The American Funds
Tax-Exempt Series I
The Tax-Exempt Fund of Maryland
The Tax-Exempt Fund of Virginia
Semi-Annual Report
January 31, 1997
(Logo)
The American Funds Group(R)
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia seek a
high level of current income free from Federal and their respective state
income taxes. Additionally, each Fund seeks to preserve capital.
Fund results in this report were computed without a sales charge unless
otherwise indicated. Here are the total returns and average annual
compound returns with all distributions reinvested for periods ended
December 31, 1996 (the most recent calendar quarter), assuming payment of
the 4.75% maximum sales charge at the beginning of the stated periods _
10 Years 5 Years 1 Year
The Tax-Exempt Fund of Maryland
Total Return +81.31% +31.02% -1.19%
Average Annual Compound Return + 6.13 + 5.55 _
The Tax-Exempt Fund of Virginia
Total Return +81.87% +30.48% -1.44%
Average Annual Compound Return + 6.16 + 5.46 _
Sales charges are lower for accounts of $25,000 or more.
The Funds' 30-day yields as of February 28, 1997, calculated in accordance
with the Securities and Exchange Commission formula, were 4.45% for the
Maryland Fund and 4.21% for the Virginia Fund. The Funds' distribution
rates as of that date were 4.88% and 4.74%, 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 Funds' 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
During the six months ended January 31 - the first six months of the 1997
fiscal year for The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of
Virginia - your investment continued to out-pace inflation if you
reinvested your dividends.
The net asset value of a share in the Maryland Fund rose from $15.39
to $15.55. As a result, the value of your shares increased 3.7% if you
reinvested your dividends, which totaled 39.7 cents a share, or 1.0% if you
took dividends in cash.
The net asset value of a share in the Virginia Fund increased from
$15.77 to $15.90 a share. Your gain was 3.4% if you reinvested your
dividends, which totaled 40.1 cents a share, or 0.8% if you did not.
During the same period, the Consumer Price Index rose 1.3%.
The Funds' results were in keeping with those achieved by similar
funds in each state. According to Lipper Analytical Services, the average
total return from a Maryland municipal bond fund was 3.4%, while the like
figure for a Virginia fund was 3.5%. Nationally, municipal bond funds did
somewhat better, recording a 4.2% total return as measured by the unmanaged
Lehman Brothers Municipal Bond Index.
Based on the Funds' 30-day tax-free distribution rates for January
1997 - 4.85% for Maryland and 4.77% for Virginia - the equivalent taxable
distribution rates for individuals in the top tax bracket were 8.68% and
8.38%, respectively, as reported in the "Highlights" on page 3.
Relatively few changes were made to either portfolio during the first
half of fiscal 1997. The average life of the Maryland portfolio remained
at 10.61 years, while the average life of the Virginia portfolio declined
from 10.71 to 10.21 years.
In the case of the Maryland Fund, we invested in a bond which brings a
whole new meaning to the concept of par value: an issue underwriting a new
golf course in Montgomery County. It is backed by the county's five
existing courses, which, by themselves, already produce annual revenues in
excess of 1.3 times what is needed to service the debt.
The Virginia Fund helped to finance ongoing operations at a life care
facility in Williamsburg. Before investing in the bond, analysts from
Capital Research and Management Company - investment adviser to both Funds
- - toured the complex and were impressed by the management team as well as
the facility itself. Then the analysts did similar in-depth research into
the facility's competitors, in order to establish context. Finally, they
compared notes with other Capital experts on the Virginia economy and the
life care industry. This basic process takes place before almost any
investment is made and is repeated frequently while the security is held.
Because we feel interest rates are likely to remain relatively level,
we have added to our holdings of housing-related issues in both portfolios.
These bonds are issued by state agencies that raise money to help
low-income home buyers, using hundreds of mortgages as collateral. While
diversification inherently reduces default risk, investors can suffer if
interest rates go up or down enough to encourage the mortgage holders to
pay off their loans more quickly or more slowly than usual. In an
environment of stable interest rates, this risk is minimized and housing
bonds tend to offer solid returns. The research analysts who serve the
Funds carefully analyze each bond to attempt to make sure that the Funds
are well-rewarded for the risks they do assume.
We look forward to continuing to strive to identify and to take
advantage of the best values among your state's tax-exempt bond issues. In
our annual report, six months from now, we will offer a more detailed look
at our progress.
Sincerely,
(Signature) (Signature)
James H. Lemon, Jr. Harry J. Lister
Chairman President
March 17, 1997
Highlights as of January 31, 1997
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Assets:
Net Assets $79,802,394 $94,432,004
Net Asset Value Per Share $15.55 $15.90
Distribution Rate<F1> 4.85% 4.77%
Quality Diversification:
Moody's/S&P Ratings (best of either)
Aaa/AAA 38.34% 38.63%
Aa/AA 20.16 36.29
A/A 15.38 7.69
Baa/BBB 14.40 8.34
Lower than BBB or nonrated 8.44 3.19
Cash and Equivalents 3.28 5.86
Total 100.00% 100.00%
Maturity Diversification<F2>:
Under 1 year 3.28% 5.86%
1 to 10 years 23.99 33.40
10+ to 20 years 51.79 39.09
20+ to 30 years 20.94 21.16
30+ years _ 0.49
Total 100.00% 100.00%
Average Life<F3> 10.61 years 10.21
years
To match Maryland's triple tax-free distribution rate of 4.85%, investors
with a combined effective Federal/state/county tax rate of 44.1% would have
had to earn a taxable distribution rate of 8.68%. For Virginia investors
with a combined effective Federal/state tax rate of 43.1%, it would have
taken a taxable distribution rate of 8.38% to equal the Fund's double
tax-free distribution rate of 4.77%.
<F1> Distribution rate for January 1997 is one month's dividend annualized,
divided by the average offering price for the month. The 30-day yield
for January, calculated per the Securities and Exchange Commission
formula, at maximum sales charge: Maryland, 4.46% and Virginia, 4.24%.
For the latest SEC yields, 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 15.94 years and 16.07
years, respectively.
The Tax-Exempt Fund of Maryland
Investment Portfolio, January 31, 1997
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year - 96.72%
College & University Revenue - 4.47%
Frederick County, College Revenue Bonds
(Hood College Project), 1990 Series:
7.05% 2004 $ 410 $ 442,870
7.05% 2005 455 491,104
Maryland Health and Higher Educational
Facilities Authority, Refunding Revenue
Bonds, Johns Hopkins University Issue,
Series 1988, 7.375% 2008 500 530,480
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds:
1992 Series A, 6.30% 2009 1,050 1,126,262
1993 Refunding Series C, 5.00% 2010 1,000 978,149
3,568,865
General Obligations (Local) - 3.27%
Anne Arundel County, Consolidated Water and
Sewer, 1993 Refunding Series, 5.30% 2016 500 486,050
Baltimore County, Metropolitan District Bonds,
63rd Issue, 1992 Series, 6.10% 2006 250 269,258
Frederick County, Public Facilities Bonds:
1990, 8.875% 2002 250 301,795
1993, Series B, 5.125% 2007 995 1,004,254
Harford County Consolidated Public
Improvement Bonds, Series 1992, 5.80% 2010 530 548,789
2,610,146
Hospital & Health Facilities Revenue - 15.84%
Maryland Health and Higher Educational
Facilities Authority:
Good Samaritan Hospital Issue, Revenue
Bonds, Series 1993, 5.70% 2009 1,000 1,037,390
Howard County, General Hospital Issue,
Series 1993:
5.50% 2013 2,000 1,872,200
5.50% 2021 2,000 1,826,800
Johns Hopkins Hospital Issue, Revenue
Refunding Bonds, Series 1993:
5.60% 2009 850 867,442
5.00% 2023 2,000 1,798,640
Memorial Hospital of Cumberland Issue,
Revenue Refunding Bonds, Series 1992,
6.50% 2010 750 795,368
Peninsula Regional Medical Center Issue,
Project and Refunding Revenue Bonds,
Series 1993, 5.00% 2023 500 444,085
Suburban Hospital Issue, Revenue Refunding
Bonds, Series 1993, 5.125% 2021 3,000 2,735,340
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1992, 7.20% 2006 215 241,737
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 1,018,630
12,637,632
Housing Finance Authority Revenue - 9.90%
Maryland Community Development
Administration, Department of Housing and
Community Development, Single-Family
Program Bonds:
1994 First Series, 5.80% 2009 2,000 2,031,060
1994 First Series, 5.70% 2017 940 948,460
1994 Fifth Series, AMT, 5.875% 2017 1,365 1,377,872
1990 First Series, 7.60% 2017 495 514,884
1988 Third Series, 8.00% 2018 1,000 1,015,070
Montgomery County, Maryland Housing
Opportunities Commission, Single Family
Mortgage Revenue, 1986 Series C, 7.25% 2013 750 773,588
Prince George's County Housing Authority,
GNMA/FNMA Collateralized Single Family
Mortgage Bonds, Series 1994 A, AMT,
6.60% 2025 930 959,286
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family Mortgage
Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 10 10,256
1988 Series B, 7.65% 2022 260 273,117
7,903,593
Industrial Development Revenue - 2.66%
Mayor and City Council of Baltimore, Port
Facilities Revenue Bonds (Consolidation
Coal Sales Company Project):
Series 1984 A, 6.50% 2011 $ 500 $ 546,390
Series 1984 B, 6.50% 2011 500 548,029
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc. Project),
1996 Series A, 6.25% 2026 1,000 1,026,950
2,121,369
Insured - 20.08%
City of Baltimore, Refunding Revenue Bonds,
FGIC Insured, 1994, Series A, 6.00% 2015 1,500 1,595,955
Charles County, Consolidated Public
Improvement Bonds of 1993, Series A,
FGIC Insured, 5.25% 2003 715 739,739
City of Frederick, General Improvement Bonds,
1992 Refunding Series, FGIC Insured,
6.125% 2008 890 954,098
Maryland Health and Higher Educational
Facilities Authority:
Anne Arundel Medical Center Issue,
Revenue Bonds, Series 1993,
AMBAC Insured, 5.25% 2013 1,000 978,960
Francis Scott Key Medical Center Issue,
Refunding Revenue Bonds, Series 1993,
FGIC Insured, 5.00% 2013 500 476,550
Johns Hopkins Medical Institutions Parking
Facilities Issue, Parking Revenue Bonds,
Series 1996, AMBAC Insured, 5.50% 2011 1,200 1,213,632
Memorial Hospital of Easton, Series 1989 B,
MBIA Insured, 7.00% 2012 1,200 1,285,320
Mercy Medical Center Issue Project and
Refunding Revenue Bonds, Series 1996,
FSA Insured, 6.50% 2013 2,000 2,229,280
Sinai Hospital of Baltimore Issue Project
and Revenue Refunding Bonds, Series 1993,
AMBAC Insured, 5.25% 2019 1,000 940,390
Prince George's County, Solid Waste Management
System Revenue Bonds, Series 1993, 6.50% 2007 2,000 2,178,440
Commonwealth of Puerto Rico:
Electric & Power Authority, MBIA Insured,
7.00% 2007 1,000 1,170,120
Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series Z,
MBIA Insured, 6.25% 2014 1,000 1,105,300
Public Improvement Bonds of 1987,
MBIA Insured, 6.75% 2006 65 67,086
Washington, D.C. Metropolitan Area Transit
Authority, Gross Revenue Transit Refunding
Bonds, Series 1993, FGIC Insured, 6.00% 2008 1,000 1,086,600
16,021,470
Life Care Facilities Revenue - 8.91%
Calvert County, Economic Development
Revenue Bonds (Asbury-Solomons Island
Facility), Series 1995, 8.625% 2024 2,300 2,535,612
Maryland Health and Higher Educational
Facilities Authority, First Mortgage
Refunding Revenue Bonds, Roland Park
Place Issue, Series 1989, 7.75% 2012 2,000 2,107,820
Prince George's County, Refunding Revenue
Bonds, Collington Episcopal Life Care
Community, Inc., Series 1994 A, 6.00% 2013 2,500 2,463,175
7,106,607
Multi-Family Housing - 5.20%
Montgomery County, Maryland Housing
Opportunities Commission, Multi-Family
Revenue Bonds:
1995 Series A, 6.10% 2015 2,025 2,059,223
1994 Series A-2, 7.50% 2024 2,000 2,093,200
4,152,423
Pre-Refunded<F1> - 13.41%
Frederick County, Public Facilities Bonds:
1991, Series B, 6.30% 2011 (2002) 1,370 1,510,589
1986 Series, 7.40% 2012 (2001) 310 354,417
Harford County, Consolidated Public
Improvement Bonds, Series 1992,
5.80% 2010 (2002) 970 1,049,094
Howard County, Metropolitan District Refunding
Bonds, 1991 Series A, 6.625% 2021 (2001) 500 545,520
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) 250 274,918
Sinai Hospital of Baltimore Issue, Revenue
Bonds, 1990 Series, AMBAC Insured,
7.00% 2019 (2000) 700 769,769
Suburban Hospital Issue Revenue Bonds:
Series 1988, 7.50% 2008 (1998) 1,000 1,069,260
Series 1992, 6.50% 2017 (2002) 500 554,285
University of Maryland Medical System
Issue, Revenue Bonds, Series 1991 A,
FGIC Insured, 6.50% 2021 (2001) 1,000 1,080,710
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1992, 7.20% 2006 (2002) 1,035 1,180,728
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency,
Single Family Mortgage Revenue Bonds,
Homeownership 5th Portfolio,
1986 Series, 7.50% 2015 (2000) 495 541,812
Public Improvement Bonds of 1992,
MBIA Insured, 6.50% 2009 (2002) 1,000 1,112,810
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds,
1989 Series B, 7.00% 2007 (1999) 600 654,654
10,698,566
Resource Recovery - 7.46%
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 2,872,513
Montgomery County, Northeast Maryland
Waste Disposal Authority, Solid Waste
Revenue Bonds AMT:
6.00% 2006 1,000 1,034,080
6.00% 2007 1,000 1,028,800
Series 1993 A, 6.30% 2016 1,000 1,015,909
5,951,302
Special Obligations - 2.94%
Montgomery County Revenue Authority,
Golf Course System Revenue Bonds,
Series 1996 A, 6.00% 2014 2,355 2,350,196
Turnpikes & Toll Roads Revenue - 1.34%
Maryland Transportation Authority Facilities
Project, Transportation Facilities Projects
Revenue Bonds, Series 1992, 5.80% 2006 1,000 1,069,290
Water & Sewer Revenue - 1.24%
Maryland Water Quality Financing
Administration, Revolving Loan Fund
Revenue Bonds, Series 1991 B, 0.00% 2005 700 461,615
Washington Suburban Sanitary District,
Refunding Bonds of 1997, 5.75% 2017 510 530,864
992,479
77,183,938
Tax-Exempt Securities Maturing in One Year or Less - 2.44%
Industrial Development Revenue - 1.88%
Anne Arundel County, Economic Development
Revenue Bonds (Baltimore Gas and Electric
Company Project):
3.20% 1997 1,000 1,000,000
3.55% 1997 500 500,000
1,500,000
Pre-Refunded<F1> - .56%
Commonwealth of Puerto Rico, Public
Improvement Bonds of 1987, MBIA Insured,
6.75% 2006 (1997) 435 449,520
1,949,520
TOTAL TAX-EXEMPT SECURITIES
(cost: $75,582,000) 79,133,458
Excess of cash and receivables over payables 668,936
NET ASSETS $79,802,394
<F1>Parenthetical year represents date of pre-refunding.
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
Investment Portfolio, January 31, 1997
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year - 94.14%
College & University Revenue - 4.58%
Rockingham County Industrial Development
Authority, Educational Facilities Revenue
Bonds (Bridgewater College), Series 1993,
6.00% 2023 $1,100 $ 1,058,211
University of Virginia, General Revenue
Pledge Bonds, Series 1993 B, 5.375% 2010 500 498,550
Virginia College Building Authority Educational
Facilities Revenue Bonds (Marymount
University Project), Series 1992, 6.875% 2007 1,650 1,755,072
Virginia Polytechnic Institute and State University,
University Services System and General
Revenue Pledge Bonds, Series C 1996,
5.35% 2009 1,000 1,010,000
4,321,833
General Obligations (Local) - 12.89%
Arlington County Virginia, Public Improvement
Bonds, Series 1996, 6.00% 2011 2,000 2,173,840
Chesapeake:
Public Improvement Bonds, Series 1992,
6.00% 2006 1,600 1,716,912
Refunding Bonds, Series 1993, 5.40% 2008 1,000 1,032,530
Water and Sewer Bonds, Series 1995 A,
5.375% 2020 1,500 1,443,375
Covington, Water and Sewer Refunding Bonds,
Series 1994, 5.25% 2013 250 242,818
Leesburg Refunding Bonds, Series 1993,
5.60% 2008 1,195 1,233,718
Lynchburg Public Improvement Refunding
Bonds, Series 1993, 5.25% 2009 1,000 1,004,210
Newport News General Obligation,
Water Bonds, Series A 1992, 6.125% 2009 1,170 1,240,095
Norfolk Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 500 516,625
Roanoke Public Improvement and Refunding
Bonds, Series 1992 B:
6.375% 2009 250 266,503
6.40% 2011 500 532,160
Spotsylvania Public Improvement Bonds,
Series 1992, 5.75% 2011 750 771,171
12,173,957
General Obligations (State) - 1.67%
Commonwealth of Virginia, Public Facilities
Bonds, 1993 Series A, 5.40% 2005 1,500 1,577,415
Hospital & Health Facilities Revenue - 14.18%
Fairfax County Industrial Development Authority,
Hospital Revenue Refunding Bonds
(INOVA Health Systems Hospital Project),
Series 1993 A:
5.00% 2007 1,500 1,492,680
5.25% 2019 1,500 1,404,975
5.00% 2023 500 449,570
Hampton Industrial Development Authority,
Hospital Revenue Bonds (Sentara Hospitals),
5.125% 2016 1,000 922,810
Lynchburg Industrial Development Authority,
Hospital Facilities, Revenue Refunding
Bonds, Centra Health, Inc., Series 1988,
8.125% 2016 1,000 1,058,900
Norfolk Industrial Development Authority,
Hospital Revenue Bonds (Sentara Hospitals-
Norfolk Project), Series A 1994, 5.00% 2020 1,750 1,575,753
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding
Bonds (Mary Immaculate Project),
1994 Series, 6.875% 2010 1,900 1,994,658
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 1,300 1,393,652
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 2,037,260
Virginia Beach, Virginia Development Authority
(Sentara Bayside Hospital), 6.60% 2009 1,000 1,064,720
13,394,978
Housing Finance Authority Revenue - 4.41%
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family
Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 15 15,384
1988 Series B, 7.65% 2022 300 315,135
Virginia Housing Development Authority,
Commonwealth Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 520,060
1995 Series A-AMT, Sub-Series A-1,
6.60% 2004 1,000 1,046,750
1994 Series I-AMT, Sub-Series I-1,
6.40% 2005 800 829,192
1994 Series H, Sub-Series H-2, 6.55% 2017 1,000 1,039,080
1992 Series A, 7.10% 2022 380 394,437
4,160,038
Industrial Development Revenue - 2.15%
Industrial Development Authority of the
County of Henrico, Solid Waste Disposal
Revenue Bonds (Browning-Ferris Industries of
South Atlantic, Inc. Project), Series 1996 A
AMT, 5.30% 2011 1,000 1,001,250
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc.
Project), 1996 Series A, 6.25% 2026 1,000 1,026,950
2,028,200
Insured - 17.76%
Augusta, Hospital Revenue Bonds,
AMBAC Insured, 5.125% 2021 2,950 2,685,356
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1,000 1,040,980
Danville, Virginia Industrial Development
Authority, Hospital Revenue Bonds,
Danville Regional Medical Center, Series 1994,
FGIC Insured, 6.00% 2007 1,000 1,067,500
Fairfax County Industrial Development
Authority, Hospital Revenue Refunding
Bonds (INOVA Health System Hospitals Project),
Series 1993 A, FSA Insured, 5.25% 2019 1,000 945,090
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 1,545,019
6.375% 2018 1,000 1,090,300
Loudoun County:
Industrial Development Authority, Hospital
Revenue Bonds, FSA Insured, 6.00% 2005 1,000 1,075,150
Sanitation Authority, Water and Sewer System
Revenue Bonds, FGIC Insured:
Series 1992, 6.25% 2010 2,000 2,132,760
Series 1996, 5.125% 2030 500 459,200
Pamunkey Regional Jail Authority, Jail Facility
Revenue Bonds, Series 1996, MBIA Insured,
5.70% 2010 1,000 1,030,510
Richmond, FGIC Insured, 5.00% 2021 1,000 914,600
Upper Occoquan Sewage Authority,
Regional Sewerage System Revenue
Bonds, Series 1995 A, MBIA Insured,
5.00% 2025 1,000 907,870
City of Virginia Beach Development Authority,
Hospital Revenue Bonds (Virginia Beach
General Hospital Project), Series 1993,
AMBAC Insured, 6.00% 2011 1,000 1,073,300
Washington, D.C. Metropolitan Area Airports
Authority, Airport System Revenue and
Refunding Bonds, MBIA Insured AMT,
Series 1992 A, 6.625% 2019 750 804,788
16,772,423
Lease Revenue (Local) - 1.98%
Fairfax County Economic Development
Authority, Lease Revenue Bonds
(Government Center Properties),
Series 1994, 5.25% 2018 2,000 1,870,580
Lease Revenue (State) - 2.52%
Virginia Public Building Authority, State
Building Revenue Bonds:
Series 1995, 5.20% 2015 1,500 1,441,275
Series 1996A, 5.00% 2015 1,000 938,540
2,379,815
Life Care Facilities Revenue - 3.21%
Industrial Development Authority of the
County of James City, Virginia, Residential
Care Facility First Mortgage Revenue Bonds
(Williamsburg Landing, Inc.), Series 1996A,
6.625% 2019 3,000 3,027,240
Local Appropriation - .56%
Fairfax County Economic Development
Authority, Parking Revenue Bonds (Huntington
Metrorail Station Project), Series 1990 A,
6.75% 2015 500 528,630
Pre-Refunded<F1>- 18.57%
Chesapeake, Hospital Authority Facility for
Chesapeake General Hospital, First Mortgage
Revenue, BIG Insured Series 1988,
7.625% 2018 (1998) 1,000 1,070,250
Fairfax County:
Industrial Development Authority Hospital
Revenue Bonds (Fairfax Hospital System
Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1,000 1,111,770
Water Authority Revenue, Series 1989,
7.30% 2021 (2000) 1,250 1,371,075
Henry County Public Service Authority,
Water and Sewer Revenue Bonds, FGIC
Insured, Series 1990, 7.20% 2019 (2000) 1,250 1,383,025
Loudoun County Sanitation Authority,
Water and Sewer System Revenue Bonds,
Series 1989, AMBAC Insured, 7.50% 2017 (1999) 375 405,803
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) 400 445,452
(Sentara Hospitals-Norfolk Project),
Series 1991, 7.00% 2020 (2000) 250 276,423
Prince William County Service Authority,
Water and Sewer System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 746,647
Roanoke:
Industrial Development Authority, Hospital
Revenue Bonds, Carilion Health System
(Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25%
2017 (2000) 750 829,883
Water System Revenue Bonds, Series 1991,
FGIC Insured, 6.50% 2021 (2001) 750 823,508
Southeastern Public Service Authority, Regional
Solid Waste System, Senior Revenue
Refunding Bonds, Series 1989, BIG Insured:
7.00% 2006 (1999) 500 541,900
7.00% 2013 (1999) 1,000 1,083,800
Suffolk, Series 1989, 7.00% 2005 (1998) 1,000 1,067,980
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2001) 10 10,959
Upper Occoquan Sewage Authority, Regional
Sewerage System Revenue Bonds, Series 1991,
MBIA Insured, 6.00% 2021 (2001) 700 742,896
Virginia Education Loan Authority, Student
Loan Program Revenue Refunding Bonds,
Senior Series 1993 D AMT, 5.95% 2009 (2005) 790 851,502
Virginia Public Building Authority, State
Building Revenue Bonds, Series 1991 A,
6.50% 2011 (2001) 1,750 1,920,923
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1,000 1,102,980
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 278,080
Commonwealth of Virginia Transportation
Board, Transportation Contract Revenue Bonds,
Route 28 Project, Series 1988:
7.70% 2008 (1998) 890 944,610
7.80% 2016 (1998) 500 531,193
17,540,659
Resource Recovery - 2.15%
Fairfax County Economic Development Authority,
Resource Recovery Revenue Bonds,
Series 1988 A AMT (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2003 500 535,979
Roanoke Valley Resource Authority, Solid
Waste System Revenue Bonds, Series 1992,
5.75% 2012 1,500 1,493,055
2,029,034
State Authority - 5.35%
Virginia Public School Authority, School
Financing Bonds:
(1991 Resolution), Series 1995 C,
5.00% 2002 1,000 1,022,410
(1987 Resolution), 1991 Refunding Series C,
6.25% 2007 1,500 1,610,070
(1991 Resolution), Series 1994 A,
6.20% 2014 1,500 1,584,045
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A,
7.50% 2017 50 51,156
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 789,163
5,056,844
Water & Sewer Revenue - 2.16%
Chesterfield County Water and Sewer Revenue
Refunding Bonds, Series 1992, 6.375% 2009 1,250 1,347,488
Rivanna Water and Sewer Authority,
Regional Water and Sewer System Refunding
Revenue Bonds, Series 1991, 6.40% 2007 645 693,342
2,040,830
88,902,476
Tax-Exempt Securities Maturing in One Year or Less - 3.94%
Industrial Development Revenue - 1.70%
Peninsula Ports Authority:
Refunding Port Facilities (Shell Oil Company),
Series 1987, 3.65% 2005<F2> 1,300 1,300,000
Coal Terminal Revenue Bonds,
3.60% 2016<F2> 300 300,000
1,600,000
Pre-Refunded<F1> - 2.24%
Portsmouth Improvement Bonds, Public
Improvement Refunding Bonds, Series 1987,
7.50% 2012 (1997) 500 526,540
Richmond Public Utility Revenue Bonds,
Series 1988 A, 8.00% 2018 (1998) 1,500 1,589,640
2,116,180
3,716,180
TOTAL TAX-EXEMPT SECURITIES
(cost: $88,431,000) 92,618,656
Excess of cash and receivables over payables 1,813,348
NET ASSETS $94,432,004
<F1>Parenthetical year represents date of pre-refunding.
<F2> Coupon rate changes periodically.
See Notes to Financial Statements
Statement of Assets and Liabilities
January 31, 1997 (dollars in thousands)
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Unaudited
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $73,663 and $84,836,
respectively) $77,184 $88,903
Maturing in one year or less
(cost: $1,919 and $3,595,
respectively) 1,949 3,716
Cash 104 706
Receivables for -
Sales of Funds' shares 46 23
Accrued interest 721 1,408
Total Assets 80,004 94,756
Liabilities:
Payables for -
Repurchases of Funds' shares 26 127
Dividends 113 130
Adviser and management
services 31 35
Accrued expenses 32 32
Total Liabilities 202 324
Net Assets:
Net assets applicable to Funds'
shares issued and outstanding $79,802 $94,432
Funds' shares outstanding<F1> 5,132,282 5,939,686
Net asset value per share $15.55 $15.90
<F1>Shares of beneficial interest, unlimited shares authorized.
See Notes to Financial Statements
Statement of Operations
For the six months ended
January 31, 1997 (dollars in thousands)
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Unaudited
Investment Income:
Income:
Interest on tax-exempt securities $2,382 $2,669
Expenses:
Investment adviser fee 102 113
Business management fee 82 91
Distribution fee 94 104
Transfer agent fee 17 19
Reports to shareholders 7 9
Registration statement and
prospectus 3 3
Postage, stationery and supplies 6 6
Trustees' fees 4 4
Custodian fee 2 2
Auditing and legal fees 16 16
Total expenses 333 367
Net investment income 2,049 2,302
Realized Gain and
Unrealized Appreciation
on Investments:
Net realized gain 339 139
Net unrealized appreciation:
Beginning of period 3,039 3,552
End of period 3,551 4,188
Net change in unrealized
appreciation 512 636
Net realized gain and change
in unrealized appreciation 851 775
Net Increase in Net Assets
Resulting from Operations $2,900 $3,077
See Notes to Financial Statements
Statement of Changes in Net Assets
The Tax-Exempt (dollars in thousands)
Fund of Maryland
Six Months Ended Year Ended
January 31, 1997<F1> July 31, 1996
Operations:
Net investment income $ 2,049 $ 4,008
Net realized gain on investments 339 81
Net change in unrealized appreciation
on investments 512 365
Net increase in net assets
resulting from operations 2,900 4,454
Dividends Paid to Shareholders
from Net Investment Income (2,049) (4,008)
Capital Share Transactions:
Proceeds from shares sold:
230,406 and 733,060 shares,
respectively 3,568 11,338
Proceeds from shares issued in
reinvestment of net investment
income dividends:
82,079 and 165,984 shares,
respectively 1,273 2,565
Cost of shares repurchased:
380,613 and 613,087 shares,
respectively (5,917) (9,466)
Net increase (decrease) in net assets
resulting from capital share
transactions (1,076) 4,437
Total Increase (Decrease) in Net Assets (225) 4,883
Net Assets:
Beginning of period 80,027 75,144
End of period $79,802 $80,027
<F1> Unaudited
See Notes to Financial Statements
Statement of Changes in Net Assets
The Tax-Exempt (dollars in thousands)
Fund of Virginia
Six Months Ended Year Ended
January 31, 1997<F1> July 31, 1996
Operations:
Net investment income $ 2,302 $ 4,705
Net realized gain on investments 139 131
Net change in unrealized appreciation
on investments 636 74
Net increase in net assets
resulting from operations 3,077 4,910
Dividends and Distributions
Paid to Shareholders:
Dividends from net investment income (2,302) (4,705)
Distributions from net realized gain
on investments _ (320)
Total dividends and distributions (2,302) (5,025)
Capital Share Transactions:
Proceeds from shares sold:
551,335 and 655,816 shares,
respectively 8,744 10,441
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
85,219 and 190,123 shares, respectively 1,351 3,020
Cost of shares repurchased:
436,496 and 912,994 shares,
respectively (6,930) (14,537)
Net increase (decrease) in net assets
resulting from capital share
transactions 3,165 (1,076)
Total Increase (Decrease) in Net Assets 3,940 (1,191)
Net Assets:
Beginning of period 90,492 91,683
End of period $94,432 $90,492
<F1> Unaudited
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 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 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 $2,000 and $2,000 for
the Maryland and Virginia Funds, respectively, were paid by these
credits rather than in cash.
2. It is the Trust's policy to continue to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute all of its net investment income, including any net realized
gain on investments, to its shareholders. Therefore, no federal income tax
provision is required.
As of January 31, 1997, net unrealized appreciation on investments for
book and federal income tax purposes for the Maryland Fund aggregated
$3,551,000, of which $3,838,000 related to appreciated securities and
$287,000 related to depreciated securities. For the Virginia Fund, net
unrealized appreciation aggregated $4,188,000, of which $4,376,000 related
to appreciated securities and $188,000 related to depreciated securities.
There was no difference between book and tax realized gains on securities
transactions for the six months ended January 31, 1997. During the six
months ended January 31, 1997, the Virginia Fund utilized a capital loss
carryforward totaling $4,000 to offset, for tax purposes, capital gains
realized during the period. The cost of portfolio securities for book and
federal income tax purposes was $75,582,000 and $88,431,000 for the
Maryland and Virginia Funds, respectively, at January 31, 1997.
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 $82,000 and $91,000 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 $13,000 and $17,000 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 $102,000 and $113,000 were recognized by the Maryland and
Virginia Funds, respectively, and were paid or are payable to Capital
Research and Management Company (CRMC) as Investment Adviser pursuant to an
investment advisory contract with the Trust. The investment advisory
contract provides for monthly fees, accrued daily, based on an annual rate
of 0.165% of the first $60 million of average net assets of each of the
Funds; 0.12% of such assets in excess of $60 million; plus 1.65% of the
gross investment income (excluding any net capital gains from transactions
in portfolio securities).
Pursuant to a Plan of Distribution, the Funds may expend up to 0.25%
of their average net assets annually for any activities primarily intended
to result in sales of Fund shares, provided the categories of expenses for
which reimbursement is made are approved by the Funds' Board of Trustees.
Fund expenses under the Plan include payments to dealers to compensate them
for their selling and servicing efforts. During the six months ended
January 31, 1997, distribution expenses under the Plan were $94,000 and
$104,000, including accrued and unpaid expenses of $27,000 and $29,000, for
the Maryland and Virginia Funds, respectively.
American Funds Service Company (AFS), the transfer agent for the
Maryland and Virginia Funds, was paid fees of $17,000 and $19,000,
respectively. American Funds Distributors, Inc. (AFD), the principal
underwriter of the Funds' shares, has informed the Funds that it has
received $12,000 and $23,000 (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
January 31, 1997, aggregate amounts deferred and earnings thereon were
$7,000 each for the Maryland and Virginia Funds.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC.
4. As of January 31, 1997:
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Accumulated undistributed
net realized gain
on investments $ 339,000 $ 135,000
Paid-in capital 75,912,000 90,109,000
Purchases and sales of
investment securities,
excluding short-term
securities, during
the six months ended
January 31, 1997:
Purchases 4,901,000 9,212,000
Sales 5,707,000 6,981,000
Per-Share Data and Ratios
The Tax-Exempt
Fund of Maryland
Six Months
Ended Year Ended July 31
1/31/97<F1> 1996 1995 1994 1993 1992
Net Asset Value,
Beginning of Period $15.39 $15.29 $15.00 $15.53 $15.22 $14.29
Income from Investment
Operations:
Net investment income .40 .80 .80 .76 .79 .83
Net realized and
unrealized gain (loss)
on investments .16 .10 .29 (.53) .31 .93
Total income from
investment operations .56 .90 1.09 .23 1.10 1.76
Less Distributions:
Dividends from net
investment income (.40) (.80) (.80) (.76) (.79) (.83)
Net Asset Value,
End of Period $15.55 $15.39 $15.29 $15.00 $15.53 $15.22
Total Return<F2> 3.65%<F3> 5.95% 7.58% 1.42% 7.44% 12.72%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $80 $80 $75 $75 $64 $48
Ratio of expenses to
average net assets .41%<F3> .81% .78% .75% .83% .91%
Ratio of net income to
average net assets 2.54%<F3> 5.14% 5.38% 4.90% 5.12% 5.60%
Portfolio turnover rate 6.29%<F3> 16.01% 20.91% 10.01% 9.05% 8.11%
<F1> Unaudited
<F2> This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the Fund's offering price.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
Per-Share Data and Ratios
Six Months
Ended Year Ended July 31
1/31/97<F1> 1996 1995 1994 1993 1992
Net Asset Value,
Beginning of Period $15.77 $15.79 $15.49 $16.01 $15.72 $14.75
Income from Investment
Operations:
Net investment income .40 .81 .83 .80 .82 .85
Net realized and
unrealized gain (loss)
on investments .13 .03 .30 (.52) .29 .97
Total income from
investment operations .53 .84 1.13 .28 1.11 1.82
Less Distributions:
Dividends from net
investment income (.40) (.81) (.83) (.80) (.82) (.85)
Distributions from
net realized gains - (.05) - - - -
Total distributions (.40) (.86) (.83) (.80) (.82) (.85)
Net Asset Value,
End of Period $15.90 $15.77 $15.79 $15.49
$16.01
$15.72
Total Return<F2> 3.40%<F3> 5.46% 7.56% 1.74% 7.29% 12.80%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $94 $90 $92 $93 $80 $57
Ratio of expenses to
average net assets .40%<F3> .79% .79% .78% .84% .93%
Ratio of net income to
average net assets 2.50%<F3> 5.11% 5.37% 5.04% 5.18% 5.61%
Portfolio turnover rate 7.84%<F3> 27.34% 32.18% 2.36% 4.96% 6.84%
<F1> Unaudited
<F2> This was calculated without deducting a sales charge. The maximum
sales charge is 4.75% of the Fund's offering price.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year's operations.
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Chairman and Chief Executive Officer,
The Johnston-Lemon Group, Incorporated
Stephen Hartwell
Chairman Emeritus of the Trust
Chairman, Washington Management Corporation
Harry J. Lister
President of the Trust
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International Company
Frank M. Ewing
Chairman and President,
Frank M. Ewing Co., Inc.
Jean Head Sisco
Partner, Sisco Associates
T. Eugene Smith
President, T. Eugene Smith, Inc.
Stephen G. Yeonas
Chairman and Chief Executive Officer,
Stephen G. Yeonas Company
Other Officers
Howard L. Kitzmiller
Senior Vice President, Secretary/Treasurer of the Trust
Senior Vice President, Secretary and Assistant Treasurer, Washington
Management Corporation
Lois A. Erhard
Vice President of the Trust
Vice President, Washington
Management Corporation
Michael W. Stockton
Assistant Vice President,
Assistant Secretary and Assistant Treasurer of the Trust
Assistant Vice President and
Assistant Treasurer, Washington Management Corporation
Office of the Funds and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92821-5804
Transfer Agent
American Funds Service Company
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-0001
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005-2216
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1462
For information about your account or any of the Funds' services, please
contact your financial adviser or call American Funds Service Company,
toll-free, at 800/421-0180.
This report is for the information of shareholders in the Funds that
comprise The American Funds Tax-Exempt Series I, but it may also be used as
sales literature when preceded or accompanied by the current prospectus,
which gives details about charges, expenses, investment objectives and
operating policies of the Funds. If used as sales material after March 31,
1997, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
TEFMD/TEFVA-013-0397
(Logo) The American Funds Group(R)
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