gains from
the sale of securities.
Upon any termination of this Agreement on a day other than the last day
of the month, the fee for the period from the beginning of the month in which
termination occurs to the date of termination shall be prorated according to
the proportion which such period bears to the full month.
7.
Nothing contained in this Agreement shall be construed to prohibit the
Adviser from performing investment advisory, management, or distribution
services for other investment companies and other persons or companies nor to
prohibit affiliates of the Adviser from engaging in such businesses or in other
related or unrelated businesses.
8.
The Adviser shall have no liability to the Trust, or its shareholders or
creditors, for any error of judgment, mistake of law, or for any loss arising
out of any investment, or for any other act or omission in the performance of
its obligations to the Trust not involving willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations and duties hereunder.
9.
The Trust has heretofore, or will promptly, and from time to time will furnish
to the Adviser the following: (a) Declaration of Trust; (b) By-Laws; (c)
Minutes of all shareholder meetings; (d) Minutes of all Board of Trustees
meetings; (e) Registration Statements filed under the 1933 Act and 1940 Act;
(f) all periodic reports filed with the Securities and Exchange Commission; (g)
all amendments, subsidiary documents, interpretations, additions or deletions
relating to any of the documents described in this paragraph.
Until notification and delivery of any of the foregoing by the Trust to the
Adviser, the Adviser may rely upon the documents theretofore furnished to it.
10.
This Agreement shall continue in effect until the close of business on
July 31, 1989. It may thereafter be renewed from year to year with respect to
each Fund by mutual consent, provided that such renewal shall be specifically
approved at least annually (i) by the Trustees of the Trust, or by the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
each Fund with respect to which renewal is to be effected, and (ii) by a
majority of the non-interested Trustees by vote cast in person at a meeting
called for the purpose of voting on such renewal. Any approval of this
Agreement or the renewal thereof with respect to a Fund by the vote of a
majority of the outstanding voting securities of that Fund, by the Trustees of
the Trust or by a majority of the non- interested Trustees, shall be effective
to continue this Agreement with respect to that Fund notwithstanding (A) that
this Agreement or the renewal thereof has not been so approved as to any other
Fund or (B) that this Agreement or the renewal thereof has not been approved by
the vote of a majority of the outstanding voting securities of the Trust as a
whole.
11.
The obligations of the Trust under this Agreement are not binding upon
any of the Trustees, officers, agents or shareholders of the Trust
individually, but bind only the Trust estate. The Adviser agrees to look
solely to the assets of the Trust or each Fund for the satisfaction of any
liability in respect of the Trust or such Fund under this Agreement and will
not seek recourse against such Trustees, officers, employees, agents or
shareholders, or any of them, or any of their personal assets for such
satisfaction.
12.
It is understood that the name "American Funds" or any derivative
thereof or logo associated with that name is the valuable property of the
Adviser and its affiliates, and that the Trust and/or the Fund(s) have the
right to use such name (or derivative or logo) only so long as this Agreement
shall continue with respect to the Trust and/or each such Fund. Upon
termination of this Agreement with respect to the Trust or any Fund, the Trust
and each such Fund shall forthwith cease to use such name (or derivative or
logo) and, in the case of the Trust, shall promptly amend its Declaration of
Trust to change its name.
13.
This Agreement may be terminated at any time as to a Fund (or the
Trust), without payment of any penalty, by the Trustees or by the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
such Fund (or the Trust), on 60 days' written notice to the Adviser, or by the
Adviser on like notice to the Trust. This Agreement shall automatically
terminate in the event of its assignment (as defined in the 1940 Act).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate originals by their officers thereunto duly authorized as
of the day and year first above written
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By Stephen Hartwell
Chairman of the Board
By Howard L. Kitzmiller
Vice President, Secretary and Treasurer
CAPITAL RESEARCH AND MANAGEMENT COMPANY
By James W. Ratzlaff
Vice Chairman of the Board
By William J. O'Brien
Assistant Vice President
RENEWAL OF INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made this 18th day of July, 1996, between The American Funds
Tax-Exempt Series I, a Massachusetts business trust (the "Trust"), and Capital
Research and Management Company, a Delaware corporation (the "Investment
Adviser").
W I T N E S S E T H:
WHEREAS, there is now in effect an Investment Advisory Agreement dated
December 1, 1988, between the Trust and the Investment Adviser, providing for
research and portfolio management services to be furnished to the Trust by the
Investment Adviser on certain terms and conditions and subject to certain
provisions set forth therein; and
WHEREAS, said Agreement was last approved by the vote of the holders of a
majority of the outstanding shares of beneficial interest of the Trust at a
Special Meeting of Shareholders held November 22, 1988, and said Agreement
provides for year to year renewals by mutual consent, upon certain specified
conditions, and the last renewal of said Agreement was approved by the Board of
Trustees of the Trust on July 18, 1996; and
WHEREAS, the Trust and the Business Manager wish to renew said Agreement for a
one-year period and such renewal has been approved as required by the terms of
the Agreement;
NOW, THEREFORE, the parties agree as follows:
1. The Investment Advisory Agreement dated December 1, 1988 is hereby renewed
for the one-year period beginning August 1, 1996 and ending at the close of
business on July 31, 1997.
2. The first sentence of Paragraph 6 of the Investment Advisory Agreement, as
amended July 21, 1994, shall read as follows:
"(a) 0.165% per annum of the first $60 million of the Fund's average daily
net assets during the month and 0.12% per annum of the Fund's average daily net
assets during the month in excess of $60 million ("Net Asset Portion"), plus
(b) 1.65% of the Fund's gross investment income for the preceding
month ("Investment Income Portion")."
3. In all other respects said Investment Advisory Agreement, as now in effect,
is reaffirmed and shall continue in effect for the period provided by such
Agreement as renewed by this Agreement.
4. This Agreement shall be executed in several counterparts, each of which
shall be original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized officers as of the
day and year first above written.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I CAPITAL RESEARCH AND MANAGEMENT
COMPANY
By James H. Lemon, Jr. By James F. Rothernberg
Chairman of the Board President
By Howard L. Kitzmiller By Larry Clemmenson
Senior Vice President and Secretary Senior Vice President
PRINCIPAL UNDERWRITING AGREEMENT
THIS PRINCIPAL UNDERWRITING AGREEMENT, between THE AMERICAN FUNDS TAX-
EXEMPT SERIES I, a Massachusetts business trust (the "Trust"), and AMERICAN
FUNDS DISTRIBUTORS, INC., a California corporation ("AFD");
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment company which
initially offers shares of beneficial interest of two series, The Tax-Exempt
Fund of Maryland and The Tax-Exempt Fund of Virginia (the "Funds"), and may
establish additional series in the future, and it is a part of the business of
the Trust, and affirmatively in the interest of the Trust, to offer shares of
the Funds and future series for sale, either continuously, or from time to time
by means of such arrangements as are determined by its Trustees to be
appropriate; and
WHEREAS, AFD is engaged in the business of promoting the distribution of
shares of investment companies through securities dealers; and
WHEREAS, the Trust and AFD wish to enter into an agreement with each
other to promote the distribution of the shares of the Funds and of all series
which may be established in the future;
NOW, THEREFORE, the parties agree as follows:
1. (a) AFD shall be the exclusive principal underwriter for the sale
of the shares of the Funds and each series of the Trust which may be
established in the future, except as otherwise provided pursuant to the
following subsection (b). The terms "shares of Trust" or "shares" as used
herein shall mean shares of beneficial interest of the Funds and each series
which may be established in the future and become covered by this Agreement in
accordance with Section 21.
(b) The Trust may, upon 60 days' written notice to AFD, from time
to time designate other principal underwriters of its shares with respect to
areas other than the North American continent, Hawaii, Puerto Rico, and such
countries or other jurisdictions as to which the Trust may have expressly
waived in writing its right to make such designation. In the event of such
designation, the right of AFD under this Agreement to sell shares in the areas
so designated shall terminate, but this Agreement shall remain otherwise in
full force and effect until terminated in accordance with the other provisions
hereof.
2. In the sale of shares of the Trust, AFD shall act as agent of the
Trust except in any transaction in which AFD sells such shares as a dealer to
the public, in which event AFD shall act as principal for its own account.
3. The Trust shall sell shares only through AFD, except that
the Trust may, to the extent permitted by the 1940 Act and the rules and
regulations promulgated thereunder or pursuant thereto, at any time:
(a) issue shares to any corporation, association, trust, partnership or other
organization, or its, or their, security holders, beneficiaries or members, in
connection with a merger, consolidation or reorganization to which the Trust is
a party, or in connection with the acquisition of all or substantially all the
property and assets of such corporation, association, trust, partnership or
other organization;
(b) issue shares at net asset value to the holders of shares of capital stock
or beneficial interest of other investment companies served as investment
adviser by any affiliated company or companies of The Capital Group, Inc., to
the extent of all or any portion of amounts received by such shareholders upon
redemption or repurchase of their shares by the issuing corporation;
(c) issue shares at net asset value to its shareholders in connection with the
reinvestment of dividends paid and other distributions made by the Trust;
(d) issue shares at net asset value to trustees, and officers of the Trust,
its Investment Adviser, its Business Manager, any principal underwriter of the
Trust, and their affiliates, including any trust, pension, profit-sharing or
other benefit plan established for such persons, and to other persons as
permitted by applicable rules adopted by the Securities and Exchange Commission
(the "Commission") under the 1940 Act, as in effect from time to time or
pursuant to any exemptive order received by the Trust from the Commission
pursuant to Section 6(c) of the 1940 Act;
(e) issue shares at net asset value to the sponsor organization, custodian, or
depositary of a periodic or single payment plan, or similar plan for the
purchase of shares of the Trust, purchasing for such plan;
(f) issue shares in the course of any other transaction specifically provided
for in the Prospectus of the Trust (as defined in Section 5 hereof) or upon
obtaining the written consent of AFD thereto; and
(g) sell shares outside of the North American continent, Hawaii and Puerto
Rico through such other principal underwriter or principal underwriters as may
be designated from time to time by the Trust, pursuant to Section 1 hereof.
4. AFD shall devote its best efforts to the sale of shares of the
Trust and shares of any other mutual funds served as investment adviser by
affiliated companies of The Capital Group, Inc., and insurance contracts funded
by shares of such mutual funds, for which AFD has been authorized to act as a
principal underwriter for the sale of shares. AFD shall maintain a sales
organization suited to the sale of shares of the Trust and shall use its best
efforts to effect such sales in countries as to which the Trust shall have
expressly waived in writing its right to designate another principal
underwriter pursuant to subsection 1(b) hereof, and shall effect and maintain
appropriate qualification to do so in all those jurisdictions in which it sells
or offers shares for sale and in which qualification is required.
5. All dealers to whom AFD shall offer and sell shares must be duly
licensed and qualified to sell shares of the Trust. Shares sold to dealers
shall be for resale by such dealers only at the public offering price set forth
in the effective Prospectus which is part of the Trust's Registration Statement
in effect under the Securities Act of 1933, as amended, at the time of such
offer or sale (herein the "Prospectus"). AFD shall not, without the consent
of the Trust, sell or offer for sale any shares of the Trust other than
pursuant to this Agreement.
6. In its sales to dealers, it shall be the responsibility of AFD to
insure that such dealers are appropriately qualified to transact business in
the shares under applicable laws, rules and regulations promulgated by such
national, state ,local or other governmental or quasi-governmental authorities
as may in a particular instance have jurisdiction.
7. The applicable public offering price of shares shall be the price
which is equal to the net asset value per share plus such sales charge as may
be provided for in the Prospectus. Net asset value per share shall be
determined by the Trust in the manner and at the time or times set forth in and
subject to the provisions of the Prospectus of the Trust.
8. All orders for shares received by AFD shall, unless rejected by AFD
or the Trust, be accepted by AFD immediately upon receipt and confirmed at an
offering price determined in accordance with the provisions of the Prospectus
and the 1940 Act, and applicable rules in effect thereunder. AFD shall not
hold orders subject to acceptance nor otherwise delay their execution. The
provisions of this Section shall not be construed to restrict the right of the
Trust to withhold shares from sale under Section 16 hereof.
9. The Trust or its transfer agent shall be promptly advised of all
orders received, and shall cause shares to be issued upon payment therefor in
New York or Los Angeles Clearing House Funds.
10. AFD shall adopt and follow procedures as approved by the officers
of the Trust for the confirmation of sales to dealers, the collection of
amounts payable by dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
Commission or the National Association of Securities Dealers, Inc. ("NASD"), as
such requirements may from time to time exist.
11. The compensation for the services of AFD as a principal underwriter
under this Agreement shall be (i) that part of the sales charge which is
retained by AFD after allowance of discounts to dealers as provided for in
Section 5 hereof, and (ii) amounts payable to AFD as reimbursement of expenses
pursuant to the Trust's Plan of Distribution under Rule 12b-1 under the 1940
Act, payable in arrears as of the 10th day following each month-end.
12. The Trust agrees to use its best efforts to maintain its
registration as a diversified open-end management investment company under the
1940 Act.
13. The Trust agrees to use its best efforts to maintain an effective
Prospectus under the Securities Act of 1933, as amended, and warrants that such
Prospectus will contain all statements required by and will conform with the
requirements of such Securities Act of 1933 and the rules and regulations
thereunder, and that no part of any such Prospectus, at the time the
Registration Statement of which it is a part becomes effective, will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading. AFD agrees and warrants that it will not in the sale of shares use
any Prospectus, advertising or sales literature not approved by the Trust or
its officers nor make any untrue statement of a material fact nor omit the
stating of a material fact necessary in order to make the statements made, in
the light of the circumstances under which they are made, not misleading. AFD
agrees to indemnify and hold the Trust harmless from any and all loss, expense,
damage and liability resulting from a breach of the agreements and warranties
in this Section contained , or from the use of any sales literature,
information, statistics or other aid or device employed in connection with the
sale of shares.
14. The expense of each printing of each Prospectus and each revision
thereof or addition thereto deemed necessary by the Trust's officers to meet
the requirements of applicable laws shall be divided between the Trust, AFD and
any other principal underwriter of the shares of the Trust as follows:
(a) the Trust shall pay the typesetting and make-ready charges;
(b) the printing charge shall be prorated between the Trust, AFD, and any
other principal underwriter(s) in accordance with the number of copies each
receives; and
(c) expenses incurred in connection with the foregoing, other than to meet the
requirements of the Securities Act of 1933, as amended, or other applicable
laws, shall be borne by AFD, except in the event such incremental expenses are
incurred at the request of any other principal underwriter(s) in which case
such incremental expenses shall be borne by the principal underwriter(s) making
the request.
15. The Trust agrees to use its best efforts to qualify and maintain
the qualification of an appropriate number of its shares for sale under the
securities laws of such states as AFD and the Trust may approve. Any such
qualification may be withheld, terminated or withdrawn by the Trust at any time
in its discretion. The expense of qualification and maintenance of
qualification shall be borne by the Trust, but AFD shall furnish such
information and other material relating to its affairs and activities as may be
required by the Trust or its counsel in connection with such qualifications.
16. The Trust may withhold shares from sale in any state or country
temporarily or permanently if, in the opinion of its counsel, such offer or
sale would be contrary to law or if the Trustees or the President or any Vice
President of the Trust determines that such offer or sale is not in the best
interest of the Trust. The Trust will give prompt notice to AFD of any
withholding.
17. (a) This Agreement may be terminated by the Trust at any time,
without payment of penalty, by vote of a majority of the Trustees of the Trust
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of the Trust's
Plan of Distribution under Rule 12b-1 under the 1940 Act or any agreement
related to such Plan (the "Independent Trustees") or by a vote of a majority of
the outstanding voting securities of the Trust on sixty (60) days' written
notice to AFD.
(b) This Agreement may be terminated by either party upon five (5) days'
written notice to the other party in the event that the Securities and Exchange
Commission has issued an order or obtained an injunction or other court order
suspending effectiveness of the Registration Statement covering the shares of
the Trust or such series.
(c) This Agreement may be terminated by the Trust as to the Trust or any
series upon five (5) days written notice to AFD provided either of the
following events has occurred:
(i) the NASD has expelled AFD or suspended its membership in that
organization;
(ii) the qualification, registration, license or right of AFD to
sell shares in a particular state has been suspended or cancelled by the State
of California or any other state in which sales of the shares of the Trust or
such series during the most recent 12-month period exceeded 10% of all shares
sold by AFD during such period.
AFD shall inform the Trust promptly of the institution of any proceeding
against it by the Securities and Exchange Commission, the NASD, or any state
regulatory authority.
18. This Agreement shall not be assignable by either party hereto and
in the event of assignment shall automatically terminate forthwith. The term
"assignment" shall have the meaning set forth in the 1940 Act.
19. No provision of this Agreement shall protect or purport to protect
AFD against any liability to the Trust or holders of its shares for which AFD
would otherwise be liable by reason of willful misfeasance, bad faith, or gross
negligence.
20. The obligations of the Trust under this Agreement are not binding
upon any of the Trustees, officers, agents or shareholders of the Funds or any
series, individually, but bind only the Trust Estate. AFD agrees to look
solely to the assets of the Trust for the satisfaction of any liability of the
Trust in respect of this Agreement and will not seek recourse against such
Trustees, officers, agents or shareholders or any of them, or any of their
personal assets for such satisfaction.
21. This Agreement becomes effective on August 1, 1989. Unless sooner
terminated in accordance with the other provisions hereof, this Agreement shall
continue in effect until July 31, 1990, and shall continue in effect from year
to year thereafter but only so long as such continuance is specifically
approved at least annually by (i) the vote of a majority of Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on such approval, and (ii) the vote of either the Board of Trustees of
the Trust or a majority (within the meaning of the 1940 Act) of the outstanding
voting securities of the Trust.
22. This Agreement shall take effect with respect to each series of the
Trust which may be established in the future at such time as it has been
approved as to such series by vote of the Board of Trustees and the Independent
Trustees in accordance with Section 21. The Agreement as approved with respect
to any series shall specify the compensation payable to AFD pursuant to Section
11, as well as any provisions which may differ from those herein with respect
to such series, subject to approval in writing by AFD.
This Agreement may be approved, amended, continued or renewed with
respect to a series as provided herein notwithstanding such approval,
amendment, continuance or renewal has not been effected with respect to any one
or more other series of the Trust.
This Agreement shall be construed under and shall be governed by
the laws of the State of California, and the parties hereto agree that proper
venue of any action with respect hereto shall be Los Angeles County,
California.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunto duly authorized, as
of August 1, 1989.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By Harry J. Lister
(President)
By Howard L. Kitzmiller
(Vice President, Secretary
and Treasurer)
AMERICAN FUNDS DISTRIBUTORS, INC.
By Hoyt J. Turner
(President)
By James R. Zukor
(Secretary)
July 18, 1996
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071
Gentlemen:
Under date of August 1, 1989, we entered into a Principal Underwriting
Agreement with you appointing you the exclusive agent for this Trust for the
sale of its shares commencing August 1, 1989, the Agreement to expire on July
31, 1990. Said Agreement has been extended annually to July 31, 1996. We now
desire to further extend the term of this Agreement for the period through July
31, 1997.
If the extension of this Agreement is agreeable to you, kindly sign both
copies of this letter in the space provided therefor and return one to us, in
which event the Agreement will have been extended accordingly. Such extension
is not to be construed, however, as a waiver by this Trust of any of its rights
under said Agreement either as now in effect or as extended.
Sincerely,
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By James H. Lemon, Jr.
Chairman of the Board
By Howard L. Kitzmiller
Senior Vice President, Secretary & Treasurer
The foregoing extension is acceptable.
AMERICAN FUNDS DISTRIBUTORS, INC.
By Michael J. Johnston Dated 8/27/96
Chairman
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 1, 1993, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and American Funds Tax Exempt Series I -
The Tax-Exempt Fund of Maryland (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for any
and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined
in Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account") for any
and all cash in any currency received by the Bank or its Subcustodian for the
account of the Customer, which cash shall not be subject to withdrawal by draft
or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional Accounts
may be established and separately accounted for as additional Accounts under
the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which the
principal trading market for such Securities is located, where such Securities
are to be presented for payment or where such Securities are acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction in
which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-interest
bearing accounts as may be available for the particular currency. To the
extent Instructions are issued and the Bank can comply with such Instructions,
the Bank is authorized to maintain cash balances on deposit for the Customer
with itself or one of its affiliates at such reasonable rates of interest as
may from time to time be paid on such accounts, or in non-interest bearing
accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians. The
Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the Customer.
(b) A Subcustodian will hold Assets together with assets belonging to other
customers of the Bank in accounts identified on such Subcustodian's books as
special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only to
the instructions of the Bank or its agent. Any Securities held in a securities
depository for the account of a Subcustodian will be subject only to the
instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit Account
upon receipt of Instructions which include all information required by the
Bank.
(b) In the event that any payment to be made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that
such amount has not been received in the ordinary course of business or (ii)
that such amount was incorrectly credited. If the Customer does not promptly
return any amount upon such notification, the Bank shall be entitled, upon oral
or written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount, but may act for the
Customer upon Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or its
Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are returned by
the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions
(a) Present for payment any Securities which are called, redeemed or retired
or otherwise become payable and all coupons and other income items which call
for payment upon presentation, to the extent that the Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other certificates
as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the Securities,
including, without limitation, affiliates of the Bank or any Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect of
Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received
which bears an expiration date, the Bank will endeavor to obtain Instructions
from the Customer or its Authorized Person as defined in Section 10, but if
Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent pursuant
to special arrangements which may have been agreed to in writing. Such proxies
shall be executed in the appropriate nominee name relating to Securities in the
Custody Account registered in the name of such nominee but without indicating
the manner in which such proxies are to be voted; and where bearer Securities
are involved, proxies will be delivered in accordance with Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered in a
nominee name of the Bank, Subcustodian or securities depository, as the case
may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer
under this Agreement. Such persons shall continue to be Authorized Persons
until such time as the Bank receives Instructions from the Customer or its
designated agent that any such employee or agent is no longer an Authorized
Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person received
by the Bank, via telephone, telex, TWX, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear
the facsimile signature of such Person), but the Customer will hold the Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties as
are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations under
this Agreement and the safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of
such Assets to the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of any loss to the
Customer by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the market value of
the property which is the subject of the loss at the date of discovery of such
loss and without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or for
the solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the Customer
for any action taken or omitted by the Bank whether pursuant to Instructions or
otherwise within the scope of this Agreement if such act or omission was in
good faith, without negligence. In performing its obligations under this
Agreement, the Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing or
holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to forces
beyond their control including, but not limited to strikes or work stoppages,
acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this Section
12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or the
retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default in the
payment of principal or income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person regarding the
financial condition of any broker, agent or other party to which Securities are
delivered or payments are made pursuant to this Agreement; or
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any
of the activities listed herein.
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement such
amount as may be agreed upon in writing, together with the Bank's reasonable
out-of-pocket or incidental expenses, including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but the
Bank may establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its subsidiaries,
affiliates or Subcustodians enter into a foreign exchange contract related to
Accounts, the terms and conditions of the then current foreign exchange
contract of the Bank, its subsidiary, affiliate or Subcustodian and, to the
extent not inconsistent, this Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent public
accountant reasonable access to the records of the Bank relating to the Assets
as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the Assets
deposited in the Accounts are (check one):
employee benefit plan or other assets subject to the Employee
Retirement Income
Security Act of 1974, as amended ("ERISA");
X mutual fund assets subject to Securities and Exchange Commission
("SEC") rules and regulations;
neither of the above.
This Agreement consists exclusively of this document and the following
rider(s) [check applicable rider(s)]:
ERISA
X MUTUAL FUND
SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement supersedes
any other agreements, whether written or oral, between the parties. Any
amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this Agreement
are held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of any such provision and of the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected
or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center 18th Floor
Brooklyn, NY 11245
Customer: American Funds Tax Exempt Series I - The Tax Exempt Fund of
Maryland
1101Vermont Avenue N.W.
Washington D.C. 20005
(i) Termination. This Agreement may be terminated by the Customer or the Bank
by giving sixty days written notice to the other, provided that such notice to
the Bank shall specify the names of the persons to whom the Bank shall deliver
the Assets in the Accounts. If notice of termination is given by the Bank, the
Customer shall, within sixty days following receipt of the notice, deliver to
the Bank Instructions specifying the names of the persons to whom the Bank
shall deliver the Assets. In either case the Bank will deliver the Assets to
the persons so specified, after deducting any amounts which the Bank determines
in good faith to be owed to it under Section 13. If within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York
to be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By: /s/Howard L. Kitzmiller
Vice President
Title
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Michael Ravenburger
Vice President
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
American Funds Tax Exempt Series I - The Tax Exempt Fund of Maryland,
effective January 1, 1993
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this Agreement
shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository, which are further defined as
follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the Act ;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof)(iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the United
States which has such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate action of the
SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11:
Account Transactions made pursuant to Section 5 and 6 of this Agreement may be
made only for the purposes listed below. Instructions must specify the purpose
for which any transaction is to be made and Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the Customer
and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of such shares to be so redeemed to the Bank, its Subcustodian or the
Customer's transfer agent;
(k) For delivery in accordance with the provisions of any agreement among the
Customer, the Bank and a broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc.,relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due
other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate security
trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the Customer
such reports (or portions thereof) of the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar reports as it may
reasonably request with respect to each Subcustodian and securities depository
holding the Customer's assets.
GLOBAL CUSTODY AGREEMENT
This AGREEMENT is effective January 1, 1993, and is between THE CHASE
MANHATTAN BANK, N.A. (the "Bank") and American Funds Tax Exempt Series I -
The Tax-Exempt Fund of Virginia (the "Customer").
1. CUSTOMER ACCOUNTS.
The Bank agrees to establish and maintain the following accounts ("Accounts"):
(a) A custody account in the name of the Customer ("Custody Account") for any
and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money, bullion, coin and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same or evidencing or representing any other
rights or interests therein and other similar property whether certificated or
uncertificated as may be received by the Bank or its Subcustodian (as defined
in Section 3) for the account of the Customer ("Securities"); and
(b) A deposit account in the name of the Customer ("Deposit Account") for any
and all cash in any currency received by the Bank or its Subcustodian for the
account of the Customer, which cash shall not be subject to withdrawal by draft
or check.
The Customer warrants its authority to: 1) deposit the cash and Securities
("Assets") received in the Accounts and 2) give Instructions (as defined in
Section 11) concerning the Accounts. The Bank may deliver securities of the
same class in place of those deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional Accounts
may be established and separately accounted for as additional Accounts under
the terms of this Agreement.
2. MAINTENANCE OF SECURITIES AND CASH AT BANK AND SUBCUSTODIAN LOCATIONS.
Unless Instructions specifically require another location acceptable to the
Bank:
(a) Securities will be held in the country or other jurisdiction in which the
principal trading market for such Securities is located, where such Securities
are to be presented for payment or where such Securities are acquired; and
(b) Cash will be credited to an account in a country or other jurisdiction in
which such cash may be legally deposited or is the legal currency for the
payment of public or private debts.
Cash may be held pursuant to Instructions in either interest or non-interest
bearing accounts as may be available for the particular currency. To the
extent Instructions are issued and the Bank can comply with such Instructions,
the Bank is authorized to maintain cash balances on deposit for the Customer
with itself or one of its affiliates at such reasonable rates of interest as
may from time to time be paid on such accounts, or in non-interest bearing
accounts as the Customer may direct, if acceptable to the Bank.
If the Customer wishes to have any of its Assets held in the custody of an
institution other than the established Subcustodians or their securities
depositories such arrangement must be authorized by a written agreement, signed
by the Bank and the Customer.
3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
The Bank may act under this Agreement through the subcustodians listed in
Schedule A of this Agreement with which the Bank has entered into subcustodial
agreements ("Subcustodians"). The Customer authorizes the Bank to hold Assets
in the Accounts in accounts which the Bank has established with one or more of
its branches or Subcustodians. The Bank and Subcustodians are authorized to
hold any of the Securities in their account with any securities depository in
which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians. The
Customer will be given reasonable notice by the Bank of any amendment to
Schedule A. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other regulatory
authority that supervises or regulates such Subcustodian.
4. USE OF SUBCUSTODIAN.
(a) The Bank will identify Assets on its books as belonging to the Customer.
(b) A Subcustodian will hold Assets together with assets belonging to other
customers of the Bank in accounts identified on such Subcustodian's books as
special custody accounts for the exclusive benefit of customers of the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject only to
the instructions of the Bank or its agent. Any Securities held in a securities
depository for the account of a Subcustodian will be subject only to the
instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding its
customer's assets shall provide that such assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, and that the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration. The foregoing
shall not apply to the extent of any special agreement or arrangement made by
the Customer with any particular Subcustodian.
5. DEPOSIT ACCOUNT TRANSACTIONS.
(a) The Bank or its Subcustodians will make payments from the Deposit Account
upon receipt of Instructions which include all information required by the
Bank.
(b) In the event that any payment to be made under this Section 5 exceeds the
funds available in the Deposit Account, the Bank, in its discretion, may
advance the Customer such excess amount which shall be deemed a loan payable on
demand, bearing interest at the rate customarily charged by the Bank on similar
loans.
(c) If the Bank credits the Deposit Account on a payable date, or at any time
prior to actual collection and reconciliation to the Deposit Account, with
interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that
such amount has not been received in the ordinary course of business or (ii)
that such amount was incorrectly credited. If the Customer does not promptly
return any amount upon such notification, the Bank shall be entitled, upon oral
or written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its
Subcustodian shall have no duty or obligation to institute legal proceedings,
file a claim or a proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount, but may act for the
Customer upon Instructions after consultation with the Customer.
6. CUSTODY ACCOUNT TRANSACTIONS.
(a) Securities will be transferred, exchanged or delivered by the Bank or its
Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made in accordance with the customary or established securities trading or
securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank, in its discretion, may credit or debit the Accounts on a
contractual settlement date with cash or Securities with respect to any sale,
exchange or purchase of Securities. Otherwise, such transactions will be
credited or debited to the Accounts on the date cash or Securities are actually
received by the Bank and reconciled to the Accounts.
(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction.
(ii) If any Securities delivered pursuant to this Section 6 are returned by
the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. ACTIONS OF THE BANK.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will perform the following functions
(a) Present for payment any Securities which are called, redeemed or retired
or otherwise become payable and all coupons and other income items which call
for payment upon presentation, to the extent that the Bank or Subcustodian is
actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other certificates
as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the Securities,
including, without limitation, affiliates of the Bank or any Subcustodian.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any transfers of
Assets to or from the Accounts. Such statements, advices or notifications
shall indicate the identity of the entity having custody of the Assets. Unless
the Customer sends the Bank a written exception or objection to any Bank
statement within sixty days of receipt, the Customer shall be deemed to have
approved such statement. In such event, or where the Customer has otherwise
approved any such statement, the Bank shall, to the extent permitted by law, be
released, relieved and discharged with respect to all matters set forth in such
statement or reasonably implied therefrom as though it had been settled by the
decree of a court of competent jurisdiction in an action where the Customer and
all persons having or claiming an interest in the Customer or the Customer's
Accounts were parties.
All collections of funds or other property paid or distributed in respect of
Securities in the Custody Account shall be made at the risk of the Customer.
The Bank shall have no liability for any loss occasioned by delay in the actual
receipt of notice by the Bank or by its Subcustodians of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take any action under this Agreement.
8. CORPORATE ACTIONS; PROXIES.
Whenever the Bank receives information concerning the Securities which
requires discretionary action by the beneficial owner of the Securities (other
than a proxy), such as subscription rights, bonus issues, stock repurchase
plans and rights offerings, or legal notices or other material intended to be
transmitted to securities holders ("Corporate Actions"), the Bank will give the
Customer notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in time
to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received
which bears an expiration date, the Bank will endeavor to obtain Instructions
from the Customer or its Authorized Person as defined in Section 10, but if
Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.
The Bank will deliver proxies to the Customer or its designated agent pursuant
to special arrangements which may have been agreed to in writing. Such proxies
shall be executed in the appropriate nominee name relating to Securities in the
Custody Account registered in the name of such nominee but without indicating
the manner in which such proxies are to be voted; and where bearer Securities
are involved, proxies will be delivered in accordance with Instructions.
9. NOMINEES.
Securities which are ordinarily held in registered form may be registered in a
nominee name of the Bank, Subcustodian or securities depository, as the case
may be. The Bank may, without notice to the Customer, cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.
10. AUTHORIZED PERSONS.
As used in this Agreement, the term "Authorized Person" means employees or
agents including investment managers as have been designated by written notice
from the Customer or its designated agent to act on behalf of the Customer
under this Agreement. Such persons shall continue to be Authorized Persons
until such time as the Bank receives Instructions from the Customer or its
designated agent that any such employee or agent is no longer an Authorized
Person.
11. INSTRUCTIONS.
The term "Instructions" means instructions of any Authorized Person received
by the Bank, via telephone, telex, TWX, facsimile transmission, bank wire or
other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank believes in good faith to have been given
by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded.
Any Instructions delivered to the Bank by telephone shall promptly thereafter
be confirmed in writing by an Authorized Person (which confirmation may bear
the facsimile signature of such Person), but the Customer will hold the Bank
harmless for the failure of an Authorized Person to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time. Either Party may electronically record any Instructions given
by telephone, and any other telephone discussions with respect to the Custody
Account. The Customer shall be responsible for safeguarding any testkeys,
identification codes or other security devices which the Bank shall make
available to the Customer or its Authorized Persons.
12. STANDARD OF CARE; LIABILITIES.
(a) The Bank shall be responsible for the performance of only such duties as
are set forth in this Agreement or expressly contained in Instructions which
are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations under
this Agreement and the safekeeping of Assets. The Bank shall be liable to the
Customer for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of
such Assets to the same extent that the Bank would be liable to the Customer if
the Bank were holding such Assets in New York. In the event of any loss to the
Customer by reason of the failure of the Bank or its Subcustodian to utilize
reasonable care, the Bank shall be liable to the Customer only to the extent of
the Customer's direct damages, to be determined based on the market value of
the property which is the subject of the loss at the date of discovery of such
loss and without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or for
the solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the Customer
for any action taken or omitted by the Bank whether pursuant to Instructions or
otherwise within the scope of this Agreement if such act or omission was in
good faith, without negligence. In performing its obligations under this
Agreement, the Bank may rely on the genuineness of any document which it
believes in good faith to have been validly executed.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.
(vi) The Bank need not maintain any insurance for the benefit of the Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from: 1) the general risk of investing, or 2) investing or
holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.
(viii) Neither party shall be liable to the other for any loss due to forces
beyond their control including, but not limited to strikes or work stoppages,
acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this Section
12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or the
retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any default in the
payment of principal or income of any security other than as provided in
Section 5(c) of this Agreement;
(iv) evaluate or report to the Customer or an Authorized Person regarding the
financial condition of any broker, agent or other party to which Securities are
delivered or payments are made pursuant to this Agreement; or
(v) review or reconcile trade confirmations received from brokers. The
Customer or its Authorized Persons issuing Instructions shall bear any
responsibility to review such confirmations against Instructions issued to and
statements issued by the Bank.
(c) The Customer authorizes the Bank to act under this Agreement
notwithstanding that the Bank or any of its divisions or affiliates may have a
material interest in a transaction, or circumstances are such that the Bank may
have a potential conflict of duty or interest including the fact that the Bank
or any of its affiliates may provide brokerage services to other customers, act
as financial advisor to the issuer of Securities, act as a lender to the issuer
of Securities, act in the same transaction as agent for more than one customer,
have a material interest in the issue of Securities, or earn profits from any
of the activities listed herein.
13. FEES AND EXPENSES.
The Customer agrees to pay the Bank for its services under this Agreement such
amount as may be agreed upon in writing, together with the Bank's reasonable
out-of-pocket or incidental expenses, including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. MISCELLANEOUS.
(a) Foreign Exchange Transactions. To facilitate the administration of the
Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions, including
standing instructions, may be issued with respect to such contracts but the
Bank may establish rules or limitations concerning any foreign exchange
facility made available. In all cases where the Bank, its subsidiaries,
affiliates or Subcustodians enter into a foreign exchange contract related to
Accounts, the terms and conditions of the then current foreign exchange
contract of the Bank, its subsidiary, affiliate or Subcustodian and, to the
extent not inconsistent, this Agreement shall apply to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is a
resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.
(c) Access to Records. The Bank shall allow the Customer's independent public
accountant reasonable access to the records of the Bank relating to the Assets
as is required in connection with their examination of books and records
pertaining to the Customer's affairs. Subject to restrictions under applicable
law, the Bank shall also obtain an undertaking to permit the Customer's
independent public accountants reasonable access to the records of any
Subcustodian which has physical possession of any Assets as may be required in
connection with the examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be governed
by the laws of the State of New York and shall not be assignable by either
party, but shall bind the successors in interest of the Customer and the Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the Assets
deposited in the Accounts are (check one):
employee benefit plan or other assets subject to the Employee
Retirement Income
Security Act of 1974, as amended ("ERISA");
X mutual fund assets subject to Securities and Exchange Commission
("SEC") rules and regulations;
neither of the above.
This Agreement consists exclusively of this document and the following
rider(s) [check applicable rider(s)]:
ERISA
X MUTUAL FUND
SPECIAL TERMS AND CONDITIONS
There are no other provisions of this Agreement and this Agreement supersedes
any other agreements, whether written or oral, between the parties. Any
amendment to this Agreement must be in writing, executed by both parties.
(f) Severability. In the event that one or more provisions of this Agreement
are held invalid, illegal or unenforceable in any respect on the basis of any
particular circumstances or in any jurisdiction, the validity, legality and
enforceability of any such provision and of the remaining provisions, under
other circumstances or in other jurisdictions will not in any way be affected
or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, no failure or
delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise thereof, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center 18th Floor
Brooklyn, NY 11245
Customer: American Funds Tax Exempt Series I - The Tax Exempt Fund of
Virginia
1101Vermont Avenue N.W.
Washington D.C. 20005
(i) Termination. This Agreement may be terminated by the Customer or the Bank
by giving sixty days written notice to the other, provided that such notice to
the Bank shall specify the names of the persons to whom the Bank shall deliver
the Assets in the Accounts. If notice of termination is given by the Bank, the
Customer shall, within sixty days following receipt of the notice, deliver to
the Bank Instructions specifying the names of the persons to whom the Bank
shall deliver the Assets. In either case the Bank will deliver the Assets to
the persons so specified, after deducting any amounts which the Bank determines
in good faith to be owed to it under Section 13. If within sixty days
following receipt of a notice of termination by the Bank, the Bank does not
receive Instructions from the Customer specifying the names of the persons to
whom the Bank shall deliver the Assets, the Bank, at its election, may deliver
the Assets to a bank or trust company doing business in the State of New York
to be held and disposed of pursuant to the provisions of this Agreement, or to
Authorized Persons, or may continue to hold the Assets until Instructions are
provided to the Bank.
CUSTOMER
By: /s/Howard L. Kitzmiller
Vice President
Title
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Michael Ravenburger
Vice President
Mutual Fund Rider to Global Custody Agreement
Between The Chase Manhattan Bank, N.A. and
American Funds Tax Exempt Series I - The Tax Exempt Fund of Virginia,
effective January 1, 1993
Customer represents that the Assets being placed in the Bank's custody are
subject to the Investment Company Act of 1940 (the "Act"), as the same may be
amended from time to time.
Except to the extent that the Bank has specifically agreed to comply with a
condition of a rule, regulation, interpretation promulgated by or under the
authority of the SEC or the Exemptive Order applicable to accounts of this
nature issued to the Bank (Investment Company Act of 1940, Release No. 12053,
November 20, 1981), as amended, or unless the Bank has otherwise specifically
agreed, the Customer shall be solely responsible to assure that the maintenance
of Assets under this Agreement complies with such rules, regulations,
interpretations or exemptive order promulgated by or under the authority of the
Securities Exchange Commission.
The following modifications are made to the Agreement:
SECTION 3. SUBCUSTODIANS AND SECURITIES DEPOSITORIES.
Add the following language to the end of Section 3:
The terms Subcustodian and securities depositories as used in this Agreement
shall mean a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository, which are further defined as
follows:
(a) "qualified U.S. Bank" shall mean a qualified U.S. bank as defined in Rule
17f-5 under the Act ;
(b) "eligible foreign custodian" shall mean (i) a banking institution or
trust company incorporated or organized under the laws of a country other than
the United States that is regulated as such by that country's government or an
agency thereof and that has shareholders' equity in excess of $200 million in
U.S. currency (or a foreign currency equivalent thereof), (ii) a majority owned
direct or indirect subsidiary of a qualified U.S. bank or bank holding company
that is incorporated or organized under the laws of a country other than the
United States and that has shareholders' equity in excess of $100 million in
U.S. currency (or a foreign currency equivalent thereof)(iii) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States or a majority owned direct or indirect
subsidiary of a qualified U.S. bank or bank holding company that is
incorporated or organized under the laws of a country other than the United
States which has such other qualifications as shall be specified in
Instructions and approved by the Bank; or (iv) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate action of the
SEC; and
(c) "eligible foreign securities depository" shall mean a securities
depository or clearing agency, incorporated or organized under the laws of a
country other than the United States, which operates (i) the central system for
handling securities or equivalent book-entries in that country, or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
SECTION 11. INSTRUCTIONS.
Add the following language to the end of Section 11:
Account Transactions made pursuant to Section 5 and 6 of this Agreement may be
made only for the purposes listed below. Instructions must specify the purpose
for which any transaction is to be made and Customer shall be solely
responsible to assure that Instructions are in accord with any limitations or
restrictions applicable to the Customer by law or as may be set forth in its
prospectus.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions;
(b) When Securities are called, redeemed or retired, or otherwise become
payable;
(c) In exchange for or upon conversion into other securities alone or other
securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment;
(d) Upon conversion of Securities pursuant to their terms into other
securities;
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities;
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses;
(g) In connection with any borrowings by the Customer requiring a pledge of
Securities, but only against receipt of amounts borrowed;
(h) In connection with any loans, but only against receipt of adequate
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer;
(i) For the purpose of redeeming shares of the capital stock of the Customer
and the delivery to, or the crediting to the account of, the Bank, its
Subcustodian or the Customer's transfer agent, such shares to be purchased or
redeemed;
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of such shares to be so redeemed to the Bank, its Subcustodian or the
Customer's transfer agent;
(k) For delivery in accordance with the provisions of any agreement among the
Customer, the Bank and a broker-dealer registered under the Securities Exchange
Act of 1934 (the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc.,relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Customer;
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Bank of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Bank will receive from brokers the Securities previously
deposited. The Bank will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due
other than to make proper request for such return;
(m) For spot or forward foreign exchange transactions to facilitate security
trading, receipt of income from Securities or related transactions;
(n) For other proper purposes as may be specified in Instructions issued by
an officer of the Customer which shall include a statement of the purpose for
which the delivery or payment is to be made, the amount of the payment or
specific Securities to be delivered, the name of the person or persons to whom
delivery or payment is to be made, and a certification that the purpose is a
proper purpose under the instruments governing the Customer; and
(o) Upon the termination of this Agreement as set forth in Section 14(i).
SECTION 12. STANDARD OF CARE; LIABILITIES.
Add the following subsection (d) to Section 12:
(c) The Bank hereby warrants to the Customer that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding the Customer's Securities
pursuant to this Agreement afford protection for such Securities at least equal
to that afforded by the Bank's established procedures with respect to similar
securities held by the Bank and its securities depositories in New York.
SECTION 14. ACCESS TO RECORDS.
Add the following language to the end of Section 14(c):
Upon reasonable request from the Customer, the Bank shall furnish the Customer
such reports (or portions thereof) of the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement. The Bank shall
endeavor to obtain and furnish the Customer with such similar reports as it may
reasonably request with respect to each Subcustodian and securities depository
holding the Customer's assets.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 12 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
August 31, 1996, 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, 1996
July 30, 1986
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071
Re: Investment Letter
Gentlemen:
The American Funds Tax-Exempt Series I, a Massachusetts business trust,
(the "Trust") hereby offers to sell to you 1924.759 shares of beneficial
interest of the Tax-Exempt Fund of Maryland and 1924.759 shares of beneficial
interest of the Tax-Exempt Fund of Virginia, with no par value (the "Shares")
at a price of $14.2875 per share upon the following terms and conditions :
You agree to pay to the Trust the aggreregate purchase price of $55,000
against delivery of a statement confirming the registration of the 1924.759
Shares of each Fund in your name.
You represent to the Trust that you are purchasing the Shares of each
Fund for your own account for investment purposes and not with the present
intention of redeeming or reselling the Shares and that the purchase price of
such Shares is in payment for an equity interest and does not represent a loan
or temporary advance by you.
Very truly yours,
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By /s/
Stephen Hartwell, Trustee
Confirmed and agreed to July 30,1986
CAPITAL RESEARCH AND MANAGEMENT COMPANY
By /s/ Paul G. Haaga, Jr.
July 30, 1986
Washington Management Corporation
1101 Vermont N.W.
Washington , D.C. 20005
Re: Investment Letter
Gentlemen:
The American Funds Tax-Exempt Series I, a Massachusetts business trust, (the
"Trust) hereby offers to sell to you 1574.803 shares of beneficial interest of
the Tax-Exempt Fund of Maryland and 1574.803 shares of beneficial interest of
the Tax-Exempt Fund of Virginia, with no par value (the "Shares" ) at a price
of $14.2875 per share upon the following terms and conditions :
You agree to pay to the Trust the aggregate purchase price of $45,000 against
delivery of a statement confirming the registration of the 1574.803 Shares of
each Fund in your n name.
You represent to the Trust that you are purchasing the Shares of each Fund
for your own account for investment purposes and not with the present intention
of redeeming or reselling the Shares and that the purchase price of such Shares
is in payment for an equity interest and does not represent a loan or temporary
advance to you.
Very truly yours,
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By /s/
Stephen Hartwell, Trustee
Confirmed and agreed to July 30, 1986
WASHINGTON MANAGEMENT CORPORATION
By /s/ Harry J. Lister
PLAN OF DISTRIBUTION
OF
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
WHEREAS, The American Funds Tax-Exempt Series I (the "Trust") is a
Massachusetts business trust which initially offers shares of beneficial
interest in two series designated The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia (the "Funds"), and may establish additional series
in the future;
WHEREAS, the Trust desires to employ American Funds Distributors, Inc.
("AFD") as distributor of the shares of beneficial interest of the Funds and of
all series which may be established in the future, and the Trust and AFD are
parties to a Principal Underwriting Agreement ("Agreement");
WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to
authorize the Trust to bear expenses of distribution of its
shares, including reimbursement of AFD for its expenses in the promotion of the
sale of shares of the Fund, pursuant to the Agreement;
WHEREAS, the Board of Trustees of the Trust has determined that there is
a reasonable likelihood that this Plan will benefit the Trust and its
shareholders;
NOW, THEREFORE, the Trust adopts this Plan as follows:
1. The Trust may expense pursuant to this Plan amounts not to exceed .25
of 1% per annum of the average daily net assets of each of the Funds.
2. Subject to the limit in paragraph 1, the Trust shall pay, or
reimburse AFD for, amounts to finance any activity which is primarily intended
to result in the sale of shares of the Funds including, but not limited to,
commissions or other payments to dealers, and salaries and other expenses of
AFD relating to selling or servicing efforts; provided, (i) that the Board of
Trustees of the Trust shall have approved categories of expenses for which
payment or reimbursement shall be made pursuant to this paragraph 2, (ii) that
reimbursement shall be made in accordance with the terms of the Agreement, and
(iii) that there shall be no reimbursement for any amounts which were expended
by AFD in a prior fiscal year of the Trust but were not reimbursed in such year
due to the limitation in paragraph 1. The Plan as adopted with respect to any
additional series shall specify the fee or other expenses payable by or with
respect to such series.
3. This Plan was initially approved, along with the related Principal
Underwriting Agreement, by the Board of Trustees (as provided in paragraph 4)
on July 17, 1986 and by the Trust's initial shareholders on July 21, 1986. The
Plan, most recently approved in amended form on July 21, 1988, was approved by
vote of a majority of the outstanding voting securities of the Trust (as
defined in the Investment Company Act of 1940 (the "1940 Act")) on November 22,
1988.
4. All material amendments to, or renewal of, this Plan must be approved,
together with any related agreement, by votes of the majority of both (i) the
Board of Trustees of the Trust and (ii) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act) and have no
direct or indirect financial interest in the operation of this Plan or any
agreement related to it (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan and/or such agreement.
Additionally, this Plan may not be amended to increase materially the amount to
be spent for distribution with respect to a series unless such amendment is
also approved by a vote of a majority of the outstanding voting securities of
that series as defined in the 1940 Act.
5. At least quarterly, the Board of Trustees shall be provided by any
person authorized to direct the disposition of monies paid or payable by the
Trust pursuant to this Plan or any related agreement, and the Board shall
review a written report of the amounts expended pursuant to the Plan and the
purposes for which such expenditures were made.
6. This Plan may be terminated as to the Trust at any time by vote of a
majority of the Independent Trustees, or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the Trust or such
series. Unless sooner terminated in accordance with this provision, this Plan
shall continue in effect until July 31, 1990. It may thereafter be renewed from
year to year in the manner provided for in paragraph 4 hereof.
7. Any agreement related to this Plan shall be in writing, and shall
provide:
A. that such agreement may be terminated as to the Trust or any series
at any time, without payment of any penalty, by vote of a majority of the
Independent Trustees or by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Trust or such series, on not
more than sixty (60) days' written notice to any other party to the agreement;
and
B. that such agreement shall terminate automatically in the event of its
assignment.
8. While this Plan is in effect, the selection and nomination of
Trustees of the Trust who are not "interested persons" of the Trust ( as
defined in the 1940 Act) shall be committed to the discretion of the
Independent Trustees.
9. This Plan may be adopted, amended, continued or renewed with respect
to a series as provided herein notwithstanding such adoption, amendment,
continuance or renewal has not been effected with respect to any one or more
other series of the Trust.
10. The Trust shall preserve copies of this Plan and any related
agreement and all reports made pursuant to paragraph 5 hereof for a period of
not less than six (6) years from the date of this Plan, or such agreement or
reports, as the case may be, the first two (2) years of which such records
shall be stored in an easily accessible place.
IN WITNESS WHEREOF, the Trust has caused this Plan to be executed by its
officers thereunto duly authorized, as of August 1, 1989.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By /s/ Harry J. Lister
(President)
By /s/ Howard L. Kitzmiller
(Vice President, Secretary and Treasurer)
RENEWAL OF PLAN OF DISTRIBUTION
WHEREAS, The American Funds Tax-Exempt Series I (the "Trust") adopted a Plan of
Distribution pursuant to rule 12b-1 under the Investment Company Act of 1940
(the "Plan"), dated August 1, 1989, for the promotion of the sale of shares of
beneficial interest of two series of this Trust, designated The Tax-Exempt Fund
of Maryland and The Tax-Exempt Fund of Virginia (the "Funds") on certain terms
and conditions and subject to certain provisions set forth therein; and
WHEREAS, continuance of said Plan was approved by the vote of the holders of a
majority of the outstanding shares of beneficial interest of the Funds at the
Special Meeting of Shareholders held November 22, 1988, and said Plan provides
for year-to-year renewals, upon certain specified conditions, and the renewal
of said Plan has been approved by the Board of Trustees of the Trust on July
18, 1996.
NOW, THEREFORE, the Plan of Distribution dated August 1, 1989 is hereby renewed
for the additional period beginning August 1, 1996, and ending at the close of
business on July 31, 1997.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By James H. Lemon, Jr.
Chairman of the Board
By Howard L. Kitzmiller
Senior Vice President, Secretary & Treasurer
July 18, 1996
<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
******** 1000 16.05 4.75 % 62.305 15.29 953
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>
07/31/96 1000 51 51 1051 0 959 0 959 50 1009.34 65.584
$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
******** 1000 16.58 4.75 % 60.314 15.79 952
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>
07/31/96 1000 50 50 1050 3 951 3 954 50 1004.38 63.689
$3
</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
******** 1000 15 4.75 % 66.667 14.29 953
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>
07/31/92 1000 57 57 1057 0 1015 0 1015 58 1073.85 70.555
07/31/93 1000 57 114 1114 0 1035 0 1035 118 1153.75 74.292
07/31/94 1000 57 171 1171 0 1000 0 1000 170 1170.12 78.008
07/31/95 1000 64 235 1235 0 1019 0 1019 239 1258.83 82.33
07/31/96 1000 67 302 1302 0 1026 0 1026 307 1333.77 86.665
$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
******** 1000 15.49 4.75 % 64.558 14.75 952
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>
07/31/92 1000 57 57 1057 0 1015 0 1015 59 1074.16 68.331
07/31/93 1000 57 114 1114 0 1034 0 1034 118 1152.46 71.984
07/31/94 1000 59 173 1173 0 1000 0 1000 172 1172.47 75.692
07/31/95 1000 64 237 1237 0 1019 0 1019 242 1261.12 79.868
07/31/96 1000 67 304 1304 4 1018 4 1022 307 1329.98 84.336
$4
</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
******** 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 1012.23 74.814
07/31/89 1000 65 176 1176 0 948 0 948 183 1131.31 79.558
07/31/90 1000 68 244 1244 0 941 0 941 250 1191.83 84.407
07/31/91 1000 74 318 1318 0 953 0 953 327 1280.47 89.606
07/31/92 1000 76 394 1394 0 1015 0 1015 428 1443.31 94.83
07/31/93 1000 77 471 1471 0 1035 0 1035 515 1550.79 99.858
07/31/94 1000 77 548 1548 0 1000 0 1000 572 1572.84 104.856
07/31/95 1000 86 634 1634 0 1019 0 1019 673 1692.04 110.663
07/31/96 1000 90 724 1724 0 1026 0 1026 766 1792.75 116.488
$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
******** 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 52 979.83 70.441
07/31/88 1000 64 119 1119 0 924 0 924 117 1041.2 75.123
07/31/89 1000 67 186 1186 0 970 0 970 192 1162.04 79.865
07/31/90 1000 72 258 1258 0 967 0 967 263 1230.21 84.842
07/31/91 1000 76 334 1334 0 983 0 983 345 1328.78 90.087
07/31/92 1000 79 413 1413 0 1048 0 1048 450 1498.92 95.351
07/31/93 1000 80 493 1493 0 1067 0 1067 541 1608.22 100.451
07/31/94 1000 83 576 1576 0 1033 0 1033 603 1636.13 105.625
07/31/95 1000 89 665 1665 0 1053 0 1053 706 1759.84 111.453
07/31/96 1000 93 758 1758 6 1051 6 1057 798 1855.92 117.687
$6
</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
******** 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 11917.82 844.038
07/31/91 10000 736 3180 13180 0 9527 1 9528 3276 12804.3 896.032
07/31/92 10000 764 3944 13944 0 10147 1 10148 4284 14432.99 948.291
07/31/93 10000 765 4709 14709 0 10353 1 10354 5153 15507.54 998.554
07/31/94 10000 773 5482 15482 0 10000 1 10001 5726 15727.7 1048.513
07/31/95 10000 860 6342 16342 0 10193 1 10194 6725 16919.73 1106.588
07/31/96 10000 901 7243 17243 0 10260 1 10261 7665 17926.9 1164.841
$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
******** 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 14988.64 953.476
07/31/93 10000 800 4923 14923 0 10673 1 10674 5407 16081.31 1004.454
07/31/94 10000 826 5749 15749 0 10327 1 10328 6032 16360.49 1056.197
07/31/95 10000 892 6641 16641 0 10527 1 10528 7069 17597.42 1114.466
07/31/96 10000 928 7569 17569 62 10513 63 10576 7982 18558.25 1176.807
$63
</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
******** 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 10210.05 754.623
07/31/89 10000 659 1282 11282 0 10064 1 10065 1346 11411.15 802.472
07/31/90 10000 687 1969 11969 0 9993 1 9994 2027 12021.27 851.365
07/31/91 10000 742 2711 12711 0 10113 1 10114 2801 12915.46 903.811
07/31/92 10000 771 3482 13482 0 10771 1 10772 3786 14558.28 956.523
07/31/93 10000 771 4253 14253 0 10991 1 10992 4650 15642.11 1007.219
07/31/94 10000 779 5032 15032 0 10616 1 10617 5247 15864.18 1057.612
07/31/95 10000 868 5900 15900 0 10821 1 10822 6244 17066.56 1116.191
07/31/96 10000 909 6809 16809 0 10892 1 10893 7189 18082.51 1174.952
$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
******** 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 13586.06 892.645
07/31/93 10000 720 3388 13388 0 10937 0 10937 3660 14597.56 939.959
07/31/94 10000 727 4115 14115 0 10563 0 10563 4241 14804.82 986.988
07/31/95 10000 810 4925 14925 0 10768 0 10768 5158 15926.94 1041.657
07/31/96 10000 848 5773 15773 0 10838 0 10838 6037 16875.03 1096.493
$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
******** 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
07/31/96 10000 759 4612 14612 0 10308 0 10308 4784 15092.9 980.695
$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
******** 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 11538.45 758.111
07/31/93 10000 611 1810 11810 0 10479 0 10479 1918 12397.46 798.291
07/31/94 10000 618 2428 12428 0 10121 0 10121 2452 12573.47 838.231
07/31/95 10000 688 3116 13116 0 10317 0 10317 3209 13526.44 884.659
07/31/96 10000 720 3836 13836 0 10385 0 10385 3946 14331.65 931.231
$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
******** 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 569 569 10569 0 10147 0 10147 591 10738.46 705.549
07/31/93 10000 569 1138 11138 0 10353 0 10353 1184 11537.95 742.946
07/31/94 10000 575 1713 11713 0 10000 0 10000 1701 11701.76 780.117
07/31/95 10000 640 2353 12353 0 10193 0 10193 2395 12588.7 823.329
07/31/96 10000 670 3023 13023 0 10260 0 10260 3078 13338.11 866.674
$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
******** 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 10378.74 691.916
07/31/95 10000 568 1583 11583 0 9568 0 9568 1597 11165.4 730.242
07/31/96 10000 595 2178 12178 0 9631 0 9631 2199 11830.05 768.684
$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
******** 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 10395.32 679.877
07/31/96 10000 554 1557 11557 0 9442 0 9442 1572 11014.15 715.669
$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
******** 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 10245.68 670.09
07/31/96 10000 546 1067 11067 0 9771 0 9771 1084 10855.58 705.366
$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
******** 10000 16.05 4.75 %623.053 15.29 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>
07/31/96 10000 507 507 10507 0 9589 0 9589 504 10093.58 655.853
$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
******** 10000 16.16 4.75 %618.812 15.39 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>
07/31/96 10000 0 0 10000 0 9524 0 9524 0 9523.52 618.812
$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
******** 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 17111.45 1083.689
07/31/96 10000 902 6830 16830 60 10801 61 10862 7183 18045.74 1144.308
$61
</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
******** 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 12156.91 824.197
07/31/92 10000 724 2688 12688 0 10804 0 10804 2909 13713.28 872.346
07/31/93 10000 732 3420 13420 0 11003 0 11003 3709 14712.98 918.987
07/31/94 10000 755 4175 14175 0 10646 0 10646 4322 14968.41 966.327
07/31/95 10000 816 4991 14991 0 10852 0 10852 5248 16100.1 1019.639
07/31/96 10000 849 5840 15840 57 10838 56 10894 6085 16979.15 1076.674
$57
</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
******** 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 13407.12 865.534
07/31/95 10000 731 3922 13922 0 10334 0 10334 4086 14420.77 913.285
07/31/96 10000 760 4682 14682 51 10321 50 10371 4837 15208.13 964.371
$51
</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
******** 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 10290.26 697.645
07/31/92 10000 613 1201 11201 0 10329 0 10329 1278 11607.65 738.4
07/31/93 10000 619 1820 11820 0 10519 0 10519 1934 12453.83 777.878
07/31/94 10000 639 2459 12459 0 10177 0 10177 2493 12670.01 817.948
07/31/95 10000 691 3150 13150 0 10375 0 10375 3252 13627.95 863.075
07/31/96 10000 719 3869 13869 48 10361 47 10408 3964 14372.05 911.354
$48
</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
******** 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 11724.46 756.905
07/31/95 10000 639 2371 12371 0 10194 0 10194 2416 12610.89 798.663
07/31/96 10000 665 3036 13036 45 10181 44 10225 3074 13299.41 843.336
$45
</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
******** 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
07/31/96 10000 590 2190 12190 39 9558 39 9597 2199 11796.28 748.02
$39
</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
******** 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
07/31/96 10000 550 1567 11567 37 9381 36 9417 1574 10991.12 696.964
$37
</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
******** 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 10246.72 648.937
07/31/96 10000 540 1059 11059 36 9699 36 9735 1071 10806.2 685.238
$36
</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
******** 10000 16.58 4.75 %603.136 15.79 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>
07/31/96 10000 502 502 10502 34 9511 33 9544 499 10043.52 636.875
$34
</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
******** 10000 16.56 4.75 %603.865 15.77 9523
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>
07/31/96 10000 0 0 10000 0 9523 0 9523 0 9522.95 603.865
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
******** 1000 16.17 4.75 % 61.843 15.4 952
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>
09/30/96 1000 50 50 1050 0 955 0 955 50 1005.52 65.082
$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
******** 1000 16.64 4.75 % 60.096 15.85 953
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>
09/30/96 1000 50 50 1050 3 949 3 952 49 1001.65 63.436
$3
</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
******** 1000 15.4 0.00 % 64.935 15.4 1000
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>
09/30/96 1000 53 53 1053 0 1003 0 1003 52 1055.84 68.339
$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
******** 1000 15.85 0.00 % 63.091 15.85 1000
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>
09/30/96 1000 52 52 1052 3 996 3 999 52 1051.57 66.597
$3
</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
******** 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>
09/30/92 1000 55 55 1055 0 981 0 981 55 1036.69 69.437
09/30/93 1000 56 111 1111 0 1047 0 1047 117 1164.13 73.078
09/30/94 1000 57 168 1168 0 965 0 965 162 1127.85 76.777
09/30/95 1000 64 232 1232 0 1012 0 1012 236 1248.25 81.055
09/30/96 1000 66 298 1298 0 1015 0 1015 302 1317.93 85.303
$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
******** 1000 15.69 4.75 % 63.735 14.94 952
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>
09/30/92 1000 55 55 1055 0 982 0 982 56 1038.17 67.37
09/30/93 1000 57 112 1112 0 1046 0 1046 118 1164.14 70.941
09/30/94 1000 58 170 1170 0 966 0 966 165 1131.57 74.642
09/30/95 1000 64 234 1234 0 1010 0 1010 238 1248.47 78.768
09/30/96 1000 65 299 1299 4 1006 4 1010 302 1312.84 83.144
$4
</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
******** 1000 14.5 0.00 % 68.966 14.5 1000
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>
09/30/92 1000 58 58 1058 0 1030 0 1030 58 1088.22 72.888
09/30/93 1000 59 117 1117 0 1099 0 1099 122 1221.96 76.708
09/30/94 1000 59 176 1176 0 1013 0 1013 170 1183.82 80.587
09/30/95 1000 67 243 1243 0 1062 0 1062 248 1310.19 85.077
09/30/96 1000 69 312 1312 0 1066 0 1066 317 1383.35 89.537
$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
******** 1000 14.94 0.00 % 66.934 14.94 1000
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>
09/30/92 1000 58 58 1058 0 1031 0 1031 59 1090.27 70.751
09/30/93 1000 59 117 1117 0 1098 0 1098 124 1222.53 74.499
09/30/94 1000 61 178 1178 0 1015 0 1015 173 1188.35 78.387
09/30/95 1000 67 245 1245 0 1061 0 1061 250 1311.13 82.721
09/30/96 1000 68 313 1313 5 1057 5 1062 316 1378.74 87.317
$5
</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
******** 1000 15.02 4.75 % 66.578 14.31 953
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>
09/30/87 1000 57 57 1057 0 855 0 855 52 907.38 70.668
09/30/88 1000 62 119 1119 0 910 0 910 120 1030.08 75.353
09/30/89 1000 65 184 1184 0 930 0 930 188 1118.48 80.063
09/30/90 1000 69 253 1253 0 921 0 921 255 1176.05 84.975
09/30/91 1000 74 327 1327 0 965 0 965 342 1307.9 90.2
09/30/92 1000 75 402 1402 0 994 0 994 429 1423.25 95.328
09/30/93 1000 77 479 1479 0 1061 0 1061 537 1598.24 100.329
09/30/94 1000 78 557 1557 0 978 0 978 570 1548.4 105.405
09/30/95 1000 87 644 1644 0 1025 0 1025 688 1713.68 111.278
09/30/96 1000 90 734 1734 0 1029 0 1029 780 1809.4 117.113
$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
******** 1000 15.13 4.75 % 66.094 14.41 952
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>
09/30/87 1000 61 61 1061 0 879 0 879 56 935.28 70.322
09/30/88 1000 64 125 1125 0 926 0 926 124 1050.76 75.001
09/30/89 1000 67 192 1192 0 943 0 943 194 1137.18 79.69
09/30/90 1000 72 264 1264 0 933 0 933 261 1194.93 84.687
09/30/91 1000 76 340 1340 0 987 0 987 356 1343.03 89.895
09/30/92 1000 78 418 1418 0 1019 0 1019 445 1464.26 95.02
09/30/93 1000 80 498 1498 0 1085 0 1085 556 1641.89 100.054
09/30/94 1000 82 580 1580 0 1002 0 1002 593 1595.95 105.274
09/30/95 1000 90 670 1670 0 1048 0 1048 712 1760.82 111.093
09/30/96 1000 92 762 1762 6 1044 6 1050 801 1851.61 117.265
$6
</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
******** 1000 14.31 0.00 % 69.881 14.31 1000
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>
09/30/87 1000 60 60 1060 0 897 0 897 55 952.36 74.171
09/30/88 1000 66 126 1126 0 955 0 955 126 1081.12 79.087
09/30/89 1000 69 195 1195 0 976 0 976 197 1173.94 84.033
09/30/90 1000 72 267 1267 0 967 0 967 267 1234.33 89.186
09/30/91 1000 78 345 1345 0 1013 0 1013 359 1372.72 94.67
09/30/92 1000 79 424 1424 0 1043 0 1043 450 1493.76 100.051
09/30/93 1000 81 505 1505 0 1113 0 1113 564 1677.41 105.299
09/30/94 1000 81 586 1586 0 1027 0 1027 598 1625.13 110.628
09/30/95 1000 92 678 1678 0 1076 0 1076 722 1798.58 116.791
09/30/96 1000 95 773 1773 0 1080 0 1080 819 1899.02 122.914
$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
******** 1000 14.41 0.00 % 69.396 14.41 1000
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>
09/30/87 1000 64 64 1064 0 923 0 923 59 982.02 73.836
09/30/88 1000 67 131 1131 0 972 0 972 131 1103.26 78.748
09/30/89 1000 70 201 1201 0 990 0 990 204 1194 83.672
09/30/90 1000 75 276 1276 0 979 0 979 275 1254.62 88.917
09/30/91 1000 80 356 1356 0 1037 0 1037 373 1410.13 94.386
09/30/92 1000 81 437 1437 0 1069 0 1069 468 1537.44 99.769
09/30/93 1000 84 521 1521 0 1139 0 1139 584 1723.95 105.055
09/30/94 1000 87 608 1608 0 1052 0 1052 623 1675.77 110.539
09/30/95 1000 94 702 1702 0 1100 0 1100 748 1848.93 116.652
09/30/96 1000 96 798 1798 6 1096 6 1102 842 1944.25 123.132
$6
</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
******** 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 1033.56 75.608
09/30/89 1000 66 188 1188 0 931 0 931 191 1122.31 80.337
09/30/90 1000 69 257 1257 0 923 0 923 257 1180.08 85.266
09/30/91 1000 75 332 1332 0 967 0 967 345 1312.38 90.509
09/30/92 1000 76 408 1408 0 995 0 995 433 1428.05 95.65
09/30/93 1000 77 485 1485 0 1062 0 1062 541 1603.64 100.668
09/30/94 1000 78 563 1563 0 979 0 979 574 1553.64 105.762
09/30/95 1000 88 651 1651 0 1027 0 1027 692 1719.46 111.653
09/30/96 1000 91 742 1742 0 1030 0 1030 785 1815.45 117.505
$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
******** 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 59 946.75 71.184
09/30/88 1000 65 129 1129 0 934 0 934 129 1063.63 75.919
09/30/89 1000 67 196 1196 0 951 0 951 200 1151.09 80.665
09/30/90 1000 73 269 1269 0 941 0 941 268 1209.48 85.718
09/30/91 1000 77 346 1346 0 996 0 996 363 1359.38 90.989
09/30/92 1000 79 425 1425 0 1027 0 1027 455 1482.1 96.178
09/30/93 1000 81 506 1506 0 1094 0 1094 567 1661.94 101.276
09/30/94 1000 83 589 1589 0 1011 0 1011 604 1615.43 106.559
09/30/95 1000 91 680 1680 0 1057 0 1057 725 1782.35 112.451
09/30/96 1000 93 773 1773 6 1053 6 1059 815 1874.26 118.699
$6
</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
******** 1000 14.29 0.00 % 69.994 14.287 1000
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 1002 0 1002 1 1003.73 70.142
09/30/87 1000 60 62 1062 0 899 0 899 56 955.93 74.449
09/30/88 1000 66 128 1128 0 957 0 957 128 1085.17 79.383
09/30/89 1000 69 197 1197 0 978 0 978 200 1178.36 84.349
09/30/90 1000 73 270 1270 0 969 0 969 269 1238.98 89.522
09/30/91 1000 78 348 1348 0 1015 0 1015 362 1377.89 95.027
09/30/92 1000 79 427 1427 0 1045 0 1045 454 1499.4 100.429
09/30/93 1000 81 508 1508 0 1115 0 1115 568 1683.74 105.696
09/30/94 1000 82 590 1590 0 1028 0 1028 603 1631.22 111.043
09/30/95 1000 92 682 1682 0 1078 0 1078 727 1805.31 117.228
09/30/96 1000 95 777 1777 0 1081 0 1081 825 1906.1 123.372
$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
******** 1000 14.29 0.00 % 69.994 14.287 1000
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 4 4 1004 0 1009 0 1009 3 1012.19 70.242
09/30/87 1000 64 68 1068 0 931 0 931 62 993.98 74.735
09/30/88 1000 68 136 1136 0 981 0 981 135 1116.65 79.704
09/30/89 1000 71 207 1207 0 999 0 999 209 1208.47 84.686
09/30/90 1000 76 283 1283 0 988 0 988 281 1269.82 89.994
09/30/91 1000 81 364 1364 0 1046 0 1046 381 1427.2 95.529
09/30/92 1000 82 446 1446 0 1079 0 1079 477 1556.06 100.977
09/30/93 1000 85 531 1531 0 1149 0 1149 595 1744.83 106.327
09/30/94 1000 88 619 1619 0 1061 0 1061 634 1695.96 111.871
09/30/95 1000 95 714 1714 0 1109 0 1109 762 1871.22 118.058
09/30/96 1000 98 812 1812 7 1105 7 1112 855 1967.69 124.616
TOTAL $7
</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/ = 1,009.34 T = +0.93%
Five Year Average Total Return 1,000(1+T)/5/ = 1,333.77 T = +5.93%
Lifetime Average Annual Total Return 1,000(1+T)/9.964/=1,792.75 T = +6.03%
VIRGINIA FUND AVERAGE ANNUAL TOTAL RETURN AT PUBLIC OFFERING PRICE:
One Year Total Return 1,000(1+T)/1/ = 1,004.38 T = +0.44%
Five Year Average Total Return 1,000(1+T)/5/ = 1,329.98 T = +5.87%
Lifetime Average Annual Total Return 1,000(1+T)/9.964/=1,855.92 T = +6.40%
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-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 76053
<INVESTMENTS-AT-VALUE> 79092
<RECEIVABLES> 772
<ASSETS-OTHER> 421
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 80285
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 258
<TOTAL-LIABILITIES> 258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76988
<SHARES-COMMON-STOCK> 5200
<SHARES-COMMON-PRIOR> 4914
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3039
<NET-ASSETS> 80027
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4644
<OTHER-INCOME> 0
<EXPENSES-NET> 636
<NET-INVESTMENT-INCOME> 4008
<REALIZED-GAINS-CURRENT> 81
<APPREC-INCREASE-CURRENT> 365
<NET-CHANGE-FROM-OPS> 4454
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4008
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 733
<NUMBER-OF-SHARES-REDEEMED> 613
<SHARES-REINVESTED> 166
<NET-CHANGE-IN-ASSETS> 4883
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (81)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 357
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 636
<AVERAGE-NET-ASSETS> 78022
<PER-SHARE-NAV-BEGIN> 15.29
<PER-SHARE-NII> .80
<PER-SHARE-GAIN-APPREC> .10
<PER-SHARE-DIVIDEND> .80
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.39
<EXPENSE-RATIO> .81
<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-31-1996
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 85964
<INVESTMENTS-AT-VALUE> 89516
<RECEIVABLES> 1469
<ASSETS-OTHER> 122
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 91107
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 615
<TOTAL-LIABILITIES> 615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86944
<SHARES-COMMON-STOCK> 5740
<SHARES-COMMON-PRIOR> 5807
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3552
<NET-ASSETS> 90492
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5432
<OTHER-INCOME> 0
<EXPENSES-NET> 727
<NET-INVESTMENT-INCOME> 4705
<REALIZED-GAINS-CURRENT> 131
<APPREC-INCREASE-CURRENT> 74
<NET-CHANGE-FROM-OPS> 4910
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4705
<DISTRIBUTIONS-OF-GAINS> 320
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 656
<NUMBER-OF-SHARES-REDEEMED> 913
<SHARES-REINVESTED> 190
<NET-CHANGE-IN-ASSETS> (1191)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 185
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 410
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 727
<AVERAGE-NET-ASSETS> 92158
<PER-SHARE-NAV-BEGIN> 15.79
<PER-SHARE-NII> .81
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> .81
<PER-SHARE-DISTRIBUTIONS> .05
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.77
<EXPENSE-RATIO> .79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
