Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Categories & Definitions 7
Portfolio of Investments 8
Notes to Portfolio of Investments 16
Statement of Assets and Liabilities 17
Statement of Operations 18
Statements of Changes in Net Assets 19
Notes to Financial Statements 20
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 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)1999, 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 (Registered
Trademark) 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 not insured or guaranteed by the
FDIC or any other government agency. Although the fund seeks to preserve
the value of your investment at $1 per share, it is possible to lose
money by investing in the fund.
(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 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 Investment Management Company, including charges and operating expenses,
please call 1-800-531-8181 for a prospectus. Read it carefully before you
invest.
Message from the President
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH, CFA,
APPEARS HERE]
The last half of 1998 was a fascinating time in the financial markets. While the
press, as usual, devoted most of its attention to stock markets, the income
markets were perhaps even more interesting.
The turmoil in foreign debt markets coupled with the problems of a notable hedge
fund, set off an almost incredible wave of events. I use the word "wave" because
it so well describes the reaction that occurred in the U.S. Treasury securities
market. We see this in the chronology of yields on the 30-year Treasury bond:
U.S. Treasury 30-year Yield
--------------------------------------------
August 3, 1998 5.66%
September 1, 1998 5.34%
October 1, 1998 4.88%
November 2, 1998 5.24%
December 1, 1998 5.03%
And, as this is being written in early March 1999, the 30-year bond has returned
to the level of August 1998.
These seemingly dry numbers tell a story that is filled with terror. This was a
flight to quality and a flight away from anything that smacked of risk. It is a
reminder that mutual funds are not bank accounts. They are conduits to
securities markets, and those markets must function every day. If the world is
in turmoil, that functioning will be rocky, but that does not mean all is bad.
If you owned Russian or Brazilian bonds it was bad. But if you owned U.S.
Treasuries it was absolutely wonderful.
That is the great lesson here. A tumultuous market produces winners as well as
losers because money must flow somewhere. That's one reason we diversify. That's
one reason we don't pay much attention to doomsayers.
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, including charges and operating expenses,
please call for a prospectus. Read it carefully before investing.
Past performance is no guarantee of future results..
Investment Review
USAA MONEY MARKET FUND
OBJECTIVE: Highest income consistent with preservation of capital and
maintenance of liquidity.
TYPES OF INVESTMENTS: High-quality, short-term debt securities that present
minimal credit risk.
- --------------------------------------------------------------------------------
7/31/98 1/31/99
- --------------------------------------------------------------------------------
Net Assets $2,491.5 Million $2,808.5 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 1/31/99
- --------------------------------------------------------------------------------
7/31/98 to
1/31/99 1 Year 5 Years 10 Years 7-day Yield
2.55% (+) 5.28% 5.19% 5.51% 4.74%
- --------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Total return equals income yield and assumes reinvestment of all dividends. No
adjustment has been made for taxes payable by shareholders on their reinvested
income dividends. The performance data quoted represent past performance and are
not an indication of future results. An investment in a money market fund is not
insured or guaranteed by the FDIC or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The 7-day yield quotation more
closely reflects current earnings of the Fund than the total return quotation.
7-DAY YIELD COMPARISON
A chart in the form of a line graph appears here illustrating the comparison of
the 7-day Yield of the USAA Money Market Fund to the IBC/Donoghue's Money Fund
Averages (Trademark)/First Tier:
USAA Money
Market Fund IBC Average
----------------- -----------
01/27/98 5.39% 4.99%
02/24/98 5.29% 4.94%
03/31/98 5.22% 4.93%
04/28/98 5.27% 4.90%
05/26/98 5.26% 4.90%
06/30/98 5.29% 4.94%
07/28/98 5.27% 4.92%
08/25/98 5.26% 4.91%
09/29/98 5.25% 4.87%
10/27/98 5.02% 4.64%
11/24/98 4.96% 4.55%
12/29/98 4.99% 4.52%
01/26/99 4.74%* 4.37%*
Data represent the last Tuesday of each month.
*Ending date 1/26/99
The graph tracks the USAA Money Market Fund's 7-day yield against IBC/Donoghue's
Money Fund Averages(Trademark)/First Tier, an average of first-tier major money
market fund yields.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER, PAMELA K. BLEDSOE, CFA, APPEARS HERE]
Globalization and technological advances continue to link almost all countries
in the world. As worldwide trading grows, the U.S. economy is subject to the
influences of economic and financial events occurring in countries other than
our own. Since our annual report in July 1998, the Federal Reserve (Fed) has
lowered the Federal Funds rate by .75%. This was the first change in interest
rate policy since the Federal Reserve increased rates on March 25, 1997. The
change in Fed policy was driven by the impact on the U.S. economy caused by
financial instability in Russia, Asia, and Latin America. Financial instability
in these regions may result in the slowing of demand for U.S. goods (exports).
By lowering interest rates, the Fed is trying to stimulate our domestic economy
to offset the slowdown that may be caused by reduced trade with other countries.
We expect reports of economic data throughout 1999 to show further growth in the
U.S., offsetting any need for further interest rate reductions.
Since our July annual report, we have reduced some of our holdings in
obligations of money center banks that could have exposure to Russia, Asia, or
Latin America. Instead, we have been purchasing more commercial paper and
variable rate demand notes (VRDN) of domestic corporations. In view of the
events cited above, we strive to maintain a stable net asset value of $1.00
while maximizing current income.
According to IBC Financial Data, the USAA Money Market Fund continues to be
ranked highly among money market funds. While past performance is no guarantee
of future results, for the twelve months ended January 31, 1999, your Fund
ranked 20 out of 268 retail Money Market funds.
PORTFOLIO RATINGS/MIX
A pie chart is shown here depicting the Portfolio Mix as of January 31, 1999
of the USAA Money Market Fund to be:
Bonds/Notes - 38.0%*; Variable Rate Demand Notes - 23.0%*; Commercial Paper -
25.8%*; and CDs - 12.3%*.
* Percentages are of the Net Assets and may or may not equal 100%.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, illustrating a $10,000
hypothetical investment in the USAA Money Market Fund for the period of 01/31/89
through 01/31/99. The data points from the graph are as follows:
USAA Money
Market Fund
----------------
01/89 $10,000
07/89 10,453
01/90 10,888
07/90 11,313
01/91 11,750
07/91 12,110
01/92 12,435
07/92 12,681
01/93 12,889
07/93 13,082
01/94 13,275
07/94 13,507
01/95 13,849
07/95 14,249
01/96 14,649
07/96 15,020
01/97 15,409
07/97 15,813
01/98 16,243
07/98 16,675
01/99 17,100
Data from 1/31/89 through 1/31/99
Past performance is no guarantee of future results and the value of your
investment will vary according to the USAA Money Market Fund's performance. An
investment in a money market fund is not insured or guaranteed by the FDIC or
any other government agency. Although the fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the fund. For 7-day yield information, please refer to the Fund's Investment
Review page.
See page 8 for a complete listing of the Portfolio of Investments.
USAA MONEY MARKET FUND
CATEGORIES AND DEFINITIONS
PORTFOLIO OF INVESTMENT IN SECURITIES
January 31, 1999
(Unaudited)
Fixed Rate Instruments - consist of bonds and notes. The interest rate is
constant to maturity. Prior to maturity, the market price of a fixed-rate
instrument generally varies inversely to the movement of interest rates.
Put Bonds - provide the right to sell the bond at face value at specific tender
dates prior to final maturity. The put feature shortens the effective maturity
of the security.
Variable Rate Demand Notes (VRDN) - provide the right, on any business day, to
sell the security at face value on either that day or within 30 days. The
interest rate is adjusted at a stipulated daily, weekly, or monthly interval to
a rate that reflects current market conditions. In bond funds, the effective
maturity is the next put date.
Cash Equivalents - consist of short-term obligations issued by banks,
corporations, and U.S. Government Agencies. The interest rate is constant to
maturity.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CD Certificate of Deposit IDB Industrial Development Board
COP Certificate of Participation LLC Limited Liability Company
CP Commercial Paper LLP Limited Liability Partnership
IDA Industrial Development MTN Medium-Term Note
Authority/Agency RB Revenue Bond
Credit Enhancement - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due. The
enhancement may be provided by either a high quality bank, insurance company, or
other corporation, or a collateral trust.
(LOC) Enhanced by a bank letter of credit.
(NBGA) Enhanced by a non-bank guarantee agreement.
(INS) Scheduled principal and interest payments are insured by:
(1) MBIA, Inc.
USAA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
January 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Principal Coupon
Amount Security Rate Maturity Value
- -------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED RATE INSTRUMENTS (42.6%)
Banks - Major Regional
$ 30,000 BankBoston Corp., CP 5.06% 4/14/1999 $ 29,688
40,000 BankBoston Corp., CP 4.88 4/20/1999 39,566
25,000 BankBoston Corp., CP 5.07 5/17/1999 24,623
14,500 Mercantile Safe Deposit & Trust Co., CD 6.30 8/16/1999 14,540
50,000 Merita Bank PLC, CD 5.69 8/06/1999 49,988
35,000 Merita N.A., Inc., CP 4.99 4/08/1999 34,670
18,108 Merita N.A., Inc., CP 4.81 4/26/1999 17,900
30,000 National Bank of Canada, CD 5.26 2/08/1999 30,000
30,000 National Bank of Canada, CD 5.72 3/08/1999 29,999
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270,974
- ---------------------------------------------------------------------------------------
Banks - Money Center
25,000 Bankers Trust Co., CD 5.76 4/26/1999 24,998
25,000 Bankers Trust Co., CD 5.70 7/23/1999 24,994
35,000 Banque Nationale de Paris, CD 5.52 2/18/1999 34,997
30,000 Commerzbank AG, CD 5.52 2/02/1999 29,999
30,000 Commerzbank AG, CD 5.54 2/02/1999 30,000
25,000 Credit Agricole Indosuez, CD 5.73 4/16/1999 24,998
30,000 Deutsche Bank AG, CD 5.70 3/30/1999 29,996
30,000 Macquarie Bank Ltd., CP 5.00 2/16/1999 29,929
15,000 Macquarie Bank Ltd., CP 5.00 2/17/1999 14,963
25,000 Macquarie Bank Ltd., CP 5.37 2/19/1999 24,925
25,000 Paribas Finance, Inc. CP 5.09 3/19/1999 24,830
20,000 Societe Generale, CD 5.70 8/03/1999 19,994
25,000 Unibanco-Uniao de Bancos Brasilieros
S.A., CP (LOC) 5.45 6/28/1999 24,436
- ---------------------------------------------------------------------------------------
339,059
- ---------------------------------------------------------------------------------------
Electric/Gas Utilities - Municipal
20,000 Cogentrix of Richmond, Inc., CP (LOC) 4.85 2/12/1999 19,965
44,362 Cogentrix of Richmond, Inc., CP (LOC) 4.90 2/16/1999 44,259
27,880 Nebraska Public Power District CP 5.04 4/28/1999 27,880
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92,104
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Finance - Consumer
25,000 American Honda Finance Corp., CP 5.23 2/09/1999 24,964
15,000 American Honda Finance Corp., CP 5.18 2/11/1999 14,974
20,040 Associates Corp. of N.A., Senior Notes 6.00 3/15/1999 20,047
18,465 Associates Corp. of N.A., Senior Notes 6.25 3/15/1999 18,477
40,980 Countrywide Home Loans, Inc., CP 5.33 2/11/1999 40,907
40,000 Countrywide Home Loans, Inc., CP 4.88 2/26/1999 39,854
10,418 Ford Motor Credit Co. MTN 6.38 9/15/1999 10,459
55,786 General Motors Acceptance Corp., CP 4.83 3/03/1999 55,547
14,750 General Motors Acceptance Corp., MTN 5.45 3/01/1999 14,746
46,739 Household Finance Corp. CP 4.83 2/01/1999 46,726
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286,701
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Finance - Diversified
16,708 General Electric Capital Corp., CP 4.81 3/08/1999 16,626
30,000 General Electric Capital Corp., CP 5.06 4/27/1999 29,633
30,000 Heller Financial, Inc., CP 4.93 2/01/1999 29,992
40,000 Heller Financial, Inc., CP 4.95 2/02/1999 39,983
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116,234
- ---------------------------------------------------------------------------------------
Hospitals
13,145 Bergen County, NJ, County Improvement
Auth., Notes (NBGA) 5.74 2/17/1999 13,145
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Natural Gas Utilities
50,000 Northern Illinois Gas Co. 5.07 1/26/2000 50,000
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Retail - General Merchandising
27,463 Sears Roebuck Acceptance Corp., CP 4.84 3/04/1999 27,341
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Total fixed rate instruments (cost: $1,195,558) 1,195,558
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PUT BONDS (13.8%)
Electric Utilities
54,700 IDA of New Hampshire, Pollution Control
RB, Series E (LOC) 5.02 5/01/2021 54,700
65,000 IDB of Columbia, AL, RB, Series 1997(a) 5.33 11/01/2021 65,000
- ---------------------------------------------------------------------------------------
119,700
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Hospitals
15,300 Metrocrest, TX, Hospital Auth. RB,
Series 1989A (LOC) 5.33 8/01/2008 15,293
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Leisure Time
7,620 Sault Ste. Marie Tribe Building Auth.,
RB, Series 1996B (LOC) 5.55 6/01/2003 7,620
- ---------------------------------------------------------------------------------------
Nursing/Continuing Care Centers
7,000 Bexar County, TX, Health Facilities
Development RB (LOC) 5.95 2/01/2022 7,000
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Oil - Domestic Integrated
26,200 Madison County, IL, RB, Series 1997A(a) 4.86 12/01/2037 26,200
- ---------------------------------------------------------------------------------------
Oil & Gas - Refining/Manufacturing
25,000 IDA of Gulf Coast RB, Series 1998 (LOC) 4.95 8/01/2028 25,000
45,000 IDB of the Parish of Calcasieu, LA, Inc.
Environmental RB, Series 1996 (LOC) 5.26 7/01/2026 45,000
29,215 Port Arthur, TX Navigation District RB,
Series 1998(a) 5.20 6/01/2018 29,215
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99,215
- ---------------------------------------------------------------------------------------
Paper & Forest Products
22,000 IDA of Bedford County, VA, RB, Series
1995B (LOC) 5.25 12/01/2025 22,000
- ---------------------------------------------------------------------------------------
Single-Family Housing
25,000 Virginia Housing Development Auth.
Mortgage Bonds 5.05 4/01/2038 25,000
- ---------------------------------------------------------------------------------------
Special Assessment/Tax/Fee
65,900 Anaheim, CA, COP (LOC) 5.28 12/01/2022 65,900
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Total put bonds (cost: $387,928) 387,928
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VARIABLE RATE DEMAND NOTES (23.0%)
Asset Backed Securities
18,282 Capital One Funding Corp., Notes,
Series 1995C (LOC) 4.91 10/01/2015 18,282
21,372 Capital One Funding Corp., Notes,
Series 1996E (LOC) 4.91 7/02/2018 21,372
- ---------------------------------------------------------------------------------------
39,654
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Automobiles
8,500 Columbus, GA Development Authority
RB (LOC) 4.96 9/01/2013 8,500
- ---------------------------------------------------------------------------------------
Auto Parts
14,400 Alabama IDA RB (Rehau Project) (LOC) 5.08 10/01/2019 14,400
9,255 Bardstown, KY, RB, Series 1994 (LOC) 5.00 6/01/2024 9,255
11,000 Bardstown, KY, RB, Series 1995 (LOC) 5.00 3/01/2025 11,000
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34,655
- ---------------------------------------------------------------------------------------
Broadcasting - Radio & TV
48,000 New Jersey Economic Development Auth.
RB (NBGA)(a) 5.04 10/01/2021 48,000
- ---------------------------------------------------------------------------------------
Buildings
7,400 San Bernardino County, CA, COP (LOC) 5.30 11/01/2025 7,400
- ---------------------------------------------------------------------------------------
Chemicals
8,455 Wyckoff Chemical Company, Inc., Note,
Series 1997 (LOC) 4.89 2/01/2027 8,455
- ---------------------------------------------------------------------------------------
Electrical Equipment
14,000 Mississippi Business Finance Corp.,
Series 1998 (a) 5.04 2/01/2023 14,000
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Finance - Diversified
20,080 KBL Capital Fund, Inc., Installment #1
Notes, Series A (LOC) 4.89 5/01/2027 20,080
- ---------------------------------------------------------------------------------------
General Obligations
15,795 San Bernardino County, CA, COP, (Glen
Helen Project), Series D (LOC) 5.19 3/01/2024 15,795
- ---------------------------------------------------------------------------------------
Healthcare - Specialized Services
6,700 Mason City Clinic, P.C., IA, Bonds,
Series 1992 (LOC) 5.05 9/01/2022 6,700
9,045 Navigator Ventures, L.L.C., Notes,
Series 1997 (LOC) 4.89 5/01/2027 9,045
- ---------------------------------------------------------------------------------------
15,745
- ---------------------------------------------------------------------------------------
Hospitals
20,000 Crouse Health Hospital, Inc., RB,
Series 1996 (LOC) 5.00 7/01/2017 20,000
15,100 Dome Corp., Bonds, Series 1991 (LOC) 4.98 8/31/2016 15,100
- ---------------------------------------------------------------------------------------
35,100
- ---------------------------------------------------------------------------------------
Leisure Time
9,000 Fox Valley Ice Arena, IL, RB, Series
1997 (LOC) 5.00 7/01/2027 9,000
14,390 Greenville, SC Memorial Auditorium
District Public Facilities COP, Series
1996C (LOC) 5.00 9/01/2014 14,390
- ---------------------------------------------------------------------------------------
23,390
- ---------------------------------------------------------------------------------------
Lodging/Hotel
15,000 Central Michigan Inns RB (LOC) 4.98 11/01/2028 15,000
- ---------------------------------------------------------------------------------------
Manufacturing - Specialized
16,750 Loma Co. L.L.C. Floating Rate, Option
Notes (LOC) 4.91 12/01/2008 16,750
13,000 Savannah, GA, Economic Development
Auth., RB, Series 1998 (LOC) 4.97 6/01/2018 13,000
- ---------------------------------------------------------------------------------------
29,750
- ---------------------------------------------------------------------------------------
Multi-Family Housing
6,150 Arbor Properties, Inc., Notes (LOC) 5.00 6/01/2022 6,150
- ---------------------------------------------------------------------------------------
Nursing Care
3,525 Grand Valley Atrium, Inc. Taxable RB,
Series 1998 (LOC) 5.01 6/01/2018 3,525
- ---------------------------------------------------------------------------------------
Nursing/Continuing Care Centers
7,900 Assisted Living Funding L.L.C., Bonds,
Series 1997 (LOC) 5.20 10/01/2017 7,900
31,200 Lincolnwood Funding Corp. RB,
Series 1995A (LOC) 4.98 8/01/2015 31,200
10,350 Missouri Health and Educational
Facilities Auth. RB, Series 1996B (LOC) 5.05 12/01/2016 10,350
- ---------------------------------------------------------------------------------------
49,450
- ---------------------------------------------------------------------------------------
Paper & Forest Products
17,000 Bancroft Bag, Inc. Notes (LOC) 4.91 10/01/2008 17,000
10,030 Mac Papers Inc., Demand Bond (LOC) 4.95 8/03/2015 10,030
10,000 Tim Bar Corp. RB (LOC) 5.00 9/01/2010 10,000
- ---------------------------------------------------------------------------------------
37,030
- ---------------------------------------------------------------------------------------
Real Estate - Other
22,400 Chestnut Partnership Bond (LOC) 5.05 1/01/2029 22,400
5,974 Erie Funding I, Notes (LOC) 4.97 11/01/2016 5,974
15,500 First Illinois Funding Corp. Project,
RB, Series 1996 (LOC) 5.00 9/01/2026 15,500
15,805 H/M Partners, L.L.C., Bond (LOC) 5.00 10/01/2020 15,805
14,220 HGR-1, L.L.C., Notes, Series 1996 (LOC) 4.98 9/15/2046 14,220
11,480 Houston County, GA, IDA, RB (LOC) 5.00 8/01/2012 11,480
24,315 LAM Funding L.L.C., Notes, Series A
(LOC) 4.89 12/15/2027 24,315
24,510 Mayfair At Great Neck, NY Bonds (LOC) 5.21 1/01/2023 24,510
10,715 Physicians Real Estate, L.L.P., Notes,
Series 1998 (LOC) 5.05 2/01/2018 10,715
10,085 Pierce Memorial Baptist Home, Inc.,
Series 1999 (LOC) 5.05 10/01/2028 10,085
6,850 PRA at Glenwood Hills Corporate Centre,
L.L.C., Notes, Series 1997 (LOC) 4.89 8/01/2027 6,850
14,365 Sbar Piperno Co., Series 1998 (LOC) 4.95 9/01/2012 14,365
9,260 Shepherd Capital, L.L.C., Notes, Series
1997 (LOC) 4.98 7/15/2047 9,260
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185,479
- ---------------------------------------------------------------------------------------
Special Assessment/Tax/Fee
20,600 County of Cuyahoga, OH, RB, Series
1992B (LOC) 4.91 6/01/2022 20,600
- ---------------------------------------------------------------------------------------
Textiles - Home Furnishings
10,000 Alabama IDA RB (Fieldcrest Project)
(LOC) 5.00 7/01/2021 10,000
- ---------------------------------------------------------------------------------------
Water/Sewer Utilities - Municipal
18,040 Hesperia, CA, Public Financing Auth. RB,
Series 1998A (LOC) 5.30 6/01/2026 18,040
- ---------------------------------------------------------------------------------------
Total variable rate demand notes (cost: $645,798) 645,798
- ---------------------------------------------------------------------------------------
ADJUSTABLE RATE NOTES (19.7%)
Banks - Major Regional
25,000 BankBoston N.A. Bank Notes 5.28 11/02/1999 25,000
40,000 Comerica Bank, MTN 5.11 6/10/1999 39,990
20,290 Long Lane Master Trust, Notes, Series
1998B (a),(b) 4.98 4/30/1999 20,290
19,800 Long Lane Master Trust, Notes, Series
1999A (a),(b) 5.13 1/20/2000 19,800
- ---------------------------------------------------------------------------------------
105,080
- ---------------------------------------------------------------------------------------
Banks - Money Center
40,000 Bankers Trust, NY, Corp. Notes (a) 4.97 2/10/1999 40,000
30,000 Bankers Trust, NY, Corp. Notes (a) 5.38 2/19/1999 30,000
- ---------------------------------------------------------------------------------------
70,000
- ---------------------------------------------------------------------------------------
Finance - Consumer
40,000 American Honda Finance Corp., MTN (a) 5.38 8/16/1999 39,998
30,000 American Honda Finance Corp., MTN (a) 5.03 4/09/1999 30,000
50,000 Chrysler Financial Corp., MTN, Series Q 4.96 2/03/1999 50,000
25,000 Household Finance Corp., MTN 5.19 3/09/1999 25,000
25,000 Household Finance Corp., MTN 4.92 4/30/1999 25,000
40,000 Toyota Motor Credit Corp., MTN 5.01 10/19/1999 40,011
- ---------------------------------------------------------------------------------------
210,009
- ---------------------------------------------------------------------------------------
Finance - Diversified
25,000 General Electric Capital Corp., MTN 5.09 6/08/1999 24,996
50,000 Sanwa Business Credit Corp., MTN
(INS) (1),(a) 5.19 5/20/1999 49,998
- ---------------------------------------------------------------------------------------
74,994
- ---------------------------------------------------------------------------------------
Leasing
50,000 PHH Corp., MTN 5.00 2/05/1999 50,000
45,000 PHH Corp., MTN 5.07 7/12/1999 44,998
- ---------------------------------------------------------------------------------------
94,998
- ---------------------------------------------------------------------------------------
Total adjustable rate notes (cost: $555,081) 555,081
- ---------------------------------------------------------------------------------------
Total investments (cost: $2,784,365) $2,784,365
=======================================================================================
</TABLE>
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
Finance - Consumer 17.7%
Banks - Money Center 14.6
Banks - Major Regional 13.4
Finance - Diversified 7.5
Real Estate - Other 6.6
Electric Utilities 4.3
Oil & Gas - Refining/Manufacturing 3.5
Leasing 3.4
Electric/Gas Utilities - Municipal 3.3
Special Assessment/Tax/Fee 3.1
Hospitals 2.3
Paper & Forest Products 2.1
Nursing/Continuing Care Centers 2.0
Natural Gas Utilities 1.8
Broadcasting - Radio & TV 1.7
Asset Backed Securities 1.4
Auto Parts 1.2
Leisure Time 1.1
Manufacturing - Specialized 1.1
Retail - General Merchandising 1.0
Other 6.0
------
99.1%
======
USAA MONEY MARKET FUND
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 1999
(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.
Investments in U.S. dollar denominated securities issued by domestic branches or
subsidiaries of foreign banks or companies were 15.1% of net assets at January
31, 1999.
SPECIFIC NOTES
(a) Security is exempt from registration under the Securities Act of 1933. Any
resale of this security in the United States may occur in an exempt transaction
to a qualified institutional buyer as defined by the Rule 144A.
(b) Illiquid securities valued using methods determined by the Fund's investment
manager under the general supervision of the Board of Directors. At January 31,
1999, these securities represented 1.4% of the net assets.
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 1999
(Unaudited)
ASSETS
Investments in securities $ 2,784,365
Cash 9,408
Receivables:
Capital shares sold 6,020
Interest 26,826
Securities sold 1,300
------------
Total assets 2,827,919
------------
LIABILITIES
Securities purchased 2,500
Capital shares redeemed 15,610
USAA Investment Management Company 228
USAA Transfer Agency Company 421
Accounts payable and accrued expenses 414
Dividends on capital shares 249
------------
Total liabilities 19,422
------------
Net assets applicable to capital shares outstanding $ 2,808,497
============
REPRESENTED BY:
Paid-in capital $ 2,808,497
============
Capital shares outstanding 2,808,497
============
Authorized shares of $.01 par value 4,700,000
============
Net asset value, redemption price, and offering price per share $ 1.00
============
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31,1999
(Unaudited)
Net investment income:
Interest income $ 73,029
------------
Expenses:
Management fees 3,119
Transfer agent's fees 2,231
Custodian's fees 346
Postage 227
Shareholder reporting fees 131
Directors' fees 2
Registration fees 201
Professional fees 22
Other 23
------------
Total expenses before reimbursement 6,302
Expenses reimbursed (338)
------------
Total expenses after reimbursement 5,964
------------
Net investment income $ 67,065
============
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 1999
and Year ended July 31, 1998
(Unaudited)
1/31/99 7/31/98
---------------------------------
From operations:
Net investment income $ 67,065 $ 122,339
---------------------------------
Distributions to shareholders from:
Net investment income (67,065) (122,339)
---------------------------------
From capital share transactions:
Proceeds from shares sold 2,180,203 3,370,264
Shares issued for dividends reinvested 64,794 118,246
Cost of shares redeemed (1,927,973) (3,158,728)
---------------------------------
Increase in net assets from capital
share transactions 317,024 329,782
---------------------------------
Net increase in net assets 317,024 329,782
Net assets:
Beginning of period 2,491,473 2,161,691
---------------------------------
End of period $ 2,808,497 $ 2,491,473
=================================
Change in shares outstanding:
Shares sold 2,180,203 3,370,264
Shares issued for dividends reinvested 64,794 118,246
Shares redeemed (1,927,973) (3,158,728)
---------------------------------
Increase in shares outstanding 317,024 329,782
=================================
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 1999
(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 annual report pertains only to the USAA
Money Market Fund (the Fund). The Fund's investment objective is the highest
income consistent with preservation of capital and maintenance of liquidity.
USAA Investment Management Company (the Manager) seeks to achieve this objective
by investing the Fund's assets in high-quality, U.S. dollar-denominated debt
securities of domestic and foreign issuers which have been determined to present
minimal credit risk.
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 - 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.
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 three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with 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 the CAPCO agreements,
the Fund may borrow from CAPCO an amount under both agreements combined of 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 agreements, does not exceed 25% of the Fund's total assets at
NationsBank's borrowing rate plus a markup. The Fund had no borrowings under any
of these agreements during the six-month period ended January 31, 1999.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made in the succeeding fiscal year or as
otherwise required to avoid the payment of federal taxes.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the
six-month period ended January 31, 1999 were $9.0 billion and $8.7 billion,
respectively.
(5) TRANSACTIONS WITH MANAGER
A. Management fees - USAA Investment Management Company carries out the Fund's
investment policies and manages the Fund's portfolio. 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. Because the Fund's annual expenses for
the six-month period ended January 31, 1999 exceeded .45%, the Manager has
waived a portion of its management fee to reduce the Fund's annual expense to
.45%.
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 $28.50 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.
(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, 1999, the Association and its affiliates
owned 1.6 million shares (.1%) of the Fund.
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.
(7) YEAR 2000
Like other mutual funds, the Fund could be adversely affected if the computer
systems used by the Manager and the Fund's other service providers are not able
to perform their intended functions effectively after 1999 because of the
inability of computer software to distinguish the year 2000 from the year 1900.
The Manager is taking steps to address this potential year 2000 problem with
respect to the computer systems that they use and to obtain satisfactory
assurances that comparable steps are being taken by the Fund's other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund from this
problem.
(8) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Six-month Ten-month
Period Ended Period Ended
January 31, Year Ended July 31, July 31,
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------------------------------------------------------------------------------
<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 .05 .05 .05 .03
Distributions from net
investment income (.03) (.05) (.05) (.05) (.05) (.03)
-------------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===============================================================================
Total return (%) * 2.55 5.45 5.28 5.41 5.49 2.74
Net assets at
end of period (000) $2,808,497 $2,491,473 $2,161,691 $1,829,749 $1,540,055 $1,006,020
Ratio of expenses to
average net assets (%) .45(a) .45 .45 .45 .45 .46(a)
Ratio of expenses to
average net assets
excluding
reimbursement (%) .47(a) .48 .49 .51 .46 -
Ratio of net investment
income to average net
assets (%) 5.00(a) 5.32 5.16 5.27 5.44 3.28(a)
</TABLE>
* Assumes reinvestment of all dividend income distributions during the period.
(a)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 Hours
Call toll free - Central Time
Monday - Friday 7:30 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 USAA TouchLine(Service Mark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
