TABLE OF CONTENTS
USAA FAMILY OF FUNDS 1
MESSAGE FROM THE PRESIDENT 2
INVESTMENT REVIEW 4
FINANCIAL INFORMATION
USAA S&P 500 INDEX FUND
Statement of Assets and Liabilities 6
Statement of Operations 7
Statements of Changes in Net Assets 8
Financial Highlights 9
Notes to Financial Statements 11
EQUITY 500 INDEX PORTFOLIO
Schedule of Portfolio Investments 14
Statement of Assets and Liabilities 22
Statement of Operations 23
Statements of Changes in Net Assets 24
Financial Highlights 25
Notes to Financial Statements 26
IMPORTANT INFORMATION
Through our ongoing efforts to reduce expenses and respond to shareholder
requests, your annual and semiannual report mailings are streamlined. One copy
of each report is sent to each address, rather than to every registered owner.
For many shareholders and their families, this eliminates duplicate copies,
saving paper and postage costs to the Fund.
If you are the primary shareholder on at least one account, prefer not to
participate in streamlining, and would like to continue receiving one report per
registered account owner, you may request this in writing to:
USAA Investment Management Company
Attn: Report Mail
9800 Fredericksburg Road
San Antonio, TX 78284-8916
or phone a mutual fund representative at 1-800-531-8448 during business hours.
THIS REPORT IS FOR THE INFORMATION OF THE SHAREHOLDERS AND OTHERS WHO HAVE
RECEIVED A COPY OF THE CURRENTLY EFFECTIVE PROSPECTUS OF THE USAA S&P 500 INDEX
FUND, MANAGED BY USAA INVESTMENT MANAGEMENT COMPANY (IMCO). IT MAY BE USED AS
SALES LITERATURE ONLY WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS,
WHICH GIVES FURTHER DETAIL ABOUT THE FUND.
USAA WITH THE EAGLE IS REGISTERED IN THE U.S. PATENT & TRADEMARK
OFFICE.(COPYRIGHT)2000, USAA. ALL RIGHTS RESERVED.
USAA FAMILY OF FUNDS SUMMARY
FUND MINIMUM
TYPE/NAME VOLATILITY INVESTMENT
--------- ---------- ----------
CAPITAL APPRECIATION
===============================================================================
Aggressive Growth Very high $3,000
Emerging Markets Very high 3,000
First Start Growth(Registered
Trademark) Moderate to high 3,000
Gold Very high 3,000
Growth Moderate to high 3,000
Growth & Income Moderate 3,000
International Moderate to high 3,000
S&P 500 (Registered Trademark)
Index Moderate 3,000
Science & Technology Very high 3,000
Small Cap Stock Very high 3,000
World Growth Moderate to high 3,000
ASSET ALLOCATION
===============================================================================
Balanced Strategy Moderate $3,000
Cornerstone Strategy Moderate 3,000
Growth and Tax
Strategy Moderate 3,000
Growth Strategy Moderate to high 3,000
Income Strategy Low to moderate 3,000
INCOME - TAXABLE
===============================================================================
GNMA(Registered Trademark) Low to moderate $3,000
High-Yield
Opportunities High 3,000
Income Moderate 3,000
Income Stock Moderate 3,000
Intermediate-Term
Bond Low to moderate 3,000
Short-Term Bond Low 3,000
INCOME - TAX EXEMPT
===============================================================================
Long-Term Moderate $3,000
Intermediate-Term Low to moderate 3,000
Short-Term Low 3,000
State Bond Income Moderate 3,000
MONEY MARKET
===============================================================================
Money Market Very low $3,000
Tax Exempt
Money Market Very low 3,000
Treasury Money
Market Trust (Registered
Trademark) Very low 3,000
State Money Market Very low 3,000
-------------------------------------------------------------------------------
FOREIGN INVESTING IS SUBJECT TO ADDITIONAL RISKS, WHICH ARE DISCUSSED IN THE
FUNDS' PROSPECTUSES.
S&P 500(REGISTERED TRADEMARK)IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES, INC.
AND HAS BEEN LICENSED FOR USE. THE PRODUCT IS NOT SPONSORED, SOLD, OR PROMOTED
BY STANDARD & POOR'S, AND STANDARD & POOR'S MAKES NO REPRESENTATION REGARDING
THE ADVISABILITY OF INVESTING IN THE PRODUCT.
SOME INCOME MAY BE SUBJECT TO STATE OR LOCAL TAXES OR THE FEDERAL ALTERNATIVE
MINIMUM TAX.
AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
THE SCIENCE & TECHNOLOGY FUND MAY BE MORE VOLATILE THAN A FUND THAT DIVERSIFIES
ACROSS MANY INDUSTRIES.
THE INVESTART(REGISTERED TRADEMARK) PROGRAM IS AVAILABLE FOR INVESTORS WITHOUT
THE $3,000 INITIAL INVESTMENT REQUIRED TO OPEN AN IMCO MUTUAL FUND ACCOUNT. A
MUTUAL FUND ACCOUNT CAN BE OPENED WITH NO INITIAL INVESTMENT IF YOU ELECT TO
HAVE MONTHLY AUTOMATIC INVESTMENTS OF AT LEAST $50 FROM A BANK ACCOUNT.
INVESTART IS NOT AVAILABLE ON TAX-EXEMPT FUNDS OR THE S&P 500 INDEX FUND. THE
MINIMUM INITIAL INVESTMENT FOR IRAs IS $250, EXCEPT FOR THE $2,000 MINIMUM
REQUIRED FOR THE S&P 500 INDEX FUND. IRAs ARE NOT AVAILABLE FOR TAX-EXEMPT
FUNDS. THE GROWTH AND TAX STRATEGY FUND IS NOT AVAILABLE AS AN INVESTMENT FOR
YOUR IRA BECAUSE THE MAJORITY OF ITS INCOME IS TAX EXEMPT.
CALIFORNIA, FLORIDA, NEW YORK, AND VIRGINIA FUNDS AVAILABLE TO RESIDENTS ONLY.
NONDEPOSIT INVESTMENT PRODUCTS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR
OTHER OBLIGATIONS OF, OR GUARANTEED BY, USAA FEDERAL SAVINGS BANK, ARE SUBJECT
TO INVESTMENT RISKS, AND MAY LOSE VALUE.
FOR MORE COMPLETE INFORMATION ABOUT THE MUTUAL FUNDS MANAGED AND DISTRIBUTED BY
USAA INVESTMENT MANAGEMENT COMPANY, INCLUDING CHARGES AND OPERATING EXPENSES,
PLEASE CALL 1-800-531-8181 FOR A PROSPECTUS. READ IT CAREFULLY BEFORE YOU
INVEST.
MESSAGE FROM THE PRESIDENT
[PHOTOGRAPH OF PRESIDENT AND VICE CHAIRMAN OF THE BOARD, MICHAEL J.C. ROTH, CFA,
APPEARS HERE]
--------------------------------------------------------------------------------
THE USAA S&P 500 INDEX FUND HAS BECOME OUR LARGEST MUTUAL FUND. AS OF EARLY JULY
2000, IT EXCEEDED $3.3 BILLION IN ASSETS. IN THAT REGARD, IT HAS BEEN A GREAT
SUCCESS FOR US AND AN INVESTMENT CHOICE FOR TENS OF THOUSANDS OF SHAREHOLDERS.
--------------------------------------------------------------------------------
When we first offered this Fund with an expense ratio of 18 basis points, our
competitors and the financial press howled. They accused us of deception, but
here we are, more than five years later, still at 18 basis points and going
strong.
The Fund has tracked the S&P 500 Index well, which has made it a building block
for many shareholders' portfolios. The S&P 500 Index, even with the technology
explosion of the last few years, remains the chief benchmark against which stock
portfolio managers are measured. In addition to its notable investment
performance, the Index and funds that emulate it produce that performance with
great tax efficiency. That's because the Index's portfolio has produced a good
return with a low yield and little turnover.
Of course these kinds of returns are never guaranteed, because stocks carry the
risk of the financial markets.
I firmly believe that the USAA S&P 500 Index Fund, when coupled with other USAA
funds of a different nature, such as the USAA Small Cap Stock, USAA Science and
Technology, or our tax-exempt funds, can create an exciting and well-balanced
investment plan.
Sincerely,
Michael J.C. Roth, CFA
PRESIDENT AND
VICE CHAIRMAN OF THE BOARD
THE USAA S&P 500 INDEX FUND HAS A $10 ANNUAL ACCOUNT MAINTENANCE FEE THAT WILL
BE CHARGED ON ACCOUNTS WITH BALANCES LESS THAN $10,000.
FOR MORE COMPLETE INFORMATION ABOUT THE MUTUAL FUNDS MANAGED AND DISTRIBUTED BY
USAA INVESTMENT MANAGEMENT COMPANY, INCLUDING CHARGES AND OPERATING EXPENSES,
CALL 1-800-531-8181 FOR A PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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.
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.
INVESTMENT REVIEW
USAA S&P 500 INDEX FUND*
OBJECTIVE: Seeks to match, as closely as possible (before the deduction of
expenses), the performance of the S&P 500 Index, which emphasizes stocks of
large U.S. companies.
INVESTMENT INSTRUMENTS: Invests all assets in the Equity 500 Index Portfolio, a
separate registered investment company, with the same investment objective as
the Fund; at least 80% of the Portfolio's assets will be invested in common
stocks of companies that compose the S&P 500 Index.
--------------------------------------------------------------------------------
6/30/00 12/31/99
--------------------------------------------------------------------------------
Net Assets $3,402.1 Million $3,196.5 Million
Net Asset Value Per Share $22.67 $22.92
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
--------------------------------------------------------------------------------
12/31/99 TO 6/30/00 1 YEAR SINCE INCEPTION ON 5/1/96
-0.57%(+) 6.94% 23.37%(++)
--------------------------------------------------------------------------------
(+) TOTAL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. THIS
SIX-MONTH RETURN IS CUMULATIVE AND DOES NOT INCLUDE THE ACCOUNT MAINTENANCE
FEE.
(++) INCLUDES THE $10 ANNUAL ACCOUNT MAINTENANCE FEE THROUGH DECEMBER 31, 1996.
TOTAL RETURN EQUALS INCOME YIELD PLUS SHARE PRICE CHANGE AND ASSUMES
REINVESTMENT OF ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. NO ADJUSTMENT HAS
BEEN MADE FOR TAXES PAYABLE BY SHAREHOLDERS ON THEIR REINVESTED INCOME DIVIDENDS
AND CAPITAL GAIN DISTRIBUTIONS. THE PERFORMANCE DATA QUOTED REPRESENT PAST
PERFORMANCE AND ARE NOT AN INDICATION OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE, AND AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
CUMULATIVE PERFORMANCE COMPARISON
A chart in the form of a line graph appears here, illustrating the comparison of
a $10,000 hypothetical investment in the USAA S&P 500 Index Fund to the S&P 500
Index for the period of 05/02/96 through 6/30/00. The data points from the graph
are as follows:
USAA S&P 500
Index Fund S&P 500 Index
-------------- -------------
05/02/96 $10,000 $10,000
06/30/96 10,442 10,467
12/31/96 11,669 11,688
06/30/97 14,057 14,095
12/31/97 15,523 15,585
06/30/98 18,249 18,345
12/31/98 19,966 20,039
06/30/99 22,402 22,519
12/31/99 24,094 24,252
06/30/00 23,956 24,149
Data from 5/2/96** through 06/30/00
THE GRAPH ILLUSTRATES HOW A $10,000 HYPOTHETICAL INVESTMENT IN THE USAA S&P 500
INDEX FUND SO CLOSELY TRACKS THE S&P 500 INDEX THAT ITS RESULTS ARE NOT VISIBLE
IN THE GRAPH. THE S&P 500 INDEX IS AN UNMANAGED INDEX REPRESENTING THE WEIGHTED
AVERAGE PERFORMANCE OF A GROUP OF 500 WIDELY HELD, PUBLICLY TRADED STOCKS. IT IS
NOT POSSIBLE TO INVEST DIRECTLY IN THE S&P 500 INDEX.
* S&P 500(REGISTERED TRADEMARK) IS A TRADEMARK OF THE MCGRAW-HILL COMPANIES,
INC., AND HAS BEEN LICENSED FOR USE. THE PRODUCT IS NOT SPONSORED, SOLD, OR
PROMOTED BY STANDARD & POOR'S, AND STANDARD & POOR'S MAKES NO REPRESENTATION
REGARDING THE ADVISABILITY OF INVESTING IN THE PRODUCT.
** DATE THE FUND INITIALLY INVESTED IN SECURITIES REPRESENTED BY THE INDEX.
-------------------------------------
TEN LARGEST
STOCK HOLDINGS
-------------------------------------
General Electric Co. 4.07%
Intel Corp. 3.50
Cisco Systems, Inc. 3.45
Microsoft Corp. 3.27
Pfizer, Inc. 2.36
Exxon Mobil Corp. 2.14
Wal-Mart Stores, Inc. 2.01
Oracle Corp. 1.87
Nortel Networks Corp. 1.58
Citigroup 1.57
-------------------------------------
PORTFOLIO SECTOR DIVERSIFICATION
PERCENT OF MARKET VALUE
6/30/00
A pie chart is shown here depicting the Portfolio Sector Diversification/Percent
of Market Value as of June 30, 2000 of the USAA S&P 500 Index Fund to be:
Technology - 33%; Financial - 13%; Health Care - 12%; Consumer Staples - 10%;
Capital Goods - 8%; Consumer Cyclicals - 7%; Communications Services - 7%;
Energy - 5%; Utilities - 2%; Basic Materials - 2%; and Transportation - 1%.
USAA S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
ASSETS
Investment in Equity 500 Index Portfolio, at value $3,375,920,222
Receivable for capital shares sold 27,448,404
--------------
Total assets 3,403,368,626
--------------
LIABILITIES
Payable for capital shares redeemed 1,005,717
USAA Transfer Agency Company 193,650
Accounts payable and accrued expenses 97,362
--------------
Total liabilities 1,296,729
--------------
Net assets applicable to capital shares outstanding $3,402,071,897
==============
REPRESENTED BY:
Paid-in capital $2,564,804,577
Accumulated undistributed net investment income 1,626,769
Accumulated net realized gain from investments and
futures transactions 355,387,090
Net unrealized appreciation on investments and futures
contracts 480,253,461
--------------
Net assets applicable to capital shares outstanding $3,402,071,897
==============
Capital shares outstanding ($.01 par value per share,
200,000,000 shares authorized) 150,036,491
==============
Net asset value, redemption price, and offering price per
share $ 22.67
==============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 11.
USAA S&P 500 INDEX FUND
STATEMENT OF OPERATIONS
SIX-MONTH PERIOD ENDED JUNE 30, 2000
(UNAUDITED)
INVESTMENT INCOME
Income allocated from Equity 500 Index Portfolio, net $ 18,933,598
-------------
EXPENSES
Administration fees 247,355
Transfer agent fees 1,031,655
Custodian's fees 27,032
Postage 277,328
Shareholder reporting fees 30,979
Directors' fees 2,175
Registration fees 216,208
Professional fees 59,676
Other 30,776
-------------
Total expenses 1,923,184
-------------
Net investment income 17,010,414
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS
Net realized gain from investment transactions 361,198,512
Net realized loss from futures transactions (3,795,194)
Net change in unrealized appreciation/depreciation on
investments and futures contracts (390,647,005)
-------------
Net realized and unrealized loss on investments and futures
contracts (33,243,687)
-------------
Net decrease in net assets from operations $ (16,233,273)
=============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 11.
<TABLE>
USAA S&P 500 INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX-MONTH PERIOD ENDED JUNE 30, 2000, AND
YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<CAPTION>
6/30/00 12/31/99
--------------------------------
<S> <C> <C>
FROM OPERATIONS
Net investment income $ 17,010,414 $ 34,459,920
Net realized gain (loss) from investments
and futures transactions 357,403,318 (10,455,328)
Net change in unrealized appreciation/depreciation
on investments and futures contracts (390,647,005) 491,990,378
--------------------------------
Net increase (decrease) in net assets from operations (16,233,273) 515,994,970
--------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (15,984,828) (34,520,614)
--------------------------------
Net realized gains (1,582,721) (6,787,580)
--------------------------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold 962,124,964 1,298,496,117
Reinvested dividends 12,296,288 26,549,566
Cost of shares redeemed (735,031,206) (459,104,661)
--------------------------------
Net increase in net assets from
capital share transactions 239,390,046 865,941,022
--------------------------------
Net increase in net assets 205,589,224 1,340,627,798
NET ASSETS:
Beginning of period 3,196,482,673 1,855,854,875
--------------------------------
End of period $3,402,071,897 $3,196,482,673
================================
ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME
End of period $ 1,626,769 $ 601,183
================================
CHANGE IN SHARES OUTSTANDING
Shares sold 43,001,288 63,600,443
Shares issued for dividends reinvested 530,590 1,254,617
Shares redeemed (32,922,493) (21,723,542)
--------------------------------
Increase in shares outstanding 10,609,385 43,131,518
================================
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 11.
</TABLE>
<TABLE>
USAA S&P 500 INDEX FUND
FINANCIAL HIGHLIGHTS
JUNE 30, 2000
(UNAUDITED)
Contained below are selected ratios and supplemental data for the periods
indicated for the USAA S&P 500 Index Fund.
<CAPTION>
Six Months Eight Months
Ended Ended
June 30, Years Ended December 31, December 31,
--------------------------------------------------------------
2000 1999 1998 1997 1996*
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net asset value at
beginning of period $ 22.92 $ 19.27 $ 15.16 $ 11.57 $ 10.00
Income from investment
operations:
Net investment income .12 .25 .21 .21 .12
Net realized and unrealized
gain (loss) on investments
and futures transactions (.25) 3.71 4.11 3.59 1.57
Distributions from net
investment income (.11) (.26) (.21) (.21) (.12)
Distributions of realized
capital gains (.01) (.05) - - -
------------------------------------------------------------
Net asset value at
end of period $ 22.67 $ 22.92 $ 19.27 $ 15.16 $ 11.57
============================================================
Total return (%)** (.57) 20.67 28.62 33.03 16.90
SUPPLEMENTAL DATA
AND RATIOS
Net assets at
end of period (000) $3,402,072 $3,196,483 $1,855,855 $ 630,619 $ 179,073
Ratios to average net assets:
Net investment
income (%) 1.06(a) 1.25 1.40 1.64 2.09(a)
Expenses after waivers,
including expenses
of the Equity 500
Index Portfolio (%) .18(a) .18(b) .18(b) .18 .18(a)
Expenses before waivers,
including expenses of
the Equity 500
Index Portfolio (%) .18(a) .18 .20 .25 .33(a)
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
(b) Effective May 1, 1998, the Manager is contractually entitled to receive fees
from the Fund only to the extent that the aggregate annual operating
expenses of the Fund and the portfolio do not exceed 0.18% of the Fund's
average net assets.
* Fund commenced operations May 1, 1996.
** Assumes reinvestment of all dividend income and capital gain distributions
during the period; does not reflect $10 annual account maintenance fee.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 11.
</TABLE>
USAA S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA MUTUAL FUND, INC. (the Company), registered under the Investment Company
Act of 1940 (the Act), as amended, is a diversified, open-end management
investment company incorporated under the laws of Maryland consisting of 13
separate funds. The information presented in this semiannual report pertains
only to the USAA S&P 500 Index Fund (the Fund). The Fund's primary investment
objective is to match, as closely as possible (before the deduction of
expenses), the performance of the S&P 500 Index, which emphasizes stocks of
large U.S. companies. The Fund seeks to achieve its objective by investing all
of its investable assets in the Equity 500 Index Portfolio (the Portfolio),
which is a separate registered investment company advised by Bankers Trust
Company (Bankers Trust) with an identical investment objective. At June 30,
2000, the Fund's investment was 46% of the Portfolio.
The financial statements of the Portfolio, including the Schedule of Portfolio
Investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
A. VALUATION OF INVESTMENTS - The Fund records its investment in the Portfolio
at value that reflects its proportionate interest in the net assets of the
Portfolio. Valuation of the securities held by the Portfolio is discussed in the
notes to the Portfolio's financial statements included elsewhere in this report.
B. INVESTMENT INCOME AND EXPENSES - The Fund records daily its pro rata share
of the Portfolio's income, expenses, and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
C. FEDERAL TAXES - The Fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its income to its shareholders. Therefore, no
federal income or excise tax provision is required. The Fund may periodically
make reclassifications among certain of its capital accounts as a result of the
timing and characterization of certain income and capital gain distributions
determined annually in accordance with federal tax regulations which may differ
from generally accepted accounting principles.
D. DISTRIBUTIONS - Distributions to shareholders are recorded on the ex-
dividend date. Distributions of net investment income are made quarterly.
Distributions of the Fund's pro rata share of the Portfolio's realized gains
from security transactions not offset by capital losses are made in the
succeeding fiscal year or as otherwise required to avoid the payment of federal
taxes.
E. USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the financial
statements. Actual results could differ from those estimates.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities. Subject to availability under both agreements with CAPCO, the Fund
may borrow from CAPCO an amount up to 5% of the Fund's total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, the Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 25% of the Fund's total
assets. The Fund had no borrowings under any of these agreements during the
six-month period ended June 30, 2000.
(3) TRANSACTIONS WITH MANAGER
A. ADMINISTRATIVE FEES - The Fund has entered into an Administration Agreement
with USAA Investment Management Company (the Manager) under which the Manager
provides administrative services to the Fund. The Fund pays the Manager a
monthly administrative fee, which on an annual basis is equal to the lesser of
.06% of the average daily net assets of the Fund or the amount that brings the
total Fund and Portfolio annual operating expenses up to .18% of the Fund's
average net assets.
B. TRANSFER AGENT'S FEES - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services (SAS), an affiliate of the Manager, provides transfer agency
services to the Fund. The Fund pays SAS a monthly fee based on an annual rate of
$20 per shareholder account, plus out-of-pocket expenses. Prior to May 1, 2000,
the annual rate was $17 per shareholder account.
C. UNDERWRITING AGREEMENT - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
D. MANAGEMENT AGREEMENT - The Manager serves as investment adviser to the Fund
and is responsible for monitoring the services provided to the Portfolio by
Bankers Trust. While the Fund maintains its investment in the Portfolio, the
Manager receives no fee for this service.
E. ACCOUNT MAINTENANCE FEE - SAS assesses a $10 annual account maintenance fee
to allocate part of the fixed cost of maintaining shareholder accounts. This fee
is waived on accounts with balances of $10,000 or more.
(4) TRANSACTIONS WITH AFFILIATES
USAA Investment Management Company is indirectly wholly owned by United Services
Automobile Association (the Association), a large, diversified financial
services institution. At June 30, 2000, the Association and its affiliates owned
46,826,261 shares (31%) 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.
(5) CHANGE OF INDEPENDENT AUDITORS
Based on the recommendation of the Fund's Audit Committee, the Fund's Board of
Directors determined not to retain PricewaterhouseCoopers LLP as the Fund's
independent auditor and voted to appoint KPMG LLP for the fiscal year ended
December 31, 2000. Since the Fund's inception in 1996, PricewaterhouseCoopers'
audit reports contained no adverse opinion or disclaimer of opinion; nor were
its reports qualified or modified as to uncertainty, audit scope, or accounting
principle. During the period that PricewaterhouseCoopers served as the Fund's
independent auditor and through March 18, 2000, there were no disagreements
between the Fund and PricewaterhouseCoopers on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
EQUITY 500 INDEX PORTFOLIO
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
SHARES DESCRIPTION VALUE
--------------------------------------------------
COMMON STOCK (98.4%)
196,505 3Com Corp.(1) $ 11,323,601
871,006 Abbott Laboratories 38,814,205
59,216 Adaptec, Inc.(1) 1,347,164
169,919 ADC Telecommuni-
cations, Inc.(1) 14,251,956
70,090 Adobe Systems, Inc. 9,111,700
20,818 Adolph Coors Co. -
Class B 1,259,489
83,341 Advanced Micro
Devices, Inc.(1) 6,438,092
258,282 AES Corp.(1) 11,784,116
80,969 Aetna, Inc. 5,197,198
150,684 Aflac, Inc. 6,922,046
256,065 Agilent Technologies(1) 18,884,794
129,942 Air Products and
Chemicals, Inc. 4,003,838
32,025 Alberto-Culver Co. -
Class B 978,764
247,048 Albertson's, Inc. 8,214,346
123,929 Alcan Aluminium Ltd. 3,841,799
488,392 Alcoa, Inc. 14,163,368
57,678 Allegheny Technologies 1,038,204
74,938 Allergan, Inc. 5,582,881
95,669 Allied Waste
Industries, Inc.(1) 956,690
421,779 Allstate Corp. 9,384,583
179,979 Alltel Corp. 11,147,449
112,800 Altera Corp.(1) 11,498,550
57,850 ALZA Corp.(1) 3,420,381
52,862 Amerada Hess Corp. 3,264,228
71,679 Ameren Corp. 2,419,166
1,310,906 America Online, Inc.(1) 69,150,291
193,318 American Electric
Power Co.(1) 5,727,046
757,320 American Express Co. 39,475,305
140,044 American General Corp. 8,542,684
43,077 American Greetings
Corp. - Class A 818,463
739,011 American Home
Products Corp. 43,416,896
875,888 American International
Group, Inc. 102,916,840
95,400 American Power
Conversion Corp.(1) 3,893,512
578,021 Amgen, Inc.(1) 40,605,975
83,807 AMR Corp.(1) 2,215,648
219,143 Amsouth Bancorp 3,451,502
72,119 Anadarko Petroleum
Corp. 3,556,368
197,222 Analog Devices, Inc.(1) 14,988,872
52,910 Andrew Corp.(1) 1,775,792
255,875 Anheuser Busch Cos.,
Inc. 19,110,664
146,820 AON Corp. 4,560,596
67,465 Apache Corp. 3,967,785
183,194 Apple Computer, Inc.(1) 9,594,786
463,982 Applied Materials, Inc.(1) 42,048,369
340,637 Archer-Daniels-
Midland Co. 3,342,501
23,346 Armstrong Holdings 357,486
40,281 Ashland, Inc. 1,412,353
410,788 Associates First Capital
Corp. - Class A 9,165,707
1,795,922 AT&T Corp. 56,796,033
34,662 Autodesk, Inc. 1,202,338
357,270 Automatic Data
Processing, Inc. 19,136,274
79,388 Autozone, Inc.(1) 1,746,536
63,889 Avery Dennison Corp. 4,288,549
137,543 Avon Products, Inc. 6,120,663
188,254 Baker Hughes, Inc. 6,024,128
15,877 Ball Corp. 511,041
938,793 Bank of America Corp. 40,368,099
416,400 Bank of New York
Co., Inc. 19,362,600
648,820 Bank One Corp. 17,234,281
224,106 Barrick Gold Corp. 4,075,928
34,058 Bausch & Lomb, Inc. 2,635,238
164,948 Baxter International,
Inc. 11,597,906
195,415 BB&T Corp. 4,665,533
64,384 Bear Stearns Cos., Inc. 2,679,984
142,484 Becton, Dickinson & Co. 4,087,510
80,170 Bed Bath & Beyond,
Inc.(1) 2,906,162
879,005 Bell Atlantic Corp.(1) 44,664,442
1,065,531 BellSouth Corp. 45,418,259
26,944 Bemis Co., Inc. 905,992
115,836 Best Buy, Inc.(1) 7,326,627
159,396 Bestfoods 11,038,173
75,283 Bethlehem Steel Corp.(1) 268,196
84,812 Biogen, Inc.(1) 5,470,374
63,910 Biomet, Inc. 2,456,541
48,925 Black & Decker Corp. 1,923,364
137,387 BMC Software, Inc.(1) 5,012,479
491,453 Boeing Co. 20,548,879
32,436 Boise Cascade Corp. 839,281
237,089 Boston Scientific Corp.(1) 5,201,140
13,176 Briggs & Stratton Corp. 451,278
1,123,136 Bristol-Myers Squibb Co. 65,422,672
120,000 Broadcom Corp. -
Class A(1) 26,272,500
25,298 Brown-Forman Corp. -
Class B 1,359,767
50,216 Brunswick Corp. 831,702
242,597 Burlington Northern
Santa Fe Corp. 5,564,569
120,425 Burlington Resources,
Inc. 4,606,256
74,378 CP&L Energy 2,375,447
28,986 C.R. Bard, Inc. 1,394,951
103,435 Cabletron Systems, Inc.(1) 2,611,734
239,297 Campbell Soup Co. 6,969,525
107,603 Capital One Financial
Corp. 4,801,784
158,539 Cardinal Health, Inc. 11,731,886
342,413 Carnival Corp. -
Class A 6,677,053
200,712 Caterpillar, Inc. 6,799,119
399,406 Cendant Corp.(1) 5,591,684
34,221 Centex Corp.(1) 804,193
80,169 Centurytel, Inc. 2,304,859
82,393 Ceridian Corp.(1) 1,982,582
755,010 Charles Schwab Corp. 25,387,211
118,700 Charter One
Financial, Inc. 2,730,100
700,086 Chase Manhattan Corp. 32,247,711
370,939 Chevron Corp. 31,460,264
96,689 Chubb Corp. 5,946,373
95,456 CIGNA Corp. 8,925,136
88,268 Cincinnati Financial
Corp. 2,774,925
94,369 Cinergy Corp. 2,400,511
115,320 Circuit City Stores, Inc. 3,827,182
3,955,648 Cisco Systems, Inc.(1) 251,430,876
1,901,058 Citigroup 114,538,744
122,330 Citrix Systems, Inc(1) 2,316,624
191,179 Clear Channel
Communications, Inc.(1) 14,338,425
134,271 Clorox Co. 6,017,019
62,772 CMS Energy 1,388,830
122,002 Coastal Corp. 7,426,872
1,398,103 Coca-Cola Co. 80,303,541
245,233 Coca-Cola Enterprises,
Inc. 4,000,363
330,277 Colgate-Palmolive Co. 19,775,335
45,733 Columbia Energy Group 3,001,228
508,458 Comcast Corp. -
Special Class A(1) 20,592,549
87,697 Comerica, Inc. 3,935,403
959,909 Compaq Computer
Corp. 24,537,674
330,471 Computer Associates
International, Inc. 16,915,984
94,950 Computer Sciences
Corp.(1) 7,091,578
202,958 Compuware Corp.(1) 2,105,689
86,122 Comverse Technology(1) 8,009,346
288,537 ConAgra, Inc. 5,500,237
119,900 Conexant Systems(1) 5,830,137
356,702 Conoco, Inc. - Class B 8,761,493
184,500 Conseco, Inc. 1,798,875
126,736 Consolidated Edison,
Inc. 3,754,554
63,351 Consolidated Stores
Corp.(1) 760,212
75,134 Constellation Energy
Group, Inc. 2,446,551
84,700 Convergys Corp.(1) 4,393,812
57,832 Cooper Industries, Inc. 1,883,154
45,660 Cooper Tire &
Rubber Co. 507,967
158,822 Corning, Inc. 42,862,087
251,705 Costco Wholesale
Corp.(1) 8,306,265
63,361 Countrywide Credit
Industries, Inc. 1,920,630
36,617 Crane Co. 890,251
90,446 Crown Cork & Seal
Co., Inc. 1,356,690
125,521 CSX Corp. 2,659,476
27,803 Cummins Engine
Co., Inc. 757,632
222,184 CVS Corp. 8,887,360
90,717 Dana Corp. 1,922,066
80,080 Danaher Corp. 3,958,955
74,654 Darden Restaurants, Inc. 1,213,127
133,475 Deere & Co. 4,938,575
1,453,350 Dell Computer Corp.(1) 71,668,322
318,938 Delphi Automotive
Systems 4,644,535
73,039 Delta Air Lines, Inc. 3,693,034
43,490 Deluxe Corp. 1,024,733
58,534 Dillard Department
Stores, Inc. - Class A 717,041
187,486 Dollar General Corp. 3,655,977
134,617 Dominion Resources, Inc. 5,771,704
115,237 Dover Corp. 4,674,301
372,807 Dow Chemical Co. 11,254,111
49,036 Dow Jones & Co., Inc. 3,591,887
80,967 DTE Energy Co. 2,474,554
592,965 Du Pont (E.I.) de
Nemours & Co. 25,942,219
206,885 Duke Power Co. 11,663,142
91,434 Dun & Bradstreet Corp. 2,617,298
14,652 Eastern Enterprises 923,076
50,300 Eastman Chemical Co. 2,401,825
178,212 Eastman Kodak Co. 10,603,614
43,982 Eaton Corp. 2,946,794
73,428 Ecolab, Inc. 2,868,281
193,084 Edison International, Inc. 3,958,222
128,540 El Paso Energy Corp. 6,547,506
284,418 Electronic Data
Systems Corp. 11,732,242
628,982 Eli Lilly & Co. 62,819,577
1,229,740 EMC Corp.(1) 94,613,121
246,970 Emerson Electric Co. 14,910,814
71,421 Engelhard Corp. 1,218,621
403,847 Enron Corp. 26,048,131
134,112 Entergy Corp. 3,646,170
76,876 Equifax, Inc. 2,017,995
1,985,363 Exxon Mobil Corp. 155,850,995
570,689 Fannie Mae 29,782,832
119,255 Federated Department
Stores, Inc.(1) 4,024,856
170,726 Fedex Corp.(1) 6,487,588
174,724 Fifth Third Bancorp 11,051,293
237,707 First Data Corp. 11,796,210
558,808 First Union Corp. 13,865,423
560,374 Firstar Corp. 11,802,877
129,033 FirstEnergy Corp. 3,016,146
510,532 Fleet Boston Financial
Corp. 17,358,088
53,100 Florida Progress Corp. 2,489,062
43,490 Fluor Corp. 1,375,371
17,575 FMC Corp.(1) 1,019,350
683,364 Ford Motor Co. 29,384,652
122,666 Fort James Corp. 2,836,651
93,442 Fortune Brands, Inc. 2,155,006
100,924 FPL Group, Inc. 4,995,738
142,247 Franklin Resources,
Inc. 4,320,753
389,746 Freddie Mac 15,784,713
67,666 Freeport-McMoRan
Copper & Gold, Inc. -
Class B(1) 625,910
150,928 Gannett Co., Inc. 9,027,381
479,922 Gap, Inc. 14,997,562
179,389 Gateway Inc.(1) 10,180,326
113,563 General Dynamics
Corp. 5,933,667
5,589,127 General Electric Co. 296,223,731
170,376 General Mills, Inc. 6,516,882
303,042 General Motors Corp. 17,595,376
99,650 Genuine Parts Co. 1,993,000
96,799 Georgia-Pacific Corp. 2,540,974
591,285 Gillette Co. 20,658,020
510,370 Global Crossing Ltd.(1) 13,429,111
94,009 Golden West Financial
Corp. 3,836,742
56,401 Goodrich (B.F.) Co. 1,921,159
88,573 Goodyear Tire &
Rubber Co. 1,771,460
68,803 GPU, Inc. 1,861,981
20,881 Great Atlantic & Pacific
Tea Co., Inc. 347,147
32,530 Great Lakes Chemical
Corp. 1,024,695
549,894 GTE Corp. 34,230,901
174,252 Guidant Corp.(1) 8,625,474
57,534 H & R Block, Inc. 1,862,663
205,385 H.J. Heinz Co. 8,985,594
251,861 Halliburton Co. 11,884,691
43,229 Harcourt General, Inc. 2,350,577
170,632 Harley-Davidson, Inc. 6,569,332
71,139 Harrah's Entertainment,
Inc.(1) 1,489,473
123,849 Hartford Financial
Services Group, Inc. 6,927,803
109,470 Hasbro, Inc. 1,648,892
319,016 HCA Healthcare Co. 9,690,111
218,473 HEALTHSOUTH Corp.(1) 1,570,275
60,147 Hercules, Inc. 845,817
76,958 Hershey Foods Corp. 3,732,463
569,391 Hewlett-Packard Co. 71,102,701
204,943 Hilton Hotels Corp. 1,921,341
1,319,456 Home Depot, Inc. 65,890,334
126,503 Homestake Mining Co. 869,708
450,710 Honeywell International,
Inc. 15,183,293
267,100 Household International,
Inc. 11,101,344
94,682 Humana, Inc.(1) 461,575
127,713 Huntington Bancshares,
Inc. 2,019,462
2 Huttig Building
Products, Inc.(1) 8
169,816 Illinois Tool Works, Inc. 9,679,512
175,012 IMS Health, Inc. 3,150,216
98,148 Inco, Ltd.(1) 1,509,025
92,312 Ingersoll-Rand Co. 3,715,558
1,906,165 Intel Corp. 254,830,433
1,008,007 International Business
Machines Corp. 110,439,767
59,815 International Flavors
& Fragrances, Inc. 1,805,665
274,349 International Paper
Co. 8,179,030
159,163 Interpublic Group of
Cos., Inc. 6,844,009
50,281 ITT Industries 1,527,285
148,110 J.C. Penney Co., Inc. 2,730,778
57,492 Jefferson-Pilot Corp. 3,244,705
788,360 Johnson & Johnson 80,314,175
44,502 Johnson Controls, Inc. 2,283,509
62,850 Kansas City Southern
Industries 5,574,009
27,739 Kaufman & Broad Home
Corp. 549,579
227,265 Kellogg Co. 6,761,134
52,314 Kerr-McGee Corp. 3,083,256
246,722 KeyCorp. 4,348,475
314,323 Kimberly Clark Corp. 18,034,282
104,333 KLA/Tencor Corp.(1) 6,110,001
275,414 Kmart Corp.(1) 1,876,258
49,668 Knight-Ridder, Inc. 2,641,717
184,528 Kohls Corp.(1) 10,264,370
472,029 Kroger Co.(1) 10,414,140
110,600 Leggett & Platt, Inc. 1,824,900
68,289 Lehman Brothers, Inc. 6,457,579
72,420 Lexmark International
Group, Inc. - Class A(1) 4,870,245
236,832 Limited, Inc. 5,121,492
110,716 Lincoln National Corp. 3,999,616
181,700 Linear Technology Corp. 11,617,444
39,344 Liz Claiborne, Inc. 1,386,876
219,223 Lockheed Martin Corp. 5,439,471
56,632 Loews Corp. 3,397,920
22,586 Longs Drug Stores, Inc. 491,246
63,392 Louisiana-Pacific Corp. 689,388
216,745 Lowe's Cos., Inc. 8,900,092
166,812 LSI Logic Corp.(1) 9,028,700
1,851,883 Lucent Technologies,
Inc. 109,724,068
41,785 Mallinckrodt Group,
Inc. 1,815,036
58,220 Manor Care, Inc.(1) 407,540
139,893 Marriott International 5,044,891
151,073 Marsh and
McLennan Cos., Inc. 15,777,686
253,943 Masco Corp. 4,586,845
235,579 Mattel, Inc. 3,106,698
157,900 Maxim Integrated
Products, Inc.(1) 10,727,331
188,608 May Department
Stores Co. 4,526,592
49,756 Maytag Corp. 1,834,753
54,006 MBIA, Inc. 2,602,414
455,003 MBNA Corp. 12,341,956
37,330 McDermott
International, Inc. 328,971
766,043 McDonald's Corp. 25,231,541
112,459 McGraw-Hill, Inc. 6,072,786
157,720 McKesson HBOC, Inc. 3,302,263
55,820 Mead Corp. 1,409,455
346,221 MediaOne Group(1) 23,123,668
124,700 Medimmune Inc.(1) 9,227,800
676,677 Medtronic, Inc. 33,706,973
278,220 Mellon Financial Corp. 10,137,641
1,302,515 Merck & Co., Inc. 99,805,212
39,700 Mercury Interactive
Corp.(1) 3,840,975
31,782 Meredith Corp. 1,072,643
210,086 Merrill Lynch & Co., Inc. 24,159,890
66,131 MGIC Investment Corp. 3,008,961
316,798 Micron Technology,
Inc.(1) 27,898,024
2,978,519 Microsoft Corp.(1) 238,281,520
25,176 Millipore Corp. 1,897,641
226,013 Minnesota Mining &
Manufacturing Co. 18,646,073
110,498 Molex, Inc. 5,317,716
641,103 Morgan Stanley Dean
Witter Discover & Co. 53,371,825
91,965 Morgan, (J.P.) &
Co., Inc. 10,127,646
1,204,548 Motorola, Inc. 35,007,176
180,329 Nabisco Group Holdings 4,677,283
356,312 National City Corp. 6,079,574
97,225 National Semiconductor
Corp.(1) 5,517,519
23,892 National Service
Industries, Inc. 465,894
36,217 Navistar International
Corp.(1) 1,124,991
54,393 NCR Corp.(1) 2,117,927
177,416 Network Appliance,
Inc.(1) 14,281,988
60,071 New Century Energies,
Inc. 1,802,130
97,966 New York Times Co. -
Class A 3,869,657
160,245 Newell Rubbermaid,
Inc. 4,126,309
97,393 Newmont Mining Corp. 2,106,124
439,360 Nextel Communications,
Inc. - Class A(1) 26,883,340
127,105 Niagara Mohawk Power
Corp.(1) 1,771,526
26,461 NICOR, Inc. 863,290
157,489 Nike, Inc. 6,270,031
77,922 Nordstrom, Inc. 1,879,868
213,203 Norfolk Southern Corp. 3,171,395
1,689,028 Nortel Networks Corp. 115,276,161
65,419 Northern States
Power Co. 1,320,646
125,907 Northern Trust Corp. 8,191,824
39,562 Northrop Grumman Corp. 2,620,983
183,949 Novell, Inc.(1) 1,701,528
65,101 Novellus Systems, Inc.(1) 3,682,275
54,749 Nucor Corp. 1,816,982
209,111 Occidental Petroleum
Corp. 4,404,400
187,041 Office Depot, Inc.(1) 1,169,006
77,574 Old Kent Financial
Corp. 2,075,105
100,623 Omnicom Group, Inc. 8,961,736
16,020 Oneok, Inc. 415,519
1,616,366 Oracle Corp.(1) 135,875,767
31,773 Owens Corning 293,900
82,512 Owens-Illinois, Inc.(1) 964,359
43,399 Paccar, Inc. 1,722,398
100,032 Pactiv Corp.(1) 787,752
80,981 Paine Webber Group, Inc. 3,684,636
68,970 Pall Corp. 1,275,945
154,897 Parametric
Technology Corp.(1) 1,703,867
63,370 Parker-Hannifin Corp. 2,170,423
210,381 Paychex, Inc. 8,836,002
116,640 PE Corp. - PE
Biosystems Group 7,683,660
104,041 PECO Energy 4,194,153
19,200 People's Energy Corp. 621,600
151,094 PeopleSoft, Inc.(1) 2,530,825
823,624 PepsiCo, Inc. 36,599,792
26,313 Perkin Elmer, Inc. 1,739,947
3,579,682 Pfizer, Inc. 171,824,736
231,869 PG&E Corp. 5,709,774
708,252 Pharmacia Corp. 36,607,775
42,295 Phelps Dodge Corp. 1,572,845
1,309,236 Philip Morris Cos. 34,776,581
141,138 Phillips Petroleum Co. 7,153,932
48,045 Pinnacle West Capital
Corp. 1,627,524
150,276 Pitney Bowes, Inc. 6,011,040
165,830 Placer Dome, Inc. 1,585,749
166,431 PNC Bank Corp. 7,801,453
24,963 Polaroid Corp. 450,894
15,619 Potlatch Corp. 517,379
98,450 PPG Industries, Inc. 4,362,566
70,992 PPL Corp. 1,557,387
90,062 Praxair, Inc. 3,371,696
745,693 Procter & Gamble Co. 42,690,924
39,448 Progressive Corporation
of Ohio 2,919,152
79,675 Providian Financial Corp. 7,170,750
122,784 Public Service Enterprise
Group 4,251,396
25,108 Pulte Corp. 542,961
74,929 Quaker Oats Co. 5,629,041
417,788 Qualcomm, Inc.(1) 25,067,280
72,068 Quintiles Transnational
Corp.(1) 1,017,961
15,052 Qwest Communications
International, Inc.(1) 747,896
72,667 R.R. Donnelley & Sons
Co. 1,639,549
109,619 Radioshack Corp. 5,193,200
171,658 Ralston Purina Group 3,422,431
192,893 Raytheon Co. - Class B 3,713,190
29,758 Reebok International
Ltd.(1) 474,268
122,161 Regions Financial Corp. 2,427,950
145,196 Reliant Energy 4,292,357
153,057 Rite Aid Corp. 1,004,437
111,499 Rockwell International
Corp. 3,512,219
129,983 Rohm & Haas Co. 4,484,414
47,276 Rowan Cos., Inc.(1) 1,436,009
1,212,939 Royal Dutch Petroleum
Co. 74,671,557
19,646 Russell Corp. 392,920
38,979 Ryder Systems, Inc. 738,165
68,960 Sabre Group Holdings,
Inc. 1,965,360
72,432 Safeco Corp. 1,439,586
281,173 Safeway, Inc.(1) 12,687,932
72,900 Sanmina Corp.(1) 6,232,950
32,700 Sapient Corp.(1) 3,496,856
492,555 Sara Lee Corp. 9,512,468
1,931,765 SBC Communications,
Inc. 83,548,836
831,316 Schering-Plough Corp. 41,981,458
314,302 Schlumberger Ltd. 23,454,787
89,116 Scientific-Atlanta, Inc. 6,639,142
122,249 Seagate Technology,
Inc.(1) 6,723,695
245,303 Seagram Co. Ltd. 14,227,574
47,345 Sealed Air Corp.(1) 2,479,694
200,049 Sears, Roebuck & Co. 6,526,599
138,396 Sempra Energy 2,352,732
17,384 Shared Medical
Systems 1,267,946
97,650 Sherwin-Williams Co. 2,068,959
115,700 Siebel Systems, Inc.(1) 18,924,181
58,611 Sigma Aldrich Corp. 1,714,372
91,748 SLM Holding Corp. 3,434,816
33,332 Snap-On Tools Corp. 887,465
334,986 Solectron Corp.(1) 14,027,539
367,400 Southern Co. 8,565,013
99,984 Southtrust Corp 2,262,138
285,555 Southwest Airlines Co. 5,407,698
6,077 Springs Industries, Inc. -
Class A 195,603
493,014 Sprint Corp. 25,143,714
515,393 Sprint PCS(1) 30,665,884
47,631 St. Jude Medical, Inc.(1) 2,185,072
120,154 St. Paul Cos., Inc. 4,100,255
49,794 Stanley Works 1,182,608
266,592 Staples, Inc.(1) 4,098,852
100,800 Starbucks Corp.(1) 3,849,300
90,452 State Street Corp. 9,593,565
100,812 Summit Bancorp 2,482,496
894,387 Sun Microsystems, Inc.(1) 81,333,318
53,113 Sunoco, Inc. 1,563,514
171,263 Suntrust Banks, Inc. 7,824,578
83,909 SuperValu, Inc. 1,599,515
156,590 Synovus Financial Corp. 2,759,899
189,462 Sysco Corp. 7,981,087
67,887 T. Rowe Price
Associates, Inc. 2,885,198
248,111 Target Corp. 14,390,438
26,199 Tektronix, Inc. 1,938,726
227,589 Tellabs, Inc.(1) 15,575,622
31,050 Temple Inland, Inc. 1,304,100
176,578 Tenet Healthcare Corp. 4,767,606
96,497 Teradyne, Inc.(1) 7,092,530
314,175 Texaco, Inc. 16,729,819
926,358 Texas Instruments, Inc. 63,629,215
83,912 Textron, Inc. 4,557,471
89,545 Thermo Electron Corp.(1) 1,886,042
37,736 Thomas & Betts Corp. 721,701
34,100 Tiffany & Co. 2,301,750
734,771 Time Warner, Inc. 55,842,596
32,700 Times Mirror Co. -
Class A 2,963,438
33,548 Timken Co. 624,832
177,279 TJX Cos., Inc. 3,323,981
74,504 Torchmark Corp. 1,839,318
81,486 Tosco Corp. 2,307,072
138,115 Toys 'R' Us, Inc.(1) 2,011,300
116,142 Transocean Sedco 6,206,338
133,460 Tribune Co. 5,274,707
86,324 Tricon Global
Restaurants, Inc.(1) 2,438,653
65,667 TRW, Inc. 2,848,306
33,231 Tupperware Corp. 731,082
149,653 TXU Corp. 4,414,764
957,517 Tyco International Ltd. 45,362,368
426,201 U.S. Bancorp 8,204,369
295,513 U.S. West, Inc. 25,340,240
100,711 Unicom Corp. 3,896,257
322,974 Unilever NV 13,887,882
75,897 Union Carbide Corp. 3,756,902
139,560 Union Pacific Corp. 5,189,888
153,275 Union Pacific Resources
Group, Inc. 3,372,050
78,574 Union Planters Corp. 2,195,161
174,861 Unisys Corp.(1) 2,546,413
268,674 United Technologies
Corp. 15,818,182
96,091 Unitedhealth Group,
Inc. 8,239,803
133,824 Unocal Corp. 4,432,920
135,912 Unumprovident Corp. 2,726,735
40,406 US Airways Group, Inc.(1) 1,575,834
92,004 UST, Inc. 1,351,309
49,537 USX - U.S. Steel Group 919,531
177,930 USX Marathon Group 4,459,371
65,111 V.F. Corp. 1,550,456
223,300 Veritas Software Corp.(1) 25,236,389
877,806 Viacom, Inc. - Class B(1) 59,855,397
89,475 Visteon Corp 1,084,883
56,708 Vulcan Materials Co. 2,420,723
40,741 W.R. Grace & Co.(1) 493,985
52,610 W.W. Grainger, Inc. 1,621,046
114,236 Wachovia Corp. 6,197,303
2,544,723 Wal-Mart Stores, Inc. 146,639,663
570,324 Walgreen Co. 18,357,304
1,197,872 Walt Disney Co. 46,492,407
310,224 Washington Mutual, Inc. 8,957,718
365,375 Waste Management, Inc. 6,942,125
55,191 Watson Pharmaceuticals(1) 2,966,516
35,959 Wellpoint Health
Networks, Inc.(1) 2,604,780
912,626 Wells Fargo Co. 35,364,258
71,649 Wendy's International,
Inc. 1,276,248
53,569 Westvaco Corp. 1,329,181
135,051 Weyerhaeuser Co. 5,807,193
41,942 Whirlpool Corp. 1,955,546
60,554 Willamette Industries,
Inc. 1,650,097
245,907 Williams Cos., Inc. 10,251,248
65,185 Winn Dixie Stores, Inc. 932,960
64,764 Wm. Wrigley, Jr. Co. 5,193,263
1,623,131 Worldcom, Inc.(1) 74,461,135
47,942 Worthington Industries,
Inc. 503,391
376,376 Xerox Corp. 7,809,802
181,299 Xilinx, Inc.(1) 14,968,499
305,545 Yahoo!, Inc.(1) 37,849,387
41,584 Young & Rubicam 2,378,085
--------------------------------------------------
TOTAL COMMON STOCK
(Cost $4,923,424,736) 7,128,372,492
--------------------------------------------------
SHORT-TERM INSTRUMENTS (2.1%)
MUTUAL FUND (2.0%)
141,630,208 Institutional Cash
Management
Fund $ 141,630,208
--------------------------------------------------
PRINCIPAL
AMOUNT
----------
U.S. TREASURY BILL (0.1%)
$11,550,000 5.61%, 9/7/00(2) 11,430,365
--------------------------------------------------
TOTAL SHORT-TERM INSTRUMENTS
(Cost $153,059,511) $ 153,060,573
--------------------------------------------------
TOTAL INVESTMENTS
(Cost $5,076,484,247) 100.5% $7,281,433,065
Liabilities in Excess
of Other Assets (0.5) (37,447,720)
--------------------------------------------------
Net Assets 100.0% $7,243,985,345
==================================================
----------------------------------
(1) Non-income producing security.
(2) Held as collateral for futures contracts.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 26.
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
ASSETS
Investments at value (cost of $5,076,484,247) $7,281,433,065
Cash 3,087,847
Receivable for shares of beneficial interest subscribed 3,163,942
Receivable for securities sold 11,239,840
Variation margin receivable 1,206,852
Dividends and interest receivable 6,355,111
Other assets 100,566
--------------
Total assets 7,306,587,223
--------------
LIABILITIES
Payable for securities purchased 3,749,598
Payable for shares of beneficial interest redeemed 58,556,607
Due to Bankers Trust 295,673
--------------
Total liabilities 62,601,878
--------------
Net assets $7,243,985,345
==============
COMPOSITION OF NET ASSETS
Paid-in capital $5,039,932,426
Net unrealized appreciation on investments and futures
contracts 2,204,052,919
--------------
Net assets $7,243,985,345
==============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 26.
EQUITY 500 INDEX PORTFOLIO
STATEMENT OF OPERATIONS
SIX-MONTH PERIOD ENDED JUNE 30, 2000
(UNAUDITED)
INVESTMENT INCOME
Dividends (net of foreign withholding tax of $335,264) $ 46,366,945
Interest 337,405
-------------
Total investment income 46,704,350
-------------
EXPENSES
Advisory fees 2,348,749
Administration and services fees 98,084
Professional fees 17,252
Trustees fees 1,622
Miscellaneous 819
-------------
Total expenses 2,466,526
-------------
Net investment income 44,237,824
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FUTURES CONTRACTS
Net realized gain from investment transactions 828,725,066
Net realized loss from futures transactions (9,545,343)
Net change in unrealized appreciation/depreciation
on investments and futures contracts (944,339,124)
-------------
Net realized and unrealized loss on investments and futures
contracts (125,159,401)
-------------
Net decrease in net assets from operations $ (80,921,577)
=============
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 26.
<TABLE>
EQUITY 500 INDEX PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
SIX-MONTH PERIOD ENDED JUNE 30, 2000, AND
YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<CAPTION>
6/30/00 12/31/99
--------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 44,237,824 $ 92,907,589
Net realized gain (loss) from investment
and futures transactions 819,179,723 (26,748,772)
Net change in unrealized appreciation/depreciation
on investments and futures contracts (944,339,124) 1,245,281,501
---------------------------------
Net increase (decrease) in net assets from operations (80,921,577) 1,311,440,318
---------------------------------
CAPITAL TRANSACTIONS
Proceeds from capital invested 2,113,458,132 4,399,103,297
Value of capital withdrawn (2,953,648,092) (2,745,951,143)
---------------------------------
Net increase (decrease) in net assets from
capital transactions (840,189,960) 1,653,152,154
--------------------------------
Total increase (decrease) in net assets (921,111,537) 2,964,592,472
NET ASSETS
Beginning of period 8,165,096,882 5,200,504,410
--------------------------------
End of period $7,243,985,345 $8,165,096,882
================================
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 26.
</TABLE>
<TABLE>
EQUITY 500 INDEX PORTFOLIO
FINANCIAL HIGHLIGHTS
JUNE 30, 2000
(UNAUDITED)
Contained below are selected supplemental data and ratios to average net assets
for the periods indicated for the Equity 500 Index Portfolio.
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
JUNE 30, 2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------
SUPPLEMENTAL DATA AND RATIOS:
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of
period (000) $7,243,985 $8,165,097 $5,200,504 $2,803,086 $1,925,224 $1,080,736
Ratios to average
net assets:
Net investment
income (%) 1.18(2),(3) 1.35 1.50 1.76 2.20 2.52
Expenses after
waivers (%) .065(2),(3) .08 .08(1) .08 .10 .10
Expenses before
waivers (%) .065(2),(3) .08 .10 .15 .15 .15
Portfolio turnover
rate (%) 11 13 4 19 15 6
(1) Effective May 6, 1998, Bankers Trust contractually agreed to limit its fees
from the portfolio to the lesser of 0.005% or the amount that brings the
total annual operating expenses up to 0.08% of the portfolio's average daily
net assets.
(2) Effective March 15, 2000, Bankers Trust contractually agreed to limit the
annual operating expenses for the Portfolio to 0.05% of the Portfolio's
average daily net assets.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS ON PAGE 26.
</TABLE>
EQUITY 500 INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION - The Equity 500 Index Portfolio (the "Portfolio") is
registered under the Investment Company Act of 1940 (the "Act"), as amended, as
an open-end management investment company. The Portfolio was organized on
December 11, 1991, as an unincorporated trust under the laws of New York and
began operations on December 31, 1992. The Declaration of Trust permits the
Board of Trustees (the "Trustees") to issue beneficial interests in the
Portfolio.
B. VALUATION OF SECURITIES - The Portfolio's investments are valued each
business day by an independent pricing service approved by the Trustees.
Securities traded on national exchanges or traded in the NASDAQ National Market
System are valued at the last sales prices reported at the close of business
each day. Over-the-counter securities not included in the NASDAQ National Market
System and listed securities for which no sale was reported are valued at the
mean of the bid and asked prices. Short-term obligations with remaining
maturities of 60 days or less are valued at amortized cost that, with accrued
interest, approximates value. Securities for which quotations are not available
are stated at fair value as determined by the Trustees.
C. SECURITIES TRANSACTIONS AND INTEREST INCOME - Securities transactions are
accounted for on a trade date basis. Dividend income is recorded on the
ex-dividend date. Interest income is recorded on the accrual basis and includes
amortization of premium and accretion of discount on investments. Expenses are
recorded as incurred. Realized gains and losses from securities transactions are
recorded on the identified cost basis.
All of the net investment income and realized and unrealized gains and losses
from the securities transactions of the Portfolio are allocated pro rata among
the investors in the Portfolio at the time of such determination.
D. FUTURES CONTRACTS - The Portfolio may enter into financial futures
contracts, which are contracts to buy a standard quantity of securities at a
specified price on a future date. The Portfolio is required to deposit either
cash or securities in an amount equal to a certain percentage of the contract
amount. Variation margin payments are made or received by the Portfolio each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as unrealized gains
or losses by the Portfolio.
Futures contracts are valued at the settlement price established each day by the
board of trade or exchange on which they are traded.
E. FEDERAL INCOME TAXES - The Portfolio is considered a partnership under the
Internal Revenue Code. Therefore, no federal income tax provision is required.
F. OTHER - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts in
the financial statements. Actual results could differ from those estimates.
(2) FEES AND TRANSACTIONS WITH AFFILIATES
The Portfolio has entered into an Administration and Services Agreement with
Bankers Trust Company ("Bankers Trust"), an indirect wholly owned subsidiary of
Deutsche Bank AG. The agreement provides for the Portfolio to pay Bankers Trust
a fee, accrued daily and paid monthly, computed as a percentage of the average
daily net assets of the Portfolio. Effective March 15, 2000, Bankers Trust
agreed to limit the annual operating expenses of the Portfolio to .05% under the
agreement. Under this agreement, the investment advisory fee and the
administration and services fee have been reduced to 0.05% and 0.08%,
respectively, of the Portfolio's average daily net assets.
The Portfolio may invest in the Institutional Cash Management Fund (the "Cash
Management Fund"), an open-end management investment company managed by Bankers
Trust. The Cash Management Fund is offered as a cash management option to the
Portfolio and other accounts managed by Bankers Trust. Distributions from the
Cash Management Fund to the Portfolio for the six months ended June 30, 2000,
amounted to $4,482,789 and are included in dividend income.
At June 30, 2000, the Portfolio was a participant with other affiliated entities
in a revolving credit facility in the amount of $200,000,000, which expires
April 27, 2001. A commitment fee on the average daily amount of the available
commitment is payable on a quarterly basis and apportioned equally among all
participants. No amounts were drawn down or outstanding for this fund under the
credit facility for the six months ended June 30, 2000.
(3) PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended June 30, 2000, were
$831,032,886 and $1,545,748,872, respectively.
For federal income tax purposes, the tax basis of investments held at June 30,
2000, was $5,076,484,247. The aggregate gross unrealized appreciation was
$2,591,087,303, and the aggregate gross unrealized depreciation was $386,138,485
for all investments as of June 30, 2000.
(4) FUTURES CONTRACTS
A summary of obligations under these financial instruments at June 30, 2000, is
as follows:
MARKET UNREALIZED
TYPE OF FUTURE EXPIRATION CONTRACTS POSITION VALUE DEPRECIATION
--------------------------------------------------------------------------------
S&P 500 Index September 2000 165 Long $60,559,125 $(895,899)
Futures
At June 30, 2000, the Portfolio segregated securities with a value of
approximately $11,430,365 to cover margin requirements on open futures
contracts.
DIRECTORS
Robert G. Davis, CHAIRMAN OF THE BOARD
Michael J.C. Roth, VICE CHAIRMAN OF THE BOARD
Barbara B. Dreeben
Robert L. Mason
David G. Peebles
Michael F. Reimherr
Laura T. Starks
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER, AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT LEGAL COUNSEL
USAA Shareholder Account Services Goodwin, Procter & Hoar LLP
9800 Fredericksburg Road Exchange Place
San Antonio, Texas 78288 Boston, Massachusetts 02109
CUSTODIAN INDEPENDENT AUDITORS
Bankers Trust Company KPMG LLP
Four Albany Street 112 East Pecan, Suite 2400
New York, New York 10006 San Antonio, Texas 78205
TELEPHONE ASSISTANCE HOURS INTERNET ACCESS
Call toll free - Central Time USAA.COM(SERVICEMARK)
Monday - Friday 6:00 a.m. to 10:00 p.m.
Saturdays 8:30 a.m. to 5:00 p.m.
Sundays 11:30 a.m. to 8:00 p.m.
FOR ADDITIONAL INFORMATION ON MUTUAL FUNDS
1-800-531-8181, (in San Antonio) 456-7200
For account servicing, exchanges, or redemptions
1-800-531-8448, (in San Antonio) 456-7202
RECORDED MUTUAL FUND PRICE QUOTES
24-hour service (from any phone)
1-800-531-8066, (in San Antonio) 498-8066
MUTUAL FUND USAA TOUCHLINE(REGISTERED TRADEMARK)
(from touch-tone phones only)
For account balance, last transaction, fund prices,
or to exchange or redeem fund shares
1-800-531-8777, (in San Antonio) 498-8777
