Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Shareholder Voting Results 6
Financial Information
USAA S&P 500 Index Fund
Distributions to Shareholders 7
Statement of Assets and Liabilities 8
Statement of Operations 9
Statements of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12
Report of Independent Accountants 15
Equity 500 Index Portfolio
Schedule of Portfolio Investments 16
Statement of Assets and Liabilities 24
Statement of Operations 25
Statements of Changes in Net Assets 26
Financial Highlights 27
Notes to Financial Statements 28
Report of Independent Accountants 31
Proxy Results 32
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 S&P 500 Index
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 detail about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark Office.
(Copyright)2000, 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(Registered
Trademark) 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
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
INCOME - TAXABLE
===============================================================================
GNMA Trust (Registered Trademark) 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
INCOME - TAX EXEMPT
===============================================================================
Long-Term Moderate $3,000
Intermediate-Term Low to moderate $3,000
Short-Term Low $3,000
State Bond Income Moderate $3,000
MONEY MARKET
===============================================================================
Money Market Very low $3,000
Tax Exempt
Money Market Very low $3,000
Treasury Money
Market Trust (Registered
Trademark) Very low $3,000
State Money Market Very low $3,000
- -------------------------------------------------------------------------------
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.
Nondeposit 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
The past year was one of the most
fascinating I have seen in my 27
years as an investment manager.
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH, CFA,
APPEARS HERE]
For much of it, I spoke to people about the choppiness of the stock market and
rising interest rates. At the beginning, it seemed that value investing might,
at last, be coming into favor again. Then in a few short weeks in the fall,
technology exploded. Portfolios that were concentrated in this area produced
returns that are typically associated with hedge funds and venture capital. By
normal stock market standards, your USAA S&P 500 Index Fund had a good year with
a return of 20.67% for the period ending December 31, 1999. By 1999 standards,
the S&P 500 Index looked anemic.
In a very important way the USAA S&P 500 Index Fund was a good investment in
1999. The incredible returns of technology stocks were driven by price/earnings
(P/E) ratios of more-than-incredible proportions. Investors shake their heads in
disbelief at P/Es measured in hundreds. Many times in recent months I expressed
concern that the S&P 500 Index's P/E ratio of 30-plus times earnings was
historically very high.
Index funds provided a somewhat reasonable approach to this quandary. Many of
the highest flying tech stocks are in the S&P 500, and because of the index's
capitalization weighting, their presence is felt. But there is also a large
presence of other companies -- like drugs, financials, and retailers -- whose
valuations were more modest. When the first week of 2000 saw a plummet of the
tech stocks, these more reasonably priced issues softened the blow. The
operational characteristics of the USAA S&P 500 Index Fund have made it a
prudent and rewarding investment vehicle.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
The performance data quoted represents past performance; the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
For the period ending December 31, 1999, the Fund's average annual total return
since inception (5/1/96) is 27.15%.
The S&P 500 Index is an unmanaged index representing the weighted average
performance of a group of 500 widely held, publicly traded stocks. It is not
possible to invest directly in the S&P 500 Index.
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.
Investment Review
USAA S&P 500 INDEX FUND*
OBJECTIVE: Seeks to match, as closely as possible (before the deduction of
expenses), the performance of the S&P 500 Index, which emphasizes stocks of
large U.S. companies.
INVESTMENT INSTRUMENTS: Invests all assets in the Equity 500 Index Portfolio, a
separate registered investment company, with the same investment objective as
the Fund; at least 80% of the Portfolio's assets will be invested in common
stocks of companies which compose the S&P 500 Index.
- --------------------------------------------------------------------------------
12/31/99 12/31/98
================================================================================
Net Assets $3,196.5 Million $1,855.9 Million
Net Asset Value Per Share $22.92 $19.27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/99
================================================================================
1 Year Since Inception on 5/1/96
20.67% 27.15%(+)
- --------------------------------------------------------------------------------
(+) Includes the $10 annual account maintenance fee through December 31, 1996.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gains distributions. No adjustment has
been made for taxes payable by shareholders on their reinvested income dividends
and capital gains 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 S&P 500 Index Fund to the S&P 500
Index for the period of 05/02/96 through 12/31/99. The data points from the
graph are as follows:
USAA S&P 500
Index Fund S&P 500 Index
-------------- -------------
05/02/96 $10,000 $10,000
06/30/96 10,442 10,467
12/31/96 11,669 11,688
06/30/97 14,057 14,095
12/31/97 15,523 15,585
06/30/98 18,249 18,345
12/31/98 19,966 20,039
06/30/99 22,402 22,519
12/31/99 24,094 24,252
Data from 5/2/96** through 12/31/99
The graph illustrates how a $10,000 hypothetical investment in the USAA S&P 500
Index Fund so closely tracks the S&P 500 Index that its results are not visible
in the graph. The S&P 500 Index is an unmanaged index representing the weighted
average performance of a group of 500 widely held, publicly traded stocks. It is
not possible to invest directly in the S&P 500 Index.
* 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.
** Date the fund initially invested in securities represented by the index.
Ten Largest
Stock Holdings
- ---------------------------------------
Microsoft Corp. 4.77
General Electric Co. 4.03
Cisco Systems, Inc. 2.76
Wal-Mart Stores, Inc. 2.42
Exxon Mobil Corp. 2.19
Intel Corp. 2.16
Lucent Technologies, Inc. 1.87
International Business
Machines Corp. 1.53
Citigroup 1.47
America Online, Inc. 1.34
- ---------------------------------------
PORTFOLIO SECTOR DIVERSIFICATION
PERCENT OF MARKET VALUE
12/31/99
A pie chart is shown here depicting the Portfolio Sector Diversification/Percent
of Market Value as of December 31, 1999 of the USAA S&P 500 Index Fund to be:
Financial - 16%; Utilities - 2%; Health Care - 9%; Industrials - 3%; Consumer
Cyclicals - 8%; Basic Materials - 4%; Telecommunications - 7%; Commercial
Services - 5%; Energy - 5%; Consumer Noncyclicals - 7%; Consumer Services - 5%;
Technology - 28%; and Transportation - 1%.
Shareholder Voting Results
On October 15, 1999, a special meeting of shareholders was held to vote on the
following proposals. All proposals were approved by the shareholders. All
shareholders of record on August 19, 1999, were entitled to vote on each
proposal. The number of votes shown for proposal 1 are for the entire USAA
Mutual Fund, Inc. (the Company). The number of votes shown for proposals 2 and 3
are for the USAA S&P 500 Index Fund, a series of the Company.
1 Proposal to elect Directors as follows:
DIRECTORS VOTES FOR VOTES WITHHELD
Robert G. Davis 1,769,441,834 27,742,867
Michael J.C. Roth 1,769,442,078 27,742,623
David G. Peebles 1,769,442,078 27,742,623
Robert L. Mason 1,769,442,172 27,742,529
Michael F. Reimherr 1,769,441,328 27,743,373
Richard A. Zucker 1,769,444,074 27,740,627
Barbara B. Dreeben 1,769,442,172 27,742,529
John W. Saunders, Jr. and Howard L. Freeman, Jr. did not stand for re-election
to the Board. Their term of office terminated on December 31, 1999.
NUMBER OF SHARES VOTING
-------------------------------------
FOR AGAINST ABSTAIN
2 Proposal to ratify the selection 85,088,575 301,275 465,380
by the Board of Directors of
PricewaterhouseCoopers LLP as the
independent accountants for the
USAA S&P 500 Index Fund.
3 Equity 500 Index Portfolio matters:
a. Proposal to approve a new 84,024,321 577,825 1,253,084
investment advisory agreement
between the Equity 500 Index
Portfolio (Portfolio) and Bankers
Trust Company.
b. Proposal to elect the Trustees 84,363,679 371,540 1,120,011
of the Portfolio.
c. Proposal to ratify the selection 84,551,235 328,890 975,105
of PricewaterhouseCoopers LLP as the
independent accountants of the
Portfolio.
Distributions to Shareholders (Unaudited)
USAA S&P 500 Index Fund completed its calendar year end on December 31, 1999.
The following per share information describes the federal tax treatment of
distributions made during the calendar year.
Ordinary income* $.26060
Long-term capital gains .04541
-------
$.30601
=======
95.22% of ordinary income distributions qualify for deductions by corporations.
* Includes distribution of short-term capital gains, which are taxable as
ordinary income.
<TABLE>
USAA S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<S> <C>
ASSETS
Investment in Equity 500 Index Portfolio, at value $3,220,329,362
Receivable for capital shares sold 3,322,911
Other receivables 203,953
--------------
Total assets 3,223,856,226
--------------
LIABILITIES
Payable for capital shares redeemed 26,735,602
USAA Investment Management Company 186,438
USAA Transfer Agent Company 129,538
Accounts payable and accrued expenses 321,975
--------------
Total liabilities 27,373,553
--------------
Net assets applicable to capital shares outstanding $3,196,482,673
==============
REPRESENTED BY:
Paid-in capital $2,325,414,531
Accumulated undistributed net investment income 601,183
Accumulated net realized loss from investments and
futures transactions (433,507)
Net unrealized appreciation on investments and futures
contracts 870,900,466
--------------
Net assets applicable to capital shares outstanding $3,196,482,673
==============
Capital shares outstanding ($.01 par value per share,
200,000,000 shares authorized) 139,427,106
==============
Net asset value, redemption price, and offering price per share $ 22.92
==============
See notes to financial statements on page 12.
</TABLE>
USAA S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
Year ended December 31, 1999
INVESTMENT INCOME
Income allocated from Equity 500 Index Portfolio, net $ 37,198,585
------------
EXPENSES
Administration fees 1,479,126
Transfer agent fees 299,312
Custodian's fees 35,916
Postage 330,815
Shareholder reporting fees 78,075
Directors' fees 4,350
Registration fees 381,311
Professional fees 68,744
Other 61,016
------------
Total expenses 2,738,665
------------
Net investment income 34,459,920
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FUTURES CONTRACTS
Net realized loss from investment transactions (17,327,242)
Net realized gain from futures transactions 6,871,914
Net change in unrealized appreciation/depreciation on
investments and futures contracts 491,990,378
------------
Net realized and unrealized gain on investments and futures
contracts 481,535,050
------------
Net increase in net assets from operations $515,994,970
============
See notes to financial statements on page 12.
<TABLE>
USAA S&P 500 INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31,
<CAPTION>
1999 1998
---------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 34,459,920 $ 16,609,994
Net realized gain (loss) from investments
and futures transactions (10,455,328) 10,738,420
--------------------------------
Net change in unrealized appreciation/depreciation
on investments and futures contracts 491,990,378 281,497,244
--------------------------------
Net increase in net assets from operations 515,994,970 308,845,658
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (34,520,614) (16,008,199)
Net realized gains (6,787,580) -
--------------------------------
Total distributions to shareholders (41,308,194) (16,008,199)
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 1,298,496,117 1,192,785,880
Shares issued for dividends reinvested 26,549,566 11,488,944
Cost of shares redeemed (459,104,661) (271,875,937)
---------------------------------
Net increase in net assets from capital share
transactions 865,941,022 932,398,887
---------------------------------
Net increase in net assets 1,340,627,798 1,225,236,346
NET ASSETS:
Beginning of period 1,855,854,875 630,618,529
---------------------------------
End of period $ 3,196,482,673 $1,855,854,875
=================================
ACCUMULATED UNDISTRIBUTED NET
INVESTMENT INCOME
End of period $ 601,183 $ 661,877
=================================
CHANGE IN SHARES OUTSTANDING
Shares sold 63,600,443 70,104,665
Shares issued for dividends reinvested 1,254,617 646,762
Shares redeemed (21,723,542) (16,046,032)
---------------------------------
Increase in shares outstanding 43,131,518 54,705,395
=================================
See notes to financial statements on page 12.
</TABLE>
<TABLE>
USAA S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
December 31, 1999
Contained below are selected ratios and supplemental data for the periods
indicated for the USAA S&P 500 Index Fund.
<CAPTION>
Eight Months
Ended
Years Ended December 31, December 31,
---------------------------------------------------
1999 1998 1997 1996*
--------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value at beginning of period $ 19.27 $ 15.16 $ 11.57 $ 10.00
--------------------------------------------------
Income from investment operations:
Net investment income .25 .21 .21 .12
Net realized and unrealized gain
on investments and
futures transactions 3.71 4.11 3.59 1.57
--------------------------------------------------
Total from investment operations 3.96 4.32 3.80 1.69
--------------------------------------------------
Distributions from:
Net investment income (.26) (.21) (.21) (.12)
Realized capital gains (.05) - - -
--------------------------------------------------
Total distributions (.31) (.21) (.21) (.12)
--------------------------------------------------
Net asset value at end of period $ 22.92 $ 19.27 $ 15.16 $ 11.57
==================================================
Total return (%)** 20.67 28.62 33.03 16.90
SUPPLEMENTAL DATA
AND RATIOS:
Net assets at end of period (000) $3,196,483 $1,855,855 $ 630,619 $ 179,073
Ratios to average net assets:
Net investment income (%) 1.25 1.40 1.64 2.09(a)
Expenses after waivers, including
expenses of the Equity 500
Index Portfolio (%) .18(b) .18(b) .18 .18(a)
Expenses before waivers, including
expenses of the Equity 500
Index Portfolio (%) .18 .20 .25 .33
Decrease reflected in above expense
ratio due to absorption of expenses
by Bankers Trust and the Manager (%) - .02 .07 .15(a)
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Effective May 6, 1998, the manager is contractually entitled to receive
fees from the Fund only to the extent that the aggregate annual operating
expenses of the Fund and the portfolio do not exceed 0.18% of the Fund's
average net assets.
* Fund commenced operations May 1, 1996.
** Assumes reinvestment of all dividend income distributions during the
period; does not reflect $10 annual account maintenance fee.
See notes to financial statements on page 12.
</TABLE>
USAA S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940 (the Act), as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of 13
separate funds. The information presented in this annual report pertains only to
the USAA S&P 500 Index Fund (the Fund). The Fund's primary investment objective
is to match, as closely as possible (before the deduction of expenses), the
performance of the S&P 500 Index, which emphasizes stocks of large U.S.
companies. The Fund seeks to achieve its objective by investing all of its
investable assets in the Equity 500 Index Portfolio (the Portfolio), which is a
separate registered investment company advised by Bankers Trust Company (Bankers
Trust) with an identical investment objective. At December 31, 1999, the Fund's
investment was 39% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
A. Valuation of investments - The Fund records its investment in the Portfolio
at value which reflects its proportionate interest in the net assets of the
Portfolio. Valuation of the securities held by the Portfolio is discussed in the
notes to the Portfolio's financial statements included elsewhere in this report.
B. Investment income and expenses - The Fund records daily its pro rata share
of the Portfolio's income, expenses, and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
C. 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. The Fund may periodically
make reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gains distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
D. Distributions - Distributions to shareholders are recorded on the ex-
dividend date. Distributions of net investment income are made quarterly.
Distributions of the Fund's pro rata share of the Portfolio's 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.
E. 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. Actual results could differ from those estimates.
(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, 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 both agreements 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 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 December 31, 1999.
(3) TRANSACTIONS WITH MANAGER
A. Administrative fees - The Fund has entered into an Administration
Agreement with USAA Investment Management Company (the Manager) under which the
Manager provides administrative services to the Fund. The Fund pays the Manager
a monthly administrative fee which on an annual basis is equal to the lesser of
0.06% of the average daily net assets of the Fund or the amount that brings the
total Fund and Portfolio annual operating expenses up to 0.18% of the Fund's
average net assets.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services (SAS), an affiliate of the Manager, provides transfer agency
services to the Fund. Effective November 1, 1999, the Fund pays SAS a monthly
fee based on an annual rate of $17 per shareholder account, plus out-of-pocket
expenses.
C. Underwriting agreement - 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. Management agreement - The Manager serves as investment adviser to the Fund
and is responsible for monitoring the services provided to the Portfolio by
Bankers Trust. While the Fund maintains its investment in the Portfolio, the
Manager receives no fee for this service.
E. Account maintenance fee - SAS assesses a $10 annual account maintenance fee
to allocate part of the fixed cost of maintaining shareholder accounts. This fee
is waived on accounts with balances of $10,000 or more.
(4) 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 December 31, 1999, the Association and its affiliates
owned 47,567,707 shares (34%) 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.
USAA S&P 500 INDEX FUND
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of USAA Mutual Fund, Inc. and Shareholders of
USAA S&P 500 Index Fund:
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
USAA S&P 500 Index Fund (one of the funds comprising USAA Mutual Fund, Inc.,
hereafter referred to as the "Fund") at December 31, 1999, and the results of
its operations, the changes in its net assets and the financial highlights for
each of the fiscal periods presented, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999, by correspondence with the transfer agent, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2000
- --------------------------------------------------------------------------------
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 they use and to obtain satisfactory
assurances that the 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.
- --------------------------------------------------------------------------------
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1999
Shares Description Value
- ------------------------------------------------------
COMMON STOCK (97.4%)
223,300 3Com Corp. (1) $ 10,495,100
994,844 Abbott Laboratories 36,125,273
66,100 Adaptec, Inc. (1) 3,296,737
85,700 ADC Tele-
communications, Inc. (1) 6,218,606
76,200 Adobe Systems, Inc. 5,124,450
22,868 Adolph Coors Co. -
Class B 1,200,570
113,241 Advanced Micro
Devices, Inc. (1) 3,276,911
134,700 AES Corp. (1) 10,068,825
90,059 Aetna, Inc. 5,026,418
166,300 Aflac, Inc. 7,847,281
144,608 Air Products and
Chemicals, Inc. 4,853,406
17,998 Alberto-Culver Co. -
Class B 464,573
286,623 Albertson's, Inc. 9,243,592
136,636 Alcan Aluminium Ltd. 5,627,695
237,100 Alcoa, Inc. 19,679,300
63,297 Allegheny Technologies 1,420,226
88,402 Allergan, Inc. 4,397,999
110,600 Allied Waste
Industries, Inc. (1) 974,662
555,598 Allstate Corp. 13,334,352
203,100 Alltel Corp. 16,793,831
62,634 ALZA Corp. (1) 2,168,702
61,093 Amerada Hess Corp. 3,467,028
82,720 Ameren Corp. 2,709,080
1,450,000 America Online, Inc. (1) 109,384,375
129,910 American Electric
Power Co. 4,173,359
295,616 American Express Co. 49,146,160
158,537 American General Corp. 12,028,995
56,014 American Greetings
Corp. - Class A 1,323,331
839,092 American Home
Products Corp. 33,091,691
994,881 American International
Group, Inc. 107,571,508
661,560 Amgen, Inc. (1) 39,734,947
97,004 AMR Corp. (1) 6,499,268
228,550 Amsouth Bancorporation 4,413,872
92,300 Anadarko
Petroleum Corp. 3,149,737
119,600 Analog Devices, Inc. (1) 11,122,800
50,276 Andrew Corp. (1) 952,102
302,180 Anheuser Busch
Companies, Inc. 21,417,007
154,375 AON Corp. 6,175,000
73,700 Apache Corp. 2,722,294
110,342 Apple Computer, Inc. (1) 11,344,537
237,200 Applied Materials, Inc. (1) 30,050,275
393,659 Archer-Daniels-
Midland Co. 4,797,719
26,183 Armstrong World
Industries, Inc. 873,858
32,287 Ashland, Inc. 1,063,453
474,522 Associates First Capital
Corp. - Class A 13,019,697
2,053,306 AT&T Corp. 104,205,279
204,550 Atlantic Richfield Co. 17,693,575
43,114 Autodesk, Inc. 1,455,097
412,824 Automatic Data
Processing, Inc. 22,240,893
94,500 Autozone, Inc. (1) 3,053,531
72,830 Avery Dennison Corp. 5,307,486
167,556 Avon Products, Inc. 5,529,348
237,813 Baker Hughes, Inc. 5,008,936
18,354 Ball Corp. 722,689
1,113,739 Bank of America Corp. 55,895,776
481,200 Bank of New York
Co., Inc. 19,248,000
736,948 Bank One Corp. 23,628,395
269,400 Barrick Gold Corp. 4,765,012
40,823 Bausch & Lomb, Inc. 2,793,824
184,263 Baxter International, Inc. 11,574,020
173,000 BB&T Corp. 4,735,875
86,199 Bear Stearns
Companies, Inc. 3,685,007
161,464 Becton, Dickinson & Co. 4,319,162
104,500 Bed, Bath &
Beyond, Inc. (1) 3,631,375
997,780 Bell Atlantic Corp. 61,425,831
1,208,664 BellSouth Corp. 56,580,583
24,831 Bemis Co., Inc. 865,981
132,400 Best Buy, Inc. (1) 6,644,825
182,660 Bestfoods 9,601,066
87,049 Bethlehem Steel Corp. (1) 729,035
70,550 Biomet, Inc. 2,822,000
56,271 Black & Decker Corp. 2,940,160
149,000 BMC Software, Inc. (1) 11,910,687
607,246 Boeing Co. 25,238,662
37,503 Boise Cascade Corp. 1,518,871
245,100 Boston Scientific Corp. (1) 5,361,562
15,282 Briggs & Stratton Corp. 819,497
1,294,056 Bristol-Myers Squibb Co. 83,062,219
29,319 Brown-Forman Corp. -
Class B 1,678,513
57,542 Brunswick Corp. 1,280,309
310,336 Burlington Northern
Santa Fe Corp. 7,525,648
123,439 Burlington
Resources, Inc. 4,081,202
53,677 C.R. Bard, Inc. 2,844,881
116,000 Cabletron Systems, Inc. (1) 3,016,000
268,154 Campbell Soup Co. 10,374,208
123,300 Capital One
Financial Corp. 5,941,519
166,197 Cardinal Health, Inc. 7,956,681
396,400 Carnival Corp. -
Class A 18,952,875
75,928 Carolina Power
& Light Co. 2,311,058
230,064 Caterpillar, Inc. 10,827,387
491,503 CBS Corp. (1) 31,425,473
475,610 Cendant Corp. (1) 12,633,391
37,280 Centex Corp. 920,350
133,630 Central & South
West Corp. 2,672,600
92,900 Centurytel, Inc. 4,401,137
86,104 Ceridian Corp. (1) 1,856,617
65,728 Champion
International Corp. 4,071,028
519,500 Charles Schwab Corp. 19,935,812
541,264 Chase Manhattan Corp. 42,049,447
412,666 Chevron Corp. 35,747,192
111,172 Chubb Corp. 6,260,373
120,299 CIGNA Corp. 9,691,588
94,500 Cincinnati
Financial Corp. 2,947,219
106,322 Cinergy Corp. 2,565,018
136,692 Circuit City Stores, Inc. 6,159,683
2,105,950 Cisco Systems, Inc. (1) 225,599,894
2,166,624 Citigroup 120,383,046
57,700 Citrix Systems, Inc (1) 7,097,100
202,500 Clear Channel
Communications, Inc. (1) 18,073,125
152,008 Clorox Co. 7,657,403
72,600 CMS Energy 2,264,212
146,132 Coastal Corp. 5,178,553
1,590,442 Coca-Cola Co. 92,643,246
258,400 Coca-Cola
Enterprises, Inc. 5,200,300
367,004 Colgate-Palmolive Co. 23,855,260
65,002 Columbia Energy Group 4,111,376
359,922 Columbia/HCA
Healthcare Corp. 10,550,214
486,424 Comcast Corp. -
Special Class A 24,442,806
98,660 Comerica, Inc. 4,606,189
1,105,184 Compaq Computer Corp. 29,909,042
349,875 Computer Associates
International, Inc. 24,469,383
100,372 Computer
Sciences Corp. (1) 9,497,700
233,000 Compuware Corp. (1) 8,679,250
45,800 Comverse Technology (1) 6,629,550
301,932 ConAgra, Inc. 6,812,341
433,351 Conoco, Inc. - Class B 10,779,606
222,768 Conseco, Inc. 3,981,978
146,436 Consolidated Edison, Inc. 5,052,042
60,005 Consolidated
Natural Gas Co. 3,896,575
69,000 Consolidated
Stores Corp. (1) 1,121,250
86,825 Constellation
Energy Group, Inc. 2,517,925
59,848 Cooper Industries, Inc. 2,420,103
52,751 Cooper Tire &
Rubber Co. 820,937
159,814 Corning, Inc. 20,606,018
143,499 Costco Wholesale
Corporation (1) 13,094,284
73,200 Countrywide Credit
Industries, Inc. 1,848,300
42,349 Crane Co. 841,686
105,850 Crown Cork &
Seal Co., Inc. 2,368,394
151,732 CSX Corp. 4,760,591
19,834 Cummins
Engine Co., Inc. 958,230
243,088 CVS Corp. 9,708,327
104,847 Dana Corp. 3,138,857
92,600 Danaher Corp. 4,467,950
86,319 Darden Restaurants, Inc. 1,564,532
287,516 Dayton Hudson Corp. 21,114,456
150,523 Deere & Co. 6,528,935
1,632,700 Dell Computer Corp. (1) 83,267,700
357,037 Delphi
Automotive Systems 5,623,333
88,798 Delta Air Lines, Inc. 4,423,250
50,391 Deluxe Corp. 1,382,603
63,597 Dillard Department
Stores, Inc. - Class A 1,283,864
148,006 Dollar General Corp. 3,367,136
131,406 Dominion
Resources, Inc. 5,157,685
130,808 Dover Corp. 5,935,413
140,876 Dow Chemical Co. 18,824,555
47,072 Dow Jones & Co., Inc. 3,200,896
102,576 DTE Energy Co. 3,218,322
242,195 Duke Power Co. 12,140,024
103,579 Dun & Bradstreet Corp. 3,055,580
671,710 Du Pont (E.I.)
de Nemours & Co. 44,248,896
15,342 Eastern Enterprises 881,206
61,381 Eastman Chemical Co. 2,927,106
204,126 Eastman Kodak Co. 13,523,347
51,182 Eaton Corp. 3,717,093
72,200 Ecolab, Inc. 2,824,825
223,070 Edison
International, Inc. 5,841,646
304,600 Electronic Data
Systems Corp. 20,389,162
705,640 Eli Lilly & Co. 46,925,060
182,310 El Paso Energy Corp. 7,075,907
659,025 EMC Corp. (1) 71,998,481
288,300 Emerson Electric Co. 16,541,212
82,408 Engelhard Corp. 1,555,451
454,632 Enron Corp. 20,174,295
154,907 Entergy Corp. 3,988,855
88,800 Equifax, Inc. 2,092,350
2,219,195 Exxon Mobil Corp. 178,783,897
662,814 Fannie Mae 41,384,449
193,210 FDX Corp. (1) 7,909,534
138,000 Federated Department
Stores, Inc. (1) 6,977,625
209,567 Fifth Third Bancorp 15,376,979
666,181 Firstar Corp. 14,073,074
277,600 First Data Corp. 13,689,150
148,984 FirstEnergy Corp. 3,380,074
611,585 First Union Corp. 20,067,633
595,303 Fleet Boston
Financial Corp. 20,723,986
21,906 Fleetwood
Enterprises, Inc. 451,811
61,300 Florida Progress Corp. 2,593,756
47,881 Fluor Corp. 2,196,541
20,350 FMC Corp. (1) 1,166,309
791,244 Ford Motor Co. 42,282,101
141,885 Fort James Corp. 3,884,102
109,074 Fortune Brands, Inc. 3,606,259
30,038 Foster Wheeler Corp. 266,587
128,794 FPL Group, Inc. 5,513,993
168,320 Franklin Resources, Inc. 5,396,760
449,814 Freddie Mac 21,169,371
77,900 Freeport-McMoRan Copper
& Gold, Inc. - Class B (1) 1,645,637
176,592 Gannett Company, Inc. 14,403,285
558,134 Gap, Inc. 25,674,164
197,200 Gateway, Inc. (1) 14,210,725
125,844 General Dynamics Corp. 6,638,271
2,126,144 General Electric Co. 329,020,784
111,800 General
Instrument Corp. (1) 9,503,000
198,338 General Mills, Inc. 7,090,583
410,234 General Motors Corp. 29,818,884
112,626 Genuine Parts Co. 2,794,533
110,302 Georgia-Pacific Corp. 5,597,826
702,016 Gillette Co. 28,914,284
491,079 Global Crossing Ltd. (1) 24,553,950
109,551 Golden West
Financial Corp. 3,669,958
46,652 Goodrich (B.F.) Co. 1,282,930
98,536 Goodyear Tire &
Rubber Co. 2,777,483
63,000 GPU, Inc. 1,886,062
24,025 Great Atlantic &
Pacific Tea Co., Inc. 669,697
36,996 Great Lakes
Chemical Corp. 1,412,785
635,636 GTE Corp. 44,852,065
197,500 Guidant Corp. (1) 9,282,500
68,135 H & R Block, Inc. 2,980,906
253,725 H.J. Heinz Co. 10,101,427
278,362 Halliburton Company 11,204,071
55,639 Harcourt General, Inc. 2,239,470
71,215 Harrah's
Entertainment, Inc. (1) 1,882,747
143,246 Hartford Financial
Services Group, Inc. 6,786,279
138,970 Hasbro, Inc. 2,649,116
322,800 HEALTHSOUTH Corp. (1) 1,735,050
68,914 Hercules, Inc. 1,920,978
80,094 Hershey Foods Corp. 3,804,465
654,740 Hewlett-Packard Co. 74,599,439
162,841 Hilton Hotels Corp. 1,567,345
1,479,378 Home Depot, Inc. 101,429,854
146,043 Homestake Mining Co. 1,140,961
513,285 Honeywell
International, Inc. 29,610,128
308,485 Household
International, Inc. 11,491,066
102,700 Humana, Inc. (1) 840,856
145,277 Huntington
Bancshares, Inc. 3,468,488
17,588 Huttig Building Prods. (1) 86,844
79,362 Ikon Office
Solutions, Inc. 540,654
192,892 Illinois Tool Works, Inc. 13,032,266
197,858 IMS Health, Inc. 5,379,264
108,366 Inco, Ltd. 2,546,601
104,846 Ingersoll-Rand Co. 5,773,083
2,146,856 Intel Corp. 176,713,085
1,158,364 International Business
Machines Corp. 125,103,312
63,787 International Flavors &
Fragrances, Inc. 2,407,959
287,874 International Paper Co. 16,246,889
163,020 Interpublic Group of
Companies, Inc. 9,404,216
58,123 ITT Industries 1,943,488
165,750 J.C. Penney Co., Inc. 3,304,641
66,465 Jefferson-Pilot Corp. 4,536,236
900,196 Johnson & Johnson 83,830,753
46,054 Johnson Controls, Inc. 2,619,321
7,639 Jostens, Inc. 185,723
68,800 Kansas City
Southern Inds. 5,134,200
28,445 Kaufman &
Broad Home Corp. 688,013
261,314 Kellogg Co. 8,051,738
60,531 Kerr-McGee Corp. 3,752,922
287,400 KeyCorp. 6,358,725
349,806 Kimberly Clark Corp. 22,824,842
60,300 KLA/Tencor Corp. (1) 6,715,913
308,503 Kmart Corp. (1) 3,104,311
57,526 Knight-Ridder, Inc. 3,422,797
108,100 Kohls Corp. (1) 7,803,469
570,940 Kroger Co. (1) 10,776,493
125,100 Leggett & Platt, Inc. 2,681,831
77,900 Lehman Brothers, Inc. 6,597,156
84,300 Lexmark International
Group, Inc. - Class A (1) 7,629,150
130,741 Limited, Inc. 5,662,720
136,920 Lincoln National Corp. 5,476,800
56,103 Liz Claiborne, Inc. 2,110,875
246,010 Lockheed Martin Corp. 5,381,469
61,900 Loews Corp. 3,756,556
24,326 Longs Drug Stores, Inc. 627,915
73,258 Louisiana-Pacific Corp. 1,043,927
247,888 Lowe's Companies, Inc. 14,811,308
95,600 LSI Logic Corp. (1) 6,453,000
2,041,521 Lucent
Technologies, Inc. 152,731,290
48,602 Mallinckrodt Group, Inc. 1,546,151
67,400 Manor Care (1) 1,078,400
152,180 Marriott International 4,803,181
171,386 Marsh and McLennan 16,399,498
283,322 Masco Corp. 7,189,296
261,265 Mattel, Inc. 3,429,103
211,647 May Department
Stores Co. 6,825,616
57,512 Maytag Corp. 2,760,576
62,300 MBIA, Inc. 3,290,219
518,837 MBNA Corp. 14,138,308
43,087 McDermott
International, Inc. 390,476
876,228 McDonald's Corp. 35,322,941
126,860 McGraw-Hill, Inc. 7,817,748
1,843,369 MCI WorldCom, Inc. (1) 97,813,794
182,073 Mckesson HBOC, Inc. 4,108,022
64,402 Mead Corp. 2,797,462
396,028 MediaOne Group (1) 30,419,901
768,008 Medtronic, Inc. 27,984,292
366,548 Mellon Financial Corp. 12,485,541
1,501,994 Merck & Co., Inc. 100,727,473
39,872 Meredith Corp. 1,662,164
230,076 Merrill Lynch & Co., Inc. 19,211,346
73,600 MGIC Investment Corp. 4,429,800
169,300 Micron Technology, Inc. (1) 13,163,075
3,339,000 Microsoft Corp. (1) 389,828,250
19,047 Milacron, Inc. 292,848
27,892 Millipore Corp. 1,077,329
254,378 Minnesota Mining &
Manufacturing Co. 24,897,247
154,900 Mirage Resorts, Inc. (1) 2,371,906
96,000 Molex, Inc. 5,442,000
411,920 Monsanto Co. 14,674,650
360,433 Morgan Stanley Dean
Witter Discover & Co. 51,451,811
112,060 Morgan, (J.P.) &
Co., Inc. 14,189,598
400,342 Motorola, Inc. 58,950,360
206,300 Nabisco Group Holdings 2,191,938
3,727 NACCO Industries, Inc. -
Class A 207,081
411,800 National City Corp. 9,754,513
110,226 National
Semiconductor Corp. (1) 4,719,051
31,126 National Service
Industries, Inc. 918,217
41,758 Navistar
International Corp. (1) 1,978,285
95,900 Network Appliance, Inc. (1) 7,965,694
69,400 New Century
Energies, Inc. 2,108,025
113,268 New York Times Co. -
Class A 5,564,291
178,996 Newell Rubbermaid, Inc. 5,190,884
116,210 Newmont Mining Corp. 2,847,145
230,200 Nextel Communications,
Inc. - Class A (1) 23,739,375
147,042 Niagara Mohawk
Power Corp. (1) 2,049,398
35,069 NICOR, Inc. 1,139,743
182,048 Nike, Inc. 9,022,754
92,458 Nordstrom, Inc. 2,421,244
238,553 Norfolk Southern Corp. 4,890,337
858,224 Nortel Networks
Corporation 86,680,624
75,388 Northern States
Power Co. 1,470,066
143,800 Northern Trust Corp. 7,621,400
51,479 Northrop
Grumman Corp. 2,783,083
217,092 Novell, Inc. (1) 8,670,112
55,794 Nucor Corp. 3,058,209
250,714 Occidental
Petroleum Corp. 5,421,690
213,000 Office Depot, Inc. (1) 2,329,688
78,000 Old Kent Financial Corp. 2,759,250
114,000 Omnicom Group, Inc. 11,400,000
17,391 Oneok, Inc. 436,949
914,784 Oracle Corp. (1) 102,512,982
33,950 Owens Corning 655,659
95,300 Owens-Illinois, Inc. (1) 2,388,456
81,907 P P & L Resources 1,873,623
62,580 Paccar, Inc. 2,773,076
115,634 Pactiv Corp. (1) 1,228,611
108,000 Paine Webber
Group, Inc. 4,191,750
78,364 Pall Corp. 1,689,724
182,800 Parametric
Technology Corp. (1) 4,947,025
71,914 Parker-Hannifin Corp. 3,690,087
172,150 Paychex, Inc. 6,886,000
69,050 PE Corp. -
PE Biosystems Group 8,307,578
120,184 PECO Energy 4,176,394
22,155 People's Energy Corp. 742,193
164,700 Peoplesoft, Inc. (1) 3,510,169
32,912 Pep Boys
(Manny Moe & Jack) 300,322
941,994 PepsiCo, Inc. 33,205,289
30,425 Perkin Elmer, Inc. 1,268,342
2,520,184 Pfizer, Inc. 81,748,469
251,605 PG&E Corp. 5,157,903
337,132 Pharmacia &
Upjohn, Inc. 15,170,940
48,965 Phelps Dodge Corp. 3,286,776
1,531,098 Philip Morris Companies 35,502,335
158,406 Phillips Petroleum Co. 7,445,082
55,500 Pinnacle West
Capital Corporation 1,696,219
185,196 Pitney Bowes, Inc. 8,947,282
191,404 Placer Dome, Inc. 2,057,593
192,033 PNC Bank Corp. 8,545,469
38,682 Polaroid Corp. 727,705
18,101 Potlatch 807,757
109,842 PPG Industries, Inc. 6,871,990
121,315 Praxair, Inc. 6,103,661
845,640 Procter & Gamble Co. 92,650,433
45,450 Progressive
Corporation of Ohio 3,323,531
92,097 Providian Financial Corp. 8,386,583
140,094 Public Service
Enterprise Group 4,877,022
29,132 Pulte Corp. 655,470
85,984 Quaker Oats Co. 5,642,700
426,400 Qualcomm, Inc. (1) 75,099,700
70,300 Quintiles
Transnational Corp. (1) 1,313,731
84,152 R.R. Donnelley &
Sons Co. 2,088,022
203,215 Ralston Purina Group 5,664,618
212,314 Raytheon Co. - Class B 5,639,591
34,329 Reebok
International Ltd. (1) 281,069
133,170 Regions Financial Corp. 3,345,896
165,792 Reliant Energy 3,792,492
67,800 Republic New York Corp. 4,881,600
48,149 Reynolds Metals Co. 3,689,417
179,402 Rite Aid Corp. 2,007,060
132,424 Rockwell
International Corp. 6,339,799
155,291 Rohm & Haas Co. 6,318,403
50,500 Rowan Companies, Inc. (1) 1,095,219
1,380,704 Royal Dutch
Petroleum Co. 83,446,298
22,611 Russell Corp. 378,734
45,017 Ryder Systems, Inc. 1,100,103
84,102 Safeco 2,092,037
329,200 Safeway, Inc. (1) 11,707,175
571,054 Sara Lee Corp. 12,598,879
2,192,069 SBC Communications, Inc. 106,863,364
944,032 Schering-Plough Corp. 39,826,350
355,362 Schlumberger Ltd. 19,989,113
47,338 Scientific-Atlanta, Inc. 2,633,176
134,800 Seagate Technology, Inc. (1) 6,276,625
280,337 Seagram Co. Ltd. 12,597,644
52,405 Sealed Air Corp. (1) 2,715,234
240,709 Sears, Roebuck & Co. 7,326,580
129,514 Sempra Energy 2,250,306
185,692 Service Corp.
International 1,288,238
16,674 Shared Medical
Systems Corp. 849,332
112,874 Sherwin-Williams Co. 2,370,354
64,100 Sigma Aldrich Corp. 1,927,006
116,515 Silicon Graphics, Inc. (1) 1,143,303
103,300 SLM Holding Corp. 4,364,425
40,194 Snap-On Tools Corp. 1,067,653
180,500 Solectron Corp. (1) 17,170,063
473,558 Southern Co. 11,128,613
115,600 Southtrust Corp 4,371,125
316,500 Southwest Airlines Co. 5,123,344
6,904 Springs Industries, Inc. -
Class A 275,729
561,564 Sprint Corp. 37,800,277
278,891 Sprint PCS (1) 28,586,328
49,488 St. Jude Medical, Inc. (1) 1,518,663
147,828 St. Paul Companies, Inc. 4,979,956
54,330 Stanley Works 1,636,691
307,200 Staples, Inc. (1) 6,374,400
100,400 State Street Corp. 7,335,475
116,400 Summit Bancorp 3,564,750
1,004,224 Sun Microsystems, Inc. (1) 77,764,596
61,345 Sunoco, Inc. 1,441,608
200,860 Suntrust Banks, Inc. 13,821,679
97,040 SuperValu, Inc. 1,940,800
143,650 Synovus Financial Corp. 2,855,044
219,020 Sysco Corp. 8,664,979
72,200 T. Rowe Price
Associates, Inc. 2,666,888
131,732 Tandy Corp. 6,479,568
29,507 Tektronix, Inc. 1,147,085
18,084 Teledyne Technologies (1) 170,668
252,050 Tellabs, Inc. (1) 16,178,459
35,922 Temple Inland, Inc. 2,368,607
189,110 Tenet Healthcare Corp. (1) 4,444,085
105,000 Teradyne, Inc. (1) 6,930,000
353,522 Texaco, Inc. 19,200,664
515,412 Texas Instruments, Inc. 49,930,538
178,027 Texas Utilities Co. 6,331,085
98,306 Textron, Inc. 7,538,841
141,100 Thermo Electron Corp. (1) 2,116,500
38,500 Thomas & Betts Corp. 1,227,188
844,130 Time Warner, Inc. 61,146,667
39,429 Times Mirror Co. -
Class A 2,641,743
34,596 Timken Co. 707,056
211,016 TJX Companies, Inc. 4,312,640
85,168 Torchmark Corp. 2,475,195
130,800 Tosco Corp. 3,556,125
164,418 Toys 'R' Us, Inc. (1) 2,353,233
134,198 Transocean Sedco
Forex, Inc. 4,520,797
149,592 Tribune Co. 8,236,910
99,799 Tricon Global
Restaurants, Inc. (1) 3,854,736
75,072 TRW, Inc. 3,899,052
36,096 Tupperware Corp. 611,376
1,087,838 Tyco International Ltd. 42,289,702
466,037 U.S. Bancorp 11,097,506
324,855 U.S. West, Inc. 23,389,560
139,725 Unicom Corp. 4,680,788
373,346 Unilever NV 20,324,023
83,252 Union Carbide Corp. 5,557,071
155,247 Union Pacific Corp. 6,772,650
191,348 Union Pacific
Resources Group, Inc. 2,439,687
81,300 Union Planters Corp. 3,206,269
207,699 Unisys Corp. (1) 6,633,387
112,700 United Healthcare Corp. 5,987,188
306,624 United
Technologies Corp. 19,930,560
152,937 Unocal Corp. 5,132,948
149,034 Unumprovident Corp. 4,778,403
47,615 US Airways Group, Inc. (1) 1,526,656
120,607 UST, Inc. 3,037,789
57,177 USX - U.S. Steel Group 1,886,841
200,564 USX Marathon Group 4,951,424
75,230 V.F. Corp. 2,256,900
440,798 Viacom, Inc. - Class B (1) 26,640,729
63,600 Vulcan Materials Co. 2,540,025
46,049 W.R. Grace & Co. (1) 638,930
60,130 W.W. Grainger, Inc. 2,874,966
128,210 Wachovia Corp. 8,718,280
2,859,596 Wal-Mart Stores, Inc. 197,669,574
667,636 Walgreen Co. 19,528,353
1,334,471 Walt Disney Co. 39,033,277
555,658 Warner-Lambert Co. 45,529,227
379,272 Washington Mutual, Inc. 9,861,072
422,351 Waste Management, Inc. 7,259,158
6,329 Water Pik Technologies (1) 60,521
67,400 Watson Pharmaceuticals (1) 2,413,763
46,100 Wellpoint Health
Networks (1) 3,039,719
1,062,736 Wells Fargo Company 42,974,387
82,762 Wendy's
International, Inc. 1,706,966
61,360 Westvaco Corp. 2,001,870
143,494 Weyerhaeuser Co. 10,304,663
48,139 Whirlpool Corp. 3,132,044
63,600 Willamette
Industries, Inc. 2,953,425
281,236 Williams Companies, Inc. 8,595,275
75,180 Winn Dixie Stores, Inc. 1,799,621
72,692 Wm. Wrigley, Jr. Co. 6,028,893
55,279 Worthington
Industries, Inc. 915,558
426,870 Xerox Corp. 9,684,613
202,000 Xilinx, Inc. (1) 9,184,688
169,700 Yahoo!, Inc. (1) 73,427,071
Total Common Stock
(Cost $4,809,122,710) 7,953,572,107
--------------
SHORT-TERM INSTRUMENTS (2.5%)
Mutual Fund (2.3%)
188,890,907 Institutional Cash
Management
Fund $ 188,890,907
--------------
Principal
Amount
---------
U.S. Treasury Bill (0.2%)
$12,020,000 5.02%, 3/2/00(2) 11,919,729
--------------
Total Short-Term Instruments
(Cost $200,811,727) 200,810,636
--------------
Total Investments
(Cost $5,009,934,437) 99.9% $8,154,382,743
Other Assets in
Excess of Liabilities 0.1 10,714,139
-----------------------
Net Assets 100.0% $8,165,096,882
=======================
- --------------------------------
(1) Non-income producing security.
(2) Held as collateral for futures contracts.
See notes to financial statements on page 28.
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
Year ended December 31, 1999
ASSETS
Investments at value (cost of $5,009,934,437) $8,154,382,743
Receivable for shares
of beneficial interest subscribed 4,508,155
Receivable for securities sold 657,504
Variation margin receivable 461,689
Dividend receivable 7,787,458
--------------
Total assets 8,167,797,549
--------------
LIABILITIES
Payable for securities purchased 2,154,113
Due to Bankers Trust 532,871
Accrued expenses 13,683
--------------
Total liabilities 2,700,667
--------------
Net assets $8,165,096,882
==============
COMPOSITION OF NET ASSETS
Paid-in capital $5,016,704,839
Net unrealized appreciation on
investments and futures contracts 3,148,392,043
--------------
Net assets $8,165,096,882
==============
See notes to financial statements on page 28.
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
Year ended December 31, 1999
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $1,063,834) $ 97,913,346
Interest 513,602
--------------
Total investment income 98,426,948
--------------
EXPENSES
Advisory fees 5,134,906
Administration and services fees 344,960
Professional fees 34,598
Trustees fees 3,252
Miscellaneous 1,643
--------------
Total expenses 5,519,359
--------------
Net investment income 92,907,589
--------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS
Net realized loss from investment transactions (44,432,856)
Net realized gain from futures transactions 17,684,084
Net change in unrealized appreciation/
depreciation on investments and futures contracts 1,245,281,501
--------------
Net realized and unrealized gain on investments and futures
contracts 1,218,532,729
--------------
Net increase in net assets from operations $1,311,440,318
==============
See notes to financial statements on page 28.
EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31,
1999 1998
--------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 92,907,589 $ 58,364,731
Net realized gain (loss) from investment
and futures transactions (26,748,772) 35,274,688
Net change in unrealized
appreciation/depreciation on
investment and futures contracts 1,245,281,501 895,089,518
-------------------------------
Net increase in net assets from operations 1,311,440,318 988,728,937
-------------------------------
CAPITAL TRANSACTIONS
Proceeds from capital invested 4,399,103,297 2,853,940,069
Value of capital withdrawn (2,745,951,143) (1,445,251,067)
-------------------------------
Net increase in net assets from
capital transactions 1,653,152,154 1,408,689,002
-------------------------------
Total increase in net assets 2,964,592,472 2,397,417,939
NET ASSETS
Beginning of year 5,200,504,410 2,803,086,471
-------------------------------
End of year $8,165,096,882 $5,200,504,410
===============================
See notes to financial statements on page 28.
<TABLE>
EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
December 31, 1999
Contained below are selected supplemental data and ratios to average net assets
for the years indicated for the Equity 500 Index Portfolio.
<CAPTION>
For the years ended December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of
year (000s omitted) $8,165,097 $5,200,504 $2,803,086 $1,925,224 $1,080,736
Ratios to average
net assets:
Net investment
income (%) 1.35 1.50 1.76 2.20 2.52
Expenses after waivers (%) 0.08 0.08* 0.08 0.10 0.10
Expenses before waivers (%) 0.08 0.10 0.15 0.15 0.15
Decrease reflected in above
expense ratios due to
fee waivers or expense
reimbursements (%) 0.00 0.02 0.07 0.05 0.05
Portfolio turnover
rate (%) 13 4 19 15 6
*Effective May 6, 1998, Bankers Trust contractually agreed to receive fees
from the portfolio only to the extent of the lesser of 0.005% or the amount
that brings the total annual operating expenses as a percentage of the
portfolio's average daily net assets up to 0.08%.
See notes to financial statements on page 28.
</TABLE>
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization - The Equity 500 Index Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end management investment company. The Portfolio was organized on
December 11, 1991, as an unincorporated trust under the laws of New York and
began operations on December 31, 1992. The Declaration of Trust permits the
Board of Trustees (the "Trustees") to issue beneficial interests in the
Portfolio.
B. Security valuation - The Portfolio's investments are valued each business
day by an independent pricing service approved by the Trustees. Securities
traded on national exchanges or traded in the NASDAQ National Market System are
valued at the last sales prices reported at the close of business each day.
Over-the-counter securities not included in the NASDAQ National Market System
and listed securities for which no sale was reported are valued at the mean of
the bid and asked prices. Short-term obligations with remaining maturities of 60
days or less are valued at amortized cost that, with accrued interest,
approximates value. Securities for which quotations are not available are stated
at fair value as determined by the Trustees.
C. Security transactions and interest income - Security transactions are
accounted for on a trade date basis. Dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes
amortization of premium and accretion of discount on investments. Realized gains
and losses from securities transactions are recorded on the identified cost
basis.
All of the net investment income and realized and unrealized gains and losses
from the security transactions of the Portfolio are allocated pro rata among the
investors in the Portfolio at the time of such determination.
D. Futures contracts - The Portfolio may enter into financial futures
contracts which are contracts to buy a standard quantity of securities at a
specified price on a future date. The Portfolio is required to deposit either
cash or securities in an amount equal to a certain percentage of the contract
amount. Variation margin payments are made or received by the Portfolio each
day, dependent on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. Federal income taxes - The Portfolio is considered a partnership under the
Internal Revenue Code. Therefore, no federal income tax provision is required.
F. Other - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
(2) FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"), an indirectly wholly owned subsidiary
of Deutsche Bank AG. The agreement provides for the Portfolio to pay Bankers
Trust a fee, accrued daily and paid monthly, computed as a percentage of the
average daily net assets of the Portfolio which on an annual basis is equal to
the lesser of (1) 0.005%, or (2) the amount that brings the total annual
operating expenses as a percentage of the Portfolio's average daily net assets
up to 0.08%.
The Portfolio has entered into an Advisory Agreement with Bankers Trust. Under
this agreement, the Portfolio pays Bankers Trust a fee computed daily and paid
monthly at an annual rate of 0.075% of the Portfolio's average daily net assets.
The Portfolio may invest in the Institutional Cash Management Fund (the "Cash
Management Fund"), an open-end management investment company managed by Bankers
Trust Company. The Cash Management Fund is offered as a cash management option
to the Portfolio and other accounts managed by Bankers Trust. Distributions from
the Cash Management Fund to the Portfolio for the year ended December 31, 1999,
amounted to $7,493,519 and are included in dividend income.
At December 31, 1999, the Portfolio was a participant with other affiliated
entities in a revolving credit facility in the amount of $150,000,000, which
expires April 29, 2000. A commitment fee of 0.10% per annum on the average daily
amount of the available commitment is payable on a quarterly basis and
apportioned equally among all participants. No amounts were drawn down or
outstanding for this fund under the credit facility for the year ended December
31, 1999.
(3) PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the year ended December 31, 1999, were
$2,458,853,481 and $886,448,613, respectively. For federal income tax purposes,
the tax basis of investments held at December 31, 1999, was $5,091,039,735. The
aggregate gross unrealized appreciation was $3,275,257,510, and the aggregate
gross unrealized depreciation was $211,914,502 for all investments as of
December 31, 1999.
(4) FUTURES CONTRACTS
A summary of obligations under these financial instruments at December 31, 1999,
is as follows:
Market Unrealized
Type of Future Expiration Contracts Position Value Appreciation
- --------------------------------------------------------------------------------
S&P 500 Index Futures March 2000 547 Long $203,331,050 $3,943,738
At December 31, 1999, the Portfolio segregated securities with a value of
approximately $11,919,729 to cover margin requirements on open futures
contracts.
EQUITY 500 INDEX PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Holders of Beneficial Interest of
Equity 500 Index Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Equity 500 Index Portfolio
(hereafter referred to as the "Portfolio") at December 31, 1999, and the results
of its operations, the changes in its net assets and the financial highlights
for each of the fiscal periods presented, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1999, by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 11, 2000
EQUITY 500 INDEX PORTFOLIO
PROXY RESULTS
For the year ended December 31, 1999, the Bankers Trust Funds shareholders voted
on the following proposals at the annual meeting of shareholders on October 8,
1999, or as adjourned. The description of each proposal and number of shares
voted are as follows:
1 To elect the Bankers Trust Pyramid Funds Board of Trustees.
VOTES FOR VOTES WITHHELD
Mr. Charles P. Biggar 2,740,598 6,940
Mr. S. Leland Dill 2,740,562 6,976
Mr. Richard T. Hale 2,740,598 6,940
Mr. Bruce E. Langton 2,740,598 6,940
Mr. Philip Saunders, Jr. 2,740,370 7,168
Mr. Harry Van Benschoten 2,740,588 6,950
Dr. Martin J. Gruber 2,740,592 6,946
Dr. Richard J. Herring 2,740,598 6,940
NUMBER OF SHARES VOTING
2 To approve the New Investment Advisory --------------------------------
Agreement with Bankers Trust Company. FOR AGAINST ABSTAIN
2,735,745 7,809 3,984
3 To ratify the selection of Pricewaterhouse-
Coopers LLP as the independent accountants of
the Fund and its corresponding Portfolio. 2,742,482 1,748 3,308
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 Legal Counsel
USAA Shareholder Account Services Goodwin, Procter & Hoar LLP
9800 Fredericksburg Road Exchange Place
San Antonio, Texas 78288 Boston, Massachusetts 02109
Custodian Independent Auditors
Bankers Trust Company PricewaterhouseCoopers LLP
Four Albany Street 250 West Pratt Street
New York, New York 10006 Baltimore, Maryland 21201
Telephone Assistance Hours Internet Access
Call toll free - Central Time usaa.com(Service Mark)
Monday - Friday 7:00 a.m. to 9:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Sundays 11:30 a.m. to 8:00 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(Registered Trademark)
(from touch-tone phones only)
For account balance, last transaction, fund prices,
or to exchange or redeem fund shares
1-800-531-8777, (in San Antonio) 498-8777
