Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Shareholder Voting Results 8
Financial Information:
Statement of Assets and Liabilities 10
Portfolio of Investments in Securities 11
Notesto Portfolio of Investments in Securities 20
Statement of Operations 21
Statements of Changes in Net Assets 22
Notes to Financial Statements 23
Important Information:
Through our ongoing efforts to reduce expenses and respond to
shareholder requests, your annual and semiannual report mailings are
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)1996, USAA. All rights reserved.
<TABLE>
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 32 funds by investment objective as of December 31,
1995. For more complete information about the mutual funds managed and
distributed by USAA IMCO, including charges and expenses, please call
1-800-531-8181 for a prospectus. Read it carefully before you invest.
Average Annual Total Return*
<CAPTION> Yield
Investment Inception Since 7-Day 30-Day(1)
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 50.42 20.44 12.02 - - -
Emerging Markets(2) 11/7/94 3.65 - - (4.26) - -
Gold(2) 8/15/84 4.04 5.60 5.46 - - -
Growth 4/5/71 32.06 15.56 12.47 - - -
Growth & Income 6/1/93 31.57 - - 13.74 - -
International(2) 7/11/88 8.29 11.98 - 9.51 - -
World Growth(2) 10/1/92 12.85 - - 12.06 - -
Asset Allocation
Balanced Strategy 9/1/95 - - - 3.24 - -
Cornerstone Strategy(2)# 8/15/84 18.40 12.37 12.68 - - -
Growth and Tax Strategy(3)**# 1/11/89 22.70 10.33 - 9.81 - 3.61
Growth Strategy(2) 9/1/95 - - - 6.50 - -
Income Strategy 9/1/95 - - - 9.94 - 4.47
Income - Taxable
GNMA 2/1/91 16.76 - - 8.64 - 6.64
Income 3/4/74 24.47 10.91 10.43 - - 6.25
Income Stock 5/4/87 28.62 14.35 - 12.12 - -
Short-Term Bond 6/1/93 11.18 - - 5.33 - 6.43
Income - Tax Exempt
Long-Term(3)** 3/19/82 18.58 8.44 8.62 - - 5.40
Intermediate-Term(3)** 3/19/82 15.07 8.22 7.95 - - 4.93
Short-Term(3)** 3/19/82 8.11 5.59 5.87 - - 4.36
California Bond(3)** 8/1/89 21.85 8.39 - 8.01 - 5.23
Florida Tax-Free Income(3)** 10/1/93 18.90 - - 3.39 - 5.35
New York Bond(3)** 10/15/90 18.07 8.60 - 9.25 - 5.31
Texas Tax-Free Income(3)** 8/1/94 22.22 - - 12.43 - 5.18
Virginia Bond(3)** 10/15/90 17.08 8.42 - 8.79 - 5.22
Money Market
Money Market(4) 2/2/81 5.80 4.54 5.97 - 5.48 -
Tax Exempt Money Market(3),(4)** 2/6/84 3.70 3.32 4.36 - 4.33 -
Treasury Money Market Trust(4) 2/1/91 5.59 - - 4.17 5.26 -
California Money Market(3),(4)** 8/1/89 3.64 3.15 - 3.70 4.14 -
Florida Tax-Free Money
Market(3),(4)** 10/1/93 3.57 - - 2.90 4.28 -
New York Money Market(3),(4)** 10/15/90 3.59 2.98 - 3.04 4.27 -
Texas Tax-Free Money Market(3),(4)** 8/1/94 3.56 - - 3.36 4.08 -
Virginia Money Market(3),(4)** 10/15/90 3.52 3.13 - 3.21 4.07 -
(1) Calculated as prescribed by the Securities and Exchange Commission.
(2) Foreign investing is subject to additional risks, which are discussed
in the funds' prospectuses.
(3) Some income may be subject to state or local taxes or the federal
alternative minimum tax.
(4) An investment in a money market fund is neither insured nor guaranteed
by the U.S. government and there is no assurance that any of the funds
will be able to maintain a stable net asset value of $1 per share.
* 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.
** 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, New York, Virginia,
Florida, and Texas funds available to residents only.
# Formerly known as Cornerstone Fund and Balanced Portfolio Fund,
respectively.
</TABLE>
Message from the President
[A photo of Michael J.C. Roth, President appears here]
We regularly get letters and phone calls from our customers
commenting on the things we do and the services we provide. We value
all of these communications, whatever their tone. They let us know
what we have done wrong and what we have done right.
There have been two events in the past couple of years that
generated lots of letters. When I say "lots," I really mean dozens, which
is small in relation to our base of over 450,000 shareholders. But, those
dozens are meaningful to us as a signal that a chord has been struck, and we
pay attention. The first event was the changes we made to our statements,
consolidating information on multiple fund accounts into a single mailing.
Some of you were uncomfortable with the fact that each fund's activity was
no longer on an individual piece of paper in the statement. We hope that by
now all of you have noted that the annual statement we sent you
in January for the previous year does have separate pages that record all
of the transactions for each fund owned. These records can easily be filed
by fund.
This time last year when we held some meetings with shareholders
in ten cities around the country, we addressed the statement ourselves
just to get your feedback. At every meeting there was invariably one person
who stood up and said, "I like the new statement." However, there will be some
format changes to our statements beginning in April, which I hope all of you
will enjoy.
The second event occurred recently. In rushing to meet a deadline, we
managed to send out a piece that incorrectly described dollar-cost averaging.
In a way, it was good to know how many of you read our pieces carefully
because we sure did hear from several of you. It was terribly embarrassing
for us, but not altogether bad because we learned from it.
These events are part of a relationship with you that we enjoy.
We enjoy it, in large part, because you do not write or call only when
something is amiss. You also let us know when we have done well and helped
you. For many years, we have preserved your letters which compliment
one of our people, and present that letter to the person you have noted. We
call this a "Laurel," and it has been one of the most successful means of
recognition for individuals we have ever seen.
We look forward to hearing from you. It helps us serve you better.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
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 1/31/96
Net Assets $1,540.1 Million $1,664.9 Million
Net Asset Value Per Share $1.00 $1.00
Average Annual Total Returns as of 1/31/96
July 31, 1995 to January 31, 1996 2.81%*
1 Year 5.78%
5 Years 4.51%
10 Years 5.96%
* Total returns for periods of less than one year are not annualized.
This six-month return is cumulative.
[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 1/95 to 1/96. The vertical axis shows the yield
and the horizontal axis shows the time period. The 7-day yield as of 1/30/96
for the USAA Money Market Fund is 5.31% and the 7-day yield as of 1/30/96
for the IBC/Donoghue's Money Fund Averages/First Tier is 4.97%.]
The graph tracks the Fund's yield for one year compared to a benchmark:
IBC/Donoghue's Money Fund Averages(TM)/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
[Photograph of J. Eric Thorderson, Portfolio Manager, appears here]
Portfolio Position
Since our last report on July 31, 1995, the Federal Reserve Board
decreased the fed funds rate by 0.25% on two occasions. Looking back
over just the last three years, interest rates have been on quite a
roller coaster ride. The fed funds rate remained at 3% for all of
1993, climbed to 6% in early 1995, and now has fallen to 5.25% in
early 1996. What appears to be on the short-term horizon for interest
rates? Well, if you examine the recent data - which was delayed due to
several federal government shutdowns - the economy looks sluggish.
Inflation has remained in check and job growth has been weak. If this
scenario persists, the Fed's natural inclination is likely to be to
lower rates further in the foreseeable future. However, the
disagreement between the White House and Congress over the balanced
budget may have an adverse effect on interest rates if it is not
resolved in a timely fashion.
Despite the ups and downs of interest rates, our basic goal is to
maintain a portfolio of high-quality securities which provides a
competitive yield. We continue to be proactive in our analysis of
every security we buy for the Fund.
Fund Performance
While past performance is not a guarantee of future results, the Fund
provided a return of 2.81% for the six-month reporting period ending
January 31, 1996. Ranking 13th out of 233 funds in its category for
one-year total return, it places among the top performing money market
funds, according to IBC/Donoghue's Money Fund AveragesTM/First Tier.(1)
1 Year 3 Years 5 Years
------ ------- -------
USAA Money Market Fund(1) 5.78% 4.36% 4.51%
Average Money Market Fund(1) 5.43% 4.12% 4.53%
(1) Source: IBC/Donoghue's Money Fund Vision Report. Data as of
January 31, 1996.
The Fund has continued to grow with assets exceeding $1.6 billion.
As we pointed out last year, the expenses incurred by shareholders of
money market funds continue to vary considerably. For the six-month period
ended January 31, 1996, the Fund's annualized operating expenses total
.45% of average net assets.(2) The average expenses for First Tier money
market funds is 67% of average net assets, according to IBC/Donoghue.
This means that you are receiving more net investment income in this fund
than you would if you were invested in a money market fund that had average
expenses.
[A pie chart is shown here depicting the Portfolio Mix as of January 31,
1996 of the USAA Money Market Fund to be: Bonds/Notes - 31%, Bankers
Acceptances - 3%, CDs - 1%, Commercial Paper - 30%, and Demand Notes - 35%.]
(2) 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 .51% for the six-month period ended January 31, 1996.
Although the Fund is not guaranteed as is a certificate of deposit
(CD),(3) we believe it remains a sound alternative to those looking for
preservation of capital and a high degree of liquidity. At the same
time, we continue to pursue our goal of providing you with returns
that are at or near the top of all money market funds.
(3) Certificates of Deposit are guaranteed and offer a fixed rate of
return as compared to the fluctuating returns of mutual funds.
See page 11 for a complete listing of the Portfolio of Investments in
Securities.
[A graph is shown here depicting the growth of $10,000, from 1/31/86
to 1/31/96, 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 $17,833.]
Past performance is no guarantee of future results and the value
of your investment may vary according to the Fund's performance. 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.
Shareholder Voting Results
On October 13, 1995, a special meeting of shareholders was held to
vote on the following proposals. All proposals were approved by the
shareholders. All shareholders of record on August 17, 1995 were
entitled to vote on each proposal. The number of votes shown below are
shown for the Money Market Fund only for proposal (2) and in the
aggregate for the entire USAA Mutual Fund, Inc. (the Company) for
proposals (1) and (3).
(1) Proposal to elect a Board of Directors as follows:
Votes Votes
Director For Withheld
Hansford T. Johnson* 958,654,342 22,342,020
Michael J.C. Roth 959,226,525 21,769,837
John W. Saunders, Jr. 958,343,963 22,652,399
George E. Brown 953,414,718 27,581,644
Howard L. Freeman, Jr. 959,776,745 21,219,617
Richard A. Zucker 947,484,789 33,511,573
Barbara B. Dreeben 945,379,515 35,616,847
Mr. C. Dale Briscoe did not stand for re-election to the Board. His
term of office terminated on December 31, 1995.
* On December 4, 1995, Hansford T. Johnson announced his departure
from the Board effective December 31, 1995. The Board elected M.
Staser Holcomb to succeed Mr. Johnson.
(2) Proposals to amend certain investment restrictions as follows:
Number of Shares Voting
For Against Abstain
--- ------- -------
Proposal to amend the 5% and 10% issuer 671,045,063 75,618,160 45,060,310
diversification restrictions to apply to 75%
of a Fund's total assets rather than 100%.
Proposal to amend the restriction relating 650,826,846 92,170,700 48,725,988
to borrowing to allow a Fund to borrow
an amount not exceeding 33 1/3% of its total
assets (including the amount borrowed)
less liabilities (other than borrowings) for
temporary or emergency purposes.
Proposal to amend the restriction relating 651,578,685 88,913,841 51,231,008
to lending portfolio securities to permit a
Fund to lend up to 33 1/3% of its total assets
to other parties.
Proposal to reclassify the investment 649,623,589 88,406,917 53,693,027
restriction on illiquid securities from
fundamental to non-fundamental and amend the
restriction to permit investments in illiquid
securities, including repurchase agreements
maturing in more than seven days, to no more
than 10% of the value of a Fund's net assets.
Proposal to reclassify the 5% restriction 655,816,379 88,704,003 47,203,152
on investment in new issuers from fundamental
to non-fundamental.
Proposal to reclassify the joint trading 674,761,806 68,758,186 48,203,542
account restriction from fundamental to
non-fundamental.
(3) Proposal to ratify or reject the 919,046,882 22,848,992 39,100,482
selection by the Board of Directors of
KPMG Peat Marwick LLP as auditors for
the Company for the fiscal year ending
July 31, 1995.
Money Market Fund
Statement of Assets and Liabilities
(In Thousands)
January 31, 1996
(Unaudited)
Assets
Investments in securities $ 1,656,112
Cash 6,525
Receivables:
Capital shares sold 1,948
Interest 11,067
-----------
Total assets 1,675,652
-----------
Liabilities
Capital shares redeemed 8,915
USAA Investment Management Company 1,083
USAA Transfer Agency Company 274
Accounts payable and accrued expenses 207
Dividends on capital shares 225
-----------
Total liabilities 10,704
-----------
Net assets applicable to capital
shares outstanding $ 1,664,948
===========
Represented by:
Paid-in capital $ 1,664,948
===========
Capital shares outstanding 1,664,948
===========
Net asset value, redemption price,
and offering price per share $ 1.00
===========
See accompanying notes to financial statements.
Money Market Fund
Categories & Definitions
Portfolio of Investments in Securities
January 31, 1996
(Unaudited)
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)
January 31, 1996
(Unaudited)
Principal Coupon
Amount Security Rate Maturity Value
- --------- -------- ------ -------- -----
Fixed Rate Instruments (48.4%)
Airports
$ 10,045 Department of Airports of Los Angeles,
CA, RB, 1995 Series E (CRE) 8.38% 5/15/96 $ 10,114
---------
Bank Holding Companies - Major Regional
40,000 Barnett Banks, Inc., CP 5.49 2/02/96 39,994
---------
Bank Holding Companies - Other Major
35,000 Banco Nacional de Comercio, CP (CRE) 5.18 7/16/96 34,164
15,000 Bank Of Tokyo, Ltd., BA 5.80 2/27/96 14,937
11,150 Bank Of Tokyo, Ltd., CD 5.52 4/15/96 11,150
20,000 Banque Nationale de Paris, CD 6.05 9/11/96 20,000
15,000 Industrial Bank of Japan, Ltd., BA 5.52 3/01/96 14,933
12,600 Industrial Bank of Japan, Ltd., BA 5.51 3/06/96 12,535
25,140 UBS Finance, Inc., CP 5.60 2/01/96 25,140
24,532 UBS Finance, Inc., CP 5.75 2/01/96 24,532
15,000 Unibanco-Uniao de Bancos Brasilieros
S.A. (Grand Cayman), CP (CRE) 5.32 6/10/96 14,712
--------
172,103
--------
Banks
20,000 FCC National Bank, Bank Notes 5.90 8/21/96 19,990
15,000 First Deposit National Bank, Bank
Notes 5.32 6/04/96 15,000
13,000 First of America Bank Illinois, N.A.,
Bank Notes 5.84 2/26/96 13,000
15,000 Fleet National Bank, Bank Notes 5.63 10/30/96 15,000
13,000 Key Bank of Alaska, Bank Notes 6.40 5/08/96 13,015
28,000 NationsBank of Texas, N.A., Bank Notes7.00 2/06/96 28,000
20,000 NationsBank of Texas, N.A., Bank Notes5.85 2/12/96 20,000
13,880 Providian National Bank, Bank Notes 5.81 3/12/96 13,880
20,000 Providian National Bank, Bank Notes 5.77 4/08/96 20,000
16,000 Providian National Bank, Bank Notes 5.75 4/17/96 16,000
15,000 Providian National Bank, Bank Notes 5.78 4/29/96 15,000
22,000 Society Bank, Michigan, Bank Notes 6.40 4/26/96 22,021
--------
210,906
---------
Buildings
11,643 75 State Street Capital Corp.,
CP (CRE) 5.67 2/09/96 11,628
--------
Electric Power
10,000 AES Barbers Point Inc., CP (CRE) 5.62 2/16/96 9,977
13,882 AES Shady Point Inc., CP (CRE) 5.50 3/05/96 13,812
--------
23,789
--------
Finance - Business/Commercial
20,000 Heller International, Inc., CP (CRE) 5.95 2/01/96 20,000
10,000 Heller International, Inc., CP (CRE) 5.95 2/07/96 9,990
18,000 Heller International, Inc., CP (CRE) 5.95 2/15/96 17,958
--------
47,948
--------
Finance - Consumer
10,000 Aristar Inc., CP 5.70 2/02/96 9,998
11,200 Aristar Inc., CP 5.60 2/14/96 11,177
11,000 Aristar Inc., CP 5.72 2/21/96 10,965
13,000 Aristar Inc., CP 5.60 2/22/96 12,958
25,000 Ford Credit Europe plc, CP 5.95 2/01/96 25,000
20,195 Ford Credit Europe plc, CP 5.59 3/27/96 20,022
16,800 Ford Motor Credit Co., CP 5.25 5/03/96 16,575
13,550 Ford Motor Credit Co., DEB 8.25 5/15/96 13,636
25,000 General Motors Acceptance Corp., CP 5.67 3/01/96 24,886
28,820 General Motors Acceptance Corp., CP 5.60 3/04/96 28,677
21,029 General Motors Acceptance Corp., CP 5.67 3/13/96 20,893
--------
194,787
--------
Hospitals
15,000 El Camino Healthcare Systems, CA,
CP (CRE) 5.45 4/29/96 15,000
11,360 Medical Building Funding V LLC, CP,
Series 1994 (CRE) 5.68 3/07/96 11,297
--------
26,297
--------
Real Estate
25,000 Maguire/Thomas Partners - Westlake
Southlake Partnership, CP (CRE) 5.82 2/05/96 24,984
13,000 Maguire/Thomas Partners - Westlake
Southlake Partnership, CP (CRE) 5.50 2/23/96 12,956
--------
37,940
--------
Transportation - Miscellaneous
15,000 Cosco Co. Ltd., CP (CRE) 5.59 4/05/96 14,851
--------
Miscellaneous
16,000 Nichimen America Inc., CP (CRE) 5.79 3/01/96 15,925
--------
Total fixed rate instruments (cost: $806,282) 806,282
--------
Variable Rate Demand Notes (25.9%)
Auto Parts
14,800 Alabama IDA RB (Rehau Project) (CRE) 5.62 10/01/19 14,800
7,940 Bardstown, KY, RB, Series 1994 (CRE) 5.55 6/01/24 7,940
11,000 Bardstown, KY, RB, Series 1995 (CRE) 5.55 3/01/25 11,000
--------
33,740
--------
Building Materials Group
9,180 Sarasota County, FL, IDA RB,
Series 1994 (CRE) 5.56 9/01/14 9,180
--------
Community Service
10,000 San Jose, CA, Financing Auth. RB,
Taxable Series A (CRE) 5.70 12/01/25 10,000
--------
Education
13,100 Dome Corp. Demand Bonds,
Series 1991 (CRE) 5.65 8/31/16 13,100
--------
Finance - Receivables
18,552 Capital One Funding Corp., Notes,
Series 1993A (CRE) 5.51 6/02/08 18,552
21,850 Capital One Funding Corp., Notes,
Series 1995C (CRE) 5.51 10/01/15 21,850
--------
40,402
--------
General Obligations
30,000 Detroit, MI, GO, Series 1995B (CRE) 5.70 5/01/05 30,000
--------
Healthcare - Diversified
11,800 Barton Healthcare, LLC Project,
Demand RB, Series 1985 (CRE) 5.70 2/15/25 11,800
12,400 GMS Associates II Project Health Care
RB, Series 1995 (CRE) 5.70 8/15/25 12,400
25,600 GMS Associates Partnership Project
Health Care RB (CRE) 5.70 5/15/24 25,600
15,575 Wenatchee Valley Clinic, P. S., WA,
Taxable Bonds, Series 1995 (CRE) 5.73 1/15/15 15,575
--------
65,375
--------
Healthcare - Miscellaneous
7,700 Mason City Clinic, P.C., IA, Demand
Bonds, Series 1992 (CRE) 5.65 9/01/22 7,700
--------
Hospitals
13,750 Armstrong County Hospital Auth., PA,
RB, Series 1993A (CRE) 5.70 9/01/17 13,750
14,850 Armstrong County Hospital Auth., PA,
RB, Series 1993B (CRE) 5.70 9/01/17 14,850
--------
28,600
--------
Hotel/Motel
8,825 Howard County, MD, Taxable RB,
Series 1994 (CRE) 5.56 10/01/09 8,825
19,200 Ramada Hotel Downtown, San Diego, CA,
DEB (CRE) 6.15 2/01/96 19,200
--------
28,025
--------
Multi-Family Housing
15,000 Palm Desert Redevelopment Agency, CA,
RB (CRE) 5.77 8/01/22 15,000
--------
Machinery - Diversified
23,100 DSL Funding Corp., Notes (CRE) 5.66 12/01/09 23,100
--------
Nursing Care
34,300 Lincolnwood Funding Corp. RB,
Series 1995A (CRE) 5.67 8/01/15 34,300
14,250 Massachusetts Nursing Homes RB,
Series 1993 (CRE) 5.70 11/15/13 14,250
--------
48,550
--------
Real Estate
14,900 H/M Partners, LLC, Bonds (CRE) 5.70 10/01/20 14,900
--------
Special Assessment/Tax/Fee
10,000 City of Gardena, CA, COP (CRE) 5.95 7/01/25 10,000
4,805 Community Redevelopment Agency, City of
Visalia, CA, DEB (CRE) 5.66 9/01/20 4,805
21,500 County of Cuyahoga, OH, Demand RB,
Series 1992B (CRE) 5.54 6/01/22 21,500
16,510 San Bernardino County, CA, COP, Glen
Helen Project, Series D (CRE) 5.81 3/01/24 16,510
--------
52,815
--------
Textiles - Products
10,000 Alabama IDA RB (Fieldcrest Project)
(CRE) 5.70 7/01/21 10,000
--------
Total variable rate demand notes
(cost: $430,487) 430,487
--------
Put Bonds (17.1%)
Electric Power
20,000 Brazos River Auth., TX, RB,
Series 1991D (CRE) 5.76 6/01/21 20,000
20,000 Brazos River Auth., TX, RB,
Series 1991D (CRE) 5.75 6/01/21 20,000
16,515 Brazos River Auth., TX, RB,
Series 1991D (CRE) 5.72 6/01/21 16,515
54,700 IDA of the State of New Hampshire, DEB,
Series E (CRE) 5.63 5/01/21 54,700
--------
111,215
--------
General Obligations
30,000 Cleveland, OH, Taxable Notes,
Series 1994 (CRE) 5.61 5/15/24 30,000
17,000 DeKalb County, GA, IDA RB,
Series 1994B 5.75 10/01/24 17,000
36,175 New York City, GO, Fiscal 1995
Series B (CRE) 6.10 8/15/20 36,175
--------
83,175
--------
Multi-Family Housing
20,900 New York City, NY, Housing Development
Corp., RB, 1995 Series B (CRE) 5.90 11/01/30 20,900
--------
Oil - International
24,060 Lower Neches Valley Auth. (Texas) RB,
Series 1995A (CRE) 5.72 5/01/30 24,060
--------
Paper & Forest Products
30,000 IDA of Bedford County, VA, RB,
Series 1995B (CRE) 5.85 12/01/25 30,000
15,000 IDA of Bedford County, VA, RB,
Series 1995C (CRE) 5.85 12/01/25 15,000
--------
45,000
--------
Total put bonds (cost: $284,350) 284,350
--------
Variable Rate Notes (8.1%)
Banks
15,000 Barnett Bank - Southwest Georgia, Bank
Notes 5.88 2/08/96 15,000
20,000 Comerica Bank, N.A., Bank Notes 5.33 4/12/96 19,999
20,000 Comerica Bank, N.A., Bank Notes 5.34 4/19/96 19,994
20,000 First Bank Sioux Falls - South Dakota,
N. A., Bank Notes 5.63 3/25/96 20,000
20,000 First Bank System Federal Savings Bank,
Notes 5.63 6/03/96 20,000
20,000 PNC Bank, N.A., Bank Notes 5.08 2/27/96 20,000
--------
114,993
--------
Finance - Consumer
20,000 American Honda Finance Corp., Notes 5.68 5/03/96 20,000(a)
--------
Total variable rate notes (cost: $134,993) 134,993
--------
Total investments (cost: $1,656,112) $1,656,112
==========
Portfolio Summary by Industry
Banks 19.6%
Finance - Consumer 12.9
Bank Holding Companies - Other Major 10.3
Electric Power 8.1
General Obligations 6.8
Healthcare - Diversified 3.9
Hospitals 3.3
Real Estate 3.2
Special Assessment/Tax/Fee 3.2
Nursing Care 2.9
Finance - Business/Commercial 2.9
Paper & Forest Products 2.7
Finance - Receivables 2.4
Bank Holding Companies - Major Regional 2.4
Multi-Family Housing 2.2
Auto Parts 2.0
Hotel/Motel 1.7
Oil - International 1.4
Machinery - Diversified 1.4
Other 6.2
-----
Total 99.5%
=====
Money Market Fund
Notes to Portfolio of Investments in Securities
January 31, 1996
(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.
Portfolio Description Abbreviations
BA Banker's Acceptance
CD Certificate of Deposit
COP Certificate of Participation
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 may occur in an exempt
transaction in the United States to a qualified institutional buyer as
defined by the Rule.
See accompanying notes to financial statements.
Money Market Fund
Statement of Operations
(In Thousands)
Six-month period ended January 31, 1996
(Unaudited)
Net investment income:
Interest $ 48,204
--------
Expenses:
Management fees 1,938
Transfer agent's fees 1,560
Custodian's fees 206
Postage 184
Shareholder reporting fees 110
Directors' fees 2
Registration fees 113
Audit fees 14
Legal fees 2
Other 24
--------
Total expenses before reimbursement 4,153
Expenses reimbursed (521)
--------
Total expenses after reimbursement 3,632
--------
Net investment income $ 44,572
========
See accompanying notes to financial statements.
Money Market Fund
Statements of Changes in Net Assets
(In Thousands)
Six-month period ended January 31, 1996
and Year ended July 31, 1995
(Unaudited)
1/31/96 7/31/95
------- -------
From operations:
Net investment income $ 44,572 $ 69,050
Distributions to shareholders from: ----------- ----------
Net investment income (44,572) (69,050)
From capital share transactions: ----------- ----------
Shares sold 1,109,677 2,059,833
Shares issued for dividends reinvested 42,920 66,406
Shares redeemed (1,027,704) (1,592,204)
----------- -----------
Increase in net assets from capital
share transactions 124,893 534,035
----------- -----------
Net increase in net assets 124,893 534,035
Net assets:
Beginning of period 1,540,055 1,006,020
----------- -----------
End of period $ 1,664,948 $ 1,540,055
=========== ==========
Change in shares outstanding:
Shares sold 1,109,677 2,059,833
Shares issued for dividends reinvested 42,920 66,406
Shares redeemed (1,027,704) (1,592,204)
----------- -----------
Increase in shares outstanding 124,893 534,035
=========== ===========
Authorized shares of $.01 par value 2,250,000 2,250,000
=========== ===========
See accompanying notes to financial statements.
Money Market Fund
Notes to Financial Statements
(In Thousands)
January 31, 1996
(Unaudited)
(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 semiannual report pertains
only to the Money Market Fund (the Fund). The Fund's investment
objective is the highest income consistent with preservation of
capital and maintenance of liquidity.
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) Lines of Credit
The Fund participates with other USAA funds in two joint short-term
revolving loan agreements totaling $850 million through January 14,
1997, one with USAA Capital Corporation, an affiliate of
the Manager ($750 million uncommitted), and one with an unaffiliated
bank ($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 these agreements, the Fund may borrow up
to a maximum of 25% of its total assets at the lending institution's
borrowing rate plus a markup to cover costs. The Fund had no
borrowings under either of these agreements during the six-month
period ended January 31, 1996.
(3) Distributions
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. All net investment income available for
distribution was distributed at January 31, 1996. 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 six-month period
ended January 31, 1996 were $5,591,984 and $5,476,183, 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.
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.
(6) Transactions with Affiliates
USAA Investment Management Company is indirectly wholly owned by
United Services Automobile Association (the Association), a large,
diversified financial services institution. At January 31, 1996, the
Association and its affiliates (including related employee benefit
plans) owned 1,731 shares (.1%) of the Fund.
(7) Financial Highlights
Per share operating performance for a share outstanding throughout
each period is as follows:
<TABLE>
<CAPTION>
Six-month Year Ten-month
period ended ended period ended
January 31, July 31, July 31, Year ended September 30,
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<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 .03 .05 .03 .03 .04 .07
Distributions from net
investment income (.03) (.05) (.03) (.03) (.04) (.07)
---------- --------- --------- -------- -------- ---------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========= ======== ======== =========
Total return (%) * 2.81 5.49 2.74 3.09 4.32 6.71
Net assets at end
of period (000) $1,664,948 $1,540,055 $1,006,020 $813,784 $900,312 $ 984,404
Ratio of expenses to
average net assets(%) .45(a,b) .45(b) .46(a) .48 .48 .54
Ratio of net investment
income to average
net assets (%) 5.52(a,b) 5.44(b) 3.28(a) 3.05 4.25 6.52
</TABLE>
* Assumes reinvestment of all dividend income and capital gain
distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months
of operations.
(b) The information contained in the above table is based on actual
expenses for the period, after giving effect to reimbursement of
expenses by the Manager. Absent such reimbursement the Fund's ratios
would have been:
Six-month Year
period ended ended
January 31, July 31,
1996 1995
---- ----
Ratio of expenses to
average net assets(%) .51(a) .46
Ratio of net investment
income to average
net assets(%) 5.46(a) 5.43
