UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
Investment Company Act File Number: 811-4653
The American Funds Tax-Exempt Series I
(Exact Name of Registrant as specified in charter)
1101 Vermont Avenue, NW
Washington, DC 20005
(Address of principal executive offices)
Registrant's telephone number, including area code: (202) 842-5665
Date of fiscal year end: July 31, 2004
Date of reporting period: July 31, 2004
Howard L. Kitzmiller
Secretary
The American Funds Tax-Exempt Series I
1101 Vermont Avenue, NW
Washington, DC 20005
(name and address of agent for service)
----------------------------------
Copies to:
JULIAN E. MARKHAM, Esq.
THOMPSON, O'DONNELL, MARKHAM, NORTON & HANNON
1212 New York Avenue, Suite 1000, N.W.
Washington, D.C. 20005
(Counsel for the Registrant)
ITEM 1 - Reports to Stockholders
Annual report dated July 31, 2004
Logo (The American Fund)
The right choice for the long term(R)
The Tax-Exempt Fund of Maryland
The Tax-Exempt Fund of Virginia
The American Funds Tax-Exempt Series I
(Cover: Aerial view of Annapolis, Maryland.)
Annual report for the year ended July 31, 2004
The Tax-Exempt Fund of Maryland(R) seeks a high level of current income free
from Federal and Maryland state income taxes. Additionally, the Fund seeks to
preserve capital.
The Tax-Exempt Fund of Virginia(R) seeks a high level of current income free
from Federal and Virginia state income taxes. Additionally, the Fund seeks to
preserve capital.
These Funds are two of the 29 American Funds, the nation's third-largest mutual
fund family. For more than seven decades, Capital Research and Management
Company,SM the American Funds adviser, has invested with a long-term focus based
on thorough research and attention to risk.
Contents
Letter to shareholders 1
The growth of a $10,000 investment 3
The Tax-Exempt Fund of Maryland: Investment portfolio 4
Financial statements 8
The Tax-Exempt Fund of Virginia: Investment portfolio 11
Financial statements 16
Notes to financial statements 19
Expense example 26
Board of Trustees and officers 28
Figures shown in this report are past results for Class A shares (unless
otherwise indicated) and are not predictive of results in future periods.
Current and future results may be lower or higher than those shown. Share price
and returns will vary, so investors may lose money. For the most current
information and month-end results, visit americanfunds.com. Fund results shown,
unless otherwise indicated, are at net asset value. If a sales charge (maximum
3.75%) had been deducted, the results would have been lower.
Here are the average annual total returns on a $1,000 investment with all
distributions reinvested for periods ended June 30, 2004 (the most recent
calendar quarter):
Class A shares 1 year 5 years 10 years
Reflecting 3.75% The Tax-Exempt Fund of Maryland 2.88% +4.05% +5.26%
maximum sales charge The Tax-Exempt Fund of Virginia 4.09% +4.17% +5.14%
At net asset value The Tax-Exempt Fund of Maryland +0.93% +4.85% +5.66%
The Tax-Exempt Fund of Virginia 0.37% +4.98% +5.54%
Results for other share classes can be found on page 25. Please see the inside
back cover for important information about other share classes.
The Funds' 30-day yields for Class A shares as of August 31, 2004, calculated in
accordance with the Securities and Exchange Commission formula, were 3.01% for
The Tax-Exempt Fund of Maryland and 2.82% for The Tax-Exempt Fund of Virginia.
(This is equivalent to a taxable yield of 5.01% for The Tax-Exempt Fund of
Maryland investors in the 39.9% tax bracket, and a taxable yield of 4.60% for
The Tax-Exempt Fund of Virginia investors in the 38.7% tax bracket.) The Funds'
distribution rates for Class A shares as of that date were 3.58% and 3.24%,
respectively. All figures reflect the 3.75% maximum sales charge. The SEC yield
reflects the rate at which each Fund is earning income on its current portfolio
of securities, while the distribution rate reflects the Funds' past dividends
paid to shareholders. Accordingly, the Funds' SEC yields and distribution rates
may differ.
Investing for short periods makes losses more likely. Investments are not
FDIC-insured, nor are they deposits of or guaranteed by a bank or any other
entity. All investments are subject to certain risks. Investments in the Funds
are subject to interest rate fluctuations. Additionally, each Fund is more
susceptible to factors adversely affecting issuers of its state's tax-exempt
securities than a more widely diversified municipal bond fund. Income may be
subject to federal alternative minimum taxes. Certain other income, as well as
capital gain distributions, may be taxable.
The return of principal in bond funds is not guaranteed. Bond funds have the
same interest rate, inflation and credit risks that are associated with the
underlying bonds owned by the Funds.
(same picture as cover)
Fellow shareholders:
The Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia posted solid
returns for the fiscal year ended July 31, 2004. Share prices for the Funds rose
as municipal bond yields declined for most of the period. Interest rates did
rise in the spring, in response to firm economic growth, but then declined
modestly as the fiscal year came to a close. The Maryland Fund's share price
rose from $15.76 to $15.94. The Virginia Fund's price increased from $16.32 to
$16.48. During the period, the Maryland Fund and the Virginia Fund paid income
dividends of 63 cents and 60 cents a share, respectively.
If, like most shareholders, you reinvested your dividends, your total return for
the 12-month period ended July 31 was 5.2% for the Maryland Fund and 4.7% for
the Virginia Fund. Neither Fund paid capital gain distributions during the
fiscal year. The chart below highlights the Funds' average annual total returns
over longer periods of time and compares them with their benchmark Lipper
averages as of July 31, 2004.
1 year 5 years 10 years
The Tax-Exempt Fund of Maryland +5.2% +5.0% +5.6%
Lipper Maryland Municipal Debt Funds Average +4.7% +4.8% +5.3%
The Tax-Exempt Fund of Virginia +4.7% +5.1% +5.5%
Lipper Virginia Municipal Debt Funds Average +5.0% +4.9% +5.5%
The Maryland Fund's tax-free income return with dividends reinvested was 4.1%,
equivalent to 6.8% from a taxable investment if you are in the highest combined
Federal, state and local tax bracket of 39.9%. If you took your dividends in
cash, your income return was 4.0%.
The Virginia Fund's tax-free income return with dividends reinvested of 3.7% was
equal to 6.1% if you are in the highest combined Federal and state tax bracket
of 38.7%. If you took dividends in cash, your income return was 3.7%.
The Fed and the economy
As is often the case, the pace of future economic activity is difficult to
predict and at times economic signals appear mixed. While the U.S. economy has
shown solid growth over the past 12 months, more recently, there have been some
signs of a slowdown. Consumer spending slowed in the second quarter as the
employment picture has been mixed and as higher energy prices pressured
households' disposable income. Additionally, as interest rates increased this
spring, mortgage refinancing slowed. Despite this slowdown, home sales are
robust as interest rates remain at fairly low levels.
The Federal Reserve Board, confident in the sustainable nature of the recovery
and in the current belief that the signs of an economic slowdown are temporary,
raised the federal funds rate from 1.0% to 1.25% on June 30. This was its first
increase in four years. On August 10, after the fiscal year ended, the Fed
raised the rate again to 1.5%.
Maryland and Virginia economies and local concerns
Maryland's financial condition is stable and its general obligation bonds
continue to be rated Aaa by Moody's Investor Service. The State has participated
in the economic recovery, which helped generate a budget surplus in fiscal 2004.
A diverse broad-based economy has performed well above average because of a
large and expanding Federal government presence. Employment growth has increased
in the business services industry and in high-tech and high-wage manufacturing,
offsetting declines in old-line manufacturing.
Virginia's economy has improved since last year. Its general obligation bonds
have been taken off Moody's Investor Watchlist for possible downgrade. The
Commonwealth's bonds were reaffirmed as Aaa and its financial condition was
listed as stable. The Virginia economy was hit hard from the high-tech
industry's decline and a manufacturing slowdown during the recession. However,
Virginia has been showing signs of recovery over the past few months. A
relatively high concentration of federal government and related jobs has helped
stabilize employment. In addition, the legislature passed a tax reform package
to help balance the Commonwealth's budget in 2004-2005.
The Funds' portfolios
The Maryland and Virginia portfolios are conservatively postured and well
diversified. Both contain a large number of quality bonds that are highly
liquid. On July 31, issues rated Aa/AA or better accounted for 66.4% of the
assets in the Maryland portfolio (almost the same as the 66.5% of last year) and
for 77.7% in the Virginia portfolio (nearly the same as the 77.1% a year ago).
Bonds rated lower than Baa/BBB, which carry greater risk and are owned because
they enhance the Funds' income stream and long-term total return potential,
represented 10.5% of net assets for Maryland (versus 11.7% a year ago) and 6.2%
for Virginia (versus 5.5% last year).
High-yield municipal bonds did well during the past 12 months as the economy
continued its strong recovery and investors searched for yield in a low interest
rate environment. Maryland's larger holding of high-yield bonds is a key reason
that its total return exceeded Virginia's.
The Maryland Fund purchased 18 new holdings while selling or redeeming 12. In
the Virginia Fund, 21 new holdings were added and nine were sold or redeemed.
Going forward
It may be difficult for the Funds to match the results of the past few years,
which occurred in a period of mostly declining interest rates. If interest rates
continue to rise, it is possible that investors could see the Funds' net asset
values decline. Over time, however, rising rates will tend to boost the Funds'
income return. The Funds would sell lower coupon bonds and reinvest the money in
higher coupon issues.
As usual, we recommend that you take a long-term perspective on your municipal
bond fund investments.
Sincerely,
(signature)
James H. Lemon, Jr., Chairman
(signature)
Harry J. Lister, Vice Chairman
(signature)
Jeffrey L. Steele, President
September 17, 2004
For current information about the Funds, visit americanfunds.com.
The growth of a $10,000 investment
The American Funds Tax-Exempt Series I
Fund figures, unless otherwise indicated, reflect deduction of the maximum sales
charge of 3.75% on the $10,000 investment./1/ Thus, the net amount invested was
$9,625./2/
The Tax-Exempt Fund of Maryland
Average annual total returns (for periods ended July 31, 2004)
Assumes reinvestment of all distributions and payment of the 3.75% maximum sales
charge at the beginning of the stated periods.
1 year 5 years 10 years
+1.25% +4.19% +5.20%
(graph showing the rise in value of an initial investment of $10,000 in 1994 to
2004.
MD Muni Lehman
TEFMD TEFMD Debt Funds Bros Muni
at MOP/5/ at NAV/3/ Average/4/ Bond Index/2/ CPI/6/
- -----------------------------------------------------------------------------
7/31/1994 9,625 10,000 10,000 10,000 10,000
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/1995 10,360 10,760 10,666 10,787 10,276
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/1996 10,977 11,402 11,275 11,499 10,580
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/1997 12,022 12,487 12,300 12,678 10,815
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/1998 12,728 13,220 12,941 13,438 10,997
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/1999 13,017 13,520 13,165 13,824 11,233
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/2000 13,281 13,795 13,481 14,420 11,644
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/2001 14,446 15,005 14,716 15,874 11,961
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/2002 15,334 15,926 15,560 16,939 12,136
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/2003 15,790 16,401 15,995 17,549 12,392
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
7/31/2004 16,607 17,249 16,781 18,565 12,763
- -------------------------------------------------------------------------
Fiscal year ended July 31)
The Tax-Exempt Fund of Virginia
Average annual total returns (for periods ended July 31, 2004)
Assumes reinvestment of all distributions and payment of the 3.75% maximum sales
charge at the beginning of the stated periods.
1 year 5 years 10 years
+0.71% +4.31% +5.08%
(graph showing the rise in value of an initial investment of $10,000 in 1994 to
2004.
VA Muni Lehman
TEFVA TEFVA Debt Funds Bros Muni
at MOP/5/ at NAV/3/ Average/4/ Bond Index/2/ CPI/6/
- ------------------------------------------------------------
7/31/1994 9,625 10,000 10,000 10,000 10,000
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/1995 10,357 10,758 10,679 10,787 10,276
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/1996 10,923 11,346 11,373 11,499 10,580
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/1997 11,919 12,380 12,468 12,678 10,815
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/1998 12,518 13,003 13,222 13,438 10,997
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/1999 12,795 13,291 13,450 13,824 11,233
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/2000 13,210 13,722 13,794 14,420 11,644
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/2001 14,452 15,012 15,043 15,874 11,961
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/2002 15,330 15,923 15,857 16,939 12,136
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/2003 15,685 16,292 16,301 17,549 12,392
- ------------------------------------------------------------
- ------------------------------------------------------------
7/31/2004 16,416 17,052 17,152 18,565 12,763
- ------------------------------------------------------------
/1/ As outlined in the perspectus, the sales charge is reduced for accounts
(and aggregated investments) of $100,000 or more and eliminated for purchases of
$1 million or more.
/2/ The maximum initial sales charge was 4.75% prior to January 10, 2000.
/3/ The index is a national index not limited to Maryland or Virginia bonds. It
is unmanaged and does not reflect sales charges, commissions or expenses.
/4/ Results at net asset value (not including sales charges.
/5/ With all distributions reinvested. The Lipper averages do not reflect sales
charges.
/6/ Computed from data supplied by the U.S. Department of Labor, Bureau of
Labor Statistics.
There is no sales charge on dividends or capital gain distributions that are
reinvested in additional shares.
Past results are not predictive of future results. The results shown are before
taxes on Fund distributions and sale of Fund shares.
Investment portfolio July 31, 2004
The Tax-Exempt Fund of Maryland
Quality diversification:
Moody's/S&P ratings (best of either)/1/
(Pie chart showing the following pieces:
Aaa/AAA 45.1%
Aa/AA 21.3%
A/A 5.9%
Baa/BBB 9.4%
Lower than Baa/BBB
or not rated 10.5%
Cash/equivalents 7.8%)
Maturity diversification:/2/
(Pie chart showing the following pieces:
Under a year 7.8%
1 to 10 years 78.5%
10+ to 20 years 10.7%
20+ to 30 years 2.2%
30+ years 0.8%)
Average life /3/ 6.55 years
/1/ If ratings are not available, they are assigned by the Fund's research
analysts.
/2/ Securities are included at prerefunded dates, not maturity dates.
/3/ Average life more accurately reflects the potential impact of call options.
Should no call options be exercised, the average maturity of the Maryland Fund
is 8.04 years.
Principal Market
Fixed-income securities -- 92.24% amount value
(000) (000)
Maryland
State Issuers
Community Dev. Administration, Dept. of Housing and Community Dev.:
Housing Rev. Bonds, GNMA Collateralized, Series 2002-B, AMT, 4.85% 2022 $2,000 $ 2,016
Residential Rev. Bonds, AMT:
Series 1998-B: 5.00% 2008 1,610 1,655
5.00% 2009 1,680 1,772
Series 2001-H: 5.20% 2022 900 920
4.40% 2025 725 744
Single-family Program Bonds, First Series 1994, 5.80% 2009 1,465 1,468
Dept. of Transportation:
Consolidated Transportation Bonds:
Ref. Series 2003, 4.00% 2008 1,000 1,049
Series 2002, 5.50% 2017 2,000 2,273
Series 2003, 5.25% 2014 4,000 4,462
Project Cert. of Part. (Mass Transit Administration Project), Series 2000, AMT, 5.00% 2008 1,420 1,522
Econ. Dev. Corp.:
Lease Rev. Bonds:
(Aviation Administration Facs.), Series 2003, AMT, FSA insured: 5.25% 2012 1,000 1,084
5.50% 2013 1,500 1,651
(Dept. of Transportation Headquarters Fac.), Series 2002: 5.00% 2014 1,755 1,888
5.375% 2019 1,500 1,620
(Montgomery County Town Square Parking Garage Project), Series 2002-A, 3.25% 2011 1,000 983
Rev. Bonds (Anne Arundel County, MD Golf Course system), Series 2001, 8.25% 2028 2,000 1,851
Tax-Exempt Adjustable Mode Solid Waste Disposal Rev. Bonds (Waste Management, Inc. Project),
Series 2002, AMT, 2.30% 2016 (put 2006) 2,000 1,973
Utility Infrastructure Rev. Bonds (University of Maryland, College Park Project), Series 2001,
AMBAC insured: 5.25% 2011 3,425 3,776
5.375% 2015 2,230 2,435
Energy Fncg. Administration, Limited Obligation Solid Waste Disposal Rev. Bonds (Wheelabrator Water
Technologies Baltimore LLC Projects), Series 1996, AMT, 6.30% 2010 3,500 3,706
G.O. Bonds, State and Local Facs.:
Capital Improvement Bonds, First Series Loan, Series 2003-A, 5.25% 2016 1,500 1,678
First Series Loan:
Series 2000-H, 5.50% 2010 2,000 2,253
Series 2001-H, 5.50% 2011 1,000 1,127
Second Series Loan:
Series 1999-W, 5.00% 2011 500 542
Series 1999-X, 5.25% 2012 2,000 2,203
Series 2002-B, 5.25% 2009 1,000 1,100
Health and Higher Educational Facs. Auth.:
Anne Arundel Medical Center Issue, Rev. Bonds, Series 1998, FSA insured, 5.125% 2028 1,000 1,014
Good Samaritan Hospital Issue, Rev. Bonds, Series 1993, 5.70% 2009 (escrowed to maturity) 1,000 1,116
Howard County General Hospital Issue, Rev. Bonds, Series 1993 (escrowed to maturity): 5.50% 2013 1,845 1,891
5.50% 2021 1,000 1,024
Institute College of Art Issue, Rev. Bonds, Series 2001, 5.50% 2032 1,250 1,264
Johns Hopkins Medical Institutions Parking Facs. Issue, Parking Rev. Bonds, Series 2001,
AMBAC insured, 5.00% 2034 880 882
Johns Hopkins University Issue, Rev. Ref. Bonds:
Series 1998, 5.25% 2014 2,505 2,730
Series 2001-A: 5.00% 2011 1,000 1,090
5.00% 2013 1,000 1,076
Series 2002-A, 5.00% 2032 1,000 1,004
LifeBridge Health Issue, Rev. Bonds, Series 2004-A: 5.00% 2012 1,000 1,070
5.25% 2018 1,000 1,048
Medlantic/Helix Issue, Rev. Bonds, Series 1998-B, AMBAC insured, 5.25% 2038 1,500 1,545
MedStar Health Issue, Ref. Rev. Bonds, Series 2004: 5.00% 2013 1,000 1,022
5.75% 2016 2,000 2,099
5.50% 2033 1,000 974
Mercy Medical Center Issue, Project and Rev. Ref. Bonds, Series 1996, FSA insured, 6.50% 2013 2,000 2,347
Mercy Ridge Issue, Rev. Bonds:
Series 2003-A, 6.00% 2035 2,000 2,001
Series 2003-B, 5.00% 2008 1,000 1,020
PUMH of Maryland, Inc. Issue, First Mortgage Rev. Bonds (Heron Point of Chestertown),
Series 1998-A: 5.75% 2019 1,500 1,476
5.75% 2026 1,640 1,583
Rev. Ref. Bonds, Adventist HealthCare Issue, Series 2003-A: 5.00% 2012 1,000 1,012
5.75% 2025 1,000 1,002
Roland Park Place Issue, Ref. and Project Rev. Bonds, Series 1999, 5.50% 2014 525 532
Suburban Hospital Issue, Rev. Bonds, Series 2004-A: 5.00% 2008 1,500 1,584
5.00% 2009 400 423
University of Maryland Medical System Issue, Rev. Bonds, Series 2000, 6.75% 2030 2,000 2,248
Morgan State University, Academic Fees and Auxiliary Facs. Fees Rev. Bonds, Series 2003-A,
FGIC insured, 5.00% 2020 1,375 1,447
Northeast Maryland Waste Disposal Auth.:
Resource Recovery Rev. Bonds (Baltimore RESCO Retrofit Project), Series 1998, AMT, 5.00% 2012 2,500 2,527
Solid Waste Ref. Rev. Bonds (Montgomery County Solid Waste Disposal System), Series 2003, AMT,
AMBAC insured: 5.25% 2009 1,000 1,078
5.50% 2010 2,500 2,729
Transportation Auth.:
Airport Parking Rev. Bonds, Baltimore/Washington International Airport Projects,
Series 2002-B, AMT, AMBAC insured, 5.375% 2015 2,000 2,140
Facs. Project, Transportation Facs. Projects Rev. Bonds, Series 1992, 5.80% 2006 1,000 1,072
University System, Auxiliary Fac. and Tuition Rev. Bonds:
Series 2001-B, 4.00% 2013 1,000 1,016
Series 2002-A: 5.00% 2013 1,010 1,095
5.125% 2022 2,000 2,078
Water Quality Fncg. Administration, Revolving Loan Fund Rev. Bonds, Series 1991-B, 0% 2005 700 687
City & County Issuers
Anne Arundel County:
G.O. Bonds, Series 2002, 5.25% 2012 1,000 1,113
Special Obligation Bonds:
(Arundel Mills Project), Series 1999, 7.10% 2029 (preref. 2009) 2,000 2,402
(National Business Park Project), Series 2000, 7.375% 2028 (preref. 2010) 1,500 1,845
Tax Increment Fncg. Bonds (Parole Town Center Project), Series 2002, 5.00% 2012 1,680 1,679
City of Baltimore, Project and Rev. Ref. Bonds (Water Projects), Series 1994-A, FGIC insured:
6.00% 2015 1,500 1,737
5.00% 2024 410 429
Mayor and City Council of Baltimore:
Convertible Rev. Ref. Bonds (Baltimore City Parking System Facs.), Series 1996-A, FGIC insured,
5.90% 2009 1,500 1,692
Port Fac. Rev. Bonds (Consolidation Coal Sales Company Project), Series 1984-B, 6.50% 2011 500 523
Project and Rev. Ref. Bonds (Water Projects), Series 2002-A, FGIC insured, 5.00% 2021 1,225 1,265
Baltimore County, G.O. Bonds:
Consolidated Public Improvement Bonds:
Ref. Series 2002, 5.25% 2010 2,000 2,227
Series 2002, 5.25% 2015 (preref. 2012) 3,000 3,346
Metropolitan Dist. Bonds (67th Issue), 5.00% 2018 (preref. 2011) 1,500 1,654
Calvert County (Asbury-Solomons Island Fac.):
Econ. Dev. Rev. Bonds, Series 1995, 8.625% 2024 (preref. 2005) 2,300 2,414
Econ. Dev. Rev. Ref. Bonds, Series 1997, MBIA insured, 5.00% 2009 1,000 1,084
Carroll County:
EMA Obligated Group Issue (Fairhaven and Copper Ridge), Rev. Ref. Bonds, Series 1999-A,
Asset Guaranty insured, RADIAN insured, 5.50% 2019 1,265 1,341
G.O. Bonds, Consolidated Public Improvement Ref. Bonds (Delayed Delivery), Series 2003, 5.00% 2010 1,000 1,098
Frederick County:
G.O. Public Facs. Bonds, Series 2000, 5.10% 2017 1,000 1,073
Special Obligation Bonds (Urbana Community Dev. Auth.):
Series 1998, 6.625% 2025 3,000 3,108
Series 2004-A, 5.95% 2030 1,000 995
Subordinate Special Obligation Bonds (Urbana Community Dev. Auth.), Series 2004-B, 6.25% 2030 1,461 1,454
Howard County, G.O. Bonds, Consolidated Public Improvement Project and Ref. Bonds,
Series 2002-A: 5.25% 2014 795 879
5.25% 2014 (preref. 2012) 205 228
Montgomery County:
Econ. Dev. Rev. Bonds (Trinity Health Credit Group), Series 2001, 5.50% 2016 1,000 1,077
G.O. Consolidated Public Improvement Bonds:
Series 2000-A, 5.30% 2013 (preref. 2010) 1,000 1,115
Series 2001-A: 4.75% 2011 1,000 1,083
4.75% 2012 1,000 1,082
5.25% 2015 2,000 2,177
Housing Opportunities Commission:
Housing Dev. Bonds (The Metropolitan), Issue 1995-A, 6.10% 2015 2,025 2,093
Single-family Mortgage Rev. Bonds, Series 1998-B: 4.80% 2009 495 506
4.90% 2010 415 438
Northeast Maryland Waste Disposal Auth., Solid Waste Rev. Bonds (Resource Recovery Project),
Series 1993-A, AMT, 6.00% 2007 1,000 1,071
Rev. Auth., Golf Course System Rev. Bonds, Series 1996-A, 6.00% 2014 (preref. 2006) 2,355 2,597
Solid Waste Disposal System Ref. Rev. Bonds, Series 2003-A, AMBAC insured, 5.00% 2013 1,000 1,090
Special Obligation Bonds:
(Kingsview Village Center Dev. Dist.), Series 1999, 6.90% 2021 2,305 2,403
(West Germantown Dev. Dist.):
Senior Series 2002-A, RADIAN insured, 5.375% 2020 750 789
Junior Series 2002-B, 6.70% 2027 1,690 1,721
Prince George's County:
(Dimensions Health Corp. Issue), Project and Rev. Ref. Bonds, Series 1994, 5.375% 2014 2,985 2,368
Housing Auth., Mortgage Rev. Bonds, AMT:
(GNMA Collateralized-Langley Garden Apartments Project), Series 1997-A, 5.60% 2017 1,130 1,191
(GNMA Collateralized-Windsor Crossing Apartments Project), Series 2002-A: 3.90% 2012 515 517
5.00% 2023 1,000 1,009
GNMA/FNMA Collateralized Single-family Mortgage Rev. Bonds, Series 1998-A, 4.65% 2019 845 865
Industrial Dev. Auth. Lease Rev. Ref. Bonds (Upper Marlboro Justice Center Project),
Series 2003-A, MBIA insured, 5.00% 2014 1,500 1,623
Special Obligation Bonds (Woodview Village Infrastructure Improvements),
Series 1997-A, 8.00% 2026 1,795 1,941
Washington Suburban Sanitary Dist., Montgomery and Prince George's Counties:
G.O. Bonds:
Ref. Bonds of 1997, 5.75% 2017 1,510 1,757
Ref. Bonds of 2001, 4.50% 2015 3,000 3,097
Sewage Disposal Ref. Bonds of 2003, 5.00% 2012 1,000 1,101
District of Columbia
Washington Metropolitan Area Transit Auth., Gross Rev. Transit Ref. Bonds, Series 1993,
FGIC insured, 6.00% 2008 1,480 1,658
Puerto Rico
Electric Power Auth.:
Rev. Bonds, Series DD, FSA insured, 4.50% 2019 1,000 1,011
Rev. Ref. Bonds:
Series GG, FSA insured, 4.75% 2021 1,020 1,039
Series KK, XLCA insured, 5.00% 2011 1,000 1,096
Series Y, MBIA insured, 7.00% 2007 1,000 1,131
Highways and Transportation Auth., Highway Rev. Ref. Bonds, Series AA,
FSA insured, 5.00% 2026 (put 2010) 1,000 1,080
Industrial, Medical, Higher Education and Environmental Pollution Control Facs. Fncg. Auth.,
Special Fac. Rev. Bonds (American Airlines, Inc. Project), Series 1985 A, 6.45% 2025 500 336
Public Fin. Corp. (Commonwealth Appropriation Bonds):
Series 2001-E: 6.00% 2026 455 512
6.00% 2026 (escrowed to maturity) 45 51
Series 2004-A, FGIC insured, 5.25% 2031 (put 2012) 2,500 2,728
Public Improvement Ref. Bonds (G.O. Bonds), Series 1998, 5.00% 2007 500 534
Virgin Islands
Public Fin. Auth.:
Rev. and Ref. Bonds (Matching Fund Loan Notes), Senior Lien, Series 1998-A: 5.20% 2009 1,500 1,606
5.20% 2010 1,000 1,061
Rev. Bonds (Virgin Islands Gross Receipts Taxes Loan Note), Series 2003-A, FSA insured, 5.25% 2017 1,000 1,098
Total fixed-income securities (cost: $177,029,000) 182,935
Short-term securities -- 6.35%
Baltimore County, Rev. Bonds (Oak Crest Village, Inc. Project), Series 1999-A, 1.09% 2029<F1> 3,390 3,390
Econ. Dev. Corp., Rev. Bonds (CHFCollege Park, LLCSouth Campus Project),
Series 2000-A, 1.08% 2032<F1> 925 925
Health and Higher Educational Facs. Auth.:
Pooled Loan Program Rev. Bonds, Series 1994-D, 1.08% 2029<F1> 2,475 2,475
Rev. Bonds, Charlestown Community Issue, Series 1998-A, 1.07% 2028<F1> 300 300
Howard County, Consolidated Public Improvement Commercial Paper Anticipation Notes,
Series C, 1.12% 9/08/2004 1,000 1,000
County Commissioners of Washington County, Demand Bonds (LSN/TLS Obligated Group Project),
Series 2003-E, 1.08% 2033<F1> 700 700
Washington Suburban Sanitary Dist., (Montgomery and Prince George's Counties), G.O. Multi-Modal Bond
Anticipation Notes, 2003 Series B, 1.06% 2023<F1> 3,800 3,800
Total short-term securities (cost: $12,590,000) 12,590
Total investment securities (cost: $189,619,000) 195,525
Other assets less liabilities 2,801
Net assets $198,326
<FN>
<F1> Coupon rate may change periodically; the date of the next scheduled coupon
rate change is considered to be the maturity date.
</FN>
See Notes to Financial Statements
Key to abbreviations
AMT = Alternative Minimum Tax
Auth. = Authority
Cert. of Part. = Certificates of Participation
Dept. = Department
Dev. = Development
Dist. = District
Econ. = Economic
Fac. = Facility
Facs. = Facilities
Fin. = Finance
Fncg. = Financing
G.O. = General Obligation
Preref. = Prerefunded
Ref. = Refunding
Rev. = Revenue
Financial statements
The Tax-Exempt Fund of Maryland
Statement of assets and liabilities at July 31, 2004
(dollars and shares in thousands,
except per-share amounts)
Assets:
Investment securities at market (cost: $189,619) $195,525
Cash 1,286
Receivables for:
Sales of Fund's shares $ 443
Interest 1,909 2,352
199,163
Liabilities:
Payables for:
Purchases of investments 428
Repurchases of Fund's shares 7
Dividends on Fund's shares 203
Management services 62
Services provided by affiliates 116
Deferred Trustees' compensation 20
Other fees and expenses 1 837
Net assets at July 31, 2004 $198,326
Net assets consist of:
Capital paid in on shares of beneficial interest $192,266
Undistributed net investment income 175
Distributions in excess of net realized gains (21)
Net unrealized appreciation 5,906
Net assets at July 31, 2004 $198,326
Shares of beneficial interest issued and outstanding unlimited shares
authorized, 12,440 total shares outstanding
Shares Net asset value
Net assets outstanding per share/1/
Class A $154,182 9,671 $15.94
Class B 18,580 1,165 15.94
Class C 17,331 1,087 15.94
Class F 4,938 310 15.94
Class R-5 3,295 207 15.94
/1/ Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for Class A, for which the
maximum offering price per share was $16.56.
See Notes to Financial Statements
Statement of operations for the year ended July 31, 2004
(dollars in thousands)
Investment income:
Income:
Interest $9,204
Fees and expenses:
Investment advisory services $414
Business management services 328
Distribution services 735
Transfer agent services 44
Administrative services 34
Reports to shareholders 33
Registration statement and prospectus 14
Postage, stationery and supplies 10
Trustees' compensation 19
Auditing and legal 37
Custodian 4
Federal and state income taxes 3
Other 12 1,687
Net investment income 7,517
Net realized gain and unrealized appreciation on investments:
Net realized gain on investments 75
Net unrealized appreciation on investments 2,036
Net realized gain and unrealized appreciation on investments 2,111
Net increase in net assets resulting from operations $9,628
Statement of changes in net assets
(dollars in thousands)
Year ended July 31
2004 2003
Operations:
Net investment income $ 7,517 $ 6,923
Net realized gain on investments 75 90
Net unrealized appreciation (depreciation) on investments 2,036 (2,279)
Net increase in net assets resulting from operations 9,628 4,734
Dividends and distributions paid or accrued to shareholders:
Dividends from net investment income (7,428 ) (6,911)
Distributions from net realized gain on investments (244)
Total dividends and distributions paid or
accrued to shareholders (7,428) (7,155)
Capital share transactions 2,641 35,007
Total increase in net assets 4,841 32,586
Net assets:
Beginning of year 193,485 160,899
End of year (including undistributed net investment
income: $175 and $96, respectively) $198,326 $193,485
See Notes to Financial Statements
Financial highlights/1/
The Tax-Exempt Fund of Maryland
Income from Dividends and
investment operations/2/ distributions
Net
gains
(losses) Divi-
Net on secur Total dends Total Net Ratio Ratio
Asset ities from (from Distri- divi- Net assets of ex- of net
value Net (both invest- net butions dends asset end of penses income
begin- invest- realized ment invest- (from and value, Total period to aver- to aver-
ning of ment and un- oper- ment capital distri- end of return (in age net age net
period income realized) ations income) gains) butions period /3/ millions) assets assets
Class A:
Year ended 7/31/2004 $15.76 $.64 $ .17 $ .81 $(.63) $ -- $(.63) $15.94 5.17% $154 .72% 3.97%
Year ended 7/31/2003 15.93 .62 (.15) .47 (.62) (.02) (.64) 15.76 2.98 156 .73 3.87
Year ended 7/31/2002 15.68 .69 .25 .94 (.69) -- (.69) 15.93 6.14 139 .75 4.40
Year ended 7/31/2001 15.12 .74 .56 1.30 (.74) -- (.74) 15.68 8.77 119 .80 4.77
Year ended 7/31/2000 15.57 .74 (.45) .29 (.74) -- (.74) 15.12 2.03 100 .82 4.92
Class B:
Year ended 7/31/2004 15.76 .52 .17 .69 (.51) -- (.51) 15.94 4.40 19 1.48 3.21
Year ended 7/31/2003 15.93 .50 (.15) .35 (.50) (.02) (.52) 15.76 2.22 18 1.48 3.09
Year ended 7/31/2002 15.68 .57 .25 .82 (.57) -- (.57) 15.93 5.35 11 1.49 3.62
Year ended 7/31/2001 15.12 .62 .56 1.18 (.62) -- (.62) 15.68 7.96 4 1.54 3.91
Period from 3/15/2000
to 7/31/2000 15.01 .16 .18 .34 (.23) -- (.23) 15.12 2.26 1 .58 1.32
Class C:
Year ended 7/31/2004 15.76 .50 .17 .67 (.49) -- (.49) 15.94 4.27 17 1.60 3.09
Year ended 7/31/2003 15.93 .48 (.15) .33 (.48) (.02) (.50) 15.76 2.09 13 1.61 2.97
Year ended 7/31/2002 15.68 .55 .25 .80 (.55) -- (.55) 15.93 5.20 6 1.64 3.51
Period from 4/12/2001
to 7/31/2001 15.49 .15 .20 .35 (.16) -- (.16) 15.68 2.29 1 .49 1.02
Class F:
Year ended 7/31/2004 15.76 .62 .17 .79 (.61) -- (.61) 15.94 5.04 5 .85 3.85
Year ended 7/31/2003 15.93 .60 (.15) .45 (.60) (.02) (.62) 15.76 2.84 3 .86 3.73
Year ended 7/31/2002 15.68 .64 .25 .89 (.64) -- (.64) 15.93 5.81 2 .99 4.18
Period from 6/15/2001
to 7/31/2001 15.59 .07 .09 .16 (.07) -- (.07) 15.68 1.03 --/4/ .14 .45
Class R-5:
Year ended 7/31/2004 15.76 .67 .17 .84 (.66) -- (.66) 15.94 5.36 3 .54 4.15
Year ended 7/31/2003 15.93 .65 (.15) .50 (.65) (.02) (.67) 15.76 3.16 3 .55 4.06
Period from 7/15/2002
to 7/31/2002 15.91 .03 .02 .05 (.03) -- (.03) 15.93 .31 3 .02 .18
Year ended July 31
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 11% 8% 5% 16% 12%
/1/ Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
/2/ Based on average shares outstanding.
/3/ Total returns exclude all sales charges, including contingent deferred
sales charges.
/4/ Amount less than $1 million.
See Notes to Financial Statements
Investment portfolio July 31, 2004
The Tax-Exempt Fund of Virginia
Quality diversification:
Moody's/S&P ratings (best of either)/1/
(pie chart showing the following pieces:
Aaa/AAA 39.4%
Aa/AA 38.3%
A/A 5.9%
Baa/BBB 5.4%
Lower than Baa/BBB
or not rated 6.2%
Cash/equivalents 4.8%)
Maturity diversification:/2/
(pie chart showing the following pieces:
Under a year 4.8%
1 to 10 years 86.0%
10+ to 20 years 8.8%
20+ to 30 years 0.4%)
Average life/3/ 6.31 years
/1/ If ratings are not available, they are assigned by the Fund's research
analysts.
/2/ Securities are included at prerefunded dates, not maturity dates.
/3/ Average life more accurately reflects the potential impact of call options.
Should no call options be exercised, the average maturity of the Virginia Fund
is 7.37 years.
Principal Market
Fixed-income securities -- 95.17% amount value
(000) (000)
Virginia
State Issuers
Big Stone Gap, Redev. and Housing Auth., Commonwealth of Virginia Correctional Fac.
Lease Rev. Bonds: (Wallens Ridge Dev. Project), Series 1995, 5.25% 2010 $1,600 $ 1,694
Series 2003, 5.00% 2014 1,000 1,085
College Building Auth.:
Educational Facs. Rev. and Ref. Bonds:
(Hampden-Sydney College Project), Series 1998, MBIA insured, 5.00% 2016 500 527
(Hampton University Project), Series 2003: 5.00% 2013 1,000 1,076
5.00% 2014 1,815 1,941
Educational Facs. Rev. Bonds:
(21st Century College Program), Series 1998, 5.00% 2017 1,000 1,048
(Public Higher Education Fncg. Program), Series 2002-A, 5.00% 2011 1,530 1,675
(University of Richmond Project), (put 2009):
Series 2002-A, 5.00% 2032 3,500 3,772
Series 2002-B, 5.00% 2032 2,000 2,155
(Washington and Lee University Project), Series 2001, 5.375% 2021 1,000 1,113
Commonwealth Transportation Board:
Federal Highway Reimbursement Anticipation Notes:
Series 2000, 5.50% 2010 1,300 1,460
Series 2002, 5.00% 2011 1,000 1,095
Transportation Rev. Bonds (U.S. Route 58 Corridor Dev. Program), Series
1999-B, 5.50% 2013 4,750 5,261
G.O. Bonds, Series 1997, 5.00% 2012 940 1,003
Housing Dev. Auth.:
Commonwealth Mortgage Bonds:
Series 1998-E, Sub-series E-4, 4.50% 2005 1,190 1,205
Series 2000-A, Sub-series A-4, AMT, 5.30% 2010 2,160 2,160
Series 2004-A1, AMT, 4.00% 2015 1,300 1,255
Series 2004-A1, AMT, 4.15% 2017 1,100 1,064
Series 2001-J, Sub-series J-1, MBIA insured: 4.55% 2010 1,000 1,042
4.65% 2011 1,000 1,042
Multi-family Housing Bonds:
Series 1996-B, 5.95% 2016 1,000 1,039
Series 1997-B, AMT, 5.80% 2010 1,185 1,229
Series 1998-I, AMT: 4.60% 2009 1,320 1,381
4.70% 2010 1,240 1,293
Rental Housing Bonds, Series 2001-K, AMT, 5.00% 2017 825 851
Northern Virginia Transportation Dist. Commission (Virginia Railway Express Project),
Commuter Rail Rev. Ref. Bonds, Series 1998, FSA insured: 5.375% 2011 1,000 1,100
5.375% 2014 1,000 1,100
Peninsula Ports Auth.:
Coal Terminal Rev. Ref. Bonds (Dominion Terminal Associates Project DETC Issue),
Series 2003, 3.30% 2033 (put 2008) 1,000 991
Health System Rev. Ref. Bonds (Riverside Health System Project), Series 1998: 5.00% 2008 1,200 1,287
5.00% 2009 1,100 1,183
Port Auth., Commonwealth Port Fund Rev. Bonds (2002 Resolution), Series 2002, AMT: 5.00% 2012 1,000 1,075
5.00% 2013 3,700 3,962
Public Building Auth., Public Facs. Rev. Bonds:
Series 1998-B: 5.00% 2010 1,000 1,072
5.00% 2011 2,100 2,250
Series 2000-A, 5.75% 2016 1,000 1,118
Series 2004-A, 5.00% 2010 2,000 2,188
Public School Auth., School Fncg. Bonds:
1991 Resolution, Series 1994-A, 6.20% 2014 (preref. 2004) 1,500 1,530
1997 Resolution:
Series 1998-A, 5.25% 2007 2,000 2,164
Series 1998-B, 4.50% 2009 3,000 3,191
Series 2002-A, 5.00% 2014 1,000 1,075
Rector and Visitors of the University of Virginia, General Rev. Pledge Bonds,
Series 2003-B: 5.00% 2016 1,000 1,072
5.00% 2017 1,480 1,578
Resources Auth.:
Clean Water State Revolving Fund Rev. Bonds, Series 2000, 5.25% 2015 1,000 1,092
Infrastructure Rev. Bonds (Pooled Loan Bond Program):
Series 2001-B, AMT, FSA insured, 4.375% 2010 1,490 1,553
Series 2002-A, 5.25% 2014 1,460 1,596
Series 2003, 5.00% 2020 2,000 2,094
Series 2003-B, AMT, MBIA insured, 5.00% 2016 1,000 1,046
Southeastern Public Service Auth., Senior Rev. Ref. Bonds, Series 1998, AMBAC insured, 5.00% 2015 4,825 5,223
Virginia Polytechnic Institute and State University, University Services System and General Rev.
Pledge Bonds, Series 1996-C, 5.35% 2009 1,000 1,081
City & County Issuers
Industrial Dev. Auth. of the Town of Abingdon, Hospital Fac. Rev. and Ref. Bonds
(Johnston Memorial Hospital), Series 1998: 5.00% 2008 1,015 1,084
5.00% 2009 1,020 1,092
Arlington County:
G.O. Ref. Bonds, Series 1993: 6.00% 2011 1,000 1,160
6.00% 2012 1,000 1,170
Industrial Dev. Auth., Resource Recovery Rev. Bonds (Alexandria/Arlington
Waste-to-Energy Fac.), Ogden Martin Systems of Alexandria/Arlington Inc. Project,
Series 1998-B, AMT, FSA insured, 5.375% 2012 2,785 2,981
Industrial Dev. Auth. of the County of Charles City, AMT:
Solid Waste Disposal Fac. Rev. Ref. Bonds (USA Waste of Virginia, Inc. Project),
Series 1999, 4.875% 2009 2,100 2,158
Tax-Exempt Adjustable Mode Solid Waste Disposal Rev. Bonds (Waste Management, Inc.),
Series 2002, 6.25% 2027 (put 2012) 1,000 1,088
City of Chesapeake:
G.O. Public Improvement and Ref. Bonds, Series 2001: 5.50% 2009 1,300 1,452
5.50% 2011 1,500 1,692
G.O. Ref. Bonds, Series 1993, 5.40% 2008 1,000 1,103
G.O. School Ref. Bonds, Series 2003, 5.00% 2013 3,000 3,280
Chesterfield County, Water and Sewer Rev. Ref. Bonds, Series 1992, 6.375% 2009 330 334
Industrial Dev. Auth. of Danville, Hospital Rev. Bonds (Danville Regional Medical Center):
Series 1994, FGIC insured, 6.00% 2007 (preref. 2004) $1,000 $ 1,018
Series 1998, AMBAC insured: 5.25% 2012 1,995 2,193
5.25% 2013 2,000 2,197
5.25% 2028 720 766
Fairfax County:
Econ. Dev. Auth., Retirement Community Rev. Bonds (Greenspring Village,
Inc. Fac.),
Series 1999-A: 6.75% 2012 500 535
7.50% 2029 2,500 2,650
Industrial Dev. Auth.:
Health Care Rev. Ref. Bonds (Inova Health Systems Project), Series 1998-A, 5.00% 2011 1,500 1,576
Hospital Rev. Ref. Bonds (Inova Health System Hospitals Project), Series 1993-A: 5.00% 2007 750 802
5.00% 2011 1,000 1,078
5.25% 2019 2,500 2,699
FSA insured, 5.25% 2019 1,000 1,092
Redev. and Housing Auth., Multi-family Housing Rev. Bonds (Grand View Apartments Project),
Series 1998-A, FHA insured, 5.05% 2010 965 1,000
Water Auth., Water Rev. Ref. Bonds, Series 1997, 5.00% 2021 1,000 1,076
City of Fredericksburg, Rev. Bonds (MediCorp Health System Obligated Group),Series 2002-B,5.25% 2027 1,500 1,502
Industrial Dev. Auth. of Halifax County, Hospital Ref. Rev. Bonds (Halifax Regional Hospital, Inc.),
Series 1998: 4.65% 2007 600 613
4.80% 2009 1,000 1,021
5.00% 2011 1,000 1,021
City of Hampton:
Convention Center Rev. Bonds, Series 2002, AMBAC insured: 5.25% 2014 1,000 1,090
5.25% 2015 1,500 1,623
G.O. Public Improvement Ref. Bonds:
Series 1998: 5.00% 2013 2,240 2,442
5.00% 2014 1,000 1,088
Series 2000, 5.25% 2011 1,000 1,103
Museum Rev. Ref. Bonds, Series 2004: 4.00% 2009 500 516
5.00% 2012 1,220 1,306
Industrial Dev. Auth. of the County of Hanover, Hospital Rev. Bonds (Memorial Regional Medical Center
Project at Hanover Medical Park), Series 1995, MBIA insured: 6.50% 2010 1,375 1,599
6.375% 2018 1,500 1,789
Henrico County:
Water and Sewer System Rev. Ref. Bonds, Series 2002, 4.625% 2013 580 616
Industrial Dev. Auth., Solid Waste Disposal Rev. Bonds (Browning-Ferris Industries of South
Atlantic, Inc. Project), AMT:
Series 1995, 5.30% 2011 (put 2005) 1,000 993
Series 1996-A, 5.45% 2014 1,000 924
Industrial Dev. Auth. of Henry County, Hospital Rev. Bonds (Memorial Hospital of Martinsville and
Henry County), Series 1997, 6.00% 2017 (preref. 2007) 1,000 1,096
Industrial Dev. Auth. of King George County, Variable Rate Demand Solid Waste Disposal Rev. Bonds
(King George Landfill, Inc. Project), Series 2003-A, AMT, 4.10% 2023 (put 2009) 1,000 1,003
Loudoun County:
Dulles Town Center, Community Dev. Auth., Special Assessment Bonds (Dulles Town Center Project),
Series 1998, 6.25% 2026 2,495 2,524
G.O. Public Improvement Bonds, Series 2001-B: 5.00% 2012 1,000 1,083
5.25% 2015 500 542
G.O. Public Improvement and Ref. Bonds, Series 2002-A, 5.00% 2012 1,795 1,974
Industrial Dev. Auth.:
Hospital Rev. Bonds (Loudoun Hospital Center), Series 1995, FSA insured, 6.00% 2005 515 534
Residential Care Facility Ref. Rev. Bonds, (Falcons Landing Project), Series 2004-A, 6.00% 2024 2,000 2,020
Sanitation Auth., Water and Sewer System Rev. Bonds, Series 2000, FSA insured, 5.00% 2014 1,185 1,265
City of Manassas, G.O. Bonds, Series 1997-B, AMT, 5.00% 2013 1,000 1,076
City of Newport News:
G.O. General Improvement Ref. Bonds, Series 2003-A, 5.00% 2010 1,000 1,093
G.O. General Improvement and Water Bonds, Series 2002-A, 5.00% 2016 1,585 1,695
City of Norfolk, MBIA insured:
G.O. Bonds, Capital Improvement and Ref. Bonds, Series 2002, 5.00% 2011 1,000 1,092
Industrial Dev. Auth., Health Care Rev. Bonds (Bon Secours Health System), Series 1997, 5.00% 2007 1,250 1,339
Norfolk Airport Auth., Airport Rev. Bonds, Series 2001-B, AMT, FGIC insured: 5.375% 2014 1,485 1,575
5.375% 2015 1,565 1,658
Peninsula Ports Auth., Health Care Facs. Rev. and Ref. Bonds (Mary Immaculate Project), Series 1994,
6.875% 2010 (preref. 2004) 1,900 1,946
Prince William County:
Virginia Gateway Community Dev. Auth., Special Assessment Bonds, Series 1999, 6.25% 2026 2,470 2,482
Heritage Hunt Commercial Community Dev. Auth., Special Assessment Bonds:
Series 1999-A, 6.85% 2019 1,312 1,364
Series 1999-B, 7.00% 2029 480 503
Industrial Dev. Auth., Hospital Fac. Rev. Bonds, (Potomac Hospital Corp. of Prince William),
Series 2003, 5.00% 2013 1,000 1,040
Service Auth., Water and Sewer System Rev. Ref. Bonds, Series 2003, 5.00% 2014 1,000 1,091
City of Richmond:
G.O. Public Improvement Ref. Bonds, Series 2001, FGIC insured, 5.375% 2015 1,000 1,095
Public Utility Rev. and Ref. Bonds, Series 1998-A, 5.25% 2009 1,500 1,620
Richmond Metropolitan Auth., Expressway Rev. and Ref. Bonds, FGIC insured:
Series 1998, 5.25% 2012 1,000 1,110
Series 2002, 5.25% 2017 1,120 1,244
Industrial Dev. Auth. of the City of Roanoke, Hospital Rev. Bonds
(Carilion Health System Obligated Group), Series 2002-A, MBIA insured, 5.50% 2015 3,500 3,812
City of Virginia Beach:
Dev. Auth.:
Health Care Facs. Rev. and Ref. Bonds (Sentara Health System), Series 1998, 5.25% 2011 1,000 1,064
Hospital Rev. Bonds (Virginia Beach General Hospital Project), Series 1993,
AMBAC insured: 6.00% 2011 1,000 1,137
5.125% 2018 2,200 2,372
G.O. Public Improvement and Ref. Bonds, Series 2002: 5.00% 2015 1,500 1,601
5.00% 2016 1,500 1,590
G.O. Public Improvement Bonds, Series 2001: 5.00% 2012 2,425 2,656
5.00% 2013 2,425 2,629
Public Fac. Rev. Bonds (Town Center Project Phase I), Series 2002-A: 5.375% 2017 1,500 1,630
5.00% 2021 2,000 2,065
Industrial Dev. Auth. of County of Isle of Wight:
Series 2000-A, 6.60% 2024 890 943
Pollution Control Rev. Ref. Bonds (International Paper Co. Projects), Series 2004-A, 4.05% 2014 3,000 2,797
Riverside Regional Jail Auth., Jail Fac. Rev. Bonds, Series 2003, MBIA insured, 5.00% 2015 1,910 2,051
District of Columbia
Metropolitan Washington Airports Auth., AMT:
Airport System Rev. and Ref. Bonds, Series 1998-B:
5.50% 2007 1,500 1,607
MBIA insured, 5.25% 2010 1,000 1,062
Airport System Rev. Bonds, Series 2001-A, MBIA insured, 5.50% 2014 1,000 1,073
Airport System Rev. Ref. Bonds:
Series 2002-D, FSA insured: 5.375% 2013 1,000 1,075
5.375% 2014 1,000 1,065
5.375% 2016 1,995 2,111
Series 2003-A, FGIC insured, 5.00% 2008 1,000 1,068
Series 2004-C-1, FSA insured, 5.00% 2008 1,000 1,067
Puerto Rico
Public Buildings Auth., Government Facs. Rev. Ref. Bonds, Series C, 5.50% 2014 1,000 1,109
Highways and Transportation Auth., Highway Rev. Ref. Bonds, Series AA:
FSA insured, 5.00% 2026 (put 2010) 1,000 1,080
AMBAC insured, 5.00% 2035 (put 2010) 1,150 1,242
Public Fin. Corp., (Commonwealth Appropriation Bonds), Series 2004-A, AMBAC insured,
5.25% 2030 (put 2012) 1,000 1,091
Virgin Islands
Public Fin. Auth., Rev. and Ref. Bonds (Matching Fund Loan Notes), Senior Lien:
Series 1998-A, 5.20% 2009 1,000 1,071
Series 1998-C: 5.50% 2005 1,000 1,040
5.50% 2007 1,000 1,074
Total fixed-income securities (cost: $208,082,000) 215,855
Short-term securities -- 4.74%
Alexandria Redev. and Housing Auth., Residential Care Fac. First Mortgage Rev. Bonds
(Goodwin House), Multi-Mode Series 1996-B, 1.09% 2006<F1> 1,120 1,120
Industrial Dev. Auth. of Loudon County, Multi-Modal Rev. Bonds
(Howard Hughes Medical Institute Issue), Series 2003-A, 1.10% 2038<F1> 3,300 3,300
City of Newport News, Industrial Dev. Auth., Rev. Bonds (CNU Warwick LLC Student
Apartments Project), Series 2004, 1.08% 2028<F1> 1,100 1,100
Peninsula Ports Auth., Coal Terminal Rev. Bonds (Dominion Term Assn.) 1.12% 2004 1,000 1,000
Industrial Dev. Auth. of the City of Roanoke, Hospital Rev. Ref. Bonds
(Carilion Health System Obligated Group):<F1> Series 2002-C, 1.09% 2027 1,370 1,370
Series 2002-D, 1.13% 2027 2,870 2,870
Total short-term securities (cost: $10,760,000) 10,760
Total investment securities (cost: $218,842,000) 226,615
Other assets less liabilities 192
Net assets $ 226,807
<FN>
<F1> Coupon rate may change periodically; the date of the next scheduled coupon
rate change is considered to be the maturity date.
</FN>
See Notes to Financial Statements
Key to abbreviations
AMT = Alternative Minimum Tax
Auth. = Authority
Dev. = Development
Dist. = District
Econ. = Economic
Fac. = Facility
Facs. = Facilities
Fin. = Finance
Fncg. = Financing
G.O. = General Obligation
Preref. = Prerefunded
Redev. = Redevelopment
Ref. = Refunding
Rev. = Revenue
Financial statements
The Tax-Exempt Fund of Virginia
Statement of assets and liabilities at July 31, 2004
(dollars and shares in thousands,
except per-share amounts)
Assets:
Investment securities at market (cost: $218,842) $226,615
Cash 110
Receivables for:
Sales of Fund's shares $ 583
Interest 2,777 3,360
230,085
Liabilities:
Payables for:
Purchases of investments 1,981
Repurchases of Fund's shares 868
Dividends on Fund's shares 216
Investment advisory services 69
Services provided by affiliates 124
Deferred Trustees' compensation 19
Other fees and expenses 1 3,278
Net assets at July 31, 2004 $226,807
Net assets consist of:
Capital paid in on shares of beneficial interest $219,412
Undistributed net investment income 162
Accumulated net realized loss (540)
Net unrealized appreciation 7,773
Net assets at July 31, 2004 $226,807
Shares of beneficial interest issued and outstanding unlimited shares
authorized, 13,760 total shares outstanding
Shares Net asset value
Net assets outstanding per share/1/
Class A $188,507 11,436 $16.48
Class B 13,850 840 16.48
Class C 14,945 907 16.48
Class F 7,383 448 16.48
Class R-5 2,122 129 16.48
/1/ Maximum offering price and redemption price per share were equal to the net
asset value per share for all share classes, except for Class A, for which the
maximum offering price per share was $17.12.
See Notes to Financial Statements
Statement of operations for the year ended July 31, 2004
(dollars in thousands)
Investment income:
Income:
Interest $9,723
Fees and expenses:
Investment advisory services $459
Business management services 362
Distribution services 779
Transfer agent services 54
Administrative services 36
Reports to shareholders 40
Registration statement and prospectus 11
Postage, stationery and supplies 10
Trustees' compensation 19
Auditing and legal 37
Custodian 4
Other 12 1,823
Net investment income 7,900
Net realized loss and unrealized appreciation on investments:
Net realized loss on investments (27)
Net unrealized appreciation on investments 1,970
Net realized loss and unrealized appreciation on investments 1,943
Net increase in net assets resulting from operations $9,843
Statement of changes in net assets
(dollars in thousands)
Year ended July 31
2004 2003
Operations:
Net investment income $ 7,900 $ 7,478
Net realized loss on investments (27) (444)
Net unrealized appreciation (depreciation)
on investments 1,970 (3,051)
Net increase in net assets resulting from operations 9,843 3,983
Dividends and distributions paid or accrued to shareholders:
Dividends from net investment income (7,895) (7,439)
Distributions from net realized gain on investments -- (429)
Total dividends and distributions paid or accrued
to shareholders (7,895) (7,868)
Capital share transactions 2,408 38,924
Total increase in net assets 4,356 35,039
Net assets:
Beginning of year 222,451 187,412
End of year (including undistributed net
investment income: $162 and $157, respectively) $226,807 $222,451
See Notes to Financial Statements
Financial highlights/1/
The Tax-Exempt Fund of Virginia
Income from Dividends and
investment operations/2/ distributions
Net
gains
(losses) Divi-
Net on secur Total dends Total Net Ratio Ratio
Asset ities from (from Distri- divi- Net assets of ex- of net
value Net (both invest- net butions dends asset end of penses income
begin- invest- realized ment invest- (from and value, Total period to aver- to aver-
ning of ment and un- oper- ment capital distri- end of return (in age net age net
period income realized) ations income) gains) butions period /3/ millions) assets assets
Class A:
Year ended 7/31/2004 $16.32 $.60 $ .16 $ .76 $(.60) $ -- $(.60) $16.48 4.67% $189 .70% 3.60%
Year ended 7/31/2003 16.57 .60 (.21) .39 (.60) (.04) (.64) 16.32 2.32 189 .71 3.61
Year ended 7/31/2002 16.29 .66 .31 .97 (.66) (.03) (.69) 16.57 6.08 169 .73 4.05
Year ended 7/31/2001 15.57 .72 .72 1.44 (.72) -- (.72) 16.29 9.40 132 .78 4.47
Year ended 7/31/2000 15.82 .74 (.25) .49 (.74) -- (.74) 15.57 3.24 114 .80 4.77
Class B:
Year ended 7/31/2004 16.32 .48 .16 .64 (.48) -- (.48) 16.48 3.90 14 1.45 2.84
Year ended 7/31/2003 16.57 .47 (.21) .26 (.47) (.04) (.51) 16.32 1.56 14 1.46 2.81
Year ended 7/31/2002 16.29 .54 .31 .85 (.54) (.03) (.57) 16.57 5.28 7 1.48 3.26
Year ended 7/31/2001 15.57 .59 .72 1.31 (.59) -- (.59) 16.29 8.56 3 1.51 3.57
Period from 3/15/2000
to 7/31/2000 15.28 .18 .34 .52 (.23) -- (.23) 15.57 3.40 --/4/ .59 1.38
Class C:
Year ended 7/31/2004 16.32 .45 .16 .61 (.45) -- (.45) 16.48 3.77 15 1.58 2.72
Year ended 7/31/2003 16.57 .45 (.21) .24 (.45) (.04) (.49) 16.32 1.43 14 1.60 2.72
Year ended 7/31/2002 16.29 .52 .31 .83 (.52) (.03) (.55) 16.57 5.15 8 1.62 3.13
Period from 4/18/2001
to 7/31/2001 16.01 .14 .29 .43 (.15) -- (.15) 16.29 2.69 1 .46 .89
Class F:
Year ended 7/31/2004 16.32 .58 .16 .74 (.58) -- (.58) 16.48 4.54 7 .83 3.48
Year ended 7/31/2003 16.57 .58 (.21) .37 (.58) (.04) (.62) 16.32 2.17 3 .85 3.44
Year ended 7/31/2002 16.29 .56 .31 .87 (.56) (.03) (.59) 16.57 5.44 1 1.23 3.51
Period from 4/4/2001
to 7/31/2001 16.18 .18 .13 .31 (.20) -- (.20) 16.29 1.95 --/4/ .31 1.26
Class R-5:
Year ended 7/31/2004 16.32 .63 .16 .79 (.63) -- (.63) 16.48 4.85 2 .52 3.78
Year ended 7/31/2003 16.57 .63 (.21) .42 (.63) (.04) (.67) 16.32 2.49 2 .53 3.79
Period from 7/15/2002
to 7/31/2002 16.55 .03 .02 .05 (.03) -- (.03) 16.57 .29 2 .02 .16
Year ended July 31
2004 2003 2002 2001 2000
Portfolio turnover rate for all classes of shares 8% 4% 10% 5% 22%
/1/ Based on operations for the period shown (unless otherwise noted) and,
accordingly, may not be representative of a full year.
/2/ Based on average shares outstanding.
/3/ Total returns exclude all sales charges, including contingent deferred
sales charges.
/4/ Amount less than $1 million.
See Notes to Financial Statements
Notes to financial statements
The American Funds Tax-Exempt Series I
1. Organization and significant accounting policies
Organization -- The American Funds Tax-Exempt Series I (the "Trust") is
registered under the Investment Company Act of 1940 as an open-end, diversified
management investment company and has issued two series of shares, The
Tax-Exempt Fund of Maryland and The Tax-Exempt Fund of Virginia (the "Funds").
The Funds seek a high level of current income exempt from Federal and their
respective state income taxes. Additionally, each Fund seeks to preserve
capital.
The Funds offer five share classes, some of which are offered to limited
categories of investors. The Funds' share classes are described below:
Contingent deferred sales
Share class Initial sales charge charge upon redemption Conversion feature
Class A Up to 3.75% None (except 1% for certain none
within one year of redemtions
purchase without an
initial sales charge)
Class B None Declines from 5% to zero for Class B converts to Class A
within six years of purchase redemptions after eight years
Class C None 1% for redemptions within Class C converts to Class F
of purchase one year after 10 years
Class F None None None
Class R-5 None None None
Holders of all share classes have equal pro rata rights to assets, dividends and
liquidation proceeds. Each share class has identical voting rights, except for
the exclusive right to vote on matters affecting only its class. Share classes
have different fees and expenses ("class-specific fees and expenses"), primarily
due to different arrangements for distribution, administrative and shareholder
services. Differences in class-specific fees and expenses will result in
differences in net investment income and, therefore, the payment of different
per-share dividends by each class.
Significant accounting policies -- The financial statements have been prepared
to comply with accounting principles generally accepted in the United States of
America. These principles require management to make estimates and assumptions
that affect reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of the significant accounting
policies followed by the Funds:
Security valuation -- Fixed-income securities are valued at prices obtained
from an independent pricing service, when such prices are available.
However, where the investment adviser deems it appropriate, such securities
will be valued at the mean quoted bid and asked prices or at prices for
securities of comparable maturity, quality and type. Short-term securities
maturing within 60 days are valued at amortized cost, which approximates
market value. The ability of the issuers of the debt securities held by the
Funds to meet their obligations may be affected by economic developments in
a specific industry, state or region. Securities and other assets for which
representative market quotations are not readily available are fair valued
as determined in good faith by authority of the Trust's Board of Trustees.
Various factors may be reviewed in order to make a good faith determination
of a security's fair value. These factors include, but are not limited to,
the type and cost of the security; contractual or legal restrictions on
resale of the security; relevant financial or business developments of the
issuer; actively traded similar or related securities; conversion or
exchange rights on the security; related corporate actions; significant
events occurring after the close of trading in the security; and changes in
overall market conditions.
Security transactions and related investment income -- Security transactions are
recorded by each Fund as of the date the trades are executed with brokers.
Realized gains and losses from security transactions are determined based on the
specific identified cost of the securities. In the event a security is purchased
with a delayed payment date, the Funds will segregate liquid assets sufficient
to meet its payment obligations. Interest income is recognized on an accrual
basis. Market discounts, premiums and original issue discounts on fixed-income
securities are amortized daily over the expected life of the security.
Class allocations -- Income, fees and expenses (other than class-specific fees
and expenses) are allocated daily among the various share classes based on the
relative value of their settled shares. Realized and unrealized gains and losses
are allocated daily among the various share classes based on their relative net
assets. Class-specific fees and expenses, such as distribution, administrative
and shareholder services, are charged directly to the respective share class.
Dividends and distributions to shareholders -- Dividends paid to shareholders
are declared daily after the determination of the Funds' net investment income
and are paid to shareholders monthly. Distributions paid to shareholders are
recorded on the ex-dividend date.
2. Federal income taxation and distributions
The Funds comply with the requirements under Subchapter M of the Internal
Revenue Code applicable to mutual funds and intend to distribute substantially
all of their net taxable income and net capital gains each year. The Funds are
not subject to income taxes to the extent such distributions are made.
Generally, income earned by the Funds is exempt from Federal income taxes;
however, the Funds might earn taxable income from the sale of certain securities
purchased at a market discount.
Distributions -- Distributions paid to shareholders are based on net investment
income and net realized gains determined on a tax basis, which may differ from
net investment income and net realized gains for financial reporting purposes.
These differences are due primarily to differing treatment for items such as
deferred expenses; net capital losses; and amortization of discounts. The fiscal
year in which amounts are distributed may differ from the year in which the net
investment income and net realized gains are recorded by the Funds. As of July
31, 2004, the cost of investment securities for Federal income tax purposes was
$189,490,000 and $218,635,000 for the Maryland Fund and the Virginia Fund,
respectively.
During the year ended July 31, 2004, the Maryland Fund reclassified $10,000 from
undistributed net investment income to additional paid-in capital to align
financial reporting with tax reporting.
As of July 31, 2004, the components of distributable earnings on a tax basis
were as follows (dollars in thousands):
Maryland
Undistributed net investment income $ 267
Short-term capital loss carryforward expiring in 2012 (21)
Gross unrealized appreciation on investment securities 7,130
Gross unrealized depreciation on investment securities (1,095)
Net unrealized appreciation on investment securities 6,035
Virginia
Undistributed net investment income $ 190
Short-term capital loss carryforward expiring in 2012 (540)
Gross unrealized appreciation on investment securities 8,759
Gross unrealized depreciation on investment securities (779)
Net unrealized appreciation on investment securities 7,980
The capital loss carryforwards shown above will be used to offset any capital
gains realized by the Funds in future years through the expiration date. The
Funds will not make distributions from capital gains while capital loss
carryforwards remain. During the year ended July 31, 2004, the Maryland Fund
realized, on a tax basis, a net capital gain of $75,000 and the Virginia Fund
realized a net capital loss of $27,000. Also included above are capital losses
of $96,000 and $513,000 for the Maryland and Virginia Funds, respectively, that
were realized during the period November 1, 2002 through July 31, 2003.
The tax character of distributions paid or accrued to shareholders was as
follows (dollars in thousands):
Maryland
Distributions Distributions Total
from tax-exempt from long-term distributions
Share class income capital gains paid or accrued
Year ended July 31, 2004
Class A $6,088 -- $6,088
Class B 596 -- 596
Class C 454 -- 454
Class F 156 -- 156
Class R-5 134 -- 134
Total $7,428 -- $7,428
Year ended July 31, 2003
Class A $5,950 $208 $6,158
Class B 457 18 475
Class C 267 10 277
Class F 108 4 112
Class R-5 129 4 133
Total $6,911 $244 $7,155
Virginia
Distributions Distributions Total
from tax-exempt from long-term distributions
Share class income capital gains paid or accrued
Year ended July 31, 2004
Class A $6,790 -- $6,790
Class B 409 -- 409
Class C 403 -- 403
Class F 214 -- 214
Class R-5 79 -- 79
Total $7,895 -- $7,895
Year ended July 31, 2003
Class A $6,656 $378 $7,034
Class B 301 20 321
Class C 322 23 345
Class F 83 4 87
Class R-5 77 4 81
Total $7,439 $429 $7,868
3. Fees and transactions with related parties
Business management services -- The Funds have a business management agreement
with Washington Management Corporation (WMC). Under this agreement, WMC, a
wholly owned subsidiary of The Johnston-Lemon Group, Incorporated (JLG),
provides services necessary to carry on the Funds' general administrative and
corporate affairs. These services include all executive personnel, clerical
staff, office space and equipment and certain accounting and recordkeeping
facilities. The agreement provides for monthly fees, accrued daily, based on an
annual rate of 0.135% on the first $60 million of each Fund's average net assets
and 0.09% on such assets in excess of $60 million. The agreement also provides
for monthly fees, based on an annual rate of 1.35% of each Fund's gross
investment income (excluding any net capital gains from transactions in
portfolio securities). For the year ended July 31, 2004, the business management
fee was $328,000 and $362,000, which was equivalent to an annualized rate of
0.167% and 0.160% of average net assets for the Maryland and Virginia Funds,
respectively. Johnston, Lemon & Co. Incorporated (JLC), a wholly owned
subsidiary of JLG, earned $23,000 and $19,000 on its retail sales of all share
classes and distribution plans of the Maryland and Virginia Funds, respectively.
Investment advisory services -- Capital Research and Management Company (CRMC),
the Funds' investment adviser, is the parent company of American Funds Service
Company (AFS), the Funds' transfer agent, and American Funds Distributors, Inc.
(AFD), the principal underwriter of the Funds' shares. The Investment Advisory
Agreement with CRMC provides for monthly fees accrued daily. These fees are
based on an annual rate of 0.165% on the first $60 million of each Fund's
average daily net assets and 0.120% on such assets in excess of $60 million. The
agreement also provides for monthly fees, accrued daily, based on an annual rate
of 1.65% of each Fund's monthly gross income. For the year ended July 31, 2004,
the investment advisory services fee was $414,000 and $459,000, which was
equivalent to an annualized rate of 0.211% and 0.203% of average net assets for
the Maryland and Virginia Funds, respectively.
Class-specific fees and expenses -- Expenses that are specific to individual
share classes are accrued directly to the respective share class. The principal
class-specific fees and expenses are described below:
Distribution services -- The Funds have adopted plans of distribution for all
share classes, except Class R-5. Under the plans, the Board of Trustees approves
certain categories of expenses that are used to finance activities primarily
intended to sell Fund shares. The plans provide for annual expenses, based on a
percentage of average daily net assets, ranging from 0.25% to 1.00% as noted on
the next page. In some cases, the Board of Trustees has approved expense amounts
lower than plan limits. All share classes may use up to 0.25% of average daily
net assets to pay service fees, or to compensate AFD for paying service fees, to
firms that have entered into agreements with AFD for providing certain
shareholder services. Expenses in excess of these amounts, up to approved
limits, may be used to compensate dealers and wholesalers for shares sold.
For Class A, the Board of Trustees has also approved the reimbursement of dealer
and wholesaler commissions paid by AFD for certain shares sold without a sales
charge. This class reimburses AFD for amounts billed within the prior 15 months
but only to the extent that the overall annual expense limit of 0.25% is not
exceeded. As of July 31, 2004, unreimbursed expenses subject to reimbursement
totaled $66,000 for the Maryland Fund and $104,000 for the Virginia Fund.
Share class Currently approved limits Plan limits
Class A 0.25% 0.25%
Class B 1.00 1.00
Class C 1.00 1.00
Class F 0.25 0.50
Transfer agent services -- The Funds have a transfer agent agreement with AFS
for classes A and B. Under this agreement, these share classes compensate AFS
for transfer agent services including shareholder recordkeeping, communications
and transaction processing. AFS is also compensated for certain transfer agent
services provided to all other share classes from the administrative services
fees paid to CRMC described below.
Administrative services -- The Funds have an administrative services agreement
with CRMC to provide transfer agent and other related shareholder services for
all classes of shares other than classes A and B. Each relevant class pays CRMC
annual fees of 0.15% (0.10% for Class R-5) based on its respective average daily
net assets. Each relevant class also pays AFS additional amounts for certain
transfer agent services. CRMC and AFS may use these fees to compensate third
parties for performing these services.
Expenses under the agreements described above for the year ended July 31, 2004,
were as follows (dollars in thousands):
Maryland
Administrative services
Distribution Transfer agent CRMC administrative Transfer agent
Share class services services services services
Class A $389 $38 Not applicable Not applicable
Class B 188 6 Not applicable Not applicable
Class C 148 Included in $22 $2
Class F 10 Administrative 6 1
Class R-5 Not applicable services 3 --
Total $735 $44 $31 $3
Virginia
Administrative services
Distribution Transfer agent CRMC administrative Transfer agent
Share class services services services services
Class A $473 $50 Not applicable Not applicable
Class B 143 4 Not applicable Not applicable
Class C 147 Included in $22 $2
Class F 16 administrative 9 1
Class R-5 Not applicable services 2 --
Total $779 $54 $33 $3
Deferred Trustees' compensation -- Since the adoption of the deferred
compensation plan in 1994, Independent Trustees may elect to defer the cash
payment of part or all of their compensation. These deferred amounts, which
remain as liabilities of the Funds, are treated as if invested in shares of the
Funds or other American Funds. These amounts represent general, unsecured
liabilities of the Funds and vary according to the total returns of the selected
Funds. Trustees' compensation in the accompanying financial statements includes
$16,000 for each Fund in current fees (either paid in cash or deferred) and a
net increase of $3,000 in each Fund in the value of the deferred amounts.
Affiliated officers and Trustees -- All the officers of the Trust and three of
its Trustees are affiliated with WMC and received no compensation directly from
the Funds.
4. Capital share transactions
Capital share transactions in the Funds were as follows (dollars and shares in
thousands):
Maryland
Reinvestments of dividends Net (decrease)
Sales<F1> and distributions Repurchases<F1> increase
Share class Amount Shares Amount Shares Amount Shares Amount Shares
Year ended July 31, 2004
Class A $27,057 1,683 $4,126 257 $(35,229) (2,190) $(4,046) (250)
Class B 3,091 193 391 24 (2,808) (175) 674 42
Class C 7,926 492 329 21 (3,652) (228) 4,603 285
Class F 2,770 172 98 6 (1,545) (97) 1,323 81
Class R-5 -- -- 87 6 -- -- 87 6
Total net increase (decrease) $40,844 2,540 $5,031 314 $(43,234) (2,690) $2,641 164
Year ended July 31, 2003
Class A $37,565 2,333 $4,093 255 $(22,042) (1,369) $19,616 1,219
Class B 9,335 580 303 19 (2,901) (181) 6,737 418
Class C 13,637 848 214 13 (6,988) (436) 6,863 425
Class F 2,368 147 71 5 (733) (46) 1,706 106
Class R-5 -- -- 86 5 (1) --<F2> 85 5
Total net increase (decrease) $62,905 3,908 $4,767 297 $(32,665) (2,032) $35,007 2,173
Virginia
Reinvestments of dividends Net (decrease)
Sales<F1> and distributions Repurchases1 increase
Share class Amount Shares Amount Shares Amount Shares Amount Shares
Year ended July 31, 2004
Class A $33,025 1,977 $4,467 268 $(39,849) (2,396) $(2,357) (151)
Class B 2,229 134 320 19 (2,557) (154) (8) (1)
Class C 5,053 303 300 18 (4,545) (274) 808 47
Class F 5,108 307 138 8 (1,361) (82) 3,885 233
Class R-5 -- -- 80 5 -- -- 80 5
Total net increase (decrease) $45,415 2,721 $5,305 318 $(48,312) (2,906) $ 2,408 133
Year ended July 31, 2003
Class A $49,393 2,947 $4,513 270 $(30,916) (1,849) $22,990 1,368
Class B 10,177 608 236 14 (3,063) (183) 7,350 439
Class C 12,553 751 259 15 (6,856) (411) 5,956 355
Class F 2,727 162 59 4 (239) (14) 2,547 152
Class R-5 -- -- 81 5 --<F2> --<F2> 81 5
Total net increase (decrease) $74,850 4,468 $5,148 308 $(41,074) (2,457) $38,924 2,319
<FN>
<F1>Includes exchanges between share classes of the Fund.
<F2> Amount less than one thousand.
</FN>
5. Investment transactions and other disclosures
The Maryland Fund and Virginia Fund made purchases of investment securities,
excluding short-term securities, of $28,209,000 and $30,946,000, and sales of
$19,166,000 and $17,175,000, respectively, during the year ended July 31, 2004.
The Funds receive a reduction in their custodian fees equal to the amount of
interest calculated on certain cash balances held at the custodian bank. For the
year ended July 31, 2004, the custodian fees of $4,000 each for the Maryland
Fund and Virginia Fund included $2,000 and $3,000, respectively, that were
offset by this reduction, rather than paid in cash.
Report of independent registered public accounting firm
The American Funds Tax-Exempt Series I
To the Board of Trustees and Shareholders:
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolios, and the related statements of operations and changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia (constituting The American Funds Tax-Exempt Series
I, hereafter referred to as the "Trust") at July 31, 2004, the results of each
of their operations for the year then ended, the changes in each of their net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods presented, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (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 the standards of the Public Company Accounting Oversight Board (United
States), which require that we plan and perform the audits 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, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
(signature of PricewaterhouseCoopers,LLP
Los Angeles, California
September 2, 2004
Tax information (unaudited)
The American Funds Tax-Exempt Series I
We are required to advise you within 60 days of the Maryland and Virginia Funds'
fiscal year-end regarding the Federal tax status of certain distributions
received by shareholders during such fiscal year. The information below is
provided for the Funds' fiscal year ending July 31, 2004.
Shareholders may exclude from Federal taxable income any exempt-interest
dividends paid by the Funds from net investment income. For purposes of
computing this exclusion, all of the dividends paid by the Funds from net
investment income earned during the fiscal year qualify as exempt-interest
dividends. Any distributions paid from realized net short-term or long-term
capital gains are not exempt from Federal taxation.
Since the information above is reported for the Funds' fiscal year and not the
calendar year, shareholders should refer to their Form 1099-DIV
or other tax information which will be mailed in January 2005 to determine the
calendar year amounts to be included on their 2004 tax returns. Shareholders
should consult their tax advisers.
Other share class results (unaudited)
The American Funds Tax-Exempt Series I
Figures shown are past results and are not predictive of results in future
periods. Current and future results may be lower or higher than those shown.
Share prices and returns will vary, so investors may lose money. For the most
current information and month-end results, visit americanfunds.com.
Returns for periods ended June 30, 2004 (the most recent calendar quarter):
The Tax-Exempt Fund of Maryland
Class B, Class C and Class F 1 year Life of class
Class B shares
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only if
shares are sold within six years of purchase 4.66% +4.55%/1/
Not reflecting CDSC +0.19% +4.95%/1/
Class C shares
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase 0.91% +4.03%/2/
Not reflecting CDSC +0.07% +4.03%/2/
Class F shares/3/
Not reflecting annual asset-based fee charged by
sponsoring firm +0.80% +4.52%/4/
The Tax-Exempt Fund of Virginia
Class B, Class C and Class F 1 year Life of class
Class B shares
Reflecting applicable contingent deferred sales
charge (CDSC), maximum of 5%, payable only if
shares are sold within six years of purchase 5.91% +4.64%/1/
Not reflecting CDSC 1.10% +5.04%/1/
Class C shares
Reflecting CDSC, maximum of 1%, payable only if
shares are sold within one year of purchase 2.18% +3.77%/5/
Not reflecting CDSC 1.22% +3.77%/5/
Class F shares/3/
Not reflecting annual asset-based fee charged
by sponsoring firm 0.49% +4.03%/6/
/1/ Average annual total return from March 15, 2000, when Class B shares were
first sold.
/2/ Average annual total return from April 12, 2001, when Class C shares were
first sold.
/3/ These shares are sold without any initial or contingent deferred sales
charge.
/4/ Average annual total return from June 15, 2001, when Class F shares were
first sold.
/5/ Average annual total return from April 18, 2001, when Class C shares were
first sold.
/6/ Average annual total return from April 4, 2001, when Class F shares were
first sold.
Expense example (unaudited)
The American Funds Tax-Exempt Series I
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs such as initial sales charges on purchase payments and contingent deferred
sales charges on redemptions (loads); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees; and other fund expenses.
This example is intended to help you understand your ongoing costs (in dollars)
of investing in the Funds so you can compare these costs with the ongoing costs
of investing in other mutual funds. The examples on the next page are based on
an investment of $1,000 invested at the beginning of the period and held for the
entire period (February 1, 2004 through July 31, 2004).
Actual expenses:
The first line of each share class in the table provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading entitled "Expenses paid during
period" to estimate the expenses you paid on your account during this period.
There are some account fees that are charged to certain types of accounts, such
as Individual Retirement Accounts (generally, a $10 fee is charged to set up the
account and an additional $10 fee is charged to the account annually) that would
increase the amount of expenses paid on your account. In addition, Class F
shareholders may be subject to fees charged by financial intermediaries,
typically ranging from 0.50% to 3.00% of assets annually depending on services
offered. You may use the information in the table to estimate the impact of
these fees by adding the amount of the fees to the number in the first line for
your share class under the heading entitled "Expenses paid during period," and
subtracting the amount of the fees from the number in that first line under the
heading entitled "Ending account value."
Hypothetical example for comparison purposes:
The second line of each share class in the table provides information about
hypothetical account values and hypothetical expenses based on the actual
expense ratio for the share class and an assumed rate of return of 5.00% per
year before expenses, which is not the actual return of the share class. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing costs of investing in the Funds and other
funds. To do so, compare this 5.00% hypothetical example with the 5.00%
hypothetical examples that appear in the shareholder reports of the other funds.
There are some account fees that are charged to certain shareholders, such as
Individual Retirement Accounts (generally, a $10 fee is charged to set up the
account and an additional $10 fee is charged to the account annually) that would
increase the amount of expenses paid on your account. In addition, Class F
shareholders may be subject to fees charged by financial intermediaries,
typically ranging from 0.50% to 3.00% of assets annually depending on services
offered. You may use the information in the table to estimate the impact of
these fees by adding the amount of the fees to the number in the second line for
your share class under the heading entitled "Expenses paid during period," and
subtracting the amount of the fees from the number in that second line under the
heading entitled "Ending account value."
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads). Therefore, the second line of each share class in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
The Tax-Exempt Fund of Maryland
Beginning Ending
account value account value Expenses paid Annualized
2/1/2004 7/31/2004 during period<F1>expense ratio
Class A -- actual return $1,000.00 $1,003.98 $3.54 .71%
Class A -- assumed 5% return 1,000.00 1,021.33 3.57 .71
Class B -- actual return 1,000.00 1,000.27 7.31 1.47
Class B -- assumed 5% return 1,000.00 1,017.55 7.37 1.47
Class C -- actual return 1,000.00 999.64 7.95 1.60
Class C -- assumed 5% return 1,000.00 1,016.91 8.02 1.60
Class F -- actual return 1,000.00 1,003.32 4.18 .84
Class F -- assumed 5% return 1,000.00 1,020.69 4.22 .84
Class R-5 -- actual return 1,000.00 1,004.84 2.64 .53
Class R-5 -- assumed 5% return 1,000.00 1,022.23 2.66 .53
The Tax-Exempt Fund of Virginia
Beginning Ending
account value account value Expenses paid Annualized
2/1/2004 7/31/2004 during period<F1>expense ratio
Class A -- actual return $1,000.00 $ 996.21 3.38 .68%
Class A -- assumed 5% return 1,000.00 1,021.48 3.42 .68
Class B -- actual return 1,000.00 992.56 7.13 1.44
Class B -- assumed 5% return 1,000.00 1,017.70 7.22 1.44
Class C -- actual return 1,000.00 991.94 7.78 1.57
Class C -- assumed 5% return 1,000.00 1,017.06 7.87 1.57
Class F -- actual return 1,000.00 995.59 4.02 .81
Class F -- assumed 5% return 1,000.00 1,020.84 4.07 .81
Class R-5 -- actual return 1,000.00 997.09 2.48 .50
Class R-5 -- assumed 5% return 1,000.00 1,022.38 2.51 .50
<FN>
<F1>1Expenses are equal to the annualized expense ratio, multiplied by the
average account value over the period, multiplied by the number of days in the
period (182), and divided by 366 (to reflect the one-half year period).
</FN>
Board of Trustees and officers
The American Funds Tax-Exempt Series I
Independent Trustees
Number of
Year first portfolios
elected a in Fund
Trustee complex<F2>
of the Principal occupation(s) during overseen
Name and age Trust<F1> past five years by Trustee Other directorships<F3> held
Cyrus A. Ansary, 70 1986 President, Investment Services 3 JPMorgan Value Opportunities Fund
International Co. LLC (private investment
company for various operating entities)
Daniel J. Callahan III, 72 2002 Vice Chairman and Treasurer, The Morris & 3 JPMorgan Value Opportunities Fund;
Gwendolyn Cafritz Foundation WGL Holdings, Inc.
James C. Miller III, 62 2000 Chairman, The CapAnalysis Group, LLC 3 Flyi Inc.; JPMorgan Value
(economic, financial and regulatory Opportunities Fund
consulting); Former Counselor, Citizens for
a Sound Economy
Katherine D. Ortega, 70 2003 Former Treasurer of the United States 3 JPMorgan Value Opportunities Fund;
The Kroger Co.; Rayonier Inc.
J. Knox Singleton, 56 2004 President and Chief Executive Officer, 3 Healthcare Realty Trust; JPMorgan
INOVA Health System Value Opportunities Fund
T. Eugene Smith, 73 1986 President, T. Eugene Smith, Inc. (real 3 JPMorgan Value Opportunities Fund
estate consulting, planning, and development)
Interested Trustees<F4>
Name, age and position with Trust
James H. Lemon, Jr., 68 1986 Chairman of the Board and Chief Executive 3 JPMorgan Value Opportunities Fund
Chairman of the Board Officer, The Johnston-Lemon Group,
Incorporated (financial services holding
company)
Harry J. Lister, 68 1986 Director, Washington Management Corporation 3 JPMorgan Value Opportunities Fund
Vice Chairman of the Board
Jeffrey L. Steele, 58 2002 President and Director, Washington 3 JPMorgan Value Opportunities Fund
President Management Corporation; Former Partner,
Dechert Price and Rhoads
Chairman Emeritus,
Stephen Hartwell
Officers
Year first
elected an
officer
Name, age and of the
position with Trust Trust<F1> Principal occupation(s) during past five years
Howard L. Kitzmiller, 74 1986 Director, Senior Vice President, Secretary and Assistant Treasurer,
Senior Vice President and Washington Management Corporation
Secretary
Lois A. Erhard, 52 1988 Vice President, Washington Management Corporation
Vice President
Michael W. Stockton, 37 1996 Director, Vice President, Assistant Secretary and Assistant Treasurer,
Vice President, Assistant Washington Management Corporation
Secretary and Treasurer
J. Lanier Frank, 43 1998 Assistant Vice President, Washington Management Corporation
Assistant Vice President
Ashley L. Shaw, 35 <F5> 2000 Assistant Secretary, Washington Management Corporation; Former Attorney/Law Clerk
Assistant Secretary
The statement of additional information includes additional information about
the Trust's Trustees and is available without charge upon request by calling
American Funds Service Company at 800/421-0180. The address for all Trustees and
officers of the Trust is 1101 Vermont Avenue, NW, Washington, DC, 20005,
Attention: Trust Secretary.
<FN>
<F1> Trustees and officers of the Trust serve until their resignation, removal
or retirement.
<F2> In each instance where a Trustee of the Trust serves on other Funds
affiliated with The American Funds Group, such service is as a Director of
Washington Mutual Investors Fund.
<F3> This includes all directorships other than those in The American Funds
Group that are held by each Trustee as a director of a public company or a
registered investment company. JPMorgan Value Opportunities Fund was formerly
The Growth Fund of Washington.
<F4> "Interested persons" within the meaning of the 1940 Act, on the basis of
their affiliation with the Trust's Business Manager, Washington Management
Corporation.
<F5> Ashley L. Shaw is the daughter of James H. Lemon, Jr.
</FN>
Offices
The American Funds Tax-Exempt Series
Offices of the Funds and of the business manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005-3521
202/842-5665
Investment adviser
Capital Research and Management Company
333 South Hope Street
Los Angeles, CA 90071-1406
135 South State College Boulevard
Brea, CA 92821-5823
Transfer agent
American Funds Service Company
P.O. Box 2280
Norfolk, VA 23501-2280
Custodian of assets
JPMorgan Chase Bank
270 Park Avenue
New York, NY 10017-2070
Counsel
Thompson, O'Donnell, Markham,
Norton & Hannon
1212 New York Avenue, NW
Washington, DC 20005-3987
Independent registered public
accounting firm
PricewaterhouseCoopers LLP
350 South Grand Avenue
Los Angeles, CA 90071-2889
Principal underwriter
American Funds Distributors, Inc.
333 South Hope Street
Los Angeles, CA 90071-1406
There are several ways to invest in The Tax-Exempt Fund of Maryland and The
Tax-Exempt Fund of Virginia. Class A shares are subject to a 3.75% maximum
up-front sales charge that declines for accounts of $100,000 or more and
eliminated for purchases of $1 million or more. Other share classes have no
up-front sales charges but are subject to additional annual expenses and fees.
For the Maryland and Virginia Funds, annual expenses for Class B shares were
higher (0.76% for the Maryland Fund and 0.75% for the Virginia Fund) than for
Class A shares; Class B shares convert to Class A shares after eight years of
ownership. If redeemed within six years, Class B shares may also be subject to a
contingent deferred sales charge ("CDSC") of up to 5% that declines over time.
Class C shares were subject to annual expenses 0.88% higher than those for Class
A shares and a 1% CDSC if redeemed within the first year after purchase. Class C
shares convert to Class F shares after 10 years. Class F shares, which are
available only through certain fee-based programs offered by broker-dealer firms
and registered investment advisers, had annual expenses 0.13% higher than did
Class A shares, and an annual asset-based fee charged by the sponsoring firm.
Expenses are deducted from income earned by the Funds. As a result, dividends
and investment results will differ for each share class.
Investors should carefully consider the investment objectives, risks, charges
and expenses of the Funds. This and other important information is contained in
the Fund's prospectus, which can be obtained from your financial adviser and
should be read carefully before investing. You may also call American Funds
Service Company at 800/421-0180 or visit the American Funds website at
americanfunds.com.
"American Funds Proxy Voting Guidelines" which describes how we vote proxies
relating to portfolio securities is available upon request, free of charge, by
calling American Funds Service Company, visiting the American Funds website or
accessing the U.S. Securities and Exchange Commission website at www.sec.gov.
The Funds' proxy voting records for the 12 months ended June 30, 2004, are also
available on the American Funds and SEC websites.
The Funds file a complete list of their portfolio holdings with the U.S.
Securities and Exchange Commission for the first and third quarters of each
fiscal year on Forms N-Q. When filed, Forms N-Q will be available free of
charge, upon request, by accessing the U.S. Securities and Exchange Commission
website or by calling American Funds Service Company. You may also review or,
for a fee, copy the forms at the Commission's Public Reference Room in
Washington, DC (800/SEC-0330).
This report is for the information of shareholders in the The American Funds
Tax-Exempt Series I, but it may also be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about charges,
expenses, investment objectives and operating policies of the Funds. If used as
sales material after September 30, 2004, this report must be accompanied by an
American Funds statistical update for the most recently completed calendar
quarter.
(American Funds Logo)
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The Capital Group Companies
ITEM 2 - Code of Ethics
The Registrant has adopted a code of ethics that applies to its Principal
Executive Officer and Principal Financial Officer. The Registrant undertakes to
provide to any person without charge, upon request, a copy of the Code of
Ethics. Such request can be made to American Funds Service Company at
800/421-0180 or to the Secretary of the Registrant, 1101 Vermont Avenue, NW,
Suite 600, Washington, DC 20005.
ITEM 3 - Audit Committee Financial Expert
The Registrant's Board has determined that Katherine D. Ortega, a member of the
Registrant's Audit Committee, is an "audit committee financial expert" and
"independent," as such terms are defined in this Item. This designation will not
increase the designee's duties, obligations or liability as compared to her
duties, obligations and liability as a member of the Audit Committee and of the
Board; nor will it reduce the responsibility of the other Audit Committee
members. There may be other individuals who, through education or experience,
would qualify as "audit committee financial experts" if the Board had designated
them as such. Most importantly, the Board believes each member of the Audit
Committee contributes significantly to the effective oversight of the
Registrant's financial statements and condition.
ITEM 4 - Principal Accountant Fees and Services
4. Fees billed by the Registrant's auditors for each of the last two fiscal
years, including fees for non-audit services billed to the adviser and
affiliates for engagements that relate directly to the operations and financial
reporting of the Registrant, and a description of the nature of the services
comprising the fees, are listed below:
Registrant:
a) Audit Fees:
2003 $54,000
2004 $53,000
b) Audit- Related Fees:
2003 none
2004 none
The audit-related fees consist of assurance
and related services relating to the
examination of the Registrant's investment
adviser conducted in accordance with
Statement on Auditing Standards Number 70
issued by the American Institute of
Certified Public Accountants.
c) Tax Fees:
2003 $7,000
2004 $6,000
The tax fees consist of professional
services relating to the preparation of the
Registrant's tax returns.
d) All Other Fees:
2003 none
2004 none
Adviser and affiliates (includes only fees for non-audit
services billed to the adviser and affiliates for engagements
that relate directly to the operations and financial reporting
of the Registrant and were subject to the pre-approval
policies described below):
a) Audit- Related Fees:
2003 none
2004 none
b) Tax Fees:
2003 none
2004 none
c) All Other Fees:
2003 none
2004 none
The Registrant's Audit Committee will pre-approve all audit and permissible
non-audit services that the Committee considers compatible with maintaining
the auditors' independence. The pre-approval requirement will extend to all
non-audit services provided to the Registrant, the business manager or
investment adviser, and any entity controlling, controlled by, or under
common control with the business manager or investment adviser that
provides ongoing services to the Registrant, if the engagement relates
directly to the operations and financial reporting of the registrant. The
Committee will not delegate its responsibility to pre-approve these
services to the business manager or investment adviser. The Committee may
delegate to one or more Committee members the authority to review and
pre-approve audit and permissible non-audit services. Actions taken under
any such delegation will be reported to the full Committee at its next
meeting. The pre-approval requirement is waived with respect to non-audit
services if certain conditions are met. The pre-approval requirement was
not waived for any of the services listed above under paragraphs b, c and
d.
Aggregate non-audit fees paid to the Registrant's auditors, including fees
for all services billed to the Registrant and the adviser and affiliates
that provide ongoing services to the Registrant were $7,000 for fiscal year
2003 and $6,000 for fiscal year 2004. The non-audit services represented by
these amounts were brought to the attention of the Committee and considered
to be compatible with maintaining the auditors' independence.
ITEM 5 - Audit Committee of Listed Registrants
Not applicable.
ITEM 6 - Schedule of Investments
The full schedule of investments for each Fund is included as part of the report
to shareholders filed under Item 1 of this Form.
ITEM 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable to this Registrant, insofar as the Registrant is not a closed-end
management investment company.
ITEM 8 - Purchase of Equity Securities by Closed End Management Investment
Company and Affiliated Procedures Not applicable to this Registrant, insofar as
the Registrant is not a closed-end management investment company.
ITEM 9 - Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees since the registrant
last submitted a proxy statement to its shareholders. The procedures are as
follows. The Registrant has a Governance Committee comprised solely of persons
who are not considered "interested persons" of the registrant within the meaning
of the Investment Company Act of 1940. The committee periodically reviews such
issues as the Board's composition, responsibilities, committees, compensation
and other relevant issues, and recommends any appropriate changes to the full
Board of Trustees. While the committee normally is able to identify from its own
resources an ample number of qualified candidates, it will consider shareholder
suggestions of persons to be considered as nominees to fill future vacancies on
the Board. Such suggestions must be sent in writing to the Governance Committee
of the Registrant, c/o the Registrant's Secretary, and should be accompanied by
complete biographical and occupational data on the prospective nominee, along
with a written consent of the prospective nominee for consideration of his or
her name by the Governance Committee.
ITEM 10 - Controls and Procedures
(a) The Registrant's Principal Executive Officer and Treasurer have concluded,
based on their evaluation of the Registrant's disclosure controls and procedures
(as such term is defined in rule 30a-3 under the Investment Company Act of
1940), that such controls and procedures are adequate and reasonably designed to
achieve the purposes described in paragraph (c) of such rule.
(b) There were no changes in the Registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the Registrant's last fiscal half-year (the Registrant's
second fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
ITEM 11 - Exhibits
(a) The Code of Ethics that is the subject of the disclosure required by Item 2
is attached as an exhibit hereto.
(b) The certifications required by Rule 30a-2 of the Investment Company Act of
1940 and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are attached as
exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE AMERICAN FUNDS TAX-EXEMPT SERIES I
By /s/ Jeffrey L. Steele, President and PEO
Date: September 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Jeffrey L. Steele, President and PEO
Date: September 27, 2004
By /s/ Michael W. Stockton, Vice President and Treasurer
Date: September 27, 2004