TABLE OF CONTENTS
USAA FAMILY OF FUNDS 1
MESSAGE FROM THE PRESIDENT 2
INVESTMENT REVIEW 4
MESSAGE FROM THE MANAGERS 5
FINANCIAL INFORMATION
Distributions to Shareholders 9
Independent Auditors' Report 10
Portfolio of Investments 11
Notes to Portfolio of Investments 21
Statement of Assets and Liabilities 22
Statement of Operations 23
Statements of Changes in Net Assets 24
Notes to Financial Statements 25
IMPORTANT INFORMATION
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE USAA AGGRESSIVE
GROWTH FUND, MANAGED BY USAA INVESTMENT MANAGEMENT COMPANY (IMCO). IT MAY BE
USED AS SALES LITERATURE ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT
PROSPECTUS, WHICH GIVES FURTHER DETAILS ABOUT THE FUND.
USAA WITH THE EAGLE IS REGISTERED IN THE U.S. PATENT & TRADEMARK
OFFICE.(COPYRIGHT)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(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, 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
[PHOTOGRAPH OF THE PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH,
CFA, APPEARS HERE.]
--------------------------------------------------------------------------------
SO FAR 2000 HAS BEEN AN UNINSPIRING INVESTMENT YEAR. LOOKING AT VARIOUS MARKET
AVERAGES, AN INVESTOR SEES MARKETS THAT ARE CLOSE TO ZERO RETURN, SLIGHTLY DOWN
OR SLIGHTLY UP.
--------------------------------------------------------------------------------
The biggest attention-grabber among indices is the Dow Jones Utilities. As
reported August 20 in THE NEW YORK TIMES, for the 2000 calendar year it is up
27.53%! If anyone predicted that, I missed it.
Years like this for the broad averages are, in a way, predictable. We know that
the S&P 500 Index, for instance, is not likely to take a sudden quantum leap and
begin to average 30% return per year. I believe it possibly will return
somewhere around 12%. (Please note I am surmising, not guaranteeing.) Another
interesting thing about the year 2000 is the number of actively managed funds
that are outperforming index funds.
Markets must take breathers like this. Such a pause allows the valuations of
securities to become more normal. That means that the relationship of, for
instance, a company's earnings per share to the price of a share becomes less
extreme. This, in turn, could ultimately allow the expected returns on stocks to
resume.
A family of mutual funds has the potential to make this kind of a period easier.
Ideally, you can build an asset allocation to express your risk tolerance. Many
fixed-income fund returns look very good in a year like this. And even if you
don't build such a portfolio, a fund family makes it easy to retreat to safety
because of the availability of bond and money market funds.
As you probably know, I am a strong proponent of asset allocation to build a
portfolio you can live with. That's because somewhere down the road this market
will ignite, and when it does you want to be sure you are there.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
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 IN THE S&P 500 INDEX.
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.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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 AGGRESSIVE GROWTH FUND
OBJECTIVE: Capital appreciation.
TYPES OF INVESTMENTS: Invests principally in equity securities of companies with
the prospect of rapidly growing earnings.
--------------------------------------------------------------------------------
7/31/99 7/31/00
--------------------------------------------------------------------------------
Net Assets $1,029.3 Million $1,981.7 Million
Net Asset Value Per Share $38.23 $56.35
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 7/31/00
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
56.71% 27.65% 21.03%
--------------------------------------------------------------------------------
TOTAL RETURN EQUALS INCOME YIELD PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. NO ADJUSTMENT HAS
BEEN MADE FOR TAXES PAYABLE BY SHAREHOLDERS ON THEIR REINVESTED INCOME DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS. THE PERFORMANCE DATA QUOTED REPRESENT PAST
PERFORMANCE AND ARE NOT AN INDICATION OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, AND AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA Aggressive Growth Fund, the S&P
500 Index, the Russell 2000 (Registered Trademark) Index, and the Lipper Small
Cap Funds Average for the period of 07/31/1990 through 07/31/2000. The data
points from the graph are as follows:
USAA
AGGRESSIVE S&P 500 RUSSELL LIPPER SMALL CAP
GROWTH FUND INDEX 2000 INDEX FUNDS AVERAGE
----------- --------- ---------- ----------------
07/31/90 $10,000 $10,000 $10,000 $10,000
01/31/91 10,027 9,839 9,052 10,484
07/31/91 12,054 11,273 10,971 12,648
01/31/92 14,681 12,068 13,106 15,340
07/31/92 12,366 12,712 12,562 14,173
01/31/93 14,023 13,343 14,841 16,822
07/31/93 13,405 13,820 15,508 17,408
01/31/94 15,373 15,057 17,601 19,796
07/31/94 13,264 14,532 16,223 18,128
01/31/95 14,533 15,136 16,543 19,049
07/31/95 19,894 18,320 20,276 23,758
01/31/96 22,366 20,982 21,498 25,207
07/31/96 24,103 21,353 21,676 26,253
01/31/97 27,356 26,506 25,572 30,764
07/31/97 28,925 32,480 28,915 34,518
01/31/98 28,382 33,636 30,193 35,408
07/31/98 30,055 38,750 29,583 36,007
01/31/99 38,295 44,571 30,294 36,895
07/31/99 43,022 46,579 31,776 39,931
01/31/00 67,765 49,180 35,669 52,087
07/31/00 67,418 50,755 36,150 54,256
DATA FROM 7/31/90 THROUGH 7/31/00
THE GRAPH ILLUSTRATES THE COMPARISON OF A $10,000 HYPOTHETICAL INVESTMENT IN THE
USAA AGGRESSIVE GROWTH FUND TO THE S&P 500 INDEX, THE BROAD-BASED RUSSELL
2000(REGISTERED TRADEMARK) INDEX, AND THE LIPPER SMALL CAP FUNDS AVERAGE. 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 IN THE S&P 500 INDEX. THE RUSSELL 2000 IS A WIDELY RECOGNIZED
UNMANAGED SMALL-CAP INDEX CONSISTING OF THE 2,000 SMALLEST COMPANIES WITHIN THE
RUSSELL 3000(REGISTERED TRADEMARK) INDEX. THE LIPPER SMALL CAP FUNDS AVERAGE IS
AN AVERAGE OF ALL THE SMALL-CAP FUNDS, AS REPORTED BY LIPPER ANALYTICAL
SERVICES, INC., AN INDEPENDENT ORGANIZATION THAT MONITORS THE PERFORMANCE OF
MUTUAL FUNDS.
MESSAGE FROM THE MANAGERS
[PHOTOGRAPH OF THE PORTFOLIO MANAGERS, ERIC M. EFRON, CFA, AND JOHN K. CABELL,
JR., CFA, APPEARS HERE.]
MARKET CONDITIONS
During the year that ended on July 31, 2000, U.S. equity markets in general
encountered high levels of volatility. The year started off on an encouraging
note. Buoyed by strong earnings reports, encouraged by a heady market for
initial public offerings (IPOs), and infatuated with the NEW ECONOMY, growth
stock prices moved up sharply between August 1, 1999, and early March 2000,
while value stocks lagged. A series of interest-rate hikes by the Federal
Reserve (the Fed) seemed not to matter. Technology stocks, particularly
Internet-related ones, led the charge upward, joined by biotech and
communications equities. As a result, valuations reached unsustainable levels.
In this highly charged environment, long-discredited small-market-capitalization
equities were particularly strong.
In early March 2000, however, there was a sea change in investor psychology.
Internet stocks, particularly the dot-coms in the business-to-consumer space,
started to show evidence that their business models might not work. Prices of
IPOs and secondary offerings began to soften. Questions arose regarding the
ownership of intellectual property in the genome and biotech areas. Rising
prices at the gas pump fueled fears of inflation. The Fed continued to boost
interest rates to slow the economy, and this time people took notice. The
confluence of these factors prompted investors to sell stocks aggressively,
which led to a dramatic drop in equity valuations and prices that lasted well
into April. Between March 10, when it peaked at 614.16 on an intraday basis, and
April 17, when bearish sentiment dragged it down to its calendar 2000
year-to-date low (441.56, intraday), the Russell 2000 Index plummeted 28.1%. The
peak-to-trough decline for the NASDAQ Composite was even more extreme, 40.7%.
The movement was especially violent in the technology, biotech, and
communications areas that had been so strong earlier in the year.
Between late April and early July, fears over the issues listed on the previous
page subsided, and U.S. equity markets staged a recovery, but it was not strong
enough to offset the damage of the preceding months. In July, stock prices in
general retreated once again, although not as much as they had in March and
April.
Even after all of this volatility, all of the major stock market indices that we
follow generated positive returns for the year ending July 31, 2000, although
they closed considerably below their annual highs. The large-cap-oriented Dow
Jones 30 Industrials and the S&P 500 Index were up 0.30% and 8.97%,
respectively. The technology-rich NASDAQ led the pack, up 42.77%. The
small-cap-intensive Russell 2000 and the S&P SmallCap 600 filled the middle
ground, generating positive total returns -- 13.77% and 12.57%, respectively.
PERFORMANCE
The USAA Aggressive Growth Fund participated fully in the volatility discussed
above. For the 12 months ended July 31, 2000, it generated a total return of
56.71%, outperforming all of the major stock market indicators that we follow.
As of July 31, 2000, 14% of the Fund's total return came from our participation
in IPOs.
PORTFOLIO STRATEGY
The USAA Aggressive Growth Fund's strategy remains unchanged. It continues to
focus on the following three factors:
CHANGE. We invest in innovative companies that are well positioned to take
advantage of long-term trends that transform our economy and society. It is our
firm belief that companies that embrace change, and even initiate it, have much
better prospects for survival, success, and growth than those that resist it. We
think that some of today's most significant changes are occurring in industries
such as the Internet, broadband and wireless communications, and genome
sciences. Therefore, these are major areas of emphasis for our investments.
SPEED. Earnings are the ultimate builders of value. Over the long term, there is
a direct correlation between rates of earnings growth and stock price
appreciation, in our analysis. With this in mind, we invest exclusively in
companies that have rapidly growing earnings or the prospect thereof. We are not
interested in stocks that have modest valuations if the potential for rapid
growth is lacking. We are more interested in whether the companies underlying
our investments will be much larger and more profitable in the future. The
stocks of most of the companies that meet our criteria for change and speed are
in the small- and mid-market-capitalization ranges, and this is reflected in our
portfolio. Nevertheless, there are some large companies such as Cisco Systems
and Home Depot that have remained innovative and rapidly growing, and we have
not hesitated to include their stocks in the Fund. This is an all-cap fund, not
a small-cap one.
BEING EARLY. We believe that the most lucrative time to invest in emerging
trends and companies is before they become widely known. By the time the
investment community at large discovers these opportunities, much of their
investment potential has been realized. To get in early, we invest in IPOs and
companies with short trading histories. At no time, however, do IPOs account for
a major part of the Fund's total assets or potential investment returns.
Within this strategic framework, we made two meaningful shifts in the portfolio
during the year that ended on July 31, 2000:
We eliminated our holdings in personal-computer-related stocks such as Dell
Computer, Microsoft, and Intel. Although these stocks represent great companies
with bright futures, we feel the personal-computer phenomenon has begun to
mature and that more exciting growth opportunities lie elsewhere. We used the
proceeds from these sales to increase our exposure in newer, fresher areas of
growth such as data networking, broadband and wireless communications, and
business-to-business commerce.
We sold some of our more speculative holdings and used the cash from these sales
to establish and enhance positions in what we consider to be higher-quality
companies with greater leadership potential. Recent purchases include Active
Software, Portal Software, Akamai Technologies, Juniper Networks, Redback
Networks, Extreme Networks, Brocade Communications Systems, GlobeSpan, Commerce
One, and Ariba. The prices and valuations of these stocks had come down sharply
to more affordable levels in the March-May correction, and presented
opportunities that we felt we could not afford to forgo. We felt that when
investors renewed their interest in small- and mid-cap growth stocks in the
technology area, they would buy the quality names first, and we wanted to be
there beforehand to take full advantage of the change in sentiment. In the
aggregate, these purchases helped the Fund participate fully in the June
recovery, and will have the potential to contribute favorably to future
performance, in our opinion.
OUTLOOK
The performance of the USAA Aggressive Growth Fund during the stock market
correction earlier this year serves as a stark reminder that funds of its type
are very volatile. This is a risk that investors should be aware of at all
times. The long-term growth prospects for the stocks in the Fund look good. The
stocks that we have invested in usually carry a high valuation. This should not
be a problem so long as the underlying companies realize their perceived growth
potential, interest rates behave, and other disruptive events remain at a
manageable level. Because this is not a perfect world, however, we think that
equity markets will continue to encounter air pockets. Although we are
optimistic about the long-term success of our investment journey, we urge our
investors to keep their seat belts fastened.
REFER TO PAGE 4 FOR THE RUSSELL 2000 DEFINITION.
NASDAQ COMPOSITE INDEX IS A MARKET-VALUE-WEIGHTED INDEX THAT MEASURES ALL
DOMESTIC AND NON-U.S.-BASED SECURITIES.
DOW JONES INDUSTRIAL AVERAGE IS A PRICE-WEIGHTED AVERAGE OF 30 ACTIVELY TRADED
BLUE CHIP STOCKS, PRIMARILY INDUSTRIALS.
THE S&P SMALLCAP 600 INDEX IS AN UNMANAGED INDEX REPRESENTING THE WEIGHTED
AVERAGE PERFORMANCE OF A GROUP OF 600 DOMESTIC STOCKS CHOSEN FOR MARKET SIZE,
LIQUIDITY, AND INDUSTRY GROUP REPRESENTATION. IT IS NOT POSSIBLE TO INVEST
DIRECTLY IN THE S&P SMALLCAP 600 INDEX.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
YOU WILL FIND A COMPLETE LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES
11-20.
---------------------------------------- -------------------------------------
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
(% OF NET ASSETS) (% OF NET ASSETS)
---------------------------------------- -------------------------------------
Applied Micro Circuits Corp. 4.5 Biotechnology 15.9
Verisign, Inc. 4.1 Electronics - Semiconductors 11.6
Metromedia Fiber Network, Inc. "A" 3.2 Communication Equipment 8.3
Med Immune, Inc. 2.7 Computer Software & Service 7.1
Sepracor, Inc. 2.7 Telephones 6.2
JDS Uniphase Corp. 2.5 Drugs 6.1
Immunex Corp 2.1 Internet Services 4.6
Genentech, Inc. 1.9 Computer - Networking 3.6
IDEC Pharmaceuticals Corp. 1.9 Electrical Equipment 2.6
TranSwitch Corp. 1.8 Finance - Diversified 2.5
---------------------------------------- -------------------------------------
YOU WILL FIND A COMPLETE LIST OF THE SECURITIES THAT THE FUND OWNS ON PAGES
11-20.
DISTRIBUTIONS TO SHAREHOLDERS
The following per share information describes the federal tax treatment of
distributions made during the fiscal year ended July 31, 2000. These figures are
provided for information purposes only and should not be used for reporting to
federal or state revenue agencies. Distributions for the calendar year will be
reported to you on Form 1099-DIV in January 2001.
Ordinary income $ .5239 *
Long-term capital gains 1.7826
-------
Total $2.3065
=======
3.34% of ordinary income distributions qualify for deduction by corporations.
* INCLUDES DISTRIBUTION OF SHORT-TERM CAPITAL GAINS, IF ANY, WHICH ARE TAXABLE
AS ORDINARY INCOME.
INDEPENDENT AUDITORS' REPORT
KPMG
The Shareholders and Board of Directors
USAA AGGRESSIVE GROWTH FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the USAA Aggressive Growth Fund, a series of
the USAA Mutual Fund, Inc., as of July 31, 2000, 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 the financial
highlights, presented in note 7 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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 Aggressive Growth Fund as of July 31, 2000, 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 accounting
principles generally accepted in the United States of America.
KPMG LLP
San Antonio, Texas
September 1, 2000
USAA AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 2000
MARKET
NUMBER VALUE
OF SHARES SECURITY (000)
--------------------------------------------------------------------------------
COMMON STOCKS (96.1%)
AEROSPACE/DEFENSE (0.7%)
425,000 AAR Corp. $ 5,100
110,000 HEICO Corp. "A" 1,760
200,000 Triumph Group, Inc.* 6,125
--------------------------------------------------------------------------------
12,985
--------------------------------------------------------------------------------
AIR FREIGHT (1.4%)
275,000 EGL, Inc.* 7,889
300,000 Forward Air Corp.* 13,538
100,000 United Parcel Service "B"* 5,875
--------------------------------------------------------------------------------
27,302
--------------------------------------------------------------------------------
AIRLINES (0.4%)
100,000 Atlantic Coast Airlines Holdings, Inc.* 3,687
155,000 Midwest Express Holdings, Inc.* 3,643
--------------------------------------------------------------------------------
7,330
--------------------------------------------------------------------------------
AUTO PARTS (0.3%)
400,000 Copart, Inc.* 5,300
--------------------------------------------------------------------------------
BANKS - MAJOR REGIONAL (0.1%)
150,000 Hamilton Bancorp, Inc.* 2,700
--------------------------------------------------------------------------------
BEVERAGES - ALCOHOLIC (0.4%)
130,000 Beringer Wine Estates Holdings, Inc. "B"* 4,777
100,000 Robert Mondavi Corp. "A"* 3,125
--------------------------------------------------------------------------------
7,902
--------------------------------------------------------------------------------
BIOTECHNOLOGY (15.9%)
18,600 Aclara Biosciences, Inc.* 781
100,000 Affymetrix, Inc.* 13,655
18,200 Discovery Partners International, Inc.* 328
150,000 Diversa Corp.* 5,400
250,000 Genentech, Inc.* 38,031
120,000 Genzyme Corp.* 8,332
150,000 Human Genome Sciences, Inc.* 18,122
300,000 IDEC Pharmaceuticals Corp.* 36,844
18,200 Illumina, Inc.* 637
825,000 Immunex Corp.* 41,817
121,000 Inhale Therapeutic Systems, Inc.* 9,824
110,000 Invitrogen Corp.* 6,903
43,700 Luminex Corp.* 1,584
150,000 Maxygen, Inc.* 9,300
900,000 Med Immune, Inc.* 53,550
50,000 Medarex, Inc.* 3,644
250,000 Millennium Pharmaceuticals, Inc.* 24,062
119,600 Sequenom, Inc.* 3,386
350,000 Techne Corp.* 34,956
80,000 Transkaryotic Therapies, Inc.* 2,120
54,600 Variagenics, Inc.* 1,106
--------------------------------------------------------------------------------
314,382
--------------------------------------------------------------------------------
BROADCASTING - RADIO & TV (1.8%)
210,000 Clear Channel Communications, Inc.* 15,999
66,900 Entercom Communications Corp.* 2,597
118,100 Infinity Broadcasting Corp.* 4,163
80,400 Spanish Broadcasting Systems, Inc. "A"* 894
85,800 Univision Communications, Inc. "A"* 10,661
81,000 Wink Communications, Inc.* 1,985
--------------------------------------------------------------------------------
36,299
--------------------------------------------------------------------------------
CHEMICALS (0.3%)
150,000 Symyx Technologies* 6,347
--------------------------------------------------------------------------------
CHEMICALS - DIVERSIFIED (0.1%)
45,600 Cabot Microelectronics Corp.* 2,143
--------------------------------------------------------------------------------
COMMUNICATION EQUIPMENT (8.3%)
9,100 Accelerated Networks, Inc.* 218
166,700 Advanced Fibre Communications, Inc.* 7,147
105,300 Airnet Communications Corp.* 2,922
36,400 Airspan Networks, Inc.* 815
17,750 Avanex Corp.* 2,253
3,500 Avici Systems, Inc.* 344
37,000 Breezecom Ltd.* 1,304
90,000 CIENA Corp.* 12,791
94,500 Clarent Corp.* 4,052
4,500 Corvis Corp.* 371
161,805 Digital Microwave Corp.* 4,399
162,800 Ditech Communications Corp.* 7,794
32,500 Efficient Networks, Inc.* 2,041
485,800 Harmonic, Inc.* 11,447
116,800 interWAVE Communications International, Ltd.* 1,810
415,376 JDS Uniphase Corp.* 49,066
113,900 MCK Communications, Inc.* 2,065
158,700 Metawave Communications Corp.* 4,295
112,700 Netro Corp.* 6,093
6,800 New Focus, Inc.* 683
41,600 Next Level Communications, Inc.* 3,733
13,700 ONI Systems Corp.* 1,213
105,800 Paradyne Networks, Inc.* 3,015
132,600 PCTEL, Inc.* 4,053
87,700 Sierra Wireless, Inc.* 5,087
21,000 Sonus Networks, Inc.* 3,915
18,200 Sunrise Telecom, Inc.* 846
31,800 Sycamore Networks, Inc.* 3,921
33,500 Telaxis Communications Corp.* 639
216,600 Terayon Communication Systems, Inc.* 11,047
9,100 Triton Network Systems, Inc.* 251
103,800 UTStarcom, Inc.* 2,640
68,400 Vyyo, Inc.* 1,847
--------------------------------------------------------------------------------
164,117
--------------------------------------------------------------------------------
COMPUTER - HARDWARE (1.8%)
36,100 Network Engines, Inc.* 997
527,200 Sandisk Corp.* 33,609
--------------------------------------------------------------------------------
34,606
--------------------------------------------------------------------------------
COMPUTER - NETWORKING (3.6%)
41,000 Brocade Communications Systems, Inc.* 7,323
440,400 Cisco Systems, Inc.* 28,819
65,700 Extreme Networks, Inc.* 9,174
117,600 Finisar Corp.* 3,124
29,700 Foundry Networks, Inc.* 2,430
58,200 Juniper Networks, Inc.* 8,290
36,800 Network Appliance, Inc.* 3,172
61,200 Redback Networks, Inc.* 7,956
10,700 Stratos Lightwave, Inc.* 401
--------------------------------------------------------------------------------
70,689
--------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICE (7.1%)
82,200 Active Software, Inc.* 4,685
139,600 Bluestone Software, Inc.* 3,089
101,000 BroadVision, Inc.* 3,655
207,800 ClickSoftware Technologies Ltd.* 1,013
94,900 Commerce One, Inc.* 3,992
63,300 Corio, Inc.* 1,060
136,400 Crossworlds Software, Inc.* 2,285
90,700 HNC Software, Inc.* 4,002
34,400 I2 Technologies, Inc.* 4,463
108,800 Liberate Technologies, Inc.* 2,496
26,600 Nuance Communications, Inc.* 3,734
25,000 Numerical Technologies, Inc.* 1,166
28,100 OpenTV Corp. "A"* 1,384
69,500 OTG Software, Inc.* 2,319
66,800 Phone.com, Inc.* 5,336
83,600 Portal Software, Inc.* 4,210
37,100 Primus Knowledge Solutions, Inc.* 988
112,200 Scientific Learning Corp.* 713
91,200 Sequoia Software Corp.* 1,072
54,600 Talarian Corp.* 693
22,800 Ulticom, Inc.* 764
159,100 ValiCert, Inc.* 1,750
511,270 VeriSign, Inc.* 81,132
115,100 Vignette Corp.* 3,899
45,600 Virage, Inc.* 749
--------------------------------------------------------------------------------
140,649
--------------------------------------------------------------------------------
DRUGS (6.1%)
165,000 Alpharma, Inc. "A" 10,807
100,000 Andrx Corp.* 7,806
300,000 Biovail Corp.* 17,400
210,000 Elan Corp. plc ADR* 11,222
70,000 Ivax Corp.* 3,448
390,000 Jones Pharma, Inc. 12,748
127,500 King Pharmaceuticals, Inc.* 3,841
500,000 Sepracor, Inc.* 52,875
--------------------------------------------------------------------------------
120,147
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT (2.6%)
40,000 Capstone Turbine Corp.* 2,200
273,200 DDI Corp.* 6,010
293,200 Flextronics International Ltd.* 20,758
115,000 Manufacturers Services Ltd.* 2,674
151,074 Sanmina Corp.* 14,031
56,800 SMTC Corp.* 1,026
341,800 Viasystems Group, Inc.* 5,618
--------------------------------------------------------------------------------
52,317
--------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTORS (11.6%)
596,800 Applied Micro Circuits Corp.* 89,072
125,500 ARM Holdings plc* 4,306
40,900 Centillium Communications, Inc.* 3,317
73,900 Exar Corp.* 6,859
66,400 GlobeSpan, Inc.* 7,499
163,800 Insilicon, Inc.* 2,774
45,700 Intersil Holding Corp.* 2,619
18,400 Marvell Technology Group Ltd.* 841
140,000 Metalink Ltd.* 3,168
216,000 MMC Networks, Inc.* 10,678
45,000 Parthus Technologies plc ADR* 1,353
66,000 Quantum Effect Devices, Inc.* 4,913
13,400 Silicon Image, Inc.* 710
7,400 Silicon Laboratories, Inc.* 426
45,500 Stanford Microdevices, Inc.* 1,917
438,975 TranSwitch Corp.* 35,063
711,600 Triquint Semiconductor, Inc.* 27,263
91,400 Virata Corp.* 5,850
358,000 Vitesse Semiconductor Corp.* 21,346
--------------------------------------------------------------------------------
229,974
--------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION (0.6%)
36,400 Lexent, Inc.* 969
225,000 Quanta Services, Inc.* 10,294
--------------------------------------------------------------------------------
11,263
--------------------------------------------------------------------------------
EQUIPMENT - SEMICONDUCTORS (0.7%)
181,100 Cymer, Inc.* 8,217
113,700 PRI Automation, Inc.* 5,188
--------------------------------------------------------------------------------
13,405
--------------------------------------------------------------------------------
FINANCE - CONSUMER (0.6%)
150,000 Metris Companies, Inc. 4,397
300,000 NCO Group, Inc.* 7,425
--------------------------------------------------------------------------------
11,822
--------------------------------------------------------------------------------
FINANCE - DIVERSIFIED (0.3%)
120,000 Heller Financial, Inc. "A"* 2,880
70,000 SEI Investments Co.* 3,833
--------------------------------------------------------------------------------
6,713
--------------------------------------------------------------------------------
FOODS (0.6%)
150,000 American Italian Pasta Co. "A"* 2,962
200,000 Suiza Foods Corp.* 9,275
--------------------------------------------------------------------------------
12,237
--------------------------------------------------------------------------------
HEALTH CARE - DIVERSIFIED (0.8%)
252,500 Accredo Health, Inc.* 8,333
120,000 ICON plc ADR* 2,175
152,200 Professional Detailing, Inc.* 5,631
--------------------------------------------------------------------------------
16,139
--------------------------------------------------------------------------------
HEALTH CARE - HMOS (1.2%)
375,000 Express Scripts, Inc. "A"* 24,094
--------------------------------------------------------------------------------
HEALTH CARE - SPECIALIZED SERVICES (1.6%)
200,000 Advance Paradigm, Inc.* 4,937
100,000 eBenX, Inc.* 2,212
270,000 Omnicare, Inc. 2,616
330,000 Orthodontic Centers of America, Inc.* 8,539
150,000 Priority Healthcare Corp. "B"* 8,044
250,000 Renal Care Group, Inc.* 5,797
--------------------------------------------------------------------------------
32,145
--------------------------------------------------------------------------------
HOME FURNISHINGS & APPLIANCES (0.5%)
350,000 Ethan Allen Interiors, Inc. 8,925
--------------------------------------------------------------------------------
HOSPITALS (0.3%)
150,000 Province Healthcare Co.* 6,431
--------------------------------------------------------------------------------
HOUSEWARES (0.1%)
125,000 Yankee Candle Co., Inc.* 2,609
--------------------------------------------------------------------------------
INTERNET SERVICES (4.6%)
11,400 724 Solutions, Inc.* 382
52,500 Akamai Technologies, Inc.* 4,140
59,300 Ariba, Inc.* 6,875
54,800 Be Free, Inc.* 281
10,600 Blue Martini Software, Inc.* 630
65,000 CareInsite, Inc.* 1,073
45,600 Click Commerce, Inc.* 1,434
56,697 CMGI, Inc.* 2,147
127,600 Cysive, Inc.* 3,062
54,600 Data Return Corp.* 1,399
101,800 Digex, Inc.* 6,420
128,300 Digital Island, Inc.* 3,681
364,500 divine interVentures, Inc.* 3,189
144,000 Entrust Technologies, Inc.* 4,113
227,500 Evoke Communications, Inc.* 1,820
40,200 Freemarkets, Inc.* 1,932
91,500 GoAmerica, Inc.* 1,075
80,500 homestore.com, Inc.* 2,817
45,500 i3 Mobile, Inc.* 603
161,300 Ibeam Broadcasting Corp.* 1,986
79,400 Infospace, Inc.* 2,680
101,500 InterNAP Network Services Corp.* 3,462
82,600 Internet Capital Group, Inc.* 2,793
228,409 Internet Pictures Corp.* 2,527
208,300 Loudeye Technologies, Inc.* 2,981
67,500 MyPoints.com, Inc.* 953
36,600 Navisite, Inc.* 1,485
204,100 Netcentives, Inc.* 2,564
318,600 Promotions.com, Inc.* 1,653
104,100 PurchasePro.com, Inc.* 4,060
36,500 Register.com, Inc.* 989
53,300 Retek, Inc.* 1,639
61,700 Selectica, Inc.* 3,193
10,700 StorageNetworks, Inc.* 1,168
177,900 Tumbleweed Communications Corp.* 8,005
205,100 Viador, Inc.* 2,179
--------------------------------------------------------------------------------
91,390
--------------------------------------------------------------------------------
INVESTMENT BANKS/BROKERAGE (0.3%)
220,000 Knight Trading Group, Inc.* 5,844
--------------------------------------------------------------------------------
LODGING/HOTEL (0.7%)
200,000 Four Seasons Hotels, Inc. 14,025
--------------------------------------------------------------------------------
MEDICAL PRODUCTS & SUPPLIES (1.2%)
203,600 Caliper Technologies Corp.* 11,198
123,200 Charles River Laboratories International* 3,719
150,000 Henry Schein, Inc.* 2,110
200,000 SciQuest.com, Inc.* 1,956
250,000 Sybron Corp.* 5,203
--------------------------------------------------------------------------------
24,186
--------------------------------------------------------------------------------
OIL & GAS - DRILLING/EQUIPMENT (1.6%)
100,000 Carbo Ceramics, Inc.* 3,463
100,000 Cooper Cameron Corp.* 6,462
260,000 Grant Prideco, Inc.* 5,233
120,000 Smith International, Inc.* 8,565
121,125 Varco International, Inc.* 2,089
130,000 Weatherford International, Inc.* 5,208
--------------------------------------------------------------------------------
31,020
--------------------------------------------------------------------------------
PERSONAL CARE (0.4%)
200,000 Estee Lauder Companies, Inc. "A" 8,800
--------------------------------------------------------------------------------
RESTAURANTS (0.9%)
80,400 Krispy Kreme Doughnuts, Inc.* 5,467
175,000 P. F. Chang's China Bistro, Inc.* 5,152
300,000 Papa John's International, Inc.* 7,144
--------------------------------------------------------------------------------
17,763
--------------------------------------------------------------------------------
RETAIL - BUILDING SUPPLIES (1.2%)
140,000 Fastenal Co. 8,645
300,000 Home Depot, Inc. 15,525
--------------------------------------------------------------------------------
24,170
--------------------------------------------------------------------------------
RETAIL - DISCOUNTERS (1.3%)
600,000 Dollar Tree Stores, Inc.* 25,537
--------------------------------------------------------------------------------
RETAIL - FOOD (0.1%)
225,000 Wild Oats Markets, Inc.* 2,278
--------------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISING (0.3%)
200,000 Costco Wholesale Corp.* 6,513
--------------------------------------------------------------------------------
RETAIL - SPECIALTY (2.1%)
420,000 99 Cents Only Stores* 18,086
50,000 Bed Bath & Beyond, Inc.* 1,841
330,000 Cost Plus, Inc.* 10,993
100,000 Tuesday Morning Corp.* 972
250,000 Williams-Sonoma, Inc.* 9,687
--------------------------------------------------------------------------------
41,579
--------------------------------------------------------------------------------
RETAIL - SPECIALTY APPAREL (0.5%)
300,000 Abercrombie & Fitch Co. "A"* 4,819
200,000 Chico's FAS, Inc.* 5,900
--------------------------------------------------------------------------------
10,719
--------------------------------------------------------------------------------
SERVICES - COMMERCIAL & CONSUMER (0.6%)
100,000 Barra, Inc.* 5,806
300,000 MSC Industrial Direct Co. "A"* 5,456
--------------------------------------------------------------------------------
11,262
--------------------------------------------------------------------------------
SERVICES - DATA PROCESSING (0.5%)
126,100 Checkfree Holdings Corp.* 7,661
81,096 MedQuist, Inc.* 1,743
--------------------------------------------------------------------------------
9,404
--------------------------------------------------------------------------------
TELECOMMUNICATIONS - CELLULAR/WIRELESS (2.4%)
22,700 Aether Systems, Inc.* 3,778
137,800 Alamosa PCS Holdings, Inc.* 2,756
264,100 Dobson Communications Corp. "A"* 5,777
233,500 Microcell Telecommunications, Inc. "B"* 7,428
72,800 Nextel Partners, Inc. "A"* 2,298
92,300 Powertel, Inc.* 8,295
105,000 Tritel, Inc.* 3,268
9,100 Triton PCS Holdings, Inc. "A"* 457
172,900 UbiquiTel, Inc.* 1,751
183,200 US Unwired, Inc. "A"* 2,611
172,700 Western Wireless Corp. "A"* 9,498
--------------------------------------------------------------------------------
47,917
--------------------------------------------------------------------------------
TELECOMMUNICATIONS - LONG DISTANCE (0.9%)
110,400 CapRock Communications Corp.* 676
249,200 ITC DeltaCom, Inc.* 4,190
53,000 Level 3 Communications, Inc.* 3,627
105,800 Startec Global Communications Corp.* 1,071
33,800 Tycom Ltd.* 1,152
93,500 Universal Access, Inc.* 2,583
144,000 Williams Communications Group* 3,888
--------------------------------------------------------------------------------
17,187
--------------------------------------------------------------------------------
TELEPHONES (6.2%)
64,700 Allegiance Telecom, Inc.* 3,595
106,500 Choice One Communications, Inc.* 3,009
81,450 Covad Communications Group, Inc.* 1,344
105,400 Cypress Communications, Inc.* 514
90,600 Focal Communications Corp.* 3,363
285,700 GT Group Telecom, Inc. "B"* 4,660
97,000 Intermedia Communications, Inc.* 1,710
276,600 McLeod USA, Inc.* 4,685
1,832,000 Metromedia Fiber Network, Inc. "A"* 64,349
135,600 Network Access Solutions Corp.* 1,356
350,800 NEXTLINK Communications, Inc. "A"* 11,598
281,900 Northeast Optic Network, Inc.* 11,857
96,600 Teligent, Inc. "A"* 1,872
48,500 Time Warner Telecom, Inc. "A"* 3,004
202,500 Winstar Communications, Inc.* 6,126
--------------------------------------------------------------------------------
123,042
--------------------------------------------------------------------------------
TEXTILES - APPAREL (0.2%)
110,000 Columbia Sportswear Co.* 4,029
97,600 Cutter and Buck, Inc.* 842
--------------------------------------------------------------------------------
4,871
--------------------------------------------------------------------------------
WASTE MANAGEMENT (0.3%)
300,000 Waste Connections, Inc.* 6,075
--------------------------------------------------------------------------------
Total common stocks (cost: $981,993) 1,904,554
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000)
------------
MONEY MARKET INSTRUMENTS (3.6%)
COMMERCIAL PAPER
$ 43,077 General Electric Capital Corp., 6.46%, 8/02/2000 43,069
29,230 Household Finance Corp., 6.45%, 8/01/2000 29,230
--------------------------------------------------------------------------------
Total money market instruments (cost: $72,299) 72,299
--------------------------------------------------------------------------------
Total investments (cost: $1,054,292) $1,976,853
================================================================================
USAA AGGRESSIVE GROWTH FUND
NOTES TO PORTFOLIO OF INVESTMENTS
JULY 31, 2000
GENERAL NOTES
Market values of securities are determined by procedures and practices discussed
in note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
Investments in foreign securities were 5.0% of net assets at July 31, 2000.
ADR - American Depositary Receipts are foreign shares held by a U.S. bank which
issues a receipt evidencing ownership. Dividends are paid in U.S. dollars.
SPECIFIC NOTES
* Non-income producing.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
JULY 31, 2000
ASSETS
Investments in securities, at market value
(identified cost of $1,054,292) $ 1,976,853
Cash 1,468
Receivables:
Capital shares sold 2,160
Dividends 56
Securities sold 13,141
-----------
Total assets 1,993,678
-----------
LIABILITIES
Securities purchased 9,241
Capital shares redeemed 1,767
USAA Investment Management Company 622
USAA Transfer Agency Company 161
Accounts payable and accrued expenses 213
-----------
Total liabilities 12,004
-----------
Net assets applicable to capital shares outstanding $ 1,981,674
===========
REPRESENTED BY:
Paid-in capital $ 992,757
Accumulated net realized gain on investments 66,356
Net unrealized appreciation of investments 922,561
-----------
Net assets applicable to capital shares outstanding $ 1,981,674
===========
Capital shares outstanding 35,168
===========
Authorized shares of $.01 par value 55,000
===========
Net asset value, redemption price, and offering price per share $ 56.35
===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED JULY 31, 2000
Net investment loss:
Income:
Dividends (net of foreign taxes withheld of $2) $ 564
Interest 2,355
---------
Total income 2,919
---------
Expenses:
Management fees 5,823
Transfer agent's fees 2,842
Custodian's fees 253
Postage 446
Shareholder reporting fees 93
Directors' fees 4
Registration fees 265
Professional fees 63
Other 19
---------
Total expenses 9,808
---------
Net investment loss (6,889)
---------
Net realized and unrealized gain on investments:
Net realized gain 71,550
Change in net unrealized appreciation/depreciation 512,148
---------
Net realized and unrealized gain 583,698
---------
Increase in net assets resulting from operations $ 576,809
=========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
YEARS ENDED JULY 31,
2000 1999
----------------------------
From operations:
Net investment loss $ (6,889) $ (4,500)
Net realized gain on investments 71,550 65,690
Change in net unrealized
appreciation/depreciation of investments 512,148 248,390
----------------------------
Increase in net assets resulting from
operations 576,809 309,580
----------------------------
Distributions to shareholders from:
Net realized gains (63,031) (91,693)
----------------------------
From capital share transactions:
Proceeds from shares sold 872,964 321,840
Reinvested dividends 62,318 90,620
Cost of shares redeemed (496,668) (337,515)
----------------------------
Increase in net assets from capital share
transactions 438,614 74,945
----------------------------
Net increase in net assets 952,392 292,832
Net assets:
Beginning of period 1,029,282 736,450
----------------------------
End of period $1,981,674 $1,029,282
============================
Change in shares outstanding:
Shares sold 15,842 10,648
Shares issued for dividends reinvested 1,708 4,176
Shares redeemed (9,303) (11,190)
----------------------------
Increase in shares outstanding 8,247 3,634
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
USAA AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
(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 13 separate funds.
The information presented in this annual report pertains only to the USAA
Aggressive Growth Fund (the Fund). The Fund's investment objective is capital
appreciation. USAA Investment Management Company (the Manager) attempts to
achieve this objective by investing the Fund's assets primarily in equity
securities of companies with the prospect of rapidly growing earnings.
A. SECURITY VALUATION - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Portfolio securities, except as otherwise noted, traded primarily on a
domestic securities exchange are valued at the last sales price on that
exchange. Portfolio securities traded primarily on foreign securities exchanges
are generally valued at the closing values of such securities on the exchange
where primarily traded. If no sale is reported, the average of the bid and asked
prices is generally used depending upon local custom or regulation.
2. Over-the-counter securities are priced at the last sales price or, if not
available, at the average of the bid and asked prices.
3. Securities purchased with maturities of 60 days or less are stated at
amortized cost, which approximates market value.
4. Securities that cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Directors.
B. FEDERAL TAXES - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. As a result of certain
permanent differences between book and tax basis accounting, reclassifications
have been made on the statement of assets and liabilities to decrease
accumulated undistributed net investment loss by $6,889,000, decrease
accumulated net realized gain on investments by $3,268,000, and decrease paid-in
capital by $3,621,000.
C. INVESTMENTS IN SECURITIES - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Dividend
income, less foreign taxes, if any, is recorded on the ex-dividend date. If the
ex-dividend date has passed, certain dividends from foreign securities are
recorded upon notification. Interest income is recorded on the accrual basis.
Discounts and premiums on short-term securities are amortized over the life of
the respective securities.
D. USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in 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 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 July 31, 2000.
(3) DISTRIBUTIONS
Distributions of net investment income and realized gains from security
transactions not offset by capital losses are made annually 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 of securities, excluding short-term
securities, for the year ended July 31, 2000, were $841,735,000 and
$521,192,000, respectively.
Gross unrealized appreciation and depreciation of investments as of July 31,
2000, were $1,028,820,000 and $106,259,000, 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 as a percentage of its annual average net assets, which on an
annual basis is equal to .50% of the first $200 million, .40% of that portion
over $200 million but not over $300 million, and .33% of the portion over $300
million.
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 $26 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
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) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------
2000 1999 1998 1997 1996
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 38.23 $ 31.62 $ 32.82 $ 27.88 $ 24.49
Net investment loss (.22)(a) (.17)(a) (.12)(a) (.14)(a) (.12)(a)
Net realized and
unrealized gain 20.65 10.77 1.26 5.65 5.12
Distributions of realized
capital gains (2.31) (3.99) (2.34) (.57) (1.61)
----------------------------------------------------------------------
Net asset value at
end of period $ 56.35 $ 38.23 $ 31.62 $ 32.82 $ 27.88
======================================================================
Total return (%)* 56.71 43.14 3.91 20.00 21.16
Net assets at end of
period (000) $1,981,674 $1,029,282 $ 736,450 $ 753,984 $ 607,437
Ratio of expenses to
average net assets (%) .60 .72 .71 .74 .74
Ratio of net investment
loss to average
net assets (%) (.42) (.55) (.38) (.47) (.42)
Portfolio turnover (%) 33.07 35.18 83.32 57.15 43.75
</TABLE>
* ASSUMES REINVESTMENT OF ALL CAPITAL GAIN DISTRIBUTIONS DURING THE PERIOD.
(a) CALCULATED USING WEIGHTED AVERAGE SHARES.
DIRECTORS
Robert G. Davis, CHAIRMAN OF THE BOARD
Michael J.C. Roth, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason
David G. Peebles
Michael F. Reimherr
Laura T. Starks
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
State Street Bank and Trust Company KPMG LLP
P.O. Box 1713 112 East Pecan, Suite 2400
Boston, Massachusetts 02105 San Antonio, Texas 78205
TELEPHONE ASSISTANCE HOURS INTERNET ACCESS
Call toll free - Central Time usaa.com(Service Mark)
Monday - Friday 6:00 a.m. to 10:00 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) 456-7200
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
