Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Managers 5
Financial Information:
Statement of Assets and Liabilities 8
Portfolio of Investments in Securities 9
Notes to Portfolio of Investments in Securities 14
Statement of Operations 15
Statements of Changes in Net Assets 16
Notes to Financial Statements 17
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are "streamlined." One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the 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 Aggressive
Growth 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)1998, USAA. All rights reserved.
USAA Family of Funds Summary
Fund Minimum
Type/Name Volatility Investment*
--------- ---------- ----------
CAPITAL APPRECIATION
=============================================================================
Aggressive Growth Very high $3,000
Emerging Markets(1) Very high $3,000
First Start Growth Moderate to high $3,000
Gold(1) Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International(1) Moderate to high $3,000
S&P 500 Index(2) Moderate $3,000
Science
& Technology(5) Very high $3,000
World Growth(1) Moderate to high $3,000
ASSET ALLOCATION
=============================================================================
Balanced Strategy(1) Moderate $3,000
Cornerstone Strategy(1) Moderate $3,000
Growth and Tax
Strategy(3) Moderate $3,000
Growth Strategy(1) Moderate to high $3,000
Income Strategy Low to moderate $3,000
INCOME - TAXABLE
============================================================================
GNMA Low to moderate $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Short-Term Bond Low $3,000
INCOME - TAX EXEMPT
============================================================================
Long-Term(3) Moderate $3,000
Intermediate-Term(3) Low to moderate $3,000
Short-Term(3) Low $3,000
State Bond Income(3)** Moderate $3,000
MONEY MARKET
==========================================================================
Money Market(4) Very low $3,000
Tax Exempt
Money Market(3),(4) Very low $3,000
Treasury Money
Market Trust(4) Very low $3,000
State Money Market(3),(4)** Very low $3,000
(1) Foreign investing is subject to additional risks, which are discussed in
the funds' prospectuses.
(2) S&P 500(Registered Trademark) is a trademark of The McGraw-Hill Companies,
Inc. and has been licensed for use. The Product is not sponsored, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in the Product.
(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.
(5) This Fund may be more volatile than a fund that diversifies across many
industries.
* The InveStart(Registered Trademark) program is available for investors
without the $3,000 initial investment required to open an IMCO mutual fund
account. A mutual fund account can be opened with no initial investment if
you elect to have monthly automatic investments of at least $50 from a bank
account. InveStart is not available on tax-exempt funds or the S&P 500
Index Fund. The minimum initial investment for IRAs is $250, except for the
$2,000 minimum required for the S&P 500 Index Fund. IRAs are not available
for tax-exempt funds. The Growth and Tax Strategy Fund is not available as
an investment for your IRA because the majority of its income is tax
exempt.
** California, Florida, New York, Texas, and Virginia funds available to
residents only.
Non-deposit investment products offered by USAA Investment Management Company
are not insured by the FDIC, are not deposits or other obligations of, or
guaranteed by, USAA Federal Savings Bank, and are subject to investment risks,
and may lose value.
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.
Message from the President
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH,
CFA, APPEARS HERE]
"We are now ready to
move to another plateau."
Back in 1980 we began to craft a family of mutual funds that would allow an
investor to create a diversified portfolio suited to an individual's appetite
for risk. In 1984 we started a brokerage service because we thought some members
might want that. The two have grown beyond our dreams. Our fund family now
offers 35 investment choices and our Brokerage Service has become a very
significant presence in its industry. We are now ready to move to another
plateau.
As I write this message, the USAA Investment Management Company is in the
process of ending our long and mutually rewarding relationship with BHC
Securities, and taking on all of the responsibilities of running our Brokerage
Service. The term for this is "self-clearing." It includes our own seat on the
Chicago Stock Exchange. Shortly after we achieve self-clearing, we shall also
move our mutual fund accounts off of an internal system and onto the facilities
of DST Systems, a Kansas City company that processes very much of the mutual
fund industry's transactions. These two moves will greatly improve our ability
to offer you better service.
Our goal is to give you a single investment account which can hold, track and
report to you on almost any type of investment you wish to make. It will offer
features such as low-cost loans based upon your investments,(1) easy movement of
funds,(2) and a single statement. It will also be tied to other USAA services
such as banking, fixed and variable annuities and property and casualty and life
insurance. We will make this the only investment account you will need. You'll
be hearing more on this in coming months.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company (IMCO), including charges and expenses,
please call for a prospectus. Read it carefully before you invest.
USAA Brokerage Services is a discount brokerage service of USAA IMCO, a member
of the NASD.
(1) Margin borrowing allows you to buy securities using funds that we will loan
you for payment. It can serve as a low-interest loan which can be used for
any purpose. Not all securities can be margined, however. Margin borrowing
involves additional risks.
(2) An investor should consider the fluctuating values of securities.
Investment Review
AGGRESSIVE GROWTH FUND
OBJECTIVE: Appreciation of capital.
TYPES OF INVESTMENTS: Common stock of companies with prospects of rapidly
growing earnings.
- -------------------------------------------------------------------------------
7/31/97 1/31/98
===============================================================================
Net Assets $754.0 Million $701.4 Million
Net Asset Value Per Share $32.82 $29.86
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/98
===============================================================================
7/31/97 to 1/31/98 1 Year 5 Years 10 Years
-1.88%(+) 3.75% 15.14% 13.97%
- -------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
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 represent past
performance and are not an indication of future results. Investment return and
principal value of an investment will fluctuate, and an investor's shares, when
redeemed, may be worth more or less than their original cost.
- ----------------------------------
CUMULATIVE PERFORMANCE COMPARISON
- ----------------------------------
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA Aggressive Growth Fund to the
Russell 2000 Index and the Lipper Small Cap Funds Average from 01/31/88 to
01/31/98. The data points from the graph are as follows:
USAA AGGRESSIVE RUSSELL 2000 LIPPER SMALL
GROWTH FUND INDEX CAP FUNDS AVERAGE
---------- -------------------------- -----------------
01/31/88 10,000 10,000 10,000
06/88 11,657 12,167 11,926
12/88 11,289 11,979 11,705
06/89 12,456 13,725 13,640
12/89 13,162 13,927 14,644
06/90 13,760 14,131 15,579
12/90 11,593 11,215 13,092
06/91 14,558 14,318 16,176
12/91 19,903 16,378 20,126
06/92 15,249 16,400 18,492
12/92 18,209 19,394 22,555
06/93 17,542 20,666 23,559
12/93 19,691 23,055 26,452
06/94 16,682 21,563 24,183
12/94 19,531 22,635 26,466
06/95 23,308 25,900 30,844
12/95 29,377 29,074 35,498
06/96 36,065 32,087 40,251
12/96 34,217 33,870 41,042
06/97 35,445 37,326 44,028
12/97 36,804 41,445 48,300
01/31/98 36,965 41,445 47,533
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Aggressive Growth Fund to the broad-based Russell 2000(Registered
Trademark) Index and the Lipper Small Cap Funds Average. The Russell
2000(Registered Trademark) is a widely recognized unmanaged small cap index
consisting of the 2,000 smallest companies within the Russell 3000(Registered
Trademark) Index. The Lipper Small Cap Funds Average is an average of all the
small cap funds, as reported by Lipper Analytical Services, an independent
organization that monitors the performance of mutual funds.
Message from the Managers
[PHOTOGRAPH OF THE FOLLOWING PORTFOLIO MANAGERS APPEARS HERE:
ERIC M. EFRON, CFA
JOHN K. CABELL, JR., CFA]
PERFORMANCE
During the six-month period that ended on January 31, 1998, U.S. equity markets
went through two distinct phases. From August through September, the market was
in a positive phase, during which widely held expectations for sustained low
interest rates and healthy earnings growth buoyed domestic stock prices. From
October through January, the Asian currency and economic crises undermined
investors' confidence in both the international and domestic markets. In
addition, the announcement of disappointing earnings by such high profile
companies as Gillette and Coca Cola further eroded sentiment in the investment
community. As a result, stock prices relinquished a good part of the gains they
enjoyed in the immediately preceding months.
Small capitalization growth stocks, which account for the bulk of the Fund's
investments, continued to underperform most other equity classes in general.
This was reflected in the performance of the Fund. For the six-month period, the
Fund generated a total return of -1.88% versus 4.42% for the Russell 2000
Index.(1)
PORTFOLIO STRATEGY
We continue to believe that sustained rapid earnings growth is the most
effective way to build value over the long term. We also believe that, in
general, high-quality smaller companies have the potential to capitalize quickly
on emerging trends in our economy and society, to grow faster, and, therefore,
to appreciate more rapidly than larger ones. With this in mind, we continue to
invest most of the Fund's assets in small cap growth equities.
(1) The broad-based Russell 2000(Registered Trademark) Index is an unmanaged,
widely recognized small cap index consisting of the 2,000 smallest companies
within the Russell 3000(Registered Trademark) Index.
Nevertheless, we recognize that small cap stocks can be very volatile. We also
recognize that they can underperform larger stocks over extended periods of
time. In order to mitigate these problems, we have invested some of our funds in
highly visible, well-known large growth stocks such as Intel, Microsoft, Cisco
Systems, Dell Computer, Home Depot, Southwest Airlines, and Household
International, just to name a few. Although these are large companies, they are
still innovative, rapidly growing, and, therefore, consistent with our
investment style and spirit.
We have cut back on the number of equity positions. It is felt that the
concentration of our investments into fewer, but larger positions, will increase
the impact that each holding has on the portfolio and will increase the
potential for improved overall performance.
The Fund continues to invest heavily in the technology, telecommunications
services, and energy sectors. Despite their potentially extreme volatility,
technology stocks are a core component to the portfolio and, on a long-term
basis, are worth the risks associated with them. Technology lies at the heart of
many of the changes that are transforming our world and is essential to
enhancing productivity and competitiveness. We have taken advantage of the
weakness of technology stocks, particularly small cap ones, in recent months to
build significant positions at what we think will prove to be bargain prices.
Earnings of telecommunications services companies are not particularly sensitive
to the economy. Furthermore, many of these companies have no overseas exposure
at all, and therefore should not subject investors to worries about problems
overseas. Finally, the regulatory climate is extremely favorable. Local
monopolies are being dismantled around the world, giving rise to the creation of
smaller, entrepreneurial service providers in the local, long distance, and
wireless sectors. These companies are poised for rapid growth and consolidation.
Accordingly, we have invested in a large number of names in this area, including
Winstar Communications, LCI, Omnipoint, and Pacific Gateway Exchange.
The Fund has invested heavily in the Oil & Gas-Drilling/Equipment sector.
Companies such as Friede Goldman, Santa Fe International, and R & B Falcon
provide technology and equipment that enhance productivity and reduce costs in
the energy exploration and services area. Energy-related stocks have declined in
recent months over concerns about falling oil and gas costs, and represent
compelling investment opportunities at current levels.
OUTLOOK
Equity markets are likely to remain volatile. On the positive side, interest
rates are low, and there appears to be no compelling reason why they should move
up significantly. The situation also appears favorable on the inflation front.
However, concerns about the economy may temper investor enthusiasm in the months
to come. Investors should keep in mind that potential returns, particularly in
aggressive growth funds such as this one, are not generated at a steady rate
over time. Rather they tend to come in dramatic bursts, often in compressed time
periods, and often when we least expect it. Patience is advised. We believe that
this patience may be rewarded over the long term.
===============================================
TOP 10 EQUITY HOLDINGS
(% OF NET ASSETS)
Cisco Systems 2.3
3Com 1.8
Microsoft 1.7
AAR 1.6
Express Scripts 1.3
Suiza Foods 1.3
Household International 1.2
Dell Computer 1.1
Intel 1.1
Papa John's International 1.0
===============================================
==========================================================
TOP 10 INDUSTRIES
(% OF NET ASSETS)
Oil & Gas - Drilling/Equipment 7.2
Computer - Networking 6.0
Computer Software & Service 5.8
Communication Equipment 5.3
Finance - Consumer 4.9
Healthcare - Specialized Services 4.5
Biotechnology 4.0
Electronics - Semiconductors 3.7
Services - Commercial & Consumer 3.7
Telephones 3.6
See page 9 for a complete listing of the Portfolio of
Investments in Securities.
============================================================
<TABLE>
AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 1998
(Unaudited)
<S> <C>
ASSETS
Investments in securities, at market value (identified cost of $567,756) $720,864
Cash 217
Receivables:
Capital shares sold 830
Dividends 14
Securities sold 3,235
--------
Total assets 725,160
--------
LIABILITIES
Securities purchased 22,455
Capital shares redeemed 753
USAA Investment Management Company 230
USAA Transfer Agency Company 165
Accounts payable and accrued expenses 110
--------
Total liabilities 23,713
--------
Net assets applicable to capital shares outstanding $701,447
========
REPRESENTED BY:
Paid-in capital $489,364
Accumulated net investment loss (1,027)
Accumulated net realized gain on investments 60,002
Net unrealized appreciation of investments 153,108
--------
Net assets applicable to capital shares outstanding $701,447
========
Capital shares outstanding 23,490
========
Net asset value, redemption price, and offering price per share $ 29.86
========
See accompanying notes to financial statements.
</TABLE>
AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS IN SECURITIES
January 31, 1998
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------- -------- -----
COMMON STOCKS (93.6%)
Advertising / Marketing (0.5%)
77,000 Lamar Advertising
Co. "A"* $ 3,162
37,530 Obie Media Corp.* 384
- -------------------------------------------------
3,546
- -------------------------------------------------
Aerospace/Defense (2.6%)
250,000 AAR Corp. 11,375
100,000 Aviation Sales Co.* 3,744
78,800 Triumph Group, Inc.* 2,935
- -------------------------------------------------
18,054
- -------------------------------------------------
Air Freight (1.1%)
150,000 Eagle USA Airfreight, Inc.* 4,406
50,000 FDX Corp.* 3,253
- -------------------------------------------------
7,659
- -------------------------------------------------
Airlines (1.2%)
100,000 Midwest Express
Holdings, Inc.* 4,156
177,500 Southwest Airlines Co. 4,626
- -------------------------------------------------
8,782
- -------------------------------------------------
Banks - Major Regional (1.6%)
100,000 Bank United Corp. 4,131
68,575 Columbia Banking
Systems, Inc.* 1,946
60,000 First Security Corp. 2,092
90,600 Hamilton Bancorp, Inc.* 3,347
- -------------------------------------------------
11,516
- -------------------------------------------------
Beverages - Alcoholic (1.0%)
100,000 Robert Mondavi Corp.* 3,619
80,000 Beringer Wine Estates
Holdings, Inc.* 3,230
- -------------------------------------------------
6,849
- -------------------------------------------------
Biotechnology (4.0%)
100,000 Centocor, Inc.* 4,006
81,000 CN Biosciences, Inc.* 2,076
120,000 Genzyme Corp.* 3,203
40,000 IDEC Pharmaceuticals
Corp.* 1,670
80,000 Immunex Corp.* 4,395
100,000 Med Immune, Inc.* 4,587
50,000 Protein Design Labs, Inc.* 1,869
53,000 SangStat Medical Corp.* 1,497
255,000 Techne Corp.* 4,590
- -------------------------------------------------
27,893
- -------------------------------------------------
Broadcasting - Radio
& TV (1.9%)
90,000 Clear Channel
Communications, Inc.* 6,930
55,400 Gray Communications
Systems, Inc. "B" 1,337
65,982 Hearst-Argyle
Television, Inc. 1,798
85,800 Univision Communications,
Inc. "A"* 3,271
- -------------------------------------------------
13,336
- -------------------------------------------------
Building Material Group (1.0%)
150,000 Fastenal Co. 6,591
35,000 Wilmar Industries, Inc.* 770
- -------------------------------------------------
7,361
- -------------------------------------------------
Communication
Equipment (5.3%)
127,800 Advanced Fibre
Communications, Inc.* 3,802
262,500 Brightpoint, Inc.* 4,413
36,000 CIENA Corp.* 1,982
152,000 Datum, Inc.* 2,128
199,400 Harmonic Lightwaves, Inc.* 2,343
154,100 Innova Corp.* 2,350
171,100 Ortel Corp.* 2,225
200,000 P-Com, Inc.* 3,900
142,900 Pairgain Technologies,
Inc.* 2,626
224,400 Positron Fiber
Systems Corp.* 1,290
50,000 QualComm, Inc.* 2,594
106,450 REMEC, Inc.* 2,741
131,900 Spectrian Corp.* 2,308
123,000 Yurie Systems, Inc.* 2,445
- -------------------------------------------------
37,147
- -------------------------------------------------
Computer - Hardware (2.2%)
80,700 Dell Computer Corp.* 8,024
36,400 JetFax, Inc.* 132
173,600 Sandisk Corp.* 3,472
101,500 SCM Microsystems, Inc.* 3,502
- -------------------------------------------------
15,130
- -------------------------------------------------
Computer -
Networking (6.0%)
388,250 3Com Corp.* 12,837
170,500 Ascend Communications,
Inc.* 5,040
259,200 Cisco Systems, Inc.* 16,346
141,300 FORE Systems, Inc.* 2,084
109,300 International Network
Services* 2,732
159,600 Xylan Corp.* 2,953
- -------------------------------------------------
41,992
- -------------------------------------------------
Computer -
Peripherals (1.1%)
246,800 HMT Technology Corp.* 2,684
189,900 Komag, Inc.* 2,564
151,700 Read-Rite Corp.* 2,247
- -------------------------------------------------
7,495
- -------------------------------------------------
Computer Software
& Service (5.8%)
108,800 Axiom, Inc.* 530
125,100 CCC Information Services
Group, Inc.* 2,737
20,000 Complete Business
Solutions, Inc.* 924
167,200 CrossKeys Systems Corp.* 2,320
103,600 Crystal Systems
Solutions Ltd.* 2,383
120,000 Harbinger Corp.* 2,970
163,200 Macrovision Corp.* 2,591
80,700 Microsoft Corp.* 12,040
100,000 Pixar, Inc.* 2,900
100,000 PLATINUM
Technology, Inc.* 2,800
206,500 Rational Software Corp.* 2,336
67,700 Security Dynamics
Technologies, Inc.* 2,386
52,500 Sterling Commerce,
Inc.* 1,906
120,000 XcelleNet, Inc.* 2,010
- -------------------------------------------------
40,833
- -------------------------------------------------
Drugs (1.8%)
100,000 Dura Pharmaceuticals,
Inc.* 3,969
100,000 Elan Corp. plc ADR* 5,193
100,000 Jones Medical
Industries, Inc. 3,494
- -------------------------------------------------
12,656
- -------------------------------------------------
Electronics -
Instrumentation (0.1%)
5,460 Thermo Vision Corp.* 38(a)
- -------------------------------------------------
Electronics -
Semiconductors (3.7%)
91,900 Intel Corp. 7,444
70,100 Lattice Semiconductor
Corp.* 3,233
105,600 Microchip Technology,
Inc.* 2,439
221,500 TranSwitch Corp.* 2,602
97,900 Triquint Semiconductor,
Inc.* 2,496
64,800 Vitesse Semiconductor
Corp.* 2,815
132,000 VLSI Technology, Inc.* 2,632
173,200 Zoran Corp.* 2,674
- -------------------------------------------------
26,335
- -------------------------------------------------
Equipment -
Semiconductors (3.3%)
171,600 Brooks Automation, Inc.* 2,789
135,000 Cerprobe Corp.* 2,464
182,800 CFM Technologies, Inc.* 2,696
159,600 Cymer, Inc.* 2,643
150,500 Electroglas, Inc.* 2,182
80,000 Etec Systems, Inc.* 3,320
159,500 Integrated Process
Equipment Corp.* 2,333
111,400 Photronics, Inc.* 2,562
104,700 Speedfam
International, Inc.* 2,493
- -------------------------------------------------
23,482
- -------------------------------------------------
Finance - Consumer (2.0%)
29,500 Associates First
Capital Corp. 2,006
65,000 Household
International, Inc. 8,092
150,000 NCO Group, Inc.* 3,713
- -------------------------------------------------
13,811
- -------------------------------------------------
Foods (1.3%)
150,000 Suiza Foods Corp.* 9,141
- -------------------------------------------------
Healthcare -
Diversified (1.0%)
131,200 PAREXEL
International Corp.* 4,527
75,400 Superior Consultant
Holdings Corp.* 2,337
- -------------------------------------------------
6,864
- -------------------------------------------------
Healthcare - Specialized
Services (4.5%)
116,090 Concentra Managed
Care, Inc.* 3,729
100,000 ESC Medical Systems Ltd.* 3,703
150,000 Express Scripts, Inc. "A"* 9,187
81,750 MedQuist, Inc.* 2,493
251,600 Orthodontic Centers of
America, Inc.* 4,246
68,000 Pediatrix Medical
Group, Inc.* 2,542
100,000 Renal Care Group, Inc.* 3,388
91,666 Total Renal Care
Holdings, Inc.* 2,229
- -------------------------------------------------
31,517
- -------------------------------------------------
Home Furnishings
& Appliances (1.0%)
150,000 Ethan Allen Interiors, Inc. 7,181
- -------------------------------------------------
Hospitals (1.2%)
165,000 National Surgery
Centers, Inc.* 4,043
100,000 Universal Health
Services, Inc.* 4,662
- -------------------------------------------------
8,705
- -------------------------------------------------
Internet Services (2.1%)
181,200 Concentric Network Corp.* 1,925
158,900 Network Solutions,
Inc. "A"* 2,979
196,800 Preview Travel, Inc.* 3,050
202,100 Sportsline USA, Inc.* 4,295
199,400 USWeb Corp.* 2,331
- -------------------------------------------------
14,580
- -------------------------------------------------
Investment Banks /
Brokerage (0.5%)
105,000 Charles Schwab Corp. 3,832
- -------------------------------------------------
Investment Companies (0.8%)
125,000 Sirrom Capital Corp. 5,875
- -------------------------------------------------
Lodging/Hotel (0.7%)
80,000 Four Seasons Hotels, Inc. 2,355
52,500 Promus Hotel Corp.* 2,372
- -------------------------------------------------
4,727
- -------------------------------------------------
Medical Products
& Supplies (2.9%)
100,000 Henry Schein, Inc.* 3,300
76,600 Ocular Sciences, Inc.* 2,039
150,000 Omnicare, Inc. 4,312
158,700 Serologicals Corp.* 4,424
125,000 Sybron Corp.* 5,930
- -------------------------------------------------
20,005
- -------------------------------------------------
Nursing Care (1.2%)
200,000 HEALTHSOUTH
Rehabilitation Corp.* 4,487
100,000 Sunrise Assisted
Living, Inc.* 4,013
- -------------------------------------------------
8,500
- -------------------------------------------------
Oil & Gas - Drilling/
Equipment (7.2%)
100,000 Carbo Ceramics, Inc. 2,825
70,000 Cooper Cameron Corp.* 3,601
70,200 Diamond Offshore
Drilling, Inc.* 3,137
85,000 Dril-Quip, Inc.* 2,518
112,000 EVI, Inc.* 4,522
140,600 Friede Goldman
International, Inc.* 3,858
100,000 Global Industries Ltd.* 1,475
23,400 Gulfmark Offshore, Inc.* 667
105,000 Halter Marine
Group, Inc.* 2,166
100,000 Hvide Marine, Inc. "A"* 1,837
100,000 National-Oilwell, Inc.* 2,650
75,000 Petroleum
Geo-Services ADR* 4,069
160,000 R & B Falcon Corp.* 4,840
95,900 Santa Fe International
Corp. 3,506
80,000 Transocean Offshore,
Inc. 3,180
61,800 Trico Marine
Services, Inc.* 1,027
61,000 UNIFAB International,
Inc.* 877
89,400 Varco International, Inc.* 1,833
48,500 Veritas DGC, Inc.* 1,791
- -------------------------------------------------
50,379
- -------------------------------------------------
Personal Care (0.9%)
75,000 Estee Lauder
Companies, Inc. 4,120
50,000 Revlon, Inc. "A"* 2,119
- -------------------------------------------------
6,239
- -------------------------------------------------
Restaurants (1.0%)
211,950 Papa John's
International, Inc.* 7,339
- -------------------------------------------------
Retail - Building
Supplies (0.9%)
105,000 Home Depot, Inc. 6,333
- -------------------------------------------------
Retail - Food (0.6%)
100,000 Dominick's
Supermarkets, Inc.* 3,962
- -------------------------------------------------
Retail - General
Merchandising (0.7%)
122,500 Dollar Tree Stores, Inc.* 5,214
- -------------------------------------------------
Retail - Specialty (2.4%)
150,000 99 Cents Only Stores* 4,762
100,000 Abercrombie
& Fitch Co.* 3,113
49,000 Cost Plus, Inc.* 1,213
90,300 Hibbett Sporting
Goods, Inc.* 2,037
150,000 Party City Corp.* 3,375
100,000 Rental Service Corp.* 2,194
- -------------------------------------------------
16,694
- -------------------------------------------------
Retail - Specialty
Apparel (0.9%)
100,000 Delia's, Inc.* 2,763
76,200 Gadzooks, Inc.* 1,524
107,100 K&G Men's Center, Inc.* 2,075
- -------------------------------------------------
6,362
- -------------------------------------------------
Services - Commercial
& Consumer (3.7%)
166,200 Altron, Inc.* 2,296
64,000 Fine Host Corp.* 240(b)
73,300 Flextronics
International Ltd.* 2,611
70,000 Hertz Corp.* 2,800
150,000 International Total
Services, Inc.* 2,906
90,600 Learning Tree
International, Inc.* 2,446
100,000 MSC Industrial
Direct Co.* 4,463
60,000 Rural/Metro Corp.* 1,815
135,000 Stewart Enterprises, Inc. 6,210
- -------------------------------------------------
25,787
- -------------------------------------------------
Services - Computer
Systems (0.3%)
61,600 Mastech Corp.* 2,298
- -------------------------------------------------
Services - Data
Processing (1.0%)
126,100 Checkfree Holdings Corp.* 3,121
54,600 Computer Horizons Corp.* 2,285
184,000 Credit Management
Solutions, Inc.* 1,725
- -------------------------------------------------
7,131
- -------------------------------------------------
Telecommunications -
Cellular/Wireless (1.5%)
205,000 Aerial Communications,
Inc.* 1,589
233,500 Microcell
Telecommunications,
Inc. "B"* 1,459
118,200 Omnipoint Corp.* 2,992
92,300 Powertel, Inc.* 1,892
114,000 Western Wireless
Corp. "A"* 2,287
- -------------------------------------------------
10,219
- -------------------------------------------------
Telecommunications -
Long Distance (3.6%)
124,600 ITC DeltaCom, Inc.* 2,383
63,600 IXC Communications, Inc.* 2,453
74,000 LCI International, Inc.* 2,123
45,500 Pacific Gateway
Exchange, Inc.* 2,453
103,600 Premiere
Technologies, Inc.* 2,590
29,000 Qwest Communications
International, Inc.* 2,055
77,000 RSL Communications Ltd.* 1,713
77,300 SmarTalk TeleServices, Inc.* 2,242
73,700 STAR Telecommunications,
Inc.* 2,824
105,800 Startec Global
Communications Corp.* 2,089
90,000 Tel-Save Holdings, Inc.* 2,137
- -------------------------------------------------
25,062
- -------------------------------------------------
Telephones (3.6%)
130,700 American Communications
Services, Inc.* 2,042
135,900 Electric Lightware,
Inc. "A"* 1,886
153,200 GST Telecommunications,
Inc.* 1,724
64,200 ICG Communications, Inc.* 1,581
41,500 Intermedia Communications
of Florida, Inc.* 2,552
46,100 McLeod, Inc.* 1,588
114,500 Metromedia Fiber
Network, Inc. "A"* 2,848
142,200 MetroNet Communications
Corp. "B"* 3,008
87,700 NEXTLINK Communications,
Inc. "A"* 2,182
96,600 Teligent, Inc. "A"* 2,777
98,000 Winstar
Communications, Inc.* 3,203
- -------------------------------------------------
25,391
- -------------------------------------------------
Textiles - Apparel (1.0%)
66,700 North Face, Inc.* 1,676
120,000 Tommy Hilfiger Corp.* 5,227
- -------------------------------------------------
6,903
- -------------------------------------------------
Truckers (0.4%)
100,000 Coach USA, Inc.* 2,894
- -------------------------------------------------
Waste Management (0.5%)
100,000 American Disposal
Services, Inc.* 3,313
- -------------------------------------------------
Total common stocks
(cost: $503,254) 656,362
- -------------------------------------------------
Principal Market
Amount Value
(000) Security (000)
----- -------- ----
SHORT-TERM (9.2%)
U.S. Government
& Agency Issues (6.3%)
$ 20,117 Federal Home Loan
Mortgage Corp.,
5.40%, 2/05/98 $20,102
24,292 Federal National Mortgage
Assn., 5.41%, 2/02/98 24,285
- -------------------------------------------------
44,387
- -------------------------------------------------
Commercial Paper (2.9%)
20,125 Ford Motor Credit Co.,
5.61%, 2/03/98 20,115
- -------------------------------------------------
Total short-term (cost: $64,502) 64,502
- -------------------------------------------------
Total investments (cost: $567,756) $720,864
=================================================
NOTES TO PORTFOLIO OF INVESTMENTS IN SECURITIES
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.
Investments in foreign securities were 5.0% of net assets at January 31, 1998.
ADR - American Depositary Receipts are receipts issued by a U.S. bank evidencing
ownership of foreign shares. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
(a) Shares were received as a stock dividend and were temporarily restricted as
to disposition. At January 31, 1998, this security was designated as restricted
and illiquid and was valued using methods determined by the Manager under
general supervision of the Board of Directors.
(b) Security was deemed to be illiquid by the Manager due to suspension of
trading based on reports that the company had made an inappropriate calculation
of earnings. This security was valued using methods determined by the Manager
under general supervision of the Board of Directors. At January 31, 1998, this
security represented .03% of the Fund's net assets.
* Non-income producing.
See accompanying notes to financial statements.
AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 1998
(Unaudited)
Net investment loss:
Income:
Dividends $ 707
Interest 1,006
--------
Total income 1,713
--------
Expenses:
Management fees 1,471
Transfer agent's fees 960
Custodian's fees 99
Postage 96
Shareholder reporting fees 38
Directors' fees 2
Registration fees 46
Professional fees 17
Other 11
--------
Total expenses 2,740
--------
Net investment loss (1,027)
--------
Net realized and unrealized gain (loss) on investments:
Net realized gain 91,047
Change in net unrealized appreciation/depreciation (104,712)
--------
Net realized and unrealized loss (13,665)
--------
Decrease in net assets resulting from operations $(14,692)
========
See accompanying notes to financial statements.
AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 1998
and Year ended July 31, 1997
(Unaudited)
1/31/98 7/31/97
------- -------
From operations:
Net investment loss $ (1,027) $ (3,280)
Net realized gain on investments 91,047 23,305
Change in net unrealized appreciation/
depreciation of investments (104,712) 103,509
--------- ----------
Increase (decrease) in net assets resulting
from operations (14,692) 123,534
--------- ----------
Distributions to shareholders from:
Net realized gains (54,316) (12,865)
--------- ----------
From capital share transactions:
Proceeds from shares sold 105,895 275,675
Dividend reinvestments 51,249 11,559
Cost of shares redeemed (140,673) (251,356)
--------- ----------
Increase in net assets from capital
share transactions 16,471 35,878
--------- ----------
Net increase (decrease) in net assets (52,537) 146,547
Net assets:
Beginning of period 753,984 607,437
--------- ----------
End of period $ 701,447 $ 753,984
========= ==========
Undistributed net investment loss included
in net assets:
End of period $ (1,027) $ (5)
========= ==========
Change in shares outstanding:
Shares sold 3,303 9,294
Shares issued for dividends reinvested 1,690 391
Shares redeemed (4,477) (8,495)
--------- ----------
Increase in shares outstanding 516 1,190
========= ==========
Authorized shares of $.01 par value 50,000 50,000
========= ==========
See accompanying notes to financial statements.
AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 1998
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company incorporated under the laws of Maryland consisting of ten separate
funds. The information presented in this semiannual report pertains only to the
Aggressive Growth Fund (the Fund). The Fund's investment objective is
appreciation of capital. USAA Investment Management Company (the Manager) seeks
to achieve this objective by investing the Fund's assets primarily in equity
securities of companies that have the prospect of rapidly growing earnings.
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 valued 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. As a result of certain
permanent differences between book and tax basis accounting, reclassifications
have been made on the statement of assets and liabilities to decrease
accumulated net investment loss by $5,034, increase paid-in capital by $820, and
decrease accumulated net realized gain on investments by $5,854.
C. Investments in securities - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income 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.
D. Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in two joint short-term revolving
loan agreements totaling $850 million, one with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($750 million uncommitted), and one with
NationsBank of Texas, N.A. ($100 million committed). The purpose of the
agreements is to meet temporary or emergency cash needs, including redemption
requests that might otherwise require the untimely disposition of securities.
Subject to availability under its agreement with CAPCO, the Fund may borrow from
CAPCO an amount up to 5% of the Fund's total assets at CAPCO's borrowing rate
with no markup. Subject to availability under its agreement with NationsBank,
the Fund may borrow from NationsBank an amount which, when added to outstanding
borrowings under the CAPCO agreement, does not exceed 25% of the Fund's total
assets at NationsBank's borrowing rate plus a markup. The Fund had no borrowings
under either of these agreements during the six-month period ended January 31,
1998.
(3) DISTRIBUTIONS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made in the succeeding fiscal year
or as otherwise required to avoid the payment of taxes.
(4) INVESTMENT TRANSACTIONS
Purchases and sales of securities, excluding short-term securities, for the
six-month period ended January 31, 1998 were $399,340,938 and $472,899,895,
respectively.
Gross unrealized appreciation and depreciation of investments as of January 31,
1998 was $171,624,128 and $18,515,870, respectively.
(5) TRANSACTIONS WITH MANAGER
A. Management fees - The investment policies of the Fund and management of the
Fund's portfolio are carried out by USAA Investment Management Company. The
Fund's management fees are computed as a percentage of its annual average net
assets, which on an annual basis is equal to .50% of the first $200,000,000,
.40% of that portion over $200,000,000 but not over $300,000,000, and .33% of
the portion over $300,000,000.
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 based on an annual charge of $23.50 per shareholder account plus
out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
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 six-month
period ended January 31, 1998 was $1,800.
(6) TRANSACTIONS WITH AFFILIATES
Certain directors and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated directors or Fund officers
received any compensation from the Fund.
<TABLE>
(7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<CAPTION>
Six-Month
Period Ended Year Ended July 31,
January 31, ------------------------------
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value at
beginning of period $ 32.82 $ 27.88 $ 24.49 $ 17.74
Net investment income (loss) (.04)(a) (.14)(a) (.12 )(a) (.05)(a)
Net realized and
unrealized gain (loss) (.58) 5.65 5.12 8.35
Distributions from net
investment income - - - -
Distributions of realized
capital gains (2.34) (.57) (1.61) (1.55)
-------- -------- -------- ---------
Net asset value at
end of period $ 29.86 $ 32.82 $ 27.88 $ 24.49
======== ======== ======== =========
Total return (%) * (1.88) 20.00 21.16 49.98
Net assets at
end of period (000) $701,447 $753,984 $607,437 $ 363,390
Ratio of expenses to
average net assets (%) .72(b) .74 .74 .86
Ratio of net investment
income (loss) to
average net assets (%) (.27)(b) (.47) (.42) (.28)
Portfolio turnover (%) 55.27 57.15 43.75 138.32
Average commission
rate paid per share+ $ .0498 $ .0501 $ .0496
Ten-Month
Period Ended Year Ended
July 31, September 30,
1994 1993
---- ----
Net asset value at
beginning of period $ 20.40 $ 18.85
Net investment income (loss) (.02)(a) .02
Net realized and
unrealized gain (loss) (1.37) 3.67
Distributions from net
investment income (.02) -
Distributions of realized
capital gains (1.25) (2.14)
--------- --------
Net asset value at
end of period $ 17.74 $ 20.40
========= ========
Total return (%) * (7.31) 21.32
Net assets at
end of period (000) $ 248,953 $277,198
Ratio of expenses to
average net assets (%) .83(b) .86
Ratio of net investment
income (loss) to
average net assets (%) (.10)(b) .10
Portfolio turnover (%) 98.99 113.01
Average commission
rate paid per share+
</TABLE>
* Assumes reinvestment of all dividend income and capital gain distributions
during the period.
+ Calculated by aggregating all commissions paid on the purchase and sale of
securities and dividing by the actual number of shares purchased or sold
for which commissions were charged.
(a) Calculated using weighted average shares.
(b) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
===============================================================================
Directors
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
Investment Adviser, Underwriter and Distributor
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
Transfer Agent
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Auditors
KPMG Peat Marwick LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance
Call toll free - Central Time
Monday - Friday 8:00 a.m. to 8:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
For Additional Information On Mutual Funds
1-800-531-8181, (in San Antonio) 456-7211
For account servicing, exchanges or redemptions
1-800-531-8448, (in San Antonio) 456-7202
Recorded Mutual Fund Price Quotes
24-Hour Service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
Mutual Fund Touchline(Registered Trademark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
================================================================================
