TABLE OF CONTENTS
USAA FAMILY OF FUNDS 1
MESSAGE FROM THE PRESIDENT 2
INVESTMENT REVIEW
USAA Florida Tax-Free Income Fund 4
USAA Florida Tax-Free Money Market Fund 10
FINANCIAL INFORMATION
Portfolios of Investments
Categories and Definitions 13
USAA Florida Tax-Free Income Fund 14
USAA Florida Tax-Free Money Market Fund 18
Notes to Portfolios of Investments 21
Statements of Assets and Liabilities 22
Statements of Operations 23
Statements of Changes in Net Assets 24
Notes to Financial Statements 25
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). THE REPORT MAY BE USED AS
SALES LITERATURE ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS,
WHICH GIVES FURTHER DETAILS ABOUT THE FUNDS.
USAA WITH THE EAGLE IS REGISTERED IN THE U.S. PATENT & TRADEMARK
OFFICE.(COPYRIGHT)2000, USAA. ALL RIGHTS RESERVED.
USAA FAMILY OF FUNDS SUMMARY
FUND MINIMUM
TYPE/NAME VOLATILITY INVESTMENT
--------- ---------- ----------
CAPITAL APPRECIATION
===============================================================================
Aggressive Growth Very high $3,000
Emerging Markets Very high 3,000
First Start Growth(Registered
Trademark) Moderate to high 3,000
Gold Very high 3,000
Growth Moderate to high 3,000
Growth & Income Moderate 3,000
International Moderate to high 3,000
S&P 500(Registerd Trademark)Index Moderate 3,000
Science & Technology Very high 3,000
Small Cap Stock Very high 3,000
World Growth Moderate to high 3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate 3,000
Growth and Tax
Strategy Moderate 3,000
Growth Strategy Moderate to high 3,000
Income Strategy Low to moderate 3,000
INCOME - TAXABLE
===============================================================================
GNMA(Registered Trademark) Low to moderate $3,000
High-Yield
Opportunities High 3,000
Income Moderate 3,000
Income Stock Moderate 3,000
Intermediate-Term
Bond Low to moderate 3,000
Short-Term Bond Low 3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term Moderate $3,000
Intermediate-Term Low to moderate 3,000
Short-Term Low 3,000
State Bond Income Moderate 3,000
MONEY MARKET
===============================================================================
Money Market Very low $3,000
Tax Exempt
Money Market Very low 3,000
Treasury Money
Market Trust(Registered Trademark) Very low 3,000
State Money Market Very low 3,000
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, WHICH ARE DISCUSSED IN THE
FUNDS' PROSPECTUSES.
S&P 500(REGISTERED TRADEMARK)IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES, INC.
AND HAS BEEN LICENSED FOR USE. THE PRODUCT IS NOT SPONSORED, SOLD, OR PROMOTED
BY STANDARD & POOR'S, AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING
THE ADVISABILITY OF INVESTING IN THE PRODUCT.
SOME INCOME MAY BE SUBJECT TO STATE OR LOCAL TAXES OR THE FEDERAL ALTERNATIVE
MINIMUM TAX.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
THE SCIENCE & TECHNOLOGY FUND MAY BE MORE VOLATILE THAN A FUND THAT DIVERSIFIES
ACROSS MANY INDUSTRIES.
THE INVESTART(REGISTERED TRADEMARK) PROGRAM IS AVAILABLE FOR INVESTORS WITHOUT
THE $3,000 INITIAL INVESTMENT REQUIRED TO OPEN AN IMCO MUTUAL FUND ACCOUNT. A
MUTUAL FUND ACCOUNT CAN BE OPENED WITH NO INITIAL INVESTMENT IF YOU ELECT TO
HAVE MONTHLY AUTOMATIC INVESTMENTS OF AT LEAST $50 FROM A BANK ACCOUNT.
INVESTART IS NOT AVAILABLE ON TAX-EXEMPT FUNDS OR THE S&P 500 INDEX FUND. THE
MINIMUM INITIAL INVESTMENT FOR IRAS IS $250, EXCEPT FOR THE $2,000 MINIMUM
REQUIRED FOR THE S&P 500 INDEX FUND. IRAS ARE NOT AVAILABLE FOR TAX-EXEMPT
FUNDS. THE GROWTH AND TAX STRATEGY FUND IS NOT AVAILABLE AS AN INVESTMENT FOR
YOUR IRA BECAUSE THE MAJORITY OF ITS INCOME IS TAX EXEMPT.
CALIFORNIA, FLORIDA, NEW YORK, AND VIRGINIA FUNDS AVAILABLE TO RESIDENTS ONLY.
NONDEPOSIT INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR
OTHER OBLIGATIONS OF, OR GUARANTEED BY, USAA FEDERAL SAVINGS BANK, ARE SUBJECT
TO INVESTMENT RISKS, AND MAY LOSE VALUE.
FOR MORE COMPLETE INFORMATION ABOUT THE MUTUAL FUNDS MANAGED AND DISTRIBUTED BY
USAA INVESTMENT MANAGEMENT COMPANY, INCLUDING CHARGES AND OPERATING EXPENSES,
PLEASE CALL 1-800-531-8181 FOR A PROSPECTUS. READ IT CAREFULLY BEFORE YOU
INVEST.
MESSAGE FROM THE PRESIDENT
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD: MICHAEL J.C. ROTH, CFA,
APPEARS HERE.]
I have noted many times in the past that our three national tax-exempt bond
funds will usually provide a textbook study of how the bond markets should work.
The USAA Long-Term Fund should have the highest return, the USAA Short-Term Fund
the lowest, and the USAA Intermediate-Term Fund should fall in between. That's
because risk is usually rewarded. A 30-year bond is more risky, for various
reasons, than a two-year bond.
THE WALL STREET JOURNAL on October 2, 2000, showed that year-to-date the
performance of these three funds lines up like this:
-----------------------------------------------------------
YEAR-TO-DATE TOTAL RETURNS FOR PERIOD ENDING 9/30/00
-----------------------------------------------------------
USAA Tax Exempt Long-Term Fund 6.7%
USAA Tax Exempt Intermediate-Term Fund 6.0%
USAA Tax Exempt Short-Term Fund 4.0%
-----------------------------------------------------------
Last year the bond market declined and demonstrated that 30-year bonds are
indeed riskier than short issues:
-----------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDING 12/31/99
-----------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
----------------------------
USAA Tax Exempt Long-Term Fund -5.04% 6.59% 6.37%
USAA Tax Exempt Intermediate-Term Fund -2.61% 6.37% 6.49%
USAA Tax Exempt Short-Term Fund 1.64% 4.98% 5.06%
-----------------------------------------------------------------------
However, over the longer term, you can see that risk usually is rewarded:
-----------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDING 9/30/00
-----------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
----------------------------
USAA Tax Exempt Long-Term Fund 4.60% 5.41% 6.82%
USAA Tax Exempt Intermediate-Term Fund 5.14% 5.32% 6.72%
USAA Tax Exempt Short-Term Fund 4.51% 4.52% 5.09%
-----------------------------------------------------------------------
The ordering of these returns and the longer term records of these funds are in
line with theory. And the numbers for 2000 look pretty good compared to major
indices this year:
--------------------------------------------------------------
YEAR-TO-DATE TOTAL RETURNS FOR PERIOD ENDING 9/30/00
--------------------------------------------------------------
Dow Jones Industrial Average -7.36%
S&P 500 Index -1.39%
Nasdaq Composite Index -9.74%
--------------------------------------------------------------
That is why a portion of my investment portfolio is composed of tax-exempt bond
funds.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
TOTAL RETURN EQUALS INCOME PLUS SHARE PRICE CHANGE AND ASSUMES REINVESTMENT OF
ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
THE PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE AND ARE NOT AN INDICATION
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL
FLUCTUATE, AND AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS
THAN THEIR ORIGINAL COST.
DOW JONES INDUSTRIAL AVERAGE IS A PRICE-WEIGHTED AVERAGE OF 30 ACTIVELY TRADED
BLUE CHIP STOCKS, PRIMARILY INDUSTRIALS.
THE S&P 500 INDEX IS AN UNMANAGED INDEX REPRESENTING THE WEIGHTED AVERAGE
PERFORMANCE OF A GROUP OF 500 WIDELY HELD, PUBLICLY TRADED STOCKS. IT IS NOT
POSSIBLE TO INVEST DIRECTLY IN THE S&P 500 INDEX.
NASDAQ COMPOSITE INDEX IS A MARKET-VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S. BASED SECURITIES.
SOME INCOME MAY BE SUBJECT TO STATE OR LOCAL TAXES OR THE FEDERAL ALTERNATIVE
MINIMUM TAX.
FOR MORE COMPLETE INFORMATION ABOUT THE MUTUAL FUNDS MANAGED AND DISTRIBUTED BY
USAA INVESTMENT MANAGEMENT COMPANY, INCLUDING CHARGES AND OPERATING EXPENSES,
PLEASE CALL FOR A PROSPECTUS. READ IT CAREFULLY BEFORE INVESTING.
INVESTMENT REVIEW
USAA FLORIDA TAX-FREE INCOME FUND
OBJECTIVE: 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 principally in long-term, investment-grade Florida
tax-exempt securities.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $170.2 Million $175.8 Million
Net Asset Value Per Share $9.14 $9.25
Tax-Exempt Dividends Per Share
Last 12 Months $0.491 $0.490
Capital Gain Distributions Per Share
Last 12 Months - -
--------------------------------------------------------------------------------
SIX-MONTH TOTAL RETURN AND 30-DAY SEC YIELD* AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 TO 9/30/00 30-DAY SEC YIELD
3.95%(+) 5.24%
--------------------------------------------------------------------------------
* CALCULATED AS PRESCRIBED BY THE SECURITIES AND EXCHANGE COMMISSION.
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
AVERAGE ANNUAL COMPOUNDED RETURNS WITH
REINVESTMENT OF DIVIDENDS - PERIODS ENDING SEPTEMBER 30, 2000
--------------------------------------------------------------------------------
TOTAL DIVIDEND PRICE
RETURN EQUALS RETURN PLUS CHANGE
--------------------------------------------------------------------------------
Since 10/1/93 4.25% = 5.36% + -1.11%
--------------------------------------------------------------------------------
5 Years 5.50% = 4.63% + 0.87%
--------------------------------------------------------------------------------
1 Year 5.20% = 5.52% + -0.32%
--------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS AND COMPOUNDED DIVIDEND RETURNS
FOR THE SIX-YEAR PERIOD ENDING SPETEMBER 30, 2000
A chart in the form of a bar graph appears here, illustrating the Annual Total
Returns and Compounded Dividend Returns of the USAA Florida Tax-Free Income Fund
for the six-year period ending September 30, 2000.
TOTAL RETURN
-------------------------
09/30/95 9.67%
09/30/96 7.30%
09/30/97 10.18%
09/30/98 9.89%
09/30/99 -4.35%
09/30/00 5.20%
DIVIDEND RETURN
-------------------------
09/30/95 6.07%
09/30/96 5.78%
09/30/97 5.79%
09/30/98 5.38%
09/30/99 4.67%
09/30/00 5.52%
CHANGE IN SHARE PRICE
-------------------------
09/30/95 3.60%
09/30/96 1.52%
09/30/97 4.39%
09/30/98 4.51%
09/30/99 -9.02%
09/30/00 -0.32%
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 Florida Tax-Free Income Fund to the 12-
Month Dividend Yield of the Lipper Florida Municipal Debt Funds Average from
9/30/95 to 9/30/00.
USAA FLORIDA TAX-FREE LIPPER FLORIDA MUNICIPAL
INCOME FUND DEBT FUNDS AVERAGE
--------------------- ------------------------
09/30/95 5.54% 5.19%
09/30/96 5.54% 5.03%
09/30/97 5.28% 4.82%
09/30/98 4.91% 4.46%
09/30/99 5.32% 4.67%
09/30/00 5.32% 4.75%
THE 12-MONTH DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING
THE PREVIOUS 12 MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR
CAPITAL GAIN DISTRIBUTIONS. THE GRAPH REPRESENTS DATA FOR PERIODS ENDING 9/30/95
TO 9/30/00.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, comparing the cumulative
performance of a $10,000 investment for the USAA Florida Tax-Free Income Fund,
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
03/31/94 9,179
09/30/94 9,332
03/31/95 9,822
09/30/95 10,235
03/31/96 10,574
09/30/96 10,982
03/31/97 11,262
09/30/97 12,100
03/31/98 12,639
09/30/98 13,297
03/31/99 13,386
09/30/99 12,718
03/31/00 12,871
09/30/00 13,379
LEHMAN BROTHERS MUNICIPAL BOND INDEX
YEAR AMOUNT
-------- -------
10/01/93 $10,000
03/31/94 9,584
09/30/94 9,756
03/31/95 10,296
09/30/95 10,847
03/31/96 11,159
09/30/96 11,502
03/31/97 11,767
09/30/97 12,539
03/31/98 13,028
09/30/98 13,632
03/31/99 13,835
09/30/99 13,537
03/31/00 13,824
09/30/00 14,373
LIPPER FLORIDA MUNICIPAL DEBT FUNDS AVERAGE
YEAR AMOUNT
-------- -------
10/01/93 $10,000
03/31/94 9,437
09/30/94 9,547
03/31/95 10,085
09/30/95 10,543
03/31/96 10,842
09/30/96 11,166
03/31/97 11,352
09/30/97 12,054
03/31/98 12,517
09/30/98 13,056
03/31/99 13,143
09/30/99 12,698
03/31/00 12,858
09/30/00 13,318
DATA SINCE INCEPTION ON 10/1/93 THROUGH 9/30/00.
THE BROAD-BASED LEHMAN BROTHERS MUNICIPAL BOND INDEX IS AN UNMANAGED INDEX THAT
TRACKS TOTAL RETURN PERFORMANCE FOR THE LOGN-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, INC., AN INDEPENDENT ORGANIZATION THAT MONITORS THE
PERFORMANCE OF MUTUAL FUNDS. ALL TAX-EXEMPT BOND FUNDS WILL FIND IT DIFFICULT TO
OUTPERFORM THE LEHMAN INDEX, BECAUSE FUNDS HAVE EXPENSES.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER, ROBERT R. PARISEAU, CFA, APPEARS HERE.]
MUNICIPAL BOND MARKET REVIEW
Yields on 20-year AAA-rated municipal bonds have declined 0.10% during the first
six months of the Fund's fiscal year, from March 31, 2000, to September 30,
2000. Bond-market investors seem to believe that the Federal Reserve Board, with
a series of six increases in short-term interest rates, has successfully slowed
the U.S. economy to a more sustainable, noninflationary rate of growth. Despite
recent increases in energy costs, inflation remains under control. Economists
give most of the credit to improved productivity as technological innovation
allows industry to use raw materials and labor more efficiently.
STRATEGY
I focus primarily on generating maximum tax-exempt income with the goal of
producing the best AFTER-TAX total return over an investment horizon of four or
more years. My rationale for this strategy is:
- I believe that a large number of our investors own the Fund for the tax-free
income and invest for the long term.
- Although past performance is no guarantee of future results, the strategy has
worked in different kinds of markets over the years. Long-term performance,
measured by total return and distribution yield, has been well above the peer
group average.
The Fund remains fully invested in long-term, investment-grade municipal bonds.
Municipal bonds that mature in 15 years or more almost always yield more than
shorter bonds of the same credit quality. However, longer-maturity bonds are
more volatile in price than shorter-maturity bonds. That's why we encourage only
those investors with an investment horizon of four or more years to buy the USAA
Florida Tax-Free Income Fund.
Like any buyer, I seek value. We define "value" at USAA as a combination of:
-STRUCTURE (coupon, maturity, call features, sinking funds, etc.)
-LIQUIDITY (ability to quickly sell the bond without substantially affecting
the price)
-CREDIT QUALITY (strength and stability of the issuer)
-YIELD (The bond may otherwise be a great fit, but if the yield is too low,
it's overpriced.)
TOTAL RETURN EQUALS INCOME RETURN PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS.
NO AMT BONDS
Our shareholders have made it very clear that they do not want the income from
their USAA tax-exempt funds to be subject to the federal alternative minimum tax
(AMT) for individuals. Consequently, since inception, no USAA tax-exempt fund
has ever distributed income that was subject to the AMT for individuals. Looking
ahead, we have no intention to purchase municipal bonds that are subject to the
AMT for individuals in any of the USAA tax-exempt funds. Of course, we would
certainly advise our shareholders if a change were to occur in the federal tax
code that would compel us to reconsider our position.
MARKET OUTLOOK
The municipal bond market has rallied considerably from its lows over the past
year. Recently, steeply higher energy prices have taken their toll on
bond-market sentiment. However, the energy crisis of the 1970s and early 1980s
taught valuable lessons. Many U.S. industries have steadily improved their
energy efficiency despite years of low-priced oil. At least so far, brutal price
competition has meant that many businesses have a hard time passing on the
higher energy costs to their customers. An obviously slowing U.S. economy should
also do its part in keeping a lid on inflationary pressures.
In summary, the current consensus in the bond market is that interest rates have
probably peaked for this economic cycle. And, if energy prices settle down and
the economy continues to slow, interest rates may even decline a little more.
FUND PERFORMANCE
While past performance is no guarantee of future results, from April 1, 2000, to
September 30, 2000, your USAA Florida Tax-Free Income Fund paid a dividend
distribution yield of 5.29%. During this period of declining interest rates, the
Fund's share price increased by $0.11, or 1.20%, to $9.25.
* * * *
Your Fund's performance received an Overall Star Rating of 4 stars in the
municipal bond fund category from Morningstar Rating(TradeMark) for the period
ending September 30, 2000.
DIVIDEND YIELD IS COMPUTED BY DIVIDING INCOME DIVIDENDS PAID DURING THE PREVIOUS
SIX MONTHS BY THE LATEST MONTH-END NET ASSET VALUE ADJUSTED FOR CAPITAL GAIN
DISTRIBUTIONS AND ANNUALIZING THE RESULT.
THE STATE OF FLORIDA
Driven by population growth, Florida's economy continues to grow and diversify.
The state is outperforming the nation in terms of employment and personal-income
growth. Current state reserve levels are sound. These reserve levels are
important because Florida is disproportionately reliant upon cyclical sales-tax
receipts as a source of operating revenues. Reflecting strong credit
fundamentals, Florida maintains bond ratings of Aa2, AA+, and AA from Moody's
Investors Service, Standard & Poor's, and Fitch IBCA, respectively. I discuss
these general economic issues because, although they may not directly relate to
each of your Fund's holdings, they do indicate the financial and economic
environment of the state. We will closely monitor those specific credit issues
and litigation that could potentially affect the value of your holdings.
TAXABLE EQUIVALENT YIELDS
The table below compares the yield of the USAA Florida Tax-Free Income Fund with
a taxable equivalent investment.
--------------------------------------------------------------------------------
TO MATCH THE USAA FLORIDA TAX-FREE INCOME FUND'S CLOSING 30-DAY SEC YIELD OF
5.24% AND:
Assuming a marginal federal tax rate of: 15% 28% 31% 36% 39.6%
and assuming an investor, filing jointly,
with $300,000 in intangible assets,
A FULLY TAXABLE INVESTMENT MUST PAY: 6.17% 7.29% 7.61% 8.20% 8.69%
--------------------------------------------------------------------------------
THIS TABLE IS BASED ON A HYPOTHETICAL INVESTMENT CALCULATED FOR ILLUSTRATIVE
PURPOSES ONLY. IT IS NOT AN INDICATION OF PERFORMANCE FOR ANY OF THE USAA FAMILY
OF FUNDS.
SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. MORNINGSTAR PROPRIETARY
RATINGS ON U.S.-DOMICILED FUNDS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE AS
OF SEPTEMBER 30, 2000. THE RATINGS ARE SUBJECT TO CHANGE EVERY MONTH.
MORNINGSTAR RATINGS ON U.S.-DOMICILED FUNDS ARE CALCULATED FROM THE FUND'S
THREE-, FIVE-, AND 10-YEAR AVERAGE ANNUAL RETURNS IN EXCESS OF 90-DAY U.S.
TREASURY BILL RETURNS WITH APPROPRIATE FEE ADJUSTMENTS AND A RISK FACTOR THAT
REFLECTS FUND PERFORMANCE BELOW 90-DAY U.S. T-BILL RETURNS. THE USAA FLORIDA
TAX-FREE INCOME FUND RECEIVED 3 AND 4 STARS FOR THREE- AND FIVE-YEAR PERIODS,
RESPECTIVELY. THE TOP 10% OF THE FUNDS IN A BROAD ASSET CLASS RECEIVE 5 STARS,
THE NEXT 22.5% RECEIVE 4 STARS, THE NEXT 35% RECEIVE 3 STARS, THE NEXT 22.5%
RECEIVE 2 STARS, AND THE BOTTOM 10% RECEIVE 1 STAR. THE FUND WAS RATED
EXCLUSIVELY AGAINST U.S.-DOMICILED FUNDS. THE FUND WAS RATED AMONG 1,720 AND
1,472 FUNDS IN THE MUNICIPAL BOND FUND CATEGORY FOR THE THREE- AND FIVE-YEAR
PERIODS, RESPECTIVELY.
PORTFOLIO RATINGS MIX
9/30/00
A pie chart is shown here depicting the Portfolio Mix as of September 30, 2000
of the USAA Florida Tax-Free Income Fund to be:
AAA - 34%; AA - 38%; A - 15%; and BBB - 14%.
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 0.8% AND
2.9%, RESPECTIVELY, OF THE FUND'S INVESTMENTS, AND ARE INCLUDED IN THEIR
APPROPRIATE CATEGORY ABOVE.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 14-17.
INVESTMENT REVIEW
USAA FLORIDA TAX-FREE MONEY MARKET FUND
OBJECTIVE: 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 and a further objective of preserving capital and maintaining
liquidity.
TYPES OF INVESTMENTS: Invests principally in 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 AMONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC
OR ANY GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR
INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE
FUND.
--------------------------------------------------------------------------------
3/31/00 9/30/00
--------------------------------------------------------------------------------
Net Assets $111.8 Million $110.9 Million
Net Asset Value Per Share $1.00 $1.00
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AND 7-DAY YIELD AS OF 9/30/00
--------------------------------------------------------------------------------
3/31/00 SINCE INCEPTION 7-DAY
TO 9/30/00 1 YEAR 5 YEARS ON 10/1/93 YIELD
1.94%(+) 3.59% 3.28% 3.14% 4.26%
--------------------------------------------------------------------------------
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE.
TOTAL RETURN EQUALS INCOME RETURN AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND
CAPITAL GAIN DISTRIBUTIONS. NO ADJUSTMENT HAS BEEN MADE FOR TAXES PAYABLE BY
SHAREHOLDERS ON THEIR REINVESTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. YIELDS AND RETURNS FLUCTUATE. THE
SEVEN-DAY YIELD QUOTATION MORE CLOSELY REFLECTS CURRENT EARNINGS OF THE FUND
THAN THE TOTAL RETURN QUOTATION.
7-DAY YIELD COMPARISON
A chart in the form of a line graph appears here illustrating the comparison of
the 7-day Yield of the USAA Florida Tax-Free Money Market Fund and the
iMoneyNet, Inc. (formerly IBC Financial Data) State Specific SB (Stock Broker) &
GP (General Purpose) (Tax-Free) Money Funds.
USAA FLORIDA TAX-FREE
MONEY MARKET FUND IMONEYNET, INC.
--------------------- ---------------
09/27/99 3.39% 2.90%
10/25/99 3.02% 2.65%
11/29/99 3.45% 3.03%
12/27/99 3.80% 3.40%
01/31/00 2.94% 2.61%
02/28/00 3.50% 2.90%
03/27/00 3.38% 2.94%
04/24/00 3.96% 3.43%
05/22/00 4.00% 3.59%
06/26/00 4.08% 3.69%
07/31/00 3.80% 3.47%
08/28/00 3.74% 3.39%
09/25/00 3.92% 3.54%
DATA REPRESENT THE LAST MONDAY OF EACH MONTH.
THE GRAPH TRACKS THE FUND'S SEVEN-DAY YIELD AGAINST IMONEYNET, INC. (FORMERLY
IBC FINANCIAL DATA) STATE SPECIFIC SB (STOCK BROKER) & GP (GENERAL PURPOSE)
(TAX-FREE) MONEY FUNDS, AN AVERAGE OF MONEY MARKET FUND YIELDS.
MESSAGE FROM THE MANAGER
[PHOTOGRAPH OF PORTFOLIO MANAGER, REGINA G. SHAFER, CFA, APPEARS HERE.]
MARKET SUMMARY
The national economy has shown signs of cooling from the economic picture we had
seen six months ago. In May, the Federal Reserve (the Fed) increased the federal
funds rate (the interest rate banks charge to other banks) to 6.50%, its fourth
increase since September 1999. The Fed's rate increase and high energy costs
seem to have caused some reduction in construction and consumer spending.
Overall, current industry sentiment is that inflation concerns have settled and
additional Fed interest rate increases may not be necessary this year.
Rates have increased in the short-term tax-exempt market since our annual report
March 31, 2000. If you recall, average one-year rates were 4.08% at that time.
One-year rates reached a high of 4.64% in May, according to the Bond Buyer
One-Year Note Index. Income tax payments took more money out of the market than
was coming in, so there was an extended period of modest demand for tax-exempt
securities, causing the spike in one-year rates. Since then, the average rate on
a one-year note has trended back down to 4.20%, still 0.12% higher than six
months ago.
STRATEGY
We continue to believe that variable-rate demand notes (VRDNs) provide a good
value for the USAA Florida Tax-Free Money Market Fund. VRDNs provide the owner
the option to sell the security back to the issuer upon seven days' notice or
less at a price of par (face value) plus accrued interest. The interest rates on
these securities also reset at least every seven days. In our opinion the VRDNs
have attractive rates and provide needed flexibility to extend into longer-term
securities if appealing opportunities arise in the longer market.
The Fund's fixed-rate purchases during the period consisted of both commercial
paper and bonds maturing within one year. Although past performance is no
guarantee of future results, these securities have performed well, and the fixed
rates have also provided the Fund with some stability when VRDN rates fall (as
they do seasonally when demand exceeds supply in the market).
THE BOND BUYER ONE-YEAR NOTE INDEX IS REPRESENTATIVE OF YIELDS ON 10 LARGE
ONE-YEAR, TAX-EXEMPT NOTES.
THE FUND
Daily and weekly VRDNs represented 81.7% of the Fund's assets on September 30,
2000. In addition, the Fund also had positions in tax-exempt commercial paper,
put bonds, and other bonds/notes.
The Fund's average maturity of 23 days on September 30, 2000, was shorter than
iMoneyNet, Inc.'s (formerly IBC Financial Data) average state-specific
tax-exempt money market fund.
FUND PERFORMANCE
For the 12 months ending September 30, 2000, your Fund ranked 9 out of 175
state-specific tax-exempt money market funds according to iMoneyNet, Inc., with
a return of 3.60%. The average for the category over the same period was 3.18%.
Please keep in mind that past performance is no guarantee of future results.
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 Florida Tax-Free Money Market
Fund. The data is from 10/1/93 through 9/30/00. The data points from the graph
are as follows:
USAA FLORIDA TAX-FREE MONEY MARKET FUND
YEAR AMOUNT
-------- -------
10/01/93 $10,000
03/31/94 10,096
09/30/94 10,218
03/31/95 10,384
09/30/95 10,570
03/31/96 10,749
09/30/96 10,923
03/31/97 11,094
09/30/97 11,281
03/31/98 11,464
09/30/98 11,652
03/31/99 11,813
09/30/99 11,988
03/31/00 12,183
09/30/00 12,419
DATA SINCE INCEPTION ON 10/1/93 THROUGH 9/30/00.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND THE VALUE OF YOUR
INVESTMENT WILL VARY ACCORDING TO THE FUND'S PERFORMANCE. INCOME MAY BE SUBJECT
TO FEDERAL, STATE, OR LOCAL TAXES OR TO THE ALTERNATIVE MINIMUM TAX. FOR THE
SEVEN-DAY YIELD INFORMATION, PLEASE REFER TO THE FUND'S INVESTMENT REVIEW PAGE.
YOU WILL FIND A LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES 18-20.
CATEGORIES & DEFINITIONS
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
FIXED-RATE INSTRUMENTS - consist of municipal bonds, notes, and commercial
paper. The interest rate is constant to maturity. Prior to maturity, the market
price of a fixed-rate instrument generally varies inversely to the movement of
interest rates.
PUT BONDS - provide the right to sell the bond at face value at specific tender
dates prior to final maturity. The put feature shortens the effective maturity
of the security.
VARIABLE-RATE DEMAND NOTES (VRDN) - provide the right, on any business day, to
sell the security at face value on either that day or within seven days. The
interest rate is generally adjusted at a stipulated daily, weekly, or monthly
interval to a rate that reflects current market conditions. In money market
funds, the effective maturity of these instruments is deemed to be less than 397
days in accordance with regulatory requirements. In bond funds, the effective
maturity is the next put date.
CREDIT ENHANCEMENTS - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due. The
enhancement may be provided by either a high-quality bank, insurance company,
corporation, or a collateral trust.
The USAA Florida Tax-Free 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 Florida Tax-Free Money Market Fund through
rigorous internal credit research.
(PRE) Prerefunded to a date prior to maturity.
(LOC) Enhanced by a bank letter of credit.
(LIQ) Enhanced by a bank Liquidity agreement.
(NBGA) Enhanced by a nonbank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1) MBIA,Inc. (4) Financial Security Assurance Holdings Ltd.
(2) AMBAC Financial Group, (5) Asset Guaranty Insurance Co.
Inc. (6) ACA Financial Guaranty Corp.
(3) Financial Guaranty
Insurance Co.
PORTFOLIO ABBREVIATIONS AND DESCRIPTIONS
COP Certificate of Participation MERLOT Municipal Exempt Receipts-
CP Commercial Paper Liquidity Optional Tender
GO General Obligation MFH Multifamily Housing
IDA Industrial Development PCRB Pollution Control Revenue Bond
Authority/Agency RB Revenue Bond
IDRB Industrial Development
Revenue Bond
USAA FLORIDA TAX-FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
PRINCIPAL COUPON FINAL MARKET
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (93.8%)
FLORIDA (90.7%)
$ 3,400 Alachua County Health Facilities Auth. RB,
Series 1996A (INS)(1) 5.80% 12/01/2026 $ 3,418
7,900 Bay County Water Systems RB,
Series 2000 (INS)(2) 5.70 9/01/2025 7,973
Board of Education Public Education GO,
6,000 Series 1998E (NBGA) 5.63 6/01/2025 6,004
4,000 Series 2000A (NBGA) 5.25 6/01/2024 3,790
5,500 Series 2000D (NBGA) 5.75 6/01/2022 5,594
2,500 Broward County Educational Facilities
Auth. RB, Series 2000B (INS)(5) 5.75 4/01/2021 2,472
Broward County Housing Finance
Auth. MFH RB,
1,100 Series 1995A 7.00 2/01/2025 1,173
1,000 Series 1997A-1 6.00 5/01/2032 1,021
2,000 Cape Canaveral Hospital District RB,
Series 1998 5.25 1/01/2028 1,540
1,855 Citrus County PCRB, Series 1992B 6.35 2/01/2022 1,901
500 Clearwater Housing Auth. RB,
Series 1997 (INS)(6) 5.35 5/01/2024 459
2,000 Collier County Health Facilities Auth.
RB, Series 1994 (e) 7.00 12/01/2019 2,066
8,000 Escambia County Health Facilities Auth.
RB, Series 1999A-2 6.00 11/15/2031 8,183
700 Gulf County School District Sales Tax RB,
Series 1997 (INS)(5) 5.75 6/01/2017 710
2,000 Hillsborough County IDA PCRB,
Series 1994 6.25 12/01/2034 2,079
Housing Finance Agency RB,
1,275 Series 1994A 6.35 7/01/2014 1,317
1,000 Series 1995H (NBGA) 6.50 11/01/2025 1,014
4,400 Miami-Dade County Aviation RB,
Series 2000B (INS)(3) 5.75 10/01/2024 4,474
3,000 Miami-Dade County Expressway Auth. RB,
Series 2000 (INS)(3) 6.00 7/01/2020 3,146
1,000 Miramar Wastewater Improvement
Assessment Bonds,
Series 1994 (PRE)(INS)(3) 6.75 10/01/2025 1,088
Nassau County Gas Tax RB,
695 Series 2000 (INS)(2),(a) 5.72 3/01/2020 228
695 Series 2000 (INS)(2),(a) 5.75 3/01/2021 215
945 Series 2000 (INS)(2),(a) 5.77 3/01/2022 275
845 Series 2000 (INS)(2),(a) 5.79 3/01/2023 231
620 Series 2000 (INS)(2),(a) 5.80 3/01/2024 160
945 Series 2000 (INS)(2),(a) 5.81 3/01/2025 229
5,000 North Miami Educational Facilities RB,
Series 1994A (e) 6.13 4/01/2020 5,051
2,130 North Miami Health Facilities Auth. RB,
Series 1996 (LOC) 6.00 8/15/2024 2,168
Orange County Health Facilities Auth. RB,
5,750 Series 1995 (e) 6.75 7/01/2020 5,531
3,780 Series 1999 (INS)(5) 5.25 6/01/2029 3,406
1,000 Orange County Housing Finance Auth. RB,
Series 1994B 6.40 2/01/2030 1,028
Palm Beach County Health
Facilities Auth. RB,
3,405 Series 1993 (PRE) 6.30 10/01/2022 3,626
4,900 Series 1996 5.63 11/15/2020 4,425
2,500 Series 1998 5.13 11/15/2029 2,040
7,875 Palm Beach County School Board COP,
Series 2000A (INS)(3) 5.88 8/01/2021 8,136
1,800 Plantation Health Facilities Auth. RB,
Series 1998 5.13 12/01/2022 1,486
Polk County Transport Improvement RB,
1,290 Series 2000 (INS)(4),(d) 5.25 12/01/2018 1,253
1,000 Series 2000 (INS)(4),(d) 5.25 12/01/2019 965
5,000 Port St. Lucie Utility Improvement and
Refunding RB, Series 1997A (INS)(1) 5.13 9/01/2027 4,621
12,780 Seminole County Water and Sewer RB,
Series 1999 5.38 10/01/2022 12,395
6,805 St. Johns County IDA Hospital RB,
Series 1992 6.00 8/01/2022 6,647
2,000 St. Johns County IDA RB,
Series 1997A (INS)(1),(c) 5.50 3/01/2017 1,999
3,215 Sunrise Special Tax District #1 GO,
Series 1991 (LOC) 6.38 11/01/2021 3,278
4,995 Sunrise Utility Systems RB,
Series 1998A (INS)(2) 5.20 10/01/2022 4,743
1,150 Tallahassee Consolidated Utility
Systems RB, Series 1994 6.20 10/01/2019 1,195
1,000 Tallahassee Lease RB,
Series 2000A (INS)(1) 5.38 8/01/2026 965
5,000 Tampa Utilities Tax Improvement RB,
Series 1999A (INS)(4) 5.20 10/01/2019 4,792
12,000 Tampa Water and Sewer RB, Series 1999 5.50 10/01/2029 11,770
1,300 Turtle Run Community Development
District RB, Series 1997 (PRE) 6.40 5/01/2011 1,356
Volusia County Education Facility
Auth. RB,
1,500 Series 1996A 6.13 10/15/2026 1,515
2,000 Series 1999A 5.75 10/15/2029 1,907
West Orange Healthcare District RB,
1,790 Series 1999A 5.50 2/01/2009 1,768
620 Series 1999A 5.50 2/01/2010 609
PUERTO RICO (3.1%)
Electric Power Auth. RB,
5,150 Series 1995Z 5.25 7/01/2021 4,939
515 Series HH (INS)(4) 5.25 7/01/2029 496
--------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $164,226) 164,870
--------------------------------------------------------------------------------
PUT BONDS (4.2%)
FLORIDA
7,055 Duval County Housing Finance Auth. MFH RB,
Series 1995 (NBGA)(e) (cost: $7,155) 6.75 4/01/2025 7,366
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (1.5%)
FLORIDA
100 Dade County Health Facilities Auth. RB,
Series 1990 (LOC) 5.65 9/01/2020 100
500 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(c) 5.67 1/01/2024 500
2,085 Hillsborough County IDA PCRB,
Series 1992 5.55 5/15/2018 2,085
--------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $2,685) 2,685
--------------------------------------------------------------------------------
Total investments (cost: $174,066) $174,921
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Water/Sewer Utilities - Municipal 24.3%
Hospitals 12.7
Special Assessment/Tax/Fee 11.5
Nursing/Continuing Care Centers 8.9
Multifamily Housing 6.9
Education 6.8
Appropriated Debt 4.6
Escrowed Bonds 3.5
Electric Utilities 3.4
Health Care - Miscellaneous 3.4
Electric/Gas Utilities - Municipal 3.1
Airport/Port 2.5
Sales Tax 2.4
General Obligations 1.9
Toll Roads 1.8
Miscellaneous 1.1
Single-Family Housing 0.7
----
Total 99.5%
====
USAA FLORIDA TAX-FREE MONEY MARKET FUND
PRINCIPAL COUPON FINAL
AMOUNT SECURITY RATE MATURITY VALUE
--------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (81.7%)
FLORIDA
$ 1,220 Brevard County Mental Health Facilities
RB, Series 1994C (LOC) 5.55% 1/01/2010 $ 1,220
1,600 Broward County Education Research and
Training Auth. IDRB, Series 1997 (LOC) 5.75 8/01/2004 1,600
2,460 Broward County Housing Finance Auth.
MFH RB, Series 1990 (NBGA) 5.60 10/01/2007 2,460
2,500 Capital Projects Finance Auth. RB,
Series 1998A (LIQ)(INS)(4) 5.50 6/01/2028 2,500
9,200 Capital Trust Agency MFH RB,
Series 1999A (NBGA)(c) 5.67 12/01/2032 9,200
45 Dade County Aviation Facilities RB,
Series 1984A (LOC) 5.45 10/01/2009 45
5,800 Dade County Health Facilities Auth. RB,
Series 1990 (LOC) 5.65 9/01/2020 5,800
2,500 Department of Juvenile Justice
Certificate of Lease Series 1998,
MERLOT Series 2000 000 (LIQ)
(INS)(1),(c) 5.50 6/15/2019 2,500
9,750 Gulf Breeze Healthcare Facilities RB,
Series 1999 (NBGA)(c) 5.67 1/01/2024 9,750
2,800 Halifax Hospital Medical Center RB,
Series 1998 (LOC) 5.50 12/01/2013 2,800
600 Hillsborough County IDA PCRB,
Series 1992 5.55 5/15/2018 600
Housing Finance Agency MFH RB,
5,270 Series 1990B (NBGA) 5.60 12/01/2009 5,270
450 Series 1990D (NBGA) 5.60 12/01/2009 450
1,600 Jacksonville Health Facilities Auth. IDRB,
Series 2000B (LOC) 5.55 3/01/2030 1,600
4,045 Lee County IDA Health Care RB,
Series 1999 (LOC) 5.60 12/01/2029 4,045
960 Miami Dade County IDRB,
Series 1999 (LOC) 5.55 6/01/2019 960
Orange County Health Facilities Auth. RB,
755 Series 1998 (LOC) 5.75 11/01/2028 755
11,000 Series 2000A (LIQ) 5.60 6/01/2030 11,000
Orange County IDA RB,
3,000 Series 1998 (LOC) 5.45 10/01/2018 3,000
3,940 Series 2000A (LOC) 5.45 3/01/2025 3,940
9,090 Palm Beach County Health Facilities
Auth. RB, Series 1999B 5.65 12/10/2014 9,090
4,850 St. Petersburg Health Facilities Auth. RB,
Series 1999 (LOC) 5.62 1/01/2024 4,850
3,000 Volusia County Housing Finance Auth. RB,
Series 1985C (LOC)(b) 5.60 9/01/2005 3,000
4,150 Wauchula IDA RB, Series 1993 (LOC) 5.50 12/01/2013 4,150
-------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $90,585) 90,585
-------------------------------------------------------------------------------
PUT BONDS (4.2%)
FLORIDA
3,630 Housing Finance Corp. Homeowner
Mortgage RB, 2000 Series 8 4.20 7/01/2017 3,630
1,000 Jacksonville PCRB, Series 1994 4.30 9/01/2024 1,000
-------------------------------------------------------------------------------
Total put bonds (cost: $4,630) 4,630
-------------------------------------------------------------------------------
FIXED-RATE INSTRUMENTS (13.6%)
FLORIDA
300 Broward County Airport System RB,
Series 1993C (INS)(2) 4.40 10/01/2000 300
3,000 Broward County Sales Tax Revenue CP
Notes, Series A 4.30 10/11/2000 3,000
500 Homestead Special Insurance Assessment RB,
Series 1993 (INS)(1) 5.00 3/01/2001 502
400 Jacksonville Beach Utilities RB,
Series 1993 (INS)(1) 5.00 10/01/2000 400
Jacksonville Electric Auth. RB,
1,250 Issue 2, Series 16 4.00 10/01/2000 1,250
1,200 Issue 2, Series 6C 6.40 10/01/2000 1,200
2,500 Lee County Hospital Board of Directors RB,
Series 1991A (PRE) 6.60 4/01/2020 2,577
225 Miami-Dade County GO, Series 1998
(INS)(3) 5.75 11/01/2000 225
235 Orange County Tourist Development Tax RB,
Series 1998A (INS)(2) 4.00 10/01/2000 235
200 Pinellas County Health Facilities Auth.
RB, Series 1993 (INS)(1) 4.70 11/15/2000 200
300 Sarasota County RB, Series 1993 (INS)(1) 4.40 10/01/2000 300
3,500 South Broward Hospital District RB,
Series 1991 (PRE) 6.61 5/13/2021 3,606
1,070 Sunrise Utility Systems RB,
Series 1996A (INS)(2),(a) 4.12 10/01/2000 1,070
250 Tampa Health Systems RB,
Series 1998A-1 (INS)(1) 4.50 11/15/2000 250
-------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $15,115) 15,115
-------------------------------------------------------------------------------
Total investments (cost: $110,330) $110,330
===============================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Hospitals 19.7%
Multifamily Housing 18.4
Health Care - Miscellaneous 12.4
Banks - Major Regional 9.9
Education 7.1
Escrowed Bonds 5.6
Buildings 5.2
Community Service 4.4
Single-Family Housing 3.3
Sales Tax 3.2
Electric/Gas Utilities - Municipal 2.6
Appropriated Debt 2.3
Nursing/Continuing Care Centers 2.1
Electric Utilities 1.4
Water/Sewer Utilities - Municipal 1.0
Other 0.9
----
Total 99.5%
====
NOTES TO PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
SPECIFIC NOTES
(a) Zero-coupon security. Rate represents the effective yield at date of
purchase. For the USAA Florida Tax-Free Income Fund and USAA Florida Tax-Free
Money Market Fund, these securities represented 0.8% and 1.0% of net assets,
respectively.
(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, 2000, this security represents 2.7% of the USAA
Florida Tax-Free Money Market Fund's net assets.
(c) These securities are not registered under the Securities Act of 1933.
Resales of these securities in the United States may occur in exempt
transactions to qualified institutional buyers as defined by Rule 144A, and as
such are generally deemed by the Manager to be liquid under guidelines
established by the Board of Directors. At September 30, 2000, these securities
represented 1.4% and 19.3% of the USAA Florida Tax-Free Income Fund's and USAA
Florida Tax-Free Money Market Fund's net assets, respectively.
(d) At September 30, 2000, the cost of securities purchased on a
delayed-delivery basis for the USAA Florida Tax-Free Income Fund was $2.3
million.
(e) At September 30, 2000, these securities were segregated to cover
delayed-delivery purchases.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
STATEMENTS OF ASSETS AND LIABILITIES
(IN THOUSANDS)
SEPTEMBER 30, 2000
(UNAUDITED)
USAA USAA
FLORIDA FLORIDA TAX-FREE
TAX-FREE MONEY MARKET
INCOME FUND FUND
------------------------------
ASSETS
Investments in securities, at market value
(identified cost of $174,066 and $110,330,
respectively) $174,921 $110,330
Cash 16 208
Receivables:
Capital shares sold 22 63
Interest 3,448 496
------------------------------
Total assets 178,407 111,097
------------------------------
LIABILITIES
Securities purchased 2,262 -
Capital shares redeemed 23 158
USAA Investment Management Company 51 18
USAA Transfer Agency Company 7 6
Accounts payable and accrued expenses 24 25
Dividends on capital shares 268 18
------------------------------
Total liabilities 2,635 225
------------------------------
Net assets applicable to capital
shares outstanding $175,772 $110,872
==============================
REPRESENTED BY:
Paid-in capital $183,405 $110,872
Accumulated net realized loss on investments (8,488) -
Net unrealized appreciation of investments 855 -
------------------------------
Net assets applicable to capital
shares outstanding $175,772 $110,872
==============================
Capital shares outstanding, unlimited number
of shares authorized, $.001 par value 19,011 110,872
==============================
Net asset value, redemption price, and
offering price per share $ 9.25 $ 1.00
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2000
(UNAUDITED)
USAA USAA
FLORIDA FLORIDA TAX FREE
TAX-FREE MONEY MARKET
INCOME FUND FUND
------------------------------
Net investment income:
Interest income $5,018 $2,432
------------------------------
Expenses:
Management fees 304 198
Transfer agent's fees 41 36
Custodian's fees 31 25
Postage 12 5
Shareholder reporting fees 5 5
Trustees' fees 5 5
Registration fees 1 -
Professional fees 16 16
Other 4 4
------------------------------
Total expenses before reimbursement 419 294
Expenses reimbursed - (14)
------------------------------
Total expenses after reimbursement 419 280
------------------------------
Net investment income 4,599 2,152
------------------------------
Net realized and unrealized gain on investments:
Net realized gain 27 -
Change in net unrealized appreciation/
depreciation 1,897 -
------------------------------
Net realized and unrealized gain 1,924 -
------------------------------
Increase in net assets resulting from operations $6,523 $2,152
==============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
SIX-MONTH PERIOD ENDED SEPTEMBER 30, 2000, AND YEAR ENDED MARCH 31, 2000
(UNAUDITED)
<CAPTION>
USAA USAA
FLORIDA TAX-FREE FLORIDA TAX-FREE
INCOME FUND MONEY MARKET FUND
-------------------------------------------------------------------------
9/30/2000 3/31/2000 9/30/2000 3/31/2000
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
From operations:
Net investment income $ 4,599 $ 9,242 $ 2,152 $ 3,288
Net realized gain (loss) on investments 27 (7,482) - -
Change in net unrealized appreciation/
depreciation of investments 1,897 (9,330) - -
-------------------------------------------------------------------------
Increase (decrease) in net assets
resulting from operations 6,523 (7,570) 2,152 3,288
-------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income (4,599) (9,242) (2,152) (3,288)
-------------------------------------------------------------------------
From capital share transactions:
Proceeds from shares sold 12,021 50,035 43,004 214,681
Dividend reinvestments 2,910 5,910 2,018 3,044
Cost of shares redeemed (11,245) (50,935) (45,945) (204,546)
-------------------------------------------------------------------------
Increase (decrease) in net assets
from capital share transactions 3,686 5,010 (923) 13,179
-------------------------------------------------------------------------
Net increase (decrease) in net assets 5,610 (11,802) (923) 13,179
Net assets:
Beginning of period 170,162 181,964 111,795 98,616
-------------------------------------------------------------------------
End of period $175,772 $170,162 $110,872 $111,795
=========================================================================
Change in shares outstanding:
Shares sold 1,314 5,333 43,004 214,681
Shares issued for dividends reinvested 318 635 2,018 3,044
Shares redeemed (1,234) (5,515) (45,945) (204,546)
-------------------------------------------------------------------------
Increase (decrease) in
shares outstanding 398 453 (923) 13,179
=========================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(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 the USAA Florida
Tax-Free Income Fund and USAA 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
USAA Florida Tax-Free Money Market Fund has a further objective of preserving
capital and maintaining liquidity.
A. SECURITY VALUATION - Investments in the USAA 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
judgment, these prices are readily available and are representative of the
securities' market values. For many securities, such prices are not readily
available. The Service generally prices these securities based on methods that
include consideration of yields or prices of tax-exempt securities of comparable
quality, coupon, maturity, and type; indications as to values from dealers in
securities; and general market conditions. Securities that cannot be valued by
the Service and all other assets are valued in good faith at fair value using
methods determined by the Manager under the general supervision of the Board of
Trustees. 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 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 tax-exempt 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 three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities. Subject to availability under both agreements with CAPCO, each Fund
may borrow from CAPCO an amount up to 5% of its total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, each Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 15% of its total assets.
The Funds had no borrowings under any of these agreements during the six-month
period ended September 30, 2000.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made annually in the succeeding fiscal year or
as otherwise required to avoid the payment of federal taxes. At September 30,
2000, the USAA Florida Tax-Free Income Fund had capital loss carryovers for
federal income tax purposes of $8,488,000 which, if not offset by subsequent
capital gains, will expire between 2003-2009. It is unlikely that the Trust's
Board of Trustees will authorize a distribution of capital gains realized in the
future until the capital loss carryovers have been utilized or expire.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the
six-month period ended September 30, 2000, were as follows:
USAA FLORIDA TAX-FREE USAA FLORIDA TAX-FREE
INCOME FUND MONEY MARKET FUND
---------------------------------------------------
Purchases $27,241,000 $114,536,000
Sales/maturities $24,465,000 $115,512,000
For the USAA Florida Tax-Free Income Fund, cost of purchases and proceeds from
sales/maturities exclude short-term securities.
Gross unrealized appreciation and depreciation of investments at September 30,
2000, were as follows:
Appreciation Depreciation Net
------------------------------------------------
USAA Florida Tax-Free
Income Fund $3,475,000 ($2,620,000) $855,000
(5) TRANSACTIONS WITH MANAGER
A. MANAGEMENT FEES - USAA Investment Management Company (the Manager) carries
out each Fund's investment policies and manages each Fund's portfolio.
Management fees are computed as a percentage of aggregate average net assets
(ANA) of both Funds combined, which on an annual basis is equal to 0.50% of the
first $50 million, 0.40% of that portion over $50 million but not over $100
million, and 0.30% of that portion over $100 million. These fees are allocated
monthly on a proportional basis to each Fund based upon ANA.
The Manager has voluntarily agreed to limit the annual expenses of each Fund to
0.50% of its average net assets through August 1, 2001.
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
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>
(7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
USAA FLORIDA TAX-FREE INCOME FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
-----------------------------------------------------------------
2000 2000 1999 1998 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 9.14 $ 10.02 $ 9.94 $ 9.33 $ 9.26 $ 9.09
Net investment income .25 .49 .50 .51 .52 .52
Net realized and
unrealized gain (loss) .11 (.88) .08 .61 .07 .17
Distributions from net
investment income (.25) (.49) (.50) (.51) (.52) (.52)
------------------------------------------------------------------------------
Net asset value at
end of period $ 9.25 $ 9.14 $ 10.02 $ 9.94 $ 9.33 $ 9.26
==============================================================================
Total return (%)* 3.95 (3.85) 5.91 12.22 6.51 7.66
Net assets at end
of period (000) $175,772 $170,162 $181,964 $145,921 $ 95,483 $ 69,079
Ratio of expenses to
average net assets (%) .49(a) .48 .47 .50 .50 .50
Ratio of expenses
to average net
assets excluding
reimbursements (%) - - - .51 .57 .67
Ratio of net investment
income to average
net assets (%) 5.35(a) 5.25 4.96 5.21 5.57 5.52
Portfolio turnover (%) 14.52 62.32 25.28 27.48 44.75 88.20
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
</TABLE>
<TABLE>
USAA FLORIDA TAX-FREE MONEY MARKET FUND
<CAPTION>
SIX-MONTH
PERIOD ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
----------------------------------------------------------------
2000 2000 1999 1998 1997 1996
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .02 .03 .03 .03 .03 .03
Distributions from net
investment income (.02) (.03) (.03) (.03) (.03) (.03)
------------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================================
Total return (%)* 1.94 3.14 3.05 3.34 3.20 3.51
Net assets at end
of period (000) $110,872 $111,795 $ 98,616 $ 89,799 $ 87,053 $ 71,224
Ratio of expenses to
average net assets (%) .50(a) .50 .50 .50 .50 .50
Ratio of expenses
to average net
assets excluding
reimbursements (%) .52(a) .53 .51 .52 .57 .64
Ratio of net investment
income to average
net assets (%) 3.83(a) 3.13 3.00 3.28 3.15 3.45
(a) ANNUALIZED. THE RATIO IS NOT NECESSARILY INDICATIVE OF 12 MONTHS OF OPERATIONS.
* ASSUMES REINVESTMENT OF ALL DIVIDEND INCOME DISTRIBUTIONS DURING THE PERIOD.
</TABLE>
TRUSTEES
Robert G. Davis, CHAIRMAN OF THE BOARD
Michael J.C. Roth, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason
David G. Peebles
Michael F. Reimherr
Laura T. Starks
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER, AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT LEGAL COUNSEL
USAA Shareholder Account Services Goodwin, Procter & Hoar LLP
9800 Fredericksburg Road Exchange Place
San Antonio, Texas 78288 Boston, Massachusetts 02109
CUSTODIAN INDEPENDENT AUDITORS
State Street Bank and Trust Company KPMG LLP
P.O. Box 1713 112 East Pecan, Suite 2400
Boston, Massachusetts 02105 San Antonio, Texas 78205
TELEPHONE ASSISTANCE HOURS INTERNET ACCESS
Call toll free - Central Time usaa.com(ServiceMark)
Monday - Friday 6 a.m. to 10 p.m.
Saturdays 8:30 a.m. to 5 p.m.
Sundays 11:30 a.m. to 8 p.m.
FOR ADDITIONAL INFORMATION ON MUTUAL FUNDS
1-800-531-8181, (in San Antonio) 456-7200
For account servicing, exchanges, or redemptions
1-800-531-8448, (in San Antonio) 456-7202
RECORDED MUTUAL FUND PRICE QUOTES
24-hour service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
MUTUAL FUND USAA TOUCHLINE(REGISTERED TRADEMARK)
(from touch-tone phones only)
For account balance, last transaction, fund prices,
or to exchange or redeem fund shares
1-800-531-8777, (in San Antonio) 498-8777
