SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
USAA Tax Exempt Fund, Inc.
(Name of Registrant as Specified In Its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
___________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
___________________________________________________________________________
5) Total fees paid:
___________________________________________________________________________
<PAGE>
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
IMPORTANT INFORMATION FOR SHAREHOLDERS IN THE LONG-TERM FUND, INTERMEDIATE-TERM
FUND, SHORT-TERM FUND, TAX EXEMPT MONEY MARKET FUND, CALIFORNIA BOND FUND,
CALIFORNIA MONEY MARKET FUND, NEW YORK BOND FUND, NEW YORK MONEY MARKET FUND,
VIRGINIA BOND FUND, AND VIRGINIA MONEY MARKET FUND
AUGUST 19, 1999
USAA EAGLE LOGO
USAA Tax Exempt Fund, Inc.
9800 Fredericksburg Road
San Antonio, Texas 78288
This document contains your proxy statement and proxy card. This proxy card is,
in essence, a ballot to vote the shares you own in one or more of the listed
mutual funds. When you complete, sign, and mail your proxy card, it tells us
how to vote on your behalf on important issues relating to your funds, and
we'll vote it exactly as you tell us. If you simply sign the proxy, we'll vote
it in accordance with the Board of Directors' recommendations found on page 5.
If you prefer, instead of mailing the enclosed proxy card, you can cast your
vote through the Internet by going to www.proxyvote.com. You may also cast your
vote by calling 1-800-690-6903 or in person at the shareholder meeting. We
encourage you to vote by Internet or telephone, using the 12-digit "control
number" that appears on your proxy card. Voting by these methods minimizes the
Funds' costs of solicitation (no return-mail postage).
We urge you to spend some time reviewing this proxy statement. Please promptly
cast your vote, whether by mail, Internet, telephone, or attending the
shareholder meeting in person. When shareholders don't vote in sufficient
numbers, the funds must incur the additional expense of follow-up solicitation,
which hurts your funds' performance. If you have any questions on these
materials, please contact us at 1-800-563-4957.
<PAGE>
TABLE OF CONTENTS
A Message from the President ............................ 3
Notice of Meeting of Shareholders ....................... 4
Proxy Statement.......................................... 5
Board of Directors' Recommendations ..................... 5
Further Information About Voting
and the Shareholder Meeting ........................ 14
Further Information About Your Funds..................... 15
PROXY CARD ENCLOSED
2
<PAGE>
A MESSAGE FROM THE PRESIDENT
Dear Shareholder:
I am writing to you to ask for your vote on important questions that affect
your investment in your funds. While you are, of course, welcome to join us at
your funds' meeting, most shareholders cast their vote by filling out and
signing the enclosed proxy card, by voting on the Internet at
www.proxyvote.com, or by calling our special toll-free number, 1-800-690-6903.
We are asking for your vote on the following matters:
I. Election of Board of Directors of USAA Tax Exempt Fund, Inc. (Company);
and
II. Ratification of the selection of KPMG LLP by the Board of Directors to
serve as the independent auditors of the Funds.
Although we would like very much to have each shareholder attend the
shareholder meeting, we realize this is not always possible. Whether or not you
plan to be present, we need your vote. For your convenience you may also cast
your vote on the Internet, or by calling a toll-free number, or by mailing the
completed and signed enclosed proxy card (a postage-paid envelope has been
enclosed for this purpose). However you choose to cast your vote, we urge you
to do so in a timely manner.
You may also receive a telephone call from either an IMCO member service
representative or a representative from D.F. King & Co., Inc. encouraging you
to return your proxy. D.F. King & Co., Inc. is a proxy solicitation firm that
has been retained to assist your funds in obtaining sufficient votes for a
quorum at the shareholder meeting by calling and encouraging those shareholders
who have not returned their proxies to do so.
Please do not set this proxy aside for another time. When shareholders don't
promptly cast their votes, their funds may have to incur the additional expense
of follow-up communications. All shareholders benefit from timely voting.
Your vote is important to us. We appreciate the time and consideration that I'm
confident you will give this matter. If you have any comments or questions
about any of the proposals, please contact us at 1-800-563-4957.
Sincerely yours,
/S/ MICHAEL J. C. ROTH
--------------------------
Michael J. C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
3
<PAGE>
USAA USAA TAX EXEMPT FUND, INC.
EAGLE
LOGO 9800 Fredericksburg Road
San Antonio, Texas 78288
Notice of Meeting of Shareholders
TO BE HELD OCTOBER 15, 1999
This is the formal agenda for the shareholder meeting (Shareholder Meeting) of
the following ten mutual funds: Long-Term Fund, Intermediate-Term Fund,
Short-Term Fund, Tax Exempt Money Market Fund, California Bond Fund, California
Money Market Fund, New York Bond Fund, New York Money Market Fund, Virginia
Bond Fund, and Virginia Money Market Fund (collectively, the Funds or Fund).
USAA Tax Exempt Fund, Inc. (Company) is an open-end management investment
company incorporated under the laws of the state of Maryland that offers shares
in these ten no-load mutual funds.
This Notice of Meeting tells you what matters will be voted on and the time and
place of the Shareholder Meeting, if you plan to attend in person.
A Shareholder Meeting of the Company will be held on Friday, October 15, 1999,
at 2 p.m., Central Standard Time, at the McDermott Auditorium in the USAA
Building, 9800 Fredericksburg Road, San Antonio, Texas 78288, to consider the
following matters:
I. Election of the Company's Board of Directors. See page 6.
II. Ratification of the selection of KPMG LLP by the Board of Directors to
serve as the independent auditors of the Funds. See page 13.
By Order of the Board of Directors
Michael D. Wagner
Secretary
San Antonio, Texas
August 19, 1999
- -------------------------------------------------------------------------------
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE, OR VOTE ON THE INTERNET AT www.proxyvote.com, OR
CALL OUR SPECIAL TOLL-FREE NUMBER, 1-800-690-6903, SO YOU WILL BE
REPRESENTED AT THE MEETING.
- -------------------------------------------------------------------------------
4
<PAGE>
PROXY STATEMENT
This document will give you the information you need to vote on the matters
listed on the previous page. Much of the information in this Proxy Statement is
required under the rules and regulations of the Securities and Exchange
Commission (SEC) and, is, therefore, quite detailed. If there is anything you
don't understand, please contact us at 1-800-563-4957.
* WHO IS ASKING FOR MY VOTE?
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
ISSUING SHARES OF THE FOLLOWING FUNDS: LONG-TERM FUND, INTERMEDIATE-TERM
FUND, SHORT-TERM FUND, TAX EXEMPT MONEY MARKET FUND, CALIFORNIA BOND FUND,
CALIFORNIA MONEY MARKET FUND, NEW YORK BOND FUND, NEW YORK MONEY MARKET
FUND, VIRGINIA BOND FUND, AND VIRGINIA MONEY MARKET FUND (EACH, A FUND OR
COLLECTIVELY, THE FUNDS). How you vote, whether by mail, Internet,
telephone, or in person, will be used at the Shareholder Meeting, and if
the Shareholder Meeting is adjourned, at any later meetings, for the
purposes stated in the Notice of Meeting (see previous page).
* WHAT ARE THE DIFFERENT WAYS I CAN CAST MY VOTE?
As a shareholder, you may vote in one of four ways. First, you may vote in
person by attending the Shareholder Meeting. Second, you may vote by
sending us a completed and executed proxy card. The proxy card has been
included with this Proxy Statement, along with a postage-paid envelope for
your convenience in mailing us your proxy card. Third, you may cast your
vote through the Internet at www.proxyvote.com. Finally, you may also cast
your vote by calling our special toll-free number, 1-800-690-6903. If you
do not anticipate attending the meeting in person, we encourage you to
vote by Internet or telephone to minimize the costs of solicitation.
* HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE ON THESE
PROPOSALS?
The Board of Directors recommends that you vote:
I. FOR the election of all nominees for election to the Company's Board
of Directors; and
II. FOR the selection of KPMG LLP to serve as the independent auditors
of the Funds.
5
<PAGE>
* WHO IS ELIGIBLE TO VOTE?
All shareholders of the Funds as of the Record Date (close of business on
August 19, 1999) are entitled to vote on the proposals listed above at the
Shareholder Meeting, or any adjournment thereof. As of August 4, 1999,
there were 156,988,221 shares of the Long-Term Fund, 177,601,545 shares of
the Intermediate-Term Fund, 96,363,307 shares of the Short-Term Fund,
1,820,644,110 shares of the Tax Exempt Money Market Fund, 58,510,934
shares of the California Bond Fund, 403,584,091 shares of the California
Money Market Fund, 8,178,507 shares of the New York Bond Fund, 70,142,427
shares of the New York Money Market Fund, 35,911,741 shares of the
Virginia Bond Fund, and 138,082,496 shares of the Virginia Money Market
Fund issued and outstanding. The Notice of Meeting, the proxy card, and
the Proxy Statement have been mailed to shareholders of record on or about
August 19, 1999.
Each share is entitled to one vote (with proportionate voting for
fractional shares). Shares represented by duly executed proxies will be
voted in accordance with shareholders' instructions. If you sign the
proxy, but don't fill in a vote, your shares will be voted "FOR" each of
the proposals. If any other business is brought before the Shareholder
Meeting, your shares will be voted as determined by the discretion of the
proxies.
PROPOSAL I
ELECTION OF BOARD OF DIRECTORS
* WHO ARE THE NOMINEES FOR THE BOARD OF DIRECTORS?
^ Robert G. Davis*
9800 Fredericksburg Road
San Antonio, Texas 78288
Mr. Davis, age 52, is President and Chief Operating Officer of United
Services Automobile Association (USAA) (6/99-present); Deputy Chief
Executive Officer for Capital Management of USAA (6/98-5/99); President,
Chief Executive Officer, Director, and Vice Chairman of the Board of
Directors of USAA Capital Corporation and several of its subsidiaries and
affiliates (1/97-present); President, Chief Executive Officer, Director,
and Chairman of the Board of Directors of USAA Financial Planning Network,
Inc. (1/97-present); Executive Vice President, Chief Operating Officer,
Director, and Vice Chairman of the Board of Directors of USAA Financial
Planning Network, Inc. (6/96-12-96); Special Assistant to Chairman, USAA
(6/96-12/96); President and Chief Executive Officer, Banc One Credit
Corporation (12/95-6/96); and President and Chief Executive Officer, Banc
One Columbus (8/91-12/95). Mr. Davis serves as a Director/Trustee and
Chairman of the Boards of Directors/Trustees of each of the remaining
funds within the USAA Family of Funds; Director and Chairman of the Boards
of Directors of USAA Investment Management Company (IMCO), USAA
Shareholder Account Services, USAA Federal Savings Bank, and USAA Real
Estate Company.
6
<PAGE>
^ Michael J. C. Roth*
9800 Fredericksburg Road
San Antonio, Texas 78288
Mr. Roth, age 57, is Chief Executive Officer, IMCO (10/93-present);
President, Director, and Vice Chairman of the Board of Directors, IMCO
(1/90-present). Mr. Roth serves as President, Director/Trustee, and Vice
Chairman of the Boards of Directors/Trustees of each of the remaining
Funds within the USAA Family of Funds and USAA Shareholder Account
Services; Director of USAA Life Insurance Company; Trustee and Vice
Chairman of USAA Life Investment Trust.
^ David G. Peebles*
9800 Fredericksburg Road
San Antonio, Texas 78288
Mr. Peebles, age 59, is Senior Vice President, Equity Investments, IMCO
(11/98-present); Vice President, Equity Investments, IMCO (2/88-11/98).
^ Barbara B. Dreeben
200 Patterson, #1008
San Antonio, Texas 78209
Mrs. Dreeben, age 54, is President, Postal Addvantage (7/92-present);
Consultant, Nancy Harkins Stationer (8/91-12/95). Mrs. Dreeben serves as a
Director/Trustee of each of the remaining Funds within the USAA Family of
Funds.
^ Robert L. Mason, Ph.D.
12823 Queens Forest
San Antonio, Texas 78230
Dr. Mason, age 53, is Staff Analyst, Southwest Research Institute
(9/98-present); Manager, Statistical Analysis Section, Southwest Research
Institute (2/79-9/98). Dr. Mason serves as a Director/Trustee of each of
the remaining Funds within the USAA Family of Funds.
^ Michael F. Reimherr
128 East Arrowhead
San Antonio, Texas 78228
Mr. Reimherr, age 53, is President of Reimherr Business Consulting
(5/95-present). Mr. Reimherr previously served as President of Twang Candy
Company (5/91-5/94).
^ Richard A. Zucker
407 Arch Bluff
San Antonio, Texas 78216
Mr. Zucker, age 56, is Vice President, Beldon Roofing and Remodeling
(1985-present). Mr. Zucker serves as a Director/Trustee of each of the
remaining Funds within the USAA Family of Funds.
7
<PAGE>
- ------------------
* indicates individual who is deemed to be an "interested person" of the
Company under the Investment Company Act of 1940 (1940 Act) because of
his affiliation with IMCO and its affiliates.
Except as indicated above, the principal occupations and business
experience of the nominees for the Board of Directors for the last five
years have been with the employers indicated, although in some cases they
have held different positions with those employers. Mr. Roth, Mrs.
Dreeben, and Mr. Zucker were elected by the shareholders in October 1995.
Dr. Mason and Mr. Davis and were appointed by the Company's Board of
Directors on September 6, 1996, and November 20, 1996, respectively.
Neither Mr. Peebles nor Mr. Reimherr are currently members of the Board of
Directors. Each director serves until his or her successor is elected and
qualified. Each of the nominees has agreed to serve on the Board of
Directors if elected. If any of the nominees is unavailable for election
at the time of the Shareholder Meeting, which is not anticipated, the
Board of Directors may vote for other nominees at their discretion.
* WHAT ARE THE RESPONSIBILITIES OF THE BOARD OF DIRECTORS?
The Board of Directors is responsible for the general oversight of the
Funds' business and for assuring that your Funds are managed in the best
interests of each Fund's respective shareholders. The Board of Directors
periodically reviews your Funds' investment performance as well as the
quality of other services provided to your Funds and their shareholders by
each of the Funds' service providers, including USAA Investment Management
Company (IMCO) and its affiliates. IMCO acts as the investment adviser to
the Funds. IMCO's address is 9800 Fredericksburg Road, San Antonio, Texas
78288. At least annually, the Board of Directors reviews the fees paid by
the Company for these services and the overall level of your Funds'
operating expenses.
* WHY ARE WE NOW ELECTING NEW MEMBERS TO THE BOARD OF DIRECTORS?
Under the 1940 Act, the Board of Directors may fill vacancies on the Board
of Directors or appoint new directors only if, immediately thereafter, at
least two-thirds of the directors will have been elected by shareholders.
Currently, two of the Company's seven directors have not been elected by
shareholders. Furthermore, Howard L. Freeman, Jr. and John W. Saunders,
Jr., each of whom had previously been elected by shareholders, have
announced their intention to resign as directors effective as of December
31,1999. The Board of Directors believes it would be in the best interests
of shareholders to fill both vacancies resulting from these resignations
and, therefore, has nominated Mr. Peebles and Mr. Reimherr to become
directors effective as of January 1, 2000. In light of the fact that only
three of the Company's directors will have been elected by shareholders as
of such date, it follows that a meeting of shareholders needs to be held
to elect directors.
Under the 1940 Act, the Company is also required to call a meeting of
shareholders promptly to elect directors if at any time less than a
majority of the directors have been
8
<PAGE>
elected by shareholders. By holding a meeting to elect directors at this
time, the Company may be able to delay the time at which another
shareholder meeting is required for the election of directors, which will
result in a savings of the costs associated with holding such a meeting.
* HOW LONG CAN DIRECTORS SERVE ON THE BOARD OF DIRECTORS?
Pursuant to a policy adopted by the Board of Directors, each duly elected
or appointed director will continue to serve as a director until the
director either reaches age 70 or has served ten years in such capacity. A
director of the Company may resign or be removed by a vote of the holders
of a majority of the outstanding shares of the Funds at any time.
* DOES USAA OWN SHARES IN ANY OF THE FUNDS?
As of June 30, 1999, USAA, a Texas reciprocal interinsurance exchange,
beneficially owned directly or indirectly through one or more of its
affiliates 5,153,216 shares (2.9%) of the Intermediate-Term Fund and no
shares of the Long-Term Fund, Short-Term Fund, Tax Exempt Money Market
Fund, California Bond Fund, California Money Market Fund, New York Bond
Fund, New York Money Market Fund, Virginia Bond Fund, or Virginia Money
Market Fund. It is anticipated that USAA and its affiliates, as well as
any related employee benefit plan(s), will vote their shares of the Funds
in favor of the proposals. The address of USAA and its affiliates is 9800
Fredericksburg Road, San Antonio, Texas 78288.
SEC rules require each Fund to tell you the name and address of any person
known to be the beneficial owner of more than 5% of any class of the
Fund's outstanding shares. The Fund must also tell you how many shares
such persons own and what percentage of the class these shares represent.
The following table identifies all persons, who as of June 30, 1999, held
of record or owned beneficially 5% or more of the Fund's shares.
NAME AND ADDRESS PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER NUMBER OF SHARES OF CLASS
- -------------- ------------------- ---------------- --------
Tax Exempt Robert M. Kommerstad 8,424,934 8.8%
Short-Term Fund Lila M. Kommerstad
Trst Kommerstad Family Trust
DTD 05/16/88
218 Deodar Ln
Bradbury, CA 91010-1011
California Money Idanta Partners Ltd 23,264,100 5.6%
Market Fund 4660 La Jolla Village Dr, Ste 850
San Diego, CA 92122-4606
9
<PAGE>
New York Money Charles E. Dowdell 5,844,012 8.6%
Market Fund Nancy L. Dowdell JTWROS
5121 Donnington Rd
Clarence NY 14031-1501
* WHAT ARE SOME OF THE WAYS IN WHICH THE BOARD OF DIRECTORS REPRESENTS
SHAREHOLDER INTERESTS?
The Board of Directors seeks to represent shareholder interests by:
* reviewing your Funds' investment performance on an individual basis with
your Funds' respective managers;
* reviewing the quality of the various other services provided to the
Funds and their shareholders by each of the Funds' service providers,
including IMCO and its affiliates;
* discussing with senior management of IMCO steps being taken to address
any performance deficiencies;
* reviewing the fees paid to IMCO and its affiliates to ensure that
such fees remain reasonable and competitive with those of the other
mutual funds, while at the same time providing sufficient resources to
continue to provide high-quality services in the future;
* monitoring potential conflicts between the Funds and IMCO and its
affiliates to ensure that the Funds continue to be managed in the best
interests of their shareholders; and
* monitoring potential conflicts among Funds to ensure that shareholders
continue to realize the benefits of participation in a large and
diverse family of funds.
* HOW OFTEN DOES THE BOARD OF DIRECTORS MEET?
The Board of Directors typically conducts regular meetings five or six
times a year to review the operations of your Funds and of the other funds
in the USAA Family of Funds. A portion of these meetings is devoted to
meetings of various committees of the Board of Directors, which focus on
particular matters. In addition, the Board of Directors may hold special
meetings by telephone or in person to discuss specific matters that may
require action prior to the next regular meeting.
Between the meetings of the Board of Directors and while the Board of
Directors is not in session, the Executive Committee of the Board of
Directors has all the powers and may exercise all the duties of the Board
of Directors in the management of the business of the Company that may be
delegated to it by the Board of Directors. The Pricing and Investment
Committee of the Board of Directors acts upon various investment-related
issues and other matters that have been delegated to it by the Board of
Directors. The Audit Committee of the Board of Directors reviews the
financial statements and the auditors' reports and undertakes certain
studies and analyses as directed by the Board of Directors. The Corporate
Governance Committee of the Board of Directors maintains
10
<PAGE>
oversight of the organization, performance, and effectiveness of the Board
and independent directors. SEE FURTHER INFORMATION ABOUT YOUR FUNDS --
COMMITTEES OF THE BOARD OF DIRECTORS.
During the fiscal year ended March 31, 1999, the Board of Directors met
seven times, the Executive Committee met once, the Audit Committee met
five times, the Pricing and Investment Committee met four times, and the
Corporate Governance Committee met four times. Each director attended at
least 75% of the total number of meetings of the Board of Directors and
any committee on which he or she served.
* WHAT ARE THE MEMBERS OF THE BOARD OF DIRECTORS PAID FOR THEIR SERVICES?
The Company pays each independent director a fee for his or her services.
Directors affiliated with IMCO and its affiliates are not compensated by
the Company for their service on the Board of Directors. Each independent
director also receives fees for serving as a director/trustee of the other
funds in the USAA Family of Funds. Directors and committee members are
compensated on the basis of an annual retainer of $5,250 for the Company
plus reimbursement for reasonable expenses incurred in attending any
meetings of the Board of Directors or a committee. The fee for attending a
regular or special meeting of the Board of Directors is $1,500. All funds
in the USAA Family of Funds meet on a combined basis for regular meetings,
and one meeting fee is allocated evenly among the total number of funds
represented at the meeting. The fee for serving on one or more committees
is $500 per committee. All compensation paid to directors is used to
acquire shares of one or more funds in the USAA Family of Funds under an
automatic investment program for directors. The directors periodically
review their fees to assure that such fees continue to be appropriate in
light of their responsibilities as well as in relation to fees paid to
directors/trustees of other mutual fund companies.
The fees paid to each director by the Company and by all the funds in the
USAA Family of Funds for the fiscal year ended March 31, 1999, are shown
below:
COMPENSATION TABLE
PENSION OR AGGREGATE ESTIMATED TOTAL ANNUAL
RETIREMENT BENEFIT ANNUAL ANNUAL COMPENSATION
NAME OF ACCRUED AS PART COMPENSATION BENEFITS UPON FROM THE USAA
THE DIRECTOR OF FUND EXPENSES FROM THE FUNDS RETIREMENT FAMILY OF FUNDS(C)
- --------------------------------------------------------------------------------
Robert G. Davis None (a) None (b) None (b) None (b)
Michael J. C. Roth None (a) None (b) None (b) None (b)
John W. Saunders, Jr. None (a) None (b) None (b) None (b)
Barbara B. Dreeben None (a) $7,022 None $36,500
Howard L. Freeman, Jr. None (a) $7,022 None $36,500
Robert L. Mason, Ph.D. None (a) $7,022 None $36,500
Richard A. Zucker None (a) $7,022 None $36,500
11
<PAGE>
- -----------------
(a) No pension or retirement benefits are accrued as part of fund expenses.
(b) Robert G. Davis, Michael J. C. Roth, and John W. Saunders, Jr. are
affiliated with the Company's investment adviser, IMCO, and, accordingly,
receive no remuneration from the Company or any other fund in the USAA
Family of Funds.
(c) At March 31, 1999, the USAA Family of Funds consisted of four registered
investment companies offering 35 individual mutual funds. Each director
presently serves as a director or trustee of each investment company in
the USAA Family of Funds. In addition, Michael J. C. Roth presently serves
as a trustee of USAA Life Investment Trust, a registered investment
company advised by IMCO, consisting of seven funds available to the public
only through the purchase of certain variable annuity contracts and
variable life insurance policies offered by USAA Life Insurance Company.
Mr. Roth receives no compensation as trustee of USAA Life Investment
Trust.
No compensation is paid by any fund to any director/trustee who is a
director, officer, or employee of IMCO or its affiliates. As of June 30,
1999, the directors and their families as a group owned beneficially or of
record less than 1% of the outstanding shares of all funds within the USAA
Family of Funds.
* HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THIS PROPOSAL?
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF ALL NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS OF THE
COMPANY.
* WHAT PERCENTAGE OF SHAREHOLDERS' VOTES ARE REQUIRED TO ELECT THE NOMINEES
TO THE BOARD OF DIRECTORS?
The nominees for directors of the Company receiving the vote of a
plurality of the votes cast at a meeting at which a quorum is present
shall be elected. Shareholders of all Funds will vote as a single class on
the election of directors.
12
<PAGE>
PROPOSAL II
RATIFICATION OF SELECTION OF KPMG LLP
AS INDEPENDENT AUDITORS OF THE FUNDS
* WHY HAS KPMG LLP BEEN SELECTED AS THE INDEPENDENT AUDITORS?
KPMG LLP, independent auditors (KPMG), has been selected by the Board of
Directors as the auditors of the Funds. KPMG was selected primarily on the
basis of its expertise as auditors of investment companies, the quality of
its audit services, and the competitiveness of the fees charged for these
services. KPMG also serves as the auditor for IMCO, the other investment
companies for which IMCO serves as investment adviser, USAA and its
subsidiaries and affiliated companies, and all the other mutual funds in
the USAA Family of Funds. KPMG has served as auditors for the Funds since
1981.
* HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE ON THIS PROPOSAL?
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
SELECTION OF KPMG LLP AS THE INDEPENDENT AUDITORS OF THE FUNDS.
* WHAT PERCENTAGE OF SHAREHOLDERS' VOTES ARE REQUIRED TO RATIFY THE
SELECTION OF INDEPENDENT AUDITORS FOR THE FUNDS?
A majority of the votes cast at a meeting at which a quorum is present is
needed to ratify the selection of the auditors. All shares of the Funds
will be voted as a single class of shares.
* WILL A REPRESENTATIVE FROM KPMG BE AVAILABLE AT THE SHAREHOLDER MEETING
FOR QUESTIONS?
Yes. A representative of KPMG is expected to be present at the Shareholder
Meeting and will be available to make statements and respond to
appropriate questions presented by shareholders.
13
<PAGE>
Further Information About Voting and the Shareholder Meeting
QUORUM AND METHODS OF TABULATION. With respect to each proposal, a majority of
the shares of the Company entitled to vote, represented in person or by proxy,
is required to constitute a quorum at the Shareholder Meeting. Under Maryland
law, abstentions do not constitute a vote "for" or "against" a matter but will
be included in determining the number of shares outstanding and the number of
shares present for purposes of the proposals described herein. Each proposal
requires a vote based on the total votes cast. As a result, abstentions will
assist the Company in obtaining a quorum, but will have no effect on the
outcome of the proposals. Broker "non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other person entitled to vote shares on a particular matter
with respect to which the brokers or nominees do not have discretionary power)
will be treated the same as abstentions.
In the event a quorum is not present at the Shareholder Meeting or in the event
a quorum is present at the Shareholder Meeting but sufficient votes to approve
the proposals are not received, the persons named as proxies may propose one or
more adjournments of the Shareholder Meeting to permit further solicitation of
proxies, provided that such persons determine such an adjournment and
additional solicitation is reasonable and in the interest of shareholders after
consideration of all relevant factors, including the nature of the relevant
proposals, the percentage of votes then cast, the percentage of negative votes
then cast, the nature of the proposed solicitation activities, and the nature
of the reasons for such further solicitation. One or more of the proposals in
this proxy statement may be voted on prior to any adjournment if sufficient
votes have been received for a proposal and such vote is otherwise appropriate.
With respect to each matter, any such adjournment will require the affirmative
vote of a majority of those shares of the Company present at the Shareholder
Meeting in person or by proxy and entitled to vote thereon.
OTHER BUSINESS. The Board of Directors knows of no other business to be brought
before the Shareholder Meeting. However, if any other matters properly come
before the Shareholder Meeting, it is their intention that proxies that do not
contain specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named as proxies on the enclosed
proxy card.
SOLICITATION OF PROXIES. In addition to soliciting proxies by mail, employees
of IMCO and/or an outside proxy solicitation service may solicit proxies by
telephone. Your Funds may also arrange to have votes recorded by telephone. The
telephone voting procedure is designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that their instructions have
been properly recorded. Shareholders would be called at the phone number IMCO
has in its records for their accounts, and would be asked for their social
security number or other identifying information. The shareholders would then
be given an opportunity to authorize proxies to vote their shares at the
meeting in accordance with their instructions. To ensure that the shareholders'
instructions have been recorded correctly, they will also receive a
confirmation of their instructions in the mail. A special toll-free number will
be available in case the information contained in the confirmation is
incorrect.
14
<PAGE>
The Board of Directors has adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this policy, your
Funds may solicit proxies from shareholders who have not voted their shares or
who have abstained from voting.
REVOCATION OF PROXIES. Proxies, including proxies given on our web site or by
telephone, may be revoked at any time before they are voted by a written
revocation received by your Funds, by properly executing a later-dated proxy,
or by attending the Shareholder Meeting and voting in person.
DATE FOR RECEIPT OF SHAREHOLDERS' PROPOSALS FOR SUBSEQUENT SHAREHOLDER
MEETINGS. Under the provisions of the Bylaws of the Company, no annual meeting
of shareholders is required, and your Funds do not currently intend to hold
such a meeting. Ordinarily, there will be no shareholder meeting unless
required by the 1940 Act or otherwise. Shareholder proposals for inclusion in
the proxy statement for any subsequent meeting must be received by your Funds
within a reasonable period of time prior to any such shareholder meeting.
Shareholders collectively holding at least 10% of the outstanding shares of the
Company may request a shareholder meeting at any time for the purpose of voting
to remove one or more of the directors. The Company will assist in
communicating to other shareholders about such meeting.
FINANCIAL INFORMATION. YOUR FUNDS WILL FURNISH, WITHOUT CHARGE, TO YOU UPON
REQUEST A COPY OF THE FUNDS' ANNUAL REPORTS FOR THEIR MOST RECENT FISCAL YEAR,
AND A COPY OF THEIR SEMIANNUAL REPORTS FOR ANY SUBSEQUENT SEMIANNUAL PERIOD.
SUCH REQUEST MAY BE DIRECTED TO USAA TAX EXEMPT FUND, INC., 9800 FREDERICKSBURG
ROAD, SAN ANTONIO, TEXAS 78288 OR 1-800-531-8181.
Further Information About Your Funds
COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has four
committees: an Executive Committee, an Audit Committee, a Pricing and
Investment Committee, and a Corporate Governance Committee. Between the
meetings of the Board of Directors and while it is not in session, the
Executive Committee may exercise all of the powers of the Board of Directors in
the management of the business of the Company, which may be delegated to it by
the Board of Directors. The Executive Committee consists of four directors,
currently Messrs. Davis, Roth, Saunders, and Freeman.
The Audit Committee consists of four directors, currently Messrs. Freeman,
Mason, and Zucker, and Mrs. Dreeben, none of whom is an "interested person" of
the Company. The Audit Committee (a) selects an external auditor; (b) reviews
and approves and annual audit plan; (c) reviews summaries of financial results;
(d) reviews the reports of the auditors; and (e) undertakes such studies and
analyses of various matters as shall from time to time be deemed necessary by
the Board of Directors, and makes appropriate recommendations to the Board of
Directors on such matters.
15
<PAGE>
The Pricing and Investment Committee consists of five directors, currently
Messrs. Saunders, Freeman, Mason, and Zucker, and Mrs. Dreeben. The Pricing and
Investment Committee (a) acts upon and deals with certain questions, issues,
and matters that may arise under Rule 2a-7 and the "Procedures to Stabilize Net
Asset Value" adopted by the Company as it impacts money market funds; and (b)
considers and acts upon such investment issues and matters as may be presented
relevant to the Funds.
The Corporate Governance Committee consists of all the directors who are not
"interested persons" of the Company, which presently consists of Messrs.
Freeman, Mason, and Zucker, and Mrs. Dreeben. Its purpose is to maintain
oversight of the organization and performance of the Board of Directors; to
evaluate the effectiveness of the Board of Directors, and to ensure that the
Board of Directors conducts itself ethically and in accordance with applicable
laws; to establish a policy on its tenure and term limitations for independent
directors; to recommend candidates to fill vacancies for independent
directorship positions of the Board of Directors; and to consider and act upon
such other issues as may be presented to it by the Board of Directors.
OFFICERS AND OTHER INFORMATION. In addition to officers that are directors, the
officers of the Company are as follows:
YEAR FIRST
NAME AND AGE OFFICE ELECTED TO OFFICE
- ------------ ------ -----------------
Michael D. Wagner (51) Secretary 1983
Alex M. Ciccone (49) Assistant Secretary 1995
Mark S. Howard (35) Assistant Secretary 1997
Sherron A. Kirk (54) Treasurer 1992
Caryl Swann (51) Assistant Treasurer 1998
Due to their affiliation with the Company's investment adviser, IMCO, the
Company's officers receive no compensation from the Company for their services.
In addition to the previously listed directors and/or officers of the Company
who also serve as directors and/or officers of IMCO, the following individuals
are directors and/or executive officers of IMCO: Carl W. Shirley, Senior Vice
President, Insurance Company Portfolios; and John J. Dallahan, Senior Vice
President, Investment Services. There are no family relationships among the
directors, officers, and managerial level employees of the Company or IMCO.
26857-0899
16
<PAGE>
USAA USAA
EAGLE INVESTMENT
LOGO MANAGEMENT
COMPANY
PROXY SERVICES
P.O. BOX 9162
FARMINGDALE, NY 11735-9858
[SHAREHOLDERS ADDRESS APPEARS HERE]
USAA TAX EXEMPT FUND, INC.
Long-Term Fund, Intermediate-Term Fund, Short-Term Fund,
Tax-Exempt Money Market Fund, California Bond Fund, California
Money Market Fund, New York Bond Fund, New York Money Market Fund,
Virginia Bond Fund and Virginia Money Market Fund
9800 Fredericksburg Road
San Antonio, Texas 78288
PROXY FOR THE SHAREHOLDER MEETING
2:00p.m., Central Standard Time, on October 15, 1999
The undersigned hereby appoints Michael J.C. Roth, John W. Saunders, Jr., and
Howard L. Freeman, Jr., and each of them, with full power of substitution, as
proxies of the undersigned to vote all shares that the undersigned is entitled
in any capacity to vote at the above-stated shareholder meeting, and at any and
all adjournments or postponements thereof (the "Shareholder Meeting"), on the
matters set forth on this Proxy Card, and, in their discretion, upon all matters
incident to the conduct of the Shareholder Meeting and upon such other matters
as may properly be brought before the Shareholder Meeting. This proxy revokes
all prior proxies given by the undersigned.
In lieu of completing, signing, and mailing this proxy card, you may cast your
votes by calling toll-free 1-800-690-6903 or accessing the web site at
www.proxyvote.com.
All properly executed proxies will be voted as directed. If no instructions are
indicated on a properly executed proxy, the proxy will be voted FOR approval of
Proposals I and II. All ABSTAIN votes will be counted only in determining the
existence of a quorum at the Shareholder Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS WITH RESPECT TO THE FUNDS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS I and II.
CONTROL NUMBER [ ]
ACCOUNT NUMBER [ ]
To vote by Telephone
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Call 1-800-690-6903
3) Enter the 12-digit control number set for the on the Proxy card and follow
the simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy card below at hand.
2) Go to web site www.proxyvote.com
3) Enter the 12-digit control number set forth on the Proxy card and follow
the simple instructions.
The appointed proxies will vote on any other business as may properly come
before the Shareholder Meeting or any adjournment thereof.
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE, AND MAIL YOUR PROXY CARD PROMPTLY
USING THE ENCLOSED, POSTAGE-PAID ENVELOPE.
TO VOTE, MARK BLOCKS BELOW IN BLUE KEEP THIS PORTION
OR BLACK INK AS FOLLOWS. USAATE FOR YOUR RECORDS
- -------------------------------------------------------------------------------
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN
THIS PORTION ONLY
_______________________________________________________________________________
[FUND NAME APPEARS HERE]
Vote On Directors FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
I. Election of Messrs. 01)Davis,
02)Roth, 03)Peebles, 04)Reimherr, [ ] [ ] [ ]
05)Zucker, 06)Dr. Mason, 07)Mrs.
Dreeben to the Board of Directors
of USAA Tax Exempt Fund, Inc.
To withhold authority to vote, mark "For All
Except" and write the nominee's number on the
line below.
_____________________________________________
Vote On Proposal
FOR AGAINST ABSTAIN
II. Ratification of the selection of
KPMG LLP as the independent [ ] [ ] [ ]
auditors of the Funds.
Receipt of the Notice of Meeting and the Proxy Statement, dated August 19,
1999, is hereby acknowledged.
(Joint owners should EACH sign. Please sign EXACTLY as your name(s) appears on
this card. When signing as attorney, trustee, executor, administrator, guardian
or corporation officer, please give your FULL title.)
_______________________________________ ______________________________
| | | |
|_______________________________________| |______________________________|
Signature(PLEASE SIGN WITHIN BOX) DATE Signature(Joint Owners) DATE
_______________________________________________________________________________
