Table of Contents
USAA Family of Funds 1
Message from the President 2
Fund Performance 4
Investment Review:
Long-Term Fund 6
Intermediate-Term Fund 11
Short-Term Fund 15
Tax Exempt Money Market Fund 19
Financial Information:
Independent Auditors' Report 23
Statements of Assets and Liabilities 24
Portfolios of Investments in Securities:
Long-Term Fund 27
Intermediate-Term Fund 34
Short-Term Fund 46
Tax Exempt Money Market Fund 55
Notes to Portfolios of Investments 68
Statements of Operations 69
Statements of Changes in Net Assets 70
Notes to Financial Statements 72
Important Information:
Through our ongoing efforts to reduce expenses and respond to
shareholder requests, your annual and semiannual report mailings are
now "streamlined." One copy of each report will be sent to each
address, instead of our previous practice of sending one report to every
registered owner. For many shareholders and their families, this eliminates
duplicate copies, saving paper and postage costs to the Funds.
If you are the primary shareholder on at least one account, prefer not
to participate in streamlining, and would like to continue receiving
one report per registered account owner, you may request this in
writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during
business hours.
This report is for the information of the shareholders and others who
have received a copy of the currently effective prospectus of the USAA
Tax Exempt Fund, Inc., managed by USAA Investment Management Company
(IMCO). It may be used as sales literature only when preceded or
accompanied by a current prospectus which gives further details about
the funds.
USAA with the eagle is registered in the U.S. Patent & Trademark
Office. (copyright)1996, USAA. All rights reserved.
USAA Family of Funds Performance Summary
If you own only one or two USAA funds, you may not be aware of the
performance of our other funds. This summary is a snapshot of the
performance of all 32 funds by investment objective as of March 31,
1996.
For more complete information about the mutual funds managed and
distributed by USAA IMCO, including charges and expenses, please call
1-800-531-8181 for a prospectus. Read it carefully before you invest.
<TABLE>
<CAPTION>
Average Annual Total Return* Yield
Investment Inception Since 7-Day 30-Day1
Objective Date 1 yr 5 yrs 10 yrs Inception Simple SEC
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Aggressive Growth 10/19/81 53.09 16.33 11.30 - - -
Emerging Markets2 11/7/94 22.89 - - 4.97 - -
Gold2 8/15/84 22.74 11.44 6.69 - - -
Growth 4/5/71 28.37 14.63 11.60 - - -
Growth & Income 6/1/93 31.71 - - 15.08 - -
International2 7/11/88 22.25 12.71 - 10.15 - -
World Growth2 10/1/92 24.29 - - 13.28 - -
Asset Allocation
Balanced Strategy 9/1/95 - - - 5.16 - -
Cornerstone Strategy2 8/15/84 22.70 12.02 11.45 - - -
Growth and Tax Strategy3** 1/11/89 17.89 9.91 - 9.87 - 3.59
Growth Strategy2 9/1/95 - - - 14.32 - -
Income Strategy 9/1/95 - - - 4.46 - 5.04
Income - Taxable
GNMA 2/1/91 9.42 7.90 - 7.69 - 6.81
Income 3/4/74 12.98 9.15 9.37 - - 6.68
Income Stock 5/4/87 24.73 13.01 - 12.32 - -
Short-Term Bond 6/1/93 9.03 - - 5.01 - 6.30
Income - Tax Exempt
Long-Term3** 3/19/82 7.88 7.57 7.60 - - 5.72
Intermediate-Term3** 3/19/82 7.97 7.51 7.17 - - 5.23
Short-Term3** 3/19/82 5.83 5.32 5.54 - - 4.33
California Bond3** 8/1/89 9.35 7.64 - 7.42 - 5.54
Florida Tax-Free Income3** 10/1/93 7.66 - - 2.26 - 5.61
New York Bond3** 10/15/90 7.67 7.61 - 8.42 - 5.49
Texas Tax-Free Income3** 8/1/94 9.42 - - 9.08 - 5.41
Virginia Bond3** 10/15/90 7.57 7.77 - 8.16 - 5.37
Money Market
Money Market4 2/2/81 5.64 4.46 5.92 - 5.00 -
Tax Exempt Money Market3,4** 2/6/84 3.65 3.22 4.30 - 3.17 -
Treasury Money Market Trust4 2/1/91 5.48 4.20 - 4.21 4.96 -
California Money Market3,4** 8/1/89 3.58 3.08 - 3.68 3.14 -
Florida Tax-Free Money Market3,4** 10/1/93 3.51 - - 2.93 3.06 -
New York Money Market3,4** 10/15/90 3.56 2.91 - 3.05 3.07 -
Texas Tax-Free Money Market3,4** 8/1/94 3.49 - - 3.34 3.06 -
Virginia Money Market3,4** 10/15/90 3.42 3.04 - 3.20 2.99 -
</TABLE>
1 Calculated as prescribed by the Securities and Exchange Commission.
2 Foreign investing is subject to additional risks, which are
discussed in the funds' prospectuses.
3 Some income may be subject to state or local taxes or the federal
alternative minimum tax.
4 An investment in a money market fund is neither insured nor
guaranteed by the U.S. government and there is no assurance that
any of the funds will be able to maintain a stable net asset value
of $1 per share.
* Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested dividends
and capital gain distributions. The performance data quoted represent past
performance and are not an indication of future results. Investment return and
principal value of an investment will fluctuate, and an investor's
shares, when redeemed, may be worth more or less than their original
cost.
** IRAs are not available for tax-exempt funds. The Growth and Tax
Strategy Fund is not available as an investment for your IRA because
the majority of its income is tax exempt. California, Florida, New
York, Texas, and Virginia funds available to residents only.
Message from the President
[A photo of Michael J.C. Roth, President and Vice Chairman of the Board,
appears here.]
One of the most striking reactions of an audience to a speaker
that I have ever witnessed came during a shareholders' meeting that
we had last year. The speaker was Ken Willmann, who guides our efforts
in the tax-exempt bond area. He was talking about bond investors in general,
and the statement that evoked such a memorable reaction was, "If you are going
to take the income, you should not invest in bonds." There was dead silence in
the room.
Ken's statement is magnificently perceptive. There has been a tradition of
opposite thinking. For as long as I can remember people talking about
investments, the phrase, "I only spend the income - I never touch the
principal," has elicited nods of admiration. Here was a disciplined person.
This thinking even found its way into our legal process. During my six years
as a trust investment officer, I frequently saw trust instruments which
allowed beneficiaries to spend income but forbade them to "invade corpus."
In 1990, we first published information showing the experience of an
investor who made one of two theoretical choices in 1975. One was to purchase
a 9% bond, and the other was to buy the S&P 40 Utilities Index (an unmanaged
index representing the market value weighted performance of a group of
approximately 40 publicly traded utilities stocks). Although this is
theoretical, it provides us easy measurement. In this report we have updated
the bond data through 1995. The black bars on the chart show the value of the
bond portfolio assuming all the interest is spent, and we applied the actual
rates of inflation to the portfolio. The income from the bond, by 1995, is of
course unchanging, and its purchasing power has also fallen, to about 1/3 of
its 1975 level.
The gray bars on the chart reflect the real value of the portfolio if
interest is reinvested. This chart illustrates just what Ken Willmann said.
The only way to maintain the purchasing power of a bond portfolio is to
reinvest the income. The primary purpose of investing in bonds is the
excellent synergy they add to a portfolio. Their combination with stocks
can result in a portfolio that has better return and risk characteristics
than either stocks or bonds alone.
But when it comes time to take some of your investment return, you do
not want to only take your bond portfolio's income. That is the time
to look at total return.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
[A graph is shown here entitled "Real Value of a Bond Portfolio - $100,000
Invested on January 1, 1975". The graph shows the impact of inflation on a
$100,000 investment with interest reinvested vs. interest distributed. The
vertical axis shows the dollar amount and the horizontal axis shows the year.
The data is as follows:
Interest Interest
Reinvested Distributed
1975 101,860 93,449
1976 105,932 89,161
1977 108,144 83,507
1978 108,114 76,591
1979 104,002 67,594
1980 100,856 60,137
1981 100,912 55,202
1982 105,896 53,145
1983 111,200 51,200
1984 116,603 49,254
1985 122,480 47,465
1986 132,011 46,934
1987 137,814 44,952
1988 143,859 43,049
1989 149,839 41,136
1990 153,920 38,768
1991 162,791 37,617
1992 172,442 36,557
1993 182,931 35,578
1994 194,209 34,653
1995 206,042 33,729]
NOTE: Real value is the purchasing power of the dollars accumulated
when the actual rate of inflation is applied. The return used in this
example of a fixed-rate investment is hypothetical and for illustrative
purposes only. Investors are encouraged to closely monitor changes in
any factor which may affect their investments.
Fund Performance
The graph and table below compare the total return of the three USAA
tax-exempt bond funds for the 10-year period ended March 31, 1996, to
the Lehman Brothers Municipal Bond Index, an unmanaged total return
performance benchmark for the investment grade tax-exempt bond market.
This index, like most broad market indices, is a hypothetical portfolio
which, unlike a mutual fund, has no operating expenses or transaction
costs. It assumes all income is reinvested. All tax-exempt bond funds
will find it difficult to outperform such an index, since funds have
expenses.
Average Annual Total Returns as of 3/31/96
1 YEAR 5 YEARS 10 YEARS
Long-Term Fund 7.88% 7.57% 7.60%
Intermediate-Term Fund 7.97% 7.51% 7.17%
Short-Term Fund 5.83% 5.32% 5.54%
Lehman Brothers Municipal Bond Index 8.38% 8.08% 8.06%
[A graph is shown here which is a comparison of the change in value of a
$10,000 investment for the period of 3/31/86 to 3/31/96, with dividends
and capital gains reinvested. The vertical axis shows the dollar amount
and the horizontal axis shows the time period. The ending values for the
items graphed are:
Lehman Brothers Muni. Bond Index $21,713
USAA Long-Term Fund 20,797
USAA Intermediate-Term Fund 19,984
USAA Short-Term Fund 17,150
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gains distributions. No adjustment
has been made for taxes payable to shareholders on their reinvested dividends
and capital gains distributions. The performance data quoted represent past
performance and are not an indication of future results. Investment return
and principal value of an investment will fluctuate, and an investor's shares,
when redeemed, may be worth more or less than their original cost.
The graph on the preceding page shows how the value of a $10,000
investment on March 31, 1986, in the Long-Term, Intermediate-Term, and
Short-Term Funds would have grown in value to $20,797, $19,984, and $17,150,
respectively, at March 31, 1996. The same $10,000 investment based on
the long-term benchmark of the Lehman Brothers Municipal Bond Index
for the same time period would be valued at $21,713. This comparison
illustrates that the longer the bonds are in a fund, the higher the
potential returns offered to compensate investors for long-term
inflation risk and sensitivity to changes in interest rates. In other
words, the higher the risk, the higher the potential reward. While
past performance is no guarantee of future results, the USAA funds
generally performed as expected, given their varying maturities - the
longer the maturity, the greater the return.
The exemption of interest income for federal income tax purposes does
not necessarily result in exemption under the income or other tax laws
of any state or local taxing authority. Shareholders should consult their
tax advisors about the status of distributions from a fund in their own
states and localities. Income may be subject to federal, state, or local
taxes or the alternative minimum tax.
Investment Review
Long-Term Fund
Objective: Provide investors with interest income that is exempt from federal
income tax.
Types of Investments: Invests primarily in investment grade tax-exempt
securities of varying maturities. The average weighted portfolio maturity
is 10 years or more.
3/31/95 3/31/96
Net Assets $1,774.6 Million $1,804.1 Million
Net Asset Value Per Share $12.96 $13.17
Average Annual Total Returns as of 3/31/96
1 Year 7.88%
5 Years 7.57%
10 Years 7.60%
30-Day SEC Yield* on March 31, 1996 5.72%
*Calculated as prescribed by the Securities and Exchange Commission
[A graph is shown here comparing the 12-month dividend yield of the USAA Long-
Term Fund and the Lipper General Municipal Debt Funds Average from 3/31/87 to
3/31/96. The vertical axis shows the yield and the horizontal axis shows the
time period. The values are:
USAA Long-
Term Fund 7.45 7.71 7.57 7.29 7.15 6.78 6.21 6.10 6.01 6.03
Lipper Gen.
Muni. Debt
Funds Avg. 7.00 7.35 7.10 6.89 6.69 6.37 5.75 5.61 5.27 5.03
The Lipper General Municipal Debt Funds Average is computed by Lipper Analytical
Services, an independent organization that monitors the performance of mutual
funds. 12-month dividend yield is computed by dividing income dividends paid
during the previous 12 months by the latest month-end net asset value adjusted
for capital gains distributions. The graph represents data from 3/31/87 to
3/31/96.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gains distributions. No
adjustment has been made for taxes payable to shareholders on their
reinvested dividends and capital gains distributions. The performance
data quoted represent past performance and are not an indication of
future results. Investment return and principal value of an investment
will fluctuate, and an investor's shares, when redeemed, may be worth
more or less than their original cost.
[A photo of Kenneth E. Willmann, Portfolio Manager appears here]
Financial Markets
The bull market in bonds which began in November 1994, lasted for most
of the fiscal year ended March 31, 1996. Bonds generally, and the
Long-Term Fund in particular, experienced declining interest rates and
rising prices from March 31, 1995, until January or February 1996.
Then interest rates turned up, and bond prices fell. This can be seen
in the graph below. Join me in studying this graph, and I will attempt
to point out and explain several interesting observations.
[A graph is shown here which is a comparison of Municipal and U.S. Treasury
Bond Yields from 3/31/95 to 3/29/96. The vertical axis shows the yield and
the horizontal axis shows the time period. The ending yields are 6.67% for
the 30 year U.S. Treasury and 5.69% for the Bond Buyer 40-Bond Index (BBI40).]
Note: Past performance is no guarantee of future results. The results of the
comparison reflect current conditions as regards tax laws, inflationary trends,
and general corporate policies and practices. Investors are encouraged to
closely monitor changes in any factor which may affect their investments.
Before we begin, let me explain the structure of the graph itself. The
vertical axis is interest rates or yields, and the horizontal axis is
dates. The dates used are the Fridays of every week in the 12-month
period ended Friday, March 29, 1996. The top line is the yield of the
active 30-year U.S. Treasury bond. This is generally considered the
benchmark for long-term interest rates in the U.S. and is often referred
to as the "Long Bond." The bottom line is the yield on the Bond Buyer
40-bond Index (BBI40). This is the industry standard for the yield of
long-term, investment-grade municipal bonds.
The most obvious information which appears in this graph is what happened
to interest rates during the period. The yield on the Long Bond fell from
a high of 7.43% on March 31, 1995, to a low of 5.95% on December 29, 1995.
This occurred because the Federal Reserve Board cut interest rates several
times in calendar year 1995. The economy was slowing also, which led to a
decline in perceived inflation risks. Inflation is a major determinant of
the level of interest rates. Yields began to rise again in January and ended
the period at 6.67% on March 29, 1996. Several factors came together to
cause this rise. First, the market became concerned that inflation
might rise since the economy was no longer weakening. Second, the
inability of Congress and the President to agree on a budget raised the
general apprehension level in financial markets. Third, the Presidential
primary season began. The original discord in the Republican party and
the uncertainty surrounding potential third party candidates fed this
apprehension.
Municipal bonds followed a similar pattern. Interestingly, the BBI40
line in the graph shows that in the first three quarters of the time
period, yields did not decline as much as that of the Long Bond. This led
to a narrowing of the spread between the yields of the BBI40 and the Long
Bond. Discussions of tax reform and uncertainty as to what effect it might
have on the tax-exempt status of municipal bond interest caused this to
occur. As the Presidential primary season got underway in January 1996, the
lack of unanimity among Republican candidates on this issue and the
early identification of Senator Bob Dole as the Republican nominee led
the financial markets to lose some fear of tax reform. As of this
writing, Senator Dole has not made any definite policy statements on
tax reform. He merely observes that the issue deserves study. Notice
that as interest rates started back up, municipal yields did not
bottom out until early February. This lag widened the spread between
the BBI40 and the Long Bond.
All of the foregoing may seem pretty technical, but it does illustrate
a valuable point. Interest rates in different sectors of the U. S.
financial markets do not move in lock step. Over short periods, such as
the month of January, the yields of the BBI40 and the Long Bond actually
moved in opposite directions. Over longer periods, however, the trends are
the same.
The Long-Term Fund
How did all of this affect the Long-Term Fund? Since bond prices move
opposite to yields, the first 10 months showed a strong rise in the net asset
value per share (NAV). The NAV was $12.96 on March 31, 1995, and it rose to
$13.71 on February 13, 1996. For those same dates, the 30-day SEC Yield fell
from 5.96% to a still attractive 5.30%. By March 31, 1996, the NAV fell back to
$13.17 and the SEC Yield rose to 5.72%. As one would expect, the performance of
the Long-Term Fund mirrored that of the municipal bond market.
Current Economy
The U.S. economy is currently experiencing slow growth and relatively
low inflation. Since it is an election year, political policy statements
could cause rapid shifts in market sentiment and interest rates. One area
to which we will pay particular attention is tax reform. If this becomes a
major campaign issue, municipal interest rates could be affected
separately from the general interest-rate markets. We will respond as
necessary when we know the nature of the tax reforms, if indeed any
are proposed.
Strategy
I will continue to follow a strategy of favoring tax-exempt income
over capital gains while maintaining a high quality portfolio. For the
12-months ended March 31, 1996, the dividend yield1 on the Fund was 6.03%,
well ahead of Lipper's General Municipal Debt Funds average of 5.03% for the
228 funds in the category.2 Compounding of the tax-exempt income is the primary
reason to own the Fund.
1 12-month dividend yield is computed by dividing income dividends
paid during the previous 12 months by the latest month-end net asset
value adjusted for capital gains distributions.
2 Lipper Analytical Services is an independent organization that
monitors the performance of mutual funds.
Portfolio Ratings/Mix
March 31, 1996
[A pie chart is shown here depicting the the Portfolio Ratings/Mix as of
March 31, 1996 for the USAA Long-Term Fund to be: AAA - 14%, AA - 32%,
A - 29% and BBB - 25%]
This chart reflects the highest rating of either Moody's Investors
Service, Standard & Poor's Rating Group or Fitch Investors Service.
See page 27 for a complete listing of the Portfolio of Investments in
Securities.
Note: Income may be subject to federal, state or local taxes, or the
alternative minimum tax.
Investment Review
Intermediate-Term Fund
OBJECTIVE: Provide investors with interest income that is exempt from
federal income tax.
Types of Investments: Invests primarily in investment
grade tax-exempt securities of varying maturities. The average weighted
portfolio maturity is between 3 and 10 years.
3/31/95 3/31/96
Net Assets $1,529.8 Million $1,660.0 Million
Net Asset Value Per Share $12.50 $12.77
Average Annual Total Return as of 3/31/96
1 Year 7.97%
5 Years 7.51%
10 Years 7.17%
30-Day SEC Yield* on March 31, 1996 5.23%
*Calculated as prescribed by the Securities and Exchange Commission.
[A graph is shown here comparing the 12-month dividend yield of the USAA
Intermediate-Term Fund and the Lipper Intermediate Municipal Debt Funds
Average from 3/31/87 to 3/31/96. The vertical axis shows the yield and the
horizontal axis shows the time period. The values are:
USAA Inter.
Term Fund 7.08 7.12 7.17 6.98 6.84 6.43 5.75 5.53 5.55 5.57
Lipper Int.
Muni. Debt.
Funds Avg. 6.18 6.29 6.50 6.37 6.18 5.79 5.14 4.75 4.66 4.51
The Lipper Intermediate Municipal Debt Funds Average is computed
by Lipper Analytical Services, an independent organization that
monitors the performance of mutual funds. 12-month dividend yield is
computed by dividing income dividends paid during the previous
02 months by the latest month-end net asset value adjusted
for capital gains distributions. The graph represents data from
3/31/87 to 3/31/96.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested dividends
and capital gain distributions. The performance data quoted represent past
performance and are not an indication of future results. Investment return and
principal value of an investment will fluctuate, and an investor's
shares, when redeemed, may be worth more or less than their original cost.
Message from the Manager
[A photo of Clifford A. Gladson, Portfolio Manager, appears here.]
Credit Market Review
From the date of our last annual report, March 31, 1995, through
February 15, 1996, slow economic growth and an inflation rate under 3%
combined to help lower interest rates on "AA" intermediate-term
municipal bonds by .84%. However, from February 15, 1996, to
March 31, 1996, there was a jump of .52% in bond yields. This reversal was
triggered primarily by two events. One was the Chairman of the Federal Reserve
Board's congressional testimony indicating he felt economic growth was on a
good track, and the other was February's drop in the unemployment rate
to 5.5%.
Fund Performance
I hope the review of the credit market helps explain how a small
annual change in "AA" intermediate-term municipal bond yields, down
.32%, could mask a rather volatile period in the bond market. During
the Fund's fiscal year, April 1, 1995, to March 31, 1996, net asset
value per share increased by $.27 to $12.77.
For this period, your Fund provided a dividend yield1 of 5.57% well
above the 4.51% average dividend yield of the 135 funds in the Lipper
Intermediate Municipal Debt Fund Index2.
1 12-month dividend yield is computed by dividing income dividends
paid during the previous 12 months by the latest month-end net asset
value adjusted for capital gains distributions.
2 Lipper Analytical Services is an independent organization that
monitors the performance of mutual funds.
Credit Analysis: Look Ahead or Look Out
When I was growing up, the security of municipal bonds was seen as
second only to U.S. government securities. In general terms, I continue to
subscribe to this view. However, in each of the last three decades,
one major issuer or some of the smaller issuers in a particular sector have
defaulted. This is why I feel it is important that at USAA Investment
Management Company, every portfolio manager starts as an analyst. Advanced
degrees and professional designations are only entry criteria. Internal
development begins with the basics of financial statement analysis and credit
history, but emphasizes looking to the future.
Our seasoned team of fixed-income professionals aims to avoid problems
before they have a chance to damage the portfolio. Last year, I was
delighted to report that we were well ahead of the curve in avoiding
the Orange County, California, bankruptcy. This year, I want to focus
on some less well-publicized troubled credits.
Back in 1993, we held a number of resource recovery bonds for waste
incinerators. The projects issuing the bonds were paid to burn garbage
and make electricity. They made economic sense as long as communities
were bound to deliver waste, and investor-owned utilities (IOUs) were
required to pay a rather high price for the electricity. However,
landfill operators were challenging municipalities' ability to control
the flow of waste, and the Environmental Protection Agency (EPA) ruled
that some ash be classified as hazardous waste. Even though court
after court ruled in favor of the resource recovery concerns, there
was no consensus on which side would ultimately prevail. We decided to
follow a Roth's Rule, "Don't own a risk you can't analyze," and sold all our
resource recovery bonds. In May 1994, the United States Supreme Court
ruled that flow control was a restraint of interstate trade and the
EPA could classify the ash as hazardous waste. The risk premium
increased on resource recovery bonds and prices fell. Analysts
scrambled to determine the viability of these enterprises.
Some portfolio managers felt this might be a buying opportunity.
However, we saw another risk on the horizon. Most resource recovery
plants are a partnership of a shell authority and an out-of-state
corporate constructor/operator. The specter of interstate competition
among IOUs made high cost power contracts, forced on local IOUs by
state regulators, a potential political liability, i.e., corporate
welfare for out-of-state concerns.
In February 1996, Illinois enacted legislation that eliminated both
the state rate subsidy and the mandatory purchase of power by IOUs from
resource recovery projects. This was done to protect in-state IOUs'
competitive position, lower rates, and save the state money. This
legislation will have a direct negative impact on $500 million
of resource recovery bonds issued in Illinois and indirect
repercussions for the entire resource recovery sector.
I view this as a serious credit development. However, I am happy to
report that we had the foresight to remain an outside observer as this
situation developed.
Current Economy
The economy is currently growing rather slowly, and inflation is
running slightly under 3%. Despite the strong job creation statistics
released in February, there is a high level of job apprehension present
in many sectors of the economy. This is reflected in weaker-than-expected
sales in big ticket durable goods, the reintroduction of automobile rebates,
and reduced corporate spending for capital outlays.
[A pie chart is shown here depicting the Portfolio Ratings/Mix as of March
31, 1996 for the USAA Intermediate-Term Fund to be: AAA - 22%, AA - 11%,
A - 42%, BBB - 20%, BB - 4% and Cash Equivalents - 1%.]
This chart reflects the highest rating of either Moody's Investors
Service, Standard & Poor's Rating Group or Fitch Investors Service.
Unrated securities that have been determined by USAA IMCO to be of
equivalent investment quality to categories AAA and BBB account for
.2% and .1%, respectively, of the Fund's investments.
See page 34 for a complete listing of the Portfolio of Investments in
Securities.
Note: Income may be subject to federal, state or local taxes, or to
the alternative minimum tax.
Investment Review
Short-Term Fund
OBJECTIVE: Provide investors with interest income that is exempt from
federal income tax.
Types Of Investments: Invests primarily in investment grade tax-exempt
securities of varying maturities. The average weighted portfolio
maturity is 3 years or less.
3/31/95 3/31/96
Net Assets $801.2 Million $774.0 Million
Net Asset Value Per Share $10.47 $10.57
Average Annual Total Return as of 3/31/96
1 Year 5.83%
5 Years 5.32%
10 Years 5.54%
30-Day SEC Yield* on March 31, 1996 4.33%
*Calculated as prescribed by the Securities and Exchange Commission.
[A graph is shown here comparing the 12-month dividend yield of the USAA
Short-Term Fund and the Lipper Short-Term Municipal Debt Funds Average from
3/31/87 to 3/31/96. The vertical axis shows the yield and the horizontal axis
shows the time period. The values are:
USAA Short-
Term Fund 5.79 5.80 6.19 6.47 6.47 5.59 4.75 4.33 4.51 4.73
Lipper Short-
Term Muni.
Debt Funds
Average 5.50 5.37 5.85 6.18 6.07 5.41 4.47 3.63 3.94 4.12
The Lipper Short-Term Municipal Debt Funds Average is computed
by Lipper Analytical Services, an independent organization that
monitors the performance of mutual funds. 12-month dividend yield is
computed by dividing income dividends paid during the previous
12 months by the latest month-end net asset value adjusted for capital
gains distributions. The graph represents data from 3/31/87 to 3/31/96.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested
dividends and capital gain distributions. The performance data quoted
represent past performance and are not an indication of future results.
Investment return and principal value of an investment will fluctuate, and
an investor's shares, when redeemed, may be worth more or less than their
original cost.
Message from the Manager
[A photo of Clifford A. Gladson, Portfolio Manager, appears here]
Credit Market Review
During the Fund's last fiscal year, April 1, 1995, to March 31, 1996, the
Federal Reserve Board cut short-term interest rates three times, reducing the
discount rate a total of .75%. Based on low inflation expectations and the
anticipation of the Fed's continued easing of credit, the yields on
3-year "AA" municipal bonds fell .95% by February 15, 1996. Then, the
Chairman of the Federal Reserve Board's expression of satisfaction with the
gradual economic expansion and a strong February employment report combined to
reverse market expectations about future reductions in short-term rates.
Between February 15, 1996, and March 31, 1996, short-term rates jumped up .40%.
The net change in the yield of 3-year "AA" municipal bonds in the Fund's
fiscal year was down .55%.
Fund Performance
Your Fund performed quite well throughout this period of interest rate
volatility. In the Fund's fiscal year ended March 31, 1996, the net
asset value per share increased by $.10 to $10.57. In the same period,
your Fund provided a dividend yield1 of 4.73%, well above the average
dividend yield of 4.12% for the 31 funds in the Lipper Short-Term
Municipal Debt Fund Index.2
I've Got a Secret
After noting the Fund's five-star rating from Morningstar3, an
interviewer asked, "What's your secret?" I remember saying to myself,
"Does he think I'm Lou Gehrig, Nostradamus, or Einstein?" Well, I'm
not the luckiest man alive, I'm not a clairvoyant, and while I have
expertise in the field of municipal bonds, I'm not a genius.
Fortunately, the Fund's four secrets for success are fundamental.
First, the Fund is well designed. Its investment objective centers on
producing a high level of tax-exempt income. Bond funds promote income
accumulation using the power of compounding. Over time, the major
component of a bond's total return is the coupon and reinvestment income.
The income objective provides the focus for prospectus investment policies
which give the manager the discretion to employ a wise level of credit,
maturity, and interest rate risk.
Next, portfolio strategies are developed that meet the Fund's income
objective, and I stick to those strategies. No one has been consistently
successful in predicting the fluctuations in interest rates. This makes market
timing a losing proposition, so I keep the Fund fully invested. The
yields for municipal bonds usually increase as maturity lengthens.
This leads me to extend the Fund's weighted average maturity near its
limit of three years.
The third secret is the steadfast support of USAA Investment
Management Company's fixed-income professionals. Our analysts have
earned my confidence in their ability to identify opportunities and
avoid credit problems. I utilize these assets to select lower
investment grade credits which enhance income and to identify
potential problem credits
1 12-month dividend yield is computed by dividing income dividends
paid during the previous 12 months by the latest month-end net asset
value adjusted for capital gains distributions.
2 Lipper Analytical Services is an independent organization that
monitors the performance of mutual funds.
3 The Fund was awarded a five-star rating for its overall
risk-adjusted performance by Morningstar. It was rated among 269;
188; and 104 national municipal bond debt funds for the 3-, 5-, and
10-year periods ended 2/29/96. Source: Morningstar, Inc. Morningstar
proprietary ratings reflect historical risk-adjusted performance and
are subject to monthly change. Funds with at least three years of
performance history are assigned ratings from one star (lowest) to five
stars (highest). Morningstar ratings are calculated from the Fund's 3-,
5- and 10-year average annual returns in excess of 90-day Treasury bill
returns with appropriate sales charge adjustments and a risk factor that
reflects fund performance below 90-day Treasury bill returns. Ten percent
of the funds receive five stars and 22.5% receive four stars.
for disposal before they can damage the portfolio. Our seasoned team
of fixed-income traders sifts through hundreds, and sometimes thousands,
of offerings every day to help me spot issues with the potential to enhance
your Fund's income. They also help me coordinate swaps (exchanging one
security for another) that increase the Fund's tax-exempt distribution yield
rather than produce taxable capital gains.
Finally, we run an efficient operation, taking advantage of cutting
edge communication and data processing technology to operate from an
economical location. This enables us to keep expenses low in order to
potentially enhance performance without sacrificing the high level of
customer service our shareholders deserve.
Current Economy
The Federal Reserve Board is making a strong argument that its
targeting of a slow and steady 2% rate of economic growth is the
reason that the news on inflation appears so encouraging. It is
difficult to take issue with their reasoning as long as the
unemployment rate remains near 5.6%.
[A pie chart is shown here depicting the Portfolio Ratings/Mix as of
March 31, 1996 for the USAA Short-Term Fund to be: AA - 17%, AAA - 16%,
A - 32%, BB - 2%, BBB - 13% and Cash Equivalents - 20%.]
This chart reflects the highest rating of either Moody's Investors
Service, Standard & Poor's Rating Group or Fitch Investors Service.
Unrated securities that have been determined by USAA IMCO to be of
equivalent investment quality to categories A and BBB account for
1.4% and .6%, respectively, of the Fund's investments.
See page 46 for a complete listing of the Portfolio of Investments in
Securities.
Note: Income may be subject to federal, state or local taxes, or the
alternative minimum tax.
Investment Review
Tax Exempt Money Market Fund
OBJECTIVE: Provide investors with interest income that is exempt from
federal income tax while preserving capital and maintaining liquidity.
Types Of Investments: High quality tax-exempt securities with
maturities of 397 days or less. The Fund will maintain a
dollar-weighted average portfolio maturity of 90 days or less and will
endeavor to maintain a constant net asset value per share of $1.00.*
*An investment in this Fund is neither insured nor guaranteed by the
U.S. government, and there can be no assurance that the Fund will
maintain a stable net asset value of $1.00 per share.
3/31/95 3/31/96
Net Assets $1,456.7 Million $1,529.2 Million
Net Asset Value Per Share $1.00 $1.00
Average Annual Total Return as of 3/31/96
1 Year 3.65%
5 Years 3.22%
10 Years 4.30%
7-Day Simple Yield on March 31, 1996 3.17%
[A graph is shown here comparing the 7-Day yield fo the USAA Tax Exempt Money
Market Fund and the IBC\Donoghue's SB & GP (Tax-Free) from 3/95 to 3/96. The
vertical axis shows the yield and the horizontal axis shows the time period.
The ending value, on 3/25/96, for the USAA Tax Exempt Money Market Fund is
3.15% and the ending value for the IBC/Donoghue's SB & GB (Tax-Free) is 2.78%.]
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. No adjustment
has been made for taxes payable by shareholders on their reinvested dividends
and capital gain distributions. Past performance is no guarantee of future
results and the value of your investment may vary according to the Fund's
performance. The graph tracks the Fund's 7-day simple yield against
IBC/Donoghue's SB (Stock Broker) and GP (General Purpose) (Tax-Free)
Money Funds, an average of all major money market fund yields.
Message from the Manager
[A photo of Thomas Ramos, Portfolio Manager, appears here]
Credit Market Review
With economic numbers reflecting a mixed view of the economy, interest
rates have been quite volatile. Since our last report, long-term rates
have moved from approximately 6.58% at the end of September 1995, down
to 5.95% in late December, back up to near 6.58% in the middle of March
1996. Short rates have had similar movement - starting from 5.60% at the end
of September 1995, down to 4.78% in the middle of February 1996 and then back
up to 5.35% by the middle of March. Since September 1995, one-year tax-exempt
notes moved from near 4.00% to a low of 3.10% in February and back up to 3.55%
in the middle of March. Currently, one-year tax-exempt notes are at 3.56%
which is 66% of comparable taxable yields.
Strategy
The market volatility has given me opportunities to selectively invest
in longer-term issues. Although a majority of the Fund's assets remain
invested in short-term variable-rate securities, I have bought issues
with maturities of approximately one year. These issues have the
potential to provide the Fund with competitive yields during periods
of changing rates. As always, I remain committed to purchasing only
high-quality issues. Consequently, the new entries in the Fund's
portfolio represent either general obligations from strong issuers
such as states, school districts, and municipal utilities or put bonds
whose credit is guaranteed by strong financial institutions.
As I indicated, the majority of the Fund remains invested in variable-rate
issues. The rate on these issues usually changes on a weekly basis. We hold
these securities not only because they have strong credit backing but also
because they have a competitive yield and provide the Fund with flexibility
during the current environment.
The Portfolio
The portfolio reflects our long-standing strategy. We buy and hold issues that
provide competitive yields, but make certain that these issues have a solid
credit backing. We do not base our strategy upon a forecast of interest rates.
[A graph is shown here showing the growth of $10,000, from 3/31/86 to 3/31/96,
invested in the USAA Tax-Exempt Money Market Fund. The vertical axis shows the
dollar amount and the horizontal axis shows the time period. The ending value
is $15,233.]
See page 55 for a complete listing of the Portfolio of Investments in
Securities.
An investment in any money market fund is neither insured nor
guaranteed by the U.S. government and there is no assurance that any
of the funds will be able to maintain a stable net asset value of $1
per share.
(This page left blank intentionally)
Independent Auditors' Report
The Shareholders and Board of Directors
USAA Tax Exempt Fund, Inc.:
We have audited the accompanying statements of assets and liabilities and
portfolios of investments in securities of the Long-Term, Intermediate-Term,
Short-Term, and Tax Exempt Money Market Funds, separate Funds of USAA Tax
Exempt Fund, Inc., as of March 31, 1996, the related statements of operations
for the year then ended, the statements of changes in net assets for each of
the years in the two-year period then ended, and the financial highlights
information presented in note 7 to the financial statements for each of the
years in the five-year period then ended. These financial statements and the
financial highlights information are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of March 31, 1996, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights information
referred to above present fairly, in all material respects, the financial
position of the Long-Term, Intermediate-Term, Short-Term, and Tax
Exempt Money Market Funds, separate Funds of USAA Tax Exempt Fund, Inc., as of
March 31, 1996, the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year period then
ended, and the financial highlights information for each of the years in the
five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
May 10, 1996
Statements of Assets and Liabilities
(In Thousands)
March 31, 1996
Long-Term
Fund
Assets
Investments in securities, at market value
(identified cost of $1,700,714, $1,597,538,
$760,513, and $1,517,347, respectively) $1,781,137
Cash 236
Receivables:
Capital shares sold 919
Interest 30,705
------------
Total assets 1,812,997
------------
Liabilities
Securities purchased 5,258
Capital shares redeemed 618
USAA Investment Management Company 432
USAA Transfer Agency Company 84
Accounts payable and accrued expenses 135
Dividends on capital shares 2,354
------------
Total liabilities 8,881
------------
Net assets applicable to capital
shares outstanding $1,804,116
============
Represented by:
Paid-in capital $1,775,033
Accumulated net realized loss on investments (51,340)
Net unrealized appreciation of investments 80,423
------------
Net assets applicable to capital
shares outstanding $1,804,116
============
Capital shares outstanding 137,015
============
Net asset value, redemption price,
and offering price per share $ 13.17
============
See accompanying notes to financial statements.
Tax Exempt
Intermediate- Short-Term Money Market
Term Fund Fund Fund
$1,654,941 $766,685 $1,517,347
628 947 4,120
216 113 3,103
25,367 10,558 11,273
- ----------- ---------- -----------
1,681,152 778,303 1,535,843
- ----------- ---------- -----------
17,732 2,009 1,500
1,153 1,505 4,381
394 184 358
82 49 79
126 90 122
1,626 446 227
- ----------- ----------- -------------
21,113 4,283 6,667
- ----------- ----------- -------------
$1,660,039 $774,020 $1,529,176
=========== =========== =============
$1,609,471 $771,248 $1,529,176
(6,835) (3,400) -
57,403 6,172 -
- ------------ ----------- -----------
$1,660,039 $774,020 $1,529,176
============ =========== ============
129,973 73,199 1,529,176
============ =========== ============
$ 12.77 $ 10.57 $ 1.00
============ =========== ============
Categories & Definitions
Portfolios of Investments in Securities
March 31, 1996
Fixed Rate Instruments - consist of municipal bonds, notes, and
commercial paper. The coupon rate is constant to maturity. Prior to
maturity, the price of a fixed rate instrument generally varies
inversely to the movement of interest rates. At maturity, the security
pays face value.
Put Bonds - provide the right to tender, or put, the bond for
redemption at face value at specific tender dates prior to final
maturity. The put feature shortens the effective maturity to the next
tender date. Between tender dates, the price of a put bond generally
varies inversely to the movement of interest rates.
Variable Rate Demand Notes (VRDN) - provide the right, on any business
day, to demand, or put, the security for redemption at face value on
either that day or in seven days. The interest rate
is adjusted at the stipulated daily, weekly, or monthly interval to a
rate that reflects current market conditions. In money market funds,
the VRDN's effective maturity is the longer of the next put date or
the interest reset date rather than the final maturity. In bond funds,
the effective maturity is the next put date. Most VRDNs possess a
credit enhancement.
Credit Enhancement (CRE) - adds the financial strength of the provider
to support the underlying obligor's debt service obligations and/or
the put option. The enhancement may be provided by either a high
quality bank, insurance company or other corporation, or a collateral
trust. Typically, the rating agencies evaluate the security based upon
the credit standing of the credit enhancement.
Long-Term Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1996
<TABLE>
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
<C> <S> <C> <C> <C>
Fixed Rate Instruments (98.5%)
Alaska
Housing Finance Corp.
Collateralized RB,
$ 10,650 1991 Second Series 6.90% 6/01/32 $ 11,019
16,820 1993 First Series 5.88 12/01/35 16,427
10,000 1994 First Series 6.70 12/01/19 10,273
15,195 1995 First Series 6.55 12/01/37 15,446
Valdez Marine Terminal RB,
21,175 Series 1985A 7.00 12/01/25 22,544
63,435 Series 1993C 5.65 12/01/28 58,901
Arizona
16,745 Salt River Project Agriculture
and Power
District Electric System RB,
Series 1987E 7.25 1/01/17(a) 17,652
California
12,400 Central Valley Cogeneration
Financing Auth. RB 6.20 7/01/20 12,066
74,000 San Joaquin Hills
Transportation RB 6.75 1/01/32 75,903
Colorado
11,480 Summit County Sports
Facilities RB, Series 1990 7.88 9/01/08 13,333
Connecticut
11,700 Health and Educational Facilities
Auth. RB, Series 1992D 6.80 7/01/22 11,794
District of Columbia
12,160 Health Facilities Mortgage RB,
Series 1985 7.75 8/01/29 12,585
8,000 Hospital RB, Series 1992B 7.00 8/15/15 7,866
Georgia
20,000 GO, Series 1995B 3.20 3/01/15 14,406
10,000 Savannah Economic Development
Auth. PCRB, Series 1995 6.15 3/01/17 10,261
Illinois
Chicago Gas Supply RB,
13,500 Series 1985B 7.50 3/01/15 14,876
7,500 Series 1985C 7.50 3/01/15 8,265
17,250 Series 1995A 6.10 6/01/25 17,225
13,725 Chicago-O'Hare International
Airport RB, Series 1994 8.20 12/01/24 15,823
21,910 Educational Facilities Auth. RB 5.70 12/01/25 20,944
Health Facilities Auth. RB,
3,700 Series 1988 8.10 12/01/03 3,759
17,775 Series 1992 7.00 1/01/15 18,188
10,170 Series 1993A 6.95 11/15/13 10,272
16,360 Series 1993A 7.00 11/15/19 16,415
12,540 Series 1993B 6.95 11/15/13 12,666
6,745 Series 1993B 7.00 11/15/19 6,767
19,600 Quincy Hospital RB, Series 1993 6.00 11/15/18 18,292
10,980 Regional Transport Auth. GO,
Series 1994C (CRE) 7.10 6/01/25 12,224
Indiana
5,505 Fifth Avenue Housing Development
Corp. RB, Series 1992C 7.25 7/01/25 5,719
100,675 Health Facility Financing Auth. RB,
Series 1992C 7.89(b) 7/01/23 13,962
40,000 Indianapolis Airport Facility RB 6.80 4/01/17 41,952
Kansas
60,245 Sedgwick County Mortgage Loan RB,
Senior Series 1991A 7.11(b) 12/01/22 8,681
Louisiana
9,000 Delhi IDA RB, Series 1982 7.50 12/01/12 9,353
25,730 Lake Charles Harbor and Terminal
District Port Facilities RB 7.75 8/15/22 28,713
Massachusetts
24,000 GO, Series 1991A 7.63 6/01/08(a) 27,679
20,125 Health and Educational Facilities
Auth. RB, Series G1 5.50 12/01/27 18,027
Michigan
9,900 Battle Creek Downtown Development
Auth. Development Bonds,
Series 1994 7.60 5/01/16 11,195
Hospital Finance Auth. RB,
15,500 Series 1994A 7.50 10/01/27 16,031
3,250 Series 1995 6.70 1/01/26 3,208
25,000 Series 1995A 5.25 11/15/25 22,479
6,500 Job Development Auth. RB, Series
1990A 8.00 12/01/13 7,164
Minnesota
10,000 Minneapolis GO, Series 1996 5.20 10/01/24 9,273
40,940 St. Paul Housing and Re-
development Auth. Hospital RB,
Series 1993A 6.63 11/01/17 40,681
Mississippi
Lafayette County Hospital RB,
2,940 Series 1991A 7.95 3/01/16 3,153
15,175 Series 1991B 7.95 3/01/16 16,275
Union County Hospital RB,
4,450 Series 1991A 7.95 3/01/16 4,772
8,350 Series 1991B 7.95 3/01/16 8,955
Missouri
21,810 Environmental Improvement and
Energy Resources Auth. PCRB,
Series 1984G-2 (CRE) 8.25 11/15/14 22,602
Nevada
15,650 Humboldt County PCRB, Series 1984 8.30 12/01/14 18,397
New Hampshire
13,070 Business Finance Auth. PCRB,
Series 1993 6.63 2/01/22 13,142
10,785 Higher Educational and Health
Facilities Auth. RB,
Series 1993 6.38 7/01/23 10,667
31,085 Single-Family Mortgage Finance
Auth. RB, Series 1993B 6.05 7/01/25 30,870
New Mexico
16,000 Chaves County Hospital RB 7.25 12/01/22 16,327
30,100 Lordsburg PCRB 6.50 4/01/13 31,261
New York
Dormitory Auth. RB,
22,570 Series 1993C (State Univ. System) 5.40 5/15/23 20,293
8,350 Series 1995A (City Univ. System) 5.63 7/01/16 7,957
9,565 Series 1995A (State Univ. System) 6.00 5/15/25 9,308
6,600 Series 1996 (Department of Health) 5.50 7/01/25 5,963
5,500 Series 1996 (Mather Memorial
Hospital) (CRE) 5.25 7/01/15 5,032(c)
21,500 Series 1996B (Mental Health Services) 6.00 8/15/16 21,398
75,745 Housing New York Corp. MFH RB 5.00 11/01/18 66,186
Medical Care Facilities Finance
Agency RB,
36,275 Series 1994A (New York Hospital) (CRE)6.90 8/15/34 39,630
13,900 Series 1995A (Brookdale Hospital) 6.85 2/15/17 14,284
5,880 Series 1995A (Health Center Projects) 6.38 11/15/19 5,920
New York City GO,
50,000 Series 1995B 7.25 8/15/19 53,682
22,825 Series 1996D 6.00 2/15/25 21,571
13,000 Series 1996J 6.00 2/15/24 12,294
North Carolina
19,905 Housing Finance Agency RB, Series R 6.95 9/01/23 20,889
North Dakota
6,900 Mercer County PCRB, 1995
Second Series (CRE) 6.05 1/01/19 6,964
Oklahoma
2,695 Valley View Hospital Auth. RB,
Series 1996 6.00 8/15/14 2,516
Pennsylvania
27,470 Philadelphia Gas Works RB, 14th Series 6.38 7/01/26 27,514
Puerto Rico
Electric Power Auth. RB,
21,175 Series T 6.38 7/01/24 21,725
25,450 Series X 6.13 7/01/21 25,663
Rhode Island
25,000 Housing and Mortgage Finance Corp.
SFH RB, Series 15-A 6.85 10/01/24 26,084
South Carolina
27,515 Piedmont Municipal Power Agency RB,
Series 1991 4.00 1/01/23 18,948
South Dakota
16,155 Housing Development Auth. Home
Mortgage RB, Series 1993A 6.00 5/01/21 16,133
Texas
19,500 Bell County Health Facilities Development
Corp. RB, Series 1989 (Escrowed) 6.50 7/01/19 21,228
6,725 Department of Housing and Community
Affairs RB, Series 1991A 6.95 7/01/23 7,002
12,500 Harris County Health Facilities RB,
Series 1992 7.13 6/01/15 13,354
19,100 Harris County IDC RB, Series 1992 6.95 2/01/22 20,084
9,630 Red River Auth. PCRB, Series 1984 7.88 9/15/14 10,028
21,055 San Antonio Electric and Gas RB,
Series 1989A 6.00 2/01/14 21,331
10,435 Tyler Health Facilities Development
Corp. RB, Series 1993B 6.75 11/01/25 10,303
Utah
11,625 Intermountain Power Agency RB,
Series 1996D 5.00 7/01/21 10,218
7,000 Juab County PCRB, Series 1991 6.00(d) 8/01/11 6,566
Virginia
9,300 Henrico County IDA Hospital RB,
Series 1985C 7.50 9/01/11(a) 10,501
15,000 Housing Development Auth. Commonwealth
Mortgage RB, Series 1990B,
Subseries B5 6.90 7/01/13 15,535
21,950 Peninsula Ports Auth. RB,
Series 1992 (CRE) 7.38 6/01/20 23,349
Washington
14,000 Chelan County Development Corporation
PCRB, Series 1995 5.85 12/01/31 13,146
66,485 King County GO, Series 1994A 6.25 1/01/34 68,968
68,500 Seattle Metropolitan Sewer RB,Series V 6.20 1/01/32 70,097
West Virginia
12,500 Water Development Auth. RB,
Series 1991A (CRE) 7.00 11/01/25 13,468
Wisconsin
33,100 Wisconsin Center District Tax RB,
Series 1996B 5.75 12/15/27 31,480
Wyoming
33,735 Community Development Auth. SFH RB,
Series 1993A 6.10 6/01/33 33,195
-------------
Total fixed rate instruments (cost: $1,696,114) 1,776,537
-------------
Variable Rate Demand Notes (0.2%)
Florida
4,500 Sarasota County Health Facilities
Auth. RB, Series 1989 (CRE) 3.40 12/01/19 4,500
New York
100 Nassau County IDA RB,
Series 1993 (CRE) 3.75 7/01/23 100
-------------
Total variable rate demand notes (cost: $4,600) 4,600
-------------
Total investments (cost: $1,700,714) $1,781,137
=============
</TABLE>
Long-Term Fund
Portfolio of Investments in Securities (continued)
March 31, 1996
Portfolio Summary By Industry
Hospitals 18.4 %
Single-Family Housing 11.7
General Obligations 10.0
Electric Power 9.3
Oil - International 4.5
Escrowed Securities 4.3
Toll Roads 4.2
Sewer 3.9
Gas Utilities 3.8
Buildings 3.7
Education 3.3
Healthcare - Miscellaneous 2.5
Special Assessment/Tax/Fee 2.4
Air Freight 2.3
Metals - Miscellaneous 1.7
Distribution & Pipelines 1.6
Paper & Forest Products 1.3
Ports/Wharfs 1.3
Aluminum 1.2
Student Loan 1.2
Leasing 1.1
Other 5.0
--------
Total 98.7 %
========
Portfolio Summary By State
Alaska 7.5% Arizona 1.0% California 4.9%
Colorado .7 Connecticut .7 District of Columbia 1.1
Florida .3 Georgia 1.4 Illinois 9.7
Indiana 3.4 Kansas .5 Louisiana 2.1
Massachusetts 2.5 Michigan 3.3 Minnesota 2.8
Mississippi 1.8 Missouri 1.3 Nevada 1.0
New Hampshire 3.0 New Mexico 2.6 New York 15.7
North Carolina 1.2 North Dakota .4 Oklahoma .1
Pennsylvania 1.5 Puerto Rico 2.6 Rhode Island 1.5
South Carolina 1.1 South Dakota .9 Texas 5.7
Utah .9 Virginia 2.7 Washington 8.4
West Virginia .8 Wisconsin 1.8 Wyoming 1.8
--------
Total 98.7%
========
Intermediate-Term Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1996
<TABLE>
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
<C> <S> <C> <C>
Fixed Rate Instruments (90.2%)
Alaska
10,000 North Slope Borough GO, Series 1995A (CRE) 5.75 %(b) 6/30/06 $ 5,835
Arizona
4,000 Educational Loan Marketing Corp. RB,
Series 1992A 6.70 3/01/00 4,120
Arkansas
7,520 Mississippi County Hospital RB, Series 1992B 6.85 11/01/02 8,038
8,635 St. Francis County Hospital RB, Series 1985 6.50 2/01/05 8,990
2,385 Student Loan RB, Series 1991 7.15 6/01/02 2,541
California
7,100 Central Valley Financing Auth. RB 6.10 7/01/13 6,936
10,500 Contra Costa Transportation Auth. RB,
Series 1991A (Escrowed) (CRE) 6.30(b) 3/01/03 7,591
Foothill/Eastern Transportation Corridor
Agency RB,
10,000 Series 1995A 6.87(b) 1/01/10 6,021
15,000 Series 1995A 7.10(b) 1/01/11 9,040
9,085 Series 1995A 6.82(b) 1/01/13 5,544
Housing Finance Agency RB,
5,775 Series 1996A 5.50 8/01/08 5,790 (c)
1,095 Series 1996A 5.60 8/01/09 1,108 (c)
5,840 Series 1996A 5.70 8/01/10 5,906 (c)
30,350 Pleasanton Joint Powers Financing Auth. RB,
Series 1993A 6.00 9/02/05 31,724
3,300 Sacramento Cogeneration Auth. RB, Series 1995 6.38 7/01/10 3,327
10,900 San Diego Port Facilities RB,
Series 1992 (CRE) 6.60 12/01/02 9,659
San Joaquin Hills Transportation RB,
3,525 Series 1993 7.05(b) 1/01/05 2,591
8,305 Series 1993 7.87(b) 1/01/06 6,149
5,000 Series 1993 7.50(b) 1/01/07 3,718
16,795 Series 1993 7.71(b) 1/01/08 12,623
12,695 Southern California Public Power Auth. RB,
Series 1992 6.10(b) 7/01/04 8,221
Colorado
5,200 Arapahoe County IDA RB, Series 1991 7.00 2/01/01 5,606
10,000 Highlands Ranch Metropolitan District #2 GO,
Series 1991 (CRE) 6.70 6/15/01(a) 9,963
10,310 Student Obligations RB, Series 1991A-2 6.90 9/01/02 10,745
District of Columbia
GO,
9,000 Series 1987A 7.40 6/01/99 9,258
27,750 Series 1993A 5.80 6/01/04 26,617
8,000 Series 1994A-3 5.50 6/01/06 7,322
11,780 Series E 5.75 6/01/05 11,091
12,000 Series E 5.75 6/01/06 11,201
6,250 Hospital RB, Series 1992B 6.75 8/15/07 6,285
Florida
5,000 Housing Finance Agency MFH RB,
Series 1984C 6.25 12/01/06 5,268
4,355 Miami Health Facilities Auth. RB,
Series 1988A 7.75 8/01/00 4,643
5,935 Nassau County PCRB, Series 1989 7.65 6/01/06 6,370
2,465 Pensacola Health Facilities RB,
Series 1988 (Escrowed) 7.50 1/01/98 2,601
Georgia
7,300 Gwinnett County MFH RB, Series 1985B (CRE) 7.50 6/01/98 7,658
8,760 Metropolitan Atlanta Rapid Transit RB,
Series M 6.25 7/01/03 9,479
6,500 Municipal Electric Auth. RB, Series Q 7.75 1/01/00 6,964
Illinois
3,000 Bedford Park Tax Increment RB,
Series 1993 (Escrowed) 7.38 12/01/04 3,484
8,685 Chicago GO, Series 1986A 7.40 1/01/00 8,921
21,235 Chicago-O'Hare International Airport RB,
Series 1994A (CRE) 6.20 1/01/07 22,747
10,110 Development Finance Auth. RB, Series 1995 7.00 3/01/07 10,415
Health Facilities Auth. RB,
3,120 Series 1989 7.75 5/15/00(a) 3,481
6,700 Series 1992 7.00 1/01/07 7,092
1,465 Independent Higher Education Loan Auth. RB,
Series 1985 (CRE) 7.50 12/01/99 1,483
Indiana
Health Facility Financing Auth. RB,
620 Series 1991 8.50 9/01/96 630
620 Series 1991 8.50 9/01/97 636
205 Series 1991 8.50 9/01/98 211
205 Series 1991 8.50 9/01/99 210
20,300 Series 1993 5.40 11/01/05 20,557
5,900 Series 1993 5.90 11/01/09 5,883
16,800 Series 1994 6.20 7/01/09 17,102
Marion County Hospital Auth. RB,
8,400 Series 1992 6.10 10/01/03 8,732
6,500 Series 1992 6.55 10/01/08 6,819
Pike Township School Building Corp. RB,
4,600 Series 1992A 6.00 2/01/06 4,868
4,700 Series 1992A 6.00 8/01/06 4,974
3,150 Scottsburg Economic Development RB,
Series 1990 7.13 3/01/99 3,276
Iowa
3,280 Higher Education Loan Auth. RB 6.13 10/01/16 3,306
10,000 Student Loan Liquidity Corp. RB, Series 1992A 6.45 3/01/02 10,576
Kansas
5,000 Kansas City IDA PCRB, Series 1984 5.45 4/01/06 4,996
Louisiana
8,055 Orleans Levee District Levee Improvement
Bonds, Series 1986 (CRE) 5.95 11/01/14 8,068
8,065 Orleans Levee District Public Improvement
Bonds, Series 1986 (CRE) 5.95 11/01/15 8,079
Maine
40,400 Bucksport Solid Waste Disposal RB 6.25 5/01/10 41,011
Maryland
2,260 Community Development Administration RB,
1987 Second Series 7.60 4/01/99 2,324
12,725 Transportation Facilities Auth. RB,
Series 1992 (CRE) 6.00(b) 7/01/04 8,455
Massachusetts
15,000 GO, Series 1991D 6.63 7/01/03 16,496
3,640 Housing Finance Agency RB, Series 1992C 6.35 11/15/03 3,853
14,495 Industrial Finance Agency RB, Series 1989A 7.10 8/01/99 15,317
45,200 New England Education Loan Marketing
Corp. RB, Series 1985A 5.80 3/01/02 47,524
Michigan
23,330 Dickinson County Economic Development
Corp. RB, Series 1989 6.55 3/01/07 24,370
7,195 Hospital Finance Auth. RB, Series 1995A 5.25 11/15/09 6,891
5,000 State Hospital Finance Auth. RB,
Series 1995A 7.50 10/01/07 5,321
Minnesota
South St. Paul Housing and Redevelopment
Auth. Hospital Facility RB,
13,500 Series 1994 6.50 11/01/04 13,802
9,095 Series 1994 6.75 11/01/09 9,273
Mississippi
15,000 Adams County PCRB, Series 1994A 5.50 12/01/05 15,133
Lafayette County Hospital RB,
720 Series 1991A 7.70 3/01/03 779
3,725 Series 1991B 7.70 3/01/03 4,030
3,720 Prentiss County Hospital RB, Series 1985 6.50 2/01/05 3,773
Union County Hospital RB,
1,100 Series 1991A 7.70 3/01/03 1,213
2,045 Series 1991B 7.70 3/01/03 2,254
Nevada
16,640 Clark County School District GO,
Series 1991B (CRE) 6.24(b) 3/01/04 11,346
3,000 Housing Division SFH RB, Series 1995D-1 5.90 10/01/14 2,957
New Hampshire
Higher Educational and Health Facilities
Auth. RB,
2,115 Series 1985A (CRE) 7.50 12/01/00 2,136
2,025 Series 1990 8.50 12/01/01 2,133
New Jersey
15,000 Economic Development Auth. RB,
Series 1994A (CRE) 5.88 7/01/11 15,411
32,260 Turnpike Auth. RB, Series 1991A 6.50 1/01/03 34,616
New Mexico
6,475 Chaves County Hospital RB, Series 1992 7.25 12/01/10 6,650
New York
Dormitory Auth. RB,
7,625 Series 1993A 5.88 5/15/11 7,561
2,725 Series 1994B 5.90 5/15/06 2,777
2,500 Series 1994B 6.00 5/15/07 2,524
1,000 Series 1995A 5.88 5/15/07 1,001
2,000 Series 1995A 5.90 5/15/08 2,000
3,500 Series 1995A 6.00 5/15/09 3,502
2,250 Series 1995A 6.00 5/15/10 2,252
2,175 Series 1995A 6.00 5/15/11 2,145
5,000 Series 1996 5.50 7/01/09 4,787
3,495 Series 1996B 6.50 8/15/10 3,706
6,550 Environmental Facilities Corp. PCRB,
Series 1991E 6.40 6/15/03 7,151
GO,
4,730 Series 1995A 5.60 3/15/06 4,833
11,000 Series 1995C 5.38 10/01/11 10,701
2,275 Housing Finance Agency Service Contract RB,
Series 1995A 6.25 9/15/10 2,284
Medical Care Facilities Finance Agency RB,
5,000 Series 1994A (CRE) 6.40 2/15/07 5,493
5,000 Series 1994A (CRE) 6.50 2/15/08 5,490
10,000 Series 1994A 6.13 8/15/13 9,662
2,675 Series 1995A 6.70 2/15/05 2,746
2,750 Series 1995A 6.70 8/15/05 2,827
2,860 Series 1995A 6.75 2/15/06 2,943
2,940 Series 1995A 6.75 8/15/06 3,028
3,045 Series 1995A 6.80 2/15/07 3,139
3,130 Series 1995A 6.80 8/15/07 3,227
7,780 Series 1995A 6.00 11/15/10 7,831
5,700 Series 1995A 6.80 8/15/12 5,880
2,205 Mortgage Agency RB, Series EE-1 7.75 10/01/00 2,256
New York City GO,
10,160 Series 1991D 8.00 8/01/99 11,112
1,375 Series 1991D (Escrowed) 8.00 8/01/99 1,531
12,780 Series 1992H 6.88 2/01/04 13,600
17,000 Series 1993B 6.75 10/01/04 18,058
9,000 Series 1993C 6.50 8/01/04 9,423
15,000 Series 1994A 6.25 8/01/08 15,089
4,500 Series 1996D 6.00 2/15/10 4,388
5,440 Series 1996H 5.75 3/15/10 5,179
13,000 New York City Municipal Assistance Corp. RB,
Series 67 7.30 7/01/00 14,361
New York City Municipal Water Finance RB,
3,295 Series 1992A 6.70 6/15/03 3,617
3,345 Series 1992A 6.70 6/15/03(a) 3,709
2,500 The City University of New York COP,
Series 1995A 6.00 8/15/06 2,572
Thruway Auth. RB,
7,500 Series 1995 6.00 4/01/09 7,548
2,150 Series 1995 6.10 4/01/10 2,164
Urban Development Corp. RB,
13,025 Series 1993 5.75 1/01/13 12,366
9,550 Series 1995 5.63 4/01/08 9,431
2,500 Series 1995 5.70 4/01/09 2,475
North Carolina
6,000 Municipal Power Agency #1 RB, Series 1992 6.00 1/01/04 6,194
Ohio
4,000 IDA RB, Series 1992 5.75 12/01/02 4,161
Oklahoma
54,460 Grand River Dam Auth. RB, Series 1993 4.00 6/01/04 51,122
Industries Auth. Health Facilities RB,
2,350 Series 1989A 7.30 6/01/01(a) 2,597
2,045 Series 1989A 7.30 6/01/01 2,227
2,355 Tulsa County Home Finance Auth. RB,
Series 1990 (Escrowed) (CRE) 7.10 5/01/02 2,634
4,500 Valley View Hospital Auth. RB, Series 1996 5.75 8/15/06 4,307
Pennsylvania
35,000 Finance Auth. RB 6.60 11/01/09 37,539
9,440 GO, Second Series 1992 6.11(b) 7/01/04 6,187
3,565 Housing Finance Agency RB, Series 1992 5.90 7/01/04 3,641
5,000 York County IDA RB, Series 1992 6.25 7/01/02 5,323
Puerto Rico
Electric Power Auth. RB,
9,000 Series N 5.00 7/01/12 8,143
5,000 Series S 7.00 7/01/06 5,639
4,420 Series X 5.80 7/01/09 4,467
4,500 Series X 5.90 7/01/10 4,566
4,000 Series X 6.00 7/01/11 4,075
4,220 Series Z 5.50 7/01/12 4,079
22,200 Housing Bank and Finance Agency RB 7.50 12/01/06 24,514
8,005 Municipal Finance Agency RB, Series 1992A 5.80 7/01/04 8,285
14,060 Public Building Auth. RB, Series K 6.50 7/01/03 15,388
Public Improvement GO,
13,850 Series 1993 5.38 7/01/05 14,004
7,500 Series 1994 6.10 7/01/06 7,985
7,825 Series 1994 6.20 7/01/07 8,299
Rhode Island
Housing and Mortgage Finance Corp. RB,
6,180 Series 15-B 6.30 10/01/07 6,369
7,600 Series 1995A (CRE) 5.70 7/01/07 7,745
South Carolina
3,000 Marion County Hospital District RB (CRE) 5.50 11/01/15 2,845
South Dakota
5,400 Rapid City IDA RB, Series 1990 7.25 11/01/00 5,868
Texas
Abilene Higher Education Facilities Corp. RB,
1,500 Series 1995 6.00 10/01/06 1,546
2,010 Series 1995 6.10 10/01/07 2,074
2,130 Series 1995 6.20 10/01/08 2,197
12,000 Bexar County Health Facilities Development
Corp. RB, Series 1993 (CRE) 5.88 11/15/10 11,993
2,940 Brazos County Health Facilities RB,
Series 1989B 7.50 1/01/01(a) 3,110
15,400 Gulf Coast Waste Disposal Auth. PCRB,
Series 1992 6.13 11/01/04 16,298
6,200 Gulf Coast Waste Disposal Auth. RB,
Series 1994 5.70 5/01/06 6,314
Harris County Toll Road RB,
9,515 Series 1995A (CRE) 5.82(b) 8/15/09 4,554
9,175 Series 1995A (CRE) 5.90(b) 8/15/10 4,126
9,140 Series 1995A (CRE) 6.00(b) 8/15/11 3,830
9,115 Series 1995A (CRE) 6.05(b) 8/15/12 3,514
5,000 Houston Water and Sewer System RB,
Series 1992B 6.00 12/01/04 5,333
11,700 Lower Colorado River Auth. RB,
Series 1992 (CRE) 6.45(b) 1/01/03 8,358
5,000 Metro Health Facilities Development Corp.
Hospital RB, Series 1993 5.25 1/01/06 4,895
11,790 Public Finance Auth. RB (CRE) 6.06(b) 2/01/04 7,919
San Antonio Electric and Gas RB,
4,190 Series 1989 7.00 2/01/01 4,515
10,000 Series 1991B (CRE) 6.38(b) 2/01/04 6,716
4,000 Southwest Higher Education Auth. RB,
Series 1995 (CRE) 5.13 10/01/16 3,674
4,000 Trinity River IDA RB 7.25 2/01/04 4,486
10,000 Turnpike Auth. RB, Series 1995 5.40 1/01/15 9,404
6,310 Tyler Health Facilities Development Corp. RB,
Series 1993B 6.63 11/01/11 6,234
7,230 Water Resources Finance Auth. RB, Series 1989 7.25 2/15/01 7,828
Ysleta ISD GO,
7,140 Series 1993 5.50(b) 8/15/11 2,970
2,000 Series 1993 5.55(b) 8/15/12 778
8,240 Series 1993 5.60(b) 8/15/13 3,002
Utah
Intermountain Power Agency RB,
8,105 Series 1987A (CRE) 5.00 7/01/12 7,420
16,430 Series 1988B (CRE) 6.48(b) 7/01/03 11,400
21,895 Series 1988B (CRE) 6.18(b) 7/01/04 14,282
Virginia
11,100 Housing Development Auth. Commonwealth
Mortgage RB, Series 1990B, Subseries B5 6.90 7/01/13 11,496
5,000 Isle of Wight County IDA PCRB, Series 1994 5.80 5/01/04 5,202
Washington
15,800 GO, Series R-1989B 7.20 9/01/00 16,793
5,500 King County GO, Series 1993A 5.90 12/01/07 5,744
West Virginia
16,940 School Building Auth. RB, Series 1994 6.25 7/01/04 18,236
Wisconsin
4,130 Health and Educational Facilities Auth. RB,
Series 1995A (CRE) 5.25 8/15/12 3,883
Wyoming
395 Farm Loan Board COP, Series 1989 (CRE) 6.50 12/01/99 394
------------
Total fixed rate instruments (cost: $1,442,892) 1,497,247
------------
Put Bonds (8.3%)
Alabama
4,000 Housing Finance Auth. MFH RB,
Series 1992C (CRE) 5.90 8/01/07 4,022
California
6,000 Simi Valley MFH RB, Series 1996A 5.40 2/01/26 5,793
3,535 Woodland MFH RB, Series 1994A 6.05 12/01/24 3,639
Florida
10,205 Broward County Housing Finance Auth.
MFH RB, Series 1991 (CRE) 7.20 5/01/07 10,578
6,210 Housing Finance Agency RB, Series 1994B 5.70 10/01/24 6,530
Georgia
5,000 Gwinnett County MFH RB, Series 1996A 5.50 4/01/26 5,000 (c)
Illinois
13,795 Arlington Heights MFH RB, Series 1991 (CRE) 7.25 5/01/11 14,234
9,765 Glendale Heights MFH RB, Series 1985A (CRE) 7.70 11/01/09 9,818
5,915 Hoffman Estates MFH RB, Series 1985A (CRE) 7.00 12/01/09 6,038
Kansas
6,590 Merriam MFH RB, Series 1991A (CRE) 7.25 4/01/21 6,864
Louisiana
18,110 Public Facilities Auth. RB, Health and
Education Facilities, Series 1985A (CRE) 7.30 12/01/15 18,669
4,360 Shreveport Home Mortgage Auth. RB,
Series 1995A (CRE) 6.40 9/01/25 4,411
New Mexico
Bernalillo County MFH RB,
7,700 Series 1994A (CRE) 6.50 10/01/19 7,888
3,320 Series 1995 (CRE) 5.80 11/01/25 3,383
Ohio
5,500 Montgomery County IDA RB, Series 1992 (CRE) 6.50 2/01/07 5,864
Texas
2,500 Gregg County Housing Finance Corp. RB,
Series 1995A (CRE) 6.40 9/01/25 2,572
Utah
600 Housing Finance Agency RB, Series 1985B 9.13 7/01/07 604
Salt Lake County MFH RB,
10,240 Series 1995A-1 (CRE) 5.70 10/01/25 10,299
6,500 Series 1995B-1 (CRE) 5.70 10/01/25 6,538
Washington
4,885 Chelan County Public Utility District #1 RB,
Series E 5.70 7/01/68 4,850
---------
Total put bonds (cost: $134,546) 137,594
---------
Variable Rate Demand Notes (1.2%)
California
3,600 Los Angeles Community Redevelopment Agency
MFH RB, Series 1989 (CRE) 3.30 4/01/09 3,600
Florida
2,800 Jacksonville Health Facilities Auth. RB,
Series 1990 (CRE) 3.95 6/01/20 2,800
Indiana
3,100 Hospital Equipment Financing Authority RB,
Series 1985A (CRE) 3.35 12/01/15 3,100
Louisiana
6,600 Offshore Terminal Auth. RB,
Series 1992A (CRE) 3.85 9/01/08 6,600
New York
1,000 Nassau County IDA Research Facility RB,
Series 1989 (CRE) 3.75 7/01/19 1,000
3,000 St. Lawrence County IDA PCRB,
Series 1985 (CRE) 3.85 12/01/07 3,000
------------
Total variable rate demand notes (cost: $20,100) 20,100
------------
Total investments (cost: $1,597,538) $1,654,941
=============
</TABLE>
Intermediate-Term Fund
Portfolio of Investments in Securities (continued)
March 31, 1996
Portfolio Summary By Industry
General Obligations 19.0%
Hospitals 15.7
Electric Power 10.3
Multi-Family Housing 9.9
Toll Roads 7.0
Paper & Forest Products 6.0
Special Assessment/Tax/Fee 4.9
Student Loan 4.9
Education 3.9
Finance - Municipal 2.8
Single-Family Housing 2.4
Escrowed Securities 1.8
Airports 1.4
Sales Tax Obligations 1.4
Water Utilities 1.1
Chemicals 1.0
Other 6.2
-------
Total 99.7%
=======
Portfolio Summary By State
Alabama .2% Alaska .4% Arizona .2%
Arkansas 1.2 California 8.4 Colorado 1.6
District of Columbia 4.3 Florida 2.3 Georgia 1.8
Illinois 5.3 Indiana 4.6 Iowa .8
Kansas .7 Louisiana 2.8 Maine 2.5
Maryland .6 Massachusetts 5.0 Michigan 2.2
Minnesota 1.4 Mississippi 1.6 Nevada .9
New Hampshire .3 New Jersey 3.0 New Mexico 1.1
New York 15.2 North Carolina .4 Ohio .6
Oklahoma 3.8 Pennsylvania 3.2 Puerto Rico 6.6
Rhode Island .9 South Carolina .2 South Dakota .4
Texas 8.3 Utah 3.0 Virginia 1.0
Washington 1.6 West Virginia 1.1 Wisconsin .2
-------
Total 99.7%
=======
Short-Term Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1996
<TABLE>
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
<C> <S> <C> <C> <C>
Fixed Rate Instruments (68.1%)
Alaska
North Slope Borough GO,
7,000 Series 1988G 8.35 6/30/98 7,590
2,000 Series 1992A (CRE) 4.65 6/30/97 2,011
6,000 Series 1993B (CRE) 4.50 1/01/98 6,002
1,250 Series 1995A (CRE) 4.85(b) 6/30/99 1,079
6,430 Series 1996A (CRE) 4.45(b) 6/30/01 5,007
Arizona
1,750 Educational Loan Marketing Corp. RB,
Series 1992A 6.70 3/01/00 1,803
Arkansas
1,630 Mississippi County Hospital RB, Series 1992B 6.05 5/01/97 1,647
1,585 St. Francis County Hospital RB, Series 1985 5.40 12/01/97 1,610
California
Foothill/Eastern Transportation Corridor
Agency RB,
1,500 Series 1995A 6.80(b) 1/01/05 869
2,000 Series 1995A 6.95(b) 1/01/07 1,187
4,840 Pleasanton Joint Powers Financing Auth. RB,
Series 1993A 5.20 9/02/98 4,924
Sacramento Cogeneration Auth. RB,
1,000 Series 1995 5.80 7/01/01 1,018
900 Series 1995 5.90 7/01/02 918
500 Series 1995 6.00 7/01/03 512
12,615 San Joaquin Hills Transportation RB 7.10(b) 1/01/00 10,077
3,500 San Joaquin Hills Transportation RB 7.16(b) 1/01/01 2,627
2,000 Statewide Communities Development Auth. COP 4.60 1/01/99 1,981
1,500 Statewide Communities Development Auth. COP 4.80 1/01/00 1,481
1,500 Statewide Communities Development Auth. COP 5.00 1/01/01 1,476
1,000 Statewide Communities Development Auth. COP 5.10 1/01/02 981
Colorado
13,000 Centennial Water and Sanitation District GO,
Series 1991A (CRE) 6.50 6/15/96 13,064
3,000 Student Obligation RB, Series 1991A-1 6.20 9/01/96 3,016
District of Columbia
18,790 GO, Series 1994A-3 4.70 6/01/99 18,011
Florida
1,115 Orange County Health Facilities Auth. RB,
Series 1995 5.63 7/01/01 1,104
Guam
GO,
20,000 Series 1994A 5.75 8/15/99 20,378
2,000 Series 1994A 5.25 9/01/99 2,006
5,000 Series 1995A 5.38 9/01/00 5,019
10,000 Series 1995A 5.50 9/01/01 10,031
Power Auth. RB,
1,640 Series 1994A 5.50 10/01/99 1,662
1,725 Series 1994A 5.60 10/01/00 1,754
Idaho
Student Loan RB,
3,705 Series 1992 5.95 4/01/96 3,705
3,540 Series 1992 5.95 10/01/96 3,541
3,330 Series 1992 6.00 4/01/97 3,330
Illinois
9,000 Cook County GO (CRE) 7.38 11/01/08(a) 10,015
Development Finance Auth. RB,
1,215 Series 1995 6.13 3/01/98 1,223
1,285 Series 1995 6.25 3/01/99 1,299
4,310 Hodgkins Tax Increment RB, Series 1995A 6.90 12/01/01 4,437
1,000 Student Assistance Commission RB,
Series 1992AA 5.05 3/01/97 1,004
Indiana
6,745 Development Finance IDA RB, Series 1996 4.80 6/01/00 6,793
Health Facility Financing Auth. RB,
4,200 Series 1991 6.25 9/01/96(a) 4,248
9,100 Series 1993 4.65 11/01/98 9,154
12,600 Series 1994 5.38 7/01/01 12,780
2,800 Marion County Hospital Auth. RB, Series 1992 5.25 10/01/97 2,833
Louisiana
10,000 De Soto Parish PCRB, Series 1993A 5.05 12/01/02 9,971
Offshore Terminal Auth. RB,
7,920 Series 1992B 6.00 9/01/01 8,219
5,000 Series 1992B 6.20 9/01/03 5,244
4,900 Series 1994B 5.85 9/01/00 5,055
3,440 Saint Charles Parish PCRB 7.63 6/01/03 3,679
Maine
Jay PCRB,
5,500 Series 1994A 4.65 9/01/02 5,337
8,305 Series 1994B 4.70 6/01/02 8,088
Massachusetts
New England Education Loan Marketing
Corp. RB,
14,800 Series 1985A 5.80 3/01/02 15,561
5,000 Series 1992A 6.13 9/01/99 5,249
7,300 Series 1993H 4.75 12/01/99 7,295
567 Turnpike Auth. RB, Series A 4.75 1/01/02(a) 591
Michigan
Hospital Finance Auth. RB,
3,500 Series 1995 7.00 10/01/01 3,664
3,500 Series 1995A 6.80 10/01/00 3,631
Missouri
5,000 Health and Educational Facility Auth. RB,
Series 1995A 4.30 12/01/00 4,919
6,530 Higher Education Loan Auth. RB, Series 1992A 5.00 2/15/97 6,554
Nevada
8,640 Reno GO, Series 1991 6.30 4/01/96 8,641
New York
Dormitory Auth. RB,
1,285 Series 1994B 5.10 5/15/99 1,308
2,190 Series 1994B 5.30 5/15/00 2,243
6,450 Series 1995A 5.10 5/15/00 6,473
6,350 Series 1995A 5.25 5/15/01 6,350
7,500 Series 1995A 5.40 5/15/02 7,526
1,250 Dormitory Department of Health RB,
Series 1996 4.75 7/01/01 1,232
25,805 Environmental Facilities Corp. PCRB,
Series 1994A 5.50 6/15/99 26,626
5,325 Medical Care Facilities Finance Agency RB,
Series 1994A (CRE) 5.80 2/15/01 5,588
New York City GO,
10,000 Series 1994D 6.00 8/15/99 10,334
8,000 Series 1994H 5.30 8/01/99 8,094
5,000 Series 1995A 5.40 8/01/00 5,045
5,000 Series 1995D 6.50 2/01/02 5,231
7,880 Thruway Auth. RB, Series 1995 5.10 4/01/01 7,856
North Carolina
3,000 Charlotte-Mecklenberg Hospital RB,
Series 1992 5.20 1/01/97 3,025
Oklahoma
990 Valley View Hospital Auth. RB, Series 1996 5.00 8/15/98 986
Oregon
5,000 Clackamas County Hospital RB, Series 1992A 5.30 10/01/96 5,025
Pennsylvania
Beaver County Finance Auth. RB,
18,810 Series 1986A (CRE) 8.00 11/01/09(a) 19,934
8,545 Series 1986B (CRE) 8.00 11/01/09(a) 9,056
Higher Education Assistance Agency Student
Loan RB,
16,175 Series 1984A (CRE) 4.63 12/01/00 16,137
17,290 Series 1985A (CRE) 6.80 12/01/00 18,635
Puerto Rico
Electric Power Auth. RB,
4,365 Series S 6.00 7/01/99 4,539
3,600 Series T 6.00 7/01/99 3,743
5,000 Highway and Transportation Auth. RB, Series U 5.50 7/01/97 5,081
5,000 Municipal Finance Agency RB, Series 1992A 4.75 7/01/97 5,024
Tennessee
7,595 Clarksville Public Building Auth. RB,
Series 1993 4.75 12/01/00 7,658
Shelby County Hospital RB,
1,500 Series 1993 4.50 11/01/98 1,490
2,500 Series 1993 5.10 11/01/03 2,460
Texas
Abilene Higher Education Facilities Corp. RB,
1,335 Series 1995 5.30 10/01/99 1,358
1,280 Series 1995 5.40 10/01/00 1,308
1,480 Series 1995 5.50 10/01/01 1,514
1,000 Series 1995 5.60 10/01/02 1,020
6,000 Calhoun County Navigation IDA PCRB,
Series 1995 4.65 6/01/01 5,894
1,450 Houston Water and Sewer System RB,
Series 1992B 4.90 12/01/97 1,465
4,090 Pasadena GO, Series 1994 5.75 2/15/99 4,248
Virginia
1,650 Fairfax County Economic Development Auth. RB,
Series 1991A 7.13 6/01/96 1,655
West Virginia
13,480 School Building Auth. Capital Improvement RB,
Series 1994 6.00 7/01/00 14,199
Wisconsin
1,000 Housing and Economic Development Auth. RB,
Series 1992A 5.20 11/01/96 1,003
----------
Total fixed rate instruments (cost: $521,455) 527,268
----------
Put Bonds (11.7%)
California
10,000 Rancho Water District Financing Auth. RB,
Series 1996 4.70 8/15/21 9,826
7,500 Redwood MFH RB, Series 1985B (CRE) 5.20 10/01/08 7,500
Colorado
5,000 Denver City and County Airport System RB,
Series 1991C (CRE) 6.00 12/01/25 5,083
Florida
Housing Finance Agency MFH RB,
5,000 Series 1983F (CRE) 5.35 12/01/05 5,125
4,000 Series 1983G (CRE) 5.35 12/01/05 4,100
5,200 Series 1995D (CRE) 5.10 4/01/13 5,200
5,630 Series 1995K (CRE) 4.85 12/01/05 5,630
Illinois
5,000 Development Finance Auth. RB,
Series 1993A (CRE) 5.00 1/01/28 5,031
11,900 Educational Facilities Auth. RB,
Series 1992 (CRE) 5.63 10/01/26 11,946
Kansas
6,270 Lenexa Health Care Facilities RB,
Series 1991 (CRE) 6.25 5/15/11(a) 6,289
Michigan
7,000 Ottawa County Economic Development RB,
Series 1991 (CRE) 6.38 5/01/16 7,009
Pennsylvania
3,800 Armstrong County Hospital Auth. RB,
Series 1992A (CRE) 5.25 11/01/12 3,863
13,625 Montgomery County Redevelopment MFH RB,
Series 1991A (CRE) 6.13 8/01/07 13,640
---------
Total put bonds (cost: $89,883) 90,242
---------
Variable Rate Demand Notes (19.3%)
Alabama
4,200 Phenix City Industrial Development Board RB,
Series 1985 (CRE) 3.95 12/01/15 4,200
Arizona
6,000 Maricopa County Pollution Control Corp.
PCRB, Series 1985A 3.75 8/01/15 6,000
California
8,000 Grand Terrace Community Redevelopment
Agency MFH RB, Series 1985A 3.35 12/01/11 8,000
2,115 Lemoore COP, Series 1995 (CRE) 3.55 11/01/20 2,115
23,300 Los Angeles Community Redevelopment
Agency MFH RB, Series 1989 (CRE) 3.30 4/01/09 23,300
6,400 Los Angeles MFH RB, Series 1986 (CRE) 3.15 12/01/16 6,400
21,410 Orange County Housing Auth. MFH RB,
Series 1985-AA (CRE) 4.55 12/01/08 21,410
Sacramento County MFH RB,
3,100 Series 1985E (CRE) 3.45 9/15/07 3,100
1,915 Series 1988B (CRE) 4.50 12/01/98 1,915
200 San Diego Housing Auth. MFH RB,
Series 1985L (CRE) 4.50 12/01/08 200
4,200 Union City MFH RB, Series 1989B (CRE) 3.25 11/01/07 4,200
Colorado
6,900 Denver City and County RB (CRE) 3.55 10/01/18 6,900
Illinois
8,115 Health Facilities Auth. RB,
Series 1985C (CRE) 3.55 10/01/15 8,115
920 West Frankfort Commercial Redevelopment RB 6.39 4/01/07 920
Indiana
10,200 Jasper County PCRB, Series 1994C (CRE) 3.85 4/01/19 10,200
New York
1,200 Chautauqua County IDA IDRB,
Series 1984A (CRE) 4.30 1/01/00 1,200
2,000 Nassau County IDA RB, Series 1993 (CRE) 3.75 7/01/23 2,000
1,800 New York City Trust for Cultural Resources RB,
Series 1990B (CRE) 3.60 12/01/15 1,800
Ohio
3,600 Dayton Special Facilities RB,
Series 1988C (CRE) 3.85 10/01/09 3,600
1,800 Warren County IDRB, Series 1985 (CRE) 3.75 12/01/05 1,800
South Carolina
2,400 Sumter County IDRB, Series 1982 (CRE) 3.68 12/01/02 2,400
Virginia
13,800 Loudoun County IDA Residential Care
Facility RB, Series 1994B (CRE) 3.95 11/01/24 13,800
Washington
15,600 Student Loan Finance Association RB,
Series 1985-2nd (CRE) 3.55 1/01/01 15,600
----------
Total variable rate demand notes (cost: $149,175) 149,175
----------
Total investments (cost: $760,513) $766,685
==========
</TABLE>
Short-Term Fund
Portfolio of Investments in Securities (continued)
March 31, 1996
Portfolio Summary By Industry
General Obligations 18.3 %
Multi-Family Housing 14.8
Student Loan 11.1
Hospitals 11.0
Education 5.8
Finance - Municipal 5.4
Water Utilities 4.7
Electric Power 3.9
Special Assessment/Tax/Fee 3.7
Paper & Forest Products 3.6
Toll Roads 3.0
Ports/Wharfs 2.4
Community Service 1.8
Retirement Homes 1.8
Escrowed Securities 1.4
Nursing Care 1.2
Other 5.2
--------
Total 99.1 %
========
Portfolio Summary By State
Alabama .5% Alaska 2.8% Arizona 1.0%
Arkansas .4 California 15.0 Colorado 3.6
District of Columbia 2.3 Florida 2.7 Guam 5.3
Idaho 1.4 Illinois 5.7 Indiana 6.0
Kansas .8 Louisiana 4.2 Maine 1.7
Massachusetts 3.7 Michigan 1.9 Missouri 1.5
Nevada 1.1 New York 12.8 North Carolina .4
Ohio .7 Oklahoma .1 Oregon .7
Pennsylvania 10.5 Puerto Rico 2.4 South Carolina .3
Tennessee 1.5 Texas 2.2 Virginia 2.0
Washington 2.0 West Virginia 1.8 Wisconsin .1
-------
Total 99.1%
=======
<TABLE>
<CAPTION>
Tax Exempt Money Market Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1996
Principal Coupon Final
Amount Security Rate Maturity Value
<C> <S> <C> <C> <C>
Variable Rate Demand Notes (53.8%)
Alabama
$ 9,500 Evergreen Board IDRB, Series 1985 (CRE) 3.80 % 12/01/04 $ 9,500
California
6,900 Agoura Hills MFH RB, Series 1995 (CRE) 3.75 6/01/15 6,900
6,080 Covina Redevelopment Agency MFH RB,
Series 1994A (CRE) 3.65 12/01/15 6,080
7,425 Fontana COP, Series 1991 (CRE) 3.90 7/01/21 7,425
200 Livermore MFH RB, Series 1992A (CRE) 3.40 12/01/22 200
6,915 Los Angeles County Housing Auth. MFH RB,
Series 1994B (CRE) 3.65 9/01/18 6,915
4,000 San Diego MFH RB, Series 1993A (CRE) 3.65 12/01/15 4,000
15,000 Torrance Hospital RB, Series 1992 (CRE) 4.00 2/01/22 15,000
Colorado
6,860 Commerce City Golf Enterprise RB,
Series 1994 (CRE) 3.65 11/01/21 6,860
17,900 Denver City and County Airport System RB,
Series 1991B (CRE) 3.85 12/01/25 17,900
11,105 Denver City and County MFH RB,
Series 1985 (CRE) 3.90 12/01/09 11,105
Housing Finance Auth. MFH RB,
7,895 Series 1990, Huntington Apartments
Project (CRE) 4.05 3/01/12 7,895
6,900 Series 1990, Silver Reef Apartments
Project (CRE) 4.05 3/01/12 6,900
16,100 Smith Creek Metropolitan District RB,
Series 1995 (CRE) 3.40 10/01/35 16,100
District of Columbia
7,228 Health Facilities RB, Series 1991 (CRE) 3.50 2/01/21 7,228
Florida
1,000 Brevard County Housing Finance Auth.
MFH RB, Series 1993 (CRE) 3.65 7/01/05 1,000
1,565 Broward County Housing Finance Auth.
MFH RB, Series 1990 (CRE) 3.70 10/01/07 1,565
1,600 Dade County Aviation Facilities RB,
Series 1984A (CRE) 3.90 10/01/09 1,600
11,600 Dade County Health Facilities Auth. RB,
Series 1990 (CRE) 3.85 9/01/20 11,600
1,600 Dade County Housing Finance Auth. MFH RB,
Series 1995-3 (CRE) 3.50 6/01/05 1,600
3,200 Dade County MFH RB, Series 1993-1 (CRE) 4.00 2/01/28 3,200
Housing Finance Agency MFH RB,
5,655 Series 1990B (CRE) 3.70 12/01/09 5,655
7,710 Series 1990D (CRE) 3.70 12/01/09 7,710
9,800 Jacksonville Health Facilities Auth. RB,
Series 1990 (CRE) 3.95 6/01/20 9,800
2,200 Jacksonville Parking System Improvement RB,
Series 1992 (CRE) 3.40 5/01/22 2,200
12,800 Manatee County MFH RB, Series 1989A (CRE) 3.50 6/01/07 12,800
900 Miami Health Facilities Auth. RB,
Series 1992 (CRE) 3.45 3/01/12 900
600 Palm Beach County IDRB, Series 1990 (CRE) 3.45 5/01/02 600
Pinellas County Housing Finance Auth. MFH RB,
7,700 Series 1989A (CRE) 3.50 7/01/07 7,700
1,395 Series 1991A (CRE) 3.50 7/01/11 1,395
1,800 Sarasota County Health Facilities Auth. RB,
Series 1989 (CRE) 3.40 12/01/19 1,800
100 Southeast Volusia Hospital RB,
Series 1995 (CRE) 3.45 5/01/22 100
1,500 Wauchula IDA RB, Series 1993 (CRE) 3.45 12/01/13 1,500
Georgia
6,500 Catoosa County IDA RB, Series 1991 (CRE) 3.45 12/01/06 6,500
5,965 Columbus IDA RB, Series 1991 (CRE) 3.55 1/01/11 5,965
8,500 Hapeville Hotel IDA RB, Series 1985 (CRE) 3.85 11/01/15 8,500
23,610 Roswell Housing Auth. MFH RB,
Series 1990 (CRE) 3.70 12/01/09 23,610
Illinois
Chicago-O'Hare International Airport RB,
16,400 Series 1983A (CRE) 3.85 12/01/17 16,400
5,300 Series 1983B (CRE) 3.85 12/01/17 5,300
6,000 Development Finance Auth. Demand Notes,
Fiscal Year 1995-1996A (CRE) 3.50 6/28/96 6,000
Development Finance Auth. MFH RB,
7,400 Series 1991 (CRE) 3.90 10/01/25 7,400
5,000 Series 1993 (CRE) 3.65 12/01/13 5,000
Indiana
2,600 Salem Economic Development RB,
Series 1985 (CRE) 5.36 10/01/00 2,600
4,035 St. Joseph County Hospital Auth. RB,
Series 1995 (CRE) 3.50 3/04/15 4,035
Kentucky
6,000 Fulton Hospital RB, Series 1985 (CRE) 3.50 5/01/10 6,000
9,490 Hancock County Industrial Building RB,
Series 1991 (CRE) 3.85 7/01/11 9,490
19,000 Ohio County PCRB, Series 1983 (CRE) 3.80 6/01/13 19,000
Louisiana
Housing Finance Agency MFH RB,
7,050 Series 1988A (CRE) 3.80 1/01/26 7,050
9,195 Series 1988B (CRE) 3.80 12/01/25 9,195
24,600 Orleans Levee District Capital Recovery
Funding RB, Series 1988A (CRE) 3.80 10/01/17 24,600
8,700 Public Facilities Auth. MFH RB,
Series 1988 (CRE) 3.65 12/01/13 8,700
12,685 Public Facilities IDA RB,
Series 1993 (CRE) 3.45 2/01/13 12,685
Michigan
3,300 Detroit Downtown Development
Auth. RB (CRE) 3.55 12/01/10 3,300
7,000 Flint Hospital Building Auth. RB,
Series 1995B (CRE) 3.35 7/01/15 7,000
3,675 Grand Rapids Economic Development Corp. RB,
Series 1991A (CRE) 4.25 8/01/17 3,675
9,400 Midland County Economic Development Corp. RB,
Series 1993B 3.70 12/01/15 9,400
Strategic Fund Ltd. Obligation RB,
9,200 Series 1994 3.85 2/01/09 9,200
3,700 Series 1995CC (CRE) 3.70 9/01/30 3,700
Minnesota
4,300 Hastings Hospital RB, Series 1988 (CRE) 3.75 11/01/13 4,300
16,300 St. Paul Housing and Redevelopment Auth. RB,
Series 1982A (CRE) 3.85 12/01/12 16,300
Mississippi
4,245 Hinds County Urban Renewal RN,
Series 1991 (CRE) 3.50 1/01/07 4,245
Missouri
Clayton IDA RB,
6,125 Series 1994A (CRE) 3.75 12/01/06 6,125
6,175 Series 1994B (CRE) 3.75 2/01/07 6,175
8,780 Series 1995C (CRE) 3.75 5/01/05 8,780
New Hampshire
6,220 Higher Educational and Health Facilities RB,
Series 1996 (CRE) 3.50 5/01/26 6,220
1,085 Housing Finance Auth. MFH RB,
Series 1990 (CRE) 3.70 7/01/06 1,085
New Jersey
2,940 Economic Development Auth. RB,
Series 1989 (CRE) 3.55 12/01/00 2,940
New York
1,210 Geneva IDA RB, Series 1993A (CRE) 3.45 3/01/08 1,210
1,400 New York City GO, Series 1995B-8 (CRE) 3.50 8/15/24 1,400
New York City Housing Development Corp. RB,
41,660 Series 1984A (CRE) 4.50 12/01/16 41,660
9,875 Series 1985A (CRE) 4.50 12/01/09 9,875
3,900 Series 1993A (CRE) 3.65 1/01/23 3,900
600 Oswego County IDA PCRB, Series 1992 3.35 12/01/08 600
North Carolina
8,100 New Hanover County Industrial Facilities and
Pollution Control Financing Auth. RB,
Series 1984 (CRE) 3.50 12/01/99 8,100
10,150 Wake County Industrial Facilities and
Pollution Control Financing Auth. RB,
Series 1985C (CRE) 3.65 10/01/15 10,150
Ohio
6,000 Clark County IDA RB (CRE) 3.65 12/01/10 6,000
Oklahoma
Muskogee Industrial Trust RB,
3,160 Series 1985, Muskogee Mall Project (CRE) 3.65 12/01/15 3,160
2,400 Series 1985, Warmack-Muskogee
Project (CRE) 3.65 12/01/15 2,400
Pennsylvania
2,570 Montgomery County Higher Education and
Health Auth. RB, Series 1992 (CRE) 3.68 12/01/02 2,570
South Carolina
Housing Finance and Development Auth. RB,
4,420 Series 1987 (CRE) 3.60 12/01/11 4,420
8,400 Series 1988 (CRE) 3.55 7/01/07 8,400
6,100 Series 1988 (CRE) 3.55 11/01/07 6,100
5,000 Job and Economic Development Auth. RB,
Series 1994 (CRE) 3.55 12/01/14 5,000
Tennessee
26,000 Clarksville Public Building Auth. RB,
Series 1995 (CRE) 3.50 10/01/25 26,000
Montgomery County Public Building Auth. RB,
15,000 Series 1995 (CRE) 3.50 7/01/15 15,000
31,000 Series 1995 (CRE) 3.50 3/01/25 31,000
Nashville and Davidson County Industrial
Development Board RB,
4,000 Series 1985 (CRE) 3.45 12/01/07 4,000
1,000 Series 1985 (CRE) 3.45 12/01/07 1,000
4,710 Series 1994 (CRE) 3.50 6/01/08 4,710
4,000 Series 1995 (CRE) 3.50 6/01/10 4,000
14,205 Series 1995 (CRE) 3.75 11/01/12 14,205
Texas
7,700 Austin Higher Education Auth. RB,
Series 1995 (CRE) 3.55 8/01/19 7,700
100 Capital IDC PCRB, Series 1984 3.40 10/01/00 100
100 Corpus Christi Port Auth. RB,
Series 1984 (CRE) 3.40 9/01/14 100
4,600 Guadalupe Blanco River Auth. PCRB,
Series 1995 (CRE) 3.85 11/01/15 4,600
5,400 Gulf Coast IDA RB, Series 1989 (CRE) 3.55 11/01/19 5,400
150 North Central Texas Health Facilities
Development Corp. RB, Series 1989 (CRE) 3.55 12/01/98 150
12,900 Nueces River Auth. PCRB, Series 1985 (CRE) 3.85 12/01/99 12,900
14,075 Tarrant County Housing Finance Corp. MFH RB,
Series 1994 (CRE) 3.65 11/01/07 14,075
1,875 Travis County Housing Finance Corp. MFH RB,
Series 1985 (CRE) 3.70 12/01/07 1,875
Utah
8,500 Ogden City IDA RB, Series 1986 (CRE) 3.85 9/01/13 8,500
Virginia
Chesterfield County IDA PCRB,
2,300 Series 1992 3.45 4/01/09 2,300
5,550 Series 1993 3.55 8/01/09 5,550
2,824 Fairfax County American College of
Radiology RB,Series 1990 (CRE) 3.50 2/01/11 2,824
300 Fauquier County IDA RB, Series 1994 (CRE) 3.50 12/01/14 300
3,400 Hampton Redevelopment and Housing Auth. RB,
Series 1984A (CRE) 3.43 12/01/06 3,400
5,253 Harrisonburg Redevelopment and Housing
Auth. RN, Series 1985 (CRE) 3.50 12/01/15 5,253
2,150 Henrico County IDA RB, Series 1986C (CRE) 3.40 7/15/16 2,150
10,200 Loudoun County IDA RB, Series 1985 (CRE) 3.80 9/01/15 10,200
5,500 Louisa County IDA RB, Series 1995 (CRE) 3.50 1/01/20 5,500
3,000 Newport News Redevelopment and Housing
Auth. MFH RB, Series 1990 (CRE) 3.43 3/01/07 3,000
5,000 Peninsula Ports Auth. RB, Series 1987 3.75 12/01/05 5,000
1,200 Prince William County IDA RB,
Series 1988 (CRE) 3.47 6/30/04 1,200
Washington
Housing Finance Commission RB,
2,600 Series 1990 (CRE) 3.95 1/01/21 2,600
2,420 Series 1991 (CRE) 3.90 7/01/11 2,420
2,170 Port of Benton Economic Development
Corp. RB, Series 1989 (CRE) 3.70 11/01/05 2,170
2,260 Seattle IDA RB, Series 1989-I, Lot 1 (CRE) 3.95 8/01/04 2,260
8,000 Student Loan Finance Association RB,
Series 1985-2nd (CRE) 3.55 1/01/01 8,000
West Virginia
5,875 Cabell County Nursing and Rehabilitation
Facilities RB, Series 1993 (CRE) 3.55 10/01/10 5,875
----------
Total variable rate demand notes (cost: $823,470) 823,470
----------
Put Bonds (22.6%)
California
12,000 Higher Education Loan Auth. RB,
Series 1987B (CRE) 3.90 7/01/02 12,000
25,000 Student Education Loan Marketing Corp. RB,
Series 1993A (CRE) 3.90 11/01/02 25,000
Florida
7,900 Jacksonville IDA RB, Series 1989 (CRE) 4.00 10/01/09 7,900
St. Lucie County PCRB,
9,000 Series 1992 3.25 5/01/27 9,000
16,500 Series 1992 3.25 5/01/27 16,500
6,000 Series 1994B 3.25 7/01/29 6,000
4,100 West Orange Memorial Hospital RB,
Series 1991A-1 (CRE) 3.30 2/01/22 4,100
Georgia
5,300 Fulco Hospital Auth. Revenue Anticipation
Certificates, Series 1989 (CRE) 3.25 10/01/18 5,300
8,025 Roswell Housing Auth. MFH RB,
Series 1984B (CRE) 4.05 11/01/14 8,025
Illinois
15,000 Chicago GO, Series 1994C (CRE) 3.80 10/31/99 15,000
Health Facilities Auth. RB,
8,500 Series 1990A (CRE) 3.30 2/01/19 8,500
16,300 Series 1991A (CRE) 4.00 10/01/15 16,300
14,000 Series 1992 3.35 1/01/26 14,000
20,000 Series 1995 3.65 6/01/30 20,000
Kentucky
5,500 Lexington-Fayette Urban County Government
Residential Facilities RB,
Series 1987 (CRE) 4.50 4/01/15 5,500 (c)
3,000 Pendleton County Self-Insurance Funding RB,
Series 1987 (CRE) 4.00 7/01/01 3,000
Louisiana
8,540 Public Facilities IDA RB, Series 1984 (CRE) 4.00 12/01/14 8,540
4,100 State Tender GO CP, Series 1991A (CRE) 3.20 7/01/03 4,100
Maryland
7,050 Anne Arundel County RB, 1988 Issue (CRE) 3.55 6/15/11 7,050
4,000 Calvert County RB, 1987 Issue (CRE) 3.45 12/01/04 4,000
Massachusetts
30,600 Boston Univ. Health and Educational
Facilities Auth. RB, Series 1985H (CRE) 3.20 12/01/15 30,600
Minnesota
3,100 Housing Finance Agency RB, Series 1995M 3.50 7/01/25 3,100
Missouri
Environmental Improvement and Energy
Resources Auth. PCRB,
11,250 Series 1984 (CRE) 4.00 6/01/14 11,253
11,800 Series 1984A (CRE) 4.00 6/01/14 11,800
4,700 Series 1985A (CRE) 3.25 6/01/15 4,700
New Hampshire
10,750 Business Finance Auth. PCRB, Series 1990B 3.20 11/01/20 10,750
5,000 Higher Educational and Health Facilities
Auth. RB, Series 1985 4.10 6/01/25 5,000
New York
Energy Research and Development Auth. PCRB,
2,200 Series 1985A (CRE) 3.30 3/15/15 2,200
12,000 Series 1985A (CRE) 3.25 3/01/16 12,000
9,000 Series 1985B (CRE) 3.85 10/15/15 9,000
4,000 Series 1985D (CRE) 3.65 12/01/15 4,000
North Carolina
6,000 Eastern Municipal Power Agency RB,
Series 1988B (CRE) 3.30 1/01/26 6,000
Oregon
18,000 Klamath Falls Electric RB,
Series 1986C (CRE) 4.40 5/01/23 18,000
Pennsylvania
6,320 Ferguson Industrial and Commercial
Development Auth. RB, Series 1981 4.10 11/01/06 6,320
Utah
8,000 Intermountain Power Agency Power Supply RB,
Series 1985E (CRE) 3.30 7/01/18 8,000
Wyoming
2,350 Rock Springs IDRB, Series 1992 (CRE) 3.35 3/01/02 2,350
----------
Total put bonds (cost: $344,888) 344,888
----------
Fixed Rate Instruments (22.8%)
California
3,225 Community College Financing Auth. TRAN,
Series 1995B 5.00 8/30/96 3,232
Revenue Anticipation Warrants,
13,110 Series 1994C (CRE) 5.75 4/25/96 13,121
12,500 Series 1994C (Insured) (CRE) 5.75 4/25/96 12,519
10,000 San Bernardino County TRAN,
Series 1995-96 (CRE) 4.50 7/05/96 10,014
Connecticut
Mashantucket Western Pequot Tribe CP,
20,000 Series 1996 (CRE) 3.50 6/28/96 20,000
3,500 Series 1996 (CRE) 3.40 10/24/96 3,500
Florida
6,150 Altamonte Springs Health Facilities
Auth. RB (CRE) 7.90 10/01/14(a) 6,390
2,165 Local Government Finance Commission
Pooled CP Notes, Series 1996A 3.30 5/17/96 2,165
Iowa
4,125 Iowa School Corp. Warrant Certificates,
Series 1995-96B (CRE) 4.25 1/30/97 4,153
Kansas
17,820 Wichita GO, Series 1996-187 3.40 8/29/96 17,829
Massachusetts
15,000 Gloucester BAN, Series 1995C (CRE) 4.25 9/20/96 15,024
15,000 Massachusetts Bay Transportation Auth.,
Series 1996A 3.75 2/28/97 15,065
Minnesota
12,500 School District Tax and Aid Anticipation COP,
Series 1996B (CRE) 4.00 3/14/97 12,587
10,000 St. Paul ISD 625 Tax Anticipation GO (CRE) 3.50 3/25/97 10,016
New Mexico
8,500 Albuquerque Municipal School District
Number 12 GO, Series 1995 5.10 8/01/96 8,534
New York
23,500 Suffolk County TAN, Series 1996-I (CRE) 4.00 8/15/96 23,565
Ohio
17,300 Univ. of Cincinnati BAN, Series 1996-K1 3.75 3/20/97 17,373
Rhode Island
4,325 Housing and Mortgage Finance Corp. MFH,
Series 1995A (CRE) 4.24 7/01/96 4,336
Texas
20,900 Houston GO CP Notes, Series 1995A 3.30 5/31/96 20,900
11,900 Richardson ISD TRAN, Series 1995 4.50 8/30/96 11,921
San Antonio Electric and Gas CP,
34,000 Series 1996A 3.25 4/04/96 34,000
17,700 Series 1996A 3.25 9/04/96 17,700
54,900 TRAN, Series 1995A 4.75 8/30/96 55,154
Virginia
5,150 Fairfax County Public Improvement RB,
Series 1993B 8.00 6/01/96 5,191
Washington
4,700 Kings County Sewer RB, Series 1996A 3.20 4/11/96 4,700
------------
Total fixed rate instruments (cost: $348,989) 348,989
------------
Total investments (cost: $1,517,347) $1,517,347
============
</TABLE>
Tax Exempt Money Market Fund
Portfolio of Investments in Securities (continued)
March 31, 1996
Portfolio Summary By Industry
Multi-Family Housing 19.8%
Electric Power 13.2
General Obligations 11.9
Education 9.4
Hospitals 8.4
Buildings 4.2
Community Service 4.1
Miscellaneous 3.9
Airports 2.7
Hotel/Motel 2.6
Special Assessment/Tax/Fee 2.4
Nursing Care 2.0
Chemicals 1.8
Escrowed Securities 1.6
Manufacturing - Diversified Industries 1.4
Transportation - Miscellaneous 1.2
Gas Utilities 1.1
Finance - Municipal 1.0
Other 6.5
-------
Total 99.2%
=======
Portfolio Summary By State
Alabama .6% California 8.0% Colorado 4.4%
Connecticut 1.5 District of Columbia .5 Florida 8.2
Georgia 3.8 Illinois 7.4 Indiana .4
Iowa .3 Kansas 1.2 Kentucky 2.8
Louisiana 4.9 Maryland .7 Massachusetts 4.0
Michigan 2.4 Minnesota 3.0 Mississippi .3
Missouri 3.2 New Hampshire 1.5 New Jersey .2
New Mexico .5 New York 7.1 North Carolina 1.6
Ohio 1.5 Oklahoma .4 Oregon 1.2
Pennsylvania .6 Rhode Island .3 South Carolina 1.6
Tennessee 6.5 Texas 12.2 Utah 1.1
Virginia 3.4 Washington 1.4 West Virginia .4
Wyoming .1
-------
Total 99.2%
=======
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Notes to Portfolios of Investments
(In Thousands)
March 31, 1996
General Notes
Market values of securities are determined by procedures and practices
discussed in note 1 to the financial statements.
The cost of securities for federal income tax purposes is
approximately the same as that reported in the financial statements.
The percentages shown represent the percentage of the investments to
net assets.
Portfolio Description Abbreviations
BAN Bond Anticipation Note ISD Independent School District
COP Certificate of Participation MFH Multi-Family Housing
CP Commercial Paper PCRB Pollution Control
CRE Credit Enhanced Revenue Bond
GO General Obligation RB Revenue Bond
IDA Industrial Development RN Revenue Note
Authority/Agency SFH Single-Family Housing
IDC Industrial Development TAN Tax Anticipation Note
Corporation TRAN Tax Revenue
IDRB Industrial Development Anticipation Note
Revenue Bond
Specific Notes
(a) Prerefunded to various dates prior to maturity at the call price.
(b) Zero Coupon security. Rate represents the effective yield at date
of purchase. For the Long-Term, Intermediate-Term, and Short-Term
Funds, these securities represented 1.3%, 9.9%, and 2.7%
of the Funds' net assets, respectively.
(c) At March 31, 1996, the cost of securities purchased on a delayed
delivery basis for the Long-Term, Intermediate-Term and Tax Exempt Money
Market Funds was $5,213, $17,710 and $1,500, respectively.
(d) Rate changes periodically and is subject to a floor of 6% and a
ceiling of 12%.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
Statements of Operations
(In Thousands)
Year ended March 31, 1996
Tax Exempt
Long-Term Intermediate- Short-Term Money Market
Fund Term Fund Fund Fund
<S> <C> <C> <C> <C>
Net investment income:
Interest income $116,293 $ 95,825 $ 40,198 $ 57,942
------------ ------------ ------------ -----------
Expenses:
Management fees 5,120 4,533 2,188 4,067
Transfer agent's fees 1,080 1,058 670 1,011
Custodian's fees 242 235 164 340
Postage 124 114 83 144
Shareholder reporting fees 50 50 42 84
Directors' fees 3 3 3 3
Registration fees 40 41 34 78
Audit fees 36 36 36 36
Legal fees 6 6 12 6
Other 68 37 21 41
----------- ---------- ----------- ---------
Total expenses 6,769 6,113 3,253 5,810
----------- ---------- ------------ ---------
Net investment income 109,524 89,712 36,945 52,132
----------- ----------- ------------ ----------
Net realized and unrealized gain
on investments:
Net realized gain 11,015 2,066 205 -
Change in net unrealized
appreciation/depreciation 18,365 30,639 7,788 -
----------- ------------ ------------ ----------
Net realized and
unrealized gain 29,380 32,705 7,993 -
----------- ------------ ------------- -----------
Increase in net assets resulting
from operations $138,904 $122,417 $44,938 $52,132
========== ============ ============= ===========
</TABLE>
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years ended March 31,
Tax Exempt
Long-Term Intermediate- Short-Term Money Market
Fund Term Fund Fund Fund
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment income $ 109,524 $ 109,659 $ 89,712 $ 84,836 $ 36,945 $ 40,035 $ 52,132 $ 44,967
Net realized gain (loss)
on investments 11,015 (62,334) 2,066 (8,896) 205 (3,175) - -
Change in net unrealized
appreciation/depreciation
of investments 18,365 36,258 30,639 10,764 7,788 535 - -
----------- ---------- --------- --------- --------- --------- ----------- ----------
Increase in net assets
resulting from
operations 138,904 83,583 122,417 86,704 44,938 37,395 52,132 44,967
----------- ---------- ---------- --------- ---------- -------- ---------- -------
Distributions to shareholders from:
Net investment income (109,524) (107,798) (89,712) (84,836) (36,945) (40,035) (52,132) (44,967)
------------ ---------- --------- -------- ---------- ---------- ---------- -------
Net realized gains - (12,042) - (3,178) - - - -
------------ ---------- --------- --------- ---------- ---------- ---------- ---------
From capital share transactions:
Shares sold 688,986 752,881 267,168 334,817 255,280 370,243 1,826,253 1,991,020
Shares issued for
dividends reinvested 78,174 87,645 69,222 68,192 31,024 33,428 49,039 42,040
Shares redeemed (767,067) (861,319) (238,806) (431,132) (321,434) (595,498) (1,802,863) (2,146,073)
------------ ----------- ---------- ---------- --------- --------- ----------- ------------
Increase (decrease) in
net assets from
capital share
transactions 93 (20,793) 97,584 (28,123) (35,130) (191,827) 72,429 (113,013)
------------ ----------- ---------- ---------- --------- ---------- ----------- -----------
Net increase (decrease) in
net assets 29,473 (57,050) 130,289 (29,433) (27,137) (194,467) 72,429 (113,013)
Net assets:
Beginning of period 1,774,643 1,831,693 1,529,750 1,559,183 801,157 995,624 1,456,747 1,569,760
----------- ----------- ---------- ---------- --------- --------- ---------- ----------
End of period $1,804,116 $1,774,643 $1,660,039 $1,529,750 $ 774,020 $ 801,157 $1,529,176 $1,456,747
=========== =========== =========== =========== =========== ========== ========== ===========
Change in shares outstanding:
Shares sold 51,936 59,286 20,825 27,070 24,121 35,503 1,826,253 1,991,020
Shares issued for
dividends reinvested 5,894 6,859 5,391 5,523 2,931 3,205 49,039 42,040
Shares redeemed (57,756) (67,925) (18,618) (35,144) (30,390) (57,164) (1,802,863) (2,146,073)
------------ ---------- ---------- ----------- --------- --------- ------------ -----------
Increase (decrease) in
shares outstanding 74 (1,780) 7,598 (2,551) (3,338) (18,456) 72,429 (113,013)
============ ========== =========== ========== ========= ========= ========= ===========
Authorized shares of $.01
par value 175,000 175,000 170,000 170,000 135,000 135,000 2,600,000 2,600,000
============ ========== =========== ========== ========= ========= ========== ===========
</TABLE>
See accompanying notes to financial statements.
Notes to Financial Statements
(In Thousands)
March 31, 1996
(1) Summary of Significant Accounting Policies
USAA Tax Exempt Fund, Inc. (the Company), registered under the
Investment Company Act of 1940, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting
of ten separate funds. The information presented in this annual report
pertains only to the Long-Term Fund, Intermediate-Term Fund,
Short-Term Fund, and Tax Exempt Money Market Fund (the Funds). The
Funds have a common objective of providing investors with interest
income that is exempt from federal income tax. The Tax Exempt Money
Market Fund has a further objective of preserving capital and
maintaining liquidity.
A. Security valuation - Investments in the Long-Term, Intermediate-Term,
and Short-Term Funds are valued each business day by a pricing service
(the Service) approved by the Company's Board of Directors. The Service
uses the mean between quoted bid and asked prices or the last
sale price to price securities when, in the Service's judgement, these
prices are readily available and are representative of the securities'
market values. For many securities, such prices are not readily
available. The Service generally prices these securities based on
methods which include consideration of yields or prices of municipal
securities of comparable quality, coupon, maturity and type,
indications as to values from dealers in securities, and general
market conditions. Securities which are not valued by the Service, and
all other assets, are valued in good faith at fair value using methods
determined by the Manager under the general supervision of the Board of
Directors. Securities purchased with maturities of 60 days or less
and, pursuant to Rule 2a-7 of the Securities and Exchange Commission,
all securities in the Tax Exempt Money Market Fund are stated at
amortized cost which approximates market value.
B. Federal taxes - Each Fund's policy is to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its income
to its shareholders. Therefore, no federal income or excise tax
provision is required.
C. Investments in securities - As is common in the industry, security
transactions are accounted for on the date the securities are purchased
or sold (trade date). Gain or loss from sales of investment securities is
computed on the identified cost basis. Interest income is recorded daily on
the accrual basis. Premiums and original issue discounts are amortized
over the life of the respective securities. Market discounts are not
amortized. Any ordinary income related to market discounts is
recognized upon disposition of the bonds.
D. Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that may affect the
reported amounts in the financial statements.
(2) Lines of Credit
The Funds participate with other USAA funds in two joint short-term
revolving loan agreements totaling $850 million through January 14, 1997,
one with USAA Capital Corporation, an affiliate of the Manager ($750 million
uncommitted), and one with an unaffiliated bank ($100 million committed).
The purpose of the agreements is to meet temporary or emergency cash needs,
including redemption requests that might otherwise require the untimely
disposition of securities. Subject to availability under these agreements,
each Fund may borrow up to a maximum of 15% of its total assets at the lending
institution's borrowing rate plus a markup to cover costs. During the year
ended March 31, 1996, the Long-Term Fund had eleven borrowings, averaging
$6.5 million with an average length of two days, and incurred $25 thousand
in interest expense. The Intermediate-Term, Short-Term, and Tax Exempt Money
Market Funds had no borrowings under either of these agreements during the
year.
(3) Distributions
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. All net investment income available for distribution was
distributed at March 31, 1996.
Distributions of realized gains from security transactions not offset
by capital losses are generally made in the succeeding fiscal year. At
March 31, 1996, the Long-Term, Intermediate-Term, and Short-Term Funds had
capital loss carryovers of approximately $51,340, $6,835, and $3,400,
respectively, which will expire in or before 2005. It is unlikely that the
Board of Directors of the Company will authorize a distribution of capital
gains realized in the future until the capital loss carryovers have been
utilized or expire.
The Funds completed their fiscal year on March 31, 1996. Federal law
(Internal Revenue Code of 1986, as amended, and the regulations
thereunder) requires each Fund to notify its shareholders after the
close of its taxable year as to what portion of its earnings was
exempt from federal taxation and the dividend distributions which
represent long-term capital gains. The net investment income earned
and distributed by each of the Funds was 100% tax exempt for federal
income tax purposes. There were no long-term capital gain
distributions for the year ended March 31, 1996.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term
securities, for the year ended March 31, 1996 were as follows:
Long-Term Intermediate- Short-Term
Fund Term Fund Fund
Purchases $965,990 $525,574 $238,403
Sales $947,145 $438,138 $331,545
Purchases and sales/maturities of securities for the year ended March
31, 1996 for the Tax Exempt Money Market Fund were $4,488,948 and
$4,408,063, respectively.
Gross unrealized appreciation and depreciation of investments at
March 31, 1996 was as follows:
Long-Term Intermediate- Short-Term
Fund Term Fund Fund
Appreciation $ 91,485 $ 64,861 $ 7,755
Depreciation (11,062) (7,458) (1,583)
------------ ------------- ------------
Net $ 80,423 $ 57,403 $ 6,172
============ ============= ============
(5) Transactions with Manager
A. Management fees - The investment policy of the Funds and the
management of the Funds' portfolios is carried out by USAA Investment
Management Company (the Manager). Management fees are computed at .28%
of the average annual net assets of each Fund.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA
Shareholder Account Services, an affiliate of the Manager, provides
transfer agent services to the Company. Shareholder accounting service
fees are based on an annual charge per shareholder account plus
out-of-pocket expenses.
C. Underwriting agreement - The Company has an agreement with the
Manager for exclusive underwriting and distribution of the Funds'
shares on a continuing best efforts basis. The agreement provides that
the Manager will receive no fee or other remuneration for such
services.
(6) Transactions with Affiliates
USAA Investment Management Company is indirectly wholly owned by
United Services Automobile Association (the Association), a large,
diversified financial services institution. At March 31, 1996, the
Association and its affiliates owned 4,189 shares (3.2%) of the
Intermediate-Term Fund and 8,757 shares (.6%) of the Tax Exempt Money
Market Fund.
Notes to Financial Statements (continued)
March 31, 1996
<TABLE>
<CAPTION>
(7) Financial Highlights
Per share operating performance for a share outstanding throughout
each period is as follows:
Net Asset Net Realized Distributions Distributions Net Asset
Value At Net and from Net of Realized Value at Net Assets
Beginning Investment Unrealized Investment Capital Gains End Total at End
of Period Income Gain (Loss) Income of Period Return of Period
Fiscal Year Ended ($) ($) ($) ($) ($) ($) (%)* ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Fund:
March 31,
1992 13.13 .92 .41 (.92) - 13.54 10.39 1,638,848
1993 13.54 .88 .75 (.88) (.08) 14.21 12.46 1,882,882
1994 14.21 .81 (.44) (.82) (.56) 13.20 2.36 1,831,693
1995 13.20 .79 (.16) (.78) (.09) 12.96 5.07 1,774,643
1996 12.96 .79 .21 (.79) - 13.17 7.88 1,804,116
Intermediate-Term Fund:
March 31,
1992 12.00 .79 .29 (.79) - 12.29 9.24 893,874
1993 12.29 .74 .61 (.74) - 12.90 11.29 1,374,159
1994 12.90 .69 (.29) (.69) (.13) 12.48 3.06 1,559,183
1995 12.48 .69 .05 (.69) (.03) 12.50 6.16 1,529,750
1996 12.50 .71 .27 (.71) - 12.77 7.97 1,660,039
Short-Term Fund:
March 31,
1992 10.35 .59 .13 (.59) - 10.48 7.09 680,075
1993 10.48 .50 .15 (.50) - 10.63 6.37 862,182
1994 10.63 .45 (.15) (.45) - 10.48 2.87 995,624
1995 10.48 .47 (.01) (.47) - 10.47 4.51 801,157
1996 10.47 .50 .10 (.50) - 10.57 5.83 774,020
Tax Exempt Money Market Fund:
March 31,
1992 1.00 .04 - (.04) - 1.00 4.30 1,483,554
1993 1.00 .03 - (.03) - 1.00 2.89 1,501,098
1994 1.00 .02 - (.02) - 1.00 2.31 1,569,760
1995 1.00 .03 - (.03) - 1.00 2.98 1,456,747
1996 1.00 .04 - (.04) - 1.00 3.65 1,529,176
</TABLE>
FINANCIAL HIGHLIGHTS (CONT)
Ratio of Net
Ratio of Investment
Expenses Income
To Average To Average Portfolio
Net Assets Net Assets Turnover
(%) (%) (%)
Fiscal Year Ended
Long-Term Fund
March 31,
1992 .40 6.83 76.28
1993 .39 6.35 88.27
1994 .38 5.69 109.28
1995 .38 6.23 64.72(a)
1996 .37 5.99 53.25(a)
Intermediate-Term Fund
March 31,
1992 .44 6.45 66.57
1993 .42 5.85 74.02
1994 .40 5.30 69.45
1995 .40 5.63 27.26(a)
1996 .38 5.54 27.51(a)
Short-Term Fund
March 31,
1992 .48 5.59 107.35
1993 .43 4.75 138.20
1994 .43 4.25 101.67
1995 .42 4.50 32.61(a)
1996 .42 4.73 35.99(a)
Tax Exempt Money Market Fund
March 31,
1992 .39 4.21 -
1993 .40 2.85 -
1994 .40 2.29 -
1995 .39 2.93 -
1996 .40 3.59 -
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Effective for 1995 and 1996, portfolio turnover rates have been
calculated excluding short-term variable rate securities, which are
those with put date intervals of less than one year.
