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 21
Financial Information:
Independent Auditors' Report 24
Portfolios of Investments:
Categories & Definitions 25
USAA Long-Term Fund 27
USAA Intermediate-Term Fund 36
USAA Short-Term Fund 54
USAA Tax Exempt Money Market Fund 66
Notes to Portfolios of Investments 79
Statement of Assets and Liabilities 80
Statements of Operations 82
Statements of Changes in Net Assets 84
Notes to Financial Statements 88
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 Funds.
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(1) Very high $3,000
First Start Growth Moderate to high $3,000
Gold(1) Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International(1) Moderate to high $3,000
S&P 500 (Registered
Trademark) Index(2) Moderate $3,000
Science & Technology(5) Very high $3,000
World Growth(1) Moderate to high $3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy(1) Moderate $3,000
Cornerstone Strategy(1) Moderate $3,000
Growth and Tax
Strategy(3) Moderate $3,000
Growth Strategy(1) Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
===============================================================================
GNMA Low to moderate $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term(3) Moderate $3,000
Intermediate-Term(3) Low to moderate $3,000
Short-Term(3) Low $3,000
State Bond Income(3)** Moderate $3,000
MONEY MARKET
===============================================================================
Money Market(4) Very low $3,000
Tax Exempt
Money Market(3),(4) Very low $3,000
Treasury Money
Market Trust(4) Very low $3,000
State Money Market(3),(4)** Very low $3,000
(1) Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2) 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.
(3) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(4) An investment in a money market fund is 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.
(5) This 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]
I have always enjoyed the investment business because it is a great challenge
and it is endlessly fascinating. For me, one of the toughest things to learn was
that it was okay when people in this business strongly disagree with you. In
fact, the market would not work as well as it does without these differences in
opinion. I believe the key is to decide on the principles you choose to follow
and stick with them.
The roaring stock market of the past few years is a case in point. If you have
not invested in growth stocks, such as technology or internet, your total return
is probably lagging the market by a bunch. I've recently seen articles that
detail the relatively poor performance of value investing in stocks and of an
investment strategy of asset allocation. Yet, I believe in the long-term
soundness of both of these strategies. Value investing means using measures,
such as price/earnings or price/cash flow ratios, to identify companies which
are good businesses but whose stock is undervalued. Asset allocation means
combining investments in different classes, such as large cap stocks and
tax-exempt bonds, into one portfolio. In spite of the roaring stock market in
growth stocks, I continue to practice asset allocation.
My views were forged in the first ten years of my investment career, 1972 to
1982.
Those years taught me these things:
- - It is important to be in stocks.
- - It is especially important to be in stocks when they surge.
- - Stocks can plummet mindlessly.
- - When stocks plummet you will need great courage to stay the course.
- - A portion of my portfolio in fixed income will help my courage at those times.
And most importantly:
- - Major market turns will be a surprise to almost everyone.
Therefore, I carry 30% to 40% of my portfolio in the USAA Tax-Exempt Long-Term
Fund. My return might have been higher in the past few years had I invested 100%
in stocks. But, I am very comfortable with my allocation. It was especially
comforting last summer when the stock market sank. And today, I am very happy
that I held my allocation in stocks.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
Past performance is no guarantee of future results.
For more complete information about the mutual funds managed and distributed by
USAA IMCO, 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: Provide investors with interest income that is exempt from federal
income tax.
TYPES OF INVESTMENTS: Invests primarily in investment grade, tax-exempt
securities with an average dollar-weighted portfolio maturity of 10 years or
more.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
3/31/98 3/31/99
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets $2,042.5 Million $2,168.2 Million
Net Asset Value Per Share $14.00 $13.92
Tax-Exempt Dividends Per Share Last Twelve Months $ .776 $ .764
Capital Gains Distributions Per Share Last Twelve Months - -
- -------------------------------------------------------------------------------------------------
30-DAY SEC YIELD* AS OF 3/31/99
- -------------------------------------------------------------------------------------------------
30-Day SEC Yield 4.56%
- -------------------------------------------------------------------------------------------------
*Calculated as prescribed by the Securities and Exchange Commission.
</TABLE>
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
- --------------------------------------------------------------------------------
10 Years 8.01% = 6.54% + 1.47%
- --------------------------------------------------------------------------------
5 Years 7.26% = 6.07% + 1.19%
- --------------------------------------------------------------------------------
1 Year 4.98% = 5.55% + -0.57%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the 10-Year Period Ended March 31, 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 10-
year period ended March 31, 1999.
Total Return for Years Ended:
- ----------------------------
03/31/90 10.44%
03/31/91 8.46%
03/31/92 10.39%
03/31/93 12.46%
03/31/94 2.36%
03/31/95 5.07%
03/31/96 7.88%
03/31/97 6.51%
03/31/98 12.04%
03/31/99 4.98%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/90 7.68%
03/31/91 7.54%
03/31/92 7.27%
03/31/93 6.92%
03/31/94 5.56%
03/31/95 6.23%
03/31/96 6.26%
03/31/97 6.13%
03/31/98 6.14%
03/31/99 5.55%
Change in Share Price:
- ---------------------
03/31/90 2.76%
03/31/91 0.92%
03/31/92 3.12%
03/31/93 5.54%
03/31/94 -3.20%
03/31/95 -1.16%
03/31/96 1.62%
03/31/97 0.38%
03/31/98 5.90%
03/31/99 -0.57%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions. Dividend return is
the income 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 gain distributions. No adjustment has been made for taxes
payable by shareholders on their reinvested dividends and capital gain
distributions. The performance data quoted represent past performance and are
not an indication of future results. Investment return and principal value of an
investment will fluctuate, and an investor's shares, when redeemed, may be worth
more or less than their original cost.
Comparison - 12 Month Dividend Yield
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 3/31/90 to
3/31/99.
USAA Long-Term Lipper General Municipal
Fund Yield Debt Funds Average Yield
-------------- ------------------------
03/31/90 7.29% 6.96%
03/31/91 7.15% 6.75%
03/31/92 6.78% 6.40%
03/31/93 6.21% 5.74%
03/31/94 6.10% 5.59%
03/31/95 6.01% 5.37%
03/31/96 6.03% 5.15%
03/31/97 5.95% 5.06%
03/31/98 5.55% 4.66%
03/31/99 5.49% 4.46%
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
gain distributions. The graph represents data for periods ending 3/31/90 to
3/31/99.
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
- -------- ------
03/31/89 $10,000
09/30/89 $10,659
03/31/90 $11,045
09/30/90 $11,264
03/31/91 $11,978
09/30/91 $12,730
03/31/92 $13,223
09/30/92 $14,129
03/31/93 $14,870
09/30/93 $15,934
03/31/94 $15,221
09/30/94 $15,244
03/31/95 $15,992
09/30/95 $16,743
03/31/96 $17,252
09/30/96 $17,901
03/31/97 $18,374
09/30/97 $19,695
03/31/98 $20,586
09/30/98 $21,531
03/31/99 $21,610
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,599
03/31/90 $11,055
09/30/90 $11,320
03/31/91 $12,075
09/30/91 $12,812
03/31/92 $13,281
09/30/92 $14,152
03/31/93 $14,944
09/30/93 $15,955
03/31/94 $15,291
09/30/94 $15,565
03/31/95 $16,427
09/30/95 $17,306
03/31/96 $17,804
09/30/96 $18,351
03/31/97 $18,774
09/30/97 $20,006
03/31/98 $20,785
09/30/98 $21,749
03/31/99 $22,074
Lipper General Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,534
03/31/90 $10,890
09/30/90 $11,092
03/31/91 $11,811
09/30/91 $12,549
03/31/92 $12,997
09/30/92 $13,861
03/31/93 $14,688
09/30/93 $15,703
03/31/94 $14,984
09/30/94 $15,137
03/31/95 $15,942
09/30/95 $16,650
03/31/96 $17,125
09/30/96 $17,632
03/31/97 $17,993
09/30/97 $19,203
03/31/98 $19,952
09/30/98 $20,830
03/31/99 $20,965
Data from 3/31/89 through 3/31/99
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 March 31, 1999, were a bit lower than a year earlier. But that
simple statement doesn't begin to describe the goings-on of the last twelve
months. The graph below shows what happened.
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 3/31/98
to 3/31/99.
30-year Bond Buyer
U.S. 40-Bond
Treasury Index (BBI40)
-------- -------------
03/31/98 5.93% 5.27%
04/15/98 5.88% 5.29%
04/30/98 5.95% 5.39%
05/15/98 5.97% 5.28%
05/29/98 5.80% 5.22%
06/15/98 5.57% 5.16%
06/30/98 5.63% 5.22%
07/15/98 5.71% 5.25%
07/31/98 5.71% 5.26%
08/14/98 5.54% 5.20%
08/31/98 5.27% 5.11%
09/15/98 5.26% 5.14%
09/30/98 4.98% 5.04%
10/15/98 4.97% 5.09%
10/30/98 5.16% 5.13%
11/16/98 5.29% 5.15%
11/30/98 5.06% 5.10%
12/15/98 5.03% 5.11%
12/31/98 5.10% 5.16%
01/15/99 5.11% 5.17%
01/29/99 5.09% 5.09%
02/15/99 5.43% 5.15%
02/26/99 5.58% 5.17%
03/15/99 5.52% 5.20%
03/31/99 5.63% 5.23%
Note: Past performance is no guarantee of future results. The results of the
comparison reflect current conditions as regards to tax laws, inflationary
trends, and general corporate policies and practices.
Please note that the top line is the yield of the active 30-year U.S. Treasury
Bond, or the Long Bond, as it is known. This is generally considered the
benchmark for long-term interest rates in the U.S. The bottom line in the graph
represents the yield of the Bond Buyer 40-Bond Index (BBI40), which is the
industry standard for the yield of long-term, investment-grade municipal bonds.
In early summer of 1998, against a backdrop of economic depression in most of
Asia, Russia collapsed economically. Latin America, particularly Brazil, began
to show signs of weakness. Investors worldwide became fearful of spreading
economic collapse and purchased U.S. Treasury Bonds as the ultimate in safety
and liquidity. This forced prices up and yields down. The U.S. stock market was
also affected and on August 31, 1998, the Dow-Jones Industrial Average(1) fell
over 500 points. At the end of September, Russia had defaulted on its debt,
which led to the failure of several hedge funds. These are private investment
funds that invest in exotic securities with high degrees of leverage. This led
to worries about the health of U.S. bank and brokerage houses. On October 5,
1998, the Long Bond reached a yield of 4.72%, a level not seen in decades.
Much of the world's economy began to stabilize in the autumn and winter. While
recovery is very hard to find, it appears that the weakest economies are no
longer in free fall. Stock markets around the world began to recover. The
worldwide panic was over.
The U.S. economy and most of Western Europe never faltered. In fact, the
continued robustness of the U.S. economy is beginning to worry many people. Will
it cause a resurgence in inflation? Will it end in sudden collapse since much of
the strength is being financed by extremely high and growing consumer debt? This
caution is very apparent because interest rates have risen in the last six
months. This is just what you would expect given these worries.
(1) The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
actively traded blue chip stocks.
THE MUNICIPAL BOND OPPORTUNITY
One of the most noticeable things in the graph above is the relative sedateness
of 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
difference in volatility was extreme in the twelve months ended March 31, 1999.
For most of the period, from late September through January, the yield on the
BBI40 was higher than that of the Long Bond. This is very unusual since the
interest on most municipal bonds is exempt from federal income taxes, and the
interest on Treasury bonds is not. Although a more normal relationship has since
reestablished itself, tax-exempt municipal bonds are still very attractive
compared to U.S. Treasuries on an after-tax basis. And, municipal bonds did not
take you on the wild ride in price that Treasury bonds did. Tax-exempt municipal
bonds have once again proven their historical attractiveness -- solid after-tax
returns with relatively little riskiness.
LONG-TERM FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1998,
to March 31, 1999, your Fund paid an annualized dividend distribution yield(2)
of 5.49% versus the Lipper General Municipal Debt Funds Average(3) of 4.46% for
the 252 funds in the category. During the twelve-month period, the share price
fell $.08 to $13.92. For the fiscal year, the Fund provided a total return(4) of
4.98%, well above the Lipper average total return of 4.87%.
Your Fund received an Overall Star Rating of 5 stars in the municipal bond fund
category from Morningstar Rating (Trademark) for the period ended March 31,
1999.(5)
(2) 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.
(3) Refer to page 5 for the Lipper Average definition.
(4) Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions.
(5) Past performance is no guarantee of future results.
Morningstar proprietary ratings reflect historical risk-adjusted performance as
of March 31, 1999. The ratings are subject to change every month. Morningstar
ratings are calculated from the fund's 3-, 5-, and 10-year average annual
returns in excess of 90-day Treasury bill returns with appropriate 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 3-, 5-, and
10-year ratings, as applicable. The USAA Tax-Exempt Long-Term Fund received 5
stars for the 3-, and 5-year periods, and 4 stars for the 10-year period,
respectively. The top 10% of the funds in a broad asset class receive 5 stars,
the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5%
receive 2 stars, and the bottom 10% receive 1 star. The fund was rated among
1,578, 1,131, and 368 funds in the municipal bond fund category for the 3-, 5-,
and 10-year periods, respectively.
To match the USAA Long-Term Fund's closing 30-Day SEC yield of 4.56% and:
- --------------------------------------------------------------------------------
Assuming a Marginal Federal Tax Rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully Taxable Investment must pay: 6.33% 6.61% 7.13% 7.55%
- --------------------------------------------------------------------------------
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
A pie chart is shown here depicting the Portfolio Ratings/Mix as of March 31,
1999 of the USAA Long-Term Fund to be:
AAA - 28%; AA - 25%; BBB - 25%; A - 21%; and Below Investment Grade - 1%.
This chart reflects the highest rating of either Moody's Investors Service,
Standard & Poor's Rating Group, or Fitch Investors Service. Unrated securities
that have been determined by USAA IMCO to be of equivalent investment quality to
categories AAA and BBB account for 5.4% and .3%, respectively, of the Fund's
investments.
Note: Income may be subject to federal, state or local taxes, or the alternative
minimum tax.
See page 27 for a complete listing of the Portfolio of Investments.
Investment Review
USAA INTERMEDIATE-TERM FUND
OBJECTIVE: Provide investors with interest income that is exempt from federal
income tax.
TYPES OF INVESTMENTS: Invests primarily in investment grade, tax-exempt
securities with an average dollar-weighted portfolio maturity of between 3 and
10 years.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
3/31/98 3/31/99
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets $2,039.5 Million $2,344.4 Million
Net Asset Value Per Share $13.38 $13.39
Tax-Exempt Dividends Per Share Last Twelve Months $.714 $.701
Capital Gains Distributions Per Share Last Twelve Months - -
- ------------------------------------------------------------------------------------------------
30-DAY SEC YIELD* AS OF 3/31/99
- ------------------------------------------------------------------------------------------------
30-Day SEC Yield 4.34%
- ------------------------------------------------------------------------------------------------
*Calculated as prescribed by the Securities and Exchange Commission.
</TABLE>
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
- --------------------------------------------------------------------------------
10 Years 7.68% = 6.15% + 1.53%
- --------------------------------------------------------------------------------
5 Years 7.17% = 5.71% + 1.46%
- --------------------------------------------------------------------------------
1 Year 5.42% = 5.35% + 0.07%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the 10-Year Period Ended March 31, 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 March 31, 1999.
Total Return for Years Ended:
- ----------------------------
03/31/90 9.29%
03/31/91 8.30%
03/31/92 9.24%
03/31/93 11.29%
03/31/94 3.06%
03/31/95 6.17%
03/31/96 7.97%
03/31/97 5.80%
03/31/98 10.59%
03/31/99 5.42%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/90 7.31%
03/31/91 7.20%
03/31/92 6.82%
03/31/93 6.33%
03/31/94 5.31%
03/31/95 5.77%
03/31/96 5.81%
03/31/97 5.80%
03/31/98 5.81%
03/31/99 5.35%
Change in Share Price:
- ---------------------
03/31/90 1.98%
03/31/91 1.10%
03/31/92 2.42%
03/31/93 4.96%
03/31/94 -2.25%
03/31/95 0.40%
03/31/96 2.16%
03/31/97 0.00%
03/31/98 4.78%
03/31/99 0.07%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions. Dividend return is
the income 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 gain distributions. No adjustment has been made for taxes
payable by shareholders on their reinvested dividends and capital gain
distributions. The performance data quoted represent past performance and are
not an indication of future results. Investment return and principal value of an
investment will fluctuate, and an investor's shares, when redeemed, may be worth
more or less than their original cost.
Comparison - 12 Month Dividend Yield
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
3/31/90 to 3/31/99.
USAA Intermediate-Term Lipper Intermediate Municipal
Fund Yield Debt Funds Average Yield
---------------------- -----------------------------
03/31/90 6.98% 6.45%
03/31/91 6.84% 6.27%
03/31/92 6.43% 5.91%
03/31/93 5.75% 5.25%
03/31/94 5.53% 4.85%
03/31/95 5.55% 4.70%
03/31/96 5.57% 4.60%
03/31/97 5.67% 4.51%
03/31/98 5.34% 4.31%
03/31/99 5.24% 4.15%
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
gain distributions. The graph represents data for periods ending 3/31/90 to
3/31/99.
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
- -------- -------
03/31/89 $10,000
09/30/89 $10,529
03/31/90 $10,929
09/30/90 $11,235
03/31/91 $11,836
09/30/91 $12,480
03/31/92 $12,930
09/30/92 $13,694
03/31/93 $14,389
09/30/93 $15,318
03/31/94 $14,830
09/30/94 $15,140
03/31/95 $15,745
09/30/95 $16,617
03/31/96 $16,999
09/30/96 $17,519
03/31/97 $17,985
09/30/97 $19,108
03/31/98 $19,890
09/30/98 $20,741
03/31/99 $20,968
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,599
03/31/90 $11,055
09/30/90 $11,320
03/31/91 $12,075
09/30/91 $12,812
03/31/92 $13,281
09/30/92 $14,152
03/31/93 $14,944
09/30/93 $15,955
03/31/94 $15,291
09/30/94 $15,565
03/31/95 $16,427
09/30/95 $17,306
03/31/96 $17,804
09/30/96 $18,351
03/31/97 $18,774
09/30/97 $20,006
03/31/98 $20,785
09/30/98 $21,749
03/31/99 $22,074
Lipper Intermediate Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,484
03/31/90 $10,850
09/30/90 $11,131
03/31/91 $11,747
09/30/91 $12,342
03/31/92 $12,736
09/30/92 $13,497
03/31/93 $14,139
09/30/93 $14,949
03/31/94 $14,542
09/30/94 $14,772
03/31/95 $15,345
09/30/95 $16,062
03/31/96 $16,419
09/30/96 $16,775
03/31/97 $17,139
09/30/97 $18,045
03/31/98 $18,599
09/30/98 $19,367
03/31/99 $19,566
Data from 3/31/89 through 3/31/99
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
During the Fund's fiscal year, March 31, 1998, to March 31, 1999, the yield on
10-year AA rated municipal bonds fell .20%. The credit market discounted the
hearty domestic economy and concentrated on the factors that appear to be
holding inflation under 2%; namely the turmoil in the foreign markets and
falling commodity prices.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1998 to
March 31, 1999, your Fund paid an annualized dividend distribution yield(1) of
5.24% versus an average dividend distribution yield of 4.15% for the Lipper
Intermediate Municipal Debt Funds Average.(2) Over this period, the Fund
provided a total return(3) of 5.42%, well above the Lipper average total return
of 4.97%.
Your Fund received an Overall Star Rating of 5 stars in the municipal bond fund
category from Morningstar Rating (Trademark) for the period ended March 31,
1999.(4)
(1) 12-month dividend yield is computed by dividing income dividends paid during
the previous 12 months by the latest month-end net asset value adjusted for
capital gains distributions.
(2) Refer to page 11 for the Lipper Average definition.
(3) Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions.
(4) Past performance is no guarantee of future results.
Morningstar proprietary ratings reflect historical risk-adjusted performance as
of March 31, 1999. The ratings are subject to change every month. Morningstar
ratings are calculated from the fund's 3-, 5-, and 10-year average annual
returns in excess of 90-day Treasury bill returns with appropriate 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 3-, 5-, and
10-year ratings, as applicable. The USAA Tax-Exempt Intermediate-Term Fund
received 5 stars for the 3-, 5-, and 10-year periods, respectively. The top 10%
of the funds in a broad asset class receive 5 stars, the next 22.5% receive 4
stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the
bottom 10% receive 1 star. The fund was rated among 1,578, 1,131, and 368 funds
in the municipal bond fund category for the 3-, 5-, and 10-year periods,
respectively.
THE MIDAS TOUCH
When Baron Rothschild, the banker to kings, was asked for the secret to his
success, he answered in one word, "compounding." Compound interest is the
additional interest earned by reinvesting simple interest payments. As long as
the after-tax yield of a fixed income investment is greater than the rate of
inflation, investors will see an increase in purchasing power, if they harness
the power of compounding and reinvest interest payments.
The graph below shows the sources of total return, assuming reinvestment of all
interest payments, for $1.00 invested in 10-year Treasury bonds from 1946
through 1998. During this timeframe, principal and compound interest would have
returned $21.11. The compound interest is five times the sum of the return of
principal and all simple interest payments which total $3.62.
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.
Beyond showing that compound interest is the dominant component of total return,
the graph also illustrates why it is necessary for fixed income investors to
reinvest interest payments if they wish to maintain the purchasing power of
their investment. To offset the erosive effect of price inflation, the initial
$1.00 investment made in 1946 must increase to $9.02 by the end of 1998.
If there is any price inflation and you put all of your savings in fixed income
securities planning to live off the interest payments, your purchasing power
will fall. The only way that purchasing power can be preserved is with the help
of compound interest. However, the interest payments most individual bondholders
receive are not large enough to make reinvestment practicable. Bond funds offer
an economic way to reinvest interest coupon payments and tap into the potential
power of compounding. The narrative for the USAA Tax-Exempt Short-Term Fund
(page 18) explores other benefits of owning tax-exempt municipal bonds through
an open-end mutual fund over the direct ownership of municipal bonds.
CURRENT MARKET CONDITIONS
I continue to feel that inflation remains tame due the combination of these
three factors:
- - Foreign competition
- - Rising productivity
- - Stable commodity prices
Even if the troubles in foreign markets fail to moderate growth in the domestic
economy, the Chairman of the Federal Reserve has indicated that only minor
revisions to monetary policy should be necessary to arrest an acceleration in
the rate of inflation.
To match the USAA Intermediate-Term Fund's
closing 30-Day SEC yield of 4.34% and:
- --------------------------------------------------------------------------------
Assuming a Marginal Federal Tax Rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully Taxable Investment must pay: 6.03% 6.29% 6.78% 7.19%
- --------------------------------------------------------------------------------
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
A pie chart is shown here depicting the Portfolio Ratings/Mix as of March 31,
1999 of the USAA Intermediate-Term Fund to be:
AAA - 31%; A - 26%; BBB - 22%; AA - 16%; BB - 3%; and Cash Equivalents - 2%.
This chart reflects the highest rating of either Moody's Investors Service,
Standard & Poor's Rating Group, or Fitch Investors Service. Unrated securities
that have been determined by USAA IMCO to be of equivalent investment quality to
category AAA and BBB account for 2.5% and 1.5% respectively, of the Fund's
investments.
Note: Income may be subject to federal, state or local taxes, or the alternative
minimum tax.
See page 36 for a complete listing of the Portfolio of Investments.
Investment Review
USAA SHORT-TERM FUND
OBJECTIVE: Provide investors with interest income that is exempt from federal
income tax.
TYPES OF INVESTMENTS: Invests primarily in investment grade, tax-exempt
securities with an average dollar-weighted portfolio maturity of 3 years or
less.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
3/31/98 3/31/99
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Assets $970.8 Million $1,033.6 Million
Net Asset Value Per Share $10.74 $10.72
Tax-Exempt Dividends Per Share Last Twelve Months $.488 $.490
Capital Gains Distributions Per Share Last Twelve Months - -
- ------------------------------------------------------------------------------------------------
30-DAY SEC YIELD* AS OF 3/31/99
- ------------------------------------------------------------------------------------------------
30-Day SEC Yield 3.60%
- ------------------------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
</TABLE>
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 1999
- --------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
- --------------------------------------------------------------------------------
10 Years 5.63% = 5.20% + 0.43%
- --------------------------------------------------------------------------------
5 Years 5.17% = 4.72% + 0.45%
- --------------------------------------------------------------------------------
1 Year 4.46% = 4.65% + -0.19%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the 10-Year Period Ended March 31, 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 10-
year period ended March 31, 1999.
Total Return for Years Ended:
- ----------------------------
03/31/90 7.91%
03/31/91 6.27%
03/31/92 7.09%
03/31/93 6.37%
03/31/94 2.87%
03/31/95 4.51%
03/31/96 5.83%
03/31/97 4.70%
03/31/98 6.35%
03/31/99 4.46%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/90 6.74%
03/31/91 6.65%
03/31/92 5.83%
03/31/93 4.94%
03/31/94 4.28%
03/31/95 4.61%
03/31/96 4.87%
03/31/97 4.70%
03/31/98 4.74%
03/31/99 4.65%
Change in Share Price:
- ---------------------
03/31/90 1.17%
03/31/91 -0.38%
03/31/92 1.26%
03/31/93 1.43%
03/31/94 -1.41%
03/31/95 -0.10%
03/31/96 0.96%
03/31/97 0.00%
03/31/98 1.61%
03/31/99 -0.19%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions. Dividend return is
the income 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 gain distributions. No adjustment has been made for taxes
payable by shareholders on their reinvested dividends and capital gain
distributions. The performance data quoted represent past performance and are
not an indication of future results. Investment return and principal value of an
investment will fluctuate, and an investor's shares, when redeemed, may be worth
more or less than their original cost.
Comparison - 12 Month Dividend Yield
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 3/31/90 to
3/31/99.
USAA Short-Term Lipper Short-Term Municipal
Fund Yield Debt Funds Average Yield
--------------- ---------------------------
3/31/90 6.47% 6.18%
3/31/91 6.47% 6.07%
3/31/92 5.59% 5.41%
3/31/93 4.75% 4.47%
3/31/94 4.33% 3.71%
3/31/95 4.51% 4.01%
3/31/96 4.73% 4.09%
3/31/97 4.60% 4.12%
3/31/98 4.55% 3.99%
3/31/99 4.57% 3.84%
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
gain distributions. The graph represents data for periods ending 3/31/90 to
3/31/99.
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
- -------- -------
03/31/89 $10,000
09/30/89 $10,457
03/31/90 $10,791
09/30/90 $11,058
03/31/91 $11,467
09/30/91 $11,898
03/31/92 $12,280
09/30/92 $12,697
03/31/93 $13,063
09/30/93 $13,452
03/31/94 $13,438
09/30/94 $13,681
03/31/95 $14,045
09/30/95 $14,559
03/31/96 $14,863
09/30/96 $15,215
03/31/97 $15,562
09/30/97 $16,120
03/31/98 $16,550
09/30/98 $17,027
03/31/99 $17,287
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,599
03/31/90 $11,055
09/30/90 $11,320
03/31/91 $12,075
09/30/91 $12,812
03/31/92 $13,281
09/30/92 $14,152
03/31/93 $14,944
09/30/93 $15,955
03/31/94 $15,291
09/30/94 $15,565
03/31/95 $16,427
09/30/95 $17,306
03/31/96 $17,804
09/30/96 $18,351
03/31/97 $18,774
09/30/97 $20,006
03/31/98 $20,785
09/30/98 $21,749
03/31/99 $22,074
Lipper Short-Term Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,403
03/31/90 $10,738
09/30/90 $11,053
03/31/91 $11,467
09/30/91 $11,856
03/31/92 $12,209
09/30/92 $12,624
03/31/93 $12,953
09/30/93 $13,247
03/31/94 $13,320
09/30/94 $13,515
03/31/95 $13,805
09/30/95 $14,223
03/31/96 $14,531
09/30/96 $14,819
03/31/97 $15,096
09/30/97 $15,521
03/31/98 $15,871
09/30/98 $16,268
03/31/99 $16,539
Data from 3/31/89 through 3/31/99
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
From March 31, 1998, to the end of the USAA Tax Exempt Short-Term Fund's fiscal
year on March 31, 1999, yields on five-year AA rated municipal bonds fell .25%.
Even though the growth in the domestic economy was stronger than expected, the
credit market felt that the weak economic growth in Asia, Latin America, and
Russia would help to keep inflation under control.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1998 to
March 31, 1999, your Fund paid an annualized dividend distribution yield(1) of
4.57% versus an average dividend distribution yield of 3.84% for the Lipper
Short-Term Municipal Debt Funds Average.(2) Over this period, the Fund provided
a total return(3) of 4.46%, well above the Lehman index average total return of
4.26%.
It is my pleasure to report that as of March 31, 1999, the USAA Tax Exempt
Short-Term Fund is ranked #1 by Lipper Analytical Services, Inc. in the
short-term municipal debt funds category over the 5-, 10-, and 15-year time
horizons among 18, 6, and 5 funds, respectively.(4)
Your Fund received an Overall Star Rating of 5 stars in the municipal bond fund
category from Morningstar Rating(TradeMark) for the period ended March 31,
1999.(5)
(1) 12-month dividend yield is computed by dividing income dividends paid during
the previous 12 months by the latest month-end net asset value adjusted for
capital gains distributions.
(2) Refer to page 17 for the Lipper Average definition.
(3) Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions.
(4) The Fund ranked #11 out of 29 funds for the 1-year period ended March 31,
1999. Lipper rankings are based on total returns.
(5) Past performance is no guarantee of future results.
Morningstar proprietary ratings reflect historical risk-adjusted performance as
of March 31, 1999. The ratings are subject to change every month. Morningstar
ratings are calculated from the fund's 3-, 5-, and 10-year average annual
returns in excess of 90-day Treasury bill returns with appropriate 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 3-, 5-, and
10-year ratings, as applicable. The USAA Tax-Exempt Short-Term Fund received 5
stars for the 3-, 5-, and 10-year periods, respectively. The top 10% of the
funds in a broad asset class receive 5 stars, the next 22.5% receive 4 stars,
the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10%
receive 1 star. The fund was rated among 1,578, 1,131, and 368 funds in the
municipal bond fund category for the 3-, 5-, and 10-year periods, respectively.
A MUTUAL ADVANTAGE
The narrative for the USAA Tax-Exempt Intermediate-Term Fund (page 12) examines
the importance of compound interest to a fixed income investor. Bond funds
provide an economic way to reinvest interest coupon payments and tap into the
power of compounding. However, there are at least four additional benefits to
owning tax-exempt municipal securities via an open-end mutual fund versus the
direct ownership of municipal bonds.
Bond funds use diversification to help reduce risk. Diversification is the
benefit received by sharing a large number of small, unrelated risks rather than
being exposed to a small number of large risks. This should be a familiar
concept to shareholders who are also USAA members.
USAA is a reciprocal insurance exchange where member premiums are used to share
the risks involved with driving. Each member is a part owner of the company.
When an accident occurs, all the members share a small portion of the loss
rather than an individual member suffering a significant financial loss. When
the members, as a whole, drive prudently, the surplus of premiums paid is used
to reduce future premiums or returned to the member as a dividend.
A mutual fund shares risk in much the same manner. The individual shareholder's
investment in a mutual fund is pooled to purchase many different securities.
Should a credit problem occur, the shareholder suffers a small loss rather than
bearing the entire burden of a catastrophic loss. If the fund manager invests
prudently and avoids credit disasters, the shareholder receives the benefits of
higher returns.
Bond funds provide liquidity. A fund investor can redeem shares at the Fund's
end-of-day net asset value, which may be worth more or less than its original
cost. An individual selling a municipal bond should offer the bond to a number
of brokers to negotiate a fair market price and be ready to deliver the bonds
for cash settlement in three days. Bonds trade in the over-the-counter market.
Each transaction is the result of a unique negotiation. Bond funds have greater
bargaining power than most individual investors do. While bonds may be issued in
$1,000 increments, there is a much smaller spread between the bid and ask price
(mark up/ mark down, or commission) for an institutional $1 million block of
bonds than for an order under $100,000.
Bond funds employ professional managers and expert credit analysts to select
securities that offer the best value. This search for value is based on the risk
and reward characteristics of the bond combined with the credit, liquidity, and
maturity requirements defined within the fund's prospectus.
Bond funds provide record keeping and worry free custodial services. The fund
agents keep comprehensive records and publish monthly account statements. An
independent custodian validates all securities purchased by the fund and
provides safekeeping for as long as the fund owns the bonds. Individual bonds
offer no record keeping services. The bondholder must arrange for safe storage
or rely on a brokerage firm to hold the security.
CURRENT MARKET CONDITIONS
The credit market seems to expect some moderation in the rate of growth in the
domestic economy. However, even if the economy continues to grow near its
current rate, the following three factors appear to have the ability to keep
inflation in check:
- - Downward pressure on prices due to foreign competition
- - Increase in domestic productivity
- - Stable commodity prices
As long as these economic conditions persist, I do not anticipate any radical
movement in short-term interest rates.
To match the USAA Short-Term Fund's closing 30-Day SEC yield of 3.60% and:
- --------------------------------------------------------------------------------
Assuming a Marginal Federal Tax Rate of: 28% 31% 36% 39.6%
- --------------------------------------------------------------------------------
A fully Taxable Investment must pay: 5.00% 5.22% 5.63% 5.96%
- --------------------------------------------------------------------------------
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
A pie chart is shown here depicting the Portfolio Ratings/Mix as of March 31,
1999 of the USAA Short-Term Fund to be:
AAA - 23%; A - 26%; BBB - 20%; Cash Equivalents - 18%; AA - 11%; and BB - 2%.
This chart reflects the highest rating of either Moody's Investors Service,
Standard & Poor's Rating Group, or Fitch Investors Service. Unrated securities
that have been determined by USAA IMCO to be of equivalent investment quality to
categories AAA, A, and BBB account for 2.7%, .6% and 2.4%, respectively, of the
Fund's investments.
Note: Income may be subject to federal, state or local taxes, or the alternative
minimum tax.
See page 54 for a complete listing of the Portfolio of Investments.
Investment Review
USAA TAX EXEMPT MONEY MARKET FUND
OBJECTIVE: Provide investors with interest income that is exempt from federal
income tax and a further objective of preserving capital and maintaining
liquidity.
TYPES OF INVESTMENTS: High quality, tax-exempt securities with maturities of 397
days or less. The Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less and will endeavor to maintain a constant net asset
value per share of $1.00.*
* An investment in 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.
- --------------------------------------------------------------------------------
3/31/98 3/31/99
- --------------------------------------------------------------------------------
Net Assets $1,631.8 Million $1,767.0 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AND 7-DAY YIELD AS OF 3/31/99
- --------------------------------------------------------------------------------
7-Day
1 Year 5 Years 10 Years Yield
3.26% 3.33% 3.83% 2.93%
- --------------------------------------------------------------------------------
Total return equals income return and assumes reinvestment of all dividends and
capital gain distributions. No adjustment has been made for taxes payable by
shareholders on their reinvested dividends and capital gain distributions. Past
performance is no guarantee of future results. 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.
----------------- -----------------------
03/31/98 3.41% 3.03%
04/28/98 3.79% 3.42%
05/26/98 3.55% 3.14%
06/30/98 3.44% 3.03%
07/28/98 3.36% 2.99%
08/25/98 3.25% 2.82%
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%*
Data represent the last Monday of each month.
* Ending date 3/29/99
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's report, interest rates have trended upward. Long
term U.S. Treasury bond yields have moved from 4.7% in October 1998, to 5.6% at
the end of March 1999. One-year treasury bill yields have moved from 3.9% in
October, to 4.7% at the end of March. Conversely, one-year tax exempt yields
moved downward from 3.2% in October 1998, to 2.9% in January 1999.
The upward movement in U.S. Treasury yields reflects a modestly growing domestic
economy. The Federal Reserve is still hesitant to raise rates since some foreign
markets appear tumultuous.
Currently, the federal funds rate, the short-term interest rate established by
the Federal Reserve Board, is 4.75%. Given our domestic economy and the global
environment, it appears unlikely that the Fed will change the rate in the near
term.
STRATEGY
The Fund now has slightly over 70% of its assets in variable rate demand
notes.(1) We believe these securities represent the best value in the short-term
tax-exempt market. We have written about these securities before. Our
shareholders will recall that these securities have a demand feature allowing
the owner to sell back the security usually with a seven-day notice which means
the re-marketing agent must buy the security back at par. Additionally, the
interest that these securities pay is reset on a seven-day basis. Certainly, in
the current environment, these securities compare well versus fixed rate
instruments.
Besides variable rate demand notes, the portfolio has modest exposure to
tax-exempt commercial paper and short-term tax-exempt notes. These securities
provide diversification for the Fund and provide somewhat of a floor when our
variable rate demand notes become too expensive, i.e., their rates drop too low.
At this time, these securities do not represent the best value in the market and
therefore, represent less than 30% of the Fund.
(1) Variable rate demand notes represent borrowings that are payable on demand
and that bear interest tied to a money market rate.
THE PORTFOLIO
The average maturity of the portfolio was 41 days at the end of March 1999. This
reflected the comparative unattractiveness of longer notes to variable rate
demand notes. This relatively short maturity also gives me flexibility in the
types of securities I will be able to buy in the future.
PERFORMANCE
While past performance is no guarantee of future results, for the 12 months
ending March 31, 1999, your Fund ranked 4 out of 134 national tax-exempt money
market funds according to IBC First Data, Inc.
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 3/31/89 to 3/31/99. The data points from the graph are as
follows:
USAA Tax Exempt Money Market Fund
Year Amount
- -------- -------
03/31/89 $10,000
09/30/89 $10,315
03/31/90 $10,624
09/30/90 $10,939
03/31/91 $11,255
09/30/91 $11,517
03/31/92 $11,738
09/30/92 $11,922
03/31/93 $12,078
09/30/93 $12,221
03/31/94 $12,357
09/30/94 $12,515
03/31/95 $12,725
09/30/95 $12,961
03/31/96 $13,190
09/30/96 $13,408
03/31/97 $13,625
09/30/97 $13,864
03/31/98 $14,099
09/30/98 $14,342
03/31/99 $14,559
Data from 3/31/89 through 3/31/99
Past performance is no guarantee of future results and the value of your
investment will vary according to the Fund's performance. Income may be subject
to federal, state or local taxes, or to the alternative minimum tax. For 7-day
yield information, please refer to the Fund's Investment Review page.
See page 66 for a complete listing of the Portfolio of Investments.
Independent Auditors' Report
KPMG
The Shareholders and Board of Directors
USAA TAX EXEMPT FUND, INC.:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of the USAA Long-Term, USAA Intermediate-Term,
USAA Short-Term, and USAA Tax Exempt Money Market Funds, funds of the USAA Tax
Exempt Fund, Inc., as of March 31, 1999, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and financial highlights,
presented in note 9 to the financial statements, for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA Long-Term, USAA Intermediate-Term, USAA Short-Term, and USAA Tax Exempt
Money Market Funds as of March 31, 1999, the results of their operations for the
year then ended, the changes in their net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
San Antonio, Texas
May 7, 1999
CATEGORIES AND DEFINITIONS
PORTFOLIOS OF INVESTMENTS
March 31, 1999
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 detailed 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.
The Manager attempts to minimize credit risk in the USAA Tax Exempt Money Market
Fund through rigorous internal credit research and by investing in 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.
(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 non-bank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1) MBIA, Inc.
(2) AMBAC Financial Group, Inc.
(3) Financial Guaranty Insurance Co.
(4) Financial Security Assurance Holdings Ltd.
(5) Asset Guaranty Insurance Co.
(6) ACA Financial Guaranty Corp.
(7) College Construction Loan Insurance Association.
(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
USAA LONG-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 1999
Principal Coupon Final Market
Amount Security Rate Maturity Value
- --------------------------------------------------------------------------------
FIXED RATE INSTRUMENTS (98.6%)
Alabama (1.0%)
$ 3,750 Baldwin County Health Care RB,
Series 1996 6.75% 4/01/2021 $ 4,055
8,000 Courtland IDRB, Series 1994 5.90 2/01/2017 8,246
10,250 Prattville IDB RB, Series 1998 5.30 9/01/2028 9,940
Alaska (2.4%)
Housing Finance Corp.
Collateralized RB,
5,615 1991 Second Series 6.90 6/01/2032 5,932
9,205 1994 First Series 6.70 12/01/2019 9,838
11,430 1995 First Series (NBGA) 6.55 12/01/2037 12,250
21,175 Valdez Marine Terminal RB,
Series 1985A 7.00 12/01/2025 23,097
California (5.9%)
11,350 Central Valley Finance Auth. RB,
Series 1993 (PRE) 6.20 7/01/2020 12,695
11,500 Los Angeles Regional Airport
Improvement Corp. RB, Series 1996 6.35 11/01/2025 12,435
17,000 Sacramento Cogeneration Auth. RB,
Series 1995 (PRE) 6.50 7/01/2021 19,774
74,000 San Joaquin Hills Transportation
Corridor Agency RB, Senior
Lien (PRE) 6.75 1/01/2032 83,496
Colorado (1.7%)
9,500 Denver Health & Hospital Auth. RB,
Series 1998A 5.38 12/01/2028 9,272
14,200 Health Facilities Auth. Hospital
RB, Series 1993 6.63 2/01/2013 14,667
11,480 Summit County Sports Facilities RB,
Series 1990 (f) 7.88 9/01/2008 13,889
Connecticut (2.3%)
Health and Educational Facilities
Auth. RB,
3,490 Series C (PRE) 6.63 7/01/2026 4,062
510 Series C 6.63 7/01/2026 561
Mashantucket (Western) Pequot
Tribe RB,
41,200 Series 1997B (d) 5.75 9/01/2027 42,352
3,000 Series 1999A (d) 5.50 9/01/2028 3,004
District of Columbia (2.0%)
25,200 Convention Center Auth. RB,
Series 1998 (INS) (2) 4.75 10/01/2028 23,445
11,795 Health Facilities Mortgage RB,
Series 1985 7.75 8/01/2029 11,943
8,000 Hospital RB, Series 1992B (PRE) 7.00 8/15/2015 8,965
Georgia (0.5%)
10,000 Savannah Economic Development Auth.
PCRB, Series 1995 6.15 3/01/2017 11,204
Hawaii (0.4%)
7,330 State Highway RB, Series 1998 5.50 7/01/2018 7,812
Idaho (1.1%)
23,400 Nez Perce County PCRB, Series 1996 6.00 10/01/2024 24,610
Illinois (8.6%)
59,000 Chicago Board of Education GO
(INS) (3),(a) 5.22 12/01/2027 13,039
Chicago Gas Supply RB,
13,500 Series 1985B 7.50 3/01/2015 14,188
7,500 Series 1985C 7.50 3/01/2015 7,882
24,250 Series 1995A 6.10 6/01/2025 26,282
13,725 Chicago-O'Hare International
Airport RB, Series 1994 8.20 12/01/2024 16,172
6,700 Development Finance Auth. RB,
Series 1996B (LOC) 6.40 9/01/2031 7,405
Health Facilities Auth. RB,
17,775 Series 1992 7.00 1/01/2015 18,803
6,500 Series 1998 5.25 9/01/2024 6,257
19,600 Quincy Hospital RB, Series 1993 6.00 11/15/2018 20,230
10,980 Regional Transport Auth. GO,
Series 1994C (INS) (3) 7.10 6/01/2025 12,547
45,000 State GO, Series 1999 (INS) (3) 5.00 3/01/2024 44,274
Indiana (3.4%)
10,945 Development Finance Auth.
Environmental RB, Series 1996 6.15 7/15/2022 11,574
100,675 Health Facility Financing Auth.
RB, Series 1992C (a) 7.89 7/01/2023 15,605
41,750 Indianapolis Airport Facility RB,
Series 1994 6.80 4/01/2017 45,613
Kansas (0.5%)
56,500 Sedgwick County Mortgage Loan RB,
Senior Series 1991A (a) 7.11 12/01/2022 9,858
Louisiana (2.1%)
East Baton Rouge Mortgage Finance
Auth. RB,
3,035 Series 1997F-1 5.35 10/01/2030 3,070
2,005 Series 1998B-1 5.35 10/01/2030 2,028
25,730 Lake Charles Harbor and Terminal
District Port Facilities RB,
Series 1995A 7.75 8/15/2022 29,112
11,015 St. Tammany Parish Hospital
Service District Number 1 RB,
Series 1998 (INS) (6) 5.00 7/01/2022 10,470
Maryland (0.7%)
13,735 Community Development Administration
SFH RB, Series 1996A 5.95 7/01/2023 14,622
Massachusetts (1.2%)
24,000 State GO, Series 1991A (PRE) 7.63 6/01/2008 26,454
Michigan (2.3%)
9,900 Battle Creek Downtown Development
Auth. Development Bonds, Series
1994 (PRE) 7.60 5/01/2016 11,648
13,005 Dickinson County Economic
Development Corp. PCRB,
Series 1993 5.85 10/01/2018 13,355
15,500 Hospital Finance Auth. RB,
Series 1995A (PRE) 7.50 10/01/2027 18,515
6,500 Job Development Auth. RB,
Series 1990A (NBGA) 8.00 12/01/2013 6,980
Minnesota (3.4%)
9,750 International Falls PCRB,
Series 1998 5.50 4/01/2023 9,259
49,400 St. Paul Housing and Redevelopment
Auth. Hospital RB, Series 1993A 6.63 11/01/2017 51,082
14,775 Washington County Housing and
Redevelopment Auth. RB,
Series 1998 5.50 11/15/2027 13,525
Mississippi (1.6%)
Lafayette County Hospital RB,
2,940 Series 1991A (PRE) 7.95 3/01/2016 3,221
15,175 Series 1991B (PRE) 7.95 3/01/2016 16,628
Union County Hospital RB,
4,450 Series 1991A (PRE) 7.95 3/01/2016 4,876
8,350 Series 1991B (PRE) 7.95 3/01/2016 9,149
Missouri (0.2%)
5,000 Health and Educational Facilities
RB, Series 1996A 6.38 2/01/2027 5,253
Montana (1.1%)
14,545 Board of Housing RB, Series
1997A-1 6.05 12/01/2037 15,334
8,910 Lewis and Clark County
Environmental RB, Series 1998 5.60 1/01/2027 8,766
Nebraska (0.7%)
15,000 Scotts Bluff County Hospital Auth.
Number 1 RB, Series 1998 5.25 11/15/2028 14,507
Nevada (0.9%)
15,650 Humboldt County PCRB, Series 1984 8.30 12/01/2014 18,381
New Hampshire (3.4%)
Higher Educational and Health
Facilities RB,
8,580 Series 1993 (PRE) 6.38 7/01/2023 9,540
2,205 Series 1993 6.38 7/01/2023 2,342
13,500 Series 1998 (INS) (6) 5.30 10/01/2028 13,195
20,000 Manchester Airport RB,
Series 1998A (INS) (1) 4.50 1/01/2028 18,073
29,420 Single-Family Mortgage Finance
Auth. RB, Series 1993B 6.05 7/01/2025 30,658
New Jersey (0.6%)
15,000 Camden County Improvement
Authority RB, Series 1997 6.00 2/15/2027 13,235
New Mexico (2.4%)
16,000 Chaves County Hospital RB (PRE) 7.25 12/01/2022 18,141
30,100 Lordsburg PCRB 6.50 4/01/2013 32,919
New York (12.1%)
21,500 Dormitory Auth. RB, Series 1996B 6.00 8/15/2016 24,015
36,500 Housing New York Corp. RB,
Series 1993 5.00 11/01/2018 36,005
Medical Care Facilities Finance
Agency RB,
36,275 Series 1994A (PRE) 6.90 8/15/2034 42,315
13,900 Series 1995A (PRE) 6.85 2/15/2017 16,179
New York City GO,
50,000 Series 1995B (PRE) (f) 7.25 8/15/2019 58,438
100 Series 1997I (PRE) 6.25 4/15/2017 115
5,790 Series 1997I 6.25 4/15/2017 6,386
15,360 Series 1997I (PRE) 6.25 4/15/2027 17,593
15,690 Series 1997I 6.25 4/15/2027 17,283
17,905 Series 1999H 5.00 3/15/2029 17,193
32,000 New York City Municipal Water
Finance Auth. RB, Series
1998D (a) 5.08 6/15/2020 10,752
14,625 Port Auth. of New York and New
Jersey RB, Eighty-Fifth Series 5.38 3/01/2028 15,465
North Carolina (0.8%)
15,660 Housing Finance Agency RB,
Series R 6.95 9/01/2023 16,653
Ohio (0.3%)
7,325 Lorain County Health Care
Facilities RB, Series 1998A 5.25 2/01/2021 6,924
Oklahoma (2.0%)
41,550 Tulsa Municipal Airport
Transportation RB, Series 1995 6.25 6/01/2020 43,952
Pennsylvania (2.2%)
Montgomery County IDA RB,
7,500 Series 1996A 5.88 11/15/2022 7,733
10,000 Series 1996B 5.75 11/15/2017 10,240
27,470 Philadelphia Gas Works RB,
14th Series 6.38 7/01/2026 29,968
Puerto Rico (8.0%)
Electric Power Auth. RB,
25,500 Series EE 4.75 7/01/2024 24,326
21,175 Series T (PRE) 6.38 7/01/2024 24,012
25,450 Series X (PRE) 6.13 7/01/2021 28,833
100,000 Highway and Transportation Auth.
RB, Series 1998A 4.75 7/01/2038 95,630
Rhode Island (1.2%)
25,000 Housing and Mortgage Finance Corp.
SFH RB, Series 15-A 6.85 10/01/2024 26,817
South Carolina (1.1%)
Connector 2000 Association Toll
Road RB,
12,700 Series 1998B (a) 5.78 1/01/2022 3,240
13,000 Series 1998B (a) 5.80 1/01/2023 3,124
13,500 Series 1998B (a) 5.80 1/01/2024 3,033
16,200 Series 1998B (a) 5.80 1/01/2025 3,426
17,100 Series 1998B (a) 5.83 1/01/2027 3,189
17,500 Series 1998B (a) 5.83 1/01/2028 3,071
20,500 Series 1998B (a) 5.83 1/01/2029 3,387
20,000 Series 1998B (a) 5.83 1/01/2037 1,999
Tennessee (0.3%)
7,000 Springfield Health and Educational
Facilities Board RB, Series 1998 5.38 8/01/2024 6,697
Texas (6.8%)
5,000 Austin Higher Education Auth. RB,
Series 1998 5.25 8/01/2023 4,830
19,500 Bell County Health Facilities
Development Corp. RB,
Series 1989 (ETM) 6.50 7/01/2019 22,628
12,500 Harris County Health Facilities
RB, Series 1992 (PRE) 7.13 6/01/2015 13,983
19,300 Harris County IDC RB, Series 1992 6.95 2/01/2022 20,635
5,675 Lewisville RB, Series
1998 (INS) (6) 5.80 9/01/2025 5,963
21,000 Port of Corpus Christi IDC PCRB,
Series 1997A 5.45 4/01/2027 20,733
19,135 Southwest Higher Education Auth.,
Inc. RB, Series 1999A 5.00 10/01/2029 18,510
6,480 State Veteran's Land Board GO,
Series 1998 (c) 6.20 11/15/2030 6,444
20,000 Travis County Health Facilities
Development Corp. RB,
Series 1998A 5.38 11/01/2028 20,016
Tyler Health Facilities
Development Corp. Hospital RB,
4,700 Series 1993A 6.75 11/01/2025 4,515
10,300 Series 1993B 6.75 11/01/2025 9,895
Vermont (0.1%)
2,500 Educational and Health Buildings
RB, Series 1998 5.50 7/01/2021 2,473
Virginia (1.5%)
8,300 Henrico County IDA Hospital RB,
Series 1985C (PRE) 7.50 9/01/2011 8,877
21,950 Peninsula Ports Auth. RB,
Series 1992 (NBGA) 7.38 6/01/2020 23,823
Washington (9.8%)
3,500 Housing Finance Commission RB,
Series 1996A (PRE) (LOC) 6.85 7/01/2021 4,105
66,485 King County GO, Series 1994A (PRE) 6.25 1/01/2034 74,163
6,995 King County Housing Auth. RB,
Series 1998A (INS) (5) 5.25 7/01/2028 7,015
73,500 Seattle Metropolitan Sewer RB,
Series V (f) 6.20 1/01/2032 77,415
50,000 State GO, Series 1999B (e) 5.00 1/01/2024 48,851
West Virginia (0.6%)
12,500 Water Development Auth. RB,
Series 1991A (INS) (4) 7.00 11/01/2025 13,677
Wyoming (1.4%)
29,865 Community Development Auth.
SFH RB, Series 1993A 6.10 6/01/2033 31,105
- --------------------------------------------------------------------------------
Total fixed rate instruments
(cost: $1,984,686) 2,139,260
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (0.4%)
California (0.2%)
4,710 Statewide Communities Development
Auth. COP, Series 1996 (LOC) 3.00 6/01/2026 4,710
Florida (0.1%)
1,265 Pinellas County Health Facilities
Auth. RB, Series 1985 (LIQ)
(INS) (2) 3.10 12/01/2015 1,265
Louisiana (0.1%)
2,100 East Baton Rouge Parish PCRB,
Series 1993 3.05 3/01/2022 2,100
- --------------------------------------------------------------------------------
Total variable rate demand notes
(cost: $8,075) 8,075
- --------------------------------------------------------------------------------
Total investments (cost: $1,992,761) $2,147,335
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Escrowed Bonds 25.8%
Hospitals 10.7
Single-Family Housing 8.2
General Obligations 6.8
Special Assessment/Tax/Fee 6.4
Water/Sewer Utilities - Municipal 4.7
Natural Gas Utilities 3.6
Airlines 3.3
Nursing/Continuing Care Centers 2.8
Airport/Port 2.6
Paper & Forest Products 2.6
Electric/Gas Utilities - Municipal 2.5
Air Freight 2.1
Gaming Companies 2.1
Education 1.9
Metals/Mining 1.9
Buildings 1.7
Oil - International Integrated 1.2
Toll Roads 1.1
Healthcare - Miscellaneous 1.1
Containers - Paper 1.0
Oil & Gas - Refining/Manufacturing 1.0
Leasing 1.0
Other 2.9
----
Total 99.0%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.0% Nebraska .7%
Alaska 2.4 Nevada .9
California 6.1 New Hampshire 3.4
Colorado 1.7 New Jersey .6
Connecticut 2.3 New Mexico 2.4
District of Columbia 2.0 New York 12.1
Florida .1 North Carolina .8
Georgia .5 Ohio .3
Hawaii .4 Oklahoma 2.0
Idaho 1.1 Pennsylvania 2.2
Illinois 8.6 Puerto Rico 8.0
Indiana 3.4 Rhode Island 1.2
Kansas .5 South Carolina 1.1
Louisiana 2.2 Tennessee .3
Maryland .7 Texas 6.8
Massachusetts 1.2 Vermont .1
Michigan 2.3 Virginia 1.5
Minnesota 3.4 Washington 9.8
Mississippi 1.6 West Virginia .6
Missouri .2 Wyoming 1.4
Montana 1.1 ----
Total 99.0%
====
USAA INTERMEDIATE-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 1999
Principal Coupon Final Market
Amount Security Rate Maturity Value
- --------------------------------------------------------------------------------
FIXED RATE INSTRUMENTS (92.7%)
Alabama (0.4%)
$ 2,000 Baldwin County Health Care Auth.
Hospital RB, Series 1996 6.75% 4/01/2015 $ 2,168
2,500 Montgomery BMC Special Care
Facilities Financing Auth. RB,
Series 1998B (INS) (1) 4.88 11/15/2018 2,414
5,000 Prattville IDB PCRB, Series 1998 5.15 9/01/2013 4,894
Alaska (0.5%)
Housing Finance Corp. Mortgage RB,
6,740 Series 1996A (INS) (1) 6.00 12/01/2015 7,179
4,000 Series 1997A-1 5.50 12/01/2017 4,117
Arizona (0.5%)
4,000 Educational Loan Marketing Corp.
RB, Series 1992A 6.70 3/01/2000 4,111
2,000 Health Facilities Auth. Hospital
RB, Series 1998 (Northern Arizona
Healthcare System) (INS) (2) 4.75 10/01/2018 1,913
4,500 Maricopa County Hospital RB,
Series 1997 6.13 4/01/2018 4,748
Arkansas (0.8%)
4,000 Little Rock Capital Improvement
RB, Series 1998A 5.70 1/01/2018 4,020
5,735 Mississippi County Hospital RB,
Series 1992B 6.85 11/01/2002 5,997
7,780 St. Francis County Hospital RB,
Series 1985 6.50 2/01/2005 8,023
800 Student Loan RB, Series 1991 7.15 6/01/2002 838
California (6.3%)
7,100 Central Valley Financing Auth.
RB (PRE) 6.10 7/01/2013 7,914
10,500 Contra Costa Transportation
Auth. RB, Series 1991A (ETM)
(INS) (3),(a) 6.30 3/01/2003 9,054
Foothill/Eastern Transportation
Corridor Agency RB,
10,000 Series 1995A (a) 6.87 1/01/2010 8,262
15,000 Series 1995A (a) 7.10 1/01/2011 12,637
9,085 Series 1995A (a) 6.82 1/01/2013 7,638
4,910 Housing Finance Agency RB,
Series 1996A (INS) (1) 5.70 8/01/2010 5,204
19,985 Pleasanton Joint Powers Financing
Auth. RB, Series 1993A 6.00 9/02/2005 21,640
Sacramento Cogeneration Auth. RB,
1,800 Series 1995 (PRE) 6.38 7/01/2010 2,070
1,500 Series 1995 6.38 7/01/2010 1,697
19,300 Sacramento Power Auth. RB,
Series 1995 5.88 7/01/2015 20,397
San Joaquin Hills Transportation
Corridor Agency Senior Lien RB,
3,525 Series 1993 (ETM) (a) 7.05 1/01/2005 3,452
8,305 Series 1993 (ETM) (a) 7.87 1/01/2006 8,312
5,000 Series 1993 (ETM) (a) 7.50 1/01/2007 5,101
16,795 Series 1993 (ETM) (a) 7.71 1/01/2008 17,463
Southern California Public Power
Auth. RB,
6,410 Series 1992 (ETM) (a) 6.10 7/01/2004 5,212
6,285 Series 1992 (a) 6.10 7/01/2004 5,117
7,980 State GO 4.50 12/01/2017 7,578
Colorado (1.5%)
5,000 Adams County PCRB, Series 1999 5.10 1/01/2019 5,009
5,200 Arapahoe County IDA RB,
Series 1991 7.00 2/01/2001 5,453
Denver Health and Hospital
Auth. RB,
1,000 Series 1998A 5.20 12/01/2012 1,001
635 Series 1998A 5.25 12/01/2013 626
2,200 Series 1998A 5.38 12/01/2018 2,170
10,000 Health Facilities Auth. Hospital
RB, Series 1993 6.63 2/01/2013 10,329
2,500 Housing and Finance Auth. MFH RB,
Series 1997C-3 5.65 10/01/2015 2,612
7,770 Student Obligations RB,
Series 1991A-2 6.90 9/01/2002 8,071
Connecticut (1.3%)
Mashantucket (Western) Pequot
Tribe RB,
4,960 Series 1996A (PRE) (d) 6.40 9/01/2011 5,783
5,040 Series 1996A (d) 6.40 9/01/2011 5,542
1,000 Series 1997B (d) 5.60 9/01/2009 1,041
2,400 Series 1997B (d) 5.70 9/01/2012 2,479
14,500 Series 1997B (d) 5.75 9/01/2018 14,952
District of Columbia (4.5%)
30,000 Convention Center Auth. RB,
Series 1998 (INS) (2) 5.00 10/01/2018 29,577
GO,
2,035 Series 1993A (ETM) 5.80 6/01/2004 2,194
25,715 Series 1993A 5.80 6/01/2004 27,361
370 Series 1994A-3 (ETM) 5.50 6/01/2006 397
7,130 Series 1994A-3 5.50 6/01/2006 7,513
440 Series E (PRE) 5.75 6/01/2005 477
11,340 Series E 5.75 6/01/2005 12,056
450 Series E (PRE) 5.75 6/01/2006 488
11,550 Series E 5.75 6/01/2006 12,234
6,250 Hospital RB, Series 1992B (PRE) 6.75 8/15/2007 6,974
6,000 Revenue Bond, Series 1999A
(National Academy of Sciences)
(INS) (2) 5.00 1/01/2019 5,863
Florida (1.5%)
Dade County RB,
8,255 Series 1996B (INS) (2),(a) 6.00 10/01/2011 4,607
8,610 Series 1996B (INS) (2),(a) 6.10 10/01/2012 4,483
8,760 Series 1996B (PRE)(INS) (2),(a) 6.20 10/01/2013 4,457
5,000 Housing Finance Agency MFH RB,
Series 1984C 6.25 12/01/2006 5,180
Miami-Dade County School Board COP,
2,250 Series 1998A (INS) (4) 5.00 8/01/2016 2,251
1,500 Series 1998A (INS) (4) 5.00 8/01/2017 1,493
5,935 Nassau County PCRB, Series 1989 7.65 6/01/2006 6,049
7,000 North Miami Educational
Facilities RB 6.10 4/01/2013 7,301
Georgia (0.6%)
8,760 Metropolitan Atlanta Rapid Transit
RB, Series M 6.25 7/01/2003 9,385
5,000 Savannah Hospital Auth./Candler
Health Systems RB, Series 1998B
(INS) (4) 5.00 7/01/2018 4,960
Hawaii (0.3%)
2,000 Honolulu City and County GO,
Series 1999C (INS) (3),(e) 5.00 7/01/2019 1,973
5,000 Housing Finance and Development
Corp. RB, Series 1997B 5.45 7/01/2017 5,142
Idaho (0.1%)
2,325 Health Facilities Auth. RB,
Series 1998 5.25 5/01/2014 2,344
Illinois (4.7%)
2,655 Bedford Park Tax Increment RB,
Series 1993 (ETM) 7.38 12/01/2004 3,093
4,880 Boone, McHenry and Dekalb Counties
Community Unit School District GO,
Series 1997 (INS) (4),(a) 5.30 12/01/2013 2,368
Chicago School Board GO,
15,535 Series 1999A (INS) (3),(a) 5.13 12/01/2016 6,273
10,775 Series 1999A (INS) 3,a 5.17 12/01/2017 4,110
21,235 Chicago-O'Hare International
Airport RB, Series 1994A
(INS) (1),(f) 6.20 1/01/2007 23,576
7,460 Cook County Forest Preserve
District GO, Series 1996
(INS) (1) 5.80 11/01/2016 7,934
10,110 Development Finance Auth. RB,
Series 1995 7.00 3/01/2007 11,171
Health Facilities Auth. RB,
10,000 Hospital Sisters Services,
Inc. (INS) (1) 5.00 6/01/2018 9,800
1,390 Series 1989 (Delnor Hospital)
(PRE) 7.75 5/15/2000 1,426
6,700 Series 1992 (Mercy Hospital) 7.00 1/01/2007 7,203
8,000 Series 1993B (Univ. of Chicago
Hospital) (INS) (1) 5.75 8/15/2014 8,425
3,150 Series 1996 (Mercy Hospital) 6.00 1/01/2006 3,365
7,815 Series 1996 (Mercy Hospital) 6.38 1/01/2015 8,400
5,000 Series 1996A (Riverside Medical
Center) 6.00 11/15/2015 5,344
1,000 Series 1998 (Centegra Health
System) 5.25 9/01/2013 998
1,000 Series 1998 (Centegra Health
System) 5.25 9/01/2014 994
2,500 Series 1998 (Centegra Health
System) 5.25 9/01/2018 2,433
1,015 Independent Higher Education
Loan Auth. RB, Series 1985 (LOC) 7.50 12/01/1999 1,024
8,050 Lake County Community Unit School
District GO, Series 1999B (INS)
(4),(a) 5.13 12/01/2016 3,273
Indiana (2.6%)
Health Facility Financing Auth. RB,
2,900 Series 1993 (Sisters St. Francis
Health Services) (PRE) 5.90 11/01/2009 3,064
14,700 Series 1994 (Sisters St. Francis
Health Services) (PRE) 6.20 7/01/2009 15,476
1,400 Series 1998 (Floyd Memorial
Hospital and Health Services) 5.25 2/15/2018 1,384
5,000 Series 1999A (Sisters St. Francis
Health Services) (INS) (1) 5.15 11/01/2019 4,987
6,000 Indianapolis Economic Development
RB, Series 1996 6.05 1/15/2010 6,335
Marion County Hospital Auth. RB,
7,000 Series 1992 (PRE) 6.10 10/01/2003 7,301
5,100 Series 1992 (PRE) 6.55 10/01/2008 5,456
Pike Township School Building
Corp. RB,
4,600 Series 1992A 6.00 2/01/2006 4,910
4,700 Series 1992A 6.00 8/01/2006 5,017
1,150 St. Joseph County Economic
Development RB, Series 1997 5.45 2/15/2017 1,140
7,260 St. Joseph County Hospital
Auth. RB, Series 1999 (Madison
Center Inc.) 5.75 2/15/2019 7,166
Iowa (0.9%)
6,000 Finance Auth. RB, Series 1998A
(INS) (1) 5.25 7/01/2015 6,130
3,280 Higher Education Loan Auth. RB
(INS) (7) 6.13 10/01/2016 3,616
10,000 Student Loan Liquidity Corp. RB,
Series 1992A (f) 6.45 3/01/2002 10,608
Louisiana (1.5%)
5,175 Offshore Terminal Auth. RB,
Series 1998 5.20 10/01/2018 5,134
Orleans Levee District RB,
7,380 Series 1986 (INS) (4) 5.95 11/01/2014 8,080
7,455 Series 1986 (INS) (4) 5.95 11/01/2015 8,120
7,015 Series A (INS) (4) 5.95 11/01/2010 7,740
1,400 Public Facilities Auth. RB,
Series 1997B 5.63 8/01/2017 1,455
3,955 St. Tammany Parish Hospital Service
District No. 1 Hospital RB,
Series 1998 (INS) (6) 5.00 7/01/2018 3,785
Maine (1.9%)
41,400 Bucksport Solid Waste Disposal RB,
Series 1985 6.25 5/01/2010 43,708
Maryland (1.9%)
Community Development
Administration RB,
19,245 1997 First Series 5.60 4/01/2018 19,734
2,865 1999 Second Series 4.75 4/01/2012 2,878
2,500 1999 Second Series 4.80 4/01/2013 2,512
10,000 1999 Second Series 5.00 4/01/2017 10,000
8,000 Series 1996A 5.88 7/01/2016 8,502
Massachusetts (1.3%)
3,640 Housing Finance Agency RB,
Series 1992C 6.35 11/15/2003 3,896
4,385 Industrial Finance Agency RB,
Series 1989A 7.10 8/01/1999 4,441
5,000 Municipal Wholesale Electric Co.
Power Supply Systems RB, Series
1993 (INS) (2) 5.45 7/01/2018 5,140
15,000 State GO, Series 1991D (f) 6.63 7/01/2003 16,197
Michigan (2.5%)
8,000 Detroit Building Auth. RB,
Series 1996A (LOC) 6.15 2/01/2011 8,663
4,000 Detroit Downtown Development
Auth. Tax Increment Bonds,
Series 1998C (INS) (1) 5.00 7/01/2018 3,929
4,450 Detroit GO, Series 1996B (INS) (3) 5.50 4/01/2014 4,677
23,330 Dickinson County Economic
Development Corp. RB, Series 1989 6.55 3/01/2007 24,544
Higher Education Facilities
Auth. RB,
2,390 Series 1998 5.35 6/01/2013 2,393
1,550 Series 1998 5.55 6/01/2017 1,566
Hospital Finance Auth. RB,
5,000 Series 1995A (PRE) 7.50 10/01/2007 6,050
325 Series 1996 5.90 10/01/2004 348
100 Series 1996 6.00 10/01/2005 108
150 Series 1996 6.10 10/01/2006 164
160 Series 1996 6.20 10/01/2007 176
2,600 Series 1996 6.25 10/01/2016 2,803
2,000 Series 1998A 5.38 10/01/2013 2,018
400 Strategic Fund Ltd. Obligation
RB, Series 1998 5.30 7/01/2018 395
Minnesota (1.5%)
4,205 Maplewood Health Care Facility
RB, Series 1996 5.95 11/15/2006 4,237
South St. Paul Hospital Facility
RB,
11,920 Series 1994 6.50 11/01/2004 12,404
9,095 Series 1994 6.75 11/01/2009 9,653
St. Paul Hospital RB,
4,000 Series 1997A 5.70 11/01/2015 3,879
1,500 Series 1997B 5.85 11/01/2017 1,460
5,260 Washington County Hospital
Facility RB, Series 1998 5.38 11/15/2018 4,866
Mississippi (1.7%)
1,000 Jones County Hospital RB,
Series 1997 5.50 12/01/2017 987
Lafayette County Hospital RB,
455 Series 1991A (PRE) 7.70 3/01/2003 485
2,360 Series 1991B (PRE) 7.70 3/01/2003 2,515
15,885 Series 1997 5.50 3/01/2009 16,760
1,500 Lincoln County Hospital RB,
Series 1998B (INS) (5) 5.50 4/01/2018 1,542
3,350 Prentiss County Hospital RB,
Series 1985 6.50 2/01/2005 3,408
Union County Hospital RB,
695 Series 1991A (PRE) 7.70 3/01/2003 742
1,295 Series 1991B (PRE) 7.70 3/01/2003 1,383
11,170 Series 1997 5.50 3/01/2009 11,849
Missouri (0.1%)
2,000 Health and Educational Facilities
Auth. RB, Series 1997 5.75 2/01/2017 2,089
Montana (0.2%)
5,000 Health Facility Auth. Hospital RB,
Series 1997 5.50 6/01/2011 5,260
Nebraska (0.5%)
Cass County School District 001 GO,
2,800 Series 1998 (INS) (2) 5.00 12/15/2014 2,805
2,000 Series 1998 (INS) (2) 5.00 12/15/2019 1,973
Investment Finance Auth.
Hospital RB,
870 Series 1997 (INS) (5) 5.30 11/15/2012 898
2,000 Series 1997 (INS) (5) 5.45 11/15/2017 2,047
5,000 Scotts Bluff County Hospital
Auth. RB, Series 1998 5.13 11/15/2019 4,815
Nevada (1.2%)
10,905 Clark County Flood Control
GO (INS) (3) 4.50 11/01/2017 10,281
16,640 Clark County School District GO,
Series 1991B (INS) (3),(a) 6.24 3/01/2004 13,610
2,975 Housing Division SFH RB,
Series 1995D-1 5.90 10/01/2014 3,108
2,000 Reno Hospital RB, Series 1998
(INS) (1) 5.00 5/15/2018 1,965
New Hampshire (0.5%)
Higher Educational and Health
Facilities Auth. RB,
410 Series 1985A (Student Loan)
(INS) (3) 7.50 12/01/2000 411
1,275 Series 1990 (Granite State
Management) 8.50 12/01/2001 1,336
3,000 Series 1997 (Kendal at Hanover)
(LOC) 5.80 10/01/2012 3,079
5,055 Series 1997 (Kendal at Hanover)
(LOC) 5.90 10/01/2018 5,169
1,990 Series 1998 (Franklin Pierce
College) (INS) (6) 5.25 10/01/2018 1,960
New Jersey (2.5%)
6,150 Camden County Improvement Auth.
RB, Series 1997 5.88 2/15/2015 5,634
Economic Development Auth. RB,
15,000 Series 1994A (INS) (1) 5.88 7/01/2011 16,458
2,000 Series 1997A (Harrogate Inc.) 5.75 12/01/2016 2,028
31,260 Turnpike Auth. RB, Series 1991A (f) 6.50 1/01/2003 33,858
New Mexico (0.3%)
6,035 Chaves County Hospital RB,
Series 1992(PRE) 7.25 12/01/2010 6,823
New York (21.6%)
6,000 Dormitory Auth. RB, Bronx-Lebanon
Hospital Center, Series 1998E 5.20 2/15/2015 6,048
Dormitory Auth. RB, Brookdale
Hospital,
5,000 Series 1998J 5.20 2/15/2015 5,040
4,000 Series 1998J 5.20 2/15/2016 4,016
4,760 Series 1998J 5.30 2/15/2017 4,811
10,300 Dormitory Auth. RB, Court
Facilities Lease, Series 1993A 5.63 5/15/2013 10,735
4,065 Dormitory Auth. RB, Lutheran
Center at Poughkeepsie,
Series 1997 (LOC) 6.00 7/01/2014 4,421
Dormitory Auth. RB, Mental Health
Services Facilities Improvement,
2,055 Series 1997A 5.75 2/15/2010 2,229
2,000 Series 1997A 5.75 2/15/2011 2,163
2,000 Series 1997A 5.75 2/15/2012 2,157
2,460 Series 1997B 5.75 2/15/2010 2,668
4,050 Series 1997B 5.75 2/15/2012 4,368
4,675 Series 1997B 5.50 8/15/2017 4,883
6,400 Dormitory Auth. RB, Municipal
Health Facilities, Series 1998-1
(INS) (4) 5.00 1/15/2016 6,402
Dormitory Auth. RB, New York City
University,
5,000 1996 Series (2) 6.00 7/01/2009 5,522
1,760 1996 Series (2) 6.00 7/01/2010 1,944
5,500 Series 1993A 5.75 7/01/2013 6,043
13,730 Series 1997-1 5.25 7/01/2014 14,017
14,560 Dormitory Auth. RB, Northern
General Hospital, Series 1998G 5.30 2/15/2019 14,515
2,680 Dormitory Auth. RB, Nyack
Hospital, Series 1996 6.00 7/01/2006 2,898
Dormitory Auth. RB, State
University Educational Facilities,
7,625 Series 1993A 5.88 5/15/2011 8,457
2,725 Series 1994B 5.90 5/15/2006 2,969
2,500 Series 1994B (PRE) 6.00 5/15/2007 2,788
1,000 Series 1995A 5.88 5/15/2007 1,094
2,000 Series 1995A (PRE) 5.90 5/15/2008 2,242
3,500 Series 1995A (PRE) 6.00 5/15/2009 3,943
2,250 Series 1995A (PRE) 6.00 5/15/2010 2,535
2,175 Series 1995A (PRE) 6.00 5/15/2011 2,450
14,120 Series 1996 5.75 5/15/2013 15,214
7,000 Series 1996 5.75 5/15/2016 7,500
7,230 Dormitory Auth. RB, Upstate
Community College, Series
1999A (e) 5.00 7/01/2019 7,028
Environmental Facilities Corp.
PCRB,
5,135 Series 1991E (PRE) 6.40 6/15/2003 5,538
1,415 Series 1991E 6.40 6/15/2003 1,520
Housing Finance Agency Service
Contract RB,
2,275 Series 1995A 6.25 9/15/2010 2,519
4,420 Series 1996A 6.00 9/15/2016 4,752
39,245 Housing New York Corp. RB,
Series 1993 5.00 11/01/2018 38,713
17,955 Long Island Power Auth. Electric
System General RB, Series 1998B
(INS) (1) 4.63 4/01/2016 17,240
Medical Care Facilities Finance
Agency RB,
5,000 Series 1994A (PRE) 6.40 2/15/2007 5,689
5,000 Series 1994A (PRE) 6.50 2/15/2008 5,714
10,000 Series 1994A 6.13 8/15/2013 10,493
7,445 Series 1995A (Adult Day Care) 6.00 11/15/2010 8,266
2,675 Series 1995A (Brookdale Hospital)
(ETM) 6.70 2/15/2005 3,050
2,750 Series 1995A (Brookdale Hospital)
(PRE) 6.70 8/15/2005 3,179
2,860 Series 1995A (Brookdale Hospital)
(PRE) 6.75 2/15/2006 3,314
2,940 Series 1995A (Brookdale Hospital)
(PRE) 6.75 8/15/2006 3,407
3,045 Series 1995A (Brookdale Hospital)
(PRE) 6.80 2/15/2007 3,536
3,130 Series 1995A (Brookdale Hospital)
(PRE) 6.80 8/15/2007 3,635
5,700 Series 1995A (Brookdale Hospital)
(PRE) 6.80 8/15/2012 6,620
22,230 Metropolitan Transportation Auth.
Service Contract RB, Series P 5.75 7/01/2015 23,203
980 Mortgage Agency RB, Series EE-1 7.75 10/01/2000 1,001
3,235 New York City Capital Improvement
Bonds 34th St. Partnership,
Series 1993 5.50 1/01/2014 3,342
New York City GO,
11,125 Series 1991D (ETM) 8.00 8/01/1999 11,304
410 Series 1991D 8.00 8/01/1999 416
11,245 Series 1992H (PRE) 6.88 2/01/2004 12,355
1,535 Series 1992H 6.88 2/01/2004 1,666
16,655 Series 1993B (PRE) 6.75 10/01/2004 18,514
345 Series 1993B 6.75 10/01/2004 380
1,700 Series 1993C (PRE) 6.50 8/01/2004 1,869
7,300 Series 1993C 6.50 8/01/2004 7,957
15,000 Series 1994A 6.25 8/01/2008 16,398
10,000 Series 1996G 5.75 2/01/2010 10,737
5,000 Series 1997I 6.00 4/15/2012 5,460
9,635 Series 1998J 5.00 8/01/2017 9,526
13,000 New York City Municipal Assistance
Corp. RB, Series 67 (PRE) 7.30 7/01/2000 13,392
New York City Municipal Water
Finance RB,
3,295 Series 1992A 6.70 6/15/2003 3,513
3,345 Series 1992A (PRE) 6.70 6/15/2003 3,593
10,935 New York City Transitional Finance
Auth. RB, Series 1999B 4.75 11/01/2018 10,549
Thruway Auth. RB,
7,500 Series 1995 (PRE) 6.00 4/01/2009 8,371
2,150 Series 1995 (PRE) 6.10 4/01/2010 2,411
10,000 Series E 4.75 1/01/2019 9,513
Urban Development Corp. RB,
20,955 Series 1993 5.75 1/01/2013 21,970
21,700 Series 1993 5.50 1/01/2015 22,273
North Carolina (0.3%)
6,000 Municipal Power Agency RB,
Series 1992 6.00 1/01/2004 6,431
Ohio (0.6%)
6,750 Dayton Special Facilities RB,
Series 1988C 6.05 10/01/2009 7,229
2,650 Franklin County Health Care
Facilities RB, Series 1997 5.50 7/01/2017 2,623
4,000 IDA RB, Series 1992 5.75 12/01/2002 4,237
Oklahoma (0.7%)
Holdenville Industrial Auth. RB,
1,650 Series 1995 (PRE) 6.60 7/01/2010 1,931
3,250 Series 1995 (PRE) 6.70 7/01/2015 3,825
Industries Auth. Health
Facilities RB,
2,350 Series 1989A (PRE) 7.30 6/01/2001 2,413
1,055 Series 1989A 7.30 6/01/2001 1,083
2,355 Tulsa County Home Finance Auth.
RB, Series 1990 (ETM)(INS) (2) 7.10 5/01/2002 2,542
4,500 Valley View Hospital Auth. RB,
Series 1996 5.75 8/15/2006 4,653
Oregon (0.1%)
1,250 Clackamas County Hospital Facility
Auth. RB, Series 1997 6.10 11/01/2012 1,297
Pennsylvania (4.6%)
35,000 Finance Auth. RB, Series 1993 6.60 11/01/2009 38,706
3,565 Housing Finance Agency RB,
Series 1992 5.90 7/01/2004 3,769
10,000 Montgomery County IDA RB,
Series 1996B 5.63 11/15/2012 10,352
Philadelphia GO,
9,055 Series 1998 (INS) (4) 4.75 3/15/2016 8,733
3,000 Series 1998 (INS) (2) 4.75 3/15/2017 2,882
11,700 Philadelphia IDA RB, Series
1998A (LOC) 5.15 3/01/2019 11,363
17,500 Philadelphia Water and Wastewater
RB, Series 1993 (INS) (3) 5.65 6/15/2012 18,422
9,440 State GO, Second Series 1992 (a) 6.11 7/01/2004 7,621
5,000 York County IDA RB, Series 1992 6.25 7/01/2002 5,343
Puerto Rico (3.9%)
Electric Power Auth. RB,
5,000 Series S 7.00 7/01/2006 5,851
4,420 Series X 5.80 7/01/2009 4,801
4,500 Series X 5.90 7/01/2010 4,894
4,000 Series X 6.00 7/01/2011 4,362
4,220 Series Z 5.50 7/01/2012 4,456
22,200 Housing Bank and Finance Agency RB 7.50 12/01/2006 26,032
8,005 Municipal Finance Agency RB,
Series 1992A 5.80 7/01/2004 8,564
14,060 Public Building Auth. GO, Series K 6.50 7/01/2003 15,348
Public Improvement GO,
7,500 Series 1994 6.10 7/01/2006 8,259
7,825 Series 1994 6.20 7/01/2007 8,617
Rhode Island (1.2%)
Health and Educational Building
Corp. RB,
3,385 Series 1996 (INS) (1) 5.50 5/15/2012 3,580
7,600 Series 1996 (INS) (1) 5.50 5/15/2016 7,902
Housing and Mortgage Finance
Corp. RB,
6,180 Series 15-B 6.30 10/01/2007 6,597
5,205 Series 1995A (INS) (2) 5.70 7/01/2007 5,594
3,630 Series 25A 5.60 10/01/2017 3,764
South Carolina (0.6%)
Connector 2000 Association Inc.
Toll Road RB,
6,400 Series 1998B (a) 5.73 1/01/2016 2,360
8,800 Series 1998B (a) 5.73 1/01/2017 3,058
9,100 Series 1998B (a) 5.75 1/01/2018 2,963
9,400 Series 1998B (a) 5.75 1/01/2019 2,883
3,000 Marion County Hospital District
RB (INS) (7) 5.50 11/01/2015 3,119
South Dakota (0.2%)
5,400 Rapid City IDA RB, Series 1990 7.25 11/01/2000 5,663
Tennessee (1.1%)
24,540 Housing Development Agency RB,
Issue 97-3B (a) 5.73 7/01/2016 9,469
3,000 Knox County Health, Educational
and Housing Facilities Board RB,
Series 1996 (INS) (7) 5.50 4/15/2011 3,182
4,325 Memphis Shelby County Airport
Auth. Special Facilities RB,
Series 1997 5.35 9/01/2012 4,523
Nashville and Davidson County
Health and Educational Facilities
Board RB,
4,000 Series 1998 (INS) (5) 5.10 8/01/2016 3,979
1,000 Series 1998 (INS) (5) 5.10 8/01/2019 982
4,000 Springfield Health and Educational
Facilities Board Hospital RB,
Series 1998 5.25 8/01/2018 3,826
Texas (7.6%)
5,410 Austin Higher Education Auth. RB,
Series 1998 5.13 8/01/2016 5,297
Bastrop ISD GO,
1,855 Series 1997 (NBGA) (a) 5.55 2/15/2014 889
3,030 Series 1997 (NBGA) (a) 5.55 2/15/2015 1,369
3,055 Series 1997 (NBGA) (a) 5.60 2/15/2016 1,302
3,155 Series 1997 (NBGA) (a) 5.60 2/15/2017 1,269
12,000 Bexar County Health Facilities
Development Corp. RB,
Series 1993 (ETM)(INS) (4) 5.88 11/15/2010 13,400
4,365 Cass County IDC PCRB, Series 1997B 5.35 4/01/2012 4,542
Fort Worth Higher Education Finance
Corp. RB,
515 Series 1997A 5.50 10/01/2006 544
545 Series 1997A 5.50 10/01/2007 575
575 Series 1997A 5.63 10/01/2008 607
2,670 Series 1997A 6.00 10/01/2012 2,821
15,400 Gulf Coast Waste Disposal Auth.
PCRB, Series 1992 6.13 11/01/2004 16,658
6,200 Gulf Coast Waste Disposal Auth.
RB, Series 1994 5.70 5/01/2006 6,696
2,070 Harrison County Health Facilities
Development Corp. RB, Series 1998
(INS) (6) 5.50 1/01/2018 2,098
13,000 Houston ISD GO, Series 1999A 5.00 2/15/2019 12,959
Houston ISD Public Facility
Corp. RB,
3,635 Series 1998A (INS) (2),(a) 5.35 9/15/2015 1,574
2,635 Series 1998A (INS) (2),(a) 5.38 9/15/2016 1,077
3,885 Series 1998A (INS) (2),(a) 5.40 9/15/2017 1,501
4,955 Series 1998B (INS) (2),(a) 5.35 9/15/2015 2,146
6,955 Series 1998B (INS) (2),(a) 5.38 9/15/2016 2,844
Houston Water and Sewer Systems RB,
175 Series 1992B (PRE) 6.00 12/01/2004 191
4,825 Series 1992B 6.00 12/01/2004 5,217
Laredo ISD Public Limited GO,
355 Series 1998A 5.06 2/01/2000 359
370 Series 1998A 5.06 2/01/2001 376
390 Series 1998A 5.06 2/01/2002 398
410 Series 1998A 5.06 2/01/2003 420
435 Series 1998A 5.06 2/01/2004 446
460 Series 1998A 5.06 2/01/2005 472
480 Series 1998A 5.06 2/01/2006 491
505 Series 1998A 5.06 2/01/2007 515
530 Series 1998A 5.06 2/01/2008 539
3,830 Lewisville RB, Series 1998
(INS) (6) 5.38 9/01/2015 3,836
11,700 Lower Colorado River Auth. RB,
Series 1992 (INS) 6.45 1/01/2003 10,085
4,390 Marlin ISD Public Facility Corp.
RB, Series 1998 (c) 5.85 2/15/2018 4,506
8,565 Municipal Power Agency RB,
Series 1987 5.50 9/01/2013 8,573
24,050 Port of Corpus Christi IDC PCRB,
Series 1997B 5.40 4/01/2018 23,797
11,790 Public Finance Auth.
RB (INS) (1),(b) 6.06 2/01/2004 9,676
10,000 San Antonio Electric and Gas
Systems RB, Series 1991B
(ETM)(INS) (3),(a) 6.38 2/01/2004 8,207
5,000 Travis County Health Facilities
Development Corp. Hospital RB,
Series 1998A 5.13 11/01/2018 4,909
4,000 Trinity River IDA RB 7.25 2/01/2004 4,519
Tyler Health Facilities Development
Corp. Hospital RB,
5,555 Series 1993B (East Texas Medical
Center) 6.63 11/01/2011 5,391
1,000 Series 1997A (Mother Frances
Hospital) 5.63 7/01/2013 1,006
5,355 Water Resources Finance Auth. RB,
Series 1989 7.25 2/15/2001 5,411
Utah (2.0%)
475 Housing Finance Agency RB,
Series 1985B 5.30 7/01/2007 476
Intermountain Power Agency RB,
8,105 Series 1987A (INS) (1) 5.00 7/01/2012 8,106
16,430 Series 1988B (INS) (1),(a) 6.48 7/01/2003 13,853
21,895 Series 1988B (INS) (1),(a) 6.18 7/01/2004 17,629
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 2,977
Virginia (0.2%)
5,000 Isle of Wight County IDA PCRB,
Series 1994 5.80 5/01/2004 5,159
Washington (1.5%)
3,255 Health Care Facilities Auth. RB,
Series 1997A (INS) (1) 5.13 8/15/2017 3,251
6,185 Higher Education Facilities
Auth. RB 5.20 10/01/2017 6,208
King County GO,
780 Series 1993A (PRE) 5.90 12/01/2007 850
4,720 Series 1993A 5.90 12/01/2007 5,094
5,000 King County Housing Auth. RB,
Series 1998A (INS) (5) 5.20 7/01/2018 5,007
10,000 Port of Seattle Passenger Facility
Charge RB, Series 1998A (INS) (1) 5.00 12/01/2017 9,909
State Health Care Facilities
Auth. RB,
2,500 Series 1998 (INS) (5) 5.25 8/15/2017 2,514
2,500 Series 1998 (INS) (5) 5.30 8/15/2018 2,520
West Virginia (0.8%)
16,940 School Building Auth. RB,
Series 1994 6.25 7/01/2004 18,530
Wisconsin (1.4%)
3,780 Center District Junior Dedicated
Tax RB, Series 1999 (INS) (4) 5.25 12/15/2018 3,938
Health and Educational Facilities
Auth. RB,
11,500 Series 1993 (Aurora Health Care)
(INS) (1) 5.25 8/15/2012 11,784
4,130 Series 1995A (Walkesha Memorial
Hospital) (INS) (2) 5.25 8/15/2012 4,255
5,000 Series 1998A (Wausau Hospital)
(INS) (2) 5.13 8/15/2020 4,910
Professional Baseball Park
District RB,
2,540 Series 1996 (PRE) 5.55 12/15/2014 2,783
2,275 Series 1996 (PRE) 5.60 12/15/2015 2,501
2,750 Series 1996 (PRE) 5.65 12/15/2016 3,032
Wyoming (0.1%)
108 Farm Loan Board COP, Series
1989 (NBGA) 6.50 12/01/1999 109
- --------------------------------------------------------------------------------
Total fixed rate instruments
(cost: $2,043,528) 2,173,714
- --------------------------------------------------------------------------------
PUT BONDS (4.7%)
Alabama (0.2%)
4,000 Housing Finance Auth. MFH RB,
Series 1992C (NBGA) 5.90 8/01/2007 4,059
California (0.5%)
7,500 Statewide Communities Development
Auth. RB, Series 1998A (d) 5.25 5/15/2025 7,538
3,535 Woodland MFH RB, Series 1994A 6.05 12/01/2024 3,702
Florida (0.4%)
Housing Finance Agency MFH RB,
4,255 Series 1996R-1 (NBGA) 5.65 12/01/2026 4,511
4,500 Series 1996S-1 (NBGA) 5.65 12/01/2026 4,771
Illinois (0.6%)
14,295 Hoffman Estates MFH RB,
Series 1996 5.75 6/01/2021 15,097
Kansas (0.3%)
6,590 Merriam MFH RB, Series
1991A (NBGA) 7.25 4/01/2021 6,736
Louisiana (0.2%)
4,360 Shreveport Home Mortgage Auth.
RB, Series 1995A (NBGA) 6.40 9/01/2025 4,642
New Mexico (0.5%)
Bernalillo County MFH RB,
7,700 Series 1994A (Sun Village Apts.)
(NBGA) 6.50 10/01/2019 8,132
3,320 Series 1995 (Sunchase Apts.)
(NBGA) 5.80 11/01/2025 3,499
Ohio (0.3%)
5,500 Montgomery County IDA RB,
Series 1992 (LOC) 6.50 2/01/2007 5,993
Pennsylvania (0.3%)
Philadelphia IDA RB,
3,500 Series 1997A 6.50 10/01/2027 3,732
4,000 Series 1997B 6.50 10/01/2027 4,266
Texas (0.1%)
2,500 Gregg County Housing Finance
Corp. RB, Series 1995A (NBGA) 6.40 9/01/2025 2,705
Utah (0.7%)
Salt Lake County MFH RB,
10,240 Series 1995A-1 (INS) (5) 5.70 10/01/2025 10,808
6,500 Series 1995B-1 (INS) (5) 5.70 10/01/2025 6,860
Washington (0.6%)
Chelan County Public Utility
District #1 RB,
5,650 Series E 5.70 7/01/2068 5,931
6,845 Series E 5.70 7/01/2068 7,185
- --------------------------------------------------------------------------------
Total put bonds (cost: $104,352) 110,167
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (1.7%)
California (0.4%)
2,065 Irvine Improvement Bonds,
Assessment District 94-13 (LOC) 3.00 9/02/2022 2,065
6,890 Orange County Special Financing
Auth. RB, Series 1995B (LOC) 4.05 11/01/2014 6,890
850 Statewide Communities Development
Auth. COP, Series 1996 (LOC) 3.00 6/01/2026 850
Iowa (0.6%)
12,750 Council Bluffs PCRB, Series 1995 3.05 1/01/2025 12,750
Kansas (0.1%)
2,400 Development Finance Auth. RB,
Series 1998BB (LOC) 3.15 11/15/2028 2,400
Michigan (0.2%)
5,400 Strategic Fund Limited Obligation
RB, Series 1994 3.15 2/01/2009 5,400
North Carolina (0.1%)
2,400 Medical Care Commission RB,
Series 1998 (LOC) 3.15 6/01/2028 2,400
Virginia (0.2%)
900 Fairfax County IDA RB,
Series 1989A 3.05 1/15/2022 900
3,585 Peninsula Ports Auth. Coal
Terminal RB, Series 1987D (LOC) 3.20 7/01/2016 3,585
Wyoming (0.1%)
1,600 Lincoln County PCRB, Series 1984C 3.30 11/01/2014 1,600
- --------------------------------------------------------------------------------
Total variable rate demand notes
(cost: $38,840) 38,840
- --------------------------------------------------------------------------------
Total investments (cost: $2,186,720) $2,322,721
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 14.2%
Escrowed Bonds 13.0
General Obligations 11.4
Electric/Gas Utilities - Municipal 6.5
Multi-Family Housing 6.1
Appropriated Debt 4.6
Special Assessment/Tax/Fee 4.5
Education 4.1
Single-Family Housing 3.9
Paper & Forest Products 3.6
Toll Roads 3.5
Buildings 3.1
Nursing/Continuing Care Centers 2.5
Real Estate Tax/Free 2.2
Finance - Municipal 2.0
Airport/Port 1.8
Healthcare - Miscellaneous 1.7
Water/Sewer Utilities - Municipal 1.5
Student Loans 1.1
Gaming Companies 1.0
Oil & Gas - Refining/Manufacturing 1.0
Other 5.8
----
Total 99.1%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama .6% Nebraska .5%
Alaska .5 Nevada 1.2
Arizona .5 New Hampshire .5
Arkansas .8 New Jersey 2.5
California 7.2 New Mexico .8
Colorado 1.5 New York 21.6
Connecticut 1.3 North Carolina .4
District of Columbia 4.5 Ohio .8
Florida 1.9 Oklahoma .7
Georgia .6 Oregon .1
Hawaii .3 Pennsylvania 4.9
Idaho .1 Puerto Rico 3.9
Illinois 5.3 Rhode Island 1.2
Indiana 2.6 South Carolina .6
Iowa 1.4 South Dakota .2
Kansas .4 Tennessee 1.1
Louisiana 1.7 Texas 7.8
Maine 1.9 Utah 2.8
Maryland 1.9 Vermont .1
Massachusetts 1.3 Virginia .4
Michigan 2.7 Washington 2.1
Minnesota 1.5 West Virginia .8
Mississippi 1.7 Wisconsin 1.4
Missouri .1 Wyoming .2
Montana .2 ----
Total 99.1%
====
USAA SHORT-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 1999
Principal Coupon Final Market
Amount Security Rate Maturity Value
- --------------------------------------------------------------------------------
FIXED RATE INSTRUMENTS (70.2%)
Alabama (0.1%)
$ 1,000 Prattville Industrial Development
PCRB, Series 1998 4.90% 9/01/2008 $ 984
Alaska (0.5%)
North Slope Borough GO,
1,250 Series 1995A (INS) (1),(a) 4.85 6/30/1999 1,240
6,500 Series 1998A (INS) (1),(a) 4.60 6/30/2008 4,280
Arizona (1.7%)
1,750 Educational Loan Marketing Corp.
RB, Series 1992A 6.70 3/01/2000 1,798
Maricopa County Hospital RB,
2,545 Series 1997 4.75 4/01/1999 2,545
2,665 Series 1997 5.00 4/01/2000 2,698
2,525 Series 1997 5.10 4/01/2001 2,577
2,260 Series 1997 5.25 4/01/2002 2,334
3,045 Series 1997 5.35 4/01/2003 3,166
2,180 Series 1997 5.35 4/01/2004 2,274
California (2.1%)
2,550 Central Valley Cogeneration RB,
Series 1993 5.40 7/01/2000 2,610
Sacramento Cogeneration Auth. RB,
1,000 Series 1995 5.70 7/01/2000 1,026
1,000 Series 1995 5.80 7/01/2001 1,043
900 Series 1995 5.90 7/01/2002 953
900 Series 1995 6.00 7/01/2003 966
San Joaquin Hills Transportation
Corridor Agency RB,
12,615 Senior Lien (ETM) (a) 7.10 1/01/2000 12,323
3,500 Senior Lien (ETM) (a) 7.16 1/01/2001 3,293
Colorado (0.4%)
Denver Health and Hospital Auth. RB,
1,180 Series 1998A 5.13 12/01/2006 1,213
1,250 Series 1998A 5.25 12/01/2007 1,294
1,250 Series 1998A 5.25 12/01/2008 1,293
Connecticut (1.1%)
Mashantucket (Western) Pequot
Tribe RB,
1,000 Series 1996A (ETM) (d) 6.25 9/01/2001 1,063
1,000 Series 1996A (d) 6.25 9/01/2001 1,083
1,250 Series 1996A (ETM) (d) 6.25 9/01/2002 1,354
1,250 Series 1996A (d) 6.25 9/01/2002 1,376
1,480 Series 1996A (ETM) (d) 6.25 9/01/2003 1,624
1,520 Series 1996A (d) 6.25 9/01/2003 1,687
1,235 Series 1996A (ETM) (d) 6.50 9/01/2006 1,426
1,265 Series 1996A (d) 6.50 9/01/2006 1,472
District of Columbia (2.3%)
GO,
920 Series 1994A-3 (ETM) 4.70 6/01/1999 922
17,870 Series 1994A-3 (f) 4.70 6/01/1999 17,908
Hospital RB,
1,450 Series 1996A (ETM) (INS) (1) 5.00 8/15/2002 1,505
1,530 Series 1996A (ETM) (INS) (1) 5.50 8/15/2003 1,629
1,610 Series 1996A (ETM) (INS) (1) 5.50 8/15/2004 1,726
Florida (0.2%)
1,470 Nassau County PCRB, Series 1992 5.60 6/01/2000 1,498
865 Orange County Health Facilities
Auth. RB, Series 1995 5.63 7/01/2001 891
Georgia (0.4%)
4,000 Camden County Development Auth.
PCRB, Series 1997 5.25 4/01/2002 4,131
Guam (2.9%)
GO,
9,290 Series 1994A 5.75 8/15/1999 9,375
2,000 Series 1994A 5.25 9/01/1999 2,017
5,000 Series 1995A 5.38 9/01/2000 5,035
10,000 Series 1995A 5.50 9/01/2001 10,064
Power Auth. RB,
1,640 Series 1994A 5.50 10/01/1999 1,659
1,725 Series 1994A 5.60 10/01/2000 1,773
Hawaii (0.5%)
4,720 Honolulu GO, Series 1999C
(INS) (3),(e) 5.00 7/01/2008 4,920
Idaho (0.4%)
Health Facilities Auth. RB,
810 Series 1998 4.65 5/01/2005 811
860 Series 1998 5.38 5/01/2006 899
950 Series 1998 5.38 5/01/2007 997
1,005 Series 1998 5.38 5/01/2008 1,056
Illinois (3.8%)
20,000 Chicago Board of Education GO,
Series 1999A (INS) (3),(a) 4.50 12/01/2009 12,172
16,265 Chicago Water RB, Series 1997
(INS) (3),(a) 5.00 11/01/2005 12,308
9,000 Cook County GO, Series 1989
(PRE) (INS) (1) 7.38 11/01/2008 9,398
1,575 Health Facilities Auth. RB,
Series 1996 5.60 1/01/2002 1,616
3,330 Hodgkins Tax Increment RB,
Series 1995A 6.90 12/01/2001 3,449
Indiana (3.6%)
6,745 Development Finance IDA RB,
Series 1996 4.80 6/01/2000 6,853
Health Facility Financing Auth. RB,
20,300 Series 1993 (PRE) 5.40 11/01/2005 21,132
6,300 Series 1994 (PRE) 5.38 7/01/2001 6,450
3,000 Series 1999A (INS) (1) 5.00 11/01/2009 3,101
Louisiana (4.3%)
11,310 De Soto Parish PCRB, Series 1993A 5.05 12/01/2002 11,713
Jefferson Parish School Board
Sales and Use Tax RB,
3,170 Series 1998 (INS) (4),(a) 4.80 9/01/2007 2,196
2,090 Series 1998 (INS) (4),(a) 4.90 3/01/2008 1,404
5,503 New Orleans Master Lease
Agreement, #2300-1 (c) 7.99 2/01/2002 5,730
Offshore Terminal Auth. RB,
7,920 Series 1992B 6.00 9/01/2001 8,312
5,000 Series 1992B 6.20 9/01/2003 5,417
5,830 Series 1994B 5.85 9/01/2000 6,019
3,440 St. Charles Parish PCRB 7.63 6/01/2003 3,525
Maine (1.4%)
Jay PCRB,
5,500 Series 1994A 4.65 9/01/2002 5,616
8,305 Series 1994B 4.70 6/01/2002 8,483
Massachusetts (3.1%)
Health and Educational Facilities
Auth. RB,
3,445 Series 1998B (INS) (6) 5.00 7/01/2006 3,549
3,645 Series 1998B (INS) (6) 5.25 7/01/2007 3,805
1,640 Series 1998B (INS) (6) 5.25 7/01/2008 1,707
New England Education Loan
Marketing Corp. RB,
17,000 Series 1985A 5.80 3/01/2002 17,844
5,000 Series 1992A 6.13 9/01/1999 5,058
Michigan (1.9%)
Hospital Finance Auth. RB, Central
Michigan Community Hospital,
245 Series 1996 5.00 10/01/1999 247
255 Series 1996 5.30 10/01/2000 261
130 Series 1996 5.50 10/01/2001 134
275 Series 1996 5.70 10/01/2002 288
285 Series 1996 5.80 10/01/2003 302
Hospital Finance Auth. RB, Genesys
Health System Medical Center,
3,500 Series 1995A 6.80 10/01/2000 3,645
3,500 Series 1995A 7.00 10/01/2001 3,730
2,500 Series 1998A 5.50 10/01/2006 2,617
1,500 Series 1998A 5.50 10/01/2007 1,572
1,000 Series 1998A 5.50 10/01/2008 1,048
5,800 Monroe Economic Development
Corp. PCRB, Series 1997 5.00 2/01/2003 5,988
Minnesota (1.2%)
5,850 Minneapolis Temporary Parking
Ramp RB, Series 1997A 4.75 6/01/2000 5,851
St. Paul Housing and Redevelopment
Auth. Hospital RB,
675 Series 1997A 5.00 11/01/2003 661
1,410 Series 1997A 5.10 11/01/2004 1,379
1,485 Series 1997A 5.20 11/01/2005 1,448
1,560 Series 1997A 5.30 11/01/2006 1,517
1,645 Series 1997A 5.35 11/01/2007 1,594
Mississippi (1.4%)
Jones County Hospital RB,
1,000 Series 1997 5.00 12/01/2005 1,033
1,050 Series 1997 5.00 12/01/2006 1,083
1,105 Series 1997 5.10 12/01/2007 1,147
1,155 Series 1997 5.20 12/01/2008 1,203
5,225 Lafayette County Hospital RB,
Series 1997 5.00 3/01/2002 5,326
1,000 Lincoln County Hospital RB,
Series 1998A (INS) (5) 5.00 4/01/2004 1,026
3,675 Union County Hospital RB,
Series 1997 5.00 3/01/2002 3,746
Nebraska (0.2%)
Investment Finance Auth. Hospital RB,
465 Series 1997 (INS) (5) 4.90 11/15/2005 481
440 Series 1997 (INS) (5) 5.00 11/15/2006 457
410 Series 1997 (INS) (5) 5.00 11/15/2007 424
505 Series 1997 (INS) (5) 5.05 11/15/2008 523
New Jersey (0.1%)
1,050 Camden County Improvement Auth.
RB, Series 1997 4.75 2/15/2000 1,029
New York (16.6%)
Dormitory Auth. RB,
3,760 Series 1989A (LOC) 4.45 4/01/1999 3,760
1,675 Series 1999B (e) 4.00 4/01/2005 1,648
1,740 Series 1999B (e) 4.00 4/01/2006 1,700
Dormitory Auth. RB, City University
System,
3,245 Series 1996-2 5.00 7/01/2000 3,309
1,285 Series 1996-2 5.10 7/01/2001 1,322
5,000 Dormitory Auth. RB, Good Samaritan
Hospital, Series 1998A (INS) (5) 5.50 7/01/2009 5,358
Dormitory Auth. RB, Nyack Hospital,
1,160 Series 1996 5.35 7/01/1999 1,165
1,170 Series 1996 5.65 7/01/2001 1,206
Dormitory Auth. RB, State University
Educational Facilities,
1,285 Series 1994B 5.10 5/15/1999 1,288
2,190 Series 1994B 5.30 5/15/2000 2,239
6,450 Series 1995A 5.10 5/15/2000 6,581
6,350 Series 1995A 5.25 5/15/2001 6,555
7,500 Series 1995A 5.40 5/15/2002 7,840
1,000 Series 1996 4.90 5/15/2000 1,018
1,350 Series 1996 5.00 5/15/2001 1,387
1,000 Series 1996 5.10 5/15/2002 1,037
1,250 Dormitory Department of Health
RB, Series 1996 4.75 7/01/2001 1,277
25,805 Environmental Facilities Corp.
PCRB, Series 1994A 5.50 6/15/1999 25,934
5,325 Medical Care Facilities Finance
Agency RB, Series 1994A (ETM) 5.80 2/15/2001 5,535
New York City GO,
600 Series 1994D (ETM) 6.00 8/15/1999 607
9,400 Series 1994D 6.00 8/15/1999 9,497
155 Series 1994H (ETM) 5.30 8/01/1999 156
7,845 Series 1994H 5.30 8/01/1999 7,900
5,000 Series 1995A 5.40 8/01/2000 5,134
1,450 Series 1995D (ETM) 6.50 2/01/2002 1,558
3,550 Series 1995D 6.50 2/01/2002 3,795
3,325 Series 1996K (ETM) 5.50 4/01/2001 3,451
4,900 Series 1998F 5.50 8/01/2006 5,261
6,420 Series 1998F 5.50 8/01/2007 6,901
5,815 Series 1999F 4.88 8/01/2010 5,898
5,000 Series 1999H 5.00 3/15/2008 5,177
4,010 State COP 4.90 2/01/2002 4,112
4,040 State COP 4.90 8/01/2002 4,159
2,035 State COP 5.00 2/01/2003 2,101
11,165 The City University of New
York COP 5.75 8/15/2003 11,881
7,880 Thruway Auth. RB, Series 1995 5.10 4/01/2001 8,089
Urban Development Corp. RB,
4,400 Series 1993 5.25 1/01/2003 4,581
1,715 Series 7 4.75 1/01/2002 1,752
North Carolina (1.1%)
11,000 Eastern Municipal Power Agency
RB, Series 1996A 5.10 1/01/2000 11,116
Ohio (0.6%)
Franklin County Health Care
Facilities RB,
1,000 Series 1997 4.70 7/01/2002 1,013
1,000 Series 1997 4.80 7/01/2003 1,013
500 Series 1997 5.00 7/01/2004 510
1,425 Series 1997 5.00 7/01/2005 1,454
1,000 Series 1997 5.10 7/01/2006 1,023
475 Series 1997 5.15 7/01/2007 486
600 Series 1997 5.25 7/01/2008 618
Oklahoma (1.8%)
Holdenville Industrial Auth. RB,
1,115 Series 1995 (ETM) 5.45 7/01/2000 1,145
1,380 Series 1995 (ETM) 6.15 7/01/2004 1,526
510 Series 1995 (ETM) 6.35 7/01/2006 581
15,000 Housing Development Auth. RB,
Series 1997A 4.75 12/01/2002 15,131
Pennsylvania (5.5%)
Beaver County Finance Auth. RB,
16,730 Series 1986A (INS) (1) 8.00 11/01/2009 16,796
8,545 Series 1986B (INS) (1) 8.00 11/01/2009 8,579
4,875 Delaware IDA Refunding RB,
Series 1997A 5.50 1/01/2000 4,911
4,435 East Hempfield Township IDA RB,
Series 1996 5.00 8/01/2001 4,549
3,990 Hampden IDA Auth. RB, Series 1999 4.70 1/01/2007 3,998
17,290 Higher Education Assistance Agency
Student Loan RB, Series 1985A
(INS) (3) 6.80 12/01/2000 18,128
Puerto Rico (2.5%)
Electric Power Auth. RB,
5,000 Series 1997AA 5.00 7/01/2003 5,216
5,000 Series 1997AA 5.00 7/01/2004 5,238
4,365 Series S 6.00 7/01/1999 4,395
3,600 Series T 6.00 7/01/1999 3,625
7,606 Municipal Revenue Collection
Center COP (c) 6.85 10/17/2003 7,941
Tennessee (0.5%)
2,000 Shelby County Hospital RB,
Series 1993 5.10 11/01/2003 2,030
3,000 Springfield Hospital RB,
Series 1998 4.90 8/01/2008 2,958
Texas (5.7%)
Abilene Higher Education
Facilities Corp. RB,
355 Series 1995 (ETM) 5.30 10/01/1999 358
980 Series 1995 5.30 10/01/1999 990
345 Series 1995 (ETM) 5.40 10/01/2000 355
935 Series 1995 5.40 10/01/2000 961
170 Series 1995 (ETM) 5.50 10/01/2001 177
1,310 Series 1995 5.50 10/01/2001 1,363
130 Series 1995 (ETM) 5.60 10/01/2002 137
870 Series 1995 5.60 10/01/2002 916
3,235 Austin Higher Education Auth. RB,
Series 1998 4.80 8/01/2009 3,178
Bexar County Limited Tax GO,
1,800 Series 1999 (a),(e) 4.35 6/15/2006 1,319
3,355 Series 1999 (a),(e) 4.45 6/15/2007 2,336
2,100 Brazoria County BAN,
Series 1999 (e) 4.35 3/01/2000 2,101
6,000 Calhoun County Navigation IDA
PCRB, Series 1995 4.65 6/01/2001 6,115
Harrison County Health Facilities
Development Corp. RB,
1,010 Series 1998 (INS) (6) 4.80 1/01/2006 1,020
1,055 Series 1998 (INS) (6) 4.80 1/01/2007 1,059
1,110 Series 1998 (INS) (6) 4.90 1/01/2008 1,114
3,000 Houston ISD GO, Series 1999A (a) 4.55 2/15/2009 1,911
Houston ISD Public Facility Corp.
Lease RB,
3,885 Series 1998A (INS) (2),(a) 4.85 9/15/2007 2,662
3,885 Series 1998A (INS) (2),(a) 4.90 9/15/2008 2,523
4,805 Series 1998B (INS) (2),(a) 4.85 9/15/2007 3,293
5,260 Series 1998B (INS) (2),(a) 4.90 9/15/2008 3,415
2,500 Lampasas County IDC RB,
Series 1997 5.20 12/01/2001 2,582
3,495 Lewisville RB, Series 1998
(INS) (6) 5.00 9/01/2010 3,522
Northeast Hospital Auth. RB,
1,230 Series 1997 5.10 5/15/2000 1,250
1,285 Series 1997 5.25 5/15/2001 1,320
2,870 Series 1997 5.40 5/15/2003 2,999
Tyler Health Facilities
Development Corp. RB,
2,700 Series 1997A 5.00 7/01/2003 2,740
3,120 Series 1997A 5.00 7/01/2004 3,158
1,625 Series 1997A 5.13 7/01/2005 1,647
1,100 Series 1997A 5.20 7/01/2006 1,114
1,125 Series 1997A 5.30 7/01/2007 1,140
Virginia (0.2%)
Halifax County IDA Hospital RB,
1,100 Series 1998 4.50 9/01/2005 1,108
600 Series 1998 4.65 9/01/2007 603
500 Series 1998 4.75 9/01/2008 503
West Virginia (1.9%)
6,000 Kanawha County PCRB, Series 1997 5.25 4/01/2002 6,179
13,480 School Building Auth. Capital
Improvement RB, Series 1994 (f) 6.00 7/01/2000 13,886
Wisconsin (0.2%)
Health and Educational Facilities
Auth. RB,
410 Series 1997 5.10 12/15/2005 419
430 Series 1997 5.20 12/15/2006 439
455 Series 1997 5.25 12/15/2007 465
475 Series 1997 5.30 12/15/2008 487
- --------------------------------------------------------------------------------
Total fixed rate instruments
(cost: $709,914) 725,441
- --------------------------------------------------------------------------------
PUT BONDS (11.3%)
California (3.2%)
3,395 Brentwood Capital Improvement RB,
Series 1996 (LOC) 5.25 6/01/2026 3,460
6,910 Fresno MFH RB, Series 1997A 4.88 1/01/2028 7,110
7,110 Redwood MFH RB, Series 1985B (NBGA) 5.20 10/01/2008 7,153
4,000 Santa Rosa Housing Auth. MFH RB,
Series 1995E (NBGA) 4.85 9/01/2007 4,009
6,170 South Gate Public Financing Auth.
Tax Allocation Bonds, Series
1997 (LOC) 4.75 9/01/2019 6,291
4,640 Vallejo Housing Auth. MFH RB,
Series 1985A (NBGA) 5.00 6/01/2007 4,648
Florida (2.2%)
Housing Finance Agency MFH RB,
5,000 Series 1983F (Horizon Place)
(NBGA) 5.35 12/01/2005 5,010
4,000 Series 1983G (Oaks at Baymeadow)
(NBGA) 5.35 12/01/2005 4,008
5,000 Series 1987 (The Crossing) (NBGA) 4.85 2/01/2008 5,027
5,200 Series 1995D (Park Colony) (LOC) 5.10 4/01/2013 5,260
4,000 Series 1995K (Oaks at Regency)
(NBGA) 4.85 12/01/2005 4,006
Illinois (1.1%)
11,240 Health Facilities Auth. RB,
Series 1998A (LOC) 4.70 7/01/2031 11,401
Louisiana (2.0%)
20,000 Public Facilities Auth. RB,
Series 1985B-1 (INS) (2),(f) 5.00 12/01/2015 20,648
Minnesota (0.7%)
7,500 Minneapolis and St. Paul Housing
and Redevelopment RB, Series
1996A (INS) (3) 5.13 6/01/2032 7,538
Texas (1.4%)
7,990 Lewisville RB, Series 1996
(PRE) (LOC) 5.00 5/01/2021 8,544
6,000 Tarrant County Housing Finance
Corp. MFH RB, Series 1985 (NBGA) 4.90 9/01/2006 6,018
Wyoming (0.7%)
6,725 Community Development Auth.
Housing RB, Series 1997-3 5.25 6/01/2017 6,903
- --------------------------------------------------------------------------------
Total put bonds (cost: $114,898) 117,034
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (18.9%)
Alaska (0.6%)
6,485 Industrial Development and Export
Auth. RB, Series 1991 (LOC) 4.40 11/01/2009 6,485
Arkansas (0.5%)
5,600 Fayetteville Public Facilities
Board RB, Series 1997 (LOC) 3.15 9/01/2027 5,600
California (9.0%)
4,475 Gardena Financing Agency RB,
Series 1991 (LOC) 4.70 9/01/2011 4,475
9,700 Orange County Apartment Development
RB, Series 1984J (LOC) 5.70 11/01/2008 9,700
11,910 Orange County Special Financing
Auth. RB, Series 1995B (LOC) 4.05 11/01/2014 11,910
Sacramento County MFH RB,
21,600 Series 1985A (LOC) 4.50 4/15/2007 21,600
10,100 Series 1985B (LOC) 5.25 4/15/2007 10,100
17,000 Series 1985C (LOC) 4.50 4/15/2007 17,000
8,100 Series 1996C (LOC) 4.65 12/01/2021 8,100
10,000 Series 1996D (LOC) 4.65 12/01/2021 10,000
Colorado (0.4%)
4,400 Housing Finance Auth. RB,
Series 1998 (NBGA) 2.90 2/15/2028 4,400
Florida (2.6%)
7,575 Atlantic Beach Improvement and
Refunding RB, Series 1994B (LOC) 3.25 10/01/2024 7,575
13,300 Dade County Health Facilities
Auth. RB, Series 1990 (LOC) 3.30 9/01/2020 13,300
3,200 Housing Finance Agency MFH RB,
Series 1985GGG (LOC) 4.75 12/01/2008 3,200
2,790 Miami Health Facilities Auth. RB,
Series 1998 (LOC) 2.95 8/01/2020 2,790
Illinois (0.5%)
755 West Frankfort Commercial
Redevelopment RB 6.01 4/01/2007 755
4,000 Wood Dale IDRB, Series 1985 (LOC) 4.55 6/01/2000 4,000
Iowa (0.5%)
5,000 Louisa County PCRB, Series A 3.00 9/01/2016 5,000
Kansas (0.3%)
3,550 Overland Park RB, Series 1996 2.90 11/01/2001 3,550
Louisiana (0.6%)
6,000 Ascension Parish PCRB,
Series 1985 (LOC) 3.35 12/01/2005 6,000
Missouri (0.2%)
1,600 Jackson County IDA RB,
Series 1996A (LOC) 3.30 11/01/2016 1,600
New York (0.2%)
1,500 Chautauqua County IDA IDRB,
Series 1984A (LOC) 4.60 1/01/2000 1,500
795 St. Lawrence County IDA PCRB,
Series 1985 (LOC) 3.30 12/01/2007 795
Pennsylvania (1.4%)
Allegheny County IDA RB,
3,600 Series 1997B (LOC) 3.15 7/01/2027 3,600
10,550 Series 1997D (LOC) 3.15 7/01/2027 10,550
Texas (0.9%)
9,280 Nueces River Auth. PCRB,
Series 1985 (LOC) 3.35 12/01/1999 9,280
Utah (0.8%)
8,470 Provo Housing MFH RB, Series
1987A (LOC) 4.90 12/15/2010 8,470
Washington (0.3%)
2,825 Housing Finance Commission RB,
Series 1990 (LOC) 3.25 1/01/2021 2,825
Wisconsin (0.1%)
700 Health and Educational Facilities
Auth. RB, Series 1997 (LOC) 3.20 11/01/2017 700
- --------------------------------------------------------------------------------
Total variable rate demand notes
(cost: $194,860) 194,860
- --------------------------------------------------------------------------------
Total investments (cost: $1,019,672) $1,037,335
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Multi-Family Housing 14.3%
Hospitals 13.3
General Obligations 11.8
Escrowed Bonds 8.5
Appropriated Debt 5.2
Education 5.1
Finance - Municipal 4.8
Student Loans 4.1
Water/Sewer Utilities - Municipal 4.0
Electric/Gas Utilities - Municipal 3.8
Nursing/Continuing Care Centers 3.4
Single-Family Housing 2.9
Special Assessment/Tax/Fee 2.7
Paper & Forest Products 2.6
Chemicals 1.9
Airport/Port 1.9
Aluminum 1.6
Real Estate Tax/Free 1.3
Agricultural Products 1.2
Foods 1.1
Buildings 1.0
Other 3.9
-----
Total 100.4%
=====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama .1% Michigan 1.9%
Alaska 1.2 Minnesota 1.9
Arizona 1.7 Mississippi 1.4
Arkansas .5 Missouri .1
California 14.3 Nebraska .2
Colorado .8 New Jersey .1
Connecticut 1.1 New York 16.9
District of Columbia 2.3 North Carolina 1.1
Florida 5.1 Ohio .6
Georgia .4 Oklahoma 1.8
Guam 2.9 Pennsylvania 6.9
Hawaii .5 Puerto Rico 2.5
Idaho .4 Tennessee .5
Illinois 5.3 Texas 8.0
Indiana 3.6 Utah .8
Iowa .5 Virginia .2
Kansas .3 Washington .3
Louisiana 6.9 West Virginia 1.9
Maine 1.4 Wisconsin .2
Massachusetts 3.1 Wyoming .7
-----
Total 100.4%
=====
USAA TAX EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 1999
Principal Coupon Final
Amount Security Rate Maturity Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES (75.7%)
Alabama (1.2%)
$ 9,500 Evergreen Board IDRB,
Series 1985 (LOC) 3.30% 12/01/2004 $ 9,500
12,000 Mobile IDB PCRB, Series 1993C 3.11 8/01/2017 12,000
Arizona (0.4%)
6,900 Pinal County IDA RB, Series
1995 (LOC) 3.10 12/01/2022 6,900
1,000 Tucson IDA MFH RB, Series
1989 (LOC) 4.85 2/01/2006 1,000
Arkansas (0.9%)
15,500 Hospital Equipment Finance Auth.
RB, Series 1998A (LOC) 3.10 11/01/2028 15,500
California (1.6%)
4,645 Fillmore COP, Series 1997 (LOC) 2.85 5/01/2029 4,645
3,600 Irvine IDA RB, Series 1985 (LOC) 4.10 11/01/2005 3,600
6,950 Livermore MFH RB, Series
1990A (LOC) 4.55 5/01/2020 6,950
5,500 Orange County Apartment Development
RB, Series 1985D (LOC) 4.50 4/01/2006 5,500
7,900 San Diego MFH RB, Series 1993A
(NBGA) 3.25 12/01/2015 7,900
Colorado (1.4%)
2,200 Aurora IDRB, Series 1991 (LOC) 3.05 8/01/2001 2,200
3,590 Denver City and County MFH RB,
Series 1985 (LOC) 3.35 12/01/2009 3,590
9,000 Educational and Cultural Facilities
RB, Series 1998 (LOC) 3.15 8/01/2013 9,000
3,150 El Paso County Economic Development
RB, Series 1996 (LOC) 3.15 11/01/2021 3,150
Health Facilities Auth. RB,
1,810 Series 1995 (LOC) 3.15 9/01/2015 1,810
1,875 Series 1996A (LOC) 3.15 12/01/2016 1,875
4,000 Postsecondary Educational Facilities
Auth. RB, Series 1998 (LOC) 3.10 4/01/2013 4,000
District of Columbia (2.4%)
7,200 Catholic University of America RB,
Series 1989A (LOC) 4.75 12/01/2009 7,200
10,800 GO, Series 1991B-1 (LOC) 3.25 6/01/2003 10,800
7,535 Housing Finance Agency MFH RB,
Series 1985A (LOC) 4.55 12/01/2005 7,535
Revenue Bond,
2,700 Series 1985
(George Washington Univ.) (LOC) 3.05 3/01/2006 2,700
2,775 Series 1985A
(George Washington Univ.) (LOC) 3.05 3/01/2006 2,775
10,830 Series 1999C (National Academy of
Sciences Project) (INS) (2) 3.10 1/01/2039 10,830
Florida (6.4%)
5,225 Atlantic Beach Improvement and
Refunding RB, Series 1994B (LOC) 3.25 10/01/2024 5,225
700 Brevard County Housing Finance
Auth. MFH RB, Series 1993 (NBGA) 3.10 7/01/2005 700
2,885 Broward County Housing Finance
Auth. MFH RB, Series 1990 (NBGA) 3.10 10/01/2007 2,885
Dade County IDA RB,
2,700 Series 1993 3.25 6/01/2021 2,700
2,350 Series 1996 (LOC) 3.05 10/01/2016 2,350
4,000 Housing Finance Agency, Series
1985D (LOC) 3.10 8/01/2006 4,000
Housing Finance Agency MFH RB,
9,270 Series 1985 EE (LOC) 3.00 9/01/2008 9,270
2,485 Series 1985C (LOC) 3.10 8/01/2006 2,485
3,300 Series 1985GGG (LOC) 4.75 12/01/2008 3,300
17,200 Series 1985U (LOC) 3.00 7/01/2008 17,200
8,885 Series 1990D (NBGA) 3.10 12/01/2009 8,885
Jacksonville Hospital RB,
7,900 Series 1988 (LOC) 4.50 2/01/2018 7,900
8,700 Series 1989 (LOC) 4.50 2/01/2019 8,700
3,490 Lee County IDA Health Care Facs
RB, Series 1996 (LOC) 3.05 6/01/2016 3,490
4,700 Miami Dade County Educational
Facilities Auth. RB, Series
1998 (LOC) 3.05 10/01/2018 4,700
14,245 Orange County Health Facilities
Auth. RB, Series 1998 (LOC) 3.05 11/01/2028 14,245
11,250 Pinellas County Health Facilities
Auth. RB, Series 1985
(LIQ)(INS) (2) 3.10 12/01/2015 11,250
3,800 Volusia County Health Facilities
Auth. RB, Series 1995 (LOC) 3.15 9/01/2020 3,800
Georgia (2.1%)
3,400 Burke County IDA PCRB, Series 1994 3.20 7/01/2024 3,400
8,330 Clayton County MFH RB, Series
1989 (LOC) 3.25 11/01/2006 8,330
1,700 Columbus IDA RB, Series 1991 (LOC) 3.05 1/01/2011 1,700
7,100 De Kalb County Development Auth.
PCRB, Series 1987 3.05 4/01/2009 7,100
2,100 Fulton County Development Auth.
PCRB, Series 1987 3.05 4/01/2010 2,100
5,000 Fulton County Housing Auth.
MFH RB (LOC) 3.10 6/01/2023 5,000
7,000 Fulton County Residential Care
Facilities RB, Series 1996 (LOC) 3.15 1/01/2018 7,000
3,090 Peachtree Development Auth. RB,
Series 1988 (LOC) 3.30 7/01/2010 3,090
Illinois (4.4%)
5,500 Chicago Tax Increment Allocation
RB, Series 1996B (LOC) 3.10 12/01/2014 5,500
Development Finance Auth. MFH RB,
805 Series 1991 (LOC) 4.50 10/01/2005 805
2,735 Series 1991 (LOC) 4.50 10/01/2015 2,735
14,700 Series 1993 (NBGA) 3.10 12/01/2013 14,700
Development Finance Auth. RB,
2,500 Series 1998 (LOC) 3.25 8/01/2022 2,500
3,000 Series 1999B (LOC) 3.15 6/30/1999 3,000
1,605 Evanston IDRB, Series 1985 (LOC) 3.65 1/01/2015 1,605
11,795 Hopedale IDRB, Series 1998 (LOC) 3.15 5/01/2009 11,795
10,100 Housing Development Auth. RB,
Series 1985U (LOC) 3.20 1/01/2008 10,100
1,400 Lake County Industrial Building
RB, Series 1985 (LOC) 4.30 10/01/2015 1,400
21,285 Schaumburg MFH RB,
Series 1989 (LOC) 3.25 12/01/2004 21,285
1,925 Winnebago County Health Care
Facility RB, Series 1996 (LOC) 3.20 1/01/2017 1,925
Indiana (1.6%)
Crawfordsville Economic
Development RB,
3,500 Series 1999A (LOC) 3.20 1/01/2030 3,500
700 Series 1999B (LOC) 3.20 1/01/2030 700
2,565 Development Finance Auth. Economic
Development RB, Series 1998 (LOC) 3.15 9/01/2018 2,565
1,535 Hobart Economic Development RB,
Series 1993 (LOC) 3.15 6/01/2003 1,535
2,200 Huntington Economic Development
RB, Series 1998 (LOC) 3.15 12/01/2025 2,200
1,300 Huntington Industrial Economic
Development RB, Series 1990 3.10 6/26/2014 1,300
4,750 Indianapolis Economic Development
RB, Series 1997 (LOC) 3.15 5/01/2018 4,750
7,600 Princeton PCRB, Series 1996 (LOC) 3.15 3/01/2019 7,600
3,500 State Development Finance Auth.
RB, Series 1996 (LOC) 3.10 7/01/2026 3,500
Iowa (1.3%)
5,300 Chillicothe PCRB, Series 1991 3.05 11/01/2010 5,300
3,900 Finance Auth. MFH Refunding RB,
Series 1995A (LOC) 3.20 12/01/2017 3,900
2,000 Finance Auth. RB, Series
1998 (LOC) 3.20 6/01/2028 2,000
7,000 Ottumwa Purchase RB, Series
1998 (LOC) 3.05 10/01/2006 7,000
4,000 Woodbury County Educational
Facility RB, Series 1996 (LOC) 3.10 11/01/2016 4,000
Kansas (3.9%)
56,500 Burlington Environmental
Improvement RB, Series 1998A 3.10 9/01/2015 56,500
9,200 Development Finance Auth. RB,
Series 1998BB (LOC) 3.15 11/15/2028 9,200
2,800 Wichita Health Systems RB,
Series 1985XXV (LOC) 4.55 10/01/2011 2,800
Kentucky (4.1%)
7,000 Economic Development Finance Auth.
Hospital RB, Series 1998A (LOC) 3.10 8/01/2013 7,000
Economic Development Finance
Auth. RB,
1,800 Series 1997 (LOC) 3.20 11/01/2017 1,800
22,850 Series 1998 (LIQ)(INS) (8) 3.15 8/01/2018 22,850
2,000 Frankfort Economic Development
RB, Series 1990 3.10 5/07/2014 2,000
9,490 Hancock County Industrial Building
RB, Series 1991 (LOC) 3.25 7/01/2011 9,490
3,190 Hardin County Water District
Number 001 Water RB, Series
1998 (LOC) 3.15 9/01/2018 3,190
6,835 Jefferson County Industrial
Building RB, Series 1997 (LOC) 3.15 1/01/2011 6,835
9,100 Jefferson County MFH RB,
Series 1996 (LOC) 3.10 12/01/2026 9,100
10,000 Ohio County PCRB, Series
1983 (LIQ)(INS) (2) 3.05 6/01/2013 10,000
Louisiana (5.4%)
Ascension Parish PCRB,
6,600 Series 1992 3.10 3/01/2011 6,600
1,550 Series 1990 3.10 9/01/2010 1,550
9,000 Delhi IDRB, Series 1996 3.20 12/01/2012 9,000
1,625 East Baton Rouge IDB IDRB,
Series 1992 (LOC) 3.05 7/01/2002 1,625
3,500 East Baton Rouge Parish PCRB,
Series 1993 3.05 3/01/2022 3,500
Housing Finance Agency MFH RB,
7,025 Series 1988A (LOC) 5.15 1/01/2026 7,025
9,040 Series 1988B (LOC) 5.15 12/01/2025 9,040
5,970 Public Facilities Auth. IDRB,
Series 1996 (LOC) 3.30 12/01/2014 5,970
Public Facilities Auth. MFH RB,
8,700 Series 1988 (NBGA) 3.10 12/01/2013 8,700
11,600 Series 1991 (NBGA) 3.35 7/01/2007 11,600
1,100 Public Facilities Auth. PCRB 3.10 8/01/2017 1,100
28,000 Public Facilities Auth. RB,
Series 1999 (LOC) 3.20 9/01/2028 28,000
900 Sulphur IDRB, Series 1994 (LOC) 3.05 12/01/2004 900
Maryland (1.5%)
Montgomery County MFH RB,
6,400 1985 Issue B (NBGA) 3.20 8/01/2015 6,400
20,200 1993 Issue I (NBGA) (d) 3.15 11/01/2020 20,200
Massachusetts (1.7%)
5,815 Industrial Finance Agency RB,
Series 1997 (LOC) 3.23 5/01/2027 5,815
23,990 Revere Housing Auth. MFH RB,
Series 1991C (LOC) 3.30 9/01/2028 23,990
Michigan (5.3%)
10,000 Dearborn Economic Development
Corp. RB, Series 1998 (LOC) 3.10 10/01/2023 10,000
24,200 Detroit Downtown Development
Auth. RB (LOC) 3.15 12/01/2010 24,200
5,300 Grand Rapids IDRB (LOC) 3.20 1/01/2010 5,300
Hospital Finance Auth.
Equipment Loan RN,
4,035 Series A #18 (LOC) 3.15 12/01/2023 4,035
6,600 Series A #16 (LOC) 3.15 12/01/2023 6,600
10,000 Series A #17 (LOC) 3.15 12/01/2023 10,000
11,500 Series A #19 (LOC) 3.15 12/01/2023 11,500
3,600 Series A #7 (LOC) 3.15 12/01/2023 3,600
4,900 Jackson County Economic Development
Corp. RB, Series 1997 (LOC) 3.15 6/01/2027 4,900
7,300 Job Development Auth. PCRB,
Series 1996 (LOC) 4.60 10/01/2008 7,300
4,700 Strategic Fund Limited Obligation
RB, Series 1994 3.15 2/01/2009 4,700
1,200 Strategic Fund PCRB, Series 1993 3.05 4/01/1999 1,200
Mississippi (0.2%)
4,280 Hinds County Urban Renewal RN,
Series 1991 (LOC) 3.10 1/01/2007 4,280
Missouri (2.0%)
2,700 Callaway County IDA RB,
Series 1995 (LOC) 3.05 4/01/2015 2,700
Clayton IDA RB,
5,475 Series 1994A (LOC) 3.35 12/01/2006 5,475
5,525 Series 1994B (LOC) 3.35 2/01/2007 5,525
8,000 Series 1995C (LOC) 3.35 5/01/2005 8,000
4,600 Jackson County IDA RB,
Series 1996A (LOC) 3.30 11/01/2016 4,600
2,700 St. Louis IDA RB,
Series 1997 (LOC) 3.35 8/30/1999 2,700
6,000 State Health and Educational
Facilities Auth. RB,
Series 1998 (LOC) 3.10 7/01/2023 6,000
1,000 West Plains IDA, Series 1986 (LOC) 4.50 11/01/2010 1,000
New Hampshire (1.2%)
6,090 Higher Educational and Health
Facilities RB, Series 1996 (LOC) 3.00 5/01/2026 6,090
3,015 Housing Finance Auth. MFH RB,
Series 1990 (NBGA) 3.10 7/01/2006 3,015
12,505 Manchester Housing Auth. MFH RB,
Series 1990A (LOC) 3.15 6/15/2015 12,505
New Jersey (0.1%)
1,965 Newark Healthcare Facility RB,
Series A (LOC) 4.75 6/01/2030 1,965
New York (1.1%)
2,900 New York City GO, Series
1994A-4 (LOC) 3.10 8/01/2021 2,900
New York City Municipal
Assistance Corp. RB,
2,500 Series K (LOC) 3.15 7/01/2008 2,500
4,900 Series K-2 (LOC) 3.15 7/01/2008 4,900
5,785 Ramapo Housing Auth. RB,
Series 1998 (LOC) 3.29 12/01/2029 5,785
2,750 Rockland County IDA RB,
Series 1999 (LOC) 3.29 2/01/2029 2,750
North Carolina (0.2%)
3,300 Buncombe County Industrial
Facilities Financing Auth. IDRB,
Series 1996 3.10 11/01/2006 3,300
Ohio (2.4%)
6,000 Clark County IDA RB (LOC) 3.29 12/01/2010 6,000
22,000 Clinton County Hospital RB,
Series 1998(LOC) 3.10 6/01/2028 22,000
9,535 Higher Educational Facility
Commission RB (LOC) 3.10 9/01/2018 9,535
4,800 Stark County IDRB,
Series 1984 (LOC) 3.30 9/01/2001 4,800
Oklahoma (0.9%)
1,935 Claremore Industrial and
Redevelopment Auth. IDRB,
Series 1991 (LOC) 3.05 1/01/2011 1,935
6,000 Muskogee Industrial Trust PCRB,
Series 1995A 3.15 1/01/2025 6,000
Muskogee Industrial Trust RB,
2,860 Series 1985, Muskogee Mall
Project (LOC) 3.20 12/01/2015 2,860
2,400 Series 1985, Warmack-Muskogee
Project (LOC) 3.20 12/01/2015 2,400
2,500 Oklahoma County Industrial Auth.
RB, Series 1999 (LOC) 3.10 4/01/2014 2,500
Oregon (5.2%)
Medford Hospital Facilities
Auth. RB,
15,000 Series 1985 (LOC) 3.20 12/01/2015 15,000
16,300 Series 1991 (LOC) 3.20 5/01/2021 16,300
23,355 Series 1997 (LOC) 3.20 5/15/2027 23,355
38,100 Port of Portland Public Grain
Elevator RB, Series 1984 (LOC) 4.50 12/01/2014 38,100
Pennsylvania (7.6%)
8,000 Allegheny County Higher Education
Building Auth. RB,
Series 1998B (LOC) 3.15 9/01/2028 8,000
Allegheny County Hospital
Development Auth. RB,
14,600 Series 1998B (LOC) 3.45 3/01/2007 14,600
15,100 Series 1998C (LOC) 3.45 3/01/2013 15,100
12,980 Series 1998D (LOC) 3.45 3/01/2018 12,980
Allegheny County IDA RB,
1,750 Series 1994 (LOC) 3.35 12/01/2008 1,750
1,050 Series 1997D (LOC) 3.15 7/01/2027 1,050
3,500 Clinton County IDA RB,
Series 1985 (LOC) 3.35 9/01/2005 3,500
77,060 Harrisburg Auth. RB,
Series 1996 (NBGA) (d) 3.15 7/01/2021 77,060
South Carolina (0.6%)
Educational Facilities Auth. RB,
1,700 Series 1997 (LOC) 3.05 7/01/2017 1,700
3,500 Series 1998 (LOC) 3.05 9/01/2018 3,500
3,000 Jobs Economic Development Auth.
RB, Series 1998 (LOC) 3.05 9/01/2016 3,000
2,400 Sumter County IDRB, Series
1982 (LOC) 3.13 12/01/2002 2,400
Tennessee (2.8%)
1,400 Maryville IDB Education RB,
Series 1997B (LOC) 3.35 8/01/2002 1,400
9,320 Memphis Health, Education and
Housing Facility Board MFH RB,
Series 1990 (LOC) 3.25 1/01/2020 9,320
9,680 Nashville and Davidson County
IDB MFH RB, Series 1989 (LOC) 3.15 10/01/2019 9,680
14,205 Nashville and Davidson County
IDB RB, Series 1995 (NBGA) 3.20 11/01/2012 14,205
14,135 Shelby County Health, Educational
and Housing Facilities Board RB,
Series 1984 (LOC) 3.00 10/01/2024 14,135
Texas (4.0%)
10,600 Amarillo Health Facilities Corp.
RB, Series 1985 (LOC) 3.20 5/31/2025 10,600
5,915 Arlington IDC RB,
Series 1985 (LOC) 4.60 10/01/2020 5,915
2,320 Austin County IDC IDRB,
Series 1998 (LOC) 3.15 11/01/2002 2,320
3,070 Bell County Health Facilities
Development Corp. RB,
Series 1998 (LOC) 3.15 5/01/2023 3,070
4,000 Gulf Coast Waste Disposal
Authority PCRB, Series 1995 3.15 6/01/2020 4,000
3,300 Harris County Housing Finance
Corp. MFH RB, Series 1988A (NBGA) 3.20 6/01/2005 3,300
2,000 Harris County IDC PCRB, Series 1997 3.10 4/01/2027 2,000
2,200 Health Facilities Development Corp.
Hospital RB, Series 1985A (LOC) 3.30 5/31/2025 2,200
7,600 Health Facilities Development Corp.
RB, Series 1985B (LOC) 3.30 8/01/2025 7,600
4,095 Matagorda County Hospital District
RB, Series 1988 (LOC) 3.30 8/01/2018 4,095
2,220 Metropolitan Higher Education
Auth. RB, Series 1984 (LOC) 4.05 12/01/2004 2,220
1,130 North Central IDA RB, Series 1983 3.10 10/01/2013 1,130
4,070 Nueces River Auth. PCRB,
Series 1985 (LOC) 3.35 12/01/1999 4,070
13,085 Port Arthur Navigation District
IDC PCRB, Series 1985 (LOC) 3.35 5/01/2003 13,085
1,850 Port Corpus Christi IDC RB,
Series 1992 (LOC) 3.15 7/01/2002 1,850
4,110 Tarrant County Housing Finance
Corp. MFH RB, Series 1985 (LOC) 3.10 12/01/2025 4,110
Utah (0.6%)
7,500 Ogden City IDRB, Series 1986 (LOC) 3.10 9/01/2013 7,500
3,000 Salt Lake County PCRB, Series 1994 3.15 2/01/2008 3,000
Virginia (0.5%)
2,275 Alexandria Redevelopment and
Housing Auth. RB, Series 1996B 3.20 10/01/2006 2,275
2,300 Chesterfield County IDA PCRB,
Series 1993 3.10 8/01/2009 2,300
3,800 Petersburg Hospital Auth. RB,
Series 1997 (LOC) 3.20 7/01/2017 3,800
860 Roanoke IDA RB, Series 1994 3.10 12/01/2013 860
Washington (0.4%)
7,525 Housing Finance Commission RB,
Series 1990 (LOC) 3.25 1/01/2021 7,525
Wisconsin (0.1%)
1,545 Green Bay IDRB, Series 1998 (LOC) 3.10 7/01/2013 1,545
Wyoming (0.2%)
3,400 Lincoln County PCRB, Series 1984C 3.30 11/01/2014 3,400
- --------------------------------------------------------------------------------
Total variable rate demand notes
(cost: $1,338,005) 1,338,005
- --------------------------------------------------------------------------------
PUT BONDS (12.0%)
California (1.9%)
Higher Education Loan Auth. RB,
20,825 Series 1987A (LOC) 3.80 6/01/2001 20,825
12,250 Series 1987B (NBGA) 3.65 7/01/2002 12,250
Illinois (3.7%)
Health Facilities Auth. RB,
11,000 Series 1985B 3.55 8/15/2005 11,000
20,000 Series 1988 3.05 8/15/2010 20,000
20,000 Series 1995 3.80 6/01/2030 20,000
14,000 Series 1996 3.70 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
Maine (0.1%)
2,500 Housing Auth. RB, Series A-2 3.80 11/15/2015 2,500
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) 3.25 7/01/2007 7,205
North Carolina (0.5%)
10,000 Wake County Industrial Facilities
PCRB, Series 1990B (LOC) 3.10 6/15/2014 10,000
Oregon (2.8%)
Klamath Falls Electric RB,
40,880 Series 1986B (f) 3.80 5/01/2023 40,880
8,000 Series 1986E 3.80 5/01/2023 8,000
Texas (0.7%)
11,840 Brazos Harbor IDC RB, Series 1986 3.15 8/01/2004 11,840
- --------------------------------------------------------------------------------
Total put bonds (cost: $212,530) 212,530
- --------------------------------------------------------------------------------
FIXED RATE INSTRUMENTS (13.3%)
Colorado (0.1%)
1,060 Inverness Metropolitan Improvement
District RB, Series 1999A (INS) 3.50 9/01/1999 1,062
Florida (0.1%)
1,825 Halifax Hospital Medical Center
TAN, Series 1999 (LOC) 3.50 3/15/2000 1,833
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 501
Iowa (0.4%)
Higher Education RAN,
3,500 Series 1998B (LOC) 4.25 7/07/1999 3,505
3,000 Series 1998C 4.25 7/07/1999 3,004
1,300 Series 1998D (LOC) 4.25 7/07/1999 1,302
Kansas (0.8%)
Wyandotte County/Kansas City
Municipal Temporary Notes,
2,200 Series MMM 3.70 8/01/1999 2,200
1,295 Series DDD 3.70 8/01/1999 1,295
690 Series EEE 3.75 8/01/1999 690
1,000 Series QQQ 3.70 8/01/1999 1,000
1,263 Series RRR 3.70 8/01/1999 1,262
1,050 Series S 3.70 8/01/1999 1,050
482 Series SSS 3.75 8/01/1999 482
3,205 Series VV 3.70 8/01/1999 3,204
2,400 Series YY 3.70 8/01/1999 2,399
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 (0.6%)
3,370 Springfield GO BAN (LOC) 4.00 6/25/1999 3,372
4,600 Springfield GO BAN (LOC) 4.00 9/02/1999 4,609
2,000 Turnpike Authority BAN,
Series 1996A (PRE) 5.00 6/01/1999 2,006
Minnesota (0.1%)
2,350 Public Facilities Auth. PCRB,
Series 1990A (PRE) 7.10 3/01/2012 2,476
New Jersey (4.1%)
1,076 Bayonne City BAN 3.60 9/10/1999 1,078
3,000 Bayonne City Temporary Notes 3.60 9/10/1999 3,007
44,370 Jersey City BAN (f) 4.00 9/17/1999 44,483
23,180 Jersey City School Promissory Notes 3.50 3/03/2000 23,269
New York (2.6%)
1,475 Dutchess County Resource Recovery
Agency RB, Series 1990A (PRE) 7.20 1/01/2002 1,547
Nassau County BAN,
20,000 Series 1999B (e) 3.63 8/17/1999 20,034
7,796 Series 1999B 3.50 8/17/1999 7,805
10,788 Oneida County GO BAN, Series 1998 4.00 4/23/1999 10,789
4,995 Urban Development Corp. RB,
Series G (PRE) 6.00 1/01/2019 5,096
Ohio (0.1%)
1,000 Columbus Refunding RB,
Series 1992B 5.80 1/01/2000 1,021
Rhode Island (0.6%)
5,055 Health & Education RB,
Series 1991 (PRE) 6.75 9/11/2011 5,230
5,500 State Resource Recovery Corp.
Landfill Lease Notes,
Series 1998A 4.00 7/30/1999 5,505
Texas (2.9%)
2,000 Allen ISD TRAN, Series 1998 3.88 8/31/1999 2,003
Dallas Area Rapid Transit
CP Notes,
8,400 Series A (LOC) 3.00 4/21/1999 8,400
7,000 Series A (LOC) 3.20 8/20/1999 7,000
7,750 Series B (LOC) 3.15 4/19/1999 7,750
2,385 Dallas Waterworks and Sewer
System CP Notes 3.20 8/20/1999 2,385
15,000 Houston Water and Sewer System CP
Notes, Series A 2.95 4/22/1999 15,000
9,300 Lower Colorado River Authority
Refunding RB, Series 1996 5.50 1/01/2000 9,460
Washington (0.1%)
2,750 Spokane RN, Series 1999 3.50 1/31/2000 2,761
Wisconsin (0.5%)
3,425 Glendale Riverhills School
District TRAN 4.00 8/20/1999 3,430
5,000 Sparta Area School District BAN 3.25 3/01/2000 5,005
- --------------------------------------------------------------------------------
Total fixed rate instruments
(cost: $234,156) 234,156
- --------------------------------------------------------------------------------
Total investments (cost: $1,784,691) $1,784,691
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Multi-Family Housing 20.4%
Hospitals 15.5
General Obligations 8.9
Nursing/Continuing Care Centers 7.3
Finance - Municipal 6.9
Electric Utilities 5.9
Education 4.4
Electric/Gas Utilities - Municipal 3.9
Buildings 3.5
Manufacturing - Diversified Industries 2.7
Community Service 2.2
Agricultural Products 2.2
Student Loans 2.0
Healthcare - Miscellaneous 1.8
Sales Tax 1.7
Chemicals 1.6
Water/Sewer Utilities - Municipal 1.4
Lodging/Hotel 1.0
Other 7.7
-----
Total 101.0%
=====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.2% Missouri 2.0%
Arizona .4 Montana 1.6
Arkansas .9 New Hampshire 1.6
California 3.5 New Jersey 4.2
Colorado 1.5 New York 3.6
District of Columbia 2.4 North Carolina .8
Florida 6.5 Ohio 2.5
Georgia 2.1 Oklahoma .9
Illinois 8.1 Oregon 8.0
Indiana 1.6 Pennsylvania 7.6
Iowa 1.7 Rhode Island .6
Kansas 4.6 South Carolina .6
Kentucky 4.4 Tennessee 2.8
Louisiana 5.6 Texas 7.7
Maine .1 Utah .6
Maryland 1.5 Virginia .5
Massachusetts 2.3 Washington .6
Michigan 5.3 Wisconsin .6
Minnesota .1 Wyoming .2
Mississippi .2 -----
Total 101.0%
=====
NOTES TO PORTFOLIOS OF INVESTMENTS
March 31, 1999
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 3.4%, 9.7%, and 6.5% 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
0.3%, 0.2%, and 1.3% 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 2.1%, 1.6%, 1.1%, and 5.5% of the USAA Long-Term, USAA
Intermediate-Term, USAA Short-Term, and USAA Tax Exempt Money Market Funds' net
assets, respectively.
(e) At March 31, 1999, the cost of securities purchased on a delayed delivery
basis for the USAA Long-Term, USAA Intermediate-Term, USAA Short-Term Funds, and
USAA Tax Exempt Money Market Funds, was $49.1, $9.1, $14.1, and $20.0 million,
respectively.
(f) At March 31, 1999, these securities were segregated to cover delayed
delivery purchases.
See accompanying notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
March 31, 1999
USAA USAA
Long-Term Intermediate-Term
Fund Fund
-------------------------------
ASSETS
Investments in securities, at market value
(identified cost of $1,992,761 and
$2,186,720, respectively) $2,147,335 $2,322,721
Cash 488 532
Receivables:
Capital shares sold 99 824
Interest 32,880 33,960
Securities sold 41,136 -
-------------------------------
Total assets 2,221,938 2,358,037
-------------------------------
LIABILITIES
Securities purchased 49,057 9,830
Capital shares redeemed 720 545
USAA Investment Management Company 517 556
USAA Transfer Agency Company 87 95
Accounts payable and accrued expenses 181 199
Dividends on capital shares 3,134 2,411
-------------------------------
Total liabilities 53,696 13,636
-------------------------------
Net assets applicable to
capital shares outstanding $2,168,242 $2,344,401
===============================
REPRESENTED BY:
Paid-in capital $2,032,092 $2,208,590
Accumulated net realized loss on investments (18,424) (190)
Net unrealized appreciation of investments 154,574 136,001
-------------------------------
Net assets applicable to
capital shares outstanding $2,168,242 $2,344,401
===============================
Capital shares outstanding 155,789 175,024
===============================
Authorized shares of $.01 par value 290,000 302,000
===============================
Net asset value, redemption price,
and offering price per share $ 13.92 $ 13.39
===============================
See accompanying notes to financial statements.
USAA USAA Tax Exempt
Short-Term Money Market
Fund Fund
-------------------------------
ASSETS
Investments in securities, at market value
(identified cost of $1,019,672, and
$1,784,691, respectively) $1,037,335 $1,784,691
Cash 773 3,481
Receivables:
Capital shares sold 772 2,127
Interest 11,956 9,660
Securities sold - 5,500
-------------------------------
Total assets 1,050,836 1,805,459
-------------------------------
LIABILITIES
Securities purchased 14,063 32,957
Capital shares redeemed 2,189 4,586
USAA Investment Management Company 245 457
USAA Transfer Agency Company 48 79
Accounts payable and accrued expenses 120 160
Dividends on capital shares 611 184
-------------------------------
Total liabilities 17,276 38,423
-------------------------------
Net assets applicable to
capital shares outstanding $1,033,560 $1,767,036
===============================
REPRESENTED BY:
Paid-in capital $1,019,351 $1,767,036
Accumulated net realized loss on investments (3,454) -
Net unrealized appreciation of investments 17,663 -
-------------------------------
Net assets applicable to
capital shares outstanding $1,033,560 $1,767,036
===============================
Capital shares outstanding 96,372 1,767,036
===============================
Authorized shares of $.01 par value 190,000 3,235,000
===============================
Net asset value, redemption price,
and offering price per share $ 10.72 $ 1.00
===============================
See accompanying notes to financial statements.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Year ended March 31, 1999
USAA USAA
Long-Term Intermediate-Term
Fund Fund
-------------------------------
Net investment income:
Interest income $123,377 $121,825
-------------------------------
Expenses:
Management fees 5,953 6,119
Transfer agent's fees 1,004 1,072
Custodian's fees 245 295
Postage 86 99
Shareholder reporting fees 44 42
Directors' fees 4 4
Registration fees 187 193
Professional fees 37 37
Other 65 24
-------------------------------
Total expenses 7,625 7,885
-------------------------------
Net investment income 115,752 113,940
-------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain 14,433 2,285
Change in net unrealized
appreciation/depreciation (26,388) (1,210)
-------------------------------
Net realized and unrealized
gain (loss) (11,955) 1,075
-------------------------------
Increase in net assets resulting
from operations $103,797 $115,015
===============================
See accompanying notes to financial statements.
USAA USAA Tax Exempt
Short-Term Money Market
Fund Fund
-------------------------------
Net investment income:
Interest income $ 49,014 $ 59,361
-------------------------------
Expenses:
Management fees 2,781 4,635
Transfer agent's fees 591 922
Custodian's fees 188 334
Postage 54 115
Shareholder reporting fees 34 75
Directors' fees 4 4
Registration fees 81 118
Professional fees 37 51
Other 19 21
-------------------------------
Total expenses 3,789 6,275
-------------------------------
Net investment income 45,225 53,086
-------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain 149 -
Change in net unrealized
appreciation/depreciation (1,264) -
-------------------------------
Net realized and unrealized loss (1,115) -
-------------------------------
Increase in net assets resulting
from operations $ 44,110 $ 53,086
===============================
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
USAA LONG-TERM FUND
(IN THOUSANDS)
Years ended March 31,
1999 1998
---------------------------
From operations:
Net investment income $ 115,752 $ 111,054
Net realized gain on investments 14,433 14,265
Change in net unrealized appreciation/
depreciation of investments (26,388) 97,208
---------------------------
Increase in net assets resulting
from operations 103,797 222,527
---------------------------
Distributions to shareholders from:
Net investment income (115,752) (111,054)
---------------------------
From capital share transactions:
Proceeds from shares sold 685,452 573,375
Dividend reinvestments 81,124 77,758
Cost of shares redeemed (628,904) (542,517)
---------------------------
Increase in net assets from
capital share transactions 137,672 108,616
---------------------------
Net increase in net assets 125,717 220,089
Net assets:
Beginning of period 2,042,525 1,822,436
---------------------------
End of period $2,168,242 $2,042,525
===========================
Change in shares outstanding:
Shares sold 48,886 41,889
Shares issued for dividends reinvested 5,780 5,652
Shares redeemed (44,798) (39,515)
---------------------------
Increase in shares outstanding 9,868 8,026
===========================
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA INTERMEDIATE-TERM FUND
(IN THOUSANDS)
Years ended March 31,
1999 1998
---------------------------
From operations:
Net investment income $ 113,940 $ 101,444
Net realized gain on investments 2,285 550
Change in net unrealized appreciation/
depreciation of investments (1,210) 84,518
---------------------------
Increase in net assets resulting
from operations 115,015 186,512
---------------------------
Distributions to shareholders from:
Net investment income (113,940) (101,444)
---------------------------
From capital share transactions:
Proceeds from shares sold 482,044 372,339
Dividend reinvestments 87,970 78,233
Cost of shares redeemed (266,193) (221,819)
---------------------------
Increase in net assets from
capital share transactions 303,821 228,753
---------------------------
Net increase in net assets 304,896 313,821
Net assets:
Beginning of period 2,039,505 1,725,684
---------------------------
End of period $2,344,401 $2,039,505
===========================
Change in shares outstanding:
Shares sold 35,847 28,210
Shares issued for dividends reinvested 6,541 5,927
Shares redeemed (19,784) (16,867)
---------------------------
Increase in shares outstanding 22,604 17,270
===========================
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA SHORT-TERM FUND
(IN THOUSANDS)
Years ended March 31,
1999 1998
---------------------------
From operations:
Net investment income $ 45,225 $ 39,878
Net realized gain on investments 149 5
Change in net unrealized appreciation/
depreciation of investments (1,264) 13,208
---------------------------
Increase in net assets resulting
from operations 44,110 53,091
---------------------------
Distributions to shareholders from:
Net investment income (45,225) (39,878)
---------------------------
From capital share transactions:
Proceeds from shares sold 386,034 437,289
Dividend reinvestments 38,210 33,473
Cost of shares redeemed (360,374) (318,067)
---------------------------
Increase in net assets from
capital share transactions 63,870 152,695
---------------------------
Net increase in net assets 62,755 165,908
Net assets:
Beginning of period 970,805 804,897
---------------------------
End of period $1,033,560 $ 970,805
===========================
Change in shares outstanding:
Shares sold 35,919 40,893
Shares issued for dividends reinvested 3,554 3,130
Shares redeemed (33,532) (29,763)
---------------------------
Increase in shares outstanding 5,941 14,260
===========================
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
USAA TAX EXEMPT MONEY MARKET FUND
(IN THOUSANDS)
Years ended March 31,
1999 1998
---------------------------
From operations:
Net investment income $ 53,086 $ 52,442
---------------------------
Distributions to shareholders from:
Net investment income (53,086) (52,442)
---------------------------
From capital share transactions:
Proceeds from shares sold 1,991,129 1,717,592
Dividend reinvestments 50,435 49,796
Cost of shares redeemed (1,906,313) (1,701,237)
---------------------------
Increase in net assets from
capital share transactions 135,251 66,151
---------------------------
Net increase in net assets 135,251 66,151
Net assets:
Beginning of period 1,631,785 1,565,634
---------------------------
End of period $1,767,036 $1,631,785
===========================
Change in shares outstanding:
Shares sold 1,991,129 1,717,592
Shares issued for dividends reinvested 50,435 49,796
Shares redeemed (1,906,313) (1,701,237)
---------------------------
Increase in shares outstanding 135,251 66,151
===========================
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA Tax Exempt Fund, Inc. (the Company), registered under the Investment
Company Act of 1940, as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of ten
separate funds. The information presented in this annual report pertains only to
the 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 NationsBank of Texas, N.A. ($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 NationsBank, each Fund may borrow from NationsBank, at
NationsBank'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 year ended March 31, 1999, the USAA Long-Term Fund had
nine borrowings, averaging $12.4 million with an average length of two days, and
incurred $33,154 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 March 31, 1999, the
USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds had capital
loss carryovers for federal income tax purposes of approximately (in thousands)
$18,424, $190 and $3,454, 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
Cost of purchases and proceeds from sales/maturities of securities for the year
ended March 31, 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 $723,393 $521,315 $109,055 $5,104,073
Sales/maturities $620,032 $254,663 $ 59,123 $4,918,335
</TABLE>
For the USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds, cost
of purchases and proceeds from sales/maturities excludes short-term securities.
Gross unrealized appreciation and depreciation of investments at March 31, 1999
was as follows:
USAA USAA USAA
Long-Term Intermediate-Term Short-Term
Fund Fund Fund
($000) ($000) ($000)
-------------------------------------------------------
Appreciation $164,192 $138,991 $ 18,396
Depreciation (9,618) (2,990) (733)
-------------------------------------------------------
Net $154,574 $136,001 $ 17,663
=======================================================
(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 March 31, 1999, the Association and its affiliates
owned 5.1 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 (UNAUDITED)
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 is taking steps to address this potential year 2000 problem with
respect to the computer systems that they use 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.
(8) SHAREHOLDER DIVIDENDS (UNAUDITED)
The Funds completed their fiscal year on March 31, 1999. Federal law (Internal
Revenue Code of 1986, as amended, and the regulations thereunder) requires each
Fund to notify its shareholders after the close of its taxable year as to what
portion of its earnings was exempt from federal taxation and dividends which
represent long-term capital gains. The net investment income earned and
distributed by each of the Funds was 100% tax exempt for federal income tax
purposes. There were no long-term capital gain distributions for the year ended
March 31, 1999.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USAA LONG-TERM FUND
March 31, 1999
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 14.00 $ 13.22 $ 13.17 $ 12.96 $ 13.20
Net investment income .76 .78 .79 .79 .79
Net realized and
unrealized gain (loss) (.08) .78 .05 .21 (.16)
Distributions from net
investment income (.76) (.78) (.79) (.79) (.78)
Distributions of realized
capital gains - - - - (.09)
---------------------------------------------------------------
Net asset value at
end of period $ 13.92 $ 14.00 $ 13.22 $ 13.17 $ 12.96
===============================================================
Total return (%) * 4.98 12.04 6.51 7.88 5.07
Net assets at end
of period (000) $2,168,242 $2,042,525 $1,822,436 $1,804,116 $1,774,643
Ratio of expenses to
average net assets (%) .36 .36 .37 .37 .38
Ratio of net investment
income to average
net assets (%) 5.44 5.65 5.95 5.99 6.23
Portfolio turnover (%) 29.56 35.20 40.78 53.25 64.72
</TABLE>
*Assumes reinvestment of all dividend income and capital gains distributions
during the period.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USAA INTERMEDIATE-TERM FUND
March 31, 1999
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 13.38 $ 12.77 $ 12.77 $ 12.50 $ 12.48
Net investment income .70 .71 .72 .71 .69
Net realized and
unrealized gain .01 .61 - 27 .05
Distributions from net
investment income (.70) (.71) (.72) (.71) (.69)
Distributions of realized
capital gains - - - - (.03)
---------------------------------------------------------------
Net asset value at
end of period $ 13.39 $ 13.38 $ 12.77 $ 12.77 $ 12.50
===============================================================
Total return (%) * 5.42 10.59 5.80 7.97 6.16
Net assets at end
of period (000) $2,344,401 $2,039,505 $1,725,684 $1,660,039 $1,529,750
Ratio of expenses to
average net assets (%) .36 .37 .37 .38 .40
Ratio of net investment
income to average
net assets (%) 5.21 5.42 5.65 5.54 5.63
Portfolio turnover (%) 11.85 7.87 23.05 27.51 27.26
</TABLE>
*Assumes reinvestment of all dividend income and capital gains distributions
during the period.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USAA SHORT-TERM FUND
March 31, 1999
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 10.74 $ 10.57 $ 10.57 $ 10.47 $ 10.48
Net investment income .49 .49 .49 .50 .47
Net realized and
unrealized gain (loss) (.02) .17 - .10 (.01)
Distributions from net
investment income (.49) (.49) (.49) (.50) (.47)
---------------------------------------------------------------
Net asset value at
end of period $ 10.72 $ 10.74 $ 10.57 $ 10.57 $ 10.47
===============================================================
Total return (%) * 4.46 6.35 4.70 5.83 4.51
Net assets at end
of period (000) $1,033,560 $ 970,805 $ 804,897 $ 774,020 $ 801,157
Ratio of expenses to
average net assets (%) .38 .39 .41 .42 .42
Ratio of net investment
income to average
net assets (%) 4.55 4.57 4.60 4.73 4.50
Portfolio turnover (%) 7.34 7.91 27.67 35.99 32.61
</TABLE>
*Assumes reinvestment of all dividend income distributions during the period.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USAA TAX EXEMPT MONEY MARKET FUND
March 31, 1999
(9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .03 .03 .04 .03
Distributions from net
investment income (.03) (.03) (.03) (.04) (.03)
---------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================
Total return (%) * 3.26 3.48 3.30 3.65 2.98
Net assets at end
of period (000) $1,767,036 $1,631,785 $1,565,634 $1,529,176 $1,456,747
Ratio of expenses to
average net assets (%) .38 .38 .39 .40 .39
Ratio of net investment
income to average
net assets (%) 3.21 3.42 3.25 3.59 2.93
</TABLE>
*Assumes reinvestment of all dividend income distributions during the period.
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 7:30 a.m. to 8:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
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(Service Mark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
