Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review:
New York Bond Fund 4
New York Money Market Fund 9
Financial Information:
Independent Auditors' Report 12
Statements of Assets and Liabilities 13
Portfolios of Investments in Securities:
New York Bond Fund 15
New York Money Market Fund 17
Notes to Portfolios of Investments 21
Statements of Operations 22
Statements of Changes in Net Assets 23
Notes to Financial Statements 24
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One copy
of each report is sent to each address, rather than 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 New York
Funds, 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)1997, USAA. All rights reserved.
<TABLE>
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 33
funds by investment objective as of March 31, 1997.
<CAPTION>
Average Annual Total Return(%)*
Investment Inception Since
Objective Date 1 yr 5 yrs 10 yrs Inception
<S> <C> <C> <C> <C> <C>
Capital Appreciation
========================================================================================================
Aggressive Growth 10/19/81 -5.70 11.02 8.98 -
Emerging Markets(1) 11/7/94 12.86 - - 8.14
Gold(1) 8/15/84 -24.30 6.19 -4.11 -
Growth 4/5/71 10.96 14.37 10.98 -
Growth & Income 6/1/93 17.96 - - 15.82
International(1) 7/11/88 15.64 14.34 - 10.77
S&P 500 Index(4) 5/1/96 - - - 19.78+
World Growth(1) 10/1/92 14.38 - - 13.53
Asset Allocation
==================
Balanced Strategy(1) 9/1/95 12.87 - - 11.35
Cornerstone Strategy(1) 8/15/84 13.36 13.32 8.63 -
Growth and Tax Strategy(2)** 1/11/89 8.57 10.08 - 9.71
Growth Strategy(1) 9/1/95 11.02 - - 16.09
Income Strategy 9/1/95 7.17 - - 7.36
Income-Taxable
================
GNMA 2/1/91 5.59 6.94 - 7.35
Income 3/4/74 4.53 7.49 8.79 -
Income Stock 5/4/87 14.01 13.16 - 12.49
Short-Term Bond 6/1/93 6.73 - - 5.45
Income - Tax Exempt
=====================
Long-Term(2)** 3/19/82 6.51 6.80 7.04 -
Intermediate-Term(2)** 3/19/82 5.80 6.82 6.92 -
Short-Term(2)** 3/19/82 4.70 4.85 5.38 -
California Bond(2)** 8/1/89 6.60 7.06 - 7.32
Florida Tax-Free Income(2)** 10/1/93 6.51 - - 3.45
New York Bond(2)** 10/15/90 5.89 6.60 - 8.03
Texas Tax-Free Income(2)** 8/1/94 7.06 - - 8.32
Virginia Bond(2)a** 10/15/90 5.82 7.01 - 7.80
Money Market
==============
Money Market(3) 2/2/81 5.21 4.41 5.82 -
Tax Exempt Money Market(2,3)** 2/6/84 3.30 3.03 4.18 -
Treasury Money Market Trust(3) 2/1/91 5.07 4.20 - 4.35
California Money Market(2,3)** 8/1/89 3.23 2.93 - 3.62
Florida Tax-Free Money Market(2,3)** 10/1/93 3.20 - - 3.01
New York Money Market(2,3)** 10/15/90 3.16 2.80 - 3.07
Texas Tax-Free Money Market(2,3)** 8/1/94 3.22 - - 3.30
Virginia Money Market(2,3)** 10/15/90 3.14 2.85 - 3.19
</TABLE>
Non-deposit investment products offered by USAA Investment Management Company
are not insured by the FDIC, are not deposits or other obligations of, or
guaranteed by, USAA Federal Savings Bank, and are subject to investment risks,
including possible loss of the principal amount invested.
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.
1 Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
2 Some income may be subject to state or local taxes or the federal alterna-
tive minimum tax.
3 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.
4 S&P 500(Registered Trademark) is a trademark of The McGraw-Hill Companies,
Inc., and has been licensed for use. The product is not sponsored, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no representation
regarding the advisability of investing in the product.
* Total return equals income return 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.
+ Cumulative total return since inception, including account maintenance fee.
Message from the President
[Photograph of Michael J. C. Roth, CFA, President and Vice Chairman of the
Board appears here]
At the most recent USAA Strategic Planning Conference, we spent much of our
time discussing USAA's Mission and how to accomplish it in today's world. Our
Mission has three main elements:
+We want to facilitate the financial
security of those whom we serve.
+We seek to do this with highly competitive
products and services.
+In so doing, we want to be the provider of
choice to the military community.
One evening I sat down and considered each of these separately. Perhaps the most
interesting outcome was my thoughts on financial security. What does that mean
to those who make up the USAA family?
I set down these elements:
+Housing and caring for a family
+Pursuing a rewarding career
+Providing for children's educations
+Providing proper medical care
+Protecting the family against accidents and emergencies
+Providing for a comfortable retirement
+Perhaps providing comfort to aging parents
+Creating an estate plan that will serve well those who survive you
+Enjoying life
The last point struck me especially.
Financial planning almost always focuses on the very serious reasons to save and
invest. But there needs to be a balance in people's lives. Here I have learned a
valuable lesson from my wife, Jutta. She has special china and silver. However,
she has always said, "Nothing is stored away in cabinets. I use it as often as I
can. These things are meant to be enjoyed."
This philosophy meshed very well with my ideas on saving. Here too I have urged
balance. You must save for the future, but you must not strangle on that saving.
You should use plans like 401(k)s and IRAs, but you should also set something
aside for now. That means saving in accounts that are not tax-sheltered, and
that means looking at vehicles like tax-exempt bond and money market funds. They
can perform the job of controlling overall portfolio risk, just as they would in
an IRA by combining equity and taxable bond funds. In this case, they are
valuable tools in helping your after-tax return while you enjoy life, the most
pleasant outcome of financial planning.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
USAA Funds Rated 5 Stars
on Overall Performance
Five-star ratings for overall risk-adjusted performance have been awarded by
Morningstar for USAA Funds as of March 31, 1997.*
USAA Tax Exempt Intermediate-Term Fund & USAA Tax Exempt Short-Term Fund
were rated 5 Stars overall among 1,751, 1,237, 601, and 267 municipal bond
funds for the 1-,3-,5-, and 10-year periods, respectively.
USAA Growth & Income Fund was rated 5 Stars for the 3-year period and 4 Stars
for the 1-year period among 1,919 and 3,048 domestic equity funds, respectively.
USAA International Fund was rated 5 Stars for the 5-year period and 4 Stars for
the 1- and 3-year periods overall and among 219, 939, and 478 international
equity funds, respectively.
*Morningstar proprietary ratings reflect historical risk-adjusted performance
through March, 31 1997. The ratings are subject to change monthly. Past
performance is no guarantee of future results. Morningstar ratings are
calculated from the fund's 3-, 5-, and 10-year average annual total returns
(with fee adjustments) in excess of 90-day Treasury bill returns, and a risk
factor that reflects fund performance below 90-day T-bill returns. The one-year
rating is calculated using the same methodology, but is not a component of the
overall rating. Ten percent of the funds in a rating category receive five
stars and the next 22.5% receive four stars.
For more information about mutual funds managed and distributed by USAA IMCO,
including charges and expenses, please call for a prospectus. Read it carefully
before investing.
Investment Review
NEW YORK BOND FUND
OBJECTIVE: Provide New York investors with a high level of current interest
income that is exempt from federal income taxes and New York state and New York
City personal income taxes.
TYPES OF INVESTMENTS: Invests primarily in long-term investment grade New York
tax-exempt securities.
3/31/96 3/31/97
Net Assets................................ $54.0 MILLION $58.0 MILLION
Net Asset Value Per Share................. $10.95 $10.94
Average Annual Total Returns As Of 3/31/97
1 Year.................................................. 5.89%
5 Years................................................. 6.60%
Since inception on October 15, 1990..................... 8.03%
30-Day SEC Yield* on March 31, 1997..................... 5.42%
*Calculated as prescribed by the Securities and Exchange Commission.
A graph is shown here which is a comparison of the change in value of a
$10,000 investment for the period of 10/15/90 to 3/31/97, with dividends
and capital gains reinvested. The ending values for the items graphed are:
Lehman Brothers Muni. Bond Index $16,524
USAA New York Bond Fund 16,532
Lipper New York Municipal Debt funds Average 15,996
The broad-based Lehman Brothers Municipal Bond Index is an unmanaged index
that tracks total return performance for the long-term investment grade
tax-exempt bond market. The Lipper New York Municipal Debt Funds Average is the
average performance level of all New York Municipal Debt Funds, as
computed by Lipper Analytical Services, an independent organization
that monitors the performance of mutual funds. All tax-exempt bond funds will
find it difficult to outperform the Lehman Index, since funds have
expenses.
Total return equals income return 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 PICTURE OF KENNETH E. WILLMANN, CFA IS HERE]
HOLIDAY HIGHS AND LOWS
It is well-known that people often experience emotional highs and lows on
holidays. We are enthusiastic about the special day and all it brings, often
remembering or reliving childhood excitement. Sometimes this reminiscing,
coupled with changes brought on by the passage of time, leads to depression.
The financial markets often mimic these mood swings. Optimistic periods lead
to falling interest rates and rising prices - often called "bull markets."
When optimism reigns, market participants look for excuses to bid up prices.
Conversely, pessimistic periods are called "bear markets." When pessimism
sets in, good news is ignored, and prices sag under the weight of emotional
depression.
The financial markets experienced these emotional swings over the twelve-
month period ended March 31, 1997. Follow me as I explain how the chart below
illustrates how holidays marked the highs and lows.
Please note that the top line is the yield of the active 30-year U.S. Treasury
Bond, or the "Long Bond" as it is known. This is generally considered the
benchmark for long-term interest rates in the U.S. The bottom line in the
graph represents the yield of the bond Buyer 40-Bond Index (BB140), which is
the industry standard for the yield of long-term, investment-grade municipal
bonds.
A graph is located here which shows Municipal and U.S. Treasury Bond yields
from 3/29/96 to 3/31/97. The vertical axis shows the yield and the horizontal
axis shows the time period. The ending value on 3/31/97 for the 30 year U.S.
Treasury is 7.10% and the ending value for the Bond Buyer 40-Bond Index
(BBI40) is 5.95%.
Note: Past performance is no guarantee of future results. The results of
the comparison reflect current conditions as regards to 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.
Let's look at the Long Bond first. It started the period with a yield of 6.67%
on March 29, 1996. It then rose to a high of 7.19% on July 5, 1996 - the day
after Independence Day! This rise was caused by the fear that the economy would
overheat, driving up inflation. Remember, when interest rates rise, prices of
bonds fall. This is a pessimistic period, or bear market (though not very
severe). As the summer progressed, it became clear that the economy was
growing moderately, and inflation was not rising. In fact, it appeared to be
falling! The combination of economic growth and falling inflation just about
defines the best of all possible worlds for the securities markets. A bull
market of optimism began, pushing interest rates down and bond prices up.
The Long Bond yield hit its low point at 6.35% on November 29, 1996 - the day
after Thanksgiving! The Federal Reserve Board (the Fed), whose job is to fret
about inflation and raise short-term interest rates when it fears inflation
may rise, began making nervous noises. This sent a shiver through the
financial markets, leading to pessimism about inflation and interest rates.
The Fed put an exclamation point on the fear by raising the Fed Funds target
rate .25% to 5.50% on March 25, 1997. The yield on the Long Bond rose
nearly to the high of Independence Day, ending the period at 7.10% on March
31, 1997.
The yield on the BB140 showed a similar pattern with the same holiday highs
and lows. There is one major difference, though. The yield on the BB140
started and ended at almost the same level: 5.96% on March 29, 1996, and
5.95% on March 31, 1997. After the November election, market participants
became more and more confident that major tax reform would not be undertaken
any time soon. This allowed the yield difference between tax-exempt and
taxable bonds to spread out and more fully reflect the average income tax
rate.
NEW YORK BOND FUND
The Fund performed similarly to the BB140. After ending the previous fiscal
year at 5.49% on March 31, 1996, the 30-day SEC Yield fell to 5.42% on March
31, 1997. This was accompanied, during the same period, by a tiny decline
in the net asset value per share (NAV) from $10.95 to $10.94. While it is
tempting to say the period was calm and not much happened, we know that there
was much movement up and down. The Fund reached a low NAV of $10.67 on
June 11, 1996, and a high of $11.20 on Februrary 19, 1997.
These dates differ from the holiday highs and lows mentioned above, and the
performance was a bit different than the BB140 for two reasons. First, I
manage the Fund to try to be better than the Index; I don't try to emulate
it. Second, the Fund is restricted to owning bonds which generate income
exempt from New York state and local income taxes. The Index does not suffer
this constraint.
NEW YORK STATE
New York State gets a degree of economic strength from a substantial and
diverse economic base. Although slower than the nation, economic growth
has been visible in recent years. I anticipate that future growth will
continue, but lag national performance. Wealth levels are notable as the
State's per capita income is greater than the U.S. figure. Also, population
totaling approximately 18.1 million ranks New York as the third most populous
state.
Preliminary results indicate New York State's financial performance for the
fiscal year ending March 31, 1997, was solid with a projected $1.3 billion
general fund operating surplus. The State has benefited from increased tax
revenues related to a generally improved economy and record Wall Street
earnings. Nevertheless, they were unable to enact a timely budget for fiscal
year beginning April 1, 1997. The State's commitment to bondholders remains
evident. Legislation has been passed appropriating adequate funding for the
payment of debt service during the fiscal year. Although the State debt burden
is high compared to other states, its obligations are manageable.
We will continue monitoring the State's economy, budget impasse and other
factors for potential impact on overall credit quality.
PHILOSOPHY
My investment philosophy for tax-exempt bonds is founded on the belief that,
over time, the vast majority of the total return available from bonds comes
in the form of income. All bonds mature at face value eventually, so capital
growth must be accomplished by compounding interest. Therefore, I concentrate
on above average income. We have done this successfully for years. The graph
below illustrates this point.
A graph is shown here comparing the 12-month dividend yield of the USAA New
York Bond Fund and the Lipper New York Municipal Debt Funds Average from
3/31/92 to 3/31/97. The vertical axis shows the yield and the horizontal axis
shows the time period.
The values are:
USAA New York
Bond Fund 6.30 5.60 5.60 5.70 5.80 5.80
Lipper. New York
Muni. Debt
Funds Avg. 6.40 5.70 5.60 5.40 5.10 4.90
The Lipper New York 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 3/31/92 to 3/31/97.
The table below compares the yield of the USAA New York Bond Fund with a
taxable equivalent investment.
To Match the New York Bond Fund's Closing 30-Day SEC Yield of 5.42% and:
Assuming a New York State Tax Rate of 7.59%
And a Marginal Federal Tax Rate of: 28% 31% 36% 39.6%
A Fully Taxable Investment Must Pay: 8.15% 8.50% 9.16% 9.71%
Assuming a New York State and City Tax Rate of 11.99%
And a Marginal Federal Tax Rate of: 28% 31% 36% 39.6%
A Fully Taxable Investment Must Pay: 8.55% 8.93% 9.62% 10.20%
This table is based on a hypothetical investment calculated for illustrative
purposes only. It is not an indication of performance for any of the USAA
Family of Funds.
I don't ignore changes in the share value in my quest for income. I try to
balance the need for income with the need for total return. For the twelve
months ended March 31, 1997, the Fund had a total return of 5.89%,(1) while the
Lipper New York Municipal Debt Funds Average was 4.82%. This philosophy has
served us well for many years. I constantly question it, however. The world
changes, and I don't want the Fund to be left behind. I understand that it is
your money, and I am merely the steward.
(1) Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions.
A pie chart is shown here depicting the Portfolio Ratings/Mix as of March 31,
1997 for the New York Bond Fund to be: AAA - 16%, AA - 43%, A - 24%,
BBB - 14% and Cash Equivalents - 3%.
This chart reflects the highest rating of either Moody's Investors Service,
Standard & Poor's Rating Group, or Fitch Investors Service.
Note: Income may be subject to federal, state or local taxes, or the alternative
minimum tax.
See page 15 for a complete listing of the Portfolio of Investments in
Securities.
INVESTMENT REVIEW
NEW YORK MONEY MARKET FUND
OBJECTIVE: Provide New York investors with a high level of current interest
income that is exempt from federal income taxes and New York state and New York
City personal income taxes, while preserving capital and maintaining liquidity.
TYPES OF INVESTMENTS: High quality New York 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.
3/31/96 3/31/97
Net Assets................................ $45.6 MILLION $50.0 MILLION
Net Asset Value Per Share................. $1.00 $1.00
Average Annual Total Returns as of 3/31/97
1 Year.............................................................. 3.16%
5 Years............................................................. 2.80%
Since inception on October 15, 1990................................. 3.07%
7-Day Simple Yield on March 31, 1997................................ 2.95%
A graph is shown here comparing the 7-day yield of the USAA New York Money
Market Fund and the IBC/Donoghue's State Specific SB & GP (Tax-Free): New York
from 3/96 to 3/97. The vertical axis shows the yield and the horizontal axis
shows the time period. The ending value, on 3/25/97, for the USAA New York
Money Market Fund is 2.88% and the ending value for the IBC Donoghue's State
Specific SB & GP (Tax-Free): New York is 2.67%.
Total return equals income return and assumes reinvestment of all dividends and
any 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 State Specific SB (Stock Broker) & GP
(General Purpose) (Tax-Free): New York Money Funds, an average of all major
money market fund yields.
MESSAGE FROM THE MANAGER
[A PICTURE OF JOHN C. BONNELL, CFA IS HERE]
Interest Rates
The short-term debt markets are heavily influenced by actions taken, or not
taken, by the Federal Reserve (the Fed). After lowering the federal funds
rate (the rate banks charge each other for overnight loans) .25% on January
31, 1996, the Fed maintained a stable policy for the remainder of 1996.
However, an exceptionally strong jobs report in February 1996 was the first
of many signs that the economy was growing much faster than originally
anticipated. These strong economic indicators and statistics were
perceived by many to have the potential of producing inflation. On March 25,
1997, the Fed announced it was increasing the federal funds rate .25% in an
attempt to prevent inflation before it became a problem. It is still unclear
(as it always is) whether this will be a single move, or one of a series of
rate hikes. The volatility in short-term rates is illustrated by the one-year
Treasury bill rate which increased more than 1.0% between February and July
1996, before falling approximately .5% by the end of 1996. The first quarter of
1997 brought higher rates once again with the one-year Treasury bill increasing
.5% to end the quarter at 6.0%, the highest since May 22, 1995.
Strategy
We strive to meet the Fund's objective in any prevailing interest rate
environment. This is done in part by maintaining a mix of fixed rate securities
and variable rate securities
in the Fund. Fixed rate securities lock in rates for a given period of time, and
help stabilize the Fund's yield during the periods when there is a large amount
of cash in the market relative to supply. Variable rate securities pay interest
that adjusts periodically to prevailing market conditions, and also provide
liquidity necessary to take advantage of higher yielding securities when
opportunities arise. Maintaining an appropriate mix of different types of
securities and conducting internal credit research combine to provide
a highly competitive return. As part of our stringent selection criteria, we
strive to ensure all purchases are the best relative value in the market at any
given time.
Performance
While past performance is no guarantee of future results, for the 12 months
ending March 31, 1997, your Fund ranked 2 out of 34 New York Money Market Funds
according to IBC Financial Data, Inc.(1) The Fund's compounded dividend yield
was 3.16%, while the average for the category over the same time period was
2.84%.
(1) IBC Financial Data, Inc. provides independent analyses of trends in the
financial services and investing industries, with particular concentration on
money market funds.
New York
Preliminary results indicate New York State's financial performance for the
fiscal year ending March 31, 1997, was solid with a projected $1.3 billion
general fund operating surplus. The State's tax revenues benefited from an
improved economy and record earnings on Wall Street. Nevertheless, the chronic
inability to enact a timely budget is problematic and detracts from the State's
otherwise improved financial position. Once again the state passed legislation
appropriating debt service payments prior to finalizing the budget, which
demonstrates commitment to bondholders. New York derives strength from its
substantial and diverse economic base. Although slower than the nation's,
economic growth has recently been visible. In the short-term, the economy is
still dealing with many consolidations in the banking industry. However, longer
term, New York should benefit from State policies to provide a more competitive
economic environment and thereby attract/retain private industry. As always, we
continue to analyze each issue on a case by case basis and remain very selective
when investing fund assets.
A graph is here showing the growth of $10,000, from 10/15/90 to 3/31/97,
invested in the USAA New York Money Market Fund. The vertical axis shows the
dollar amount and the horizontal axis shows the time period. The ending value
is $12,171.
Past performance is no guarantee of future results and the value of your
investment may vary according to the Fund's performance. Income may be subject
to federal, state or local taxes, or to the alternative minimum tax.
An investment in this Fund is neither insured nor guaranteed by the U.S.
government and there is no assurance that the Fund will maintain a stable net
asset value of $1 per share.
See page 17 for a complete listing of the Portfolio of Investments in
Securities.
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 New York Bond and New York Money
Market Funds, separate Funds of USAA Tax Exempt Fund, Inc., as of March 31,
1997, 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, 1997, 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 New York Bond and New York Money Market Funds, separate Funds of
USAA Tax Exempt Fund, Inc., as of March 31, 1997, 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 9, 1997
<TABLE>
Statements of Assets and Liabilities
(In Thousands)
March 31, 1997
<CAPTION>
New York
New York Money Market
Bond Fund Fund
--------- ----
<S> <C> <C>
Assets
Investments in securities, at market value
(identified cost of $55,186 and $49,649, respectively) $ 57,115 $ 49,649
Cash 70 630
Receivables:
Capital shares sold 90 122
Interest 903 326
--------- ---------
Total assets 58,178 50,727
--------- ---------
Liabilities
Securities purchased - 626
Capital shares redeemed 17 45
USAA Investment Management Company 38 34
USAA Transfer Agency Company 4 3
Accounts payable and accrued expenses 20 20
Dividends on capital shares 64 3
-------- ---------
Total liabilities 143 731
-------- ---------
Net assets applicable to capital shares outstanding $ 58,035 $ 49,996
======== =========
Represented by:
Paid-in capital $ 59,284 $ 49,996
Accumulated net realized loss on investments (3,178) -
Net unrealized appreciation of investments 1,929 -
-------- ---------
Net assets applicable to capital shares outstanding $ 58,035 $ 49,996
======== =========
Capital shares outstanding 5,305 49,996
======== =========
Net asset value, redemption price, and offering price per share $ 10.94 $ 1.00
======== =========
</TABLE>
See accompanying notes to financial statements.
Categories & Definitions
Portfolios of Investments in Securities
March 31, 1997
Fixed Rate Instruments -- consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the
price of a fixed rate instrument generally varies inversely to the movement
of interest rates.
Put Bonds -- provide the right to sell the bond at face value at specific tender
dates prior to final maturity. The put feature shortens the effective maturity
to the next tender date.
Variable Rate Demand Notes (VRDN) -- provide the right, on any business day,
to sell the security at face value on either that day or in seven days. The
interest rate is adjusted at a stipulated daily, weekly, or monthly interval to
a rate that reflects current market conditions. In money market funds, the
effective maturity is the date on which the underlying principal amount may be
recovered or the next rate adjustment date consistent with regulatory
requirements. 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 of the
enhancement to support the issuer's ability to repay the principal when due. 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 provider of the
credit enhancement, rather than the credit standing of the issuer.
<TABLE>
New York Bond Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1997
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
------ -------- ---- -------- -----
Fixed Rate Instruments (95.0%)
New York
Dormitory Auth. RB,
<C> <S> <C> <C> <C>
$ 1,750 Series 1990A (Devereux Foundation) (CRE) 7.40% 7/01/15(a) $ 1,919
2,000 Series 1992 (Manhattan College) (CRE) 6.50 7/01/19 2,064
2,000 Series 1994 (Gurwin Geriatric Center) 7.35 8/01/29 2,214
2,500 Series 1994B (State Univ. System) 6.25 5/15/20 2,512
2,500 Series 1996 (St. John's Health Care) 6.25 2/01/36 2,535
2,550 Series 1996-2 (City Univ. System) 6.00 7/01/26 2,481
2,800 Series 1997 (Lutheran Center) (CRE) 6.05 7/01/26 2,728
1,650 Environmental Facilities Corp. PCRB,
Series 1990B 7.50 3/15/11 1,769
1,970 Groton Community Health Care Facilities RB,
Series 1994A 7.45 7/15/21 2,177
Housing Finance Agency,
2,450 MFH RB, Housing Project, Series 1996A (CRE) 6.13 11/01/20 2,490
1,910 MFH RB, Secured Mortgage Program,
Series 1992E 6.75 8/15/25 1,977
1,000 Local Government Assistance Corp. RB,
Series 1993D 5.00 4/01/23 860
Medical Care Facilities Finance Agency RB,
2,500 Series 1994A (Community General Hospital
of Sullivan County) 6.25 2/15/24 2,430
1,985 Series 1994A (Hospital and Nursing Home
Facilities) 6.50 2/15/34 2,036
2,000 Series 1994A (New York Hospital) (CRE) 6.90 8/15/34 2,177
2,000 Series 1994E (Mental Health Services) 6.50 8/15/24 2,052
2,500 Series 1995A (Brookdale Hospital) 6.85 2/15/17 2,583
2,500 Series 1995A (Health Center Projects) 6.38 11/15/19 2,587
6,250 Mortgage Agency RB, Series EE-3 7.75 4/01/16 6,606
3,235 New York City Capital Improvement Bonds 34th
St. Partnership, Series 1993 5.50 1/01/14 3,033
3,000 New York City GO, Series 1995B 7.25 8/15/19 3,277
1,000 New York City IDA RB, Series 1997 (YMCA) 5.80% 8/01/16 955
1,750 New York City Municipal Water Finance RB,
Series 1996B 5.88 6/15/26 1,703
- -------------------------------------------------------------------------------------------------------
Total fixed rate instruments (cost: $53,236) 55,165
- -------------------------------------------------------------------------------------------------------
Variable Rate Demand Note (3.4%)
New York
1,950 St. Lawrence County IDA PCRB,
Series 1985 (CRE) (cost: $1,950) 4.00 12/01/07 1,950
- -------------------------------------------------------------------------------------------------------
Total investments (cost: $55,186) $ 57,115
=======================================================================================================
</TABLE>
Portfolio Summary By Industry
-----------------------------
Nursing Care 20.1 %
Hospitals 12.4
Education 12.2
Single-Family Housing 11.4
Healthcare - Miscellaneous 8.0
Multi-Family Housing 7.7
Special Assessment/Tax/Fee 6.7
General Obligations 5.6
Aluminum 3.4
Escrowed Securities 3.3
Water Utilities 3.1
Water/Sewer 2.9
Community Service 1.6
----
Total 98.4 %
====
<TABLE>
New York Money Market Fund
Portfolio of Investments in Securities
(In Thousands)
March 31, 1997
<CAPTION>
Principal Coupon Final
Amount Security Rate Maturity Value
------ -------- ---- -------- -----
Variable Rate Demand Notes (66.5%)
New York (63.3%)
Dormitory Auth. RB,
<C> <S> <C> <C> <C>
$ 3,700 Series 1994A (CRE) 3.45% 7/01/24 $ 3,700
2,000 Series 1995 (CRE) 3.45 7/01/25 2,000
1,150 Glens Falls IDA RB, Series 1985 (CRE) 3.30 8/01/05 1,150
Job Development Auth. Special Purpose Bonds,
215 Series 1984 C1-C30 (CRE) 3.55 3/01/99 215
715 Series 1984 D1-D9 (CRE) 3.55 3/01/99 715
620 Series 1984 H1-H11 (CRE) 3.55 3/01/99 620
1,200 Local Government Assistance Corp. RB,
Series 1995D (CRE) 3.40 4/01/25 1,200
2,200 Medical Care Facilities Finance Agency RB,
Series 1994A (CRE) 3.30 11/01/03 2,200
Monroe County IDA RB,
450 Series 1985 (CRE) 3.50 12/01/00 450
2,400 Series 1995D (CRE) 3.35 6/15/16 2,400
1,000 Nassau County IDA RB, Series 1984 (CRE) 3.40 12/01/99 1,000
2,100 New York City Housing Development Corp. RB,
Series 1993A (CRE) 3.35 2/01/07 2,100
New York City IDA RB,
2,200 Series 1985 (CRE) 3.45 12/01/15 2,200
2,100 Series 1985 (CRE) 3.45 12/01/15 2,100
1,200 Niagara County IDA RB, Series 1994A 3.90 11/15/24 1,200
300 North Hempstead Solid Waste Management
Auth. RB, Series 1993A (CRE) 3.45 2/01/12 300
2,400 Oswego County IDA PCRB, Series 1992 3.40 12/01/08 2,400
1,000 Rotterdam IDA RB, Series 1993A (CRE) 3.30 11/01/09 1,000
200 St. Lawrence County IDA PCRB,
Series 1985 (CRE) 4.00 12/01/07 200
2,000 Suffolk County IDA RB, Series 1992 (CRE) 3.30 12/01/12 2,000
2,500 Town of Hempstead IDA RB, Series 1997 3.35 12/01/10 2,500
Puerto Rico (3.2%)
1,600 Industrial, Tourist, Educational, Medical
and Environmental Control Facilities
Financing Auth. RB, Series 1995A (CRE) 3.45% 1/01/15 1,600
- -------------------------------------------------------------------------------------------------------
Total variable rate demand notes (cost: $33,250) 33,250
- -------------------------------------------------------------------------------------------------------
Put Bonds (7.0%)
New York
Energy Research and Development Auth. PCRB,
1,250 Series 1985B (CRE) 3.85 10/15/15 1,250
2,000 Series 1985B (CRE) 3.60 3/01/16 2,000
240 Hudson IDA RB, Series 1985 (CRE) 4.25 12/15/00 240
- -------------------------------------------------------------------------------------------------------
Total put bonds (cost: $3,490) 3,490
- -------------------------------------------------------------------------------------------------------
Fixed Rate Instruments (25.8%)
New York
200 Amsterdam City School District GO,
Series 1997 (CRE) 4.80 6/15/97 200 (b)
250 Auburn School District GO, Series 1994A (CRE) 5.25 6/15/97 251
1,000 Beacon School District GO, Series 1996 (CRE) 5.00 7/15/97 1,003
450 Brookhaven GO Public Improvement Bonds,
Series 1996B (CRE) 4.60 8/15/97 451
Campbell-Savona Central School District GO,
300 Series 1997 (CRE) 4.70 6/15/97 301
425 Series 1997 (CRE) 4.50 6/15/97 425 (b)
279 Carthage Central School District GO,
Series 1996 (CRE) 4.75 6/15/97 280
355 Cato-Meridian Central School District GO,
Series 1996A (CRE) 4.70 6/15/97 356
325 Cheektowaga-Sloan Union Free School
District GO, Series 1997 (CRE) 5.10 6/01/97 326
360 Chittenango Central School District GO,
Series 1996 (CRE) 5.10 6/15/97 361
185 Deposit Central School District GO,
Series 1991 (CRE) 6.35% 6/15/97 186
Dormitory Auth. Revenue Notes CP,
697 Series 1989A (CRE) 3.65 5/02/97 697
598 Series 1989A (CRE) 3.40 5/02/97 598
210 Elmira Heights Central School District GO,
Series 1997 (CRE) 4.75 6/15/97 210
1,000 Erie County GO RAN, Series 1996A (CRE) 4.25 4/17/97 1,000
261 Fillmore Central School District GO,
Series 1996 (CRE) 4.90 6/15/97 262
487 Gorham-Middlesex Central School GO,
Series 1997 (CRE) 4.25 6/15/97 488
700 Huntington GO Public Improvement Bonds,
Series 1996 (CRE) 4.80 7/15/97 701
430 Lakeland Central School District GO,
Series 1996 (CRE) 6.00 7/15/97 433
2,000 New York City GO RAN, Series 1997B (CRE) 4.50 6/30/97 2,004
660 Niagra Falls City School District GO,
Series 1997 (CRE) 4.63 11/01/97 663
655 Ogdensburg City School District GO,
Series 1996A (CRE) 4.00 6/15/97 655
407 Rome GO Public Improvement Bonds,
Series 1996 (CRE) 5.10 12/01/97 410
220 Seaford Union Free School District GO,
Series 1996 (CRE) 6.50 6/15/97 221
100 Sweet Home Central School District GO,
Series 1994 (CRE) 4.75 1/15/98 101
325 Wayland-Cohocton Central School District GO,
Series 1996 (CRE) 4.55 6/15/97 326
- --------------------------------------------------------------------------------------------------------
Total fixed rate instruments (cost: $12,909) 12,909
- --------------------------------------------------------------------------------------------------------
Total investments (cost: $49,649) $ 49,649
========================================================================================================
</TABLE>
Portfolio Summary By Industry
-----------------------------
General Obligations 16.6%
Education 12.9
Nursing Care 11.4
Buildings 11.1
Hotel/Motel 8.6
Resource Recovery 8.0
Electric Power 7.4
Tobacco 4.8
Hospitals 4.4
Multi-Family Housing 4.2
Community Service 4.0
Finance - Municipal 2.6
Sales Tax Obligations 2.4
Manufacturing - Diversified Industries .5
Aluminum .4
----
Total 99.3%
====
Notes to Portfolios of Investments in Securities
March 31, 1997
General Notes
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
CP Commercial Paper
CRE Credit Enhanced
GO General Obligation
IDA Industrial Development Authority/Agency
MFH Multi-Family Housing
PCRB Pollution Control Revenue Bond
RAN Revenue Anticipation Notes
RB Revenue Bond
Specific Notes
(a) Prerefunded to various dates prior to maturity at the call price.
(b) At March 31, 1997, the cost of securities purchased on a delayed delivery
basis for the New York Money Market Fund was $625,799.
See accompanying notes to financial statements.
<TABLE>
Statements of Operations
(In Thousands)
Year ended March 31, 1997
<CAPTION>
New York
New York Money Market
Bond Fund Fund
--------- ----
<S> <C> <C>
Net investment income:
Interest income $ 3,517 $ 1,694
------- -------
Expenses:
Management fees 248 209
Transfer agent's fees 45 35
Custodian's fees 39 40
Postage 3 4
Shareholder reporting fees 3 4
Directors' fees 4 4
Registration fees - 2
Audit fees 12 12
Legal fees 6 6
Other 5 5
------- -------
Total expenses before reimbursement 365 321
Expenses reimbursed (86) (86)
------- -------
Total expenses after reimbursement 279 235
------- -------
Net investment income 3,238 1,459
------- -------
Net realized and unrealized gain (loss) on investments:
Net realized loss (437) -
Change in net unrealized appreciation/depreciation 345 -
------- -------
Net realized and unrealized loss (92) -
------- -------
Increase in net assets resulting from operations $ 3,146 $ 1,459
======= =======
</TABLE>
See accompanying notes to financial statements.
<TABLE>
Statements of Changes in Net Assets
(In Thousands)
Years ended March 31,
<CAPTION>
New York
New York Money Market
Bond Fund Fund
--------- ----
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
From operations:
Net investment income $ 3,238 $ 3,049 $ 1,459 $ 1,170
Net realized gain (loss) on investments (437) 658 - -
Change in net unrealized appreciation/
depreciation of investments 345 190 - -
--------- -------- --------- ----------
Increase in net assets resulting from
operations 3,146 3,897 1,459 1,170
--------- -------- --------- ----------
Distributions to shareholders from:
Net investment income (3,238) (3,049) (1,459) (1,170)
--------- -------- --------- ----------
From capital share transactions:
Proceeds from shares sold 11,430 14,008 53,699 51,173
Shares issued for dividends reinvested 2,480 2,362 1,404 1,120
Cost of shares redeemed (9,770) (13,738) (50,661) (34,264)
--------- -------- --------- ----------
Increase in net assets from
capital share transactions 4,140 2,632 4,442 18,029
--------- -------- --------- ----------
Net increase in net assets 4,048 3,480 4,442 18,029
Net assets:
Beginning of period 53,987 50,507 45,554 27,525
--------- -------- --------- ----------
End of period $ 58,035 $ 53,987 $ 49,996 $ 45,554
========= ======== ========= ==========
Change in shares outstanding:
Shares sold 1,041 1,269 53,699 51,173
Shares issued for dividends reinvested 226 214 1,404 1,120
Shares redeemed (891) (1,244) (50,661) (34,264)
--------- -------- -------- ----------
Increase in shares outstanding 376 239 4,442 18,029
========= ======== ======== ==========
Authorized shares of $.01 par value 25,000 25,000 100,000 100,000
========= ======== ======== ==========
</TABLE>
See accompanying notes to financial statements.
Notes to Financial Statements
March 31, 1997
(1) Summary of Significant Accounting Policies
USAA Tax Exempt Fund, Inc. (the Company), registered under the Investment
Company Act of 1940, as amended, 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 New York Bond Fund and New York Money Market Fund (the Funds). The Funds
have a common objective of providing New York investors with a high level of
current interest income that is exempt from federal, New York state, and New
York City personal income taxes. The New York Money Market Fund has a further
objective of preserving capital and maintaining liquidity.
A. Security valuation - Investments in the New York Bond Fund 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 Investment Company Act of 1940, as amended, all
securities in the New York 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 - 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. The Funds concentrate their
investments in New York municipal securities and therefore may be exposed to
more credit risk than portfolios with a broader geographical diversification.
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 13, 1998, one with USAA
Capital Corporation (CAPCO), 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, of which only 5% may
be borrowed from CAPCO, at the lending institution's borrowing rate plus a
markup. The Funds had no borrowings under either of these agreements during the
year ended March 31, 1997.
(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, 1997.
Distributions of realized gains from security transactions not offset by capital
losses are made in the succeeding fiscal year or as otherwise required to avoid
the payment of federal taxes. At March 31, 1997, the New York Bond Fund had
capital loss carryovers for federal income tax purposes of approximately
$3,178,000 which, if not offset by subsequent capital gains will expire between
2003-2005. 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, 1997. 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 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, New
York state, and New York City income tax purposes. There were no long-term
capital gain distributions for the year ended March 31, 1997.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term securities,
for the year ended March 31, 1997 for the New York Bond Fund were $23,651,219
and $22,546,897, respectively. Purchases and sales/maturities of securities for
the year ended March 31, 1997 for the New York Money Market Fund were
$123,099,203 and $118,855,000, respectively.
Gross unrealized appreciation and depreciation of investments at March 31, 1997
for the New York Bond Fund was $2,176,188 and $247,859, respectively.
(5) Transactions with Manager
A. Management fees -- The investment policies of the Funds and the management of
the Funds' portfolios are carried out by USAA Investment Management Company (the
Manager). Management fees are computed as a percentage of aggregate average net
assets (ANA) of both Funds combined, which on an annual basis is equal to .50%
of the first $50,000,000, .40% of that portion over $50,000,000 but not over
$100,000,000, and .30% of that portion over $100,000,000. These fees are
allocated on a proportional basis to each Fund monthly based upon ANA.
The Manager has voluntarily agreed to limit the annual expenses of each Fund to
.50% of its annual average net assets.
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 Funds based on an annual charge per shareholder account plus
out-of-pocket expenses.
C. Underwriting services -- The Manager provides exclusive underwriting and
distribution of the Funds' shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
(6) Transactions with Affiliates
Certain directors and officers of the Funds are also directors, officers, and/or
employees of the Manager. None of the affiliated directors or Fund officers
received any compensation from the Funds.
<TABLE>
New York Bond Fund
March 31, 1997
(7) Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 10.95 $ 10.77 $ 10.83 $ 11.62 $ 10.94
Net investment income .64 .63 .62 .62 .65
Net realized and
unrealized gain (loss) (.01) .18 (.06) (.50) .80
Distributions from net
investment income (.64) (.63) (.62) (.62) (.65)
Distributions of realized
capital gains - - - (.29) (.12)
--------- --------- -------- -------- ---------
Net asset value at
end of period $ 10.94 $ 10.95 $ 10.77 $ 10.83 $ 11.62
========= ========= ======== ======== =========
Total return (%) * 5.89 7.67 5.42 .68 13.74
Net assets at end
of period (000) $ 58,035 $ 53,987 $ 50,507 $ 56,912 $ 48,925
Ratio of expenses to
average net assets (%) .50(a) .50(a) .50(a) .50(a) .50(a)
Ratio of net investment
income to average
net assets (%) 5.83(a) 5.75(a) 5.83(a) 5.24(a) 5.79(a)
Portfolio turnover (%) 41.42 74.80 74.74 124.40 107.12
(a) The information contained in this table is based on actual expenses for the
period, after giving effect to reimbursements of expenses by the Manager.
Absent such reimbursements the Fund's ratios would have been:
Ratio of expenses to
average net assets (%) .66 .69 .71 .69 .80
Ratio of net investment
income to average
net assets (%) 5.67 5.56 5.62 5.05 5.49
</TABLE>
* Assumes reinvestment of all dividend income and capital gains distributions
during the period.
<TABLE>
New York Money Market Fund
March 31, 1997
(7) Financial Highlights (continued)
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .04 .03 .02 .03
Distributions from net
investment income (.03) (.04) (.03) (.02) (.03)
-------- --------- --------- -------- ---------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ======== =========
Total return (%) * 3.16 3.56 2.76 2.00 2.51
Net assets at end
of period (000) $ 49,996 $ 45,554 $ 27,525 $ 24,513 $ 19,428
Ratio of expenses to
average net assets (%) .50 (a) .50(a) .50(a) .50 (a) .50(a)
Ratio of net investment
income to average
net assets (%) 3.12 (a) 3.47(a) 2.74(a) 1.98 (a) 2.46(a)
(a) The information contained in this table is based on actual expenses for the
period, after giving effect to reimbursements of expenses by the Manager.
Absent such reimbursements the Fund's ratios would have been:
Ratio of expenses to
average net assets (%) .69 .78 .85 .98 1.06
Ratio of net investment
income to average
net assets (%) 2.93 3.19 2.39 1.50 1.90
</TABLE>
* Assumes reinvestment of all dividend income distributions during the period.
