Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review
USAA Long-Term Fund 4
USAA Intermediate-Term Fund 10
USAA Short-Term Fund 15
USAA Tax Exempt Money Market Fund 20
Financial Information:
Distributions to Shareholders 23
Independent Auditors' Report 24
Portfolios of Investments:
Categories and Definitions 25
USAA Long-Term Fund 27
USAA Intermediate-Term Fund 35
USAA Short-Term Fund 51
USAA Tax Exempt Money Market Fund 63
Notes to Portfolios of Investments 75
Statements of Assets and Liabilities 76
Statements of Operations 78
Statements of Changes in Net Assets 80
Notes to Financial Statements 84
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA Tax Exempt
Fund, Inc., managed by USAA Investment Management Company (IMCO). It may be used
as sales literature only when preceded or accompanied by a current prospectus
which gives further details about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(Copyright)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 the President and Vice Chairman of the Board, Michael J.C. Roth,
CFA, appears here.]
From the vantage point of March 2000, we can all look at the tax-exempt bond
market and breathe just a little more easily. It has been a long time since we
have been able to do that.
At USAA Investments we believe that many investors are, in truth, more
comfortable with some of their assets allocated to bonds. Bonds are less
volatile than stocks over long periods, and they can lessen the turmoil in a
portfolio. Many times I hear people ask, "Why would anyone invest in bonds when
stocks have such higher returns?" My answer is that I have known few people who
have the fortitude to have all of their money in stocks. That doesn't mean that
a person who allocates some of a portfolio to bonds is weak. That's simply the
way we are. When stocks drop precipitously, I am convinced that opportunities
are created. But only a calm, calculating person can take advantage of them.
That usually means a person who is properly allocated all the time. Those
precipitous drops tend to surprise everyone.
Another key belief of ours is that income is the basis of most of the potential
returns on bonds and that by maximizing income we may produce very good results
over time.
This emphasis on income can hurt in a year like 1999, but when you consider
periods of just a few years you get a clearer picture of what we mean.
- --------------------------------------------------------------------------------
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%
USAA Tax Exempt Money Market Fund 3.15% 3.40% 3.60%
- --------------------------------------------------------------------------------
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.
The key thing about this chart is that all of these returns include the bad
market of 1999. One poor year has not overturned the good returns of many years.
Markets will always move, but we believe that a sound and consistent strategy
will pay off.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company (USAA Investments), including charges and
operating expenses, please call for a prospectus. Read it carefully before
investing.
Some income may be subject to state or local taxes or the federal alternative
minimum tax.
Investment Review
USAA LONG-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of 10 years or
more.
- --------------------------------------------------------------------------------
3/31/99 3/31/00
- --------------------------------------------------------------------------------
Net Assets $2,168.2 Million $1,935.9 Million
Net Asset Value Per Share $13.92 $12.75
Tax-Exempt Dividends Per Share Last 12 Months $.764 $.756
Capital Gain Distributions Per Share
Last 12 Months - -
- --------------------------------------------------------------------------------
30-Day SEC Yield* as of 3/31/00
- --------------------------------------------------------------------------------
30-Day SEC Yield 5.52%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 2000
- --------------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
- --------------------------------------------------------------------------------
10 Years 6.62% = 6.27% + 0.35%
- --------------------------------------------------------------------------------
5 Years 5.57% = 5.90% + -0.33%
- --------------------------------------------------------------------------------
1 Year -2.95% = 5.46% + -8.41%
- --------------------------------------------------------------------------------
Annual Total Returns and Compounded Dividend Returns
for the Ten-Year Period Ending March 31, 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 ten-
year period ended March 31, 2000.
Total Return for Years Ended:
- ----------------------------
03/31/91 8.46%
03/31/92 10.39%
03/31/93 12.46%
03/31/94 2.36%
03/31/95 5.07%
03/31/96 7.88%
03/31/97 6.51%
03/31/98 12.04%
03/31/99 4.98%
03/31/00 -2.95%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/91 7.54%
03/31/92 7.27%
03/31/93 6.92%
03/31/94 5.56%
03/31/95 6.23%
03/31/96 6.26%
03/31/97 6.13%
03/31/98 6.14%
03/31/99 5.55%
03/31/00 5.46%
Change in Share Price:
- ---------------------
03/31/91 0.92%
03/31/92 3.12%
03/31/93 5.54%
03/31/94 -3.20%
03/31/95 -1.16%
03/31/96 1.62%
03/31/97 0.38%
03/31/98 5.90%
03/31/99 -0.57%
03/31/00 -8.41%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital 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 3/31/91 to
3/31/00.
USAA Long-Term Lipper General Municipal
Fund Yield Debt Funds Average Yield
-------------- ------------------------
03/31/91 7.15% 6.75%
03/31/92 6.78% 6.41%
03/31/93 6.23% 5.77%
03/31/94 6.23% 5.65%
03/31/95 6.03% 5.38%
03/31/96 6.03% 5.13%
03/31/97 5.95% 5.07%
03/31/98 5.55% 4.67%
03/31/99 5.49% 4.49%
03/31/00 5.93% 4.72%
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
3/31/91 to 3/31/00.
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
- -------- ------
03/31/90 $10,000
09/30/90 10,199
03/31/91 10,846
09/30/91 11,526
03/31/92 11,972
09/30/92 12,793
03/31/93 13,463
09/30/93 14,427
03/31/94 13,782
09/30/94 13,802
03/31/95 14,480
09/30/95 15,160
03/31/96 15,620
09/30/96 16,208
03/31/97 16,637
09/30/97 17,832
03/31/98 18,639
09/30/98 19,495
03/31/99 19,566
09/30/99 18,865
03/31/00 18,988
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,239
03/31/91 10,923
09/30/91 11,590
03/31/92 12,014
09/30/92 12,801
03/31/93 13,518
09/30/93 14,432
03/31/94 13,832
09/30/94 14,080
03/31/95 14,859
09/30/95 15,655
03/31/96 16,105
09/30/96 16,600
03/31/97 16,982
09/30/97 18,097
03/31/98 18,802
09/30/98 19,674
03/31/99 19,967
09/30/99 19,537
03/31/00 19,951
Lipper General Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,188
03/31/91 10,844
09/30/91 11,521
03/31/92 11,933
09/30/92 12,722
03/31/93 13,475
09/30/93 14,406
03/31/94 13,748
09/30/94 13,889
03/31/95 14,625
09/30/95 15,276
03/31/96 15,713
09/30/96 16,175
03/31/97 16,509
09/30/97 17,615
03/31/98 18,298
09/30/98 19,106
03/31/99 19,229
09/30/99 18,555
03/31/00 18,793
Data from 3/31/90 through 3/31/00.
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 since funds have expenses.
Message from the Manager
[Photograph of Portfolio Manager, Robert R. Pariseau, CFA, appears here.]
THE MUNICIPAL BOND MARKET
You just can't keep a strong economy down. Apparently, not even the Federal
Reserve Board can do it. After raising the federal funds target rate five times
since last June, the U.S. economy still grew by 7.35% in the fourth quarter of
1999. Thankfully, inflation has remained under control -- although it's been
creeping up since early 1998. Last year, the fixed-income markets suffered a
crisis in confidence fearing that inflation would most certainly increase. In
response, bond prices fell as interest rates rose for most of 1999.
However, the virtuous cycle of robust noninflationary growth described by
Chairman Alan Greenspan continues as technological innovation allows industry to
use raw materials and labor more efficiently. Add a volatile stock market to
continued low inflation, and we have the ingredients for a bond-market rally
that began in late January of this year. Of course, that ignores Chairman
Greenspan's warning that the economy is growing well in excess of its
sustainable, noninflationary rate.
The yield on the Bond Buyer 40-Bond Index (BBI40) steadily increased by 1.1%
from March 1999 until January 2000. Since late January, the yield has fallen
roughly 0.4%, closing at 5.97% on March 31, 2000. The 30-year U.S. Treasury bond
(the long bond) ended the period at 5.83%. Investor redemptions last fall and a
reduction in issuance of the long bond were major reasons why the municipal
market has underperformed the U.S. government long-bond market.
Municipal and U.S. Treasury Bond Yields
A chart in the form of a line graph appears here illustrating the yields of the
30-year U.S. Treasury Bond and the Bond Buyer 40-Bond Index (BBI40) from 3/31/99
to 3/31/00.
30-year Bond Buyer
U.S. 40-Bond
Treasury Index (BBI40)
-------- -------------
03/31/99 5.63% 5.23%
04/15/99 5.53% 5.21%
04/30/99 5.66% 5.28%
05/14/99 5.92% 5.38%
05/31/99 5.83% 5.37%
06/15/99 6.11% 5.53%
06/30/99 5.96% 5.55%
07/15/99 5.92% 5.50%
07/30/99 6.10% 5.59%
08/16/99 6.09% 5.88%
08/31/99 6.06% 5.78%
09/15/99 6.10% 5.86%
09/30/99 6.05% 5.89%
10/15/99 6.26% 6.06%
10/29/99 6.16% 6.08%
11/15/99 6.02% 5.99%
11/30/99 6.29% 6.11%
12/15/99 6.33% 6.11%
12/31/99 6.48% 6.22%
01/14/00 6.70% 6.29%
01/31/00 6.49% 6.31%
02/15/00 6.25% 6.24%
02/29/00 6.14% 6.17%
03/15/00 6.08% 6.09%
03/31/00 5.83% 5.97%
Past performance is no guarantee of future results.
The 30-year U.S. Treasury bond is generally considered the benchmark for U.S.
long-term interest rates.
The Bond Buyer 40-Bond Index is the industry standard for the yield of
long-term, investment-grade municipal bonds.
STRATEGY
I focus primarily on generating maximum tax-exempt income with the goal of
producing the best after-tax total return over a three- to five-year investment
horizon. 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, has been well above the peer-group
average.
The Fund remains fully invested in long-term, investment-grade municipal bonds.
Municipal bonds maturing in 20 years or longer 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 our
tax-exempt bond funds. In regard to credit risk, I believe investment-grade
bonds (rated BBB or higher by a rating agency) offer the best risk/reward
compared to junk 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 their inception, no USAA tax-exempt
fund has ever distributed income that was subject to the AMT for individuals.
Looking ahead, we have no intention of purchasing 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 occurs in the
federal tax code that would compel us to reconsider our position.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1999,
to March 31, 2000, your Fund paid a dividend distribution yield of 5.93% versus
an average dividend distribution yield of 4.72% for the Lipper General Municipal
Debt Funds Average. During the fiscal year, the Fund's share price decreased by
$1.17 to $12.75. During this period, the Fund's total return was -2.95% compared
to the Lipper Average of -2.40%.
* * * *
I'm pleased to say that your Fund received an Overall Star Rating of 4 stars in
the municipal bond fund category from Morningstar Rating(TradeMark) for the
period ended March 31, 2000.
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 distribution.
Refer to the bottom of page 5 for the Lipper Average definition.
Total return equals income return plus share price change and assumes
reinvestment of all dividends and capital gain distributions.
Past performance is no guarantee of future results. Morningstar proprietary
ratings on U.S.-domiciled funds reflect historical risk-adjusted performance as
of March 31, 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 Tax Exempt Long-Term Fund
received 4 stars, 5 stars, 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 1,682, 1,394,
and 403 funds in the municipal bond fund category for the three-, five-, and
10-year periods, respectively.
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
March 31, 2000
A pie chart is shown here depicting the Portfolio Ratings Mix as of March 31,
2000 of the USAA Long-Term Fund to be:
AAA - 29%; AA - 22%; A - 23%; BBB - 24%; BB - 1%; 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 and BBB account for 3.3% and
1.0%, respectively, of the Fund's investments, and are included in their
appropriate category above.
See page 27 for a complete listing of the portfolio of investments.
Investment Review
USAA INTERMEDIATE-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of between three
and 10 years.
- --------------------------------------------------------------------------------
3/31/99 3/31/00
- --------------------------------------------------------------------------------
Net Assets $2,344.4 Million $2,123.3 Million
Net Asset Value Per Share $13.39 $12.58
Tax-Exempt Dividends Per Share Last
12 Months $.701 $.690
Capital Gain Distributions Per Share
Last 12 Months - -
- --------------------------------------------------------------------------------
30-Day SEC Yield* as of 3/31/00
- --------------------------------------------------------------------------------
30-Day SEC Yield 5.12%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 2000
- --------------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
================================================================================
10 Years 6.64% = 5.93% + 0.71%
- --------------------------------------------------------------------------------
5 Years 5.72% = 5.59% + 0.13%
- --------------------------------------------------------------------------------
1 Year -0.84% = 5.21% + -6.05%
================================================================================
Annual Total Returns and Compounded Dividend Returns
for the Ten-Year Period Ending March 31, 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 ten-year period ended March 31, 2000.
Total Return for Years Ended:
- ----------------------------
03/31/91 8.30%
03/31/92 9.24%
03/31/93 11.29%
03/31/94 3.06%
03/31/95 6.16%
03/31/96 7.97%
03/31/97 5.80%
03/31/98 10.59%
03/31/99 5.42%
03/31/00 -0.84%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/91 7.20%
03/31/92 6.82%
03/31/93 6.33%
03/31/94 5.31%
03/31/95 5.76%
03/31/96 5.81%
03/31/97 5.80%
03/31/98 5.81%
03/31/99 5.35%
03/31/00 5.21%
Change in Share Price:
- ---------------------
03/31/91 1.10%
03/31/92 2.42%
03/31/93 4.96%
03/31/94 -2.25%
03/31/95 0.40%
03/31/96 2.16%
03/31/97 0.00%
03/31/98 4.78%
03/31/99 0.07%
03/31/00 -6.05%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital 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
3/31/91 to 3/31/00.
USAA Intermediate-Term Lipper Intermediate Municipal
Fund Yield Debt Funds Average Yield
---------------------- -----------------------------
03/31/91 6.84% 6.25%
03/31/92 6.43% 5.90%
03/31/93 5.75% 5.26%
03/31/94 5.56% 4.85%
03/31/95 5.56% 4.70%
03/31/96 5.57% 4.61%
03/31/97 5.67% 4.54%
03/31/98 5.34% 4.33%
03/31/99 5.24% 4.17%
03/31/00 5.49% 4.35%
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
3/31/91 to 3/31/00.
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
- -------- -------
03/31/90 $10,000
09/30/90 10,280
03/31/91 10,830
09/30/91 11,419
03/31/92 11,831
09/30/92 12,530
03/31/93 13,166
09/30/93 14,016
03/31/94 13,570
09/30/94 13,853
03/31/95 14,407
09/30/95 15,205
03/31/96 15,554
09/30/96 16,030
03/31/97 16,457
09/30/97 17,484
03/31/98 18,199
09/30/98 18,978
03/31/99 19,185
09/30/99 18,742
03/31/00 19,024
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,239
03/31/91 10,923
09/30/91 11,590
03/31/92 12,014
09/30/92 12,801
03/31/93 13,518
09/30/93 14,432
03/31/94 13,832
09/30/94 14,080
03/31/95 14,859
09/30/95 15,655
03/31/96 16,105
09/30/96 16,600
03/31/97 16,982
09/30/97 18,097
03/31/98 18,802
09/30/98 19,674
03/31/99 19,967
09/30/99 19,537
03/31/00 19,951
Lipper Intermediate Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,265
03/31/91 10,824
09/30/91 11,368
03/31/92 11,729
09/30/92 12,420
03/31/93 13,011
09/30/93 13,749
03/31/94 13,373
09/30/94 13,590
03/31/95 14,126
09/30/95 14,789
03/31/96 15,119
09/30/96 15,451
03/31/97 15,791
09/30/97 16,631
03/31/98 17,145
09/30/98 17,857
03/31/99 18,044
09/30/99 17,751
03/31/00 18,017
Data from 3/31/90 through 3/31/00.
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, since funds have expenses.
Message from the Manager
[Photograph of Portfolio Manager, Clifford A. Gladson, CFA, appears here.]
CREDIT MARKET REVIEW
Since our last annual report on March 31, 1999, the Federal Reserve (the Fed)
has raised the short-term interest rate 1.25%. The Fed is concerned that the
strong growth in the domestic economy will lead to price inflation. By the end
of the USAA Tax Exempt Intermediate-Term Fund's fiscal year on March 31, 2000,
yields on ten-year AA-rated municipal bonds rose 0.78%.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1999,
to March 31, 2000, your Fund paid a dividend distribution yield of 5.49%, well
above the average dividend distribution yield of 4.35% for the Lipper
Intermediate-Term Municipal Debt Funds Average. During the Fund's fiscal year,
rising interest rates caused the share price to fall $0.81 to $12.58.
* * * * *
Your Fund's performance received an Overall Star Rating of 5 stars in the
municipal bond fund category from Morningstar Rating (TradeMark) for the period
ending March 31, 2000.
HOW I APPROACH YOUR FUND'S INCOME OBJECTIVE
The primary objective of each USAA tax-exempt bond fund is to distribute a high
level of tax-exempt income. Our tax-exempt funds are designed to promote
tax-free income accumulation rather than taxable capital gain distributions.
This income orientation is impacted by the mathematical nature of bonds, the
federal income tax code, and the behavior of the fixed-income market.
Interest rates fluctuate. When interest rates rise, the price of a bond falls.
When interest rates fall, the price of a bond rises. At maturity, barring a
credit disaster, a bond pays off at face value. The only tax-exempt income that
is earned depends on the bond's coupon yield at the time of purchase. For a
discussion of how we employ forward-looking credit analysis to add value to the
portfolios, please see the fund manager's message about the USAA Tax Exempt
Short-Term Fund on page 18.
Common sense dictates that a taxpayer values tax-exempt income over taxable
capital gain distributions. The table on page 10 shows the sources of total
return for the USAA Tax Exempt Intermediate-Term Fund over the last one, five,
and 10 years. Notice that the tax-exempt dividend return is the dominant
component of long-term total return. The three graphs below the table further
illustrate how the Fund's dividend returns and yearly price appreciation combine
to produce annual total returns. Besides dominating long-term total return,
tax-exempt income distributions help smooth out the annualized total return.
Two market factors shape our income-oriented portfolio strategy. First, to our
knowledge, no one has consistently been able to 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 have the potential to increase a fund's dividend distribution
yield. We carefully manage trading activity to reduce 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, in order to earn a high level of income, the Fund's weighted average
maturity will usually be near its upper limit.
CURRENT MARKET CONDITIONS
The credit market anticipates that the Fed will continue to raise short-term
interest rates until there is some moderation in the rate of growth of the
domestic economy. The market's confidence in the Fed's resolve to keep inflation
at bay is reflected by long-term interest rates rising at a slower rate than
short-term interest rates. I continue to view any rise in interest rates as an
opportunity to improve the distribution yield of your Fund.
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.
Refer to the bottom of page 11 for the Lipper Average definition.
Past performance is no guarantee of future results. Morningstar proprietary
ratings on U.S.-domiciled funds reflect historical risk-adjusted performance as
of March 31, 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 Tax Exempt
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 1,682, 1,394,
and 403 funds in the municipal bond fund category for the three-, five-, and
10-year periods, respectively.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Intermediate-Term Fund with a
taxable equivalent invesment.
- --------------------------------------------------------------------------------
To match the USAA Intermediate-Term Fund's closing 30-day SEC yield of 5.12%
and:
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
A fully taxable investment must pay: 7.11% 7.42% 8.00% 8.48%
- --------------------------------------------------------------------------------
This table is based on a hypothetical investment caluclation 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
March 31, 2000
A pie chart is shown here depicting the Portfolio Ratings Mix as of March 31,
2000 of the USAA Intermediate-Term Fund to be:
AAA - 35%; AA - 15%; A - 26%; and BBB - 24%.
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 1.6%,
0.05%, and 2.1%, respectively, of the Fund's investments, and are included in
their appropriate category above.
See page 35 for a complete listing of the portfolio of investments.
Investment Review
USAA SHORT-TERM FUND
OBJECTIVE: Interest income that is exempt from federal income tax.
TYPES OF INVESTMENTS: Invests principally in investment-grade, tax-exempt
securities with a dollar-weighted average portfolio maturity of three years or
less.
- --------------------------------------------------------------------------------
3/31/99 3/31/00
- --------------------------------------------------------------------------------
Net Assets $1,033.6 Million $967.6 Million
Net Asset Value Per Share $10.72 $10.46
Tax-Exempt Dividends Per Share Last
12 Months $.490 $.473
Capital Gain Distributions Per Share Last
12 Months - -
- --------------------------------------------------------------------------------
30-Day SEC Yield* as of 3/31/00
- --------------------------------------------------------------------------------
30-Day SEC Yield 4.42%
- --------------------------------------------------------------------------------
* Calculated as prescribed by the Securities and Exchange Commission.
Average Annual Compounded Returns with
Reinvestment of Dividends - Periods Ending March 31, 2000
- --------------------------------------------------------------------------------
Total Return Equals Dividend Return Plus Price Change
================================================================================
10 Years 5.04% = 4.97% + 0.07%
- --------------------------------------------------------------------------------
5 Years 4.66% = 4.68% + -0.02%
- --------------------------------------------------------------------------------
1 Year 2.05% = 4.48% + -2.43%
================================================================================
Annual Total Returns and Compounded Dividend Returns
for the Ten-Year Period Ending March 31, 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 ten-
year period ended March 31, 2000.
Total Return for Years Ended:
- ----------------------------
03/31/91 6.27%
03/31/92 7.09%
03/31/93 6.37%
03/31/94 2.87%
03/31/95 4.51%
03/31/96 5.83%
03/31/97 4.70%
03/31/98 6.35%
03/31/99 4.46%
03/31/00 2.05%
**Compounded Dividend Yield for Years Ended:
- -------------------------------------------
03/31/91 6.65%
03/31/92 5.83%
03/31/93 4.94%
03/31/94 4.28%
03/31/95 4.61%
03/31/96 4.87%
03/31/97 4.70%
03/31/98 4.74%
03/31/99 4.65%
03/31/00 4.48%
Change in Share Price:
- ---------------------
03/31/91 -0.38%
03/31/92 1.26%
03/31/93 1.43%
03/31/94 -1.41%
03/31/95 -0.10%
03/31/96 0.96%
03/31/97 0.00%
03/31/98 1.61%
03/31/99 -0.19%
03/31/00 -2.43%
** Compounded Dividend yield calculation includes only income distributions.
Total return equals dividend return plus share price change and assumes
reinvestment of all dividends and capital 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 3/31/91 to
3/31/00.
USAA Short-Term Lipper Short-Term Municipal
Fund Yield Debt Funds Average Yield
--------------- ---------------------------
3/31/91 6.47% 6.07%
3/31/92 5.59% 5.41%
3/31/93 4.75% 4.47%
3/31/94 4.33% 3.71%
3/31/95 4.51% 4.01%
3/31/96 4.73% 4.15%
3/31/97 4.60% 4.17%
3/31/98 4.55% 4.03%
3/31/99 4.57% 3.87%
3/31/00 4.52% 3.86%
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
3/31/91 to 3/31/00.
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
- -------- -------
03/31/90 $10,000
09/30/90 10,247
03/31/91 10,627
09/30/91 11,026
03/31/92 11,380
09/30/92 11,766
03/31/93 12,106
09/30/93 12,466
03/31/94 12,453
09/30/94 12,679
03/31/95 13,015
09/30/95 13,492
03/31/96 13,774
09/30/96 14,100
03/31/97 14,421
09/30/97 14,939
03/31/98 14,337
09/30/98 15,779
03/31/99 16,020
09/30/99 16,104
03/31/00 16,347
Lehman Brothers Municipal Bond Index
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,239
03/31/91 10,923
09/30/91 11,590
03/31/92 12,014
09/30/92 12,801
03/31/93 13,518
09/30/93 14,432
03/31/94 13,832
09/30/94 14,080
03/31/95 14,859
09/30/95 15,655
03/31/96 16,105
09/30/96 16,600
03/31/97 16,982
09/30/97 18,097
03/31/98 18,802
09/30/98 19,674
03/31/99 19,967
09/30/99 19,537
03/31/00 19,951
Lipper Short-Term Municipal Debt Funds Average
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,294
03/31/91 10,679
09/30/91 11,041
03/31/92 11,370
09/30/92 11,756
03/31/93 12,062
09/30/93 12,336
03/31/94 12,405
09/30/94 12,586
03/31/95 12,856
09/30/95 13,245
03/31/96 13,532
09/30/96 13,801
03/31/97 14,058
09/30/97 14,453
03/31/98 14,780
09/30/98 15,149
03/31/99 15,402
09/30/99 15,533
03/31/00 15,754
Data from 3/31/90 through 3/31/00.
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 since funds have expenses.
Message from the Manager
[Photograph of Portfolio Manager, Clifford A. Gladson, CFA, appears here.]
CREDIT MARKET REVIEW
During the USAA Tax Exempt Short-Term Fund's last fiscal year, from March 31,
1999, to March 31, 2000, the Federal Reserve (the Fed) raised the short-term
interest rate five times. Even though price inflation remained rather benign,
the Fed felt that preemptive action was necessary to slow the rapid growth in
the domestic economy, which it fears will lead to price inflation. By the end of
the Fund's fiscal year, the federal discount rate increased 1.25%, and the
yields on five-year AA-rated municipal bonds rose 1.04%.
FUND PERFORMANCE
While past performance is no guarantee of future results, from March 31, 1999,
to March 31, 2000, your Fund paid a dividend distribution yield of 4.52%, well
above the average dividend distribution yield of 3.86% for the Lipper Short-Term
Municipal Debt Funds Average. During the Fund's fiscal year, rising interest
rates caused the share price to decrease $0.26 to $10.46.
* * * * *
Your Fund's performance received an Overall Star Rating of 5 stars in the
municipal bond fund category from Morningstar Rating(TradeMark) for the period
ending March 31, 2000.
INDEPENDENT CREDIT ANALYSIS
When I was in college, the textbooks ranked the security of municipal bonds
second only to U.S. government securities. In general terms, I continue to
subscribe to this view. However, in each of the last three decades, at least one
major issuer and a number of smaller issuers have defaulted. This is why I feel
it is important that at USAA every portfolio manager starts as a credit analyst.
Advanced degrees and professional designations are only entry criteria for our
analysts. Even though we emphasize the basic three C's of credit analysis --
character, cash flow, and collateral -- the art of credit analysis transcends
simple formulas. The analyst must develop a forward-looking judgment that builds
on past events to assess an issuer's future willingness to pay, future ability
to pay, and future incentive to pay. We don't want to prepare for the last war.
More importantly, an analyst must develop the confidence to recognize that a
material risk may defy analysis and avoid purchasing these credits. Over the
years, our municipal analysts identified potential credit problems before they
could damage the portfolio.
While we use the credit ratings of three nationally recognized statistical
rating organizations (Moody's, Standard & Poor's, and Fitch) as guidelines,
actual purchase decisions are based on our independent credit analysis. There
are a number of high-grade credits rated A or better, some with ratings of AAA,
that we will not purchase. On the other hand, if the rating of a holding is
downgraded below investment grade, we do not sell automatically. This might be
the easiest action for the portfolio manager to take, but it may not be in the
best interest of the shareholder. It is our policy to conduct an independent
analysis to determine if the bond's principal and interest will be paid as
promised. The portfolio manager must then decide if it is in the best interest
of the shareholder to hold or sell the security. If the decision is made to hold
the security, it is placed on close and constant surveillance.
Please be assured that USAA has a seasoned team of fixed-income professionals
looking out for your best interests. For a discussion on how we approach the
income objective of your Fund, please see my report on the USAA Tax Exempt
Intermediate-Term Fund on page 13.
CURRENT MARKET CONDITIONS
It appears that the Fed will continue to raise short-term interest rates until
there is some moderation in the rate of growth in the domestic economy. I
continue to invest 23% of the Fund assets in variable-rate demand notes (VRDNs).
The yields on these VRDNs reset either daily or weekly and possess a periodic
demand feature at par (100% of face value) of the same duration. During periods
of rising interest rates, the VRDNs can quickly adjust to rising interest rates
and help the VRDN to maintain a value of par.
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.
Refer to the bottom of page 16 for the Lipper Average definition.
Past performance is no guarantee of future results. Morningstar proprietary
ratings on U.S.-domiciled funds reflect historical risk-adjusted performance as
of March 31, 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 Tax Exempt 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 1,682, 1,394, and 403 funds in
the municipal bond fund category for the three-, five-, and 10-year periods,
respectively.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Tax-Exempt Short-Term Fund with a
taxable equivalent invesment.
- --------------------------------------------------------------------------------
To match the USAA Short-Term Fund's closing 30-day SEC yield of 5.12% and:
Assuming a marginal federal tax rate of: 28% 31% 36% 39.6%
A fully taxable investment must pay: 6.14% 6.41% 6.91% 7.32%
- --------------------------------------------------------------------------------
This table is based on a hypothetical investment caluclation for illustrative
purposes only. It is not an indication of performance for any of the USAA family
of funds.
Portfolio Ratings Mix
March 31, 2000
A pie chart is shown here depicting the Portfolio Ratings Mix as of March 31,
2000 of the USAA Short-Term Fund to be:
AAA - 21%; AA - 22%; A - 27%; and BBB - 30%.
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 2.3%,
1.6%, and 1.5%, respectively, of the Fund's investments, and are included in
their appropriate category above.
Some income may be subject to federal, state, or local taxes, or the federal
alternative minimum tax.
See page 51 for a complete listing of the portfolio of investments.
Investment Review
USAA TAX EXEMPT MONEY MARKET FUND
OBJECTIVE: Interest income that is exempt from federal income tax and a further
objective of preserving capital and maintaining liquidity.
TYPES OF INVESTMENTS: Invests 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.
- --------------------------------------------------------------------------------
3/31/99 3/31/00
- --------------------------------------------------------------------------------
Net Assets $1,767.0 Million $1,863.2 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
Average Annual Total Returns and 7-Day Yield as of 3/31/00
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years 7-Day Yield
3.27% 3.40% 3.54% 3.49%
- --------------------------------------------------------------------------------
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.
----------------- ---------------
03/29/99 2.92% 2.45%
04/26/99 3.25% 2.74%
05/31/99 3.13% 2.66%
06/28/99 3.36% 2.91%
07/26/99 2.99% 2.55%
08/30/99 3.06% 2.65%
09/27/99 3.44% 3.01%
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%
Data represent the last Monday of each month.
Ending date 3/27/00.
The graph tracks the Fund's seven-day yield against iMoneyNet, Inc. (formerly
IBC Financial Data) SB (Stock Broker) and GP (General Purpose) (Tax-Free) Money
Funds, an average of money market fund yields.
Message from the Manager
[Photograph of Portfolio Manager, Tony Era, appears here.]
OVERVIEW
As we enter the second quarter of 2000, financial markets appear buoyant despite
the continued credit-tightening posture of the Federal Reserve (the Fed). So far
this year, the Fed has increased the federal funds rate twice, each time by
0.25%. This move in the federal funds rate to 6.0% followed three 0.25%
increases since June of last year. This rising-rate environment has resulted in
one-year Treasury bill yields increasing from 5.49% on September 30, 1999, to
6.41% on March 31, 2000. In the tax-exempt market, the yield on one-year
AAA-rated GO (Government Obligation) notes had risen by 0.5% to 4.22% on March
31, 2000, from 3.72% on September 30, 1999. In general, financial markets are
anticipating additional rate increases as the Fed moves to further raise
interest rates in an attempt to prevent the domestic economy from overheating.
STRATEGY
Since our semiannual report, we have maintained a sizeable percentage of the
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 an
environment of potentially higher interest rates, we intend to maintain 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 on a weekly basis. In the current environment these securities continue to
compare favorably to fixed-rate instruments.
THE PORTFOLIO
At the end of March, VRDNs represented over 70% of the Fund's assets. In
addition to purchasing VRDNs, the portfolio has invested moderately in
tax-exempt commercial paper and short-term tax-exempt notes. Although these
securities are bought at a fixed rate, they provide a cushion whenever yields on
VRDNs drop too low. You will also notice that the Fund's weighted-average
maturity was lengthened by five days, from 40 days on September 30, 1999, to 45
days on March 31, 2000.
PERFORMANCE
While past performance is no guarantee of future results, for the 12 months
ending March 31, 2000, your Fund ranked 6 out of 136 national money market funds
according to iMoneyNet, Inc., with a return of 3.27%. The average for the
category over the same period was 2.87%.
Cumulative Performance of $10,000
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment of the USAA Tax Exempt Money Market Fund.
The data is from 3/31/90 to 3/31/00. The data points from the graph are as
follows:
USAA Tax Exempt Money Market Fund
Year Amount
- -------- -------
03/31/90 $10,000
09/30/90 10,297
03/31/91 10,594
09/30/91 10,841
03/31/92 11,049
09/30/92 11,222
03/31/93 11,369
09/30/93 11,503
03/31/94 11,632
09/30/94 11,780
03/31/95 11,978
09/30/95 12,200
03/31/96 12,416
09/30/96 12,621
03/31/97 12,825
09/30/97 13,049
03/31/98 13,271
09/30/98 13,500
03/31/99 13,704
09/30/99 13,919
03/31/00 14,154
Data from 3/31/90 through 3/31/00.
Past performance is no guarantee of future resluts, 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.
iMoneyNet, Inc. (formerly IBC Financial Data) provides independent analysis of
trends in the financial services and investing industries with particular
concentration on money market funds.
See page 63 for a complete listing of the portfolio of investments.
Distributions to Shareholders
The Funds completed their fiscal year on March 31, 2000. Federal law (Internal
Revenue Code of 1986, as amended, and the regulations thereunder) requires each
Fund to notify its shareholders after the close of its taxable year of what
portion of its earnings was exempt from federal taxation and dividends which
represent long-term gains. The net investment income earned and distributed by
each of the Funds was 100% tax exempt for federal income tax purposes. There
were no long-term capital gain distributions for the year ended March 31, 2000.
Independent Auditors' Report
KPMG
The Shareholders and Board of Directors
USAA TAX EXEMPT FUND, INC.:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the USAA Long-Term, USAA Intermediate-Term,
USAA Short-Term, and USAA Tax Exempt Money Market Funds, series of the USAA Tax
Exempt Fund, Inc., as of March 31, 2000, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended, and the financial
highlights, presented in note 7 to the financial statements, for each of the
years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of March 31, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA Long-Term, USAA Intermediate-Term, USAA Short-Term, and USAA Tax Exempt
Money Market Funds as of March 31, 2000, the results of their operations for the
year then ended, the changes in their net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
San Antonio, Texas
May 5, 2000
CATEGORIES AND DEFINITIONS
PORTFOLIOS OF INVESTMENTS
March 31, 2000
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 (VRDNs) - 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 or
other corporation, or a collateral trust.
The USAA Tax Exempt Money Market Fund's investments consist of securities
meeting the requirements to qualify as "eligible securities" under the
Securities and Exchange Commission (SEC) rules applicable to money market funds.
With respect to quality, "eligible securities" generally consist of securities
rated in one of the two highest categories for short-term securities, or, if not
rated, of comparable quality, at the time of purchase. The Manager also attempts
to minimize credit risk in the USAA Tax Exempt Money Market Fund through
rigorous internal credit research.
(ETM) Escrowed to final maturity.
(PRE) Prerefunded to a date prior to maturity.
(LOC) Enhanced by a bank letter of credit.
(LIQ) Enhanced by a bank liquidity agreement.
(NBGA) Enhanced by a non-bank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1) MBIA, Inc.
(2) AMBAC Financial Group, Inc.
(3) Financial Guaranty Insurance Co.
(4) Financial Security Assurance Holdings Ltd.
(5) Asset Guaranty Insurance Co.
(6) ACA Financial Guaranty Corp.
(7) College Construction Loan Insurance Association.
(8) Capital Reinsurance Co.
(9) AXA Reinsurance Group.
PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
BAN Bond Anticipation Note IDRB Industrial Development
COP Certificate of Participation Revenue Bond
CP Commercial Paper ISD Independent School District
CSD Central School District MFH Multi-Family Housing
GO General Obligation PCRB Pollution Control Revenue Bond
IDA Industrial Development RAN Revenue Anticipation Note
Authority/Agency RB Revenue Bond
IDB Industrial Development Board RN Revenue Note
IDC Industrial Development Corp. SFH Single-Family Housing
TAN Tax Anticipation Note
<TABLE>
USAA LONG-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 2000
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (98.0%)
Alabama (1.8%)
$ 3,750 Baldwin County Health Care RB, Series 1996 6.75% 4/01/2021 $ 3,501
8,000 Courtland IDRB, Series 1994 5.90 2/01/2017 7,536
10,250 Prattville IDB RB, Series 1998 5.30 9/01/2028 8,527
15,000 Public School and College RB,
Series 1999A (INS)(2) 5.50 9/01/2029 14,337
Alaska (2.4%)
Housing Finance Corp. Collateralized RB,
3,780 1991 Second Series 6.90 6/01/2032 3,879
7,750 1994 First Series 6.70 12/01/2019 8,039
11,430 1995 First Series (NBGA) 6.55 12/01/2037 11,811
21,175 Valdez Marine Terminal RB, Series 1985A 7.00 12/01/2025 22,195
California (5.5%)
11,500 Los Angeles Regional Airport
Improvement Corp. RB, Series 1996 6.35 11/01/2025 11,010
74,000 San Joaquin Hills Transportation
Corridor Agency RB, Series 1993 (PRE) 6.75 1/01/2032 79,774
15,500 State GO, Series 2000 5.75 3/01/2030 15,543
1,000 Vallejo Sanitation and Flood Control COP,
Series 1993 (INS)(3) 5.00 7/01/2019 935
Colorado (1.7%)
9,500 Denver Health and Hospital Auth. RB,
Series 1998A 5.38 12/01/2028 7,508
13,700 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 12,154
11,480 Summit County Sports Facilities RB,
Series 1990 7.88 9/01/2008 13,026
Connecticut (2.5%)
Health and Educational Facilities Auth. RB,
3,490 Series C (PRE) 6.63 7/01/2026 3,839
510 Series C 6.63 7/01/2026 517
49,200 Mashantucket (Western) Pequot Tribe RB,
Series 1997B(d) 5.75 9/01/2027 44,812
District of Columbia (3.9%)
25,200 Convention Center Auth. RB,
Series 1998 (INS)(2) 4.75 10/01/2028 21,061
51,025 GO, Series 1999A 5.50 6/01/2029 46,839
8,000 Hospital RB, Series 1992B (PRE) 7.00 8/15/2015 8,562
Florida (0.2%)
3,820 Miami-Dade County Aviation RB,
Series 2000B (INS)(3) 5.75 10/01/2024 3,828
Georgia (0.5%)
10,000 Savannah Economic Development Auth. PCRB,
Series 1995 6.15 3/01/2017 10,136
Hawaii (0.4%)
7,330 State Highway RB, Series 1998 5.50 7/01/2018 7,267
Idaho (1.1%)
23,400 Nez Perce County PCRB, Series 1996 6.00 10/01/2024 21,208
Illinois (8.3%)
Chicago Gas Supply RB,
13,500 Series 1985B 7.50 3/01/2015 13,770
7,500 Series 1985C 7.50 3/01/2015 7,650
24,250 Series 1995A 6.10 6/01/2025 24,366
13,725 Chicago-O'Hare International Airport RB,
Series 1994 8.20 12/01/2024 15,027
880 Development Finance Auth. RB,
Series 1996B (INS)(4) 6.40 9/01/2031 905
Health Facilities Auth. RB,
17,775 Series 1992 7.00 1/01/2015 17,709
7,000 Series 1998 5.25 9/01/2024 5,677
19,600 Quincy Hospital RB, Series 1993 6.00 11/15/2018 18,519
Regional Transportation Auth. GO,
10,980 Series 1994C (INS)(3) 7.10 6/01/2025 12,078
23,980 Series 1999 (INS)(4) 5.75 6/01/2020 24,279
23,000 State GO, Series 1999 (INS)(3) 5.00 3/01/2024 20,458
Indiana (3.9%)
Development Finance Auth. Environmental RB,
10,945 Series 1996 6.15 7/15/2022 10,228
7,930 Series 1996 6.25 7/15/2030 7,548
100,675 Health Facility Financing Auth. RB,
Series 1992C(a) 7.89 7/01/2023 15,605
41,750 Indianapolis Airport Facility RB,
Series 1994 6.80 4/01/2017 42,682
Kansas (0.5%)
45,750 Sedgwick County Mortgage Loan RB,
Senior Series 1991A(a) 7.12 12/01/2022 8,755
Louisiana (1.9%)
25,730 Lake Charles Harbor and Terminal
District Port Facilities RB, Series 1995A 7.75 8/15/2022 27,662
11,015 St. Tammany Parish Hospital Service
District Number 1 RB, Series 1998 (INS)(6) 5.00 7/01/2022 8,990
Maine (1.5%)
29,750 State Turnpike Auth. RB,
Series 2000 (INS)(3),(e) 5.75 7/01/2028 29,615
Maryland (0.5%)
9,265 Community Development Administration SFH RB,
Series 1996A 5.95 7/01/2023 9,195
Massachusetts (2.5%)
14,875 Development Finance Agency RB, Series 1999P 5.45 5/15/2059 13,044
5,000 Health and Education Facilities Auth. RB,
Series 2000A (INS)(3),(e) 5.88 10/01/2029 5,021
31,000 Water Resources Auth. RB,
Series 2000A (INS)(3) 5.75 8/01/2030 30,843
Michigan (4.6%)
9,900 Battle Creek Downtown Development Auth.
Development Bonds, Series 1994 (PRE) 7.60 5/01/2016 11,013
13,005 Dickinson County Economic Development
Corp. PCRB, Series 1993 5.85 10/01/2018 12,143
Hospital Finance Auth. RB,
15,500 Series 1995A (PRE) 7.50 10/01/2027 17,411
42,000 Series 1999A 6.13 11/15/2026 42,159
6,500 Job Development Auth. RB, Series 1990A (NBGA) 8.00 12/01/2013 6,731
Minnesota (3.2%)
9,750 International Falls PCRB, Series 1998 5.50 4/01/2023 8,076
48,030 St. Paul Housing and Redevelopment
Auth. Hospital RB, Series 1993A 6.63 11/01/2017 43,096
14,775 Washington County Housing and
Redevelopment Auth. RB, Series 1998 5.50 11/15/2027 10,917
Mississippi (1.7%)
Lafayette County Hospital RB,
2,940 Series 1991A (PRE) 7.95 3/01/2016 3,088
15,175 Series 1991B (PRE) 7.95 3/01/2016 15,940
Union County Hospital RB,
4,450 Series 1991A (PRE) 7.95 3/01/2016 4,675
8,350 Series 1991B (PRE) 7.95 3/01/2016 8,771
Missouri (0.2%)
5,000 Health and Educational Facilities RB,
Series 1996A 6.38 2/01/2027 4,775
Montana (1.1%)
14,350 Board of Housing RB, Series 1997A-1 6.05 12/01/2037 14,139
8,910 Lewis and Clark County Environmental RB,
Series 1998 5.60 1/01/2027 6,712
Nebraska (0.6%)
14,500 Scotts Bluff County Hospital Auth. Number 1 RB,
Series 1998 5.25 11/15/2028 11,783
Nevada (1.8%)
19,000 Clark County Economic Development RB,
Series 1999 5.50 5/15/2029 17,418
15,650 Humboldt County PCRB, Series 1984 8.30 12/01/2014 17,423
New Hampshire (2.8%)
Higher Educational and Health Facilities RB,
8,580 Series 1993 (PRE) 6.38 7/01/2023 9,107
2,205 Series 1993 6.38 7/01/2023 2,208
17,500 Series 1998 (INS)(6) 5.30 10/01/2028 15,131
27,000 Single-Family Mortgage Finance Auth. RB,
Series 1993B 6.05 7/01/2025 26,997
New Jersey (0.5%)
15,000 Camden County Improvement Auth. RB,
Series 1997 6.00 2/15/2027 10,419
New Mexico (2.5%)
16,000 Chaves County Hospital RB (PRE) 7.25 12/01/2022 17,262
30,100 Lordsburg PCRB 6.50 4/01/2013 30,755
New York (11.7%)
21,500 Dormitory Auth. RB, Series 1996B 6.00 8/15/2016 22,407
Medical Care Facilities Finance Agency RB,
36,275 Series 1994A (PRE) 6.90 8/15/2034 40,014
13,900 Series 1995A (PRE) 6.85 2/15/2017 15,265
New York City GO,
50,000 Series 1995B (PRE) 7.25 8/15/2019 55,193
350 Series 1997I (PRE) 6.25 4/15/2017 379
5,540 Series 1997I 6.25 4/15/2017 5,766
12,985 Series 1997I (PRE) 6.25 4/15/2027 14,050
13,065 Series 1997I 6.25 4/15/2027 13,403
20,000 Series 1999H 5.00 3/15/2029 17,207
New York City Municipal Water Finance Auth. RB,
30,000 Series 1998D(a) 5.08 6/15/2020 9,006
11,000 Series 1999A 5.75 6/15/2030 10,772
10,000 New York City Transitional Finance Auth. RB,
Series 2000B 5.75 11/15/2020 10,030
14,625 Port Auth. of New York and New Jersey RB,
Eighty-Fifth Series 5.38 3/01/2028 13,931
North Carolina (0.7%)
13,645 Housing Finance Agency RB, Series 1991R 6.95 9/01/2023 14,091
Ohio (0.3%)
7,325 Lorain County Health Care Facilities RB,
Series 1998A 5.25 2/01/2021 5,668
Oklahoma (2.4%)
46,600 Tulsa Municipal Airport Transportation RB,
Series 1995 6.25 6/01/2020 45,861
Pennsylvania (2.6%)
Montgomery County IDA RB,
7,500 Series 1996A 5.88 11/15/2022 6,792
10,000 Series 1996B 5.75 11/15/2017 9,184
Philadelphia Gas Works RB,
8,870 14th Series (PRE) 6.38 7/01/2026 9,396
18,600 14th Series 6.38 7/01/2026 18,721
31,755 Pittsburgh Water and Sewer Auth. RB,
Series 1998B (INS)(3),(a) 5.42 9/01/2029 5,422
Puerto Rico (4.8%)
8,025 Commonwealth Public Improvement GO,
Series 2000 (INS)(1),(e) 5.75 7/01/2026 8,070
103,000 Highway and Transportation Auth. RB,
Series 1998A 4.75 7/01/2038 84,754
Rhode Island (1.3%)
25,000 Housing and Mortgage Finance Corp. SFH RB,
Series 15-A 6.85 10/01/2024 25,678
Tennessee (0.3%)
7,000 Springfield Health and Educational
Facilities Board RB, Series 1998 5.38 8/01/2024 5,356
Texas (6.7%)
5,000 Austin Higher Education Auth. RB,
Series 1998 5.25 8/01/2023 4,249
19,500 Bell County Health Facilities
Development Corp. RB, Series 1989 (ETM) 6.50 7/01/2019 21,061
12,500 Harris County Health Facilities RB,
Series 1992 (PRE) 7.13 6/01/2015 13,271
19,300 Harris County IDC RB, Series 1992 6.95 2/01/2022 19,749
21,000 Port of Corpus Christi IDC PCRB, Series 1997A 5.45 4/01/2027 17,393
19,135 Southwest Higher Education Auth. RB,
Series 1999A 5.00 10/01/2029 16,305
20,000 State Veteran's Land Board GO, Series 2000(c) 7.15 11/15/2032 20,045
5,020 Travis County Health Facilities
Development Corp. RB, Series 1999A (INS)(2) 5.88 11/15/2024 4,987
Tyler Health Facilities Development
Corp. Hospital RB,
4,700 Series 1993A 6.75 11/01/2025 3,889
10,300 Series 1993B 6.75 11/01/2025 8,522
Vermont (0.1%)
2,500 Educational and Health Buildings RB,
Series 1998 5.50 7/01/2021 2,197
Virginia (1.6%)
8,000 Henrico County IDA Hospital RB,
Series 1985C (PRE) 7.50 9/01/2011 8,224
21,950 Peninsula Ports Auth. RB, Series 1992 (NBGA) 7.38 6/01/2020 22,650
Washington (4.3%)
Housing Finance Commission RB,
3,500 Series 1996A (PRE) 6.85 7/01/2021 3,862
5,000 Series 1999 (INS)(5) 6.00 7/01/2029 4,892
73,500 Seattle Metropolitan Sewer RB,
Series V(f) 6.20 1/01/2032 74,433
West Virginia (1.2%)
10,000 University RB, Series 1998A (INS)(1) 5.25 4/01/2028 9,299
12,500 Water Development Auth. RB,
Series 1991A (INS)(4) 7.00 11/01/2025 13,166
Wisconsin (0.4%)
8,000 University of Wisconsin Hospitals and
Clinics Auth. RB, Series 2000 (INS)(4) 6.20 4/01/2029 8,202
Wyoming (1.5%)
29,865 Community Development Auth. SFH RB,
Series 1993A 6.10 6/01/2033 29,862
- -------------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,906,669) 1,898,293
- -------------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (1.6%)
Arkansas (0.1%)
400 Fayetteville Public Facilities Board RB,
Series 1997 (LOC) 4.00 9/01/2027 400
California (0.7%)
9,800 Irvine Improvement Bonds, Assessment
District 97-17 (LOC) 3.40 9/02/2023 9,800
5,545 Statewide Communities Development Auth. COP,
Series 1996 (LOC) 3.45 6/01/2026 5,545
Florida (0.5%)
Hillsborough County IDA PCRB,
3,200 Series 1990 4.00 9/01/2025 3,200
5,300 Series 1992 4.05 5/15/2018 5,300
2,000 St. Lucie County PCRB, Series 1995 4.05 3/01/2027 2,000
Iowa (0.1%)
370 Higher Education Loan Auth. RB,
Series 1997 (LOC) 4.10 4/01/2027 370
New York (0.1%)
2,990 St. Lawrence County IDA PCRB,
Series 1985 (LOC) 4.00 12/01/2007 2,990
Virginia (0.1%)
470 Waynesboro IDA RB, Series 1997 (LOC) 4.05 12/15/2028 470
- -------------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $30,075) 30,075
- -------------------------------------------------------------------------------------------------
Total investments (cost: $1,936,744) $1,928,368
=================================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Escrowed Bonds 19.2%
Hospitals 12.3
Special Assessment/Tax/Fee 8.9
Single-Family Housing 7.9
Water/Sewer Utilities - Municipal 7.5
General Obligations 6.6
Education 4.4
Natural Gas Utilities 3.8
Airlines 3.7
Paper & Forest Products 3.5
Nursing/Continuing Care Centers 3.0
Gaming Companies 2.3
Air Freight 2.2
Airport/Port 2.1
Metals/Mining 1.9
Toll Roads 1.5
Electric Utilities 1.4
Health Care - Miscellaneous 1.2
Oil - International Integrated 1.1
Electric/Gas Utilities - Municipal 1.0
Leasing 1.0
Other 3.1
----
Total 99.6%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.8% Missouri 0.2
Alaska 2.4 Montana 1.1
Arkansas 0.1 Nebraska 0.6
California 6.2 Nevada 1.8
Colorado 1.7 New Hampshire 2.8
Connecticut 2.5 New Jersey 0.5
District of Columbia 3.9 New Mexico 2.5
Florida 0.7 New York 11.8
Georgia 0.5 North Carolina 0.7
Hawaii 0.4 Ohio 0.3
Idaho 1.1 Oklahoma 2.4
Illinois 8.3 Pennsylvania 2.6
Indiana 3.9 Puerto Rico 4.8
Iowa 0.1 Rhode Island 1.3
Kansas 0.5 Tennessee 0.3
Louisiana 1.9 Texas 6.7
Maine 1.5 Vermont 0.1
Maryland 0.5 Virginia 1.7
Massachusetts 2.5 Washington 4.3
Michigan 4.6 West Virginia 1.2
Minnesota 3.2 Wisconsin 0.4
Mississippi 1.7 Wyoming 1.5
----
Total 99.6%
====
<TABLE>
USAA INTERMEDIATE-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 2000
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (92.2%)
Alabama (0.4%)
$ 2,000 Baldwin County Health Care Auth.
Hospital RB, Series 1996 6.75% 4/01/2015 $ 1,891
2,500 Montgomery BMC Special Care Facilities
Financing Auth. RB, Series 1998B (INS)(1) 4.88 11/15/2018 2,201
5,000 Prattville IDB PCRB, Series 1998 5.15 9/01/2013 4,497
Alaska (0.5%)
Housing Finance Corp. Mortgage RB,
5,870 Series 1996A (INS)(1) 6.00 12/01/2015 6,014
4,000 Series 1997A-1 5.50 12/01/2017 3,796
Arizona (0.3%)
2,000 Health Facilities Auth. Hospital RB,
Series 1998 (INS)(2) 4.75 10/01/2018 1,746
4,500 Maricopa County Hospital RB, Series 1997 6.13 4/01/2018 4,108
Arkansas (0.7%)
4,000 Little Rock Capital Improvement RB,
Series 1998A 5.70 1/01/2018 3,728
4,445 Mississippi County Hospital RB,
Series 1992B 6.85 11/01/2002 4,522
6,865 St. Francis County Hospital RB,
Series 1985 6.50 2/01/2005 6,905
435 Student Loan RB, Series 1991 7.15 6/01/2002 446
California (5.9%)
7,100 Central Valley Financing Auth. RB (PRE) 6.10 7/01/2013 7,566
10,500 Contra Costa Transportation Auth. RB,
Series 1991A (ETM)(INS)(3),(a) 6.30 3/01/2003 9,186
Foothill/Eastern Transportation
Corridor Agency RB,
10,000 Series 1995A (ETM)(a) 6.87 1/01/2010 8,458
15,000 Series 1995A (PRE)(a) 7.10 1/01/2011 12,879
9,085 Series 1995A (PRE)(a) 6.82 1/01/2013 7,826
Modesto Irrigation District COP,
3,320 Series 1999A (INS)(2),(a) 5.64 7/01/2017 1,252
3,325 Series 1999A (INS)(2),(a) 5.69 7/01/2018 1,172
19,900 Pleasanton Joint Powers Financing Auth.
RB, Series 1993A 6.00 9/02/2005 20,647
Sacramento Cogeneration Auth. RB,
1,800 Series 1995 (PRE) 6.38 7/01/2010 1,972
1,500 Series 1995 6.38 7/01/2010 1,572
19,300 Sacramento Power Auth. RB, Series 1995 5.88 7/01/2015 18,899
San Joaquin Hills Transportation
Corridor Agency Senior Lien RB,
3,525 Series 1993 (ETM)(a) 7.05 1/01/2005 3,459
8,305 Series 1993 (ETM)(a) 7.87 1/01/2006 8,297
5,000 Series 1993 (ETM)(a) 7.50 1/01/2007 5,070
16,795 Series 1993 (ETM)(a) 7.71 1/01/2008 17,296
Colorado (1.4%)
5,000 Adams County PCRB, Series 1999 (INS)(2) 5.10 1/01/2019 4,629
5,200 Arapahoe County IDA RB, Series 1991 7.00 2/01/2001 5,278
Denver Health and Hospital Auth. RB,
1,000 Series 1998A 5.20 12/01/2012 880
635 Series 1998A 5.25 12/01/2013 555
2,200 Series 1998A 5.38 12/01/2018 1,842
9,500 Health Facilities Auth. Hospital RB,
Series 1993 6.63 2/01/2013 8,428
2,500 Housing and Finance Auth. MFH RB,
Series 1997C-3 5.65 10/01/2015 2,472
4,770 Student Obligations RB, Series 1991A-2 6.90 9/01/2002 4,823
Connecticut (1.5%)
Mashantucket (Western) Pequot Tribe RB,
4,960 Series 1996A (PRE)(d) 6.40 9/01/2011 5,441
6,750 Series 1996A(d) 6.40 9/01/2011 7,016
1,000 Series 1997B(d) 5.60 9/01/2009 984
2,400 Series 1997B(d) 5.70 9/01/2012 2,321
16,500 Series 1997B(d) 5.75 9/01/2018 15,365
District of Columbia (4.1%)
30,000 Convention Center Auth. RB,
Series 1998 (INS)(2) 5.00 10/01/2018 27,410
14,105 GO, Series 1993A 5.80 6/01/2004 14,457
3,870 Series 1994A-3 5.50 6/01/2006 3,917
440 Series E (PRE) 5.75 6/01/2005 458
11,340 Series E 5.75 6/01/2005 11,621
450 Series E (PRE) 5.75 6/01/2006 469
11,550 Series E 5.75 6/01/2006 11,810
6,250 Hospital RB, Series 1992B (PRE) 6.75 8/15/2007 6,622
RB,
4,560 Series 1999 (INS)(6) 6.20 7/01/2019 4,555
6,000 Series 1999A (INS)(2) 5.00 1/01/2019 5,401
Florida (1.2%)
Dade County RB,
7,905 Series 1996B (INS)(2),(a) 6.00 10/01/2011 4,224
8,610 Series 1996B (INS)(2),(a) 6.10 10/01/2012 4,325
8,760 Series 1996B (PRE)(INS)(2),(a) 6.20 10/01/2013 4,330
5,000 Housing Finance Agency MFH RB,
Series 1984C 6.25 12/01/2006 5,088
7,000 North Miami Educational Facilities RB 6.10 4/01/2013 7,026
Georgia (0.6%)
8,760 Metropolitan Atlanta Rapid Transit RB,
Series M 6.25 7/01/2003 9,098
5,000 Savannah Hospital Auth./Candler Health
Systems RB, Series 1998B (INS)(4) 5.00 7/01/2018 4,519
Hawaii (0.3%)
2,000 Honolulu City and County GO,
Series 1999C (INS)(3) 5.00 7/01/2019 1,815
5,000 Housing Finance and Development Corp. RB,
Series 1997B 5.45 7/01/2017 4,727
Idaho (0.1%)
2,325 Health Facilities Auth. RB, Series 1998 5.25 5/01/2014 2,020
Illinois (5.3%)
2,290 Bedford Park Tax Increment RB,
Series 1993 (ETM) 7.38 12/01/2004 2,516
Chicago School Board GO,
15,535 Series 1999A (INS)(3),(a) 5.13 12/01/2016 5,885
10,775 Series 1999A (INS)(3),(a) 5.17 12/01/2017 3,818
21,235 Chicago-O'Hare International Airport RB,
Series 1994A (INS)(1) 6.20 1/01/2007 22,556
7,460 Cook County Forest Preserve District GO,
Series 1996 (INS)(1) 5.80 11/01/2016 7,578
10,110 Development Finance Auth. RB,
Series 1995 7.00 3/01/2007 10,467
Health Facilities Auth. RB,
10,000 Hospital Sisters Services, Inc. (INS)(1) 5.00 6/01/2018 8,948
6,700 Series 1992 (Mercy Hospital) 7.00 1/01/2007 6,873
8,000 Series 1993B (Univ. of Chicago
Hospital) (INS)(1) 5.75 8/15/2014 7,992
3,150 Series 1996 (Mercy Hospital) 6.00 1/01/2006 3,171
7,815 Series 1996 (Mercy Hospital) 6.38 1/01/2015 7,278
5,000 Series 1996A (Riverside Medical Center) 6.00 11/15/2015 4,849
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2013 891
1,000 Series 1998 (Centegra Health System) 5.25 9/01/2014 881
2,500 Series 1998 (Centegra Health System) 5.25 9/01/2018 2,116
8,050 Lake County Community Unit School
District GO, Series 1999B (INS)(4),(a) 5.13 12/01/2016 3,094
University of Illinois COP,
5,820 Series 1999 (INS)(1) 5.25 8/15/2015 5,637
4,000 Series 1999 (INS)(1) 5.25 8/15/2016 3,845
14,070 Will County Forest Preserve District GO,
Series 1999B (INS)(3),(a) 5.40 12/01/2017 5,063
Indiana (2.5%)
Health Facility Financing Auth. RB,
2,900 Series 1993 (Sisters St. Francis
Health Services) (PRE) 5.90 11/01/2009 2,984
12,600 Series 1994 (Sisters St. Francis
Health Services) (PRE) 6.20 7/01/2009 12,910
1,400 Series 1998 (Floyd Memorial Hospital
and Health Services) 5.25 2/15/2018 1,224
5,000 Series 1999A (Sisters St. Francis
Health Services) (INS)(1) 5.15 11/01/2019 4,569
6,000 Indianapolis Economic Development RB,
Series 1996 6.05 1/15/2010 5,831
Marion County Hospital Auth. RB,
5,600 Series 1992 (PRE) 6.10 10/01/2003 5,789
3,700 Series 1992 (PRE) 6.55 10/01/2008 3,834
Pike Township School Building Corp. RB,
4,600 Series 1992A 6.00 2/01/2006 4,733
4,700 Series 1992A 6.00 8/01/2006 4,835
1,150 St. Joseph County Economic Development RB,
Series 1997 5.45 2/15/2017 982
7,260 St. Joseph County Hospital Auth. RB,
Series 1999 5.75 2/15/2019 6,133
Iowa (1.3%)
5,550 Finance Auth. RB, Series 1998A (INS)(1) 5.25 7/01/2015 5,311
3,280 Higher Education Loan Auth. RB (INS)(7) 6.13 10/01/2016 3,393
7,950 Marion County Commercial Development RB,
Series 1999 (INS)(9) 5.95 1/01/2014 8,141
10,000 Student Loan Liquidity Corp. RB,
Series 1992A 6.45 3/01/2002 10,290
Louisiana (1.5%)
5,175 Offshore Terminal Auth. RB, Series 1998 5.20 10/01/2018 4,705
Orleans Levee District RB,
7,120 Series 1986 (INS)(4) 5.95 11/01/2014 7,388
7,210 Series 1986 (INS)(4) 5.95 11/01/2015 7,456
7,015 Series A (INS)(4) 5.95 11/01/2010 7,416
1,400 Public Facilities Auth. RB, Series 1997B 5.63 8/01/2017 1,354
3,955 St. Tammany Parish Hospital Service
District No. 1 Hospital RB,
Series 1998 (INS)(6) 5.00 7/01/2018 3,365
Maine (2.0%)
41,400 Bucksport Solid Waste Disposal RB,
Series 1985 6.25 5/01/2010 41,886
Maryland (1.1%)
Community Development Administration RB,
16,945 1997 First Series 5.60 4/01/2018 16,714
7,415 Series 1996A 5.88 7/01/2016 7,447
Massachusetts (1.1%)
3,640 Housing Finance Agency RB, Series 1992C 6.35 11/15/2003 3,803
5,000 Municipal Wholesale Electric Co. Power
Supply Systems RB, Series 1993 (INS)(2) 5.45 7/01/2018 4,723
15,000 State GO, Series 1991D 6.63 7/01/2003 15,649
Michigan (2.5%)
8,000 Detroit Building Auth. RB,
Series 1996A (LOC) 6.15 2/01/2011 8,201
4,000 Detroit Downtown Development Auth. Tax
Increment Bonds, Series 1998C (INS)(1) 5.00 7/01/2018 3,665
23,330 Dickinson County Economic Development
Corp. RB, Series 1989 6.55 3/01/2007 23,830
2,390 Higher Education Facilities Auth. RB,
Series 1998 5.35 6/01/2013 2,231
Hospital Finance Auth. RB,
5,000 Series 1995A (Genesys Health System)(PRE) 7.50 10/01/2007 5,693
325 Series 1996 (Central Michigan Hospital) 5.90 10/01/2004 327
100 Series 1996 (Central Michigan Hospital) 6.00 10/01/2005 101
150 Series 1996 (Central Michigan Hospital) 6.10 10/01/2006 152
160 Series 1996 (Central Michigan Hospital) 6.20 10/01/2007 162
2,600 Series 1996 (Central Michigan Hospital) 6.25 10/01/2016 2,479
400 Strategic Fund Ltd. Obligation RB,
Series 1998 5.30 7/01/2018 347
5,460 Strategic Fund RB, Series 1997A (LOC) 5.75 8/01/2019 5,320
Minnesota (1.5%)
4,205 Maplewood Health Care Facility RB,
Series 1996 5.95 11/15/2006 3,972
South St. Paul Hospital Facility RB,
10,235 Series 1994 6.50 11/01/2004 9,889
9,095 Series 1994 6.75 11/01/2009 8,628
St. Paul Hospital RB,
4,000 Series 1997A 5.70 11/01/2015 3,274
1,500 Series 1997B 5.85 11/01/2017 1,229
5,260 Washington County Hospital Facility RB,
Series 1998 5.38 11/15/2018 4,039
Mississippi (1.7%)
1,000 Jones County Hospital RB, Series 1997 5.50 12/01/2017 847
Lafayette County Hospital RB,
355 Series 1991A (PRE) 7.70 3/01/2003 363
1,835 Series 1991B (PRE) 7.70 3/01/2003 1,876
15,885 Series 1997 5.50 3/01/2009 15,967
1,500 Lincoln County Hospital RB,
Series 1998B (INS)(5) 5.50 4/01/2018 1,430
2,960 Prentiss County Hospital RB, Series 1985 6.50 2/01/2005 2,901
Union County Hospital RB,
540 Series 1991A (PRE) 7.70 3/01/2003 553
1,005 Series 1991B (PRE) 7.70 3/01/2003 1,030
11,170 Series 1997 5.50 3/01/2009 11,267
Missouri (0.1%)
2,000 Health and Educational Facilities Auth. RB,
Series 1997 5.75 2/01/2017 1,777
Montana (0.1%)
1,250 Health Facility Auth. Hospital RB,
Series 1997 5.50 6/01/2011 1,234
Nebraska (0.5%)
Cass County School District 001 GO,
2,800 Series 1998 (INS)(2) 5.00 12/15/2014 2,616
2,000 Series 1998 (INS)(2) 5.00 12/15/2019 1,814
Investment Finance Auth. Hospital RB,
770 Series 1997 (INS)(5) 5.30 11/15/2012 745
2,000 Series 1997 (INS)(5) 5.45 11/15/2017 1,901
5,000 Scotts Bluff County Hospital Auth. RB,
Series 1998 5.13 11/15/2019 4,168
Nevada (1.0%)
3,000 Clark County Flood Control GO (INS)(3) 4.50 11/01/2016 2,587
16,640 Clark County School District GO,
Series 1991B (INS)(3),(a) 6.24 3/01/2004 13,641
2,825 Housing Division SFH RB, Series 1995D-1 5.90 10/01/2014 2,803
2,000 Reno Hospital RB, Series 1998 (INS)(1) 5.00 5/15/2018 1,802
New Hampshire (0.5%)
Higher Educational and Health Facilities
Auth. RB,
60 Series 1985A (Student Loan) (INS)(3) 7.50 12/01/2000 60
1,025 Series 1990 (Granite State Management) 8.50 12/01/2001 1,039
3,000 Series 1997 (Kendal at Hanover) (LOC) 5.80 10/01/2012 2,990
5,055 Series 1997 (Kendal at Hanover) (LOC) 5.90 10/01/2018 4,894
1,990 Series 1998 (Franklin Pierce
College) (INS)(6) 5.25 10/01/2018 1,793
New Jersey (2.6%)
6,150 Camden County Improvement Auth. RB,
Series 1997 5.88 2/15/2015 4,599
Economic Development Auth. RB,
15,000 Series 1994A (INS)(1) 5.88 7/01/2011 15,577
2,000 Series 1997A 5.75 12/01/2016 1,752
31,260 Turnpike Auth. RB, Series 1991A 6.50 1/01/2003 32,484
New Mexico (0.3%)
5,840 Chaves County Hospital RB,
Series 1992 (PRE) 7.25 12/01/2010 6,276
New York (22.1%)
6,000 Dormitory Auth. RB, Bronx-Lebanon
Hospital Center, Series 1998E 5.20 2/15/2015 5,561
Dormitory Auth. RB, Brookdale Hospital,
5,000 Series 1998J 5.20 2/15/2015 4,634
4,000 Series 1998J 5.20 2/15/2016 3,672
4,760 Series 1998J 5.30 2/15/2017 4,389
10,300 Dormitory Auth. RB, Court Facilities
Lease, Series 1993A 5.63 5/15/2013 10,326
4,065 Dormitory Auth. RB, Lutheran Center at
Poughkeepsie, Series 1997 (LOC) 6.00 7/01/2014 4,168
Dormitory Auth. RB, Mental Health
Services Facilities Improvement,
2,055 Series 1997A 5.75 2/15/2010 2,100
2,000 Series 1997A 5.75 2/15/2011 2,038
2,000 Series 1997A 5.75 2/15/2012 2,030
2,460 Series 1997B 5.75 2/15/2010 2,514
4,050 Series 1997B 5.75 2/15/2012 4,110
4,675 Series 1997B 5.50 8/15/2017 4,495
Dormitory Auth. RB, New York City University,
5,000 1996 Series 2 6.00 7/01/2009 5,212
1,760 1996 Series 2 6.00 7/01/2010 1,831
5,500 Series 1993A 5.75 7/01/2013 5,636
13,730 Series 1997-1 5.25 7/01/2014 13,164
14,560 Dormitory Auth. RB, Northern General Hospital,
Series 1998G 5.30 2/15/2019 13,320
2,680 Dormitory Auth. RB, Nyack Hospital,
Series 1996 6.00 7/01/2006 2,655
Dormitory Auth. RB, State University
Educational Facilities,
2,725 Series 1994B 5.90 5/15/2006 2,828
2,500 Series 1994B (PRE) 6.00 5/15/2007 2,654
1,000 Series 1995A 5.88 5/15/2007 1,039
3,500 Series 1995A (PRE) 6.00 5/15/2009 3,737
2,250 Series 1995A (PRE) 6.00 5/15/2010 2,403
2,175 Series 1995A (PRE) 6.00 5/15/2011 2,323
14,120 Series 1996 5.75 5/15/2013 14,362
7,000 Series 1996 5.75 5/15/2016 7,024
7,230 Dormitory Auth. RB, Upstate Community
College, Series 1999A 5.00 7/01/2019 6,377
Environmental Facilities Corp. PCRB,
5,135 Series 1991E (PRE) 6.40 6/15/2003 5,353
1,415 Series 1991E 6.40 6/15/2003 1,472
Housing Finance Agency Service Contract RB,
2,275 Series 1995A 6.25 9/15/2010 2,392
4,420 Series 1996A 6.00 9/15/2016 4,500
75,745 Housing New York Corp. RB, Series 1993 5.00 11/01/2018 67,755
Medical Care Facilities Finance Agency RB,
5,000 Series 1994A (PRE) 6.40 2/15/2007 5,395
5,000 Series 1994A (PRE) 6.50 2/15/2008 5,416
10,000 Series 1994A 6.13 8/15/2013 10,261
7,445 Series 1995A (Adult Day Care) 6.00 11/15/2010 7,758
2,675 Series 1995A (Brookdale Hospital) (ETM) 6.70 2/15/2005 2,878
2,750 Series 1995A (Brookdale Hospital) (PRE) 6.70 8/15/2005 3,002
2,860 Series 1995A (Brookdale Hospital) (PRE) 6.75 2/15/2006 3,129
2,940 Series 1995A (Brookdale Hospital) (PRE) 6.75 8/15/2006 3,216
3,045 Series 1995A (Brookdale Hospital) (PRE) 6.80 2/15/2007 3,337
3,130 Series 1995A (Brookdale Hospital) (PRE) 6.80 8/15/2007 3,431
5,700 Series 1995A (Brookdale Hospital) (PRE) 6.80 8/15/2012 6,248
22,230 Metropolitan Transportation Auth.
Service Contract RB, Series P 5.75 7/01/2015 22,312
Mortgage Agency RB,
25,000 Series 83 5.45 4/01/2018 24,259
505 Series EE-1 7.75 10/01/2000 508
3,235 New York City Capital Improvement Bonds
34th St. Partnership, Series 1993 5.50 1/01/2014 3,202
New York City GO,
11,450 Series 1992H (PRE) 6.88 2/01/2004 12,053
1,330 Series 1992H 6.88 2/01/2004 1,390
16,655 Series 1993B (PRE) 6.75 10/01/2004 17,678
345 Series 1993B 6.75 10/01/2004 364
1,700 Series 1993C (PRE) 6.50 8/01/2004 1,790
7,300 Series 1993C 6.50 8/01/2004 7,637
15,000 Series 1994A 6.25 8/01/2008 15,774
10,000 Series 1996G 5.75 2/01/2010 10,294
5,000 Series 1997I 6.00 4/15/2012 5,212
9,635 Series 1998J 5.00 8/01/2017 8,755
New York City Municipal Water Finance RB,
3,295 Series 1992A 6.70 6/15/2003 3,406
3,345 Series 1992A (PRE) 6.70 6/15/2003 3,467
Thruway Auth. RB,
7,500 Series 1995 (PRE) 6.00 4/01/2009 7,971
2,150 Series 1995 (PRE) 6.10 4/01/2010 2,294
8,840 Series 1999B (INS)(3) 5.00 4/01/2019 8,075
Urban Development Corp. RB,
20,955 Series 1993 5.75 1/01/2013 21,174
21,700 Series 1993 5.50 1/01/2015 21,258
North Carolina (0.3%)
6,000 Municipal Power Agency RB, Series 1992 6.00 1/01/2004 6,086
Ohio (0.8%)
6,750 Dayton Special Facilities RB, Series 1988C 6.05 10/01/2009 6,833
4,000 Franklin County Development RB, Series 1999 5.80 10/01/2014 4,087
2,650 Franklin County Health Care Facilities RB,
Series 1997 5.50 7/01/2017 2,203
4,000 IDA RB, Series 1992 5.75 12/01/2002 4,072
Oklahoma (0.5%)
Holdenville Industrial Auth. RB,
1,650 Series 1995 (PRE) 6.60 7/01/2010 1,801
3,250 Series 1995 (PRE) 6.70 7/01/2015 3,564
1,745 Tulsa County Home Finance Auth. RB,
Series 1990 (ETM)(INS)(2) 7.10 5/01/2002 1,811
4,040 Valley View Hospital Auth. RB, Series 1996 5.75 8/15/2006 3,918
Oregon (0.1%)
1,250 Clackamas County Hospital Facility Auth. RB,
Series 1997 6.10 11/01/2012 1,162
Pennsylvania (4.0%)
30,660 Finance Auth. RB, Series 1993 6.60 11/01/2009 32,524
5,500 Higher Educational Facility Auth. RB,
Series 1999A (INS)(4) 5.25 8/01/2014 5,278
3,565 Housing Finance Agency RB, Series 1992 5.90 7/01/2004 3,652
10,000 Montgomery County IDA RB, Series 1996B 5.63 11/15/2012 9,438
11,700 Philadelphia IDA RB, Series 1998A (LOC) 5.15 3/01/2019 10,877
10,550 Philadelphia Water and Wastewater RB,
Series 1993 (INS)(3) 5.65 6/15/2012 10,512
9,440 State GO, Second Series 1992(a) 6.11 7/01/2004 7,612
5,000 York County IDA RB, Series 1992 6.25 7/01/2002 5,137
Puerto Rico (3.8%)
Electric Power Auth. RB,
5,000 Series S 7.00 7/01/2006 5,509
4,420 Series X 5.80 7/01/2009 4,604
4,500 Series X 5.90 7/01/2010 4,704
4,000 Series X 6.00 7/01/2011 4,192
4,220 Series Z 5.50 7/01/2012 4,274
22,200 Housing Bank and Finance Agency RB 7.50 12/01/2006 24,428
2,330 Municipal Finance Agency RB, Series 1992A 5.80 7/01/2004 2,436
14,060 Public Building Auth. GO, Series K 6.50 7/01/2003 14,741
Public Improvement GO,
7,500 Series 1994 6.10 7/01/2006 7,910
7,825 Series 1994 6.20 7/01/2007 8,271
Rhode Island (1.3%)
Health and Educational Building Corp. RB,
3,385 Series 1996 (INS)(1) 5.50 5/15/2012 3,403
7,600 Series 1996 (INS)(1) 5.50 5/15/2016 7,444
4,345 Series 1999A (LOC) 5.88 11/15/2014 4,320
Housing and Mortgage Finance Corp. RB,
6,180 Series 15-B 6.30 10/01/2007 6,307
4,805 Series 1995A (INS)(2) 5.70 7/01/2007 4,919
1,775 Series 25A 5.60 10/01/2017 1,693
South Carolina (0.3%)
4,250 Georgetown County Environment
Improvement RB, Series 2000A 5.95 3/15/2014 4,298
3,000 Marion County Hospital District RB (INS)(7) 5.50 11/01/2015 2,968
South Dakota (0.3%)
5,400 Rapid City IDA RB, Series 1990 7.25 11/01/2000 5,477
Tennessee (1.0%)
24,540 Housing Development Agency RB,
Issue 97-3B(a) 5.73 7/01/2016 9,185
3,000 Knox County Health, Educational and
Housing Facilities Board RB,
Series 1996 (INS)(7) 5.50 4/15/2011 3,025
2,000 Memphis Shelby County Airport Auth.
Special Facilities RB, Series 1997 5.35 9/01/2012 1,876
Nashville and Davidson County Health
and Educational Facilities Board RB,
4,000 Series 1998 (INS)(5) 5.10 8/01/2016 3,639
1,000 Series 1998 (INS)(5) 5.10 8/01/2019 887
4,000 Springfield Health and Educational
Facilities Board Hospital RB, Series 1998 5.25 8/01/2018 3,149
Texas (8.8%)
5,410 Austin Higher Education Auth. RB,
Series 1998 5.13 8/01/2016 4,737
Bastrop ISD GO,
1,855 Series 1997 (NBGA)(a) 5.55 2/15/2014 856
3,030 Series 1997 (NBGA)(a) 5.55 2/15/2015 1,310
3,055 Series 1997 (NBGA)(a) 5.60 2/15/2016 1,237
3,155 Series 1997 (NBGA)(a) 5.60 2/15/2017 1,196
12,000 Bexar County Health Facilities Development
Corp. RB, Series 1993 (ETM)(INS)(4) 5.88 11/15/2010 12,495
32,925 Brazos River Auth. RB, Series 1999A 5.38 4/01/2019 28,513
4,365 Cass County IDC PCRB, Series 1997B 5.35 4/01/2012 4,224
11,415 Clint ISD Public Facility Corp. RB,
Series 1999(c) 7.00 5/01/2019 11,671
Fort Worth Higher Education Finance Corp. RB,
515 Series 1997A 5.50 10/01/2006 510
545 Series 1997A 5.50 10/01/2007 538
575 Series 1997A 5.63 10/01/2008 571
2,670 Series 1997A 6.00 10/01/2012 2,677
15,400 Gulf Coast Waste Disposal Auth. PCRB,
Series 1992 6.13 11/01/2004 15,791
6,200 Gulf Coast Waste Disposal Auth. RB,
Series 1994 5.70 5/01/2006 6,300
2,070 Harrison County Health Facilities
Development Corp. RB, Series 1998 (INS)(6) 5.50 1/01/2018 1,861
Houston ISD Public Facility Corp. RB,
3,635 Series 1998A (INS)(2),(a) 5.35 9/15/2015 1,504
2,635 Series 1998A (INS)(2),(a) 5.38 9/15/2016 1,020
3,885 Series 1998A (INS)(2),(a) 5.40 9/15/2017 1,408
4,955 Series 1998B (INS)(2),(a) 5.35 9/15/2015 2,051
6,955 Series 1998B (INS)(2),(a) 5.38 9/15/2016 2,693
4,825 Houston Water and Sewer Systems RB,
Series 1992B 6.00 12/01/2004 5,014
Laredo ISD Public Limited GO,
370 Series 1998A 5.06 2/01/2001 370
390 Series 1998A 5.06 2/01/2002 388
410 Series 1998A 5.06 2/01/2003 405
435 Series 1998A 5.06 2/01/2004 427
460 Series 1998A 5.06 2/01/2005 448
480 Series 1998A 5.06 2/01/2006 464
505 Series 1998A 5.06 2/01/2007 485
530 Series 1998A 5.06 2/01/2008 505
3,830 Lewisville RB, Series 1998 (INS)(6) 5.38 9/01/2015 3,600
11,700 Lower Colorado River Auth. RB,
Series 1992 (ETM)(a) 6.45 1/01/2003 10,212
4,260 Marlin ISD Public Facility Corp. RB,
Series 1998(c) 5.85 2/15/2018 4,004
8,565 Municipal Power Agency RB, Series 1987 5.50 9/01/2013 8,564
24,050 Port of Corpus Christi IDC PCRB,
Series 1997B 5.40 4/01/2018 20,529
11,790 Public Finance Auth. RB (INS)(1),(a) 6.06 2/01/2004 9,709
10,000 San Antonio Electric and Gas System RB,
Series 1991B (ETM)(INS)(3),(a) 6.38 2/01/2004 8,235
4,000 Trinity River IDA RB 7.25 2/01/2004 4,277
Tyler Health Facilities Development
Corp. Hospital RB,
5,275 Series 1993B 6.63 11/01/2011 4,755
1,000 Series 1997A 5.63 7/01/2013 879
Utah (2.4%)
430 Housing Finance Agency RB, Series 1985B 5.30 7/01/2007 430
Intermountain Power Agency RB,
8,105 Series 1987A (INS)(1) 5.00 7/01/2012 7,834
16,430 Series 1988B (INS)(1),(a) 6.48 7/01/2003 13,963
21,895 Series 1988B (INS)(1),(a) 6.18 7/01/2004 17,632
4,000 Series 1997B (INS)(1) 5.75 7/01/2019 4,018
7,000 Juab County PCRB, Series 1991(b) 6.00 8/01/2011 6,943
Vermont (0.1%)
3,000 Educational and Health Buildings
Financing Agency RB, Series 1998 5.50 7/01/2018 2,689
Virginia (0.9%)
5,000 Isle of Wight County IDA PCRB, Series 1994 5.80 5/01/2004 5,022
10,000 Public School Auth. RB, Series 1999A 5.13 8/01/2019 9,350
5,000 Richmond Convention Center Auth. RB,
Series 2000 6.13 6/15/2020 5,107
Washington (1.2%)
3,255 Health Care Facilities Auth. RB,
Series 1997A (INS)(1) 5.13 8/15/2017 3,015
6,185 Higher Education Facilities Auth. RB 5.20 10/01/2017 5,663
2,000 Housing Finance Commission RB,
Series 1999 (INS)(5) 5.88 7/01/2019 1,958
King County GO,
780 Series 1993A (PRE) 5.90 12/01/2007 808
4,720 Series 1993A 5.90 12/01/2007 4,856
5,000 King County Housing Auth. RB,
Series 1998A (INS)(5) 5.20 7/01/2018 4,529
State Health Care Facilities Auth. RB,
2,500 Series 1998 (INS)(5) 5.25 8/15/2017 2,298
2,500 Series 1998 (INS)(5) 5.30 8/15/2018 2,298
West Virginia (0.8%)
16,940 School Building Auth. RB, Series 1994 6.25 7/01/2004 17,612
Wisconsin (0.9%)
Health and Educational Facilities Auth. RB,
11,500 Series 1993 (Aurora Health Care) (INS)(1) 5.25 8/15/2012 11,248
4,130 Series 1995A (Walkesha Memorial
Hospital) (INS)(2) 5.25 8/15/2012 4,040
5,000 Series 1998A (Wausau Hospital) (INS)(2) 5.13 8/15/2020 4,465
- -------------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,953,466) 1,957,434
- -------------------------------------------------------------------------------------------------
PUT BONDS (5.1%)
Alabama (0.2%)
4,000 Housing Finance Auth. MFH RB,
Series 1992C (INS)(9) 5.90 8/01/2007 4,015
California (0.5%)
7,500 Statewide Communities Development Auth. RB,
Series 1998A(d) 5.25 5/15/2025 7,071
3,535 Woodland MFH RB, Series 1994A 6.05 12/01/2024 3,602
Florida (0.4%)
Housing Finance Agency MFH RB,
4,210 Series 1996R-1 (Windwood Oaks I) (INS)(9) 5.65 12/01/2026 4,273
4,500 Series 1996S-1 (Windwood Oaks II) (INS)(9) 5.65 12/01/2026 4,567
Illinois (0.7%)
14,295 Hoffman Estates MFH RB, Series 1996 5.75 6/01/2021 14,529
Kansas (0.3%)
6,590 Merriam MFH RB, Series 1991A (NBGA) 7.25 4/01/2021 6,663
Louisiana (0.2%)
4,360 Shreveport Home Mortgage Auth. RB,
Series 1995A (INS)(9) 6.40 9/01/2025 4,487
New Mexico (0.5%)
Bernalillo County MFH RB,
7,700 Series 1994A (Sun Village Apts.) (INS)(9) 6.50 10/01/2019 7,905
3,320 Series 1995 (Sunchase Apts.) (INS)(9) 5.80 11/01/2025 3,373
Ohio (0.3%)
5,500 Montgomery County IDA RB, Series 1992 (LOC) 6.50 2/01/2007 5,702
Pennsylvania (0.5%)
Philadelphia IDA RB,
6,500 Series 1997A 6.50 10/01/2027 6,236
4,000 Series 1997B 6.50 10/01/2027 3,837
Texas (0.1%)
2,500 Gregg County Housing Finance Corp. RB,
Series 1995A (INS)(9) 6.40 9/01/2025 2,587
Utah (0.8%)
Salt Lake County MFH RB,
10,240 Series 1995A-1 (INS)(5) 5.70 10/01/2025 10,384
6,500 Series 1995B-1 (INS)(5) 5.70 10/01/2025 6,592
Washington (0.6%)
Chelan County Public Utility District #1 RB,
5,650 Series E 5.70 7/01/2068 5,751
6,845 Series E 5.70 7/01/2068 6,959
- -------------------------------------------------------------------------------------------------
Total put bonds (cost: $107,129) 108,533
- -------------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (1.3%)
California (0.2%)
Irvine Improvement Bonds,
815 Assessment District 89-10 (LOC) 3.40 9/02/2015 815
3,500 Assessment District 94-13 (LOC) 3.40 9/02/2022 3,500
Iowa (0.2%)
4,200 Muscatine County PCRB 3.90 10/01/2007 4,200
Michigan (0.1%)
3,400 Jackson County Economic Development
Corp. RB, Series 1997 (LOC) 4.00 6/01/2027 3,400
Minnesota (0.1%)
400 Cohasset RB, Series 1997A (LOC) 4.00 6/01/2020 400
Texas (0.5%)
9,900 Port Arthur Navigation District IDC PCRB,
Series 1985 (LOC) 4.10 5/01/2003 9,900
Washington (0.1%)
3,100 Housing Finance RB, Series 1997 (LOC) 4.10 1/01/2027 3,100
Wisconsin (0.1%)
Health and Educational Facilities Auth. RB,
1,000 Series 1996B (LOC) 4.10 10/01/2026 1,000
700 Series 1997 (LOC) 4.05 11/01/2017 700
- -------------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $27,015) 27,015
- -------------------------------------------------------------------------------------------------
Total investments (cost: $2,087,610) $2,092,982
=================================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 13.7%
Escrowed Bonds 13.2
General Obligations 9.9
Multi-Family Housing 6.4
Electric/Gas Utilities - Municipal 5.6
Buildings 5.4
Appropriated Debt 5.0
Education 4.2
Paper & Forest Products 4.1
Single-Family Housing 4.0
Special Assessment/Tax/Fee 3.8
Nursing/Continuing Care Centers 3.0
Real Estate Tax-Free 2.4
Toll Roads 1.9
Health Care - Miscellaneous 1.7
Electric Utilities 1.6
Finance - Municipal 1.6
Airport/Port 1.3
Gaming Companies 1.2
Water/Sewer Utilities - Municipal 1.1
Oil & Gas - Refining/Manufacturing 1.0
Other 6.5
----
Total 98.6%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 0.6% Montana 0.1%
Alaska 0.5 Nebraska 0.5
Arizona 0.3 Nevada 1.0
Arkansas 0.7 New Hampshire 0.5
California 6.6 New Jersey 2.6
Colorado 1.4 New Mexico 0.8
Connecticut 1.5 New York 22.1
District of Columbia 4.1 North Carolina 0.3
Florida 1.6 Ohio 1.1
Georgia 0.6 Oklahoma 0.5
Hawaii 0.3 Oregon 0.1
Idaho 0.1 Pennsylvania 4.5
Illinois 6.0 Puerto Rico 3.8
Indiana 2.5 Rhode Island 1.3
Iowa 1.5 South Carolina 0.3
Kansas 0.3 South Dakota 0.3
Louisiana 1.7 Tennessee 1.0
Maine 2.0 Texas 9.4
Maryland 1.1 Utah 3.2
Massachusetts 1.1 Vermont 0.1
Michigan 2.6 Virginia 0.9
Minnesota 1.6 Washington 1.9
Mississippi 1.7 West Virginia 0.8
Missouri 0.1 Wisconsin 1.0
----
Total 98.6%
====
<TABLE>
USAA SHORT-TERM FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 2000
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (58.2%)
Alabama (0.1%)
$1,000 Prattville Industrial Development PCRB,
Series 1998 4.90% 9/01/2008 $ 936
Alaska (0.4%)
6,500 North Slope Borough GO, Series 1998A (INS)(1),(a) 4.60 6/30/2008 4,191
Arizona (1.3%)
Maricopa County Hospital RB,
2,665 Series 1997 5.00 4/01/2000 2,665
2,525 Series 1997 5.10 4/01/2001 2,517
2,260 Series 1997 5.25 4/01/2002 2,249
3,045 Series 1997 5.35 4/01/2003 3,019
2,180 Series 1997 5.35 4/01/2004 2,141
California (1.1%)
2,550 Central Valley Cogeneration RB, Series 1993 5.40 7/01/2000 2,554
Sacramento Cogeneration Auth. RB,
1,000 Series 1995 5.70 7/01/2000 1,003
1,000 Series 1995 5.80 7/01/2001 1,011
900 Series 1995 5.90 7/01/2002 916
900 Series 1995 6.00 7/01/2003 922
1,000 San Francisco Bay Area Transit
Facilities Auth. Notes, Series 1999 (INS)(6) 5.63 8/01/2006 1,031
3,500 San Joaquin Hills Transportation
Corridor Agency RB, Senior Lien (ETM)(a) 7.16 1/01/2001 3,401
Colorado (0.4%)
Denver Health and Hospital Auth. RB,
1,180 Series 1998A 5.13 12/01/2006 1,127
1,250 Series 1998A 5.25 12/01/2007 1,190
1,250 Series 1998A 5.25 12/01/2008 1,175
Connecticut (1.1%)
Mashantucket (Western) Pequot Tribe RB,
1,000 Series 1996A (ETM)(d) 6.25 9/01/2001 1,025
1,000 Series 1996A (d) 6.25 9/01/2001 1,020
1,250 Series 1996A (ETM)(d) 6.25 9/01/2002 1,295
1,250 Series 1996A (d) 6.25 9/01/2002 1,284
1,480 Series 1996A (ETM)(d) 6.25 9/01/2003 1,545
1,520 Series 1996A (d) 6.25 9/01/2003 1,572
1,235 Series 1996A (ETM)(d) 6.50 9/01/2006 1,343
1,265 Series 1996A (d) 6.50 9/01/2006 1,340
District of Columbia (0.5%)
Hospital RB,
1,450 Series 1996A (ETM) (INS)(1) 5.00 8/15/2002 1,457
1,530 Series 1996A (ETM) (INS)(1) 5.50 8/15/2003 1,559
1,610 Series 1996A (ETM) (INS)(1) 5.50 8/15/2004 1,644
Florida (0.2%)
1,470 Nassau County PCRB, Series 1992 5.60 6/01/2000 1,472
590 Orange County Health Facilities Auth. RB,
Series 1995 5.63 7/01/2001 591
Georgia (0.4%)
4,000 Camden County Development Auth. PCRB,
Series 1997 5.25 4/01/2002 4,016
Guam (1.7%)
GO,
5,000 Series 1995A 5.38 9/01/2000 5,013
10,000 Series 1995A 5.50 9/01/2001 10,011
1,725 Power Auth. RB, Series 1994A (ETM) 5.60 10/01/2000 1,739
Hawaii (0.5%)
4,720 Honolulu GO, Series 1999C (INS)(3) 5.00 7/01/2008 4,696
Idaho (0.4%)
Health Facilities Auth. RB,
810 Series 1998 4.65 5/01/2005 762
860 Series 1998 5.38 5/01/2006 839
950 Series 1998 5.38 5/01/2007 913
1,005 Series 1998 5.38 5/01/2008 956
Illinois (4.0%)
20,000 Chicago Board of Education GO,
Series 1999A (INS)(3),(a) 4.50 12/01/2009 11,837
16,265 Chicago Water RB, Series 1997 (INS)(3),(a) 5.00 11/01/2005 12,205
1,075 Health Facilities Auth. RB, Series 1996 5.60 1/01/2002 1,083
2,350 Hodgkins Tax Increment RB, Series 1995A 6.90 12/01/2001 2,375
11,551 Sangamon County Lease RB, #M99202(c) 5.05 12/15/2005 11,363
Indiana (3.3%)
6,745 Development Finance IDA RB, Series 1996 4.80 6/01/2000 6,751
Health Facility Financing Auth. RB,
17,300 Series 1993 (PRE) 5.40 11/01/2005 17,631
4,200 Series 1994 (PRE) 5.38 7/01/2001 4,294
3,000 Series 1999A (INS)(1) 5.00 11/01/2009 2,936
Louisiana (4.1%)
11,310 De Soto Parish PCRB, Series 1993A 5.05 12/01/2002 11,292
Jefferson Parish School Board
Sales and Use Tax RB,
3,170 Series 1998 (INS)(4),(a) 4.80 9/01/2007 2,160
2,090 Series 1998 (INS)(4),(a) 4.90 3/01/2008 1,377
2,600 Lake Charles Harbor and Terminal
District RB, Series 1990 5.50 5/01/2006 2,592
Offshore Terminal Auth. RB,
7,920 Series 1992B 6.00 9/01/2001 8,049
5,000 Series 1992B 6.20 9/01/2003 5,164
5,830 Series 1994B 5.85 9/01/2000 5,866
3,440 St. Charles Parish PCRB 7.63 6/01/2003 3,484
Maine (1.4%)
Jay PCRB,
5,500 Series 1994A 4.65 9/01/2002 5,426
8,305 Series 1994B 4.70 6/01/2002 8,217
Massachusetts (2.7%)
Health and Educational Facilities Auth. RB,
3,445 Series 1998B (INS)(6) 5.00 7/01/2006 3,322
3,645 Series 1998B (INS)(6) 5.25 7/01/2007 3,558
1,640 Series 1998B (INS)(6) 5.25 7/01/2008 1,585
17,000 New England Education Loan Marketing Corp. RB,
Series 1985A 5.80 3/01/2002 17,320
Michigan (2.0%)
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 277
285 Series 1996 5.80 10/01/2003 287
Hospital Finance Auth. RB, Genesys
Health System Medical Center,
3,500 Series 1995A (ETM) 6.80 10/01/2000 3,546
3,500 Series 1995A (ETM) 7.00 10/01/2001 3,625
2,500 Series 1998A (ETM) 5.50 10/01/2006 2,566
1,500 Series 1998A (ETM) 5.50 10/01/2007 1,541
1,000 Series 1998A (ETM) 5.50 10/01/2008 1,027
5,800 Monroe Economic Development Corp. PCRB,
Series 1997 5.00 2/01/2003 5,793
Minnesota (0.6%)
St. Paul Housing and Redevelopment
Auth. Hospital RB,
675 Series 1997A 5.00 11/01/2003 639
1,410 Series 1997A 5.10 11/01/2004 1,317
1,485 Series 1997A 5.20 11/01/2005 1,370
1,560 Series 1997A 5.30 11/01/2006 1,422
1,645 Series 1997A 5.35 11/01/2007 1,479
Mississippi (1.1%)
Jones County Hospital RB,
1,000 Series 1997 5.00 12/01/2005 956
1,050 Series 1997 5.00 12/01/2006 992
1,105 Series 1997 5.10 12/01/2007 1,037
1,155 Series 1997 5.20 12/01/2008 1,076
3,570 Lafayette County Hospital RB, Series 1997 5.00 3/01/2002 3,574
860 Lincoln County Hospital RB, Series 1998A (INS)(5) 5.00 4/01/2004 860
2,510 Union County Hospital RB, Series 1997 5.00 3/01/2002 2,514
Montana (0.4%)
4,351 State Lottery Commission Lease, #169(c) 5.12 4/29/2004 4,344
Nebraska (0.7%)
5,000 American Public Energy Agency RB,
Series 1999A (INS)(2) 5.25 6/01/2008 4,843
Investment Finance Auth. Hospital RB,
465 Series 1997 (INS)(5) 4.90 11/15/2005 457
440 Series 1997 (INS)(5) 5.00 11/15/2006 434
410 Series 1997 (INS)(5) 5.00 11/15/2007 401
505 Series 1997 (INS)(5) 5.05 11/15/2008 493
New York (14.5%)
Dormitory Auth. RB, City University System,
3,245 Series 1996-2 5.00 7/01/2000 3,251
1,285 Series 1996-2 5.10 7/01/2001 1,292
Dormitory Auth. RB, Community
Enhancement Facilities,
1,675 Series 1999B 4.00 4/01/2005 1,556
1,740 Series 1999B 4.00 4/01/2006 1,601
5,000 Dormitory Auth. RB, Good Samaritan
Hospital, Series 1998A (INS)(5) 5.50 7/01/2009 5,136
1,170 Dormitory Auth. RB, Nyack Hospital,
Series 1996 5.65 7/01/2001 1,173
Dormitory Auth. RB, State University
Educational Facilities,
2,190 Series 1994B 5.30 5/15/2000 2,193
6,450 Series 1995A 5.10 5/15/2000 6,458
6,350 Series 1995A 5.25 5/15/2001 6,405
7,500 Series 1995A 5.40 5/15/2002 7,592
1,000 Series 1996 4.90 5/15/2000 1,001
1,350 Series 1996 5.00 5/15/2001 1,358
1,000 Series 1996 5.10 5/15/2002 1,006
445 Dormitory Auth. Revenue Notes CP,
Series 1989A (LOC) 5.00 4/07/2000 445
1,250 Dormitory Department of Health RB,
Series 1996 4.75 7/01/2001 1,250
5,325 Medical Care Facilities Finance Agency RB,
Series 1994A (ETM) 5.80 2/15/2001 5,396
New York City GO,
5,000 Series 1995A 5.40 8/01/2000 5,020
1,450 Series 1995D (ETM) 6.50 2/01/2002 1,496
3,550 Series 1995D 6.50 2/01/2002 3,653
3,325 Series 1996K (ETM) 5.50 4/01/2001 3,368
4,900 Series 1998F 5.50 8/01/2006 5,003
6,420 Series 1998F 5.50 8/01/2007 6,558
5,815 Series 1999F 4.88 8/01/2010 5,555
5,000 Series 1999H 5.00 3/15/2008 4,924
10,000 New York City Transitional Finance Auth. RB,
Series 1999A 5.00 8/15/2008 9,942
4,010 State COP 4.90 2/01/2002 4,014
4,040 State COP 4.90 8/01/2002 4,044
2,035 State COP 5.00 2/01/2003 2,037
11,165 The City University of New York COP 5.75 8/15/2003 11,413
10,000 Thruway Auth. Highway and Bridge Trust
Fund Bonds, Series 1999B (INS)(3) 5.00 4/01/2008 9,951
7,880 Thruway Auth. RB, Series 1995 5.10 4/01/2001 7,935
2,015 Ulster County IDA RB, Series 1999 (LOC) 5.20 11/15/2009 1,927
Urban Development Corp. RB,
4,400 Series 1993 5.25 1/01/2003 4,434
1,715 Series 7 4.75 1/01/2002 1,713
Ohio (0.6%)
Franklin County Health Care Facilities RB,
1,000 Series 1997 4.70 7/01/2002 980
1,000 Series 1997 4.80 7/01/2003 970
500 Series 1997 5.00 7/01/2004 481
1,425 Series 1997 5.00 7/01/2005 1,353
1,000 Series 1997 5.10 7/01/2006 942
475 Series 1997 5.15 7/01/2007 442
600 Series 1997 5.25 7/01/2008 555
Oklahoma (1.8%)
Holdenville Industrial Auth. RB,
1,115 Series 1995 (ETM) 5.45 7/01/2000 1,118
1,380 Series 1995 (ETM) 6.15 7/01/2004 1,437
510 Series 1995 (ETM) 6.35 7/01/2006 542
15,000 Housing Development Auth. RB, Series 1997A 4.75 12/01/2002 14,845
Pennsylvania (2.7%)
4,435 East Hempfield Township IDA RB, Series 1996 5.00 8/01/2001 4,448
3,990 Hampden IDA RB, Series 1999 4.70 1/01/2007 3,759
17,290 Higher Education Assistance Agency
Student Loan RB, Series 1985A (INS)(3) 6.80 12/01/2000 17,570
Puerto Rico (1.7%)
Electric Power Auth. RB,
5,000 Series 1997AA 5.00 7/01/2003 5,030
5,000 Series 1997AA 5.00 7/01/2004 5,023
6,283 Municipal Revenue Collection Center COP(c) 6.85 10/17/2003 6,414
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 2,740
Texas (5.7%)
Abilene Higher Education Facilities Corp. RB,
345 Series 1995 (ETM) 5.40 10/01/2000 347
935 Series 1995 5.40 10/01/2000 940
170 Series 1995 (ETM) 5.50 10/01/2001 172
1,310 Series 1995 5.50 10/01/2001 1,325
130 Series 1995 (ETM) 5.60 10/01/2002 132
870 Series 1995 5.60 10/01/2002 883
3,235 Austin Higher Education Auth. RB,
Series 1998 4.80 8/01/2009 2,936
Bexar County Limited Tax GO,
1,800 Series 1999(a) 4.35 6/15/2006 1,304
3,355 Series 1999(a) 4.45 6/15/2007 2,300
6,000 Calhoun County Navigation IDA PCRB,
Series 1995 4.65 6/01/2001 6,009
Harrison County Health Facilities
Development Corp. RB,
1,010 Series 1998 (INS)(6) 4.80 1/01/2006 958
1,055 Series 1998 (INS)(6) 4.80 1/01/2007 987
1,110 Series 1998 (INS)(6) 4.90 1/01/2008 1,037
3,000 Houston ISD GO, Series 1999A(a) 4.55 2/15/2009 1,843
Houston ISD Public Facility Corp. Lease RB,
3,885 Series 1998A (INS)(2),(a) 4.85 9/15/2007 2,621
3,885 Series 1998A (INS)(2),(a) 4.90 9/15/2008 2,451
4,805 Series 1998B (INS)(2),(a) 4.85 9/15/2007 3,242
5,260 Series 1998B (INS)(2),(a) 4.90 9/15/2008 3,319
2,500 Lampasas County IDC RB, Series 1997 5.20 12/01/2001 2,515
3,495 Lewisville RB, Series 1998 (INS)(6) 5.00 9/01/2010 3,367
Northeast Hospital Auth. RB,
1,230 Series 1997 5.10 5/15/2000 1,229
1,285 Series 1997 5.25 5/15/2001 1,282
2,870 Series 1997 5.40 5/15/2003 2,842
Tyler Health Facilities Development Corp. RB,
2,700 Series 1997A 5.00 7/01/2003 2,630
3,120 Series 1997A 5.00 7/01/2004 2,999
1,625 Series 1997A 5.13 7/01/2005 1,552
1,100 Series 1997A 5.20 7/01/2006 1,042
1,125 Series 1997A 5.30 7/01/2007 1,058
1,855 Water Resources Finance Auth. RB,
Series 1999 (INS)(2) 4.50 8/15/2007 1,771
Virginia (0.2%)
Halifax County IDA Hospital RB,
1,100 Series 1998 4.50 9/01/2005 1,035
600 Series 1998 4.65 9/01/2007 554
500 Series 1998 4.75 9/01/2008 459
West Virginia (2.0%)
6,000 Kanawha County PCRB, Series 1997 5.25 4/01/2002 6,011
13,480 School Building Auth. Capital
Improvement RB, Series 1994 6.00 7/01/2000 13,534
Wisconsin (0.2%)
Health and Educational Facilities Auth. RB,
410 Series 1997 5.10 12/15/2005 392
430 Series 1997 5.20 12/15/2006 409
455 Series 1997 5.25 12/15/2007 429
475 Series 1997 5.30 12/15/2008 445
- -------------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $570,153) 563,393
- -------------------------------------------------------------------------------------------------
PUT BONDS (16.3%)
Alabama (1.6%)
15,000 Birmingham Special Care Facilities
Financing Auth. RB, Series 2000A-2 6.00 11/15/2028 15,120
California (3.3%)
3,340 Brentwood Capital Improvement RB,
Series 1996 (LOC) 5.25 6/01/2026 3,338
6,815 Fresno MFH RB, Series 1997A 4.88 1/01/2028 6,670
6,955 Redwood MFH RB, Series 1985B (NBGA) 5.20 10/01/2008 6,956
4,000 Santa Rosa Housing Auth. MFH RB,
Series 1995E (NBGA) 4.85 9/01/2007 3,996
5,990 South Gate Public Financing Auth. Tax
Allocation Bonds, Series 1997 (LOC) 4.75 9/01/2019 5,980
5,000 Statewide Community Development Auth. RB,
Series 1999F 5.30 6/01/2029 4,864
Illinois (1.1%)
11,115 Health Facilities Auth. RB, Series 1998A (LOC) 4.70 7/01/2031 10,757
Indiana (1.4%)
Jasper County Industrial PCRB,
10,000 Series 1988B 4.35 11/01/2016 10,000
3,700 Series 1988C 4.25 11/01/2016 3,700
Louisiana (5.0%)
20,000 Public Facilities Auth. RB, Series 1985B-1 (INS)(2) 5.00 12/01/2015 19,994
St. Charles Parish PCRB,
10,000 Series 1999B 4.85 6/01/2030 9,858
18,860 Series 1999C 5.35 10/01/2029 18,536
Michigan (1.0%)
Hospital Finance Auth. RB,
5,000 Series 1999A 5.30 11/15/2033 4,995
5,000 Series 1999A 5.20 11/15/2033 4,983
Texas (2.2%)
5,000 Brazos River Auth. RB, Series 1999B 5.20 12/01/2018 4,923
7,990 Lewisville RB, Series 1996 (PRE) (LOC) 5.00 5/01/2021 8,480
7,500 Matagorda County Navigation District 1 PCRB,
Series 1999A 4.90 5/01/2030 7,481
Wyoming (0.7%)
6,725 Community Development Auth. Housing RB,
Series 1997-3 5.25 6/01/2017 6,724
- -------------------------------------------------------------------------------------------------
Total put bonds (cost: $158,023) 157,355
- -------------------------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (23.0%)
Arkansas (0.5%)
5,175 Texarkana IDRB, Series 1991 4.65 3/01/2021 5,175
California (0.4%)
4,305 Gardena Financing Agency RB, Series 1991 (LOC) 3.85 9/01/2011 4,305
Florida (7.5%)
8,505 Broward County Housing Finance Auth. MFH RB,
Series 1990 (NBGA) 4.00 10/01/2007 8,505
9,500 Capital Trust Agency MFH RB,
Series 1999A (NBGA)(d) 4.00 12/01/2032 9,500
300 Dade County IDA PCRB, Series 1995 4.05 4/01/2020 300
1,600 Dade County Special Obligation Bonds,
Series 1990 (LOC) 3.95 10/01/2010 1,600
19,150 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(d) 4.00 1/01/2024 19,150
645 Hillsborough County IDA PCRB, Series 1992 4.05 5/15/2018 645
Jacksonville Hospital RB,
14,200 Series 1988 (LOC) 5.35 2/01/2018 14,200
11,200 Series 1989 (LOC) 5.35 2/01/2019 11,200
7,700 St. Lucie County PCRB, Series 1995 4.05 3/01/2027 7,700
Hawaii (1.4%)
13,600 Housing Finance and Development Corp. RB,
Series 1990B (LOC) 4.60 7/01/2025 13,600
Illinois (2.5%)
Development Finance Auth. MFH RB,
720 Series 1991 (LOC) 5.45 10/01/2005 720
2,735 Series 1991 (LOC) 5.45 10/01/2015 2,735
15,800 Series 1993 (LOC) 4.00 12/01/2013 15,800
695 West Frankfort Commercial Redevelopment RB 6.98 4/01/2007 695
4,000 Wood Dale IDRB, Series 1985 (LOC) 4.60 6/01/2000 4,000
Iowa (0.1%)
100 Finance Auth. RB, Series 1998 (LOC) 4.05 6/01/2028 100
Kansas (2.5%)
24,400 Burlington Environmental Improvement RB,
Series 1998A 4.00 9/01/2015 24,400
Louisiana (1.0%)
9,835 Housing Finance Agency MFH RB,
Series 1988B (LOC) 4.10 12/01/2025 9,835
Michigan (0.8%)
7,300 Job Development Auth. PCRB, Series 1985 (LOC) 5.20 10/01/2008 7,300
Minnesota (0.5%)
5,000 Minneapolis Convention Center Bonds,
Series 1999 (LIQ) 3.75 12/01/2028 5,000
Missouri (1.1%)
10,690 Health and Educational Facility RB,
Series 1996 (LOC) 3.95 12/01/2016 10,690
New Jersey (0.2%)
1,960 Newark Healthcare Facility RB, Series A (LOC) 5.10 6/01/2030 1,960
Oregon (0.2%)
2,300 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 4.05 5/15/2029 2,300
South Carolina (3.8%)
36,500 Jobs Economic Development Auth. RB,
Series 1999(d) 5.46 12/01/2001 36,500
Virginia (0.3%)
2,600 Norfolk Redevelopment and Housing Auth. RB,
Series 1999 (LOC) 4.00 9/01/2009 2,600
400 Waynesboro IDA RB, Series 1997 (LOC) 4.05 12/15/2028 400
Washington (0.2%)
1,800 Housing Finance Commission RB,
Series 1990 (LOC) 4.05 1/01/2021 1,800
- -------------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $222,715) 222,715
- -------------------------------------------------------------------------------------------------
Total investments (cost: $950,891) $943,463
=================================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 18.9%
Electric Utilities 9.0
Multi-Family Housing 8.8
General Obligations 8.0
Escrowed Bonds 7.4
Appropriated Debt 6.3
Education 5.0
Student Loans 3.6
Paper & Forest Products 2.8
Special Assessment/Tax/Fee 2.6
Electric/Gas Utilities - Municipal 2.2
Health Care - Miscellaneous 2.2
Nursing/Continuing Care Centers 2.2
Single-Family Housing 2.2
Finance - Municipal 2.1
Airport/Port 2.0
Water/Sewer Utilities - Municipal 1.8
Chemicals 1.4
Agricultural Products 1.3
Real Estate Tax-Free 1.2
Foods 1.1
Toll Roads 1.1
Other 4.3
----
Total 97.5%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.7% Minnesota 1.1%
Alaska 0.4 Mississippi 1.1
Arizona 1.3 Missouri 1.1
Arkansas 0.5 Montana 0.4
California 4.8 Nebraska 0.7
Colorado 0.4 New Jersey 0.2
Connecticut 1.1 New York 14.5
District of Columbia 0.5 Ohio 0.6
Florida 7.7 Oklahoma 1.8
Georgia 0.4 Oregon 0.2
Guam 1.7 Pennsylvania 2.7
Hawaii 1.9 Puerto Rico 1.7
Idaho 0.4 South Carolina 3.8
Illinois 7.6 Tennessee 0.4
Indiana 4.7 Texas 7.9
Iowa 0.1 Virginia 0.5
Kansas 2.5 Washington 0.2
Louisiana 10.1 West Virginia 2.0
Maine 1.4 Wisconsin 0.2
Massachusetts 2.7 Wyoming 0.7
Michigan 3.8 ----
Total 97.5%
====
<TABLE>
USAA TAX EXEMPT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
March 31, 2000
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
VARIABLE-RATE DEMAND NOTES (77.3%)
Alabama (1.8%)
$22,000 Birmingham Medical Clinic Board RB,
Series 1998 (LOC) 4.01% 10/01/2028 $ 22,000
9,500 Evergreen Board IDRB, Series 1985 (LOC) 4.00 12/01/2004 9,500
1,225 Montgomery Engelside Medical Clinic Board RB,
Series 1999A (LOC) 4.10 3/01/2008 1,225
Arizona (0.4%)
6,705 Pinal County IDA RB, Series 1995 (LOC) 4.00 12/01/2022 6,705
Arkansas (0.3%)
6,400 Hospital Equipment Finance Auth. RB (INS)(1) 3.91 11/01/2010 6,400
California (0.2%)
3,600 Irvine IDA RB, Series 1985 (LOC) 4.70 11/01/2005 3,600
Colorado (1.1%)
5,000 Centennial Downs Metropolitan District GO,
Series 1999 (LOC) 4.00 12/01/2028 5,000
9,000 Educational and Cultural Facilities RB,
Series 1998 (LOC) 4.05 8/01/2013 9,000
3,070 El Paso County Economic Development RB,
Series 1996 (LOC) 4.05 11/01/2021 3,070
Health Facilities Auth. RB,
1,740 Series 1995 (LOC) 4.05 9/01/2015 1,740
1,805 Series 1996A (LOC) 4.05 12/01/2016 1,805
Delaware (0.1%)
2,100 Economic Development Auth. RB, Series 1993C 3.95 10/01/2028 2,100
Florida (13.5%)
2,885 Broward County Housing Finance Auth. MFH RB,
Series 1990 (NBGA) 4.00 10/01/2007 2,885
Capital Trust Agency MFH RB,
73,300 Series 1999A (LOC)(d) 4.00 12/01/2032 73,300
15,000 Series 1999B (LOC)(d) 4.00 12/01/2032 15,000
24,665 Dade County Health Facilities Auth. RB,
Series 1990 (LOC) 4.55 9/01/2020 24,665
6,735 Dade County IDA PCRB, Series 1995 4.05 4/01/2020 6,735
2,275 Dade County IDA RB, Series 1996 (LOC) 4.05 10/01/2016 2,275
89,400 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(d) 4.00 1/01/2024 89,400
Housing Finance Agency MFH RB,
4,000 Series 1985D (LOC) 3.96 8/01/2006 4,000
10,470 Series 1985EE (LOC) 4.00 9/01/2008 10,470
8,885 Series 1990D (NBGA) 4.00 12/01/2009 8,885
4,700 Miami Dade County Educational
Facilities Auth. RB, Series 1998 (LOC) 4.05 10/01/2018 4,700
4,500 Miami Dade County IDA IDRB, Series 1999 (LOC) 3.95 6/01/2019 4,500
1,815 Sarasota Educational Facilities RB,
Series 1996 (LOC) 3.95 2/01/2021 1,815
3,400 St. Petersburg Health Facilities Auth. RB,
Series 1997 (LOC) 3.95 7/01/2027 3,400
Georgia (0.6%)
4,000 Columbus Hospital Auth. RB (LOC) 3.95 1/01/2018 4,000
5,000 Marietta Housing Auth. MFH RB,
Series 1988A (NBGA) 3.85 5/15/2007 5,000
2,935 Peachtree Development Auth. RB,
Series 1988 (LOC) 4.10 7/01/2010 2,935
Illinois (3.1%)
Development Finance Auth. RB,
2,400 Series 1998 (LOC) 4.05 8/01/2022 2,400
3,000 Series 1999-2000A (LOC) 4.00 6/30/2000 3,000
12,000 Du Page County RB, Series 1999 (LOC) 3.98 7/01/2024 12,000
10,000 Educational Facilities Auth. RB,
Series 1999A (LOC) 3.96 6/01/2029 10,000
1,530 Evanston IDRB, Series 1985 (LOC) 4.55 1/01/2015 1,530
10,000 Health Facilities Auth. RB,
Series 1995A (LOC) 3.90 2/15/2016 10,000
10,635 Hopedale IDRB, Series 1998 (LOC) 4.02 5/01/2009 10,635
1,000 Lake County Industrial Building RB,
Series 1985 (LOC) 4.25 10/01/2015 1,000
6,300 Sauget Village PCRB 3.90 5/01/2028 6,300
Indiana (1.1%)
700 Crawfordsville Economic Development RB,
Series 1999B (LOC) 4.02 1/01/2030 700
2,300 Development Finance Auth. Economic
Development RB, Series 1998 (LOC) 4.05 9/01/2018 2,300
8,190 Educational Facilities Auth. RB,
Series 2000A (LOC) 4.00 12/01/2029 8,190
1,265 Hobart Economic Development RB,
Series 1993 (LOC) 4.02 6/01/2003 1,265
2,165 Huntington Economic Development RB,
Series 1998 (LOC) 4.00 12/01/2025 2,165
1,300 Huntington Industrial Economic
Development RB, Series 1990 4.05 6/26/2014 1,300
4,605 Indianapolis Economic Development RB,
Series 1997 (LOC) 4.00 5/01/2018 4,605
Iowa (1.6%)
5,300 Chillicothe PCRB, Series 1991 4.05 11/01/2010 5,300
3,900 Finance Auth. MFH Refunding RB,
Series 1995A (LOC) 4.05 12/01/2017 3,900
100 Finance Auth. RB, Series 1998 (LOC) 4.05 6/01/2028 100
2,700 Higher Education Loan Auth. RB,
Series 1997 (LOC) 4.10 4/01/2027 2,700
4,990 Iowa Finance Auth. RB, Series 1999 (LOC) 4.00 2/01/2019 4,990
2,000 Iowa Higher Education Loan Auth. RB,
Series 1999B (LOC) 4.00 6/01/2019 2,000
10,000 Louisa County PCRB, Series 1986A 4.00 9/01/2016 10,000
Kansas (4.1%)
Burlington Environmental Improvement RB,
30,000 Series 1998A 4.00 9/01/2015 30,000
32,700 Series 1998B 4.00 9/01/2015 32,700
14,440 LaCygne Environmental Improvement RB,
Series 1994 4.00 3/01/2015 14,440
Kentucky (5.5%)
25,000 Breckinridge County Lease Program RB,
Series 1999 (LOC) 3.90 12/01/2029 25,000
6,700 Economic Development Finance Auth.
Hospital RB, Series 1998A (LOC) 4.10 8/01/2013 6,700
Economic Development Finance Auth. RB,
1,800 Series 1997 (LOC) 4.10 11/01/2017 1,800
25,790 Series 1998 (LIQ)(INS)8 4.05 8/01/2018 25,790
2,000 Frankfort Economic Development RB,
Series 1990 4.05 5/07/2014 2,000
9,490 Hancock County Industrial Building RB,
Series 1991 (LOC) 4.15 7/01/2011 9,490
3,090 Hardin County Water District Number 001
Water RB, Series 1998 (LOC) 4.05 9/01/2018 3,090
6,400 Jefferson County Industrial Building RB,
Series 1997 (LOC) 4.05 1/01/2011 6,400
9,100 Jefferson County MFH RB, Series 1996 (LOC) 4.00 12/01/2026 9,100
7,000 Jefferson County Retirement Home RB,
Series 1999 (LOC) 3.98 10/01/2019 7,000
6,000 Jeffersontown League of Cities Funding
Trust Lease Program RB, Series 2000 (LOC) 3.90 3/01/2030 6,000
Louisiana (1.9%)
Ascension Parish PCRB,
6,600 Series 1992 4.05 3/01/2011 6,600
1,550 Series 1990 4.05 9/01/2010 1,550
10,000 Delhi IDRB, Series 1996 3.95 12/01/2012 10,000
5,730 Public Facilities Auth. IDRB, Series 1996 (LOC) 4.10 12/01/2014 5,730
10,700 Public Facilities Auth. MFH RB,
Series 1991 (NBGA) 4.10 7/01/2007 10,700
1,100 Public Facilities Auth. PCRB, Series 1992 4.05 8/01/2017 1,100
Maryland (1.6%)
2,500 IDA Economic Development RB, Series 1994 4.25 12/01/2003 2,500
Montgomery County MFH RB,
7,900 1985 Issue B (NBGA) 3.90 8/01/2015 7,900
20,200 1993 Issue I (NBGA)(d) 3.90 11/01/2020 20,200
Massachusetts (1.6%)
5,750 Industrial Finance Agency RB,
Series 1997 (LOC) 3.88 5/01/2027 5,750
23,990 Revere Housing Auth. MFH RB,
Series 1991C (LOC) 4.10 9/01/2028 23,990
Michigan (1.7%)
9,200 Detroit Downtown Development Auth. RB (LOC) 3.95 12/01/2010 9,200
5,300 Grand Rapids IDRB (LOC) 4.00 1/01/2010 5,300
9,400 Hospital Finance Auth. Equipment Loan RN,
Series A #17 (LOC) 3.85 12/01/2023 9,400
1,100 Jackson County Economic Development Corp. RB,
Series 1997 (LOC) 4.00 6/01/2027 1,100
6,000 Southfield Economic Development Corp. RB,
Series 2000 (LOC) 3.95 2/01/2035 6,000
Minnesota (2.1%)
Minneapolis MFH RB,
8,510 Series 1995 (Laurel Curve) (NBGA)(d) 4.03 12/01/2030 8,510
7,535 Series 1995 (The Deforest) (NBGA)(d) 4.03 12/01/2030 7,535
7,530 Series 1995 (The McNair) (NBGA)(d) 4.03 12/01/2030 7,530
14,640 Series 1995 (Wilson Park Towers) (NBGA)(d) 4.03 12/01/2030 14,640
Mississippi (0.2%)
3,910 Hinds County Urban Renewal RN,
Series 1991 (LOC) 4.05 1/01/2007 3,910
Missouri (2.0%)
Clayton IDA RB,
5,225 Series 1994A (LOC) 4.25 12/01/2006 5,225
5,275 Series 1994B (LOC) 4.25 2/01/2007 5,275
7,700 Series 1995C (LOC) 4.25 5/01/2005 7,700
Health and Educational Facilities Auth. RB,
5,950 Series 1998 (LOC) 4.05 7/01/2023 5,950
4,600 Series 1999A (LOC) 4.15 8/15/2024 4,600
7,000 Series 2000 (LOC) 4.05 7/01/2025 7,000
1,000 West Plains IDA RB, Series 1986 (LOC) 4.35 11/01/2010 1,000
New Hampshire (1.2%)
7,710 Higher Educational and Health Facilities RB,
Series 1996 (LOC) 3.95 5/01/2026 7,710
3,025 Housing Finance Auth. MFH RB,
Series 1990 (NBGA) 4.00 7/01/2006 3,025
12,505 Manchester Housing Auth. MFH RB,
Series 1990A (LOC) 4.00 6/15/2015 12,505
New Jersey (0.1%)
2,000 Gloucester County PCRB, Series 1992 3.60 11/01/2022 2,000
New York (0.1%)
1,800 Hempstead Town IDA RB, Series 1999 (NBGA) 3.95 12/01/2010 1,800
North Carolina (0.2%)
3,300 Buncombe County Industrial Facilities
Financing Auth. IDRB, Series 1996 4.05 11/01/2006 3,300
Ohio (3.1%)
6,000 Clark County IDA RB (LOC) 4.14 12/01/2010 6,000
Clinton County Hospital RB,
31,385 Series 1999 (LOC) 4.00 7/01/2029 31,385
8,615 Series 2000 (LOC) 4.00 7/01/2029 8,615
6,500 Cuyahoga County IDRB, Series 2000 (LOC) 4.00 11/01/2019 6,500
4,800 Stark County IDRB, Series 1984 (LOC) 3.90 9/01/2001 4,800
Oklahoma (4.6%)
50,000 Development Finance Auth. RB,
Series 1999A (LOC) 4.00 6/01/2029 50,000
6,305 IDA RB, Series 1998 (LOC) 4.00 8/01/2018 6,305
24,200 Muskogee Industrial Trust PCRB, Series 1995A 3.95 1/01/2025 24,200
Muskogee Industrial Trust RB,
2,300 Series 1985 (LOC) 4.10 12/01/2015 2,300
2,760 Series 1985 (LOC) 4.10 12/01/2015 2,760
Oregon (3.5%)
11,200 Clackamas County Hospital Facility RB,
Series 1999C (LOC) 4.05 5/15/2029 11,200
Medford Hospital Facilities Auth. RB,
15,000 Series 1985 (LOC) 4.05 12/01/2015 15,000
16,050 Series 1991 (LOC) 4.05 5/01/2021 16,050
23,355 Series 1997 (LOC) 4.05 5/15/2027 23,355
Pennsylvania (2.8%)
Allegheny County Hospital Development Auth. RB,
13,100 Series 1988B (LOC) 4.10 3/01/2007 13,100
15,100 Series 1988C (LOC) 4.10 3/01/2013 15,100
12,980 Series 1988D (LOC) 4.10 3/01/2018 12,980
1,750 Allegheny County IDA RB, Series 1994 (LOC) 4.00 12/01/2008 1,750
6,000 Allentown Redevelopment Authority MFH RB,
Series 1990 (LOC) 4.05 7/01/2020 6,000
3,500 Clinton County IDA RB, Series 1985 (LOC) 3.95 9/01/2005 3,500
South Dakota (1.7%)
27,345 Health and Educational Facilities Auth. RB,
Series 2000 (LIQ)(INS)(1) 3.95 7/01/2025 27,345
4,500 Yankton IDRB, Series 1997 3.96 7/01/2006 4,500
Tennessee (9.2%)
25,000 Knox County Health Educational and Housing
Facilities Board RB, Series 1999A (LOC) 4.00 5/01/2029 25,000
1,100 Maryville IDB Education RB, Series 1997B (LOC) 4.11 8/01/2002 1,100
Nashville and Davidson County IDB MFH RB,
6,710 Series 1989 (LOC) 4.05 9/01/2019 6,710
9,680 Series 1989 (LOC) 4.05 10/01/2019 9,680
Nashville and Davidson County IDB RB,
14,205 Series 1995 (NBGA) 4.10 11/01/2012 14,205
1,750 Series 1999 (LOC) 4.11 7/01/2006 1,750
9,285 Smyrna Housing Association Inc. MFH RB,
Series 1989 (LOC) 4.05 8/01/2019 9,285
85,000 Sumner County Health Educational and
Housing Facilities RB, Series 1999A (NBGA)(d) 3.99 6/01/2029 85,000
5,500 Williamson County IDB RB, Series 2000 (LOC) 4.11 3/01/2020 5,500
13,000 Wilson County Sports Auth. RB,
Series 1999 (LOC) 3.96 9/01/2029 13,000
Texas (3.5%)
14,675 Alamo Heights Higher Education Facility RB,
Series 1999A (LOC) 4.05 4/01/2019 14,675
10,600 Amarillo Health Facilities Corp. RB,
Series 1985 (LOC) 4.10 5/31/2025 10,600
3,600 Angelina and Neches River Auth. IDC RB,
Series 1984C (LOC) 4.00 5/01/2014 3,600
4,000 Angelina and Neches River Auth. RB,
Series 1984D (LOC) 4.00 5/01/2014 4,000
5,915 Arlington IDC RB, Series 1985 (LOC) 4.20 10/01/2020 5,915
2,970 Bell County Health Facilities
Development Corp. RB, Series 1998 (LOC) 3.90 5/01/2023 2,970
2,000 Grayson County IDC RB, Series 1991 3.90 12/01/2002 2,000
1,900 Gulf Coast Waste PCRB, Series 1994 3.90 4/01/2013 1,900
1,800 Health Facilities Development Corp.
Hospital RB, Series 1985A (LOC) 4.10 5/31/2025 1,800
6,600 Health Facilities Development Corp. RB,
Series 1985B (LOC) 4.10 8/01/2025 6,600
4,005 Matagorda County Hospital District RB,
Series 1988 (LOC) 4.20 8/01/2018 4,005
930 North Central IDA RB, Series 1983 4.05 10/01/2013 930
4,150 Polly Ryon Hospital Auth. RB,
Series 1999 (LOC) 3.90 11/01/2024 4,150
1,475 Port Corpus Christi IDC RB, Series 1992 (LOC) 4.05 7/01/2002 1,475
Utah (0.8%)
7,100 Ogden City IDRB, Series 1986 (LOC) 4.20 9/01/2013 7,100
8,370 Provo Housing MFH RB, Series 1987A (LOC) 3.97 12/15/2010 8,370
Virginia (0.9%)
4,470 Alexandria Redevelopment and Housing Auth. RB,
Series 1996B (LOC) 4.05 10/01/2006 4,470
2,000 Peninsula Ports Auth. Coal Terminal RB,
Series 1987D (LOC) 4.00 7/01/2016 2,000
11,100 Waynesboro IDA RB, Series 1997 (LOC) 4.05 12/15/2028 11,100
Washington (0.1%)
1,700 Housing Finance Commission RB,
Series 1990 (LOC) 4.05 1/01/2021 1,700
Wisconsin (0.2%)
3,600 Health and Educational Facilities Auth. RB,
Series 1997 (LOC) 4.05 11/01/2017 3,600
Wyoming (0.8%)
Sweetwater County PCRB,
9,335 Series 1992A 4.05 4/01/2005 9,335
6,305 Series 1992B 4.05 12/01/2005 6,305
- -------------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $1,440,810) 1,440,810
- -------------------------------------------------------------------------------------------------
PUT BONDS (8.3%)
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 3.65 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 3.45 8/15/2030 14,000
Indiana (0.2%)
4,000 Jasper County Industrial PCRB, Series 1988C 4.50 11/01/2016 4,000
Kentucky (0.3%)
5,500 Lexington-Fayette Urban County RB,
Series 1987 (LOC) 3.30 4/01/2015 5,500
Montana (2.1%)
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
10,000 Series 1998 (NBGA) 4.35 3/01/2018 10,000
2,430 Series 1998 (NBGA) 4.35 3/01/2018 2,430
New Hampshire (0.4%)
7,205 IDA Resources Recovery RB, Series 1985 (INS)(1) 4.05 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
Utah (0.3%)
6,000 Intermountain Power Agency RB,
Series 1985E (LIQ)(INS)(2) 4.08 7/01/2014 6,000
- -------------------------------------------------------------------------------------------------
Total put bonds (cost: $154,310) 154,310
- -------------------------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (13.8%)
Colorado (1.0%)
18,575 Poudre School District TAN, Series 1999 3.90 6/30/2000 18,577
Florida (0.5%)
9,500 Lee County Hospital Board of Directors RB,
Series 1991A (PRE) 6.60 4/01/2020 9,895
Hawaii (0.2%)
4,480 State GO, Series 1997 CP (INS)(3) 5.00 10/01/2000 4,501
Iowa (0.4%)
Higher Education Loan Auth. RAN,
1,700 Series 1999A 3.50 5/24/2000 1,700
1,500 Series 1999B 3.50 5/24/2000 1,500
1,960 Series 1999D 3.50 5/24/2000 1,961
1,820 Series 1999H 3.50 5/24/2000 1,821
Louisiana (0.4%)
Public Facilities Auth. GO,
4,350 Series 1999B 4.25 10/24/2000 4,360
3,265 Series 1999C 4.25 10/24/2000 3,272
Massachusetts (1.8%)
3,500 Fall River GO BAN (LOC) 4.25 6/15/2000 3,505
Springfield,
2,890 GO BAN (LOC) 4.00 6/23/2000 2,893
10,000 GO BAN (LOC) 4.25 9/15/2000 10,022
5,000 GO BAN (LOC) 4.75 1/12/2001 5,019
12,441 Whitman Hanson Regional School District BAN,
Series 1999 4.25 10/13/2000 12,473
Michigan (0.3%)
4,500 Jackson Public Schools, Student Aid Notes,
Series 1999B (LOC) 4.00 7/06/2000 4,505
Minnesota (0.2%)
3,500 Clay County ISD Number 152 Anticipation
Certificates, Series 1999 (LOC) 4.00 9/29/2000 3,503
Missouri (0.2%)
Health and Educational Facilities Auth. RAN,
1,500 Series 1999C (LOC) 3.50 4/29/2000 1,501
700 Series 1999D 3.50 4/29/2000 700
1,200 Series 1999F (LOC) 3.50 4/29/2000 1,200
1,000 Series 1999G 3.50 4/29/2000 1,000
Nebraska (0.2%)
3,000 Public Power District RB, Series 1992 5.20 7/01/2000 3,008
New York (2.9%)
2,000 Andover Central School District BAN,
Series 2000 4.63 1/26/2001 2,007
3,750 Nassau County BAN, Series 1999C (LOC) 4.25 5/16/2000 3,753
10,000 Nassau County TAN, Series 1999B (LOC) 4.75 8/31/2000 10,030
3,835 New York City IDA Civic Facility RB,
Series 1990 (PRE) 9.63 6/01/2015 3,984
8,450 South Seneca CSD BAN, Series 2000 4.63 3/15/2001 8,479
25,000 Suffolk County TAN, Series 2000I (LOC) 4.50 8/10/2000 25,044
Texas (5.2%)
Dallas Area Rapid Transit CP Notes,
15,000 Series 1998B&C (LOC) 4.00 6/19/2000 15,000
10,000 Series 1998B&C (LOC) 4.10 8/22/2000 10,000
6,200 Series 1998C (LOC) 4.00 6/12/2000 6,200
Dallas Waterworks and Sewer System CP Notes,
2,000 Series 1999B 3.95 4/05/2000 2,000
3,500 Series 1999B 3.90 4/05/2000 3,500
4,432 Series 1999B 3.60 4/05/2000 4,432
13,731 Series 1999B 4.15 8/22/2000 13,731
6,550 Harris County Toll Road RB,
Series 1984 (a) 4.20 8/01/2000 6,462
Houston Water and Sewer System CP Notes,
5,000 Series A 3.95 5/15/2000 5,000
25,000 Series A 4.15 7/27/2000 25,000
5,125 Sabine River Auth. Water Supply Facilities RB,
Series 1991 6.50 12/01/2000 5,196
Wisconsin (0.5%)
10,000 Kenosha Unified School District TAN,
Series 1999B 4.25 11/01/2000 10,018
- -------------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $256,752) 256,752
- -------------------------------------------------------------------------------------------------
Total investments (cost: $1,851,872) $1,851,872
=================================================================================================
</TABLE>
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 21.5%
Multi-Family Housing 17.7
Electric Utilities 7.8
General Obligations 7.0
Education 6.7
Nursing/Continuing Care Centers 6.3
Health Care - Miscellaneous 5.7
Banks - Major Regional 4.2
Finance - Municipal 4.0
Water/Sewer Utilities - Municipal 3.3
Buildings 2.4
Sales Tax 2.2
Electrical Equipment 1.5
Community Service 1.4
Manufacturing - Diversified Industries 1.4
Other 6.3
----
Total 99.4%
====
PORTFOLIO SUMMARY BY STATE
--------------------------
Alabama 1.8% Missouri 2.2%
Arizona 0.9 Montana 2.1
Arkansas 0.3 Nebraska 0.2
California 0.2 New Hampshire 1.6
Colorado 2.1 New Jersey 0.1
Delaware 0.1 New York 3.0
Florida 14.2 North Carolina 0.2
Georgia 0.8 Ohio 3.1
Hawaii 0.2 Oklahoma 4.6
Illinois 7.1 Oregon 3.5
Indiana 1.3 Pennsylvania 2.9
Iowa 2.0 South Dakota 1.7
Kansas 4.1 Tennessee 9.2
Kentucky 5.8 Texas 8.7
Louisiana 2.3 Utah 1.1
Maryland 1.6 Virginia 0.9
Massachusetts 3.4 Washington 0.1
Michigan 2.0 Wisconsin 0.7
Minnesota 2.3 Wyoming 0.8
Mississippi 0.2 ----
Total 99.4%
====
NOTES TO PORTFOLIOS OF INVESTMENTS
March 31, 2000
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 2.0%, 9.9%,
5.4%, and .4% of the Funds' net assets, respectively.
(b) Adjustable rate security. Rate changes periodically and is subject to a
floor of 6% and a ceiling of 12%.
(c) Illiquid securities valued using methods determined by a pricing service
under general supervision of the Board of Directors. For the USAA Long-Term,
USAA Intermediate-Term, and USAA Short-Term Funds, these securities represented
1.0%, .7%, and 2.3% of the Funds' net assets, respectively.
For the USAA Long-Term Fund, the Texas State Veteran's Land Board GO is exempt
from registration under the Securities Act of 1933 and any resale of the
security must occur in an exempt transaction in the United States to a qualified
institutional buyer as defined by Rule 144A.
(d) These securities are exempt from registration under the Securities Act of
1933 and have been determined to be liquid by management. Any resale of these
securities may occur in an exempt transaction in the United States to a
qualified institutional buyer as defined by Rule 144A. These securities
represented 2.3%, 1.8%, 7.8%, and 17.2% of the USAA Long-Term, USAA
Intermediate-Term, USAA Short-Term, and USAA Tax Exempt Money Market Funds' net
assets, respectively.
(e) At March 31, 2000, the cost of securities purchased on a delayed-delivery
basis for the USAA Long-Term Fund was $42.3 million.
(f) At March 31, 2000, this security was segregated to cover delayed-delivery
purchases.
See accompanying notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
March 31, 2000
USAA USAA
Long-Term Intermediate-
Fund Term Fund
----------------------------
ASSETS
Investments in securities, at market value
(identified cost of $1,936,744 and
$2,087,610, respectively) $1,928,368 $2,092,982
Cash 516 676
Receivables:
Capital shares sold 1,484 585
Interest 32,204 33,093
Securities sold 21,581 -
----------------------------
Total assets 1,984,153 2,127,336
----------------------------
LIABILITIES
Securities purchased 42,310 -
Capital shares redeemed 2,348 685
USAA Investment Management Company 453 498
USAA Transfer Agency Company 66 85
Accounts payable and accrued expenses 77 98
Dividends on capital shares 3,007 2,660
----------------------------
Total liabilities 48,261 4,026
----------------------------
Net assets applicable to
capital shares outstanding $1,935,892 $2,123,310
============================
REPRESENTED BY:
Paid-in capital $1,983,492 $2,131,631
Accumulated net realized loss on investments (39,224) (13,693)
Net unrealized appreciation (depreciation)
of investments (8,376) 5,372
----------------------------
Net assets applicable to
capital shares outstanding $1,935,892 $2,123,310
============================
Capital shares outstanding 151,884 168,720
============================
Authorized shares of $.01 par value 290,000 302,000
============================
Net asset value, redemption price, and
offering price per share $ 12.75 $ 12.58
============================
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 $950,891 and
$1,851,872, respectively) $943,463 $1,851,872
Cash 400 5,608
Receivables:
Capital shares sold 604 3,016
Interest 11,018 8,882
Securities sold 14,000 8,000
--------------------------
Total assets 969,485 1,877,378
--------------------------
LIABILITIES
Securities purchased - 6,462
Capital shares redeemed 893 6,894
USAA Investment Management Company 229 439
USAA Transfer Agency Company 47 79
Accounts payable and accrued expenses 84 106
Dividends on capital shares 612 184
--------------------------
Total liabilities 1,865 14,164
--------------------------
Net assets applicable to
capital shares outstanding $967,620 $1,863,214
==========================
REPRESENTED BY:
Paid-in capital $978,334 $1,863,214
Accumulated net realized loss on investments (3,286) -
Net unrealized depreciation
of investments (7,428) -
--------------------------
Net assets applicable to
capital shares outstanding $967,620 $1,863,214
==========================
Capital shares outstanding 92,470 1,863,214
==========================
Authorized shares of $.01 par value 190,000 3,235,000
==========================
Net asset value, redemption price,
and offering price per share $ 10.46 $ 1.00
==========================
See accompanying notes to financial statements.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
Year ended March 31, 2000
USAA USAA
Long-Term Intermediate-
Fund Term Fund
----------------------------
Net investment income:
Interest income $ 124,753 $ 128,618
----------------------------
Expenses:
Management fees 5,700 6,254
Transfer agent's fees 1,054 1,166
Custodian's fees 267 316
Postage 130 140
Shareholder reporting fees 27 31
Directors' fees 3 3
Registration fees 83 128
Professional fees 61 64
Other 19 35
-----------------------------
Total expenses 7,344 8,137
-----------------------------
Net investment income 117,409 120,481
-----------------------------
Net realized and unrealized loss on investments:
Net realized loss (20,800) (13,503)
Change in net unrealized appreciation/
depreciation (162,950) (130,629)
-----------------------------
Net realized and unrealized loss (183,750) (144,132)
-----------------------------
Decrease in net assets resulting from operations $ (66,341) $ (23,651)
=============================
See accompanying notes to financial statements.
USAA USAA Tax-Exempt
Short-Term Money Market
Fund Fund
----------------------------
Net investment income:
Interest income $ 49,031 $65,332
----------------------------
Expenses:
Management fees 2,822 5,066
Transfer agent's fees 607 980
Custodian's fees 203 377
Postage 73 148
Shareholder reporting fees 26 66
Directors' fees 3 3
Registration fees 39 82
Professional fees 48 61
Other 21 27
----------------------------
Total expenses 3,842 6,810
----------------------------
Net investment income 45,189 58,522
----------------------------
Net realized and unrealized loss on investments:
Net realized loss (34) -
Change in net unrealized appreciation/
depreciation (25,091) -
----------------------------
Net realized and unrealized loss (25,125) -
----------------------------
Increase in net assets resulting from operations $ 20,064 $58,522
============================
See accompanying notes to financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Years ended March 31,
USAA Long-Term Fund
----------------------------
2000 1999
----------------------------
From operations:
Net investment income $ 117,409 $ 115,752
Net realized gain (loss) on investments (20,800) 14,433
Change in net unrealized appreciation/
depreciation of investments (162,950) (26,388)
----------------------------
Increase (decrease) in net assets
resulting from operations (66,341) 103,797
----------------------------
Distributions to shareholders from:
Net investment income (117,409) (115,752)
----------------------------
From capital share transactions:
Proceeds from shares sold 518,603 685,452
Dividend reinvestments 80,816 81,124
Cost of shares redeemed (648,019) (628,904)
----------------------------
Increase (decrease) in net assets from
capital share transactions (48,600) 137,672
----------------------------
Net increase (decrease) in net assets (232,350) 125,717
Net assets:
Beginning of period 2,168,242 2,042,525
----------------------------
End of period $1,935,892 $2,168,242
============================
Change in shares outstanding:
Shares sold 39,201 48,886
Shares issued for dividends reinvested 6,194 5,780
Shares redeemed (49,300) (44,798)
----------------------------
Increase (decrease) in shares outstanding (3,905) 9,868
============================
See accompanying notes to financial statements.
USAA Intermediate-Term Fund
----------------------------
2000 1999
----------------------------
From operations:
Net investment income $ 120,481 $ 113,940
Net realized gain (loss) on investments (13,503) 2,285
Change in net unrealized appreciation/
depreciation of investments (130,629) (1,210)
----------------------------
Increase (decrease) in net assets
resulting from operations (23,651) 115,015
----------------------------
Distributions to shareholders from:
Net investment income (120,481) (113,940)
----------------------------
From capital share transactions:
Proceeds from shares sold 355,559 482,044
Dividend reinvestments 89,641 87,970
Cost of shares redeemed (522,159) (266,193)
----------------------------
Increase (decrease) in net assets from
capital share transactions (76,959) 303,821
----------------------------
Net increase (decrease) in net assets (221,091) 304,896
Net assets:
Beginning of period 2,344,401 2,039,505
----------------------------
End of period $2,123,310 $2,344,401
============================
Change in shares outstanding:
Shares sold 27,691 35,847
Shares issued for dividends reinvested 7,022 6,541
Shares redeemed (41,017) (19,784)
----------------------------
Increase (decrease) in shares outstanding (6,304) 22,604
============================
See accompanying notes to financial statements.
USAA Short-Term Fund
----------------------------
2000 1999
----------------------------
From operations:
Net investment income $ 45,189 $ 45,225
Net realized gain (loss) on investments (34) 149
Change in net unrealized appreciation/
depreciation of investments (25,091) (1,264)
----------------------------
Increase in net assets resulting from
operations 20,064 44,110
----------------------------
Distributions to shareholders from:
Net investment income (45,189) (45,225)
----------------------------
From capital share transactions:
Proceeds from shares sold 352,575 386,034
Dividend reinvestments 37,734 38,210
Cost of shares redeemed (431,124) (360,374)
----------------------------
Increase (decrease) in net assets from
capital share transactions (40,815) 63,870
----------------------------
Net increase (decrease) in net assets (65,940) 62,755
Net assets:
Beginning of period 1,033,560 970,805
----------------------------
End of period $ 967,620 $1,033,560
============================
Change in shares outstanding:
Shares sold 33,406 35,919
Shares issued for dividends reinvested 3,581 3,554
Shares redeemed (40,889) (33,532)
----------------------------
Increase (decrease) in shares outstanding (3,902) 5,941
============================
See accompanying notes to financial statements.
USAA Tax Exempt
Money Market Fund
-----------------------------
2000 1999
-----------------------------
From operations:
Net investment income $ 58,522 $ 53,086
-----------------------------
Distributions to shareholders from:
Net investment income (58,522) (53,086)
-----------------------------
From capital share transactions:
Proceeds from shares sold 2,072,357 1,991,129
Dividend reinvestments 55,670 50,435
Cost of shares redeemed (2,031,849) (1,906,313)
-----------------------------
Increase in net assets from
capital share transactions 96,178 135,251
-----------------------------
Net increase in net assets 96,178 135,251
Net assets:
Beginning of period 1,767,036 1,631,785
-----------------------------
End of period $ 1,863,214 $ 1,767,036
=============================
Change in shares outstanding:
Shares sold 2,072,357 1,991,129
Shares issued for dividends reinvested 55,670 50,435
Shares redeemed (2,031,849) (1,906,313)
----------------------------
Increase in shares outstanding 96,178 135,251
============================
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA Tax Exempt Fund, Inc. (the Company), registered under the Investment
Company Act of 1940, as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of ten
separate funds. The information presented in this annual report pertains only to
the USAA Long-Term Fund, USAA Intermediate-Term Fund, USAA Short-Term Fund, and
USAA Tax Exempt Money Market Fund (the Funds). The Funds have a common objective
of providing investors with interest income that is exempt from federal income
tax. The Tax Exempt Money Market Fund has a further objective of preserving
capital and maintaining liquidity.
A. Security valuation - Investments in the USAA Long-Term, USAA
Intermediate-Term, and USAA Short-Term Funds are valued each business day by a
pricing service (the Service) approved by the Company's Board of Directors. The
Service uses the mean between quoted bid and asked prices or the last sale price
to price securities when, in the Service's 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 which 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.
As a result of certain permanent differences between book and tax accounting for
the USAA Short-Term Fund, reclassifications were made to the statement of assets
and liabilities to decrease paid-in-capital by $202,000 and to decrease
accumulated net realized loss on investments by $202,000.
C. Investments in securities - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Interest
income is recorded daily on the accrual basis. Premiums and original issue
discounts are amortized over the life of the respective securities. Market
discounts are not amortized. Any ordinary income related to market discounts is
recognized upon disposition of the securities.
D. Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the financial
statements.
(2) LINES OF CREDIT
The Funds participate with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities. Subject to availability under both agreements with CAPCO, each Fund
may borrow from CAPCO an amount up to 5% of its total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, each Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 15% of its total assets.
During the year ended March 31, 2000, the USAA Long-Term Fund had one borrowing
of $2.17 million for three days incurring $834 in interest expense. The USAA
Intermediate-Term, USAA Short-Term, and USAA Tax Exempt Money Market Funds had
no borrowings under any of these agreements during the period.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made in the succeeding fiscal year or as
otherwise required to avoid the payment of federal taxes. At March 31, 2000, the
USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds had capital
loss carryovers for federal income tax purposes of approximately $39.2, $13.7
and $3.3 million, 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 year
ended March 31, 2000, were as follows:
<TABLE>
<CAPTION>
USAA USAA USAA USAA Tax Exempt
Long-Term Fund Intermediate-Term Fund Short-Term Fund Money Market Fund
($000) ($000) ($000) ($000)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases $576,366 $228,061 $144,425 $4,450,458
Sales/maturities $637,955 $315,077 $253,715 $4,381,969
</TABLE>
For the USAA Long-Term, USAA Intermediate-Term, and USAA Short-Term Funds, cost
of purchases and proceeds from sales/maturities excludes short-term securities.
Gross unrealized appreciation and depreciation of investments at March 31, 2000,
was as follows:
USAA USAA USAA
Long-Term Intermediate-Term Short-Term
Fund Fund Fund
($000) ($000) ($000)
----------------------------------------------
Appreciation $ 70,169 $ 57,132 $ 3,245
Depreciation (78,545) (51,760) (10,673)
----------------------------------------------
Net $ (8,376) $ 5,372 $ (7,428)
==============================================
(5) TRANSACTIONS WITH MANAGER
A. Management fees - USAA Investment Management Company (the Manager) carries
out each Fund's investment policies and manages each Fund's portfolio.
Management fees are computed at .28% of the average annual net assets of each
Fund.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Funds based on an annual charge of $28.50 per shareholder account plus
out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Funds' shares on a continuing, best-efforts basis. The
Manager receives no commissions or fees for this service.
(6) TRANSACTIONS WITH AFFILIATES
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At March 31, 2000, the Association and its affiliates
owned 5.2 million shares (3.1%) 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 - USAA LONG-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 13.92 $ 14.00 $ 13.22 $ 13.17 $ 12.96
Net investment income .76 .76 .78 .79 .79
Net realized and
unrealized gain (loss) (1.17) (.08) .78 .05 .21
Distributions from net
investment income (.76) (.76) (.78) (.79) (.79)
-----------------------------------------------------------------------
Net asset value at
end of period $ 12.75 $ 13.92 $ 14.00 $ 13.22 $ 13.17
=======================================================================
Total return (%) * (2.95) 4.98 12.04 6.51 7.88
Net assets at end
of period (000) $1,935,892 $2,168,242 $2,042,525 $1,822,436 $1,804,116
Ratio of expenses to
average net assets (%) .36 .36 .36 .37 .37
Ratio of net investment
income to average
net assets (%) 5.77 5.44 5.65 5.95 5.99
Portfolio turnover (%) 29.04 29.56 35.20 40.78 53.25
</TABLE>
* Assumes reinvestment of all dividend income distributions during the period.
(7) FINANCIAL HIGHLIGHTS - USAA INTERMEDIATE-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 13.39 $ 13.38 $ 12.77 $ 12.77 $ 12.50
Net investment income .69 .70 .71 .72 .71
Net realized and
unrealized gain (loss) (.81) .01 .61 - .27
Distributions from net
investment income (.69) (.70) (.71) (.72) (.71)
-----------------------------------------------------------------------
Net asset value at
end of period $ 12.58 $ 13.39 $ 13.38 $ 12.77 $ 12.77
=======================================================================
Total return (%) * (.84) 5.42 10.59 5.80 7.97
Net assets at end
of period (000) $2,123,310 $2,344,401 $2,039,505 $1,725,684 $1,660,039
Ratio of expenses to
average net assets (%) .36 .36 .37 .37 .38
Ratio of net investment
income to average
net assets (%) 5.39 5.21 5.42 5.65 5.54
Portfolio turnover (%) 10.46 11.85 7.87 23.05 27.51
</TABLE>
* Assumes reinvestment of all dividend income distributions during the period.
(7) FINANCIAL HIGHLIGHTS - USAA SHORT-TERM FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 10.72 $ 10.74 $ 10.57 $ 10.57 $ 10.47
Net investment income .47 .49 .49 .49 .50
Net realized and
unrealized gain (loss) (.26) (.02) .17 - .10
Distributions from net
investment income (.47) (.49) (.49) (.49) (.50)
----------------------------------------------------------------------
Net asset value at
end of period $ 10.46 $ 10.72 $ 10.74 $ 10.57 $ 10.57
======================================================================
Total return (%) * 2.05 4.46 6.35 4.70 5.83
Net assets at end
of period (000) $967,620 $1,033,560 $970,805 $804,897 $774,020
Ratio of expenses to
average net assets (%) .38 .38 .39 .41 .42
Ratio of net investment
income to average
net assets (%) 4.48 4.55 4.57 4.60 4.73
Portfolio turnover (%) 18.88 7.34 7.91 27.67 35.99
</TABLE>
* Assumes reinvestment of all dividend income distributions during the period.
(7) FINANCIAL HIGHLIGHTS - USAA TAX EXEMPT MONEY MARKET FUND
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Year Ended March
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .03 .03 .03 .04
Distributions from net
investment income (.03) (.03) (.03) (.03) (.04)
-----------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=======================================================================
Total return (%) * 3.27 3.26 3.48 3.30 3.65
Net assets at end
of period (000) $1,863,214 $1,767,036 $1,631,785 $1,565,634 $1,529,176
Ratio of expenses to
average net assets (%) .38 .38 .38 .39 .40
Ratio of net investment
income to average
net assets (%) 3.24 3.21 3.42 3.25 3.59
</TABLE>
* 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
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 7:00 a.m. to 9:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Sundays 11:30 a.m. to 8:00 p.m.
For Additional Information on Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges, or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-hour service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
Mutual Fund USAA TouchLine(Registered Trademark)
(from 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
