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 8
Notes to Portfolio of Investments 16
Statement of Assets and Liabilities 17
Statement of Operations 18
Statements of Changes in Net Assets 19
Notes to Financial Statements 20
Important Information
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
This report is for the information of the shareholders and others who have
received a copy of the currently effective prospectus of the USAA 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) 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 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 GROWTH FUND
OBJECTIVE: Long-term growth of capital with secondary objectives of regular
income and conservation of principal.
TYPES OF INVESTMENTS: Prior to March 1, 2000, the Fund invested principally in
stocks that, at the time of purchase, were considered out-of-favor and
undervalued. Effective March 1, 2000, the Fund will invest principally in equity
securities of companies that are, or have the prospect of becoming, one of the
dominant companies within its industry and that have above-average growth in
revenues and earnings per share.
- --------------------------------------------------------------------------------
7/31/99 1/31/00
================================================================================
Net Assets $1,683.0 Million $1,779.4 Million
Net Asset Value Per Share $24.03 $22.97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns as of 1/31/00
================================================================================
7/31/99 to 1/31/00 1 Year 5 Years 10 Years
7.00%(+) 9.64% 18.89% 15.14%
- --------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Total return equals income yield plus share price change and assumes
reinvestment of all dividends and capital gains distributions. No adjustment has
been made for taxes payable by shareholders on their reinvested income dividends
and capital gains distributions. The performance data quoted represent past
performance and are not an indication of future results. Investment return and
principal value of an investment will fluctuate, and an investor's shares, when
redeemed, may be worth more or less than their original cost.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA Growth Fund, the S&P 500 Index,
and the Lipper Growth Funds Average for the period of 01/31/90 through
01/31/2000. The data points from the graph are as follows:
USAA Lipper Growth
Growth Fund S&P 500 Index Funds Average
----------- ------------- -------------
01/31/90 $10,000 $10,000 $10,000
07/31/90 10,900 11,014 11,055
01/31/91 10,981 10,837 10,947
07/31/91 12,079 12,416 12,637
01/31/92 13,317 13,291 14,147
07/31/92 13,682 14,001 14,075
01/31/93 15,080 14,695 15,501
07/31/93 15,257 15,221 15,920
01/31/94 16,242 16,584 17,737
07/31/94 15,900 16,005 16,706
01/31/95 17,237 16,671 16,999
07/31/95 20,106 20,177 20,927
01/31/96 22,382 23,109 22,726
07/31/96 22,608 23,517 23,031
01/31/97 26,902 29,193 27,993
07/31/97 32,211 35,773 33,121
01/31/98 27,558 37,046 33,633
07/31/98 30,630 42,679 37,711
01/31/99 37,339 49,090 42,911
07/31/99 38,262 51,301 44,544
01/31/00 40,940 54,166 50,904
Data from 1/31/90 through 1/31/00
The graph illustrates the comparison of a $10,000 hypothetical investment in the
USAA Growth Fund to the S&P 500 Index and the Lipper Growth Funds Average, an
average performance level of all growth funds, as reported by Lipper Analytical
Services, Inc., an independent organization that monitors the performance of
mutual funds. The S&P 500 Index is an unmanaged index representing the weighted
average performance of a group of 500 widely held, publicly traded stocks. It is
not possible to invest directly in the S&P 500 Index.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: DAVID G. PARSONS, CFA, APPEARS HERE.]
PERFORMANCE REVIEW
The top story of the past six months has been technology. Of the major market
sectors, technology alone outperformed the S&P 500 Index. In fact, most sectors
were down over the period. The USAA Growth Fund mirrored this phenomenon.
Generally, technology and biotechnology carried the Fund. Over the course of the
period, our technology weighting rose from 26% to 38% -- mainly due to price
appreciation.
For the six-month period ending January 31, 2000, the Fund's total return was 7%
versus 5.58% for the S&P 500 Index and 13.03% for the Lipper Growth Funds
Average. This performance is primarily attributable to the fact that we were
overweighted in technology versus the S&P 500 Index, but apparently
underweighted versus competing growth funds.
During the past six months, the Fund remained overweighted against the S&P 500
Index in the financial and health care sectors, both of which performed poorly
over the period. Nevertheless, we persisted in our commitment to these areas
because, outside of technology and telecommunication services, they represented
the most important growth engines of the U.S. economy.
OUTLOOK
We remain concerned about rising interest rates and high valuations, especially
in the technology sector. However, the strong U.S. economy and strong earnings
announcements continue to overshadow these concerns and drive the market higher.
The beauty of a diversified portfolio is that if we do witness a shift from the
technology sector or any other sector, we hope to be invested in other growing
areas of the economy that will be attractive to investors and may benefit the
performance of the Fund.
Past performance is no guarantee of future results.
Respectfully submitted on February 4, 2000.
- --------------------------------------------------------------------------------
The message above reflects the six-month reporting period ending January 31,
2000. Effective March 1, 2000, Patrick O'Hare will assume management of the USAA
Growth Fund. The strategy he will use concentrates in equity securities of
companies that are, or have the prospect of becoming, one of the dominant
companies within its industry. He will primarily invest in companies with
above-average growth in revenues and earnings per share.
Top Ten Equity Holdings Top Ten Industries
(% of Net Assets) (% of Net Assets)
- --------------------------------- --------------------------------------
Cisco Systems, Inc. 3.0 Communications Equipment 9.2
Intel Corp. 2.9 Computer Software & Service 8.4
General Electric Co. 2.6 Computer-Hardware 7.5
Microsoft Corp. 2.5 Drugs 6.2
Nortel Networks Corp. 2.3 Finance-Diversified 5.4
Merck & Co., Inc. 2.2 Health Care-Diversified 4.9
IBM Corp. 2.1 Computer-Networking 4.2
Wal-Mart Stores, Inc. 2.1 Telecommunications-Long-Distance 4.2
Lucent Technologies, Inc. 2.0 Electronics-Semiconductors 3.9
Oracle Corp. 2.0 Banks-Major Regional 3.3
- --------------------------------- --------------------------------------
See page 8 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 GROWTH FUND
PORTFOLIO OF INVESTMENTS
January 31, 2000
(Unaudited)
Market
Number Value
of Shares Security (000)
- --------------------------------------------------------------------------------
COMMON STOCKS (99.7%)
Aerospace/Defense (0.1%)
100,000 Lockheed Martin Corp. $ 1,875
- --------------------------------------------------------------------------------
Air Freight (0.4%)
40,000 CNF Transportation, Inc. 1,197
110,000 Fedex Corp. * 4,352
34,600 United Parcel Service "B" 2,059
- --------------------------------------------------------------------------------
7,608
- --------------------------------------------------------------------------------
Airlines (0.3%)
300,000 Southwest Airlines Co. 4,781
- --------------------------------------------------------------------------------
Aluminum (0.1%)
20,000 Alcoa, Inc. 1,394
- --------------------------------------------------------------------------------
Banks - Major Regional (3.3%)
210,000 Bank Of New York Co., Inc. 8,531
200,000 Bank One Corp. 5,963
148,000 Fleet Boston Financial Corp. 4,653
200,000 Mellon Financial Corp. 6,862
200,000 National City Corp. 4,325
130,000 Northern Trust Corp. 7,849
86,000 PNC Bank Corp. 4,128
70,000 State Street Corp. 5,613
290,000 Wells Fargo & Co. 11,600
- --------------------------------------------------------------------------------
59,524
- --------------------------------------------------------------------------------
Banks - Money Center (2.0%)
371,755 Bank of America Corp. 18,007
192,000 First Union Corp. 6,444
90,000 J. P. Morgan & Co., Inc. 11,053
- --------------------------------------------------------------------------------
35,504
- --------------------------------------------------------------------------------
Beverages - Alcoholic (0.5%)
143,400 Anheuser-Busch Companies, Inc. 9,680
- --------------------------------------------------------------------------------
Beverages - Nonalcoholic (1.0%)
418,808 Cadbury Schweppes plc ADR 9,790
225,000 PepsiCo, Inc. 7,678
- --------------------------------------------------------------------------------
17,468
- --------------------------------------------------------------------------------
Biotechnology (3.1%)
516,000 Amgen, Inc. * 32,863
100,000 Biogen, Inc. * 8,625
40,000 Genetech, Inc. * 5,620
30,000 Genzyme Corp. * 1,560
50,000 Med Immune, Inc. * 7,300
- --------------------------------------------------------------------------------
55,968
- --------------------------------------------------------------------------------
Broadcasting - Radio & TV (1.2%)
318,800 CBS Corp. * 18,590
32,200 Clear Channel Communications, Inc. * 2,781
- --------------------------------------------------------------------------------
21,371
- --------------------------------------------------------------------------------
Chemicals (0.2%)
70,000 Du Pont (E. I.) De Nemours & Co. 4,130
- --------------------------------------------------------------------------------
Chemicals - Diversified (0.4%)
200,000 Monsanto Co. 7,063
- --------------------------------------------------------------------------------
Communication Equipment (9.2%)
140,000 ADC Telecommunications, Inc. * 9,231
100,000 CIENA Corp. * 6,563
40,000 JDS Uniphase Corp. * 8,157
638,000 Lucent Technologies, Inc. 35,249
200,000 Motorola, Inc. 27,350
88,000 Nokia Corp. ADR 16,104
430,000 Nortel Networks Corp. 41,119
75,000 Scientific Atlanta Inc. 5,780
250,000 Tellabs, Inc. * 13,500
- --------------------------------------------------------------------------------
163,053
- --------------------------------------------------------------------------------
Computer - Hardware (7.5%)
950,000 Compaq Computer Corp. 26,006
274,400 Dell Computer Corp. * 10,547
150,000 Gateway 2000, Inc. * 9,178
255,000 Hewlett-Packard Co. 27,604
340,000 IBM Corp. 38,144
290,000 Sun Microsystems, Inc. * 22,783
- --------------------------------------------------------------------------------
134,262
- --------------------------------------------------------------------------------
Computer - Networking (4.2%)
200,000 3Com Corp. * 10,150
495,000 Cisco Systems, Inc. * 54,202
400,000 Newbridge Networks Corp. * 11,325
- --------------------------------------------------------------------------------
75,677
- --------------------------------------------------------------------------------
Computer - Peripherals (1.2%)
124,800 EMC Corp. * 13,291
100,000 Quantum Corp.-DLT & Storage System * 963
50,000 Quantum Corp.-Hard Disk Drive * 369
162,500 Seagate Technology, Inc. * 6,510
- --------------------------------------------------------------------------------
21,133
- --------------------------------------------------------------------------------
Computer Software & Service (8.4%)
453,000 America Online, Inc. * 25,793
80,000 BMC Software, Inc. * 3,030
200,000 Computer Associates International, Inc. 13,737
120,000 Compuware Corp. * 2,543
35,000 Lycos, Inc. * 2,570
452,800 Microsoft Corp. * 44,318
175,000 Novell, Inc. * 5,841
700,000 Oracle Corp. * 34,967
300,000 Parametric Technology Corp. * 6,431
300,000 PeopleSoft, Inc. * 6,750
80,000 Synopsys, Inc. * 3,695
- --------------------------------------------------------------------------------
149,675
- --------------------------------------------------------------------------------
Distributions - Food/Health (0.8%)
25,000 Bergen Brunswig Corp. 164
400,000 McKesson HBOC, Inc. 8,225
185,000 Sysco Corp. 6,579
- --------------------------------------------------------------------------------
14,968
- --------------------------------------------------------------------------------
Drugs (6.2%)
300,000 Eli Lilly & Co. 20,062
500,000 Merck & Co., Inc. 39,406
100,000 Mylan Laboratories, Inc. 2,663
500,000 Pfizer, Inc. 18,188
370,000 Pharmacia & Upjohn, Inc. 17,390
300,000 Schering-Plough Corp. 13,200
- --------------------------------------------------------------------------------
110,909
- --------------------------------------------------------------------------------
Electrical Equipment (3.0%)
340,200 General Electric Co. 45,374
180,000 Honeywell International, Inc. 8,640
- --------------------------------------------------------------------------------
54,014
- --------------------------------------------------------------------------------
Electronics - Semiconductors (3.9%)
150,000 Advanced Micro Devices, Inc. * 5,438
520,000 Intel Corp. 51,447
30,000 Micron Technology, Inc. 1,866
100,000 Texas Instruments, Inc. 10,787
- --------------------------------------------------------------------------------
69,538
- --------------------------------------------------------------------------------
Entertainment (1.3%)
132,600 Time Warner, Inc. 10,600
350,000 Walt Disney Co. 12,709
- --------------------------------------------------------------------------------
23,309
- --------------------------------------------------------------------------------
Equipment - Semiconductors (1.1%)
60,000 Applied Materials, Inc. * 8,235
60,000 KLA-Tencor Corp. * 3,517
30,000 Lam Research Corp. * 3,746
45,000 Novellus Systems, Inc. * 2,211
30,000 Teradyne, Inc. * 1,943
- --------------------------------------------------------------------------------
19,652
- --------------------------------------------------------------------------------
Finance - Consumer (0.7%)
100,000 Countrywide Credit Industries, Inc. 2,600
100,000 Household International, Inc. 3,525
226,100 MBNA Corp. 5,709
- --------------------------------------------------------------------------------
11,834
- --------------------------------------------------------------------------------
Finance - Diversified (5.4%)
86,900 American Express Co. 14,322
100,000 Associates First Capital Corp. "A" 2,000
572,575 Citigroup, Inc. 32,887
272,300 Fannie Mae 16,321
225,000 Freddie Mac 11,292
250,000 Morgan Stanley Dean Witter 16,563
120,000 SLM Holding Corp. 4,673
- --------------------------------------------------------------------------------
98,058
- --------------------------------------------------------------------------------
Foods (1.2%)
75,000 Bestfoods 3,263
75,000 ConAgra, Inc. 1,603
75,000 General Mills, Inc. 2,339
75,000 H.J. Heinz Co. 2,789
100,000 Hershey Foods Corp. 4,250
75,000 Quaker Oats Co. 4,453
110,000 Sara Lee Corp. 2,028
- --------------------------------------------------------------------------------
20,725
- --------------------------------------------------------------------------------
Gaming Companies (0.0%) (a)
40,000 Mirage Resorts, Inc. * 500
- --------------------------------------------------------------------------------
Health Care - Diversified (4.9%)
190,000 Abbott Laboratories 6,199
440,000 American Home Products Corp. 20,707
300,000 Bristol-Myers Squibb Co. 19,800
150,000 Ivax Corp. * 4,987
291,950 Johnson & Johnson, Inc. 25,126
100,000 Warner-Lambert Co. 9,494
- --------------------------------------------------------------------------------
86,313
- --------------------------------------------------------------------------------
Health Care - HMOs (0.2%)
60,000 United Healthcare Corp. 3,180
- --------------------------------------------------------------------------------
Hospitals (0.2%)
100,000 Columbia/HCA Healthcare Corp. 2,732
75,000 Tenet Healthcare Corp. * 1,706
- --------------------------------------------------------------------------------
4,438
- --------------------------------------------------------------------------------
Household Products (2.8%)
150,000 Colgate-Palmolive Co. 8,888
275,300 Kimberly-Clark Corp. 17,051
229,600 Procter & Gamble Co. 23,161
- --------------------------------------------------------------------------------
49,100
- --------------------------------------------------------------------------------
Housewares (0.2%)
120,000 Newell Rubbermaid, Inc. 3,600
- --------------------------------------------------------------------------------
Insurance Brokers (0.5%)
91,350 Marsh & McLennan Cos., Inc. 8,587
- --------------------------------------------------------------------------------
Insurance - Life/Health (0.4%)
71,300 American General Corp. 4,381
45,000 Conseco, Inc. 686
50,000 Reliastar Financial Corp. 1,484
- --------------------------------------------------------------------------------
6,551
- --------------------------------------------------------------------------------
Insurance - Multiline Companies (1.4%)
236,000 American International Group, Inc. 24,573
- --------------------------------------------------------------------------------
Insurance - Property/Casualty (0.5%)
131,200 Allstate Corp. 3,042
60,000 MGIC Investment Corp. 2,794
34,900 Progressive Corp. 2,172
- --------------------------------------------------------------------------------
8,008
- --------------------------------------------------------------------------------
Internet Services (2.1%)
70,000 Amazon.com, Inc. * 4,519
26,000 Ebay, Inc. * 3,902
40,000 Exodus Communications, Inc. * 4,595
34,000 Inktomi Corp. * 3,381
55,000 PSINet, Inc. * 4,393
50,000 Yahoo! Inc. * 16,103
- --------------------------------------------------------------------------------
36,893
- --------------------------------------------------------------------------------
Investment Banks/Brokerage (1.4%)
150,000 Charles Schwab Corp. 5,409
140,000 E-Trade Group, Inc. * 2,949
28,900 Goldman Sachs Group, Inc. 2,648
40,000 Lehman Brothers Holdings, Inc. 2,860
125,000 Merrill Lynch & Co., Inc. 10,844
- --------------------------------------------------------------------------------
24,710
- --------------------------------------------------------------------------------
Investment Management (1.2%)
250,000 Franklin Resources, Inc. 8,922
300,000 T. Rowe Price Associates, Inc. 11,662
- --------------------------------------------------------------------------------
20,584
- --------------------------------------------------------------------------------
Leisure Time (0.0%) (a)
40,000 Mattel, Inc. 418
- --------------------------------------------------------------------------------
Lodging/Hotel (0.1%)
30,000 Marriott International, Inc. "A" 932
- --------------------------------------------------------------------------------
Manufacturing - Diversified Industries (1.0%)
80,000 Minnesota Mining & Manufacturing Co. 7,490
225,000 Tyco International Ltd. 9,619
- --------------------------------------------------------------------------------
17,109
- --------------------------------------------------------------------------------
Medical Products & Supplies (1.2%)
300,000 Becton, Dickinson & Co. 7,856
70,000 Guidant Corp. * 3,684
200,000 Medtronic, Inc. 9,150
- --------------------------------------------------------------------------------
20,690
- --------------------------------------------------------------------------------
Oil & Gas - Drilling/Equipment (0.8%)
100,000 Baker Hughes, Inc. 2,462
110,000 Halliburton Co. 3,960
125,000 Schlumberger Ltd. 7,633
24,200 Transocean Sedco Forex, Inc. 770
- --------------------------------------------------------------------------------
14,825
- --------------------------------------------------------------------------------
Oil & Gas - Exploration & Production (0.5%)
125,000 Anadarko Petroleum Corp. 4,102
150,000 Apache Corp. 5,475
- --------------------------------------------------------------------------------
9,577
- --------------------------------------------------------------------------------
Personal Care (0.5%)
212,600 Gillette Co. 7,999
- --------------------------------------------------------------------------------
Photography - Imaging (0.3%)
260,000 Xerox Corp. 5,428
- --------------------------------------------------------------------------------
Publishing/Newspapers (0.3%)
70,000 Gannett, Inc. 4,865
25,000 Tribune Co. 1,055
- --------------------------------------------------------------------------------
5,920
- --------------------------------------------------------------------------------
Retail - Building Supplies (1.2%)
375,000 Home Depot, Inc. 21,234
- --------------------------------------------------------------------------------
Retail - Computers & Electronics (0.2%)
75,000 Best Buy Co., Inc. * 3,581
- --------------------------------------------------------------------------------
Retail - Department Stores (0.6%)
60,000 Kohls Corp. * 4,208
90,300 Target Corp. * 5,965
- --------------------------------------------------------------------------------
10,173
- --------------------------------------------------------------------------------
Retail - Drugs (0.0%) (a)
50,000 Rite Aid Corp. 353
- --------------------------------------------------------------------------------
Retail - General Merchandising (2.1%)
680,200 Wal-Mart Stores, Inc. 37,241
- --------------------------------------------------------------------------------
Retail - Specialty Apparel (0.4%)
155,500 Gap, Inc. 6,949
- --------------------------------------------------------------------------------
Savings & Loan Holding Co. (0.2%)
150,000 Washington Mutual, Inc. 3,806
- --------------------------------------------------------------------------------
Services - Computer Systems (0.5%)
120,000 Electronic Data Systems Corp. 8,115
- --------------------------------------------------------------------------------
Services - Data Processing (0.4%)
150,000 First Data Corp. 7,359
- --------------------------------------------------------------------------------
Telecommunications - Cellular/Wireless (0.5%)
80,000 NEXTEL Communications, Inc. * 8,510
- --------------------------------------------------------------------------------
Telecommunications - Long-Distance (4.2%)
500,000 AT&T Corp. 26,375
175,000 Global Crossing Ltd. * 8,881
80,000 Level 3 Communications, Inc. * 9,435
212,500 MCI WorldCom, Inc. * 9,762
500,000 Qwest Communications International, Inc. * 19,687
- --------------------------------------------------------------------------------
74,140
- --------------------------------------------------------------------------------
Telephones (2.1%)
117,200 BellSouth Corp. 5,516
350,000 GTE Corp. 25,659
154,900 SBC Communications Corp. 6,680
- --------------------------------------------------------------------------------
37,855
- --------------------------------------------------------------------------------
Tobacco (0.1%)
50,000 Philip Morris Cos., Inc. 1,047
- --------------------------------------------------------------------------------
Total common stocks (cost: $1,341,348) 1,773,471
- --------------------------------------------------------------------------------
Principal
Amount
(000)
- -------------
SHORT-TERM (0.2%)
Commercial Paper
$ 4,737 General Electric Capital Corp., 5.81%, 2/01/2000
(cost: $4,737) 4,737
- --------------------------------------------------------------------------------
Total investments (cost: $1,346,085) $1,778,208
================================================================================
USAA GROWTH FUND
NOTES TO PORTFOLIO OF INVESTMENTS
January 31, 2000
(Unaudited)
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 5.3% of net assets at January 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
(a) Represents less than 0.1% of net assets.
* Non-income producing.
See accompanying notes to financial statements.
<TABLE>
USAA GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
January 31, 2000
(Unaudited)
<S> <C>
ASSETS
Investments in securities, at market value (identified cost of $1,346,085) $1,778,208
Cash 634
Receivables:
Capital shares sold 471
Dividends and interest 944
Securities sold 21,552
----------
Total assets 1,801,809
----------
LIABILITIES
Securities purchased 18,268
Capital shares redeemed 2,758
USAA Investment Management Company 1,149
USAA Transfer Agency Company 236
Accounts payable and accrued expenses 32
----------
Total liabilities 22,443
----------
Net assets applicable to capital shares outstanding $1,779,366
==========
REPRESENTED BY:
Paid-in capital $1,334,356
Accumulated undistributed net investment loss (368)
Accumulated net realized gain on investments 13,255
Net unrealized appreciation of investments 432,123
----------
Net assets applicable to capital shares outstanding $1,779,366
==========
Capital shares outstanding 77,475
==========
Authorized shares of $.01 par value 150,000
==========
Net asset value, redemption price, and offering price per share $ 22.97
==========
See accompanying notes to financial statements.
</TABLE>
USAA GROWTH FUND
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended January 31, 2000
(Unaudited)
Net investment income:
Income:
Dividends (net of foreign taxes withheld of $27) $ 8,781
Interest 666
--------
Total income 9,447
--------
Expenses:
Management fees 6,518
Transfer agent's fees 1,381
Custodian's fees 113
Postage 142
Shareholder reporting fees 28
Directors' fees 1
Registration fees 61
Professional fees 50
Other 2
--------
Total expenses 8,296
--------
Net investment income 1,151
--------
Net realized and unrealized gain on investments:
Net realized gain 59,717
Change in net unrealized appreciation/depreciation 56,138
--------
Net realized and unrealized gain 115,855
--------
Increase in net assets resulting from operations $117,006
========
See accompanying notes to financial statements.
USAA GROWTH 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 $ 1,151 $ 2,803
Net realized gain on investments 59,717 145,928
Change in net unrealized appreciation/depreciation
of investments 56,138 185,012
------------------------
Increase in net assets
resulting from operations 117,006 333,743
------------------------
Distributions to shareholders from:
Net investment income (3,041) (1,913)
------------------------
Net realized gains (180,145) (51,220)
------------------------
From capital share transactions:
Proceeds from shares sold 112,706 237,515
Shares issued for dividends reinvested 179,362 52,132
Cost of shares redeemed (129,530) (290,822)
------------------------
Increase (decrease) in net assets
from capital share transactions 162,538 (1,175)
------------------------
Net increase in net assets 96,358 279,435
Net assets:
Beginning of period 1,683,008 1,403,573
------------------------
End of period $1,779,366 $1,683,008
========================
Undistributed net investment income (loss)
included in net assets:
End of period $ (368) $ 1,522
========================
Change in shares outstanding:
Shares sold 4,843 10,772
Shares issued for dividends reinvested 8,190 2,811
Shares redeemed (5,583) (13,593)
------------------------
Increase (decrease) in shares outstanding 7,450 (10)
========================
See accompanying notes to financial statements.
USAA GROWTH 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
Growth Fund (the Fund). The Fund's primary investment objective is long-term
growth of capital with secondary objectives of regular income and conservation
of principal. Prior to March 1, 2000, USAA Investment Management Company (the
Manager) sought to achieve the Fund's objectives by investing principally in
stocks that, at the time of purchase, were considered out-of-favor and
undervalued. Effective March 1, 2000, the Fund will invest principally in equity
securities of companies that are, or have the prospect of becoming, one of the
dominant companies within its industry and that have above-average growth in
revenues and earnings per share.
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.
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 which cannot be valued by the methods set forth above, and all
other assets, are valued in good faith at fair value, using methods determined
by the Manager under the general supervision of the Board of Directors.
B. Federal taxes - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required.
C. Investments in securities - Security transactions are accounted for on the
date the securities are purchased or sold (trade date). Gain or loss from sales
of investment securities is computed on the identified cost basis. 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. 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
Distributions of net investment income and 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 of securities, excluding short-term
securities, for the six-month period ended January 31, 2000, were $607.9 million
and $616.3 million, respectively.
Gross unrealized appreciation and depreciation of investments as of January 31,
2000, were $528.8 million and $96.7 million, 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 .75% of its 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 $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.
D. Brokerage services - USAA Brokerage Services, a discount brokerage service
of the Manager, may execute portfolio transactions for the Fund. The amount of
brokerage commissions paid to USAA Brokerage Services during the six-month
period ended January 31, 2000, was $20,706.
(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.
<TABLE>
(7) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<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 $ 24.03 $ 20.04 $ 23.66 $ 20.05 $ 19.06 $ 17.63
Net investment income .02 .04 .01 .24 .33 .26
Net realized and
unrealized gain (loss) 1.48 4.72 (1.31) 6.92 1.92 3.95
Distributions from net
investment income (.04) (.03) (.09) (.34) (.29) (.27)
Distributions of realized
capital gains (2.52) (.74) (2.23) (3.21) (.97) (2.51)
------------------------------------------------------------------------------
Net asset value at
end of period $ 22.97 $ 24.03 $ 20.04 $ 23.66 $ 20.05 $ 19.06
==============================================================================
Total return (%) * 7.00 24.92 (4.91) 42.48 12.44 26.46
Net assets at
end of period (000) $1,779,366 $1,683,008 $1,403,573 $1,650,257 $1,162,262 $922,821
Ratio of expenses to
average net assets (%) .95(a) .97 .96 .97 1.01 1.04
Ratio of net investment
income to
average net assets (%) .13(a) .18 .04 1.28 1.70 1.63
Portfolio turnover (%) 35.71 39.60 68.93 75.41 62.30 69.64
* Assumes reinvestment of all dividend income and capital gains distributions
during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
</TABLE>
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
