Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Distributions to Shareholders 7
Independent Auditors' Report 8
Statement of Assets and Liabilities 9
Portfolio of Investments in Securities 10
Notes to Portfolio of Investments 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Notes to Financial Statements 18
Important Information:
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are now "streamlined."
One copy of each report will be sent to each address, instead of our
previous practice of sending one report to every registered owner. For many
shareholders and their families, this eliminates duplicate copies, saving
paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one
report per registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a Mutual Fund Representative at 1-800-531-8448 during business
hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA Growth &
Income Fund, managed by USAA Investment Management Company (IMCO). It may
be used as sales literature only when preceded or accompanied by a current
prospectus which gives further details about the fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(copyright)1995, 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 29 funds by investment objective as of June 30, 1995. If
you're interested in more information, please call us at 1-800-531-1087 for
a prospectus. Please read the prospectus carefully before investing.
<TABLE>
<CAPTION>
Average Annual Total Return**
Investment Inception Since 7-Day 30-Day***
Objective Date 1 yr 5 yrs 10 yrs Inception Simple SEC
Capital Appreciation
<S> <C> <C> <C> <C> <C> <C> <C>
Aggressive Growth 10/19/81 39.72 11.12 9.78 - - -
Emerging Markets 11/7/94 - - - (.50 ) - -
Gold 8/15/84 6.88 4.66 2.86 - - -
Growth 4/5/71 26.34 12.37 11.75 - - -
Growth & Income 6/1/93 21.19 - - 10.49 - -
International 7/11/88 4.23 7.89 - 9.33 - -
World Growth 10/1/92 7.88 - - 11.71 - -
Asset Allocation
Growth and Tax
Strategy**** 1/11/89 11.09 8.59 - 8.93 - 4.06
Cornerstone
Strategy**** 8/15/84 9.25 9.24 12.00 - - -
Income - Taxable
GNMA 2/1/91 11.00 - - 8.08 - 6.79
Income 3/4/74 15.07 10.00 10.04 - - 6.87
Income Stock 5/4/87 19.52 12.26 - 11.44 - -
Short-Term Bond 6/1/93 8.40 - - 4.83 - 6.77
Income - Tax Exempt
Long-Term 3/19/82 7.28 7.66 8.60 - - 5.79
Interediate-Term 3/19/82 7.60 7.71 7.82 - - 5.22
Short-Term 3/19/82 5.23 5.52 5.76 - - 4.36
California Bond* 8/1/89 8.96 7.66 - 7.23 - 5.79
Florida Tax-Free Income*10/1/93 7.82 - - .09 - 5.71
New York Bond* 10/15/90 7.36 - - 8.65 - 5.60
Texas Tax-Free Income* 8/1/94 - - - 8.40 - 5.63
Virginia Bond* 10/15/90 8.79 - - 8.31 - 5.78
Money Market
Money Market 2/2/81 5.33 4.76 6.06 - 5.75 -
Tax Exempt Money Market 2/6/84 3.34 3.57 4.45 - 3.82 -
Treasury Money Market
Trust 2/1/91 5.06 - - 4.01 5.69 -
California Money Market* 8/1/89 3.31 3.36 - 3.71 3.74 -
Florida Tax-Free Money
Market* 10/1/93 3.23 - - 2.72 3.74 -
New York Money Market* 10/15/90 3.15 - - 2.98 3.69 -
Texas Tax-Free Money
Market* 8/1/94 - - - 3.06 3.72 -
Virginia Money Market* 10/15/90 3.25 - - 3.18 3.61 -
* Shares of the state funds are authorized for sale only to residents of
the states listed above.
</TABLE>
** Total return equals income yield 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 represents past performance and is 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.
An investment in any money market fund is neither insured nor guaranteed
by the U.S. government and there is no assurance that any of the funds
will maintain a stable net asset value of $1 per share.
Some tax-exempt income may be subject to state or local taxes or the
federal alternative minimum tax.
Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
*** Calculated as prescribed by the Securities and Exchange Commission.
**** Formerly known as Balanced Portfolio Fund and Cornerstone Fund,
respectively.
Message from the President
" . . . I did decide to practice one
thing I have preached for many years."
Most of these messages look back at events. This one looks forward.
On January 29, 1995, my wife and I became grandparents. Karl Joseph
Marbach was born to Alexandra, my wife's daughter, and her husband
Keith Marbach. When my wife learned of the name Alexandra and Keith
had chosen, she smiled. She noted that my middle names are Joseph Carl,
and she said, "I think this kid's college education is secure."
"Secure" may be an exaggeration, but I did decide to practice one thing
I have preached for many years. I told Alexandra to get the little fellow
a social security number, and as soon as she furnished that to me (well,
almost as soon), I opened an InveStart((registered trademark)) account for
Karl Joseph. This account, in the USAA Income Stock Fund, was opened for
$100, and will have $50 per month added to it by an electronic funds
transfer from my checking account.
InveStart is a program that we have offered for many years. For now it
is available for use with the Income Stock Fund, Cornerstone Strategy
Fund and Money Market Fund.(1) That lineup will soon expand. We
originally intended it for young USAA members as a good way to start
investing. We found, however, that many grandparents were using it as I
just did.
The effect for Karl Joseph can be quite powerful. It is well documented
that the stock market, as measured by the S&P 500 stock index, has
produced a total return of 10% for the last 18 years ended July 31, 1995
(Source: Lipper Analytical Services, Inc.).(2)
The chart on the next page shows the growth of an account with a $100
initial investment and $50 subsequent monthly investments for 18 years
at an 8% return - a hypothetical figure based upon and more conservative
than historical results. It is for illustrative purposes only and should
not be considered an indication of fund performance by any of the USAA
Family of Funds.
[Photograph of Michael J. C. Roth, President and Chairman of the Board
appears here]
A systematic plan like this doesn't assure a profit or protect against
loss in declining markets. Since such a plan involves continuous investment
in securities regardless of fluctuating price levels of such securities,
you should consider your financial ability to continue purchases through
periods of low and high price levels.
[A graph is shown here which shows the growth of an account with a $100
initial investment and $50 subsequent monthly investments for 18 years
at an 8% return - a hypothetical figure based upon and more conservative
than historical results. The horizontal axis shows the years, and the
vertical axis shows the dollar amount. The beginning value is $100 and the
ending value is $24,209.]
In 18 years, college will cost more than it does now. This sum today
would go a long way toward an education in an in-state public university.
In 18 years it will not buy as much education as it does today, but it
will be quite meaningful. If we add to the cash flow on birthdays, or if
other relatives kick in, it will be even more meaningful. And it
is relatively painless.
I promise to keep you posted on the progress of Karl Joseph's education
fund. This is not theoretical; it is real.
Sincerely,
Michael Joseph Carl Roth
President and
Vice Chairman of the Board
(1)An investment in a money market 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 per share. Please
read the prospectus carefully before you invest or send money.
(2)Past performance is no guarantee of future results.
Hypothetical Illustration:
Growth & Income Fund
OBJECTIVE: Capital growth and current income.
Types of Investments: Primarily dividend-paying common stocks.
7/31/95
Net Assets $208.5 Million
Net Asset Value Per Share $12.07
Average Annual Total Return as of 7/31/95
1 Year 20.30%
Since inception on June 1, 1993 11.64%
[A graph is shown here which is a comparison of the change in value
of a $10,000 investment, for the period of 6/1/93 to 7/31/95, with
dividends and capital gains reinvested. The ending value of each
item graphed is as follows: S&P 500 Index - $13,244 and the USAA
Growth & Income Fund - $12,711.]
The S&P 500 Index is an unmanaged index representing the 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.
Total return equals income yield 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 income
dividends and capital gain distributions. The performance data quoted
represents past performance and is 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.
Message from the Manager
[Photograph of R. David Ullom, Portfolio Manager, appears here]
Fund Performance
The USAA Growth & Income Fund's fiscal year-end performance as of
July 31, 1995, shown on the preceding page and below, has improved
considerably since the July 31, 1994 annual report and the latest
semiannual report.* During they we continued to adhere to our
value-oriented investment philosophy, which places emphasis on
selecting securities based on earnings, cash flow, dividends, asset
values and our assessment of a company's management. We do not base
investment selections on economic forecasts or market outlooks.
Instead, we place importance on being a patient investor and viewing the
investment process over an extended period of time.
What Helped
Investments in aerospace/defense, healthcare, foods, and tobacco had the
most significant influence on the Fund's performance since all of these
areas boasted above-average appreciation. More specifically, the Fund's
investment weighting in aerospace (Boeing, Rockwell and B.F. Goodrich)
and healthcare (SmithKline Beecham, Merck and American Home Products)
provided superior returns. Various investments in technology-oriented
companies such as National Semiconductor and First Financial Management
also contributed to the performance.
What Hindered
Detracting from the Fund's performance in the first half of the fiscal
year were our investments in various companies providing intermediate
goods and services (chemicals, machinery, energy and paper & forest products).
Also impeding performance were investments in consumer cyclicals, primarily
automobiles.
*Average Annual Total Return
7/31/94 1/31/95 7/31/95
------- ------- -------
1 year 6.40% -1.04% 20.30%
Since
inception
(6/1/93) 4.80% 4.42% 11.64%
Past performance is no guarantee of future results.
Outlook
As discussed, our investment philosophy is value-oriented and not
predicated on a forecast for the U.S. economy or stock markets. Therefore,
we will continue to invest in securities that meet our value criteria. More
specifically, we will continue to invest in select cyclical industries such
as chemicals, paper & forest products, and railroads.
Percentages of the net assets in the portfolio of the investments referenced
in the Message from the Manager are as follows: aerospace/defense 7.1%;
healthcare-related 6.0% (includes healthcare-diversified and drugs); foods
2.7%; tobacco 4.4%; Boeing 3.2%; Rockwell 1.5%; B.F. Goodrich 2.3%; SmithKline
Beecham 1.8%; Merck 1.2%; American Home Products 1.5%; National Semiconductor
1.6%; First Financial Management 1.3%; chemicals 5.8%; machinery 1.4%;
oil-related 7.6% (includes oil-domestic, oil-exploration and production, oil-
international, oil well equipment & service); paper & forest products 4.1%;
automobiles 2.2%, and railroads 1.4%.
See page 10 for a complete listing of the Portfolio of Investments in
Securities.
[A pie chart is shown here depicting the Portfolio Investment Diversification
as of July 31, 1995 of the USAA Growth & Income Fund to be: Intermediate
Goods & Services - 28.6%, Consumer Staples - 18.6%, Capital Goods - 13.3%,
Consumer Cyclicals - 13.0%, and Credit Sensitive - 27.2%]
Top 10 Holdings
(% of Net Assets)
Boeing Co. 3.2
B.F. Goodrich 2.3
Xerox 2.3
Ball Corp. 2.1
Occidental Petroleum 1.9
SmithKline Beecham Adr 1.8
Dow Chemical 1.7
WMX Technologies 1.7
AT&T 1.7
Universal Corp. 1.6
Top 10 Industries
(% of Net Assets)
Telephones 7.1
Aerospace/Defense 7.1
Chemicals 5.8
Tobacco 4.4
Paper & Forest Products 4.1
Real Estate Invest Trusts 3.4
Oil - Domestic 3.1
Drugs 3.0
Healthcare - Diversified 3.0
Retail stores - Specialty 3.0
Distributions to Shareholders
USAA Growth & Income Fund completed its fiscal year on July 31, 1995.
As required by Federal Law (Internal Revenue Code of 1986, as amended, and
the Regulations thereunder), the following sets forth per share data
concerning the portions of the dividend distributions which represent
domestic dividend income qualifying for the dividends received deduction,
and short-term and long-term capital gains for the year ended July 31, 1995.
The per share data on this schedule reflects distributions related to
earnings for the fiscal year ended July 31, 1995. The per share data on
this table may not agree with other disclosures concerning distributions
which occurred during the fiscal year.
Dividend income -
domestic (qualifying) $ .2300
Short-term capital gain -
(treated as ordinary income) .0400
Long-term capital gain .1626
----------
TOTAL DISTRIBUTIONS $ .4326
==========
Independent Auditors' Report
The Shareholders and Board of Directors
USAA Mutual Fund, Inc.:
We have audited the accompanying statement of assets and liabilities and
portfolio of investments in securities of the Growth & Income Fund of USAA
Mutual Fund, Inc. as of July 31, 1995, the related statement of operations
for the year ended July 31, 1995, the statements of changes in net assets
for the year ended July 31, 1995 and the ten-month period ended July 31,
1994, and the financial highlights information presented in note 6 to the
financial statements for each of the periods in the three-year period
ended July 31, 1995. These financial statements and the financial highlights
information are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
and the financial highlights information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
the financial highlights information are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of July 31, 1995, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and the financial highlights
information referred to above present fairly, in all material respects, the
financial position of the Growth & Income Fund of USAA Mutual Fund, Inc. as
of July 31, 1995, the results of its operations for the year ended July 31,
1995, the changes in its net assets for the year ended July 31, 1995 and
the ten-month period ended July 31, 1994, and the financial highlights
information for each of the periods in the three-year period ended July 31,
1995, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
September 5, 1995
Growth & Income Fund
Statement of Assets and Liabilities
(In Thousands)
July 31, 1995
Assets
Investments in securities, at market value
(identified cost of $181,811) $ 210,000
Cash 277
Receivables:
Capital shares sold 299
Dividends 308
------------
Total assets 210,884
------------
Liabilities
Securities purchased 2,019
Capital shares redeemed 165
USAA Investment Management Company 104
USAA Transfer Agency Company 43
Accounts payable and accrued expenses 63
------------
Total liabilities 2,394
------------
Net assets applicable to capital
shares outstanding $ 208,490
============
Represented by:
Paid-in capital $ 178,473
Accumulated undistributed net investment income 236
Accumulated net realized gain on investments 1,592
Net unrealized appreciation of investments 28,189
------------
Net assets applicable to capital
shares outstanding $ 208,490
============
Capital shares outstanding 17,271
============
Net asset value, redemption price, and offering
price per share $ 12.07
============
See accompanying notes to financial statements.
Growth & Income Fund
Portfolio of Investments in Securities
July 31, 1995
Market
Number Value
of Shares Security (000)
--------- -------- -----
Common Stock (95.1%)
Aerospace/Defense (7.1%)
90,000 B.F. Goodrich Co. $ 4,882
101,000 Boeing Co. 6,767
68,000 Rockwell International Corp. 3,103
---------
14,752
---------
Aluminum (1.6%)
60,000 Aluminum Co. of America 3,413
---------
Automobiles (2.2%)
34,000 Chrysler Corp. 1,657
104,000 Ford Motor Co. 3,003
---------
4,660
---------
Bank Holding Companies - Money Center (1.4%)
46,000 Bakers Trust New York Corp. 2,967
---------
Bank Holding Companies - Other Major (1.4%)
54,000 BankAmerica Corp. 2,916
---------
Beverages - Soft Drink (1.3%)
59,000 PepsiCo, Inc. 2,766
---------
Brokerage Firms (1.5%)
62,000 Dean Witter, Discover & Co. 3,131
---------
Chemicals (5.8%)
85,000 Avery Dennison Corp. 3,411
49,000 Dow Chemical Co. 3,632
40,900 Olin Corp. 2,367
75,000 Union Carbide Corp. 2,606
---------
12,016
---------
Chemicals - Specialty (1.3%)
85,000 Morton International, Inc. 2,700
---------
Computer Software & Service (2.3%)
30,000 First Financial Management Corp. $ 2,625
120,000 Novell, Inc.* 2,175
---------
4,800
---------
Containers - Metals & Glass (2.1)%
116,000 Ball Corp. 4,292
---------
Drugs (3.0%)
50,000 Merck & Co., Inc. 2,581
84,000 SmithKline Beecham plc ADR Units 3,780
---------
6,361
---------
Electric Power (2.3%)
77,000 CINergy Corp. 2,002
63,000 Houston Industries, Inc. 2,756
---------
4,758
---------
Engineering & Construction (0.3%)
85,000 Morrison Knudsen Corp. 659
---------
Entertainment (1.4%)
66,000 Time Warner, Inc. 2,830
---------
Foods (2.7%)
90,000 Dean Foods Co. 2,542
56,000 Ralston-Talston Purina Group 2,996
---------
5,538
---------
Healthcare - Diversified (3.0%)
40,000 American Home Products Corp. 3,160
44,000 Johnson & Johnson 3,157
---------
6,317
---------
Homebuilding (1.3%)
100,000 Centex Corp. 2,800
---------
Household Products (1.3%)
40,000 Procter & Gamble Co. 2,755
---------
Insurance - Multi/Line Companies (1.3%)
43,100 Aetna Life & Casualty Co. 2,667
---------
Insurance - Property/Casualty (2.7%)
40,789 Allstate Corp. 1,275
36,750 Americal International Group, Inc. 2,756
62,000 PartnerRe Holdings Ltd. 1,565
---------
5,596
---------
Leisure Time (1.2%)
122,800 Brunswick Corp. 2,471
---------
Machinery - Diversified (1.4%)
156,000 BW/IP, Inc. 2,964
---------
Manufacturing - Diversified Industries (1.3%)
90,000 Hillenbrand Industries, Inc. 2,678
---------
Medical Products & Supplies (1.6%)
104,000 C.R. Bard, Inc. 3,276
---------
Metals - Miscellaneous (1.6%)
100,000 Inco Ltd. 3,388
---------
Natural Gas Distribution - Pipelines (2.1%)
84,000 NICOR, Inc. 2,132
77,000 Sonat, Inc. 2,310
---------
4,442
---------
Office Equipment & Supplies (2.3%)
40,000 Xerox Corp. 4,765
---------
Oil - Domestic (3.1%)
177,000 Occidental Petroleum Corp. 3,982
88,000 Unocal Corp. 2,475
---------
6,457
---------
Oil - Exploration & Production (1.5%)
112,000 Apache Corp. 3,066
---------
Oil - International (1.4%)
39,000 Exxon Corp. 2,828
---------
Oil Well Equipment & Service (1.6%)
82,000 Halliburton Co. 3,331
---------
Paper & Forest Products (4.1%)
205,000 Fort Howard Corp.* 2,973
180,000 Jefferson Smurfit Corp.* 2,666
64,000 Weyerhaeuser Co. 2,992
---------
8,631
---------
Pollution Control (1.7%)
116,000 WMX Technologies, Inc. 3,625
---------
Railroads (1.4%)
40,000 Norfolk Southern Corp. 2,905
---------
Real Estate Investment Trusts (3.4%)
105,000 Developers Diversified Realty Corp. 3,189
46,000 Equity Residential Properties Trust 1,357
153,000 Storage Equities, Inc. 2,620
---------
7,166
---------
Retail Stores - Department Stores (1.5%)
73,000 May Department Stores Co. 3,166
---------
Retail Stores - General Merchandising (2.1%)
60,000 J.C.Penney Company Inc. 2,902
44,000 Sears, Roebuck & Co. 1,436
---------
4,338
---------
Retail Stores - Specialty (3.0%)
144,000 OfficeMax, Inc.* 3,240
185,000 Phillips-Van Heusen Corp. 2,914
---------
6,154
---------
Telephones (7.1%)
66,000 American Telephone & Telegraph Co. 3,481
131,000 COMSAT Corp. 3,029
83,000 GTE Corp. 2,947
53,000 NYNEX Corp. 2,186
95,000 Sprint Corp. 3,254
---------
14,897
---------
Tobacco (4.4%)
38,000 Philip Morris Companies, Inc. 2,722
106,000 RJR Nabisco Holdings Corp. 2,928
160,000 Universal Corp. 3,440
---------
9,090
---------
Total common stocks (cost: $171,080) 198,332
---------
Preferred Stocks (1.6%)
33,000 National Semiconductor Corp. depositary
shares, $3.25 convertible (cost: $2,297) 3,234
---------
Short-Term (4.0%)
Principal
Amount Coupon
(000) Rate Maturity
----- ---- --------
Commerical Paper
$4,214 General Motors Acceptance
Corp. 5.95% 8/01/95 4,215
4,220 Prudential Funding Corp. 5.75 8/02/95 4,219
--------
Total short-term (cost: $8,434) 8,434
--------
Total investments (cost: $181,811) $210,000
========
------------
*Non-income producing.
Growth & Income Fund
Notes to Portfolio of Investments
July 31, 1995
General Notes
Market 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.
See accompanying notes to financial statements.
Growth & Income Fund
Statement of Operations
(In Thousands)
Year ended July 31, 1995
Net investment income:
Income:
Dividends $ 4,792
Interest 439
----------
Total income 5,231
----------
Expenses:
Management fee 977
Transfer agent's fees 412
Custodian's fees 73
Postage 60
Shareholder reporting fees 22
Directors' fees 3
Registration fees 47
Audit fees 32
Legal fees 5
Other 8
----------
Total expenses 1,639
----------
Net investment income 3,592
----------
Net realized and unrealized gain on investments:
Net realized gain 3,109
Change in net unrealized appreciation/depreciation 25,689
----------
Net realized and unrealized gain 28,798
----------
Increase in net assets resulting from operations $ 32,390
==========
See accompanying notes to financial statements.
Growth & Income Fund
Statements of Changes in Net Assets
(In Thousands)
Year ended July 31, 1995
and Ten-month period ended July 31, 1994
1995 1994
---- ----
From operations:
Net investment income $ 3,592 $ 1,766
Net realized gain on investments 3,109 191
Change in net unrealized appreciation
/depreciation of investments 25,689 1,093
---------- ----------
Increase in net assets resulting from
operations 32,390 3,050
---------- ----------
Distributions to shareholders from:
Net investment income (3,472) (1,884)
---------- ----------
Net realized gains (1,568) (159)
---------- ----------
From capital share transactions:
Shares sold 75,855 86,539
Shares issued for dividends reinvested 4,882 1,959
Shares redeemed (34,219) (24,489)
---------- ----------
Increase in net assets from capital
share transactions 46,518 64,009
---------- ----------
Net increase in net assets 73,868 65,016
Net assets:
Beginning of period 134,622 69,606
---------- ----------
End of period $ 208,490 $ 134,622
========== ==========
Undistributed net investment income included in net assets:
Beginning of period $ 116 $ 234
========== ==========
End of period $ 236 $ 116
========== ==========
Change in shares outstanding:
Shares sold 6,987 8,398
Shares issued for dividends reinvested 461 193
Shares redeemed (3,176) (2,397)
---------- ----------
Increase in shares outstanding 4,272 6,194
========== ==========
Authorized shares of $.01 par value 25,000 25,000
========== ==========
See accompanying notes to financial statements.
Growth & Income Fund
Notes to Financial Statements
(In Thousands)
July 31, 1995
(1) Summary of Significant Accounting Policies
USAA MUTUAL FUND, INC. (the Company), registered under the Investment
Company Act of 1940, is a diversified, open-end management investment
company incorporated under the laws of Maryland consisting of seven
separate funds. The information presented in this annual report
pertains only to the Growth & Income Fund (the Fund).
On November 8, 1993, the Board of Directors of the Company voted to change
the Fund's fiscal year end from September 30 to July 31. The financial
information for the ten-month period ended July 31, 1994 reflects this change.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day
the Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are value at the last sales price on that
exchange.
2. Over-the-counter securities are priced at the last sales price or, if
not available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are stated at
amortized cost which approximates market value.
4. Securities which cannot be valued by the methods set forth above, and
all other assets, are valued in good faith at fair value, using methods
determined by the Manager under the general supervision of the Board of
Directors.
B. Federal taxes - The 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 - As is common in the industry, 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. Dividend income, less foreign taxes,
if any, is recorded on the ex-dividend date. If the ex-dividend date has
passed, certain dividends from foreign securities are recorded upon
notification. Interest income is recorded on the accrual basis. Discounts
and premiums on short-term securities are amortized over the life of
the respective securities.
(2) Line of Credit
The Fund participates with other USAA funds in a joint $150 million
short-term revolving loan agreement (the Agreement) through January 15,
1996, for temporary or emergency purposes, including the meeting of
redemption requests that might otherwise require the untimely disposition
of securities. Subject to availability under this Agreement, the Fund may
borrow up to 5% of the market value of its assets or 10% of the Fund's
assets taken at cost at the time of the borrowing, whichever amount is
less. Borrowings under this Agreement will bear interest at .125% over the
Federal Funds Rate as published by the Federal Reserve Bank of New York or
at .125% over the London Interbank Offered Rate. The Fund had no borrowings
under this Agreement during the year ended July 31, 1995.
(3) Distributions
Distributions of net investment income are made quarterly. Distributions of
realized gains from security transactions not offset by capital losses are
made in the succeeding fiscal year. A long-term capital gain distribution of
$.0926 per share, declared and paid in September 1995, is not reflected in the
accompanying financial statements.
(4) Investment Transactions
Purchases and sales of securities, excluding short-term securities, for the
year ended July 31, 1995 were $75,748 and $30,316, respectively.
Gross unrealized appreciation and depreciation of investments as of July
31, 1995 was $30,537 and $2,348, respectively.
(5) Transactions with Manager
A. Management fees - The investment policy of the Fund and the management
of the Fund's portfolio is carried out by USAA Investment Management
Company (the Manager). The Fund's management fees are computed at .60% of
its annual average net assets.
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 Fund. Shareholder accounting service fees
are based on an annual charge per shareholder account plus out-of-pocket
expenses.
C. Underwriting agreement - The Company has an agreement with the Manager
for exclusive underwriting and distribution of the Fund's shares on a
continuing best efforts basis. This agreement provides that the Manager
will receive no fee or other remuneration for such services.
D. Brokerage services - USAA Brokerage Services, a discount brokerage
service of the Manager, may execute portfolio transactions for the Fund.
The amount of brokerage commissions paid to USAA Brokerage Services
during the year ended July 31, 1995 was $21.
(6) Financial highlights
Per share operating performance for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Ten-Month Four-Month
Year Ended Period Ended Period Ended
July 31, July 31, September 30,
1995 1994 1993**
---- ---- ----
<S> <C> <C> <C>
Net asset value at beginning of
period $ 10.36 $ 10.23 $ 10.00
Net investment income .24(b) .17(b) .03
Net realized and unrealized gain 1.81 .16 .20
Distributions from net
investment income (.23) (.18) -
Distributions of realized capital
gains (.11) (.02) -
--------- --------- ----------
Net asset value at end of
period $ 12.07 $ 10.36 $ 10.23
======== ========== ==========
Total return (%) * 20.30 3.28 2.30
Net assets at end of period $208,490 $ 134,622 $ 69,606
Ratio of expenses to average
net assets (%) 1.01 1.12(a) 1.63(a)
Ratio of net investment income
to average net assets (%) 2.21 1.95(a) 1.87(a)
Portfolio turnover (%) 19.45 13.90 10.68
</TABLE>
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
(b) Calculated using weighted average shares.
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
** Fund commence operations June 1, 1993.
