(Logo)The American Funds Group(R)
The American Funds
Tax-Exempt Series I
The Tax-Exempt Fund
of Maryland
The Tax-Exempt Fund
of Virginia
Semi Annual Report / January 31, 2000
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia are two of
the 29 funds in The American Funds Group,_ 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.
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.
Fund results in this report were calculated for A shares at net asset value
(without a sales charge) unless otherwise indicated. Here are the average
annual compound returns with all distributions reinvested for periods ended
December 31, 1999 (the most recent calendar quarter), assuming payment of the
3.75% maximum sales charge at the beginning of the stated periods:
Maryland Fund Virginia Fund
10 years +5.66% +5.64%
5 years +5.52% +5.18%
12 months -6.01% -6.18%
Sales charges are lower for accounts of $100,000 or more.
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.
Please see back cover for important information about Class A (existing shares
renamed) and Class B shares, which will be offered effective
March 15, 2000.
Fellow Shareholders
As a result of rising interest rates, the six months ended January 31 _ the
first half of fiscal 2000 for The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia _ were very disappointing for the municipal bond
markets.
In its effort to keep inflation at bay as the economy steamed ahead, the
Federal Reserve raised the Federal funds rate _ a key driver of short-term
interest rates _ in two increments, from 5.0% to 5.5%. In early February,
just after the end of the period, the Fed acted again, bumping the rate to
5.75%. Of course, as rates rose, existing bonds paying older, lower rates
became less valuable.
The net asset values of the Maryland and Virginia Funds suffered. During the
half-year, the share price for the Maryland Fund fell 76 cents, from $15.57 to
$14.81. The share price for the Virginia Fund was down 69 cents, from $15.82
to $15.13. Partially offsetting the declines in share values, each Fund paid
income dividends totaling 37 cents a share.
If, like most shareholders, you reinvested your dividends your total return
was...
-2.6% for the Maryland Fund
-2.1% for the Virginia Fund
Income returns remained very attractive relative to taxable bonds. The
Maryland Fund's six-month tax-free income return of 2.4% with dividends
reinvested, or 4.8% on an annualized basis, was the equivalent of 8.5% a year
from a taxable investment if you are in the highest combined Federal, state and
local tax bracket of 44.1%.
The Virginia Fund's six-month tax-free income return of 2.3%
(with dividends reinvested), or 4.7% on an annualized basis, was the equivalent
of 8.2% a year from a taxable investment if you are in the highest combined
Federal and state tax bracket of 43.1%.
Portfolio Changes
Inevitably, some investors react to disappointments by selling shares. The
Funds' longstanding emphasis on liquidity enables the investment adviser not
only to meet the need for extra cash but also to invest at higher yields,
bolstering future income flows.
In the Maryland portfolio, a number of higher rated bonds were replaced with
lower rated, higher yielding issues. In the Virginia portfolio, sales were
from the middle of the quality spectrum and additions at both the top and
bottom.
The average life of both portfolios rose by more than a year, to about 10
years. This reflected the fact that when rates are rising, some bond prices
are based on actual maturity dates rather than the dates on which they might be
"called" (paid off early). The most significant concentrations in both
portfolios, however, were pre-refunded bonds, which have relatively short
maturities. These rock-solid securities _ bonds that, upon being replaced
with new, lower coupon issues, have been escrowed in U.S. Treasury bonds _
represented 14% of assets in the Maryland Fund and 15% of assets in the
Virginia Fund as of January 31.
Another significant concentration in the Maryland Fund was single-family
housing bonds (13% of assets). Housing bonds typically do well when municipals
are under pressure, and this time around was no exception.
In Virginia, another major sector was hospital facility bonds (17% of assets).
Hospitals around the nation have been struggling to compete in an environment
where managed care providers increasingly call the shots. Many Virginia
hospitals have little or no competition in their service areas, so they are
less likely to lose business due to decisions by managed care providers.
Insured bonds played a major role in both portfolios, representing 17% of the
Maryland Fund's assets and 23% of the Virginia Fund's assets as of January 31.
Because credit risks are minimal, changes in prices of insured bonds depend
almost entirely on changes in interest rates.
Looking ahead
During the 1990s, the municipal bond sector had two bad calendar years _ 1994
and 1999. The worst year for The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia was 1994, when both were down 4.8%. Interestingly,
the very next year, 1995, was the best year ever for the two Funds: they were
up 16.4% and 15.9%, respectively. Of course, it is impossible to know what
might happen this year.
This much we do know: all investments have their ups and downs, but municipal
bond funds, historically, have proved to be among the most stable. That is a
characteristic many find increasingly comforting in today's volatile financial
markets.
Your Fund is managed to keep you ahead of inflation over the long haul. If
that goal sounds appropriate, we strongly believe that your Fund is the right
place to be. It is worth observing that, despite recent results, the Maryland
Fund's average annual compound return since inception on August 14, 1986, has
been 5.9%, and for the Virginia Fund, the average annual compound return has
been 6.2%. Meanwhile, the cost of living has risen by an average of 3.2% 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
March 13, 2000
The Funds' 30-day yields as of February 29, 2000, calculated in accordance with
the Securities and Exchange Commission formula, were 4.59% for the Maryland
Fund and 4.48% for the Virginia Fund. The Funds' distribution rates as of that
date were 5.00% and 4.85%, respectively. The SEC yield reflects income each
Fund expects to earn based on its current portfolio of securities, while the
distribution rate is based solely on the Funds' 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 Tax-Exempt Fund of Maryland
January 31, 2000
Quality Diversification:
Moody's/S&P Ratings (best of either)
(a pie chart showing the following distribution)
Aaa/AAA 43.6%
Aa/AA 14.6%
A/A 10.8%
Baa/BBB 11.1%
Lower than BBB 14.7%
Cash and Equivalents 5.2%
Maturity Diversification<F1>:
(a pie chart showing the following distribution)
Under 1 year 05.2%
1 to 10 years 53.8%
10+ to 20 years 28.7%
20+ to 30 years 11.0%
30+ years 1.3%
Average Life<F2> 10.48 years
[FN]
<F1>Securities are included at pre-refunded dates, not maturity dates.
<F2>Average life more accurately reflects the potential impact of call options.
Should no call options be exercised, the average maturity of the Maryland Fund
is 14.16 years.
</FN>
The Tax-Exempt Fund of Maryland
(graphic: Maryland Map)
Investment Portfolio
January 31, 2000
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year _ 94.83%
College & University Revenue _ .92%
Frederick County, College Revenue Bonds
(Hood College Project), Series 1990:
7.05% 2004 $ 410 $ 422,333
7.05% 2005 455 468,686
891,019
General Obligations (Local) _ 1.60%
Anne Arundel County, Consolidated Water and
Sewer, 1993 Refunding Series, 5.30% 2016 500 468,970
Harford County Consolidated Public
Improvement Bonds, Series 1992, 5.80% 2010 100 102,561
Montgomery County, Consolidated Public
Improvement Bonds, Series 2000 A,
5.30% 2013 1,000 976,310
1,547,841
General Obligations (State) _ 4.06%
Maryland General Obligation Bonds,
State and Local Facilities, Second Series
Loan of 1999:
5.00% 2011 500 482,445
5.25% 2012 2,000 1,965,000
Commonwealth of Puerto Rico,
Public Improvement Refunding Bonds,
Series 1998, 5.00% 2007 1,500 1,476,690
3,924,135
Hospital & Health Facilities Revenue _ 8.00%
Maryland Health and Higher Educational
Facilities Authority:
Good Samaritan Hospital Issue,
Revenue Bonds, Escrowed to Maturity,
Series 1993, 5.70% 2009 1,000 1,021,500
Howard County, General Hospital Issue,
Escrowed to Maturity, Series 1993:
5.50% 2013 2,000 1,973,980
5.50% 2021 1,000 952,010
Suburban Hospital Issue, Revenue
Refunding Bonds, Series 1993,
5.125% 2021 1,500 1,207,860
Prince George's County (Dimensions Health
Corporation Issue):
Hospital Revenue Bonds, Series 1992,
7.20% 2006 215 219,889
Project and Refunding Revenue Bonds,
Series 1994, 5.375% 2014 2,985 2,366,687
7,741,926
Housing Finance Authority Revenue _ 12.57%
Maryland Community Development
Administration, Department of Housing and
Community Development:
Residential Revenue Bonds, 1998 Series B, AMT:
5.00% 2008 1,610 1,543,732
5.00% 2009 1,680 1,593,161
Single-Family Program Bonds, First Series:
1994 5.80% 2009 2,000 2,002,900
1994 5.70% 2017 2,085 2,083,916
1990 7.60% 2017 385 390,667
Montgomery County, Housing Opportunities
Commission, Single Family Mortgage
Revenue Bonds Series:
1998 B, 4.80% 2009 600 574,098
1997 A, 5.50% 2009 660 653,763
1998 B, 4.90% 2010 500 476,695
Prince George's County Housing Authority,
GNMA/FNMA Collateralized Single Family
Mortgage Bonds, Series:
1998 A, AMT, 4.65% 2019 2,000 1,949,680
1994 A, AMT, 6.60% 2025 830 842,749
Commonwealth of Puerto Rico Housing
Finance Corporation, Single Family
Mortgage Revenue Bonds, 1st Portfolio,
Series 1988 B, 7.65% 2022 45 46,237
12,157,598
Industrial Development Revenue _ 2.07%
Mayor and City Council of Baltimore,
Port Facilities Revenue Bonds (Consolidation
Coal Sales Company Project), Series:
1984 A, 6.50% 2011 500 528,550
1984 B, 6.50% 2011 500 528,550
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc.
Project), Series 1996 A, AMT, 6.25% 2026 1,000 945,740
2,002,840
Insured _ 17.16%
City of Baltimore, Project and Refunding
Revenue Bonds (Water Projects), Series A,
FGIC Insured:
1994, 6.00% 2015 1,500 1,549,560
1994, 5.00% 2024 1,220 1,039,013
Calvert County, Economic Development
Refunding Revenue Bonds (Asbury-Solomons
Island Facility), Series 1997, MBIA Insured:
5.00% 2009 1,000 975,040
5.00% 2017 1,000 882,470
5.00% 2027 1,000 835,270
Carroll County, Revenue Bonds, EMA
Obligated Group Issue (Fairhaven and
Copper Ridge), Series 1999 A, 5.50% 2019 1,265 1,155,932
City of Frederick, General Improvement Bonds,
1992 Refunding Series, FGIC Insured,
6.125% 2008 890 925,289
Maryland Health and Higher Educational
Facilities Authority:
Medlantic/Helix Health Issue, Revenue Bonds:
FSA Insured, Series 1998 B, 5.25% 2011 1,000 976,740
AMBAC Insured, Series 1998 A, 5.25% 2038 1,500 1,281,390
Mercy Medical Center Issue Project and
Refunding Revenue Bonds, Series 1996,
FSA Insured, 6.50% 2013 2,000 2,160,440
Prince George's County, Solid Waste
Management System Revenue Bonds,
Series 1993, FSA Insured, 6.50% 2007 2,000 2,117,680
Commonwealth of Puerto Rico, MBIA Insured:
Electric & Power Authority, Series 1995 Y,
7.00% 2007 1,000 1,119,661
Public Improvement Bonds of 1987, 6.75% 2006 25 25,297
Washington Metropolitan Area Transit Authority,
Gross Revenue Transit Refunding Bonds,
FGIC Insured, Series 1993, 6.00% 2008 1,480 1,553,126
16,596,908
Life Care Facilities Revenue _ 8.30%
Maryland Health and Higher Educational
Facilities Authority, Refunding and
Project Revenue Bonds, Roland Park
Place Issue, Series 1999:
5.40% 2011 1,000 886,950
5.45% 2012 1,000 876,740
5.50% 2014 1,525 1,333,735
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 1,278,495
5.75%, 2026 1,640 1,357,953
Prince George's County, Refunding Revenue
Bonds, Collington Episcopal Life Care
Community, Inc., Series 1994 A, 6.00% 2013 2,500 2,290,949
8,024,822
Multi-Family Housing _ 5.33%
Montgomery County, Maryland Housing
Opportunities Commission, Multi-Family
Revenue Bonds, Series:
1995 A, 6.10% 2015 2,025 2,034,457
1994 A-2, 7.50% 2024 2,000 2,048,740
Prince George's County, Mortgage Revenue
Bonds (GNMA Collateralized-Langley Gardens
Apartments Project), Series 1997 A, 5.60% 2017 1,130 1,077,545
5,160,742
Pre-Refunded<F1> _ 13.85%
Calvert County, Economic Development
Revenue Bonds (Asbury-Solomons Island Facility),
Series 1995, 8.625% 2024 (2005) 2,300 2,667,609
Frederick County, Public Facilities Bonds,
Series 1991, B, 6.30% 2011 (2002) 1,370 1,445,405
Harford County, Consolidated Public Improvement
Bonds, Series 1992, 5.80% 2010 (2002) 1,400 1,462,804
Howard County, Metropolitan District Refunding
Bonds, 1991 Series A, 6.625% 2021 (2001) 500 517,105
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 1,685,966
Memorial Hospital of Cumberland Issue,
Revenue Refunding Bonds, Series 1992,
6.50% 2010 (2004) 750 794,813
Suburban Hospital Issue Revenue Bonds,
Series 1992, 6.50% 2017 (2002) 500 529,780
University of Maryland Medical System Issue,
Revenue Bonds, Series 1991 A, FGIC
Insured, 6.50% 2021 (2001) 1,000 1,028,420
Prince George's County, Hospital Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1992, 7.20% 2006 (2002) 1,035 1,112,822
Commonwealth of Puerto Rico, Public
Improvement Bonds of 1992, MBIA Insured,
6.50% 2009 (2002) 1,000 1,058,380
University of Maryland System Auxiliary Facility
and Tuition Revenue Bonds, Series 1992 A,
6.30% 2009 (2001) 1,050 1,092,272
13,395,376
Resource Recovery _ 6.97%
Maryland Energy Financing Administration,
Limited Obligation Solid Waste Disposal
Revenue Bonds (Wheelabrator Water
Technologies Baltimore L.L.C. Projects),
1996 Series, AMT, 6.30% 2010 3,500 3,572,030
Montgomery County, Northeast Maryland
Waste Disposal Authority, Solid Waste
Revenue Bonds, Series A, AMT:
6.00% 2006 1,115 1,142,619
6.00% 2007 1,000 1,023,040
Series 1993, 6.30% 2016 1,000 1,009,270
6,746,959
Special Obligations _ 6.62%
Montgomery County Revenue Authority,
Golf Course System Revenue Bonds,
Series 1996 A, 6.00% 2014 2,355 2,200,206
Montgomery County, Special Obligation Bonds
(Kingsview Village Center Develepment District),
Series 1999, 6.90% 2021 2,410 2,361,029
Virgin Islands Public Finance Authority,
Revenue and Refunding Bonds (Virgin Islands
Matching Fund Loan Notes), Series 1998 A:
5.20% 2009 1,000 930,830
5.20% 2010 1,000 912,860
6,404,925
Tax Allocation _ 2.02%
Anne Arundel County, Special Obligation
Bonds (Arundel Mills Project), Series 1999,
7.10% 2029 2,000 1,955,700
Tax Assessment Bonds _ 2.19%
Prince George's County, Special Obligation
Bonds (Woodview Village Infrastructure
Improvements), Series 1997 A, 8.00% 2026 1,970 2,119,581
Turnpikes & Toll Roads Revenue _ 1.07%
Maryland Transportation Authority Facilities
Project, Transportation Facilities Projects
Revenue Bonds, Series 1992, 5.80% 2006 1,000 1,039,240
Water & Sewer Revenue _ 2.10%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series
1991 B, 0% 2005 700 521,570
Washington Suburban Sanitary District,
Refunding Bonds, Series 1997, 5.75% 2017 1,510 1,507,403
2,028,973
91,738,585
Tax-Exempt Securities Maturing in One Year or Less _ 3.51
Industrial Development Revenue _ 1.96%
Montgomery County, Variable Rate Economic
Development Revenue Bonds (The Institute
for Genomic Research, Inc. Facility),
Series 1999, 3.30% 2009<F3> 1,900 1,900,000
Life Care Facilities Revenue _ 1.03%
Baltimore County, Revenue Bonds (Oak Crest
Village, Inc. Project), Series 1999 A, 3.25% 2029<F3> 1,000 1,000,000
Pre-Refunded1 _ .52%
Commonwealth of Puerto Rico, Housing Bank
and Finance Agency, Single Family Mortgage
Revenue Bonds, Homeownership 5th Portfolio,
Series 1986, 7.50% 2015 (2000) 495 500,544
3,400,544
TOTAL TAX-EXEMPT SECURITIES
(cost: $96,914,000) 95,139,129
Excess of cash and receivables over payables 1,604,902
NET ASSETS $96,744,031
[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
(graphic: Map of Maryland)
Financial Statements
Statement of Assets and Liabilities
January 31, 2000
Unaudited (dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $93,517) $91,739
Maturing in one year or less
(cost: $3,397) 3,400
Cash 1,872
Receivables for _
Sales of Fund's shares $ 44
Interest 1,003 1,047
98,058
Liabilities:
Payables for _
Purchases of investments 986
Repurchases of Fund's shares 106
Dividends 138
Adviser and management services 36
Other expenses 48 1,314
Net Assets at January 31, 2000 _
Equivalent to $14.81 per share on 6,530,186
shares of beneficial interest issued and
outstanding (unlimited shares authorized) $96,744
See Notes to Financial Statements
The Tax-Exempt Fund of Maryland
(graphic: Map of Maryland)
Statement of Operations
For the six months ended January 31, 2000
Unaudited (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $2,925
Expenses:
Investment adviser fee $ 125
Business management fee 100
Distribution expenses 130
Transfer agent fee 26
Reports to shareholders 11
Registration statement and prospectus 5
Postage, stationery and supplies 4
Trustees' fees 3
Auditing and legal fees 8
Custodian fee 3 415
Net investment income 2,510
Realized Loss and Unrealized Appreciation
(Depreciation) on Investments:
Net realized loss (200)
Net unrealized appreciation (depreciation)
on investments:
Beginning of period 3,121
End of period (1,775)
Change in unrealized appreciation
(depreciation) on investments (4,896)
Net realized loss and change in unrealized
appreciation (depreciation) on investments (5,096)
Net Decrease in Net Assets Resulting
from Operations $(2,586)
See Notes to Financial Statements
The Tax-Exempt Fund of Maryland
(graphic: Map of Maryland)
Statement of Changes in Net Assets
Six months ended Year ended
(dollars in thousands) January 31, 2000<F1> July 31, 1999
Operations:
Net investment income $ 2,510 $ 4,981
Net realized gain (loss) on investments (200) 11
Change in unrealized appreciation
(depreciation) on investments (4,896) (2,767)
Net increase (decrease) in net assets
resulting from operations (2,586) 2,225
Dividends and Distributions Paid
to Shareholders:
Dividend paid from net investment
income (2,510) (4,983)
Distribution paid from net realized
gain on investments _ (623)
Total dividends and distributions (2,510) (5,606)
Capital Share Transactions:
Proceeds from shares sold: 651,768
and 1,410,162 shares, respectively 9,856 22,658
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
102,977 and 230,443 shares, respectively 1,559 3,694
Cost of shares repurchased: 1,316,175
and 874,913 shares, respectively (19,959) (14,037)
Net increase (decrease) in net assets
resulting from capital share
transactions (8,544) 12,315
Total Increase (Decrease) in Net Assets (13,640) 8,934
Net Assets:
Beginning of period 110,384 101,450
End of period $ 96,744 $110,384
[FN]
<F1>Unaudited
</FN>
See Notes to Financial Statements
The Tax-Exempt Fund of Maryland
(graphic: Map of Maryland)
Per-Share Data and Ratios
Six months
ended Year ended July 31
1/31/2000<F1>1999 1998 1997 1996 1995
Net Asset Value,
Beginning of Period $15.57 $16.04 $16.02 $15.39 $15.29 $15.00
Income from Investment
Operations:
Net investment income .37 .74 .78 .79 .80 .80
Net gains (losses) on
securities (both realized
and unrealized) (.76) (.37) .14 .63 .10 .29
Total from investment
operations (.39) .37 .92 1.42 .90 1.09
Less Distributions:
Dividends (from net
investment income) (.37) (.74) (.78) (.79) (.80) (.80)
Distributions (from
capital gains) _ (.10) (.12) _ _ _
Total distributions (.37) (.84) (.90) (.79) (.80) (.80)
Net Asset Value,
End of Period $14.81 $15.57 $16.04 $16.02 $15.39 $15.29
Total Return<F2> (2.55)%<F3> 2.28% 5.89% 9.52% 5.95% 7.58%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $97 $110 $101 $87 $80 $75
Ratio of expenses to
average net assets .40%<F3> .78% .79% .82% .81% .78%
Ratio of net income to
average net assets 2.42%<F3> 4.63% 4.84% 5.08% 5.14% 5.38%
Portfolio turnover rate 6.74%<F3> 11.38% 10.30% 15.27% 16.01% 20.91%
[FN]
<F1>Unaudited
<F2>Excludes sales charge.
<F3>Based on operations for the period shown and, accordingly, not
representative of a full year.
</FN>
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
January 31, 2000
Quality Diversification:
Moody's/S&P Ratings (best of either)
(a pie chart showing the following distribution)
Aaa/AAA 42.0%
Aa/AA 26.6%
A/A 6.2%
Baa/BBB 4.0%
Lower than BBB 12.0%
Cash and Equivalents 9.2%
Maturity Diversification<F1>:
(a pie chart showing the following distribution)
Under 1 year 9.2%
1 to 10 years 48.6%
10+ to 20 years 33.8%
20+ to 30 years 8.4%
Average Life<F2> 9.70 years
[FN]
<F1>Securities are included at pre-refunded dates, not maturity dates.
<F2>Average life more accurately reflects the potential impact of call options.
Should no call options be exercised, the average maturity of the Virginia Fund
is 12.12 years.
</FN>
The Tax-Exempt Fund of Virginia
(graphic: Map of Virginia)
Investment Portfolio
January 31, 2000
Principal
Amount Market
Unaudited (000) Value
Tax-Exempt Securities Maturing in More than One Year _ 90.80%
Airports _ 1.33%
Metropolitan Washington Airports Authority,
Airport System Revenue and Refunding Bonds,
Series 1998 B AMT, 5.50% 2007 $1,500$ 1,508,730
College & University Revenue _ .88%
Virginia Polytechnic Institute and State
University, University Services System
and General Revenue Pledge Bonds,
Series 1996 C, 5.35% 2009 1,000 997,380
General Obligations (Local) _ 6.30%
Arlington County:
Public Improvement Bonds, Series 1996,
6.00% 2011 1,000 1,053,320
Refunding Bonds, Series 1993, 6.00% 2012 1,000 1,050,210
Chesapeake:
Public Improvement Bonds, Series 1992,
6.00% 2006 800 835,360
Refunding Bonds, Series 1993, 5.40% 2008 1,000 1,015,010
Hampton Public Improvement Refunding Bonds,
Series 2000, 5.25% 2011 1,000 980,780
Leesburg Refunding Bonds, Series 1993,
5.60% 2008 1,195 1,211,622
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1,000 997,260
7,143,562
Hospital & Health Facilities Revenue _ 13.13%
Industrial Development Authority of the Town
of Abingdon, Hospital Facility Revenue and
Refunding Bonds (Johnston Memorial
Hospital), Series 1998:
5.00% 2008 1,015 957,927
5.00% 2009 1,020 948,416
Fairfax County:
Industrial Development Authority,
Health Care Revenue Refunding Bonds
(INOVA Health System Project),
Series 1998 A, 5.00% 2011 1,500 1,386,345
Industrial Development Authority,
Hospital Revenue Refunding Bonds
(INOVA Health Systems Hospital Project),
Series 1993 A:
5.00% 2007 750$ 727,770
5.25% 2019 2,500 2,247,400
5.00% 2023 500 418,895
Industrial Development Authority of Halifax
County, Hospital Refunding Revenue Bonds
(Halifax Regional Hospital, Inc.), Series 1998:
4.65% 2007 600 547,536
4.80% 2009 1,000 893,580
Industrial Development Authority of Henry
County, Hospital Revenue Bonds (Memorial
Hospital of Martinsville and Henry County),
Series 1997, 6.00% 2017 1,000 974,570
Industrial Development Authority of the City of
Norfolk, Hospital Revenue Bonds:
(Daughters of Charity National Health
System-DePaul Medical Center), Escrowed
to Maturity, Series 1992 A:
6.20% 2002 1,700 1,732,147
6.50% 2007 1,000 1,062,620
(Sentara Hospitals-Norfolk Project),
Series 1994 A, 5.00% 2020 1,000 835,810
Peninsula Ports Authority, Health System
Revenue and Refunding Bonds (Riverside
Health System Project), Series:
1992 A, 5.00% 2008 1,200 1,132,524
1998, 5.00% 2009 1,100 1,022,802
14,888,342
Housing Finance Authority Revenue _1.85%
Commonwealth of Puerto Rico Housing Finance
Corporation, Single Family Mortgage Revenue
Bonds, 1st Portfolio, Series 1988 B, 7.65% 2022 55 56,511
Virginia Housing Development Authority,
Commonwealth Mortgage Bonds, Series:
1994 H, Sub-Series H-1, 6.10% 2003 500 505,640
1998 E, Sub-Series E-1, 4.50% 2005 1,190 1,150,218
1992 A, 7.10% 2022 380 386,042
2,098,411
Industrial Development Revenue _ 2.37%
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 $1,000 914,240
5.45% 2014 1,000 834,570
Puerto Rico Ports Authority, Special Facilities
Revenue Bonds (American Airlines, Inc. Project),
Series 1996 A, 6.25% 2026 1,000 945,740
2,694,550
Insured _ 22.69%
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 2,852,850
Industrial Development Authority of Augusta
County, Hospital Refunding Revenue Bonds
(Augusta Health Care, Inc.), AMBAC Insured,
Series 1998, 5.00% 2005 1,000 990,610
Chesapeake Certificates of Participation,
MBIA Insured, Series 1993, 5.40% 2005 1,000 1,016,600
Industrial Development Authority of Danville,
Hospital Revenue Bonds (Danville Regional
Medical Center), Series 1998, AMBAC Insured:
5.25% 2012 1,995 1,917,235
5.25% 2013 2,000 1,899,720
Industrial Development Authority of Fairfax
County, Hospital Revenue Refunding Bonds
(INOVA Health System Hospitals Project),
Series 1993 A, FSA Insured, 5.25% 2019 1,000 907,410
Fairfax County Redevelopment and Housing
Authority, Multifamily Housing Revenue
Bonds (Grand View Apartments Project),
Series 1998 A, FHA Insured, 5.05% 2010 1,000 946,150
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 1,490,129
6.375% 2018 1,000 1,036,910
Loudoun County:
Industrial Development Authority, Hospital
Revenue Bonds, FSA Insured, 6.00% 2005 1,000 1,036,200
Sanitation Authority, Water and Sewer System
Revenue Bonds, FGIC Insured, Series 1992,
6.25% 2010 1,000 1,042,350
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 1,219,713
Northern Virginia Transportation District
Commission, (Virginia Railway Express Project)
Commuter Rail:
Revenue Bonds, Series 1997,
MBIA Insured, 5.20% 2013 1,000 948,110
Revenue Refunding Bonds,
Series 1998, FSA Insured, 5.375% 2014 1,000 958,340
Pamunkey Regional Jail Authority, Jail Facility Revenue
Bonds, Series 1996, MBIA Insured, 5.70% 2010 1,000 1,016,310
Richmond Metropolitan Authority, Expressway
Revenue and Refunding Bonds, FGIC Insured,
Series 1998, 5.25% 2012 1,000 972,810
Southeastern Public Service Authority,
Senior Revenue Refunding Bonds,
Series 1998, AMBAC Insured, 5.00% 2015 3,000 2,721,870
City of Virginia Beach Development Authority,
Hospital Revenue Bonds (Virginia Beach
General Hospital Project), Series 1993,
AMBAC Insured, 6.00% 2011 1,000 1,040,510
Metropolitan Washington Airports Authority,
Airport System Revenue and Refunding Bonds,
MBIA Insured, AMT Series:
1998 B, 5.25% 2010 1,000 967,810
1992 A, 6.625% 2019 750 761,512
25,743,149
Lease Revenue (State) _ .85%
Virginia Public Building Authority, Public
Facilities Revenue Bonds, Series 1998 B,
5.00% 2010 1,000 960,130
Life Care Facilities Revenue _ 4.30%
Fairfax County Economic Development Authority,
Retirement Community Revenue Bonds
(Greenspring Village, Inc. Facility), Series 1999 A:
6.75% 2012 1,000 939,210
7.50% 2029 2,500 2,353,225
Industrial Development Authority of the County
of James City, Residential Care Facility First
Mortgage Revenue Bonds (Williamsburg
Landing, Inc.), Series 1996 A, 6.625% 2019 1,650
1,583,588
4,876,023
Multi-Family Housing _ 5.09%
Virginia Housing Development Authority,
Multi-Family Housing Bonds, Series:
1995 H, 5.45% 2005 1,255 1,257,322
1998 I-AMT, 4.60% 2009 1,320 1,205,582
1998 I-AMT, 4.70% 2010 1,240 1,127,656
1997 B-AMT, 5.80% 2010 1,185 1,189,005
1996 B, 5.95% 2016 1,000 992,700
5,772,265
Pre-Refunded<F1> _ 14.92%
Danville Industrial Development Authority,
Hospital Revenue Bonds, Danville Regional
Medical Center, Series 1994, FGIC Insured,
6.00% 2007 (2004) 1,000 1,051,370
Fairfax County Industrial Development Authority,
Hospital Revenue Bonds (Fairfax Hospital
System Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1,000 1,055,630
Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 (2002) 1,170 1,224,592
Norfolk:
Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 (2001) 500 518,645
Industrial Development Authority, Hospital
Revenue Bonds (Children's Hospital
of the King's Daughters Obligated
Group), Series 1991, AMBAC Insured,
7.00% 2011 (2001) 400 420,832
Peninsula Ports Authority:
Health Care Facilities Revenue and Refunding
Bonds (Mary Immaculate Project),
1994 Series, 6.875% 2010 (2004) 1,900 2,078,771
Health System Revenue and Refunding Bonds
(Riverside Health System Project),
Series 1992 A, 6.625% 2010 (2002) 1,300 1,378,338
Prince William County Service Authority,
Water and Sewer System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 711,919
Roanoke:
Public Improvement and Refunding Bonds,
Series 1992 B:
6.375% 2009 (2001) 250$ 261,620
6.40% 2011 (2001) 500 525,760
Valley Resource Authority, Solid Waste
System Revenue Bonds, Series 1992,
5.75% 2012 (2002) 1,500 1,562,115
Water System Revenue Bonds, Series 1991,
FGIC Insured, 6.50% 2021 (2001) 750 785,205
Upper Occoquan Sewage Authority, Regional
Sewerage System Revenue Bonds, Series 1991,
MBIA Insured, 6.00% 2021 (2001) 700 714,945
Virginia Beach, Virginia Development Authority
(Sentara Bayside Hospital), 6.60% 2009 (2001) 1,000 1,052,820
Virginia College Building Authority Educational
Facilities Revenue Bonds (Marymount University
Project), Series 1992, 6.875% 2007 (2002) 1,650 1,743,374
Virginia Public Building Authority, State
Building Revenue Bonds, Series 1991 A,
6.50% 2011 (2001) 1,750 1,834,473
16,920,409
Pollution Control _ 1.48%
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 2,000 1,681,740
Special Obligations _ 1.68%
Virgin Islands Public Finance Authority, Revenue
and Refunding Bonds (Virgin Islands Matching
Fund Loan Notes), Series:
1998 C, 5.50% 2007 1,000 976,430
1998 A, 5.20% 2009 1,000 930,830
1,907,260
State Appropriation _ 1.39%
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 1,573,808
State Authority _ 3.83%
Virginia Public School Authority, School
Financing Bonds:
(1997 Resolution), Series 1998 A, 5.25% 2007 $2,000 $ 2,016,640
(1991 Resolution), Series 1994 A, 6.20% 2014 1,500 1,548,060
Virginia Resources Authority, Water System
Refunding Revenue Bonds, Series 1992 A,
6.45% 2013 750 783,983
4,348,683
Tax Assessment Bonds _ 6.20%
Dulles Town Center, Community Development
Authority (Loudoun County), Special Assessment
Bonds (Dulles Town Center Project), Series 1998,
6.25% 2026 2,000 1,846,960
Heritage Hunt Commercial Community Development
Authority (Prince William County),
Special Assesment Bonds, Series:
1999 A, 6.85% 2019 2,500 2,443,925
1999 B, 7.00% 2029 500 484,005
Virginia Gateway, Community Development
Authority (Prince William County), Special
Assessment Bonds, Series 1999, 6.25% 2026 2,500 2,253,100
7,027,990
Water & Sewer Revenue _ 2.51%
Chesterfield County Water and Sewer Revenue
Refunding Bonds, Series 1992, 6.375% 2009 1,250 1,318,563
City of Richmond, Public Utility Revenue
and Refunding Bonds, Series 1998 A,
5.25% 2009 1,500 1,476,315
Virginia Resources Authority, Water and
Sewer System Revenue Bonds (Pooled
Loan Program), Series 1986 A, 7.50% 2017 50 50,357
2,845,235
102,987,667
Tax-Exempt Securities Maturing in One Year or Less _ 8.70%
College & University Revenue _ .44%
Economic Development Authority of Henrico
County, Variable Rate Educational Facilities
Revenue Bonds (The Steward School),
Series 1999, 3.25% 2029<F2> 500 500,000
Hospital & Health Facilities Revenue _ 4.28%
Industrial Development Authority of the City
of Roanoke, Hospital Revenue Bonds (Carilion
Health System Obligated Group), Series<F2>:
1997 A, 3.65% 2027 $1,650 $ 1,650,000
1997 B, 3.65% 2027 1,300 1,300,000
The Hospital Authority of the City of Petersburg,
Variable Rate Hospital Facility Bonds (Southside
Regional Medical Center), Series 1997, 5.05% 2017<F2> 1,900 1,900,000
4,850,000
Life Care Facilities Revenue _ 1.23%
Industrial Development Authority of the City of
Waynesboro, Variable Rate Residential Care
Facilities Revenue Bonds (Sunnyside Presbyterian
Home), Series 1997, 3.65% 2028<F2> 1,400 1,400,000
Pre-Refunded1 _ 2.75%
Fairfax County Economic Development Authority,
Parking Revenue Bonds (Huntington Metrorail
Station Project), Series 1990 A, 6.75% 2015 (2000) 500 517,860
Henry County Public Service Authority,
Water and Sewer Revenue Bonds, FGIC Insured,
Series 1990, 7.20% 2019 (2000) 1,250 1,293,337
Industrial Development Authority of the City of
Norfolk, Hospital Revenue Bonds (Sentara Hospitals-
Norfolk Project), Series 1991, 7.00% 2020 (2000) 250 260,360
Industrial Development Authority of the
City of Roanoke, Hospital Revenue Bonds
(Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 775,005
University of Virginia, Hospital Revenue Bonds,
Series 1984 A, HIBI Insured, 9.875% 2001 (2000) 10 10,602
Virginia Resources Authority, Water and Sewer Systems
Revenue Bonds, Series 1990, 7.25% 2011 (2000) 250 260,100
3,117,264
9,867,264
TOTAL TAX-EXEMPT SECURITIES
(cost: $115,094,000) 112,854,931
Excess of cash and receivables over payables 573,192
NET ASSETS $113,428,123
[FN]
<F1>Parenthetical year represents date of pre-refunding.
<F2>Coupon rate changes periodically.
</FN>
See Notes to Financial Statements
The Tax-Exempt Fund of Virginia
(graphic: Map of Virginia)
Financial Statements
Statement of Assets and Liabilities
January 31, 2000
Unaudited (dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $105,363) $102,988
Maturing in one year or less
(cost: $9,731) 9,867
Cash 47
Receivables for _
Sales of Fund's shares $ 186
Interest 1,694 1,880
114,782
Liabilities:
Payables for _
Purchases of investments 988
Repurchases of Fund's shares 118
Dividends 152
Adviser and management services 41
Other expenses 55 1,354
Net Assets at January 31, 2000 _
Equivalent to $15.13 per share on 7,497,333
shares of beneficial interest issued and
outstanding (unlimited shares authorized) $113,428
See Notes to Financial Statements
The Tax-ExemptFund of Virginia
(graphic: Map of Virginia)
Statement of Operations
For the six months ended January 31, 2000
Unaudited (dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $ 3,280
Expenses:
Investment adviser fee $ 139
Business management fee 112
Distribution expenses 149
Transfer agent fee 27
Reports to shareholders 14
Registration statement and prospectus 5
Postage, stationery and supplies 4
Trustees' fees 3
Auditing and legal fees 8
Custodian fee 3
Other expenses 1 465
Net investment income 2,815
Realized Loss and Unrealized Appreciation
(Depreciation) on Investments:
Net realized loss (252)
Net unrealized appreciation (depreciation)
on investments:
Beginning of period 2,811
End of period (2,239)
Change in unrealized appreciation
(depreciation) on investments (5,050)
Net realized loss and change in unrealized
appreciation (depreciation) on investments (5,302)
Net Decrease in Net Assets Resulting
from Operations $(2,487)
See Notes to Financial Statements
The Tax-ExemptFund of Virginia
(graphic: Map of Virginia)
Statement of Changes in Net Assets
Six months ended Year ended
(dollars in thousands) January 31, 2000<F1> July 31, 1999
Operations:
Net investment income $ 2,815 $ 5,450
Net realized gain (loss) on investments (252) 64
Change in unrealized appreciation
(depreciation) on investments (5,050) (3,044)
Net increase (decrease) in net assets
resulting from operations (2,487) 2,470
Dividends and Distributions
Paid to Shareholders:
Dividend paid from net investment
income (2,815) (5,453)
Distribution paid from net realized
gain on investments _ (1,311)
Total dividends and distributions (2,815) (6,764)
Capital Share Transactions:
Proceeds from shares sold: 1,060,912
and 1,549,930 shares, respectively 16,369 25,326
Proceeds from shares issued in
reinvestment of net investment
income dividends and distributions
of net realized gain on investments:
105,089 and 258,204 shares, respectively 1,619 4,219
Cost of shares repurchased: 1,543,568
and 938,045 shares, respectively (23,836) (15,287)
Net increase (decrease) in net assets
resulting from capital share
transactions (5,848) 14,258
Total Increase (Decrease) in Net Assets (11,150) 9,964
Net Assets:
Beginning of period 124,578 114,614
End of period $113,428 $124,578
[FN]
<F1>Unaudited
</FN>
See Notes to Financial Statements
The Tax-ExemptFund of Virginia
(graphic: Map of Virginia)
Per-Share Data and Ratios
Six months
ended Year ended July 31
1/31/2000<F1>1999 1998 1997 1996 1995
Net Asset Value,
Beginning of Period $15.82 $16.36 $16.37 $15.77 $15.79 $15.49
Income from Investment
Operations:
Net investment income .37 .73 .78 .80 .81 .83
Net gains (losses) on
securities (both realized
and unrealized) (.69) (.36) .03 .60 .03 .30
Total from investment
operations (.32) .37 .81 1.40 .84 1.13
Less Distributions:
Dividends (from net
investment income) (.37) (.73) (.78) (.80) (.81) (.83)
Distributions (from
capital gains) _ (.18) (.04) _ (.05) _
Total distributions (.37) (.91) (.82) (.80) (.86) (.83)
Net Asset Value,
End of Period $15.13 $15.82 $16.36 $16.37 $15.77 $15.79
Total Return<F2> (2.07)%<F3> 2.21% 5.08% 9.10% 5.46% 7.56%
Ratios/Supplemental Data:
Net assets, end of
period (in millions) $113 $125 $115 $101 $90 $92
Ratio of expenses to
average net assets .39%<F3> .77% .78% .81% .79% .79%
Ratio of net income to
average net assets 2.37%<F3> 4.46% 4.73% 4.99% 5.11% 5.37%
Portfolio turnover rate 7.84%<F3> 12.72% 24.66% 18.41% 27.34% 32.18%
[FN]
<F1>Unaudited
<F2>Excludes sales charge.
<F3>Based on operations for the period shown and, accordingly, not
representative of a full year.
</FN>
See Notes to Financial Statements
Notes to Financial Statements
Unaudited
1. Organization and Significant Accounting Policies
Organization _ The American Funds Tax-Exempt Series I (the "Trust") is
registered under the Investment Company Act of 1940 as an open-end, diversified
management investment company and has initially issued two series of shares,
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia (the
"Funds"). The Funds seek a high level of current income exempt from Federal and
their respective state income taxes. Additionally, each Fund seeks to preserve
capital.
Significant Accounting Policies _ The 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 det
ermined 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.
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 January 31, 2000, net unrealized depreciation on investments for
book and Federal income tax purposes for the Maryland Fund aggregated
$1,775,000, of which $1,958,000 related to appreciated securities and
$3,733,000 related to depreciated securities. For the Virginia Fund, net
unrealized depreciation aggregated $2,239,000, of which $1,659,000 related to
appreciated securities and $3,898,000 related to depreciated securities. There
was no difference between book and tax realized losses on securities
transactions for the six months ended January 31, 2000.
3. Fees and Transactions with Related Parties
Business Management and Investment Advisory Fees _ Officers of the Trust
received no remuneration from the Funds in such capacities. Their remuneration
was paid by Washington Management Corporation (WMC). Fees of $100,000 and
$112,000 were recognized by the Maryland and Virginia Funds, respectively, and
were paid to WMC as business manager of the Funds pursuant to the business
management contract under which WMC provides business management services.
The contract 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
$14,000 and $12,000 on its retail sales of shares and distribution plans of the
Maryland and Virginia Funds, respectively, and received no brokerage
commissions resulting from purchases and sales of securities for the investment
account of the Funds.
Fees of $125,000 and $139,000 for investment advisory services were
incurred by the Maryland and Virginia Funds, respectively, 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 $20,000 and $23,000 (after
allowances to dealers) for the Maryland and Virginia Funds, respectively, as
its portion of the sales charges paid by purchasers of the Funds' shares. Such
sales charges are not an expense of the Funds and, hence, are not reflected in
the accompanying statement of operations.
Pursuant to a Plan of Distribution, each Fund may expend up to 0.25% of
its average net assets annually for any activities primarily intended to result
in sales of fund shares, provided the categories of expenses for which
reimbursement is made are approved by the Funds' Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts. During the six months ended January 31,
2000, distribution expenses under each Plan were $130,000 and $149,000,
including accrued and unpaid expenses of $38,000 and $44,000, for the Maryland
and Virginia Funds, respectively. The aggregate amounts of distribution
expenses subject to recovery by AFD which the Funds have not reimbursed were
$31,000 and $79,000, respectively.
Transfer Agent Fees _ American Funds Service Company (AFS), the transfer
agent for the Maryland and Virginia Funds, was paid fees of $26,000 and
$27,000, respectively.
Deferred Trustees' Fees _ Independent Trustees may elect to defer part
or all of the fees earned for services as members of the Board. Amounts
deferred are not funded and are general unsecured liabilities of the Funds. As
of January 31, 2000, aggregate deferred amounts and earnings thereon since the
deferred compensation plan's adoption (1994) net of any payments to Trustees,
were $17,000 each for the Maryland and Virginia Funds.
WMC and JLC are both wholly owned subsidiaries of the Johnson-Lemon Group,
Incorporated (JLG). CRMC is wholly owned by The Capital Group Companies, Inc.
AFS and AFD are both wholly owned subsidiaries of CRMC. All the officers of
the Fund and three of its trustees are affiliated with JLG.
4. Investment Transactions and Other Disclosures
As of January 31, 2000:
The Tax-Exempt The Tax-Exempt
Fund of MarylandFund of Virginia
Accumulated undistributed
net realized loss on
investments $ (200,000)$ (263,000)
Paid-in capital 98,719,000 115,930,000
Purchases and sales of
investment securities,
excluding short-term
securities, during the
six months ended
January 31, 2000
Purchases 6,623,000 8,928,000
Sales 14,086,000 19,117,000
Pursuant to their custodian agreements, the Funds receive credits
against their custodial fees for imputed interest on certain balances with the
custodian bank. The custodian fees of $3,000 for both the Maryland and Virginia
Funds were paid by these credits rather than in cash.
The American Funds Tax-Exempt Series I
Board of Trustees
James H. Lemon, Jr.
Chairman of the Trust
Stephen Hartwell
Chairman Emeritus of the Trust
Harry J. Lister
President of the Trust
Cyrus A. Ansary
Jean Head Sisco
T. Eugene Smith
Stephen G. Yeonas
Other Officers
Howard L. Kitzmiller
Senior Vice President, Secretary/Treasurer of the Trust
Lois A. Erhard
Vice President of the Trust
Michael W. Stockton
Assistant Vice President, Assistant Secretary and Assistant Treasurer of the
Trust
J. Lanier Frank
Assistant Vice President of the Trust
Office of the Funds and of the Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3585
202/842-5665
Investment Manager
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1443
135 South State College Boulevard
Brea, CA 92821-5804
Transfer Agent
American Funds Service Company
P.O. Box 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
For information about your account or any of the Funds' services, or for a
prospectus for 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 March 31, 2000, this report must
be accompanied by an American Funds Group Statistical Update for the most
recently completed calendar quarter.
TEFMD/TEFVA-013-0300
(Recycle Logo)
Printed on recycled paper
(Logo)The American Funds Group(R)
The American Funds Tax-Exempt Series I
The Tax-Exempt Fund of Maryland
The Tax-Exempt Fund of Virginia
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.
