(Logo: The American Funds Group (R))
The American Funds Tax-Exempt Series I
The Tax-Exempt Fund of Maryland
(Graphics: Map of Maryland)
The Tax-Exempt Fund of Virginia
(Graphic: Map of Virginia)
Annual Report for the year ended July 31, 2000
The Tax-Exempt Fund of Maryland(R) and The Tax-Exempt Fund of Virginia(R)
seek a high level of current income free from Federal and their respective
state income taxes. Additionally, each Fund seeks to preserve capital.
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia are two
of the 29 funds in The American Funds Group,(R) the nation's third-largest
mutual fund family. For nearly seven decades, Capital Research and
Management Company, the American Funds adviser, has invested with a
long-term focus based on thorough research and attention to risk.
Fund results in this report were calculated for Class A shares at net asset
value (without a sales charge) unless otherwise indicated. Here are the
average annual compound returns on a $1,000 investment for periods ended
June 30, 2000 (the most recent calendar quarter), with all distributions
reinvested:
Class A Shares
reflecting 3.75% maximum sales charge
Maryland Fund Virginia Fund
10 years +5.80% +5.77%
5 years +4.34 +4.07
12 months -2.27 -1.66
Results for Class B shares are not shown because of the brief time between
their introduction on March 15 and the end of the Funds' fiscal year.
Please see back inside cover for important information about Class A and B
shares.
The Funds' 30-day yields for Class A shares as of August 31, 2000,
calculated in accordance with the Securities and Exchange Commission
formula, were 4.39% for the Maryland Fund and 4.28% for the Virginia Fund.
The Funds' distribution rates for Class A shares as of that date were 4.70%
and 4.46%, respectively. The SEC yield reflects income each Fund expects
to earn based on current holdings, while the distribution rate is based
solely on the Fund's past dividends. Accordingly, the Funds' SEC yields
and distribution rates may differ. For the latest yields based on actual
distributions, call toll-free 800/325-3590.
The figures in this report reflect past results and are not predictive of
future results. Share price and return will vary, so you may lose money.
Investing for short periods makes losses more likely. Investments are not
FDIC-insured, nor are they deposits of or guaranteed by a bank or any other
entity.
All investments are subject to certain risks. Investments in the Funds are
subject to interest rate fluctuations. Additionally, each Fund is more
susceptible to factors adversely affecting issuers of its state's
tax-exempt securities than a more widely diversified municipal bond fund.
Income may be subject to Federal alternative minimum taxes. Certain other
income, as well as capital gain distributions, may be taxable.
Fellow Shareholders
For the year ended July 31, 2000, you received monthly dividends totaling
approximately 74 cents per share from either The Tax-Exempt Fund of
Maryland or The Tax-Exempt Fund of Virginia. Income returns from your
investment remained very attractive compared to other fixed-income
alternatives. The Maryland Fund's tax-free income return of 4.89% with
dividends reinvested was the equivalent of 8.75% from a taxable investment
if you are in the highest combined Federal, state and local tax bracket of
44.1%.
The Virginia Fund's tax-free income return of 4.75% was the equivalent of
8.35% from a taxable investment if you are in the highest combined Federal
and state tax bracket of 43.1%.
However, the value of your shares declined somewhat. The Maryland Fund's
share price began the period at $15.57, fell to $14.81 at midyear and
finished at $15.12. The Virginia Fund's share price began the year at
$15.82, dropped to $15.13 and recovered to $15.57.
If, like most shareholders, you reinvested your dividends, your total
return was:
- 2.0% for the Maryland Fund
- 3.2% for the Virginia Fund
Fed rate hikes hurt the Funds
There was considerable volatility in the financial markets during the
period, stemming from uncertainty over the Federal Reserve Board's actions
to engineer a "soft landing" by slowing economic growth without triggering
a recession.
Between July 1999 and May 2000, the Fed raised a key short-term interest
rate -- the Federal funds rate, which banks charge each other for overnight
loans -- from 5.0% to 6.5%, in several stages. This led to higher yields on
short to intermediate Treasury issues. Meanwhile, the government's effort
to reduce debt by buying back Treasury bonds with long maturities (10
years or more) led to a perceived shortage of "long bonds." Their prices
rose, and yields fell below those of short-term bonds, causing a rare
inverted yield curve.
As our fiscal year came to a close, there were signs that the Fed's effort
may be succeeding. Further Federal funds rate increases, while not
impossible, seemed unlikely. That would be good news for the Funds, because
when interest rates increase, existing bonds become less attractive than
the newer issues which pay the higher rates.
The Fed's best efforts to bring the soaring economy in for a soft landing
after an astonishingly long flight might hit a bump or two. One
possibility is a mild general recession -- a good reason, of course, to
hold relatively stable investments, such as bonds. Another possibility is
a series of rolling recessions from industry to industry. Either way, we
feel the strength and diversity in the Funds' portfolios will help you
continue to achieve your investment goals.
Relatively low turnover
There were very few changes in the Funds' holdings during the fiscal year.
Indeed, there was a 12% turnover in the Maryland Fund: 10 issues were sold
or redeemed and five new issues were purchased. In the Virginia Fund, the
turnover rate was 22%: 20 issues were sold or redeemed and 13 issues were
added.
Part of the reason why turnover in these Funds is relatively low is that we
favor a buy-and-hold approach. Another is the relatively small universe of
available issues. In 1999, municipal bond issuers in Maryland brought just
96 new issues to market, while the comparable number in Virginia was 170.
This trend of relatively few new issues has continued in the first seven
months of 2000.
Real estate helped, healthcare hurt
During the past few years, we have invested in a number of land-secured
financings of large real estate projects in both Maryland and Virginia. We
call them "dirt bonds" because we typically get involved at around the
ground-breaking stage. These bonds often pay above-average yields, and
several made significant contributions to our results in fiscal 2000. (For
more information about how "dirt bonds" work, please see [story below].)
Among new land-secured positions in the Maryland portfolio is National
Business Park, an office complex in Anne Arundel County. In Virginia, we
added to our holdings in the Dulles Town Center project.
Meanwhile, a number of hospital and healthcare-related issues did poorly --
especially in Maryland, where the Dimensions Health System was downgraded
by rating services. Hospitals in Maryland have become somewhat riskier than
most because the state's rate system has tended to discourage rate
adjustments and there is a strong competitive environment. Over time, we
have been reducing our exposure and investing the proceeds into more
attractive sectors.
In the Virginia portfolio, on the other hand, hospital holdings have tended
to be beneficial. Virginia hospitals represented in the Fund tend to have
dominant market positions and have not been significantly affected by
cost-reduction pressures from managed- care programs.
Looking ahead
It is hard to say what impact the upcoming presidential election might have
on municipal bonds. We will be watching carefully for signs that proposals
for tax cuts and/or changes in the healthcare system, in particular, might
affect the Funds' holdings. As always, we benefit from unique insights
contributed by our Investment Adviser's research office in Washington, D.C.
-- a rare resource among mutual funds.
In the meantime, we will continue to focus on minimizing risk and providing
you with an income that stays well ahead of inflation over the long haul.
Since the Funds' inception on August 14, 1986, both have beaten inflation
by a wide margin. The Maryland Fund has produced an average annual compound
return of 6.1%, and the Virginia Fund has produced an average annual
compound return of 6.3%; inflation has risen an average of 3.3% a year.
We look forward to reporting to you again six months from now.
Sincerely,
(Signature) (signature)
James H. Lemon, Jr. Harry J. Lister
Chairman President
September 15, 2000
What are "dirt bonds"?
They're bonds financing real estate developments -- typically issued at the
raw land (dirt) stage -- where taxes paid by the ultimate landowners are
expected to repay the up-front costs for basic improvements.
Ratings agencies consider these bonds to be riskier than most, because a
troubled developer might default on paying the taxes before the landowners
move in. The only recourse for bondholders in such situations is
foreclosure, which may not recover the full amount invested. Of course, if
a developer is experienced, well established and financially strong, the
risks are lessened considerably.
Dirt bonds are relatively new in Maryland and Virginia, but have been used
for decades in several other states. Ed Nahmias, a Capital Research and
Management Company analyst with 18 years of investment experience,
researches these issues for both the Maryland and Virginia portfolios. He
points to U.S. Home's Heritage Hunt project, in Gainesville, Virginia, as a
good example.
"U.S. Home is among the nation's largest developers of active adult
communities," Ed says. "They took a one-time horse farm and turned it into
one of the few age-restricted communities in the Washington area. First
they got the rights to use a 'dirt bond' to finance water and sewer
service. Then they built a golf course, a clubhouse and a pool-- all the
better to lure prospective tenants. When I visited the property last
November, several units had already been pre-sold and a marketing plan was
firmly in place. I thought the location was ideal and that U.S. Home's
competitors wouldn't be able to match the project's high standard."
The Growth of a $10,000 Investment
(with all distributions reinvested)
The Tax-Exempt Fund of Maryland
Average Annual Compounding Returns<F1>
(for periods ended July 31, 2000)
1 Year 5 Years 10 Years
-1.83% +4.29% +5.77%
(Graphic: Chart showing the growth of a $10,000 investment on 7/31/90
growing to $19,775 at the rate of the Lehman Brothers Municipal Bond Index
<F2>; to $17,521 with The Tax-Exempt Fund of Maryland; and to $13,236 at
the rate of the Consumer Price Index (inflation). All chart points are for
fiscal year ended July 31)
The Tax-Exempt Fund of Virginia
Average Annual Compounding Returns<F1>
(for periods ended July 31, 2000)
1 Year 5 Years 10 Years
-0.65% +4.19% +5.80%
(Graphic: Chart showing the growth of a $10,000 investment on 7/31/90
growing to $19,775 at the rate of the Lehman Brothers Municipal Bond Index
<F2>; to $17,571 with The Tax-Exempt Fund of Virginia; and to $13,236 at
the rate of the Consumer Price Index (inflation). All chart points are for
fiscal year ended July 31)
PLOT POINTS FOR GRAPHS
Year Ended Maryland Virginia Lehman Bros
July 31 Fund Fund Muni Index CPI
1990 $ 9,625 $ 9,625 $10,000 $10,000
1991 10,341 10,400 10,873 10,445
1992 11,656 11,731 12,367 10,775
1993 12,524 12,586 13,461 11,074
1994 12,702 12,805 13,713 11,380
1995 13,665 13,773 14,792 11,695
1996 14,478 14,525 15,768 12,040
1997 15,857 15,847 17,385 12,308
1998 16,791 16,651 18,427 12,515
1999 17,174 17,019 18,957 12,784
2000 17,521 17,571 19,775 13,236
Results reflect payment of maximum sales charge of 3.75% on the $10,000
investment; thus, the net amount invested was $9,625.
As outlined in the prospectus, the sales charge is reduced for larger
investments.
[FN]
<F1> Assumes reinvestment of all distributions and payment of the $3.75%
maximum sales charge at the beginning of the stated periods.
<F2> The index is a national index not limited to Maryland or Virginia
bonds. It is unmanaged and does not reflect sales charges, commissions or
expenses.
</FN>
Past results are not predictive of future results.
What Makes the American Funds Different?
As a shareholder in The Tax-Exempt Fund of Maryland or The Tax-Exempt Fund
of Virginia, you are also a member of The American Funds Group, the
nation's third-largest mutual fund family. You won't find us advertised.
Yet thousands of financial advisers recommend the American Funds for their
clients' serious money -- money set aside for education, a home, retirement
and other important dreams.
What the 29 funds in our group have in common is a commitment to your best
interests and the proven approach of our investment adviser, Capital
Research and Management Company. In business since 1931, Capital's calling
cards include:
A long-term, value-oriented approach:
Rather than follow short-term fads, we rely on our own intensive research
to find well-managed companies with reasonably priced securities and solid,
long-term potential. Despite our size, we offer relatively few funds
compared with many large fund families, allowing us to maintain a careful
focus on our objectives and enabling you to benefit from economies of
scale.
An unparalleled global research effort:
We opened our first overseas office in 1962, well before most mutual funds
began investing internationally. Today, the American Funds draw on one of
the industry's most globally integrated research networks. Capital Research
spends substantial resources getting to know companies and industries
around the world.
A multiple portfolio counselor system:
More than 40 years ago, we developed a unique strategy for managing
investments that blends teamwork with individual accountability. Every
American Fund is divided among a number of portfolio counselors, each of
whom manages his or her portion independently, within each fund's
objectives; in most cases, research analysts manage a portion as well. Over
time, this method has contributed to consistency of results and continuity
of management.
Experienced investment professionals:
More than 75% of the portfolio counselors who serve the American Funds were
in the investment business before the sharp stock market decline in October
1987. Long tenure and experience through a variety of market conditions
mean we aren't "practicing" with your money.
A commitment to low operating expenses:
You can't control market returns, but you can control what you invest in
and how much you pay to own it. American Funds provide exceptional value
for shareholders, with operating expenses that are among the lowest in the
mutual fund industry. Our portfolio turnover rates are low as well, keeping
transaction costs and tax consequences contained.
A Portfolio for Every Investor
Most financial advisers suggest that investors balance their portfolios by
investing across several types of investments. Which mix is right for you?
That depends on a number of things -- including your risk tolerance,
investment time horizon and financial goals. The American Funds Group
offers 29 funds with an array of investment objectives to help you and your
financial adviser build a portfolio specifically tailored to your needs.
Growth Funds
Emphasis on long-term growth through stocks
AMCAP Fund(R)
EuroPacific Growth Fund(R)
The Growth Fund of America(R)
The New Economy Fund(R)
New Perspective Fund(R)
New World Fund(SM)
SMALLCAP World Fund(R)
Growth-and-Income Funds
Emphasis on long-term growth and dividends through stocks
American Mutual Fund(R)
Capital World Growth and Income Fund(SM)
Fundamental Investors(SM)
The Investment Company of America(R)
Washington Mutual Investors Fund(SM)
Equity-Income Funds
Emphasis on above-average income and growth through stocks and/or bonds
Capital Income Builder(R)
The Income Fund of America(R)
Balanced Fund
Emphasis on long-term growth and current income through stocks and bonds
American Balanced Fund(R)
Income Funds
Emphasis on current income through bonds
American High-Income Trust(SM)
The Bond Fund of America(SM)
Capital World Bond Fund(R)
Intermediate Bond Fund of America(R)
U.S. Government Securities Fund(SM)
Tax-Exempt Income Funds
Emphasis on tax-free current income through municipal bonds
American High-Income Municipal Bond Fund(R)
Limited Term Tax-Exempt Bond Fund of America(SM)
The Tax-Exempt Bond Fund of America(R)
State-specific tax-exempt funds:
The Tax-Exempt Fund of California(R)
The Tax-Exempt Fund of Maryland(R)
The Tax-Exempt Fund of Virginia(R)
Money Market Funds
Seek stable monthly income through money market instruments
The Cash Management Trust of America(R)
The Tax-Exempt Money Fund of America(SM)
The U.S. Treasury Money Fund of America(SM)
We also offer a full line of retirement plans and variable annuities.
For more complete information about any of the funds, including charges and
expenses, please obtain a prospectus from your financial adviser, download
one from our Web site at www.americanfunds.com or phone the funds' transfer
agent, American Funds Service Company at 800/421-0180. Please read the
prospectus carefully before you invest or send money. For more information,
ask your financial adviser for a copy of our brochure A Portfolio for Every
Investor.
The Tax-Exempt Fund of Maryland
As of July 31, 2000
(Graphic: Map of Maryland)
Quality Diversification:
Moody's/S&P Ratings (best of either)
(Graphic: Pie Chart showing the following percentages)
Aaa/AAA 39.1%
Aa/AA 13.0%
A/A 11.2%
Baa/BBB 10.4%
Lower than BBB or not rated 018.2%
Cash and Equivalents 08.1%
Maturity Diversification<F1>:
(Graphic: Pie Chart showing the following percentages)
Under 1 year 08.1%
1 to 10 years 53.7%
10+ to 20 years 24.3%
20+ to 30 years 12.5%
30+ years 1.4%
Average Life<F2> 10.06 years
[FN]
<F1> Securities are included at pre-refunded dates, not maturity dates.
<F2> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Maryland Fund is 11.76 years.
</FN>
Why triple tax-free investing can be worthwhile
<TABLE>
<CAPTION>
Tax-free yields vs. taxable yields
Your taxable income Combined In Maryland, a tax-exempt yield of:
Federal and 4% 5% 6% 7%
Single Joint MD tax rate<F1> is equivalent to a taxable yield of:
<S> <S> <C> <C> <C> <C> <C>
$ 3,000 - 26,250 $ 3,000 - 43,850 21.4% 5.1% 6.4% 7.6% 8.9%
26,251 - 63,550 43,851 - 105,950 33.4 6.0 7.5 9.0 10.5
63,551 - 132,600 105,951 - 161,450 36.2 6.3 7.8 9.4 11.0
132,601 - 288,350 161,451 - 288,350 40.8 6.8 8.4 10.1 11.8
Over 288,350 Over 288,350 44.1 7.2 8.9 10.7 12.5
<FN>
<F1>Based on 2000 Federal and 2000 Maryland state and county tax rates (at
7.5% individually calculated for each bracket and averaged to fit within
Federal brackets). The rates do not include an adjustment for the loss of
personal exemptions and the phase-out of itemized deductions that are
applicable at certain taxable income levels.
</FN>
</TABLE>
To use this table, find your estimated taxable income to determine your
combined Federal and Maryland tax rate. Then look at the right-hand column
to see what you would have had to earn from a taxable investment to equal
the Fund's 4.70% tax-free distribution rate in August.
Because of tax increases in recent years, many high-income investors are
finding that their returns on taxable fixed-income issues have to be even
higher to match those currently offered by tax-exempt municipals. For
instance, a couple with a taxable income of $150,000 faces a combined
Federal and Maryland tax rate of 36.2%. In this bracket, the Fund's current
4.70% distribution rate would be equivalent to a return on a taxable
fixed-income investment of 7.37%.
The Tax-Exempt Fund of Maryland
Investment Portfolio
July 31, 2000
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 455 464,864
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 1,000 1,048,720
Howard County, General Hospital Issue, Series 1993:
5.50% 2013 2,000 2,040,500
5.50% 2021 1,000 1,000,200
4,089,420
General Obligations (Local) -- 1.11%
Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 100 103,607
Montgomery County, Consolidated Public Improvement Bonds,
Series 2000 A, 5.30% 2013 1,000 1,016,670
1,120,277
General Obligations (State) -- 4.05%
Maryland General Obligation Bonds, State and Local
Facilities,Second Series Loan of 1999:
5.00% 2011 500 502,910
5.25% 2012 2,000 2,036,440
Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds, Series 1998, 5.00% 2007 1,500 1,537,380
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 1,500 1,274,205
University of Maryland Medical System Issue, Revenue Bonds,
Series 2000, 6.75% 2030 2,000 2,043,220
Prince George's County (Dimensions Health Corporation Issue):
Hospital Revenue Bonds, Series 1992, 7.20% 2006 215 220,143
Project and Refunding Revenue Bonds, Series 1994,
5.375% 2014 2,985 1,924,728
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 2,000 2,019,980
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 1,985 1,946,948
1994, 6.60% 2025 745 761,144
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio,
Series 1988 B, 7.65% 2022 25 25,547
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 500 527,275
Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), Series 1996 A,
AMT, 6.25% 2026 1,000 991,040
1,518,315
Insured -- 16.18%
City of Baltimore, Project and Refunding Revenue Bonds
(Water Projects), Series 1994 A, FGIC Insured:
6.00% 2015 1,500 1,617,705
5.00% 2024 1,220 1,133,978
Calvert County, Economic Development Refunding Revenue Bonds
(Asbury-Solomons Island Facility), Series 1997, MBIA Insured:
5.00% 2009 1,000 1,014,710
5.00% 2017 1,000 948,940
5.00% 2027 1,000 910,670
Carroll County, Revenue Bonds, EMA Obligated Group Issue
(Fairhaven and Copper Ridge), Series 1999 A, 5.50% 2019 1,265 1,241,256
City of Frederick, General Improvement Bonds, 1992 Refunding
Series, FGIC Insured, 6.125% 2008 890 932,916
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 2,000 2,235,240
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 1,000 1,144,900
Washington Metropolitan Area Transit Authority, Gross Revenue
Transit Refunding Bonds, FGIC Insured, Series 1993, 6.00% 2008 1,480 1,595,262
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 1,000 952,780
5.50% 2014 1,525
1,418,280
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 1,500 1,308,615
5.75%, 2026 1,640 1,392,770
Prince George's County, Refunding Revenue Bonds, Collington
Episcopal Life Care Community,Inc.,Series 1994 A, 6.00% 2013 2,500 2,434,950
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 2,000 2,063,180
Prince George's County, Mortgage Revenue Bonds (GNMA
Collateralized-Langley Gardens Apartments Project),
Series 1997 A,5.60% 2017 1,130 1,131,853
5,258,731
Pre-Refunded<F1> -- 10.70%
Calvert County, Economic Development Revenue Bonds (Asbury-
Solomons Island Facility), Series 1995, 8.625% 2024 (2005) 2,300 2,680,052
Frederick County, Public Facilities Bonds, Series 1991 B,
6.30% 2011 (2002) 1,370 1,442,103
Harford County, Consolidated Public Improvement Bonds,
eries 1992, 5.80% 2010 (2002) 1,400 1,463,700
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)<F2> 1,695 1,697,576
Memorial Hospital of Cumberland Issue, Revenue Refunding
Bonds, Series 1992, 6.50% 2010 (2004) 750 799,815
Suburban Hospital Issue Revenue Bonds, Series 1992,
6.50% 2017 (2002) 500 528,130
Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1,106,208
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 Techno-
Logies Baltimore L.L.C. Projects),1996 Series,AMT,6.30% 2010 3,500 3,653,931
Montgomery County, Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds, Series A, AMT:
6.00% 2006 1,115 1,154,716
6.00% 2007 1,000 1,034,780
Series 1993, 6.30% 2016 1,500 1,534,620
7,378,047
Special Obligations -- 6.54%
Montgomery County:
Revenue Authority, Golf Course System Revenue Bonds,
Series 1996 A, 6.00% 2014 2,355 2,244,692
Special Obligation Bonds (Kingsview Village Center
Development District), Series 1999, 6.90% 2021 2,410 2,413,471
Virgin Islands Public Finance Authority, Revenue and Refunding
Bonds (Virgin Islands Matching Fund Loan Notes), Series 1998 A:
5.20% 2009 1,000 967,020
5.20% 2010 1,000 959,060
6,584,243
Tax Allocation -- 1.99%
Anne Arundel County, Special Obligation Bonds (Arundel Mills
Project), Series 1999, 7.10% 2029 2,000 2,007,360
Tax Assessment Bonds -- 4.55%
Anne Arundel County, Special Obligation Bonds (National
Business Park Project), Series 2000, 7.375% 2028 1,500 1,517,640
Frederick County, Special Obligation Bonds (Urbana Community
Development Authority), Series 1998, 6.625% 2025 1,000 961,110
Prince George's County, Special Obligation Bonds (Woodview
Village Infrastructure Improvements), Series 1997 A,
8.00% 2026 1,940 2,106,704
4,585,454
Turnpikes & Toll Roads Revenue -- 1.05%
Maryland Transportation Authority Facilities Project,
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1,000 1,058,580
Water & Sewer Revenue -- 2.11%
Maryland Water Quality Financing Administration, Revolving
Loan Fund Revenue Bonds, Series 1991 B, 0% 2005 700 546,490
Washington Suburban Sanitary District, Refunding Bonds,
Series 1997, 5.75% 2017 1,510 1,578,916
2,125,406
TOTAL TAX-EXEMPT SECURITIES MATURING IN
MORE THAN ONE YEAR (cost: $92,374,000) 92,570,395
Tax-Exempt Securities Maturing in One Year or Less -- 6.65%
Hospital Facilities -- 1.39%
Maryland Health and Higher Education Facilities Authority,
Pooled Loan Program Revenue Bonds, Series 1994 D,
3.95% 2024<F3> 1,400 1,400,000
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% 20353 3,200 3,200,000
Pre-Refunded<F1> -- 2.08%
Maryland Health and Higher Education Facilities Authority,
University of Maryland Medical System Issue, Revenue
Bonds, Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1,000 1,019,390
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds, Series 1992 A, 6.30% 2009 (2001) 1,050 1,081,133
2,100,523
TOTAL TAX-EXEMPT SECURITIES MATURING IN
ONE YEAR OR LESS (cost: $6,623,000) 6,700,523
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
[FN]
<F1> Parenthetical year represents date of pre-refunding.
<F2> 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.
<F3> Coupon rate changes periodically.
</FN>
See Notes to Financial Statements
The Tax-Exempt Fund of Maryland Financial Statements
(Graphic: Map of Maryland)
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 --
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 asset value per share $15.12
Class B shares:
Net assets $1,181
Shares outstanding 78,115
Net asset value per share $15.12
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
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
Statement of Changes in Net Assets
Year ended July 31
(dollars in thousands) 2000 1999
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
The Tax-Exempt Fund of Maryland Per-Share Data and Ratios
(Graphic: Map of Maryland)
<TABLE>
<CAPTION>
Net gains
(losses) on Net
Net securities Total Distri- Net assets, Ratio
asset (both from Dividends butions asset end of Ratio of of net
Year value, Net realized invest. (from net (from Total value, Total year exp. to inc. to Portfolio
ended beginning invest. and un- oper- invest. capital distri- end of return (in avg. net avg. net turnover
July 31 of year income realized) ations income) gains) butions year <F1> millions) assets assets rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A:
2000 $15.57 $.74<F2> $(.45)<F2> $.29 $(.74) $ -- $(.74) $15.12 2.02% $100 .82% 4.92% 11.98%<F3>
1999 16.04 .74 (.37) .37 (.74) (.10) (.84) 15.57 2.28 110 .78 4.63 11.38
1998 16.02 .78 .14 .92 (.78) (.12) (.90) 16.04 5.89 101 .79 4.84 10.30
1997 15.39 .79 .63 1.42 (.79) -- (.79) 16.02 9.52 87 .82 5.08 15.27
1996 15.29 .80 .10 .90 (.80) -- (.80) 15.39 5.95 80 .81 5.14 16.01
Class B:
2000<F4> 15.01 .16<F2> .18<F2> .34 (.23) -- (.23) 15.12 2.15 1 1.53<F5> 4.21<F5> 11.98<F3>
<FN>
<F1> Total returns exclude all sales charges, including contingent deferred sales charges.
<F2> Based on average shares outstanding.
<F3> Represents portfolio turnover rate (equivalent for all share classes) for the year ended July 31, 2000.
<F4> Per-share data from March 15, 2000 when Class B shares were first offered for sale.
<F5> Annualized.
</FN>
The Tax-Exempt Fund of Virginia
As of July 31, 2000
(Graphic: Map of Virginia)
Quality Diversification:
Moody's/S&P Ratings (best of either)
(Graphic: Pie Chart showing the following percentages:)
Aaa/AAA 38.1%
Aa/AA 31.1%
A/A 7.1%
Baa/BBB 4.1%
Lower than BBBor not rated 10.9%
Cash and Equivalents 8.7%
Maturity Diversification<F1>:
(Graphic: Pie Chart showing the following percentages:)
Under 1 year 8.7%
1 to 10 years 48.0%
10+ to 20 years 35.8%
20+ to 30 years 7.5%
Average Life<F2> 9.74 years
<FN>
<F1> Securities are included at pre-refunded dates, not maturity dates.
<F2> Average life more accurately reflects the potential impact of call
options. Should no call options be exercised, the average maturity of the
Virginia Fund is 10.65 years.
</FN>
Why double tax-free investing can be worthwhile
</TABLE>
<TABLE>
<CAPTION>
Tax-free yields vs. taxable yields
Your taxable income Combined In Virginia, a tax-exempt yield of:
Federal and 4% 5% 6% 7%
Single Joint VA tax rate<F1> is equivalent to a taxable yield of:
<S> <S> <C> <C> <C> <C> <C>
$ 3,000 - 5,000 $ 3,000 - 5,000 17.6% 4.9% 6.1% 7.3% 8.5%
$ 5,001 - 17,000 $ 5,001 - 17,000 19.3 5.0 6.2 7.4 8.7
$ 17,001 - 26,250 $ 17,001 - 43,850 19.9 5.0 6.2 7.5 8.7
$ 26,251 - 63,550 $ 43,851 - 105,950 32.1 5.9 7.4 8.8 10.3
$ 63,551 - 132,600 $105,951 - 161,450 35.0 6.2 7.7 9.2 10.8
$132,601 - 288,350 $161,451 - 288,350 39.7 6.6 8.3 10.0 11.6
Over 288,350 Over 288,350 43.1 7.0 8.8 10.5 12.3
<FN>
<F1> Based on 2000 Federal and 2000 Virginia tax rates (at 3% to 5.75%
individually calculated for each bracket and averaged to fit within Federal
brackets). The rates do not include an adjustment for the loss of personal
exemptions and the phase-out of itemized deductions that are applicable at
certain taxable income levels.
</FN>
</TABLE>
To use this table, find your estimated taxable income to determine your
combined Federal and Virginia tax rate. Then look at the right-hand column
to see what you would have had to earn from a taxable investment to equal
the Fund's 4.46% tax-free distribution rate in August.
Because of tax increases in recent years, many high-income investors are
finding that their returns on taxable fixed-income issues have to be even
higher to match those currently offered by tax-exempt municipals. For
instance, a couple with a taxable income of $150,000 faces a combined
Federal and Virginia tax rate of 35.0%. In this bracket, the Fund's current
4.46% distribution rate would be equivalent to a return on a taxable
fixed-income investment of 6.86%.
The Tax-Exempt Fund of Virginia
Investment Portfolio
July 31, 2000
(Graphic: Map of Virginia)
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 ServicesSystem 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 1,700 1,723,239
6.50% 2007 1,000 1,060,530
2,783,769
General Obligations (Local) -- 9.29%
Arlington County:
Public Improvement Bonds, Series 1996, 6.00% 2011 1,000 1,091,980
Refunding Bonds, Series 1993, 6.00% 2012 1,000 1,090,770
Chesapeake Refunding Bonds, Series 1993, 5.40% 2008 1,000 1,046,690
Hampton Public Improvement Refunding Bonds, Series:
2000, 5.25% 2011 1,000 1,025,570
1998, 5.00% 2013 2,240 2,212,359
1998, 5.00% 2014 2,960 2,904,529
Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1,195 1,236,251
10,608,149
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 1,015 991,949
5.00% 2009 1,020 988,920
Fairfax County:
Industrial Development Authority, Health Care Revenue
Refunding Bonds (INOVA Health System Project),
Series 1998 A, 5.00% 2011 1,500 1,463,325
Industrial Development Authority, Hospital Revenue
Refunding Bonds (INOVA Health Systems Hospital Project),
Series 1993 A:
5.00% 2007 750 754,185
5.25% 2019 2,500 2,408,200
5.00% 2023 500 457,500
Industrial Development Authority of Halifax County,
Hospital Refunding Revenue Bonds (Halifax Regional
Hospital, Inc.), Series 1998:
4.65% 2007 600
555,252
4.80% 2009 1,000 919,550
5.00% 2011 1,000 919,460
Industrial Development Authority of Henry County, Hospital
Revenue Bonds (Memorial Hospital of Martinsville and
Henry County), Series 1997, 6.00% 2017 1,000 1,014,110
Peninsula Ports Authority, Health System Revenue and
Refunding Bonds (Riverside Health System Project), Series:
1992 A, 5.00% 2008 1,200 1,198,008
1998, 5.00% 2009 1,100 1,093,312
12,763,771
Housing Finance Authority Revenue -- 3.59%
Commonwealth of Puerto Rico Housing Finance Corporation,
SingleFamily Mortgage Revenue Bonds, 1st Portfolio,
Series 1988 B, 7.65% 2022 35 35,766
Virginia Housing Development Authority, Commonwealth Mortgage
Bonds, Series:
1994 H, Sub-Series H-1, 6.10% 2003 500 507,285
1998 E, Sub-Series E-1, 4.50% 2005 1,190 1,172,650
2000 A AMT, Sub-Series A-3, 5.55% 2006 730 744,549
2000 A AMT, Sub-Series A-1, 5.65% 2010 1,605 1,633,938
4,094,188
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 1,000 916,550
5.45% 2014 1,000 836,570
Puerto Rico Ports Authority, Special Facilities Revenue
Bonds (American Airlines, Inc. Project), Series 1996 A AMT,
6.25% 2026 1,000 991,040
2,744,160
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 3,000 3,025,351
Industrial Development Authority of Danville, Hospital
Revenue Bonds (Danville Regional Medical Center),
Series 1998, AMBAC Insured:
5.25% 2012 1,995 2,008,227
5.25% 2013 2,000 1,998,900
Industrial Development Authority of Fairfax County, Hospital
Revenue Refunding Bonds (INOVA Health System Hospitals
Project),Series 1993 A, FSA Insured, 5.25% 2019 1,000 968,980
Fairfax County Redevelopment and Housing Authority,
Multifamily Housing Revenue Bonds (Grand View Apartments
Project), Series 1998 A, FHA Insured, 5.05% 2010 1,000 962,020
Industrial Development Authority of the County of Hanover,
Hospital Revenue Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA Insured:
6.50% 2010 1,375 1,534,486
6.375% 2018 1,500 1,639,515
Industrial Development Authority of Loudoun County, Hospital
Revenue Bonds, FSA Insured, 6.00% 2005 1,000 1,054,450
Industrial Development Authority of the City of Norfolk,
Health Care Revenue Bonds (Bon Secours Health System),
Series 1997, MBIA Insured, 5.00% 2007 1,250 1,266,625
Northern Virginia Transportation District Commission
(Virginia Railway Express Project), Commuter Rail Revenue
Refunding Bonds,Series 1998, FSA Insured:
5.375% 2011 1,000 1,026,240
5.375% 2014 1,000 1,003,000
Pamunkey Regional Jail Authority, Jail Facility Revenue
Bonds, Series 1996, MBIA Insured, 5.70% 2010 1,000 1,049,590
Industrial Development Authority of the County of Prince
William, Hospital Facility Refunding Revenue Bonds (Potomac
HospitalCorporation of Prince William), Series 1998,
FSA Insured, 5.00% 2018 1,000
920,820
Richmond Metropolitan Authority, Expressway Revenue and
Refunding Bonds, FGIC Insured, Series 1998, 5.25% 2012 1,000 1,018,210
Industrial Development Authority of Russell County,
Pollution Control Revenue Bonds (Appalachian Power Company
Project),Series H, MBIA Insured, 5.00% 2021 1,110 1,011,698
Southeastern Public Service Authority, Senior Revenue
Refunding Bonds, Series 1998, AMBAC Insured, 5.00% 2015 3,000 2,900,371
City of Virginia Beach Development Authority, Hospital
Revenue Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1,000 1,079,850
Virginia College Building Authority, Educational Facilities
Revenue and Refunding Bonds (Hampton-Sydney CollegeProject),
Series 1998, MBIA Insured, 5.00% 2016 1,180 1,124,151
Metropolitan Washington Airports Authority, Airport System
Revenue and Refunding Bonds, Series 1998, MBIA Insured AMT,
5.25% 2010 1,000 1,018,470
26,610,954
Lease Revenue (State) -- 1.78%
Virginia Public Building Authority, Public Facilities Revenue
Bonds, Series:
1998 B, 5.00% 2010 1,000 1,007,540
2000 A, 5.75% 2016 1,000 1,028,720
2,036,260
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 500 494,635
7.50% 2029 2,500 2,543,100
3,037,735
Multi-Family Housing -- 4.10%
Virginia Housing Development Authority, Multi-Family
Housing Bonds, Series:
1998 I-AMT, 4.60% 2009 1,320 1,261,207
1998 I-AMT, 4.70% 2010 1,240 1,185,043
1997 B-AMT, 5.80% 2010 1,185 1,228,063
1996 B, 5.95% 2016 1,000 1,011,880
4,686,193
Pre-Refunded<F1> -- 9.59%
Danville Industrial Development Authority, Hospital Revenue
Bonds, Danville Regional Medical Center, Series 1994,
FGIC Insured, 6.00% 2007 (2004) 1,000 1,061,710
Fairfax County Industrial Development Authority,
Hospital Revenue Bonds (Fairfax Hospital System Project),
INOVA Health Systems, Series 1991 C, 6.801% 2023 (2001) 1,000 1,041,600
Newport News General Obligation, Water Bonds, Series A 1992,
6.125% 2009 (2002) 1,170 1,223,317
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding Bonds
(Mary Immaculate Project), 1994 Series, 6.875% 2010 (2004) 1,900 2,078,125
Health System Revenue and Refunding Bonds (Riverside Health
System Project), Series 1992 A, 6.625% 2010 (2002) 1,300 1,374,373
Roanoke Valley Resource Authority, Solid Waste System Revenue
Bonds, Series 1992, 5.75% 2012 (2002) 1,500 1,564,635
Virginia Beach, Virginia Development Authority (Sentara
Bayside Hospital), 6.60% 2009 (2001) 1,000 1,046,090
Virginia College Building Authority Educational Facilities
Revenue Bonds (Marymount University Project), Series 1992,
6.875% 2007 (2002) 1,485 1,564,463
10,954,313
Pollution Control -- 1.53%
Industrial Development Authority of the County of Charles
City, Solid Waste Disposal Facility Revenue Refunding Bonds
(USA Wasteof Virginia, Inc. Project), Series 1999,
4.875% 2009 2,000 1,743,960
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 1,000 1,003,150
1998 A, 5.20% 2009 1,000 967,020
1,970,170
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 1,600 1,629,744
State Authority -- 3.20%
Virginia Public School Authority, School Financing Bonds:
(1997 Resolution), Series 1998 A, 5.25% 2007 2,000 2,065,580
(1991 Resolution), Series 1994 A, 6.20% 2014 1,500 1,591,125
3,656,705
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 2,500 2,319,950
Heritage Hunt Commercial Community Development Authority
(Prince William County), Special Assessment Bonds, Series:
1999 A, 6.85% 2019 2,500 2,497,200
1999 B, 7.00% 2029 500 496,295
Virginia Gateway, Community Development Authority(Prince
William County), Special Assessment Bonds, Series 1999,
6.25% 2026 2,500 2,305,825
7,619,270
Water & Sewer Revenue -- 3.37%
Chesterfield County Water and Sewer Revenue Refunding Bonds,
Series 1992, 6.375% 2009 1,250 1,317,437
City of Richmond, Public Utility Revenue and Refunding Bonds,
Series 1998 A, 5.25% 2009 1,500 1,541,700
Fairfax County Water Authority, Water Refunding Revenue Bonds,
Series 1997, 5.00% 2021 1,000 936,880
Virginia Resources Authority, Water and Sewer System Revenue
Bonds (Pooled Loan Program), Series 1986 A, 7.50% 2017 50 50,368
3,846,385
TOTAL TAX-EXEMPT SECURITIES MATURING IN
MORE THAN ONE YEAR (cost: $103,762,000) 104,312,286
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<F2> 1,600 1,600,000
Pre-Refunded<F1> -- 5.91%
Henry County Public Service Authority, Water and Sewer
Revenue Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1,250 1,272,662
Norfolk:
Capital Improvement and Refunding Bonds, Series 1992 A,
6.00% 2011 (2001) 500 514,090
Industrial Development Authority, Hospital Revenue Bonds:
(Children's Hospital of the King's Daughters Obligated
Group), Series 1991, AMBAC Insured, 7.00% 2011 (2001) 400 416,464
(Sentara Hospitals -- Norfolk Project), Series 1991,
7.00% 2020 (2000) 250 256,568
Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured,
6.50% 2021 (2001) 680 706,445
Roanoke Public Improvement and Refunding Bonds, Series 1992 B:
6.375% 2009 (2001) 250 259,773
6.40% 2011 (2001) 500 522,060
University of Virginia, Hospital Revenue Bonds, Series 1984 A,
HIBI Insured, 9.875% 2001 (2000) 10 10,367
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 710,647
Virginia Public Building Authority, State Building Revenue
Bonds, Series 1991 A, 6.50% 2011 (2001) 1,750 1,820,525
Virginia Resources Authority, Water and Sewer Systems
Revenue Bonds, Series 1990, 7.25% 2011 (2000) 250 256,122
6,745,723
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) 112,658,009
Excess of cash and receivables over payables 1,540,889
NET ASSETS $114,198,898
[FN]
<F1> Parenthetical year represents date of pre-refunding.
<F2> Coupon rate changes periodically.See Notes to Financial Statements
[FN]
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia Financial Statements
(Graphic: Map of Virginia)
Statement of Assets and Liabilities
July 31, 2000
(dollars in thousands)
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
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
Statement of Changes in Net Assets
Year ended July 31
(dollars in thousands) 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
The Tax-Exempt Fund of Virginia
Per-Share Data and Ratios
(Graphic: Map of Virginia)
<TABLE>
<CAPTION>
Net gains
(losses) on Net
Net securities Total Distri- Net assets, Ratio
asset (both from Dividends butions asset end of Ratio of of net
Year value, Net realized invest. (from net (from Total value, Total year exp. to inc. to Portfolio
ended beginning invest. and un- oper- invest. capital distri- end of return (in avg. net avg. net turnover
July 31 of year income realized) ations income) gains) butions year <F1> millions) assets assets rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A:
2000 $15.82 $.74<F2> $(.25)<F2> $.49 $(.74) $ -- $(.74) $15.57 3.24% $114 .80% 4.77% 22.37%<F3>
1999 16.36 .73 (.36) .37 (.73) (.18) (.91) 15.82 2.21 125 .77 4.46 12.72
1998 16.37 .78 .03 .81 (.78) (.04) (.82) 16.36 5.08 115 .78 4.73 24.66
1997 15.77 .80 .60 1.40 (.80) -- (.80) 16.37 9.10 101 .81 4.99 18.41
1996 15.79 .81 .03 .84 (.81) (.05) (.86) 15.77 5.46 90 .79 5.11 27.34
Class B:
2000<F4> 15.28 .18<F2> .34<F2> .52 (.23) -- (.23) 15.57 3.30 -- 1.55<F5> 4.03<F5> 22.37<F3>
<FN>
<F1> Total returns exclude all sales charges, including contingent deferred sales charges.
<F2> Based on average shares outstanding.
<F3> Represents portfolio turnover rate (equivalent for all share classes) for the year ended July 31, 2000.
<F4> Per-share data from March 15, 2000 when Class B shares were first offered for sale.
<F5> Annualized.
</FN>
</TABLE>
Notes to Financial Statements
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 circum-stances 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 .0165% 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:
The Tax-Exempt The Tax-Exempt
(dollars in thousands) Fund of Maryland Fund of Virginia
Capital paid in on shares of
beneficial interest $100,668 $113,454
Accumulated net realized loss (243) (116)
Net unrealized appreciation 274 861
Net Assets $100,699 $114,199
The Tax-Exempt Fund of Maryland
Capital share transactions were as follows:
<TABLE>
<CAPTION>
Year ended July 31, 2000 Year ended July 31, 1999
(dollars in thousands) Amount Shares Amount Shares
<S> <C> <C> <C> <C>
Class A shares:
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)
Net (decrease) increase in Class A (7,769) (511,845) 12,315 765,692
Class B shares:<F1>
Sold 1,183 78,684 -- --
Reinvestment of dividends 2 144 -- --
Repurchased (11) (713) -- --
Net increase in Class B 1,174 78,115 -- --
Total net (decrease) increase in share transactions
$(6,595) (433,730) $12,315 765,692
<FN>
<F1>Class B shares offered for sale commencing March 15, 2000
</FN>
</TABLE>
The Tax-Exempt Fund of Virginia
<TABLE>
<CAPTION>
Year ended July 31, 2000 Year ended July 31, 1999
(dollars in thousands) Amount Shares Amount Shares
<S> <C> <C> <C> <C>
Class A shares:
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)
Net (decrease) increase in Class A (8,480) (551,501) 14,258 870,089
Class B shares:<F1>
Sold 156 10,184 -- --
Reinvestment of dividends -- 39 -- --
Repurchased -- (10) -- --
Net increase in Class B 156 10,213 -- --
Total net (decrease) increase in share transactions
$( 8,324) (541,288) $14,258 870,089
FN>
<F1>Class B shares offered for sale commencing March 15, 2000
</FN>
</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.
(signature: PriceWaterhouseCoopers LLP)
Los Angeles, California
August 31, 2000
Tax Information (unaudited)
During the fiscal year ended July 31, 2000, the Maryland and Virginia Funds
paid 74.6 and 73.6 cents per Class A share, and 22.6 and 22.5 cents per
Class B share, respectively, of exempt-interest distributions within the
meaning of Section 852(b)(5)(A) of the Internal Revenue Code.
This information is given to meet certain requirements of the Internal
Revenue Code and should not be used by shareholders for preparing their
income tax returns. For tax return preparation purposes, please refer to
the calendar year-end information you receive from the Funds' transfer
agent.
Since the amounts above are reported for the Funds' fiscal year and not the
calendar year, shareholders should refer to their Form 1099-DIV or other
tax information which will be mailed in January 2001 to determine the
calendar year amounts to be included on their 2000 tax returns.
Shareholders should consult their tax advisers.
Shareholder Services
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(Graphic: telephone)
American FundsLine(R)
Use our 24-hour automated phone system for fund information and
transactions.
(Graphic: Computer)
FundsLine Online(R)
Visit our Web site when you want to access your account, download a
prospectus, or find fund information.
(Graphic: coins)
Reduced sales charge
Larger purchases may qualify for a reduced sales charge. To help reach a
breakpoint, you may:
- Add your present purchase to the value of all eligible
household accounts
and/or
- Add your present purchase to purchases you intend to make
over 13 months.
Assets in money market funds generally do not apply when determining sales
charges.
(Graphic: Stylized Bank Building)
American FundsLink(SM)
Link your fund account to your bank account for direct transfers between
the two and to purchase shares using American FundsLine or FundsLine
OnLine.
(Graphic: calendar)
Automatic Transactions
Use this service when you want to purchase, sell and exchange shares on a
regular basis.
(Graphic: Hominid directing funds from box to box)
Flexible dividend options
Use your dividend and capital gain distributions to meet your changing
needs.
You may:
- Invest dividends and capital gain distributions back into the fund
- Diversify by investing dividends and capital gain distributions
into another American Fund.
- Take dividends in cash
- Have dividends paid directly to someone else.
Because certain transactions have restrictions or tax consequences, please
consult your financial adviser before requesting changes.
Would you like more information?
Your financial adviser will be happy to explain these services in greater
detail, or you may contact American Funds Service Company.
To contact The American Funds Service Company:
Shareholder Services Representative --
8 a.m. to 8 p.m. Eastern time, Monday- Friday -- 800/421-0180
American FundsLine -- 24-hour automated telephone system -- 800/325-3590
FundsLine OnLine -- Web site -- www.americanfunds.com
By mail -- Write to P.O. Box 2280, Norfolk, VA, 23501-2280
Please obtain the applicable prospectuses from your financial adviser or
our Web site and read them carefully before investing or sending money.
American Funds reserves the right to terminate or modify these services.
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Chairman and Chief Executive Officer, The Johnston-Lemon Group,
Incorporated
Stephen Hartwell
Chairman Emeritus of the Trust
Chairman, Washington Management Corporation
Harry J. Lister
President of the Trust
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International LLC
James C. Miller III
Counselor, Citizens for a Sound Economy
T. Eugene Smith
President, T. Eugene Smith, Inc.
Margita E. White
President, Association for Maximum Service Television Inc.
Stephen G. Yeonas
Chairman and Chief Executive Officer, Stephen G. Yeonas Co.
Other officers
Jeffrey L. Steele
Executive Vice President of the Trust
Director and Executive Vice President, Washington Management Corporation
Howard L. Kitzmiller
Senior Vice President, Secretary/Treasurer of the Trust
Director, Senior Vice President, Secretary and Assistant Treasurer,
Washington Management Corporation
Lois A. Erhard
Vice President of the Trust
Vice President, Washington Management Corporation
Michael W. Stockton
Assistant Vice President, Assistant Secretary and Assistant Treasurer of
the Trust
Vice President, Assistant Secretary and Assistant Treasurer, Washington
Management Corporation
J. Lanier Frank
Assistant Vice President of the Trust
Assistant Vice President, Washington Management Corporation
Ashley L. Shaw
Assistant Secretary of the Trust
Assistant Secretary, Washington Management Corporation
Office of the Funds and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment ADVISER
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92821-5804
Transfer Agent
American Funds Service Company
P.O. Box 2280Norfolk, VA 23501-2280
Custodian of Assets
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081-0001
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005-2216
Principal Underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1462
Independent Accountants
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-3406
There are two ways to invest in The Tax-Exempt Fund of Maryland and the
Tax-Exempt Fund of Virginia. Class A shares are subject to a 3.75% maximum
up-front sales charge that declines for accounts of $100,000 or more. Class
B shares have no up-front charge. They are, however, subject to additional
expenses of approximately 0.75% a year over the first eight years of
ownership. If redeemed within six years, they may also be subject to a
contingent deferred sales charge (5% maximum) that declines over time.
For information about your account or any of the Funds' services or for a
prospectus on any of the American Funds, please contact your financial
adviser. You may also call American Funds Service Company, toll-free, at
800/421-0180 or visit www.americanfunds.com on the World Wide Web. Please
read the prospectus carefully before you invest or send money.
This report is for the information of shareholders in the Funds that
comprise The American Funds Tax-Exempt Series I, but it may also be used as
sales literature when preceded or accompanied by the current prospectus,
which gives details about charges, expenses, investment objectives and
operating policies of the Funds. If used as sales material after September
30, 2000, this report must be accompanied by an American Funds Group
Statistical Update for the most recently completed calendar quarter.
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Printed on recycled paper
TEFMD/TEFVA-011-0900
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The American Funds Tax-Exempt Series I
The Tax-Exempt Fund of Maryland / The Tax-Exempt Fund of Virginia
