AMERICAN FUNDS TAX EXEMPT SERIES I, 485BPOS, 2000-11-14

AMERICAN FUNDS TAX EXEMPT SERIES I
485BPOS, 2000-11-14

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===============================================================================
SEC FILE NOS. 33-5270
811-4653
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 19
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 18

THE AMERICAN FUNDS TAX-EXEMPT SERIES I

(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(202) 842-5665

HARRY J. LISTER
WASHINGTON MANAGEMENT CORPORATION
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPIES TO:
J. JUDE O'DONNELL, ESQ.
THOMPSON, O'DONNELL, MARKHAM, NORTON & HANNON
805 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(COUNSEL FOR THE REGISTRANT)

THE REGISTRANT FILED ITS 24F-2 NOTICE FOR FISCAL 2000 ON OCTOBER 5, 2000.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:

|X| IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON NOVEMBER 15,
2000,
PURSUANT TO PARAGRAPH (B) OF RULE 485.

<PAGE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I

The Tax-Exempt Fund of Maryland/(R)/

The Tax-Exempt Fund of Virginia/(R)/

Prospectus
NOVEMBER 15, 2000

THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED
OR DISAPPROVED OF THESE SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<PAGE>

---------------------------------------------------------
THE AMERICAN FUNDS TAX-EXEMPT SERIES I

1101 Vermont Avenue, N.W.
Washington, D.C. 20005

<TABLE>
<CAPTION>
TICKER NEWSPAPER FUND
FUND SYMBOL ABBREV NO.
-------------------------------------------------------------
<S> <C> <C> <C>
The Tax-Exempt Fund of Maryland
Class A TMMDX TEMdA 24
Class B TEMBX TEMdB 224
-------------------------------------------------------------
The Tax-Exempt Fund of Virginia
Class A TFVAX TEVAA 25
Class B TEVBX TEVAB 225
</TABLE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
-------------------------------------------------------
<S> <C>
Risk/Return Summary 2
-------------------------------------------------------
Fees and Expenses of the Funds 6
-------------------------------------------------------
Investment Objectives, Strategies and Risks 8
-------------------------------------------------------
Management and Organization 12
-------------------------------------------------------
Shareholder Information 14
-------------------------------------------------------
Choosing a Share Class 15
-------------------------------------------------------
Purchase and Exchange of Shares 16
-------------------------------------------------------
Sales Charges 17
-------------------------------------------------------
Sales Charge Reductions and Waivers 19
-------------------------------------------------------
Plans of Distribution 21
-------------------------------------------------------
How to Sell Shares 21
-------------------------------------------------------
Distributions and Taxes 22
-------------------------------------------------------
Financial Highlights 24
-------------------------------------------------------
</TABLE>

The American Funds Tax-Exempt Series I (the "Trust") is a fully managed,
diversified, open-end investment company consisting of two separate series, The
Tax-Exempt Fund of Maryland (the "Maryland Fund") and The Tax-Exempt Fund of
Virginia (the "Virginia Fund"). Except where the context indicates otherwise,
references to the "fund" apply to each of these two tax-exempt bond funds.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
24/25-010-1100/MC

<PAGE>

---------------------------------------------------------
RISK/RETURN SUMMARY

The fund's primary objective is to provide you with a high level of current
income exempt from regular federal and the respective state (Maryland or
Virginia) income taxes. Its secondary objective is to preserve your investment.
It invests primarily in investment grade municipal bonds, and to a lesser
extent lower quality bonds, issued by municipalities in the respective state
(Maryland or Virginia) including counties, cities, towns, and various regional
or special districts.

The fund is designed for investors seeking income exempt from federal and state
taxes, and capital preservation over the long term. An investment in the fund
is subject to risks, including the possibility that the fund may provide less
income or decline in value in response to economic, political or social events
in the U.S. or abroad. Because the fund invests in securities issued by the
respective state (Maryland or Virginia) municipalities, the fund is more
susceptible to factors adversely affecting issuers of such state's securities
than is a comparable municipal bond mutual fund which does not concentrate in a
single state. The values of debt securities may be affected by changing
interest rates and credit risk assessments. Lower quality or longer maturity
bonds may be subject to greater price fluctuations than higher quality or
shorter maturity bonds.

Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.

YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

INVESTMENT RESULTS

The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year to year
and by showing how the fund's average annual total returns for various periods
compare with those of a broad measure of market performance. Past results are
not an indication of future results.

Unlike the bar charts, the investment result tables reflect the fund's
investment results with the maximum initial or deferred sales charge deducted,
as required by Securities and Exchange Commission rules. Class A share results
are shown with the maximum initial sales charge of 3.75% deducted. Sales
charges are reduced for purchases of $100,000 or more. Results would be higher
if they were calculated at net asset value. All fund results reflect the
reinvestment of dividend and capital gain distributions.

Class B shares are subject to a maximum deferred sales charge of 5.00% if
shares are redeemed within the first year of purchasing them. The deferred
sales charge declines thereafter until it reaches 0% after six years. Class B
shares convert to Class A shares after eight years. Since the fund's Class B
shares began investment operations on March 15, 2000, no results are available
as of the most recent calendar year-end.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

THE MARYLAND FUND

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1990 5.86
1991 9.97
1992 8.37
1993 10.31
1994 -4.77
1995 16.45
1996 3.74
1997 8.96
1998 5.73
1999 -2.34
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 2000
was 4.93%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 6.32% (quarter ended March 31, 1995)
LOWEST -4.58% (quarter ended March 31, 1994)
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 8/14/86
(with the maximum sales charge -6.01% 5.52% 5.66% 5.75%
imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
Lehman Brothers Municipal -2.06% 6.91% 6.89% 7.44%
Bond Index/2/
------------------------------------------------------------------------------
</TABLE>

Class A yield: 4.49%
(For current yield information, please call American FundsLine at
1-800-325-3590).

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers Municipal Bond Index represents the long-term investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

THE VIRGINIA FUND

CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES

(Results do not include a sales charge; if one were included, results would
be lower.)
[bar chart]
1990 5.71
1991 11.26
1992 7.84
1993 11.29
1994 -4.78
1995 15.85
1996 3.49
1997 8.31
1998 5.69
1999 -2.52
[end bar chart]

The fund's year-to-date return for the nine months ended September 30, 2000
was 6.03%.
------------------------------------------------------------------------------

The fund's highest/lowest quarterly results during this time period were:

<TABLE>
<CAPTION>
<S> <C> <C>
HIGHEST 6.61% (quarter ended March 31, 1995)
LOWEST -4.47% (quarter ended March 31, 1994)
</TABLE>

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 8/14/86
(with the maximum sales charge -6.18% 5.18% 5.64% 5.93%
imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
------------------------------------------------------------------------------
Lehman Brothers Municipal -2.06% 6.91% 6.89% 7.44%
Bond Index/2/
------------------------------------------------------------------------------
</TABLE>

Class A yield: 4.31%
(For current yield information, please call American FundsLine at
1-800-325-3590).

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

2 The Lehman Brothers Municipal Bond Index represents the long-term investment
grade municipal bond market. This index is unmanaged and does not reflect
sales charges, commissions or expenses.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
FEES AND EXPENSES OF THE FUND

<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A CLASS B
--------------------------------------------------------------------------
<S> <C> <C>
Maximum sales charge imposed on purchases 3.75%/1/ 0.00%
(as a percentage of offering price)
--------------------------------------------------------------------------
Maximum sales charge imposed on reinvested dividends 0.00% 0.00%
--------------------------------------------------------------------------
Maximum deferred sales charge 0.00%/2/ 5.00%/3/
--------------------------------------------------------------------------
Redemption or exchange fees 0.00% 0.00%
</TABLE>

1 Sales charges are reduced or eliminated for purchases of $100,000 or more.

2 A contingent deferred sales charge of 1% applies on certain redemptions made
within 12 months following purchases of $1 million or more made without a
sales charge.

3 Deferred sales charges are reduced after 12 months and eliminated after six
years.

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets) CLASS A CLASS B/1/
---------------------------------------------------------------------
<S> <C> <C>
THE MARYLAND FUND
---------------------------------------------------------------------
Management Fees 0.43% 0.43%
Distribution and/or Service (12b-1) Fees 0.25%/2/ 1.00%
Other Expenses 0.14% 0.10%
Total Annual Fund Operating Expenses 0.82% 1.53%
THE VIRGINIA FUND

---------------------------------------------------------------------
Management Fees 0.42% 0.42%
Distribution and/or Service (12b-1) Fees 0.25%/2/ 1.00%
Other Expenses 0.13% 0.13%
Total Annual Fund Operating Expenses 0.80% 1.55%
</TABLE>

1 Annualized.

2 Class A 12b-1 expenses may not exceed 0.25% of the fund's average net assets
annually.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated, that your investment
has a 5% return each year and that the fund's operating expenses remain the
same as shown above. The "Class A" example reflects the maximum initial sales
charge in Year One. The "Class B - assuming redemption" example reflects
applicable contingent deferred sales charges through Year Six (after which time
they are eliminated). Both Class B examples reflect Class A expenses for Years
9 and 10 since Class B shares automatically convert to Class A after eight
years. Although your actual costs may be higher or lower, based on these
assumptions your cumulative expenses would be:

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE MARYLAND FUND
Class A $456 $ 627 $ 813 $1,350
Class B - assuming redemption $656 $ 883 $1,034 $1,632
assuming no redemption $156 $ 483 $ 834 $1,632
--------------------------------------------------------------------------
THE VIRGINIA FUND
Class A $454 $ 621 $ 803 $1,328
Class B - assuming redemption $658 $ 890 $1,045 $1,643
assuming no redemption $158 $ 490 $ 845 $1,643
--------------------------------------------------------------------------
</TABLE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS

The fund's primary investment objective is to provide you with a high level of
current income exempt from regular federal and the respective state (Maryland
or Virginia) income taxes. Its secondary objective is preservation of capital.
The fund seeks to achieve these objectives by investing primarily in municipal
bonds, and to a lesser extent lower quality bonds, issued by municipalities in
the respective state (Maryland or Virginia). Municipal bonds are debt
obligations generally issued to obtain funds for various public purposes,
including the construction of public facilities. In addition, the fund may
invest up to 20% of its assets in securities that may subject you to federal
alternative minimum taxes.

Because the fund invests in securities of issuers within the State of Maryland
or Virginia, the fund is more susceptible to factors adversely affecting
issuers of such state's securities than is a comparable municipal bond mutual
fund which does not concentrate in a single state. Both Maryland and Virginia
are affected by changes in levels of federal funding and financial support of
certain industries, as well as by federal spending cutbacks due to the large
number of residents that are employed by the federal government. In addition,
each state is dependent on certain economic sectors. Maryland's economy is
based largely on manufacturing, the service trade, and financial, real estate
and insurance entities. Virginia's economy is most dependent on the government
sector, manufacturing and financial services. To the extent there are changes
to any of these sectors the fund may be adversely impacted. More detailed
information about the fund's risks is contained in the statement of additional
information.

The fund will invest primarily in investment grade debt securities rated Baa or
BBB or better by Moody's Investors Service, Inc. or Standard & Poor's
Corporation or unrated but determined to be of equivalent quality. However, the
fund may invest up to 20% of its assets in lower quality, lower rated debt
securities rated Ba and BB or below or unrated but determined to be of
equivalent quality.

The values of most debt securities held by the fund may be affected by changing
interest rates, and individual securities by changes in their effective
maturities and credit ratings. For example, the values of bonds in the fund's
portfolio generally will decline when interest rates rise and vice versa. In
addition, falling interest rates may cause an issuer to redeem or "call" a
security before its stated maturity, which may result in the fund having to
reinvest the proceeds in lower yielding securities. Debt securities are also
subject to credit risk, which is the possibility that the credit strength of an
issuer will weaken and/or an issuer of a debt security will fail to make timely
payments of principal or interest and the security will go into default. The
values of lower quality or longer maturity bonds may be subject to greater
price fluctuations than higher quality or shorter maturity bonds. Also, bonds
of certain sectors may from time to time have

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

special risks. For example, the health care sector can be affected by state and
federal regulation. The fund's investment adviser attempts to reduce these
risks through diversification of the portfolio and with ongoing credit analysis
of each issuer as well as by monitoring economic and legislative developments.

The fund may also hold cash or money market instruments or taxable debt
securities. The size of the fund's cash position will vary and will depend on
various factors, including market conditions and purchases and redemptions of
fund shares. A larger cash position could detract from the achievement of the
fund's objectives, but it also would reduce the fund's exposure in the event of
a market downturn and provide liquidity to make additional investments or to
meet redemptions.

The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
investments. The basic investment philosophy of the investment adviser is to
seek undervalued securities that represent good long-term investment
opportunities. Securities may be sold when the investment adviser believes they
no longer represent good long-term value.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

ADDITIONAL INVESTMENT RESULTS

For periods ended December 31, 1999:

THE MARYLAND FUND

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A - began 8/14/86 -2.34% 6.33% 6.06% 6.05%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/200 N/A N/A N/A N/A
</TABLE>

THE VIRGINIA FUND

<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN ONE YEAR FIVE YEARS TEN YEARS LIFETIME/1/
<S> <C> <C> <C> <C>
Class A/ /- began 8/14/86 -2.52% 5.99% 6.04% 6.23%
(with no sales charge imposed)
------------------------------------------------------------------------------
Class B - began 3/15/00 N/A N/A N/A N/A
</TABLE>

1 Lifetime figures are from the date the fund's Class A shares began investment
operations.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

THE MARYLAND FUND

The following chart illustrates the quality ratings of the various bonds held
in the portfolio as of the end of the fund's fiscal year, July 31, 2000. See
the statement of additional information for a description of quality ratings.

[pie chart}
AAA 39.1%
AA 13.0%
A 11.2%
BBB 10.4%
BB or lower 18.2%
Cash and Equivalents 8.1%
[end pie chart]

Because the fund is actively managed, its holdings will change from time to
time.
------------------------------------------------------------------------------

THE VIRGINIA FUND

Because the fund is actively managed, its holdings will change from time to
time.
------------------------------------------------------------------------------

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
MANAGEMENT AND ORGANIZATION

BUSINESS MANAGER

Washington Management Corporation, since the fund's inception, has provided the
services necessary to carry on the fund's general administrative and corporate
affairs. These services encompass general corporate governance, regulatory
compliance and oversight of each of the fund's contractual service providers
including custodian operations, shareholder services and fund share
distribution functions. Washington Management Corporation, a wholly owned
subsidiary of The Johnston-Lemon Group, Incorporated, maintains its principal
business address at 1101 Vermont Avenue., NW, Washington, DC 20005.

INVESTMENT ADVISER

Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and
other funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio of the fund.
The total management fee paid by the fund, as a percentage of average net
assets, for the previous fiscal year is discussed earlier under "Fees and
Expenses of the Fund."

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

MULTIPLE PORTFOLIO COUNSELOR SYSTEM

Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested, within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research
and Management Company's research professionals may make investment decisions
with respect to a portion of a fund's portfolio. The primary individual
portfolio counselors for The Tax-Exempt Fund of Maryland and Virginia are
listed below.

<TABLE>
<CAPTION>
APPROXIMATE YEARS OF EXPERIENCE
AS AN INVESTMENT PROFESSIONAL
(INCLUDING THE LAST FIVE YEARS)
YEARS OF EXPERIENCE
PORTFOLIO AS PORTFOLIO COUNSELOR -----------------------------------
COUNSELORS FOR (AND RESEARCH PROFESSIONAL, WITH CAPITAL
THE AMERICAN IF APPLICABLE) FOR RESEARCH AND
FUNDS TAX- THE AMERICAN FUNDS TAX-EXEMPT MANAGEMENT
EXEMPT SERIES I PRIMARY TITLE(S) SERIES I (APPROXIMATE) COMPANY
--------------------------------------------------------------------- OR AFFILIATES TOTAL YEARS
-----------------------------------
<S> <C> <C> <C> <C>
DAVID A. Vice President and 7 years 9 years 12 years
HOAG Director, Capital
Research Company*
--------------------------------------------------------------------------------------------------------
BRENDA S. Vice President and 7 years 9 years 11 years
ELLERIN Director, Capital
Research Company*
--------------------------------------------------------------------------------------------------------
* Company affiliated with Capital Research and Management Company
--------------------------------------------------------------------------------------------------------------------
</TABLE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
SHAREHOLDER INFORMATION

SHAREHOLDER SERVICES

American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your
needs and circumstances change. These services may be terminated or modified at
any time upon 60 days' written notice. For your convenience, American Funds
Service Company has four service centers across the country.

AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS

A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is
sent to new shareholders and is available by writing or calling American Funds
Service Company.

TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. Additionally,
accounts held by investment dealers may not offer certain services. If you have
any questions, please contact your dealer.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
CHOOSING A SHARE CLASS

The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.

Factors you should consider in choosing a class of shares include:

. How long you expect to own the shares

. How much you intend to invest

. The expenses associated with owning shares of each class

. Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)

EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISER TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.

Differences between Class A and Class B shares include:

<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------------------------------------------
<S> <S>
Initial sales charge of up to No initial sales charge.
3.75%. Sales charges are reduced or
eliminated for purchases of
$100,000 or more (see "Sales
Charges - Class A").
------------------------------------------------------------------------------
Distribution and service (12b-1) Distribution and service (12b-1) fees
fees of up to 0.25% annually. of 1.00% annually.
------------------------------------------------------------------------------
Higher dividends than Class B Lower dividends than Class A shares due
shares due to lower annual to higher distribution fees and other
expenses. expenses.
------------------------------------------------------------------------------
No contingent deferred sales charge A contingent deferred sales charge if
(except on certain redemptions on you sell shares within six years of
purchases of $1 million or more buying them. The charge starts at 5%
bought without an initial sales and declines thereafter until it
charge). reaches 0% after six years. (see "Sales
Charges - Class B").
------------------------------------------------------------------------------
No purchase maximum. Maximum purchase of $100,000.
------------------------------------------------------------------------------
Automatic conversion to Class A shares
after eight years, reducing future
annual expenses.
------------------------------------------------------------------------------
</TABLE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES

PURCHASE

Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."

EXCHANGE

You may exchange your shares into shares of the same class of other funds in
The American Funds Group generally without a sales charge. For purposes of
computing the contingent deferred sales charge on Class B shares, the length of
time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.

Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.

THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE
IS CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A
PERIOD OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY
INVESTOR WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES
ACTUAL OR POTENTIAL HARM TO THE FUND.

<TABLE>
<CAPTION>
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<S> <C>
To establish an account $ 1,000
To add to an account $ 50
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

SHARE PRICE

The fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In calculating net
asset value, market prices are used when available. If a market price for a
particular security is not available, the fund will determine the appropriate
price for the security.

Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of certain Class A and B shares may be subject to contingent
deferred sales charges.

---------------------------------------------------------
SALES CHARGES

CLASS A

The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced or eliminated for larger
purchases as indicated below.

<TABLE>
<CAPTION>
SALES CHARGE AS A PERCENTAGE OF
----------------------------------
DEALER
NET COMMISSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.75% 3.90% 3.00%
------------------------------------------------------------------------------
$100,000 but less than 3.50% 3.63% 2.75%
$250,000
------------------------------------------------------------------------------
$250,000 but less than 2.50% 2.56% 2.00%
$500,000
------------------------------------------------------------------------------
$500,000 but less than 2.00% 2.04% 1.60%
$750,000
------------------------------------------------------------------------------
$750,000 but less than $1
million 1.50% 1.52% 1.20%
------------------------------------------------------------------------------
$1 million or more and certain other
investments described below see below see below see below
</TABLE>

CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE

Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS
ARE MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined
contribution-type plans investing $1 million or more, or with 100 or more
eligible employees, and Individual Retirement Account rollovers involving
retirement plan assets invested in the American Funds, may invest with no sales
charge and are not

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

subject to a contingent deferred sales charge. Investments made through
retirement plans, endowments or foundations with $50 million or more in assets,
or through certain qualified fee-based programs may also be made with no sales
charge and are not subject to a contingent deferred sales charge. The fund may
pay a dealer concession of up to 1% under its Plan of Distribution on
investments made with no initial sales charge.

CLASS B

Class B shares are sold without any initial sales charge. However, a contingent
deferred sales charge may be applied to the value of the shares you redeem
within six years of purchase, as shown in the table below.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares sold within year 1 2 3 4 5 6
----------------------------------------------------------------
Contingent deferred sales charge 5% 4% 4% 3% 2% 1%
</TABLE>

Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B Shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales
charge will be sold first and then shares that you have owned the longest.
American Funds Distributors pays compensation equal to 4% of the amount
invested to dealers who sell Class B shares.

CLASS B CONVERSION TO A SHARES

Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS

You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your
Class B contingent deferred sales charge using one or any combination of the
methods described below, in the statement of additional information and
"Welcome to the Family."

REDUCING YOUR CLASS A SALES CHARGE

You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.

AGGREGATING ACCOUNTS

To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:

. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of
the trust.

. solely controlled business accounts.

. single-participant retirement plans.

Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or
"Welcome to the Family" for more information.

CONCURRENT PURCHASES

You may combine simultaneous purchases of Class A and/or B shares of two or
more American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to qualify for a
reduced Class A sales charge. Direct purchases of money market funds are
excluded.

RIGHTS OF ACCUMULATION

You may take into account the current value (or if greater, the amount you
invested less any withdrawals) of your existing Class A and B holdings in the
American Funds, as well as individual holdings in various American Legacy
variable annuities or variable life insurance policies, to determine your Class
A sales charge. Direct purchases of money market funds are excluded.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

STATEMENT OF INTENTION

You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine the applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be
due if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.

CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES

The contingent deferred sales charge on Class B shares may be waived in the
following cases:

. when receiving payments through systematic withdrawal plans (up to 12% of
the value of your account);

. when receiving required minimum distributions from retirement accounts upon
reaching age 70 1/2; or

. for redemptions due to death or post-purchase disability of the
shareholder.

For more information, please consult your financial adviser, the statement of
additional information or "Welcome to the Family."

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
PLANS OF DISTRIBUTION

The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of trustees. The plans
provide for annual expenses of up to 0.25% for Class A shares and 1.00% for
Class B shares. Up to 0.25% of these payments are used to pay service fees to
qualified dealers for providing certain shareholder services. The remaining
0.75% expense for Class B shares is used for financing commissions paid to your
dealer. The 12b-1 fees paid by the fund, as a percentage of average net assets,
for the previous fiscal year is indicated above under "Fees and Expenses of the
Fund." Since these fees are paid out of the fund's assets or income on an
ongoing basis, over time they will increase the cost and reduce the return of
an investment. The higher fees for Class B shares may cost you more over time
than paying the initial sales charge for Class A shares.

OTHER COMPENSATION TO DEALERS

American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.

---------------------------------------------------------
HOW TO SELL SHARES

Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:

THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)

. Shares held for you in your dealer's name must be sold through the dealer.

WRITING TO AMERICAN FUNDS SERVICE COMPANY

. Requests must be signed by the registered shareholder(s).

. A signature guarantee is required if the redemption is:

-- Over $50,000;

-- Made payable to someone other than the registered shareholder(s); or

-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.

. American Funds Service Company reserves the right to require signature
guarantee(s) on all redemptions.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

. Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/:

. Redemptions by telephone, fax, or computer (including American FundsLine
and American FundsLine OnLine) are limited to $50,000 per shareholder each
day.

. Checks must be made payable to the registered shareholder.

. Checks must be mailed to an address of record that has been used with the
account for at least 10 days.

TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR FUNDSLINE ONLINE

Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all
of these services. You may reinstate these services at any time.

Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, the funds's business
manager, and each of their respective directors, trustees, officers, employees
and agents harmless from any losses, expenses, costs or liabilities (including
attorney fees) which may be incurred in connection with the exercise of these
privileges, provided American Funds Service Company employs reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine. If reasonable procedures are not
employed, it and/or the fund may be liable for losses due to unauthorized or
fraudulent instructions.

---------------------------------------------------------
DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS

The fund declares dividends from net investment income daily and distributes
the accrued dividends, which may fluctuate, to shareholders each month.
Dividends begin accruing one day after payment for shares is received by the
fund or American Funds Service Company. Capital gains, if any, are usually
distributed in November. When a dividend or capital gain is distributed, the
net asset value per share is reduced by the amount of the payment.

You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do not elect
to take

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

capital gain distributions in cash because these distributions reduce principal
value.

TAX CONSEQUENCES

Interest on municipal bonds is generally not included in gross income for
federal income tax purposes. The fund is permitted to pass through to its
shareholders federally tax-exempt income subject to certain requirements.
However, the fund may invest in obligations which pay interest that is subject
to state and local taxes when distributed by the fund.

TAXES ON DISTRIBUTIONS

Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes to the extent they include income from
debt securities that are not exempt from tax - unless you are exempt from
taxation.

It is anticipated that federal exempt-interest dividends paid by the fund and
derived from interest on bonds exempt from respective state (Maryland or
Virginia) income tax will also be exempt from such state corporate and personal
income tax. To the extent the fund's dividends are derived from interest on
debt obligations other than respective state (Maryland or Virginia) municipal
securities, such dividends will be subject to such state's state income tax
even though the dividends may be exempt from federal income tax.

For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of net
long-term capital gains are taxable to you as long-term capital gains. Any
taxable distributions you receive from the fund will normally be taxable to you
when made, regardless of whether you reinvest distributions or receive them in
cash.

TAXES ON TRANSACTIONS

Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges,
and the price you receive when you sell them.

Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund's
results for the past five years. Certain information reflects financial results
for a single fund share. The total returns in the table represent the rate that
an investor would have earned or lost on an investment in the fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, is included in the statement of additional information,
which is available upon request.

THE MARYLAND FUND

<TABLE>
<CAPTION>
Net gains/(losses)
Net asset on securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Year ended beginning of investment and investment investment (from capital Total value, end of
July 31 year income unrealized) operations income) gains) distributions year
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $15.57 $.74/2/ $(45)/2/ $.29 ($.74) -- ($.74) $15.12
1999 16.04 .74 (.37) .37 (.74) (.10) (.84) 15.57
1998 16.02 .78 .14 .92 (.78) (.12) (.90) 16.04
1997 15.39 .79 .63 1.42 (.79) -- (.79) 16.02
1996 15.29 .80 .10 .90 (.80) -- (.80) 15.39
CLASS B:
2000/4/ 15.01 .16/2/ .18/2/ .34 (.23) -- (.23) 15.12
<CAPTION>

Ratio of Ratio of
Net assets, expenses to net income
Year ended end of year average net to average Portfolio
July 31 Total return/1/ (in millions) assets net assets turnover rate
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 2.02% $100 .82% 4.92% 11.98%/3/
1999 2.28 110 .78 4.63 11.38
1998 5.89 101 .79 4.84 10.30
1997 9.52 87 .82 5.08 15.27
1996 5.95 80 .81 5.14 16.01
CLASS B:
2000/4/ 2.15 1 1.53/5/ 4.21/5/ 11.98/3/
</TABLE>

1 Total returns exclude all sales charges, including contingent deferred sales
charges.

2 Based on average shares outstanding.

3 Represents portfolio turnover rate (equivalent for all share classes) for the
year ended July 31, 2000.

4 Per share data from March 15, 2000 when Class B shares were first offered for
sale.

5 Annualized.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

THE VIRGINIA FUND

<TABLE>
<CAPTION>
Net gains/(losses)
Net asset on securities Dividends
value, Net (both realized Total from (from net Distributions Net asset
Year ended beginning of investment and investment investment (from capital Total value, end of
July 31 year income unrealized) operations income) gains) distributions year
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
2000 $15.82 $.74/2/ $(.25)/2/ $.49 $(.74) -- $(.74) $15.57
1999 16.36 .73 (.36) .37 (.73) (.18) (.91) 15.82
1998 16.37 .78 .03 .81 (.78) (.04) (.82) 16.36
1997 15.77 .80 .60 1.40 (.80) -- (.80) 16.37
1996 15.79 .81 .03 .84 (.81) (.05) (.86) 15.77
CLASS B:
2000/4/ 15.28 .18/2/ .34/2/ .52 (.23) -- (.23) 15.57
<CAPTION>

Ratio of Ratio of
Net assets, expenses to net income
Year ended end of year average net to average Portfolio
July 31 Total return/1/ (in millions) assets net assets turnover rate
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS A:
2000 3.24% $114 .80% 4.77% 22.37%/3/
1999 2.21 125 .77 4.46 12.72
1998 5.08 115 .78 4.73 24.66
1997 9.10 101 .81 4.99 18.41
1996 5.46 90 .79 5.11 27.34
CLASS B:
2000/4/ 3.30 -- 1.55/5/ 4.03/5/ 22.37/3/
</TABLE>

1 Total returns exclude all sales charges, including contingent deferred sales
charges.

2 Based on average shares outstanding.

3 Represents portfolio turnover rate (equivalent for all share classes) for the
year ended July 31, 2000.

4 Per share data from March 15, 2000 when Class B shares were first offered for
sale.

5 Annualized.

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

---------------------------------------------------------
NOTES

THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext. 11
FOR 24-HOUR INFORMATION American FundsLine(R)
800/325-3590
American FundsLine OnLine(R)
http://www.americanfunds.com

</TABLE>

Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.

* * * * *

MULTIPLE TRANSLATIONS This prospectus may be translated into other languages.
If there is any inconsistency or ambiguity as to the meaning of any word or
phrase in a translation, the English text will prevail.

ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information
about the fund including financial statements, investment results, portfolio
holdings, a statement from portfolio management discussing market conditions
and the fund's investment strategies, and the independent accountants' report
(in the annual report).

STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODES OF ETHICS The SAI contains
more detailed information on all aspects of the fund, including the fund's
financial statements and is incorporated by reference into this prospectus.
The Codes of Ethics describe the personal investing policies adopted by the
fund and the fund's investment adviser and its affiliated companies.

The Codes of Ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the fund
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http://www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

HOUSEHOLD MAILINGS Each year you are automatically sent an updated
prospectus, annual and semi-annual report for the fund. In order to reduce the
volume of mail you receive, when possible, only one copy of these documents
will be sent to shareholders that are part of the same family and share the
same residential address.

If you would like to receive individual copies of these documents, or a free
copy of the SAI or Codes of Ethics, please call American Funds Service Company
at 800/421-0180 or write to the Secretary of the fund at 1101 Vermont Avenue,
N.W., Washington, D.C. 20005.
Investment Company File No. 811-4653
Printed on recycled paper

<PAGE>

THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
THE TAX-EXEMPT FUND OF VIRGINIA

Part B
Statement of Additional Information

November 15, 2000

This document is not a prospectus but should be read in conjunction with the
current prospectus of The American Funds Tax-Exempt Series I (the "trust") dated
November 15, 2000. The trust currently consists of two series, The Tax-Exempt
Fund of Maryland (the "Maryland Fund" or "fund") and the Tax-Exempt Fund of
Virginia (the "Virginia Fund" or "fund"). Except where the context indicates
otherwise, all references herein to the "fund" apply to each of the two funds.
The prospectus may be obtained from your investment dealer or financial planner
or by writing to the trust at the following address:

The American Funds Tax-Exempt Series I
Attention: Secretary
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 842-5665

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item Page No.
---- --------
<S> <C>
Certain Investment Limitations and Guidelines . . . . . . . . . . . 2
Description of Certain Securities and Investment Techniques . . . . 2
Fundamental Policies and Investment Restrictions. . . . . . . . . . 6
Fund Organization and Voting Rights . . . . . . . . . . . . . . . . 8
Fund Trustees and Officers. . . . . . . . . . . . . . . . . . . . . 10
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . 16
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . 20
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Sales Charge Reductions and Waivers . . . . . . . . . . . . . . . . 24
Individual Retirement Account (IRA) Rollovers . . . . . . . . . . . 27
Price of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Selling Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Shareholder Account Services and Privileges . . . . . . . . . . . . 30
Execution of Portfolio Transactions . . . . . . . . . . . . . . . . 33
General Information . . . . . . . . . . . . . . . . . . . . . . . . 33
Class A Share Investment Results and Related Statistics . . . . . . 35
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Financial Statements
</TABLE>

The American Funds Tax-Exempt Series I - Page 1

<PAGE>

CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES

The following limitations and guidelines are considered at the time of purchase,
under normal market conditions, and are based on a percentage of the fund's net
assets unless otherwise noted. This summary is not intended to reflect all of
the fund's investment limitations.

. The fund will invest at least 80% of its assets in, or derive at least 80%
of its income from, securities that are exempt from both federal and the
respective state (Maryland or Virgina) tax.

. The fund may invest up to 20% of its assets in securities subject to
alternative minimum taxes.

. The fund may invest up to 20% of its assets in straight debt securities
(not including convertible securities) rated Ba and BB or below (or unrated
but determined to be of equivalent quality).

Although the fund is not normally required to dispose of a security in the event
its rating is reduced below the current minimum rating for its purchase (or it
is not rated and its quality becomes equivalent to such a security), if, as a
result of a downgrade or otherwise, the fund holds more than 20% of its net
assets in these securities, the fund will dispose of the excess as deemed
prudent by the investment adviser.

The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions.

DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES

The descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."

DEBT SECURITIES - Bonds and other debt securities are used by issuers to borrow
money. Issuers pay investors interest and generally must repay the amount
borrowed at maturity. Some debt securities, such as zero coupon bonds, do not
pay current interest, but are purchased at a discount from their face values.
The prices of debt securities fluctuate depending on such factors as interest
rates, credit quality, and maturity. In general their prices decline when
interest rates rise and vice versa.

Lower quality, lower rated bonds rated Ba or below by Standard & Poor's
Corporation and BB or below by Moody's Investors Services, Inc. or unrated but
considered to be of equivalent quality are described by the rating agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already be
in default. The market prices of these securities may fluctuate more than higher
quality securities and may decline significantly in periods of general economic
difficulty. It may be more difficult to dispose of, or to determine the value
of, lower quality, lower rated bonds.

Certain risk factors relating to "lower quality, lower rated bonds" are
discussed below.

SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower quality, lower
rated bonds can be sensitive to adverse economic changes and political and
corporate developments

The American Funds Tax-Exempt Series I - Page 2

<PAGE>

and may be less sensitive to interest rate changes. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress that would adversely affect their
ability to service their principal and interest payment obligations, to
meet projected business goals, and to obtain additional financing. In
addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices and yields of lower
quality, lower rated bonds.

PAYMENT EXPECTATIONS - Lower quality, lower rated bonds, like other bonds,
may contain redemption or call provisions. If an issuer exercises these
provisions in a declining interest rate market, the fund would have to
replace the security with a lower yielding security, resulting in a
decreased return for investors. If the issuer of a bond defaults on its
obligations to pay interest or principal or enters into bankruptcy
proceedings, the fund may incur losses or expenses in seeking recovery of
amounts owed to it.

LIQUIDITY AND VALUATION - There may be little trading in the secondary
market for particular bonds, which may affect adversely the fund's ability
to value accurately or dispose of such bonds. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of lower quality, lower rated bonds,
especially in a thin market.

MUNICIPAL BONDS - Municipal bonds are debt obligations generally issued to
obtain funds for various public purposes, including the construction of public
facilities. Opinions relating to the validity of municipal bonds, their
exclusion from gross income for federal income tax purposes and, where
applicable, state and local income tax are rendered by bond counsel to the
issuing authorities at the time of issuance.

The two principal classifications of municipal bonds are general obligation
bonds and limited obligation or revenue bonds. General obligation bonds are
secured by the issuer's pledge of its full faith and credit including, if
available, its taxing power for the payment of principal and interest. Issuers
of general obligation bonds include states, counties, cities, towns and various
regional or special districts. The proceeds of these obligations are used to
fund a wide range of public facilities such as the construction or improvement
of schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality. Annual rental payments are payable to the extent such rental
payments are appropriated annually.

Typically, the only security for a limited obligation or revenue bond is the net
revenue derived from a particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a special tax or other special
revenues. Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many provide
additional security in the form of a debt service reserve fund which may also be
used to make principal and interest payments on the issuer's obligations. In
addition, some revenue obligations (as well as general obligations) are insured
by a bond insurance company or backed by a letter of credit issued by a banking
institution.

The American Funds Tax-Exempt Series I - Page 3

<PAGE>

Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but by the
revenues of the authority derived from payments by the private entity which owns
or operates the facility financed with the proceeds of the bonds. Obligations of
housing finance authorities have a wide range of security features including
reserve funds and insured or subsidized mortgages, as well as the net revenues
from housing or other public projects. Most of these bonds do not generally
constitute the pledge of the credit of the issuer of such bonds. The credit
quality of such revenue bonds is usually directly related to the credit standing
of the user of the facility being financed or of an institution which provides a
guarantee, letter of credit, or other credit enhancement for the bond issue.

MUNICIPAL INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed
bonds issued by municipalities. Interest payments are made to bondholders
semi-annually and are made up of two components: a fixed "real coupon" or
spread, and a variable coupon linked to an inflation index. Accordingly,
payments will increase or decrease each period as a result of changes in the
inflation index. In a period of deflation payments may decrease to zero, but in
any event will not be less than zero.

ZERO COUPON BONDS - Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the securities begin paying
current interest. They are issued and traded at a discount from their face
amount or par value, which discount varies depending on the time remaining until
cash payments begin, prevailing interest rates, liquidity of the security, and
the perceived credit quality of the issuer.

PRE-REFUNDED BONDS - From time to time, a municipality may refund a bond that it
has already issued prior to the original bond's call date by issuing a second
bond, the proceeds of which are used to purchase securities. The securities are
placed in an escrow account pursuant to an agreement between the municipality
and an independent escrow agent. The principal and interest payments on the
securities are then used to pay off the original bondholders. For the purposes
of diversification, pre-refunded bonds will be treated as governmental issues.

U.S. VIRGIN ISLANDS AND PUERTO RICO OBLIGATIONS - The fund may invest in
obligations of the Commonwealth of Puerto Rico and its agencies and authorities
and the U.S. Virgin Islands to the extent such obligations are exempt from
federal and state income taxes. Adverse political and economic conditions and
developments, affecting Puerto Rico and the U.S. Virgin Islands, may in turn
affect negatively the value of the fund's holdings in such obligations.

FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund agrees to purchase such securities it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails to
deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.

As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in an amount sufficient to meet its payment
obligations in these transactions. Although these transactions will

The American Funds Tax-Exempt Series I - Page 4

<PAGE>

not be entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily could be in a leveraged position (because it may have an amount
greater than its net assets subject to market risk). Should market values of the
fund's portfolio securities decline while the fund is in a leveraged position,
greater depreciation of its net assets would likely occur than were it not in
such a position. The fund will not borrow money to settle these transactions and
therefore, will liquidate other portfolio securities in advance of settlement if
necessary to generate additional cash to meet its obligations thereunder.

TEMPORARY INVESTMENTS - The fund may invest in short-term municipal obligations
of up to one year in maturity during periods of temporary defensive strategy
resulting from abnormal market conditions, or when such investments are
considered advisable for liquidity. Generally, the income from all such
securities is exempt from federal income tax. Further, a portion of the fund's
assets, which will normally be less than 20%, may be held in cash or invested in
high-quality taxable short-term securities of up to one year in maturity. Such
investments may include: (1) obligations of the U.S. Treasury; (2) obligations
of agencies and instrumentalities of the U.S. Government; (3) money market
instruments, such as certificates of deposit issued by domestic banks, corporate
commercial paper, and bankers' acceptances; and (4) repurchase agreements.

REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements, under
which the fund buys a security and obtains a simultaneous commitment from the
seller to repurchase the security at a specified time and price. Repurchase
agreements permit the fund to maintain liquidity and earn income over periods of
time as short as overnight. The seller must maintain with the fund's custodian
collateral equal to at least 100% of the repurchase price, including accrued
interest, as monitored daily by the Investment Adviser. The fund will only enter
into repurchase agreements involving securities in which it could otherwise
invest and with selected banks and securities dealers whose financial condition
is monitored by the Investment Adviser. If the seller under the repurchase
agreement defaults, the fund may incur a loss if the value of the collateral
securing the repurchase agreement has declined and may incur disposition costs
in connection with liquidating the collateral. If bankruptcy proceedings are
commenced with respect to the seller, realization upon the collateral by the
fund may be delayed or limited.

ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Keeping in mind the fund's objective, the Investment Adviser will
increase the fund's exposure to this price volatility only when it appears
likely to increase current income without undue risk to capital.

ISSUE CLASSIFICATION - Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which they
were issued, often tend to trade at different yields. Correspondingly,
securities issued for similar purposes and with the same general maturity
characteristics, but which vary according to the creditworthiness of their
respective issuers, tend to trade at different yields. These yield differentials
tend to fluctuate in response to political and economic developments, as well as
temporary imbalances in normal supply/demand relationships. The Investment
Adviser monitors these fluctuations closely, and will attempt to adjust
portfolio concentrations in various issue classifications according to the value
disparities brought about by these yield relationship fluctuations.

The Investment Adviser believes that, in general, the market for municipal bonds
is less liquid than that for taxable fixed-income securities. Accordingly, the
ability of the fund to make

The American Funds Tax-Exempt Series I - Page 5

<PAGE>

purchases and sales of securities in the foregoing manner may, at any particular
time and with respect to any particular securities, be limited (or
non-existent).

PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the length
of time particular investments may have been held. Short-term trading profits
are not the fund's objective and changes in its investments are generally
accomplished gradually, though short-term transactions may occasionally be made.
High portfolio turnover (100% or more) involves correspondingly greater
transaction costs in the form of dealer spreads or brokerage commissions, and
may result in the realization of net capital gains, which are taxable when
distributed to shareholders.

Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved.

The fund's portfolio turnover rate would equal 100% if each security in the
fund's portfolio was replaced once per year. See "Financial Highlights" in the
prospectus for the fund's annual portfolio turnover for each of the last five
fiscal periods.

RISK OF NON-COMPLIANCE WITH CERTAIN FEDERAL REQUIREMENTS - The Internal Revenue
Code of 1986 imposes limitations on the use and investment of the proceeds of
state and local governmental bonds and of other funds of the issuers of such
bonds. These limitations must be satisfied on a continuing basis to maintain
the exclusion from gross income of interest on such bonds. The provisions of
the Code generally apply to bonds issued after August 15, 1986. Bond counsel
qualify their opinions as to the federal tax status of new issues of bonds by
making such opinions contingent on the issuer's future compliance with these
limitations. Any failure on the part of an issuer to comply could cause the
interest on its bonds to become taxable to investors retroactive to the date the
bonds were issued. These restrictions in the Code also may affect the
availability of certain municipal securities.

FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS

FUNDAMENTAL POLICIES - The fund has adopted the following fundamental policies
and investment restrictions which may not be changed without approval by holders
of a majority of its outstanding shares. Such majority is defined in the
Investment Company Act of 1940 ("1940 Act") as the vote of the lesser of (i) 67%
or more of the outstanding voting securities present at a meeting, if the
holders of more than 50% of the outstanding voting securities are present in
person or by proxy, or (ii) more than 50% of the outstanding voting securities.
All percentage limitations are considered at the time securities are purchased
and are based on the fund's net assets unless otherwise indicated. None of the
following investment restrictions involving a maximum percentage of assets will
be considered violated unless the excess occurs immediately after, and is caused
by, an acquisition by the fund.

These restrictions provide that the fund may not:

1. Invest more than 5% of the value of its total assets in the securities of
any one issuer or hold more than 10% of any class of securities of any one
issuer (for this purpose all indebtedness of an issuer should be deemed a single
class), provided that this limitation shall apply only to 75% of the value of
the fund's total assets and, provided further, that the limitation shall not
apply to obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities;

The American Funds Tax-Exempt Series I - Page 6

<PAGE>

2. Enter into any repurchase agreement maturing in more than seven days
(unless subject to a demand feature of seven days or less) if any such
investment, together with any illiquid securities held by the fund, exceeds 10%
of the value of its total assets;

3. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in securities secured by real estate or interests therein;

4. Acquire securities subject to legal or contractual restrictions on
disposition;

5. Make loans to others, except for the purchase of debt securities or
entering into repurchase agreements;

6. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;

7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales;

8. Borrow money, except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale of
portfolio securities to accommodate unusually heavy redemption requests, if they
should occur; it is not intended for investment purposes;

9. Mortgage, pledge, or hypothecate its assets, except in an amount up to 10%
of the value of its total assets, but only to secure borrowings for temporary or
emergency purposes;

10. Underwrite any issue of securities, except to the extent that the purchase
of municipal bonds directly from the issuer in accordance with the fund's
investment objective, policies and restrictions, and later resale may be deemed
to be an underwriting;

11. Invest in companies for the purpose of exercising control or management;

12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization;

13. Buy or sell commodities or commodity contracts or oil, gas or other mineral
exploration or development programs;

14. Write, purchase or sell puts, calls, straddles, spreads or any combination
thereof;

15. Purchase or retain the securities of any issuer, if, to the knowledge of
the fund, those individual officers and Trustees of the trust, its Investment
Adviser, or principal underwriter, each owning beneficially more than 1/2 of 1%
of the securities of such issuer, together own more than 5% of the securities of
the issuer.

16. Invest more than 5% of the value of the fund's total assets in securities
of any issuer with a record of less than three years continuous operation,
including predecessors, except those issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, or municipal bonds rated as least "A" by
either Moody's Investors Service, Inc. or Standard & Poor's Corporation; or

The American Funds Tax-Exempt Series I - Page 7

<PAGE>

17. Invest more than 25% of its assets in securities of any industry, although
for purposes of this limitation, the issuers of municipal securities and U. S.
Government obligations are not considered to be part of any industry.

Notwithstanding Investment Restriction number 12, the fund may invest in
securities of other investment companies if deemed advisable by its officers in
connection with the administration of a deferred compensation plan adopted by
the Trustees pursuant to an exemptive order granted by the Securities and
Exchange Commission.

For the purpose of the fund's investment restrictions, the identification of the
"issuer" of municipal bonds which are not general obligation bonds is made by
the Investment Adviser on the basis of the characteristics of the obligation as
described, the most significant of which is the ultimate source of funds for the
payment of principal of and interest on such bonds.

For the purpose of investment restriction number 13, the term "oil, gas or other
mineral exploration or development programs" includes oil, gas, or other mineral
exploration or development leases.

NON-FUNDAMENTAL POLICIES - The following non-fundamental policy(ies) may be
changed by the Board of Trustees without shareholder approval:

The fund may not:

invest 25% or more of its assets in securities the interest on which is
paid from revenues of similar type projects (such as hospitals and health
facilities; turnpikes and toll roads; ports and airports; or colleges and
universities). The fund may, however, invest more than an aggregate of 25%
of its total assets in industrial development bonds.

FUND ORGANIZATION AND VOTING RIGHTS

The fund, an open-end, diversified management investment company, was organized
as a Massachusetts business trust on May 30, 1986. All fund operations are
supervised by the fund's Board of Trustees which meets periodically and performs
duties required by applicable state and federal laws. Members of the board who
are not affiliated with the business manager or investment adviser or their
affiliates are paid certain fees for services rendered to the fund as described
in "Trustees and Trustee Compensation" below. They may elect to defer all or a
portion of these fees through a deferred compensation plan in effect for the
fund.

As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been elected by
shareholders. At that time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees. The Trustees must call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Trustee when requested to do so by the record holders of 10% of the
outstanding shares of the trust. At such a meeting, a Trustee may be removed
after the holders of record of not less than a majority of the outstanding
shares of the trust have declared that the Trustee be removed either by
declaration in writing or by votes cast in person or by proxy. Except as set
forth above, the Trustees will continue to hold office and may appoint successor
Trustees. The shares do not have cumulative voting rights, which means that the
holders of a majority of the shares of the Trust voting for the election of
Trustees can elect all the Trustees. No amendment may be made to the Declaration
of

The American Funds Tax-Exempt Series I - Page 8

<PAGE>

Trust without the affirmative vote of a majority of the outstanding shares of
the trust except amendments to change the name of the trust, to correct any
ambiguous, defective or inconsistent provision of, or to supply any omission to,
the Declaration of Trust, to establish new funds, or to reduce or eliminate the
payment of taxes by the trust may be made by the Trustees without the vote or
consent of shareholders. If not terminated by the vote or written consent of a
majority of the outstanding shares, the trust will continue indefinitely.

The fund has two classes of shares - Class A and Class B. The Board of Trustees
may establish additional series and/or classes of shares in the future. Each
"series" of shares represents interests in a separate portfolio and has its own
investment objectives and policies. When more than one series of shares is
outstanding, shares of all series will vote together for a single set of
Trustees, and on other matters affecting only one series, only the shareholders
of that series shall be entitled to vote. On matters relating to more than one
series but affecting the series differently, separate votes by series are
required. The shares of each class represent an interest in the same investment
portfolio. Each class has equal rights as to voting, redemption, dividends and
liquidation, except that each class bears different distribution expenses and
may bear different transfer agent fees and other expenses properly attributable
to the particular class as approved by the Board of Trustees. Class A and Class
B shareholders have exclusive voting rights with respect to the rule 12b-1 Plans
adopted in connection with the distribution of shares and on other matters in
which the interests of one class are different from interests in another class.
Shares of all classes of the fund vote together on matters that affect all
classes in substantially the same manner. Each class votes as a class on matters
that affect that class alone.

The trust does not hold annual meetings of shareholders. However, significant
matters which require shareholder approval, such as certain elections of board
members or a change in a fundamental investment policy, will be presented to
shareholders at a meeting called for such purpose. Shareholders have one vote
per share owned. At the request of the holders of at least 10% of the shares,
the trust will hold a meeting at which any member of the board could be removed
by a majority vote.

SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts, where the trust was organized, shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the trust. However, the
risk of a shareholder incurring any financial loss on account of shareholder
liability is limited to circumstances in which the trust itself would be unable
to meet its obligations. The Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the trust and provides that
notice of the disclaimer may be given in any agreement, obligation, or
instrument which is entered into or executed by the trust or Trustees. The
Declaration of Trust provides for indemnification out of trust property of any
shareholder held personally liable for the obligations of the trust and also
provides for the trust to reimburse such shareholder for all legal and other
expenses reasonably incurred in connection with any such claim or liability.

Under the Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The trust will
provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulation thereunder.

The American Funds Tax-Exempt Series I - Page 9

<PAGE>

FUND TRUSTEES AND OFFICERS

Trustees and Trustee Compensation

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION TOTAL COMPENSATION
(INCLUDING (INCLUDING VOLUNTARILY
VOLUNTARILY DEFERRED
DEFERRED COMPENSATION/1/) FROM TOTAL NUMBER
COMPENSATION/1/) ALL FUNDS ADVISED BY OF FUND
FROM THE FUND CAPITAL RESEARCH AND BOARDS
POSITION PRINCIPAL OCCUPATION(S) DURING FISCAL YEAR MANAGEMENT COMPANY ON WHICH
WITH DURING ENDED OR ITS AFFILIATES FOR THE TRUSTEE
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS JULY 31, 2000 YEAR ENDED JULY 31, 2000 SERVES/2/
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cyrus A. Ansary Trustee Investment Services $ 3,000 $62,600 3
1725 K Street, N.W., International Co.
Suite 410 L.L.C.,
Washington, D.C. President
20006
Age: 66
-----------------------------------------------------------------------------------------------------------------------------------
Stephen Chariman Washington Management none/3/ none/3/ 3
Hartwell/+///++/ Emeritus and Corporation, Chairman
Age: 85 Trustee of the Board
-----------------------------------------------------------------------------------------------------------------------------------
James H. Lemon, Chairman of the The Johnston-Lemon none/3/ none/3/ 3
Jr./+///++/ Trust Group, Incorporated,
Age: 64 Chairman of the Board
and Chief Executive
Officer
-----------------------------------------------------------------------------------------------------------------------------------
Harry J. President and Washington Management none/3/ none/3/ 3
Lister/+///++/ Trustee Corporation, President
Age: 64 and Director
-----------------------------------------------------------------------------------------------------------------------------------
James C. Miller III Trustee Citizens for a Sound $ 600/4/ $60,500 3
1250 H Street, N.W., Economy, Counselor
Suite 700
Washington, D.C.
20005
Age: 57
-----------------------------------------------------------------------------------------------------------------------------------
T. Eugene Smith Trustee T. Eugene Smith, Inc. $3,700 $63,700 3
666 Tintagel Lane President
McLean, VA 22101
Age: 70
-----------------------------------------------------------------------------------------------------------------------------------
Margita E. White Trustee Association for Maximum $600/4/ $60,000 3
1776 Massachusetts Service Television
Avenue, N.W., Suite Inc., President
310
Washington, D.C.
20036
Age: 62
-----------------------------------------------------------------------------------------------------------------------------------
Stephen G. Yeonas Trustee Stephen G. Yeonas $ 3,900/2/ $27,000 3
6867 Elm Street, Company,
Suite 210 Chairman of the Board
McLean, VA 22101 and Chief Executive
Age: 75 Officer
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The American Funds Tax-Exempt Series I - Page 10

<PAGE>

+ "Interested persons" within the meaning of the 1940 Act on the basis of their
affiliation with the fund's Business Manager, Washington Management
Corporation.

++ Address is 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
1 Amounts may be deferred by eligible Trustees under a non-qualified deferred
compensation plan adopted by the trust in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustees.

2 Since the deferred compensation plans' adoption, the total amount of deferred
compensation accrued by the funds (plus earnings thereon) through the 2000
fiscal year for participating Trustees is as follows: Trustee Stephen G.
Yeonas ($36,193). Amounts deferred and accumulated earnings thereon are not
funded and are general unsecured liabilities of the fund until paid to the
Trustees.

3 Stephen Hartwell, James H. Lemon, Jr. and Harry J. Lister are affiliated with
the Business Manager and, accordingly, receive no compensation from the trust.

4 James C. Miller III and Margita E. White became Trustees on May 17, 2000.

The American Funds Tax-Exempt Series I - Page 11

<PAGE>

OTHER OFFICERS

<TABLE>
<CAPTION>
POSITION(S) PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS AGE WITH REGISTRANT DURING
----------------------------------------------------- PAST 5 YEARS
-----------------------------
<S> <C> <C> <C>
Jeffrey L. Steele/+/ 54 Executive Vice Executive Vice President and
President Director, Washington
Management Corporation;
former Partner, Dechert Price
and Rhoads
----------------------------------------------------------------------------------
Howard L. 70 Senior Vice President, Senior Vice President,
Kitzmiller/+/ Secretary and Secretary, Assistant
Treasurer Treasurer and Director,
Washington Management
Corporation
----------------------------------------------------------------------------------
Lois A. Erhard/+/ 48 Vice President Vice President, Washington
Management Corporation
----------------------------------------------------------------------------------
Michael W. Stockton/+/ 33 Assistant Vice Vice President, Assistant
President, Assistant Secretary and Assistant
Secretary and Treasurer, Washington
Assistant Treasurer Management Corporation
----------------------------------------------------------------------------------
J. Lanier Frank/+/ 39 Assistant Vice Assistant Vice President,
President Washington Management
Corporation
----------------------------------------------------------------------------------
Ashley L. Shaw/+/ 31 Assistant Secretary Assistant Secretary,
Washington Management
Corporation, former Part-time
Associate, Reed Smith Shaw
and McClay; fomer Law Clerk,
The Honorable William E.
Anderson
----------------------------------------------------------------------------------
</TABLE>

+ Address is 1101 Vermont Avenue, N.W., Washington, D.C. 20005.

All of the Trustees and officers listed are officers, and/or directors/trustees
of one or more of the other funds for which Washington Management Corporation
serves as Business Manager. No compensation is paid by a fund to any officer or
Trustee who is a director, officer or employee of the Business Manager,
Investment Adviser or affiliated companies. Each fund pays an annual retainer
fee of $750, an attendance fee of $200 per meeting and $100 per Committee
meeting to unaffiliated Trustees. Each fund also reimburses certain
meeting-related expenses of the unaffiliated Trustees.

No pension or retirement benefits are accrued as part of fund expenses. The
trust may elect, on a voluntary basis, to defer all or a portion of their fees
through a deferred compensation plan in effect for the fund. As of July 31, 2000
the officers and Trustees of the fund and their families, as a group, owned
beneficially or of record 1.64% and 1.91%, respectively, of the outstanding
shares of the Maryland and Virginia funds.

MANAGEMENT

BUSINESS MANAGER - Since its inception, the trust has operated under a Business
Management Agreement with Washington Management Corporation. The Business
Manager maintains its principal business address at 1101 Vermont Avenue, N.W.,
Washington, D.C. 20005.

The primary function of the Business Manager is to oversee the various services
and operations of the trust. The Business Manager provides services necessary to
carry on the trust's general

The American Funds Tax-Exempt Series I - Page 12

<PAGE>

administrative and corporate affairs. These services include all executive
personnel, clerical staff, office space and equipment, arrangements for and
supervision of all shareholder services, federal and state regulatory compliance
and responsibility for accounting and record keeping facilities. The Business
Manager provides similar services to other mutual funds.

The fund pays all expenses not specifically assumed by the Business Manager,
including but not limited to, custodian, transfer and dividend disbursing agency
fees and expenses; costs of the designing, printing and mailing of reports,
prospectuses, proxy statements and notices to its shareholders; expenses of
shareholder meetings; taxes; insurance; expenses of the issuance, sale
(including stock certificates, registration and qualification expenses), or
repurchase of shares of the fund; legal and auditing expenses; expenses pursuant
to the fund's Plans of Distribution; fees and expense reimbursements paid to
Trustees; association dues; and costs of stationery and forms prepared
exclusively for the trust.

The Business Manager receives a fee at the annual rate of 0.135% of the first
$60 million of the fund's net assets, 0.09% of the fund's net assets in excess
of $60 million plus 1.35% of the gross investment income. For the fiscal years
ended July 31, 2000, 1999 and 1998, the Business Manager's fees amounted to
$196,000, $202,000 and $181,000, for the Maryland Fund and $219,000, $224,000
and $201,000 for the Virginia Fund respectively. For the fiscal year ended July
31, 2000, the Business Manager's fees for the Maryland Fund amounted to .194% of
average net assets and for the Virginia Fund amounted to .189% of average
assets.

The current Business Management Agreement, unless sooner terminated, will
continue in effect until July 31, 2001 and may be renewed from year to year
thereafter, provided that any such renewal has been specifically approved at
least annually by (i) the Board of Trustees, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the fund, and
(ii) the vote of a majority of trustees who are not parties to the Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement provides that the Business Manager has no liability to the fund for
its acts or omissions in the performance of its obligations to the fund not
involving willful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that either
party has the right to terminate it, without penalty, upon sixty (60) days'
written notice to the other party and that the Agreement automatically
terminates in the event of its assignment (as defined in the 1940 Act).

The Business Manager has established a charitable foundation, The Washington
Management Corporation Foundation, which makes contributions to charities
organized under Section 501 (c)(3) or 509(a)(2) of the Internal Revenue Code.
Trustees and officers of the trust, as well as all employees of the Business
Manager and its affiliates, may participate in a gift matching program sponsored
by the Foundation.

INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the U.S. and abroad
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva, Hong
Kong, Singapore and Tokyo), with a staff of professionals, many of whom have a
number of years of investment experience. The Investment Adviser is located at
333 South Hope Street, Los Angeles, CA 90071, and at 135 South State College
Boulevard, Brea, CA 92821. The Investment Adviser's research professionals
travel several million miles a year, making more than 5,000 research visits in
more than 50 countries around the world. The Investment Adviser believes that it
is able to attract and

The American Funds Tax-Exempt Series I - Page 13

<PAGE>

retain quality personnel. The Investment Adviser is a wholly owned subsidiary of
The Capital Group Companies, Inc.

The Investment Adviser is responsible for managing more than $300 billion of
stocks, bonds and money market instruments and serves over 11 million
shareholder accounts of all types throughout the world. These investors include
privately owned businesses and large corporations as well as schools, colleges,
foundations and other non-profit and tax-exempt organizations.

The Investment Adviser manages the investment portfolio of the fund subject to
the policies established by the Board of Trustees and places orders for the
fund's portfolio securities transactions. As compensation for its services, the
Investment Adviser receives a fee at the annual rate of 0.165% of the first $60
million of the fund's net assets plus 0.12% of the fund's net assets in excess
of $60 million plus 1.65% of gross investment income. For the fiscal years ended
July 31, 2000, 1999 and 1998, the Investment Adviser's fees were $243,000,
$252,000 and $224,000, for the Maryland Fund and $273,000, $279,000 and $250,000
for the Virginia Fund, respectively. For the fiscal year ended July 31, 2000,
the Investment Adviser's fees for the Maryland Fund amounted to .241% of average
net assets and for the Virginia Fund amounted to .235% of average net assets

INVESTMENT ADVISORY AGREEMENT - The Investment Advisory Agreement (the
"Agreement") between the fund and the Investment Adviser will continue in effect
until July 31, 2001, unless sooner terminated, and may be renewed from year to
year thereafter, provided that any such renewal has been specifically approved
at least annually by (i) the Board of Trustees, or by the vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the fund, and
(ii) the vote of a majority of Trustees who are not parties to the Agreement or
interested persons (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement provides that the Investment Adviser has no liability to the fund for
its acts or omissions in the performance of its obligations to the fund not
involving willful misconduct, bad faith, gross negligence or reckless disregard
of its obligations under the Agreement. The Agreement also provides that either
party has the right to terminate it, without penalty, upon 60 days' written
notice to the other party, and that the Agreement automatically terminates in
the event of its assignment (as defined in the 1940 Act).

PRINCIPAL UNDERWRITER - American Funds Distributors, Inc. (the "Principal
Underwriter") is the principal underwriter of the fund's shares. The Principal
Underwriter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
South State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. The fund has adopted Plans of
Distribution (the "Plans"), pursuant to rule 12b-1 under the 1940 Act. The
Principal Underwriter receives amounts payable pursuant to the Plans (see
below). In addition, the Principal Underwriter receives revenues from sales of
the fund's shares. For Class A shares, the Principal Underwriter receives
commission revenue consisting of that portion of the Class A sales charge
remaining after the discounts which it allows to investment dealers. For Class B
shares, the Principal Underwriter sells the rights to 12b-1 fees paid by the
fund for distribution expenses to a third party and receives the revenue
remaining after compensating investment dealers for sales of Class B shares. The
fund also reimburses the Principal Underwriter for the immediate service fees
advanced and paid to dealers by the Principal Underwriter for sales of Class B
shares.

The American Funds Tax-Exempt Series I - Page 14

<PAGE>

Commissions retained by the Principal Underwriter on sales of Class A shares
during the 2000 fiscal year amounted to $43,000 for the Maryland Fund and
$43,000 for the Virginia Fund after allowance of $165,000 and $168,000 for the
Maryland Fund and the Virginia Fund, respectively, to dealers.

For the Maryland Fund, revenue retained and service fee reimbursements received
by the Principal Underwriter on sales of Class B shares during the 2000 fiscal
year amounted to $10,000 after compensation of $42,000 to dealers. For the
Virginia Fund, revenue retained and service fee reimbursements received by the
Principal Underwriter on sales of Class B shares during the 2000 fiscal year
amounted to $1,000 after compensation of $6,000 to dealers.

For the Maryland Fund, during the fiscal years ended 1999 and 1998 the Principal
Underwriter retained $80,000 and $48,000, respectively, on sales of Class A
shares after an allowance of $325,000 and $202,000 to dealers, respectively. For
the Virginia Fund, during the fiscal years ended 1999 and 1998 the Principal
Underwriter retained $87,000 and $58,000, respectively, on sales of Class A
shares after an allowance of $340,000 and $242,000 to dealers, respectively.

Johnston, Lemon & Co. Incorporated ("Johnston, Lemon") a wholly-owned subsidiary
of the business manager's parent company, The Johnston-Lemon Group, Inc.
("JLG"), received commission amounts of $27,000, $39,000 and $44,000 and
$19,000, $23,000 and $41,000 respectively, for the fiscal years ended July 31,
2000, 1999 and 1998, on its retail sales of the Maryland and Virginia funds and
the Distribution Plans of the funds, but received no net brokerage commissions
resulting from purchases and sales of the securities for the investment account
of the funds.

As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Board of
Trustees and separately by a majority of the trustees who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement. The officers
and trustees who are "interested persons" of the fund may be considered to have
a direct or indirect financial interest in the operation of the Plans due to
present or past affiliations with the Business Manager, Investment Adviser and
related companies. Potential benefits of the Plans to the fund include
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment process
from growth or stability of assets and maintenance of a financially healthy
management organization. The selection and nomination of trustees who are not
"interested persons" of the trust are committed to the discretion of the
trustees who are not "interested persons" during the existence of the Plans. The
Plans may not be amended to increase materially the amount spent for
distribution without shareholder approval. Plan expenses are reviewed quarterly
and the Plans must be renewed annually by the Board of Trustees.

Under the Plans, the fund may expend up to 0.25% of its net assets annually for
Class A shares and 1.00% of its net assets annually for Class B shares to
finance any activity which is primarily intended to result in the sale of fund
shares, provided the fund's Board of Trustees has approved the category of
expenses for which payment is being made. For Class A shares, these include up
to 0.25% in service fees for qualified dealers and dealer commissions and
wholesaler compensation on sales of shares exceeding $1 million purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, rollover IRA accounts as described in "Individual
Retirement Account (IRA) Rollovers" below, and retirement plans, endowments or

The American Funds Tax-Exempt Series I - Page 15

<PAGE>

foundations with $50 million or more in assets). For Class B shares, these
include 0.25% in service fees for qualified dealers and 0.75% in payments to the
Principal Underwriter for financing commissions paid to qualified dealers
selling Class B shares.

Commissions on sales of Class A shares exceeding $1 million (including purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Class A Plan
limitation not reimbursed during the most recent fiscal quarter are recoverable
for five quarters, provided that such commissions do not exceed the annual
expense limit. After five quarters, these commissions are not recoverable.
During the 2000 fiscal year, the funds paid or accrued $251,000 and $290,000,
respectively, for compensation to dealers or the Principal Underwriter under the
Plan for Class A shares of which $38,000 and $44,000 remained accrrued and
unpaid, respectively at July 31,2000. As of the end of the 2000 fiscal year,
accrued and unpaid distribution expenses for Class B shares of the Maryland Fund
amounted to $1,000.

OTHER COMPENSATION TO DEALERS - The Principal Underwriter, at its expense (from
a designated percentage of its income), currently provides additional
compensation to dealers. Currently these payments are limited to the top 100
dealers who have sold shares of the fund or other funds in The American Funds
Group. These payments will be based principally on a pro rata share of a
qualifying dealer's sales. The Principal Underwriter will, on an annual basis,
determine the advisability of continuing these payments.

All officers of the trust and three of its Trustees, who are "interested
persons" of the trust, are officers or directors of Washington Management
Corporation, a wholly-owned subsidiary of JLG. Johnston, Lemon participates in
receiving dealer service fee payments from the Plans. Some of the trust's
officers and three Trustees who are "interested persons" of the trust are also
registered representatives with Johnston, Lemon and, as such, to the extent they
have sold shares of the fund, receive a portion of the service fee payments in
the same manner as all other Johnston, Lemon registered representatives.

DIVIDENDS, DISTRIBUTIONS AND TAXES

The fund declares dividends from its net investment income daily and distributes
the accrued dividends to shareholders each month. The percentage of the
distribution that is tax-exempt may vary from distribution to distribution. For
the purpose of calculating dividends, daily net investment income of the fund
consists of: (a) all interest income accrued on the fund's investments including
any original issue discount or market premium ratably amortized to the date of
maturity or determined in such other manner as may be deemed appropriate; minus
(b) all liabilities accrued, including interest, taxes and other expense items,
amounts determined and declared as dividends or distributions and reserves for
contingent or undetermined liabilities, all determined in accordance with
generally accepted accounting principles.

The following is only a summary of certain additional tax considerations
generally affecting the fund and its shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the fund or its
shareholders, and the discussion here and in the fund's Prospectus is not
intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax situations.

The American Funds Tax-Exempt Series I - Page 16

<PAGE>

FEDERAL TAXES - The fund is not intended to constitute a balanced investment
program and is not designed for investors seeking capital appreciation or
maximum tax-exempt income irrespective of fluctuations in principal. Shares of
the fund generally would not be suitable for tax-exempt institutions or
tax-deferred retirement plans (e.g., plans qualified under Section 401 of the
Internal Revenue Code, Keogh-type plans and individual retirement accounts).
Such retirement plans would not gain any benefit from the tax-exempt nature of
the fund's dividends because such dividends would be ultimately taxable to
beneficiaries when distributed to them. In addition, the fund may not be an
appropriate investment for entities which are "substantial users" of facilities
financed by private activity bonds or "related persons" thereof. "Substantial
user" is defined under U.S. Treasury Regulations to include a non-exempt person
who regularly uses a part of such facilities in his trade or business and whose
gross revenues derived with respect to the facilities financed by the issuance
of bonds are more than 5% of the total revenues derived by all users of such
facilities, or who occupies more than 5% of the usable area of such facilities
or for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
Corporation and its shareholders.

The fund intends to meet all the requirements and has elected the tax status of
a "regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Under Subchapter M, if the fund
distributes within specified times at least 90% of the sum of its taxable and
tax-exempt net investment income, it will be taxed only on that portion, if any,
which it retains.

To qualify, the fund must (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock, securities, currencies, or other income
derived with respect to its business of investing in such stock, securities, or
currencies; and (b) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's assets is
represented by cash, cash items, U.S. Government securities, securities of other
regulated investment companies, and other securities which must be limited, in
respect of any one issuer to an amount not greater than 5% of the fund's assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies) or in two or more issuers which the fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses.

The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest dividends")
will be the same for all shareholders receiving dividends during such year. In
order for the fund to pay exempt-interest dividends during any taxable year, at
the close of each fiscal quarter at least 50% of the aggregate value of the
Trust's and fund's assets must consist of certain tax-exempt obligations. Not
later than 60 days after the close of its taxable year, the fund will notify
each shareholder in writing of the portion of the dividends paid by the fund to
the shareholder with respect to such taxable year which constitutes
exempt-interest dividends. The aggregate amount of dividends so designated
cannot, however, exceed the excess of the amount of interest excludable from
gross income from tax under Section 103 of the Code received by the fund during
the taxable year over any amounts disallowed as deductions under Sections 265
and 171(a)(2) of the Code.

Interest on indebtedness incurred by a shareholder to purchase or carry fund
shares is not deductible for federal income tax purposes if the fund distributes
exempt-interest dividends

The American Funds Tax-Exempt Series I - Page 17

<PAGE>

during the shareholder's taxable year. If a shareholder receives an
exempt-interest dividend with respect to any share and such share is held for
six months or less, any loss on the sale or exchange of such share will be
disallowed to the extent of the amount of such exempt-interest dividend.

While the fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually except as
indicated above. The fund will have no tax liability with respect to such
distributed gains, and the distributions will be taxable to shareholders as
long-term capital gains, regardless of how long a shareholder has held fund
shares. Such distributions will be designated as a capital gains dividend in a
written notice mailed by the fund to shareholders not later than 60 days after
the close of the fund's taxable year. If a shareholder receives a designated
capital gain distribution (treated by the shareholder as a long-term capital
gain) with respect to any fund share and such fund share is held for six months
or less, then (unless otherwise disallowed) any loss on the sale or exchange of
that fund share will be treated as long-term capital loss to the extent of the
designated capital gain distribution. The fund may also make a distribution of
net realized long-term capital gains near the end of the calendar year to comply
with certain requirements of the Code. Gain recognized on the disposition of a
debt obligation (including tax-exempt obligations purchased after April 30,
1993) purchased by the fund at a market discount (generally, at a price less
than its principal amount) will be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time the
fund held the debt obligation.

Similarly, while the fund does not expect to earn any significant investment
company taxable income, in the event that any taxable income is earned by the
fund it will be distributed except as indicated above. In general, the fund's
investment company taxable income will be its taxable income (for example, its
short-term capital gains) subject to certain adjustments and excluding the
excess of any net long-term capital gain for the taxable year over the net
short-term capital loss, if any, for such year. The fund would be taxed on any
undistributed investment company taxable income. Any such income distributed
will be taxable to shareholders as ordinary income (whether distributed in cash
or additional shares).

If a shareholder exchanges or otherwise disposes of shares of the fund within 90
days of having acquired such shares, and if, as a result of having acquired
those shares, the shareholder subsequently pays a reduced sales charge for
shares of the fund, or of a different fund, the sales charge previously incurred
in acquiring the fund's shares will not be taken into account (to the extent
such previous sales charges do not exceed the reduction in sales charges) for
the purposes of determining the amount of gain or loss on the exchange, but will
be treated as having been incurred in the acquisition of such other funds.
Also, any loss realized on a redemption or exchange of shares of the fund will
be disallowed to the extent substantially identical shares are reacquired within
the 61-day period beginning 30 days before and ending 30 days after the shares
are disposed of.

Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
regulated investment company's "required distribution" for the calendar year
ending within the regulated investment company's taxable year over the
"distributed amount" for such calendar year. The term "required distribution"
means the sum of (i) 98% of ordinary income (generally net investment income)
for the calendar year, (ii) 98% of capital gain net income (both long-term and
short-term) for the one-year period ending on October 31 (as though the one-year
period ending on October 31 were the regulated investment company's taxable
year), and (iii) the sum of any untaxed, undistributed net investment income and
net capital gains of the regulated investment

The American Funds Tax-Exempt Series I - Page 18

<PAGE>

company for prior periods. The term "distributed amount" generally means the
sum of (i) amounts actually distributed by the fund from its current year's
ordinary income and capital gain net income and (ii) any amount on which the
fund pays income tax during the periods described above. Except as indicated
above, the fund intends to meet these distribution requirements to avoid the
excise tax liability.

If for any taxable year the fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income would be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions would
be taxable to shareholders to the extent of earnings and profits, and might be
eligible for the dividends-received deduction for corporations. Under normal
circumstances, no part of the distributions to shareholders by the fund is
expected to qualify for the dividends-received deduction allowed to corporate
shareholders.

As of the date of this statement of additional information, the maximum
individual tax rate applicable to ordinary income is 39.6% (effective tax rates
may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on assets held more than one year is 20% and the maximum corporate
tax applicable to ordinary income and net capital gains is 35%. However, to
eliminate the benefit of lower marginal corporate income tax rates, corporations
which have taxable income in excess of $100,000 for a taxable year will be
required to pay an additional amount of tax of up to $11,750 and corporations
which have taxable income in excess of $15,000,000 for a taxable year will be
required to pay an additional amount of tax of up to $100,000. Naturally, the
amount of tax payable by a taxpayer will be affected by a combination of tax law
rules covering, e.g., deductions, credits, deferrals, exemptions, sources of
income and other matters.

In most cases, the interest on "private activity" bonds as defined under the
Code is an item of tax preference subject to the alternative minimum tax ("AMT")
on corporations and individuals. As of the date of this statement of additional
information, individuals are subject to an AMT at a maximum marginal rate of 28%
(20% on capital gains with respect to assets held more than 18 months) and
corporations at a rate of 20%. Shareholders will not be permitted to deduct any
of their share of fund expenses in computing alternative minimum taxable income.
With respect to corporate shareholders, all interest on municipal bonds and
other tax-exempt obligations, including exempt-interest dividends paid by the
fund, is included in adjusted book income and adjusted current earnings in
calculating federal alternative minimum taxable income, and may also affect
corporate federal "environmental tax" liability.

Fund shareholders are required by the Code to report to the federal government
all exempt-interest dividends and all other tax-exempt interest received.

Under the Code, distributions of net investment income by the fund to a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation, or foreign partnership (a "foreign shareholder") will be
subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate, if
applicable). Withholding will not apply if a dividend paid by the fund is
"effectively connected" with a U.S. trade or business, in which case the
reporting and withholding requirements applicable to U.S. citizens, U.S.
residents, or domestic corporations will apply.

Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information, as
well as state tax law, in light of their particular tax situations.

The American Funds Tax-Exempt Series I - Page 19

<PAGE>

PURCHASE OF SHARES

<TABLE>
<CAPTION>
METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
-------------------------------------------------------------------------------
<S> <C> <C>
See "Purchase $50 minimum (except where a
Minimums" for initial lower minimum is noted under
investment minimums. "Purchase Minimums").
-------------------------------------------------------------------------------
By contacting Visit any investment Mail directly to your
your investment dealer dealer who is investment dealer's address
registered in the printed on your account
state where the statement.
purchase is made and
who has a sales
agreement with
American Funds
Distributors.
-------------------------------------------------------------------------------
By mail Make your check Fill out the account additions
payable to the fund form at the bottom of a recent
and mail to the account statement, make your
address indicated on check payable to the fund,
the account write your account number on
application. Please your check, and mail the check
indicate an investment and form in the envelope
dealer on the account provided with your account
application. statement.
-------------------------------------------------------------------------------
By telephone Please contact your Complete the "Investments by
investment dealer to Phone" section on the account
open account, then application or American
follow the procedures FundsLink Authorization Form.
for additional Once you establish the
investments. privilege, you, your financial
advisor or any person with your
account information can call
American FundsLine(R) and make
investments by telephone
(subject to conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By computer Please contact your Complete the American FundsLink
investment dealer to Authorization Form. Once you
open account, then established the privilege, you,
follow the procedures your financial advisor or any
for additional person with your account
investments. information may access American
FundsLine OnLine(R) on the
Internet and make investments
by computer (subject to
conditions noted in
"Shareholder Account Services
and Privileges - Telephone and
Computer Purchases, Redemptions
and Exchanges" below).
-------------------------------------------------------------------------------
By wire Call 800/421-0180 to Your bank should wire your
obtain your account additional investments in the
number(s), if same manner as described under
necessary. Please "Initial Investment."
indicate an investment
dealer on the account.
Instruct your bank to
wire funds to:

Wells Fargo Bank
155 Fifth Street,
Sixth Floor
San Francisco, CA
94106
(ABA#121000248)

For credit to the
account of:
American Funds Service
Company a/c#
4600-076178
(fund name)
(your fund acct. no.)
-------------------------------------------------------------------------------
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY
PURCHASE ORDER.
-------------------------------------------------------------------------------
</TABLE>

PURCHASE MINIMUMS - The minimum initial investment for all funds in The American
Funds Group, except the money market funds and the state tax-exempt funds, is
$250. The minimum initial investment for the money market funds (The Cash
Management Trust of America, The Tax--

The American Funds Tax-Exempt Series I - Page 20

<PAGE>

Exempt Money Fund of America, and The U.S. Treasury Money Fund of America) and
the state tax-exempt funds (The Tax-Exempt Fund of California, The Tax-Exempt
Fund of Maryland, and The Tax-Exempt Fund of Virginia) is $1,000. Purchase
minimums are reduced to $50 for purchases through "Automatic Investment Plans"
(except for the money market funds) or to $25 for purchases by retirement plans
through payroll deductions and may be reduced or waived for shareholders of
other funds in The American Funds Group. TAX-EXEMPT FUNDS SHOULD NOT SERVE AS
RETIREMENT PLAN INVESTMENTS. The minimum is $50 for additional investments
(except as noted above).

PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.

FUND NUMBERS - Here are the fund numbers for use with our automated phone line,
American FundsLine/(R)/ (see description below):

<TABLE>
<CAPTION>
FUND FUND
NUMBER NUMBER
FUND CLASS A CLASS B
---- ------- -------
<S> <C> <C>
STOCK AND STOCK/BOND FUNDS
AMCAP Fund/(R)/ . . . . . . . . . . . . . . . . 02 202
American Balanced Fund/(R)/ . . . . . . . . . . 11 211
American Mutual Fund/(R)/ . . . . . . . . . . . 03 203
Capital Income Builder/(R)/ . . . . . . . . . . 12 212
Capital World Growth and Income Fund/SM/ . . . . 33 233
EuroPacific Growth Fund/(R)/ . . . . . . . . . . 16 216
Fundamental Investors/SM/ . . . . . . . . . . . 10 210
The Growth Fund of America/(R)/ . . . . . . . . 05 205
The Income Fund of America/(R)/ . . . . . . . . 06 206
The Investment Company of America/(R)/ . . . . . 04 204
The New Economy Fund/(R)/ . . . . . . . . . . . 14 214
New Perspective Fund/(R)/ . . . . . . . . . . . 07 207
New World Fund/SM/ . . . . . . . . . . . . . . . 36 236
SMALLCAP World Fund/(R)/ . . . . . . . . . . . . 35 235
Washington Mutual Investors Fund/SM/ . . . . . . 01 201
BOND FUNDS
American High-Income Municipal Bond Fund/(R)/ . 40 240
American High-Income Trust/SM/ . . . . . . . . . 21 221
The Bond Fund of America/SM/ . . . . . . . . . . 08 208
Capital World Bond Fund/(R)/ . . . . . . . . . . 31 231
Intermediate Bond Fund of America/SM/ . . . . . 23 223
Limited Term Tax-Exempt Bond Fund of America/SM/ 43 243
The Tax-Exempt Bond Fund of America/(R)/ . . . . 19 219
The Tax-Exempt Fund of California/(R)/* . . . . 20 220
The Tax-Exempt Fund of Maryland/(R)/* . . . . . 24 224
The Tax-Exempt Fund of Virginia/(R)/* . . . . . 25 225
U.S. Government Securities Fund/SM/ . . . . . . 22 222

MONEY MARKET FUNDS
The Cash Management Trust of America/(R)/ . . . 09 209
The Tax-Exempt Money Fund of America/SM/ . . . . 39 N/A
The U.S. Treasury Money Fund of America/SM/ . . 49
___________
*Available only in certain states.
</TABLE>

The American Funds Tax-Exempt Series I - Page 21

<PAGE>

SALES CHARGES

CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A shares
of stock, stock/bond, and bond funds of The American Funds Group are set forth
below. The money market funds of The American Funds Group are offered at net
asset value. (See "Fund Numbers" for a listing of the funds.)

<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS CONCESSION
PERCENTAGE OF THE: AS PERCENTAGE
------------------ OF THE
AMOUNT OF PURCHASE
AT THE OFFERING PRICE NET AMOUNT OFFERING OFFERING
-INVESTED- PRICE PRICE
------------------------------------------------------------- -------- ----- -----
<S> <C> <C> <C>
STOCK AND STOCK/BOND FUNDS
Less than $25,000 . . . . . . . . . . . . . . . . . . . . 6.10% 5.75% 5.00%
$25,000 but less than $50,000 . . . . . . . . . . . . . . 5.26 5.00 4.25
$50,000 but less than $100,000. . 4.71 4.50 3.75
BOND FUNDS
Less than $100,000 . . . . . . . . 3.90 3.75 3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000 . 3.63 3.50 2.75
$250,000 but less than $500,000 . 2.56 2.50 2.00
$500,000 but less than $750,000 . 2.04 2.00 1.60
$750,000 but less than $1 million 1.52 1.50 1.20
$1 million or more . . . . . . . . . . none none (see below)
-----------------------------------------------------------------------------
</TABLE>

CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES - Investments of $1 million or
more are sold with no initial sales charge. HOWEVER, A 1% CONTINGENT DEFERRED
SALES CHARGE (CDSC) MAY BE IMPOSED IF REDEMPTIONS ARE MADE WITHIN ONE YEAR OF
PURCHASE. Employer-sponsored defined contribution-type plans investing $1
million or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from retirement plan assets invested in the
American Funds (see "Individual Retirement Account (IRA) Rollovers" below) may
invest with no sales charge and are not subject to a contingent deferred sales
charge. Investments made by investors in certain qualified fee-based programs,
and retirement plans, endowments or foundations with $50 million or more in
assets may also be made with no sales charge and are

The American Funds Tax-Exempt Series I - Page 22

<PAGE>

not subject to a CDSC. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments made with no initial sales charge.

In addition, Class A shares of the stock, stock/bond and bond funds may be sold
at net asset value to:

(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to, the funds managed by Capital
Research and Management Company, current or retired employees of Washington
Management Corporation, current or retired employees and partners of The Capital
Group Companies, Inc. and its affiliated companies, certain family members and
employees of the above persons, and trusts or plans primarily for such persons;

(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with the
Principal Underwriter (or who clear transactions through such dealers) and plans
for such persons or the dealers;

(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;

(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;

(5) insurance company separate accounts;

(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and

(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation. Shares are offered at net asset value to these persons
and organizations due to anticipated economies in sales effort and expense.

CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. The charge is 1% of the lesser of
the value of the shares redeemed (exclusive of reinvested dividends and capital
gain distributions) or the total cost of such shares. Shares held the longest
are assumed to be redeemed first for purposes of calculating this CDSC. The CDSC
may be waived in certain circumstances. See "CDSC Waivers for Class A Shares"
below.

DEALER COMMISSIONS ON CLASS A SHARES - The following commissions (up to 1%) will
be paid to dealers who initiate and are responsible for purchases of $1 million
or more, for purchases by any employer-sponsored defined contribution plan
investing $1 million or more, or with 100 or more eligible employees, IRA
rollover accounts (as described in "Individual Retirement Account (IRA)
Rollovers" below), and for purchases made at net asset value by certain
retirement plans, endowments and foundations with collective assets of $50
million or more: 1.00% on amounts of $1 million to $4 million, 0.50% on amounts
over $4 million to $10 million, and 0.25% on amounts over $10 million.

The American Funds Tax-Exempt Series I - Page 23

<PAGE>

CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE ON
SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
------------------------------------------------------------------------------
<S> <C>
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>

There is no CDSC on appreciation in share value above the initial purchase price
or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever is
less. In processing redemptions of Class B shares, shares that are not subject
to any CDSC will be redeemed first and then shares that you have owned the
longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO CERTAIN
RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K) PLANS,
EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT SHARING
PLANS.

Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.

CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the event
the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee; however, such an exchange could constitute a taxable event for
you and, absent such an exchange, Class B shares would continue to be subject to
higher expenses for longer than eight years.

SALES CHARGE REDUCTIONS AND WAIVERS

REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.

The American Funds Tax-Exempt Series I - Page 24

<PAGE>

STATEMENT OF INTENTION - You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same
sales charge as if all shares had been purchased at once. This includes
purchases made during the previous 90 days, but does not include
appreciation of your investment or reinvested distributions. The reduced
sales charges and offering prices set forth in the Prospectus apply to
purchases of $25,000 or more made within a 13-month period subject to the
following statement of intention (the "Statement"). The Statement is not a
binding obligation to purchase the indicated amount. When a shareholder
elects to use a Statement in order to qualify for a reduced sales charge,
shares equal to 5% of the dollar amount specified in the Statement will be
held in escrow in the shareholder's account out of the initial purchase (or
subsequent purchases, if necessary) by the Transfer Agent. All dividends
and any capital gain distributions on shares held in escrow will be
credited to the shareholder's account in shares (or paid in cash, if
requested). If the intended investment is not completed within the
specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the
sales charge which would have been paid if the total of such purchases had
been made at a single time. If the difference is not paid by the close of
the period, the appropriate number of shares held in escrow will be
redeemed to pay such difference. If the proceeds from this redemption are
inadequate, the purchaser will be liable to the Principal Underwriter for
the balance still outstanding. The Statement may be revised upward at any
time during the 13-month period, and such a revision will be treated as a
new Statement, except that the 13-month period during which the purchase
must be made will remain unchanged. Existing holdings eligible for rights
of accumulation (see below), including Class A shares held in a fee-based
arrangement, as well as purchases of Class B shares, and any individual
investments in American Legacy variable annuities and variable life
insurance policies (American Legacy, American Legacy II and American Legacy
III variable annuities, American Legacy Life, American Legacy Variable
Life, and American Legacy Estate Builder) may be credited toward satisfying
the Statement. During the Statement period reinvested dividends and capital
gain distributions, investments in money market funds, and investments made
under a right of reinstatement will not be credited toward satisfying the
Statement. The Statement will be considered completed if the shareholder
dies within the 13-month Statement period. Commissions will not be adjusted
or paid on the difference between the Statement amount and the amount
actually invested before the shareholder's death.

When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month
period will be handled as follows: The regular monthly payroll deduction
investment will be multiplied by 13 and then multiplied by 1.5. The current
value of existing American Funds investments (other than money market fund
investments) and any rollovers or transfers reasonably anticipated to be
invested in non-money market American Funds during the 13-month period, and
any individual investments in American Legacy variable annuities and
variable life insurance policies are added to the figure determined above.
The sum is the Statement amount and applicable breakpoint level. On the
first investment and all other investments made pursuant to the Statement,
a sales charge will be assessed according to the sales charge breakpoint
thus determined. There will be no retroactive adjustments in sales charges
on investments made during the 13-month period.

Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.

The American Funds Tax-Exempt Series I - Page 25

<PAGE>

AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and
your children under the age of 21, if all parties are purchasing shares for
their own accounts and/or:

. employee benefit plan(s), such as an IRA, individual-type 403(b) plan,
or single-participant Keogh-type plan;

. business accounts solely controlled by these individuals (for example,
the individuals own the entire business);

. trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may
be aggregated with accounts of the person who is the primary
beneficiary of the trust.

Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:

. for a single trust estate or fiduciary account, including an employee
benefit plan other than those described above;

. made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding
employee benefit plans described above; or

. for a diversified common trust fund or other diversified pooled
account not specifically formed for the purpose of accumulating fund
shares.

Purchases made for nominee or street name accounts (securities held in the
name of an investment dealer or another nominee such as a bank trust
department instead of the customer) may not be aggregated with those made
for other accounts and may not be aggregated with other nominee or street
name accounts unless otherwise qualified as described above.

CONCURRENT PURCHASES - You may combine purchases of Class A and/or B shares
of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
policies. Direct purchases of the money market funds are excluded. Shares
of money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.

RIGHTS OF ACCUMULATION - You may take into account the current value (or if
greater, the amount you invested less any withdrawals) of your existing
Class A and B holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or
charity. When determining your sales charge, you may also take into account
the value of your individual holdings, as of the end of the week prior to
your investment, in various American Legacy variable annuities and variable
life insurance policies. Direct purchases of the money market funds are
excluded.

The American Funds Tax-Exempt Series I - Page 26

<PAGE>

CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:

(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).

(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.

(3) Tax-free returns of excess contributions to IRAs.

(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.

CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:

(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic Withdrawals" below) may withdraw up to 12% of the net asset value of
their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.

The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware that
the amount of that payment not subject to a CDSC may vary over time depending on
fluctuations in net asset value of their account. This privilege may be revised
or terminated at any time.

(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.

(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving joint
tenant(s), at the time they notify the Transfer Agent of the decedent's death
and remove his/her name from the account, may redeem shares from the account
without incurring a CDSC. Redemptions subsequent to the notification to the
Transfer Agent of the death of one of the joint owners will be subject to a
CDSC.

INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS

Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below) through
an IRA rollover plan. All such rollover investments will be subject to the terms
and conditions for Class A and B shares contained in the fund's current
prospectus and statement of additional information. In the case of an IRA
rollover involving plan assets from a plan that offered the American Funds, the
assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule

The American Funds Tax-Exempt Series I - Page 27

<PAGE>

applicable to investments of $1 million or more (see "Dealer Commissions on
Class A Shares" above).

PRICE OF SHARES

Shares are purchased at the offering price next determined after the purchase
order is received and accepted by the fund or the Transfer Agent; this offering
price is effective for orders received prior to the time of determination of the
net asset value and, in the case of orders placed with dealers, accepted by the
Principal Underwriter prior to its close of business. In the case of orders sent
directly to the fund or the Transfer Agent, an investment dealer MUST be
indicated. The dealer is responsible for promptly transmitting purchase orders
to the Principal Underwriter.

Orders received by the investment dealer, the Transfer Agent, or the fund after
the time of the determination of the net asset value will be entered at the next
calculated offering price. Prices which appear in the newspaper do not always
indicate prices at which you will be purchasing and redeeming shares of the
fund, since such prices generally reflect the previous day's closing price
whereas purchases and redemptions are made at the next calculated price. The
price you pay for shares, the offering price, is based on the net asset value
per share which is calculated once daily as of approximately 4:00 p.m. New York
time, which is the normal close of trading on the New York Stock Exchange each
day the Exchange is open. If, for example, the Exchange closes at 1:00 p.m., the
fund's share price would still be determined as of 4:00 p.m. New York time. The
New York Stock Exchange is currently closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas
Day.

All portfolio securities of funds advised by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined as follows:

1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or the
over-the-counter market. Fixed-income 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.

Short-term securities maturing within 60 days are valued at amortized cost which
approximates market value.

Assets or liabilities initially expressed in terms of non-U.S. currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.

Securities and assets for which representative market quotations are not readily
available are valued at fair value as determined in good faith under policies
approved by the fund's Board. The fair value of all other assets is added to the
value of securities to arrive at the total assets;

The American Funds Tax-Exempt Series I - Page 28

<PAGE>

2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and

3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.

Any purchase order may be rejected by the Principal Underwriter or by the fund.
The Principal Underwriter will not knowingly sell shares of the fund directly or
indirectly to any person or entity, where, after the sale, such person or entity
would own beneficially directly or indirectly more than 4.5% of the outstanding
shares of the fund without the consent of a majority of the fund's Board of
Trustees.

SELLING SHARES

Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:

THROUGH YOUR DEALER (certain charges may apply)

-
Shares held for you in your dealer's street name must be sold through the
dealer.

WRITING TO AMERICAN FUNDS SERVICE COMPANY

- Requests must be signed by the registered shareholder(s).

- A signature guarantee is required if the redemption is:

- Over $50,000;

- Made payable to someone other than the registered
shareholder(s); or

- Sent to an address other than the address of record, or
an address of record which has been changed within the
last 10 days.

Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution. The Transfer Agent reserves the
right to require a signature guarantee on all redemptions.

- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.

- You must include any shares you wish to sell that are in
certificate form.

TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE/(R)/ OR AMERICAN FUNDSLINE ONLINE/(R)/

- Redemptions by telephone or fax (including American FundsLine/(R)/ and
American FundsLine OnLine/(R)/) are limited to $50,000 per shareholder each
day.

The American Funds Tax-Exempt Series I - Page 29

<PAGE>

- Checks must be made payable to the registered shareholder(s).

- Checks must be mailed to an address of record that has been used
with the account for at least 10 days.

MONEY MARKET FUNDS

- You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.

- You may establish check writing privileges (use the money market funds
application).

- If you request check writing privileges, you will be provided with
checks that you may use to draw against your account. These checks may
be made payable to anyone you designate and must be signed by the
authorized number or registered shareholders exactly as indicated on
your checking account signature card.

- Check writing is not available for Class B shares of The Cash
Management Trust.

If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.

Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.

You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by the Transfer Agent.

SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES

AUTOMATIC INVESTMENT PLAN - An automatic investment plan enables you to make
monthly or quarterly investments in The American Funds through automatic debits
from your bank account. To set up a plan you must fill out an account
application and specify the amount you would like to invest ($50 minimum) and
the date on which you would like your investments to occur. The plan will begin
within 30 days after your account application is received. Your bank account
will be debited on the day or a few days before your investment is made,
depending on the bank's

The American Funds Tax-Exempt Series I - Page 30

<PAGE>

capabilities. The Transfer Agent will then invest your money into the fund you
specified on or around the date you specified. For example, if the date you
specified falls on a weekend or holiday, your money will be invested on the next
business day. If your bank account cannot be debited due to insufficient funds,
a stop-payment or the closing of the account, the plan may be terminated and the
related investment reversed. You may change the amount of the investment or
discontinue the plan at any time by writing to the Transfer Agent.

AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are reinvested
in additional shares of the same class at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, the
Transfer Agent or your investment dealer.

If you have elected to receive dividends and/or capital gain distributions in
cash, and the postal or other delivery service is unable to deliver checks to
your address of record, or you do not respond to mailings from American Funds
Service Company with regard to uncashed distribution checks, your distribution
option will automatically be converted to having all dividends and other
distributions reinvested in additional shares.

CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS - You may cross-reinvest
dividends and capital gains ("distributions") of the same share class into any
other fund in The American Funds Group at net asset value, subject to the
following conditions:

(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the fund
receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),

(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,

(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distributions must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.

EXCHANGE PRIVILEGE - You may only exchange shares into other funds in The
American Funds Group within the same class. However, exchanges from Class A
shares of The Cash Management Trust of America may be made to Class B shares of
any other American Fund for dollar cost averaging purposes. Exchange purchases
are subject to the minimum investment requirements of the fund purchased and no
sales charge generally applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on the fund being
purchased, unless the money market fund shares were acquired by an exchange from
a fund having a sales charge, or by reinvestment or cross-reinvestment of
dividends or capital gain distributions.

You may exchange shares by writing to the Transfer Agent (see "Selling Shares"),
by contacting your investment dealer, by using American FundsLine and American
FundsLine OnLine (see "American FundsLine and American FundsLine OnLine" below),
or by telephoning 800/421-0180 toll-free, faxing (see "American Funds Service
Company Service Areas" -- "Principal Underwriter and Transfer Agent" in the
prospectus for the appropriate fax numbers) or telegraphing the Transfer Agent.
(See "Telephone and Computer Purchases, Redemptions and Exchanges"

The American Funds Tax-Exempt Series I - Page 31

<PAGE>

below.) Shares held in corporate-type retirement plans for which Capital Bank
and Trust Company serves as trustee may not be exchanged by telephone, computer,
fax or telegraph. Exchange redemptions and purchases are processed
simultaneously at the share prices next determined after the exchange order is
received. (See "Purchase of Shares"--"Price of Shares.") THESE TRANSACTIONS HAVE
THE SAME TAX CONSEQUENCES AS ORDINARY SALES AND PURCHASES.

AUTOMATIC EXCHANGES - You may automatically exchange shares of the same class in
amounts of $50 or more among any of the funds in The American Funds Group on any
day (or preceding business day if the day falls on a non-business day) of each
month you designate.

AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.

ACCOUNT STATEMENTS - Your account is opened in accordance with your registration
instructions. Transactions in the account, such as additional investments will
be reflected on regular confirmation statements from the Transfer Agent.
Dividend and capital gain reinvestments and purchases through automatic
investment plans and certain retirement plans will be confirmed at least
quarterly.

AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE - You may check your share
balance, the price of your shares, or your most recent account transaction,
redeem shares (up to $50,000 per shareholder each day), or exchange shares
around the clock with American FundsLine and American FundsLine OnLine. To use
these services, call 800/325-3590 from a TouchTone(TM) telephone or access the
American Funds Web site on the Internet at www.americanfunds.com. Redemptions
and exchanges through American FundsLine and American FundsLine OnLine are
subject to the conditions noted above and in "Telephone and Computer Purchases,
Redemptions and Exchanges" below. You will need your fund number (see the list
of funds in The American Funds Group under "Purchase of Shares - Purchase
Minimums" and "Purchase of Shares - Fund Numbers"), personal identification
number (generally the last four digits of your Social Security number or other
tax identification number associated with your account) and account number.

TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine) or computer (including American
FundsLine OnLine), fax or telegraph purchase, redemption and/or exchange
options, you agree to hold the fund, the Transfer Agent, any of its affiliates
or mutual funds managed by such affiliates, the business manager and each of
their respective directors, trustees, officers, employees and agents harmless
from any losses, expenses, costs or liability (including attorney fees) which
may be incurred in connection with the exercise of these privileges. Generally,
all shareholders are automatically eligible to use these options. However, you
may elect to opt out of these options by writing the Transfer Agent (you may
also reinstate them at any time by writing the Transfer Agent). If the Transfer
Agent does not employ reasonable procedures to confirm that the instructions
received from any person with appropriate account information are genuine, it
and/or the fund may be liable for losses due to unauthorized or fraudulent
instructions. In the event that

The American Funds Tax-Exempt Series I - Page 32

<PAGE>

shareholders are unable to reach the fund by telephone because of technical
difficulties, market conditions, or a natural disaster, redemption and exchange
requests may be made in writing only.

REDEMPTION OF SHARES - The fund's Declaration of Trust permits the fund to
direct the Transfer Agent to redeem the shares of any shareholder for their then
current net asset value per share if at such time the shareholder owns of record
shares having an aggregate net asset value of less than the minimum initial
investment amount required of new shareholders as set forth in the fund's
current registration statement under the 1940 Act, and subject to such further
terms and conditions as the Board of Trustees of the fund may from time to time
adopt.

SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.

EXECUTION OF PORTFOLIO TRANSACTIONS

The Investment Adviser places orders for the fund's portfolio securities
transactions. The Investment Adviser strives to obtain the best available prices
in its portfolio transactions taking into account the costs and quality of
executions. When, in the opinion of the Investment Adviser, two or more brokers
(either directly or through their correspondent clearing agents) are in a
position to obtain the best price and execution, preference may be given to
brokers who have sold shares of the fund or who have provided investment
research, statistical, or other related services to the Investment Adviser. The
fund do not consider that it has an obligation to obtain the lowest available
commission rate to the exclusion of price, service and qualitative
considerations.

There are occasions on which portfolio transactions for the fund may be executed
as part of concurrent authorizations to purchase or sell the same security for
other funds served by the Investment Adviser, or for trusts or other accounts
served by affiliated companies of the Investment Adviser. Although such
concurrent authorizations potentially could be either advantageous or
disadvantageous to the fund, they are effected only when the Investment Adviser
believes that to do so is in the interest of the fund. When such concurrent
authorizations occur, the objective is to allocate the executions in an
equitable manner. The fund will not pay a mark-up for research in principal
transactions.

Brokerage commissions paid on portfolio transactions for the fiscal period ended
July 31, 2000 amounted to $51,000 for the Maryland Fund and $34,000 for the
Virginia Fund.

Johnston, Lemon & Co. Incorporated, which together with the Business Manager is
wholly owned by the Johnston-Lemon Group, Incorporated, may serve as broker for
the fund in effecting certain portfolio transactions, and may retain
commissions, in accordance with certain regulations of the Securities and
Exchange Commission.

GENERAL INFORMATION

CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, Three Metrotech Center, Brooklyn, NY
11245, as Custodian.

'TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the records of each shareholder's account,
processes purchases

The American Funds Tax-Exempt Series I - Page 33

<PAGE>

and redemptions of the fund's shares, acts as dividend and capital gain
distribution disbursing agent, and performs other related shareholder service
functions. American Funds Service Company was paid a fee of $56,000 and $58,000,
for the Maryland Fund and the Virginia Fund, respectively, for the 2000 fiscal
year.

INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 350 South Grand Avenue,
Los Angeles, CA 90071, serves as the fund's independent accountants providing
audit services, preparation of tax returns and review of certain documents to be
filed with the Securities and Exchange Commission. The financial statements
included in this Statement of Additional Information from the Annual Report have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing. The selection of the fund's independent accountants is
reviewed and determined annually by the Board of Trustees.

PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The fund's fiscal year ends on July
31. Shareholders are provided updated prospectuses annually. In addition,
shareholders are provided at least semiannually with reports showing the
investment portfolio, financial statements and other information. The fund's
annual financial statements are audited by the fund's independent accountants,
PricewaterhouseCoopers LLP. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
prospectuses and shareholder reports. To receive additional copies of a
prospectus or report, shareholders should contact the Transfer Agent.

PERSONAL INVESTING POLICY - The trust, Capital Research and Management Company
and its affiliated companies, including the fund's principal underwriter, have
adopted codes of ethics which allow for personal investments, including
securities in which the fund may invest from time to time. This policy includes:
a ban on acquisitions of securities pursuant to an initial public offering;
restrictions on acquisitions of private placement securities; pre-clearance and
reporting requirements; review of duplicate confirmation statements; annual
recertification of compliance with codes of ethics; blackout periods on personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.

OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following information
is not included in the Annual Report:

DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- JULY 31, 2000

<TABLE>
<CAPTION>
THE TAX-EXEMPT THE TAX-EXEMPT
FUND OF MARYLAND FUND OF VIRGINIA
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value and redemption price per share
(Net assets divided by shares outstanding) . . . . . . . . . . $15.12 15.57
Maximum offering price per share
(100/96.25 of net asset value per share,
which takes into account the fund's current maximum
sales charge). . . . . . . . . . . . . . . . . . . . . . . . . $15.71 16.18
</TABLE>

The American Funds Tax-Exempt Series I - Page 34

<PAGE>

CLASS A SHARE INVESTMENT RESULTS AND RELATED STATISTICS

The Maryland Fund yield was 4.55% and the Virginia Fund yield was 4.39% based on
a 30-day (or one month) period ended July 31, 2000, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:

YIELD = 2[( a-b/cd + 1)/6/ -1]

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = the maximum offering price per share on the last day
of the period.

The fund may also calculate a tax equivalent yield based on a 30-day (or one
month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of the
yield (as computed by the formula stated above) which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any, of the
yield that is not tax-exempt. The Maryland Fund's tax-equivalent yield based on
the maximum federal/state/county tax rate of 44.1% for the 30-day (or one month)
period ended July 31, 2000 was 8.14%. For the Virginia Fund investors with the
maximum combined effective federal/state tax rate of 43.1%, the tax-equivalent
yield was 7.72% for the period ended July 31, 2000.

The Maryland Fund one year total return and average annual total return for the
five- and ten-year periods ended on July 31, 2000 was -1.83%, +4.29% and +5.77%,
respectively. The Virginia Fund one year total return and average annual total
return for the five- and ten-year periods ended on July 31, 2000 was -0.65%,
+4.19% and +5.80%, respectively.

The average total return ("T") is computed by equating the value at the end of
the period ("ERV") with a hypothetical initial investment of $1,000 ("P") over a
period of years ("n") according to the following formula as required by the
Securities and Exchange Commission: P(1+T)/n/ = ERV.

In calculating average annual total return at the maximum offering price, the
fund assumes: (1) deduction of the maximum sales load of 3.75%
from the $1,000 initial investment; (2) reinvestment of
dividends and distributions at net asset value on the reinvestment date
determined by the Board; and (3) a complete redemption at the end of any period
illustrated. In addition, the fund will provide lifetime average total return
figures. From time to time, the fund may calculate investment results for Class
B shares.

The fund may also, at times, calculate total return based on net asset value per
share (rather than the offering price), in which case the figure would not
reflect the effect of any sales charges which would have been paid if shares
were purchased during the period reflected in the computation. Consequently,
total return calculated in this manner will be higher. These total returns may
be calculated over periods in addition to those described above. Total return
for the

The American Funds Tax-Exempt Series I - Page 35

<PAGE>

unmanaged indices will be calculated assuming reinvestment of dividends and
interest, but will not reflect any deductions for advisory fees, brokerage costs
or administrative expenses.

The fund may include information on its investment results and/or comparisons of
its investment results to various unmanaged indices (such as the Dow Jones
Average of 30 Industrial Stocks and the Standard and Poor's 500 Composite Stock
Index) or results of other mutual funds or investment or savings vehicles in
advertisements or in reports furnished to present or prospective shareholders.
The fund may also, from time to time, combine its results with those of other
funds in The American Funds Group for purposes of illustrating investment
strategies involving multiple funds.

The fund may refer to results and surveys compiled by organizations such as CDA/
Wiesenberger, Ibbotson Associates, Lipper Analytical Services, Morningstar,
Inc., and by the U.S. Department of Commerce. Additionally, the fund may refer
to results published in various newspapers and periodicals, including Barron's,
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance Magazine,
Money, U.S. News and World Report and The Wall Street Journal.

The fund may illustrate the benefits of tax-deferral by comparing taxable
investments to investments made through tax-deferred retirement plans.

The fund may compare its investment results with the Consumer Price Index, which
is a measure of the average change in prices over time in a fixed market basket
of goods and services (e.g. food, clothing, and fuels, transportation, and other
goods and services that people buy for day-to-day living).

The American Funds Tax-Exempt Series I - Page 36

<PAGE>

APPENDIX
Description of Bond Ratings

BOND RATINGS - The ratings of Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) represent their opinions as to the quality
of the municipal bonds which they undertake to rate. It should be emphasized,
however, that ratings are general and are not absolute standards of quality.
Consequently, municipal bonds with the same maturity, coupon and rating may
have different yields, while municipal bonds of the same maturity and coupon
with different ratings may have the same yield.

Moody's rates the long-term debt securities issued by various entities from
-------
"Aaa" to "C." Moody's applies the numerical modifiers 1, 2, and 3 in each
generic rating classification from Aa through B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its generic
rating category. Ratings are described as follows:

"Bonds which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as 'gilt edge.'
Interest payments are protected by a large or by an exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues."

"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."

"Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."

"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."

"Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class."

"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."

The American Funds Tax-Exempt Series I - Page 37

<PAGE>

"Bonds which are rated Caa are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest."

"Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings."

"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."

S & P rates the long-term securities debt of various entities in categories
-----
ranging from "AAA" to "D" according to quality. The ratings from "AA" to "CCC"
may be modified by the addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories. Ratings are described as follows:

"Debt rated 'AAA' has the highest rating assigned by S & P. Capacity to pay
interest and repay principal is extremely strong."

"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."

"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."

"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories."

"Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or impled 'BBB-' rating.

"Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating."

"The rating 'CC' is typically applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC' rating."

"The rating 'C' is typically applied to debt subordinated to senior debt which
is assigned an actual or implied 'CCC-' debt rating. The 'C' rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued."

"The rating 'C1' is reserved for income bonds on which no interest is being
paid."

The American Funds Tax-Exempt Series I - Page 38

<PAGE>

"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon
the filing of a bankruptcy petition if debt service payments are jeopardized."

Note Ratings

STANDARD & POOR'S CORPORATION: "SP-1" and "SP-2" are the two highest note rating
categories, and are described as follows:

"SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
(+) designation."

"SP-2 Satisfactory capacity to pay principal and interest."

MOODY'S INVESTORS SERVICE, INC.: "MIG-1" and "MIG-2" are the two highest note
rating categories, and are described as follows:

"MIG 1: This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing."

"MIG 2: This designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
Description of Commercial Paper Ratings

MOODY'S employs the designations "Prime-1," "Prime-2" and "Prime-3" to indicate
-------
commercial paper having the highest capacity for timely repayment. Issuers rated
Prime-1 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protection; broad
margins in earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.

Issues rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

S&P ratings of commercial paper are graded into four categories ranging from "A"
---
for the highest quality obligations to "D" for the lowest.

A - Issues assigned its highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with numbers
1, 2, and 3 to indicate the relative degree of safety.

The American Funds Tax-Exempt Series I - Page 39

<PAGE>

A-1 - This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.

A-2 - Capacity for timely payments on issues with this designation is strong;
however, the relative degree of safety is not as high as for issues designated
"A-1."

The American Funds Tax-Exempt Series I - Page 40

<TABLE>
The Tax-Exempt Fund of Maryland
Investment Portfolio, July 31, 2000
<S> <C> <C>
Principal
Amount Market
(000) Value
---------------------------
Tax-Exempt Securities Maturing in More than One Year - 91.93%

College & University Revenue - .88%

Frederick County, College Revenue Bonds (Hood College Project),
Series 1990:
7.05% 2004 $ 410 $ 418,889
7.05% 2005 455 464864
-------------
883,753
Escrowed to Maturity - 4.06%

Maryland Health and Higher Educational Facilities Authority:
Good Samaritan Hospital Issue, Revenue Bonds,
Series 1993, 5.70% 2009 1000 1048720

Howard County, General Hospital Issue, Series 1993:
5.50% 2013 2000 2040500
5.50% 2021 1000 1000200
-------------
4089420
General Obligations (Local) - 1.11%

Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 100 103607

Montgomery County, Consolidated Public Improvement Bonds,
Series 2000 A, 5.30% 2013 1000 1016670
-------------
1,120,277
-------------
General Obligations (State) - 4.05%

Maryland General Obligation Bonds, State and Local
Facilities, Second Series Loan of 1999:
5.00% 2011 500 502910
5.25% 2012 2000 2036440

Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds, Series 1998, 5.00% 2007 1500 1537380
-------------
4,076,730
-------------
Hospital & Health Facilities Revenue - 5.43%

Maryland Health and Higher Educational Facilities Authority:
Suburban Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.125% 2021 1500 1274205

University of Maryland Medical System Issue, Revenue Bonds,
Series 2000, 6.75% 2030 2000 2043220

Prince George's County (Dimensions Health Corporation Issue):
Hospital Revenue Bonds, Series 1992, 7.20% 2006 215 220143

Project and Refunding Revenue Bonds, Series 1994, 5.375% 2014 2985 1924728
-------------
5,462,296
-------------
Housing Finance Authority Revenue - 11.76%

Maryland Community Development Administration, Department of
Housing and Community Development:
Residential Revenue Bonds, 1998 Series B, AMT:
5.00% 2008 1,610 1,598,328
5.00% 2009 1,680 1,658,227

Single-Family Program Bonds, First Series 1994:
5.80% 2009 2000 2019980
5.70% 2017 2,085 2,091,922

Montgomery County, Housing Opportunities Commission,
Single Family Mortgage Revenue Bonds Series:
1998 B, 4.80% 2009 600 582,606
1997 A, 5.50% 2009 650 671,235
1998 B, 4.90% 2010 500 490,440

Prince George's County Housing Authority, GNMA/FNMA
Collateralized Single Family Mortgage Bonds, Series A, AMT:
1998, 4.65% 2019 1985 1946948
1994, 6.60% 2025 745 761144

Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio,
Series 1988 B, 7.65% 2022 25 25547
-------------
11,846,377
-------------
Industrial Development Revenue - 1.51%

Mayor and City Council of Baltimore, Port Facilities Revenue
Bonds (Consolidation Coal Sales Company Project), Series
1984 B, 6.50% 2011 500 527275

Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), Series 1996 A, AMT, 6.25% 2026 1000 991040
-------------
1,518,315
-------------
Insured - 16.18%

City of Baltimore, Project and Refuding Revenue Bonds (Water Projects),
Series 1994 A, FGIC Insured:
6.00% 2015 1500 1617705
5.00% 2024 1220 1133978

Calvert County, Economic Development Refunding Revenue Bonds
(Asbury-Solomons Island Facility), Series 1997, MBIA Insured:
5.00% 2009 1000 1014710
5.00% 2017 1000 948940
5.00% 2027 1000 910670

Carroll County, Revenue Bonds, EMA Obligated Group Issue
(Fairhaven and Copper Ridge), Series 1999 A, 5.50% 2019 1265 1241256

City of Frederick, General Improvement Bonds, 1992 Refunding
Series, FGIC Insured, 6.125% 2008 890 932916

Maryland Health and Higher Educational Facilities Authority:
Medlantic/Helix Health Issue, Revenue Bonds
AMBAC Insured, Series 1998 A, 5.25% 2038 1,500 1,396,590

Mercy Medical Center Issue Project and Refunding Revenue
Bonds, Series 1996, FSA Insured, 6.50% 2013 2000 2235240

Prince George's County, Solid Waste Management System
Revenue Bonds, Series 1993, FSA Insured, 6.50% 2007 2,000 2,121,100

Commonwealth of Puerto Rico, MBIA Insured,
Electric & Power Authority, Series 1995 Y, 7.00% 2007 1000 1,144,900

Washington Metroplitan Area Transit Authority, Gross Revenue Transit
Refunding Bonds, FGIC Insured, Series 1993, 6.00% 2008 1480 1595262
-------------
16,293,267
-------------
Life Care Facilities Revenue - 7.46%

Maryland Health and Higher Educational Facilities Authority,
Refunding and Project Revenue Bonds, Roland Park Place Issue,
Series 1999:
5.45% 2012 1000 952780
5.50% 2014 1525 1418280

Maryland Health and Higher Educational Facilities Authority,
First Mortgage Revenue Bonds, PUMH of Maryland, Inc. Issue
(Heron Point of Chestertown), Series 1998 A:
5.75%, 2019 1500 1308615
5.75%, 2026 1640 1392770

Prince George's County, Refunding Revenue Bonds, Collington
Episcopal Life Care Community, Inc., Series 1994 A, 6.00% 2013 2500 2434950
-------------
7,507,395
-------------
Multi-Family Housing - 5.22%

Montgomery County, Maryland Housing Opportunities Commission,
Multi-Family Revenue Bonds, Series:
1995 A, 6.10% 2015 2,025 2,063,698
1994 A-2, 7.50% 2024 2000 2063180

Prince George's County, Mortgage Revenue Bonds
(GNMA Collateralized-Langley Gardens Apartments Project),
Series 1997 A, 5.60% 2017 1130 1131853
-------------
5258731
-------------
Pre-Refunded (1) - 10.70%

Calvert County, Economic Development Revenue Bonds
(Asbury-Solomons Island Facility), Series 1995, 8.625% 2024 (2005) 2300 2680052

Frederick County, Public Facilities Bonds,
Series 1991 B, 6.30% 2011 (2002) 1370 1442103

Harford County, Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 (2002) 1400 1463700

Maryland Health and Higher Educational Facilities Authority:
(Charity Obligated Group-Daughters of Charity National
Health System), Hospital Revenue Bonds,
Series 1997 D, 4.60% 2026 (2003)2 1695 1697576

Memorial Hospital of Cumberland Issue, Revenue Refunding
Bonds, Series 1992, 6.50% 2010 (2004) 750 799815

Suburban Hospital Issue Revenue Bonds, Series 1992,
6.50% 2017 (2002) 500 528130

Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1106208

Commonwealth of Puerto Rico, Public Improvement Bonds of 1992,
MBIA Insured, 6.50% 2009 (2002) 1,000 1,057,160

-------------
10,774,744
-------------
Resource Recovery - 7.33%

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 3500 3653931

Montgomery County, Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds, Series A, AMT:
6.00% 2006 1115 1154716
6.00% 2007 1000 1034780
Series 1993, 6.30% 2016 1500 1534620
-------------
7378047
-------------
Special Obligations - 6.54%

Montgomery County:
Revenue Authority, Golf Course System Revenue Bonds,
Series 1996 A, 6.00% 2014 2355 2244692

Special Obligation Bonds (Kingsview Village Center
Development District), Series 1999, 6.90% 2021 2410 2413471

Virgin Islands Public Finance Authority, Revenue and Refunding Bonds
(Virgin Islands Matching Fund Loan Notes), Series 1998 A:
5.20% 2009 1000 967020
5.20% 2010 1000 959060
-------------
6584243
-------------
Tax Allocation - 1.99%

Anne Arundel County, Special Obligation Bonds (Arundel Mills
Project), Series 1999, 7.10% 2029 2000 2007360
-------------
Tax Assessment Bonds - 4.55%

Anne Arundel County, Special Obligation Bonds (National Business
Park Project), Series 2000, 7.375% 2028 1500 1517640

Frederick County, Special Obligation Bonds (Urbana Community
Development Authority), Series 1998, 6.625% 2025 1000 961110

Prince George's County, Special Obligation Bonds (Woodview Village
Infrastructure Improvements), Series 1997 A, 8.00% 2026 1940 2106704
-------------
4585454
-------------
Turnpikes & Toll Roads Revenue - 1.05%

Maryland Transportation Authority Facilities Project,
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1000 1058580
-------------
Water & Sewer Revenue - 2.11%

Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series 1991 B, 0% 2005 700 546490

Washington Suburban Sanitary District, Refunding Bonds, Series
1997, 5.75% 2017 1510 1578916
-------------
2125406
-------------
TOTAL TAX-EXEMPT SECURITIES MATURING IN MORE THAN ONE YEAR (cost: $92,374,000) 92570395
-------------
Tax-Exempt Securities Maturing in One Year or Less - 6.65%

Hospital Facilities - 1.39%

Maryland Health and Higher Educational Facilities Authority, Pooled
Loan Program Revenue Bonds, Series 1994 D, 3.95% 2024 (3) 1400 1400000
-------------
Industrial Development Revenue - 3.18%

Maryland Energy Financing Administration, Limited Obligation Solid
Waste Disposal Facility Revenue Bonds (Cimenteries CBR S.A. Project),
Series 2000, 3.40% 2035 (3) 3200 3200000
-------------
Pre-Refunded (1)- 2.08%

Maryland Health and Higher Educational Facilities Authority,
University of Maryland Medical System Issue, Revenue Bonds,
Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1000 1019390

University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds, Series 1992 A, 6.30% 2009 (2001) 1050 1081133
-------------
2100523
-------------
TOTAL TAX-EXEMPT SECURITES MATURING IN ONE YEAR OR LESS (cost: $6,623,000) 6700523
-------------

TOTAL TAX-EXEMPT SECURITIES (cost: $98,997,000) 99,270,918
Excess of cash and receivables over payables 1,428,349
-------------
NET ASSETS $100,699,267
==============
/1/ Parenthetical year represents date of pre-refunding.
/2/ 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.

/1/ Coupon rate changes periodically.

See Notes to Financial Statements

</TABLE>

<TABLE>
The Tax-Exempt Fund of Maryland
Financial Statements
<S> <C> <C>
Statement of Assets and Liabilities
July 31, 2000
(dollars in thousands)
----------------------------------------------------------------------- ------------- -------------
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $92,374) $92,570
Maturing in one year or less
(cost: $6,623) 6,701
Cash 72
Receivables for --
Sales of investments $ 200
Sales of Fund's shares 464
Interest 941 1,605
----------- -----------
100,948
-----------
Liabilities:
Payables for --
Purchases of investments 0
Repurchases of Fund's shares 4
Dividends 140
Management services 37
Other expenses 68 249
----------- -----------
Net Assets at July 31, 2000 $100,699
===========
Shares of beneficial interest issued and outstanding (unlimited shares
authorized)
Class A shares:
Net assets $99,518
Shares outstanding 6,579,771
Net assest value per share $15.12

Class B shares:
Net assets $1,181
Shares outstanding 78,115
Net assest value per share $15.12

See Notes to Financial Statements

The Tax-Exempt Fund of Maryland
Statement of Operations
for the year ended July 31, 2000
(dollars in thousands)
----------------------------------------------------------------------- ------------- -------------

Investment Income:
Income:
Interest on tax-exempt securities $5,787

Expenses:
Investment adviser fee $ 243
Business management fee 196
Distribution expenses- Class A 251
Distribution expenses- Class B 1
Transfer agent fee- Class A 56
Transfer agent fee- Class B -
Reports to shareholders 21
Registration statement and prospectus 15
Postage, stationery and supplies 7
Trustees' fees 7
Auditing and legal fees 27
Custodian fee 5
Taxes other than federal income tax 0
Other expenses 1 830
----------- -----------
Net investment income 4,957
-----------
Realized Loss and Unrealized Appreciation
on Investments:
Net realized loss (243)
Net unrealized appreciation:
Beginning of year 3,121
End of year 274
-----------
Net change in unrealized appreciation (2,847)
-----------
Net realized loss and change in unrealized
appreciation (3,090)
-----------
Net Increase in Net Assets
Resulting from Operations $1,867
==========

See Notes to Financial Statements

The Tax-Exempt Fund of Maryland
Statement of Changes in Net Assets Year ended July 31
(dollars in thousands) 2000 1999

----------------------------------------------------------------------- --------------- ---------------
1998 1998
-------------- --------------

Operations:
Net investment income $ 4,957 $ 4,981
Net realized (loss) gain on investments (243) 11
Net change in unrealized appreciation on investments (2,847) (2,767)
----------- -----------
Net increase in net assets resulting from operations 1,867 2,225
----------- -----------
Dividends and Distributions Paid to Shareholders:
Dividends from net investment income:
Class A (4,952) (4,983)
Class B (5) -
Distributions from net realized gain on investments:
Class A - (623)
Class B - -
----------- -----------
Total dividends and distributions (4,957) (5,606)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold 18,920 22,658
Proceeds from shares issued in reinvestment of net investment income
dividends and distributions of net realized gain on investments 3,027 3,694
Cost of shares repurchased (28,542) (14,037)
----------- -----------
Net (decrease) increase in net assets resulting from capital
share transactions (6,595) 12,315
----------- -----------
Total (Decrease) Increase in Net Assets (9,685) 8,934

Net Assets:
Beginning of year 110,384 101,450
----------- -----------
End of year $100,699 $110,384
=========== ===========

See Notes to Financial Statements

</TABLE>

<TABLE>
TAX-EXEMPT FUND OF MARYLAND
PER-SHARE DATA AND RATIOS
<S> <C> <C> <C> <C> <C> <C> <C>
Net
Net asset gains(losses) Dividends
value, Net on securities Total from (from net Distributions
Year Ended beginning investment(both realized investment investment(from capital Total
July 31 of year income and unrealized)operations income) gains) Distributions
Class A:
2000 $15.57 $.74 (2) ($.45)(2) $.29 ($.74) - ($.74)
1999 16.04 .74 (.37) .37 (.74) (.10) (.84)
1998 16.02 .78 .14 .92 (.78) (.12) (.90)
1997 15.39 .79 .63 1.42 (.79) - (.79)
1996 15.29 .80 .10 .90 (.80) - (.80)
Class B:
2000 (4) 15.01 .16 (2) .18 (2) .34 (.23) - (.23)

</TABLE>

<TABLE>
TAX-EXEMPT FUND OF MARYLAND
PER-SHARE DATA AND RATIOS (CONT)
<S> <C> <C> <C> <C> <C> <C>

Ratio of Ratio of
Net asset Net assets, expenses net income Portfolio
Year Ended value, end Total end of year to average to average turnover
July 31 of year return (1) (in millions) net assets net assets rate
Class A:
2000 $15.12 2.02% $100 .82% 4.92% 11.98%(3)
1999 15.57 2.28 110 .78 4.63 11.38
1998 16.04 5.89 101 .79 4.84 10.30
1997 16.02 9.52 87 .82 5.08 15.27
1996 15.39 5.95 80 .81 5.14 16.01
Class B:
2000 (4) 15.12 2.15 1 1.53 (5) 4.21 (5 11.98 (3)

(1) Total returns exclude all sales charges, including contingent deferred sales charges.
(2) Based on average shares outstanding.
(3) Represents portfolio turnover rate (equivalent for all share classes) for the year ended July 31, 2000.
(4) Per-share data from March 15, 2000 when B shares were first offered for sale.
(5) Annualized.

</TABLE>

<TABLE>
The Tax-Exempt Fund of Virginia
Investment Portfolio, July 31, 2000
<S> <C> <C>
Principal
Amount Market
(000) Value
- -
Tax-Exempt Securities Maturing in More than One Year - 91.34%

Airports - 1.36%

Metropolitan Washington Airports Authority, Airport
System Revenue and Refunding Bonds, Series 1998 B AMT, 5.50% 2007 $ 1,500 $1,556,940
-
College & University Revenue - 1.72%

Virginia College Building Authority, Educational Facilities Revenue
Bonds (21st Century College Program), Series 1998, 5.00% 2017 1,000 938,410

Virginia Polytechnic Institute and State University, University Services
System and General Revenue Pledge Bonds, Series 1996 C, 5.35% 2009 1,000 1,031,210
-
1,969,620
-
Escrowed to Maturity - 2.44%

Industrial Development Authority of the City of Norfolk, Hospital
Revenue Bonds (Daughters of Charity National Health System-DePaul
Medical Center), Series 1992 A:
6.20% 2002 1700 1723239
6.50% 2007 1000 1060530
-
2783769
-
General Obligations (Local) - 9.29%

Arlington County:
Public Improvement Bonds, Series 1996, 6.00% 2011 1000 1091980
Refunding Bonds, Series 1993, 6.00% 2012 1000 1090770

Chesapeake Refunding Bonds, Series 1993, 5.40% 2008 1000 1046690

Hampton Public Improvement Refunding Bonds, Series:
2000, 5.25% 2011 1000 1025570
1998, 5.00% 2013 2240 2212359
1998, 5.00% 2014 2960 2904529

Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1195 1236251
-
10608149
-
Hospital & Health Facilities Revenue - 11.18%

Industrial Development Authority of the Town of Abingdon,
Hospital Facility Revenue and Refunding Bonds (Johnston Memorial
Hospital), Series 1998:
5.00% 2008 1015 991949
5.00% 2009 1020 988920

Fairfax County:
Industrial Development Authority, Health Care Revenue Refunding
Bonds (INOVA Health System Project), Series 1998 A, 5.00% 2011 1500 1463325

Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 750 754185
5.25% 2019 2500 2408200
5.00% 2023 500 457500

Industrial Development Authority of Halifax County,
Hospital Refunding Revenue Bonds (Halifax Regional Hospital, Inc.),
Series 1998:
4.65% 2007 600 555252
4.80% 2009 1000 919550
5.00% 2011 1000 919460

Industrial Development Authority of Henry County, Hospital Revenue
Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.00% 2017 1000 1014110

Peninsula Ports Authority, Health System Revenue and Refunding Bonds
(Riverside Health System Project), Series:
1992 A, 5.00% 2008 1200 1198008
1998, 5.00% 2009 1100 1093312
-
12763771
-
Housing Finance Authority Revenue - 3.59%

Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio,
Series 1988 B, 7.65% 2022 35 35766

Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, Series:
1994 H, Sub-Series H-1, 6.10% 2003 500 507285
1998 E, Sub-Series E-1, 4.50% 2005 1190 1172650
2000 A AMT, Sub-Series A-3, 5.55% 2006 730 744549
2000 A AMT, Sub-Series A-1, 5.65% 2010 1605 1633938
-
4094188
-
Industrial Development Revenue - 2.40%

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 1000 916550
5.45% 2014 1000 836570

Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), Series 1996 A AMT, 6.25% 2026 1000 991040
-
2744160
-
Insured - 23.30%

Industrial Development Authority of Arlington County, Resource
Recovery Revenue Bonds (Alexandria/Arlington Waste-to-Energy Facility),
Ogden Martin Systems of Alexandria/Arlington, Inc. Project,
Series 1998 B, FSA Insured AMT, 5.375% 2012 3000 3025351

Industrial Development Authority of Danville,
Hospital Revenue Bonds (Danville Regional Medical Center),
Series 1998, AMBAC Insured:
5.25% 2012 1995 2008227
5.25% 2013 2000 1998900

Industrial Development Authority of Fairfax County,
Hospital Revenue Refunding Bonds (INOVA Health System
Hospitals Project), Series 1993 A, FSA Insured, 5.25% 2019 1000 968980

Fairfax County Redevelopment and Housing Authority, Multifamily
Housing Revenue Bonds (Grand View Apartments Project), Series
1998 A, FHA Insured, 5.05% 2010 1000 962020

Industrial Development Authority of the County of Hanover,
Hospital Revenue Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA Insured:
6.50% 2010 1375 1534486
6.375% 2018 1500 1639515

Industrial Development Authority of Loudoun County, Hospital Revenue Bonds,
FSA Insured, 6.00% 2005 1000 1054450

Industrial Development Authority of the City of Norfolk, Health Care
Revenue Bonds (Bon Secours Health System), Series 1997, MBIA Insured,
5.00% 2007 1250 1266625

Northern Virginia Transportation District Commission (Virginia Railway
Express Project),Commuter Rail Revenue Refunding Bonds, Series 1998, FSA Insured:
5.375% 2011 1000 1026240
5.375% 2014 1000 1003000

Pamunkey Regional Jail Authority, Jail Facility Revenue Bonds,
Series 1996, MBIA Insured, 5.70% 2010 1000 1049590

Industrial Development Authority of the County of Prince William, Hospital
Facility Refunding Revenue Bonds (Potomac Hospital Corporation of Prince
William), Series 1998, FSA Insured, 5.00% 2018 1000 920820

Richmond Metropolitan Authority, Expressway Revenue and Refunding Bonds,
FGIC Insured, Series 1998, 5.25% 2012 1000 1018210

Industrial Development Authority of Russell County, Pollution Control Revenue
Bonds (Appalachian Power Company Project), Series H, MBIA Insured, 5.00% 2021 1110 1011698

Southeastern Public Service Authority, Senior Revenue
Refunding Bonds, Series 1998, AMBAC Insured, 5.00% 2015 3000 2900371

City of Virginia Beach Development Authority, Hospital Revenue
Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1000 1079850

Virginia College Building Authority, Educational Facilities Revenue
and Refunding Bonds (Hampden-Sydney College Project), Series 1998,
MBIA Insured, 5.00% 2016 1180 1124151

Metropolitan Washington Airports Authority, Airport System Revenue
and Refunding Bonds, Series 1998, MBIA Insured AMT, 5.25% 2010 1000 1018470
-
26610954
-
Lease Revenue (State) - 1.78%

Virginia Public Building Authority, Public Facilities Revenue Bonds, Series:
1998 B, 5.00% 2010 1000 1007540
2000 A, 5.75% 2016 1000 1028720
-
2036260
-
Life Care Facilities Revenue - 2.66%

Fairfax County Economic Development Authority, Retirement Community
Revenue Bonds (Greenspring Village, Inc. Facility), Series 1999 A:
6.75% 2012 500 494635
7.50% 2029 2500 2543100
-
3037735
-
Multi-Family Housing - 4.10%

Virginia Housing Development Authority, Multi-Family Housing Bonds, Series:
1998 I-AMT, 4.60% 2009 1320 1261207
1998 I-AMT, 4.70% 2010 1240 1185043
1997 B-AMT, 5.80% 2010 1185 1228063
1996 B, 5.95% 2016 1000 1011880
-
4686193
-
Pre-Refunded (1) - 9.59%

Danville Industrial Development Authority, Hospital
Revenue Bonds, Danville Regional Medical Center,
Series 1994, FGIC Insured, 6.00% 2007 (2004) 1000 1061710

Fairfax County Industrial Development Authority, Hospital Revenue Bonds
(Fairfax Hospital System Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1000 1041600

Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 (2002) 1170 1223317

Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding Bonds (Mary Immaculate
Project), 1994 Series, 6.875% 2010 (2004) 1900 2078125

Health System Revenue and Refunding Bonds (Riverside Health System
Project), Series 1992 A, 6.625% 2010 (2002) 1300 1374373

Roanoke Valley Resource Authority, Solid Waste System Revenue
Bonds, Series 1992, 5.75% 2012 (2002) 1500 1564635

Virginia Beach, Virginia Development Authority (Sentara Bayside
Hospital), 6.60% 2009 (2001) 1000 1046090

Virginia College Building Authority Educational Facilities Revenue
Bonds (Marymount University Project), Series 1992, 6.875% 2007 (2002) 1485 1564463
-
10954313
-
Pollution Control - 1.53%

Industrial Development Authority of the County of Charles City,
Solid Waste Disposal Facility Revenue Refunding Bonds (USA Waste of
Virginia, Inc. Project), Series 1999, 4.875% 2009 2000 1743960
-
Special Obligations - 1.73%

Virgin Islands Public Finance Authority, Revenue and Refunding
Bonds (Virgin Islands Matching Fund Loan Notes), Series:
1998 C, 5.50% 2007 1000 1003150
1998 A, 5.20% 2009 1000 967020
-
1970170
-
State Appropriation - 1.43%

Big Stone Gap, Redevelopment and Housing Authority,
Commonwealth of Virginia Correctional Facility Lease Revenue Bonds
(Wallens Ridge Development Project), Series 1995, 5.25% 2010 1600 1629744
-
State Authority - 3.20%

Virginia Public School Authority, School Financing Bonds:
(1997 Resolution), Series 1998 A, 5.25% 2007 2000 2065580
(1991 Resolution), Series 1994 A, 6.20% 2014 1500 1591125
-
3656705
-
Tax Assessment Bonds - 6.67%

Dulles Town Center, Community Development Authority (Loudoun
County), Special Assessment Bonds (Dulles Town
Center Project), Series 1998, 6.25% 2026 2500 2319950

Heritage Hunt Commercial Community Development Authority (Prince
William County), Special Assesment Bonds, Series:
1999 A, 6.85% 2019 2500 2497200
1999 B, 7.00% 2029 500 496295

Virginia Gateway, Community Development Authority (Prince William County),
Special Assessment Bonds, Series 1999, 6.25% 2026 2500 2305825
-
7619270
-
Water & Sewer Revenue - 3.37%

Chesterfield County Water and Sewer Revenue Refunding Bonds,
Series 1992, 6.375% 2009 1250 1317437

City of Richmond, Public Utility Revenue and Refunding Bonds,
Series 1998 A, 5.25% 2009 1500 1541700

Fairfax County Water Authority, Water Refunding Revenue Bonds,
Series 1997, 5.00% 2021 1000 936880

Virginia Resources Authority, Water and Sewer System Revenue Bonds
(Pooled Loan Program), Series 1986 A, 7.50% 2017 50 50368
-
3846385
-
TOTAL TAX-EXEMPT SECURITIES MATURING IN MORE THAN ONE YEAR (cost: $103,762,000) 104312286
-
Tax-Exempt Securities Maturing in One Year or Less - 7.31%

Hospital & Health Facilities Revenue - 1.40%

Industrial Development Authority of the City of Roanoke,
Hospital Revenue Bonds (Roanoke Memorial Hospitals, Community Hospital
of Roanoke Valley, Bedford County Memorial Hospital, Giles Memorial Hospital,
Radford Community Hospital, Franklin Memorial Hospital and Saint Albans
Psychiatric Hospital Project), Series 1995 A, 3.30% 2019 (2) 1600 1600000
-
Pre-Refunded (1) - 5.91%

Henry County Public Service Authority, Water and Sewer Revenue
Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1250 1272662

Norfolk:
Capital Improvement and Refunding Bonds, Series 1992 A, 6.00% 2011 (2001) 500 514090

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 416464

(Sentara Hospitals-Norfolk Project), Series 1991, 7.00% 2020 (2000) 250 256568

Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 706445

Roanoke Public Improvement and Refunding Bonds, Series 1992 B:
6.375% 2009 (2001) 250 259773
6.40% 2011 (2001) 500 522060

University of Virginia, Hospital Revenue Bonds,
Series 1984 A, HIBI Insured, 9.875% 2001 (2000) 10 10367

Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 710647

Virginia Public Building Authority, State Building Revenue Bonds,
Series 1991 A, 6.50% 2011 (2001) 1750 1820525

Virginia Resources Authority, Water and Sewer Systems Revenue Bonds,
Series 1990, 7.25% 2011 (2000) 250 256122
-
6745723
-
TOTAL TAX-EXEMPT SECURITIES MATURING IN ONE YEAR OR LESS (cost: $8,035,000) $8,345,723
-

TOTAL TAX-EXEMPT SECURITIES (cost: $111,797,000) 112658009
Excess of cash and receivables over payables 1540889
-
NET ASSETS 114198898
-

(1) Parenthetical year represents date of pre-refunding.

(2) Coupon rate changes periodically.
See Notes to Financial Statements
</TABLE>

<TABLE>
The Tax-Exempt Fund of Virginia
Financial Statements
Statement of Assets and Liabilities
July 31, 2000 (dollars in thousands)
<S> <C> <C>
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $103,762) $104,312
Maturing in one year or less
(cost: $8,035) 8,346
Cash 74
Receivables for--
Sales of Fund's shares $ 513
Interest 1,769 2,282
------------ ------------
115,014
Liabilities:
Payables for--
Purchases of investments 477
Repurchases of Fund's shares 75
Dividends 148
Management services 41
Other expenses 74 815
------------ ------------
Net Assets at July 31,2000 $114,199
============
Shares of beneficial interest issued and
outstanding (unlimited shares authorized)
Class A shares:
Net assets $114,040
Shares outstanding 7,323,399
Net asset value per share $15.57

Class B shares:
Net assets $159
Shares outstanding 10,213
Net asset value per share $15.57

See Notes to Financial Statements

The Tax-Exempt Fund of Virginia
Statement of Operations
For the year ended July 31, 2000 (dollars in thousands)

Investment Income:
Income:
Interest on tax-exempt securities $6,468

Expenses:
Investment adviser fee $ 273
Business management fee 219
Distribution expenses - Class A 290
Distribution expenses - Class B -
Transfer agent fee - Class A 58
Transfer agent fee - Class B -
Reports to shareholders 26
Registration statement and prospectus 16
Postage, stationery and supplies 7
Trustees' fees 7
Auditing and legal fees 27
Custodian fee 6
Other expenses 1 930
------------ ------------
Net investment income 5,538
------------

Realized Loss and Unrealized
Appreciation on Investments:
Net realized loss (105)
Net unrealized appreciation:
Beginning of year 2,811
End of year 861
------------
Net change in unrealized
appreciation (1,950)
------------
Net realized loss and change in
unrealized appreciation (2,055)
------------
Net Increase in Net Assets
Resulting from Operations $3,483
============
See Notes to Financial Statements

The Tax-Exempt Fund of Virginia
Statement of Changes in Net Assets
(dollars in thousands)

Year Ended July 31,
2000 1999
------------ ------------
Operations:
Net investment income $ 5,538 $ 5,450
Net realized (loss) gain on investments (105) 64
Net change in unrealized
appreciation on investments (1,950) (3,044)
------------ ------------
Net increase in net assets
resulting from operations 3,483 2,470
------------ ------------
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income:
Class A (5,537) (5,453)
Class B (1) -
Distributions from net realized gain
on investments:
Class A - (1,311)
Class B - -
------------ ------------
Total dividends and distributions (5,538) (6,764)
------------ ------------

Capital Share Transactions:
Proceeds from shares sold 25,575 25,326
Proceeds from shares issued in
reinvestment of net investment income
dividends and distributions of net
realized gain on investments 3,152 4,219
Cost of shares repurchased (37,051) (15,287)
------------ ------------
Net (decrease) increase in net assets
resulting from capital share transactions (8,324) 14,258
------------ ------------
Total (Decrease) Increase in Net Assets (10,379) 9,964

Net Assets:
Beginning of year 124,578 114,614
------------ ------------
End of year $ 114,199 $124,578
============ ============

See Notes to Financial Statements

</TABLE>

<TABLE>
Per-Share Data and Ratios
The Tax-Exempt Fund of Virginia
<S> <C> <C> <C> <C> <C> <C> <C>
Net
Net asset gains(losses) Dividends
value, Net on securities Total from (from net Distributions
Year Ended beginning investme(both realized investment investment(from capital Total
July 31, of year income and unrealized)operations income) gains) Distributions
Class A:
2000 $15.82 $.74 $(.25)(2) $.49 $(.74) $ - $(.74)
1999 16.36 .73 (.36) .37 (.73) (.18) (.91)
1998 16.37 .78 .03 .81 (.78) (.04) (.82)
1997 15.77 .80 .60 1.40 (.80) - (.80)
1996 15.79 .81 .03 .84 (.81) (.05) (.86)
Class B: (4)
2000 15.28 .18 (2 .34 (2) .52 (.23) - (.23)
</TABLE>

<TABLE>
Per-Share Data and Ratios
The Tax-Exempt Fund of Virginia
<S> <C> <C> <C> <C> <C> <C> <C>

Ratio of Ratio of
Net asset Net assets, expenses net income Portfolio
Year Ended value, end Total end of year to average to average turnover
July 31, of year return(1 (in millions) net assets net assets rate
Class A:
2000 $15.57 3.24% $114 .80% 4.77% 22.37%(3)
1999 15.82 2.21 125 .77 4.46 12.72
1998 16.36 5.08 115 .78 4.73 24.66
1997 16.37 9.10 101 .81 4.99 18.41
1996 15.77 5.46 90 .79 5.11 27.34
Class B: (4)
2000 15.57 3.30 - 1.55 (5) 4.03 (5 22.37 (3)

(1) Total returns exclude all sales charges, including contingent deferred sales charges.
(2) Based on average shares outstanding.
(3) Represents portfolio turnover rate (equivalent for all share classes) for the year ended July 31, 2000.
(4) Per-share data from March 15, 2000 when Class B shares were first offered for sale.
(5) Annualized.

</TABLE>

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.
The Funds offer Class A and Class B shares. Class A shares are sold with an
initial sales charge of up to 3.75%. Class B shares are sold without an
initial sales charge but subject to a contingent deferred sales charge paid
upon redemption. This charge declines from 5% to zero over a period of six
years. Class B shares have higher distribution expenses and transfer agent
fees than Class A shares. Class B shares are automatically converted to Class
A shares eight years after the date of purchase. Holders of both classes of
shares have pro rata rights to assets and dividends, and identical voting,
liquidation and other rights, except that each class bears different
distribution and transfer agent expenses, and each class shall have exclusive
rights to vote on matters affecting only their class.
SIGNIFICANT ACCOUNTING POLICIES - The financial statements have been prepared
in conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of 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. The ability of the issuers
of the debt securities held by the Funds to meet their obligations may be
affected by economic developments in a specific industry, state, or region.
Short-term securities maturing within 60 days are valued at amortized cost,
which approximates market value. Securities and assets for which representative
market quotations are not readily available are valued at fair value as
determined in good faith under policies approved by the Board of Trustees.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for as of the trade date. Realized gains and losses from
securities transactions are determined based on specific identified cost. In
the event securities are purchased on a delayed delivery or "when-issued"
basis, the Funds will instruct the custodian to segregate liquid assets
sufficient to meet their payment obligations in these transactions. Premiums
and original issue discounts on securities purchased are amortized daily over
the expected life of the security. Amortization of market discounts on
securities is recognized upon disposition.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends to shareholders are
declared daily after the determination of the Funds' net investment income and
are paid to shareholders monthly. Distributions paid to shareholders are
recorded on the ex-dividend date.
ALLOCATIONS - Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated daily between the share
classes based on their relative net asset values. Distribution expenses,
transfer agent fees, and other class-specific expenses, if any, are accrued
daily and charged to the applicable share class.
2. FEDERAL INCOME TAXATION
The Funds comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and intend to distribute all of
their net taxable income and net capital gains for the fiscal year. As
regulated investment companies, the Funds are not subject to income taxes if
such distributions are made. Required distributions are determined on a tax
basis and may differ from net investment income and net realized gains for
financial reporting purposes. In addition, the fiscal year in which amounts
are distributed may differ from the year in which the net investment income and
net realized gains are recorded by the Funds.
As of July 31, 2000, net unrealized APPRECIATION on investments for book and
Federal income tax purposes for the Maryland Fund aggregated $274,000; of which
$2,615,000 related to appreciated securities and $2,341,000 related to
depreciated securities. For the Virginia Fund, net unrealized APPRECIATION
aggregated $861,000, of which $2,534,000 related to appreciated securities and
$1,673,000 related to depreciated securities. There was no difference between
book and tax realized losses on securities transactions for the year ended July
31, 2000. The costs of portfolio securities for book and federal income tax
purposes were $98,997,000 and $111,797,000, for the Maryland and Virginia
Funds, respectively, at July 31, 2000.

3. FEES AND TRANSACTIONS WITH RELATED PARTIES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY FEES - Fees of $196,000 and
$219,000 were incurred by the Maryland and Virginia Funds, respectively, during
the year ended July 31,2000 and were payable to Washington Management
Corporation (WMC) as business manager of the Funds pursuant to the business
management agreement under which WMC provides business management services.
The agreement provides for monthly fees, accrued daily, computed at an annual
rate of 0.135% of the first $60 million of average net assets for 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,(JLC),earned $27,000
and $19,000 on its retail sales of shares and distribution plans of the
Maryland and Virginia Funds, respectively, during the year ended July 31, 2000,
and received no brokerage commissions resulting from purchases and sales of
securities for the investment account of the Funds.
Fees of $243,000 and $273,000 for investment advisory services were incurred
by the Maryland and Virginia Funds, respectively, during the year ended July
31, 2000, pursuant to an investment advisory agreement with Capital Research
and Management Company (CRMC). The agreement 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 - American Funds Distributors, Inc. (AFD), the principal
underwriter of the Funds' shares, received $43,000 (after allowances to
dealers)during the year ended July 31, 2000, each for the Maryland and Virginia
Funds, as its portion of the sales charges paid by purchasers of the Funds'
Class A shares. Such sales charges are not an expense of the Funds and, hence,
are not reflected in the accompanying statement of operations.
Pursuant to a Plan of Distribution for Class A shares, each Fund may expend
up to 0.25% of Class A daily 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 in advance by the Funds' Board of
Trustees. Fund expenses under the Plan include payments to dealers to
compensate them for their selling and servicing efforts. During the year ended
July 31, 2000, distribution expenses under each Plan for Class A shares were
$251,000 and $290,000, including accrued and unpaid expenses of $38,000 and
$44,000 for the Maryland and Virginia Funds, respectively. The aggregate
amounts of Class A distribution expenses subject to recovery by AFD, which the
Funds have not reimbursed, were $30,000 and $79,000, respectively. Some or all
of the amounts not paid by the Funds' may be recovered by the Distributor in
the future.
Pursuant to a Plan of Distribution for Class B shares, each Fund may expend up
to 1.00% of Class B daily net assets annually to compensate dealers for their
selling and servicing efforts. The distribution expense, including accrued and
unpaid expenses, under the Plan for Class B shares was $1,000 for the Maryland
Fund.
TRANSFER AGENT FEE - American Funds Service Company (AFS), the transfer agent
for the Maryland and Virginia Funds, was paid fees of $56,000 and $58,000,
respectively, during the year ended July 31, 2000.
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 July 31,
2000, aggregate deferred amounts and earnings thereon since the deferred
compensation plan's adoption (1994) net of any payments to Trustees, were
$18,000 each for the Maryland and Virginia Funds.
AFFILIATIONS - WMC and JLC are both wholly owned subsidiaries of the
Johnson-Lemon Group, Incorporated (JLG). All the officers of the Trust and
three of its trustees are affiliated with JLG. No such persons received any
remuneration directly from the Trust.
CRMC is wholly owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC.
4. INVESTMENT TRANSACTIONS AND OTHER DISCLOSURES
During the fiscal year ending July 31, 2000, the Maryland and Virginia Funds
made purchases of investment securities of $11,537,000 and $25,003,000, and
sales of $18,589,000 and $33,450,000, respectively. Short-term securities
transactions were excluded.
Pursuant to the custodian agreements, the Funds receive credits against their
custodian fees for imputed interest on certain balances with the custodian
bank. The custodian fees of $5,000 and $6,000 for the Maryland and Virginia
Funds, respectively, were paid by these credits rather than in cash.
As of July 31, 2000, net assets consisted of the following:

<TABLE>
<CAPTION>
<S> <C> <C>
(DOLLARS IN THOUSANDS) THE TAX-EXEMPT The Tax-Exempt
FUND OF MARYLAND FUND OF VIRGINIA

Capital paid in on shares of $100,668 $113,454
beneficial interest

Accumulated net realized loss (243) (116)

Net unrealized appreciation 274 861

Net Assets $100,699 $114,199

========= ========

</TABLE>

THE TAX-EXEMPT FUND OF MARYLAND
Capital share transactions were as follows:

<TABLE>
<CAPTION>
<S> <C> <C>
Year ended July 31, 2000 Year ended July 31, 1999

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS) Amount Shares Amount Shares

CLASS A SHARES:

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sold $ 17,737 1,177,963 $ 22,658 1,410,162

Reinvestment of dividends and distributions 3,025 200,758 3,694 230,443

Repurchased (28,531) (1,890,566) (14,037) (874,913)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net (decrease)increase in Class A (7,769) (511,845) 12,315 765,692

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS B SHARES:*

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sold 1,183 78,684 - -

Reinvestment of dividends 2 144 - -

Repurchased (11) (713) - -

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net increase in Class B 1,174 78,115 - -

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL NET (DECREASE) INCREASE IN SHARE TRANSACTIONS $(6,595) (433,730) $12,315 765,692

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
*CLASS B SHARES OFFERED FOR SALE COMMENCING MARCH 15, 2000

</TABLE>

THE TAX-EXEMPT FUND OF VIRGINIA
Capital share transactions were as follows:

<TABLE>
<CAPTION>
<S> <C> <C>
Year ended July 31, 2000 Year ended July 31, 1999

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS) Amount Shares Amount Shares

CLASS A SHARES:

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sold $ 25,419 1,651,889 $ 25,326 1,549,930

Reinvestment of dividends and distributions 3,152 205,216 4,219 258,204

Repurchased (37,051) (2,408,606) (15,287) (938,045)

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net (decrease)increase in Class A (8,480) (551,501) 14,258 870,089

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
CLASS B SHARES:*

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Sold 156 10,184 - -

Reinvestment of dividends - 39 - -

Repurchased - (10) - -

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net increase in Class B 156 10,213 - -

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL NET (DECREASE) INCREASE IN SHARE TRANSACTIONS $(8,324) (541,288) $14,258 870,089

</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C>
*CLASS B SHARES OFFERED FOR SALE COMMENCING MARCH 15, 2000

</TABLE>

REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF THE AMERICAN FUNDS TAX-EXEMPT
SERIES I
In our opinion, the accompanying statements of assets and liabilities,
including the investment portfolios, and the related statements of operations
and of changes in net assets and the per-share data and ratios present fairly,
in all material respects, the financial position of The Tax-Exempt Fund of
Maryland and The Tax-Exempt Fund of Virginia (constituting The American Funds
Tax-Exempt Series I, hereafter referred to as the "Trust") at July 31, 2000,
the results of each of their operations, the changes in each of their net
assets and each of their per-share data and ratios for the years indicated, in
conformity with generally accepted accounting principles in the United States.
These financial statements and per-share data and ratios (hereafter referred to
as "financial statements") are the responsibility of the Trust's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers, LLP
Los Angeles, California

August 31, 2000

PART C
OTHER INFORMATION

ITEM 23 EXHIBITS:
(a) On file (see SEC file nos. 811-4653 and 33-5270)
(b). On file (see SEC file nos. 811-4653 and 33-5270)
(c). On file (see SEC file nos. 811-4653 and 33-5270)
(d). On file (see SEC file nos. 811-4653 and 33-5270)
(e). On file (see SEC file nos. 811-4653 and 33-5270)
(f). None
(g). On file (see SEC file nos. 811-4653 and 33-5270)
(h). On file (see SEC file nos. 811-4653 and 33-5270)
(i). On file (see SEC file nos. 811-4653 and 33-5270)
(j). Consent of Independent Accountants
(k). None
(l). Not applicable to this filing
(m). On file (see SEC file nos. 811-4653 and 33-5270)
(n). On file (see SEC file nos. 811-4653 and 33-5270)
(p). On file (see SEC file nos. 811-4653 and 33-5270)

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policy written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual which insures its
officers and trustees against certain liabilities.
Article VI of the Trust's By-Laws states:
(a) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case,
ITEM 25. INDEMNIFICATION (CONT.)
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking and security by or on behalf of the Trustee or officer to
repay such amount unless it shall ultimately be determined that such person is
entitled to be indemnified by the Trust as authorized herein.
(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled and shall
continue as to a person who has ceased to be Trustee or officer and shall inure
to the benefit of the heirs, executors and administrators of such person.
(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed to
protect any Trustee, officer, distributor, investment adviser or controlling
shareholder of the Trust against any liability to the Trust or to its
shareholders to which such person would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
(i) The Trust shall have power to purchase and maintain insurance on behalf of
any person against any liability asserted against or incurred by such person,
whether or not the Trust would have the power to indemnify such person against
such liability under the provisions of this Article. Nevertheless, insurance
will not be purchased or maintained by the Trust if the purchase or maintenance
of such insurance would result in the indemnification of any person in
contravention of any rule or regulation of the Securities and Exchange
Commission. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested Trustees or independent legal counsel.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America,
U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.

<TABLE>
<CAPTION>
(B) (1) (2) (3)

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES

BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT

<S> <C> <C> <C>
David L. Abzug Vice President None

27304 Park Vista Road

Agoura Hills, CA 91301

John A. Agar Vice President None

1501 N. University, Suite 227A

Little Rock, AR 72207

Robert B. Aprison Vice President None

2983 Bryn Wood Drive

Madison, WI 53711

L William W. Bagnard Vice President None

Steven L. Barnes Senior Vice President None

5400 Mount Meeker Road

Suite 1

Boulder, CO 80301-3508

B Carl R. Bauer Vice President None

Michelle A. Bergeron Senior Vice President None

4160 Gateswalk Drive

Smyrna, GA 30080

J. Walter Best, Jr. Regional Vice President None

9013 Brentmeade Blvd.

Brentwood, TN 37027

Joseph T. Blair Senior Vice President None

148 E. Shore Ave.

Groton Long Point, CT 06340

John A. Blanchard Vice President None

6421 Aberdeen Road

Mission Hills, KS 66208

Ian B. Bodell Senior Vice President None

P.O. Box 1665

Brentwood, TN 37024-1665

Mick L. Brethower Senior Vice President None

2320 North Austin Avenue

Georgetown, TX 78626

Alan Brown Vice President None

4129 Laclede Avenue

St. Louis, MO 63108

B J. Peter Burns Vice President None

Brian C. Casey Vice President None

8002 Greentree Road

Bethesda, MD 20817

Victor C. Cassato Senior Vice President None

609 W. Littleton Blvd., Suite 310

Greenwood Village, CO 80120

Christopher J. Cassin Senior Vice President None

19 North Grant Street

Hinsdale, IL 60521

Denise M. Cassin Vice President None

1301 Stoney Creek Drive

San Ramon, CA 94538

L Larry P. Clemmensen Director None

L Kevin G. Clifford Director, President and Co-Chief None

Executive Officer

Ruth M. Collier Senior Vice President None

29 Landsdowne Drive

Larchmont, NY 10538

S David Coolbaugh Assistant Vice President None

H Carlo O. Cordasco Assistant Vice President None

Thomas E. Cournoyer Vice President None

2333 Granada Boulevard

Coral Gables, FL 33134

Douglas A. Critchell Senior Vice President None

3521 Rittenhouse Street, N.W.

Washington, D.C. 20015

L Carl D. Cutting Vice President None

William F. Daugherty Regional Vice President None

1216 Highlander Way

Mechanicsburg, PA 17055

Daniel J. Delianedis Vice President None

8689 Braxton Drive

Eden Prairie, MN 55347

L Jay DePerno Regional Vice President None

Michael A. DiLella Vice President None

P. O. Box 661

Ramsey, NJ 07446

G. Michael Dill Senior Vice President None
505 E. Main Street

Jenks, OK 74037

Kirk D. Dodge Senior Vice President None

2627 Mission Street

San Marino, CA 91108

Peter J. Doran Director, Executive Vice President None

100 Merrick Road, Suite 216W

Rockville Centre, NY 11570

L Michael J. Downer Secretary None

Robert W. Durbin Vice President None

74 Sunny Lane

Tiffin, OH 44883

I Lloyd G. Edwards Senior Vice President None

John Fodor Senior Vice President None

15 Latisquama Road

Southborough, MA 01772

Daniel B. Frick Regional Vice President None

845 Western Avenue

Glen Ellyn, IL 60137

Clyde E. Gardner Senior Vice President None

Route 2, Box 3162

Osage Beach, MO 65065

B Evelyn K. Glassford Vice President None

Jeffrey J. Greiner Vice President None

12210 Taylor Road

Plain City, OH 43064

L Paul G. Haaga, Jr. Director None

B Mariellen Hamann Assistant Vice President None

David E. Harper Senior Vice President None

150 Old Franklin School Road

Pittstown, NJ 08867

H Mary Pat Harris Assistant Vice President None

Ronald R. Hulsey Senior Vice President None

6744 Avalon

Dallas, TX 75214

Robert S. Irish Vice President None

1225 Vista Del Mar Drive

Delray Beach, FL 33483

Michael J. Johnston Director None

630 Fifth Avenue, 36th Floor

New York, NY 10111

B Damien M. Jordan Vice President None

John P. Keating Regional Vice President None

2285 Eagle Harbor Parkway

Orange Park, FL 32073

L Dorothy Klock Vice President None

H Diane Koske Assistant Vice President

Andrew R. LeBlanc Regional Vice President None

78 Eton Road

Garden City, NY 11530

Arthur J. Levine Senior Vice President None

12558 Highlands Place

Fishers, IN 46038

B Karl A. Lewis Assistant Vice President None

T. Blake Liberty Vice President None

5506 East Mineral Lane

Littleton, CO 80122

Mark J. Lien Regional Vice President None

5570 Beechwood Terrace

West Des Moines, IA 50266

L Lorin E. Liesy Vice President None

Louis Linquata Regional Vice President None

170 South Battin

Wichita, KS 67218

LW Robert W. Lovelace Director None

Stephen A. Malbasa Senior Vice President None

13405 Lake Shore Blvd.

Cleveland, OH 44110

Steven M. Markel Senior Vice President None

5241 South Race Street

Littleton, CO 80121

L J. Clifton Massar Director, Senior Vice President None

L E. Lee McClennahan Senior Vice President None

James R. McCrary Regional Vice President None

963 1st Street, #1

Hermosa Beach, CA 90254

S John V. McLaughlin Senior Vice President None

Terry W. McNabb Vice President None

2002 Barrett Station Road

St. Louis, MO 63131

David R. Murray Vice President None

1263 Brookwood Street

Birmingham, MI 48009

Stephen S. Nelson Vice President None

P.O. Box 470528

Charlotte, NC 28247-0528

William E. Noe Vice President None

304 River Oaks Road

Brentwood, TN 37027

Peter A. Nyhus Vice President None

3084 Wilds Ridge Court

Prior Lake, MN 55372

Eric P. Olson Vice President None

62 Park Drive

Glenview, IL 60025

Jeffrey Olson Regional Vice President None

930 S. Cowley Street, #305

Spokane, WA 99202

Gary A. Peace Regional Vice President None

291 Kaanapali Drive

Napa, CA 94558

Samuel W. Perry Regional Vice President None

6133 Calle del Paisano

Scottsdale, AZ 85251

David Petzke Regional Vice President None

4016 Saint Lucia Street

Boulder, CO 80301

Fredric Phillips Senior Vice President None

175 Highland Avenue, 4th Floor

Needham, MA 02494

B Candance D. Pilgrim Assistant Vice President None

Carl S. Platou Vice President None

7455 80th Place, S.E.

Mercer Island, WA 98040

L John O. Post Senior Vice President None

S Richard P. Prior Vice President None

Steven J. Reitman Senior Vice President None

212 The Lane

Hinsdale, IL 60521

Brian A. Roberts Vice President None

P.O. Box 452

Glenville, NC 28736

George S. Ross Senior Vice President None

P.O. Box 376

Southport, ME 04576

L Julie D. Roth Vice President None

L James F. Rothenberg Director None

Douglas F. Rowe Vice President None

414 Logan Ranch Road

Georgetown, TX 78628

Christopher S. Rowey Vice President None

10538 Cheviot Drive

Los Angeles, CA 90064

Dean B. Rydquist Senior Vice President None

1080 Bay Pointe Crossing

Alpharetta, GA 30005

Richard R. Samson Senior Vice President None

4604 Glencoe Avenue, #4

Marina del Rey, CA 90292

Joseph D. Scarpitti Vice President None

31465 St. Andrews

Westlake, OH 44145

L R. Michael Shanahan Director None

Brad W. Short Regional Vice President None

1601 Seal Way

Seal Beach, CA 90740

David W. Short Chairman of the Board and None

1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer

Pittsburgh, PA 15238

William P. Simon Senior Vice President None

912 Castlehill Lane

Devon, PA 19333

Rodney G. Smith Senior Vice President None

100 N. Central Expressway

Suite 1214

Richardson, TX 75080

S Sherrie L. Snyder-Senft Assistant Vice President None

Anthony L. Soave Regional Vice President None

8831 Morning Mist Drive

Clarkston, MI 48348

L Therese L. Souiller Assistant Vice President None

Nicholas D. Spadaccini Vice President None

855 Markley Woods Way

Cincinnati, OH 45230

L Kristen J. Spazafumo Assistant Vice President None

Daniel S. Spradling Senior Vice President None

181 Second Avenue

Suite 228

San Mateo, CA 94401

LW Eric H. Stern Director None

B Max D. Stites Vice President None

Thomas A. Stout Vice President None

1004 Ditchley Road

Virginia Beach, VA 23451

Craig R. Strauser Vice President None

3 Dover Way

Lake Oswego, OR 97034

Francis N. Strazzeri Senior Vice President None

3021 Kensington Trace

Tarpon Springs, FL 34689

L Drew W. Taylor Assistant Vice President None

Gary J. Thoma Regional Vice President None

604 Thelosen Drive

Kimberly, WI 54136

L James P. Toomey Vice President None

I Christopher E. Trede Vice President None

George F. Truesdail Senior Vice President None

400 Abbotsford Court

Charlotte, NC 28270

Scott W. Ursin-Smith Vice President None

60 Reedland Woods Way

Tiburon, CA 94920

J. David Viale Regional Vice President None

204 Fernleaf Drive

Corona Del Mar, CA 92625

Thomas E. Warren Vice President None

119 Faubel Street

Sarasota, FL 34242

L J. Kelly Webb Senior Vice President, None

Treasurer and Controller

Gregory J. Weimer Vice President None

206 Hardwood Drive

Venetia, PA 15367

B Timothy W. Weiss Director None

George J. Wenzel Regional Vice President None

251 Barden Road

Bloomfield, MI 48304

H J. D. Wiedmaier Assistant Vice President None

SF N. Dexter Williams Senior Vice President None

Timothy J. Wilson Vice President None

113 Farmview Place

Venetia, PA 15367

B Laura L. Wimberly Vice President None

H Marshall D. Wingo Director, Senior Vice President None

L Robert L. Winston Director, Senior Vice President None

William R. Yost Senior Vice President None

9320 Overlook Trail

Eden Prairie, MN 55347

Janet M. Young Regional Vice President None

1616 Vermont

Houston, TX 77006

Jonathan A. Young Regional Vice President None

329 Downing Drive

Chesapeake, VA 23322

Scott D. Zambon Regional Vice President None

2887 Player Lane

Tustin Ranch, CA 92782

</TABLE>

__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
SF Business Address, One Market, Steuart Tower, Suite 1800, San Francisco, CA
94105-1016
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240

(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Trust, 1101 Vermont Avenue, N.W., Washington, D.C. 20005, and
its investment adviser, Capital Research and Management Company (CRMC), 333
South Hope Street, Los Angeles, CA 90071. Certain accounting records are
maintained and kept in the offices of CRMC's fund accounting department, 5300
Robin Hood Road, Norfolk, VA 23513.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92821.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, New
York, 10081.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
N/A
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amended Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Washington, District of Columbia, on the 14th day of
November, 2000.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By
Harry J. Lister, President

Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on November 14, 2000, by the
following persons in the capacities indicated.
SIGNATURE TITLE
(1) Principal Executive Officer:
Harry J. Lister President
(2) Principal Financial Officer and
Principal Accounting Officer:
Howard L. Kitzmiller Senior Vice President,
Secretary and Treasurer
(3) Trustees:
James H. Lemon, Jr.* Chairman of the Board
Stephen Hartwell* Chairman Emeritus and Trustee
Harry J. Lister President and Trustee
Cyrus A. Ansary* Trustee
James C. Miller III* Trustee
T. Eugene Smith* Trustee
Margita E. White* Trustee
Stephen G. Yeonas* Trustee

*By
Howard L. Kitzmiller, Attorney-in-Fact