======================================================
SEC FILE NOS. 33-5270
811-4653
======================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 18
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 17
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(202) 842-5665
HARRY J. LISTER
WASHINGTON MANAGEMENT CORPORATION
1101 VERMONT AVENUE, N.W.
WASHINGTON, D.C. 20005
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
J. JUDE O'DONNELL, ESQ.
THOMPSON, O'DONNELL, MARKHAM, NORTON & HANNON
805 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(COUNSEL FOR THE REGISTRANT)
THE REGISTRANT FILED ITS 24F-2 NOTICE FOR FISCAL 1999 ON OCTOBER 8, 1999.
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
|X| IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE ON MARCH 15, 2000,
PURSUANT TO PARAGRAPH (B) OF RULE 485.
<PAGE>
[THE AMERICAN FUNDS GROUP LOGO]
The American Funds Tax-Exempt Series I
- -------------------------------------
The Tax-Exempt Fund of Maryland-Registered Trademark-
The Tax-Exempt Fund of Virginia-Registered Trademark-
PROSPECTUS
MARCH 15, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES. FURTHER, IT HAS NOT DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
- -------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk/Return Summary 1
..................................................................
Fees and Expenses of the Fund 5
..................................................................
Investment Objectives, Strategies and Risks 7
..................................................................
Management and Organization 11
..................................................................
Shareholder Information 13
..................................................................
Choosing a Share Class 14
..................................................................
Purchase and Exchange of Shares 15
..................................................................
Sales Charges 16
..................................................................
Sales Charge Reductions and Waivers 18
..................................................................
Plans of Distribution 19
..................................................................
How to Sell Shares 20
..................................................................
Distributions and Taxes 21
..................................................................
Financial Highlights 23
</TABLE>
- -------------------------------------------------------------------
The American Funds Tax-Exempt Series I (the "Trust") is a fully managed,
diversified, open-end investment company consisting of two separate series, The
Tax-Exempt Fund of Maryland (the "Maryland Fund") and The Tax-Exempt Fund of
Virginia (the "Virginia Fund"). Except where the context indicates otherwise,
references to the "fund" apply to each of these two tax-exempt bond funds.
24/25-010-0300/MC THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
RISK/RETURN SUMMARY
The fund's primary objective is to provide you with a high level of current
income exempt from regular federal and the respective state (Maryland or
Virginia) income taxes. Its secondary objective is to preserve your investment.
It invests primarily in investment grade municipal bonds, and to a lesser extent
lower quality bonds, issued by municipalities in the respective state (Maryland
or Virginia) including counties, cities, towns, and various regional or special
districts.
The fund is designed for investors seeking income exempt from federal and state
taxes, and capital preservation over the long term. An investment in the fund is
subject to risks, including the possibility that the fund may decline in value
in response to economic, political or social events in the U.S. or abroad.
Because the fund invests in securities issued by the respective state (Maryland
or Virginia) municipalities, the fund is more susceptible to factors adversely
affecting issuers of such state's securities than is a comparable municipal bond
mutual fund which does not concentrate in a single state. The values of debt
securities may be affected by changing interest rates and credit risk
assessments. In addition, lower quality and longer maturity bonds will be
subject to greater credit risk and price fluctuations than higher quality and
shorter maturity bonds.
Your investment in the fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency, entity or person.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND. THE LIKELIHOOD OF LOSS IS GREATER
IF YOU INVEST FOR A SHORTER PERIOD OF TIME.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 1
<PAGE>
INVESTMENT RESULTS
The following information provides some indication of the risks of investing in
the fund by showing changes in the fund's investment results from year to year
and by showing how the fund's average annual returns for various periods compare
with those of a broad measure of market performance. Past results are not an
indication of future results.
Unlike the bar charts, the investment results tables reflect each fund's
investment results with the maximum initial or deferred sales charge deducted,
as required by Securities and Exchange Commission rules. Class A share results
are shown with the maximum initial sales charge of 3.75% deducted. Sales charges
are reduced for purchases of $100,000 or more. Results would be higher if they
were calculated at net asset value. All fund results reflect the reinvestment of
dividend and capital gain distributions.
Class B shares are subject to a maximum deferred sales charge of 5.00% if shares
are redeemed within the first year of purchasing them. The deferred sales charge
declines thereafter until it reaches 0% after six years. Class B shares convert
to Class A shares after eight years. Since the fund's Class B shares begin
investment operations on March 15, 2000, no results are available as of the date
of this prospectus.
2 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
THE MARYLAND FUND
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
(Results do not include a sales charge; if one were included, results
would be lower.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 5.86%
91 9.97%
92 8.37%
93 10.31%
94 -4.77%
95 16.45%
96 3.74%
97 8.96%
98 5.73%
99 -2.34%
</TABLE>
The fund's highest/lowest QUARTERLY results during this time period were:
HIGHEST 6.32% (quarter ended March 31, 1995)
LOWEST -4.58% (quarter ended March 31, 1994)
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN: ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Class A(1)
(with maximum sales charge deducted) -6.01% 5.52% 5.66% 5.75%
.......................................................................................
Class B(2) N/A N/A N/A N/A
.......................................................................................
Lehman Brothers Municipal Bond Index(3) -2.06% 6.91% 6.89% 7.44%
.......................................................................................
</TABLE>
Class A yield: 4.49%
(For current yield information: please call American FundsLine-Registered
Trademark- at 1-800-325-3590)
(1) THE FUND BEGAN INVESTMENT OPERATIONS FOR CLASS A SHARES ON AUGUST 14, 1986.
(2) THE FUND IS BEGINNING INVESTMENT OPERATIONS FOR CLASS B SHARES ON MARCH 15,
2000.
(3) THE LEHMAN BROTHERS MUNICIPAL BOND INDEX REPRESENTS THE LONG-TERM INVESTMENT
GRADE MUNICIPAL BOND MARKET. THIS INDEX IS UNMANAGED AND DOES NOT REFLECT
SALES CHARGES, COMMISSIONS OR EXPENSES. THE LIFETIME FIGURE IS FROM THE DATE
THE FUND'S CLASS A SHARES BEGAN INVESTMENT OPERATIONS.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 3
<PAGE>
THE VIRGINIA FUND
CALENDAR YEAR TOTAL RETURNS FOR CLASS A SHARES
(Results do not include a sales charge; if one were included, results
would be lower.)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
90 5.71%
91 11.26%
92 7.84%
93 11.29%
94 -4.78%
95 15.85%
96 3.49%
97 8.31%
98 5.69%
99 -2.52%
</TABLE>
The fund's highest/lowest QUARTERLY results during this time period were:
HIGHEST 6.61% (quarter ended March 31, 1995)
LOWEST -4.47% (quarter ended March 31,1994)
For periods ended December 31, 1999:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN: ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
Class A(1)
(with maximum sales charge deducted) -6.18% 5.18% 5.64% 5.93%
.......................................................................................
Class B(2) N/A N/A N/A N/A
.......................................................................................
Lehman Brothers Municipal Bond Index(3) -2.06% 6.91% 6.89% 7.44%
.......................................................................................
</TABLE>
Class A yield: 4.31%
(For current yield information: please call American FundsLine-Registered
Trademark- at 1-800-325-3590)
(1) THE FUND BEGAN INVESTMENT OPERATIONS FOR CLASS A SHARES ON AUGUST 14, 1986.
(2) THE FUND IS BEGINNING INVESTMENT OPERATIONS FOR CLASS B SHARES ON MARCH 15,
2000.
(3) THE LEHMAN BROTHERS MUNICIPAL BOND INDEX REPRESENTS THE LONG-TERM INVESTMENT
GRADE MUNICIPAL BOND MARKET. THIS INDEX IS UNMANAGED AND DOES NOT REFLECT
SALES CHARGES, COMMISSIONS OR EXPENSES. THE LIFETIME FIGURE IS FROM THE DATE
THE FUND'S CLASS A SHARES BEGAN INVESTMENT OPERATIONS.
4 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS A CLASS B
<S> <C> <C>
- -------------------------------------------------------------------
Maximum sales charge imposed on purchases
(AS A PERCENTAGE OF OFFERING PRICE) 3.75%(1) 0.00%
..................................................................
Maximum sales charge imposed on
reinvested dividends 0.00% 0.00%
..................................................................
Maximum deferred sales charge 0.00%(2) 5.00%(3)
..................................................................
Redemption or exchange fees 0.00% 0.00%
</TABLE>
(1) SALES CHARGES ARE REDUCED OR ELIMINATED FOR PURCHASES OF $100,000 OR MORE.
(2) A CONTINGENT DEFERRED SALES CHARGE OF 1% APPLIES ON CERTAIN REDEMPTIONS MADE
WITHIN 12 MONTHS FOLLOWING PURCHASES OF $1 MILLION OR MORE MADE WITHOUT A
SALES CHARGE.
(3) DEFERRED SALES CHARGES ARE REDUCED AFTER 12 MONTHS AND ELIMINATED AFTER SIX
YEARS.
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) CLASS A CLASS B(1)
<S> <C> <C>
- --------------------------------------------------------------------------
THE MARYLAND FUND
- --------------------------------------------------------------------------
Management Fees 0.42% 0.42%
Distribution and/or Service (12b-1) Fees 0.25%(2) 1.00%(3)
Other Expenses 0.11% 0.11%
Total Annual Fund Operating Expenses 0.78% 1.53%
THE VIRGINIA FUND
- --------------------------------------------------------------------------
Management Fees 0.41% 0.41%
Service (12b-1) Fees 0.25%(2) 1.00%(3)
Other Expenses 0.11% 0.11%
Total Annual Fund Operating Expenses 0.77% 1.52%
</TABLE>
(1) BASED ON ESTIMATED AMOUNTS FOR THE CURRENT FISCAL YEAR.
(2) CLASS A 12B-1 EXPENSES MAY NOT EXCEED 0.25% OF THE FUND'S AVERAGE NET ASSETS
ANNUALLY.
(3) CLASS B 12B-1 EXPENSES MAY NOT EXCEED 1.00% OF THE FUND'S AVERAGE NET ASSETS
ANNUALLY.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 5
<PAGE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the fund for the time periods indicated, that your investment
has a 5% return each year and that the fund's operating expenses remain the same
as shown above. The Class A example reflects the maximum initial sales charge in
Year One. The Class B-assuming redemption example reflects applicable contingent
deferred sales charges through Year Six (after which time they are eliminated).
Both Class B examples reflect Class A expenses for Years 9 and 10 since Class B
shares automatically convert to Class A after eight years. Although your actual
costs may be higher or lower, based on these assumptions your cumulative
expenses would be:
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ONE THREE FIVE TEN
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------
THE MARYLAND FUND
Class A $452 $615 $ 792 $ 1,305
Class B - assuming redemption $656 $883 $1,034 $ 1,621*
assuming no redemption $156 $483 $ 834 $ 1,621*
- ---------------------------------------------------------------------
THE VIRGINIA FUND
Class A $451 $612 $ 787 $ 1,293
Class B - assuming redemption $655 $880 $1,029 $ 1,610
assuming no redemption $155 $480 $ 829 $ 1,610
- ---------------------------------------------------------------------
</TABLE>
6 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- -------------------------------------------------------------------
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The fund's primary investment objective is to provide you with a high level of
current income exempt from regular federal and the respective state (Maryland or
Virginia) income taxes. Its secondary objective is preservation of capital. The
fund seeks to achieve these objectives by investing primarily in investment
grade municipal bonds, and to a lesser extent lower quality bonds, issued by
municipalities in the respective state (Maryland or Virginia). Municipal bonds
are debt obligations generally issued to obtain funds for various public
purposes, including the construction of public facilities. In addition, the fund
may invest up to 20% of its assets in securities that may subject you to federal
alternative minimum taxes.
Because the fund invests in securities of issuers within the state of Maryland
or Virginia, the fund is more susceptible to factors adversely affecting issuers
of such state's securities than is a comparable municipal bond mutual fund which
does not concentrate in a single state. Both Maryland and Virginia are affected
by changes in levels of federal funding and financial support of certain
industries, as well as by federal spending cutbacks due to the large number of
residents that are employed by the federal government. In addition, each state
is dependent on certain economic sectors. Maryland's economy is based largely on
manufacturing, the service trade, and financial, real estate and insurance
entities. Virginia's economy is most dependent on the government sector,
manufacturing and financial services. To the extent there are changes to any of
these sectors the fund may be adversely impacted. More detailed information
about the fund's risks is contained in the statement of additional information.
The fund will invest primarily in debt securities rated Baa or BBB or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation (or unrated but
determined by the investment adviser to be of equivalent quality) and may invest
up to 20% of its assets in lower quality, lower rated debt securities rated Ba
and BB or below. The values of most debt securities held by the fund may be
affected by changing interest rates, and individual securities by changes in
their effective maturities and credit ratings. For example, the values of bonds
in the fund's portfolio generally will decline when interest rates rise and vice
versa. Debt securities are also subject to credit risk which is the possibility
that an issuer of a debt security will fail to make timely payments of principal
or interest and the security will go into default. The values of lower quality
and longer maturity bonds may be subject to greater credit risk and price
fluctuations than higher quality and shorter maturity bonds. The fund's
investment adviser attempts to reduce these risks by doing
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 7
<PAGE>
a credit analysis of each issuer as well as by monitoring economic and
legislative developments.
The fund may also hold cash and invest in money market instruments or taxable
debt securities. The size of the fund's cash position will vary and will depend
on various factors, including market conditions and purchases and redemptions of
fund shares. A larger cash position could detract from the achievement of the
fund's objective but it also would reduce the fund's exposure in the event of a
market downturn and provides liquidity to make additional investments or to meet
redemptions.
The fund relies on the professional judgment of its investment adviser, Capital
Research and Management Company, to make decisions about the fund's portfolio
securities. The basic investment philosophy of Capital Research and Management
Company is to seek undervalued securities which represent good long-term
investment opportunities.
8 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
ADDITIONAL INVESTMENT RESULTS
For periods ended December 31, 1999:
The Maryland Fund
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN(1) ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Class A(2)
(with no sales charge deducted) -2.34% 6.33% 6.06% 6.05%
..............................................................................................
Class B(3) N/A N/A N/A N/A
</TABLE>
(1) THESE FUND RESULTS WERE CALCULATED AT NET ASSET VALUE ACCORDING TO A FORMULA
THAT IS REQUIRED FOR ALL STOCK AND BOND FUNDS AND INCLUDE THE REINVESTMENT
OF DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE FUND BEGAN INVESTMENT OPERATIONS FOR CLASS A SHARES ON AUGUST 14, 1986.
(2) THE FUND BEGAN INVESTMENT OPERATIONS FOR CLASS B SHARES ON MARCH 15, 2000.
The Virginia Fund
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURN(1) ONE YEAR FIVE YEARS TEN YEARS LIFETIME
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Class A(2)
(with no sales charge deducted) -2.52% 5.99% 6.04% 6.23%
..............................................................................................
Class B(3) N/A N/A N/A N/A
</TABLE>
(1) THESE FUND RESULTS WERE CALCULATED AT NET ASSET VALUE ACCORDING TO A FORMULA
THAT IS REQUIRED FOR ALL STOCK AND BOND FUNDS AND INCLUDE THE REINVESTMENT
OF DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS.
(2) THE FUND BEGAN INVESTMENT OPERATIONS FOR CLASS A SHARES ON AUGUST 14, 1986.
(3) THE FUND IS BEGINNING INVESTMENT OPERATIONS FOR CLASS B SHARES ON MARCH 15,
2000.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 9
<PAGE>
THE MARYLAND FUND
THE FOLLOWING CHART ILLUSTRATES THE QUALITY RATINGS OF THE VARIOUS BONDS
HELD IN THE PORTFOLIO AS OF THE END OF THE FUND'S FISCAL YEAR, JULY 31,
1999. SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR A DESCRIPTION OF
QUALITY RATINGS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 45.9%
AA 16.4%
A 10.0%
BBB 10.7%
BB 7.8%
B 2.0%
Cash and Short-term Securities 7.2%
</TABLE>
BECAUSE THE FUND IS ACTIVELY MANAGED, ITS HOLDINGS WILL CHANGE FROM TIME
TO TIME.
THE VIRGINIA FUND
THE FOLLOWING CHART ILLUSTRATES THE QUALITY RATINGS OF THE VARIOUS BONDS
HELD IN THE PORTFOLIO AS OF THE END OF THE FUND'S FISCAL YEAR, JULY 31,
1999. SEE THE STATEMENT OF ADDITIONAL INFORMATION FOR A DESCRIPTION OF
QUALITY RATINGS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
AAA 40.5%
AA 31.5%
A 7.9%
BBB 5.6%
BB 9.8%
Cash and Short-term Securities 4.7%
</TABLE>
BECAUSE THE FUND IS ACTIVELY MANAGED, ITS HOLDINGS WILL CHANGE FROM TIME
TO TIME.
10 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- -------------------------------------------------------------------
MANAGEMENT AND ORGANIZATION
BUSINESS MANAGER
Washington Management Corporation, since the fund's inception, has provided the
services necessary to carry on the fund's general administrative and corporate
affairs. These services encompass general corporate governance, regulatory
compliance and oversight of each of the fund's contractual service providers
including custodian operations, shareholder services and fund share distribution
functions. Washington Management Corporation, a wholly owned subsidiary of The
Johnston-Lemon Group, Incorporated, maintains its principal business address at
1101 Vermont Avenue, NW, Washington, DC 20005.
INVESTMENT ADVISER
Capital Research and Management Company, an experienced investment management
organization founded in 1931, serves as investment adviser to the fund and other
funds, including those in The American Funds Group. Capital Research and
Management Company, a wholly owned subsidiary of The Capital Group Companies,
Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. Capital
Research and Management Company manages the investment portfolio of the fund.
Total management fees paid by the fund to its business manager and investment
adviser, as a percentage of average net assets, for the previous fiscal year are
discussed earlier under "Fees and Expenses of the Fund."
Capital Research and Management Company and its affiliated companies have
adopted a personal investing policy that is consistent with the recommendations
contained in the report issued by the Investment Company Institute's Advisory
Group on Personal Investing.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 11
<PAGE>
MULTIPLE PORTFOLIO COUNSELOR SYSTEM
Capital Research and Management Company uses a system of multiple portfolio
counselors in managing mutual fund assets. Under this approach the portfolio of
a fund is divided into segments which are managed by individual counselors.
Counselors decide how their respective segments will be invested within the
limits provided by a fund's objective(s) and policies and by Capital Research
and Management Company's investment committee. In addition, Capital Research and
Management Company's research professionals may make investment decisions with
respect to a portion of a fund's portfolio.
The primary individual portfolio counselors for The Tax-Exempt Fund of Maryland
and Virginia are listed below.
<TABLE>
<CAPTION>
YEARS OF EXPERIENCE AS
INVESTMENT PROFESSIONAL
(INCLUDING THE
LAST FIVE YEARS)
PORTFOLIO COUNSELORS WITH CAPITAL
FOR YEARS OF EXPERIENCE RESEARCH AND
THE AMERICAN AS PORTFOLIO COUNSELOR FOR MANAGEMENT
FUNDS TAX- THE AMERICAN FUNDS TAX- COMPANY OR
EXEMPT SERIES I PRIMARY TITLE(S) EXEMPT SERIES I ITS AFFILIATES TOTAL YEARS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
DAVID A. HOAG Vice President and Director, 7 years 9 years 12 years
Capital Research Company*
- ---------------------------------------------------------------------------------------------------------------------------------
BRENDA S. ELLERIN Vice President and Director, 7 years 9 years 10 years
Capital Research Company*
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* A WHOLLY OWNED SUBSIDIARY OF CAPITAL RESEARCH AND MANAGEMENT COMPANY.
12 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
SHAREHOLDER SERVICES
American Funds Service Company, the fund's transfer agent, offers you a wide
range of services you can use to alter your investment program should your needs
and circumstances change. These services may be terminated or modified at any
time upon 60 days' written notice. For your convenience, American Funds Service
Company has four service centers across the country.
AMERICAN FUNDS SERVICE COMPANY SERVICE AREAS
CALL TOLL-FREE FROM ANYWHERE IN THE U.S.
(8 A.M. TO 8 P.M. ET):
800/421-0180
[MAP]
<TABLE>
<S> <C> <C> <C>
WESTERN WESTERN CENTRAL EASTERN CENTRAL EASTERN
SERVICE CENTER SERVICE CENTER SERVICE CENTER SERVICE CENTER
American Funds American Funds American Funds American Funds
Service Company Service Company Service Company Service Company
P.O. Box 2205 P.O. Box 659522 P.O. Box 6007 P.O. Box 2280
Brea, California San Antonio, Texas Indianapolis, Norfolk, Virginia
92822-2205 78265-9522 Indiana 23501-2280
Fax: 714/671-7080 Fax: 210/474-4050 46206-6007 Fax: 757/670-4773
Fax: 317/735-6620
</TABLE>
A COMPLETE DESCRIPTION OF THE SERVICES WE OFFER IS INCLUDED IN THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION. In addition, an easy-to-read guide to
owning a fund in The American Funds Group titled "Welcome to the Family" is sent
to new shareholders and is available by writing or calling American Funds
Service Company.
TAX-EXEMPT FUNDS SHOULD NOT SERVE AS RETIREMENT PLAN INVESTMENTS. Additionally,
accounts held by investment dealers may not offer certain services. If you have
any questions, please contact your dealer.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 13
<PAGE>
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
The fund offers both Class A and Class B shares. Each share class has its own
sales charge and expense structure, allowing you to choose the class that best
meets your situation.
Factors you should consider in choosing a class of shares include:
l How long you expect to own the shares
l How much you intend to invest
l The expenses associated with owning shares of each class
l Whether you qualify for any reduction or waiver of sales charges (for
example, Class A shares may be a less expensive option over time if you
qualify for a sales charge reduction or waiver)
EACH INVESTOR'S FINANCIAL CONSIDERATIONS ARE DIFFERENT. YOU SHOULD SPEAK WITH
YOUR FINANCIAL ADVISOR TO HELP YOU DECIDE WHICH SHARE CLASS IS BEST FOR YOU.
Differences between Class A and Class B shares include:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C>
- ------------------------------------------------------------------------
Initial sales charge of up to 3.75%. No initial sales charge.
Sales charges are reduced for purchases
of $100,000 or more
(see "Sales Charges -- Class A").
.......................................................................
Distribution and service (12b-1) Distribution and service
fees of up to 0.25% annually. (12b-1)
fees of up to 1.00% annually.
.......................................................................
Higher dividends than Class B shares Lower dividends than Class A
due to lower annual expenses. shares due to higher
distribution fees and other
expenses.
.......................................................................
No contingent deferred sales charge A contingent deferred sales
(except on certain redemptions on charge
purchases of $1 million or more bought if you sell shares within six
without an initial sales charge). years of buying them. The
charge starts at 5% and
declines thereafter until it
reaches 0% after six years.
(see "Sales Charges --
Class B").
.......................................................................
No purchase maximum. Maximum purchase of $100,000.
.......................................................................
Automatic conversion to
Class A shares after eight
years, reducing future annual
expenses.
.......................................................................
</TABLE>
14 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND EXCHANGE OF SHARES
PURCHASE
Generally, you may open an account by contacting any investment dealer (who may
impose transaction charges in addition to those described in this prospectus)
authorized to sell the fund's shares. You may purchase additional shares using
various options described in the statement of additional information and
"Welcome to the Family."
EXCHANGE
You may exchange your shares into shares of the same class of other funds in The
American Funds Group generally without a sales charge. For purposes of computing
the contingent deferred sales charge on Class B shares, the length of time you
have owned your shares will be measured from the date of original purchase and
will not be affected by any exchange.
Exchanges of shares from the money market funds initially purchased without a
sales charge generally will be subject to the appropriate sales charge.
Exchanges have the same tax consequences as ordinary sales and purchases. See
"Transactions by Telephone..." for information regarding electronic exchanges.
THE FUND AND AMERICAN FUNDS DISTRIBUTORS, THE FUND'S PRINCIPAL UNDERWRITER,
RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER FOR ANY REASON. ALTHOUGH THERE IS
CURRENTLY NO SPECIFIC LIMIT ON THE NUMBER OF EXCHANGES YOU CAN MAKE IN A PERIOD
OF TIME, THE FUND AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT
ANY PURCHASE ORDER AND MAY TERMINATE THE EXCHANGE PRIVILEGE OF ANY INVESTOR
WHOSE PATTERN OF EXCHANGE ACTIVITY THEY HAVE DETERMINED INVOLVES ACTUAL OR
POTENTIAL HARM TO THE FUND.
PURCHASE MINIMUMS FOR CLASS A AND B SHARES
<TABLE>
<S> <C>
- ----------------------------------------------------------------------
To establish an account $ 1,000
To add to an account $ 50
PURCHASE MAXIMUM FOR CLASS B SHARES $100,000
</TABLE>
SHARE PRICE
The fund calculates its share price, also called net asset value, as of
approximately 4:00 p.m. New York time, which is the normal close of trading on
the New York Stock Exchange, every day the Exchange is open. In
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 15
<PAGE>
calculating net asset value, market prices are used when available. If a market
price for a particular security is not available, the fund will determine the
appropriate price for the security.
Your shares will be purchased at the net asset value plus any applicable sales
charge in the case of Class A shares, or sold at the net asset value next
determined after American Funds Service Company receives and accepts your
request. Sales of Certain Class A and B shares may be subject to contingent
deferred sales charges.
- --------------------------------------------------------------------------------
SALES CHARGES
CLASS A
The initial sales charge you pay when you buy Class A shares differs depending
upon the amount you invest and may be reduced for larger purchases as indicated
below.
<TABLE>
<CAPTION>
SALES CHARGE AS A
PERCENTAGE OF
------------------------------
.
NET DEALER CONCESSION
OFFERING AMOUNT AS % OF
INVESTMENT PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Less than $100,000 3.75% 3.90% 3.00%
...................................................................................................
$100,000 but less than $250,000 3.50% 3.63% 2.75%
...................................................................................................
$250,000 but less than $500,000 2.50% 2.56% 2.00%
...................................................................................................
$500,000 but less than $750,000 2.00% 2.04% 1.60%
...................................................................................................
$750,000 but less than $1 million 1.50% 1.52% 1.20%
...................................................................................................
$1 million or more and certain other
investments described below see below see below see below
...................................................................................................
</TABLE>
CLASS A PURCHASES NOT SUBJECT TO SALES CHARGE
Investments of $1 million or more are sold with no initial sales charge.
HOWEVER, A 1% CONTINGENT DEFERRED SALES CHARGE MAY BE IMPOSED IF REDEMPTIONS ARE
MADE WITHIN ONE YEAR OF PURCHASE. Employer-sponsored defined contribution-type
plans investing $1 million or more, or with 100 or more eligible employees, and
Individual Retirement Account rollovers
16 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
involving retirement plan assets invested in the American Funds, may invest with
no sales charge and are not subject to a contingent deferred sales charge.
Investments made through retirement plans, endowments or foundations with
$50 million or more in assets, or through certain qualified fee-based programs,
may also be made with no sales charge and are not subject to a contingent
deferred sales charge. The fund may pay a dealer concession of up to 1% under
its Plan of Distribution on investments made with no initial sales charge.
CLASS B
Class B shares are sold without any initial sales charge. However, a contingent
deferred sales charge may be applied to shares you redeem within six years of
purchase, as shown in the table below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
<S> <C> <C>
- -------------------------------------------------------------------------------------------
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
</TABLE>
Shares acquired through reinvestment of dividends or capital gain distributions
are not subject to a contingent deferred sales charge. In addition, the
contingent deferred sales charge may be waived in certain circumstances. See
"Contingent Deferred Sales Charge Waivers for Class B shares" below. The
contingent deferred sales charge is based on the original purchase cost or the
current market value of the shares being sold, whichever is less. For purposes
of determining the contingent deferred sales charge, if you sell only some of
your shares, shares that are not subject to any contingent deferred sales charge
will be sold first and then shares that you have owned the longest.
CLASS B CONVERSION TO A SHARES
Class B shares automatically convert to Class A shares in the month of the
eight-year anniversary of the purchase date. The Internal Revenue Service
currently takes the position that this automatic conversion is not taxable.
Should their position change, shareholders would still have the option of
converting but may face certain tax consequences. Please see the statement of
additional information for more information.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 17
<PAGE>
- --------------------------------------------------------------------------------
SALES CHARGE REDUCTIONS AND WAIVERS
You must let your investment dealer or American Funds Service Company know if
you qualify for a reduction in your Class A sales charge or waiver of your Class
B contingent deferred sales charge using one or any combination of the methods
described below, in the statement of additional information and "Welcome to the
Family".
REDUCING YOUR CLASS A SALES CHARGES
You and your "immediate family" (your spouse and your children under the age of
21) may combine investments to reduce your Class A sales charge.
AGGREGATING ACCOUNTS
To receive a reduced Class A sales charge, investments made by you and your
immediate family (see above) may be aggregated if made for their own account(s)
and/or:
- - trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of the
trust.
- - solely controlled business accounts.
- - single-participant retirement plans.
Other types of accounts may also be aggregated. You should check with your
financial adviser or consult the statement of additional information or "Welcome
to the Family" for more information.
CONCURRENT PURCHASES
You may combine simultaneous purchases of Class A and/or B shares of two or more
American Funds, as well as individual holdings in various
18 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
American Legacy variable annuities or variable life insurance policies, to
qualify for a reduced Class A sales charge. Direct purchases of money market
funds are excluded.
RIGHTS OF ACCUMULATION
You may take into account the current value of your existing Class A and B
holdings in The American Funds, as well as individual holdings in various
American Legacy variable annuities or variable life insurance policies, to
determine your Class A sales charge. Direct purchases of the money market funds
are excluded.
STATEMENT OF INTENTION
You can reduce the sales charge you pay on your Class A share purchases by
establishing a Statement of Intention. A Statement of Intention allows you to
combine all Class A and B share non-money market fund purchases, as well as
individual American Legacy variable annuity and life insurance policies you
intend to make over a 13-month period, to determine that applicable sales
charge. At your request purchases made during the previous 90 days may be
included; however, capital appreciation and reinvested dividends and capital
gains do not apply toward these combined purchases. A portion of your account
may be held in escrow to cover additional Class A sales charges which may be due
if your total investments over the 13-month period do not qualify for the
applicable sales charge reduction.
CONTINGENT DEFERRED SALES CHARGE WAIVERS FOR CLASS B SHARES
The contingent deferred sales charge on Class B shares may be waived in the
following cases:
- to receive payments through systematic withdrawal plans (up to 12% of the
value of your account);
- to receive certain distributions, such as required minimum distributions
from retirement accounts; or
- for redemptions due to death or post-purchase disability of the
shareholder.
For information, please consult your financial adviser, "Welcome to the Family,"
and the statement of additional information.
- --------------------------------------------------------------------------------
PLANS OF DISTRIBUTION
The fund has Plans of Distribution or "12b-1 Plans" under which it may finance
activities primarily intended to sell shares, provided the categories of
expenses are approved in advance by the fund's board of trustees. The plans
provide for annual expenses of up to 0.25% for Class A shares and up to 1.00%
for Class B shares. Up to 0.25% of these payments are used to pay
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 19
<PAGE>
service fees to qualified dealers for providing certain shareholder services.
The remaining 0.75% expense for Class B shares is used for financing commissions
paid to your dealer. The 12b-1 fees paid by the fund, as a percentage of average
net assets, for the previous fiscal year is indicated above under "Fees and
Expenses of the Fund." Since these fees are paid out of the fund's assets or
income on an ongoing basis, over time they will increase the cost and reduce the
return of an investment. The higher fees for Class B shares may cost you more
over time than paying the initial sales charge for Class A shares.
OTHER COMPENSATION TO DEALERS
American Funds Distributors may provide additional compensation to, or sponsor
informational meetings for, dealers as described in the statement of additional
information.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
Once a sufficient period of time has passed to reasonably assure that checks or
drafts (including certified or cashiers' checks) for shares purchased have
cleared (normally 15 calendar days), you may sell (redeem) those shares in any
of the following ways:
THROUGH YOUR DEALER (CERTAIN CHARGES MAY APPLY)
- Shares held for you in your dealer's name must be sold through the dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- Requests must be signed by the registered shareholder(s).
- A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
-- Sent to an address other than the address of record, or an address of
record which has been changed within the last 10 days.
- Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
20 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE-REGISTERED TRADEMARK- OR AMERICAN FUNDSLINE ONLINE-REGISTERED
TRADEMARK-:
- Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- Checks must be made payable to the registered shareholder.
- Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
TRANSACTIONS BY TELEPHONE, FAX, AMERICAN FUNDSLINE OR AMERICAN FUNDSLINE ONLINE
Generally, you are automatically eligible to use these services for redemptions
and exchanges unless you notify us in writing that you do not want any or all of
these services. You may reinstate these services at any time.
Unless you decide not to have telephone, fax, or computer services on your
account(s), you agree to hold the fund, American Funds Service Company, any of
its affiliates or mutual funds managed by such affiliates, the fund's business
manager, and each of their respective directors, trustees, officers, employees
and agents harmless from any losses, expenses, costs or liabilities (including
attorney fees) which may be incurred in connection with the exercise of these
privileges, provided American Funds Service Company employs reasonable
procedures to confirm that the instructions received from any person with
appropriate account information are genuine. If reasonable procedures are not
employed, it and/or the fund may be liable for losses due to unauthorized or
fraudulent instructions.
- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends from net investment income daily and distributes the
accrued dividends which may fluctuate, to shareholders each month. Dividends
begin accruing one day after payment for shares is received by the fund or
American Funds Service Company. Capital gains, if any, are usually distributed
in November. When a capital gain is distributed, the net asset value per share
is reduced by the amount of the payment.
You may elect to reinvest dividends and/or capital gain distributions to
purchase additional shares of this fund or any other fund in The American Funds
Group or you may elect to receive them in cash. Most shareholders do
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 21
<PAGE>
not elect to take capital gain distributions in cash because these distributions
reduce principal value.
TAX CONSEQUENCES
Interest on municipal bonds is generally not included in gross income for
federal income tax purposes. Each fund is permitted to pass through to its
shareholders federally tax-exempt income subject to certain requirements.
However, the fund may invest in obligations which pay interest that is subject
to state and local taxes when distributed by the fund.
TAXES ON DISTRIBUTIONS
Distributions you receive from the fund may be subject to income tax and may
also be subject to state or local taxes to the extent they include income from
debt securities that are not exempt from tax -- unless you are exempt from
taxation.
It is anticipated that federal exempt-interest dividends paid by the fund and
derived from interest on bonds exempt from the respective state (Maryland or
Virginia) income tax will also be exempt from such state's corporate and
personal income tax. To the extent the fund's dividends are derived from
interest on debt obligations other than the respective state (Maryland or
Virginia) municipal securities, such dividends will be subject to such state's
state income tax even though the dividends may be exempt from federal income
tax.
For federal tax purposes, any taxable dividends and distributions of short-term
capital gains are treated as ordinary income. The fund's distributions of net
long-term capital gains are taxable to you as capital gains. Any taxable
distributions you receive from the fund will normally be taxable to you when
made, regardless of whether you reinvest distributions or receive them in cash.
TAXES ON TRANSACTIONS
Your redemptions, including exchanges, may result in a capital gain or loss for
federal tax purposes. A capital gain or loss on your investment in the fund is
the difference between the cost of your shares, including any sales charges, and
the price you receive when you sell them.
Please see the statement of additional information, the "Welcome to the Family"
guide, and your tax adviser for further information.
22 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
These financial highlights tables are intended to help you understand each
fund's results for the past five years and is currently only shown for Class A
Shares. A similar table will be shown for Class B shares beginning with the
funds' 2000 fiscal year end. Certain information reflects financial results for
a single fund share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in each fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Funds'
financial statements, is included in the statement of additional information,
which is available upon request.
THE MARYLAND FUND
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
.................................
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
------------------------------------------------
Net asset value,
beginning of year $16.04 $16.02 $15.39 $15.29 $15.00
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .74 .78 .79 .80 .80
Net gains (losses) on securities
(both realized and unrealized) (.37) .14 .63 .10 .29
- -----------------------------------------------------------------------------------------
Total from investment operations .37 .92 1.42 .90 1.09
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.74) (.78) (.79) (.80) (.80)
Distributions (from capital gains) (.10) (.12) -- -- --
........................................................................................
Total distributions (.84) (.90) (.79) (.80) (.80)
- -----------------------------------------------------------------------------------------
Net asset value, end of year $15.57 $16.04 $16.02 $15.39 $15.29
- -----------------------------------------------------------------------------------------
Total return(1) 2.28% 5.89% 9.52% 5.95% 7.58%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $110 $101 $87 $80 $75
........................................................................................
Ratio of expenses to average net assets .78% .79% .82% .81% .78%
........................................................................................
Ratio of net income to average net
assets 4.63% 4.84% 5.08% 5.14% 5.38%
........................................................................................
Portfolio turnover rate 11.38% 10.30% 15.27% 16.01% 20.91%
</TABLE>
(1)EXCLUDES SALES CHARGE.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 23
<PAGE>
THE VIRGINIA FUND
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
.................................
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
------------------------------------------------
Net asset value,
beginning of year $16.36 $16.37 $15.77 $15.79 $15.49
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .73 .78 .80 .81 .83
Net gains (losses) on securities
(both realized and unrealized) (.36) .03 .60 .03 .30
- -----------------------------------------------------------------------------------------
Total from investment operations .37 .81 1.40 .84 1.13
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income) (.73) (.78) (.80) (.81) (.83)
Distributions (from capital gains) (.18) (.04) -- (.05) --
........................................................................................
Total distributions (.91) (.82) (.80) (.86) (.83)
- -----------------------------------------------------------------------------------------
Net asset value, end of year $15.82 $16.36 $16.37 $15.77 $15.79
- -----------------------------------------------------------------------------------------
Total return(1) 2.21% 5.08% 9.10% 5.46% 7.56%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in millions) $125 $115 $101 $90 $92
........................................................................................
Ratio of expenses to average net assets .77% .78% .81% .79% .79%
........................................................................................
Ratio of net income to average net
assets 4.46% 4.73% 4.99% 5.11% 5.37%
........................................................................................
Portfolio turnover rate 12.72% 24.66% 18.41% 27.34% 32.18%
</TABLE>
(1)EXCLUDES SALES CHARGE.
24 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- --------------------------------------------------------------------------------
NOTES
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 25
<PAGE>
- -------------------------------------------------------------------
NOTES
26 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- -------------------------------------------------------------------
NOTES
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 27
<PAGE>
- -------------------------------------------------------------------
NOTES
28 THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS
<PAGE>
- -------------------------------------------------------------------
NOTES
THE AMERICAN FUNDS TAX-EXEMPT SERIES I / PROSPECTUS 29
<PAGE>
<TABLE>
<S> <C>
FOR SHAREHOLDER SERVICES American Funds Service Company
800/421-0180
FOR RETIREMENT PLAN SERVICES Call your employer or plan administrator
FOR DEALER SERVICES American Funds Distributors
800/421-9900 Ext.11
FOR 24-HOUR INFORMATION American FundsLine-Registered Trademark-
800/325-3590
American FundsLine OnLine-Registered Trademark-
http://www.americanfunds.com
</TABLE>
Telephone conversations may be recorded or monitored for
verification, recordkeeping and quality assurance purposes.
* * * * *
MULTIPLE TRANSLATIONS This prospectus may be translated into other languages. If
there is any inconsistency or ambiguity as to the meaning of any word or phrase
in a translation, the English text will prevail.
ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS Contains additional information about
the fund including financial statements, investment results, portfolio holdings,
a statement from portfolio management discussing market conditions and the
fund's investment strategies, and the independent accountants' report (in the
annual report).
STATEMENT OF ADDITIONAL INFORMATION (SAI) AND CODE OF ETHICS The SAI contains
more detailed information on all aspects of the fund, including the fund's
financial statements and is incorporated by reference into this prospectus. The
investment adviser's code of ethics describes the personal investing policy
adopted by the fund's investment adviser and its affiliated companies.
The code of ethics and current SAI have been filed with the Securities and
Exchange Commission ("SEC"). These and other related materials about the fund
are available for review or to be copied at the SEC's Public Reference Room in
Washington, D.C. (202/942-8090) or on the EDGAR database on the SEC's Internet
Web site at http:// www.sec.gov, or, after payment of a duplicating fee, via
e-mail request to [email protected] or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.
HOUSEHOLD MAILINGS Each year you are automatically sent an updated prospectus,
annual and semi-annual report for the fund. In order to reduce the volume of
mail you receive, when possible, only one copy of these documents will be sent
to shareholders that are part of the same family and share the same residential
address.
If you would like to receive individual copies of these documents, or a free
copy of the SAI or Codes of Ethics, please call American Funds Service Company
at 800/421-0180 or write to the Secretary of the fund at 1101 Vermont Avenue,
NW, Washington, D.C. 20005.
Investment Company File No. 811-4653 [LOGO] Printed on recycled paper
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
THE TAX-EXEMPT FUND OF VIRGINIA
PART B
STATEMENT OF ADDITIONAL INFORMATION
MARCH 15, 2000
This document is not a prospectus but should be read in conjunction with the
current Prospectus dated March 15, 2000 of The American Funds Tax-Exempt Series
I (the "Trust"). The Trust currently consists of two series, The Tax-Exempt
Fund of Maryland (the "Maryland Fund" or "fund") and The Tax-Exempt Fund of
Virginia (the "Virginia Fund" or "fund"). Except where the context indicates
otherwise, all references herein to the "fund" apply to each of the two funds.
The Prospectus may be obtained from your securities dealer or financial planner
or by writing to the Trust at the following address:
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Attention: Secretary
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
(202) 842-5665
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE NO.
<S> <C>
Certain and Investment Limitations and Techniques B-1
Description of Certain Securities and Investment Techniques B-2
Investment Restrictions B-5
Fund Organization B-7
Trust Officers and Trustees, including Trustee Compensation B- 9
Management B-12
Dividends and Distributions B-14
Additional Information Concerning Taxes B-14
Purchasing Shares B-16
Sales Charges B-19
Sales Charge Reductions and Waivers B-21
Individual Retirement Account (IRA) Rollovers B-23
Price of Shares B-23
Selling Shares B-24
Shareholder Account Services and Privileges B-25
Execution of Portfolio Transactions B-27
General Information B-28
Class A Share Investment Results B-29
Description of Ratings for Debt Securities B-30
Financial Statements Attached
</TABLE>
CERTAIN INVESTMENT LIMITATIONS AND GUIDELINES
The following limitations and guidelines are considered at the time of
purchase, under normal market conditions, and are based on a percentage of the
fund's net assets unless otherwise noted. This summary is not intended to
reflect all of the fund's investment limitations.
The fund will invest at least 80% of its assets in, or derive at least 80% of
its income from, securities exempt from both federal and the respective state
(Maryland or Virginia) tax.
The fund may invest up to 20% of its assets in securities subject to
alternative minimum taxes.
The fund may invest up to 20% of its assets in straight debt securities (not
including convertible securities) rated Ba and BB or below (or unrated but
determined to be of equivalent quality).
Although the fund is not normally required to dispose of a security in the
event its rating is reduced below the current minimum rating for its purchase
(or it is not rated and its quality becomes equivalent to such a security), if,
as a result of a downgrade or otherwise, the fund holds more than 20% of its
assets in these securities, the fund will dispose of the excess as deemed
prudent by the investment adviser.
The fund may experience difficulty liquidating certain portfolio securities
during significant market declines or periods of heavy redemptions. The
descriptions below are intended to supplement the material in the prospectus
under "Investment Objectives, Strategies and Risks."
DESCRIPTION OF CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
DEBT SECURITIES -- Bonds and other debt securities are used by issuers to
borrow money. Issuers pay investors interest and generally must repay the
amount borrowed at maturity. Some debt securities, such as zero coupon bonds,
do not pay current interest, but are purchased at a discount from their face
values. The prices of debt securities fluctuate depending on such factors as
interest rates, credit quality, and maturity. In general their prices decline
when interest rates rise and vice versa.
High-yield, high-risk bonds rated Ba or below by Standard & Poor's Corporation
or BB or below by Moody's Investors Services, Inc. (or unrated but considered
to be of equivalent quality) are described by the ratings agencies as
speculative and involve greater risk of default or price changes due to changes
in the issuer's creditworthiness than higher rated bonds, or they may already
be in default. The market prices of these securities may fluctuate more than
higher quality securities and may decline significantly in periods of general
economic difficulty. It may be more difficult to dispose of, or to determine
the value of, high-yield, high-risk bonds. Certain risk factors relating to
"high-yield, high-risk bonds" are discussed below.
Certain risk factors relating to "lower quality, lower rated" bonds are
described below.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES - Lower quality, lower rated
bonds can be very sensitive to adverse economic changes and corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers or issuers whose revenue is very
sensitive to economic conditions may experience financial stress that would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaulted on its obligations to pay
interest or principal or entered into bankruptcy proceedings, the fund may
incur losses or expenses in seeking recovery of amounts owed to it. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices and yields of lower quality, lower
rated bonds.
PAYMENT EXPECTATIONS - Lower quality, lower rated bonds may contain redemption
or call provisions. If an issuer exercised these provisions in a declining
interest rate market, the fund would have to replace the security with a lower
yielding security, resulting in a decreased return for investors. Conversely,
a lower quality, lower rated bond's value will decrease in a rising interest
market, as will the value of the fund's assets.
LIQUIDITY AND VALUATION - There may be little trading in the secondary market
for particular bonds, which may affect adversely the fund's ability to value
accurately or dispose of such bonds. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower quality, lower bonds, especially in a thin
market.
MUNICIPAL BONDS - Municipal bonds are generally debt obligations issued to
obtain funds for various public purposes, including the construction of public
facilities. Opinions relating to the validity of municipal bonds and to the
exclusion from gross income for federal income tax purposes and, where
applicable, the exemption from state and local income tax are rendered by bond
counsel to the respective issuing authorities at the time of issuance.
The two principal classifications of municipal bonds are general obligation and
limited obligation (revenue) bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit including, if available, its
taxing power for the payment of principal and interest. Issuers of general
obligation bonds include states, counties, cities, towns and various regional
or special districts. The proceeds of these obligations are used to fund a
wide range of public facilities such as the construction or improvement of
schools, highways and roads, water and sewer systems and facilities for a
variety of other public purposes. Lease revenue bonds or certificates of
participation in leases are payable from annual lease rental payments from a
state or locality and may be considered a general obligation of the entity
making annual rental payments to the extent such rental payments are
appropriated annually.
Typically, the only security for a limited obligation or revenue bond is the
net revenue derived from a particular facility or class of facilities financed
thereby or, in some cases, from the proceeds of a special tax or other special
revenues. Revenue bonds have been issued to fund a wide variety of
revenue-producing public capital projects including: electric, gas, water and
sewer systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; hospitals; and convention, recreational and housing
facilities. Although the security behind these bonds varies widely, many
provide additional security in the form of a debt service reserve fund which
may also be used to make principal and interest payments on the issuer's
obligations. In addition, some revenue obligations (as well as general
obligations) are insured by a bond insurance company or backed by a letter of
credit issued by a banking institution.
Revenue bonds also include, for example, pollution control, health care and
housing bonds, which, although nominally issued by municipal authorities, are
generally not secured by the taxing power of the municipality but are secured
by the revenues of the authority derived from payments by the private entity
which owns or operates the facility financed with the proceeds of the bonds.
Obligations of housing finance authorities have a wide range of security
features including reserve funds and insured or subsidized mortgages, as well
as the net revenues from housing or other public projects. Most of these bonds
do not generally constitute the pledge of the credit of the issuer of such
bonds. The credit quality of such revenue bonds is usually directly related to
the credit standing of the user of the facility being financed or of an
institution which provides a guarantee, letter of credit or other credit
enhancement for the bond issue.
MUNICIPAL INFLATION-INDEXED BONDS - The fund may invest in inflation-indexed
bonds issued by municipalities. Interest payments are made to bondholders
semi-annually and are made up of two components; a fixed "real coupon" or
spread, and a variable coupon linked to an inflation index. Accordingly,
payments will increase or decrease each period as a result of changes in the
inflation index. In a period of deflation payments may decrease to zero, but
in any event will not be less than zero.
ZERO COUPON BONDS - Municipalities may issue zero coupon securities which are
debt obligations that do not entitle the holder to any periodic payments of
interest prior to maturity or a specified date when the security begins to pay
interest. They are issued and traded at a discount from their face amount or
par value, which discount varies depending on the time remaining until cash
payments begin, prevailing interest rates, liquidity of the security, and the
perceived credit quality of the issuer.
PRE-REFUNDED BONDS - From time to time, a municipality may refund a bond that
it has already issued prior to the original bond's call date by issuing a
second bond, the proceeds of which are used to purchase securities. The
securities are placed in an escrow account pursuant to an agreement between the
municipality and an independent escrow agent. The principal and interest
payments on the securities are then used to pay off the original bondholders.
For the purpose of diversification, pre-refunded bonds will be treated as
governmental issues.
FORWARD COMMITMENTS - The fund may enter into commitments to purchase or sell
securities at a future date. When the fund purchases such securities, it
assumes the risk of any decline in value of the security beginning on the date
of the agreement. When the fund agrees to sell such securities, it does not
participate in further gains or losses with respect to the securities beginning
on the date of the agreement. If the other party to such a transaction fails
to deliver or pay for the securities, the fund could miss a favorable price or
yield opportunity, or could experience a loss.
As the fund's aggregate commitments under these transactions increase, the
opportunity for leverage similarly increases. The fund will not use these
transactions for the purpose of leveraging and will segregate liquid assets
which will be marked to market daily in amounts sufficient to meet its payment
obligations in these transactions. Although these transactions will not be
entered into for leveraging purposes, to the extent the fund's aggregate
commitments under these transactions exceed its segregated assets, the fund
temporarily would be in a leveraged position (because it will have an amount
greater than its net assets subject to market risk). Should market values of
the fund's portfolio securities decline while the fund is in a leveraged
position, greater depreciation of its net assets will likely occur than were it
not in such a position. The fund will not borrow money to settle these
transactions and, therefore, will liquidate other portfolio securities in
advance of settlement if necessary to generate additional cash to meet its
obligations thereunder.
TEMPORARY INVESTMENTS - The fund may invest in short-term municipal obligations
with a maturity of one year or less during periods of temporary defensive
strategy or when such investments are considered advisable for liquidity.
Generally, the income from all such securities is exempt from federal income
tax. See "Additional Information Concerning Taxes" below. Further, a portion
of the fund's assets, which normally will be less than 20% of assets, may be
held in cash or invested in high quality taxable short-term securities with a
maturity of one year or less. Such temporary investments may include: (1)
obligations of the U.S. Treasury; (2) obligations of agencies and
instrumentalities of the U.S. Government; (3) money market instruments, such as
certificates of deposit issued by domestic banks, corporate commercial paper,
and bankers' acceptances; and (4) repurchase agreements (which are described
below).
REPURCHASE AGREEMENTS - Although the fund has no current intention to do so
during the next 12 months, it may enter on a temporary basis into repurchase
agreements, under which the fund buys a security and obtains a simultaneous
commitment from the seller to repurchase the security at a specified time and
price. Repurchase agreements permit the fund to maintain liquidity and earn
income over periods of time as short as overnight. The seller must maintain
with the fund's custodian bank collateral equal to at least 100% of the
repurchase price including accrued interest, as monitored daily by the
Investment Adviser. The fund will only enter into repurchase agreements
involving securities in which it could otherwise invest and with selected banks
and securities dealers whose financial condition is monitored by the Investment
Adviser. If the seller under the repurchase agreement defaults, the fund may
incur a loss if the value of the collateral securing the repurchase agreement
has declined and may incur disposition costs in connection with liquidating the
collateral. If bankruptcy proceedings are commenced with respect to the
seller, realization upon the collateral by a fund may be delayed or limited.
ADJUSTMENT OF MATURITIES - The Investment Adviser seeks to anticipate movements
in interest rates and adjusts the maturity distribution of the portfolio
accordingly. Longer term securities ordinarily yield more than shorter term
securities but are subject to greater and more rapid price fluctuation.
Keeping in mind the fund's objective of producing a high level of current
income, the Investment Adviser will increase the fund's exposure to this price
volatility only when it appears likely to increase current income without undue
risk to capital.
ISSUE CLASSIFICATION - Securities with the same general quality rating and
maturity characteristics, but which vary according to the purpose for which
they were issued, often tend to trade at different yields. These yield
differentials tend to fluctuate in response to political and economic
developments, as well as temporary imbalances in normal supply/demand
relationships. The Investment Adviser monitors these fluctuations closely, and
will attempt to adjust portfolio concentrations in various issue
classifications according to the value disparities brought about by these yield
relationship fluctuations.
QUALITY - Securities issued for similar purposes and with the same general
maturity characteristics, but which vary according to the creditworthiness of
their respective issuers, tend to trade at different yields. These yield
differentials also tend to fluctuate in response to political, economic and
supply/demand factors. The Investment Adviser will attempt to take advantage
of these fluctuations by adjusting the concentration of portfolio securities in
any given quality category according to the value disparities produced by these
yield relationship fluctuations.
The Investment Adviser believes that, in general, the market for municipal
bonds is less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the fund to make purchases and sales of securities
in the foregoing manner may, at any particular time and with respect to any
particular securities, be limited or non-existent.
PORTFOLIO TURNOVER - Portfolio changes will be made without regard to the
length of time particular investments may have been held. High portfolio
turnover involves correspondingly greater transaction costs in the form of
dealer spreads or brokerage commissions, and may result in the realization of
net capital gains, which are taxable when distributed to shareholders.
Fixed-income securities are generally traded on a net basis and usually neither
brokerage commissions nor transfer taxes are involved. The fund does not
anticipate its portfolio turnover to exceed 100% annually. The fund's
portfolio turnover rate would equal 100% if each security in the fund's
portfolio was replaced once every year. See "Financial Highlights" in the
Prospectus for the fund's portfolio turnover for each of the last five years.
RISK OF NON-COMPLIANCE WITH CERTAIN FEDERAL REQUIREMENTS - The Internal Revenue
Code of 1986, as amended, imposes limitations on the use and investment of the
proceeds of state and local governmental bonds and of other funds of the
issuers of such bonds. These limitations must be satisfied on a continuing
basis to maintain the exclusion from gross income of interest on such bonds.
The provisions of the Code generally apply to bonds issued after August 15,
1986. Bond counsel qualify their opinions as to the federal tax status of new
issues of bonds by making such opinions contingent on the issuer's future
compliance with these limitations. Any failure on the part of an issuer to
comply could cause the interest on its bonds to become taxable to investors
retroactive to the date the bonds were issued. These restrictions in the Code
also may affect the availability of certain municipal securities.
INVESTMENT RESTRICTIONS
The fund has adopted certain investment restrictions which may not be changed
without a majority vote of its outstanding shares. Such majority is defined by
the Investment Company Act of 1940, (the "1940 Act"), as the vote of the lesser
of (i) 67% or more of the outstanding voting securities present at a meeting,
if the holders of more than 50% of the outstanding voting securities are
present in person or by proxy, or (ii) more than 50% of the outstanding voting
securities. Investment limitations expressed in the following restrictions are
considered at the time securities are purchased and are based on the fund's net
assets unless otherwise indicated. These restrictions provide that the fund
may not:
1. Invest more than 5% of the value of its total assets in the securities of
any one issuer or hold more than 10% of any class of securities of any one
issuer (for this purpose all indebtedness of an issuer shall be deemed a single
class), provided that this limitation shall apply only to 75% of the value of
the fund's total assets and, provided further, that the limitation shall not
apply to obligations of the U.S. Government or its agencies or
instrumentalities;
2. Enter into any repurchase agreement maturing in more than seven days
(unless subject to a demand feature of seven days or less) if any such
investment, together with any illiquid securities held by the fund, exceeds 10%
of the value of its total assets;
3. Buy or sell real estate in the ordinary course of its business; however,
the fund may invest in securities secured by real estate or interests therein;
4. Acquire securities subject to legal or contractual restrictions on
disposition;
5. Make loans to others, except for the purchase of debt securities or
entering into repurchase agreements;
6. Sell securities short, except to the extent that the fund contemporaneously
owns or has the right to acquire at no additional cost securities identical to
those sold short;
7. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of purchases or sales;
8. Borrow money, except from banks for temporary or emergency purposes, not in
excess of 5% of the value of the fund's total assets, excluding the amount
borrowed. This borrowing provision is intended to facilitate the orderly sale
of portfolio securities to accommodate unusually heavy redemption requests, if
they should occur; it is not intended for investment purposes;
9. Mortgage, pledge, or hypothecate its assets, except in an amount up to 10%
of the value of its total assets, but only to secure borrowings for temporary
or emergency purposes;
10. Underwrite any issue of securities, except to the extent that the purchase
of municipal bonds directly from the issuer in accordance with the fund's
investment objective, policies and restrictions, and later resale may be deemed
to be an underwriting;
11. Invest in companies for the purpose of exercising control or management;
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition, or reorganization;
13. Buy or sell commodities or commodity contracts or oil, gas or other
mineral exploration or development programs;
14. Write, purchase or sell puts, calls, straddles, spreads or any combination
thereof;
15. Purchase or retain the securities of any issuer, if, to the knowledge
of the fund, those individual officers and Trustees of the Trust, its
Investment Adviser, or principal underwriter, each owning beneficially more
than $ of 1% of the securities of such issuer, together own more than 5% of the
securities of such issuer;
16. Invest more than 5% of the value of the fund's total assets in securities
of any issuer with a record of less than three years continuous operation,
including predecessors, except those issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, or municipal bonds rated at
least "A" by either Moody's Investors Service, Inc. or Standard & Poor's
Corporation; or
17. Invest more than 25% of its assets in securities of any industry although,
for purposes of this limitation, the issuers of municipal securities and U. S.
Government obligations are not considered to be part of any industry.
Notwithstanding Investment Restriction #12, the fund may invest in securities
of other investment companies if deemed advisable by its officers in connection
with the administration of a deferred compensation plan adopted by the Trustees
pursuant to an exemptive order granted by the Securities and Exchange
Commission.
For the purpose of the fund's investment restrictions, the identification of
the "issuer" of municipal bonds which are not general obligation bonds is made
by the Investment Adviser on the basis of the characteristics of the obligation
as described, the most significant of which is the ultimate source of funds for
the payment of principal of and interest on such bonds.
For purposes of investment restriction number 13, the term "oil, gas or other
mineral exploration or development programs" includes oil, gas or other mineral
exploration or development leases.
Another policy of the fund which is not deemed a fundamental policy, and thus
may be changed by the Board of Trustees without shareholder approval, is that
the fund may not invest 25% or more of its assets in securities the interest on
which is paid from revenues of similar type projects (such as hospitals and
health facilities; turnpikes and toll roads; ports and airports; or colleges
and universities). The fund may, however, invest more than an aggregate of 25%
of its total assets in industrial development bonds.
FUND ORGANIZATION AND VOTING RIGHTS
The fund is an open-end, diversified management investment company. It was
organized as a Massachusetts business trust in 1986. All fund operations are
supervised by the fund's board of trustees who meet periodically and perform
duties required by applicable state and federal laws. Members of the board who
are not affiliated with the business manager or investment adviser or their
affiliates are paid certain fees for services rendered to the fund as decribed
in "Trust Officers and Trustees" below. They may elect to defer all or a
portion of these fees through a deferred compensation plan in effect for the
fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees holding office have been elected by
shareholders. At that time, the Trustees then in office will call a
shareholders' meeting for the election of Trustees. The Trustees must call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Trustee when requested to do so by the record holders of 10% of the
outstanding shares of the Trust. At such a meeting, a Trustee may be removed
after the holders of record of not less than a majority of the outstanding
shares of the Trust have declared that the Trustee be removed either by
declaration in writing or by votes cast in person or by proxy. Except as set
forth above, the Trustees will continue to hold office and may appoint
successor Trustees. The shares do not have cumulative voting rights, which
means that the holders of a majority of the shares of the Trust voting for the
election of Trustees can elect all the Trustees. No amendment may be made to
the Declaration of Trust without the affirmative vote of a majority of the
outstanding shares of the Trust except that amendments to change the name of
the Trust, to correct any ambiguous, defective or inconsistent provision of, or
to supply any omission to, the Declaration of Trust, to establish new funds, or
to reduce or eliminate the payment of taxes by the Trust may be made by the
Trustees without the vote or consent of Shareholders. If not terminated by the
vote or written consent of a majority of the outstanding shares, the Trust will
continue indefinitely.
The fund currently issues shares in two series with each series issuing two
classes of shares - Class A and Class B. The Board of Trustees may establish
additional series of shares in the future. Each "series" of shares represents
interests in a separate portfolio and has its own investment objectives and
policies. When more than one series of shares is outstanding, shares of all
series will vote together for a single set of Trustees, and on other matters
affecting the entire Trust, with each share entitled to a single vote. On
matters affecting only one series, only the shareholders of that series shall
be entitled to vote. On matters relating to more than one series but affecting
the series differently, separate votes by series are required. The shares of
each class in each series represent an interest in the same investment
portfolio. Each class has equal rights as to voting, redemption, dividends and
liquidation, except that each class bears different distribution expenses and
may bear different transfer agent fees and other expenses properly attributable
to the particular class as approved by the Board of Trustees. Class A and Class
B shareholders have exclusive voting rights with respect to the rule 12b-1
Plans adopted in connection with the distribution of shares and on other
matters in which the interests of one class are different from interests of
another class. Shares of all classes of the fund vote together on matters that
affect all classes in substantially the same manner. Each class votes as a
class on matters that affect that class alone.
SHAREHOLDER AND TRUSTEE RESPONSIBILITY - Under the laws of certain states,
including Massachusetts, where the Trust was organized, shareholders of a
Massachusetts business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the Trust. However, the
risk of a shareholder incurring any financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides that notice of the disclaimer may be given in any agreement,
obligation, or instrument which is entered into or executed by the Trust or
Trustees. The Declaration of Trust provides for indemnification out of Trust
property of any shareholder held personally liable for the obligations of the
Trust and also provides for the Trust to reimburse such shareholder for all
legal and other expenses reasonably incurred in connection with any such claim
or liability.
Under the Declaration of Trust, the Trustees or officers are not liable for
actions or failure to act; however, they are not protected from liability by
reason of their willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of their office. The Trust
will provide indemnification to its Trustees and officers as authorized by its
By-Laws and by the 1940 Act and the rules and regulations thereunder. TRUST
OFFICERS AND TRUSTEES
(WITH THEIR PRINCIPAL OCCUPATIONS DURING THE PAST FIVE YEARS)#
TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION WITH PRINCIPAL OCCUPATION(S) AGGREGATE COMPENSATION TOTAL COMPENSATION TOTAL
NUMBER
REGISTRANT DURING PAST 5 YEARS# (INCLUDING VOLUNTARILY DEFERRED FROM ALL FUNDS OF
AFFILIATED
COMPENSATION/1/) FROM FUNDS AFFILIATED WITH THE FUND
BOARDS
DURING FISCAL YEAR ENDED AMERICAN FUNDS ON WHICH
7/31/99 GROUP FOR THE YEAR TRUSTEE
ENDED 7/31/99 SERVES
<S> <C> <C> <C> <C> <C>
Cyrus A. Ansary Trustee Investment Services $2,500 $53,200 3
1725 K Street, N.W., Suite 410 International Co. LLC,
Washington, D.C. 20006 President
Age: 65
Stephen Hartwell*{ Chairman Emeritus Washington Management none/3/ none/3/ 3
Age: 84 and Trustee Corporation, Chairman of
the Board
James H. Lemon, Jr.*{ Chairman of the The Johnston-Lemon none/3/ none/3/ 3
Age: 63 Trust Group, Incorporated,
Chairman of the Board
and
Chief Executive Officer
Harry J. Lister*{ President and Trustee Washington Management none/3/ none/3/ 3
Age: 63 Corporation, President
and
Director
Jean Head Sisco Trustee Sisco Associates, $3,500 $23,100 3
5335 Wisconsin Avenue, N.W. Partner
Washington, D.C. 2001508
Age: 74
T. Eugene Smith Trustee T. Eugene Smith, Inc., $3,700 $55,300 3
666 Tintagel Lane President
McLean, VA 22101
Age: 69
Stephen G. Yeonas Trustee Stephen G. Yeonas $3,500/2/ $23,100 3
1355 Beverly Road, Suite 102 Company,
McLean, VA 22101 Chief Executive Officer
Age: 74
</TABLE>
OTHER OFFICERS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HOWARD L. KITZMILLER{ LOIS A. ERHARD{ MICHAEL W. STOCKTON{ J. LANIER FRANK{
Senior Vice President, Secretary Vice President Assistant Vice President, Assistant Assistant VicePresident
and Treasurer Washington Management Corporation, Secretary and Assistant Treasurer Washington Management
Corporation,
Washington Management Corporation, Vice President (Age: 47) Washington Management Assistant Vice President (Age: 38)
Director, Senior Vice President, Secretary and Corporation,
Assistant Treasurer (Age: 69) Vice President, Assistant Secretary
and Assistant Treasurer (Age: 32)
</TABLE>
# Positions within the organizations listed may have changed during this
period.
* Trustees who are considered "interested persons" as defined in the 1940 Act,
on the basis of their affiliation with the fund's Business Manager, Washington
Management Corporation.
{ Address is 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
/1/Amounts may be deferred by eligible trustees under a non-qualified deferred
compensation plan adopted by the fund in 1994. Deferred amounts accumulate at
an earnings rate determined by the total return of one or more funds in The
American Funds Group as designated by the Trustee.
/2/Since the plan's adoption, the total amount of deferred compensation accrued
by the funds (plus earnings thereon) through 9/30/99, for participants is as
follows: Trustee Stephen G. Yeonas ($33,448). Amounts deferred and accumulated
earnings thereon are not funded and are general unsecured liabilities of the
funds until paid to the Trustee.
/3/Stephen Hartwell, James H. Lemon, Jr. and Harry J. Lister are affiliated
with the Business Manager and, accordingly, receive no compensation from the
funds.
All of the officers listed are officers of the Business Manager. All of the
Trustees and officers are also officers and/or directors of one or more of the
other funds for which Washington Management Corporation serves as Business
Manager. No Trustee compensation is paid by the funds to any officer or
Trustee who is a director, officer or employee of the Business Manager, the
Investment Adviser or affiliated companies. Each fund pays an annual retainer
fee of $750, an attendance fee of $200 per meeting and $100 per Committee
meeting to unaffiliated Trustees. The Trustees may elect, on a voluntary
basis, to defer all or a portion of those fees through a deferred compensation
plan in effect for the funds. Each fund also reimburses certain
meeting-related expenses of the Trustees.
The Business Manager has established a charitable foundation, the Washington
Management Corporation Foundation, which makes contributions to charities
organized under Section 501 (c)(3) or 509(a)(2) of the Internal Revenue Code.
Trustees and officers of the fund, as well as all employees of the Business
Manager and its afffiliates, may particpate in a gift matching program
sponsored by the Foundation.
As of February 29, 2000, the officers and Trustees and their families as a
group, owned beneficially or of record 1.76% and 1.80%, respectively, of the
outstanding shares of the Maryland and Virginia funds.
MANAGEMENT
BUSINESS MANAGER - Since its inception, the Trust has operated under a
Business Management Agreement with Washington Management Corporation (the
"Business Manager"), 1101 Vermont Avenue, N.W., Washington, D.C. 20005.
The primary function of the Business Manager is to oversee the various services
and operations of the fund. The Business Manager provides all services
required to carry on the fund's general administrative and corporate affairs.
These services include all executive personnel, clerical staff, office space
and equipment, arrangements for and supervision of all shareholder services,
Federal and state regulatory compliance and responsibility for accounting and
record keeping facilities. The Business Manager provides similar services to
other mutual funds.
The Business Manager receives a fee at the annual rate of 0.135% of the first
$60 million of the fund's net assets plus 0.09% of the fund's net assets in
excess of $60 million plus 1.35% of gross investment income. For the fiscal
years ended July 31, 1999, 1998, and 1997 the Business Manager's fees were
$202,000, $181,000 and $165,000 for the Maryland Fund and $224,000, $201,000
and $184,000 for the Virginia Fund, respectively. For the fiscal year ended
July 31, 1999, the Business Manager's fees for the Maryland Fund amounted to
0.188% of average net assets and for the Virginia Fund amounted to 0.183% of
average net assets.
INVESTMENT ADVISER - The Investment Adviser, Capital Research and Management
Company, founded in 1931, maintains research facilities in the U.S. and abroad
(Los Angeles, San Francisco, New York, Washington, D.C., London, Geneva,
Singapore, Hong Kong and Tokyo), with a staff of professionals, many of whom
have a number of years of investment experience. The Investment Adviser is
located at 333 South Hope Street, Los Angeles, CA 90071, and at 135 South State
College Boulevard, Brea, CA 92821. The Investment Adviser's research
professionals travel several million miles a year, making more than 5,000
research visits in more than 50 countries around the world. The Investment
Adviser believes that it is able to attract and retain quality personnel.
The Investment Adviser is responsible for more than $300 billion of stocks,
bonds and money market instruments and serves over 11 million investors of all
types. These investors include privately owned businesses and large
corporations as well as schools, colleges, foundations and other non-profit and
tax-exempt organizations.
The Investment Adviser receives a fee at the annual rate of 0.165% of the first
$60 million of the fund's net assets plus 0.12% of the fund's net assets in
excess of $60 million plus 1.65% of gross investment income. For the fiscal
years ended July 31, 1999, 1998, and 1997 the Investment Adviser's fees were
$252,000, $224,000 and $203,000, for the Maryland Fund and $279,000, $250,000
and $229,000 for the Virginia Fund, respectively. For the fiscal year ended
July 31, 1999, the Investment Adviser's fees for the Maryland Fund amounted to
0.234% of average net assets and for the Virginia Fund amounted to 0.228% of
average net assets.
BUSINESS MANAGEMENT AGREEMENT AND INVESTMENT ADVISORY AGREEMENT - The Business
Management Agreement and Investment Advisory Agreement, unless sooner
terminated, will continue in effect until July 31, 2000 and may be renewed from
year to year thereafter, provided that any such renewal has been specifically
approved at least annually as to the fund by (i) the Board of Trustees, or by
the vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the fund, and (ii) the vote of a majority of Trustees who are not
parties to the Agreements or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval. The Agreements also provide that either party has the right
to terminate them, without penalty, upon sixty (60) days' written notice to the
other party and that the Agreements automatically terminate in the event of
their assignment (as defined in the 1940 Act).
The fund pays all expenses not specifically assumed by the Business Manager or
the Investment Adviser, including, but not limited to, registration and filing
fees with federal and state agencies; blue sky expenses; expenses of
shareholders' meetings; the expense of reports to existing shareholders;
expenses of printing proxies and prospectuses; insurance premiums; legal and
auditing fees; dividend disbursement expenses; the expense of the issuance,
transfer and redemption of its shares; custodian fees; printing and preparation
of registration statements; taxes; the fund's distribution expenses pursuant to
the Plan of Distribution; compensation, fees and expenses paid to Trustees who
are not "interested persons" of the Trust; association dues; and costs of
stationery, forms and certificates prepared exclusively for the fund.
PRINCIPAL UNDERWRITER - American Funds Distributors, Inc.(the Principal
Underwriter) is the principal underwriter of the fund's shares. The Princiapl
Underwiter is located at 333 South Hope Street, Los Angeles, CA 90071, 135
Sotuh State College Boulevard, Brea, CA 92821, 3500 Wiseman Boulevard, San
Antonio, TX 78251, 8332 Woodfield Crossing Boulevard, Indianapolis, IN 46240,
and 5300 Robin Hood Road, Norfolk, VA 23513. Each fund in theTrust has adopted
Plans of Distribution (the "Plans"), pursuant to rule 12b-1 under the 1940 Act
(see "Principal Underwriter" in the Prospectus). The Principal Underwriter
receives amounts payable pursuant to the Plans (see below) and commissions
consisting of that portion of the sales charge remaining after the discounts
which it allows to investment dealers. For the fiscal years ended July 31,
1999, 1998 and 1997 the commissions on Class A Maryland Fund shares totaled
$405,000, $250,000, and $170,000 of which the Principal Underwriter retained
$80,000, $48,00 and $32,000, respectively, while the Class A commissions on the
Virginia Fund shares totaled $427,000, $300,000 and $265,000 of which the
Principal Underwriter retained $87,000, $58,000 and $52,000, respectively.
Johnston, Lemon & Co. Incorporated ("Johnston, Lemon"), a wholly-owned
subsidiary of the business manager's parent company, The Johnston-Lemon Group,
Inc. ("JLG"), received commission amounts of $39,000, $44,000, and $27,000, and
$23,000, $41,000 and $35,000, respectively, for the fiscal years ended July 31,
1999, 1998 and 1997, on its retail sales of the Maryland and Virginia Funds and
the Distribution Plans of the funds, but received no net brokerage commissions
resulting from purchases and sales of securities for the investment account of
the funds.
As required by rule 12b-1 and the 1940 Act, the Plans (together with the
Principal Underwriting Agreement) have been approved by the full Board of
Trustees and separately by a majority of the Trustees who are not "interested
persons" of the fund and who have no direct or indirect financial interest in
the operation of the Plans or the Principal Underwriting Agreement, and the
Plans have been approved by the vote of a majority of the outstanding voting
securities of the Trust. The officers and Trustees who are "interested
persons" of the Trust may be considered to have a direct or indirect financial
interest in the operation of the Plans due to present or past affiliations with
the Business Manager. Potential benefits of the Plans to the fund are improved
shareholder services, savings to the fund in transfer agency costs, savings to
the fund in advisory fees and other expenses, benefits to the investment
process from growth or stability of assets and maintenance of a financially
healthy management organization. The selection and nomination of Trustees who
are not "interested persons" of the Trust shall be committed to the discretion
of the Trustees who are not interested persons during the existence of the
Plans. The Plans may not be amended to increase materially the amount to be
spent for distribution without shareholder approval. The Board of Trustees
reviews quarterly a written report of amounts expended under the Plans or any
related agreement and the purposes for which such expenditures were made and
approves annually any continuance of the Plans.
Under the Plans the fund may expend up to 0.25% of its net assets annually for
Class A shares and up to 1.00% of its net assets annually for Class B shares
to finance any activity which is primarily intended to result in the sale of
fund shares, provided the fund's Board of Trustees has approved the category of
expenses for which payment is being made. For Class A shares these include up
to 0.25% in service fees for qualified dealers and dealer commissions and
wholesaler compensation on sales of shares exceeding $1 million purchased
without a sales charge (including purchases by employer-sponsored defined
contribution-type retirement plans investing $1 million or more or with 100 or
more eligible employees, rollover IRA accounts as described in "Individual
Retirement Account (IRA) Rollovers" below, and retirement plans, endowments or
foundations with $50 million or more in assets). For Class B shares these
include 0.25% in service fees for qualified dealers and 0.75% in payments to
the Principal Underwriter for financing commissions paid to qualified dealers
selling Class B shares.
Commissions on sales of Class A shares exceeding $1 million (inluding purchases
by any employer-sponsored 403(b) plan or purchases by any defined contribution
plan qualified under Section 401(a) of the Internal Revenue Code, including any
"401(k)" plan with 100 or more eligible employees) in excess of the Class A
Plan limitation not reimbursed during the most recent fiscal quarter are
recoverable for five quarters, provided that such commissions do not exceed the
annual expense limit. After five quarters, commissions are not recoverable.
During the Trust's fiscal year ended July 31, 1999, distribution expenses under
the Class A Plan paid or payable to the Principal Underwriter were $268,000 for
the Maryland Fund and $305,000 for the Virginia Fund, all of which was used as
compensation to dealers and wholesalers. As of July 31, 1999, accrued and
unpaid distribution expenses were $45,000 and $52,000, respectively.
OTHER COMPENSATION TO DEALERS - American Funds Distributors, at its expense
(from a designated percentage of its income) currently provides additional
compensation to dealers. Currently these payments are limited to the top one
hundred dealers who have sold shares of the fund or other funds in The American
Funds Group. These payments will be based on a pro rata share of a qualifying
dealer's sales. American Funds Distributors will, on an annual basis, determine
the advisability of continuing these payments.
All officers of the fund and three of its Trustees, who are "interested
persons" of the fund, are officers or directors of Washington Management
Corporation, a wholly-owned subsidiary of JLG. Johnston, Lemon participates
in receiving dealer service fee payments from the Plans. Some of the fund's
officers and three Directors who are "interested persons" of the fund are also
registered representatives with Johnston, Lemon and, as such, to the extent
they have sold shares of the fund, receive a portion of the service fee
payments in the same manner as all other Johnston, Lemon registered
representatives.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS AND DISTRIBUTIONS - For the purpose of calculating dividends, daily
net investment income of the fund consists of: (a) all interest income accrued
on the fund's investments including any discount or premium ratably amortized
to the date of maturity or determined in such other manner as may be deemed
appropriate; minus (b) all liabilities accrued, including interest, taxes and
other expense items, amounts determined and declared as dividends or
distributions and reserves for contingent or undetermined liabilities, all
determined in accordance with generally accepted accounting principles.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, or the shareholder does
not respond to mailings from American Funds Service Company with regard to
uncashed distribution checks, the shareholder's distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares.
ADDITIONAL INFORMATION CONCERNING TAXES
The following is only a summary of certain additional tax considerations
generally affecting the fund and its shareholders. No attempt is made to
present a detailed explanation of the tax treatment of the fund or its
shareholders, and the discussion here and in such fund's Prospectus is not
intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax situations.
GENERAL - The fund is not intended to constitute a balanced investment program
and is not designed for investors seeking capital appreciation or maximum
tax-exempt income irrespective of fluctuations in principal. Shares of the
fund generally would not be suitable for tax-exempt institutions or
tax-deferred retirement plans (E.G., plans qualified under Section 401 of the
Internal Revenue Code, Keogh-type plans and individual retirement accounts).
Such retirement plans would not gain any additional benefit from the tax-exempt
nature of the fund's dividends because such dividends would be ultimately
taxable to the beneficiaries when distributed to them. In addition, the fund
may not be an appropriate investment for entities which are "substantial users"
of facilities financed by industrial development bonds or "related persons"
thereof. "Substantial user" is defined under U.S. Treasury Regulations to
include a non-exempt person who regularly uses a part of such facilities in
their trade or business and whose gross revenues derived with respect to the
facilities financed by the issuance of bonds are more than 5% of the total
revenues derived by all users of such facilities, or who occupies more than 5%
of the usable area of such facilities or for whom such facilities or a part
thereof were specifically constructed, reconstructed or acquired. "Related
persons" include certain related natural persons, affiliated corporations, a
partnership and its partners and an S Corporation and its shareholders.
The fund intends to meet all the requirements and to elect the tax status of a
"regulated investment company" under the provisions of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, the fund will
not be subject to federal income taxes to the extent it distributes its net
investment income and net realized capital gains, if any, to shareholders. The
fund must distribute 90% of the aggregate interest excludable from gross income
and 90% of the investment company taxable income earned by it during the
taxable year.
The percentage of total dividends paid by the fund with respect to any taxable
year which qualify for exclusion from gross income ("exempt-interest
dividends") for Federal tax purposes will be the same for all shareholders
receiving dividends during such year. In order for the fund to pay
exempt-interest dividends during any taxable year, at the close of each fiscal
quarter at least 50% of the aggregate value of the Trust's and fund's assets
must consist of tax-exempt obligations. Not later than 60 days after the close
of its taxable year, the fund will notify each shareholder of the portion of
the dividends paid by the Fund to the shareholder with respect to such taxable
year which constitutes exempt-interest dividends. The aggregate amount of
dividends so designated cannot, however, exceed the excess of the amount of
interest excludable from gross income from tax under Section 103 of the Code
received by the Fund during the taxable year over any amounts disallowed as
deductions under Sections 265 and 171(a)(2) of the Code.
Interest on indebtedness incurred by a shareholder to purchase or carry Fund
shares is not deductible for federal income tax purposes if the Fund
distributes exempt-interest dividends during the shareholder's taxable year.
If a shareholder receives an exempt-interest dividend with respect to any share
and such share is held for six months or less, any loss on the sale or exchange
of such share will be disallowed to the extent of the amount of such
exempt-interest dividend.
While the Fund does not expect to realize substantial long-term capital gains,
any net realized long-term capital gains will be distributed annually. The
fund will have no tax liability with respect to such gains, and the
distributions will be taxable to shareholders as long-term capital gains,
regardless of how long a shareholder has held the fund's shares. Such
distributions will be designated as a capital gains dividend in a written
notice mailed by the fund to shareholders not later than 60 days after the
close of the fund's taxable year. The fund may also make a distribution of net
realized long-term capital gains near the end of the calendar year to comply
with certain requirements of the Code. Gain recognized on the disposition of a
debt obligation (including tax-exempt obligations purchased after April 30,
1993) purchased by the fund at a market discount (generally at a price less
than the principal amount) will be treated as ordinary income to the extent of
the portion of the market discount which accrued during the period of time the
fund held the debt obligation. Similarly, while the fund does not expect to
earn any taxable income, any taxable income earned by the fund will be
distributed and will be taxable to shareholders as ordinary income (whether
distributed in cash or additional shares).
If for any taxable year the fund does not qualify for the special tax treatment
afforded regulated investment companies, all of its taxable income will be
subject to tax at regular corporate rates (without any deduction for
distributions to its shareholders). In such event, dividend distributions
would be taxable to shareholders to the extent of earnings and profits, and may
be eligible for the dividends received deduction for corporations.
Under the Code, if, within 90 days after fund shares are purchased, such shares
are redeemed and either reinstated in the same fund or exchanged for shares of
any other fund in The American Funds Group and the otherwise applicable sales
charge is waived, then the amount of the sales charge previously incurred in
purchasing fund shares shall not be taken into account for purposes of
determining the amount of any gain or loss on the redemption, but will be
treated as having been incurred in the purchase of the fund shares acquired in
the reinstatement or exchange.
The tax status of a gain realized on a redemption will not be affected by
exercise of the reinstatement privilege, but a loss may be nullified if you
reinvest in the same fund within 30 days.
As of the date of this statement of additional information, the maximum federal
individual stated tax rate applicable to ordinary income is 39.6% (effective
tax rates may be higher for some individuals due to phase out of exemptions and
elimination of deductions); the maximum individual tax rate applicable to net
capital gains on securities held more than one year is 20%; and the maximum
corporate tax rate applicable to ordinary income and net capital gain is 35%.
Naturally, the amount of tax payable by a shareholder with respect to either
distributions from the fund or disposition of fund shares will be affected by a
combination of tax rules covering E.G., deductions, credits, deferrals,
exemptions, sources of income and other matters.
FEDERAL TAXES - Under the Code, a nondeductible excise tax of 4% is imposed on
the excess of a regulated investment company's "required distribution" for the
calendar year ending within the regulated investment company's taxable year
over the "distributed amount" for such calendar year. The term "required
distribution" means the sum of (i) 98 percent of ordinary income (generally net
investment income) for the calendar year, (ii) 98 percent of capital gain net
income (both long-term and short-term) for the one-year period ending on
October 31 (as though the one-year period ending on October 31 were the
regulated investment company's taxable year), and (iii) the sum of any untaxed,
undistributed net investment income and net capital gains of the regulated
investment company for prior periods. The term "distributed amount" generally
means the sum of (i) amounts actually distributed by each fund from its current
year's ordinary income and capital gain net income and (ii) any amount on which
such fund pays income tax for the year. Each fund intends to meet these
distribution requirements to avoid the excise tax liability.
Individuals and corporations may be subject to alternative minimum tax. The
Code treats interest on private activity bonds, as defined therein, as an item
of tax preference for alternative minimum tax purposes. Also, shareholders
will not be permitted to deduct any of their share of fund expenses in
computing alternative minimum taxable income. Further, under the Code federal
exempt-interest dividends are includable in adjusted current earnings in
calculating corporate alternative minimum taxable income.
Fund shareholders are required by the Code to report to the federal government
all exempt-interest dividends and all other tax-exempt interest received.
PURCHASE OF SHARES
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METHOD INITIAL INVESTMENT ADDITIONAL INVESTMENTS
See "Investment Minimums and Fund Numbers" for initial investment minimums. $50 minimum (except where a lower
minimum is noted under "Purchase Minimums").
By contacting Visit any investment dealer who is registered in the state where the purchase is made and who has a sales agreement
with American Funds Distributors. Mail directly to your investment
your dealer's address printed on your
investment account statement.
dealer
By mail Make your check payable to the fund and mail to the address indicated on the account application. Please indicate
an investment dealer on the account application. Fill out the account additions form at the bottom of a recent account statement,
make your check payable to the fund, write your account number on your check, and mail the check and form in the envelope provided
with your account statement.
By telephone Please contact your investment dealer to open account, then follow the procedures for additional investments.
Complete the "Investments by Phone" section on the account application or American FundsLink Authorization Form. Once you establish
the privilege, you, your financial advisor or any person with your account information can call American FundsLineR and make
investments by telephone (subject to conditions noted in "Telephone and Computer
Purchases, Redemptions and Exchanges" below).
By computer Please contact your investment dealer to open account, then follow the procedures for additional investments.
Complete the American FundsLink Authorization Form. Once you establish the privilege, you, your financial advisor or any person
with your account information may access American FundsLine OnLineR on the Internet and make investments by computer (subject to
conditions noted in "Telephone and Computer Purchases, Redemptions and Exchanges"
below).
By wire Call 800/421-0180 to obtain your account number(s), if necessary. Please indicate an investment dealer on the
account. Instruct your bank to wire funds to: Your bank should wire your additional investments in the same manner as described
under "Initial Investment."
Wells Fargo Bank
155 Fifth Street
Sixth Floor
San Francisco, CA 94106
(ABA #121000248)
For credit to the account of:
American Funds Service Company
a/c #4600-076178
(fund name)
(your fund acct. no.)
THE FUNDS AND AMERICAN FUNDS DISTRIBUTORS RESERVE THE RIGHT TO REJECT ANY PURCHASE ORDER.
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PURCHASE MINIMUMS - The minimum initial investment for all funds in The
American Funds Group, except the money market funds and the state tax-exempt
funds, is $250. The minimum initial investment for the money market funds (The
Cash Management Trust of America, The Tax- Exempt Money Fund of America, and
The U.S. Treasury Money Fund of America) and the state tax-exempt funds (The
Tax-Exempt Fund of California, The Tax-Exempt Fund of Maryland, and The
Tax-Exempt Fund of Virginia) is $1,000. Purchase minimums are reduced to $50
for purchases through "Automatic Investment Plans" (except for the money market
funds) or to $25 for purchases by retirement plans through payroll deductions
and may be reduced or waived for shareholders of other funds in The American
Funds Group. Tax-exempt funds should not serve as retirement plan investments.
The minimum is $50 for additional investments (except as noted above).
PURCHASE MAXIMUM FOR CLASS B SHARES - The maximum purchase order for Class B
shares for all American Funds is $100,000. For investments above $100,000 Class
A shares are generally a less expensive option over time due to sales charge
reductions or waivers.
Fund Numbers - Here are the fund numbers for use with our automated phone line,
American FundsLineR (see description below):
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FUND FUND FUND
NUMBER NUMBER
CLASS A CLASS B
STOCK AND STOCK/BOND FUNDS
AMCAP FundR 202
02
American Balanced FundR 211
11
American Mutual FundR 203
03
Capital Income BuilderR 212
12
Capital World Growth and Income Fund$ 233
33
EuroPacific Growth FundR 216
16
Fundamental Investors$ 210
10
The Growth Fund of AmericaR 205
05
The Income Fund of AmericaR 206
06
The Investment Company of AmericaR 204
04
The New Economy FundR 214
14
New Perspective FundR 207
07
New World Fund$ 236
36
SMALLCAP World FundR 235
35
Washington Mutual Investors Fund$ 201
01
BOND FUNDS
American High-Income Municipal Bond FundR 240
40
American High-Income Trust$ 221
21
The Bond Fund of America$ 208
08
Capital World Bond FundR 231
31
Intermediate Bond Fund of America$ 223
23
Limited Term Tax-Exempt Bond Fund of America$ 243
43
The Tax-Exempt Bond Fund of AmericaR 219
19
The Tax-Exempt Fund of CaliforniaR* 220
20
The Tax-Exempt Fund of MarylandR* 224
24
The Tax-Exempt Fund of VirginiaR* 225
25
U.S. Government Securities Fund$ 222
22
MONEY MARKET FUNDS
The Cash Management Trust of AmericaR 209
09
The Tax-Exempt Money Fund of America$ N/A
39
The U.S. Treasury Money Fund of America$ N/A
49
*Available only in certain states.
</TABLE>
CLASS A SALES CHARGES - The sales charges you pay when purchasing Class A
shares of the stock, stock/bond, and bond funds of The American Funds Group
are set forth below. The money market funds of The American Funds Group are
offered at net asset value. (See "Fund Numbers" for a listing of the funds.)
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AMOUNT OF PURCHASE SALES CHARGE AS DEALER
AT THE OFFERING PRICE PERCENTAGE OF THE: CONCESSION
AS PERCENTAGE
OF THE
OFFERING
PRICE
NET AMOUNT OFFERING
INVESTED PRICE
STOCK AND STOCK/BOND FUNDS
Less than $25,000
6.10% 5.75% 5.00%
$25,000 but less than $50,000. . . . . . . . . . . 5.26 5.00 4.25
$50,000 but less than $100,000
4.71 4.50 3.75
BOND FUNDS
Less than $100,000
3.90 3.75 3.00
STOCK, STOCK/BOND, AND BOND FUNDS
$100,000 but less than $250,000
3.63 3.50 2.75
$250,000 but less than $500,000
2.56 2.50 2.00
$500,000 but less than $750,000. . . . . . . . 2.04 2.00 1.60
$750,000 but less than $1,000,000
1.52 1.50 1.20
$1,000,000 or more (see below)
none none CLASS A PURCHASES NOT SUBJECT TO SALES CHARGES -- Investment of
$1 million or more are sold with no initial
sales charge. However, a 1% contingent deferred sales charge
(CDSC) may be imposed if redemptions are
made within one year of purchase. Employer-sponsored defined
contribution-type plans investing $1 million
or more, or with 100 or more eligible employees, and Individual
Retirement Account rollovers from
retirement plan assets invested in the American Funds (see
"Individual Retirement Account (IRA) Rollovers"
below) may invest with no sales charge and are not subject to a
contingent deferred sales charge.
Investments made by investors in certain qualified fee-based
programs, and retirement plans, endowments or
foundations with $50 million or more in assets may also be made
with no sales charge and are not subject to a
CDSC. A dealer concession of up to 1% may be paid by the fund
under its Plan of Distribution on investments
made with no initial sales charge.
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In addition, Class A shares of the stock, stock/bond and bond funds may sell
shares at net asset value to:
(1) current or retired directors, trustees, officers and advisory board members
of, and certain lawyers who provide services to the funds managed by Capital
Research and Management Company, employees of Washington Management
Corporation, employees and partners of The Capital Group Companies, Inc. and
its affiliated companies, certain family members of the above persons, and
trusts or plans primarily for such persons;
(2) current registered representatives, retired registered representatives with
respect to accounts established while active, or full-time employees (and their
spouses, parents, and children) of dealers who have sales agreements with
American Funds Distributors (or who clear transactions through such dealers)
and plans for such persons or the dealers;
(3) companies exchanging securities with the fund through a merger, acquisition
or exchange offer;
(4) trustees or other fiduciaries purchasing shares for certain retirement
plans of organizations with retirement plan assets of $50 million or more;
(5) insurance company separate accounts;
(6) accounts managed by subsidiaries of The Capital Group Companies, Inc.; and
(7) The Capital Group Companies, Inc., its affiliated companies and Washington
Management Corporation.
Shares are offered at net asset value to these persons and organizations due to
anticipated economies in sales effort and expense.
CONTINGENT DEFERRED SALES CHARGE ON CLASS A SHARES - A contingent deferred
sales charge of 1% applies to redemptions made from funds, other than the money
market funds, within 12 months following Class A share purchases of $1 million
or more made without an initial sales charge. The charge is 1% of the lesser
of the value of the shares redeemed (exclusive of reinvested dividends and
capital gain distributions) or the total cost of such shares. Shares held the
longest are assumed to be redeemed first for purposes of calculating this CDSC.
The CDSC may be waived in certain circumstances. See "CDSC Waivers for Class A
Shares" below.
DEALER COMMISSIONS ON CLASS A SHARES -- Commissions of up to 1% will be paid to
dealers who initiate and are responsible for purchases of $1 million or more,
for purchases by any employer-sponsored defined contribution plan investing
$1,000,000 or more, or with 100 or more eligible employees, IRA rollover
accounts (as decribed in "Individual Retirement Account (IRA) Rollovers"
below), and for purchases made at net asset value by certain retirement plans,
endowments and foundations with collective assets of $50 million or more: 1.00%
on amounts of $1 million to $4 million, 0.50% on amounts over $4 million to $10
million, and 0.25% on amounts over $10 million. For certain tax-exempt accounts
open prior to September 1, 1969, sales charges and dealer commissions, as a
percent of offering price, are respectively 3% and 2.5% (under $50,000); 2.5%
and 2.0% ($50,000 but less than $100,000); 2.0% and 1.5% ($100,000 but less
than $250,000) and 1.5% and 1.25% ($250,000 but less than $1 million).
CLASS B SALES CHARGES - Class B shares are sold without any initial sales
charge. However, a CDSC may be applied to shares you sell within six years of
purchase, as shown in the table below:
CONTINGENT DEFERRED SALES CHARGE ON
SHARES SOLD WITHIN YEAR AS A % OF SHARES BEING SOLD
1 5.00%
2 4.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
There is no CDSC on appreciation in share value above the initial purchase
price or on shares acquired through reinvestment of dividends or capital gain
distributions. In addition, the CDSC may be waived in certain circumstances.
See "CDSC Waivers for Class B shares" below. The CDSC is based on the original
purchase cost or the current market value of the shares being sold, whichever
is less. In processing redemptions of Class B shares, shares that are not
subject to any CDSC will be redeemed first and then shares that you have owned
the longest during the six-year period. CLASS B SHARES ARE NOT AVAILABLE TO
CERTAIN RETIREMENT PLANS, INCLUDING GROUP RETIREMENT PLANS SUCH AS 401(K)
PLANS, EMPLOYER-SPONSORED 403(B) PLANS, AND MONEY PURCHASE PENSION AND PROFIT
SHARING PLANS.
Compensation equal to 4% of the amount invested is paid by the Principal
Underwriter to dealers who sell Class B shares.
CONVERSION OF CLASS B SHARES TO CLASS A SHARES - Class B shares automatically
convert to Class A shares in the month of the eight-year anniversary of the
purchase date. The conversion of Class B shares to Class A shares after eight
years is subject to the Internal Revenue Service's continued position that the
conversion of Class B shares is not subject to federal income tax. In the
event the Internal Revenue Service no longer takes this position, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. At your
option, Class B shares may still be exchanged for Class A shares on the basis
of relative net asset value of the two classes, without the imposition of a
sales charge or fee; HOWEVER, SUCH AN EXCHANGE COULD CONSTITUTE A TAXABLE EVENT
FOR you, and absent such an exchange, Class B shares would continue to be
subject to higher expenses for longer than eight years.
SALES CHARGE REDUCTIONS AND WAIVERS
REDUCING YOUR CLASS A SALES CHARGE - You and your "immediate family" (your
spouse and your children under age 21) may combine investments to reduce your
costs. You must let your investment dealer or American Funds Service Company
(the "Transfer Agent") know if you qualify for a reduction in your sales charge
using one or any combination of the methods described below.
STATEMENT OF INTENTION -- You may enter into a non-binding commitment to
purchase shares of a fund(s) over a 13-month period and receive the same sales
charge as if all shares had been purchased at once. This includes purchases
made during the previous 90 days, but does not include appreciation of your
investment or reinvested distributions. The reduced sales charges and offering
prices set forth in the Prospectus apply to purchases of $ 25,000 or more made
within a 13-month period subject to the following statement of intention (the
"Statement") terms. The Statement is not a binding obligation to purchase the
indicated amount. When a shareholder elects to utilize a Statement in order to
qualify for a reduced sales charge, shares equal to 5% of the dollar amount
specified in the Statement will be held in escrow in the shareholder's account
out of the initial purchase (or subsequent purchases, if necessary) by American
Funds Service Company. All dividends and any capital gain distributions on
shares held in escrow will be credited to the shareholder's account in shares
(or paid in cash, if requested). If the intended investment is not completed
within the specified 13-month period, the purchaser will remit to the Principal
Underwriter the difference between the sales charge actually paid and the sales
charge which would have been paid if the total of such purchases had been made
at a single time. If the difference is not paid by the close of the period the
appropriate number of shares held in escrow will be redeemed to pay such
difference. If the proceeds from this redemption are inadequate, the purchaser
will be liable to the Principal Underwriter for the balance still outstanding.
The Statement may be revised upward at any time during the 13-month period, and
such a revision will be treated as a new Statement, except that the 13-month
period during which the purchase must be made will remain unchanged. Existing
holdings eligible for rights of accumulation (see the account application) and
any individual investments in American Legacy products (American Legacy,
American Legacy II and American Legacy III variable annuities, American Legacy
Life, American Legacy Variable Life, and American Legacy Estate Builder) may be
credited toward satisfying the Statement. During the Statement period,
reinvested dividends and capital gain distributions, investments in money
market funds and investments made under a right of reinstatement will not be
credited toward satisfying the Statement.
When the trustees of certain retirement plans purchase shares by payroll
deduction, the sales charge for the investments made during the 13-month period
will be handled as follows: The regular monthly payroll deduction investment
will be multiplied by 13 and then multiplied by 1.5. The current value of
existing American Funds investments (other than money market fund investments),
and any rollovers or transfers reasonably anticipated to be invested in
non-money market American Funds during the 13-month period, and any individual
investments in American Legacy products are added to the figure determined
above. The sum is the Statement amount and applicable breakpoint level. On
the first investment and all other investments made pursuant to the Statement,
a sales charge will be assessed according to the sales charge breakpoint thus
determined. There will be no retroactive adjustment in sales charges on
investments made during the 13-month period.
Shareholders purchasing shares at a reduced sales charge under a Statement
indicate their acceptance of these terms with their first purchase.
AGGREGATION - Sales charge discounts are available for certain aggregated
investments. Qualifying investments include those by you, your spouse and your
children under the age of 21, if all parties are purchasing shares for their
own accounts and/or:
-employee benefit plan(s), such as an IRA, individual-type 403(b) plan, or
single-participant Keogh-type plan;
- -business accounts solely controlled by these individuals (for example, the
individuals own the entire business);
- -trust accounts established by the above individuals. However, if the
person(s) who established the trust is deceased, the trust account may be
aggregated with accounts of the person who is the primary beneficiary of the
trust.
Individual purchases by a trustee(s) or other fiduciary(ies) may also be
aggregated if the investments are:
- -for a single trust estate or fiduciary account, including an employee benefit
plan other than those described above;
- -made for two or more employee benefit plans of a single employer or of
affiliated employers as defined in the 1940 Act, again excluding employee
benefit plans described above; or
- -for a diversified common trust fund or other diversified pooled account not
specifically formed for the purpose of accumulating fund shares.
Purchases made for nominee or street name accounts (securities held in the name
of an investment dealer or another nominee such as a bank trust department
instead of the customer) may not be aggregated with those made for other
accounts and may not be aggregated with other nominee or street name accounts
unless otherwise qualified as described above.
CONCURRENT PURCHASES - You may combine purchases of Class A and/or Class B
shares of two or more funds in The American Funds Group, as well as individual
holdings in American Legacy variable annuities and variable life insurance
products. Direct purchases of the money market funds are excluded. Shares of
money market funds purchased through an exchange, reinvestment or
cross-reinvestment from a fund having a sales charge do qualify.
RIGHT OF ACCUMULATION -- You may take into account the current value of your
existing Class A and B holdings in The American Funds Group, as well as your
holdings in Endowments (shares of which may be owned only by tax-exempt
organizations), to determine your sales charge on investments in accounts
eligible to be aggregated, or when making a gift to an individual or charity.
When determining your sales charge, you may also take into account the value of
your individual holdings, as of the end of the week prior to your investment,
in various American Legacy products (American Legacy, American Legacy II and
American Legacy III variable annuities, American Legacy Life, American Legacy
Variable Life, and American Legacy Estate Builder). Direct purchases of the
money market funds are excluded.
CDSC WAIVERS FOR CLASS A SHARES - Any CDSC on Class A shares may be waived in
the following cases:
(1) Exchanges (except if shares acquired by exchange are then redeemed within
12 months of the initial purchase).
(2) Distributions from 403(b) plans or IRAs due to death, post-purchase
disability or attainment of age 59-1/2.
(3) Tax-free returns of excess contributions to IRAs.
(4) Redemptions through systematic withdrawal plans (see "Automatic
Withdrawals" below), not exceeding 12% of the net asset value of the account
each year.
CDSC WAIVERS FOR CLASS B SHARES - Any CDSC on Class B shares may be waived in
the following cases:
(1) Systematic withdrawal plans (SWPs) - investors who set up a SWP (see
"Automatic With-drawals" below) may withdraw up to 12% of the net asset value
of their account each year without incurring any CDSC. Shares not subject to a
CDSC (such as shares representing reinvestment of distributions) will be
redeemed first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the lowest CDSC
will be redeemed next until the 12% limit is reached.
The 12% fee from CDSC limit is calculated on a pro rata basis at the time the
first payment is made and is recalculated thereafter on a pro rata basis at the
time of each SWP payment. Shareholders who establish a SWP should be aware
that the amount of that payment not subject to a CDSC may vary over time
depending on fluctuations in net asset value of their account. This privilege
may be revised or terminated at any time.
(2) Required minimum distributions taken from retirement accounts upon the
attainment of age 70-1/2.
(3) Distributions due to death or post-purchase disability of a shareholder. In
the case of joint tenant accounts, if one joint tenant dies, the surviving
joint tenant(s), at the time they notify the Transfer Agent of the decedent's
death and remove his/her name from the account, may redeem shares from the
account without incurring a CDSC. Redemptions subsequent to the notification
to the Transfer Agent of the death of one of the joint owners will be subject
to a CDSC.
INDIVIDUAL RETIREMENT ACCOUNT (IRA) ROLLOVERS
Assets from an employer-sponsored retirement plan (plan assets) may be invested
in any class of shares of the American Funds (except as described below)
through an IRA rollover plan. All such rollover investments will be subject to
the terms and conditions for Class A and B shares contained in the fund's
current prospectus and statement of additional information. In the case of an
IRA rollover involving plan assets from a plan that offered the American Funds,
the assets may only be invested in Class A shares of the American Funds. Such
investments will be at net asset value and will not be subject to a contingent
deferred sales charge. Dealers who initiate and are responsible for such
investments will be compensated pursuant to the schedule applicable to
investments of $1 million or more (see "Dealer Commissions on Class A Shares"
above).
PRICE OF SHARES
PRICE OF SHARES - Purchases of shares are made at the offering price next
determined after the purchase order is received by the fund or American Funds
Service Company; this offering price is effective for orders received prior to
the time of determination of the net asset value and, in the case of orders
placed with dealers, accepted by the Principal Underwriter prior to its close
of business. In case of orders sent directly to the fund or American Funds
Service Company, an investment dealer MUST be indicated. The dealer is
responsible for promptly transmitting purchase orders to the Principal
Underwriter. Orders received by the investment dealer, the Transfer Agent, or
the fund after the time of the determination of the net asset value will be
entered at the next calculated offering price. Prices which appear in the
newspaper are not always indicative of prices at which you will be purchasing
and redeeming shares of the fund, since such prices generally reflect the
previous day's closing price whereas purchases and redemptions are made at the
next calculated price.
The price you pay for shares, the public offering price, is based on the net
asset value per share which is calculated once daily as of approximately 4:00
p.m., New York Time each day the New York Stock Exchange is open. For example,
if the Exchange closes at 1:00 p.m. on one day and at 4:00 p.m. on the next,
the fund's share price would be determined as of 4:00 p.m. New York time on
both days. The New York Stock Exchange is currently closed on weekends and on
the following holidays: New Year's Day, Presidents' Day, Martin Luther King,
Jr. Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
and Christmas.
All portfolio securities of funds managed by Capital Research and Management
Company (other than money market funds) are valued, and the net asset value per
share is determined, as follows:
1. Equity securities, including depositary receipts, are valued at the last
reported sale price on the exchange or market on which such securities are
traded, as of the close of business on the day the securities are being valued
or, lacking any sales, at the last available bid price. In cases where equity
securities are traded on more than one exchange, the securities are valued on
the exchange or market determined by the Investment Adviser to be the broadest
and most representative market, which may be either a securities exchange or
the over-the-counter market. Fixed-income securities are valued at prices
obtained from a pricing service, when such prices are available; however, in
circumstances where the Investment Adviser deems it appropriate to do so, such
securities will be valued at the mean quoted bid and asked prices or at prices
for securities of comparable maturity, quality and type.
Securities with original maturities of one year or less having 60 days or less
to maturity are amortized to maturity based on their cost if acquired within 60
days of maturity or, if already held on the 60th day, based on the value
determined on the 61st day. Forward currency contracts are valued at the mean
of representative quoted bid and asked prices.
Assets or liabilities initially expressed in terms of foreign currencies are
translated prior to the next determination of the net asset value of the fund's
shares into U.S. dollars at the prevailing market rates.
Securities and assets for which representative market quotations are not
readily available are valued at fair value as determined in good faith under
policies approved by the fund's Board; The fair value of all other assets is
added to the value of securities at the total assets;
2. Liabilities, including accruals of taxes and other expense items, are
deducted from total assets; and
3. Net assets so obtained are then divided by the total number of shares
outstanding, and the result, rounded to the nearer cent, is the net asset value
per share.
Any purchase order may be rejected by the Principal Underwriter or by the
Trust. The Trust will not knowingly sell fund shares (other than for the
reinvestment of dividends or capital gain distributions) directly or indirectly
or through a unit investment trust to any other investment company, person or
entity, where, after the sale, such investment company, person, or entity would
own beneficially directly, indirectly, or through a unit investment trust more
than 4.5% of the outstanding shares of the fund without the consent of a
majority of the Board of Trustees.
SELLING SHARES
Shares are sold at the net asset value next determined after your request is
received in good order by the Transfer Agent. Sales of certain Class A and B
shares may be subject to deferred sales charges. You may sell (redeem) shares
in your account in any of the following ways:
THROUGH YOUR DEALER (certain charges may apply)
- - Shares held for you in your dealer's street name must be sold through the
dealer.
WRITING TO AMERICAN FUNDS SERVICE COMPANY
- - Requests must be signed by the registered shareholder(s)
- - A signature guarantee is required if the redemption is:
-- Over $50,000;
-- Made payable to someone other than the registered shareholder(s); or
- -- Sent to an address other than the address of record, or an address of record
which has been changed within the last 10 days.
Your signature may be guaranteed by a domestic stock exchange or the National
Association of Securities Dealers, Inc., bank, savings association or credit
union that is an eligible guarantor institution.
- - Additional documentation may be required for sales of shares held in
corporate, partnership or fiduciary accounts.
- - You must include any shares you wish to sell that are in certificate form.
TELEPHONING OR FAXING AMERICAN FUNDS SERVICE COMPANY, OR BY USING AMERICAN
FUNDSLINE OR AMERICAN FUNDSLINE ONLINE
- - Redemptions by telephone or fax (including American FundsLine and American
FundsLine OnLine) are limited to $50,000 per shareholder each day.
- - Checks must be made payable to the registered shareholder(s).
- - Checks must be mailed to an address of record that has been used with the
account for at least 10 days.
MONEY MARKET FUNDS
- - You may have redemptions of $1,000 or more wired to your bank by writing
American Funds Service Company.
- - You may establish check writing privileges (use the money market funds
application)
- -- If you request check writing privileges, you will be provided with checks
that you may use to draw against your account. These checks may be made
payable to anyone you designate and must be signed by the authorized number or
registered shareholders exactly as indicated on your checking account signature
card.
- - Check writing is not available for Class B shares of The Cash Management
Trust.
If you sell Class B shares and request a specific dollar amount to be sold, we
will sell sufficient shares so that the sale proceeds, after deducting any
contingent deferred sales charge, equals the dollar amount requested.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the 1940 Act), sale proceeds will be paid on or before the
seventh day following receipt and acceptance of an order. Interest will not
accrue or be paid on amounts that represent uncashed distribution or redemption
checks.
Redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) for shares purchased have cleared (which may take up to 15
calendar days from the purchase date). Except for delays relating to clearance
of checks for share purchases or in extraordinary circumstances (and as
permissible under the Investment Company Act of 1940), sale proceeds will be
paid on or before the seventh day following receipt and acceptance of an order.
Interest will not accrue or be paid on amounts that represent uncashed
distribution or redemption checks.
You may reinvest proceeds from a redemption or a dividend or capital gain
distribution of Class A or Class B shares without a sales charge in the Class A
shares of any fund in The American Funds Group within 90 days after the date of
the redemption or distribution (any contingent deferred sales charge on Class A
shares will be credited to your account). Redemption proceeds of shares
representing direct purchases in the money market funds are excluded. Proceeds
will be reinvested at the next calculated net asset value after your request is
received and accepted by American Funds Service Company.
SHAREHOLDER ACCOUNT SERVICES AND PRIVILEGES
AUTOMATIC INVESTMENT PLAN - The automatic investment plan enables shareholders
to make regular investments monthly or quarterly in shares through automatic
charges to their bank accounts. With shareholder authorization and bank
approval, the Transfer Agent will automatically charge the bank account for the
amount specified ($50 minimum) and the date on which you would like your
reinvestments to occur. The plan will begin within 30 days after your account
application is received. Your bank account will be debited on the day or a few
days before investments are credited, depending on the bank's capabilities. If
your bank account cannot be charged due to insufficient funds, a stop-payment
order or closing of the account, the plan may be terminated and the related
investment reversed. You may change the amount of the investment or
discontinue the plan at any time by writing to the Transfer Agent.
AUTOMATIC REINVESTMENT - Dividends and capital gain distributions are
reinvested in additional shares at no sales charge unless you indicate
otherwise on the account application. You also may elect to have dividends
and/or capital gain distributions paid in cash by informing the fund, American
Funds Service Company or your investment dealer.
CROSS-REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS -- You may cross-reinvest
dividends and capital gains ("distributions") into any other fund in The
American Funds Group at net asset value, subject to the following conditions:
(a) The aggregate value of your account(s) in the fund(s) paying distributions
equals or exceeds $5,000 (this is waived if the value of the account in the
fund receiving the distributions equals or exceeds that fund's minimum initial
investment requirement),
(b) If the value of the account of the fund receiving distributions is below
the minimum initial investment requirement, distributions must be automatically
reinvested,
(c) If you discontinue the cross-reinvestment of distributions, the value of
the account of the fund receiving distribution must equal or exceed the minimum
initial investment requirement. If you do not meet this requirement within 90
days of notification, the fund has the right to automatically redeem the
account.
EXCHANGE PRIVILEGE - You may exchange shares into other funds in The American
Funds Group within the same class. However, exchanges from Class A shares of
The Cash Management Trust of America may be made to Class B shares of any other
American Fund for dollar cost averaging purposes. Exchange purchases are
subject to the minimum investment requirements of the fund purchased and no
sales charge generally applies. However, exchanges of shares from the money
market funds are subject to applicable sales charges on the fund being
purchased, unless the money market fund shares were acquired by an exchange
from a fund having a sales charge, or by reinvestment or cross-reinvestment of
dividends or capital gain distributions.
You may exchange shares by writing to American Funds Service Company (see
"Selling Shares"), by contacting your investment dealer, by using American
FundsLine and American FundsLine OnLine (see "American FundsLine and American
FundsLine OnLine" below), or by telephoning 800/421-0180 toll-free, faxing (see
"Principal Underwriter and Transfer Agent" in the prospectus for the
appropriate fax numbers) or telegraphing American Funds Service Company. (See
"Telephone and Computer Purchases, Redemptions and Exchanges" below.) Shares
held in corporate-type retirement plans for which Capital Guardian Trust
Company serves as trustee may not be exchanged by telephone, computer, fax or
telegraph. Exchange redemptions and purchases are processed simultaneously at
the share prices next determined after the exchange order is received. (See
"Purchase of Shares--Price of Shares.") THESE TRANSACTIONS HAVE THE SAME TAX
CONSEQUENCES AS ORDINARY SALES AND PURCHASES.
AUTOMATIC EXCHANGES - You may automatically exchange shares (in amounts of $50
or more) among any of the funds in The American Funds Group on any day (or
preceding business day if the day falls on a non-business day) of each month
you designate.
AUTOMATIC WITHDRAWALS - Withdrawal payments are not to be considered as
dividends, yield or income. Automatic investments may not be made into a
shareholder account from which there are automatic withdrawals. Withdrawals of
amounts exceeding reinvested dividends and distributions and increases in share
value would reduce the aggregate value of the shareholder's account. The
Transfer Agent arranges for the redemption by the Fund of sufficient shares,
deposited by the shareholder with the Transfer Agent, to provide the withdrawal
payment specified.
ACCOUNT STATEMENTS - Your account is opened in accordance with your
registration instructions. Transactions in the account, such as additional
investments and dividend reinvestments, will be reflected on regular
confirmation statements from American Funds Service Company. Purchases through
automatic investment plans and certain retirement plans will be confirmed at
least quarterly.
AMERICAN FUNDSLINE AND AMERICAN FUNDSLINE ONLINE- You may check your share
balance, the price of your shares, or your most recent account transaction,
sell shares (up to $50,000 per shareholder, per day), or exchange shares around
the clock with American FundsLine and American FundsLine OnLine. To use this
service, call 800/325-3590 from a TouchTonet telephone or access the American
Funds Web site on the Internet at www.americanfunds.com. Redemptions and
exchanges through American FundsLineR and American FundsLine OnLine are subject
to the conditions noted above and in "Telephone and Computer Redemptions and
Exchanges" below. You will need your fund number (see the list of funds in The
American Funds Group under "Purchase of Shares--Fund Numbers"), personal
identification number (the last four digits of your Social Security number or
other tax identification number associated with your account) and account
number.
TELEPHONE AND COMPUTER PURCHASES, REDEMPTIONS AND EXCHANGES - By using the
telephone (including American FundsLine and American FundsLine OnLine), fax or
telegraph redemption and/or exchange options, you agree to hold the fund,
American Funds Service Company, any of its affiliates or mutual funds managed
by such affiliates, the Fund's Business Manager and each of their respective
directors, trustees, officers, employees and agents harmless from any losses,
expenses, costs or liability (including attorney fees) which may be incurred in
connection with the exercise of these privileges. Generally, all shareholders
are automatically eligible to use these options. However, you may elect to opt
out of these options by writing American Funds Service Company (you may also
reinstate them at any time by writing American Funds Service Company). If
American Funds Service Company does not employ reasonable procedures to confirm
that the instructions received from any person with appropriate account
information are genuine, it and/or the fund may be liable for losses due to
unauthorized or fraudulent instructions. In the event that shareholders are
unable to reach the fund by telephone because of technical difficulties, market
conditions, or a natural disaster, redemption and exchange requests may be made
in writing only.
REDEMPTION OF SHARES - The Transfer Agent may redeem the shares of any
shareholder if the shares owned by such shareholder through redemptions, market
decline or otherwise, have a value of less than the minimum initial investment
amount required of new shareholders, (determined, for this purpose only as the
greater of the shareholder's cost or current net asset value of the shares,
including any shares acquired through reinvestment of income dividends and
capital gains distributions). Prior notice of at least 60 days will be given
to a shareholder before the involuntary redemption provision is made effective
with respect to the shareholder's account . The shareholder will have not less
than 30 days from the date of such notice within which to bring the account up
to the minimum determined as set forth above.
SHARE CERTIFICATES - Shares are credited to your account and certificates are
not issued unless you request them by writing to the Transfer Agent.
EXECUTION OF PORTFOLIO TRANSACTIONS
Orders for the fund's portfolio securities transactions are placed by the
Investment Adviser. The Investment Adviser strives to obtain the best
available prices in its portfolio transactions taking into account the costs
and promptness of executions. When, in the opinion of the Investment Adviser,
two or more brokers (either directly or through their correspondent clearing
agents) are in a position to obtain the best price and execution, preference
may be given to brokers who have sold shares of the fund or who have provided
investment research, statistical, or other related services to the Investment
Adviser. The fund does not consider that it has an obligation to obtain the
lowest available commission rate to the exclusion of price, service and
qualitative considerations.
There are occasions on which portfolio transactions for the fund may be
executed as part of concurrent authorizations to purchase or sell the same
security for other funds served by the Investment Adviser, or for trusts or
other accounts served by affiliated companies of the Investment Adviser.
Although such concurrent authorizations potentially could be either
advantageous or disadvantageous to the fund, they are effected only when the
Investment Adviser believes that to do so is in the interest of the fund. When
such concurrent authorizations occur, the objective is to allocate the
executions in an equitable manner. The fund will not pay a mark-up for
research in principal transactions.
Substantially all portfolio transactions are effected on a principal basis and
ordinarily include a mark-up or mark-down, but no stated commission. Brokerage
commissions paid on portfolio transactions, including dealer concessions on
underwritings, for the fiscal year ended July 31, 1999 equaled $54,000 for the
Maryland Fund and $64,000 for the Virginia Fund, respectively.
Johnston, Lemon & Co. Incorporated, which together with the Business Manager is
wholly owned by The Johnston-Lemon Group, Incorporated, may serve as broker for
the fund in effecting certain portfolio transactions, and may retain
commissions, in accordance with certain regulations of the Securities and
Exchange Commission.
GENERAL INFORMATION
CUSTODIAN OF ASSETS - Securities and cash owned by the fund, including proceeds
from the sale of shares of the fund and of securities in the fund's portfolio,
are held by The Chase Manhattan Bank, Three Metrotech Center, Brooklyn, NY
11245, as Custodian.
TRANSFER AGENT - American Funds Service Company, a wholly owned subsidiary of
the Investment Adviser, maintains the record of each shareholder's account,
processes purchases and redemptions of the fund's shares, acts as dividend and
capital gain distribution disbursing agent, and performs other related
shareholder service functions. American Funds Service Company was paid a fee
of $38,000 and $41,000, for the Maryland Fund and the Virginia Fund,
respectively, for the fiscal year ended July 31, 1999.
INDEPENDENT ACCOUNTANTS - PricewaterhouseCoopers LLP, 400 South Hope Street,
Los Angeles, CA 90071, has served as the Trust's independent accountants since
its inception, providing audit services, preparation of tax returns and review
of certain documents to be filed with the Securities and Exchange Commission.
The Financial Statements included in this Statement of Additional Information
have been so included in reliance on the report of PricewaterhouseCoopers LLP
given on the authority of that firm as experts in auditing and accounting.
PROSPECTUSES AND REPORTS TO SHAREHOLDERS - The Trust's fiscal year ends on July
31. Shareholders are provided updated prospectuses annually. In addition,
shareholders are provided, at least semiannually, with reports showing the
investment portfolio and financial statements audited annually by the Trust's
independent accountants, PricewaterhouseCoopers LLP, whose selection is
determined annually by the Trustees. In an effort to reduce the volume of mail
shareholders receive from the fund when a household owns more than one account,
the Transfer Agent has taken steps to eliminate duplicate mailings of
shareholder reports. To receive additional copies of a propsectus or report,
shareholders should contact the Transfer Agent.
PERSONAL INVESTING POLICY - The Trust, Capital Research and Management Company
and its affiliated companies, including the Trust's principal underwriter, have
adopted codes of ethics which allow for personal investment. The personal
investing policy is consistent with Investment Company Institute guidelines.
This policy includes: a ban on acquisitions of securities pursuant to an
initial public offering; restrictions on acquisitions of private placement
securities; pre-clearance and reporting requirements; review of duplicate
confirmation statements; annual recertification of compliance with codes of
ethics; disclosure of personal holdings by certain investment personnel prior
to recommendation for purchase for the fund; blackout periods for personal
investing for certain investment personnel; ban on short-term trading profits
for investment personnel; limitations on service as a director of publicly
traded companies; and disclosure of personal securities transactions.
OTHER INFORMATION - The financial statements including the investment portfolio
and the report of Independent Accountants contained in the Annual Report are
included in this Statement of Additional Information. The following
information is not included in the Annual Report:
DETERMINATION OF NET ASSET VALUE, REDEMPTION PRICE AND
MAXIMUM OFFERING PRICE PER SHARE FOR CLASS A SHARES -- JULY 31, 1999
<TABLE>
<CAPTION>
THE TAX-EXEMPT FUND OF Maryland THE TAX-EXEMPT FUND OF VIRGINIA
<S> <C> <C>
Net asset value and redemption price per share $15.57 $15.82
(Net assets divided by shares outstanding)
Maximum Offering price per share (100/96.25 of $16.18 $16.44
net asset value per share, which takes into
account the fund's current maximum sales charge)
</TABLE>
CLASS A INVESTMENT RESULTS AND RELATED STATISTICS
The Maryland Fund yield was 3.90% and the Virginia Fund yield was 4.07% based
on a 30-day (or one month) period ended July 31, 1999, computed by dividing the
net investment income per share earned during the period by the maximum
offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[((a-b/cd) + 1)/6/ -1]
Where:a =dividends and interest earned during the period.
b =expenses accrued for the period (net of reimbursements).
c =the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d =the maximum offering price per share on the last day of the period.
The fund may also calculate a tax equivalent yield based on a 30-day (or one
month) period ended no later than the date of the most recent balance sheet
included in the registration statement, computed by dividing that portion of
the yield (as computed by the formula stated above) which is tax-exempt by one
minus a stated income tax rate and adding the product to that portion, if any,
of the yield that is not tax-exempt. The Maryland Fund's tax-equivalent yield
based on the maximum combined effective federal/state/county tax rate of 44.1%
for the 30-day (or one month) period ended July 31, 1999 was 6.98%. For the
Virginia Fund investors with the maximum combined effective federal/state tax
rate of 43.1%, the tax-equivalent yield was 7.15% for the period ended July 31,
1999.
The Maryland Fund average annual total return for the one-year, five-year and
ten-year periods ending on July 31, 1999 was -1.52%, +5.42% and +6.11%,
respectively. The Virginia Fund average annual total return for the same time
periods was -1.64%, +5.06% and +6.06%, respectively. The average annual total
return ("T") is computed by equating the value at the end of the period ("ERV")
with a hypothetical initial investment of $1,000 ("P") over a period of years
("n") according to the following formula as required by the Securities and
Exchange Commission:
P(1+T)/n/ = ERV.
The following assumptions will be reflected in computations made in accordance
with the formula stated above: (1) deduction of the maximum sales load of
3.75% from the $1,000 initial investment; (2) reinvestment of dividends and
distributions at net asset value on the reinvestment date determined by the
Board; and (3) a complete redemption at the end of any period illustrated. The
fund will calculate total return for ten-year periods after such a period has
elapsed. In addition, the fund will provide lifetime average total return
figures.
The funds may also calculate distribution rates on a taxable and tax equivalent
basis. The distribution rates are computed by annualizing the current month's
dividend and dividing by the average net asset value or maximum
offering price for the month. The distribution rates may differ from the
yields.
The fund may also refer to results compiled by organizations such as CDA
Investment Services, Ibbotson Associates, Lipper Analytical Services,
Morningstar, Inc., Weisenberger Investment Company Services and the U.S.
Department of Commerce. Additionally, the fund may, from time to time, refer
to results published in various newspapers or periodicals, including "Barrons",
Forbes, Fortune, Institutional Investor, Kiplinger's Personal Finance
Magazine, Money, U.S. News and World Report and "The Wall Street Journal."
DESCRIPTION OF RATINGS FOR DEBT SECURITIES
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Corporation represent their opinions as to the quality of the municipal bonds
which they undertake to rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings
may have the same yield.
Moody's Investors Service, Inc. rates the long-term debt securities issued by
various entities from "Aaa" to "C." Moody's applies the numerical modifiers 1,
2, and 3 in each generic rating classification from Aa through B in its
corporate bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category. Ratings are described as follows:
BONDS --
"Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as 'gilt
edge.' Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues."
"Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than the Aaa
securities."
"Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future."
"Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well."
"Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class."
"Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small."
"Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest."
"Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or having other marked
shortcomings."
"Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
NOTES --
"The MIG 1 designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing."
"The MIG 2 designation denotes high quality. Margins of protection are ample
although not as large as in the preceding group."
COMMERCIAL PAPER --
"Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- -- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while appropriate, maybe
more affected by external conditions. Ample alternate liquidity is
maintained."
Standard & Poor's Corporation rates the long-term securities debt of various
entities in categories ranging from "AAA" to "D" according to quality. The
ratings from "AA" to "CCC" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Ratings are described as follows:
BONDS --
"Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong."
"Debt rated 'AA' has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree."
"Debt rated 'A' has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories."
"Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories."
"BB, B, CCC, CC, C -- Regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C
The highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions."
"The rating 'C1' is reserved for income bonds on which no interest is being
paid."
"Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The 'D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized."
NOTES --
"The SP-1 rating denotes a very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation."
"The SP-2 rating denotes a satisfactory capacity to pay principal and
interest."
COMMERCIAL PAPER --
"The A-1 designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus
(+)designation.
The A-2 designation indicates a capacity for timely payment on issues so
designated is strong; however, the relative degree of safety is not as high as
for issues designated A-1."
<TABLE>
<S> <C> <C>
The Tax-Exempt Fund of Maryland
Investment Portfolio, July 31, 1998
Principal
Amount Market
(000) Value
---------------------------
Tax-Exempt Securities Maturing in More than One Year - 94.82%
College & University Revenue - 1.91%
Frederick County, College Revenue Bonds (Hood College Project),
1990 Series:
7.05% 2004 $ 410 $435,178
7.05% 2005 455 487414
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds, 1993 Refunding Series C, 5.00% 2010 1000 1018320
-------------
1,940,912
-------------
General Obligations (Local) - 1.35%
Anne Arundel County, Consolidated Water and Sewer, 1993
Refunding Series, 5.30% 2016 500 506625
Frederick County, Public Facilities Bonds 1990, 8.875% 2002 250 293780
Harford County Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 530 569035
-------------
1,369,440
-------------
General Obligations (State) - 1.52%
Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds, Series 1998, 5.00% 2007 1500 1545090
-------------
Hospital & Health Facilities Revenue - 11.06%
Maryland Health and Higher Educational Facilities Authority:
(Charity Obligated Group-Daughters of Charity National
Health System), Variable Rate Hospital Revenue Bonds,
Series 1997D, 4.60% 2026 1750 1770230
Good Samaritan Hospital Issue, Revenue Bonds, Series 1993,
5.70% 2009 1000 1101440
Howard County, General Hospital Issue, Series 1993:
5.50% 2013 2000 2100880
5.50% 2021 1000 1042120
Johns Hopkins Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.60% 2009 850 900609
Suburban Hospital Issue, Revenue Refunding Bonds,
Series 1993, 5.125% 2021 1500 1470210
Prince George's County (Dimensions Health Corporation Issue):
Hospital Revenue Bonds, Series 1992, 7.20% 2006 215 241841
Project and Refunding Revenue Bonds, Series 1994, 5.375% 2014 1600 1614288
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds (Mennonite General Hospital Project),
1996 Series A, 6.375% 2006 910 978004
-------------
11,219,622
-------------
Housing Finance Authority Revenue - 13.75%
Maryland Community Development Administration, Department of
Housing and Community Development:
Residential Revenue Bonds, 1998 Series B, AMT:
5.00% 2008 1,610 1,643,182
5.00% 2009 1,680 1,704,226
Single-Family Program Bonds:
1994 First Series, 5.80% 2009 2000 2112440
1994 First Series, 5.70% 2017 2,630 2,715,764
1994 Fifth Series, AMT, 5.875% 2017 1135 1169958
1990 First Series, 7.60% 2017 495 515335
1988 Third Series, 8.00% 2018 1,000 1,037,750
Montgomery County, Housing Opportunities Commission,
Single Family Mortgage Revenue Bonds:
1998 Series B, 4.80% 2009 600 598,062
1997 Series A, 5.50% 2009 750 777,068
1998 Series B, 4.90% 2010 500 498,730
Prince George's County Housing Authority, GNMA/FNMA
Collateralized Single Family Mortgage Bonds,
Series 1994 A, AMT, 6.60% 2025 930 992961
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 10 10210
1988 Series B, 7.65% 2022 160 169665
-------------
13,945,351
-------------
Industrial Development Revenue - 2.14%
Mayor and City Council of Baltimore, Port Facilities Revenue
Bonds (Consolidation Coal Sales Company Project):
Series 1984 A, 6.50% 2011 500 546335
Series 1984 B, 6.50% 2011 500 546335
Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), 1996 Series A, 6.25% 2026 1000 1081150
-------------
2,173,820
-------------
Insured - 18.04%
City of Baltimore, Refunding Revenue Bonds, FGIC Insured,
1994, Series A:
6.00% 2015 1500 1697475
5.00% 2024 1220 1216438
Calvert County, Economic Development Refunding Revenue Bonds,
(Asbury-Solomons Island Facility), Series 1997, MBIA Insured:
5.00% 2009 1000 1027350
5.00% 2010 1000 1020470
5.00% 2017 1000 984000
5.00% 2027 1000 976970
Charles County, Consolidated Public Improvement Bonds of 1993,
Series A, FGIC Insured, 5.25% 2003 715 747154
City of Frederick, General Improvement Bonds, 1992 Refunding
Series, FGIC Insured, 6.125% 2008 890 969814
Maryland Health and Higher Educational Facilities Authority:
Johns Hopkins Medical Institutions Parking Facilities Issue,
Parking Revenue Bonds, Series 1996, AMBAC Insured, 5.50% 2011 1200 1270956
Helix Health Issue, Revenue Bonds, Series 1997, AMBAC Insured,
5.00% 2007 1250 1295913
Memorial Hospital of Easton, Series 1989 B,
MBIA Insured, 7.00% 2012 1,200 1,254,840
Mercy Medical Center Issue Project and Refunding Revenue
Bonds, Series 1996, FSA Insured, 6.50% 2013 2000 2359120
Prince George's County, Solid Waste Management System
Revenue Bonds, Series 1993, 6.50% 2007 2,000 2,227,700
Commonwealth of Puerto Rico:
Electric & Power Authority, MBIA Insured, 7.00% 2007 1000 1,183,930
Public Improvement Bonds of 1987, MBIA Insured, 6.75% 2006 65 66130
-------------
18,298,260
-------------
Lease Revenue (State) - 1.57%
Maryland Stadium Authority, Sports Facilities
Lease Revenue Bonds, Series 1989 D, 7.50% 2010 1500 1593330
-------------
Life Care Facilities Revenue - 7.66%
Maryland Health and Higher Educational Facilities Authority,
First Mortgage Refunding Revenue Bonds, Roland Park Place Issue,
Series 1989, 7.75% 2012 2000 2078600
Maryland Health and Higher Educational Facilities Authority,
First Mortgage Revenue Bonds, PUMH of Maryland, Inc. Issue
(Heron Point of Chestertown), Series 1998A:
5.75%, 2019 1500 1481790
5.75%, 2026 1640 1595294
Prince George's County, Refunding Revenue Bonds, Collington
Episcopal Life Care Community, Inc., Series 1994 A, 6.00% 2013 2500 2615275
-------------
7,770,959
-------------
Multi-Family Housing - 5.37%
Montgomery County, Maryland Housing Opportunities Commission,
Multi-Family Revenue Bonds:
1995 Series A, 6.10% 2015 2,025 2,149,173
1994 Series A-2, 7.50% 2024 2000 2135360
Prince George's County, Mortgage Revenue Bonds
(GNMA Collateralized-Langley Gardens Apartments Project),
Series 1997 A, 5.60% 2017 1130 1168013
-------------
5452546
-------------
Pre-Refunded/1/ - 13.67%
Baltimore County, Metropolitan District Bonds, 63rd Issue,
1992 Series, 6.10% 2006 (2002) 250 272510
Calvert County, Economic Development Revenue Bonds
(Asbury-Solomons Island Facility), Series 1995, 8.625% 2024 (2005) 2300 2870584
Frederick County, Public Facilities Bonds:
1991, Series B, 6.30% 2011 (2002) 1370 1503191
1986 Series, 7.40% 2012 (2001) 310 347281
Harford County, Consolidated Public Improvement Bonds,
Series 1992, 5.80% 2010 (2002) 970 1049152
Howard County, Metropolitan District Refunding Bonds,
1991 Series A, 6.625% 2021 (2001) 500 536465
Maryland State Health and Higher Educational Facilities
Authority:
Junior Lien Revenue Bonds, Francis Scott Key Medical Center
Issue, 1990 Series A, 7.00% 2025 (2000) 250 269223
Memorial Hospital of Cumberland Issue, Revenue Refunding
Bonds, Series 1992, 6.50% 2010 (2004) 750 838050
Suburban Hospital Issue Revenue Bonds, Series 1992,
6.50% 2017 (2002) 500 552195
University of Maryland Medical System Issue, Revenue Bonds,
Series 1991 A, FGIC Insured, 6.50% 2021 (2001) 1000 1069420
Prince George's County, Hospital Revenue Bonds (Dimensions
Health Corporation Issue), Series 1992, 7.20% 2006 (2002) 1,035 1167501
Commonwealth of Puerto Rico:
Housing Bank and Finance Agency, Single Family Mortgage Revenue
Bonds, Homeownership 5th Portfolio, 1986 Series, 7.50% 2015 (2000) 495 525274
Public Improvement Bonds of 1992, MBIA Insured, 6.50% 2009 (2002) 1,000 1,101,260
University of Maryland System Auxiliary Facility and Tuition
Revenue Bonds:
1989 Series B, 7.00% 2007 (1999) 600 634427
1992 Series A, 6.30% 2009 (2001) 1050 1126325
-------------
13,862,858
-------------
Resource Recovery - 6.98%
Maryland Energy Financing Administration, Limited Obligation Solid
Waste Disposal Revenue Bonds (Wheelabrator Water Technologies
Baltimore L.L.C. Projects), 1996 Series, AMT, 6.30% 2010 3500 3834215
Montgomery County, Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds AMT:
6.00% 2006 1000 1084720
6.00% 2007 1000 1089580
Series 1993 A, 6.30% 2016 1000 1069650
-------------
7078165
-------------
Special Obligations - 4.46%
Montgomery County Revenue Authority, Golf Course System Revenue
Bonds, Series 1996 A, 6.00% 2014 2355 2502117
Virgin Islands Public Finance Authority, Revenue and Refunding Bonds:
(Virgin Islands Matching Fund Loan Notes), Series 1998 A:
5.20% 2009 1000 1017060
5.20% 2010 1000 1008550
-------------
4527727
-------------
Tax Assessment Bonds - 2.12%
Prince George's County, Special Obligation Bonds (Woodview Village
Infrastructure Improvements), Series 1997 A, 8.00% 2026 2000 2146439
-------------
Turnpikes & Toll Roads Revenue - 1.08%
Maryland Transportation Authority Facilities Project,
Transportation Facilities Projects Revenue Bonds,
Series 1992, 5.80% 2006 1000 1092350
-------------
Water & Sewer Revenue - 2.14%
Maryland Water Quality Financing Administration,
Revolving Loan Fund Revenue Bonds, Series 1991 B, 0.00% 2005 700 512512
Washington Suburban Sanitary District, Refunding Bonds of 1997,
5.75% 2017 1510 1662631
-------------
2175143
-------------
96192012
-------------
Tax-Exempt Securities Maturing in One Year or Less - 3.92%
General Obligation (Local) - 1.36%
The Maryland-National Capital Park and Planning Commission,
Prince George's County, Park Acquisition and Development
Variable Rate Bond Anticipation Notes, Series V-2, 3.70% 2002 /2/ 1380 1380000
Hospital Facilities - 2.56%
Maryland Health and Higher Educational Facilities Authority,
Variable Rate Demand Revenue Bonds (Catholic Health
Initiatives), Series 1997 B, 3.55% 2015/2/ 2600 2600000
-------------
3980000
-------------
TOTAL TAX-EXEMPT SECURITIES (cost: $94,284,000) 100,172,012
Excess of cash and receivables over payables 1,278,348
-------------
NET ASSETS $101,450,360
==============
/1/Parenthetical year represents date of pre-refunding.
/2/Coupon rate changes periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
The Tax-Exempt Fund of Maryland
Financial Statements
Statement of Assets and Liabilities
July 31, 1998
(dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $90,304) $ 96,192
Maturing in one year or less
(cost: $3,980) $3,980
Cash 78
Receivables for --
Sales of Fund's shares 534
Interest 968 5,560
----------- -----------
101,752
-----------
Liabilities:
Payables for --
Repurchases of Fund's shares 77
Dividends 135
Adviser and management services 36
Other expenses 54 302
----------- -----------
Net Assets at July 31, 1998 -
Equivalent to $16.04 per share on 6,325,924 shares
of beneficial interest issued and outstanding (unlimited
shares authorized) $101,450
=
See Notes to Financial Statements
Statement of Operations
for the year ended July 31, 1998
(dollars in thousands)
Investment Income:
Income:
Interest on tax-exempt securities $5,230
Expenses:
Investment adviser fee $ 224
Business management fee 181
Distribution expenses 231
Transfer agent fee 31
Reports to shareholders 15
Registration statement and prospectus 6
Postage, stationery and supplies 8
Trustees' fees 7
Auditing and legal fees 24
Custodian fee 5
Other expenses 5 737
----------- -----------
Net investment income 4,493
-----------
Realized Gain and Unrealized Appreciation
on Investments:
Net realized gain 698
-----------
Net unrealized appreciation on investments:
Beginning of year 5,851
End of year 5,888
-----------
Change in unrealized appreciation on investments 37
-----------
Net realized gain and change in unrealized
appreciation on investments 735
-----------
Net Increase in Net Assets
Resulting from Operations $5,228
=
See Notes to Financial Statements
Statement of Changes in Net Assets
(dollars in thousands)
Year Ended July 31,
1998 1997
----------------------------
Operations:
Net investment income $ 4,493 $ 4,135
Net realized gain on investments 698 561
Net change in unrealized appreciation on investments 37 2,812
----------- -----------
Net increase in net assets resulting from operations 5,228 7,508
----------- -----------
Dividends and Distributions Paid to Shareholders:
Dividends paid from net investment income (4,491) (4,135)
Distribution paid from net realized gain on investments (642) -
----------- -----------
Total dividends and distributions (5,133) (4,135)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold: 1,252,351 and 717,812 shares, respectively 20,079 11,169
Proceeds from shares issued in reinvestment of net investment income
dividends and distributions of net realized gain on investments:
211,827 and 163,465 shares, respectively 3,386 2,544
Cost of shares repurchased: 548,078 and 671,863 shares, respectively (8,767) (10,456)
----------- -----------
Net increase in net assets resulting from capital
share transactions 14,698 3,257
----------- -----------
Total Increase in Net Assets 14,793 6,630
Net Assets:
Beginning of year 86,657 80,027
----------- -----------
End of year $101,450 $86,657
= =
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-share
Data and Ratios Year En ded Jul y 31
The Tax-Exempt -------- -------- -------- -------- --------
Fund of Maryland 1998 1997 1996 1995 1994
Net Asset Value,
Beginning of Year $16.02 $15.39 $15.29 $15.00 $15.53
---------- ---------- ---------- -------- --------
Income from Investment
Operations:
Net investment income .78 .79 .80 .80 .76
Net realized and
unrealized gain (loss)
on investments .14 .63 .10 .29 (.53)
---------- ---------- ---------- -------- --------
Total income from
investment operations .92 1.42 .90 1.09 .23
---------- ---------- ---------- -------- --------
Less Distributions:
Dividends from net
investment income (.78) (.79) (.80) (.80) (.76)
Distributions from net
realized gains (.12) - - - -
---------- ---------- ---------- -------- --------
Total distributions (.90) (.79) (.80) (.80) (.76)
---------- ---------- ---------- -------- --------
Net Asset Value,
End of Year $16.04 $16.02 $15.39 $15.29 $15.00
========== ========== ========== ======== ========
Total Return (1) 5.89 9.52% 5.95% 7.58% 1.42%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $101 $87 $80 $75 $75
Ratio of expenses to
average net assets .79% .82% .81% .78% .75%
Ratio of net income to
average net assets 4.84% 5.08% 5.14% 5.38% 4.90%
Portfolio turnover rate 10.30% 15.27% 16.01% 20.91% 10.01%
(1) Excludes maximum sales charge of 4.75%.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
The Tax-Exempt Fund of Virginia
Investment Portfolio, July 31, 1998
Principal
Amount Market
(000) Value
- -
Tax-Exempt Securities Maturing in More than One Year - 96.15%
College & University Revenue - 2.50%
Virginia College Building Authority Educational Facilities Revenue
Bonds (Marymount University Project), Series 1992, 6.875% 2007 $1,650 $1,805,381
Virginia Polytechnic Institute and State University, University Services
System and General Revenue Pledge Bonds, Series C 1996, 5.35% 2009 1,000 1,058,160
-
2863541
-
General Obligations (Local) - 9.55%
Arlington County:
Public Improvement Bonds, Series 1996, 6.00% 2011 1000 1130850
Refunding Bonds, Series 1993, 6.00% 2012 1000 1128880
Chesapeake:
Public Improvement Bonds, Series 1992, 6.00% 2006 1600 1729664
Refunding Bonds, Series 1993, 5.40% 2008 1000 1071520
Leesburg Refunding Bonds, Series 1993, 5.60% 2008 1195 1270464
Lynchburg Public Improvement Refunding Bonds,
Series 1993, 5.25% 2009 1000 1037760
City of Virginia Beach, Virginia, General Obligation Public
Improvement and Refunding Bonds, Series 1998:
5.25% 2007 1385 1468017
5.25% 2010 2000 2106900
-
10944055
-
General Obligations (State) - .70%
Commonwealth of Virginia, Public Facilities Bonds,
1993 Series A, 5.40% 2005 750 800370
-
Hospital & Health Facilities Revenue - 14.55%
Industrial Development Authority of the town of Abingdon, Virginia,
Hospital Facility Revenue and Refunding Bonds (Johnston Memorial
Hospital), Series 1998
5.00% 2008 1015 1034437
5.00% 2009 1020 1031516
5.00% 2010 505 506101
Fairfax County Industrial Development Authority, Hospital
Revenue Refunding Bonds (INOVA Health Systems Hospital
Project), Series 1993 A:
5.00% 2007 750 776175
5.25% 2019 2500 2565925
5.00% 2023 500 495405
Industrial Development Authority of Halifax County, Virginia
Hospital Refunding Revenue Bonds (Halifax Regional Hospital, Inc.),
Series 1998:
4.65% 2007 600 594852
4.80% 2009 1000 990900
Industrial Development Authority of Henry County, Hospital Revenue
Bonds (Memorial Hospital of Martinsville and Henry County),
Series 1997, 6.00% 2017 2000 2138460
Industrial Development Authority of the City of Norfolk, Hospital
Revenue Bonds (Daughters of Charity National Health System-DePaul
Medical Center), Series 1992 A, 6.50% 2007 1000 1098520
Norfolk Industrial Development Authority, Hospital Revenue
Bonds (Sentara Hospitals-Norfolk Project),
Series A 1994, 5.00% 2020 1000 974370
Peninsula Ports Authority, Health System Revenue and Refunding Bonds
(Riverside Health System Project), Series 1992 A, 6.625% 2010 1300 1416779
Puerto Rico Industrial, Tourist, Educational, Medical and
Environmental Control Facilities Financing Authority,
Hospital Revenue Bonds (Mennonite General Hospital Project),
1996 Series A, 6.375% 2006 1830 1966756
Virginia Beach, Virginia Development Authority (Sentara Bayside
Hospital), 6.60% 2009 1000 1089270
-
16679466
-
Housing Finance Authority Revenue - 4.63%
Commonwealth of Puerto Rico Housing Finance Corporation,
Single Family Mortgage Revenue Bonds, 1st Portfolio:
1988 Series A, 7.80% 2021 10 10210
1988 Series B, 7.65% 2022 190 201478
Virginia Housing Development Authority, Commonwealth
Mortgage Bonds:
1994 Series H, Sub-Series H-1, 6.10% 2003 500 528590
1995 Series A-AMT, Sub-Series A-1, 6.60% 2004 1000 1046130
1998 Series E, Sub-Series E-1, 4.50% 2005 /1/ 1190 1187025
1994 Series I-AMT, Sub-Series I-1, 6.40% 2005 800 860896
1994 Series H, Sub-Series H-2, 6.55% 2017 1000 1067980
1992 Series A, 7.10% 2022 380 399079
-
5301388
-
Industrial Development Revenue - 2.77%
Industrial Development Authority of the County of Henrico,
Solid Waste Disposal Revenue Bonds (Browning-Ferris Industries of
South Atlantic, Inc. Project):
Series 1996 A AMT, 5.30% 2011 1,000 1,051,090
Series 1996 A AMT, 5.45% 2014 1,000 1,039,720
Puerto Rico Ports Authority, Special Facilities Revenue Bonds
(American Airlines, Inc. Project), 1996 Series A, 6.25% 2026 1000 1081150
-
3171960
-
Insured - 21.26%
Chesapeake Certificates of Participation,
MBIA Insured, 1993 Series, 5.40% 2005 1000 1056130
Industrial Development Authority of Danville, Virginia,
Hospital Revenue Bonds (Danville Regional Medical Center),
Series 1998, AMBAC Insured:
5.25% 2012 1995 2067658
5.25% 2013 1000 1034910
Fairfax County Industrial Development Authority,
Hospital Revenue Refunding Bonds (INOVA Health System
Hospitals Project), Series 1993 A, FSA Insured, 5.25% 2019 1000 1024400
Fairfax County Redevelopment and Housing Authority, Multifamily
Housing Revenue Bonds (Grand View Apartments Project), Series
1998 A, FHA Insured, 5.05% 2010 1000 1003460
Industrial Development Authority of the County of Hanover,
Hospital Revenue Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA Insured:
6.50% 2010 1375 1608159
6.375% 2018 1000 1164240
Loudoun County:
Industrial Development Authority, Hospital Revenue Bonds,
FSA Insured, 6.00% 2005 1000 1093170
Sanitation Authority, Water and Sewer System Revenue Bonds,
FGIC Insured, Series 1992, 6.25% 2010 2000 2179960
Industrial Development Authority of the City of Norfolk, Health Care
Revenue Bonds (Bon Secours Health System), Series 1997, MBIA Insured:
5.00% 2006 1190 1224486
5.00% 2007 1250 1292688
Pamunkey Regional Jail Authority, Jail Facility Revenue Bonds,
Series 1996, MBIA Insured, 5.70% 2010 1000 1081379
Industrial Development Authority of the County of Prince William
(Virginia), Hospital Facility Refunding Revenue Bonds (Potomac
Hospital Corporation of Prince William), FSA Insured,
Series 1998, 5.00% 2008 1475 1521787
Southeastern Public Service Authority of Virginia, Senior Revenue
Refunding Bonds, Series 1998, AMBAC Insured, 5.00% 2015 4000 4031720
City of Virginia Beach Development Authority, Hospital Revenue
Bonds (Virginia Beach General Hospital Project),
Series 1993, AMBAC Insured, 6.00% 2011 1000 1125640
Washington, D.C. Metropolitan Area Airports Authority, Airport
System Revenue and Refunding Bonds, MBIA Insured AMT:
Series 1998 B, 5.25% 2010 1000 1040570
Series 1992 A, 6.625% 2019 750 819788
-
24370145
-
Lease Revenue (State) - .91%
Virginia Public Building Authority, Public Facilities Revenue
Refunding Bonds, Series 1998A, 5.00% 2004 1000 1039090
-
Life Care Facilities Revenue- 5.17%
Industrial Development Authority of the County of Henrico, Virginia,
Residential and Health Care Facility Mortgage Revenue Refunding Bonds
(Our Lady of Hope), Series 1997, 6.00% 2016 2730 2794292
Industrial Development Authority of the County of James City,
Virginia, Residential Care Facility First Mortgage Revenue Bonds
(Williamsburg Landing, Inc.), Series 1996A, 6.625% 2019 3000 3133110
-
5927402
-
Multi-Family Housing - 2.03%
Virginia Housing Development Authority, Multi-Family Housing Bonds:
1997 Series B-AMT, 5.80% 2010 1185 1268780
1996 Series B, 5.95% 2016 1000 1056760
-
2325540
-
Pre-Refunded (2) - 13.95%
Danville, Virginia Industrial Development Authority, Hospital
Revenue Bonds, Danville Regional Medical Center,
Series 1994, FGIC Insured, 6.00% 2007 (2004) 1000 1101420
Fairfax County:
Economic Development Authority, Parking Revenue
Bonds (Huntington Metrorail Station Project),
Series 1990 A, 6.75% 2015 (2000) 500 537675
Industrial Development Authority Hospital Revenue Bonds
(Fairfax Hospital System Project), INOVA Health Systems,
Series 1991 C, 6.801% 2023 (2001) 1000 1095110
Henry County Public Service Authority, Water and Sewer Revenue
Bonds, FGIC Insured, Series 1990, 7.20% 2019 (2000) 1250 1351600
Newport News General Obligation, Water Bonds,
Series A 1992, 6.125% 2009 (2002) 1170 1270175
Norfolk:
Capital Improvement and Refunding Bonds,
Series 1992 A, 6.00% 2011 (2001) 500 532565
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 438908
(Sentara Hospitals-Norfolk Project), Series 1991, 7.00% 2020 (2000) 250 270923
Peninsula Ports Authority, Health Care Facilities Revenue and
Refunding Bonds (Mary Immaculate Project), 1994 Series, 6.875% 2010 (2004) 1900 2216844
Prince William County Service Authority, Water and Sewer
System Revenue Bonds, Series 1991, FGIC Insured, 6.50% 2021 (2001) 680 738942
Roanoke:
Industrial Development Authority, Hospital Revenue Bonds,
Carilion Health System (Roanoke Memorial Hospital Projects),
Series 1990, MBIA Insured, 7.25% 2017 (2000) 750 810225
Public Improvement and Refunding Bonds, Series 1992 B:
6.375% 2009 (2001) 250 271033
6.40% 2011 (2001) 500 544635
Water System Revenue Bonds,
Series 1991, FGIC Insured, 6.50% 2021 (2001) 750 815010
University of Virginia, Hospital Revenue Bonds,
1984 Series A, HIBI Insured, 9.875% 2001 (2000) 10 11400
Upper Occoquan Sewage Authority, Regional Sewerage System
Revenue Bonds, Series 1991, MBIA Insured, 6.00% 2021 (2001) 700 738647
Virginia Public Building Authority, State Building Revenue Bonds,
Series 1991 A, 6.50% 2011 (2001) 1750 1903353
Virginia Resources Authority:
Solid Waste Disposal System Revenue Bonds,
1990 Series A, 7.30% 2015 (2000) 1000 1072570
Water and Sewer System Revenue Bonds
Series 1990, 7.25% 2011 (2000) 250 271516
-
15992551
-
Resource Recovery - 1.82%
Fairfax County Economic Development Authority, Resource Recovery
Revenue Bonds, Series 1988 A AMT (Ogden Martin Systems of
Fairfax, Inc. Project), 7.55% 2003 500 522169
Roanoke Valley Resource Authority, Solid Waste System Revenue
Bonds, Series 1992, 5.75% 2012 1500 1561905
-
2084074
-
Special Obligations - 1.80%
Virgin Islands Public Finance Authority, Revenue and Refunding
Bonds (Virgin Islands Matching Fund Loan Notes):
Series 1998 C, 5.50% 2007 1000 1046820
Series 1998 A, 5.20% 2009 1000 1017060
-
2063880
-
State Appropriation - 1.44%
Big Stone Gap, Virginia Redevelopment and Housing Authority,
Commonwealth of Virginia Correctional Facility Lease Revenue Bonds
(Wallens Ridge Development Project), Series 1995, 5.25% 2010 1600 1654224
-
State Authority - 5.46%
Virginia Public School Authority, School Financing Bonds:
(1997 Resolution), Series 1998 B, 5.25% 2007 2000 2121400
(1987 Resolution), 1991 Refunding Series C, 6.25% 2007 1500 1621890
(1991 Resolution), Series 1994 A, 6.20% 2014 1500 1655760
Virginia Resources Authority:
Water and Sewer System Revenue Bonds
(Pooled Loan Program), 1986 Series A, 7.50% 2017 50 50451
Water System Refunding Revenue Bonds,
1992 Series A, 6.45% 2013 750 811237
-
6260738
-
Tax Assessment Bonds - 1.77%
Dulles Town Center, Community Development Authority (Loudoun
County, Virginia), Special Assessment Bonds (Dulles Town
Center Project), Series 1998, 6.25% 2026 2000 2024520
-
Turnpikes & Toll Roads Revenue - 1.76%
Pocahontas Parkway Association, Route 895 Connector, Toll
Road Revenue Bonds, Series 1998A, 5.25% 2009 2000 2022520
-
Water & Sewer Revenue - 4.08%
Chesterfield County Water and Sewer Revenue Refunding Bonds,
Series 1992, 6.375% 2009 1250 1371050
City of Richmond, Virginia, Public Utility Revenue and Refunding Bonds
Series 1998 A:
5.25% 2009 1500 1569390
5.25% 2011 1000 1033480
Rivanna Water and Sewer Authority, Regional Water and Sewer
System Refunding Revenue Bonds, Series 1991, 6.40% 2007 645 697729
-
4671649
-
110197113
-
Tax-Exempt Securities Maturing in One Year or Less - 3.67%
Industrial Development Revenue - 2.44%
Industrial Development Authority of King George County, Virginia,
Variable Rate Demand Exempt Facility Revenue Bonds (Birchwood Power
Partners, L.P. Project):
Series 1994 A, 3.85% 2024 /3/ 2200 2200000
Series 1994 B, 3.85% 2024 /3/ 600 600000
-
2800000
-
Pre-Refunded /2/ - 1.23%
Loudoun County Sanitation Authority, Water and Sewer System
Revenue Bonds, Series 1989, AMBAC Insured, 7.50% 2017 (1999) 375 388448
Suffolk, Series 1989, 7.00% 2005 (1998) 1000 1025400
-
1413848
-
4213848
-
TOTAL TAX-EXEMPT SECURITIES (cost: $108,556,000) 114410961
Excess of cash and receivables over payables 202598
-
NET ASSETS $114,613,559
=
/1/ Represents a when-issued security.
/2/ Parenthetical year represents date of pre-refunding.
/3/ Coupon rate changes periodically.
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C>
The Tax-Exempt Fund of Virginia
Financial Statements
Statement of Assets and Liabilities
July 31, 1998
(dollars in thousands)
Assets:
Tax-exempt securities:
Maturing in more than one year
(cost: $104,382) $110,197
Maturing in one year or less
(cost: $4,174) 4,214
Cash 63
Receivables for --
Sales of Funds' shares $ 260
Interest 1,584 1,844
----------- -----------
116,318
-----------
Liabilities:
Payables for --
Purchases of investments 1,187
Repurchases of Funds' shares 273
Dividends 143
Adviser and management services 40
Other expenses 61 1,704
----------- -----------
Net Assets at July 31, 1998 -
Equivalent to $16.36 per share on 7,004,811 shares
of beneficial interest issued and outstanding (unlimited
shares authorized) $114,614
=
See Notes to Financial Statements
Statement of Operations
for the year ended July 31, 1998 The
(dollars in thousands) Tax-Exempt
Fund of
Virginia
--------------
Investment Income:
Income:
Interest on tax-exempt securities $5,827
-----------
Expenses:
Investment adviser fee 250
Business management fee 201
Distribution fee 264
Transfer agent fee 34
Reports to shareholders 18
Registration statement and prospectus 5
Postage, stationery and supplies 9
Trustees' fees 7
Auditing and legal fees 24
Custodian fee 5
Other expenses 6 823
----------- -----------
Net investment income 5,004
-----------
Realized Gain and Unrealized Appreciation
on Investments:
Net realized gain 1,368
-----------
Net unrealized appreciation on investments:
Beginning of year 7,054
End of year 5,855
-----------
Change in unrealized appreciation on investments (1,199)
-----------
Net realized gain and change in unrealized
appreciation on investments 169
-----------
Net Increase in Net Assets
Resulting from Operations $5,173
=
See Notes to Financial Statements
Statement of Changes in Net Assets
(dollars in thousands) Year Ended July 31
1998 1997
---------- -----------
Operations:
Net investment income $ 5,004 $ 4,680
Net realized gain on investments 1,368 118
Net change in unrealized appreciation on investments (1,199) 3,502
----------- -----------
Net increase in net assets resulting from operations 5,173 8,300
----------- -----------
Dividends and Distributions Paid to Shareholders:
Dividend paid from net investment income (5,001) (4,680)
Distribution paid from net realized gain on investments (244) -
----------- -----------
Total dividends and distributions (5,245) (4,680)
----------- -----------
Capital Share Transactions:
Proceeds from shares sold: 1,285,596 and 1,037,170 shares, respectively 21,057 16,514
Proceeds from shares issued in reinvestment of net investment income
dividends and distributions of net realized gain on investments:
188,801 and 168,347 shares, respectively 3,083 2,677
Cost of shares repurchased: 616,127 and 798,604 shares, respectively (10,063) (12,694)
----------- -----------
Net increase in net assets resulting from capital
share transactions 14,077 6,497
----------- -----------
Total Increase in Net Assets 14,005 10,117
Net Assets:
Beginning of year 100,609 90,492
----------- -----------
End of year $114,614 $100,609
= =
See Notes to Financial Statements
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Per-Share
Data and Ratios Year En ded Jul y 31
The Tax-Exempt -------- -------- -------- -------- --------
Fund of Virginia 1998 1997 1996 1995 1994
Net Asset Value,
Beginning of Year $16.37 $15.77 $15.79 $15.49 $16.01
------------------------------------------------
Income from Investment
Operations:
Net investment income .78 .80 .81 .83 .80
Net realized and
unrealized gain (loss)
on investments .03 .60 .03 .30 (.52)
------------------------------------------------
Total income from
investment operations .81 1.40 .84 1.13 .28
------------------------------------------------
Less Distributions:
Dividends from net
investment income (.78) (.80) (.81) (.83) (.80)
Distributions from
net realized gains (.04) - (.05) - -
-------------------- - - -
Total distributions (.82) (.80) (.86) (.83) (.80)
-------------------- - - -
Net Asset Value,
End of Year $16.36 $16.37 $15.77 $15.79 $15.49
================================================
Total Return (1) 5.08% 9.10% 5.46% 7.56% 1.74%
Ratios/Supplemental Data:
Net assets, end of
year (in millions) $115 $101 $90 $92 $93
Ratio of expenses to
average net assets .78% .81% .79% .79% .78%
Ratio of net income to
average net assets 4.73% 4.99% 5.11% 5.37% 5.04%
Portfolio turnover rate 24.66% 18.41% 27.34% 32.18% 2.36%
(1) Excludes maximum sales charge of 4.75%.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. The American Funds Tax-Exempt Series I (the "Trust") is registered under
the Investment Company Act of 1940 as an open-end, diversified management
investment company and has initially issued two series of shares, The
Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia (the "Funds").
The Funds seek a high level of current income exempt from Federal and their
respective state income taxes. Additionally, each Fund seeks to preserve
capital. The following paragraphs summarize the significant accounting
policies consistently followed by the Trust in the preparation of its financial
statements:
Tax-exempt securities are valued at prices obtained from a pricing service,
when such prices are available; however, in circumstances where the investment
adviser deems it appropriate to do so, such securities will be valued at the
mean quoted bid and asked prices or at prices for securities of comparable
maturity, quality, and type. Securities with original maturities of one year or
less having 60 days or less to maturity are amortized to maturity based on
their cost if acquired within 60 days of maturity or, if already held on the
60/th/ day, based on the value determined on the 61/st/ day. Securities for
which representative market quotations are not readily available are valued at
fair value as determined in good faith under policies approved by the Trust's
Board.
As is customary in the mutual fund industry, securities transactions are
accounted for on the date the securities are purchased or sold. In the event
the Trust purchases securities on a delayed delivery or "when-issued" basis, it
will segregate with its custodian liquid assets in an amount sufficient to meet
its payment obligations in these transactions. Realized gains and losses from
securities transactions are reported on an identified cost basis. Interest
income is reported on the accrual basis. Premiums and original issue discounts
on securities purchased are amortized. Amortization of market discounts on
securities is recognized upon disposition, subject to applicable tax
requirements. Dividends to shareholders are declared daily after determination
of the fund's net investment income and paid to shareholders monthly.
Distributions paid to shareholders are recorded on the ex-dividend date.
2. It is the Trust's policy to continue to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its net investment income, including any net realized gain on
investments, to its shareholders. Therefore, no federal income tax provision
is required.
As of July 31, 1998, net unrealized appreciation on investments for book and
federal income tax purposes for the Maryland Fund aggregated $5,888,000, of
which $5,959,000 related to appreciated securities and $71,000 related to
depreciated securities. For the Virginia Fund, net unrealized appreciation
aggregated $5,855,000, of which $5,908,000 related to appreciated securities
and $53,000 related to depreciated securities. There was no difference between
book and tax realized gains on securities transactions for the year ended July
31, 1998. The cost of portfolio securities for book and federal income tax
purposes was $94,284,000 and $108,556,000 for the Maryland and Virginia Funds,
respectively, at July 31, 1998.
3. Officers of the Trust received no remuneration from the Funds in such
capacities. Their remuneration was paid by Washington Management Corporation
(WMC), a wholly owned subsidiary of The Johnston-Lemon Group, Incorporated.
Fees of $181,000 and $201,000 were recognized by the Maryland and Virginia
Funds, respectively, and were paid or are payable to WMC for business
management services. The business management contract provides for monthly
fees, accrued daily, based on an annual rate of 0.135% of the first $60 million
of average net assets of each of the Funds; 0.09% of such assets in excess of
$60 million; plus 1.35% of the gross investment income (excluding any net
capital gains from transactions in portfolio securities). Johnston, Lemon &
Co. Incorporated, a wholly owned subsidiary of The Johnston-Lemon Group,
Incorporated, has informed the Funds that it has earned $44,000 and $41,000 on
its retail sales of shares and under the distribution plan of the Maryland and
Virginia Funds, respectively, but received no net brokerage commissions
resulting from purchases and sales of securities for the investment account of
the Funds. All the officers of the Trust and three of its trustees are
affiliated with WMC.
Fees of $224,000 and $250,000 were recognized by the Maryland and Virginia
Funds, respectively, and were paid or are payable to Capital Research and
Management Company (CRMC) as Investment Adviser pursuant to an investment
advisory contract with the Trust. The investment advisory contract provides
for monthly fees, accrued daily, based on an annual rate of 0.165% of the first
$60 million of average net assets of each of the Funds; 0.12% of such assets in
excess of $60 million; plus 1.65% of the gross investment income (excluding any
net capital gains from transactions in portfolio securities).
Pursuant to a Plan of Distribution, the Funds may expend up to 0.25% of
their average net assets annually for any activities primarily intended to
result in sales of Fund shares, provided the categories of expenses for which
reimbursement is made are approved by the Funds' Board of Trustees. Fund
expenses under the Plan include payments to dealers to compensate them for
their selling and servicing efforts and reimbursements to American Funds
Distributors, Inc. (AFD), the principal underwriter of the Funds' shares, for
its activities and expenses related to the sale of Fund shares or servicing of
shareholder accounts. During the year ended July 31, 1998, distribution
expenses under the Plan were $231,000 and $264,000, including accrued and
unpaid expenses of $36,000 and $43,000, for the Maryland and Virginia Funds,
respectively. Had no limitation been in effect, the Funds would have paid
$256,000 and $311,000, respectively, in distribution expense under the Plan.
American Funds Distributors, Inc. (AFD), the principal underwriter of the
Funds' shares, has informed the Funds that it has received $48,000 and $58,000
(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.
American Funds Service Company (AFS), the transfer agent for the Maryland and
Virginia Funds, was paid fees of $31,000 and $34,000, respectively.
Trustees who are unaffiliated with WMC may elect to defer part or all of the
fees earned for services as members of the Board. Amounts deferred are not
funded and are general unsecured liabilities of the Funds. As of July 31, 1998,
aggregate amounts deferred and earnings thereon were $14,000 each for the
Maryland and Virginia Funds.
CRMC is owned by The Capital Group Companies, Inc. AFS and AFD are both
wholly owned subsidiaries of CRMC.
4. As of July 31, 1998:
The Tax-Exempt The Tax-Exempt
Fund of Fund of
Maryland Virginia
Accumulated
undistributed net
realized gain
on investments $ 617,000 $ 1,238,000
Paid-in capital 94,943,000 107,518,000
Purchases and sales of
investment securities,
excluding short-term
securities, during the
year ended July 31, 1998:
Purchases 21,023,000 36,387,000
Sales 9,291,000 25,433,000
Pursuant to the custodian agreement, the Funds receive credits against their
custodian fees for imputed interest on certain balances with the custodian
bank. The custodian fee of $5,000 for both the Maryland and Virginia Funds was
paid by these credits rather than in cash.
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 portfolio, 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 ATrust@) at July 31, 1999,
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 periods indicated,
in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Los Angeles, California
August 31, 1999
PART C
OTHER INFORMATION
ITEM 23 EXHIBITS:
(a).Designation Notice dated December 16, 1999
(b). On file (see SEC file nos. 811-4653 and 33-5270)
(c). Form of Share Certificate
(d). On file (see SEC file nos. 811-4653 and 33-5270)
(e). Form of Amended and Restated Principal Underwriting Agreement
(f). None
(g). On file (see SEC file nos. 811-4653 and 33-5270)
(h). On file (see SEC file nos. 811-4653 and 33-5270)
(i). Legal Opinion for Class B Shares
(j). Consent of Independent Accountants
(k). None
(l). Not applicable to this filing
(m). Form of Amended and Restated Principal Underwriting Agreement
(n). Form of Multiple Class Plan
(p). Code of Ethics
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Registrant is a joint-insured under an Investment Advisor/Mutual Fund Errors
and Omissions Policy written by American International Surplus Lines Insurance
Company, Chubb Custom Insurance Company, and ICI Mutual which insures its
officers and trustees against certain liabilities.
Article VI of the Trust's By-Laws states:
(a) The Trust shall indemnify any Trustee or officer of the Trust who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than action by or in the right of the Trust) by reason
of the fact that such person is or was such Trustee or officer or an employee
or agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person reasonably believed to be opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that such person's conduct was unlawful.
(b) The Trust shall indemnify any Trustee or officer of the Trust who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a judgment
in its favor by reason of the fact that such person is or was such Trustee or
officer or an employee or agent of the Trust, or is or was serving at the
request of the Trust as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Trust, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Trust unless and
only to the extent that the court in which such action or suit was brought, or
any other court having jurisdiction in the premises, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case,
ITEM 25. INDEMNIFICATION (CONT.)
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.
(c) To the extent that a Trustee or officer of the Trust has been successful
on the merits in defense of any action, suit or proceeding referred to in
subparagraphs (a) or (b) above or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith, without the necessity for the determination as to the standard of
conduct as provided in subparagraph (d).
(d) Any indemnification under subparagraph (a) or (b) (unless ordered by a
court) shall be made by the Trust only as authorized in the specific case upon
a determination that indemnification of the Trustee or officer is proper under
the standard of conduct set forth in subparagraph (a) or (b). Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of Trustees who were not parties to such action, suit or proceeding,
and are disinterested Trustees or (ii) if such a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking and security by or on behalf of the Trustee or officer to
repay such amount unless it shall ultimately be determined that such person is
entitled to be indemnified by the Trust as authorized herein.
(f) Agents and employees of the Trust who are not Trustees or officers of the
Trust may be indemnified under the same standards and procedures set forth
above, in the discretion of the Board.
(g) Any indemnification pursuant to this Article shall not be deemed exclusive
of any other rights to which those indemnified may be entitled and shall
continue as to a person who has ceased to be Trustee or officer and shall inure
to the benefit of the heirs, executors and administrators of such person.
(h) Nothing in the Declaration of Trust or in these By-Laws shall be deemed to
protect any Trustee, officer, distributor, investment adviser or controlling
shareholder of the Trust against any liability to the Trust or to its
shareholders to which such person would otherwise be subject by reason of
willful malfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such person's office.
(i) The Trust shall have power to purchase and maintain insurance on behalf of
any person against any liability asserted against or incurred by such person,
whether or not the Trust would have the power to indemnify such person against
such liability under the provisions of this Article. Nevertheless, insurance
will not be purchased or maintained by the Trust if the purchase or maintenance
of such insurance would result in the indemnification of any person in
contravention of any rule or regulation of the Securities and Exchange
Commission. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition of such
action, suit or proceeding, as authorized in the particular case, upon receipt
of an undertaking by or on behalf of the Trustee or officer to repay such
amount unless it shall ultimately be determined that such person is entitled to
be indemnified by the Trust as authorized herein. Such determination must be
made by disinterested Trustees or independent legal counsel.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer of controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such Trustee, officer of controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
None.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) American Funds Distributors, Inc. is also the Principal Underwriter of
shares of: AMCAP Fund, Inc., American Balanced Fund, Inc., The American Funds
Income Series, The American Funds Tax-Exempt Series I, The American Funds
Tax-Exempt Series II, American High-Income Municipal Bond Fund, Inc., American
High-Income Trust, American Mutual Fund, Inc., The Bond Fund of America, Inc.,
Capital Income Builder, Inc., Capital World Bond Fund, Inc., Capital World
Growth and Income Fund, Inc., The Cash Management Trust of America, Fundamental
Investors, Inc., The Growth Fund of America, Inc., The Income Fund of America,
Inc., The Investment Company of America, Intermediate Bond Fund of America,
Limited Term Tax-Exempt Bond Fund of America, The New Economy Fund, New
Perspective Fund, Inc., New World Fund, Inc., SMALLCAP World Fund, Inc., The
Tax-Exempt Bond Fund of America, Inc., The Tax-Exempt Money Fund of America,
U.S. Treasury Money Fund of America and Washington Mutual Investors Fund, Inc.
<TABLE>
<CAPTION>
(B) (1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
<S> <C> <C> <C>
David L. Abzug Regional Vice President None
27304 Park Vista Road
Agoura Hills, CA 91301
John A. Agar Vice President None
#61 Point West Circle
Little Rock, AR 72211
Robert B. Aprison Vice President None
2983 Bryn Wood Drive
Madison, WI 53711
L William W. Bagnard Vice President None
Steven L. Barnes Senior Vice President None
5400 Mount Meeker Road
Suite 1
Boulder, CO 80301-3508
B Carl R. Bauer Assistant Vice President None
Michelle A. Bergeron Senior Vice President None
4160 Gateswalk Drive
Smyrna, GA 30080
J. Walter Best, Jr. Regional Vice President None
9013 Brentmeade Blvd.
Brentwood, TN 37027
Joseph T. Blair Senior Vice President None
148 E. Shore Ave.
Groton Long Point, CT 06340
John A. Blanchard Vice President None
6421 Aberdeen Road
Mission Hills, KS 66208
Ian B. Bodell Senior Vice President None
P.O. Box 1665
Brentwood, TN 37024-1665
Mick L. Brethower Senior Vice President None
29003 Colonial Drive
Georgetown, TX 78628
Alan Brown Regional Vice President None
4129 Laclede Avenue
St. Louis, MO 63108
B J. Peter Burns Vice President None
Brian C. Casey Regional Vice President None
8002 Greentree Road
Bethesda, MD 20817
Victor C. Cassato Senior Vice President None
609 W. Littleton Blvd., Suite 310
Greenwood Village, CO 80120
Christopher J. Cassin Senior Vice President None
19 North Grant Street
Hinsdale, IL 60521
Denise M. Cassin Vice President None
1301 Stoney Creek Drive
San Ramon, CA 94538
L Larry P. Clemmensen Director None
L Kevin G. Clifford Director, President and Co-Chief None
Executive Officer
Ruth M. Collier Senior Vice President None
29 Landsdowne Drive
Larchmont, NY 10538
S David Coolbaugh Assistant Vice President None
H Carlo O. Cordasco Assistant Vice President None
Thomas E. Cournoyer Vice President None
2333 Granada Boulevard
Coral Gables, FL 33134
Douglas A. Critchell Senior Vice President None
3521 Rittenhouse Street, N.W.
Washington, D.C. 20015
L Carl D. Cutting Vice President None
William Daugherty Regional Vice President None
1216 Highlander Way
Mechanicsburg, PA 17055
Daniel J. Delianedis Regional Vice President None
8689 Braxton Drive
Eden Prairie, MN 55347
Michael A. Dilella Vice President None
P. O. Box 661
Ramsey, NJ 07446
G. Michael Dill Senior Vice President None
505 E. Main Street
Jenks, OK 74037
Kirk D. Dodge Senior Vice President None
633 Menlo Avenue, Suite 210
Menlo Park, CA 94025
Peter J. Doran Director, Executive Vice President None
100 Merrick Road, Suite 216W
Rockville Centre, NY 11570
L Michael J. Downer Secretary None
Robert W. Durbin Vice President None
74 Sunny Lane
Tiffin, OH 44883
I Lloyd G. Edwards Senior Vice President None
L Paul H. Fieberg Senior Vice President None
John Fodor Vice President None
15 Latisquama Road
Southborough, MA 01772
Daniel B. Frick Regional Vice President None
845 Western Avenue
Glen Ellyn, IL 60137
Clyde E. Gardner Senior Vice President None
Route 2, Box 3162
Osage Beach, MO 65065
B Evelyn K. Glassford Vice President None
Jeffrey J. Greiner Vice President None
12210 Taylor Road
Plain City, OH 43064
L Paul G. Haaga, Jr. Director None
B Mariellen Hamann Assistant Vice President None
David E. Harper Senior Vice President None
150 Old Franklin School Road
Pittstown, NJ 08867
H Mary Pat Harris Assistant Vice President None
Ronald R. Hulsey Vice President None
6744 Avalon
Dallas, TX 75214
Robert S. Irish Regional Vice President None
1225 Vista Del Mar Drive
Delray Beach, FL 33483
Michael J. Johnston Director None
630 Fifth Avenue, 36th Floor
New York, NY 10111
B Damien M. Jordan Vice President None
Arthur J. Levine Senior Vice President None
12558 Highlands Place
Fishers, IN 46038
B Karl A. Lewis Assistant Vice President None
T. Blake Liberty Regional Vice President None
5506 East Mineral Lane
Littleton, CO 80122
Mark J. Lien Regional Vice President None
5570 Beechwood Terrace
West Des Moines, IA 50266
L Lorin E. Liesy Assistant Vice President None
L Susan G. Lindgren Vice President - Institutional None
Investment Services
LW Robert W. Lovelace Director None
Stephen A. Malbasa Vice President None
13405 Lake Shore Blvd.
Cleveland, OH 44110
Steven M. Markel Senior Vice President None
5241 South Race Street
Littleton, CO 80121
L J. Clifton Massar Director, Senior Vice President None
L E. Lee McClennahan Senior Vice President None
S John V. McLaughlin Senior Vice President None
Terry W. McNabb Vice President None
2002 Barrett Station Road
St. Louis, MO 63131
L R. William Melinat Vice President - Institutional None
Investment Services
David R. Murray Vice President None
60 Briant Drive
Sudbury, MA 01776
Stephen S. Nelson Vice President None
P.O. Box 470528
Charlotte, NC 28247-0528
William E. Noe Regional Vice President None
304 River Oaks Road
Brentwood, TN 37027
Peter A. Nyhus Vice President None
3084 Wilds Ridge Court
Prior Lake, MN 55372
Eric P. Olson Vice President None
62 Park Drive
Glenview, IL 60025
Gary A. Peace Regional Vice President None
291 Kaanapali Drive
Napa, CA 94558
Samuel W. Perry Regional Vice President None
6133 Calle del Paisano
Scottsdale, AZ 85251
Fredric Phillips Senior Vice President None
175 Highland Avenue, 4th Floor
Needham, MA 02494
B Candance D. Pilgrim Assistant Vice President None
Carl S. Platou Vice President None
7455 80th Place, S.E.
Mercer Island, WA 98040
L John O. Post Senior Vice President None
S Richard P. Prior Vice President None
Steven J. Reitman Senior Vice President None
212 The Lane
Hinsdale, IL 60521
Brian A. Roberts Vice President None
244 Lambeau Lane
Glenville, NC 28736
George S. Ross Senior Vice President None
55 Madison Avenue
Morristown, NJ 07960
L Julie D. Roth Vice President None
L James F. Rothenberg Director None
Douglas F. Rowe Vice President None
414 Logan Ranch Road
Georgetown, TX 78628
Christopher S. Rowey Regional Vice President None
9417 Beverlywood Street
Los Angeles, CA 90034
Dean B. Rydquist Senior Vice President None
1080 Bay Pointe Crossing
Alpharetta, GA 30005
Richard R. Samson Senior Vice President None
4604 Glencoe Avenue, #4
Marina del Rey, CA 90292
Joseph D. Scarpitti Vice President None
31465 St. Andrews
Westlake, OH 44145
L R. Michael Shanahan Director None
Brad W. Short Regional Vice President None
306 15th Street
Seal Beach, CA 90740
David W. Short Chairman of the Board and None
1000 RIDC Plaza, Suite 212 Co-Chief Executive Officer
Pittsburgh, PA 15238
William P. Simon Senior Vice President None
912 Castlehill Lane
Devon, PA 19333
L John C. Smith Assistant Vice President - None
Institutional Investment Services
Rodney G. Smith Vice President None
100 N. Central Expressway
Suite 1214
Richardson, TX 75080
S Sherrie L. Snyder-Senft Assistant Vice President None
Anthony L. Soave Regional Vice President None
8831 Morning Mist Drive
Clarkston, MI 48348
Therese L. Souiller Assistant Vice President None
2652 Excaliber Court
Virginia Beach, VA 23454
Nicholas D. Spadaccini Regional Vice President None
855 Markley Woods Way
Cincinnati, OH 45230
L Kristen J. Spazafumo Assistant Vice President None
Daniel S. Spradling Senior Vice President None
181 Second Avenue
Suite 228
San Mateo, CA 94401
LW Eric H. Stern Director None
B Max D. Stites Vice President None
Thomas A. Stout Regional Vice President None
1004 Ditchley Road
Virginia Beach, VA 23451
Craig R. Strauser Vice President None
3 Dover Way
Lake Oswego, OR 97034
Francis N. Strazzeri Senior Vice President None
31641 Saddletree Drive
Westlake Village, CA 91361
L Drew W. Taylor Assistant Vice President None
S James P. Toomey Vice President None
I Christopher E. Trede Vice President None
George F. Truesdail Vice President None
400 Abbotsford Court
Charlotte, NC 28270
Scott W. Ursin-Smith Vice President None
60 Reedland Woods Way
Tiburon, CA 94920
J. David Viale Regional Vice President None
7 Gladstone Lane
Laguna Niguel, CA 92677
Thomas E. Warren Regional Vice President None
119 Faubel Street
Sarasota, FL 34242
L J. Kelly Webb Senior Vice President, None
Treasurer and Controller
Gregory J. Weimer Vice President None
206 Hardwood Drive
Venetia, PA 15367
B Timothy W. Weiss Director None
George J. Wenzel Regional Vice President None
3406 Shakespeare Drive
Troy, MI 48084
J. D. Wiedmaier Assistant Vice President None
3513 Riverstone Way
Chesapeake, VA 23325
Timothy J. Wilson Vice President None
113 Farmview Place
Venetia, PA 15367
B Laura L. Wimberly Vice President None
H Marshall D. Wingo Director, Senior Vice President None
L Robert L. Winston Director, Senior Vice President None
William R. Yost Vice President None
9320 Overlook Trail
Eden Prairie, MN 55347
Janet M. Young Regional Vice President None
1616 Vermont
Houston, TX 77006
Scott D. Zambon Regional Vice President None
2887 Player Lane
Tustin Ranch, CA 92782
</TABLE>
__________
L Business Address, 333 South Hope Street, Los Angeles, CA 90071
LW Business Address, 11100 Santa Monica Boulevard, 15th Floor, Los Angeles, CA
90025
B Business Address, 135 South State College Boulevard, Brea, CA 92821
S Business Address, 3500 Wiseman Boulevard, San Antonio, TX 78251
H Business Address, 5300 Robin Hood Road, Norfolk, VA 23513
I Business Address, 8332 Woodfield Crossing Blvd., Indianapolis, IN 46240
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
Accounts, books and other records required by Rules 31a-1 and 31a-2 under the
Investment Company Act of 1940, as amended, are maintained and kept in the
offices of the Trust, 1101 Vermont Avenue, N.W., Washington, D.C. 20005, and
its investment adviser, Capital Research and Management Company (CRMC), 333
South Hope Street, Los Angeles, CA 90071. Certain accounting records are
maintained and kept in the offices of CRMC's fund accounting department, 5300
Robin Hood Road, Norfolk, VA 23513.
Records covering shareholder accounts are maintained and kept by the transfer
agent, American Funds Service Company, 135 South State College Blvd., Brea, CA
92821.
Records covering portfolio transactions are also maintained and kept by the
custodian, The Chase Manhattan Bank, One Chase Manhattan Plaza, New York, New
York, 10081.
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
N/A
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amended Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Washington, District of Columbia, on the 9th day of
March, 2000.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By Harry J. Lister, President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
registration statement has been signed below on March 9, 2000, by the following
persons in the capacities indicated.
SIGNATURE TITLE
(1) Principal Executive Officer:
Harry J. Lister President
(2) Principal Financial Officer and
Principal Accounting Officer:
Howard L. Kitzmiller Senior Vice President, Secretary and Treasurer
(3) Trustees:
James H. Lemon, Jr.* Chairman of the Board
Stephen Hartwell* Chairman Emeritus and Trustee
Harry J. Lister President and Trustee
Cyrus A. Ansary* Trustee
Jean Head Sisco* Trustee
T. Eugene Smith* Trustee
Stephen G. Yeonas* Trustee
*By Howard L. Kitzmiller, Attorney-in-Fact
DESIGNATION NOTICE
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
Establishment and Designation of Classes
Of Shares of Beneficial Interest Without Par Value
(the "Instrument")
The undersigned, being a majority of the Trustees of The American Funds
Tax-Exempt Series I, a Massachusetts business trust (the "Trust"), acting
pursuant to Article VI of the Trust's Declaration of Trust dated April 22, 1986
(the "Declaration of Trust"), hereby further divide and classify the authorized
and unissued shares of beneficial interest (together with the shares of
beneficial interest without par value, now outstanding, the "Shares") of the
Trust, into the two classes of shares designated below in paragraph 1 (each a
"Class" and, collectively, the "Classes"). Each Class (including all currently
issued and outstanding Shares, which shall be redesignated "Class A Shares")
shall be unlimited in number and have the special and relative rights specified
in this Instrument:
1. The Classes shall be designated as follows:
Class A
Class B
2. Each Share shall represent a pro rata beneficial interest in the assets
attributable to its Class, and shall be entitled to receive its pro rata share
of net assets attributable to that Class of Shares of the Trust upon the
liquidation of the Trust, all as provided in or not inconsistent with the
Declaration of Trust. Unless otherwise provided in this Instrument, each Share
shall have the voting, dividend, liquidation and other rights, preferences,
powers, restrictions, limitations, qualifications, terms and conditions, as set
forth in the Declaration of Trust.
3. Upon the effective date of this Instrument:
a. Each Share of each Class of the Trust shall be entitled to one vote (or
fraction thereof in respect of a fractional Share) on matters, which those
Shares (or Class of Shares) shall be entitled to vote. Shareholders of the
Trust shall vote together on any matter, except to the extent otherwise
required by the Investment Company Act of 1940 (the "Investment Company Act"),
and the rules thereunder, in which case only the Shareholders of that Class or
those Classes shall be entitled to vote thereon.
b. Class A Shares and Class B Shares may be issued and sold subject to
different sales loads or charges, whether initial, deferred or contingent, or
any combination thereof, as may be established from time to time by the
Trustees of the Trust in accordance with the Investment Company Act and
applicable rules and regulations of Self-regulatory organizations and as shall
be set forth in the applicable prospectus for the Shares.
c. Liabilities, expenses, costs, charges or reserves that should be properly
allocated to the Shares of a particular Class of the Trust may, pursuant to a
Plan adopted by the Trustees to conform with Rule 18f-3 under the Investment
Company Act, or a similar rule, provision, interpretation or order under the
Investment Company Act, be charged to and borne solely by that Class and the
bearing of expenses solely by a Class of Shares may be appropriately reflected
and cause differences in net asset value attributable to, and the dividend,
redemption and liquidation rights of, the Shares of different Classes.
d. Except as otherwise provided hereinafter, on the eighth anniversary of the
first business day of the month following the month in which Class B Shares
were purchased by a holder thereof, such Shares (as well as a pro rata portion
of any Class B Shares purchased through the reinvestment of dividends or other
distributions paid on all Class B Shares held by such holder) shall
automatically convert to Class A Shares on the basis of the respective net
asset values of the Class B Shares and the Class A Shares on the conversion
date; PROVIDED, HOWEVER, that the Trustees, in their sole discretion, may
suspend the conversion of Class B Shares if any conversion of such Shares would
constitute a taxable event under federal income tax law (in which case the
holder of such Class B Shares shall have the right to exchange from time to
time any or all of such Class B Shares held by such holder for Class A Shares
on the basis of the respective net asset values of the Class B shares and the
Class A shares on the applicable exchange date and without the imposition of a
sales charge or fee); and PROVIDED, FURTHER, that conversion (or exchange) of
Class B Shares represented by share certificates shall be subject to tender of
such certificates; and
e. Subject to the foregoing paragraph, Class A Shares and Class B Shares may
have such different exchange rights, as the Trustees shall determine in
compliance with the Investment Company Act.
4. The Trustees (including any successor Trustees) of the Trust shall have the
right at any time and from time to time to reallocate assets, liabilities and
expenses or to change the designation of any Class now or hereafter created, or
to otherwise change the special and relative rights of any Class, provided that
no change shall adversely affect the rights of Shareholders of such Class.
I, James H. Lemon, Jr., Chairman of the American Funds Tax-Exempt Series I,
hereby certify and acknowledge that the amendments herein were duly adopted by
the Trustees on December 16, 1999 in a manner provided by the Declaration of
Trust.
James H. Lemon, Jr., Chairman
James H. Lemon, Jr.
Cyrus A. Ansary
Stephen Hartwell
Harry J. Lister
[fund logo]
NUMBER (certificate number)
SHARES (number of shares)
CUSIP (cusip number)
CLASS (class of shares)
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
A MASSACHUSETTS BUSINESS TRUST
This Certifies that (shareholder name and address) is the owner of (number of
shares) fully paid Shares of Beneficial Interest, of the Class and number
indicated above, of The American Funds Tax-Exempt Series I, The Tax-Exempt Fund
of Maryland, without par value, transferable on the books of the Trust by the
holder thereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless
countersigned by the Transfer Agent. (See reverse for certain abbreviations.)
Witness, the facsimile signatures of duly authorized officers of the Trust.
Dated: (date issued)
S/Howard L. Kitzmiller
Secretary
S/Harry J. Lister
President
Countersigned
AMERICAN FUNDS SERVICE COMPANY
TRANSFER AGENT
BY ___________________
AUTHORIZED SIGNATURE
(BACK OF CERTIFICATE)
THE ISSUER OF THE SHARES REPRESENTED BY THIS CERTIFICATE WILL FURNISH TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF
EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, THE VARIATIONS IN THE RELATIVE
RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH CLASS AND SERIES INSOFAR AS
THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF
DIRECTORS OR TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES
OF CLASSES AND SERIES OF SHARES OF THE ISSUER. IF YOU WOULD LIKE A COPY OF THE
FULL STATEMENT, PLEASE WRITE TO THE SECRETARY OF THE ISSUER OR ITS TRANSFER
AGENT.
CLASS B AND SERIES B SHARES REDEEMED WITHIN SIX YEARS OF THEIR PURCHASE ARE
SUBJECT TO A DEFERRED SALES CHARGE OF UP TO 5%. IN ADDITION, DURING THE MONTH
FOLLOWING THE 96-MONTH PERIOD THAT BEGINS ON THE FIRST DAY OF THE MONTH IN
WHICH SUCH SHARES ARE PURCHASED, CLASS B AND SERIES B SHARES (ALONG WITH SHARES
OF THE SAME CLASS AND SERIES PURCHASED THROUGH REINVESTMENT OF DIVIDENDS AND
OTHER DISTRIBUTIONS ON SUCH SHARES) WILL AUTOMATICALLY CONVERT TO CLASS A
SHARES (OR COMMON SHARES) ON THE BASIS OF THEN CURRENT RELATIVE NET ASSET
VALUES PER SHARE. THE ISSUER MAY SUSPEND SUCH CONVERSION IN CERTAIN LIMITED
CIRCUMSTANCES, IN WHICH CASE AN EXCHANGE PRIVILEGE WILL APPLY. THE ISSUER MAY
REQUIRE TENDER OF THIS CERTIFICATE PRIOR TO ANY CONVERSION OR EXCHANGE. IF
SUCH TENDER IS NOT REQUIRED, THE NUMBER OF SHARES REPRESENTED BY THIS
CERTIFICATE AFTER SUCH CONVERSION OR EXCHANGE WILL BE DIFFERENT THAN THE NUMBER
INDICATED ON THE FACE OF THIS CERTIFICATE. SHAREHOLDERS MAY RETURN THIS
CERTIFICATE AFTER ANY CONVERSION OR EXCHANGE AND OBTAIN A NEW CERTIFICATE (OR
CERTIFICATES) REPRESENTING THE ACTUAL NUMBER AND TYPE OF SHARES OWNED.
NOTE: SHARES REPRESENTED BY THIS CERTIFICATE MAY BE REDEEMED WITHOUT THE
CONSENT OR APPROVAL OF THE SHAREHOLDER FOR THE THEN CURRENT NET ASSET VALUE PER
SHARE IF AT SUCH TIME THE SHAREHOLDER OWNS OF RECORD SHARES HAVING AN AGGREGATE
NET ASSET VALUE OF LESS THAN THE MINIMUM INITIAL INVESTMENT AMOUNT.
EXPLANATION OF ABBREVIATIONS
The following abbreviations, when used in the registration on the face of this
certificate, shall have the meanings assigned below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADM __ Administratrix FBO __ For the benefit of TTEE __ Trustee
Administrator GDN __ Guardian U/A __ Under agreement
COM PROP __ Community property JT TEN __ Joint tenants with right of UGMA/(State) __ Uniform Gift to Minors
Act in
CUST __ Custodian survivorship effect in the state indicated
DTD __ Dated LIFE TEN __ Life tenant UTMA/(State) __ Uniform Transfers to Minors Act
EST __ Estate (State)/TOD __ Uniform Transfer on Death in effect in the state
indicated
Of the estate of Act in effect in the state U/W __ Last will and testament
ET AL __ And others indicated Under last will and testament of
EXEC __ Executor TR __ Trust Under the will of
Executrix TEN COM __ Tenants in common
TEN ENT __ Tenants by the entireties
Note: Abbreviations refer where appropriate to the isngular or plural, male or female. Other abbreviations may also be used,
including U.S. Postal Service two-letter state abbreviations.
</TABLE>
REQUIREMENTS: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND EXACTLY WITH
THE NAME(S) WRITTEN ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR.
SIGNATURE(S) MUST BE GUARANTEED BY AN "ELIGIBLE GUARANTOR," SUCH AS A BANK,
SAVINGS ASSOCIATION OR CREDIT UNION THAT IS FEDERALLY INSURED OR A MEMBER FIRM
OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. A NOTARY PUBLIC IS NOT
AN ACCEPTABLE GUARANTOR.
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELL, ASSIGN, AND TRANSFER
SHARES OF THE ISSUER REPRESENTED BY THIS
CERTIFICATE TO:
______________________________________________________________________________
____________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE)
AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
_____________________________________________________ ATTORNEY TO TRANSFER
THESE SHARES ON THE BOOKS OF THE ISSUER WITH FULL POWER OF
SUBSTITUTION._________________________________________________________________
__________________________ _______________________________
Signature of owner Date
______________________________________________________________________________
_____________ _______________________________ Signature of
co-owner, if any Date
IMPORTANT: BEFORE SIGNING, PLEASE READ AND COMPLY WITH THE REQUIREMENTS
PRINTED ABOVE.
SIGNATURE(S) GUARANTEED BY:
_______________________________________________________________________
[fund logo]
NUMBER (certificate number)
SHARES (number of shares)
CUSIP (cusip number)
CLASS (class of shares)
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF VIRGINIA
A MASSACHUSETTS BUSINESS TRUST
This Certifies that (shareholder name and address) is the owner of (number of
shares) fully paid Shares of Beneficial Interest, of the Class and number
indicated above, of The American Funds Tax-Exempt Series I, The Tax-Exempt Fund
of Virginia, without par value, transferable on the books of the Trust by the
holder thereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless
countersigned by the Transfer Agent. (See reverse for certain abbreviations.)
Witness, the facsimile signatures of duly authorized officers of the Trust.
Dated: (date issued)
S/Howard L. Kitzmiller
Secretary
S/Harry J. Lister
President
Countersigned
AMERICAN FUNDS SERVICE COMPANY
TRANSFER AGENT
BY ___________________
AUTHORIZED SIGNATURE
(BACK OF CERTIFICATE)
THE ISSUER OF THE SHARES REPRESENTED BY THIS CERTIFICATE WILL FURNISH TO ANY
SHAREHOLDER UPON REQUEST AND WITHOUT CHARGE A FULL STATEMENT OF THE
DESIGNATIONS, PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF THE SHARES OF
EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, THE VARIATIONS IN THE RELATIVE
RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH CLASS AND SERIES INSOFAR AS
THE SAME HAVE BEEN FIXED AND DETERMINED, AND THE AUTHORITY OF THE BOARD OF
DIRECTORS OR TRUSTEES TO FIX AND DETERMINE THE RELATIVE RIGHTS AND PREFERENCES
OF CLASSES AND SERIES OF SHARES OF THE ISSUER. IF YOU WOULD LIKE A COPY OF THE
FULL STATEMENT, PLEASE WRITE TO THE SECRETARY OF THE ISSUER OR ITS TRANSFER
AGENT.
CLASS B AND SERIES B SHARES REDEEMED WITHIN SIX YEARS OF THEIR PURCHASE ARE
SUBJECT TO A DEFERRED SALES CHARGE OF UP TO 5%. IN ADDITION, DURING THE MONTH
FOLLOWING THE 96-MONTH PERIOD THAT BEGINS ON THE FIRST DAY OF THE MONTH IN
WHICH SUCH SHARES ARE PURCHASED, CLASS B AND SERIES B SHARES (ALONG WITH SHARES
OF THE SAME CLASS AND SERIES PURCHASED THROUGH REINVESTMENT OF DIVIDENDS AND
OTHER DISTRIBUTIONS ON SUCH SHARES) WILL AUTOMATICALLY CONVERT TO CLASS A
SHARES (OR COMMON SHARES) ON THE BASIS OF THEN CURRENT RELATIVE NET ASSET
VALUES PER SHARE. THE ISSUER MAY SUSPEND SUCH CONVERSION IN CERTAIN LIMITED
CIRCUMSTANCES, IN WHICH CASE AN EXCHANGE PRIVILEGE WILL APPLY. THE ISSUER MAY
REQUIRE TENDER OF THIS CERTIFICATE PRIOR TO ANY CONVERSION OR EXCHANGE. IF
SUCH TENDER IS NOT REQUIRED, THE NUMBER OF SHARES REPRESENTED BY THIS
CERTIFICATE AFTER SUCH CONVERSION OR EXCHANGE WILL BE DIFFERENT THAN THE NUMBER
INDICATED ON THE FACE OF THIS CERTIFICATE. SHAREHOLDERS MAY RETURN THIS
CERTIFICATE AFTER ANY CONVERSION OR EXCHANGE AND OBTAIN A NEW CERTIFICATE (OR
CERTIFICATES) REPRESENTING THE ACTUAL NUMBER AND TYPE OF SHARES OWNED.
NOTE: SHARES REPRESENTED BY THIS CERTIFICATE MAY BE REDEEMED WITHOUT THE
CONSENT OR APPROVAL OF THE SHAREHOLDER FOR THE THEN CURRENT NET ASSET VALUE PER
SHARE IF AT SUCH TIME THE SHAREHOLDER OWNS OF RECORD SHARES HAVING AN AGGREGATE
NET ASSET VALUE OF LESS THAN THE MINIMUM INITIAL INVESTMENT AMOUNT.
EXPLANATION OF ABBREVIATIONS
The following abbreviations, when used in the registration on the face of this
certificate, shall have the meanings assigned below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ADM __ Administratrix FBO __ For the benefit of TTEE __ Trustee
Administrator GDN __ Guardian U/A __ Under agreement
COM PROP __ Community property JT TEN __ Joint tenants with right of UGMA/(State) __ Uniform Gift to Minors
Act in
CUST __ Custodian survivorship effect in the state indicated
DTD __ Dated LIFE TEN __ Life tenant UTMA/(State) __ Uniform Transfers to Minors Act
EST __ Estate (State)/TOD __ Uniform Transfer on Death in effect in the state
indicated
Of the estate of Act in effect in the state U/W __ Last will and testament
ET AL __ And others indicated Under last will and testament of
EXEC __ Executor TR __ Trust Under the will of
Executrix TEN COM __ Tenants in common
TEN ENT __ Tenants by the entireties
Note: Abbreviations refer where appropriate to the isngular or plural, male or female. Other abbreviations may also be used,
including U.S. Postal Service two-letter state abbreviations.
</TABLE>
REQUIREMENTS: THE SIGNATURE(S) ON THIS ASSIGNMENT MUST CORRESPOND EXACTLY WITH
THE NAME(S) WRITTEN ON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR.
SIGNATURE(S) MUST BE GUARANTEED BY AN "ELIGIBLE GUARANTOR," SUCH AS A BANK,
SAVINGS ASSOCIATION OR CREDIT UNION THAT IS FEDERALLY INSURED OR A MEMBER FIRM
OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. A NOTARY PUBLIC IS NOT
AN ACCEPTABLE GUARANTOR.
FOR VALUE RECEIVED, THE UNDERSIGNED HEREBY SELL, ASSIGN, AND TRANSFER
SHARES OF THE ISSUER REPRESENTED BY THIS
CERTIFICATE TO:
______________________________________________________________________________
____________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS OF ASSIGNEE)
AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT
_____________________________________________________ ATTORNEY TO TRANSFER
THESE SHARES ON THE BOOKS OF THE ISSUER WITH FULL POWER OF
SUBSTITUTION._________________________________________________________________
__________________________ _______________________________
Signature of owner Date
______________________________________________________________________________
_____________ _______________________________ Signature of
co-owner, if any Date
IMPORTANT: BEFORE SIGNING, PLEASE READ AND COMPLY WITH THE REQUIREMENTS
PRINTED ABOVE.
SIGNATURE(S) GUARANTEED BY:
_______________________________________________________________________
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
consisting of
THE TAX-EXEMPT FUND OF MARYLAND
THE TAX-EXEMPT FUND OF VIRGINIA
AMENDED AND RESTATED PRINCIPAL UNDERWRITING AGREEMENT
THIS PRINCIPAL UNDERWRITING AGREEMENT, between THE AMERICAN FUNDS TAX-EXEMPT
SERIES I, a Massachusetts business trust (the "Trust"), and AMERICAN FUNDS
DISTRIBUTORS, INC., a California corporation ("the Distributor").
W I T N E S S E T H:
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end diversified investment company which
offers two series each with two classes of shares of beneficial interest,
designated as Class A shares and Class B shares, and it is a part of the
business of the Trust, and affirmatively in the interest of the Trust, to offer
shares of the Trust either from time to time or continuously as determined by
the Trust's officers subject to authorization by its Board of Trustees; and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of shares of investment companies through securities
broker-dealers; and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other to promote the distribution of the shares of the Trust and of all
series or classes of the Trust which may be established in the future;
NOW, THEREFORE, the parties agree as follows:
1. (a) The Distributor shall be the exclusive principal underwriter for the
sale of the shares of the Trust and of each series or class of the Trust which
may be established in the future, except as otherwise provided pursuant to the
following subsection (b). The terms "shares of Fund" or "shares" as used
herein shall mean shares of beneficial interest of the Trust and each series or
class which may be established in the future and become covered by this
Agreement in accordance with Section 23 of this Agreement.
(b) The Trust may, upon 60 days' written notice to the Distributor, from time
to time designate other principal underwriters of its shares with respect to
areas other than the North American continent, Hawaii, Puerto Rico, and such
countries or other jurisdictions as to which the Trust may have expressly
waived in writing its right to make such designation. In the event of such
designation, the right of the Distributor under this Agreement to sell shares
in the areas so designated shall terminate, but this Agreement shall remain
otherwise in full force and effect until terminated in accordance with the
other provisions hereof.
2. In the sale of shares of the Trust, the Distributor shall act as agent of
the Trust except in any transaction in which the Distributor sells such shares
as a dealer to the public, in which event the Distributor shall act as
principal for its own account.
3. The Trust shall sell shares only through the Distributor, except that the
Trust may, to the extent permitted by the 1940 Act and the rules and
regulations promulgated thereunder or pursuant thereto, at any time:
(a) issue shares to any corporation, association, trust, partnership or other
organization, or its, or their, security holders, beneficiaries or members, in
connection with a merger, consolidation or reorganization to which the Trust is
a party, or in connection with the acquisition of all or substantially all the
property and assets of such corporation, association, trust, partnership or
other organization;
(b) issue shares at net asset value to the holders of shares of capital stock
or beneficial interest of other investment companies served as investment
adviser by any affiliated company or companies of The Capital Group Companies,
Inc., to the extent of all or any portion of amounts received by such
shareholders upon redemption or repurchase of their shares by the other
investment companies;
(c) issue shares at net asset value to its shareholders in connection with the
reinvestment of dividends paid and other distributions made by the Trust;
(d) issue shares at net asset value to persons entitled to purchase shares at
net asset value without sales charge or contingent deferred sales charge as
described in the current prospectus which is part of the Trust's Registration
Statement in effect under the Securities Act of 1933, as amended, for each
series issued by the Trust at the time of such offer or sale (the
"Prospectus").
4. The Distributor shall devote its best efforts to the sale of shares of the
Trust and shares of any other mutual funds served as investment adviser by
affiliated companies of The Capital Group Companies, Inc., and insurance
contracts funded by shares of such mutual funds, for which the Distributor has
been authorized to act as a principal underwriter for the sale of shares. The
Distributor shall maintain a sales organization suited to the sale of shares of
the Trust and shall use its best efforts to effect such sales in jurisdictions
as to which the Trust shall have expressly waived in writing its right to
designate another principal underwriter pursuant to subsection 1(b) hereof, and
shall effect and maintain appropriate qualification to do so in all those
jurisdictions in which it sells or offers shares for sale and in which
qualification is required.
5. Within the United States of America, all dealers to whom the Distributor
shall offer and sell shares must be duly licensed and qualified to sell shares
of the Trust. Shares sold to dealers shall be for resale by such dealers only
at the public offering price set forth in the current Prospectus. The
Distributor shall not, without the consent of the Trust, sell or offer for sale
any shares of a series or class issued by the Trust other than as principal
underwriter pursuant to this Agreement.
6. In its sales to dealers, it shall be the responsibility of the Distributor
to insure that such dealers are appropriately qualified to transact business in
the shares under applicable laws, rules and regulations promulgated by such
national, state, local or other governmental or quasi-governmental authorities
as may in a particular instance have jurisdiction.
7. The applicable public offering price of shares shall be the price which is
equal to the net asset value per share, as shall be determined by the Trust in
the manner and at the time or times set forth in and subject to the provisions
of the Prospectus of the Trust.
8. All orders for shares received by the Distributor shall, unless rejected by
the Distributor or the Trust, be accepted by the Distributor immediately upon
receipt and confirmed at an offering price determined in accordance with the
provisions of the Prospectus and the 1940 Act, and applicable rules in effect
thereunder. The Distributor shall not hold orders subject to acceptance nor
otherwise delay their execution. The provisions of this Section shall not be
construed to restrict the right of the Trust to withhold shares from sale under
Section 18 hereof.
9. The Trust or its transfer agent shall be promptly advised of all orders
received, and shall cause shares to be issued upon payment therefor in New York
or Los Angeles Clearing House Funds.
10. The Distributor shall adopt and follow procedures as approved by the
officers of the Trust for the confirmation of sales to dealers, the collection
of amounts payable by dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the requirements of the
Securities and Exchange Commission or the National Association of Securities
Dealers, Inc. ("NASD"), as such requirements may from time to time exist.
11. The Distributor, as a principal underwriter under this Agreement for Class
A shares, shall be receive (i) that part of the sales charge which is retained
by the Distributor after allowance of discounts to dealers, unless waived by
the Distributor for certain qualified fee-based programs, as set forth in the
Prospectus of the Trust, and (ii) amounts payable to the Distributor pursuant
to each Fund of the Trust's Plan of Distribution under Rule 12b-1 under the
1940 Act relating to its Class A shares.
12. The Distributor, as principal underwriter under this agreement for Class B
shares shall receive (i) distribution fees as commissions for the sale of Class
B shares and contingent deferred sales charges ("CDSC") (as defined below), as
set forth in the Trust's Prospectus, and (ii) shareholder service fees at the
rate of 0.25% per annum of the average net asset value of Class B shares
pursuant to each Fund of the Trust's Plan of Distribution under Rule 12b-1
under the 1940 Act relating to its Class B shares (the "Plan").
13. (a) In accordance with the Plan, the Fund shall pay to the Distributor or,
at the Distributor's direction, to a third-party, monthly in arrears on or
prior to the 10/th/ business day of the following calendar month, the
Distributor's Allocable Portion (as defined below) of a fee (the "Distribution
Fee") which shall accrue daily in an amount equal to the product of (A) the
daily equivalent of 0.75% per annum multiplied by (B) the net asset value of
the Class B shares of the Fund outstanding on such day. The Fund agrees to
withhold from redemption proceeds of the Class B shares, the Distributor's
Allocable Portion of any CDSCs payable with respect to the Class B shares, as
provided in the Trust's Prospectus, and to pay the same over to the Distributor
or, at the Distributor's direction to a third-party, at the time the redemption
proceeds are payable to the holder of such shares redeemed. Payment of these
CDSC amounts to the Distributor is not contingent upon the adoption or
continuation of any Plan.
(b) For purposes of this Agreement, the term "Allocable Portion" of
Distribution Fees and CDSCs payable with respect to Class B shares shall mean
the portion of such Distribution Fees and CDSC allocated to the Distributor in
accordance with the Allocation Schedule attached hereto as Schedule A.
(c) The Distributor shall be considered to have completely earned the right to
the payment of its Allocable Portion of the Distribution Fees and the right to
payment of its Allocable Portion of the CDSCs with respect to each "Commission
Share" (as defined in the Allocation Schedule attached hereto as Schedule A)
upon the settlement date of such Commission Share taken into account in
determining the Distributor's Allocable Portion of Distribution Fees.
(d) The provisions set forth in Section 1 of the Plan (in effect on the date
hereof) relating to Class B shares, together with the related definitions are
hereby incorporated into this Section 13 by reference with the same force and
effect as if set forth herein in their entirety.
14. The Trust agrees to use its best efforts to maintain its registration as a
diversified open-end management investment company under the 1940 Act.
15. The Trust agrees to use its best efforts to maintain an effective
Prospectus under the Securities Act of 1933, as amended, and warrants that such
Prospectus will contain all statements required by and will conform with the
requirements of such Securities Act of 1933 and the rules and regulations
thereunder, and that no part of any such Prospectus, at the time the
Registration Statement of which it is a part becomes effective, will contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading (excluding any information provided by the Distributor in writing
for inclusion in the Prospectus). The Distributor agrees and warrants that it
will not in the sale of shares use any Prospectus, advertising or sales
literature not approved by the Trust or its officers nor make any untrue
statement of a material fact nor omit the stating of a material fact necessary
in order to make the statements made, in the light of the circumstances under
which they are made, not misleading. The Distributor agrees to indemnify and
hold the Trust harmless from any and all loss, expense, damage and liability
resulting from a breach of the agreements and warranties contained in this
Section, or from the use of any sales literature, information, statistics or
other aid or device employed in connection with the sale of shares.
16. The expense of each printing of each Prospectus and each revision thereof
or addition thereto deemed necessary by the Trust's officers to meet the
requirements of applicable laws shall be divided between the Trust, the
Distributor and any other principal underwriter of the shares of the Trust as
follows:
(a) the Trust shall pay the typesetting and make-ready charges;
(b) the printing charges shall be prorated between the Trust, the Distributor,
and any other principal underwriter(s) in accordance with the number of copies
each receives; and
(c) expenses incurred in connection with the foregoing, other than to meet the
requirements of the Securities Act of 1933, as amended, or other applicable
laws, shall be borne by the Distributor, except in the event such incremental
expenses are incurred at the request of any other principal underwriter(s), in
which case such incremental expenses shall be borne by the principal
underwriter(s) making the request.
17. The Trust agrees to use its best efforts to qualify and maintain the
qualification of an appropriate number of the shares of each series or class it
offers for sale under the securities laws of such states as the Distributor and
the Trust may approve. Any such qualification for any series or class may be
withheld, terminated or withdrawn by the Trust at any time in its discretion.
The expense of qualification and maintenance of qualification shall be borne by
the Trust, but the Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Trust
or its counsel in connection with such qualifications.
18. The Trust may withhold shares of any series or class from sale to any
person or persons or in any jurisdiction temporarily or permanently if, in the
opinion of its counsel, such offer or sale would be contrary to law or if the
Directors or the President or any Vice President of the Trust determines that
such offer or sale is not in the best interest of the Trust. The Trust will
give prompt notice to the Distributor of any withholding and will indemnify it
against any loss suffered by the Distributor as a result of such withholding by
reason of nondelivery of shares of any series or class after a good faith
confirmation by the Distributor of sales thereof prior to receipt of notice of
such withholding.
19. (a) This Agreement may be terminated at any time, without payment of any
penalty, as to the Trust or any series or class on sixty (60) days' written
notice by the Distributor to the Trust.
(b) This Agreement may be terminated as to the Trust or any series or class by
either party upon five (5) days' written notice to the other party in the event
that the Securities and Exchange Commission has issued an order or obtained an
injunction or other court order suspending effectiveness of the Registration
Statement covering the shares of the Trust or such series or class.
(c) This Agreement may be terminated as to the Trust or any series or class by
the Trust upon five (5) days' written notice to the Distributor provided either
of the following events has occurred:
(i) The NASD has expelled the Distributor or suspended its membership in that
organization; or
(ii) the qualification, registration, license or right of the Distributor to
sell shares of any series in a particular state has been suspended or canceled
by the State of California or any other state in which sales of the shares of
the Trust or such series during the most recent 12-month period exceeded 10% of
all shares of such series sold by the Distributor during such period.
(d) This Agreement may be terminated as to the Trust or any series or class at
any time on sixty (60) days' written notice to the Distributor without the
payment of any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of the Trust or such series or class.
20. This Agreement shall not be assignable by either party hereto and in the
event of assignment shall automatically terminate forthwith. The term
"assignment" shall have the meaning set forth in the 1940 Act. Notwithstanding
this Section, this Agreement, with respect to the Trust's Class B shares, has
been approved in accordance with Section 22 in anticipation of the
Distributor's transfer of its Allocable Portion (but not its obligations under
this Agreement) to a third-party pursuant to a "Purchase and Sale Agreement" in
order to raise funds to cover distribution expenditures, and such transfer will
not cause of a termination of this Agreement.
21. No provision of this Agreement shall protect or purport to protect the
Distributor against any liability to the Trust or holders of its shares for
which the Distributor would otherwise be liable by reason of willful
misfeasance, bad faith, or gross negligence.
22. This Agreement shall become effective on January 1, 2000. Unless sooner
terminated in accordance with the other provisions hereof, this Agreement shall
continue in effect until July 31, 2000, and shall continue in effect from year
to year thereafter but only so long as such continuance is specifically
approved at least annually by (i) the vote of a majority of the Independent
Trustees of the Trust cast in person at a meeting called for the purpose of
voting on such approval, and (ii) the vote of either a majority of the entire
Board of Trustees of the Trust or a majority (within the meaning of the 1940
Act) of the outstanding voting securities of the Trust.
23. If the Trust shall at any time issue shares in more than one series or
class, this Agreement shall take effect with respect to such series or class of
the Trust which may be established in the future at such time as it has been
approved as to such series or class by vote of the Board of Trustees and the
Independent Trustees in accordance with Section 22. The Agreement as approved
with respect to any series or class shall specify the compensation payable to
the Distributor pursuant to Sections 11 and 12, as well as any provisions which
may differ from those herein with respect to such series, subject to approval
in writing by the Distributor.
This Agreement may be approved, amended, continued or renewed with respect to
a series or class as provided herein notwithstanding such approval, amendment,
continuance or renewal has not been effected with respect to any one or more
other series or class of the Trust.
This Agreement shall be construed under and shall be governed by the laws of
the State of California, and the parties hereto agree that proper venue of any
action with respect hereto shall be Los Angeles County, California.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunto duly authorized, as
of December 16, 1999.
AMERICAN FUNDS DISTRIBUTORS, INC. THE AMERICAN FUNDS TAX EXEMPT SERIES I
By By
Kevin G. Clifford Harry J. Lister
President President
By By
Michael J. Downer Howard L. Kitzmiller
Secretary Secretary
SCHEDULE A
to the
Amended and Restated Principal Underwriting Agreement
ALLOCATION SCHEDULE
The following relates solely to Class B shares.
The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect
of Class B shares shall be 100% until such time as the Distributor shall cease
to serve as exclusive distributor of Class B shares; thereafter, collections
that constitute CDSCs and Distribution Fees relating to Class B shares shall be
allocated among the Distributor and any successor distributor ("Successor
Distributor") in accordance with this Schedule.
Defined terms used in this Schedule and not otherwise defined herein shall
have the meanings assigned to them in the Amended and Restated Principal
Underwriting Agreement (the "Distribution Agreement"), of which this Schedule
is a part. As used herein the following terms shall have the meanings
indicated:
"Commission Share" means each B share issued under circumstances which would
normally give rise to an obligation of the holder of such share to pay a CDSC
upon redemption of such share (including, without limitation, any B share
issued in connection with a permitted free exchange), and any such share shall
continue to be a Commission Share of the applicable Fund prior to the
redemption (including a redemption in connection with a permitted free
exchange) or conversion of such share, even though the obligation to pay the
CDSC may have expired or conditions for waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share, the date
with reference to which the amount of the CDSC payable on redemption thereof,
if any, is computed.
"Free Share" means, in respect of a Fund, each B share of the Fund, other than
a Commission Share (including, without limitation, any B share issued in
connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of a Fund, the first date on which the Fund
issued shares.
"Net Asset Value" means the net asset value determined as set forth in the
Prospectus of each Fund.
"Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share
sold by one of the selling agents listed on Exhibit I. If, subsequent to the
Successor Distributor becoming exclusive distributor of the Class B shares, the
Distributor reasonably determines that the transfer agent is able to track all
Commission Shares and Free Shares sold by any of the selling agents listed on
Exhibit I in the same manner as Commission Shares and Free Shares are currently
tracked in respect of selling agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such selling agent from Exhibit I so that Commission
Shares and Free Shares sold by such selling agent will no longer be treated as
Omnibus Shares.
PART I: ATTRIBUTION OF CLASS B SHARES
Class B shares that are outstanding from time to time, shall be attributed to
the Distributor and each Successor Distributor in accordance with the following
rules;
(1) Commission Shares other than Omnibus Shares:
(a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission
Shares") attributed to the Distributor shall be those Non-Omnibus Commission
Shares the date of Original Issuance of which occurred on or after the
Inception Date of the applicable Fund and on or prior to the date the
Distributor ceased to be exclusive distributor of Class B shares of the Fund.
(b) Non-Omnibus Commission Shares attributable to each Successor Distributor
shall be those Non-Omnibus Commission Shares the Date of Original Issuance of
which occurs after the date such Successor Distributor became the exclusive
distributor of Class B shares of the Fund and on or prior to the date such
Successor Distributor ceased to be the exclusive distributor of Class B shares
of the Fund.
(c) A Non-Omnibus Commission Share of a Fund issued in consideration of the
investment of proceeds of the redemption of a Non-Omnibus Commission Share of
another Fund (the "Redeeming Fund") in connection with a permitted free
exchange, is deemed to have a Date of Original Issuance identical to the Date
of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund,
and any such Commission Share will be attributed to the Distributor or
Successor Distributor based upon such Date of Original Issuance in accordance
with rules (a) and (b) above.
(2) Free Shares:
Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Non-Omnibus
Commission Shares of a Fund outstanding on such date are attributed to each on
such date; provided that if the Distributor and its transferees reasonably
determines that the transfer agent is able to produce monthly reports that
track the Date of Original Issuance for such Non-Omnibus Free Shares, then such
Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be attributed to the
Distributor or a Successor Distributor, as the case may be, in the same
proportion that the Non-Omnibus Commission Shares of the applicable Fund
outstanding on such date are attributed to it on such date; provided that if
the Distributor reasonably determines that the transfer agent is able to
produce monthly reports that track the Date of Original Issuance for the
Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause
1(a), (b) and (c) above.
PART II: ALLOCATION OF CDSCs
(1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares:
CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be
allocated to the Distributor or a Successor Distributor depending upon whether
the related redeemed Commission Share is attributable to the Distributor or
such Successor Distributor, as the case may be, in accordance with Part I
above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the
Distributor or a Successor Distributor in the same proportion that CDSCs
related to the redemption of Commission Shares are allocated to each thereof;
provided, that if the Distributor reasonably determines that the transfer agent
is able to produce monthly reports which track the Date of Original Issuance
for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus
Shares shall be allocated among the Distributor and any Successor Distributor
depending on whether the related redeemed Omnibus Share is attributable to the
Distributor or a Successor Distributor, as the case may be, in accordance with
Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEE
Assuming that the Distribution Fee remains constant over time so that Part IV
hereof does not become operative:
(1) The portion of the aggregate Distribution Fee accrued in respect of all
Class B shares of a Fund during any calendar month allocable to the Distributor
or a Successor Distributor is determined by multiplying the total of such
Distribution Fee by the following fraction:
(A + C)/2
(B + D)/2
where:
A= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the beginning of such calendar month
B= The aggregate Net Asset Value of all Class B shares of a Fund at the
beginning of such calendar month
C= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the end of such calendar month
D= The aggregate Net Asset Value of all Class B shares of a Fund at the end of
such calendar month
(2) If the Distributor reasonably determines that the transfer agent is able
to produce automated monthly reports that allocate the average Net Asset Value
of the Commission Shares (or all Class B shares if available) of a Fund among
the Distributor and any Successor Distributor in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the portion of the
Distribution Fee accrued in respect of all such Class B shares of a Fund during
a particular calendar month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Distribution Fee by the following
fraction:
(A)/(B)
where:
A= Average Net Asset Value of all such Class B shares of a Fund for such
calendar month attributed to the Distributor or a Successor Distributor, as the
case may be
B= Total average Net Asset Value of all such Class B shares of a Fund for such
calendar month
PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR
DISTRIBUTOR'S ALLOCABLE PORTION
The parties to the Distribution Agreement recognize that, if the terms of any
distributor's contract, any distribution plan, any prospectus, the Conduct
Rules or any other applicable law change so as to disproportionately reduce, in
a manner inconsistent with the intent of this Distribution Agreement, the
amount of the Distributor's Allocable Portion or any Successor Distributor's
Allocable Portion had no such change occurred, the definitions of the
Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the Class B shares relating to a Fund shall be adjusted
by agreement among the relevant parties; provided, however, if the Distributor,
the Successor Distributor and the Fund cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the Conduct Rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
March 6, 2000
The American Funds Tax-Exempt Series - I
1101 Vermont Avenue, N.W.
Washington, D.C. 20005
Dear Sirs:
You have asked for our opinion with respect to the issuance of shares of each
Fund of The American Funds Tax-Exempt Series-I (the "Trust) being registered
pursuant to post-effective amendment No. 18 to the Trust's registration
statement. We have examined and considered such information as we deemed
relevant to this matter, including applicable provisions of the Massachusetts
Statutes, the Trust's Declaration of Trust, pertinent resolutions adopted by
the Trust's directors, and the Trust's prospectus dated March 15, 2000. Based
upon the foregoing, it is our opinion that the shares, when sold in compliance
with the Trust's registration statement, will have been duly and validly
authorized and issued as fully paid and non-assessable shares of each Fund of
the Trust.
We hereby consent to the use of this letter by the Trust in connection with its
filing of post-effective amendment No. 18 to the Trust's registration statement
on Form N. 1A.
Very truly yours,
THOMPSON, O'DONNELL, MARKHAM,
NORTON & HANNON
John Jude O'Donnell
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form N-1A of our
report dated August 31, 1999, relating to the financial statements and
per-share data and ratios of American Funds Tax-Exempt Series I, which appears
in such Registration Statement. We also consent to the references to us under
the headings "Financial Highlights", "Independent Accountants", and "Reports to
Shareholders" in such Registration Statement.
PricewaterhouseCoopers LLP
Los Angeles, California
March 3, 2000
PLAN OF DISTRIBUTION
of
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
relating to its
CLASS B SHARES
WHEREAS, The Tax-Exempt Fund of Maryland (the "Fund") is a series of The
American Funds Tax-Exempt Series I, a Massachusetts business trust, and offers
two classes of shares of beneficial interest, designated as Class A shares and
Class B shares;
WHEREAS, American Funds Distributors, Inc. ("AFD") or any successor entity
designated by the Fund (AFD and any such successor collectively are referred to
as "Distributor") will serve as distributor of the shares of beneficial
interest of the Fund, and the Fund and Distributor are parties to a principal
underwriting agreement (the "Agreement");
WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to authorize
the Fund to bear expenses of distribution of its Class B shares; and
WHEREAS, the Board of Trustees of the Fund has determined that there is a
reasonable likelihood that this Plan will benefit the Fund and its
shareholders;
NOW, THEREFORE, the Fund adopts this Plan as follows:
1. PAYMENTS TO DISTRIBUTOR. The Fund may expend pursuant to this Plan and as
set forth below an aggregate amount not to exceed 1.00% per annum of the
average net assets of the Fund's Class B shares.
A. SERVICE FEES. The Fund shall pay to the Distributor monthly in arrears a
shareholder servicing fee (the "Shareholder Servicing Fee") at the rate of
0.25% per annum on the Fund's Class B shares outstanding for less than one
year. The Fund shall also pay to the Distributor quarterly a Shareholder
Servicing Fee at the rate of 0.25% per annum on Class B shares that are
outstanding for one year or more. The Shareholder Servicing Fee is designed to
compensate Distributor for paying Service Fees to broker-dealers with whom
Distributor has an agreement.
B. DISTRIBUTION FEES. The Fund shall pay to the Distributor monthly in
arrears its "Allocable Portion" (as described in Schedule A to this Plan
"Allocation Schedule", and until such time as the Fund designates a successor
to AFD as distributor, the Allocable Portion shall equal 100%) of a fee (the
"Distribution Fee"), which shall accrue each day in an amount equal to the
product of (A) the daily equivalent of 0.75% per annum multiplied by (B) the
net asset value of the Fund's Class B shares outstanding on each day.
The Distributor may sell and assign its right to its Allocable Portion (but
not its obligations to the Fund under the Agreement) of the Distribution Fee to
a third party, and such transfer shall be free and clear of offsets or claims
the Fund may have against the Distributor, it being understood that the Fund is
not releasing the Distributor from any of its obligations to the Fund under the
Agreement or any of the assets the Distributor continues to own. The Fund may
agree, at the request of the Distributor, to pay the Allocable Portion of the
Distribution Fee directly to the third party transferee.
Any Agreement between the Fund and the Distributor relating to the Fund's
Class B shares shall provide that:
(i) the Distributor will be deemed to have performed all services required to
be performed in order to be entitled to receive its Allocable Portion of the
Distribution Fee payable in respect of each "Commission Share" (as defined in
the Allocation Schedule) upon the settlement date of each sale of such
Commission Share taken into account in determining such Distributor's Allocable
Portion of the Distribution Fee;
(ii) notwithstanding anything to the contrary in this Plan or the Agreement,
the Fund's obligation to pay the Distributor its Allocable Portion of the
Distribution Fee shall not be terminated or modified (including without
limitation, by change in the rules applicable to the conversion of the Class B
shares into shares of another class) for any reason (including a termination of
this Plan or the Agreement between such Distributor and the Fund) except:
(a) to the extent required by a change in the Investment Company Act of 1940
(the "1940 Act"), the rules and regulations under the 1940 Act, the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD"), or
any judicial decisions or interpretive pronouncements by the Securities and
Exchange Commission, which is either binding upon the Distributor or generally
complied with by similarly situated distributors of mutual fund shares, in each
case enacted, promulgated, or made after March 15, 2000,
(b) on a basis which does not alter the Distributor's Allocable Portion of
the Distribution Fee computed with reference to Commission Shares of the Fund,
the Date of Original Issuance (as defined in the Allocation Schedule) of which
occurs on or prior to the adoption of such termination or modification and with
respect to Free Shares (as defined in the Allocation Schedule) which would be
attributed to the Distributor under the Allocation Schedule with reference to
such Commission Shares, or
(c) in connection with a Complete Termination (as defined below) of this Plan
by the Fund;
(iii) the Fund will not take any action to waive or change any contingent
deferred sales charge ("CDSC") in respect to the Class B shares, the Date of
Original Issuance of which occurs on or prior to the taking of such action
except as provided in the Fund's prospectus or statement of additional
information on the date such Commission Share was issued, without the consent
of the Distributor or its assigns;
(iv) notwithstanding anything to the contrary in this Plan or the Agreement,
none of the termination of the Distributor's role as principal underwriter of
the Class B shares of the Fund, the termination of the Agreement or the
termination of this Plan will terminate the Distributor's right to its
Allocable Portion of the CDSCs in respect of Class B shares of the Fund;
(v) except as provided in (ii) above and notwithstanding anything to the
contrary in this Plan or the Agreement, the Fund's obligation to pay the
Distributor's Allocable Portion of the Distribution Fees and CDSCs payable in
respect of the Class B shares of the Fund shall be absolute and unconditional
and shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, at law or equity, including, without limitation, any of the
foregoing based on the insolvency or bankruptcy of the Distributor; and
(vi) until the Distributor has been paid its Allocable Portion of the
Distribution Fees in respect of the Class B shares of the Fund, the Fund will
not adopt a plan of liquidation in respect of the Class B shares without the
consent of the Distributor and its assigns. For purposes of this Plan, the
term Allocable Portion of the Distribution Fees or CDSCs payable in respect of
the Class B shares as applied to any Distributor shall mean the portion of such
Distribution Fees or CDSCs payable in respect of such Class B shares of the
Fund allocated to the Distributor in accordance with the Allocation Schedule as
it relates to the Class B shares of the Fund, and until such time as the Fund
designates a successor to AFD as distributor, the Allocable Portion shall equal
100% of the Distribution Fees and CDSCs. For purposes of this Plan, the term
"Complete Termination" in respect of this Plan as it relates to the Class B
shares means a termination of this Plan involving the complete cessation of the
payment of Distribution Fees in respect of all Class B shares, the termination
of the distribution plans and principal underwriting agreements, and the
complete cessation of the payment of any asset based sales charge (within the
meaning of the Conduct Rules of the NASD) or similar fees in respect of the
Fund and any successor mutual fund or any mutual fund acquiring a substantial
portion of the assets of the Fund (the Fund and such other mutual funds
hereinafter referred to as the "Affected Funds") and in respect of the Class B
shares and every future class of shares (other than future classes of shares
established more than eight years after the date of such termination) which has
substantially similar characteristics to the Class B shares (all such classes
of shares the "Affected Classes of Shares") of such Affected Funds taking into
account the manner of payment and amount of asset based sales charge, CDSC or
other similar charges borne directly or indirectly by the holders of such
shares; provided that
(a) the Board of Trustees of such Affected Funds, including the Independent
Trustees (as defined below) of the Affected Funds, shall have determined that
such termination is in the best interest of such Affected Funds and the
shareholders of such Affected Funds, and
(b) such termination does not alter the CDSC as in effect at the time of such
termination applicable to Commission Shares of the Fund, the Date of Original
Issuance of which occurs on or prior to such termination.
2. APPROVAL BY THE BOARD. This Plan shall not take effect until it has been
approved, together with any related agreement, by votes of the majority of both
(i) the Board of Trustees of the Fund and (ii) those Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of this Plan or any
agreement related to it (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan and/or such agreement.
3. REVIEW OF EXPENDITURES. At least quarterly, the Board of Trustees shall be
provided by any person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement, and the
Board shall review, a written report of the amounts expended pursuant to this
Plan and the purposes for which such expenditures were made.
4. TERMINATION OF PLAN. This Plan may be terminated as to the Fund's Class B
shares at any time by vote of a majority of the Independent Trustees, or by
vote of a majority of the outstanding Class B shares of the Fund. Unless
sooner terminated in accordance with this provision, this Plan shall continue
in effect until July 31, 2000. It may thereafter be continued from year to
year in the manner provided for in paragraph 2 hereof.
Notwithstanding the foregoing or paragraph 6, below, any amendment or
termination of this Plan shall not affect the rights of the Distributor to
receive its Allocable Portion of the Distribution Fee, unless the termination
constitutes a Complete Termination of this Plan as described in paragraph 1
above.
5. REQUIREMENTS OF AGREEMENT. Any Agreement related to this Plan shall be in
writing, and shall provide:
0. that such agreement may be terminated as to the Fund at any time, without
payment of any penalty by the vote of a majority of the Independent Trustees or
by a vote of a majority of the outstanding Class B shares of the Fund, on not
more than sixty (60) days' written notice to any other party to the agreement;
and
b. that such agreement shall terminate automatically in the event of its
assignment.
6. AMENDMENT. This Plan may not be amended to increase materially the maximum
amount of fee or other distribution expenses provided for in paragraph 1 hereof
with respect to the Class B shares of the Fund unless such amendment is
approved by vote of a majority of the outstanding voting securities of the
Class B shares of the Fund and as provided in paragraph 2 hereof, and no other
material amendment to this Plan shall be made unless approved in the manner
provided for in paragraph 2 hereof.
7. NOMINATION OF TRUSTEES. While this Plan is in effect, the selection and
nomination of Independent Trustees shall be committed to the discretion of the
Independent Trustees of the Fund.
8. ISSUANCE OF SERIES OF SHARES. If the Fund shall at any time issue shares
in more than one series, this Plan may be adopted, amended, continued or
renewed with respect to a series as provided herein, notwithstanding that such
adoption, amendment, continuance or renewal has not been effected with respect
to any one or more other series of the Fund.
9. RECORD RETENTION. The Fund shall preserve copies of this Plan and any
related agreement and all reports made pursuant to paragraph 3 hereof for not
less than six (6) years from the date of this Plan, or such agreement or
reports, as the case may be, the first two (2) years of which such records
shall be stored in an easily accessible place.
IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its
officers thereunto duly authorized, as of December 16, 1999.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF MARYLAND
By ___________________________ By ___________________________
Harry J. Lister, President Howard L. KItzmiller, Secretary
SCHEDULE A
to the
Plan of Distribution of
The American Funds Tax-Exempt Series I
The Tax Exempt Fund of Maryland
relating to its Class B shares
ALLOCATION SCHEDULE
The following relates solely to Class B shares.
The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect
of Class B shares shall be 100% until such time as the Distributor shall cease
to serve as exclusive distributor of Class B shares; thereafter, collections
that constitute CDSCs and Distribution Fees relating to Class B shares shall be
allocated among the Distributor and any successor distributor ("Successor
Distributor") in accordance with this Schedule.
Defined terms used in this Schedule and not otherwise defined herein shall
have the meanings assigned to them in the Amended and Restated Principal
Underwriting Agreement (the "Distribution Agreement"), of which this Schedule
is a part. As used herein the following terms shall have the meanings
indicated:
"Commission Share" means each B share issued under circumstances which would
normally give rise to an obligation of the holder of such share to pay a CDSC
upon redemption of such share (including, without limitation, any B share
issued in connection with a permitted free exchange), and any such share shall
continue to be a Commission Share of the applicable Fund prior to the
redemption (including a redemption in connection with a permitted free
exchange) or conversion of such share, even though the obligation to pay the
CDSC may have expired or conditions for waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share, the date
with reference to which the amount of the CDSC payable on redemption thereof,
if any, is computed.
"Free Share" means, in respect of a Fund, each B share of the Fund, other than
a Commission Share (including, without limitation, any B share issued in
connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of a Fund, the first date on which the Fund
issued shares.
"Net Asset Value" means the net asset value determined as set forth in the
Prospectus of each Fund.
"Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share
sold by one of the selling agents listed on [Exhibit I]. If, subsequent to the
Successor Distributor becoming exclusive distributor of the Class B shares, the
Distributor reasonably determines that the transfer agent is able to track all
Commission Shares and Free Shares sold by any of the selling agents listed on
Exhibit I in the same manner as Commission Shares and Free Shares are currently
tracked in respect of selling agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such selling agent from Exhibit I so that Commission
Shares and Free Shares sold by such selling agent will no longer be treated as
Omnibus Shares.
PART I: ATTRIBUTION OF CLASS B SHARES
Class B shares that are outstanding from time to time, shall be attributed to
the Distributor and each Successor Distributor in accordance with the following
rules;
(1) Commission Shares other than Omnibus Shares:
(a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission
Shares") attributed to the Distributor shall be those Non-Omnibus Commission
Shares the date of Original Issuance of which occurred on or after the
Inception Date of the applicable Fund and on or prior to the date the
Distributor ceased to be exclusive distributor of Class B shares of the Fund.
(b) Non-Omnibus Commission Shares attributable to each Successor Distributor
shall be those Non-Omnibus Commission Shares the Date of Original Issuance of
which occurs after the date such Successor Distributor became the exclusive
distributor of Class B shares of the Fund and on or prior to the date such
Successor Distributor ceased to be the exclusive distributor of Class B shares
of the Fund.
(c) A Non-Omnibus Commission Share of a Fund issued in consideration of the
investment of proceeds of the redemption of a Non-Omnibus Commission Share of
another Fund (the "Redeeming Fund") in connection with a permitted free
exchange, is deemed to have a Date of Original Issuance identical to the Date
of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund,
and any such Commission Share will be attributed to the Distributor or
Successor Distributor based upon such Date of Original Issuance in accordance
with rules (a) and (b) above.
(2) Free Shares:
Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Non-Omnibus
Commission Shares of a Fund outstanding on such date are attributed to each on
such date; provided that if the Distributor and its transferees reasonably
determines that the transfer agent is able to produce monthly reports that
track the Date of Original Issuance for such Non-Omnibus Free Shares, then such
Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be attributed to the
Distributor or a Successor Distributor, as the case may be, in the same
proportion that the Non-Omnibus Commission Shares of the applicable Fund
outstanding on such date are attributed to it on such date; provided that if
the Distributor reasonably determines that the transfer agent is able to
produce monthly reports that track the Date of Original Issuance for the
Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause
1(a), (b) and (c) above.
PART II: ALLOCATION OF CDSCs
(1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares:
CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be
allocated to the Distributor or a Successor Distributor depending upon whether
the related redeemed Commission Share is attributable to the Distributor or
such Successor Distributor, as the case may be, in accordance with Part I
above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the
Distributor or a Successor Distributor in the same proportion that CDSCs
related to the redemption of Commission Shares are allocated to each thereof;
provided, that if the Distributor reasonably determines that the transfer agent
is able to produce monthly reports which track the Date of Original Issuance
for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus
Shares shall be allocated among the Distributor and any Successor Distributor
depending on whether the related redeemed Omnibus Share is attributable to the
Distributor or a Successor Distributor, as the case may be, in accordance with
Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEE
Assuming that the Distribution Fee remains constant over time so that Part IV
hereof does not become operative:
(1) The portion of the aggregate Distribution Fee accrued in respect of all
Class B shares of a Fund during any calendar month allocable to the Distributor
or a Successor Distributor is determined by multiplying the total of such
Distribution Fee by the following fraction:
(A + C)/2
(B + D)/2
where:
A= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the beginning of such calendar month
B= The aggregate Net Asset Value of all Class B shares of a Fund at the
beginning of such calendar month
C= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the end of such calendar month
D= The aggregate Net Asset Value of all Class B shares of a Fund at the end of
such calendar month
(2) If the Distributor reasonably determines that the transfer agent is able
to produce automated monthly reports that allocate the average Net Asset Value
of the Commission Shares (or all Class B shares if available) of a Fund among
the Distributor and any Successor Distributor in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the portion of the
Distribution Fee accrued in respect of all such Class B shares of a Fund during
a particular calendar month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Distribution Fee by the following
fraction:
(A)/(B)
where:
A= Average Net Asset Value of all such Class B shares of a Fund for such
calendar month attributed to the Distributor or a Successor Distributor, as the
case may be
B= Total average Net Asset Value of all such Class B shares of a Fund for such
calendar month
PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR
DISTRIBUTOR'S ALLOCABLE PORTION
The parties to the Distribution Agreement recognize that, if the terms of any
distributor's contract, any distribution plan, any prospectus, the Conduct
Rules or any other applicable law change so as to disproportionately reduce, in
a manner inconsistent with the intent of this Distribution Agreement, the
amount of the Distributor's Allocable Portion or any Successor Distributor's
Allocable Portion had no such change occurred, the definitions of the
Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the Class B shares relating to a Fund shall be adjusted
by agreement among the relevant parties; provided, however, if the Distributor,
the Successor Distributor and the Fund cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the Conduct Rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
PLAN OF DISTRIBUTION
of
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OFVIRGINIA
relating to its
CLASS B SHARES
WHEREAS, The Tax-Exempt Fund of Virginia (the "Fund") is a series of The
American Funds Tax-Exempt Series I, a Massachusetts business trust, and offers
two classes of shares of beneficial interest, designated as Class A shares and
Class B shares;
WHEREAS, American Funds Distributors, Inc. ("AFD") or any successor entity
designated by the Fund (AFD and any such successor collectively are referred to
as "Distributor") will serve as distributor of the shares of beneficial
interest of the Fund, and the Fund and Distributor are parties to a principal
underwriting agreement (the "Agreement");
WHEREAS, the purpose of this Plan of Distribution (the "Plan") is to authorize
the Fund to bear expenses of distribution of its Class B shares; and
WHEREAS, the Board of Trustees of the Fund has determined that there is a
reasonable likelihood that this Plan will benefit the Fund and its
shareholders;
NOW, THEREFORE, the Fund adopts this Plan as follows:
1. PAYMENTS TO DISTRIBUTOR. The Fund may expend pursuant to this Plan and as
set forth below an aggregate amount not to exceed 1.00% per annum of the
average net assets of the Fund's Class B shares.
A. SERVICE FEES. The Fund shall pay to the Distributor monthly in arrears a
shareholder servicing fee (the "Shareholder Servicing Fee") at the rate of
0.25% per annum on the Fund's Class B shares outstanding for less than one
year. The Fund shall also pay to the Distributor quarterly a Shareholder
Servicing Fee at the rate of 0.25% per annum on Class B shares that are
outstanding for one year or more. The Shareholder Servicing Fee is designed to
compensate Distributor for paying Service Fees to broker-dealers with whom
Distributor has an agreement.
B. DISTRIBUTION FEES. The Fund shall pay to the Distributor monthly in
arrears its "Allocable Portion" (as described in Schedule A to this Plan
"Allocation Schedule", and until such time as the Fund designates a successor
to AFD as distributor, the Allocable Portion shall equal 100%) of a fee (the
"Distribution Fee"), which shall accrue each day in an amount equal to the
product of (A) the daily equivalent of 0.75% per annum multiplied by (B) the
net asset value of the Fund's Class B shares outstanding on each day.
The Distributor may sell and assign its right to its Allocable Portion (but
not its obligations to the Fund under the Agreement) of the Distribution Fee to
a third party, and such transfer shall be free and clear of offsets or claims
the Fund may have against the Distributor, it being understood that the Fund is
not releasing the Distributor from any of its obligations to the Fund under the
Agreement or any of the assets the Distributor continues to own. The Fund may
agree, at the request of the Distributor, to pay the Allocable Portion of the
Distribution Fee directly to the third party transferee.
Any Agreement between the Fund and the Distributor relating to the Fund's
Class B shares shall provide that:
(i) the Distributor will be deemed to have performed all services required to
be performed in order to be entitled to receive its Allocable Portion of the
Distribution Fee payable in respect of each "Commission Share" (as defined in
the Allocation Schedule) upon the settlement date of each sale of such
Commission Share taken into account in determining such Distributor's Allocable
Portion of the Distribution Fee;
(ii) notwithstanding anything to the contrary in this Plan or the Agreement,
the Fund's obligation to pay the Distributor its Allocable Portion of the
Distribution Fee shall not be terminated or modified (including without
limitation, by change in the rules applicable to the conversion of the Class B
shares into shares of another class) for any reason (including a termination of
this Plan or the Agreement between such Distributor and the Fund) except:
(a) to the extent required by a change in the Investment Company Act of 1940
(the "1940 Act"), the rules and regulations under the 1940 Act, the Conduct
Rules of the National Association of Securities Dealers, Inc. (the "NASD"), or
any judicial decisions or interpretive pronouncements by the Securities and
Exchange Commission, which is either binding upon the Distributor or generally
complied with by similarly situated distributors of mutual fund shares, in each
case enacted, promulgated, or made after March 15, 2000,
(b) on a basis which does not alter the Distributor's Allocable Portion of
the Distribution Fee computed with reference to Commission Shares of the Fund,
the Date of Original Issuance (as defined in the Allocation Schedule) of which
occurs on or prior to the adoption of such termination or modification and with
respect to Free Shares (as defined in the Allocation Schedule) which would be
attributed to the Distributor under the Allocation Schedule with reference to
such Commission Shares, or
(c) in connection with a Complete Termination (as defined below) of this Plan
by the Fund;
(iii) the Fund will not take any action to waive or change any contingent
deferred sales charge ("CDSC") in respect to the Class B shares, the Date of
Original Issuance of which occurs on or prior to the taking of such action
except as provided in the Fund's prospectus or statement of additional
information on the date such Commission Share was issued, without the consent
of the Distributor or its assigns;
(iv) notwithstanding anything to the contrary in this Plan or the Agreement,
none of the termination of the Distributor's role as principal underwriter of
the Class B shares of the Fund, the termination of the Agreement or the
termination of this Plan will terminate the Distributor's right to its
Allocable Portion of the CDSCs in respect of Class B shares of the Fund;
(v) except as provided in (ii) above and notwithstanding anything to the
contrary in this Plan or the Agreement, the Fund's obligation to pay the
Distributor's Allocable Portion of the Distribution Fees and CDSCs payable in
respect of the Class B shares of the Fund shall be absolute and unconditional
and shall not be subject to dispute, offset, counterclaim or any defense
whatsoever, at law or equity, including, without limitation, any of the
foregoing based on the insolvency or bankruptcy of the Distributor; and
(vi) until the Distributor has been paid its Allocable Portion of the
Distribution Fees in respect of the Class B shares of the Fund, the Fund will
not adopt a plan of liquidation in respect of the Class B shares without the
consent of the Distributor and its assigns. For purposes of this Plan, the
term Allocable Portion of the Distribution Fees or CDSCs payable in respect of
the Class B shares as applied to any Distributor shall mean the portion of such
Distribution Fees or CDSCs payable in respect of such Class B shares of the
Fund allocated to the Distributor in accordance with the Allocation Schedule as
it relates to the Class B shares of the Fund, and until such time as the Fund
designates a successor to AFD as distributor, the Allocable Portion shall equal
100% of the Distribution Fees and CDSCs. For purposes of this Plan, the term
"Complete Termination" in respect of this Plan as it relates to the Class B
shares means a termination of this Plan involving the complete cessation of the
payment of Distribution Fees in respect of all Class B shares, the termination
of the distribution plans and principal underwriting agreements, and the
complete cessation of the payment of any asset based sales charge (within the
meaning of the Conduct Rules of the NASD) or similar fees in respect of the
Fund and any successor mutual fund or any mutual fund acquiring a substantial
portion of the assets of the Fund (the Fund and such other mutual funds
hereinafter referred to as the "Affected Funds") and in respect of the Class B
shares and every future class of shares (other than future classes of shares
established more than eight years after the date of such termination) which has
substantially similar characteristics to the Class B shares (all such classes
of shares the "Affected Classes of Shares") of such Affected Funds taking into
account the manner of payment and amount of asset based sales charge, CDSC or
other similar charges borne directly or indirectly by the holders of such
shares; provided that
(a) the Board of Trustees of such Affected Funds, including the Independent
Trustees (as defined below) of the Affected Funds, shall have determined that
such termination is in the best interest of such Affected Funds and the
shareholders of such Affected Funds, and
(b) such termination does not alter the CDSC as in effect at the time of such
termination applicable to Commission Shares of the Fund, the Date of Original
Issuance of which occurs on or prior to such termination.
2. APPROVAL BY THE BOARD. This Plan shall not take effect until it has been
approved, together with any related agreement, by votes of the majority of both
(i) the Board of Trustees of the Fund and (ii) those Trustees of the Fund who
are not "interested persons" of the Fund (as defined in the 1940 Act) and have
no direct or indirect financial interest in the operation of this Plan or any
agreement related to it (the "Independent Trustees"), cast in person at a
meeting called for the purpose of voting on this Plan and/or such agreement.
3. REVIEW OF EXPENDITURES. At least quarterly, the Board of Trustees shall be
provided by any person authorized to direct the disposition of monies paid or
payable by the Fund pursuant to this Plan or any related agreement, and the
Board shall review, a written report of the amounts expended pursuant to this
Plan and the purposes for which such expenditures were made.
4. TERMINATION OF PLAN. This Plan may be terminated as to the Fund's Class B
shares at any time by vote of a majority of the Independent Trustees, or by
vote of a majority of the outstanding Class B shares of the Fund. Unless
sooner terminated in accordance with this provision, this Plan shall continue
in effect until July 31, 2000. It may thereafter be continued from year to
year in the manner provided for in paragraph 2 hereof.
Notwithstanding the foregoing or paragraph 6, below, any amendment or
termination of this Plan shall not affect the rights of the Distributor to
receive its Allocable Portion of the Distribution Fee, unless the termination
constitutes a Complete Termination of this Plan as described in paragraph 1
above.
5. REQUIREMENTS OF AGREEMENT. Any Agreement related to this Plan shall be in
writing, and shall provide:
a. that such agreement may be terminated as to the Fund at any time, without
payment of any penalty by the vote of a majority of the Independent Trustees or
by a vote of a majority of the outstanding Class B shares of the Fund, on not
more than sixty (60) days' written notice to any other party to the agreement;
and
b. that such agreement shall terminate automatically in the event of its
assignment.
6. AMENDMENT. This Plan may not be amended to increase materially the maximum
amount of fee or other distribution expenses provided for in paragraph 1 hereof
with respect to the Class B shares of the Fund unless such amendment is
approved by vote of a majority of the outstanding voting securities of the
Class B shares of the Fund and as provided in paragraph 2 hereof, and no other
material amendment to this Plan shall be made unless approved in the manner
provided for in paragraph 2 hereof.
7. NOMINATION OF TRUSTEES. While this Plan is in effect, the selection and
nomination of Independent Trustees shall be committed to the discretion of the
Independent Trustees of the Fund.
8. ISSUANCE OF SERIES OF SHARES. If the Fund shall at any time issue shares
in more than one series, this Plan may be adopted, amended, continued or
renewed with respect to a series as provided herein, notwithstanding that such
adoption, amendment, continuance or renewal has not been effected with respect
to any one or more other series of the Fund.
9. RECORD RETENTION. The Fund shall preserve copies of this Plan and any
related agreement and all reports made pursuant to paragraph 3 hereof for not
less than six (6) years from the date of this Plan, or such agreement or
reports, as the case may be, the first two (2) years of which such records
shall be stored in an easily accessible place.
IN WITNESS WHEREOF, the Fund has caused this Plan to be executed by its
officers thereunto duly authorized, as of December 16, 1999.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
THE TAX-EXEMPT FUND OF VIRGINIA
By By
Harry J. Lister, President Howard L. KItzmiller, Secretary
SCHEDULE A
to the
Plan of Distribution of
The American Funds Tax-Exempt Series I
The Tax Exempt Fund of Virginia
relating to its Class B shares
ALLOCATION SCHEDULE
The following relates solely to Class B shares.
The Distributor's Allocable Portion of Distribution Fees and CDSCs in respect
of Class B shares shall be 100% until such time as the Distributor shall cease
to serve as exclusive distributor of Class B shares; thereafter, collections
that constitute CDSCs and Distribution Fees relating to Class B shares shall be
allocated among the Distributor and any successor distributor ("Successor
Distributor") in accordance with this Schedule.
Defined terms used in this Schedule and not otherwise defined herein shall
have the meanings assigned to them in the Amended and Restated Principal
Underwriting Agreement (the "Distribution Agreement"), of which this Schedule
is a part. As used herein the following terms shall have the meanings
indicated:
"Commission Share" means each B share issued under circumstances which would
normally give rise to an obligation of the holder of such share to pay a CDSC
upon redemption of such share (including, without limitation, any B share
issued in connection with a permitted free exchange), and any such share shall
continue to be a Commission Share of the applicable Fund prior to the
redemption (including a redemption in connection with a permitted free
exchange) or conversion of such share, even though the obligation to pay the
CDSC may have expired or conditions for waivers thereof may exist.
"Date of Original Issuance" means in respect of any Commission Share, the date
with reference to which the amount of the CDSC payable on redemption thereof,
if any, is computed.
"Free Share" means, in respect of a Fund, each B share of the Fund, other than
a Commission Share (including, without limitation, any B share issued in
connection with the reinvestment of dividends or capital gains).
"Inception Date" means in respect of a Fund, the first date on which the Fund
issued shares.
"Net Asset Value" means the net asset value determined as set forth in the
Prospectus of each Fund.
"Omnibus Share" means, in respect of a Fund, a Commission Share or Free Share
sold by one of the selling agents listed on [Exhibit I]. If, subsequent to the
Successor Distributor becoming exclusive distributor of the Class B shares, the
Distributor reasonably determines that the transfer agent is able to track all
Commission Shares and Free Shares sold by any of the selling agents listed on
Exhibit I in the same manner as Commission Shares and Free Shares are currently
tracked in respect of selling agents not listed on Exhibit I, then Exhibit I
shall be amended to delete such selling agent from Exhibit I so that Commission
Shares and Free Shares sold by such selling agent will no longer be treated as
Omnibus Shares.
PART I: ATTRIBUTION OF CLASS B SHARES
Class B shares that are outstanding from time to time, shall be attributed to
the Distributor and each Successor Distributor in accordance with the following
rules;
(1) Commission Shares other than Omnibus Shares:
(a) Commission Shares that are not Omnibus Shares ("Non-Omnibus Commission
Shares") attributed to the Distributor shall be those Non-Omnibus Commission
Shares the date of Original Issuance of which occurred on or after the
Inception Date of the applicable Fund and on or prior to the date the
Distributor ceased to be exclusive distributor of Class B shares of the Fund.
(b) Non-Omnibus Commission Shares attributable to each Successor Distributor
shall be those Non-Omnibus Commission Shares the Date of Original Issuance of
which occurs after the date such Successor Distributor became the exclusive
distributor of Class B shares of the Fund and on or prior to the date such
Successor Distributor ceased to be the exclusive distributor of Class B shares
of the Fund.
(c) A Non-Omnibus Commission Share of a Fund issued in consideration of the
investment of proceeds of the redemption of a Non-Omnibus Commission Share of
another Fund (the "Redeeming Fund") in connection with a permitted free
exchange, is deemed to have a Date of Original Issuance identical to the Date
of Original Issuance of the Non-Omnibus Commission Share of the Redeeming Fund,
and any such Commission Share will be attributed to the Distributor or
Successor Distributor based upon such Date of Original Issuance in accordance
with rules (a) and (b) above.
(2) Free Shares:
Free Shares that are not Omnibus Shares ("Non-Omnibus Free Shares") of a Fund
outstanding on any date shall be attributed to the Distributor or a Successor
Distributor, as the case may be, in the same proportion that the Non-Omnibus
Commission Shares of a Fund outstanding on such date are attributed to each on
such date; provided that if the Distributor and its transferees reasonably
determines that the transfer agent is able to produce monthly reports that
track the Date of Original Issuance for such Non-Omnibus Free Shares, then such
Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) Omnibus Shares:
Omnibus Shares of a Fund outstanding on any date shall be attributed to the
Distributor or a Successor Distributor, as the case may be, in the same
proportion that the Non-Omnibus Commission Shares of the applicable Fund
outstanding on such date are attributed to it on such date; provided that if
the Distributor reasonably determines that the transfer agent is able to
produce monthly reports that track the Date of Original Issuance for the
Omnibus Shares, then the Omnibus Shares shall be allocated pursuant to clause
1(a), (b) and (c) above.
PART II: ALLOCATION OF CDSCs
(1) CDSCs Related to the Redemption of Non-Omnibus Commission Shares:
CDSCs in respect of the redemption of Non-Omnibus Commission Shares shall be
allocated to the Distributor or a Successor Distributor depending upon whether
the related redeemed Commission Share is attributable to the Distributor or
such Successor Distributor, as the case may be, in accordance with Part I
above.
(2) CDSCs Related to the Redemption of Omnibus Shares:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to the
Distributor or a Successor Distributor in the same proportion that CDSCs
related to the redemption of Commission Shares are allocated to each thereof;
provided, that if the Distributor reasonably determines that the transfer agent
is able to produce monthly reports which track the Date of Original Issuance
for the Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus
Shares shall be allocated among the Distributor and any Successor Distributor
depending on whether the related redeemed Omnibus Share is attributable to the
Distributor or a Successor Distributor, as the case may be, in accordance with
Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEE
Assuming that the Distribution Fee remains constant over time so that Part IV
hereof does not become operative:
(1) The portion of the aggregate Distribution Fee accrued in respect of all
Class B shares of a Fund during any calendar month allocable to the Distributor
or a Successor Distributor is determined by multiplying the total of such
Distribution Fee by the following fraction:
(A + C)/2
(B + D)/2
where:
A= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the beginning of such calendar month
B= The aggregate Net Asset Value of all Class B shares of a Fund at the
beginning of such calendar month
C= The aggregate Net Asset Value of all Class B shares of a Fund attributed to
the Distributor or such Successor Distributor, as the case may be, and
outstanding at the end of such calendar month
D= The aggregate Net Asset Value of all Class B shares of a Fund at the end of
such calendar month
(2) If the Distributor reasonably determines that the transfer agent is able
to produce automated monthly reports that allocate the average Net Asset Value
of the Commission Shares (or all Class B shares if available) of a Fund among
the Distributor and any Successor Distributor in a manner consistent with the
methodology detailed in Part I and Part III(1) above, the portion of the
Distribution Fee accrued in respect of all such Class B shares of a Fund during
a particular calendar month will be allocated to the Distributor or a Successor
Distributor by multiplying the total of such Distribution Fee by the following
fraction:
(A)/(B)
where:
A= Average Net Asset Value of all such Class B shares of a Fund for such
calendar month attributed to the Distributor or a Successor Distributor, as the
case may be
B= Total average Net Asset Value of all such Class B shares of a Fund for such
calendar month
PART IV: ADJUSTMENT OF THE DISTRIBUTOR'S ALLOCABLE PORTION AND EACH SUCCESSOR
DISTRIBUTOR'S ALLOCABLE PORTION
The parties to the Distribution Agreement recognize that, if the terms of any
distributor's contract, any distribution plan, any prospectus, the Conduct
Rules or any other applicable law change so as to disproportionately reduce, in
a manner inconsistent with the intent of this Distribution Agreement, the
amount of the Distributor's Allocable Portion or any Successor Distributor's
Allocable Portion had no such change occurred, the definitions of the
Distributor's Allocable Portion and/or the Successor Distributor's Allocable
Portion in respect of the Class B shares relating to a Fund shall be adjusted
by agreement among the relevant parties; provided, however, if the Distributor,
the Successor Distributor and the Fund cannot agree within thirty (30) days
after the date of any such change in applicable laws or in any distributor's
contract, distribution plan, prospectus or the Conduct Rules, they shall submit
the question to arbitration in accordance with the commercial arbitration rules
of the American Arbitration Association and the decision reached by the
arbitrator shall be final and binding on each of them.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
MULTIPLE CLASS PLAN
WHEREAS, The American Funds Tax-Exempt Series I (the "Trust"), a
Massachusetts business trust which initially offers shares of beneficial
interest in two series designated The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia (the "Funds") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company;
WHEREAS, American Funds Distributors, Inc. ("the Distributor") serves as the
principal underwriter for the Funds;
WHEREAS, the Funds have each adopted Plans of Distribution ("12b-1 Plan")
under which the Funds may bear expenses of distribution of its shares,
including payment and/or reimbursement to the Distributor for certain of its
expenses incurred in connection with the Funds;
WHEREAS, each Fund is authorized to issue two classes of shares of beneficial
interest, designated as Class A shares and Class B shares;
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management investment
companies to issue multiple classes of voting stock representing interests in
the same portfolio if, among other things, an investment company adopts a
written Multiple Class Plan (the "Plan") setting forth the separate
arrangement and expense allocation of each class and any related conversion
features or exchange privileges; and
WHEREAS, the Board of Trustees of the Trust has determined that it is in the
best interest of each class of shares of each Fund individually, and each Fund
as a whole, to adopt this Plan;
NOW THEREFORE, the Trust adopts this Plan as follows:
Each class of shares will represent interests in the same portfolio
of investments of each Fund, and be identical in all respects to each other
class, except as set forth below. The differences among the various classes of
shares of each Fund will relate to: (i) distribution, service and other
charges and expenses as provided for in paragraph 3 of this Plan; (ii) the
exclusive right of each class of shares to vote on matters submitted to
shareholders that relate solely to that class or the separate voting right of
each class on matters for which the interests of one class differ from the
interests of another class; (iii) such differences relating to eligible
investors as may be set forth in the Trust's prospectus and statement of
additional information ("SAI"), as the same may be amended or supplemented from
time to time; (iv) the designation of each class of shares; (v) conversion
features; and (vi) exchange privileges.
2. (a) Certain expenses may be attributable to each Fund, but not a
particular class of shares thereof. All such expenses will be borne by each
class on the basis of the relative aggregate net assets of the classes.
Notwithstanding the foregoing, the Distributor, the investment adviser or other
provider of services to the Funds may waive or reimburse the expenses of a
specific class or classes to the extent permitted by Rule 18f-3 under the 1940
Act and any other applicable law.
(b) A class of shares may be permitted to bear expenses that are directly
attributable to that class, including: (i) any distribution fees associated
with any rule 12b-1 Plan for a particular class and any other costs relating to
implementing or amending such rule 12b-1 Plan; (ii) any service fees associated
with any rule 12b-1 Plan attributable to such class; and (iii) any shareholder
servicing fees attributable to such class.
(c) Any additional incremental expenses not specifically identified above that
are subsequently identified and determined to be applied properly to one class
of shares of each Fund shall be so applied upon approval by votes of the
majority of both (i) the Board of Trustees of the Trust; and (ii) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the 1940 Act) ("Independent Trustees").
3. Each class of each Fund shall differ in the amount of, and the
manner in which distribution costs are borne by shareholders and in the costs
associated with transfer agency services as follows:
(a) Class A shares
Class A shares are sold at net asset value plus a front-end sales charge, at
net asset value without a front-end sales charge but subject to a contingent
deferred sales charge ("CDSC"), and at net asset value without any sales
charge, as set forth in the Trust's prospectus and SAI.
Class A shares are subject to an annual distribution expense under each Fund's
Class A Plan of Distribution of up to 0.25% of average net assets, as set forth
in the Trust's prospectus, SAI, and Plan of Distribution. This expense
consists of a service fee of up to 0.25% plus certain other distribution costs.
Class B shares
Class B shares shall be sold at net asset value without a front-end sales
charge, but are subject to a CDSC and maximum purchase limits as set forth in
the Trust's prospectus and SAI.
Class B shares shall be subject to an annual distribution expense under each
Fund's Class B Plan of Distribution of up to 1.00% of average net assets, as
set forth in the Trust's prospectus, SAI, and Class B Plan of Distribution.
This expense shall consist of a distribution fee of approximately 0.75% and a
service fee of approximately 0.25% of such net assets.
Class B shares will automatically convert to Class A shares of each Fund
approximately eight years after purchase, subject to the limitations described
in the Trust's prospectus and SAI. All conversions shall be effected on the
basis of the relative net asset values of the two classes of shares without the
imposition of any sales load or other charge.
Class B shares shall be subject to a fee (included within the transfer agency
expense) for additional costs associated with tracking the age of each Class B
share.
All other rights and privileges of each Fund's shareholders are identical
regardless of which class of shares are held.
4. This Plan shall not take effect until it has been approved by
votes of the majority of both (i) the Board of Trustees of the Trust; and (ii)
the Independent Trustees.
5. This Plan shall become effective with respect to any class of
shares of each Fund, other than Class A or Class B shares, upon the
commencement of the initial public offering thereof (provided that the Plan has
previously been approved with respect to such additional class by votes of the
majority of both (i) the Board of Trustees of the Trust; and (ii) Independent
Trustees prior to the offering of such additional class of shares), and shall
continue in effect with respect to such additional class or classes until
terminated in accordance with paragraph 7. An addendum setting forth such
specific and different terms of such additional class or classes shall be
attached to and made part of this Plan.
6. No material amendment to the Plan shall be effective unless it is
approved by the votes of the majority of both (i) the Board of Trustees of the
Trust; and (ii) Independent Trustees.
7. This Plan may be terminated at any time with respect to each Fund
as a whole or any class of shares individually, by the votes of the majority of
both (i) the Board of Trustees of the Trust; and (ii) Independent Trustees.
This Plan may remain in effect with respect to a particular class or classes of
shares of each Fund even if it has been terminated in accordance with this
paragraph with respect to any other class of shares.
IN WITNESS WHEROF, the Trust has caused this Plan to be executed by its
officers thereunto duly authorized, as of December 16, 1999.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By By
Harry J. Lister, President Howard L. Kitzmiller, Secretary
CODE OF ETHICS
The Board of Directors of Washington Mutual Investors Fund adopts a Code of
Ethics intended to comply with the requirements of Rule 17j-1 under the
Investment Company Act of 1940. The Code recognizes that the Fund's officers
and access persons (with the exception of non-interested Directors) are covered
by the Code of Ethics adopted by Washington Management Corporation with
investment personnel and some access persons covered by the Code of Conduct of
the Capital Group Companies, Inc. The Board of Directors of the Fund, after
considering the limited nature of access of the non-interested Directors to
current information with respect to security transactions being effected or
considered on behalf of the Fund, adopts this Code of Ethics to specifically
cover the non-interested Directors.
The purposes of this memorandum are to: provide Directors with a summary of
the information that is available to them; summarize those types of
transactions which must be reported under the Code; and to provide a format for
reporting any such transactions.
1. Portfolio Transaction Information
Directors are regularly sent financial statements of the Fund, which include
portfolio changes as well as a listing of the entire portfolio. In addition,
special reports may periodically be sent to Directors or given to them at Board
meetings, and discussions at Board meetings may include information regarding
Fund portfolio transactions.
2. Transactions to be Reported
Any securities transaction* which you know or should have known to have been
made within a 15-day period of a transaction by the Fund in the same security
or which you know or should have known was considered by the Fund or its
Investment Adviser for purchase or sale by the Fund during such 15-day period
should be reported. Any such reports are to be made on a confidential basis to
the Fund's Corporate Secretary within 10 days after the end of each calendar
quarter on a form which will be provided. We will review the reports and
contact you in any instance where further inquiry or documentation appears
advisable.
3. Transaction Reports
At the end of each calendar quarter the Corporate Secretary will mail a
reporting form to each non-interested Director. A copy of the form is
enclosed.
*See paragraph #4, "Exempted Transactions"
4. Exempted Transactions
The following security transactions are exempted from the reporting
requirements of the Code:
A. Transactions in securities issued by the United States Government.
B. Transactions in bankers' acceptances, bank certificates of deposit,
commercial paper.
C. Transactions in shares of registered investment companies.
D. Transactions where the Director has no direct or indirect influence or
control.
E. Transactions which are non-volitional on the part of the Director of the
Fund (e.g. securities received as part of a stock dividend).
F . Purchases which are part of an automatic dividend reinvestment plan.
5. Questions
Any questions regarding this policy should be directed to the Fund's Corporate
Secretary.
Adopted December 16, 1999
Effective January 1, 2000
The Capital Group Companies
CODE OF CONDUCT
All of us within the Capital organization are responsible for maintaining the
very highest ethical standards when conducting business. In keeping with these
standards, we must never allow our own interests to be placed ahead of our
shareholders' and clients' interests.
Over the years we have earned a reputation for the highest integrity.
Regardless of lesser standards that may be followed through business or
community custom, we must observe exemplary standards of honesty and integrity.
REPORTING VIOLATIONS
If you know of any violation of our Code of Conduct, you have a responsibility
to report it. Deviations from controls or procedures that safeguard the
company, including the assets of shareholders and clients, should also be
reported.
You can report confidentially to:
Your manager or department head
CGC Audit Committee:
Wally Stern -- Chairman
Donnalisa Barnum
David Beevers
Jim Brown
Larry P. Clemmensen
Roberta Conroy
Bill Hurt -- (emeritus)
Sonny Kamm
Mike Kerr
Victor Kohn
John McLaughlin
Don O'Neal
Tom Rowland
John Smet
Antonio Vegezzi
Shaw Wagener
Kelly Webb
Mike Downer or any other lawyer in the CGC Legal Group
Don Wolfe of Deloitte & Touche LLP (CGC's auditors).
CGC GIFTS POLICY -- CONFLICTS OF INTEREST
A conflict of interest occurs when the private interests of associates
interfere or could potentially interfere with their responsibilities at work.
Associates must not place themselves or the company in a position of actual or
potential conflict. Associates may not accept gifts worth more than $100,
excessive business entertainment, loans, or anything else involving personal
gain from those who conduct business with the company. In addition, a business
entertainment event exceeding $200 in value should not be accepted unless the
associate receives permission from the Gifts Policy Committee.
REPORTING -- Although the limitations on accepting gifts applies to ALL
associates as described above, some associates will be asked to fill out
quarterly reports. If you receive a reporting form, you must report any gift
exceeding $50 (although it is recommended that you report ALL gifts received)
and business entertainment in which an event exceeds $75.
GIFTS POLICY COMMITTEE
The Gifts Policy Committee oversees administration of and compliance with the
Policy.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.
While investment research analysts are most likely to come in contact with
material nonpublic information, the rules (and sanctions) in this area apply to
all CGC associates and extend to activities both within and outside each
associate's duties.
PERSONAL INVESTING POLICY
As an associate of the Capital Group companies, you may have access to
confidential information. This places you in a position of special trust.
You are associated with a group of companies that is responsible for the
management of many billions of dollars belonging to mutual fund shareholders
and other clients. The law, ethics and our own policy place a heavy burden on
all of us to ensure that the highest standards of honesty and integrity are
maintained at all times.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
ALL ASSOCIATES
Information regarding proposed or partially completed plans by CGC companies to
buy or sell specific securities must not be divulged to outsiders.
Favors or preferential treatment from stockbrokers may not be accepted.
Associates may not subscribe to ANY initial public offering (IPO). Generally,
this prohibition applies to spouses of associates and any family member
residing in the same household. However, an associate may request that the
Personal Investing Committee consider granting an exception under special
circumstances.
COVERED PERSONS
Associates who have access to investment information in connection with their
regular duties are generally considered "covered persons." If you receive a
quarterly personal securities transactions report form, you are a covered
person. You should take the time to review this policy, as ongoing
interpretations of the policy will be explained therein.
Covered persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the funds and client
accounts. This policy also includes securities transactions of family members
living in the covered person's household and any trust or custodianship for
which the associate is trustee or custodian. A conflict may occur if you, a
family member in the same household, a trust or custodianship for which you are
trustee or custodian have a transaction in a security when the funds or client
accounts are considering or concluding a transaction in the same security.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, portfolio control associates,
and investment administration personnel (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
Before buying or selling securities, covered persons must check with the CGC
Legal Group based in LAO. (You will generally receive a response within one
business day.) Unless a shorter period is specified, clearance is good for two
trading days (including the day you check). If you have not executed your
transaction within this period, you must again pre-clear your transaction.
Covered persons must PROMPTLY submit quarterly reports of certain transactions.
Transactions of securities (including fixed-income securities) or options (see
below) must be pre-cleared as described above and reported except for: open-end
investment companies (mutual funds); money market instruments with maturities
of one year or less; direct obligations of the U.S. Government, bankers'
acceptances, CDs or other commercial paper; commodities; and options or futures
on broad-based indices. Covered persons must also report transactions made by
family members in their household and by those for which they are a trustee or
custodian.. NOTE THAT INVESTMENTS IN PRIVATE PLACEMENTS AND VENTURE CAPITAL
PARTNERSHIPS ARE ALSO SUBJECT TO PRECLEARANCE AND REPORTING. Reporting forms
will be supplied at the appropriate times AND MUST BE SUBMITTED BY THE DATE
INDICATED ON THE FORM
In addition, the following transactions must be reported but need not have been
pre-cleared: gifts or bequests (either receiving or giving) of securities MUST
be reported (sales of securities received as a gift MUST be both precleared and
reported); transactions in debt instruments rated "A" or above by at least one
national rating service; sales pursuant to tender offers; and dividend
reinvestment plan purchases (provided the purchase pursuant to such plan is
made with dividend proceeds only).
PERSONAL INVESTING SHOULD BE VIEWED AS A PRIVILEGE, NOT A RIGHT. AS SUCH,
LIMITATIONS MAY BE PLACED ON THE NUMBER OF PRE-CLEARANCES AND/OR TRANSACTIONS
AS DEEMED APPROPRIATE BY THE PERSONAL INVESTING COMMITTEE.
BROKERAGE ACCOUNTS
Covered persons should inform their stockbrokers that they are employed by an
investment adviser, trust company or affiliate of either. U.S. brokers are
subject to certain rules designed to prevent favoritism toward such accounts.
Associates may not accept negotiated commission rates which they believe may be
more favorable than the broker grants to accounts with similar characteristics.
In addition, covered persons must direct their brokers to send duplicate
confirmations and copies of all periodic statements on a timely basis to The
Legal Group of The Capital Group Companies, Inc. ALL DOCUMENTS RECEIVED ARE
KEPT STRICTLY CONFIDENTIAL.
[If extraneous information is included on an associate's statements (E.G.,
checking account information or other information that is not subject to the
policy), the associate might want to establish a separate account solely for
transactions subject to the policy.]
ANNUAL DISCLOSURE OF PERSONAL SECURITIES HOLDINGS
Covered persons will be required to disclose all personal securities holdings
upon commencement of employment (or upon becoming a covered person) and
thereafter on an annual basis. Reporting forms will be supplied for this
purpose.
ANNUAL RECERTIFICATION
All access persons will be required to certify annually that they have read and
understood the Personal Investing Policy and recognize that they are subject
thereto.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Ownership of securities
that are held professionally as well as personally will be reviewed on a
periodic basis by the Legal Group and may also be reviewed by the applicable
Management Committee and/or Investment Committee or Subcommittee. In addition,
to the extent that disclosure has not already been made by the Legal Group to
the applicable Management Committee and/or Investment Committee or
Subcommittee, any associate who is in a position to recommend the purchase or
sale of securities by the fund or client accounts that s/he personally owns
should FIRST disclose such ownership either in writing (in a company write-up)
or orally (when discussing the company at investment meetings) prior to making
a recommendation./1/
BLACKOUT PERIOD <UNDEF> Investment personnel may not buy or sell a security
within at least seven calendar days before and after A FUND OR CLIENT ACCOUNT
THAT HIS OR HER COMPANY MANAGES transacts in that security. Profits resulting
from transactions occurring within this time period are subject to special
review and may be subject to disgorgement.
BAN ON SHORT-TERM TRADING PROFITS -- Investment personnel are prohibited from
profiting from the purchase and sale or sale and purchase of the same (or
equivalent) securities within 60 days. THIS RESTRICTION APPLIES TO THE
PURCHASE OF AN OPTION AND THE EXERCISE OF THE OPTION WITHIN 60 DAYS.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the investment committee of the appropriate management company or CGC
Management Committee BEFORE SERVING ON THE BOARD OF DIRECTORS OF PUBLICLY
TRADED COMPANIES. This can be arranged by calling the LAO Legal Group.
PERSONAL INVESTING COMMITTEE
Any questions or hardships that result from these policies or requests for
exceptions should be referred to CGC's Personal Investing Committee by calling
the LAO Legal Group.
/1/ Note that this disclosure requirement is consistent with both AIMR
standards as well as the ICI Advisory Group Guidelines.
Washington Management Corporation/ Washington
Investment Advisers CODE OF ETHICS
All of us are responsible for maintaining the very highest ethical standards
when conducting business. In keeping with these standards, we must never allow
our own interests to be placed ahead of our shareholders' interests.
We must observe exemplary standards of honesty and integrity. If you have
trouble interpreting laws or regulations pertaining to this Code, ask the
WMC/WIA Compliance Officer, Howard Kitzmiller, for advice (202) 842-5668.
CONFLICTS OF INTEREST
A conflict of interest occurs when your private interests interfere or could
potentially interfere with your responsibilities at work. You must not place
yourself or your employer in a position of actual or potential conflict. You
may not accept gifts worth more than $100, or business entertainment exceeding
$200 in value, from those who conduct business with the Investment Companies.
You should not take inappropriate advantage of your position, and you may not
accept favors or preferential treatment from stockbrokers.
INSIDER TRADING
Antifraud provisions of the federal securities laws generally prohibit persons
while in possession of material nonpublic information from trading on or
communicating the information to others. Sanctions for violations can include
civil injunctions, permanent bars from the securities industry, civil penalties
up to three times the profits made or losses avoided, criminal fines and jail
sentences.
Section 204 of The Investment Advisers Act of 1940 requires an investment
adviser to establish, maintain and enforce written policies and procedures to
prevent the misuse, in violation of law, rules or regulations, of material
nonpublic information (i.e., "insider trading"). While those most likely to
come in contact with material nonpublic information are persons involved in
researching and selecting investments, the restrictions (and sanctions) on use
of such information apply to all persons reporting under this Code of Ethics.
Accordingly, the Boards of Directors of Washington Investment Advisers, Inc.
and Washington Management Corporation have approved an Insider Trading Policy
Statement, dated July 19, 1994, and supplied to each person reporting under
this Code of Ethics. Because this is a complex area of the law, you should
read and retain said Policy Statement. Any questions concerning it should be
addressed to the WMC/WIA compliance officer.
This Insider Trading Policy Statement is in addition to, and does not affect
the applicability of, any similar statement pertaining to persons who are also
employees of Johnston, Lemon & Co. Incorporated.
PERSONAL SECURITIES TRANSACTIONS
As an Officer and/or Director and/or employee of Washington Management
Corporation (WMC), or Washington Investment Advisers, Inc. (WIA) (the
Companies) or as an employee of Johnston, Lemon & Co. Incorporated (J/L) who
may directly, or indirectly, assist such individuals of such Companies, you may
from time to time have access to confidential information regarding The
American Funds Tax-Exempt Series I (AFTES-I), The Growth Fund of Washington,
Inc. (GFW) and Washington Mutual Investors Fund, Inc. (WMIF) (the Investment
Companies). As an "access person" this places you in a position of special
trust.
You must not divulge information to personnel of Johnston, Lemon & Co.
Incorporated or to outsiders concerning either proposed or partially completed
programs of the Funds to buy or sell particular securities. Lists of
securities in the Funds' portfolios are considered confidential until released
in public reports.
The Investment Companies are responsible for the management of substantial
assets belonging to thousands of shareholders. Both ethics and the law place a
heavy burden on you to ensure that the highest standards of integrity be
maintained at all times. To avoid any possible conflict of interest in
carrying out your responsibilities to such shareholders, you are bound by this
Code of Ethics.
There are several rules that must be followed to avoid possible conflicts of
interest in personal securities transactions.
You may not subscribe to (i) any, initial public offering or (ii) any other
securities offerings that are subject to allocation (so-called "hot issues").
Also, persons subject to this Code of Ethics shall not offer, grant or allot
any securities, including initial public offerings, to any director, trustee or
advisory board member or an affiliated person thereof, of a fund served by
Washington Management Corporation as business manager or Washington Investment
Advisers, Inc. as investment adviser, except on the same terms as such
securities are made available to other comparable clients in the ordinary
course of business.
You may not participate in private securities offerings without advance written
approval of the WMC/WIA compliance officer.
ACCESS PERSONS
Those who have access to investment information in connection with their
regular duties are generally considered "access persons." If you receive an
initial holdings or annual holdings report form or a quarterly personal
securities transactions report form, you are an access person. When you become
an access person, you must, within 10 days complete an initial holdings report.
(See "Reporting" below.)
Access persons must conduct their personal securities transactions in such a
way that they do not conflict with the interests of the mutual funds. This
policy also includes securities transactions of their immediate family members
(for example, a spouse, children and parents) residing in the access person's
household and any account (for example, a family trust) over which the access
person (or immediate family member) exercises investment discretion or control.
Additional rules apply to "investment personnel" including portfolio
counselors/managers, research analysts, traders, investment administration
personnel, and fund officers (see below).
PRE-CLEARANCE OF SECURITIES TRANSACTIONS
You must pre-clear with the WMC/WIA compliance officer all personal
transactions involving any stocks, options or convertible bonds but excluding
any foreign securities or any securities not required under this Code to be
reported (see "Reporting" below.). You must also pre-clear all purchases in an
underwriting of any municipal bonds of entities in Maryland, Virginia, the
District of Columbia, Puerto Rico, Guam or the Virgin Islands and the sale of
any bonds issued in those jurisdictions unless they are rated A or above by a
national rating service.
Any authorization to engage in securities transactions in public companies
obtained through the pre-clearance process for stocks not on the WMIF Eligible
List shall be good for five trading days unless sooner revoked. Clearance for
Eligible List Stocks, when given, is ordinarily for one or two days only.
Permission to engage in private securities offerings, where granted, is not
subject to such time limit but re-approval should be sought should
circumstances change (e.g. modification of the terms of the offering).
BROKERAGE ACCOUNTS
You shall not maintain any brokerage accounts with any other broker/dealer
except Johnston, Lemon & Co. Incorporated, without written approval of the
WMC/WIA compliance officer. You shall direct your broker to provide duplicate
confirmations to the WMC/WIA compliance officer on a timely basis.
ANNUAL RECERTIFICATION
All access persons will be required to certify annually that they have read and
understood the Code of Ethics and the Insider Trading Policy Statement and
recognize that they are subject thereto. They will also be required to certify
annually that they have complied with this Code and have disclosed or reported
all personal securities transactions and holdings required to be disclosed or
reported. Forms will be supplied for this purpose.
ADDITIONAL RULES FOR INVESTMENT PERSONNEL
DISCLOSURE OF OWNERSHIP OF RECOMMENDED SECURITIES -- Any person in a position
to recommend the purchase or sale of securities by The Growth Fund of
Washington must not recommend securities personally owned without first
disclosing ownership to the WIA Investment Committee.
BLACKOUT PERIOD -- Portfolio counselors/managers and research analysts may not
buy or sell a security within at least seven calendar days before and after A
FUND ACCOUNT THAT HE MANAGES transacts in that security. Profits resulting
from transactions occurring within this time period are subject to
disgorgement.
SERVICE AS A DIRECTOR -- Investment personnel must obtain prior authorization
of the WMC or WIA Board of Directors BEFORE SERVING ON THE BOARD OF DIRECTORS
OF PUBLICLY TRADED COMPANIES.
REPORTING
When a person first becomes subject to this Code of Ethics, he or she must
submit, within 10 days, an initial report of all securities holdings (excluding
Johnston, Lemon stock, mutual funds, money market investments, commodities, and
direct obligations of the U.S. government), including holdings of immediate
family members residing in their household and any account over which he or she
or such immediate family member exercise investment discretion or control.
Thereaf t er, persons subject to this Code of Ethics are required to
report quarterly within 10 days of the end of a calendar quarter all their
securities transactions (excluding Johnston, Lemon stock, mutual funds money
market instruments, commodities, direct obligations of the U.S., purchases
through dividend reinvestment plans, transactions through systematic investment
plans and corporate activities that are nonvolitional on the part of the
investor, such as mergers, stock splits and tender offers.), including those of
immediate family members residing in their household and any account over which
they or such immediate family member exercise investment discretion or
control. Annually, all persons subject to this Code are required to
report their holdings as of December 31. This report, which must be submitted
by January 30 /th/ 20 each year, also must include holdings of immediate
family members and is subject to the same exclusions as the initial holdings
report, discussed above.
Forms for all of these reports will be provided at each reporting period. Any
violation of this Code for which the compliance officer recommends the
imposition of any sanction shall be referred to the Board of Directors of
Washington Management Corporation or of Washington Investment Advisers, Inc.,
as appropriate, for resolution.
BOARD OF DIRECTORS/TRUSTEES OF THE INVESTMENT COMPANIES
Approval of the Code of Ethics and Amendments to it <UNDEF> The Boards of
Directors/Trustees of the Investment Companies will be asked to approve the
Code initially and any material amendments to it. A material amendment to the
Code must be approved no later than six months after its adoption by WMC/WIA.
The Directors/Trustees of the Investment Companies must receive a certification
from WMC/WIA that procedures reasonably necessary to prevent access persons
from violating the Code have been adopted. WMC/WIA will furnish to the
Directors/Trustees a written report annually that discusses any issues arising
under the Code since the last report to the Directors/Trustees. This report
will also include information about material violations of the Code or of our
procedures and any sanctions imposed as a result of these violations.
Adopted November 30, 1999
Effective January 1, 2000
