Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Independent Auditors' Report 7
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes to Portfolio of Investments 19
Statement of Operations 20
Statements of Changes in Net Assets 21
Notes to Financial Statements 22
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
Money Market 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>
Average Annual Total Return**
<CAPTION>
Investment Inception Since 7-Day 30-Day***
Objective Date 1 yr 5 yrs 10 yrs Inception Simple SEC
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION
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.
** 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.
</TABLE>
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)
(Photo of the President and Vice Chairman of the Board, Michael J.C. Roth,
appears here)
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.
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.
Investment Review
Money Market Fund
OBJECTIVE: Highest income consistent with preservation of capital and
maintenance of liquidity.
TYPES OF INVESTMENTS: High quality debt instruments with maturities of
397 days or less.
7/31/95
Net Assets $1,540.1 Million
Net Asset Value Per Share $1.00
Average Annual Total Return as of 7/31/95
1 Year 5.49%
5 Years 4.72%
10 Years 6.04%
[A graph is shown here which is a comparison of the 7-day yield of the USAA
Money Market Fund to the 7-Day Yield of the IBC/Donoghue's Money Fund
Averages/First Tier from 7/94 to 1/95. The vertical axis shows the yield and
the horizontal axis shows the time period. The 7-day yield as of 7-25-95 for
the USAA Money Market Fund is 5.61% and 7-day yield as of 7-25-95 for the
IBC/Donogue's Money Fund Averages/First Tier is 5.29%.]
The graph tracks the Fund's yield for one year compared to a benchmark:
IBC/Donoghue's Money Fund Averages/First Tier, an average of first-tier
major money market fund yields. While past performance is no guarantee
of future results, the Fund consistently outperformed the benchmark.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gain distributions. An
investment in this Fund is neither insured nor guaranteed by the U.S.
government, and there can be no assurance that the Fund will maintain a
stable net asset value of $1.00 per share.
Message from the Manager
(Photo of the Portfolio Manager, J. Eric Thorderson, appears here)
Portfolio Position
We started out 1995 with a high degree of uncertainty regarding the
direction of interest rates. As you all are aware, 1994 was a period of
rapidly rising interest rates. In our last report dated January 31,
1995, we stated that we felt we were closer to the end of the tightening
cycle than the beginning. Now, in the span of several short months,
interest rates have gone from a rising, or tightening environment to a
falling, or easing one.
Despite fluctuations in interest rates, the strategy of the USAA Money
Market Fund remains the same. This is consistent with our belief that it
is virtually impossible to forecast interest rates. Our basic goal is to
maintain a portfolio of competitive-yielding, high-quality securities.
We review all the securities in the Fund in relation to the current market
with a focus on such important factors as liquidity, credit quality, yield
and maturity.
We use the same stringent criteria to scrutinize potential new
purchases. In addition, we consider how a new security will impact the
Fund if it is purchased. For example, governmental regulation limits the
average maturity of every money market fund to 90 days or less and the
maturity of any one security to 397 days or less. Therefore, we avoid
any security that would put the Fund in violation of these restrictions.
Most of our analytical effort is done prior to purchasing the security
because we prefer to hold it until maturity and not sell it unless it is
absolutely necessary. Anytime we have to sell a security, we risk losing
a portion of the principal. If we are comfortable with a security from
the very beginning and hold it until it matures, this risk is eliminated.
Although we do not forecast interest rates, we monitor them very
closely. Investment theory would suggest that if rates are trending
higher, purchasing securities with shorter maturities would be in the
best interests of the shareholder. Likewise, if rates are headed lower,
securities with longer maturities would be in order. We keep this in
mind as we consider new purchases. In fact, since our last report, the
average maturity of the Fund has been increased by approximately 23 days
to an average of 58 days. In summary, we do everything we can to meet the
objective of the Fund; namely, the highest income consistent with the
preservation of capital and maintenance of liquidity.
[A pie chart is shown here depicting the Portfolio Mix as of July 31, 1995 of
the USAA Money Market Fund to be: Bonds/Notes - 26%, Demand Notes - 24%,
CDs- 6%, Variable Rate Notes - 8% and Commercial Paper - 36%.]
See page 9 for a complete listing of the Portfolio of Investments in
Securities.
[A graph is shown here depicting the growth of $10,000, from 7/31/85 to
7/31/95, invested in the USAA Money Market Fund. The vertical axis shows
the dollar amount, and the horizontal axis shows the time period. The
ending value is $17,981.]
Past performance is no guarantee of future results and the value
of your investment may vary according to the Fund's performance. Income
may be subject to federal, state, or local taxes or to the alternative
minimum tax.
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 Money Market 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 7 to the financial
statements for each of the periods in the five-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 Money Market 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
five-year period ended July 31, 1995, in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
San Antonio, Texas
September 5, 1995
MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(In Thousands)
July 31, 1995
<TABLE>
<S> <C>
Assets
Investments in securities $1,527,743
Cash 9,956
Receivables:
Capital shares sold 2,516
Interest 8,665
----------
Total assets 1,548,880
----------
Liabilities
Capital shares redeemed 7,865
USAA Investment Management Company 154
USAA Transfer Agency Company 240
Accounts payable and accrued expenses 358
Dividends on capital shares 208
-----------
Total liabilities 8,825
-----------
Net assets applicable to capital shares outstanding $1,540,055
===========
Represented by:
Paid-in capital $1,540,055
===========
Capital shares outstanding 1,540,055
===========
Net asset value, redemption price, and offering price per share $ 1.00
===========
See accompanying notes to financial statements.
</TABLE>
Money Market Fund
Categories & Definitions
Portfolio of Investments in Securities
July 31, 1995
This year's Portfolio of Investments in Securities has a new format. The
securities are now divided into four categories - fixed rate instruments,
variable rate demand notes, put bonds, and variable rate notes. We hope this
presentation enhances your understanding of the securities held in the fund.
Fixed Rate Instruments - consist of commercial paper, certificates of deposit,
banker's acceptance, and notes. The coupon rate is constant to maturity.
At maturity, the security pays face value.
Variable Rate Demand Notes (VRDN) - provide the right, on any business
day, to demand, or put, the security for redemption at face value on
either that day or in seven days. The interest rate is adjusted at the
stipulated daily, weekly, or monthly interval to a rate that reflects
current market conditions. The VRDN's effective maturity is the longer
of the next put date or the interest reset date rather than the final
maturity. Most VRDNs possess a credit enhancement.
Put Bonds - provide the right to tender, or put, the bond for redemption
at face value at specific tender dates prior to final maturity. The put
feature shortens the effective maturity to the next tender date.
Variable Rate Notes - Similar to VRDNs in the fact that the interest
rate is adjusted to reflect current market conditions. However, these
securities do not offer the put feature of VRDNs. At maturity, the
security pays face value.
Credit Enhancement (CRE) - adds the financial strength of the provider
to support the underlying obligor's debt service obligations and/or the
put option. The enhancement may be provided by either a high quality bank,
insurance company, or other corporation, or a collateral trust. Typically,
the rating agencies evaluate the security based upon the credit standing
of the credit enhancement.
Money Market Fund
Portfolio of Investments in Securities
(In Thousands)
July 31, 1995
<TABLE>
<CAPTION>
Principal Coupon
Amount Security Rate Maturity Value
--------- --------- -------- -------- -----
<C> <S> <C> <C> <C>
Fixed Rate Instruments (51.6%)
Airports
$10,045 Departments of Airports of Los Angeles,
CA, RB, 1995 Series E, (CRE) 8.38% 5/15/96 $ 10,236
-------
Auto Parts
17,000 Michelin Tire Corp., CP, (CRE) 5.95 8/11/95 16,972
-------
Bank Holding Companies - Money Center
8,968 Bankers Trust New York Corp., CP 6.22 9/05/95 8,914
13,445 Bayerische Landesbank Girozentrale, CP 5.78 9/18/95 13,341
16,250 Chase Manhattan Corp., CP 6.24 8/18/95 16,202
-------
38,457
-------
Bank Holding Companies - Other Major
25,000 Bank of Nova Scotia, CD 6.03 7/05/96 25,000
15,000 Societe Generale, CD 6.21 7/15/96 15,000
15,000 Unibanco-Uniao de Bancos Brasilieros
S.A. (Grand Cayman), CP, (CRE) 5.77 1/10/96 14,610
-------
54,610
-------
Banks
20,000 Bayerische Landesbank Girozentrale, CD 6.38 5/31/96 20,000
15,000 Canadian Imperial, CD 6.20 5/31/96 15,000
15,000 Deutsche Bank, A.G., CD 6.33 5/23/96 15,000
10,400 First Deposit National Bank, Bank Notes 6.50 8/14/95 10,400
13,000 Key Bank of Alaska, Bank Notes 6.40 5/08/96 13,044
28,000 NationsBank of Texas, N.A., Bank Notes 7.00 2/06/96 27,985
25,360 Providian National Bank, Bank Notes 5.91 8/04/95 25,360
14,700 Providian National Bank, Bank Notes 5.93 10/19/95 14,700
14,000 Providian National Bank, Bank Notes 6.06 11/27/95 14,000
10,000 Providian National Bank, Bank Notes 5.76 12/11/95 10,000
22,000 Society Bank, Michigan, Bank Notes 6.40 4/26/96 22,067
--------
187,556
--------
Chemicals
25,000 Monsanto Co., CP 5.82 11/06/95 24,608
----------
Finance - Business/Commercial
17,000 Heller International, Inc., CP, (CRE) 5.94 8/24/95 16,935
22,720 Heller International, Inc., CP, (CRE) 5.77 9/01/95 22,607
9,888 Heller International, Inc., CP, (CRE) 5.75 9/12/95 9,822
10,574 Sears, Roebuck Acceptance Corp., CP 5.97 8/11/95 10,557
12,054 Sears, Roebuck Acceptance Corp., CP 5.92 8/24/95 12,008
-------
71,929
-------
Finance - Consumer
15,000 American Honda Finance Corp., CP 6.12 8/07/95 14,985
22,840 American Honda Finance Corp., CP 6.17 10/02/95 22,597
10,430 American Honda Finance Corp., CP 5.97 10/03/95 10,321
9,000 Aristar Inc., CP 6.00 8/03/95 8,997
15,000 Aristar Inc., CP 5.98 8/09/95 14,980
14,699 Chrysler Financial Corp., CP 5.95 8/16/95 14,663
10,570 General Motors Acceptance Corp., CP 6.06 8/02/95 10,568
14,885 General Motors Acceptance Corp., CP 5.99 8/17/95 14,845
15,845 General Motors Acceptance Crp., CP 5.78 9/06/95 15,754
18,685 Heller Financial, Inc., CP 6.40 8/01/95 18,685
10,650 Heller Financial, Inc., CP 6.12 8/21/95 10,614
19,610 Heller Financial, Inc., CP 5.80 9/14/95 19,471
10,880 Heller Financial, Inc., CP 5.80 10/10/95 10,757
20,000 Mitsubishi Motors Credit of America,
Inc., CP, (CRE) 5.86 9/20/95 19,837
15,000 Mitsubishi Motors Credit of America,
Inc., CP, (CRE) 5.86 9/29/95 14,856
16,180 Toyota Motor Credit Corp., CP 6.85 10/06/95 15,977
-------
237,907
-------
Hospitals
10,000 El Camino Healthcare Systems, CA, CP, (CRE) 6.10 9/18/95 10,000
15,000 El Camino Healthcare Systems, CA, CP, (CRE) 6.43 9/29/95 15,000
11,370 Medical Building Funding V LLC, CP,
Series 1994, (CRE) 6.10 9/11/95 11,291
-------
36,291
-------
Insurance - Multi/Line Companies
6,075 American Bankers Insurance Group, CP, (CRE) 5.96 8/10/95 6,066
-------
Photography - Imaging
10,000 Minolta Corp., CP, (CRE) 5.96 8/15/95 9,977
-------
Real Estate
10,000 Maguire/Thomas Partners - Westlake
Southlake Partnership, CP, (CRE) 5.77 8/23/95 9,965
12,000 Maguire/Thomas Partners - Westlake
Southlake Partnership, CP, (CRE) 5.82 9/08/95 11,926
20,000 Maguire/Thomas Partners - Westlake
Southlake Partnership, CP, (CRE) 5.75 10/27/95 19,722
-------
41,613
-------
Shoes
15,620 Melville Corp., CP 6.18 12/05/95 15,282
-------
Special Assessment/Tax/Fee
14,442 Sunshine State Governmental Financing
Commission, CP, (CRE) 5.85 9/05/95 14,360
-------
Specialized Services
14,010 Omnicom Finance, Inc., CP, (CRE) 5.75 8/03/95 14,005
--------
Transportation - Miscellaneous
14,450 Cosco Co. Ltd., CP, (CRE) 6.18 9/25/95 14,314
--------
Total fixed rate instruments (cost: $794,183) 794,183
--------
Variable Rate Demand Notes (23.4%)
Auto Parts
14,900 Alabama IDA RB (Rehau Project), (CRE) 6.00 10/01/19 14,900
7,940 Bardstown, KY, RB, Series 1994, (CRE) 5.90 6/01/24 7,940
10,000 Bardstown, KY, RB, Series 1995, (CRE) 5.90 3/01/25 10,000
-------
32,840
-------
Building Materials Group
9,650 Sarasota County, FL, IDA RB,
Series 1994, (CRE) 5.90 9/01/14 9,650
-------
Community Service
10,000 San Jose, CA, Financing Auth. RB,
Taxable Series A, (CRE) 6.25 12/01/25 10,000
-------
Finance - Receivables
15,850 Capital One Funding Corp., Notes,
Series 1993A, (CRE) 5.84 6/02/08 15,850
9,980 Capital One Funding Corp., Notes,
Series 1994D, (CRE) 5.84 10/01/24 9,980
10,335 Midwest Funding Corp., Notes,
Series 1992A, (CRE) 5.84 5/01/07 10,335
-------
36,165
-------
General Obligations
25,000 Detroit, MI, GO, Series 1995B, (CRE) 5.95 5/01/06 25,000
-------
Healthcare - Diversified
12,100 Barton Healthcare, LLC Project, Demand
RB, Series 1985, (CRE) 5.90 2/15/25 12,100
25,600 GMS Associates Partnership Project
Health Care RB, (CRE) 5.90 5/15/24 25,600
15,575 Wenatchee Valley Clinic, P. S., WA,
Taxable Bonds, Series 1995, (CRE) 5.99 1/15/15 15,575
------
53,275
------
Healthcare - Miscellaneous
7,900 Mason City Clinic, P.C., IA, Demand
Bonds, Series 1992, (CRE) 5.95 9/01/22 7,900
------
Hospitals
13,750 Armstrong County Hospital Auth., TX,
RB, Series 1993A, (CRE) 5.90 9/01/17 13,750
14,850 Armstrong County Hospital Auth., TX,
RB, Series 1993B, (CRE) 5.90 9/01/17 14,850
-------
28,600
-------
Hotel/Motel
9,175 Howard County, MD, Taxable RB,
Series 1994, (CRE) 5.90 10/01/09 9,175
19,300 Ramada Hotel Downtown, San Diego, CA,
DEB, (CRE) 6.35 2/01/96 19,300
--------
28,475
--------
Housing - Multi/Family
15,000 Palm Desert Redevelopment Agency, CA,
RB, (CRE) 6.20 8/01/22 15,000
3,125 Washington State Multifamily Mortgage RB,
Series 1995, (CRE) 5.90 7/01/25 3,125
-------
18,125
-------
Machinery - Diversified
24,000 DSL Funding Corp., Notes, (CRE) 5.99 12/01/09 24,000
--------
Nursing Care
34,700 Lincolnwood Funding Group RB,
Series 1995A, (CRE) 6.09 8/01/15 34,700
14,550 Massachusetts Nursing Homes RB,
Series 1993, (CRE) 5.90 11/15/13 14,550
-------
49,250
-------
Special Assessment/Tax/Fee
4,820 Community Redevelopment Agency,
City of Visalia, CA, DEB, (CRE) 6.01 9/01/20 4,820
21,500 County of Cuyahoga, OH, Demand RB,
Series 1992B, (CRE) 6.41 6/01/22 21,500
------
26,320
------
Textiles - Products
10,000 Alabama IDA RB (Fieldcrest Project), (CRE) 6.05 7/01/21 10,000
-------
Total variable rate demand notes (cost: $359,600) 359,600
--------
Put Bonds (16.0%)
Education
13,500 Dome Corp. Demand Bonds, Series 1991, (CRE) 6.04 8/31/16 13,500
--------
Electric Power
20,000 Brazos River Auth., TX, RB,
Series 1991D, (CRE) 5.95 6/01/21 20,000
16,515 Brazos River Auth., TX, RB,
Series 1991D, (CRE) 6.02 6/01/21 16,515
54,700 IDA of the State of New Hampshire, DEB,
Series E, (CRE) 6.22 5/01/21 54,700
-------
91,215
-------
General Obligations
30,000 Cleveland, OH, Taxable Notes,
Series 1994, (CRE) 5.95 5/15/24 30,000
17,000 Development Auth. of DeKalb County, GA,
RB, Series 1994B 6.11 10/01/24 17,000
23,000 New York City, GO, Fiscal 1995 Series
B, (CRE) 6.26 8/15/20 23,000
-------
70,000
-------
Hospitals
10,000 Metrocrest Hospital Auth., TX, CP,
Series 1989A, (CRE) 6.12 8/01/07 10,000
10,450 Siouxland Regional Cancer Center, IA,
Taxable Bonds, Series 1994, (CRE) 6.95 12/01/14 10,450
--------
20,450
--------
Oil - International
17,000 Gulf Coast Waste Disposal Auth. RB,
Series 1993, (CRE) 5.77 8/01/23 17,000
15,000 Lower Neches Valley Auth., TX, RB,
Series 1995A, (CRE) 6.05 5/01/30 15,000
-------
32,000
-------
Resource Recovery
20,000 Massachusetts Industrial Finance Agency RB,
Series 1986C, (CRE) 6.13 12/01/06 20,000
--------
Total put bonds (cost: $247,165) 247,165
--------
Variable Rate Notes (8.2%)
Banks
15,000 Barnett Bank - Southwest Georgia,
Bank Notes 6.19 2/08/96 14,999
20,000 Comerica Bank, N.A., Bank Notes 5.81 4/12/96 19,996
20,000 First Bank Sioux Falls - South Dakota,
N. A., Bank Notes 5.88 3/25/96 20,000
15,000 First of America Bank - West Michigan,
Bank Notes 5.88 9/18/95 15,000
20,000 PNC Bank, N.A., Bank Notes 5.68 2/27/96 20,000
-------
89,995
-------
Finance - Consumer
20,000 American Honda Finance Corp., Notes 5.93 5/03/96 20,000 (a)
16,800 AVCO Financial Services, Inc., DEB 5.89 9/13/95 16,800
-------
36,800
-------
Total variable rate notes (cost: $126,795) 126,795
-------
Total investments (cost: $1,527,743) $1,527,743
==========
</TABLE>
Money Market Fund
Portfolio of Investments in Securities (continued)
July 31, 1995
Portfolio Summary by Industry
Banks 18.0%
Finance - Consumer 17.8
General Obligations 6.2
Electric Power 5.9
Hospitals 5.5
Finance - Business/Commercial 4.7
Bank Holding Companies - Other Major 3.6
Healthcare - Diversified 3.5
Auto Parts 3.2
Nursing Care 3.2
Real Estate 2.7
Special Assessment/Tax/Fee 2.6
Bank Holding Companies - Money Center 2.5
Finance - Receivables 2.3
Oil - International 2.1
Hotel/Motel 1.8
Chemicals 1.6
Machinery - Diversified 1.6
Resource Recovery 1.3
Housing - Multi/Family 1.2
Shoes 1.0
Other 6.9
-------
Total 99.2%
=======
Money Market Fund
Notes to Portfolio of Investments
July 31, 1995
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.
Portfolio Description Abbreviations
CD Certificate of Deposit
CP Commercial Paper
CRE Credit Enhanced
DEB Debentures
GO General Obligation
IDA Industrial Development Authority/Agency
RB Revenue Bond
Specific Notes
(a) Securities which are exempt from registration by Rule 144A under the
Securities Act of 1933 and when purchased were determined to be liquid.
Any resale of these securities in the United States will occur in an
exempt transaction to a qualified institutional buyer.
See accompanying notes to financial statements.
Money Market Fund
Statement of Operations
(In Thousands)
Year ended July 31, 1995
Net investment income:
Interest income $ 74,774
---------
Expenses:
Management fees 3,056
Transfer agent's fees 1,590
Custodian's fees 385
Postage 322
Shareholder reporting fees 191
Directors' fees 3
Registration fees 251
Audit fees 28
Legal fees 5
Other 47
--------
Total expenses beforereimbursement 5,878
Expenses reimbursed (154)
--------
Total expenses after reimbursement 5,724
--------
Net investment income $69,050
========
See accompanying notes to financial statements.
Money Market Fund
Statements of Changes in Net Assets
(In Thousands)
Year ended July 31, 1995
and Ten-month period ended July 31, 1994
<TABLE>
<CAPTION>
1995 1994
------ -------
<S> <C> <C>
From operations:
Net investment income $ 69,050 $ 23,964
-------- --------
Distributions to shareholders from:
Net investment income (69,050) (23,964)
-------- ---------
From capital share transactions:
Shares sold 2,059,833 1,149,938
Shares issued for dividends reinvested 66,406 23,101
Shares redeemed (1,592,204) (980,803)
----------- ---------
Increase in net assets from capital share transactions 534,035 192,236
----------- ---------
Net increase in net assets 534,035 192,236
Net assets:
Beginning of period 1,006,020 813,784
---------- ----------
End of period $1,540,055 $1,006,020
========== ==========
Change in shares outstanding:
Shares sold 2,059,833 1,149,938
Shares issued for dividends reinvested 66,406 23,101
Shares redeemed (1,592,204) (980,803)
----------- ----------
Increase in shares outstanding 534,035 192,236
=========== ==========
Authorized shares of $.01 par value 2,250,000 2,250,000
=========== ==========
See accompanying notes to financial statements.
</TABLE>
Money Market 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 Money Market
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. Pursuant to Rule 2a-7 of the Securities and Exchange Commission,
securities in the Fund are stated at amortized cost which approximates
market value. Repurchase agreements are valued at cost.
2. 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. Interest income is recorded on the
accrual basis. Discounts and premiums on 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
As required by Federal Law (Internal Revenue Code of 1986, as amended,
and the Regulations thereunder), the distributions related to earnings
for the fiscal year ended July 31, 1995 were $.05 per share, which were
entirely derived from taxable interest income.
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. All net investment income available for distribution
was distributed at July 31, 1995. Distributions of realized gains from
security transactions not offset by capital losses are made in the succeeding
fiscal year.
(4) Investment Transactions
Purchases and sales/maturities of securities for the year ended July 31,
1995 were $8,190,657 and $7,702,713, 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
.24% of its annual average net assets.
The Manager has voluntarily agreed to limit the annual expenses of the
Fund to .45% of its annual average net assets. Without this limitation,
the Fund's ratio of expenses to average net assets would have been .46% for
the year ended July 31, 1995.
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.
Money Market Fund
Notes to Financial Statements (Continued)
(In Thousands)
July 31, 1995
(6) Transactions with Affiliates
USAA Investment Management Company is wholly owned by United Services
Automobile Association (the Association), a large diversified financial
services institution. At July 31, 1995, the Association and its affiliates
(including related employee benefit plans) owned 24,452 shares (1.6%) of the
Fund.
(7) Financial Highlights
Per share operating performance for a share outstanding throughout each
period is as follows:
<TABLE>
<CAPTION>
Ten-Month
Year Ended Period Ended
July 31, July 31, Year Ended September 30,
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .05 .03 .03 .04 .07
Distributions from net
investment income (.05) (.03) (.03) (.04) (.07)
------ ------ ------ ------- ------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return (%) * 5.49 2.74 3.09 4.32 6.71
Net assets at
end of period $1,540,055 $1,006,020 $813,784 $900,312 $984,404
Ratio of expenses to
average net assets (%) .45 .46(a) .48 .48 .54
Ratio of net investment
income to average net
assets (%) 5.44 3.28(a) 3.05 4.25 6.52
(a) Annualized. The ratio is not necessarily indicative of 12 months of operations.
* Assumes reinvestment of all dividend income and capital gain distributions during the period.
</TABLE>
