The American Funds
Tax-Exempt
Series I
The Tax-Exempt Fund of Maryland
The Tax-Exempt Fund of Virginia
Annual Report
July 31, 1996
(logo)
The American Funds Group(R)
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia seek a
high level of current income free from Federal and their respective state
income taxes. Additionally, each Fund seeks to preserve capital.
Fund results in this report were computed without a sales charge
unless otherwise indicated. Here are the total returns and average annual
compound returns with all distributions reinvested for periods ended June
30, 1996 (the most recent calendar quarter), assuming payment of the 4.75%
maximum sales charge at the beginning of the stated periods -- For The
Tax-Exempt Fund of Maryland's lifetime (from 8/14/86): +77.72%, or +5.99% a
year; 5 years: +33.57%, or +5.96% a year; 12 months: +0.95%. For The
Tax-Exempt Fund of Virginia's lifetime (from 8/14/86): +83.89%, or +6.36% a
year; 5 years: +33.80%, or +6.00% a year; 12 months: +0.39%. Sales charges
are lower for accounts of $25,000 or more.
The Funds' 30-day yields as of August 31, 1996, calculated in
accordance with the Securities and Exchange Commission formula, were 4.48%
for the Maryland Fund and 4.35% for the Virginia Fund. The Funds'
distribution rates as of that date were 4.87% and 4.79%, respectively. The
SEC yield reflects income each Fund expects to earn based on its current
portfolio of securities, while the distribution rate is based solely on the
Fund's past dividends. Accordingly, the Fund's SEC yields and distribution
rates may differ.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. ALL INVESTMENTS ARE
SUBJECT TO CERTAIN RISKS. INVESTMENTS IN THE FUNDS ARE SUBJECT TO INTEREST
RATE FLUCTUATIONS. ADDITIONALLY, EACH FUND IS MORE SUSCEPTIBLE TO FACTORS
ADVERSELY AFFECTING ISSUERS OF THEIR STATE'S TAX-EXEMPT SECURITIES THAN A
MORE WIDELY DIVERSIFIED MUNICIPAL BOND FUND. SHARE PRICE AND RETURN WILL
VARY; THEREFORE, YOU MAY GAIN OR LOSE MONEY BY INVESTING IN A FUND.
INVESTORS SHOULD MAINTAIN A LONG-TERM INVESTMENT PERSPECTIVE. FUND SHARES
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR INSURED OR GUARANTEED BY, THE U.S.
GOVERNMENT, ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, OR ANY OTHER AGENCY, ENTITY OR PERSON.
INCOME MAY BE SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAXES. CERTAIN
OTHER INCOME, AS WELL AS CAPITAL GAIN DISTRIBUTIONS, MAY BE TAXABLE.
Fellow Shareholders
For the fiscal year ended July 31, 1996, the value of your investment in
The Tax-Exempt Fund of Maryland or The Tax-Exempt Fund of Virginia grew at
roughly twice the rate of inflation. Monthly income dividends from the
Maryland Fund totalled 79.5 cents a share, and if -- like most shareholders
- -- you reinvested those dividends, your total return was 6.0%. The Virginia
Fund provided income dividends totaling 81.2 cents a share and paid a
capital gain distribution of 5.5 cents a share in November, which resulted
in a total return of 5.5% if you reinvested them. Inflation for the period,
as measured by the Consumer Price Index, was 3.0%.
Based upon the Funds' 30-day tax-free distribution rates for July
1996 5.01% for Maryland and 4.92% for Virginia -- the equivalent taxable
yield for individuals in the top tax bracket was 8.96% and 8.65%,
respectively, as shown in the "Highlights" table on page 3.
The past fiscal year was an unusual period. The economy was relatively
weak during the first half, when interest rates declined and the Funds
achieved all of their gains. Since then, the economy has strengthened to
the point that the nation is nearing full employment and investors are wary
that the Federal Reserve might raise interest rates to keep inflation
in check.
Last winter, during the early days of the presidential campaign, there
was considerable discussion of a "flat tax" which could have eliminated
much of the tax advantage of municipal bonds compared with taxable bonds.
The possibility helped keep municipal bond prices relatively low. Now that
talk of a flat tax has receded, municipal bond prices have again risen.
While the remaining contenders for the nation's top job have each suggested
tax changes, there appears to be little threat to the tax preference
afforded municipal bonds.
At the end of the Funds' fiscal years, President Clinton signed
legislation intended to turn responsibility for the welfare system over to
the states. Depending on how states structure their programs, this could
strain state budgets. Revenues are strong in Maryland and Virginia, so we
expect the effect in both states will be minimal.
During the year, Maryland and Virginia both issued fewer bonds than
usual. This has made attractive opportunities more difficult to find and
underlines the importance of the diversification your Fund provides.
We reacted to developments during the course of the year in a number of
ways. Over the first half, the average life of the portfolios declined from
10.95 years to 9.86 years for the Maryland Fund and 11.31 years to 9.53
years for the Virginia Fund. By the end of the second half, however, we had
raised them to 10.61 years and 10.71 years, respectively. During the year
we increased our holdings of higher yielding, higher risk (lower than A or
nonrated) bonds -- from 17.42% to 19.48% for the Maryland portfolio, and
5.16% to 8.60% for the Virginia portfolio.
The capital gain distribution paid by the Virginia Fund during the
year resulted from a very positive calendar 1995, when we took some
significant gains in order to invest in more compelling values.
Looking forward, we see several reasons for cautious optimism. One is
the relative economic strength of Maryland and Virginia, both of which
finished their most recent fiscal years with budget surpluses. Another is
the growing trend toward consolidations in the hospital industry. Both
portfolios include several bonds issued to support health care facilities.
Consolidations tend to help hospitals lower costs and could lead to bonds
being tendered at premiums.
We hope and expect that the coming months will be somewhat more
stable _ with no government shutdowns and a much milder winter than the
one experienced in the past year. In any case, we will continue to use our
investment adviser's unique municipal bond research capabilities in an
effort to provide you with generous current income free from Federal and
state taxes, while also seeking to maintain the value of your investment.
We look forward to reporting to you again in March.
Sincerely,
(Signatures)
James H. Lemon, Jr. Harry J. Lister
Chairman President
September 19, 1996
Growth of a $10,000 Investment
Average Annual Compound Returns<F1>
1 Year 5 Years Lifetime
The Tax Exempt Fund of Maryland +0.93% +5.93% +6.03%
The Tax Exempt Fund of Virginia +.44% +5.87% +6.40%
<F1> Assumes reinvestment of all distributions and payment of the 4.75%
maximum sales charge at the beginning of the stated periods.
Graph 1
(A line graph comparing the performance of the Lehman Brothers Municipal Bond
Index, The Tax-Exempt Fund of Virginia, The Tax-Exempt Fund of Maryland,
and the Consumer Price Index (inflation) from 1986 through 1996, Fiscal
Years ended July 31 as required inder Item 5A of Form N-1A-Management's
Discussion of Fund Performance.)
The Fund's results in the graph reflect payment of the 4.75% maximum sales
charge on a $10,000 investment. Thus, the net amount invested in each Fund
was $9,525. The graph reflects the lifetime results from the Funds' date of
August 14, 1986. All dividends and capital gain distributions are
reinvested in additional shares without a sales charge. The Lehman Brothers
Municipal Bond Index is a national index that includes about 20,000 bonds
and reflects approximately $300 billion of market capitalization. It is not
intended to be generally representative of any municipal bond fund that
invests exclusively in the issues of a specific state. A broad-based
municipal bond index generally representative of the Maryland and Virginia
Funds is not currently available to cover the lifetimes of the Funds. The
indexes are unmanaged and do not reflect sales charges, commissions or
expenses. Past results are not predictive of future results.
Highlights -- as of July 31, 1996
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Assets:
Net Assets $80,026,969 $90,491,926
Net Asset Value Per Share $15.39 $15.77
Distribution Rate<F1> 5.01% 4.92%
Quality Diversification:
Moody's/S&P Ratings
(best of either)
Aaa/AAA 42.33% 41.04%
Aa/AA 19.40 37.40
A/A 15.09 9.94
Baa/BBB 11.17 8.60
Lower than BBB or not rated 8.31 _
Cash and Equivalents 3.70 3.02
Total 100.00% 100.00%
Maturity Diversification:<F2>
Under 1 year 3.70% 3.02%
1 to 10 years 29.68 34.65
10+ to 20 years 45.59 41.97
20+ to 30 years 21.03 20.36
Total 100.00% 100.00%
Average Life<F3> 10.61 years 10.71 years
To match Maryland's triple tax-free distribution rate of 5.01%,
investors with a combined effective Federal/state/county tax rate of 44%
would have to earn a taxable yield of 8.96%.
For Virginia investors with a combined effective Federal/state tax
rate of 43%, it would take a taxable yield of 8.65% to equal the Fund's
double tax-free distribution rate of 4.92%.
<F1> Distribution rate for July 1996 is one month's dividend annualized,
divided by the average offering price for the month. The 30-day yield for
July, calculated per the Securities and Exchange Commission formula, at
maximum sales charge: Maryland, 4.60% and Virginia, 4.43%. For the latest
yields based on actual distributions, call toll-free 800/421-0180.
<F2> Securities are included at pre-refunded dates, not maturity dates.
<F3> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Maryland Fund and the Virginia Fund is 15.84 years and 16.12 years,
respectively.
The Tax-Exempt Fund of Maryland
Investment Portfolio, July 31, 1996
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 455 494,840
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 1,050 1,125,390
1993 Refunding Series C, 5.00% 2010 1,000 964,989
3,566,249
General Obligations (Local) _ 4.04%
Anne Arundel County, Consolidated Water and Sewer,
1993 Refunding Series, 5.30% 2016 500 482,480
Baltimore County:
Consolidated Public Improvement Bonds, 1990 Series,
6.75% 1999 600 637,782
Metropolitan District Bonds, 63rd Issue, 1992 Series,
6.10% 2006 250 267,723
Frederick County, Public Facilities Bonds:
1990, 8.875% 2002 250 303,513
1993, Series B, 5.125% 2007 995 994,025
Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 530 543,605
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 1,000 1,018,730
Howard County, General Hospital Issue, Series 1993:
5.50% 2013 2,000 1,804,040
5.50% 2021 2,000 1,763,620
Johns Hopkins Hospital Issue, Revenue Refunding Bonds,
Series 1993:
5.60% 2009 850 855,406
5.00% 2023 2,000 1,759,820
Memorial Hospital of Cumberland Issue, Revenue
Refunding Bonds, Series 1992, 6.50% 2010 750 774,023
Peninsula Regional Medical Center Issue, Project
and Refunding Revenue Bonds, Series 1993, 5.00% 2023 500 435,710
Suburban Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.125% 2021 3,000 2,682,180
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue), Series 1992,
7.20% 2006 215 240,581
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 1,000 1,007,819
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 2,000 2,001,280
1994 First Series, 5.70% 2017 960 962,602
1994 Fifth Series, AMT, 5.875% 2017 1,435 1,439,592
1990 First Series, 7.60% 2017 495 513,884
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 930 951,483
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 15 15,469
1988 Series B, 7.65% 2022 285 298,962
8,002,692
Industrial Development Revenue _ 2.60%
Mayor and City Council of Baltimore, Port Facilities
Revenue Bonds (Consolidation Coal Sales Company Project):
Series 1984 A, 6.50% 2011 500 541,225
Series 1984 B, 6.50% 2011 500 542,974
Puerto Rico Ports Authority, Special Facilities Revenue
Bonds, (American Airlines, Inc. Project), 1996 Series A,
6.25% 2026 1,000 998,150
2,082,349
Insured _ 22.31%
City of Baltimore, Refunding Revenue Bonds, FGIC Insured:
1995, Series A, 7.25% 2005 1,000 1,161,470
1994, Series A, 6.00% 2015 1,500 1,564,905
Charles County, Consolidated Public Improvement Bonds of
1993, Series A, FGIC Insured, 5.25% 2003 715 734,348
City of Frederick, General Improvement Bonds, 1992
Refunding Series, FGIC Insured, 6.125% 2008 890 944,717
Maryland Health and Higher Educational Facilities Authority:
Anne Arundel Medical Center Issue, Revenue Bonds,
Series 1993, AMBAC Insured, 5.25% 2013 1,000 960,420
Francis Scott Key Medical Center Issue, Refunding Revenue
Bonds, Series 1993, FGIC Insured, 5.00% 2013 500 465,640
Johns Hopkins Medical Institutions Parking Facilities
Issue, Parking Revenue Bonds, Series 1996, AMBAC Insured,
5.50% 2011 1,200 1,196,916
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 2,000 2,224,160
Sinai Hospital of Baltimore Issue Project and Revenue
Refunding Bonds, Series 1993, AMBAC Insured, 5.25% 2019 2,000 1,831,820
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 1,000 1,162,510
Highway and Transportation Authority, Highway Revenue
Refunding Bonds, Series Z, MBIA Insured, 6.25% 2014 1,000 1,085,320
Washington, D.C. Metropolitan Area Transit Authority,
Gross Revenue Transit Refunding Bonds, Series 1993,
FGIC Insured, 6.00% 2008 1,000 1,070,810
17,858,412
Life Care Facilities Revenue _ 8.72%
Calvert County, Economic Development Revenue Bonds
(Asbury-Solomons Island Facility), Series 1995,
8.625% 2024 2,300 2,441,289
Maryland Health and Higher Educational Facilities
Authority, First Mortgage Refunding Revenue Bonds,
Roland Park Place Issue, Series 1989, 7.75% 2012 2,000 2,112,140
Prince George's County, Refunding Revenue Bonds,
Collington Episcopal Life Care Community, Inc.,
Series 1994 A, 6.00% 2013 2,500 2,423,025
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
Pre-Refunded<F1> _ 16.92%
Frederick County, Public Facilities Bonds:
1991, Series B, 6.30% 2011 (2002) 1,370 1,503,205
1986 Series, 7.40% 2012 (2001) 310 354,857
Harford County, Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 (2002) 970 1,042,343
Howard County, Metropolitan District Refunding Bonds,
1991 Series A, 6.625% 2021 (2001) 500 545,860
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) 1,000 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) 250 275,785
Sinai Hospital of Baltimore Issue, Revenue Bonds,
1990 Series, AMBAC Insured, 7.00% 2019 (2000) 700 772,198
Suburban Hospital Issue Revenue Bonds:
Series 1988, 7.50% 2008 (1998) $1,250 $ 1,351,000
Series 1992, 6.50% 2017 (2002) 500 552,635
University of Maryland Medical System Issue, Revenue
Bonds, Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1,000 1,080,660
Morgan State University Academic Fees and Auxiliary
Facilities Fees Revenue Bonds, 1990 Series A,
MBIA Insured, 7.00% 2020 (2000) 475 524,714
Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1,179,797
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency, Single Family Mortgage
Revenue Bonds, Homeownership 5th Portfolio, 1986 Series,
7.50% 2015 (2000) 495 546,435
Public Improvement Bonds of 1992, MBIA Insured,
6.50% 2009 (2002) 1,000 1,109,680
University of Maryland System Auxiliary Facility and
Tuition Revenue Bonds, 1989 Series B, 7.00% 2007 (1999) 600 657,077
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, AMT, 6.30% 2010 2,750 2,814,873
Montgomery County, Northeast Maryland Waste Disposal
Authority, Solid Waste Revenue Bonds AMT:
6.00% 2006 1,000 1,027,770
6.00% 2007 1,000 1,028,170
Series 1993 A, 6.30% 2016 1,000 1,003,650
5,874,463
Turnpikes & Toll Roads Revenue _ 1.32%
Maryland Transportation Authority Facilities Project,
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1,000 1,053,990
Water & Sewer Revenue _ .55%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds,
Series 1991 B, 0.00% 2005 700 439,516
77,067,527
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 500 500,000
Pre-Refunded<F1> _ .66%
Commonwealth of Puerto Rico, Public Improvement
Bonds of 1987, MBIA Insured, 6.75% 2006 (1997) 500 524,040
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<F2> 1,000 1,000,000
2,024,040
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
<F1> Parenthetical year represents date of pre-refunding.
<F2> Coupon rate may change periodically.
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
Investment Portfolio, July 31, 1996
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% 2007 1,650 1,756,376
3,788,778
General Obligations (Local) _ 10.95%
Chesapeake:
Public Improvement Bonds, Series 1992, 6.00% 2006 1,600 1,704,560
Refunding Bonds, Series 1993, 5.40% 2008 1,000 1,014,600
Water and Sewer Bonds, Series 1995 A, 5.375% 2020 1,500 1,438,995
Covington, Water and Sewer Refunding Bonds,
Series 1994, 5.25% 2013 250 237,633
Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1,195 1,214,837
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1,000 993,080
Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 1,170 1,231,975
Norfolk Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 500 509,820
Roanoke Public Improvement and Refunding Bonds,
Series 1992 B:
6.375% 2009 250 265,690
6.40% 2011 500 531,575
Spotsylvania Public Improvement Bonds,
Series 1992, 5.75% 2011 750 762,194
9,904,959
General Obligations (State) _ 1.72%
Commonwealth of Virginia, Public Facilities Bonds,
1993 Series A, 5.40% 2005 1,500 1,555,875
Hospital & Health Facilities Revenue _ 16.65%
Arlington County Industrial Development Authority,
Hospital Revenue Refunding Bonds (The Arlington
Hospital), Series 1993:
5.125% 2008 $1,000 $ 956,530
5.00% 2021 1,000 867,740
Fairfax County Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 1,500 1,467,000
5.25% 2019 1,500 1,400,325
5.00% 2023 500 445,405
Hampton Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals), 5.125% 2016 1,000 880,540
Lynchburg Industrial Development Authority, Hospital
Facilities, Revenue Refunding Bonds, Centra
Health, Inc., Series 1988, 8.125% 2016 1,000 1,072,380
Norfolk Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals-Norfolk Project),
Series A 1994, 5.00% 2020 1,750 1,553,213
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding Bonds
(Mary Immaculate Project), 1994 Series, 6.875% 2010 1,900 1,975,867
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 1,300 1,372,722
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 2,000 2,015,640
Virginia Beach, Virginia Development Authority
(Sentara Bayside Hospital), 6.60% 2009 1,000 1,062,170
15,069,532
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 20,625
1988 Series B, 7.65% 2022 320 335,677
Housing Finance Authority Revenue _ (continued)
Virginia Housing Development Authority, Commonwealth
Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 515,820
1995 Series A-AMT, Sub-Series A-1, 6.60% 2004 1,000 1,038,970
1994 Series I-AMT, Sub-Series I-1, 6.40% 2005 800 824,920
1994 Series H, Sub-Series H-2, 6.55% 2017 1,000 1,025,730
1992 Series A, 7.10% 2022 380 404,578
4,166,320
Industrial Development Revenue _ 2.19%
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 1,000 998,150
1,985,200
Insured _ 19.19%
Augusta, Hospital Revenue Bonds, AMBAC Insured,
5.125% 2021 1,100 996,380
Chesapeake Certificates of Participation,MBIA Insured,
1993 Series, 5.40% 2005 1,000 1,026,640
Danville, Virginia Industrial Development Authority,
Hospital Revenue Bonds, Danville Regional Medical
Center, Series 1994, FGIC Insured, 6.00% 2007 1,000 1,055,420
Fairfax County Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health System Hospitals
Project), Series 1993 A, FSA Insured, 5.25% 2019 1,540 1,437,667
Industrial Development Authority of the County of Hanover,
Hospital Revenue Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA Insured:
6.50% 2010 1,375 1,508,953
6.375% 2018 1,000 1,084,730
Loudoun County:
Industrial Development Authority, Hospital Revenue
Bonds, FSA Insured, 6.00% 2005 1,000 1,062,550
Sanitation Authority, Water and Sewer System Revenue
Bonds, Refunding Series 1992, FGIC Insured, 6.25% 2010 2,000 2,115,740
Pamunkey Regional Jail Authority, Jail Facility Revenue
Bonds, Series 1996, MBIA Insured, 5.70% 2010 $1,000 $ 1,015,250
Richmond, FGIC Insured, 5.00% 2021 1,000 901,540
Southeastern Public Service Authority of Virginia, Senior
Revenue Refunding Bonds (Regional Solid Waste System),
Series 1993 A, MBIA Insured, 5.125% 2013 1,500 1,417,350
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1995 A, MBIA Insured, 5.00% 2025 1,000 894,190
City of Virginia Beach Development Authority, Hospital
Revenue Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1,000 1,061,430
Washington, D.C. Metropolitan Area:
Airports Authority, Airport System Revenue and Refunding
Bonds, MBIA Insured AMT, Series 1992 A, 6.625% 2019 750 790,470
Transit Authority, Gross Revenue Transit Refunding
Bonds, Series 1993, FGIC Insured, 4.70% 2003 1,000 992,100
17,360,410
Lease Revenue (Local) _ 2.05%
Fairfax County Economic Development Authority,
Lease Revenue Bonds (Government Center Properties),
Series 1994, 5.25% 2018 2,000 1,857,300
Lease Revenue (State) _ 1.57%
Virginia Public Building Authority, State Building Revenue
Bonds, Series 1995, 5.20% 2015 1,500 1,421,145
Local Appropriation _ .58%
Fairfax County Economic Development Authority, Parking
Revenue Bonds (Huntington Metrorail Station Project),
Series 1990 A, 6.75% 2015 500 524,545
Pre-Refunded<F1> _ 21.86%
Chesapeake, Hospital Authority Facility for Chesapeake
General Hospital, First Mortgage Revenue, BIG Insured
Series 1988, 7.625% 2018 (1998) 1,000 1,082,890
Fairfax County:
Industrial Development Authority Hospital Revenue
Bonds (Fairfax Hospital System Project), INOVA Health
Systems, Series 1991 C, 6.801% 2023 (2001) 1,000 1,107,030
Water Authority Revenue, Series 1989, 7.30% 2021 (2000) 1,250 1,383,000
Henry County Public Service Authority, Water and Sewer
Revenue Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1,250 1,390,263
Loudoun County Sanitation Authority, Water and Sewer System
Revenue Bonds, Series 1989, AMBAC Insured, 7.50% 2017 (1999) 375 409,695
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) 400 446,552
(Sentara Hospitals-Norfolk Project), Series 1991,
7.00% 2020 (2000) 250 277,585
Portsmouth Improvement Bonds, Public Improvement Refunding
Bonds, Series 1987, 7.50% 2012 (1997) 500 533,615
Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured,
6.50% 2021 (2001) 680 747,272
Richmond Public Utility Revenue Bonds,
Series 1988 A, 8.00% 2018 (1998) 1,500 1,612,980
Roanoke:
Industrial Development Authority, Hospital Revenue Bonds,
Carilion Health System (Roanoke Memorial Hospital
Projects), Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 834,578
Water System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 750 824,198
Southeastern Public Service Authority, Regional Solid
Waste System, Senior Revenue Refunding Bonds,
Series 1989, BIG Insured:
7.00% 2006 (1999) 500 545,515
7.00% 2013 (1999) 1,000 1,091,030
Suffolk, Series 1989, 7.00% 2005 (1998) 1,000 1,076,800
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2001) 25 27,479
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 742,182
Virginia Education Loan Authority, Student Loan Program
Revenue Refunding Bonds, Senior Series 1993 D AMT,
5.95% 2009 (2005) 790 840,402
Virginia Public Building Authority, State Building
Revenue Bonds, Series 1991 A, 6.50% 2011 (2001) 1,750 1,922,008
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1,000 1,110,760
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 279,533
Commonwealth of Virginia Transportation Board,
Transportation Contract Revenue Bonds, Route 28 Project,
Series 1988:
7.70% 2008 (1998) 890 956,634
7.80% 2016 (1998) 500 538,192
19,780,193
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 500 536,615
Roanoke Valley Resource Authority, Solid Waste System
Revenue Bonds, Series 1992, 5.75% 2012 1,500 1,483,650
2,020,265
State Authority _ 5.56%
Virginia Public School Authority, School Financing Bonds:
(1991 Resolution), Series 1995 C, 5.00% 2002 1,000 1,016,310
(1987 Resolution), 1991 Refunding Series C, 6.25% 2007 1,500 1,599,465
(1991 Resolution), Series 1994 A, 6.20% 2014 1,500 1,569,960
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A, 7.50% 2017 50 51,458
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 789,936
5,027,129
Transportation _ 1.40%
Commonwealth of Virginia Transportation Board,
Transportation Revenue Refunding Bonds
(Northern Virginia Transportation District Program),
Series 1993 C, 5.30% 2009 $1,285 $ 1,268,578
Water & Sewer Revenue _ 2.24%
Chesterfield County Water and Sewer Revenue
Refunding Bonds, Series 1992, 6.375% 2009 1,250 1,337,438
Rivanna Water and Sewer Authority, Regional Water and Sewer
System Refunding Revenue Bonds, Series 1991, 6.40% 2007 645 689,363
2,026,801
87,757,030
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<F2> 1,500 1,500,000
Pre-Refunded<F1> _ .28%
Fairfax County, Industrial Development Authority Hospital
Revenue Bonds (Fairfax Hospital Association System),
Series 1985 A, 7.875% 2017 (1996) 250 259,188
1,759,188
TOTAL TAX-EXEMPT SECURITIES (cost: $85,964,000) 89,516,218
Excess of cash and receivables over payables 975,708
NET ASSETS $90,491,926
<F1> Parenthetical year represents date of pre-refunding.
<F2> Coupon rate may change periodically.
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
July 31, 1996
(dollars in thousands)
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<F1> 5,200,410 5,739,628
Net asset value per share $15.39 $15.77
<F1>Shares of beneficial interest, unlimited shares authorized
See Notes to Financial Statements
Statement of Operations
For the year ended July 31, 1996 (dollars in thousands)
The The
Tax-Exempt Tax-Exempt
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 change in 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
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
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. Additionally, each Fund
seeks to preserve capital. 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 a 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. Fees of $160,000 and $183,000 were recognized by the Maryland
and Virginia Funds, respectively, and were paid or are payable to WMC 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 accounts 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 Maryland Fund of Virginia
Accumulated
undistributed net
realized 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
<TABLE>
<CAPTION>
Per-Share Data and Ratios
The Tax-Exempt Fund of Maryland
Year Ended July 31
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $15.29 $15.00 $15.53 $15.22 $14.29
Income from Investment Operations:
Net investment income .80 .80 .76 .79 .83
Net realized and unrealized gain (loss)
on investments .10 .29 (.53) .31 .93
Total income from investment operations .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<F1> 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 rate 16.01% 20.91% 10.01% 9.05% 8.11%
The Tax-Exempt Fund of Virginia
Year Ended July 31
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<F1> 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%
<F1> This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of each Fund's offering price.
</TABLE>
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.
(Signature)
Price Waterhouse LLP
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 above is reported for the fiscal year and not the calendar year,
shareholders should refer to the year-end information which will be mailed
with or following the final year-end distribution to determine the calendar
year status of the Fund's distributions for purposes of their respective
1996 tax returns. Shareholders should consult their tax advisers.
Shareholders Services
To help you add to your account
Automatic Reinvestment of Distributions
All dividends and capital gain distributions can be automatically
reinvested in additional shares at net asset value (without sales charge),
thus providing you with additional potential for growth through
compounding.
Investing by Mail
Simply send a check for $50 or more to the fund's transfer agent. You can
send personal checks or you can put bonus, gift or dividend checks to work
by endorsing them to the fund for investment into your account.
Automatic Investment Plan
You can make automatic investments regularly by authorizing the fund's
transfer agent to deduct a specified sum from your bank account.
Cross-Reinvestment of Distributions
You can cross-reinvest dividends or dividends and capital gain
distributions from one fund into another at no charge if you have a balance
of at least $5,000 in the originating fund or meet the minimum initial
investment for the receiving fund.
To help you add to your investment at a reduced sales charge
Quantity Discounts
There are discounts on large investments, whether they are in one fund or a
combination of funds in The American Funds Group, as explained in the
prospectus.
Right of Accumulation
You can add the value of your present shares of any of the funds in The
American Funds Group (except shares of our money market funds that were
purchased directly) to the amount of any new purchase in order to qualify
for a quantity discount on your new investment.
Statement of Intention
You can, without obligation, sign a Statement of Intention that allows you
to combine the purchases you intend to make over a 13-month period so as to
take immediate advantage of the maximum quantity discount available.
To help you pay your bills
Dividends in Cash
You have the option of taking your dividends in cash.
Automatic Withdrawal Plan
You can arrange to have regular checks for specified amounts sent to you or
to anyone you designate in any month(s) you choose.
To help you meet your changing needs
Exchange Privileges
Should your goals or financial circumstances change, you can easily
restructure your investment program by transferring some or all of your
holdings into other funds in The American Funds Group. You can do this at
no charge by mail or by phone. Automatic exchanges of $50 or more may also
be made between funds. Your initial exchange must meet the receiving fund's
minimum investment requirement unless the originating fund's balance is at
least $5,000 (in which case you have a year to meet the minimum investment
requirement). Please remember that fund exchanges constitute a sale and
purchase for tax purposes.
To help you with recordkeeping
Confirmation of Transactions
You receive account statements reflecting the transactions in your account.
Consolidated Quarterly Statements
If you have more than one account with the American Funds, you can request
a quarterly statement combining certain accounts registered to the same
individual.
Telephone Information Service
American FundsLine(R) is a toll-free service which gives you information
about your account as well as current prices for the American Funds. Just
call 800/325-3590. (Please have your account number and fund number ready.)
ImageCheck(SM)
If you're a shareholder in a fund that has check-writing privileges (The
Cash Management Trust of America, The U.S. Treasury Money Fund of America
or The Tax-Exempt Money Fund of America), each month you'll receive photo
images of the front and back of each cleared check on easy-to-file 8 1/2" x
11" statements.
Year-End Tax Report
At the end of each year, you will receive an individual report which shows
the tax status of the dividends and any capital gain distributions paid to
you during the year. In many instances, these reports can help you
calculate taxes due on shares you've sold by reporting average cost.
Safekeeping of Certificates
Your shares are credited to your account and certificates are not issued
unless specifically requested. This helps eliminate the costly, irritating
problem of lost or destroyed certificates.
For more complete information about these services or about any of the
American Funds, including charges and expenses, please obtain a prospectus
from your securities dealer or financial planner, or phone the Fund's
transfer agent, American Funds Service Company, toll-free at 800/421-0180.
These services are subject to change or termination.
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Chairman and Chief Executive Officer,
The Johnston-Lemon Group, Incorporated
Stephen Hartwell
Chairman Emeritus of the Trust
Chairman, Washington Management Corporation
Harry J. Lister
President of the Trust
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International Company
Frank M. Ewing
Chairman and President,
Frank M. Ewing Co., Inc.
Jean Head Sisco
Partner, Sisco Associates
T. Eugene Smith
President, T. Eugene Smith, Inc.
Stephen G. Yeonas
Chairman and Chief Executive Officer,
Stephen G. Yeonas Company
Other Officers
Howard L. Kitzmiller
Senior Vice President, Secretary/Treasurer of the Trust
Director, Senior Vice President, Secretary and Assistant Treasurer,
Washington Management Corporation
Lois A. Erhard
Vice President of the Trust
Vice President, Washington Management Corporation
Michael W. Stockton
Assistant Treasurer of the Trust
Assistant Vice President and Assistant Treasurer, Washington Management
Corporation
Offices of the Funds and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071
135 South State College Boulevard
Brea, CA 92621
Transfer Agent
American Funds Service Company
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, NY 10081-0001
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005-2216
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1462
Independent Accountants
Price Waterhouse LLP
400 South Hope Street
Los Angeles, CA 90071-2889
This report is for the information of shareholders in the Funds that
comprise The American Funds Tax-Exempt Series I, but it may also be used as
sales literature when preceded or accompanied by the current prospectus,
which gives details about charges, expenses, investment objectives and
operating policies of the Funds. If used as sales material after September
30, 1996, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
Annual Report/1996 (Logo) Printed on Recycled paper TEFMD/TEFVA-011-0996
(Logo)
The American Funds Group(R)
