TABLE OF CONTENTS
USAA FAMILY OF FUNDS 1
MESSAGE FROM THE PRESIDENT 2
INVESTMENT REVIEW
USAA Long-Term Fund 4
USAA Intermediate-Term Fund 9
USAA Short-Term Fund 14
USAA Tax Exempt Money Market Fund 19
FINANCIAL INFORMATION
Portfolios of Investments
Categories and Definitions 22
USAA Long-Term Fund 24
USAA Intermediate-Term Fund 32
USAA Short-Term Fund 48
USAA Tax Exempt Money Market Fund 59
Notes to Portfolios of Investments 70
Statements of Assets and Liabilities 71
Statements of Operations 73
Statements of Changes in Net Assets 75
Notes to Financial Statements 79
IMPORTANT INFORMATION
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Funds.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE USAA NATIONAL
TAX-EXEMPT FUNDS, MANAGED BY USAA INVESTMENT MANAGEMENT COMPANY (IMCO). THE
REPORT 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)2000, USAA. ALL RIGHTS RESERVED.
USAA FAMILY OF FUNDS SUMMARY
FUND MINIMUM
TYPE/NAME VOLATILITY INVESTMENT
-------------------------------------------------------
CAPITAL APPRECIATION
-------------------------------------------------------
Aggressive Growth Very high $3,000
Emerging Markets Very high 3,000
First Start Growth
(Registered Trademark) Moderate to high 3,000
Gold Very high 3,000
Growth Moderate to high 3,000
Growth & Income Moderate 3,000
International Moderate to high 3,000
S&P 500(Registered
Trademark)Index Moderate 3,000
Science & Technology Very high 3,000
Small Cap Stock Very high 3,000
World Growth Moderate to high 3,000
-------------------------------------------------------
ASSET ALLOCATION
-------------------------------------------------------
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate 3,000
Growth and Tax
Strategy Moderate 3,000
Growth Strategy Moderate to high 3,000
Income Strategy Low to moderate 3,000
-------------------------------------------------------
INCOME - TAXABLE
-------------------------------------------------------
GNMA(Registered
Trademark) Low to moderate $3,000
High-Yield
Opportunities High 3,000
Income Moderate 3,000
Income Stock Moderate 3,000
Intermediate-Term
Bond Low to moderate 3,000
Short-Term Bond Low 3,000
-------------------------------------------------------
INCOME - TAX EXEMPT
-------------------------------------------------------
Long-Term Moderate $3,000
Intermediate-Term Low to moderate 3,000
Short-Term Low 3,000
State Bond Income Moderate 3,000
-------------------------------------------------------
MONEY MARKET
-------------------------------------------------------
Money Market Very low $3,000
Tax Exempt
Money Market Very low 3,000
Treasury Money
Market Trust
(Registered Trademark) Very low 3,000
State Money Market Very low 3,000
-------------------------------------------------------
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, WHICH ARE DISCUSSED IN THE
FUNDS' PROSPECTUSES.
S&P 500(REGISTERED TRADEMARK)IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES, INC.
AND HAS BEEN LICENSED FOR USE. THE PRODUCT IS NOT SPONSORED, SOLD, OR PROMOTED
BY STANDARD & POOR'S, AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING
THE ADVISABILITY OF INVESTING IN THE PRODUCT.
SOME INCOME MAY BE SUBJECT TO STATE OR LOCAL TAXES OR THE FEDERAL ALTERNATIVE
MINIMUM TAX.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
THE SCIENCE & TECHNOLOGY FUND MAY BE MORE VOLATILE THAN A FUND THAT DIVERSIFIES
ACROSS MANY INDUSTRIES.
THE INVESTART(REGISTERED TRADEMARK) PROGRAM IS AVAILABLE FOR INVESTORS WITHOUT
THE $3,000 INITIAL INVESTMENT REQUIRED TO OPEN AN IMCO MUTUAL FUND ACCOUNT. A
MUTUAL FUND ACCOUNT CAN BE OPENED WITH NO INITIAL INVESTMENT IF YOU ELECT TO
HAVE MONTHLY AUTOMATIC INVESTMENTS OF AT LEAST $50 FROM A BANK ACCOUNT.
INVESTART IS NOT AVAILABLE ON TAX-EXEMPT FUNDS OR THE S&P 500 INDEX FUND. THE
MINIMUM INITIAL INVESTMENT FOR IRAS IS $250, EXCEPT FOR THE $2,000 MINIMUM
REQUIRED FOR THE S&P 500 INDEX FUND. IRAS ARE NOT AVAILABLE FOR TAX-EXEMPT
FUNDS. THE GROWTH AND TAX STRATEGY FUND IS NOT AVAILABLE AS AN INVESTMENT FOR
YOUR IRA BECAUSE THE MAJORITY OF ITS INCOME IS TAX EXEMPT.
CALIFORNIA, FLORIDA, NEW YORK, AND VIRGINIA FUNDS AVAILABLE TO RESIDENTS ONLY.
NONDEPOSIT 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 noted many times in the past that our three national tax-exempt bond
funds will usually provide a textbook study of how the bond markets should work.
The USAA Long-Term Fund should have the highest return, the USAA Short-Term Fund
the lowest, and the USAA Intermediate-Term Fund should fall in between. That's
because risk is usually rewarded. A 30-year bond is more risky, for various
reasons, than a two-year bond.
THE WALL STREET JOURNAL on October 2, 2000, showed that year-to-date the
performance of these three funds lines up like this:
--------------------------------------------------------------------------------
YEAR-TO-DATE TOTAL RETURNS FOR PERIOD ENDING 9/30/00
--------------------------------------------------------------------------------
UAAA Tax Exempt Long-Term Fund 6.7%
USAA Tax Exempt Intermediate-Term Fund 6.0%
USAA Tax Exempt Short-Term Fund 4.0%
--------------------------------------------------------------------------------
Last year the bond market declined and demonstrated that 30-year bonds are
indeed riskier than short issues:
--------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDING 12/31/99
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
-----------------------------
USAA Tax Exempt Long-Term Fund -5.04% 6.59% 6.37%
USAA Tax Exempt Intermediate-Term Fund -2.61% 6.37% 6.49%
USAA Tax Exempt Short-Term Fund 1.64% 4.98% 5.06%
--------------------------------------------------------------------------------
However, over the longer term, you can see that risk usually is rewarded:
--------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDING 9/30/00
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
----------------------------
USAA Tax Exempt Long-Term Fund 4.60% 5.41% 6.82%
USAA Tax Exempt Intermediate-Term Fund 5.14% 5.32% 6.72%
USAA Tax Exempt Short-Term Fund 4.51% 4.52% 5.09%
--------------------------------------------------------------------------------
The ordering of these returns and the longer term records of these funds are in
line with theory. And the numbers for 2000 look pretty good compared to major
indices this year:
--------------------------------------------------------------------------------
YEAR-TO-DATE TOTAL RETURNS FOR PERIOD ENDING 9/30/00
--------------------------------------------------------------------------------
Dow Jones Industrial Average -7.36%
S&P 500 Index -1.39%
Nasdaq Composite Index -9.74%
--------------------------------------------------------------------------------
That is why a portion of my investment portfolio is composed of tax-exempt bond
funds.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
TOTAL RETURN EQUALS INCOME PLUS SHARE PRICE CHANGE AND ASSUMES REINVESTMENT OF
ALL 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.
DOW JONES INDUSTRIAL AVERAGE IS A PRICE-WEIGHTED AVERAGE OF 30 ACTIVELY TRADED
BLUE CHIP STOCKS, PRIMARILY INDUSTRIALS.
THE S&P 500 INDEX IS AN UNMANAGED INDEX REPRESENTING THE WEIGHTED AVERAGE
PERFORMANCE OF A GROUP OF 500 WIDELY HELD, PUBLICLY TRADED STOCKS. IT IS NOT
POSSIBLE TO INVEST DIRECTLY IN THE S&P 500 INDEX.
NASDAQ COMPOSITE INDEX IS A MARKET-VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES.
SOME INCOME MAY BE SUBJECT TO STATE OR LOCAL TAXES, OR THE FEDERAL ALTERNATIVE
MINIMUM TAX.
FOR MORE COMPLETE INFORMATION ABOUT THE MUTUAL FUNDS MANAGED AND DISTRIBUTED BY
USAA INVESTMENT MANAGEMENT COMPANY, INCLUDING CHARGES AND OPERATING EXPENSES,
PLEASE CALL FOR A PROSPECTUS. READ IT CAREFULLY BEFORE INVESTING.
INVESTMENT REVIEW
USAA LONG-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of 10 years or
more.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $1,935.9 Million $1,956.2 Million
Net Asset Value Per Share $12.75 $12.87
Tax-Exempt Dividends Per Share Last 12 Months $0.756 $0.749
Capital Gain Distributions Per Share Last
12 Months - -
--------------------------------------------------------------------------------
SIX-MONTH TOTAL RETURN AND 30-DAY SEC YIELD* AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 to 9/30/00 30-DAY SEC YIELD
3.92%(+) 5.52%
--------------------------------------------------------------------------------
* CALCULATED AS PRESCRIBED BY THE SECURITIES AND EXCHANGE COMMISSION.
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
AVERAGE ANNUAL COMPOUNDED RETURNS WITH
REINVESTMENT OF DIVIDENDS - PERIODS ENDING SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
--------------------------------------------------------------------------------
10 Years 6.82% = 7.42% + -0.60%
--------------------------------------------------------------------------------
5 Years 5.41% = 5.86% + -0.45%
--------------------------------------------------------------------------------
1 Year 4.60% = 5.98% + -1.38%
--------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS
FOR THE 10-YEAR PERIOD ENDING SEPTEMBER 30, 2000
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 ending September 30, 2000.
TOTAL RETURN
---------------------
09/30/91 13.01%
09/30/92 10.99%
09/30/93 12.77%
09/30/94 -4.32%
09/30/95 9.83%
09/30/96 6.91%
09/30/97 10.02%
09/30/98 9.32%
09/30/99 -3.23%
09/30/00 4.60%
DIVIDEND RETURN
---------------------
09/30/91 7.70%
09/30/92 7.04%
09/30/93 6.69%
09/30/94 5.16%
09/30/95 6.70%
09/30/96 6.15%
09/30/97 6.17%
09/30/98 5.83%
09/30/99 5.19%
09/30/00 5.98%
CHANGE IN SHARE PRICE
---------------------
09/30/91 5.31%
09/30/92 3.95%
09/30/93 6.08%
09/30/94 -9.48%
09/30/95 3.13%
09/30/96 0.76%
09/30/97 3.85%
09/30/98 3.49%
09/30/99 -8.42%
09/30/00 -1.38%
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. DIVIDEND RETURN IS
THE INCOME FROM DIVIDENDS RECEIVED OVER THE PERIOD ASSUMING REINVESTMENT OF ALL
DIVIDENDS. SHARE PRICE CHANGE IS THE CHANGE IN NET ASSET VALUE OVER THE PERIOD
ADJUSTED FOR CAPITAL 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.
12-MONTH DIVIDEND YIELD COMPARISON
A chart in the form of a bar graph appears here illustrating the comparison of
the 12-Month Dividend Yield of the USAA Long-Term Fund to the 12-Month Dividend
Yield of the Lipper General Municipal Debt Funds Average from 9/30/91 to
9/30/00.
USAA LONG-TERM LIPPER GENERAL MUNICIPAL
FUND DEBT FUNDS AVERAGE
-------------- ------------------------
09/30/91 6.93% 6.51%
09/30/92 6.46% 6.08%
09/30/93 5.89% 5.35%
09/30/94 6.11% 5.54%
09/30/95 6.13% 5.25%
09/30/96 5.95% 5.05%
09/30/97 5.67% 4.80%
09/30/98 5.40% 4.47%
09/30/99 5.82% 4.68%
09/30/00 5.84% 4.73%
THE 12-MONTH DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING
THE PREVIOUS 12 MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR
CAPITAL GAIN DISTRIBUTIONS. THE GRAPH REPRESENTS DATA FOR PERIODS ENDING 9/30/91
TO 9/30/00.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment for the USAA Long-Term Fund, Lehman Brothers
Municipal Bond Index and the Lipper General Municipal Debt Funds Average. The
data points from the graph are as follows:
USAA LONG-TERM FUND
YEAR AMOUNT
-------- ------
09/30/90 $10,000
03/31/91 10,634
09/30/91 11,301
03/31/92 11,738
09/30/92 12,543
03/31/93 13,201
09/30/93 14,145
03/31/94 13,513
09/30/94 13,533
03/31/95 14,197
09/30/95 14,864
03/31/96 15,315
09/30/96 15,892
03/31/97 16,312
09/30/97 17,484
03/31/98 18,275
09/30/98 19,115
03/31/99 19,185
09/30/99 18,498
03/31/00 18,618
09/30/00 19,348
LEHMAN BROTHERS MUNICIPAL BOND INDEX
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,667
09/30/91 11,319
03/31/92 11,733
09/30/92 12,502
03/31/93 13,202
09/30/93 14,095
03/31/94 13,508
09/30/94 13,751
03/31/95 14,512
09/30/95 15,289
03/31/96 15,728
09/30/96 16,212
03/31/97 16,585
09/30/97 17,674
03/31/98 18,362
09/30/98 19,214
03/31/99 19,501
09/30/99 19,080
03/31/00 19,485
09/30/00 20,258
LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,645
09/30/91 11,313
03/31/92 11,721
09/30/92 12,497
03/31/93 13,241
09/30/93 14,159
03/31/94 13,509
09/30/94 13,648
03/31/95 14,376
09/30/95 15,011
03/31/96 15,444
09/30/96 15,906
03/31/97 16,234
09/30/97 17,321
03/31/98 17,992
09/30/98 18,789
03/31/99 18,907
09/30/99 18,237
03/31/00 18,477
09/30/00 19,132
DATA FROM 9/30/90 THROUGH 9/30/00.
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, BECAUSE FUNDS HAVE EXPENSES.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER: ROBERT R. PARISEAU, CFA, APPEARS HERE.]
MUNICIPAL BOND MARKET REVIEW
Yields on 20-year AAA-rated municipal bonds have declined 0.10% during the first
six months of the Fund's fiscal year, from March 31, 2000, to September 30,
2000. Bond-market investors seem to believe that the Federal Reserve Board, with
a series of six increases in short-term interest rates, has successfully slowed
the U.S. economy to a more sustainable, noninflationary rate of growth. Despite
recent increases in energy costs, inflation remains under control. Economists
give most of the credit to improved productivity as technological innovation
allows industry to use raw materials and labor more efficiently.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 2000,
to September 30, 2000, your USAA Long-Term Fund paid an annualized dividend
distribution yield of 5.77%. During this period of declining interest rates, the
Fund's share price increased by $0.12, or 0.94%, to $12.87.
* * * *
Your Fund's performance received an Overall Star Rating of 4 stars in the
municipal bond fund category from Morningstar Rating(TradeMark) for the period
ending September 30, 2000.
DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING THE PREVIOUS
SIX MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR CAPITAL GAIN
DISTRIBUTIONS AND ANNUALIZING THE RESULT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. MORNINGSTAR PROPRIETARY
RATINGS ON U.S.-DOMICILED FUNDS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE AS
OF SEPTEMBER 30, 2000. THE RATINGS ARE SUBJECT TO CHANGE EVERY MONTH.
MORNINGSTAR RATINGS ON U.S.-DOMICILED FUNDS ARE CALCULATED FROM THE FUND'S
THREE-, FIVE-, AND 10-YEAR AVERAGE ANNUAL RETURNS IN EXCESS OF 90-DAY U.S.
TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS, AND A RISK FACTOR THAT
REFLECTS FUND PERFORMANCE BELOW 90-DAY U.S. T-BILL RETURNS. THE USAA LONG-TERM
FUND RECEIVED 4, 5, AND 4 STARS FOR THE THREE-, FIVE-, 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
EXCLUSIVELY AGAINST U.S.-DOMICILED FUNDS. THE FUND WAS RATED AMONG 1,720, 1,472,
AND 424 FUNDS IN THE MUNICIPAL BOND FUND CATEGORY FOR THE THREE-, FIVE-, AND
10-YEAR PERIODS, RESPECTIVELY.
STRATEGY
I focus primarily on generating maximum tax-exempt income with the goal of
producing the best AFTER-TAX total return over an investment horizon of four or
more years. My rationale for this strategy is:
-I believe that a large number of our investors own the Fund for the tax-free
income and invest for the long term.
-Although past performance is no guarantee of future results, the strategy has
worked in different kinds of markets over the years. Long-term performance,
measured by total return and distribution yield, has been well above the
peer group average.
The Fund remains fully invested in long-term, investment-grade municipal bonds.
Municipal bonds that mature in 15 years or more almost always yield more than
shorter bonds of the same credit quality. However, longer-maturity bonds are
more volatile in price than shorter-maturity bonds. That's why we encourage only
those investors with an investment horizon of four or more years to buy the USAA
Long-Term Fund.
Like any buyer, I seek value. We define "value" at USAA as a combination of:
-STRUCTURE (coupon, maturity, call features, sinking funds, etc.)
-LIQUIDITY (ability to quickly sell the bond without substantially affecting
the price)
-CREDIT QUALITY (strength and stability of the issuer)
-YIELD (The bond may otherwise be a great fit, but if the yield is too low,
it's overpriced.)
NO AMT BONDS
Our shareholders have made it very clear that they do not want the income from
their USAA tax-exempt funds to be subject to the federal alternative minimum tax
(AMT) for individuals. Consequently, since inception, no USAA tax-exempt fund
has ever distributed income that was subject to the AMT for individuals. Looking
ahead, we have no intention to purchase municipal bonds that are subject to the
AMT for individuals in any of the USAA tax-exempt funds. Of course, we would
certainly advise our shareholders if a change were to occur in the federal tax
code that would compel us to reconsider our position.
MARKET OUTLOOK
The municipal bond market has rallied considerably from its lows over the past
year. Recently, steeply higher energy prices have taken their toll on
bond-market sentiment. However, the energy crisis of the 1970s and early 1980s
taught valuable lessons. Many U.S. industries have steadily improved their
energy efficiency despite years of low-priced oil. At least so far, brutal price
competition has meant that many businesses have a hard time passing on the
higher energy costs to their customers. An obviously slowing U.S. economy should
also do its part in keeping a lid on inflationary pressures.
In summary, the current consensus in the bond market is that interest rates have
probably peaked for this economic cycle. And, if energy prices settle down and
the economy continues to slow, interest rates may even decline a little more.
TOTAL RETURN EQUALS INCOME RETURN PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Long-Term Fund with a taxable
equivalent investment.
--------------------------------------------------------------------------------
TO MATCH THE USAA LONG-TERM FUND'S CLOSING 30-DAY SEC YIELD OF 5.52% AND:
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
A FULLY TAXABLE INVESTMENT MUST PAY: 7.67% 8.00% 8.63% 9.14%
--------------------------------------------------------------------------------
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.
SOME INCOME MAY BE SUBJECT TO FEDERAL, STATE, OR LOCAL TAXES OR THE FEDERAL
ALTERNATIVE MINIMUM TAX.
PORTFOLIO RATINGS MIX
9/30/00
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 2000 of the USAA Long-Term Fund to be:
AAA - 31%; AA - 21%; A - 25%; BBB - 19%; BB - 1%; and B - 2%.
THE FOUR HIGHEST LONG-TERM CREDIT RATINGS, IN DESCENDING ORDER OF CREDIT
QUALITY, ARE AAA, AA, A, AND BBB. THIS CHART REFLECTS THE HIGHER RATING OF
EITHER MOODY'S INVESTORS SERVICE, STANDARD & POOR'S RATING SERVICES, OR FITCH
IBCA. UNRATED SECURITIES THAT HAVE BEEN DETERMINED BY USAA IMCO TO BE OF
EQUIVALENT INVESTMENT QUALITY TO CATEGORIES AAA AND BBB ACCOUNT FOR 2.4% AND
1.0%, RESPECTIVELY, OF THE FUNDS INVESTMENTS, AND ARE INCLUDED IN THEIR
APPROPRIATE CATEGORY ABOVE.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 24-31.
INVESTMENT REVIEW
USAA INTERMEDIATE-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of between three
and 10 years.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $2,123.3 Million $2,168.1 Million
Net Asset Value Per Share $12.58 $12.68
Tax-Exempt Dividends Per Share Last 12 Months $0.690 $0.689
Capital Gain Distributions Per Share Last
12 Months - -
--------------------------------------------------------------------------------
SIX-MONTH TOTAL RETURN AND 30-DAY SEC YIELD* AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 to 9/30/00 30-DAY SEC YIELD
3.58%(+) 4.96%
--------------------------------------------------------------------------------
* CALCULATED AS PRESCRIBED BY THE SECURITIES AND EXCHANGE COMMISSION.
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
AVERAGE ANNUAL COMPOUNDED RETURNS WITH
REINVESTMENT OF DIVIDENDS - PERIODS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
--------------------------------------------------------------------------------
10 Years 6.72% = 5.86% + 0.86%
--------------------------------------------------------------------------------
5 Years 5.32% = 5.56% + -0.24%
--------------------------------------------------------------------------------
1 Year 5.14% = 5.61% + -0.47%
--------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS
FOR THE 10-YEAR PERIOD ENDED SEPTEMBER 30, 2000
A chart in the form of a bar graph appears here, illustrating the Annual Total
Returns and Compounded Dividend Returns of the USAA Intermediate-Term Fund for
the 10-year period ended September 30, 2000.
TOTAL RETURN
---------------------
09/30/91 11.08%
09/30/92 9.73%
09/30/93 11.87%
09/30/94 -1.17%
09/30/95 9.76%
09/30/96 5.43%
09/30/97 9.07%
09/30/98 8.55%
09/30/99 -1.24%
09/30/00 5.14%
DIVIDEND RETURN
---------------------
09/30/91 7.26%
09/30/92 6.54%
09/30/93 6.01%
09/30/94 5.16%
09/30/95 6.04%
09/30/96 5.74%
09/30/97 5.86%
09/30/98 5.60%
09/30/99 5.01%
09/30/00 5.61%
CHANGE IN SHARE PRICE
---------------------
09/30/91 3.82%
09/30/92 3.19%
09/30/93 5.86%
09/30/94 -6.33%
09/30/95 3.72%
09/30/96 -0.31%
09/30/97 3.21%
09/30/98 2.95%
09/30/99 -6.25%
09/30/00 -0.47%
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. DIVIDEND RETURN IS
THE INCOME FROM DIVIDENDS RECEIVED OVER THE PERIOD ASSUMING REINVESTMENT OF ALL
DIVIDENDS. SHARE PRICE CHANGE IS THE CHANGE IN NET ASSET VALUE OVER THE PERIOD
ADJUSTED FOR CAPITAL 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.
12-MONTH DIVIDEND YIELD COMPARISON
A chart in the form of a bar graph appears here illustrating the comparison of
the 12-Month Dividend Yield of the USAA Intermediate-Term Fund to the 12-Month
Dividend Yield of the Lipper Intermediate Municipal Debt Funds Average from
9/30/91 to 9/30/00.
USAA INTERMEDIATE-TERM LIPPER INTERMEDIATE MUNICIPAL
FUND DEBT FUNDS AVERAGE
---------------------- -----------------------------
09/30/91 6.67% 6.07%
09/30/92 6.07% 5.55%
09/30/93 5.38% 4.76%
09/30/94 5.56% 4.85%
09/30/95 5.50% 4.71%
09/30/96 5.63% 4.58%
09/30/97 5.44% 4.44%
09/30/98 5.22% 4.37%
09/30/99 5.43% 4.31%
09/30/00 5.45% 4.43%
THE 12-MONTH DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING
THE PREVIOUS 12 MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR
CAPITAL GAIN DISTRIBUTIONS. THE GRAPH REPRESENTS DATA FOR PERIODS ENDING 9/30/91
TO 9/30/00.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment for the USAA Intermediate-Term Fund, Lehman
Brothers Municipal Bond Index and the Lipper Intermediate Municipal Debt Funds
Average. The data points from the graph are as follows:
USAA INTERMEDIATE-TERM FUND
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,535
09/30/91 11,108
03/31/92 11,508
09/30/92 12,188
03/31/93 12,807
09/30/93 13,634
03/31/94 13,200
09/30/94 13,475
03/31/95 14,014
09/30/95 14,790
03/31/96 15,130
09/30/96 15,593
03/31/97 16,008
09/30/97 17,007
03/31/98 17,703
09/30/98 18,460
03/31/99 18,662
09/30/99 18,231
03/31/00 18,505
09/30/00 19,168
LEHMAN BROTHERS MUNICIPAL BOND INDEX
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,667
09/30/91 11,319
03/31/92 11,733
09/30/92 12,502
03/31/93 13,202
09/30/93 14,095
03/31/94 13,508
09/30/94 13,751
03/31/95 14,512
09/30/95 15,289
03/31/96 15,728
09/30/96 16,212
03/31/97 16,585
09/30/97 17,674
03/31/98 18,362
09/30/98 19,214
03/31/99 19,501
09/30/99 19,080
03/31/00 19,485
09/30/00 20,258
LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS AVERAGE
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,546
09/30/91 11,080
03/31/92 11,434
09/30/92 12,105
03/31/93 12,685
09/30/93 13,403
03/31/94 13,025
09/30/94 13,238
03/31/95 13,759
09/30/95 14,403
03/31/96 14,724
09/30/96 15,053
03/31/97 15,391
09/30/97 16,216
03/31/98 16,724
09/30/98 17,430
03/31/99 17,608
09/30/99 17,314
03/31/00 17,577
09/30/00 18,167
DATA FROM 9/30/90 THROUGH 9/30/00.
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, BECAUSE FUNDS HAVE EXPENSES.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER: CLIFFORD A. GLADSON, CFA, APPEARS HERE]
CREDIT MARKET REVIEW
During the first six months of the USAA Intermediate-Term Fund's fiscal year,
from March 31, 2000, to September 30, 2000, yields on 10-year AA-rated municipal
bonds declined 0.21%. The credit market seems to believe that the Federal
Reserve's (the Fed) six short-term interest rate hikes have slowed the growth in
the domestic economy to a level that will keep price inflation in check.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 2000,
to September 30, 2000, your Fund paid an annualized dividend distribution yield
of 5.41%. During this period of declining yields, the Fund's share price
increased $0.10 to $12.68.
* * * * *
Your Fund's performance continues to earn an Overall Star Rating of 5 stars in
the municipal bond fund category from Morningstar Rating(TradeMark) for the
period ending September 30, 2000.
DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING THE PREVIOUS
SIX MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR CAPITAL GAIN
DISTRIBUTIONS AND ANNUALIZING THE RESULT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. MORNINGSTAR PROPRIETARY
RATINGS ON U.S.-DOMICILED FUNDS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE AS
OF SEPTEMBER 30, 2000. THE RATINGS ARE SUBJECT TO CHANGE EVERY MONTH.
MORNINGSTAR RATINGS ON U.S.-DOMICILED FUNDS ARE CALCULATED FROM THE FUND'S
THREE-, FIVE-, AND 10-YEAR AVERAGE ANNUAL RETURNS IN EXCESS OF 90-DAY U.S.
TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS AND A RISK FACTOR THAT
REFLECTS FUND PERFORMANCE BELOW 90-DAY U.S. T-BILL RETURNS. THE USAA
INTERMEDIATE-TERM FUND RECEIVED 5 STARS FOR THE THREE-, FIVE-, 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
EXCLUSIVELY AGAINST U.S.-DOMICILED FUNDS. THE FUND WAS RATED AMONG 1,720, 1,472,
AND 424 FUNDS IN THE MUNICIPAL BOND FUND CATEGORY FOR THE THREE-, FIVE-, AND
10-YEAR PERIODS, RESPECTIVELY.
SMOKE AND MIRRORS
While we use the credit ratings of three nationally recognized statistical
rating organizations (Moody's Investors Service, Standard & Poor's, and Fitch
IBCA) as guidelines, actual purchase decisions are based on our independent
credit analysis. There are a number of bonds rated A or better, some with
ratings as high as AAA, that we will NOT purchase. We believe that credit
analysis must go beyond the numbers. For example, I am often asked why the Fund
does not own bonds backed by tobacco settlement payments (tobacco bonds).
Avoidance of this class of bonds is not a reflection of personal moral
principles, but is based on a fiduciary responsibility to our shareholders.
In the interest of full disclosure, with a family history of emphysema, I do not
smoke and have used all my persuasive powers to discourage my children from
smoking. While I think that smoking may pose a long-term health risk, I consider
smoking to be a matter of personal choice.
From a credit perspective, taxes on tobacco have been structured to provide a
predictable revenue stream that can support an investment-grade rating. The
fluctuations and trends in tobacco use can be modeled and analyzed. We can then
judge if we are taking a wise risk if we depend on this type of revenue stream
to pay back the bonds.
Tobacco bonds are not secured by taxes. The anticipated revenue stream for
tobacco bonds is predicated on an out-of-court agreement between tobacco
companies and the participating state governments. The revenue stream for the
tobacco settlement may be subject to additional legal claims from federal
government and class action lawsuits. The potential size of these actions could
be staggering and the new legal claims may be granted a superior lien to tobacco
company revenues. The tobacco settlement is not immune to bankruptcy risk. If
the tobacco companies filed for bankruptcy protection, a judge could modify
settlement terms or reduce payments. In addition, the Internal Revenue Service
is auditing the structure of tobacco bonds to determine the tax-exempt status of
the coupon payments. In short, issuers of tobacco bonds are transferring a
significant amount of event risk to the bondholder.
It is my opinion that tobacco bonds possess a level of event risk that is not
acceptable for an investment-grade security. While USAA tax-exempt funds are
managed with an income orientation, we embrace the old adage that there is NO
return on principal without return OF principal. For a discussion of how we
manage tax-exempt funds with an income orientation, please see my message in the
USAA Short-Term Fund section on page 16 in this report.
CURRENT MARKET CONDITIONS
Even though it appears that the credit markets seem to believe the threat of
higher inflation has eased, I remain vigilant for commodity-induced inflation
from the recent price increases in oil and natural gas. Once energy prices
stabilize, I will view any increase in interest rates as an opportunity to
improve the tax-exempt distribution yield of your Fund.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Intermediate-Term Fund with a
taxable equivalent investment.
--------------------------------------------------------------------------------
TO MATCH THE USAA INTERMEDIATE-TERM FUND'S CLOSING 30-DAY SEC YIELD OF 4.96%
AND:
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
A FULLY TAXABLE INVESTMENT MUST PAY: 6.88% 7.18% 7.74% 8.21%
--------------------------------------------------------------------------------
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.
SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
PORTFOLIO RATINGS MIX
9/30/00
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 2000 of the USAA Intermediate-Term Fund to be:
AAA - 35%; AA - 18%; A - 25%; BBB - 21%; and B - 1%.
THE FOUR HIGHEST LONG-TERM CREDIT RATINGS, IN DESCENDING ORDER OF CREDIT
QUALITY, ARE AAA, AA, A, AND BBB. THIS CHART REFLECTS THE HIGHER RATING OF
EITHER MOODY'S INVESTORS SERVICE, STANDARD & POOR'S RATING SERVICES, OR FITCH
IBCA. UNRATED SECURITIES THAT HAVE BEEN DETERMINED BY USAA IMCO TO BE OF
EQUIVALENT INVESTMENT QUALITY TO CATEGORIES AAA, A, BBB, AND BB ACCOUNT FOR
1.7%, 0.5%, 2.1%, AND 0.05% RESPECTIVELY, OF THE FUNDS INVESTMENTS, AND ARE
INCLUDED IN THEIR APPROPRIATE CATEGORY ABOVE.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 32-47.
INVESTMENT REVIEW
USAA SHORT-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of three years or
less.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $967.6 Million $990.6 Million
Net Asset Value Per Share $10.46 $10.52
Tax-Exempt Dividends Per Share Last 12 Months $0.473 $0.483
Capital Gain Distributions Per Share Last 12 Months - -
--------------------------------------------------------------------------------
SIX-MONTH TOTAL RETURN AND 30-DAY SEC YIELD* AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 to 9/30/00 30-DAY SEC YIELD
2.95%(+) 4.60%
--------------------------------------------------------------------------------
* CALCULATED AS PRESCRIBED BY THE SECURITIES AND EXCHANGE COMMISSION.
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
AVERAGE ANNUAL COMPOUNDED RETURNS WITH
REINVESTMENT OF DIVIDENDS - PERIODS ENDING SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS PRICE CHANGE
--------------------------------------------------------------------------------
10 Years 5.09% = 4.89% + 0.20%
--------------------------------------------------------------------------------
5 Years 4.52% = 4.67% + -0.15%
--------------------------------------------------------------------------------
1 Year 4.51% = 4.70% + -0.19%
--------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS
FOR THE 10-YEAR PERIOD ENDING SEPTEMBER 30, 2000
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 ending September 30, 2000.
TOTAL RETURN
---------------------
09/30/91 7.60%
09/30/92 6.71%
09/30/93 5.95%
09/30/94 1.70%
09/30/95 6.41%
09/30/96 4.51%
09/30/97 5.95%
09/30/98 5.62%
09/30/99 2.06%
09/30/00 4.51%
DIVIDEND RETURN
---------------------
09/30/91 6.44%
09/30/92 5.37%
09/30/93 4.63%
09/30/94 4.22%
09/30/95 4.88%
09/30/96 4.79%
09/30/97 4.72%
09/30/98 4.69%
09/30/99 4.47%
09/30/00 4.70%
CHANGE IN SHARE PRICE
---------------------
09/30/91 1.16%
09/30/92 1.34%
09/30/93 1.32%
09/30/94 -2.52%
09/30/95 1.53%
09/30/96 -0.28%
09/30/97 1.23%
09/30/98 0.93%
09/30/99 -2.41%
09/30/00 -0.19%
TOTAL RETURN EQUALS DIVIDEND RETURN PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. DIVIDEND RETURN IS
THE INCOME FROM DIVIDENDS RECEIVED OVER THE PERIOD ASSUMING REINVESTMENT OF ALL
DIVIDENDS. SHARE PRICE CHANGE IS THE CHANGE IN NET ASSET VALUE OVER THE PERIOD
ADJUSTED FOR CAPITAL 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.
12-MONTH DIVIDEND YIELD COMPARISON
A chart in the form of a bar graph appears here illustrating the comparison of
the 12-Month Dividend Yield of the USAA Short-Term Fund to the 12-Month Dividend
Yield of the Lipper Short-Term Municipal Debt Funds Average from 9/30/91 to
9/30/00.
USAA SHORT-TERM LIPPER SHORT-TERM MUNICIPAL
FUND DEBT FUNDS AVERAGE
--------------- ---------------------------
9/30/91 6.14% 5.80%
9/30/92 5.15% 4.92%
9/30/93 4.44% 4.02%
9/30/94 4.30% 3.82%
9/30/95 4.65% 4.17%
9/30/96 4.71% 4.14%
9/30/97 4.54% 4.10%
9/30/98 4.52% 3.96%
9/30/99 4.55% 3.78%
9/30/00 4.61% 4.03%
THE 12-MONTH DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING
THE PREVIOUS 12 MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR
CAPITAL GAIN DISTRIBUTIONS. THE GRAPH REPRESENTS DATA FOR PERIODS ENDING 9/30/91
TO 9/30/00.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment for the USAA Short-Term Fund, Lehman
Brothers Municipal Bond Index and the Lipper Short-Term Municipal Debt Funds
Average. The data points from the graph are as follows:
USAA SHORT-TERM FUND
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,370
09/30/91 10,760
03/31/92 11,106
09/30/92 11,482
03/31/93 11,814
09/30/93 12,165
03/31/94 12,152
09/30/94 12,372
03/31/95 12,700
09/30/95 13,165
03/31/96 13,441
09/30/96 13,758
03/31/97 14,072
09/30/97 14,577
03/31/98 14,965
09/30/98 15,397
03/31/99 15,632
09/30/99 15,714
03/31/00 15,952
09/30/00 16,423
LEHMAN BROTHERS MUNICIPAL BOND INDEX
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,667
09/30/91 11,319
03/31/92 11,733
09/30/92 12,502
03/31/93 13,202
09/30/93 14,095
03/31/94 13,508
09/30/94 13,751
03/31/95 14,512
09/30/95 15,289
03/31/96 15,728
09/30/96 16,212
03/31/97 16,585
09/30/97 17,674
03/31/98 18,362
09/30/98 19,214
03/31/99 19,501
09/30/99 19,080
03/31/00 19,485
09/30/00 20,258
LIPPER SHORT-TERM MUNICIPAL DEBT FUNDS AVERAGE
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,374
09/30/91 10,726
03/31/92 11,045
09/30/92 11,421
03/31/93 11,718
09/30/93 11,984
03/31/94 12,051
09/30/94 12,227
03/31/95 12,490
09/30/95 12,867
03/31/96 13,146
09/30/96 13,407
03/31/97 13,657
09/30/97 14,041
03/31/98 14,359
09/30/98 14,718
03/31/99 14,963
09/30/99 15,091
03/31/00 15,304
09/30/00 15,695
DATA FROM 9/30/90 THROUGH 9/30/00.
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, BECAUSE FUNDS HAVE EXPENSES.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER: CLIFFORD A. GLADSON, CFA, APPEARS HERE.]
CREDIT MARKET REVIEW
Since our annual report on March 31, 2000, the current cycle of increasing
short-term interest rates appears to have reached a plateau. After a year of
raising short-term interest rates a total of 2%, the Federal Reserve (the Fed)
seems to believe that the growth in the domestic economy is slowing to a level
that will not reignite price inflation. By September 30, 2000, the end of the
first half of the USAA Short-Term Fund's fiscal year, yields on five-year
AA-rated municipal bonds fell 0.35%.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 2000,
to September 30, 2000, your Fund paid an annualized dividend distribution yield
of 4.65%. Despite the rather volatile short-term interest rate environment
during the first six months of the fiscal year, the Fund's share price increased
$0.06 to $10.52.
* * * * *
Your Fund's performance continues to earn an Overall Star Rating of 5 stars in
the municipal bond fund category from Morningstar Rating(TradeMark) for the
period ending September 30, 2000.
SHOW ME THE (TAX-EXEMPT) MONEY
The primary objective of each USAA tax-exempt bond fund is to distribute a high
level of tax-exempt dividends. This leads us to manage these funds with an
income orientation that reflects the mathematical nature of bonds, the Federal
Income Tax Code, and the behavior of the fixed-income market. For a discussion
on our approach to credit analysis, please see my message in the USAA
Intermediate-Term Fund section on page 11 in this report.
Interest rates fluctuate. When interest rates rise, the price of a bond falls.
When interest rates fall, the price of a bond rises. At maturity, barring a
credit disaster, a bond pays off at face value. The only tax-exempt income that
is earned depends on the bond's coupon yield at the time of purchase.
Common sense dictates that a taxpayer values tax-exempt income over taxable
capital gain distributions. The table on page 14 shows the sources of total
return for the USAA Short-Term Fund over the last one, five, and 10 years.
Notice that the tax-exempt distribution return is the dominant component of
long-term total return. The graphs below the table further illustrate how the
Fund's distribution returns and yearly price appreciation combine to produce
annual total returns.
Two market factors shape our income-oriented portfolio strategy. First, to our
knowledge, no one has been able to consistently predict the movement in interest
rates. This makes market timing a losing proposition. Consequently, USAA
tax-exempt funds tend to remain fully invested and do not try to time the
market. When we do trade bonds, it is to take advantage of interest-rate
movements that can increase a fund's dividend distribution yield. We carefully
manage trading activity to minimize taxable capital gain distributions. The
second market factor that influences portfolio strategy is that yields for
municipal bonds tend to increase as bond maturity lengthens. This means that the
Fund's weighted average maturity will usually be near its upper limit to earn a
high level of income.
DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING THE PREVIOUS
SIX MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR CAPITAL GAIN
DISTRIBUTIONS AND ANNUALIZING THE RESULT.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. MORNINGSTAR PROPRIETARY
RATINGS ON U.S.-DOMICILED FUNDS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE AS
OF SEPTEMBER 30, 2000. THE RATINGS ARE SUBJECT TO CHANGE EVERY MONTH.
MORNINGSTAR RATINGS ON U.S.-DOMICILED FUNDS ARE CALCULATED FROM THE FUND'S
THREE-, FIVE-, AND 10-YEAR AVERAGE ANNUAL RETURNS IN EXCESS OF 90-DAY U.S.
TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS AND A RISK FACTOR THAT
REFLECTS FUND PERFORMANCE BELOW 90-DAY U.S. T-BILL RETURNS. THE USAA SHORT-TERM
FUND RECEIVED 5 STARS FOR THE THREE-, FIVE-, 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 EXCLUSIVELY AGAINST
U.S.-DOMICILED FUNDS. THE FUND WAS RATED AMONG 1,720, 1,472, AND 424 FUNDS IN
THE MUNICIPAL BOND FUND CATEGORY FOR THE THREE-, FIVE-, AND 10-YEAR PERIODS,
RESPECTIVELY.
CURRENT MARKET CONDITIONS
The credit market expects that the Fed will maintain the current level of
short-term interest rates so long as there is moderate growth in the domestic
economy. My view on short-term interest rates is focused on the recent rise in
the cost of energy and its possible inflationary impact on consumer prices.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Short-Term Fund with a taxable
equivalent investment.
--------------------------------------------------------------------------------
TO MATCH THE USAA SHORT-TERM FUND'S CLOSING 30-DAY SEC YIELD OF 4.60% AND:
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
A FULLY TAXABLE INVESTMENT MUST PAY: 6.38% 6.66% 7.18% 7.61%
--------------------------------------------------------------------------------
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.
SOME INCOME MAY BE SUBJECT TO FEDERAL, STATE, OR LOCAL TAXES OR THE FEDERAL
ALTERNATIVE MINIMUM TAX.
PORTFOLIO RATINGS MIX
9/30/00
A pie chart is shown here depicting the Portfolio Ratings Mix as of September
30, 2000 of the USAA Short-Term Fund to be:
AAA - 23%; AA - 26%; A - 22%; and BBB - 29%.
THE FOUR HIGHEST LONG-TERM CREDIT RATINGS, IN DESCENDING ORDER OF CREDIT
QUALITY, ARE AAA, AA, A, AND BBB. THIS CHART REFLECTS THE HIGHER RATING OF
EITHER MOODY'S INVESTORS SERVICE, STANDARD & POOR'S RATING SERVICES, OR FITCH
IBCA. UNRATED SECURITIES THAT HAVE BEEN DETERMINED BY USAA IMCO TO BE OF
EQUIVALENT INVESTMENT QUALITY TO CATEGORIES AAA, A, AND BBB ACCOUNT FOR 1.8%,
1.6%, AND 1.4%, RESPECTIVELY, OF THE FUNDS INVESTMENTS, AND ARE INCLUDED IN
THEIR APPROPRIATE CATEGORY ABOVE.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 48-58.
INVESTMENT REVIEW
USAA TAX EXEMPT MONEY MARKET FUND
OBJECTIVE: Interest income that is exempt from federal income tax and a further
objective of preserving capital and maintaining liquidity.
TYPES OF INVESTMENTS: Invests principally in high-quality, tax-exempt securities
with maturities of 397 days or less. The Fund will maintain a dollar-weighted
average portfolio maturity of 90 days or less and will endeavor to maintain a
constant net asset value per share of $1.00.*
* AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $1,863.2 Million $1,872.7 Million
Net Asset Value Per Share $1.00 $1.00
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AND 7-DAY YIELD AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 to 9/30/00 1 YEAR 5 YEARS 10 YEARS 7-DAY YIELD
2.00%(+) 3.73% 3.43% 3.44% 4.39%
--------------------------------------------------------------------------------
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
TOTAL RETURN EQUALS INCOME RETURN AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND
CAPITAL 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
SEVEN-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 iMoneyNet, Inc.
(formerly IBC Financial Data) SB (Stock Broker) and GP (General Purpose)
(Tax-Free) Money Funds.
USAA TAX EXEMPT
MONEY MARKET FUND IMONEYNET, INC.
----------------- ---------------
09/27/99 3.44% 3.01%
10/25/99 3.15% 2.80%
11/29/99 3.52% 3.15%
12/27/99 4.03% 3.57%
01/31/00 3.04% 2.80%
02/28/00 3.55% 3.19%
03/27/00 3.45% 3.14%
04/24/00 3.92% 3.61%
05/22/00 4.14% 3.75%
06/26/00 4.20% 3.86%
07/31/00 3.96% 3.61%
08/28/00 3.92% 3.57%
09/25/00 4.06% 3.77%
DATA REPRESENT THE LAST MONDAY OF EACH MONTH.
THE GRAPH TRACKS THE FUND'S SEVEN-DAY YIELD AGAINST IMONEYNET, INC. (FORMERLY
IBC FINANCIAL DATA) SB (STOCK BROKER) & GP (GENERAL PURPOSE) (TAX-FREE) MONEY
FUNDS, AN AVERAGE OF MONEY MARKET FUND YIELDS.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER: TONY ERA APPEARS HERE]
MARKET OVERVIEW
Although productivity gains may partially offset inflationary tendencies in the
economy, the Federal Reserve (the Fed) remains vigilant in monitoring demand
imbalances that would lead to higher prices. Most recently, the high price of
oil has presented a threat to the economy that, if not addressed, may lead to
sustained increases in manufacturing and transportation costs and, ultimately,
higher consumer prices. The result could be a slowdown in the economy that
exceeds the Fed's target. Market sentiment toward Fed policy currently runs from
neutral to expectations for lowering rates. Since its last increase in May, the
Fed has held the federal funds rate steady at 6.50% while continuing to maintain
a bias toward inflation. The next meeting is scheduled for November 15, 2000.
Since our last report, investor sentiment in the tax-exempt market remains
bearish. The yield on one-year AAA-rated general obligation notes has risen from
4.22% on March 31, 2000, to 4.34% on September 30, 2000.
STRATEGY
Since our annual report in March, we have continued to maintain a sizable
percentage of the USAA Tax Exempt Money Market Fund's assets in variable-rate
demand notes (VRDNs). These securities, in our view, offer the best value in the
short-term tax-exempt market. In a near-term environment of stable to moderately
higher interest rates, we do not intend to deviate from this strategy. As you
may recall from previous reports, VRDNs have a demand feature that provides the
owner the option to sell the bond back to the issuer at par value (100% of face
value) with a notice of seven days or less. Another attractive feature of these
securities is that their interest rate is generally reset weekly. In the current
environment, these securities continue to compare favorably to fixed-rate
instruments.
THE PORTFOLIO
On September 30, 2000, VRDNs represented more than 70% of the USAA Tax Exempt
Money Market Fund's assets. In addition to purchasing VRDNs, the portfolio
continues to invest moderately in tax-exempt commercial paper and short-term
tax-exempt notes. Although these securities are bought at a fixed rate, they do
provide a cushion whenever yields on VRDNs drop too low. You will also notice
the Fund's weighted average maturity was shortened by nine days, from 45 days on
March 31, 2000, to 36 days on September 30, 2000.
CUMULATIVE PERFORMANCE OF $10,000
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment of the USAA Tax Exempt Money Market Fund.
The data is from 9/30/90 to 9/30/00. The data points from the graph are as
follows:
USAA TAX EXEMPT MONEY MARKET FUND
YEAR AMOUNT
-------- -------
09/30/90 $10,000
03/31/91 10,289
09/30/91 10,528
03/31/92 10,730
09/30/92 10,898
03/31/93 11,041
09/30/93 11,172
03/31/94 11,296
09/30/94 11,440
03/31/95 11,633
09/30/95 11,849
03/31/96 12,058
09/30/96 12,257
03/31/97 12,455
09/30/97 12,673
03/31/98 12,889
09/30/98 13,111
03/31/99 13,309
09/30/99 13,517
03/31/00 13,746
09/30/00 14,022
DATA FROM 9/30/90 THROUGH 9/30/00.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THE VALUE OF YOUR
INVESTMENT WILL VARY ACCORDING TO THE FUND'S PERFORMANCE. SOME INCOME MAY BE
SUBJECT TO FEDERAL, STATE, OR LOCAL TAXES, OR TO THE FEDERAL ALTERNATIVE MINIMUM
TAX. FOR SEVEN-DAY YIELD INFORMATION, PLEASE REFER TO THE FUND'S INVESTMENT
REVIEW.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 59-69.
CATEGORIES AND DEFINITIONS
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
FIXED-RATE INSTRUMENTS - consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the market
price of a fixed-rate instrument generally varies inversely to the movement of
interest rates.
PUT BONDS - provide the right to sell the bond at face value at specific tender
dates prior to final maturity. The put feature shortens the effective maturity
of the security.
VARIABLE-RATE DEMAND NOTES (VRDN) - provide the right, on any business day, to
sell the security at face value on either that day or within seven days. The
interest rate is generally adjusted at a stipulated daily, weekly, or monthly
interval to a rate that reflects current market conditions. In money market
funds, the effective maturity of these instruments is deemed to be less than 397
days in accordance with regulatory requirements. In bond funds, the effective
maturity is the next put date.
CREDIT ENHANCEMENTS - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due. The
enhancement may be provided by either a high-quality bank, insurance company,
corporation, or a collateral trust.
The USAA Tax Exempt Money Market Fund's investments consist of securities
meeting the requirements to qualify as "eligible securities" under the
Securities and Exchange Commission (SEC) rules applicable to money market funds.
With respect to quality, "eligible securities" generally consist of securities
rated in one of the two highest categories for short-term securities, or, if not
rated, of comparable quality at the time of purchase. The Manager also attempts
to minimize credit risk in the USAA Tax Exempt Money Market Fund through
rigorous internal credit research.
(ETM) Escrowed to final maturity.
(PRE) Prerefunded to a date prior to maturity.
(LOC) Enhanced by a bank letter of credit.
(LIQ) Enhanced by a bank liquidity agreement.
(NBGA) Enhanced by a nonbank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1) MBIA, Inc. (6) ACA Financial Guaranty Corp.
(2) AMBAC Financial Group, Inc. (7) College Construction Loan
(3) Financial Guaranty Insurance Co. Insurance Association
(4) Financial Security/Assurance (8) Capital Reinsurance Co.
Holdings Ltd. (9) AXA Reinsurance Group
(5) Asset Guaranty Insurance Co.
PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
BAN Bond Anticipation Note ISD Independent School District
COP Certificate of Participation MERLOT Municipal Exempt Receipts-
CP Commercial Paper Liquidity Optional Tender
GO General Obligation MFH Multifamily Housing
IDA Industrial Development PCRB Pollution Control Revenue Bond
Authority/Agency RAN Revenue Anticipation Note
IDB Industrial Development Board RB Revenue Bond
IDC Industrial Development Corp. RN Revenue Note
IDRB Industrial Development SFH Single-Family Housing
Revenue Bond TAN Tax Anticipation Note
USAA LONG-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
PRINCIPAL COUPON FINAL MARKET
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (97.5%)
ALABAMA (2.3%)
$ 3,750 Baldwin County Health Care RB,
Series 1996 6.75% 4/01/2021 $ 3,499
8,000 Courtland IDRB, Series 1994 5.90 2/01/2017 7,691
10,250 Prattville IDB RB, Series 1998 5.30 9/01/2028 8,898
15,000 Public School and College RB,
Series 1999A (INS)(2) 5.50 9/01/2029 14,587
10,000 University Alabama at Birmingham
Hospital RB, Series 2000A (INS)(1) 5.88 9/01/2031 10,066
ALASKA (1.1%)
21,175 Valdez Marine Terminal RB, Series
1985A 7.00 12/01/2025 22,093
CALIFORNIA (0.5%)
10,000 State GO, Series 2000 5.25 9/01/2026 9,663
COLORADO (2.2%)
9,000 Denver City and County COP,
Series 2000B (INS)(2) 5.50 12/01/2025 8,789
9,500 Denver Health and Hospital Auth. RB,
Series 1998A 5.38 12/01/2028 7,514
13,700 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 13,466
11,480 Summit County Sports Facilities RB,
Series 1990 7.88 9/01/2008 13,137
CONNECTICUT (2.7%)
56,950 Mashantucket (Western) Pequot Tribe
RB, Series 1997B(d) 5.75 9/01/2027 52,518
DISTRICT OF COLUMBIA (4.1%)
25,200 Convention Center Auth. RB,
Series 1998 (INS)(2) 4.75 10/01/2028 21,089
52,900 District of Columbia GO,
Series 1999A (INS)(1) 5.50 6/01/2029 51,156
8,000 Hospital RB, Series 1992B (PRE) 7.00 8/15/2015 8,519
FLORIDA (1.2%)
Board of Education Public Education
GO,
15,665 Series 1998E (NBGA) 5.63 6/01/2025 15,676
7,000 Series 1998E (NBGA) 5.63 6/01/2029 6,989
1,000 Sunrise Utility Systems RB, Series
1998A (INS)(2) 5.20 10/01/2022 950
GEORGIA (2.4%)
12,000 Fayette County Public Facilities
Auth. RB, Series 2000 5.88 6/01/2028 12,194
8,000 Henry County Water and Sewage Auth.
RB, Series 2000 (INS)(3) 5.63 2/01/2030 7,954
Private Colleges and University Auth.
RB,
5,000 Series 1999A 5.50 11/01/2025 4,923
10,750 Series 1999A 5.50 11/01/2031 10,510
10,000 Savannah Economic Development Auth.
PCRB, Series 1995 6.15 3/01/2017 10,324
HAWAII (0.4%)
7,330 State Highway RB, Series 1998 5.50 7/01/2018 7,342
IDAHO (1.1%)
23,400 Nez Perce County PCRB, Series 1996 6.00 10/01/2024 22,370
ILLINOIS (8.0%)
13,725 Chicago-O'Hare International Airport
RB, Series 1994 8.20 12/01/2024 15,323
Health Facilities Auth. RB,
17,775 Series 1992 7.00 1/01/2015 13,338
7,000 Series 1998 5.25 9/01/2024 5,737
5,030 Series 2000 6.85 11/15/2029 5,152
17,600 Quincy Hospital RB, Series 1993 6.00 11/15/2018 17,228
Regional Transportation Auth. GO,
10,980 Series 1994C (PRE)(INS)(3) 7.10 6/01/2025 12,092
23,980 Series 1999 (INS)(4) 5.75 6/01/2020 24,737
37,550 Regional Transportation Auth. RB,
Series 2000A (INS)(1) 6.50 7/01/2030 42,623
23,000 State GO, Series 1999 (INS)(3) 5.00 3/01/2024 20,753
INDIANA (5.1%)
Bond Bank State Revolving Fund RB,
10,440 Series 2000A 5.50 8/01/2021 10,255
11,015 Series 2000A 5.50 8/01/2022 10,788
Development Finance Auth. Environ-
mental RB,
10,945 Series 1996 6.15 7/15/2022 10,697
7,930 Series 1996 6.25 7/15/2030 7,782
100,675 Health Facility Financing Auth. RB,
Series 1992C(a) 7.89 7/01/2023 16,900
41,750 Indianapolis Airport Facility RB,
Series 1994 6.80 4/01/2017 43,131
KANSAS (0.4%)
43,245 Sedgwick County Mortgage Loan RB,
Senior Series 1991A(a) 7.12 12/01/2022 8,671
LOUISIANA (1.9%)
25,730 Lake Charles Harbor and Terminal
District RB, Series 1995A 7.75 8/15/2022 27,569
11,015 St. Tammany Parish Hospital Service
District Number 1 RB, Series 1998
(INS)(6) 5.00 7/01/2022 9,290
MAINE (1.4%)
27,750 State Turnpike Auth. RB, Series 2000
(INS)(3) 5.75 7/01/2028 27,853
MASSACHUSETTS (3.4%)
14,875 Development Finance Agency RB,
Series 1999P 5.45 5/15/2059 13,591
5,000 Health and Education Facilities Auth.
RB, Series 2000A (INS)(3) 5.88 10/01/2029 5,081
13,000 Massachusetts Bay Transportation
Auth.
Assessment Bonds, Series 2000A 5.25 7/01/2030 12,156
36,000 Water Resources Auth. RB,
Series 2000A (INS)(3) 5.75 8/01/2030 36,197
MICHIGAN (5.2%)
9,900 Battle Creek Downtown Development
Auth. Development Bonds, Series
1994 (PRE) 7.60 5/01/2016 11,031
13,005 Dickinson County Economic Development
Corp. PCRB, Series 1993 5.85 10/01/2018 12,611
Hospital Finance Auth. RB,
15,500 Series 1995A (PRE) 7.50 10/01/2027 17,471
43,000 Series 1999A 6.13 11/15/2026 43,254
6,500 Job Development Auth. RB,
Series 1990A (NBGA) 8.00 12/01/2013 6,657
10,000 Municipal Auth. RB, Series 1999 5.50 10/01/2021 9,871
MINNESOTA (3.1%)
9,750 International Falls PCRB, Series 1998 5.50 4/01/2023 8,380
48,030 St. Paul Housing and Redevelopment
Auth. Hospital RB, Series 1993A 6.63 11/01/2017 42,032
14,775 Washington County Housing and
Redevelopment Auth. RB, Series 1998 5.50 11/15/2027 10,587
MISSISSIPPI (1.6%)
Lafayette County Hospital RB,
2,940 Series 1991A (PRE) 7.95 3/01/2016 3,038
15,175 Series 1991B (PRE) 7.95 3/01/2016 15,683
Union County Hospital RB,
4,450 Series 1991A (PRE) 7.95 3/01/2016 4,599
8,350 Series 1991B (PRE) 7.95 3/01/2016 8,630
MISSOURI (0.2%)
5,000 Health and Educational Facilities RB,
Series 1996A 6.38 2/01/2027 4,741
MONTANA (0.4%)
8,910 Lewis and Clark County Environmental
RB, Series 1998 5.60 1/01/2027 7,046
NEBRASKA (1.2%)
Platte County Hospital Auth. Number 1
Hospital RB,
4,500 Series 2000 (INS)(5) 6.10 5/01/2025 4,553
6,500 Series 2000 (INS)(5) 6.15 5/01/2030 6,600
14,500 Scotts Bluff County Hospital Auth.
Number 1 RB, Series 1998 5.25 11/15/2028 12,020
NEVADA (2.9%)
19,000 Clark County Economic Development RB,
Series 1999 5.50 5/15/2029 17,992
21,000 Clark County GO, Series 2000 (INS)(1) 5.50 7/01/2025 20,485
15,650 Humboldt County PCRB, Series 1984 8.30 12/01/2014 17,452
NEW HAMPSHIRE (0.8%)
17,500 Higher Educational and Health
Facilities RB, Series 1998 (INS)(6) 5.30 10/01/2028 15,461
NEW JERSEY (3.0%)
15,000 Camden County Improvement Auth. RB,
Series 1997 6.00 2/15/2027 10,140
50,000 Turnpike Auth. RB, Series 2000A 5.50 1/01/2027 49,211
NEW MEXICO (2.5%)
16,000 Chaves County Hospital RB (PRE) 7.25 12/01/2022 17,178
30,100 Lordsburg PCRB 6.50 4/01/2013 30,889
NEW YORK (15.1%)
Dormitory Auth. RB,
21,500 Series 1996B (Mental Health
Services) 6.00 8/15/2016 22,709
5,010 Series 2000A (INS)(1),(a) 5.95 7/01/2020 2,902
5,690 Series 2000A (INS)(1),(a) 6.00 7/01/2022 3,291
3,210 Series 2000A (INS)(1),(a) 6.05 7/01/2024 1,852
6,310 Series 2000B(e) 5.38 5/15/2018 6,162
8,655 Series 2000B(e) 5.38 5/15/2019 8,378
9,120 Series 2000B(e) 5.38 5/15/2020 8,746
10,910 Dutchess County IDA Civic Facility RB,
Series 2000 5.75 8/01/2030 10,718
Long Island Power Auth. Electric
Systems RB,
14,000 Series 2000A (INS)(4),(a) 5.94 6/01/2021 4,289
11,500 Series 2000A (INS)(4),(a) 5.91 6/01/2023 3,115
17,000 Series 2000A (INS)(4),(a) 5.93 6/01/2025 4,084
10,900 Series 2000A (INS)(4),(a) 5.94 6/01/2026 2,465
New York City GO,
50,000 Series 1995B (PRE)(f) 7.25 8/15/2019 55,250
13,065 Series 1997I 6.25 4/15/2027 13,544
20,000 Series 1999H 5.00 3/15/2029 17,494
7,800 Series 2000A 6.00 5/15/2020 8,060
10,700 Series 2000A 5.50 5/15/2024 10,336
22,740 Series 2001E 5.75 5/15/2030 22,433
New York City Municipal Water
Finance Auth. RB,
30,000 Series 1998D(a) 5.08 6/15/2020 9,674
11,000 Series 1999A 5.75 6/15/2030 11,003
8,000 Series 2000B 6.00 6/15/2033 8,270
6,850 New York City Transit Auth. MTA RB,
Series 2000A (INS)(2) 5.88 1/01/2030 6,955
New York City Transitional Finance
Auth. RB,
4,000 Series 1999C 5.50 5/01/2025 3,897
10,000 Series 2000B 5.75 11/15/2020 10,156
26,140 Series 2000C 5.50 11/01/2029 25,310
14,625 Port Auth. of New York and New
Jersey RB, Eighty-Fifth Series 5.38 3/01/2028 14,172
NORTH CAROLINA (0.7%)
13,485 Housing Finance Agency RB, Series
1991R 6.95 9/01/2023 13,896
OHIO (0.3%)
7,325 Lorain County Health Care Facilities
RB, Series 1998A 5.25 2/01/2021 5,814
PENNSYLVANIA (2.1%)
Montgomery County IDA RB,
7,500 Series 1996A 5.88 11/15/2022 6,949
10,000 Series 1996B 5.75 11/15/2017 9,304
18,600 Philadelphia Gas Works RB, 14th
Series 6.38 7/01/2026 18,723
31,755 Pittsburgh Water and Sewer Auth. RB,
Series 1998B (INS)(3),(a) 5.42 9/01/2029 5,777
PUERTO RICO (3.2%)
74,600 Highway and Transportation Auth. RB,
Series 1998A 4.75 7/01/2038 62,598
RHODE ISLAND (1.3%)
25,000 Housing and Mortgage Finance Corp.
SFH RB, Series 15-A 6.85 10/01/2024 25,689
TENNESSEE (0.3%)
7,000 Springfield Health and Educational
Facilities Board RB, Series 1998 5.38 8/01/2024 5,315
TEXAS (7.5%)
5,000 Austin Higher Education Auth. RB,
Series 1998 5.25 8/01/2023 4,288
19,500 Bell County Health Facilities
Development Corp. RB, Series 1989
(ETM) 6.50 7/01/2019 21,580
10,420 Edinburg Consolidated ISD GO,
Series 2000 (NBGA) 5.50 2/15/2030 10,016
12,500 Harris County Health Facilities RB,
Series 1992 (PRE) 7.13 6/01/2015 13,239
19,700 Harris County IDC RB, Series 1992 6.95 2/01/2022 20,128
20,000 Houston Water and Sewer Systems RB,
Series 1998A, B (INS)(4),(a) 5.83 12/01/2023 5,117
21,000 Port of Corpus Christi IDC PCRB,
Series 1997A 5.45 4/01/2027 17,629
19,135 Southwest Higher Education Auth. RB,
Series 1999A 5.00 10/01/2029 16,531
20,000 State Veteran's Land Board GO,
Series 2000(c) 7.15 11/15/2032 19,861
6,420 Travis County Health Facilities
Development Corp. RB, Series
1999A (INS)(2) 5.88 11/15/2024 6,449
Tyler Health Facilities Development
Corp. Hospital RB,
4,700 Series 1993A (East Texas Medical
Center) 6.75 11/01/2025 3,780
10,300 Series 1993B (East Texas Medical
Center) 6.75 11/01/2025 8,285
UTAH (0.4%)
7,150 Nebo School District GO, Series 2000
(NBGA) 5.50 7/01/2020 7,119
VERMONT (0.1%)
2,500 Educational and Health Buildings RB,
Series 1998 5.50 7/01/2021 2,258
VIRGINIA (2.2%)
11,340 Commonwealth Transportation Board RB,
Series 1999A,B 5.50 5/15/2020 11,279
9,500 Danville IDA Hospital RB, Series
1998 (INS)(2) 5.25 10/01/2028 8,941
21,950 Peninsula Ports Auth. RB,
Series 1992 (NBGA) 7.38 6/01/2020 22,605
WASHINGTON (4.1%)
5,000 Housing Finance Commission RB,
Series 1999 (INS)(5) 6.00 7/01/2029 4,925
73,500 Seattle Metropolitan Sewer RB,
Series V(f) 6.20 1/01/2032 75,940
WEST VIRGINIA (0.7%)
12,500 Water Development Auth. RB,
Series 1991A (INS)(4) 7.00 11/01/2025 13,040
WISCONSIN (0.4%)
8,000 Univ. of Wisconsin Hospitals and
Clinics Auth. RB, Series 2000
(INS)(4) 6.20 4/01/2029 8,374
--------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,915,842) 1,907,187
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (0.8%)
CALIFORNIA (0.4%)
300 Alameda County IDA RB, Series 1994 5.00 6/01/2004 300
5,100 Irvine Improvement Bonds,
Assessment District 87-8 (LOC) 4.75 9/02/2024 5,100
1,400 Irvine Ranch Water District RB,
Series 1993 (LOC) 4.75 4/01/2033 1,400
100 Ontario Industrial Development
Auth. RB, Series 1985 (LOC) 5.00 4/01/2015 100
FLORIDA (0.1%)
2,135 Dade County IDA PCRB, Series 1995 5.55 4/01/2020 2,135
700 St. Lucie County PCRB, Series 1993 5.50 1/01/2026 700
INDIANA (0.1%)
2,165 Huntington Economic Development RB,
Series 1998 (LOC) 5.70 12/01/2025 2,165
IOWA (0.1%)
2,000 Higher Education Loan Auth. RB,
Series 1999B (LOC) 5.70 6/01/2019 2,000
VIRGINIA (0.1%)
300 Petersburg Hospital Auth. RB,
Series 1997 (LOC) 5.55 7/01/2017 300
900 Waynesboro IDA RB, Series 1997 (LOC) 5.55 12/15/2028 900
--------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $15,100) 15,100
--------------------------------------------------------------------------------
Total investments (cost: $1,930,942) $1,922,287
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
---------------------------------------------
Hospitals 14.0%
Special Assessment/Tax/Fee 13.8
Water/Sewer Utilities-Municipal 10.5
General Obligations 9.8
Escrowed Bonds 9.6
Education 7.0
Toll Roads 3.9
Paper & Forest Products 3.6
Gaming Companies 2.7
Nursing/Continuing Care Centers 2.7
Single-Family Housing 2.5
Air Freight 2.2
Airport/Port 1.9
Metals/Mining 1.9
Electric/Gas Utilities-Municipal 1.7
Natural Gas Utilities 1.4
Health Care-Miscellaneous 1.2
Oil-International Integrated 1.1
Electric Utilities 1.0
Leasing 1.0
Other 4.8
----
Total 98.3%
====
PORTFOLIO SUMMARY BY STATE
---------------------------------
Alabama 2.3%
Alaska 1.1
California 0.8
Colorado 2.2
Connecticut 2.7
District of Columbia 4.1
Florida 1.4
Georgia 2.4
Hawaii 0.4
Idaho 1.1
Illinois 8.0
Indiana 5.2
Iowa 0.1
Kansas 0.4
Louisiana 1.9
Maine 1.4
Massachusetts 3.4
Michigan 5.2
Minnesota 3.1
Mississippi 1.6
Missouri 0.2
Montana 0.4
Nebraska 1.2
Nevada 2.9
New Hampshire 0.8
New Jersey 3.0
New Mexico 2.5
New York 15.1
North Carolina 0.7
Ohio 0.3
Pennsylvania 2.1
Puerto Rico 3.2
Rhode Island 1.3
Tennessee 0.3
Texas 7.5
Utah 0.4
Vermont 0.1
Virginia 2.3
Washington 4.1
West Virginia 0.7
Wisconsin 0.4
----
Total 98.3%
====
USAA INTERMEDIATE-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
PRINCIPAL COUPON FINAL MARKET
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (91.2%)
ALABAMA (0.5%)
$ 2,000 Baldwin County Health Care Auth.
Hospital RB, Series 1996 6.75% 4/01/2015 $ 1,887
2,500 Montgomery BMC Special Care Facilities
Financing Auth. RB, Series 1998B
(INS)(1) 4.88 11/15/2018 2,213
5,000 Prattville IDB PCRB, Series 1998 5.15 9/01/2013 4,584
2,000 Univ. of Alabama at Birmingham
Hospital RB, Series 2000A (INS)(1) 5.75 9/01/2020 2,010
ALASKA (0.6%)
Housing Finance Corp. Mortgage RB,
5,580 Series 1996A (INS)(1) 6.00 12/01/2015 5,745
6,670 Series 1997A-1 5.50 12/01/2017 6,468
ARIZONA (0.2%)
4,500 Maricopa County Hospital RB, Series
1997 6.13 4/01/2018 4,366
ARKANSAS (0.7%)
4,000 Little Rock Capital Improvement RB,
Series 1998A 5.70 1/01/2018 3,841
4,445 Mississippi County Hospital RB,
Series 1992B 6.85 11/01/2002 4,494
6,865 St. Francis County Hospital RB,
Series 1985 6.50 2/01/2005 6,896
285 Student Loan RB, Series 1991 7.15 6/01/2002 291
CALIFORNIA (5.1%)
7,100 Central Valley Financing Auth. RB
(PRE) 6.10 7/01/2013 7,575
10,500 Contra Costa Transportation Auth. RB,
Series 1991A (ETM)(INS)(3),(a) 6.30 3/01/2003 9,462
Foothill/Eastern Transportation
Corridor Agency RB,
10,000 Series 1995A (ETM)(a) 6.87 1/01/2010 8,876
15,000 Series 1995A (PRE)(a) 7.10 1/01/2011 13,532
9,085 Series 1995A (PRE)(a) 6.82 1/01/2013 8,212
Modesto Irrigation District COP,
3,320 Series 1999A (INS)(2),(a) 5.64 7/01/2017 1,275
3,325 Series 1999A (INS)(2),(a) 5.69 7/01/2018 1,191
19,900 Pleasanton Joint Powers Financing
Auth. RB, Series 1993A 6.00 9/02/2005 20,789
Sacramento Cogeneration Auth. RB,
1,800 Series 1995 (PRE) 6.38 7/01/2010 1,989
1,500 Series 1995 6.38 7/01/2010 1,604
San Joaquin Hills Transportation
Corridor Agency Senior Lien RB,
3,525 Series 1993 (ETM)(a) 7.05 1/01/2005 3,576
8,305 Series 1993 (ETM)(a) 7.87 1/01/2006 8,596
5,000 Series 1993 (ETM)(a) 7.50 1/01/2007 5,261
16,795 Series 1993 (ETM)(a) 7.71 1/01/2008 17,995
COLORADO (1.2%)
5,000 Adams County PCRB, Series 1999
(INS)(2) 5.10 1/01/2019 4,658
5,200 Arapahoe County IDA RB, Series 1991 7.00 2/01/2001 5,234
Denver Health and Hospital Auth. RB,
1,000 Series 1998A 5.20 12/01/2012 906
635 Series 1998A 5.25 12/01/2013 572
2,200 Series 1998A 5.38 12/01/2018 1,835
9,500 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 9,337
2,500 Housing and Finance Auth. MFH RB,
Series 1997C-3 5.65 10/01/2015 2,500
CONNECTICUT (1.6%)
Mashantucket (Western) Pequot Tribe RB,
4,960 Series 1996A (PRE)(d) 6.40 9/01/2011 5,501
10,780 Series 1996A(d) 6.40 9/01/2011 11,325
1,000 Series 1997B(d) 5.60 9/01/2009 999
2,400 Series 1997B(d) 5.70 9/01/2012 2,365
16,500 Series 1997B(d) 5.75 9/01/2018 15,533
DISTRICT OF COLUMBIA (4.0%)
30,000 Convention Center Auth. RB,
Series 1998 (INS)(2) 5.00 10/01/2018 27,702
GO,
14,105 Series 1993A 5.80 6/01/2004 14,562
3,870 Series 1994A-3 5.50 6/01/2006 3,971
440 Series E (PRE) 5.75 6/01/2005 460
11,340 Series E 5.75 6/01/2005 11,744
450 Series E (PRE) 5.75 6/01/2006 470
11,550 Series E 5.75 6/01/2006 11,938
6,250 Hospital RB, Series 1992B (PRE) 6.75 8/15/2007 6,617
Revenue Bond,
4,560 Series 1999 (INS)(6) 6.20 7/01/2019 4,578
6,000 Series 1999A (INS)(2) 5.00 1/01/2019 5,467
FLORIDA (0.9%)
Dade County RB,
7,905 Series 1996B (INS)(2),(a) 6.00 10/01/2011 4,391
8,610 Series 1996B (INS)(2),(a) 6.10 10/01/2012 4,481
8,760 Series 1996B (PRE)(INS)(2),(a) 6.20 10/01/2013 4,544
7,000 North Miami Educational Facilities RB 6.10 4/01/2013 7,096
GEORGIA (0.6%)
8,760 Metropolitan Atlanta Rapid Transit RB,
Series M 6.25 7/01/2003 9,035
5,000 Savannah Hospital Auth./Candler Health
Systems RB, Series 1998B (INS)(4) 5.00 7/01/2018 4,573
HAWAII (0.3%)
2,000 Honolulu City and County GO,
Series 1999C (INS)(3) 5.00 7/01/2019 1,830
5,000 Housing Finance and Development Corp.
RB, Series 1997B 5.45 7/01/2017 4,906
IDAHO (0.1%)
2,325 Health Facilities Auth. RB, Series
1998 5.25 5/01/2014 2,086
ILLINOIS (5.7%)
2,290 Bedford Park Tax Increment RB,
Series 1993 (ETM) 7.38 12/01/2004 2,520
Channahon Tax Increment RB,
2,550 Series 2000 6.25 1/01/2010 2,583
6,040 Series 2000 6.88 1/01/2020 6,126
Chicago School Board GO,
15,535 Series 1999A (INS)(3),(a) 5.13 12/01/2016 6,201
10,775 Series 1999A (INS)(3),(a) 5.17 12/01/2017 4,030
21,235 Chicago-O'Hare International Airport
RB, Series 1994A (INS)(1),(f) 6.20 1/01/2007 22,708
7,460 Cook County Forest Preserve District
GO, Series 1996 (INS)(1) 5.80 11/01/2016 7,608
10,110 Development Finance Auth. RB,
Series 1995 7.00 3/01/2007 10,398
Health Facilities Auth. RB,
10,000 Hospital Sisters Services, Inc.
(INS)(1) 5.00 6/01/2018 9,076
6,700 Series 1992 (Mercy Hospital) 7.00 1/01/2007 5,377
8,000 Series 1993B
(Univ. of Chicago Hospital)(INS)(1) 5.75 8/15/2014 8,067
3,150 Series 1996 (Mercy Hospital) 6.00 1/01/2006 2,728
7,815 Series 1996 (Mercy Hospital) 6.38 1/01/2015 5,795
5,000 Series 1996A (Riverside Medical
Center) 6.00 11/15/2015 4,862
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2013 906
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2014 893
2,500 Series 1998 (Centegra Health System) 5.25 9/01/2018 2,135
4,250 Series 2000 (Riverside Medical
Center) 6.80 11/15/2020 4,372
8,050 Lake County Community Unit School
District GO, Series 1999B
(INS)(4),(a) 5.13 12/01/2016 3,213
Univ. of Illinois COP,
5,820 Series 1999 (INS)(1) 5.25 8/15/2015 5,711
4,000 Series 1999 (INS)(1) 5.25 8/15/2016 3,893
14,070 Will County Forest Preserve District
GO, Series 1999B (INS)(3),(a) 5.40 12/01/2017 5,315
INDIANA (2.2%)
7,465 Bond Bank State Revolving Fund RB,
Series 2000A 5.50 8/01/2016 7,486
Health Facility Financing Auth. RB,
1,400 Series 1993 (Sisters St. Francis)
(PRE) 5.90 11/01/2009 1,429
1,400 Series 1998 (Floyd Memorial
Hospital) 5.25 2/15/2018 1,240
5,000 Series 1999A (Sisters St. Francis)
(INS)(1) 5.15 11/01/2019 4,624
6,000 Indianapolis Economic Development RB,
Series 1996 6.05 1/15/2010 5,854
Marion County Hospital Auth. RB,
5,600 Series 1992 (PRE) 6.10 10/01/2003 5,740
3,700 Series 1992 (PRE) 6.55 10/01/2008 3,793
Pike Township School Building Corp. RB,
4,600 Series 1992A 6.00 2/01/2006 4,771
4,700 Series 1992A 6.00 8/01/2006 4,874
1,150 St. Joseph County Economic Development
RB, Series 1997 5.45 2/15/2017 994
7,260 St. Joseph County Hospital Auth. RB,
Series 1999 5.75 2/15/2019 6,156
IOWA (1.3%)
5,500 Finance Auth. RB, Series 1998A
(INS)(1) 5.25 7/01/2015 5,348
3,280 Higher Education Loan Auth. RB,
Series 1995 (INS)(7) 6.13 10/01/2016 3,416
7,950 Marion County Commercial Development
RB, Series 1999 (INS)(9) 5.95 1/01/2014 8,214
10,000 Student Loan Liquidity Corp. RB,
Series 1992A(f) 6.45 3/01/2002 10,237
LOUISIANA (1.5%)
5,175 Offshore Terminal Auth. RB, Series
1998 5.20 10/01/2018 4,726
Orleans Levee District RB,
7,120 Series 1986 (INS)(4) 5.95 11/01/2014 7,430
7,210 Series 1986 (INS)(4) 5.95 11/01/2015 7,495
7,015 Series A (INS)(4) 5.95 11/01/2010 7,474
1,400 Public Facilities Auth. RB, Series
1997B 5.63 8/01/2017 1,392
3,955 St. Tammany Parish Hospital Service
District No. 1 Hospital RB,
Series 1998 (INS)(6) 5.00 7/01/2018 3,438
MAINE (1.9%)
41,400 Bucksport Solid Waste Disposal RB,
Series 1985 6.25 5/01/2010 42,074
MARYLAND (1.1%)
Community Development Administration
RB,
16,560 1997 First Series 5.60 4/01/2018 16,604
7,405 Series 1996A 5.88 7/01/2016 7,557
MASSACHUSETTS (1.6%)
3,640 Housing Finance Agency RB, Series
1992C 6.35 11/15/2003 3,787
Municipal Wholesale Electric Co. Power
Supply Systems RB,
5,000 Series 1993 (INS)(2) 5.45 7/01/2018 4,845
10,000 Series 1993 A (INS)(2) 5.31 7/01/2018 9,689
15,000 State GO, Series 1991D(f) 6.63 7/01/2003 15,520
MICHIGAN (2.4%)
8,000 Detroit Building Auth. RB, Series
1996A (LOC) 6.15 2/01/2011 8,288
4,000 Detroit Downtown Development Auth. Tax
Increment Bonds, Series 1998C
(INS)(1) 5.00 7/01/2018 3,696
23,330 Dickinson County Economic Development
Corp. RB, Series 1989 6.55 3/01/2007 23,810
2,390 Higher Education Facilities Auth. RB,
Series 1998 5.35 6/01/2013 2,299
Hospital Finance Auth. RB,
5,000 Series 1995A (Genesys Health
System)(PRE) 7.50 10/01/2007 5,715
325 Series 1996 (Central Michigan
Hospital) 5.90 10/01/2004 330
100 Series 1996 (Central Michigan
Hospital) 6.00 10/01/2005 102
150 Series 1996 (Central Michigan
Hospital) 6.10 10/01/2006 154
160 Series 1996 (Central Michigan
Hospital) 6.20 10/01/2007 165
2,600 Series 1996 (Central Michigan
Hospital) 6.25 10/01/2016 2,561
Strategic Fund RB,
5,460 Series 1997A (LOC) 5.75 8/01/2019 5,382
400 Series 1998 5.30 7/01/2018 360
MINNESOTA (1.5%)
2,500 Housing Finance Agency Single Family
Mortgage RB, Series 1997G 6.00 1/01/2018 2,578
4,205 Maplewood Health Care Facility RB,
Series 1996 5.95 11/15/2006 3,988
South St. Paul Hospital Facility RB,
10,235 Series 1994 6.50 11/01/2004 9,826
9,095 Series 1994 6.75 11/01/2009 8,514
St. Paul Hospital RB,
4,000 Series 1997A 5.70 11/01/2015 3,203
1,500 Series 1997B 5.85 11/01/2017 1,200
5,260 Washington County Hospital Facility
RB, Series 1998 5.38 11/15/2018 3,995
MISSISSIPPI (1.7%)
Lafayette County Hospital RB,
355 Series 1991A (PRE) 7.70 3/01/2003 359
1,835 Series 1991B (PRE) 7.70 3/01/2003 1,856
15,885 Series 1997 5.50 3/01/2009 16,162
1,500 Lincoln County Hospital RB,
Series 1998B (INS)(5) 5.50 4/01/2018 1,445
2,960 Prentiss County Hospital RB, Series
1985 6.50 2/01/2005 2,912
Union County Hospital RB,
540 Series 1991A (PRE) 7.70 3/01/2003 548
1,005 Series 1991B (PRE) 7.70 3/01/2003 1,019
11,170 Series 1997 5.50 3/01/2009 11,453
MISSOURI (0.5%)
2,000 Health and Educational Facilities
Auth. RB, Series 1997 5.75 2/01/2017 1,838
Saint Louis RB,
4,000 Series 2000 6.00 1/01/2008 4,016
4,460 Series 2000 6.13 1/01/2009 4,489
NEBRASKA (0.8%)
Cass County School District 001 GO,
2,800 Series 1998 (INS)(2) 5.00 12/15/2014 2,651
2,000 Series 1998 (INS)(2) 5.00 12/15/2019 1,830
Investment Finance Auth. Hospital RB,
620 Series 1997 (INS)(5) 5.30 11/15/2012 617
2,000 Series 1997 (INS)(5) 5.45 11/15/2017 1,930
Platte County Hospital Auth. Number 1
Hospital RB,
500 Series 2000 (INS)(5) 5.50 5/01/2010 507
500 Series 2000 (INS)(5) 5.55 5/01/2011 505
500 Series 2000 (INS)(5) 5.65 5/01/2012 505
500 Series 2000 (INS)(5) 5.75 5/01/2013 506
500 Series 2000 (INS)(5) 5.90 5/01/2015 505
3,500 Series 2000 (INS)(5) 6.05 5/01/2020 3,545
5,000 Scotts Bluff County Hospital Auth. RB,
Series 1998 5.13 11/15/2019 4,246
NEVADA (1.0%)
1,000 Clark County Flood Control GO
(INS)(3) 4.50 11/01/2016 868
16,640 Clark County School District GO,
Series 1991B (INS)(3),(a) 6.24 3/01/2004 14,123
6,040 Department of Business and
Industry RB (INS)(2),(a) 5.76 1/01/2017 2,362
2,685 Housing Division SFH RB, Series
1995D-1 5.90 10/01/2014 2,677
2,000 Reno Hospital RB, Series 1998
(INS)(1) 5.00 5/15/2018 1,824
NEW HAMPSHIRE (0.5%)
Higher Educational and Health
Facilities Auth. RB,
20 Series 1985A (Student Loan)(INS)(3) 7.50 12/01/2000 20
1,025 Series 1990 (Granite State
Management) 8.50 12/01/2001 1,028
3,000 Series 1997 (Kendal at Hanover)
(LOC) 5.80 10/01/2012 3,015
5,055 Series 1997 (Kendal at Hanover)
(LOC) 5.90 10/01/2018 5,056
1,990 Series 1998 (Franklin Pierce
College)(INS)(6) 5.25 10/01/2018 1,820
NEW JERSEY (2.5%)
6,150 Camden County Improvement Auth. RB,
Series 1997 5.88 2/15/2015 4,515
Economic Development Auth. RB,
15,000 Series 1994A (INS)(1) 5.88 7/01/2011 15,713
2,000 Series 1997A 5.75 12/01/2016 1,773
31,260 Turnpike Auth. RB, Series 1991A(f) 6.50 1/01/2003 32,445
NEW MEXICO (0.3%)
5,840 Chaves County Hospital RB, Series
1992 (PRE) 7.25 12/01/2010 6,250
NEW YORK (21.2%)
6,000 Dormitory Auth. RB, Bronx-Lebanon
Hospital Center, Series 1998E 5.20 2/15/2015 5,766
Dormitory Auth. RB, Brookdale
Hospital,
5,000 Series 1998J 5.20 2/15/2015 4,805
4,000 Series 1998J 5.20 2/15/2016 3,818
4,760 Series 1998J 5.30 2/15/2017 4,576
10,300 Dormitory Auth. RB, Court Facilities
Lease, Series 1993A 5.63 5/15/2013 10,337
4,065 Dormitory Auth. RB, Lutheran Center at
Poughkeepsie, Series 1997 (LOC) 6.00 7/01/2014 4,209
Dormitory Auth. RB, Mental Health
Services Facilities Improvement,
2,055 Series 1997A 5.75 2/15/2010 2,150
2,000 Series 1997A 5.75 2/15/2011 2,079
2,000 Series 1997A 5.75 2/15/2012 2,066
2,460 Series 1997B 5.75 2/15/2010 2,574
4,050 Series 1997B 5.75 2/15/2012 4,184
4,675 Series 1997B 5.50 8/15/2017 4,621
Dormitory Auth. RB, New York City
University,
5,000 1996 Series 2 6.00 7/01/2009 5,306
1,760 1996 Series 2 6.00 7/01/2010 1,859
5,500 Series 1993A 5.75 7/01/2013 5,760
14,560 Dormitory Auth. RB, Northern General
Hospital, Series 1998G 5.30 2/15/2019 13,782
2,680 Dormitory Auth. RB, Nyack Hospital,
Series 1996 6.00 7/01/2006 2,668
Dormitory Auth. RB, State University
Educational Facilities,
2,725 Series 1994B 5.90 5/15/2006 2,884
2,500 Series 1994B (PRE) 6.00 5/15/2007 2,667
1,000 Series 1995A 5.88 5/15/2007 1,064
3,500 Series 1995A (PRE) 6.00 5/15/2009 3,768
2,250 Series 1995A (PRE) 6.00 5/15/2010 2,423
2,175 Series 1995A (PRE) 6.00 5/15/2011 2,342
14,120 Series 1996 5.75 5/15/2013 14,536
7,000 Series 1996 5.75 5/15/2016 7,105
7,230 Dormitory Auth. RB, Upstate Community
College, Series 1999A 5.00 7/01/2019 6,570
Environmental Facilities Corp. PCRB,
5,135 Series 1991E (PRE) 6.40 6/15/2003 5,309
1,415 Series 1991E 6.40 6/15/2003 1,462
Housing Finance Agency Service
Contract RB,
2,275 Series 1995A 6.25 9/15/2010 2,422
4,420 Series 1996A 6.00 9/15/2016 4,542
75,745 Housing New York Corp. RB, Series
1993 5.00 11/01/2018 69,604
13,595 Long Island Power Auth. Electric
Systems RB, Series 2000A (INS)
(4),(a) 5.60 6/01/2014 6,505
Medical Care Facilities Finance
Agency RB,
5,000 Series 1994A (PRE) 6.40 2/15/2007 5,444
5,000 Series 1994A (PRE) 6.50 2/15/2008 5,464
10,000 Series 1994A 6.13 8/15/2013 10,341
7,445 Series 1995A (Adult Day Care) 6.00 11/15/2010 7,857
2,675 Series 1995A (Brookdale Hospital)
(ETM) 6.70 2/15/2005 2,900
2,750 Series 1995A (Brookdale Hospital)
(PRE) 6.70 8/15/2005 3,027
2,860 Series 1995A (Brookdale Hospital)
(PRE) 6.75 2/15/2006 3,153
2,940 Series 1995A (Brookdale Hospital)
(PRE) 6.75 8/15/2006 3,242
3,045 Series 1995A (Brookdale Hospital)
(PRE) 6.80 2/15/2007 3,363
3,130 Series 1995A (Brookdale Hospital)
(PRE) 6.80 8/15/2007 3,457
5,700 Series 1995A (Brookdale Hospital)
(PRE) 6.80 8/15/2012 6,295
22,230 Metropolitan Transportation Auth.
Service Contract RB, Series P 5.75 7/01/2015 22,407
25,000 Mortgage Agency RB, Series 83 5.45 4/01/2018 24,684
3,235 New York City 34th St. Partnership
Capital Improvement Bonds,
Series 1993 5.50 1/01/2014 3,235
New York City GO,
11,450 Series 1992H (PRE) 6.88 2/01/2004 11,979
1,330 Series 1992H 6.88 2/01/2004 1,388
16,655 Series 1993B (PRE) 6.75 10/01/2004 17,626
345 Series 1993B 6.75 10/01/2004 363
1,700 Series 1993C (PRE) 6.50 8/01/2004 1,785
7,300 Series 1993C 6.50 8/01/2004 7,620
15,000 Series 1994A 6.25 8/01/2008 15,911
10,000 Series 1996G 5.75 2/01/2010 10,446
5,000 Series 1997I 6.00 4/15/2012 5,262
9,635 Series 1998J 5.00 8/01/2017 8,994
New York City Municipal Water Finance
RB,
3,295 Series 1992A 6.70 6/15/2003 3,375
3,345 Series 1992A (PRE) 6.70 6/15/2003 3,433
Thruway Auth. RB,
7,500 Series 1995 (PRE) 6.00 4/01/2009 8,044
2,150 Series 1995 (PRE) 6.10 4/01/2010 2,314
Urban Development Corp. RB,
20,955 Series 1993 5.75 1/01/2013 21,185
21,700 Series 1993 5.50 1/01/2015 21,413
NORTH CAROLINA (0.3%)
6,000 Municipal Power Agency RB, Series
1992 6.00 1/01/2004 6,145
OHIO (0.8%)
6,750 Dayton Special Facilities RB,
Series 1988C 6.05 10/01/2009 6,849
4,000 Franklin County Development RB,
Series 1999 5.80 10/01/2014 4,068
2,650 Franklin County Health Care Facilities
RB, Series 1997 5.50 7/01/2017 2,233
4,000 IDA RB, Series 1992 5.75 12/01/2002 4,074
OKLAHOMA (0.5%)
Holdenville Industrial Auth. RB,
1,650 Series 1995 (PRE) 6.60 7/01/2010 1,815
3,250 Series 1995 (PRE) 6.70 7/01/2015 3,590
1,420 Tulsa County Home Finance Auth. RB,
Series 1990 (ETM)(INS)(2) 7.10 5/01/2002 1,454
3,555 Valley View Hospital Auth. RB,
Series 1996 5.75 8/15/2006 3,471
OREGON (0.1%)
1,250 Clackamas County Hospital Facility
Auth. RB, Series 1997 6.10 11/01/2012 1,159
PENNSYLVANIA (4.0%)
30,660 Finance Auth. RB, Series 1993 6.60 11/01/2009 32,700
5,500 Higher Educational Facility Auth. RB,
Series 1999A (INS)(4) 5.25 8/01/2014 5,375
3,565 Housing Finance Agency RB, Series
1992 5.90 7/01/2004 3,638
10,000 Montgomery County IDA RB, Series
1996B 5.63 11/15/2012 9,634
11,700 Philadelphia IDA RB, Series
1998A (LOC) 5.15 3/01/2019 11,049
10,550 Philadelphia Water and Wastewater RB,
Series 1993 (INS)(3) 5.65 6/15/2012 10,697
9,440 State GO, Second Series 1992(a) 6.11 7/01/2004 7,879
5,000 York County IDA RB, Series 1992 6.25 7/01/2002 5,128
PUERTO RICO (4.0%)
Electric Power Auth. RB,
5,000 Series S 7.00 7/01/2006 5,599
4,420 Series X 5.80 7/01/2009 4,686
4,500 Series X 5.90 7/01/2010 4,781
4,000 Series X 6.00 7/01/2011 4,254
4,220 Series Z 5.50 7/01/2012 4,341
22,200 Housing Bank and Finance Agency RB 7.50 12/01/2006 24,397
1,465 Municipal Finance Agency RB, Series
1992A 5.80 7/01/2004 1,529
14,060 Public Building Auth. GO, Series K 6.50 7/01/2003 14,744
Public Improvement GO,
7,500 Series 1994 6.10 7/01/2006 7,988
7,825 Series 1994 6.20 7/01/2007 8,346
5,735 Puerto Rico Commonwealth
Infrastructure RB, Series A(e) 5.38 10/01/2016 5,826
RHODE ISLAND (1.3%)
Health and Educational Building Corp.
RB,
3,385 Series 1996 (INS)(1) 5.50 5/15/2012 3,446
7,600 Series 1996 (INS)(1) 5.50 5/15/2016 7,525
4,345 Series 1999A (LOC) 5.88 11/15/2014 4,373
Housing and Mortgage Finance Corp. RB,
6,180 Series 15-B 6.30 10/01/2007 6,313
4,805 Series 1995A (INS)(2) 5.70 7/01/2007 4,926
1,690 Series 25A 5.60 10/01/2017 1,685
SOUTH CAROLINA (0.3%)
4,250 Georgetown County Environment
Improvement RB, Series 2000A 5.95 3/15/2014 4,333
3,000 Marion County Hospital District
RB (INS)(7) 5.50 11/01/2015 3,000
SOUTH DAKOTA (0.3%)
5,400 Rapid City IDA RB, Series 1990 7.25 11/01/2000 5,410
TENNESSEE (1.0%)
24,540 Housing Development Agency RB,
Issue 97-3B(a) 5.73 7/01/2016 9,848
3,000 Knox County Health, Educational, and
Housing Facilities Board RB,
Series 1996 (INS)(7) 5.50 4/15/2011 3,075
2,000 Memphis Shelby County Airport Auth.
Special Facilities RB, Series 1997 5.35 9/01/2012 1,952
Nashville and Davidson County Health
and Educational Facilities Board RB,
4,000 Series 1998 (INS)(5) 5.10 8/01/2016 3,705
1,000 Series 1998 (INS)(5) 5.10 8/01/2019 904
4,000 Springfield Health and Educational
Facilities Board Hospital RB,
Series 1998 5.25 8/01/2018 3,132
TEXAS (8.8%)
5,410 Austin Higher Education Auth. RB,
Series 1998 5.13 8/01/2016 4,808
Bastrop ISD GO,
1,855 Series 1997 (NBGA)(a) 5.55 2/15/2014 890
3,030 Series 1997 (NBGA)(a) 5.55 2/15/2015 1,364
3,055 Series 1997 (NBGA)(a) 5.60 2/15/2016 1,285
3,155 Series 1997 (NBGA)(a) 5.60 2/15/2017 1,245
12,000 Bexar County Health Facilities
Development Corp. RB, Series 1993
(ETM)(INS)(4) 5.88 11/15/2010 12,722
32,925 Brazos River Auth. RB, Series 1999A 5.38 4/01/2019 29,197
4,365 Cass County IDC PCRB, Series 1997B 5.35 4/01/2012 4,261
10,710 Clint ISD Public Facility Corp. RB,
Series 1999(c) 7.00 5/01/2019 11,145
Fort Worth Higher Education
Finance Corp. RB,
515 Series 1997A 5.50 10/01/2006 518
545 Series 1997A 5.50 10/01/2007 546
575 Series 1997A 5.63 10/01/2008 579
2,670 Series 1997A 6.00 10/01/2012 2,703
15,400 Gulf Coast Waste Disposal Auth. PCRB,
Series 1992 6.13 11/01/2004 15,901
6,200 Gulf Coast Waste Disposal Auth. RB,
Series 1994 5.70 5/01/2006 6,359
2,070 Harrison County Health Facilities
Development Corp. RB, Series
1998 (INS)(6) 5.50 1/01/2018 1,919
Houston ISD Public Facility Corp. RB,
3,635 Series 1998A (INS)(2),(a) 5.35 9/15/2015 1,577
2,635 Series 1998A (INS)(2),(a) 5.38 9/15/2016 1,068
3,885 Series 1998A (INS)(2),(a) 5.40 9/15/2017 1,476
4,955 Series 1998B (INS)(2),(a) 5.35 9/15/2015 2,150
6,955 Series 1998B (INS)(2),(a) 5.38 9/15/2016 2,818
4,825 Houston Water and Sewer Systems RB,
Series 1992B 6.00 12/01/2004 5,039
Laredo ISD Public Limited GO,
370 Series 1998A 5.06 2/01/2001 370
390 Series 1998A 5.06 2/01/2002 390
410 Series 1998A 5.06 2/01/2003 409
435 Series 1998A 5.06 2/01/2004 434
460 Series 1998A 5.06 2/01/2005 456
480 Series 1998A 5.06 2/01/2006 474
505 Series 1998A 5.06 2/01/2007 495
530 Series 1998A 5.06 2/01/2008 516
3,830 Lewisville RB, Series 1998 (INS)(6) 5.38 9/01/2015 3,634
11,700 Lower Colorado River Auth. RB,
Series 1992 (ETM)(a) 6.45 1/01/2003 10,522
4,260 Marlin ISD Public Facility Corp. RB,
Series 1998(c) 5.85 2/15/2018 4,118
Municipal Power Agency RB,
8,565 Series 1987 5.50 9/01/2013 8,565
5,000 Series 1993 (INS)(1),(a) 5.63 9/01/2017 1,913
24,050 Port of Corpus Christi IDC PCRB,
Series 1997B 5.40 4/01/2018 21,058
11,790 Public Finance Auth. RB (INS)(1),(a) 6.06 2/01/2004 10,043
10,000 San Antonio Electric and Gas System
RB, Series 1991B (ETM)(INS)(3),(a) 6.38 2/01/2004 8,521
4,000 Trinity River IDA RB 7.25 2/01/2004 4,281
Tyler Health Facilities Development
Corp. Hospital RB,
5,275 Series 1993B 6.63 11/01/2011 4,672
1,000 Series 1997A 5.63 7/01/2013 877
UTAH (2.4%)
410 Housing Finance Agency RB, Series
1985B 5.30 7/01/2007 410
Intermountain Power Agency RB,
5,115 Series 1987A (ETM)(INS)(1) 5.00 7/01/2012 5,086
2,990 Series 1987A (INS)(1) 5.00 7/01/2012 2,936
10,395 Series 1988B (ETM)(INS)(1),(a) 6.48 7/01/2003 9,124
6,035 Series 1988B (INS)(1),(a) 6.48 7/01/2003 5,293
13,855 Series 1988B (ETM)(INS)(1),(a) 6.18 7/01/2004 11,573
8,040 Series 1988B (INS)(1),(a) 6.18 7/01/2004 6,708
4,000 Series 1997B (INS)(1) 5.75 7/01/2019 4,031
7,000 Juab County PCRB, Series 1991(b) 6.00 8/01/2011 6,915
VERMONT (0.1%)
3,000 Educational and Health Buildings
Financing Agency RB, Series 1998 5.50 7/01/2018 2,747
VIRGINIA (0.9%)
5,000 Isle of Wight County IDA PCRB,
Series 1994 5.80 5/01/2004 5,031
10,000 Public School Auth. RB, Series
1999A 5.13 8/01/2019 9,447
5,000 Richmond Convention Center Auth. RB,
Series 2000 6.13 6/15/2020 5,220
WASHINGTON (1.2%)
Health Care Facilities Auth. RB,
3,255 Series 1997A (INS)(1) 5.13 8/15/2017 3,032
2,500 Series 1998 (INS)(5) 5.25 8/15/2017 2,349
2,500 Series 1998 (INS)(5) 5.30 8/15/2018 2,345
6,185 Higher Education Facilities Auth. RB 5.20 10/01/2017 5,826
2,000 Housing Finance Commission RB,
Series 1999 (INS)(5) 5.88 7/01/2019 1,970
King County GO,
500 Series 1993A (PRE) 5.90 12/01/2007 520
4,720 Series 1993A 5.90 12/01/2007 4,878
5,000 King County Housing Auth. RB,
Series 1998A (INS)(5) 5.20 7/01/2018 4,707
WEST VIRGINIA (0.8%)
16,940 School Building Auth. RB, Series
1994 6.25 7/01/2004 17,711
WISCONSIN (0.9%)
Health and Educational Facilities
Auth. RB,
11,500 Series 1993 (Aurora Health Care)
(INS)(1) 5.25 8/15/2012 11,494
4,130 Series 1995A (Waukesha Memorial
Hospital)(INS)(2) 5.25 8/15/2012 4,128
5,000 Series 1998A (Wausau Hospital)
(INS)(2) 5.13 8/15/2020 4,558
--------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,956,113) 1,977,970
--------------------------------------------------------------------------------
PUT BONDS (5.3%)
ALABAMA (0.2%)
4,000 Housing Finance Auth. MFH RB,
Series 1992C (INS)(9) 5.90 8/01/2007 4,004
CALIFORNIA (0.5%)
7,500 Statewide Communities Development
Auth. RB, Series 1998A(d) 5.25 5/15/2025 7,238
3,535 Woodland MFH RB, Series 1994A 6.05 12/01/2024 3,593
FLORIDA (0.4%)
Housing Finance Agency MFH RB,
4,185 Series 1996R-1 (Windwood Oaks I)
(INS)(9) 5.65 12/01/2026 4,256
4,500 Series 1996S-1 (Windwood Oaks II)
(INS)(9) 5.65 12/01/2026 4,580
ILLINOIS (0.7%)
14,295 Hoffman Estates MFH RB, Series 1996 5.75 6/01/2021 14,569
IOWA (0.3%)
6,000 Finance Auth. Economic Development RB,
Series 2000A (LOC) 5.65 4/01/2033 6,065
KANSAS (0.3%)
6,590 Merriam MFH RB, Series 1991A (NBGA) 7.25 4/01/2021 6,662
LOUISIANA (0.2%)
4,360 Shreveport Home Mortgage Auth. RB,
Series 1995A (INS)(9) 6.40 9/01/2025 4,479
NEW MEXICO (0.5%)
Bernalillo County MFH RB,
7,700 Series 1994A (Sun Village Apts.)
(INS)(9) 6.50 10/01/2019 7,874
3,320 Series 1995 (Sunchase Apts.)
(INS)(9) 5.80 11/01/2025 3,374
OHIO (0.2%)
5,500 Montgomery County IDA RB,
Series 1992 (LOC) 6.50 2/01/2007 5,670
PENNSYLVANIA (0.5%)
Philadelphia IDA RB,
6,500 Series 1997A 6.50 10/01/2027 6,279
4,000 Series 1997B 6.50 10/01/2027 3,864
TEXAS (0.1%)
2,500 Gregg County Housing Finance Corp. RB,
Series 1995A (INS)(9) 6.40 9/01/2025 2,581
UTAH (0.8%)
Salt Lake County MFH RB,
10,240 Series 1995A-1 (INS)(5) 5.70 10/01/2025 10,405
6,500 Series 1995B-1 (INS)(5) 5.70 10/01/2025 6,604
WASHINGTON (0.6%)
Chelan County Public Utility
District #1 RB,
5,650 Series E 5.70 7/01/2068 5,804
6,845 Series E 5.70 7/01/2068 7,018
--------------------------------------------------------------------------------
Total put bonds (cost: $113,105) 114,919
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (3.3%)
FLORIDA (0.6%)
1,000 Broward County Housing Finance Auth.
MFH RB, Series 1985 (LOC) 5.50 11/01/2005 1,000
500 Dade County Health Facilities Auth.
RB,
Series 1990 (LOC) 5.65 9/01/2020 500
1,600 Hillsborough County IDA PCRB,
Series 1992 5.55 5/15/2018 1,600
2,000 Jacksonville PCRB, Series 1995 5.55 5/01/2029 2,000
8,500 Orange County School Board COP,
Series 2000B (LIQ)(INS)(2) 5.50 8/01/2025 8,500
IOWA (0.2%)
4,200 Muscatine County PCRB 5.70 10/01/2007 4,200
LOUISIANA (0.3%)
6,300 Public Facilities Auth. MFH RB,
Series 1991 (NBGA) 5.75 7/01/2007 6,300
MINNESOTA (1.0%)
1,600 Cohasset RB, Series 1997A (LOC) 5.65 6/01/2020 1,600
10,640 Minneapolis, Series 1996 (LIQ) 5.45 12/01/2006 10,640
10,000 Minneapolis GO, Series 2000 (LIQ) 5.45 12/01/2018 10,000
MISSOURI (0.2%)
4,100 Independence IDA IDRB, Series 1997A
(LOC) 5.65 11/01/2027 4,100
NEW YORK (0.1%)
2,000 Dormitory Auth. RB, Series 1993
(Oxford University)(LOC) 5.60 7/01/2023 2,000
PENNSYLVANIA (0.2%)
Allegheny County IDA RB,
700 Series 1997B (LOC) 5.65 7/01/2027 700
2,900 Series 1997C (LOC) 5.65 7/01/2027 2,900
TEXAS (0.2%)
3,400 Austin Higher Education Auth. RB,
Series 2000 (LOC) 5.60 4/01/2025 3,400
VIRGINIA (0.2%)
4,700 Waynesboro IDA RB, Series 1997 (LOC) 5.55 12/15/2028 4,700
WASHINGTON (0.3%)
4,400 Housing Finance Commission RB,
Series 1999A (LOC) 5.75 1/01/2030 4,400
2,300 Housing Finance RB, Series 1997 (LOC) 5.75 1/01/2027 2,300
--------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $70,840) 70,840
--------------------------------------------------------------------------------
Total investments (cost: $2,140,058) 2,163,729
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
-----------------------------------------
Hospitals 13.8%
General Obligations 10.7
Escrowed Bonds 9.0
Multifamily Housing 6.7
Appropriated Debt 5.3
Buildings 5.3
U.S. Government 4.6
Electric/Gas Utilities-Municipal 4.4
Single-Family Housing 4.2
Paper & Forest Products 4.1
Special Assessment/Tax/Fee 4.1
Education 3.7
Nursing/Continuing Care Centers 3.5
Real Estate Tax/Fee 2.2
Electric Utilities 1.8
Finance-Municipal 1.8
Airport/Port 1.7
Health Care-Miscellaneous 1.7
Toll Roads 1.6
Gaming Companies 1.4
Water/Sewer Utilities-Municipal 1.4
Oil & Gas-Refining/Manufacturing 1.0
Other 5.8
----
Total 99.8%
====
PORTFOLIO SUMMARY BY STATE
------------------------------
Alabama 0.7%
Alaska 0.6
Arizona 0.2
Arkansas 0.7
California 5.6
Colorado 1.2
Connecticut 1.6
District of Columbia 4.0
Florida 2.0
Georgia 0.6
Hawaii 0.3
Idaho 0.1
Illinois 6.4
Indiana 2.2
Iowa 1.7
Kansas 0.3
Louisiana 2.0
Maine 1.9
Maryland 1.1
Massachusetts 1.6
Michigan 2.4
Minnesota 2.6
Mississippi 1.6
Missouri 0.7
Nebraska 0.8
Nevada 1.0
New Hampshire 0.5
New Jersey 2.5
New Mexico 0.8
New York 21.3
North Carolina 0.3
Ohio 1.1
Oklahoma 0.5
Oregon 0.1
Pennsylvania 4.6
Puerto Rico 4.0
Rhode Island 1.3
South Carolina 0.3
South Dakota 0.3
Tennessee 1.0
Texas 9.1
Utah 3.2
Vermont 0.1
Virginia 1.1
Washington 2.1
West Virginia 0.8
Wisconsin 0.9
----
Total 99.8%
====
USAA SHORT-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
PRINCIPAL COUPON FINAL MARKET
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (58.5%)
ALABAMA (0.1%)
$ 1,000 Prattville Industrial Development
PCRB, Series 1998 4.90% 9/01/2008 $ 950
ALASKA (0.4%)
6,500 North Slope Borough GO,
Series 1998A (INS)(1),(a) 4.60 6/30/2008 4,436
ARIZONA (1.0%)
Maricopa County Hospital RB,
2,525 Series 1997 5.10 4/01/2001 2,527
2,260 Series 1997 5.25 4/01/2002 2,266
3,045 Series 1997 5.35 4/01/2003 3,053
2,180 Series 1997 5.35 4/01/2004 2,175
CALIFORNIA (0.7%)
Sacramento Cogeneration Auth. RB,
1,000 Series 1995 5.80 7/01/2001 1,009
900 Series 1995 5.90 7/01/2002 920
900 Series 1995 6.00 7/01/2003 931
1,000 San Francisco Bay Area Transit
Facilities Auth. Notes, Series
1999 (INS)(6) 5.63 8/01/2006 1,042
3,500 San Joaquin Hills Transportation
Corridor Agency RB, Senior Lien
(ETM)(a) 7.16 1/01/2001 3,464
COLORADO (0.4%)
Denver Health and Hospital Auth. RB,
1,180 Series 1998A 5.13 12/01/2006 1,145
1,250 Series 1998A 5.25 12/01/2007 1,211
1,250 Series 1998A 5.25 12/01/2008 1,198
CONNECTICUT (1.1%)
Mashantucket (Western) Pequot Tribe
RB,
1,000 Series 1996A (ETM)(d) 6.25 9/01/2001 1,017
1,000 Series 1996A(d) 6.25 9/01/2001 1,014
1,250 Series 1996A (ETM)(d) 6.25 9/01/2002 1,293
1,250 Series 1996A(d) 6.25 9/01/2002 1,282
1,480 Series 1996A (ETM)(d) 6.25 9/01/2003 1,549
1,520 Series 1996A(d) 6.25 9/01/2003 1,575
1,235 Series 1996A (ETM)(d) 6.50 9/01/2006 1,355
1,265 Series 1996A(d) 6.50 9/01/2006 1,349
DISTRICT OF COLUMBIA (0.5%)
Hospital RB,
1,450 Series 1996A (ETM)(INS)(1) 5.00 8/15/2002 1,462
1,530 Series 1996A (ETM)(INS)(1) 5.50 8/15/2003 1,566
1,610 Series 1996A (ETM)(INS)(1) 5.50 8/15/2004 1,658
FLORIDA (0.0%)
305 Orange County Health Facilities Auth.
RB, Series 1995 5.63 7/01/2001 306
GEORGIA (0.4%)
4,000 Camden County Development Auth. PCRB,
Series 1997 5.25 4/01/2002 4,023
GUAM (1.2%)
10,000 GO, Series 1995A 5.50 9/01/2001 10,028
1,725 Power Auth. RB, Series 1994A (ETM) 5.60 10/01/2000 1,725
HAWAII (0.5%)
4,720 Honolulu GO, Series 1999C (INS)(3) 5.00 7/01/2008 4,767
IDAHO (0.4%)
Health Facilities Auth. RB,
810 Series 1998 4.65 5/01/2005 779
860 Series 1998 5.38 5/01/2006 850
950 Series 1998 5.38 5/01/2007 932
1,005 Series 1998 5.38 5/01/2008 978
ILLINOIS (4.0%)
20,000 Chicago Board of Education GO,
Series 1999A (INS)(3),(a) 4.50 12/01/2009 12,434
16,265 Chicago Water RB, Series 1997
(INS)(3),(a) 5.00 11/01/2005 12,695
1,075 Health Facilities Auth. RB,
Series 1996 5.60 1/01/2002 1,032
2,350 Hodgkins Tax Increment RB,
Series 1995A 6.90 12/01/2001 2,371
11,551 Sangamon County Lease RB(c) 5.05 12/15/2005 11,459
INDIANA (2.1%)
Health Facility Financing Auth. RB,
17,300 Series 1993 (PRE) 5.40 11/01/2005 17,581
3,000 Series 1999A (INS)(1) 5.00 11/01/2009 3,012
IOWA (0.5%)
4,850 Clinton Refunding IDRB, Series 2000 5.80 11/01/2005 4,953
LOUISIANA (3.5%)
11,310 De Soto Parish PCRB, Series 1993A 5.05 12/01/2002 11,337
Jefferson Parish School Board Sales
and Use Tax RB,
3,170 Series 1998 (INS)(4),(a) 4.80 9/01/2007 2,258
2,090 Series 1998 (INS)(4),(a) 4.90 3/01/2008 1,441
2,600 Lake Charles Harbor and Terminal
District RB, Series 1990 5.50 5/01/2006 2,612
Offshore Terminal Auth. RB,
7,920 Series 1992B 6.00 9/01/2001 8,013
5,000 Series 1992B 6.20 9/01/2003 5,182
3,440 St. Charles Parish PCRB 7.63 6/01/2003 3,482
MAINE (1.4%)
Jay PCRB,
5,500 Series 1994A 4.65 9/01/2002 5,458
8,305 Series 1994B 4.70 6/01/2002 8,329
MASSACHUSETTS (4.1%)
Health and Educational Facilities
Auth. RB,
3,445 Series 1998B (INS)(6) 5.00 7/01/2006 3,388
3,645 Series 1998B (INS)(6) 5.25 7/01/2007 3,627
1,640 Series 1998B (INS)(6) 5.25 7/01/2008 1,624
17,000 New England Education Loan Marketing
Corp. RB, Series 1985A 5.80 3/01/2002 17,274
14,000 State GO, Series 2000B 5.50 6/01/2008 14,700
MICHIGAN (1.9%)
Hospital Finance Auth. RB, Central
Michigan Hospital,
255 Series 1996 5.30 10/01/2000 255
130 Series 1996 5.50 10/01/2001 131
275 Series 1996 5.70 10/01/2002 278
285 Series 1996 5.80 10/01/2003 289
Hospital Finance Auth. RB, Genesys
Health System Medical Center,
3,500 Series 1995A (ETM) 6.80 10/01/2000 3,500
3,500 Series 1995A (ETM) 7.00 10/01/2001 3,590
2,500 Series 1998A (ETM) 5.50 10/01/2006 2,602
1,500 Series 1998A (ETM) 5.50 10/01/2007 1,563
1,000 Series 1998A (ETM) 5.50 10/01/2008 1,045
5,800 Monroe Economic Development Corp.
PCRB, Series 1997 5.00 2/01/2003 5,829
MINNESOTA (0.6%)
St. Paul Housing and Redevelopment
Auth. Hospital RB,
675 Series 1997A 5.00 11/01/2003 644
1,410 Series 1997A 5.10 11/01/2004 1,326
1,485 Series 1997A 5.20 11/01/2005 1,379
1,560 Series 1997A 5.30 11/01/2006 1,431
1,645 Series 1997A 5.35 11/01/2007 1,489
MISSISSIPPI (1.1%)
Jones County Hospital RB,
1,000 Series 1997 5.00 12/01/2005 969
1,050 Series 1997 5.00 12/01/2006 1,007
1,105 Series 1997 5.10 12/01/2007 1,054
1,155 Series 1997 5.20 12/01/2008 1,095
3,570 Lafayette County Hospital RB,
Series 1997 5.00 3/01/2002 3,573
710 Lincoln County Hospital RB,
Series 1998A (INS)(5) 5.00 4/01/2004 710
2,510 Union County Hospital RB, Series
1997 5.00 3/01/2002 2,520
MISSOURI (0.6%)
Saint Louis Airport Project Double
Barrel RB,
1,500 Series 2000 6.25 1/01/2003 1,521
1,750 Series 2000 6.00 1/01/2004 1,770
3,000 Series 2000 6.00 1/01/2005 3,028
MONTANA (0.4%)
3,886 State Lottery Commission Lease,
#169(c) 5.12 4/29/2004 3,904
NEBRASKA (0.7%)
5,000 American Public Energy Agency RB,
Series 1999A (INS)(2) 5.25 6/01/2008 4,776
Investment Finance Auth. Hospital RB,
465 Series 1997 (INS)(5) 4.90 11/15/2005 466
440 Series 1997 (INS)(5) 5.00 11/15/2006 443
410 Series 1997 (INS)(5) 5.00 11/15/2007 411
505 Series 1997 (INS)(5) 5.05 11/15/2008 505
NEW YORK (15.7%)
1,285 Dormitory Auth. RB, City University
System, Series 1996-2 5.10 7/01/2001 1,291
Dormitory Auth. RB, Community
Enhancement Facilities,
1,675 Series 1999B 4.00 4/01/2005 1,600
1,740 Series 1999B 4.00 4/01/2006 1,643
5,000 Dormitory Auth. RB, Good Samaritan
Hospital, Series 1998A (INS)(5) 5.50 7/01/2009 5,235
1,170 Dormitory Auth. RB, Nyack Hospital,
Series 1996 5.65 7/01/2001 1,172
Dormitory Auth. RB, State University
Educational Facilities,
6,350 Series 1995A 5.25 5/15/2001 6,387
7,500 Series 1995A 5.40 5/15/2002 7,611
1,350 Series 1996 5.00 5/15/2001 1,356
1,000 Series 1996 5.10 5/15/2002 1,010
1,250 Dormitory Department of Health RB,
Series 1996 4.75 7/01/2001 1,252
20,360 Long Island Power Auth. Electric
Systems RB, Series 1998A (INS)
(4),(a) 5.15 6/01/2006 15,544
5,325 Medical Care Facilities Finance
Agency RB, Series 1994A (ETM) 5.80 2/15/2001 5,354
3,000 Nassau County GO, Series 2000F 7.00 3/01/2003 3,140
New York City GO,
1,450 Series 1995D (ETM) 6.50 2/01/2002 1,489
3,550 Series 1995D 6.50 2/01/2002 3,642
3,325 Series 1996K (ETM) 5.50 4/01/2001 3,345
4,900 Series 1998F 5.50 8/01/2006 5,107
6,420 Series 1998F 5.50 8/01/2007 6,703
5,815 Series 1999F 4.88 8/01/2010 5,747
3,000 Series 1999H 5.00 3/15/2008 3,031
3,750 Series 2001A 5.00 5/15/2007 3,806
3,940 Series 2001A 5.00 5/15/2008 3,981
10,000 New York City Transitional Finance
Auth. RB, Series 1999A 5.00 8/15/2008 10,146
4,010 State COP 4.90 2/01/2002 4,029
4,040 State COP 4.90 8/01/2002 4,065
2,035 State COP 5.00 2/01/2003 2,053
11,165 The City Univ. of New York COP 5.75 8/15/2003 11,502
Thruway Auth. Highway and Bridge Trust
Fund Bonds,
10,000 Series 1999B (INS)(3) 5.00 4/01/2008 10,147
7,650 Series 2000B (INS)(3) 5.50 4/01/2008 8,001
7,880 Thruway Auth. RB, Series 1995 5.10 4/01/2001 7,910
2,015 Ulster County IDA RB, Series 1999
(LOC) 5.20 11/15/2009 1,981
Urban Development Corp. RB,
4,400 Series 1993 5.25 1/01/2003 4,457
1,715 Series 7 4.75 1/01/2002 1,720
OHIO (0.6%)
Franklin County Health Care
Facilities RB,
1,000 Series 1997 4.70 7/01/2002 985
1,000 Series 1997 4.80 7/01/2003 975
500 Series 1997 5.00 7/01/2004 483
1,425 Series 1997 5.00 7/01/2005 1,361
1,000 Series 1997 5.10 7/01/2006 948
475 Series 1997 5.15 7/01/2007 445
600 Series 1997 5.25 7/01/2008 559
OKLAHOMA (1.7%)
Holdenville Industrial Auth. RB,
1,380 Series 1995 (ETM) 6.15 7/01/2004 1,443
510 Series 1995 (ETM) 6.35 7/01/2006 547
15,000 Housing Development Auth. RB,
Series 1997A 4.75 12/01/2002 14,887
PENNSYLVANIA (2.6%)
4,435 East Hempfield Township IDA RB,
Series 1996 5.00 8/01/2001 4,447
3,990 Hampden IDA RB, Series 1999 4.70 1/01/2007 3,801
17,290 Higher Education Assistance Agency
Student Loan RB, Series 1985A
(INS)(3) 6.80 12/01/2000 17,353
PUERTO RICO (1.6%)
Electric Power Auth. RB,
5,000 Series 1997AA 5.00 7/01/2003 5,076
5,000 Series 1997AA 5.00 7/01/2004 5,091
5,587 Municipal Revenue Collection
Center COP(c) 6.85 10/17/2003 5,710
TENNESSEE (0.4%)
1,000 Shelby County Hospital RB, Series
1993 5.10 11/01/2003 1,000
3,000 Springfield Hospital RB, Series 1998 4.90 8/01/2008 2,737
TEXAS (6.3%)
Abilene Higher Education Facilities
Corp. RB,
345 Series 1995 (ETM) 5.40 10/01/2000 345
935 Series 1995 5.40 10/01/2000 935
170 Series 1995 (ETM) 5.50 10/01/2001 172
1,310 Series 1995 5.50 10/01/2001 1,321
130 Series 1995 (ETM) 5.60 10/01/2002 132
870 Series 1995 5.60 10/01/2002 884
3,235 Austin Higher Education Auth. RB,
Series 1998 4.80 8/01/2009 2,999
Bexar County Limited Tax GO,
1,800 Series 1999(a) 4.35 6/15/2006 1,359
3,355 Series 1999(a) 4.45 6/15/2007 2,404
6,000 Calhoun County Navigation IDA PCRB,
Series 1995 4.65 6/01/2001 6,008
750 Harlandale ISD School Refunding Bonds,
Series 2000 (NBGA)(a) 5.10 8/15/2008 507
Harrison County Health Facilities
Development Corp. RB,
1,010 Series 1998 (INS)(6) 4.80 1/01/2006 977
1,055 Series 1998 (INS)(6) 4.80 1/01/2007 1,008
1,110 Series 1998 (INS)(6) 4.90 1/01/2008 1,062
3,000 Houston ISD GO, Series 1999A(a) 4.55 2/15/2009 1,950
Houston ISD Public Facility Corp.
Lease RB,
3,885 Series 1998A (INS)(2),(a) 4.85 9/15/2007 2,743
3,885 Series 1998A (INS)(2),(a) 4.90 9/15/2008 2,580
4,805 Series 1998B (INS)(2),(a) 4.85 9/15/2007 3,393
5,260 Series 1998B (INS)(2),(a) 4.90 9/15/2008 3,493
2,500 Lampasas County IDC RB, Series 1997 5.20 12/01/2001 2,512
3,495 Lewisville RB, Series 1998 (INS)(6) 5.00 9/01/2010 3,421
Northeast Hospital Auth. RB,
1,285 Series 1997 5.25 5/15/2001 1,284
2,870 Series 1997 5.40 5/15/2003 2,851
7,160 Tarrant County Water Control and
Improvement District #1 RB, Series
1993 4.63 3/01/2004 7,160
Tyler Health Facilities Development
Corp. RB,
2,700 Series 1997A 5.00 7/01/2003 2,643
3,120 Series 1997A 5.00 7/01/2004 3,016
1,625 Series 1997A 5.13 7/01/2005 1,560
1,100 Series 1997A 5.20 7/01/2006 1,048
1,125 Series 1997A 5.30 7/01/2007 1,064
1,440 Water Resources Finance Auth. RB,
Series 1999 (INS)(2) 4.50 8/15/2007 1,414
VIRGINIA (0.6%)
Halifax County IDA Hospital RB,
1,100 Series 1998 4.50 9/01/2005 1,053
600 Series 1998 4.65 9/01/2007 565
500 Series 1998 4.75 9/01/2008 470
Newport News IDA IDRB,
1,650 Series 2000 5.50 9/01/2006 1,724
2,000 Series 2000 5.50 9/01/2008 2,100
WEST VIRGINIA (0.6%)
6,000 Kanawha County PCRB, Series 1997 5.25 4/01/2002 6,026
WISCONSIN (0.8%)
Health and Educational Facilities
Auth. RB,
410 Series 1997 5.10 12/15/2005 396
430 Series 1997 5.20 12/15/2006 413
455 Series 1997 5.25 12/15/2007 433
475 Series 1997 5.30 12/15/2008 452
6,595 Waterford Union High School
District GO 5.30 3/01/2003 6,655
--------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $580,972) 579,037
--------------------------------------------------------------------------------
PUT BONDS (18.5%)
ALABAMA (1.5%)
15,000 Birmingham Special Care Facilities
Financing Auth. RB, Series 2000A-2 6.00 11/15/2028 15,175
CALIFORNIA (3.2%)
3,285 Brentwood Capital Improvement RB,
Series 1996 (LOC) 5.25 6/01/2026 3,300
6,765 Fresno MFH RB, Series 1997A 4.88 1/01/2028 6,644
6,870 Redwood MFH RB, Series 1985B (NBGA) 5.20 10/01/2008 6,870
4,000 Santa Rosa Housing Auth. MFH RB,
Series 1995E (NBGA) 4.85 9/01/2007 4,006
5,805 South Gate Public Financing Auth. Tax
Allocation Bonds, Series 1997 (LOC) 4.75 9/01/2019 5,792
5,000 Statewide Community Development
Auth. RB, Series 1999F 5.30 6/01/2029 5,053
ILLINOIS (1.1%)
10,980 Health Facilities Auth. RB, Series
1998A (LOC) 4.70 7/01/2031 10,860
INDIANA (2.5%)
Jasper County Industrial PCRB,
9,800 Series 1988B 4.80 11/01/2016 9,800
10,000 Series 1988B 4.45 11/01/2016 10,000
3,700 Series 1988C 4.45 11/01/2016 3,700
1,500 Series 1988D 4.45 11/01/2016 1,500
LOUISIANA (4.9%)
20,000 Public Facilities Auth. RB,
Series 1985B-1 (INS)(2),(f) 5.00 12/01/2015 20,088
St. Charles Parish PCRB,
10,000 Series 1999B 4.85 6/01/2030 9,930
18,860 Series 1999C 5.35 10/01/2029 18,813
MICHIGAN (1.0%)
Hospital Finance Auth. RB,
5,000 Series 1999A 5.30 11/15/2033 4,988
5,000 Series 1999A 5.20 11/15/2033 4,985
OHIO (0.4%)
4,155 Water Development PCRB, Series
1998A(e) 5.35 10/01/2030 4,155
OKLAHOMA (0.2%)
1,500 Tulsa County Home Finance Auth. RB,
Series 1993A (INS)(9) 5.35 12/01/2018 1,509
TEXAS (3.0%)
10,000 Brazos River Auth. RB, Series 1999B 5.20 12/01/2018 10,022
7,990 Lewisville RB, Series 1996 (PRE)(LOC) 5.00 5/01/2021 8,414
7,500 Matagorda County Navigation
District 1 PCRB, Series 1999A 4.90 5/01/2030 7,468
4,000 Matagorda County Navigation
District 1 RB, Series 1999C 5.20 5/01/2029 3,985
WYOMING (0.7%)
6,725 Community Development Auth.
Housing RB, Series 1997-3 5.25 6/01/2017 6,717
--------------------------------------------------------------------------------
Total put bonds (cost: $183,456) 183,774
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (22.8%)
ARKANSAS (0.5%)
5,175 Texarkana IDRB, Series 1991 6.25 3/01/2021 5,175
CALIFORNIA (2.5%)
8,700 Alameda County IDA RB, Series
1994 (NBGA) 5.00 6/01/2004 8,700
4,020 Gardena Financing Agency RB,
Series 1991 (LOC) 4.95 9/01/2011 4,020
4,000 Irvine Ranch Water District RB,
Series 1993 (LOC) 4.75 4/01/2033 4,000
7,841 Orange County District 88-1
Improvement RB, Series 1988 (LOC) 4.75 9/02/2018 7,841
FLORIDA (7.8%)
8,505 Broward County Housing Finance Auth.
MFH RB, Series 1990 (NBGA) 5.60 10/01/2007 8,505
9,500 Capital Trust Agency MFH RB,
Series 1999A (NBGA)(d) 5.67 12/01/2032 9,500
20,350 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(d) 5.67 1/01/2024 20,350
Jacksonville Hospital RB,
14,200 Series 1988 (LOC) 7.15 2/01/2018 14,200
11,200 Series 1989 (LOC) 7.15 2/01/2019 11,200
10,000 Orange County Health Facilities
Auth. RB, Series 2000A (LIQ) 5.60 6/01/2030 10,000
3,800 Orange County School Board COP,
Series 2000B (LIQ)(INS)(2) 5.50 8/01/2025 3,800
ILLINOIS (0.4%)
Development Finance Auth. MFH RB,
720 Series 1991 (LOC) 7.05 10/01/2005 720
2,735 Series 1991 (LOC) 7.05 10/01/2015 2,735
630 West Frankfort Commercial
Redevelopment RB 7.36 4/01/2007 630
IOWA (0.6%)
6,200 Storm Lake Higher Education
Facilities RB, Series 2000 (LIQ) 5.90 11/01/2015 6,200
KANSAS (2.5%)
24,400 Burlington Environmental
Improvement RB, Series 1998A 5.65 9/01/2015 24,400
LOUISIANA (1.0%)
9,835 Housing Finance Agency MFH RB,
Series 1988B (LOC) 5.80 12/01/2025 9,835
MICHIGAN (0.7%)
7,300 Job Development Auth. PCRB,
Series 1985 (LOC) 5.85 10/01/2008 7,300
MISSOURI (0.1%)
370 Health and Educational Facilities
Auth. RB, Series 1999A (LOC) 5.75 8/15/2024 370
NEW JERSEY (0.2%)
1,950 Newark Healthcare Facility RB,
Series A (LOC) 6.90 6/01/2030 1,950
NEW MEXICO (1.2%)
12,000 Hospital Equipment Loan Council RN,
Series 2000A(d) 7.02 1/03/2002 12,000
NEW YORK (1.0%)
3,230 Long Island Power Auth. Electric
Systems RB, Series 6 (LOC) 5.45 5/01/2033 3,230
New York City GO,
1,700 Series 1994A-10 (LOC) 5.50 8/01/2016 1,700
3,100 Series 1994A-8 (LOC) 5.55 8/01/2017 3,100
1,600 St. Lawrence County IDA PCRB,
Series 1985 (LOC) 5.55 12/01/2007 1,600
OREGON (0.2%)
2,300 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 5.65 5/15/2029 2,300
PENNSYLVANIA (0.0%)
100 Allegheny County IDA RB, Series
1997B (LOC) 5.65 7/01/2027 100
SOUTH CAROLINA (3.7%)
36,500 Jobs Economic Development Auth. RB,
Series 1999(d) 7.12 12/01/2001 36,500
VIRGINIA (0.4%)
1,100 Alexandria Redevelopment and Housing
Auth. RB, Series 1996B (LOC) 5.55 10/01/2006 1,100
2,600 Norfolk Redevelopment and Housing
Auth. RB, Series 1999 (LOC) 5.55 9/01/2009 2,600
500 Waynesboro IDA RB, Series 1997 (LOC) 5.55 12/15/2028 500
--------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $226,161) 226,161
--------------------------------------------------------------------------------
Total investments (cost: $990,589) $988,972
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
-----------------------------------------
Hospitals 19.3%
Electric Utilities 10.1
General Obligations 10.0
Appropriated Debt 6.9
Escrowed Bonds 6.7
Multifamily Housing 5.6
Education 4.2
Electric/Gas Utilities-Municipal 4.1
Student Loans 3.5
Water/Sewer Utilities-Municipal 2.9
Paper & Forest Products 2.6
Health Care-Miscellaneous 2.3
Single-Family Housing 2.2
Airport/Port 2.0
Finance-Municipal 2.0
Real Estate Tax/Fee 2.0
Toll Roads 1.9
Foods 1.6
Chemicals 1.4
Nursing/Continuing Care Centers 1.1
Aluminum 1.0
Banks-Major Regional 1.0
Special Assessment/Tax/Fee 1.0
Other 4.4
----
Total 99.8%
====
PORTFOLIO SUMMARY BY STATE
------------------------------
Alabama 1.6%
Alaska 0.4
Arizona 1.0
Arkansas 0.5
California 6.4
Colorado 0.4
Connecticut 1.0
District of Columbia 0.5
Florida 7.9
Georgia 0.4
Guam 1.2
Hawaii 0.5
Idaho 0.4
Illinois 5.5
Indiana 4.6
Iowa 1.1
Kansas 2.5
Louisiana 9.4
Maine 1.4
Massachusetts 4.1
Michigan 3.7
Minnesota 0.6
Mississippi 1.1
Missouri 0.7
Montana 0.4
Nebraska 0.7
New Jersey 0.2
New Mexico 1.2
New York 16.7
Ohio 1.0
Oklahoma 1.8
Oregon 0.2
Pennsylvania 2.6
Puerto Rico 1.6
South Carolina 3.7
Tennessee 0.4
Texas 9.3
Virginia 1.0
West Virginia 0.6
Wisconsin 0.8
Wyoming 0.7
----
Total 99.8%
====
USAA TAX EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
PRINCIPAL COUPON FINAL
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (72.1%)
ALABAMA (1.8%)
$22,000 Birmingham Medical Clinic Board RB,
Series 1998 (LOC) 5.62% 10/01/2028 $ 22,000
9,500 Evergreen Board IDRB, Series 1985
(LOC) 4.50 12/01/2004 9,500
1,225 Montgomery Engelside Medical Clinic
Board RB, Series 1999A (LOC) 5.85 3/01/2008 1,225
ALASKA (0.2%)
3,230 Industrial Development and Export
Auth. RB,Series 1991 (LOC) 5.60 11/01/2009 3,230
ARIZONA (0.4%)
6,705 Pinal County IDA RB, Series 1995 (LOC) 5.70 12/01/2022 6,705
CALIFORNIA (0.2%)
3,400 Irvine IDA RB, Series 1985 (LOC) 6.10 11/01/2005 3,400
COLORADO (1.0%)
5,000 Centennial Downs Metropolitan District
GO, Series 1999 (LOC) 5.60 12/01/2028 5,000
8,000 Educational and Cultural Facilities RB,
Series 1998 (LOC) 5.60 8/01/2013 8,000
3,070 El Paso County Economic Development RB,
Series 1996 (LOC) 5.65 11/01/2021 3,070
Health Facilities Auth. RB,
1,665 Series 1995 (LOC) 5.65 9/01/2015 1,665
1,805 Series 1996A (LOC) 5.65 12/01/2016 1,805
DELAWARE (0.1%)
2,100 Economic Development Auth. RB,
Series 1993C 5.70 10/01/2028 2,100
FLORIDA (12.7%)
2,885 Broward County Housing Finance Auth.
MFH RB, Series 1990 (NBGA) 5.60 10/01/2007 2,885
Capital Trust Agency MFH RB,
73,300 Series 1999A (NBGA)(d) 5.67 12/01/2032 73,300
15,000 Series 1999B (NBGA)(d) 5.67 12/01/2032 15,000
28,800 Dade County Health Facilities Auth. RB,
Series 1990 (LOC) 5.65 9/01/2020 28,800
2,275 Dade County IDA RB, Series 1996 (LOC) 5.75 10/01/2016 2,275
4,000 Department of Juvenile Justice
Certificate of Lease Series 1998,
MERLOT Series 2000 000 (LIQ)
(INS)(1),(d) 5.50 6/15/2019 4,000
89,400 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(d) 5.67 1/01/2024 89,400
4,000 Housing Finance Agency MFH RB,
Series 1985D (LOC) 5.50 8/01/2006 4,000
4,700 Miami Dade County Educational
Facilities Auth. RB, Series 1998
(LOC) 5.75 10/01/2018 4,700
4,790 Miami Dade County IDRB, Series
1999 (LOC) 5.55 6/01/2019 4,790
5,000 Orange County Health Facilities Auth.
RB, Series 2000A (LIQ) 5.60 6/01/2030 5,000
1,815 Sarasota Educational Facilities RB,
Series 1996 (LOC) 5.60 2/01/2021 1,815
2,600 University Athletic Association RB,
Series 1990 (LOC) 5.60 2/01/2020 2,600
GEORGIA (0.5%)
4,000 Columbus Hospital Auth. RB, Series
1997 (LOC) 5.60 1/01/2018 4,000
3,200 Fulton County Residential Care
Facilities RB, Series 1996 (LOC) 5.65 1/01/2018 3,200
2,765 Peachtree Development Auth. RB,
Series 1988 (LOC) 5.85 7/01/2010 2,765
IDAHO (0.5%)
4,075 Health Facilities Auth. RB, Series
1995 (LOC) 5.65 5/01/2022 4,075
5,000 Nez Perce County PCRB, Series 1984
(LOC) 5.55 12/01/2014 5,000
ILLINOIS (3.7%)
10,000 Chicago RB, Series 2000A (LOC) 5.60 6/01/2005 10,000
2,700 Development Finance Auth. Educational
Facilities RB, Series 2000A (LOC) 5.75 10/01/2030 2,700
15,800 Development Finance Auth. MFH RB,
Series 1993 (LOC) 5.80 12/01/2013 15,800
Development Finance Auth. RB,
2,290 Series 1998 (LOC) 5.65 8/01/2022 2,290
815 Series 1999A (LIQ) 5.60 10/01/2029 815
12,000 Du Page County RB, Series 1999 (LOC) 5.65 7/01/2024 12,000
5,500 Educational Facilities Auth. RB,
Series 1999A (LOC) 5.63 6/01/2029 5,500
1,445 Evanston IDRB, Series 1985 (LOC) 4.80 5/01/2015 1,445
10,120 Hopedale IDRB, Series 1998 (LOC) 5.65 5/01/2009 10,120
1,000 Lake County Industrial Building RB,
Series 1985 (LOC) 5.80 10/01/2015 1,000
6,600 Sauget Village PCRB 5.70 5/01/2028 6,600
1,860 Winnebago County Health Care Facility
RB, Series 1996 (LOC) 5.60 1/01/2017 1,860
INDIANA (1.1%)
Crawfordsville Economic Development
RB,
3,500 Series 1999A (LOC) 5.60 1/01/2030 3,500
700 Series 1999B (LOC) 5.65 1/01/2030 700
2,155 Development Finance Auth. Economic
Development RB, Series 1998 (LOC) 5.65 9/01/2018 2,155
7,190 Educational Facilities Auth. RB,
Series 2000A (LOC) 5.60 12/01/2029 7,190
970 Hobart Economic Development RB,
Series 1993 (LOC) 5.65 6/01/2003 970
1,300 Huntington Industrial Economic
Development RB, Series 1990 5.65 6/26/2014 1,300
4,455 Indianapolis Economic Development RB,
Series 1997 (LOC) 5.55 5/01/2018 4,455
IOWA (0.8%)
5,300 Chillicothe PCRB, Series 1991 5.65 11/01/2010 5,300
2,500 Finance Auth. MFH Refunding RB,
Series 1995A (LOC) 5.75 12/01/2017 2,500
2,000 Finance Auth. Private School Facilities
RB, Series 1998 (LOC) 5.75 6/01/2028 2,000
4,990 Finance Auth. Purchase RB, Series
1999 (LOC) 5.70 2/01/2019 4,990
KANSAS (3.1%)
Burlington Environmental Improvement RB,
28,000 Series 1998A 5.65 9/01/2015 28,000
30,430 Series 1998B 5.65 9/01/2015 30,430
KENTUCKY (6.1%)
3,000 Boyd County Industrial Building RB,
Series 2000 (LOC) 5.63 10/01/2015 3,000
24,505 Breckinridge County Lease Program RB,
Series 1999 (LOC) 5.55 12/01/2029 24,505
6,700 Economic Development Finance Auth.
Hospital RB, Series 1998A (LOC) 5.80 8/01/2013 6,700
Economic Development Finance Auth. RB,
1,800 Series 1997 (LOC) 5.70 11/01/2017 1,800
44,365 Series 1998 (LIQ)(INS)(8) 5.75 8/01/2018 44,365
2,000 Frankfort Economic Development RB,
Series 1990 5.65 5/07/2014 2,000
9,490 Hancock County Industrial Building RB,
Series 1991 (LOC) 5.75 7/01/2011 9,490
3,055 Hardin County Water District Number 001
Water RB, Series 1998 (LOC) 5.65 9/01/2018 3,055
6,185 Jefferson County Industrial Building RB,
Series 1997 (LOC) 5.65 1/01/2011 6,185
4,400 Jefferson County MFH RB, Series 1996
(LOC) 5.80 12/01/2026 4,400
6,000 Jeffersontown League of Cities Funding
Trust Lease Program RB,
Series 2000 (LOC) 5.55 3/01/2030 6,000
2,000 Middletown RB, Series 1999 (LOC) 5.60 7/01/2012 2,000
LOUISIANA (1.9%)
Ascension Parish PCRB,
7,500 Series 1985 (LOC) 5.75 12/01/2005 7,500
1,550 Series 1990 (LOC) 5.65 9/01/2010 1,550
6,600 Series 1992 (LOC) 5.65 3/01/2011 6,600
10,000 Delhi IDRB, Series 1996 5.70 12/01/2012 10,000
5,730 Public Facilities Auth. IDRB,
Series 1996 (LOC) 5.85 12/01/2014 5,730
3,900 Public Facilities Auth. MFH RB,
Series 1991 (NBGA) 5.75 7/01/2007 3,900
1,100 Public Facilities Auth. PCRB,
Series 1992 5.65 8/01/2017 1,100
MARYLAND (1.2%)
2,500 IDA Economic Development RB,
Series 1994 5.85 12/01/2003 2,500
20,200 Montgomery County MFH RB, Series 1993
Issue I (NBGA)(d) 5.60 11/01/2020 20,200
MASSACHUSETTS (1.6%)
5,680 Industrial Finance Agency RB,
Series 1997 (LOC) 4.48 5/01/2027 5,680
23,990 Revere Housing Auth. MFH RB,
Series 1991C (LOC) 5.65 9/01/2028 23,990
MICHIGAN (1.2%)
9,200 Detroit Downtown Development Auth.
RB (LOC) 5.60 12/01/2010 9,200
7,500 Hospital Finance Auth. Equipment Loan
RB, Series B (LOC) 4.39 5/01/2030 7,500
5,000 Southfield Economic Development Corp.
RB, Series 2000 (LOC) 5.55 2/01/2035 5,000
MINNESOTA (1.3%)
Minneapolis MFH RB,
8,510 Series 1995 (Laurel Curve) (NBGA) 5.85 12/01/2030 8,510
7,535 Series 1995 (The Deforest) (NBGA) 5.85 12/01/2030 7,535
7,530 Series 1995 (The McNair) (NBGA) 5.85 12/01/2030 7,530
MISSISSIPPI (0.3%)
3,710 Hinds County Urban Renewal RN,
Series 1991 (LOC) 5.65 1/01/2007 3,710
1,900 Hospital Equipment and Facilities Auth.
RB, Series 2000 (LOC) 5.72 7/01/2015 1,900
MISSOURI (2.1%)
Clayton IDA RB,
5,225 Series 1994A (LOC) 5.75 12/01/2006 5,225
5,275 Series 1994B (LOC) 5.75 2/01/2007 5,275
7,375 Series 1995C (LOC) 5.75 5/01/2005 7,375
4,950 Environmental Improvement and Energy
Resources Auth. RB, Series 1992 5.60 7/01/2017 4,950
Health and Educational Facilities
Auth. RB,
5,950 Series 1998 (LOC) 5.60 7/01/2023 5,950
2,840 Series 1999A (LOC) 5.75 8/15/2024 2,840
7,000 Series 2000 (LOC) 5.60 7/01/2025 7,000
1,000 West Plains IDA RB, Series 1986 (LOC) 4.70 11/01/2010 1,000
NEW HAMPSHIRE (0.7%)
12,335 Manchester Housing Auth. MFH RB,
Series 1990A (LOC) 5.55 6/15/2015 12,335
NEW YORK (0.4%)
1,800 Hempstead Town IDA RB, Series 1999
(NBGA) 5.65 12/01/2010 1,800
5,750 Tompkins County IDA RB, Series 2000
(LOC) 5.40 6/01/2025 5,750
NORTH CAROLINA (1.7%)
3,300 Buncombe County Industrial Facilities
Financing Auth. IDRB, Series 1996 5.65 11/01/2006 3,300
13,045 Medical Care Commission Health Care
Facilities RB, Series 1999 (LOC) 5.60 3/01/2024 13,045
15,795 Medical Care Commission Retirement
Facilities RB, Series A (LOC) 5.60 9/01/2033 15,795
OHIO (3.4%)
8,000 Air Quality Development Auth. RB,
Series 1989A (LOC) 5.45 2/01/2014 8,000
6,000 Clark County IDA RB (LOC) 5.80 12/01/2010 6,000
31,385 Clinton County Hospital RB, Series
1999 (LOC) 5.60 7/01/2029 31,385
6,500 Cuyahoga County IDRB, Series 2000
(LOC) 5.60 11/01/2019 6,500
7,650 Lorain County Economic Development RB,
Series 2000 (LOC) 5.60 8/01/2022 7,650
4,500 Water Development Auth. PCRB,
Series 1997B (LOC) 5.50 8/01/2020 4,500
OKLAHOMA (4.2%)
44,000 Development Finance Auth. RB,
Series 1999A (LIQ) 5.60 6/01/2029 44,000
6,200 IDA RB, Series 1998 (LOC) 5.60 8/01/2018 6,200
24,200 Muskogee Industrial Trust PCRB RB,
Series 1995A 5.70 1/01/2025 24,200
Muskogee Industrial Trust RB,
2,300 Series 1985 (LOC) 5.80 12/01/2015 2,300
2,760 Series 1985 (LOC) 5.80 12/01/2015 2,760
OREGON (3.5%)
11,200 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 5.65 5/15/2029 11,200
Medford Hospital Facilities Auth. RB,
15,000 Series 1985 (LOC) 5.65 12/01/2015 15,000
15,800 Series 1991 (LOC) 5.65 5/01/2021 15,800
23,355 Series 1997 (LOC) 5.65 5/15/2027 23,355
PENNSYLVANIA (0.4%)
1,750 Allegheny County IDA RB,
Series 1994 (LOC) 5.60 12/01/2008 1,750
6,000 Allentown Redevelopment Auth. MFH RB,
Series 1990 (LOC) 5.65 7/01/2020 6,000
SOUTH DAKOTA (1.3%)
19,865 Health and Educational Facilities
Auth. RB,
Series 2000 (LIQ)(INS)(1) 5.60 7/01/2025 19,865
4,500 Yankton IDRB, Series 1997 5.62 7/01/2006 4,500
TENNESSEE (9.5%)
25,000 Knox County Health, Educational, and
Housing Facilities Board RB,
Series 1999A (LIQ) 5.60 5/01/2029 25,000
900 Maryville IDB Education RB,
Series 1997B (LOC) 5.77 8/01/2002 900
20,000 Memphis Health, Educational, and Housing
Facility Board RB, Series 2000
(NBGA)(d) 5.67 8/01/2032 20,000
Nashville and Davidson County IDB
MFH RB,
6,710 Series 1989 (LOC) 5.65 9/01/2019 6,710
9,680 Series 1989 (LOC) 5.65 10/01/2019 9,680
14,205 Series 1995 (NBGA) 5.90 11/01/2012 14,205
1,750 Nashville and Davidson County IDB RB,
Series 1999 (LOC) 5.77 7/01/2006 1,750
9,285 Smyrna Housing Association Inc. MFH RB,
Series 1989 (LOC) 5.65 8/01/2019 9,285
85,000 Sumner County Health, Educational, and
Housing Facilities RB,
Series 1999A (NBGA)(d) 5.65 6/01/2029 85,000
5,500 Williamson County IDB RB,
Series 2000 (LOC) 5.72 3/01/2020 5,500
TEXAS (2.9%)
10,400 Alamo Heights Higher Education Facility
RB, Series 1999A (LOC) 5.80 4/01/2019 10,400
10,400 Amarillo Health Facilities Corp. RB,
Series 1985 (LOC) 5.70 5/31/2025 10,400
6,400 Arlington IDC RB, Series 1985 (LOC) 4.85 10/01/2020 6,400
3,300 Austin Higher Education Auth. RB,
Series 2000 (LOC) 5.60 4/01/2025 3,300
3,000 Bell County Health Facilities
Development Corp. RB, Series 1998
(LOC) 5.60 5/01/2023 3,000
1,930 Brazos River Auth. PCRB, Series 1988 5.65 11/01/2000 1,930
800 Garland IDA PCRB 6.10 12/01/2005 800
2,000 Grayson County IDC RB, Series 1991 5.60 12/01/2002 2,000
2,000 Harris County Housing Finance Corp.
MFH RB, Series 1988A (NBGA) 5.60 6/01/2005 2,000
2,900 Houston Higher Education Finance Corp.
RB, Series 2000 (LOC) 5.60 7/01/2020 2,900
4,400 Matagorda County Hospital District RB,
Series 1988 (LOC) 5.80 8/01/2018 4,400
1,800 North Central IDA RB, Series 1983 5.65 10/01/2013 1,800
3,900 Polly Ryon Hospital Auth. RB,
Series 1999 (LOC) 5.60 11/01/2024 3,900
1,185 Port Corpus Christi IDC RB, Series
1992 (LOC) 5.65 7/01/2002 1,185
UTAH (0.4%)
6,900 Ogden City IDRB, Series 1986 (LOC) 4.50 9/01/2013 6,900
VIRGINIA (0.5%)
2,590 Alexandria Redevelopment and Housing
Auth. RB, Series 1996B (LOC) 5.55 10/01/2006 2,590
4,100 Peninsula Ports Auth. Coal Terminal RB,
Series 1987D (LOC) 5.55 7/01/2016 4,100
2,400 Waynesboro IDA RB, Series 1997 (LOC) 5.55 12/15/2028 2,400
WASHINGTON (0.3%)
6,000 Housing Finance RB, Series 1997 (LOC) 5.75 1/01/2027 6,000
WISCONSIN (0.3%)
2,500 Health and Educational Facilities Auth.
RB, Series 1997 (LOC) 5.70 11/01/2017 2,500
2,700 Whitefish Bay Village Recreational
Facilities RB, Series 2000 (LOC) 5.60 4/01/2020 2,700
WYOMING (0.8%)
Sweetwater County PCRB,
9,335 Series 1992A 5.75 4/01/2005 9,335
6,305 Series 1992B 5.75 12/01/2005 6,305
--------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $1,349,940) 1,349,940
--------------------------------------------------------------------------------
PUT BONDS (10.2%)
ARIZONA (0.5%)
8,895 Mesa Municipal Development Corp. RB,
Series 1996A (LOC) 3.80 10/15/2016 8,895
FLORIDA (0.2%)
3,800 Housing Finance Corp. Homeowner
Mortgage RB, 2000 Series 8 4.20 7/01/2017 3,800
GEORGIA (0.2%)
4,465 Marietta Housing Auth. MFH RB,
Series 1985E (LOC) 4.35 1/15/2009 4,465
ILLINOIS (4.0%)
Health Facilities Auth. RB,
15,000 Series 1985B 4.45 8/15/2015 15,000
20,000 Series 1988 4.20 8/15/2010 20,000
25,000 Series 1995 4.25 6/01/2030 25,000
14,000 Series 1996 4.75 8/15/2030 14,000
INDIANA (0.8%)
Jasper County Industrial PCRB,
10,000 Series 1988B 4.45 11/01/2016 10,000
5,500 Series 1988C 4.45 11/01/2016 5,500
KENTUCKY (0.3%)
5,500 Lexington-Fayette Urban County RB,
Series 1987 (LOC) 4.35 4/01/2015 5,500
MONTANA (2.5%)
Board of Investments Municipal Finance
Consolidation Act Bonds,
3,140 Series 1991 (NBGA) 4.35 3/01/2001 3,140
6,165 Series 1992 (NBGA) 4.35 3/01/2005 6,165
6,795 Series 1995 (NBGA) 4.35 3/01/2010 6,795
9,915 Series 1997 (NBGA) 4.35 3/01/2017 9,915
12,430 Series 1998 (NBGA) 4.35 3/01/2018 12,430
7,500 Series 2000 (NBGA) 4.35 3/01/2025 7,500
NEW HAMPSHIRE (0.4%)
7,205 IDA Resources Recovery RB,
Series 1985 (INS)(1) 4.38 7/01/2007 7,205
PENNSYLVANIA (0.1%)
2,000 Ferguson Industrial and Commercial
Development Auth. RB, Series 1981 4.20 11/01/2006 2,000
VIRGINIA (1.2%)
4,000 Louisa IDA PCRB, Series 1984 4.50 12/01/2008 4,000
19,400 York County IDA PCRB, Series 1985 4.30 7/01/2009 19,400
--------------------------------------------------------------------------------
Total put bonds (cost: $190,710) 190,710
--------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (17.9%)
FLORIDA (1.6%)
9,500 Lee County Hospital Board of Directors
RB, Series 1991A (PRE) 6.60 4/01/2020 9,793
19,500 South Broward Hospital District RB,
Series 1991 (PRE) 6.61 5/13/2021 20,090
HAWAII (0.2%)
4,480 State GO, Series 1997CP (INS)(3) 5.00 10/01/2000 4,480
LOUISIANA (0.4%)
Public Facilities Auth. GO,
4,350 Series 1999B 4.25 10/24/2000 4,351
3,265 Series 1999C 4.25 10/24/2000 3,266
MASSACHUSETTS (3.0%)
5,000 Springfield GO BAN (LOC) 4.75 1/12/2001 5,007
24,177 Triton Regional School District BAN 4.75 4/12/2001 24,232
12,441 Whitman Hanson Regional School
District BAN 4.25 10/13/2000 12,443
13,840 Whitman Hanson Regional School
District BAN 4.50 4/19/2001 13,856
MICHIGAN (0.3%)
1,800 Gladstone Area Schools State Aid Notes 5.20 8/22/2001 1,809
3,000 Oscoda Area Schools District State
Aid Notes 5.15 7/20/2001 3,015
MINNESOTA (0.3%)
3,600 Greenway ISD Number 316 GO,
Series 2000 (NBGA) 4.50 9/30/2001 3,601
2,500 Southern Minnesota Municipal Power
Agency RB, Series 1989B (INS)(1),(a) 4.40 1/01/2001 2,473
MISSOURI (1.0%)
Health and Educational Facilities
Auth. RAN,
1,200 Series 2000A 4.75 4/20/2001 1,202
4,150 Series 2000B 4.75 4/20/2001 4,159
815 Series 2000D 4.75 4/20/2001 816
1,360 Series 2000E (LOC) 4.75 4/20/2001 1,363
5,500 Series 2000F 4.75 4/20/2001 5,510
2,025 Series 2000G 4.75 4/20/2001 2,029
1,500 Series 2000H 4.75 4/20/2001 1,503
2,000 Series 2000J 4.75 4/20/2001 2,004
NEW YORK (1.2%)
2,000 Andover Central School District
BAN, Series 2000 4.63 1/26/2001 2,003
12,175 Oneida County GO BAN 4.50 4/20/2001 12,183
8,450 South Seneca Central School
District BAN, Series 2000 4.63 3/15/2001 8,464
TEXAS (8.6%)
Dallas Area Rapid Transit CP Notes,
11,100 Series 1998B (LOC) 4.25 10/12/2000 11,100
1,500 Series 1998B (LOC) 4.05 10/12/2000 1,500
8,000 Series 1998B (LOC) 4.25 12/08/2000 8,000
2,500 Series 1998B (LOC) 4.25 12/08/2000 2,500
6,700 Series 1998B (LOC) 4.15 12/08/2000 6,700
6,200 Series 1998C (LOC) 4.25 11/20/2000 6,200
15,000 Series 1998D (LOC) 4.45 10/30/2000 15,000
5,000 Series 1998D (LOC) 4.40 12/15/2000 5,000
2,000 Series 2000C (LOC) 4.30 12/08/2000 2,000
Dallas Waterworks and Sewer System
CP Notes,
1,888 Series 1999B 5.25 10/04/2000 1,888
15,594 Series 1999B 4.70 10/18/2000 15,594
894 Series 1999B 4.35 10/18/2000 894
9,127 Series 1999B 4.25 10/20/2000 9,127
9,932 Series 1999B 4.15 11/16/2000 9,932
14,484 Series 1999B 4.40 12/14/2000 14,484
10,000 Houston GO CP Notes, Series 1995A 4.40 12/14/2000 10,000
5,000 Houston Water and Sewer System CP
Notes, Series A 4.75 10/18/2000 5,000
1,000 Municipal Power Agency CP Notes,
Series 1991 4.05 11/09/2000 1,000
Public Financing Auth. GO CP Notes,
15,000 Series 1993A 4.55 10/23/2000 15,000
10,000 Series 1993A 4.35 11/10/2000 10,000
5,500 Series 1993A 4.40 12/15/2000 5,500
5,125 Sabine River Auth. Water Supply
Facilities RB, Series 1991 6.50 12/01/2000 5,143
WISCONSIN (1.3%)
10,700 Eau Claire Area School District BAN,
Series 2000A 4.60 5/15/2001 10,704
10,000 Kenosha Unified School District TAN,
Series 1999B 4.25 11/01/2000 10,003
4,650 Oconto Falls Public School District
BAN 4.80 4/01/2001 4,651
--------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $336,572) 336,572
--------------------------------------------------------------------------------
Total investments (cost: $1,877,222) $1,877,222
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------------------
Hospitals 19.5%
Multifamily Housing 15.9
Electric Utilities 8.4
General Obligations 7.8
Education 7.2
Nursing/Continuing Care Centers 6.1
Health Care-Miscellaneous 6.0
Finance-Municipal 4.1
Banks-Major Regional 4.0
Sales Tax 3.6
Water/Sewer Utilities-Municipal 3.5
Buildings 2.3
Escrowed Bonds 1.6
Electrical Equipment 1.5
Manufacturing-Diversified Industries 1.2
Chemicals 1.0
Miscellaneous 1.0
Other 5.5
-----
Total 100.2%
=====
PORTFOLIO SUMMARY BY STATE
-----------------------------------
Alabama 1.8%
Alaska 0.2
Arizona 0.8
California 0.2
Colorado 1.1
Delaware 0.1
Florida 14.5
Georgia 0.8
Hawaii 0.2
Idaho 0.5
Illinois 7.7
Indiana 1.9
Iowa 0.8
Kansas 3.1
Kentucky 6.4
Louisiana 2.4
Maryland 1.2
Massachusetts 4.6
Michigan 1.4
Minnesota 1.6
Mississippi 0.3
Missouri 3.1
Montana 2.5
New Hampshire 1.0
New York 1.6
North Carolina 1.7
Ohio 3.4
Oklahoma 4.2
Oregon 3.5
Pennsylvania 0.5
South Dakota 1.3
Tennessee 9.5
Texas 11.5
Utah 0.4
Virginia 1.7
Washington 0.3
Wisconsin 1.6
Wyoming 0.8
-----
Total 100.2%
=====
NOTES TO PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
SPECIFIC NOTES
(a) Zero-coupon security. Rate represents the effective yield at date of
purchase. For the USAA Long-Term, USAA Intermediate-Term, USAA Short-Term, and
USAA Tax Exempt Money Market funds, these securities represented 3.5%, 10.5%,
7.1%, and 0.1% 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
Fund, USAA Intermediate-Term Fund, and USAA Short-Term Fund, these securities
represented 1.0%, 0.7%, and 2.1% 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 not registered under the Securities Act of 1933.
Resells of these securities in the United States may occur in exempt
transactions to qualified institutional buyers as defined by Rule 144A, and as
such are generally deemed by the Manager to be liquid under guidelines
established by the Board of Directors. These securities represented 3.7%, 2.0%,
9.0%, and 16.4% of the USAA Long-Term Fund, USAA Intermediate-Term Fund, USAA
Short-Term Fund, and USAA Tax Exempt Money Market Fund's net assets,
respectively.
(e) At September 30, 2000, the cost of securities purchased on a
delayed-delivery basis for the USAA Long-Term Fund, USAA Intermediate-Term Fund,
and USAA Short-Term Fund were $23.7 million, $5.8 million, and $4.2 million,
respectively.
(f) At September 30, 2000, this security was segregated to cover
delayed-delivery purchases.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
USAA USAA
LONG-TERM INTERMEDIATE-
FUND TERM FUND
---------------------------
ASSETS
Investments in securities, at market value
(identified cost of $1,930,942, and $2,140,058,
respectively) $1,922,287 $2,163,729
Cash 171 1,799
Receivables:
Capital shares sold 277 271
Interest 33,248 32,953
Securities sold 27,940 -
---------------------------
Total assets 1,983,923 2,198,752
---------------------------
LIABILITIES
Securities purchased 23,687 26,510
Capital shares redeemed 548 781
USAA Investment Management Company 453 499
USAA Transfer Agency Company 83 92
Accounts payable and accrued expenses 100 146
Dividends on capital shares 2,897 2,582
---------------------------
Total liabilities 27,768 30,610
---------------------------
Net assets applicable to
capital shares outstanding $1,956,155 $2,168,142
===========================
REPRESENTED BY:
Paid-in capital $1,984,237 $2,159,749
Accumulated net realized loss on investments (19,427) (15,278)
Net unrealized appreciation
(depreciation) of investments (8,655) 23,671
---------------------------
Net assets applicable to
capital shares outstanding $1,956,155 $2,168,142
===========================
Capital shares outstanding 152,003 170,926
===========================
Authorized shares of $.01 par value 290,000 302,000
===========================
Net asset value, redemption price,
and offering price per share $ 12.87 $ 12.68
===========================
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 $990,589 and $1,877,222
respectively) $ 988,972 $1,877,222
Cash 558 3,272
Receivables:
Capital shares sold 389 2,159
Interest 11,288 11,906
---------------------------
Total assets 1,001,207 1,894,559
---------------------------
LIABILITIES
Securities purchased 8,857 15,805
Capital shares redeemed 739 5,199
USAA Investment Management Company 229 429
USAA Transfer Agency Company 48 83
Accounts payable and accrued expenses 82 101
Dividends on capital shares 690 218
---------------------------
Total liabilities 10,645 21,835
---------------------------
Net assets applicable to
capital shares outstanding $ 990,562 $1,872,724
===========================
REPRESENTED BY:
Paid-in capital $ 995,539 $1,872,724
Accumulated net realized loss on investments (3,360) -
Net unrealized depreciation of investments (1,617) -
---------------------------
Net assets applicable to
capital shares outstanding $ 990,562 $1,872,724
===========================
Capital shares outstanding 94,119 1,872,724
===========================
Authorized shares of $.01 par value 190,000 3,235,000
===========================
Net asset value, redemption price,
and offering price per share $ 10.52 $ 1.00
===========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2000
(UNAUDITED)
USAA USAA
LONG-TERM INTERMEDIATE-TERM
FUND FUND
------------------------------
Net investment income:
Interest income $59,997 $61,983
------------------------------
Expenses:
Management fees 2,715 2,984
Transfer agent's fees 494 545
Custodian's fees 119 161
Postage 85 82
Shareholder reporting fees 35 32
Directors' fees 3 3
Registration fees 41 31
Professional fees 30 30
Other 12 16
------------------------------
Total expenses 3,534 3,884
------------------------------
Net investment income 56,463 58,099
------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) 19,797 (1,585)
Change in net unrealized appreciation/
depreciation (279) 18,299
------------------------------
Net realized and unrealized gain 19,518 16,714
------------------------------
Increase in net assets resulting from operations $75,981 $74,813
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA USAA TAX EXEMPT
SHORT-TERM MONEY MARKET
FUND FUND
----------------------------
Net investment income:
Interest income $24,729 $40,353
----------------------------
Expenses:
Management fees 1,370 2,605
Transfer agent's fees 285 489
Custodian's fees 93 170
Postage 37 79
Shareholder reporting fees 15 37
Directors' fees 3 3
Registration fees 48 29
Professional fees 24 30
Other 5 12
----------------------------
Total expenses 1,880 3,454
----------------------------
Net investment income 22,849 36,899
----------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized loss (74) -
Change in net unrealized appreciation/
depreciation 5,811 -
----------------------------
Net realized and unrealized gain 5,737 -
----------------------------
Increase in net assets resulting from operations $28,586 $36,899
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
STATEMENTS OF CHANGES IN NET ASSETS
USAA LONG-TERM FUND
(IN THOUSANDS)
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2000, AND YEAR ENDED MARCH 31, 2000
(UNAUDITED)
--------------------------
9/30/2000 3/31/2000
--------------------------
From operations:
Net investment income $ 56,463 $ 117,409
Net realized gain (loss) on investments 19,797 (20,800)
Change in net unrealized appreciation/
depreciation of investments (279) (162,950)
--------------------------
Increase (decrease) in net assets
resulting from operations 75,981 (66,341)
--------------------------
Distributions to shareholders from:
Net investment income (56,463) (117,409)
--------------------------
From capital share transactions:
Proceeds from shares sold 153,791 518,603
Dividend reinvestments 38,083 80,816
Cost of shares redeemed (191,129) (648,019)
--------------------------
Increase (decrease) in net assets from
capital share transactions 745 (48,600)
--------------------------
Net increase (decrease) in net assets 20,263 (232,350)
Net assets:
Beginning of period 1,935,892 2,168,242
--------------------------
End of period $1,956,155 $1,935,892
==========================
Change in shares outstanding:
Shares sold 12,146 39,201
Shares issued for dividends reinvested 2,987 6,194
Shares redeemed (15,014) (49,300)
--------------------------
Increase (decrease) in shares outstanding 119 (3,905)
==========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA INTERMEDIATE-TERM FUND
------------------------
9/30/2000 3/31/2000
------------------------
From operations:
Net investment income $ 58,099 $ 120,481
Net realized loss on investments (1,585) (13,503)
Change in net unrealized appreciation/
depreciation of investments 18,299 (130,629)
------------------------
Increase (decrease) in net assets
resulting from operations 74,813 (23,651)
------------------------
Distributions to shareholders from:
Net investment income (58,099) (120,481)
------------------------
From capital share transactions:
Proceeds from shares sold 117,748 355,559
Dividend reinvestments 42,115 89,641
Cost of shares redeemed (131,745) (522,159)
------------------------
Increase (decrease) in net assets from
capital share transactions 28,118 (76,959)
------------------------
Net increase (decrease) in net assets 44,832 (221,091)
Net assets:
Beginning of period 2,123,310 2,344,401
------------------------
End of period $2,168,142 $2,123,310
========================
Change in shares outstanding:
Shares sold 9,354 27,691
Shares issued for dividends reinvested 3,346 7,022
Shares redeemed (10,494) (41,017)
------------------------
Increase (decrease) in shares outstanding 2,206 (6,304)
========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA SHORT-TERM FUND
-------------------------
9/30/2000 3/31/2000
-------------------------
From operations:
Net investment income $ 22,849 $ 45,189
Net realized loss on investments (74) (34)
Change in net unrealized appreciation/
depreciation of investments 5,811 (25,091)
-------------------------
Increase in net assets
resulting from operations 28,586 20,064
-------------------------
Distributions to shareholders from:
Net investment income (22,849) (45,189)
-------------------------
From capital share transactions:
Proceeds from shares sold 154,175 352,575
Dividend reinvestments 18,725 37,734
Cost of shares redeemed (155,695) (431,124)
--------------------------
Increase (decrease) in net assets from
capital share transactions 17,205 (40,815)
-------------------------
Net increase (decrease) in net assets 22,942 (65,940)
Net assets:
Beginning of period 967,620 1,033,560
-------------------------
End of period $ 990,562 $ 967,620
=========================
Change in shares outstanding:
Shares sold 14,728 33,406
Shares issued for dividends reinvested 1,787 3,581
Shares redeemed (14,866) (40,889)
-------------------------
Increase (decrease) in shares outstanding 1,649 (3,902)
=========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA TAX EXEMPT MONEY MARKET FUND
--------------------------
9/30/2000 3/31/2000
--------------------------
From operations:
Net investment income $ 36,899 $ 58,522
--------------------------
Distributions to shareholders from:
Net investment income (36,899) (58,522)
--------------------------
From capital share transactions:
Proceeds from shares sold 899,058 2,072,357
Dividend reinvestments 35,350 55,670
Cost of shares redeemed (924,898) (2,031,849)
--------------------------
Increase in net assets from
capital share transactions 9,510 96,178
--------------------------
Net increase in net assets 9,510 96,178
Net assets:
Beginning of period 1,863,214 1,767,036
--------------------------
End of period $1,872,724 $1,863,214
==========================
Change in shares outstanding:
Shares sold 899,058 2,072,357
Shares issued for dividends reinvested 35,350 55,670
Shares redeemed (924,898) (2,031,849)
--------------------------
Increase in shares outstanding 9,510 96,178
==========================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA Tax Exempt Fund, Inc. (the Company), registered under the Investment
Company Act of 1940, as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of 10
separate funds. The information presented in this semiannual report pertains
only to the USAA Long-Term Fund, USAA Intermediate-Term Fund, USAA Short-Term
Fund, and USAA Tax Exempt Money Market Fund (the Funds). The Funds have a common
objective of providing investors with interest income that is exempt from
federal income tax. The Tax Exempt Money Market Fund has a further objective of
preserving capital and maintaining liquidity.
A. SECURITY VALUATION - Investments in the USAA Long-Term Fund, USAA
Intermediate-Term Fund, and USAA Short-Term Fund are valued each business day by
a pricing service (the Service) approved by the Company's Board of Directors.
The Service uses the mean between quoted bid and asked prices or the last sale
price to price securities when, in the Service's judgment, 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 that include consideration of yields or
prices of tax-exempt securities of comparable quality, coupon, maturity, and
type; indications as to values from dealers in securities; and general market
conditions. Securities that cannot be valued by the Service, and all other
assets, are valued in good faith at fair value using methods determined by the
Manager under the general supervision of the Board of Directors. Securities
purchased with maturities of 60 days or less and, pursuant to Rule 2a-7 under
the Investment Company Act of 1940, as amended, all securities in the USAA Tax
Exempt Money Market Fund, are stated at amortized cost, which approximates
market value.
B. FEDERAL TAXES - Each Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required.
C. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Interest
income is recorded daily on the accrual basis. Premiums and original issue
discounts are amortized over the life of the respective securities. Market
discounts are not amortized. Any ordinary income related to market discounts is
recognized upon disposition of the securities.
D. USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the financial
statements.
(2) LINES OF CREDIT
The Funds participate with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities. Subject to availability under both agreements with CAPCO, each Fund
may borrow from CAPCO an amount up to 5% of its total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, each Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 15% of its total assets.
The Funds had no borrowings under any of these agreements during the six-month
period ended September 30, 2000.
(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 annually in the succeeding fiscal year or
as otherwise required to avoid the payment of federal taxes. At September 30,
2000, the USAA Long-Term Fund, USAA Intermediate-Term Fund, and USAA Short-Term
Fund had capital loss carryovers for federal income tax purposes of $19,427,000,
$15,278,000, and $3,360,000, respectively, which, if not offset by subsequent
capital gains, will expire between 2003-2009. 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
six-month period ended September 30, 2000, were as follows:
<TABLE>
<CAPTION>
USAA USAA USAA USAA TAX EXEMPT
LONG-TERM FUND INTERMEDIATE-TERM FUND SHORT-TERM FUND MONEY MARKET FUND
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $510,348,000 $82,536,000 $92,068,000 $1,825,604,000
Sales/maturities $523,619,000 $78,884,000 $68,034,000 $1,799,790,000
</TABLE>
For the USAA Long-Term Fund, USAA Intermediate-Term Fund, and USAA Short-Term
Fund, cost of purchases and proceeds from sales/maturities exclude short-term
securities.
Gross unrealized appreciation and depreciation of investments at September 30,
2000, were as follows:
USAA USAA USAA
LONG-TERM INTERMEDIATE-TERM SHORT-TERM
FUND FUND FUND
-----------------------------------------------------
Appreciation $ 56,673,000 $ 65,403,000 $ 4,963,000
Depreciation (65,328,000) (41,732,000) (6,580,000)
-----------------------------------------------------
Net $ (8,655,000) $ 23,671,000 $(1,617,000)
=====================================================
(5) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES - USAA Investment Management Company (the Manager) carries
out each Fund's investment policies and manages each Fund's portfolio.
Management fees are computed at .28% of the average annual net assets of each
Fund.
B. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Funds based on an annual charge of $28.50 per shareholder account plus
out-of-pocket expenses.
C. UNDERWRITING SERVICES - The Manager provides exclusive underwriting and
distribution of the Funds' shares on a continuing best-efforts basis. The
Manager receives no commissions or fees for this service.
(6) TRANSACTIONS WITH AFFILIATES
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At September 30, 2000, the Association and its affiliates
owned 4,030,000 shares (2.4%) 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) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
USAA LONG-TERM FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
----------------------------------------------------------------
2000 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $ 12.75 $ 13.92 $ 14.00 $ 13.22 $ 13.17 $ 12.96
Net investment
income .37 .76 .76 .78 .79 .79
Net realized and
unrealized
gain (loss) .12 (1.17) (.08) .78 .05 .21
Distributions from net
investment income (.37) (.76) (.76) (.78) (.79) (.79)
-----------------------------------------------------------------------------
Net asset value at
end of period $ 12.87 $ 12.75 $ 13.92 $ 14.00 $ 13.22 $ 13.17
=============================================================================
Total return (%)* 3.92 (2.95) 4.98 12.04 6.51 7.88
Net assets at end
of period (000) $1,956,155 $1,935,892 $2,168,242 $2,042,525 $1,822,436 $1,804,116
Ratio of expenses
to average
net assets (%) .36(a) .36 .36 .36 .37 .37
Ratio of net investment
income to
average net assets (%) 5.82(a) 5.77 5.44 5.65 5.95 5.99
Portfolio turnover (%) 27.00 29.04 29.56 35.20 40.78 53.25
</TABLE>
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF
OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
<TABLE>
USAA INTERMEDIATE-TERM FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
---------------------------------------------------------------
2000 2000 1999 1998 1997 1996
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $ 12.58 $ 13.39 $ 13.38 $ 12.77 $ 12.77 $ 12.50
Net investment
income .34 .69 .70 .71 .72 .71
Net realized and
unrealized
gain (loss) .10 (.81) .01 .61 - .27
Distributions from net
investment income (.34) (.69) (.70) (.71) (.72) (.71)
----------------------------------------------------------------------------
Net asset value at
end of period $ 12.68 $ 12.58 $ 13.39 $ 13.38 $ 12.77 $ 12.77
============================================================================
Total return (%)* 3.58 (.84) 5.42 10.59 5.80 7.97
Net assets at end
of period (000) $2,168,142 $2,123,310 $2,344,401 $2,039,505 $1,725,684 $1,660,039
Ratio of expenses
to average
net assets (%) .36(a) .36 .36 .37 .37 .38
Ratio of net investment
income to
average net assets (%) 5.45(a) 5.39 5.21 5.42 5.65 5.54
Portfolio turnover (%) 3.82 10.46 11.85 7.87 23.05 27.51
</TABLE>
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF
OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
<TABLE>
USAA SHORT-TERM FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
--------------------------------------------------------------
2000 2000 1999 1998 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $ 10.46 $ 10.72 $ 10.74 $ 10.57 $ 10.57 $ 10.47
Net investment
income .25 .47 .49 .49 .49 .50
Net realized and
unrealized
gain (loss) .06 (.26) (.02) .17 - .10
Distributions from net
investment income (.25) (.47) (.49) (.49) (.49) (.50)
---------------------------------------------------------------------------
Net asset value at
end of period $ 10.52 $ 10.46 $ 10.72 $ 10.74 $ 10.57 $ 10.57
===========================================================================
Total return (%)* 2.95 2.05 4.46 6.35 4.70 5.83
Net assets at end
of period (000) $ 990,562 $ 967,620 $1,033,560 $ 970,805 $ 804,897 $ 774,020
Ratio of expenses
to average
net assets (%) .38(a) .38 .38 .39 .41 .42
Ratio of net investment
income to
average net assets (%) 4.67(a) 4.48 4.55 4.57 4.60 4.73
Portfolio turnover (%) 9.39 18.88 7.34 7.91 27.67 35.99
</TABLE>
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF
OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
<TABLE>
USAA TAX EXEMPT MONEY MARKET FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
--------------------------------------------------------------
2000 2000 1999 1998 1997 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment
income .02 .03 .03 .03 .03 .04
Distributions from net
investment income (.02) (.03) (.03) (.03) (.03) (.04)
---------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===========================================================================
Total return (%)* 2.00 3.27 3.26 3.48 3.30 3.65
Net assets at end
of period (000) $1,872,724 $1,863,214 $1,767,036 $1,631,785 $1,565,634 $1,529,176
Ratio of expenses
to average
net assets (%) .37(a) .38 .38 .38 .39 .40
Ratio of net investment
income to
average net assets (%) 3.97(a) 3.24 3.21 3.42 3.25 3.59
</TABLE>
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF
OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
DIRECTORS
Robert G. Davis, CHAIRMAN OF THE BOARD
Michael J.C. Roth, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason
David G. Peebles
Michael F. Reimherr
Laura T. Starks
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER, AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT LEGAL COUNSEL
USAA Shareholder Account Services Goodwin, Procter & Hoar LLP
9800 Fredericksburg Road Exchange Place
San Antonio, Texas 78288 Boston, Massachusetts 02109
CUSTODIAN INDEPENDENT AUDITORS
State Street Bank and Trust Company KPMG LLP
P.O. Box 1713 112 East Pecan, Suite 2400
Boston, Massachusetts 02105 San Antonio, Texas 78205
TELEPHONE ASSISTANCE HOURS INTERNET ACCESS
Call toll free - Central Time usaa.com(ServiceMark)
Monday - Friday 6 a.m. to 10 p.m.
Saturday 8:30 a.m. to 5 p.m.
Sundays 11:30 a.m. to 8 p.m.
FOR ADDITIONAL INFORMATION ON MUTUAL FUNDS
1-800-531-8181, (in San Antonio) 456-7200
For account servicing, exchanges, or redemptions
1-800-531-8448, (in San Antonio) 456-7202
RECORDED MUTUAL FUND PRICE QUOTES
24-hour service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
MUTUAL FUND USAA TOUCHLINE(Registered Trademark)
(from touch-tone phones only)
For account balance, last transaction, fund prices,
or to exchange or redeem fund shares
1-800-531-8777, (in San Antonio) 498-8777
