Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review:
USAA Long-Term Fund 4
USAA Intermediate-Term Fund 10
USAA Short-Term Fund 16
USAA Tax Exempt Money Market Fund 20
Shareholder Voting Results 23
Financial Information:
Portfolios of Investments:
Categories and Definitions 24
USAA Long-Term Fund 26
USAA Intermediate-Term Fund 34
USAA Short-Term Fund 51
USAA Tax Exempt Money Market Fund 63
Notes to Portfolios of Investments 74
Statements of Assets and Liabilities 75
Statements of Operations 77
Statements of Changes in Net Assets 79
Notes to Financial Statements 83
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 Fund.
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 Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office
Copyright)1999, USAA. All rights reserved.
USAA Family of Funds Summary
Fund Minimum
Type/Name Volatility Investment
--------- ---------- ----------
CAPITAL APPRECIATION
===============================================================================
Aggressive Growth Very high $3,000
Emerging Markets Very high $3,000
First Start Growth Moderate to high $3,000
Gold Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International Moderate to high $3,000
S&P 500 (Registered Trademark)
Index Moderate $3,000
Science & Technology Very high $3,000
Small Cap Stock Very high $3,000
World Growth Moderate to high $3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate $3,000
Growth and Tax
Strategy Moderate $3,000
Growth Strategy Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
===============================================================================
GNMA Low to moderate $3,000
High-Yield
Opportunities High $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Intermediate-Term
Bond Low to moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term Moderate $3,000
Intermediate-Term Low to moderate $3,000
Short-Term Low $3,000
State Bond Income Moderate $3,000
MONEY MARKET
===============================================================================
Money Market Very low $3,000
Tax Exempt
Money Market Very low $3,000
Treasury Money
Market Trust Very low $3,000
State Money Market Very low $3,000
- -------------------------------------------------------------------------------
Foreign investing is subject to additional risks, which are discussed in the
funds' prospectuses.
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.
Some income may be subject to state or local taxes or the federal alternative
minimum tax.
An investment in a money market fund is not insured or guaranteed by the FDIC
or any other government agency. Although the fund seeks to preserve the value
of your investment at $1 per share, it is possible to lose money by investing
in the fund.
The Science & Technology Fund may be more volatile than a fund that diversifies
across many industries.
The InveStart (Registered Trademark) program is available for investors without
the $3,000 initial investment required to open an IMCO mutual fund account.
A mutual fund account can be opened with no initial investment if you elect to
have monthly automatic investments of at least $50 from a bank account.
InveStart is not available on tax-exempt funds or the S&P 500 Index Fund. The
minimum initial investment for IRAs is $250, except for the $2,000 minimum
required for the S&P 500 Index Fund. 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.
Non-deposit investment products are not insured by the FDIC, are not deposits or
other obligations of, or guaranteed by, USAA Federal Savings Bank, are subject
to investment risks, and may lose value.
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company, including charges and operating expenses,
please call 1-800-531-8181 for a prospectus. Read it carefully before you
invest.
Message from the President
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD: MICHAEL J.C. ROTH, CFA,
APPEARS HERE]
FOR AS LONG AS I HAVE MANAGED MONEY
for customers, it has been obvious that few things puzzle or distress them as
much as a falling bond market. People generally view bonds as a risk-lowering
tool. They add bonds to a portfolio to reduce overall volatility and to create
an added buffer with the relatively high income. Some people use bond portfolios
as their sole investment. Their thinking is that they will live off the income
and not be concerned about market values because they intend to let the bonds
mature. These kinds of strategies were much easier to execute before the days of
fixed-income mutual funds.
Mutual funds did something for bond investors that had never been done before --
show investors every day what their portfolio was worth. In the process, the
funds revealed just how much bond prices can move in a day or a week. No
investor likes to see a portfolio lose market value, especially when the
investor is thinking in terms of "low risk." The latter part of 1998 and the
first three quarters of 1999 have been a period of generally rising interest
rates, which has meant falling market prices. Let me tell you how we approach
such times.
First, we believe interest-rate movements are nearly impossible to predict with
both accuracy and consistency. Second, we believe that most tax-exempt income
investors are primarily interested in a high and stable level of income. Since
the common way to preserve market value in a period of rising interest rates is
to switch to money market investments at much lower yields, the importance of
belief one is magnified. And third, we believe experience going back many years
indicates that the part of a portfolio that is invested in longer maturities may
provide returns that are superior to the money markets.
The chart below shows the one-, five-, and ten-year average annual total returns
for our four national tax-exempt funds. Please bear in mind that there are no
guarantees here -- just as with all mutual funds.
Average Annual Total Returns as of September 30, 1999
- --------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------
USAA Tax Exempt Long-Term Fund -3.23 6.45 6.93
- --------------------------------------------------------------------------
USAA Tax Exempt Intermediate-Term Fund -1.24 6.23 6.88
- --------------------------------------------------------------------------
USAA Tax Exempt Short-Term Fund 2.06 4.90 5.21
- --------------------------------------------------------------------------
USAA Tax Exempt Money Market Fund 3.10 3.39 3.67
- --------------------------------------------------------------------------
Total return equals income plus share price change and assumes reinvestment of
all 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.
I think the best way to address volatility in bond markets is by allocating some
of your portfolio to the short-term part of the market. I believe that the
pattern of the average annual total returns shown in the chart above is viable.
So, the income part of my portfolio is concentrated in the USAA Tax Exempt
Long-Term Fund. If such a strategy leaves you uncomfortable, we have other
options. We'll be happy to help you craft a portfolio with which you are
comfortable.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company, including charges and operating expenses,
please call for a prospectus. Read it carefully before investing.
Some income may be subject to state or local taxes or the federal alternative
minimum tax.
Investment Review
USAA LONG-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests primarily in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of ten years or
more.
- --------------------------------------------------------------------------------
3/31/99 9/30/99
================================================================================
Net Assets $2,168.2 Million $2,064.2 Million
Net Asset Value Per Share $13.92 $13.05
Tax-Exempt Dividends Per Share Last 12 Months $.764 $.759
Capital Gains Distributions Per Share Last 12
Months - -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Six-Month Total Return and 30-Day SEC Yield* as of 9/30/99
================================================================================
3/31/99 to 9/30/99 30-Day SEC Yield
-3.58%(+) 5.30%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending September 30, 1999
- --------------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
- --------------------------------------------------------------------------------
10 Years 6.93% = 6.37% + .56%
5 Years 6.45% = 6.00% + .45%
1 Year -3.23% = 5.19% + -8.42%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the Ten-Year Period Ending September 30, 1999
A chart in the form of a bar graph appears here, illustrating the Annual Total
Returns and Compounded Dividend Returns of the USAA Long-Term Fund for the Ten-
year period ended September 30, 1999.
Total Return for Years Ended:
- ----------------------------
09/30/90 5.68%
09/30/91 13.01%
09/30/92 10.99%
09/30/93 12.77%
09/30/94 -4.32%
09/30/95 9.83%
09/30/96 6.91%
09/30/97 10.02%
09/30/98 9.32%
09/30/99 -3.23%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
09/30/90 7.37%
09/30/91 7.70%
09/30/92 7.04%
09/30/93 6.69%
09/30/94 5.16%
09/30/95 6.70%
09/30/96 6.15%
09/30/97 6.17%
09/30/98 5.83%
09/30/99 5.19%
Change in Share Price:
- ---------------------
09/30/90 -1.69%
09/30/91 5.31%
09/30/92 3.95%
09/30/93 6.08%
09/30/94 -9.48%
09/30/95 3.13%
09/30/96 0.76%
09/30/97 3.85%
09/30/98 3.49%
09/30/99 -8.42%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital gains distributions. Dividend return
is the income from dividends received over the period assuming reinvestment of
all dividends. Share price change is the change in net asset value over the
period adjusted for capital gains distributions. No adjustment has been made for
taxes payable by 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.
12-Month Dividend Yield Comparison
A chart in the form of a bar graph appears here illustrating the comparison of
the 12 Month Dividend Yield of the USAA Long-Term Fund to the 12 Month Dividend
Yield of the Lipper General Municipal Debt Funds Average from 9/30/90 to
9/30/99.
USAA Long-Term Lipper General Municipal
Fund Yield Debt Funds Average Yield
-------------- ------------------------
09/30/90 7.38% 6.99%
09/30/91 6.93% 6.51%
09/30/92 6.45% 6.06%
09/30/93 5.83% 5.33%
09/30/94 6.01% 5.47%
09/30/95 6.13% 5.24%
09/30/96 5.95% 5.06%
09/30/97 5.67% 4.79%
09/30/98 5.40% 4.47%
09/30/99 5.82% *
The 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 for periods ending
9/30/90 to 9/30/99.
* Information from Lipper Analytical Services, Inc. was not available at press
time.
Cumulative Performance Comparison
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 Investment for the USAA Long-Term Fund, Lehman Brothers
Municipal Bond Index and the Lipper General Municipal Debt Funds Average. The
data points from the graph are as follows:
USAA Long-Term Fund
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,362
09/30/90 10,568
03/31/91 11,238
09/30/91 11,943
03/31/92 12,405
09/30/92 13,256
03/31/93 13,950
09/30/93 14,948
03/31/94 14,280
09/30/94 14,302
03/31/95 15,004
09/30/95 15,708
03/31/96 16,185
09/30/96 16,794
03/31/97 17,238
09/30/97 18,477
03/31/98 19,313
09/30/98 20,200
03/31/99 20,274
09/30/99 19,548
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,430
09/30/90 10,680
03/31/91 11,392
09/30/91 12,088
03/31/92 12,531
09/30/92 13,351
03/31/93 14,099
09/30/93 15,053
03/31/94 14,426
09/30/94 14,685
03/31/95 15,498
09/30/95 16,327
03/31/96 16,797
09/30/96 17,313
03/31/97 17,712
09/30/97 18,874
03/31/98 19,610
09/30/98 20,519
03/31/99 20,825
09/30/99 20,376
Lipper General Municipal Debt Funds Average
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,340
09/30/90 10,533
03/31/91 11,211
09/30/91 11,911
03/31/92 12,337
09/30/92 13,156
03/31/93 13,936
09/30/93 14,897
03/31/94 14,216
09/30/94 14,362
03/31/95 15,102
09/30/95 15,761
03/31/96 16,195
09/30/96 16,656
03/31/97 16,992
09/30/97 18,122
03/31/98 18,818
09/30/98 19,627
03/31/99 19,734
09/30/99 19,020
Data from 9/30/89 through 9/30/99
The broad-based Lehman Brothers Municipal Bond Index is an unmanaged index that
tracks total return performance for the investment-grade tax-exempt bond market.
The Lipper General Municipal Debt Funds Average is the average performance level
of all general municipal debt funds, as computed by Lipper Analytical Services,
Inc., 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.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: KENNETH E. WILLMANN, CFA, APPEARS HERE]
INTEREST RATE MARKETS
Interest rates on September 30, 1999, were sharply higher than on March 31,
1999. The graph below illustrates this well.
Municipal and U.S. Treasury Bond Yields
A chart in the form of a line graph appears here illustrating the yields of the
30-year U.S. Treasury Bond and the Bond Buyer 40-Bond Index (BBI40) from 3/31/99
to 9/30/99.
30-year Bond Buyer
U.S. 40-Bond
Treasury Index (BBI40)
-------- -------------
03/31/99 5.63% 5.23%
04/15/99 5.53% 5.21%
04/30/99 5.66% 5.28%
05/14/99 5.92% 5.38%
05/31/99 5.83% 5.37%
06/15/99 6.11% 5.53%
06/30/99 5.96% 5.55%
07/15/99 5.92% 5.50%
07/30/99 6.10% 5.59%
08/16/99 6.09% 5.88%
08/31/99 6.06% 5.78%
09/15/99 6.10% 5.86%
09/30/99 6.05% 5.89%
Note: Past performance is no guarantee of future results.
Please note that the top line on the chart on the previous page 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 United
States. The bottom line in the graph represents the yield of the Bond Buyer
40-Bond Index (BBI40), which is the industry standard for the yield of
long-term, investment-grade municipal bonds.
This rise is based on the continued robustness of the U.S. economy. The
unemployment rate of 4.2% in August was lower than it had been in years.
Consumer confidence and spending both continue to be very strong. The strength
of the economy has made many people nervous that the inflation rate may begin
to go up. The price of crude oil rose over 50% from March 31 to September 30,
1999. So far, this has not been passed through to other prices, as the
Consumer Price Index has remained tame. In response to this, the Federal
Reserve Open Market Committee raised short-term rates by 0.25% twice, in June
and again in August. If the domestic economy does not begin to slow soon, more
interest-rate increases may be necessary.
Much of the precipitous fall in Treasury bond rates in 1998 resulted from severe
economic problems in much of the developing world -- especially in Asia. While
Japan continues to languish, most of the rest of Asia has recovered nicely in
1999. International economic strength also contributes to inflation fears and,
hence, to rising interest rates.
One of the most noticeable things in the graph on the previous page is the
narrowing of the gap between the long bond and the BBI40. Municipal yields
usually are less volatile than those of U.S. Treasuries -- which are among the
most volatile bonds in the world. This six-month period was different. There are
two reasons: There was a very large issuance of municipal bonds early in the
period, and municipal bond prices caught up with earlier declines in Treasury
bond prices. Tax-exempt municipal bonds are very attractive compared to U.S.
Treasuries on an after-tax basis.
LONG-TERM FUND PERFORMANCE
While past performance is no guarantee of future results, the Fund's annualized
dividend distribution yield for the past six months was 5.78%. At press time,
Lipper yield data was not available for the same time period. The Fund's total
return was -3.58%.
Dividend yield is computed by dividing income dividends paid during the previous
six months by the latest month-end net asset value adjusted for capital gains
distributions and annualizing the result.
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gains distributions.
Your Fund's performance received an Overall Star Rating of five stars in the
municipal bond fund category from Morningstar Rating(Trademark) for the period
ended September 30, 1999.
* * * * *
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Long-Term Fund with a taxable
equivalent investment.
To match the USAA Long-Term Fund's closing 30-day SEC yield of 5.30% and:
- --------------------------------------------------------------------------------
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully taxable investment must pay: 7.37% 7.69% 8.29% 8.78%
- --------------------------------------------------------------------------------
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.
Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of September 30, 1999.
The ratings are subject to change every month. Morningstar ratings are
calculated from the Fund's three-, five-, and ten-year average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments and a
risk factor that reflects Fund performance below 90-day T-bill returns. Overall
rating is a weighted average of a fund's three-, five-, and ten-year ratings, as
applicable. The USAA Long-Term Fund received five, five, and four stars for the
three-, five-, and ten-year periods, respectively. The top 10% of the funds in a
broad asset class receive five stars, the next 22.5% receive four stars, and the
next 35% receive three stars. The Fund was rated among 1,611, 1,241, and 375
funds in the municipal bond fund category for the three-, five-, and ten-year
periods, respectively.
Note: Some income may be subject to federal, state, or local taxes, or the
federal alternative minimum tax.
Portfolio Ratings Mix
September 30, 1999
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 1999 of the USAA Long-Term Fund to be:
Cash Equivalents - 1.9%; BBB - 26.2%; BB - 1.2%; AAA - 27.1%; AA - 20.1%; and A
- - 23.5%.
The four highest long-term credit ratings, in descending order of credit
quality, are AAA, AA, A, and BBB. This chart reflects the higher rating of
either Moody's Investors Service, Standard & Poor's Rating Group, or Fitch IBCA.
Unrated securities that have been determined by USAA IMCO to be of equivalent
investment quality to categories AAA and BBB account for 3.1% and 0.03%,
respectively, of the Fund's investments, and are included in their appropriate
category above.
See page 26 for a complete listing of the Portfolio of Investments.
Investment Review
USAA INTERMEDIATE-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests primarily in investment-grade tax-exempt
securities with a dollar-weighted average portfolio maturity of between three
and ten years.
- --------------------------------------------------------------------------------
3/31/99 9/30/99
================================================================================
Net Assets $2,344.4 Million $2,267.9 Million
Net Asset Value Per Share $13.39 $12.74
Tax-Exempt Dividends Per Share Last 12 Months $.701 $.691
Capital Gains Distributions Per Share Last 12
Months - -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Six-Month Total Return and 30-Day SEC Yield* as of 9/30/99
================================================================================
3/31/99 to 9/30/99 30-Day SEC Yield
-2.31%(+) 4.94%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending September 30, 1999
- ---------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
- ---------------------------------------------------------------------------
10 Years 6.88% = 6.02% + .86%
- ---------------------------------------------------------------------------
5 Years 6.23% = 5.64% + .59%
- ---------------------------------------------------------------------------
1 Year -1.24% = 5.01% + -6.25%
- ---------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the 10-Year Period Ended September 30, 1999
A chart in the form of a bar graph appears here, illustrating the Annual Total
Returns and Compounded Dividend Returns of the USAA Intermediate-Term Fund for
the 10-year period ended September 30, 1999.
Total Return for Years Ended:
- ----------------------------
09/30/90 6.71%
09/30/91 11.08%
09/30/92 9.73%
09/30/93 11.87%
09/30/94 -1.17%
09/30/95 9.76%
09/30/96 5.43%
09/30/97 9.07%
09/30/98 8.55%
09/30/99 -1.24%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
09/30/90 7.13%
09/30/91 7.26%
09/30/92 6.54%
09/30/93 6.01%
09/30/94 5.16%
09/30/95 6.04%
09/30/96 5.74%
09/30/97 5.86%
09/30/98 5.60%
09/30/99 5.01%
Change in Share Price:
- ---------------------
09/30/90 -0.42%
09/30/91 3.82%
09/30/92 3.19%
09/30/93 5.86%
09/30/94 -6.33%
09/30/95 3.72%
09/30/96 -0.31%
09/30/97 3.21%
09/30/98 2.95%
09/30/99 -6.25%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital gains distributions. Dividend return
is the income from dividends received over the period assuming reinvestment of
all dividends. Share price change is the change in net asset value over the
period adjusted for capital gains distributions. No adjustment has been made for
taxes payable by 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.
12-Month Dividend Yield Comparison
A chart in the form of a bar graph appears here illustrating the comparison of
the 12 Month Dividend Yield of the USAA Intermediate-Term Fund to the 12 Month
Dividend Yield of the Lipper Intermediate Municipal Debt Funds Average from
9/30/90 to 9/30/99.
USAA Intermediate-Term Lipper Intermediate Municipal
Fund Yield Debt Funds Average Yield
---------------------- -----------------------------
09/30/90 6.98% 6.38%
09/30/91 6.67% 6.06%
09/30/92 6.07% 5.55%
09/30/93 5.35% 4.72%
09/30/94 5.55% 4.79%
09/30/95 5.50% 4.66%
09/30/96 5.63% 4.54%
09/30/97 5.44% 4.41%
09/30/98 5.22% 4.19%
09/30/99 5.43% *
The 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 for periods ending
9/30/90 to 9/30/99.
* Information from Lipper Analytical Services, Inc. was not available at press
time.
Cumulative Performance Comparison
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 Investment for the USAA Intermediate-Term Fund, Lehman
Brothers Municipal Bond Index and the Lipper Intermediate Municipal Debt Funds
Average. The data points from the graph are as follows:
USAA Intermediate-Term Fund
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,380
09/30/90 10,671
03/31/91 11,241
09/30/91 11,852
03/31/92 12,280
09/30/92 13,006
03/31/93 13,666
09/30/93 14,549
03/31/94 14,085
09/30/94 14,379
03/31/95 14,953
09/30/95 15,782
03/31/96 16,145
09/30/96 16,638
03/31/97 17,081
09/30/97 18,147
03/31/98 18,890
09/30/98 19,698
03/31/99 19,913
09/30/99 19,453
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,430
09/30/90 10,680
03/31/91 11,392
09/30/91 12,088
03/31/92 12,531
09/30/92 13,351
03/31/93 14,099
09/30/93 15,053
03/31/94 14,426
09/30/94 14,685
03/31/95 15,498
09/30/95 16,327
03/31/96 16,797
09/30/96 17,313
03/31/97 17,712
09/30/97 18,874
03/31/98 19,610
09/30/98 20,519
03/31/99 20,825
09/30/99 20,376
Lipper Intermediate Municipal Debt Funds Average
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,347
09/30/90 10,621
03/31/91 11,198
09/30/91 11,760
03/31/92 12,135
09/30/92 12,850
03/31/93 13,461
09/30/93 14,219
03/31/94 13,840
09/30/94 14,064
03/31/95 14,632
09/30/95 15,315
03/31/96 15,655
09/30/96 16,017
03/31/97 16,359
09/30/97 17,200
03/31/98 17,733
09/30/98 18,443
03/31/99 18,635
09/30/99 18,315
Data from 9/30/89 through 9/30/99
The broad-based Lehman Brothers Municipal Bond Index is an unmanaged index that
tracks total return performance for the investment-grade tax-exempt bond market.
The Lipper Intermediate Municipal Debt Funds Average is the average performance
level of all intermediate municipal debt funds, as computed by Lipper Analytical
Services, Inc., 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.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: CLIFFORD A. GLADSON, CFA, APPEARS HERE]
CREDIT MARKET REVIEW
Since our report of March 31, 1999, interest rates have continued to rise as
market participants tried to anticipate the reaction of the Federal Reserve to
robust economic growth during a period of low inflation. Between March 31, 1999,
and September 30, 1999, the yield on ten-year AA rated municipal bonds increased
0.65%.
FUND PERFORMANCE
While past performance is no guarantee of future results, for the first six
months of the fiscal year, March 31 to September 30, the Fund's six-month total
return was -2.31%. During this period, the Fund's share price fell $0.65 to
$12.74. However, over the last six months, your Fund's annualized dividend yield
increased to 5.40%.
Your Fund's performance received an Overall Star Rating of five stars in the
municipal bond fund category from Morningstar Rating(Trademark) for the period
ended September 30, 1999.
* * * * *
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gains distributions.
Dividend yield is computed by dividing income dividends paid during the previous
six months by the latest month-end net asset value adjusted for capital gains
distributions and annualizing the result.
Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of September 30, 1999.
The ratings are subject to change every month. Morningstar ratings are
calculated from the Fund's three-, five-, and ten-year average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments and a
risk factor that reflects Fund performance below 90-day T-bill returns. Overall
rating is a weighted average of a fund's three-, five-, and ten-year ratings, as
applicable. The USAA Intermediate-Term Fund received five stars for the three-,
five-, and ten-year periods, respectively. The top 10% of the funds in a broad
asset class receive five stars, the next 22.5% receive four stars, and the next
35% receive three stars. The Fund was rated among 1,611, 1,241, and 375 funds in
the municipal bond fund category for the three-, five-, and ten-year periods,
respectively.
SILVER LINING
This is the third bear market for bonds that I have had to weather over the last
12 years. While repetition has not made the experience more bearable, it has
forged my resolve. I remain committed to managing your Fund with an income
orientation. This means that the rise in interest rates is an opportunity to
position the portfolio to enhance the level of tax-exempt dividends. My
concentration on tax-exempt income reflects the mathematical nature of bonds,
the Federal Income Tax Code, and the behavior of the fixed-income market.
Interest rates fluctuate. When interest rates rise, the price of a bond falls.
When interest rates fall, the price of a bond rises. At maturity, barring a
credit disaster, a bond pays off at face value. The tax-exempt income earned
depends on the bond's yield at the time of purchase.
The table on page 10 shows the sources of total return for the USAA
Intermediate-Term Fund over the last one, five, and ten years. Notice that the
tax-exempt dividend return is the dominant component of long-term total return.
This table encourages the fixed-income investor to look beyond the short-term
price decline caused by rising interest rates and see the silver lining of
higher long-term income distributions. The three graphs on page 10 further
illustrate how the dividend return and yearly price fluctuation combine to
produce annual total returns. Besides dominating long-term total return, income
distributions help smooth out the annualized total return.
Components of Total Return:
US Treasury Intermediate Government Bonds
1646 - 1998
A chart in the form of a line graph appears here, illustrating the sources of
return for $1.00 invested in 10-year Treasury bonds over the last 53 years.
Principal Coupons Reinvested Inflation
Price Price Price Price
---------- ----------- ------------- ----------
1946 1.00 .01 .00 1.18
1950 1.00 .07 .00 1.37
1954 1.00 .15 .01 1.47
1958 .93 .26 .03 1.59
1962 .95 .41 .10 1.67
1966 .90 .56 .17 1.81
1970 .86 .77 .37 2.18
1974 .84 .99 .69 2.85
1978 .81 1.23 1.19 3.72
1982 .78 1.56 2.59 5.36
1986 .89 1.88 5.59 6.07
1990 .87 2.16 8.32 7.35
1994 .88 2.39 11.54 8.23
1998 .99 2.62 17.49 9.02
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.
Two market factors shape my income-oriented portfolio strategy. First, to my
knowledge, no one has consistently been able to predict the movement in interest
rates. This makes market timing a losing proposition. Consequently, the Fund
tends to be fully invested. When I do trade bonds, it is to take advantage of
interest-rate movements that can increase a fund's dividend distribution yield.
I carefully manage trading activity to minimize taxable capital gains
distributions, if any. Common sense dictates that taxpayers value tax-exempt
income over taxable capital gains distributions.
The second market factor that influences portfolio strategy is that yields for
municipal bonds tend to increase as bond maturity lengthens. This means, in
order to earn a high level of income, the Fund's weighted average maturity will
usually be near its upper limit.
MARKET OUTLOOK
While I firmly believe that no one can consistently predict the short-term
movements in interest rates, I do feel that this interest-rate cycle is slowly
approaching its peak. I will continue the Fund's concentration on its objective
of providing investors with interest income that is exempt from federal income
tax.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Intermediate-Term Fund with a
taxable equivalent investment.
To match the USAA Intermediate-Term Fund's
closing 30-day SEC yield of 4.94% and:
- --------------------------------------------------------------------------------
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully taxable investment must pay: 6.86% 7.16% 7.72% 8.18%
- --------------------------------------------------------------------------------
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.
Note: Some income may be subject to federal, state, or local taxes, or the
federal alternative minimum tax.
Portfolio Ratings Mix
September 30, 1999
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 1999 of the USAA Intermediate-Term Fund to be:
A - 24.4%; Cash Equivalents - 1.7%; BBB - 25.3%; BB - 0.4%; AAA - 31.3%; and AA
- - 16.9%.
The four highest long-term credit ratings, in descending order of credit
quality, are AAA, AA, A, and BBB. This chart reflects the higher rating of
either Moody's Investors Service, Standard & Poor's Rating Group, or Fitch IBCA.
Unrated securities that have been determined by USAA IMCO to be of equivalent
investment quality to categories AAA, A, and BBB account for 2.6%, 0.01%, and
1.5%, respectively, of the Fund's investments, and are included in their
appropriate category above.
See page 34 for a complete listing of the Portfolio of Investments.
Investment Review
USAA SHORT-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests primarily in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of three years or
less.
- --------------------------------------------------------------------------------
3/31/99 9/30/99
================================================================================
Net Assets $1,033.6 Million $1,019.2 Million
Net Asset Value Per Share $10.72 $10.54
Tax-Exempt Dividends Per Share Last 12 Months $.490 $.479
Capital Gains Distributions Per Share Last 12
Months - -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Six-Month Total Return and 30 Day SEC Yield* as of 9/30/99
================================================================================
3/31/99 to 9/30/99 30-Day SEC Yield
.52%(+) 4.11%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending September 30, 1999
- --------------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
- --------------------------------------------------------------------------------
10 Years 5.21% = 5.08% + .13%
- --------------------------------------------------------------------------------
5 Years 4.90% = 4.71% + .19%
- --------------------------------------------------------------------------------
1 Year 2.06% = 4.47% + -2.41%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the Ten-Year Period Ended September 30, 1999
A chart in the form of a bar graph appears here, illustrating the Annual Total
Returns and Compounded Dividend Returns of the USAA Short-Term Fund for the
Ten-year period ended September 30, 1999.
Total Return for Years Ended:
- ----------------------------
09/30/90 5.74%
09/30/91 7.60%
09/30/92 6.71%
09/30/93 5.95%
09/30/94 1.70%
09/30/95 6.41%
09/30/96 4.51%
09/30/97 5.95%
09/30/98 5.62%
09/30/99 2.06%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
09/30/90 6.61%
09/30/91 6.44%
09/30/92 5.37%
09/30/93 4.63%
09/30/94 4.22%
09/30/95 4.88%
09/30/96 4.79%
09/30/97 4.72%
09/30/98 4.69%
09/30/99 4.47%
Change in Share Price:
- ---------------------
09/30/90 -0.87%
09/30/91 1.16%
09/30/92 1.34%
09/30/93 1.32%
09/30/94 -2.52%
09/30/95 1.53%
09/30/96 -0.28%
09/30/97 1.23%
09/30/98 0.93%
09/30/99 -2.41%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital gains distributions. Dividend return
is the income from dividends received over the period assuming reinvestment of
all dividends. Share price change is the change in net asset value over the
period adjusted for capital gains distributions. No adjustment has been made for
taxes payable by 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.
12-Month Dividend Yield Comparison
A chart in the form of a bar graph appears here illustrating the comparison of
the 12 Month Dividend Yield of the USAA Short-Term Fund to the 12 Month Dividend
Yield of the Lipper Short-Term Municipal Debt Funds Average from 9/30/90 to
9/30/99.
USAA Short-Term Lipper Short-Term Municipal
Fund Yield Debt Funds Average Yield
--------------- ---------------------------
9/30/90 6.51% 6.20%
9/30/91 6.14% 5.80%
9/30/92 5.15% 4.92%
9/30/93 4.44% 4.02%
9/30/94 4.30% 3.81%
9/30/95 4.65% 4.17%
9/30/96 4.71% 4.14%
9/30/97 4.54% 4.10%
9/30/98 4.52% 3.96%
9/30/99 4.55% *
The 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 for periods ending
9/30/90 to 9/30/99.
* Information from Lipper Analytical Services, Inc. was not available at press
time.
Cumulative Performance Comparison
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 Investment for the USAA Short-Term Fund, Lehman
Brothers Municipal Bond Index and the Lipper Short-Term Municipal Debt Funds
Average. The data points from the graph are as follows:
USAA Short-Term Fund
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,319
09/30/90 10,574
03/31/91 10,966
09/30/91 11,377
03/31/92 11,743
09/30/92 12,141
03/31/93 12,492
09/30/93 12,863
03/31/94 12,850
09/30/94 13,082
03/31/95 13,430
09/30/95 13,921
03/31/96 14,213
09/30/96 14,549
03/31/97 14,880
09/30/97 15,414
03/31/98 15,825
09/30/98 16,281
03/31/99 16,530
09/30/99 16,616
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,430
09/30/90 10,680
03/31/91 11,392
09/30/91 12,088
03/31/92 12,531
09/30/92 13,351
03/31/93 14,099
09/30/93 15,053
03/31/94 14,426
09/30/94 14,685
03/31/95 15,498
09/30/95 16,327
03/31/96 16,797
09/30/96 17,313
03/31/97 17,712
09/30/97 18,874
03/31/98 19,610
09/30/98 20,519
03/31/99 20,825
09/30/99 20,376
Lipper Short-Term Municipal Debt Funds Average
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,322
09/30/90 10,625
03/31/91 11,023
09/30/91 11,397
03/31/92 11,736
09/30/92 12,135
03/31/93 12,451
09/30/93 12,733
03/31/94 12,804
09/30/94 12,991
03/31/95 13,278
09/30/95 13,697
03/31/96 13,977
09/30/96 14,239
03/31/97 14,502
09/30/97 14,924
03/31/98 15,258
09/30/98 15,657
03/31/99 15,928
09/30/99 16,008
Data from 9/30/89 through 9/30/99
The broad-based Lehman Brothers Municipal Bond Index is an unmanaged index that
tracks total return performance for the investment-grade tax-exempt bond market.
The Lipper Short-Term Municipal Debt Funds Average is the average performance
level of all short-term municipal debt funds, as computed by Lipper Analytical
Services, Inc., 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.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: CLIFFORD A. GLADSON, CFA, APPEARS HERE]
CREDIT MARKET REVIEW
During the first six months of the Fund's fiscal year ending March 31, 1999, the
Federal Reserve increased short-term interest rates by 0.50%. While inflation
remained tame, the Federal Reserve was concerned that higher-than-expected
economic growth and a tight labor market would lead to higher prices. This
prompted a general rise in interest rates, and the yield on five-year AA rated
municipal bonds jumped 0.62%.
FUND PERFORMANCE
While past performance is no guarantee of future results, for the first six
months of the fiscal year, March 31 to September 30, the Fund's six-month total
return was 0.52%. During this period, the Fund's share price fell $0.18 to
$10.54. However, over the last six months, your Fund's annualized dividend yield
increased to 4.46%.
Your Fund's performance received an Overall Star Rating of five stars in the
municipal bond fund category from Morningstar Rating(TM) for the period ended
September 30, 1999.
* * * * *
SERVING TWO MASTERS
The USAA Short-Term Fund is managed to distribute a high level of tax-exempt
income while maintaining a weighted average maturity of less than three years.
Many of the Fund's shareholders correctly assume an additional investment goal
- -- that a short-term bond fund will exhibit a relatively low level of price
volatility. These two goals are not naturally compatible.
All else being equal, the credit market demands a higher level of income
payments for bonds with longer maturities. However, as the bond maturity
increases, the price volatility increases.
Fortunately, there is a class of municipal security that helps me manage the
competing demands of income and price stability -- the variable-rate demand note
(VRDN). VRDNs possess a demand feature that provides the owner the option to
sell the bonds back to the issuer at par (100% of face value) with a notice of
seven days or less. The demand feature is usually supported by a letter of
credit from a large bank. The interest rates paid by VRDNs are adjusted daily or
weekly based on the demand feature. VRDNs react very quickly to changes in
short-term interest rates. However, due to the short time between interest rate
adjustments and demand periods, VRDNs exhibit very low price volatility.
Depending on market conditions, the Fund typically holds between 15% and 30% of
its assets in VRDNs to help capture rises in interest rates and reduce the
volatility of the share price.
Although past performance is no guarantee of future results, VRDNs have
contributed to the Fund's ability to achieve positive total return in each of
the Fund's fiscal years since inception.
Total return equals income return plus share price change and assumes
reinvestment of dividends and capital gains distributions.
Dividend yield is computed by dividing income dividends paid during the previous
six months by the latest month-end net asset value adjusted for capital gains
distributions and annualizing the result.
Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of September 30, 1999.
The ratings are subject to change every month. Morningstar ratings are
calculated from the Fund's three-, five-, and ten-year average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments and a
risk factor that reflects Fund performance below 90-day T-bill returns. Overall
rating is a weighted average of a fund's three-, five-, and ten-year ratings, as
applicable. The USAA Short-Term Fund received five stars for the three-, five-,
and ten-year periods, respectively. The top 10% of the funds in a broad asset
class receive five stars, the next 22.5% receive four stars, and the next 35%
receive three stars. The Fund was rated among 1,611, 1,241, and 375 funds in the
municipal bond fund category for the three-, five-, and ten-year periods,
respectively.
MARKET OUTLOOK
While the increase in short-term interest rates may go on for a while, I plan to
continue to concentrate on the Fund's objective of providing investors with
interest income that is exempt from federal income tax.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Short-Term Fund with a taxable
equivalent investment.
To match the USAA Short-Term Fund's closing 30-day SEC yield of 4.11% and:
- --------------------------------------------------------------------------------
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully taxable investment must pay: 5.71% 5.95% 6.42% 6.80%
- --------------------------------------------------------------------------------
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.
Portfolio Ratings Mix
September 30, 1999
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 1999 of the USAA Short-Term Fund to be:
AAA - 22.4%; AA - 7.7%; A - 25.3%; Cash Equivalents - 25.8%; BBB - 18.2%; and BB
- - 0.6%.
The four highest long-term credit ratings, in descending order of credit
quality, are AAA, AA, A, and BBB. This chart reflects the higher rating of
either Moody's Investors Service, Standard & Poor's Rating Group, or Fitch IBCA.
Unrated securities that have been determined by USAA IMCO to be of equivalent
investment quality to categories AAA, A, and BBB account for 2.5%, 1.6%, and
2.3%, respectively, of the Fund's investments, and are included in their
appropriate category above.
Note: Some income may be subject to federal, state, or local taxes, or the
federal alternative minimum tax. See page 51 for a complete listing of the
Portfolio of Investments.
Investment Review
USAA TAX EXEMPT MONEY MARKET FUND
OBJECTIVE: Interest income that is exempt from federal income tax and a further
objective of preserving capital and maintaining liquidity.
TYPES OF INVESTMENTS: Invests primarily in 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 a money market fund is not insured or guaranteed by the FDIC
or any other government agency. Although the Fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
- --------------------------------------------------------------------------------
3/31/99 9/30/99
================================================================================
Net Assets $1,767.0 Million $1,810.3 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns and 7-Day Yield as of 9/30/99
================================================================================
3/31/99 to 9/30/99 1 Year 5 Years 10 Years 7-Day Yield
1.56%(+) 3.10% 3.39% 3.67% 3.50%
- --------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Total return equals income return and assumes reinvestment of all dividends and
capital gains distributions. No adjustment has been made for taxes payable by
shareholders on their reinvested dividends and capital gains distributions. Past
performance is no guarantee of future results. Yields and returns fluctuate. The
7-day yield quotation more closely reflects current earnings of the Fund than
the total return quotation.
7-Day Yield Comparison
A chart in the form of a line graph appears here illustrating the comparison of
the 7-day Yield of the USAA Tax Exempt Money Market Fund and the IBC Financial
Data, Inc. SB (Stock Broker) and GP (General Purpose) (Tax-Free) Money Funds.
USAA Tax Exempt
Money Market Fund IBC Financial Data, Inc.
----------------- -----------------------
09/29/98 3.70% 3.21%
10/27/98 3.15% 2.69%
11/24/98 3.27% 2.75%
12/29/98 3.46% 2.95%
01/26/99 2.84% 2.42%
02/22/99 2.73% 2.27%
03/29/99 2.92% 2.45%
04/26/99 3.25% 2.74%
05/31/99 3.13% 2.66%
06/28/99 3.36% 2.91%
07/26/99 2.99% 2.55%
08/30/99 3.06% 2.65%
09/27/99 3.44% 3.01%
Data represent the last Monday of each month.
Ending date 9/27/99
The graph tracks the Fund's 7-day yield against IBC Financial Data, Inc. SB
(Stock Broker) and GP (General Purpose) (Tax-Free) Money Funds, an average of
money market fund yields.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: THOMAS G. RAMOS, CFA, APPEARS HERE]
OVERVIEW
Since our last shareholder report, interest rates have trended upward. Long-term
U.S. Treasury bond yields have moved from 5.60% at the end of March to 6.10% in
early October. One-year Treasury bill yields have moved from 4.70% in March to
5.20% in October. One-year tax-exempt yields have moved from 3.05% in March to
3.73% in October.
The upward movement in U.S. Treasury yields reflects a modestly growing domestic
economy and the Federal Reserve's increase of the federal funds rate in June
from 4.75% to 5.00%, then again in August from 5.00% to 5.25%.
STRATEGY
Since March, we have maintained our strategy of placing most of the Fund's
assets in variable-rate demand notes (VRDNs). We continue to believe that these
securities are the best value in the short-term tax-exempt market. Our
shareholders will recall that these securities have a demand feature which
provides the owner the option to sell the bonds back to the issuer at par (100%
of face value) with a notice of seven days or less. Additionally, the interest
that these securities pay is reset on a seven-day basis. In the current
environment, these securities compare well with fixed-rate instruments.
The average maturity of the portfolio was 40 days at the end of September. This
reflected the comparative unattractiveness of longer notes to VRDNs.
THE PORTFOLIO
VRDNs represent over 70% of the Fund's assets. In addition to VRDNs, the
portfolio continues to have a modest exposure in tax-exempt commercial paper and
short-term tax-exempt notes. These securities are bought at a fixed rate and
thus provide a cushion whenever VRDNs become too expensive, i.e. their rate
drops too low.
PERFORMANCE
While past performance is no guarantee of future results, for the six months
ending September 30, 1999, your Fund ranked 3 out of 133 national money market
funds according to IBC Financial Data, Inc., with a yield of 3.10%. The average
for the category over the same period was 2.64%.
Cumulative Performance of $10,000
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment of the USAA Tax Exempt Money Market Fund.
The data is from 9/30/89 to 9/30/99. The data points from the graph are as
follows:
USAA Tax Exempt Money Market Fund
Year Amount
- -------- -------
09/30/89 $10,000
03/31/90 10,299
09/30/90 10,605
03/31/91 10,911
09/30/91 11,165
03/31/92 11,380
09/30/92 11,558
03/31/93 11,709
09/30/93 11,848
03/31/94 11,980
09/30/94 12,133
03/31/95 12,336
09/30/95 12,565
03/31/96 12,787
09/30/96 12,999
03/31/97 13,209
09/30/97 13,440
03/31/98 13,668
09/30/98 13,904
03/31/99 14,115
09/30/99 14,335
Data from 9/30/89 through 9/30/99
Past performance is no guarantee of future results, and the value of your
investment will vary according to the Fund's performance. Some income may be
subject to federal, state, or local taxes, or to the federal alternative minimum
tax. For 7-day yield information, please refer to the Fund's Investment Review
page.
IBC Financial Data, Inc. provides independent analysis of trends in the
financial services and investing industries with particular concentration on
money market funds.
See page 63 for a complete listing of the Portfolio of Investments.
Shareholder Voting Results
On October 15, 1999, a special meeting of shareholders was held to vote on the
following proposals. All proposals were approved by the shareholders. All
shareholders of record on August 19, 1999, were entitled to vote on each
proposal. The number of votes shown below are shown for the entire USAA Tax
Exempt Fund, Inc. (the Company) for proposals 1 and 2.
1 Proposal to elect a Board of Directors as follows:
DIRECTORS VOTES FOR VOTES WITHHELD
Robert G. Davis 1,653,325,550 19,504,676
Michael J.C. Roth 1,653,325,550 19,504,676
David G. Peebles 1,653,325,550 19,504,676
Robert L. Mason 1,653,325,550 19,504,676
Michael F. Reimherr 1,653,325,550 19,504,676
Richard A. Zucker 1,653,325,550 19,504,676
Barbara B. Dreeben 1,653,325,550 19,504,676
John W. Saunders, Jr. and Howard L. Freeman, Jr. did not stand for re-election
to the Board. Their term of office will terminate on December 31, 1999.
2 Proposal to ratify or reject the selection by the Board of Directors of KPMG
LLP as auditors for the Company for the fiscal year ending March 31, 2000.
NUMBER OF SHARES VOTING
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1,631,286,201 19,197,037 22,346,988
CATEGORIES AND DEFINITIONS
PORTFOLIOS OF INVESTMENTS
September 30, 1999
(Unaudited)
Fixed-Rate Instruments - consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the market
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
of the security.
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 generally adjusted at a stipulated daily, weekly, or monthly
interval to a rate that reflects current market conditions. In money market
funds, the effective maturity of these instruments is deemed to be less than 397
days in accordance with regulatory requirements. In bond funds, the effective
maturity is the next put date.
Credit Enhancements - add 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.
The USAA Tax Exempt Money Market Fund's investments consist of securities
meeting the requirements to qualify as "eligible securities" under the
Securities and Exchange Commission (SEC) rules applicable to money market funds.
With respect to quality, "eligible securities" generally consist of securities
rated in one of the two highest categories for short-term securities, or, if not
rated, of comparable quality, at the time of purchase. The Manager also attempts
to minimize credit risk in the USAA Tax Exempt Money Market Fund through
rigorous internal credit research.
(ETM) Escrowed to final maturity.
(PRE) Prerefunded to a date prior to maturity.
(LOC) Enhanced by a bank letter of credit.
(LIQ) Enhanced by a bank liquidity
agreement.
(NBGA)Enhanced by a nonbank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1)MBIA, Inc. (5) Asset Guaranty Insurance Co.
(2)AMBAC Financial Group, Inc. (6) ACA Financial Guaranty Corp.
(3)Financial Guaranty Insurance Co. (7) College Construction Loan
(4)Financial Security Assurance Insurance Association.
Holdings Ltd. (8) Capital Reinsurance Co.
PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
BAN Bond Anticipation Note ISD Independent School District
COP Certificate of Participation MFH Multi-Family Housing
CP Commercial Paper PCRB Pollution Control Revenue Bond
GO General Obligation RAN Revenue Anticipation Note
IDA Industrial Development RB Revenue Bond
Authority/Agency RN Revenue Note
IDB Industrial Development Board SFH Single-Family Housing
IDC Industrial Development Corp. TAN Tax Anticipation Note
IDRB Industrial Development TRAN Tax Revenue Anticipation Note
Revenue Bond
<TABLE>
USAA LONG-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (97.5%)
Alabama (1.7%)
$ 3,750 Baldwin County Health Care RB,
Series 1996 6.75% 4/01/2021 $ 3,845
8,000 Courtland IDRB, Series 1994 5.90 2/01/2017 7,784
10,250 Prattville IDB RB, Series 1998 5.30 9/01/2028 9,112
15,000 Public School and College RB,
Series 1999A (INS)(2) 5.50 9/01/2029 14,374
Alaska (2.3%)
Housing Finance Corp. Collateralized RB,
4,460 1991 Second Series 6.90 6/01/2032 4,622
8,930 1994 First Series 6.70 12/01/2019 9,239
11,430 1995 First Series (NBGA) 6.55 12/01/2037 11,789
21,175 Valdez Marine Terminal RB, Series 1985A 7.00 12/01/2025 22,474
California (5.1%)
11,350 Central Valley Finance Auth. RB,
Series 1993 (PRE) 6.20 7/01/2020 12,322
11,500 Los Angeles Regional Airport
Improvement Corp. RB, Series 1996 6.35 11/01/2025 11,755
74,000 San Joaquin Hills Transportation
Corridor Agency RB, Series 1993 (PRE) 6.75 1/01/2032 81,289
Colorado (1.7%)
9,500 Denver Health and Hospital Auth. RB,
Series 1998A 5.38 12/01/2028 8,186
13,700 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 13,133
11,480 Summit County Sports Facilities RB,
Series 1990 7.88 9/01/2008 13,183
Connecticut (2.4%)
Health and Educational Facilities Auth. RB,
3,490 Series C (PRE) 6.63 7/01/2026 3,905
510 Series C 6.63 7/01/2026 529
48,200 Mashantucket (Western) Pequot Tribe RB,
Series 1997B (d) 5.75 9/01/2027 44,883
District of Columbia (3.7%)
25,200 Convention Center Auth. RB,
Series 1998 (INS)(2) 4.75 10/01/2028 20,702
51,025 GO, Series 1999A 5.50 6/01/2029 46,813
8,000 Hospital RB, Series 1992B (PRE) 7.00 8/15/2015 8,735
Georgia (0.5%)
10,000 Savannah Economic Development Auth.
PCRB, Series 1995 6.15 3/01/2017 10,408
Hawaii (0.4%)
7,330 State Highway RB, Series 1998 5.50 7/01/2018 7,191
Idaho (1.1%)
23,400 Nez Perce County PCRB, Series 1996 6.00 10/01/2024 22,882
Illinois (9.1%)
Chicago Gas Supply RB,
13,500 Series 1985B 7.50 3/01/2015 13,918
7,500 Series 1985C 7.50 3/01/2015 7,732
24,250 Series 1995A 6.10 6/01/2025 24,610
13,725 Chicago-O'Hare International Airport RB,
Series 1994 8.20 12/01/2024 15,575
Development Finance Auth. RB,
5,820 Series 1996B (PRE)(INS)(4) 6.40 9/01/2031 6,445
880 Series 1996B (INS)(4) 6.40 9/01/2031 935
45,000 GO, Series 1999 (INS)(3) 5.00 3/01/2024 39,451
Health Facilities Auth. RB,
17,775 Series 1992 7.00 1/01/2015 18,405
7,000 Series 1998 5.25 9/01/2024 5,961
19,600 Quincy Hospital RB, Series 1993 6.00 11/15/2018 18,792
Regional Transportation Auth. GO,
10,980 Series 1994C (INS)(3) 7.10 6/01/2025 12,342
23,980 Series 1999 (INS)(4) 5.75 6/01/2020 24,166
Indiana (3.4%)
10,945 Development Finance Auth. Environmental RB,
Series 1996 6.15 7/15/2022 10,605
100,675 Health Facility Financing Auth. RB,
Series 1992C (a) 7.89 7/01/2023 15,568
41,750 Indianapolis Airport Facility RB,
Series 1994 6.80 4/01/2017 44,063
Kansas (0.4%)
49,850 Sedgwick County Mortgage Loan RB,
Senior Series 1991A (a) 7.63 12/01/2022 8,562
Kentucky (0.7%)
17,870 Lexington Fayette Urban County
Government GO, Series 1999 4.75 5/01/2024 15,128
Louisiana (1.8%)
25,730 Lake Charles Harbor and Terminal District
Port Facilities RB, Series 1995A 7.75 8/15/2022 28,333
11,015 St. Tammany Parish Hospital Service
District Number 1 RB, Series 1998 (INS)(6) 5.00 7/01/2022 9,419
Maryland (0.5%)
10,235 Community Development Administration
SFH RB, Series 1996A 5.95 7/01/2023 10,306
Massachusetts (0.6%)
14,875 Development Finance Agency RB,
Series 1999P 5.45 5/15/2059 13,216
Michigan (2.9%)
9,900 Battle Creek Downtown Development Auth.
Development Bonds, Series 1994 (PRE) 7.60 5/01/2016 11,266
13,005 Dickinson County Economic Development
Corp. PCRB, Series 1993 5.85 10/01/2018 12,663
Hospital Finance Auth. RB,
15,500 Series 1995A (PRE) 7.50 10/01/2027 17,760
11,895 Series 1998A (INS)(6) 5.50 10/01/2027 10,906
6,500 Job Development Auth. RB,
Series 1990A (NBGA) 8.00 12/01/2013 6,825
Minnesota (3.4%)
9,750 International Falls PCRB, Series 1998 5.50 4/01/2023 8,473
49,400 St. Paul Housing and Redevelopment
Auth. Hospital RB, Series 1993A 6.63 11/01/2017 49,011
14,775 Washington County Housing and
Redevelopment Auth. RB, Series 1998 5.50 11/15/2027 12,316
Mississippi (1.6%)
Lafayette County Hospital RB,
2,940 Series 1991A (PRE) 7.95 3/01/2016 3,142
15,175 Series 1991B (PRE) 7.95 3/01/2016 16,219
Union County Hospital RB,
4,450 Series 1991A (PRE) 7.95 3/01/2016 4,756
8,350 Series 1991B (PRE) 7.95 3/01/2016 8,925
Missouri (0.2%)
5,000 Health and Educational Facilities RB,
Series 1996A 6.38 2/01/2027 5,050
Montana (1.1%)
14,545 Board of Housing RB, Series 1997A-1 6.05 12/01/2037 14,639
8,910 Lewis and Clark County Environmental RB,
Series 1998 5.60 1/01/2027 8,172
Nebraska (0.6%)
15,000 Scotts Bluff County Hospital Auth.
Number 1 RB, Series 1998 5.25 11/15/2028 13,189
Nevada (1.7%)
19,000 Clark County Economic Development RB,
Series 1999 5.50 5/15/2029 17,628
15,650 Humboldt County PCRB, Series 1984 8.30 12/01/2014 17,771
New Hampshire (2.7%)
Higher Educational and Health
Facilities RB,
8,580 Series 1993 (PRE) 6.38 7/01/2023 9,276
2,205 Series 1993 6.38 7/01/2023 2,257
17,500 Series 1998 (INS)(6) 5.30 10/01/2028 15,475
28,030 Single-Family Mortgage Finance Auth. RB,
Series 1993B 6.05 7/01/2025 28,284
New Jersey (0.5%)
15,000 Camden County Improvement Auth. RB,
Series 1997 6.00 2/15/2027 11,223
New Mexico (2.4%)
16,000 Chaves County Hospital RB (PRE) 7.25 12/01/2022 17,641
30,100 Lordsburg PCRB 6.50 4/01/2013 30,931
New York (11.0%)
21,500 Dormitory Auth. RB, Series 1996B 6.00 8/15/2016 22,394
Medical Care Facilities Finance Agency RB,
36,275 Series 1994A (PRE) 6.90 8/15/2034 40,783
13,900 Series 1995A (PRE) 6.85 2/15/2017 15,574
New York City GO,
50,000 Series 1995B (PRE) 7.25 8/15/2019 56,435
350 Series 1997I (PRE) 6.25 4/15/2017 385
5,540 Series 1997I 6.25 4/15/2017 5,751
17,985 Series 1997I (PRE) 6.25 4/15/2027 19,762
13,065 Series 1997I 6.25 4/15/2027 13,467
20,000 Series 1999H 5.00 3/15/2029 17,312
New York City Municipal Water Finance
Auth. RB,
30,000 Series 1998D (a) 5.08 6/15/2020 8,999
12,000 Series 2000A (INS)(3) 5.75 6/15/2031 11,826
14,625 Port Auth. of New York and New Jersey RB,
Eighty-Fifth Series 5.38 3/01/2028 13,941
North Carolina (0.7%)
14,125 Housing Finance Agency RB, Series 1991R 6.95 9/01/2023 14,729
Ohio (0.3%)
7,325 Lorain County Health Care Facilities RB,
Series 1998A 5.25 2/01/2021 6,306
Oklahoma (2.3%)
46,600 Tulsa Municipal Airport Transportation RB,
Series 1995 6.25 6/01/2020 46,862
Pennsylvania (2.4%)
Montgomery County IDA RB,
7,500 Series 1996A 5.88 11/15/2022 7,180
10,000 Series 1996B 5.75 11/15/2017 9,508
Philadelphia Gas Works RB,
8,870 14th Series (PRE) 6.38 7/01/2026 9,567
18,600 14th Series 6.38 7/01/2026 18,802
31,755 Pittsburgh Water and Sewer Auth. RB,
Series 1998B (INS)(3), (a) 5.30 9/01/2029 5,358
Puerto Rico (8.4%)
Electric Power Auth. RB,
25,450 Series 1995 X (PRE) 6.13 7/01/2021 28,088
34,120 Series EE 4.75 7/01/2024 29,063
21,175 Series T (PRE) 6.38 7/01/2024 23,443
113,000 Highway and Transportation Auth. RB,
Series 1998A 4.75 7/01/2038 93,206
Rhode Island (1.3%)
25,000 Housing and Mortgage Finance Corp. SFH RB,
Series 15-A 6.85 10/01/2024 25,981
South Carolina (1.0%)
Connector 2000 Association Toll Road RB,
12,700 Series 1998B (a) 5.78 1/01/2022 2,732
13,000 Series 1998B (a) 5.80 1/01/2023 2,610
13,500 Series 1998B (a) 5.80 1/01/2024 2,501
16,200 Series 1998B (a) 5.80 1/01/2025 2,799
17,100 Series 1998B (a) 5.83 1/01/2027 2,571
17,500 Series 1998B (a) 5.83 1/01/2028 2,454
20,500 Series 1998B (a) 5.83 1/01/2029 2,682
20,000 Series 1998B (a) 5.85 1/01/2037 1,474
Tennessee (0.3%)
7,000 Springfield Health and Educational
Facilities Board RB, Series 1998 5.38 8/01/2024 6,027
Texas (6.4%)
5,000 Austin Higher Education Auth. RB,
Series 1998 5.25 8/01/2023 4,415
19,500 Bell County Health Facilities
Development Corp. RB, Series 1989 (ETM) 6.50 7/01/2019 21,016
12,500 Harris County Health Facilities RB,
Series 1992 (PRE) 7.13 6/01/2015 13,616
19,300 Harris County IDC RB, Series 1992 6.95 2/01/2022 20,189
21,000 Port of Corpus Christi IDC PCRB,
Series 1997A 5.45 4/01/2027 18,669
19,135 Southwest Higher Education Auth., Inc. RB,
Series 1999A 5.00 10/01/2029 16,642
20,000 Travis County Health Facilities
Development Corp. RB, Series 1998A 5.38 11/01/2028 18,327
Tyler Health Facilities Development
Corp. Hospital RB,
4,700 Series 1993A 6.75 11/01/2025 4,201
10,300 Series 1993B 6.75 11/01/2025 9,205
6,480 Veteran's Land Board GO, Series 1998 (c) 6.20 11/15/2030 6,026
Vermont (0.1%)
2,500 Educational and Health Buildings RB,
Series 1998 5.50 7/01/2021 2,299
Virginia (1.5%)
8,000 Henrico County IDA Hospital RB,
Series 1985C (PRE) 7.50 9/01/2011 8,376
21,950 Peninsula Ports Auth. RB,
Series 1992 (NBGA) 7.38 6/01/2020 23,180
Washington (6.7%)
Housing Finance Commission RB,
3,500 Series 1996A (PRE)(LOC) 6.85 7/01/2021 3,941
5,000 Series 1999 (INS)(5) 6.00 7/01/2029 4,922
50,000 King County GO, Series 1994A (PRE) 6.25 1/01/2034 54,207
73,500 Seattle Metropolitan Sewer RB, Series V 6.20 1/01/2032 74,544
West Virginia (1.1%)
10,000 University RB, Series 1998A (INS)(1) 5.25 4/01/2028 9,283
12,500 Water Development Auth. RB,
Series 1991A (INS)(4) 7.00 11/01/2025 13,349
Wyoming (1.5%)
29,865 Community Development Auth. SFH RB,
Series 1993A 6.10 6/01/2033 30,132
- ------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,991,635) 2,013,596
- ------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (1.9%)
California (0.2%)
4,100 Irvine Ranch Water District COP,
Series 1986 (LOC) 3.50 8/01/2016 4,100
Florida (0.6%)
2,640 Dade County IDA PCRB, Series 1995 3.95 4/01/2020 2,640
7,725 Hillsborough County IDA PCRB,
Series 1992 3.95 5/15/2018 7,725
1,000 St. Lucie County PCRB, Series 1995 3.95 3/01/2027 1,000
Georgia (0.2%)
4,350 Fulton County Residential Care
Facilities RB, Series 1996 (LOC) 3.95 1/01/2018 4,350
Kansas (0.2%)
2,900 Development Finance Auth. RB,
Series 1998BB (LOC) 3.95 11/15/2028 2,900
Michigan (0.2%)
4,800 Jackson County Economic Development
Corp. RB, Series 1997 (LOC) 3.95 6/01/2027 4,800
North Carolina (0.2%)
3,600 Raleigh Durham Airport Auth. Special
Facility RB, Series 1995B-1 (LOC) 3.90 11/01/2015 3,600
Pennsylvania (0.2%)
4,700 Allegheny County IDA RB,
Series 1997D (LOC) 3.95 7/01/2027 4,700
Virginia (0.1%)
2,750 Waynesboro IDA RB, Series 1997 (LOC) 3.95 12/15/2028 2,750
- ------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $38,565) 38,565
- ------------------------------------------------------------------------------------------
Total investments (cost: $2,030,200) $2,052,161
==========================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Escrowed Bonds 24.1%
Hospitals 11.0
Special Assessment/Tax/Fee 8.3
Single-Family Housing 7.7
General Obligations 6.7
Water/Sewer Utilities - Municipal 5.7
Education 4.0
Airlines 3.8
Natural Gas Utilities 3.6
Paper & Forest Products 3.5
Nursing/Continuing Care Centers 2.8
Electric/Gas Utilities - Municipal 2.3
Gaming Companies 2.2
Air Freight 2.1
Metals/Mining 1.9
Airport/Port 1.8
Electric Utilities 1.4
Health Care - Miscellaneous 1.1
Oil - International Integrated 1.1
Leasing 1.0
Toll Roads 1.0
Other 2.3
----
Total 99.4%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.7%
Alaska 2.3
California 5.3
Colorado 1.7
Connecticut 2.4
District of Columbia 3.7
Florida .6
Georgia .7
Hawaii .4
Idaho 1.1
Illinois 9.1
Indiana 3.4
Kansas .6
Kentucky .7
Louisiana 1.8
Maryland .5
Massachusetts .6
Michigan 3.1
Minnesota 3.4
Mississippi 1.6
Missouri .2
Montana 1.1
Nebraska .6
Nevada 1.7
New Hampshire 2.7
New Jersey .5
New Mexico 2.4
New York 11.0
North Carolina .9
Ohio .3
Oklahoma 2.3
Pennsylvania 2.6
Puerto Rico 8.4
Rhode Island 1.3
South Carolina 1.0
Tennessee .3
Texas 6.4
Vermont .1
Virginia 1.6
Washington 6.7
West Virginia 1.1
Wyoming 1.5
----
Total 99.4%
====
<TABLE>
USAA INTERMEDIATE-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Fixed-rate Instruments (92.3%)
Alabama (0.4%)
$2,000 Baldwin County Health Care Auth.
Hospital RB, Series 1996 6.75% 4/01/2015 $ 2,075
2,500 Montgomery BMC Special Care Facilities
Financing Auth. RB, Series 1998B (INS)(1) 4.88 11/15/2018 2,186
5,000 Prattville IDB PCRB, Series 1998 5.15 9/01/2013 4,613
Alaska (0.5%)
Housing Finance Corp. Mortgage RB,
6,295 Series 1996A (INS)(1) 6.00 12/01/2015 6,419
4,000 Series 1997A-1 5.50 12/01/2017 3,870
Arizona (0.4%)
4,000 Educational Loan Marketing Corp. RB,
Series 1992A 6.70 3/01/2000 4,041
2,000 Health Facilities Auth. Hospital RB,
Series 1998 (INS)(2) 4.75 10/01/2018 1,720
4,500 Maricopa County Hospital RB, Series 1997 6.13 4/01/2018 4,478
Arkansas (0.8%)
4,000 Little Rock Capital Improvement RB,
Series 1998A 5.70 1/01/2018 3,812
5,735 Mississippi County Hospital RB,
Series 1992B 6.85 11/01/2002 5,893
7,780 St. Francis County Hospital RB,
Series 1985 6.50 2/01/2005 7,882
585 Student Loan RB, Series 1991 7.15 6/01/2002 605
California (6.0%)
7,100 Central Valley Financing Auth. RB (PRE) 6.10 7/01/2013 7,684
10,500 Contra Costa Transportation Auth. RB,
Series 1991A (ETM)(INS)(3), (a) 6.30 3/01/2003 9,078
Foothill/Eastern Transportation
Corridor Agency RB,
10,000 Series 1995A (a) 6.87 1/01/2010 8,339
15,000 Series 1995A (a) 7.10 1/01/2011 12,706
9,085 Series 1995A (a) 6.82 1/01/2013 7,715
235 Housing Finance Agency RB,
Series 1996A (INS)(1) 5.70 8/01/2010 243
Modesto Irrigation District COP,
3,320 Series 1999A (INS)(2), (a) 5.64 7/01/2017 1,186
3,325 Series 1999A (INS)(2), (a) 5.69 7/01/2018 1,110
19,920 Pleasanton Joint Powers Financing Auth. RB,
Series 1993A 6.00 9/02/2005 20,800
Sacramento Cogeneration Auth. RB,
1,800 Series 1995 (PRE) 6.38 7/01/2010 2,003
1,500 Series 1995 6.38 7/01/2010 1,639
19,300 Sacramento Power Auth. RB,
Series 1995 (Cogeneration Project) 5.88 7/01/2015 19,278
San Joaquin Hills Transportation
Corridor Agency Senior Lien RB,
3,525 Series 1993 (ETM) (a) 7.05 1/01/2005 3,415
8,305 Series 1993 (ETM) (a) 7.87 1/01/2006 8,181
5,000 Series 1993 (ETM) (a) 7.50 1/01/2007 5,000
16,795 Series 1993 (ETM) (a) 7.71 1/01/2008 17,051
Southern California Public Power Auth. RB,
6,410 Series 1992 (ETM) (a) 6.10 7/01/2004 5,200
6,285 Series 1992 (a) 6.10 7/01/2004 5,093
Colorado (1.4%)
5,000 Adams County PCRB, Series 1999 5.10 1/01/2019 4,576
5,200 Arapahoe County IDA RB, Series 1991 7.00 2/01/2001 5,344
Denver Health and Hospital Auth. RB,
1,000 Series 1998A 5.20 12/01/2012 929
635 Series 1998A 5.25 12/01/2013 582
2,200 Series 1998A 5.38 12/01/2018 1,957
9,500 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 9,107
2,500 Housing and Finance Auth. MFH RB,
Series 1997C-3 5.65 10/01/2015 2,487
Metropolitan Football Stadium District RB,
3,650 Series 1999A (INS)(1), (a) 5.22 1/01/2011 1,995
2,000 Series 1999A (INS)(1), (a) 5.30 1/01/2012 1,024
4,770 Student Obligations RB, Series 1991A-2 6.90 9/01/2002 4,871
Connecticut (1.3%)
Mashantucket (Western) Pequot Tribe RB,
4,960 Series 1996A (PRE) (d) 6.40 9/01/2011 5,534
5,040 Series 1996A (d) 6.40 9/01/2011 5,270
1,000 Series 1997B (d) 5.60 9/01/2009 987
2,400 Series 1997B (d) 5.70 9/01/2012 2,328
16,500 Series 1997B (d) 5.75 9/01/2018 15,652
District of Columbia (4.6%)
30,000 Convention Center Auth. RB,
Series 1998 (INS)(2) 5.00 10/01/2018 26,829
GO,
2,035 Series 1993A (ETM) 5.80 6/01/2004 2,132
25,715 Series 1993A 5.80 6/01/2004 26,663
370 Series 1994A-3 (ETM) 5.50 6/01/2006 383
7,130 Series 1994A-3 5.50 6/01/2006 7,275
440 Series E (PRE) 5.75 6/01/2005 465
11,340 Series E 5.75 6/01/2005 11,746
450 Series E (PRE) 5.75 6/01/2006 475
11,550 Series E 5.75 6/01/2006 11,895
6,250 Hospital RB, Series 1992B (PRE) 6.75 8/15/2007 6,764
Revenue Bond,
4,560 Series 1999 (American Association of
Homes and Services) (INS)(6) 6.20 7/01/2019 4,624
6,000 Series 1999A (National Academy of
Sciences) (INS)(2) 5.00 1/01/2019 5,487
Florida (1.3%)
Dade County RB,
8,255 Series 1996B (INS)(2), (a) 6.00 10/01/2011 4,345
8,610 Series 1996B (INS)(2), (a) 6.10 10/01/2012 4,241
8,760 Series 1996B (PRE)(INS)(2), (a) 6.20 10/01/2013 4,266
5,000 Housing Finance Agency MFH RB,
Series 1984C 6.25 12/01/2006 5,129
Miami-Dade County School Board COP,
2,250 Series 1998A (INS)(4) 5.00 8/01/2016 2,082
1,500 Series 1998A (INS)(4) 5.00 8/01/2017 1,375
7,000 North Miami Educational Facilities RB 6.10 4/01/2013 7,023
Georgia (0.6%)
8,760 Metropolitan Atlanta Rapid Transit RB,
Series M 6.25 7/01/2003 9,201
5,000 Savannah Hospital Auth./Candler Health
Systems RB, Series 1998B (INS)(4) 5.00 7/01/2018 4,507
Hawaii (0.5%)
5,000 GO, Series 1999 (INS)(4) 5.75 9/01/2014 5,088
2,000 Honolulu City and County GO,
Series 1999C (INS)(3) 5.00 7/01/2019 1,797
5,000 Housing Finance and Development Corp. RB,
Series 1997B 5.45 7/01/2017 4,834
Idaho (0.1%)
2,325 Health Facilities Auth. RB, Series 1998 5.25 5/01/2014 2,172
Illinois (5.2%)
2,655 Bedford Park Tax Increment RB,
Series 1993 (ETM) 7.38 12/01/2004 2,985
4,880 Boone, McHenry and Dekalb Counties
Community Unit School District GO,
Series 1997 (INS)(4), (a) 5.30 12/01/2013 2,204
Chicago School Board GO,
15,535 Series 1999A (INS)(3), (a) 5.13 12/01/2016 5,706
10,775 Series 1999A (INS)(3), (a) 5.17 12/01/2017 3,713
21,235 Chicago-O'Hare International Airport RB,
Series 1994A (INS)(1) 6.20 1/01/2007 22,773
7,460 Cook County Forest Preserve District GO,
Series 1996 (INS)(1) 5.80 11/01/2016 7,495
10,110 Development Finance Auth. RB,
Series 1995 7.00 3/01/2007 10,784
Health Facilities Auth. RB,
10,000 Hospital Sisters Services, Inc. (INS)(1) 5.00 6/01/2018 8,890
6,700 Series 1992 (Mercy Hospital) 7.00 1/01/2007 7,050
8,000 Series 1993B (Univ. of Chicago
Hospital) (INS)(1) 5.75 8/15/2014 8,035
3,150 Series 1996 (Mercy Hospital) 6.00 1/01/2006 3,260
7,815 Series 1996 (Mercy Hospital) 6.38 1/01/2015 7,886
5,000 Series 1996A (Riverside Medical Center) 6.00 11/15/2015 4,946
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2013 919
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2014 911
2,500 Series 1998 (Centegra Health System) 5.25 9/01/2018 2,198
8,050 Lake County Community Unit School
District GO, Series 1999B (INS)(4), (a) 5.13 12/01/2016 2,981
Univ. of Illinois COP,
5,820 Series 1999 (INS)(1) 5.25 8/15/2015 5,534
4,000 Series 1999 (INS)(1) 5.25 8/15/2016 3,763
14,070 Will County Forest Preserve District GO,
Series 1999B (INS)(3), (a) 5.40 12/01/2017 4,883
Indiana (2.5%)
Health Facility Financing Auth. RB,
2,900 Series 1993 (Sisters St. Francis Health
Services) (PRE) 5.90 11/01/2009 3,016
12,600 Series 1994 (Sisters St. Francis Health
Services) (PRE) 6.20 7/01/2009 13,067
1,400 Series 1998 (Floyd Memorial Hospital
and Health Services) 5.25 2/15/2018 1,252
5,000 Series 1999A (Sisters St. Francis
Health Services) (INS)(1) 5.15 11/01/2019 4,521
6,000 Indianapolis Economic Development RB,
Series 1996 6.05 1/15/2010 5,988
Marion County Hospital Auth. RB,
7,000 Series 1992 (PRE) 6.10 10/01/2003 7,199
5,100 Series 1992 (PRE) 6.55 10/01/2008 5,358
Pike Township School Building Corp. RB,
4,600 Series 1992A 6.00 2/01/2006 4,792
4,700 Series 1992A 6.00 8/01/2006 4,896
1,150 St. Joseph County Economic Development RB,
Series 1997 5.45 2/15/2017 1,064
7,260 St. Joseph County Hospital Auth. RB,
Series 1999 5.75 2/15/2019 6,634
Iowa (0.9%)
6,000 Finance Auth. RB, Series 1998A (INS)(1) 5.25 7/01/2015 5,676
3,280 Higher Education Loan Auth. RB (INS)(7) 6.13 10/01/2016 3,370
10,000 Student Loan Liquidity Corp. RB,
Series 1992A 6.45 3/01/2002 10,394
Louisiana (1.4%)
5,175 Offshore Terminal Auth. RB, Series 1998 5.20 10/01/2018 4,728
Orleans Levee District RB,
7,380 Series 1986 (INS)(4) 5.95 11/01/2014 7,604
7,455 Series 1986 (INS)(4) 5.95 11/01/2015 7,648
7,015 Series A (INS)(4) 5.95 11/01/2010 7,413
1,400 Public Facilities Auth. RB, Series 1997B 5.63 8/01/2017 1,387
3,955 St. Tammany Parish Hospital Service
District No. 1 Hospital RB,
Series 1998 (INS)(6) 5.00 7/01/2018 3,451
Maine (1.9%)
41,400 Bucksport Solid Waste Disposal RB,
Series 1985 6.25 5/01/2010 42,946
Maryland (1.1%)
Community Development Administration RB,
17,760 1997 First Series 5.60 4/01/2018 17,360
8,000 Series 1996A 5.88 7/01/2016 8,014
Massachusetts (1.1%)
3,640 Housing Finance Agency RB, Series 1992C 6.35 11/15/2003 3,823
5,000 Municipal Wholesale Electric Co. Power
Supply Systems RB, Series 1993 (INS)(2) 5.45 7/01/2018 4,774
15,000 State GO, Series 1991D 6.63 7/01/2003 15,855
Michigan (2.4%)
8,000 Detroit Building Auth. RB,
Series 1996A (LOC) 6.15 2/01/2011 8,206
4,000 Detroit Downtown Development Auth. Tax
Increment Bonds, Series 1998C (INS)(1) 5.00 7/01/2018 3,618
4,450 Detroit GO, Series 1996B (INS)(3) 5.50 4/01/2014 4,435
23,330 Dickinson County Economic Development
Corp. RB, Series 1989 6.55 3/01/2007 24,094
Higher Education Facilities Auth. RB,
2,390 Series 1998 5.35 6/01/2013 2,241
1,550 Series 1998 5.55 6/01/2017 1,458
Hospital Finance Auth. RB,
5,000 Series 1995A (Genesys Health System) (PRE) 7.50 10/01/2007 5,805
325 Series 1996 (Central Michigan Hospital) 5.90 10/01/2004 336
100 Series 1996 (Central Michigan Hospital) 6.00 10/01/2005 104
150 Series 1996 (Central Michigan Hospital) 6.10 10/01/2006 156
160 Series 1996 (Central Michigan Hospital) 6.20 10/01/2007 168
2,600 Series 1996 (Central Michigan Hospital) 6.25 10/01/2016 2,643
2,000 Series 1998A (Genesys Regional Medical
Center) 5.38 10/01/2013 1,899
400 Strategic Fund Ltd. Obligation RB,
Series 1998 5.30 7/01/2018 358
Minnesota (1.5%)
4,205 Maplewood Health Care Facility RB,
Series 1996 5.95 11/15/2006 4,105
South St. Paul Hospital Facility RB,
11,920 Series 1994 6.50 11/01/2004 12,017
9,095 Series 1994 6.75 11/01/2009 9,227
St. Paul Hospital RB,
4,000 Series 1997A 5.70 11/01/2015 3,609
1,500 Series 1997B 5.85 11/01/2017 1,353
5,260 Washington County Hospital Facility RB,
Series 1998 5.38 11/15/2018 4,494
Mississippi (1.7%)
1,000 Jones County Hospital RB, Series 1997 5.50 12/01/2017 924
Lafayette County Hospital RB,
455 Series 1991A (PRE) 7.70 3/01/2003 474
2,360 Series 1991B (PRE) 7.70 3/01/2003 2,459
15,885 Series 1997 5.50 3/01/2009 16,175
1,500 Lincoln County Hospital RB,
Series 1998B (INS)(5) 5.50 4/01/2018 1,416
3,350 Prentiss County Hospital RB, Series 1985 6.50 2/01/2005 3,353
Union County Hospital RB,
695 Series 1991A (PRE) 7.70 3/01/2003 725
1,295 Series 1991B (PRE) 7.70 3/01/2003 1,352
11,170 Series 1997 5.50 3/01/2009 11,231
Missouri (0.1%)
2,000 Health and Educational Facilities Auth. RB,
Series 1997 5.75 2/01/2017 1,934
Montana (0.2%)
5,000 Health Facility Auth. Hospital RB,
Series 1997 5.50 6/01/2011 4,955
Nebraska (0.5%)
Cass County School District 001 GO,
2,800 Series 1998 (INS)(2) 5.00 12/15/2014 2,596
2,000 Series 1998 (INS)(2) 5.00 12/15/2019 1,794
Investment Finance Auth. Hospital RB,
870 Series 1997 (INS)(5) 5.30 11/15/2012 840
2,000 Series 1997 (INS)(5) 5.45 11/15/2017 1,882
5,000 Scotts Bluff County Hospital Auth. RB,
Series 1998 5.13 11/15/2019 4,458
Nevada (1.8%)
10,425 Clark County Flood Control GO (INS)(3) 4.50 11/01/2016 8,852
10,905 Clark County Flood Control GO (INS)(3) 4.50 11/01/2017 9,151
16,640 Clark County School District GO,
Series 1991B (INS)(3), (a) 6.24 3/01/2004 13,534
2,900 Housing Division SFH RB, Series 1995D-1 5.90 10/01/2014 2,927
2,000 Reno Hospital RB, Series 1998 (INS)(1) 5.00 5/15/2018 1,785
4,705 Washoe County School District GO (INS)(3) 4.75 6/01/2017 4,104
New Hampshire (0.5%)
Higher Educational and Health
Facilities Auth. RB,
350 Series 1985A (Student Loan) (INS)(3) 7.50 12/01/2000 351
1,275 Series 1990 (Granite State Management) 8.50 12/01/2001 1,308
3,000 Series 1997 (Kendal at Hanover) (LOC) 5.80 10/01/2012 3,007
5,055 Series 1997 (Kendal at Hanover) (LOC) 5.90 10/01/2018 5,012
1,990 Series 1998 (Franklin Pierce College)
(INS)(6) 5.25 10/01/2018 1,807
New Jersey (2.4%)
6,150 Camden County Improvement Auth. RB,
Series 1997 5.88 2/15/2015 4,871
Economic Development Auth. RB,
15,000 Series 1994A (INS)(1) 5.88 7/01/2011 15,752
2,000 Series 1997A (Harrogate Inc.) 5.75 12/01/2016 1,873
31,260 Turnpike Auth. RB, Series 1991A 6.50 1/01/2003 32,980
New Mexico (0.3%)
6,035 Chaves County Hospital RB,
Series 1992 (PRE) 7.25 12/01/2010 6,635
New York (21.5%)
6,000 Dormitory Auth. RB, Bronx-Lebanon
Hospital Center, Series 1998E 5.20 2/15/2015 5,584
Dormitory Auth. RB, Brookdale Hospital,
5,000 Series 1998J 5.20 2/15/2015 4,668
4,000 Series 1998J 5.20 2/15/2016 3,696
4,760 Series 1998J 5.30 2/15/2017 4,417
10,300 Dormitory Auth. RB, Court Facilities Lease,
Series 1993A 5.63 5/15/2013 10,241
4,065 Dormitory Auth. RB, Lutheran Center at
Poughkeepsie, Series 1997 (LOC) 6.00 7/01/2014 4,172
Dormitory Auth. RB, Mental Health
Services Facilities Improvement,
2,055 Series 1997A 5.75 2/15/2010 2,114
2,000 Series 1997A 5.75 2/15/2011 2,043
2,000 Series 1997A 5.75 2/15/2012 2,031
2,460 Series 1997B 5.75 2/15/2010 2,530
4,050 Series 1997B 5.75 2/15/2012 4,113
4,675 Series 1997B 5.50 8/15/2017 4,477
Dormitory Auth. RB, New York City University,
5,000 1996 Series 2 6.00 7/01/2009 5,226
1,760 1996 Series 2 6.00 7/01/2010 1,826
5,500 Series 1993A 5.75 7/01/2013 5,581
13,730 Series 1997-1 5.25 7/01/2014 12,954
14,560 Dormitory Auth. RB, Northern General
Hospital, Series 1998G 5.30 2/15/2019 13,284
2,680 Dormitory Auth. RB, Nyack Hospital,
Series 1996 6.00 7/01/2006 2,743
Dormitory Auth. RB, State University
Educational Facilities,
7,625 Series 1993A 5.88 5/15/2011 8,012
2,725 Series 1994B 5.90 5/15/2006 2,884
2,500 Series 1994B (PRE) 6.00 5/15/2007 2,704
1,000 Series 1995A 5.88 5/15/2007 1,057
2,000 Series 1995A (PRE) 5.90 5/15/2008 2,164
3,500 Series 1995A (PRE) 6.00 5/15/2009 3,804
2,250 Series 1995A (PRE) 6.00 5/15/2010 2,446
2,175 Series 1995A (PRE) 6.00 5/15/2011 2,364
14,120 Series 1996 5.75 5/15/2013 14,267
7,000 Series 1996 5.75 5/15/2016 7,011
7,230 Dormitory Auth. RB, Upstate Community
College, Series 1999A 5.00 7/01/2019 6,457
Environmental Facilities Corp. PCRB,
5,135 Series 1991E (PRE) 6.40 6/15/2003 5,423
1,415 Series 1991E 6.40 6/15/2003 1,490
Housing Finance Agency Service Contract RB,
2,275 Series 1995A 6.25 9/15/2010 2,403
4,420 Series 1996A 6.00 9/15/2016 4,483
75,745 Housing New York Corp. RB, Series 1993 5.00 11/01/2018 67,756
Medical Care Facilities Finance Agency RB,
5,000 Series 1994A (PRE) 6.40 2/15/2007 5,496
5,000 Series 1994A (PRE) 6.50 2/15/2008 5,520
10,000 Series 1994A 6.13 8/15/2013 10,017
7,445 Series 1995A (Adult Day Care) 6.00 11/15/2010 7,865
2,675 Series 1995A (Brookdale Hospital) (ETM) 6.70 2/15/2005 2,936
2,750 Series 1995A (Brookdale Hospital) (PRE) 6.70 8/15/2005 3,062
2,860 Series 1995A (Brookdale Hospital) (PRE) 6.75 2/15/2006 3,191
2,940 Series 1995A (Brookdale Hospital) (PRE) 6.75 8/15/2006 3,280
3,045 Series 1995A (Brookdale Hospital) (PRE) 6.80 2/15/2007 3,404
3,130 Series 1995A (Brookdale Hospital) (PRE) 6.80 8/15/2007 3,500
5,700 Series 1995A (Brookdale Hospital) (PRE) 6.80 8/15/2012 6,373
22,230 Metropolitan Transportation Auth.
Service Contract RB, Series P 5.75 7/01/2015 22,103
Mortgage Agency RB,
25,000 Series 83 5.45 4/01/2018 24,015
745 Series EE-1 7.75 10/01/2000 755
3,235 New York City Capital Improvement Bonds
34th St. Partnership, Series 1993 5.50 1/01/2014 3,208
New York City GO,
11,450 Series 1992H (PRE) 6.88 2/01/2004 12,278
1,330 Series 1992H 6.88 2/01/2004 1,410
16,655 Series 1993B (PRE) 6.75 10/01/2004 18,033
345 Series 1993B 6.75 10/01/2004 370
1,700 Series 1993C (PRE) 6.50 8/01/2004 1,823
7,300 Series 1993C 6.50 8/01/2004 7,759
15,000 Series 1994A 6.25 8/01/2008 15,890
10,000 Series 1996G 5.75 2/01/2010 10,289
5,000 Series 1997I 6.00 4/15/2012 5,182
9,635 Series 1998J 5.00 8/01/2017 8,641
New York City Municipal Water Finance RB,
3,295 Series 1992A 6.70 6/15/2003 3,441
3,345 Series 1992A (PRE) 6.70 6/15/2003 3,519
8,840 Thruway Auth. Highway and Bridge Trust
Fund RB, Series 1999B (INS)(3) 5.00 4/01/2019 8,006
Thruway Auth. RB,
7,500 Series 1995 (PRE) 6.00 4/01/2009 8,101
2,150 Series 1995 (PRE) 6.10 4/01/2010 2,333
10,000 Series E 4.75 1/01/2019 8,691
Urban Development Corp. RB,
20,955 Series 1993 5.75 1/01/2013 21,024
21,700 Series 1993 5.50 1/01/2015 21,098
North Carolina (0.3%)
6,000 Municipal Power Agency RB, Series 1992 6.00 1/01/2004 6,141
Ohio (0.6%)
6,750 Dayton Special Facilities RB, Series 1988C 6.05 10/01/2009 6,910
2,650 Franklin County Health Care Facilities RB,
Series 1997 5.50 7/01/2017 2,438
4,000 IDA RB, Series 1992 5.75 12/01/2002 4,118
Oklahoma (0.5%)
Holdenville Industrial Auth. RB,
1,650 Series 1995 (PRE) 6.60 7/01/2010 1,828
3,250 Series 1995 (PRE) 6.70 7/01/2015 3,618
2,055 Tulsa County Home Finance Auth. RB,
Series 1990 (ETM)(INS)(2) 7.10 5/01/2002 2,170
4,040 Valley View Hospital Auth. RB, Series 1996 5.75 8/15/2006 4,041
Oregon (0.1%)
1,250 Clackamas County Hospital Facility
Auth. RB, Series 1997 6.10 11/01/2012 1,226
Pennsylvania (4.7%)
35,000 Finance Auth. RB, Series 1993 6.60 11/01/2009 37,603
5,500 Higher Educational Facility Auth. RB,
Series 1999A (INS)(4) 5.25 8/01/2014 5,230
3,565 Housing Finance Agency RB, Series 1992 5.90 7/01/2004 3,694
10,000 Montgomery County IDA RB, Series 1996B 5.63 11/15/2012 9,746
Philadelphia GO,
9,055 Series 1998 (INS)(4) 4.75 3/15/2016 7,946
3,000 Series 1998 (INS)(4) 4.75 3/15/2017 2,611
11,700 Philadelphia IDA RB, Series 1998A (LOC) 5.15 3/01/2019 10,239
Philadelphia Water and Wastewater RB,
6,950 Series 1993 (PRE) 5.65 6/15/2012 7,301
10,550 Series 1993 (INS) 5.65 6/15/2012 10,667
9,440 State GO, Second Series 1992 (a) 6.11 7/01/2004 7,552
5,000 York County IDA RB, Series 1992 6.25 7/01/2002 5,219
Puerto Rico (3.9%)
Electric Power Auth. RB,
5,000 Series S 7.00 7/01/2006 5,617
4,420 Series X 5.80 7/01/2009 4,617
4,500 Series X 5.90 7/01/2010 4,697
4,000 Series X 6.00 7/01/2011 4,174
4,220 Series Z 5.50 7/01/2012 4,245
22,200 Housing Bank and Finance Agency RB 7.50 12/01/2006 24,935
8,005 Municipal Finance Agency RB,
Series 1992A 5.80 7/01/2004 8,405
14,060 Public Building Auth. GO, Series K 6.50 7/01/2003 14,983
Public Improvement GO,
7,500 Series 1994 6.10 7/01/2006 8,006
7,825 Series 1994 6.20 7/01/2007 8,350
Rhode Island (1.3%)
Health and Educational Building Corp. RB,
3,385 Series 1996 (INS)(1) 5.50 5/15/2012 3,389
7,600 Series 1996 (INS)(1) 5.50 5/15/2016 7,370
4,345 Series 1999A (LOC) 5.88 11/15/2014 4,348
Housing and Mortgage Finance Corp. RB,
6,180 Series 15-B 6.30 10/01/2007 6,379
5,205 Series 1995A (INS)(2) 5.70 7/01/2007 5,416
2,405 Series 25A 5.60 10/01/2017 2,352
South Carolina (0.6%)
Connector 2000 Association Inc. Toll Road RB,
6,400 Series 1998B (a) 5.73 1/01/2016 2,117
8,800 Series 1998B (a) 5.73 1/01/2017 2,719
9,100 Series 1998B (a) 5.75 1/01/2018 2,580
9,400 Series 1998B (a) 5.75 1/01/2019 2,488
3,000 Marion County Hospital District RB (INS)(7) 5.50 11/01/2015 2,936
South Dakota (0.2%)
5,400 Rapid City IDA RB, Series 1990 7.25 11/01/2000 5,553
Tennessee (1.0%)
24,540 Housing Development Agency RB,
Issue 97-3B (a) 5.73 7/01/2016 9,100
3,000 Knox County Health, Educational and
Housing Facilities Board RB,
Series 1996 (INS)(7) 5.50 4/15/2011 3,007
2,000 Memphis Shelby County Airport Auth.
Special Facilities RB, Series 1997 5.35 9/01/2012 1,957
Nashville and Davidson County Health
and Educational Facilities Board RB,
4,000 Series 1998 (INS)(5) 5.10 8/01/2016 3,635
1,000 Series 1998 (INS)(5) 5.10 8/01/2019 886
4,000 Springfield Health and Educational
Facilities Board Hospital RB,
Series 1998 5.25 8/01/2018 3,477
Texas (8.1%)
5,410 Austin Higher Education Auth. RB,
Series 1998 5.13 8/01/2016 4,859
Bastrop ISD GO,
1,855 Series 1997 (NBGA) (a) 5.55 2/15/2014 823
3,030 Series 1997 (NBGA) (a) 5.55 2/15/2015 1,262
3,055 Series 1997 (NBGA) (a) 5.60 2/15/2016 1,192
3,155 Series 1997 (NBGA) (a) 5.60 2/15/2017 1,155
12,000 Bexar County Health Facilities
Development Corp. RB,
Series 1993 (ETM)(INS)(4) 5.88 11/15/2010 12,699
32,925 Brazos River Auth. RB, Series 1999A 5.38 4/01/2019 29,516
4,365 Cass County IDC PCRB, Series 1997B 5.35 4/01/2012 4,277
Fort Worth Higher Education Finance Corp. RB,
515 Series 1997A 5.50 10/01/2006 521
545 Series 1997A 5.50 10/01/2007 548
575 Series 1997A 5.63 10/01/2008 579
2,670 Series 1997A 6.00 10/01/2012 2,682
15,400 Gulf Coast Waste Disposal Auth. PCRB,
Series 1992 6.13 11/01/2004 16,046
6,200 Gulf Coast Waste Disposal Auth. RB,
Series 1994 5.70 5/01/2006 6,383
2,070 Harrison County Health Facilities
Development Corp. RB, Series 1998 (INS)(6) 5.50 1/01/2018 1,940
Houston ISD Public Facility Corp. RB,
3,635 Series 1998A (INS)(2), (a) 5.35 9/15/2015 1,444
2,635 Series 1998A (INS)(2), (a) 5.38 9/15/2016 980
3,885 Series 1998A (INS)(2), (a) 5.40 9/15/2017 1,355
4,955 Series 1998B (INS)(2), (a) 5.35 9/15/2015 1,968
6,955 Series 1998B (INS)(2), (a) 5.38 9/15/2016 2,586
Houston Water and Sewer Systems RB,
175 Series 1992B (PRE) 6.00 12/01/2004 187
4,825 Series 1992B 6.00 12/01/2004 5,094
Laredo ISD Public Limited GO,
355 Series 1998A 5.06 2/01/2000 356
370 Series 1998A 5.06 2/01/2001 371
390 Series 1998A 5.06 2/01/2002 392
410 Series 1998A 5.06 2/01/2003 411
435 Series 1998A 5.06 2/01/2004 434
460 Series 1998A 5.06 2/01/2005 456
480 Series 1998A 5.06 2/01/2006 473
505 Series 1998A 5.06 2/01/2007 493
530 Series 1998A 5.06 2/01/2008 513
3,830 Lewisville RB, Series 1998 (INS)(6) 5.38 9/01/2015 3,546
11,700 Lower Colorado River Auth. RB,
Series 1992 (INS)(2), (a) 6.45 1/01/2003 10,094
4,390 Marlin ISD Public Facility Corp. RB,
Series 1998 (c) 5.85 2/15/2018 4,196
8,565 Municipal Power Agency RB, Series 1987 5.50 9/01/2013 8,511
24,050 Port of Corpus Christi IDC PCRB,
Series 1997B 5.40 4/01/2018 21,814
11,790 Public Finance Auth. RB (INS)(1), (a) 6.06 2/01/2004 9,627
10,000 San Antonio Electric and Gas Systems RB,
Series 1991B (ETM)(INS)(3), (a) 6.38 2/01/2004 8,165
5,000 Travis County Health Facilities Development
Corp. Hospital RB, Series 1998A 5.13 11/01/2018 4,573
4,000 Trinity River IDA RB 7.25 2/01/2004 4,361
Tyler Health Facilities Development
Corp. Hospital RB,
5,555 Series 1993B (East Texas Medical Center) 6.63 11/01/2011 5,131
1,000 Series 1997A (Mother Frances Hospital) 5.63 7/01/2013 936
Utah (2.1%)
455 Housing Finance Agency RB, Series 1985B 5.30 7/01/2007 455
Intermountain Power Agency RB,
8,105 Series 1987A (INS)(1) 5.00 7/01/2012 7,826
16,430 Series 1988B (INS)(1), (a) 6.48 7/01/2003 13,837
21,895 Series 1988B (INS)(1), (a) 6.18 7/01/2004 17,533
7,000 Juab County PCRB, Series 1991 (b) 6.00 8/01/2011 7,000
Vermont (0.1%)
3,000 Educational and Health Buildings
Financing Agency RB, Series 1998 5.50 7/01/2018 2,783
Virginia (0.6%)
5,000 Isle of Wight County IDA PCRB, Series 1994 5.80 5/01/2004 5,074
10,000 Public School Auth. RB, Series 1999A 5.13 8/01/2019 9,273
Washington (1.5%)
3,255 Health Care Facilities Auth. RB,
Series 1997A (INS)(1) 5.13 8/15/2017 2,977
6,185 Higher Education Facilities Auth. RB 5.20 10/01/2017 5,663
2,000 Housing Finance Commission RB,
Series 1999 (INS)(5) 5.88 7/01/2019 1,953
King County GO,
780 Series 1993A (PRE) 5.90 12/01/2007 824
4,720 Series 1993A 5.90 12/01/2007 4,986
5,000 King County Housing Auth. RB,
Series 1998A (INS)(5) 5.20 7/01/2018 4,659
10,000 Port of Seattle Passenger Facility
Charge RB, Series 1998A (INS)(1) 5.00 12/01/2017 9,051
State Health Care Facilities Auth. RB,
2,500 Series 1998 (INS)(5) 5.25 8/15/2017 2,300
2,500 Series 1998 (INS)(5) 5.30 8/15/2018 2,301
West Virginia (0.8%)
16,940 School Building Auth. RB, Series 1994 6.25 7/01/2004 17,923
Wisconsin (0.9%)
Health and Educational Facilities Auth. RB,
11,500 Series 1993 (Aurora Health Care) (INS)(1) 5.25 8/15/2012 11,190
4,130 Series 1995A (Walkesha Memorial
Hospital) (INS)(2) 5.25 8/15/2012 4,037
5,000 Series 1998A (Wausau Hospital) (INS)(2) 5.13 8/15/2020 4,469
Wyoming (0.1%)
108 Farm Loan Board COP, Series 1989 (NBGA) 6.50 12/01/1999 109
- -----------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $2,071,964) 2,092,991
- -----------------------------------------------------------------------------------------
PUT BONDS (4.7%)
Alabama (0.2%)
4,000 Housing Finance Auth. MFH RB,
Series 1992C (NBGA) 5.90 8/01/2007 4,044
California (0.5%)
7,500 Statewide Communities Development Auth. RB,
Series 1998A (d) 5.25 5/15/2025 7,128
3,535 Woodland MFH RB, Series 1994A 6.05 12/01/2024 3,632
Florida (0.4%)
Housing Finance Agency MFH RB,
4,235 Series 1996R-1 (Windwood Oaks I) (NBGA) 5.65 12/01/2026 4,361
4,500 Series 1996S-1 (Windwood Oaks II) (NBGA) 5.65 12/01/2026 4,634
Illinois (0.6%)
14,295 Hoffman Estates MFH RB, Series 1996 5.75 6/01/2021 14,704
Kansas (0.3%)
6,590 Merriam MFH RB, Series 1991A (NBGA) 7.25 4/01/2021 6,732
Louisiana (0.2%)
4,360 Shreveport Home Mortgage Auth. RB,
Series 1995A (NBGA) 6.40 9/01/2025 4,534
New Mexico (0.5%)
Bernalillo County MFH RB,
7,700 Series 1994A (Sun Village Apts.) (NBGA) 6.50 10/01/2019 7,973
3,320 Series 1995 (Sunchase Apts.) (NBGA) 5.80 11/01/2025 3,417
Ohio (0.3%)
5,500 Montgomery County IDA RB,
Series 1992 (LOC) 6.50 2/01/2007 5,820
Pennsylvania (0.3%)
Philadelphia IDA RB,
3,500 Series 1997A 6.50 10/01/2027 3,534
4,000 Series 1997B 6.50 10/01/2027 4,038
Texas (0.1%)
2,500 Gregg County Housing Finance Corp. RB,
Series 1995A (NBGA) 6.40 9/01/2025 2,616
Utah (0.8%)
Salt Lake County MFH RB,
10,240 Series 1995A-1 (INS)(5) 5.70 10/01/2025 10,517
6,500 Series 1995B-1 (INS)(5) 5.70 10/01/2025 6,676
Washington (0.5%)
Chelan County Public Utility District #1 RB,
5,650 Series E 5.70 7/01/2068 5,654
6,845 Series E 5.70 7/01/2068 6,849
- -----------------------------------------------------------------------------------------
Total put bonds (cost: $104,333) 106,863
- -----------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (1.6%)
Arkansas (0.1%)
800 Fayetteville Public Facilities Board RB,
Series 1997 (LOC) 3.95 9/01/2027 800
California (0.1%)
2,300 State Financing Auth. PCRB,
Series 1996C (LOC) 3.70 11/01/2026 2,300
Florida (1.0%)
22,000 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA) (d) 3.92 1/01/2024 22,000
3,620 Hillsborough County IDA PCRB, Series 1992 3.95 5/15/2018 3,620
Georgia (0.2%)
5,400 Fulton County Residential Care
Facilities RB, Series 1996 (LOC) 3.95 1/01/2018 5,400
Missouri (0.1%)
2,800 State Health and Educational Facilities
Auth. RB, Series 1996A (LOC) 3.95 6/01/2026 2,800
Virginia (0.1%)
40 Alexandria Redevelopment and Housing
Auth. RB, Series 1996B (LOC) 3.95 10/01/2006 40
- -----------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $36,960) 36,960
- -----------------------------------------------------------------------------------------
Total investments (cost: $2,213,257) $2,236,814
=========================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 13.9%
General Obligations 11.8
Escrowed Bonds 11.7
Multi-Family Housing 6.1
Electric/Gas Utilities - Municipal 5.8
Buildings 4.7
Education 4.3
Appropriated Debt 4.2
Single-Family Housing 3.9
Toll Roads 3.9
Paper & Forest Products 3.8
Special Assessment/Tax/Fee 3.5
Nursing/Continuing Care Centers 2.8
Health Care - Miscellaneous 2.6
Real Estate Tax/Free 2.1
Finance - Municipal 2.0
Electric Utilities 1.8
Airport/Port 1.6
Gaming Companies 1.1
Oil & Gas - Refining/Manufacturing 1.0
Water/Sewer Utilities - Municipal 1.0
Other 5.0
----
Total 98.6%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama .6%
Alaska .5
Arizona .5
Arkansas .8
California 6.6
Colorado 1.4
Connecticut 1.3
District of Columbia 4.6
Florida 2.8
Georgia .8
Hawaii .5
Idaho .1
Illinois 5.8
Indiana 2.5
Iowa .9
Kansas .3
Louisiana 1.6
Maine 1.9
Maryland 1.1
Massachusetts 1.1
Michigan 2.4
Minnesota 1.5
Mississippi 1.7
Missouri .2
Montana .2
Nebraska .5
Nevada 1.8
New Hampshire .5
New Jersey 2.4
New Mexico .8
New York 21.5
North Carolina .3
Ohio .8
Oklahoma .5
Oregon .1
Pennsylvania 5.1
Puerto Rico 3.9
Rhode Island 1.3
South Carolina .6
South Dakota .2
Tennessee 1.0
Texas 8.2
Utah 2.8
Vermont .1
Virginia .6
Washington 2.1
West Virginia .8
Wisconsin .9
Wyoming .1
----
Total 98.6%
====
<TABLE>
USAA SHORT-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (60.7%)
Alabama (0.1%)
$1,000 Prattville Industrial Development PCRB,
Series 1998 4.90% 9/01/2008 $ 942
Alaska (0.4%)
6,500 North Slope Borough GO,
Series 1998A (INS)(1), (a) 4.60 6/30/2008 4,155
Arizona (1.4%)
1,750 Educational Loan Marketing Corp. RB,
Series 1992A 6.70 3/01/2000 1,768
Maricopa County Hospital RB,
2,665 Series 1997 5.00 4/01/2000 2,679
2,525 Series 1997 5.10 4/01/2001 2,547
2,260 Series 1997 5.25 4/01/2002 2,290
3,045 Series 1997 5.35 4/01/2003 3,097
2,180 Series 1997 5.35 4/01/2004 2,215
California (2.3%)
2,550 Central Valley Cogeneration RB, Series 1993 5.40 7/01/2000 2,584
Sacramento Cogeneration Auth. RB,
1,000 Series 1995 5.70 7/01/2000 1,015
1,000 Series 1995 5.80 7/01/2001 1,028
900 Series 1995 5.90 7/01/2002 936
900 Series 1995 6.00 7/01/2003 945
1,000 San Francisco Bay Area Transit
Facilities Auth. Notes, Series 1999 (INS)(6) 5.63 8/01/2006 1,037
San Joaquin Hills Transportation
Corridor Agency RB,
12,615 Senior Lien (ETM) (a) 7.10 1/01/2000 12,503
3,500 Senior Lien (ETM) (a) 7.16 1/01/2001 3,330
Colorado (0.4%)
Denver Health and Hospital Auth. RB,
1,180 Series 1998A 5.13 12/01/2006 1,157
1,250 Series 1998A 5.25 12/01/2007 1,225
1,250 Series 1998A 5.25 12/01/2008 1,218
Connecticut (1.0%)
Mashantucket (Western) Pequot Tribe RB,
1,000 Series 1996A (ETM) (d) 6.25 9/01/2001 1,040
1,000 Series 1996A (d) 6.25 9/01/2001 1,032
1,250 Series 1996A (ETM) (d) 6.25 9/01/2002 1,318
1,250 Series 1996A (d) 6.25 9/01/2002 1,304
1,480 Series 1996A (ETM) (d) 6.25 9/01/2003 1,576
1,520 Series 1996A (d) 6.25 9/01/2003 1,598
1,235 Series 1996A (ETM) (d) 6.50 9/01/2006 1,366
1,265 Series 1996A (d) 6.50 9/01/2006 1,362
District of Columbia (0.5%)
Hospital RB,
1,450 Series 1996A (ETM) (INS)(1) 5.00 8/15/2002 1,475
1,530 Series 1996A (ETM) (INS)(1) 5.50 8/15/2003 1,584
1,610 Series 1996A (ETM) (INS)(1) 5.50 8/15/2004 1,672
Florida (0.2%)
1,470 Nassau County PCRB, Series 1992 5.60 6/01/2000 1,482
590 Orange County Health Facilities Auth. RB,
Series 1995 5.63 7/01/2001 597
Georgia (0.4%)
4,000 Camden County Development Auth. PCRB,
Series 1997 5.25 4/01/2002 4,054
Guam (1.8%)
GO,
5,000 Series 1995A 5.38 9/01/2000 5,042
10,000 Series 1995A 5.50 9/01/2001 10,089
Power Auth. RB,
1,640 Series 1994A 5.50 10/01/1999 1,640
1,725 Series 1994A 5.60 10/01/2000 1,759
Hawaii (0.5%)
4,720 Honolulu GO, Series 1999C (INS)(3) 5.00 7/01/2008 4,718
Idaho (0.3%)
Health Facilities Auth. RB,
810 Series 1998 4.65 5/01/2005 781
860 Series 1998 5.38 5/01/2006 863
950 Series 1998 5.38 5/01/2007 948
1,005 Series 1998 5.38 5/01/2008 996
Illinois (4.8%)
20,000 Chicago Board of Education GO,
Series 1999A (INS)(3), (a) 4.50 12/01/2009 11,714
16,265 Chicago Water RB, Series 1997 (INS)(3), (a) 5.00 11/01/2005 12,079
9,000 Cook County GO, Series 1989 (PRE) (INS)(1) 7.38 11/01/2008 9,208
1,575 Health Facilities Auth. RB, Series 1996 5.60 1/01/2002 1,591
3,330 Hodgkins Tax Increment RB, Series 1995A 6.90 12/01/2001 3,392
11,551 Sangamon County Lease RB, #M99202 (c) 5.05 12/15/2005 11,441
Indiana (3.4%)
6,745 Development Finance IDA RB, Series 1996 4.80 6/01/2000 6,785
Health Facility Financing Auth. RB,
20,300 Series 1993 (PRE) 5.40 11/01/2005 20,861
4,200 Series 1994 (PRE) 5.38 7/01/2001 4,255
3,000 Series 1999A (INS)(1) 5.00 11/01/2009 2,957
Louisiana (4.1%)
11,310 De Soto Parish PCRB, Series 1993A 5.05 12/01/2002 11,406
Jefferson Parish School Board Sales and
Use Tax RB,
3,170 Series 1998 (INS)(4), (a) 4.80 9/01/2007 2,138
2,090 Series 1998 (INS)(4), (a) 4.90 3/01/2008 1,363
4,505 New Orleans Master Lease Agreement,
#2300-1 (c) 7.99 2/01/2002 4,617
Offshore Terminal Auth. RB,
7,920 Series 1992B 6.00 9/01/2001 8,130
5,000 Series 1992B 6.20 9/01/2003 5,224
5,830 Series 1994B 5.85 9/01/2000 5,927
3,440 St. Charles Parish PCRB 7.63 6/01/2003 3,521
Maine (1.3%)
Jay PCRB,
5,500 Series 1994A 4.65 9/01/2002 5,476
8,305 Series 1994B 4.70 6/01/2002 8,282
Massachusetts (2.6%)
Health and Educational Facilities Auth. RB,
3,445 Series 1998B (INS)(6) 5.00 7/01/2006 3,369
3,645 Series 1998B (INS)(6) 5.25 7/01/2007 3,591
1,640 Series 1998B (INS)(6) 5.25 7/01/2008 1,602
17,000 New England Education Loan Marketing
Corp. RB, Series 1985A 5.80 3/01/2002 17,513
Michigan (1.9%)
Hospital Finance Auth. RB, Central
Michigan Hospital,
245 Series 1996 5.00 10/01/1999 245
255 Series 1996 5.30 10/01/2000 258
130 Series 1996 5.50 10/01/2001 132
275 Series 1996 5.70 10/01/2002 281
285 Series 1996 5.80 10/01/2003 293
Hospital Finance Auth. RB, Genesys
Health System Medical Center,
3,500 Series 1995A 6.80 10/01/2000 3,582
3,500 Series 1995A 7.00 10/01/2001 3,644
2,500 Series 1998A 5.50 10/01/2006 2,528
1,500 Series 1998A 5.50 10/01/2007 1,509
1,000 Series 1998A 5.50 10/01/2008 1,002
5,800 Monroe Economic Development Corp. PCRB,
Series 1997 5.00 2/01/2003 5,835
Minnesota (0.6%)
St. Paul Housing and Redevelopment
Auth. Hospital RB,
675 Series 1997A 5.00 11/01/2003 648
1,410 Series 1997A 5.10 11/01/2004 1,342
1,485 Series 1997A 5.20 11/01/2005 1,399
1,560 Series 1997A 5.30 11/01/2006 1,458
1,645 Series 1997A 5.35 11/01/2007 1,521
Mississippi (1.4%)
Jones County Hospital RB,
1,000 Series 1997 5.00 12/01/2005 986
1,050 Series 1997 5.00 12/01/2006 1,027
1,105 Series 1997 5.10 12/01/2007 1,078
1,155 Series 1997 5.20 12/01/2008 1,128
5,225 Lafayette County Hospital RB, Series 1997 5.00 3/01/2002 5,249
860 Lincoln County Hospital RB,
Series 1998A (INS)(5) 5.00 4/01/2004 865
3,675 Union County Hospital RB, Series 1997 5.00 3/01/2002 3,706
Montana (0.5%)
4,803 State Lottery Commission Lease, #169 (c) 5.12 4/29/2004 4,807
Nebraska (0.7%)
5,000 American Public Energy Agency RB,
Series 1999A (INS)(2) 5.25 6/01/2008 5,074
Investment Finance Auth. Hospital RB,
465 Series 1997 (INS)(5) 4.90 11/15/2005 463
440 Series 1997 (INS)(5) 5.00 11/15/2006 438
410 Series 1997 (INS)(5) 5.00 11/15/2007 405
505 Series 1997 (INS)(5) 5.05 11/15/2008 497
New Jersey (0.1%)
1,050 Camden County Improvement Auth. RB,
Series 1997 4.75 2/15/2000 1,038
New York (13.1%)
Dormitory Auth. RB, City University System,
3,245 Series 1996-2 5.00 7/01/2000 3,272
1,285 Series 1996-2 5.10 7/01/2001 1,302
Dormitory Auth. RB, Community
Enhancement Facilities,
1,675 Series 1999B 4.00 4/01/2005 1,598
1,740 Series 1999B 4.00 4/01/2006 1,635
5,000 Dormitory Auth. RB, Good Samaritan
Hospital, Series 1998A (INS)(5) 5.50 7/01/2009 5,088
1,170 Dormitory Auth. RB, Nyack Hospital,
Series 1996 5.65 7/01/2001 1,185
Dormitory Auth. RB, State University
Educational Facilities,
2,190 Series 1994B 5.30 5/15/2000 2,211
6,450 Series 1995A 5.10 5/15/2000 6,504
6,350 Series 1995A 5.25 5/15/2001 6,455
7,500 Series 1995A 5.40 5/15/2002 7,700
1,000 Series 1996 4.90 5/15/2000 1,007
1,350 Series 1996 5.00 5/15/2001 1,367
1,000 Series 1996 5.10 5/15/2002 1,019
2,365 Dormitory Auth. Revenue Notes CP,
Series 1989A (LOC) 4.85 10/08/1999 2,365
1,250 Dormitory Department of Health RB,
Series 1996 4.75 7/01/2001 1,260
5,325 Medical Care Facilities Finance Agency RB,
Series 1994A (ETM) 5.80 2/15/2001 5,443
New York City GO,
5,000 Series 1995A 5.40 8/01/2000 5,062
1,450 Series 1995D (ETM) 6.50 2/01/2002 1,522
3,550 Series 1995D 6.50 2/01/2002 3,709
3,325 Series 1996K (ETM) 5.50 4/01/2001 3,394
4,900 Series 1998F 5.50 8/01/2006 5,068
6,420 Series 1998F 5.50 8/01/2007 6,619
5,815 Series 1999F 4.88 8/01/2010 5,571
5,000 Series 1999H 5.00 3/15/2008 4,964
4,010 State COP 4.90 2/01/2002 4,052
4,040 State COP 4.90 8/01/2002 4,090
2,035 State COP 5.00 2/01/2003 2,062
11,165 The City University of New York COP 5.75 8/15/2003 11,601
10,000 Thruway Auth. Highway and Bridge Trust
Fund Bonds, Series 1999B (INS)(3) 5.00 4/01/2008 10,058
7,880 Thruway Auth. RB, Series 1995 5.10 4/01/2001 7,977
2,015 Ulster County IDA RB, Series 1999 (LOC) 5.20 11/15/2009 1,954
Urban Development Corp. RB,
4,400 Series 1993 5.25 1/01/2003 4,493
1,715 Series 7 4.75 1/01/2002 1,727
North Carolina (1.1%)
11,000 Eastern Municipal Power Agency RB,
Series 1996A 5.10 1/01/2000 11,015
Ohio (0.6%)
Franklin County Health Care Facilities RB,
1,000 Series 1997 4.70 7/01/2002 993
1,000 Series 1997 4.80 7/01/2003 991
500 Series 1997 5.00 7/01/2004 496
1,425 Series 1997 5.00 7/01/2005 1,404
1,000 Series 1997 5.10 7/01/2006 981
475 Series 1997 5.15 7/01/2007 464
600 Series 1997 5.25 7/01/2008 585
Oklahoma (1.8%)
Holdenville Industrial Auth. RB,
1,115 Series 1995 (ETM) 5.45 7/01/2000 1,128
1,380 Series 1995 (ETM) 6.15 7/01/2004 1,463
510 Series 1995 (ETM) 6.35 7/01/2006 550
15,000 Housing Development Auth. RB, Series 1997A 4.75 12/01/2002 14,900
Pennsylvania (3.1%)
655 Beaver County Finance Auth. RB,
Series 1986A (INS)(1) 8.00 11/01/2009 655
4,875 Delaware IDA Refunding RB, Series 1997A 5.50 1/01/2000 4,878
4,435 East Hempfield Township IDA RB, Series 1996 5.00 8/01/2001 4,468
3,990 Hampden IDA Auth. RB, Series 1999 4.70 1/01/2007 3,739
17,290 Higher Education Assistance Agency
Student Loan RB, Series 1985A (INS)(3) 6.80 12/01/2000 17,786
Puerto Rico (1.7%)
Electric Power Auth. RB,
5,000 Series 1997AA 5.00 7/01/2003 5,097
5,000 Series 1997AA 5.00 7/01/2004 5,098
6,955 Municipal Revenue Collection Center COP (c) 6.85 10/17/2003 7,079
Tennessee (0.5%)
2,000 Shelby County Hospital RB, Series 1993 5.10 11/01/2003 2,006
3,000 Springfield Hospital RB, Series 1998 4.90 8/01/2008 2,835
Texas (5.8%)
Abilene Higher Education Facilities Corp. RB,
355 Series 1995 (ETM) 5.30 10/01/1999 355
980 Series 1995 5.30 10/01/1999 980
345 Series 1995 (ETM) 5.40 10/01/2000 350
935 Series 1995 5.40 10/01/2000 948
170 Series 1995 (ETM) 5.50 10/01/2001 174
1,310 Series 1995 5.50 10/01/2001 1,336
130 Series 1995 (ETM) 5.60 10/01/2002 134
870 Series 1995 5.60 10/01/2002 895
3,235 Austin Higher Education Auth. RB,
Series 1998 4.80 8/01/2009 2,998
Bexar County Limited Tax GO,
1,800 Series 1999 (a) 4.35 6/15/2006 1,292
3,355 Series 1999 (a) 4.45 6/15/2007 2,276
2,100 Brazoria County BAN, Series 1999 4.35 3/01/2000 2,101
6,000 Calhoun County Navigation IDA PCRB,
Series 1995 4.65 6/01/2001 6,036
Harrison County Health Facilities
Development Corp. RB,
1,010 Series 1998 (INS)(6) 4.80 1/01/2006 969
1,055 Series 1998 (INS)(6) 4.80 1/01/2007 998
1,110 Series 1998 (INS)(6) 4.90 1/01/2008 1,045
3,000 Houston ISD GO, Series 1999A (a) 4.55 2/15/2009 1,845
Houston ISD Public Facility Corp. Lease RB,
3,885 Series 1998A (INS)(2), (a) 4.85 9/15/2007 2,590
3,885 Series 1998A (INS)(2), (a) 4.90 9/15/2008 2,440
4,805 Series 1998B (INS)(2), (a) 4.85 9/15/2007 3,203
5,260 Series 1998B (INS)(2), (a) 4.90 9/15/2008 3,304
2,500 Lampasas County IDC RB, Series 1997 5.20 12/01/2001 2,529
3,495 Lewisville RB, Series 1998 (INS)(6) 5.00 9/01/2010 3,329
Northeast Hospital Auth. RB,
1,230 Series 1997 5.10 5/15/2000 1,238
1,285 Series 1997 5.25 5/15/2001 1,300
2,870 Series 1997 5.40 5/15/2003 2,925
Tyler Health Facilities Development Corp. RB,
2,700 Series 1997A 5.00 7/01/2003 2,674
3,120 Series 1997A 5.00 7/01/2004 3,070
1,625 Series 1997A 5.13 7/01/2005 1,595
1,100 Series 1997A 5.20 7/01/2006 1,073
1,125 Series 1997A 5.30 7/01/2007 1,095
2,000 Water Resources Finance Auth. RB,
Series 1999 (INS)(2) 4.50 8/15/2007 1,940
Virginia (0.2%)
Halifax County IDA Hospital RB,
1,100 Series 1998 4.50 9/01/2005 1,058
600 Series 1998 4.65 9/01/2007 568
500 Series 1998 4.75 9/01/2008 470
West Virginia (1.9%)
6,000 Kanawha County PCRB, Series 1997 5.25 4/01/2002 6,056
13,480 School Building Auth. Capital
Improvement RB, Series 1994 6.00 7/01/2000 13,677
Wisconsin (0.2%)
Health and Educational Facilities Auth. RB,
410 Series 1997 5.10 12/15/2005 404
430 Series 1997 5.20 12/15/2006 423
455 Series 1997 5.25 12/15/2007 445
475 Series 1997 5.30 12/15/2008 466
- ------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $618,996) 618,396
- ------------------------------------------------------------------------------------------
PUT BONDS (11.2%)
California (3.2%)
3,340 Brentwood Capital Improvement RB,
Series 1996 (LOC) 5.25 6/01/2026 3,361
6,860 Fresno MFH RB, Series 1997A 4.88 1/01/2028 6,820
7,035 Redwood MFH RB, Series 1985B (NBGA) 5.20 10/01/2008 7,040
4,000 Santa Rosa Housing Auth. MFH RB,
Series 1995E (NBGA) 4.85 9/01/2007 3,991
6,170 South Gate Public Financing Auth. Tax
Allocation Bonds, Series 1997 (LOC) 4.75 9/01/2019 6,181
5,000 Statewide Community Development Auth. RB,
Series 1999F 5.30 6/01/2029 4,942
Florida (2.3%)
Housing Finance Agency MFH RB,
5,000 Series 1983F (Horizon Place) (NBGA) 5.35 12/01/2005 5,008
4,000 Series 1983G (Oaks at Baymeadow) (NBGA) 5.35 12/01/2005 4,006
5,000 Series 1987 (The Crossing) (NBGA) 4.85 2/01/2008 4,999
5,200 Series 1995D (Park Colony) (LOC) 5.10 4/01/2013 5,225
4,000 Series 1995K (Oaks at Regency) (LOC) 4.85 12/01/2005 4,005
Illinois (1.1%)
11,115 Health Facilities Auth. RB, Series 1998A
(LOC) 4.70 7/01/2031 10,993
Louisiana (2.5%)
20,000 Public Facilities Auth. RB,
Series 1985B-1 (INS)(2) 5.00 12/01/2015 20,223
5,000 St. Charles Parish PCRB 4.85 6/01/2030 4,970
Minnesota (0.7%)
7,500 Minneapolis and St. Paul Housing and
Redevelopment RB, Series 1996A (INS)(3) 5.13 6/01/2032 7,500
Texas (0.8%)
7,990 Lewisville RB, Series 1996 (PRE) (LOC) 5.00 5/01/2021 8,484
Wyoming (0.6%)
6,725 Community Development Auth. Housing RB,
Series 1997-3 5.25 6/01/2017 6,773
- ------------------------------------------------------------------------------------------
Total put bonds (cost: $113,951) 114,521
- ------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (27.1%)
Arkansas (1.2%)
12,275 Fayetteville Public Facilities Board RB,
Series 1997 (LOC) 3.95 9/01/2027 12,275
California (1.4%)
4,305 Gardena Financing Agency RB,
Series 1991 (LOC) 4.70 9/01/2011 4,305
9,700 Orange County Apartment Development RB,
Series 1984J (LOC) 5.70 11/01/2008 9,700
Florida (5.0%)
8,760 Atlantic Beach Improvement and
Refunding RB, Series 1994B (LOC) 4.05 10/01/2024 8,760
11,200 Dade County Health Facilities Auth. RB,
Series 1995 (LIQ) 4.05 9/01/2025 11,200
2,600 Dade County Special Obligation Bonds,
Series 1990 (LOC) 4.75 10/01/2010 2,600
2,440 Hillsborough County IDA PCRB, Series 1992 3.95 5/15/2018 2,440
Jacksonville Hospital RB,
14,700 Series 1988 (LOC) 5.25 2/01/2018 14,700
11,500 Series 1989 (LOC) 5.25 2/01/2019 11,500
Hawaii (1.2%)
12,400 Housing Finance and Development Corp. RB,
Series 1990B (LOC) 4.70 7/01/2025 12,400
Illinois (0.8%)
Development Finance Auth. MFH RB,
805 Series 1991 (LOC) 5.30 10/01/2005 805
2,735 Series 1991 (LOC) 5.30 10/01/2015 2,735
695 West Frankfort Commercial Redevelopment RB 6.39 4/01/2007 695
4,000 Wood Dale IDRB, Series 1985 (LOC) 4.70 6/01/2000 4,000
Iowa (1.3%)
12,750 Council Bluffs PCRB, Series 1995 3.90 1/01/2025 12,750
Kansas (1.8%)
6,500 Development Finance Auth. RB,
Series 1998BB (LOC) 3.95 11/15/2028 6,500
1,300 Kansas City RB, Series 1985 (LOC) 4.00 8/01/2015 1,300
Wichita Health Systems RB,
5,400 Series 1985XXV (LOC) 4.50 10/01/2008 5,400
4,800 Series 1985XXV (LOC) 4.50 10/01/2011 4,800
Louisiana (1.7%)
9,900 Housing Finance Agency MFH RB,
Series 1988B (LOC) 4.45 12/01/2025 9,900
7,300 Public Facilities Auth. MFH RB,
Series 1991 (NBGA) 4.10 7/01/2007 7,300
Michigan (0.7%)
7,300 Job Development Auth. PCRB,
Series 1985 (LOC) 5.25 10/01/2008 7,300
Minnesota (1.1%)
8,450 Cohasset RB, Series 1997A (LOC) 3.95 6/01/2020 8,450
3,050 Duluth Economic Development Auth.
Health Facilities RB, Series 1997 (LOC) 3.95 6/01/2019 3,050
Mississippi (0.2%)
1,900 Jackson County Port Facility RB, Series 1993 3.90 6/01/2023 1,900
Missouri (2.3%)
12,400 Independence IDA IDRB, Series 1997A (LOC) 3.95 11/01/2027 12,400
6,200 Jackson County IDA RB, Series 1996A (LOC) 4.10 11/01/2016 6,200
5,000 State Health and Educational Facilities
Auth. RB, Series 1996A (LOC) 3.95 6/01/2026 5,000
New Jersey (0.2%)
1,965 Newark Healthcare Facility RB, Series A (LOC) 4.95 6/01/2030 1,965
New Mexico (1.6%)
16,300 Hurley PCRB, Series 1985 3.85 12/01/2015 16,300
New York (0.7%)
1,500 Chautauqua County IDA IDRB,
Series 1984A (LOC) 5.25 1/01/2000 1,500
2,600 Long Island Power Auth. Electric
Systems RB, Series 5 (LOC) 3.75 5/01/2033 2,600
2,925 St. Lawrence County IDA PCRB,
Series 1985 (LOC) 3.95 12/01/2007 2,925
Oregon (0.2%)
2,300 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 3.88 5/15/2029 2,300
Pennsylvania (1.1%)
Allegheny County IDA RB,
2,975 Series 1997A (LOC) 3.95 7/01/2027 2,975
3,900 Series 1997B (LOC) 3.95 7/01/2027 3,900
2,750 Series 1997D (LOC) 3.95 7/01/2027 2,750
1,400 Schuylkill County IDA RB,
Series 1997A (LOC) 3.75 12/01/2022 1,400
Texas (2.5%)
12,800 Gulf Coast Waste Disposal Auth. PCRB,
Series 1995 3.85 6/01/2020 12,800
10,565 Nueces River Auth. PCRB,
Series 1985 (LOC) 4.00 12/01/1999 10,565
1,800 Port Arthur Navigation District IDC PCRB,
Series 1985 (LOC) 4.00 5/01/2003 1,800
Virginia (1.8%)
12,370 Alexandria Redevelopment and Housing
Auth. RB, Series 1996B (LOC) 3.95 10/01/2006 12,370
3,275 Peninsula Ports Auth. Coal Terminal RB,
Series 1987D (LOC) 3.90 7/01/2016 3,275
2,830 Waynesboro IDA RB, Series 1997 (LOC) 3.95 12/15/2028 2,830
Washington (0.3%)
3,000 Housing Finance RB, Series 1997 (LOC) 4.20 1/01/2027 3,000
- ------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $275,620) 275,620
- ------------------------------------------------------------------------------------------
Total investments (cost: $1,008,567) $1,008,537
==========================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 16.8%
Multi-Family Housing 8.7
Escrowed Bonds 8.2
Nursing/Continuing Care Centers 7.6
General Obligations 7.1
Appropriated Debt 6.6
Education 4.9
Electric/Gas Utilities - Municipal 3.8
Student Loans 3.6
Oil - International Integrated 3.0
Electric Utilities 2.9
Single-Family Housing 2.9
Paper & Forest Products 2.7
Finance - Municipal 2.3
Airport/Port 2.2
Aluminum 1.9
Special Assessment/Tax/Fee 1.8
Water/Sewer Utilities - Municipal 1.7
Chemicals 1.3
Real Estate Tax/Free 1.3
Agricultural Products 1.2
Foods 1.1
Toll Roads 1.0
Other 4.4
----
Total 99.0%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama .1%
Alaska .4
Arizona 1.4
Arkansas 1.2
California 6.9
Colorado .4
Connecticut 1.0
District of Columbia .5
Florida 7.5
Georgia .4
Guam 1.8
Hawaii 1.7
Idaho .3
Illinois 6.7
Indiana 3.4
Iowa 1.3
Kansas 1.8
Louisiana 8.3
Maine 1.3
Massachusetts 2.6
Michigan 2.6
Minnesota 2.4
Mississippi 1.6
Missouri 2.3
Montana .5
Nebraska .7
New Jersey .3
New Mexico 1.6
New York 13.8
North Carolina 1.1
Ohio .6
Oklahoma 1.8
Oregon .2
Pennsylvania 4.2
Puerto Rico 1.7
Tennessee .5
Texas 9.1
Virginia 2.0
Washington .3
West Virginia 1.9
Wisconsin .2
Wyoming .6
----
Total 99.0%
====
<TABLE>
USAA TAX EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
Principal Coupon Final
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
VARIABLE-RATE DEMAND NOTES (77.9%)
Alabama (1.3%)
$12,000 Birmingham Medical Clinic Board RB,
Series 1991 (LOC) 3.93% 10/01/2018 $ 12,000
9,500 Evergreen Board IDRB, Series 1985 (LOC) 3.60 12/01/2004 9,500
1,225 Montgomery Engelside Medical Clinic
Board RB, Series 1999A (LOC) 4.05 3/01/2008 1,225
Arizona (0.8%)
8,000 Mesa IDA RB, Series 1999B (LIQ)(INS)(1) 3.80 1/01/2029 8,000
6,900 Pinal County IDA RB, Series 1995 (LOC) 3.90 12/01/2022 6,900
Arkansas (0.3%)
5,175 Texarkana IDRB, Series 1991 4.50 3/01/2021 5,175
California (1.3%)
3,600 Irvine IDA RB, Series 1985 (LOC) 4.45 11/01/2005 3,600
6,950 Livermore MFH RB, Series 1990A (LOC) 4.75 5/01/2020 6,950
5,500 Orange County Apartment Development RB,
Series 1985D (LOC) 5.30 4/01/2006 5,500
7,400 San Diego MFH RB, Series 1993A (NBGA) 3.90 12/01/2015 7,400
Colorado (1.3%)
2,000 Aurora IDRB, Series 1991 (LOC) 3.85 8/01/2001 2,000
6,300 Denver City and County Economic
Development RB, Series 1999 (LOC) 3.85 7/01/2029 6,300
9,000 Educational and Cultural Facilities RB,
Series 1998 (LOC) 3.90 8/01/2013 9,000
3,150 El Paso County Economic Development RB,
Series 1996 (LOC) 3.90 11/01/2021 3,150
Health Facilities Auth. RB,
1,740 Series 1995 (LOC) 3.90 9/01/2015 1,740
1,875 Series 1996A (LOC) 3.90 12/01/2016 1,875
Delaware (0.1%)
2,100 Economic Development Authority RB,
Series 1993C 3.90 10/01/2028 2,100
District of Columbia (0.6%)
10,830 Revenue Bond, Series 1999C (National
Academy of Sciences Project)(LIQ)(INS)(2) 3.90 1/01/2039 10,830
Florida (8.0%)
700 Brevard County Housing Finance Auth.
MFH RB, Series 1993 (NBGA) 3.85 7/01/2005 700
2,885 Broward County Housing Finance Auth.
MFH RB, Series 1990 (NBGA) 3.90 10/01/2007 2,885
Dade County Health Facilities Auth. RB,
18,765 Series 1990 (LOC) 4.40 9/01/2020 18,765
1,800 Series 1995 (LIQ)(INS)(2) 4.05 9/01/2025 1,800
2,350 Dade County IDA RB, Series 1996 (LOC) 3.85 10/01/2016 2,350
89,000 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(d) 3.92 1/01/2024 89,000
Housing Finance Agency MFH RB,
2,485 Series 1985C (LOC) 3.85 8/01/2006 2,485
4,000 Series 1985D (LOC) 3.90 8/01/2006 4,000
9,270 Series 1985EE (LOC) 3.90 9/01/2008 9,270
8,885 Series 1990D (NBGA) 3.90 12/01/2009 8,885
4,700 Miami Dade County Educational
Facilities Auth. RB, Series 1998 (LOC) 3.85 10/01/2018 4,700
Georgia (1.6%)
5,500 Albany Dougherty County Hospital
Authority RB, Series 1996 (LOC)(INS)(2) 3.80 9/01/2026 5,500
8,330 Clayton County MFH RB, Series 1989 (LOC) 4.05 11/01/2006 8,330
2,100 Fulton County Development Auth. PCRB,
Series 1987 3.90 4/01/2010 2,100
Fulton County Housing Auth. MFH RB (LOC)
5,000 Series 1994 (LOC) 3.85 10/01/2024 5,000
5,000 Series 1996 (LOC) 3.80 6/01/2023 5,000
2,935 Peachtree Development Auth. RB,
Series 1988 (LOC) 4.05 7/01/2010 2,935
Illinois (6.3%)
14,700 Development Finance Auth. MFH RB,
Series 1996 (NBGA) 3.75 12/01/2013 14,700
Development Finance Auth. RB,
2,500 Series 1998 (LOC) 3.90 8/01/2022 2,500
3,000 Series 1999-2000A (LOC) 3.85 6/30/2000 3,000
25,000 Series 1999B (LOC)(INS)(2) 3.80 9/01/2029 25,000
7,000 Du Page County RB, Series 1999 (LOC) 3.82 7/01/2024 7,000
13,000 Educational Facilities Authority RB,
Series 1999A (LOC) 3.79 6/01/2029 13,000
1,530 Evanston IDRB, Series 1985 (LOC) 4.25 1/01/2015 1,530
11,110 Hopedale IDRB, Series 1998 (LOC) 3.88 5/01/2009 11,110
10,000 Housing Development Auth. RB,
Series 1985U (LOC) 3.90 1/01/2008 10,000
1,400 Lake County Industrial Building RB,
Series 1985 (LOC) 4.15 10/01/2015 1,400
3,400 Sauget PCRB 3.90 5/01/2028 3,400
21,285 Schaumburg MFH RB, Series 1989 (LOC) 3.95 12/01/2004 21,285
1,925 Winnebago County Health Care Facility RB,
Series 1996 (LOC) 3.83 1/01/2017 1,925
Indiana (0.7%)
700 Crawfordsville Economic Development RB,
Series 1999B (LOC) 3.88 1/01/2030 700
2,300 Development Finance Auth. Economic
Development RB, Series 1998 (LOC) 3.90 9/01/2018 2,300
1,265 Hobart Economic Development RB,
Series 1993 (LOC) 3.88 6/01/2003 1,265
2,200 Huntington Economic Development RB,
Series 1998 (LOC) 3.90 12/01/2025 2,200
1,300 Huntington Industrial Economic
Development RB, Series 1990 3.95 6/26/2014 1,300
4,605 Indianapolis Economic Development RB,
Series 1997 (LOC) 3.85 5/01/2018 4,605
Iowa (1.1%)
5,300 Chillicothe PCRB, Series 1991 3.90 11/01/2010 5,300
3,900 Finance Auth. MFH Refunding RB,
Series 1995A (LOC) 3.95 12/01/2017 3,900
2,000 Finance Auth. RB, Series 1998 (LOC) 4.00 6/01/2028 2,000
5,000 Louisa County PCRB, Series 1986A 3.90 9/01/2016 5,000
3,600 Woodbury County Educational Facility RB,
Series 1996 (LOC) 3.85 11/01/2016 3,600
Kansas (4.3%)
56,500 Burlington Environmental Improvement RB,
Series 1998A 3.90 9/01/2015 56,500
14,440 Cygne Environmental Improvement RB,
Series 1994 3.90 3/01/2015 14,440
6,200 Kansas City RB, Series 1985 (LOC) 4.00 8/01/2015 6,200
Kentucky (3.9%)
7,000 Economic Development Finance Auth.
Hospital RB, Series 1998A (LOC) 3.90 8/01/2013 7,000
Economic Development Finance Auth. RB,
1,800 Series 1997 (LOC) 3.95 11/01/2017 1,800
25,850 Series 1998 (LIQ)(INS)(8) 3.85 8/01/2018 25,850
2,000 Frankfort Economic Development RB,
Series 1990 3.95 5/07/2014 2,000
9,490 Hancock County Industrial Building RB,
Series 1991 (LOC) 4.00 7/01/2011 9,490
3,125 Hardin County Water District Number 001
Water RB, Series 1998 (LOC) 3.90 9/01/2018 3,125
6,610 Jefferson County Industrial Building RB,
Series 1997 (LOC) 3.90 1/01/2011 6,610
9,100 Jefferson County MFH RB, Series 1996 (LOC) 3.85 12/01/2026 9,100
6,000 Jefferson County Retirement RB,
Series 1999 (LOC) 3.80 10/01/2019 6,000
Louisiana (2.0%)
Ascension Parish PCRB,
6,600 Series 1992 3.95 3/01/2011 6,600
1,550 Series 1990 3.95 9/01/2010 1,550
10,000 Delhi IDRB, Series 1996 3.90 12/01/2012 10,000
5,970 Public Facilities Auth. IDRB,
Series 1996 (LOC) 4.05 12/01/2014 5,970
1,100 Public Facilities Auth. PCRB, Series 1992 3.95 8/01/2017 1,100
11,700 Public Facilities Auth. RB, Series 1985 (LOC) 3.85 12/01/2000 11,700
Maryland (1.9%)
8,100 Health and Higher Educational
Facilities RB, Series 1997 (LOC) 4.10 7/01/2022 8,100
Montgomery County MFH RB,
6,500 1985 Issue B (NBGA) 3.85 8/01/2015 6,500
20,200 1993 Issue I (NBGA)(d) 3.85 11/01/2020 20,200
Massachusetts (1.6%)
5,750 Industrial Finance Agency RB,
Series 1997 (LOC) 3.93 5/01/2027 5,750
23,990 Revere Housing Auth. MFH RB,
Series 1991C (LOC) 3.95 9/01/2028 23,990
Michigan (2.8%)
10,000 Dearborn Economic Development Corp. RB,
Series 1998 (LOC) 3.80 10/01/2023 10,000
24,200 Detroit Downtown Development Auth. RB
(LOC) 3.90 12/01/2010 24,200
5,300 Grand Rapids IDRB (LOC) 3.90 1/01/2010 5,300
10,600 Hospital Finance Auth. Equipment Loan RN,
Series A #19 (LOC) 3.85 12/01/2023 10,600
Minnesota (3.3%)
12,950 Burnsville Housing RB, Series 1999 (LOC) 3.85 1/01/2045 12,950
4,100 Duluth Economic Development Auth.
Health Facilities RB, Series 1997 (LOC) 3.95 6/01/2019 4,100
Minneapolis MFH RB,
8,510 Series 1995 (Laurel Curve) (NBGA)(d) 3.75 12/01/2030 8,510
4,795 Series 1995 (Swinford) (NBGA)(d) 3.75 12/01/2030 4,795
7,535 Series 1995 (The Deforest) (NBGA)(d) 3.75 12/01/2030 7,535
7,530 Series 1995 (The McNair) (NBGA)(d) 3.75 12/01/2030 7,530
14,640 Series 1995 (Wilson Park Towers) (NBGA)(d) 3.75 12/01/2030 14,640
Mississippi (0.2%)
4,100 Hinds County Urban Renewal RN,
Series 1991 (LOC) 3.95 1/01/2007 4,100
Missouri (1.4%)
Clayton IDA RB,
5,475 Series 1994A (LOC) 4.10 12/01/2006 5,475
5,525 Series 1994B (LOC) 4.10 2/01/2007 5,525
7,700 Series 1995C (LOC) 4.10 5/01/2005 7,700
5,950 Health and Educational Facilities Auth. RB,
Series 1998 (LOC) 3.80 7/01/2023 5,950
1,000 West Plains IDA RB, Series 1986 (LOC) 4.40 11/01/2010 1,000
Nebraska (0.5%)
3,510 Buffalo County IDRB, Series 1985 (LOC) 3.85 2/01/2015 3,510
5,100 Nuckolls County IDRB, Series 1985 (LOC) 3.85 2/01/2015 5,100
New Hampshire (1.3%)
7,710 Higher Educational and Health
Facilities RB, Series 1996 (LOC) 3.85 5/01/2026 7,710
3,025 Housing Finance Auth. MFH RB,
Series 1990 (NBGA) 3.90 7/01/2006 3,025
12,505 Manchester Housing Auth. MFH RB,
Series 1990A (LOC) 3.85 6/15/2015 12,505
New York (0.1%)
750 Erie County IDA RB, Series 1998B (LOC) 3.75 2/01/2005 750
North Carolina (0.2%)
3,300 Buncombe County Industrial Facilities
Financing Auth. IDRB, Series 1996 3.95 11/01/2006 3,300
Ohio (1.6%)
2,930 Butler County Healthcare Facilities RB,
Series 1999 (LOC) 3.90 3/01/2029 2,930
6,000 Clark County IDA RB (LOC) 4.05 12/01/2010 6,000
20,000 Clinton County Hospital RB, Series 1999 (LOC) 3.80 7/01/2029 20,000
Oklahoma (4.7%)
50,000 Development Finance Authority RB,
Series 1999A (LOC) 3.80 6/01/2029 50,000
Muskogee Industrial Trust PCRB,
24,200 Series 1995A 3.90 1/01/2025 24,200
6,000 Series 1997A 3.90 6/01/2027 6,000
Muskogee Industrial Trust RB,
2,760 Series 1985, Muskogee Mall Project (LOC) 4.00 12/01/2015 2,760
2,400 Series 1985, Warmack-Muskogee
Project (LOC) 4.00 12/01/2015 2,400
Oregon (5.7%)
11,200 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 3.88 5/15/2029 11,200
Medford Hospital Facilities Auth. RB,
15,000 Series 1985 (LOC) 3.88 12/01/2015 15,000
16,050 Series 1991 (LOC) 3.88 5/01/2021 16,050
23,355 Series 1997 (LOC) 3.88 5/15/2027 23,355
38,100 Port of Portland Public Grain Elevator RB,
Series 1984 (LOC) 5.25 12/01/2014 38,100
Pennsylvania (3.1%)
Allegheny County Hospital Development
Auth. RB,
14,600 Series 1998B (LOC) 4.00 3/01/2007 14,600
15,100 Series 1998C (LOC) 4.00 3/01/2013 15,100
12,980 Series 1998D (LOC) 4.00 3/01/2018 12,980
Allegheny County IDA RB,
1,750 Series 1994 (LOC) 4.00 12/01/2008 1,750
725 Series 1997A (LOC) 3.95 7/01/2027 725
1,350 Series 1997D (LOC) 3.95 7/01/2027 1,350
6,000 Allentown Redevelopment Authority MFH RB,
Series 1990 (LOC) 3.95 7/01/2020 6,000
3,500 Clinton County IDA RB, Series 1985 (LOC) 4.00 9/01/2005 3,500
South Carolina (0.1%)
2,400 Sumter County IDRB, Series 1982 (LOC) 3.88 12/01/2002 2,400
South Dakota (0.3%)
4,500 Yankton IDRB, Series 1997 3.88 7/01/2006 4,500
Tennessee (10.5%)
25,000 Knox County Health Educational and Housing
Facilities Board RB, Series 1999A (LOC) 3.80 5/01/2029 25,000
1,200 Maryville IDB Education RB,
Series 1997B (LOC) 4.00 8/01/2002 1,200
9,320 Memphis Health, Education and Housing
Facility Board MFH RB, Series 1990 (LOC) 3.95 1/01/2020 9,320
Nashville and Davidson County IDB MFH RB,
6,710 Series 1989 (LOC) 3.95 9/01/2019 6,710
9,680 Series 1989 (LOC) 3.95 10/01/2019 9,680
Nashville and Davidson County IDB RB,
14,205 Series 1995 (NBGA) 4.00 11/01/2012 14,205
1,750 Series 1999 (LOC) 4.00 7/01/2006 1,750
14,135 Shelby County Health, Educational and Housing
Facilities Board RB, Series 1984 (LOC) 3.90 10/01/2024 14,135
9,285 Smyrna Housing Association Inc. MFH RB,
Series 1989 (LOC) 3.95 8/01/2019 9,285
85,000 Sumner County Health Educational and
Housing Facilities RB, Series 1999A (NBGA)(d) 3.92 6/01/2029 85,000
13,000 Wilson County Sports Authority RB,
Series 1999 (LOC) 3.87 9/01/2029 13,000
Texas (3.7%)
15,075 Alamo Heights Higher Education Facility RB,
Series 1999A (LOC) 3.85 4/01/2019 15,075
10,600 Amarillo Health Facilities Corp. RB,
Series 1985 (LOC) 4.00 5/31/2025 10,600
1,000 Angelina and Neches River Auth. IDC RB,
Series 1984C (LOC) 4.00 5/01/2014 1,000
5,915 Arlington IDC RB, Series 1985 (LOC) 4.25 10/01/2020 5,915
2,970 Bell County Health Facilities
Development Corp. RB, Series 1998 (LOC) 3.90 5/01/2023 2,970
8,000 Brazoria County Health Facilities Development
Corp. Hospital RB, Series 1999 (LOC) 3.90 7/01/2013 8,000
2,000 Grayson County IDC RB, Series 1991 3.95 12/01/2002 2,000
3,300 Harris County Housing Finance Corp. MFH RB,
Series 1988A (NBGA) 3.85 6/01/2005 3,300
2,000 Health Facilities Development Corp.
Hospital RB, Series 1985A (LOC) 4.00 5/31/2025 2,000
7,200 Health Facilities Development Corp. RB,
Series 1985B (LOC) 4.00 8/01/2025 7,200
4,005 Matagorda County Hospital District RB,
Series 1988 (LOC) 4.05 8/01/2018 4,005
1,130 North Central IDA RB, Series 1983 3.95 10/01/2013 1,130
2,560 Nueces River Auth. PCRB, Series 1985 (LOC) 4.00 12/01/1999 2,560
1,475 Port Corpus Christi IDC RB, Series 1992 (LOC) 3.90 7/01/2002 1,475
Utah (0.9%)
7,300 Ogden City IDRB, Series 1986 (LOC) 3.45 9/01/2013 7,300
8,570 Provo Housing MFH RB, Series 1987A 3.83 12/15/2010 8,570
Virginia (0.1%)
145 Alexandria Redevelopment and Housing
Auth. RB, Series 1996B (LOC) 3.95 10/01/2006 145
1,400 Waynesboro IDA RB, Series 1997 (LOC) 3.95 12/15/2028 1,400
Wisconsin (0.3%)
5,700 Health and Educational Facilities Auth. RB,
Series 1997 (LOC) 4.00 11/01/2017 5,700
- -----------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $1,410,885) 1,410,885
- -----------------------------------------------------------------------------------------
PUT BONDS (6.8%)
Illinois (4.1%)
Health Facilities Auth. RB,
15,000 Series 1985B 3.65 8/15/2015 15,000
20,000 Series 1988 3.05 8/15/2010 20,000
6,000 Series 1990A (LOC) 3.50 2/01/2019 6,000
20,000 Series 1995 (f) 3.25 6/01/2030 20,000
14,000 Series 1996 3.45 8/15/2030 14,000
Kentucky (0.3%)
5,500 Lexington-Fayette Urban County RB,
Series 1987 (LOC) 3.30 4/01/2015 5,500
Montana (1.6%)
Board of Investments Municipal Finance
Consolidation Act Bonds,
3,140 Series 1991 (NBGA) 3.05 3/01/2001 3,140
6,235 Series 1992 (NBGA) 3.05 3/01/2005 6,235
6,795 Series 1995 (NBGA) 3.05 3/01/2010 6,795
9,930 Series 1997 (NBGA)(f) 3.05 3/01/2017 9,930
2,430 Series 1998 (NBGA) 3.05 3/01/2018 2,430
New Hampshire (0.4%)
7,205 IDA Resources Recovery RB,
Series 1985 (INS)(1) 3.65 7/01/2007 7,205
New York (0.4%)
7,000 Monroe County IDA RB, Series 1984 3.70 9/01/2014 7,000
- -----------------------------------------------------------------------------------------
Total put bonds (cost: $123,235) 123,235
- -----------------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (15.5%)
Colorado (1.0%)
18,575 Poudre School District TAN, Series 1999 3.90 6/30/2000 18,582
Florida (0.3%)
1,825 Halifax Hospital Medical Center TAN,
Series 1999 (LOC) 3.50 3/15/2000 1,829
4,000 Jacksonville GO CP Notes 3.65 1/31/2000 4,000
Illinois (0.1%)
Cook County School District Number 74
GO Limited Tax School Bonds,
1,170 Series 1999A 3.25 12/01/1999 1,171
500 Series 1999B 3.25 12/01/1999 500
Iowa (0.4%)
Higher Education Loan Auth. RAN,
1,700 Series 1999A 3.50 5/24/2000 1,702
1,500 Series 1999B 3.50 5/24/2000 1,501
1,960 Series 1999D 3.50 5/24/2000 1,962
1,820 Series 1999H 3.50 5/24/2000 1,822
Louisiana (0.2%)
Public Facilities Auth. RN,
2,500 Series 1998B 3.35 10/25/1999 2,500
1,175 Series 1998C 3.35 10/25/1999 1,175
Massachusetts (2.4%)
Springfield,
6,250 GO BAN (LOC) 4.25 3/02/2000 6,267
11,500 GO BAN (LOC) 4.00 3/02/2000 11,523
2,890 GO BAN (LOC) 4.00 6/23/2000 2,900
10,000 GO BAN (LOC) 4.25 9/15/2000 10,046
12,441 Whitman Hanson Regional School District
BAN, Series 1999 (e) 4.25 10/13/2000 12,501
Michigan (0.2%)
4,500 Jackson Public Schools, Student Aid Notes,
Series 1999B (LOC) 4.00 7/06/2000 4,515
Minnesota (0.1%)
2,350 Public Facilities Auth. PCRB,
Series 1990A (PRE) 7.10 3/01/2012 2,433
Missouri (0.2%)
Health and Educational Facilities Auth. RAN,
1,500 Series 1999C (LOC) 3.50 4/22/2000 1,502
700 Series 1999D 3.50 4/22/2000 701
1,200 Series 1999F (LOC) 3.50 4/22/2000 1,202
1,000 Series 1999G 3.50 4/22/2000 1,002
New Jersey (1.3%)
23,180 Jersey City School Promissory Notes (f) 3.50 3/03/2000 23,221
New York (1.3%)
1,475 Dutchess County Resource Recovery
Agency RB, Series 1990A (PRE) 7.20 1/01/2002 1,518
3,750 Nassau County BAN, Series 1999C (LOC) 4.25 5/16/2000 3,765
3,835 New York City IDA Civic Facility RB (PRE) 9.63 6/01/2015 4,095
9,000 Niagara Falls City School District
GO RAN (INS)(2) 3.50 1/07/2000 9,000
4,995 Urban Development Corp. RB, Series G (PRE) 6.00 1/01/2019 5,029
Ohio (0.1%)
1,000 Columbus Refunding RB, Series 1992B 5.80 1/01/2000 1,006
Texas (6.7%)
Dallas Area Rapid Transit CP Notes,
12,000 Series 1995A (LOC) 3.50 1/14/2000 12,000
15,000 Series 1998B (LOC) 3.50 1/14/2000 15,000
5,000 Series 1998B (LOC) 3.50 1/14/2000 5,000
7,800 Series 1998B (LOC) 3.55 1/31/2000 7,800
6,000 Series 1998B (LOC) 3.60 2/29/2000 6,000
3,000 Series 1999C (LOC) 3.60 3/07/2000 3,000
Dallas Waterworks and Sewer System CP Notes,
5,833 Series 1999B (LOC) 3.60 12/15/1999 5,833
15,777 Series 1999B (LOC) 3.55 12/15/1999 15,777
2,385 Series 1999B (LOC) 3.50 12/15/1999 2,385
4,432 Series 1999B (LOC) 3.50 2/08/2000 4,432
4,298 Series 1999B (LOC) 3.55 8/02/2000 4,298
Houston Water and Sewer System CP Notes,
5,000 Series A 3.50 10/29/1999 5,000
15,000 Series A 3.60 11/30/1999 15,000
9,300 Lower Colorado River Auth. RB, Series 1996 5.50 1/01/2000 9,353
9,500 San Antonio Water Systems CP, Series 1995 3.65 1/31/2000 9,500
Virginia (0.7%)
12,500 Norfolk IDA RN, Series 1998 3.90 10/06/1999 12,500
Washington (0.2%)
2,750 Spokane RN, Series 1999 3.50 1/31/2000 2,754
Wisconsin (0.3%)
5,000 Sparta Area School District BAN 3.25 3/01/2000 5,002
- ------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $279,604) 279,604
- -----------------------------------------------------------------------------------------
Total investments (cost: $1,813,724) $1,813,724
==========================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 21.8%
Multi-Family Housing 20.1
Electric Utilities 6.3
Health Care - Miscellaneous 6.1
General Obligations 5.7
Nursing/Continuing Care Centers 5.0
Education 4.4
Banks - Major Regional 4.3
Water/Sewer Utilities - Municipal 3.6
Finance - Municipal 3.3
Sales Tax 2.7
Agricultural Products 2.6
Community Service 2.4
Manufacturing - Diversified Industries 2.2
Buildings 1.8
Aluminum 1.1
Escrowed Bonds 1.0
Other 5.8
-----
Total 100.2%
=====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.3%
Arizona .8
Arkansas .3
California 1.3
Colorado 2.3
Delaware .1
District of Columbia .6
Florida 8.3
Georgia 1.6
Illinois 10.5
Indiana .7
Iowa 1.5
Kansas 4.3
Kentucky 4.2
Louisiana 2.2
Maryland 1.9
Massachusetts 4.0
Michigan 3.0
Minnesota 3.4
Mississippi .2
Missouri 1.6
Montana 1.6
Nebraska .5
New Hampshire 1.7
New Jersey 1.3
New York 1.8
North Carolina .2
Ohio 1.7
Oklahoma 4.7
Oregon 5.7
Pennsylvania 3.1
South Carolina .1
South Dakota .3
Tennessee 10.5
Texas 10.4
Utah .9
Virginia .8
Washington .2
Wisconsin .6
-----
Total 100.2%
=====
NOTES TO PORTFOLIOS OF INVESTMENTS
September 30, 1999
(Unaudited)
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.
SPECIFIC NOTES
(a) Zero-Coupon security. Rate represents the effective yield at date of
purchase. For the USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term
Funds, these securities represented 2.8%, 10.2%, and 6.3% of the Funds' net
assets, respectively.
(b) Adjustable rate security. Rate changes periodically and is subject to a
floor of 6% and a ceiling of 12%.
(c) Illiquid securities valued using methods determined by a pricing service
under general supervision of the Board of Directors. For the USAA Long-Term,
USAA Intermediate-Term, and USAA Short-Term Funds, these securities represented
.3%, .2%, and 2.7% of the Funds' net assets, respectively.
For the USAA Long-Term Fund, the Texas State Veteran's Land Board GO is exempt
from registration under the Securities Act of 1933 and any resale of the
security must occur in an exempt transaction in the United States to a qualified
institutional buyer as defined by Rule 144A.
(d) These securities are exempt from registration under the Securities Act of
1933 and have been determined to be liquid by management. Any resale of these
securities may occur in an exempt transaction in the United States to a
qualified institutional buyer as defined by Rule 144A. These securities
represented 2.2%, 2.6%, 1.0%, and 13.1% of the USAA Long-Term, USAA
Intermediate-Term, USAA Short-Term, and USAA Tax Exempt Money Market Funds' net
assets, respectively.
(e) At September 30, 1999, the cost of securities purchased on a
delayed-delivery basis for the USAA Tax Exempt Money Market Fund was $12.5
million.
(f) At September 30, 1999, these securities were segregated to cover
delayed-delivery purchases.
See accompanying notes to financial statements.
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
USAA USAA
Long-Term Intermediate-Term
Fund Fund
-----------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value (identified
cost of $2,030,200 and $2,213,257, respectively) $2,052,161 $2,236,814
Cash 365 431
Receivables:
Capital shares sold 187 189
Interest 33,414 34,437
Securities sold - -
----------------------------
Total assets 2,086,127 2,271,871
----------------------------
LIABILITIES
Securities purchased 16,985 -
Capital shares redeemed 1,366 799
USAA Investment Management Company 472 521
USAA Transfer Agency Company 97 108
Accounts payable and accrued expenses 71 133
Dividends on capital shares 2,960 2,408
----------------------------
Total liabilities 21,951 3,969
----------------------------
Net assets applicable to capital
shares outstanding $2,064,176 $2,267,902
============================
REPRESENTED BY:
Paid-in capital $2,064,262 $2,247,516
Accumulated net realized loss on investments (22,047) (3,171)
Net unrealized appreciation of investments 21,961 23,557
----------------------------
Net assets applicable to capital
shares outstanding $2,064,176 $2,267,902
============================
Capital shares outstanding 158,172 177,996
============================
Authorized shares of $.01 par value 290,000 302,000
============================
Net asset value, redemption price,
and offering price per share $ 13.05 $ 12.74
============================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
(IN THOUSANDS)
September 30, 1999
(Unaudited)
<CAPTION>
USAA USAA Tax Exempt
Short-Term Money Market
Fund Fund
-----------------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value (identified
cost of $1,008,567 and $1,813,724, respectively) $1,008,537 $1,813,724
Cash 1,137 6,488
Receivables:
Capital shares sold 223 1,680
Interest 11,089 7,582
Securities sold - 4,814
--------------------------
Total assets 1,020,986 1,834,288
--------------------------
LIABILITIES
Securities purchased - 18,501
Capital shares redeemed 813 4,643
USAA Investment Management Company 234 417
USAA Transfer Agency Company 56 90
Accounts payable and accrued expenses 117 156
Dividends on capital shares 582 201
--------------------------
Total liabilities 1,802 24,008
--------------------------
Net assets applicable to capital
shares outstanding $1,019,184 $1,810,280
==========================
REPRESENTED BY:
Paid-in capital $1,022,598 $1,810,280
Accumulated net realized loss on investments (3,384) -
Net unrealized depreciation of investments (30) -
--------------------------
Net assets applicable to capital
shares outstanding $1,019,184 $1,810,280
==========================
Capital shares outstanding 96,681 1,810,280
==========================
Authorized shares of $.01 par value 190,000 3,235,000
==========================
Net asset value, redemption price,
and offering price per share $ 10.54 $ 1.00
==========================
See accompanying notes to financial statements.
</TABLE>
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Six-month period ended September 30, 1999
(Unaudited)
USAA USAA
Long-Term Intermediate-Term
Fund Fund
----------------------------
Net investment income:
Interest income $ 63,112 $ 65,052
----------------------------
Expenses:
Management fees 2,970 3,234
Transfer agent's fees 531 588
Custodian's fees 106 160
Postage 28 45
Shareholder reporting fees 10 17
Directors' fees 2 2
Registration fees 58 82
Professional fees 13 13
Other 7 19
-----------------------------
Total expenses 3,725 4,160
-----------------------------
Net investment income 59,387 60,892
-----------------------------
Net realized and unrealized loss on investments:
Net realized loss (3,623) (2,981)
Change in net unrealized appreciation/
depreciation (132,613) (112,444)
----------------------------
Net realized and unrealized loss (136,236) (115,425)
----------------------------
Decrease in net assets resulting
from operations $(76,849) $(54,533)
============================
See accompanying notes to financial statements.
<TABLE>
STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
Six-month period ended September 30, 1999
(Unaudited)
<CAPTION>
USAA USAA Tax Exempt
Short-Term Money Market
Fund Fund
---------------------------
<S> <C> <C>
Net investment income:
Interest income $ 24,680 $ 30,983
---------------------------
Expenses:
Management fees 1,435 2,493
Transfer agent's fees 305 488
Custodian's fees 107 187
Postage 36 54
Shareholder reporting fees 18 38
Directors' fees 2 2
Registration fees 25 44
Professional fees 13 16
Other 3 13
---------------------------
Total expenses 1,944 3,335
---------------------------
Net investment income 22,736 27,648
---------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 70 -
Change in net unrealized
appreciation/depreciation (17,693) -
---------------------------
Net realized and unrealized loss (17,623) -
Increase in net assets resulting
from operations $ 5,113 $ 27,648
===========================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
USAA LONG-TERM FUND
(IN THOUSANDS)
Six-month period ended September 30, 1999, and year ended March 31, 1999
(Unaudited)
<CAPTION>
9/30/99 3/31/99
--------------------------
<S> <C> <C>
From operations:
Net investment income $ 59,387 $ 115,752
Net realized gain (loss) on investments (3,623) 14,433
Change in net unrealized appreciation/depreciation
of investments (132,613) (26,388)
--------------------------
Increase (decrease) in net assets
resulting from operations (76,849) 103,797
--------------------------
Distributions to shareholders from:
Net investment income (59,387) (115,752)
--------------------------
From capital share transactions:
Proceeds from shares sold 335,563 685,452
Dividend reinvestments 41,310 81,124
Cost of shares redeemed (344,703) (628,904)
--------------------------
Increase in net assets from
capital share transactions 32,170 137,672
--------------------------
Net increase (decrease) in net assets (104,066) 125,717
Net assets:
Beginning of period 2,168,242 2,042,525
--------------------------
End of period $2,064,176 $2,168,242
==========================
Change in shares outstanding:
Shares sold 24,744 48,886
Shares issued for dividends reinvested 3,073 5,780
Shares redeemed (25,434) (44,798)
--------------------------
Increase in shares outstanding 2,383 9,868
==========================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA INTERMEDIATE-TERM FUND
(IN THOUSANDS)
Six-month period ended September 30, 1999, and year ended March 31, 1999
(Unaudited)
<CAPTION>
9/30/99 3/31/99
--------------------------
<S> <C> <C>
From operations:
Net investment income $ 60,892 $ 113,940
Net realized gain (loss) on investments (2,981) 2,285
Change in net unrealized appreciation/depreciation
of investments (112,444) (1,210)
-------------------------
Increase (decrease) in net assets
resulting from operations (54,533) 115,015
-------------------------
Distributions to shareholders from:
Net investment income (60,892) (113,940)
-------------------------
From capital share transactions:
Proceeds from shares sold 207,675 482,044
Dividend reinvestments 46,572 87,970
Cost of shares redeemed (215,321) (266,193)
-------------------------
Increase in net assets from
capital share transactions 38,926 303,821
-------------------------
Net increase (decrease) in net assets (76,499) 304,896
Net assets:
Beginning of period 2,344,401 2,039,505
-------------------------
End of period $2,267,902 $2,344,401
=========================
Change in shares outstanding:
Shares sold 15,860 35,847
Shares issued for dividends reinvested 3,575 6,541
Shares redeemed (16,463) (19,784)
-------------------------
Increase in shares outstanding 2,972 22,604
=========================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA SHORT-TERM FUND
(IN THOUSANDS)
Six-month period ended September 30, 1999, and year ended March 31, 1999
(Unaudited)
<CAPTION>
9/30/99 3/31/99
---------------------------
<S> <C> <C>
From operations:
Net investment income $ 22,736 $ 45,225
Net realized gain on investments 70 149
Change in net unrealized appreciation/
depreciation of investments (17,693) (1,264)
-------------------------
Increase in net assets resulting from operations 5,113 44,110
-------------------------
Distributions to shareholders from:
Net investment income (22,736) (45,225)
-------------------------
From capital share transactions:
Proceeds from shares sold 185,485 386,034
Dividend reinvestments 19,149 38,210
Cost of shares redeemed (201,387) (360,374)
-------------------------
Increase in net assets from
capital share transactions 3,247 63,870
-------------------------
Net increase (decrease) in net assets (14,376) 62,755
Net assets:
Beginning of period 1,033,560 970,805
-------------------------
End of period $1,019,184 $1,033,560
=========================
Change in shares outstanding:
Shares sold 17,448 35,919
Shares issued for dividends reinvested 1,805 3,554
Shares redeemed (18,944) (33,532)
-------------------------
Increase in shares outstanding 309 5,941
=========================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA TAX EXEMPT MONEY MARKET FUND
(IN THOUSANDS)
Six-month period ended September 30, 1999, and year ended March 31, 1999
(Unaudited)
<CAPTION>
9/30/99 3/31/99
-----------------------------
<S> <C> <C>
From operations:
Net investment income $ 27,648 $ 53,086
-----------------------------
Distributions to shareholders from:
Net investment income (27,648) (53,086)
-----------------------------
From capital share transactions:
Proceeds from shares sold 1,031,739 1,991,129
Dividend reinvestments 26,307 50,435
Cost of shares redeemed (1,014,802) (1,906,313)
-----------------------------
Increase in net assets from
capital share transactions 43,244 135,251
-----------------------------
Net increase in net assets 43,244 135,251
Net assets:
Beginning of period 1,767,036 1,631,785
-----------------------------
End of period $ 1,810,280 $ 1,767,036
=============================
Change in shares outstanding:
Shares sold 1,031,739 1,991,129
Shares issued for dividends reinvested 26,307 50,435
Shares redeemed (1,014,802) (1,906,313)
-----------------------------
Increase in shares outstanding 43,244 135,251
=============================
See accompanying notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
(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 semiannual report pertains
only to the USAA Long-Term Fund, USAA Intermediate-Term Fund, USAA Short-Term
Fund, and USAA 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 USAA Long-Term, USAA
Intermediate-Term, and USAA 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 under
the Investment Company Act of 1940, as amended, all securities in the USAA 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 - 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 securities.
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 three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($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 both agreements with CAPCO, each Fund
may borrow from CAPCO an amount up to 5% of its total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, each Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 15% of its total assets.
During the six-month period ended September 30, 1999, the USAA Long-Term Fund
had one borrowing of $2.17 million with a length of three days incurring $834 in
interest expense. The USAA Intermediate-Term, USAA Short-Term, and USAA Tax
Exempt Money Market Funds had no borrowings under any of these agreements during
the period.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. 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 September 30, 1999,
the USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds had
capital loss carryovers for federal income tax purposes of approximately $22.0,
$3.2 and $3.4 million, respectively which, if not offset by subsequent capital
gains will expire between 2000-2005. It is unlikely that the Company's Board of
Directors will authorize a distribution of capital gains realized in the future
until the capital loss carryovers have been utilized or expire.
(4) INVESTMENT TRANSACTIONS
Costs of purchases and proceeds from sales/maturities of securities for the
six-month period ended September 30, 1999, were as follows:
<TABLE>
<CAPTION>
USAA USAA USAA USAA Tax Exempt
Long-Term Fund Intermediate-Term Fund Short-Term Fund Money Market Fund
($000) ($000) ($000) ($000)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $324,824 $176,814 $ 70,453 $2,513,389
Sales/maturities $316,682 $152,019 $ 77,164 $2,483,633
</TABLE>
For the USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds, costs
of purchases and proceeds from sales/maturities excludes short-term securities.
Gross unrealized appreciation and depreciation of investments at September 30,
1999, was as follows:
USAA USAA USAA
Long-Term Intermediate-Term Short-Term
Fund Fund Fund
($000) ($000) ($000)
-----------------------------------------
Appreciation $ 95,161 $ 74,147 $ 7,069
Depreciation (73,200) (50,590) (7,099)
-----------------------------------------
Net $ 21,961 $ 23,557 $ (30)
=========================================
(5) TRANSACTIONS WITH MANAGER
A. Management fees - USAA Investment Management Company (the Manager) carries
out each Fund's investment policies and manages each Fund's portfolio.
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 Funds based on an annual charge of $28.50 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
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At September 30, 1999, the Association and its affiliates
owned 5.2 million shares (2.9%) of the USAA Intermediate-Term Fund.
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.
(7) YEAR 2000
Like other mutual funds, the Funds could be adversely affected if the computer
systems used by the Manager and the Funds' other service providers are not able
to perform their intended functions effectively after 1999 because of the
inability of computer software to distinguish the year 2000 from the year 1900.
The Manager has taken steps to address this potential year 2000 problem with
respect to the computer systems that it uses and to obtain satisfactory
assurances that comparable steps are being taken by the Funds' other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the Funds from this
problem.
<TABLE>
(8) FINANCIAL HIGHLIGHTS -- USAA LONG-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended
September 30, Year Ended March 31,
-------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period $ 13.92 $ 14.00 $ 13.22 $ 13.17 $ 12.96 $ 13.20
Net investment
income .38 .76 .78 .79 .79 .79
Net realized and
unrealized
gain (loss) (.87) (.08) .78 .05 .21 (.16)
Distributions from net
investment income (.38) (.76) (.78) (.79) (.79) (.78)
Distributions of realized
capital gains - - - - - (.09)
---------------------------------------------------------------------------
Net asset value at
end of period $ 13.05 $ 13.92 $ 14.00 $ 13.22 $ 13.17 $ 12.96
===========================================================================
Total return (%)* (3.58) 4.98 12.04 6.51 7.88 5.07
Net assets at end
of period (000) $2,064,176 $2,168,242 $2,042,525 $1,822,436 $1,804,116 $1,774,643
Ratio of expenses to
average net
assets (%) .35(a) .36 .36 .37 .37 .38
Ratio of net investment
income to average
net assets (%) 5.60(a) 5.44 5.65 5.95 5.99 6.23
Portfolio turnover (%) 15.27 29.56 35.20 40.78 53.25 64.72
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
</TABLE>
<TABLE>
(8) FINANCIAL HIGHLIGHTS -- USAA INTERMEDIATE-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended
September 30, Year Ended March 31,
-------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period $ 13.39 $ 13.38 $ 12.77 $ 12.77 $ 12.50 $ 12.48
Net investment
income .34 .70 .71 .72 .71 .69
Net realized and
unrealized
gain (loss) (.65) .01 .61 - .27 .05
Distributions from net
investment income (.34) (.70) (.71) (.72) (.71) (.69)
Distributions of realized
capital gains - - - - - (.03)
--------------------------------------------------------------------------------
Net asset value at
end of period $ 12.74 $ 13.39 $ 13.38 $ 12.77 $ 12.77 $ 12.50
================================================================================
Total return (%)* (2.31) 5.42 10.59 5.80 7.97 6.16
Net assets at end
of period (000) $2,267,902 $2,344,401 $2,039,505 $1,725,684 $1,660,039 $1,529,750
Ratio of expenses to
average net
assets (%) .36(a) .36 .37 .37 .38 .40
Ratio of net investment
income to average
net assets (%) 5.27(a) 5.21 5.42 5.65 5.54 5.63
Portfolio turnover (%) 6.74 11.85 7.87 23.05 27.51 27.26
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
</TABLE>
<TABLE>
(8) FINANCIAL HIGHLIGHTS -- USAA SHORT-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended
September 30, Year Ended March 31,
-------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period $ 10.72 $ 10.74 $ 10.57 $ 10.57 $ 10.47 $ 10.48
Net investment
income .24 .49 .49 .49 .50 .47
Net realized and
unrealized
gain (loss) (.18) (.02) .17 - .10 (.01)
Distributions from net
investment income (.24) (.49) (.49) (.49) (.50) (.47)
--------------------------------------------------------------------------------
Net asset value at
end of period $ 10.54 $ 10.72 $ 10.74 $ 10.57 $ 10.57 $ 10.47
================================================================================
Total return (%)* .52 4.46 6.35 4.70 5.83 4.51
Net assets at end
of period (000) $1,019,184 $1,033,560 $ 970,805 $ 804,897 $ 774,020 $ 801,157
Ratio of expenses to
average net
assets (%) .38(a) .38 .39 .41 .42 .42
Ratio of net investment
income to average
net assets (%) 4.44(a) 4.55 4.57 4.60 4.73 4.50
Portfolio turnover (%) 8.83 7.34 7.91 27.67 35.99 32.61
(a) Annualized. The ratio is not necessarily indicative of 12 months of operations.
* Assumes reinvestment of all dividend income distributions during the period.
</TABLE>
<TABLE>
(8) FINANCIAL HIGHLIGHTS -- USAA TAX EXEMPT MONEY MARKET FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended
September 30, Year Ended March 31,
------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment
income .02 .03 .03 .03 .04 .03
Distributions from net
investment income (.02) (.03) (.03) (.03) (.04) (.03)
-------------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================
Total return (%)* 1.56 3.26 3.48 3.30 3.65 2.98
Net assets at end
of period (000) $1,810,280 $1,767,036 $1,631,785 $1,565,634 $1,529,176 $1,456,747
Ratio of expenses to
average net
assets (%) .37(a) .38 .38 .39 .40 .39
Ratio of net investment
income to average
net assets (%) 3.11(a) 3.21 3.42 3.25 3.59 2.93
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income distributions during the period.
</TABLE>
DIRECTORS
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
KPMG LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 7:00 a.m. to 9:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Sundays 11:30 a.m. to 8:00 p.m.
Internet Access
www.usaa.com
For Additional Information on Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges, or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-Hour Service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
Mutual Fund USAA TouchLine(Registered Trademark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
