TABLE OF CONTENTS
USAA Family of Funds 1
Message from the President 2
Investment Review:
Florida Tax-Free Income Fund 4
Florida Tax-Free Money Market Fund 9
Financial Information:
Statements of Assets and Liabilities 13
Portfolios of Investments in Securities:
Florida Tax-Free Income Fund 15
Florida Tax-Free Money Market Fund 18
Notes to Portfolios of Investments in Securities 20
Statements of Operations 21
Statements of Changes in Net Assets 22
Notes to Financial Statements 23
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Funds.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA Florida Funds,
managed by USAA Investment Management Company (IMCO). It may be used as sales
literature only when preceded or accompanied by a current prospectus which gives
further details about the funds.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(Copyright)1997, USAA. All rights reserved.
USAA Family of Funds Performance Summary
If you own only one or two USAA funds, you may not be aware of the performance
of our other funds. This summary is a snapshot of the performance of all 35
funds by investment objective as of September 30, 1997.
<TABLE>
<CAPTION>
Investment Inception Average Annual Total Return(%)*
Objective Date 1 year 5 years 10 years Since Inception
<S> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION
Aggressive Growth 10/19/81 12.97 22.01 12.58 -
Emerging Markets(1) 11/7/94 17.80 - - 9.18
First Start Growth 8/1/97 - - - -0.70
Gold(1) 8/15/84 -15.16 3.76 -6.42 -
Growth 4/5/71 34.93 18.50 12.42 -
Growth & Income 6/1/93 37.04 - - 19.40
International(1) 7/11/88 26.99 17.03 - 11.90
S&P 500 Index(4)+ 5/1/96 40.33 - - 32.89
Science & Technology(5) 8/1/97 - - - -2.00
World Growth(1) 10/1/92 28.41 15.94 - 15.94
ASSET ALLOCATION
Balanced Strategy(1) 9/1/95 26.23 - - 16.92
Cornerstone Strategy(1) 8/15/84 26.15 15.31 9.33 -
Growth and Tax Strategy(2)** 1/11/89 18.12 11.73 - 10.69
Growth Strategy(1) 9/1/95 26.54 - - 24.91
Income Strategy 9/1/95 18.42 - - 11.85
INCOME--TAXABLE
GNMA 2/1/91 10.02 6.70 - 7.81
Income 3/4/74 11.55 7.35 10.31 -
Income Stock 5/4/87 31.46 16.04 13.55 -
Short-Term Bond 6/1/93 8.07 - - 5.92
INCOME--TAX EXEMPT
Long-Term(2)** 3/19/82 10.02 6.87 8.85 -
Intermediate-Term(2)** 3/19/82 9.07 6.89 8.05 -
Short-Term(2)** 3/19/82 5.95 4.89 5.81 -
California Bond(2)** 8/1/89 9.85 7.43 - 7.81
Florida Tax-Free Income(2)** 10/1/93 10.18 - - 4.88
New York Bond(2)** 10/15/90 9.69 6.58 - 8.49
Texas Tax-Free Income(2)** 8/1/94 10.30 - - 9.56
Virginia Bond(2)** 10/15/90 8.92 7.12 - 8.26
MONEY MARKET
Money Market(3) 2/2/81 5.32 4.58 5.77 -
Tax Exempt Money Market(2),(3)** 2/6/84 3.39 3.06 4.13 -
Treasury Money Market Trust(3) 2/1/91 5.16 4.38 - 4.41
California Money Market(2),(3)** 8/1/89 3.30 2.98 - 3.61
Florida Tax-Free Money Market(2),(3)** 10/1/93 3.28 - - 3.06
New York Money Market(2),(3)** 10/15/90 3.22 2.85 - 3.09
Texas Tax-Free Money Market(2),(3)** 8/1/94 3.36 - - 3.33
Virginia Money Market(2),(3)** 10/15/90 3.26 2.90 - 3.21
</TABLE>
Non-deposit investment products offered by USAA Investment Management Company
are not insured by the FDIC, are not deposits or other obligations of, or
guaranteed by, USAA Federal Savings Bank, and are subject to investment risks,
including possible loss of the principal amount invested.
For more complete information about the mutual funds managed and distributed
by USAA IMCO, including charges and expenses, please call 1-800-531-8181 for
a prospectus. Read it carefully before you invest.
(1) Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(3) An investment in a money market fund is neither insured nor guaranteed by
the U.S. government and there is no assurance that any of the funds will be
able to maintain a stable net asset value of $1 per share.
(4) 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.
(5) This Fund may be more volatile than a fund that diversifies across many
industries.
* Total return equals income return plus share price change 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. 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.
** IRAs are not available for tax-exempt funds. The Growth and Tax Strategy Fund
is not available as an investment for your IRA because the majority of its
income is tax-exempt. California, Florida, New York, Texas, and Virginia
funds available to residents only.
+ Includes the $10 annual account maintenance fee through December 31, 1996.
MESSAGE FROM THE PRESIDENT
We recently received a bit of good news.
It is that all eight of the tax-exempt bond funds which we offer, the Long-Term,
Intermediate-Term and Short-Term Funds, plus our five state-specific bond funds,
have been awarded five-star ratings by Morningstar for the one-year period ended
September 30, 1997.* We are pleased with this achievement, mainly because of
what it confirms. To understand that, let's talk about what these ratings mean.
<TABLE>
EIGHT IS GREAT!
USAA's eight Tax-Exempt Bond Funds
all receive Morningstar's 5 star rating
in the municipal bond funds category for the year ended 9-30-97.*
<CAPTION>
FUND 1 YEAR 3 YEAR 5 YEAR 10 YEAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
USAA Tax Exempt Intermediate-Term Fund ***** 5* 5* 5*
USAA Tax Exempt Short-Term Fund ***** 5* 5* 5*
USAA Virginia Bond Fund** ***** 5* 5*
USAA Tax Exempt Long-Term Fund ***** 5* 4* 4*
USAA California Bond Fund** ***** 5* 4*
USAA New York Bond Fund** ***** 5* 3*
USAA Texas Tax-Free Income Fund** ***** 5*
USAA Florida Tax-Free Income Fund** ***** 4*
Total Funds rated: 1,760 1,374 668 326
</TABLE>
Past performance is no guarantee of future results.
* Morningstar proprietary ratings reflect historical risk-adjusted performance
through 9/30/97. The ratings are subject to change monthly. Morningstar ratings
are calculated from the Fund's 3-, 5-, and 10-year average annual total returns
(with fee adjustments) in excess of 90-day Treasury bill returns, and a risk
factor that reflects fund performance below 90-day Treasury bill returns. There
is a three-year minimum performance requirement before a fund is rated. The
one-year rating is calculated using the same methodology, but is not a component
of the overall rating. Overall rating is a weighted average of a fund's 3-, 5-,
and 10-year ratings, when applicable. Among 1,374 municipal bond funds, the USAA
Tax Exempt Intermediate-Term, Short-Term, Texas Tax-Free Income, and Virginia
Bond Funds received overall ratings of 5 stars. The USAA Tax Exempt Long-Term,
California Bond, New York Bond, and Florida Tax-Free Income Funds received
overall ratings of 4 stars. The top ten percent of the funds in a rating
category receive five stars and the next 22.5% receive four stars.
** These funds are only available for residents in these states.
(PHOTO OF THE PRESIDENT, MICHAEL J. C. ROTH, APPEARS HERE)
There are some standard words which you will see commonly published along with
any reference to Morningstar ratings. They are what we call a legend and they
include this; "Morningstar proprietary ratings reflect historical risk-adjusted
performance through [date]. The ratings are subject to change monthly..." At
many conferences I have attended, I have heard Morningstar executives emphasize
the point that their ratings are historically based and that they are not
predictive. In other words they tell you who did well, but they do not purport
to tell you who will do well.
Having said all that, we are pleased with these ratings because they are an
affirmation of one of our basic beliefs. We believe investors in tax-exempt bond
funds want, and will benefit most from tax-exempt income. That seems obvious
when you put it on paper, but it is something which is easily obscured. The
performance and the relative ratings of these funds are based upon their total
returns, which means both interest income and price change. We have chosen very
deliberately to manage our funds for consistently high yields, and we believe
that over time this will be beneficial to our investors both in terms of income
and total return. The Morningstar ratings indicate that in the recent past we
have been correct in these beliefs.
And besides, it's nice to have someone say you're "five-star."
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more information about mutual funds managed and distributed by USAA IMCO,
including charges and expenses, please call for a prospectus. Read it carefully
before investing.
INVESTMENT REVIEW
FLORIDA TAX-FREE INCOME FUND
OBJECTIVE: Provide Florida investors with a high level of current interest
income that is exempt from federal income taxes and shares that are exempt from
the Florida intangible personal property tax.
TYPES OF INVESTMENTS: Invests primarily in long-term investment grade Florida
tax-exempt securities.
3/31/97 9/30/97
------- --------
Net Assets................................ $95.5 MILLION $114.4 MILLION
Net Asset Value Per Share................. $9.33 $9.76
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/97
March 31, 1997 to September 30, 1997....................... 7.44%(+)
1 Year..................................................... 10.18%
Since inception on October 1, 1993......................... 4.88%
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
30-Day SEC Yield* on September 30, 1997.................... 5.04%
*Calculated as prescribed by the Securities and Exchange Commission.
Total return equals income return plus share price change 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. 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.
- -----------------------------------
CUMULATIVE PERFORMANCE COMPARISON
- -----------------------------------
A chart in the form of a line graph appears here, comparing the cumulative
performance of the USAA Florida Tax-Free Income Fund, the Lehman Brothers
Municipal Bond Index and the Lipper Florida Municipal Debt Funds Average.
The data points from the graph are as follows:
USAA Florida Tax Free Income Fund
Year Amount
- ----- ------
10/01/93 $10,000
12/31/93 $10,078
06/30/94 $ 9,290
12/31/94 $ 9,066
06/30/95 $10,016
12/31/95 $10,780
06/30/96 $10,666
12/31/96 $11,252
06/30/97 $11,709
09/30/97 $12,100
Lehman Brothers Municipal Bond Index
Year Amount
- ---- ------
10/01/93 $10,000
12/31/93 $10,140
06/30/94 $ 9,689
12/31/94 $ 9,616
06/30/95 $10,544
12/31/95 $11,295
06/30/96 $11,244
12/31/96 $11,795
06/30/97 $12,172
09/30/97 $12,539
Lipper Florida Municipal Debt Funds Average
Year Amount
- ---- ------
10/01/93 $10,000
12/31/93 $10,108
06/30/94 $ 9,511
12/31/94 $ 9,376
06/30/95 $10,276
12/31/95 $11,050
06/30/96 $10,882
12/31/96 $11,381
06/30/97 $11,672
09/30/97 $12,006
The broad-based Lehman Brothers Municipal Bond Index is an unmanaged index that
tracks total return performance for the long-term investment grade tax-exempt
bond market. The Lipper Florida Municipal Debt Funds Average is the average
performance level of all Florida Municipal Debt Funds, as computed by Lipper
Analytical Services, 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 IS HERE]
A Remarkable Economy
The Federal Reserve Board (the Fed) has made it quite evident that they will
tolerate a robust economy and low unemployment. After all, Fed Chairman Alan
Greenspan himself described the economy's performance as remarkable. Such
tolerance is unusual for the Fed since in the past prolonged economic growth and
tight labor markets raised serious concerns of inflation. However, Chairman
Greenspan has made it crystal clear that, if inflation should re-ignite, he
would act forcefully. Very likely the Fed would initiate one or more increases
in short-term interest rates triggering a negative reaction by the financial
markets. Obviously, new economic conditions and relationships have lowered the
inflationary threshold compared to the 1980s. But, a limit still exists. It will
be most interesting to see how long and how far this economy can go without
generating inflationary pressures.
Interest Rates
The yield on the Bond Buyer 40-Bond Index (BBI40), the industry standard for the
yield of long-term, investment-grade municipal bonds, fell nearly 1/2 percent
from March 31, 1997, until July. During August and September the BBI40 traded in
the range of 5.40% to 5.60%.
Portfolio Strategy
I focus primarily on generating maximum tax-exempt income that potentially
should produce the best after-tax total return over a 3-5 year investment
horizon. I do not buy exotic derivatives or bonds subject to the alternative
minimum tax (AMT), nor do I hedge the portfolio with futures contracts.
Absolute concentration on pretax total return implies that the manager believes
he or she can forecast interest rates. I don't believe anyone has ever
demonstrated that they can consistently predict the future of interest rates.
Although I pay close attention to total return, my primary concern remains on
generating tax-free income. There are other reasons. Typically income is the
largest component of total return, and over longer time horizons price
volatility tends to even out.
Current Market Conditions
With interest rates nearing four-year lows, finding a value in the marketplace
is more of a challenge. Currently, investment grade bonds, regardless of their
credit rating (AAA or BBB), are selling at yields within a very narrow range. I
will invest only in those bonds that I believe offer the best value for
shareholders.
Your Fund's Performance
Since long-term interest rates dropped during the period, your Fund's net asset
value (NAV) per share increased by $.43 to $9.76, or 4.6%, since March 31, 1997.
The Fund's performance compared favorably to its peer group. While past
performance is no guarantee of future results, the Fund's annualized dividend
yield(1) for the past six months was 5.26%, as compared to the Lipper Florida
Municipal Debt Funds average of 4.73% for the 67 funds in the category.(2) For
the same period, the Fund's total return(3) was 7.44%, compared to the Lipper
average of 6.18%.
------------------------------------
COMPARISON-12 MONTH DIVIDEND YIELD
------------------------------------
A chart in the form of a bar graph appears here illustrating the comparison of
the 12 Month Dividend Yield of the USAA Florida Tax-Free Income Fund and the
Lipper Florida Municipal Debt Funds Average from 9/30/95 to 9/30/97.
USAA Florida Tax-Free Lipper Florida Municipal
Income Fund Yield Debt Funds Average
9/30/95 5.54% 5.14%
9/30/96 5.54% 4.95%
9/30/97 5.28% 4.8%
The Lipper Florida Municipal Debt Funds Average is computed by Lipper Analytical
Services, an independent organization that monitors the performance of mutual
funds. 12-month dividend yield is computed by dividing income dividends paid
during the previous 12 months by the latest month-end net asset value adjusted
for capital gains distributions. The graph represents data from 9/30/95 to
9/30/97.
(1) Dividend yield is computed by dividing income dividends paid during the
previous 6 months by the latest month-end net asset value adjusted for
capital gains distributions and annualizing the result.
(2) Lipper Analytical Services is an independent organization that monitors
the performance of mutual funds.
(3) Total return equals income return plus share price change and assumes
reinvestment of dividends and capital gains distributions.
TO MATCH THE FLORIDA TAX-FREE INCOME FUND'S CLOSING 30-DAY SEC YIELD OF
5.04% AND:
ASSUMING A MARGINAL FEDERAL TAX RATE OF:
28% 31% 36% 39.6%
ASSUMING AN INVESTOR, FILING JOINTLY, WITH $300,000 IN INTANGIBLE ASSETS:
A FULLY TAXABLE INVESTMENT MUST PAY: 7.01% 7.31% 7.88% 8.35%
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.
The State of Florida
Florida's population has grown approximately twice as fast as the nation's over
the last decade. This robust growth does have its darker side since the state
faces budgetary pressures for social programs, education, and infrastructure.
State debt levels are increasing. However, the state sets realistic budget goals
and has reached target funding levels for its budget stabilization and working
capital reserve funds. A constitutional limitation on State tax revenues
implemented in fiscal 1996 may begin to restrict revenue growth. Revenues
pledged for debt service are exempt from the provision.
As for the economy, trade and service, as well as the traditional tourism and
agricultural sectors, set the pace in terms of personal income and employment
growth. Unemployment rates continue to improve while outperforming the national
rate. The state is rated AA by all three national rating agencies. Looking
forward, we will closely monitor financial and legislative issues that could
potentially impact your Fund's holdings.
---------------------
PORTFOLIO RATINGS/MIX
SEPTEMBER 30, 1997
---------------------
A pie chart is shown here depicting the Portfolio Mix as of September 30, 1997
of the USAA Florida Tax-Free Income Fund to be:
AA - 26%, A -31%, Cash Equivalents - 2%, AAA 18%, BBB 23%
This chart reflects the highest rating of either Moody's Investors Service,
Standard & Poor's Rating Group, or Fitch Investors Service. Unrated securities
that have been determined by USAA IMCO to be of equivalent investment quality
to category BBB account for 4.5% of the Fund's investments.
Note: Income may be subject to the federal alternative minimum tax.
See page 15 for a complete listing of the Portfolio of Investments in
Securities.
INVESTMENT REVIEW
FLORIDA TAX-FREE MONEY MARKET FUND
OBJECTIVE: Provide Florida investors with a high level of current interest
income that is exempt from federal income taxes and shares that are exempt from
the Florida intangible personal property tax, while preserving capital and
maintaining liquidity.
TYPES OF INVESTMENTS: High quality Florida 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 this Fund is neither insured nor guaranteed by the U.S.
government, and there can be no assurance that the Fund will maintain a
stable net asset value of $1.00 per share.
3/31/97 9/30/97
------- -------
Net Assets....................... $87.1 MILLION $77.1 MILLION
Net Asset Value Per Share........ $1.00 $1.00
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/97
March 31, 1997 to September 30, 1997................... 1.69%(+)
1 Year................................................. 3.28%
Since inception on October 1, 1993..................... 3.06%
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
7-Day Simple Yield on September 30, 1997................ 3.62%
Total return equals income return and assumes reinvestment of all dividends and
any 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.
------------------------
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 Florida Tax-Free Income Fund to the 7-Day Yield of
the IBC/Donoghue's State Specific SB & GP Money Funds from 9/96 to 9/97.
USAA Florida Tax-Free
Money Market Fund IBC/Donoghue
9/96 3.41% 3.09%
10/96 3.2% 2.94%
11/96 3.17% 2.91%
12/96 3.44% 3.23%
1/97 3.06% 2.83%
2/97 3.08% 2.77%
3/97 2.96% 2.7%
4/97 3.65% 3.48%
5/97 3.46% 3.24%
6/97 6.64% 3.27%
7/97 3.3% 3.02%
8/97 3.05% 2.79%
9/97 3.60%* 3.25%*
Data represent the last Monday of each month.
*Ending date 9/29/97
The graph tracks the Fund's 7-day simple yield against IBC/Donoghue's State
Specific SB (Stock Broker) & GP (General Purpose) (Tax-Free) Money Funds, an
average of all major money market fund yields.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER: JOHN C. BONNELL, CFA IS HERE]
The Market
All financial markets are driven by supply and demand relationships. This was
especially highlighted in the summer months by the tax-exempt money market.
During the six months ending September 30, 1997, the one-year Treasury bill
yield ranged from 6.07% to 5.42% and has generally trended down since the end of
April. The same cannot be said for one-year municipal notes. As measured by the
Bond Buyer One-Year Note Index,(1) yields ranged from 3.97% to 3.76% during the
same time span, and ended the period at 3.82%, only slightly lower than the
3.85% at the end of March. Why didn't short-term municipals follow the
short-term treasury market closer? The municipal market is influenced more by
the amount of securities available in the market, and the amount of cash to be
invested. Several possible factors that combined this year to influence both the
supply of and demand for short-term tax-exempt securities included the
following:
- The scarcity in supply of one-year notes.
- Borrowings made for periods longer than twelve months.
- An increase in the alternative to fixed rate notes.
With improved economic conditions issuers did not need to borrow as much as in
prior years. In fact, more issuers chose to borrow for fifteen months,
temporarily making their securities too long for money market investments.
Alternatively, underwriters created money market eligible variable rate products
out of long-term securities, thus increasing the supply of variable rate
securities.(2)
The equity and long-term bond markets both experienced tremendous price gains
over the last six months. This was accompanied by extreme volatility which many
expect caused large cash flows into and out of money market funds. In addition,
during the Federal government budget negotiations one proposal contained a
provision that would reduce the amount of tax-exempt interest corporations could
claim. This provision was not included in the final budget bill, but many feel
corporations reduced their municipal holdings (a large amount being short-term
securities) temporarily, only to buy into the market after the budget was
passed. These events combined to influence the demand for short-term municipal
securities. Situations such as these, which are unique to the municipal market,
explain why the municipal market does not always closely track the much larger
and highly efficient treasury market.
(1) Bond Buyer Index is the industry standard for yields of investment-grade
municipal bonds.
(2) Variable rate demand note: A note representing borrowings that is payable
on demand and that bears interest tied to money market rate.
Strategy
Your Fund strives to meet its objective in any prevailing market environment.
This is done in part by maintaining a mix of fixed rate securities and variable
rate securities in the fund. Fixed rate securities lock in rates and help
stabilize the Fund's yield during the periods when there is a large amount of
money in the market relative to supply. Variable rate securities provide
liquidity necessary to take advantage of higher yielding securities as
opportunities arise. Our longstanding commitment to credit research is a major
factor that ensures all purchases are the best relative value in the market at
any given time.
Performance
While past performance is no guarantee of future results, for the 12 months
ending September 30, 1997, your Fund ranked 13 out of 149 State Specific
Tax-Exempt Money Market Funds according to IBC Financial Data, Inc. with a yield
of 3.28%. The average for the category over the same time period was 3.00%.
Florida
Florida remains one of the nation's fastest growing states with annual
population growth rates approximately twice that of the nation over the last
decade. Economic strength comes from expansion of trade and services, as well as
the traditional tourism and agriculture sectors. As a result, Florida continues
to outperform other states in terms of income growth and employment. Florida's
unemployment rate improved to 4.6% in August 1997 as compared to the August 1996
rate of 5.0%. The corresponding national unemployment rates were 4.9% and 5.2%,
respectively. State economic reports project future growth to moderate, but
continue to outperform the U.S. as a whole.
Rapid population growth creates budgetary pressures for social programs and
infrastructure. Because of this, the level of Florida's debt has increased and
additional future borrowing is anticipated. Sales tax revenues remain critical
to the State's fiscal health and comprise approximately 70% of governmental
revenues. Financial results for fiscal 1996 were favorable, enabling the State
to achieve target funding levels for budget reserve funds. Initial results
indicate continued better than expected performance for fiscal 1997. A
constitutional limitation on State revenue collections which took effect in
fiscal 1996 may become restrictive. However, revenues pledged for debt service
on State bonds are excluded from the provision. The state continues to enjoy
excellent credit ratings from the three major rating agencies (Moody's Aa2,
Standard and Poor's AA+, and Fitch Investors Service AA). As always, we continue
to analyze each issue on a case-by-case basis and remain very selective when
investing Fund assets.
- -----------------------------------
Cumulative Performance of $10,000
- -----------------------------------
A chart in the form of a line graph appears here illustrating the cumulative
performance of a $10,000 Investment in the Florida Tax-Free Money Market Fund.
Data since inception on 10/01/93 through 09/30/97. The data points are as
follows:
10/01/93 $10,000
10/93 $10,014
12/93 $10,048
06/94 $10,153
12/94 $10,298
06/95 $10,481
12/95 $10,666
06/96 $10,836
12/96 $11,011
06/97 $11,189
09/30/97 $11,281
Past performance is no guarantee of future results and the value of your
investment will vary according to the fund's performance. Income may be subject
to federal, state or local taxes, or to the alternative minimum tax.
An investment in this Fund is neither insured nor guaranteed by the U.S.
government and there is no assurance that the Fund will maintain a stable net
asset value of $1 per share.
See page 18 for a complete listing of the Portfolio of Investments in
Securities.
<TABLE>
Statements of Assets and Liabilities
(In Thousands)
September 30, 1997
(Unaudited)
<CAPTION>
Florida Florida
Tax-Free Tax-Free Money
Income Fund Market Fund
----------- -----------
<S> <C> <C>
Assets
Investments in securities, at market value
(identified cost of $108,856 and $67,186, respectively) $ 114,250 $ 67,186
Cash 351 223
Receivables:
Capital shares sold 550 38
Interest 2,073 486
Securities sold - 9,306
---------- ---------
Total assets 117,224 77,239
---------- ---------
Liabilities
Securities purchased 2,358 -
Capital shares redeemed 199 100
USAA Investment Management Company 51 36
USAA Transfer Agency Company 5 5
Accounts payable and accrued expenses 26 19
Dividends on capital shares 181 14
---------- ---------
Total liabilities 2,820 174
---------- ---------
Net assets applicable to capital shares outstanding $ 114,404 $ 77,065
========== =========
Represented by:
Paid-in capital $ 110,408 $ 77,065
Accumulated net realized loss on investments (1,398) -
Net unrealized appreciation of investments 5,394 -
---------- ---------
Net assets applicable to capital shares outstanding $ 114,404 $ 77,065
========== =========
Capital shares outstanding, unlimited number of shares
authorized, $.001 par value 11,720 77,065
========== =========
Net asset value, redemption price, and offering price per share $ 9.76 $ 1.00
========== =========
See accompanying notes to financial statements.
</TABLE>
Categories & Definitions
Portfolios of Investments in Securities
September 30, 1997
(Unaudited)
Fixed-Rate Instruments -- consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the 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
to the next tender date.
Variable Rate Demand Notes (VRDN) -- provide the right, on any business day, to
sell the security at face value on either that day or in seven days. The
interest rate is adjusted at a stipulated daily, weekly, or monthly interval to
a rate that reflects current market conditions. In money market funds, the
effective maturity is the date on which the underlying principal amount may be
recovered or the next rate adjustment date consistent with regulatory
requirements. In bond funds, the effective maturity is the next put date. Most
VRDNs possess a credit enhancement.
Credit Enhancement (CRE) -- adds 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. Typically, the rating agencies
evaluate the security based upon the credit standing of the provider of the
credit enhancement, rather than the credit standing of the issuer.
Portfolio Description Abbreviations
CP Commercial Paper
CRE Credit Enhanced
IDA Industrial Development Authority/Agency
IDRB Industrial Development Revenue Bond
GO General Obligation
MFH Multi-Family Housing
PCRB Pollution Control Revenue Bond
RB Revenue Bond
TAN Tax Anticipation Note
<TABLE>
Florida Tax-Free Income Fund
Portfolio of Investments in Securities
(In Thousands)
September 30, 1997
(Unaudited)
<CAPTION>
Principal Coupon Final Market
Amount Security Rate Maturity Value
------ -------- ---- -------- -----
<C> <S> <C> <C> <C>
Fixed Rate Instruments (91.4%)
Florida (83.9%)
$3,400 Alachua County Health Facilities Auth. RB,
Series 1996A (CRE) 5.80 % 12/01/26 $ 3,524
3,500 Board of Education Capital Outlay Bonds,
Series 1995B 5.88 6/01/20 3,638
Broward County Housing Finance Auth. MFH RB
1,100 Series 1995A 7.00 2/01/25 1,205
1,000 Series 1997A-1 6.00 5/01/32 1,039
Cape Coral Health Facilities Auth. RB
1,000 Series 1997 (CRE) 5.50 10/01/17 1,002
1,400 Series 1997 (CRE) 5.63 10/01/27 1,405
1,855 Citrus County PCRB, Series 1992B 6.35 2/01/22 2,003
2,000 Collier County Health Facilities Auth. RB,
Series 1994 7.00 12/01/19 2,186(d)
2,000 Dade County Special Obligation Bonds, Series 1995 6.10 4/01/20 2,103
Duval County Housing Finance Auth. MFH RB
1,700 Series 1996 5.90 9/01/16 1,753
2,510 Series 1996 6.00 3/01/21 2,578
1,930 Series 1997A (CRE) 5.65 7/01/22 1,951
1,000 Escambia County Housing Finance Agency MFH RB,
Series 1985 5.63 8/01/16 1,011(c)
700 Gulf County School District Sales Tax RB (CRE) 5.75 6/01/17 718
2,000 Hillsborough County IDA PCRB 6.25 12/01/34 2,191
Housing Finance Agency RB
1,695 Series 1994B 6.35 7/01/14 1,798
1,000 Series 1995H (CRE) 6.50 11/01/25 1,036
1,200 Indian River County Hospital District RB,
Series 1996 (CRE) 5.70 10/01/15 1,245
2,000 Jacksonville Electric Auth. RB, Series 1997A 5.63 10/01/37 2,007
7,150 Jacksonville Health Facilities Auth. RB,
Series 1997B 5.25 8/15/27 6,899
1,000 Martin County Health Facilities Auth. Hospital RB,
Series 1997A (CRE) 5.25 11/15/17 984
1,000 Miami Beach Health Facilities Auth. Hospital RB,
Series 1992 (CRE) 6.25 11/15/19 1,067
1,000 Miramar Wastewater Improvement Assessment Bonds,
Series 1994 (CRE) 6.75 10/01/25 1,121
5,000 North Miami Educational Facilities RB, Series 1994A 6.13 4/01/20 5,125(d)
2,130 North Miami Health Facilities Auth. RB,
Series 1996 (CRE) 6.00 8/15/24 2,204
5,750 Orange County Health Facilities Auth. RB,
Series 1995 6.75 7/01/20 6,458(d)
1,000 Orange County Housing Finance Auth. RB 6.40 2/01/30 1,066
3,575 Orlando and Orange County Expressway Auth. RB,
Series 1993 5.95 7/01/23 3,639
5,500 Orlando Utilities Commission RB, Series 1993B 5.25 10/01/23 5,378
3,405 Palm Beach County Health Facilities Auth. Hospital RB,
Series 1993 6.30 10/01/22 3,613
4,900 Palm Beach County Health Facilities Retirement
Community RB, Series 1996 5.63 11/15/20 4,958
1,340 Palm Beach County Housing Finance Auth. RB,
Series 1994B 6.40 4/01/14 1,439
6,805 St. Johns County IDA RB 6.00 8/01/22 7,043
3,215 Sunrise Special Tax District #1 GO, Series 1991 (CRE) 6.38 11/01/21 3,405
1,150 Tallahassee Consolidated Utility Systems RB,
Series 1994 6.20 10/01/19 1,227
1,300 Turtle Run Community Development District RB (CRE) 6.40 5/01/11 1,359
1,500 Volusia County Education Facility Auth. RB,
Series 1996A 6.13 10/15/26 1,557
3,000 Volusia County Health Facilities Auth. Hospital RB,
Series 1996 (CRE) 5.50 11/15/26 3,017
Guam (0.9%)
1,000 Government Limited Obligation Infrastructure
Improvement RB, Series 1989A (CRE) 7.10 11/15/09 1,052
Puerto Rico (6.6%)
5,150 Electric Power Auth. RB, Series 1995Z 5.25 7/01/21 4,980
2,500 Highway Auth. RB, Series Q 6.00 7/01/20 2,555
- ------------------------------------------------------------------------------------------------------
Total fixed rate instruments (cost: $99,483) 104,539
- ------------------------------------------------------------------------------------------------------
Put Bond (6.6%)
Florida
7,055 Duval County Housing Finance Auth. MFH RB,
Series 1995 (CRE) (cost: $7,163) 6.75 4/01/25 7,501
- ------------------------------------------------------------------------------------------------------
Variable Rate Demand Note (1.9%)
Florida
2,210 Atlantic Beach Improvement and Refunding RB,
Series 1994B (CRE) (cost: $2,210) 3.95 10/01/24 2,210
- ------------------------------------------------------------------------------------------------------
Total investments (cost: $108,856) $ 114,250
======================================================================================================
</TABLE>
Portfolio Summary By Industry
-----------------------------
Hospitals 23.9%
Housing - Multi-Family 16.7
Electric Power 14.5
Retirement Homes 10.3
Special Assessment/Tax/Fee 9.4
Education 5.8
Healthcare - Miscellaneous 5.7
Toll Roads 3.2
General Obligations 3.0
Housing - Single-Family 2.8
Water/Sewer 2.1
Nursing Care 1.9
Sales Tax Obligations .6
----
Total 99.9%
====
<TABLE>
Florida Tax-Free Money Market Fund
Portfolio of Investments in Securities
(In Thousands)
September 30, 1997
(Unaudited)
<CAPTION>
Principal Coupon Final
Amount Security Rate Maturity Value
------ -------- ---- -------- -----
<C> <S> <C> <C> <C>
Variable Rate Demand Notes (66.6%)
Florida
$1,800 Atlantic Beach Improvement and Refunding RB,
Series 1994B (CRE) 3.95 % 10/01/24 $ 1,800
1,500 Brevard County Housing Finance Auth. MFH RB,
Series 1993 (CRE) 4.15 7/01/05 1,500
1,460 Brevard County Mental Health Facilities RB,
Series 1994C (CRE) 4.15 1/01/10 1,460
1,000 Broward County Education Research and
Training Auth. IDRB, Series 1997 (CRE) 4.15 8/01/04 1,000
3,400 Broward County Housing Finance Auth. MFH RB,
Series 1990 (CRE) 4.25 10/01/07 3,400
600 Broward County IDA RB, Series 1992 4.20 3/01/99 600
6,400 Dade County Aviation Facilities RB,
Series 1984A (CRE) 4.30 10/01/09 6,400
3,160 Dade County MFH RB, Series 1993-1 (CRE) 4.35 2/01/28 3,160
2,800 Housing Finance Agency MFH RB,
Series 1985GGG (CRE) 4.20 12/01/08 2,800
600 Jacksonville Health Facilities Auth. RB,
Series 1988 (CRE) 4.20 2/01/18 600
1,700 Jacksonville Hospital RB, Series 1988 (CRE) 4.25 2/01/18 1,700
1,900 Miami Health Facilities Auth. RB, Series 1996 (CRE) 4.15 12/01/16 1,900
3,800 Palm Beach County Housing Finance Auth. MFH RB,
Series 1988D (CRE) 4.20 11/01/07 3,800
6,690 Plant City Hospital RB, Series 1993 (CRE) 4.20 3/01/13 6,690
3,380 St. Johns County IDA RB, Series 1997 (CRE) 4.15 5/01/09 3,380
1,000 St. Petersburg Capital Improvement RB,
Series 1997B (CRE) 4.15 10/01/17 1,000
3,500 St. Petersburg Health Facilities Auth. RB,
Series 1997 (CRE) 4.13 7/01/27 3,500
3,600 Volusia County Health Facilities Auth. RB,
Series 1995 (CRE) 3.85 9/01/20 3,600
3,000 Volusia County Housing Finance Auth. RB,
Series 1985C (CRE) 4.43 9/01/05 3,000(b)
- ------------------------------------------------------------------------------------------------------
Total variable rate demand notes (cost: $51,290) 51,290
- ------------------------------------------------------------------------------------------------------
Fixed Rate Instruments (20.6%)
Florida
2,995 Dade County Public Improvement GO, Series H (CRE) 6.50 6/01/98 3,046
2,500 Dade County Sales Tax RB, Series 1996 (CRE) 4.00 10/01/97 2,500
3,000 Department of Environmental Protection
Preservation RB, Series 1996A (CRE) 5.50 7/01/98 3,036
500 Gainesville Utilities Systems RB, Series 1987A 7.30 10/01/01(a) 510
3,300 Halifax Hospital Medical Center TAN,
Series 1997 (CRE) 4.13 4/15/98 3,302
1,000 Jacksonville Water and Sewer District RB,
Series 1996 (CRE) 4.00 10/01/97 1,000
690 Local Government Finance Commission Pooled
CP Notes, Series 1996A (CRE) 3.90 10/09/97 690
440 Port of St. Lucie Special Assessment Bonds,
Series 1997A (CRE) 3.60 10/01/97 440
1,370 St. Lucie County School District GO, Series 1997 (CRE) 4.00 2/01/98 1,372
- ------------------------------------------------------------------------------------------------------
Total fixed rate instruments (cost: $15,896) 15,896
- ------------------------------------------------------------------------------------------------------
Total investments (cost: $67,186) $ 67,186
======================================================================================================
</TABLE>
Portfolio Summary By Industry
-----------------------------
Housing - Multi-Family 22.9%
Hospitals 15.2
Nursing Care 11.7
Airports 8.3
General Obligations 5.7
Aluminum 4.4
Real Estate 3.9
Sales Tax Obligations 3.2
Retirement Homes 3.1
Healthcare - Miscellaneous 1.9
Water/Sewer 1.9
Community Service 1.3
Special Assessment/Tax/Fee 1.3
Finance - Municipal .9
Aerospace/Defense .8
Escrowed Securities .7
----
Total 87.2%
====
Notes to Portfolios of Investments in Securities
September 30, 1997
(Unaudited)
General Notes
Values of securities are determined by procedures and practices discussed in
note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
Specific Notes
(a) Prerefunded to various dates prior to maturity at the call price.
(b) This security was purchased within the terms of a private placement
memorandum and is subject to a seven day demand feature. Under procedures
adopted by the Board of Trustees, the adviser has determined that this
security is liquid. At September 30, 1997, this security represents 3.9% of
the Florida Tax-Free Money Market Fund's net assets.
(c) At September 30, 1997, the cost of the security purchased on a delayed
delivery basis for the Florida Tax-Free Income Fund was $1,000,000.
(d) At September 30, 1997, these securities were segregated to cover delayed
delivery purchases.
See accompanying notes to financial statements.
<TABLE>
Statements of Operations
(In Thousands)
Six-month period ended September 30, 1997
(Unaudited)
<CAPTION>
Florida Florida
Tax-Free Tax-Free Money
Income Fund Market Fund
----------- -----------
<S> <C> <C>
Net investment income:
Interest income $ 3,041 $ 1,570
------- --------
Expenses:
Management fees 198 155
Transfer agent's fees 29 27
Custodian's fees 25 18
Postage 2 2
Shareholder reporting fees 2 3
Trustees' fees 4 4
Registration fees 4 1
Professional fees 6 6
Other 4 3
------- --------
Total expenses before reimbursement 274 219
Expenses reimbursed (14) (16)
------- --------
Total expenses after reimbursement 260 203
------- --------
Net investment income 2,781 1,367
------- --------
Net realized and unrealized gain on investments:
Net realized gain 459 -
Change in net unrealized appreciation/depreciation 4,155 -
------- --------
Net realized and unrealized gain 4,614 -
------- --------
Increase in net assets resulting from operations $ 7,395 $ 1,367
======= ========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended September 30, 1997 and Year ended March 31, 1997
(Unaudited)
<CAPTION>
Florida Tax-Free Florida Tax-Free
Income Fund Money Market Fund
----------- -----------------
9/30/97 3/31/97 9/30/97 3/31/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
From operations:
Net investment income $ 2,781 $ 4,555 $ 1,367 $ 2,418
Net realized gain on investments 459 80 - -
Change in net unrealized appreciation/
depreciation of investments 4,155 457 - -
---------- --------- --------- ----------
Increase in net assets resulting
from operations 7,395 5,092 1,367 2,418
---------- --------- --------- ----------
Distributions to shareholders from:
Net investment income (2,781) (4,555) (1,367) (2,418)
---------- --------- --------- ----------
From capital share transactions:
Proceeds from shares sold 20,556 41,561 32,649 147,643
Shares issued for dividends reinvested 1,822 3,019 1,271 2,229
Cost of shares redeemed (8,071) (18,713) (43,908) (134,043)
---------- --------- --------- ----------
Increase (decrease) in net assets
from capital share transactions 14,307 25,867 (9,988) 15,829
---------- --------- --------- ----------
Net increase (decrease) in net assets 18,921 26,404 (9,988) 15,829
Net assets:
Beginning of period 95,483 69,079 87,053 71,224
---------- --------- --------- ----------
End of period $ 114,404 $ 95,483 $ 77,065 $ 87,053
========== ========= ========= ==========
Change in shares outstanding:
Shares sold 2,141 4,449 32,649 147,643
Shares issued for dividends reinvested 189 323 1,271 2,229
Shares redeemed (845) (1,999) (43,908) (134,043)
---------- --------- --------- ----------
Increase (decrease) in
shares outstanding 1,485 2,773 (9,988) 15,829
========== ========= ========= ==========
See accompanying notes to financial statements.
</TABLE>
Notes to Financial Statements
September 30, 1997
(Unaudited)
(1) Summary of Significant Accounting Policies
USAA State Tax-Free Trust (the Trust), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company organized as a Delaware business trust consisting of four separate
funds. The information presented in this semiannual report pertains only to the
Florida Tax-Free Income Fund and Florida Tax-Free Money Market Fund (the Funds).
The Funds have a common objective of providing Florida investors with a high
level of current interest income that is exempt from federal income taxes and
shares that are exempt from the Florida intangible personal property tax. The
Florida Tax-Free Money Market Fund has a further objective of preserving capital
and maintaining liquidity.
A. Security valuation -- Investments in the Florida Tax-Free Income Fund are
valued each business day by a pricing service (the Service) approved by the
Trust's Board of Trustees. The Service uses the mean between quoted bid and
asked prices or the last sale price to price securities when, in the Service's
judgement, these prices are readily available and are representative of the
securities' market values. For many securities, such prices are not readily
available. The Service generally prices these securities based on methods which
include consideration of yields or prices of municipal securities of comparable
quality, coupon, maturity and type, indications as to values from dealers in
securities, and general market conditions. Securities which are not valued by
the Service, and all other assets, are valued in good faith at fair value using
methods determined by the Manager under the general supervision of the Board of
Trustees. Securities purchased with maturities of 60 days or less and, pursuant
to Rule 2a-7 of the Investment Company Act of 1940, as amended, all securities
in the Florida Tax-Free Money Market Fund, are stated at amortized cost which
approximates market value.
B. Federal taxes -- Each Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required.
C. Investments in securities -- Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Interest
income is recorded daily on the accrual basis. Premiums and original issue
discounts are amortized over the life of the respective securities. Market
discounts are not amortized. Any ordinary income related to market discounts is
recognized upon disposition of the securities. The Funds concentrate their
investments in Florida municipal securities and therefore may be exposed to more
credit risk than portfolios with a broader geographical diversification.
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 two joint short-term revolving
loan agreements totaling $850 million, one with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($750 million uncommitted), and one with
NationsBank of Texas, N.A. ($100 million committed). The purpose of the
agreements is to meet temporary or emergency cash needs, including redemption
requests that might otherwise require the untimely disposition of securities.
Subject to availability under its agreement with CAPCO, each Fund may borrow
from CAPCO an amount up to 5% of its total assets at CAPCO's borrowing rate with
no markup. Subject to availability under its agreement with NationsBank, each
Fund may borrow from NationsBank an amount which, when added to outstanding
borrowings under the CAPCO agreement, does not exceed 15% of its total assets at
NationsBank's borrowing rate plus a markup. The Funds had no borrowings under
either of these agreements during the six-month period ended September 30, 1997.
(3) Distributions
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. All net investment income available for distribution was
distributed at September 30, 1997.
Distributions of realized gains from security transactions not offset by capital
losses are made in the succeeding fiscal year or as otherwise required to avoid
the payment of federal taxes. At September 30, 1997, the Florida Tax-Free Income
Fund had capital loss carryovers for federal income tax purposes of
approximately $1,398,000 which, if not offset by subsequent capital gains will
expire between 2003-2004. It is unlikely that the Board of Trustees of the Trust
will authorize a distribution of capital gains realized in the future until the
capital loss carryovers have been utilized or expire.
(4) Investment Transactions
Purchases and sales/maturities of securities, excluding short-term securities,
for the six-month period ended September 30, 1997 for the Florida Tax-Free
Income Fund were $37,734,057 and $20,186,763, respectively. Purchases and
sales/maturities of securities for the six-month period ended September 30, 1997
for the Florida Tax-Free Money Market Fund were $105,352,994 and $118,720,000,
respectively.
Gross unrealized appreciation and depreciation of investments at September 30,
1997 for the Florida Tax-Free Income Fund was $5,393,987 and $0, respectively.
(5) Transactions with Manager
A. Management fees -- The investment policies of the Funds and the management of
the Funds' portfolios are carried out by USAA Investment Management Company (the
Manager). Management fees are computed as a percentage of aggregate average net
assets (ANA) of both Funds combined, which on an annual basis is equal to .50%
of the first $50,000,000, .40% of that portion over $50,000,000 but not over
$100,000,000, and .30% of that portion over $100,000,000. These fees are
allocated on a proportional basis to each Fund monthly based upon ANA.
The Manager has voluntarily agreed to limit the annual expenses of each Fund to
.50% of its average net assets through August 1, 1998.
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 $26 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
Certain trustees and officers of the Funds are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Funds.
<TABLE>
Notes to Financial Statements (Continued)
Florida Tax-Free Income Fund
September 30, 1997
(Unaudited)
(7) Financial Highlights
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended Year Ended March 31,
September 30, -------------------------------------------------
1997 1997 1996 1995 1994 **
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 9.33 $ 9.26 $ 9.09 $ 8.98 $ 10.00
Net investment income .26 .52 .52 .49 .21
Net realized and
unrealized gain (loss) .43 .07 .17 .11 (1.02)
Distributions from net
investment income (.26) (.52) (.52) (.49) (.21)
---------- --------- --------- --------- --------
Net asset value at
end of period $ 9.76 $ 9.33 $ 9.26 $ 9.09 $ 8.98
========== ========= ========= ========= ========
Total return (%) * 7.44 6.51 7.66 7.01 (8.22)
Net assets at end
of period (000) $ 114,404 $ 95,483 $ 69,079 $ 42,891 $ 24,948
Ratio of expenses to
average net assets (%) .50(a)(b) .50(a) .50(a) .50(a) .50(a)(b)
Ratio of net investment
income to average
net assets (%) 5.35(a)(b) 5.57(a) 5.52(a) 5.59(a) 4.63(a)(b)
Portfolio turnover (%) 19.95 44.75 88.20 71.76 284.11
</TABLE>
(a) The information contained in this table is based on actual expenses for
the period, after giving effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's ratios would have been:
Six-Month
Period Ended Year Ended March 31,
September 30, ----------------------------------
1997 1997 1996 1995 1994**
---- ---- ---- ---- ----
Ratio of expenses to
average net assets (%) .53(b) .57 .67 .81 1.33(b)
Ratio of net investment
income to average
net assets (%) 5.32(b) 5.50 5.35 5.28 3.80(b)
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income and capital gains distributions
during the period.
** Fund commenced operations October 1, 1993.
<TABLE>
Notes to Financial Statements (Continued)
Florida Tax-Free Money Market Fund
September 30, 1997
(Unaudited)
(7) Financial Highlights (continued)
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended Year Ended March 31,
September 30, ------------------------------------------------
1997 1997 1996 1995 1994**
---- ---- ---- ---- ----
<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 .02 .03 .03 .03 .01
Distributions from net
investment income (.02) (.03) (.03) (.03) (.01)
--------- --------- --------- --------- --------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ========
Total return (%) * 1.69 3.20 3.51 2.86 .96
Net assets at end
of period (000) $ 77,065 $ 87,053 $ 71,224 $ 52,225 $ 29,877
Ratio of expenses to
average net assets (%) .50(a)(b) .50(a) .50(a) .50(a) .50(a)(b)
Ratio of net investment
income to average
net assets (%) 3.36(a)(b) 3.15(a) 3.45(a) 2.97(a) 1.98(a)(b)
</TABLE>
(a) The information contained in this table is based on actual expenses for the
period, after giving effect to reimbursements of expenses by the
Manager. Absent such reimbursements the Fund's ratios would have been:
Six-Month
Period Ended Year Ended March 31,
September 30, -------------------------------------
1997 1997 1996 1995 1994**
---- ---- ---- ---- ----
Ratio of expenses to
average net assets (%) .54(b) .57 .64 .72 1.11(b)
Ratio of net investment
income to average
net assets (%) 3.32(b) 3.08 3.31 2.75 1.37(b)
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
* Assumes reinvestment of all dividend income distributions during the
period.
** Fund commenced operations October 1, 1993.
