Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Financial Information:
Independent Auditors' Report 7
Categories and Definitions 8
Portfolio of Investments 9
Notes to Portfolio of Investments 17
Statement of Assets and Liabilities 18
Statement of Operations 19
Statements of Changes in Net Assets 20
Notes to Financial Statements 21
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 Very high $3,000
First Start Growth Moderate to high $3,000
Gold Very high $3,000
Growth Moderate to high $3,000
Growth & Income Moderate $3,000
International Moderate to high $3,000
S&P 500(Registered
Trademark) Index Moderate $3,000
Science & Technology Very high $3,000
Small Cap Stock Very high $3,000
World Growth Moderate to high $3,000
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ASSET ALLOCATION
- --------------------------------------------------------------------------------
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate $3,000
Growth and Tax Strategy Moderate $3,000
Growth Strategy Moderate to high $3,000
Income Strategy Low to moderate $3,000
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INCOME - TAXABLE
- --------------------------------------------------------------------------------
GNMA Low to moderate $3,000
High-Yield Opportunities High $3,000
Income Moderate $3,000
Income Stock Moderate $3,000
Intermediate-Term Bond Low to moderate $3,000
Short-Term Bond Low $3,000
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INCOME - TAX EXEMPT
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Long-Term Moderate $3,000
Intermediate-Term Low to moderate $3,000
Short-Term Low $3,000
State Bond Income Moderate $3,000
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MONEY MARKET
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Money Market Very low $3,000
Tax Exempt Money Market Very low $3,000
Treasury Money Market
Trust Very low $3,000
State Money Market Very low $3,000
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Foreign investing is subject to additional risks, which are discussed in the
funds' prospectuses.
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.
Some income may be subject to state or local taxes or the federal alternative
minimum tax.
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.
The Science & Technology 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, 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 the President and Vice Chairman of the Board, Michael J. C. Roth,
CFA, appears here.]
Year 2000 Readiness Disclosure
As we rapidly approach the year 2000, an interesting market picture is emerging.
Many of our shareholders have had questions about the "year 2000 problem," and
we have spent a lot of time, energy, and money on it. We believe that we -- and
your funds -- are in good shape because we have treated the problem seriously.
We also believe that we -- and your funds -- are not alone in that effort. I
always like to look at what the market tells us about such things.
Many dire predictions have been around for years now. Last summer, I asked some
business associates for the names of some systems people at major financial
firms to whom I could speak about Y2K. One of these was the head of the effort
at a major credit card institution. He was more dire in his outlook than anyone
else I spoke to. One prediction was, "By the second quarter of 1999, the federal
government will intervene in the financial markets and the banking system
because of the spreading panic." It is mid-September. The financial markets are
choppy because Fed Chairman Greenspan keeps talking about inflation, but so far,
no panic. Not even a hint. As for other predictions, we find that the Y2K
problem is being taken very seriously by firms with which we do business or with
whom we invest. We cannot assure that nothing will go wrong, but we are quite
sure that these firms have made a serious effort to confront it, just as we
have. As an added safeguard, we've developed, and continue to test, contingency
plans designed to help ensure continuous service in the event of a Y2K problem.
Early January will be very interesting. I have cancelled all employee vacations
from mid-December through mid-January. We will be here for you. Because our
computers will be doing the normal year-end processing on Saturday, January 1,
2000, we probably won't be able to give you year-end figures for your accounts
until sometime that afternoon. We plan to have some employees in from noon until
6 p.m. CST on New Year's Day, and Sunday, January 2, we will be in the office
from 8 a.m. until 8 p.m. CST. With patience, because we expect heavy phone
traffic in general, you should be able to reach us. We will also have our voice
response system (VRS) and Web site up. There may be some problems, but I expect
we will be able to wish you a "Happy New Year."
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.
Investment Review
USAA MONEY MARKET FUND
OBJECTIVE: Highest income consistent with preservation of capital and
maintenance of liquidity.
TYPES OF INVESTMENTS: Invests principally in high-quality, U.S.
dollar-denominated, short-term debt instruments that present minimal credit risk
and comply with strict SEC guidelines applicable to money market funds.
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7/31/98 7/31/99
- --------------------------------------------------------------------------------
Net Assets $2,491.5 Million $ 3,011.0 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
Average Annual Total Returns and Current Yield as of 7/31/99
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years 7-Day Yield
4.95% 5.32% 5.29% 4.77%
- --------------------------------------------------------------------------------
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
----------------- -----------
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%
02/23/99 4.69% 4.26%
03/30/99 4.63% 4.22%
04/27/99 4.60% 4.19%
05/25/99 4.58% 4.18%
06/29/99 4.67% 4.26%
07/27/99 4.78%* 4.38%*
Data represent the last Tuesday of each month.
* Ending date 7/27/99
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 the Portfolio Manager, Pamela K. Bledsoe, CFA, appears here.]
Last year, the Federal Reserve (Fed) sought to offset a slowdown in the U.S.
economy that could have been caused by reduced trade with other countries.
Actions were implemented by the Federal Reserve Board during September, October,
and November of 1998, which lowered the Federal Funds rate by 0.75%. It worked.
Over the course of the last few months, numerous economic statistics have been
released indicating the strength of the U.S. economy.
Statistics, such as job growth, wages, and manufacturing strength, indicate the
U.S. economy appears to be going full steam ahead. As expected by the
marketplace, the Fed increased the Federal Funds rate by 0.25% on June 30, 1999,
citing the need to be pre-emptive against any inflationary pressures that could
result from the domestic economy growing too quickly. With unemployment levels
continuing to decline, any upward pressure on wages may be a catalyst for future
rate increases.
At fiscal year end, the structure of the USAA Money Market Fund was poised to
take advantage of the recent rise in interest rates while selectively purchasing
longer-term maturities that provided good value. The above strategy continues to
perform well. While past performance is no guarantee of future results, for the
12 months ended July 31, 1999, the USAA Money Market Fund ranked 23 out of 269
retail money market funds, according to IBC Financial Data, Inc. During the
month of July 1999, the net assets of the Money Market Fund increased to over $3
billion.
PORTFOLIO RATINGS/MIX
JULY 31, 1999
A pie chart is shown here depicting the Portfolio Mix as of July 31, 1999 of the
USAA Money Market Fund to be:
Bonds/Notes - 37.4%; Variable-Rate Demand Notes - 26.7%; Commercial Paper -
19.2%; and CDs - 16.2%.
Percentages are of the net assets and may or may not equal 100%.
Cumulative Performance of $10,000
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 07/31/89
through 07/31/99. The data points from the graph are as follows:
USAA Money
Market Fund
----------------
07/31/89 $10,000
01/31/90 10,417
07/31/90 10,822
01/31/91 11,240
07/31/91 11,585
01/31/92 11,896
07/31/92 12,131
01/31/93 12,330
07/31/93 12,515
01/31/94 12,700
07/31/94 12,922
01/31/95 13,249
07/31/95 13,632
01/31/96 14,015
07/31/96 14,369
01/31/97 14,741
07/31/97 15,127
01/31/98 15,539
07/31/98 15,952
01/31/99 16,359
07/31/99 16,741
Data from 7/31/89 through 7/31/99
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 9 for a complete listing of the Portfolio of Investments.
Independent Auditors' Report
KPMG
The Shareholders and Board of Directors
USAA MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of the USAA Money Market Fund, a series of USAA
Mutual Fund, Inc., as of July 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and financial highlights, presented in
note 8 to the financial statements, for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
USAA Money Market Fund as of July 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
San Antonio, Texas
September 3, 1999
USAA MONEY MARKET FUND
CATEGORIES AND DEFINITIONS
PORTFOLIO OF INVESTMENTS
July 31, 1999
Fixed Rate Instruments - consist of bonds and notes. The yield 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. The effective maturity for these
instruments is deemed to be less than 397 days in accordance with detailed
regulatory requirements.
Adjustable Rate Notes - similar to VRDNs in the fact that the interest rate is
adjusted periodically to reflect current market conditions. These interest rates
are adjusted at a given time, such as monthly or quarterly. However, these
securities do not offer the right to sell the security at face value prior to
maturity.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CD Certificate of Deposit
COP Certificate of Participation
CP Commercial Paper
IDA Industrial Development Authority/Agency
IDB Industrial Development Board
LLC Limited Liability Company
LLP Limited Liability Partnership
MTN Medium-Term Note
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.
USAA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
July 31, 1999
Coupon
or
Principal Discount
Amount Security Rate Maturity Value
- --------------------------------------------------------------------------------
FIXED RATE INSTRUMENTS (38.2%)
Banks - Major Regional
$30,000 BankBoston Corp., CP 4.84% 10/13/1999 $ 29,701
50,000 BankBoston Corp., CP 4.88 10/20/1999 49,451
25,000 BankBoston Corp., CP 4.98 11/17/1999 24,623
25,000 Key Bank North America, Senior Notes 5.65 6/26/2000 24,984
51,000 Long Lane Master Trust IV, CP (a),(b) 5.16 8/30/1999 50,781
25,000 Long Lane Master Trust IV, CP (a),(b) 4.95 4/28/2000 24,065
14,500 Mercantile Safe Deposit & Trust Co., CD 6.30 8/16/1999 14,503
30,000 Mercantile Safe Deposit & Trust Co., CD 6.04 4/03/2000 30,165
50,000 Merita Bank PLC, CD 5.69 8/06/1999 50,000
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298,273
- --------------------------------------------------------------------------------
Banks - Money Center
22,000 Banque National de Paris, CD 5.14 2/18/2000 21,992
25,000 Bayerische Landesbank Girozentrale, CD 5.12 3/21/2000 24,965
30,000 Canadian Imperial Bank of Commerce, CD 5.01 2/07/2000 29,994
50,000 Commerzbank AG, CD 5.02 2/07/2000 49,991
40,000 Commerzbank AG, CD 5.06 2/09/2000 39,981
25,000 Commerzbank AG, CD 5.09 2/16/2000 24,995
50,000 Deutsche Bank AG, CD 5.06 2/08/2000 49,990
12,750 J. P. Morgan Co., Inc., MTN 5.70 2/15/2000 12,752
20,000 Societe Generale, CD 5.70 8/03/1999 20,000
35,000 Unifunding, Inc., CP 4.79 8/05/1999 34,977
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309,637
- --------------------------------------------------------------------------------
Computer - Hardware
10,000 IBM Corp., MTN 5.76 7/10/2000 10,010
- --------------------------------------------------------------------------------
Electric/Gas Utilities - Municipal
13,737 Cogentrix of Richmond, Inc., CP (LOC) 5.12 8/17/1999 13,704
27,880 Nebraska Public Power District, CP 5.13 10/25/1999 27,880
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41,584
- --------------------------------------------------------------------------------
Finance - Consumer
12,500 American General Finance Corp., CP 7.25 4/15/2000 12,628
10,000 Aristar, Inc., CP 5.18 8/13/1999 9,981
12,761 Aristar, Inc., CP 5.15 8/18/1999 12,728
13,500 Associates Corp. of N.A., Senior Notes 6.38 6/15/2000 13,574
21,099 Commercial Credit Corp., Notes 6.75 5/15/2000 21,275
49,000 Countrywide Home Loans, Inc., CP 5.14 8/09/1999 48,937
28,700 Countrywide Home Loans, Inc., CP 5.12 8/20/1999 28,618
10,418 Ford Motor Credit Co., MTN 6.38 9/15/1999 10,427
14,000 Ford Motor Credit Co., Notes 6.85 8/15/2000 14,154
21,755 Homeside Lending, Inc., MTN 6.88 5/15/2000 22,036
- --------------------------------------------------------------------------------
194,358
- --------------------------------------------------------------------------------
Finance - Diversified
12,000 Cit Group Inc., MTN 5.85 5/26/2000 12,062
77,323 General Electric Capital Corp., CP 5.10 8/03/1999 77,290
45,000 Heller Financial, Inc., CP 5.16 8/03/1999 44,981
45,000 Heller Financial, Inc., CP 5.16 8/27/1999 44,826
- --------------------------------------------------------------------------------
179,159
- --------------------------------------------------------------------------------
Leasing
12,168 PHH Corp., CP 5.20 8/02/1999 12,165
- --------------------------------------------------------------------------------
Natural Gas Utilities
50,000 Northern Illinois Gas Co., Senior Notes 5.07 1/26/2000 50,000
- --------------------------------------------------------------------------------
Real Estate - Other
22,000 Mt. Sinai Medical Center, CP (LOC) 5.08 8/18/1999 21,944
- --------------------------------------------------------------------------------
Retail - General Merchandising
33,540 Sears Roebuck Acceptance Corp., CP 5.07 8/05/1999 33,516
- --------------------------------------------------------------------------------
Total fixed rate instruments (cost: $1,150,646) 1,150,646
- --------------------------------------------------------------------------------
PUT BONDS (15.0%)
Electric Utilities
54,700 IDA of New Hampshire, Pollution Control
RB, Series E (LOC) 5.26 5/01/2021 54,700
65,000 IDB of Columbia, AL, RB, Series 1997(a) 5.13 11/01/2021 65,000
- --------------------------------------------------------------------------------
119,700
- --------------------------------------------------------------------------------
Hospitals
15,300 Metrocrest, TX, Hospital Auth. RB,
Series 1989A (LOC) 4.99 8/01/2008 15,296
- --------------------------------------------------------------------------------
Leisure Time
6,780 Sault Ste. Marie Tribe Building Auth.
RB, Series 1996B (LOC) 5.65 6/01/2003 6,780
- --------------------------------------------------------------------------------
Nursing/Continuing Care Centers
6,830 Bexar County, TX, Health Facilities
Development RB (LOC) 5.09 2/01/2022 6,830
- --------------------------------------------------------------------------------
Oil - Domestic Integrated
23,500 IDA of California, Pollution Control
RB, Series 1996(a) 5.24 10/01/2031 23,500
- --------------------------------------------------------------------------------
Oil & Gas - Refining/Manufacturing
25,000 IDA of Gulf Coast RB, Series 1998 5.13 8/01/2028 25,000
45,000 IDB of the Parish of Calcasieu, LA, Inc.
Environmental RB, Series 1996 (LOC) 5.13 7/01/2026 45,000
37,215 Port Arthur, TX Navigation District
RB, Series 1998(a) 5.23 6/01/2018 37,215
- --------------------------------------------------------------------------------
107,215
- --------------------------------------------------------------------------------
Paper & Forest Products
22,000 IDA of Bedford County, VA, RB,
Series 1995B (LOC) 5.05 12/01/2025 22,000
- --------------------------------------------------------------------------------
Single-Family Housing
40,000 Virginia Housing Development Auth.
Mortgage Bonds, Series 1999A Stem IV 5.30 10/01/2039 40,000
40,000 Virginia Housing Development Auth.
Mortgage Bonds, Series 1999A Stem II 5.35 10/01/2039 39,984
- --------------------------------------------------------------------------------
79,984
- --------------------------------------------------------------------------------
Special Assessment/Tax/Fee
70,200 Anaheim, CA, COP (LOC) 5.08 12/01/2022 70,200
- --------------------------------------------------------------------------------
Total put bonds (cost: $451,505) 451,505
- --------------------------------------------------------------------------------
VARIABLE-RATE DEMAND NOTES (26.7%)
Asset-Backed Securities
14,181 Capital One Funding Corp., Notes,
Series 1995C (LOC) 5.27 10/01/2015 14,181
27,649 Capital One Funding Corp., Notes,
Series 1996E (LOC) 5.27 7/02/2018 27,649
- --------------------------------------------------------------------------------
41,830
- --------------------------------------------------------------------------------
Automobiles
8,500 Columbus, GA Development Auth. RB (LOC) 5.17 9/01/2013 8,500
- --------------------------------------------------------------------------------
Auto Parts
14,400 Alabama IDA RB (Rehau Project) (LOC) 5.35 10/01/2019 14,400
9,255 Bardstown, KY, RB, Series 1994 (LOC) 5.23 6/01/2024 9,255
11,000 Bardstown, KY, RB, Series 1995 (LOC) 5.23 3/01/2025 11,000
- --------------------------------------------------------------------------------
34,655
- --------------------------------------------------------------------------------
Beverages - Alcoholic
12,825 J. J. Taylor Co., Inc., Bonds (LOC) 5.20 8/02/2004 12,825
- --------------------------------------------------------------------------------
Broadcasting - Radio & TV
45,700 New Jersey Economic Development Auth.
RB (NBGA)(a) 5.22 10/01/2021 45,700
- --------------------------------------------------------------------------------
Buildings
7,400 San Bernardino County, CA, COP (LOC) 5.53 11/01/2025 7,400
- --------------------------------------------------------------------------------
Chemicals
7,685 Wyckoff Chemical Company, Inc., Notes,
Series 1997 (LOC) 5.16 2/01/2027 7,685
- --------------------------------------------------------------------------------
Electrical Equipment
14,000 Mississippi Business Finance Corp., RB,
Series 1998(a) 5.22 2/01/2023 14,000
- --------------------------------------------------------------------------------
Finance - Diversified
16,740 KBL Capital Fund, Inc., Installment #1
Notes, Series A (LOC) 5.16 5/01/2027 16,740
- --------------------------------------------------------------------------------
Gaming Companies
21,000 Detroit, Michigan Economic Development
Corp., RB, Series 1999A (LOC) 5.23 5/01/2009 21,000
41,830 Detroit, Michigan Economic Development
Corp., RB, Series 1999C (LOC) 5.25 5/01/2009 41,830
- --------------------------------------------------------------------------------
62,830
- --------------------------------------------------------------------------------
General Obligations
15,530 San Bernardino County, CA, COP, (Glen
Helen Project), Series D (LOC) 5.43 3/01/2024 15,530
- --------------------------------------------------------------------------------
Health Care - Specialized Services
13,920 American Health Care Centers, Inc.,
Notes (LOC) 5.27 2/01/2019 13,920
6,200 Mason City Clinic, P.C., IA, Bonds,
Series 1992 (LOC) 5.25 9/01/2022 6,200
8,495 Navigator Ventures, L.L.C., Notes,
Series 1997 (LOC) 5.16 5/01/2027 8,495
- --------------------------------------------------------------------------------
28,615
- --------------------------------------------------------------------------------
Hospitals
20,000 Crouse Health Hospital, Inc. RB,
Series 1996(LOC) 5.26 7/01/2017 20,000
15,100 Dome Corp., Bonds, Series 1991 (LOC) 5.26 8/31/2016 15,100
12,000 Indiana Health Facility Financing
Auth. RB (LOC) 5.23 1/01/2019 12,000
- --------------------------------------------------------------------------------
47,100
- --------------------------------------------------------------------------------
Leisure Time
8,135 Fox Valley Ice Arena, IL, RB,
Series 1997 (LOC) 5.23 7/01/2027 8,135
14,390 Greenville, SC Memorial Auditorium
District Public Facilities COP,
Series 1996C (LOC) 5.30 9/01/2014 14,390
- --------------------------------------------------------------------------------
22,525
- --------------------------------------------------------------------------------
Lodging/Hotel
16,850 Central Michigan Inns, RB, Series 1998A
(LOC) 5.21 11/01/2028 16,850
- --------------------------------------------------------------------------------
Manufacturing - Diversified Industries
12,500 HHH Investment Co., RB, Series 1999
(LOC) 5.35 7/01/2029 12,500
- --------------------------------------------------------------------------------
Manufacturing - Specialized
15,868 Loma Co. L.L.C. Floating Rate, Option
Notes (LOC) 5.27 12/01/2008 15,868
12,635 Savannah, GA, Economic Development
Auth. RB, Series 1998 (LOC) 5.18 6/01/2018 12,635
10,000 Southland Tube Inc., Notes, Series 1999
(LOC) 5.16 6/01/2010 10,000
- --------------------------------------------------------------------------------
38,503
- --------------------------------------------------------------------------------
Multi-Family Housing
6,070 Arbor Properties, Inc., Notes (LOC) 5.20 6/01/2022 6,070
7,020 Arbor Station IV, L.L.C., Notes (LOC) 5.20 2/01/2024 7,020
- --------------------------------------------------------------------------------
13,090
- --------------------------------------------------------------------------------
Nursing/Continuing Care Centers
30,015 Lincolnwood Funding Corp. RB,
Series 1995A (LOC) 5.26 8/01/2015 30,015
10,230 Missouri Health and Educational
Facilities Auth. RB, Series 1996B (LOC) 5.25 12/01/2016 10,230
- --------------------------------------------------------------------------------
40,245
- --------------------------------------------------------------------------------
Paper & Forest Products
15,410 Bancroft Bag, Inc. Notes, Series 1998
(LOC) 5.27 11/01/2008 15,410
10,000 Jasper County Economic Development RB
(LOC) 5.26 7/01/2029 10,000
9,580 Mac Papers Inc., Demand Bond (LOC) 5.20 8/03/2015 9,580
10,000 Tim Bar Corp. RB (LOC) 5.25 9/01/2010 10,000
15,000 Willacoochie, GA Development Auth.
RB (LOC) 5.18 5/01/2027 15,000
- --------------------------------------------------------------------------------
59,990
- --------------------------------------------------------------------------------
Real Estate - Other
12,060 Baltimore County MD, RB (LOC) 5.20 1/01/2029 12,060
22,400 Chestnut Partnership Bond (LOC) 5.25 1/01/2029 22,400
5,725 Erie Funding I, Notes (LOC) 5.22 11/01/2016 5,725
15,500 First Illinois Funding Corp. Project
RB, Series 1996 (LOC)(d) 5.23 9/01/2026 15,500
15,945 H/M Partners, L.L.C., Bond (LOC) 5.20 10/01/2020 15,945
14,220 HGR-1, L.L.C., Notes, Series 1996 (LOC) 5.21 9/15/2046 14,220
11,480 Houston County, GA, IDA RB (LOC) 5.21 8/01/2012 11,480
24,315 LAM Funding L.L.C., Notes, Series A
(LOC) 5.16 12/15/2027 24,315
24,510 Mayfair At Great Neck, NY Bonds (LOC) 5.45 1/01/2023 24,510
6,650 Physicians Real Estate, L.L.P., Notes,
Series 1998 (LOC) 5.25 2/01/2018 6,650
10,085 Pierce Memorial Baptist Home, Inc.,
Bonds, Series 1999 (LOC) 5.25 10/01/2028 10,085
11,710 PRA at Glenwood Hills Corporate Centre,
L.L.C., Notes, Series 1997 (LOC) 5.16 8/01/2027 11,710
14,365 Sbar Piperno Co. RB, Series 1998 (LOC) 5.20 9/01/2012 14,365
8,360 Shepherd Capital, L.L.C., Notes,
Series 1997 (LOC) 5.21 7/15/2047 8,360
- --------------------------------------------------------------------------------
197,325
- --------------------------------------------------------------------------------
Retail - Department Stores
10,000 Belk Inc. RB, Series 1998 (LOC) 5.20 7/01/2008 10,000
- --------------------------------------------------------------------------------
Special Assessment/Tax/Fee
19,750 County of Cuyahoga, OH, RB,
Series 1992B (LOC) 5.27 6/01/2022 19,750
- --------------------------------------------------------------------------------
Textiles - Home Furnishings
10,000 Alabama IDA RB (Fieldcrest Project)
(LOC) 5.20 7/01/2021 10,000
- --------------------------------------------------------------------------------
Water/Sewer Utilities - Municipal
18,040 Hesperia, CA, Public Financing Auth.
RB, Series 1998A (LOC) 5.53 6/01/2026 18,040
- --------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $802,228) 802,228
- --------------------------------------------------------------------------------
ADJUSTABLE RATE NOTES (19.6%)
Automobiles
17,500 Daimler-Chrysler MTN, Series Q 5.23 3/20/2000 17,513
13,000 Daimler-Chrysler MTN, Series R 5.15 5/11/2000 13,001
- --------------------------------------------------------------------------------
30,514
- --------------------------------------------------------------------------------
Banks - Major Regional
50,000 American Express Centurion Bank, Notes 5.14 5/08/2000 50,000
25,000 BankBoston N. A. Bank Notes 5.06 11/02/1999 25,000
15,840 Long Lane Master Trust II, Notes (a),(b) 5.26 6/26/2000 15,840
19,800 Long Lane Master Trust IV, Notes,
Series 1999A (a),(b) 5.47 1/20/2000 19,800
60,000 National Bank of Commerce, CD 5.26 3/30/2000 60,017
30,000 Northern Rock PLC, Notes(a) 5.12 6/14/2000 30,000
50,000 Union Bank of California, CD 5.31 4/17/2000 50,000
- --------------------------------------------------------------------------------
250,657
- --------------------------------------------------------------------------------
Banks - Money Center
40,000 Societe Generale, CD 5.11 3/03/2000 39,987
- --------------------------------------------------------------------------------
Electric Utilities
15,000 National Rural Utilities Corp., MTN(c) 5.18 8/02/2000 14,998
- --------------------------------------------------------------------------------
Finance - Consumer
40,000 American Honda Finance Corp., MTN(a) 4.98 8/16/1999 40,000
35,000 Associates Corp. of N.A., Senior Notes 5.06 3/20/2000 34,985
40,000 Ford Motor Credit Co., MTN 5.35 6/08/2000 40,101
40,000 Toyota Motor Credit Corp., MTN 5.35 10/19/1999 40,003
- --------------------------------------------------------------------------------
155,089
- --------------------------------------------------------------------------------
Finance - Diversified
30,000 General Electric Capital Corp., MTN,
Series A 5.26 4/13/2000 30,000
25,000 General Electric Capital Corp., MTN,
Series A 4.98 5/26/2000 25,000
- --------------------------------------------------------------------------------
55,000
- --------------------------------------------------------------------------------
Oil - International Integrated
45,000 Texaco Capital Inc., MTN, Series 1999 4.85 5/03/2000 44,973
- --------------------------------------------------------------------------------
Total adjustable rate notes (cost: $591,218) 591,218
- --------------------------------------------------------------------------------
Total investments (cost: $2,995,597) $2,995,597
================================================================================
PORTFOLIO SUMMARY BY CONCENTRATION
----------------------------------
Banks - Major Regional 18.2%
Banks - Money Center 11.6
Finance - Consumer 11.6
Finance - Diversified 8.3
Real Estate - Other 7.3
Electric Utilities 4.5
Oil & Gas - Refining/Manufacturing 3.6
Special Assessment/Tax/Fee 3.0
Paper & Forest Products 2.7
Single-Family Housing 2.7
Gaming Companies 2.1
Hospitals 2.1
Natural Gas Utilities 1.7
Nursing/Continuing Care Centers 1.6
Broadcasting - Radio & TV 1.5
Oil - International Integrated 1.5
Asset Backed Securities 1.4
Electric/Gas Utilities - Municipal 1.4
Automobiles 1.3
Manufacturing - Specialized 1.3
Auto Parts 1.2
Retail - General Merchandising 1.1
Health Care - Specialized Services 1.0
Leisure Time 1.0
Other 5.8
-----
Total 99.5%
=====
USAA MONEY MARKET FUND
NOTES TO PORTFOLIO OF INVESTMENTS
July 31, 1999
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 9.5% of net assets at July 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 July 31,
1999, these securities represented 3.7% of the net assets.
(c) At July 31, 1999, the cost of securities purchased on a delayed delivery
basis was $15.0 million.
(d) At July 31, 1999, this security was segregated to cover the delayed delivery
purchase.
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
July 31, 1999
ASSETS
Investments in securities $2,995,597
Cash 11,467
Receivables:
Capital shares sold 10,824
Interest 22,963
-----------
Total assets 3,040,851
-----------
LIABILITIES
Securities purchased 15,001
Capital shares redeemed 12,995
USAA Investment Management Company 706
USAA Transfer Agency Company 425
Accounts payable and accrued expenses 451
Dividends on capital shares 260
-----------
Total liabilities 29,838
-----------
Net assets applicable to capital shares outstanding $3,011,013
===========
REPRESENTED BY:
Paid-in capital $3,011,013
===========
Capital shares outstanding 3,011,013
===========
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)
Year ended July 31, 1999
Net investment income:
Interest income $147,470
----------
Expenses:
Management fees 6,709
Transfer agent's fees 4,671
Custodian's fees 792
Postage 659
Shareholder reporting fees 193
Directors' fees 4
Registration fees 202
Professional fees 42
Other 22
----------
Total expenses before reimbursement 13,294
Expenses reimbursed (764)
----------
Total expenses after reimbursement 12,530
----------
Net investment income $134,940
==========
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Years ended July 31,
1999 1998
---------------------------
From operations:
Net investment income $ 134,940 $ 122,339
---------------------------
Distributions to shareholders from:
Net investment income (134,940) (122,339)
---------------------------
From capital share transactions:
Proceeds from shares sold 4,461,879 3,370,264
Shares issued for dividends reinvested 130,534 118,246
Cost of shares redeemed (4,072,873) (3,158,728)
---------------------------
Increase in net assets from capital share
transactions 519,540 329,782
---------------------------
Net increase in net assets 519,540 329,782
Net assets:
Beginning of period 2,491,473 2,161,691
---------------------------
End of period $ 3,011,013 $ 2,491,473
===========================
Change in shares outstanding:
Shares sold 4,461,879 3,370,264
Shares issued for dividends reinvested 130,534 118,246
Shares redeemed (4,072,873) (3,158,728)
---------------------------
Increase in shares outstanding 519,540 329,782
===========================
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
(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 thirteen 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, US. 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 Bank of America. ($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 Bank
of America, the Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 25% of the Fund's total
assets. The Fund had no borrowings under any of these agreements during the year
ended July 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 year
ended July 31, 1999, were $20.0 billion and $19.5 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 year ended July 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 July 31, 1999, the Association and its affiliates owned
1.1 million shares (.04%) 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 (Unaudited)
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 has taken steps to address this potential year 2000 problem with
respect to the computer systems that it uses 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:
Year ended July 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
-----------------------------------------------------------
Net asset value at
beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment
income .05 .05 .05 .05 .05
Distributions from
net investment
income (.05) (.05) (.05) (.05) (.05)
-----------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===========================================================
Total return (%) * 4.95 5.45 5.28 5.41 5.49
Net assets at end
of period (000) $3,011,013 $2,491,473 $2,161,691 $1,828,749 $1,540,055
Ratio of expenses
to average net
assets (%) .45 .45 .45 .45 .45
Ratio of expenses
to average net
assets excluding
reimbursement (%) .48 .48 .49 .51 .46
Ratio of net
investment income
to average net
assets (%) 4.83 5.32 .16 5.27 5.44
* Assumes reinvestment of all dividend income distributions during the period.
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 LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance Hours
Call toll free - Central Time
Monday - Friday 7:00 a.m. to 9:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Internet Access
www.usaa.com
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 ToughLine(Registered Trademark)
(from Touchtone phones only)
For account balance, last transaction or fund prices
1-800-531-8777, (in San Antonio) 498-8777
