(Logo) The American Funds Group
The American Finds
Tax-Exempt Series I
The Tax-Exempt Fund of Maryland(R)
(map logo)
The Tax-Exempt Fund of Virginia(R)
(map logo)
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.
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia are two of
the 28 mutual funds in The American Funds Group,
advised by Capital Research
and Management Company. Since 1931, Capital has invested with a long-term focus
based on thorough research and attention to risk.
Here are the average annual compound returns with all distributions reinvested
for periods ended December 31, 1998 (the most recent calendar quarter),
assuming payment of the 4.75% maximum sales charge at the beginning of the
stated periods:
Maryland Fund Virginia Fund
10 years +6.85% +6.71%
5 years +4.77% +4.47%
12 months +0.71% +0.66%
Sales charges are lower for accounts of $25,000 or more.
FUND RESULTS IN THIS REPORT WERE COMPUTED WITHOUT A SALES CHARGE UNLESS
OTHERWISE INDICATED. FIGURES SHOWN ARE PAST RESULTS AND ARE NOT PREDICTIVE OF
FUTURE RESULTS. SHARE PRICE AND RETURN WILL VARY, SO YOU MAY LOSE MONEY.
INVESTING FOR SHORT PERIODS MAKES LOSSES MORE LIKELY. INVESTMENTS ARE NOT
FDIC-INSURED, NOR ARE THEY DEPOSITS OF OR GUARANTEED BY A BANK OR ANY OTHER
ENTITY.
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 ITS STATE'S TAX-EXEMPT
SECURITIES THAN A MORE WIDELY DIVERSIFIED MUNICIPAL BOND FUND. INCOME MAY BE
SUBJECT TO FEDERAL ALTERNATIVE MINIMUM TAXES. CERTAIN OTHER INCOME, AS WELL AS
CAPITAL GAIN DISTRIBUTIONSA, MAY BE TAXABLE.
Fellow Shareholders
Municipal bond investors enjoyed a rare phenomenon during the six months ended
January 31: The absolute yields of municipal bonds were, in many cases, neck
and neck with those of Treasury bonds. Of course, income from munis offered
the investors who lived in the states that issued them the considerable
advantage of being free of Federal taxes as well as state taxes. You benefited
as an investor in The Tax-Exempt Fund of Maryland or The Tax-Exempt Fund of
Virginia.
During the period, Maryland Fund investors saw the value of their shares rise
16 cents, from $16.04 to $16.20. Income dividends totaled 37.7 cents a share
and the Fund made a long-term capital gain distribution of 9.5 cents a share.
Virginia Fund shareholders saw the value of their shares gain 14 cents, from
$16.36 to $16.50. Income dividends totaled 36.7 cents a share and a capital
gain distribution amounted to 17.9 cents (14.3 cents long-term and 3.6 cents
short-term) a share.
If, like most shareholders, you reinvested your dividends and capital gain
distributions, your total return was...
4.0% for the Maryland Fund
4.2% for the Virginia Fund
Both Funds handily outpaced inflation, which was 0.7% for the period, as
measured by the Consumer Price Index.
For those who reinvest dividends, The Maryland Fund's six-month income return
of 2.8%, or 5.6% on an annualized basis, was the equivalent of 10.0% a year
from a taxable investment if you are in the highest combined Federal, state and
local tax bracket of 44.1%.
The Virginia Fund's six-month income return of 2.7%, or 5.4% on an annualized
basis, was the equivalent of 9.4% a year from a taxable investment if you are
in the highest combined Federal and state tax bracket of 43.1%.
Why did muni and Treasury yields meet?
Municipal bond issuers took advantage of low interest rates to sell record
amounts of debt in calendar 1998. Maryland, for instance, issued 33% more than
in 1997, while Virginia issuance was up more than 50% over the prior period.
As the supply grew, price increases slowed.
Meanwhile, the economic crisis that had been dogging Southeast Asia expanded
its reach in August as Russia defaulted on debt and devalued the ruble. Shaken
global investors took the development as an omen and stampeded out of equities
all over the world.
Long-Term Capital Management _ a huge hedge fund _ was caught in a highly
leveraged position; its rapid collapse quickened the "flight to quality."
Suddenly, everyone was interested in lower risk, creating a huge demand for
dollars and U.S. Treasury bonds, generally considered the world's safest
investments.
The Federal Reserve Board, striving to keep the domestic economy on an even
keel in the face of such global uncertainty, lowered the Federal funds rate
(the rate banks charge each other for overnight loans) three times _ a total
reduction of 0.75%. These cuts helped the U.S. stock market to turn around in
a hurry and move to new highs by December. Bond markets gained, too. Many of
the world's other central banks followed suit, with similar results in their
respective markets.
However, ongoing declines in Latin America kept fueling the popularity of
Treasuries, pushing prices to record highs _ and forcing yields to decreased
levels comparable with those of munis.
Looking ahead
The unusual similarity in absolute yields from Treasuries and municipal bonds
is already fading, partly because calmer global markets have lessened demand
for Treasuries and partly because issuance of new municipal bonds has fallen
since December.
On the surface, conditions for municipal bonds look good. Inflation remains
low and the overall economy continues to grow. That said, interest rates are
so low that it is difficult to imagine them going any lower. The Funds'
investment adviser, Capital Research and Management Company, notes that, in the
current environment, it is unlikely to make any large investments in long-term
bonds for either Fund.
We should note that both portfolios look much as they did six months ago. This
is partly because the Funds' adviser believes strongly in the existing holdings
and partly because making fewer transactions keeps costs low and helps to
minimize taxable capital gains. When changes are made, of course, they are
based on the thorough, proprietary investment research that is the hallmark of
The American Funds Group.
We look forward to reporting to you again six months from now.
Sincerely,
[SIGNATURE] [SIGNATURE]
James H. Lemon, Jr. Harry J. Lister
Chairman President
March 17, 1999
Preparing for the Year 2000 _ The Funds' key service providers _ Capital
Research and Management Company, the investment adviser, Washington Mutual
Corporation, the business manager, and American Funds Service Company, the
transfer agent _ have updated all significant computer systems to process
date-related information properly following the turn of the century. Testing of
these and other systems with business partners, vendors and other service
providers will continue through much of 1999. We will continue to keep you up
to date in our regular publications. If you'd like more detailed information,
please call Shareholder Services at 800/421-0180, ext. 21, or visit our Web
site at www.americanfunds.com
The Funds' 30-day yields as of February 28 were 3.39% for the Maryland Fund and
3.51% for the Virginia Fund. Those yields represent results of a Securities
and Exchange Commission formula based on earnings anticipated from current
holdings, and reflect the maximum sales charge. The Funds' distribution rates,
which are based solely on past dividends, were 4.32% and 4.18%, respectively.
For the latest yields based on actual distributions, call toll-free
800/421-0180.
The Tax-Exempt Fund of Maryland
January 31, 1999
Quality Diversification:
Moody's/S&P Ratings (best of either)
(A pie chart showing the following components and percentages)
Aaa/AAA ............... 43.3%
Aa/AA ................. 21.8%
A/A ................... 12.2%
Baa/BBB ................ 8.4%
Lower than BBB ......... 8.7%
Cash and Equivalents ... 5.6%
Maturity Diversification <F1>:
(A pie chart showing the following components and percentages)
Under 1 year ........... 5.6%
1 to 10 years .......... 67.1%
10+ to 20 years ........ 20.4%
20+ to 30 years ........ 5.4%
30+ years .............. 1.5%
Average Life <F2> 8.27 years
[FN]
<F1> Securities are included at pre-refunded dates, not maturity dates.
<F2> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Maryland Fund is 14.38 years.
</FN>
Investment Portfolio
January 31, 1999
The Tax-Exempt
Fund of Maryland
(map logo)
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year _ 94.44%
College & University Revenue _ 1.80%
Frederick County, College Revenue Bonds
(Hood College Project), 1990 Series:
7.05% 2004 $ 410 $ 436,388
7.05% 2005 455 483,074
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds,
1993 Refunding Series C, 5.00% 2010 1,000 1,044,179
1,963,641
General Obligations (Local) _ 1.00%
Anne Arundel County, Consolidated Water and
Sewer, 1993 Refunding Series, 5.30% 2016 500 517,785
Harford County Consolidated Public
Improvement Bonds, Series 1992, 5.80% 2010 530 577,297
1,095,082
General Obligations (State) _ 1.47%
Commonwealth of Puerto Rico, Public
Improvement Refunding Bonds, Series 1998,
5.00% 2007 1,500 1,607,415
Hospital & Health Facilities Revenue _ 9.50%
Maryland Health and Higher Educational
Facilities Authority:
(Charity Obligated Group-Daughters of
Charity National Health System),
Hospital Revenue Bonds, Series 1997D,
4.60% 2026 (2003)<F1> 1,725 1,767,815
Good Samaritan Hospital Issue,
Revenue Bonds, Series 1993, 5.70% 2009 1,000 1,127,770
Howard County, General Hospital
Issue, Series 1993:
5.50% 2013 2,000 2,136,300
5.50% 2021 1,000 1,061,570
Johns Hopkins Hospital Issue, Revenue
Refunding Bonds, Series 1993, 5.60% 2009 850 916,887
Suburban Hospital Issue, Revenue
Refunding Bonds, Series 1993, 5.125% 2021 1,500 1,494,000
Prince George's County (Dimensions Health
Corporation Issue):
Hospital Revenue Bonds, Series 1992,
7.20% 2006 $ 215$ 240,510
Project and Refunding Revenue Bonds,
Series 1994, 5.375% 2014 1,600 1,639,247
10,384,099
Housing Finance Authority Revenue _ 14.65%
Maryland Community Development
Administration, Department of Housing
and Community Development:
Residential Revenue Bonds, 1998 Series B, AMT:
5.00% 2008 1,610 1,664,466
5.00% 2009 1,680 1,728,653
Single-Family Program Bonds:
1994 First Series, 5.80% 2009 2,000 2,128,440
1994 First Series, 5.70% 2017 2,630 2,736,725
1994 Fifth Series, AMT, 5.875% 2017 1,135 1,179,049
1990 First Series, 7.60% 2017 495 513,355
1988 Third Series, 8.00% 2018 1,000 1,046,500
Montgomery County, Housing Opportunities
Commission, Single Family Mortgage Revenue
Bonds:
1998 Series B, 4.80% 2009 600 617,340
1997 Series A, 5.50% 2009 750 788,543
1998 Series B, 4.90% 2010 500 513,955
Prince George's County Housing Authority,
GNMA/FNMA Collateralized Single Family
Mortgage Bonds:
Series 1998 A, AMT, 4.65% 2019 2,000 2,011,880
Series 1994 A, AMT, 6.60% 2025 885 949,915
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family
Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 5 5,088
1988 Series B, 7.65% 2022 120 126,556
16,010,465
Industrial Development Revenue _ 1.99%
Mayor and City Council of Baltimore, Port
Facilities Revenue Bonds (Consolidation Coal
Sales Company Project):
Series 1984 A, 6.50% 2011 500 550,800
Series 1984 B, 6.50% 2011 500 550,800
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc.
Project), 1996 Series A, 6.25% 2026 $1,000 $ 1,073,750
2,175,350
Insured _ 22.51%
City of Baltimore, Refunding Revenue Bonds,
FGIC Insured,1994, Series A:
6.00% 2015 1,500 1,756,305
5.00% 2024 1,220 1,258,296
City of Baltimore, Consolidated Public
Improvement Bonds of 1998, Series A,
FGIC Insured, 5.375% 2010 1,185 1,305,621
Calvert County, Economic Development
Refunding Revenue Bonds, (Asbury-Solomons
Island Facility), Series 1997, MBIA Insured:
5.00% 2009 1,000 1,073,150
5.00% 2010 1,000 1,069,020
5.00% 2017 1,000 1,016,380
5.00% 2027 1,000 1,005,400
Charles County, Consolidated Public
Improvement Bonds of 1993, Series A,
FGIC Insured, 5.25% 2003 715 760,331
City of Frederick, General Improvement Bonds,
1992 Refunding Series, FGIC Insured,
6.125% 2008 890 983,681
Maryland Health and Higher Educational
Facilities Authority:
Johns Hopkins Medical Institutions Parking
Facilities Issue, Parking Revenue Bonds,
Series 1996, AMBAC Insured, 5.50% 2011 1,200 1,315,776
Helix Health Issue, Revenue Bonds, Series
1997, AMBAC Insured, 5.00% 2007 1,250 1,343,688
Medlantic/Helix Health Issue, Revenue Bonds,
Series 1998 A, AMBAC Insured:
5.25% 2010 2,840 3,104,631
5.25% 2038 1,500 1,601,475
Mercy Medical Center Issue Project and
Refunding Revenue Bonds, Series 1996,
FSA Insured, 6.50% 2013 2,000 2,446,100
Upper Chesapeake Hospitals Issue, Revenue
Bonds, Series 1998 A 5.50% 2020 1,000 1,048,660
Prince George's County, Solid Waste
Management System Revenue Bonds,
Series 1993, FSA Insured, 6.50% 2007 $2,000 $ 2,241,260
Commonwealth of Puerto Rico:
Electric & Power Authority, 1995 Series Y,
MBIA Insured, 7.00% 2007 1,000 1,218,680
Public Improvement Bonds of 1987,
MBIA Insured, 6.75% 2006 45 45,806
24,594,260
Lease Revenue (State) _ 1.45%
Maryland Stadium Authority, Sports Facilities
Lease Revenue Bonds, Series 1989 D, 7.50% 2010 1,500 1,581,330
Life Care Facilities Revenue _ 7.11%
Maryland Health and Higher Educational
Facilities Authority, First Mortgage Refunding
Revenue Bonds, Roland Park Place Issue,
Series 1989, 7.75% 2012 2,000 2,058,540
Maryland Health and Higher Educational
Facilities Authority, First Mortgage Revenue
Bonds, PUMH of Maryland, Inc. Issue (Heron
Point of Chestertown), Series 1998A:
5.75%, 2019 1,500 1,491,795
5.75%, 2026 1,640 1,607,594
Prince George's County, Refunding Revenue
Bonds, Collington Episcopal Life Care
Community, Inc., Series 1994 A, 6.00% 2013 2,500 2,608,375
7,766,304
Multi-Family Housing _ 5.04%
Montgomery County, Maryland Housing
Opportunities Commission, Multi-Family
Revenue Bonds:
1995 Series A, 6.10% 2015 2,025 2,170,739
1994 Series A-2, 7.50% 2024 2,000 2,158,280
Prince George's County, Mortgage Revenue
Bonds (GNMA Collateralized-Langley Gardens
Apartments Project), Series 1997 A, 5.60% 2017 1,130 1,181,856
5,510,875
Pre-Refunded<F2> _ 11.96%
Calvert County, Economic Development
Revenue Bonds (Asbury-Solomons Island Facility),
Series 1995, 8.625% 2024 (2005) 2,300 2,900,484
Frederick County, Public Facilities Bonds:
1991, Series B, 6.30% 2011 (2002) $1,370 $ 1,519,577
1986 Series, 7.40% 2012 (2001) 310 347,975
Harford County, Consolidated Public
Improvement Bonds, Series 1992,
5.80% 2010 (2002) 970 1,063,624
Howard County, Metropolitan District Refunding
Bonds, 1991 Series A, 6.625% 2021 (2001) 500 537,530
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) 250 268,295
Memorial Hospital of Cumberland Issue,
Revenue Refunding Bonds, Series 1992,
6.50% 2010 (2004) 750 852,488
Suburban Hospital Issue Revenue Bonds,
Series 1992, 6.50% 2017 (2002) 500 557,795
University of Maryland Medical System Issue,
Revenue Bonds, Series 1991 A, FGIC Insured,
6.50% 2021 (2001) 1,000 1,074,240
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1992, 7.20% 2006 (2002) 1,035 1,175,739
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency, Single
Family Mortgage Revenue Bonds,
Homeownership 5th Portfolio, 1986 Series,
7.50% 2015 (2000) 495 522,433
Public Improvement Bonds of 1992, MBIA
Insured, 6.50% 2009 (2002) 1,000 1,114,580
University of Maryland System Auxiliary Facility
and Tuition Revenue Bonds, 1992 Series A,
6.30% 2009 (2001) 1,050 1,130,272
13,065,032
Resource Recovery _ 6.62%
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 3,500 3,903,445
Resource Recovery _ continued
Montgomery County, Northeast Maryland Waste
Disposal Authority, Solid Waste Revenue
Bonds AMT:
6.00% 2006 $1,000 $ 1,115,410
6.00% 2007 1,000 1,120,890
Series 1993 A, 6.30% 2016 1,000 1,088,470
7,228,215
Special Obligations _ 4.19%
Montgomery County Revenue Authority, Golf
Course System Revenue Bonds, Series 1996 A,
6.00% 2014 2,355 2,492,909
Virgin Islands Public Finance Authority,
Revenue and Refunding Bonds: (Virgin Islands
Matching Fund Loan Notes), Series 1998 A:
5.20% 2009 1,000 1,044,080
5.20% 2010 1,000 1,038,990
4,575,979
Tax Assessment Bonds _ 2.06%
Prince George's County, Special Obligation
Bonds (Woodview Village Infrastructure
Improvements), Series 1997 A, 8.00% 2026 2,000 2,249,479
Turnpikes & Toll Roads Revenue _ 1.03%
Maryland Transportation Authority Facilities
Project, Transportation Facilities Projects
Revenue Bonds, Series 1992, 5.80% 2006 1,000 1,127,230
Water & Sewer Revenue _ 2.06%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series
1991 B, 0% 2005 700 528,500
Washington Suburban Sanitary District,
Refunding Bonds, 1997, 5.75% 2017 1,510 1,716,372
2,244,872
103,179,628
Tax-Exempt Securities Maturing in One Year or Less _ 4.28%
College & University Revenue _ 1.19%
Maryland Health and Higher Educational
Facilities Authority, Loyola College Issue,
Revenue Bonds, Series 1996 B, 2.85% 2013<F3> 1,300 1,300,000
Hospital Facilities _ .92%
Maryland Health and Higher Educational
Facilities Authority, Pooled Loan Program
Revenue Bonds, Series D, 2.70% 2024<F3> $1,000 $ 1,000,000
Pre-Refunded<F2> _ 1.71%
Maryland Health and Higher Educational
Facilities Authority, Memorial Hospital of
Easton, Series 1989 B, MBIA Insured, 7.00% 2012 1,200 1,244,388
University of Maryland System Auxiliary
Facility and Tuition Revenue Bonds,
1989 Series B, 7.00% 2007 (1999) 600 628,206
1,872,594
Water & Sewer Revenue _ .46%
Washington Suburban Sanitary District,
Refunding Bonds, 1992, 5.35% 1999 500 504,185
4,676,779
TOTAL TAX-EXEMPT SECURITIES
(cost: $100,403,000) 107,856,407
Excess of cash and receivables over payables 1,399,084
NET ASSETS $109,255,491
[FN]
<F1> Valued in the market on the basis of its effective maturity (shown in
parentheses)_ that is the date at which the investor must put the security to
the issuer for redemption.
<F2> Parenthetical year represents date of pre-refunding.
<F3> Coupon rate changes periodically.
</FN>
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
January 31, 1999
Unaudited (dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $95,807) $103,179
Maturing in one year or less
(cost: $4,596) 4,677
Cash 521
Receivables for _
Sales of investments $ 969
Sales of Fund's shares 110
Interest 1,047 2,126
110,503
Liabilities:
Payables for _
Purchases of investments 1,000
Repurchases of Fund's shares 21
Dividends 139
Adviser and management services 39
Other expenses 49 1,248
Net Assets at January 31, 1999 _
Equivalent to $16.20 per share on 6,743,849
shares of beneficial interest issued and
outstanding (unlimited shares authorized) $109,255
See Notes to Financial Statements
Statement of Operations
For the six months ended January 31, 1999
Unaudited (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $2,852
Expenses:
Investment adviser fee $ 124
Business management fee 100
Distribution expenses 132
Transfer agent fee 16
Reports to shareholders 14
Registration statement and prospectus 8
Postage, stationery and supplies 3
Trustees' fees 3
Auditing and legal fees 15
Custodian fee 3
Other expenses 1 419
Net investment income 2,433
Realized Gain and Unrealized Appreciationon Investments:
Net realized gain 109
Net unrealized appreciation on investments:
Beginning of period 5,888
End of period 7,453
Change in unrealized appreciation
on investments 1,565
Net realized gain and change in unrealized
appreciation on investments 1,674
Net Increase in Net Assets Resulting from Operations $4,107
See Notes to Financial Statements
Statement of Changes in Net Assets
(dollars in thousands)
Operations:
Net investment income $ 2,433 $ 4,493
Net realized gain on investments 109 698
Net change in unrealized appreciation
on investments 1,565 37
Net increase in net assets resulting
from operations 4,107 5,228
Dividends and Distributions Paid to Shareholders:
Dividends paid from net investment
income (2,436) (4,491)
Distributions paid from net realized gain
on investments (623) (642)
Total dividends and distributions (3,059) (5,133)
Capital Share Transactions:
Proceeds from shares sold: 769,365
and 1,252,351 shares, respectively 12,436 20,079
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
128,597 and 211,827 shares, respectively 2,079 3,386
Cost of shares repurchased: 480,037 and
548,078 shares, respectively (7,758) (8,767)
Net increase in net assets resulting
from capital share transactions 6,757 14,698
Total Increase in Net Assets 7,805 14,793
Net Assets:
Beginning of period 101,450 86,657
End of period $109,255 $101,450
[FN]
<F1>Unaudited
</FN>
See Notes to Financial Statements
Six months
ended Year ended July 31
1/31/99<F1> 1998 1997 1996 1995 1994
Net Asset Value,
Beginning of Period $16.04 $16.02 $15.39 $15.29 $15.00 $15.53
Income from Investment
Operations:
Net investment income .38 .78 .79 .80 .80 .76
Net gains (losses) on
securities (both realized
and unrealized) .26 .14 .63 .10 .29 (.53)
Total from investment
operations .64 .92 1.42 .90 1.09 .23
Less Distributions:
Dividends (from net
investment income) (.38) (.78) (.79) (.80) (.80) (.76)
Distributions (from
capital gains) (.10) (.12) _ _ _ _
Total distributions (.48) (.90) (.79) (.80) (.80) (.76)
Net Asset Value,
End of Period $16.20 $16.04 $16.02 $15.39 $15.29 $15.00
Total Return<F2> 3.99% 5.89% 9.52% 5.95% 7.58% 1.42%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $109 $101 $87 $80 $75 $75
Ratio of expenses to
average net assets .40% .79% .82% .81% .78% .75%
Ratio of net income to
average net assets 2.31% 4.84% 5.08% 5.14% 5.38% 4.90%
Portfolio turnover rate 2.14% 10.30% 15.27% 16.01% 20.91% 10.01%
[FN]
<F1> Unaudited
<F2> Excludes maximum sales charge of 4.75%.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year.
</FN>
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
January 31, 1999
Quality Diversification:
Moody's/S&P Ratings (best of either)
(A pie chart showing the following components and percentages)
Aaa/AAA ................ 37.4%
Aa/AA .................. 35.1%
A/A .................... 11.5%
Baa/BBB ................ 7.4%
Lower than BBB ......... 6.5%
Cash and Equivalents ... 2.1%
Maturity Diversification <F1> :
(A pie chart showing the following components and percentages)
Under 1 year ........... 2.1%
1 to 10 years .......... 65.8%
10+ to 20 years ........ 27.8%
20+ to 30 years ........ 4.3%
Average Life <F2> 8.18 years
[FN]
<F1> Securities are included at pre-refunded dates, not maturity dates.
<F2> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Virginia Fund is 12.56 years.
</FN>
Investment Portfolio
January 31, 1999
The Tax-Exempt
Fund of Virginia
(map logo)
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year _ 97.94%
College & University Revenue _ 2.37%
Virginia College Building Authority Educational
Facilities Revenue Bonds (Marymount University
Project), Series 1992, 6.875% 2007 $1,650 $1,815,941
Virginia Polytechnic Institute and State
University, University Services System
and General Revenue Pledge Bonds,
Series C 1996, 5.35% 2009 1,000 1,091,650
2,907,591
General Obligations (Local) _ 9.17%
Arlington County:
Public Improvement Bonds, Series 1996,
6.00% 2011 1,000 1,178,770
Refunding Bonds, Series 1993, 6.00% 2012 1,000 1,178,400
Chesapeake:
Public Improvement Bonds, Series 1992,
6.00% 2006 1,600 1,750,864
Refunding Bonds, Series 1993, 5.40% 2008 1,000 1,110,740
Leesburg Refunding Bonds, Series 1993,
5.60% 2008 1,195 1,291,305
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1,000 1,060,320
City of Virginia Beach, Virginia, General
Obligation Public Improvement and Refunding
Bonds, Series 1998:
5.25% 2007 1,385 1,514,525
5.25% 2010 2,000 2,180,760
11,265,684
General Obligations (State) _ .66%
Commonwealth of Virginia, Public Facilities
Bonds, 1993 Series A, 5.40% 2005 750 814,538
Hospital & Health Facilities Revenue _ 12.19%
Industrial Development Authority of the Town of
Abingdon, Virginia, Hospital Facility Revenue
and Refunding Bonds (Johnston Memorial
Hospital), Series 1998
5.00% 2008 1,015 1,069,130
5.00% 2009 1,020 1,070,255
5.00% 2010 505 527,114
Hospital & Health Facilities Revenue _ continued
Fairfax County Industrial Development Authority,
Hospital Revenue Refunding Bonds (INOVA
Health Systems Hospital Project), Series 1993 A:
5.00% 2007 $ 750 801,855
5.25% 2019 2,500 2,654,300
5.00% 2023 500 512,495
Industrial Development Authority of Halifax
County, Virginia Hospital Refunding Revenue
Bonds (Halifax Regional Hospital, Inc.),
Series 1998:
4.65% 2007 600 612,780
4.80% 2009 1,000 1,019,470
Industrial Development Authority of Henry County,
Hospital Revenue Bonds (Memorial Hospital of
Martinsville and Henry County), Series 1997,
6.00% 2017 2,000 2,168,200
Industrial Development Authority of the City of
Norfolk, Hospital Revenue Bonds (Daughters
of Charity National Health System-DePaul
Medical Center), Series 1992 A, 6.50% 2007 1,000 1,112,850
Norfolk Industrial Development Authority,
Hospital Revenue Bonds (Sentara Hospitals-
Norfolk Project), Series A 1994, 5.00% 2020 1,000 990,110
Peninsula Ports Authority, Health System
Revenue and Refunding Bonds Riverside Health
System Project):
Series 1992 A, 5.00% 2008 1,200 1,267,812
Series 1998, 5.00% 2009 1,100 1,157,948
14,964,319
Housing Finance Authority Revenue _ 3.42%
Commonwealth of Puerto Rico Housing Finance
Corporation, Single Family Mortgage Revenue
Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 10 10,175
1988 Series B, 7.65% 2022 145 152,923
Virginia Housing Development Authority,
Commonwealth Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 529,680
1995 Series A-AMT, Sub-Series A-1, 6.60% 2004 1,000 1,043,830
1998 Series E, Sub-Series E-1, 4.50% 2005 1,190 1,198,889
1994 Series I-AMT, Sub-Series I-1, 6.40% 2005 800 865,400
1992 Series A, 7.10% 2022 380 394,554
4,195,451
Industrial Development Revenue _ 2.59%
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 $ 1,049,340
5.45% 2014 1,000 1,060,420
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc. Project),
1996 Series A, 6.25% 2026 1,000 1,073,750
3,183,510
Insured _ 22.19%
Industrial Development Authority of Augusta
County, Virginia, Hospital Refunding Revenue
Bonds (Augusta Health Care, Inc.), Series 1998,
5.00% 2005 1,000 1,062,620
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1,000 1,074,910
Industrial Development Authority of Danville,
Virginia, Hospital Revenue Bonds (Danville
Regional Medical Center), Series 1998,
AMBAC Insured:
5.25% 2012 1,995 2,149,593
5.25% 2013 1,000 1,074,830
Fairfax County Industrial Development Authority,
Hospital Revenue Refunding Bonds (INOVA
Health System Hospitals Project), Series 1993 A,
FSA Insured, 5.25% 2019 1,000 1,059,020
Fairfax County Redevelopment and Housing
Authority, Multifamily Housing Revenue Bonds
(Grand View Apartments Project), Series 1998 A,
FHA Insured, 5.05% 2010 1,000 1,018,610
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 1,658,429
6.375% 2018 1,000 1,204,680
Loudoun County:
Industrial Development Authority, Hospital
Revenue Bonds, FSA Insured, 6.00% 2005 1,000 1,115,150
Sanitation Authority, Water and Sewer System
Revenue Bonds, FGIC Insured, Series 1992,
6.25% 2010 2,000 2,208,340
Industrial Development Authority of the City of
Norfolk, Health Care Revenue Bonds (Bon
Secours Health System), Series 1997,
MBIA Insured:
5.00% 2006 $1,190 $ 1,264,827
5.00% 2007 1,250 1,332,150
City of Norfolk, Virginia, General Obligation
Capital Improvement and Refunding Bonds,
Series 1998, 5.00%, 2008 1,000 1,077,420
Pamunkey Regional Jail Authority, Jail Facility
Revenue Bonds, Series 1996, MBIA Insured,
5.70% 2010 1,000 1,113,530
Industrial Development Authority of the County
of Prince William (Virginia), Hospital Facility
Refunding Revenue Bonds (Potomac Hospital
Corporation of Prince William), Series 1998,
FSA Insured, 5.00% 2008 1,475 1,576,023
Southeastern Public Service Authority of Virginia,
Senior Revenue Refunding Bonds, Series 1998,
AMBAC Insured, 5.00% 2015 4,000 4,189,920
City of Virginia Beach Development Authority,
Hospital Revenue Bonds (Virginia Beach General
Hospital Project), Series 1993, AMBAC Insured,
6.00% 2011 1,000 1,166,190
Washington, D.C. Metropolitan Area Airports
Authority, Airport System Revenue and
Refunding Bonds, MBIA Insured AMT:
Series 1998 B, 5.25% 2010 1,000 1,079,030
Series 1992 A, 6.625% 2019 750 829,403
27,254,675
Lease Revenue (State) _ 1.73%
Virginia Public Building Authority:
Public Facilities Revenue Refunding Bonds,
Series 1998A, 5.00% 2004 1,000 1,063,960
Public Facilities Revenue Bonds, Series 1998B,
5.00% 2010 1,000 1,060,150
2,124,110
Life Care Facilities Revenue _ 4.87%
Industrial Development Authority of the County
of Henrico, Virginia, Residential and Health Care
Facility Mortgage Revenue Refunding Bonds
(Our Lady of Hope), Series 1997, 6.00% 2016 2,730 2,806,003
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 $ 3,173,250
5,979,253
Local Appropriation _ .44%
Fairfax County Economic Development
Authority, Parking Revenue Bonds (Huntington
Metrorail Station Project), Series 1990 A,
6.75% 2015 500 537,325
Multi-Family Housing _ 5.10%
Virginia Housing Development Authority,
Multi-Family Housing Bonds:
1995 Series H, 5.45% 2005 1,255 1,320,197
1998 Series I-AMT, 4.60% 2009 1,320 1,332,197
1998 Series I-AMT, 4.70% 2010 1,240 1,248,841
1997 Series B-AMT, 5.80% 2010 1,185 1,285,820
1996 Series B, 5.95% 2016 1,000 1,069,150
6,256,205
Pre-Refunded<F1> _ 14.73%
Danville, Virginia Industrial Development
Authority, Hospital Revenue Bonds, Danville
Regional Medical Center, Series 1994,
FGIC Insured, 6.00% 2007 (2004) 1,000 1,124,500
Fairfax County Industrial Development Authority
Hospital Revenue Bonds (Fairfax Hospital System
Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1,000 1,096,200
Henry County Public Service Authority, Water
and Sewer Revenue Bonds, FGIC Insured,
Series 1990, 7.20% 2019 (2000) 1,250 1,350,125
Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 (2002) 1,170 1,283,958
Norfolk:
Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 (2001) 500 535,235
Industrial Development Authority, Hospital
Revenue Bonds:
(Children's Hospital of the King's Daughters
Obligated Group), Series 1991, AMBAC
Insured, 7.00% 2011 (2001) 400 440,200
(Sentara Hospitals-Norfolk Project),
Series 1991, 7.00% 2020 (2000) 250 270,950
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding
Bonds (Mary Immaculate Project), 1994 Series,
6.875% 2010 (2004) $1,900 $ 2,236,794
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 (2002) 1,300 1,450,982
Prince William County Service Authority, Water
and Sewer System Revenue Bonds, Series 1991,
FGIC Insured, 6.50% 2021 (2001) 680 742,880
Roanoke:
Industrial Development Authority, Hospital
Revenue Bonds, Carilion Health System
(Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 806,925
Public Improvement and Refunding Bonds,
Series 1992 B:
6.375% 2009 (2001) 250 272,790
6.40% 2011 (2001) 500 548,180
Water System Revenue Bonds, Series 1991,
FGIC Insured, 6.50% 2021 (2001) 750 819,353
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2000) 10 11,336
Upper Occoquan Sewage Authority, Regional
Sewerage System Revenue Bonds, Series 1991,
MBIA Insured, 6.00% 2021 (2001) 700 743,715
Virginia Beach, Virginia Development Authority
(Sentara Bayside Hospital), 6.60% 2009 (2001) 1,000 1,102,630
Virginia Public Building Authority, State
Building Revenue Bonds, Series 1991 A,
6.50% 2011 (2001) 1,750 1,914,745
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1,000 1,066,550
Water and Sewer System Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 270,935
18,088,983
Pollution Control _ 1.63%
Industrial Development Authority of the County
of Charles City (Virginia), Solid Waste Disposal
Facility Revenue Refunding Bonds, (USA Waste
of Virginia, Inc. Project), Series 1999, 4.875% 2009 2,000 2,004,699
Resource Recovery _ 1.30%
Roanoke Valley Resource Authority, Solid Waste
System Revenue Bonds, Series 1992, 5.75% 2012 $1,500 $ 1,599,645
Special Obligations _ 1.72%
Virgin Islands Public Finance Authority, Revenue
and Refunding Bonds (Virgin Islands Matching
Fund Loan Notes):
Series 1998 C, 5.50% 2007 1,000 1,072,570
Series 1998 A, 5.20% 2009 1,000 1,044,080
2,116,650
State Appropriation _ 1.39%
Big Stone Gap, Virginia Redevelopment and
Housing Authority, Commonwealth of Virginia
Correctional Facility Lease Revenue Bonds
(Wallens Ridge Development Project),
Series 1995, 5.25% 2010 1,600 1,708,720
State Authority _ 5.19%
Virginia Public School Authority, School
Financing Bonds:
(1997 Resolution), Series 1998 A, 5.25% 2007 2,000 2,188,540
(1987 Resolution), 1991 Refunding Series C,
6.25% 2007 1,500 1,634,550
(1991 Resolution), Series 1994 A, 6.20% 2014 1,500 1,676,655
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A,
7.50% 2017 50 50,549
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 818,136
6,368,430
Tax Assessment Bonds _ 1.67%
Dulles Town Center, Community Development
Authority (Loudoun County, Virginia), Special
Assessment Bonds (Dulles Town Center Project),
Series 1998, 6.25% 2026 2,000 2,048,080
Turnpikes & Toll Roads Revenue _ 1.68%
Pocahontas Parkway Association, Route 895
Connector, Toll Road Revenue Bonds,
Series 1998A, 5.25% 2009 2,000 2,061,220
Water & Sewer Revenue _ 3.90%
Chesterfield County Water and Sewer Revenue
Refunding Bonds, Series 1992, 6.375% 2009 $1,250 $ 1,387,938
City of Richmond, Virginia, Public Utility
Revenue and Refunding Bonds, Series 1998 A:
5.25% 2009 1,500 1,628,670
5.25% 2011 1,000 1,071,830
Rivanna Water and Sewer Authority, Regional
Water and Sewer System Refunding Revenue
Bonds, Series 1991, 6.40% 2007 645 702,134
4,790,572
120,269,660
Tax-Exempt Securities Maturing in One Year or Less _ .91%
Hospital Facilities _ .16%
The Hospital Authority of the City of Petersburg,
Variable Rate Hospital Facility Bonds (Southside
Regional Medical Center), Series 1997, 3.20% 20172 200 200,000
Industrial Development Revenue _ .33%
Industrial Development Authority of King
George County, Virginia, Variable Rate Demand
Exempt Facility Revenue Bonds (Birchwood
Power Partners, L.P. Project) Series 1994 A,
3.30% 20242 400 400,000
Pre-Refunded<F1> _ .42%
Fairfax County Economic Development
Authority, Resource Recovery Revenue Bonds,
Series 1988 A AMT (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2003 (1999) 500 515,125
1,115,125
TOTAL TAX-EXEMPT SECURITIES
(cost: $113,458,000) 121,384,785
Excess of cash and receivables over payables 1,417,337
NET ASSETS $122,802,122
[FN]
<F1> Parenthetical year represents date of pre-refunding.
<F2> Coupon rate changes periodically.
</FN>
See Notes to Financial Statements
Financial Statements
Statement of Assets and Liabilities
January 31, 1999
Unaudited (dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $112,337) $120,270
Maturing in one year or less
(cost: $1,121) 1,115
Cash 65
Receivables for _
Sales of investments $1,948
Sales of Fund's shares 143
Interest 1,791 3,882
125,332
Liabilities:
Payables for _
Purchases of investments 2,000
Repurchases of Fund's shares 281
Dividends 151
Adviser and management services 42
Other expenses 56 2,530
Net Assets at January 31, 1999 _
Equivalent to $16.50 per share on 7,442,627
shares of beneficial interest issued and
outstanding (unlimited shares authorized) $122,802
See Notes to Financial Statements
Statement of Operations
For the six months ended January 31, 1999
Unaudited (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $3,125
Expenses:
Investment adviser fee $ 138
Business management fee 110
Distribution expenses 149
Transfer agent fee 18
Reports to shareholders 18
Registration statement and prospectus 7
Postage, stationery and supplies 4
Trustees' fees 3
Auditing and legal fees 15
Custodian fee 3
Other expenses 3 468
Net investment income 2,657
Realized Gain and Unrealized Appreciationon Investments:
Net realized gain 190
Net unrealized appreciation on investments:
Beginning of period 5,855
End of period 7,927
Change in unrealized appreciation
on investments 2,072
Net realized gain and change in unrealized
appreciation on investments 2,262
Net Increase in Net Assets Resulting from Operations $4,919
See Notes to Financial Statements
Statement of Changes in Net Assets
Six months ended Year ended
(dollars in thousands) January 31, 1999<F1> July 31, 1998
Operations:
Net investment income $ 2,657 $ 5,004
Net realized gain on investments 190 1,368
Net change in unrealized appreciation
on investments 2,072 (1,199)
Net increase in net assets resulting
from operations 4,919 5,173
Dividends and Distributions Paid to Shareholders:
Dividends paid from net investment
income (2,660) (5,001)
Distributions paid from net realized gain
on investments (1,311) (244)
Total dividends and distributions (3,971) (5,245)
Capital Share Transactions:
Proceeds from shares sold: 705,711
and 1,285,596 shares, respectively 11,664 21,057
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
156,597 and 188,801 shares, respectively 2,578 3,083
Cost of shares repurchased: 424,492 and
616,127 shares, respectively (7,002) (10,063)
Net increase in net assets resulting
from capital share transactions 7,240 14,077
Total Increase in Net Assets 8,188 14,005
Net Assets:
Beginning of period 114,614 100,609
End of period $122,802 $114,614
[FN]
<F1>Unaudited
</FN>
See Notes to Financial Statements
Per-Share Data and Ratios
Six months
ended Year ended July 31
1/31/99<F1> 1998 1997 1996 1995 1994
Net Asset Value,
Beginning of Period $16.36 $16.37 $15.77 $15.79 $15.49 $16.01
Income from Investment
Operations:
Net investment income .37 .78 .80 .81 .83 .80
Net gains (losses) on
securities (both realized
and unrealized) .32 .03 .60 .03 .30 (.52)
Total from investment
operations .69 .81 1.40 .84 1.13 .28
Less Distributions:
Dividends (from net
investment income) (.37) (.78) (.80) (.81) (.83) (.80)
Distributions (from
capital gains) (.18) (.04) _ (.05) _ _
Total distributions (.55) (.82) (.80) (.86) (.83) (.80)
Net Asset Value,
End of Period $16.50 $16.36 $16.37 $15.77 $15.79 $15.49
Total Return<F2> 4.24% 5.08% 9.10% 5.46% 7.56% 1.74%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $123 $115 $101 $90 $92 $93
Ratio of expenses to
average net assets .39% .78% .81% .79% .79% .78%
Ratio of net income to
average net assets 2.22% 4.73% 4.99% 5.11% 5.37% 5.04%
Portfolio turnover rate 3.78% 24.66% 18.41% 27.34% 32.18% 2.36%
[FN]
<F1> Unaudited
<F2> Excludes maximum sales charge of 4.75%.
<F3> Based on operations for the period shown and, accordingly, not
representative of a full year.
</FN>
See Notes to Financial Statements
Notes to Financial Statements
Unaudited
1. Organization and Significant Accounting Policies
Organization _ 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.
Significant Accounting Policies _ The following paragraphs summarize the
significant accounting policies consistently followed by the Funds in the
preparation of their financial statements:
Security Valuation _ Tax-exempt securities are valued at prices obtained
from a pricing service, when such prices are available; however, in
circumstances where the investment adviser deems it appropriate to do so,
such securities will be valued at the mean quoted bid and asked prices or
at prices for securities of comparable maturity, quality, and type.
Securities with original maturities of one year or less having 60 days or
less to maturity are amortized to maturity based on their cost if
acquired within 60 days of maturity or, if already held on the 60th day,
based on the value determined on the 61st day. Securities for which
representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by
the Trust's Board.
Security Transactions and Related Investment Income _ As is customary in
the mutual fund industry, securities transactions are accounted for on
the date the securities are purchased or sold. In the event the Funds
purchase securities on a delayed delivery or "when-issued" basis, they
will segregate with their custodian liquid assets in an amount
sufficient to meet their payment obligations in these transactions.
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. Amortization of market discounts on securities is
recognized upon disposition, subject to applicable tax
requirements.
Dividends and Distributions to Shareholders _ Dividends to shareholders
are declared daily after determination of the Funds' net investment
income and paid to shareholders monthly. Distributions paid to
shareholders are recorded on the ex-dividend date.
2. Federal Income Taxation _ Each Fund's policy is 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 provisions are required.
As of January 31, 1999, net unrealized appreciation on investments for book and
Federal income tax purposes for the Maryland Fund aggregated $7,453,000, of
which $7,479,000 related to appreciated securities and $26,000 related to
depreciated securities. For the Virginia Fund, net unrealized appreciation
aggregated $7,927,000, of which $7,933,000 related to appreciated securities
and $6,000 related to depreciated securities. There was no difference between
book and tax realized gains on securities transactions for the six months ended
January 31, 1999. The cost of portfolio securities for book and federal income
tax purposes was $100,403,000 and $113,458,000 for the Maryland and Virginia
Funds, respectively, at January 31, 1999.
3. Fees and Transactions with Related Parties
Business Management and Investment Advisory Fees _ 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 $100,000 and $110,000 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 $23,000 and $11,000 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 $124,000 and $138,000 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).
Distribution Expenses _ 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, 1999, distribution expenses under the Plan were $132,000 and
$149,000, including accrued and unpaid expenses of $41,000 and $45,000, for the
Maryland and Virginia Funds, respectively. The aggregate amount of
distribution expenses subject to recovery for which the Maryland and Virginia
Funds have not been reimbursed were $41,000 and $34,000, respectively.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
Funds' shares, has informed the Funds that it has received $34,000 and $45,000
(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.
Transfer Agent Fees _ American Funds Service Company (AFS), the transfer agent
for the Maryland and Virginia Funds, was paid fees of $16,000 and $18,000,
respectively.
Deferred Trustees' Fees _ Independent Trustees 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, 1999, aggregate amounts deferred and earnings thereon were $15,000 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. Investment Transactions and Other Disclosures As of January 31, 1999:
The Tax-Exempt The Tax-Exempt
Fund of Maryland Fund of Virginia
Accumulated undistributed
net realized gain on
investments $ 103,000 $ 117,000
Paid-in capital 101,700,000 114,758,000
Purchases and sales of
investment securities,
excluding short-term
securities, during the
six months ended
January 31, 1999:
Purchases 11,176,000 11,412,000
Sales 2,163,000 4,436,000
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 fee of $3,000 for both the Maryland and Virginia Funds was
paid by these credits rather than in cash.
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Stephen Hartwell
Chairman Emeritus of the Trust
Harry J. Lister
President of the Trust
Cyrus A. Ansary
Jean Head Sisco
T. Eugene Smith
Stephen G. Yeonas
Other Officers
Howard L. Kitzmiller
Senior Vice President, Secretary/Treasurer of the Trust
Lois A. Erhard
Vice President of the Trust
Michael W. Stockton
Assistant Vice President, Assistant Secretary and
Assistant Treasurer of the Trust
J. Lanier Frank
Assistant Vice President of the Trust
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 of Assets
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. You may also call American Funds Service
Company, toll-free, at 800/421-0180 or visit www.americanfunds.com on the World
Wide Web.
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, 1999, this report must
be accompanied by an American Funds Group Statistical Update for the most
recently completed calendar quarter.
TEFMD/TEFVA-013-0399
(recycle logo)
Printed on recycled paper
(logo)The American Funds
The American Funds Tax-Exempt Series I
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
