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 10
Statement of Assets and Liabilities 11
Statement of Operations 12
Statements of Changes in Net Assets 13
Notes to Financial Statements 14
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 Treasury Money
Market Trust, 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 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 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 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]
As I write this message, I am also in the process of preparing to lead a panel
on personal finance at the Greater San Antonio Chamber of Commerce's annual
conference on economic development. As we enter 2000, I have asked my fellow
panelists to look back to what they consider to be the key lessons they have
learned in careers that all span at least 25 years in investments.
The incident and the person I have chosen is the visit of a well-known equity
strategist from one of the major investment bankers to San Antonio in the spring
of 1982. I should remind you what the spring of 1982 was like. The market had
not yet shaken off the effects of repeated, arbitrary increases in the price of
oil; the roaring inflation which followed; and the highest U.S. interest rates
since the Civil War. Stocks and bonds had not yet come off their worst
performance since World War II. Against this backdrop, that well-known equity
strategist delivered a magnificent after-dinner presentation. He plucked facts
and figures from a wide variety of sources and wove them into a compelling
argument. His conclusion was clear: "Stay out of this market!" He was brilliant.
He was dead wrong. That summer saw the beginning of the greatest bull market for
both stocks and bonds in U.S. history.
This incident has greatly influenced my thinking and my career. It taught me
these things:
- It is best to base investment strategy on something other than a forecast
of the market.
- If you insist on forecasting the market, it doesn't help to make the little
calls. You absolutely must be right at times like spring of 1982.
- If you use an asset allocation approach to investing, your chances of being
in at a major turning point are 100%.
That is why I believe in the asset allocation approach of our strategy funds.
Sincerely,
Michael J.C. Roth, CFA
President and
Vice Chairman of the Board
Past performance is no guarantee of future results.
For more complete information about the mutual funds managed and distributed by
USAA Investment Management Company, including charges and operating expenses,
please call for a prospectus. Read it carefully before investing.
Investment Review
USAA TREASURY MONEY MARKET TRUST
OBJECTIVE: Maximum current income while maintaining the highest degree of safety
and liquidity.
TYPES OF INVESTMENTS: Invests principally in U.S. government securities with
maturities of 397 days or less, mostly U.S. Treasury bills, notes, and bonds,
and repurchase agreements collateralized by these instruments.
- --------------------------------------------------------------------------------
11/30/99 5/31/99
================================================================================
Net Assets $158.7 Million $144.0 Million
Net Asset Value Per Share $1.00 $1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Average Annual Total Returns and 7-Day Yield as of 11/30/99
================================================================================
5/31/99 Since Inception 7-Day
to 11/30/99(+) 1 Year 5 Years on 2/1/91 Yield
2.40% 4.67% 5.14% 4.55% 5.13%
- --------------------------------------------------------------------------------
(+) Total returns for periods of less than one year are not annualized. This
six-month return is cumulative.
Past performance is no guarantee of future results.
Total return equals income yield and assumes reinvestment of all dividends. No
adjustment has been made for taxes payable by shareholders on their reinvested
income dividends. Past performance is no guarantee of future results. Yields and
returns fluctuate. The 7-day yield quotation more closely reflects current
earnings of the Fund than the total return quotation.
7-DAY YIELD COMPARISON
A chart in the form of a line graph appears here illustrating the comparison of
the 7-Day Yield of the USAA Treasury Money Market Trust to the IBC Financial
Data, Inc./U.S. Treasury & Repo Average for the period of 11/24/98 through
11/30/99:
USAA Treasury
Money Market Trust IBC Average
------------------ -----------
11/24/98 4.43% 4.05%
12/29/98 4.54% 4.14%
01/26/99 4.39% 4.04%
02/23/99 4.47% 4.09%
03/30/99 4.52% 4.18%
04/27/99 4.40% 4.05%
05/25/99 4.38% 4.04%
06/22/99 4.34% 3.97%
07/27/99 4.72% 4.27%
08/31/99 4.71% 4.44%
09/28/99 4.74% 4.43%
10/26/99 4.77% 4.40%
11/30/99 5.13% 4.80%
Data represent the last Tuesday of each month.
Ending date 11/30/99
The graph tracks the Fund's 7-day yield against IBC Financial Data, Inc./U.S.
Treasury & Repo, an average of all major Treasury money market fund yields.
Message from the Manager
[PHOTOGRAPH OF PORTFOLIO MANAGER: PAMELA BLEDSOE NOBLE, CFA, APPEARS HERE]
TREASURY MARKET UPDATE
The U.S. Treasury Department has made significant changes in its approach to
funding the national debt as budget deficits of the past 27 years give way to
modest surpluses, according to estimates by the Congressional Budget Office.
Recently, the Treasury has reduced the size of individual note and bond issues,
reduced the frequency of its auction schedules, eliminated its 3- and 7-year
maturity notes altogether, and announced it will begin repurchasing outstanding
debt. These measures will very likely reduce the supply of Treasury notes and
bonds available for purchase by investors.
INTEREST RATE UPDATE
A year ago, we were experiencing a decline in interest rates as the Federal
Reserve (the Fed) responded to concerns about the impact of financial
instability in Russia, Asia, and Latin America. These concerns have now taken a
back seat to efforts to guard against inflationary pressures in the U.S.
economy. As a result, the Fed has now reversed all of its rate reductions made
in 1998 by increasing the Fed funds rate by 0.75% since June 30, 1999. The
impact of these rate increases has been to boost the yield on a one-year
Treasury bill from 4.49% on November 30, 1998, to 5.68% at the close of trading
on November 30, 1999.
PERFORMANCE
Regardless of the interest rate environment, the USAA Treasury Money Market
Trust is invested to provide the maximum current income while maintaining the
highest level of safety and liquidity. This objective is pursued by balancing
the mix between U.S. Treasury bills, notes, and repurchase agreements.
According to IBC Financial Data, Inc., the USAA Treasury Money Market Trust was
ranked 4 out of 94 Treasury and Repo government money market funds for the 12
months ended November 30, 1999. Past performance is no guarantee of future
results.
CUMULATIVE PERFORMANCE OF $10,000
A chart in the form of a line graph appears here illustrating the cumulative
performance of a $10,000 investment of the USAA Treasury Money Market Trust. The
data is from 2/01/91 through 11/30/99. The data points from the graph are as
follows:
USAA Treasury Money Market Trust
Amount
------
02/01/91 $10,000
05/31/91 10,172
11/30/91 10,436
05/31/92 10,649
11/30/92 10,822
05/31/93 10,973
11/30/93 11,128
05/31/94 11,294
11/30/94 11,530
05/31/95 11,845
11/30/95 12,173
05/31/96 12,482
11/30/96 12,791
05/31/97 13,114
11/30/97 13,453
05/31/98 13,801
11/30/98 14,152
05/31/99 14,466
11/30/99 14,813
Data since inception on 2/01/91 through 11/30/99
The graph illustrates a hypothetical $10,000 investment in the USAA Treasury
Money Market Trust. Past performance is no guarantee of future results, and the
value of your investment may vary according to the Fund's performance. Income
may be subject to federal, state, or local taxes, or to the alternative minimum
tax. For 7-day yield information, please refer to the Fund's investment review
page.
An investment in this Fund is not insured or guaranteed by the FDIC or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in the
Fund.
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
Investment Trust (the Trust) for proposals 1 and 2.
1 Proposal to elect Trustees as follows:
TRUSTEES VOTES FOR VOTES WITHHELD
Robert G. Davis 181,888,787 2,690,901
Michael J.C. Roth 181,881,641 2,698,047
David G. Peebles 181,888,787 2,690,901
Robert L. Mason 181,888,787 2,690,901
Michael F. Reimherr 181,883,427 2,696,261
Richard A. Zucker 181,875,813 2,696,966
Barbara B. Dreeben 181,883,427 2,696,261
John W. Saunders, Jr. and Howard L. Freeman, Jr. did not stand for re-election
to the Board. Their term of office will terminate on December 31, 1999.
2 Proposal to ratify the selection by the Board of Trustees of KPMG LLP as
auditors for the Trust for the fiscal year ending May 31, 2000.
NUMBER OF SHARES VOTING
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
179,181,697 2,930,888 2,467,103
USAA TREASURY MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS
(IN THOUSANDS)
November 30, 1999
(Unaudited)
Principal
Amount Security Value
- --------------------------------------------------------------------------------
U.S. TREASURY BILLS (9.9%)
$ 300 4.70%, 12/02/1999 $ 300
558 4.74%, 12/02/1999 558
3,000 5.13%, 1/20/2000 2,979
2,000 4.96%, 1/27/2000 1,984
2,000 4.93%, 3/09/2000 1,973
2,000 4.89%, 3/16/2000 1,971
3,000 4.87%, 4/06/2000 2,949
3,000 4.93%, 4/13/2000 2,945
- --------------------------------------------------------------------------------
Total U.S. treasury bills (cost: $15,659) 15,659
- --------------------------------------------------------------------------------
U.S. TREASURY NOTES (25.6%)
2,000 7.75%, 12/31/1999 2,005
2,000 5.38%, 1/31/2000 2,002
1,000 5.88%, 2/15/2000 1,002
2,000 8.50%, 2/15/2000 2,015
3,000 5.50%, 2/29/2000 3,004
3,000 6.88%, 3/31/2000 3,019
2,500 6.75%, 4/30/2000 2,519
3,000 6.38%, 5/15/2000 3,017
2,550 6.25%, 5/31/2000 2,563
1,500 5.38%, 6/30/2000 1,500
2,000 5.88%, 6/30/2000 2,007
3,000 6.13%, 7/31/2000 3,014
3,000 6.00%, 8/15/2000 3,010
3,500 6.25%, 8/31/2000 3,519
1,500 4.50%, 9/30/2000 1,485
2,000 6.13%, 9/30/2000 2,007
3,000 4.00%, 10/31/2000 2,955
- --------------------------------------------------------------------------------
Total U.S. treasury notes (cost: $40,643) 40,643
- --------------------------------------------------------------------------------
Total U.S. treasury bills and notes (cost: $56,302) 56,302
- --------------------------------------------------------------------------------
U.S. GOVERNMENT GUARANTEED NOTE (3.1%)
5,000 5.60%, 4/02/2007(a) (cost: $5,000) 5,000
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (60.8%)
39,300 ABN AMRO, Inc., 5.56%, acquired on 11/30/99 and due
12/01/99 at $39,306 (collateralized by a $39,364
U.S. Treasury Note, 6.00%, due 08/15/00; market
value of $40,106) 39,300
7,800 Deutsche Bank Securities, 5.58%, acquired on 11/30/99
and due 12/01/99 at $7,801 (collateralized by a $7,850
U.S. Treasury Note, 5.5%, due 2/29/00; market value
of $7,960) 7,800
39,341 First Union Capital Markets, 5.55%, acquired on 11/30/99
and due 12/01/99 at $39,347 (collateralized by a $41,749
U.S. Treasury Note, 5.875%, due 2/15/00; market value of
$40,151) 39,341
5,000 Merrill Lynch Government Securities Inc., 5.35%, acquired
on 11/30/99 and due 12/01/99 at $5,001 (collateralized
by a $4,995 U.S. Treasury Note, 7.125%, due 02/29/00;
market value of $5,107) 5,000
5,100 State Street Corp., 5.52%, acquired on 11/30/99 and due
12/01/99 at $5,101 (collateralized by a $5,140 U.S.
Treasury Note, 5.625%, due 12/31/99; market value of
$5,256) 5,100
- --------------------------------------------------------------------------------
Total repurchase agreements (cost: $96,541) 96,541
- --------------------------------------------------------------------------------
Total investments (cost: $157,843) $157,843
================================================================================
USAA TREASURY MONEY MARKET TRUST
NOTES TO PORTFOLIO OF INVESTMENTS
November 30, 1999
(Unaudited)
GENERAL NOTES
Values of securities are determined by procedures and practices discussed in
note 1 to the financial statements.
The cost of securities for federal income tax purposes is approximately the same
as that reported in the financial statements.
The percentages shown represent the percentage of the investments to net assets.
SPECIFIC NOTES
(a) This security has an optional demand feature on each quarterly reset. The
interest rate is adjusted at a quarterly interval to a rate that reflects
current market conditions. In money market funds, the effective maturity of
these instruments is deemed to be less than 397 days in accordance with detailed
regulatory requirements.
See accompanying notes to financial statements.
USAA TREASURY MONEY MARKET TRUST
STATEMENT OF ASSETS AND LIABILITIES
(IN THOUSANDS)
November 30, 1999
(Unaudited)
ASSETS
Investments in securities $ 61,302
Repurchase agreements 96,541
Cash 289
Receivables:
Capital shares sold 179
Interest 622
--------
Total assets 158,933
--------
LIABILITIES
Capital shares redeemed 149
USAA Investment Management Company 16
USAA Transfer Agency Company 14
Accounts payable and accrued expenses 10
Dividends on capital shares 21
--------
Total liabilities 210
--------
Net assets applicable to capital shares outstanding $158,723
========
REPRESENTED BY:
Paid-in capital $158,723
========
Capital shares outstanding, unlimited number of shares authorized,
no par value 158,723
========
Net asset value, redemption price, and offering price per share $ 1.00
========
See accompanying notes to financial statements.
USAA TREASURY MONEY MARKET TRUST
STATEMENT OF OPERATIONS
(IN THOUSANDS)
Six-month period ended November 30, 1999
(Unaudited)
Net investment income:
Interest income $3,786
------
Expenses:
Management fees 93
Transfer agent's fees 77
Custodian's fees 34
Postage 5
Shareholder reporting fees 1
Trustees' fees 2
Registration fees 22
Professional fees 15
Other 1
------
Total expenses 250
------
Net investment income $3,536
======
See accompanying notes to financial statements.
USAA TREASURY MONEY MARKET TRUST
STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
Six-month period ended November 30, 1999,
and year ended May 31, 1999
(Unaudited)
11/30/99 5/31/99
------------------------
From operations:
Net investment income $ 3,536 $ 6,027
------------------------
Distributions to shareholders from:
Net investment income (3,536) (6,027)
------------------------
From capital share transactions:
Proceeds from shares sold 77,562 149,402
Shares issued for dividends reinvested 3,386 5,709
Cost of shares redeemed (66,220) (117,795)
------------------------
Increase in net assets from capital share
transactions 14,728 37,316
------------------------
Net increase in net assets 14,728 37,316
Net assets:
Beginning of period 143,995 106,679
------------------------
End of period $158,723 $143,995
========================
Change in shares outstanding:
Shares sold 77,562 149,402
Shares issued for dividends reinvested 3,386 5,709
Shares redeemed (66,220) (117,795)
------------------------
Increase in shares outstanding 14,728 37,316
========================
See accompanying notes to financial statements.
USAA TREASURY MONEY MARKET TRUST
NOTES TO FINANCIAL STATEMENTS
November 30, 1999
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USAA INVESTMENT TRUST (the Trust), registered under the Investment Company Act
of 1940, as amended, is a diversified, open-end management investment company
organized as a Massachusetts business trust consisting of eleven separate funds.
The information presented in this semiannual report pertains only to the USAA
Treasury Money Market Trust (the Fund). The Fund's investment objective is to
provide maximum current income while maintaining the highest degree of safety
and liquidity. USAA Investment Management Company (the Manager) seeks to achieve
this objective by investing the Fund's assets in U.S. Government securities with
maturities of 397 days or less.
A. Security valuation - The value of each security is determined (as of the
close of trading on the New York Stock Exchange on each business day the
Exchange is open) as set forth below:
1. Pursuant to Rule 2a-7 of the Investment Company Act of 1940, as amended,
securities in the Fund are stated at amortized cost which approximates market
value. Repurchase agreements are valued at cost.
2. 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 Trustees.
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). Interest income is
recorded on the accrual basis. Discounts and premiums on securities are
amortized over the life of the respective securities. Gain or loss from sales of
investment securities is computed on the identified cost basis.
D. Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that may affect the reported amounts in the
financial statements.
(2) LINES OF CREDIT
The Fund participates with other USAA funds in three joint short-term revolving
loan agreements totaling $850 million, two with USAA Capital Corporation
(CAPCO), an affiliate of the Manager ($250 million committed and $500 million
uncommitted), and one with Bank of America ($100 million committed). The purpose
of the agreements is to meet temporary or emergency cash needs, including
redemption requests that might otherwise require the untimely disposition of
securities. Subject to availability under both agreements with CAPCO, the Fund
may borrow from CAPCO an amount up to 5% of the Fund's total assets at CAPCO's
borrowing rate with no markup. Subject to availability under its agreement with
Bank of America, the Fund may borrow from Bank of America, at Bank of America's
borrowing rate plus a markup, an amount which, when added to outstanding
borrowings under the CAPCO agreements, does not exceed 25% of the Fund's total
assets. The Fund had no borrowings under either of these agreements during the
six-month period ended November 30, 1999.
(3) DISTRIBUTIONS
Net investment income is accrued daily as dividends and distributed to
shareholders monthly. Distributions of realized gains from security transactions
not offset by capital losses are made in the succeeding fiscal year or as
otherwise required to avoid the payment of federal taxes.
(4) INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales/maturities of securities for the
six-month period ended November 30, 1999, were $8,897.4 million and $8,882.5
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 .125% of its annual average net assets.
The Manager has voluntarily agreed to limit the annual expenses of the Fund to
.375% of its annual average net assets through October 1, 1999, and accordingly
has waived a portion of its management fees.
B. Transfer agent's fees - USAA Transfer Agency Company, d/b/a USAA Shareholder
Account Services, an affiliate of the Manager, provides transfer agent services
to the Fund based on an annual charge of $28.50 per shareholder account plus
out-of-pocket expenses.
C. Underwriting services - The Manager provides exclusive underwriting and
distribution of the Fund's shares on a continuing best efforts basis. The
Manager receives no commissions or fees for this service.
(6) TRANSACTIONS WITH AFFILIATES
Certain trustees and officers of the Fund are also directors, officers, and/or
employees of the Manager. None of the affiliated trustees or Fund officers
received any compensation from the Fund.
(7) REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with commercial banks or
recognized security dealers. These agreements are secured by obligations backed
by the full faith and credit of the U.S. government. Obligations pledged as
collateral are required to maintain a value equal to or in excess of the resale
price of the repurchase agreement and are held by the Fund's custodian until
maturity of the repurchase agreement. The Fund's Manager monitors the
creditworthiness of sellers with which the Fund may enter into repurchase
agreements.
(8) YEAR 2000
Like other mutual funds, the Fund could be adversely affected if the computer
systems used by the Manager and the Fund's other service providers are not able
to perform their intended functions effectively after 1999 because of the
inability of computer software to distinguish the year 2000 from the year 1900.
The Manager has taken steps to address this potential year 2000 problem with
respect to the computer systems that they use and to obtain satisfactory
assurances that the comparable steps are being taken by the Fund's other major
service providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund from this
problem.
9) FINANCIAL HIGHLIGHTS
Per share operating performance for a share outstanding throughout each period
is as follows:
<TABLE>
<CAPTION>
Six-month
Period Ended
November 30, Year Ended May 31,
---------------------------------------------------------------------------
1999 1999 1998 1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income .02 .05 .05 .05 .05 .05
Distributions from net
investment income (.02) (.05) (.05) (.05) (.05) (.05)
---------------------------------------------------------------------------
Net asset value at
end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
===========================================================================
Total return (%) * 2.40 4.82 5.24 5.06 5.38 4.88
Net assets at end
of period (000) $158,723 $143,995 $106,679 $ 88,612 $ 76,777 $ 67,876
Ratio of expenses to
average net assets (%) .340(a) .360 .375 .375 .375 .375
Ratio of expenses to
average net assets
excluding
reimbursements (%) n/a n/a .392 .394 .403 .488
Ratio of net investment
income to average
net assets (%) 4.76(a) 4.69 5.11 4.95 5.23 4.91
* Assumes reinvestment of all dividend income distributions during the period.
(a) Annualized. The ratio is not necessarily indicative of 12 months of
operations.
</TABLE>
TRUSTEES
Robert G. Davis, Chairman of the Board
Michael J.C. Roth, President and Vice Chairman of the Board
John W. Saunders, Jr., Vice President
Barbara B. Dreeben
Howard L. Freeman, Jr.
Robert L. Mason
Richard A. Zucker
INVESTMENT ADVISER, UNDERWRITER, AND DISTRIBUTOR
USAA Investment Management Company
9800 Fredericksburg Road
San Antonio, Texas 78288
TRANSFER AGENT
USAA Shareholder Account Services
9800 Fredericksburg Road
San Antonio, Texas 78288
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
INDEPENDENT AUDITORS
KPMG LLP
112 East Pecan, Suite 2400
San Antonio, Texas 78205
Telephone Assistance Hours
Call toll free - Central Time
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.
Internet Access
usaa.com(Service Mark)
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
