Table of Contents
USAA Family of Funds 1
Message from the President 2
Investment Review 4
Message from the Manager 5
Shareholder Voting Results 7
Financial Information
Portfolio of Investments 9
Notes to Portfolio of Investments 18
Statement of Assets and Liabilities 19
Statement of Operations 20
Statements of Changes in Net Assets 21
Notes to Financial Statements 22
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA Money Market
Fund, managed by USAA Investment Management Company (IMCO). It may be used as
sales literature only when preceded or accompanied by a current prospectus,
which gives further details about the Fund.
USAA with the eagle is registered in the U.S. Patent & Trademark
Office.(Copyright)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) Trust 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
[Photograph of the President and Vice Chairman of the Board, Michael J.C. Roth,
CFA, appears here]
What an exciting time this is!
The way we do business, the way we communicate with each other, the way we live
our lives is all changing with breathtaking speed. It is fascinating and
sometimes scary. And it creates new investment ideas every day.
As we begin 2000, a challenging investment picture is out there. In the last
half of 1999, especially, investors in growth or technology stocks had wonderful
returns. These came on the heels of four previous years of returns that were
well above average. Those returns in 1999 were the product of the actions of
investors who think on the leading edge: technology, Internet, electronics. For
investors who included bonds or value-based stocks in their portfolios, 1999 was
disappointing. The returns there were largely driven by the Federal Reserve,
which is much more concerned with inflation than with leading-edge thinking. I
do not mean that as a put-down; that's just how it is.
And one last piece of the puzzle: the returns for growth and technology stocks
are coupled with price/earnings ratios that are so far above any common standard
that people are only guessing at what they mean.
So, in a nutshell, 1999 was huge returns on growth and tech stocks coupled with
valuations that were stratospheric and paltry returns on everything else. And,
oh yes, the economy continues to grow in a way that has some economists talking
about eliminating the national debt in just over a decade.
Great opportunities coupled with very interesting risks is a picture that for
many of you will continue to argue for the approach we have counseled. Create a
portfolio that pursues your goals within a level of risk which you can tolerate.
That portfolio can be much more exciting than it was a few years ago. We'd love
to help you create it.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
Past performance is no guarantee of future results.
Investment Review
USAA MONEY MARKET FUND
OBJECTIVE: Highest income consistent with preservation of capital and the
maintenance of liquidity.
TYPES OF INVESTMENTS: Invests principally in high-quality, U.S.
dollar-denominated, short-term debt instruments that present minimal credit risk
and comply with strict SEC guidelines applicable to money market funds.
- --------------------------------------------------------------------------------
7/31/99 1/31/00
- --------------------------------------------------------------------------------
Net Assets $3,011.0 Million $3,274.2 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 1/31/00
- --------------------------------------------------------------------------------
7/31/99 to
1/31/00 1 Year 5 Years 10 Years 7-day Yield
2.65%(+) 5.05% 5.34% 5.13% 5.42%
- --------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Total return equals income yield and assumes reinvestment of all dividends. No
adjustment has been made for taxes payable by shareholders on their reinvested
income dividends. The performance data quoted represent past performance and are
not an indication of future results. An investment in a money market fund is not
insured or guaranteed by the FDIC or any other government agency. Although the
fund seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The 7-day yield quotation more
closely reflects current earnings of the fund than the total return quotation.
7-DAY YIELD COMPARISON
A chart in the form of a line graph appears here illustrating the comparison of
the 7-day Yield of the USAA Money Market Fund to the IBC/Donoghue's Money Fund
Averages (Trademark)/First Tier:
USAA Money
Market Fund IBC Average
----------------- -----------
01/26/99 4.74% 4.37%
02/23/99 4.69% 4.26%
03/30/99 4.63% 4.22%
04/27/99 4.60% 4.19%
05/25/99 4.58% 4.18%
06/29/99 4.67% 4.26%
07/27/99 4.78% 4.38%
08/31/99 4.88% 4.55%
09/28/99 4.98% 4.65%
10/26/99 5.08% 4.76%
11/30/99 5.29% 4.97%
12/28/99 5.68% 5.15%
01/25/00 5.41% 5.10%
Data represent the last Tuesday of each month Ending date 1/25/00
The graph tracks the USAA Money Market Fund's 7-day yield against IBC/Donoghue's
Money Fund Averages(Trademark)/First Tier, an average of first-tier major money
market fund yields.
Message from the Manager
[Photograph of the Portfolio Manager, Pamela Bledsoe Noble, CFA, appears here]
CURRENT MARKET CONDITIONS
A year ago, we experienced a decline in interest rates as the Federal Reserve
(the Fed) responded to concerns about the financial instability in Russia, Asia,
and Latin America. These concerns have now taken a back seat to efforts to guard
against inflationary pressures in the U.S. economy. As a result, the Fed
reversed all of its rate reductions made in 1998 by increasing the federal funds
rate by 0.75% between June 30, 1999, and November 16, 1999. While the Fed made
no adjustments to monetary policy over year-end, it did increase the federal
funds rate an additional 0.25% during its first meeting of this year. The impact
of these rate increases boosted the yield on a one-year Treasury bill from 4.51%
on November 30, 1998, to 6.24% at the close of trading on January 31, 2000.
The outlook for the economy in the year 2000 is very much like 1999 -- healthy
economic growth and moderate inflation. If the economy continues to show signs
of solid growth, most Wall Street economists are forecasting rising interest
rates.
STRATEGY
Regardless of the interest rate environment, money market funds provide the
maximum current income while maintaining the highest level of safety and
liquidity. In my last message to you on July 31, 1999, I stated that the
structure of the Fund was poised to take advantage of the recent rise in
interest rates while selectively purchasing longer-term maturities that provided
good value. I continue to employ this strategy today.
PERFORMANCE
According to IBC Financial Data, the USAA Money Market Fund was ranked 24 out of
284 retail general purpose money market funds for the 12 months ended January
31, 2000.
Additionally, IBC ranked the USAA Money Market Fund as one of the top general
purpose funds for the 10-year period January 1990 through December 1999. Past
performance is no guarantee of future results.
Respectfully submitted on February 4, 2000.
PORTFOLIO MIX
JANUARY 31, 2000
A pie chart is shown here depicting the Portfolio Mix as of January 31, 2000 of
the USAA Money Market Fund to be:
Fixed-Rate Instruments - 39.6%; Variable-Rate Demand Notes - 25.1%;
Adjustable-Rate Notes - 22.9%; and Put Bonds - 11.0%.
Percentages are of the net assets in the portfolio and may or may not equal
100%.
CUMULATIVE PERFORMANCE OF $10,000
A chart in the form of a line graph appears here, illustrating a $10,000
hypothetical investment in the USAA Money Market Fund for the period of 01/31/90
through 01/31/2000. The data points from the graph are as follows:
USAA Money
Market Fund
----------------
01/31/90 $10,000
07/31/90 10,389
01/31/91 10,789
07/31/91 11,119
01/31/92 11,418
07/31/92 11,644
01/31/93 11,834
07/31/93 12,012
01/31/94 12,190
07/31/94 12,403
01/31/95 12,716
07/31/95 13,083
01/31/96 13,448
07/31/96 13,788
01/31/97 14,145
07/31/97 14,516
01/31/98 14,913
07/31/98 15,308
01/31/99 15,702
07/31/99 16,071
01/31/00 16,496
Data from 1/31/90 through 1/31/00
Past performance is no guarantee of future results and the value of your
investment will vary according to the USAA Money Market Fund's performance. An
investment in a money market fund is not insured or guaranteed by the FDIC or
any other government agency. Although the fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by investing in
the fund. For 7-day yield information, please refer to the fund's investment
review page.
See page 9 for a complete listing of the portfolio of investments.
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 below are for the entire series of the USAA
Mutual Fund, Inc. (the Company) for proposals 1 and 2.
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
Barbara B. Dreeben 1,769,442,172 27,742,529
Robert L. Mason 1,769,442,172 27,742,529
David G. Peebles 1,769,442,078 27,742,623
Michael F. Reimherr 1,769,441,328 27,743,373
Richard A. Zucker 1,769,444,074 27,740,627
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.
2 Proposal to ratify the selection by the Board of Directors of KPMG LLP as
auditors for the Company.
NUMBER OF SHARES VOTING
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1,664,427,712 19,027,937 27,873,822
USAA MONEY MARKET FUND
CATEGORIES AND DEFINITIONS
PORTFOLIO OF INVESTMENT IN SECURITIES
January 31, 2000
(Unaudited)
Fixed-rate instruments - consist of bonds and notes. The yield is constant to
maturity. Prior to maturity, the market price of a fixed-rate instrument
generally varies inversely to the movement of interest rates.
Put bonds - provide the right to sell the bond at face value at specific tender
dates prior to final maturity. The put feature shortens the effective maturity
of the security.
Variable-rate demand notes (VRDN) - provide the right, on any business day, to
sell the security at face value on either that day or within 30 days. The
interest rate is adjusted at a stipulated daily, weekly, or monthly interval to
a rate that reflects current market conditions. The effective maturity for these
instruments is deemed to be less than 397 days in accordance with detailed
regulatory requirements.
Adjustable-rate notes - similar to VRDNs in the fact that the interest rate is
adjusted periodically to reflect current market conditions. These interest rates
are adjusted at a given time, such as monthly or quarterly. However, these
securities do not offer the right to sell the security at face value prior to
maturity.
PORTFOLIO DESCRIPTION ABBREVIATIONS
CD Certificate of Deposit IDB Industrial Development Board
COP Certificate of Participation LLC Limited Liability Company
CP Commercial Paper LLP Limited Liability Partnership
IDA Industrial Development MTN Medium-Term Note
Authority/Agency RB Revenue Bond
Credit enhancements - add the financial strength of the provider of the
enhancement to support the issuer's ability to repay the principal when due. The
enhancement may be provided by either a high-quality bank, insurance company, or
other corporation, or a collateral trust.
(LOC) Enhanced by a bank letter of credit.
(NBGA) Enhanced by a non-bank guarantee agreement.
USAA MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
January 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Principal Coupon
Amount Security Rate Maturity Value
- ------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FIXED-RATE INSTRUMENTS (39.6%)
Asset-Backed Securities
$25,000 Windmill Funding Corp., CP 5.74% 3/02/2000 $ 24,880
- ------------------------------------------------------------------------------------------------------------
Automobiles
25,000 Chrysler Financial Corp., MTN 6.47 6/19/2000 25,025
- ------------------------------------------------------------------------------------------------------------
Banks - Major Regional
30,000 Bank One, N.A., Chicago, Illinois, MTN 6.20 10/18/2000 29,990
25,000 European American Bank, Bank Note 5.75 2/10/2000 25,000
20,000 Fleet Boston Corp., CP 5.75 2/22/2000 19,933
25,000 Key Bank North America, Senior Notes 5.65 6/26/2000 24,993
17,706 Long Lane Master Trust IV, CP (a), (b) 6.09 2/01/2000 17,706
25,000 Long Lane Master Trust IV, CP (a), (b) 4.95 4/28/2000 24,701
20,000 M&I Bank Fox Valley, WI, MTN 6.36 10/26/2000 19,998
35,000 MBNA America Bank, N.A., CD 6.14 2/03/2000 35,000
25,000 MBNA America Bank, N.A., CD 5.88 3/08/2000 25,000
30,000 Mercantile Safe Deposit & Trust Co., CD 6.04 4/03/2000 30,041
35,000 Zions Bancorp, CP 5.91 3/07/2000 34,799
20,000 Zions Bancorp, CP 6.00 4/18/2000 19,743
30,000 Zions Bancorp, CP 5.96 4/24/2000 29,588
- ------------------------------------------------------------------------------------------------------------
336,492
- ------------------------------------------------------------------------------------------------------------
Banks - Money Center
22,000 Banque National de Paris, CD 5.14 2/18/2000 21,999
25,000 Bayerische Landesbank Girozentrale, CD 5.12 3/21/2000 24,993
30,000 Canadian Imperial Bank of Commerce, CD 5.01 2/07/2000 30,000
50,000 Commerzbank AG, CD 5.02 2/07/2000 50,000
40,000 Commerzbank AG, CD 5.06 2/09/2000 39,999
25,000 Commerzbank AG, CD 5.09 2/16/2000 24,999
50,000 Deutsche Bank AG, CD 5.06 2/08/2000 50,000
12,750 J. P. Morgan Co., Inc., MTN 5.70 2/15/2000 12,750
25,000 Westpac Banking Corp., Notes 6.02 9/15/2000 24,992
- ------------------------------------------------------------------------------------------------------------
279,732
- ------------------------------------------------------------------------------------------------------------
Computer - Hardware
26,000 IBM Corp., MTN 6.38 6/15/2000 26,048
10,000 IBM Corp., MTN 5.76 7/10/2000 10,005
10,650 IBM Corp., MTN 6.04 8/07/2000 10,650
- ------------------------------------------------------------------------------------------------------------
46,703
- ------------------------------------------------------------------------------------------------------------
Electric/Gas Utilities - Municipal
15,000 Cogentrix of Richmond, Inc., CP (LOC) 5.85 2/11/2000 14,976
17,880 Nebraska Public Power District, CP 5.85 3/13/2000 17,880
- ------------------------------------------------------------------------------------------------------------
32,856
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Electrical Equipment
31,800 Allied Signal, Inc., Notes 6.75 8/15/2000 31,919
- ------------------------------------------------------------------------------------------------------------
Electronics - Instrumentation
35,000 Sci Systems Inc., CP 5.92 3/22/2000 34,712
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Finance - Consumer
12,500 American General Finance Corp., Senior Notes 7.25 4/15/2000 12,537
13,500 Associates Corp. of N.A., Senior Notes 6.38 6/15/2000 13,531
41,510 Associates Corp. of N.A., Senior Notes 5.85 1/15/2001 41,248
21,099 Commercial Credit Corp., Notes 6.75 5/15/2000 21,162
59,461 Countrywide Home Loans, Inc., CP 5.85 2/01/2000 59,461
25,000 Countrywide Home Loans, Inc., CP 5.70 2/24/2000 24,909
25,000 Countrywide Home Loans, Inc., CP 5.73 2/25/2000 24,904
20,000 Countrywide Home Loans, Inc., CP 5.72 2/29/2000 19,911
14,000 Ford Motor Credit Co., Notes 6.85 8/15/2000 14,080
13,000 Ford Motor Credit Co., MTN 6.25 11/08/2000 12,994
20,500 Homeside Lending, Inc., CP 5.69 2/18/2000 20,445
21,755 Homeside Lending, Inc., MTN 6.88 5/15/2000 21,856
- ------------------------------------------------------------------------------------------------------------
287,038
- ------------------------------------------------------------------------------------------------------------
Finance - Diversified
12,000 Cit Group Inc., MTN 5.85 5/26/2000 12,024
45,000 Heller Financial, Inc., CP 5.70 2/15/2000 44,900
50,000 Heller Financial, Inc., CP 5.86 3/16/2000 49,642
- ------------------------------------------------------------------------------------------------------------
106,566
- ------------------------------------------------------------------------------------------------------------
Leasing
15,000 PHH Corp., CP 5.78 2/17/2000 14,961
35,000 PHH Corp., CP 5.78 2/18/2000 34,905
20,000 PHH Corp., CP 5.80 2/23/2000 19,929
- ------------------------------------------------------------------------------------------------------------
69,795
- ------------------------------------------------------------------------------------------------------------
Telephones
21,955 GTE Corp. Debentures 9.38 12/01/2000 22,435
- ------------------------------------------------------------------------------------------------------------
Total fixed-rate instruments (cost: $1,298,153) 1,298,153
- ------------------------------------------------------------------------------------------------------------
PUT BONDS (11.0%)
Electric Utilities
59,700 IDA of New Hampshire, Pollution Control RB,
Series E (LOC) 5.86 5/01/2021 59,700
65,000 IDB of Columbia, AL, RB, Series 1997 (a) 6.03 11/01/2021 65,000
- ------------------------------------------------------------------------------------------------------------
124,700
- ------------------------------------------------------------------------------------------------------------
Hospitals
16,100 Metrocrest, TX, Hospital Auth. RB,
Series 1989A (LOC) 5.63 8/01/2008 16,012
- ------------------------------------------------------------------------------------------------------------
Nursing/Continuing Care Centers
6,830 Bexar County, TX, Health Facilities
Development RB (LOC) 5.09 2/01/2022 6,830
10,000 Colorado Health Facilities Auth RB,
Series C (LOC) 6.55 11/01/2026 10,000
- ------------------------------------------------------------------------------------------------------------
16,830
- ------------------------------------------------------------------------------------------------------------
Oil - Domestic Integrated
32,418 IDA of California, Pollution Control RB,
Series 1996 (a) 6.15 10/01/2031 32,418
- ------------------------------------------------------------------------------------------------------------
Oil & Gas - Refining/Manufacturing
25,000 IDA of Gulf Coast RB, Series 1998 (LOC) 6.04 8/01/2028 25,000
45,000 IDB of the Parish of Calcasieu, LA,
Inc. Environmental RB, Series 1996 (LOC) 6.11 7/01/2026 45,000
29,215 Port Arthur, TX Navigation District, RB,
Series 1998 (a) 6.03 6/01/2018 29,215
- ------------------------------------------------------------------------------------------------------------
99,215
- ------------------------------------------------------------------------------------------------------------
Special Assessment/Tax/Fee
70,200 Anaheim California COP (LOC) 6.05 12/01/2022 70,200
Total put bonds (cost: $359,375) 359,375
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VARIABLE-RATE DEMAND NOTES (25.1%)
Asset-Backed Securities
13,756 Capital One Funding Corp., Notes,
Series 1995C (LOC) 5.94 10/01/2015 13,756
23,352 Capital One Funding Corp., Notes,
Series 1996E (LOC) 5.94 7/02/2018 23,352
- ------------------------------------------------------------------------------------------------------------
37,108
- ------------------------------------------------------------------------------------------------------------
Automobiles
8,110 Columbus, GA Development Auth. RB (LOC) 6.03 9/01/2013 8,110
- ------------------------------------------------------------------------------------------------------------
Auto Parts
14,400 Alabama IDA RB (Rehau Project) (LOC) 6.04 10/01/2019 14,400
9,255 Bardstown, KY, RB, Series 1994 (LOC) 5.95 6/01/2024 9,255
11,275 Bardstown, KY, RB, Series 1995 (LOC) 5.95 3/01/2025 11,275
- ------------------------------------------------------------------------------------------------------------
34,930
- ------------------------------------------------------------------------------------------------------------
Beverages - Alcoholic
11,560 J. J. Taylor Co., Inc., Bonds (LOC) 5.86 8/02/2004 11,560
- ------------------------------------------------------------------------------------------------------------
Beverages - Nonalcoholic
20,000 T3 Holdings, Inc., Bonds 5.82 5/01/2008 20,000
- ------------------------------------------------------------------------------------------------------------
Broadcasting - Radio & TV
43,700 New Jersey Economic Development Auth.
RB (NBGA) (a) 5.80 10/01/2021 43,700
- ------------------------------------------------------------------------------------------------------------
Buildings
7,300 San Bernardino County, CA, COP (LOC) 6.17 11/01/2025 7,300
- ------------------------------------------------------------------------------------------------------------
Electric Utilities
23,050 Sempra Energy Employee Stock Trust,
Senior Notes (a) 5.92 11/01/2014 23,050
- ------------------------------------------------------------------------------------------------------------
Electrical Equipment
14,000 Mississippi Business Finance Corp., RB,
Series 1998 (a) 5.80 2/01/2023 14,000
- ------------------------------------------------------------------------------------------------------------
Finance - Diversified
16,740 KBL Capital Fund, Inc., Installment #1
Notes, Series A (LOC) 5.79 5/01/2027 16,740
- ------------------------------------------------------------------------------------------------------------
Gaming Companies
21,000 Detroit, MI, Economic Development Corp.,
RB, Series 1999A (LOC) 5.87 5/01/2009 21,000
41,830 Detroit, MI, Economic Development Corp.,
RB, Series 1999C (LOC) 5.89 5/01/2009 41,830
- ------------------------------------------------------------------------------------------------------------
62,830
- ------------------------------------------------------------------------------------------------------------
General Obligations
15,530 San Bernardino County, CA, COP, (Glen
Helen Project), Series D (LOC) 5.87 3/01/2024 15,530
- ------------------------------------------------------------------------------------------------------------
Health Care - Specialized Services
13,735 American Health Care Centers, Inc.,
Notes (LOC) 5.85 2/01/2019 13,735
6,100 Mason City Clinic, P.C., IA, Bonds,
Series 1992 (LOC) 5.88 9/01/2022 6,100
8,495 Navigator Ventures, L.L.C., Notes,
Series 1997 (LOC) 5.79 5/01/2027 8,495
- ------------------------------------------------------------------------------------------------------------
28,330
- ------------------------------------------------------------------------------------------------------------
Hospitals
20,000 Crouse Health Hospital, Inc., RB,
Series 1996 (LOC) 5.87 7/01/2017 20,000
14,600 Dome Corp., Bonds, Series 1991 (LOC) 5.87 8/31/2016 14,600
11,700 Indiana Health Facility Financing
Auth., RB (LOC) 5.87 1/01/2019 11,700
15,000 Infirmary Health Systems
Special Care, RB (LOC) 5.90 1/01/2024 15,000
- ------------------------------------------------------------------------------------------------------------
61,300
- ------------------------------------------------------------------------------------------------------------
Leisure Time
8,135 Fox Valley Ice Arena, IL, RB,
Series 1997 (LOC) 5.86 7/01/2027 8,135
13,910 Greenville, SC Memorial Auditorium District
Public Facilities COP, Series 1996C (LOC) 5.95 9/01/2014 13,910
- ------------------------------------------------------------------------------------------------------------
22,045
- ------------------------------------------------------------------------------------------------------------
Lodging/Hotel
16,275 Central Michigan Inns, RB,
Series 1998A (LOC) 5.93 11/01/2028 16,275
- ------------------------------------------------------------------------------------------------------------
Manufacturing - Diversified Industries
12,500 HHH Investment Co., RB,
Series 1999 (LOC) 5.90 7/01/2029 12,500
- ------------------------------------------------------------------------------------------------------------
Manufacturing - Specialized
14,986 Loma Co. L.L.C. Floating Rate, Option
Notes (LOC) 5.94 12/01/2008 14,986
12,635 Savannah, GA, Economic Development
Auth., RB, Series 1998 (LOC) 6.04 6/01/2018 12,635
10,000 Southland Tube Inc., Notes,
Series 1999 (LOC) 6.02 6/01/2010 10,000
- ------------------------------------------------------------------------------------------------------------
37,621
- ------------------------------------------------------------------------------------------------------------
Multi-Family Housing
6,070 Arbor Properties, Inc., Notes (LOC) 5.75 6/01/2022 6,070
12,020 Arbor Station IV, L.L.C., Notes (LOC) 5.75 2/01/2024 12,020
- ------------------------------------------------------------------------------------------------------------
18,090
- ------------------------------------------------------------------------------------------------------------
Nursing/Continuing Care Centers
29,435 Lincolnwood Funding Corp. RB,
Series 1995A (LOC) 5.87 8/01/2015 29,435
10,105 Missouri Health and Educational
Facilities Auth. RB, Series 1996B (LOC) 5.89 12/01/2016 10,105
- ------------------------------------------------------------------------------------------------------------
39,540
- ------------------------------------------------------------------------------------------------------------
Paper & Forest Products
14,835 Bancroft Bag, Inc. Notes,
Series 1998 (LOC) 5.94 11/01/2008 14,835
10,000 Jasper County Economic Development, RB (LOC) 5.90 7/01/2029 10,000
10,915 Mac Papers Inc., Demand Bond (LOC) 5.86 8/03/2015 10,915
9,400 Tim Bar Corp. RB (LOC) 5.91 9/01/2010 9,400
13,900 Willacoochie, GA Development Auth. RB (LOC) 5.82 5/01/2027 13,900
- ------------------------------------------------------------------------------------------------------------
59,050
- ------------------------------------------------------------------------------------------------------------
Real Estate - Other
22,115 Chestnut Partnership Bond (LOC) 5.89 1/01/2029 22,115
14,715 First Illinois Funding Corp. Project, RB,
Series 1996 (LOC) 5.86 9/01/2026 14,715
14,220 HGR-1, L.L.C., Notes, Series 1996 (LOC) 5.93 9/15/2046 14,220
10,925 Houston County, GA, IDA, RB (LOC) 6.07 8/01/2012 10,925
12,000 JPV Capital LLC, Notes (LOC) 5.93 12/01/2039 12,000
23,585 LAM Funding L.L.C., Notes,
Series A (LOC) 5.79 12/15/2027 23,585
24,510 Mayfair At Great Neck, NY, Bonds (LOC) 6.10 1/01/2023 24,510
6,650 Physicians Real Estate, L.L.P., Notes,
Series 1998 (LOC) 5.88 2/01/2018 6,650
10,085 Pierce Memorial Baptist Home, Inc., Bonds,
Series 1999 (LOC) 5.88 10/01/2028 10,085
11,400 PRA at Glenwood Hills Corporate Centre,
L.L.C., Notes, Series 1997 (LOC) 5.79 8/01/2027 11,400
13,710 Sbar Piperno Co., RB, Series 1998 (LOC) 5.86 9/01/2012 13,710
7,960 Shepherd Capital, L.L.C., Notes,
Series 1997 (LOC) 5.93 7/15/2047 7,960
- ------------------------------------------------------------------------------------------------------------
171,875
- ------------------------------------------------------------------------------------------------------------
Retail - Department Stores
12,900 Belk Inc. RB, Series 1998 (LOC) 5.86 7/01/2008 12,900
- ------------------------------------------------------------------------------------------------------------
Special Assessment/Tax/Fee
19,750 County of Cuyahoga, OH, RB,
Series 1992B (LOC) 5.94 6/01/2022 19,750
- ------------------------------------------------------------------------------------------------------------
Textiles - Home Furnishings
10,000 Alabama IDA RB (Fieldcrest Project) (LOC) 5.75 7/01/2021 10,000
- ------------------------------------------------------------------------------------------------------------
Water/Sewer Utilities - Municipal
18,040 Hesperia, CA, Public Financing Auth. RB,
Series 1998A (LOC) 6.11 6/01/2026 18,040
- ------------------------------------------------------------------------------------------------------------
Total variable-rate demand notes (cost: $822,174) 822,174
- ------------------------------------------------------------------------------------------------------------
ADJUSTABLE-RATE NOTES (22.9%)
Automobiles
17,500 Daimler-Chrysler MTN, Series Q 5.85 3/20/2000 17,503
13,000 Daimler-Chrysler MTN, Series R 5.77 5/11/2000 13,000
- ------------------------------------------------------------------------------------------------------------
30,503
- ------------------------------------------------------------------------------------------------------------
Banks - Major Regional
50,000 American Express Centurion Bank, Notes 5.75 5/08/2000 50,000
15,840 Long Lane Master Trust II, Notes (a), (b) 6.22 6/26/2000 15,840
60,000 National Bank of Commerce, CD 5.91 3/30/2000 60,004
25,000 National Bank of Commerce, CD 5.99 9/18/2000 25,000
30,000 Northern Rock PLC, Notes (a) 6.11 6/14/2000 30,000
30,000 Southtrust Bank N.A., Notes 5.77 7/24/2000 29,986
25,000 Southtrust Bank N.A., Notes 6.12 11/08/2000 24,991
50,000 Union Bank of California, CD 6.04 4/17/2000 50,000
34,000 Zions Bancorp, Senior Notes (a) 6.29 10/27/2000 34,000
- ------------------------------------------------------------------------------------------------------------
319,821
- ------------------------------------------------------------------------------------------------------------
Banks - Money Center
40,000 Societe Generale, CD 5.76 3/03/2000 39,998
40,000 Societe Generale, CD 5.77 11/09/2000 39,976
- ------------------------------------------------------------------------------------------------------------
79,974
- ------------------------------------------------------------------------------------------------------------
Electric Utilities
15,000 National Rural Utilities Corp., MTN 5.83 8/02/2000 14,999
- ------------------------------------------------------------------------------------------------------------
Finance - Consumer
35,000 Associates Corp. of N. A., Senior Notes 5.69 3/20/2000 34,997
40,000 Ford Motor Credit Co., MTN 6.37 6/08/2000 40,041
30,000 Ford Motor Credit Co., MTN 6.17 10/02/2000 29,989
25,000 Household Finance Corp., MTN 6.21 8/14/2000 25,008
- ------------------------------------------------------------------------------------------------------------
130,035
- ------------------------------------------------------------------------------------------------------------
Finance - Diversified
30,000 General Electric Capital Corp., MTN,
Series A 5.98 4/13/2000 30,000
25,000 General Electric Capital Corp., MTN,
Series A 6.04 5/26/2000 25,000
- ------------------------------------------------------------------------------------------------------------
55,000
- ------------------------------------------------------------------------------------------------------------
Natural Gas Utilities
25,000 Northern Illinois Gas Co., Senior Notes (a) 6.11 1/29/2001 25,000
- ------------------------------------------------------------------------------------------------------------
Oil - International Integrated
45,000 Texaco Capital Inc., MTN, Series 1999 6.01 5/03/2000 44,991
- ------------------------------------------------------------------------------------------------------------
Telephones
50,000 GTE Corp. Debentures 6.14 1/05/2001 49,964
- ------------------------------------------------------------------------------------------------------------
Total adjustable-rate notes (cost: $750,287) 750,287
- ------------------------------------------------------------------------------------------------------------
Total investments (cost: $3,229,989) $3,229,989
============================================================================================================
</TABLE>
PORTFOLIO SUMMARY BY INDUSTRY
-----------------------------
Banks - Major Regional 20.0%
Finance - Consumer 12.7
Banks - Money Center 11.0
Finance - Diversified 5.4
Real Estate - Other 5.2
Electric Utilities 5.0
Oil & Gas - Refining/Manufacturing 3.0
Special Assessment/Tax/Fee 2.7
Hospitals 2.4
Telephones 2.2
Leasing 2.1
Automobiles 1.9
Gaming Companies 1.9
Asset-Backed Securities 1.9
Paper & Forest Products 1.8
Nursing/Continuing Care Centers 1.7
Computer - Hardware 1.4
Electrical Equipment 1.4
Oil - International Integrated 1.4
Broadcasting - Radio & TV 1.3
Manufacturing - Specialized 1.1
Auto Parts 1.1
Electronics - Instrumentation 1.1
Electric/Gas Utilities - Municipal 1.0
Oil - Domestic Integrated 1.0
Other 6.9
----
Total 98.6%
====
USAA MONEY MARKET FUND
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2000
(Unaudited)
GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
Investments in U.S. dollar denominated securities issued by domestic branches or
subsidiaries of foreign banks or companies were 8.2% of net assets at January
31, 2000.
SPECIFIC NOTES
(a) Security is exempt from registration under the Securities Act of 1933. Any
resale of this security in the United States may occur in an exempt transaction
to a qualified institutional buyer as defined by the Rule 144A.
(b) Illiquid securities valued using methods determined by the Fund's investment
manager under the general supervision of the Board of Directors. At January 31,
2000, these securities represented 1.8% of the net assets.
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2000
(Unaudited)
ASSETS
Investments in securities $3,229,989
Cash 20,483
Receivables:
Capital shares sold 19,802
Interest 32,247
Securities sold 401
----------
Total assets 3,302,922
----------
LIABILITIES
Capital shares redeemed 27,065
USAA Investment Management Company 755
USAA Transfer Agency Company 475
Accounts payable and accrued expenses 69
Dividends on capital shares 402
----------
Total liabilities 28,766
----------
Net assets applicable to capital shares outstanding $3,274,156
==========
REPRESENTED BY:
Paid-in capital $3,274,156
==========
Capital shares outstanding 3,274,156
==========
Authorized shares of $.01 par value 4,700,000
==========
Net asset value, redemption price, and offering price per share $ 1.00
==========
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2000
(Unaudited)
Net investment income:
Interest income $89,243
-------
Expenses:
Management fees 3,770
Transfer agent's fees 2,707
Custodian's fees 402
Postage 278
Shareholder reporting fees 106
Directors' fees 1
Registration fees 139
Professional fees 50
Other 36
-------
Total expenses before reimbursement 7,489
Expenses reimbursed (331)
-------
Total expenses after reimbursement 7,158
-------
Net investment income $82,085
=======
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended January 31, 2000,
and year ended July 31, 1999
(Unaudited)
1/31/00 7/31/99
---------------------------
From operations:
Net investment income $ 82,085 $ 134,940
---------------------------
Distributions to shareholders from:
Net investment income (82,085) (134,940)
---------------------------
From capital share transactions:
Proceeds from shares sold 2,512,922 4,461,879
Shares issued for dividends reinvested 79,332 130,534
Cost of shares redeemed (2,329,111) (4,072,873)
---------------------------
Increase in net assets from capital share
transactions 263,143 519,540
---------------------------
Net increase in net assets $ 263,143 519,540
Net assets:
Beginning of period 3,011,013 2,491,473
---------------------------
End of period $ 3,274,156 $ 3,011,013
===========================
Change in shares outstanding:
Shares sold 2,512,922 4,461,879
Shares issued for dividends reinvested 79,332 130,534
Shares redeemed $(2,329,111) $(4,072,873)
---------------------------
Increase in shares outstanding 263,143 519,540
===========================
See accompanying notes to financial statements.
USAA MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
January 31, 2000
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940, as amended, is a diversified, open-end management investment
company incorporated under the laws of Maryland consisting of 13 separate funds.
The information presented in this semiannual report pertains only to the USAA
Money Market Fund (the Fund). The Fund's investment objective is the highest
income consistent with preservation of capital and maintenance of liquidity.
USAA Investment Management Company (the Manager) seeks to achieve this objective
by investing the Fund's assets principally in high-quality, U.S.
dollar-denominated, short-term debt instruments that present minimal credit risk
and comply with strict SEC guidelines applicable to money market funds.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Pursuant to Rule 2a-7 of the Securities and Exchange Commission, securities
in the Fund are stated at amortized cost, which approximates market value.
Repurchase agreements are valued at cost.
2. Securities 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.
C. Investments in securities - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. Interest
income is recorded on the accrual basis. Discounts and premiums on securities
are amortized over the life of the respective securities.
D. Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that may affect the reported amounts in the financial
statements.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities.
Subject to availability under 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. Each committed line of credit is also subject to a facility fee. CAPCO
charges an annual facility fee of up to .08% of the committed facility, and Bank
of America charges an annual facility fee of .09% of the committed facility. The
Fund had no borrowings under any of these agreements during the six-month period
ended January 31, 2000.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made in the succeeding fiscal year or as
otherwise required to avoid the payment of federal taxes.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the
six-month period ended January 31, 2000, were $9.4 billion and $9.2 billion,
respectively.
(5) TRANSACTIONS WITH MANAGER
A. Management fees - USAA Investment Management Company carries out the Fund's
investment policies and manages the Fund's portfolio. The Fund's management fees
are computed at .24% of its annual average net assets.
The Manager has voluntarily agreed to limit the annual expenses of the Fund to
.45% of its annual average net assets. Because the Fund's estimated (annualized)
expenses for the six-month period ended January 31, 2000, exceeded .45%, the
Manager has absorbed a portion of the Fund's expenses to reduce the Fund's
expense ratio to .45%. Effective December 1, 1999, the limitation was increased
to .46% of the Fund's annual average net assets.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Fund based on an annual charge of $28.50 per shareholder account plus
out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing, best-efforts basis. The
Manager receives no commissions or fees for this service.
(6) TRANSACTIONS WITH AFFILIATES
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At January 31, 2000, the Association and its affiliates
owned 3.0 million shares (.09%) of the Fund.
Certain directors and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated directors or Fund officers
received any compensation from the Fund.
(7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Six-month
Period Ended
January 31, Year Ended July 31,
------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .03 .05 .05 .05 .05 .05
Distributions from net
investment income (.03) (.05) (.05) (.05) (.05) (.05)
------------------------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==========================================================================================
Total return (%) * 2.65 4.95 5.45 5.28 5.41 5.49
Net assets at
end of period (000) $3,274,156 $3,011,013 $2,491,473 $2,161,691 $1,828,749 $1,540,055
Ratio of expenses to
average net assets (%) .45(a),(b) .45 .45 .45 .45 .45
Ratio of expenses to
average net
assets excluding
reimbursement (%) .48(a) .48 .48 .49 .51 .46
Ratio of net investment
income to average
net assets (%) 5.22(a) 4.83 5.32 5.16 5.27 5.44
</TABLE>
*Assumes reinvestment of all dividend income distributions during the period.
(a)Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b)Effective December 1, 1999, the Manager voluntarily agreed to limit the
Fund's expense ratio to .46% of the Fund's average annual net assets.
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
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 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
